The firm, which has experienced a nightmare six months, last Friday issued its fourth profit warning this year. It also revealed that its debts stood at £230m.
This has led analysts to question whether the firm can survive beyond the end of this month. Stephen Rawlinson, an Arbuthnot construction analyst, said in a note on Monday: "Jarvis appears unlikely to be able to get to the end of July in its current form."
The firm's only hope appears to be a sale of all or part of the business or a huge scaling back of its operations. This could see it become a PFI finance firm similar to Laing, with no contracting interests.
Industry sources, however, have questioned whether anyone would be interested in buying any of it.
One source said: "Until its current situation is sorted out I cannot see anyone coming at present. You would have to look incredibly closely at the Jarvis books and deals before doing a deal."
The doubts came as some Jarvis clients, including Kirklees council in Huddersfield, West Yorkshire, were making provisions for potential changes to their PFI deals if the firm was to get in more serious trouble (see The clients' views).
I think Jarvis effectively mortgaged its future
The chairman of Jarvis, Steve Norris, was forced to put a public statement out this week claiming that the firm would emerge stronger from its troubles (see Norris' statement).
Insiders at the firm have dismissed reports this week questioning its future. The say these claims are exaggerated and that parts of the business, such as rail and road, are making money. One said: "Just because the banks have not publicly said what will happen after the end of the month doesn't mean they will pull the plug."
One insider insisted that the firm's troubles go back three or four years. One source said: "There have been historical problems not necessarily the doings of the current administration."
Theories have emerged about how Jarvis got into such trouble. One is that Jarvis had structured some of its PFI deals to take future gains early in the life of the contract. One contracting source said: "It bid cheaply on construction and to cover that has revalued future return on investment. It effectively mortgaged its future."
The source said that as future revenues were now in question, there were doubts over the sale value of the projects. The source claimed the firm had lost £7-8m on the £50m construction element of a PFI deal that involves 21 schools in Liverpool.
It is believed that the firm has included forecasts of future revenues from activities such as hiring out school halls and renting out student accommodation to boost its predicted income. One source close to the firm said: "It does not have the expertise to gain this sort of income."
Jarvis' share price was 25p when Building went to press on Wednesday.
Norris’ statementThe board is united in the approach we are taking. It has a full appreciation of the group’s strategic options, believes that these are in the right direction, and that the executive is taking the correct action in pursuing these options. The board fully supports the work of the current executive team.
The company has just announced that it has received a payment from Network Rail of £30m, and is in negotiation about further payments. We are paying our suppliers and receiving payments due to us. We are working hard with Network Rail to see if we can gain more renewal work.
The company continues to win new work in the accommodation services division and through its roads business. We are bidding for other contracts where we continue to believe we will be successful. We hope to make announcements about these contracts soon.
Good progress is also being made with our programme of planned disposals.
As Kevin Hyde said on Friday, we face extremely challenging times. The board believes that all the actions a company facing these issues should take, are being taken. We have been in discussion with our lenders, which led to last week’s announcement and those discussions continue. The new Jarvis will emerge as a stronger, leaner company with a substantial turnover, able to meet its customers’ needs and rebuild shareholder value.
The clients’ views: Six of Jarvis’ major public sector clients give updates on their schemes
A Kirklees council spokesperson said: “The special schools contract [PFI 2] has not been signed yet but will inevitably be delayed. But, as with the general comment, we await developments.
“We’re waiting to see what happens as it is in the bank’s hands at the moment. We do anticipate there may be delays if there has to be a changeover of personnel, but there are mechanisms built into our contracts with Jarvis to safeguard the council’s interest.”
Councillor Rosalie Monbiot, cabinet member for education in Norfolk council, said: “Jarvis has confirmed in the past 24 hours that it is fully committed to this project and expects to be able to deliver it.
“Work continues to achieve this. For example, there are meetings over several days this week with individual schools to finalise their detailed plans.”
“Our next critical date will be the beginning of the autumn term and we are continuing discussions with Jarvis to ensure works are completed for that date.”
“Jarvis has reassured us that it continues to operate within its banking facilities and is working with its bankers, which are supportive of the Jarvis business.”