Burger Fuel Group Ltd Half Year Results – 30 September 2022

The Directors of Burger Fuel Group Limited (BFG) present the unaudited results for the 6 months to 30 September 2022. Net Profit after tax for the period was $552,316 compared to $404,525 for the same period last year. This represents an increase of 36.5%. Group Operating Revenue (excluding IFRS 16 and the Government support income) increased by 13.9% on the same period last year to $10.7M. This is mainly due to royalty income from increased sales across the system compared to periods of COVID lockdowns last year. The NZ system was closed in August and September 2021 thus we are benchmarking against 14 less trading days for the entire NZ system in August, and an additional 21 lost trading days for the Auckland stores in September. We estimate total system sales were down circa~ $5.9M in FY22 due to COVID lockdowns. The Group has no debt and as at 30 September 2022 had cash reserves of $7.4M. GROUP PERFORMANCE Total system sales (all regions all brands) were $51.6M for the period, representing an increase of 13.17% over the same period last year. The increase is mainly due to the opening of the franchised BurgerFuel Cambridge store which is preforming well and the fact that we are benchmarking against reduced trading days, as the entire NZ system was closed due to COVID lockdowns from 18 August 2022 until 1 September 2022, with the Auckland stores reopening on 22 September. This amounts to 1,477 lost trading days across the total system in FY22. Total store numbers globally across all three brands are 75 as at 30 September 2022, with the closing of 3 stores in the UAE on 1 April 2022 (when the Master Licence agreement ceased with AKI Group) which was offset with the opening of one franchised store in New Zealand being BurgerFuel Cambridge. The new brands, Winner Winner and Shake Out accounted for 7.9% of total systems sales (up from 6.8% in FY22) and their total sales are up 32.03% on FY22, once again due to benchmarking against a COVID year. BurgerFuel International sales accounted for 9.51% of total BurgerFuel sales. OPERATING RESULTS BurgerFuel New Zealand Total BurgerFuel sales for the period were up 11.8% on the previous year. This was due to 1,317 additional trading days in the 6 months to 30 September 2022 compared to the previous year, and also the opening of the franchised BurgerFuel Cambridge store in May 2022. The Group is also pleased to announce that it opened the 60th NZ BurgerFuel store in Rolleston, Christchurch on 31 October 2022 and are planning to open another store in Dunedin before the end of the financial year. With COVID restrictions lifted we are starting to see more people coming back to the CBDs which is helping our city stores. Staff shortages are still a major issue across the BurgerFuel system, and we had 52 lost trading days in a company owned BurgerFuel store in the 6 months to 30 September 2022. BurgerFuel Middle East (MENA) As previously advised, on 1 April 2022 the Group exited the UAE Licensee Agreement with AKI Group. In our FY22 full year results we advised that we expected to finalise a Development Agent (DA) Agreement for the MENA region, and we are pleased to announce that this agreement has now been executed. This structure effectively appoints a Master Licensee for the entire region to one company that assumes responsibility for the appointment and operations of individual stores and regional franchisees. The Development Agent Agreement will be operated by Mr Farah George Farah. Farah was instrumental in executing the original UAE Master Licence Agreement with AKI Group back in 2008. He has a significant amount of operational experience in the MENA region and is very familiar with the BurgerFuel brand. With his expertise and contacts, we are looking forward to restarting the brand's growth in this region once again. Under the DA Agreement BFG will receive a share of royalties generated from BurgerFuel sales in the region. Each new store will be owned or franchised under the new DA agreement. The DA will be responsible for site selection and store construction as well as training and day to day operations. As previously advised, the Group incurred costs in FY23 in relation to setting up this new DA structure with a view to rebuilding the brand in the MENA region over future years. The Middle East business total sales comparison for the first half of this year records a decrease of 22% due to our Master Licence Agreement partner AKI Group exiting the brand and closing 3 BurgerFuel stores. The BurgerFuel World Trade Centre store is still operating and is part of the new DA structure. There are also some dark/ghost kitchens operating, in Dubai, which are delivery only. Currently we are not receiving any royalty income from the MENA region whilst the DA structure is embedded and some operational issues in those territories are being addressed. The future of MENA will be entirely dependent on the success of the proposed DA structure. Whilst BFG's percentage share of royalties will be substantially lower than in previous years, our operational involvement will also be on a significantly reduced basis. As always, we caution shareholders regarding Middle East operations as they can be vulnerable, and circumstances can change there at any time, due to political or other factors beyond our control. Winner Winner & Shake Out New Zealand Sales for the new brands are up 32.03% on the previous 6 months mainly due to benchmarking against 160 reduced trading days in FY22. We also had reduced trading (18 days) in our company owned Winner Winner store in FY23 due to staff shortages and not being able to open for full trading weeks. The labour market still remains extremely tight. The Group is pleased to announce that we have opened a company owned Shake Out store in the Commercial Bay precinct in the Auckland CBD on 31 October 2022. This is our 4th Shake Out store and this busy location will assist in the brands' exposure. The Winner Winner store numbers remain at 4. We have also added delivery options for the Shake Out and Winner Winner stores, which is helping with brand exposure and increased sales. Because the Winner Winner brand is a dine-in concept it has been impacted more with COVID lockdowns. Now that restrictions have been lifted, we are hoping sales will start improving over the coming months. Our company owned Takapuna store is still not performing as well as we would like, but with the staffing issues resolved and more activity in the community, we are hoping performance will improve in the coming months. The Group continues to monitor the performance of this store closely. The Group is still investing a considerable amount in these new brands and will continue to do so going forward. GROUP OUTLOOK We do see challenging times ahead with increasing supply chain costs, labour shortages and rising hourly rates as well as the general economic cost pressures that are hitting all New Zealand households. However, our main brand BurgerFuel remains strong. The last few tough COVID years have only served to validate BurgerFuel's brand strength in NZ. 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. There have been no further developments regarding the KPMG strategic option review. 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 CEO ENDS Investor enquires please contact: Mark Piet Mark@Burgerfuel.co.nz +64 9 376 6007 End CA:00403091 For:BFG Type:HALFYR Time:2022-11-25 12:57:52