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Last Updated: Friday, 15 July, 2005, 08:56 GMT 09:56 UK
Warning for Jarvis as losses grow
London Underground train
Last December Jarvis sold its stake in the tube network
Engineering and construction group Jarvis has suffered deepening losses and warned of "fundamental uncertainty" that it can remain in business.

Pre-tax losses widened to 353.8m ($623.3m) from 256m in the 12 months to 31 March.

Its auditors are likely to modify their report amid doubts over its ability to continue as a "going concern".

However, Jarvis reported "remarkable and heartening resilience" from its remaining businesses.

Insolvency threat

Earlier this week, Jarvis asked its shareholders to back a deal that would put it in the hands of its creditors.

Jarvis said the deal was vital in order to save it from bankruptcy.

Trading at the start of the current financial year demonstrates an improved performance

As part of the deal, Jarvis will give creditors 95% of the group in return for cancelling 350m of debt.

This is the final part of a rescue plan that has seen Jarvis sell key assets, and will leave shareholders with just 4.75% of the group.

The company warned shareholders that even without their approval it would implement the plan, and, failing that, enter insolvency proceedings.

On the plus side, Jarvis said its two major cost-cutting programmes - which led to job cuts and the closure of its London head office - would yield annual savings of 50m.

"Trading at the start of the current financial year demonstrates an improved performance," the group said.

Its strategy of focusing on the core businesses of rail renewal, plant hire and road products would provide "a much improved base from which to develop the business".

Asset sales

Jarvis was once the UK's biggest construction and engineering company, but has fallen on hard times since a train derailment on a track it maintained killed seven people in 2002.

Since then the company has overstretched itself by bidding for a large amount of Private Finance Initiative (PFI) contracts.

In a bid to get back on track, Jarvis has recently been selling assets to focus on its new core businesses.

Last December it was forced to sell its stake in the Tube Lines consortium, which was its most valuable asset, for 146.8m.

Shares in Jarvis were down 0.7 pence at 7.5p on Friday morning.

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