Social housing business will hive off two profitable arms for sale
The environment and compliance divisions of Connaught will not be placed into administration, according to two sources close to the situation.
They said that while both the social housing division and PLC are expected to be placed into administration as early as today, the environment and compliance parts of the business would be hived off into a separate vehicle. They will receive funding while the management team remains in place to attempt to sell the divisions.
One source said: “They are the financially healthier parts of Connaught and will be kept as separate entities to be put up for sale.”
Another source confirmed that the company was looking to sell the two arms and had been in talks for several weeks. They said: “They are the profitable and cash-generative parts of the business.”
KPMG is expected to be appointed administrator for the remainder of the group.
The news follows a statement to the Stock Market this morning from Connaught that said its shares would cease trading after its banks refused to provide extra funding to keep the business going.
It follows an announcement in July that the company’s banks had agreed a short term £15m facility to tide it over after it ran into financial difficulties.
In a statement to the market this morning, the company said: “Connaught has had continuing discussions with its lenders and other sources of finance with the objective of securing additional funding and a restructuring of the group’s financing for the longer term.”
“The group now believes that the availability of additional funds from its lenders will not be forthcoming and, whilst it remains in discussions with other parties, the ability to provide an adequate solution to the funding issues the Group faces has become increasingly uncertain.”
The company has blamed government cuts for some of its financial difficulties. At the same time analysts have raised questions about its accounting practices that meant upfront mobilization costs on contracts were spread over the lifetime of the contract rather than at the beginning.
Connaught was unavailable for comment.