Jarvis is the latest construction firm to get support services listing in an attempt to boost its falling share price.
Jarvis has joined the ranks of former building firms exiting the stock market’s construction sector this week after being awarded a support services listing.

The move follows last week’s news that Tilbury Douglas is also planning to move sectors (25 February). Speculation has now started that other players, including Carillion, the former contracting arm of Tarmac, will try to follow suit. Amey jumped sectors last year and has seen its share price improve considerably.

As of 17 March, Jarvis’ shares will sit alongside the likes of Capita and WS Atkins rather than companies such as Birse and Try Construction.

The main benefit for the company is that support services companies are generally considered a safer bet for investors because they have longer-term maintenance contracts, are less vulnerable to economic cycles and carry less risk than building contractors.

For this reason, support services firms tend to attract higher price to earnings ratios, a key measure used by investors when selecting stocks.

The shift is the latest development in Jarvis’ campaign to revive its flagging share price. The firm’s shares have fallen from 697.5p to 136p over the past year because of fears that the high margins it earns on work for its biggest client, Railtrack, are not sustainable.

Jarvis’ shares jumped 7p to 143p on Tuesday, the day of the announcement. Company secretary Geoff Mason said Jarvis had gone for a new classification because it was “a far more appropriate sector for the business nowadays”.

“We are not a builder anymore,” he said, adding “we will be analysed on a different basis and that may give us a better price to earnings ratio.”

Support services companies tend to be followed by a different set of analysts from the construction sector. Companies that are considering reclassifying as support services outfits hope it will allow them to improve relations with analysts and investors.

However, construction analysts say they are increasingly being asked to follow a mixture of stocks and that the benefits of relisting may not be as great as expected.

Building revealed in January that Jarvis chief executive Paris Moayedi is planning to replace his finance director Henry Lafferty and give him responsibility for the firm’s growing private finance initiative portfolio.

A headhunting firm has now been employed to find the new finance director.

  • Tilbury Douglas has restructured into three divisions: support services, equipment services and construction services. This follows the sale of its Scottish housebuilding operation last week. The company said support services would be the biggest growth area for the group, particularly the outsourcing of management, maintenance and services functions.