Rent cut drives contractor profit warning
Social housing contractor Lakehouse has issued a profit warning linked to reduced spending following the 1% rent cut.
The contractor, which floated on the stock market in March last year, issued the warning to investors yesterday prompting a fall in its share price.
It said it was “operating against a backdrop of cost reductions… resulting in part from a requirement for social landlords to reduce rents by 1% a year for the next four years”.
The contractor primarily works with social landlords, both housing associations and councils. In the year to September 2015 its regeneration business, which works almost entirely with social landlords, turned over £161.7m, and its compliance business, which is also largely reliant on the sector, turned over £36.6m. Its total revenue was £340m.
Some housing associations and councils, which form a large part of Lakehouse’s client groups, have reduced planned spending on repairs as a result of the rent cut, which was a surprise announcement in the summer Budget.
The contractor said some social landlords were holding back on capital spending commitments until budgets are confirmed in April.
It said that as a result, work from procurement frameworks it is involved in has not materialised.
The statement added that funding pressures on social landlords mean it is having to bid at lower margins for energy work, such as insulation.
It said: “In light of the above headwinds the group now expects the financial outturn for the current year to fall short of its previous expectations and to see a reduction on last year’s profit level.”
Stuart Black, executive chair of Lakehouse, said: “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.
“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.”