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Mark Slater leads shareholder revolt at Lakehouse

Citywire AAA-rated Mark Slater leads calls for boardroom shake-up at housing contractor Lakehouse, whose shares have halved this year.

 
Mark Slater leads shareholder revolt at Lakehouse

Update, adds Mark Slater comment: Star fund manager Mark Slater is leading a shareholder revolt at Lakehouse (LAKE) as the social housing contractor's board comes under increasing pressure following a torrid time for investors since floating last year.

Shares in the company have halved since an initial public offering in March last year, after Lakehouse warned last month that profits are likely to fall this year as social housing landlords hold back on spending.

Chief executive Sean Birrane resigned yesterday but that has not proved enough for Citywire AAA-rated Slater, who holds the company in his Slater Growth and Income funds.

He has joined with Steve Rawlings, Lakehouse's founder, to demand the company's three non-executive directors, Chris Geoghegan, Jill Ainscough and Jonathan Ford, be removed. News of the intervention sent the shares 7.7% higher at 43.9p this morning.

Rawlings, who stepped down from the business four years ago, is putting himself forward as a non-executive, alongside Ric Piper, former finance director at engineering group WS Atkins (ATKW) and activist investor Robert Legget, managing director of fund group Progressive Value Management.

Slater said change was needed and that the company's problems could not be attributed solely to the wider pressures in the social housing market. 'There may well be some business specific pressures, but there have also been some unenforced errors,' he said.

The manager argued that the existing non-executive directors had not done a good enough job in guiding management. 'The calibre of the people we are looking to bring in is very high,' he said. 'The founder is highly motivated to ensure shareholder value is restored.'

Slater added that he had been approached by other shareholders after launching the action, and was confident the bid for a boardroom shake-up would win approval. 'Our view is that we will succeed,' he said.

Ainscough's position on the board has already come under pressure, with more than a quarter of shareholders voting against her reappointment at the company's annual general meeting last month.

Slater and Rawlings, who together own more than 20% of the company according to Thomson Reuters data, have requisitioned a general meeting of shareholders to vote on their proposals. Under stock exchange rules, the board is required to call the meeting within 21 days.

Slater, the son of City legend Jim, has built a reputation as one of the UK's best fund managers, thanks to the astonishing returns he has delivered on his flagship fund, Slater Growth. Over 10 years the fund sits well ahead of any others in the UK All Companies sector, with a return of 275.5%.

Slater runs relatively concentrated portfolios, with just 53 stocks in his Growth fund. Lakehouse was one of his buys last year, and he now owns just over 6% of the company, according to Thomson Reuters data.

Slater said when buying the company that he was impressed with the strength of its management, and was attracted by the company's valuation. Lakehouse last year floated at £140 million, below initial hopes of a £200 million valuation.

But having seen value in the company's then price-earnings ratio of eight, the shares, even with today's rally on news of the intervention, are trading at just over four times forward earnings. Based on dividend forecasts of 3.5p per share, they are yielding nearly 8%.

Lakehouse has blamed the pressure on social landlords for its woes. Housing associations have been forced to cut rents by 1% each year for the next four years under changes brought in by chancellor George Osborne in last year's summer Budget. The company said this had forced some to delay spending commitments until budgets are confirmed in April this year.

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