IN the face of difficult trading conditions within the ship repair sector, the A&P Group has reported increased profits despite making one third of its workforce in its North east yards redundant.

In the report accompanying results for the 12 months ended March 31 2015, directors said the business had continued to raise its profile in both its traditional markets and new sectors such as renewables, oil and gas.

Turnover for the group during the year was £91 million, a drop of 18 per cent on the previous year. Profit before taxation at £11.4 million is up from £10.5 million for the previous year representing a nine per cent increase in profitability.

The report said: “These results are regarded as highly pleasing given that the expectations at the beginning of the year were for a difficult economic climate to affect profitability, a tight market in the core ship repair business and little activity in the offshore sector.

“These factors placed greater emphasis on the need to concentrate on the core larger ticket ship repair and conversion activities and secure significant fabrication contracts, whilst improving performance in respect of previously acquired long-term work.”

The Ministry of Defence Cluster contract and the forthcoming UKCATTS contract awarded to Falmouth through to 2018 continue to make a significant contribution to the results for the year.

The report said: “ MoD/RFA contracts will continue to feature strongly in 2015 and beyond, allowing us to plan with confidence for the future.”

The group has strong business activity in Australia where it is a prime contractor on the service and support of the HMAS Choules, formerly RFA Largs Bay, which was prepared in Falmouth for service in the Royal Australian Navy.

The Falmouth, Tyne and Tees yards saw subdued occupancy during the first half of the year with Falmouth in particular being underpinned by the MoD work.

The report said: “The latter part of the year remained subdued across all yards and whilst the group continues to attract a significant amount of work from commercial customers, they have continued to reduce the average spend per ship, a trend that has continued into the early part of 2015/16 financial year.

“The port operation (cargo and cruise) in Falmouth continued its strong and steady performance and is an integral part of the group’s operation there.”

The group intends to take advantage of the Falmouth and Tyne sites, which are well placed to secure work as part of the supply chain for and to provide support services for the emerging renewable energy sector and also into the oil and gas and heavy engineering industry.

During the year, the company completed work on a second UK aircraft carrier project on time and within budget, representing a significant portion of turnover from the North East operation.

A&P also worked on building sections of new generation Astute Class submarines and expects further contracts in this area.

Defence sector contracts likewise made an important contribution to the results and the company completed a number of projects within oil and gas.

The report continued: “Despite the success in the North East in defence work, the core ship repair market remains competitive with revenues running below expectations and occupancy levels of its dock and berth assets having decreased.

“The significant reduction in global oil prices experienced toward the end of 2014 has led to a decline in fabrication work opportunities in the oil and gas market and a difficult trading year is expected in 2015/16.

“As a consequence of anticipated lower revenues, the company has taken steps to reduce its cost base by way of a reorganisation in the first quarter of 2015/16, resulting in 31 per cent of the North East workforce being made redundant. It is a commitment that in challenging markets, direct and indirect costs will be managed in line with our committed and predicted revenue on a short, medium and long-term basis.”

A dividend of £1.75 million was paid out during the year, compared to £2 million the previous year.

The report added: “Our shareholders and current management team are committed to delivering our five-year plan and ensuring that the business continues to go from strength to strength as we pursue opportunities in new sectors and continue to service existing customers.”