The UK's Winchester Entertainment has posted its preliminary results for the year ended 31 March 2003, with turnover at £5.1m, down from £6.5m in 2002, and a pre-tax loss of £11.2m, up from £8.3m in 2002. This resulted in a loss per share of 40.2p.

But the company, listed on the UK's Alternative Investment Market (AIM), drew a line under 2002, insisting the worst was over and that it is in a good position to benefit from any market improvement.

2002 was a tough year for Winchester: the company issued a series of profit warnings, and chief executive Gary Smith was investigated by UK watchdog the Financial Services Authority (he was cleared).

"Quite clearly these are not pleasing results," said Winchester chairman Huw Davies in a statement. "[But] there is reason to believe that our interim results announced in December 2002 marked the low point in the company's fortunes. The remedial action taken to address the losses of the last two years is beginning to show results."

Although Winchester posted an improved cash position at year end - of £5m, a rise from £2.9m on September 30 2002 - Davies predicted that the next twelve months "will not be easy for the business" and said that the year to March 31, 2004, is still likely to see a modest loss. The net assets of the company at year-end were £14.5m, equivalent to 53p per share, compared with £25.5m or 93p per share last year. The board does not propose to pay a dividend.

Winchester also announced that its Los Angeles office has reached agreements on the first two films of its slate of twelve scripts. Paramount Pictures will pay a "significant" option fee for an initial 12-month term to further develop and produce The Daughter, Queen Of Sheba; while Stratus Film Company has optioned romantic comedy Forever And A Day to develop, finance and produce.

In the UK, Winchester is in negotiations on several films including Harv The Barbarian and a film version of the hit television series Red Dwarf, which will utilise tax-based funding, pre-sales and gap finance.

The company's international sales operations generated £3.3m of business, some 65% of Winchester's total revenues. The majority came from Alicia Silverstone comedy Scorched, but contributions were also made from the back catalogue including Jane Doe and Heartbreakers. The Night We Called It A Day, starring Dennis Hopper and Melanie Griffith, was extensively promoted at this year's Cannes Film Festival, and pre-sales have been made to Spain, Scandinavia and with certain airlines.

During the year, Winchester's UK distribution operation released Baise Moi, Lantana and Slap Her She's French, as well as Undercover Brother on behalf of Universal Studios International BV.

It will this year release Billy Connolly comedy The Man Who Sued God; Scorched; Spanish language festival hit Mondays In The Sun, starring Javier Bardem; The Night We Called It A Day, starring Dennis Hopper and Melanie Griffiths; and Triggermen, starring Neil Morrissey, Adrian Dunbar and Pete Postlethwaite.

Through a video/DVD distribution arrangement with Universal Pictures (UK) announced in November 2002, five titles have been released and Universal will release a further ten Winchester titles in the next 12 months.

The last six months have also seen the company settle a number of significant corporate matters including the settlement of the debt owed by the German tax fund, an agreement with TV2 Norway (TV2) for the transfer of Winchester's rights in the Snow Children television series in return for TV2 waiving its entitlement to certain outstanding production liabilities and sales guarantees; and the disposal of Optical Image, Winchester's loss making post-production subsidiary.

Earlier this month, the company also agreed to acquire Cobalt Pictures from owners and founders John Muse and Alton Irby, which Winchester says will add to its film financing potential and increase its international film sales rights.