Kentucky Fried Chicken (Bermuda) Ltd’s profits dropped by more than one quarter during fiscal 2011 as sales continued to decline and staff costs rose.The fast food outlet’s net income dropped $67,176 or 11 cents per share, to $167,480, or 29 cents per share, at April 5, 2011 compared to $234,656, or 40 cents per share, for the same period in 2010.In a letter to shareholders chairman Donald Lines said: “As indicated in KFC’s preliminary results release, fiscal 2011 was a challenging year for the company as declining sales combined with increased staff costs resulted in a decline of $89,925, or 44.7 percent, in operating income.”2011 sales were $5.032 million, down $249,390, or 4.7 percent, from the prior year. Operating expenses declined by $97,546, or 2.6 percent, as tight cost controls by management enabled declines in all expense categories except payroll costs and benefits which increased slightly, year over year.As a consequence of reduced profitability the board of KFC declared only two dividend payments to shareholders during fiscal year 2011 of 10 cents per share, in September and December 2010.“As anticipated, KFC has endured a rocky start to fiscal 2012 and continues to see a downward trend in sales together with expense control challenges continuing from the last two years,” wrote Mr Lines. “While KFC remains well capitalised with adequate liquidity to fund anticipated operations, it is clear that maintaining the status quo will not result in either a near-term return to peak sales or a return to profitability levels previously experienced toward the end of the last decade.“With the decline in Hamilton cruise ship visitors, few major construction projects underway within Hamilton, a continuing outflow of guest workers from Bermuda, and difficult economic circumstances for many of our customers, it will be essential for KFC to adapt its operations and cost structures to these realities in order to maintain strength for the company, provide stable employment opportunities for its staff, and deliver an acceptable return to its investors.“Through the collaboration and co-operation of the board, management, and staff, we are optimistic that KFC will adjust to changing circumstances in fiscal 2012 and emerge stronger, continuing its proud tradition of serving Bermuda with a reliable, affordable and high quality product.”Mr Lines said that KFC started discussions with the Bermuda Industrial Union (BIU) early in April 2011 regarding the renewal of the company’s collective agreement for its unionised staff and to date the discussions are still ongoing.He added that the company’s negotiating team had been given a mandate to reach a “fair and economically sensible” agreement with the BIU membership that respected the historical service of its existing employees, the need for its staff to be fairly compensated, as well as the financial realities of KFC’s business operations and the economic climate of the marketplace.KFC’s annual general meeting will be held on Friday July 15, 2011 at 11.30am at the LOM Building, Hamilton.