Real Good Food, which also released its half-year report today, will receive £1.5mln in cash upfront and is scheduled to receive a further £500,000 before the end of September of next year; R&W Scott will also take on £2.45mln of third-party debt.
The business contributed £10.36mln of revenue to Real Good Food’s top-line in the year to the end of March 2017 and made a loss of £3.3mln.
The business had net assets of £1.89mln but Real Good Food said it expects to record a paper loss of around £3.0mln on the disposal and will write down parent company reserves in the current financial year by around £5mln.
Previously cash-strapped Real Good Food has made three disposals this year, raising £7.2mln in cash (with another £500,000 to come) and offloading £7.2mln of third-party debt.
"This disposal, alongside those of Haydens and Garretts, marks a significant milestone in the turnaround and performance improvement programme of Real Good Food. We are now able to focus on the core continuing businesses, Brighter Foods and Cake Decoration, with no bank term loan and a fully funded growth plan,” said Hugh Cawley, the chief executive officer of Real Good Food.
"Overall, through the actions of the last twelve months, the performance of, and prospects for, what is now a smaller and more focused group, have improved considerably. The company now has a solid platform from which to maximise earnings and look to optimise shareholder value," he added.
In the six months to the end of September, Real Good Food’s revenue from continuing operations eased slightly to £30.4mln from £31.4mln the year before.
Underlying earnings (EBITDA) were positive at £900,000, compared to a loss the previous year of £400,000.
A goodwill impairment charge of £6.3mln was largely responsible for a loss before tax of £9.1mln, compared to a loss in the corresponding period of 2017 of £3.4mln.
Net debt at the end of the reporting period had been reduced to £29.9mln from £35.8mln at the end of September 2017.
Current trading remains in line with management’s expectations.
"The first half saw significant, progressive corporate activity, including a further restructuring of the Group to focus on our two core divisions, Cake Decorations and Food Ingredients. At the same time, the underlying performance of these continuing operations improved, reflecting the cost savings made,” Cawley said.
"The performance of these continuing operations remains in line with our modest expectations for the year. Overall, the board remains confident, but far from complacent, in the future prospects for the group and reiterates that the performance of, and prospects for, what is now a smaller and more focused group, have improved considerably," he added.