Civilian Content, the UK media concern currently bidding to extend its National Lottery franchise: The Film Consortium, is inching towards profitability after posting a pre-tax loss of $390,000 (£250,000) for the first half of the year.

The loss marks an improvement of 68% on the first half of last year, when the AIM-listed company was $1.3m (£800,000) in the red. Civilian Content posted a group loss before tax of $8.1m (£5.2) for the whole of last year, although that included an exceptional loss on discontinued operations of $5.6m (£3.6m).

UK Lottery administration body the Film Council is in the advanced stages of considering a proposal from Civilian that could extend its franchise's life-span when its initial six years expires in 2003. Although Civilian declined to comment on details of its proposal, it is thought to have devised a restructured operation rather than a simple extension of its franchise. The Film Consortium had $17.8m (£11.4m) of lottery funding left over from its original grant as of June.

Managing director Chris Auty said he was "cautiously positive" about the half year results but declined comment on the outlook for the end of year. "It is very hard to predict the market at the moment as it so up and so down. Toronto was noticeably subdued again."

The group, which has now cut annual operating cost by 35%, has Kristian Levring's Malaysian jungle drama The Intended, Michael Winterbottom's Afghan refugee story The Silk Road and 3D IMAX nature film Bugs! ready for release next year.

Civilian confirmed that pre-production has started on Bright Young Things, written and directed by Stephen Fry and starring Judi Dench, Jim Broadbent, Peter O'Toole and Emily Mortimer. Sales arm The Works sold Bend It Like Beckham to more than 30 counties and recently took over sales duties on Toronto audience hit Whale Rider.

"The international film market continues to experience one of the most significant downturns of the last decade and as a result conditions remain extremely challenging," said chairman David Elstein. "The swift action taken by the management to restructure the business has enabled us to sharply reduce our cost base and will enable us to move into profitability in due course."