SUPPLIER of anti-counterfeiting measures Applied Optical Technologies has made an operating loss of £1.5m in the past year.

The Washington, Wearside, company has blamed restructuring and a period of "considerable transition" for the poor results.

The company made a profit of 1.1m in the previous year. Turnover at the group rose to £28.6m, compared to £17.7 in the previous 12 months.

The group's US operations were the star turn, performing at record levels, with turnover up by 68 per cent.

The group's chairman, David Mahony, said the first quarter of the year had seen a significant improvement in the fortunes of the business.

He said: "The new European management team has addressed the operational problems in its area and the positive impact of a reduced cost base is starting to be felt.

"Order intake is growing, with an improvement in the product mix as security business grows and accounts for a larger percentage of turnover."

During the past year, the company has had a number of notable contract wins.

These included: parts protection for General Motors in Europe; a new licensing programme for Major League baseball in the US; a security labelling programme for the 2002 FIFA World Cup; and security laminates for passes for the 2000 Sydney Olympics.

The group has also recently received an initial order for de-metallised foil for use in the production of euro notes.

While this order will not have a major impact on the group's profitability, it establishes the technical credentials which will enable it to secure euro and other banknote business.

Trials are at an advanced stage with a number of customers, and Applied anticipates further orders in the future.

During the year, the company made a number of management changes.

These included the resignation of group chief executive David Tidmarsh, in January. He has been replaced by Mark Turnage.

Mr Mahony said: "Changes of this kind are often necessary as a business grows, but unavoidably these have a severe impact on the individuals affected. I and my colleagues would like to record our appreciation of the contribution which was made by David Tidmarsh."

Looking ahead, Mr Mahony said: "The markets which we serve continue to experience strong growth, particularly in the security area.

"The range of products and services which we are able to offer leaves us well placed to benefit from this opportunity, as the improvements in our European operating efficiencies are realised.

"Inevitably, these will take time to achieve fully, but we believe the recovery is now soundly based.