Jarvis plc

1846–2001

CEO Paris Maoyedi has transformed Jarvis plc from a tiny, money-losing construction firm in the early 1990s to one of the United Kingdom's leading facilities management and infrastructure services firms. Between 1995 and 2000 alone the company's revenues have soared from less than £80 million to near £670 million. The company's steady profit gains have contributed to one of the United Kingdom's most successful stock advances during the decade, as Jarvis's share price has soared from as little as five pence to near as high as 700 pence at times. The most significant feature of the 'new' Jarvis--the company's prehistory dates back to the 19th century--is its leading share of the United Kingdom's railroad maintenance and infrastructure services market, built up through a series of acquisitions after the breakup and privatization of former government monopoly British Rail in the early 1990s. The company holds a number of key Railtrack contracts worth more than £700 million, including a five-year £250 million contract awarded in February 2000. In early 2001 the company was on the fast track toward winning a new £50 million maintenance contract for the United Kingdom's east coast mainline railway. At the same time, Jarvis has been making inroads in capturing a strong share of the European roads and airport maintenance activities, a market the company entered with its 1998 acquisition of Streamline Holdings. Jarvis, through its Accommodation Services division, is also a strong contender in the market for public sector construction and facilities management projects, particularly under the Private Finance Initiative (PFI) program, set up in 1992 to encourage the building and management of public sector facilities by private sector companies. Jarvis has captured a strong share of PFI-financed projects, included a £170 million contract for the design, construction, and long-term management of the Ministry of Defence's Army Foundation College, awarded in September 2000.

Express Train to Transformation in the 1990s

Jarvis plc was a small and struggling publicly held construction firm that had been hit hard by the building bust in the United Kingdom in the late 1980s. Originally established in 1846, the company--which had achieved a market capitalization of only about £10 million--collapsed along with the construction market and by the early 1990s was posting annual losses of more than £5 million. The company might have faded out completely if it had not caught the attention of construction industry veteran Paris Maoyedi in 1994.

Iranian-born Maoyedi (his original first name was Parviz, but he had it changed to Paris to make it easier to pronounce) had come to England as a student in the late 1950s, then married and remained in the United Kingdom to begin a distinguished career with construction firm AMEC plc at the start of the 1960s. Maoyedi went on to a number of top management positions within AMEC, before leaving that company in the 1980s to take a top role with another firm, Walter Lawrence, as it was preparing to enter the housebuilding market. Seeing a future in accommodation services, Maoyedi left Walter Lawrence in 1988 and decided to found his own company, Team Services, to specialize in student dormitories.

Rather than take Team Services itself public, given the disastrous construction climate of the late 1980s, when the building boom that had marked the United Kingdom during that decade suddenly turned to bust, Maoyedi found a back door to a public listing. Jarvis plc had been hard hit by the collapse of the building market and had seen its share price slide below five pence per share. Maoyedi approached his partners in Team Services with the idea of performing a reverse takeover of Jarvis, thereby enabling Team Services to go public under the Jarvis name. The two companies entered talks, but Jarvis's partners decided not to pursue the takeover. Instead, Maoyedi went ahead and formed a joint venture company with Jarvis, investing his personal funds into the £1 million venture.

Instead, Maoyedi went ahead and formed a joint venture company with Jarvis, investing his personal funds into the £1 million venture.

1994–1998

That joint venture did not go far. Instead of pursuing the joint venture, Jarvis, by then leaking more than £5 million per year and facing being cut off by its creditor bank, offered Maoyedi the CEO's position at Jarvis. Maoyedi was reluctant to accept the offer. As he told the Daily Telegraph: 'I didn't exactly jump at the idea.' Jarvis won him over, finally, after giving Maoyedi the power to replace the company's board of directors. Maoyedi joined Jarvis at the end of 1994. His first success at the company was in convincing its bank creditor to add another £1.5 million to the company's overdraft, saving the company from failure. Maoyedi helped restructure the company, refocusing its operations on competing for higher-margin contracts in the design-and-build and space management segments. Maoyedi also sent the company out after a new type of contract, funded by the Private Finance Initiative of the British government to encourage the private sector to take over the construction and management of various public works projects, including schools and hospitals. By the end of 1995, Jarvis had returned to profitability, posting some £500,000 in pretax profits on more than £76 million in sales.

Jarvis might have remained a relatively small construction company had Maoyedi not recognized the opportunities waiting in the proposed breakup and privatization of the nearly 50-year-old government-held U.K. railroad monopoly British Rail. The breakup called for the division of British Rail maintenance and infrastructure facilities wing into some 11 separate companies (which later merged down to just six companies). Maoyedi led Jarvis in a bid for one of these companies, Northern Infrastructure Maintenance Company, or NIMCO, which was responsible for maintenance and renewal operations on more than 4,000 miles of track in the northern England region. Jarvis paid just £9 million for NIMCO and suddenly transformed itself from a small construction group to a company with nearly 4,000 employees. The company inherited more than £350 million in contracts extending over five years, while gaining control of about one-fifth of the new railway infrastructure market.

The NIMCO acquisition caused Jarvis's long-dormant stock to wake up as Jarvis now appeared a strong player in a new and vital market. By the end of 1996, the company had booked the second strongest share price gain on the London stock exchange, when its share price soared by more than 500 percent. While the company worked to integrate its new division, continuing a payroll slimming exercise begun under British Rail to reduce the NIMCO division to fewer than 3,000 employees, Jarvis's share price began to climb. Its new market clout placed Jarvis in the position to consider further expansions to its new arm. By the end of its next fiscal year (the company changed its year-end to March 31) the company's sales had risen to more than £261 million, with more than £6 million in retained profits.

In 1997, Jarvis made its next moves to capture the lead of its new market. In May of that year, the company paid £4.9 million to buy a 50 percent share, plus an option to acquire full control for an additional £5 million, of Scotland-based Relayfast, a rail engineering and maintenance company formed out of the British Rail privatization. Less than a month later, Jarvis was prepared to take its rail division to the next level. In June 1997, the company raised some £62 million in a rights issue in order to acquire another of the British Rail spin-off companies, Fastline, and to acquire the remaining 50 percent of Relayfast.

Yet the rights issue nearly failed, as Jarvis and its share price were hit hard by a Railtrack decision that placed a temporary ban on contracts to Jarvis because of alleged overpricing made by the NIMCO division before its takeover by Jarvis. That dispute was quickly resolved, with Railtrack and Jarvis forming a joint venture, Alliance, to oversee the handling of contracts between the two companies. The dispute, however, caused a sharp drop in the company's share price, leaving the bulk of the rights issue in the hands of its underwriting companies. Jarvis's underwriters were nevertheless to profit handsomely as Jarvis's share price later tripled in value. When Jarvis at last succeeded in merging its new Fastline and Relayfast operations into its railway maintenance division, the company had gained the leading share in its market, with more than 60 percent of the country's railway system under its responsibility. The company was buoyed further by the award of three contracts for three years each from Railtrack, worth some £290 million in December 1997. These contracts helped boost the company's revenues, which topped £355 million, with net profits of more than £17 million for the year ending March 31, 1998.

1996–2002

'Europe's Biggest' for the 21st Century

With its rail operations at their limit in the United Kingdom--the Fastline acquisition had already prompted calls for intervention from the United Kingdom's Mergers and Monopolies Commission--Jarvis now looked to extend itself into becoming what Maoyedi described to the Daily Telegraph as 'Europe's biggest integrated infrastructure maintenance company for transport.'

In May 1998, the company announced a friendly takeover of Streamline Holdings. Worth nearly £184 million, the stock and cash deal gave Jarvis entry into a new area of operations, that of road and airport maintenance, not only in the United Kingdom, but across Europe as well, while also boosting its U.K. railway maintenance business. Streamline had been a part of Shell until the early 1990s, when it was spun off as part of a management buyout and then taken public in 1996, and had built a position as Europe's leading road maintenance company. Streamline had only recently entered the airport maintenance field, an area Maoyedi pledged to develop further. The Streamline acquisition was to help boost Jarvis's revenues to more than £605 million by the end of its 1999 fiscal year.

Yet Jarvis entered 1999 under a cloud, as its railway workers, more than 60 percent of whom belonged to the RMT union, joined an industrywide strike to protest attempts to change their contracts. To trim its payroll costs, Jarvis sought to eliminate the long-standing provision for overtime pay on weekend and overnight shifts--the very times when Jarvis was able to conduct its railway maintenance operations. The dispute was to last more than ten months, and was finally resolved with a compromise, with Jarvis agreeing to raise base salaries in exchange for an end to overtime pay. This, and a new dispute with Railtrack, helped to depress the company's earnings in 2000, despite a rise in revenues to more than £669 million for the year.

The new dispute with Railtrack, which continued to press for lower prices from its railway maintenance bidders, highlighted Jarvis's need to reduce the weight of its railway maintenance activities on its revenues. The company's road maintenance division continued to show promise and was to be boosted by the acquisition of Trafiroad NV, of Belgium, which also brought the company Trafiroad's Netherlands operations. The deal, worth up to £8.5 million, was to be carried out in two stages, with the first tier giving Jarvis 75 percent of Trafiroad in exchange for 1.65 million shares in Jarvis, worth more than £3.7 million. The second phase to acquire the remaining shares of Trafiroad was scheduled to be completed before 2002. The company also added to its European road maintenance network with France's Prosign, which was that country's leading maker and applier of road paint and other road marking products.

2000–2001

While building up its railway and road operations, Jarvis was also stepping up its growth into another direction, that of facilities management, as the company continued to benefit from the PFI program. In February 2000, Jarvis joined with the Halifax Group to win contracts to build and manage the Army Foundation College, a project with an ultimate worth of more than £435 million. In September of that year, the company won another large-scale contract with the award of a £230 million contract to upgrade and maintain eight public schools.

As the company focused on its public works construction and management wing, it exited a number of noncore areas, selling off a roofing subsidiary early in 2000, then receiving £20 million for a building products subsidiary in October 2000. Entering 2001, Jarvis was lifted again by the announcement that it had been chosen preferred bidder for a new Railtrack contract, worth £50 million, which was expected to give Jarvis access to maintenance work on the United Kingdom's east coast mainline railway for the first time. At the same time, the company announced that it had won a 25-year contract worth nearly £100 million to develop, build, and manage the new site for the prestigious Jews Free School.