Metronet members flag up warning

Two members of the Metronet consortium, WS Atkins and Balfour Beatty, have warned the Stock Exchanges that all is not well.

In a trading update issued by Atkins, the group gives advance warning of a £36m hit when it unveils the results for the financial year ending on 31 March 2007.

Trans4m, the contracting joint venture subsidiary within Metronet which carries out the stations improvement programme, accounts for part of this tally. Atkins and Balfour are two of Trans4m's four members. Atkins' share of the Trans4m losses last year ran to £11m. It flagged up a further £4m hit relating to Trans4m companies outside its tied supply chain.

Metronet apart, Atkins has enjoyed a sparkling year and pre-tax profit, before the impact of the London Underground venture, is "anticipated to be ahead of expectations."

Atkins' staff numbers ended the year at 16,600 which represents a rise of 1,700 on the previous year-end.

Strong cash generation has taken Atkins' net funds to close on £190m.

However, Atkins added: "The results for the year are anticipated to be impacted by an exceptional loss of £36m in relation to Metronet."

Like Atkins, Balfour has also taken £21m profit from its Metronet investment, but while Atkins has felt the need to reverse this, Balfour hasn't.

"Metronet's finances are under increasing pressure as a result of the high level of unanticipated costs which have been and continue to be incurred and the continuing absence of a commercial settlement with LUL in respect of these costs," said Balfour in its Stock Exchange statement.

Balfour said that the prospect of a lengthy extraordinary review, with the Arbiter only then advising on how these unanticipated costs should be split, has raised the level of uncertainty.

The £59m carrying value of Balfour's shareholding in Metronet is under review. Since the start of 2007, Balfour has invested £13m in the consortium and is committed to a further £19m tranche.

Balfour believes that anticipated losses in contracting work on Metronet are fully covered by the provisions made in its 2006 figures.