Burger Fuel Group Ltd Half Year Results – 30 September 2021

Burger Fuel Group Limited Chairman and Chief Executive's Review For the period ended 30 September 2021 Burger Fuel Group Ltd Half Year Results for the 6 months ended 30 September 2021 OVERVIEW The Directors of Burger Fuel Group Limited (BFG) present the unaudited results for the 6 months to 30 September 2021. Net Profit after tax for the period was $404,525 compared to $358,901 in the same period last year. This represents an increase of 12.7%. The results include revenue of a non-cash nature of $221,000 required to be recognised under IFRS15 "Revenue from Contract with Customers". Group Operating Revenue (excluding IFRS 16 and the Government support income) increased by 15.8% on the same period last year to $9.4M. This is mainly due to increased sales across the system (royalty income) and the additional sales revenue from the opening of the company owned Winner Winner store in Takapuna. Under NZ IFRS 15 "Revenue from Contract with Customers" any Franchise fees or Licence fees received, are required to be spread over the term of the agreement. Our Master Licence Agreement (MLA) for Egypt was due to expire in September 2031, but our efforts to continue with our brand in Egypt were abandoned and it was agreed to terminate the MLA in June 2021. With this termination, under IFRS 15 we are required to recognise the remaining term of the agreement ($221,000) as revenue in our financial statements. This was a non-cash item and therefore did not increase our cash position. The Group has no debt and as at 30 September 2021 had cash reserves of $6.8M. GROUP PERFORMANCE Total system sales were $45.6m, for the period representing an increase of 11.63% over the same period last year. The increase is mainly due to the opening of the franchised BurgerFuel Whangarei store the company owned Winner Winner restaurant in Takapuna and the franchised BurgerFuel Faisaliyah store in Saudi Arabia. Total store numbers globally are 77 as at 30 September 2021 with the closing of the Rabwa store in Saudi Arabia. The new brands, Winner Winner and Shake Out accounted for 6.8% of total systems sales and international sales accounted for 13.6%. Group Net Profit After Tax was up $46K (12.7%) on the same period last year. This was due to the additional revenue booked for the cancellation of the Egypt MLA, but we also had additional costs with establishing our new brands including our company owned Winner Winner restaurant, which with the long and ongoing lockdown in Auckland, is not performing as well as anticipated and is impacting our Group results. The reduced revenue due to COVID-19 was however assisted by rent relief provided by most of our landlords and the Government wage subsidy and resurgence payment support. OPERATING RESULTS BurgerFuel New Zealand Total sales for the period were up 11.7% on the previous year. This was due to additional trading days in the 6 months to 30 Sept 2021 compared to the previous year, and also the opening of the franchised BurgerFuel Whangarei store in March 2021. The nationwide COVID-19 Alert Level 4 lockdown from the 18th of August 2021 to the 22nd of September 2021 for the Auckland stores (and to the 1st of September 2021 for the rest of the country) impacted the total system sales for the Group. Comparing lost sales days due to the lockdown for the same 6-month period in FY21 & FY22, the Auckland stores have had 8 less trading days in FY22 and the remaining stores have had 13 more trading days in FY22 compared to FY21. Following the country's move to Alert Level 3 all BurgerFuel stores remain open. In Auckland all stores operate on a click and collect basis whilst under Alert Level 3. Other than our inner-city stores, sales have been strong across the system since re-opening. Alert levels continue to change across the country and accordingly our customers' ability to dine in is tied to the Government's decisions around the various levels. BurgerFuel Middle East (MENA) The Middle East business total sales comparison for the first half of this year records an increase of 4.8% due the opening of Dammam Faisaliyah store in Saudi. Currently we are not receiving any royalty income from the MENA region, while we assist our partners in that region, to recover from the global pandemic. As noted in our AGM in August 2021, the future of the Middle East remains uncertain at this stage. We expect conditions in the Middle East (both UAE and Saudi Arabia) to remain challenging for the foreseeable future. Winner Winner & Shake Out New Zealand Sales for the new brands are up 25.9% on the previous 6 months mainly due to the opening of the Winner Winner Takapuna company owned store. We have not opened any new Shake Out stores due to the COVID-19 environment that we currently operate in, and the Shake Out brand remains at 3 stores. The locations in Palmerston North and Hamilton continue to trade reasonably well, given this a new and unestablished brand. The company owned Smales Farm store in Takapuna is located within an office complex and as such continues to face difficult trading conditions due to the COVID-19 working from home requirements. Shake Out has been a "contactless & cashless" brand since its inception, so the COVID-19 restrictions were relatively easy to implement. The Winner Winner brand now has 4 stores with the opening of a company owned store in 16 Anzac Street, Takapuna on 30 November 2020. This brand and particularly the new restaurant in Takapuna continues to be significantly affected by the COVID-19 alert level system. Unlike our famous brand BurgerFuel, Winner Winner is unknown and the constant stops and starts in and out of alert levels is taking its toll on some of the restaurants, but especially Takapuna. GROUP OUTLOOK The Group's Chief Operating Officer Tyrone Foley resigned in September 2021, but we were pleased to announce his appointment to the board on the 27th October 2021, as a non-independent director. There have been no further developments regarding the KPMG strategic review, and this is likely to remain on hold until we can see how the impact of the COVID-19 pandemic unfolds in 2022. There is no question that COVID-19 has significantly affected our ability to undertake development in the later part of this half year. At this point we are unclear how trading will materialise next year and under the new Government vaccine mandates being introduced within the hospitality sector, in New Zealand. We are confident that the BurgerFuel brand which has proven to be robust throughout the pandemic alert levels, will remain stable and continue to deliver a solid performance for the group. However, the new brands are less certain and whilst Shake Out is performing well enough, Winner Winner is far more affected in certain areas. We are not confident to undertake future development of the new brands at this point, until we can see an end to the pandemic alert levels and lockdowns. FY22 continues to be affected by the cycling in and out of alert levels and we will not know if performance will improve or not for some months yet. It is likely to be a rather flat, full year result with little or no further development being undertaken, prior to 31 March 2022. That said, the Group maintains strong cash reserves and as always, we will continue to review any opportunities for development of current brands and future company growth that may present themselves in the new future. We would like to thank all shareholders, staff, franchisees, suppliers and of course our valued customers for their support. Best regards Peter Brook Chairman Josef Roberts Group CEO End CA:00383685 For:BFG Type:HALFYR Time:2021-11-26 14:13:28