Connaught expects to record full year loss
Embattled social housing contractor Connaught has issued a stark financial warning to its backers.
In a trading update issued today the firm said it expects to record a pre-tax loss for its financial year, which runs to 31 August, after taking into account exceptional charges.
The warning has been issued following a review of the implications of current trading on full year financial performance.
The statement also says the company ‘anticipates making provision for further losses on current contracts in its results for the financial year ending 31 August 2010’.
It adds that it expects to making ‘significant write-downs’ to the value of its assets compared with their value on 31 August 2009.
Connaught’s business has been damaged by uncertainty around future funding for social housing maintenance, and the state of the wider economy.
In June it issued a profit warning saying it had identified 31 social housing contracts which had been deferred by councils, reducing full year revenues by £80 million.
This was followed in July by a further statement warning that the contractor was in ‘urgent’ need of funds, and would breach its banking covenants. It subsequently secured £15 million from lenders.
In today’s statement Sir Roy Gardner, chief executive of Connaught, said: ‘It is clear we face challenges in turning this group around, but I remain both confident that this can be achieved and committed to seeing the process through.’
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Readers' comments (24)
| 08/08/2010 11:54 am
Have sucked the taxpayer dry doubtless taking more than their fair share of NuLab's £37Bn bid-rigged DHS feeding frenzy, things are clearly not looking too good for Connaught. What a rotten bit of luck eh? Maybe they should not have had so many eggs in the same precarious basket. In the immortal words of the Sergeant Major from It Ain't Half Hot Mum: Oh dear, how sad, never mind...
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Anonymous | 08/08/2010 1:34 pm
Will Connaught be around very long?
Weekend FT poses that question. Barclays sold its stake in the group last week at a massive discount.
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Melvin Bone | 09/08/2010 9:39 am
It seems they did not save any of the monies they were making hand over fist from when Labour were dishing the dosh...
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Chris | 09/08/2010 10:07 am
Hang on a minute - aren't we all supposed to be getting down on our knees and paying homage to the private sector. Isn't the private sector supposed to be rescuing the country from the nasty bloated public sector who are only self serving and can't organise the proverbial in a boozer. The private sector can do not wrong we have been told, and are going to provide all the jobs from growth so that we can just step from the jobs providing services for communities and people to the jobs selling products made by someone else to people who neither want nor require them.
Connaught must be a public sector employers in disguise then, can't possibly one of the wonderful private sector employers?
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Anonymous | 09/08/2010 10:18 am
The question is how did Connaught grow so big, with £2bn worth of orders at one stage, when no in the public sector choose to take a serious look at its accounts.
The undue diligence explains why the National Audit Office thought the public sector had overspent on decent homes work by £18bn, or double the forecast figure of £19bn.
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Chris | 09/08/2010 10:27 am
Maybe I'm just so silly about such complex matters but can a public sector agency demand to see the accounts of an organisation, other than the published public accounts. I'm not sure that is how competative tendering works, but perhaps I misunderstood the process.
This massive company, is supposed to be the model for the provision of public services, correcting all that was supposed to be wrong with in-house provision. Is it instead a model example of a philosophy that simply does not work?
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Anonymous | 09/08/2010 10:49 am
I suggest you take yourself along to a meeting of housing officers, or a council meeting involving housing, or a meeting of an almo board.
Better still, become a leaseholder, get a bill and ask someone to explain it.
All wil be revealed.
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Melvin Bone | 09/08/2010 11:38 am
They made an operating profit of £32.6m (2008: £26.9m).
So almost £60m over 2 years.
They should have saved some money for a rainy day...
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Anonymous | 09/08/2010 12:09 pm
How they made that profit is the subject of some debate?
The FT reports that profits were taken at the start of a project rather than taken sequentially over time. Also, that costs of its suppliers were loaded at the back.
This is a recipe for disaster. Analysts picked up what was happening from the accounts then zipped over to its suppliers, Travis Perkins and BSS, to check this was the case.
When your client's money, and your kid's crust, is on the line you tend to take an interest. If the taxpayer picks up the bill, who cares.
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Anonymous | 09/08/2010 12:09 pm
How they made that profit is the subject of some debate?
The FT reports that profits were taken at the start of a project rather than taken sequentially over time. Also, that costs of its suppliers were loaded at the back.
This is a recipe for disaster. Analysts picked up what was happening from the accounts then zipped over to its suppliers, Travis Perkins and BSS, to check this was the case.
When your client's money, and your kid's crust, is on the line you tend to take an interest. If the taxpayer picks up the bill, who cares.
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