The recovery of Jarvis, the rail maintenance group chaired by Steve Norris, the former Conservative Transport Minister, was thrown into doubt yesterday after a profit warning saw three quarters of its value wiped out.

Shares in the group, which two years ago staved off financial collapse through a debt-for-equity swap, slumped 58p to 20p - their biggest one-day fall - after revealing that full-year profits would fall materially below expectations.

Analysts are now forecasting a pretax profit for the year of £6 million compared with previous estimates of £14.5 million, with next year’s profit at £16 million compared with an expected £22 million.

The group, which three years ago accepted joint liability with Network Rail for the Potters Bar rail crash, when a high-speed train was derailed outside the Hertfordshire station, blamed its woes on a mix of lower-quality rail work, uncertainty in its plant business and a move by Network Rail to buy its own vans instead of hiring them from Jarvis.

Geoff Allum, at KBC, said that the announcement was “highly disappointing and unexpected” and would set back the group’s recovery by a year.

He pointed out that a trading statement in September had highlighted the group’s lack of visibility in its plant division, but not that the market’s forecasts were out of line.

Jarvis sold off units, including its specialist building and construction maintenance business, and exited contracts after amassing losses of more than £630 million in three years.

Richard Entwistle, chief executive, insisted that the problems were a tempory setback. “The recovery is still on track. We will produce a profit this year. The process is just going to be that much slower,” he said.

In a statement, the group, which in June unveiled its third annual loss, of £14.1 million, said that the setback was “in the nature of a business in the recovery process”. The company said: “The uncertainty we identified in the plant business has become more pronounced with several factors impacting on trading.”

First-half results to September 30 were broadly in line with expectations, it said, with a loss of £600,000 compared with profits of £500,00 a year earlier.

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