Quarterly Report - 2000 Q2

For 3 months ending June 30, 2000

Context

While the Greater Toronto and Washington economies roared along, subtle structural changes in their larger national markets continued. Consumer spending fell and the 'new economy' wobbled badly as share prices hit the wall in April. Continued mergers designed to absorb over-capacity swept through the telecom, commodities, and automotive sectors.

Signs of a slowdown are imminent-oil and commodity price inflation is evident, and for the first time in 4 years, U.S. unemployment rose (with the increase in 1 month alone being the largest in 10 years). Financial institutions activated their early commercial credit warning systems with most special loans units on notice.

The shift in professional services to e-com and CRM infrastructure build-out continued. Focus moved from B2C to B2B strategy and construction. Most major consulting houses now claim that their e-com practices represent 30% of billings.

Corporate Overview

Profit Magazine ranked SBR 22nd among Canada's 100 fastest growing companies (4th in the GTA) in terms of past 5-year performance.

April witnessed a strong push in the areas of business development and new account capture. May experienced a heavy drive to intensify recruiting and HR activity while resetting the Admin function. HR's functional practice ignited with engagements awarded for both bulk and high-end technologist recruiting for major North American banking, mining, and pharmaceuticals interests.

In June, the business' major initiatives attempted to strengthen operations in support of a more diversified customer base and demanding project roster. The quarter set records for the largest number of active projects and the highest blended rate on a single engagement in company history.

In summary, Q2 was characterized by rapid operational build-out and infrastructure refinement. Business focus remained on backlog and revenue throughput. A healthy balance between SG&A hours and those of project delivery was restored.

Enterprise Services

Business Development set new records for both dollar volume and number of proposals bid-by month, by quarter. The push to raise ROS continued with the hiring of 5 new staff into the unit. Records were also set in the number of sales presentations given in a month as well as in the frequency of media coverage. Marquee accounts were won across the majority of tier-1 sectors targeted-financial services, telecom, food & beverage, mining, health sciences.

Among the quarter's greatest successes was that delivered by the Human Resources unit, which itself doubled size. HR infrastructure build-out was placed on hold to allow the unit to increase the business' own headcount by 15%. Over 2,000 resumés were screened, 600 interviews conducted, with an offer acceptance rate above 85%. This unit is anticipated to exceed most FY objectives in Q3.

SBR's Admin Services function is now comprised of-Contract Admin, Audit and Standards, MIS, Accounting. The development of a series of audit programs in support of SBR's drive toward ISO and CMM certification continued. Another floor of SBR's 6-storey historic corporate location was placed under restoration.

Business Unit Activity

Internet and Network Services/C5I

A team of Internet technical specialists and writers continued to develop courseware and audit tools for one of the world's largest security service firms. The activities of this unit continued to receive press coverage as a number of major Internet security breaches (such as the "Love-Bug") occurred during the course of the quarter. Active for less than 6 months, this line- of-business now accounts for 10% of SBR's revenue.

Business Turnarounds and Workouts

Two projects consumed the resources of this line-of-business throughout the quarter. One assignment involved a publicly-traded manufacturer and distributor of batteries to both the defense and automotive sectors. SBR's team worked closely with the management of 3 North American locations in such areas as receivables processing, finance, and HR. Another major engagement involved the turnaround of a major bottler of non-alcoholic beverages. In less than 6 weeks, the SBR team almost doubled plant output.

Decision Support Services/DSS

With staff levels stable throughout Q2, business development efforts are now fully focused in the areas of-e-commerce and business strategy, quantitative services (particularly econometrics and data modeling), customized middleware applications, market intelligence. In less than 3 years, the unit has completed projects for virtually every major Canadian telecom, insurance, and banking interest. Specific projects delivered during the quarter included:


• Competitor intelligence for a national producer of baked goods;
• E-commerce performance benchmarking in the life insurance sector;
• Regional strategic planning support for a major manufacturer of telecom equipment;
• Operating and investment strategy governing the alliance of 3 international telecom behemoths;
• Risk mitigation in the area of credit card services.

The integration of qualitative with quantitative analytics and research begun in Q1 has altered the project portfolio of this unit dramatically.

Operations Support Services/OSS

Operations Support Services (OSS) provides expertise in systems analysis, logistics, and project management. Projects are performed principally in retail, resources, manufacturing, and food processing sectors. Engagements in Q2 included:

• Project management supporting a digital imaging pilot for one of Canada's major banks;
• Development of a performance scorecarding framework for a leading discount retailer;
• Regulatory compliance pertaining to customer information processing at one of North America's largest retailers;
• Data warehouse build-out within the finance group of a multinational conglomerate.

The unit has witnessed monthly revenue quadruple in 6 months. Headcount increased 35% over the quarter.

Hybrid Legal Services

With a raft of Canadian and U.S. legislation governing privacy and Internet transaction standards, SBR's Hybrid Legal Services unit continues to extend activity. Projects typically demand unusual configurations of specialists-in law, MIS, process management, telecommunications. IETS also achieved one of the highest customer assessment ratings of any unit.