Descon Engineering Limited ("DEL" or "the Company") is an unquoted public limited company that was initially incorporated as a private limited company in 1977. In 1997, the Company transitioned into an unquoted public company. DEL specializes in the construction and development of a wide range of infrastructure projects throughout Pakistan. With decades of experience, the Company has established itself as a key player in the engineering and construction sector, focusing on delivering large-scale, complex projects that contribute to the country’s infrastructure development.

Nearly forty-eight years ago, Descon Engineering established its office in Lahore, and since then, it has expanded its global presence across the Middle East and North Africa. The Company now operates in the United Arab Emirates, Saudi Arabia, Oman, Qatar, as well as Kuwait, Iraq, and Egypt. One of the key strengths of Descon Engineering is its highly experienced project team, which is equipped with essential certifications, including ISO, OHSAS, and ASME. In addition to these certifications, the Company adheres to strict internal Quality Assurance (QA), Quality Control (QC), and Health, Safety, and Environment (HSE) standards, ensuring the successful delivery of complex projects in diverse and challenging environments.

The Company is well-regarded for its ability to deliver tailored solutions for projects across key sectors, including energy, infrastructure, and the process industry. DEL offers a comprehensive range of services, covering every stage of a project lifecycle. This includes engineering design, procurement, manufacturing, construction, commissioning, and ongoing maintenance. With a strong track record of executing complex, large-scale projects, DEL has built a reputation for excellence in providing innovative, client-specific solutions in diverse and demanding markets.

DEL was founded by Mr. Abdul Razak Dawood in 1977 under the name Design Engineering and Construction Services (Descon). In terms of ownership, 99.9% of the Company’s shares are held by DEL Projects (Private) Limited. DEL Projects (Private) Limited is owned by Mr. Abdul Razak Dawood, along with his two sons, Mr. Taimur Dawood (the elder son) and Mr. Faisal Dawood (the younger son), as well as other family members. This family-led ownership structure has played a key role in the Company's long-term vision and success.

The Company benefits from a highly experienced management team that brings valuable expertise and insight into efficiently managing its business operations. This leadership has been instrumental in maintaining Descon Engineering’s position as one of the most reliable and trusted engineering and contracting companies in Pakistan. By leveraging their industry knowledge and experience, the management team ensures the Company’s continued success and strong reputation in the market.

Originally founded in Pakistan, the Descon Group has significantly expanded its operations beyond its home country, establishing a strong presence in key international markets, including Abu Dhabi, Saudi Arabia, Qatar, Oman, and Egypt. The Group has developed deep expertise and experience in a diverse range of sectors, including Oil & Gas, Cement, Power, Hydropower, Dams, Barrages, and Canals, Fertilizer, Renewable Energy, Sugar, as well as the Industrial, Chemical, and Petrochemical industries. Through its unwavering commitment to innovation, quality, and operational excellence, Descon has built a strong reputation for delivering large-scale, complex engineering solutions that adhere to the highest industry standards. The Group’s diverse portfolio and regional expansion highlight its strategic growth approach and ability to adapt to the dynamic needs of various industries. With a strong emphasis on sustainability and technology, Descon continues to play a pivotal role in driving development across the sectors it serves, both in Pakistan and internationally.

The sponsors’ diverse investments and their strategic focus on expansion have contributed to DEL’s financial stability and growth. With a solid backing from the sponsors, DEL has the resources and financial resilience to successfully navigate challenges and continue executing large-scale projects both domestically and internationally. This strong financial foundation enables the Company to maintain its competitive edge, invest in innovation, and pursue sustainable growth across various industries.

The overall governance of DEL is overseen by a seven-member board of directors, with three members coming from the sponsoring family, including the Chairman, Mr. Taimur Dawood, and the Vice Chairman, Mr. Faisal Dawood. The remaining three directors are non-executive members who play a crucial role in ensuring the effectiveness and independence of the board structure. The non-executive directors contribute valuable perspectives and help maintain strong oversight, ensuring that the Company’s strategies align with best practices in corporate governance and delivering long-term value to stakeholders.

The Board of Directors of DEL is chaired by Mr. Taimur Dawood, representing the Abdul Razak Dawood (ARD) family. In addition to his role as Chairman of DEL, Mr. Taimur also served as Chairman of other key Descon entities, including DEL Engineering Domestic (Pvt.) Limited, Descon Oxychem Limited, and Descon Power Solutions (Pvt.) Limited. He is also the Managing Director of GrayMackenzie Engineering Services BV, based in the Netherlands. Mr. Taimur Dawood holds a Bachelor’s degree in Industrial Engineering from Purdue University, USA, and an MBA from Columbia University, New York, USA. Prior to joining Descon, he worked as an equity analyst at Graham Partners, a technology-focused hedge fund, and as a technology analyst at UBS. With over 25 years of experience in product marketing, project finance, strategy development and execution, turnaround management, and mergers and acquisitions, Mr. Taimur brings a wealth of expertise to the board. From 2001 to 2011, he successfully led Descon Chemicals Limited as its Chief Executive Officer (CEO).

DEL is committed to upholding strong corporate governance principles. To enhance governance and ensure effective oversight, the Board has established four key committees: i) Human Resource and Remuneration, ii) Audit, iii) Whistle Blowing Steering Committee, and iv) Corporate Risk Management Committee. Each committee is chaired by a Board member and consists of a balanced mix of executive and non-executive members. The creation of these committees ensures thorough oversight and reinforces the Board's governance functions. To maintain effective monitoring and control, the Board conducts monthly meetings with management, facilitated by designated Board members. Prior to these meetings, Management Information System (MIS) reports are provided to all Board members, enabling detailed discussions on key performance areas. This process plays a crucial role in enhancing the Board’s effectiveness in shaping the Company’s strategic direction and ensuring adherence to best governance practices.

Crowe – Hussain Chaudhury & Co., Chartered Accountants, is the external auditor of the Company. The auditor gave an unqualified opinion on the Company’s financial statements for the year ended June 30, 2024.

DEL has established a well-structured organizational framework, designed to streamline operations and enhance efficiency across its various functions. The Company is organized into distinct divisions and departments, eachspecializing in key areas critical to the business. These include Finance, Strategy, Information Systems, Internal Audit, Human Resources, Corporate Communication, Legal, and Public Affairs. Each department is led by a department head, who is responsible for overseeing the performance and strategic direction of their respective functions. These department heads report directly to the CEO, ensuring that the leadership team is well-informedand aligned with the Company’s overall goals and objectives. The CEO, in turn, provides updates and reports to the Board, ensuring effective governance and oversight.

Mr. Taimur Saeed is the CEO of DEL. He has had a long and distinguished career within the Company, having previously served as President of the Manufacturing Division and President of the Marketing & Sales department. Mr. Taimur became affiliated with Descon in 2010, and his most recent role prior to becoming CEO was as the Chief Executive Officer of Descon Oxychem Limited. The senior management team at Descon Engineering is highly experienced, with each member bringing over 25 years of industry expertise. This wealth of experience has earned them recognition and respect across the industry, ensuring that the leadership team is well-equipped to guide the Company through complex challenges and drive its continued success.

DEL has successfully acquired and executed hundreds of projects for prominent blue-chip clients both in Pakistan and internationally, solidifying its reputation as a highly effective management team. The Company possesses all the necessary capabilities to deliver turnkey projects, allowing it to provide comprehensive EPCC (Engineering, Procurement, Construction, and Commissioning) services. This integrated approach enables DEL to offer tailored solutions to international clients, ensuring the successful completion of complex and large-scale projects across various sectors.

DEL has developed a strong IT infrastructure that facilitates seamless communication and data sharing across its headquarters and multiple local and international sites. This connectivity is supported by both 'Data Link Cloud' and 'Internet Cloud' technologies. To streamline operations and enhance efficiency, the Company implemented the SAP ERP (EC&O - Engineering, Construction, and Operations) system in 2016. This system was deployed with the collaboration of Abacus – Pakistan and SAP Germany, enabling DEL to manage its complex operations, track projects in real time, and integrate various business functions across the organization.

DEL adheres to the highest standards of Quality, Health, Safety, and Environmental (QHSE) practices across its construction projects. The Company ensures full compliance with applicable laws and relevant industry standards, demonstrating its commitment to maintaining a safe and environmentally responsible work environment. DEL is also certified with several internationally recognized quality standards, including ISO 9001 (Quality Management), ISO 14001 (Environmental Management), and OHSAS 18001-2007 (Occupational Health and Safety Management). These certifications reflect the Company’s dedication to upholding excellence in quality, safety, and environmental practices in all its operations.

The Public Sector Development Program (PSDP) for FY24 experienced a year-on-year (YoY) increase of approximately 30.7%, reaching PKR 950 billion. A specific allocation has been made for the Construction and Transport sectors under both Current and Development Expenditure on the Revenue Account. The total allocation for these sectors stands at PKR 40.5 billion for Current Expenditure and PKR 39.1 billion for Development Expenditure. Compared to the previous fiscal year (SPLY), these allocations have seen slight adjustments, with the figures for Construction and Transport last year being PKR 30.2 billion and PKR 55.2 billion, respectively. In addition to infrastructure projects, there is a growing demand for hydel-based power plants aimed at improving the energy mix, with funding being provided by multilateral agencies.

Among the over 10,000 firms registered with the Pakistan Engineering Council (PEC) as Constructors/Operators, only approximately 100 companies—around 1%—hold the prestigious CA category (no limit) license. Descon Engineering Limited is one of these select few firms, granting it a significant advantage by placing it on the pre-qualifying list of approved constructors. This esteemed license reflects the Company's exceptional capabilities and eligibility to undertake large-scale and complex projects, further enhancing its reputation in the industry.

In FY24, the Company achieved a revenue growth of around 27%, primarily due to the successful execution of projects from its pipeline, as well as the initiation of new construction projects. This resulted in a significant increase in revenue, which reached PKR 35,222 million, up from PKR 27,690 million in FY23. The growth reflects the Company’s ability to effectively deliver on existing contracts and secure new opportunities in the construction sector. Looking ahead, the Company’s revenue for the first quarter of FY25 was PKR 8,869 million, indicating a strong start to the new fiscal year and a continued upward trajectory.

In light of the challenging economic environment and the highly competitive nature of the industry, the Company successfully managed to increase its gross profit (GP) margin to 11.4% as of the end of June 2024, despite a rise in cost structures. This represents an improvement over the previous year (end-June 2023: 8.5%; end-June 2022: 12.5%). Additionally, the Company’s net profit (NP) margin improved to 2.7%, up from a negative 0.2% in FY23, driven by a higher revenue contribution. For the first quarter of FY25, the Company’s GP margin continued to show improvement, reaching 12.9%, while the NP margin slightly decreased to 1.8%. The industry remains highly fragmented, with numerous players competing for similar products and services. Despite this, the Company has positioned itself as a leading engineering and construction firm by consistently meeting customer expectations, maintaining a strong focus on safety and quality, and fostering a culture of embracing challenges. This approach has been integral to driving sustainable growth.

DEL’s management envisages long term sustainable outlook in the market by planning to move to the capital market instead of the money market to meet upcoming financing needs. The healthy backlog business ensures sustainable and long-term growth. Management continues to progressing up the value chain to add value for the customers aiming to look at the challenges that arise as opportunities to achieve continuous improvement.

The Company’s working capital is primarily supported by short-term borrowings and internal cash flow. As of the first quarter of FY25, Descon Engineering’s net working capital days increased to 28 days, compared to 26 days in FY24 (FY23: 30 days), primarily due to a reduction in trade receivables. Descon Engineering secures working capital financing for each project, tailored to the specific turnaround requirements of the respective projects. Typically, the Company arranges working capital financing for a four-month period, reflecting the lead time needed to initiate project processing.   The Company’s short-term borrowings stood at PKR 6,609 million in 1QFY25, down from PKR 7,028 million in FY24 (FY23: PKR 4,806 million).

During FY24, DEL experienced a notable improvement in its free cash flows from operations (FCFO), reaching PKR 4,372 million, up from PKR 2,639 million in FY23 and PKR 2,242 million in FY22. This positive performance was driven by higher profits. As a result, the debt servicing coverage ratio (FCFO/Finance Cost) improved to 2.8x in FY24, compared to 2.0x in FY23, despite an increase in finance costs, which rose to PKR 1,750 million from PKR 1,527 million in FY23. In the first quarter of FY25, the Company reported FCFO of PKR 938 million, with the coverage ratio slightly decreasing to 2.2x during the same period, primarily due to a rise in finance costs.

DEL has effectively managed its capital structure. The Company’s total debt increased to PKR 8,422 million in FY24, up from PKR 6,056 million in FY23, primarily due to a rise in short-term borrowings, which increased to PKR 7,028 million from PKR 4,806 million in the previous year. However, the Company’s total debt slightly decreased to PKR 8,306 million in the first quarter of FY25, attributed to a reduction in short-term borrowings to PKR 6,609 million during the same period. As a result, the Company’s leverage ratio as of the end of 1QFY25 stood at 32%, up from 29.5% in FY23 (FY24: 32.4%).