Frost Group seeks 21m pounds to speed acquisitions

Click to follow
The Independent Online
THE FROST GROUP, Britain's largest independent chain of petrol stations, is raising pounds 21.3m in a rights issue to speed its acquisition programme.

John Murgatroyd, finance director, said that Frost could have financed its original expansion programme with retained profits but wanted to move faster because there were so many cheap stations on the market. He expected the chain, which stands at 170 sites, to reach the 250 mark by 1995 instead of 1997.

Frost is issuing 11.7 million new shares at 187p on a basis of one new ordinary share for every five held.

Following the rights issue the group will have about pounds 3m of net cash. It expects the strength of the balance sheet will improve its ability to negotiate good margins and credit terms on the supply of petrol.

Frost's strategy is to build up the size of its chain so that it is in a stronger position to negotiate with its suppliers. It estimates it buys a gallon of petrol for 10p less than a single-site petrol station.

'Oil companies are very concerned about credit risk, and therefore the stronger we are the more they are going to want to deal with us and they will compete to supply us,' Mr Murgatroyd said.

In the two years since flotation the group has bought 91 sites.

Analysts expect the rights issue and accelerated acquisition programme to enhance earnings from mid-1994. The shares fell 1p to 224p.