The National Theatre in London has lifted itself out of debt a year ahead of schedule thanks largely to the strong performance of its musical 'My Fair Lady'.

The starring role of Martine McCutcheon as Eliza Doolittle prompted sell-out performances, despite the actress cutting short her run due to illness.

The National also credited its production of 'South Pacific' for the financial success.

But it warned that the current year could be more difficult after launching a season of lower-priced tickets in a bid to attract a wider market of theatregoers.

Get me to the bank on time

The National started its financial year with a deficit of �626,000 which it intended to eliminate by March next year.

In fact, it reversed this to a cash reserve of �99,000 by 30 March 2002, a year ahead of schedule.

The scope for addressing any unexpected financial problem is inevitably restricted

National Theatre

"The box office success from programming two musicals, My Fair Lady and South Pacific, within one financial year, contributed much to this achievement," said the theatre.

However, it was quick to caution:

"Such an opportunity is rarely available to the Theatre and is unlikely to be possible in the near future."

New generation

The theatre said prospects for the coming 12 months were "less certain than usual", particularly after launching the 'Transformation' season in April 2002.

This is intended to attract new and younger audiences by selling tickets at lower prices. But it will necessarily affect box office takings.

The National said it was "confident that the net current asset position is sufficiently secure to maintain solvency for the foreseeable future".

But it also warned that its volatile finances made it vulnerable.

"The scope for addressing any unexpected financial problem is inevitably restricted."

Financial help

The National Theatre relies heavily on sponsorship income, receiving �3.4m in the year to March 2002.

It also receives an Arts Council grant, which rose 3% in the year to �12.8m and is set to rise to �13.8m in the current year.

However, the success of its musicals in the last year significantly boosted the theatre's own income, which reached 64% of total revenues.

That is the highest level for five years.

Again, the theatre immediately warned that it cannot relax about its financial position.

With lottery funding running out in the next two to three years, it will soon have to fund refurbishments itself.

"It is already clear that this will put a considerable additional strain on the Theatre's resources," it said.