Quarterly Report - 2000 Q1

For 3 months ending March 31, 2000

Context

Volatility and growth characterised SBR's two major metropolitan markets-the Greater Toronto Area/GTA, the Greater Washington Area/GWA. In both markets consumers continued to spend like crazy, corporations invested like mad, and locally based stocks hit new highs.

Expectations of a U.S. slowdown may gnaw at the vitality of SBR's GTA market. Toronto's banking sector continues its aggressive cost reduction and the restructuring of thousands of positions within this community is well underway. Canada's weaker banks are targets for merger speculation. Restructuring among several domestic life insurers is also expected.

The GWA economy continues to roar along, fueled by federal election activity, the Virginia dot-coms/telecoms corridor, and the gen-tech watershed related to the human genome. The inherently cycle-resistant nature of the GWA heightened this sense of economic exuberance.

Restructuring of the global professional services sector witnessed CAP GEMINI acquiring E&Y's consulting practice; IBM purchased LGS. Firms are scrambling to secure AS-PAC and CALA market positions. Rate wars among local professional services providers continue.

Corporate Overview

Q1 witnessed a significant turnaround for SBR. Revenue growth absorbed the excess capacity with which the business was saddled at 99YE. A significant reorganisation was conducted in January, followed by an aggressive sales campaign in February. In March, focus returned to the operating unit build-out needed to meet a wave of new work. Process and infrastructure investments made in 99Q4 began to show return.

After 4 years of full-time activity, SBR's core business components have stabilised – 50% of current staff hold over 2 years of service despite the fact that the business continues to double in size each year. Infrastructure emphasis is now on process change and cost effectiveness, rather than initial construction. SBR's customer base is the most diversified in its history – no single account, service line, nor sector represented more than 10% of the quarter's revenue. Consulting and higher priced professional advisory services have been intimately integrated within the business' contracting portfolio. This has been accomplished with a more senior hire and the seasoning of what will become the next generation of company leadership.

Enterprise Services

SBR's Business Development Unit set records in-appointments booked per month, sales calls made, press coverage obtained, new work won. Two new marquee accounts landed. Over 350 sales presentations were booked-twice the level of 99Q4. Forty proposals were delivered for a total value of $3.5M-February alone saw over $2.1M in proposal value bid. An overhaul of key proposal procedures was accomplished with win rates restored to 1:2. Disciplined process improvement across the entire Sales Unit (which now consumes 65% of all overhead costs) began to raise ROS.

The Human Resources Unit set 12-month records in-new hires, retention, and practice revenue. Over 1,000 resumés were screened, 250 interviews conducted, and 15 staff hired. A series of new programs were moved through design including-professional development, secondary comp, executive recruiting, and training.

Admin Services focused on 99YE closure. Business metrics were realigned, the company's project cost systems were revamped, and a roster of audit protocols were put into play. The Facilities Management Unit continued to focus on maintenance and leasing.

Business Unit Activity

Financial Services Group/FSG

FSG delivered a strong quarter working principally in the following areas:

• food processing sector lobby support for a Chicago-based agribusiness interest;
• e-commerce and long-range forecasting for an international steel conglomerate in support of its strategic planning cycle;
• middleware, computer modeling, and custom-database development for international food sector interests;
• U.S. GAAP accounting and financial system conversion project support for a major insurer.
• Q1 saw the unit integrate research and consulting services into its portfolio. This extends the business' ability to bundle qualitative analytics with its mainstay quantitative and IT-driven offerings. All key banking, insurance, turnaround, and policy analysis projects were extended. The legal services sector has emerged as a key business source, with firms turning to FSG to provide project management,as well as financial and technical analysis.

New Practice Areas

Internet Security

Established in 99Q3, SBR's Electronic Countermeasures/ECM Unit has already doubled in size while receiving national and international press-coverage. A major contract to develop intellectual property (including audit tools and courseware) for a global provider of security services was signed. Interest in the Unit's offerings has been strong in the pharmaceuticals, health sciences, and retail sectors. This unit will again double size in Q2.

Business Turnaround and Asset Workouts

Corporate insolvencies are on the rise worldwide with North American filings at their highest level since 1986. As expected, SBR's Turnaround and Asset Workout Practice delivered a strong quarter. A related sales campaign was met with excellent response given SBR's ability to back-shop high-end turnaround expertise through all phases of the workout cycle. This line of business is expected to provide a new roster of customers while becoming a major revenue accelerator throughout 2000.

Operations Support Services/OSS

OSS opened the quarter troubled by insufficient backlog and its incumbent staff utilisation issues. However, by quarter's end the business was in the throes of an aggressive expansion almost doubling size. Moreover, despite the weak start, OSS delivered 20% more revenue this quarter than for 99Q1. Major projects included:

• fleet management systems rollout support for one of North America's largest utilities;
• project management for a digital imaging pilot within a leading international bank;
• reverse logistics involving a parts inventory held by a metals conglomerate;
• global rollout of web-enabled data warehousing technologies across the finance units of a telecom equipment manufacturing giant.

Projects within the OSS portfolio are characterised by their engineering elements. These reside within four lines of business-SCM, change management, process and systems mapping, information packaging and delivery.

Industrial Engineering and Technical Services/IETS

Industrial engineering engagements carried out by this unit focused on the metals, pharma, and high-tech sectors. SBR launched the unit in Q4, and by year-end it was delivering 20% of all corporate revenues with only 10% of the company’s head-count.

As one of SBR’s newest business units, IETS ended the year with morale improving among its members and a healthy backlog. IETS also achieved one of the highest customer assessment ratings of any unit.

Competitive Productivity Services/CPS

CPS developed a multi-leveled network security risk assessment tool. The unit also created two leading-edge courses in network security risk and e-business professional network security. These courses represent initial courseware offerings aimed at information technology managers and senior executives. CPS ended the year by completing a nine-month contract that saw the production of innovative tools and resources enabling the global launch of an information security business for one of the world’s largest security providers. New business accounted for 89% of the unit’s revenues for 2000 while project extensions made up the remainder.