Patisserie Valerie is a large café
chain which has been operating in the
UK since 1926. The chain specialises
in the manufacturing and sale of cakes
and other baked goods in addition to
offering a wide variety of other food.
The bakery is 37% owned by
renowned entrepreneur Luke Johnson.
Since Johnson’s acquisition of the
business in 2006, the chain has
expanded tremendously to now operate
almost 200 stores across the UK and
Republic of Ireland.
On the 10th of October 2018, Patisserie Valerie was notified of the suspension of all trading in
the company’s shares. This was due to the discovery of a black hole in the company’s accounts
of more than £20 million. The discovery indicated severe potential fraudulent accounting and
irregularities, as it was a potentially huge material misstatement in the company’s records. The
next day, Patisserie Valerie announced a major shortfall between its reported financial status
and the current financial position of the business. Just one day before this discovery the
company had reported that it held £28 million in cash and on the 11th of October it announced
that it then held -9 million British pounds in cash! The company was to be deemed out of
business if the directors were unable to immediately inject capital into it. Furthermore,
unreported and unauthorised overdrafts of almost £10 million were then discovered on the 14th
of October 2018.
In January 2019, the company announced the failure of its negotiations with banks to obtain
support from their side. Eventually, Patisserie Valerie declared its plans to close 70 of its
operating stores, which meant the loss of almost 900 jobs. Currently, Patisserie Valerie has
succeeded in obtaining a cash injection from its Chairman, Luke Johnson. Also, in midFebruary, 2019 it concluded a management buyout agreement worth £13 million with
Causeway Capital Partners to acquire the company’s assets. Nonetheless, the investigation into
how this fraudulent accounting might have taken place is still ongoing.
The links below will provide you with:
§ A brief discussion of the Patisserie Valerie case from the BBC news
o https://www.youtube.com/watch?v=_ikLT7BwWoE
§ An interview with Chris Boxall; portfolio manager and one of the Patisserie Valerie’s
stock owners, analysing the case
o https://www.youtube.com/watch?v=BrkYfgjfD6k