Building maintenance outfit Lakehouse (LAKE:AIM) bombs in morning trading, shedding 57% to 36p, as rent reductions in the social housing sector lead to contract delays and weaker than expected financial performance.
Social landlords are required to reduce rent by 1% per annum for the next four years which 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', according to Lakehouse's management team.
Social housing budgets are also under pressure after a government initiative to transfer housing assets to the sector which required them to raise external debt.
Earnings per share are now expected to be lower than in the year to 30 September 2015 which on an underlying basis were 13.7p.
Management flagged a number of issues at full year results announced in December. Lakehouse's underlying profit-before-tax at £21.6 million excluded £8.7 million of exceptional costs related to its initial public offering (IPO) and losses on contract exits and start-ups.
There was also a further £6.5 million of non-cash amortisation charges excluded from underlying profit-before-tax.
You can read our take on Lakehouse's update in this week's edition of Shares Magazine, on sale at WH Smith and other newsagents from Thursday 4 February.