Lakehouse plc Trading Update and Lakehouse awarded £37m contract (9450F)

TIDMLAKE

RNS Number : 9450F

Lakehouse plc

02 August 2016

PRESS RELEASE

2 August 2016

Lakehouse plc

("Lakehouse" or "the Group")

Trading Update and Lakehouse awarded GBP37m domestic smart meter contract with Scottish Power ("the Contract")

Lakehouse, the asset and energy support services group, today provides an update on trading, together with the announcement of a major contract win.

Trading Update

At 30 June 2016, the Group had an order book of GBP596m, GBP633 million including the Contract which is broadly in line with the GBP636 million reported in the Interim Results for the six months ended to 31 March 2016 (which were published on 17 May 2016) ("Interim Results").

As reported in the Interim Results, the Board remains focused on resolving performance issues in the Regeneration division. This includes a number of contract settlements on which there is a range of potential outcomes for the Group, both in terms of cash flow and impact on the Income Statement. Management anticipate there are likely to be further write-downs, during the current financial year as we seek to close out these issues with clients. Based on current discussions, this is expected to have an adverse impact of GBP4 million in the current financial year.

The Board notes the ongoing consultation concerning the UK Government's policy on Energy Company Obligations, which is due to enter its third phase on 1 April 2017. The outcome of this consultation is crucial to determining the levels of funding and, as importantly, the types of works that will be funded. We remain in active dialogue with Government over the future direction of policy on energy efficiency, which we see as critical to achieving the legal obligations the UK has to deliver carbon savings and will influence the Board's overall outlook for the Energy Division.

Elsewhere in the Group, underlying trading and order visibility remains generally strong in our Compliance and Construction divisions, subject mainly to the timing of project work. The Group continues to invest in areas of growth and a programme has begun to reduce and re-assign headcount in certain operational and support functions to better align costs and staff levels with the Group's future plans.

As at 30 June 2016, the Group's net debt was GBP30.6 million, comprising GBP28 million drawn from its GBP45 million revolving credit facility, together with an overdraft of GBP2.6 million drawn from its GBP5 million facility.

Contract Win

The Group is pleased to announce the award of a GBP37m contract with Scottish Power for the installation of domestic smart meters across Northern Scotland, Wales and North West England. The Group expects to install more than 450,000 meters over the course of the Contract's five year term.

The Contract will mobilise during the remainder of the current financial year to 30 September 2016, with the Group making an investment of approximately GBP1.5 million in the current financial year to mobilise and train more than 100 dual fuel engineers. In accordance with the Group's accounting policy, all mobilisation and training costs will be expensed as incurred.

The Group has been successful in securing further contracts with three leading utilities for domestic meter installation and negotiations are ongoing with another two. This diversification will involve a rapid transition of the business into Domestic meter installation services, which the Group expects will involve a cost of GBP1 million in the current financial year, as we redeploy and retrain existing staff. This reflects a recent decision by the Group's existing major metering customer to take installation in house, following a number of acquisitions among our competitors.

In light of such a rapid transformation exercise, the Group expects the year ending 30 September 2017 to be one of consolidation for its metering activities, as we seek to deliver top quartile performance for our clients on the above contracts.

The Group is encouraged by demand in the metering market, which is expected to contribute an important element to the Group's future growth agenda. The Board considers the Contract to be an important step in the ongoing diversification of the Energy Services division, consistent with the aim of reducing its reliance on Government energy subsidies.

General meetings and management changes

The Group anticipates that the cost of and events surrounding the two general meetings held in April and August 2016, together with the exit arrangements (in line with contractual obligations) of certain executive members of management, will cost GBP1.5 million.

Outlook

The Group is disappointed to report that the outlook for the current financial year is significantly below its previous expectations. This reflects a number of one-off and non-recurring items, upon which the Board feels it is important to take immediate action. The actions are expected to help restore shareholder value in the medium term and the Board remains confident in the opportunities and prospects for the Group, notwithstanding a challenging and difficult year to 30 September 2016.

Bob Holt, Executive Chairman, said:

"We are delighted to have secured this significant contract for our meter installation activities as well as significantly expanding our relationship with Scottish Power. This is an important award in helping to diversify our Energy Services division, reducing its current level of reliance on energy subsidies and particularly the Energy Company Obligation, a policy currently being consulted on by the UK Government.

Elsewhere in the Group we are making progress and taking action on a number of operating challenges in the Group, especially on contract settlements within the Regeneration division. As previously reported, the Board remains very focused on restoring shareholder value."

Michael McMahon, Executive Director Lakehouse plc and Managing Director Lakehouse Energy Services, said:

"The successful award of the Contract reaffirms our strategy of becoming a first tier supplier of metering technology and we are making good progress in mobilising the contract. Our specialist metering company Providor, which was acquired in May 2015, will benefit as a result of this award as part of our plan for further growth underpinned by excellent customer service levels.

We are particularly delighted to extend and strengthen our relationship with Scottish Power and are committed to building these strategic relationships for long term value."

ENDS

Enquiries:

 
 Lakehouse                         Telephone: 01708 
                                    758 800 
 Bob Holt, Executive Chairman      Telephone: 07778 
                                    798816 
 Michael McMahon, Executive 
  Director 
 Jeremy Simpson, Chief Financial 
  Officer 
 
 Financial Public Relations 
 Camarco                           Telephone: 0203 
                                    757 4992 
 Ginny Pulbrook 
 Tom Huddart 
 
 

Notes to Editors:

Lakehouse is an asset and energy support services group that constructs, improves, maintains and provides services to homes, schools, public and commercial buildings with a focus on clients in the UK public sector and regulated markets. Services are delivered through four divisions: Regeneration, Compliance, Energy Services and Construction. The Group was founded in 1988 and is headquartered in Romford, Essex. It currently employs more than 2,400 staff from 34 offices across the UK.

This information is provided by RNS

The company news service from the London Stock Exchange

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August 02, 2016 02:01 ET (06:01 GMT)