Negative working capital and current ratios for the six month ended June 30, 2021

Restaurant and entertainment company, KLE is cutting its losses but still remains in the red during the first half of 2021.

For the six-month period ended June 30, KLE experienced a loss from operations, as a direct result of decline in revenues, due to the coronavirus pandemic and the government containment measures.

The losses incurred from operations amounted to $11.5 million, which shows a significant improvement over the prior year, where the losses equaled $28.1 million.

The total comprehensive loss for the period under review amounted to $40.8 million compared to $44.2 million in the prior period. KLE continues to show negative working capital and current ratios, due mainly in part to its inability to pay and longer payment terms negotiated with its short-term creditors. Liquidity continues to be a struggle for the business for this quarter.

Big 300% improvement in revenues in Q2

On the revenue side, there was a notable improvement during the second quarter of 2021 compared to the similar quarter in the 2020 financial year. Revenues for April – June 2021 equaled $38.2 million, compared to $7.7 million in the similar period of the prior year.

This represents more than a 300 per cent increase, which is a major source of optimism for company directors. Revenues to date totaled $73 million compared to $80 million in the prior period.

According to KLE, “it must be considered however, that the last period enjoyed three months of full optimal operations whereas this period has been subjected to massive uncertainty, curfew restrictions and lockdowns. In light of this and the current economic climate, this can be considered a much needed improvement for our company”.

The directors report that, “the company remains optimistic as we continue to battle the challenges brought about by the COVID-19 pandemic. Our hopefulness is also brought about by the increasing public awareness and understanding of the virus as well as the mass vaccination drives and vaccine availability in the country. Also, the Government of Jamaica has given its clearest indication that curfew hours will be reduced as well as its firm affirmations that its COVID containment policies will account for and strive to lessen the implications they have on the restaurant and entertainment industries”.

Driving down cost

KLE says it will continue to employ cost savings strategies and monitor its key performance indicators to improve efficiencies and achieve profitability. For the first half of the year, cost of sales amounted to $22.7 million compared to $24.6 million for the first half of 2020.

This decrease is as a result of the first two months of 2020 operating at maximum capacity as well as exceptional buying patterns in 2021. The company’s cost of operating is in line with the latest cost strategies and budgets.

Cost of sales percentage for the current period was 31 per cent, which is in line with budget. Also KLE continues to battle with the price increases from several of its key suppliers.

Some suppliers had multiple increases during the quarter. Also during the quarter, the rate of exchange had a significant impact on its cost strategies and on vendor prices.

As a response to the rising vendor prices, management continues to undertake price revision as needed to keep our cost in line with budget. The company also continues to seek out the most reasonable vendors and establish new vendor relationships to combat the rapid price increases.

All this is being done while maintaining the quality of the product KLE offers. On the expenditure side, this is being contained. Total expenses for the six months ending June 30 amounted to $63.2 million compared to $87.5 million in the prior year.

All major expenditures including labour, utilities and other administrative expenses were managed to prevent significant increases. Labour cost has been tightly managed to ensure it is commensurate with revenues of the business, utilities are monitored to mitigate wastage.