Crisis deepens at Jarvis after biggest shareholder sells out

Shares in Jarvis, the road and rail group, slumped 19 per cent yesterday after its biggest shareholder announced it had sold almost its entire 25 per cent stake.

Shares in Jarvis, the road and rail group, slumped 19 per cent yesterday after its biggest shareholder announced it had sold almost its entire 25 per cent stake.

K Capital, a US hedge fund, said it had reduced its holding from 25 to 1 per cent, crystallising losses of about £14m on its holding. The shares fell 2.5p to 10.75p. Jarvis said it would issue so-called Section 212 notices under the Companies Act to find out where the shares had ended up. However, Alan Lovell, Jarvis' chief executive, said he knew no more about the share trade than what had been announced in the market. "We don't know anything about it so there is no point speculating," he said.

K Capital is a Boston-based hedge fund that takes aggressive positions in companies that have run into trouble. It has built up its stake in Jarvis over the past six months as other institutions have bailed out of the company.

Its decision to finally sell out is the second major blow to the company's share price this week. On Monday Jarvis warned that the rising cost of completing construction contracts within its accommodation division would mean a cash outflow of £80m more than expected. The shares lost 60 per cent of their value.

However, Mr Lovell yesterday remained upbeat about the prospects for Jarvis. Appointed three weeks ago, Mr Lovell said he had the company's banks on-side to see the company through to an eventual recovery.

He said a disposal programme involving its Tube lines business was going well and that the company had identified an extra £30m of cost savings. He even ventured the prospect that after next March, when the current standstill agreement with its banks expires, the company will be in a position to consider inviting an investment from a large strategic partner, probably from Europe.

He said: "We want to extend our banking terms for a year after March 2005. That will give us the opportunity to have a full strategic review at that stage and see what future steps we should take. This could involve a strategic partner of some sort. For example, you could see a European engineering or construction company wanting to buy in to our technology. But there will be time for consideration of all these options after the next couple of months."

Under previous management, Jarvis as been bedevilled by a series of profit warnings as well as being linked to the Potters Bar rail crash.

Mr Lovell has embarked on a strategy to focus the company on its core businesses of rail laying in the UK and road maintenance contracts for local authorities, while making disposals to try to reduce its £230m debt pile.