WS Atkins in the red as a result of £121m Metronet hit.

WS Atkins plunged into the red last year as a result of a £121m hit due to troubles within Metronet, the joint venture responsible for two-thirds of the London Underground £15bn upgrade.

The Metronet woes are made up of two main parts. The biggest pain is the £91m write-down in the group’s investment in Metronet PPP companies, taking the carrying value to nil.

In addition Trans4m, a subsidiary working for Metronet, has been saddled with penalties for late delivery of stations into service. Transam4m’s liabilities are capped at £26m.

Keith Clarke, chief executive of WS Atkins, said: “Metronet is currently unable to access its lending facilities. Metronet, its banks and shareholders are in discussion about how to ensure that Metronet is able to continue until the completion of the Extraordinary Review.

“Metronet’s financial structure demands that a resolution of this issue is achieved if it is to continue to be able to deliver its PPP programme.

“Given the current uncertainties associated with Metronet’s funding position and the outcome of the Extraordinary Review process, the results for the group include an exceptional loss of £91.3m (after jv tax).

“This exceptional loss has no cash impact but reduces the carrying value of the group’s investment in Metronet to £nil.”

Trans4m is responsible for the delivery of stations. Delivery remains behind plan and costs have “risen significantly”. As a result, Trans4m has started awarding station contracts to outside contractors rather than using companies within its tied supply chain.

To resolve the muddle in the medium-term, Metronet has reached agreement on a heads of terms for the early termination of Trans4m’s contract. The deal is subject to Metronet’s banks giving it clearance.

Atkins’ results (12 months to 31 March 2007) show turnover higher at £1.6bn (comparable figure in the previous year: £1.4bn). There was a pre-tax loss of £40m as a result of the £121m hit relating to Metronet issues.

In the previous year Atkins made a pre-tax profit of £75m.