FRONTLINE COVER FA 070606 CR2.indd

frontline technologies corporation ltd
annual report 2006 5
> joint message from the chairman
and president & chief executive officer
GROWTH
Dear Shareholders,
Financial year 2006 marked Frontline’s
third consecutive year in achieving
profitable, double-digit revenue growth,
gaining significant market share and
increasing market opportunity for our
products and services around the Asia
Pacific region.
We continued on our path to
strengthen our foundation of
growth and profitability through
a concentrated focus on our
Outsourcing and IT Services
businesses, which contributed to
better margins. We are pleased to
report that this focus, together with
the Group’s strategy of leveraging
on the advantage of cost arbitrage
via our offshore delivery capabilities
in India and China, led to a third
consecutive year-on-year growth in
revenue and net profit for the financial
year ended 31 March 2006.
Strong Financial Growth
Increased contributions across all sectors
of our business saw strong revenue
growth of 14.6%, from $147.5 million in
FY2005 to $169.1 million in FY2006.
Steve Ting
Executive Chairman & Founder
Frontline Technologies Corporation Limited
As the Group turned its focus on higher margin revenues,
gross margins also continued to improve, increasing
from 25.0% in FY2005 to 25.9% in FY2006. This resulted
in an impressive 41.5% increase in our net profit to $7.3
million, a $2.1 million increase from FY2005. Our gross
margin percentage and profit before tax also reached an
all-time high over four quarters of 25.9% and $11.1 million,
respectively.
Key Growth Drivers
In line with the Group’s call to action, the year’s growth
drivers were primarily in the Outsourcing and IT Consulting
and Services segments. In FY2006, revenue from the
provision of IT Consulting and Services increased by
123.1% to $16.9 million, and contributed 10.0% to total
revenue, while recurring revenue from IT Outsourcing
projects grew by a robust 39.7% to $61.5 million, and
contributed 36.4% to total revenue. Collectively, these
value-added related segments accounted for 46.4% of our
total revenue. IT Infrastructure sales accounted for 53.6%
of total revenue, compared to 65.0% in FY2005. Moving
forward, we expect IT Infrastructure revenue to further
decrease as a proportion of total revenue, as we focus on
higher margin service revenue.
India and China continue to be twin growth engines,
registering notable earnings in FY2006. India achieved
$62.8 million in revenue, contributing 37.2% of total
revenue, up 5.9% from FY2005. The Group’s overseas
subsidiaries continue to increase in proportion to overall
Group revenues, accounting for 52.9% of the total revenue.
Revenue from our operations in Singapore also increased
to $79.7 million, compared to $68.7 million in FY2005.