Interim Management Statement

Jarvis plc (“the Group”) today publishes its Interim Management Statement covering the period from 1 October 2007 to date.

The Group continues to follow its strategy for recovery and trading results in the third quarter showed improvement over quarters one and two.

Rail

Our Rail business undertook one of its largest ever workloads over the Christmas period, safely delivering a number of major projects including work at Milton Keynes and Trent Valley on the west coast, Tollerton and Wrawby on the east coast, and Monktonhall in Scotland.The volume of work, which normally peaks at Christmas, reached levels this year which put considerable pressure on the manpower resources of the business.

The Rugby remodelling project attracted considerable press attention post Christmas.As we have previously stated this is the most complex project of its type ever undertaken in the UK.Work on this project commenced in early 2007 and is continuing. We are working very closely with our client, Network Rail, to ensure its delivery.This is the standard approach we adopt when undertaking any work on their behalf, which occurs almost every weekend of the year and which ordinarily passes without incident or comment.

In December, the Rail business secured the implementation phase of route sections 1, 2, 3 and 7 of the AO9 contract including track renewals, line speed enhancements, realignment of switches and crossings and overhead line alterations.Further work secured on the AO9 contract includes the complete renewal of nine sections of track at Carnforth and Penrith.These contracts, worth in the region of £4m, are now underway and are part of Network Rail’s line speed profile upgrades on the west coast.More recently, the business has been awarded contracts worth approximately £7m for the Low Row Signalling Equipment Renewal and Doncaster Concentrator Renewal signalling works.

Following Network Rail’s decision in September 2007 to appoint Jarvis as one of its four prime contractors for track renewals (“Six to Four”), we successfully completed the transition of the East Midlands area operations to Jarvis responsibility on 22 January 2008.The additional workbank will cover plain line and switch and crossing track renewals, and ancillary works including some signalling and overhead line upgrades. The transfer of our Integrated Management Team (IMT) in Scotland to another contractor following Six to Four is expected to be completed on 31 March 2008 and is proceeding to plan.As previously announced in September 2007, as a result of the Six to Four decision we expect our revenues to increase by approximately £15m in 2008/9 following completion of these transitions.

Plant

Our Plant business benefited from the increased activity levels in Rail, although as highlighted in the trading update of 22 November 2007 the mix of work being undertaken within the Rail business has favoured overhead line rather than pure track work, which has adversely impacted the utilisation of On Track Machines in the Plant division.We continue to discuss with our client the impact of changed utilisation patterns on our revenues and profitability under the national contract.Discussions to date have been constructive but we have not as yet reached agreement.

Small plant turnover increased significantly during the third quarter, resulting in greatly improved operating margins.This was due to higher volumes from Rail activity, increased prices and cost efficiencies.

The freight business continued to be loss making as its volumes were insufficient to recover its overheads, but is expected to move into profit following commencement of the bulk coal haulage contract with E.ON UK plc in April 2008.

Accommodation Services

The performance of Accommodation Services has improved following the retrospective performance deductions experienced on one contract in the first half, as reported in the Company’s last interim report.The business is now profitable at the contract level but it is not as yet fully recovering its associated overheads and is consequently still loss making at the pre tax level.In line with the Group’s strategy of focussing on its core operations, the business mutually agreed termination of two of its contracts which took effect from 31 January.Taken together these contracts were marginally profitable, though the terminations are not expected to impact materially on operating results going forward.

Current Trading

Whilst the pace of the Group’s recovery has been slower than originally anticipated, as previously documented, the Group continues to follow its strategy for recovery and trading results in the third quarter showed continued improvement over quarters one and two.The increase in activity levels in the third quarter in Rail and Plant resulted in improved profit and cash performance compared to the first two quarters and against the same period last year.

Net debt in the Group’s management accounts at 28 December was £44.0m, in line with management expectations, and the Group’s working capital facilities are adequate for the Group’s current requirements.

The repayment of tax and interest relating to prior years, which the Group announced on 7 February in principle, has now been confirmed by Her Majesty’s Revenue and Customs as totalling £6.5m.We expect to receive the repayment by the end of this month.

Outlook

Prospects for our Rail business remain good given the future programme of enhancement projects planned by Network Rail.We also believe that Network Rail’s recent reaffirmation of the need to develop a 365 day railway will create more opportunities for our innovative approach to mechanised service solutions. The major challenge for the industry is to ensure that there are sufficient resources to deliver the required work safely, effectively and efficiently.We continue to believe that our Plant business will benefit from the increased levels of rail activity.Our challenge remains to improve the level of visibility on plant demand.

Steve Norris, Executive Chairman of Jarvis plc said:

“Whilst the pace of the Group’s recovery has been slower than originally anticipated the Group continues to follow its strategy for recovery and trading results in the third quarter showed continued improvement over quarters one and two.I am confident we are still on track to report the best set of results since 2003 and prospects for our Rail business remain good given the future programme of enhancement projects planned by Network Rail”.

For further information, please contact:

Toni Jackson, Group Communication Manager  - 01904 712667 or 07919 939031

Tim Anderson or James Strong at Buchanan Communications – 0207 466 5000

Back to top