Burger Fuel posts skinny maiden annual profit

File photo

Burger Fuel Worldwide turned in a skinny $33,513 maiden annual net profit - the result of solid Middle East trading, consolidation in New Zealand, cost cutting and closing its company-owned Kings Cross, Sydney store.

The result compares with a $552,983 net loss for the year ended March 31, 2010, and the company has accumulated $4.5 million in losses since its mid-2007 float.

While the company's sales fell 4.8 per cent to $8.1 million for the year, it said system sales, including those of its franchisees, rose 10.3 per cent to $33 million.

It said sales from its two Middle Eastern stores rose nearly four-fold to $4.1 million and a further four stores are planned to open in the current year in Dubai, two in Saudi Arabia and one in Kurdistan in Northern Iraq.

Burger Fuel exports all the beef its Middle Eastern stores sell and it says while exports are expected to grow, the strength of the New Zealand dollar against the US dollar may affect its competitiveness.

Closing the Bayfair store on April 11 and opening the Mt Maunganui store on December 6 were behind a 0.9 per cent fall in New Zealand sales, including franchisees, to $27 million.

"Although the economic conditions in New Zealand remain uncertain, it is the intention that some new franchised stores may open in New Zealand in the current year," the company said.

In Australia, sales fell 18.6 per cent to $1.9 million, reflecting the Kings Cross store's closure.

"As previously advised, the directors are of the view that expansion in Australia at this time under the direct ownership model is not economic due to the rising operational costs in that country, particularly the labour costs which have risen by more than 50 per cent in the past four years."

The franchised Newtown, Sydney store continues to operate and Burger Fuel intends to move toward a master license system in Australia eventually, the same model it is using in the Middle East.

With the Middle East market now starting to show returns, the new stores will significantly enhance the Burger Fuel brand, the company said. It is considering master license agreements in other Middle Eastern countries.

"The Burger Fuel product and brand is gaining international acceptance and we believe the opportunity for growth to be a real and credible proposition," it said.

However, while it wants to grow profit, investment in growth may affect short-term profit.

"As always, this will be measured against the group's resources and the ability to re-coup investment with acceptable returns.""

Burger Fuel shares last traded at 40 cents on May 26, down from its brief spike to 50 cents earlier in May after the company announced the sale of the Iraqi master franchise. The shares were floated at $1.