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Lakehouse in profit warning following government's social housing cuts

Lakehouse has issued a profit warning less than a year after the company went public.

The contractor said the government’s decision to cut social housing rent had hit its regeneration and energy services divisions.

As a result, the group said its financial performance in the current financial year would be worse than previously expected, but did not give an indication of how much it expected its profit to be hit by.

In a trading statement this morning, Lakehouse said: “We are operating against a backdrop of active cost reductions taking place within client organisations, resulting in part from a requirement for social landlords to reduce rents by 1 per cent per annum for the next four years.

“In certain cases, client expenditure commitments are being held back until budgets are confirmed in April 2016.”

It added: “As such, despite our success in securing positions on key frameworks, including resecuring Eastern Procurement, the expected level of tenders from these frameworks has not materialised at the rate previously expected.

“This has led to a slower than expected first quarter performance in regeneration and, as a consequence, a lowering of our financial expectations for the division in the current financial year.”

The contractor added that “funding pressures” had also hit public sector clients in its energy services division, meaning that insulation contracts were having to be bid at lower margins.

Despite this, company chairman Stuart Black said the company was well placed to overcome these challenges. “Following our successful maiden results as a public company, we have seen recently a number of headwinds facing our markets come together to impact our business,” he said.

“I am confident that having built a group with a range of services that allow us to help our clients address their operational and financial needs, we remain well placed to overcome these challenges.”

In its preliminary results for the year to 30 September 2015, Lakehouse reported an 11.3 per cent increase in underlying revenue to £336.6m with organic revenue up 2.5 per cent. Its underlying pre-tax profit more than doubled to £21.6m from £10.1m.

Lakehouse’s March 2015 IPO raised net cash of £24.6m, after costs of £5.4m.

For more on Lakehouse

Construction News talks to Stuart Black: ”You either grow or you cut. We’ve never cut”

 

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