Automotive and aerospace engineering firm GKN saw its full-year profits cut in half, but said its strong aviation business helped balance out a decline in the automotive sector.

The firm reported a pre-tax profit of £83 million, down from £170 million last year, with revenues down three per cent.

GKN chief executive Sir Kevin Smith said: "GKN has made significant progress in realigning its operations to weaker markets and preserving cash.

"In response to the global recession we restructured the group to reduce the break-even points in Automotive, Powder Metallurgy and OffHighway by around 20 per cent and re-positioned our Aerospace business for lower aircraft production volumes in 2009.

"As the year progressed, automotive production improved and the benefits of the group’s restructuring plan increased.

"As a result, all divisions were profitable in the fourth quarter, with the exception of OffHighway, and the group reported a trading margin of 6.5 per cent.

"Our focus on cash enabled us to end the year with net debt of £300 million, well below our target. "Capital investment has been maintained at 0.7 times depreciation and inventory levels reduced by £130 million.

"With strong operating cash flow and the successfully concluded £403 million rights issue in July, we were able to repay our revolving credit facilities and buy back £124 million of our outstanding bonds.

"This significantly strengthens our capital base and reduces our interest cost going forward.

"Our financial strength and strong market positions mean that we are well positioned to take full advantage as markets continue to recover.

"We expect to recommence dividend payments with the 2010 interim."