Warning after Connaught cash crisis
A housing consultancy is warning its clients to put contingency plans in place should their contractors get into trouble, following a cash crisis at a major maintenance firm.
The Housing Quality Network has issued a briefing to its customers outlining the problems they could face if a major partner hits difficulties.
The advice follows an admission from housing maintenance firm Connaught that it urgently needs cash to pay its contractors and suppliers.
In a statement to the City, the group said it will breach its banking covenants and it has started negotiations with its lenders. It added the talks to get additional funding had been ‘constructive’.
In another development, Chris Sellers, Connaught’s business development director, is taking over as acting chief executive of the group’s social housing business. He is standing in for Peter Jones who has been suspended while the company investigates allegations that he sold shares days before a major profits warning.
The firm’s share price plummeted on the back of a statement in June that the company expected an £80 million reduction in revenues as councils postponed social housing work following the emergency Budget.
The firm has a large number of contracts with social housing providers, often to supply housing maintenance services for several years.
Alistair McIntosh, chief executive of consultancy Housing Quality Network, said landlords needed to make recovery plans in case any of their key partner organisations got into trouble. He said: ‘Connaught is not going to be the only organisation which faces financial difficulties.’
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