The Times – lid lifted on £40m hole at heart of Patisserie Valerie: Cheques worth millions of pounds were bounced at HSBC and Barclays in Solihull in the West Midlands, artificially inflating the cash reserves of accounts belonging to Patisserie Valerie, according to a report. The banks are a 20-minute drive from the head office of Patisserie Valerie in Birmingham. The report by PricewaterhouseCoopers (PwC), which has been investigating the suspected fraud that led to the collapse of Patisserie Valerie for the past three months, has not been published but details have been reported by The Times. The report contains details of ways a black hole of more than £40m was hidden in the accounts of Patisserie Holdings, its parent company. PwC has identified forged company minutes used to take out overdrafts of almost £10m, bank contracts with forged signatures of some senior directors and fictitious invoices for shop refurbishments. All of this went undetected for at least three years and possibly far longer until an announcement to shareholders in October in which the company revealed “significant and potentially fraudulent accounting irregularities”. The Serious Fraud Office opened an investigation and Patisserie Holdings’ shares were suspended. Administrators were called in last week after the company failed to renew its banking facilities with Barclays and HSBC. A total of 71 sites have closed with the loss of 900 jobs. “This is a company that may have been built on sand all along and no one got wind of it,” said Gavin Pearson, a forensic accountant at Quantuma. Unlike many of its rivals in the casual dining business, Patisserie Valerie was reporting a rise in sales each year and an ever-growing pile of cash. “Anyone looking to invest should have looked at its margins relative to its peers,” said Stephen Clapham, an analyst specialising in studying company accounts. “In fact it was making better margins than Starbucks in 2011, which is inconceivable.” Sam Fuller, managing director of GCA Altium, a mergers and acquisitions adviser, added: “Surely alarm bells must have been ringing when everyone else was being pummelled by the heavily publicised rising tide of costs? Did no-one on the board raise any doubts?” The manipulation of the accounts has been described as unsophisticated, leading to further questions from shareholders and regulators about how Patisserie Valerie’s board, its auditors and its banks failed to spot the apparent fraud. Grant Thornton, Patisserie’s former auditor, is facing questions over whether it examined the company’s accounting journals, which could have provided clues about the suspected fraud. Its audits going back three years are also being investigated by the Financial Reporting Council. Meanwhile, the Financial Conduct Authority is scrutinising Barclays and HSBC for possible failures in their monitoring of Patisserie’s current accounts and overdrafts. “These were simple techniques being used to fake the numbers to make the shops look like they were performing well,” said a person who has read the PwC report. There was no evidence in PwC’s report money was being routinely siphoned off for personal use, the person added. Both PwC and KPMG, its administrators, are picking over Patisserie’s true financial position, and the business, which still operates 121 outlets around the UK, could be sold this week. David Costley-Wood, the joint administrator, said last week KPMG was “pleased with the level of interest we have received”.

 

Craft beer brewery boom continues: A total of 430 craft breweries opened in the UK in 2017, the latest figures from HM Revenue & Customs has revealed. This has accelerated from more than 300% in 2009/2010, when openings ran at just over 100 each year. Craft beer has seen a 90% rise in sales in the past year, reports The Mail. 

 

LXi Reit provides £6.6m forward funding for Travelodge hotel in Gosport: LXi Reit has exchanged contracts to provide forward funding for the pre-let development of a Travelodge hotel in Gosport, Hampshire, for £6.6m, reflecting a 5.7% net initial yield. The 70-bedroom hotel has been fully pre-let to Travelodge Hotels on a 25-year lease from completion with no tenant break right, with five-yearly rent reviews index-linked to Consumer Price Index inflation (collared at 1% per annum and capped at 4% per annum compound). Planning consent has been granted, the agreement for lease has exchanged and LXi Reit is forward funding the property on a fixed price basis. The company will receive an income from the developer during the construction period. LXi Reit is not developing the site or assuming development risk. The building works are due to complete in the fourth quarter of this year. Founded in 1985, Travelodge operates more than 560 hotels and more than 40,000 rooms in the UK, Spain and Ireland.

Leadership Summit open for bookings: Propel is launching the Leadership Summit, which will see a select group of the sector’s most experienced bosses share their expertise on leadership. The full-day event, in partnership with Elliotts, will take place on Tuesday, 12 February at One Moorgate Place and is open for bookings. Speakers will include Will Stratton-Morris, UK chief executive of Caffe Nero, who will talk about building high-performance teams. Alasdair Murdoch, chief executive of Burger King, speaks about the role of leadership in business turnarounds. Elliotts chief executive Ann Elliott will talk to Des Gunewardena, chief executive of D&D London, about the lessons of leadership he has picked up in his career in the sector. Duncan Garrood, chief executive of Ten Entertainment, will give his views on leadership and the customer experience, while Jo Fleet, managing director of Flat Iron, will talk about empowering people and trust and getting the team to “buy in” through clear communication and vision. Mark Jones, chief executive of Carluccio’s, will explain how the company is building the quality and skillsets of its general managers to lead the business out of decline. Simon Townsend, chief executive of Ei Group, will give his views on the challenges of leadership during a period of immense change and Zoe Bowley, managing director of PizzaExpress, will give her top ten tips on leadership. Meanwhile, Loungers founder Alex Reilley will talk about the adaptations involved in growing a business from one site to more than 100, celebrating success and the art of succession, while Ann Elliott will give her views on the power of mentoring to grow talent in organisations. Propel managing director Paul Charity said: “With the industry facing such challenging times, effective leadership has never been more important. This is an unmissable opportunity to learn from high-profile leaders in our sector.” Prices are £295 plus VAT for Premium members, £345 plus VAT for operators and £445 plus VAT for suppliers. To book, email anne.steele@propelinfo.com