BurgerFuel has reported a preliminary after-tax net profit of $505,478 for the year to March 31, a near 60 per cent drop compared to the 2019 financial year as it felt the impact of restructuring, investment in new brands and Covid-19 lockdown.
Group operating revenue rose 4 per cent to $21.8m in the year. The marginal increase, up on last year's $21m, was mainly due to the opening of the fast food company's Shake Out store in Auckland's Smales Farm.
In FY19 BurgerFuel posted a net profit of $1.2 million. The 59.1 per cent drop in earnings after tax, this year, was attributed to costs associated with a KPMG review process undertaken in August last year, legal costs, writing off "certain obsolete assets" and stock write offs due to the closure of restaurants over the Covid-19 lockdown period.
The group also undertook significant investment to launch and roll out its Shake Out and fried chicken brand Winner Winner.
Total system sales – including both company-owned and franchised stores - fell by 2.1 per cent to $101.3m in the year. New Zealand sales increased by 1.3 per cent as a result of the opening of five new stores.
BurgerFuel has no debt and cash reserves of $5.6m. It will forgo paying out a dividend, with group chief executive Josef Roberts saying the business needed to "retain sufficient working capital" in case of any further downturn in the economy.
The group operates 78 BurgerFuel, Shake Out and Winner Winner stores throughout New Zealand, the United States and the Middle East.
Roberts said the company had prepared to add to its restaurant locations in FY21, but the Covid-19 crisis had forced it to "moderate those plans".
"We do not anticipate any significant store development in the next 12 months," he said.
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"We remain focused on safeguarding the business and reducing costs in order to endure these uncertain times and be able to take opportunities that may present themselves in the months to come."
Roberts said he was pleased with the company's FY20 results despite the challenges in the market.
"We are pleased we have managed to maintain a reasonable profit given the costs associated with the ongoing development of our new brands. We have also had to absorb a number of extraordinary costs in this period," Roberts told the Herald.
"It's been challenging and remains so especially in all major cities where the populace has not yet returned to pre-Covid levels.
"We are undertaking some restructuring based on the fact that we see little development of new outlets in the foreseeable future. The economy ahead remains very uncertain, so we will have to see how and when things pick up."
The restructure would not result in any restaurant locations closures, he said.
BurgerFuel local same store sales decreased by 2.1 per cent, which was partly attributed to six days of lost trade caused by the lockdown.
Shake Out sales increased by 243 per cent in FY20, while Winner Winner sales increased by 56.4 per cent. The two new brands represented 7.6 per cent of total NZ group sales in March.
Both brands had been negatively affected by Covid-19, including the closure of the Shake Out Browns Bay store.
BurgerFuel sales in the United States and Middle East were down in the year, and the company is unsure of its future in both markets.
De-listing from NZX still 'an option'
In its market update, BurgerFuel said its advisers KPMG were still reviewing its options regarding a possible sale, merger, joint venture, international partnership or domestic partnership.
Roberts told the Herald that de-listing from the stock exchange remained a possible option.
"While we currently have no plans to change our status as a publicly listed company, de-listing is not an easy process under NZX rules. It still remains as an option in the future," he said.
Prior to the company calling in KPMG in August last year, BurgerFuel underwent a rebrand and changed its name from BurgerFuel Worldwide to BurgerFuel Group.
It also moved to the main NZX board after listing on NZX's junior Alternative Market in 2007.
KPMG was called in to review the company's options for growth. As part of that process the group decided it would focus its efforts on the New Zealand market, and subsequently launched in-house burger brand Shake Out and acquired fried chicken concept Winner Winner.
As part of the review process, KPMG questioned why BurgerFuel was listed on the NZX as it had little debt and a strong balance sheet. It said the company's shares were illiquid and volatile.
BurgerFuel founders Chris Mason and Josef Roberts still control the company, holding a 74 per cent stake.
The shares were unchanged at 43c having fallen about 25 per cent over the past 52 weeks.