Best of the Best plc

("Best of the Best", "BOTB", "the Company" or "the Group")

Interim results for the six months ended 31 October 2021

Best of the Best plc runs competitions online to win cars and other prizes.

Operational gearing, higher customer acquisition costs and increased prizes have reduced margins on

broadly stable revenues

Key Financials: 

·      Total revenue for the six months £19.12 million (2020: £22.09 million), in line with management's expectations

·      Profit before tax £3.04 million (2020: £6.80 million), in line with management's expectations

·      Earnings per share 27.26p (2020: 59.84p)

·      Net assets of £6.35 million (2020: £6.75 million), substantially underpinned by property and cash

·      Strong financial position with cash balances of £8.34 million (2020: £11.18 million) and no borrowings

Outlook: 

·      Following a period of stabilisation (albeit at a significantly higher level than pre Covid), the cost of acquiring players increased by a further c. 37% in November and December 2021 compared to the prior six month average, resulting in fewer customer registrations for similar levels of marketing investment.

·      Early January 2022 indications suggest that marketing costs may be trending back towards levels experienced in the period under review, but reduced customer acquisition in November and December 2021, together with a cautious outlook means that we believe our revenues for the full 12 months will now be £34 - £35 million, with pre-tax profits expected to be £4.25 - £4.75 million.

·      We are a profitable, cash generative business with no debt and a large and loyal customer base. We will be taking steps to reduce the bottom line impact of reduced revenues by maintaining a sharp focus on costs, and prioritising only the most efficient marketing channels.

William Hindmarch, Chief Executive, said:

"We are confident that the business, now operating purely online, is positioned to grow above the traditional growth rates experienced when operations were focused on bricks and mortar retail. Our very strong results last year were driven by material increases in our marketing budget, the addition of new competitions, prize enhancements and pricing changes, delivering significant quantities of new customers and traffic to our website, which our operationally geared business model converted into heightened levels of profitability.  However, it is now also becoming apparent that the business benefitted more than originally assumed from a tailwind during the Covid period, whilst much of the country remained in lockdown with restricted movement, travel, entertainment and other retail opportunities.

Emerging out of lockdowns, we have been faced with very tough comparatives, however, revenues are running at twice the level of that when we exited our last physical retail site and completed the transformation to a fully online business.

During the period under review, the business traded in line with market expectations as updated in August 2021 and, having exhibited the incredible benefits of operational gearing during the financial year ended April 2021, the Board remains fully focused on re-harnessing this opportunity by adjusting customer acquisition, through product development and by seeking additional revenue streams.

Whilst we are facing a new set of challenges, we remain a profitable, cash generative business with no debt and a large and loyal customer base which remains engaged.  Understandably, we will be taking steps to reduce the bottom line impact of reduced revenues, by maintaining a sharp focus on costs, and prioritizing the most efficient marketing channels.

We recognise that there is potential volatility ahead, which is evident in our cautious short-term outlook, but look to the medium and long term with confidence as we push towards a return to steady growth and more normalised marketing costs."

Enquiries:

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014  Please visit www.botb.com for further information
 

Chief Executive's Statement

Interim Results

Revenue for the six months ended 31 October 2021 was £19.12 million (2020: £22.09 million). Profit before tax was £3.04 million (2020: £6.80 million) with earnings per share of 27.26p (2020: 59.84p). Net assets at 31 October 2021 stood at £6.35 million underpinned by cash balances at the period end of £8.34 million and our 967-year leasehold office properties in London, valued at £0.95 million. The Group has no borrowings.

Strategy, Competitions & CRM

With a principally fixed cost operating model and high levels of operational gearing, our strategy focuses on increasing revenues, player numbers and engagement by efficiently recruiting new customers through a variety of principally digital marketing channels, whilst innovating and improving our competitions and prizes. Our dedicated in-house marketing team also allocates significant resources towards CRM, via a range of communications channels and retention initiatives, to maximise customer LTVs and ROI.

BOTB's customer database and engagement with social media followers have developed significantly in recent years, supporting existing revenue streams and providing potential new monetisation opportunities in the future.  The database now stands at 1.8 million contactable customers, with much of our CRM and customer service carried out via daily content updates on our social media accounts, mainly Facebook (420,000 followers) and Instagram (300,000 followers).

Our principal competitions are the Weekly Dream Car and Midweek Competitions.  Both offer the opportunity to win brand new cars (from a choice of up to 200 models) combined with the ability to add up to £50,000 in cash with your prize.  Ticket prices start from just 45p with our largest prizes valued at c. £250,000.

With tickets from just 25p, the Lifestyle Competition featuring motorbikes, luxury watches, holidays, top technology and cash prizes, continues to be popular, addressing a wider non-car market, as well as cross selling to our core automotive audience.

We take significant time, effort and resources to try and surprise all of our BOTB winners in person with the car they have won. Together with a film crew, our presenter Christian Williams travels the length and breadth of the UK to deliver these surprises, creating compelling and engaging video content, marketing assets, website and social content.  Whilst this has been much harder to enact in line with Government advice during the various stages of lockdown and restricted movement, we are pleased to have continued to build upon our uniquely emotive library of material, whilst celebrating our 600^th car winner and a number of other milestones.

New player acquisition

As previously mentioned, the costs of acquiring new customers (CPA) during the period have increased significantly above pre-pandemic levels (see table below).  This appears to have been driven by a number of market forces, including the trend that, upon exiting lockdown, most businesses across all sectors have sought to increase their online marketing budgets in order to drive market share and to speed up their transition away from traditional retail.  This has, in our experience, enabled channels (e.g. Meta Group - Facebook & Instagram) to materially increase the cost of advertising impressions (CPM's) on their platforms. 

Furthermore, as widely acknowledged during the same period and in line with many online focused companies, the changes introduced by Apple's iOS14 operating system have undoubtedly reduced the accuracy of our targeting and thereby the efficiency of our marketing, albeit it is hard to precisely quantify the effects at this stage.

Whilst a smaller overall contributor to new players, we continue to use a multitude of other channels beyond social media to acquire customers such as Influencers, TV and other more traditional forms of advertising. 

We are in early-stage discussions about working in partnership with larger media companies to diversify and broaden our acquisition channels, whilst we continue to explore possible overseas options and will report on both of these developments as they materialise.  We recognise this to be an important area of focus in the year ahead and will be allocating resources accordingly.

IT development

Our systems architecture, content management systems, websites and user experience have continued to benefit from incremental improvements aimed at both new and existing customers. Our in-house team of developers work to a fortnightly deployment schedule with new code being released regularly and consistently, to roll out new functionality. Most recently we have undertaken a major upgrade of our Umbraco CMS, allowing increased flexibility and automation of competition management, pricing, and new product development.

Our CRM is substantially driven by our email marketing program and during the period we successfully migrated to a new provider Emarsys, which affords us more sophisticated targeting, segmentation and content personalisation opportunities going forward.  The iOS App is operating as expected, now accounting for approximately 13% of total revenues.

Outlook

Emerging out of successive lockdowns and the Covid period, we have been faced with very tough comparatives, however, revenues are running at twice the level of that when we exited our last physical retail site and completed the transformation to a fully online business. We are confident that the business, now operating purely online, is positioned to grow above the traditional growth rates experienced when operations were focused on bricks and mortar retail.

During the period under review, the business traded in line with the market expectations as updated in August 2021 and, having exhibited the incredible benefits of operational gearing during the financial year ended April 2021, the Board remains fully focused on re-harnessing this opportunity by adjusting customer acquisition, through product development and by seeking additional revenue streams.

Whilst we are facing a new set of challenges, we remain a profitable, cash generative business with no debt and a large and loyal customer base which remains engaged.  Understandably, we will be taking steps to reduce the bottom line impact of reduced revenues, by maintaining a sharp focus on costs, and prioritizing the most efficient marketing channels.

We recognise that there is potential volatility ahead, which is evident in our cautious short term outlook, but look to the medium and long term with confidence as we push towards a return to steady growth.

I look forward to updating shareholders in due course.

William Hindmarch

Chief Executive