What’s behind Lakehouse plc’s 30% gain today?

Shares in Lakehouse plc (LON: LAKE) are surging but should you buy?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in housing services provider Lakehouse (LSE: LAKE) are surging today, trading up by more than 30% in early deals as investors celebrate the appointment of Robert Holt as a director and executive chairman yesterday. Following the resignation of CEO Stuart Black on 21 April 2016, Mr Holt has been appointed to spearhead the company’s turnaround after a turbulent period of trading.

Indeed, in the group’s interim results for the six months ended 31 March 2016, management reported that Lakehouse has had a challenging start to 2016 with challenging market conditions exacerbated by internal disruption as the composition of the company’s board was reconsidered.

Perfect person for the job?

Robert Holt seems to be the perfect man to instigate a turnaround at Lakehouse. He has plenty of experience in the property sector after running social housing maintenance company Mears more than a decade. He purchased Mears for just £50,000 in 1996 and today the company is worth just under £400m with sales set to hit £1bn, according to City estimates, by 2017.

So, if he can replicate his Mears success with Lakehouse, the group’s long-suffering shareholders may finally be able to receive a return on their investment. Lakehouse has been one of London’s worst-ever-performing IPOs. When the company went public in January this year, shares changed hands for just under 100p each. Two subsequent profit warnings followed and today the firm’s shares trade at 29p, a full 68% below the IPO price. Before today’s gains shares in Lakehouse were down 75% year-to-date.

Taking on a challenge

It’s clear that Bob Holt has got his work cut out for him. Even though Lakehouse has only been a public company for a few months, the firm has already been subject to plenty of scrutiny and has fought an activist battle with Slater Investments Ltd and Steve Rawlings. Rawlings founded the company in 1988 and left in 2012. Together with Slater Investments, they account for a combined stake of around 22% of Lakehouse.

This activist battle, coupled with numerous top-level management changes has hit Lakehouse’s day-to-day operations. It posted a pre-tax loss of £1.8m in the six months to 31 March, compared to a profit of £1.2m reported for the same period a year earlier. Stripping out exceptional items, underlying pre-tax profit fell 45%. Revenues ticked higher to £167.8m from £161.3m for the period.

For the year ending 30 September 2016, City analysts currently expect Lakehouse to report earnings per share of 7.9p, which implies that the company is trading at a forward P/E of 3.2. A full-year dividend of 3p per share is also expected, giving a dividend yield of 12%. Analysts have pencilled-in earnings per share growth of 10% for 2017.

The bottom line 

So overall, the appointment of Bob Holt at the helm of Lakehouse could mark the beginning of a new chapter for the company. And with its shares trading at such a depressed valuation, there could be value to be found in this turnaround story.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Dividend Shares

How to invest £20,000 in 2025 to generate safe passive income

It’s easy to generate passive income from the stock market today. Here’s how Edward Sheldon thinks investors should build an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Could the FTSE 100 hit 9,000 in 2025?

The FTSE 100 has lagged other indexes over the last year. But some commentators believe 2025 could be a stellar…

Read more »

Investing Articles

Why selling cars could drive the Amazon share price higher in 2025

After outperforming the S&P 500 in 2024, Stephen Wright's looking at what could push the Amazon share price to greater…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

3 of the best British shares to consider buying for 2025

Looking for UK shares to think about buying next year? These three stocks have all been brilliant long-term investments but…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

5 crucial Warren Buffett investing habits and a stock to consider buying now

Here's a UK stock idea that looks like it's offering the kind of good value sought by US billionaire investor…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

2 legendary FTSE 250 shares I won’t touch with a bargepole in 2025

Roland Head looks at two household names and explains why these FTSE 250 shares are already on his list of…

Read more »

Investing Articles

Why I think the Barclays share price is still a bargain heading into 2025

Stephen Wright thinks a combination of dividends and share buybacks means the Barclays share price is still attractive, despite a…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s how an investor could use £10 a day to target a £2,348 second income

For just a tenner a day, our writer illustrates how an investor could build a four-figure annual second income over…

Read more »