City predicts takeover as Jarvis returns to black

Jarvis looks more ripe for takeover than ever following its return to the black this week, according to City sources.

The prediction came after the rail specialist bounced back from a £21.7m loss last year.

In the year ended 31 March 2008, pre-tax profit was £11.1m, more than double the consensus forecast of £5.5m. Turnover increased 12% from £288.5m to £321.9m, thanks to a strong second half.

One City analyst said: “The results are better than expected. The company is a lot more attractive today than it was yesterday.” Another said: “The fact it has also extended its debt repayment period and reduced interest charges means it is now in a secure position.”

The share price was 10% up at 27p in early morning trading.

Trade buyers linked with Jarvis include Balfour Beatty and French group Bouygues.

John O’Kane, finance director, would not comment on the speculation, repeating the company’s statement that it was considering all options but that there was no offer on the table.

Despite the absence of an offer, the company is currently in an “offer period”, which limits what it can say about the takeover speculation. Asked how the two facts tallied, O’Kane said: “I can’t comment on that. You’d have to ask the takeover panel.” One source called it an “odd situation”.

The attraction of Jarvis to suitors is the workflow from Network Rail and City sources said Bouygues had the cash to buy the company. “It would be the only way to make it onto the track renewal framework for an outsider,” said one. Others said Balfour Beatty would not be such a logical suitor, as it is already on the framework.

Steven Norris, Jarvis chairman, called the results a “significant milestone” and said the group was well placed to take advantage of spending levels in UK rail that were at an “unprecedented high”.

Jarvis has suffered from reputational and financial difficulties since the Potters Bar train derailment in May 2002, for which it accepted liability on behalf of the industry.