The company that publishes the Bermuda Sun, Island Press (Holdings) Ltd., has seen its profits drop by 36 percent for the first six months of 2003.

It comes after the company lost the contract to publish Bermuda's main telephone directory and took on extra costs after expanding into publishing in the Caribbean.

The company was upbeat in its interim report to its shareholders, stating that it was "very proud" of the results and adding that it expected to get significant returns from its new investments in the future.

In a release the company also said it had seen sales rise by 67 percent or $3.5 million to $8.6 million following the buy-out of two new companies that increased its operations through the Caribbean and the United States.

But the cost of sales also almost doubled - rising from $2.4 million to $4.6 million for the six month periods in 2002 and 2003 respectively.

"The period ended March 31, 2003 has been an exciting time for the company," said Randolph French, president and chief executive officer. "During the past twelve months, the company acquired Caribbean Publishing Company Ltd. which publishes telephone directories in the Caribbean and in United States and incorporated Industrial Electrics & Controls Ltd. in Bermuda to install, maintain, repair and replace sophisticated electrical control systems.

"Unfortunately, in 2002 the contract to publish the Bermuda Telephone Directory was not renewed. These six month results indicate the major changes that the company has experienced."

Net profit was reported as $362,425 for the period ended March 31, 2003, compared with $566,885 for the same period in 2002. Net profit per common share was $0.73 and $1.10 respectively.

The company said that sales for the six month period in 2003, which include Caribbean Publishing Company were $8,575,845 compared with $5,115,757 for the same period last year which included the results of publishing the Bermuda Telephone Directory.

The company's gross profit was reported as $3,941,280 or 46 percent of sales compared with $2,675,582 or 52 percent of sales for the previous period, said a statement from Island Press.

"The result represents the different costs associated with doing business in the Caribbean and Bermuda as opposed to doing business only in Bermuda," said Mr. French.

General and administrative expenses rose by 77 percent from $2.0 million to $3.5 million after the company took on an extra 80 staff with the new operations in the US and in 12 Caribbean islands, said the report.

"The company is in a growth mode and included in these costs are post-acquisition and development costs associated with the expansion of the company's operations into new markets in Bermuda and other jurisdictions," said Mr. French, adding that Island Press expected "to achieve significant revenues from these expenditures in future periods".

"The company is very proud of these results," added Mr. French. "Times of change and transition are challenging. The company has accepted the change in its business in Bermuda and has moved forward aggressively to grow into new markets. At the same time, the company has continued to be a major producer of commercial print in Bermuda, publishes the Bermuda Sun twice weekly and Preview Magazine."