The latest accounts for Penman show the Dumfries-based business made pre-tax profit of £1.7 million in the 12 months to March 31, when directors said the company enjoyed another successful year.
Accounts show that privately owned Penman suffered a 6% fall in profits, from £1.8m in the preceding year. Turnover fell 11% to £18.6m, from £21m.
However, the directors said Penman had managed to increase operating profit to 9.3% of sales, from 8.8%.
"This has been achieved though maintaining a balanced portfolio of UK and overseas, governmental and civilian contractors," they wrote.
Led by managing director Bryan Findlay, Penman Engineering has a product range that includes cash-in-transit vehicles used by banks and armoured cabs that can provide protection against mine blasts.
Directors added: "This year has also seen increased demand for our highly innovative, market and product specific design knowledge and services, particularly overseas."
Penman provides designs in areas such as armour protection and vehicle re-configurations.
Penman has been looking to overseas markets to reduce its reliance on the UK, where the Government is implementing big cuts in public spending.
"The most significant risk for our business is the constraint on government spending particularly in the UK," said directors.
However, they concluded: "We see a bright future for the group based on remaining flexible, innovative and competitive."
Directors signalled confidence by increasing the total dividends paid in the year to £937,200 from £437,200 in the preceding year.
Directors earned £752,451 total emoluments in the latest financial year, up from £739,575. The company contributed £439,255 to money purchase pension schemes for directors up from £36,667 in the previous year.
Average employees during the year increased to 139, from 134 in the previous year.
Penman started as a family firm of cartwrights, building horse-drawn carriages, in 1859. It entered the armoured market after the acquisition of Hotspur Armoured Products in 1989.