Bermuda Press (Holdings) Ltd.'s profits fell by more than a third in the year ended September 30, 2008, as expenses rose and the company felt the impact of a Government withdrawal of advertising.

In the company's joint statement to shareholders, president Christopher Whittle and vice-president Michael King said BPH had "emerged from its most challenging year in decades in good shape".

BPH, the parent company of The Royal Gazette, said net income for the year was $1.78 million, or $1.29 per share, compared to $2.7 million, or $1.96 per share, in the previous year.

The company recorded revenue of $36.53 million — an increase of $1.1 million compared to 2007 — but expenses climbed by $2.34 million to $34.95 million. As well as its newspaper and magazine operations, which include the Mid-Ocean News, rg and The Bottom Line, BPH owns the Bermuda Press, the Stationery Store, Office Solutions and Pronto Print, plus a real estate portfolio that includes the Crown House office building on Par-la-Ville Road. The report to shareholders said Government's decision to stop advertising in the The Royal Gazette and not to renew subscriptions had cost BPH several hundred thousands of dollars in lost revenue last year.

"It is thought by some that Government's actions are attempts to restrict freedom of speech and to weaken The Royal Gazette in anticipation of the launch of a new daily newspaper as announced by the Premier," the report stated.

BPH said Government's actions were "clearly intended to punish the newspaper for revelations which government found unpalatable and for its championing of open government and the public's right to know, although Government's public stance was that it intended to save money by placing its messages on the internet and in other non-print media.

"Alas, Government's messages are not being received by very many in the community. A poll taken in March 2008 shows that The Royal Gazette remains far and away Bermuda's most effective advertising medium, with the majority of respondents reporting a very good or good response to their Royal Gazette advertising when compared to the internet."

The poll found that 86 percent of the Island's adult population read the Gazette during the course of each week.

"When we received the results of the poll, management attempted to meet with the Premier and Cabinet but without success," the report added.

BPH said that In spite of Government's actions, the Gazette has "continued to report fully and fairly on Government activities, including the publication of numerous photo ops for the Premier and his Ministers".

Efforts by management to replace the lost revenue from other sources and to reduce expenses had been only partially successful. "There is only so much which can be done to reduce costs without impinging upon the quality of our newspapers," the report added. Newspapers are having a difficult time elsewhere too. The Newspaper Association of America expects advertising revenues to be down by 16 percent for 2008, BPH noted.

"Though it is often said that Bermuda is Another World, we are not immune to these conditions and our editors and their staff are working hard to produce quality newspapers of interest and relevance to the entire community we are privileged to serve," BPH said.

In the face of economic uncertainty, BPH said it was reluctant to make forecasts for the current year "although it seems unlikely that we will be able to match the 2007-2008 year's results".

In 2008, the company invested in upgrades to its accounting and information technology systems that will enable management to improve the flow of information to management and allow customers to do more online. The income statement showed publishing and retail revenue climbed to $26.91 million from $25.77 million the previous year and rental income rose slightly to $2.04 million from $2.01 million. Commercial printing revenue fell to $7.06 million from $7.22 million.

Payroll and employee benefits was the single biggest expense at $16.94 million — up from $15.73 million the previous year.

BPH's dividends paid to shareholders totalled 76 cents per share, a yield of 6.6 percent at yesterday's closing price of $11.50 on the Bermuda Stock Exchange.

The share price values the company at $15.87 million — around half of its book value of $30.58 million at September 30 last year.