Shares in Jarvis, the engineering and construction group, dropped a further 11 per cent yesterday after it warned it had been hit by delays in negotiating new contracts. It will mean that 2003 profits will be £13m lower than the figure of about £80m that was previously expected for the financial year that ends in March.
The news comes as subcontractors and City analysts increasingly point to the tarnished value of the Jarvis name and its ability to continue winning work from the all-important public sector.
Jarvis said that 10 Private Finance Initiative projects it is competing for have taken longer than expected to choose a preferred bidder, increasing bidding costs. The impact of these delays will knock profits by £12m. In addition, there is a £1m charge to write down the value of Jarvis' investment in its primary health joint venture.
Andrew Sutton, a Jarvis executive director, said: "The delays are principally delays on the client side in their own procurement process."
The company said it would now adopt a "more selective approach" to bidding for contracts. It has also begun a programme to cut costs by £6m in its accommodation services division, which will be merged with the company's construction and facilities management businesses. Jarvis has already pulled out of rail maintenance work.
Jarvis said it expected to "see a significant recovery" in the profitability of accommodation services in the next financial year. But ABN Amro, the broker, warned it would be "prudent" not to add the £12m into next year's forecasts.
Jarvis shares plummeted 24 per cent on Tuesday. Yesterday the stock closed at 124.5p, its lowest level since November 1996. On Tuesday, a trade organisation, the Specialist Engineering Contractors Group, called for Jarvis to be barred from public sector work unless it improved its record on the time it takes to pay subcontractors. The company has insisted it is no worse than others in the industry.
Jarvis also said yesterday it was "very confident" of receiving £24m it says it is owed by Network Rail. "Excellent progress" is being made in talks over this disputed money, Jarvis said.Reuse content