Nov 28, 2001

Jarvis, the outsourcing company that has Paris Moayedi as chief executive, is expected to be among contractors that will benefit most from Chancellor Gordon Brown's thrust toward greater public spending. The company has been actively participating in Private Finance Initiative projects and has now secured orders worth GBP4.4bn, up from the GBP4bn reported in June.

Jarvis' growth is proof that Mr Moayedi has been right in investing the company's resources on PFI projects; mishandling of a contract, however, could easily cancel a lot of the gains the company has accumulated from these projects. A decision by analysts to adjust their full-year projection for Jarvis to GBP55m from GBP49m boosted shares in the company by 17.5p to 502.25p.

Asite is owned by PremiSys Technologies, an AIM-listed property services and investment group, whose backers include Stanhope, the property company, and Rotch, the private property company run by brothers Robert and Vincent Tchenguiz.

SIR JOHN EGAN, the scourge of the construction industry, is to become chairman of Asite, an electronic marketplace for the industry, which launches in June.
Sir John gained notoriety in the industry with a hard-hitting 1998 report Rethinking Construction, which called for wholesale changes to raise efficiency levels.

The Asite chairmanship will be his first role in the industry since he challenged construction firms to reduce capital costs and construction time and improve its performance.

Sir John said: “This is a very inefficient industry but there is huge enthusiasm to change things. Asite will allow the industry to collaborate.

“It’s a first step to deliver the recommendations of the Construction Taskforce: to eliminate waste, integrate the supply chain and standardise best practice.”

BAA, the airports operator where Sir John was chief executive from 1990 to 1999, has also become a shareholder and is looking to put an increasing proportion of its annual construction budget through the portal.

Landlords and developers including British Land, Tishman Speyer, Stanhope, Prudential and Legal & General have also become shareholders in Asite. The company is expected to be profitable in 2002.

Jarvis PLC - Re Contract
RNS; May 2, 2001

Paris Moayedi, Chief Executive of Jarvis, commented: 'This award represents a major opportunity for Jarvis to apply its core skills in operational improvement and facilities management to provide the highest level of efficiency and safety for transport systems. This commitment enables us to make the best use of PFI/PPP to secure long term quality earnings.'

Jarvis, the international facilities management group, is pleased to announce that the Tube Lines consortium, in which it holds a one-third share, has been selected by London Underground (LUL) to operate the 30 year concession to provide Infrastructure Services and capital investment on the Jubilee,

Northern and Piccadilly (JNP) Lines.

Under the terms of the contract, which will be awarded under the Government's London Underground PPP (Public Private Partnership) policy, Tube Lines would spend more than #2 billion to regenerate the JNP lines over the next seven years, with new signalling, new track, more trains and modernised stations.

However, considerable work remains to be done to ensure that the negotiations with LUL continue to a satisfactory financial close.
If these negotiations are successful, Jarvis will provide specialist management resources and systems in partnership with another consortium member, Amey plc, and the existing London Underground team. This team will be responsible for the planning and execution of a programme of operational expenditure totalling #1bn over the first seven years of the concession. Over the same period Bechtel, the third partner in the consortium and one of the world's largest project management groups, will lead a £1 billion capital investment programme in the network.

These massive new levels of investment in the London Underground system are expected to transform the travelling experience for its millions of passengers by reducing overcrowding and journey times, maximising safety systems and investing in run-down stations.

In order to ensure the successful delivery of projects and increased operational performance, Jarvis and its partners will lend Tube Lines some of their best project and programme managers from around the world. In return for these management services Jarvis will receive long-term fee income.

Jarvis, along with Bechtel and Amey, also holds a one-third share in the Surface Lines consortium, which is still awaiting a decision on its bid from LUL.

It was as if Keyvan Foroshan wanted a new challenge. He was managing multi-million pound contracts working for large construction company when he decided to leave and start his own company, K1 Construction Ltd. It was not necessarily a question of money, but of self fulfilment. " The one downfall when you leave a large company to run a company with absolutely no equity, is that at first the contracts are minuscule in value to what you might be used to," says Keyvan " It discourages a lot of people setting up on their own. It can get a bit disenchanting, but you have got to be able to take it one step at a time. It is no good to leave a large company and think that you can continue to bring in contracts of that magnitude."

(BIBN) Your strategy is to concentrate on Blue-Chip companies rather than private individuals. Why is that?

(KF) As a small company, you have to assess what degree of risk you are going to take. Any new business has a high level of risk involved. You have to bear in mind that in my case there was no massive capitol injection. Blue-chip companies tend not to go bankrupt (especially those that have been around for a number of years). They do sometimes pay you late, but you always get your money. With private individuals this is not always the case. We had one bad experience and this resulted in us concentrating on the commercial side. With private individuals, the contracts are generally one-offs, whereas with blue-chip companies your services are mostly needed again in the future. In construction, you are better off with the blue-chip companies who have the large property portfolios, whereby if you have done a good job on one contract then you are likely to be involved in other contracts.


Keyvan Foroshan

(BIBN) Is the type of work different?

(KF) The work does tend to be different. We concentrate on what we call fast-track contracts, where there is an existing building that needs to be upgraded. The work is done on a building that is up and running, and needs a complete strip-out and re-fitting of all the internal elements. Because of the rental prices that these properties attract, the clients want you to get in there and get out again as soon as is physically possible. That is the market that we are currently concentrating on. And there seems to be a lot of work available as far as that is concerned.

(BIBN) With having to finance the whole project before getting paid, how do you manage the cash-flow?

(KF) With difficulty. We have just finished a £250,000 contract which took over three months. The reality is that from the moment you start you do not get any money until you hand the job over, and it is a frightening prospect. Let us assume that you are working on a 10% or 15% margin, then for a £25,000 profit, you are laying out something in the region of £250,000 to meet the requirements. The earliest opportunity to request payment is a month into the contract, and realistically it takes another 6-8 weeks before you get any money in your bank account. So by default there is a three month period between the start date and the date that you receive your first cheque. It is a problem, even for the large companies. It is something that prevents rapid expansion, amongst other things. You have to be extremely careful not to over commit, because you will literally go into bankruptcy. Completing the work is not so much the problem as financing it.

(BIBN) With the fast-track contracts, do you operate on large profit margins?

(KF) You can do. But even with the construction industry booming at the moment, the prices that our competitors are offering are extremely competitive, so in spite of the volume of work being quite high, the margins are still not that fantastic. We have to be careful because everything that we do is on a competitive tender, we do not do anything via negotiations, or at least we have not done so recently. The problem is that if you do start to get over-ambitious in terms of profit margins, the chances are that you will end up with no work at all. There is always someone who is prepared to take on the contract on a very nominal margin.

(BIBN) How do you manage to deliver a high standard of workmanship?

(KF) We have good operative and suppliers, and most of the contracts have fairly well-defined specifications. You are only as good as your last job. So even if you perform well on 10 jobs for a client, if you do a bad job on the 11th then that will be the one that you are remembered for. So the pressure is always on. Once you set the standard then you have got to maintain it. I managed multi-million pound contracts, so I have been on both sides of the fence in terms of the scale of contracts and the various management procedures that are in place. As a company, we are aware of what is expected of us in terms of high quality products, and we ensure that we deliver just that.

Email: MD@K1construction.com