SFI appoints advisor to consider its options

- Last updated on GMT

Related tags: Leveraged buyout, Finance, Sfi

by The PMA Team SFI Group has appointed an advisor to look at refinancing or selling the company. The company, which saw its banks swap debt for...

by The PMA Team

SFI Group has appointed an advisor to look at refinancing or selling the company.

The company, which saw its banks swap debt for equity in April 2004 after the discovery of £60m in fundamental accounting errors, has asked Kroll Corporate Finance to report on its options.

SFI's executive chairman Stuart Lawson believes the company, which has spent around £6m on redeveloping 40 sites, needs another £10m to complete its refurbishment programme.

Investments have included £500,000 spent on opening Label in Manchester, which has been turning over £30,000 per week since its site was converted from a Bar Med in October. "It points to what you can do (at SFI)," said Lawson.

Its nine-strong syndicate of lenders has requested a strategic review before deciding on the next step. A trade sale, management buyout and a privateequity investor are among the possible options.

In recent months, SFI, which has debt of £80m, has had approaches from both trade buyers and private equity firms. The company's three-year recovery plan forecast a profit of around £17m for the financial year ending in May 2006 ­ it made £8.3m last year.

However, Lawson told the Morning Advertiser that he believed it would take an additional year to achieve the £17m annual profit level. He said "external pressures" on the business had increased in the past 18 months.

Analysts believe that GI Partners, which owns Yates Group and property tycoon Robert Tchenguiz would be the obvious buyers for SFI. The company's value is hampered by an exclusively leasehold estate.

In a trading update, SFI reported overall like-for-likes were up by 2%. The 57-strong Slug & Lettuce saw sales up by 6% with its Latin bars up 14%. Litten Tree, which has 59 venues, has seen sales down by 2% although invested sites were up 7%.

The most disappointing result was at the 18-strong Bar Med unit where like-for-likes slipped by 10%. Lawson also revealed that head office costs had been shaved by £1.5m.

Legal action against former auditor Horwath Clark Whitehill over the fundamental accounting errors is continuing with access gained by SFI to audit papers.

Related topics: Legislation, Other operators

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