Food and beverage and entertainment company KLE Group Limited posted losses of J$20.1 million for its first quarter ending March 31, 2020 compared to a profit of J$332,000 the year before.
Revenue for the company climbed to $72.67 million up from $49.72 million for the comparative period, but still fell below target, while cost of sales and administrative and other costs climbed.
Company Chairman Gary Matalon said in comments attached to the report, “the fine and casual dining segments in the restaurant industry have been challenged significantly by the pandemic due to their “full-service” nature and higher price point than the fast food segment.”
He said revenues for the first quarter fell short of target,” attributing that directly to the affects COVID-19 on the business.
Matalon said that KLE experienced strong performance in January and February, but saw a sharp decline in March as the virus spread to the Caribbean and then Jamaica.”
Daily revenues from thereon dropped by over 90 per cent below the budget.
Total revenue for the first quarter amounted to $72.67 million, a positive increase in the revenue is directly related to the revenues of the Montego Bay Location.
KLE took over the Usain Bolt Tracks and Records Montego Bay franchise on January 7, 2020.
Matalon said a decrease of $2.8m in other operating due to the timing sponsorship revenues paid in. He said the company is currently renegotiating expiring sponsorship contracts with our partners for the 2020 financial year. However, he noted that uncertainty from the effects of the pandemic have delayed this process and are challenging the company’s ability to close these deals.
KLE will continue to employ cost savings strategies and monitor key performance indicators to improve efficiencies and achieve profitability, Matalon said.
Commenting on cost of sales which climbed, for the first three months of the year to $22 million from $14 million for the first quarter of 2019, he outlined that this was due to the Montego Bay acquisition.
For the three months ended March 31, 2020 operating expenses totalled $67 million, compared to the prior year amount of $36 million, again related to the acquisition of the Montego Bay Tracks and Records.
Matalon stated that the addition of the Montego Bay unit offered the KLE economies of scale specifically within marketing, purchasing, accounting, supply chain and other general overheads. The expenses are now being split between Kingston and Montego Bay.
Included in administrative expense which also climbed to $66 million from $36 million is a bad debt write off of $12.7 million.
The company, on the approval of the audit committee, wrote off the receivables balance carrying on the books for funds outstanding from the discontinued Famous Nightclub operation.
Matalon explained, “these receivables have been deemed uncollectable and are written off in accordance with acceptable accounting practices.”
The company is reporting a loss from operations as a direct result of the bad debt write off and the decline in revenues in the month of March due to the corona virus.
The CEO said opportunities in the restaurant industry going forward can be great once the model is successfully adjusted to take advantage of the new realities.
However, he noted, “this will require some fresh capital and investment. We look forward to this challenge and feel, once the capital is in place, we are well positioned, both in brand and expertise to successfully make the changes necessary.”
Matalon said the construction of resort property Bessa is ongoing, and demand for units remain strong.
He concluded, “As we shift our focus to pivoting to achieve a model which will allow us to continue our path to growth and profitability, we remain on our mission to increase shareholder value.”