Yesterday the news that Connaught may go into Administration was very disappointing to hear. When companies do go into administration, as it did with Jarvis Plc earlier this year, it negatively affects so many people, there is clearly a domino effect.
Nearly 10,000 jobs are at risk as the property and environmental services giant Connaught faces collapse. The company, which specialises in social housing, said it was “in the process of appointing administrators”. The appointment is expected to be completed and announced formally on Wednesday morning.
Earlier, Connaught said it had tried to secure funding for its £220m debts, but had failed. Trading in Connaught’s shares has now been suspended.
“The board is saddened to announce that it is in the process of appointing partners from KPMG as administrators of Connaught and its subsidiary, Connaught Partnerships, which comprises its social housing division,” the company said.
What about all the sub-contractors working for them, that are owed money, the recruitment businesses that are owed money, they are likely to get very little of the money they are owed. Poor management of companies that go into administration, means that knock on effects include staff lose jobs, sub contractors may go bankrupt. Why is this allowed to happen?
In last months article, Suicide bidding: Connaught and Rok accused, I stated that it was a ridiculous state of affairs that Connaught, Rok and many other companies bid for work at such low margins, break even or even at a loss. Business is about making healthy and sustainable profit margins; somewhere along the line some companies obviously lose track of this, or think that can run at break even or loss making, then turn that philosophy around. I think that if you are known for low bids, low margins eventually this sticks with your customers, you are then stuck in this place, it is hard to justify and charge healthy profit margins in the future.
The only positive to take from this is that the vultures will already be starting to hover over Connaught, one businesses loss is another gain. The lack of confidence in Connaught means that companies hiring Connaught will look to take the work back in-house, or alternatively re-assign the work to their competitors. Good luck to their competitors and good luck to Connaught, their staff and their suppliers.
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I agree – it would appear the only part of Connaught worth saving is compliance (Safecontractor and Exor) which currently returns about 10% profit. However to keep up with demand from the construction sector, Connaught have had to recruit many health and safety assesors that are only trained in general H&S and have never even been on a construction site! Which would imply that Safecontractor are more concerned with profit rather efficacy and safety.
Add to the fact that many clients may be reluctant to have their contractors vetted by a failing company and it would appear that even Safecontractor is’nt SAFE.
vincent
September 8th, 2010 at 1:19 pmpermalink
Vincent,
It is apparent that Health and Safety is more and more important in the age we live, however this is not probably the reason for the demise of Connaught Plc. It may come out why Connaught got themselves in to this position, it may not.
I am sure that if they have bid low, which has apparently been a business model they have implemented, it really has come back to bite them. I feel sorry for the employees and sub-contractors the most, I hope they all get through this difficult period.
Some good news though, today I read that Morgan Sindall’s affordable homes division Lovell has bought the majority of Connaught’s ongoing contracts in a £28m deal which will see 2,500 staff transfer to the company. Well done Morgan Sindall, good work and probably a shrewd piece of business.
Bill Wynn
September 10th, 2010 at 10:48 ampermalink
[...] we have seen the demise of several big businesses this year (Jarvis and Connaught being perhaps the two largest casualties); there is without doubt a need for employees to hold onto [...]
Some key statistics regarding employee turnover
September 20th, 2010 at 3:50 pmpermalink