"It was our hope that we would continue to build on our success and improve profitability in 2002, however that was not to be as events that are familiar to all overshadowed our good intentions. In my report to you on May 5, 2000, I stated that "attaining good results when business is good is quite easy, but to succeed during difficult times is the true test of a company's underlying strength". Bermuda Aviation Services Ltd. (BAS) did achieve a level of success we can be proud of during a very difficult period, demonstrating its ability to generate reasonable profits in adverse conditions. Some of the challenges we faced, such as the events of last September and the declining economic conditions, were beyond our control, affecting not only aviation but most businesses in Bermuda and around the globe. The levels of activity in the local aviation, tourism and retail sectors were probably at their weakest ever. But after such an encouraging performance last year, and although expected, the operating performance of the company for this year is clearly disappointing. And whilst we are disappointed with our 2002 results I can assure you that we took the necessary actions to mitigate the effects of the downturn and position the company to regain the desired momentum. We lowered our costs and reduced expenses while simultaneously restructuring each company and division to meet the lower demands of their businesses. Our ability to embrace change and our desire to continually reinvent our way of doing business helped us overcome this most difficult period.
Our airport operations were of course hit the hardest, with revenue in that sector declining 8%. Sales in our retail and wholesale divisions also slowed as consumer purchasing fell back to levels not seen since 2000. Most of the erosion occurred in the last six months of our fiscal year whereas the operating performance for the company in the first six months or our fiscal year was substantially ahead of that for the same period a year ago.
Total revenue for the period under review fell 4% or $0.7 to $19.1 million. Timely action by our management group and recent diversification helped us offset the weakness in the most affected units with strong performances from those units less affected. The improved business mix and other cost cutting measures allowed us to post an operating profit of $1.6 million, which is 26% lower than that earned for the same period a year ago. Net profits for the period were also lower, falling 26% to $1.6 million as we once again incurred redundancy cost associated with the loss of significant business in our catering unit. Expenses during the period were lowered 0.5% or $0.1. We are pleased to see continuing support of the company through the continued interest in its shares. This year they traded at a record high of $11.00, despite our lower earnings. With an annualized dividend of $0.60 per share, we feel that they are an excellent investment.
The next fiscal year will provide new challenges as the external problems that affected us over the last six months of our fiscal year are likely to continue for some time. In particular, we expect revenues in our catering departments and retail outlets to continue to be under pressure for at least the next twelve to eighteen months. And, with huge increases in our aviation insurance coverage compounded by fewer scheduled flights and charters, our field and cargo divisions are expected to experience lower earnings as softer sales put further pressure on those divisions. Additionally, our airline clients continue to evaluate every dollar they spend with us as they streamline their operations trying to get maximum yield on our routes. We can therefore expect little or no relief as we renew their service contracts. The initiatives taken over the past year, and in particular the last six months of this fiscal year, will help minimize the impact of the expected unsatisfactory year of aviation related earning.
We are however determined to maintain profitability during these periods of difficulty and are determined to make BAS a less cyclical company. Most importantly, one that consistently shows growth and profitability. Our strategy is one that is designed to get us through challenging times. It provides for us to rationalize and restructure each unit as required and remain on a charted course of seeking new ventures that makes strategic sense and brings value to our company. To that end, BAS acquired a majority interest in the business and related property of Weir Enterprises in February of this year. Weir is a small but successful auto parts distributor with many years of success and growth through highly effective management and excellent sourcing of product. The merger is seen as another addition that will give BAS a solid foundation for future earnings stability and long term growth. BAS now has a portfolio of well managed companies that will provide value as we renew our focus and commitment to our shareholders and customers. We are pleased to welcome George Hammond and the management and staff of Weir Enterprise to our family.
2002 marked several milestones in the company's history as BAS-Serco completed its first year of a five year contract to provide air operations and infrastructure support at the Bermuda International Airport. May 2002 will also mark the first anniversary of the company's facilities management contract at The Bank of N. T. Butterfield and Son Ltd. This year we also closed our Bond Room facility which we had operated for nearly fifty years to make way for the new in-bond facility at the airport. During the period the company successfully completed negotiations with the Bermuda Industrial Union for all unionized workers covering a three year period. We can honestly say that our relationship with the BIU is excellent because of the openness and dialogue we have with our staff.
Historically, BAS has had little or no significant amount of debt on its balance sheet, so our immediate objective will be to reduce the increased levels incurred to support our recent growth objectives. Our next priority will be to maintain a sharp focus on cost control to produce better operating margins and hopefully reverse the decline experienced this past year. BAS is well positioned to meet these economic challenges.
Finally I wish to acknowledge the great team that enabled us to produce these results. After many years of significant growth, BAS came through a tough year in reasonably good shape. The level of success was not what we had hoped for in 2002, but the men and women in our company put forward a valiant effort to ensure we achieved a level of profitability that would be acceptable to our shareholders. Those results could not have been achieved without their commitment, and our Board of Directors is very encouraged and gratified by the dedication they showed during such a challenging time. I would like to give particular thanks to the management group who responded quickly and decisively to the changes required. Their talent and determination is key to achieving our vision of being the best as we provide value to our shareholders. I am very proud of their achievements in this challenging year, as they assure me that we can expect the same resolve and determination in the coming year."
Signed by:
W. Neville Conyers
Chairman