KLE restructures, mothballs CEO post to save money
KLE Group, which operates the Usain Bolt’s Tracks & Records restaurant, has restructured its operation to better align with the new realities that COVID-19 has inflicted on the market.
Gary Matalon, who served as CEO, has temporarily stepped down from the position, effective November 23, freeing the loss-making company of the expense of his executive salary. He will continue to oversee the franchise operations, while seeking out other opportunities to grow the business.
KLE began as an entertainment company that, at the time it went public eight years ago, was mostly a nightclub operator with a casual dining operation. The nightclubs eventually folded and KLE subsequently refocussed on building out a franchise for its Tracks and Records operation. It also decided to enter the real estate market, starting out with a development in St Mary, called Bessa, that is yet to be finalised.
Under its current restructuring, two new subcommittees have been formed: one to oversee the operations of the restaurant unit – with its members made up of directors David Shirley, Norman Peart, Joe Bogdanovich and Marlon Hill, with Matalon as chair; while the other, for oversight of the real estate division, is made up of directors Matalon, Zuar Jarrett, Stephen Shirley and Bogdanovich, with David Shirley as chair.
The newly implemented structure is subject to revision in the coming months as conditions evolve, KLE advised, but in the short term, it is expected to “significantly” save money for the business, which spent $59 million in salaries and wages at the end of financial year 2019. Executive director compensation topped $10 million that year, according the company’s financial disclosures.
“At this stage, we are working towards profitability in the scaled-down business that exists because of challenges born from COVID-19. Until we raise some capital, increase activity and resume growth, this will be sufficient,” Matalon told the Financial Gleaner.
KLE has seen a dramatic decline in patronage during the pandemic, but business rebounding for KLE Group’s restaurant business Tracks and Records, which produced $27.4 million in revenue for its third quarter ending September. The June quarter was its worst period, historically, with revenue of just $7.7 million flowing into the business.
Matalon is now cautiously optimistic about performance for the upcoming festive season, but is banking on KLE’s recently launched take-out and delivery service, as well as customer loyalty, to take the company through the remainder of the year.
The company said it already eliminated around 87 per cent of its salary bill up to June, through lay-offs and mandatory salary cuts, and reduced its utility bills by 60 per cent by decommissioning all heavy-duty equipment.
“The big challenge we are faced with is the fact that our model is full-service casual dining, which by design focuses on giving the customers a good experience. A lot goes into the physical space, service platform and menu to achieve that,” said Matalon.
“Like many other restaurant models, it is a high-volume, low-margin business model, and when restrictions such as social distancing and limited access are imposed, the model is essentially incapable of working in the way it was intended. In addition to this, curfews ultimately reduce or, in some cases, eliminate entire day-parts of our business,” he said.
The changes envisioned will require capital, an issue that Matalon said the board is currently looking into.
KLE expects to launch the Bessa project during the first quarter of 2021. It’s designed to produce 86 residential units, which are being constructed in partnership with Sagicor, which holds 75 per cent interest, with KLE owning the other 25 per cent.
“We are extremely optimistic in regard to the real estate market. Interest has been expressed prior to COVID-19 and the flow of interest continues now. In fact, we have exceeded reservations for some of the units,” Matalon said.
David Shirley, who is both chairman of the KLE real estate committee and chairman of KLE Group Limited, told the Financial Gleaner that the development is now expected to be finalised by August 2021. The listing prices for the development, which is comprised of condos and villas, will range between US$230,000 and US$750,000.