Investors stand by for pounds 20m cup of tea

Whittard of Chelsea, purveyors of exotic teas such as First Flush and Broken Orange Pekoe for over a century, is heading for the Alternative Investment Market later this month with a valuation of about pounds 20m.

The company was founded in 1886, but it is only in the last five years that it has clocked up noticeable growth. For most of its life, it operated from one small shop in the Fulham Road, London. In 1974, David Gyle-Thomp- son, the current chairman, acquired the business. He closed the orginal shop but opened three others in the neighbourhood.

It was not until the recruitment of Will Hobhouse in 1988 as managing director that trading really took off. The company has expanded rapidly in the last five years and now has 79 outlets in the UK and overseas. The shops are small - most are less than 100 square feet - to preserve a cosy and upmarket atmosphere. In Britain, most are in London and the South-east, although Whittard has also established outlets in France, Poland, Iceland and Japan. The Japanese operation, which is run by an agent, is busy taking advantage of the local love affair with English teas, which are now prized above green tea. The English Breakfast blend is particularly popular.

As well as tea and coffee (from Java) Whittard sells jam, biscuits, teapots and tea strainers - everything bar the cucumber sandwiches that you need for a traditional afternoon tea.

Profits have risen sharply. The company turned in pre-tax profits of pounds 1.3m in the year to end-May 1995, a 60 per cent improvement on the previous year. The AIM float is needed to provide an exit route for one of its venture capitalist backers.

Mr Hobhouse honed his specialist retailing skills at Tie Rack, where he rose through the ranks to become chief executive. The big difference between the chains is that Tie Rack is a franchising operation while Whittard owns its shops. It plans to continue expanding its store network at home and abroad.

In some locations, it will compete with Costa Coffee, the niche retailer that is now part of Whitbread.