Rose Theatre chief executive Robert O’Dowd said he was disappointed but not surprised after the venue made public a loss of more than £200,000 last year.
The deficit - revealed in the 2012/13 annual accounts of the Kingston Theatre Trust, which manages the Rose - came despite the continued £500,000 funding from Kingston Council and further £380,000 from Kingston University.
Mr O’ Dowd said several underperforming shows - including The Vortex, The Second Mrs Tanqueray and last year’s Christmas show Cinderella The Midnight Princess - contributed to poor box office receipts.
Ticket sales fell by £190,000 to £1.28m, with grants and donations dropping by £155,795.
Total income fell to £3m from £3.5m the year before while spending was down slightly – £3.2m compared to last year’s £3.4m.
Despite saving £180,000 in overheads through a “stringent cost control” programme, the theatre’s wage bill increased by £12,000.
The accounts also said liabilities exceeded assets by £858,343 “which may cast significant doubt about the charitable company’s ability to continue as a going concern”.
Overall, the theatre reported a trading loss of £204,126.
However Mr O’Dowd said he was confident of the theatre bouncing back next year, when box office sales from hit shows including Smack Family Robinson and The Snow Gorilla are accounted for.
Mr O’Dowd said: “It’s not a surprise. I was disappointed by the performances of those three plays.
“This year it looks like we should be in profit but there’s still three months to go and a lot can change.
“I’m feeling much more confident that next year’s accounts will show a brighter picture.
“We will then need to build on that and make sure there’s a sustainable future for the Rose.
“This year, at this moment, it’s going in the right direction.”
The Vortex was praised by critics, but failed to attract audiences
In the year ending March 2013, the theatre sold 103,000 tickets for 21 productions, not including one-off events.
More than 55,000 people also attended artistic, educational and social events, including 250 young people taking part in the Rose Youth Theatre.
But the theatre’s own productions – with the exception of Michael Frayne’s Here - were box office flops.
Last year's Christmas show, Cinderella The Midnight Princess, was another box office casualty
Mr O’Dowd said: “Theatre is tough at the best of times.
“It is not an easy thing to rely on the vagaries of public taste.
“Maybe with The Vortex and Mrs Tanqueray, it was a case of one melodrama too many.”
The results have led to a strategic rethink for the theatre.
Artistic director Stephen Unwin has left after six years, and will not be replaced.
Instead, the theatre is moving to a producer-led model – shifting away from star names and choosing titles it believes will appeal to its audience, such as Michael Frayne’s Donkey’s Year’s and Kingston author Jacqueline Wilson’s Hetty Feather, which both feature this spring.
Rose chief executive Robert O'Dowd
The theatre has appointed a new head of fundraising, Emma Richards, and gained new corporate partners including restaurants Cote and La Tasca.
It also hopes to double the turnover of its cafe following a deal with the Swallow Bakery, which has taken over the every day running of the catering operation.
The trust's report concludes that while there is uncertainty about the "timing and value" of some of the income streams, the trustees believe sufficient funds will be generated through the new strategy to continue operating as a going concern.
Kingston Council lead Liz Green gave her backing to the Rose, saying she believed the annual £500,000 funding was value for taxpayer money.
She said: "Based on the service we receive and the benefits to the residents who use the theatre, yes, I believe it is money well spent."