2. Review of Recent Performance
For the current year-to-date, PECD Group recorded revenue and loss before tax of RM376.2 million and RM1.1 billion respectively as compared to RM1.4 billion and losses of RM128.7 million respectively in the corresponding preceding period.

The poor performance for the year is mainly attributed to the combined effects of provisions on project claims and significantly lower revenue due to the completion of the Prince Court Hospital Project in November 2006, and the finalisation of several hotel and residential projects in Dubai during the year. Furthermore, the Sudan Marine Terminal Project also experienced major delays and project variations which resulted in losses for the Group.

PECD in its quest for growth had ventured into foreign markets. This led to the aggressive bidding activities in these foreign markets, namely Sudan and Dubai which in turn culminated in fixed price contracts on the abovementioned projects. Due to the nature of such fixed-price contracts, invariably and inevitably, PECD as contractors had to absorb the brunt of inadvertent design, specification and project management oversights, as well as the usual and expected variation orders. The Group’s position was further exacerbated by unanticipated escalations of raw material prices and difficult ‘on-the-ground’ conditions in Sudan and Dubai. Finally, the systemic weakening of the US dollar relative to the Ringgit, added to the Group’s woes. In conclusion, the financial results are indicative of the major difficulties in operating in foreign markets

In the meantime, PECD has submitted significant claims on cost-overruns and variations based on PECD’s understanding of its legal right and recourse in these jurisdictions. PECD is confident on its position with respect to these claims and its rights and recourses moving forward, despite the fact that such claims are being contested.

Because of the protracted nature of negotiations in settling these claims, PECD has decided to adopt a prudent stance and make provisions for the claims of its projects. Nonetheless, these prudential provisions will in no way undermine PECD’s confidence of its legal position and rights. PECD will execute its best endeavours in realizing the project claims, and be fully committed to maximize a positive resolution to these claims.

3. Future Prospects
With the Group’s experience in Dubai and Sudan, the Group has taken an introspective review of its performance for the past 3 years, in particular, its performance in overseas projects.

Therefore, the PECD Group will re-focus its attention on the local market and re-establish its reputation as the preferred engineering and construction firm in Malaysia. PECD intends to leverage on the significant experience that the Group has in undertaking the following industry sub-sectors in the construction and engineering industry;

Therefore, PECD Group will immediately consolidate on its strengths and rebuild its competency base and execution capability in the above sub-sectors, and be purely focused on Malaysia projects. This strategy is directly consistent with the Government’s development plans on the identified development corridors of; Iskandar Development Region, Northern Corridor, Eastern Corridor, SCORE (Sarawak) and Sabah Development Corridor with a combined potential development value of RM834 billion over a 20-year period. The Group’s aim is to actively participate in these future projects and have already begun focusing efforts to rebuild the Group’s order book in this regard.
Currently, the Group’s order book stands at RM123 million. This does not include an additional two new projects which are expected to be confirmed and launched in the Quarter 2 of 2008.

The Group is also currently undertaking a major debt restructuring exercise to improve its financial position and to strengthen its capacity and footing to bid for new projects. The proposed financial restructuring plan is currently being developed and as soon as it is finalized, PECD shall immediately notify creditors to initiate discussions.

The Board of PECD is confident that the restructuring plan will be successful. The Group will then emerge leaner and stronger, with a sound balance sheet to execute the future order book. In the meantime, the Group is continuing with its efforts to rationalize its own cost structure, improve cash flows and operational margins.

The above prospects of PECD is charted by the new management team, Board members and the new substantial shareholder of the Group which assumed its shareholding in PECD, at the end of the first quarter of 2007. This existing largest shareholder of the Group is committed to the debt restructuring exercise and the future of the Group. Their unwavering support was exemplified by their injection of cash during the PECD’s recent rights issuance in November 2007 of RM37.5 million and RM30 million of advances in April/May 2007. The subscription of the rights issue also demonstrated other shareholders’ support of the Group, manifesting in a cash injection of RM66.7 million additional to the injection by the largest shareholder. Given the significant financial support already given, the substantial shareholder is determined to not only ensure a successful restructuring but also a robust pipeline of projects to secure the future of the Group.

4. Obligations of PECD Berhad as an Affected Listed Issuer
In accordance with PN17, PECD is required to comply with the following requirements:-

5. Consequences of Non-Compliance
In the event PECD fails to comply with the obligation to regularise its condition, all of its listed securities shall be suspended from trading on the 5th market day after expiry of the Submission Timeframe or Implementation Timeframe, as the case may be, and de-listing procedures shall be commenced against PECD.

6. Status of Plan to Regularise Condition
The Company must now submit the Regularisation Plan as defined in paragraph 8.14C(3) of the Bursa LR to the relevant authorities for approval or, where the relevant authorities’ approvals are not required, obtain all other approvals necessary for the implementation of the Regularisation Plan within 8 months from the date of this announcement. The Board of Directors of PECD, together with the Company’s appointed specialist advisers, are currently deliberating on the possible plans to regularise PECD’s condition and shall announce the plan to Bursa upon finalisation.