'I never expected it to be as bad as it was'

Steven Norris tells Edward Simpkins how Jarvis was rescued from the brink of collapse

Steven Norris says his worst hour in a roller-coaster of a year as chairman of Jarvis came last June when it looked as though the beleaguered construction and rail services group might go bust. The timing could not have been worse, coming just days before Norris was due to contest the London mayoral election as the Conservative candidate.

In the event Norris lost the election, without, he claims, the help of Jarvis, and the company was given a year's stay of execution following a bout of intensive negotiations with its bankers. Norris says the refinancing deal, which was unveiled just after the election result, was the high point of his turbulent year at Jarvis.

With the agreement of the company's long-suffering lenders, disaster was averted and Jarvis survived to undergo a period of intense restructuring. This culminated in the sale on Christmas Eve of its biggest asset, a stake in Tube Lines, the company that runs a third of the London Underground, for £147m to Spain's Ferrovial and a deal to extend its banking facilities for a further year.

Last week Jarvis announced a record loss of £283m, made up largely of writedowns on businesses that the company is quitting, such as construction, as the group tried to draw a final line under its troubled recent history.

So far investors have bought into the argument of Alan Lovell, the restructuring expert brought in by Norris as chief executive two months ago, that Jarvis has a viable future as a rail renewals, plant hire and roads business, albeit a heavily indebted one.

The share price jumped by more than 50 per cent on the results announcement as Lovell admitted that Jarvis was looking for a big equity investor to take a stake or to agree a debt for equity swap with its banks. Although the company will have an expected £240m of debt on its balance sheet by its year end in March, a strategic deal or debt agreement should ensure that the company is not about to go bust.

It is hard not to feel some respect for Norris for taking the helm of a company that has been in crisis for much of the past three years. Jarvis has been blighted by three profits warnings in a year and cost overruns in key projects.

Jarvis's financial problems are very much of its own making and it is unlikely that much sympathy will be felt by its shareholders or the families of the seven people killed in the Potters Bar rail crash in 2002, which was caused by faulty points on a section of track maintained by Jarvis. But there is no denying that Norris has steered Jarvis back from the brink of collapse.

"I never expected the position to be as bad as it was, but I knew when I took it on that it was going to be tough and I knew it was going to be a lot of work," Norris says, pointing out that as the last man standing he was practically obliged to take on the chairman's job. It is a job that has been attended by so much ill fortune that it almost looks cursed.

In August 2002, Colin Skellett, the chairman of Wessex Water, resigned the chairmanship at Jarvis after the City of London Police fraud squad arrested him over allegations that he had taken a £1m bribe to influence the sale of the water company to a Malaysian conglomerate.

"We had lost two chairmen in very short order," Norris says. "Colin was, of course, never charged. He was cleared. It was patently obvious to anyone who knew him that he was absolutely beyond reproach, and he was also an absolutely excellent chairman, but the shareholders demanded his resignation."

Then nine months later Skellett's successor, Lord McGowan, the former senior partner of Panmure described by Norris as a "wise and able chairman", died of cancer.

"That left us very much denuded in terms of non-executives, and because Paris Moayedi was due to retire as chief executive, he took on the job temporarily and we promoted the then chief operating officer, Kevin Hyde, to CEO because that had been the planned succession."

However, it was about then that the cracks began to appear.

"It became clear when our September half-year results were produced in November 2003 that something was going seriously wrong in terms of cash," Norris says. "The company was continuing to report profits steaming ahead as late as September 2003 but it was obvious that there was a massive disconnection between profits on the one hand and the haemorrhaging of cash on the other."

That discovery led to Norris taking over as chairman.

"What that accelerated was the departure of a number of senior executives, and the retirement of Paris Moayedi certainly took place as planned," he says.

Moayedi, who became chief executive in 1994, was credited with turning a small and unremarkable construction company into what became for a time the UK's largest construction group.

But Norris says that in his opinion the culture Moayedi created at Jarvis allowed problems to grow unnoticed by senior staff. "I think there was far too much of a culture which had developed in the mercurial, entrepreneurial Moayedi years," Norris says. "It is impossible to ignore the influence of Paris Moayedi on Jarvis right the way through to 2003, which was: `Don't bring me bad news, don't bring me problems, bring me solutions.' "

Norris's conclusion is that this resulted in "creditor stretch" - in plain language Jarvis was not paying its bills and contractors started to walk off-site.

"When we started to say to managers 'Please don't tell me what you think I want to hear, tell me what the exact position is', it became plain that we were effectively running out of cash and that unless we had some emergency cash in the business we would have to declare the company insolvent."

Norris says this was when the hard work really started.

"That was March 2004 and from very shortly after our first profits warning in February I was involved with the banks in putting together the standstill arrangements and the extension of new money to the company which was vitally necessary."

So does Norris have any regrets? "I've been very hands on," he says. "There have been periods of time when the description 'non-executive' has been frankly laughable, as was the equally inappropriate description 'part time'. It has been intense but I've enjoyed it."

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