The head of Birmingham-born Winchester Entertainment believes it is over the worst, despite its full-year pre-tax loss widening from £8.3 million to £11.2 million. The movies distributor also warned the current year to next March would likely see a "modest loss while foundations are laid for future prosperity". However, boss Gary Smith, who started the business ten years ago said: "We are survivors and have made a lot of changes in the group that will see us through to more profitable times. "We still have another hard 12 months ahead. Times remain difficult but we are on a much more positive footing." Film markets suffered a difficult year in the 12 months to March 31, mainly due to the prolonged slump in the advertising industry, which depressed sales, particularly at television broadcasters. Winchester spent much of the period working hard to remedy the situation and protect its balance sheet. It reduced its exposure to children's TV, which was "draining cash", reduced overhead costs and made the decision to improve the quality of its films. Mr Smith expects to see returns from these actions in the next two years. He added he believed the company had experienced the low point during the first-half, following a Financial Services Authority investigations into his share dealing. Mr Smith was later cleared of all wrong doing. Although the first half saw an operational cash outflow of £6.3 million, the company swung to an operational cash flow of £1.3 million in the closing six months, said Evolution Beeson Gregory's Adrian Kearsey. Loss-making Winchester has been rated an "outperform" by the analyst, who senses the company is turning the corner. The turnaround was principally driven by the resolution of the German Tax Fund dispute and the successful completion of the Universal Pictures distribution deal, he added. He is also expecting a transformation of the group's international film sales during 2004, partly because of a more benign media environment. More importantly, projects in development - including a Red Dwarf feature - are beginning to firm and are likely to generate a string of executive producer fees in 2004. If delivered, these projects will establish the foundations for higher sales agency commissions, which would be booked in 2005. The international film segment should break-even this year, benefiting from lower amortisation charges and following the wholesale divisional restructuring and the disposal of the Snow Children, the Television segment is likely to break-even in the current year and probably will be cash flow positive. The loss per share was 40.2p in the year against a loss of 27.4p. No dividend is being paid. The cash balance was £5 million at the period end, compared with £7.3 million in 2002. Shares closed up 114p at 18p. | 
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