Share price plunges to 27p after warning that housing specialist will breach banking covenants
The share price of social housing specialist Connaught has plunged by three quarters this morning following the warning that it will breach its banking covenants as debts rise above the £120m previously predicted.
The share price has fallen from 102p to 27p per share, after the company announced that it had “identified an urgent requirement for additional funds to meet the current and ongoing needs of the businesses”.
The group has entered into negotiations with its lenders to secure additional funding after concluding that net debt will be significantly in excess of the previously advised level of £120m at its year end of 31 August 2010 and that it will breach its banking covenants.
Connaught has appointed a number of new directors to try and steer its way through the crisis that has seen 92% wiped of its share prices since it announced a profit warning on 25 June related to the coalition government’s cuts.
Stephen Billingham, the former finance director of British Energy Group and WS Atkins has joined the group to work on financial and funding matters.
Roger Wood, the former managing director of British Gas Services and managing director of the AA business, is chairing a steering committee responsible for Connaught’s operational efficiency programme while Michael Young, who was corporate affairs director at Centrica and director of corporate policy and communications at Compass Group, will be advising on communication and reviewing management processes.
Chris Sellers, the group’s business development director has assumed the full operational role of acting chief executive of the social housing business.
Sir Roy Gardner, non-executive chairman of the Group since May said: “These are challenging times for Connaught. We are fortunate that we have been able to attract a number of senior and experienced individuals to support the company at this time and we welcome the constructive discussions with our lenders. We continue to place great importance on the solid relationship we have built with our supply chain and customers and the continuing support we receive from our employees.”
Connaught has been going through troubled times in the last few weeks.
On 16 July Mark Tincknell, the firm’s chief executive stepped down while five days later it announced that it was to investigate share sales made before the profit warning made in June.