Patisserie Valerie plunges into administration closing 70 cafes immediately

Patisserie Valerie plunges into administration closing 70 cafes immediately

It is thought that up to 900 Patisserie Valerie employees could lose their jobs

The café chain, which has been on the brink of collapse for months, has now gone into administration for good after failed rescue talks with banks.

It has been decided that 70 cafes will close immediately, while it is hoped that a buyer will be found for the remaining 121. Big Four firm KPMG has been appointed as the administrator.

Patisserie Valerie hit trouble last October when accounting irregularities were discovered on its accounts, including an inexplicable £20m hole in its books.

Today’s news comes after significant developments in the case last week, when “thousands of false entries into the company’s ledgers” were discovered.

On Tuesday 22 January Patisserie Valerie gave a statement saying that as a “direct result of the significant fraud” it could not renew its bank facilities, meaning did not have enough money to keep trading.

KPMG revealed there would be “significant” redundancies as a result of the café closures.

Patisserie Valerie has a total of 2,800 employees. According to the BBC, up to 900 of these staff may lose their jobs.

Prior to its collapse, chairman Luke Johnson, who originally helped to bail the company out in October, had been in talks with HSBC and Barclays to see whether a cash lifeline extension was possible.

Johnson has managed to extend an unsecured but interest-free loan of £3m so that all employees can at least be paid their January wages.

An unknown individual continues to be investigated in connection with the fraudulent activity. Former auditors Grant Thornton are also under investigation by the Financial Reporting Council as they question how such a big hole in the accounts was missed.

MP Rachel Reeves, chairwoman of the Business, Energy, and Industrial Strategy Committee, told the BBC that this administration “raises grave corporate governance concerns”.

Her committee has started looking into the future of the audit industry in the UK following a number of recent accounting scandals. Reeves confirmed that the Patisserie Valerie case would be a part of these inquiries.

Simon Bittlestone, CEO of Metapraxis, said “The fact that Patisserie Valerie has gone into administration is categoric proof that its management information was simply not good enough.

“Its accounting system had become so complex that it hid any understanding of the underlying business performance. The fact is that if those not implicated in the scandal had effective management information that allowed them to cut through the noise, they would have spotted such colossal mistakes far earlier.

“To avoid making the same mistakes, companies need to promote a greater collaboration between financial and management accounting. As it stands, the stories are becoming too distorted and the finance skillsets too disparate.

“When they start complementing each other, the board will have heightened understanding of the entire business and will know when something’s not quite adding up.”

 

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