"In our Annual Report to Shareholders for the year issued on 9th May 2000 we reported net income of $239,132 for the year ended 31st January 2000 compared with $293,605 for the year ended 31st January 1999.
We noted the reason for the lower income was largely due to higher operating costs and said that we were actively addressing the question of reduced earnings by examination of our costs and our sources of supplies.
We are pleased to report that in the first four months of this fiscal year sales are ahead of last year by some 2.8% and our gross profit is up by about 3.8%. Unfortunately, despite reduction in some operating costs, salaries and government levies combined with the cost of training and other expenses have resulted in a decline in net income from $93,349 reported in the first four months of last year to $76,841 in the first four months ended 31st May 2000.
While we view with disappointment the lower level of earnings this year to date, which is largely due to increases in the cost of salaries and supplies, we should note that included in this year's expenses are costs which we hope are non-recurring such as repairs to the water tank which raised our maintenance costs to $31,000 compared with $21,000 a year ago. We also had, as a result of the water tank problems, an increase in the cost of water from $5,400 to $8,600 this year. We hope, therefore, that for the remainder of the year our earnings will equal those reported for the year ended 31st January 2000, assuming sales remain at the same level.
Perhaps the most difficult cost to control is salaries and government levies on this cost. This cost pressure is one we have little ability to control and it is one phenomenon which we understand many local businesses face. On the one hand there is customer resistance to price increases to cover this cost and there is, on the other an unrelenting demand for increased salaries which in turn increases the cost of payroll taxes and pension plans and the other levies such as health insurance and social insurance which are related to employment.
In January we paid a dividend of .10¢ a share to shareholders of record 31st December 1999 and during the year ended 31st January 2000 the Company repurchased 30,000 of its own shares at an average price of $3.89 reducing shares outstanding as at 31st January 2000 to 617,007.
Since the end of the fiscal year we have purchased an additional 16,676 shares further reducing the shares outstanding to just over 600,000. It is our intention to continue to buy in shares of the Company for cancellation to the extent we have surplus funds available, with the view to reducing the shares outstanding to a more acceptable level.
Notwithstanding the purchase of shares for cancellation, the Company is in a very comfortable cash position. At 31st May 2000 our cash resources amounted to $396,000 and our payables were just over $178,000. It should be noted, however, that some fairly major repairs to the facilities will have to be carried out this year as such requirements were largely ignored in the period leading up to the recapitalization of the Company in 1998. We also have plans to relocate the office to the area occupied by the store room and to upgrade the office facilities which are in desperate need of refurbishment. Capital expenditures in this year will, therefore, amount to approximately $150,000.
In a meeting of the Directors held immediately preceding this meeting, it was agreed to pay a further dividend of .10¢ per share on 15th August 2000 to shareholders of record 31st July 2000.
I would like to welcome Kevin Manuel, our new General Manager, who joined us in mid November and Tracey Robinson, our new Assistant Manager, for they have done a first class job since they assumed these roles.
In closing, I would like to thank my fellow Executive Directors, Crayton Greene, Susan Wilson and Bill Thomson for their assistance and hard work during the past year. I also extend thanks to Graham Redford for his continuing assistance in his role as a consultant."