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Wed 17th Oct 2018 - Update: Patisserie Holdings calls shareholder meeting, another Jamie Oliver finance chief leaves
Patisserie Holdings calls emergency shareholder meeting, shares to remain suspended: Patisserie Holdings has called an emergency shareholder meeting and warned trading in it shares may not restart for several weeks as the company rebuilds its accounts following the discovery of “potentially fraudulent irregularities”. Shares in the company were suspended last Wednesday (10 October) after the discovery of a black hole in its finances, which led to the arrest of chief financial officer Chris Marsh and the launch of an inquiry into his activities by the Serious Fraud Office. On Friday (12 October), the company said a preliminary analysis suggested for the year ending September 2019 it would achieve underlying earnings of £12m and revenues of £120m, down from guidance of £31m and £136m respectively. However, it said the restated forecasts were based on “limited work performed to date and cannot be verified until there has been further work”. In a circular sent out to shareholders yesterday (Tuesday, 16 October), the company said the shares would remain suspended on AIM. The circular added: “At present, the directors do not expect that suspension to be lifted at least until there is greater clarity disclosed to the market around the financial position of the group; and they are satisfied the company’s financial reporting function is appropriate for a quoted company.” The shareholder meeting will take place on Thursday, 1 November. The company said on Friday that, far from having the £28.8m of cash declared in May, it had net debt of £9.8m. Luke Johnson, its executive chairman and 37% shareholder, provided a £20m lifeline in the form of loans, while the group raised £15.7m via a share placing. In yesterday’s circular on the placing of the new shares, the first tranche of which will be issued this week, the company warned investors the financial irregularities were “also likely to have affected the historical financial statements of the company”. The placing price of 50p represents a discount of 88.4% to the price of 429.5p at which the shares were suspended. The first Patisserie Valerie cafe was opened in London in 1926 by the Belgian-born Madame Valérie. Johnson bought it in 2006 and floated the company in May 2014 with a value of £170m. Today it has 206 outlets.
Third finance chief leaves Jamie Oliver in a year: James Gregory has become the third finance executive to leave Jamie Oliver Group in just over a year. A company spokesman said Gregory had moved to Australia for family reasons. He has been replaced as chief financial officer by Pamela Lovelock, according to filings at Companies House. In April, chief financial officer Crispin Holder stepped down after six months having steered the business through a company voluntary agreement (CVA), which saw 12 restaurants close. Former finance director Tara O’Neill resigned in September last year to pursue a new role in Ireland. Former restaurant business chief executive Simon Blagden also left at the same time as O’Neill. Oliver’s restaurant chain, Jamie’s Italian, had expanded quickly but later found itself buckling under expensive rent agreements, forcing it to seek the CVA. Earlier this year, Oliver admitted: “We had simply run out of cash.”
Goodbody offers thoughts on Domino’s Pizza ahead of trading update: Goodbody leisure analyst Rachel Fox has offered some thoughts on Domino’s Pizza ahead of its third-quarter trading update tomorrow (Thursday, 18 October). She said: “In the key UK division all eyes will again be on the UK ex-splits like-for-like sales growth figure. We do not forecast quarterly but currently model a 3% like-for-like growth rate in the second half. Given the third quarter of 2017 is the most difficult comparable of the year with 8.10%, we suspect the ex-split like-for-like could be very low single digits in the third quarter. The group exited the second quarter with a 4.7% like-for-like, which was slightly behind our expectations as hot weather offset some of the benefit of the World Cup. We suspect weather was a similar drag in July and the World Cup benefit would have subsided in August and September. Based on our discussions with investors, concerns around a slowing growth profile in the UK has been a key contributor to the de-rating of the shares so a flat to negative third-quarter like-for-like would be badly received and would imply downward pressure on our second-half like-for-like forecast. The group opened 22 stores in the UK in the first half (17 franchisees) and noted it was expecting to open ‘about 60’ stores in the full year so we should see circa 20 stores opening in the third quarter. In August management noted it had opened 29 sites and is on site in another 12 so there should be little surprise here. A significant source of disappointment in the first-half results was the performance in international, with Sweden, Norway and Switzerland loss-making in the period. In particular in Norway, the group is undoubtedly seeing some growing pains, which it is working to address. We currently forecast a profit of £2.2m for international but flagged after the first half update this forecast looks very challenged given it lost £1.8m in the first half. We would look for any rhetoric that could indicate the operational issues (labour scheduling in Norway) that contributed to this loss have subsided. We model 3% ex-splits like-for-like sales for the Republic Of Ireland in the second half and would expect to see an acceleration from the +2.5% achieved at the first-half stage, which marked a material slow down from previous years. Management noted at this point it was disappointed with its promotional campaign and that weather had negatively impacted. The last round of the share buy back completed in late-August (£50m) and the company has noted the board will determine later this year whether or not it will commence a further round. With net debt to Ebitda running at 1.5 times there is scope to add another 0.5 times of leverage (target leverage range 1.7 times to 2.5 times) which would equate to a further £50m programme. However, the third-quarter update may be too early to get an update on this.” 

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