Caterer Compass warns profits to be hit by restructuring costs

(Add CEO comments, details)

By Li-mei Hoang

LONDON, July 29 (Reuters) - Britain's Compass Group (Other OTC: CMPGF - news) , the world's biggest catering firm, said operating profit this year and next would be hit by restructuring costs as it looks to offset weakness in its offshore and remote business and in Australia, Brazil and Turkey.

Compass, which serves around 3 billion meals a year, said on Wednesday the restructuring plan would hit operating profit by around 20-25 million pounds ($31-39 million) in 2015 and 2016 and that this year's full-year operating margin would be flat.

Chief Executive Richard Cousins said the company had decided to restructure its business after demand for its catering services fell in Brazil and Turkey due to challenging economic and political conditions.

Its offshore and remote business, which provides catering to the oil and gas and commodities sectors, had also seen a fall in demand due to a global slowdown in the market.

"It is that global trend that we are seeing in offshore and remote and specific trends in some emerging markets like Brazil and Turkey that is encouraging us to do some modest restructuring," Cousins told Reuters.

"We are taking the cost head-on, on the chin in this financial year and next. It's not massive but we just felt it was better to deal with the issues," he added.

The company warned that currency translations would negatively affect its 2014 reported revenue by 154 million pounds and underlying operating profit by 6 million pounds.

Shares (Berlin: DI6.BE - news) in the firm fell more than 4 percent in early trade, the biggest drop on the FTSE 100 Index.

"Structural growth opportunities, driven by outsourcing continue to be promising and Compass has a resilient, cash generative business model," Numis analysts said in a note.

"Whilst concerns about emerging markets and potential currency headwinds persist, however, it is difficult to see a near-term catalyst for the shares," they added.

The group reported organic revenue growth of 5.1 percent for the third quarter to June 30, helped by strong net new business in its core North American business and an acceleration of growth in its Europe and Japan region.

($1 = 0.6414 pounds) (Reporting by Neil Maidment and Li-mei Hoang; Editing by Dale Hudson)