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Best of the Best

  • BY: Andrew Hore |
  • POSTED: 11/10/2010 |

BAA has terminated its contracts with Best of the Best the latter’s share price has more than halved. 

Best of the Best organises competitions to win luxury cars that it displays in airport terminals. The company operates at four BAA airports but there are sites in three of the terminals at Heathrow.

BAA wants to use the space for extra seating and signage. The two companies have been working together for a decade and are negotiating an orderly termination of the contracts. BAA took a 20% stake in Best of the Best in October 2002. That was diluted by the flotation in 2006 but BAA still has a 13.76% stake.

Heathrow has been an important revenue generator and, although Best of the Best still has two sites at Gatwick – thankfully BAA has completed the sale of the airport or things would have been even worse - and at UK regional airports plus Dublin (from November) and Copenhagen, this has knocked the stuffing out of the business.

Losing that amount of revenue will be significant for Best of the Best. Best of the Best paid BAA rent and other charges of £869,000 in the year to April 2010, down from £903,000 the previous year. That will include Gatwick for at least part of the period.

To put that in perspective the whole cost base of the company was £6.85m, down from £7m the previous year. Operating leases on land and buildings accounted for £1.56m of those costs. The BAA payments are likely to come under this. That suggests that BAA plus Gatwick could have accounted for well over one-half of revenues. Even if it is not that much, the BAA chunk of revenues will still be large.

The cost base will certainly have to be cut, assuming that the business is still viable on a standalone basis. 

The stated net asset value at the end of April 2010 was £4.28m, which included cash of £2.29m. At 13.5p a share, down 16p, Best of the Best is valued at £1.72m.

Best of the Best floated on 14 August 2006 and raised £2.5m gross at 63p each.

Commercial director Rupert Garton acquired 12,000 shares at 30p each on 21 July.

Download the October edition of AIM Journal at http://www.hubinvest.com/AIMPDFOctober2010_13.pdf

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