Kentucky Fried Chicken (Bermuda) Ltd.’s net income declined by almost 60% in the six-month period ending on July, 31 compared to the same period last year — dropping from $156,387 to $66,474.
But in a report to shareholders issued today, chairman Donald Lines remained optimistic about the company’s longterm prospects saying it would continue to innovate and curb costs in a bid to ride out the current economic storm.
Mr. Lines praised Kentucky Fried Chicken management and staff for their reliability and efficiency during these difficult economic times. And he said the company was proud it had avoided workforce cuts despite weakening sales and profitability.
One of the few franchises on the island, the fast food restaurant opened on Queen Street in 1975, and employs dozens of Bermudians.
Mr Lines’s letter to shareholders follows below:
As anticipated when we last reported to shareholders, fiscal 2011 is proving to be a difficult operating environment for your Company and the effects of that challenging environment are having a dramatic negative impact on the Company’s earnings. Net income for the six months ended July 31, 2010 amounted to $66,474 ($0.11 per share), a decrease of 57.49% compared to adjusted net income of $156,387 in the six months ended July 31, 2009.
Sales for the first half of fiscal 2011 were $130,193 (4.89%) lower than the prior year. Correspondingly, gross profit decreased by $100,261 (4.99%) over the same period in fiscal 2010 despite management’s commendable efforts to tightly control costs of goods.
We believe that both economic hardships faced by the local population as well as minimal cruise ship dockings in Hamilton have contributed to declining sales. Despite difficult times, the Company will continue to innovate and introduce new offerings (such as Krushems, launched in August 2010) to encourage repeat customers and entice new customers.
Non-staff expenses decreased by $19,797 (1.98%) from the same period in the previous year while staff-related expenditures increased by $33,093 (3.74%) over the prior year as factors such as increased payroll taxes negatively impacted the Company’s operating costs. Your company is proud to have continued to offer stable employment to its staff in the face of declining sales and profitability. A stable, flexible and reliable work force is essential to the Company’s ability to efficiently serve customers in good times as well as bad. We thank our employees for their dedication and flexibility as together we search for practical ways to avoid staff reductions during a difficult operating environment while ensuring total operating expenses are contained appropriate to our level of business activity.
The Company remains highly liquid with $2.25 million in cash and equivalents on hand at 31st July, 2010 –- a 7% increase over the prior year. Total shareholder’s equity stood at $2,951,572 at the close of the first half ($5.07 per share).
No dividends were paid in the first half of the year. However, the Board has resolved to pay from retained earnings two dividend payments of .10¢ per share on each of September 1, 2010 and December 1, 2010 to shareholders of record as at August 17, 2010 and November 16, 2010 respectively.
Donald P. Lines, OBE, FCA, JP
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