CASH-STRAPPED social housing firm Connaught has insisted its £24.5million contract to revamp former Plymouth City Council homes will continue despite the company's financial crisis.

Exeter-based Connaught, chaired by Plymouth Argyle chairman Sir Roy Gardner, this week said it was in urgent need of additional funding.

It also faces an investigation by City watchdog the Financial Services Authority (FSA), and has seen its shares tumble since warning a month ago of a £200million blow to revenues as a consequence of Government spending delays.

Connaught opened new offices at Plymouth's Foresters Business Park only last year.

In December, it was awarded the lucrative five-year deal to fit about 14,000 kitchens and bathrooms in homes transferred by the council to Plymouth Community Homes.

It has now stressed that this work will be unaffected by its financial woes.

Meanwhile, Plymouth Community Homes said it would keep the situation under review, with a senior manager due to meet counterparts at Connaught later this week.

A Connaught spokesman said: "Connaught is currently in constructive discussions with its lenders about securing additional funding to meet the current and ongoing needs of the business.

"We have been keeping in close contact with our clients to keep them informed and the overwhelming reaction from them has been supportive.

"Our priority remains providing our clients with a high-quality, value-for-money service at all times and these current issues will not prevent us continuing to deliver services in Plymouth."

A Plymouth Community Homes spokesman said: "We are aware of the situation and in communications with Connaught. One of our senior managers will be meeting Connaught local management at the end of the week.

"We will continue to keep the situation under review."

He added: "In the meantime, Connaught contractors are still providing services for us." He stressed Connaught was only one of four firms working on the improvement programme.

An £18million contract went to Frank Haslam Milan, MITIE is carrying out £16.5million of work and Apollo Housing has a £15million deal.

Connaught this week said it would breach banking covenants after warning its debts would be above the advised level of £120million by the end of August.

The firm, which has about 180 multi-million-pound social housing contracts nationally, said it had an 'urgent requirement' for additional funds to meet current and ongoing business, in part due to pressure from suppliers and sub-contractors.

Sir Roy Gardner only became chairman in May and is heavily out of pocket on £500,000 of shares bought before the problems emerged.

Purchased when trading above 300p, the shares were yesterday worth 34.7p.

Sir Roy has now drafted in four new directors to help weather the storm and launched a review of accounting policies on mobilisation costs for contracts.

Connaught recently identified 31 projects where spending would be delayed as a result of the clampdown.