Jarvis shares in freefall as fresh update deepens gloom

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The Independent Online

What little value remained in the shares of Jarvis all but disappeared yesterday when the road and rail group delivered yet another disastrous trading update that wiped 60 per cent off its share price.

What little value remained in the shares of Jarvis all but disappeared yesterday when the road and rail group delivered yet another disastrous trading update that wiped 60 per cent off its share price.

The company is now in the hands of its banks and is on the verge of collapse, having lurched from one crisis to another in recent years. Yesterday's statement was a litany of bad news including a new £80m black hole in its accounts, lost contracts, write-offs and spiralling costs.

It warned that a cash outflow of £80m would result from the rising costs of completing construction contracts in its accommodation and services division. Jarvis said: "Constraints on working capital, caused by delays to cash receipts from disposals and adverse trading results ... have meant that activity has reduced considerably on the construction sites."

The statement was the latest bad news to issue from the company that first hit the headlines as the company that maintained the stretch of railway track involved in the Potters Bar rail crash. Since then it has suffered a deteriorating reputation in its private finance division, which is being sold, and in areas such as building schools.

Norfolk County Council yesterday became the latest organisation to pull out of contract negotiations with Jarvis, when it decided not to proceed with the company for a schools refurbishment project having selected the company as preferred bidder. The decision came after Jarvis issued its update to the Stock Exchange earlier in the day and reflects the company's parlous status.

Jarvis's new chief executive, Alan Lovell, said: "Having completed an urgent review of the group's operational and financial status in the three weeks since my appointment, it is clear that the restoration of the group to financial health will take longer than previously indicated. We remain in discussion with our lenders and other stakeholders to ensure their continuing support through this challenging period."

The company's announcement detailed a number of worsening problems at the group, which has paid off two previous chief executives in the space of a year. The latest incumbent said the group would continue to incur losses during the current financial year and that a substantial proportion of planned disposal proceeds would be required for working capital rather than dealing with the company's £200m-plus debt mountain.

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