Patisserie Holdings is launching a share offer and has admitted it needs a £20m capital injection to avoid calling in administrators.
The crisis-hit company is hoping to raise £15m through the offer and is also set to enter into a new £10m loan agreement with chairman Luke Johnson. It said that, based on current information, this would enable it to continue trading in its current form for the foreseeable future.
Update 5.45pm 12 October: Patisserie Holdings has reported that the share placing has raised £15.7m before expenses.
The business, which operates more than 150 Patisserie Valerie sites and around 50 sites under other brands, has been conducting an emergency investigation after becoming aware of serious accounting issues this week.
Finance director Chris Marsh was suspended from his role on Tuesday, and has since been arrested and bailed.
In a statement issued to the Stock Exchange this afternoon (12 October), Patisserie Holdings said it has a net debt of around £9.8m, adding that “historical statements on the cash position of the company were mis-stated”.
“The board believes the current financial position of the company is such that it requires an immediate cash injection of no less than £20m, without which there is no scope for the group to continue trading in its current form and would therefore need to appoint administrators,” it stated.
Based on current information, it expects annual revenue of £120m and EBITDA of £12m in the year ending 30 September 2019 but warned these figures are based on the investigative work performed to date. They could not be verified until further work is conducted including a re-audit of the company’s financial statements and the 30 September 2018 year-end audit.
Investigations into the financial irregularities were at “very preliminary stage”, and will be subject to further review in the “weeks and months to come”.
“At this stage, the directors cannot predict the outcome of those investigations with any degree of certainty,” it stated, adding that further findings of financial irregularity could result in more losses for the company, its shareholders and wider stakeholders.
The company’s shares remain suspended from trading on AIM and this is expected to continue until the financial position is clearer.
Patisserie Holdings is now looking to raise around £15m through the issue of 30,000,000 new ordinary shares. Luke Johnson is to loan the business £10m under a three-year term on an interest-free/fee-free basis, and will also provide a £10m bridging loan of up to £10m to be paid back from the share offer.
The company said that, based on current information, it will be able to continue trading in its current form for the foreseeable future on completion of the fundraising.
“Shareholders should be aware that without the loan, the bridging loan and the proceeds of the placing the group would need to immediately secure alternative financing,” it stated.
“There can be no guarantee that alternative financing will be available to the company in the required amounts or on acceptable terms for the ongoing working capital requirements of the group and therefore the group would likely enter into immediate administration.”
Patisserie Holdings crisis timeline
- 10 October (AM): Share trading suspended as company launches investigation into serious accounting irregularities. Chief financial officer Chris Marsh suspended.
- 10 October (PM): Winding-up petition filed at the High Court relating to £1.14m owed to HMRC by Stonebeach Limited, the company’s principal trading subsidiary.
- 11 October: Patisserie Holdings reports it cannot continue to trade in its current form without immediate cash injection.
- 12 October (AM): Chris Marsh arrested by police and released on bail.
- 12 October (PM): Business announces plans for £15m share offer and £10m loan, admitting it needs £20m to avoid calling in administrators