Compass loses way on weak results in energy and mining

Suzie Neuwirth
COMPASS shares guided south yesterday, after the catering giant warned that restructuring costs would hit profits, after a weaker performance from its energy and mining clients.

The FTSE 100 firm said that a restructuring plan to reduce costs in its offshore and remote business and in some emerging markets will wipe £20-25m from its operating profit both this year and next year.

Compass provides meals to hospitals, workplaces and remote environments such as oil rigs,

It made the biggest losses on the index in early trading, declining by more than four per cent.

The company blamed “volume and margin pressures in our oil and gas and mining client base – particularly in Australia – and soft volumes in some emerging markets”.

Commodities prices have been subdued, causing mining and oil and gas companies to cut back their operations, meaning smaller catering contacts for Compass.

The firm reported organic revenue growth of 5.1 per cent in the third quarter, compared to 5.5 per cent for the first nine months.

It is “positive” about full-year revenue however, due to growth in North America, Europe and Japan.

“The company may be maintaining its positive revenue expectations for the full-year, but investors are clearly more worried about the outlook for profits. And quite rightly so,” said Mike van Dulken at Accendo Markets.

Shares took a hammering yesterday afternoon and closed down 5.34 per cent to 1,028p in London.