KPMG have been appointed administrators of the beleaguered property group after the group failed to secure funding to meet its spiralling debts.
Administrators have been called in after discussions between social housing group Connaught and its lenders (a consortium led by Royal Bank of Scotland) broke down this week.
“Following extensive discussions with the group's secured lenders, it is now clear that sufficient support would not be extended to the group as a whole to enable it to continue trading as a going concern,” the group said in a statement.
“As a consequence, the board is saddened to announce that it is in the process of appointing partners from KPMG as administrators of Connaught plc and its subsidiary, Connaught Partnerships Limited, which comprises its social housing division”.
RBS initially agreed to lend the group £15 million towards meeting its debts, which stand at £220 million, but Connaught failed to persuade lenders to back its restructuring plans.
The company has been beleaguered with cash flow issues for months now, having warned back in June that it was likely to report an £80 million loss for the year partly due to cut backs on public sector projects.
The group said its compliance and environmental divisions would avoid administration; these operations are being touted for a possible sale according to the Financial Times.
Redundancies are expected among its 10,000 staff, although it’s hoped that job losses will be minimised by contracts being transferred to alternative suppliers.
Connaught is currently subject to two Financial Services Authority investigations, including one against ex northern managing director Peter Jones, who reportedly sold most of his shares in the group two days before a profit warning.
“This is a serious example of the knock-on impact of the spending cuts to suppliers announced back in May. The construction industry was particularly hard hit during the downturn, even now, the private sector is struggling to regain growth," said David Hudson, a partner at Baker Tilly Restructuring and Recovery LLP.
“It further unbalances the view that the UK is on its way out of the recession. The impact of the spending cuts with Connaught not only affected the building contractor itself but subcontractors and suppliers to it. Many contractors took advantage of TTP (Time to Pay) with HMRC during the down turn. Some may have also employed the use of CVAs (Company Voluntary Arrangements) to allow continuation of trade and for the survival of the business.
“However, due to the strain on HMRC and creditors, HMRC is coming under stricter guidelines in a situation where a company falls short due to default. The fate of Connaught sends a strong message to suppliers to the public sector and we expect to see more cases to follow.”
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Another one where the music stopped ...
and they were left holding the parcel
Having £175 million goodwill on your books which is not a bankable asset really does not help
Now contrast this with BP and their current situation - if their assets were all intangible (goodwill) they would really be in trouble. However, by having 'real' assets they have something to sell to bail themselves out the position.
In todays climate anyone who invests in a company with excessive 'virtual' assets such as goodwill really does need to consider what they are getting for their money
Also take note of directors share dealings
Peter Jones - http://www.thisismoney.co.uk/markets/article.html?in_article_id=509906&in_page_id=3
Mark Ticknell - http://followthedirectors.co.uk/2010/08/09/connaught-do-you-remember-tincknells-sale-in-april-2008-at-375p/