Scottish Knowledge lost £1 million last year - but its chief executive, Steve Beere, said the losses were "very much" within budget.

The distance-learning company, which began operation in August 1997, has the backing of all 14 Scottish universities and colleges and more than 20 corporate shareholders. News International, which publishes The THES , signed a £3.54 million deal with Scottish Knowledge two years ago.

Mr Beere said: "We wrote off £750,000 in new courses last year and there was a £250,000 operating loss. It's pretty much in line with expectations within the business that we are in. It is how our business plan is structured.

"We have to work hand-in-hand and within the capacity of the universities to develop the courses. The plan was to invest as much as possible in new courses.

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"We have plenty of money in the bank, we have got £3 million, plenty of cash. In the first six months of this year, we exceeded the whole of last year's revenue."

The company last year signed a deal to set up a global e-university for the energy giant Shell, delivering education and training programmes to 10,000 of Shell's 96,000-strong workforce worldwide. It also struck a £12 million deal with the United Arab Emirates to project-manage the design and construction of a Petroleum Institute in Abu Dhabi, that will link the country's 11 colleges and five universities to Scotland.

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Some 4,500 students took Scottish Knowledge courses last year, 500 of whom are on long-term, three-year programmes.

Scottish Knowledge had been touted as a possible partner in the e-university, established by the government through the Higher Education Funding Council for England. But it is now understood that the partnership plan is unlikely to come to fruition.

The e-university is due to announce its first chief executive later this month.