Contractor close to rehabilitation with City by clinching deal to upgrade West Coast Main Line.
Jarvis is in pole position to win a big contract to renew part of the West Coast Main Line for Railtrack.

The company is understood to be in final talks over price, which should be between £350m and £450m, sources close to Railtrack said this week.

Jarvis has been under a cloud in the City since a dispute last month with Railtrack, by far its biggest customer, over other contracts. Its share price fell 30% on the day the dispute was revealed and has still not recovered.

But City sources say Jarvis is about to rehabilitate itself through the West Coast Main Line coup. It is understood to have convinced Railtrack that it would save money in the long run by relaying a large part of the line rather than maintaining the present track.

It has also spent £10m on a massive US track-laying machine that can lay 100 m of sleepers and rail in a night, four times more quickly than similar equipment currently in use in the UK.

A source close to Jarvis said the machine was a key element in the package it was offering Railtrack. "We can now carry out work on week nights instead of causing disruption at weekends," he said.

Railtrack will have to work with Jarvis because it has the best track-laying capability

City Analyst

Railtrack has agreed to upgrade the west coast line to allow tilting Virgin trains to run at 125 mph by 2002 and at 140 mph by 2006. The work is worth more than £2bn.

Railtrack confirmed last week at its annual general meeting that it is on target to meet these deadlines. It is also understood to have alluded to the fact that one of its suppliers [Jarvis] had bought a state-of-the-art track-laying machine that would help do the job.

A Railtrack spokesperson said it was in detailed discussions with Jarvis but said they were confidential. However, one analyst said: "Railtrack will have to work with Jarvis because even if it does not win the job, which seems unlikely, whoever does will have to subcontract the work to Jarvis because it has the best track-laying capability." One million shares in Jarvis were traded on Wednesday morning this week after speculation about the west coast line became known. One analyst was particularly upbeat: "I am resurrecting Jarvis," he said.

But another was less sure that Jarvis could obtain the sort of margins it has been used to. He said: "It is not the £450m turnover that counts, but the profit it is making. The market makers are sceptical, so there is a wide spread on the shares." Jarvis is also believed to be close to settlement of its £12m dispute with Railtrack that sparked the City's disenchantment last month.