After shakeup, DIRTT CEO search ‘almost complete’
DIRTT Environmental Solutions Ltd. is very close to appointing a new CEO, the final step in a major reorganization that has been ongoing since the start of this year, the company said Thursday.
The Calgary-based firm — which specializes in the design and manufacturing of prefabricated interior spaces — shocked investors in January when it pushed co-founder Mogens Smed from the CEO role and appointed an interim chief executive in his place. DIRTT also ousted its president, Scott Jenkins, and appointed an interim CFO.
A new, permanent CFO has since been appointed.
In a conference call with analysts Thursday, interim CEO Michael Goldstein said the search for a new, permanent chief executive is “almost complete.”
“We’re down to a very short list of strong candidates,” Goldstein said, adding the company expects to name its new CEO sometime in the third quarter.
The management shakeup at DIRTT is only part of what has been a turbulent few months at the company.
This spring, DIRTT faced a potential proxy battle with U.S.-based fund manager Iron Compass, but later reached a settlement that saw two of Iron Compass’ nominees named to DIRTT’s board.
The upheaval has unsettled many DIRTT investors, in part because Smed — who remains the company’s executive chair — has long been the public face of the company and has a dedicated following of employees and shareholders.
At the company’s annual general meeting in June, shareholders repeatedly interrupted the proceedings to grill the meeting ’s chairman about the changes.
On Thursday, DIRTT management pointed to the company’s second-quarter earnings as proof that the reorganization was a positive move. Revenue increased 15.2 per cent year-over-year in the quarter, while profits were up nearly 10 per cent to $32.8 million.
The company also cut its costs, though some of those savings were offset by costs incurred as a result of the reorganization and the proxy defence.
Analyst Neil Linsdell of Industrial Alliance Securities said while it’s clear DIRTT’s cost-cutting efforts are improving the company ’s bottom line, there is a lot of uncertainty among industry watchers about the long-term strategic plan for the company.
“I’m still very anxious to see the permanent CEO that comes out of this process, because that person is really going to set the tone more than anything else,” Linsdell said.
“We’re still in a wait and see on who’s going to come in, what’s the planning going to be and what’s going to come next in terms of execution.”
Darrin Hopkins — director and co-head of the private client capital markets division at Richardson GMP, whose clients own stock in the company — expressed frustration in June when Goldstein, in his interim CEO role, failed to attend the annual general meeting. He said he remains unsettled by the shakeup at DIRTT, going so far as to call it “bizarre.”
“I actually have more anxiety now, because they still don’t have a CEO,” Hopkins said, adding he does not believe the improved financial results this quarter can be credited to the company’s new management.
“My view is that this quarter and probably the next quarter are still a result of the former president and the former CEO. I think it probably takes a full year for the work they were doing to work its way through the system.”
DIRTT also reiterated Thursday that it is not currently in any discussions regarding the sale of the company.
On Aug. 1, in response to a Reuters report, DIRTT confirmed that its board of directors had established a special committee in response to an inbound non-binding transaction proposal received shortly after management changes were announced earlier this year.
The special committee retained independent financial and legal advisers to assist it with evaluating the proposal and to consider other strategic alternatives; however, it was determined that no strategic transaction should be pursued at the present time and the committee was disbanded.
DIRTT’s share price closed at $6.47 Thursday, down 3.72 per cent.