Shipbuilder VT Group pledges double-digit earnings growth

VT Group, the shipbuilding and support services company formerly known as Vosper Thornycroft, yesterday pledged to increase profits by at least 10 per cent for each of the next three years.

The pledge came as the group announced its withdrawal from the offshore oil and gas market with the loss of about 100 jobs and unveiled plans to expand its involvement in private finance initiative (PFI) schemes.

The profits pledge follows a root and branch review of the group by its new chief executive Paul Lester, who arrived six months ago after the elevation of Martin Jay to the chairmanship.

Mr Lester said he believed the target for achieving double-digit earnings growth could be met without having to acquire more businesses.

VT's order book now stands at £2bn – of which £500m is accounted for by six PFI contracts.

Over the next six months the group is bidding for a further £1.5bn of support service business, much of which will be let as PFI contracts.

Pre-tax profits for the six months to the end of September fell by 29 per cent to £10.9m after £4.6m in goodwill write-offs and a £2.6m charge to pay for the relocation of the company's shipbuilding facilities from Southampton to a new yard in Portsmouth.

Profits excluding goodwill amortisation and exceptional items rose 6 per cent to £18m on sales up by a third to £269m, of which two-thirds came from support services contracts.

The move to Portsmouth will cost a further £9m over the next 18 months but will give VT the most modern shipyard in the UK. The yard will carry out a 20 per cent of the production work on the Navy's batch of six Type 45 destroyers.

VT is hoping for a similar workshare on a £3bn contract for two new aircraft carriers for the Royal Navy. If successful it would create another 1,000 jobs, doubling the size of the workforce at Portsmouth.

Mr Jay sought to play down fears about VT's exposure to the PFI following the crisis which has hit Amey and W S Atkins. He said that when the six current contracts were in full operation, they would only represent 6 per cent of group turnover.

He also said that the £59m of borrowings against these contracts were ring-fenced so that the banks concerned did not have any recourse to the rest of the VT group.