UPDATE 1-Connaught shares plunge on profit warning

* Impacted by contract delays in social housing

* Sees 2010 sales hit by 80 mln stg, EBITA by 13 mln

* Sees 2011 sales hit by 120 mln stg, EBITA by 16 mln

* Shares slump 33 pct

(Adds detail, analyst comment, shares, background)

LONDON, June 25 (Reuters) - Shares in Britain's Connaught CNT.L plunged after the specialist in social housing repairs said its earnings were being hit by contract deferrals as cost-conscious local governments cut back on spending.

In an unexpected trading update on Friday, Connaught said it had identified 31 contracts in its social housing division where some capital expediture had been deferred.

Shares in Connaught fell 33 percent after the statement, to close at 215 pence, their lowest level since October 2006.

Peer Mears (MERG.L) closed down 7.8 percent at 249 pence.

The delays would hit sales by 80 million pounds ($119.8 million) and earnings before interest, tax and amortisation (EBITA) by 13 million pounds this year, the firm said.

If the conditions were to continue, revenues would be hit by 120 million pounds and EBITA by 16 million pounds in 2011, it added.

In response, analyst Andrew Nussey at KBC Peel Hunt said it expected to reduce its 2010 pretax profit forecast for the company to 40 million pounds from 55 million.

"Given that this has occurred suddenly, there has been no opportunity to reduce cost and the full gross margin impact (we estimate about 14 million pounds) will fall to the bottom line," Nussey said.

Connaught said it had identified the contracts as it carried out a review in the wake of Britain's June 22 emergency budget which slashed spending, as the government seeks to balance the books on a deficit that rivals that of crisis-hit Greece [ID:nLDE65L0CF].

About half of Connaught's earnings derive from the social housing division, with the rest coming from landscaping, forestry and other support services.

(Reporting by Rosalba O'Brien; Editing by Matt Scuffham)

($1=.6680 Pound)