In the fast lane

Brian Souter, the founder and chairman of Stagecoach, famously does not like suits. He finds them the most ‘uncomfortable item of clothing’ ever invented and, with a fortune of some #300m behind him, nobody questions his right to eschew them in favour of cowboy shirts, chinos and Kickers.

But in his early days training as an accountant, his dislike of conventional garb did not go down well with his employers. In 1977, when he started as a trainee working with Arthur Andersen, working around Scotland on audits, he soon fell foul of the firm’s dress code. He recalls: ‘I got into trouble for wearing a jumper underneath my jacket. They told me not to wear one.’ He had, though, been used to wearing one on the buses when he worked as a conductor to pay his way through university, a moonlighting job that he continued to do on Saturdays for the two years of his accountancy traineeship, unknown to Andersens.

Andersens deserves credit for spotting the talent of the maverick from Perth who has created Britain’s largest start-up company of Thatcher’s era. Other accountancy firms did not like the unconventional background.

He says: ‘I had a terrible time when I got interviews because a lot of the people who interviewed me were terrible snobs. I didn’t go to the right school, didn’t live in the right street and my father was not in the right occupation.’

He was bemused that interviewers kept asking what his father did: ‘I thought, “what’s that got to do with them? They are giving the job to me, not to him”.’ Firms like Coopers & Lybrand or Deloitte & Touche would never give me a job offer because they were heavily into public school and the right sort of background.’ He thinks it might have been Andersens’ US background which made it willing to take on someone who had worked his way through university.

Souter is still angry about his treatment at the hands of the big firms, and this is reflected in the fact that, to this day, Stagecoach makes minimal use of the consultants and advisers which most companies employ with abandon.

‘It’s not that I have a chip on my shoulder. I was taught by my parents that we were as good as anybody else.

‘The middle class teaches its children that they’re better than anybody else, but we weren’t taught that. We were working class, and we were taught that we were as good as anybody else and could not be bullied and pushed about. I never realised, until then, that all this class stuff really existed because I felt very confident. We’d been brought up with a good set of values, so we didn’t feel disadvantaged.’

Souter’s background was modest. He was brought up on a windy council estate on the outskirts of Perth. His father was a bus driver who used to moonlight in his spare time, driving anything from hearses to taxis. The family was deeply religious – members of the Church of Nazarene, a Wesleyan Methodist sect which banned alcohol and tobacco – and Souter grew up imbued with a strong work ethic. As one senior Methodist puts it, ‘Methodists are so good at making money because so many other pursuits are denied to them. What else can they do?’.

Souter remains a member of the group to this day, and never works on Sundays. Derek Scott, one his bosses at Andersens and later Stagecoach’s finance director, describes how Souter’s religious feelings affected his working life: ‘The (Andersens) induction course was intensive.

‘We were sent to France for three weeks, and Brian said he wouldn’t be able to work Sundays as he wanted to go to church. Andersens had been established in Britain since 1957 and this was the first time that someone had stood up and said this.’ Souter, of course, got his way.

Souter had not been a particularly successful student at school. Indeed, the man who is famous in the City for being able to assess a company’s worth with a quick glance at its balance sheet is terrible at maths: ‘I cannot do maths. I’ve a mental block about it. I can’t understand algebra. All those Xs and Ys don’t make any sense to me and seem totally pointless.’

He ended up with eight ‘O’ grades (the Scottish equivalent of O-Levels) but none in maths. He gained a diploma in commerce and then tried for accountancy courses, but his failure in maths was almost his undoing.

Finally, he persuaded Strathclyde university to take him as a mature student without an ‘O’ grade in maths, straight into the second year of the accountancy course.

To pay his way, he worked on the buses. His shift started at 4.50am, which meant that when his battered old car was off the road, he had to get up at 3am and walk two miles to pick up the staff bus. He would do a couple of factory runs, take a bus into Glasgow and, still in his conductor’s uniform, go to his lectures. Then he would do the other half of his shift, working from 2.40pm until 7.30pm. On Saturdays, he would often do a double shift because it was paid at twice the normal rate. He even found time to teach a three-hour night class once a week at the College of Commerce.

Unsurprisingly, initially he received lousy marks and, reining back slightly on his bus work, had to really cram during his second and final year – eventually passing with distinction.

Souter was a loyal member of the union while working on the buses, going on strikes that personally he had voted against. Although highly critical of the management in the then-nationalised bus industry, at the time, he says: ‘I wanted to make state capitalism work,’ partly because his sympathies lie with the Left.

They still do, and although he can be a tough employer, his company recognises and encourages trade unions and employee participation via share ownership.

His children attend state schools and he believes in free education and healthcare for all.

Souter applied his unconventional approach to his auditing work at Andersens.

Rather than just sit in the office with the accountant and go through the books, Souter liked to wander around asking questions, sometimes to Scott’s consternation: ‘On a whisky distillery audit, I criticised Brian because we had three management accountants working with us in one big room.

‘And I said “Brian, you’re going to spend a lot of time with these guys – you should be asking them a lot of questions.” But I’d find he would be off down the canteen chatting to the canteen ladies, or walking round the plant.’

Souter’s unconventional approach bore fruit. On one audit he discovered, by talking to the cleaners, that the management was planning to close down the factory, and the auditors had not been told.

Souter had a reputation for doing thorough audits, but being slow over them. He was once given a payroll check to do, which was supposed to take 30 hours, but he spent 90 hours on it. It was, though, according to Scott, ‘the best payroll test ever written’.

Souter remained an outsider at Andersens, his sartorial rebellion proved symptomatic of a wider alienation from the company’s ethos. He spent a lot of time in Aberdeen auditing the oil boom companies, where he claims he learnt much about the dangers of expanding too quickly (which did not stop Stagecoach going from a turnover of #36.8m in 1989 to #98.4m in 1990).

But as a non-drinker and non-smoker, he did not socialise easily with the other young accountants who were drawn to the pubs and restaurants in the prosperous town.

Souter has no regrets about his time at Andersens. Indeed, he says: ‘It was an important training ground for me because it gave me some professional discipline which I badly needed. It taught me to put things down on paper and to be structured in my approach.’

Back in Perth, his sister, Ann Gloag, and her husband Robin had started a caravan business, renting out half-a-dozen to holidaymakers including Paul and Linda McCartney. They had also started contract hire using a Ford Transit minibus.

Souter, meanwhile, hoped to drop out for a year and drive to China in a bus, a 45-seater Bristol bought for #425. But he failed to get a visa, so instead turned the bus into a business opportunity that was to create Stagecoach. He lent it to the Gloag’s company, GT coaches, which in turn hired it to construction company Balfour Beatty, which was building a bypass locally. The bus started making money, paying for itself within weeks.

Souter saw there was money to be made, and spotted that the coach market was being deregulated. So Stagecoach was born, with two second-hand buses bought with Souter’s savings, plus money borrowed from his father and a rich uncle. On 9 October 1980, three days after the market was deregulated, the first Stagecoach bus ran between Dundee and London via Glasgow.

This was the first of several market opportunities that Souter was to spot in the next few years, using the unique ability that transformed Stagecoach from a two bus company into a member of the FTSE-100 in less than two decades.

Christian Wolmar is a writer and journalist

GROWTH VIA ACQUISITIONS

Stagecoach joined the FTSE-100 in July this year with its market capitalisation hovering around the #2bn mark.

This phenomenal growth has been mostly through acquisition.

The inaugural coach business grew to a turnover of #3.5m by 1985, but it was the purchase of National Bus Company subsidiaries that allowed Stagecoach to begin its rapid growth.

By the year ending on 31 March 1991, turnover had reached #103m with #2.5m profits. The operation was largely based on providing local bus services in the UK although the company was also active in Malawi. The coach services were sold in 1989.

Stagecoach floated in April 1993 at a value of #134m and, with continuing expansion through the purchase of large municipal bus companies, including two in London, turnover reached #338m by 1995. The next major spurt of expansion was with rail privatisation.

Stagecoach won a franchise for South West Trains, and then the Porterbrook rolling stock company, which resulted in turnover more than doubling between 1996 and 1997, to #1.15bn.

The company also expanded overseas with its acquisition of Swebus, Sweden’s largest bus company, and significant bus operations in Portugal and New Zealand.

This year, Stagecoach has widened its horizons with acquisitions outside its core business. It has purchased Prestwick Airport, creating an aviation division, and has a stake in Road King, which runs toll roads in China.

The latter has so far been unsuccessful, with shares falling well below the acquisition level.

Another recent acquisition was the Sheffield Supertram operation, and this year Stagecoach also acquired the Yellow Bus operation in New Zealand after overcoming regulatory obstacles.

It also took a 49% stake in Virgin Rail.

In April, Souter handed over the day to day running of Stagecoach to Mike Kinski, who made his mark with Scottish Power, and became Stagecoach’s group chief executive, while as chairman he concentrates on further acquisitions.

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