Patisserie Valerie calls in KPMG as administrators
Blair Nimmo and David Costley-Wood, partners at KPMG, have been appointed as joint administrators to Patisserie Holdings plc, the parent company of high street café chain Patisserie Valerie, which has collapsed putting thousands of jobs at risk after failing to secure an agreement with its lenders
23 Jan 2019
The firm was brought in earlier this month to look at the options for the company, which has been in financial turmoil since the discovery of accounting irregularities last October.
In a January update Patisserie Valerie said an internal investigation had found these involve ‘very significant manipulation of the balance sheet and profit and loss accounts’, including thousands of false entries into the company's ledgers. The total amount involved was estimated to be as much as £40m.
In its latest update the company said that ‘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.’
Patisserie Holdings has over 200 stores across the UK and operates under five different brands including Druckers Vienna Patisserie, Philpotts, Baker & Spice, and Flour Power City, as well as Patisserie Valerie.
The company employs in excess of 3000 staff, and on appointment the administrators said they will close a total of 70 stores and concessions, while continuing to trade 121 stores while they assess options for the business.
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.
‘Unfortunately, however, we have had to take the difficult decision to close 70 stores resulting in a significant number of redundancies. We will be working with those affected employees, providing all support and assistance they need.’
David Costley-Wood and Will Wright have been appointed joint administrators to subsidiaries Patisserie Acquisition Ltd, Stonebeach Ltd Philpotts Ltd, and Flour Power City Ltd.
Patisserie Holding’s chairman, entrepreneur Luke Johnson, who bought Patisserie Valerie in 2006, has personally extended an unsecured, interest-free loan of £3m to help ensure that the January wages are paid to all staff working in the ongoing business. The statement said this loan will also assist the administrators in trading as many profitable stores as possible while a sale process is undertaken.
The Financial Reporting Council is investigating Grant Thornton’s audit of the financial statements of Patisserie Holdings for the years ended 30 September 2015, 2016 and 2017 under its audit enforcement procedure.
The regulator is also conducting an investigation under the accountancy scheme into Patisserie Valerie’s former CFO, Chris Marsh’s preparation and approval of Patisserie Holdings Plc’s financial statements and other financial information provided by Marsh.
In a separate move, investors in the company that owns Patisserie Valerie are looking at launching legal action over the collapse of the cafe chain.
Steven Mash, partner in the dispute resolution team at Fladgate warned: ‘Investors in struggling companies do not, unfortunately, have a right to recover their investment as a matter of course.
‘There are, howeve,r a number of avenues that can be pursued should it become apparent that the business has been operated negligently or indeed with wilful irregularities both against the company and against the directors personally if they have breached their fiduciary duties.
‘Shareholders who invested in the company prior to it being placed into administration on the back of misleading statements in published information are likely to have a claim under section 90A of the Financial Services and Markets Act 2000, legislation which is becoming more widely used to protect shareholders’ rights ever since the collapse of RBS and the ill-fated rights issue in 2008.’
Report by Pat Sweet, Sara White