Mayflower, which makes chassis and body panels for cars and buses, yesterday sealed a last-minute debt refinancing package and warned that this year's profits were unlikely to match market expectations.

The company had been labouring under £190m of debt, much of which was due to be repaid by the end of this month.

But yesterday's deal with 17 banks, led by Credit Suisse First Boston and Royal Bank of Scotland, provides for a fresh £160m debt facility, with the first repayment not due until January 2005.

Mayflower said the cost of financing the new facility would be "higher than under the previous scheme", but it would not be drawn further on the interest rate or the cost of negotiating the agreement.

The deal comes as something of an embarrassment for the chief executive, John Simpson, who over the sum mer had said debt refinancing would be resolved swiftly and on much more favourable terms.

Yesterday shares in Mayflower closed 3p lower at 27.25p.

The company said slow markets, particularly in the car sector, and increased competition, notably from bus builder Volvo, were likely to hit its full-year profits. Industry insiders expect a review of costs at the group's TransBus division to lead to job cuts. "We can't rule that out," a Mayflower spokeswoman said.

In contrast, fellow engineering group GKN yesterday said it had seen signs of a recovery in the car market over the last three months.

"Looking ahead to 2004, most forecasts show a small pick-up in automotive demand and little change in aerospace markets," GKN said. The company said it expected to meet profit expectations. Shares in GKN closed up 1.5p at 259p.