SFI goes Stateside for support amid City concern
Bar group looks to USA to raise institutional support for business
The SFI Group management has been in America in a bid to drum up institutional support amid growing concerns among fund managers in the City.
The company, which owns the Slug & Lettuce and Bar Med brands, recently bought the 28-strong Parisa café-bar chain.
The Parisa deal has raised questions over the company's strategy. It is thought the £15m deal was primarily done because it was cheap but the Parisa venues come with low capacity and high rents, not an ideal combination. Many of the rents in SFI's existing portfolio have also shot through the roof.
"They have bought themselves out of trouble for the moment" said one City analyst. "It's exactly what they did with Slug & Lettuce last year. If they hadn't done the deal they would have missed their targets.
"A host of fund managers asked why the Parisa deal was done and the SFI response was because it was cheap. Well, in this current market that is simply not good enough and it is not what fund managers look for in a portfolio," he added.
What fund managers seem to want is focused businesses with few non-core activities. SFI has a clutch of non-core businesses such as the For Your Eyes Only table dancing venues.
A growing sentiment is that the company does not deserve the same multiples as others in the sector such as Luminar. The company's gearing stands at a massive 130 per cent.
Yet the bullish stories keep coming. Last week the Daily Telegraph encouraged investors to jump aboard. It said that SFI "comprises one of the most formidable collections of high street pub offerings in the industry."
The company has been visiting fund managers in New York and Denver which has led to some institutional buying in US.
British investment banks are more cautious. It is generally felt that the quality of institutions on SFI's share register has deteriorated - people that track the markets every day have sold out of SFI.
Another London analyst said: "With small units and high rents you don't need much to go wrong."
That the company has a track record of fantastic growth is undeniable but the question is, at what price.
Related stories:
SFI lands £15m Parisa (16 November 2001)
SFI Group chases Parisa (15 November 2001)
SFI: To buy or not to buy? (25 October 2001)
