K.L.E. Group Limited (KLE) – Disclosure

1. K.L.E. Group (“KLE”, “the Company”) advises that in 2021 the Board of Directors took the decision to pursue T&R Restaurant Systems Limited (t/a “Franjam”), an associated company in which KLE owns a 49% stake, a restructuring of the Company’s operations with an effective date of July 1, 2021, conditional on obtaining the approval of its bankers. Formal agreement on the terms of the restructuring having been reached between KLE and Franjam, we sought and have obtained the approval of our bankers, allowing this announcement to be made. 

2. The Board based its decision to pursue this initiative on the urgency of the need to stem the losses which KLE has been incurring since the onset of the COVID-19 pandemic and the severely restricted operations that have impacted our food and beverage business. It was therefore the Board’s considered opinion on the matter that the Company required an urgent and significant restructuring of its assets and liabilities in order to protect against the further erosion of shareholder value.

3. The restructuring sees the Company’s restaurant operations, and its associated assets transferred to Franjam, on the basis that in return for such transfer, Franjam assumes full responsibility for the liabilities associated with the restaurant operations, thereby relieving KLE of these significant operating costs. This is a non-cash transaction between the entities.

4. KLE will continue to manage its other significant and substantially more valuable business line, i.e., the Bessa development project (with its partner Sagicor Group Jamaica Limited), which is now in the final stages. The Board anticipates, it will realise a positive return on that project, and will also enjoy the revenue from the property management function at Bessa which it will assume upon the completion of the project.

5. Additionally, in order to provide much needed liquidity for the Company, during the final quarter of the financial year, the Board also took the opportunity to conclude a commercial arrangement with Zuar Jarrett, a director of the company, through which he provided immediate funding to the Company on a non-recourse basis in exchange for the Company paying over to him, as and when received, an agreed portion of its share of profit that it is currently projected to earn at the conclusion of the Bessa development. A key advantage of the arrangement is that it enabled the Company to retire a long outstanding obligation it had to Mr. Jarrett in connection with professional services provided by him to the company at the inception of the project.  The arrangement was completed on December 24, 2021.

6. The effect of the restructuring is that the Company’s focus will pivot away from operating a food & beverage business towards property development and management, while the Company’s balance sheet will have been significantly streamlined and better positioned to power the company forward in a dynamic environment. Through its continued ownership of a 49% stake in Franjam, KLE will remain in a position to reap indirectly a share of the financial benefits of any turnaround in the operating results of the divested restaurant business, while being insulated from the associated costs of operating that business.  The Board will also continue to pursue additional business opportunities as they arise

The Board remains firmly of the view that these actions are taken and the outcomes are in the best interest of the Company and its shareholders in the medium to long term.