Announcing the move at the same time as its half year results, the company said it had sold R&W Scott, which is based in Carluke, Scotland, for a total consideration of £3.95m. This would consist of an immediate £1m cash payment, a further deferred amount of £0.5m and £2.45m of third party debt assumed by R&W Scott's management team.
In the group's financial year ended 31 March 2017, RGF said R&W Scott had contributed £10.36m of revenue, and incurred a pre-tax loss of £3.3m, closing that year with net assets of £1.89m. RGF stated that the MBO "offered the best route to maximising value from the business, whilst disposing of this non-core asset".
R&W Scott has been producing jams and preserves for more than 130 years. It also makes chocolate flavoured coatings, sweet and savoury spreads and speciality soft icings for customers in sectors including retail, foodservice and wholesale customers worldwide. It has been a part of RGF since its inception.
The initial cash from the proceeds received would be used for working capital, RGF said.
Other disposals
R&W Scott is the third business the company has disposed of since the end of its last financial year, following the sale of its Garrett Ingredients and Haydens Bakery businesses to Kent Food and Bakkavor Group respectively. All three deals had raised £17.8m, it added.
"This disposal, alongside those of Haydens and Garretts, marks a significant milestone in the turnaround and performance improvement programme of Real Good Food," said RGF chief executive Hugh Cawley. "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.
“Overall, through the actions of the past 12 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.”
The R&W Scott deal follows RGF's board's scathing criticism of the previous direction of the business in October. The company has also just announced the appointment of two independent non-executive directors: Mike Holt and Steve Dawson.
Downturn in revenue
In results for the six months ended 30 September, RGF announced a slight downturn in revenue from continued operations, from £31.9m to £30.4m and a pre-tax loss of £9.1m. This included a goodwill write-down of £6.3m in its Cake Decoration division. However, the company said it remained confident in the long-term potential of that division and said the group had delivered underlying adjusted profit before interest, tax, depreciation and amortisation of £0.9m, up from 2017.
The company reported that it had also succeeded in wiping £5.9m of net debt from the balance sheet, which now stands at £29.9m.
RGF invested £2m in the past six months in production capacity for Brighter Foods' snack bars and is looking to commission Renshaw's new soft icing plant shortly.
Cawley said: “The first half saw significant, progressive corporate activity, including 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."
