One to Watch: Jarvis

Published on Friday 26 February 2010 20:31

JARVIS is a UK-based engineering company, involved in rail infrastructure, renewal and enhancement, plant hire, freight and facilities management.

Jarvis

9.2p -0.38p

Scotsman says HOLD

The company has three segments: rail, which carries out infrastructure work such as track development and signalling; plant, which provides machinery; and accommodation services – managing facilities.

On the face of it, Jarvis does not look a particularly promising proposition. The latest update was something of a couched profits warning, confirming that trading conditions continue to be difficult, specifically with the timing of contract awards.

Jarvis did point to its success in being awarded the Chiltern Railways Evergreen 3 contract and is hopeful of developing new customer contacts over the next few months.

Jarvis was once one of the UK's largest construction companies but has been struggling for some time and the recent trading update is another prospect of promises postponed.

Market conditions are difficult but the need to upgrade the UK's rail network is widely recognised and Jarvis should be ideally placed to capitalise.

There are issues over margins, although Jarvis does have, on the face of it, a competitive advantage through its leading position in the UK rail industry.

It is clear the investment community is unconvinced and, as a result, short-term sparkling performance is most unlikely.

On the other hand, Jarvis's balance sheet is reasonably robust, net debt down to 12.6 million against an equivalent figure of 21.5m last year. Investing at these levels is something of an act of faith but the rating takes little on trust and the shares appear to have interesting dimensions, provided one accepts the risks.

&#149 The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.