Watlington Waterworks Issues Director's Report

Hamilton, Bermuda:  15 April 2005 - The Bermuda Stock Exchange (BSX) has received the following Directors Report from Watlington Waterworks relating to the year ended 31, December 2004: 

The company had its third successive record-breaking year as net earnings for the year increased from just under two million dollars in 2003 to over two million dollars for this past year. This result was due in part to a lengthy period of below average rainfall in the first half of the year, which inevitably assisted by creating very strong demand for our products and services through the first half of they year.  Demand remained strong through most of the second half of the year enabling the company to achieve record annual sales.  Our recent past investments in capital improvements have resulted in improved operational efficiencies, which have enables us to keep operational expenses constrained thereby contributing to our overall improved net earnings.

During the year, the company replaced 12,000 feet of old water mains and completed several smaller pipe-laying projects to strengthen our underground pipeline network.  Over the past two years, the company has replaced approximately 17,000 feet of old water mains.  As a direct consequence, the company has seen over sixty percent reduction in mains leaks.  Plans to build a substitute reservoir for our 70-year-old reservoir were approved during the final quarter of the year, and the company entered into an agreement with an overseas specialist contractor to build the reservoir.  It is anticipated the new reservoir will be completed and commissioned during the first half of the current year.  The replacement of the old reservoir with a new and larger facility on the same site will commence late this year.  These construction projects are running concurrent with other capital projects including the provision of a further SWRO plant, which will increase out water production capabilities.  These improvements are all designed to strengthen out infrastructure, and the company's success over the past two years has placed it in a strong position to finance these capital projects together with some external financing.

The demand for the company's products and services has dipped below last year's levels through the first quarter of this year. This is attributed to the more severe winter weather we have experienced.  Temperatures have been below average and rainfall has been higher than for the same time last year.  These environmental factors naturally depress demand for our products and services therefore our earning for the first quarter of this year are expected to be less than for the same period last year.  While a quarter does not make a year, the poor start to this year will make it difficult to have a fourth successive record year although we are optimistic that this year's results will be favourable.

Additionally, the Company achieved the following results for the financial year ended 31 December 2004: Revenue was $9,045,783 in 2004 up from $8,294,674 in 2003; Net earnings were $2,286,775 in 2004 compared to $1,946,889 in 2003; Net earnings per share were $1.98 in 2004 versus $1.70 in 2003; Shareholders equity increased to $11.31 in 2004 from $9.65 in 2003.