Tuesday, December 14, 2010

Burger Fuel Worldwide: Losses Mount

Burger Fuel Worldwide Ltd [BFW.NZX] has just racked up its 7th consecutive half year loss to 30 Sept 2010 since listing in mid 2007.

Typical of management, the company is highlighting sales revenue from franchised stores, which has risen sharply due to store openings in the Middle East and downplaying the franchise income - which is what the company will eventually make a profit on - which has increased by a small fraction.

Key Points

Loss of $219,000 down 26% on lasts half's $296,000

Flagship Kings Cross store closed

Middle East stores performing well.

Australasia stores flat

Set to exit remaining Sydney store.

$1,153,153 cash left in bank

Profit possibly set for 2012 - 2013

The $219,022 loss is a 26% improvement on last years comparable figure so at least this is improving but the company is struggling in New Zealand and has largely abandoned its Australian operations which were a big focus of growth when they announced their IPO. Their Flagship store in Kings Cross has been closed to save money.

The focus from 2010 onwards is growing in the Middle East. Well done to change tack so quickly but the homework just hadn't been well done before a couple of million dollars of shareholder money was lost in Australia.

Shareholders will have to question as to whether the Middle East is going to be any different from the Australian experience but thus far it is looking a little more promising than our more competitive and more business savvy cousins across the Tasman.

Management have focused the 2010 calendar year on pruning business costs and have managed to save $68,000 in the last half year .

Significantly management have changed their expansion model so will grow by means of Area Development or Master License Agreements. This is where the licensee is responsible for all capital and operational costs. This will clearly allow the company to grow quicker and cheaper where it sees the opportunity.

Management indicate they see limited scope for expansion in Australasia and see a patchy and uncertain 2011 ahead.

There is no indication as to when the company will make its maiden profit but management indicated that "the company expects to reach profitability in the near future".

It looks to me that 2012 - 2013 could be that near future.

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