Middle East payment delays push project manager Hill International to Q4 loss

The project manager Hill International slipped to a fourth-quarter loss as it was hit with an increasing number of bad debts from its Middle East operations.

The US-based company said that revenue for the last three months of 2015 was US$189.8 million – up 11 per cent on the previous year.

However, it declared a net loss as a result of $5m of “unusual expenses” — the biggest of which was a $2.2m increase in bad debts “primarily related to accounts receivable in the Middle East”.

Its full-year results for 2015 show a net profit of $6.9m (2014: $6.2m loss) as its revenue increased by 12 per cent to $720.6m.

The company’s president and chief executive, David Richter described its full-year results as “a significant achievement”.

“Although challenges in the Middle East are likely to persist due to current low oil prices, we are still targeting a modest level of overall revenue growth this year,” he said. 

“Our continuing focus in 2016 will be to minimise our indirect costs and maximise our bottom-line profitability so that we can use our anticipated strong cash flow to reduce our outstanding debt.”

The company said that it expects consulting fee revenue to be in the range of $630m to $660m, which would represent flat growth at the lower end and a 5 per cent increase at the ­higher end.

Hill International’s current Middle East projects include the Riyadh Metro, the extension of King Abdulaziz Airport in Jeddah and the Jabal Omar development overlooking Mecca’s Grand Mosque in Saudi Arabia. In the UAE, it is overseeing a number of residential projects for Abu Dhabi National Oil Company (Adnoc), as well as infrastructure works at its Zirku island offshore project.

It has not yet given a breakdown of where it earned its revenue, but in 2014 47 per cent came from the Middle East.

Last August, it saw off a challenge from the New York-based activist fund Bulldog Investors, which wanted the company to hire an investment bank with a view to selling the business.

Hill International had rejected a previous $5.50 per share offer from the private equity fund DC Capital Partners in May. DC Capital Partners had wanted to combine the business with one of its previous acquisitions, Michael Baker International, and reduce its exposure to the Middle East.

Hill rejected the offer, and DC Capital Partners wrote to the company again in December proposing a second bid offering $4.75 per share, stating that “no tangible results” had been achieved. However, a cost optimisation programme announced that Hill’s management has said it will remove $25m of overheads from the business.

The company’s shares closed last Thursday evening at $3.07, giving it a market capitalisation of $158m.


Follow The National’s Business section on Twitter

Share This Post