The Salvation Army, one of the main collectors of used clothing in the UK, has acquired the private business which operates textile collections on its behalf in a deal worth up to 12.75m.
The charitys trading arm, the Salvation Army Trading Company (SATCoL), has purchased Northamptonshire-based Kettering Textiles for an initial asset value of 2 million, with an additional projected consideration of up to 10.75 million based on performance over the next three years.
SATCoL was established in 1991 and since its formation it has worked in partnership with Kettering Textiles to collect material from over 5000 textile recycling banks and door-to-door collections throughout the UK.
At present The Salvation Army receives two thirds of the profit generated by clothing collections, with Kettering textiles receiving the remaining third, in an arrangement which came under criticism in 2011 following an investigation by The Guardian (see letsrecycle.com story). However three years after the acquisition SATCoL will receive 100% of the profit.
According to the Salvation Army the deal is the first of its kind in the charitable sector which will see SATCoL aim to increase its profitability and secure long term revenue. It is expected to see SATCoL earn an extra 34 million in pre-tax profit over the next four years.
Acquisition
The acquisition was welcomed by environment secretary Caroline Spelman. She said: This is a fantastic business opportunity for one of the UKs best known charities. Not only will this create jobs and lead to revenue worth tens of millions of pounds, which The Salvation Army will put to good use in its charity work, but its also great for the environment, keeping valuable items from rotting in landfill an aim that The Salvation Army has been a great supporter of.
Commenting on the deal transaction, Lieutenant Colonel Ivor Telfer, chairman of SATCoL, said: It has always been part of SATCoLs strategic thinking to create a long term, sustainable and dependable income stream and this acquisition gives us that by providing, in due course, with 100% of the profits from this scheme.
“This is a fantastic business opportunity for one of the UKs best known charities. Not only will this create jobs and lead to revenue worth tens of millions of pounds, which The Salvation Army will put to good use in its charity work, but its also great for the environment.”
Caroline Spelman
Completing this deal now provides SATCoL with a smooth transition of Kettering Textiles employees, know-how and key customer relationships for a significant period of time.
The day-to-day running of Kettering Textiles will not be affected by the takeover and Salvation Army Trading Company has said that it will safeguard all staff jobs with employees expected to move over to the Salvation Army group at a later date. Directors at the firm will also remain involved in the business for a minimum of two years to aid the handover of responsibilities.
Nigel Hanger, managing director of Kettering Textiles, said: As I approach retirement age I have made no secret of my desire to step back from the running of the business and following an approach from SATCoL, the Board of Kettering Textiles concluded that this transaction was in the long term interest of our employees, customers and suppliers. The deal safeguards staff jobs whilst providing SATCoL with the long standing and vast management expertise of Kettering Textiles Limited and our key wholesaler relationships.
Growth
Following the transaction the charity will form a new wholly-owned division called Salvation Army Clothing Collection Division which the door-to-door and textile collections will operate under.
The Salvation Army Trading Company has said it plans to use some of the additional profits from its clothing collection division to continue to expand its number of charity shops across the UK from 133 stores to around 300 outlets in the next five years.
SATCoL also said it will continue to gift aid at least 75% of its annual profits to the work of the Salvation Army. Clothing and recycling reuse has earned the charity 23 million in gift aid in the past four years, which has been driven by demand in Eastern Europe and around the world where the clothing is sold in second-hand shops.
SATCoL said that industry data shows that the selling price for clothing for recycling and reuse have grown by 35-40% over the past five years with significant growth throughout the industry expected as only 24% of clothes discarded in the UK are recovered for recycling and reuse.
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