Compass Shares Slide as Falling Oil Price Weighs on Business

Compass Group Plc shares fell the most in more than a year amid concern that reduced business from oil-and-gas companies will hurt profitability.

The caterer said Wednesday it plans to further reduce expenses in the unit serving that industry, and the restructuring will cost of 20 million pounds ($31 million) to 25 million pounds in both 2015 and 2016. The stock fell 3.9 percent to 1,044 pence at 10:20 a.m. in London, the steepest drop in the benchmark U.K. FTSE 100 Index.

As a supplier of catering services to offshore energy platforms, the falling oil price has led to declining business. Difficulties in this area may reduce profit by 60 million pounds ($94 million) next year, Greg Johnson, an an analyst at Shore Capital, said in a note. The effect will be a 10-basis- point reduction in profit margins this year and next, he said.

The oil-and-gas slowdown is hampering performance in the company’s fastest-growing regions. Organic growth in North America is being constrained, while Compass’s cost savings program only partially offset margin pressure in its Australian business, the company said in a statement Wednesday.

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