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Jarvis shake-up signals long fightback

HAVING seen its share price collapse from 787p in the past year to a recent low of 125p, it was somewhat inevitable that boardroom changes would be in the pipeline at Jarvis.

This week, the firm announced that Colin Skellett, the chairman and chief executive of Wessex Water would be joining Jarvis as chairman-designate and Bill Colvin, formerly of British Borneo Oil and Gas, would be joining as group finance director.

Whether it will be enough to revive the group's stock market value remains to be seen. In hindsight, Jarvis should probably have struck a note of caution when the City was first gripped by the potential offered by its rail maintenance businesses.

As it was, the profit warnings and problems with Railtrack soon stripped Jarvis of its glamorous rating.

Yet its 160p share price, seven times prospective earnings and virtually the cheapest in the support services sector, suggests the gloom may have been overdone.

The firm has a secured workload of £1.4 billion and it has been making headway with it PFI business; building links with a number of universities which are planning to outsource their student accommodation. Jarvis has also agreed a new framework for track renewals contracts with Railtrack; and has since won a £280 million deal for renewals on the West Coast Main Line.

Contract wins and fresh faces on the board are unlikely to impress the City. Any marked recovery in the shares must probably await a period of quiet; followed by improved results.

The nature of the industry makes a hostile bid unlikely for Jarvis. Then again, if the shares don't start to move, the firm could always start talking to some of the more highly-rated groups in its sector like WS Atkins.

Citysite Bill Fishlock (M11City)