REG - XP Factory PLC - Final Results
02/09/2024 07:00
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RNS Number : 4158C XP Factory PLC 02 September 2024
XP Factory Plc
2 September 2024
XP Factory plc (AIM: XPF)
("XP Factory", the "Company" or the "Group")
Final audited results for the 15 months ended 31 March 2024
XP Factory is pleased to announce its audited final results for the 15 months
ended 31 March 2024
FINANCIAL HIGHLIGHTS
· Group revenue for the 15 month period increased to £57.3m (12 months 2022:
£22.8m) demonstrating the significant growth in scale:
- Escape Hunt® owner operated site revenue increased to £16.7m (12
months 2022: £9.8m)
- Boom Battle Bar® ("Boom") owner operated revenue increased to
£37.5m (12 month period 2022: £9.5m)
· Gross margin increased slightly to 64.6% (2022: 64.4%)
· Pre IFRS 16 Group Adjusted EBITDA increased to £6.3m (12 months 2022:
£2.6m)
· Site level pre IFRS 16 EBITDA increased to £16.2m (12 months 2022: £8.3m)
· Group Adjusted EBITDA rose to £9.9m (12 months 2022: 4.0m)
· Operating profit(1) of £1.9m was £7.0m ahead of prior year (12 months 2022:
loss £4.9m)
· Loss after taxation of £0.5m (12 months 2022: £1.0m)
· £11.1m cash generated from operations (12 months 2022: £3.3m) - £8.3m
invested in capital expenditure
· £3.9m cash balance at 31 March 2024 (31 Dec 2022: £3.2m)
OPERATING HIGHLIGHTS
· Double digit like-for-like sales growth delivered across both owner-operated
brands:
- Boom: up 22.4 % in the 65 weeks to 31 March 2024
- Escape Hunt: up 16.9% in the 65 weeks to 31 March 2024
· New owner operated Boom sites opened in Dubai in July 2023, Canterbury in
September 2023 and Southend in October 2023
· Boom franchise sites in Chelmsford and Ealing acquired in June 2023, Glasgow
and Liverpool in November 2023, and Watford in December 2023
· Boom owner operated Pre IFRS16 site level EBITDA margin increased to 17%
(2022: 13%)
· Boom Pre IFRS 16 site level EBITDA return on capital of 52%
· New owner operated Escape Hunt site opened in Woking in July 2023
· Escape Hunt owner operated Pre IFRS 16 site level EBITDA margin of 42% (2022:
42%) continues to exceed internal targets
· Escape Hunt Pre IFRS 16 site level EBITDA return on capital of 48%
· Pipeline of further site openings developed across both brands
POST PERIOD END HIGHLIGHTS
· Three Escape Hunt sites and one Boom currently in build stage, with a
developed pipeline underpinning site roll-out targets for the year
· Acquisitions of further Boom franchise sites in Wandsworth and Aldgate
completed in May 2024 and Bournemouth in June 2024
· 1.9% LFL sales growth delivered across the Boom owner operated sites in the 20
weeks to 18 August 2024
· 1.5% LFL sales growth across the Escape Hunt owner operated estate in the 20
weeks to 18 August 2024
· Credit approval received for new £10m Revolving Credit Facility from Barclays
1. Operating profit calculated before fair value gain of £6.2m
in 12 months to 31 December 2022; £0.3m fair value loss and £0.5m gain on
closure of subsidiary in 15 months to 31 March 2024.
Richard Harpham, Chief Executive of XP Factory, commented:
"I am delighted to report on another exceptional period of growth which has
delivered results ahead of market expectations. Our focus on incremental
improvements alongside ongoing expansion in the estate has helped deliver
market leading returns on investment in both our brands and strong operating
cash generation. Since the period end, we have continued to see positive
like-for-like growth and performances well ahead of the industry as a whole.
With record advance bookings for the busy end of year season and improving
consumer sentiment, the Board's expectations for the full year are unchanged
and we continue to view the prospects for the business with optimism."
Enquiries:
XP Factory Plc +44 (0) 20 7846 3322
https://www.xpfactory.com/ (https://www.xpfactory.com/)
Richard Harpham (Chief Executive Officer)
Graham Bird (Chief Financial Officer)
Kam Bansil (Investor Relations)
Singer Capital Markets, NOMAD and Broker +44 (0) 20 7496 3000
https://www.singercm.com/ (https://www.singercm.com/)
Peter Steel
Alaina Wong
James Todd
IFC Advisory - Financial PR +44 (0) 20 3934 6630
https://www.investor-focus.co.uk/ (https://www.investor-focus.co.uk/)
Graham Herring
Florence Chandler
Notes to Editors:
About XP Factory plc
The XP Factory Group is one of the UK's pre-eminent experiential leisure
businesses which currently operates two fast growing leisure brands. Escape
Hunt is a global leader in providing escape-the-room experiences delivered
through a network of owner-operated sites in the UK, an international network
of franchised outlets and through digitally delivered games which can be
played remotely.
Boom Battle Bar is a fast-growing network of owner-operated and franchise
sites in the UK that combine competitive socialising activities with themed
cocktails, drinks and street food in a high energy, fun setting. Activities
include a range of games such as augmented reality darts, Bavarian axe
throwing, 'crazier golf', shuffleboard and others. The Group's products
enjoy premium customer ratings and cater for leisure or teambuilding, in small
groups or large, and are suitable for consumers, businesses and other
organisations. The Company has a strategy to expand the network in the UK and
internationally, creating high quality games and experiences delivered through
multiple formats and which can incorporate branded IP content.
(https://xpfactory.com/ (https://xpfactory.com/) )
STRATEGIC REPORT
Chairman's Statement
I am delighted to be reporting on another transformational and successful
reporting period for the Group. After achieving some very ambitious targets
in 2022 to significantly expand our then newly acquired Boom Battle Bar estate
whilst also expanding our Escape Hunt network, our focus in the period was
much more about optimising the estate, building our capabilities and applying
learnings to enhance performance.
It is a credit to the team who delivered turnover of £57.3m in the period, up
from £22.8m in the 12 months to 31 December 2022. Adjusted EBITDA of £6.3m
pre IFRS16 and £9.9m post IFRS16 and the Group's first full reporting period
operating profit (excluding revaluation gains) of £2.4m, up from a loss of
£4.9m in the 12 months to December 2022 resulted in an outcome modestly ahead
of market expectations.
Both Escape Hunt and Boom had exceptional performances in their own ways.
Escape Hunt has continued to deliver industry leading margins and return on
capital, whilst growing at rates well ahead of its peers. Boom has developed
from a business in its infancy to a substantial cash generative division,
likewise delivering an industry leading return on capital and affording the
opportunity for further investment and shareholder value creation.
Importantly, it has been very satisfying to see the exceptional level of
turnover growth deliver strong operating cashflow which has enabled us to
continue to invest in expanding our estate.
The business has made progress in a number of areas. Notably, our investment
in data and technology capabilities is already bearing fruit, evidenced by
improved gross margins within Boom and the strong return on capital that we
have been able to achieve on investment towards expanding capacity at selected
sites.
We achieved our target for new site openings in the period, opening three new
Boom sites located in Canterbury, Southend and Dubai respectively, and a
further Escape Hunt in Woking. The pipeline for further expansion is well
developed and we are currently in build at three further Escape Hunt sites and
one new Boom site. Our experience in Dubai will serve as a good test case to
expand into other territories in future, whilst our ability to relocate the
modular Escape Hunt games provides confidence in the prospect of being able to
rotate content in future, cost effectively.
During the year we also bought back five Boom franchise sites, and since the
period end have bought back a further three. Our longer term strategy is to
build a brand which is attractive to larger scale franchisees capable of
managing multiple franchise sites. In the interim we will be opportunistic
about buying back sites with a view to improving performance where possible
and leveraging our operating platform effectively.
We put significant effort into creating a clear brand identity for Boom, and I
am delighted to report that it has been well received by customers and
employees alike.
Since the period end, we have received credit approval on agreed terms for a
new £10 million Revolving Credit Facility from Barclays, providing us with
significant financial headroom, the flexibility to continue our growth at
pace, and a development which represents a strong endorsement of the progress
we have made.
We are conscious of both our public duty towards and the benefits of
developing a culture which embraces environmental, social and governance
issues alongside commercial success as we develop our corporate identity and
culture. We present our first SECR report this year and internally, the
business has recently introduced a number of employee focused incentives and
support structures through our THRIVE initiative. As the business is now
generating a healthy operating cashflow, we have introduced a bonus scheme for
all centrally located staff, linked to business success. We also have equity
participation programmes available to all staff and appropriate site level
incentivisation for site level employees.
Our board was unchanged during the period under review. We have a highly
experienced board of directors who have made a significant contribution to the
success of the business thus far, and to whom I would like to extend my
thanks.
Finally, I wanted to thank all our people in the Group without whose efforts
and dedication the business could not successfully built the platform we have
today.
Outlook
The opportunity presented by the growth of experiential leisure remains as
attractive today as it was when XP Factory (then Escape Hunt) started its
journey. The addition of Boom Battle Bar to the Group has significantly
enhanced its scale and prospects and we are well placed to continue to benefit
from attractive property opportunities. Escape Hunt's financial performance
has settled into an attractive rhythm, producing high site level margins and
highly attractive return on capital, whilst Boom's performance has proven that
our initial expectations of the opportunity were well founded.
Trading since the start of the financial year to March 2025 has been positive,
with both brands delivering positive volume-driven like-for-like growth, 1.9%
in the case of Escape Hunt, and 1.5% in the case of Boom in the 20 weeks to 18
August 2024. Whilst the rate of growth has slowed compared to the same period
a year ago, the change reflects the gradual maturing of the estates. Both
businesses have maintained margins whilst absorbing significant further labour
cost increases, driven by the increases to minimum living wage levels and our
desire to continue to pay a premium to attract talent. Whilst the summer
uplift in sales in July and August was modest, forward bookings for the end of
year peak are well ahead in comparison to previous years providing confidence
for the coming months and leaving the Board's expectations for the full year
unchanged. Our recently approved banking facility is a strong endorsement of
the progress made within the Group and provides us with flexibility to roll
out new sites in line with our strategy and the potential to accelerate our
plans as we secure new sites.
With the anticipation of further interest rate cuts on the horizon and a
materially lower inflation rate which is now being outstripped by labour
inflation, we believe there is scope for improving consumer confidence
underpinning optimism in our sector and we view the future with growing
confidence.
Richard Rose
Chairman
31 August 2024
Chief Executive's Report
In the 15 months to 31 March 2024 XP Factory delivered another period of
impressive growth, with sales increasing to £57.3m (12 months 2022: £22.8m),
and pre-IFRS16 Adjusted EBITDA increasing to £6.3m (12 months 2022: £2.6m).
Post IFRS16 Adjusted EBITDA was £9.9m (12 months 2022: £4.0m). A significant
milestone was achieved, as the business generated for the first time a
positive underlying Operating Profit(1) of £1.9m, compared to a loss of
£4.9m in 2022. While some of this growth came from the four sites opened in
the year (three Boom, one Escape Hunt), most was driven by the underlying
momentum in the business, the strong like-for-like sales performances across
both brands, and the continual improvements in operating margins.
· Group revenue increased to £57.3m (12 months 2022: £22.8m)
· Adjusted EBITDA pre IFRS16 rose to £6.3m (12 months 2022: £2.6m)
· 20 owner-operated and 10 franchise Boom Battle Bar sites open as at
31 March 2024 (31 Dec 2022: 11 owner-operated and 16 franchise sites)
· 23 owner-operated and 22 franchise Escape Hunt sites open as at 31
March 2024 (2022: 23 owner-operated and 23 franchise sites)
· 98% customer satisfaction score earned on both businesses (Source:
Feed It Back)
1. Underlying operating profit is before fair value gains /
losses (2022: gain £6.2m; 15 Months to 31 March 2024, loss £0.3m) and profit
on closure of subsidiary (15 months to 31 March 2024 £0.5m)
Following a year of significant opening activity in 2022, the 15 month period
has been much more about optimising the estate and using the learnings from
sites that have been operating for over a year to apply to new sites and
retrospectively make changes to existing sites. Whilst the pace of new site
roll-outs has been more gradual, revenue has continued to build driven by
strong like-for-like growth, the full year effects of sites opened in 2022,
and further new site openings in the period. Our investment into data and
technology capability is already paying off and we are confident that the
business continues to improve day by day.
The strong cash generation from the business has been a particular highlight,
with £11.1m of cash generated from operations (£7.9m on a post IFRS16 basis)
enabling us to continue to invest in growing the Group. The business has
remained resilient in the face of the widely publicised cost of living crisis
and high inflation impacting consumers and the leisure sector as a whole. In
view of these challenges, we have deliberately avoided price increases in all
but a few selected instances, instead aiming to absorb the additional costs
and focus on driving volumes. To date, we believe this has been the right
approach evidenced by our ability to grow both sales and margin.
The business has made further strategic progress, not only by continuing the
roll out of new sites and the buy-back of franchise sites, but also in our
approach to data and information within the business and at sites. Using
insights learned from existing sites we are improving the layout of both new
and existing sites, optimising the combination of games and the mix of sales
and understanding our customers better. The period under review also saw the
formal relaunch of the Boom Battle Bar brand identity which has put new energy
into a number of sites and underpins the Group ethos, enabling both our
customers and employees feel that they are winning at life!
Since the year end, we have received credit approval from Barclays for a new
£10 million Revolving Credit Facility. This represents a significant
milestone for the Group, and an endorsement of the progress we have made in
creating a more stable, mature business over the last few years. Whilst we
plan to remain conservative in our use of debt, the facility will give us the
flexibility to sign new sites and potentially accelerate plans for growth and
shareholder value creation.
Escape Hunt
Escape Hunt's performance in the period was exceptional. The Escape Hunt owner
operated division delivered turnover of £16.7m, up 71% compared to the 12
month period to 31 December 2022. A new venue was added in Woking, opening
in July 2023. We also consolidated our two venues in Norwich as planned into
one site, providing our first real evidence of our ability to move the modular
games which are now being produced. The result was that we ended the period
with 23 owner operated Escape Hunt venues, the same number as at 31 December
2022. The underlying turnover growth therefore came from the full year
effects of sites opened in 2022 and the strong like-for-like growth of 16.9%
generated by existing sites over the 15 month period. Whilst double digit
like-for-like growth is not expected to continue, the delivery of such a
strong performance during a period of consumer weakness is testament to the
team and the proposition. Corporate sales grew in line with consumer growth,
representing 5% of total sales.
Pre IFRS16 site level EBITDA margins remained very strong at 42% (FY22 42%).
This is notwithstanding the loss of the VAT benefit enjoyed in the first three
months of 2022 which did not continue in 2023.
Consumer ratings have always been a key performance indicator for the business
and we were delighted that, once again, to have so many of our sites being
awarded the Tripadvisor™ consumer choice award. Ratings are monitored by
third parties on our behalf, and it has been enormously satisfying to see
average review ratings maintained at 98%, well above the experiential leisure
industry as a whole.
The strong EBITDA conversion within Escape Hunt is driving attractive return
on capital. Across the UK portfolio of owner operated sites, Escape Hunt
delivered an annualised 48% return on capital over the 15 month period,
significantly ahead of the Group's cost of capital, highlighting the
attractions of continuing to invest in the business to grow shareholder value.
The consumer appeal for Escape Hunt's products within the experiential leisure
sector seems to be continuing to grow, and evidence would suggest that the
business is winning market share, underpinning the attractions of the segment
and giving confidence to our strategy of further investment.
The Escape Hunt franchise estate now represents only a small proportion of the
Group's activities. The underlying business performed satisfactorily after a
couple of difficult years as a result of COVID. Activity was broadly flat as
franchise revenue was £0.8m in the 15 month period, an increase of 18%
compared to the 12 month period to 31 December 2022, delivered by a slightly
reduced estate which comprised 22 sites at 31 March 2024.
Boom Battle Bar
The 15 month period represents the first period of Boom's trading during which
we have been able to start benchmarking performance with the benefit of some
history. The owner operated estate delivered turnover of £37.5m in the 15
month period, up from £9.5m in the 12 month period to 31 December 2022. The
growth was delivered by full year effects of sites opened or acquired in 2022,
new site openings in the period, franchisee acquisitions and robust
like-for-like growth of 22.4%. Christmas 2023 was the first festive season
where we had significant inventory available well ahead of the critical
corporate booking season, and this enabled strong corporate sales growth.
Corporate sales in the 15 month period totalled £4.5m, representing 12% of
sales up from 10% in 2022.
Margins in the business continue to improve in line with our expectations.
Gross margins in the owner operated estate improved to 59% from 52%, helped by
the positive benefits of operational gearing on labour costs as well as the
significant operational efficiencies afforded by the implementation of new
systems at site level. Pre IFRS 16 site level EBITDA margins were 17%, up from
13% in 2022. Whilst these remain below our longer term aspirations for the
division of 20% - 25%, pre IFRS 16 site level EBITDA was 23% in the six months
between July and December 2023. The overall year has been impacted by younger
sites which typically operate at lower margins, and by certain of the
franchise acquisitions, which in the period have tended to be smaller, less
well performing sites where we believe performance can be improved under our
ownership. We are already seeing steady improvement at sites we have bought
back, and together with the maturity benefits from maturing younger sites, we
remain confident that our mid-term aspiration of achieving a 20% - 25% EBITDA
margin is realistic.
Return on capital within the Boom owner operated estate for the 15 month
period was a market leading 53% annualised (based on sites owned and operated
for twelve months to 31 March 2024). The high returns are helped by
significant landlord contributions which we have typically been able to
secure, but underpinned by an attractive operating model. During the year, we
opened new sites in Canterbury and Southend in the UK, which together received
£0.95m of capital contributions. We also opened a new site in Dubai, which is
a good test to how we might be able to leverage the concept into new
territories.
Boom's business model is inherently more exposed to cost pressures from
suppliers than Escape Hunt. Despite significant increases in utilities, cost
of sales and labour costs, we have sought to maintain prices and absorb the
cost increases through volume growth. The improvement in gross margins
delivered underpins that decision as we seek to maintain a strong customer
proposition and build customer loyalty.
Operationally, we have continued to focus on improving our customer journey
and adapting processes and layouts in line with our learnings. In a number of
sites, we have built additional bar capacity where we were constrained
previously, and across the board we have refined our offering significantly.
This catalogue of small improvements has manifested itself in an average
customer satisfaction score of 96% which sits materially ahead of the
competition.
People and culture
XP Factory has grown significantly over the last two years in particular. As
the business matures, we are investing in our people, systems and capability
to ensure the business is both sustainable and scalable. We aim to build a
culture which nurtures and develops talents, embraces best practices, and
operates with integrity, honesty and enthusiasm. A number of initiatives
have been put in place to support employees in their roles and, importantly,
the Group is investing in areas of the business which will help drive
performance.
The investment made into data and technology is of paramount importance.
Examples include the upgrades made to our POS systems and the online booking
systems, as well as how we are using our CRM system. Further work will
continue in this area as we aim to use insights gained from existing sites to
improve customer experiences and ultimately business performance. Our data
analysis is already being used to inform decisions on location and layout of
sites, pricing, promotional activity and a range of other operational
decisions. We are beginning to look at how AI might become a tool to further
develop our customer propositions, capabilities, reporting and efficiency.
We are also increasingly aware of our environmental, social and governance
responsibilities. Information is provided separately this year in our first
SECR Report. We have also launched a new internal programme called THRIVE,
which aims to enhance employee wellbeing and engagement.
Strategic objectives
Continued execution of our strategic priorities
Our strategic priorities remain as set out previously and we have continued to
make progress in each of these areas during the period:
1. Maximise the UK footprint by rolling out each brand, either through
direct investment into owner operated sites or through franchise arrangements
Following the aggressive roll-out in 2022, we consciously moderated the pace
of roll out during 2023 to ensure we optimise the performance and operations
within the enlarged estate. During the period, we opened a new Escape Hunt
site in Woking and new Boom in Dubai, Canterbury and Southend. We also
acquired former Boom franchise sites in Chelmsford, Ealing, Liverpool, Glasgow
and Watford. We completed our plan to merge our two Escape Hunt sites in
Norwich into the larger unit, bringing the combined owner operated estate to
23 Escape Hunt venues and 19 Boom Battle Bar venues. Since the period end,
we have made further acquisitions of franchise sites in Aldgate, Wandsworth
and Bournemouth.
2. Accelerate growth in international territories, ultimately through
franchise
We opened our first international Boom Battle Bar in Dubai and continue
actively to explore possibilities in other territories. In the short term,
as before, our focus for both brands will remain the UK with the aim of
developing a robust, defensible business capable of international franchise.
3. Continue to develop new products and markets which facilitate the
growth of B2B sales
We put significant investment into our B2B sales capability at the start of
the reporting period with both Boom and Escape Hunt benefitting from strong
growth in corporate sales revenue. Escape Hunt has also developed a new range
of outdoor experiences which were rolled out across the estate during 2023
providing additional sales potential and catering to new customers.
4. Integrate the businesses, exploit synergies where possible and develop
an infrastructure that supports scale and future growth
This final objective has taken a greater degree of importance in the period
under review as we aim to optimise the performance of the existing business
and create a platform that is defensible, attractive to larger scale
franchisees and capable of supporting a significantly larger business.
During the year, we upgraded our in-store point of sale systems as well as
migrating to new online booking solutions across the Boom estate. The new
systems set the business on a stronger platform and will allow us to scale
more efficiently in future.
Current position and longer-term opportunity
The Group is now beginning to see the benefits of our enhanced scale providing
the foundations for improved efficiency and expanding our competitive
advantage. By design, our model is capital efficient, with rapid payback and
high return on investment, as well as being eminently scalable with an
objective to achieve accelerated market share, superior returns and deliver a
consistent customer experience. We aim to continue to receive industry
leading satisfaction scores. Our key strengths are as follows:
· Modular formats - standardised lay-outs and automated games
· Growing data sets, learning what does and does not work - all
accelerating timescales for sites to reach maturity
· Increasingly trusted brand with strong customer review scores and
industry recognition
· Cost advantages of room build through modular off-site construction
with fit-out completed on-site
· Ability to achieve favourable rent conditions with frequent landlord
incentives provided on new-builds
· Scaling of supplier relationships with the prospect of margin
enhancement
The above factors are all helping to drive attractive unit economics, with the
potential for enhanced returns in the future. Areas of further potential
opportunity include upgrading our games offering in existing sites, widening
our food choice, harnessing data insights to a greater extent to optimise site
layouts and game offering and using technology to enhance customer experience.
In summary, the experiential leisure industry has proven to be exceptionally
robust despite the current pressures on the consumer. However, it remains in
its infancy in terms of the wider leisure opportunity in the UK. Competitive
socialising participation is growing quickly at 13% p.a. and the Group is
ideally positioned to benefit from these structural growth trends. In the
short-term, we are seeking to optimise the pace of site roll-out at the pace
at which we are able to generate capital. We remain vigilant of evolving
trends and continue to actively manage our existing estate as well as
evaluating new opportunities to drive profitable growth. We have invested in
our capability to analyse data from our sites more thoroughly, both to improve
existing sites and to identify the optimal locations for new sites. Initial
analysis supports our expectation that in the longer-term, we see an
opportunity to scale the business considerably domestically and
internationally, with a market opportunity of 50+ Escape Hunt and 100+ Boom
Battle Bar sites in the UK alone.
Post period end trading and outlook
The opportunity presented by the growth of experiential leisure remains as
attractive today as it was when XP Factory (then Escape Hunt) started its
journey. The addition of Boom Battle Bar to the Group has significantly
enhanced the scale and prospects for the Group and we are well placed to
continue to benefit from attractive property opportunities. Escape Hunt's
financial performance has settled into an attractive rhythm, producing high
site level margins and highly attractive return on capital, whilst Boom's
performance has proven that our initial expectations of the opportunity were
well founded.
Trading since the start of the financial year to March 2025 has been positive,
with both brands delivering positive volume-driven like-for-like growth, 1.9%
in the case of Escape Hunt, and 1.5% in the case of Boom in the 20 weeks to 18
August 2024. Whilst the rate of growth has slowed compared to the same period
a year ago, the change reflects the gradual maturing of the estates. Both
businesses have maintained margins whilst absorbing significant further labour
cost increases, driven by the increases to minimum living wage levels and our
desire to continue to pay a premium to attract talent. Whilst the summer
uplift in sales in July and August has been modest, forward bookings for the
end of year are well ahead in comparison to previous years providing
confidence for the coming months and leaving the Board's expectations for the
full year unchanged. Our recently approved banking facility is a strong
endorsement of the progress made within the Group and provides us with
flexibility to roll out new sites in line with our strategy and potentially to
accelerate our plans for growth and shareholder value creation.
With the anticipation of further interest rate cuts on the horizon and a
materially lower inflation rate which is being outstripped by labour
inflation, we believe there is scope for improving consumer confidence
underpinning optimism in our sector and we view the future with growing
confidence.
Richard Harpham
Chief Executive Officer
31 August 2024
Financial Review
Group Results
Revenue
Group revenue for the 15 month period increased by 151% to £57.3 million
compared to £22.8 million in the twelve months of 2022, reflecting the full
year effects of the new Boom and Escape Hunt sites opened during 2022, further
site openings in the 15 month period and robust underlying like-for-like
growth.
Fifteen months Year Increase / (decrease)
ended ended
31 March 31 December
2024 2022
£'000 £'000
New site upfront location exclusivity fees, support and administrative fees 354 1,368 (74%)
Franchise revenues 2,339 2,012 16%
Owned branch game revenues 31,085 13,535 130%
Owned branch food and drinks revenues 22,188 5,149 331%
Retros on food and drink purchases 1,012 645 57%
Other 361 125 189%
Total 57,339 22,834 151%
Within the Escape Hunt owner operated estate, revenue grew 71% to £16.7m from
£9.8m in the 12 month period of 2022. The performance was underpinned by
strong annualised like-for-like growth of 16.9% across the whole estate. The
seven most mature sites in the estate which were originally opened in 2018 saw
17.2% like-for-like growth calculated on the same basis.
The Boom owner operated estate delivered revenue of £37.5m, up from £9.5m in
the 12 month period of 2022, an increase of 295%. At the start of the
reporting period, the estate comprised 11 owner operated sites. Three new
sites were opened and a further five franchise sites were brought under owner
operation. The results also include turnover from the site in Swindon, which
is managed by our team through an operating agreement and which we now include
in our owner operated site numbers, taking the total to 20 owner operated
sites.
The Escape Hunt franchise network delivered turnover of £0.8m, an 18%
increase on 2022. The Boom franchise business delivered turnover of £2.3m
compared to £2.9m in 2022. However, of the 2022 revenue, £1.5m was royalty
income whilst £0.8m related to the construction and resale of a franchise
site, against which there was an associated £0.5m cost of sale. It is no
longer our policy to build sites on behalf of franchisees, so this has not
been repeated. The underlying increase in royalty income was due to the full
year effects of franchise sites opened in 2022, offset by the conversion of
franchise sites to owner-operated venues.
Gross profit
Cost of sales includes the variable labour cost at sites and other direct cost
of sales, but not fixed salaries of site staff, whose costs are included as
site level administration costs. The Board believes this categorisation best
reflects the underlying performance at sites and provides a more useful
measure of the business.
Gross profit rose 152% to £37.0m from £14.7m in the 12 month period of
2022. Gross margin at Group level is impacted by the mix of sales between
Boom and Escape Hunt and between franchise and owner operated performance.
Gross margin within the Escape Hunt owner operated network rose to 71% from
69% in 2022, helped by operating leverage of sales growth outstripping the
associated labour costs. Boom gross margins improved from 52% to 59%. During
the period the Group implemented new point of sales systems in all the Boom
owner operated sites and there has been a concerted focus on continual
operational improvement. This, together with the positive impact of
operational gearing delivered from growing sales helped improve the gross
margin.
Comparison of Jan-Mar performance 2023 and 2024
Revenue and gross profit in the three months to 31 March 2024 increased
significantly over the same period in 2023, both periods of which are included
in the 15 month reporting period. Within Escape Hunt owner operated sites,
the growth largely reflected like-for like growth of 11.7%, with the balance
being from the additional site opened in 2023 in Woking. Escape Hunt franchise
revenue growth reflected underlying improvements in the franchise estate
performance. Within Boom, like-for-like growth in the owner operated estate in
the three month period was 11.6% with the additional revenue growth coming
from the three new sites opened in 2023 in Dubai, Canterbury and Southend,
together with the acquisitions of former franchise sites in Chelmsford,
Ealing, Liverpool, Glasgow and Watford. The acquisition of these franchise
sites accounts for the fall in Boom Franchise revenue and gross profit. The
revenue and gross profit by operating division in the three months ended 31
March 2024 and the same period in 2023 was as follows:
£'000 3 Months to 3 Months to
31-Mar-24 31-Mar-23 % change
Revenue
Escape Hunt Owner operated 3,396 3,040 12%
Escape Hunt Franchise 162 146 10%
Boom Owner Operated 8,931 5,219 71%
Boom Franchise 362 550 -34%
12,851 8,955 43%
Gross profit
Escape Hunt Owner operated 2,425 2,096 16%
Escape Hunt Franchise 162 146 10%
Boom Owner Operated 5,504 2,794 97%
Boom Franchise 362 550 -34%
8,452 5,586 51%
Site level EBITDA and Adjusted EBITDA
Site level Adjusted EBITDA is a key performance measure for the business and
is calculated before IFRS 16 adjustments. Escape Hunt delivered £7.0m pre
IFRS 16 site level EBITDA, a 72% increase on the 12 month period in 2022, and
representing a 42% EBITDA margin, in line with the margin achieved in 2022,
and significantly ahead of the original expectations set for Escape Hunt
sites.
Boom owner operated estate delivered a site level EBITDA of £6.2m, up 384% on
the £1.3m delivered in the 12 month period of 2022 and representing a
margin of 16%. The margin for the 15 month period has been diluted by younger
sites and also by the acquisition of franchise sites which in the period under
review has included some lower performing sites where we believe the site
performance can be improved under direct ownership.
Adjusted EBITDA is a key performance indicator for the Company. The Group
recorded a significant increase in the reporting period, with pre IFRS16
Adjusted EBITDA profit rising 146% to £6.3m from £2.6m in the 12 month
period in 2022. After IFRS16, Adjusted EBITDA was £9.9m, an increase of
150% from £4.0m in the 12 month period in 2022.
Escape Hunt Escape Hunt Boom Boom Unallocated 15 months to Mar 2024
Owned Franchise Owned Franchise £'000
Sales 16,726 828 37,513 2,272 - 57,339
Pre IFRS 16 Adjusted site level EBITDA 7,035 799 6,245 2,256 - 16,335
Site level EBITDA margin 42% 96% 17% 99% - 28%
Other income - - 3 - - 3
Centrally incurred costs (1,814) (201) (921) (112) (6,961) (10,007)
Pre-IFRS Adjusted EBITDA 5,221 598 5,326 2,144 (6,961) 6,328
IFRS adjustments (net of pre-opening) 618 - 2,976 - - 3,594
Adjusted EBITDA 5,839 598 8,302 2,144 (6,961) 9,922
Escape Hunt Escape Hunt Boom Boom Unallocated 12 months to Dec 2022
Owned Franchise Owned Franchise £'000
Sales 9,773 703 9,501 2,857 - 22,834
Pre IFRS 16 Adjusted site level EBITDA 4,095 703 1,270 2,279 - 8,347
Site level EBITDA margin 42% 100% 13% 80% 37%
Other income 141 - - - 6 147
Centrally incurred costs (1,218) (134) (678) (105) (3,803) (5,938)
Pre-IFRS Adjusted EBITDA 3,018 569 592 2,174 (3,797) 2,556
IFRS adjustments (net of pre-opening) 613 - 787 - - 1,400
Adjusted EBITDA 3,631 569 1,379 2,174 (3,797) 3,956
The Group has revised the allocation of centrally incurred costs and restated
the prior year segmental split to show a consistent treatment. Centrally
incurred costs (before pre-opening costs) for the 15 months rose to £10.0m
from £5.9 million in the 12 month period to December 2022 reflecting the
longer reporting period, the full year effects of an increased head office
function following the substantial growth of the Boom estate, together with
increased costs to support the expanding business and the impact of a high
inflationary environment.
Operating profit
A reconciliation between statutory operating profit and Adjusted EBITDA is
shown below.
15 months ended 31 March 2024 Year ended 31 December 2022
£'000 £'000
Pre IFRS 16 and Adjusted EBITDA 6,328 2,556
IFRS 16 adjustments (excl pre-opening) 3,594 1,400
Adjusted EBITDA 9,922 3,956
Depreciation and amortisation (6,913) (5,164)
Loss on disposal of tangible and intangible assets (202) (126)
Profit on closure/modification of leases and rent credits - 123
Branch closure costs and other exceptional items 124 (399)
Branch pre-opening costs (915) (2,018)
Provision against loan to franchisee (14) (26)
Foreign currency gains / (losses) (24) (1,133)
IFRS 9 provision for guarantee losses 24 (68)
Gain on closure of subsidiary 480 -
Fair value adjustment (313) 6,210
Share-based payment expense (72) (81)
Operating profit 2,097 1,274
Operating profit rose to £2.1m from £1.3m in 2022. The 2022 result
included a £6.2m fair value adjustment profit relating to the contingent
consideration for the acquisition of Boom, whilst the 15 month period to 31
March 2024 included a £312k fair valuation loss related to the same item.
Excluding this and the £480k gain on closure of subsidiary in the current
period, which arose on the final liquidation of the legacy subsidiaries in
Seychelles, Malaysia and Thailand connected with the original acquisition of
Experiential Ventures in 2017, the underlying operating profit rose to £1.9m
from a 12 month 2022 loss of £4.9m.
The operating profit is after £0.9m pre-opening costs (2022: £2.0m) relating
to openings of both Boom and Escape Hunt sites during the year. £0.6m
related to Boom sites and £0.3m to Escape Hunt sites. Pre-opening costs
comprised the following:
Pre-opening costs Boom EH Total
£,000 £'000 £'000
Admin and marketing 232 84 316
Property costs 35 0 35
Cost of sales - consumables 109 0 109
Training 107 5 112
Central staff marketing and training 235 128 363
Pre IFRS 16 718 217 935
Rent accruals -20 0 -20
Post IFRS 16 698 217 915
2022 operating profit includes £1.1m of foreign exchange costs. These
related principally to an intercompany balance between Experiential Ventures
and Escape Hunt IP Limited, both 100% owned subsidiaries within the Group.
Experiential Ventures has since been voluntarily wound down with intercompany
balances being offset and giving rise to a gain on closure of subsidiary of
£480k in the current period. There is no cash impact.
Branch closure and exceptional costs / gains comprise costs associated with
the closure of the previous Escape Hunt site in Norwich, other costs of an
exceptional nature are offset by a fair value gain of £240k recorded in
relation to the finalisation of completion accounts relating to the
acquisition of the Boom Battle Bar in Cardiff.
The fair value adjustment of £0.3m relates to the settlement of the
contingent liability connected with the acquisition of Boom in June 2023.
(2022: £6.2m gain)
The Board has re-assessed the useful life of certain of the Group's fixed
assets, notably games and leasehold improvements. Previously, games in both
Escape Hunt and in Boom Battle Bar were depreciated over two years, whilst
leasehold improvements were depreciated over five years. The success of the
early Escape Hunt sites which have continued to show strong like-for-like
growth with the original games installed over five years ago, has provided
strong evidence that the policy for games was aggressive. The games are
regularly maintained with maintenance costs expensed as incurred. The Board
has therefore re-assessed the useful life of games to be five years for games
in both Escape Hunt and Boom. Similarly, the leasehold improvements were being
depreciated over five years on the basis that the original Escape Hunt leases
had five-year break clauses. Boom sites generally have break clauses after ten
years and the success of Escape Hunt has given confidence that the useful life
of leasehold improvements is expected to be at least ten years. The change
is regarded as a change in estimate rather than a change in accounting
policy. As such, no change has been made to prior year numbers, but
depreciation in the 15 months to 31 March 2024 reflects the new estimates. The
impact in the current period has been a reduction in depreciation of
approximately £3.1m compared to what would have been charged under the
previous estimates.
Cashflow and capital expenditure
The Group generated £11.1m of cash from operations (2022: £3.3m),
benefitting from positive working capital inflows of £2.1m. £8.3m was
invested in plant and equipment and intangibles. This comprised total
investment of £6.5m within Boom owner-operated sites and £1.6m in Escape
Hunt owner operated sites, with £0.2m invested centrally on intangibles.
The spend was offset by landlord capital contribution receipts of £1.3m.
Within Boom, a total of £3.5m related to investment in new sites, including
final capex on sites opened in late 2022, but principally the new sites opened
during the year in Dubai, Canterbury and Southend as well as a modest amount
of capex in acquired franchise sites. £2.1m was directed to existing sites
to make improvements and expand capacity, £0.7m reflects maintenance capex,
and £0.2m reflects the conversion of operating leases on certain games to
finance leases following a re-negotiation with the supplier.
A total of £1.6m was invested into Escape Hunt of which £0.9m was invested
in new sites, including Woking (£0.5m) and games pre-ordered for further new
sites planned in Glasgow and Cambridge. £0.4m was invested in extending
existing sites through the addition of new rooms, and £0.4m represented
maintenance capex.
£600k was paid for the second deferred consideration instalment for the
acquisition of Boom Cardiff (shown within movements in provisions), whilst the
final deferred consideration payment of £257k was paid relating to the
original Boom acquisition as well as the related £360k loan notes. In total,
£2.7m of debt repayments were made (inclusive of the Cardiff and MFT Capital
deferred consideration payments), whilst £2.1m of new debt was raised
(excluding vendor finance), comprising £0.8m fit-out finance, £1.2m of bank
and other borrowings and £0.2m of equipment rentals treated as finance
leases.
The acquisitions of Boom franchises in Chelmsford, Ealing, Liverpool, Glasgow
and Watford were all partly funded by vendor loans such that the acquisitions
led to only a modest outflow of cash of £50k on completion as the Group
received the benefit of existing cash balances totalling £236k. Vendor
loans in respect of the acquisitions made during the year totalled £2.1m.
£1.2m of vendor loans remained outstanding at 31 March 2024.
Cash at 31 March 2023 was £3.9m (31 Dec 2022: £3.2m), and net cash,
excluding IFRS 16 lease liabilities was £0.1m (2022: net cash £0.8m).
Balance sheet
Net assets as at 31 March 2024 were £25.0m (31 December 2022: £21.6m).
The net book value of property plant and equipment rose to £19.4m from
£12.7m reflecting the capital investment programme, offset by depreciation in
the year.
Right of use assets rose from £17.8m to £20.3m, reflecting the IFRS 16
treatment of new leases signed in the year as well as acquisitions of
franchise sites, offset by depreciation. Landlord incentives of £1.6m, were
offset against the value of right of use assets in accordance with IFRS
treatment during the 15 month period. The increase is reciprocated by an
increase in lease liabilities to £29.8m from £24.0m. Whilst ordinarily the
value of right of use assets would offset the value of lease liabilities
exactly, there are three factors which cause a significant mismatch between
the two balance sheet items, firstly on inception and subsequently over the
period of the lease. Firstly, as mentioned above, landlord incentives are
offset against right of use asset under IFRS16 treatment. As the majority of
Boom sites have received substantial cash contributions from landlords, this
has led to a significant difference between the value of the lease liability
and the value of the right of use asset at the inception of the lease.
Secondly, where sites benefit from rent free or reduced rental periods at the
start of the lease, the value of the lease liability will increase until the
full rental is payable. However, the right of use asset is depreciated from
the date of inception, further exacerbating the difference in values.
Finally, the right of use assets are depreciated on a straight line basis,
whereas the treatment of the lease liabilities leads to higher interest
charges in the early years of the lease. As a result, the liability will
reduce more slowly at the start of the lease than towards the end.
The intangibles balance of £23.6m predominantly includes goodwill and
acquired intangibles (franchise contracts) from the acquisitions in prior
years of Boom, the French, Belgian and Middle East master franchises for
Escape Hunt, and in 2023 the acquisitions of Boom franchise sites.
The total balance in provisions has reduced during the year to £0.6m from
£5.4m. The balance in 2022 included £4.1m of contingent consideration
which was settled by the issue of 23.9m shares to MFT Capital in June 2023,
representing 95.7% of the maximum payout. The final settlement of the
consideration gave rise to a fair value loss in 2023 of £312k. There was no
cash impact.
The balance sheet includes a total of £3.9m of loans. £1.2m of this
relates to loans connection with the acquisitions of Boom Battle Bar franchise
sites in the period. Loans related to the acquisitions of Boom in Cardiff
and Boom in Norwich have been fully repaid. £1.3m relates to fit-out finance
utilised to fund aspects of the Boom Battle Bar site roll out, £1.2m bank and
other similar loans, and the balance is equipment leases treated as finance
leases.
The deferred tax liability was recognised to offset future amortisation of
acquired intangibles (franchise contracts) arising from the acquisitions of
the French and Belgian Escape Hunt master franchise and the acquisition of
Boom Battle Bars both in 2021. £118k has been credited to the statement of
comprehensive income during the period.
Key Performance Indicators
The Directors and management have identified the following key performance
indicators ('KPIs') that the Company tracks for each of its operating brands.
These will be refined and augmented as the Group's business matures:
· Numbers of owner-operated sites: 23 Escape Hunt sites and 20 Boom
Battle Bar sites as at 31 March 2024 (2022: 23 Escape Hunt and 11 Boom Battle
Bar)
· Numbers of franchised sites: 22 Escape Hunt and 10 Boom Battle Bar
sites as at 31 March 2024 (2022: 23 Escape Hunt and 16 Boom Battle Bar)
· Site level revenue: £54.2m in the 15 months to 31 March 2024 (£19.3m
in the year to 31 December 2022)
· Site level EBITDA: £19.0m in the 15 months to 31 March 2024 (£7.7m in
the year to 31 December 2022)
· Franchise revenue: £3.1m in the 15 months to 31 March 2024 (£3.6m in
the year to 31 December 2022)
· Central costs: £9.9m in the 15 months to 31 March 2024 (£5.9m in the
year to 31 December 2022)
· Adjusted EBITDA, before IFRS 16 for the Group: £6.3m in the 15 months
to 31 March 2024 (£2.6m in the year to 31 December 2022)
The Company monitors performance of the owner-operated sites on a weekly
basis. The Board also receives monthly updates on the progress on site
selection, site openings and weekly as well as monthly information on
individual site revenue and site operating costs. Monthly management accounts
are also reviewed by the Board which focuses on revenue, site profitability
and adjusted EBITDA as the key figures within the management accounts.
Both the number of franchised branches as well as their financial performance
are monitored by the management team and assistance is provided to all
branches that request it in terms of marketing advice as well as the provision
of additional games.
The key weekly KPIs by which the UK and owner-operated business is operated
are the site revenue (including UK franchise sites), gross margins (in the
case of Boom sites) marketing spend and staff costs and consequent ratio of
staff costs to revenue. Total revenue is tracked against budget, adjusted for
seasonality, number of rooms open and the stage in the site's maturity cycle.
Staff costs are measured against target percentages of revenue. The
effectiveness of marketing is assessed by observing revenue conversion rates
and the impact on web traffic, bookings and revenue from specific marketing
campaigns.
The Company's systems track performance on both a weekly and a monthly basis.
These statistics provide an early and reliable indicator of current
performance. The profitability of the business is managed primarily via a
review of revenue, adjusted EBITDA and margins. Working capital is reviewed
by measures of absolute amounts.
Graham Bird
Chief Financial Officer
31 August 2024
DIRECTORS' REPORT FOR THE 15-MONTH PERIOD ENDED 31 MARCH 2024
The Directors present their report together with the audited financial
statements of the Group for the 15-month period ended 31 March 2024.
Principal activities
The principal activities of the Group are that of operating consumer facing
leisure brands offering immersive experiences.
The Group currently operates two brands, each of which is developing a network
of locations, either owned and operated directly or franchised. Escape Hunt is
a global leader in providing escape-the-room experiences delivered through a
network of owner-operated sites in the UK, an international network of
franchised outlets, and through digitally delivered games which can be played
remotely.
Boom Battle Bar is a fast-growing network of owner-operated and franchise
sites in the UK and UAE that combine competitive socialising activities with
themed cocktails, drinks and street food in a setting aimed to be high energy
and fun.
Cautionary statement
The review of the business and its future development in the strategic report
has been prepared solely to provide additional information to shareholders to
assess the Company's strategies and the potential for these strategies to
succeed. It should not be relied on by any other party for any other purpose.
The review contains forward-looking statements which are made by the Directors
in good faith based on information available to them up to the time of the
approval of the reports and should be treated with caution due to the inherent
uncertainties associated with such statements.
Results and dividends
The results of the Company are set out in detail in the Financial Statements.
Given the nature of the business and its growth strategy, the Board does not
recommend a dividend this year, nor does it expect to in the near future. The
Directors believe the Company should focus on improving performance to
generate profits to fund the Company's growth strategy over the medium term.
Business review and future developments
Details of the business activities and developments made during the period can
be found in the Strategic Report and in Note 1 to the Financial Statements
respectively.
Business relationships with suppliers, customers and others
Details of how the business has considered relationships with suppliers,
customers and others, and the effect this regard has had, including on the
principal decisions made in the year, can be found in the Strategic Report.
Streamlined Energy and Carbon Reporting
The Group presents its global greenhouse gas (GHG) emissions and energy use
data under Streamlined Energy and Carbon Reporting (SECR) for the 15-month
period ended 31 March 2024.
Emissions (tCO(2)e) 15-month period ended Year ended
31 March 31 December 2022*
2024
Scope 1: Combustion of gas 60.6 N/A
Scope 2: Purchased electricity 709.5 N/A
Total Scope 1 and 2 770.1 N/A
Scope 3: Other indirect 166.2 N/A
Total Scope 1, 2 and 3 936.3 N/A
Energy Consumption (kWh)
Scope 1: Combustion of gas 331,197 N/A
Scope 2: Purchased electricity 3,341,140 N/A
Total Scope 1 and 2 3,672,337 N/A
Scope 3: Other indirect 343,856 N/A
Total Scope 1, 2 and 3 4,016,193 N/A
Intensity Ratio (kgCO(2)e per m(2)) 34.3 N/A
Intensity Ratio (kgCO(2)e per £1k turnover) 16.3 N/A
* Previous usage is not available as this represents the first SECR report
produced by the Group
Methodology
· Base data was provided to the external consultant and converted using
DEFRA 2023 Conversion Factors in line with Environmental Reporting Guidelines
(2019) as most of the financial year falls into the calendar year 2023, and
International Carbon Factors for Global Energy
· Global energy has been included for sites situated in the UAE, France
and Belgium, with International Energy Agency data sets, or country specific
reports for 2023 emissions.
· Spend based data was provided for business travel, and this was
converted to total distance (km) based on cost per km, extracted from
Department for Transport, Office of Rail and Road, Transport for London, or
other appropriate regulatory bodies
· No market-based reporting is included as no energy is purchased from
a renewable energy tariff
· 29 franchise locations have been excluded from the environmental
reporting boundary as they fall outside the Group's financial control
· Due to a lack of available data, energy use and emissions at the
Woking site were estimated using a benchmark derived from other Escape Hunt
locations. The site's energy consumption was calculated at 96 kWh/m(2),
resulting in an estimated total of 26,845 kWh for its 280 m(2) area.
As this is the first year of reporting under the SECR framework, the Group has
engaged an external consultant to establish a comprehensive and accurate
baseline of energy usage across all operational sites. The Group has also
engaged an operational consultant to review energy usage across the portfolio
of sites and recommend measures to reduce overall usage. The Group
predominantly occupies sites that use electric HVAC systems and stands to
benefit from the ongoing decarbonisation of the UK's electricity grid. As the
grid continues to integrate more renewable energy sources, the carbon
intensity of electricity consumption is expected to decrease, thereby
contributing to an overall reduction in carbon emissions. Using the current
information as a base year, the Group will in future incorporate energy
intensity ratios as a key performance indicator alongside other waste and
recycling measures to assess progress. Further information on the Group's
non-financial, sustainability and corporate governance matters is set out in
the strategic report.
Research and development activities
The Group has historically invested in research and development activities
relating to software and intellectual property that supports the Group's
experiential leisure activities. It remains part of the Group's strategy to
further invest in selected areas which will enhance the Group's operating and
data analytic capabilities. Further details of the Group's strategic
objectives are set out in the strategy report.
Employment policies
The Group has employment policies which give full and fair consideration for
the employment of disabled persons, having regard to their particular
aptitudes and abilities. Where possible, the Group will make appropriate,
sympathetic changes and provide training to continue the employment of any
employees who become disabled whilst in the employment of the Group and will
otherwise provide training and support the career development and promotion of
any such employees.
Employee engagement
The Group attaches importance to good communications and relations with
employees. Information that is or may be relevant to employees in the
performance of their duties is circulated to them on a regular basis, or
immediately if it requires their immediate attention. There is regular
consultation with employees through meetings or other lines of communication,
so that their views are known and can be taken into account in making
decisions on matters that will or may affect them. Employee participation in
their venue's performance is encouraged and there is regular communication
with all employees on the performance of their particular venue or central
function and on the financial and economic factors affecting the overall
performance of the Group.
Disclosure of information to auditor
The Directors who held office at the date of approval of this Directors'
report confirm that, so far as they are each aware, there is no relevant audit
information of which the Company's auditor is unaware; and each director has
taken all the steps that he/ she ought to have taken as a director to make
himself/ herself aware of any relevant audit information and to establish that
the Company's auditor is aware of that information.
Financial instruments and risk management
Disclosures regarding financial instruments are provided within Note 30 to the
Financial Statements.
Capital structure and issue of shares
Details of the Company's share capital, together with details of the movements
during the period are set out in Note 23 to the Financial Statements. The
Company has one class of ordinary share which carries no right to fixed
income.
Post balance sheet events
Since the period end, there has been a change of government in the UK with the
Labour party winning a significant majority in the house of commons. Inflation
has fallen from the historically high levels experienced over the previous 12
- 24 months, and as at the date of this report seems to have stabilised at
around 2% per annum. Whilst interest rates have not yet been cut, the
consensus view is that the UK will benefit from a rate cut before the end of
the calendar year. These changes should all be positive for consumers and
sentiment generally, but they do not provide any further information impacting
the financial performance or position of the Group as at 31 March 2024.
Since the period end, the Group bought back a further three Boom franchise
sites in the UK. More details can be found in note 34 of the Consolidated
Financial Statements.
Board of Directors
The Directors of the Company who have served during the year and at the date
of this report are:
Director Role Date of appointment Date of resignation Board Committee
Richard Rose Independent Non-Executive Chairman 25/5/2016 N A R
Richard Harpham Chief Executive Officer 3/5/2017
Graham Bird Chief Financial Officer 6/1/2020
Martin Shuker Independent Non-Executive Director 29/6/2022 N A R
Philip Shepherd Independent Non-Executive Director 29/6/2022 N A R
Richard Harpham was first appointed on 25 May 2015 and resigned on 15 June
2016. He was subsequently re-appointed on 3 May 2017.
Board Committee abbreviations are as follows: N = Nomination Committee; A =
Audit Committee; R = Remuneration Committee
The Board comprises two Executive and three Non-Executive directors.
Richard Rose, Independent Non-Executive Chairman
Richard has a wealth of experience chairing high profile boards. Previously he
has been CEO of two multi-site quoted businesses where he significantly
increased shareholder value. Since then he has held a number of Chairman roles
including Booker Group plc (retiring in 2015 after three terms) and AO World
plc where he retired in 2016. He has been Non-Executive Chairman of Watchstone
Group plc since May 2015 is also Chairman of IB Group Ltd since October 2018.
Richard is a member of the Remuneration Committee, the Audit Committee and the
Nomination Committee of the Company.
Richard Harpham, Chief Executive Officer
Richard joined the Company on its admission to AIM in May 2017 having worked
since November 2016 with the Escape Hunt (now XP Factory) management team.
Richard's prior role was with Harris + Hoole, having been Chief Financial
Officer and then Managing Director, responsible for its turnaround. Before
this, Richard spent over four years at Pret A Manger as Global Head of
Strategy. Richard has also held a number of strategic and financial positions
at companies including Constellation Brands, Shire Pharmaceuticals and Fujitsu
Siemens Computers.
Graham Bird, Chief Financial Officer
Graham, who joined the Company in January 2020, has significant experience in
financial and City matters and in growing small businesses. He is a chartered
accountant, having qualified with Deloitte in London, and has worked in
advisory, investment, commercial and financial roles. Prior to joining XP
Factory, Graham was one of the founding employees at Gresham House plc
("Gresham House") where, in addition to supporting the growth of Gresham
House, he was responsible for establishing and managing the successful
strategic equity business unit which focuses on both quoted and unquoted
equity investments. Prior to joining Gresham House, Graham spent six years in
senior executive roles at PayPoint Plc ("PayPoint"), including director of
strategic planning and corporate development and executive chairman and
president of PayByPhone. Before joining PayPoint, he was head of strategic
investment at SVG Investment Managers, having previously been at JPMorgan
Cazenove, where he served as a director in the corporate finance department.
Martin Shuker, Independent Non-Executive Director
Martin has had a long and distinguished career with Yum Brands, the US Fortune
500 Global hospitality business. He spent 24 years in a variety of leadership
roles, most recently as Managing Director KFC Western Europe where he had full
strategic, growth and operational responsibility over 1,700 restaurants and
165 franchisees which generated £2.3 billion in sales and £120 million of
profit.
As MD of KFC UK, he more than doubled sales in the UK to £1.3 billion and met
or exceeded targets in 11 of 13 years.
Martin has demonstrated his ability in consistently achieving growth and
bottom-line performance of established owner-operated and franchise businesses
over a long period of time and has relevant experience in entering new
territories through franchise routes. He successfully opened new markets in a
number of European countries and has demonstrated his ability to both manage
an established franchise network as well as establishing new networks in new
territories.
Prior to YUM, Martin had a variety of marketing roles with United Biscuits.
Martin is chairman of the Company's Remuneration Committee.
Philip Shepherd, Independent Non-Executive Director
Philip is a former partner of PricewaterhouseCoopers ("PwC"), where he
originally trained in audit and tax, qualifying as an ACA in 1987.
Following a career in corporate finance and transaction advisory services,
Philip returned to PwC in 2004 working both in the UK and overseas, leading
Strategy and Deals practices, with a particular focus on the hospitality and
leisure sectors. Since leaving PwC in 2018, he has held a number of board and
advisor roles, again with a focus on hospitality and leisure. He regularly
travels abroad where he advises, and speaks, on the experiential leisure
market and start up opportunities. Philip combines his experience in
accounting and audit with deal evaluation and execution and has a deep
understanding of the hospitality and leisure markets both in the UK and
globally.
Philip is chairman of the Company's Audit Committee.
Directors' interests in shares
Directors' interests in the shares of the Company at the date of this report
are disclosed below. Directors' interests in contracts of significance to
which the Company was a party during the financial period are disclosed in
note 28 to the Financial Statements.
Director Ordinary shares held % held
Richard Rose 53,666 0.03
Richard Harpham 935,246 0.53
Graham Bird 1,939,373 1.11
Philip Shepherd 62,163 0.04
Martin Shuker Nil 0.00
XP Factory Plc owns all the ordinary shares in its subsidiary, Escape Hunt
Group Ltd ("EHGL"). EHGL issued a total of 1,000 Growth shares in 2017 to
three then directors and employees. These have subsequently all been bought
back. As at 31 March 2024, XP Factory owns 100% of the Growth shares. The
Growth shares carry no voting rights and are not entitled to any dividends
that may be paid by EHGL.
Directors' interests in options
The following options have been granted to certain Directors under the Escape
Hunt Plc 2020 EMI Share Option Scheme. The options vested over three years
and were subject to achieving certain performance conditions related to share
price appreciation over a four year period. These conditions were all
fulfilled.
Director Options held Exercise price Options vested Date of Grant Expiry date
Richard Harpham 5,333,333 7.5 pence 5,333,333 16 July 2020 16 July 2025
Graham Bird 3,733,333 7.5 pence 3,733,333 16 July 2020 16 July 2025
No directors exercised any options during the year.
Substantial interests
As at 31 March 2024 the Company has been advised of the following significant
interests (greater than 3%) in its ordinary share capital:
Shareholder Ordinary shares held % held
Canaccord Genuity Group Inc 32,484,656 18.61
MFT Capital Ltd 23,924,420 13.71
Lansdowne Partners 13,333,731 7.64
Hargreaves Lansdown PLC 11,222,261 6.43
Allianz SE 9,250,000 5.30
Mr Stephen Lucas 7,233,024 4.14
Abrdn PLC 6,907,548 3.96
Mr John E Story 5,934,529 3.40
Raymond James Financial 5,411,777 3.10
Except as referred to above, the Directors are not aware of any person who was
interested in 3% or more of the issued share capital of the Company or could
directly or indirectly, jointly or severally, exercise control.
Directors' insurance
The Company has maintained directors' and officers' liability insurance
throughout the period for the benefit of the Company, the Directors and its
Officers.
Independent auditors
A resolution proposing the re-appointment of HW Fisher LLP as auditor of the
Company is to be proposed at the forthcoming Annual General Meeting.
Going Concern
The time horizon required for the Going Concern Statement is a minimum of 12
months from the date of signing the financial statements. Consistent with
prior periods, the Directors have adopted an assessment period of 18 months
and run forecasts for a three-year period from the period end date of 31 March
2024.
In determining whether there are material uncertainties, the Directors
consider the Group's business activities and principal risks. The Directors'
reviewed the Group's cash flows, liquidity positions and borrowing facilities
for the going concern period.
There has been no material uncertainty identified which would cast significant
doubt upon the Group's ability to continue using as a going concern. As such,
the Directors considered it appropriate to adopt the going concern basis of
accounting in the preparation of the Group's financial statements.
Annual General Meeting
The Annual General Meeting (AGM) will be held on 30 September 2024.
Signed by order of the board
Graham Bird
Chief Financial Officer
31 August 2024
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the Group
and parent Company financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Group and parent Company
financial statements for each financial year. Under the AIM Rules of the
London Stock Exchange they are required to prepare the Group financial
statements in accordance with UK-adopted International Accounting Standards as
issued by the International Accounting Standards Board and applicable law and
they have elected to prepare the parent Company financial statements in
accordance with UK accounting standards and applicable law (UK Generally
Accepted Accounting Practice), including FRS 102 The Financial Reporting
Standard applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and parent Company and of their profit or loss for that
period. In preparing each of the Group and Parent company financial
statements, the directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable, relevant, reliable
and prudent;
· for the Group financial statements, state whether they have been
prepared in accordance with UK-adopted International Accounting Standards;
· for the parent Company financial statements, state whether applicable
UK accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
· assess the Group and parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern; and
· use the going concern basis of accounting unless they either intend
to liquidate the Group or the parent Company or to cease operations, or have
no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the parent Company's transactions and disclose
with reasonable accuracy at any time the financial position of the parent
Company and enable them to ensure that its financial statements comply with
the Companies Act 2006. They are responsible for such internal control as
they determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report and a Directors' Report that complies with that
law and those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Website publication
The Directors are responsible for ensuring the annual report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
Directors' Confirmations
The Directors consider that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group and parent Company's position and
performance, business model and strategy.
In the case of each Director in office at the date the Directors' Report is
approved:
· so far as the Director is aware, there is no relevant audit
information of which the Group and parent Company's auditors are unaware; and
· they have taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit information
and to establish that the Group and parent Company's auditors are aware of
that information.
Signed by order of the Board
Richard Rose
31 August 2024
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF XP FACTORY PLC
Opinion
We have audited the financial statements of XP Factory Plc (the 'Parent
Company') and its subsidiaries (the 'Group') for the period ended 31 March
2024, which comprise:
• the consolidated Statement of Comprehensive Income;
• the consolidated and Parent Company Statements of Financial
Position,
• the consolidated and Parent Company Statement of Changes in
Equity;
• the consolidated Statement of Cash Flows;
• the related notes to the Consolidated and Parent Company financial
statements including significant accounting policies.
The financial reporting framework that has been applied in the preparation of
the Group financial statements is applicable law and UK-adopted International
Accounting Standards ('IAS'). The financial reporting framework that has been
applied in the preparation of the Parent Company financial statements is
applicable law and United Kingdom Accounting Standards, Financial Reporting
Standard 102 The Financial Reporting Standard applicable in the UK and
Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion;
• the financial statements give a true and fair view of the state of
the Group's and of the Parent Company's affairs as at 31 March 2024 and of the
Group's loss for the period then ended;
• the Group's financial statements have been properly prepared in
accordance with UK-adopted International Accounting Standards ('IAS');
• the Parent Company financial statements have been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report.
We are independent of the Group and Parent Company in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC's Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Summary of our audit approach
Context
There are thirty six components of the Group, twenty nine located and
operating in the United Kingdom (UK) and seven located and operating overseas.
Of the twenty nine located and operating in the UK, three were dissolved
during the period. Of the seven located and operating overseas, three were
dissolved during the period. One of the components located and operating in
the UK is not a subsidiary of the Group, but has been consolidated as part of
the results of the Group on the basis of control. Please refer to Note 14 to
the Consolidated financial statements for more information. The audits of XP
Factory Plc and its UK subsidiary undertakings requiring statutory audits were
conducted from the UK by the audit engagement team. Financial information from
other components not considered to be individually significant was subject to
limited review procedures carried out by the audit engagement team.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
The key audit matters that we identified in the current period were:
• Revenue recognition arising from occurrence, completeness and
cut-off in the period;
• Management override of controls;
• IFRS 16 and the adoption of IFRS 16;
• Valuation and impairment of goodwill and other intangible assets
arising from business combinations; and
• Going Concern.
An overview of the scope of our audit
The key audit matters identified above are discussed further in this section.
This is not a complete list of all risks identified by our audit.
We identified going concern as a key audit matter and have detailed our
response in the conclusions relating to going concern section below.
Area of focus How our audit addressed the area of focus
Revenue recognition arising from occurrence, completeness and cut-off in the Our audit work included, but was not restricted to the following:
period
· We evaluated the sales controls system in place to determine the
There is a presumed risk of misstatement arising from lack of completeness or controls surrounding the income.
inaccurate cut-off relating to revenues.
· We checked a sample of the franchise agreements and contracts
through to the income recognised in the accounts and invoices.
· We checked a sample of sales from the booking systems through to
the income recognised in the accounts.
· We also completed checks on deferred and accrued income.
· We reviewed the revenue recognition accounting policy to ensure
the application was consistent.
Based on our audit work detailed above, we confirm that we have nothing
material to report, and or draw attention to in respect of these matters.
Management override of controls Our audit work included, but was not restricted to the following:
Management is in a unique position to override controls that otherwise appear · We undertook a review to gain an understanding of the overall
to be operating effectively. governance and oversight process surrounding management's review of the
financial statements.
· We examined the significant accounting estimates and judgements
relevant to the financial statements for evidence of bias by the directors.
· We reviewed the financial statements and considered whether the
accounting policies are appropriate and have been applied consistently.
· We undertook a review of the journals posted through the
nominal ledger for significant and unusual transactions and investigated them,
reviewing and confirming the journal entry postings.
· We undertook a review of the consolidation journals to ensure
they were reasonable.
Based on our audit work detailed above, we confirm that we have nothing
material to report, and or draw attention to in respect of these matters.
IFRS 16 and the adoption of IFRS 16 Our audit work included, but was not restricted to the following:
The Group holds multiple property leases and judgement is required regarding · We obtained management's calculation of the recognition of right
the recognition of right of use assets and lease liabilities. of use assets and lease liabilities.
· We reviewed a sample of lease agreements and re-performed
calculations to verify the accuracy the calculation.
· We reviewed the calculation for completeness based on our
knowledge of leases within the business.
· We reviewed the significant judgements made in the recognition of
the right of use assets and lease liabilities, particularly with respect to
the discount rate implicit in the lease.
· We reviewed the appropriateness of the disclosures made and its
consistency with our knowledge of the lease agreements and the application of
IFRS 16.
Based on our audit work detailed above, we confirm that we have nothing
material to report, and or draw attention to in respect of these matters.
Valuation and impairment of goodwill and other intangible assets arising from Our audit work included, but was not restricted to the following:
business combinations
Valuation
The Group's intangibles comprise of goodwill, trademarks, intellectual
property, franchise agreements, and the portal. · We obtained management's valuation of the acquired intangibles
and discussed the key inputs into the assessment with management.
· We performed procedures, including challenge regarding
Intangibles arising from business combinations in the year amounted to £1.9m reasonableness of the inputs into the model.
(2022: £1.5m).
· We reviewed the significant judgements made in the model,
particularly with respect to the discount rate applied, the calculation of tax
amortisation benefits and the recognition of deferred tax liabilities.
The total carrying value of intangible assets was £23.6m (2022: £22.7m).
· We tested to ensure the mathematical accuracy of the model
presented.
The uncertainty of future cash flows indicate there could be an impairment in
the carrying value of the intangible assets and as such we considered this to
be a key audit matter. Impairment
· We obtained management's assessment of impairment and discussed
the key inputs into the assessment with management.
· We performed procedures, including challenge regarding
reasonableness of the inputs into the model.
· We considered management's sensitivity analysis and also
performed an additional range of sensitivities to assess whether a reasonably
likely change to a key input would result in an impairment charge.
· We tested to ensure the mathematical accuracy of the model
presented.
Based on our audit work detailed above, we confirm that we have nothing
material to report, and or draw attention to in respect of these matters.
Our application of materiality
In planning and performing our audit we applied the concept of materiality. An
item is considered material if it could reasonably be expected to change the
economic decisions of a user of the financial statements. We used the concept
of materiality to both focus our testing and to evaluate the impact of
misstatements identified.
Based on our professional judgement, we determined overall materiality for the
Group financial statements as a whole to be £1,147,000, based on 2% of Group
turnover.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Our evaluation of the directors' assessment of the Group's and Parent
Company's ability to continue to adopt the going concern basis of accounting
included obtaining and reviewing the forecast financial projections.
Management prepared two main scenarios for the future business following the
planned opening of new sites in the UK. As part of their assessment, the
following scenarios were presented:
• A central case for which revenue forecasts are based on a
regression analysis of previous performance for the twelve months, adjusted
for seasonality. The central case includes the planned roll out of new sites
and buy-back of franchise sites and is based on existing property deals which
are in legal stages, heads of terms or final negotiations and management have
a high degree of visibility. The central case represents the targets
considered achievable by divisional management. Central case produces a cash
generative, profitable business.
• A downside case which reflects a combination of downside
sensitivities in each of the Boom and Escape Hunt businesses. The downside
case reflects a reduction in activity for both Boom and Escape Hunt.
Sensitivities include a sales reduction of 10% in both Boom and Escape Hunt
leading to reduced margins, cost inflation of a further 2% in Boom, a
reduction of discretionary capex by 75% in Boom and 50% in Escape Hunt,
controllable central costs reduced by 30%, a delay in the construction and
timing of the opening of new sites until early 2025. The downside case
significantly reduces turnover and profitability, however demonstrates that
even if a wide range of targets are missed, the business has sufficient cash
to meet its obligations.
In both scenarios the Group has surplus working capital to meet its working
capital requirements for the foreseeable future.
We performed audit procedures, including but not restricted to the following:
• We reviewed the forecast revenues and resulting cash flows within
the assessment period;
• We compared the forecast to available management information for
the business post year-end;
• We considered management's sensitivity analysis and also performed
an additional range of sensitivities to assess whether a reasonably likely
change to a key input would result in an erosion of the revised headroom on
working capital available in the downside model used by management;
• We reviewed the announcements and considered if any items will
have a financial impact affecting the going concern;
• We reviewed the appropriateness of the disclosures made and its
consistency with our knowledge of the business.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's or Parent Company's
ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors'
report for the financial period for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors' report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent
Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the Parent Company financial statements are not in agreement with
the accounting records and returns; or
• certain disclosures of directors' remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the Directors' responsibilities statement, the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group's and the Parent Company's ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
As part of our planning process:
• We enquired of management the systems and controls the Group and
Parent Company has in place, the areas of the financial statements that are
most susceptible to the risk of irregularities and fraud, and whether there
was any known, suspected or alleged fraud. The Group and Parent Company did
not inform us of any known, suspected or alleged fraud.
• We obtained an understanding of the legal and regulatory
frameworks applicable to the Group and Parent Company. We determined that the
following were most relevant: UK-adopted International Accounting Standards,
FRS 102, Companies Act 2006, Planning Consent, Alcohol Licencing, Health &
Safety Standards, Food Hygiene, US Regulations relating to US Franchises.
• We considered the incentives and opportunities that exist in the
Group and Parent Company, including the extent of management bias, which
present a potential for irregularities and fraud to be perpetuated, and
tailored our risk assessment accordingly.
• Using our knowledge of the Group and Parent Company, together with
the discussions held with the Group and Parent Company at the planning stage,
we formed a conclusion on the risk of misstatement due to irregularities
including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud
during the course of the audit included:
• Identifying and testing journal entries and the overall accounting
records, in particular those that were significant and unusual.
• Reviewing the financial statement disclosures and determining
whether accounting policies have been appropriately applied.
• Reviewing and challenging the assumptions and judgements used by
management in their significant accounting estimates, particularly regarding
the value of right of use assets and lease liabilities arising from long term
leases under IFRS16, valuation and impairment of intangible fixed assets
including goodwill and valuation, impairment of investments and recoverability
of amounts owed from fellow group companies.
• Assessing the extent of compliance, or lack of, with the relevant
laws and regulations.
• Testing key revenue lines, in particular cut-off, for evidence of
management bias.
• Performing a physical verification of key assets and stock items.
• Obtaining third-party confirmation of material bank and loan
balances.
• Documenting and verifying all significant related party and
consolidated balances and transactions.
• Reviewing documentation such as the Group's and Parent Company's
board minutes for discussions of irregularities including fraud.
• Testing all material consolidation adjustments.
Owing to the inherent limitations of an audit, there is an unavoidable risk
that we may not have detected some material misstatements in the financial
statements even though we have properly planned and performed our audit in
accordance with auditing standards. The primary responsibility for the
prevention and detection of irregularities and fraud rests with the directors.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
http://www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor's report
Use of our audit report
This report is made solely to the Parent Company's members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the Parent Company's members
those matters we are required to state to them in an auditor's report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Parent Company and the Parent
Company's members as a body, for our audit work, for this report, or for the
opinions we have formed.
Gary Miller (Senior Statutory Auditor)
For and on behalf of HW Fisher LLP
Chartered Accountants
Statutory Auditor
Acre House
11/15 William Road
London
NW1 3ER
United Kingdom
Date 31 August 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 15 Month Period Ended 31 March 2024
All figures in £'000s 15 month period ended Year ended
31 December
31 March 2022
Continuing operations Note 2024
Revenue 4 57,339 22,834
Cost of sales 6 (20,291) (8,122)
Gross profit 37,048 14,712
Other income 33 3 74
Fair value adjustment on contingent consideration 22 (313) 6,210
Administrative expenses 6 (34,641) (19,724)
Operating profit / (loss) 6 2,097 1,272
Adjusted EBITDA 9,922 3,954
Amortisation of intangibles 13 (786) (886)
Rent concessions recognised in the year 12 - 33
Depreciation of property plant and equipment 11 (3,653) (2,825)
Depreciation of right-of-use assets 12 (2,474) (1,453)
Loss on disposal of tangible assets 11 (104) (126)
Loss on disposal of intangible assets 13 (98) -
Profit on termination / change of leases 12 - 90
Branch closure costs (50) (106)
Branch pre-opening costs (915) (2,018)
Provision against loan to franchisee 16 (14) (26)
Provision for guarantee losses 22 24 (68)
Exceptional costs and gains 6 174 (293)
Gain on closure of subsidiary 14 480 -
Foreign currency losses (24) (1,133)
Fair value movements on provisions 22 (313) 6,210
Share-based payment expense 25 (72) (81)
Operating profit / (loss) 2,097 1,272
Net Interest charged 8 (242) (1,292)
Lease finance charges 12 (2,394) (1,086)
Loss before taxation (539) (1,106)
Taxation 9 119 112
Loss after taxation (420) (994)
Other comprehensive income:
Items that may or will be reclassified to profit or loss:
Exchange differences on translation of foreign operations (670) 363
Total comprehensive loss (1,090) (631)
Loss attributable to:
Equity holders of XP Factory Plc (420) (994)
Non-controlling interests - -
(451) (994)
Total comprehensive loss attributable to:
Equity holders of XP Factory Plc (1,090) (631)
Non-controlling interests - -
(1,090) (631)
Loss per share attributable to equity holders:
Basic and diluted (Pence) 10 (0.27) (0.66)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2024
As at As at
31 March 31 December
Note 2024 2022
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 11 19,360 12,753
Right-of-use assets 12 20,326 17,842
Intangible assets 13 23,639 22,696
Finance Lease receivable 12 1,389 1,273
Rent deposits 71 61
Loan to franchisee 16 - -
64,785 54,625
Current assets
Inventories and work in progress 18 348 323
Trade receivables 17 1,635 1,934
Other receivables and prepayments 17 2,444 1,839
Cash and cash equivalents 19 3,935 3,189
8,362 7,285
TOTAL ASSETS 73,147 61,910
LIABILITIES
Current liabilities
Trade payables 20 3,758 1,837
Contract liabilities 21 1,809 1,029
Other loans 24 1,941 1,057
Lease liabilities 12 2,032 1,073
Other payables and accruals 20 7,546 5,259
Provisions 22 - 4,970
17,086 15,225
Consolidated Statement of Financial Position
As at 31 March 2024 (continued)
As at As at
31 March 31 December
2024 2022
Note £'000 £'000
Non-current liabilities
Contract liabilities 21 419 455
Provisions 22 609 413
Other loans 24 1,917 423
Deferred tax liability 9 326 832
Lease liabilities 12 27,786 22,965
31,057 25,088
TOTAL LIABILITIES 48,143 40,313
NET ASSETS 25,004 21,597
EQUITY
Capital and reserves attributable to equity holders of XP Factory Plc
Share capital 23 2,182 1,883
Share premium account 27 48,832 44,705
Merger relief reserve 27 - 4,756
Accumulated losses 27 (25,977) (30,312)
Currency translation reserve 27 (391) 279
Capital redemption reserve 27 46 46
Share-based payment reserve 27 312 240
25,004 21,597
Non-controlling interests - -
TOTAL EQUITY 25,004 21,597
The notes on pages 57 to 115 are an integral part of these financial
statements.
The financial statements were approved by the Board of Directors and
authorised for issue on 31 August 2024 and are signed on its behalf by:
Graham Bird
Director
Registered company number 10184316
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 15 month period ended 31 March 2024
Attributable to owners of the parent
15 month period ended Share capital Share premium account Merger relief reserve Currency translation reserve Capital redemption reserve Share-based payment reserve Accumulated losses Total
31 Mar 2024
Convertible loan note reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1,883 44,705 4,756 279 46 240 - (30,312) 21,597
1 Jan 2023
Loss for the year* - - - - - - - (421) (421)
Other comprehensive income - - - (670) - - - - (670)
Total comprehensive loss - - - (670) - - - (421) (1,091)
Issue of shares 299 4,127 - - - - - - 4,426
Reclassification of merger reserve (4,756) 4,756 -
Share-based Payment Charges - - - - - 72 - - 72
Transactions with owners 299 4,127 - - - 72 - - 4,498
Balance as at 31 Mar 2024 2,182 48,832 - (391) 46 312 - (25,977) 25,004
Year ended 31 Dec 2022:
Balance as at 1 Jan 2022 1,825 44,366 4,756 (83) 46 158 68 (29,318) 21,817
Loss for the year* - - - - - - - (994) (994)
Other comprehensive income - - - 363 - - - - 363
Total comprehensive loss - - - 363 - - - (994) (631)
Issue of shares 3 - - - - - - - 3
Redemption of convertible loan notes 55 339 - - - - (68) - 326
Share-based payment charges - - - - - 82 - - 82
Transactions with owners 58 339 - - - 82 (68) - 411
Balance as at 31 Dec 2022 1,883 44,705 4,756 279 46 240 - (30,312) 21,597
* Includes amortisation of intangible assets
The notes on pages 57 to 115 are an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 15 month period ended 31 March 2024
15 month period ended Year ended
31 December
31 March 2022
2024
£'000 £'000
Cash flows from operating activities
Loss before income tax (540) (1,106)
Adjustments:
Depreciation of property, plant and equipment 11 3,653 2,825
Depreciation of right-of-use assets 12 2,474 1,453
Amortisation of intangible assets 13 786 886
Fair value movements 22 313 (6,210)
Movement in provision against franchisee loan 16 14 26
Loss on disposal of plant and equipment 11 104 126
Loss on disposal of intangibles 13 98 -
Net foreign exchange differences (148) 348
Profit of disposal of subsidiary 14 (480) -
Share-based payment expense 25 72 81
Lease interest charge 12 2,394 1,086
Rent concessions received 12 - (33)
Profit on closure / modification of leases 12 - (90)
Interest charge 8 242 1,292
Operating cash flow before working capital changes 8,983 684
(Increase) / decrease in trade and other receivables (234) 1,359
Decrease in inventories 39 184
(Decrease) in provisions (577) (160)
Increase in trade and other payables 3,168 1,571
(Decrease) / increase in deferred income (318) (317)
Cash generated in operations 11,061 3,321
Income taxes paid 9 21 -
Net cash generated in operating activities 11,082 3,321
Cash flows from investing activities
Purchase of property, plant and equipment 11 (7,223) (8,998)
Purchase of intangibles 13 (209) (217)
Landlord incentives received 12 1,300 2,914
Payment of deposits (11) (16)
Loan made to master franchisee - 84
Acquisition of subsidiaries, net of cash acquired 15 (50) (436)
Interest received 60 82
(554)
Net cash used in investing activities (6,133) (6,587)
Cash flows from financing activities
Proceeds from issue of ordinary shares 23 - 6
Proceeds from new loans 24 1,169 820
Repayment of loans 24 (1,809) (1,271)
Interest paid (418) (147)
Repayment of leases 12 (3,135) (1,185)
Net cash (used) / generated from financing activities (4,193) (1,777)
Net (decrease) / increase in cash and cash equivalents 756 (5,043)
Cash and cash equivalents at beginning of period 3,189 8,225
Effects of exchange rate changes on the balance of cash held in foreign (10) 7
currencies
Cash and cash equivalents at end of period 3,935 3,189
Reconciliation of movements in net debt
As at 31 Dec 2022 Cash movements Assumed through acquisition, including vendor finance Equipment fit out and lease funding Foreign exchange movements Balance at 31 March 2024
£'000
Cash 3,189 756 - - (10) 3,935
Borrowings 1,479 (641) 2,096 923 - 3,858
Net debt 1,710 1,397 (2,096) 923 (10) 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General Information
The Company was incorporated in England on 17 May 2016 under the name of
Dorcaster Limited with registered number 10184316 as a private company with
limited liability under the Companies Act 2006. The Company was re-registered
as a public company on 13 June 2016 and changed its name to Dorcaster Plc on
13 June 2016. On 8 July 2016, the Company's shares were admitted to AIM. The
company is domiciled in the United Kingdom.
Until its acquisition of Experiential Ventures Limited on 2 May 2017, the
Company was an investing company (as defined in the AIM Rules for Companies)
and did not trade.
On 2 May 2017, the Company ceased to be an investing company on the completion
of the acquisition of the entire issued share capital of Experiential Ventures
Limited. Experiential Ventures Limited was the holding company of the Escape
Hunt Group, the activities of which related solely to franchise.
On 2 May 2017, the Company's name was changed to Escape Hunt Plc and became
the holding company of the enlarged Escape Hunt Group. Thereafter the group
established the Escape Hunt owner operated business which operates through a
UK subsidiary. All of the Escape Hunt franchise activity was subsequently
transferred to a UK subsidiary. On 22 November 2021, the Company acquired BBB
Franchise Limited, together with its subsidiaries operating collectively as
Boom Battle Bars. At the same time, the group took steps to change its name
to XP Factory Plc with the change taking effect on 3 December 2021.
XP Factory Plc currently operates two fast-growing leisure brands. Escape
Hunt is a global leader in providing escape-the-room experiences delivered
through a network of owner-operated sites in the UK, an international network
of franchised outlets in five continents, and through digitally delivered
games which can be played remotely.
Boom Battle Bar is a fast-growing network of owner-operated and franchise
sites in the UK that combine competitive socialising activities with themed
cocktails, drinks and street food in a high energy, fun setting. Activities
include a range of games such as augmented reality darts, Bavarian axe
throwing, 'crazier golf', shuffleboard and others.
The Company's registered office is Boom Battle Bar Oxford Street Ground Floor
And Basement Level, 70-88 Oxford Street, London, England, W1D 1BS.
The consolidated financial information represents the audited consolidated
results of the Company and its subsidiaries, (together referred to as "the
Group").
During the year the Group moved its accounting reference date from 31 December
to 31 March. As such, the results for the current period represent a fifteen
month period from 1 January 2023 to 31 March 2024 and are therefore not
directly comparable with the prior year results which represent a 12 month
period from 1 January 2022 to 31 December 2022. Both Boom and Escape Hunt
have peak trading periods that coincide with Christmas and the Board believes
that there will be a number of benefits to the change including:
· Earlier and better visibility of the likely outturn for any financial
year given the significance of December trading for the full year results
· The audit will take place during the Group's quietest months between
April and June, which is expected to lead to greater efficiency of process for
both internal staff and auditors
· The change will align the Group with several other leisure operators.
Basis of preparation
The audited consolidated financial statements have been prepared in accordance
with UK-adopted International Accounting Standards ("IFRSs").
The audited financial statements are presented in Pounds Sterling, which is
the presentational currency for the financial statements. All values are
rounded to the nearest thousand pounds except where otherwise indicated. They
have been prepared under the historical cost convention, except for financial
instruments that have been measured at fair value through profit and loss.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies.
Changes in accounting policy
a) New standards, interpretations and amendments effective from 1 January
2023
In the current year a number of amendments to IFRSs issued by the
International Accounting Standards Board (IASB) and endorsed by the UK
Endorsement Board became mandatorily effective for an accounting period that
beings on or after 1 January 2023. The relevant amendments for the Group are:
Disclosure of Accounting Policies (Amendments to IAS 1) - 1 January 2023
Changes requirements from disclosing 'significant' to 'material' accounting
policies and provides explanations and guidance on how to identify material
accounting policies.
Definition of Accounting Estimates (Amendments to IAS 8) - 1 January 2023
Clarifies how to distinguish changes in accounting policies from changes in
accounting estimates.
There are no other new standards impacting the Group adopted in the annual
financial statements for the period ended 31 March 2024. The Directors do not
expect any material impact on the Group's reporting from new accounting
standards, interpretations and amendments not yet effective but currently
under contemplation by the International Accounting Standards Board.
2. Material accounting policies
The principal accounting policies applied in the preparation of the audited
consolidated financial information set out below have, unless otherwise
stated, been applied consistently throughout.
Basis of consolidation
The audited consolidated financial information incorporates the preliminary
financial statements of the Company and its subsidiaries. Subsidiaries are
entities over which the Group has control. The Group controls an investee if
the Group has power over the investee, exposure to variable returns from the
investee, and the ability to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate that there may
be a change in any of these elements of control.
Subsidiaries are consolidated from the date on which control is obtained by
the Group up to the effective date on which control is lost, as appropriate.
Under the acquisition method, the results of the subsidiaries acquired or
disposed of are included from the date of acquisition or up to the date of
disposal. At the date of acquisition, the fair values of the subsidiaries' net
assets are determined and these values are reflected in the Consolidated
Financial Statements. The cost of acquisition is measured at the aggregate of
the fair values, at the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments issued by the Group in exchange
for control of the acquiree. Any excess of the purchase consideration of the
business combination over the fair value of the identifiable assets and
liabilities acquired is recognized as goodwill. Goodwill, if any, is not
amortised but reviewed for impairment at least annually. If the consideration
is less than the fair value of assets and liabilities acquired, the difference
is recognized directly in the statement of comprehensive income.
Acquisition-related costs are expensed as incurred.
Intra-group transactions, balances and recognized gains on transactions are
eliminated. Unrealised losses are also eliminated unless cost cannot be
recovered. Where necessary, adjustments are made to the Financial Statements
of subsidiaries to ensure consistency of accounting policies with those of the
Group.
The financial statements of the subsidiaries are prepared for the same
reporting period as that of the Company, using consistent accounting policies.
Where necessary, accounting policies of subsidiaries are changed to ensure
consistency with the policies adopted by other members of the Group.
Changes in the Group's interest in a subsidiary that do not result in a loss
of control are accounted for as equity transactions. The carrying amounts of
the Group's interests and the non-controlling interests are adjusted to
reflect the changes in their relative interests in the subsidiary. Any
difference between the amount by which the non-controlling interests are
adjusted and the fair value of the consideration paid or received is
recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary it derecognises the assets and
liabilities of the subsidiary and any non-controlling interest. The profit or
loss on disposal is calculated as the difference between (i) the aggregate of
the fair value of the consideration received and the fair value of any
retained interest and (ii) the previous carrying amount of the assets
(including goodwill), and liabilities of the subsidiary and any
non-controlling interests. Amounts previously recognised in other
comprehensive income in relation to the subsidiary are accounted for (i.e.
reclassified to profit or loss or transferred directly to retained earnings)
in the same manner as would be required if the relevant assets or liabilities
were disposed of.
Going Concern
The financial statements have been prepared on a going concern basis which
contemplates the continuity of normal business activities and the realisation
of assets and the settlement of liabilities in the ordinary course of
business.
The Directors have assessed the Group's ability to continue in operational
existence for the foreseeable future which is at least, but not limited to,
twelve months from the end of the reporting period in accordance with the
Financial Reporting Council's Guidance on the going concern basis of
accounting and reporting on solvency and liquidity risks issued in April 2016.
The Board has prepared detailed cashflow forecasts covering a three year
period from the reporting date.
The Group plans to continue the roll out of new sites under both the Escape
Hunt and Boom Battle Bar brands in the UK which are expected to contribute to
performance in future.
The central case is based on opening a limited number of new Escape Hunt and
Boom owner operated sites in the UK in line with the Board's stated strategy.
Sites are expected to take a period of time to reach maturity based on
previous experience. The central case does not assume any openings other than
sites for which leases have already been secured.
The Group has also considered a 'downside' scenario. In this scenario the
Group has assessed the potential impact of a reduction in sales across the
group and cost increases. In the 'downside' scenario, the Directors believe
it can take mitigating actions to preserve cash. Principally the roll-out of
further sites would be delayed and cost saving measures would be introduced at
head office central services. Reductions could be targeted in both people and
areas such as IT, professional services and marketing. Other areas of
planned capital expenditure would also be curtailed. These include planned
expenditure system improvements and capital expenditure at sites. Taking
into account the mitigating factors, the Group believes it would have
sufficient resources for its present needs.
Based on the above, the Directors consider there are reasonable grounds to
believe that the Group will be able to pay its debts as and when they become
due and payable, as well as to fund the Group's future operating expenses. The
going concern basis preparation is therefore considered to be appropriate in
preparing these financial statements.
Merger relief
The issue of shares by the Company is accounted for at the fair value of the
consideration received. Any excess over the nominal value of the shares issued
is credited to the share premium account other than in a business combination
where the consideration for shares in another company includes the issue of
shares, and on completion of the transaction, the Company has secured at least
a 90% equity holding in the other company. In such circumstances the credit is
applied to the merger relief reserve.
Foreign currency transactions and translation
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity's functional currency are recorded at the
rate of exchange prevailing on the date of the transaction.
The functional currency of the Company's subsidiaries which operate overseas
are as follows:
Escape Hunt Entertainment LLC Arab Emirates Dinar
Boom Battle Facilities Management Services LLC Arab Emirates Dinar
BGP Escape France Euro
BGP Entertainment Belgium Euro
E V Development Co. Limited Thai Baht
Experiential Ventures Limited US Dollar
Escape Hunt Operations Limited US Dollar
Escape Hunt USA Franchises Limited US Dollar
These subsidiaries, when recording their own foreign transactions follow the
principles below. At the end of each financial year, monetary items
denominated in foreign currencies are retranslated at the rates prevailing as
of the end of the financial year. Non-monetary items carried at fair value
that are denominated in foreign currencies are retranslated at the rates
prevailing on the date when the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary items, and on
retranslation of monetary items are included in profit or loss for the period.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations (including comparatives) are
expressed in the presentational currency which is Pounds Sterling using
exchange rates prevailing at the end of the financial year. Income and expense
items (including comparatives) are translated at the average exchange rates
for the period, unless exchange rates fluctuated significantly during that
period, in which case the exchange rates at the dates of the transactions are
used. Exchange differences arising are recognised initially in other
comprehensive income and accumulated in the Group's foreign exchange
reserve.
On disposal of a foreign operation, the accumulated foreign exchange reserve
relating to that operation is reclassified to profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Depreciation is charged to the income statement on a straight-line basis over
the estimated useful lives of each part of an item of property, plant and
equipment. Land is not depreciated. The estimated useful lives are as follows:
Office equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements 10 years
Computers 3 years
Games 5 years
Depreciation methods, useful lives and residual values are reviewed at each
reporting date. During the current reporting period, the management of the
company conducted a review of the useful lives of its assets. As a result of
this review, the useful lives of leasehold improvements has been revised from
5 years to 10 years, and the useful lives of games has been revised from 2
years to 5 years. This change in estimate has been applied prospectively from
the beginning of the current reporting period. The effect of this change in
estimate on the current reporting period is an increase in profit before tax
of approximately £3.0m due to a reduction in the depreciation expense. The
impact on future periods is expected to be similar, subject to any other
changes in estimates.
Research and development expenditure
Research expenditure is recognised as an expense when it is incurred.
Development expenditure is recognised as an expense except that costs incurred
on development projects are capitalised as long-term assets to the extent that
such expenditure is expected to generate future economic benefits. Development
expenditure is capitalised if, and only if an entity can demonstrate all of
the following:-
(i) its ability to measure reliably the expenditure attributable to the asset
under development;
(ii) the product or process is technically and commercially feasible;
(iii) its future economic benefits are probable;
(iv) its ability to use or sell the developed asset; and
(v) the availability of adequate technical, financial and other resources to
complete the asset under development.
Capitalised development expenditure is measured at cost less accumulated
amortisation and impairment losses, if any. Certain internal salary costs
are included where the above criteria are met. These internal costs are
capitalised when they are incurred in respect of new game designs which are
produced and installed in the UK owner-operated sites, where the ensuing
revenue is tracked on a weekly basis at each site by each game. Development
expenditure initially recognised as an expense is not recognised as assets in
subsequent periods.
Intangible assets
Expenditure on internally generated goodwill and brands is recognised in the
income statement as an expense as incurred.
With the exception of goodwill, intangible assets that are acquired by the
Group are stated at cost less accumulated amortisation and accumulated
impairment losses.
Game design and development costs are expensed as incurred unless such
expenditure meets the criteria to be capitalised as a non-current asset.
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives of intangible assets unless such lives are
indefinite.
The estimated useful lives are as follows:
Trademarks 3 years
Intellectual property:
Trade names and domain names 3 years
Rights to system and business processes 3 years
Internally generated intellectual property 5 years
Franchise Term of franchise
agreements
App 2 years
development
Portal 3 years
During the current reporting period, the management of the company conducted a
review of the useful lives of its assets. As a result of this review, the
useful lives of internally generated intellectual property has been revised
from 2 years to 5 years in line with the change made to the useful lives of
games. This change in estimate has been applied prospectively from the
beginning of the current reporting period. The effect of this change in
estimate on the current reporting period is an increase in profit before tax
of approximately £0.1m due to a reduction in the amortisation expense. The
impact on future periods is expected to be similar, subject to any other
changes in estimates.
Impairment of assets
Financial assets
A financial asset not carried at fair value through profit or loss is assessed
at each reporting date to determine whether there is objective evidence that
it is impaired. A financial asset is impaired if objective evidence indicates
that a loss event has occurred after the initial recognition of the asset, and
that the loss event had a negative effect on the estimated future cash flows
of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost
is calculated as the difference between its carrying amount and the present
value of the estimated future cash flows taking into account credit risk. The
present value of the future cash flows represents the expected value of the
future cash flows discounted at the appropriate rate. Interest on the
impaired asset continues to be recognised through the unwinding of the
discount. When a subsequent event causes the amount of impairment loss to
decrease, the decrease in impairment loss is reversed through profit or loss.
Non-financial assets
The carrying amounts of the Group's non-financial assets are reviewed at each
reporting date to determine whether there is any indication of impairment. If
any such indication exists, then the asset's recoverable amount is estimated.
For goodwill, and intangible assets that have indefinite useful lives or that
are not yet available for use, the recoverable amount is estimated each year
at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of
its value in use and its fair value less costs to sell. For the purpose of
impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other
assets or groups of assets (the "cash-generating unit"). The goodwill acquired
in a business combination, for the purpose of impairment testing, is allocated
to cash-generating units, or ("CGU"). Subject to an operating segment ceiling
test, for the purposes of goodwill impairment testing, CGUs to which goodwill
has been allocated are aggregated so that the level at which impairment is
tested reflects the lowest level at which goodwill is monitored for internal
reporting purposes. Goodwill acquired in a business combination is allocated
to groups of CGUs that are expected to benefit from the synergies of the
combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU
exceeds its estimated recoverable amount. Impairment losses are recognised in
profit or loss. Impairment losses recognised in respect of CGUs are allocated
first to reduce the carrying amount of any goodwill allocated to the units,
and then to reduce the carrying amounts of the other assets in the unit (group
of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior periods are assessed at each
reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
Employee benefits
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided. A liability is
recognised for the amount expected to be paid under short-term cash bonus or
profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Revenue recognition
The Group is operating and developing a network of franchised, licensed and
owner-operated branches and offsite "escape the room" type games under the
Escape Hunt™ brand and a network of owner-operated and franchised
competitive socialising cocktail bar venues under the Boom Battle Bar™
brand. The Group receives revenues from its directly owned branches but also
from franchisees, master-franchisees and sub-franchisees.
The Group, as franchisor, develops original escape games and other fun
competitive socialising games and supporting materials and provides
management, creative, technical and marketing services based on its knowledge
of and expertise in the relevant disciplines to enable delivery of
proprietary consumer experiences.
The Group considers that its contracts with franchisees, master-franchisees
and sub-franchisees provide a customer with a right to access the Group's
intellectual property throughout the franchise term which is typically for a
minimum term of ten years. Accordingly, the Group satisfies each of its
performance obligations by transferring control of goods and services to the
customer over the period of the franchise agreement. Franchise revenues are
therefore recognised over time.
The Group derives "upfront exclusivity fees" as well as training fees and
documentation fees from the sale and set up of franchises and subsequent
"Service Revenues" in the form of revenue shares, administration fees, and
other related income.
New branch upfront location exclusivity fees
The initial non-refundable upfront exclusivity fees relate to the transfer of
promised goods or services which are satisfied throughout the life of the
franchise agreement. Payment of the initial upfront exclusivity fee is due
immediately on the signing of a franchise agreement.
The Group, as franchisor, supplies a manual and grants to a franchisee during
the term of a franchise agreement, the exclusive rights to carry on its
business and to utilise the know-how, intellectual property rights and games
within a territory. The franchise term typically provides for an initial term
of 10 years, with automatic rights for renewal of successive 10-year periods.
The Group offers to:
• Assist the franchisee to establish, manage and operate
the business within the territory;
• Provide advice on the choice of branch location;
• Identify equipment, furniture, props and other items
required to conduct the business;
• Assist in designing the layout and fit-out of any
chosen branch location;
• Provide full game and other activity design to be
installed in each branch;
• Provide guidance on setting up website, booking and
other online services;
• Provide the franchisee with the franchise manual;
• Train the franchisee and its staff;
• Give the franchisee continuing assistance and advice
for the efficient running of the franchise business;
• Regularly update the franchisee on any changes to the
services and know-how;
• Design and provide territory-specific, and
branch-specific, logos for use in advertising, merchandise and uniforms; and
• Communicate at all times with the franchisee in a
timely manner.
The initial fee is recognised as revenue on a straight-line basis over the
period of the franchise agreement where this is 10 years (or less in case of
sub-franchise agreements, where the term of the sub-franchise agreement
typically equals the remaining term of the master franchise agreement). Where
the franchise term is not specified or is greater than 10 years, revenue is
recognised over 10 years to reflect a lack of certainty over the actual
duration of the franchise arrangement. See Note 3 for more details.
Fees related to future periods are carried forward as deferred income within
current and non-current liabilities, as appropriate. The amounts of deferred
revenue at each reporting date are disclosed in Note 21 to the financial
statements.
IFRS 15 also requires the Group to consider if there is a financing element to
such long-term contracts. However, it is considered that there is no such
financial element provided by the Group to franchisees as payment is received
at the time of signing the franchise agreement and at the commencement of the
delivery of the various services under such agreement.
Under a Master Franchise Agreement, the Group is entitled to a one-off upfront
exclusivity fee representing an advance payment for a number of branches with
all branches paid at a fixed rate, payable on signing of the Agreement. The
contract is not deemed to be fulfilled and in force until this payment is
received in full by the franchisor. This fee is recognised over the lower of
the franchise term and 10 years, in the same manner as in a single franchise
arrangement.
Where the Group, through a Master Franchisee, enters into contracts with
sub-franchisees, the initial fee is recognised in the same manner as contracts
with direct franchisees (i.e. spread over 10 years), where not already covered
in the fees attributed to the Master Franchisee. In the event of termination
of a franchise agreement, any remaining deferred income related to this
contract is immediately recognised in full.
Documentation fees are recognised when the franchise agreement and associated
leases and other legal documents are exchanged and have reached practical
completion. Training fees are recognised when the franchise site is opened.
In some instances, the Group will take on the full responsibility on a
franchise new build, fitting out a franchise site and will have a direct
relationship with the suppliers. The cost of the build will then be billed
to the franchisee in stage payments, including a markup to cover internal
costs and provide margin. In these instances, the cost of the build is carried
as work in progress until it is invoiced to the franchisee. The total value
of the build is recognised as revenue when invoiced. Profit is not
recognised until completion of the build.
Franchise revenues
As part of each franchise agreement, the Group receives franchise service
revenues at a fixed percentage of a franchisee's monthly revenues which are
recognised as the income is earned.
Service revenues comprise:
· An agreed share of the franchisee's monthly revenues, payable
weekly or monthly;
· Fixed monthly fees payable quarterly in advance;
· Extra costs in respect of site visits and website set-up fees;
and
· Fees charged for additional services, such as management of
marketing and social media on behalf of a franchisee, for which franchisees
opt in.
Revenue shares, support and administration and other related revenues are
recognised as and when those sales occur. Amounts billed in advance are
deferred to future periods as deferred revenue.
Owner-operated branch and offsite games
Revenues from the owner-operated branch and offsite activities include
entrance fees and the sale of food and beverages and merchandise. Such
revenues are recognised as and when those sales occur. Where customers book in
advance, the recognition of revenue is deferred until the customer
participates in the experience.
Retros from suppliers
Retrospective rebates from food and drink suppliers are recognised to match
the relevant purchase volumes.
Deferred revenue
The amounts of deferred revenue at each reporting date are disclosed in Note
21.
Contract costs
Where the game design costs relate to games for individual franchisees, the
costs are not capitalised but expensed as in line with the delivery of
services to franchisees, unless these costs are significant and other
capitalisation criteria are met.
Government Grants
Grants relating to revenue are recognised on the performance model through the
consolidated statement of comprehensive income by netting off against the
costs to which the grants were intended to compensate. Where the grant is not
directly associated with costs incurred during the period, the grant is
recognised as 'other income'. Grants relating to assets are recognised in
income on a systematic basis over the expected useful life of the asset.
Leases
All leases are accounted for by recognising a right-of-use asset and a lease
liability except for:
• Leases of low value assets; and
• Leases with a duration of 12 months or less.
Identifying Leases
The Group accounts for a contract, or a portion of a contract, as a lease when
it conveys the right to use an asset for a period of time in exchange for
consideration. Leases are those contracts that satisfy the following criteria:
a) There is an identified asset;
b) The Group obtains substantially all the economic benefits from use of the
asset; and
c) The Group has the right to direct use of the asset.
In determining whether the Group obtains substantially all the economic
benefits from use of the asset, the Group considers only the economic benefits
that arise from use of the asset, not those incidental to legal ownership or
other potential benefits.
In determining whether the Group has the right to direct use of the asset, the
Group considers whether it directs how and for what purpose the asset is used
throughout the period of use. If there are no significant decisions to be made
because they are pre-determined due to the nature of the asset, the Group
considers whether it was involved in the design of the asset in a way that
predetermines how and for what purpose the asset will be used throughout the
period of use. If the contract or portion of a contract does not satisfy these
criteria, the Group applies other applicable IFRSs rather than IFRS 16.
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term. The discount rate is the rate
implicit in the lease, if readily determinable. If not, the Company's
incremental borrowing rate is used, which the Company has assessed to be 6%
above the Bank of England base rate.
Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
• amounts expected to be payable under any residual value guarantee;
• the exercise price of any purchase option granted in favour of the
Group if it is reasonably certain to assess that option;
• any penalties payable for terminating the lease, if the term of
the lease has been estimated on the basis of termination option being
exercised.
Right of use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
• lease payments made at or before commencement of the lease;
• initial direct costs incurred; and
• the amount of any provisions recognised where the Group is
contractually required to dismantle, remove or restore the leased asset
(typically leasehold dilapidations - see Note 22).
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a
straight-line basis over the remaining term of the lease or over the remaining
economic life of the asset if, rarely, this is judged to be shorter than the
lease term.
When the Group revises its estimate of the term of any lease (because, for
example, it re-assesses the probability of a lessee extension or termination
option being exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are discounted at
the discount rate appropriate at the time of revision. The carrying value of
lease liabilities is similarly revised when the variable element of future
lease payments dependent on a rate or index is revised. In both cases an
equivalent adjustment is made to the carrying value of the right-of-use asset,
with the revised carrying amount being amortised over the remaining (revised)
lease term.
Nature of leasing activities (in the capacity as lessee)
During the financial year, the Group leased owner-operated Escape Hunt and
Boom Battle Bar venues. The Group also leases certain items of plant and
equipment, but these are not significant to the activities of the Group.
Nature of leasing activities (in the capacity as lessor)
During the financial year, the Group sub-let part of the space in Bournemouth
which the group leases under a master lease agreement. The sub-let is to a
Boom Battle Bar franchisee and is treated as a finance lease receivable.
Financing income and expenses
Financing expenses comprise interest payable, finance charges on shares
classified as liabilities and finance leases recognised in profit or loss
using the effective interest method, unwinding of the discount on provisions,
and net foreign exchange losses that are recognised in the income statement
(see foreign currency accounting policy). Borrowing costs that are directly
attributable to the acquisition, construction or production of an asset that
takes a substantial time to be prepared for use, are capitalised as part of
the cost of that asset. Financing income comprise interest receivable on funds
invested, dividend income, and net foreign exchange gains.
Interest income and interest payable is recognised in profit or loss as it
accrues, using the effective interest method. Dividend income is recognised in
the income statement on the date the entity's right to receive payments is
established. Foreign currency gains and losses are reported on a net basis.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit other
than in a business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the
reporting date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the temporary
difference can be utilised.
Share-based payment arrangements
Equity-settled share-based payments to employees are measured at the fair
value of the equity instruments at the grant date. Equity-settled share based
payments to non-employees are measured at the fair value of services received,
or if this cannot be measured, at the fair value of the equity instruments
granted at the date that the Group obtains the goods or counterparty renders
the service. Details regarding the determination of the fair value of
equity-settled share-based transactions are set out in note 25 to the
consolidated financial statements.
The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based
on the Group's estimate of equity instruments that will eventually vest, with
a corresponding increase in equity. Where the conditions are non-vesting, the
expense and equity reserve arising from share-based payment transactions is
recognised in full immediately on grant.
At the end of each reporting period, the Group revises its estimate of the
number of equity instruments expected to vest. The impact of the revision of
the original estimates, if any, is recognised in profit or loss such that the
cumulative expense reflects the revised estimate, with a corresponding
adjustment to other reserves.
Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows,
cash and cash equivalents include cash on hand, deposits held at call with
financial institutions, other short-term highly liquid investments with
original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of
changes in value, and bank overdrafts.
Trade and other receivables
Trade receivables are recognised initially at the transaction price and
subsequently measured at amortised cost using the effective interest method,
less provision for impairment. If the arrangement constitutes a financing
transaction, the receivable instrument is measured at the present value of the
future payments discounted at a market rate of interest.
Impairment provisions for current and non-current trade receivables are
recognised based on the simplified approach within IFRS 9 using a provision
matrix in the determination of the lifetime expected credit losses. In the
process, the probability of the non-payment of the trade receivables is
assessed. This probability is multiplied by the amount of the expected loss
arising from default to determine the lifetime expected credit loss for the
trade receivables.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the weighted average principle and includes expenditure incurred in
acquiring the inventories and other costs in bringing them to their existing
location and condition.
Provisions
A provision is recognised when the Group has a present obligation, legal or
constructive, as a result of a past event and it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate can be made. Provisions are reviewed at
each reporting date and adjusted to reflect the current best estimate. If it
is no longer probable that an outflow of economic resources will be required
to settle the obligation, the provision is reversed. Where the effect of the
time value of money is material, provisions are discounted using a current
pre-tax rate that reflects, where appropriate, the risks specific to the
liability. When discounting is used, the increase in the provision due to the
passage of time is recognised as an interest expense.
The Group has recognized provisions for liabilities of uncertain timing or
amount including those for leasehold dilapidations, contingent consideration
and losses arising of financial guarantee contracts.
Dilapidation provisions
Provisions for dilapidations are recognised on a lease-by-lease basis over the
period of time landlord assets are being used and are based on the Directors'
best estimate of the likely committed cash outflow.
Contingent and deferred consideration
Contingent consideration is consideration that is payable in respect of
acquisitions which is contingent on the achievement of certain performance or
events after the date of acquisition. Deferred consideration is
consideration payable in respect of acquisitions which is deferred, but is not
dependent on any future performance or events.
The likely value of contingent consideration is estimated based on the
anticipated future performance of the business acquired and a probability of
the necessary performance being achieved. The expected future value of the
contingent consideration is discounted from the anticipated date of payment to
the present value. For cash settled contingent consideration, the discount
rate is the risk free rate together with the Consumer Price index for
inflation. For Equity settled contingent consideration, the future value is
discounted using the Directors' assessment of the company's cost of equity.
The present value is recognised as a liability at the date of transaction.
The implied interest is recognised over the period between the date of
acquisition and anticipated date of payment of the contingent consideration.
Deferred consideration is recognised as a liability at its face value at the
date of acquisition.
Losses arising on financial guarantee contracts
Provision for losses on financial guarantee contracts uses the simplified
approach within IFRS 9 using a provision matrix in the determination of the
lifetime expected losses. In the process, the probability of the guarantee
being called is assessed. This probability is multiplied by the amount of the
expected loss arising from default to determine the lifetime expected credit
loss for the financial guarantee contract.
Contingent liabilities
Contingent liabilities are possible obligations whose existence depends on the
outcome of uncertain future events or present obligations where the outflow of
resources is uncertain or cannot be measured reliably. Contingent liabilities
are not recognised in the financial statements but are disclosed unless the
possibility of an outflow of resources is remote.
Financial Liabilities and equity
Financial liabilities and equity are classified according to the substance of
the financial instrument's contractual obligations rather than the financial
instrument's legal form. Financial liabilities, excluding convertible debt
and derivatives are initially measured at transaction price (including
transaction costs) and subsequently held at amortised cost.
Financial liabilities
Basic financial liabilities, including trade and other payables, bank and
other loans and loans from fellow group companies that are classified as debt
are initially recognised at transaction price unless the arrangement
constitutes a financing transaction, where the debt instrument is measured at
the present value of the future payments discounted at a market rate of
interest.
Debt instruments are subsequently carried at amortised cost, using the
effective interest rate method.
Derecognition of financial liabilities
Financial liabilities are derecognised when, and only when, the Group's
contractual obligations are discharged, cancelled or they expire.
Equity instruments
Equity instruments including share capital issued by the Company are recorded
at the proceeds received, net of direct issue costs. Dividends payable on
equity instruments are recognised as liabilities once they are no longer at
the discretion of the Company.
3. Critical accounting estimates and judgements
In the application of the Group's accounting policies, which are described in
Note 2 above, the Directors are required to make judgements and estimates
about the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are
based on historical experience and other factors, including expectations of
future events that may have a financial impact on the entity and that are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates. The estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are recognised in the
period.
The key estimates and underlying assumptions concerning the future and other
key sources of estimation uncertainty at the statement of financial position
date, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial period
are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and future periods
if the revision affects both current and future periods. In particular:
Key judgements
Initial upfront exclusivity
fees
Note 2 describes the Group's policies for recognition of revenues from initial
upfront exclusivity fees. In making their judgement, the Directors consider
that the upfront non-refundable exclusivity fee provides the customer with a
right to access the Group's intellectual property throughout the franchise
term which is typically for a minimum term of ten years. The Group's service
obligations include a requirement to advise, assist and update the customer
throughout the term of the agreement.
However, certain franchise contracts are for the unspecified term which
theoretically can run in perpetuity. Furthermore, for term franchise contracts
certain factors could reduce the franchise term (such as early termination)
whilst franchises may be extended beyond their initial term. No franchises
have yet been in place for a full term and in the absence of sufficient track
record the Directors made a judgement that until a clear pattern of
terminations and extensions of franchises becomes clear, it is reasonable to
assume that franchises will on average run for 10 years, hence the initial
upfront exclusivity fees are recognised over this estimated period.
Recognition of deferred tax assets
The Group's tax charge on ordinary activities is the sum of the total current
and deferred tax charges.
A deferred tax asset is recognised when it has become probable that future
taxable profit will allow the deferred tax asset to be recovered. Recognition,
therefore, involves judgement regarding the prudent forecasting of future
taxable profits of the business and in applying an appropriate risk adjustment
factor.
Based on detailed forward-looking analysis and the judgement of management, it
has been concluded that a deferred tax asset should not yet be recognised for
the carry forward of unused tax losses and unused tax credits totalling
approximately £15.4m, as the timing and nature of future taxable profits
remains uncertain given the relatively young stage of development and the of
the group and the rate of planned expansion which under current rules gives
rise to certain accelerated capital allowances reducing taxable income.
Whilst the Directors do expect the business in its current form to become
profitable, the Directors do not yet regard the timing and future scale of
taxable profits against which the unused tax losses and unused tax credits can
be utilised in the near term to be sufficiently probable to justify
recognition of deferred tax assets. In forming this conclusion, management
have considered the same cash flow forecasts used for impairment testing
purposes. Impairment testing adjusts for risk through the discounting of
future cash flows and focus on cash generation rather than taxable profits.
Additionally, the owner-operated segment is still in a relatively early stage
of development, and the Directors envisage that there will be an extended
period (and thus increasing uncertainty as time progresses) before it expects
to recoup net operating losses. The analysis indicates that the unused losses
may not be used in the foreseeable future as the Group does not yet have a
history of taxable profits nor sufficiently convincing evidence that such
taxable profits will arise within the near term.
Recognition of R&D credits and other government grants
Research and development credits and other government grants are recognised as
an asset when it has become probable that the grant will be received.
Companies within the Group have previously made successful applications for
grants relating to research and development and in respect of support related
to the COVID-19 pandemic.
In relation to research and development grants, no claims are outstanding, but
the company expects to make claims in respect of activity undertaken in
future, but not in respect of activity undertaken in 2022 or the 15 months to
31 March 2024. As such, no claims in relation to 2022 or 2023 have been
recognised as an asset.
Contingent consideration
The likely value of contingent consideration is estimated based on the
anticipated future performance of the business acquired and a probability of
the necessary performance being achieved. The expected future value of the
contingent consideration is discounted from the anticipated date of payment to
the present value. For cash settled contingent consideration, the discount
rate is the risk free rate together with the Consumer Price index for
inflation. For Equity settled contingent consideration, the future value is
discounted using the Director's assessment of the company's cost of equity,
being 13.7 per cent. The present value is recognised as a liability at the
date of transaction. The implied interest is recognised over the period
between the date of acquisition and anticipated date of payment of the
contingent consideration.
Key estimates
Impairment of intangible assets
IFRS requires management to undertake an annual test for impairment of
indefinite lived assets and, for finite lived assets, to test for impairment
if events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable.
Impairment testing is an area involving management judgement in determining
estimates, requiring assessment as to whether the carrying value of assets can
be supported by the net present value of future cash flows derived from such
assets using cash flow projections which have been discounted at an
appropriate rate. In calculating the net present value of the future cash
flows, certain assumptions are required to be made in respect of highly
uncertain matters including management's expectations of:
• growth in EBITDA, calculated as adjusted operating profit before
depreciation and amortisation;
• the forecast occupancy rate (and growth thereof) for each escape
room based on historic experience from similar rooms;
• the forecast level of turnover (and growth thereof) for each
Boom Battle Bar site, based on historic experience of the site in question and
similar sites;
• the level of capital expenditure to open new sites and to
maintain existing sites, as well as the costs of disposals;
• long-term growth rates; and
• the selection of discount rates to reflect the risks involved.
The Group prepares and approves a detailed annual budget and strategic plan
for its operations, which are updated regularly to take account of actual
activity and are used in the fair value calculations. The forecasts perform a
detailed analysis for three years, apply an anticipated growth rate for years
4 and 5 of between 3% and 10% per annum and apply a 2% growth rate
thereafter. Further details are provided in the sensitivity analysis below.
Changing the assumptions selected by management, in particular the discount
rate and growth rate assumptions used in the cash flow projections, could
significantly affect the Group's impairment evaluation and hence results.
The current strategic plan for the group indicates an excess of the net
present value of future cashflows compared to the carrying value of intangible
assets.
The sensitivity of impairment tests to changes in underlying assumptions is
summarised below:
Site level EBITDA
If the site level EBITDA is 10% lower in each business unit within the Group
than as set out in the strategic plan, this would lead to reduction in the net
present value of intellectual property of £12.1m (2022: £12.9m) but would
not result in the need for an impairment charge.
Discount rate
The discount rate used for the fair value calculation has been assumed at
13.7%. A 100 basis point increase in the discount rate reduces the net present
value of intellectual property across the group by £4.0m (2022: £5.6m) but
would not result in the need for an impairment charge.
The discount rate used was the same as in prior years, notwithstanding the
significant increase in base interest rates between 31 December 2022 and 31
March 2024, impacting the risk free rates and cost of borrowing used in the
calculations of the group's weighted average cost of capital. Whilst
interest rates have increased, it is the Directors' view that the risk premium
associated with XP Factory will have reduced significantly over the same
period given the following:
· The group has achieved a scale at which it is capable of operating
profitably where previously it lacked such scale
· The group is significantly more diversified with the addition of the
Boom business to the group
· The network of owner operated sites is significantly more diversified
with a much larger estate and the group is consequently less exposed to any
single site
· The group has developed a proven operating history with Escape Hunt
in particular, operating at attractive growth rates and margins
· The group exited the financial year ended 31 March 2024 with sites
generating positive cashflow and EBITDA. This has continued into the current
financial year.
Furthermore, external estimates of the group's cost of capital, which are
based on historic numbers which do not take account of these factors, indicate
a level not materially different to the director's assessment. The cost of
capital indicated for similar competitors further supports the directors'
view.
Long-term growth rates
The growth rate used for the fair value calculation after year 5 has been
assumed at 2% per annum. If this rate was decreased by 100 basis points the
net present value of intellectual property across the group would fall by
£2.7m (2022: £2.8m) but would not result in the need for an impairment
charge.
Capital expenditure
If capital expenditure over the forecast period were to be 10% higher than in
the strategic plan, the net present value of intellectual property across the
group would fall by £1.1m (2022: £1.0m) but would not result in the need for
an impairment charge.
Estimation of useful life and amortisation rates for intellectual property
assets
The useful life used to amortise intangible assets relates to the expected
future performance of the assets acquired and management's estimate of the
period over which economic benefit will be derived from the asset.
The estimated useful life principally reflects management's view of the
average economic life of each asset and is assessed by reference to historical
data and future expectations. Any reduction in the estimated useful life would
lead to an increase in the amortisation charge. The average economic life of
the intellectual property has been estimated at 5 years. If the estimation of
economic lives was reduced by one year, the amortisation charge for IP would
have increased by £114k (year ended 31 December 2022: £204k).
Estimation of useful life and depreciation rates for property, plant and
equipment of the owner- operated business
The useful life used to depreciate assets of the owner-operated business
relates to the expected future performance of the assets acquired and
management's estimate of the period over which economic benefit will be
derived from the asset.
Property, plant and equipment represent a significant proportion of the asset
base of the Group being 26% (2022: 21%) of the Group's total assets.
Therefore, the estimates and assumptions made to determine their carrying
value and related depreciation are critical to the Group's financial position
and performance.
The charge in respect of periodic depreciation is derived after determining an
estimate of an asset's expected useful life and the expected residual value at
the end of its life. Increasing an asset's expected life or its residual value
would result in a reduced depreciation charge in the consolidated income
statement. The useful lives and residual values of the Group's assets are
determined by management at the time the asset is acquired and reviewed
annually for appropriateness. The lives are based on historical experience
with similar assets as well as anticipation of future events which may
impact their life such as changes in technology. Historically changes in
useful lives and residual values have not resulted in material changes to the
Group's depreciation charge.
The useful economic lives of property, plant and equipment has been estimated
at between 2 and 10 years. If the estimation of economic lives was reduced by
one year, the depreciation charge for property, plant and equipment would have
increased by £895k (year ended 31 December 2022: £995k).
Estimation of the value of right of use assets and lease liabilities arising
from long term leases under IFRS16
The value of right of use assets and the associated lease liability arising
from long term leases is estimated by calculating the net present value of
future lease payments. In doing so, the Directors have used the discount
rate implicit in the lease, if readily determinable. If not, the Company's
incremental borrowing rate is used which the Company has assessed to be 6%
above the Bank of England base rate.
Estimation of dilapidations provision
The provision for dilapidations is estimated by anticipating the cost of
stripping out a site at the end of the contracted lease to restore the
property to the condition required under the terms of the lease. The
liability is accrued over the period of the lease. The judgement of the cost
of the strip out is based on a management estimate and represents a key
estimate.
Estimation of share base payment charges
The calculation of the annual charge in relation to share based payments
requires management to estimate the fair value of the share-based payment on
the date of the award. The estimates are complex and consider a number of
factors including the vesting conditions, the period of time over which the
awards are recognised, the exercise price of options which are the subject of
the award, the expected future volatility of the company's share price,
interest rates, the expected return on the shares, and the likely future date
of exercise. The charge recognized in the period ended 31 March 2024 was
£47k (2022: £69k).
The Group also operates a broader share based Incentive scheme available to
all employees, allowing employees to purchase shares tax efficiently each
month. For each share purchased (a "Partnership Share"), the employee is
granted a further matching share ("Matching Share"). The Management has
estimated the cost of the Matching Shares recognized in the period ended 31
March 2024 was £26k (2022: £12k) Further details are provided in note 25.
Estimation of liabilities arising from Financial Guarantee Contracts -
Franchise lease guarantees
The Company is a co-tenant or has provided a guarantee on a number of property
leases for which a franchisee is the primary lessee. IFRS 9 requires the
recognition of expected credit losses in respect of financial guarantees,
including those provided by the Group. Where there has been a significant
increase in credit risk, the standard requires the recognition of the expected
lifetime losses on such financial guarantees. The assessment of whether there
has been a significant increase in credit risk is based on whether there has
been an increase in the probability of default occurring since previous
recognition. An entity may use various approaches to assess whether credit
risk has increased. The assessment of the probability of default is inherently
subjective and requires management judgement.
In all cases where the Group is co-tenant or has provided guarantees for
underlying leases, the Group has taken security in the form of personal
guarantees from the lessee and, in addition, has step-in rights which enable
the relevant company in the group to take over the assets and operations of
the franchisee and to operate the site as an owner-operated site. Management
believes that the personal guarantees and step in rights significantly reduce
the probability of incurring losses and provide a mechanism to mitigate any
adverse impact on the group in the event of any guarantees being called upon.
Details of the number of lease guarantees provided, the average length of the
guarantee and the average annual rental are given in note 22.
Each guarantee is assessed separately. Management's view of the probability
of the lessee defaulting on its lease obligations is assigned to the specific
guarantee. Lessees are categorized on a rating of 1 - 5, which allocates a
probability of default to each banding, with category 1 representing very
limited risk, and 5 representing extreme risk. Management then assesses the
likelihood of the personal guarantee from the lessee, together with the
step-in rights being insufficient to fully cover the payments required to be
made under the guarantee provided to the landlord. This is based on historic
experience of the former owner of Boom Battle Bars which has, on a number of
occasions, taken on existing franchisees within other parts of its business
which have either been re-sold or have since become owner-operated sites.
Based on this experience and taking account of the current economic
environment, Management has judged that 1 in 6 sites where the guarantee is
called would result in a loss. Finally, management applies an assessment as
to the proportion of the future lease liability that might be suffered in the
event that the guarantee is not fully covered by the personal guarantees
and/or the step in rights. The proportion used in the calculation was 50%.
This cumulative probability is applied to the net present value of the future
lease liability. The net present value is calculated by reference to the
expected future cash payments required under the lease using a discount rate
of 11.25%.
In the period to March 2024, the average probability of default used across
the portfolio was assessed as between 10% and 20% (2022: between 10% and 15%).
This was made on the basis that the franchisees are all relatively new and
remain inexperienced in operating Boom sites. The overall expected loss
provision at 31 March 2024 was £69,719 (2022: £93,505).
Sensitivities.
The key assumptions impacting the assessment of the expected loss provision
are the discount rate used to calculate the net present value of the leases
under guarantee; the probability of default assigned to each guaranteed lease;
the proportion of defaulted leases that would give rise to a credit loss; and
the proportion of the total liability that would not be covered by security
and step-in rights. The sensitivity to each of these assumptions in the
period to 31 March 2024 and the year to 31 December 2022 is shown in the table
below:
Assumption Base case Sensitivity applied Increase in Expected loss provision (£'000)
2024 2022
Discount rate 11.3% 1% decrease 3.7 4.7
Probability of default Individually assessed 10% increase in probability of default 6.9 9.4
Proportion of defaulted leases giving rise to a loss 16.67% Increase by 3.33% 2.2 18.7
(1 in 6) (1 in 5)
Proportion of liability not covered by guarantee / step-in right 50% 10% increase in loss 6.9 9.4
Estimation of the value of Contingent consideration and implied interest
charges
The value of the contingent consideration in relation to Boom Battle Bars was
initially estimated using a share price of 35.8p per XP Factory share, being
the share price on 23(rd) November 2021, the date that the Acquisition of Boom
Battle Bars completed, and assuming all 25,000,000 shares potentially due
under the provisions of the sale agreement are issued. The valuation is
considered a level 2 valuation under IFRS 13, indicating that it is a
financial liability that does not have regular market pricing, but whose value
can be determined using other data values or market prices. The future value
of the deferred consideration, was again estimated at 31 December 2022 using a
cost of capital of 13.7 per cent, an implied share price of 18.5 pence per
share and an expectation of issuing 23.5m shares. The final value of the
contingent consideration was settled on 23 June 2023 by the issue of 23.9m
shares at a share price of 18.5 pence per share. The difference between the
fair value estimated at 31 December 2022 and the final value gave rise to a
revaluation charge of £0.3m being recognised in the period to 31 March 2024
(2022: revaluation gain of £6.2m and a finance charge of £1.3m).
Estimation of valuation of acquired intangibles
As part of the acquisition of Boom Battle Bars, the Directors recognised
£4,386k as relating to franchise contracts in place at the date of
acquisition. The valuation took into account the forecast revenue from the
relevant franchise contracts over the remaining life of the contracts, net of
tax and allocated costs to service the contracts, discounted at the estimated
cost of capital, 13.7 per cent. During the period to 31 March 2024, three of
the franchise sites to which the acquired intangible applied were acquired.
The value of the acquired intangibles attributable to these three sites as at
31 December 2022 has been reclassified to goodwill associated with the
acquisition Boom Battle Bars. The remaining value of acquired
intangibles will be amortised over the remaining franchise term. As at 31
March 2024, the value of acquired intangibles was £1.31m (2022: £3.48m).
The Directors have re-assessed the value of the acquired intangibles based on
the latest forecasts for specific franchisee sites and an allocation of
central costs using a cost of capital of 13.7 per cent to determine whether an
impairment was necessary. The analysis concluded that no impairment is
necessary. A 1% increase in the cost of capital applied would reduce the
value of acquired intangibles in the year by £313k (2022: £116k), but would
not lead to an impairment of the carrying value.
4. Revenue
15 Month Period Year
Ended Ended
31 March 31 December
2024 2022
£'000 £'000
Upfront location exclusivity fees, support and administration fees 354 1,368
Franchise revenue share 2,339 2,012
Revenues from owned branches 31,085 13,535
Food and drinks revenue from owned branches 22,188 5,149
Retros/rebates received on food and drinks purchases 1,012 645
Other 360 125
57,339 22,834
Revenues from contracts with customers:
15 Month Period Year
Ended Ended
31 March 31 December
2024 2022
£'000 £'000
Revenue from contracts with franchise customers 3,028 3,380
Revenue from customers at owner operated branches 53,298 19,454
Total revenue from contracts with customers 56,326 22,834
In respect of contracts from franchise customers, the satisfaction of
performance obligations is treated as over a period of up to 10 years. The
typical timing of payment from customers is a mixture of upfront fees, payable
at the start of the contract, fixed fees payable quarterly or monthly during
the term of the contract and variable consideration typically received shortly
after the month in which the revenue has been accrued.
Future upfront exclusivity fee income that has been deferred on the balance
sheet is certain as the amount has already been received. Support and
administrative fees and other fees are considered to be reasonably certain and
unaffected by future economic factors, except to the extent that adverse
economic factors would result in premature franchise closure. Revenue based
service fees are dependent on and affected by future economic factors,
including the performance of franchisees.
A total of £53.3m (2022: £19.5m) of revenues relate to the owner-operated
segment. All other revenues in the table refer to the franchise segment as
detailed in Note 5 (Segment Information).
Upfront exclusivity fees are billed and received in advance of the performance
of obligations. This generally creates deferred revenue liabilities which
are greater than the amount of revenue recognised from each customer in a
financial year.
Revenue share income is necessarily billed monthly in arrears (and accrued on
a monthly basis).
5. Segment information
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the group of
executive directors and the chief executive officer who make strategic
decisions.
Management considers that the Group has four operating segments. Revenues are
reviewed based on the nature of the services provided under each of the Escape
Hunt™ and Boom Battle Bar™ brands as follows:
1. The Escape Hunt franchise business, where all franchised branches are
operating under effectively the same model;
2. The Escape Hunt owner-operated branch business, which as at 31 March
2024 consisted of 23 Escape Hunt sites (2022: 23), comprising 20 in the UK,
one in Dubai, one in Paris and one in Brussels; and
3. The Boom Battle Bar franchise business, where all franchised branches
operate under the same model within the Boom Battle Bar™ brand.;
4. The Boom Battle Bar owner-operated business, which as at 31 March 2024
consisted of 20 Boom Battle Bar sites (2022: 12), comprising 19 in the UK and
one in Dubai.
The Group operates on a global basis. As at 31 March 2024, the Group had
active Escape Hunt franchisees in 7 countries (2022: 10). The Group does not
presently analyse or measure the performance of the franchising business into
geographic regions or by type of revenue, since this does not provide
meaningful analysis to managing the business. The geographic split of
revenue was as follows:
15 Month Period Year
Ended Ended
31 March 31 December
2024 2022
£'000 £'000
United Kingdom 54,015 20,872
Europe 1,398 1,291
Rest of world 1,926 671
57,339 22,834
Segment results, assets and liabilities include items directly attributable to
a segment as well as those that can be allocated on a reasonable basis.
The cost of sales in the owner-operated business comprise variable site staff
costs and other costs directly related to revenue generation.
Escape Hunt Escape Hunt Boom Boom
Owner Franchise operated Owner Franchise operated Unallocated Total
operated operated
Period Ended 31 March 2024 £'000 £'000 £'000 £'000 £'000
16,726 828 37,513 2,272 - 57,339
Revenue
Cost of sales (4,896) - (15,395) - - (20,291)
Gross profit/(loss) 11,830 828 22,118 2,272 - 37,048
Site level operating costs (4,477) - (13,456) - - (17,933)
Other income - - 3 - - 3
Site level EBITDA 7,353 828 8,665 2,272 - 19,118
Centrally incurred overheads (1,915) (202) (1,180) (113) (7,352) (10,762)
Depreciation and amortization (1,875) (169) (4,389) (408) (72) (6,913)
Exceptional items (57) - 44 236 431 654
Operating profit 3,506 457 3,140 1,987 (6,993) 2,097
Adjusted EBITDA 5,840 597 8,302 2,142 (6,959) 9,922
Depreciation and amortisation (1,296) (169) (2,494) (408) (72) (4,439)
Depreciation - right-of-use assets (579) - (1,895) - - (2,474)
Foreign currency losses - 29 (53) - - (24)
Share-based payment expenses - - - - (72) (72)
Provision against loan to franchisee - - - 17 (31) (14)
Provision for guarantee losses - - - - 24 24
Gain / (loss) of disposal of assets (125) - (85) - 19 (202)
Exceptional Professional & Branch Closure Costs (107) - 44 236 (49) 174
Gain on disposal of subsidiary - - - - 480 480
Branch pre-opening costs (217) - (698) - - (915)
Fair value adjustments - - - - (313) (313)
Rent credits recognised - - - - - -
Operating profit 3,506 457 3,140 1,987 (6,993) 2,097
Interest expense/receipt - - - - (242) (242)
Finance lease charges (390) - (2,004) - - (2,394)
Profit / (Loss) before tax 3,116 457 1,136 1,987 (7,235) (539)
Taxation (3) - 24 98 - 119
Profit/(loss) after tax 3,113 457 1,160 2,085 (7,235) (420)
Other information:
Non-current assets 7,686 39 32,913 2,663 21,484 64,785
Escape Hunt Escape Hunt Boom Boom
Owner Franchise operated Owner Franchise operated Unallocated Total
operated operated
Year ended 31 December 2022 £'000 £'000 £'000 £'000 £'000
Revenue 9,773 703 9,501 2,857 - 22,834
Cost of sales (2,990) - (4,541) (591) - (8,122)
Gross profit/(loss) 6,783 703 4,960 2,266 - 14,712
Site level operating costs (restated) (2,561) - (4,609) - - (7,170)
Other income 141 - - - - 141
Site level EBITDA 4,363 703 351 2,266 - 7,683
Centrally incurred overheads (restated) (1,222) (188) (678) (173) (5,202) (7,462)
Depreciation and amortization (2,552) (136) (1,798) (439) (240) (5,165)
Other income - - - - 6,216 6,216
Operating profit (restated) 589 379 (2,125) 1,654 774 1,272
Adjusted EBITDA (restated) 3,626 569 1,380 2,174 (3,784) 3,955
Depreciation and amortisation (2,102) (136) (795) (439) (240) (3,712)
Depreciation - right-of-use assets (450) - (1,003) - - (1,453)
Foreign currency losses - 4 - - (1,137) (1,133)
Share-based payment expenses - - - - (81) (81)
Provision against loan to franchisee - (26) - - - (26)
Provision for guarantee losses - - - (68) - (68)
Gain / (loss) of disposal of assets (126) - - - - (126)
Exceptional Professional & Branch Closure Costs (107) (31) (64) (13) (184) (399)
Branch pre-opening costs (375) - (1,643) - - (2,018)
Profit on closure / modification of leases 90 - - - - 90
Fair value adjustments - - - - 6,210 6,210
Rent credits recognised 33 - - - - 33
Operating profit (restated) 589 379 (2,125) 1,654 774 1,272
Interest expense/receipt - - (56) 39 (1,275) (1,292)
Finance lease charges (229) - (857) - - (1,086)
Profit / (Loss) before tax (restated) 360 379 (3,038) 1,693 (501) (1,106)
Taxation - 2 - 110 - 112
Profit/(loss) after tax (restated) 360 381 (3,038) 1,803 (501) (994)
Other information:
Non-current assets 6,851 195 24,473 4,559 18,247 54,325
Significant customers:
No customer provided more than 10% of total revenue in either the 15 month
period ended 31 March 2024 or the year ended 31 December 2022.
6. Operating loss before taxation
Loss from operations has been arrived at after charging / (crediting):
15 Month Period Year
Ended Ended
31 March 31 December
2024 2022
£'000 £'000
Auditor's remuneration:
- Audit of the Parent and Group financial statements 225 150
- Review of interim financial statements - 13
Impairment of trade receivables 69 21
Foreign exchange losses 24 1,133
Staff costs including directors, net of amounts capitalized 10,656 4,997
Depreciation of property, plant and equipment (Note 11) 3,653 2,825
Depreciation of right-of-use assets (Note 12) 2,474 1,453
Amortisation of intangible assets (Note 13) 786 886
Share-based payment costs (non-employees) 72 81
Detailed information on statement of profit or loss items:
Cost of sales 15 Month Period Year
Ended ended
31 March 31 December
2024 2022
£'000 £'000
Wages and salaries 11,245 4,254
Food and beverages 6,728 1,880
Other costs of sale 2,318 1,988
20,291 8,122
Administrative expenses 15 Month Period Year
Ended Ended
31 March 31 December
2024 2022
£'000 £'000
Depreciation of property, plant and equipment 3,653 2,825
Depreciation of right-of-use assets 2,474 1,453
Amortisation 786 886
Loss on disposal of non-current assets 202 -
Staff costs including directors, net of amounts capitalised 10,656 4,997
Share-based payments 72 81
Gain on disposal of subsidiary (480)
Foreign currency (gains) / losses 24 1,133
Other administrative expenses 17,254 8,348
34,641 19,724
7. Staff costs
15 Month Period Year
Ended Ended
31 March 31 December
2024 2022
£'000 £'000
Wages salaries and benefits (including directors) 20,260 8,820
Share-based payments 73 81
Social security costs 1,332 675
Other post-employment benefits 488 272
Less amounts capitalised (252) (596)
21,901 9,251
Included in cost of sales 11,245 4,254
Included in Admin expenses 10,656 4,997
21,901 9,251
Key management personnel:
15 Month Period Year
Ended Ended
31 March 31 December
2024 2022
£'000 £'000
Wages, salaries and benefits (including directors) 1,263 653
Share-based payments 26 40
Social security costs 164 90
Pensions 54 26
Other post-employment benefits 15 8
Less amounts capitalised (93) (85)
1,429 732
Key management personnel are the directors and one member of staff. Their
remuneration was as follows:
15 Month Period Ended 31 March 2024 Bonus
Salary and fees Share-based payments Pension contributions Other benefits
Total
£'000 £'000 £'000 £'000 £'000 £'000
Graham Bird 254 70 7 12 5 348
Richard Rose 75 - - - - 75
Richard Harpham 295 82 9 14 3 403
Philip Shepherd 38 - - - - 38
Martin Shuker 38 - - - - 38
Total Board of directors 700 152 16 26 8 902
Joanne Briscoe 159 23 4 19 3 208
Other key management 191 40 6 9 5 250
1,048 215 26 54 15 1,360
Amounts capitalised (93) - - - - (93)
Profit and loss expense 956 215 26 54 15 1,267
Year Ended 31 December 2022 Salary and fees Share-based payments Pension contributions Other benefits
Bonus Total
£'000 £'000 £'000 £'000 £'000 £'000
Graham Bird 188 - 12 9 3 212
Richard Rose 60 - - - - 60
Richard Harpham 218 - 17 10 2 247
Karen Bach 15 - - - - 15
Philip Shepherd 15 - - - - 15
Martin Shuker 15 - - - - 15
Total Board 511 - 29 19 5 564
Other key management 142 - 11 7 4 164
653 - 40 26 8 728
Amounts capitalised (85) - - - - (85)
Total 568 - 40 26 8 643
Only two directors are accruing retirement benefits, being Richard Harpham and
Graham Bird. Both make personal contributions and receive company
contributions into defined contribution (money purchase) pensions schemes.
There are no defined benefit schemes in the group and the Group has no pension
commitments other than monthly contributions for employees.
The average monthly number of employees was as follows:
15 Month Period Ended Year
Ended
31 March 31 December
2024 2022
No. No.
Management 6 4
Administrative 54 49
Operations 990 663
1,049 716
8. Interest
15 Month Period Year
Ended Ended
31 March 31 December
2024 2022
£'000 £'000
Interest income 176 82
Interest expense (418) (1,376)
Net interest (expense) / income (242) (1,292)
9. Taxation
15 Month Period Year
Ended Ended
31 March 31 December
2024 2022
£'000 £'000
Current tax expense
Current tax on profits for the year - -
Total Current tax - -
Deferred tax expense
Origination and reversal of Temporary differences (526) (269)
Effects of Business combinations 408 157
Total deferred tax (118) (112)
Total tax expense (118) (112)
A reconciliation of income tax expense applicable to the loss before taxation
at the statutory tax rate to the income tax expense at the effective tax rate
of the Group is as follows:
15 Month Period Year
Ended Ended
31 March 31 December
2024 2022
£'000 £'000
Loss before taxation (540) (1,106)
Tax calculated at the standard rate of tax of 23.82% (2022:19%) (128) (210)
Tax effects of:
Expenses not deductible for tax purposes 168 280
Non-taxable income (75) (1,132)
Enhanced relief for qualifying additions (9) (101)
Movement in unrecognised tax losses 398 619
Tax on foreign operations 105 224
Non qualifying amortisation 56 22
Depreciation on ineligible assets 373 186
Increase in dilapidation provision 56 28
Remeasurement of deferred tax for changes in tax rates (1,191) -
Timing differences on right of use assets 271 -
Foreign exchange differences in relation to closure of foreign subsidiary (119) -
Amounts written off from connected company not taxable (22) -
Other (1) (28)
(118) (112)
Changes in tax rates and factors affecting the future tax charge
Changes to the UK corporation tax rates were made as part of the 2021 Budget.
These were substantially enacted on 24 May 2021. This included an increase in
the main rate from 19% to 25% from 1 April 2023. The company is taxed at a
rate of 25% unless its profits are sufficiently low enough to qualify for a
lower rate of tax, the lowest being 19%.
Deferred tax
Deferred tax assets have been recognised in respect of all tax losses and
other temporary differences giving rise to deferred tax assets where the
directors believe it is probable that these assets will be recovered.
The Group has tax losses of approximately £22,340k as at 31 March 2024
(£22,527k as at 31 December 2022) which, subject to agreement with taxation
authorities, are available to carry forward against future profits. The tax
value of such losses amounted to approximately £5,585k (£5,632k as at 31
December 2022). A deferred tax asset has been recognised in respect of
£6,976k (2022: £3,023k) of these losses to offset the deferred tax liability
in respect of fixed asset temporary differences. A deferred tax asset has
therefore not been recognised in respect of the remaining tax losses of
£15,364k (2022: £19,504k) due to there being insufficient certainty that
profits will be recognised in future years.
Recognised temporary differences as at 31 December:
15 Month Period Year ended
Ended 31 December
31 March 2022
2024
£'000 £'000
Fixed asset temporary differences 1,744 756
Unused tax losses (1,744) (756)
Intangibles acquired through business combination 326 832
326 832
Estimates and assumptions, including uncertainty over income tax treatments
The Group is subject to income tax in several jurisdictions and significant
judgement is required in determining the provision for income taxes. During
the ordinary course of business, there are transactions and calculations for
which the ultimate tax determination is uncertain. As a result, the Group
recognises tax liabilities based on estimates of whether additional taxes and
interest will be due.
These tax liabilities are recognised when, despite the Directors' belief that
its tax return positions are supportable, the Directors believe it is more
likely than not that a taxation authority would not accept its filing
position. In these cases, the Group records its tax balances based on either
the most likely amount or the expected value, which weights multiple potential
scenarios. The Directors believe that its accruals for tax liabilities are
adequate for all open audit years based on its assessment of many factors
including past experience and interpretations of tax law.
No material uncertain tax positions exist as at 31 March 2024. This assessment
relies on estimates and assumptions and may involve a series of complex
judgments about future events. To the extent that the final tax outcome of
these matters is different than the amounts recorded, such differences will
impact income tax expense in the period in which such determination is made.
In the Year Ended 31 December 2021 upon acquisition of both the French master
franchise in March 2021 and the Boom group of companies in November 2021,
there were intangibles acquired as part of the purchase. These acquired
intangibles were deemed to create a deferred tax liability and calculated at
25.75% for France and 25% for Boom. In total, these amounted to £1,112k.
These deferred tax liabilities were recognised in the period ended 31 December
2021 and are being amortised over the same periods as the acquired intangible.
As at 31 March 2024 these have been amortised to £326k (2022: £832k).
10. Loss per share
Basic loss per share is calculated by dividing the loss attributable to equity
holders by the weighted average number of ordinary shares in issue during the
period. Diluted net loss per share is calculated by dividing net loss by the
weighted average number of shares in issue and potential dilutive shares
outstanding during the period.
Because XP Factory is in a net loss position, diluted loss per share excludes
the effects of ordinary share equivalents consisting of stock options and
warrants, which are anti-dilutive. The total number of shares subject to share
options and conversion rights outstanding excluded from consideration in the
calculation of diluted loss per share for the 15 Month Period Ended 31 March
2024 was 19,699,481 shares (Year Ended 31 December 2022: 19,699,481 shares).
15 Month Period Year
Ended Ended
31 31
March December
2024 2022
Loss after tax attributable to owners of the Company (£'000)
(420) (994)
Weighted average number of shares:
- Basic and diluted 165,271,148 150,043,518
Loss per share
- Basic and diluted (Pence) (0.26) (0.66)
11. Property, plant and equipment
Leasehold improvements Office equipment Computers Furniture and fixtures Games Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost:
As at 1 January 2022 5,465 50 165 824 5,526 12,030
Additions 6,968 1 135 425 1,470 8,999
Additions arising from acquisition 1,001 - 32 389 67 1,489
Disposals (246) - (7) (29) (302) (584)
As at 31 December 2022 13,188 51 325 1,609 6,761 21,934
Additions 3,872 140 326 1,294 2,514 8,146
Additions arising from acquisition 2,140 35 33 395 156 2,759
Transfers - 498 - (493) (5) -
Translation differences (27) (29) (2) (17) (8) (83)
Disposals (334) - (2) (8) (183) (527)
As at 31 March 2024 18,839 695 680 2,780 9,235 32,229
Accumulated depreciation:
As at 1 January 2022 (2,785) (49) (101) (270) (3,308) (6,514)
Additions arising from acquisition (195) - (7) (94) (14) (310)
Depreciation charge (1,335) (1) (46) (193) (1,250) (2,825)
Translation differences 3 - - - 4 7
Disposals 147 - 7 30 277 461
As at 31 December 2022 (4,165) (50) (147) (527) (4,292) (9,181)
Additions arising from acquisition (380) (13) (6) (75) (15) (489)
Depreciation charge (1,929) (40) (153) (529) (1,002) (3,653)
Translation differences 53 1 - 7 (11) 50
Disposals 289 - 1 26 88 404
As at 31 March 2024 (6,132) (102) (305) (1,098) (5,232) (12,869)
Net book value
As at 31 March 2024 12,707 593 375 1,682 4,003 19,360
As at 31 December 2022 9,023 1 178 1,082 2,469 12,753
The amount of expenditure recognised in the carrying value of leasehold
improvements in the course of construction at 31 March 2024 is £nil (2022:
£36,625).
12. Right-of-use assets and lease liabilities
15 Month Period ended Year ended
Right-of-use assets 31 March 31 December
2024 2022
£'000 £'000
Land and buildings - right-of-use asset cost b/f 20,484 8,920
Closures / modification of leases during the period 275 (411)
Additions during the period, including through acquisition 6,245 15,018
Lease incentives (1,563) (2,914)
Less: Accumulated depreciation b/f (2,641) (1,318)
Depreciation charged for the period (2,474) (1,453)
Net book value 20,326 17,842
The Group leases land and buildings for its offices and escape room and battle
bar venues under agreements of between five to fifteen years with, in some
cases, options to extend. The leases have various escalation clauses. On
renewal, the terms of the leases are renegotiated.
During the year ended 31 December 2022 the Group entered into a lease on a
premises in Bournemouth where a portion of the property is sub-let to a Boom
franchisee. The total value of the master lease is recognised within lease
liabilities whilst the underlease has been recognised as a finance lease
receivable.
15 Month Period ended Year ended
Finance lease receivable 31 Mar 31 Dec
2024 2022
£'000 £'000
Balance at beginning of period 1,273 -
Additions during the year - 1,234
Interest charged 116 39
Payments received - -
Balance at end of period 1,389 1,273
During the 15 Month Period Ended 31 March 2024, £nil of rent concessions have
been recognised in the profit and loss (2022: £33k) to reflect credits
provided by landlords during the COVID-19 pandemic. Only those rent
concessions which adequately fulfil the criteria of paragraph 46A of the
amendment to IFRS 16 on this subject have been included in the profit and
loss.
Where leases have been renegotiated during the year, these have been treated
as modifications of leases and included as separate items in the note above.
15 Month Period ended Year ended
Lease liabilities 31 Mar 31 Dec
2024 2022
£'000 £'000
In respect of right-of-use assets
Balance at beginning of period 24,039 8,405
Closures / modification of leases during the period 275 (501)
Additions during the year 6,245 16,252
Interest incurred 2,394 1,086
Rent concessions received - (33)
Repayments during the period (3,135) (1,186)
Reallocated (to) / from accruals and trade payables - 16
Lease liabilities at end of period 29,818 24,039
As at As at
31 Mar 31 Dec
2024 2022
£'000 £'000
Maturity
< 1 month 232 76
1 - 3 months 463 119
3 - 12 months 1,337 878
Non-current 27,786 22,965
Total lease liabilities 29,818 24,039
In the Escape Hunt group of companies, leases are generally 10 years with a 5
year break clause. Where the break clause is tenant only the leases are
accounted for over the full period of the lease as it is assumed the break
clause will not be enacted, whereas where the break clause is both ways,
leases are accounted for over the period to the initial break clause years.
In the Boom group of companies, leases are generally over 15 years with a 10
year tenant only break clause, which are therefore accounted over 15 years.
Only leases with a break that can be invoked by the landlord are accounted for
over 10 years.
The group has no short term leases of properties.
None of the leases imposed restrictions or covenants.
The group also leases laptops for a small number of staff on leases of 3
years. The charge to the profit and loss for the 15 Month Period Ended 31
March 2024 for these computers was £10k (2022: £7k). These leases are all
cancellable on short notice.
There are a number of properties for which turnover rent is payable. The
amount charged to the profit and loss for these turnover rent payments in the
15 Month Period Ended 31 March 2024 was £1,191k (2022: £191k ).
As at 31 March 2024 there were no leases that had not commenced to which the
group was committed.
13. Intangible assets
Goodwill Trademarks Intellectual property Internally generated IP Franchise agreements App Quest Portal Total
£'000 £'000 £'000 £'000 £'000 £'00' £'000 £'000
Cost
At 1 January 2022 17,696 78 10,195 1,715 5,248 100 316 35,348
Additions arising from internal development - 8 - - - 61 218
149
Additions arising from acquisition 1,475 - - - - - - 1,475
Transfers arising from acquisition 469 - - - (625) - - (156)
Disposals - - - - - - - -
At 31 December 2022 19,640 86 10,195 1,864 4,623 100 377 36,885
Additions arising from internal development - 14 - 101 - - 93 208
Additions arising from acquisition 1,896 - - - - - - 1,896
Re-analysis 1,339 - - - (1,635) - - (296)
Disposals - - - - - - (149) (149)
Translation differences - (4) - 14 - - 9 19
As at 31 March 2024 22,875 96 10,195 1,979 2,988 100 330 38,563
Accumulated amortisation / impairment
At 1 January 2022 (1,393) (60) (10,195) (669) (580) (100) (306) (13,303)
Amortisation for the year - (12) - (563) - (9) (886)
(302)
Additions arising from acquisition - - - - - - - -
Translation differences - - - - - - - -
Disposals - - - - - - - -
At 31 December 2022 (1,393) (72) (10,195) (971) (1,143) (100) (315) (14,189)
Amortisation for the year - (9) - (192) (532) - (53) (786)
Additions arising from acquisition - - - - - - - -
Translation differences - - - - - - - -
Disposals - - - - - - 51 51
As at 31 March 2024 (1,393) (81) (10,195) (1,163) (1,675) (100) (317) (14,924)
Carrying amounts
At 31 March 2024 21,482 15 - 816 1,313 - 14 23,639
At 31 December 2022 18,247 14 - 893 3,480 - 62 22,696
Goodwill and acquisition related intangible assets recognised have arisen from
the acquisition of Experiential Ventures Limited in May 2017, Escape Hunt
Entertainment LLC in September 2020, BGP Escape France, BGP Entertainment
Belgium in March 2021 and the Boom group of companies in November 2021, Boom
East in August 2022, Boom Battle Bar Cardiff in September 2022, BBB Chelmsford
and BBB Ealing in June 2023, BBB Liverpool and BBB Five in November 2023.
Goodwill has also been recognised on the consolidation of BBB Nine Limited
(Boom Battle Bar Swindon) which is managed by the group under an operating
agreement. Refer to Notes 14 and 15 for further details.
Goodwill acquired in a business combination is allocated, at acquisition, to
the cash generating units ('CGUs') that are expected to benefit from that
business combination. Management considers that the goodwill is attributable
to the owner-operated business because that is where the benefits are expected
to arise from expansion opportunities and synergies of the business.
No value was attributed to the brand and customer relationships as the Board's
strategic review of the business and a repositioning of our branding exercise
enabled the Group to clearly define its quality, service and values, and make
it more attractive to new customers and partners. Furthermore, the value of
any existing brand and customer relationships which was separately
identifiable from other intangible assets was insignificant.
The Group tests goodwill annually for impairment or more frequently if there
are indications that these assets might be impaired. The recoverable amounts
of the CGU are determined from fair value less costs to sale. The value of the
goodwill comes from the future potential of the assets rather than using the
assets as they are (i.e. there is assumed expansionary capex which supports
growth in revenues and the value of the business and therefore goodwill).
The key assumptions for the fair value less costs to sale approach are those
regarding capital expenditure which supports a consequent growth in revenues
and associated earnings and a discount rate. The Group monitors its pre-tax
Weighted Average Cost of Capital and those of its competitors using market
data. In considering the discount rate applying to the CGU, the Directors have
considered the relative sizes, risks and the inter-dependencies of its CGUs.
The impairment reviews use a discount rate adjusted for pre-tax cash flows.
The Group prepares cash flow forecasts derived from the most recent financial
plan approved by the Board and extrapolates revenues, net margins and cash
flows for the following three years based on forecast growth rates of the CGU.
Cash flows beyond this period are also considered in assessing the need for
any impairment provisions. A discount rate of 13.7% and capex of £9.1 million
over the three years has been assumed. Growth in years 4- 6 is assumed at 5%
per annum. The rate used for the fair value calculation thereafter is 2%.
The directors consider these assumptions are consistent with that which a
market participant would use in determining fair value.
Intellectual property
The Intellectual Property relates to the valuation of the Library of Game Wire
Frame Templates of games, the process of games development and the inherent
know how and understanding of making successful games.
The fair value of these assets on acquisition of £10,195k was determined by
discounting estimated future net cash flows generated by the asset where no
active market for the assets exists.
The Group tests intellectual property for impairment only if there are
indications that these assets might be impaired. An impairment loss is
calculated as the difference between its carrying amount and the present value
of the estimated future cash flows.
Franchise agreements
The intangible asset of the Franchise Business was the net present value of
the net income from the franchisee agreements acquired.
The approach selected by management to value the franchise agreements was the
Multi-Period Excess Earnings Method ("MEEM") which is within the income
approach. The multi-period excess earnings method estimated value is based on
expected future economic earnings attributable to the agreements.
The key assumptions used within the intangible asset valuation were as
follows:
- Economic life - The valuation did not assume income for a period
longer than the asset's economic life (the period over which it will generate
income). The contractual nature of the Franchise Agreements (with terms
typically between 6 and 10 years) means it is possible to forecast with a
reasonable degree of certainty the remaining term of each agreement and
therefore the period in which it will generate revenue. Only contracts which
were signed at the acquisition date were included.
- Renewal - No provision for the renewal of existing Franchise
Contracts has been included with the valuation. This reflects the fact that
potential contract renewals will only take place several years in the future,
and the stated strategy of management has been to focus on the development of
owner-managed sites rather than renewing the franchises when they are due for
renewal - as they may be bought out.
- Contributory Asset Charges (CAC-) - The projections assumed after
returns are paid/charged to complementary assets which are used in conjunction
with the valued asset to generate the earnings associated with it. The only
CAC identified by management is the charge relating to IP - a charge has been
included to take into account the Intellectual Property used within the
franchise operation. This is considered key in generating earnings at the
franchised sites. Management has applied the same royalty rate of 10% used to
value this asset.
- Discount Rate - The Capital Asset Pricing Model ("CAPM") was used to
calculate a discount rate of 13.7%.
- Taxation - At the time of acquisition, the franchise profits were
earned within a group subsidiary which was incorporated in the Labuan province
of Malaysia. The tax rate applicable in Labuan was applied to the earnings
generated from franchise operations for franchise contracts acquired at that
time. The acquisitions in France and the UK during 2021 have used anticipated
tax rates of 25.75% and 25% respectively.
During the period ended 31 March 2024, the Franchise businesses BBB
Chelmsford, BBB Ealing, BBB Liverpool, BBB Five and the business and assets of
Boom Watford were purchased. As such amounts that were previously being held
as Franchise agreement intangibles have been transferred to goodwill to
reflect the new group ownership and management of these companies.
The carrying amount of the franchise agreements has been considered on the
basis of the value in use derived from the expected future cash flows.
14. Subsidiaries
Details of the Company's subsidiaries as at 31 March 2024 are as follows:
Name of subsidiary Country of incorporation Principal activity Effective equity interest held by the Group (%) Ref
Escape Hunt Group Limited England and Wales Operator of escape rooms 100
#1
Escape Hunt IP Limited England and Wales IP licensing 100 #1
Escape Hunt Franchises Limited England and Wales Franchise holding 100 #1
Escape Hunt Innovations Limited England and Wales Game design 100 #1
Escape Hunt Limited England and Wales Dormant 100 #1
Escape Hunt USA Franchises Ltd England and Wales Franchise holding 100 #1
Escape Hunt Entertainment LLC United Arab Emirates Operator of Escape Rooms in Dubai and master franchise to the Middle East 100 #1
BGP Escape France France Operator of Escape Rooms in Paris and master franchise to France, Belgium and 100 #1
Luxembourg
BGP Entertainment Belgium Belgium Operator of Escape Rooms in Brussels 100 #1
BBB Franchise Limited England and Wales Franchise holding 100 #1
BBB Ventures Limited England and Wales Intermediate holding company 100 #2
BBB UK Trading Limited England and Wales Central administration and employment entity for the Boom owner-operated 100 #2
division
Boom BB One Limited England and Wales Operator of battle bar Lakeside 100 #2
BBB Six Limited England and Wales Operator of battle bar Edinburgh 100 #2
BBB UK Property Limited (formerly BBB Seven Limited) England and Wales Operator of battle bars in O2, Leeds, Birmingham, Canterbury, Southend, 100 #2
Watford, Liverpool and Glasgow
BBB Eleven Limited England and Wales Operator of battle bar Plymouth 100 #2
BBB Twelve Limited England and Wales Operator of battle bar Manchester 100 #2
BBB Thirteen Limited England and Wales Operator of battle bar Oxford Street 100 #2
BBB Fourteen Limited England and Wales Operator of battle bar Exeter 100 #2
BBB Sixteen Limited England and Wales Dormant 100 #2
BBB IP Limited (formerly BBB Seventeen Limited) England and Wales Holder of Boom IP 100 #2
Boom East Limited England and Wales Operator of battle bar Norwich 100 #2
Boom Battle Bar Cardiff Limited England and Wales Operator of battle bar Cardiff 100 #2
BBB Chelmsford Limited England and Wales Operator of battle bar Chelmsford 100 #2
BBB Ealing Limited England and Wales Operator of battle bar Ealing 100 #2
BBB Five Limited England and Wales Former operator of battle bar - Glasgow 100 #2
BBB Liverpool Limited England and Wales Former operator of battle bar - Liverpool 100 #2
Boom Battle Facilities Management Services LLC United Arab Emirates Operator of battle bar Dubai 100 #1
Each of the companies incorporated in England and Wales have their registered
office at 70-88 Oxford Street, London, England, W1D 1BS.
Each of the subsidiaries for which reference #1 is shown is directly held by
the Company. Those referenced #2 are held indirectly through one of the
directly held subsidiaries.
The registered address of each overseas subsidiary is as follows:
Escape Hunt Entertainment LLC
Retail Space 26, Galleria Mall, Al Wasl Road, Bur Dubai, Dubai
Boom Battle Facilities Management Services LLC
Office no. 1506-7, The One Tower, Al Thanya First, Dubai, UAE
BGP Escape France
112 bis rue cardinet 75017, France
BGP Entertainment Belgium
13-15 rue de Livourne, 1060 Brussels
Previously held entities
Escape Hunt Operations Ltd
Lot A020, Level 1, Podium Level, Financial Park Labuan, Jalan Merdeka,8700
Labuan, Malaysia.
E V Development Co. Ltd
No. 689 Bhiraj Tower at EmQuartier, Sukhumvit (Soi 35) Road, Klongton-Nua
Sub-district, Bangkok, Thailand.
Experiential Ventures Limited
103 Sham Peng Tong Plaza, Victoria, Mahe, Seychelles.
Boom BB Two Limited
70-88 Oxford Street, London, England, W1D 1BS
BBB Three Limited
70-88 Oxford Street, London, England, W1D 1BS
BBB fifteen Limited
70-88 Oxford Street, London, England, W1D 1BS
BBB Sixteen Limited
70-88 Oxford Street, London, England, W1D 1BS
During the year the liquidation of Experiential Ventures Limited, and along
with it its wholly owned subsidiaries Escape Hunt Operations Ltd and E V
Development Co. Limited were finalised. The subsequent writing off of final
intercompany balances and the foreign exchange differences that had arisen to
that point owed gave rise to a gain of £498k which has been presented on the
P&L as part of exceptional costs.
On 21 November 2023 Boom BB Two Limited, BBB Three Limited and BBB Fifteen
Limited were dissolved. On 9 April 2024, BBB Sixteen was also dissolved. These
businesses were originally expected to each hold the lease of a site but it
was decided that leases would be signed into BBB UK Property Limited going
forwards to consolidate the business. The subsequent writing off of final
intercompany balances owed gave rise to a loss of £13k, £3k, £0.3k and £3k
respectively (being £19k total) which have all been presented on the P&L
as part of exceptional costs.
15. Business Combination
Acquisition of BBB Chelmsford Ltd
On ( )8 June 2023, the XP Factory Group acquired 100% of the equity interest
in BBB Chelmsford Ltd, thereby obtaining control. BBB Chelmsford Ltd runs an
owner operated Boom Battle Bar site situated in Chelmsford.
The details of the business combination are as follows:
£'000
Fair value of consideration transferred
Amounts settled in cash 44
Vendor loan 252
Total purchase consideration 296
The vendor loan is being repaid in 24 monthly instalments. The balance payable
as at 31 March 2024 was £132k
Further acquisition related costs of £7.5k that were not directly
attributable to the issue of shares are included in administrative expenses
under the owner operated segment.
Book Value Fair Value Adjustment £'000 Fair Value £'000
£'000
Assets and liabilities recognised as a result of the acquisition
Cash 98 - 98
Other receivables and deposits 27 - 27
Inventory 15 15
Property, plant and equipment 630 - 630
Right of use assets 917 - 917
Trade payables (64) - (64)
Lease liabilities (1,077) - (1,077)
Loans (549) - (549)
Other payables (232) - (232)
Net identifiable assets acquired (235) - (235)
Goodwill arising on consolidation - 531 531
Total (235) 531 296
There were no trade receivables present in the company as at the date of
acquisition.
The goodwill of £531k is attributable to growth expectations, expected future
profitability and the expertise and experience of BBB Chelmsford Ltd's
workforce. Goodwill has been allocated to the owner operated segment and is
not expected to be deductible for tax purposes.
BBB Chelmsford Ltd contributed revenues of £1.43m and net profits of £205k
in the period between acquisition and 31 March 2024. If the acquisition had
occurred on 1 January 2023, consolidated revenue would have been £671k
higher, however consolidated net profits would have been £231k lower due to
the recognition of rent accruals during the rent free period which had
previously not been accounted for.
Acquisition of BBB Ealing Ltd
On 8 June 2023, the XP Factory Group acquired 100% of BBB Ealing Ltd, thereby
obtaining control. BBB Ealing Ltd runs an owner operated Boom Battle Bar site
situated in Ealing.
The details of the business combination are as follows:
£'000
Fair value of consideration transferred
Amounts settled in cash 104
Vendor loan 84
Total consideration 188
The vendor loan is being repaid in 24 monthly instalments. The balance payable
as at 31 March 2024 was £44k
Further acquisition related costs of £7.5k that were not directly
attributable to the issue of shares are included in administrative expenses
under the owner operated segment.
Book Value Fair Value Adjustment £'000 Fair Value £'000
£'000
Assets and liabilities recognised as a result of the acquisition
Cash 70 - 70
Other receivables and deposits 13 - 13
Inventory 12 - 12
Property, plant and equipment 673 - 673
Right of use assets 1,178 - 1,178
Trade payables (191) - (191)
Lease liabilities (1,483) - (1,483)
Loans (439) - (439)
Other payables (398) - (398)
Net identifiable liabilities acquired (566) - (566)
Goodwill arising on consolidation - 754 754
Total (566) 754 188
There were no trade receivables present in the company as at the date of
acquisition.
The goodwill of £700k is attributable to growth expectations, expected future
profitability and the expertise and experience of the BBB Ealing Ltd's
workforce. Goodwill has been allocated to the owner operated segment and is
not expected to be deductible for tax purposes.
BBB Ealing Ltd contributed revenues of £892k but net losses of £99k in the
period between acquisition and 31 March 2024. If the acquisition had occurred
on 1 January 2023, consolidated revenue would have been £467k higher, however
consolidated net profits would have been £592k lower due to the recognition
of rent accruals during the rent free period along with rates costs which had
previously not been accounted for.
Acquisition of BBB Five Ltd
Effective 1 November 2023, the XP Factory Group acquired 100% of BBB Five Ltd,
thereby obtaining control. BBB Five Ltd runs an owner operated Boom Battle Bar
site situated in Glasgow.
The details of the business combination are as follows:
£'000
Fair value of consideration transferred
Amounts settled in cash 14
Vendor loan 138
Total consideration 152
The vendor loan is being repaid in 24 monthly instalments. The balance payable
as at 31 March 2024 was £134k
Further acquisition related costs of £10k that were not directly attributable
to the issue of shares are included in administrative expenses under the owner
operated segment.
Book Value Fair Value Adjustment £'000 Fair Value £'000
£'000
Assets and liabilities recognised as a result of the acquisition
Cash 73 - 73
Other receivables and deposits 10 - 10
Inventory 27 - 27
Property, plant and equipment 206 - 206
Right of use assets 1,578 - 1,578
Trade payables (39) - (39)
Lease liabilities (1,825) - (1,825)
Loans (190) - (190)
Other payables (172) - (172)
Net identifiable liabilities acquired (333) - (333)
Goodwill arising on consolidation - 485 485
Total (333) 485 152
There were no trade receivables present in the company as at the date of
acquisition.
The goodwill of £483k is attributable to growth expectations, expected future
profitability and the expertise and experience of the BBB Five Ltd's
workforce. Goodwill has been allocated to the owner operated segment and is
not expected to be deductible for tax purposes.
BBB Five Ltd contributed revenues of £654k net profits of £134k in the
period between acquisition and 31 March 2024. If the acquisition had occurred
on 1 January 2023, consolidated revenue would have been £1.1m higher, however
consolidated net profits would have been £404k lower due to the recognition
of rent accruals during the rent free period which had previously not been
accounted for.
Acquisition of BBB Liverpool Ltd
Effective 1 November 2023, the XP Factory Group acquired 100% of BBB Liverpool
Ltd, thereby obtaining control. BBB Liverpool Ltd runs an owner operated Boom
Battle Bar site situated in Liverpool.
The details of the business combination are as follows:
£'000
Fair value of consideration transferred
Amounts settled in cash 90
Total consideration 90
Further acquisition related costs of £14k that were not directly attributable
to the issue of shares are included in administrative expenses under the owner
operated segment.
Book Value Fair Value Adjustment £'000 Fair Value £'000
£'000
Assets and liabilities recognised as a result of the acquisition
Cash 6 - 6
Trade receivables 20 - -
Other receivables and deposits 26 - 26
Inventory 3 - 3
Property, plant and equipment 252 - 252
Right of use assets 135 - 135
Trade payables (29) - (29)
Lease liabilities (169) - (169)
Loans (114) - (114)
Other payables (341) 196 (145)
Net identifiable liabilities acquired (232) 196 (36)
Goodwill arising on consolidation - 126 126
Total (232) 322 90
The fair value of acquired trade receivables is £20k. The gross contractual
amount for trade receivables due is £20k of which none had been provided
against as at the date of acquisition.
The goodwill of £126k is attributable to growth expectations, expected future
profitability and the expertise and experience of the BBB Liverpool Ltd's
workforce. Goodwill has been allocated to the owner operated segment and is
not expected to be deductible for tax purposes.
BBB Liverpool Ltd contributed revenues of £301k and net profits of £27k in
the period between acquisition and 31 March 2024. If the acquisition had
occurred on 1 January 2023, consolidated revenue would have been £583k
higher, however consolidated net profits would have been £330k lower due to
the write off of debts receivable.
Acquisition of business and assets of Boom Battle Bar Watford
On 8 December 2023, the XP Factory Group acquired the business and assets of
AK Leisure Investments Ltd. AK Leisure Investments Ltd runs an owner operated
Boom Battle Bar site situated in Watford.
The details of the business combination are as follows:
£'000
Fair value of consideration transferred
Amounts settled in cash 134
Vendor loan 229
Total consideration 363
No further acquisition related costs were incurred.
Book Value Fair Value Adjustment £'000 Fair Value £'000
£'000
Assets and liabilities recognised as a result of the acquisition
Other receivables and deposits 10 - 10
Inventory 7 - 7
Property, plant and equipment 509 - 509
Right of use assets 541 - 541
Trade payables (23) - (23)
Lease liabilities (541) - (541)
Loans (95) - (95)
Other payables (45) - (45)
Net identifiable liabilities acquired 363 - 363
Goodwill arising on consolidation - - -
Total 363 - 363
No cash or trade receivables were acquired.
The fair value of the total consideration is equal to the net identifiable
assets acquired and there is no goodwill arising from the acquisition.
16. Loan to franchisee
A loan of £300,000 is due from a master franchisee which bears interest at 5%
per annum plus 2% of the franchisee's revenues and is repayable in instalments
between January 2020 and June 2023.
The majority of income receivable under the terms of the loan relates to
interest at a fixed rate. The impact of COVID-19 on the borrower in 2020 has
been significant, as a result of which it is considered unlikely that the loan
will be repaid. The pandemic caused the franchisee to fall into arrears on
rent at one of his sites and on loan repayments. As at 31 March 2024 this
loan, together with accrued interest, has been provided for in full.
17. Trade and other receivables
As at As at
31 March 31 December
2024 2022
£'000 £'000
Trade receivables (customer contract balances) 1,636 1,934
Prepayments 1,840 1,140
Accrued income (customer contract balances) 481 421
Deposits and other receivables 122 278
4,079 3,773
The Group's exposure to credit risk and impairment losses related to trade
receivables is disclosed in Note 30.
Significant movements in customer contract assets during the 15 Month Period
Ended 31 March 2024 are summarised below:
15 Month Period Ended 31 March 2024: Trade Accrued income
Receivables
£'000 £'000
Contract assets:
Balance at 1 January 2023 1,934 782
Transfers from contract assets recognised at the beginning of the period to 782 (782)
receivables
Net (decreases)/increases as a result of changes in the measure of progress (669) 633
Provisions for doubtful amounts (410) (31)
Balance at 31 March 2024 1,636 603
The amount of revenue recognised from performance obligations satisfied in
previous periods is nil.
The group receives payments from customers based on terms established in its
contracts. In the case of franchise revenues in Escape Hunt, amounts are
billed within five working days of a month end and settlement is due by the
14(th) of the month. In the case of franchise revenues in Boom Battle Bar,
amounts are billed every Tuesday and settlement is due by Friday each week.
Accrued income relates to the conditional right to consideration for completed
performance under the contract, primarily in respect of franchise revenues.
Accounts receivable are recognised when the right to consideration becomes
unconditional.
18. Inventories
As at As at
31 March 31 December
2024 2022
£'000 £'000
Branch consumables (at cost) 348 323
Total inventories 348 323
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the weighted average principle and includes expenditure incurred in
acquiring the inventories and other costs in bringing them to their existing
location and condition. As items are sold, the costs of those items are drawn
down from the value of inventory and recorded as an expense under costs of
sale in the profit and loss for the period.
The movement in stocks was as follows:
As at As at
31 March 31 December
2024 2022
£'000 £'000
Balance brought forward 323 462
Utilised in the year (6,736) (2,316)
Acquired through acquisition 64 44
Purchases / cost incurred 6,697 2,133
Total inventories 348 323
19. Cash and cash equivalents
As at As at
31 March 31 December
2024 2022
£'000 £'000
Bank balances 3,935 3,189
Cash and cash equivalents in the statement of cash flow 3,935 3,189
The currency profiles of the Group's cash and bank balances are as follows:
As at As at
31 March 31 December
2024 2022
£'000 £'000
Pounds Sterling 3,350 2,644
Australian Dollars 100 92
United States Dollars 165 77
Euros 223 272
United Arab Emirates Dirhams 97 103
3,935 3,189
20. Trade and other payables (current)
As at As at
31 March 31 December
2024 2022
£'000 £'000
Trade payables 3,757 1,837
Accruals 5,544 3,657
Deferred income 1,809 1,438
Taxation 320 -
Loans due in < 1yr 1,941 1,101
Other taxes and social security 1,595 957
Other payables 87 645
15,054 9,635
21. Deferred income
As at As at
31 March 31 December
2024 2022
£'000 £'000
Contract liabilities (deferred income):
Balance at beginning of year 1,484 1,692
Revenue recognised in the year that was included in the deferred income
balance at the beginning of the year and from balances acquired during the
year (1,484) (1,002)
Drawdown of landlord contributions (15) -
Increases due to cash received, excluding amounts recognised as revenue during 1,620 686
the period
Increases on acquisition of new businesses 611 109
Decreased on termination of franchises (18) (8)
Translation differences 6 7
Reclassification 24 -
Transaction price allocated to the remaining performance obligations 2,228 1,484
All of the above amounts relate to contracts with customers and include
amounts which will be recognised within one year and after more than one year.
The amounts on the early termination of upfront franchise fees were recognised
as revenue as all performance obligations have been satisfied.
As at As at
31 March 31 December
2024 2022
£'000 £'000
Upfront exclusivity, legal and training fees 173 550
Landlord contributions 250 -
Escape room advance bookings 504 135
Boom Battle Bar advance bookings 943 233
Gift vouchers 358 566
2,228 1,484
As at As at
Upfront exclusivity, legal and training fees 31 March 31 December
2024 2022
£'000 £'000
Within one year 30 95
After more than one year 143 455
173 550
Deferred revenues in respect of upfront exclusivity fees are expected to be
recognised as revenues over the remaining lifetime of each franchise
agreement. Deferred legal fees are recognised on the earlier of the date of
completion of the franchise lease and the date of occupation and training fees
are recognised on the date the franchise site is opened. The average remaining
period of the Escape Hunt franchise agreements is approximately three years.
The average remaining life on all Boom franchise leases is approximately eight
years. All other deferred revenue is expected be recognised as revenue
within one year.
22. Provisions
The following provisions have been recognised in the period:
15 Month Period ended Year ended
31 Mar 31 Dec
2024 2022
£'000 £'000
Provision for contingent consideration - 4,113
Provision for deferred consideration - 857
Dilapidations provisions 539 314
Provision for financial guarantee contracts 70 94
Other provisions - 5
609 5,383
Provisions represent future liabilities and are recognised on an item by item
basis based on the Group's best estimate of the likely committed cash outflow.
Movements on provisions can be illustrated as follows:
Contingent consideration Deferred consideration Dilapi-dations Financial guarantee contracts Other Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost:
As at 31 December 2022 4,113 857 314 94 5 5,383
Provisions recognised - 112 225 - - 337
Releases recognised (4,113) (969) - (24) (5) (5,111)
As at 31 March 2024 - - 539 70 - 609
The ageing of provisions can be split as follows:
As at As at
31 March 31 December
2024 2022
£'000 £'000
Within one year - 4,970
After more than one year 609 413
609 5,383
The contingent consideration in 2022 related to an earnout payment in
connection with the Boom acquisition in the 2021. The valuation is considered
a level 2 valuation under IFRS 13, indicating that it is a financial liability
that does not have regular market pricing, but whose value can be determined
using other data values or market prices.
The value of the contingent consideration was initially estimated using a
share price of 35.8p per XP Factory share, being the share price on 23rd
November 2021, the date that the Acquisition of Boom Battle Bars completed,
and assuming all 25,000,000 shares potentially due under the provisions of the
sale agreement would be issued. The future value of the deferred
consideration, was again estimated at 31 December 2022 using a cost of capital
of 13.7 per cent, an implied share price of 18.5 pence per share and an
expectation of issuing 23.5m shares. The final value of the contingent
consideration was settled on 23 June 2023 by the issue of 23.9m shares at a
share price of 18.5 pence per share. The difference between the fair value
estimated at 31 December 2022 and the final value gave rise to a revaluation
charge of £0.3m being recognised in the period to 31 March 2024 (2022:
revaluation gain of £6.2m and a finance charge of £1.3m).
As at As at
31 March 31 December
2024 2022
£'000 £'000
Fair value of contingent consideration at acquisition 8,950 8,950
Financing charges recognised in year to 31 December 2021 106 106
Financing charges recognised during the year to 31 December 2022 1,267 1,267
Fair value adjustment (6,210) (6,210)
Financing charges recognised during the 15 months to 31 March 2024 - -
Releases during the 15 months to 31 March 2024 (4,113)
Provision for contingent consideration as at 31 March 2024 - 4,113
Financial guarantee contracts relate to leases where the Group has signed as
co-tenant or has provided a guarantee for a site operated by a franchisee.
31 Mar 31 Dec
2024 2022
£'000 £'000
Provision for financial guarantee contracts at start of period 94 26
Additional provision in period 68
Releases in period (24)
Provision at 31 March 2024 70 94
Number sites for which guarantees provided 6 7
Average term of lease remaining (years) 12.9 14.2
Average annual rent (£'000) 165 166
At the end of the reporting period, the directors of the Company have assessed
the past due status of the debts under guarantee, the financial position of
the debtors as well as the economic outlook of the industries in which the
debtors operate. There has been no change in the estimation techniques or
significant assumptions made during the reporting periods in assessing the
loss allowance for these financial assets.
23. Share capital
As at As at
31 March 31 December
2024 2022
£'000 £'000
Issued and fully paid:
At beginning of the year: 150,633,180 (2022: 146,005,098) Ordinary shares of
1.25 pence each
1,883 1,825
Issued during the year: 23,924,420 Ordinary shares 299
58
As at end of period / year 2,182 1,883
- 174,557,600 (2022: 150,633,180)
Ordinary shares of 1.25 pence each
XP Factory Plc does not have an authorised share capital and is not required
to have one.
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company.
During the 15 Month Period Ended 31 March 2024, the following changes in the
issued share capital of the Company occurred:
- 23,924,420 shares were issued to MFT Capital Ltd in final settlement
of the Contingent Consideration in connection with the acquisition of the Boom
Battle Bar group of companies in November 2021. The shares were issued at
18.5 pence per share, being a total consideration of £4.4m. The settlement
represented 95.7% of the maximum payout.
24. Borrowings
As at As at
31 March 31 December
2024 2022
£'000 £'000
Amounts due within one year
Vendor loans 922 40
Rolled up interest - 5
Fit out finance, including equipment finance leases 795 -
Bank and other borrowings 224 1,012
1,941 1,057
Amounts due in more than one year:
Vendor loans 234 -
Fit out finance 683 -
Bank and other borrowings 1,000 -
Other loans - 423
As at end of period / year 1,917 1,480
€100,000 vendor loan notes were issued on 9 March 2021 ("France Notes") as
part of the consideration for the acquisition of the French and Belgian master
franchise. The France Notes carry interest at 4 per cent per annum and are
repayable, together with accrued interest, in two equal tranches on the first
and second anniversary of issue. The France Notes are secured by means of a
pledge of the shares in BGP Entertainment Belgium.
On 9 March 2023, the final €50,000 outstanding on the France Notes was
repaid in full.
On 22 November 2021, the Company issued £360,000 vendor loan notes to MFT
Capital Limited as part of the consideration for the acquisition of Boom
Battle Bars ("Boom Notes"). The Boom Notes were unsecured and carried
interest at 5 per cent per annum. During 2022, the redemption date for the
Boom Notes was extended to the second anniversary of the transaction in
connection with the acquisition of Boom Battle Bar Cardiff Limited. The
£360,000 Boom Notes were fully repaid in November 2023.
During the period, the Group bought back five franchise sites in Chelmsford,
Ealing, Glasgow, Liverpool and Watford. Each of these acquisitions used vendor
finance in form of deferred payments to the franchisee to help fund the
respective acquisitions. Details are set out in note 15. As at 31 March
2024, £1,156k of this vendor finance remained outstanding.
During the 15 months ended 31 March 2024, the group made use of certain fit
out finance facilities from a range of different suppliers. The total fit-out
finance outstanding at the end of the period was £1,478k.
25. Share option and incentive plans
XP Factory Plc (formerly Escape Hunt Plc) Enterprise Management Incentive Plan
On 15 July 2020, the Company established the Escape Hunt plc Enterprise
Management Incentive Plan ("2020 EMI Plan"). The 2020 EMI Plan is an HMRC
approved plan which allows for the issue of "qualifying options" for the
purposes of Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003
("Schedule 5"), subject to the limits specified from time to time in paragraph
7 of Schedule 5, and also for the issue of non qualifying options.
It is the Board's intention to make awards under the 2020 EMI Plan to attract
and retain senior employees. The 2020 EMI Plan is available to employees
whose committed time is at least 25 hours per week or 75% of his or her
"working time" and who is not precluded from such participation by paragraph
28 of Schedule 5 (no material interest). The 2020 EMI Plan will expire on
the 10th anniversary of its formation.
The Company has made four awards to date as set out in the table below. The
options are exercisable at their relevant exercise prices and vest in three
equal tranches on each of the first, second and third anniversary of the
grants, subject to the employee not having left employment other than as a
Good Leaver. The number of options that vest are subject to a performance
condition based on the Company's share price. This will be tested on each
vesting date and again between the third and fourth anniversaries of awards.
If the Company's share price at testing equals the first vesting price, one
third of the vested options will be exercisable. If the Company's share price
at testing equals the second vesting price, 90 per cent of the vested options
will be exercisable. If the Company's share price at testing equals or exceeds
the third vesting price, 100% of the vested options will be exercisable. The
proportion of vested options exercisable for share prices between the first
and second vesting prices will scale proportionately from one third to 90 per
cent. Similarly, the proportion of options exercisable for share prices
between the second and third vesting prices will scale proportionately from 90
per cent to 100 per cent.
The options will all vest in the case of a takeover. If the takeover price
is at or below the exercise price, no options will be exercisable. If the
takeover price is greater than or equal to the second vesting price, 100 per
cent of the options will be exercisable. The proportion of options
exercisable between the first and second vesting prices will scale
proportionately from nil to 100 per cent.
If not exercised, the options will expire on the fifth anniversary of award.
Options exercised will be settled by the issue of ordinary shares in the
Company.
Awards #1 #2 #3 #4
Date of award 15-Jul-20 18-Nov-21 23-Nov-21 15-Dec-23
Date of expiry 15-Jul-25 18-Nov-26 23-Nov-26 29-Nov-31
Exercise price 7.5p 35.0p 35.0p 15.0p
Qualifying awards - number of shares under option 13,333,332 700,001 533,334 666,667
Non-qualifying awards - number of shares under option 2,400,000 0 0 0
First vesting price 11.25p 43.75p 43.75p 18.75p
Second vesting price 18.75p 61.25p 61.25p 25.05p
Third vesting price 25.00p 70.00p 70.00p 26.25p
Proportion of awards vesting at first vesting price 33.33% 33.33% 33.33% 33.33%
Proportion of awards vesting at second vesting price 90.00% 90.00% 90.00% 90.00%
Proportion of awards vesting at third vesting price 100% 100% 100% 100%
As at 31 March 2024, 17,366,667 options were outstanding under the 2020 EMI
Plan (2022: 16,700,000).
As at As at
31 March 31 December
2024 2022
'000 '000
Options outstanding at the beginning of the period 16,700 16,966
Awards made during the year 667 -
Options exercised - -
Options lapsed or forfeited - (266)
Options outstanding at the end of the period 17,367 16,700
Options vested and exercisable at the end of the period 16,700 -
The sum of £72,852 has been recognised as a share-based payment and charged
to the profit and loss during the year (2022: £68,535). The fair value of
the options granted during the period has been calculated using the Black
& Scholes formula with the following key assumptions:
Awards #1 #2 #3 #4
Exercise price 7.5p 35.0p 35.0p 15.0p
Volatility 34.60% 31% 31% 35.0%
Share price at date of award 7.375p 33.50p 32.00p 15.00p
Option exercise date 15-Jul-24 18-Nov-25 23-Nov-25 31-Jul-29
Dividend yield 0% 0% 0% 0%
Risk free rate -0.05% 1.55% 1.55% 3.50%
The performance conditions were taking into account as follows:
The value of the options have then been adjusted to take account of the
performance hurdles by assuming a lognormal distribution of share price
returns, based on an expected return on the date of issue. This results in
the mean expected return calculated using a lognormal distribution equalling
the implied market return on the date of issue validating that the expected
return relative to the volatility is proportionately correct. This was then
used to calculate an implied probability of the performance hurdles being
achieved within the four year window and the Black & Scholes derived
option value was adjusted accordingly.
Time based vesting: It has been assumed that there is between a 90% and 95%
probability of all share option holders for each award remaining in each
consecutive year thereafter.
The weighted average remaining contractual life of the options outstanding at
31 March 2024 is 18.9 months (2022: 31.7 months).
An option-holder has no voting or dividend rights in the Company before the
exercise of a share option.
During the year ended December 2022, 266,667 options lapsed due to a vesting
condition not being met. No adjustment has been made to the share based
payment charge as a result.
Escape Hunt Employee Share Incentive Scheme
In January 2021, the Company established the Escape Hunt Share Incentive Plan
("SIP").
The SIP has been adopted to promote and support the principles of wider share
ownership amongst all the Company's employees. The Plan is available to all
eligible employees, including Escape Hunt's executive directors, and invites
individuals to elect to purchase ordinary shares of 1.25p each in the Company
via the SIP trustee using monthly salary deductions. Shares are be purchased
monthly by the SIP trustee on behalf of the participating employees at the
prevailing market price. Individual elections can be as little as £10 per
month, but may not, in aggregate, exceed £1,800 per employee in any one tax
year. The Ordinary Shares acquired in this manner are referred to as
"Partnership Shares" and, for each Partnership Share purchased, participants
are awarded one further Ordinary Share, known as a "Matching Share", at nil
cost.
Matching Shares must normally be held in the SIP for a minimum holding period
of 3 years and, other than in certain exceptional circumstances, will be
forfeited if, during that period, the participant in question ceases
employment or withdraws their corresponding Partnership Shares from the Plan.
As at 31 March 2024, 415,045 matching shares (31 December 2022, 173,904) had
been awarded and were held by the trustees for release to employees pending
satisfaction of their retention conditions . A charge of £26,167 (2022:
£12,592) has been recognised in the accounts in respect of the Matching
Shares awards.
26. Capital management
The Board defines capital as share capital and all components of equity.
The Board's policy is to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain future development of
the business. In particular, the Company has in the past raised equity as a
means of executing its acquisition strategy and as a sound basis for operating
the acquired Escape Hunt and Boom Battle Bar businesses in line with the
Group's strategy. The Board of Directors will also monitor the level of
dividends to ordinary shareholders.
The Company is not subject to externally imposed capital requirements.
27. Reserves
The share premium account arose on the Company's issue of shares and is not
distributable by way of dividends.
The share-based payment reserve represents the cumulative charge for share
options over the vesting period with such charges calculated at the fair value
at the date of the grant.
The merger relief reserve arose from the issue of shares to by the Company in
exchange for shares in Experiential Ventures Limited and is not distributable
by way of dividends. Upon the liquidation of Experiential Ventures Limited,
the merger reserve has been transferred to retained income.
In the case of the Company's acquisition of Experiential Ventures Limited,
where certain shares were acquired for cash and others on a share for share
basis, then merger relief has been applied to those shares issued on a share
for share basis.
The convertible loan note reserve represents the equity component of the
convertible loan notes on the date of issue.
The currency translation reserve represents cumulative foreign exchange
differences arising from the translation of the Financial Statements of
foreign subsidiaries and is not distributable by way of dividends.
The capital redemption reserve has arisen following the purchase by the
Company of its own shares pursuant to share buy-back agreements and comprises
the amount by which the distributable profits were reduced on these
transactions in accordance with the Companies Act 2006.
28. Related party transactions
Related parties are entities with common direct or indirect shareholders
and/or directors. Parties are considered to be related if one party has the
ability to control the other party in making financial and operating
decisions.
During the period under review there were no material related party
transactions.
29. Directors and key management remuneration
Details of the Directors' remuneration are set out in Note 7 above.
30. Financial risk management
General objectives, policies and processes
The overall objective of the Directors is to set policies that seek to reduce
risk as far as possible without unduly affecting the Company's competitiveness
and flexibility. Further details regarding these policies are set out below.
The Directors review the Company's monthly reports through which they assess
the effectiveness of the processes put in place and the appropriateness of the
objectives and policies it sets.
Categories of financial assets and liabilities
The Company's activities are exposed to credit, market and liquidity risk. The
Company's overall financial risk management policy focuses on the
unpredictability of financial markets and seeks to minimise potential adverse
effects on its financial performance.
The principal financial instruments used by the Company, from which financial
instrument risk arises, are as follows:
· cash and cash equivalents;
· trade and other receivables; and
· trade and other payables;
The financial assets and financial liabilities maturing within the next 12
months approximated their fair values due to the relatively short-term
maturity of the financial instruments.
The Company had no financial assets or liabilities carried at fair values. The
Directors consider that the carrying amount of financial assets and
liabilities approximates to their fair value.
A summary of the financial instruments held by category is provided below:
Financial assets at amortised cost:
As at As at
31 March 31 December
2024 2022
£'000 £'000
Trade receivables 1,636 1,934
Other receivables and deposits 2,152 2,132
Cash and cash equivalents 3,935 3,189
7,723 7,256
Financial liabilities at amortised cost:
As at As at
31 March 31 December
2024 2022
£'000 £'000
Trade payables 3,758 1,837
Accruals and other payables 7,548 5,259
Loan notes - 45
Other loans 3,858 1,435
Deferred consideration - 857
Contingent consideration - 4,113
15,164 13,546
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group's receivables from
customers. The Group will provide against the carrying value receivables when
the board considers that there is no reasonable expectation of full
recovery. The provision reflects the extent to which a loss is expected.
The financial asset will be fully written off and removed from the books when
there is no longer any prospect of enforcement action.
The Group manages its exposure to credit risk by the application of credit
approvals, credit limits and monitoring procedures on an ongoing basis. For
other financial assets (including cash and bank balances), the Group minimises
credit risk by dealing exclusively with high credit rating counterparties.
Management have assessed the increase in credit risk over the last 12 months
and have adjusted the carrying values of receivables where appropriate. In
aggregate, Management does not consider there to have been a significant
change in credit risk since initial recognition of receivables balances.
Management reviews credit risk on an ongoing basis taking into account the
circumstances at the time.
Impairment of financial assets
As described in Note 2 above, the Group applies the "expected loss" model
which focuses on the risk that a loan or receivable will default rather than
whether a loss has been incurred.
The carrying amount of financial assets in the statement of financial position
represents the Group's maximum exposure to credit risk, before taking into
account any collateral held. The Group does not hold any collateral in respect
of its financial assets.
Concentration of credit risk relating to trade receivables is limited due to
the Group's many varied customers. The Group's historical experience in the
collection of accounts receivable falls within the recorded allowances. Due to
these factors, management believes that no additional credit risk beyond the
amounts provided for collection losses is inherent in the Group's trade
receivables. The ageing of trade receivables at the reporting date was as
follows:
As at As at
31 March 31 December
2024 2022
Gross amounts (before impairment): £'000 £'000
Not past due 1,330 983
Past due 0-30 days 52 271
Past due 31-60 days 123 98
Past due more than 60 days 541 923
2,046 2,275
Impairment losses:
The movement in the allowance for impairment losses in respect of trade
receivables during the year was as follows:
As at As at
31 March 31 December
2024 2022
£'000 £'000
At beginning of year (341) (264)
Impairment losses recognised (396) (77)
Bad debts written off 15 -
Other adjustments 312 -
At end of year (410) (341)
The allowance account for trade receivables is used to record impairment
losses unless the Group is satisfied that no recovery of the amount owing is
possible; at that point the amounts considered irrecoverable are written off
against the trade receivables directly.
The Group assesses collectability based on historical default rates expected
credit losses to determine the impairment loss to be recognised. Management
has reviewed the trade receivables ageing and believes that, except for
certain past due receivables which are specifically assessed and impaired, no
impairment loss is necessary on the remaining trade receivables due to the
good track records and reputation of its customers.
During the year ended 2020 the Group recognised an impairment in full against
both the capital and accrued interest portions of the loan receivable from a
master franchise. Further impairments have been recognised against all
interest due in the current financial period. Therefore as at 31 March 2024
the net balance outstanding on this loan per these financial statements is nil
(2021: £nil).
Liquidity risk
The ageing of financial liabilities at the reporting date was as follows:
As at As at
31 March 31 December
2024 2022
£'000 £'000
Not past due 13,818 12,427
Past due 0-30 days 731 567
Past due 31-60 days 205 171
Past due more than 60 days 410 381
15,164 13,546
As at 31 March 2024 £3,650k (2022: £2,912k) of the cash and bank balances,
as detailed in Note 19 to the financial statements are held in financial
institutions which are regulated and located in the UK, which management
believes are of high credit quality. Management does not expect any losses
arising from non-performance by these counterparties.
The concentration of credit risk is limited due to the fact that the customer
base is large and unrelated.
Liquidity risk arises from the Company's management of working capital. It is
the risk that the Company will encounter difficulty in meeting its financial
obligations as they fall due.
The Company's policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due. The principal
liabilities of the Group arise in respect of trade and other payables which
are all payable within 12 months. At 31 March 2024, total trade payables
within one year were £3,675k (2022: £1,837k), which is considerably less
than the Group's cash held at the year-end of £3,936k (2022: £3,189k). The
Board receives and reviews cash flow projections on a regular basis as well as
information on cash balances.
Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices will affect the Group's
income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
The Group has insignificant financial assets or liabilities that are exposed
to interest rate risks.
Foreign currency risk
The Group has exposure to foreign currency movements on trade and other
receivables, cash and cash equivalents and trade and other payables
denominated in currencies other than the respective functional currencies of
the Group entities. It also exposed to foreign currency risk on sales and
purchases that are denominated in foreign currencies. The currencies giving
rise to this risk are primarily the United States ("US") dollar, the Euro
("EUR"), and Australian ("AUD") dollars. Currently, the Group does not hedge
its foreign currency exposure. However, management monitors the exposure
closely and will consider using forward exchange or option contracts to hedge
significant foreign currency exposure should the need arise.
The Group's exposure to foreign currency risk expressed in Pounds was as
follows:
UK Pound Sterling United States Dollar Euro Australian Dollar Other Total
As at 31 March 2024 £'000 £'000 £'000 £'000 £'000 £'000
Financial assets:
Trade receivables 1,510 - 76 - 51 1,636
Other receivables and deposits 2,076 - 76 - - 2,152
Cash and bank balances 3,455 60 223 100 97 3,935
7,040 60 374 100 148 7,723
Financial liabilities:
Trade payables 3,496 - 170 - 92 3,758
Other payables and accruals 7,224 - 276 - 47 7,548
Other loans 3,507 - - - 351 3,858
14,227 - 446 - 490 15,088
Foreign currency exposure (net) - 60 (71) 100 (342) (253)
UK Pound Sterling United States Dollar Euro Australian Dollar Other Total
As at 31 December 2022 £'000 £'000 £'000 £'000 £'000 £'000
Financial assets:
Trade receivables 1,453 8 420 - 53 1,934
Other receivables and deposits 2,011 - 122 - - 2,132
Cash and bank balances 2,506 41 446 92 104 3,189
5,970 49 987 92 157 7,256
Financial liabilities:
Trade payables 1,697 1 108 - 31 1,837
Other payables and accruals 5,068 6 185 - - 5,259
Loan notes 0 - 45 - - 45
Other loans 1,419 - 16 - - 1,435
Deferred consideration 857 - - - - 857
Contingent consideration 4,113 - - - - 4,113
13,154 7 353 - 31 13,546
Foreign currency exposure (net) - 43 634 92 126 895
Sensitivity analysis
A 10% strengthening of the Pound against the following currencies at 31 March
2024 would increase/(decrease) profit or loss by the amounts shown below. This
analysis assumes that all other variables, in particular interest rates,
remain constant.
Increase/ Increase/
(Decrease) (Decrease)
£'000 £'000
2023/24 2022
Effects on profit after taxation/equity
United States Dollar:
- strengthened by 10% (6) (4)
- weakened by 10% 6 4
Euro:
- strengthened by 10% (7) (63)
- weakened by 10% 7 63
Australian Dollar:
- strengthened by 10% (10) (9)
- weakened by 10% 10 9
31. Commitments
As at 31 March 2024, the Group had capital expenditure commitments in respect
of leasehold improvements totalling £nil (2022: £36,625).
32. Contingencies
The Directors are not aware of any other contingencies which might impact on
the Company's operations or financial position.
33. Government grants
The following Government grants have been recognised during the period:
15 month period ended Year ended
31 Mar 31 Dec
2024 2022
£'000 £'000
Local authority Small Business Grants - 68
R&D Claims made under the SME Scheme - -
Total - 68
In addition, the Company benefitted from Business Rates Relief introduced for
the retail, hospitality and leisure industries. The benefit in the period
was £147k (2022: £458k)
None of the other income in the 15 Month Period Ended 31 March 2024 related to
government grants.
34. Events after the reporting period
Since the reporting date, the Group has acquired a further three Boom sites
from franchisees. Sites in Aldgate East and Wandsworth were acquired through
exercising termination rights under the respective franchise agreements. The
site in Aldgate East was acquired for a consideration of £0.1m with payment
being offset against amounts owed to the Group by the franchisee. The site in
Wandsworth was acquired for a consideration of £0.1m with payment being
offset against amounts owed to the Group by the franchisee. The Group also
acquired a Boom site in Bournemouth for a net consideration of £0.4m.
£0.1m was paid on completion and the balance is structured as a vendor loan
repayable over three years.
There are no other significant events since the reporting date that require
disclosure.
35. Ultimate controlling party
As at 31 March 2024, no one entity owns greater than 50% of the issued share
capital. Therefore,
the Company does not have an ultimate controlling party.
COMPANY INFORMATION
Directors
Richard Rose, Independent Non-Executive Chairman
Richard Harpham, Chief Executive Officer
Graham Bird, Chief Financial Officer
Martin Shuker, Non-Executive Director
Philip Shepherd, Non-Executive Director
Company secretary
Joanne Briscoe
Company number
10184316
Registered address
Ground Floor and Basement level
70-88 Oxford Street
London W1D 1BS
Independent auditors
HW Fisher LLP
Acre House
11-15 William Road,
London NW1 3ER
Nominated adviser and Broker
Singer Capital Markets Advisory LLC
One Bartholomew Lane
London
EC2N 2AX
Registrars
Link Market Services Limited
29 Wellington Street
Leeds
LS1 4DL
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