Patisserie Valerie boss describes £20m accounting black hole as a 'nightmare'

Luke Johnson, the serial entrepreneur behind Patisserie Valerie, described the cake chain’s near-collapse as a nightmare, as he said the company had run up nearly £10m in secret overdrafts.

Patisserie Valerie’s finance director was arrested last week, after the company stunned the stock market by revealing it had found “significant, and potentially fraudulent, accounting irregularities”, reported to be more than £20m.

Speaking after he agreed to lend £20m of his own money to keep the business afloat, Johnson said he had experienced the “most harrowing week of my life”, which felt like a “nightmare that I’d wake up from”.

“There were 2,800 jobs at stake, there was 12 years of effort that I and colleagues had put into the business and the board were determined not to allow the business to go into administration,” he told the Sunday Times.

Johnson has paused his weekly column with the newspaper, which also reported details of secret overdrafts that directors said they discovered only this week.

The existence of two facilities worth £9.7m, with HSBC and Barclays, came as a shock to Patisserie Valerie’s directors and its auditors, Grant Thornton, according to Johnson.

The restaurant magnate, who made his name with the £8m purchase and rapid expansion of Pizza Express, has secured a rescue package designed to save Patisserie Valerie, which warned last week it would go under without a significant injection of capital.

Under the terms of the deal, Johnson, the company’s largest investor with a 37% stake, will lend it £10m, plus a further short-term £10m bridging loan.

The latter loan will be repaid when investors pay £15.7m for new shares at a deeply discounted price of 50p that means the company will be worth less than £70m, days after its valuation on the junior Aim stock market was pegged at nearly half a billion pounds.

Investors taking part in the rescue include fund managers Invesco Perpetual, Schroders and Miton, alongside stockbroker Hargreave Hale.

Johnson, who invests in businesses including Majestic Bingo and Feng Sushi via his private equity group Risk Capital Partners, said he would have to scale back his other commitments.

But he predicted the rescue package would be enough to steer Patisserie Valerie out of danger.

“At certain points in the week I was thinking, ‘I can’t carry on with this’, but I don’t feel like that this evening,” he said. “I think we are coming out the other side.”


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