According to i-FM.net review, 2016 was a very busy and even dramatic year for the industry. Incentive FM Group appears twice in the review, recognising our ambitious acquisitions and developments in both the M&E and Window Cleaning sectors.
For Industry representative bodies the tale is one of collapse, change, instability and uncertainty. For some of the larger players and Mitie in particular it’s tale of woes are recorded perhaps as a warning to all of us about how we manage our businesses. Jeremy Waud – Incentive FM Group Chairman
It’s been a busy year, with the usual mix of contract wins, senior appointments and new ventures. A typical year in UK FM. But it’s also been a period of uncertainty, with the effects of previous events lingering, plus some new ones coming through.
Notable amongst the latter was the Brexit referendum. That uncertainty was apparent in some quarters of the market, and it seems inevitable that there will be more to follow. Still, FM as a whole continues to prove itself resilient, creative and above all an interesting place to be.
One of the most interesting, and perhaps instructive, companies to watch in the whole outsourcing marketplace over the past few years has been Serco. On most measures, the company has been a considerable success; but along with that success have come some problems – including a loss of focus on a coherent strategy and standing as a target for various issues and criticisms. One of Serco’s growth plans some years ago had been a big push into business process outsourcing. But when its fortunes turned, that looked like a big mistake – and the start of the year saw confirmation that it had finally sold that part of the group. The disposal was a key part of its wholesale makeover – which, though it is still very much underway, seems to be working.
On the flipside of that, acquisition remains a key part of growth strategy for many in FM outsourcing. January also saw the news that Servest had bought Accuro Catering, a national operator specialising in the education and healthcare sectors. Servest called Accuro ‘a good strategic fit’ that would lend support to its expansion in the catering services area.
January also brought news of the not wholly surprising collapse of the Building Futures Group. BFG was the product of a merger in 2013 which brought together Asset Skills, the sector skills council for facilities management, cleaning, property, housing and parking – an unlikely blend in itself – with the Facilities Management Association and the Cleaning & Support Services Association. In fact, it turned out in January 2015 that the CSSA had never quite finalised its part of the merger when it declared that it was quitting the group. In any case, BFG had never seemed to find sufficient purpose to ensure a long life.
In other break-up news, it emerged that Germany’s Bilfinger Group had appointed advisors following receipt of offers for the acquisition of its building, facilities services and real estate divisions. The group, which had been struggling with market conditions for some time, said its executive board would review the offers, focusing on the best interest of the company and its shareholders. That, of course, led to considerable speculation about who was interested and what might happen next.
Another big change in the status quo saw Royal Mail confirm that it was preparing to bring Romec, its facilities and maintenance operations service provider, in-house after running it as a joint venture business for nearly 15 years. Engineering group Hayden first took a 49% stake in the business in 2002, creating the jv. That stake was subsequently transferred as Hayden moved into Balfour Beatty, with the ownership moving again to Cofely (now ENGIE) with its acquisition of Balfour Beatty Workplace in 2013. It seemed ENGIE wasn’t interested in that particular part of the status quo.
If technology is one of the great themes set to shape the future of FM, it often seems that energy is another. The first is about how businesses do things; the second is something they can buy into – and many service providers have moved to take advantage of the opportunities. Early in the year it was BAM with the formation of BAM Energy Limited, a new company that would draw on group expertise to offer design, installation, management and maintenance services, as well as support with finance. That was the second such move in a week. The Robertson Group had earlier announced the appointment of its first Energy Director, who will be running a new energy services business operating within Robertson Facilities Management.
On the institutes and associations side of the industry, the British Institute of Facilities Management confirmed the appointment of Ray Perry as its new Chief Executive Officer. BIFM had revealed late in 2015 that then-CEO James Sutton would be stepping down over the summer. Perry, at that point Chief Executive of the National Pawnbrokers Association, was due to take on his new role in time for the institute’s pre-summer AGM.
Returning to the busy mid-market theme, this month also saw the completion of an MBO at the £20m Premier Support Services group. The Birmingham-based business specialises in cleaning, security, and property and grounds maintenance, and that move was part of a plan to grow both organically and through acquisitions with a view to double pre-tax earnings over the next four years.
Energy is a recurring theme in FM. It cropped up in March as ENGIE announced the acquisition of digital energy management specialist C3 Resources. ENGIE said the deal supported its strategy to deliver innovation in customer-led solutions using technology. Its plan was to use C3’s platform to enhance the way it analyses data in order to better serve energy supply and service customers across various sectors. That platform is ideal for managing large volumes of energy and environmental data and tracking actions through to resolution in compliance with ISO 50001, ENGIE said.
In the same month, CIBSE had had enough, slamming government for its lack of consistent energy policymaking and disjointed attempts at delivery. The Chartered Institution of Building Services Engineers in a submission to the House of Commons Energy and Climate Change Committee argued that the UK’s lack of progress on the energy efficiency of its buildings was down to the lack of a long-term plan from successive governments and the failure to treat energy efficiency as a national infrastructure priority. Sara Kassam, Head of Sustainability at CIBSE, said: “In their current form, national energy policies are hampering efforts to make buildings more efficient. By giving energy efficiency the national attention and funding that it deserves, we can tackle the UK’s energy trilemma of reducing carbon emissions, enhancing energy security and ensuring that energy is affordable and accessible.”
More acquisition news. The Dublin-based Noonan Group extended its security operations with the acquisition of The Shield Guarding Company. Shield, which reported a £3.6m loss on a £59m turnover for the year to end March 2015, had been the subject of rumours in the industry for some time. Noonan has grown significantly in recent years and was already operating throughout Ireland and the UK. It said the buy would extend its security operations significantly.
And more institute and association news – with the announcement of a collaboration between the International Facility Management Association and the Royal Institution of Chartered Surveyors. By joining strategic resources, IFMA and RICS said they intended to create ‘an unprecedented level of industry support’ to meet growing demands from the 25m FM practitioners around the world, as well as launch ‘a single and compelling career pathway’ into the FM profession. “As global thought leaders dedicated to the professionals who support the built environment, IFMA and RICS identified a unique opportunity to team up and fortify existing resources to enhance the outstanding level of service they already provide to professionals and built environment industry,” said IFMA President and CEO Tony Keane.
The FM Business Confidence Monitor, produced by BIFM in partnership with i-FM and Barclays, has established its place in the industry as a test of business sentiment, both at the moment and projected out over the remainder of the year. 2016’s survey found that, though there were plenty of reasons to be cautious, the general mood in the UK facilities management sector was one of optimism. Despite concerns about political and economic factors affecting the wider business climate, almost two-thirds of participants said they were positive or very positive about the environment. That was down somewhat on the previous year’s results, but nevertheless indicated considerable confidence within the industry for its immediate prospects.
As spring approached the facilities services business Temco UK announced that it had bought itself out of the wider group. That followed the acquisition of the group at the beginning of the year of the ambitious French services business Atalian. The £5m Temco UK said the deal was ‘amicable’ and would lead to benefits for both parties.
A couple of weeks later Servest and Atalian revealed that they were launching a 50/50 owned joint venture business, operating as Atalian Servest Ltd, to offer integrated FM services to both existing and new customers across national boundaries. Commenting on the motivation for the deal, Rob Legge, Servest Group CEO UK and Europe, said: “The world is becoming a smaller place and we have seen that businesses are now looking for unified solutions that bring their communities together. We wanted to offer our customers a pan-European solution with a partner that operates with the same cultural and business philosophies as adopted by Servest in the UK.”
Also in the news this month was Carillion with hard evidence that sustainability pays. That came in the form of its annual Sustainability Report, which for the first time, included a financial analysis. The company was able to show that its sustainability strategy and the associated actions and behaviours had made a clear contribution to its profit of £33.8m. Commenting on the strategy overall, Chief Executive Richard Howson said: “Our sustainability leadership makes us a better business to invest in and work with. Just as importantly, it helps us to attract, develop and retain talented, loyal people.”
And on the subject of business success and getting the best from talented people, May’s BIFM conference saw the launch of The Stoddart Review, an ambitious programme aiming to bring together business leaders and workplace experts to assess why organisations continue to see the workplace as a cost rather than an asset that they can use to unlock latent value in their workforce. Launched in memory of Chris Stoddart, the backers of the initiative intend it to serve as a legacy for a man that helped shape the FM profession.
The Incentive FM Group announced that it had acquired ACE Environmental Engineering, an HVAC design, installation and maintenance specialist. The deal was seen as complementing Incentive’s earlier buy of Comserve, a mechanical and electrical maintenance and installation services company. The group said its intention was to create a strong national M&E service offering with a multi-skilled mobile engineering workforce.
In a different segment of the FM world, workplace technology specialist Condeco announced the acquisition of myVRM, a New York-based software company with workflow automation expertise in video collaboration, content sharing, unified communications, virtual meetings and analytics. “This move will provide the scale to underpin our continued global expansion, which has seen us achieve over 40% growth in 2015. Adding scale to our already global business will help as we respond to the appetite for workplace utilisation tools – demand which is increasing exponentially as companies strive for efficiency, competitiveness and productivity,” said Condeco CEO Paul Statham.
In other acquisition news, property services group JLL confirmed that it was buy property maintenance provider Integral. JLL said the acquisition would strengthen its ability to self-perform maintenance services for clients across the EMEA region, as well as add an engineering centre of excellence in the UK. The deal valued Integral at about £230m.
Back in the mid-market segment again, in mid-June Kingdom announced the acquisition of Ocean. A £20m business, Ocean specialises in cleaning services, complemented with a variety of other offers. Its acquisition moved the ambitious Kingdom, best known for its cleaning and security operations, to an estimated annual turnover of £105m.
On the negative side of the news scene, it also emerged in June that Warwickshire-based hard services specialist EIC had in the administrators, surprising many in the industry as well as most of its employees. Formerly an £80m business, the company operated from seven offices around the country specialising in M&E design, installation and maintenance services, though its offer had broadened in recent years – including a recent push in the direction of more mainstream FM. The explanation offered for the failure was ‘poor recent trading performance, underpinned by an ever increasing competitive market’.
Summer brought the news that Kier was doing a bit of business restructuring to launch a Workplace Services division. Building on its existing FM capabilities, and combining the business services expertise acquired in its Mouchel buy, it had devised a new offer focusing on the physical workplace, workplace services and transformation programmes. Managing Director Steve Davies said: “Bringing our successful facilities management and business services units together means we can offer clients end-to-end business solutions, which leaves them free to concentrate on their core business.”
Incentive FM Group was back in the news with another acquisition, this time of ARL Support Services, a specialist window cleaning company. That was its second move in this service area: it had bought window cleaner SWC earlier in the year.
More summertime buying. Bellrock confirmed that it had acquired two firms with the goal of expanding its portfolio of property consultancy services into new markets. Added to the portfolio were Stanley Hicks Ltd, a 200-year-old chartered surveying business based in the City of London, and Property Solutions (UK) Ltd, a service charge specialist for the office and retail sectors, based in Bristol. Bellrock would follow this in September with the news that it had acquired Concerto Support Services, an FM, asset management and project management software business.
In a small echo of December’s news that the landmark Southwest One contract had no future, the Department for Work and Pensions announced plans for the replacement of its PRIME contract. That 20-year deal had been put in place at a time when it looked like big deals combining serviced accommodation with facilities management services might be the future, at least for big organisations. PRIME seems to have been a success, but DWP was confident it was time for a change in any case.
The close of summer brought the news that the Bilfinger group had completed the sale of its property and FM division, a prospect that first hit the headlines in January. The buyer was investment group EQT, which some years ago was also a major investor in the ISS group. The sale price of €1.2bn was built on a complex deal that gave Bilfinger an immediate cash injection while holding back a substantial proportion for payment later, on the theory that the previous owner could share in the value achieved by the new owner when the business was subsequently sold on.
Fittingly for back-to-school month, new student experience survey findings from the Association of University Directors of Estates showed that facilities remain a key factor for nearly two-thirds of students when choosing a university. For the third year running, study facilities, including IT stations and libraries, came out on top, with only 24% of students placing importance on entertainment and social buildings when it comes to deciding their choice of higher education institution. AUDE Chair Trevor Humphreys commented: “Effective estate management is key to ensuring higher education institutions deliver the best possible student experience, both academically and socially, so it’s encouraging to know that despite many sector challenges, a very high level of students feel their university offers clean and well maintained buildings.”
A little later in the month, CoreNet Global, the CRE professionals group, confirmed what we all know anyway – the speed of technological development is dramatically reshaping the way that corporations manage and use their real estate. Or if it isn’t happening already, it surely must and probably within a matter of just a few years. Group Chair Kate Langan observed: “The ramifications are quite dramatic: these shifts will impact everything from traffic patterns, the environment and energy, to daily living and the overall quality of life.” Technology reshaping the world is simply a fact of life.
Insights into a different kind of market force followed with the release of a trading update from Mitie that warned of ‘significantly’ lower operating profit for the current year than previously forecast. The company said its was feeling the effects of economic pressures, specifically lower UK growth rates, changes to labour legislation, further public sector budget constraints and uncertainty both pre and post the EU referendum. Capita was in the news only days later with a similar warning on its performance. Outsourcing markets in particular like confidence, consistency and clarity. Any dent in that can lead to client unease, delays in decision making and holes in the financial strategy.
RICS and IFMA were back in the news with the announcement that they were working together to develop a unified career map in order to align training courses, qualification requirements and certification levels. IFMA said the map would deliver ‘unprecedented clarity and internationally recognised authority on the required skills, training and experience necessary for all professional stages and goals’ within FM. It was being positioned as one of many resources coming out of the collaboration between the two bodies, unveiled in the spring.
Mitie was also back in the news, with the announcement that after 10 years as Chief Executive, Ruby McGregor-Smith was to leave the company in December. The process of finding her replacement started late last year when she made her plans known to Mitie’s board and was already complete, the group said. Phil Bentley, ex-Group CEO at Cable and Wireless Communications, was set to take the top job.
BIFM also hit the headlines in October, first with the news that it was calling a halt to its long-standing relationship with Quadrilect, its partner in BIFM Training. That joint agreement would come to an end in September 2017, the Institute said. It went on to explain plans to launch a new training programme centrally as part of a new BIFM Academy, with a range of courses to be delivered nationally after September 2017. CEO Ray Perry said: “The BIFM Academy will become the central professional development hub for disseminating continuing professional development content and training.” But later in the month Perry himself was the news as BIFM revealed that he had left the job he’d started only months before following a mutually agreed decision with the Institute’s board. Linda Hausmanis, Director of Professional Development, was named as Acting Chief Executive.”
More M&A action in the broad mid-market area of FM as Servest confirmed that it had acquired Catering Academy in a strategic move to grow its existing catering division. Established in 2004, the independent catered was a national player working mainly in the business and industry, education and healthcare sectors. Servest said it saw the acquisition enabling it to expand and develop its catering presence in education in particular. That news followed quickly on the heels of the FM group’s move to buy building services contractor Arthur McKay. Speaking about that deal, Serves CEO Rob Legge said: “The acquisition is part of our growth strategy to become one of the top five FM service providers in the UK.”
Also this month, hard services group Spie bought the Birmingham-based technical facilities management and property services provider Triosgroup. The deal brought to Spie’s portfolio a team of about 690 people spread across five regional offices – Birmingham, Enfield, Cirencester, Basingstoke and Warrington. The £61m Triosgroup operated in three divisions: Property Maintenance, Legal & Statutory Compliance and Access and Security. Spie said the deal would diversify its end-user markets, expanding its presence in particular in retail and leisure.
Later, another senior departure was announced – this time it was Interserve CEO Adrian Ringrose saying he would be leaving the group is to once a successor was in place, a move expected to be completed in 2017. Ringrose said he was planning to pursue the next phase of his career after 15 years with Interserve.
Then Mitie was back in the news again, this time with even more bad news. Publishing its interim report, it revealed that for the six months to 30 September 2016 group revenue was down 2.6%, operating profit was down 39% – and the loss for the period topped £100m. The company’s share price graph literally looked like the price fell off a cliff first thing in the morning after publication of the report. It blamed the problems on, amongst other things, changing market conditions as clients adjusted to rising labour costs and economic uncertainty. It also declared its intention to exit the home healthcare business as quickly as possible.
One regular December occurrence is confirmation of the finalists in the running for the annual i-FM Technology in FM Award. We’ve past the 10-year mark on this competition, and the entries just get better and better – a clear sign that technology is playing a bigger and bigger role in FM. The finalists for the 2017 Award were ENGIE, Interserve, JLL, Mitie and CDS. The winner is revealed at each year’s Workplace Futures conference, held in February.
The development of officially recognised standards for FM has been a long, slow process – a real labour of faith and determination for the handful of practitioners who have championed this. One – probably the key figure in the whole effort – was honoured late in the year with the presentation of a BSI Leadership Award. That went to Stan Mitchell, who was praised for his “enthusiasm, superb industry reputation and support for new members” of the pro-standards campaign.
A much-anticipated report from The Stoddart Review also hit the headlines this month. Positioned as a wake-up call to business leaders, the report, ‘The Workplace Advantage’, called for an industry-wide rethink to demonstrate and measure the value of the workplace as a counter-balance to the prevailing cost focus – offering a series of recommendations for action. Programme Director Polly Plunket-Checkemian said: “We’ve found some excellent examples of best practice where firms are moving away from an approach that until now too often has been driven by cost-cutting, space-saving and an inflexible approach to office design. Agility is the key in facilities management and we need to do more to demonstrate and measure value rather than count the cost.”
Finally, the latest report from business advisors Grant Thornton on M&A in the FM sector noted continued high levels of deal activity throughout Q2 and Q3 2016. A total of 30 FM deals were announced in Q3 2016, the highest amount since Q2 2012. The first nine months of the year saw a total of 76 deals, the highest level of activity since 2011. If deal activity remained strong in Q4, GT said, deal volumes could exceed the 97 recorded in 2015 – and we could see activity hit the 100 mark for the year, last achieved in 2011. But, the firm cautioned, while many service providers were adopting a business-as-usual approach and maintaining their growth agendas, the full impact of the vote to leave the EU remains unknown and could still have implications for the sector.
Published: 21st December 2016
Author: i-FM News Team
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