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Patisserie Valerie to close down without 'immediate injection of capital' Patisserie Valerie to close down without 'immediate injection of capital'
(about 4 hours later)
The stricken cakes and cafe chain Patisserie Valerie said it will have to cease trading without “an immediate injection of capital”. The stricken cakes and cafe chain Patisserie Valerie is teetering close to collapse after admitting it needed “an immediate injection of capital” to survive.
The owner of Patisserie Valerie was plunged into financial crisis on Wednesday after it revealed a multimillion-pound accounting black hole and that its main trading subsidiary was facing a winding-up order. The blunt statement from the directors of the 200-strong chain, which has nearly 3,000 staff, came less than 48 hours after the company said it had discovered a multimillion-pound black hole in its accounts and was suspending its shares.
On Thursday, the board said there was a “material shortfall between the reported financial status and the current financial status of the business” and it would need new funds to continue trading. The company – valued at £450m when trading was halted – was unable to say if it would be able to pay staff wages this week.
It said the company was “assessing all options available to the business to keep it trading and will update the market in due course”. It later revealed it was facing a winding-up order from HMRC over an unpaid tax bill of more than £1m that was filed in the high court in mid-September but which the firm’s directors had been unaware of.
The company’s options for a cash injection include an emergency loan, a rights issue or a white knight bidder who may insist on a pre-pack administration process. On Thursday, the board said it needed new funds to continue trading “in its current form” and revealed there was a “material shortfall between the reported financial status and the current financial status of the business”. Patisserie Valerie said it was “assessing all options available to the business to keep it trading and will update the market in due course”.
Duncan Swift, the head of food advisory at the accountancy firm Moore Stephens, said he was aware that some suppliers to Patisserie Valerie’s trading subsidiary, Stonebeach, had paused deliveries until the position of the company was clarified. Those options are likely to include an emergency loan or a white knight bidder who may prefer the business to go into administration first in order to ditch any debts.
The 92-year-old cake chain has not said how much cash it needs, or estimated the size of the accounting black hole – though it is said to be more than £20m. Insolvency experts said that any rescue bid would be extremely difficult unless Patisserie Holdings, the Aim-listed owner of the cafe chain, was able to establish the scale of its financial problems.
The chairman of Patisserie Valerie is the serial entrepreneur Luke Johnson, whose other restaurant ventures have included Strada, Giraffe, Pizza Express and, at one time, The Ivy in London’s West End. His 37% stake in the cake business was valued at £165m at the beginning of this week, but that could now be wiped out.
Duncan Swift, head of food advisory at the accountancy firm Moore Stephens, said some suppliers to Patisserie Valerie’s trading subsidiary, Stonebeach, had already halted deliveries until the position of the company was clarified.
Swift said Stonebeach should not be able to make new orders or take credit from suppliers, adding that only products already in transit and unable to be recalled were likely to be delivered in the coming days.Swift said Stonebeach should not be able to make new orders or take credit from suppliers, adding that only products already in transit and unable to be recalled were likely to be delivered in the coming days.
“A winding-up order would normally be the death knell for a business. The saving grace may be that it is part of a larger group which has got financial support and shareholders with reserves they could use to refinance the company,” he said. The chain’s finance chief, Chris Marsh, who has worked for the company since 2006 and banked a £700,000 profit selling share options in July, has been suspended from his role.
The 92-year-old cake chain, which has more than 200 stores and more than 2,500 employees, on Wednesday halted trading in its shares as it revealed “potentially fraudulent” financial irregularities that, according to Sky News, could amount to more than £20m. The Guardian visited five Patisserie Valerie branches in central London, where staff claimed they had not been told anything about the company’s financial problems. Store managers said it was “business as usual”.
Just hours after the suspension, Patisserie Holdings said its board had been unaware that HM Revenue and Customs had filed a winding-up petition at the high court against Stonebeach over an unpaid £1.14m tax bill. The petition was filed on 14 September and published in the London Gazette, the official public record, on 5 October. “We don’t know anything,” said a young female employee from Portugal who declined to be named. “We are a bit worried, but there is nothing we can do. Also this is London, if I lose this job I can get another one.”
The winding-up petition enables other creditors to call in their debts and is likely to have prompted banks to freeze Stonebeach’s accounts and credit insurers to withdraw cover for its suppliers. Patisserie Holdings declined to comment. Another staff member said: “We are a big company and I think they are going to find a solution. We don’t know anything apart from what we read in the newspapers.”
The winding-up petition filed by HMRC enables other creditors to call in their debts and is likely to have prompted banks to freeze Stonebeach’s accounts. Credit insurers are also understood to have withdrawn cover for the company’s suppliers. Patisserie Holdings declined to comment.
All transactions from 5 October are subject to scrutiny and in such cases the directors could potentially be held personally accountable for trading while insolvent.All transactions from 5 October are subject to scrutiny and in such cases the directors could potentially be held personally accountable for trading while insolvent.
Patisserie Holdings is understood to have called in PricewaterhouseCoopers to carry out a forensic analysis of its books. It is also expected that the Financial Reporting Council and the Financial Conduct Authority regulators will examine the issues at Patisserie Valerie. The Serious Fraud Office could also potentially look into the matter. All three bodies declined to comment on whether they had yet been in touch with the company. Patisserie Holdings has called in PricewaterhouseCoopers to carry out a forensic analysis of its books.
It is also expected that the Financial Reporting Council and the Financial Conduct Authority regulators will examine the issues at Patisserie Valerie. The Serious Fraud Office could also potentially look into the matter. All three bodies declined to comment on whether they had yet been in touch with the company.
Retail industryRetail industry
Food & drink industryFood & drink industry
Financial Conduct AuthorityFinancial Conduct Authority
AccountancyAccountancy
Financial sectorFinancial sector
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