Few crumbs of comfort for the cake shop mastermind
Conspiracy or cock-up? Company doctors say that a corporate car crash is usually the result of one or the other, rarely both. How unfortunate then, that Patisserie Valerie, the cake shop where serial entrepreneur Luke Johnson is both executive chairman and the biggest shareholder, appears to have been the victim of both.
An accounting scandal and suspected fraud has threatened to reduce the fancy baker to a pile of crumbs and only an immediate cash injection has been able to pull it back from the brink.
The speed with which the chain has unravelled is shocking. At the start of the week, all seemed fine. More than that in fact. Patisserie Valerie has been one of the star performers of the junior AIM market of recent years, and Johnson, who made a fortune in the Nineties as an early backer of Pizza Express, seemed to have yet another business success story under his belt.
Fast forward a matter of just days, and its shares have been suspended after tens of millions of pounds suddenly went missing from the coffers. Finance chief Chris Marsh has been arrested on suspicion of fraud, and the SFO called in.
Perhaps it was all simply too good to be true. Analysts have certainly questioned how a modest cake-maker can achieve such an eye-watering valuation. When Patisserie Valerie imploded faster than an over-cooked souffle at the beginning of the week, it was valued at an eye-popping £450m. Johnson’s 37pc stake was worth £165m.
What is true is that this has happened right under the entrepreneur’s nose, and for a man who hasn’t been shy about dispensing pearls of business wisdom to his fellow entrepreneurs in a weekly column for The Sunday Times, that is highly embarrassing.
Still, perhaps what Johnson lacks in man charm, he makes up for with a thick skin. He certainly isn’t shy about admitting his weaknesses. In a recent column the entrepreneur confessed to being a poor judge of character, including when it came to business partners.
This seems particularly true when it comes to Marsh, the finance director. The pair have worked together for over a decade including on at least two other ventures – Healthy Living Centres and Fishworks – both of which failed. What made him stick with the same finance expert for so long?
So much for his executive chairman role. Were all the usual checks and balances in place or is Johnson guilty of complacency?
To be fair, he has moved quickly, providing £20m in emergency loans as part of a wider discounted fundraising that secures the chain’s immediate future. But with the bulk of his estimated £220m fortune tied up in the business, he could hardly afford to let it sink into the sea.
Still, multiple questions remain: what are the terms of the loans?; will smaller shareholders be diluted?; does this enable Johnson to tighten his grip on the business on the cheap?
Hopefully all will be revealed about this chastening experience in his next column.
‘Patisserie Valerie has been one of the star performers of the junior AIM market’
The shareholder rebellion at Unilever has been described as a watershed for the City by one of its biggest shareholders. But will its screeching U-turn over plans to up sticks to Rotterdam mean bloodshed in the boardroom?
Preachy chief executive Paul Polman is now on borrowed time. The globe-trotting, high priest of the British corporate establishment was the brains and driving force behind the ill-fated move and is on his way out next year anyway. What’s the point in allowing him to hang around, many have asked.
The case for ousting chairman Martijn Dekkers is equally compelling. Instead of backing this madcap escapade, he should have seen that it was not only ill-thought out but doomed to failure, especially when investors began to rebel.
A strong chairman would have pulled the plug much earlier. Dekkers proved painfully feeble during the most decisive moment in Unilever’s long and gilded history and its hard to see how he can lead the search for the new chief executive after failing so abysmally to stand up to Polman.
Incredibly though, this calamitous Dutch double-act may live to see another day. Ditching the chief executive and chairman of a company this big in quick succession would be fraught with risk.
Shareholders are unlikely to back such dramatic action.
Yet the case for a boardroom shake-up remains overwhelming. An immediate priority should be upping the British contingent. Today John Rishton, the former boss of Rolls-royce, is the sole Brit on the board. Unilever will argue that its multinational board reflects its status as a global company. After all, its brands, including PG Tips and Hellmann’s, are sold in 190 countries.
But, it is also the UK’S third-largest company with a great British heritage dating back to Victorian times and the creation of soap maker Lever Brothers in 1885. Unilever’s headquarters remain in London, where it employs more than 7,000 staff, and more than half the business is run from the capital. Over the next decade that is expected to increase to 75pc.
And yet 10 of the 11 non-executives are non-brits. This is a serious imbalance that needs to be quickly corrected. Surely a board more reflective of Unilever’s strong British roots wouldn’t have been quite so eager to turn their back on more than 100 years of history. Nor would it have been so deaf to such overwhelming opposition.