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UPDATE 2-Patisserie Valerie owner warns of collapse without urgent capital injection

Thu, 11th Oct 2018 13:54


* Cafe chain pursuing 'immediate' capital injection

* Crisis triggered by accounting irregularities

* CFO suspended and trading in shares halted (Recasts and adds background)

By Ben Martin

LONDON, Oct 11 (Reuters) - The owner of Britain's Patisserie Valerie café chain warned on Thursday that it is in danger of collapse if it cannot urgently raise capital after discovering a potential accounting fraud.

Patisserie Holdings said an investigation had found a "material shortfall" between the reported accounts of the London-listed company and its true financial health.

"Without an immediate injection of capital, the directors are of the view that there is no scope for the business to continue trading in its current form," it said in a statement.

Patisserie Holdings, whose cafes are best known for their range of cakes and employ about 2,500 staff, added that it was working with its advisers to assess its options.

The company had said on Wednesday that its directors first became aware of "significant, and potentially fraudulent, accounting irregularities" a day earlier.

At the same time it disclosed that it had suspended its finance chief, Chris Marsh, halted trading in its shares, and launched an investigation. The company had a market value of about 444 million pounds before its stock was suspended.

Marsh, who joined the company in 2006, did not return a request for comment from Reuters on social media site LinkedIn and could not be contacted.

Later on Wednesday, the firm said that HM Revenue & Customs had filed a winding up order against its main trading subsidiary over 1.14 million pounds that Britain’s tax office says it is owed, with a High Court hearing listed for Oct. 31.

While that petition had been filed at court on Sept. 14 and advertised in the London Gazette, one of the UK’s official journals of record, on Oct. 5, Patisserie Holdings said its directors had only learnt of the legal proceedings on Oct. 10.

A spokesman for the chain, which is led by leisure industry entrepreneur and leading shareholder Luke Johnson, declined to say how the board was first notified of the problems or whether the Serious Fraud Office (SFO) had been contacted.

An SFO spokeswoman said the white collar crime prosecutor could not confirm or deny whether it had opened an investigation, while Grant Thornton, Patisserie Holdings' auditor, also declined to comment.

AUDIT SCRUTINY

There was no indication from Patisserie Holdings about what had happened to the 28.8 million pounds in net cash which it had said in May it had as of the end of March.

Accounts filed by Stonebeach Limited, the subsidiary that is being pursued by HMRC, say that it had about 17 million pounds of cash in the bank and at hand at the end of September 2017.

Patisserie Holdings, which was floated four years ago and has grown from eight sites to more than 200 since it was bought by Johnson’s Rick Capital Partners private equity firm in 2006, posted first-half pretax profits of 11.1 million pounds on revenues of 60.5 million pounds.

The swift unravelling of the business, in which Johnson retains a stake of about 37 percent, comes amid heightened scrutiny in Britain of the way that companies are audited, with the UK's Competition and Markets Authority launching a review of the audit sector on Tuesday.

This follows high-profile British corporate collapses, including those of construction firm Carillion and drinks retailer Conviviality earlier this year.

The Financial Reporting Council, Britain's accounting watchdog, did not comment on whether it had opened an investigation into the audit of Patisserie Holdings. ($1 = 0.7552 pounds) (Reporting by Ben Martin in London Editing by Keith Weir and Alexander Smith)



(c) Copyright Thomson Reuters 2018. Click For Restrictions - https://agency.reuters.com/en/copyright.html




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