The chief executive of Scotland's biggest call centre business said there was a bright future for the Scottish industry after the firm posted strong growth in profits amid signs that the rush to offshore work was easing.

Ken Hills said a 33% increase in pre-tax profits for Telecom Service Centres, to £2.5m, showed that UK firms could continue to prosper despite unrelenting competition from lower-cost countries overseas.

Pointing to a 16% increase in revenues in the year ended August 31, to £49.3m, Hills highlighted the fact that TSC's success came on the back of a series of business wins with firms in the UK, including Bank of Scotland.

TSC, which employs 2000 workers in Scotland, was also awarded additional contracts by existing clients.

Hills admitted that margins had been under intense pressure as a result of competition from countries like India.

He said TSC was keen to develop a capacity to provide services in Eastern Europe, where wages are much lower than in the UK, to help it meet the challenge.

However, confirming that TSC had not lost any contracts as a result of clients deciding to move work overseas, Hills said the company was not thinking about transferring to offshore locations work currently done in the UK.

TSC recently announced plans to create 500 jobs at a new centre that it will open this year in Kilmarnock, with a £1.4m Regional Selective Assistance grant from the Scottish Executive.

Hills said TSC might use overseas centres to offer routine processing services, which did not require telephone contact with customers. This would form part of a continuing drive to broaden the range of services offered by TSC, which moved into the debt collection business by acquiring an English firm last year.

Hills said some firms had found to their cost that services like technical support, requiring sophisticated interaction between agents and customers on the phone, could best be provided from the UK.

"There are encouraging signs of a growing realisation that moving offshore just to save money is a dumb move - and many companies who did that are now retracing their steps while others are taking a more measured approach," he said.

Hills highlighted last month's decision by Aviva, the insurance giant, to repatriate 150 claims-handling jobs from India because employees there did not understand terms such as "immersion heater".

There were further signs at the weekend that the off-shoring bandwagon might be moving into reverse, in some areas of the market at least.

According to a report in the Mail on Sunday, NTL, the cable TV firm, is considering ending all call centre contacts in India to try to improve its reputation for customer service.

Latest accounts for TSC provide further evidence of a dramatic improvement in the trading performance of the firm in the last two years under Hills.

The former Thus executive was head-hunted to lead a turnaround in February 2004, a year after a £23m management buy-in backed by Lloyds TSB was followed by losses, which saw the original MBI team depart.

In the year ended August 31, 2005, TSC posted a £1.9m pre-tax profit, compared with a loss of £1.7m in the previous 12 months. Sales soared from £29m to £43m.

However, even after the latest success the company had shareholders' funds of just £7.5m, well short of the price paid by the MBI team.

TSC, the fourth-largest contact centre company in the UK, was launched in Rothesay with seven staff a decade ago.

The firm now employs nearly 3000 people in nine locations from Stornoway to the Dearne Valley in Yorkshire.