City observers said SFI had been the victim of a concerted bear raid after market whispers that the company's new finance director, Tim Andrews, had been clamping down on terms with suppliers.
Douglas Jack, a leisure analyst at the City firm WestLB Panmure put out a note for investors repeating rumours that the company was failing to pay its creditors.
SFI is also suffering from being in the same branded bars sector as Old Monk Company, owner of the Springbok sports bar brand, where the shares plummeted 75% yesterday to 7p after the company admitted it was in talks with its bank over its financial position. It had a stock market valuation of just £1.8m at yesterday's close of business.
SFI put out a statement saying it noted the fall in its share price "with disappointment". It implicitly confirmed rumours that some suppliers were being paid more slowly, saying that eight new site openings since June, making a total of 22 in the past six months, "had put short-term pressure on creditors," meaning its fit-out suppliers. However, the statement insisted that the company was "actively managing the situation". It told the Financial Times that improving cash flow from new pubs would ease the pressure in the next few weeks.
Commentators feel the most likely explanation of any tough new line with suppliers is that it is part of an attempt by SFI to reduce its level of bank loans. In its statement yesterday the company said it was in the process of reducing gearing to below 100% within 18 months, an objective it announced in June.
Trading in the first quarter continued to be positive, with returns meeting expectations, it said, and the company continued to trade within its existing bank facilities. It said it was "particularly pleased with the performance of new openings.
The company said it had made "significant" progress in the disposal of non-core assets, "most of which will be completed in the near future".
However, one City analyst commented that SFI was "just another small company that has overextended itself and is paying the price for being undercapitalised. In better market conditions it would have come back to the market for funds to continue its expansion programme, but now it plainly can't do that." SFI's market capitalisation is now less than £100m, making a take-over approach "a possibility", observers said yesterday
The company agm has been fixed for 21 October 2002, "when a full trading update will be made," SFI said.