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.


Burger Fuel Worldwide @ Share Investor

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Burger Fuel 2010 Full Year Profit Analysis

I pointed out last week that Burger Fuel Worldwide [BFW.NZ] 2010 full year profit should be better than the 2009 result because of the surge in the growth of the fast food sector over the last couple of years and they have done better, with a narrower loss of just over half a million.

The vast bulk of revenue for this franchising company still comes via direct sales from company owned stores rather than royalties from franchisees but these royalties should rise as the company expands in the Middle East where it has done exceptionally well.

In New Zealand same stores sales for franchisee/company owned stores increased by just over 5%. When a new store in Mission Bay is included this increase amounts to over 12%. A good result but on a par with the likes of Restaurant Brands Ltd [RBD.NZ] which increased sales in the 2010 year by just under 5% (see 2010 Annual report for details)

No stores were opened in New Zealand during 2010 and it appears saturation point may have been reached with 27 stores a reasonable number given the size of the premium end of the fast food market that BFW operates in.

A big worry for Burger Fuel management will be its two beach-head stores in Sydney, Australia one of which is situated in Kings Cross.

There was much fanfare about the Kings Cross store being a hugely visible entry into OZ, with big expansion plans, with an emphasis by management on the marketing possibilities that the high exposure site had for foreign visitors to the "Cross" spreading the Burger Fuel word on a global scale.

Well that hasn't happened and as I pointed out in 2007 the store operating costs would be a huge burden on sustainable profitability and that, unfortunately, has turned out to be the case.

Looking at the 2011 year the company is set to grow in the Middle East but just get by in New Zealand.

Australia will be a big burden on such a small company and management will need to focus on costs or consider picking up sticks across the ditch. There is more and slicker competition in the gourmet burger business in Sydney than back on home turf.

Expansion of the company will be further hamstrung by its ever decreasing cash in the bank and as management have said they are relying on expansion of units rather than same store sales to get to profitability.

Shareholders can only hope.


Key Points from BFW 2010 Full Year

1. $552,983 loss - 22% better than last year.

2. $8,722,000 up 17% on 2009

3. Cash reserves down 25% to 1,159,000

4. Earnings per share -1.04c VS -$1.34 last year

5. 2 new stores in Dubai & Saudi Arabia doing well.

6. Australia failing to fire and with significant overheads mounting.

7. 210,000 shares issued to directors during the year.


Burger Fuel Worldwide @ Share Investor

Burger Fuel 2010 Full Year Profit Preview
Burger Fuel Worldwide: 2009 Half Year profit analysis
Stock of the Week: Burger Fuel Worldwide
Download full company analysis from Thomson First-Call
Burger Fuel doesn't rule out capital raising
Burger Fuel Worldwide: Closer look at Company Accounts
Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungry
Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary

Discuss BFW @ Share Investor Forum - Register free




c Share Investor 2010