Patisserie Valerie, the cafe chain which came within hours of financial collapse in October after discovering a multimillion-pound black hole in its accounts, has uncovered “thousands of false entries into the company’s ledgers”.
In a statement to the Stock Exchange, the company, which operates 200 cafes and employs 3,000 staff, said that work carried out by 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.”
Luke Johnson, the multimillionaire chairman of the business, was forced to pump £20m of his own cash into the stricken firm to keep it afloat. Other shareholders put up £15m. The company was valued at £450m when the financial crisis was uncovered, but the shares were suspended and have yet to restart trading.
The Serious Fraud Office has confirmed that it has opened a criminal investigation into an individual but has not given further information.
Patisserie Holdings said on Wednesday it was clear that the cash flow and profitability of the business has been overstated in the past and was “materially below” the numbers the company provided when the accounting black hole first emerged.
The company said it had hired accountants KPMG in a bid “to help it recover from the devastating effects of the fraud, and to preserve value for its stakeholders going forward”.
The company was granted a standstill of its banking facilities until Friday of this week, and is now in talks with its lenders to extend the agreement.
When the scandal was first revealed, Patisserie Valerie said that 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.
In a 12 October statement it said underlying profits might have been only £12m in the year to 19 September, compared with £26m reported a year before. The new update says that £12m was an overestimate.
It added that it would take some time before a reliable trading outlook could be produced.