Connaught admits it will breach debt covenants

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The social housing maintenance group Connaught is "in serious trouble", analysts warned yesterday, after the company admitted that its net debt would be significantly higher than its previous forecasts.

Shares in Connaught, which said last month that it would be hit by the Government's planned public spending cuts, fell by 69 per cent to close at 31.5p, valuing the FTSE 250-listed business at just £44m.

"The group has ... concluded that net debt will be significantly in excess of the previously advised level of £120m at its year end of 31 August 2010 and it will breach its banking covenants," Connaught said in a statement.

Several analysts removed share price targets, saying there was now insufficient information available about the company's financial position.

"With the group now in financial difficulty, we believe there is little prospect of any new contract wins, and there is a material risk of losses," said Guy Hewitt, at Investec. "The chairman has brought on board a number of experienced managers but Connaught appears to be a company in serious trouble."

Sir Roy Gardner, the City veteran who was appointed non-executive chairman in the spring, is in effect leading the company after its founder and chief executive, Mark Tincknell, stepped aside earlier this month "to recover from recent health issues".

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