Patisserie Valerie had so little cash it stopped putting butter in its puff pastry, new owner reveals
- The cake chain collapsed into administration having been worth £450million
- The new owners found broken ovens, a leaking roof, and suppliers left unpaid
- The firm laid off 900 staff after a £100m black hole was found in its accounts
Patisserie Valerie had so little cash it stopped putting butter in its puff-pastry, the rescued business’s new owner has revealed.
Broken ovens had lain unused for months, the bakery roof was leaking, suppliers had gone unpaid and there was no head of health and safety, private equity firm boss Matt Scaife has said.
The cake chain crashed into administration early this year after a £100m black hole was discovered in its accounts, leading to the loss of 900 jobs.
Mr Scaife, whose firm Causeway Capital Partners bought the chain – once valued at £450m – for just £5m spoke of his shock at discovering some of the problems in the cash-strapped business.
Patisserie Valerie, which had more than 200 stores last year, had to suspend trading in its shares after a £100m black hole was discovered in its accounts
Timeline: from Soho patisserie to national chain to administration … and beyond
1926: Patisserie Valerie is founded as a small cake shop in London
2006: Luke Johnson, the entrepreneur behind Pizza Express, buys the eight-branch chain and begins aggressive debt-financed expansion.
October 10, 2018: Patisserie Holdings, which owns Patisserie Valerie, reveals a multimillion-pound black hole in its accounts.
It says its main subsidiary is facing a winding up order from HMRC.
Trading in shares of the company, valued at £450m, are suspended.
October 12: Luke Johnson agrees to pump £20m of his own money into PV to keep it afloat amid claims of ‘fraudulent activity’.
October 26: Finance director Chris Marsh resigns after being arrested and bailed. The Serious Fraud Office opens an investigation.
November 15: chief exec Paul May is replaced by Steve Francis, a specialist in business rescue and turnaround. Johnson remains as chairman but agrees to waive his £60,000 salary.
January 16, 2019: Patisserie Valerie says it had found ‘thousands of false entries into the company’s ledgers’, resulting in profits ‘materially below’ the numbers reported when the black hole was first found. Forensic accountants say they had found ‘very significant manipulation’ of the chain’s books.
January 22: Patisserie Holdings goes into administration. Around 70 branches close with the loss of 900 jobs.
February 8: Mike Ashley’s Sports Direct says it is making a surprise bid for Patisserie Valerie, but changes his mind two days later.
February 14: Causeway Capital Partners buys a large chunk of the business as one of a series of deals and sell-offs which raise £13m and save 2,000 jobs.
He told the Telegraph it was clear the company had been ‘seriously mismanaged’ in the run up to its collapse.
He said: ‘Things had been going wrong for a considerable time and as soon as we arrived the extent of the under-investment became increasingly apparent.
‘There were ovens that had been broken for several months, and there was a leak in the bakery roof.
‘Suppliers were often left unpaid, while new ones were sought. Overall, it was not a good culture.’
He added: ‘When someone decides to stop using butter in the puff pastry – in a patisserie – you know that something serious has happened.
‘At the same time there was no head of health and safety in place, which for a food business is extraordinary. It was symptomatic of what was going on across the business.’
Patisserie Valerie’s extraordinary implosion, from a UK-conquering chain of 200 stores to its insolvency in January and sale to Causeway weeks later, gripped corporate Britain.
The ‘significant, and potentially fraudulent, accounting irregularities’ revealed in October last year put one of Britain’s best-known entrepreneurs, executive chairman Luke Johnson, under the microscope.
He has always insisted he knew nothing of the financial black hole, and invested or loans tens of millions of his own money in the business as the scale of its problems started to become known.
The chain’s finance director, Chris Marsh, was arrested and bailed . The Serious Fraud Office has opened a criminal investigation but has not commented further.
More than 900 staff lost their jobs in the wake of the collapse and the new company operated by Causeway now operates 96 outlets with 2,000 staff, and is shrinking the product range from 800 to 150 and menus from 37 to two.
Mr Johnson, whom MailOnline has contacted for comment, said he had been tricked by a fake picture of the firm’s financial health and questioned the work of auditor Grant Thornton. He said the chain’s collapse had shattered his ego.
Meanwhile Mr Scaife, who is the Causewau partner in charge of turning Patisserie Valerie around remains upbeat.
He said: ‘We are delighted with the progress we have made. We found a lot of problems but we also inherited some great staff who really care about what they do.
‘There’s been a lot of hard work but it’s very much back on track.’
Pizza Express mogul Luke Johnson, the man behind the Patisserie Valerie expansion, said recently its collapse had affected his health