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PATISSERIE HOLDINGS (CAKE)

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CommissarJones
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Re: PATISSERIE HOLDINGS (CAKE)

#173314

Postby CommissarJones » October 12th, 2018, 4:01 pm

CAKE is proposing a share placing to raise £15 million, and Luke Johnson is going to lend the company another £10 million.

https://www.investegate.co.uk/patisseri ... 44169469D/

And the Serious Farce Office is investigating.

https://www.sfo.gov.uk/2018/10/12/patis ... dings-plc/

Bouleversee
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Re: MrC's Smallcap Sweeps for Oct 2018

#173345

Postby Bouleversee » October 12th, 2018, 5:34 pm

PinkDalek wrote:
dspp wrote:I hold Pat Val (Cake)in the Ff folio.it will be interesting to see what comes out.



Ff (not Family firms maybe Foolish folio)?

A separate Cake Topic on here might take some beating, as I don't think MrC engages in much conversation, as such, on his helpful Smallcap Sweeps.

Not that I've got anything to add to the mix, that hasn't been said in various external places already.


Or Forever Fund?

ADrunkenMarcus
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Re: PATISSERIE HOLDINGS (CAKE)

#173395

Postby ADrunkenMarcus » October 12th, 2018, 8:43 pm

An emergency capital raise and continued trading is better than administration!

Were the company's finances fact or fiction?

Operating margins of 15.9%, 14.7%, 15.9%, 16.5% and 17.6% (from 2013 to 2017 inclusive) indicated a business gradually strengthening its position as it expanded a profitable store estate.

Return on Capital Employed of 34%, 21.4%, 21.3%, 21.4% and 21.5% (from 2013 to 2017 inclusive) indicated remarkably(!) stable returns.

Lots of questions to answer. The 2013 figures were, presumably, fully audited(!) before the company floated in 2014. They were paying a dividend growing very strongly and had reported almost £29 million in net cash on the balance sheet, not almost £10 million in debt that has actually arisen.

It seems from recent (unverified) estimates that the true operating margin may have been more like 7.6% and not 17.6%.

If it can continue as a going concern, subject to the new cash, as the directors indicate, then there may be a chance some shareholder value can be rebuilt over time. However, profits will be lower; the p/e is bound to be much lower; the balance sheet is weaker; the dividend may be cut or eliminated; and more shares are in issue. I think even seeing the 170p float price any time soon is pie in the sky. Confidence has likely collapsed.

I am glad I sold out of my SIPP holding at 416p in August. It represented over 5% of the portfolio when I sold. I can't claim I saw this coming! Unfortunately, I still had it in my dividend growth portfolio - it represented one of my smallest positions at 1.7% of the capital, so a collapse to 50p a share or less (or even a total wipeout) won't destroy more than that.

Best wishes

Mark.

dspp
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Re: PATISSERIE HOLDINGS (CAKE)

#173429

Postby dspp » October 13th, 2018, 9:44 am

The emergency raise is better than collapse, I'll give you that.

I appreciate the legal constraints a board will have been under in the circumstances. Nonetheless to not give private investors equal access to the raise on an equivalent basis to the institutionals is annoying to say the least. I take it that the board count as institutionals, but of course they will.

Whatever has been going on, it was the job of the board to have put in place the systems and checks to prevent this. I am utterly amazed that nobody at all bar one sole individual is in the frame here. That is incomprehensible to me. If nothing else the entire board - including the major shareholder - are guilty of incompetence. They should contribute their funds to the refinance, find replacements, and go. Every single one of them. This was a £400m+ mkt cap organisation, not some utterly rinky dink outfit.

I d not know how far back the trouble started, and hence what this has to say about the role of the auditors.

The FF-folio is a Friend's portFolio, hence the name. Fortunately it had only 1% or so in CAKE, by design not accident.

I think there will be a lot more to come out from this.

regards, dspp

flyer61
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Re: PATISSERIE HOLDINGS (CAKE)

#173430

Postby flyer61 » October 13th, 2018, 9:45 am

Mark,

thanked, excellent summation. I have never owned (though possibly through a VCT?) but a £440 million market cap for a couple of hundred cake shops made me get tummy flutters right from the get go. The Company was gone without the Johnson lifeline. This will possibly roll on for sometime so fasten your seat belts and standby to be amazed.

My guess is 22 - 27 pence a share when and if it is relisted.

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Re: PATISSERIE HOLDINGS (CAKE)

#173434

Postby Bouleversee » October 13th, 2018, 10:25 am

dspp wrote:The emergency raise is better than collapse, I'll give you that.

I appreciate the legal constraints a board will have been under in the circumstances. Nonetheless to not give private investors equal access to the raise on an equivalent basis to the institutionals is annoying to say the least. I take it that the board count as institutionals, but of course they will.

Whatever has been going on, it was the job of the board to have put in place the systems and checks to prevent this. I am utterly amazed that nobody at all bar one sole individual is in the frame here. That is incomprehensible to me. If nothing else the entire board - including the major shareholder - are guilty of incompetence. They should contribute their funds to the refinance, find replacements, and go. Every single one of them. This was a £400m+ mkt cap organisation, not some utterly rinky dink outfit.

I d not know how far back the trouble started, and hence what this has to say about the role of the auditors.

The FF-folio is a Friend's portFolio, hence the name. Fortunately it had only 1% or so in CAKE, by design not accident.

I think there will be a lot more to come out from this.

regards, dspp


I agree with you. I don't know how many private investors would want to risk further capital in a rights issue but since the placing is to be at 50p and the shares were 429.5p when suspended, some of them might have been tempted and should have been given the opportunity. Since Luke Johnson has taken out £48m since the listing, his bridging loan of £10m does not seem overgenerous. I don't hold but can't wait to hear what exactly has happened here or what will be in Johnson's column tomorrow if it appears. I can't think how he is going to talk his way out of this one.

I read somewhere that Dairy Crest (which I do hold and is also not doing so well as previously) had been involved in some way, possibly in connection with a previous winding up order which had subsequently been withdrawn. I guess they must have been a supplier who had not been paid on time but eventually got their dosh. Anyone know? I should think all their suppliers will be unwilling to continue unless paid in advance which could be a good reason why they might not survive.

kempiejon
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Re: PATISSERIE HOLDINGS (CAKE)

#173440

Postby kempiejon » October 13th, 2018, 10:51 am

Bouleversee wrote:...Since Luke Johnson has taken out £48m since the listing, his bridging loan of £10m does not seem overgenerous. I don't hold but can't wait to hear what exactly has happened here or what will be in Johnson's column tomorrow if it appears. I can't think how he is going to talk his way out of this one...


Perhaps not.
Readers of The Sunday Times expecting to read Luke Johnson’s excellent business column this weekend will be disappointed. I understand that, although the column has not been scrapped, it has been mutually agreed that Mr Johnson, below, will take a short break.

While his views on the Patisserie Holdings situation doubtless would have made fascinating reading, I suspect he would have been prevented from talking about it for legal reasons https://www.thetimes.co.uk/edition/busi ... -m5hnmc7lk

Bouleversee
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Re: PATISSERIE HOLDINGS (CAKE)

#173441

Postby Bouleversee » October 13th, 2018, 10:56 am

Thanks, Kempie. I was rather expecting that. I wouldn't be entirely surprised if the column never resumed.

ADrunkenMarcus
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Re: PATISSERIE HOLDINGS (CAKE)

#173452

Postby ADrunkenMarcus » October 13th, 2018, 11:16 am

flyer61 wrote:thanked, excellent summation. I have never owned (though possibly through a VCT?) but a £440 million market cap for a couple of hundred cake shops made me get tummy flutters right from the get go. The Company was gone without the Johnson lifeline. This will possibly roll on for sometime so fasten your seat belts and standby to be amazed.

My guess is 22 - 27 pence a share when and if it is relisted.


I'd hope for somewhat more than that, but it's merely *hope*. If EBITDA for 2019 is half what was expected, then that does provide some potential for future recovery, assuming suppliers can be paid and normal service continues for customers meanwhile.

Do they uncover something even worse? If so, all bets are off.

The issue is it will take time to do a forensic accounting / audit exercise of the company's books, possibly going back to 2014. Luke Johnson is quoted as indicating the store roll out programme is being paused. There will be a period where they simply need to stabilise the business and forgo all thoughts of growth and, yet, the 'self funded' rollout programme was a key element of the company's attractiveness to investors.

If operating margins are, say, 50% of what was reported and return on capital is similarly lower, then on that basis the financials would have not met my requirements for investing.

Best wishes

Mark.

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Re: PATISSERIE HOLDINGS (CAKE)

#173475

Postby dspp » October 13th, 2018, 12:48 pm

Many of the senior people appear to have "had previous" together in other businesses, including the FD. Over on the LSE CAKE board some people have been doing some digging.

It is hard to believe that only one person knew what was going on. Either they knew, or they should have known. Both are equally unattractive.

This is going to be fascinating.

- dspp

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Re: PATISSERIE HOLDINGS (CAKE)

#173482

Postby Bouleversee » October 13th, 2018, 1:29 pm

If Luke Johnson doesn't know what is going on in his own company, what hope have we got? Rather than waste our time trying to make sense of company accounts or even looking at Lemonfool or other boards, we might as well play the monkey with the pin. The government is tightening up on gambling on betting terminals but those losses are trivial compared with the large sums we can lose even after doing our homework as best we can.

jackdaww
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Re: PATISSERIE HOLDINGS (CAKE)

#173488

Postby jackdaww » October 13th, 2018, 2:12 pm

Bouleversee wrote:If Luke Johnson doesn't know what is going on in his own company, what hope have we got? Rather than waste our time trying to make sense of company accounts or even looking at Lemonfool or other boards, we might as well play the monkey with the pin. The government is tightening up on gambling on betting terminals but those losses are trivial compared with the large sums we can lose even after doing our homework as best we can.


========================

i think most company boards do know what's going on in their company, otherwise investing would be pretty well impossible.

there is though a need for much better corporate governance , and stronger auditing.

patval looked a decent investment to many people , i have never seen any adverse info before this.

unfortunately many people will lose capital for what may be fraud and or shocking incompetence.

:(

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Re: PATISSERIE HOLDINGS (CAKE)

#173493

Postby BrummieDave » October 13th, 2018, 2:37 pm

kempiejon wrote:
Bouleversee wrote:...Since Luke Johnson has taken out £48m since the listing, his bridging loan of £10m does not seem overgenerous. I don't hold but can't wait to hear what exactly has happened here or what will be in Johnson's column tomorrow if it appears. I can't think how he is going to talk his way out of this one...


Perhaps not.
Readers of The Sunday Times expecting to read Luke Johnson’s excellent business column this weekend will be disappointed. I understand that, although the column has not been scrapped, it has been mutually agreed that Mr Johnson, below, will take a short break.

While his views on the Patisserie Holdings situation doubtless would have made fascinating reading, I suspect he would have been prevented from talking about it for legal reasons https://www.thetimes.co.uk/edition/busi ... -m5hnmc7lk


It's been the first thing I read every Sunday for some time, and I've taken many ideas on broad topics from his seemingly sensible comment. I'll miss the column, and will watch with interest as this all unwinds.

PinkDalek
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Re: PATISSERIE HOLDINGS (CAKE)

#173509

Postby PinkDalek » October 13th, 2018, 3:43 pm

dspp wrote:Many of the senior people appear to have "had previous" together in other businesses, including the FD. Over on the LSE CAKE board some people have been doing some digging.


Thanks for splitting out this Topic, as suggested the other day.

I haven't looked there*** (nor at The Times) but Graham Neary wrote an interesting summary in Friday's Small Cap Value Report, including Some links between all of the characters:, over at Stockopedia (free registration - no spam - unobtrusive ads - iirc):

https://www.stockopedia.com/content/sma ... ar-407719/

There are some 85 comments to date. Some, I think, are pure guesswork, whereas one or two of the other assumptions are nearer what I think may have been the position.

*** I have now but there's too many advfn type comments (such as the rather less than informative "!!!") spread over some 21 pages.

Can you point to any informative "digging" reply in particular? Unless it is the one where someone has plagiarised much of Graham Neary's article.

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Re: PATISSERIE HOLDINGS (CAKE)

#173516

Postby dspp » October 13th, 2018, 4:12 pm

PinkDalek wrote:
Can you point to any informative "digging" reply in particular? Unless it is the one where someone has plagiarised much of Graham Neary's article.


I don't know copied who, or whether great minds think alike, but

http://www.lse.co.uk/ShareChat.asp?ShareTicker=CAKE

see mick-b at 00:16 on 13 Oct 2018.

Luke Johnson was the Chairman of Healthy Living Centres with Chris Marsh as FD.
Gary Ashworth was the Chairman of Interquest.
Luke Johnson was an investor and a director of Interquest.
Gary Ashworth was the Chairman of Fishworks while Chris Marsh was FD and Luke Johnson was an investor.
The ties are clearly very deep between all three men.


Others have commented on other links.

It could all be coincidence.

regards, dspp

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Re: PATISSERIE HOLDINGS (CAKE)

#173551

Postby PinkDalek » October 13th, 2018, 6:13 pm

dspp wrote:
PinkDalek wrote:
Can you point to any informative "digging" reply in particular? Unless it is the one where someone has plagiarised much of Graham Neary's article.


I don't know copied who, or whether great minds think alike, but

http://www.lse.co.uk/ShareChat.asp?ShareTicker=CAKE

see mick-b at 00:16 on 13 Oct 2018. ...


Thanks, yes, that’s the one I mentioned. It must be clear who copied who though. As I said, Neary’s piece was on Friday and “mick” headed his post with “from the PAUL SCOTT site”.

monabri
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Re: PATISSERIE HOLDINGS (CAKE)

#173625

Postby monabri » October 14th, 2018, 9:22 am

https://www.londonstockexchange.com/exc ... 82900.html

Looking a bit brighter..." Business as normal"

I don't own shares in CAKE but what I hope comes out of it are the requirements for stronger financial controls and - more importantly- much stiffer penalties if management are found to be cooking the books.

Dod101
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Re: PATISSERIE HOLDINGS (CAKE)

#173629

Postby Dod101 » October 14th, 2018, 9:50 am

monabri wrote:I don't own shares in CAKE but what I hope comes out of it are the requirements for stronger financial controls and - more importantly- much stiffer penalties if management are found to be cooking the books.


I do not own shares here either but what do you mean by 'stronger financial controls'? Until we all get much more information it is difficult to make any meaningful comment but I see in the Sunday Times today that apparently, the board has discovered that the chain had previously unknown overdrafts of almost £10 million. That seems incredible. How could two banks agree overdrafts without a Board resolution at least? What sort of management accounts did they have and who was overseeing them? It sounds as if not just the Executive Chairman (Luke Johnson) was hands off but so was the chief executive. Amazing if it is true.

The auditors do not look too clever either.

How does anyone police this sort of thing? Strong management and more importantly engagement by the management in what is going on is one way but until more info becomes available it is difficult to comment much further.

Dod

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Re: PATISSERIE HOLDINGS (CAKE)

#173645

Postby flyer61 » October 14th, 2018, 10:43 am

One thing is for sure Luke Johnson's entire career is inextricably linked with what happens from now on at Val Pat. I called in at the Chester shop yesterday. It was noticeable listening to people looking in the window that knew the business was in big trouble. In fact they were like Ghouls!
Inside it appeared business as usual, oh and the cakes were delicious.

ADrunkenMarcus
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Re: PATISSERIE HOLDINGS (CAKE)

#173646

Postby ADrunkenMarcus » October 14th, 2018, 10:46 am

flyer61 wrote:Inside it appeared business as usual, oh and the cakes were delicious.


That's something!

Best wishes

Mark.


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