Bakery and cafe chain Patisserie Valerie (CAKE.L) said late on Wednesday that the multimillion fraud on its books discovered last year is far more significant than first thought, involving “thousands of false entries into the Company’s ledgers.”
The company said in an update to shareholders on Wednesday afternoon that forensic accountants had discovered “the misstatement of its accounts was extensive, involving very significant manipulation of the balance sheet and profit and loss accounts.”
“It will take some time before a reliable trading outlook can be completed,” it said.
Patisserie Valerie said cashflow and profitability had been misstated in the past and “is materially below” what the market was told on 12 October, shortly after the accounting errors were first discovered. The company has appointed RSM as its new auditors but said it “will be some time to complete a restatement of the Company’s accounts.”
KPMG has also been appointed to “assist in carrying out a review of all options available to it in order to recover from the devastating effects of the fraud, and to preserve value for its stakeholders going forward.”
Patisserie Valerie first told the market it had discovered accounting irregularities in October. The bakery chain, which is owned by prominent entrepreneur Luke Johnson, has been battling for survival ever since. Johnson gave the chain an emergency £10m bridging loan to help ensure its survival.
Patisserie Valerie said Wednesday that it was in talks with banks about extending a freeze on its banking facilities beyond January 18. The size of these facilities was not disclosed and a spokesperson declined to give figures.
The company added that it has carried out wholesale management change since the scandal was uncovered.
“The Company has appointed a new CEO, a new interim CFO, a new non-executive director, a new commercial director and a new production director, as well as other management appointments,” it said.
Chris Marsh, the company’s former chief financial officer, was arrested and bailed shortly after the fraud was uncovered. The Serious Fraud Office is also investigating. The Times reported the accounting blackhole could be as big as £40m ($51.4).
Patisserie Valerie shares have been suspended since the fraud was first uncovered in October.