Housing giant Connaught faces collapse

Shares in social housing giant Connaught were suspended today as the company, which has a base in West Bromwich, appeared on the brink of collapse.

The property services group, which has axed more than 100 jobs in Sandwell in recent weeks, has £220 million of debt and is said to be on the verge of being put into administration by its bank creditors after lenders refused to offer further support.

The group, which employs 10,000 people, issued a statement this morning saying it had asked for trading in its shares on the London Stock Exchange to be suspended while it tried to clarify its financial position.

Among 180 social housing contracts in the UK, Connaught has an operation in Kelvin Way, from where it has worked on the £425 million revamp of 29,000 council homes in Sandwell.

But just 36 of the 177-strong workforce are now left to work on the last few months of the contract, which runs out at the end of December.

Shares have lost about 95 per cent of their value since it emerged in June that 31 of its contracts would be hit by public sector spending cuts.

Connaught has borrowed money from six banks and four other creditors. Royal Bank of Scotland recently provided £15 million to help keep the business going. But its creditors are thought to have rejected a rescue plan put together by new chairman Sir Roy Gardner and decided instead to put the group into administration.

In today's statement, Connaught spokesman Paul Haines said that since agreeing a short-term overdraft at the end of July, the group had been in continuing talks to try and secure additional funding and long-term restructuring of its financing.

Shares in Connaught stood at 16.65p today, valuing the company at just £23.3 million. They have collapsed from a June value of around 330p each after Connaught revealed the impact of delays to 31 projects would wipe £80 million off its revenues.

By Simon Penfold