i-FM: The online resource for facilities professionals

January
Good news to start the year in the form of a new report from AMA Research looking at the central and local government markets for outsourcing of bundled facilities services. Following steady growth in recent years, market value is about £6.4bn. Central government is the larger sub-sector, valued at around £4.5bn. It's also a more mature market, with growth rates of 2-3% running at about half those seen in local government. Both should hold up well in comparison to private sector markets, AMA said.

January also saw the conclusion Land Securities' long-running negotiations to sell its Trillium division. The buyer was named as Telereal, a complementary business and an occasional competitor of LST's. The deal valued Trillium at £750m, somewhat less than Landsec had originally hoped for. A bit later in the month, Trillium announced that it would no longer bid for PFI projects on the basis that the process 'takes too long and costs too much'.

Others seemed quite happy to remain in the market for long-term public sector deals. MITIE, for example, emerged as a key part of the preferred consortium for Derbyshire County Council's £750m Building Schools for the Future project. MITIE's share of the project is worth about £65m and involves looking after 46 schools across the county for 25 years.

And finally, over at the Facilities Management Association there was a passing of the torch as long-serving Director General Maurice Tidy stepped down in favour of Chris Hoar. A sales and marketing man by experience, Hoar brings a track record in manufacturing, construction and services (including senior roles at Compass Group), followed by consultancy roles focused on improving organisational efficiency. His objective is to move the FMA on to its next stage of development through increased membership and wider representation across the industry.

February
Considerable excitement as Global FM, the alliance of FM member organisations, declared 28 August 2009 as the first ever World FM Day. Planned to be an annual occurrence, the event is intended to be celebrated by all group members with such occasions as networking lunches, seminars and workshops, the organisation said.

Faceo was celebrating its own special occasion following the acquisition of two companies, both specialists in electrical equipment compliance testing. CEO Chris Kenneally said both buys would extend Faceo's market access, increase its opportunities for growth and strengthen its financial position.

On a somewhat bigger scale, Sodexo revealed that it was taking over the slot vacated by Land Securities Trillium in Metrix, the preferred bidder consortium on the £12bn contract to build and run the new Defence Technical Academy for the MoD. The 30-year project is the UK's biggest PFI deal, and the new academy will be the largest vocational training facility in the country. The company followed up later with the news that Neil Murray had been appointed to the newly created role of Managing Director for the facilities management division. Murray had been MD for the UK and Eire at GSH.

March
According to research from business advisor Deloitte, many companies were going into the spring planning to use the greening of their IT infrastructure as a strategic platform for reductions in energy use, carbon emissions and exposure to risks of energy price volatility. "Leading companies realise they must begin to establish sustainability strategies in order to ensure their long-term viability," the firm said.

Somewhat less positive news followed with new research into the UK facilities management market. This, from specialists MBD, predicted growth of about 2% on average over the next five years – down from the 5% typical of a couple of years ago. The slow-down will be most noticeable in the short-term, the firm said, reflecting the impact of recession. But by 2011, stronger growth is expected.

As if to prove that growth is still quite possible, and that its earlier acquisition of GSL was the right move, G4S Integrated Services announced that it had won a major contract to provide FM at the new £109m Cancer Centre on the Churchill Hospital site in Oxford. The deal was an extension to one secured with the hospital in 2005.

April
With recession hitting retailers hard, some of the UK's biggest landlords unveiled a ten-point plan to help their tenants cut costs. This came after a public row about how and when rents are paid. The British Property Federation said that trials of the strategy were delivering savings of between 10% and 20%.

And even with all the market pressures, businesses delivering services to retail groups and others remain an attractive market themselves. A study from accountants Grant Thornton revealed that most private equity firms viewed business support and infrastructure services companies as top of the list of preferred investments. Operating in comparatively defensible sectors and offering reliable cash flow, they look especially good in troubled times.

Coincidentally, publication of the government's Operational Efficiency Programme revealed plans to make major savings across the vast public property portfolio. If actually put into practice, these moves would be little short of revolutionary. One key focus is targeted savings of 20% on both property assets and running costs. The latter are estimated to be £25bn per year, so the scope for gains is immense.

May
At a time when there was comparatively little business news to report, much interest was sparked by rumours that Dalkia was considering selling one or more of its businesses. Newspaper reports suggested that the French owners were looking at the possibility of selling the UK FM business or the energy management business. UK Marketing Director Mike Sewell dismissed the reports as 'conjecture'.

Elsewhere, a struggling business was forced to move toward administration. Problems at Eastlake Work Group did not extend to Work Facilities, the FM division, but they did leave it feeling rather exposed. Within a few days, it emerged that Europa had bought both that division and the project business, Work Services, for an undisclosed sum. They were quickly rebranded Europa Workspace Solutions, under existing MD Bill Squires.

That sort of news was probably one factor in shaping the results of our follow-up i-FM Business Confidence Survey. Six months earlier, the general view in the market was 'it's business-as-usual'. But now we found a clear shift towards a more cautious stance, more 'how long is this going to go on?' More FMs were unsure about where the market was headed, less bullish on their company's performance and more wary about their own futures.

June
Since they were introduced only a few months before, Energy Performance Certificates seemed to be attracting more than their fair share of criticism. Now a 'mystery shopping' exercise revealed that more than 80% of agents acting for commercial buildings for sale or rent were unable to provide the required documentation. Most said they didn't think the certificate was necessary or they simply had no explanation for why it was not available.

Further afield, there was good news for Jones Lang LaSalle with the kind of multi-country contract much talked about last year but not so much delivered. JLL revealed two wins this month: a 30-site FM deal with mobile phone giant Nokia spanning 11 countries in the Asia Pacific region; and a 25-site 11-country deal in the same region with technology and consumer products group Philips. For Nokia, this was the first time it had outsourced management of its facilities in this region.

Growth of another kind closer to home with Richard Sykes being promoted to Managing Director of Carillion Consulting and Government Services, a new business formed through the re-organisation of two existing units within the group. Sykes, who is also Chairman of the Facilities Management Association, joined Carillion as MD for Consulting in February. The new business has annual revenue of about £700m and employs 6,400 staff.

July
Not to be outdone by its competitor JLL, CBRE confirmed that it had secured its own multi-site, multi-country deal. Pharmaceutical giant Pfizer named the firm to provide facilities management services at 10 group offices in nine European cities, following an evaluation process that stretched out over nine months.

And some things were happening here at home, too. Incentive FM announced that it had bought cleaning company Quality Assured Services in a move designed to complement its existing offer and strengthen its presence in the contract cleaning sector. The deal saw Incentive grow its turnover by about £6m and its headcount by about 600.

On a somewhat bigger scale, MITIE landed a three-year £100m integrated facilities management contract with financial services group Santander. The deal covers Santander's entire UK corporate head office buildings portfolio of 33 sites in England, Scotland and Northern Ireland. MITIE said that it continued to see good growth opportunities as economic conditions put pressure on client-side organisations.

Late in the month, Asset Skills, the sector skills council for the facilities management, housing, property, planning, cleaning and parking industries, confirmed that its licence had been renewed following what Chief Executive Richard Beamish described as a 'rigorous assessment'.

August
In another landmark financial services sector deal, Interserve landed a £200m FM contract with HSBC. This involves responsibility for a long list of services for a portfolio that includes more than 1,600 retail and 80 office sites across the UK including the Channel Islands and the Isle of Man. It also covers HSBC’s global headquarters in Canary Wharf, London.

Perhaps MITIE didn’t want to be outdone on the news pages. In any case, it now confirmed that it was the buyer of the Dalkia FM business, paying £120m in cash, plus up to £10m subject to performance. In what must be a contender for under-statement of the year, MITIE said it had identified 'a growing market opportunity to implement carbon reduction, sustainability and environmental programmes'.

Adding a bit of confidence to MITIE's view was a research study from the Royal Institution of Chartered Surveyors concluding that sustainability remained high on corporate agendas despite the poor economic climate. Over 40% of surveyors questioned said that sustainability was a more important issue for their clients now than it was last year. The major driver was bottom-line considerations: there's a perception that sustainability pays.

Less good news came from market researchers AMA who reported that corporate outsourcing faces a depressed 2010 and 2011 before returning to the growth trend that characterised the first half of the decade.

On the positive side, the Institute of Chartered Accountants in England and Wales declared the recession over. Their latest UK Business Confidence Monitor showed a record jump in confidence from -28.2 to +4.8. Based on this, the ICAEW predicted that the UK recession was coming to an end. But, the accountants cautioned, it was too early to celebrate: recovery is a fragile thing and could still be derailed.

September
As if to remind us that celebration might be premature, business advisory firm BDO Stoy Hayward revealed its expectation of a prolonged slump in the retail sector. It went on to predict that the number of business failures in that industry would go on rising in 2010.That gloomy conclusion was based on the near-certainty that unemployment rates would continue to climb for some time even after the official end of recession coupled with the fact that wage growth would continue to be restricted and consumer credit would be harder to come by.

Meanwhile, as the focus remained on energy efficiency, it was becoming clear that while new regulations and their associated compliance requirements may be government's best answer to the need for change, there is no substitute for the power of market forces when it comes to what actually works. A survey of facilities and maintenance engineers found that more than half were implementing measures in order to reduce cost. Less than a third were thinking about their carbon footprint; and only just over a tenth were driven by compliance needs.

That balance of priorities was a worry at the Heating and Ventilating Contractors' Association. President Graham Manly used the occasion of the HVCA Annual Luncheon to damn a growing 'non-compliance culture' in the UK. We're undermining our own long-term environmental targets through lack of enforcement, paltry penalties and the absence of perceived benefit, he argued.

Later in the month, RICS caught the industry's attention with the publication of its first guidance note on FM. The strategic role of facilities management in business performance was effectively the initial chapter of a planned part-work, the White Book, intended to be the 'definitive practice guide'. Admittedly, RICS positioned this as guidance for its own members working in FM, but there was a clear feeling elsewhere in the industry that toes had been trodden upon.

Finally, i-FM revealed that EMCOR had landed a major FM contract with property investment group Prupim. When full details emerged weeks later, EMCOR confirmed that the five-year deal was valued at £200m and covered more than 200 commercial properties including retail parks, industrial estates, offices and business parks

October
Rumours had been floating around for some weeks, and by early October we were able to confirm that Jamie Reynolds was stepping down as CEO of the GSH Group. Reynolds had been co-CEO with Chris McLain – also now out of the picture – for almost exactly a year. This was just the latest move in a turbulent period that saw a whole series of boardroom changes at GSH, as well as the departure of previous CEO Colin Tennent – as well as the delisting from the Alternative Investment Market. The company makes an interesting case study in how management strategy can be shaped by a determined majority shareholder.

In other market news, Incentive FM announced that it had won its largest ever contract - a five-year, multi-million pound deal to manage a range of services for the Covent Garden Estate. Taking on the existing site team and a series of supply contracts, including cleaning, maintenance and security, Incentive's brief was to improve standards and deliver more effective services for Covent Gardens' 300 tenants (which together attract over 43 million visitors a year to the area).

A few more of those international deals were also done in the autumn. CBRE, which already had the FM contract at multiple sites for technology giant Cisco, saw its remit extended to project management services on a global basis. That news was followed with the announcement that Lexmark, the printer specialist, had appointed the firm to provide facilities management services at office locations across EMEA, building on an existing relationship covering transaction management services.

And by the end of the month, Johnson Controls had announced a mirror-image deal: its existing FM relationship with technology company Motorola was extended to cover real estate transactions globally. JCI said its client was in pursuit of a more efficiently managed real estate portfolio to achieve significant savings.

The cost-savings message echoed precisely one of the key findings of i-FM's biennial UK Market Audit. Figures released this month showed that cost control topped the list of facilities managers' priorities for 2009/10. No real surprise there: this issue has always been ranked high in our surveys. What was different this year was just how far ahead of all other considerations it was. Nothing else was close…and even number two - creating savings through efficiencies – followed the same theme.

November
Ready to tackle the demand for efficient service delivery was a newcomer to the market; or rather, an established niche player now with a new focus. VT Group, the one-time ship-builder, revealed that it had transformed itself into a services business. CEO Paul Lester declared the group was on the threshold of an exciting new era. He said VT was ready for a public sector that would soon be outsourcing 'with a vengeance'.

Lester also said that VT was likely to be on the acquisition trail. In fact, it emerged within weeks that the group was hoping to buy public sector specialist Mouchel. VT said it had put together 'a strategically compelling proposition'. Mouchel countered that it was being substantially undervalued.

Recession, and its impacts on clients and their markets, can be good or bad for facilities services companies. Creation (and the consequent rationalisation) of the Lloyds Banking Group meant that there was one too many suppliers in at least one area of the business. Eurest emerged as the winner, coming away with a five-year multi-million pound catering and facilities management contract. Aramark, which had been the provider at the recently acquired HBOS, was the loser.

The Compass Group business & industry division was also the winner when oil company Shell decided to rationalise its extensive list of suppliers in the Americas. Eurest landed a £200m extension to its existing hard and soft services contract, taking in sites in the US, Canada and South America.

While traditional markets were clearly under pressure, despite some big wins, at least one marginal area was looking like quite a safe – even promising - place to be. Social housing, in which specialists like Mears and Connaught appear to be thriving, has attracted some fresh attention from a variety of quarters. MITIE, which is already a modest player here, decided to up its commitment with the £38.5m acquisition of Environmental Property Services plc. MITIE said the buy would take its total social housing business to about £200m in annualised revenues and provide a strong platform for further growth in the sector.

Finally this month, RICS took another step that could ultimately bring some significant change to the FM landscape. Following a review and restructuring of its qualifications programme, the Institution launched a new AssocRICS designation. This is available to anyone working in the sector (it applies to those in FM as well as other RICS specialisations) who can demonstrate specific levels of experience. As a stepping-stone to full RICS membership, it opens up a route to chartered status for professionals with sufficient track record but no higher education degree: exactly what some FM practitioners say they want for the profession.

December
The month opened with news that The Asset Factor had sold its 50% shareholding in FM services provider NB Entrust to joint venture partner NB Real Estate. The business had been set up in 2007 to provide facilities management services to NB’s investment and occupier clients.

Was there more to the story than that? Well, yes. Within a few weeks it emerged that The Asset Factor's three founding Directors, Oliver Jones, Keith Perry and Matthew Punshon, had joined consultancy EC Harris at partner level. Jones, Perry and Punshon left their jv partner Helical Bar amicably, retaining their investment in and non-exec roles with The Asset Factor and its various ventures: services operation Asset Oncall, training business Asset Faculty and management venture Asset Space.

Another bit of interesting personnel news came with the announcement that Jamie Reynolds, ex-CEO at GSH, had been named Chief Operating Officer at building services company Managed Support Services. At the same time, MSS announced the acquisition of Status Building Services Group for £3.7m as part of a plan to build an integrated facilities management business within the UK. Reynolds is tasked with further expansion through organic growth and strategic acquisitions.

The year drew to a close with another reminder that, whatever the number-crunchers might say about the recession being over, there were plenty of challenges still to come. For a short time early on in this difficult period, the public sector was being hailed as a promising alternative to a battered private sector market. A changing tide was epitomised by the publication of a report from business advisors Deloitte declaring that for the government sector, both local and central, the 'age of austerity' had already arrived. This brings with it the need to cut costs but also the equal – or perhaps greater – need to re-think organisational size and structure, the firm said.

Almost on cue, two big local authorities announced important strategic decisions. Edinburgh City Council, faced with the need to cut expenditure by £90m over the next three years, confirmed that it would soon be looking for new service delivery solutions. And Essex County Council revealed that it had signed up IBM as its partner to advise on and implement changes. IBM, the lead player in last year's Southwest One partnership with Somerset County Council, said the place to start was modernisation of back-office functions and streamlining of procurement. So the public sector does hold promise as a growth market for FM services in 2010 and beyond - but it doesn't look like being a soft option.

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