Patisserie Holdings gets winding up order over unpaid tax, warns over potential fraud
Things went from bad to worse for Patisserie Holdings on Wednesday as the company said it has received a winding up petition for its main trading subsidiary, Stonebeach, for £1.14m in tax owed to HMRC, having earlier warned of potentially fraudulent accounting irregularities.
FTSE AIM 100
3,637.40
17:14 26/04/24
FTSE AIM 50
3,960.47
17:14 26/04/24
FTSE AIM All-Share
755.28
17:14 26/04/24
Patisserie Holdings
429.50p
05:31 21/02/19
Travel & Leisure
7,572.38
16:59 26/04/24
The group, which released a statement earlier saying it had asked for its shares to be suspended from trading on AIM amid a possible fraud probe, said the petition was filed on 14 September and advertised in the London Gazette last Friday, but claimed it has only just become aware of it.
The hearing date is listed for 31 October and Patisserie said that it and its advisors are in communication with HRMC.
The company said earlier in the day that it had discovered "significant, potentially fraudulent" accounting irregularities and as a result, a potential "material" mis-statement of the accounts.
"This has significantly impacted the company's cash position and may lead to a material change in its overall financial position," it said. The business, which owns Patisserie Valerie, Druckers Vienna Patisserie, Philpotts, Baker and Spice and Flour Power City Bakery, said it will conduct a full investigation with its legal and professional advisers into its true financial position.
In the meantime chief financial officer Chris Marsh has been suspended from his role.
Chairman Luke Johnson said: "We are all deeply concerned about this news and the potential impact on the business. We are determined to understand the full details of what has happened and will communicate these to investors and stakeholders as soon as possible."
The statement followed a report late on Tuesday by Sky News, which suggested that Patisserie Holdings has found a black hole of £20m or more in its accounts.
Neil Wilson, chief market analyst at Markets.com, said "£20m would be a huge blow but not terminal as the company’s net cash position stood at £28.8m at the time of the most recent interim results".
Meanwhile, CMC Markets analyst Michael Hewson noted that in its most recent trading update, the company posted a first-half profit of £11.5m on revenues of £60.5m, which means "on a best case scenario the company may find that its profits for the year could well get wiped out".
Russ Mould, investment director at AJ Bell, said that at the moment, there isn’t enough detail to find out exactly what’s happened although the fact the company says the matter may potentially be fraudulent doesn’t bode well for its shareholders.
"Patisserie had, until now, always been seen as a well-run, successful business with growth in profits and dividends. In May it reported a £28.8m net cash position and executive chairman Luke Johnson said the business had ‘a strong balance sheet’. Now the business says the accounting issue has ‘significantly impacted’ its cash position.
"Sometimes it is easy to spot dubious accounting methods in a company’s financial results, other times you have no clue. Investors trust a company to be open and honest with its reporting as the publication of financial results and trading updates are often the only insight they have into how a business is performing."
Mould said that while it's too early to jump to conclusions about Patisserie, the news is incredibly damaging for investor sentiment towards corporate reporting transparency in general.
"Recent financial errors at drinks distributor Conviviality (which led to its demise) are still ingrained in investors’ memories, so too accounting hiccups at supermarket Tesco and telecoms group BT," he said.