Cake, decoration and bakery products group Real Good Foods PLC (LON:RGD) is in slimming mode as it seeks to stabilise after a tough 18 months of trading.
Latest to be trimmed is Garrett Ingredients. It has been sold to Kent Foods for £1.8mln.
Real Good Food still owns a number of standalone businesses. Renshaw and Rainbow Dust Colours in cake decoration; R&W Scott in food ingredients and the premium bakery arm (Haydens).
However, Garrett had “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”.
The proceeds from the sale will be used to pay down debt.
The group's major shareholders have staunchly supported the business while the AIM-listed group sorts out its financial position and trading.
In March, a term sheet was signed by the group’s three major shareholders - Napier Brown Ingredients, Omnicane International and funds managed by Downing LLP - that provided a £4mln at a coupon of 10% per year.
The company said the funds relieve pressure on cash availability over the coming months, while it continues to work on the longer-term arrangements.
Garrett better suited elsewhere
Hugh Cawley, chief executive, said Garret was a small, non-core business and its sale was as part of a plan to improve the group's performance.
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.
At 14.65p, the company is valued at £11.5mln.