An audit of Patisserie Holdings’ accounts has revealed “extensive” accounting irregularities.
The bakery chain announced this week that the cash flow and profitability of the business were “materially below” that announced in its most recent trading update.
The report has been published after trading in shares of Patisserie Holdings was suspended after “potentially fraudulent” accounting irregularities were flagged in October.
After discovering the accounting irregularities, Patisserie Holdings had slashed its estimated revenue and profits for the year to September to £120 million and £12 million respectively. It now says its projected £12 million profit is an overestimate.
According to its latest company update, the work carried out by the company’s forensic accountants since October has revealed “that the misstatement of its accounts was extensive, involving very significant manipulation of the balance sheet and profit and loss accounts”.
Among other manipulations, it said, this involved “thousands of false entries into the Company’s ledgers”.
The report added that it will take “some time” before a reliable trading outlook can be completed.
The company has since 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.
The group’s latest announcement adds to the troubled company’s woes. Last year, the group’s Chairman, Luke Johnson, was forced to loan the business £20 million of his own money to keep the firm afloat. Also, it is important to note that other shareholders later put up £15 million, £10 million of which was used to pay back half of Johnson’s loan.
The Financial Reporting Council (FRC) has now been called in to investigate the group’s accountancy firm for its role as auditor to Patisserie Valerie.