Share Investor

Thursday, June 12, 2008

Burger Fuel leaves investors hungry

Burger Fuel's gourmet burgers are delicious, ample, fresh and have plenty of filling. It is a shame that its latest profit results are meagre, lacking in substance and leave investors hungry.

Too negative?

Just look at the revenue for the last 9.5 month reporting period. Around NZ$4.7 million. This is derived from a 10% cut out of Franchisee's turnover, which probably totaled around NZ$15 million for that period. 4% of that revenue was used for marketing of the company. The balance of the revenue comes from a construction management fee, a franchise territory fee, a franchise training fee and revenue from company owned stores.

On this revenue Burger Fuel Worldwide [BFW] reported an audited loss of $2,149,067 for the nine-and-a-half month period to 31 March 2008.

Burger Fuel @ Share Investor

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The IPO raised around $8 million dollars cash in July 2007, with $3 million contributed from the company founders because the IPO flopped, and as of 31 March 2008 it had chewed through almost $5 million of it. Granted there have been costs involved in opening a company owned store in Sydney and costs establishing the company as a franchisor to the chain of owner operator stores but as a franchisor Burger Fuel's store opening costs should be largely covered by franchisee fees and contributions as outlined above.

What it looks like is that there will be more capital needed in 12-16 months to continue company expansion.

As an investor and business owner myself, I like to be making money from my enterprise from day one. Of course there are capital costs in a "start up" such as BFW but as the listed life of this company is now almost a year old, the promise of profit doesn't look good as the company expands.

The company should be making a small profit already, excluding the almost $1 million cost of the IPO, but one of the answers why they might not be could lay here:

This included an additional elected marketing spend in NZ of $339,304 over and above the franchisee marketing budget for the period.If the franchise model is a sound one as the company expands then why would the franchisor spend money above and over the amount the franchisee pays to do the marketing? Should the marketing fee be bigger given that $339,304.00 is not a small amount of money when you consider the small revenue base and small number of stores at present?

A big worry is the progress of the brand in Australia

BurgerFuel Australia unaudited system sales for the period 1 April 2007 to 31 March 2008 are $1,453,892.

With two stores opened in OZ, one in Kings Cross opened since October 2007 and an established one in Newton, the revenue of the two combined of only $1.45 million is tiny.

An outlet based in Sydney's Kings Cross should be doing well north of A$2 million per year to cover the high costs of being based in that area. Rents are high and as this store is company owned it will have to do much better as to not continue to be a drain on franchisor company profit.

All is not lost though!

One small promising light shines from the deserts of Dubai where BFW signed a Master Franchisee agreement in May with Al Khayyat Investment Group Investments LLC to open a store there latter in the year.

The financial details of that deal are sketchy but we all wait in hope for good sales figures for the first few months to help give investors an indication if the concept will fly in a market already saturated with manifold more times competition for the disposable entertainment buck than the company faces in Australasia.

Burger Fuel reminds me of the 42 Below Vodca company, which was listed a few years back. It had a very strong brand and loyal following and struggled initially because it didn't have the funds or systems to take the company and its product to the world. It never made money but was eventually sold to Bacardi for NZ$138 million in 2006 and they had the backing and moola to take the brand somewhere.

Is Burger Fuel destined to be bought up by a YUM! or one of the many worldwide operators of fast food brands?

You never know, Josef Roberts, a director of Burger Fuel, did just that when he started up the Australasian Red Bull company and then sold it to the parent .

Judged by the latest profit announcement this could be Burger Fuel investors only hope for a return on their money.

Related Links

Burger Fuel website

c Share Investor 2008

Wednesday, June 11, 2008

Go ahead, make my Day

PC used to mean a big burly strong, tall, male Police Constable not politically correct.

The shooting of an Indian dairy owner by some low life Polynesians last weekend continued the PC garbage image of the police.

Instead of going in with guns immediately and shooting the bugger dead we have an innocent victim six feet under instead.

"Police protocol" apparently had to be followed and 30 minutes after the first call to the boys in blue they arrived. About 25 minutes too late.

This kind of nonsense was also followed after the Kahui slayings and when the young wild man Wallace went on a rampage with golf clubs and baseball bats and was rightly shot for his troubles before he injured or killed an innocent victim.

The constable who shot him was wrongly vilified by the criminal's family and the police gave him little backing.

The problem isn't the cops on the beat as such, but their political masters, the Labour Party, who have hamstrung the cops to such an extent they are too scared to do their duty-protect and serve the public.

When an excuse is made by the cops in the latest incident, that they wanted to make sure it was safe for them before they entered the dairy then you know you have a big problem. What about keeping the public safe, it is your job!!

It is time the head of the Police, Howard Broad, stepped down from his position because of the failure he clearly is. Appointed by Helen Clark herself, this man has been guilty of manipulating young constables in the past, not to breath test him after being found drunk at the wheel of his car. He is a disgrace and so is Clark for appointing him. She knew he was a drunk driver.

What we need is a Dirty Harry rather than a Deborah Harry at the top. New Zealanders are sick of being victims and it is time we took back the streets, in South Auckland and other desolate parts of the country.

Instead of reporting to base after a shooting to get approval to use guns, make sure their hair is parted on the left and their pants are not too tight and put innocent lives at risk, all we need is a Clint Eastwood to answer a victim's call with a few succinct sounds.

BANG, BANG, BANG, BANG.

We know what the alternative is and it is unacceptable to most of us.

c Political Animal 2008

Sky City Assets: Buy, sell and hold

News out today that Sky City Entertainment[SKC.NZ] has sold a share in a the Christchurch Crowne Plaza Hotel and in turn received a larger stake in the Christchurch Casino that it owns with Skyline Enterprizes and cash in hand leaves this shareholder a happy man.

It adds to the news yesterday that the casino company will develop a "luxury resort" on the Little Mindal land it owns in front of the Darwin Casino.

The larger stake in the CHCH Casino takes the Sky City holding from 41% to a 46% holding.

The hotel was sold for $61.5 million, so one might presume that the Sky City share of the booty was $30.75 million. There was no breakdown of how much the extra 5% stake in the South Island Casino cost and therefore how much cash was left to disperse to debt pay downs or even a dividend to shareholders.

Shareholders in Sky City are entitled to know what the 5% cost.

The cash left over is more likely to be going towards subsidising Sky City Cinemas, a division that was on the block for a year but failed to sell as of last Friday because the buyer "failed to get financing", according to the Sky City Press release.

Any credible buyer interested in the cinema would only have to fork out about NZ$60 million and they would have known that was around the asking price when Sky City wrote down the assets of the division last year.

It is more likely that the deal fell through because the assets wouldn't have even got near the $60 million price tag rather than blaming the credit crunch for failing to sell a loss making business.

I'm naturally annoyed at management for not disposing with the cinemas, even for less than the asking price. It is going to be a continuing drain on capital expenditure and is never going to make any sort of decent return on assets or capital.

Cinemas as a business are on a par with the airline industry when it comes to losing money and track records for both show a history of company collapses, huge expense for owners and continued disappointment.

Nigel Morrison needs a boot in the head for that one.

Sky City @ Share Investor

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JOHN BOSCAWEN: Freedom of Speech Trust Newsletter

Newsletter No.2 – Electoral Finance Act

By John Boscawen – Freedom of Speech Trust

10 June 2008

The Electoral Finance Act was passed by Parliament in December last year despite the objection of our Human Rights Commission, the New Zealand Law Society and all our major newspapers. The Act imposes restrictions on free speech far beyond what both the Human Rights Commission and the Electoral Commission considered reasonable. The Freedom of Speech Trust has been established to campaign for the Act’s repeal. Please feel free to circulate this newsletter to your friends and associates.

A tribute to Graham Stairmand

It is with great regret and sympathy that I acknowledge the very recent death of Graham Stairmand, President of the Grey Power Federation.

Graham was a strong opponent of the Electoral Finance Bill and he joined Garth McVicar, Rodney Hide and myself in a legal action against the Bill late last year. (See below).

His work for senior citizens was acknowledged by the presence at his funeral of the Minister for Senior Citizens Hon. Ruth Dyson, National’s spokesperson for Senior Citizens Sandra Goudie and MPs Peter Brown and Nicky Wagner.

I acknowledge his opposition to the Act, the support he gave me and the courage he showed in joining the legal challenge. I extend my deepest sympathy to his family.

Bill of Rights challenge against the Attorney General returned to High Court – 15 May

In the absence of a written constitution one of the most important protections we have to our democracy and to our rights to free speech is the New Zealand Bill of Rights Act 1990. This Act requires the Attorney General to notify parliament of any bill that comes before the House that is “inconsistent” with the Act.

Almost everyone (and certainly the Human Rights Commission and the New Zealand Law Society) agrees that the Electoral Finance Bill was inconsistent with the Bill of Rights Act when it was introduced last July, yet the Attorney General failed to notify the inconsistency. This is hard to comprehend given the Bill required every New Zealander to first sign a statutory declaration before they spent a single dollar expressing any political opinion in election year. Incredibly the Crown Law Office thought this was acceptable and not inconsistent with the Bill of Rights.

Late last year I, along with Garth McVicar, the late Graham Stairmand and Rodney Hide commenced legal proceedings in the High Court in Wellington seeking a declaration that the Attorney General failed in his duty. We sought urgency.

The Crown opposed urgency and sought to have the proceedings struck out – so, in the event they were successful we would have been denied the chance to argue our case.

Earlier this year we updated our Statement of Claim to argue that the Electoral Finance Act, (as passed) was also inconsistent with the Bill of Rights.

The strike out application was heard in a full day open court hearing at the Wellington High Court on 15 May. Justice Clifford reserved his decision.

Tauranga Protest – 3 May

On Saturday 3 May between 600-800 people marched through downtown Tauranga opposing the Electoral Finance Act. The protest march was an outstanding success and was the largest protest seen in Tauranga for several years – certainly since the 1981 Springbok Tour, if not before.

The protest was widely covered in the Bay of Plenty with extensive coverage in the Bay of Plenty Times – which featured it as its main front page story on the Thursday before the march.

For their coverage, see http://www.bayofplentytimes.co.nz/storydisplay.cfm?storyID=3771539&msg=email link.

TV3 also covered a full report of the protest on their main 6.00pm news bulletin.

Other Protest Actions

In addition to the Tauranga protest we have organized two recent protests. In the first, 35 opponents of the Act protested outside the Rendezvous Hotel in Auckland (formerly the Carlton Hotel) on 23 May where the Prime Minister was addressing a post Budget luncheon. Our placards called for a repeal of the Act and a restoration of free speech.

In the second protest, a small group distributed leaflets to the attendees of the Green Party Conference in Auckland over Queen’s Birthday weekend. We highlighted the fact that the Green Party was proposing a closer working relationship with the Maori Party. The irony was that the Maori Party had been a strong opponent of the Electoral Finance Act. In his speech to parliament on the third final reading of the Bill, Maori Party MP Hone Harawira said:

‘Yes folks, money talks, but nothing talks quite like the truth and the truth about this bill is that it’s nothing but an arrogant dismissal by this Labour-led government to deny the citizens of Aotearoa New Zealand the right to participate in one of the fundamental rights of any so-called democratic society: How you elect your government……. Money is not what drives people to vote. It is the truth’.

Our message to the Green Party MPs and their supporters was to show some leadership, acknowledge that parliament did not fully understand what it was doing when the Act was passed and move to repeal it.

More protests, particularly in provincial areas, are planned for later this year.

Uncertainty of our Electoral Law and the likelihood on legal challenges post election day

When I first began my campaign of opposition to the Electoral Finance Bill my focus was the impact of the Act on free speech and the right of ordinary citizens to participate in the electoral process. The recent ruling by the High Court that the Engineering, Printing Manufacturing Union people may be prohibited from registering as a third party because it is involved with the management of the Labour Party is just one example of the restrictions the Act imposed.

However an equally important issue has emerged over recent months and that is the application of the Act to the MPs, themselves. This is well illustrated by the Chief Electoral Officer ruling that Trevor Mallard’s car, painted red and emblazoned with his name and Labour Party logos is an “election advertisement”. While the trivial issue may be the car failed to carry the authorization of Trevor Mallard’s financial agent, the much more important issue is that the cost of his election advertisement must be included in his $20,000 expense allowance for his election campaign in the Hutt electorate.

The problem he faces, is how much and what cost does he include? Certainly the cost of the paintwork but what about the running costs of the car? - a form of depreciation allowance?

Trevor Mallard is now faced with the very real prospect of having to run a very conservative campaign, and spending well within his $20,000 allowance. The alternative is to spend close to the $20,000 allowance, and to run the risk, assuming he retains his electoral seat, of being challenged in court post election day on the ground he did not fully return the full cost of his car’s advertising. This highlights the point made by Professor Bill Hodge speaking at our Auckland protest in March that the Act is uncertain and is likely to lead to a number of legal challenges post election day with the final result of the election not known until well into next year.

Continuing Campaign

If you are concerned about the implications of the Electoral Finance Act on our democracy and on free speech I would be grateful for any support you can give to bring about repeal of the Act. In the first instance you can forward this email to your friends and family.

Financial contributions can be made to Trust at PO Box 42-267, Orakei, Auckland, or direct to the Trust’s bank account 12-3252-0039335-00.

Regards

John Boscawen

Trustee – Freedom of Speech Trust

Email: john@boscawen.co.nz

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List of MPs who voted for Act

Cartoon and comment