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Jarvis: margins of 8.4%
00:00 21 Jun 2000
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by John Leitch
Jarvis has unveiled an operating margin of 8.4%, down slightly on last year but still more than four times higher than most of its construction rivals.
Now transformed into a major facilities management group, Jarvis' latest annual results published last week (12 months to 31 March 2000) showed a doubling in the size of its order book to £2.2bn. Jarvis is currently engaged in 18 PFI/University Partnership Programme projects, compared with six at the previous year-end.
The past 12 months have been turbulent for Jarvis and its share price has slid from 790p to 160p. Management changes will see the arrival of a new finance director and Jarvis has brought in new auditors, Ernst & Young. Redundancy costs during the year were higher than expected at £9m.
Also, uncertainty exists over settlement on long-term Railtrack contracts, where Jarvis is looking for £15m to cover "variations and other entitlements".
The group's accounting policy has also changed. Chief executive Paris Moayedi said: "Jarvis has had considerable success in the PFI and UPP markets. As a result of the change in the mix of our business, we have chosen to adopt a revised accounting policy that provides a more consistent approach to revenue recognition in the presentation of our accounts."
The review alters the timing of the recognition of revenues and profits. The change will have no effect on total cash flows, revenues or profits that will be earned over the lifetime of PFI contracts, claimed the group.
Results calculated on Jarvis' new accounting basis showed turnover at £670m (£620m) and pre-tax profit unchanged at £32m. Using the group's old accounting basis, the pre-tax profit figures would have been higher: £37m for 2000 and £34m in the previous year.
Jarvis continues to log margins that are beyond the reach of conventional construction groups. Its 1998 figure of 11.2% was followed by 9.1% last year. The latest figure of 8.4% is down but still sky-high.
Sources report that of the six maintenance contractors working for Railtrack, three are taking an enlightened view and are negotiating to hold margins up - First Engineering, Amey and Jarvis - while the rest are driving them down towards conventional construction margins, namely Amec, GTRM and Balfour Beatty.
Capital Projects and Plant Hire, one of Jarvis' two business streams, had a turnover of £210m, up 34%, with operating profit jumping by a third to £14m. Jarvis' construction business has withdrawn from tendered general contracting. Turnover lost as a result has been more than covered by PFI, UPP and other partnership contracts.
Jarvis recently created Odyssey Property Services, in joint venture with UBS Warburg, to capitalise on the outsourcing of property and property services by the private sector.
Jarvis' second business stream, Facilities Management, saw operating profits dip £2m to £26m as turnover stood still at £450m. Total turnover divided between rail at £290m and Traffic Systems at £160m.
Jarvis has issued a statement on the £15m disputed sum with Railtrack. It says: "Negotiations are progressing in accordance with a pre-agreed procedure but are at an early stage and may take some time to complete given the complex nature of the issues involved.
"On the basis of the information available to them, the directors are of the opinion that the settlements will not be materially different from the amounts recognised in the accounts.
"The auditors have drawn attention to this matter, but their opinion is not qualified."
In Traffic Systems, the performance of Jarvis' highway maintenance and French road services businesses was below expectation. New management has been brought in to head both businesses and there has been restructuring.
Jarvis' stockbroker Peel Hunt forecasts a major rise in pre-tax profit for the current year to £50m.
BOXTEXT: JARVIS
Annual results (12 months to 31/3/00)
Pre-tax profit £32m n/c
Turnover £670m s 8%
Jarvis has unveiled an operating margin of 8.4%, down slightly on last year but still more than four times higher than most of its construction rivals.
Now transformed into a major facilities management group, Jarvis' latest annual results published last week (12 months to 31 March 2000) showed a doubling in the size of its order book to £2.2bn. Jarvis is currently engaged in 18 PFI/University Partnership Programme projects, compared with six at the previous year-end.
The past 12 months have been turbulent for Jarvis and its share price has slid from 790p to 160p. Management changes will see the arrival of a new finance director and Jarvis has brought in new auditors, Ernst & Young. Redundancy costs during the year were higher than expected at £9m.
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Also, uncertainty exists over settlement on long-term Railtrack contracts, where Jarvis is looking for £15m to cover "variations and other entitlements".
The group's accounting policy has also changed. Chief executive Paris Moayedi said: "Jarvis has had considerable success in the PFI and UPP markets. As a result of the change in the mix of our business, we have chosen to adopt a revised accounting policy that provides a more consistent approach to revenue recognition in the presentation of our accounts."
The review alters the timing of the recognition of revenues and profits. The change will have no effect on total cash flows, revenues or profits that will be earned over the lifetime of PFI contracts, claimed the group.
Results calculated on Jarvis' new accounting basis showed turnover at £670m (£620m) and pre-tax profit unchanged at £32m. Using the group's old accounting basis, the pre-tax profit figures would have been higher: £37m for 2000 and £34m in the previous year.
Jarvis continues to log margins that are beyond the reach of conventional construction groups. Its 1998 figure of 11.2% was followed by 9.1% last year. The latest figure of 8.4% is down but still sky-high.
Sources report that of the six maintenance contractors working for Railtrack, three are taking an enlightened view and are negotiating to hold margins up - First Engineering, Amey and Jarvis - while the rest are driving them down towards conventional construction margins, namely Amec, GTRM and Balfour Beatty.
Capital Projects and Plant Hire, one of Jarvis' two business streams, had a turnover of £210m, up 34%, with operating profit jumping by a third to £14m. Jarvis' construction business has withdrawn from tendered general contracting. Turnover lost as a result has been more than covered by PFI, UPP and other partnership contracts.
Jarvis recently created Odyssey Property Services, in joint venture with UBS Warburg, to capitalise on the outsourcing of property and property services by the private sector.
Jarvis' second business stream, Facilities Management, saw operating profits dip £2m to £26m as turnover stood still at £450m. Total turnover divided between rail at £290m and Traffic Systems at £160m.
Jarvis has issued a statement on the £15m disputed sum with Railtrack. It says: "Negotiations are progressing in accordance with a pre-agreed procedure but are at an early stage and may take some time to complete given the complex nature of the issues involved.
"On the basis of the information available to them, the directors are of the opinion that the settlements will not be materially different from the amounts recognised in the accounts.
"The auditors have drawn attention to this matter, but their opinion is not qualified."
In Traffic Systems, the performance of Jarvis' highway maintenance and French road services businesses was below expectation. New management has been brought in to head both businesses and there has been restructuring.
Jarvis' stockbroker Peel Hunt forecasts a major rise in pre-tax profit for the current year to £50m.
BOXTEXT: JARVIS
Annual results (12 months to 31/3/00)
Pre-tax profit £32m n/c
Turnover £670m s 8%
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