Doel favours Connaught in UK Opportunities

F&C's Phil Doel has added Connaught, the integrated support services group, to his F&C UK Opportunities Fund.

Connaught's principal activity is providing integrated asset management and compliance services to the public and private sectors focusing on social housing maintenance, estate management, electrical and mechanical maintenance and specialist maintenance.

Their shares have been de-rated during the last year whilst investors focused on economically sensitive recovery situations, rather than steady growth companies, and over concerns of new business strain on cash flow (as contracts get bigger and more complex, mobilisation costs rise). There has recently also been a change in CEO with one of the group's founders standing down as executive chairman to be permanent CEO. Coupled with its UK-centric exposure and reliance on local government funding, there has been a fair mix of headwinds.

Whilst the change in management is not ideal, Doel believes that it represents a degree of continuity and the search for a well respected independent non-executive new Chairman should reassure. The returning CEO and FD have also both bought significant numbers of shares since the changes were announced.

Doel commented: "Despite some hiccups, I anticipate that the current market conditions will increasingly value genuine growth more highly again and that Connaught can demonstrate this as it continues to consolidate its leadership in UK social housing. This is a market where outsourcing demonstrably lowers cost and improves service, where contracts are being bundled which should favour larger players and where Connaught is already gaining a reasonable share."