RTE has recorded a surplus of £6 million for 1997, way ahead of its previous forecast, but it has lost £3 million on its core business of broadcasting.

The figures show that the broadcaster's commercial activities, namely RTE Commercial Enterprises, are now contributing the bulk of its profits. A wholly-owned subsidiary, it deals with items such as programme sales, merchandising and publications.

By contrast, in 1996 RTE recorded an overall group surplus of £2.5 million, but a deficit of £2 million on its broadcasting activities.

The RTE Authority's chairman, Prof Farrel Corcoran, said the last year was "well above expectations and will go some way to helping RTE meet the competitive challenges facing it in the near future, including those generated by the roll out of digital TV".

However, writing in the group's annual report, he says the trend which emerged in the 1990s which shows "broadcasting expenditure rising inexorably over broadcasting revenue" to the point of "producing a deficit in the core business of RTE since 1995, has not been turned back".

"The key fact in the accounts is that broadcasting incurred a deficit of £3 million in 1997, although buoyancy in Commercial Enterprises which earned over £7 million, produced a favourable group surplus," he said.

Earlier this year, at the publication of RTE's 1996 results, RTE's director general, Mr Bob Collins, forecast that the RTE could face losses up to £5 million in 1997.

In a statement on the 1997 accounts, Mr Collins says RTE was disappointed that the Fianna Fail/ PD coalition had decided not to index link the licence fee - reversing a decision taken by its predecessors.

He said successive RTE authorities had called for the licence to be index-linked, and it would have "provided a measure of security in relation to levels of future financing". The report shows that RTE's group revenue was £176.9 million last year, compared to £159.4 million in 1996.

Revenue from TV licences increased by almost £6 million last year, to £61 million, compared to £55.4 million in 1996. Commercial income from television broadcasting increased by almost £4 million from £68.5 million to £72.3 million.

Radio advertising revenue increased by just over £1 million to £16 million. Other income rose by £2.2 million to £5.1 million. Overall there was an increase of just under £12 million in broadcasting income last year.

Operating expenses rose by almost £14 million to £171 million, last year, compared to £157.2 million in 1996.

Programming expenses increased by more than £8 million to £111.7 million. E Commercial Enterprises made a substantial increase in profits which significantly underpinned RTE`S overall profitability," The report says part of the profit at RTE Commercial Enterprises arose through the rental of facilities at RTE transmission sites. "An investment of $2.2 million in Intelsat, an international satellite operation, has also proved very rewarding," it adds.

The report says a £1.5 million investment in Tara TV, a UK cable channel which broadcasts Irish made programmes, "is also expected to bear fruit, with the channel making steady progress in the difficult UK cable market". The station is currently available in 500,000 homes, a figure which is expected to double this year.

Staff numbers increased slightly by 21 people to 2,046, but staff costs rose sharply from £63.3 million in 1996 to £66.4 million last year. Even allowing for Partnership 2000 increases, it appears that some personnel got substantial pay increases.

The Government has announced it is seeking details of the salary levels of RTE's top 20 broadcasters.

Mr Collins reveals that An Post, which collects the licence fee, and RTE had commissioned an independent study of the process last year. He says RTE is anxious to ensure as much as possible of licence income is available for programme making and as little as possible is consumed by administrative costs.

While "warmly appreciating" An Post's efforts in collecting licence fees, Mr Collins says "RTE believes that much more needs to be done to ensure that the audience obtains maximum benefits for their licence fee payments". On Telifis na Gaeilge, E chairman, Mr Prof Corcoran says the station has consolidated its position very significantly since its launch in October 1996. However, he says that the station must be underpinned "by a secure funding support mechanism which adequately provides for the activities of Teilifis na Gaeilge itself".