In 1997 Bermuda Bakery, Ltd. recovered about $700,000 from a its former controller, boosting profits for the year to $1.33 million, or $4.67 a share, a gain of 870 percent over 1996.

The stellar performance was boosted by stemming the flow of losses in its bakery division, and cutting costs from its rental divison. Without the recovered money the company net income would have been $604,453, still 340 percent higher than 1996.

The bakery lost $53,130 from its bakery division, down 83 percent from the $308,895 lost in 1996. Sales revenue increased ten percent to $5.1 million.

Expenses for the division increased four percent to about $5 million.

Meanwhile, income from the company's rental division increased 43 percent to $495,700. Rental revenue increased 11 percent in 1997 to $773,281 while expenses fell 21 percent to $277,581. The company owns the Belvedere Building.

Company president James Pearman said the company was attempting to concentrate on getting its bakery division profitable. The company is taking a hard look at its cake and sweet division which employs 13 staff. Under consideration is the closure of the Buttercrust Shop.

"The losses are incurred in the cake and sweet dough department, followed by the Buttercrust Shop,'' he told shareholders at the company's annual general meeting last week. "Detailed studies are ongoing as to what to do with these two parts of the bakery division. No formal decisions have been taken, and it would therefore be premature to say what the company's intentions are.

Nevertheless, we have been, over the past two years, moving towards returning to our core business, the production and sale of bread and rolls.'' Expenses in the 1998 year will include redundancy packages for any laid off workers and renovations to the Belvedere Building. The company has been increasing rents at the building but will remain competitive with new office space being built in Hamilton.

"The real estate division is holding this company together,'' he said.

The company is also considering forming a separate company for the bread making business. The activation of the company is on hold pending further discussions by the board of directors.

The main boost to the company's profits came from the $728,585 the company recorded on its balance sheet for money recovered net of expenses for a two year "fraud investigation''. The Bermuda Bakery Limited won a $741,466 default judgment in Supreme Court against its former controller Earl Fithian in February 1997 and recovered the money from his assets in Bermuda.

The bakery won the judgment for amounts it had to repay tenants of its Belvedere Building who were overcharged for land tax and electricity. There were amounts missing the company had to pay for payroll and other taxes, insurance premiums and pensions, amounts taken from sales receipts and amounts paid for professional services of the investigation and pursuing the statement of claim.

In December of 1995, Mr. Fithian failed to show up at the Hamilton police station to honour his police bail requirements. In the 1995 fiscal year the company posted only $17,843 profit compared to a $320,264 gain for 1995. In the annual report was a fraud investigation expense of $119,500.

As part or the matter, the company suspended trading of its stock on December 8, 1995 after share holding and dividend irregularities were discovered. The share register was reconciled December 12 and trading resumed in May 1997.

Mr. Pearman said the money was recovered from Mr. Fithian's bank account and was paid in cash.