Net income for the period amounted to $1,410,958; this result includes a one-time gain on the sale of investments of $906,347. Recurring net income amounted to $504,611 compared with $453,553 for the same six months a year ago. This increase of $51,058, or 11.25%, is attributable to the retail division but there is a severe caution attached to any assumptions for the second half of the year based on these results and this caution is explained later in this report.
Net sales to July 31st, 2001 amounted to $6,045,106 as compared with $5,696,734 for the same period last year, an increase of $348,372, or 6.1%. Gross margin on sales for the same periods amounted to $2,221,499 in 2001 as compared with $2,122,506 in 2000, an increase of $98,993, or, 4.7%.
Expenses in the first half of the current financial period amounted to $2,295,677 compared with $2,247,742 for the same period last year. This increase in expenses of $47,935, or, 2.1% is due to increased personnel expenses.
The Company continues to have a strong balance sheet, with our ratio of current assets to current liabilities being extremely favourable. During this current six month period, the Company decided to sell a portion of our marketable securities and retire almost all of our long-term debt. It is expected that we will have completely retired our mortgage by early 2002.
In August, 2001, Masters Limited ceased to be the operator of the Collector's Hill Service Station. The landlord sold the property to Coral Petroleum Ltd. And our lease with the new landowner was not renewed. Included in the sales figures for the first six months of the year was a sum of $1,625,780 (2000: $1,554,163) that relates to this service station. Gross margin contains an amount of $326,250 (2000: $322,746). Direct expenses include the sum of $321,214 (2000: $319,062) and net income for the period includes a net contribution from this division of $5,036 (2000: $3,684). All expenses relating to the closure, including redundancy and accumulated vacation expense, have been provided for in the results for the six months ended July 31st, 2001.
The Directors caution the shareholders that the second six months of the financial year are critical to the overall annual performance of the Company. In excess of 26% of the annual sales for the company are earned in the months of November and December. If the company cannot achieve sales similar to last year in these two months, then the annual result from operations will be significantly lower than a year ago.
Whereas the first quarter of this financial period showed significant sales growth (attributable to the construction boom), we have seen sales in the most recent months (August and September) slide significantly from our expectations with the erosion having already commenced in June, 2001. The decline in sales is particularly noticeable in those products where consumer expenditure is somewhat discretionary - especially in those products associated with home decorating and textiles. There is every indication that consumers are "tightening their belts" and this phenomenon was definitely noticeable prior to the tragic events of September 11th; this halt in our tourism (both recreational and business) will have the effect of accelerating an already existing downward economic spiral.
The Directors are well aware of the challenges facing retail businesses in Bermuda. Masters Limited is well-positioned, in the short-term, to "weather the storm" as exhibited by our strong balance sheet. However, without a commitment from the community to "Buy Bermuda" and without strong support from the Bermuda Government in recognizing that the most onerous tax burdens fall upon the beleaguered retail industry, then we may be faced with a downturn that would force us to institute significant cost reductions.
The Company is committed to "doing its part" and we will adopt as many measures as are practical to encourage local buying while retaining our existing service levels. The Directors, Management and Staff - our entire Masters Team - are determined to get through these difficult times.
In view of these uncertain times, the Directors have decided to be prudent and retain our declared dividend policy. Accordingly the Directors have today reaffirmed the declaration of the dividend of $0.10 per share to shareholders of record as at October 19th, 2001 but it will now be payable on November 15th, 2001 rather than October 25th, 2001 as previously stated in our published annual report for the year ended January 31st, 2001.
On behalf of the Directors of Masters Limited, I extend our appreciation to our staff for their continued efforts on behalf of the Company.
Susan D. Wilson, C. A., J.P.,
President and Chief Executive Officer