REG - XP Factory PLC - Trading Update

XP FactoryAnnouncement

25/01/2023 07:00

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RNS Number : 7414N  XP Factory PLC  25 January 2023

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.

 

25 January 2023

XP Factory Plc

("XP Factory", the "Company" or the "Group")

Trading Update

"Transformational year of growth - Group revenue tripled"

XP Factory, one of the UK's pre-eminent experiential leisure businesses
operating the Escape Hunt and Boom Battle Bar brands, is pleased to provide an
update on trading for the year to 31 December 2022.

Highlights:

 ·             A transformational year of growth:
 o                                 Strategic target of 27 open Boom Battle Bar sites achieved by year end - 11
                                   owner-operated and 16 franchised
 o                                 5 new owner-operated Escape Hunts opened, taking the total to 23 (plus 23
                                   franchised)
 o                                 Group revenue of £21.9m was more than 300% of 2021 (2021: £7.0m)
 o                                 Escape Hunt owner operated revenue of £9.9m was 64% ahead of 2021
 o                                 Boom Battle Bar owner-operated revenue of £8.8m in its inaugural year

 

 ·             Profitability being delivered in line with expectations:
 o                                            Escape Hunt EBITDA margins in excess of 35% in the year are driving a return
                                              on capital(1) in excess of 35% per annum
 o                                            Boom Battle Bar owner operated margins being delivered in line with
                                              anticipated maturity curve, supporting case for strong return on capital from
                                              sites
 o                                            Group Pre IFRS 16 Adjusted EBITDA(2) expected to be c.£2.6m, in line with
                                              expectations (2021 £0.1m)

 

 ·             Strategic milestones being delivered:
 o                                  Owner operated estate bolstered with Norwich Boom Battle Bar acquisition
                                    already paid back and Boom Battle Bar Cardiff continuing to perform strongly
 o                                  The Board estimate annualised run-rate revenues from the current business of
                                    circa £33m
 o                                  Fit-out funding facility of £3.3m agreed to support additional site growth in
                                    Boom Battle Bar in 2023
 o                                  Cash at year end of £3.2m
 o                                  Substantial majority of Boom Battle Bar earnout likely to be achieved

 

 1  Calculated as site level EBITDA divided by the total capex at sites, net
of landlord contributions

2 Adjusted EBITDA calculated before IFRS16 Adjustments, before restructuring
and exceptional costs and before pre-opening costs.

Trading

2022 represented a transformational year in which the Board set ambitious
targets to grow our newly acquired Boom Battle Bar business whilst continuing
to grow Escape Hunt.  The targets set for new site roll outs were achieved
and today the Group has critical mass in both its Escape Hunt and Boom Battle
Bar networks.

Escape Hunt

Sales for the Escape Hunt owner operated network rose 64 per cent to £9.9m
for the year achieving record levels of sales in the final quarter, and in
particular in December 2022, notwithstanding the 15 per cent VAT reduction in
the 2021 comparatives.  Whilst H1 of 2021 was impacted by site closures
during Covid, the growth in H2 2022 reflects 14.0 per cent underlying like for
like growth(3).

Margins in Escape Hunt have continued to surpass internal benchmarks, with the
site level EBITDA margin expected to be in excess of 35 per cent for the full
year.  The like for like EBITDA growth from the owner operated estate in H2,
after normalising for the VAT reduction received in 2021, is expected to be
approximately 53%.  This generated an annualised cash return(4) on invested
capital for the Escape Hunt UK owner operated estate of c.35 per cent.  The
Escape Hunt Franchise network similarly experienced an improved H2 compared to
2021.

Boom Battle Bar

2022 represented a 'maiden year' for Boom Battle Bar as we built the
foundations of a significant network.  26 Boom Battle Bar sites were open and
trading throughout December 2022, compared to only six in 2021.  The 27(th)
site, operated as a franchise site, opened on 28(th) December 2022.

Turnover from the Boom Battle Bar owner operated estate was approximately
£8.8m and royalty revenue from the franchise estate was approximately
£1.5m.   Notwithstanding the impact of train strikes which affected the
London sites on the strike days in particular, December performance gives us
significant cause for optimism.  Notably, our flagship site in Oxford Street,
London.  The site opened on 27 November 2022 and performance to date has been
very encouraging with the site recording the highest weekly sales of any site
in the network in only its third week of operation.   New sites are not
expected to be profitable on day one, as operational performance in new sites
gradually improves over time and revenue builds through awareness.  The older
sites in our owner operated portfolio are now delivering consistent margins
within the range the Board had previously expected, whilst newer sites are
tracking in line with an expected maturity curve.  The Board therefore remain
confident that the return on capital metrics from our owner operated Boom
Battle Bar estate will be highly attractive and likely to be in excess of the
excellent levels achieved in Escape Hunt, once landlord contributions are
taken into account.  We have recently agreed terms on a fit-out funding
facility of £3.3m to support additional site growth in Boom Battle Bar in
2023.  The facility is granted on a site by site basis and provides extended
credit over a 48 month period directly from the fit-out supplier at 5 per cent
over base rates.

Both acquisitions made during the year have performed very well.  The Norwich
site, acquired in August 2022, has already fully paid back the cost of
acquisition on a cash basis, whilst the Cardiff site, acquired in September
2022, remains a profitable, high turnover site which is expected to payback
the full acquisition price within two to three years.  In the 16 weeks
between the date of acquisition and the end of the year, Cardiff delivered
12.5 per cent like for like sales growth.

The turnover achieved within the Boom Battle Bar owner operated and franchise
estate, together with the successful expansion to 27 sites during the year is
expected to result in a substantial majority of the 25m earnout shares being
issued to the vendors. The final earnout will be determined through the audit
process, with the number of shares to be issued fixed and not impacted by
share price movements. There is no cash consideration payable in respect of
the earnout. Details of the earnout were set out in the Circular sent to
shareholders dated 4 November 2021.

The timing of site openings, together with the seasonal importance of October
to December, meant that the Group's performance in 2022 was heavily skewed
towards the last few weeks of the year and highly sensitive to any changes in
opening dates.  The increased mix of sites towards owner-operated (11 actual
vs 6 budgeted) paradoxically has a short-term adverse impact on profitability
as we lose the benefit of up-front franchise fees and have to account for
operating losses in the early weeks and months of operation while the
businesses mature. However, despite this, and despite December's train strikes
having an estimated adverse impact of approximately £0.35m on EBITDA, the
Group still expects to report an Adjusted EBITDA(5), before IFRS 16, in line
with expectations, at approximately £2.6m.  Cash balances at the year-end
were £3.2m.

Commenting, Richard Harpham, Chief Executive of XP Factory plc said "2022 has
been a transformational year.  We are delighted to have achieved our target
of having 27 Boom Battle Bar sites open by the end of 2022 together with the
further expansion of our Escape Hunt network. The platform that this combined
estate sets up for the Group forms the basis for a profitable and cash
generative group with very attractive return on capital metrics in future and
provides options for us to deliver significant growth for all our
stakeholders. In the current climate, we believe that our focus on providing
value for money and a highly differentiated social experience resonates
strongly."

 

3 After normalising for the VAT benefit in 2021

4 Calculated as site level EBITDA divided by the total capex at sites, net of
landlord contributions

(5) Adjusted EBITDA calculated before IFRS16 Adjustments, before restructuring
and exceptional costs and before pre-opening costs.

 

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)

 Shore Capital, NOMAD and Broker                                         +44 (0) 20 7408 4050

 https://www.shorecap.co.uk/ (https://www.shorecap.co.uk/)

 Tom Griffiths/David Coaten (Corporate Advisory)

 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 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 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/) )

 Facebook:   EscapeHuntUK       BoomBattleBar
 Twitter:    @EscapeHuntUK      @boombattlebar
 Instagram:  @escapehuntuk      @boombattlebar

 

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