Consolidated earnings of the Company for the six months ended 30th June 2002 amounted to $30,636 compared with $36,947 in the same period last year. Consolidated earnings reflect the net income of BCS Agencies amounting to $288,152 for the six months ended June 30th 2002 compared with net income of $289,620 in 2001 less Transact losses for this year to date of $213,676 compared with losses of $148,817 in 2001 less Corporate and Property losses of $43,840 for this year to date compared with losses of $103,856 in 2001. Sales during the first six months of this year declined by $347,329 to $476,387 due to the elimination of a number of Transact low margin services. Gross margin declined only $46,496 to $331,508.
Total assets of the group amounted to $3,251,762 including fixed assets of $2,341,218 as at June 30th 2002 compared with $4,431,917 in 2001 including fixed assets of $2,608,745. At June 30th 2002 the Company had cash and time deposits of $514,742 compared with $1,275,178 at this time last year. Total liabilities amounted to $897,614 at June 30th 2002, including long term debt of $428,627, compared with total liabilities of $2,527,906 at June 30th 2001 including long term debt of $1,862,291. Shareholder's equity has increased from $2,103,921 to $2,354, 148.
BCS Properties Limited
Last year, the land and building (20 Dundonald Street) was transferred to this holding company at net book value. The directors segregated the property from the trading companies as the first step in the process to make the property a distinct operating entity, responsible for its own financing and earnings. With the closure of The Computer Centre, the amount of space required by the BCS Group has declined and income generated by rent from group subsidiaries is accordingly lower. The area that was the service shop for The Computer Centre is available to be rented.
BCS Agencies Limited (IBM's exclusive agent in Bermuda)
IBM President and CEO, Sam Palmisano commenting on the significance of the 1st-half of 2002, said, "This was an important time for our company. We had to win sales and sign contracts despite just about the worst industry conditions we've seen in a generation."
BCS Agencies Limited found the business environment during the 1st-half of 2002 quite challenging. However, similar to our global-reaching partner, we were also able to build on our strengths and work toward the long-term interests of our customers, partners and stakeholders. This approach allowed for sustained performance during a difficult time.
Recognizing that economic activity is highly cyclical, several of our customers used the past period to reinvest in their IT infrastructure. Network consultation, design and implementation as well as server and software sales and support remained an area of focus. The expectation being that those institutions will be well suited to better reap the benefits of the economic turnaround.
Many organizations also used the past several months to reconsider their disaster recovery policies and practices. Coupled with IBM's resources, our Business Recovery and Resumption Services team was commissioned to ensure that customers in Bermuda are able to quickly recover their IT operations in the event of unsuspecting failures or downtime.
The influx of new reinsurance companies in Bermuda (post Sept. 11) provided another area of unexpected but welcomed business. Many of these organizations rely on IBM's workhorse server - iSeries (AS/400) - for their mission-critical business due to the reliability of the server and the strength of the industry-specific applications written for it. We were able to provide servers to some of these new customers as well as upgrade the environments of some established re-insurers as this market continued to grow.
The ability to provide new solutions to the changing requirements of our customer-base should provide continued growth as traditional hardware and services sales slowly rebound. We anticipate a stronger 2nd-half to 2002 as the economic turbulence subsides and our customers' confidence is reinstated.
Transact Limited
In the wake of the burst e-commerce bubble, Transact switched its focus to the domestic market. Transact has transformed itself into a complete e-business service provider specializing in Internet services, application services and managed hosting services. In February 2002, Transact successfully launched its Dial Internet Service. Transact anticipates launching its DSL Internet service in September.
Transact is an IBM, Lotus and Tivoli business partner. Our close IBM relationship sets Transact apart from other service providers in Bermuda.
For the six months ending June 2002 Transact's revenue was $179,122 down $360,293 from the corresponding period last year. This decline is primarily due to the wind-down of the AT&T Global Network service.
In July 2000 we advised Shareholders that the payment of quarterly dividends would be suspended, "until Transact is profitable or we decide to refinance the development cost of this new business". We further noted that we anticipated entry into the market at the level noted would cost a minimum of $1.5 million.
The accumulated losses of Transact, which reflect our continuing investment in the development of this business, amounted to $937,345 at June 30th 2002. To this cost we must add the cost of the systems and equipment purchased for this purpose amounting to $507,843 less accumulated depreciation of $352,285 (included in our losses to date). This brings our total investment to date to $1,092,903 ($818,540 at June 2001).
Going forward through to the end of 2002, we forecast a steady decline in losses.
Signed by:
Donald P. Lines, OBE,FCA,JP
Chairman