The owner of Patisserie Valerie – the 200-strong cafe brand embroiled in an accounts scandal that nearly collapsed the business – has admitted the multi-million pound fraud it uncovered last year was worse than it first thought.
Patisserie Holdings revealed in October 2018 that it had stumbled across a £20m black hole in its books, forcing majority shareholder Luke Johnson to come its rescue with a funding package to keep it afloat.
A new CEO, interim CFO, non-executive director, commercial director and production director have all been appointed since in a bid to help the chain recover.
But today it said that work carried out by the company’s forensic accountants 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 company stated.
The initial indications from the work carried out to date is that the cash flow 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.
The company has hired KPMG to assist it in carrying out a review of all options available to it in order to recover from the “devastating effects” of the fraud, and to preserve value for its stakeholders going forward.
RSM were appointed auditors today, but due to the fraud and attendant accounting issues it will be some time to complete a restatement of the accounts and prepare the audited figures to 30th September 2018, it said.
Additionally, Patisserie Holdings remains in discussions with its bankers to extend the standstill of its bank facilities beyond January 18th, and said it will issue an update when those discussions have concluded.