The Salvation Army’s trading arm has bought commercial contractor Kettering Textiles Limited for an initial £2m, and has agreed to pay £12.75m in total depending on future earnings of the company over the next three years.
Kettering Textiles attracted controversy last year after press reports criticised it for making £10m from running Salvation Army’s clothing collection banks over a three-year period, while the charity pocketed £16.3m.
Kettering Textiles Limited is one of the UK’s biggest clothing collection and textile recycling companies. It held a contract with the Salvation Army Trading Company to collect clothes from its recycling banks under which the charity received two-thirds of profit, and Kettering Textiles got one-third.
The Salvation Army Trading Company says the deal announced this week - a charity acquiring a commercial operator - is the first of its kind in the charitable sector, and will provide it long-term, sustainable income stream to expand its charity shop network by well over a third over the next five years.
The Salvation Army Trading Company has purchased Kettering Textiles at an initial asset value of £2m, with an additional projected consideration of a maximum £10.75m based on its performance over the next three years.
According to Salvation Army Trading Company calculations, Kettering’s clothing collection scheme will provide it with approximately £34m in pre-tax profit over the next four years.
The trading arm plans to use the additional projected profits from its new clothing collection division to expand Salvation Army’s number of charity shops across the UK from 133 stores to around 300 over the next five years.
An official statement on the acquisition highlights that the Charity Commission and Fundraising Standards Board have been informed about the transaction.
Guardian expose
The mention is likely to have been prompted by a Guardian article last year which criticised Kettering Textiles for making £10m from running Salvation Army’s clothing collection banks over a three-year period, while the charity pocketed £16.3m.
The Guardian journalist who wrote the story complained about the relationship to the Fundraising Standards Board, who referred the complaint to the Salvation Army. In response, the charity rolled out disclosure statements for all of its clothing collection bins operated by Kettering Textiles.
In its latest accounts the Salvation Army Trading Company says: “In January 2011 a national newspaper published a sensationalist article regarding the Salvation Army Trading Company and its textile collection contractor. Following this coverage both the Charity Commission and the Fundraising Standards Board gave an entirely clean report, both in terms of its operational relationship with Kettering and its governance of that relationship.”
Until this year, the Salvation Army Trading Company’s board members included Nigel Hanger, managing director of Kettering Textiles, who is also understood to be a majority shareholder of the firm.
Hanger resigned and stood down from the Salvation Army Trading Company board in January of this year.
