Jarvis's FD: engineering an escape

There is nothing quite like a large executive pay package to draw publicity
onto yourself, especially when the company you work for is already clouded in
controversy and you are planning to walk out the door in a few months’ time.

That is the situation Jarvis Group finance director Alasdair Marnoch finds
himself in after it emerged that he was one of the engineering company’s 10
executives at the front of the queue to cash in on a new reward scheme that will
pay out up to 200% of base salary if targets are met.

The new share option package will allow Marnoch to cash in a third of these
gains if the Jarvis shareprice climbs, two-thirds if the stock rises 50% and the
full amount if shares go up by 75%.

However, despite the fact that he stands to take home hundreds of thousands
of pounds if these targets are met, Marnoch has already indicated that he will
be leaving Jarvis next year, even though he was only appointed as finance
director in June.

The lucrative pay scheme comes into effect just weeks after Jarvis secured a
rescue refinancing. The group, groaning under debt, managed to secure a £378m
debt for equity swap and £38.5m of additional funding from Deutsche Bank.

Jarvis was once one of the UK’s engineering giants, valued at a hefty £830m,
but following a number of derailments on train tracks it had been responsible
for, including the Potters Bar rail crash in 2002 that claimed seven lives, it
has been brought to its knees. By the end of 2004, Jarvis was sitting on losses
of £354m and now trades on the FTSE Fledgling index with a market cap of £123m.

Since joining the group, Marnoch has played a crucial role in securing
the efinancing lifeboat and keeping Jarvis alive, but his decision to quit the
group in 2006 while still being eligible for the new share option pay day has
provoked outrage in media and market-watcher circles.

Marnoch, CIMA-qualified and formerly an officer in the parachute regiment,
will be at the centre of investors’ attention, who are certain to keep a close
eye on his performance to make sure they are getting their money’s worth before
his exit.

In Jarvis’ last set of accounts, for the year ended 31 March 2005, the group
showed a loss of £99m, which was an improvement on previous years but still some
way off pleasing the company’s investors. The group’s share price is still
languishing around the 80p level where once it was nearly 10 times that.

Marnoch may be leaving Jarvis soon, but until he does, a demanding, difficult
few months lie ahead.