KFC (Bermuda) Ltd. continues its recovery from the brink of bankruptcy it faced in 1996.

But while posting slightly higher sales for the six month reporting period to July 31, the company's profits dipped due to higher expenses compared to the same period last year.

KFC (Bermuda) had profit of $138,837 or 21 cents per share for six months to July 31, compared with earnings of $164,962 or 25 cents a share last year.

Sales for the six months totalled $1.56 million compared to $1.55 million last year.

The company attributed the lower earnings to a 13 percent increase in the cost of goods sold combined with increases in payroll costs hurt the bottom line.

The company said the payroll costs were due in part to staff turnover.

Current assets, including cash of $298,971, added to $347,646, higher than the $228,681, of which $190,254 in cash, at the end of the same period last year.

Liabilities continued to fall, declining to $166,931 from $411,337. A bank loan of $229,957 was repaid by the end of last year. Shareholders equity amounted to $1.49 million or $2.33 a share, compared to $1.25 million or $1.93 a share a year ago.

KFC was in dire straits at the end of 1996, losing money at about $400,000 a year and had accumulated debts of about $1 million. The company was unable to meet payroll at one time.

Lines Overseas Management Ltd. stepped in to advance the company $100,000 and underwrite a rights issue to raise about $965,000.