FOLLOWING the separation of Usain Bolt's Tracks & Records in December 2021 to T&R Restaurant Systems Limited (FranJam), KLE Group Limited has formed Bessa Resort Management Limited to manage the Bessa Project in Oracabessa, St Mary.
KLE Group currently has a 25 per cent stake in Bessa, which has 86 luxury residences built on an eight-acre property. There are 24 oceanfront condos, 12 pool villas, and 50 river condos ranging from US$260,000 to US$795,000. The project, which has been in gestation since 2013, has been delayed by various events that over the years impacted its completion. While there are new delays, the project is set to open in short order with more than 50 per cent of sales involving deposits or contracts with lawyers.
To this end, KLE incorporated Bessa Resort Management on June 7 to manage the development that is expected to generate revenues for the group which currently hasn't earned revenue in 2022. KLE has also engaged an American travel and leisure company to provide marketing support and bookings for its Bessa rental programme of units it retains from the project.
"As an active chairman my board and I have refocused the business and look towards hospitality and lifestyle brand opportunities. This will include, when possible, the restaurant business; however, for now we will work towards completion of the US$36-million Bessa project. At present the company is finalising the management agreements and the road map to ensuring maximum profitability. At this time we are not in a position to disclose the capital that the business will need to successfully carry out its mandate," said KLE Chairman David Shirley in an e-mail with the Business Observer.
KLE formerly owned Tracks and Records restaurants at Marketplace in Kingston and at St James Place in Montego Bay. However, the business was significantly impacted over the last two years by the novel coronavirus pandemic, which limited the operational capacity of the dine-in business. KLE's shareholder equity went into a deficit in 2021, which meant the business had more liabilities than assets.
KLE currently owns 49 per cent of FranJam while the remaining portion is owned by its Chairman Joseph James Bogdanovich, who is the largest shareholder in KLE. Tracks and Records posted a $14.24-million loss in 2021, with KLE recording a share of loss of $6.98 million. For the first nine months of 2022 FranJam delivered an $8.23-million net profit, with KLE recording $4.03 million as share of profit.
KLE's only recurring expenses are professional fees, including accounting, corporate secretary and listing fees which totalled $8.97 million. It does not have a chief executive officer role but it retains a chief financial officer and real estate and restaurant division subcommittees.
Despite the improvement in performance, KLE still recorded a loss from continuing operations of $9.60 million, which is an improvement compared to the loss of $57.95 million. Once the profit of $27.21 million in profit from discontinued operations is included, KLE's net profit stands at $17.61 million.
KLE's non-current assets consist of $122.72 million related to its joint venture in Bessa at $15.28 million, its associate stake in Franjam valued at $72.39 million, and $35.06 million in investments. Its current asset base $50.33 million consists of $43.17 million in cash. KLE's equity base stands at $26.61 million while its total liabilities stand at $146.43 million.
KLE currently has grand plans in its pipeline, according to Shirley, who mentioned the creation of the KLE Oracbessa Music Festival and Bessa Triathlon series, along with doing premium events in St Ann and St Mary. It is currently talking with its partners about 'SPF/Forever Beach', which is a premium, ultra-all-inclusive party series. KLE used to run the Famous Nightclub in Portmore before selling it in January 2016.
FranJam is currently exploring the opening of new spots across the country for Tracks and Records and rolling out its full-scale plan in the coming years. There was mention of reviving the franchising model with a possibility to explore Shanghai, China, earlier this year, especially since FranJam owns the intellectual property surrounding Tracks and Records.
With the company having a relatively limited capital base in its current state, it remains unclear how KLE will execute some of the projects it endeavours beyond the usual partnerships. When the Business Observer asked Shirley earlier this year, he said, "Restore investor confidence, be properly capitalised for opportunities, and put efficient management in place to deliver results. KLE must start to return value to its shareholders, as in its latest results. Once investor confidence is restored the board will decide on the need to raise capital."
KLE listed on the Junior Market of the Jamaica Stock Exchange in October 2012, with its tax remission coming to an end last month. KLE's initial public offering saw it raising a consideration of $130.27 million at $3.70 per share. However, its share price has remained below that listing price and currently trades at $1.78, with a top 10 shareholder selling 2 million shares on November 17. Junior Market companies have a share capital limit of $500 million which leaves ample room for KLE to raise additional capital once the market agrees with a possible offer.
"KLE Group has survived a financial crisis — a pandemic that eliminated entertainment and restaurant business for two years. As chairman I have fought to keep the business alive by being resilient and focused on restructuring the company to add real value. The restaurant business is now profitable and contributes positively to KLE; Bessa has already borne fruit with the injection of new capital; and the investment has great potential in an industry that is currently outperforming. KLE has always been creative and innovative — now is the time to demonstrate how we will do this efficiently and profitably," Shirley closed.