The Bermuda Press (Holdings) Limited ? the parent company of ? posted income of $2.5 million for the financial year ended September 30, 2005.

The amount is off 28 percent from $3.4 million earned in financial year 2004 which BPH attributed mostly to a one-time gain of $421,000 in 2004 from the sale of investments in the Bank of Bermuda after that company was sold to HSBC.

Director and president Roger Davidson said BPH saw an improvement in revenues last year, although this was accompanied by increases in operating costs and taxes. Total revenue for financial year 2005 was $32.7 million, a four percent gain over $31.4 million posted in financial year 2004.

However total expenses rose 6.4 percent in 2005 to $30 million compared to $28 million in financial year 2004 with no corresponding increase in sales, which president and director W. Roger Davidson said ?reflects our competitive operating environment?.

?Competition in our publishing, commercial printing, office supplies and equipment markets has intensified this year while payroll and administrative costs have increased,? Mr. Davidson said adding that in order to deliver quality products and service, the company must invest in people, technology and equipment. In the company?s 2005 Directors? Report, Mr. Davidson expressed concern about increasing costs in light of Bermuda?s heavy reliance on conditions in the US where inflation appears rising underpinned by high oil prices and a possible undermining due to, ?substantial budget deficits and an apparent lack of political will to face the consequences?.

?The implications for Bermuda are for higher interest rates and continued tightening in the credit markets,? said Mr. Davidson.

He also highlighted the accelerating shift to financial services from the tourist-oriented sectors of the local economy which had been the strongest supporters of BPH?s publications, both through circulation and advertising.

?The loss of Trimingham?s and Smith?s, Bermuda?s two flagship stores and increasing overseas shopping, much of it via the Internet, further affects Bermuda?s retail sector.

?The impact of simultaneous weakness, temporary and structural, in both the hospitality and retail sectors of the local economy diminishes the size of our potential audience and of our advertising support,? he said.

BPH expects the gradual formation of smaller stores that need to raise their profiles through advertising will counterbalance this negative economic shift.

During the 2005 financial year, Bermuda Press integrated the printing operations of Engravers with The Bermuda Press Limited a move that Mr. Davidson said reflects some of the continuing consolidation of local businesses that rely on the declining retail and hotel sectors.

As well as Engraver?s printing operations, BPH acquired property that will be useful for the Office Solutions and Stationary Store, said Mr. Davidson.

?Competing with overseas printers and their lower cost base is extremely difficult. Import duty on equipment and spare parts, as well as the duty on fuel that is hidden in the cost of electricity, is our chief hurdle since it effectively subsidises overseas competitors,? said Mr. Davidson.

He warned that the Island is in danger of developing a two-tier economy, in which Bermudian firms and their employees are ?disadvantaged by the very Government whose purpose is to serve and protect them?.

?Our hope is that Government will take action before an event, which seriously and adversely affects Bermudian businesses and their employees, forces Government to step forward when it is too late to make a meaningful difference,? he said adding that Bermuda?s economy, other than the international business sector, is showing signs of slowing.

He pointed to falling numbers in air arrivals and reports that the construction industry is cooling. Although new insurance start-ups will produce some revenue for government, Mr. Davidson said they are unlikely to employ the number of Bermudians that once worked in tourism and retail. ?The long-term effect of this employment shift will have a significant effect on the Island?s employment profile,? he said.

The prospects for Bermuda Press are not however ?bleak? due to diversification of the business and restructuring of existing business. Rental income from BPH?s Crown House property on Par-la-Ville Road and Columbia House property, the home of the stationary Store, contributed significantly to the company?s 2005 earnings.

As for the publishing business, Mr. Davidson noted that 70 percent of readers polled in an independent poll in 2005 implicitly trust the findings of while the weekly Mid-Ocean News has become Bermuda?s top investigative medium with ?too little credit given for its efforts?.

The total number of pages published by the two newspapers increased this year with continuing to publish without missing a scheduled day since 1828.

The newspaper is now sold in blue self-service boxes at a few select locations while its website continues to attract a greater number of visitors, he said.

At Crown Communications, MR. Davidson said The Bottom Line, has consolidated its position as Bermuda leading business publication while the second edition of The Insurance Journal was well received in November.

RG Magazine is in its 15th year of publication and remains Bermuda?s most widely read general interest magazine, said Mr. Davidson.

The Bermuda Communications Directory was distributed early in 2006 to all households in Bermuda.

Operations at The Bermuda Press Limited are continually under review by management to achieve efficiencies without losing effectiveness, said Mr. Davidson.

Print Express has continued to perform well, servicing sectors of the short-run quick turnaround printing business. The consolidation of Pronto Print into The Bermuda Press has been completed as has the integration of Engravers Limited.

?We are better utilising our capacity in plant and equipment to become more competitive in all of our markets, opening opportunities for our combined sales staff,? said Mr. Davidson.

BPH?s office products and equipment divisions also improved performance in difficult market conditions in 2005 with Office Solutions and the Stationary Store both continuing to lead their market sectors. Artcetera also improved its results this year, said Mr. Davidson.

Company director Peter Cooper retired in 2005 while Richard D. Spurling was appointed to the Board last month.

BPH increased its shareholders? dividend to 75 cents from 68 cents in 2004.