Heavy investments in research and development at Wellstream International are partly to blame for pre-tax profits falling by 80% last year, the firm said.
Based at Walker Riverside in Newcastle, the company makes and installs flexible pipes for the oil and gas industry and became part of sector giant GE after it was acquired in 2011.
Since then, the firm has expanded and now employs 593 staff, having increased headcount by 24 in 2013.
Revenues rose by 2.4% to £200.8m in the 12-month period and by the year end the firm had net assets of £120.7m – a sharp rise on the previous year’s £55.1m, which was predominantly boosted by the sale of 54m shares to raise £54.3m.
However, pre-tax profits fell from £40.7m to £7.8m, after making heavy investments into research and development as well as making a £1.9m royalty payment.
Accounts filed at Companies House also show the firm’s profits were also hit by the introduction of a multi-million pound GE headquarters intra-group service charge.
In a strategic report accompanying the accounts, directors said: “Increased research and development expenditure of £4.8m, the introduction of GE headquarters intra-group service charge payment of £6.5m and the introduction of Monogram Licensing International Inc royalty payment of £1.9m are the main factors contributing to the reduction in profit before tax.”
Since becoming part of GE, Wellstream has seen renewed investment in the Walker factory, particularly within R&D and new technology, and the strategic report said this will continue in the future.
In April the firm spent £15m – a fifth of which came through support from the Regional Growth Fund – on two storage carousels at its site on Walker Riverside, a move which creates scores of new jobs.
The carousels will help to meet demand for the growing number of developments worldwide that need bigger pipes for higher pressure wells.
Looking ahead, the firm said it will continue to invest in the introduction of new products which it believes will set the firm apart from rivals.
Bruce Heppenstall, general manager of Rest of World Region for Wellstream Subsea Flexibles at GE Oil & Gas, said: “GE are pleased with a strong financial performance from its Wellstream business and its contribution to the wider Oil & Gas portfolio.
“Since GE acquired Wellstream we have continually invested in our plant and people including most recently a £15m investment supported by the Regional Growth Fund to increase the business’ capacity and capabilities of the Newcastle site which has also led to the creation of more than 150 new jobs.
“To further simplify our operating structure the legal entity of Wellstream is now being transferred into a GE Oil & Gas UK entity along with the other GE Oil & Gas businesses operating out of the UK.
“However the strong Wellstream brand will continue to represent GE Oil & Gas Flexibles risers portfolio.”