Real Good Food PLC (LON:RGD) has agreed to sell Garrett Ingredients Limited to food ingredients company Kent Foods Limited for £1.8mln.
Shares dropped 6.2% to 15p in morning trading.
The disposal of the dairy and bakery ingredients supplier is part of Real Good Food’s efforts to turnaround the company following a series of profit warnings.
The group said it believes Garrett has “more in common with Kent whose skills and aptitude are better suited to managing its contracts, given Real Good Food's resources are being increasingly focused on serving the end consumer”.
Real Good Food will use the proceeds from the sale to pay down debt.
"We are pleased to have agreed the sale of this small, non-core business as part of our plan to improve the group's performance,” said chief executive Hugh Cawley.
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The company expects to make a “modest loss” on the disposal.
Garrett generated an operating loss of £0.9mln on revenues of £21.3mln in 2017.
Last month Real Good Food told investors that it was continuing to explore the details of a proposed financing, which would include an issue of new equity.
READ: Real Good Food suffers poor Christmas but maintains benefits of investment are starting to show
In a January trading update, it said it expected to make an underlying loss in the year to the end of March of as much as £3.5mln following worse-than-expected trading in late 2017 and early 2018 due to a poor performance in UK grocery retail and destocking in overseas markets.