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Tuesday, 11 June, 2002, 09:44 GMT 10:44 UK
Market discipline for Jarvis


The stockmarkets punished rail contractor Jarvis for its involvement in the Potters Bar rail crash - so can its good profit figures restore investor confidence?
At first glance, it's hard not to admire Jarvis, the business-services contractor. Last year was another 12 months of rising turnover, profits and dividends.

The fact that it has adopted a new accounting policy - UITF 34 - is a bit confusing for those of us without an advanced degree in computer sciences, but the general trend is unmistakeably upwards.


The City has already passed judgment on what Potters Bar means for Jarvis

Despite these impressive numbers, however, Jarvis is a company with a dark cloud hanging over it.

As the contractor responsible for maintaining the stretch of rail line on which the Potters Bar accident occurred, it is mired in allegations of cutting corners to save money and sloppy workmanship from its inspection staff.

Market punishment...

With police and the Health & Safety Executive conducting investigations into the derailment that killed seven people, it's difficult for Jarvis to defend itself publicly.

Chief executive, Paris Moayedi, admits that "everyone at Jarvis has been shocked and saddened" by the deaths and that "safety is always at the top of our agenda".


The quickest way for any transport operator or contractor to wipe out its business prospects is to be found guilty of poor safety standards

The City, of course, is no respecter of sensitivities and has already passed judgment on what Potters Bar means for Jarvis.

The company's shares have dropped sharply from 580p to about 320p, as investors fret over potential litigation from the friends and families of the derailment's victims and possible loss of contracts if inquiries conclude that Jarvis was negligent.

... and market discipline

Among Jarvis's more hysterical critics, there are those who claim that because the company is publicly quoted, and therefore under pressure to deliver rising returns to shareholders, it has compromised on safety.

Some union leaders argue that only state-owned operators can be relied upon to give safety the priority it deserves.

This argument does not bear scrutiny. British Airways, an airline with one of the world's best safety records, is privately owned. Aeroflot, an airline with one of the worst safety records, is state owned.

All companies in transport-related industries know that in order to provide investment in state-of-the-art equipment, healthy profits are essential. The quickest way for any transport operator or contractor to wipe out its business prospects is to be found guilty of poor safety standards.

If Jarvis is proven to have been responsible for shoddy work that led directly to the Potters Bar, regulators will be unforgiving.

The market, too, will issue a damning verdict.

Until all the facts are known, the company's executives are doing their best to shore up crumbling confidence in what only a few months ago was a stockmarket star.


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11 Jun 02 | Business
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16 Oct 01 | Business
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