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Connaught in tailspin after profit warning

Marion Dakers
SHARES in social housing maintenance firm Connaught have lost over half their market value since Friday’s surprise profit warning.

The firm’s stock tumbled 37 per cent yesterday, following losses of 33 per cent in the last half-hour of trading last week when the company announced that 31 contract deferrals from hard-up local councils would hit full year revenues by £80m and earnings by £13m.

Traders rushed to dump the stock yesterday, with over 11m shares changing hands. It hit a low of 131p shortly after the markets opened, before closing at 135p.

Shares in the company also saw heavy losses in January, when chief executive Mark Davies announced his resignation. He was replaced by Mark Tincknell, who said on Friday that the company’s medium-term outlook remained strong, with most of its contracts linked to essential services.

Analysts at BNP Paribas were downbeat about the stock. “Brokers have spoken to other players in the industry and while all expect conditions to get more challenging, no-one else is seeing declines on this scale, so investors may conclude Connaught had been attempting to rebuild credibility after a disastrous six-month period,” the broker said in a note.

Some analysts were more optimistic. Richard Bennett from Altium Securities said that while it is “clearly disappointing news, this should leave a more defensive group with limited exposure to cyclical maintenance revenues”.

He also drew attention to the cost-cutting programme the company is running over the next two years, which is expected to save at least £25m. The firm has also said it has a £5.3bn bid pipeline.