Shares in pub operator SFI Group plummeted 51.5p to 26p this week after the company announced a profits warning and admitted it had breached its banking covenants.

It has also putting future expansion plans on hold and has scrapped the 1.87p final dividend, which it announced in September.

The company, which operates the Slug & Lettuce, Bar Med and Litten Tree brands, said that it had suffered a sharp downturn in sales over the last month and as a result it believed profits for the year will be below expectations.

The group has continued to dispose of non-core and underperforming assets in order to try and reduce the debt acquired in its expansion drive. It has realised £5.2m in the past few weeks and further contracts worth £2.7m have also been exchanged. However, the five For Your Eyes Only table dancing clubs have been taken off the market for the time being, as SFI has been unable to achieve an acceptable price.

The company opened 46 sites in the last financial year and had planned 12 for the year to May 2003. Five of these have now opened and three sites have undergone refurbishments, but only one more opening is anticipated.

The company has now been granted temporary waivers in relation to breaches of its existing banking facilities, while it works towards revised facilities - expected to be in place by the end of December.

After finance director, Tim Andrews, has completed a review of the group's position, the company will focus on a period of consolidation to 'reduce gearing and strengthen the balance sheet'.

Despite the financial straits in which the company finds itself, in a statement issued at its AGM, SFI said: 'The directors remain confident about the long-term prospects for the business which has strong and successful brands that generate significant operational cash flow.'