The sale includes the business as well as certain assets that were undisclosed by RGF. Kent Foods will pay for the acquisition in cash, with the money used to reduce RGF’s indebtedness.
Garretts sourced dairy, sugar and other specialist food ingredients to sell to food manufacturers across the UK and had been part of RGF since 2005.
Consumers over producers
The board believed the business had more in common with Kent, whose “skills and aptitude were better suited to managing its contracts”. RGF said this was the result of its resources being increasingly focused on the end consumer instead of producers.
For the financial year ended 31 March 2017, Garretts contributed £21.3m of sales at an operating loss of £0.9m, with net assets of £1.9m. RGF expected to report a modest loss on the disposal.
Commenting on the sale, chief executive Hugh Cawley said: “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.”
The sale to Kent Foods is expected to be completed by 20 April.
Followed a search for funding
RGF’s disposal of Garretts followed the company’s search for new funding to supplement short term financing in January, after revealing a pre-tax loss of £6.7m in interim results for the six months to 30 September 2017.
Despite revenue climbing 30% to £63.6m during the first half of last year, the company said substantial additional funding would be required over the year ahead for working capital and investment needed to implement the group’s growth plan.
Last year also saw the business launch an investigation into its financial reporting and corporate governance, after it was revealed former directors – including founder and ex-chairman Pieter Totté – received payments for consultancy services, not reported by the company.