Gordon McHarg has the office to himself when he picks up the phone.
The managing director of AutoRek is speaking from the 8,000 square foot premises in Glasgow’s Garment Factory that the fintech company moved into two years ago to accommodate its continuing growth. A similar move to upgrade its presence in Edinburgh took place at the end of 2019.
Forecasts of growth for this year, however, have been ripped up by disruption caused by the coronavirus. But Mr McHarg, who co-founded the business in 1994, remains confident it will still make a profit.
While he said “fog had descended” on the business plan because of upheaval caused by the pandemic, which has led the firm to take stock and slow its previous plans, he declared: “It may well be a different road we are on, but when it does lift there will be opportunities.
“Despite being in that fintech world, we do have 25 years of business behind us. With this business, I have been through the dot.com crash, the 9/11 impact, the 2007-2009 financial crash. These economic adjustments and crashes come round from time to time.
“Yes, there is always a challenge, always a pain to business at the time, but equally there will be opportunities. It is a case of making sure you are positioned for that.”
Asked how the disruption caused by coronavirus would affect performance this year, Mr McHarg said turnover will not comfortably exceed £10 million for the first time, as was forecast before the crisis. “This year we will be close to £10m,” he said. “Profitability will be in the region of £1m to £1.5m, so we will still remain profitable. [That] is my expectation for the rest of the year.
“Obviously, I will caveat that. Nobody really knows. We are all hoping enough has been done, and as we emerge, we [hope we] are not going to have a so-called phase two [spike in infections]. Nobody really knows that at this point in time.
“Our projects and our operating performance year to date, even despite the Covid virus, would see us on track for being £1m to £1.5m profitability. That would still represent the equivalent of a 15-20 per cent top-line turnover increase.”
Mr McHarg said previously-held plan to expand its product team in Edinburgh from 12 to 30 people.
“We have kind of stalled at 17,” he said. “But we are looking to restart that recruitment process over the next few weeks.”
He added: “Our Glasgow offices is provisioned to grow from 50 people up to 100 in the next few years. That is pretty much still the plan, albeit we have a little pause in that process at this point in time.”
The firm employs 75 staff in Glasgow, Edinburgh, London and New York. One benefit of having recently moved into bigger premises is being able to welcome staff back in a socially-distant fashion.
Plans are in place to gradually bring staff back as the lockdown is eased, with Mr McHarg anticipating that no more than 50 per cent of staff will return on a “two days in, two days out, with one day spare”.
“I suspect in the longer term remote working will be more of a norm, for us and for organisations like us. That is the reality of the new world.”
He added: “One week before the Scottish Government decided to lockdown, we had already moved to 100 per cent, full, remote working. Largely, what we do can be run remotely, providing the technology is in place.
“In terms of day to day operations, we have been largely unaffected. As with most businesses, the new business environment is obviously challenging, and that will continue to be place until the economic impact is better understood, and organisations understand and re-plan their budgets going forward.”
AutoRek began life as a Microsoft consultancy business based in Glasgow, and went on to open an office in Edinburgh to help broaden its recruitment pool, so that it could try and attract graduate from the universities in both cities.
Today, it provides its own software to institutions such as the Bank of England, Lloyds Banking Group and Nationwide. The application, which it has developed over the years, “effectively provides a financial controls, reconciliation, data management capability” for clients such as banks and asset managers.
One of the biggest drivers of growth in recent years has been its switch from selling to leasing its software around four of five years ago.
“When you have clients like Lloyds Banking Group, Fidelity, Bank of England, Nationwide, signing up on a rental basis, then you have a much stronger and continuous revenue income,” Mr McHarg said.
“It keeps the business highly resilient to market issues like this (coronavirus), but it also affords quite a significant amount of organic investment. Being able to recycle that additional revenue, and into growing the team, has been fundamental to our growth in the past three of four years.”
He added: “The contracts will typically be three to five years, and normally at the end we will just renegotiate the continuing rental. Throughout those three or five years clients will continually be getting upgrades, so they will be getting a new version of the software, and they will be entitled to that upgrade as part of their rental.
“A lot of our clients are seven, eight, nine, 10 years old, and [in the case of] Lloyds Banking Group, many years more than that. Once our software is in place, it is pretty sticky.”
Asked if he detected any signs of business confidence improving, Mr McHarg said AutoRek is continuing to develop relationships with existing customers and reports “more conversations” are happening with potential clients. “We recently closed a deal with a Norwegian organisation,” he said. “Even just getting one or two new contracts, starting to trickle through, is a good sign.
“There are some signs of things starting to move, but it would be an optimist to say it would be any time soon that things are going to return to any kind of business norm. We can but hope.”
As well as recently signing up Nationwide and the Bank of Scotland, AutoRek signed a deal with a Californian-based company which is “promoting our software embedded into their offering in the US market.”
He added: “We initially a plan about a year and a half ago to really start generating new business in the US, and that partnership has really accelerated that process and helped us to establish a significant revenue stream coming from the US corporate market.”
The software is also deployed in Qatar, Switzerland, and the Netherlands.
Q&A
What countries have you most enjoyed travelling to, for business or leisure, and why?
My favourite trip was a wine tour to Haro in the Rioja region of Spain. Touring the old vineyards nurtured by the many generations of local families who are still using traditional methods was a great experience, that and obviously the wine was excellent!
When you were a child, what was your ideal job? Why did it appeal?
I got my first computer, a Sinclair ZX81, at the age of 14 and from that point I knew my ideal job would be in computing. Possibly a little geeky to admit but I have been very lucky as I have a job which was also my childhood hobby. I should add that like many 1000’s of others I would love to have been a professional footballer but my programming skills are just a little bit better or at least they used to be.
What was your biggest break in business?
In the late 1990s we were engaged by Barclays Stockbrokers to create management software for the flotation of Railtrack and the public offerings of several building societies. Writing software to manage the data reconciliation of millions of transactions generated by the sale of these companies was the origin of what is now our core business, AutoRek.
What was your worst moment in business?
In late 2012 we were involved in a bid for a major data management and reconciliation project at the New York Stock Exchange. A few days prior to Christmas having worked long hours and very late nights, with some of my team missing important family events, we attended a meeting in London to be informed our bid had been successful. We were obviously absolutely delighted as not many names are bigger than NYSE in the financial services market. Unfortunately the elation was very short lived. On our way out of the building, while congratulating ourselves on a job very well done, I noticed the news ticker on the TV at reception announcing that the NYSE had been acquired by Intercontinental Exchange. On the 24th December I received a call from the NYSE letting me know that the project would not be going ahead. After all the effort I decided Christmas Eve wasn’t the right time to inform the team that they had cancelled the deal and kept the bad news until we returned in the New Year.
What book are you reading and what music are you listening to?
The last book I read was “The Infinite Game” by Simon Sinek. The book challenges how business should be run, contrasting the more common approach of short term objectives leading to finite outcomes verses a longer term perspective creating more sustainable, responsible and ultimately more successful businesses.
No particular music taste but I listen to Prince more than any other artist.
Source: The Herald