WE’VE all heard the one about not putting too many eggs in one basket. Havelock Europa chief executive David Ritchie is acutely aware of how damaging the practice can be.
Earlier this year he told The Herald that one of the first things he did when moving up from the chief operating officer job in 2015 was to look at how exposed the business was to any one market.
His finding: the proportional representation of the banking sector on the firm’s books “was far too high”.
It is no surprise, then, that the firm’s finances suffered when in 2015 a major banking client - widely held to be Lloyds - pulled the plug on pretty much all the branch refurbishment work it had booked with Havelock Europa.
With almost £20 million being wiped off the firm’s turnover in one fell swoop the impact was instantaneous and, as yesterday’s profit warning showed, far reaching. A slowdown in client demand is one thing, but when it comes on the back of an already transformative loss of income it is likely to prove strategy altering.
Which is why the outcome of a business review Havelock Europa chairman Ian Godden launched earlier this year with the specific aim of improving profitability is likely to be very closely watched.
Cashflow at the firm is likely to remain tight, especially as a temporary extension to the firm’s overdraft will have to be paid back and a £700,000 deferred payment to its pension scheme dealt with.
With profits on course to “fall considerably below expectations”, a major restructuring - for which read job losses - must surely now be on the cards.
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