Troubled engineering firm Amey has warned that delays in completing its contract to run part of the London Underground will dent its earnings.

The firm said the Tube contract delays, along with hiccups in finalising other public sector financing projects, would reduce full-year profits before tax and financial charges to �35m ($22.4m).

Amey said it would also write off �85m at the end of the year, partly to reflect a decline in the value of its investment in Croydon's tram network.

The company added that its debts would finish the year higher than previously expected at between �190m and �200m.

Unfazed

The financial markets took the news in their stride, marking Amey shares down 3.3% to 29p at the close of trade on Monday.

Amey shocked the City earlier this year when it changed the way it accounted for costs and revenues stemming from its public service maintenance projects, leading to an �18m loss for 2001.

The move shook investor confidence in firms involved in the government's so called Private Finance Initiative (PFI), which encourages private companies to fund public service facilities in return for a guaranteed revenue stream from the public purse.

Amey's financial difficulties delayed final agreement on the Tube Lines consortium's contract to run the London Underground's Jubilee, Northern and Piccadilly Lines.

The deal is now expected to get the go-ahead before the end of the year after Amey's Tube Lines partners, Jarvis and Bechtel, agreed to fund its �60m investment in the project.

Overhaul

Amy shares, formerly among the best-performing on the stock market, have lost more than 90% of their value this year.

In an effort to shore up its finances, the firm has cancelled its annual dividend payment to shareholders, and is selling its stake in some PFI projects.

The company said on Monday that it expected a "successful outcome" to discussions with lenders, and stressed that its core transport and business process outsourcing activities are performing well.