Connaught nears administration
Troubled social housing contractor Connaught is believed to be on the brink of administration.
The FTSE 250 company, which for the last few weeks has been in emergency talks with its creditors, has issued a statement to the stock market saying it ‘believes that the availability of additional funds from its lenders will not be forthcoming’ and suspending the trading of its shares.
The company’s troubles first came to light in June when it announced an £80 million reduction in revenues as councils postponed social housing work following the emergency Budget. Chief executive Mark Tincknell and finance director Stephen Hill announced they were standing down.
It later said it expects to make ‘significant write-downs’ to the value of its assets compared to last year.
Since then Barnet Homes and Solihull Council have said they are ending contracts with Connaught and housing associations which hold contracts with the firm have been drawing up contingency plans.
The Royal Bank of Scotland provided the firm with an emergency £15 million loan in July and has, along with other creditors, spent the last few weeks talking to Connaught about the firm’s future.
However the statement issued this morning says although Connaught ‘remains in discussions with other parties, the ability to provide an adequate solution to the funding issues the group faces has become increasingly uncertain’.
It adds that a further announcement will be made ‘in due course’.
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Readers' comments (11)
Anonymous | 07/09/2010 10:48 am
This was always on the cards, fancy website, saying all the right things and putting in tender prices that couldn't achieve a profit to naive clients who thought that they were getting a good deal and saving thousands.
When contracts were awarded they couldn't perform due to fixed manpower resources based on the tender prices.
They have taken over a lot of good small companies and won contracts from good, solid, performing smaller companies -What will happen to the clients who now face budget cuts and increased tender prices?
I feel really sorry for the employees that are about to lose their jobs.
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Anonymous | 07/09/2010 11:45 am
The currently published difficulties of Connaught have highlighted what most of us who work in the social housing repairs sector are already aware of. One of the key reasons being suggested is that the firm ran into serious difficulties over the past couple of months, after it emerged that a series of contracts are/would be loss making.
Social Housing clients are attracted to accept (sometimes ridiculously) low tender prices for both repairs and decent homes type work, with no serious review on whether they are achievable in the long term – usually smitten by the quality marketing of the bigger players. Indeed some competitors have recently actioned injunctions on impending awards due to concerns over low pricing.
Whilst sincere sympathy goes out to the employees that will no doubt be affected, my work involves supporting subcontractors in these respective supply chains, who will also be severely cash strapped as a result, if not already.
Due to tendering legislation we are typically excluded from direct tendering for this type of work, but it is on us whom these main contractors are heavily reliant on to actually deliver the contracts.
Contractors still seek to secure their margins for the contract once it commences and this inevitably results in a continuing squeeze on subcontractors to take on work at significantly reduced rates accompanied by a poor/slow payment regime.
This practice is unsustainable and needs to be seriously addressed.
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Anonymous | 07/09/2010 11:45 am
The currently published difficulties of Connaught have highlighted what most of us who work in the social housing repairs sector are already aware of. One of the key reasons being suggested is that the firm ran into serious difficulties over the past couple of months, after it emerged that a series of contracts are/would be loss making.
Social Housing clients are attracted to accept (sometimes ridiculously) low tender prices for both repairs and decent homes type work, with no serious review on whether they are achievable in the long term – usually smitten by the quality marketing of the bigger players. Indeed some competitors have recently actioned injunctions on impending awards due to concerns over low pricing.
Whilst sincere sympathy goes out to the employees that will no doubt be affected, my work involves supporting subcontractors in these respective supply chains, who will also be severely cash strapped as a result, if not already.
Due to tendering legislation we are typically excluded from direct tendering for this type of work, but it is on us whom these main contractors are heavily reliant on to actually deliver the contracts.
Contractors still seek to secure their margins for the contract once it commences and this inevitably results in a continuing squeeze on subcontractors to take on work at significantly reduced rates accompanied by a poor/slow payment regime.
This practice is unsustainable and needs to be seriously addressed.
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Sidney Webb | 07/09/2010 11:56 am
Anonymous is absolutely right, and the situation is even worse in the area of supporting people funding where contract values have been driven down to levels that make providing care impossible.
The rebutal will be, how can a better service be afforded. The question should be, how can we fail to afford ensuring properties are properly repaired and those in needs are properly cared for, thus avoiding the huge cost neglect will force us to face in years to come.
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Anonymous | 07/09/2010 3:04 pm
Surely the RSLs know indicatively what the works are going to cost prior to issuing the tender docs? If the pricing is coming in that low, then you certainly can reject it if it was felt it was not deliverable - which would appear to be the case here. As mentioned in all posts though, it is the employees, and supply chains who will be hit hardest. There is a bit of blame alround here me thinks.
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Anonymous | 07/09/2010 3:33 pm
I must confess I thought they did well to last this long. I have experience working with this company in three different boroughs where the council did not want to terminate their contract for fear of losing face instead they were blaming everybody else but the contractor.
The desperate need to reduce costs is the problem. There is very little evidence that any contractor is actually delivering VFM within the tender price. In fact, my own experience has been that 75% of the work allocated has returned with a significant amount of variation, i.e., replacing a tap washer becomes replacing taps, etc., This also very difficult to check because of lack resources, monitoring roles have been significantly reduced.
The solution to the problem is identifying actually costs and to stop arbitrary and politically motivated drives that you can make 'efficiency savings' every year.
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Valerie McClelland | 08/09/2010 10:15 am
It is very easy to make judgements while looking on from a position of safety. Rather than sitting back in your ivory towers looking down, try having a little sympathy for those of us who have worked extremely hard for Connaught and who are now on the brink of ruin with no prospect of other employment on the horizon. I for one, a single mother with a family to feed and a mortgage to pay, will probably lose my house as a result of this collapse.
I don't dispute that there have obviously been gross errors made at high level but the reality for most of us on the front line for Connaught is much starker than just laying blame.
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Pauline Walton | 08/09/2010 11:02 am
I am surprised at the claim that the news of Connaught's problems were only evident from June this year.
Connaught's accounts were published in mid November last year, and Tim Steer of Artemis had his interview with Connaught published in mid-December. His action to avoid Connaught was based on those two sources and anyone could have viewed them online.
Any contracts signed with Connaught after the end of December 2009 must lead one to question the quality of the due diligence.
Norwich City Council has a case to answer.
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Melvin Bone | 08/09/2010 11:17 am
On Radio 4 this morning the problems that Connaught faces were blamed on accounts that were not generating enough 'cash'. It seems they have plenty of turnover but were not actually generating any real profit.
The financial expert likened Connaughts situation to Enrons without the fraud...
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Pauline Walton | 08/09/2010 11:17 am
I do wonder how many actual jobs will be lost? The work in social housing is not optional and most of the labour comes from local sub-contractors as explained above. But any job loss is frightening and the uncertainty is killing.
I have been horrified by the way the government procurement process operates. It produces neither quality nor value for money and it is not a truly competitive process.
Why can't the process reflect the commercial world?
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