Crisis deepens at rail firm Jarvis

THE crisis at Jarvis deepened today as the controversial rail engineer and Private Finance Initiative contractor announced the immediate departure of finance director Robert Kendall, a shock loss in its school buildings business, a fire sale of PFI investments and the possible axeing of the dividend.

The latest wave of bad news, released in a trading statement for the year to end-March, sent the shares crashing 32 3/4p, or almost 20%, to 145p. The company, chaired by Tory London mayoral hopeful Steve Norris, has been dogged by controversy from its role in the fatal Potters Bar train derailment two years ago to its contract to part-run the Underground.

It admitted today that long-running problems in its schools accommodation business, which constructs and maintains buildings, will send what has become a core part of Jarvis into a £5m loss for the year against an expected £5m profit.

'The loss for the division has primarily been caused by overruns on construction costs for a number of refurbishment contracts,' said Kevin Hyde, the chief executive promoted to run the company last year by since-departed founder Paris Moayedi.

The company has also sold its equity investment in a number of accommodation-PFI projects for £4.7m, booking a loss of £6m. The shock reversals in the accommodation division and the loss last autumn of hundreds of millions of pounds of maintenance work for Network Rail, which will cost the company £40m in exit charges, are set to hit the annual shareholders' payout.

'In the light of the recent overall performance of the group and our review of the group's activities, the board will review the appropriate dividend policy for the group,' Jarvis said. The payout rose 13% to 13p last year.

The restructuring has been overseen by banker Alistair Rae, who will now take over as finance director from £222,000-a-year Kendall.

Net debt has soared 50% to £125m in the past year but the sale of or exit from investments has brought it down from £153m last autumn.