UK: Rail contractor Jarvis collapses
Posted: 26 Mar 2010, 06:14
2,000 jobs at risk as Jarvis collapses into administration
Rail maintenance contractor stops trading after workload plummets and lenders refuse to prop it up
* Terry Macalister and Julia Kollewe
* The Guardian, Friday 26 March 2010
Jarvis, one of the most infamous names in the world of British engineering over the last 10 years, has finally been forced into administration.
Up to 2,000 jobs are in danger as a result of lenders pulling the plug on a company once worth £1bn, but which has been brought low by a turbulent history involving private finance initiative debacles, rewards for failure and the Potters Bar rail crash.
Jarvis, chaired by the former Conservative transport minister Steven Norris, blamed cuts in government spending for the final crisis, saying the business had been hit by a "very considerable reduction in rail and plant work".
In a formal statement to the stock exchange, the company said: "Following negotiations with the company's secured lenders, it has become clear that sufficient support will not be extended to the company to enable it to continue trading as a going concern."
Norris and his fellow directors believed they had no option but to place the company, and some of its subsidiaries, into administration and to request that trading in its shares be suspended with immediate effect.
The collapse was not unexpected. Network Rail has cut its track renewal programme by 30% – a move that already led to a plunge in half-year revenues for Jarvis, to £114.7m, from £203.1m a year earlier. As recently as last month Jarvis warned of an operating loss of £5m for the year to March. It also said it had run up restructuring costs of £3m between October and February. Several waves of job cuts halved the company's workforce from 4,000 this time last year .
The company has been on a downward, and often turbulent, spiral since admitting liability for the accident in 2002 at Potters Bar, in which seven passengers died. Jarvis was responsible for maintaining a stretch of track on which a set of points broke and derailed the train. Jarvis felt obliged soon afterwards to relinquish its rail maintenance duties.
Instead the group tried to build up other sections of the business, including the PFI and public-private partnership work where it had already built a significant presence. But there were immediate signs that its tarnished reputation was seriously damaging its business prospects, and it was not long before the then-chairman, Paris Moayedi, resigned.
Jarvis teamed up with the US healthcare group Interhealth Canada to bid for work establishing new diagnostic and treatment centres for the NHS. Having earmarked two of 12 contracts in this area it then had to admit it had failed to be shortlisted for either of them.
Within two years of Potters Bar, Norris was being accused of arrogance and of presiding over a "multi-faceted shambles". The business had been forced into an emergency disposals of assets, including a PPP stake in the Tube Lines consortium at London Underground, in a bid to reduce towering debt repayments.
At one stage the government held emergency talks about the company's involvement in the PFI when work stopped on key public sector projects such as the redevelopment of the Whittington hospital in north London.
There were also rows with shareholders over perceived rewards for failure, as a black hole was found in the accounts while outgoing directors were given substantial rewards.
The share price dived from 530p at one point – valuing Jarvis at at more than £1bn – to a 7p low at another stage.
In recent times a pared-down Jarvis tried to reduce its reliance on its key public-sector client, Network Rail, and it won a £55m contract with Chiltern Railways in January. Jarvis also secured a small signalling contract with London Underground recently, but it was not enough to escape from almost a decade of gradual failure.
Rail maintenance contractor stops trading after workload plummets and lenders refuse to prop it up
* Terry Macalister and Julia Kollewe
* The Guardian, Friday 26 March 2010
Jarvis, one of the most infamous names in the world of British engineering over the last 10 years, has finally been forced into administration.
Up to 2,000 jobs are in danger as a result of lenders pulling the plug on a company once worth £1bn, but which has been brought low by a turbulent history involving private finance initiative debacles, rewards for failure and the Potters Bar rail crash.
Jarvis, chaired by the former Conservative transport minister Steven Norris, blamed cuts in government spending for the final crisis, saying the business had been hit by a "very considerable reduction in rail and plant work".
In a formal statement to the stock exchange, the company said: "Following negotiations with the company's secured lenders, it has become clear that sufficient support will not be extended to the company to enable it to continue trading as a going concern."
Norris and his fellow directors believed they had no option but to place the company, and some of its subsidiaries, into administration and to request that trading in its shares be suspended with immediate effect.
The collapse was not unexpected. Network Rail has cut its track renewal programme by 30% – a move that already led to a plunge in half-year revenues for Jarvis, to £114.7m, from £203.1m a year earlier. As recently as last month Jarvis warned of an operating loss of £5m for the year to March. It also said it had run up restructuring costs of £3m between October and February. Several waves of job cuts halved the company's workforce from 4,000 this time last year .
The company has been on a downward, and often turbulent, spiral since admitting liability for the accident in 2002 at Potters Bar, in which seven passengers died. Jarvis was responsible for maintaining a stretch of track on which a set of points broke and derailed the train. Jarvis felt obliged soon afterwards to relinquish its rail maintenance duties.
Instead the group tried to build up other sections of the business, including the PFI and public-private partnership work where it had already built a significant presence. But there were immediate signs that its tarnished reputation was seriously damaging its business prospects, and it was not long before the then-chairman, Paris Moayedi, resigned.
Jarvis teamed up with the US healthcare group Interhealth Canada to bid for work establishing new diagnostic and treatment centres for the NHS. Having earmarked two of 12 contracts in this area it then had to admit it had failed to be shortlisted for either of them.
Within two years of Potters Bar, Norris was being accused of arrogance and of presiding over a "multi-faceted shambles". The business had been forced into an emergency disposals of assets, including a PPP stake in the Tube Lines consortium at London Underground, in a bid to reduce towering debt repayments.
At one stage the government held emergency talks about the company's involvement in the PFI when work stopped on key public sector projects such as the redevelopment of the Whittington hospital in north London.
There were also rows with shareholders over perceived rewards for failure, as a black hole was found in the accounts while outgoing directors were given substantial rewards.
The share price dived from 530p at one point – valuing Jarvis at at more than £1bn – to a 7p low at another stage.
In recent times a pared-down Jarvis tried to reduce its reliance on its key public-sector client, Network Rail, and it won a £55m contract with Chiltern Railways in January. Jarvis also secured a small signalling contract with London Underground recently, but it was not enough to escape from almost a decade of gradual failure.