Bakery chain Patisserie Valerie collapses into administration
Patisserie Valerie has collapsed into administration, putting up to 3,000 jobs at risk, after it was unable to extend its bank facilities amid allegations of fraud.
The bakery chain said discussions with its lenders HSBC and Barclays to extend a standstill agreement had come to nothing, leaving it with no option but to appoint KPMG as administrator.
Parent company Patisserie Holdings Plc said: “As a direct result of the significant fraud referred to in previous announcements, it has been unable to renew its bank facilities, and therefore regrettably the business does not have sufficient funding to meet its liabilities as they fall due.”
The company added that Patisserie Valerie chairman Luke Johnson had extended £3m unsecured, interest-free loan to help ensure that January wages are paid to all staff working in the ongoing business.
KPMG said it would continue to trade 121 out of 200 stores, but added that 70 cafes and concessions would close over the next few days, resulting in a “significant number” of redundancies.
Blair Nimmo, head of restructuring at KPMG and joint administrator, said: “Our intention is to continue trading across the profitable stores, as collectively the brands have a strong presence on the high street and have proven very popular with consumers.
“At the same time, we will be seeking a buyer for the business and are hopeful of a good level of interest.”
Just hours before the company announced it was going into administration, shareholder Chris Boxall told Sky News Business presenter Ian King:
“The issue with Patisserie Holdings – we’ve never seen anything like it…most of us would have taken a shot at running a cake and coffee shop – what could have gone wrong?
“We’re not being told.
“The fear now is that there is little value left for shareholders.
Quite frankly, we took a prudent view and set the client book value to zero at year end.”
It became apparent that the once successful company was in trouble when shares of Patisserie Holdings were suspended from trading in October, after it disclosed the discovery of a black hole in its accounts, from “potentially fraudulent” accounting irregularities.
That led to its former finance director being arrested and released amid a Serious Fraud Office investigation.
Last week, the company indicated that the scale of alleged fraud against the chain could now be worse than it first feared.
It said: “The work carried out by the company’s forensic accountants since (October) has revealed that the misstatement of its accounts was extensive, involving very significant manipulation of the balance sheet and profit and loss accounts.
“Among other manipulations, this involved thousands of false entries into the company’s ledgers.
“It will take some time before a reliable trading outlook can be completed while the above work streams progress.
“The initial indications from the work carried out to date is that the cashflow and profitability of the business has been overstated in the past and is materially below that announced in the trading update on 12 October 2018, which was based on limited work carried out over a 48-hour period.”
That investigation last year resulted in estimated revenue and profits for the year to September being slashed to £120m and £12m respectively.
Grant Thornton, which had overseen Patisserie’s books since 2006, is the subject of a Financial Reporting Council inquiry for its handling of the contract.
The first Patisserie Valerie opened in Soho, London in 1926, and went on a massive expansion drive in 2006, taking the number of outlets to its current 200.
The company has crashed into administration in its 93rd year, at a particularly challenging time for UK high street retailers.