SFI shares crash as dividend is axed

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The Independent Online

The future of SFI was thrown into doubt yesterday after the pubs group whose high-street brands include Slug & Lettuce admitted it had breached its banking covenants, issued a profits warning and scrapped its final dividend.

The future of SFI was thrown into doubt yesterday after the pubs group whose high-street brands include Slug & Lettuce admitted it had breached its banking covenants, issued a profits warning and scrapped its final dividend.

The warning, which came one month after the group dismissed market concerns about a cash squeeze, sent SFI's shares down 66 per cent, falling 51.5p to 26p.

Analysts said SFI had paid the price for an over-ambitious new openings programme, which has seen it open 54 units in the past two years and 22 in the past six months. In addition, it has struggled to complete planned disposals of some of its assets, including a chain of lapdancing clubs, putting further pressure on its cash flow.

SFI said its bankers, led by Barclays, had granted "temporary waivers" relating to certain breaches of existing facilities. The conditions attached forced it to axe its proposed final dividend payment of 1.87p per share, it added. The company, which had £121m of debt in the year to 31 May, is negotiating new banking facilities but these will not be in place until the new year – after the key Christmas trading period.

Analysts slashed full-year profit forecasts, previously forecast at around £21m, by as much as 20 per cent. The collapse in the group's market valuation – from nearly £200m earlier this year to £20m yesterday – made it a takeover target, they added.

Andrew Latham, who was promoted from managing director to chief executive in April, said a downturn in trading and delays to disposals had put the group under unsustainable pressure to pay its creditors.

Like-for-like sales growth, which was 5.6 per cent at the start of the year, had slowed to 1.3 per cent, "reflecting the much tougher trading environment", SFI said.

The group, whose other brands are Bar Med, The Litten Tree and Fiesta Havana, said its finance director, Tim Andrews, who took up the post in July, was "conducting a full review" of the business. This includes putting all future expansions, bar one, on hold, following a previous decision to halve its new openings programme.

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