Sir Roy Gardner calls in help as Connaught’s price plunges

Sir Roy Gardner, the tough former chief executive of British Gas owner Centrica and one-time chairman of Manchester United, has drafted in another group of his former colleagues to try and bail the company out.

Connaught shares dived 80.6p to an all-time low of 19.8p. Less than a year ago they stood at an all-time peak of 444p.

They have lost 93% of their value since Connaught issued a late Friday afternoon profit warning on June 25. The company floated on the stock market at 125p a share 12 years ago.

Today's wipe-out means that US speculator Richard Breeden, a former chairman of the Securities & Exchange Commission, has lost more than
£15 million in less than a month having built up a 13% stake in Connaught after buying shares at more than 100p each following last month's shock profit warning.

Connaught today said that it had started urgent talks with its syndicate of banks "to secure additional funding" and added that the discussions had been "constructive".

But analysts feared the worst.

Altium Securities' Richard Bennett, a buyer of the shares as recently as July 8, said he was "withdrawing forecasts, recommendations and our price target until the company can provide clarification of its financial situation".

Execution Noble's David Brockton went further, saying investors would now have to choose between putting up new funds or letting the banks grab the business.

He said: "Connaught's industry reputation will be severely impacted from these successive updates and backing a turnaround will take a significant amount of time, in our view.

"The damage to the group's industry reputation is only just being felt and will now worsen materially."

James Gilbert of Collins Stewart pointed out that "balance sheet strength is one factor housing associations and local authorities evaluate when awarding new work".

Connaught said its August year-end net debt would now be "significantly" higher than the £120 million it had predicted on July 8.

It would not say what its debt might rise to but pointed out it has banking facilities of £200.6 million.

The company would breach banking covenants once debt rose above £150 million.

Connaught blamed its original problems on the decision by several local councils to put off capital spending on 31 social housing contracts.

It declined to respond to questions today as to whether the problems were deeper rooted or could involve fraud.

Gardner, a corporate heavyweight, today brought in former British Gas Services and AA managing director Roger Wood, Centrica's former top PR man Michael Young and Stephen Billingham who was involved in major turnarounds as finance director at both British Energy and WS Atkins.