SFI builds platform of recovery says Lawson

by The PMA Team Troubled Slug & Lettuce and Litten Tree operator SFI Holdings has reported a £26.4m loss in the year ended 29 May. But executive chairman Stuart Lawson has claimed restructuring during the year, including its banks writing off £80m of its debt for a 75% share of the business, has now set a "platform" for recovery. Actual operating losses, setting aside exceptional items, were reduced to £100,000 and the company has seen like-for-likes increase by 2% in the first 12 weeks of the new financial year. Lawson said: "The platform created by the financial restructuring means that the strengthened management team is now able to focus on addressing the opportunities that exist for the group through the delivery of the recovery plan objectives. "The key components are well understood albeit they are being implemented against a continually challenging regulatory, customer and sector perspective and within confines of the available financial resources. "The first steps have been negotiated successfully, but it will take some time for all the activities to be implemented and their benefits to flow through the operating results." Overall sales fell by £24.5m to £128.7m after disposal of 26 sites and a like-for-like decline of 3.5% ­ actual earnings before exceptional items were £8.2m compared to £9.2m the year before. The Bar Med brand at SFI has seen the greatest amount of change in the past year with the brand now having 22 sites after seven conversions and two site disposals. A further seven sites are identified for possible conversion in the coming year. SFI has also invested in 10 of its Litten Tree sites and has developed an updated brand template. The accounts reveal that Lawson, who now owns 3.1% of the business, earned £426,000 last year, including a performance-related bonus of £201,000. Former finance director Tim Andrews, who left the business in June, earned £332,000 including a compensation payment of £110,000. Shareholders have also been told that legal action against former auditors Horwath Clark Whitehill (HCW) for negligence in checking SFI's accounts continues during the period that ended in the discovery of a £20m black hole and the delisting of its shares. Lawson said: "SFI has provided a detailed analysis to Barlow Lyde & Gilbert, HCW's legal advisors, as to the potential basis of the claim in respect of HCW's audit of the accounts for the three years to 31 May 2002, and the reasons why it requires access to the audit working papers in order to substantiate the claim." One City analyst said: "It's a very long way back for SFI. It's encouraging that current trading has picked up. The 53 Slug & Lettuces are the most valuable part of this business. "The eventual upside could be in two years' time when licensing reform has increased the barriers to entry on the high street ­ and Mr Wetherspoon is not able to expand. That's when SFI's sites increase in value.