Tuesday, December 9, 2008

Burger Fuel: Running on empty

Listed Franchisor Burger Fuel Worldwide [BFW.NZ] results out yesterday were disappointing for shareholders.

Back in September 2007 directors anticipated NZ$50,000.00 in losses per month but losses of NZ$669,000 in the six months to 30 September 2008 were more than double that figure.

Even more worrying, losses have mounted as 2008 continued. If you strip out 2007 IPO costs the losses for the 9.5 months to 31 March 2008 were $83,578.00 per month. This compares to $111,500.00 per month for this latest reporting period.

Hardly a positive trend.

Lets look at revenue for the company to see if that changes the picture.

Surely if losses are more than double company estimates then revenue should be sharply up when we compare the 30 September 2008 revenue with the previous 3.5 month period in 2007?

Yes it is but sadly not more than double.


Burger Fuel @ Share Investor

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With revenue of $3,518,000 in the six months to 30 September 2008 and $ 2,336,000 for the 6 months to 30 September 2007, it is quite a good lift but hardly the stellar stuff that was shouted from Burger Fuel's advertising pre IPO, because it shows costs have far outstripped income and as I pointed out above these costs appear to be increasing rather than abating.

These revenue figures are based on 4 more stores since listing so this makes income figures look even worse.

Burger Fuel management say the next six months will be about cost containment and they will not anticipate opening any new outlets until well into 2009.

This will clearly be important to stem the franchisors already increasing operating expenses as their franchisees come under pressure from increasing business costs such as labour, ingredients and energy.

Like its bigger listed cousin Restaurant Brands Ltd [RBD.NZ] who had a recent poor last quarter sales, Burger Fuel will continue to struggle in the face of increasing competition, fickle consumer tastes and demands for better service and quality fast food.

Its short company history as a listed vehicle have been wildly disappointing and it looks even further away from any tangible success than it was when it listed mid 2007.

As least there is still their bastard Burger.

Burger Fuel shares were at 38c at close of the NZX at 5.00pm Tuesday 9 December 2008.


BFW
Burger Fuel Worldwide Limited Ordinary Shares
As at 5:59 pm, 9 Dec 2008


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c Share Investor 2008