Level of debt means SFI Group shareholders are left with not

SFI reveals £16m overspend by The PMA Team SFI Group shareholders will be left with nothing after the company overspent by £16m in 14 months opening new sites, an investigation by the company has revealed. The company, which runs the Slug & Lettuce, Bar Med and Litten Tree chains, has been over-stating its profits and assets since May 2000. Its problems came to a head last year when it tried to open 46 outlets in a single year ­ and accelerated its spending through the early part of 2002. After overspending by as much as £12m in a year up to the end of May 2002, the company spent £4m more than its budget in eight weeks during June and July last year, opening new sites. Stuart Lawson, who joined the company as executive chairman in June from the Alldays chain, said: "The company's capital expenditure during calendar year 2002 could not be supported by its bank facilities and operating cash flows." Lawson also admitted that it was "unable to repay" its current level of debt ­ it owes a syndicate of banks £151.2m and further £6.7m in unpaid interest and fees. It has £9m in the bank after assets disposals but also has "further significant exposure arising from interest hedges". Lawson conceded the business had only continued trading because the company's banks did not want to crystallise their own losses. "Neither current nor projected trading is sufficient to support repayment of such a high level of debt and the directors believe that the company's equity value is completely eroded," he said. Lawson made it clear that SFI Group is making much less money, in a tougher high street environment, than it used to. "The underlying profitability of the business is lower than previously reported and lower than the level of profitability with which shareholders have previously been familiar," he said. Asked if shareholders could regain some value for their shares, Lawson responded: "I think it's possible ­ but it's a small hope given the level of debt.