The following statement was released by the Company regarding its interim results:
In our letter to Shareholders following the Annual General Meeting on 19th July 2000 we noted the reason for the lower earnings in the year ended 31st January 2000 compared with 1999 was largely due to higher operating costs. We said that we were actively addressing the reduction of earnings by examination of all our costs and the sources and cost of supplies.
We also reported that in the first four months of this fiscal year sales were ahead of last year by some 2.8% and our gross profit was up by about 3.8%. Unfortunately, despite the 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 viewed with disappointment the lower level of earnings in the first four months of this year, which was largely due to increases in the cost of salaries and supplies, we pointed out that included in this year's expenses are costs which we hoped would be 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 in the first four months.
We are pleased to report that despite indications of a reduction in net income when compared with last year, noted in July, earnings for the first six months ended 31st July 2000, which amounted to $148,936, are higher than earnings of $138,680 in the first half of last year due to an increase in sales which are up 8.1% over last year. Gross profits in the first six months of this year increased by $138,136 as a result of the increase in sales and operating expenses have also increased by an amount of $125,071 largely due to an $86,286 or 22.1% increase in employment costs and an additional $68,351 in advertising expenses.
Salaries and wages are, as we pointed out earlier, the most difficult cost to control. 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 will increase the cost of payroll taxes, pension plans and other levies such as health insurance and social insurance.
In our letter to shareholders in July we stated it was our intention to continue to buy in shares of the Company for cancellation with the view to reducing the shares outstanding to a more acceptable level - to the extent we have surplus funds available. 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 last fiscal year we have purchased an additional 17,776 shares at an average cost of $5.01, further reducing the shares outstanding to just under 600,000.
Notwithstanding the purchase of shares for cancellation, the Company is in a very comfortable cash position. At 31st July 2000 our cash resources amounted to $451,841 and our payables were just over $233,000. It should be noted, however, that some fairly major repairs to the facilities will have to be carried out later this year - for 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 storeroom and to upgrade the office facilities that are in desperate need of refurbishment. Capital expenditures to be made later in this year should, we estimate, amount to approximately $150,000.
In January we paid a dividend of .10¢ a share to shareholders of record 31st December 1999 and in a meeting of the Directors held immediately preceding the Annual General Meeting in July, it was agreed that a further dividend of .10¢ per share would be paid on 15th August 2000 to shareholders of record 31st July 2000.