Mears defends local authority prospects

Published:  02 July, 2010

BROCKWORTH: Social housing maintenance group Mears has issued a strong defence of the its prospects in the face of the recent profit warning from rival company, Connaught.

Connaught blamed spending cuts at local authorities announced in the budget for a profit warning last Friday that has wiped £300m off the company's market capitalisation. Connaught warned that 31 of its contracts would be affected as clients "deferred" capital expenditure.

Bob Holt, chairman of Mears, declined to comment specifically on the problems at Connaught, but said that in general it was very unusual for local authorities to put off contracts at short notice. He said it is not a sector specific problem: "This is company specific... We're not feeling any hurt."

Mears earlier issued a statement saying that it does not face similar difficulties while analysts said that Mears was less exposed to capital expenditure than Connaught to explain the difference in how the spending squeeze is affecting the two companies.

The Financial Times quotes a source close to one of Connaught's main buildings materials suppliers as saying: "We're keeping a close eye on what's going on there at the moment but we think they have enough financial headroom for it not be major concern."

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