Auditor raises concern about iCreate finances

TRAINING INSTITUTE iCreate Limited plans to slash costs by one-third to cope with the COVID-19 outbreak and reduce losses highlighted by its auditors.

The company needs to shed costs, including $12.5 million in bank overdrafts as at December, to sustain its operations.

“We are redirecting resources from Montego Bay to Kingston,” said President and CEO Tyrone Wilson in a Financial Gleaner interview. “Closing that office will free up expenses drastically; and we made cuts here in Kingston.”

The company closed its Montego Bay office and placed a series of classes fully online, and also cut staff and reduced salaries. Wilson said the closure would save about 25 per cent on costs and that the staff cuts would shave another 10 per cent.

“We have taken the decision to reduce costs due to COVID-19, but also to ensure we are a nimbler iCreate,” he said.

The rate of cash burn pushed the company to seek additional funding through a five-year $24-million bond arranged by Sagicor Investments Jamaica in February. Wilson said it would fund the company’s working capital needs, and that the debt capital, alongside the 35 per cent reduction in costs, would allow the institute’s operations to continue without need for additional funding.

At year ending December 2019, the company grew its annual revenue to $45 million from $30 million a year earlier, but made a net loss of $46 million. iCreate closed its financial year with a weak balance sheet, including negative equity of $4.98 million that was due to losses that had piled up to about $61 million. And that’s even with an equity injection of nearly $56 million netted by its junior market initial public offering of shares in January 2019.

Still, that deficit was an improvement on the negative equity of $14.35 million reported for 2018, the training institute’s year of inception.

The company also recorded negative working capital, that is, an excess of short-term liabilities over short-term assets, of $33.5 million last year – liquidity issues that the bond proceeds were meant to alleviate.

“From inception, the company has not achieved the level of revenues projected and required to sustain its operations. This indicates the existence of a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern,” said the company’s auditor, Crichton Mullings & Associates.

Alongside the cost cuts, iCreate is attempting to leverage business from the ongoing shift to online platforms for learning programmes as alternatives to the service that would have been provided in educational institutions that have been shuttered to restrain the coronavirus spread.

The company has moved a number of courses online.

“We are also seeing bumps in demand for online training,” Wilson said. “But now, the most important thing is crisis management, and keeping close to our students and managing costs.”

The institute was formed in 2018 as a wholly owned subsidiary of eMedia Interactive Group Limited, which is majority held by Wilson. In January 2019, iCreate Limited became a publicly listed company on the junior market of the Jamaica Stock Exchange. The stock is trading at or around 43 cents per share, 50 per cent off its year-to-date high of 86 cents.

steven.jackson@gleanerjm.com