Jarvis plc - Financial and Trading Update

Following the appointment of Alan Lovell as Group Chief Executive, the time and cost of completing outstanding construction activities within its Accommodation Services Division has been reassessed. Constraints on working capital, caused by delays to cash receipts from disposals and adverse trading results described more fully below, have meant that activity has reduced considerably on the construction sites. The cost of completion of these contracts has risen substantially. Consequently, it is expected that there will be a total Group cash outflow of some £80 million more than expected in July.

The Group continues to look for ways to limit its exposure to these contracts. It is in discussion with its partners in the projects and is examining the possibility of bringing in new partners to help with their completion. Work continues with Alma Mater over the disposal of the UPP business and Vinci SA over the disposal of parts of the PFI business.

The effect of this factor, combined with others described below, means that the Group continues to incur losses during the current financial year. It also means that the Group now anticipates that a substantial proportion of the proceeds from its disposals programme is likely to be required for working capital purposes rather than for the repayment of debt.

Satisfactory progress continues to be made with the Group's main disposal programme. The sale of its European roads business and the realisation of the value of its Tube Lines investment remain on course for the end of the year. It is intended that this realisation should be related to longer term refinancing arrangements with the Group's lenders. The Group continues to implement smaller disposals, although there has been slower progress than anticipated in respect of certain property sales.

The annual results for 2004 made reference to one remaining issue to be resolved with Network Rail, in respect of work invoiced but unpaid. The resolution of this issue has been more complex and has taken longer than anticipated. However, a resolution has been achieved, with documentation now being finalised. The settlement amount, which has now been paid to the Group, is less than expected and accordingly a write off of some £9 million will be incurred in the current year.

Within the roads division trading has been below budget and the loss of an important contract with Cheshire County Council will also reduce revenue in the second half of the year. Elsewhere, the Group has been faced with a high level of financing and associated professional costs due to the highly complex issues involved during restructuring.

The Group continues to operate within its debt facilities. Headroom is limited and accordingly management is concentrating on cash to ensure the Group remains within those facilities pending finalisation of the disposals and refinancing within the timescale outlined above. The Group's lenders continue to be kept fully abreast of developments.

The Group continues to be active on other aspects of restructuring and these have developed since mid-October. The core businesses for the future are rail, roads and plant hire, and will be centred on York. This relocation is on course to be completed by the end of March 2005. At its AGM, the Group reported good progress in reducing costs. Since then a further savings target of £30 million has been identified and implementation is planned to begin over the next few weeks.

Commenting today Group Chief Executive Alan Lovell said:

"Having completed an urgent review of the Group's operational and financial status in the three weeks since my appointment as chief executive, it is clear that the restoration of the Group to financial health will take longer than previously indicated. We remain in discussion with our lenders and other stakeholders to ensure their continuing support through this challenging period.

"The disposals programme and new and existing cost-reduction initiatives are key priorities, together with a resolution of outstanding operational issues, in particular the remaining PFI/UPP construction contracts."

Contact for further details:

Merlin PR	0207 653 6620
Paul Downes / Bridget Fury
Jonathan Haslam	0207 017 8147

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