Fiction loses big

Fiction loses big

Wednesday, March 05, 2014

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FICTION Lounge took a huge financial hit, which helped deepen its owner's net loss to $56 million in 2013.

KLE, which also operates Famous Night Club and Usain Bolt's Tracks and Records, blamed the more than tripling of its loss position, from $15.6 million in 2012, on uncertainty surrounding an International Monetary Fund (IMF) deal early last year and a rapidly devaluing Jamaican dollar, which is still taking place.

"While Tracks and Records, Odyssey and Famous brands contributed an operating profit for the group, Fiction suffered a significant decerease in revenue in 2013, which resulted in an operating loss," said a board statement to shareholders accompanying the latest financials.

Indeed, an imminent agreement to sell Fiction to a prominent player in the entertainment industry and management's decision to focus on expanding the Tracks and Records brand might translate into a financial turnaround for the company this year.

The restaurant incurred a $12 million loss in 2012, when Fiction returned nearly $15 million in profit, but the night club situated at Marketplace saw a near $15 million operating loss for the first nine months of 2013, compared to a one million loss at its neighbouring operations during the same period.

KLE didn't disclose segment profit results for the full year, nor did it give a reason for excluding it from its audited financial results, but the newly opened Famous, located in Portmore, would have had to reverse a $3.2 million loss up to September 30 to have ended last year in the black.

In any case, KLE's working capital ran down over the past year, and its current liabilities as at December 31, 2013, exceeded its current assets by over $100 million.

Also, its cash position, which was beefed up to $80 million after its late 2012 initial public offering, fell to $12 million at the end of 2013, not including the drawdown of $9.5 million in bank overdraft, which attracts interest of 17.4 per cent a year.

At the time of going public, KLE expected Fiction's patron base of 2,000 to climb as "management seeks to continually enhance the entertainment packages and facilities available at Fiction Lounge".

It also set out to establish another Usain Bolt's Tracks and Records outlet in Falmouth and a lifestyle-themed resort in Oracabessa, St Mary.

KLE, which was expected to put up US$550,000 ($56 million) for a 25 per cent stake in the resort, announced that it signed a partnership agreement with Sagicor Life Jamaica last May to undertake the project.

In its latest financial statments, it indicated that it made a $9.7 million advance payment on the "Bessa" project, as it is called, but given the company's weak working capital and cash flow, it is not clear if it will still be able to undertake the investment.

The entertainment company's revenue grew from $288 million in 2012 to $334 million last year, while $25 million in depreciation in 2013 also helped dragged down the company's bottom line.

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