Patisserie Valerie hires KPMG to prepare for potential collapse

Following the emergence of a £20 million black hole in its accounts, café chain Patisserie Valerie has struggled to return to stability, while scrambling to uncover the extent of its short-fall in cash flow. Now, as forensic specialists have uncovered the damage may be even greater than first thought, the group has brought KPMG on board, to weigh up “all options” in the company’s future.

A “devastating” accounting scandal at the café chain was “significantly worse than first thought”, according to a release earlier in January, after forensic accountants identified “thousands of false entries into the company's ledgers.” The discrepancies in parent company Patisserie Holdings are thought to have been revealed by professionals from Big Four firm PwC. Their analysis “revealed that the misstatement of its accounts was extensive.”

The announcement followed the resignation of Non-Executive Director James Horler, who became the latest senior figure to resign from his position at the beleaguered cake chain just days before. According to a statement from the firm on the London Stock Exchange this afternoon, Horler has resigned “with immediate effect in order to focus on his role as chief executive officer at another business.”

In a statement to the London Stock Exchange, Patisserie Holdings announced that the misstatement of its accounts – initially uncovered in October 2018 – involved thousands of false entries into the company's ledgers, according to the forensic investigation. It also explained that the cash flow and profitability of the business had been overstated in the past, and was “materially below that announced in the trading update on 12 October 2018, which was based on limited work carried out over a 48-hour period."

The group added that RSM was now appointed as auditor, replacing Grant Thornton, who held the contract at the time the “accounting black hole” occurred. However, due to the extent of the irregularities, it will take "some time" for RSM to complete a restatement of its accounts and prepare the audited figures to 30th September 2018.

Now, as the situation seemingly continues to rapidly deteriorate, Patisserie Valerie has apparently lurched towards the brink of collapse. The Birmingham headquartered company has brought in Big Four firm KPMG to explore “all options”, including falling into an insolvency. Initially, however, KPMG will advise the group on what routes it could take “to recover from the devastating effects of the fraud, and to preserve value for its stakeholders going forward.”