General Update

As part of continuing discussions with Network Rail about payment in respect of rail renewals work undertaken over recent years but for which certification was outstanding, agreement about payment has been reached on a significant tranche of work. The group will receive a payment of some £30 million shortly.

This sum takes into account a write off of about £10 million following commercial negotiations with Network Rail. It also takes account of the settlement of a recent claim of approximately £16 million by Network Rail against the group in respect of work carried out between 1998 and 2001. The conclusion of these arrangements with Network Rail will result in a combined charge and write off of about £26 million in the year ended 31 March 2004.

Separately, the group is also in discussion with Network Rail over a substantial claim by Jarvis for payments for other rail renewal work undertaken over recent years. An agreement is expected to lead to a further cash payment to Jarvis but could involve further write offs in the accounts for the year ended 31 March 2004.

The group has also been reviewing the appropriateness of carrying forward a number of items across the whole of the group’s balance sheet. In addition to the previously announced exceptional costs of £40 million in respect of the group’s exit from rail maintenance, and the write offs and claims mentioned above in respect of track renewal work, the group expects to make further write offs and provisions which could exceed £115 million. The majority of this would be in the accommodation services division and would consist of write offs, provisions against assets and some provisions for costs. The company has also been reviewing the level of goodwill within its roads business, and believes that a write off of approximately £15 million is appropriate, and it intends to reflect this in the accounts for the year ended 31 March 2004.

None of these write offs would affect the group’s cash position.

As a result of exiting rail maintenance activities from 31 March 2004, and with lower construction volumes in accommodation services, there has been a substantial outflow of cash as the group pays down high creditor levels. As a result the net debt level is currently in the region of £230 million. The reduction in turnover has also left an overhead level which is too high for the current level of activity. The group has already set in hand a significant programme of cost reduction and we expect to see the benefit of this in the second half of the financial year.

The company has been keeping its lenders informed of these and other matters. These lenders have agreed to provide until 30 July 2004 a waiver of breaches of financial and other covenants in their credit agreements, which may arise as a result of the write offs announced today and certain other matters, including the expected write offs in accommodation services. Jarvis is continuing its strategic review and discussions with its lenders regarding appropriate financing arrangements for the group in future. The company will update the market on the position when it presents its preliminary results later in July for the year ended 31 March 2004.

In the circumstances set out above, the board will not propose or pay a final dividend in respect of the year ended 31 March 2004.

Good progress is being made with the full review of the group’s strategy, and this will be reported on with the preliminary results.

Kevin Hyde, group chief executive, today said:

“This is an extremely challenging time for the group and we are taking the necessary decisions and implementing them. We are collecting outstanding payments and have more to do. We are also taking very significant overhead cost out of the business. Considerable progress has been made, and further action is planned to ensure a leaner, sustainable core business for the future.”

2 July 2004
End

For further details contact:
Paul Ravenscroft
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

Back to top