Bermuda Computer Services yesterday reported a massive increase in its operating profit for 2002, but said its Internet subsidiary Transact had recorded a $453,000 loss.

BCS recorded net income for the 12 months to December 31, 2002 of $176,112 compared to a profit of $256,538 in 2001.

But it said the result for 2001 included a gain on sale of investments of $246,076 and an operating profit of just $10,462.

Much of the increase in profit could be attributed to subsidiary BCS Agencies Ltd., which is responsible for sales, service and support to all IBM corporate customers in Bermuda.

The agency contributed $619,684 to earnings compared to $546,699 a year earlier.

The company noted that sales rose slightly in spite of reduced spending on formation technology worldwide, and said some customers, especially in tshe Insurance and Finance sectors, took the opportunity to invest in their IT infrastructures "in order to position themselves for the inevitable market correction". BCS Properties increased its contribution to earnings from $2,672 to $77,330, the company said.

But overall profits were dragged down by Transact, the company's Internet/e-commerce subsidiary which lost $453,384 in 2002 compared to a loss of $491,167 in 2001. BCS projected that Transact would cut that loss to $243,000 in 2003 as its dial-up and DSL Internet services launched in the last year gain market share.

"We are confident that demand for the solutions, which we've developed will continue to grow," the company said. "Transact successfully launched its dial Internet service in February, 2002 and launched its DSL service at the end of November 2002. The company is developing additional services to be launched later this year.

"We still feel there is a significant market for our Application Service Provider offerings and for our Disaster Recovery and Storage Management offerings utilising our advanced communications systems and the Internet. As a result we expect steady revenue growth throughout 2003."

The company has advanced $1.25 million to Transact and has suspended its dividend until the company becomes profitable.