The stock was last 6% lower on the day and dealing at three-month lows after advising that it had incurred a £3.6m pre-tax loss during October-March, reflecting the ongoing restructuring at its Property Services arm.

Despite these troubles, Lakehouse’s release was mostly reassuring, suggesting that today’s sell-off is a tad overdone. The Essex business advised that “we expect trading for the full year will remain in line with management expectations and aim to finalise the operational improvement process within Property Services during the second half.”

Indeed, there was many positives to take from today’s release. Lakehouse declared that “the core businesses of Compliance, Energy Services and Construction all performed well, posting underlying double digit EBITA growth.” Revenues across these divisions shot 14% higher during the first six months, the business announced.

And Lakehouse’s order book clocked in at a solid £580m as of March, up 7% year-on-year thanks to £267m worth of new business.

Fiery forecasts

The City expects Lakehouse’s bottom line to endure another hefty hit following last year’s 62% drop — a 23% decline is currently anticipated for the 12 months ending September 2017.

Still, such profit problems are not expected to dent Lakehouse’s progressive dividend policy. A 2p per share reward is estimated for this year, up from 1.5p in fiscal 2016 and yielding a mighty 4.5%. And the yield strides to 5.7% for next year thanks to an anticipated 2.5p dividend.

Predicted dividends are covered two times by predicted earnings in the 2017, bang on the widely-regarded safety benchmark. And for next year coverage moves to an improved 2.1 times.

And the number crunchers expect earnings at Lakehouse to start moving in the right direction with a 30% advance next year. So while the business may be suffering some trouble right now, I reckon today’s weakness may prove a great time to latch onto the company’s promising turnaround plan.

Hard work pays off

Charles Taylor (LSE: CTR) is another great London-based dividend stock that could help you make a fortune.

For 2017 the firm is expected to pay an 11p per share dividend, up from 10.5p last year and yielding 4.6%. The good news does not cease there either, an 11.6p reward chalked in for 2018 yielding a terrific 4.9%.

Investors should be pretty confident in Charles Taylor meeting these generous projections too. A modest 1% earnings rise this year is enough to cover the dividend twice. And an estimated 5% bottom-line push for 2018 keeps coverage around this figure.

Charles Taylor’s share price has failed to move seriously skywards since March’s bubbly full-year release, and I reckon this provides an opportunity for eagle-eyed investors to pile in. The insurance-sector staffer advised back then that revenues soared 18.1% during 2016, to £169.3m, a result that powered adjusted pre-tax profit 4% higher to £14.8m.

And I fully expect it to keep on impressing. The business has spent huge sums on diversifying by both sector and geography via organic investment and M&A, including splashing out £30m last year on CEGA Group, which gives it a major leg-up in the technical medical assistance and travel claims management segment.

These moves should provide the foundation for exceptional earnings growth in the years ahead, in my opinion, and with it the facility for dividends to keep mashing the market average.

The post 2 massive yielders that could make you stinking rich appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A new beginning?

Support services group Lakehouse (LSE: LAKE) has risen by 7% so far today, after the group announced a solid set of underlying financial results for the year ending 30 September.

It reported an underlying pre-tax profit of £9.9m and underlying revenue of £305.8m for last year. This equates to underlying earnings per share of 5.2p, which puts the stock on a trailing P/E of about 7.

The group’s dividend has been cut as I expected, but not abandoned. Lakehouse will pay a final dividend of 0.5p per share, giving a total payout of 1.5p and a trailing yield of 4.1%.

The group’s order book currently stands at £543m, down by around 10% from £595m at this point last year. However, forward visibility of revenue for the current year was 87% in November, above last year’s like-for-like comparison of 77%.

Before today’s announcement, the firm’s house broker was forecasting adjusted earnings of 8.7p per share for the 2016/17 financial year, with a dividend of 3.1p per share.

These forecasts may change after today’s results, but if they’re correct then Lakehouse trades on a forecast P/E of 4.2 with a prospective yield of 8.5%. If the company can deliver on these forecasts, then I’d expect the shares to double.

However, significant uncertainty remains, and debt has risen as a result of recent acquisitions. I’d want to do further research before deciding whether to invest.

A smoking recovery?

Smoke alarm manufacturer Sprue Aegis (LSE: SPRP) had a grim 2016, with the shares losing half their value after a series of problems and profit warnings.

Things seem to be getting back on track. In a trading update today, the company said it expects to report full-year sales of £57.1m for 2016, in line with consensus forecasts of £58m.

Adjusted operating profit is expected to be £2.1m, which looks about right to me, against forecasts for adjusted (post-tax) earnings of £1.12m.

Sprue’s recovery appears to have been driven by the German market, where new rules have triggered a surge in demand for smoke alarms. The firm said that German sales rose by 52% last year after a new range of products — which had been delayed — went on sale. Sprue expects Germany to remain a significant growth market over the coming years.

However, the company did warn that costs have risen significantly since the EU referendum, as a result of sterling’s weakness against the dollar. Most of the group’s manufacturing costs are in dollars.

Sprue ended last year with net cash of £14.3m and no debt. This suggests to me that the group’s dividend of 8p per share will be maintained, giving the stock a forecast yield of 4.6%.

However, at 173p, the shares look expensive when measured against 2016 forecast earnings of 4.2p per share. In my opinion, the company’s investment appeal depends on whether it can hit broker forecasts for earnings of 11p per share in 2017. For now, I rate Sprue as a hold.

The post 2 small caps that could double in 2017 appeared first on The Twelfth Magpie.

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Roland Head 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.

Lakehouse

Shares in asset and energy support services company Lakehouse (LSE: LAKE) have fallen by around 7% today after it released a somewhat mixed trading update. Its Regeneration division continues to create challenges for the business, with Lakehouse now anticipating that there will be further writedowns during the current financial year as it seeks to close out issues with contract settlements. This is expected to have an adverse impact of £4m on its full-year results.

However, Lakehouse is also experiencing strong underling trading elsewhere in its business and today announced a £37m contract win from Scottish Power to install domestic smart meters across Scotland, Wales and North West England. And with Lakehouse expected to return to double-digit bottom-line growth next year, its shares trade on a price-to-earnings growth (PEG) ratio of just 0.4. This indicates that while investor sentiment may be weak at the moment, there’s good value on offer for long-term investors.

Hornby

Despite releasing no significant news today, shares in Hornby (LSE: HRN) have risen by 7%. However, they’re still down by 67% year-to-date as the financial strength of the hobby products producer has been called into question by some investors. However, with Hornby having undertaken a successful placing to raise £8m in recent weeks, its balance sheet is now much stronger than it was previously and this lowers its risk profile considerably.

Furthermore, the placing should allow Hornby to execute its new business strategy. This includes a major cost reduction plan as well as a more focused product range. While Hornby intends to keep its main brands, it will also streamline its European operating model and seek to exit unprofitable concessions. Although this strategy seems sound and could work, Hornby continues to offer a very uncertain outlook and therefore it may be prudent to await evidence of a successful turnaround before buying it.

Proton Power Systems

Rising by 86% today is Clean Tech total power solution provider Proton Power Systems (LSE: PPS). It has today announced a major restructuring due to it seeing major growth ahead in the Clean Tech market, with its business set to be split into three segments. These are Stationary business, Mobile business and Maritime business, with Proton expecting to deliver year-on-year revenue streams as the commercialisation of its core technology is now realised.

Furthermore, Proton is on track to increase its sales by 250% this year and due to it seeing proof that the fuel cell technology it offers is commercially attractive to customers, Proton’s long-term outlook is now much more positive. Certainly, it remains a relatively high-risk play, but with clean energy becoming more in-demand and Proton now having a clear structure through which to take advantage of this, now could be a good time for less risk-averse investors to buy it.

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Peter Stephens 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.

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.

The post What’s behind Lakehouse plc’s 30% gain today? appeared first on The Twelfth Magpie.

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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.

One problem is that Flybe has been a serial disappointer. The group’s turnaround has taken longer than expected, but real progress was made last year. Sales rose by 8.7%. Solutions were found for all of the firm’s surplus airplanes. Net cash also remains strong at £62m, or 28p per share.

Analysts’ current forecasts put Flybe shares on a forecast P/E of 5.6 for the current year. If Flybe can deliver on these forecasts, I believe the shares should rise sharply from current levels.

Troubled retailer with promise?

Mothercare (LSE: MTC) has slumped by 36% so far in 2016, thanks to a recent profit warning that revealed a 10.8% fall in international sales during the final quarter of last year.

The group’s international business has been hit by reduced consumer spending in the Middle East and China. But analysts expect adjusted earnings to rise by 5% to 9.9p per share this year. This gives Mothercare a forecast P/E of 14, with an attractive PEG ratio of 0.4.

These figures seem reasonable to me. Mothercare’s balance sheet has net cash and UK like-for-like sales returned to growth last year. Further downgrades are possible, but if you believe Mothercare’s brand will remain popular, now could be a good time to pick up a few shares.

Potential to double?

Property services firm Lakehouse (LSE: LAKE) floated on the London market in March 2015. Since then, the shares have fallen by 69%, thanks to a combination of profit warnings and management in-fighting.

So why might you want to invest in this firm? Well, the dust has now settled on Lakehouse’s profit warnings and the group has a new finance director and chairman. The company’s house broker, who we can assume has been briefed by the new board, has issued earnings guidance for the current year of 7.9p per share.

That puts Lakehouse stock on a forecast P/E of just 3.6. The firm is also expected to pay a 3p dividend, giving a potential yield of 10%. These figures are quite extreme and indicate a real risk Lakehouse won’t deliver.

But small caps are often under-researched by the market and mispricing can happen. Lakehouse’s recent interim results suggest that the forecast figures could be realistic, if the group has a strong second half.

If Lakehouse comes close to delivering on its forecast figures, I’d expect the shares to double.

Neil Woodford is backing this stock

The share price of online hostel-booking service Hostelworld Group (LSE: HSW) has fallen by 45% over the last month. The group warned in May that trading over the second quarter had been “below our expectations”. Bookings are expected to be “marginally down compared to last year”.

However, at least one top fund manager appears unconcerned by this blip. Neil Woodford’s funds own 22% of Hostelworld. Mr Woodford purchased additional shares after the recent drop.

The group’s figures look promising too. The shares trade on 10 times 2016 forecast earnings, and Hostelworld appears to generate a decent amount of free cash flow.

The post Are small caps Flybe Group plc, Mothercare plc, Lakehouse plc and Hostelworld Group plc poised to double this year? appeared first on The Twelfth Magpie.

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Roland Head 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.

Falling down

Shares in Lakehouse (LSE: LAKE) collapsed last week following a poor reception to the construction play’s half-year numbers. Lakehouse advised that revenues excluding acquisitions dropped 17% during October-March, to £130.1m, forcing underlying EBITA to crash 80% to £1.7m.

In particular, the Regeneration division has endured “more difficult trading conditions during the period than expected at the start of the financial year as a result of reduced client budgets and changes in procurement structures,” the firm said. This is the second profit warning that Lakehouse has issued within the space of a few months.

 Still, many investors would no doubt argue that the risks facing Lakehouse are currently baked into the price.

The business is expected to succumb to a 42% earnings slump in the period to September 2016, although still this results in a P/E rating of 4.6 times. And City expectations of a 3p-per-share dividend yields an eye-popping 8.6%, mashing the Footsie big-cap average of 3.5%.

However, the scale of internal strife at the firm — not to mention scale of problems facing its Regeneration arm — arguably makes Lakehouse a poor pick for risk-averse stock selectors.

Driller dives

Oil services giant Lamprell (LSE: LAM) also ducked during Monday-Friday, the stock defying Brent’s move to fresh six-month peaks above $49 per barrel. Investors remain concerned about the scale of capex cutbacks across the oil industry, not to mention the prospect of fresh reductions as the sector toils under chronic supply imbalances.

Just this month Shell slashed its capital expenditure budget for 2016, to $30bn from $33bn previously, despite a recovering crude values. Against this backcloth it comes as no surprise that confidence in support specialists like Lamprell remains equally creaky.

The number crunchers expect earnings at Lamprell to tank 60% in 2016, resulting in a P/E rating of 7.7 times. But like Lakehouse, I reckon current projections could be subject to severe downgrades in the near future, making Lamprell another high-risk selection.

Sandwich star

Food manufacturer and supplier Greencore (LSE: GNC) toppled further from recent record highs last week after advising of a murky trading outlook. 

Greencore saw revenues gallop 8.1% during October-March, to £691.6m, with strong food demand across the US and UK driving like-for-like revenues 12.7% higher. But investors locked onto the firm’s comments that “the UK backdrop is expected to remain uncertain given the changing nature of the grocery industry and other potential economic headwinds.”

The City expects Greencore to post earnings jumps of 10% and 11% in the years to September 2016 and 2017 correspondingly, however.

And consequently Greencore’s slightly-heady P/E rating of 18.5 times for the current period slips to an improved 16.5 times for 2017. While the sandwich maker may not be flavour of the month at present, I fully expect the business to continue serving up robust earnings growth.

The post Should you buy last week’s losers Lakehouse plc (-27%), Lamprell plc (-11%) and Greencore Group (-7%)? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Greencore. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Downgraded expectations

Shares in housing maintenance specialist Lakehouse (LSE: LAKE) have tumbled by a whopping 32% today after it released a profit warning. The company stated that difficulties in its regeneration segment have caused its financial performance to be below previous guidance, with reduced client budgets and changes in procurement structures having a negative impact on its performance in the first half of the year. As a result, Lakehouse has posted a pre-tax loss of £1.8m for the half-year, with its full-year expectations being downgraded.

Clearly, today’s news is disappointing for Lakehouse’s investors and, while it has the potential to turn its performance around, there is a risk that the challenges it has faced of late will continue. So while the company remains confident in its long term outlook — as evidenced by the payment of a 1p per share dividend versus no dividend in the prior half-year —  it may be prudent to watch rather than buy Lakehouse at the present time. That’s especially the case since social landlords must now reduce their rents by 1% each year until 2020, with the possibility of a negative impact on regeneration spend during the period.

Multiple challenges

Also falling today were shares in Crossrider (LSE: CROS), with the digital advertising platform creator stating that it now expects revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) to be 25% lower in the current year versus the previous year. This has caused its shares to slump by 29% today, which brings their fall for 2016 to 51%.

The fall in sales and profitability is at least partly due to structural changes in the markets in which Crossrider operates. Mobile revenue growth rates have declined significantly, especially within mobile subscription campaigns, which have in turn been hurt by increasing regulation in a number of key markets. And with revenue from monetising web apps with advertising being in decline, Crossrider is facing multiple challenges which are set to negatively impact on its bottom line.

Clearly, Crossrider has the capacity to turn its performance around. That’s particularly the case because the company has $70m of cash and could therefore make acquisitions. However, with its near-term performance set to disappoint, there appear to be better opportunities elsewhere.

Upbeat recent results

Meanwhile, Zoltav Resources (LSE: ZOL) is down by 13% today despite no significant news flow having been released by the Russia-focused oil and gas company. Of course, its shares have performed relatively well this year due to an improved outlook for the oil industry, with the price of black gold rising from $28 per barrel to close to $50 per barrel. This has improved investor sentiment in a range of oil and gas companies, with there being further potential for this in the short to medium term.

Furthermore, Zoltav’s share price has benefitted from an upbeat set of results being released last month which showed that it has recorded its maiden operating profit due in part to a rise in revenue of 41%. While this is very positive for the company and its shares could deliver a rise in the coming months, with a number of oil and gas stocks being profitable and trading on low valuations there may be better risk/reward opportunities available elsewhere.

The post Should you avoid these 13%+ fallers today? Lakehouse plc, Zoltav Resources Inc and Crossrider plc appeared first on The Twelfth Magpie.

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Shares of Landore Resources (LSE: LND) have rocketed up 200% today to 2.26p. The AIM-listed mineral explorer reported a “significant gold discovery” on its flagship Junior Lake Property in Ontario, Canada.

Landore said the discovery was made as a result of follow up drilling on the prospect reported last month. Latest drilling indicated a wider gold mineralised zone with higher grade intersections, suggesting “the mineralisation could be coalescing with depth”. Meanwhile, mineralisation near the surface has potential for initial development as “a low cost, bulk tonnage, open pit operation”.

Clearly, this is good news, and should help the company raise further funding. Landore has no debt and last raised £656,820 at 0.6p a share in October, compared with the current price of 2p. So, in a reasonably strong position to progress the project, and with its operations in Canada (none of the geo-political risk of many junior explorers in far-flung places), Landore could be worth a closer look by investors interested in what is one of the more speculative sectors of the stock market.

Fall overdone

Shares of Sepura (LSE: SEPU) have dived 30% to 138p, following the release of a trading update ahead of results for the company’s financial year ended 1 April. The group, which designs, manufactures and supplies digital radios, infrastructure and applications for professional mobile radio (PMR) users, said earnings for the year will be below expectations.

Reasons given for the miss were two “significant opportunities” failing to close before the year end, weakness in a couple of areas of the group’s business, and also a hefty adverse impact from foreign exchange movements. Year-end net debt has increased significantly, mainly due to working capital expansion resulting from the contract delays and slower debtor collection.

The good news is that Sepura’s debt providers ‎have waived any potential breach of year-end covenants, presumably on the strength of the company’s “particularly strong trading” during the final weeks of the year, and management’s expectation that the two significant opportunities will close imminently and the working capital expansion will unwind.

Based on 2016/17 analyst earnings expectations and following today’s dive in the shares, Sepura is trading on a price-to-earnings (P/E) ratio of less than 12. For a company that had previously been averaging annual earnings growth in excess of 20%, the fall appears overdone in light of what seem to have been largely short-term issues.

Shareholder revolt

There’s a right old ding-dong going on at Lakehouse (LSE: LAKE). The support services company, which is focused on the UK public sector, listed on the stock market at 89p little more than a year ago.

The chairman was “delighted” to report maiden results on 10 December, and said: “The Board remains confident of its expectations for the current year and the future”. Less than eight weeks later, Lakehouse issued a profit warning, which saw its shares crash 58% to 35p.

A shareholder revolt is being led by well-known small-cap fund manager Mark Slater and Lakehouse founder Steve Rawlings, who have requisitioned a general meeting on 19 April. The requisitionists’ proposals include kicking the three current non-executive directors off the board and replacing them with Rawlings and two others.

Referring to the current board’s “disastrous stewardship” of Lakehouse, the requisitionists reckon the proposed new non-execs will be able to “identify quickly action that is needed and to develop, with the executives, a strategy to restore shareholder value”.

In a statement today, the Lakehouse incumbents reiterated their recommendation to shareholders to vote against the requisitionists’ proposals. With the company in turmoil, this appears to be a stock for investors to watch for the time being.

The post Why Are Landore Resources Ltd., Sepura Plc & Lakehouse PLC Making Waves Today? appeared first on The Twelfth Magpie.

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• With a 7% yield, is this dividend share a no-brainer?
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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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G A Chester 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.

Of course, some big dividends will get cut. In today’s article I’ll ask how safe three of today’s 7%-plus yields really are.

A heavyweight gamble?

Royal Dutch Shell (LSE: RDSB) currently offers a yield of 7.7%, but there are risks facing this payout.

Current City forecasts suggest that Shell’s $1.88 per share dividend will not be covered by earnings in 2016. The payout wasn’t covered last year, either.

Shell’s acquisition of BG Group means that future earnings and cash flow are less certain than previously. However, Shell has said several times that it intends to maintain the current dividend in 2016. I think we can be fairly sure of this.

Beyond this is less certain. Shell generated $5.6bn of free cash flow, but spent $9.4bn on cash dividends in 2015. Shell can afford to fill this gap using borrowed money, but only for a year or two.

I think there is good chance that Shell will avoid a dividend cut and rate the shares a buy. But this does depend on the oil market starting to recover over the next 12 months.

Boardroom bust up = bargain buy?

A profit warning less than one year after an IPO is considered bad form. The market punished building services firm Lakehouse (LSE: LAKE) severely when it warned on profits in February, pushing the shares down by 60% in one day.

Lakehouse said that the warning was due to cost-cutting in the social housing sector. Profits for the current year are now expected to be lower than they were last year.

The outlook became even more uncertain when small-cap specialist Mark Slater, who owns 6% of Lakehouse, teamed up with Lakehouse founder Steve Rawlings to call for some of the firm’s directors to be replaced.

It’s not entirely clear why Mr Slater is doing this. But Lakehouse has confirmed that it’s trading in line with expectations for the current year. This means that the shares trade on a 2016 forecast P/E of just 5, with a prospective yield of 7.2%.

There’s a risk of further problems. But based on the available information, Lakehouse shares look cheap to me.

Safer than Lakehouse?

Entu (LSE: ENTU) is another recently-floated housing stock that crashed after a profit warning. This is why I don’t invest in small company IPOs. The previous owner often chooses to sell because they think that conditions are about to get tougher.

However, Entu’s profit warning was the result of a specific issue last year. The firm decided to close its solar division after the government slashed the subsidies available for solar panels. Many other solar installers have also been affected.

Apart from this, Entu seems to have been trading well. The good news for us, as potential buyers, is that Entu shares now trade 35% below their IPO price.

Profits are expected to rise this year, and the shares have a forecast P/E of 5.8, and a prospective yield of 9.2%!

These shares may suffer in the next housing downturn. But despite this risk, I think they look attractive at the moment.

The post How Safe Are These 7%+ Yields? Royal Dutch Shell Plc, Lakehouse PLC And Entu (UK) Plc? appeared first on The Twelfth Magpie.

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A key reason for it is stronger-than-expected demand for the company’s key analytics products, IS Solutions and Celebrus. They provide high margins and also excellent cross-selling opportunities, with the potential for a significant amount of recurring revenue too.

In addition, IS Solutions has secured two major projects with new and existing customers within the retail and financial services sectors. They’re due to add revenue of up to £2m in the current year and more than £250,000 in each year following that. And with IS Solutions being on track to establish a US office and adding to its European sales force, it seems to be very much on the up as a business.

With IS Solutions trading on a price-to-earnings growth (PEG) ratio of just 1 prior to today’s update, it offered good value for money. However, with it now being expected to post much higher levels of profitability, it seems to offer a risk/reward ratio that may be of great interest to less risk-averse, long-term investors.

Short-term pain

While shares in IS Solutions have soared today, shares in support services company Lakehouse (LSE: LAKE) have slumped by 55% after it released a profit warning.

Despite Lakehouse having increased its number of framework contracts by 22% in the current year, it’s operating against a backdrop of active cost reductions that are taking place among its customers. This is partly due to social landlords being required to cut rents by 1% per year for the next four years and means that the expected level of tenders from the frameworks hasn’t been recorded at the anticipated rate. As such, financial forecasts for the regeneration division have now been lowered.

Furthermore, Lakehouse’s energy services division is also being hurt by funding pressure on social landlords. This means that insulation contracts are being won at lower margins, while the smart meter roll-out programme has been delayed beyond September 2016. This will hurt profitability yet further in the current year, although Lakehouse remains optimistic regarding its long-term future.

Clearly, today’s update is highly disappointing and while the company may still have a bright long-term future, it appears as though the next few years will be tough due to industry-wide cost cutting. Therefore, now may not be the time to buy a slice of the business – especially when there are a number of other high quality stocks trading on low valuations.

The post Buy, Sell Or Hold After Recent Results? IS Solutions Plc And Lakehouse PLC appeared first on The Twelfth Magpie.

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Peter Stephens 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.