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Jarvis faces break up after £260M write off


CONTRACTOR JARVIS could be forced to sell off all but its rail renewals business in a bid to stave off financial collapse, one of the firm's stockbrokers predicted this week.

Its roads and accommodation services divisions top the list of the most attractive disposals to outside bidders.

Cash from the sell-off would go towards cutting debts which have shot up by £100M since April.

Last week Jarvis announced that it was writing off £206M against claims from Network Rail and from clients for accommodation services projects.

Further rail-related write-offs are expected.

The firm also said that it had breached its banking covenants.

This means its banks could recall their loans, effectively pulling the plug on the company.

The contractor's banks have given it a month to come up with a recovery plan.

A company spokesman refused to discuss the write offs in detail.

Jarvis' slide has hit forward orders and undermined its credit worthiness among suppliers, said Mike Foster, an analyst at Jarvis' stockbroker KBC Peel Hunt.

He said a large chunk of the debt could be paid off if the roads business was sold.

'Although there have been minor accounting adjustments its roads business is a saleable operation. Jarvis could get as much as £100M for it [if the company were in a strong position], but that's doubtful as it's desperate, ' Foster said.

The contractor has also been looking to sell its stake in London Underground upgrade contractor TubeLines since March. TubeLines' other shareholders are considered the most likely buyers.

Foster said Jarvis' failure to shift its TubeLines stake was a worry. 'All buyers see Jarvis as being a motivated seller, ' he said. This was driving down the potential sale price.

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