Tesco backs Dobbies' £150m fund raising

Dobbies Garden Centres issued £150m worth of new shares yesterday to help fund ambitious expansion plans, despite already having more than £100m of debt.

The issuance is being underwritten by Tesco, the chain's majority shareholder, which owns 65 per cent of the stock following a £156m takeover in October.

But Sir Tom Hunter, who owns the rival garden centres Wyevale and Blooms of Bressingham, raised his stake from 10 per cent to almost 30 per cent during Tesco's takeover campaign, which put the brakes on plans to delist the company.

A spokesman for Sir Tom's West Coast Capital investment vehicle said the offer documentation is under consideration.

James Barnes, Dobbies' chief executive, says the share issue is central to the 24-store chain's aim for 100 shops within 10 years. "With about £100m of debt and assets of only £44m we are heavily geared already for a plc in the current climate," he said.

But commentators say it is only necessary because of the takeover tussle. "Dobbies is really just a Tesco subsidiary, but because it is still listed they have to take a roundabout route to provide money to expand the business," one City analyst said.

Dobbies published annual results yesterday showing sales up 21.4 per cent to £83.5m and adjusted earnings before interest, tax, depreciation and amortisation up 19.3 per cent to £13.1m. But adjusted pre-tax profits were down 4.8 per cent to £5.2m and earnings per share was down 24.7 per cent to 22.3p.