SUR.L Regulatory News (SUR)

22 July 2016

Lakehouse plc

("Lakehouse", the "Company" or the "Group")

Board changes and publication of shareholder circular

Notice of General Meeting

Lakehouse, the asset and energy support services group, is pleased to announce the appointment of Mr Robert ("Bob") Holt OBE as a Director and Executive Chairman of the Company on 21 July 2016. At the same time, it was agreed that Ric Piper would step down as Non-Executive Chairman but would continue as a Non-Executive Director as described below.

As set out in the Group's interim results for the six months ended 31 March 2016 (the "Interim Results"), announced on 17 May 2016, Lakehouse has had a challenging start to 2016, brought about by market headwinds and operational challenges, combined with some disruption internally, as the composition of the Board was resolved.

Furthermore, following the resignation of Stuart Black as Chief Executive Officer on 21 April 2016, the Board has undertaken a review seeking to identify a suitable long-term executive management solution for Lakehouse and is pleased to have brought this to a conclusion with Mr Holt's appointment.

The Board of Lakehouse believes that Mr Holt's expertise and background in the support services industry, in particular his knowledge, considerable experience of and reputation in the sector in which the Company's principal business operates and his track record of turning around underperforming companies, will be invaluable to the Group going forward. It makes him a highly qualified candidate for the position of Executive Chairman of the Company as the Board seeks to restore value for Lakehouse Shareholders.

Ric Piper, who was previously the Non-Executive Chairman of the Company, has agreed to remain on the Board as an independent Non-Executive Director until 30 November 2016 to facilitate an appropriate handover of responsibilities to Mr Holt, if his appointment is confirmed following the General Meeting. The Board sincerely thanks Ric Piper for his positive contribution to the Board and the business during his time as Chairman and wishes him well.

Mr Holt's appointment as Executive Chairman does not require shareholder approval. However, considering the upheaval and changes to the composition of the Board over recent months, the Lakehouse Board (including Mr Holt) nevertheless considers that it is appropriate to ensure that the appointment of Mr Holt has the support of Lakehouse Shareholders.

In addition to Mr Holt's appointment, the Board are today putting proposals to shareholders regarding a revised remuneration policy (the "Revised Directors' Remuneration Policy") that will enable the proposed remuneration package for Mr Holt to be implemented and the adoption of a new share incentive scheme, the Lakehouse plc Special Incentive Award Plan ("SIAP"). A circular containing these proposals (the "Circular") will be posted to shareholders today.

In the event that Mr Holt's appointment is not confirmed by the approval of the requisite majority of Lakehouse Shareholders at a general meeting of the Company (the "General Meeting"), or the Revised Directors' Remuneration Policy or the SIAP are not approved by the requisite majorities at the General Meeting, Mr Holt will resign as a Director and Executive Chairman without compensation and the Revised Directors' Remuneration Policy and the SIAP will not be adopted.

The Circular contains a notice convening the General Meeting, to be held at 10.00am on 9 August 2016 at the offices of Eversheds LLP, One Wood Street, London EC2V 7WS, at which the resolutions to approve and confirm the appointment of Mr Holt as Executive Chairman, to adopt a Revised Directors' Remuneration Policy and to approve the adoption of the SIAP, will be considered.

Robert Legget, Senior Independent Non-Executive Director and Acting Chairman of the Remuneration Committee of Lakehouse said:

"We are delighted that we have attracted a very senior candidate of the calibre of Bob Holt. He is a sector specialist, has a proven track record of operational expertise and is expected to be key to helping Lakehouse restore value to our shareholders. We are confident shareholders will recognise his potential positive contribution and support his appointment."

Bob Holt said: 

"I'm delighted to be joining the Board of Lakehouse and believe that my experience in the areas in which the Group operates will be of benefit. 

The Board is committed to return significant shareholder value and I look forward to working with the team to deliver that strategy."

Save where otherwise defined in this announcement, capitalised words and expressions have the meanings given to them in the circular.

For further information about this announcement contact:

Simon HowellCompany Secretary, LakehouseTel: 01708 758800

Ginny Pulbrook

Partner, Camarco

Tel: 0203 757 4992

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No 596/2014 and is disclosed in accordance with the Company's obligation under Article 17 of those Regulations.

Background to, and reasons for, Mr Holt's proposed appointment

Following the resignations of Sean Birrane, then Chief Executive Officer, on 8 March 2016 and Stuart Black, Chief Executive Officer and previously Executive Chairman, on 21 April 2016, the Group has been operating without a Chief Executive Officer with overall responsibility for the operational performance and strategic direction of the Group. As set out in the Interim Results, due to market and operational factors, this has been a challenging period for Lakehouse which has required the Executive Directors to focus on establishing an effective self-help programme to drive business improvement.

The Board believes that the Group requires experienced executive leadership to navigate the business through the current challenging market conditions whilst also setting a clear strategic direction for the Group over the medium term. For this reason, the Board of Lakehouse has been actively seeking to identify and recruit a senior executive who it believes is capable of fulfilling this role for Lakehouse and is able to take up the position immediately.

Bob Holt is an experienced manager and developer of service businesses. He has operated in the service sector since 1981, initially in a financial capacity and later moving into general management and has an extensive track record of working with growing businesses in the service sector.

In 1996, Mr Holt purchased a controlling interest in Mears Group PLC ("Mears") and floated the company on AIM with a market capitalisation at the time of its initial public offering of £3.6 million. Since that time, Mr Holt has been instrumental in growing Mears to a business with annual revenues in excess of £880 million (for the financial year ended 31 December 2015) and a market capitalisation of over £380 million (as at 21 July 2016, being the latest practicable date prior to the date of this announcement). Mears moved to the Main Market of the London Stock Exchange in 2008 and Mr Holt currently serves as its non-executive chairman. Mears has won a number of industry and stock exchange awards in the years since Mr Holt has been associated with it.

As well as his continued involvement with Mears, Mr Holt also currently serves as non-executive chairman of Inspired Energy plc, Herbert T. Forrest Limited, DX (Group) plc, Inprova Group Limited and Totally plc. Mr Holt was also previously Managing Director of MITIE Maintenance Limited, a national provider of building, mechanical and electrical maintenance services, from December 1993 to January 1996 and Managing Director of Grasham Services Limited from June 1990 to December 1993. He was awarded an OBE in January 2016.

The Board of Lakehouse believes that Mr Holt's expertise and background in the support services industry, in particular his knowledge, considerable experience of and reputation in the sector in which the Company's principal business operates and his track record of turning around underperforming companies, will be of considerable benefit to the Group going forward and makes him a highly qualified candidate for the position of Executive Chairman of the Company as the Board seeks to restore value for Lakehouse Shareholders.

Whilst Mr Holt will continue in his position as non-executive chairman of Mears and the other companies of which he is currently a director (as set out below), the Board is satisfied that, should his appointment as Executive Chairman be confirmed at the General Meeting, Mr Holt will be able to dedicate the time and resources required to fulfilling this role fully.

Furthermore, the Board has given due and careful consideration to any potential conflicts of interest that may arise as a consequence of Mr Holt assuming the role of Executive Chairman of the Company whilst, at the same time, retaining his position as non-executive chairman of Mears (and as chairman of the other companies referred to above). Although the Board recognises that there may be occasions where such conflicts arise, the Board believes that the number and extent of any such conflicts is likely to be minimal as a consequence of there being limited overlap between the nature of the operations of Mears and the other companies' operations and the operations of the Company. The Board is therefore satisfied that the existing processes and procedures it has in place will be sufficient to ensure that any such conflicts, should they arise, are appropriately managed.

Details of Mr Holt's current directorships and partnerships and details of the companies and/or partnerships where Mr Holt has been a director or partner or member of the administrative, management or supervisory bodies during the five years immediately prior to the date of this document are set out below:

There is no further information required to be disclosed in relation to Mr Holt pursuant to Listing Rule 9.6.13R.

Summary of the principal terms of Mr Holt's proposed remuneration package

Subject to his appointment being confirmed at the General Meeting, the Board has approved in principle a remuneration package for Mr Holt that it considers to be appropriate in order to secure and retain the services of a candidate of the calibre of Mr Holt. The Board of Lakehouse is confident that Mr Holt's proposed remuneration package is appropriately aligned with the interests of Lakehouse Shareholders.

Mr Holt has been appointed in order that he can deliver a proactive strategy to restore value to Lakehouse Shareholders in the short term as well as establishing a clear framework to deliver sustainable growth over the longer term.

The Company's existing share incentive schemes, which were introduced at the time of its IPO, were not designed, and the Board does not consider them appropriate, for the purpose of aligning the interests of Mr Holt to those of Lakehouse Shareholders as regards the restoration of value to Lakehouse Shareholders, given the impact of the Company's previously announced operational and market challenges.

The SIAP has therefore been designed, and is proposed, for the sole purpose of incentivising Mr Holt and selected Executive Directors of the Company to deliver value to Lakehouse Shareholders over the short term.

A summary of the principal terms of the SIAP is set out in Appendix 3 of the Circular which will be posted to shareholders today and lodged on the Group's website: www.lakehouse.co.uk.

It should be noted, however, that under the terms of the SIAP, Mr Holt and any other Executive Director of the Company who is made an award under the SIAP:

· will not receive any value from their award unless, at the end of the performance period (described below) the total shareholder return (being the aggregate of the closing middle market price of a Lakehouse Share for the last Dealing Day of such performance period and all dividends paid per Lakehouse Share during the two consecutive financial years of the Company commencing on 1 October 2016) equals or exceeds 58.57 pence; and

· will only receive full value from their award if at the end of such performance period the total shareholder return (measured on the basis described above) is 98.40 pence or more.

For these purposes, the performance period mentioned above is the period starting with the date of Mr Holt's appointment to the Board (if such appointment is confirmed by Lakehouse Shareholders) and ending on the first to occur of 31 January 2019 or the date of publication of the audited results of the Company for the financial year ending 30 September 2018.

Should Mr Holt's appointment as a Director and Executive Chairman of the Company be confirmed at the General Meeting and the SIAP be approved by Lakehouse Shareholders, it is proposed that Mr Holt would be made a single one-off award under the SIAP in respect of 2,307,692 Lakehouse Shares (the "Proposed Award"). No consideration would be payable by Mr Holt for the grant of the Proposed Award or in respect of its exercise. The number of Lakehouse Shares ultimately capable of being acquired by Mr Holt pursuant to such award shall be determined in accordance with the terms of the Performance Condition summarised in detail in Appendix 3 of the Circular. In the event that the Proposed Award is granted to Mr Holt and it transpires that at the end of the performance period referred to above the total shareholder return is 98.40 pence or more, Mr Holt should be able to acquire 4,615,384 Lakehouse Shares pursuant to the exercise of the Proposed Award.

It is also proposed that other Executive Directors of the Company who are key to assisting Mr Holt deliver a restoration of shareholder value over the short term may, at the discretion of the Remuneration Committee, also be made a single one-off award under the SIAP following its adoption. It is proposed that doing so will ensure that the individuals who are critical to delivering value to Lakehouse Shareholders will all be aligned to that goal.

The quantum of the Proposed Award and the terms of the SIAP which govern it do not fall within the scope of the Company's current remuneration policy (the "Current Directors' Remuneration Policy") which was approved at the AGM. It is also the case that other elements of the proposed structure of Mr Holt's proposed remuneration package are outside the scope of the Current Directors' Remuneration Policy. Accordingly, in order to provide the proposed remuneration package to Mr Holt, to adopt and operate the SIAP, to grant the Proposed Award to Mr Holt and to grant an award under the SIAP to other Executive Directors of the Company to be selected by the Remuneration Committee, it will be necessary for the Company to adopt the Revised Directors' Remuneration Policy.

Other than the Proposed Award referred to above, the key elements of Mr Holt's remuneration package are as follows:

· Mr Holt will enter into a service agreement under which he will be employed as a Director and Executive Chairman. He will be employed full-time for an initial period of one month and thereafter three days per week and will receive an annual salary of £75,000 gross.

· Mr Holt will not receive any pension or other benefits under his service agreement and he will not be eligible for any annual incentive award.

· Mr Holt will also be available to provide consultancy services to the Company and other Group Companies in relation to advice about the turnaround management strategy of the Group. These services will be provided by a consultancy company of which he is a shareholder. The daily fee payable for such consultancy services is £1,595 plus VAT. The Company intends that such services will be provided for two days per week over 47 weeks per year at a total cost of £150,000 per annum (plus VAT).

In addition, Mr Holt's proposed service and consultancy arrangements will have the following key terms:

· Mr Holt's service agreement may be terminated by either party giving to the other six months' notice. His service agreement may be terminated immediately if he commits any material or continued breach or gross misconduct.

· The Company may, at its discretion, terminate Mr Holt's service agreement by paying him six months' salary in lieu of notice ("PILON"). The payment may, at the Company's discretion, be paid in equal monthly instalments. Where it elects to pay in instalments, the Company may reduce any instalment by the amount that Mr Holt has earned or is expected to earn in the six month period following termination. As Mr Holt already has a number of other outside interests, only replacement income that he earns from his employment with the Company may be offset against PILON instalments and not income he would have received in any other event.

· The consultancy agreement under which Mr Holt's consultancy services will be provided may be terminated by either party giving to the other six months' notice. The Company may terminate the consultancy agreement immediately in the event of a serious or continuing breach.

· The Company may, at its discretion, terminate the consultancy agreement under which Mr Holt's consultancy services will be provided by paying his consultancy company an amount equal to the maximum daily fees that would be received by the consultancy company during the notice period. The payments may, at the Company's discretion, be paid in equal monthly instalments and may be reduced by other replacement fees earned by the consultancy company during the six months following termination.

· Both the service agreement and the consultancy agreement allow the Company to exclude Mr Holt from providing services during any notice period. Under his service agreement, Mr Holt is restricted from soliciting or dealing with certain customers of the Company or soliciting certain employees of the Company for a period of 12 months following termination.

The Board believes that the proposed remuneration package for Mr Holt:

· provides appropriate alignment with the interests of Lakehouse Shareholders in relation to restoring value to Lakehouse Shareholders over the next two years; and

· is appropriate to secure the appointment of an Executive Chairman with the extensive experience and expertise which Mr Holt has demonstrated throughout his career.