Page 17 - Patisserie Valerie Teaching Note

Q & A

Q1 Why would Luke Johnson feel obligated to introduce
funds into Patisserie Holdings plc after the 10 October
th
2018?

A1 In its most recent results statement in May, 2018
Patisserie Holdings said it had cash reserves of £28.8m.

The company collapsed after the accounting scandal

which left the firm without enough money to pay its

debts.

Q2 How quickly did the cash black hole open up?

A2 Cash black holes generally open up when the finance

department loses control of the process of reconciling

the cash in the bank to the accounts. If it built up

quickly, it means the business is haemorrhaging cash
and would make investors nervous of putting in any

more money. This was not the case with Patisserie

Valerie where the sheer volume of misstatements

would indicate a much longer period blood-letting.

Q3 What was the finance director doing?

A3 Chris Marsh had worked with Luke Johnson for well

over a decade. Current and former associates of his tell

me he is a "quiet guy", "not ostentatious - no gold
watch or fast car", "definitely Luke's man". He has been

suspended while forensic accountants try to figure

what happened here.