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Last Updated: Wednesday, 13 October, 2004, 11:52 GMT 12:52 UK
Jarvis to sell PFI bidding unit
School playground
Jarvis will continue to manage new and refurbished school buildings
Jarvis, the embattled engineering and construction firm, is further reducing its involvement in the Private Finance Initiative (PFI) building project.

The firm is set to sell its bidding arm, which tenders for school construction projects, to the Vinci group for an undisclosed price.

Jarvis will give up preferred-bidder status in four school projects, but it will manage the completed buildings.

Jarvis is restructuring its business after making a 255m loss last year.

Downsizing

Jarvis has been dogged by controversy since the 2002 Potters Bar rail crash - it was responsible for track maintenance on that part of the railway line - and has more recently suffered severe financial difficulties.

After amassing debts of 230m, Jarvis said in July that it would have to sell some businesses and reduce its operations to ensure its survival.

The company was bidding for things without having the depth of experience to pitch bids at the right level
Geoff Allum, Investec

Under the deal announced on Wednesday, Jarvis is to give up exclusive negotiating rights for contracts to build schools in Norwich, Manchester, Northern Ireland and the Republic of Ireland.

Under PFI, businesses are awarded contracts to build and oversee facilities over a thirty-year period, with the public sector paying every year to use them.

JARVIS OPERATIONS
Rail: the UK's largest maintenance contractor
London Underground: partner in Tube Lines consortium maintaining three lines
Councils: Street cleaning, recycling, traffic and other services
Healthcare: Built sixty bed hospital in Berkshire
Education: School and university accomodation services
Jarvis has no further tenders out to build schools and is unlikely to enter the market again.

However, it will continue to manage new and refurbished schools, which it says provides most of its PFI revenue.

Setbacks

The company has suffered a number of setbacks in PFI projects in recent months.

In August, it was stripped of a 174m school building contract by Fife Council while last month Kirklees Metropolitan Council decided not to proceed with a four-school project in which Jarvis was preferred bidder.

Geoff Allum, an analyst with Investec Securities, said Jarvis had struggled to finish projects on time.

"The company was expanding at a fast pace and was bidding for things without having the depth of experience to pitch bids at the right level.

"If you price a bid wrong and are stuck with it for a long time, you are liable to have cash flow problems."

Jarvis' problems worsened this summer when it breached certain banking agreements and said it would incur 141m in write-off costs relating to its university accomodation business.

The company's chief executive Kevin Hyde announced his resignation late last month.




SEE ALSO:
Jarvis chief executive resigns
29 Sep 04  |  Business
Council pulls plug on 174m deal
13 Aug 04  |  Scotland
Jarvis announces higher losses
11 Aug 04  |  Business
Council cancels Jarvis contract
05 Aug 04  |  England
Jarvis slides to 246m year loss
30 Jul 04  |  Business
Jarvis 'struggling for survival'
05 Jul 04  |  Business


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