The owner of popular café brand Patisserie Valerie has admitted the multi-million pound fraud it uncovered last year was worse than it first thought. The companies forensic accountants have revealed extensive misstatement of its account involving ‘very significant’ manipulation of the balance sheet and profit and loss accounts.
Patisserie Holdings revealed in October 2018 that it had discovered a £20m black hole in its books, forcing majority shareholder Luke Johnson inject £20m of his own money to keep it afloat. As a result, finance director Chris Marsh was suspended from his role as Chief Financial Officer (CFO) and was subsequently arrested by police the next day
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.
However, 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 original 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 considerably below that announced in the trading update on 12 October 2018, which was based on partial work carried out over a 48-hour period. Patisserie Valerie said an initial investigation of its accounts showed that instead of having £28m in the bank, as the company had previously told the City, it was nearly £10m in debt.
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.