Pub group SFI, which owns the Slug & Lettuce and Bar Med chains, has seen its share price halve after warning profits were likely to come in lower than expected.

The company also announced it would be cutting back its expansion plans in an attempt to improve its finances.

SFI said it had breached some of its banking conditions because of a rapid pub opening programme which had added 46 new outlets, and created debts of �120m.

The group added that its For Your Eyes Only chain of lap-dancing clubs was no longer up for sale, as it had been unable to get a good enough price for the business.

In further bad news for investors, SFI said it would not be paying a final dividend.

Its shares fell 66% to 26p by Monday's close.

Sluggish sales

The pub sector is struggling at the moment, with rival operator Old Monk applying for administration earlier this month.

SFI said the "tougher trading environment" contributed to underlying sales growth of just 1.3% over the first 18 weeks of the financial year.

The company said its expansion plans had led it to ask its banks for "temporary waivers in relation to certain breaches of the existing banking facilities".

And it added that it was now working with its bankers towards "revised facilities" which should be in place at the end of the year.

SFI is now planning to open only one more pub in the current financial year.

Analysts had been expecting SFI to post profits of about �23m for the financial year, compared with �19.5m the year before.

But the company said that in the light of its current problems it believed that profits were now "likely to be below market expectations".