Shares in Jarvis rose more than 12 per cent as the rail maintenance specialist put a poor first-half performance and shock November profits warning behind it.

The York-based company, rescued from the brink of bankruptcy at the end of 2004, made a pre-tax profit for the year to March 31 of £4.5m, compared with a loss of £13.1m last time, on revenues that rose to £322m (£289m).

Exceptional items of £4.7m continued to be a drag on profits but were considerably down from £13m last time.

Shares in the company lost 75 per cent of their value last November as it warned of operational problems over its contracts with Network Rail and then announced interim losses of £3.3m.

But Stephen Norris, chairman and a former Conservative minister, on Wednesday declared himself satisfied with the recovery in Jarvis's fortunes. "We are climbing the slope to full recovery, albeit the gradient is not as steep as we originally anticipated," he said.

Richard Entwistle, chief executive, said the company was well positioned to benefit from the £30bn of spending by the state-controlled rail operator planned between 2009 and 2014.

The company has spent £10m over the past two years untangling itself from lossmaking PFI contracts as it has refocused on its rail maintenance and plant businesses.

Its accommodation and facilities management operations were no longer a drain on the business according to John O'Kane, finance director. He added Jarvis had completed a refinancing programme this month that had seen "a reduction in the cost of debt and extended facilities".

The company's net debt level grew over the year to £39m (£24m) but was stable on an underlying basis.

Michael Parkinson, analyst at Brewin Dolphin, on Wednesday estimated Jarvis was 12 months behind its original recovery schedule. But he increased his current- year profits forecast from £9.5m to £11m, generating a "comfortable" forward p/e of 7.4 times.

Shares in Jarvis closed up 2p at 26½p, compared with their 52-week range of 8.58p to 93p.

FT Comment

Jarvis is intimately involved in Network Rail's core ambition of making Britain's trains run on time. Yet it admits that its own recovery is still running behind schedule. The company is over the trauma of its involvement in the 2002 Potter's Bar rail disaster and the over-extension to secure PFI projects that proved its undoing. Earlier this month the company, once a corporate basket case, effectively admitted it was on the block when it announced that a sale was a strategic option, though it denied active takeover talks. That is progress of sorts. But post-rescue investors will still feel bruised by last November's warning, as Jarvis shares languish well below last autumn's levels.