VSEL, the Cumbria-based shipbuilder, plans further heavy job cuts as capacity continues to outstrip demand. The maker of the Trident submarines, had already reduced the workforce to 6,000 by the end of last year from 16,400 in the middle of 1989.

Noel Davies, chief executive, refused to predict the timing and level of future job losses. He said that VSEL was intent on establishing an independent defence business that could be maintained in the future.

VSEL announced a 10 per cent increase in pre-tax profits to pounds 61m in the year to 31 March 1994. But Mr Davies warned that his year's results would be broadly similar. VSEL's shares fell 50p to close at 928p.

Turnover rose from pounds 441.9m in 1993 to pounds 465.6m last year and earnings per share increased by 11 per cent to 103.7p.

The dividend is 34p against a payout in the previous year of 29p. Mr Davies said that VSEL's policy was to increase dividends at least in line with earnings.

Trident submarines, the first of which has been delivered to the Royal Navy, still account for the bulk of VSEL's work and profits. A second Trident is undergoing trials and work continues on two more. VSEL is also working on the AS90 self-propelled gun for the British Army and by the end of last month had delivered 128 of the 179 guns ordered.

Mr Davies said that future opportunities included a contract for up to five Trafalgar class nuclear-powered attack submarines, which is expected to be awarded by the Ministry of Defence in January 1996. Invitations to tender are expected next month and VSEL has 60 people working on it.

The company will also bid with Kvaerner Govan to build two Landing Platform Docks, which carry armaments and tanks. The vessels will replace Intrepid and Fearless, which served in the Falklands war.

Mr Davies said VSEL would not seek to diversify, preferring to stick to the industry it knows. But he said the company would look at any merger or acquisition propositions.

VSEL has pounds 322m in cash, of which only pounds 90m is tied up in loan stock or leasing arrangements. The company has spent pounds 101m of the pounds 125m set aside in 1990/91 to cover restructuring and made a further provision last year to cover increased redundancy costs. No further provisions are expected to be needed to cover future job losses.

Vosper Thornycroft, the shipping and engineering group, has failed to win a contract for the supply of minehunters to the Royal Australian Navy. The company said that the order, which would have been worth pounds 45m to Vosper, had been given to Australia Defence Industries.

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