Cake and decorations specialist Real Good Food (RGD) has sold its ingredients business Garrett’s as part of its cost-reduction efforts.

The Liverpool-based company is expect to make a “modest loss” on the sale to independent ingredient supplier Kent Foods.

Real Good Foods sold the business for £1.8m as it trimmed down following a tough 18 months of trading.

In October 2017 the business announced a profit warming after commodity price increases and labour costs hit earnings.

For the year ending March 31 2017, Garrett Ingredients Limited recorded an operating loss of £0.9m on sales of £21.3m.

Garrett’s was founded in 1948 and supplies sugars, dairy products, fats and oils, stabilisers and ice cream mixes to businesses. It was bought by Real Good Food in 2010.

The board at Real Good Food said it “believes that [Garrett’s] has more in common with Kent whose skills and aptitude are better suited to managing its contracts.

Investors of Real Good Food were told in January 2018 that “poorer than expected” sales in late 2017 and early 2018 meant that it was expected to post earnings before tax (EBITDA) of up to £3.5m for the year.

In the last 12 months, share prices for the AIM-listed food group have fallen from 38.5p to 14.5 per share. It is valued at around £11.4m.

Real Good Food were pleased to sell the Bristol-based ingredients company to help improve its financial performance, said chief executive, Hugh Cawley.

“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,” he commented.

The proceeds of the sale will be used to pay down debt. The company still owns a number of standalone businesses: Premuim bakery arm Haydens, R&W Scott food ingredients and decoration business Renshaw and Rainbow Dust Colours.

Last month, the Group’s three major shareholders – Napier Brown ingredients, Omincare and Downing LLP – supported the business with a term sheet to provide a loan of £4m at a coupon of 10% per year, to relieve pressure over the coming months