The construction management company Hill International reported that net profit in its second quarter shrank by two-thirds because of a decline in work from the Middle East.
The US-based company, which is set for a showdown with activist shareholder Bulldog Investors at its annual general meeting next week, reported a 66.1 per cent decline in second-half profit to US$1.5 million (Dh5.5m), compared with $4.4m in the same period a year earlier.
Revenue dropped by 3.3 per cent to $175.6m, which thecompany blamed on a decline in fees from its project management division in the Middle East, which suffered an $8.6m (14.1 per cent) drop in consulting fees.
Net profit for the first six months of the year was down 42.3 per cent to $2.9m on flat revenue of $351.8m.
The company’s president and chief executive, David Richter, blamed “the impact that the collapse in oil prices had on new work in our Middle East project management operation”. He said that he expected this dip to be temporary, pointing to $90m of new project wins both in the Middle East and the US so far this year. The company’s backlog increased by almost 10 per cent to $949m.
New Jersey-based Bulldog Investors has tabled a motion to remove three of Hill International’s directors, including David Richter’s father, Irvin, who is chairman of its board. The motion will be voted on by shareholders at Thursday’s annual meeting.
Bulldog has argued that Hill International’s recent financial performance has been poor and that the company’s governance has been weak, which has resulted in excessive executive pay. It has also been critical of management’s decision to turn down two offers for the company from private equity firm DC Capital Partners — one for $5.50 per share in December, and another for $4.75 per share in May. The company’s shares closed on Wednesday at $4.20 per share.
DC Capital’s plan for Hill International involves taking the company private, merging it with its portfolio company Michael Baker International and reducing its exposure to the Middle East. Hill earned 48 per cent of its 2015 revenue of $631m from the region.
In his correspondence with shareholders ahead of the annual meeting, David Richter has insisted that the three directors whose positions are under threat – Irvin Richter, Steve Kramer and Gary Mazzucco – are “absolutely critical” to its success. He also defended its financial position, stating that it has taken $21m of costs out of the business and performed better than many rivals in tough market conditions.
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