All's well that ends well as RSC wipes out its £2.8m deficit

The Royal Shakespeare Company is on course to go back into the black next year after strong box office sales and major belt-tightening helped slash a deficit of £2.8m to £400,000.

The Royal Shakespeare Company is on course to go back into the black next year after strong box office sales and major belt-tightening helped slash a deficit of £2.8m to £400,000.

A dramatic reduction in management and production costs, alongside hits including All's Well That Ends Well with Dame Judi Dench, helped the company turn the corner in its battle to get out of the red, its annual general meeting was told yesterday.

The company is now confident of breaking even within 12 months after the four tragedies staged this summer, including Sir Antony Sher in Othello and Toby Stephens as Hamlet, outperformed any of its previous summer seasons.

The resulting confidence, combined with improved planning, has transformed the fortunes of a company left reeling in 2002 by public squabbles over its departure from the Barbican for a peripatetic life in the West End, and by its plans - since rescinded - to knock down its main theatre in Stratford-upon-Avon. The rows culminated in the resignation of Adrian Noble, its artistic director.

The figures released in its annual report yesterday showed that his successor, Michael Boyd, in his first year at the helm and now working with a new chairman, Sir Christopher Bland, has done significantly more than his stated aim of halving the inherited deficit.

They were both clear that sorting out the finances was the only way to get the company back on its feet artistically. They succeeded with stronger box office income than expected, while changes in the management of budgets produced significant under-spends in nearly all departments.

Sir Christopher said the report reflects "a period of transition for the company, marked by a new clarity about our ambitions, renewed confidence in our artistic direction and improved finances". Mr Boyd added: "If we're going to innovate and experiment on stage, we need to balance the books first."

Although reviews have not been as universally positive as they have been for the also resurgent National Theatre in the past year, the company looks a different beast from the beleaguered institution of two years ago.

Michael Boyd's ambitious plans for the company , which include more new plays, to complement the Shakespearean canon, and ventures such as the staging in 2006 of Shakespeare's entire repertoire, are pulling in the audiences. Advance box office takings for the company's transfer of its Stratford season to London, in a temporary home at the Albery Theatre, are very strong. Hamlet has already taken 70 per cent of its target box office for a run which opens on 23 November, and there are healthy bookings for its new production of Euripides' Hecuba, which stars Vanessa Redgrave.

Meanwhile, actors including Bill Nighy and Imelda Staunton have called for public support for Britain's first purpose-built, professional theatre for children. They launched a public appeal yesterday for the final £1.6m towards the £12.6m cost of a dedicated home for the Unicorn Theatre, which has been producing plays for young people for more than 50 years. The new auditorium, behind the London mayor's HQ on the South Bank, would include educational facilities.