Jarvis 'close to collapse' without Tube stake sale

By Steve Hawkes
Updated: 08:23 EST, 6 December 2004

 

CASH-STRAPPED road and rail engineer Jarvis today warned it may collapse in weeks unless it can complete the controversial £110m sale of its stake in London Underground consortium Tube Lines.

In a bleak update, the group said that without the refinancing that the sale would allow, it will have to seek emergency funding by the second half of January.

Jarvis added: 'Such funding cannot be guaranteed nor can its terms, which may be materially disadvantageous to shareholders. If such support were not forthcoming, the group would be unable to continue to trade.'

The warning came at the end of a statement listing the latest sell-off, this time of £25m of property, as the company desperately looks to win more breathing space from its banks.

Jarvis House, the group's head office in York, is among a portfolio of properties being sold to Network Rail. Others are being packaged up in a sale and leaseback deal with the rail operator.

Insiders said the January date was simply a worst-case scenario and chief executive Alan Lovell insisted he was confident the Tube Lines deal would be settled by the end of the month.

'We are very advanced in these discussions. We have broadly agreed terms with the purchaser,' he said. 'Today's announcement marks a very important step in our strategy. Property is one of the three main assets from which we seek to realise value.'

But this will do little to ease the frazzled nerves of shareholders who have seen the group, chaired by former Tory minister Steven Norris, pushed to the brink over the past 11 months.

Fears are already growing about the Tube Lines deal, given that the Mayor of London, Ken Livingstone - a fierce critic of the public-private partnership on the Underground - needs to give his blessing.

Jarvis also warned today that 'trading is continuing to prove difficult'. It intends to put out interim results before the end of the month and these will show a 'substantial' deterioration in the group's finances.

The shares today dived 1¾p to an all-time low of 9p. Trading at 575p two years ago, the group - which still commanded a market value of £1bn last year - is now worth less than £15m.

Jarvis struck a deal with its banks in July to secure extra cash to see it through until it could complete restructuring. The deal runs until March and Lovell hopes to extend it by a year at that point.

Jarvis wants to pull out of its accommodation services business and plans to close its centre in Farringdon, London. Hundreds of jobs are likely to go as the rationalisation progresses.