Patisserie Holdings PLC, based in United Kingdom, has been a 90-year old cafe and casual dining company which operates through segments including Patisserie Valerie, Flour Power City, Philpotts; and Drucker’s Baker & Spice. The product range comprises coffee, packaging, fruit, cocoa, dairy, wheat items and various cakes in categories including celebration cakes, gluten free cakes and wedding cakes.
Patisserie Valerie was performing well with its business accelerating and share price rising from 170 pence in 2014 to more than 400 pence in 2018 until it went into administration on January 22, 2019. Preceding the fallout, in October 2018, the company astonishingly reported a major GBP 40-million black hole in its finances with significant fraudulent accounting irregularities and thus went into crisis leaving the investors perplexed. Secret overdraft facilities worth GBP 9.7 million were discovered at HSBC and Barclays.
The company’s largest investor, Johnson, with a 37% stake, offered an emergency funding of GBP 10 million plus a short term GBP 10 million loan to be repaid when the few investors agreed to buy GBP 15.7 million worth of new shares priced at 50p, rendering the company’s worth way below the last valuation of GBP 581.21 million. The business failed to secure finances from the bank to meet its liabilities. Following the news of the near collapse, the group’s shares remain suspended on the London Stock Exchange. The crumbling of the most liked bakery and dining chain has to led to immediate closure of its 70 stores and almost 900 lay-offs. Around 2800 jobs were said to be at stake across the remaining retail stores.
The company along with its banks and the auditor, Grant Thornton, are facing scrutinising enquiries from high-end regulators including the Financial Reporting Council and the Serious Fraud Office into the occurrence of this fiasco. The appalling catastrophe presents a major learning lesson for the entrepreneurs and upcoming enterprises to keep growth pace and controls in check while expanding.
Some of the shareholders have been planning to take legal action against the firm. It has been discovered that the accounts for the company dating back to at least September 2014 comprise unreliable data on its financial performance according to the information provided to the potential bidders by the administrator KPMG. KPMG has unveiled that sales at the most prominent outlets had already fallen by 4% in the past two years and the stores currently opened were already onto the path of incurring losses worth GBP 2 million in the time-period ending September 2019.
Even so, the company has had a good brand value over the years, a fair market presence and good profit earnings. Moving forward, some of the potential parties are showcasing interest in buying few of the sites that are still trading but no formal announcement or offer has been reported until now.
The pressure on the retail sector in UK has been growing in the recent years with store closures, reduced consumer spending, low disposable income since the financial crisis of 2008, consumer preference for large malls and other changes on the high street. The political disharmony and the global economic slowdown can be considered to add fuel to the fire. Thus, the catastrophe for Patisserie Valerie has come amidst a rather unfavourable landscape in the UK.
With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities.
Amidst this, are you getting worried about these falling interest rates and wondering where to put your money?
Well! Team Kalkine has a solution for you. You still can earn a relatively stable income by putting money in the dividend-paying stocks.
We think it is the perfect time when you should start accumulating selective dividend stocks to beat the low-interest rates, while we provide a tailored offering in view of valuable stock opportunities and any dividend cut backs to be considered amid scenarios including a prolonged market meltdown.