FRONTKEN CORPORATION BERHAD
(651020-T)
ANNUAL REPORT 2014
13
MANAGEMENT DISCUSSION
AND ANALYSIS
(cont’d)
The rising costs undermine our bottom line unless the same is matched by higher margin jobs. The cost of
manpower, fluctuation of currency exchange and material, all equipment and machinery repair and maintenance
cost, transport and travel cost in combination would impact the way we do our business. Risks associated with
rising labour costs are valid to a certain extent. In our Company, keeping costs low remain our primary objective.
The staff retention and hiring of foreign labour continue to plague our industry as the demand for manpower is
high and staff is enticed by the better remuneration packages and benefits offered by competitors or commercial
companies while the government policy on foreign workers would impact our resources. This has increased labour
cost significantly. Replacement and recruitment for expansion in growth areas are real challenges. The strategies
to overcome these are to improve productivities and to relook at our service offerings. We may have to merge or
remove areas where we are weak, have low margins and have low growth potential. These risks are further managed
by getting the information at the soonest possible time from the end-user and paying particular attention to the
scope of work provided by the customer prior to any mobilisation. The division ensures that the scopes of work are
predetermined and approved by the clients, and if any deviations are identified at any point in the project, these are
quoted separately to capture the additional costs and billed back to the clients. Investment in modern and efficient
technology could ease the efficiency of our deliverables and reduce manpower.
Prospects
Our Group anticipates that our business units involved in the oil and gas Industry will contribute a significant share to
the Group revenue in year 2015, taking into consideration the positive contribution from the progressive revenue of
USD34.5 million from our ATB project. The investment in TTES allows us to reap the benefit of the new partnership
which will enable us to tap further into the existing client base of TTES in the oil and gas industry as it has a license
with Petronas for it to supply and provide services to Petronas.
The prospects for year 2015 will see the revenue stream from the oil and gas industry, power generation sector
and the manpower provision of certified technicians to areas around South East Asia for other projects where
support will be provided by the various business units under our Group. We continue to seek new opportunities
with potential appointment and expanding our work relationship with established customers. We are also working
on long term service agreements with our customers that are manufacturers of oil field equipment. We are prepared
for the anticipated major plants shutdown of our existing clients which will see some revenue flowing from that area.
Nevertheless, we are still cautious of year 2015 as the uncertainties of the domestic and overseas markets could
continue to run through the rest of the year. We remain positive of our business and would continue to look for
opportunities to grow.
