Best of the Best warns on profits, shares tumble

Best of the Best tumbled on Wednesday after the organiser of weekly competitions to win cars and other prizes warned on profits.

The company now expects full-year revenues of around £34m to £35m, down from 45.7m a year earlier. Meanwhile, pre-tax profit is expected to be £4.25m to £4.75m, down from £14.06m.

In its results for the six months to the end of October, Best of the Best posted revenue of £19.12m, down from £22.09m in the same period a year ago but in line with management expectations. Pre-tax profit fell to £3.04m from £6.80m, also in line.

The group said that following a period of stabilisation, the cost of acquiring players increased by a further 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 marketing costs may be trending back towards levels experienced in the period under review, but reduced customer acquisition in November and December 2021 and a "cautious" outlook meant the company was guiding to lower full-year profits and revenue.

Chief executive William Hindmarch 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."

At 1115 GMT, the shares were down 27% at 440p.

Russ Mould, investment director at AJ Bell, said the company may be secretly praying for everyone to be told to work from home permanently.

"It thrived during the early stages of the pandemic as people were bored at home, potentially on furlough, and wanted to find a way of making a quick buck. Revenue and profit soared, and the company even put itself up for sale, perhaps thinking if ever there was an opportunistic time to get top price for the business, this was it," he said.

"The sale didn’t happen and interest in its games faded as work from home restrictions were lifted. Now customer acquisition costs are soaring, and profit is falling, with the share price having slumped by 78% in the past 12 months. While the business is still making money, shareholders are likely to be losing patience fast and perhaps thinking that its stock market code BOTB might actually stand for BoOm To Bust."