Connaught woes deepen as government cuts bite

LONDON (Reuters) - Connaught Plc is set to breach the terms of its loans and desperately needs more cash, the social housing services company said on Monday as government cuts eat into its livelihood.

Shares in the company fell 80.9 percent to 19.5 pence as the support services group, listed on the FTSE 250 index of mid-sized companies, said it had identified an “urgent requirement for additional funds” following a review of its finances and it was in talks with its lenders.

“This is clearly a disturbing statement which leaves us uncertain about trading and the financial position ... we are still in the dark and retain our ‘sell’ rating,” Joe Brent, analyst at Liberum Capital, wrote in a note.

Analysts at Altium Securities said they would withdraw forecasts, recommendation and price target for Connaught’s shares until they had more clarification from the company on the state of its finances.

Connaught provides maintenance services for the social housing sector, an area vulnerable to Downing Street’s swingeing public sector cuts. Last month, local governments deferred some of their contracts with the company.

Shares in Connaught have shed more than 90 percent since June 25, slicing over 400 million pounds off its market value. At 10:40 a.m. they had slumped 80 percent to 19 pence.

Connaught also said it was planning a number of changes to its management team, including hiring former finance director for engineering firm Atkins, Stephen Billingham. Liberum welcomed the appointment.

“More encouragingly (Chairman Sir Roy Gardner) has put together an A team management, including Stephen Billingham, who we think is a top notch FD,” Brent added in his note.

Reporting by Golnar Motevalli; editing by Andrew Callus