Middle East pay delays hit Hill International, says chief, as it slides to loss
The project management firm Hill International has declared a net loss of US$6.9 million in the third quarter of 2016, citing lower revenues and payment delays from its Middle East operations.
The US-based project management company said consulting fee revenues for the quarter dropped by 19.3 per cent, or $11.4m, in the Middle East.
The company, which earned almost half of its total 2015 consulting fee revenues of $631m from the Middle East, said it faced one-off expenses of $10.6m during the third quarter this year. Some $8m of this was bad debt expense because of money owed from clients, whom it said “primarily” came from the Middle East. The remaining $2.6m were costs incurred in contesting a proxy challenge from the activist firm Bulldog Investors, which resulted in the company’s founder and chairman Irvin Richter stepping down from Hill’s board in September.
Total revenue for the quarter was $168m, 6.1 per cent lower than the same period last year. Revenue for the first nine months of 2016 is 2.1 per cent lower at $519.8m and it has swung to a net loss of $3.9m, compared with a profit of $8m for the same period in 2015.
Hill International said, based on its performance during the period, it has revised its earnings and revenues targets for the full year. It expects consulting fees to be between $600m and $610m, or about 3 to 5 per cent lower than last year.
“We saw challenges in the third quarter in our Middle East project management operation, with respect to both sales of new work and cash flow on existing work, as low oil prices have continued to have a major impact on construction activity there,” said David Richter, the son of the founder and the chief executive of Hill International.
“However, we see strong performance continuing for both the US project management operation and the construction claims operation globally and we expect to return to revenue growth company-wide in 2017 as oil prices recover.”
Hill International is currently working on a number of major infrastructure developments in the region. It is undertaking project management roles at the expansion of Muscat International Airport, the new Riyadh Metro and the Doha Metro.
Many firms in the construction industry have suffered financially as a result of delayed payments in the Middle East – most notably in Saudi Arabia, where the government halted payments to many companies in the sector in late 2015 in response to tightening budgets owing to lower oil prices. However, last week, the government’s economic body, the council of economic and development affairs said it would begin making delayed payments to the private sector by mid-December.
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Updated: November 15, 2016 04:00 AM