GAS cylinder firm Pressure Technologies vowed to continue diversifying after problems in the deepwater drilling industry sent annual sales and profits tumbling.
The Sheffield firm, whose high-pressure products serve sectors including oil and gas, aviation and defence, said it believes the "trough" has been hit in the deepwater market.
Ripples from BP's oil spill in the Gulf of Mexico earlier this year constrained deepwater drilling, in turn driving down demand for Pressure's ultra-large cylinders used in oil rigs.
Combined with losing work to a South Korean competitor and slow markets, this drove the group's pre-tax profits down 31.4 per cent to 3.5m in the year to the start of October. Sales were down 17.2 per cent year-on-year to 21.7m.
Pressure expects tough conditions to continue in the deepwater industry through the first half of 2011, before a gradual improvement in 2011/12.
Shares dropped 12.1 per cent on the gloomy short-term outlook to close down 25p at 182.5p, but Pressure said increasing its total dividend by nine per cent to 7.2p per share shows its confidence in its medium-term prospects.
The group, which has made two acquisitions so far this year, said its net cash of 6.5m gives room to grow through further acquisitions. It is confident profits from its engineered products and biogas divisions will begin to feed through this year, reducing its reliance on the oil and gas sector.
It is also diversifying into testing high-pressure cylinders in civil aircraft.
The biogas arm, which purifies methane gas produced by decomposing organic matter, recently injected the first gas into the national grid. The division has a 10m tender list as big utility firms increasingly look to use its upgrading technology.
Chief executive John Hayward said: "The important thing about last year is we got on with the diversification programme.
"Given our strong balance sheet and cash resources we are well positioned to exploit (acquisition) opportunities and the board intends to capitalise on those niche markets."
Such was the slump in demand for ultra-large cylinders that Pressure finished the year with no orders for oil rig ultra-large air pressure vessels.
However, two orders have since been placed, and it sees a pattern of growing orders.