Net income for the period amounted to $685,321 compared with $1,410,958 for the same six months for the previous financial period. It should be noted that last year's earnings encompassed a one-time gain on the sale of investments in the amount of $906,347 and net income of $5,036 for discontinued operations.
Comparable net income for the first six months of this financial period increased by $185,746 (2002: $685,321 versus 2001: $499,575) or 37.2% over the same period for last year. This increase in earnings is mainly attributable to increased activity in the retail division, however, some $50,000 of this increase is directly attributable to employment tax relief as we managed to keep our entire staff employed over the slow retail period without any layoffs, while at the same time promoting heavily in order to increase sales as well as out customer base.
Sales to July 31st, 2002 amounted to $4,938,532 as compared with $4,419,326 (adjusted for discontinued operations) for the same period last year, as increase of $519,206, or, 11.7%. Gross Margin on sales for the same period amounted to $2,058,226 in 2002 as compared with $1,895,249 (adjusted for discontinued operations) in 2002, an increase of $162,977, or, 8.6%. The negative 3% difference between sales growth and gross margin growth exhibits the heavy emphasis that the Company had to place on special promotions (and thinner margins) in order to be successful in an increasingly difficult retail environment.
Expenses in the first half of the current financial period amounted to $1,949,152 compared with $1,974,462 (adjusted for discontinued operations) for the same period last year. Personnel costs decreased by the sum saved through the employment tax relief as previously mentioned.
Salary increases were held for the first six months of this financial year as we took the position that it was better to keep all of our staff employed on a full time basis rather than increase salaries and they have lay-offs during the slow season. Although this decision was more costly to the Company, we feel that or staff make a major contribution to the success of this Company and any reduction in their income during the tough, slow season would be detrimental to their well-being and not in the best long-term interests of the Company. In view of the Employment Tax relief we have had for these first two quarters, we also felt that this decision was well justified.
The increase of $91,000 in general and administrative expenses has three significant components that contributed to these higher costs, i.e. building maintenance costs, advertising and decreases in investment income (due to the sale of significant investments during the previous year). We are expecting significant increases in our property insurance costs for the second half of the current financial year; we also have some one-time maintenance costs that are expected to impact this line item even further during the second half of the current financial year.
The Company continues to have a strong balance sheet, with an enviable ratio of current assets to current liabilities. It is the opinion of the Directors that the Company is in a very strong position to sustain itself through what they see as very difficult economic times ahead.
During 2002, both Masters Limited and its affiliated company retired their property mortgages. Accordingly, there is sufficient cash flow in this period to issue a special one-time dividend in the amount of $0.20 to shareholders of record on November 15th, 2002 and payable on November 30th, 2002. This special dividend will be added to the regular dividend of $0.15 and therefore shareholders can expect a total dividend of $0.35 per share.
The Company is totally committed to doing everything possible to support "Buy Bermuda" programmes. We have made every attempt to lower prices, contain costs and negotiate the best possible deals with our vendors. Expansion of the Bermuda retail market is limited and the Company will continue to strive to find vertical markets in which to promote. As mentioned in previous reports, the major portion of our earnings from the retail operations are earned in the final few months of the year, i.e. the Christmas retail season. During the last financial year, we fully participated in the €˜Buy Bermuda" programme and we have adopted that same approach in our forward planning for the same period this year. Therefore, as we near this critical selling period, we issue the same caution as in previous years, i.e. that our final results are very much dependent on the second six months of the financial year.
On behalf of the Directors of Masters Limited, we once again express our appreciation to our management and staff for their continued efforts on behalf of the Company.
Signed by Susan D. Wilson, C. A., J.P.,
President and Chief Executive Officer