BurgerFuel lifts profit 37% with Middle East surge, but shares slide

BurgerFuel Worldwide, the fast food chain and franchisor, has boosted first-half profit 37% as sales in its Middle Eastern franchises surge and the local chain takes on a new structure. Shares sink 6.5% to $1.15.

Net profit rose to $308,000, or 0.57 cents per share, in the six months ended September 30, form $225,000, or 0.42 cents, a year earlier, the Auckland-based company says in a statement.

Revenue climbed 10% to $5.3 million, with Middle Eastern sales climbing 22% to $1.49 million. The New Zealand unit lifted revenue 12% to $3.87 million.

The company will not pay an interim dividend, preferring to horde capital for expansion.

"Results for this period demonstrate a determined focus to grow company profits, whilst at the same time balancing out the need for further investment into our international expansion," chairman Peter Brook says.

"While we are always mindful of returning profits to shareholders by way of dividends, it is essential at this time that we continue investment to support growth and take a long-term view of our business."

In recent years, BurgerFuel has increased its exposure to the Middle East by signing master licensing agreements, which earns the company up-front territory fees and on-going royalties based on store turnover.

The fast food chain is focused on breaking into Middle East nations and is part the Beachheads Global public-private partnership run by New Zealand Trade & Enterprise, which provides tailored mentoring for high-growth local companies.

The company increased system sales 27% to $22.1 million. Total system sales represent till takings across all company-owned and franchise stores.

BurgerFuel sold its company-owned Australian store to a franchisee last year and sees the market as holding large potential in the future.

The tightly-held stock trades infrequently on the NZAX and has surged 132% this year. Today's fall values the company at $61.7 million. When the company went public in 2007 it sold 15 million shares at $1 apiece.

(BusinessDesk)

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I like Burger Fuel, it's like New Zealand's version of McDonald's and has a strong future ahead of them. However the only problem I have with them, is they won't let anyone invest in their franchise.

Around 88% of the shares are owned by one group, which means there is little or no chance of being able to buy a good stake of the company. If they freed up some of those shares and allowed people to buy even just 30% of the company you'd see those shares sky-rocket through the roof.

But I must admit that either way they're doing a good job, the only reason I see for it dropping is people taking cashing out since they have doubled in the last two years.

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You had your change at the IPO. You could even have put them on your credit card.

The problem is if the founders (the 88% you refer to) sold, that would be seen as a negative to the market resulting the price falling. At some stage they will but it will have to be managed carefully.

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Can't wait for them to open stores in Israel.

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Are they kosher? It would be very expensive mince (ground beef) if you can only use the front half of the beast.

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Not really an issue for a country as multicultural as Israel. McDonald's is the largest restaurant chain there with over 170 branches, of which about over 40 are kosher.

http://www.mcdonalds.co.il/

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They are doing well at implementing their stategy (middle east expansion) but they still look a bit overvalued in my opinion. Market cap is over $60m for profits of $600k. They dont have the exponential growth like XRO and DIL.

I also want to see them expand into the South Island. If they cant implement that properly, how are they gonig to implement a worldwide expansion (just look at their failed Australian roll out).

The small free float as pointed out by Anon #1 also hampers those trying to get in as you cant buy a meaningful stake without pushing up the shareprice too much.

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The South Island, like Australia, is a tiny market, and quiet frankly, why bother with either of them? The real money will come from the middle east and the flow of annual royalties back to New Zealand from the stores there. And don't forget, the Arabs have among some of the deepest pockets in the world. If BurgerFuel achieves a certain level of critical mass over there, it will be ripe for a takeover by wealthy Gulf interests.

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Yeah I'd be clamouring to get my hands on shares in a company that books and "hordes" a massive $300,000 total profit from 35 or more stores. Really high margin there.

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It's a franchise so each of those stores is running a profit too.

Large profits will come as they grow.

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Lets hope the profit is a little more than $12000 per store. I spend that on coffees each year at Sierra.

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