Auditors give support services group guarded bill of health as it posts loss of £247m for year to 31 March
Question marks still hang over the future of support service group Jarvis even though the firm received support from its banks last Friday.
The firm posted a loss of £246.7m for the year to 31 March and admitted that “fundamental uncertainties” existed over the business.
This lack of certainty was described by one construction analyst as a “huge, huge issue” for the firm, which must rapidly sell off assets to lighten its debt burden. It is expected to dispose of its Tube PPP stake and pull out of contracting. It is therefore looking for partners to take over the construction elements in its present contracts.
Chief executive Kevin Hyde described the firm’s year as “difficult” and the results as “disappointing”.
Jarvis received a guarded bill of health from auditor Ernst & Young, assisted by Deloitte & Touche. However, they have pointed to “significant uncertainties” hanging over the future of Jarvis. These include:
- Whether parts of the business can be sold to the timescale and prices predicted. If not the firm will have to look at further sell-offs or seek more working capital from its banks.
- Uncertainty over money owed to Jarvis.
- Bad publicity has soured relations with customers and suppliers, and the auditors say this needs to be improved quickly. Schemes where Jarvis is preferred bidder must be signed quickly.
- The Jarvis business plan is predicated on the firm’s ability to attract new business and the effectiveness of its management changes. The auditors note that if these do not prove to be the case “the going-concern basis on which these financial statements have been prepared may prove to be inappropriate”.
Turnover increase by 10% to £1.3bn from for the 12 months to 31 March compared with same period for the previous year.
One analyst said the firm’s future was in the balance. He said: “The company’s chances of achieving a turnaround are too difficult to call at the moment. I wouldn’t like to comment on where Jarvis will go from here. Much will rest on whether other outstanding liabilities come out of the woodwork.”
Robert Wallace, Jarvis accommodation services chief executive, said he was disappointed at the decision to scale down the division less than a month after he took over.
Wallace joined Jarvis on 1 July with a brief to turn round the loss-making PFI arm, but has now been told that it will no longer undertake the construction element of contracts but instead focus on areas such as facilities management.
A Jarvis source said: “We are talking to potential construction partners. We will get construction partners on board in the next month – we might end up setting on one or two smaller players to work on [all] projects.”
Jarvis at bay: Can the company come back from the brink?
Nigel Markwick, a senior brand consultant at Wolff Olins, believes that the lack of attention paid to the company's image after the Potters Bar rail crash will make it difficult for it to regain public trust, writes Sarah Richardson.
Markwick said: "There has been little attempt to convince people that they can trust the company. Changing the name and logo might pull the wool over a few people's eyes but it's not going to fool the City analysts. What the company needs is to re-establish itself in the public's confidence. Jarvis was a great British business with 150 years of heritage behind it. To change the company name now would destroy the little that remains of that tradition, and wouldn't help Jarvis much at all."
One analyst agreed. He said: "If the company can get back to a position where it is a viable business concern, then it could consider a change of name. But people aren't stupid. Jarvis is Jarvis, whatever it's called. For the moment the company needs to concentrate on finding money as fast as it possibly can."