XP Factory Plc (LON:XPF) Chief Executive Officer Richard Harpham caught up with DirectorsTalk to discuss the company’s FY25 results, highlighting double-digit growth across both Escape Hunt and Boom Battle Bar, as well as strategic expansion plans.
Q1: Richard, could you just walk us through the key financial highlights from the year?
A1: I guess the place to start obviously is that it was another year of really strong growth for the business. We posted revenues of almost £58 million, which on a comparable basis is 19% up from last year. I say on a comparable basis, some of your listeners will remember that we actually reported a 15-month period in our last accounting phase but if you normalise that out for the equivalent 12-month period to March, we would have been 19% up. On an EBITDA basis, we were 30% up so we reported £6.6 million of EBITDA this year versus £5.1 million on a comparable basis last.
So, at a high level, I guess those numbers are really strong against pretty decent comparables the year before, a very good performance for both businesses.
Within those numbers, both businesses were up on a like for like basis and both businesses were up on an absolute basis as well. Escape Hunt was 7% up in aggregate on sales, and within which 3.2% was driven by like for likes. Boom, 29% up year over year, 2.3% like for like there as well. So, a really strong performance for the business overall.
We’ve continued to see our customer reviews being absolutely at the top of the market. That’s something that’s been a real part of our DNA, if you like, now for good 5 or 6 years so great to see that continue. Great still to see continuing these returns on capital that sit north of 50% for both businesses and great to see flow through economics in both brands, which are working too. So, 44% EBITDA and Escape Hunt is, I would suggest, truly market leading. That’s a remarkable place to play up on the 42% that we’d had in the year prior, and indeed, Boom is making really good progress towards its 20% target, reporting as it did 18% EBITDA, up on the 17% from the prior year.
So, lots to be really excited about.
Q2: You mentioned the continued positive like for like sales growth, and that’s across both brands. Starting with Boom, what would you highlight as the main drivers of performance for that half?
A2: Well, in neither business, Boom nor Escape Hunt was at price so these were volume- driven like for like performances, and I think that’s a really important factor.
I suppose the one thing that you’re always going to point to is just the focus on team and the focus on customer. If you get it right for your team, such you’ve got people who are energetic, looking to work, looking to come back, looking to really bring the energy to both businesses, then you’re in a good place to start. Obviously, if you’re doing your very best by customer, then God willing, customers continue to come. So that volume driven like for like really was born of that.
We do always have a few initiatives that are going on as well. There was a little bit of expansionary capex in both businesses, which creates additional games lanes for Boom, additional rooms in some parts for Escape Hunt. That’s driving a benefit too.
Fundamentally, it was a really strong performance by our teams that flowed well into customers. Of course, last year was a relatively good macro environment as well, which, of course, helps for hospitality businesses like ours. I mean that more across the country, the macros generally, be it confidence in business, confidence in consumer spending last year was a little bit better as well. So that certainly helped.
Q3: Just turning to Escape Hunt, what were the main highlights there?
A3: Again, same thing. Absolute focus on customer delivery, making sure that we still continue to sit at the very, very top of the reviews rankings. That little bit of expansionary work where we’ve had a few additional games rooms added to existing sites has made a lot of a difference. Quite demonstrably, we were seeing latent demand in that business where we would be fully booked on a Friday night, Saturday, Sunday. So where, in a small number of cases, it was possible to build into our existing sites and create more games rooms, that of course has really benefited us as that additional capacity has been completely flowed into as well, so to speak. So again, really the key contributor.
Q4: Now, since period-end, you have opened several new sites, can you talk us through those openings and what they mean for XP Factory’s growth strategy?
A4: Well, if we start maybe with the growth strategy. We’ve laid out quite clearly a strategy for the near term, a three- year strategy, and we’ve said that we expect to see our business move through to a run rate level of sales of circa £100 million, and we expect to see that flow through at a circa £15 million on a normalised basis. Within that, of course, there are quite significant expectations on the number of sites that we will go on to build in that three/four-year period.
So, just as a reminder, we’ve suggested that for Escape Hunt, there might be somewhere between eight and ten sites to go after a year, there’s something in that ballpark. We see the market being worth at least a hundred here in the UK now, that’s gone up quite significantly from where we would have been discussing perhaps 18 months ago.
On the Boom side, we see fewer sites, but bigger, more prominent sites within key areas. The sites that really work for us within Boom, those ones that are highly prominent, that are really in very high dense areas that have got a lot of head flow, worker densities, consumer densities, lots of different dynamics. So, where we do great sites like that, we see extraordinary returns.
On that note, one of the sites we’ve opened at the back end of last year was Cambridge, we opened that both for Boom and for Escape Hunt, and in both cases, those sites have gone very, very much up at the upper end of our overall site scorings if you like. So, for both businesses, those sit in the top few really successful site for both.
At the back end of last year, we opened Worcester and Glasgow for Escape Hunt, both of those continue to trade really well. This year, we’ve opened already Canterbury for Escape Hunt, we’ve opened Reading for Boom, we’ve doubled up on our Resorts World site for Escape Hunt in Birmingham, and really, we had our first full week of trading in that doubled up site last week, which surpassed all of our expectations.
So, lots of progress towards that strategic goal of quite significant advances in top and bottom line.
Q5: Now, you’ve hinted at this already, but just looking ahead, what can investors expect from XP Factory over the next year?
A5: The strategy remains completely unchanged. We still expect to be making progress against that strategy, as I say, £100 million of run rate sales, £15 million of run rate EBITDA with a head office that’s decreasing as a percentage down somewhere between 10-12%. I should have added actually, we’re making good progress on that now with head office being down at 15% last year versus 17.15% a year before. So that’s all coming in the right direction.
You will see us obviously hoping to continually deliver at these, I would suggest, market-leading rates for return 50% on capital in both businesses. To be fair, you will also see us making sure that we’re managing cash appropriately, given that the macro environment right now is not as strong as it has been.
So, nothing about our fundamentals changes particularly, but it is a slightly tougher consumer environment at the moment. We reported on our first quarter showing a little bit of a slowdown in like for like, fortunately that’s picking back up again but we’re going to be cognisant of that. We’re going to make sure we manage our cash and manage our facilities while still continuing to grow.
