Robert Wallace, new head of Jarvis Accommodation Services, says he is here to save struggling firm, not sell it

Beleaguered support services group Jarvis has rejected claims that it is on the brink of collapse or that it will break up Jarvis Accommodation Services, its key PFI division.

Robert Wallace, who was installed as the £31m-turnover division’s chief executive on 1 July, told Building that he joined Jarvis on the assurance that the company had a long-term future.

Wallace’s claim was supported by news that accountant Deloitte & Touche, brought in last month to double-check the company’s books, had advised the company’s bankers to support its restructuring plan.

It had been reported that the appointment of Wallace was forced on Jarvis by the banks. This led to speculation that the banks expected him to find ways of retrieving the cash they were owed, which could have included the sale of the PFI division’s most valuable assets.

Wallace said: “The story was absolute nonsense. I have met with the banks since, but I am driven here by the desire to take on a challenge. I am here to do business for an indefinite period. I am not here as a hatchet man to close Jarvis Accommodation Services.”

Even Deloitte & Touche asked Wallace if he planned to break up or sell the division.

Wallace was deputy chief executive of Skanska UK from 1998 to 2003. He said he had joined Jarvis after writing directly to group chief executive Kevin Hyde, whom he had previously known in Hong Kong, asking if he could help to revive the fortunes of Jarvis.

I am here to do business for an indefinite period, not as a hatchet man to close Jarvis Accommodation Services

He said Hyde replied that a vacancy was coming up after Rob Johnson’s decision to resign as chief executive of accommodation services. “Kevin said: ‘This position is available, so why not have a go at it?’ I said: ‘I’m going on holiday, but I’ll see you in a fortnight’.”

Wallace did admit the scale of the problem that he faced: in the latest profit warning, issued one day after he started, Jarvis said it would have to write off at least £115m from its balance sheet at the end of the month, most of which would come from accommodation services.

The fear in the City is that much of this write-off might relate to contract delays, which would affect the company’s cash flow and further increase a net debt level that stands at more than £230m.

Wallace admitted that the £115m did include cash outflows, but added: “A chunk of it is cash-related, but there are non-cash items in there. We’ve been badly shooting ourselves in the foot.”

He said that some of this was the result of underbidding contracts, leading to project delays and cost overruns. Wallace added that his first priority would be to complete schools due to be handed over in September.

He said: “Can I deliver every bit of these projects by September? I can’t say that, but I think we will have an acceptable contingency plan in place for each project.”

Can I deliver every bit of these schools by September? I can't say that, but we will have plans in place

Robert Wallace

Jarvis’ creditors are seeking assurances that the firm is a reasonable bet after it breached its banking covenants.

Wallace has promised to take risk out of the business, but has yet to reveal how. He has said that it could take as long as two years to provide accommodation services with a more reliable income stream. However, he predicted that the banks would be impressed enough by his business plans to continue supporting Jarvis.

Wallace looks likely to make some redundancies and to pull out of high-risk refurbishment work.

He said that the division would ultimately disinvest in other markets, but was not certain which ones.

Wallace suggested that accommodation services would emerge from Jarvis’ restructuring as its main business – possibly as soon as the end of July. “Accommodation services is the one people will be watching,” he said.

  • Jarvis is to cut overheads by moving staff from three offices across London and Essex to a single base in Farringdon, central London

Jarvis workers speak out over site pressure

Jarvis employees working on a university accommodation site in south-east London have spoken out about the pressure and uncertainty gripping the company, writes Jonathan Dean.

The workers on the McMillan Student Village site in Greenwich said pressure was on the company to deliver at site level. Project manager Paul Wilcocks said the company faced increasing pressure to keep on top of subcontractors' payments, largely because of the negative press that Jarvis has received.

Wilcocks said: 'We can't really afford not to pay them, because as soon as we stop paying them, the negative publicity will kick in and everyone will be chasing and clamouring. Some of my guys were even paid early last month.'

He added that his project is due to finish on time on 13 September. He said: 'We're comfortable with that target and we're going to finish the job. Indeed, one block that was not due until 24 August is being handed over as we speak. I think Jarvis Construction owes its subcontractors less than it has done for 18 months.'

However, on-site uncertainty is palpable. One Jarvis site employee, who wished to remain nameless, said he and his workmates do not know what is on the cards.