Burger Fuel Worldwide Limited
Chairman and Chief Executive''s Review
For the period ended 30 September 2017
Burger Fuel Worldwide Ltd Half Year Results for the 6 months ended 30
September 2017
Overview
The Directors of BurgerFuel Worldwide (BFW) present the unaudited results for
the 6 months to 30 September 2017.
Net Profit after tax in the period was $65,071 compared to a loss of
($115,328) in the same period last year, showing a gain of $180,399.
Our Group Operating Revenue increased by 21.9% on the same period last year
to $12.6M. This increase in revenue is mainly due to the new Indianapolis &
Takapuna company owned stores. Takapuna was purchased in October 2016 & the
Indianapolis store opened in May 2017. BurgerFuel Total System Sales (store
sales including franchised stores) are up 9.2% to $52.7M for the period -
this is made up of both new and existing stores'' sales growth.
BFW RESULTS (UNAUDITED) FOR THE PERIOD 1 APRIL TO 30 SEPTEMBER 2017
30 September 2017 30 September 2016
$000 $000
Operating Revenue * 12,651 10,378
Operating Expenses ** (12,247) (10,457)
Net Profit Before Tax 404 (79)
Net Profit After Tax 65 (115)
* Revenue includes; Operating revenue & interest income.
** Expenses include; Operating expenses, depreciation, amortisation &
interest expense.
TOTAL SYSTEM SALES UP 9.02% to $52.7M
Australasian Region
In New Zealand we continue to receive strong customer support in both the
regional areas and cities.
Our focus remains on operational excellence, cost efficiencies, systemisation
and the development of world-class training technology and system development
and are seeing the benefits of this.
The BurgerFuel NZ company-owned store strategy continues to develop, with
last year''s purchase of Takapuna becoming a key contributor. We see further
potential to own more BurgerFuel outlets over time and will continue to
review these opportunities as they present themselves.
While sales continue to grow year-on-year, as previously communicated, the
Board notes that the market should expect new store openings in New Zealand
to slow down as this market approaches its full potential - especially in the
North Island. BFW still sees the opportunity for further expansion in the
South Island where we are actively reviewing potential sites and franchisees.
While focus will remain on the protection and growth of the existing New
Zealand business, BFW will continue in its exploration of diversification
opportunities. As communicated in the Annual Report, the board will continue
to consider all options for expansion within the New Zealand Market, both
inside and outside the BurgerFuel brand.
Australia remains difficult, and alongside an extremely competitive
landscape, we continue to face high operating costs such as rent and labour.
In November 2017, our franchisees in the Gold Coast closed their Mermaid
Beach store due to a relatively low performance level. This will have no
material effect on BFW results.
We will continue to support our existing franchised stores in Australia but
comfortable operating margins remain hard to achieve and accordingly further
expansion in this market is highly unlikely.
The Middle East
In the Middle East, despite the many adversities we face due to ongoing
economic and political unrest, we have seen growth in certain areas and
continue to make progress in this market.
As of the 30th September 2017, we now have a total of 25 BurgerFuel stores
across the Middle East.
Our business in Saudi Arabia has continued to see growth in sales within the
period. As previously communicated, this can be largely attributed to the
recent revitalisation of the Saudi economy as well as an increase in
BurgerFuel''s marketing activity.
The UAE, as a whole, is continuing to see a slowdown in the retail sector and
this has been reflected in sales. We are also facing a densely populated
competitor market. Despite these challenges, our business in the UAE
continues to operate reasonably well, and Dubai remains a strong focus for us
in the Middle Eastern region.
In Egypt, the ongoing political turmoil as well as the economy there in
general, continues to result in extremely low sales volumes. The reality is
that should this continue, this is not a market that BurgerFuel can operate
in successfully or safely. We are currently working with our local partners
to assess our future in Egypt and will update the market with any
developments as they come to light. The market should note that Egypt has
never contributed in any significant way to BFW results, and therefore a full
exit from this country will have no material impact on the group.
In Iraq, where we have one store in Baghdad, sales continue to perform
reasonably well. This has given our Master Franchisees in that country
confidence to open another site in Baghdad. We hope to announce that the
doors have swung open on this store shortly.
In summary, the MENA region continues to be a good contributor for the Group.
We do however caution the market every year that our outlook in any of these
regions can change quickly due to the ongoing potential for volatility in the
Middle East. As such, we continue to monitor these markets closely.
United States
The first BurgerFuel USA store in Indianapolis has now been open for 6
months. Initial operations demonstrated strong sales but sales have since
softened to a level that whilst still reasonable, are below where we need to
be. We are entering our first winter in this market, which in general is a
known contributor to a reduction in sales. At this stage, it is too early to
advise on the viability of the brand in the USA. Focus will remain on the
continued growth of this store and monitoring its performance closely as we
come into the warmer months. Costs of operating in America are very high as
we do not have a partner in that country and the Board is conscious that
major investment is required there in order to both establish and build a
brand.
BurgerFuel continues to maintain a high level of awareness in Indianapolis
and American consumers are indicating that they like our product. BurgerFuel
recently won the ''Best Burger'' award and ''Best Restaurant'' award in
Indianapolis via public vote. The brand has also received some strong
exposure on a national level in the United States, placing in the Thrillist
''Top 31 Burgers in America''s list. Whilst we are proud of these achievements
we are also highly mindful of costs and a potential weakening of the New
Zealand dollar. We will keep the market informed of any further developments
in the USA.
Group Outlook / Summary
The Group continues to protect and grow the existing business, as well as
look for new expansion opportunities both inside and outside of the
BurgerFuel brand.
Investment over the last 6 months has continued to be significant due to the
resource required to support the USA entry and development plan.
Additionally, investments have been made in new product development and
business development that will allow the Group to keep moving forward within
existing markets and create a strong foundation for further growth.
It is clear to the Board that the cost of doing business in overseas markets
is rising and the time required to establish a brand overseas is also
lengthening due to the level of high competition in every global market. Rent
and labour costs are also approaching levels never seen before and this makes
return on investment both longer and more expensive to achieve. It is for
this reason that new strategies that allow for diversification within the New
Zealand market, where we are well established, have been put in place.
The Group has no debt and as at 30 September 2017 had cash reserves of $5.3M.
BFW remains in a strong position, not only financially, but also from a
resource and intellectual property perspective. This puts the Group in good
stead for further growth and the Board will continue to consider all options
for further expansion within the New Zealand market.
We would like to thank all our shareholders for their continued support and
we look forward to keeping you informed of our progress.
We wish all our shareholders, staff, franchisees, suppliers and of course our
valued customers, a safe and Merry Christmas and a prosperous New Year.
Best regards
Peter Brook Josef Roberts
Chairman Group CEO
End CA:00311798 For:BFW Type:HALFYR Time:2017-12-12 14:47:44