Patisserie – Hidden Overdrafts but Where’s the Other £18 Million?

The Sunday Times ran some articles on Patisserie Holdings (CAKE) today including an interview with Chairman Luke Johnson. It seems the one big hole in the accounts was hidden overdrafts with Barclays and HSBC totaling £9.7 million. But where’s the rest of the £28 million that was claimed to be held as cash in the interim balance sheet?

Mr Johnson is quoted as saying “There was criticism that I was stretched too thin – fair criticism”. He has promised to reduce his commitments and will even stop writing his column for the Sunday Times.

There is currently speculation about the value of the company and what the share price might be when listing is restored. It’s not difficult to work out what the earnings might be from Mr Johnson past comments about current trading, but there will be one enormous write-down likely in the Annual figures which may well be reported late with previous years restated. The big unknown is what else is unknown. Also existing shareholders may sell in droves as once investors lose confidence in management, they often dump their shares as a way of forgetting the trauma. It might take a long time, even years, to restore confidence in the company and it’s very unlikely to trade on a p/e of 25 which is what it was at before the suspension.

Forecasting likely earnings and hence the share price in future is a mug’s game at this point in time so I will not even attempt to do so. Any new investors keen to pick up the stock will simply be speculating. Those who already hold the stock will need to consider carefully whether they want to wait long enough for a possible recovery.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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