Dobbies Garden Centres, the retailer at the centre of last year's takeover battle between Tesco and Sir Tom Hunter, today announced plans to raise £150 million through a rights issue after annual profits slumped 11.7 per cent.

The garden centre specialist said today it will offer investors six shares in exchange for every five held at £12.00 each to raise a total £150 million, which is 14.6 per cent above Dobbie's market value.

The price Dobbies is offering is below the £15.00 per share Tesco paid last year in a vicious fight with Scottish tycoon, Sir Tom, which left the supermarket giant in control of just 65 per cent of Dobbies. Sir Tom continues to hold a 29.9 per cent stake in Dobbies and also controls Wyevale Garden Centres, the UK’s biggest garden centre chain.

The company said it will use the proceeds from the rights issue for acquisitions but it is not clear if it also intends to pay off some of its debt which is currently more than £100 million. Last year, Tesco granted Dobbies a £100 million 10-year loan facility.

Shares in Dobbies plunged by 8.15 per cent to £12.40 today after the company said that profits for the 12 months to 31 October, 2007, fell from £4.3 million to £3.8 million while like-for-like sales rose only 1.4 per cent. Annual turnover increased by 21.4 per cent to £83.5 million but 20 per cent of the rise was generated by new store openings.

Dobbies blamed a poor performance in the second half of its financial year on a wet summer. The group also said that it was cautious about 2008 due to a slowdown in consumer spending.

The company said today: “It's no secret that at a time when many households are feeling the pinch from rising energy bills, fuel charges and high interest rates, retailers will have to compete harder than ever to succeed. The garden centre sector is no exception, and we remain cautious with regard to consumer economics in 2008."

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