Connaught shares suspended
Published: 07 September, 2010
EXETER: Troubled social housing group Connaught has pulled its shares from the Stock Exchange amid reports the company is on the brink of administration.
In July, the company's bank, Royal Bank of Scotland, agreed a short term £15m facility to tide it over after it ran into financial difficulties. The company also entered talks with is creditors including Travis Perkins.
In a statement to the market this morning, the company said: "Since that date Connaught has had continuing discussions with its lenders and other sources of finance with the objective of securing additional funding and a restructuring of the group's financing for the longer term."
"The group now believes that the availability of additional funds from its lenders will not be forthcoming and, whilst it remains in discussions with other parties, the ability to provide an adequate solution to the funding issues the Group faces has become increasingly uncertain."
The BBC reported that the company's creditors have decided to put it into administration. Other options are a debt for equity swap with its lenders or a sell-off of parts of the business.
Sir Roy Gardner, who recently became chairman of the company, has attempted to put together a rescue plan with the help of several new directors. Founder Mark Tincknell left the company earlier this year on health grounds less than six months into his second spell as chief executive.
The company has blamed government cuts for some of its financial difficulties. At the same time analysts have raised questions about its accounting practices that meant upfront mobilization costs on contracts were spread over the lifetime of the contract rather than at the beginning.
Until their suspension today, the company's shares had fallen by more than 90% following the warning in June that it had identified 31 projects where spending will be delayed as a result of austerity measures, wiping £80m off revenues and £13m from underlying profits in this financial year.
Sales and profits were also expected to fall by a further £120m and £16m respectively next year, it added. Connaught's debts were estimated to be in region of £220m.