Outlook: Potters Bar nemesis for former wonder stock

Corus confusion; ITV/Greg Dyke

Jarvis, THE engineering and construction services group that grew fat on private finance initiative contracts, has become the very embodiment of the old truism that once one thing goes wrong, everything goes wrong at the same time. Yesterday's profits warning is the third in as many months, and although the company is still forecast to have reasonable earnings this year, net debt is high, bank covenants are pressing, the finance director has been fired, the dividend is to be slashed and many of the company's contracts seem to be fast unravelling.

For Jarvis, the trouble started with the Potters Bar rail crash nearly two years ago. It's never really ceased since. Jarvis was responsible for track maintenance in the Potters Bar area. The company immediately cited sabotage as a possible reason for the derailment, but no evidence has ever been tabled to support the contention.

Paris Moayedi, the Iranian-born entrepreneur who made Jarvis what it is, has none the less always been robust in defence of his company's involvement. The evidence may look damning, but this is no open and shut case, he insists, which may account for the fact that there has yet to be any official allocation of blame. All maintenance procedures were followed religiously, Jarvis continues to claim. Furthermore, the rail network must take its share of responsibility. When a driver had reported a shudder on the line shortly before the crash, the network control centre had mistakenly sent a Jarvis team to the wrong piece of track to investigate.

Be that as it may, Jarvis has been unable to recover from the damage to reputation that the crash inflicted. Withdrawing from the rail maintenance business altogether, which we learned yesterday would cost £40m in exceptional charges, has failed to put the lid on the affair. Mr Moayedi was eventually prevailed upon to go, his place taken as chairman by the London mayoral candidate, Steven Norris, but nor has that managed to halt the tale of woe.

It is in the nature of entrepreneurially led companies such as Jarvis that when the founding father eventually leaves, a whole host of other difficulties come to light, and so it has proved. The latest problems arise in a series of contracts for the refurbishment of schools, where Jarvis appears to have been particularly aggressive in its pricing and its assumptions of how much of the subsequent cost overruns could be reclaimed from the client. You have to wonder how many other, still ongoing contracts are in the same condition.

All over the place, Jarvis seems to be bailing out. The proposed sale of a substantial part of the company's stake in Tube Lines, one of the key public private partnerships for the London Underground, is only the latest example. None of it gives much cause to believe Jarvis will eventually see its way through the present crisis in its affairs.

Corus confusion

More and more mysterious grow the motivations of the two Russian industrialists who have popped up on the share register of Corus, the Anglo-Dutch steel maker. Alisher Usmanov, the bigger shareholder of the two with 13.29 per cent of the stock, yesterday notified the company that he plans to nominate a director to the board at the forthcoming annual general meeting. Having started buying the shares when they were just 4p in March last year, Mr Usmanov is already sitting on a sizeable profit, but what is it that he wants out of the former British Steel?

Mr Usmanov knows the steel industry back to front. Among his business interests is a sizeable iron ore mine in the Urals and two Russian steel plants. He's also a big wheel at Gazprom, Russia's largest gas distributor. But if his main interest in Corus is an iron ore and gas supply contract, he's yet to put any proposals to that effect to the company. The other Russian shareholder, albeit a much smaller one with less than 3 per cent of the stock, is Oleg Deripaska, one of Russia's biggest aluminium producers. He might be interested in buying Corus's Dutch aluminium smelting business, which may again be on the market. He's also demanding that Corus consider the closure of its British steel plants. Or perhaps he wants to acquire Corus's Teesside plant, which in 2006 becomes a straight commodity producer of slab steel. Whatever it is he wants, he too has yet to put any proposal to the company.

It's all a rather curious way of going about things. However, the primary reason for the Russian interest, other than ego, which for the new generation of Russian capitalists should never be underestimated, may be a good deal less devious.

After another prolonged period in the doldrums, Corus has again risen Phoenix like from the blast furnace. The explanation is China. Corus supplies no steel directly to China, but booming demand from the People's Republic has somewhat incredibly created a worldwide shortage in steel capacity, thereby putting a rocket under the price of steel. Even more incredibly, we've been treated to the spectacle of Corus as once again a net recruiter of steel workers, even in the UK, where it is increasing production at its Port Talbot works.

Corus has already been able to raise its prices twice this year with no impact on demand. Another rise of up to 20 per cent is scheduled for July, taking the cumulative rise in prices to nearly 50 per cent in just seven months. Input prices - iron ore, coke, energy and freight - are also rising steeply, but not by quite as much. As a consequence, even the group's perennially loss-making UK plants became profitable in the final quarter of last year. Assuming conditions remain as buoyant as they are, overall profits of anything up to £200m look possible for 2004. The £291m rescue rights issue, launched only last December, may even have been unnecessary.

Maybe the Russians know what they are doing after all.

ITV/Greg Dyke

It doesn't matter how many times Sir Peter Burt, chairman of ITV, denies it, he's never entirely going to put the lid on media speculation that he's about to dispense with his present chief executive, Charles Allen, in favour of the now unemployed former director general of the BBC, Greg Dyke. To have fanned the flames of such gossip by holding a two-hour meeting with Mr Dyke at the offices of the venture capital firm, Apax Partners, therefore looks either deliberate or a trifle unwise.

To make matters worse, the other person at the meeting was Stephen Grabiner, former head of ONdigital. Only a few months back Mr Grabiner was working on a private equity bid for ITV. Sir Peter says that ITV wasn't discussed at all, which seems implausible to say the least, but I guess we have to believe him. Instead the meeting was about other business opportunities in the media. Sir Peter includes Apax in his portfolio of interests.

Leaving aside the obvious potential for conflict of interest in combining the chairmanship of ITV with an active role at Apax in other media opportunities, I none the less think we have to accept that Sir Peter will not be recruiting Mr Dyke to ITV any time soon. Mr Dyke is a master of popular TV, and with Freeview, he has also demonstrated a commercial flair well in advance of anything ITV has been able to produce. It is sometimes said that he'd put 50 per cent on the share price if Sir Peter could lure him.

Yet there's one thing that counts against Mr Dyke - the Hutton report. ITV has set its sights on further reductions in its regulatory burden, presently costed at £476m a year in spectrum charges and public service broadcasting obligations. Mr Dyke's chances of extracting any favours out of No 10 must be about zero.

Not that Charles Allen can yet rest easy in his bed. Mr Allen has few friends in the City after the ITV Digital fiasco, and Sir Peter is still in the evaluation stage of his new role. If Sir Peter had wanted to put the skids under Mr Allen, he could hardly have set about it more effectively than by meeting up with Mr Dyke, even if it was never his intention to offer the Roland Rat creator the CEO's job.