Year end update and change of Director

The Accommodation Services Division has continued to disappoint. Against previous market expectations of operating profits in the region of £5m, latest estimates for this division currently indicate a loss for the year of a similar magnitude. After refinancing gains, the equity interests of the PFI/UPP portfolio of investments have been sold at a loss of some £6m.

The loss for the division has primarily been caused by overruns on construction costs for a number of the refurbishment contracts. These contracts are now nearing completion and a substantial restructuring has taken place within the Accommodation Services Division to improve its performance. In addition to the previously announced reduction in bid costs for next year, the bidding, construction and facilities management functions have been combined into one entity based on just two regional centres of London and Manchester. Greater regional focus has already been brought to bear on accommodation services bidding activity and future construction contracts will either use far fewer sub-contractors or alternatively contracts will be direct-let to a construction partner who will bear their own bidding costs. A number of consequential management changes within the division have been made and the new structure became operational from 1 April.

In the light of recent overall performance of the group and our review of the group’s activities, the Board will review the appropriate dividend policy for the Group.

Working Capital is expected to show an inflow of approximately £30m in the second half. Net debt as at 31March 2004 is in line with market estimates.

Over £20m of annualised costs are being taken out across the group and most of the cost of this has been absorbed during the last year.

Jarvis announces today the award of preferred bidder status for 2 schools in Manchester with a development value of £35m and a whole life value of £115m, and for 2 schools at Bangor in Northern Ireland with a development value of £30m and a whole life value of £155m. It has also been appointed preferred bidder by the University of East London to provide some 1,500 student rooms in a project with a whole life value of £150m. Jarvis has also reached financial close on the contract to build 2 new schools in Rhondda with a development value of £27m and a whole life value of £96m. These contracts total a further £516m of whole life value.

As announced at the time of the interim results in November 2003, Jarvis has reviewed its range of activities and as a result has made a number of disposals of non-core activities. These include closing its Student UK operation and disposing of its 51% stake in Avonwood for a nominal sum. It has also decided to exit its joint venture, Jarvis Primary Health, and its ownership of Ultramast. In addition it has sold a 10% stake in Agilisys to its joint venture partner, netdecisions Ltd for £1.6m, together with put and call options for the remaining 40% for a consideration of up to £6m. In addition to realising cash, these disposals will simplify the group, provide greater transparency and free up management time.

Negotiations on exiting Jarvis’ rail maintenance activities have concluded satisfactorily and the three maintenance contracts were handed back as expected at the beginning of this month. The exceptional charge for exiting this activity will be £40m, being principally the write off of pension credit and consequential redundancy and other costs.

Kevin Hyde, Chief Executive of Jarvis commented “Last year has been a challenging year for Jarvis in many respects. In our rail activities we decided to significantly reduce the company’s risk exposure by exiting track maintenance. This was completed successfully on 31 March. In the Accommodation Services Division we have had to cope with the complexities of a number of substantial schools refurbishment contracts and the associated working capital outflow. These are now finally nearing completion. We have already commenced, with our advisers, a process to reduce debt, streamline and simplify the group and to improve levels of transparency.”

The Company also announces that Robert Kendall , Group Finance Director, has tendered his resignation from the Board and will stand down from the Board with immediate effect. Alistair Rae is appointed to the role of acting Finance Director with immediate effect. Alistair qualified as a Chartered Accountant with KPMG and his subsequent career includes positions at Deloitte & Touche, Cazenove and HSBC Investment Bank . He joined Jarvis as Director of Strategy and Corporate Affairs in February 2002.

Kevin Hyde said: “I would like to thank Robert for his contribution to Jarvis over many years, the last three as Group Finance Director and wish him every success in his future career. I am pleased that Robert has agreed to assist in an orderly hand-over of the finance function to Alistair.”

For further details contact
Paul Ravenscroft on 020 7 462 4639 or mobile 07958 903820
Email paul.ravenscroft@jarvis-uk.com

or

Andrew Honnor/David Trenchard at Tulchan Communications 020 7 353 4200

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