Last year founder and 76% shareholder John Scott, 40, moved out to Monaco to lead the international growth of Scott Group, which employs 1000 worldwide including 300 in Scotland.
Holding the fort at headquarters near Dunfermline is older brother and minority shareholder Norman, 42, who has just unveiled a unified rebranding of the group’s businesses from packaging to property, and says: “We can absolutely see more opportunity ahead of us.”
The empire is founded on the humble wooden pallet, a core need for every company shipping goods around the country, but not a high-technology product. “In the sawmill we acquired, to replace capital equipment would be a huge capital investment,” Norman Scott says. “Pallet machinery would be very low entry – a nailgun and you were off... pallet-making was a business that could be grown with rather less resources.”
The big breakthrough for the embryonic empire came when founder John landed a major contract with BP at Grangemouth, doubling turnover and doing even more for credentials.
By the time Norman left the family estate agency to join the business in 1995, it had already grown tenfold to turn over £1m, and was looking outwards.
“We were becoming more aware of what was around us and who was in the market,” Mr Scott says.
In 1998 came another doubling of size when Scott Group acquired Scotland’s then biggest pallet-maker. “All of a sudden we were a more serious player, it opened our eyes to the opportunity, and we began to understand more fully how fragmented the market was.”
Over the next nine years, around 30 companies were acquired, with support from Bank of Scotland, which Mr Scott says has continued through the banking upheaval. Several complementary divisions have sprung up, turnover has shot up from £3m to this year’s expected £120m, and after a four-year lull Mr Scott says: “We are now back in looking at evaluating a number of acquisition opportunities. It is probably less about geography now and more about additional turnover on existing sites to improve the efficiency of what we already have. We are also looking to expand further into Europe – we are already manufacturing pallets from our base in Latvia, supplying into Germany, France and Belgium.”
The Latvian adventure began a decade ago, when the brothers went in search of new sources of timber to keep pace with the company’s growth. Ready-to-assemble timber is still shipped into the local port of Rosyth, Barry in South Wales and Wisbech in eastern England, but in 2004 the group set up its own operation in Riga with a Latvian managing director, spotting the opportunity to supply existing customers with pallets for their European operations.
“We were keen to replicate what we have done in the UK in other markets,” Mr Scott says. “It is still relatively small-scale but we are manufacturing for some large businesses on the continent and growing that business now.”
On John Scott’s move to Monaco, his brother says: “If you are going to be based anywhere in Europe, Monaco is a good choice. Apart from the obvious reasons, the main driver was that we have talked for many years about the opportunity in Europe, and to do it justice he felt he had to be on the ground – it was a big move for him but it has been a successful one.”
Among the acquisitions was European Logistics Management, rebranded Scott ELM, which specialises in tracking and recovering pallets which would be dumped. “It is all about recovery and re-use, which is very important to everybody’s environmental agenda these days,” Mr Scott says. “Timber prices have risen sharply and look set to continue to rise, and with more demand for virgin timber, for us to recover and re-use makes perfect sense.”
He adds: “ELM is something we are quite focused on, working with a number of key customers particularly in the construction and building products trade.”
Scott Group supplies the top 10 players in the building products sector, where the downturn blew a chill wind through the business two years ago. Turnover in the core business was down £17m to £61m, and operating profit was slashed by a third to £1.6m. The construction slump has freed up UK and Irish sawmills to supply 70% rather than only 30% of the group’s timber – and choked off much of its dedicated supply from Latvia. “It is a challenge,” admits Mr Scott, whose key responsibility has always been timber sourcing. “But we have maintained a strong presence in the Baltic and to maintain our volumes we have been looking to sell any surplus into different markets.”
He adds: “The pallet industry is a very resilient one, through the depths of the downturn there have been very few failures, people seem able to downsize, control cost, and stick with it...I think 2010 will prove to be our most successful trading year, in every division.” Scott Group now has a sizeable packaging division with four acquired businesses, including Tripak in Uddingston and last year Rosewood in Cumbernauld. They are all “doing similar things but slightly different”, says Mr Scott, who has recently brought the division more closely within his remit.
“We have moved some management resource around to give that division more focus, we are now actively looking at packaging and how to take the business forward.”
Completing the empire are a property arm and an industrial supplies business, formerly Fasco, now Scott Direct, which is valued as giving customers a wider product offering.
Living in Dunblane with his wife and two sons aged 12 and six, Mr Scott praises his Monaco-based brother (married with no children) as a “true entrepreneur, extremely high energy, ambitious, focused”.
He himself admits to being “quite entrepreneurial” and having “a certain amount of business acumen”, but stresses: “We have built up a really strong team, that is how we have run the business.”
The Scott Group banner is not just for customers, he concludes. “Part of the rebranding exercise is about promoting the business to our own people so they understand more about the scale...We talk about having a passion for success and that is what we are trying to cascade right through the organisation.”