Torotrak, based in Aston Way, Leyland, near Preston, has blamed hold-ups in production of its Infinitrak products at its US partner firm MTD Holdings' factory in Kentucky for the losses.

It also revealed that a "softening" in demand for such equipment, which will be used in thousands of sit-on lawnmowers in America, had led to "significantly lower" sales for its products than initially planned for the coming financial year.

But chief executive Dick Elsy said the past 12 months had been "an exceptional year" for deal-making after it secured a number of big-money licensing agreements.

These include Indian vehicle-maker Tata Holdings, a £7m three-year deal with an unnamed European truck manufacturer and two further agreements, including one with a firm working with a Formula One racing team.

Mr Elsy said: "We have secured one of the most strategically important customers in Torotrak's history in the truck and bus market and our business prospects overall have strengthened considerably.

"Most importantly, Torotrak has overcome the final obstacles to volume production in one of the most cost competitive markets, outdoor power equipment.

"Although we are approximately one year behind our original production plan, achieving our first sales in this market through our joint venture, Infinitrak, is a major milestone."

He said the company had already received £5.4m in payments this year and said it aimed to generate "sustainable and recurring positive operating cash flow" from 2010 onwards.

The company, which employs 60 designers at its base, said a £6.7m share placing had helped to lift its balance sheet to £11.5m from £4.3m a year ago.

>> Vote in our latest web poll