REG - XP Factory PLC - Interim Results
19/03/2024 07:00
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RNS Number : 3145H XP Factory PLC 19 March 2024
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK
VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH
LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED. ON
PUBLICATION OF THIS ANNOUNCEMENT, THIS INFORMATION IS CONSIDERED TO BE IN THE
PUBLIC DOMAIN.
19 March 2024
XP Factory plc
("XP Factory", the "Company" or the "Group")
Interim Results
XP Factory plc (AIM: XPF), one of the UK's pre-eminent experiential leisure
businesses operating the Escape Hunt® and Boom Battle Bar® brands, is
pleased to announce its unaudited interim results for the twelve months ended
31 December 2023 ("2023").
Year ended 31 December 2023 (£'000) Year ended 31 December 2022 (£'000) % Change
Revenue 44,754 22,834 +96.0%
Gross Profit 28,720 14,712 +95.2%
Site level EBITDA 15,301 7,683 +99.2%
Pre IFRS 16 Adjusted EBITDA(1) 5,519 2,555 +116.0%
Adjusted EBITDA(1) 8,038 3,955 +103.2%
Operating profit / (loss) before fair value movements(2) 1,763 (4,938) nm
Loss per share (pence) (0.26) (0.66) nm
FINANCIAL HIGHLIGHTS
· Group revenue increased 96% to £44.7m (2022: £22.8m) demonstrating the
significant growth in scale:
- Escape Hunt® owner operated site revenue increased 38% to £13.5m
(2022: £9.8m)
- Boom Battle Bar® ("Boom") owner operated revenue increased 201% to
£28.6m (2022: £9.5m)
· Gross margin maintained at 64.2% (2022: 64.4%)
· Pre IFRS 16 Group Adjusted EBITDA(1) increased 116% to £5.5m (2022: £2.6m)
· Site level pre IFRS 16 EBITDA increased 64% to £13.6m (2022: £8.3m)
· Group Adjusted EBITDA rose 103% to £8.0m (2022: 4.0m)
· Operating profit(2) of £1.7m was £6.7m ahead of prior year (2022: loss
£4.9m)
· £9.5m cash generated from operations (2022: £3.2m) - £6.9m invested in
capital expenditure
· £4.4m cash balance at 31 December 2023 (31 Dec 2022: £3.2m)
OPERATING HIGHLIGHTS
· Double digit like-for-like(2) sales growth delivered across both
owner-operated brands:
o Boom: up 29 % in the 52 weeks to 31 December 2023
o Escape Hunt®: up 17% in the 52 weeks to 31 December 2023
· 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 site level EBITDA margin of 18% (2022: 13%)
· New owner operated Escape Hunt site opened in Woking in July 2023
· Escape Hunt® owner operated site level EBITDA margin of 42% (2022: 42%)
continue to exceed internal targets
· Pipeline of further site openings developed
· Continued strong like for like growth in first 10 weeks of 2024 underpins
confidence in the future
(1) Earnings before interest, tax, depreciation and amortization, calculated
before pre-opening losses, exceptional items, and other non-cash items. A
full reconciliation to operating loss is provided below in the text of the
announcement.
(2) Excluding £6.2m 'fair value gain' on revaluation of contingent
consideration in 2022 and £312k 'fair value loss' in 2023.
Richard Harpham, Chief Executive of XP Factory, commented: "I'm delighted with
the Company's performance over the last 12 months, and doubling in scale for
the second year running is testament to the extraordinary efforts of our team.
Both brands have significant runways ahead of them, and I'm excited to have
such a robust foundation in place from which to grow further".
Enquiries
XP Factory plc +44 (0) 20 7846 3322
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
Peter Steel
Alaina Wong
James Fischer
IFC Advisory - Financial PR +44 (0) 20 3934 6630
Graham Herring
Florence Chandler
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 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 franchised
sites in the UK that combine competitive socialising activities with themed
cocktails, drinks and street food in a high energy 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/) )
CHIEF EXECUTIVE'S REPORT
INTRODUCTION
2023 saw XP Factory deliver another year of transformational growth, with
sales almost doubling to £44.8m (2022: £22.8m), and pre-IFRS16 Adjusted
EBITDA increasing 116% to £5.5m (2022: £2.6m). A significant milestone was
achieved, as the business generated for the first time a positive Operating
Profit(3) of £1.7m, compared to a loss of £4.9m in 2022. While some of this
growth came from the four sites opened in the year (3 Boom, 1 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.
Following such an active year of site openings in 2022, focus in in 2023 was
much more about optimising the estate that we had built, and looking for
opportunities to create additional capacity where possible. With Boom the much
younger brand, we took a particularly analytical approach to its early
performance and identified several areas where we could improve operationally,
create better customer flows, and target a narrower group of guests in our
brand efforts. For Escape Hunt, we were able to build some additional rooms in
the existing estate, where peak hours saw us constrained by our capacity.
Across both brands, these efforts have yielded a high return on capital and
have further cemented our foundation for future growth.
We are extremely pleased with the resilience the business has demonstrated in
a challenging consumer environment and believe that our obsession with
affordability and customer satisfaction has paid dividends. Whilst the
experiential leisure sector continues to exhibit robust structural growth, we
are delighted that both Escape Hunt and Boom have delivered LFL sales growth,
return on capital employed ("ROCE"), customer review scores and margins
significantly ahead of their industry peers. Moreover, the double digit LFL
sales growth seen in even our earliest Escape Hunt® sites, some of which have
now been trading for six years, reinforces our confidence in the longevity of
the model. This has enabled us to re-assess the expected lives of games and
leasehold improvements, reducing the annual depreciation charge, described in
more detail below. Our overall strategy for the Group has not changed and we
look forward to leveraging the robust platform we have created to support
significant expansion in the UK and beyond.
3. Before Fair value adjustments relating to share based
contingent consideration. 2022: £6.2m gain; 2023: £0.3m loss
Boom Battle Bar®
Owner operated
Boom's owner-operated estate delivered £28.6m sales in the period, a 201%
increase versus £9.5m in 2022. The drivers behind this growth include £12.8m
from the full year effect of sites opened in 2022, 29% (£2.6m) LFL sales
growth from the maturing estate, £1.6m from the three new sites built towards
the back end of the year (Dubai, Southend and Canterbury), and £2.1 from the
franchisee sites which we bought back. Sales performance over the Christmas
period was remarkably strong, with corporate sales 393% ahead of prior year
representing 16% of sales (2022: 10%), and consumer demand causing all-time
sales records to be beaten in six consecutive weeks.
Margins within the business continue to improve in line with our expectations,
with gross profit margins improving to 58% for the year, up from 52% in 2022.
Site level EBITDA was 23% in the second half of 2023, resulting in a site
level EBITDA margin of 18% for the full year, with this latter number being
diluted by young sites making expected losses in their first few weeks of
trading. The trajectory is very much as anticipated and provides confidence
that our mid-term aspiration of a 20-25% EBITDA margin (pre IFRS 16) is
realistic.
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 sit materially ahead of the
competition and a ROCE which, at 48%, is market leading.
At 31 December 2023, the Group had 19 owner-operated Boom sites trading.
Franchise
Boom's franchise business delivered £1.9m revenue in the year. This
anticipated reduction of £1m vs prior year (2022: £2.9m) is largely from the
fact that the 2022 revenue included £0.9m relating to the build and
subsequent sale of a franchise unit for which there was an associated,
offsetting cost of sale. Other changes were driven by the full year effect
of sites opened in 2022, offset by Group having bought back Chelmsford,
Ealing, Liverpool, Watford and Glasgow in the period, and the full year effect
of the buy-backs of franchise sites in Cardiff and Norwich in 2022. These
vendor-financed deals are attractive to XP Factory, and we will continue to do
similarly if opportunities present themselves and if we believe the
risk-adjusted returns match the returns we can make from opening new sites.
Escape Hunt®
Owner-operated
In another encouraging year for Escape Hunt, the owner-operated estate
generated £13.5m sales, 38% ahead of prior year (FY22: £9.7m). Like for like
sales growth was 17% while the earliest cohort of seven sites, which have been
operating for over six years and are still playing their original games, grew
19% vs last year. The exceptional LFL growth underpins our confidence in the
enduring nature of the concept, and with escape rooms moving ever forwards in
the consumer psyche, we remain particularly optimistic about the future of the
brand.
Site level EBITDA margins held steady at 42%, even after absorbing meaningful
wage increases during the year. Rather than increasing prices to offset rising
cost lines, instead we sought to create capacity and drive volume, and in so
doing, we proved remarkably resilient, even in a challenging consumer market.
The bolstered corporate sales team delivered 40% more business than in the
prior year and the Christmas period again proved to be popular, with corporate
bookings representing 5% of total sales, a similar percentage to what has been
achieved previously. Our focus on delivering outstanding customer service
continued as always, and we were delighted to receive a market leading 99%
satisfaction rating, compared to an average of 88% for the leisure industry as
a whole and 94% for the competitive socialising sub sector.
The return on capital within Escape Hunt remains extremely high at 46%.
Interestingly we are typically seeing an upwards trend in the returns profile,
since the new sites being opened tend to mature more quickly now that the
brand is becoming better known, and our build costs are holding stable.
Within the year we opened a new Escape Hunt in Woking, bringing our UK site
total to 20, and our owner operated total to 23 with the inclusion of Dubai,
Paris and Brussels.
Franchise
Franchise sales of £0.8m represent a 9% increase vs prior year, and since the
units are almost all more than five years old, the performance further
demonstrates the longevity and reliance of the business.
STRATEGY
Overview
Following our recent expansion, the Group is the largest escape room and
competitive socialising operator in the UK. This is a fast growing and
resilient niche of the leisure sector, with our sites benefiting from industry
leading unit economics with further improvement potential. Our experience to
date demonstrates the opportunity to expand in the UK and the rationale for
taking our proven concept overseas with reduced execution risk. Our strategy
to deliver profitable growth is supported by a clear focus on the strength and
longevity of return on capital employed available, with accelerated payback
periods following initial investment.
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. Since the period end, we have 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.
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 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 year 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
· 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.
FINANCIAL REVIEW
Financial performance
Unaudited Group revenue in the twelve months to 31 December 2023 was £44.8m,
an increase of 96% over the same period in 2022. The increase reflects the
significant site expansion undertaken in 2022 together with strong like for
like sales growth. Escape Hunt® owner-operated revenue grew 38% to £13.5m,
reflecting the full year benefit of turnover from new sites opened in 2022
together with 17% like for like sales growth from the existing estate. Boom
owner operated revenue grew 201%, reflecting like for like sales growth of 29%
and the growth of the owner operated estate from two sites in January 2022 to
19 at 31 December 2023.
Group adjusted EBITDA pre IFRS16 adjustments grew strongly from £2.6m to
£5.5m and to £8.0m (2022: £4.0m) after IFRS 16 adjustments.
Twelve months ended Dec 2023 Twelve months ended Dec 2022
£'000 £'000
Adjusted EBITDA - pre IFRS 16 5,519 2,555
IFRS 16 adjustments 2,518 1,400
Adjusted EBITDA post IFRS 16 8,037 3,955
Amortisation of intangibles (712) (886)
Depreciation of Fixed assets (2,731) (2,825)
Depreciation of Right of Use assets (1,934) (1,453)
Rent credits recognised -
Loss on disposal of tangible assets (89) (126)
Profit on closure/modification of leases - 90
Branch closure costs and other exceptional costs (57) (399)
Branch pre-opening costs (734) (2,018)
Provision against loan to franchisee 4 (26)
Foreign currency gains / (losses) 18 (1,133)
IFRS 9 provision for guarantee losses 24 (68)
Share-based payment expense (63) (81)
Operating profit (loss) before fair value movement 1,763 (4,938)
Fair value movement on contingent consideration (312) 6,210
Operating profit 1,451 1,272
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 twelve months to 31 December 2023 reflects the new
estimates. The impact in the current period has been a reduction in
depreciation of approximately £2.3m compared to what would have been charged
under the previous estimates.
In 2022, the Group recorded a fair value gain on the revaluation of contingent
consideration of £6.2m. The treatment is an IFRS requirement and arose from
the fall in value of the expected contingent consideration due to the fall in
share price between the date on which Boom was acquired (November 2021) and
the end of 2022. The contingent consideration 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.
£734k of expenditure in the period related to pre-opening costs, largely for
the new Boom sites in Dubai, Canterbury and Southend, as well as the new
Escape Hunt® site in Woking, but also in relation to sites in Cambridge where
we plan both an Escape Hunt® and Boom Battle Bar® site, and Glasgow where a
new Escape Hunt® site is planned.
At a site level, Escape Hunt® owner operated segment continued to perform
strongly, delivering site-level EBITDA of £5.6m at a margin of 42%. Within
the Boom Battle Bar® owner operated segment, gross margins (inclusive of
variable labour) improved to 58% from 52% over the same period in 2022. The
underlying site level EBITDA margin of 18% (2022: 13%) reflects a site level
EBITDA of 23% in H2 2023 versus 11% achieved in the first six months of the
year. Whilst the overall result is still below our medium-term target of 20%
- 25%, the significant improvement over the first half reflects a strong
second half of the year in Boom's business and more significantly continuing
maturity of the sites where initial losses and lower margins generated from
more recently opened sites diluted the margins achieved in both 2022 and H1
2023.
2023 Escape Hunt® Escape Hunt® Boom Boom H1 2023
Owned Franchise Owned Franchise Unallocated £'000
Sales 13,470 791 28,583 1,909 - 44,753
Gross profit 9,459 791 16,560 1,909 - 28,719
Pre IFRS 16 Adjusted site level EBITDA 5,631 791 5,246 1,905 - 13,573
Site level EBITDA margin 42% 100% 18% 100% 30%
Centrally incurred costs (480) (94) (103) (27) (7,350) (8,054)
Pre-IFRS Adjusted EBITDA 5,151 697 5,143 1,878 (7,350) 5,519
IFRS adjustments (net of pre-opening) 564 - 1,954 - - 2,518
Post IFRS 16 Adjusted EBITDA 5,715 697 7,097 1,878 (7,350) 8,037
2022 Escape Hunt® Escape Hunt® Boom Boom 2022
Owned Franchise Owned Franchise Unallocated £'000
Sales 9,773 703 9,501 2,857 - 22,834
Gross profit (2,990) - (4,541) (591) - (8,122)
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 (63) (134) (188) (105) (5,449) (5,939)
Pre-IFRS Adjusted EBITDA 4,173 569 1,082 2,174 (5,443) 2,555
IFRS adjustments (net of pre-opening) 613 - 787 - - 1,400
Post IFRS 16 Adjusted EBITDA 4,786 569 1,869 2,174 (5,443) 3,955
Central costs of £8.1m reflect the full year effects of growth in 2022 to
support the larger estate, covering operations, marketing, finance and other
support functions as well as further growth in 2023 commensurate with the
addition of further sites. There has also been an impact from inflation as
salaries and other central costs have risen in line with market rates.
Interest costs of £294k reflect the fit out, finance lease and vendor finance
utilised.
Unaudited Group operating profit was £1.5m (2022: £1.3m). Loss before tax
was £0.5m leading to a basic loss per share of 0.26p. (2022: 0.66p loss)
Note that the 2022 results included a £6.2m gain on revaluation of contingent
consideration relating to the earn out payment for Boom.
Cashflow
The Group generated £9.5m of cash from operations (2022: £3.3m). £6.9m
was invested in plant and equipment and intangibles. This comprised total
investment of £5.3m within Boom owner-operated sites and £1.4m in Escape
Hunt® owner operated sites.
Within Boom, a total of £3.4m 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. £1.0m was directed to
existing sites to make improvements and expand capacity, which has provided
very attractive returns, £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 £1.4m 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. £0.3m was invested in extending
existing sites through the addition of new rooms, and £0.2m 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 £360k was paid relating to the
original Boom acquisition. In total, £2.1m of debt repayments were made
(inclusive of the Cardiff and MFT Capital deferred consideration payments),
whilst £2.2m 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 £61k 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.
£1.5m of vendor loans remained outstanding at 31 December 2023.
Cash at 31 December 2023 was £4.4m (31 Dec 2022: £3.2m), and net debt/net
cash, excluding IFRS 16 lease liabilities was £0.0m (2022: net cash £0.8m).
Balance sheet
As mentioned above, the Group has utilised various forms of funding to finance
the ongoing expansion of the estate both through building new sites and the
buy-back of franchise sites. As a result, gross debt inclusive of provisions
for deferred consideration increased from £2.4m to £4.5m.
Net assets as at 31 December 2023 were £24.5m (31 December 2022: £21.6m).
Group net debt was £0.0m (31 Dec 2022: net cash £0.8m).
As announced on 4 August 2023, the Company's year-end has been moved to 31
March. As a result, the Group's current financial year will comprise 15
months from 1 January 2023 to 31 March 2024. Following these unaudited
interim results for the twelve months to 31 December 2023, the Board intends
to report as follows, in each case with appropriate comparatives:
· Audited final results for the fifteen months to 31 March 2024 -
publication by 30 September 2024
· Unaudited interim results for the six months to 30 September 2024
- publication by 31 December 2024
POST PERIOD END TRADING AND OUTLOOK
Both Escape Hunt® and Boom Battle Bar® have continued to deliver strong like
for like sales growth in the first 10 weeks of 2024 (11% and 9% respectively),
and the new sites and recently acquired former franchise sites are performing
in line our anticipated maturity profiles. As we have come to expect, half
term in February proved particularly successful for Escape Hunt, and at Boom,
the operational focus over the last 12 months continues to yield the margin
and customer improvements that were targeted. We remain confident about the
outlook for the business and the board is confident that the results to 31
March 2024 will be in line with market expectations.
Richard Harpham
Chief Executive Officer
19 March 2024
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE CONDENSED INTERIM REPORT AND CONDENSED FINANCIAL STATEMENTS
The directors confirm that the condensed consolidated interim financial
information has been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', and that the Interim Report
includes a fair review of the information required by DTR 4.2.7R and DTR
4.2.8R, namely:
· an indication of important events that have occurred during the first twelve
months and their impact on the condensed consolidated interim financial
information, and a description of the principal risks and uncertainties for
the remaining three months of the financial year; and
· material related-party transactions in the first twelve months and any
material changes in the related-party transactions described in the last
Annual Report.
The directors of XP Factory plc are listed on page 33 of this report. A list
of current directors is maintained on the Company's web site:
https://www.xpfactory.com/investors/key-people
By order of the Board
Richard Rose
Non-Executive Chairman
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE TWELVE MONTHS ENDED 31 December 2023
Twelve months ended Twelve months ended
31 Dec 2023 31 Dec 2022
Note Unaudited Audited
Continuing operations £'000 £'000
Revenue 44,574 22,834
Cost of sales (16,034) (8,122)
Gross profit 28,720 14,712
Other income 42 74
Fair Value adjustment on contingent consideration (312) 6,210
Administrative expenses (26,999) (19,724)
Operating profit 1,451 1,272
Adjusted EBITDA 8,037 3,954
Amortisation of intangibles (712) (886)
Depreciation of tangible fixed assets (2,731) (2,825)
Depreciation of Right of Use assets (1,934) (1,453)
Rent credits / concessions recognised - 33
Loss on disposal of tangible assets (89) (126)
Profit on closure/modification of leases - 90
Branch closure costs and other exceptional costs (57) (399)
Branch pre-opening costs (734) (2,018)
Provision against loan to franchisee 4 (26)
Foreign currency gains / (losses) 18 (1,133)
Fair value movement on contingent consideration (312) 6,210
IFRS 9 provision for guarantee losses 24 (68)
Share-based payment expense (63) (81)
Operating profit 1,451 1,272
Interest received 144 82
Interest expense (294) (1,374)
Lease finance charges 13 (1,836) (1,086)
Loss before taxation (535) (1,106)
Taxation 7 104 112
Loss after taxation (431) (994)
Other comprehensive income:
Items that may or will be reclassified to profit or loss:
Exchange differences on translation of foreign operations (169) 363
Total comprehensive loss (600) (631)
Loss attributable to:
Equity holders of XP Factory plc (431) (994)
(431) (994)
Total comprehensive loss attributable to:
Equity holders of XP Factory plc (600) (631)
(600) (631)
Loss per share attributable to equity holders:
Basic (Pence) 6 (0.26) (0.66)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 December 2023
As at As at
20122012 20122012
31 December 31 December
2023 2022
Note Unaudited Audited
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 8 19,419 12,753
Right-of-use assets 9 20,329 17,842
Intangible assets 10 23,653 22,696
Finance lease receivable 9 1,366 1,273
Rent deposits 60 61
64,827 54,625
Current assets
Inventories 435 323
1,5941,
Trade receivables 897 1,934
Other receivables and prepayments 2,140 1,839
Cash and bank balances 4,431 3,189
7,903 7,285
TOTAL ASSETS 73,034 61,910
LIABILITIES
Current liabilities
Trade payables 3,157 1,837
Contract liabilities 2,095 1,029
Loans 14 2,185 1,057
Lease liabilities 13 1,819 1,073
Other payables and accruals 7,248 5,259
Provisions 12 41 4,970
16,545 15,215 15,225
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022
(continued)
As at As at
31 December 31 December
2022 2022
Note Unaudited Audited
£'000 £'000
Non-current liabilities
Contract liabilities 74 455
Provisions 12 525 413
Loans 14 2,269 423
Deferred tax liability 337 832
Lease liabilities 13 27,495 22,965
-
30,700 25,088
TOTAL LIABILITIES 47,245 40,313
NET ASSETS 25,485 21,597
EQUITY
Capital and reserves attributable to equity holders of XP Factory plc
Share capital 15 2,182 1,883
Share premium account 48,832 44,705
Merger relief reserve 4,756 4,756
Accumulated losses (30,742) (30,312)
Currency translation reserve 110 279
Capital redemption reserve 46 46
Share-based payment reserve 301 240
TOTAL EQUITY 25,485 21,597
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium account Merger relief reserve Currency translation reserve Capital redemption reserve Share-based payment reserve Accumulated losses Total
Convertible loan note reserve
Twelve months ended £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
31 December
2023
£'000
Balance as at 1,883 44,705 4,756 279 46 240 - (30,312) 21,597
1 January 2023
Loss for the period - - - - - - - (431) (431)
Other comprehensive income - - - (169) - - - - (169)
Total comprehensive loss - - - (169) - - - (431) (600)
Issue of shares 299 4,127 - - - - - - 4,426
Share-based payment charge - - - - - 62 - - 62
Transactions with owners 299 4,127 - - - 62 - - 4,488
Balance as at 31 December 2023 2,182 48,832 4,756 110 46 301 - (30,742) 25,485
Twelve months ended £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
31 December
2022
Balance as at 1,825 44,366 4,756 (83) 46 158 68 (29,318) 21,817
1 January 2022
Loss for the period - - - - - - - (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 charge - - - - - 82 - - 82
Transactions with owners 58 339 - - - 82 (68) - 411
Balance as at 31 December 2022 1,883 44,705 4,756 279 46 240 - (30,312) 21,597
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED 31 December 2022
Twelve months ended Twelve months ended
31 December 2023 31 December 2022
Unaudited Audited
Cash flows from operating activities Note £'000 £'000
Loss before income tax (535) (1,106)
Adjustments:
Depreciation of property, plant and equipment 8 2,731 2,825
Depreciation of right-of-use assets 9 1,934 1,453
Amortisation of intangible assets 10 712 886
Fair Value movement on contingent consideration 312 (6,210)
Provision against non-current assets (4) 26
Loss on write-off of property, plant and equipment 89 126
Share-based payment expense 81
Foreign currency movements (179) 348
Lease interest charges 12 1,836 1,086
Rent concessions received 12 - (33)
Profit on closure/modification of leases - (90)
Interest expense / (income) 151 1,292
Operating cash flow before working capital changes 7,109 684
Decrease in trade and other receivables 805 1,359
Increase in stock and WIP (48) 184
Increase in trade and other payables 2,646 1,571
Increase in provisions (816) (160)
Increase / (decrease) in deferred income (201) (317)
Cash generated / (used) in operations 9,495 3,321
Income taxes paid 17 -
Net cash generated / (used) in operating activities 9,512 3,321
Cash flows from investing activities
Purchase of property, plant and equipment 8 (6,750) (8,998)
Landlord incentive received 500 2,914
Purchase of intangibles 10 (181) (217)
Payment of deposits - (16)
Movement in Loans advanced to franchisees - 84
Acquisition of subsidiary, net of cash acquired (64) (436)
Interest received 103 82
Net cash used in investing activities (6,392) (6,587)
Cash flows from financing activities
Proceeds from issue of ordinary shares 13 - 6
Interest payments (346) (147)
Finance lease interest payments 12 (464) (444)
Finance lease capital payments 12 (1,850) (741)
Movements on loans 790 (451)
Net cash generated / (used) from financing activities (1,870) (1,777)
Net increase / (decrease) in cash and bank balances 1,250 (5,043)
Cash and cash equivalents at beginning of period 3,189 8,225
Exchange rate changes on cash held in foreign currencies (8) 7
3
Cash and cash equivalents at end of period 4,431 3,189
NOTES TO THE UNAUDITED INTERIM REPORT
FOR THE TWELVE MONTHS ENDED 31 December 2022
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.
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 Ground Floor and Basement Level, 70-88
Oxford Street, London, England, W1D 1BS.
The consolidated interim financial information represents the unaudited
consolidated results of the Company and its subsidiaries, (together referred
to as "the Group"). The Consolidated Interim Financial Statements are
presented in Pounds Sterling, which is the currency of the primary economic
environment in which the Company operates.
2. Basis of preparation
These interim consolidated financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting. They do not include all
disclosures that would otherwise be required in a complete set of financial
statements and should be read in conjunction with the 2022 annual report. The
statutory financial statements for the year ended 31 December 2022 were
prepared in accordance with International Financial Reporting Standards in
accordance with the requirements of the Companies Act 2006. The auditors
reported on those financial statements; their Audit Report was unqualified.
The interim financial information is unaudited and does not constitute
statutory accounts as defined in the Companies Act 2006.
The interim financial information was approved and authorised for issue by the
Board of Directors on 19 March 2024.
3. 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 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
thirty-nine-month period from the reporting date. The forecasts take into
account the Group's plans to continue to expand the network of both Boom
Battle Bar® and Escape Hunt® sites through organic growth. The forecasts
consider downside scenarios reflecting the potential impact of an economic
slowdown, delays in the roll out of sites and inflationary pressures. Based
on the assumptions contained in the scenarios considered and taking into
account mitigating actions that could be taken in the event of adverse
circumstances, 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.
4. Significant accounting policies
The Company has applied the same accounting policies, presentation, methods of
computation, significant judgements and the key sources of estimation of
uncertainties in its interim consolidated financial statements as in its
audited financial statements for the year ended 31 December 2022, which have
been prepared in accordance with International Financial Reporting Standards
in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006.
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, comprising 22 sites, where
all franchised branches are operating under effectively the same model;
2. The Escape Hunt® owner-operated branch business, which as at 31
December 2023 consisted of 21 Escape Hunt® sites in the UK, one in Dubai, one
in Paris and one in Brussels;
3. The Boom Battle Bar® franchise business, comprising 11 sites,
where all franchised branches operate under the same model within the Boom
Battle Bar® brand; and
4. The Boom Battle Bar® owner-operated business, which as at 31
December 2022 comprised 19 Boom Battle Bar® sites in the.
The Group operates on a global basis. As at 31 December 2023, the Company had
active Escape Hunt® franchisees in 10 countries. The Company 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.
Escape Hunt® Owner Escape Hunt® Franchise Unallocated Total
operated Boom Owner operated Boom Franchise
Twelve months ended 31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 13,470 791 28,584 1,909 - 44,754
Cost of sales (4,011) - (12,023) - - (16,034)
Gross profit 9,459 791 16,561 1,909 - 28,720
Site level operating costs (4,162) - (11,984) - - (16,146)
Other income 29 - 6 - - 35
IFRS 16 Adjustment 710 - 1,954 - - 2,664
IFRS 16 Adjustment - pre-opening 27 27
Site level EBITDA 6,036 791 6,564 1,909 - 15,300
Centrally incurred overheads (524) (133) (59) (28) (7,735) (8,479)
Depreciation and amortisation (1,862) (136) (2,973) (357) (49) (5,377)
Other Income - - - - 7 7
Operating profit / (loss) 3,650 522 3,532 1,524 (7,777) 1,451
Adjusted EBITDA 5,716 696 7,098 1,878 (7,351) 8,037
Depreciation and amortisation (941) (136) (1,960) (357) (49) (3,443)
Depreciation of right-of-use assets (921) - (1,013) - - (1,934)
Exceptional professional and branch closures (46) - 14 (1) (24) (57)
Pre-opening costs (117) - (617) - - (734)
Provision against guarantee losses - - - - 24 24
Reverse provision against loan to franchisee - - - 4 - 4
Fair Value Adjustment on Contingent consideration - - - - (312) (312)
Loss on disposal of assets (41) - (46) - (2) (89)
Foreign currency gains - (38) 56 - - 18
Share-based payment expenses - - - - (63) (63)
Operating profit 3,650 522 3,532 1,524 (7,777) 1,451
Interest income 144 144
Interest expense (294) (294)
Finance lease charges (298) - (1,538) - - (1,836)
Profit/(loss) from operations before tax 3,352 522 1,994 1,524 (7,927) (535)
Taxation (6) 3 24 83 - 104
Profit / (loss) for the period 3,346 525 2,018 1,607 (7,927) (431)
Other information:
Non-current assets 7,200 89 33,503 2,662 21,373 64,827
Escape Hunt® Owner Escape Hunt® Franchise Unallocated Total
operated Boom Owner operated Boom Franchise
Twelve months ended 31 December 2022 £'000 £'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 6,783 703 4,960 2,266 - 14,712
Site level operating costs (3,227) - (6,008) - - (9,235)
Other income 141 - - - - 141
IFRS 16 Adjustment 666 - 1,399 - - 2,065
Site level EBITDA 4,363 703 351 2,266 - 7,683
Centrally incurred overheads (156) (188) (188) (173) (6,847) (7,552)
Depreciation and amortisation (2,552) (136) (1,798) (439) (240) (5,165)
Other income - - - - 6,216 6,216
IFRS16 adjustment 90 - - - - 90
Operating profit / (loss) 1,745 379 (1,635) 1,654 (871) 1,272
Adjusted EBITDA 4,782 569 1,870 2,174 (5,440) 3,955
Depreciation and amortisation (2,102) (136) (795) (439) (240) (3,712)
Depreciation of right-of-use assets (450) - (1,003) - - (1,453)
Exceptional professional and branch closures (107) (31) (64) (13) (184) (399)
Profit on closure / modification of leases 90 - - - - 90
Pre-opening costs (375) - (1,643) - - (2,018)
Provision against loan to franchisee - (26) - - - (26)
Provision against guarantee losses - - - (68) - (68)
Fair Value Adjustment on Contingent consideration - - - - 6,210 6,210
Loss on disposal of assets (126) - - - - (126)
Foreign currency gains - 4 - - (1,137) (1,133)
Rent credits recognised in year 33 - - - - 33
Share-based payment expenses - - - - (81) (81)
Operating profit 1,745 380 (1,635) 1,654 (872) 1,272
Interest income / expense - - (56) 39 (1,275) (1,292)
Finance lease charges (229) - (857) - - (1,086)
Profit/(loss) from operations before tax 1,516 380 (2,548) 1,693 (2,147) (1,106)
Taxation - 2 - 110 - 112
Profit / (loss) for the period 1,516 382 (2,548) 1,803 (2,147) (994)
Other information:
Non-current assets 6,851 195 24,473 4,559 18,247 54,325
6. 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 loss per share is not presented as the potential issue of
ordinary shares from the exercise of options are anti-dilutive.
Twelve months Twelve months
ended ended
31 December 31 December
2023 2022
Unaudited Audited
£ £
Loss after tax (£000) (431) (994)
Weighted average number of shares:
- Basic and diluted 162,955,895 150,043,518
Loss per share (pence)
- Basic and diluted (0.26) (0.66)
7. Taxation
The tax charge is based on the expected effective tax rate for the year. The
Group estimates it has tax losses of approximately £24.5m as at 31 December
2023 (31 Dec 2022: £22.4m) which, subject to agreement with taxation
authorities, would be available to carry forward against future profits. The
estimated tax value of such losses amounts to approximately £6.1m (31 Dec
2022: £5.6m).
8. Property, plant and equipment
Leasehold property Office equipment Computers
Furniture and fixtures Games Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 31 December 2022 13,190 51 325 1,609 6,761 21936
Additions arising from purchases 3,016 28 282 1,238 2,186 6,750
Disposals (201) - (8) (129) (89) (427)
Additions arising from acquisition 2,026 25 28 373 246 2,698
Reclassification 400 - - - - 400
Conversion differences (27) - (1) 13 5 (10)
As at 31 December 2023 18,404 104 626 3,104 9,109 31,347
Accumulated depreciation
At 31 December 2022 (4,167) (50) (147) (528) (4,291) (9,183)
Depreciation charge (1,469) (3) (108) (383) (769) (2,732)
Disposals 180 - 8 110 41 339
Additions arising from acquisitions (340) (4) (2) (29) (7) (382)
Conversion differences 35 1 2 (10) 2 30
As at 31 December 2023 (5,761) (56) (247) (840) (5,024) (11,928)
Carrying amounts
At 31 December 2022 9,023 1 178 1,081 2,470 12,753
At 31 December 2023 12,643 48 379 2,264 4,085 19,419
9. Right-of-use assets
As at As at
31 December 31 Dec
2023 2022
£'000 £'000
Land and buildings - right-of-use asset cost b/f 20,484 8,920
Closures / leases ended for renegotiation during the period - (411)
Additions during the year, including through acquisition 5,634 15,018
Lease incentives (1,213) (2,914)
Less: Accumulated depreciation b/f (2,642) (1,318)
Depreciation charged for the period (1,934) (1,453)
Net book value 20,329 17,842
The additions in the period relate to new leases signed together with leases
recognised under IFRS 16 at the point of acquisition. The Group leases land
and buildings for Escape Hunt® and Boom 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 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.
Year ended Year ended
Finance lease receivable 31 December 31 Dec
2023 2022
£'000 £'000
Balance at beginning of period 1,273 -
Additions during the year - 1,234
Interest charged 93 39
Payments received - -
Balance at end of period 1,366 1,273
10. Intangible assets
Goodwill Trademarks and patents Intellectual property Internally generated IP Franchise agreements App Quest Portal Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 31 December 2022 19,640 86 10,195 1,864 4,623 100 377 36,885
Additions - - - 101 - - 80 181
Disposals - - - - - - - -
Additions arising from acquisition 1,785 - - - - - - 1,785
Re-analysis 1,339 - - - (1,636) - - (297)
Conversion differences - - - - - - - 0
As at 31 December 2023 22,764 86 10,195 1,965 2,987 100 457 38,554
Accumulated amortisation
At 31 December 2022 (1,393) (73) (10,195) (971) (1,143) (100) (314) (14,189)
Amortisation - (7) - (206) (460) - (38) (712)
Disposals - - - - - - - -
Additions arising from acquisitions - - - - - - - -
Conversion Differences - - - - - - - -
At 31 December 2023 (1,393) (80) (10,195) (1,177) (1,603) (100) (352) (14,901)
Carrying amounts
At 31 December 2022 18,247 13 - 893 3,480 - 63 22,696
At 31 December 2023 21,371 6 - 788 1,384 - 105 23,653
11. Business Combinations
Acquisition of BBB Chelmsford Ltd and BBB Ealing Limited
On 8 June 2023 XP Factory Plc acquired 100% of the equity interest in BBB
Chelmsford Limtied, and 100% of the equity interest in BBB Ealing Limited from
the same seller and thereby obtaining control of both entities. BBB Chelmsford
Ltd runs a Boom Battle Bar® site situated in Chelmsford. BBB Ealing Ltd runs
a Boom Battle Bar® site in Ealing and previously operated as franchise sites.
The total purchase consideration is subject to potential adjustment based on a
completion accounts process, with any adjustment being accounted for through
varying the vendor loan amount. The vendor loan carries interest at 5% and
is being paid off in twenty four equal monthly instalments. The balance
payable as at 31 December 2023 was £230.2k, which is based on an initial
assessment of the completion accounts balances. The Completion accounts are
due to be finalized on or before 1 June 2024.
The details of the business combination and the allocation of the estimated
fair value of the consideration are as follows:
BBB Chelmsford Ltd BBB Ealing Ltd Total
£'000 £'000 £'000
Fair value of consideration transferred
Amounts settled in cash 78 7 85
Vendor loan 254 191 445
Total purchase consideration 332 198 530
BBB Chelmsford Ltd 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 62 - 62
Property, plant and equipment 630 - 630
Right of use assets - 917 917
Trade payables (64) - (64)
Inventory 15 15
Lease liabilities - (1,077) (1,077)
Loans (534) - (531)
Other payables (441) 160 (281)
Net identifiable assets acquired (234) - (234)
Goodwill arising on consolidation - 566 566
Total (234) 566 332
There were no trade receivables present in the company as at the date of
acquisition.
The excess of the total consideration over the net identifiable assets
acquired of £566k has been analysed and it has all been recognised as
goodwill. This goodwill is primarily related to growth expectations, expected
future profitability and the expertise and experience of BBB Chelmsford'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 £985k and a net profit of 112k in
the period between acquisition and 31 December 2023.
BBB Ealing Ltd 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 12 - 172
Property, plant and equipment 673 - 673
Right of use assets - 1,177 1,177
Trade payables (193) - (193)
Inventory 12 12
Lease liabilities - (1,483) (1,483)
Loans (426) - (426)
Other payables (732) 306 (436)
Net identifiable assets acquired (584) - (584)
Goodwill arising on consolidation - 782 782
Total (584) 782 198
There were no trade receivables present in the company as at the date of
acquisition.
The excess of the total consideration over the net identifiable assets
acquired of £782k has been analysed and it has all been recognised as
goodwill. This goodwill is primarily related to growth expectations, expected
future profitability and the expertise and experience of BBB Ealing'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 £638k and a net loss of 42k in the
period between acquisition and 31 December 2023.
Acquisition of BBB Liverpool Ltd
Effective 1 November 2023 XP Factory Plc acquired 100% of the equity interest
in BBB Liverpool Limited thereby obtaining control of the entity. BBB
Liverpool Ltd runs a Boom Battle Bar® site situated in Liverpool and
previously operated as a franchise site.
The total purchase consideration is subject to potential adjustment based on a
completion accounts process, with any adjustment being accounted for through
varying the deferred consideration. The deferred consideration carries no
interest and is repayable in a single instalment at the later of six months
after completion and the date on which the completion accounts are
finalised. The deferred consideration provided as at 31 December 2023 was
£31k, which is based on an initial assessment of the completion accounts
balances. .
The details of the business combination and the allocation of the estimated
fair value of the consideration are as follows:
Total
£'000
Fair value of consideration transferred
Amounts settled in cash 69
Deferred consideration 31
Transfer of debt payable to XP Factory group (85)
Total purchase consideration 15
BBB Liverpool Ltd Book Value Fair Value Adjustment £'000 Fair Value £'000
£'000
Assets and liabilities recognised as a result of the acquisition
Cash 6 - 6
Other receivables and deposits 13 - 19
Property, plant and equipment 278 - 278
Trade payables (37) - (37)
Inventory 3 - 3
Loans (132) - (132)
Other payables (282) 112 (108)
Net identifiable assets acquired (150) - (38)
Goodwill arising on consolidation - 53 53
Total (150) 165 15
There were no trade receivables present in the company as at the date of
acquisition.
The excess of the total consideration over the net identifiable assets
acquired of £54k has been analysed and it has all been recognised as
goodwill. This goodwill is primarily related to growth expectations, expected
future profitability and the expertise and experience of BBB Ealing'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 £145k and a net profit of 36k in
the period between acquisition and 31 December 2023.
Acquisition of BBB Five Ltd
Effective 1 November 2023 XP Factory Plc acquired 100% of the equity interest
in BBB Five Limited thereby obtaining control of the entity. BBB Five Ltd runs
a Boom Battle Bar® site situated in Glasgow and previously operated as a
franchise site.
The total purchase consideration is subject to potential adjustment based on a
completion accounts process, with any adjustment being accounted for through
varying the vendor loan. The vendor loan carries interest at 5% per annum
and is repayable in monthly instalments over 18 months. The outstanding
vendor consideration provided as at 31 December 2023 was £65k, which is based
on an initial assessment of the completion accounts balances. .
The details of the business combination and the allocation of the estimated
fair value of the consideration are as follows:
Total
£'000
Fair value of consideration transferred
Amounts settled in cash 10
Vendor loan 65
Total purchase consideration 75
BBB Five Ltd Book Value Fair Value Adjustment £'000 Fair Value £'000
£'000
Assets and liabilities recognised as a result of the acquisition
Cash 59 59
Other receivables and deposits 3 3
Property, plant and equipment 230 230
Right of use assets 1,576 1,576
Trade payables (40) (40)
Inventory 27 27
Lease liabilities (1,825) (1,825)
Loans (199) (199)
Other payables (390) 249 (141)
Net identifiable assets acquired (310) - (310)
Goodwill arising on consolidation - 385 385
Total (310) 385 75
There were no trade receivables present in the company as at the date of
acquisition.
The excess of the total consideration over the net identifiable assets
acquired of £782k has been analysed and it has all been recognised as
goodwill. This goodwill is primarily related to growth expectations, expected
future profitability and the expertise and experience of BBB Ealing'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 £273k and a profit of 112k in the period
between acquisition and 31 December 2023.
Acquisition of Boom Battle Bar Watford
Effective 10 December 2023 XP Factory Plc acquired the operating assets and
trade relating to the Boom Battle Bar® site in Watford ("Boom Watford").
The total purchase consideration is subject to potential adjustment based on a
completion accounts process, with any adjustment being accounted for through
varying the vendor loan. The vendor loan carries no interest and is
repayable in monthly instalments over 24 months. The outstanding vendor
consideration provided as at 31 December 2023 was £229k, which is based on an
initial assessment of the completion accounts balances.
The details of the business combination and the allocation of the estimated
fair value of the consideration are as follows:
Total
£'000
Fair value of consideration transferred
Amounts settled in cash 134
Vendor loan 229
Total purchase consideration 363
Boom Battle Bar® Watford Book Value Fair Value Adjustment £'000 Fair Value £'000
£'000
Assets and liabilities recognised as a result of the acquisition
Other receivables and deposits 9 - 9
Property, plant and equipment 509 - 509
Trade payables (23) - (23)
Inventory 7 - 7
Loans (95) - (95)
Other payables (44) - (44)
Net identifiable assets acquired 363 - 363
Goodwill arising on consolidation - - -
Total 363 - 363
There were no trade receivables present in the company as at the date of
acquisition.
Boom Watford contributed revenues of £93k and a profit of 35k in the period
between acquisition and 31 December 2023.
12. Provisions
As at As at 31 Dec 2022
31 December 20223
£'000 £'000
Provision for contingent consideration - 4,113
Provision for deferred consideration 41 857
Dilapidations provisions 455 314
Provision for financial guarantee contracts 70 94
Other provisions - 5
Provisions at end of period 566 5,383
Due within one year 41 4,970
Due after more than one year 525 413
566 5,383
The movement on provisions in the period can be analysed as follows:
Contingent consideration Deferred consideration Dilapi-dations Financial guarantee contracts Other Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost:
As at 31 December 2021 9,056 637 162 26 5 9,886
Additions arising from acquisition - 600 - - - 600
Provisions recognised 1,267 - 152 68 - 1,487
Fair value revaluation (6,210) - - - - (6,210)
Releases recognised - (380) - - - (380)
As at 31 December 2022 4,113 857 314 94 5 5,383
Additions arising from acquisition - 41 - -- 41
Provisions recognised - 112 141 253
Releases in the year (4,133) (969) - (24) (5) (5,111)
As at December 2023 - 41 455 70 - 566
13. Lease liabilities
Twelve months ended Twelve months ended
31 December 2023 31 December 2022
£'000 £'000
In respect of right-of-use assets
Balance at beginning of period 24,039 8,405
Closures / leases ended for renegotiation during the period - (501)
Additions during the period 5,734 16,252
Interest Incurred 1,836 1,086
Repayments during the period (2,331) (1,186)
Rent concessions received - (33)
Reallocated from accruals and trade payables 36 16
Lease liabilities at end of period 29,314 24,039
As at As at
31 December 30 Dec
2022 2021
£'000 £'000
Maturity
< 1month 256 76
1 - 3 months 442 119
3 - 12 months 1,122 878
Non-current 27,494 22,965
Total lease liabilities 27,314 24,039
14. Loans and loan notes
As at As at
31 December 31 December
2023 2022
£'000 £'000
Amounts due within one year
Vendor loans and loan notes 996 472
Fit out finance, including equipment finance leases 802 361
Bank and other borrowings 387 224
2,185 1,057
Amounts due in more than one year:
Vendor loans and loan notes 489 -
Fit out finance 838 333
Bank and other borrowings 942 90
As at end of period / year 2,269 423
Total at end of period / year 4,454 1,480
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 are unsecured and carry 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 acquisition of Boom
East Limited (Boom Norwich) also utilised vendor financing, of which £8k was
outstanding at 31 December 2022. All these amounts were fully repaid during
the year.
During the year, the Group acquired BBB Chelmsford Limited, BBB Ealing Ltd,
BBB Liverpool Limited, BBB Five Limited and the trade and business of Boom
Battle Bar® Watford, more details of which are set out in note 11. Some of
these acquisitions had founder loans which have been taken on as part of the
acquisitions, and in all cases part of the purchase prices has been funded by
further vendor loans. Total vendor loans outstanding at 31 December 2023 was
£1,485k.
The Group has utilised asset backed fit-out finance and has used an unsecured
loan to fund fit outs in certain Boom and Escape Hunt® locations, has a
number of small bank loans in certain subsidiaries, and uses a loan facility
to spread the cost of insurance over the year.
15. Share capital
Twelve months Year
ended ended
31 December 31 December
2023 2022
Unaudited Audited
£'000 £'000
As at beginning of period / year 1,833
- 150,633,180 (2022: 146,005,098)
Ordinary shares of 1.25 pence each 1,825
Issued during the period / year 299
- 23,924,420 Ordinary shares (2022: 4,628,082 Ordinary Shares) 58
As at end of period / year 2,182
- 174,557,600 (2021: 150,633,180)
Ordinary shares of 1.25 pence each 1,883
During the twelve months ended 31 December 2023 the Company issued 23,924,420
to MFT Capital Limited in relation to the deferred earn-out consideration for
the acquisition of Boom Battle Bars, as described in the announcement on 3
November 2021.
Share option and incentive plans
XP Factory plc Enterprise Management Incentive Plan
On 15 July 2020, the Company established the XP Factory 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 in the
period up to 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 by the expiry date, the options will expire. 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 31-Jul-30
Exercise price 7.5p 35.0p 35.0p 15.0p
Qualifying awards - number of shares under option 13,333,332 700,001 533,334 0
Non-qualifying awards - number of shares under option 2,400,000 0 0 666,666
First vesting price 11.25p 43.75p 43.75p
Second vesting price 18.75p 61.25p 61.25p 18.75p
Third vesting price 25.00p 70.00p 70.00p 25.00p
Proportion of awards vesting at first vesting price 33.33% 33.33% 33.33% 26.25p
Proportion of awards vesting at second vesting price 90.00% 90.00% 90.00% 33.33%
Proportion of awards vesting at third vesting price 100% 100% 100% 90.00%
Options vested 15,733,734 - -
As at 31 December 2023, 17,366,666 options were outstanding under the 2020 EMI
Plan (31 Dec 2022: 16,700,000) exercisable at the prices shown above. No
options were exercised during the period, and no options expired or had
lapsed. As at 31 December 2023 15,733,734 options had vested.
The sum of £45,422 has been recognised as a share-based payment and charged
to the profit and loss during the period (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:
Table 2
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
Risk free rate -0.05% 1.55% 1.55% 3.50%
The performance conditions were taken 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 equaling
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 December 2023 is 21.9 months (31 Dec 2022: 31.7 months).
An option-holder has no voting or dividend rights in the Company before the
exercise of a share option.
Escape Hunt® Employee Share Incentive Scheme
In November 2020, 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.
In the twelve months to 31 December 2023 182,080 matching shares were awarded
through the scheme (2022: 119,831). A charge of £16.3k has been recognised
through the profit and loss account. (2022: £12.6k)
16. Key management personnel compensation
Twelve months Twelve months
ended ended
31 December 31 December
2023 2022
Unaudited Unaudited
£'000 £'000
Salaries and benefits (including directors) 898 653
Share-based payments 20 40
Social security costs 151 90
Other post-employment benefits 18 26
Less amounts capitalised (108) (85)
Total 979 732
17. Related party transactions
During the period under review, the Directors are not aware of any significant
transactions with related parties (twelve months ended 31 December 2022: nil).
18. Subsequent Events
There are no material subsequent events requiring disclosure.
19. Principal Risks and uncertainties
A detailed description of the principal risks and uncertainties associated
with the Group can be found on pages 25 to 28 of the 2022 Annual Report and
remain relevant at the date of this interim report. A copy of the 2022 Group
Annual Report is available on the Group's website at
https://www.xpfactory.com/investors/documents
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
Boom Battle Bar® Oxford Street
Ground Floor and Basement Level, 70-88 Oxford Street
London, England
W1D 1BS
Independent auditors
HW Fisher LLP
Acre House
11-15 William Rd
London
NW1 3ER
Nominated adviser and broker
Singer Capital Markets Advisory LLP
One Bartholomew Lane
London
EC2N 2AX
Registrars
Link Market Services Limited
29 Wellington Street
Leeds
LS1 4DL
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