Few crumbs of com­fort for the cake shop mas­ter­mind

The Sunday Telegraph - Money & Business - - Business - Ben Mar­low

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’

Unilever’s im­bal­ance

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.

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