Blackfriar: Redhall needs to douse fire on biofuel pipework contract

The executive chairman, who hopes to build Wakefield-based Redhall into an engineering powerhouse, has had a week to forget.

In fact, he’s had a few months worth forgetting. Last month Redhall announced chief executive Simon Foster was resigning for “family reasons”, while revealing bad weather has slowed progress on key contracts.

Its growth ambitions were also dealt a heavy blow in October when it lost a battle to buy York-based Mount Engineering after being outbid by US manufacturing giant Cooper Industries. But the Vivergo contract is the worst piece of news to befall the company in recent years. Vivergo Fuels, a tie-up between BP, British Sugar and Du Pont, axed the contract despite it only being 69 per cent complete – or 78 per cent finished according to Redhall. In doing so, it risked the project missing its launch date.

Vivergo blamed “unacceptable” performance by Redhall for taking such drastic action on the contract. The abrupt termination also leaves 400 jobs in limbo. Redhall claims its staff on the contract have transferred to Vivergo under employment law, but Vivergo denies any responsibility for them.

As a result, a tense stand-off between angry workers and police has formed outside the unfinished plant near Hull.

Shares in the company tumbled 29.5p or 22 per cent to close at 106.5p on Monday when Redhall revealed the extent of the rift. They have not stopped falling, and last night closed at 82p, a fall of 40 per cent from their 136p close last week. Its shares have not been at this level since August 2006.

Redhall insists it’s done nothing wrong and is suing Vivergo. Exactly what went wrong between the companies will unfold in coming months, but the ripples from this have worrying implications for the Wakefield-based engineer. Redhall trumpeted the biofuels contract as a landmark move into the renewables sector when it won the £18m deal a year ago.

But losing such a high-profile contract in these acrimonious circumstances poses a severe threat to its reputation.

Redhall needs to draw a line under this debacle. If not, it could cost it a lot more than £14m.

n FOR all Lynne Peacock’s protestations that “nothing’s really changed”, her surprise departure demonstrates just how pivotal a period Yorkshire Bank faces.

Ms Peacock this week announced she is standing down as chief executive after seven years, to “take things easier”.

Her long-standing deputy, David Thorburn, steps up to drive Yorkshire and its sister bank Clydesdale on their new growth spurt. “The concept that there might be some sort of change of direction is not something that has any credibility,” insisted Ms Peacock. “Our number one priority is to focus on organic growth. If something else came along that demonstrated better shareholder value for NAB it’s something that the group has a duty to consider.”

Her usual measured self, Ms Peacock would not be drawn on speculation it wants to buy 600 Lloyds branches the part-nationalised lender is being forced to offload, or that it will bid for the fully-nationalised Northern Rock. But Down Under, the message was far less opaque. Michael Ullmer, outgoing deputy chief executive of Yorkshire’s parent National Australia Bank, admitted the lender will definitely be having an “objective look” at the Lloyds branches.

“I get the sense now that the new chief executive (Antonio Horta-Osorio) and his team want to clear the decks more quickly,” Mr Ullmer was quoted as saying.

“We’d certainly have an objective look at them.”

NAB’s faces a dilemma: either quit the UK, or grow here, and grow fast. Having emerged from the UK financial crisis with its head held high, the lender is taking a good look at the forced branch sales.

Tranches of 600 branches are a rare opportunity. With just 339 Yorkshire and Clydesdale branches, the lender would be one of just a few who could viably take them on without raising concerns about competition.

Ms Peacock, who insisted it was “entirely my decision” to quit, has steered the lender admirably through the downturn. It faced tough times in 2005, selling its Irish operations, closing 100 branches and axing 1,700 jobs.

In the years that followed, safe but slightly boring summed up the lender.

It stuck to plain vanilla banking while Yorkshire rivals Halifax Bank of Scotland and Bradford & Bingley threw credit at the commercial property and high loan-to-value markets.

That strategy has now been vindicated. Ms Peacock might be coy about its expansion plans, but Blackfriar bets the next year will be anything but boring for Yorkshire Bank.