Famous nightclub sold, KLE annual losses double
Published:Tuesday | May 3, 2016 | 12:00 AM
KLE Group completed the sale of Famous Nightclub in January.
The price was undisclosed, but the company had $35 million net assets held for sale on its balance sheet due to the divestment of the entertainment venue in Portmore, St Catherine.
This amount is what is expected to be realised from the sale after paying the cost of $17 million for early termination of the lease for the property which was supposed to run until 2021.
Some equipment located at the leased premises will be transferred to the lessor to cover the closing cost.
"Subsequent results in the first quarter of 2016 have proven these actions to be positively impacting the performance of the business and its goal achievement," said the directors' report accompanying the company's 2015 audited financial statements released to the market at the top of this week.
KLE Group CEO Gary Matalon declined to name the nightclub buyer, saying the new investor in Famous would soon put out a press release.
Last year, KLE revenue totalled $174 million, a $31-million reduction from year-earlier levels, while net loss worsened from $34 million in the year ending December 2014, to $64 million in 2015.
This was largely due to Famous racking up a $30-million loss last year, a reversal from the $8 million profit it posted for 2014.
The worsened financial performance has taken a toll on the company's balance sheet. Its working capital deficit grew from $60 million at the end of 2014 to just over $100 million last December. The company also ran out of cash by the end of 2015.
"There exists the issue of going concern due to continued losses by the business and its related entities," said the notes to KLE's financial statements.
But management is optimistic about the company's future now that it is focused on the expansion of its Tracks and Records franchise.
It secured the franchise operations manual for $16 million last year, and it expects the first franchise operator, located in Ocho Rios, to open its doors in the second half of 2016.
FUTURE LOCATIONS
"We expect to open future locations in key markets internationally in the near future," added the directors' report.
For its Bessa project, which seeks to develop a property in Oracabessa, St Mary, in partnership with Sagicor Life Jamaica, KLE's board decided to farm out a portion of its risk in the investment to a small group of investors, who would take on US$250,000 of the US$350,000 risk that KLE had previously committed to take on.
KLE would still manage the project for an annual administration fee equal to one per cent of the invested amount by the investor group and a bonus equal to 15 per cent of the profit made by each investor. But that is if the profit exceeds the US LIBOR rate plus four per cent.