TWO of Scotland's pioneering entrepreneurs yesterday defied the growing economic gloom, unveiling figures that proved that businesses – or at least some of them – can prosper amid the economic slowdown.
While most companies retrench to cope with the downturn, Brian Souter and Sir Bill Gammell revealed that both the transport and the oil business have increasingly profitable futures ahead.
Souter's Stagecoach, which he founded with his sister A
nn Gloag, posted underlying pre-tax profits of £174.4 million for the year to 30 April, marginally ahead of market expectations.
At Stagecoach's UK bus division, profits jumped 25 per cent to £110m. UK rail operating profit rose 0.3 per cent to £59m while profits from Stagecoach's share of Virgin Rail more than tripled to £42m.
Analysts predict that Stagecoach will continue to do well even if economic conditions worsen as people leave their cars at home for reasons of both expense and concern for the environment.
Stagecoach is also prospering because the cost of running a car has shot up by 35 per cent in the past year, prompting people to turn to the bus for transport.
It is also benefiting from people adopting "greener" lifestyles.
And Stagecoach is succeeding because fuel comprises just 12 per cent of the costbase of a bus company, compared to a figure of 35 per cent for an airline. Souter and Gloag will also benefit from a 31 per cent jump in the total dividend to 5.4p. Their combined 26 per cent stake in Stagecoach gives them a final dividend of about £7.5m.
Although in a different business arena, Gammell yesterday outlined the success projected for his Cairn group based on the positive impact of high crude prices.
Cairn India, a subsidiary of the UK firm, is now expecting operating cash flow of $3 billion a year once its Indian fields are operating at capacity. Every $20 a barrel movement on the price of oil adds $500m to that figure, it disclosed.
Cairn's Edinburgh-based parent company owns 60 per cent of Cairn India and dividends from the company will flow back to the UK as the oilfields reach peak production – and peak profits – over the coming years
Gammell said yesterday was a "breakthrough moment", with construction of a 600km, $800m pipeline to develop the fields.
Stagecoach and Cairn's figures were published as a report today shows Scotland is now feeling the full effects of the global credit crunch, according to the latest Lloyds TSB Scotland business monitor, with Scotland suffering from slowing output, rising costs and falling business expectations.
It also reveals that the slowdown is affecting the service sector more severely than manufacturing.
According to the bank's quarterly poll of more than 1,800 businesses, the gap between service firms reporting an increase in turnover and those flagging a decrease has fallen sharply.
Indian bonanza, page 34 Souter's luck, page 34 Lloyds survey, page 37
The full article contains 494 words and appears in The Scotsman newspaper.
