TELECOMS group Stentor has announced a rise in pre-tax losses to £11.17 million (€14.19 million) from £6.67 million in the year ended March 31st, 1999.

While its trading position has improved since then - it incurred a loss of £1.45 million in the three months to June 30th, 1999 - it will need extra funding to keep it operational. The balance sheet shows a deficit of £4.3 million in shareholders' funds, although this was reduced to £2.8 million by the end of June.

In addition to the injection of £3 million received last April, Stentor said it would require an additional £2 million this year, with a further £0.6 million in 2001. Stentor has already secured a loan of £0.6 million from CoOperation Retirement Benefit Fund, which controls 82 per cent of its equity and trade finance of £0.4 million.

The directors are in discussions to obtain an invoice discounting facility of £0.7 million and "are considering how they can best meet the remainder of the group's identified cash requirement".

The group plans to raise an additional £4 million to fund the group's future development. While discussions have taken place with financial institutions, nothing has been finalised, but Stentor is confident of a "successful conclusion".

Reviewing the latest results, the chairman, Mr John Uttley, said the group had made "significant operational and strategic advances" since last November. It began "producing gross profit from its sales in February 1999 and management expects this trend to continue during the current financial year".

The losses in the second half, he noted, were 38 per cent less than in the first half. By March 1999, direct costs had fallen to 80 per cent from 168 per cent of revenue in September 1998. In addition, revenue had grown four-fold to £5.8 million.

The improvement has been attributed to competition in the provision of fibre capacity between Ireland and the UK since last December, which reduced direct costs by 25 per cent. Moreover, the liberalisation of telecoms reduced the cost of connection calls in Ireland by 65 per cent.

The chief executive, Mr Gerard O'Keeffe, said employment was reduced from 82 to 32 but had now increased to 44 to cope with new business. Stentor has interconnected its network to a number of international telecoms companies in Britain and the US and, by using the lowest-cost routing feature of its telephone systems, it has been able to drive down international call termination costs. Mr O'Keeffe noted the strategic alliance with GTE, which will lead to a range of value-added services.

Stentor has also formed an alliance with a US company to offer facilities and management services in New York. Moreover, Mr O'Keeffe said the group now had key infrastructure elements in place.

Stentor had projected pre-tax profits in 2003, but Mr O'Keeffe said the group now expected to improve on that, adding that each quarter would show decreasing losses. "It is extremely encouraging," he said.