November 20, 2019 (PPI-OT)

Following is the text of press release issued by The Pakistan Credit Rating Agency Limited (PACRA)

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The ratings reflect Pakistan Services Limited's (The Company) position in the hospitality industry as the market leader. Pakistan Services Limited witnessed growth in recent years (in line with Industry dynamics) amid improving security conditions and progression of CPEC with stable margins. However, ongoing geopolitical scenario, coupled with slowdown in domestic economic activity, has impacted the Company's revenues and profitability in FY19.

The Company has taken cost control measures to sustain margins. However pressure on the profitability persists as the Company booked a loss in FY19. The Company has modest leveraging and a large asset base. Relatively higher finance cost and low cashflows have resulted in weak coverages. This trend is expected to continue as cashflows may remain suppressed till new properties commence operations.

The management intends to dispose of some of its properties (real estate assets) to supplement its liquidity and meet sizeable upcoming debt repayments. The Company's association with Hashoo Group and sponsors demonstrated track record of support remains a key rating factor. The Company is undertaking several initiatives to improve its cashflows and relieve pressure on liquidity, including sale of certain properties. PACRA has placed the entity ratings of Pakistan Services Limited on 'Rating Watch - Developing'. The ratings will be reviewed based on materialization of these initiatives.

Ratings are dependent on effective implementation of envisaged strategy to improve cashflows while maintaining modest leveraging and strengthening coverages. Any significant delay in commencement of new projects and/or further deterioration in margins, leading to weak coverages and pressure on liquidity, will have a negative impact on ratings. Meanwhile, maintaining sufficient cushion for debt repayment remains critical.

For more information, contact:AnalystThe Pakistan Credit Rating Agency Limited (PACRA)Awami Complex, FB1, Usman Block New Garden Town,Lahore - PakistanTel: +9242 586 9504 -6Fax: +9242 583 0425Email: hammad.rashid@pacra.comWeb: www.pacra.com

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