Jarvis has agreed to sell its private finance initiative (PFI) business as part of a wide ranging disposals programme to ease its financial problems caused by a £230m debt pile.
The news brought immediate relief to the Jarvis share price which rose 21.4 per cent to 12.5p after coming under sustained pressure during the week. The sale also marks a successful conclusion to Alan Lovell's first month as the company's new chief executive.
The PFI unit, which this week lost the chance to bid for a Norfolk County Council contract, has preferred bidder status to build schools in Manchester, Northern Ireland and the Republic of Ireland. It will be sold to the German company Hochtief. No price was disclosed but it is thought that the three contracts together, which have total revenues worth £400m over 25 years, could attract a price tag of £5m.
The sale is an important psychological development in Mr Lovell's attempts to stabilise the company in the short term and restore confidence among shareholders. Mr Lovell is planning a new round of cost cuts on top of the £30m he has already announced and a £23m efficiency drive completed under the previous management.
This third round will not be as big as the previous two. He intends to carry out a full strategic review which will include seeking new strategic partners expected to come into Jarvis as significant shareholders. This would repeat the strategy that Mr Lovell adopted at Costain, the construction group where he was chief executive from 1992 to 1997.
"We have no specific plan beyond this phase which involves taking advantage of the disposals and extending the existing banking terms, which end in March 2005, for a year beyond that. That will give us opportunity to have a full strategic review and see what future steps should be taken which might involve strategic partners of some sort," Mr Lovell said.
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