NEWBURGH Engineering has moved back into profit but warned the business environment in which it operates continues to be challenging.
The Rotherham-based company reported a pre-tax profit of £642,014 in the year to March 31 2011, compared to a loss of £8,299 the year before, on a turnover of £10.7m – up from £8.5m.
In a statement published in its accounts filed on Companies House, the firm said: “As for many businesses of our size, the business environment in which we operate continues to be challenging.
“The markets in which we operate are highly competitive and margins remain tight. Competition comes from both home and abroad as, increasingly, manufacturing in the UK suffers against cheaper foreign competitors.”
Newburgh, which employs 130 staff, is a specialist manufacturer of component parts and assemblies for the nuclear, defence, oil and gas, petrochemical, aerospace and power generation industries.
Managing director Vince Middleton said the firm’s Bradwell site in Derbyshire, which works across a number of sectors, had not been adversely affected by the downturn. But the main site in Rotherham, which opened in 2007, relied heavily on oil and gas projects, many of which were cancelled during the recession.
“When we opened up the Rotherham site, demand was from the oil and gas sectors,” he said. “When the recession hit, those projects were turned off so the Rotherham site was hit quite hard. We always knew that concentrating on oil and gas was a risk but it was easy to do at the time.”
He added: “When you are going into a recession, you are always a bit more optimistic about how bad it is going to be. We didn’t react quickly enough and we should have gone out and started selling hard straight away.”
The economic conditions have forced the company to diversify into new areas, including rail, power generation and the printing sector to reduce its dependency on one industry.
However, one prevailing problem affecting Newburgh, and the engineering sector in general, is the shortage of skills.
The company joined forces with Kostal UK and Brinsworth Training to develop a ‘New Era’ apprenticeship scheme to tackle the issue, which has been embraced by other South Yorkshire firms.
“We are optimistic about the future of skills in our region,” said Mr Middleton.
Other schemes include Sheffield University’s Advanced Manufacturing Institute (AMI), which recently secured government backing for a new training centre aimed at closing the skills gap for high-value manufacturing companies.
However, it will take a long time before the number of skilled workers reaches the required level.
“We need thousands of people within the region’s engineering sector,” said Mr Middleton. “We are trying to get the message across to young people that everything is engineering – including their iPhones – to get them interested in how things happen.”
Mr Middleton said Newburgh was having to turn work away because it did not have the manpower to complete some contracts. “There is a lot of work out there that we can’t take on,” he said. “We need another 50 staff but there aren’t enough people to fill the posts.”
He added: “I put an advert on the internet for a machining engineer and got nine applicants, only one of which was worth considering, and they were from New Zealand.
“Apprentices are starting to come through but it is a four-to-five-year training programme so we’re not going to get the skills from that straight away.”
An added threat for the company is Rolls-Royce, which plans to build two huge factories at the Advanced Manufacturing Park on the Sheffield-Rotherham border, creating more than 350 jobs.
Mr Middleton said: “Indigenous businesses will suffer in the short-term when Rolls-Royce recruits staff but in five or 10 years, it will be good for the area because they will have raised the game of everyone in the region.”
Newburgh recently took on a significant contract to provide large diesel engines for generators. Mr Middleton said the contract could lead to more work and help the company to grow further if it had more engineers.
He said the company would consider opening another base overseas – in Poland or Mexico – in the future to chase the right skills. “We have got to go where there are the right people,” he said.
Mr Middleton added that next year’s results would probably be similar to those posted this year. “We are not into short-term profits,” he said. “The measure of our success will be if we are still here in 200 years and still doing things well.”