Bermuda restaurant, Kentucky Fried Chicken is expecting an earnings increase of approximately 37 percent by the end of the year after releasing its half year results yesterday.

But shareholders were also warned that the restaurant will need to be upgraded within the year.

The Chairman released a letter to shareholders regarding the half-annual results which said: "In our letter to Shareholders following the Annual General Meeting on 19th June 2001 we reported that in the first three months of this fiscal year sales were ahead of last year by some 20 percent and our gross profit was up by about 23 percent.

"We are pleased to report that in the first six months of this year sales are still ahead of last year by about 17 percent and our gross profit is up by 19 percent."

The Chairman attributed the increase in sales to be mainly the result of continued changes in their mix of product sales and a more aggressive marketing programme.

Earnings for the first six months ended 31st July 2001 amounted to $204,235 compared to $148,936 in the first half of last year, an increase of 37 percent.

The Chairman said: "The increase in earnings is mainly due to higher sales and a reduction in certain operating costs.

"Despite continuing upward pressure from costs and particularly employment costs, we hope this level of earnings will be maintained for the remainder of the year."

However, the Chairman said the company was very concerned about the probable effects of the 'attack on America' and the tragic consequences of these attacks in New York and Washington.

"These events have undoubtedly further weakened consumer confidence at a time when there are signs of a synchronised slowdown in global economic activity. This in turn suggests tourist and international business activity will decline, negatively affecting everyone in Bermuda," he said.

On 28th February 2001 the company paid a dividend of $0.10 per share to shareholders of record 15 February 2001 and in recognition of the healthy level of earnings achieved in the first half of this fiscal year, an extra dividend of $0.10 per share was paid on August 1, 2001 in addition to the regular semi-annual dividend of $0.10 per share which was payable to shareholders of record 30th June 2001.

In the companies Annual Report to Shareholders issued in April, they said that it was their 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 they have surplus funds available.

During the year ended 31st January 2001, the Company purchased 50,576 of its own shares, reducing shares outstanding to 614,931. Since the end of the last fiscal year, we have purchased a further 16,931 shares reducing the shares outstanding to 598,000 as at 31st August 2001.

The Chairman said that notwithstanding the purchase of shares for cancellation, the Company is in a very comfortable cash position and at 31st July 2001 their cash resources amounted to $630,830 and their payables were $273,893.

However, in a warning to shareholders, the Chairman said: "It should be noted however that some fairly major repairs and improvements to the facilities will have to be carried out later this year. Such repair work includes the refurbishment of the dining area, improvement of the layout in order to facilitate efficient service and upgrade of the office facilities."