Social housing servicing group Connaught 'nears administration'

Really2

Connaught, the property services group that specialises in social housing, is on the brink of going into administration, the BBC has learned.

The company, which employs 10,000 people, has suspended trading of its shares, and said a further announcement would be made "in due course".

Connaught has £220m of debt, provided by six banks and a quartet of other creditors.

But it said discussions to secure further funding had been unsuccessful.

"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 company said in a statement to the London Stock Exchange.

"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."

Connaught ran into serious difficulties over the past couple of months, after it emerged that a series of contracts would be loss making.

Royal Bank of Scotland recently provided Connaught with a further £15m in an attempt to keep the group going.

However, its bank creditors have now decided instead to put the business in administration, under UK insolvency procedures.

In his blog, Robert Peston writes: "In spite of the severity of the economic crisis that engulfed the UK in 2008, few listed businesses have collapsed.

"In that sense Connaught, a FTSE 250 company which at one stage had a market value of well over £500m, is unusual."

Shares in the Exeter-based company have lost about 90% of their value since late June, when it announced it had identified 31 contracts that had been deferred following the spending cuts announced in the Budge

Falling asset prices + increases in debtors through recession = HA failing over.

It will be interesting how this pans out, I dare say some on here would like to see a fire sale. My money would be on another HA buying their assets off the administrators (providing the administrators can't sort it out before).

But it is interesting that this model for social housing is failing, are there many more like it in the same position.
Was right to buy & selling of housing stock actually the right thing to do to lower councils exposure to costs after all?

Generali

Unfortunately there will be a lot more companies going bust over the next few months and years due to budget cuts.

Fortunately the assets aren't destroyed when a company goes bust. The properties will be sold to maximise the return to creditors.

The_White_Horse

how can these HA not have unpayable debt? they borrow 220m and then how do they make money to pay this back? surely renting the flats to subsidised filth doesn't raise enough money - especially when they have to give the scum M&S vouchers to pay rent on time, and print idiotic magazines for the filth to read. why don't they simply evict people who don't pay rent rather than spend money trying to enduce payments????

Wookster

The_White_Horse wrote: »

how can these HA not have unpayable debt? they borrow 220m and then how do they make money to pay this back? surely renting the flats to subsidised filth doesn't raise enough money - especially when they have to give the scum M&S vouchers to pay rent on time, and print idiotic magazines for the filth to read. why don't they simply evict people who don't pay rent rather than spend money trying to enduce payments????

It'd be poetic justice if those evicted squatted near your house :rotfl:

Generali

The_White_Horse wrote: »

how can these HA not have unpayable debt? they borrow 220m and then how do they make money to pay this back? surely renting the flats to subsidised filth doesn't raise enough money - especially when they have to give the scum M&S vouchers to pay rent on time, and print idiotic magazines for the filth to read. why don't they simply evict people who don't pay rent rather than spend money trying to enduce payments????

Well a company managing £720,000,000-worth of assets* employing 10,000 to do so seems pretty inefficient for a start. It means each person looks after £72,000-worth of housing!





*Equity = Assets - liabilities. The article states debt = £220,000,000 (which should be the majority of the liabilities) and equity = £500,000,000.

julieq

As far as I know Connaught isn't a housing association. It provides maintenance to owners of social housing, and its troubles are largely due to having a mixture of lossmaking and cancelled contracts.

SingleSue

The_White_Horse wrote: »

best thing to do would be sell off the flats to private individuals. all the scum living in their currently can pay market rent to the new owners or f**k off.

the lot living in HA near me are (a) scum, making noise, mess and generally being unsocial or (b) have two or three new cars and have no need whatsoever for social housing. hateful grasping people.

Get rid of all HA now.

But white horse dear chap, you keep telling me I am not scum because I am a carer yet I live in HA housing....so does that make me scum or not?

Really2

julieq wrote: »

As far as I know Connaught isn't a housing association. It provides maintenance to owners of social housing, and its troubles are largely due to having a mixture of lossmaking and cancelled contracts.

Good spot Julie, the article is not clear.

julieq

OK, dug into the actual story and Connaught is indeed a service provider, not a HA. It has failed for two reasons, one of which being reductions in local authority spending on social housing maintenance, and the other being a revenue driven business model that failed to properly account for costs, i.e. very poor financial management. They had very large turnover and very marginal profit.

On the cuts in social housing maintenance incidentally, my next door neighbour used to make a very good living doing this for local authorities. He also has a lockup filled with the perfectly good fixtures and fittings he had to rip out of social housing between tenants because the rule was that the housing had to meet a particular standard precisely and the fact that it already exceeded that standard was irrelevant. The public sector is (or was) a very very bizarre place.

Generali

julieq wrote: »

As far as I know Connaught isn't a housing association. It provides maintenance to owners of social housing, and its troubles are largely due to having a mixture of lossmaking and cancelled contracts.

That explains how they can have such a ratio of assets:workers!

lynzpower

julieq wrote: »

As far as I know Connaught isn't a housing association. It provides maintenance to owners of social housing, and its troubles are largely due to having a mixture of lossmaking and cancelled contracts.

I have worked on some project where connaught was meant to do works.

Ill tell you why they are making losses -because they have 5 call outs to solve the easiest problem ( leaking bath through a ceiling type)

inefficient and money grabbing.

If they go down, how much money wil the taxpayer lose in failed maintainence contracts? anyone know