Patisserie Valerie accounting fraud scandal worse than initially feared

After the café chain nearly collapsed last year over accounting irregularities, the company’s owner has since announced that the scale of the alleged fraud is far worse than it initially thought.

Patisserie Valerie Source: Bloomberg

The owner of Patisserie Valerie is looking at ‘all options available’ to the company after finding out that the scale of its accounting scandal is far worse than it initially feared.

The severity of the issue came to light after Patisserie Holdings’ forensic accountants revealed that the misstatement of the café chain’s accounts was extensive and involved ‘significant manipulation of the balance sheet and profit and loss accounts’.

Other account manipulations also involved thousands of false entries into the company’s ledgers, according to a recent update released by Patisserie Holdings.

The café chain’s owner admitted that it will take some time before it is able to provide a reliable trading outlook, with more investigation required into the account irregularities.

Patisserie Valerie caught cooking the books

From the work carried out by forensic accountants to date, it appears that the cash flow and profitability of Patisserie Valerie had been exaggerated in the past and is materially lower than the figures it provided in its October 12 2018 trading update.

Patisserie Holdings has hired KPMG to assist it in carrying out a review of all options available to it to recover from the devastating effects of the fraud, and to preserve value for its stakeholders going forward.

The company confirmed that RSM have been appointed auditors, but due to the fraud and attendant accounting issues it will be some time to complete a restatement of the business’ accounts and prepare the audited figures to 30th September 2018.

The company has also been in discussion with its bankers to extend the standstill of its bank facilities beyond January 18 and will issue an update when those discussions have concluded.

Unclear future for Patisserie Valerie

There is still a lot of work to be carried out before its shares will recommence trading, with its owner offering no timeline for when the business will return to normal.

Since the revelations about the alleged fraud surfaced the company has replaced practically all of its senior management team, with former Starbucks executive Rhys Iley coming onboard as commercial director in December and turnaround specialist Steve Francis taking the helm as its new CEO back in November.

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