Connaught: 55% climb in interim turnover to £260m

Connaught, the social housing operator, has enjoyed a sparkling first half with interim turnover climbing by 55% to £260m.

Mark Davies, chief executive, said: “The headline is that we’ve had a very good first half. In the year t o date we have secured £670m of new orders.”

Connaught provides maintenance and refurbishment services to housing associations and local authorities.

It does not have any new build or development operations and does not feel any need for them.

Within the social housing sector, the maintenance and refurbishment market is worth £10m, says Davies.

“The market is fast maturing and its current fragmented nature – with the top ten operators covering just 19% of the market – is changing,” he reports.

“The market is stable as it is one of the few areas of public expenditure funded by a revenue stream, with over five million households paying a weekly rent.”

The separate market within the social housing sector for new build is worth a further £5bn.

Connaught’s latest interim results cover the six months to 29 February 2008. Pre-tax profit ran to £9.7m (figure in the previous comparable period: £8.1m). The previous interim turnover ran to £170m.

The latest figures give a profit margin of 3.8%, down from 4.9% the last time round.

Davies said the comparison was rather unfair as the latest pre-tax profit had already been trimmed by a £3.3m charge to cover the amortisation of the acquisition of six competitors.

Does that suggest Connaught has been buying fresh air?

Davies chuckles. “Not at all,” he replies. “All the businesses have a good reputation but they are not asset-rich. They have good brands and good client relationships.”

Segmental analysis shows turnover contributions from two divisions:

• £210m – social housing
• £50m – compliance

Operating profit contributions (excluding central costs) were:

• £8.1m – social housing
• £4.9m – compliance

Connaught’s smaller operation, the compliance division offers safety, health and risk management solutions through its white collar advisory and blue collar servicing businesses.

Connaught has established its own business model, the only player to come reasonably close is Mears.

Might Davies swoop for one of the other top 10 players?

He says the answer is no.

“We are the number one with a 4% share and we are not looking to buy one of the other nine names. We don’t see the need as we can already offer clients the whole range of services.”