Tube Lines stake sale crucial to reducing debt strain

'Fundamental uncertainties' still exist

Jarvis disappointed some in the City by not having any asset sales ready to announce yesterday.

The divestment programme is key to bringing down debt, though analysts warned that, even with the £150m proceeds, debt would still be a strain because the business that emerges would have a much smaller profit base to support its loans.

Emma Ormond, an analyst at Oriel Securities, said: "The timing [of the sales] is uncertain and the value is uncertain because Jarvis is quite clearly a distressed seller."

The most significant part of the disposal plans is the company's one-third stake in Tube Lines, the consortium that has a long-term £4.4bn contract to upgrade three of the major London Underground lines.

This stake could be worth up to £100m alone, but it would depend on whether the whole interest was sold and whether the deal included the actual contracting work that Jarvis has on the lines. With the contracting work, a sector player such as Balfour Beatty or Amec would be interested. If just the equity interest is sold, it could be picked up by a financial investor.

Also being sold by Jarvis is its European roads construction business, which could fetch some £50m. Additionally, the group will attempt to sell its UK rail plant and property portfolio.