Will we be all fishing half-eaten, mouldy sandwiches out of bins at the back of Greggs by Christmas?

Two weeks ago, we asked “Will the FM job market really die by Christmas?

It was following the spectacular collapse of FM-and-outsourcing giant Carillion plc. As I’m sure you’re aware, Carillion provided FM to 150,000 properties in the UK, Canada, and the Middle East.

News broke yesterday that competitor Capita is also going through tough times – its share price dipped by nearly 40% in early trading after it suspended its dividend and went on the hunt for equity (reminiscent of RBS’s £12bn equity raise in 2007?).

That was only the start of bad news for the company –

  • £22m from the Defence Infrastructure Organisation won’t be earned
  • £100m in promised savings for the MoD never materialised
  • net company debt around £1.15bn
  • a pensions deficit of £381m

 

Facilities management and Capita

Just like Carillion, Capita has a significant facilities and property management business.

According to its website, “we manage over 70 million square feet of property assets in the UK.

We look after around 14 million sq ft of town centre, retail parks and leisure schemes. And we take care of 5000 assets for local authorities. We specialise in total property management of standard and trophy offices, mixed use buildings, retail spaces, commercial portfolios, local authority assets and healthcare estates.”

Is the writing on the wall for FM? The sector has boomed for well over a decade. It didn’t appear to suffer too much in the financial crisis and has gone from strength to strength since.

 

Bad business models

Well, we don’t think so and here’s why.

The problems that sank Carillion and have put a hole in Capita’s bow are one and the same. However, at the time of writing and to all appearances, it looks like the leak in Capita’s side will not sink that particular ship.

Both firms are involved in outsourcing – they provide services to businesses, charities, schools, the BBC, local government, central government, the NHS, and so on meaning that their customers do not have to carry the fixed costs of carrying internal departments and all of the headaches that go with it (recruitment, firing, payroll, employment law, and so on).

Services both companies offer including building and construction, facilities management, TV license fee collection, congestion charge administration, school dinner, hospital bed provision, prison management, and so on. It’s difficult to see how they’re all related.

At points, it seemed that, for both firms, they would bid for any tender going, regardless or not of whether they had the internal skills, processes, staff, suppliers, and so on capable of satisfactorily delivering the service. Where they did not have the skills, they would go out and buy a company that did.

Massive punts were then taken on pricing the jobs. Sometimes they worked out, sometimes they didn’t. Compounding this even further was very slow payment by customers.

 

Writing on the wall

Whether Capita spotted the fundamental problems with its business plan and cash flow earlier than Carillion is open to debate. What does seem certain is that Capita have responded to concerns about its own business model and are making the adjustments its management (and the markets) believe are necessary to protect its own future and ensure its own survival.

Whether an economy is good or bad, there will always be companies that are lean, mean, and focused and others who grow seemingly uncontrollably across verticals that make sense and also across sectors which seem to have no tie in with its original core business. Capita and Carillion’s plights merely emphasise this point.

 

What this means to you

In our opinion, unless you’re an FM employee of Capita (and all here wish you well during this time of uncertainty), nothing.

There have never been more jobs available at Maxwell Stephens as there are now. The sector seems to be still moving.

So, you won’t be scratting around in the bins at the back of Greggs or Maccie D’s this Christmas and ending up with heartburn. You’ll get heartburn by going through the front door of either establishment as a paying customer.

If you’re looking for an exciting new challenge or you’re seeking a world-class FM professional to join your team, please call us on 0207 118 48 48 or email cv@maxwellstephens.com.