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Labor Costs Weigh on ABM, Despite Record Revenues
Print Article Contributed by BSM Staff

NEW YORK – Though profits are down slightly, ABM Industries Inc., a provider of facility solutions, has posted record revenues of $1.6 billion in the second quarter, driven by the acquisition of GCA, and organic growth of 4.5 percent, primarily in the Business & Industry segment, and parking and transportation wins within the Aviation segment.

The company said it is feeling the effects of a “tightening labor market.”

Net income for the second quarter of 2018 was $26.6 million, or 40 cents per share, compared to $31.3 million, or 55 cents a share on sales of $1.3 billion in the same period last year.

"The second quarter demonstrated meaningful operational progress as we continued with the integration of GCA and our 2020 Vision initiatives,” said Scott Salmirs, president and CEO of ABM Industries. “We achieved organic growth of 4.5%, higher free cash flow generation and delivered on our GCA-related synergies."

The GCA acquisition provided $256.4 million of incremental revenues, which is predominantly reflected in the Education, Technology & Manufacturing, and Business & Industry segments in the amounts of $141.5 million, $60.6 million, and $42.5 million, respectively.

On a GAAP basis, income from continuing operations was $25.4 million, or $0.38 per diluted share, compared to income from continuing operations of $31.6 million, or $0.56 per diluted share last year.
Salmirs said the company “began to see the cost-impact from the tightening labor markets” as it progressed through the quarter, particularly towards the end of April. 

“We have implemented a number of labor initiatives to mitigate the challenges stemming from rising wages and low unemployment,” said Salmirs. “While we don't believe the current labor environment will change in the near-term, the pressures we are seeing should diminish as we manage through our customers' contract cycles and grow our sales platform.  Our focus on process as well as our investments in technology will be catalysts as we navigate this period."

The company has assets of $3.75 billion, and liabilities of $2.3 billion.

ABM is a provider of facility solutions with revenues of approximately $5.5 billion and more than 130,000 employees in 350+ offices throughout the United States and various international locations. Its comprehensive capabilities include janitorial, electrical & lighting, energy solutions, facilities engineering, HVAC & mechanical, landscape & turf, mission critical solutions and parking, provided through stand-alone or integrated solutions. ABM provides custom facility solutions in urban, suburban and rural areas to properties of all sizes - from schools and commercial buildings to hospitals, data centers, manufacturing plants and airports.

For more information, visit www.abm.com.