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

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.

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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.