Investigations reveal accounting black hole swelled to £94m

Investigations into the collapse of Patisserie Valerie have found the group’s hidden problems were at least £50m worse than initial estimates suggested.

The Birmingham-based cafe chain was plunged into a crisis in October when it revealed serious accounting irregularities.

Patisserie Valerie was a respected stock market-listed business worth £450m last October, before it revealed huge issues with its finances.

It sparked off a sequence of increasingly desperate measures – its shares were suspended, finance director Chris Marsh was arrested and left, chief executive Paul May departed, £10m emergency funding was put in – that ultimately failed to save the retailer.

Administrators from KPMG were appointed in January once it became clear the group would not be able to pay the wages.

Initial estimates of Patisserie Valerie’s accounting black hole were set around £40m, caused by the overstatement of cash and the existence of previously-unknown overdrafts.

But further investigation has found other problems, including company assets being overstated by £23m and creditors understated by £10m, which increased the accounting black hole to around £94m.

A number of investigations into the company’s collapse are continuing, focusing on allegations of fraud and the failure of directors and auditors to spot accounting irregularities.

There is the possibility of further legal action. Chief executive Steve Francis, who was brought in as a turnaround specialist, was dismissed by new owners Causeway Capital and is reported to be planning to sue.

Causeway paid £8m – £3m of which is deferred and based on future earnings – in a deal that saved 96 shops and nearly 2,000 jobs. Administrators had already closed 70 stores and 920 jobs had already been cut.