Habib Construction Services Limited (‘‘the Company’’ or ‘‘HCS’’) was incorporated in 2009 and subsequently converted into a Public Limited (Unlisted) Company on July 15, 2016. The registered office of the Company is located at 15-A, G-1, Johar Town, near Doctor’s Hospital, Lahore.

HCS was incorporated by a group of experienced industry professionals. Within six months, the Company achieved the prestigious C-A (No Limit) license from the Pakistan Engineering Council, establishing its eligibility to undertake large-scale infrastructure projects. Since inception, HCS has built a strong reputation for timely project execution, cost efficiency, and dependable partnerships with both clients and vendors.

The Company undertakes diverse infrastructure development works across Pakistan, with an operational focus on highways, bridges, underpasses, flyovers, airports, and other civil engineering projects. Notable projects completed by the Company include the Lahore Ring Road, 2x2.5 MW Hydel Power Project at Chashma, Bahria Grand Hotel, civil works for Benazir Bhutto International Airport, Beijing Underpass in Lahore, Kalma Chowk Underpass and Flyover, Cavalry Ground Underpass, and the Metro Bus projects in Islamabad, Lahore, and Multan. These projects highlight HCS’s ability to execute large and technically demanding assignments, strengthening its position in Pakistan’s construction industry.

The ownership structure remains concentrated, with the two directors, Mr. Shahid Saleem and Mr. M. Shabbir, collectively holding around 52% of HCS. The remaining shares are distributed among the management team, bringing the total number of shareholders to 31. This structure provides employees with an ownership stake, fostering a greater sense of commitment and belonging across the organization.

The ownership structure has remained stable, with no significant changes in key management personnel since inception. The continued involvement of the directors and management shareholders supports alignment of interests and provides stability to the Company’s overall management and governance.

HCS benefits from the long-standing association of its shareholders and directors, each bringing extensive knowledge of the construction industry. Mr. Shahid Saleem, its co-founder and Chief Executive Officer, who brings over three decades of experience in Pakistan’s construction sector. Under his leadership, the Company has expanded significantly, delivering landmark projects that have reinforced its position as a trusted and leading infrastructure developer in Pakistan. Their collective experience, supported by an employee-shareholding structure, ensures continuity in leadership, informed decision-making, and a deep understanding of industry dynamics, which underpin the Company’s sustained growth and stability.

The sponsors of HCS possess adequate financial strength, with their ownership stake concentrated solely in the construction business. This focused exposure reduces the risk of financial diversion and ensures alignment with the Company’s long-term performance. Their support has been evident through personal guarantees in the past, while HCS’s equity participation in Malir Expressway Limited and Shajar Roads Limited reflects the sponsors’ capacity to engage in large-scale infrastructure projects.

The Company is overseen by a three-member Board of Directors, all of whom hold executive roles. This structure ensures continuity in leadership and alignment with management. However, there remains room for improvement in governance practices, particularly through the potential inclusion of independent directors to strengthen oversight and broaden strategic perspective.

The Board comprises qualified professionals with extensive experience in the construction industry. Mr. Saleem Shahid, Chief Executive Officer, brings over three decades of industry expertise. He is supported by Mr. Mohammad Shabir, an actuary by profession responsible for operational oversight, and Mr. Mohsin, a Fellow Chartered Accountant with more than 20 years of experience in financial management. Collectively, the Board’s diverse expertise provides strategic direction and supports the sustainable growth of the Company.

HCS has constituted two Board Committees – the Audit Committee and the Human Resource & Remuneration Committee– to ensure effective oversight of management policies and the Company’s operations. While attendance at Board and Committee meetings has been recorded, the documentation of formal minutes and independent oversight mechanisms present areas for further strengthening.

Malik Haroon Shahid Safder & Co., Chartered Accountants, the external auditors of the Company, have issued an unqualified opinion on the financial statements for the year ended June 30, 2025. The audit of FY26 is currently in progress.

The Company has an organizational structure with operations segregated into six departments: (i) Engineering, (ii) Information Technology, (iii) Contract Management, (iv) Surveyor, (v) Construction Management, and (vi) Finance. Clear lines of responsibility are defined for each department, ensuring effective functional oversight and accountability.

Mr. Shahid Saleem, Chief Executive Officer and one of the founding members of HCS, has over 31 years of diversified experience with leading private sector construction companies and provides strategic leadership to the organization. Supporting him, the senior management team comprises three Project Managers, each with more than 25 years of experience in the construction sector, including over a decade with HCS. They report directly to the CEO and are assisted by a technical team primarily consisting of planning engineers and site in-charges.

The Company does not have formal management committees in place; however, senior management convenes meetings on a need basis for discussions and decision-making. In addition, management regularly reviews MIS-based reports, which support informed and timely decisions.

HCS utilizes ERP software, customized for the construction industry by BE-Tech, to manage its operations. The system facilitates monitoring of receivables, payables, general ledger, accounts, and related functions.

The Company has internal control systems and procedures in place to support operational efficiency and reliability of reporting. Oversight is further reinforced by the dual role of employees as shareholders, which enhances accountability and alignment of interests with the Company’s long-term objectives.

Pakistan's construction sector is exhibiting a gradual recovery, with the Public Sector Development Programme (PSDP) remaining the major demand driver, followed by private investment. The proposed FY27 PSDP stands at PKR 1,126 billion, marking an increase of approximately 34.5% YoY over the revised FY26 allocation of PKR 837.2 billion. Under the proposed FY27 PSDP, Infrastructure has been allocated PKR 729.9 billion, representing approximately 65% of the total outlay, with Transport & Communication receiving the largest share at PKR 408.9 billion, followed by Water at PKR 140.4 billion and Energy at PKR 135.6 billion. Despite continued constraints on non-PSDP development spending due to tight fiscal policy and IMF commitments, prioritized infrastructure projects continue to offer selective opportunities for construction firms. Construction sector activity remained resilient, recording growth of 5.73% in FY26 compared with overall GDP growth of 3.7%, supported by private-sector activity and government spending, while cement demand, a key indicator of construction activity, rose approximately 10% YoY. Over the medium term, supported by urbanization, population growth, CPEC-related infrastructure development, improving demand for cement and steel, and gradual macroeconomic stabilization, the construction sector is expected to maintain a stable growth trajectory, although its performance will remain dependent on continued public infrastructure investment and easing fiscal and geopolitical pressures.

The Company is one of only ~156 firms (1.6% of over 10,000 registered with PEC) holding the prestigious “CA” category license, enabling participation in large-scale projects. While the sector is generally less formalized, HCS has adopted a corporate structure with employee-shareholders, though the Board remains predominantly sponsor-led. With experienced leadership and technical depth, HCS competes with major players such as FWO, Maaksons Engineering, and Habib Rafiq (Pvt) Limited, maintaining a strong reputation for timely and quality project execution.

HCS’s revenue is project-driven, generated through contracts executed independently as well as through joint ventures, primarily in the road and building sectors. The continuity of revenue is closely linked to the availability and execution of infrastructure projects in the Country. As of June 2026, the Company has a portfolio of 8 active projects with a total project cost of approximately PKR 66.3bln. Work completed till June 2026 stands at approximately 24% of total cost, leaving a healthy balance work pipeline to be executed. Major projects include the Development of Mass Transit System in Faisalabad (Orange Line), Infrastructure Development at NSIT Phase-1 (Packages II & III), and the Malir Expressway (EPC Contract). Other notable projects include the Construction of Punjab Local Government Academy at Lahore, Construction of Green Building for EMC, EPD, and Allied New Entities under PGDP, and Traffic Management Solution at Kashmir Chowk, Murree Road, Islamabad. For FY26, the Company recorded contract revenue of approximately PKR 17.6bln. Revenue growth and continuity are influenced by macroeconomic conditions, including inflation and interest rates, which have historically impacted construction activity and project execution. With the recent easing of the policy rate, sector activity is expected to revive, likely translating into increased project mobilization in the coming periods.

The Company's revenue profile is inherently cyclical, owing to its dependence on large, time-bound contracts. Revenue tends to build during the initial mobilization phase, is recognized as project milestones are achieved, which differ in timing and magnitude across projects, and gains renewed momentum as works approach their final stages. The topline is therefore governed by the timing of fresh awards relative to the completion of existing works. With projects positioned at disparate phases at any given point, margins naturally vary from year to year rather than remaining constant. During FY26, gross margins expanded to 16.1% (FY25: 11.3%), while net profit margins also recovered to 8.0%, compared to 3.9% in FY25.

Besides its core construction business, which benefits from a healthy project pipeline supporting revenue and financial sustainability, HCS holds strategic equity investments in unlisted public companies, providing additional income streams and diversification. The Company has a 7.02% equity stake in Shajar Roads Limited and a 6% stake in Malir Expressway Limited, both held for strategic purposes. These holdings complement the Company’s core operations, enhancing medium-term revenue visibility and supporting financial stability.

HCS manages its working capital primarily through customer receipts, supplemented by a small portion of short-term borrowings, which stood at PKR 151mln as of Jun-26 (Jun-25: PKR 143mln; Jun-24: PKR 133mln). The Company also maintains substantial exposure to non-funded facilities, such as performance guarantees, which are critical for project execution. The net working capital cycle during FY26 reflected the operating model of construction contractors, where timely certification and collection of receivables, together with supplier credit and customer advances, keep the cycle lean and limit reliance on funded debt.

During FY26, the Company's free cash flow from operations (FCFO) improved and remained positive, Consequently, coverage indicators strengthened over the period and remained at comfortable levels, supported by the Company's minimal finance cost burden. Internally generated cash flows are adequate to service its funded obligations. This provides the Company with ample cushion to absorb project-related fluctuations in cash flows.

HCS maintains a conservative capital structure with a low reliance on funded debt. As of Jun-26, Total Borrowings stood at PKR 151mln (Jun-25: PKR 146mln), comprising solely short-term running finance, while Shareholders' Equity stood at PKR 7,131mln (Jun-25: PKR 6,379mln). The leverage ratio remained minimal, reflecting the Company's strong equity base. The Company's exposure is predominantly non-funded, driven by bank guarantees issued against its contracting business, and this unfunded exposure remains well supported by the equity base.