Based in Liverpool, Real Good Food sells cake ingredients and decorations all over the world and has agreed to sell its snack food division to The Hut Group in Manchester for £43m. Tony McDonough reports

Liverpool cake ingredients and decorations business Real Good Food (RGF) has agreed to sell its South Wales-based snack bar business in a £43m deal.

RGF, which employs hundreds of people at its factory in Toxteth, will sell Brighter Foods to Manchester-based The Hut Group. It owns 84% of the business with the rest owned by managers at Brighter Foods so its share of the sale proceeds will be £35.64m.

The net assets being disposed of amount to £17.3m, resulting in a profit on disposal of approximately £20.4m. Brighter Foods, which creates, develops and manufactures snack bars for the healthy snacks market. It operates from manufacturing facilities in Gwynedd in mid-Wales.

The sale leaves AIM-listed RGF with Renshaw, a cake ingredients division, and Rainbow Dust Colours, a cake decoration business. Both customers in the UK and across the world from the production base in Toxteth.

In a statement to the stock exchange, RGF said: “The board believes that the disposal provides the company with the opportunity to crystallise an attractive return on invested capital with respect to Brighter Foods.”

It also said it would help “reduce net debt, make a material contribution towards the group’s pension deficit and also to provide additional financial flexibility to support the operation and growth of the continuing group”. The group’s pension fund would be boosted by £8.5m using the proceeds of the sale. 

RGF, which in January reported widening pre-tax losses of £4m for the six months to September 30, 2020, due largely to the COVID pandemic, also issued a trading update which reported rising revenues in the second half of its financial year to March 31, 2021.

Executive chairman Mike Holt said: “We are very pleased with the disposal which crystallises substantial value for the group and enables us to halve our debt burden at a stroke, whilst materially improve the funding of the pension scheme.

“It also provides a basis for further balance sheet restructuring, as we look to accelerate and maximise value within Renshaw and Rainbow Dust Colours.”