An increase in online marketing spend at car competition runner Best of the Best (BOTB:AIM) is paying off, sending online sales up by an impressive 40.6% to £7 million.
This drove an overall 12.6% increase in revenue to £10.1 million in the year to 30 April, pushing pre-tax profit 10.9% higher to £1.06 million.
The solid figures and news that management is exploring new channels to address a wider audience sends the shares 3% higher to 203.5p.
The £19 million cap says it will further increase its player acquisition and marketing investment this year and will shortly complete a website rebuilding project, which will be fully mobile responsive.
FinnCap analyst Harold Evans reckons that every £1 spent on marketing returns £1.50 in sales – and he expects this positive trend to continue.
‘Best of the Best has a strong track record, attributable to its differentiated strategy and the lack of direct competition. This differentiation gives us confidence that its marketing initiatives will continue to produce results,’ he says.
The company is incorporating new loyalty features on its website which are intended to improve customer retention.
FinnCap forecasts Best of the Best’s gross margin to improve by 500 basis points to 66% by the year ending April 2018, with gross profit and EBITDA (earnings before interest, tax, depreciation and amortisation) growing at a compound annual growth rate of 14%.
‘Best of the Best offers an attractive mix of growth and cash generation, which we believe is likely to be returned to shareholders,’ adds Evans.
The analyst’s price target is 227p, implying 11.5% upside.