XP Factory : Annual Report and Accounts Jan – Dec 2022

xpfactoryplc

ANNUAL REPORT AND ACCOUNTS 2022

CONTENTS

		PAGE NUMBER
FINANCIAL AND OPERATIONAL HIGHLIGHTS	1
STRATEGIC REPORT	2
	CHAIRMAN'S STATEMENT	2
	AT A GLANCE	4
	OUR BRANDS	8
	OUR DIGITAL JOURNEY	14
	CHIEF EXECUTIVE'S REPORT	16
	FINANCIAL REVIEW	19
	CORPORATE RESPONSIBILITY	24
	PRINCIPAL RISKS AND UNCERTAINTIES	25
	STATEMENT BY THE DIRECTORS IN PERFORMANCE OF THEIR STATUTORY DUTIES IN ACCORDANCE
	WITH S172(1) COMPANIES ACT 2006	29
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2022	31
CORPORATE GOVERNANCE REPORT	36
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF XP FACTORY PLC	43
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	52
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	53
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	55
CONSOLIDATED STATEMENT OF CASH FLOWS	56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	57
COMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022	105
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022	106
COMPANY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2022	107
COMPANY INFORMATION	120

xpfactory plc

ANNUAL REPORT AND ACCOUNTS 2022

FINANCIAL AND OPERATIONAL HIGHLIGHTS 



FINANCIAL HIGHLIGHTS

• £22.8m Group revenue - up 228% vs prior year (2021: £7.0m)
• £2.6m adjusted EBITDA pre IFRS16 (2021: loss £0.6m)
• £9.8m Escape Hunt owner-operated revenue up 62% vs prior year (2021: £6.0m)
• £0.7m Escape Hunt franchise EBITDA up 75% vs prior year (2020: £0.4m)
• £9.5m Boom Battle Bar owner-operated revenue of in its first full year of operation
• £2.9m Boom Battle Bar franchise revenue
• £1.3m Group operating profit (2021: loss of £0.5m)
• 35% return on capital across Escape Hunt owner operated estate
• £3.2m cash at year end (2021: £8.2m) and £4.0m on 30 April 2023

OPERATIONAL AND STRATEGIC HIGHLIGHTS

• Successfully integrated Boom Battle Bar into XP Factory Group
• Opened 27 Boom sites by the end of 2022 - 11 owner operated and 16 franchised
• Acquired Boom franchise sites in Norwich and Cardiff
• Opened 4 new Escape Hunt sites and relocated 1 other, expanding estate to 23 venues (2021: 19)
• Achieved 97% customer satisfaction ratings across both brands
• Secured £3.3m credit facility with fit-out providers for new Boom owner operated sites

POST YEAR END

• 3 Boom sites and 1 Escape Hunt currently in build, with a developed pipeline underpinning site roll-out targets for the year
• 44% LFL sales growth delivered across Q1 2023 in the Boom sites that were trading last year, with operating metrics maturing as expected
• Boom franchise sites performing in line with the Board's expectations
• 32% LFL sales growth across the Escape Hunt owner operated estate, with overall trading ahead of the Board's expectations in Q1 2023

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ANNUAL REPORT AND ACCOUNTS 2022

Strategic Report

Chairman's Statement 



I am delighted to be reporting on a transformational and successful year for the group. We set ambitious targets at the start of 2022 to significantly expand our then newly acquired Boom Battle Bar estate from seven sites open when we acquired the business in November 2021 to having 27 Boom sites open by the end of 2022, whilst also expanding our Escape Hunt network. Through an enormous effort by the whole team, our target was achieved. Today we have a business which has critical mass and can justifiably claim to a leading experiential leisure business in the UK.

Whilst attention has been focused on integrating and expanding the Boom Battle Bar business, Escape Hunt has had an exceptional year. The strong performance delivered in the second half of 2021 after the long periods of lockdown during covid continued into 2022. Escape Hunt's performance has been steadily maturing and the site level margins being delivered has exceeded our original expectations. Investment into the intellectual property of the brand, being games and operating know how, has created a truly unique business operating a leisure concept that is increasingly recognised by the consumer. We believe there is significant further scope for growth and we will continue to nurture and develop Escape Hunt accordingly.

The Boom Battle Bar concept is still relatively new, but the early signs of success suggest there is a very attractive opportunity to grow and generate substantial shareholder value. The targets we set for growing the Boom business in 2022 posed a significant challenge for the team to build the organisational capability whilst maintaining the pace of expansion. Both our marketing

and operations capabilities have been boosted during the year and we have successfully created the platform we had aimed to achieve. Margins from the Boom owner operated estate have been steadily improving and it is pleasing to see the positive customer reviews being achieved.

The Board remains resolved to capitalise on the continued growth of experiential leisure, and we believe the foundations that have now been built will enable XP Factory to become a leader in developing the industry. In the short term, the group's strategy remains focused on building our UK presence, whilst we take some initial steps to test international markets. The return on capital opportunity for both our brands presents a significant shareholder value creation dynamic. For Boom in particular, returns can be further boosted by landlord contributions towards the fit out. Having achieved what we set out to do in 2022, our challenge now is to optimise the pace of roll-out within the constraints of the capital we have available. Escape Hunt has developed strong defensible characteristics through its proprietary games, operations and customer service. Our aim is to do the same within Boom so our focus in Boom will shift towards more owner operated sites whilst we continue to develop the operations, games management and customer service. This means investment into systems and processes and will also allow us to scale more easily. We believe that will set the business well for the future enabling us to more easily replicate owner operated success and also to create an attractive proposition for larger scale franchisees both in the UK and in international markets.

During the year we took the opportunity to buy back two franchised Boom sites in Cardiff and Norwich respectively. The returns profile from these acquisitions has to date been attractive with the acquisition of Boom Norwich already paid back. These opportunistic acquisitions follow similar successful acquisitions of our Escape Hunt Dubai master franchise in 2020 and the Escape Hunt French and Belgium master franchises in 2021, both of which have also delivered very attractive returns. Where these types of opportunities arise on favourable terms, we expect to take them up.

As the business grows, we are also mindful of our wider ESG objectives. The group's purpose is to bring people closer together through shared experiences as we believe that enriches lives. Consistent with this objective, it has been pleasing to see the seeds of a strong and growing corporate culture within the enlarged business. We have implemented a number of initiatives internally to support our people and our goal is to offer our workforce an enriching and supportive work environment. Our recruitment approach to create a more inclusive workforce is working as is evident from the rich mix of cultures and backgrounds across the organisation. There is also ongoing focus to implement local initiatives to improve our environmental habits and we work closely with our major suppliers with these objectives in mind.

During the year we made a number of changes to the board. Having served on the board since the company's formation, Karen Bach left in June 2022. Her support and insight in the early Escape Hunt journey and through the difficult period over the pandemic was much appreciated. At the same time we were delighted to welcome Martin Shuker and Philip Shepherd to the board. Martin brings a wealth of experience in the consumer leisure sector and brings considerable franchising know-how from his time at KFC. Philip, who is our audit committee chairman, likewise brings considerable experience in the experiential leisure sector. More details on each of the board members is set out on pages 32 - 33 of this report.

Finally, I wanted to thank all our people in the group without whose efforts and dedication the business could not have survived the pandemic nor successfully built the platform we have today.

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ANNUAL REPORT AND ACCOUNTS 2022

Chairman's Statement 



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 in the first quarter of 2023 has been strong, with the group as a whole performing ahead of management expectations. Escape Hunt had an exceptionally strong first quarter with like for like revenues, adjusted for the VAT benefit in 2022, up by 32%. Within this, it has been particularly satisfying to see the oldest seven sites in the UK estate delivering like for like growth of 18%. Margins continue to meet or beat our internal targets. The franchise estate has delivered modest year on year growth.

Boom is still a very new business with very little historic trading against which to compare. The four owner operated sites which traded the full Q1 in 2022 delivered like for like growth of 44%. The rest of the estate has also shown strong growth and continued progression towards the operating metrics we expect at maturity. The franchise estate has performed in line with expectations.

Overall, whilst mindful of the ongoing pressures on the consumer and on our cost base, the performance in Q1 of 2023 gives us cause for optimism.

Richard Rose

Chairman

23 May 2023

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ANNUAL REPORT AND ACCOUNTS 2022