Small Cap Value Report (Fri 12 Oct 2018) - CAKE, CAR

Friday, Oct 12 2018 by

Good morning!

Markets have stabilised today, with the FTSE back up 50 points.

Monday is historically the day when we get stock market crashes, so perhaps we are being set up for more weakness at the start of next week!

Patisserie Holdings (LON:CAKE)

  • Share price: 429.5p (suspended)
  • No. of shares: 104 million
  • Market cap: £446 million

Finance Director

Overall, it's a quiet news day on the RNS feed. But not for CAKE.

The Serious Fraud Office has confirmed that it has opened "a criminal investigation into an individual", in response to the RNS by Patisserie Holdings (LON:CAKE) that its currently-suspended Finance Director has been arrested and released on bail.

The Press Association reported yesterday that the company could go into administration as soon as this morning, without an immediate cash injection. So we should get an update very soon. Needless to say, the outlook is bleak. The possibility of a pre-pack administration has been mentioned.

I was curious to learn about the Finance Director's history. This is his bio on the Patisserie Holdings website:


Ok, so he has been involved with the company for 12 years. Is that a bad thing? I wouldn't say so. Although it could be argued that it's unusually long.

But the two other AIM-listed companies he worked for ended badly for his investors.

The seafood restaurant chain Fishworks Plc went into administration, while the loss-making gym chain Healthy Living Centres delisted with its share price close to zero.

There is also a link with Gary Ashworth, who was involved in forcing Interquest off the stock market  and into private hands. Paul Scott nominated Interquest as "the small company which seems to worst treat its outside shareholders" and described management as "incompetent, and not to be trusted".

Some links between all of the characters:

  • 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.

What does it all mean? Could investors have avoided Patisserie…

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All my own views. I am not regulated by the FSA. No advice.

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Patisserie Holdings PLC is a United Kingdom-based cafe and casual dining company. The Company offers cakes, pastries, snacks, meals, and hot and cold drinks across the United Kingdom. The Company's segments include Druckers, Flour Power and Philpotts. It offers products, such as coffee, dairy, fruit, packaging, cocoa and wheat items. It offers cakes in various categories, including celebration cakes, gluten free cakes and wedding cakes. The Company operates under various brands, including Druckers-Vienna Patisserie, Philpotts and Flour Power City Bakery. The Company offers a range of cakes, such as Gluten Free Flapjack, Gluten Free Chocolate Chip Muffin, Cortina, Chocolate Box, Carrot Cake, Cheesecake, Blackforest, Exotic Fruit Tart, Pecan Tart, Citron Tart, Choc Mousse, Mixed Berry Mousse, Raspberry Tart, Madame Valerie Slice, Mille-Feuille, Gluten Free Chocolate Brownie and Gluten Free Marble Cake. more »

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Carclo plc is engaged in the supply of fine tolerance, injection molded plastic components, mainly for medical products. The Company is also engaged in the design and supply of specialized injection molded light-emitting diode (LED)-based lighting systems to the automotive industry. The Company operates through four segments: Technical Plastics, LED Technologies, Aerospace and CIT Technology. The Technical Plastics segment supplies fine tolerance, injection molded plastic components, which are used in medical, optical and electronics products. The LED Technologies segment develops solutions in LED lighting. The Aerospace segment supplies systems to the manufacturing and aerospace industries. The CIT Technology segment manages its digital printing of conductive metals onto plastic substrates. The Company is a supplier of control cables in Europe. more »

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  Is LON:CAKE fundamentally strong or weak? Find out More »

109 Comments on this Article show/hide all

dfhscgfsd 14th Oct '18 90 of 109

Graham mentioned Luke Johnson was involved at interquest. If he has 37% and the institutions just picked up 20-25% more at 50p is there a chance he can buy the company with a low offer? 

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doublelutz 14th Oct '18 91 of 109

In reply to post #408459

I would have thought it obvious that he would want security and that would be on assets of the company.

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stuamp 14th Oct '18 92 of 109

Would be interested to hear Graham’s views on the article in the FT dated 10th October 2018 called ‘HMRC Files petition to wind up Patissere Valerie’ and in particular the associate company Stonebeach Limited (company number 04396961), which generated 90% of the parent company’s revenue and profits. Also why it needs approx 8 number associated companies to run its organisation. My main interest is to find out what signs we need to look for and where to find them. Thankfully, I was not a shareholder.

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nigelpm 14th Oct '18 93 of 109

In reply to post #408484

Absolutely right Peter. This is one very clear example of how the market can be rigged against the smaller private investor.

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Edward John Canham 14th Oct '18 94 of 109

Patisserie Holdings (LON:CAKE)

Sunday Times reports undisclosed overdrafts of £10m and no cash - LJ unaware - what to believe?

Need what happened here in the public domain ASAP - this can't be something that is sat on for 4 years.


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DJCP 14th Oct '18 95 of 109

Few notes re Patisserie Holdings (LON:CAKE) - apologies if they've been covered already, but I've been reading a lot from various sites ! ... and I'd be grateful for any corrections :o)

1) The link to Stonebeach at Companies House:
Patisserie Holdings Plc (which some of us (still) have shares in !)
Patisserie Valerie Holding Ltd - a holding company
which owns
Stonebeach Ltd - which is the main trading company (i.e. the shops) - Two Directors, Chris Marsh and Paul May.

According to the last Annual Report, within the group are 3 holding, 4 trading and 4 dormant companies, all under the Plc umbrella.

2) I thought Directors private addresses were no longer accessible on Companies House, but from the link above, it tells us that CM's addresss is the same as the registered office* when appointed as Secretary in 2014, but gives a residential address when appointed a Director in 2007. A quick search and it seem this residential address was last sold in 2006, so it's feasible he still lives there.
* I've read elsewhere that the Reg'd Office address of Sarehole Road, can quite easily be 'anagrammed' into something else ! lol

3) How easy would it be for an FD to set up another bank account with an overdraft facility, without anyone else being involved, or would it take at least one other Director? Now, if only we had an Ex-FD who we could ask ! lol
I presume, IF this is possible, then all post would be given direct to CM (unopened?), and therefore unknown to other Directors and the auditors. You can't expect auditors to audit bank accounts they know nothing about, and how can this ever be stopped from happening again.

4) I have read a comment elsewhere about the shares resuming trading on Thursday, but can't find any confirmation of this - although I recognise the poster, and doubt he'd post a blatant guess/lie.

Hopefully a Non-Brexit, Non-Cake, uneventful week ahead - How boring would that be ! lol

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Fangorn 15th Oct '18 96 of 109

Re Patisserie...

An investigation last week found that £9.7m had been spent on two overdrafts set up with HSBC and Barclays which executive chairman Luke Johnson and the board did not know about, Mr Johnson told the Sunday Times.

So it is blatant fraud and the CFO likely the culprit.

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mmarkkj777 15th Oct '18 97 of 109

I have to say hats of to Luke Johnson for sticking in there and digging deep into his own pockets to attempt to save the company.

The cynics will say, well he can afford it, or he must have known something, but I very much doubt the latter.

I sincerely hope he succeeds and he can turn the business around. If he manages to keep it afloat, it will be down to pure determination. After this, who knows, it could go from strength to strength.

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peterg 15th Oct '18 98 of 109

In reply to post #408669

I think Johnson's motivation will not be as altruistic as you suggest. As owner of 37% of the company, if he can at least keep the show on the road for £20m, some of which he should get back soon, he almost certainly comes out ajeat - possibly well ahead - of where he would be had CAKE gone to the wall.

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Ramridge 15th Oct '18 99 of 109

Re Patisserie Holdings (LON:CAKE)

Whether LJ's rescue was motivated by trying to minimise the damage to his own fortunes or for
other reasons such as saving his reputation, I applaud the consequences of saving by all accounts, some 3000 jobs.

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simoan 15th Oct '18 100 of 109

In reply to post #408689

I think Johnson's motivation will not be as altruistic as you suggest. As owner of 37% of the company,

I'm not sure this is fair - you can't possibly know his motivation. All we know is that he's admitted he probably took his eye off the ball, he's made a substantial interest free loan and is not taking part in the equity raise, so will be diluted down from 37% to 29%. As others have said, he's also trying to save many jobs in the process. I'm not sure what more he could have done, under the circumstances.

All the best, Si

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peterg 15th Oct '18 101 of 109

All we know is that he's admitted he probably took his eye off the ball,

Bit of an understatement!

As others have said, he's also trying to save many jobs in the process. I'm not sure what more he could have done, under the circumstances.

I don't disagree with any of that, and it's certainly a good thing for all concerned that his able to do so. But I'm just saying i don't really think any hats off are due. This is not about altruism.


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dmjram 15th Oct '18 102 of 109

In reply to post #408699

Giving a short term loan (secured was suggested over the weekend though not confirmed, anyone know?) and letting others put up risk capital in an attempt to stop your largest investment going to £0 from c£165m doesn't sound much like altruism.
Which is not to be expected in any event - he was no friend of small shareholders with Interquest. He appears to be a hard nosed investor trying to salvage his biggest investment and reputation at least cost to himself. As most people in his position would.

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simoan 15th Oct '18 103 of 109

But I'm just saying i don't really think any hats off are due. This is not about altruism.

Absolutely, I didn't mean to imply it was! This is capitalism and he's trying to protect his own interests and in so doing protecting those of others as a by-product. Don't get me wrong, I'm not a big fan of Luke Johnson, and being something of an iconoclast not a big fan of "celebrity" investors full stop. He's been shown to be every bit as infallible as the rest of us and possibly even more so given he should have had full inside information. Maybe just the kind of cold shower he needed...

All the best, Si

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extrader 15th Oct '18 104 of 109

Hi all,

There's also the small matter of a charge that Patisserie Holdings had for around £5.6 m, created July 2007, in favour of Risk Capital Partners (Johnson and Scalzo as Noteholders) and which was satisfied last week, on 11th Oct 2018...

Risk Capital is LJ investment vehicle...


The coincidence of timing seems unhelpful, on the face of it.


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hayashi22 15th Oct '18 105 of 109

In reply to post #408764


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Bonitabeach 15th Oct '18 106 of 109

In reply to post #408784

There's also the small matter of a charge that Patisserie Holdings had for around £5.6 m, created July 2007, in favour of Risk Capital Partners (Johnson and Scalzo as Noteholders) and which was satisfied last week, on 11th Oct 2018...
Risk Capital is LJ investment vehicle...
It would appear that if the ship had been mortally holed Mr (I knew nothing) Johnson was going to be first in the lifeboat.


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hayashi22 15th Oct '18 107 of 109

The idea that the FD carries the rap for everything seems a bit far fetched.

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jonesj 15th Oct '18 108 of 109

In reply to post #408784

Thanks for the link. There are some interesting articles there. For example:

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shipoffrogs 15th Oct '18 109 of 109

In reply to post #408854

The Head of Grant Thornton has also gone.

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 Are LON:CAKE's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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