Connaught probe after shares plunge (From Daily Echo)

Connaught probe after shares plunge

10:23am Wednesday 28th July 2010 in

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THE City watchdog has launched a probe into beleaguered social housing firm Connaught, which has a £12m contract with Southampton City Council.

The move comes after the firm lost 90 per cent of its value in a month, including a 70 per cent plummet on Monday.

In total, Connaught shareholders have seen the company’s value plunge from almost £450m to £44m in a little over a month.

Connaught has assured Southampton city bosses its £12m contract to refurbish council houses under the Decent Homes initiative won’t be affected by the financial woes.

The company, which warned yesterday it was in “urgent” need of additional funding, faces an investigation by the Financial Services Authority (FSA).

The FSA is said to be looking at several lines of inquiry including whether Connaught revealed price-sensitive information quickly enough. Connaught and the FSA declined to comment.

The crisis-hit company has seen shares tumble since warning of a £200m blow to revenues from Government spending delays a month ago.

The Exeter-based firm said yesterday it would breach banking covenants after warning its debts will be well over the previously advised level of £120m by the end of August.

The firm, which has about 180 multi-million pound social housing contracts all over the country, is in talks with its lenders after a review had identified an “urgent requirement” for additional funds to meet current and ongoing business, in part due to pressure from suppliers and sub-contractors.

Southampton City Council said it had received “complete assurances” that work on the remaining 370 properties covered by the £12m, three-year Decent Homes contract would be carried out.

Already Connaught has repaired 1,300 kitchens and a similar number of bathrooms in council properties across the city under the initiative, which has until the end of the year to run.

Connaught shares edged eight per cent higher yesterday after Monday’s 70 per cent tumble, although both chairman Sir Roy Gardner and founder Mark Tincknell are heavily out of pocket on shares bought at the beginning of May before the problems emerged.

The duo bought shares worth £500,000 and £1m respectively when shares were trading above 300p. Yesterday they closed at 33.7p.