Troubled Connaught wants more cash

Embattled social housing maintenance provider Connaught has warned investors that it is set to breach its banking covenants and urgently needs more funds if it is to meet the “current and ongoing needs of the business”.

The announcement, made early this morning, prompted a sharp drop in share prices when trading opened. In its statement, Connaught says that a detailed review has identified the need for extra cash, in part caused by “additional pressure from suppliers and subcontractors”.

Today’s update on its fortunes says that the Group has concluded that its net debt will be “significantly in excess” of the levels it previously announced of £120 million at its year end of 31 August 2010 – and that it will breach its banking covenants.

Connaught said it is negotiating with its lenders to secure additional funding and that these talks have been “constructive”.

The crisis has prompted some changes in the Group’s leadership, with Sir Roy Gardner having joined as non-executive chairman in May this year. He is set to make further appointments aimed at strengthening the management team.

Chris Sellers, the Connaught Group’s business development director, has been appointed as the acting chief executive of the social housing arm of the group.

Stephen Billingham, former finance director of British Energy Group plc and WS Atkins plc has joined the Connaught Group to work for the chairman on financial and funding matters. Roger Wood, former managing director of British Gas Services and managing director of the AA business, is chairing a steering committee responsible for Connaught’s operational efficiency programmes, with the remit of delivering “significant cost savings”.

Michael Young, who was corporate affairs director at Centrica plc and director of corporate policy and communications at Compass Group plc, is advising the board on communications and also reviewing its management processes.

“These are challenging times for Connaught,” said Sir Roy. “We are fortunate that we have been able to attract a number of senior and experienced individuals to support the company at this time and we welcome the constructive discussion with our lenders.”