IT was the kind of phone call bosses dread receiving. When Ivan Dunleavy, chief executive of Europe’s biggest film studio, Pinewood Shepperton, was disturbed one Sunday morning a year ago, it was to be told that the company’s famous 007 sound-stage, where many Bond classics had been filmed, was burning down.

He rushed to Pinewood, whose 1.1m sq ft of studios are tucked away in a corner of Buckinghamshire, to inspect the damage for himself. Luckily, nobody had been hurt, but the stage was in ruins. The smoking debris would have to be torn down and the structure rebuilt.

A year later, the new, improved 007 stage is fully operational – and in a suitable twist, former James Bond star Pierce Brosnan is working on the set, filming a screen version of the hit musical Mamma Mia.

As it turned out, the fire had little impact on the financial performance of Pinewood Shepperton, which also owns the Teddington television studios in the southwest of London; but the up-and-down nature of the film industry has proved a drag on the company’s share price. In June, a disappointing trading statement revealed that several productions originally slated to begin filming this year would now not get under way until 2008 – after the end of Pinewood’s financial year.

It is something to which Dunleavy has had to become accustomed when explaining the dynamics of the business to investors. A possible writers’ strike in Hollywood is the latest event that may cause a downturn in production.

“That’s a situation that has occurred before – there’s reasonable precedent for it,” said Dunleavy. “It’s an issue we’ve been very upfront about and it’s too early to say what the outcome will be. But it’s worth remembering that the demand for film has consistently risen over the past 100 years. There will be peaks and troughs along the way.”

But as the Pinewood studio celebrates its 70th anniversary this summer, it is worth noting that while it may have played host to blockbusters such as Superman, Batman and Casino Royale as recently as 1993, no films at all were being made there.

These days, things are rather different. First, the British film industry is in pretty rude health. A recent study by Oxford Economics (commissioned by the UK Film Council and Pinewood) showed that it contributed £4.3 billion to the British economy in 2006, a 39% increase on 2004. Pinewood and Shepperton are significant beneficiaries of that activity. Dunleavy said it was hard to be precise about how much of the work they picked up, but pointed out that over the past five years the company had supplied goods and services to 16 of the top 20 performing UK films in Europe.

Second, management at the company, which was formed when Pinewood merged with Shepperton in 2001, a year after the former had been acquired from the Rank Group in a management buy-in, has worked hard to increase the amount of turnover from nonfilm activities.

Chiefly, this has meant increasing the number of television productions filmed at the studio, and was the main factor behind the acquisition of nearby Teddington Studios in 2005.

One of the sound stages at Pinewood had originally been built for the 1960s television series The Persuaders with Roger Moore – another 007 connection – but was never used for the show and was turned into another film stage. Dunleavy took the decision to reclaim the building for television work. “We wanted to demonstrate to the television market that we were serious about TV,” he said.

So far, said Dunleavy, the strategy was working. “I think the message is getting across. When we started, we had zero income from TV, now it’s 30% of our revenues. But there’s more to be done.” He would like sales from TV to reach a par with those from the film industry.

Another potential growth area is Bollywood, which is starting to produce films outside India, including in Britain. It is not lost on Dunleavy that a thriving international Indian film industry could also help to counter some of the volatility in his business, but he cautioned that it was very early days.

“Clearly, there are strong common links between the UK and India and we’ll see how that develops. We’re always keen to tap into anyone who’s keen to use the studio,” he said.

The quality of the facilities has not been in doubt; the queue of Alist Hollywood directors happy to endorse the studios is testament to that – Paul Greengrass chose them to film The Bourne Ultimatum, released this weekend and already tipped to be this summer’s blockbuster. But analysts hope there may be greater prospects for the group in its role as a property company.

“For a smaller media company, it’s got two unique dynamics; a world-class operation and its physically based assets,” one City media analyst said.

The management has acquired planning permission to double the amount of floorspace at Pinewood and Shepperton, a process that is expected to take a decade. Although some of the land will be turned into new stages, much of it will be rented out to companies providing services to the screen industries. The company already acts as landlord to about 280 businesses that provide everything from prop-building to digital effects.

Dunleavy hopes to persuade an increasing number of producers to decamp from their usual haunts in Soho or west London. It’s a big ask but the rewards are plain; Investec, the stockbroker, estimates that the value to Pinewood in developing its property equates to more than 300p per share, against its current price of 217½p.

Developing the assets in this way is a long-term project but plays a key part in ensuring that the studio remains competitive against international rivals, especially in the face of a weak dollar.

The Oxford Economics study estimates that by 2010 production costs in Britain will be 27% lower than in America, although still 7% dearer than in the Czech Republic. This is where the media-hub strategy, as Dunleavy brands it, comes into its own.

It may be more expensive than the studios in Eastern Europe but, he argues, Britain offers Hollywood greater technical expertise. “Security and risk are important issues for those with big production budgets,” said Dunleavy. “The UK is well placed to offer people security – intellectual-property security as well as being very acceptable environments in which to film. All those issues need to be put into the mix when you’re talking about cost.”

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