Hill International chief expects further shrinkage in Middle East operations in 2017

The head of US project management company Hill International has said it expects its business in the Middle East to decline further this year and is prepared to take appropriate cost-cutting measures.

Speaking on an investors’ call after revealing a net loss of US$18.8m for 2016, compared to a net profit of $6.9m in the prior year, the company’s chief executive David Richter said that although he believed the economic decline in the region’s construction industry caused by lower oil prices had now bottomed out, the company firm was expecting “our business in the Middle East to shrink this year”.

“We are planning for that and reacting to it,” he said.

The company, which is in the middle of selling a construction claims group advising on legal disputes to Bridgepoint Development Capital for $147m to strengthen its balance sheet, reported a 5.7 per cent drop in full-year revenue to $520.8m, and a 7.2 per cent decline in consulting fees to $434.1m. About 47.2 per cent of this came from Middle East operations – a drop from 52.6 per cent in the prior year.

The company revealed a net loss of $4.3m from continuing operations in the final quarter of the year, compared to a profit of $2.1m a year earlier. This was because its consulting fee revenue dropped by 18.1 per cent to $100.6m. Mr Richter said revenue from its Middle East operations fell by 34.1 per cent during the three-month period, down by $22.8m partly because of contract cancellations.

The company also incurred a bad debt loss of $6m during the final quarter of the year, bringing the total bad debt expense for 2016 up to $17.9m, up from $9m a year earlier.

“Obviously, a lot of these receivables – in fact the majority of them – relate to clients in the Middle East and the economic situation. It’s why we still have shrinkage in our business, revenue-wise, in the Middle East, and we expect another one again this year,” Mr Richter said.

“Low oil prices have caused a lot of difficulties with a lot of our clients – both public and private. In their construction activity, it’s affected their cash flow and cash availability, and it’s made the situation more difficult for us.”

Mr Richter said that for firms in the construction industry, “this is a difficult time to have a major presence in the Middle East”, but he added that the firm was continuing to win new work, which he expects to filter through to growth in its regional business once more in 2018.

The company expects the sale of the construction claims group to be completed by the end of this month, and that the consulting fee revenue for its continuing project management operations will be between 2 and 8 per cent lower in 2017.

Hill International employs 4,300 staff in 100 countries worldwide. The company has 15 offices in the Middle East and North Africa region.


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