Nightmare at the cake counter for Patisserie Valerie. Luke Johnson tells how the scandal at his cafe chain led to the ‘most harrowing week’ of his life. The week started normally for Luke Johnson. On Monday evening, the former Pizza Express backer and serial entrepreneur went for a drink with a friend. On Tuesday morning, he walked through Mayfair to the offices of his venture capital firm, Risk Capital Partners. At 9.28am, he cheerfully submitted his Sunday Times column — a piece about the importance of business partners — and at 11am he sat down with the chief executive of the cafe chain Patisserie Holdings (CAKE), his single biggest investment, for what he thought would be a routine update. Instead, his world imploded. Paul May was in a state of shock. He told Johnson that Patisserie Valerie’s bank accounts had been frozen. As Johnson listened in disbelief, May ran through a series of increasingly alarming discoveries. Patisserie Valerie had been a darling of London’s AIM market since floating in 2014, its shares rising from 170p to 429.5p, valuing it at £446m. The information May relayed to Johnson suggested that, in fact, it was close to insolvent, with a £20m black hole in its accounts.
Patisserie Valerie’s secret overdrafts. Shock disclosure of £10m unreported loans exposes chaos at cafe chain. The board of troubled cafe chain Patisserie Holdings (CAKE) has discovered that overdrafts of almost £10m were run up on two secret facilities, The Sunday Times can reveal. Company overdrafts had been set up with Barclays and HSBC, and £9.7m had been used by the time they were discovered last week. The disclosure caps several days of astonishing developments at the listed cafe chain that have left its executive chairman, the entrepreneur and Sunday Times columnist Luke Johnson, fighting for his fortune and reputation. Johnson, 56, said it had been “the most harrowing week of my life”.
Serious Fraud Office eyes new HBOS Reading probe. The Serious Fraud Office (SFO) is considering a fresh investigation into a multimillion-pound fraud at a subsidiary of Lloyds Banking Group (LLOY), emails reveal. The agency is conducting “a pre-investigative review” into allegations in an internal report known as Project Lord Turnbull, claiming that HBOS had a strategy to conceal the fraud at its Reading office which affected hundreds of business customers. Six people, including two former bank staff, were jailed for the £245m scam last February. This prompted Lloyds, which bought HBOS in 2008, to apologise and launch a £100m compensation scheme.
Unilever (ULVR) bosses, including Paul Polman, braced for City grilling. Investors demand answers on bungled relocation plan. Unilever’s bosses will this week face investors for the first time since the failed attempt to move the company’s headquarters from London to Rotterdam. The FTSE 100 consumer goods maker, which was forced into an embarrassing U-turn over the relocation earlier this month after a backlash from leading institutional investors, is due to report results for the third quarter. However, its financial earnings are likely to be overshadowed by questions over the future of chief executive Paul Polman, finance director Graeme Pitkethly and chairman Marijn Dekkers.
B&M boss Simon Arora crosses Channel for French prey. The discount retailer B&M European Value Retail S.A. (DI) (BME) is hunting for an acquisition to break into the French market, as chief executive Simon Arora sets about trying to turn the company into one of Europe’s largest players. Arora has drawn up a list of targets in France and is understood to be holding talks with a local chain. A deal would take Arora a step nearer to achieving his vision of turning B&M into the “Dollar General of Europe” – a reference to the 15,000-store US discount chain. B&M acquired German discounter Jawoll in 2014.
Why the tie-up between Standard Life and Aberdeen is a merger most foul! A new chairman will have his work cut out keeping the peace after the tie-up between Standard Life and Aberdeen. Sipping coffee amid the hubbub of the recent Conservative Party conference, Martin Gilbert looked relaxed — despite having partied until 2am with the Ryder Cup winners in Paris, snatched a few hours’ sleep, then caught a flight to Birmingham. The gregarious Gilbert was phlegmatic when conversation turned to the merger of his Aberdeen Asset Management with its Edinburgh rival Standard Life. The share price of the so-called “Staberdeen” has fallen by more than a third in a year as clients have withdrawn £34.5bn of net funds because of concerns over performance. “It looks brilliant,” Gilbert joked, referring to even greater problems Aberdeen had suffered before the deal. He laughed: “I mean, can you imagine what it would have been like if we hadn’t done it?” The formation of Standard Life Aberdeen (SLA) came at a time of turmoil for the fund management industry, which is being shaken by the rise of passive and “smart beta” investment products that offer savers exposure to stock markets at a fraction of the cost of traditional funds. Both companies had been bleeding clients’ money.
Shadowy analyst Boatman plots attack on Babcock. The FTSE 250 engineering services company Babcock International Group (BAB) has come under attack from a shadowy research firm that claims to have spent six months compiling a dossier on its shortcomings. Boatman Capital Research, which is not traceable on Companies House and refuses to disclose the identity of its directors, claims that the company has been “burying bad news about its performance” and that the leadership team is “not up to the job”. A section of Boatman’s report, sent to The Sunday Times, concentrates on Babcock’s Appledore shipyard in Devon. It says that Babcock has “failed to win new business” for the yard since building an offshore patrol vessel for the Irish navy, and has used Appledore as a “piggy bank” by taking dividends of £11m in the past two years.
Time to get back together with Vodafone Group (VOD). If Vodafone had called to sell shares at the beginning of the year, there could have been only one response: hang up. It wasn’t looking good. The telecoms giant was under pressure after having to splash out in auctions for spectrum — the right to use the airwaves — and it was in talks to buy cable assets in Europe. Both stoked fears over the company’s ability to sustain dividend growth. Investors acted accordingly and shares have fallen more than 35% since January. Today, Vodafone is trading at a discount to its European peers, where traditionally it has enjoyed a premium. There are signs it has reached the bottom of its trough. With the shares closing on Friday at 151p, the risks are more than priced in. Buy.
