Atkins refuses to commit to more Metronet funding

Keith Clarke, the chief executive of Atkins, would not commit this week to ploughing more money into Metronet after the company declared a £121m loss on the upgrading of London Underground.

The hit caused Atkins to produce its worst set of results under Clarke, reporting: an overall loss of £36.9m. The consultant, which has a 20% stake in the PPP consortium, was also hit by the big write-down on Metronet. This included £70m of equity investment, a £21.3m profit reversal, and additional supply-chain provisions.

Atkins’ consortium partner, Balfour Beatty, said in a trading update that it was taking a £100m exceptional charge over Metronet. However, the impact on its interim results, due in August, will be largely offset by exceptional gains of £90m related to sales and acquisitions.

This is the first time Metronet has caused Atkins to make a loss on its overall business. The uncertainty over future equity has fuelled speculation that the PPP could become insolvent if London Underground does not strike a revised deal with the consortium.

Clarke said the hit reflected the uncertainty of the outcome of an extraordinary review into Metronet, announced last week. This review, by an independent arbiter, will determine whether liability for an estimated £1.2bn of cost overruns on the upgrade programme rests with Metronet, or the client, London Underground.

Metronet’s banks have suspended funding and although Clarke said Atkins was committed to ensuring the consortium continued, he would not commit the company to providing further equity.

Uncertainty over equity has led to speculation that the PPP could become insolvent

He said: “There is the possibility that more equity will be required, and we will look at that with due consideration for our shareholders if that arises.”

A London Underground spokesperson said Metronet had not clarified its position on future costs and investment. The spokesperson said: “We’ve been calling on Metronet to seek an extraordinary review since February. This is the only way we’re going to get clarity on these issues.”

City analysts said the decision to write down the entire value of the investment was a worrying indication for the future of Metronet. One said: “The fact that they have written the whole thing off does send a message about the value of the Metronet business, even though they are saying it won’t go under.”

As large quoted companies, both Atkins and Balfour Beatty are likely to come under heavy shareholder pressure to justify continuing involvement in the consortium. Atkins’ share price fell 3.1% to £10.95 after the announcement, despite a strong underlying performance with profit up 19% at £81.7m.

Atkins announced that it is to sell its Lambert Smith Hampton, its UK-based property agency, to De Facto 1489, a company backed by LSH management and Bank of Scotland Integrated Finance, for £46.5m.