Stock takes: Fast food firm waiting for pick-up

Burger Fuel has announced another loss. Photo / Martin Sykes

Burger Fuel waited until late Monday to announce its full year result - another loss - although it was not as bad as the previous 12 months.

The burger bar company with global ambitions lost $553,000 in the year to March, but in a glimmer of hope that's a 22 per cent improvement on the previous loss.

It targeted its youthful customer base to invest when it went public in 2007 but these first time investors experienced a share price tumble from $1 soon after listing and those still in the company saw it hit just 25c last year.

The company had a market cap of $53 million when it listed and this has more than halved.

But buying last week did push its shares from 30c to 40c. And as the graph shows its share price performance is roughly in line with other companies on the NZAX.

The company says sales in New Zealand and Australia are up and turnover at its store in Saudi Arabia which opened in February has exceeded expectations. It has slowed its expansion in New Zealand - in a market where statistics show more budget conscious Kiwis are taking comfort in takeaways - and put the brakes put on its long awaited Dubai outlet.

It was originally due to open in late 2008 but the company blames delays on the general economic slowdown and continued uncertainty in the emirate last year. Shares closed steady at 40c yesterday.



THE GREAT DIVIDE

Wednesday's announcement by Sir Ron Brierley's Guinness Peat Group that it will spin off its Australian business into a separately listed company has confirmed the split in the company's board - and it doesn't seem to have gone in favour of New Zealand director Tony Gibbs.

Stock Takes understands the deal to allow Australian-based director Gary Weiss to shave off the Australian assets into a company he will head up is a compromise designed to get Weiss out of his chairman's role at threadmaker Coats so it can be floated off sooner.

But the role of Weiss hasn't been made clear yet. Nowhere in the four-page statement released by the company was anything said about who would be on the boards of either companies once and if the demerger is completed.

When asked who would make up the board of parent company GPG, Weiss wasn't keen to talk about it although he has been more than happy to talk up the proposed Australian company which he says will have new independent directors who will outnumber the executive directors. Gibbs has only said that Weiss' position is unclear.

LONG TALKS

Stock Takes understands the proposal is the result of nearly five months of talks between the board members but it seems Weiss has the backing of both GPG chairman Sir Ron Brierley and independent director Ron Langley, who is a long-time friend of Brierley.

Both Brierley and Langley will be on the board of the Australian business. Notably absent are Gibbs and British-based director Blake Nixon.

Three against two is why the deal has gone ahead in the current state although those in the Gibbs camp insist it has been watered down from original proposals which would have seen even more assets split off into the Australian business.

Perhaps Gibbs is hoping investors will vote against the deal, giving a clear message to Weiss that his plan is not the best way forward.

New Zealand shareholders have certainly panned the proposal so far, saying it fails to deliver on the promised value return to investors.

Fund managers spoken to want non-core assets to be sold off so some cash can be given back to investors and a share buy-back scheme established to help boost GPG's share price, which has fallen to dismal levels.

VOTING POWER

But it's hard to know if the New Zealand vote will be enough to stop the proposal from going ahead. While the largest number of shareholders reside in New Zealand - there are about 30,000 retail investors here - most have only small stakes.

The Accident Compensation Corporation is a big shareholder, with about 4.29 per cent of the shares. AMP also has a big stake, as does Suncorp Metway, which owns local fund manager Tyndall Investment Management.

But GPG's largest shareholder is Singaporean investment company Tan Chin Tuan.

Several US institutions also hold major stakes and it's hard to know which way they will vote.

Brierley himself is the largest individual investor with about 3 per cent of the company while Weiss, Gibbs and Nixon all have about 1 per cent each.

WEISS IN TOWN

Weiss is understood to be in Auckland today after visiting investors in Wellington yesterday to try to talk them round to his way of thinking.

Those in Weiss' camp say he is committed to both the Australian business and GPG Plc and that he would be keen to stay on the board of the parent company even after the split if shareholders will have him.

Looks like it's going to be a long campaign for both Gibbs and Weiss, with investors not due to vote until November.

GPG's shares closed down 3c yesterday at 63c on heavy turnover.

EXPENSIVE LESSON

The costs of DNZ's failed listing just before Christmas were revealed in the accounts out last week for the March 31 year: $5.2 million.

Ouch, a big wad of cash which could otherwise have gone to the embattled shareholders, some of whom have seen three-quarters of their money vanish in this poorly performing property business.

But chairman Tim Storey said not all the documentation bought for that $5.2 million would be wasted.

As he noted, DNZ is taking another tilt at listing this year.

So some recycling appears to be on the cards.

Further study of DNZ's accounts revealed a $14.6 million related-party loan.

And the manager is being richly rewarded: $4.7 million as manager's fees and expenses, $2.2 million in property management fees, $1.2 million in leasing fees and more money for rent review fees and accounting fees.

POOR EXCUSES

Brent King's investment company IRG looks likely to be suspended from the stock exchange from Tuesday for filing its full-year results late.

NZX's market supervision arm gave warning this week that the sharemarket minnow, formerly called Viking Capital, would be suspended if it did not get its results into the exchange by Monday. They were due on June 14.

King has blamed the late delivery on a change in personnel and says it will get the figures out in the next two to three weeks.

Preliminary figures filed on May 11 show the company expects to make an unaudited profit of $175,000 for the year to March 31 although it has warned that asset write-downs may adversely impact the figures.

King has promised the annual report will be ready in time for the July 31 deadline.

IRG shares last traded at 1.1c.

SHORT TIMEFRAME

Dorchester Pacific has left investors little time to digest its complex recapitalisation proposal.

The full plans were only revealed on Tuesday which means most investors probably won't get hold of the 96-page offer document until today.

The investor roadshow kicks off on Monday in Auckland with a final vote meeting held on June 30 - just two weeks after the details were announced.

It's taken more than six months to get to this stage. Stock Takes can't help wondering if it wouldn't have hurt to give investors a little more time to consider all the documents.

WATCHDOG WATCHING?

Dorchester's letters to debenture holders have also revealed strong criticisms from the investment watchdog.

The Securities Commission says the way the company has represented its estimated return to investors is misleading because it doesn't take into account the time value of money. But Dorchester's board says it has presented its estimates in "cents in the dollar" terms because that is what investors are used to and it makes it comparable to its receivership figures.

The commission has also suggested the board's comparison between the capital restructuring plan and a receivership contains "significant bias" because the Dorchester board appears to be assuming an improvement in the financial markets and in demand for its products.

It also suggests Dorchester's assessment of its receivership figures are based on fire sale prices and a deterioration in market conditions before the assets are sold.

Dorchester says both claims are wrong. "With regards to the receivership scenario, the directors have assumed the same market conditions as would apply under the capital reconstruction plan."

It's great that Dorchester has included the criticisms but Stock Takes wonders why the commission let the document go through if it wasn't happy with the way it was represented to investors. Dorchester closed down 1c at 15c yesterday.