UK computer services company Xansa - which employs around 300 people in the West Midlands - yesterday posted a five per cent fall in full-year revenue, blaming the cost of moving work to its Indian operations.
However, the company said it expects growth to accelerate over the next year amid rising profit margins.
The Reading headquartered company, which employs more than half of its staff in India, where salaries for skilled graduates are much lower, said revenue for the year to April 30 fell to £ 357.3 million from £376.4 million a year earlier.
Underlying profit before tax and exceptional items jumped six per cent to £13.3 million from £12.5 million, while underlying diluted earnings per share rose to 4.29 pence from 3.79 pence.
"Margins are up as expected year-on-year and we have seen a return to revenue growth in the second half of the year," Xansa chief executive Alistair Cox said.
"This important turning point means that the volume of new work we are now under-taking outweighs the dilutive effect of moving previously onshore delivered work to our offshore delivery centres in India."
Like many computer services companies and consultancies Xansa is expanding its Indian operations to meet growing demand from large Western companies for cheap information technology and administrative services.
Lower Indian wage costs lets Xansa charge customers less but make a bigger profit on the contract.
Xansa, which runs computer systems and develops technology for companies including Barclays and Boots Group said it had increased its Indian workforce by 39 per cent over the past year to 3,920 people, representing more than half of its total workforce.
It expected the information technology services market to continue to grow in the single digits over the next year, but it anticipates its revenues to grow faster than the market.
Xansa said second-half revenues were boosted by new client wins including Renault Formula 1, and also by contract renewals.
Xansa also saw strong growth in its public sector business, which increased revenues by 48 per cent to £66.8 million. A joint venture with National Health Service Trusts to supply back-office financial and accounting services also showed good progress.
Xansa said it now supplies more than 100 Trusts, with 16 more "lined up", although the service made a loss in the last financial year.
Meanwhile, support services firm Serco said it had enjoyed a strong six months and was trading in line with expectations.
"We continue to address significant opportunities across our markets. Our selective approach to bidding and portfolio management leaves us confident of delivering double-digit growth and increasing margins going forward," the company said.
Serco, which operates London's Docklands Light Railway, said it had won contracts worth £1 billion so far this year.
Last year the group acquired Birmingham technology firm ITNet in a deal valued at £235 million.