Connaught tumbles and appoints administrators

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After weeks of financial woes, a crashed share price and speculation as to its future, Connaught plc today (7 September) moved to appoint administrators and suspend the trading of its shares. This followed a failure to secure further funding required to restructure.

This news brings to an end the collapse of its share price from £3.20 in late June to £0.165 when trading closed on Monday 6 September. Connaught has £220m of debt spread over six banks and four other creditors.

Connaught is one of the UK’s leading integrated service providers, operating in the social housing, environmental, public sector and compliance markets with a direct workforce approaching 10,000.

The problems arose within its social housing division following the government spending cuts announced in the emergency budget in late June. Connaught identified 31 unprofitable contracts.

In a company statement released on 7 September it states: “Since the end of July, Connaught has held discussions with its lenders and alternative providers of finance with the objective of securing additional funding and a restructuring of the company”s financing for the longer term. During this period, the board of the company has also continued to explore its options to improve the financial position of the Connaught group of companies (the ”Group”) and to realise value for the benefit of all stakeholders.”

Connaught – what next?

The statement continues: “The Group”s other main subsidiaries, Connaught Compliance Ltd, National Britannia Holdings Ltd, Fountains Ltd and Connaught Environmental Ltd (and their respective subsidiaries), which comprise the Group”s Compliance and Environmental divisions, are not being placed into administration and will continue to trade normally. An agreement with its funders is in the course of being negotiated and an announcement will be made shortly tomorrow regarding this.”

Connaught”s pest control activities fall within Connaught Compliance and so would appear to be carrying-on as normal.

To strengthen its pest control portfolio, Connaught bought Igrox in July 2009 for £3.9 million, with additional earn-out payments in 2011 and 2012 subject to significant performance conditions – see Pest report here.

Details of any further announcements will be posted here as they appear.

See update re pest control activities released on 17 September.

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