Patisserie Valerie’s accounting black hole grows.

19/3/19.

The gap in Patisserie Valerie’s accounts has widened to £94m, according to administrators at KPMG, as their report reveals that the café chain overstated its cash position by an estimated £54m. Following its collapse in January, the group was originally found to have overstated its cash position by £40m, but investigations now suggest a further £54m of unstated debts, with the company having failed to disclose overdrafts worth £10m and overstating its assets by £23m.

 

The report published by the administrators confirms: “Further analysis by the directors and forensic accountants in the following months led the board to understand that the consolidated accounts were overstated by approximately £94m.” It adds that Patisserie Valerie should consider taking legal action against several parties, including auditors Grant Thornton, after a scheme of inflating accounts led to the company’s collapse.

 

Regulators are combing accounts

 

“Thousands of false entries into the company’s ledgers” were revealed after the firm entered administration at the start of the year, with the scale of the company’s debts – concealed by fraudulent accounts – still coming to light. Suspicions regarding inflated profit margin and sales figures reported by the group’s accounts were first raised by HMRC over two years ago, with the Treasury suspecting that some invoices may have been forged.

 

In October 2018, majority shareholder Luke Johnson provided £20m in rescue funding to keep operations running in the short term, but despite this the company collapsed in January after failing to reach a deal with lenders and admitting it was unable to pay wage costs for the month as the “direct result of . . . significant fraud.” A host of regulators including the Serious Fraud Office, Insolvency Service, Financial Reporting Council and HMRC fraud investigation service are currently looking into the company’s accounting documents and servers to establish evidence of misconduct.

 

Piecemeal sales aim to raise £17m

 

The administrator’s current strategy is to dismantle and sell off the parent group’s seven companies individually, in a move that it is hoped will raise an estimated £17m. Several of the businesses have already been offloaded – with the Baker & Spice café chain sold in February for £2.5m. The Patisserie Valerie chain itself has been sold to Irish private equity firm Causeway Capital Partners for £8m, and the Philpotts sandwich chain has been sold to AF Blakemore & Son for £5m.

 

Meanwhile, five individuals and one supplier are thought to have been named in a report identifying fraudulent accounting practices at the parent company. The group’s former finance director Chris Marsh is under investigation by the Serious Fraud Office and was imprisoned on related charges earlier this year. The supplier implicated is accused of issuing fake invoices. Others company suppliers were affected significantly by what administrators have termed a widespread pattern of late payments, with the group’s 60 day payment terms allegedly exceeded by double in some instances.

See our previous articles

Patisserie Valerie enters administration

Patisserie Valerie acknowledges ‘backlog’ of unpaid supplier invoices

How can CPA help?

Were you owed money by Patisserie Valerie? Did they regularly pay you late?

Just because you have been dealing with a customer for many years without any issues, it doesn’t mean you are trading risk free.

Healthy companies can see their fortunes change , leaving suppliers who have extended credit caught out.

Just look at how many other big chains have disappeared from the high street  in recent years.

It may be too late to help you with Patisserie Valerie but what about your other customers?

At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.

We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports predict approximately 96% of company insolvencies long before they arrive.

Companies in trouble usually have very bad bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.

As a third party collector, we can get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.

Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper.

Also if you have regularly been paid paid late by business customers, why not talk to our new Late Payment Compensation department? We can help unlock hidden potential compensation claims you are due from those bad payers. This compensation could springboard your business to success.

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