Two new sub-committees set up to take over suspended CEO role
Restaurant and real estate company KLE Group is restructuring its management to better align with the new revenue realities facing the company.
With declining revenues compounded by higher operating cost, KLE, which operates Usain Bolt’s Tracks and Records restaurant franchise as Sumfest Acoustic Cafe, Bessa and Forever Beach/SPF real estate brands is cuttings costs through its management restructuring.
Cutting cost is seen as imperative at this time for KLE, which is now reeling from the impact of COVID-19, given that the actions taken by the Government of Jamaica to protect its citizens from the global pandemic, have had an extreme impact on the company’s ability to conduct business.
The adverse COVID-19 business environment has forced KLE to adjust the cost side of the business in order to survive. The management restructuring, which was decided and agreed on at the company’s last board meeting held on November 6, 2020, will see the post of Chief Executive Officer (CEO), held by founding member, Gary Matalon, being suspended.
Matalon will however continue to oversee franchise opportunities and other opportunities for growth. Arising from the management restructuring, a new group structure is being put in place.
The new structure will see the formation of two separate sub-committees of the board with responsibility for overseeing the operations of the restaurant division and another for the real estate division. These two news sub-committees will take over the day-to-day operation of the company, which was previously carried out by Matalon in his capacity as CEO.
RESPONSIBILITIES OF THE NEW SUB-COMMITTEES
The Restaurant Division Sub-Committee will be chaired by Matalon as well as fellow directors David Shirley, Norman Peart, Joe Bogdanovich and Marlon Hill. Shirley is the current chairman of the board.
The Real Estate Division Sub-Committee will be chaired by Shirley accompanied by Matalon, Zuar Jarrett, Stephen Shirley and Bogdanovich. KLE has notified the Jamaica Stock Exchange, where its shares are traded, of the management changes.
The changes took effect Monday, November 23, 2020. According to KLE, the changes “will allow the company to alleviate the burden of the executive costs of a CEO until the external environment stabilises and more reasonable predictions can be made on the way forward”.
The company advised that “the newly implemented structure is subject to revision in the coming months for appropriateness as things evolve”.
MOUNTING LOSSES OWING TO COVID-19
The company has been incurring losses since the onset of COVID-19 in Jamaica. For the March quarter, the company reported losses amounting to $20.1 million compared to a profit of $332-thousand for same quarter of 2019.
Cost of sales and administrative and other costs climbed as the financial bleeding continued in the June quarter, where the losses jumped to $28.1 million coming from a profit of $10.1 million for the June quarter of 2019.
KLE recorded its worst revenue figures since inception due to the impact of the COVID-19 pandemic, where in the June quarter earnings was a mere $7,777 given the fact that the restaurant business was totally closed during the period.
By extension, revenues year-to-date have been impacted tremendously with total revenues for January to June 2020 amounting to $80 million compared to $102 million in the prior period. The total comprehensive loss for the period totalled $44 million compared to $632,000 in the prior period.
For the first half of the year, cost of sales amounted to $25 million compared to $29 million for the first quarter of 2019.
SLIGHT IMPROVEMENTS DURING SECOND QUARTER
For the second quarter expenses were significantly reduced as the company went into cost saving mode in reaction to the severe impact of the pandemic and the declining revenue. Average expenses for the quarter declined by 70 – 80 per cent.
Salaries and wages saw the biggest decline of 87 per cent and utilities declined by 60 per cent. Some of the expenses reduction strategies employed included the laying off of team members, mandatory salary cuts for all staff, and decommissioning of all heavy-duty equipment.