Zonal boss takes stock of success

Business Correspondent/Personal Finance Editor

Saturday 8 December 2012

Market leader Zonal's turnover has rocketed from £14 million to £36m in three years, it made £2.6m and £2.7m pre-tax in 2010 and 2011, and this year's profit is down to £1m only because of £1m of investment.

CASHING IN: Zonal Retail Data System's managing director Stuart McLean said the firm has no intention of selling out. Picture: Steve Cox

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"We spent lots of money this year because we still design our own hardware," Mr McLean says. "By doing it ourselves we can design it to meet our own requirements."

The company has opened an innovation centre in Oxford as a sales and training area and showcase for its products. "We have made it a bit like a coffee shop leading into a high-tech room," Mr McLean says. "This is where we take customers, and we wanted it to be different so people remembered it. It has been hugely successful."

The centre's fit-out was completed one evening last May, just 12 hours before a 28-strong delegation from a major pub company was due to visit. The deal that followed – double the size of Zonal's previous biggest contract in 2010 covering 800 pubs for the Spirit group – will cement the company's position in the hospitality market as the major supplier to the UK's four biggest pub groups, and will underpin its 240 headcount.Stuart, the third of four brothers, was nine when the McLean family moved from Surrey to take over a well-known hotel near Edinburgh. "The barmaids used to give drinks to their boyfriends and put cash in their pockets," he says. "We did a stock take every night and worked out we were losing £50 – my dad was a bit tight and wanted to do something about it." Family knowhow, including Stuart's year in London taking a business degree, saw the invention of the first computerised till system to track food and drink purchases and the 1979 creation of Zonal. The system halted the hotel's invisible shrinkage overnight, Mr McLean recalls. "Our lucky break came when someone from Scottish & Newcastle stopped by for a pint of lager one night." S & N went on to adopt the system for its entire pub estate, using it to monitor its own pub managers while the managers used it to monitor their staff. "I was basically the engineer," Mr McLean says. "I would drive around fixing tills and installing them."Zonal grew in tandem with its only customer S & N, which in time put rising accountant Brian Stewart, later chief executive and chairman, on the family company's board. "But there came a point where we looked at S & N and thought we had better do something else as well," Mr McLean says. "At that time, there wasn't anyone else to buy a till system from, now there are hundreds." But its big early lead has helped Zonal to fight off competition in its sector, even from US giant Micros, one of many regular suitors for the fiercely independent Scottish company.Mr McLean says "the best decision we ever made" was to fund growth by selling the family hotel and buying an office in Edinburgh's Forth Street, where it now owns a raft of property which has rocketed in value, and where it is about to develop a new headquarters. "We could see the future," he recalls. "But we were limited because we were a family business, and the likes of Intercontinental Hotels were not going to talk to three men in a garage in Edinburgh. So we got heavily in bed with the regional brewers and that has been a huge success."Zonal began supplying Wetherspoon when it had 20 pubs – it now has 870 – and Greene King before it built an empire spanning Belhaven, Hungry Horse and Loch Fyne. "We have grown with these customers, it's in our DNA." Mr McLean took over as managing director 13 years ago, and decided to bring in top external expertise, attracting the former finance director at Jenners Liz Barclay and the then MD at Micros Pete Edwards. The group has a deliberately slow-growing business in Florida, turning over some $2m after 15 years, whose director also sits on the board. It has helped Zonal understand the influential US market and "keep us ahead of the curve", Mr McLean says, adding: "We might be a family-owned company but we are not family-run."Cash-rich Zonal has been out on the acquisition trail itself, buying electronic ordering system business Freshnet. It is now moving into the digital marketing arena, with a 30% stake in a company making waves with a real-time consumer data system for the hospitality sector. "It's an interesting time," the MD says. "There are so many things happening for us, it's good."Mr McLean, a father of three, says none of the next generation is yet in the family business but there is a "pool of nine" children. Meanwhile, Zonal has no intention of selling out. "We love it, we've got a point to prove, we have plans for improvement, and we can't imagine doing anything else."

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Zonal boss takes stock of success

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