For the first time in its 70 year history, Watlington Waterworks said yesterday its net income - for the year ended December 31, 2002 - exceeded $1 million.

President and chief executive officer Allan Rance said the achievement was a result of strong demand for the company's goods and services, combined with the benefits of an operating cost containment strategy that has included long-term debt repayment and goodwill amortisation from the purchase of Pure Water (Bermuda) Limited in 1996.

"The company has continued with long-term plans to strenghten infrastructure in order to either constrain future operating costs or increase sales opportunities,'' Mr. Rance said in a directors' report. "Some of the company's distribution and storage network is now 70 years old. It is prudent that the company recognizes a need to reserve capital for a medium-term plan to strengthen or replace the aging infrastructure in the next five to 10 years.''

Mr. Rance said the reservoirs in Devonshire will need to be replaced with substantially larger ones. "Seawater desalting is the only way forward to increase potable water supplies,'' Mr. Rance said. "To this end the company continues to invest in sea water desalination resources and equipment as part of the ongoing strategy to improve manufacturing capacity.''

Looking ahead, Mr. Rance said there are "numerous uncertainties beyond our control'' that could affect future projections. "In particular the possible knock-on effects from international events that may adversely affect our tourism.''

He added that conservative estimates for the year indicate that income could grow by five percent.

Meanwhile, revenues climbed to $7,471,475 compared to $7,205,026 during the previous year.

Net earnings were $1,011,718 compared to $540,600. Net earnings per share were $0.89 versus $0.47 a year ago.