Home / Business / Europe’s FM sector to get a boost in revenues from increased outsourcing

Europe’s FM sector to get a boost in revenues from increased outsourcing

Over the next two years, organic revenue in the EMEA facilities management sector will grow in the low to mid-single digits (including market share gains) on the back of increased outsourcing, according to a new report published by Moody’s Investors Service.

Titled “Facilities Management – EMEA Corporates, Business Services: Increased Outsourcing to Drive Growth Despite Emerging Market Headwinds”, Moody’s latest report looks at food service, cleaning, security, workwear and laundry services, as well as property management and integrated services across Europe, the Middle East and Africa.

Martin Hallmark, a Moody’s senior credit officer and author of the report, commented:

“Facilities managers’ organic revenues will grow by one to two per cent above GDP as more companies outsource non-core functions, particularly in emerging markets. Although, this is likely to be dampened in the next one to two years by weak commodities and oil and gas markets slowing emerging markets’ growth.”

The report states that margins will remain relatively low but stable or growing as companies drive scale efficiencies, whilst customer retention rates and revenue diversity will remain high, although with intense competition on contract renewal. And, that it is these trends which will result in firms retaining solid credit characteristics overall.

In relation to the size of the business, the larger more diverse players, such as Compass Group Plc, ISS Global A/S and Sodexo, will according to the report continue to demonstrate positive growth well ahead of GDP benefitting from their scale advantages and revenue diversity.

For smaller FM firms however, such as La Financiere ATALIAN S.A. and Manutencoop Facility Management S.p.A., greater potential earnings volatility could impact them as they have higher country and customer concentration.

Mergers and acquisitions will continue apace in the sector although the report says firms will focus on smaller mainly debt- and cash-funded bolt-on acquisitions due to the greater number of opportunities, lower integration complexity and lower valuations.

In the coming years, technology will be a key area of focus leading to increased collaboration between technology and the larger FM players, as seen with the recent ISS and International Business Machines Corporation partnership in integrated facilities services and building management.

The full report is available to subscribers on www.moodys.com

About Sarah OBeirne


Leave a Reply

Your email address will not be published. Required fields are marked *