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The future of Jarvis was thrown further into doubt last week after its auditor said it was 鈥渇undamentally uncertain鈥� whether the company could continue to operate.

The full extent of Jarvis鈥� problems was revealed last Friday, when the firm announced a 拢354m loss for the year to 31 March 2005. This was more than the City had expected, and followed a 拢256m loss for the previous year. Turnover was slashed 45% to 拢586m.

RSM Robson Rhodes, which replaced Ernst & Young as Jarvis鈥� auditor in May, allegedly because of a dispute over fees, has written to the company to highlight its concern about the future.

Jarvis said: 鈥淭hey have indicated that, due to the uncertainties that currently exist, their audit report is likely to be modified to draw attention to the fundamental uncertainty in respect of the ability of the group to continue as a going concern.鈥�

These uncertainties include securing the agreement of shareholders to support a 拢350m debt-for-equity swap, as well as the group鈥檚 ability to raise a further 拢20-30m in working capital.

During the year, Jarvis sold or closed subsidiaries to focus on three core divisions 鈥� rail, plant hire and roads.

The 拢354m loss included 拢247m in exceptional charges such as redundancy costs, and the cost of closing its railway maintenance business.

Other losses were attributed to a reduction of the amount of rail renewal work that Jarvis had secured, and the loss of road maintenance contracts, including one contract in Cheshire. It also recorded losses in its facilities management activities.

There were some nuggets of good news for the company during the year. It made a 拢53m profit from the sale of its stake in Tubelines, the London Underground infrastructure company, and 拢43m from its share of joint venture profits.

Alan Lovell, the chief executive of Jarvis, said: 鈥淭he directors believe that the successful completion of the restructuring and the focus on the core businesses of rail, plant and road, aligned with further cost-saving measures, and the exit from, or stabilisation of, the

non-core activities of construction and FM, will provide a much improved base from which to develop the business.鈥�

Jarvis staff numbers have shrunk from 11000 to fewer than 5000, although that is partly caused by the transfer of some staff to other companies, as a result of disposals.

During the period Jarvis lost a string of senior managers. Kevin Hyde resigned as chief executive last August and was replaced by Lovell two months later. Finance director Alistair Rae quit the company in March to be replaced in June by Alasdair Marnoch. Andrew Lezala, the chief operating officer, left shortly after Rae to become chief executive of London Underground consortium Metronet.

Jarvis has relocated its head office from London to York and is set to close its London office. The company spent 拢7m on fitting out its London office and has written off these costs.

Shares dropped 6% to 7.39p when the results were announced.

On Monday Jarvis announced it was in advanced talks to sell its highway maintenance business to Accord.