TIDMXPF
RNS Number : 3171N
XP Factory PLC
31 May 2022
31 May 2022
XP Factory plc (AIM: XPF)
("XP Factory", the "Company" or the "Group")
Final results for the year ended 31 December 2021
XP Factory is pleased to announce its audited final results for
the year ended 31 December 2021.
FINANCIAL HIGHLIGHTS
-- Group revenue up 163% at GBP7.0m (2020: GBP2.7m)
-- Adjusted EBITDA of GBP2.7m (2020: loss GBP1.4m) inclusive
of GBP2.6m R&D credits, net of associated costs
-- Pre-IFRS 16 Adjusted EBITDA profit of GBP0.5m in the six
months to 31 December 2021 (2020: loss GBP0.9m demonstrating
critical mass achieved
-- Escape Hunt(TM) owner-operated revenue up 189% to GBP6.0m
(2020: GBP2.1m)
-- GBP3.4m positive Site Level EBITDA from owner-operated
sites (2020: GBP0.4m) was driven by a strong bounce back
in trade post lifting of Covid restrictions in mid-May
2021
-- Franchise EBITDA of GBP0.3m (2020: GBP0.3m)
-- Group operating loss of GBP0.5m (2020: loss of GBP6.4m)
helped by strong H2 trading and GBP2.6m R&D credits (net)
-- GBP16.1m net of expenses raised through an equity placing
and open offer to fund acquisition of Boom Battle Bar
in November 2021
-- Cash at year end GBP8.2m (2020: GBP2.7m) and GBP6.9m on
30 April 2022
OPERATIONAL AND STRATEGIC HIGHLIGHTS
-- Successful acquisition of Boom Battle Bar and renaming
of the Group to XP Factory Plc in November 2021
-- Post-acquisition, 1 new Boom owner operated site opened
at the O2 Arena and 1 new franchise site in Coventry opened
in December bringing estate to 2 owner operated and 7 franchise
sites at year end
-- Escape Hunt owner-operated estate expanded by 46% to 19
sites (2020: 13 sites), including Watford, Kingston, Lakeside,
Milton Keynes and the acquisition of the French master
franchise with owner operated sites in Paris and Brussels
-- New games successfully developed and launched at new Escape
Hunt sites
-- All nine Escape Hunt sites open for more than 12 months
were named by TripAdvisor(TM) as a Travellers' Choice Winner
in August 2021 and continued five star TripAdvisor(TM)
ratings across the UK estate
-- Acquisition of Middle East master franchise in Q4 2020
fully paid back within 12 months
POST YEAR
-- In the year to date, 6 new Boom sites opened, including
owner operated site in Exeter, co-located with Escape Hunt,
and franchise sites in Watford, Ipswich, Glasgow, Aldgate
East and Bath
-- Further 6 Boom sites in build and 10 contracts exchanged
or in final legals underpinning site roll-out targets for
the year
-- Site level economics for Boom being proven by performance
at owner-operated sites
-- Boom franchise sites performing in line with the Board's
expectations
-- Escape Hunt sites performing well with UK owner operated
estate and traded ahead of the Board's expectations in
Q1 2022
Richard Harpham, Chief Executive of Escape Hunt, commented :
"2021 was an important year in our journey. It marked the
inflexion point at which we delivered sufficient critical mass to
become profitable and was the year where we best set ourselves up
to become a key player in the leisure space with the acquisition of
Boom. The customer demand we have seen since Covid restrictions
were lifted has been overwhelmingly positive and has reinforced our
belief that businesses like ours serve an important role in
bringing people together. With the Escape Room category becoming
much more a part of the mainstream consumer psyche, and with
competitive socialising being such a fast growing sub-sector within
the leisure market, we feel that XP Factory is perfectly positioned
through its operating brands Escape Hunt and Boom respectively.
With such a well-developed pipeline of sites, such encouraging
demonstrable unit economics in both brands, and such a
well-positioned business in terms of customer demand, we have
reason to be highly optimistic about the future for XP
Factory."
Enquiries:
XP Factory Plc
https://www.xpfactory.com/
Richard Harpham (Chief Executive
Officer)
Graham Bird (Chief Financial
Officer)
Kam Bansil (Investor Relations) +44 (0) 20 7846 3322
Shore Capital, NOMAD and Broker
https://www.shorecap.co.uk/
Tom Griffiths/David Coaten (Corporate
Advisory) +44 (0) 20 7408 4050
IFC Advisory - Financial PR
https://www.investor-focus.co.uk/
Graham Herring
Florence Chandler +44 (0) 20 3934 6630
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/ )
STRATEGIC REPORT
Chairman's Statement
Positioned for success
2021 was a transformative year with two very different halves
for XP Factory Plc, and one which saw us exit the year better
positioned than ever before to capitalise on the fast growing
market for experiential leisure. We achieved a significant
milestone as for the first time, the business delivered positive
EBITDA in the 6 months to 31 December 2021, with Escape Hunt
breaking multiple weekly sales records. Combined with the
acquisition of Boom Battle Bar in November 2021, a very healthy
pipeline of sites and a significantly strengthened balance sheet,
this leaves us poised for significant growth and cause for optimism
about the future.
Escape Hunt
Entering 2021 in national lockdown, with our venues closed and
our operating teams largely on furlough, the first half of the year
was very challenging for businesses in our sector. However, we
never wavered from our core belief that as social beings, we crave
togetherness and interaction, and the Board focused its efforts on
best preparing the business to be able to deliver the safe and
enjoyable experiences that our customers had been missing for so
many months, once restrictions were lifted. As customers returned
to the venues, I was delighted to see sales exceeding the Board's
expectations, but was also extremely proud of our teams who worked
tirelessly to deliver exceptional service despite the difficult
conditions. The performance within Escape Hunt continued into 2022,
with Q1 being ahead of expectations.
The mental wellbeing of our teams was at the forefront of our
minds throughout the periods when they were on furlough, and we
made sure to maintain very regular contact and keep them engaged
with the business. Our extensive re-training once restrictions were
lifted allowed our staff to feel comfortable on their return, and
we have been happy with how natural the transition back to work has
been.
In preparation for reopening our venues, we invested further in
the software platform used in sites to deliver the Escape Hunt
experiences, and began to see the benefits of increased operating
leverage and efficiency as customers returned. When we first
launched the business in 2017, we required one games master for
every game that was running, whereas today, one games master can
operate up to 3 games simultaneously. This software, combined with
the modular design of our games rooms which we now install in
sites, has dramatically simplified the build process at new sites,
and our new units opened in Milton Keynes, Watford, Kingston and
Lakeside bear testament to this.
The second half of the year exceeded even our own expectations,
as the business was well placed to exploit pent up customer demand
and trading in sites was hugely encouraging. The investment we made
in growing our estate substantially throughout 2020 allowed us to
deliver group profitability over the 6 months to 31 December 2021,
and we were delighted to see substantial growth in the mature
sites, as well as stellar performances in the new venues, where
sales were ramping up faster than we had seen before.
It was also good to see our investment in innovation being
rewarded with a GBP2.6m R&D grant from HMRC (net of fees), and
this, when combined with the underlying trading from sites,
contributed to a year which delivered GBP2.7m Adjusted EBITDA,
despite being closed for the majority of the first 6 months.
Acquisitions
We remain grateful to those of our investors who stood by and
supported us when COVID presented an existential threat to our
industry, and particularly we thank them for supporting the raise
of GBP1.4m (before expenses) in January 2021, which allowed us to
buy back our Escape Hunt French and Belgian master franchise and
provided us with further working capital. This acquisition is
proving fruitful for the business, with the existing sites
returning to their pre-COVID levels of demand, and with avenues for
future growth being explored. As with the acquisition of the Dubai
franchise last year, the return on capital is expected to be very
strong, and in both cases, we have gained an engaged and talented
team to further develop their respective territories.
In November 2021, we completed our acquisition of Boom Battle
Bar - a competitive socialising business showcasing a selection of
games alongside a menu of cocktails and street food. Supported
again by our shareholders, we raised GBP16.1m (net of expenses) to
complete the purchase and to provide capital for the planned growth
of the estate, and have positioned ourselves to become the fastest
growing leisure business in the UK. With our current pipeline of
over 40 potential sites in development, we anticipate having 27
venues trading by the end of 2022, spread across franchise and
owned units. We believe that this footprint will enable us to
become a pre-eminent player in the industry.
The acquisition of Boom is a good strategic fit alongside Escape
Hunt, as the core customer is in common across both brands, and the
experience we have developed in hosting games in Escape Hunt
transfers to the hosting of games at Boom. The addition of F&B
at Boom is new to the business, but many of our existing management
team have their backgrounds in this area. The opportunity to
exploit a property market which has been at its lowest point in a
generation has enabled us to secure an enviable pipeline of sites,
at materially lower rents than would have been achievable
previously, and this, combined with the capital contributions on
offer, should allow us to make very strong returns on the capital
we employ.
The Board
I would like to thank my Board for their unwavering confidence,
and for their belief that despite the difficult conditions born of
COVID, the business could nevertheless emerge larger, stronger and
better positioned if targeted investment was deployed in the right
areas.
Outlook
2021 represented an inflexion point for XP Factory.
Demonstrating that the Escape Hunt estate had scale enough to
deliver group profitability marked a significant milestone for the
business, and combined with the acquisition of Boom, I am excited
about the future. The management team has already made huge strides
towards the integration of Boom into XP Factory, and have opened an
additional 8 sites since its acquisition. There will no doubt be
challenges to be faced with increasing uncertainty from the current
macro-economic environment, inflation and cost pressures and, as a
young business, opening so many sites in a short period of time.
However, by the end of 2022, we will have built a substantial
network across our two brands and with Escape Hunt continuing to
grow whilst delivering outstanding customer experiences, the two
brands together form a wonderful foundation for exciting times to
come.
Richard Rose
Chairman
31 May 2022
Chief Executive's Report
Last year, in my statement I wrote that despite the
unprecedented challenges of 2020, we chose as a Board to invest
heavily in growing our estate in order that we might emerge from
COVID with a critical mass capable of supporting our cost base, and
with a company poised for exceptional growth. The performance in
2021 validated that strategic decision and, although H1 2021 was
materially affected by lockdown restrictions, I am delighted to
highlight below some key performance metrics for the full year:
-- 163% increase in Group revenue to GBP7.0m (2020: GBP2.7m)
-- Pre-IFRS 16 Adjusted Group EBITDA (before R&D credits)
of GBP480k in the six months to 31 December 2021 (2020:
loss of GBP890k)
-- GBP63k Adjusted EBITDA (before R&D credits) for the year
to 31 December 2021 (2020: loss of GBP1.4m)
-- Including R&D credits received (GBP2.6m, net of costs),
Adjusted Group EBITDA was GBP2.7m for the year to 31 December
2021 (2020: loss of GBP1.4m)
-- Group operating loss for the year to 31 December 2021
of GBP0.5m (2020: loss of GBP6.4m)
We were delighted that trading in the second half of the year
exceeded our expectations, and that we were able to offer our
customers experiences that brought them together to make memories
after so many months of social lent. Our teams worked tirelessly to
create safe but fun environments and delivered outstanding customer
service despite the challenges. The Escape Hunt owner-operated
footprint increased by 46% in the year (from 13 sites in 2020 to 19
in 2021), and this, combined with improved operational efficiency
across all sites, allowed us to capitalise on pent-up demand. The
resulting performance that delivered a profitable H2 at Group level
represents a key milestone in our journey and serves as the
foundation from which we expect to grow rapidly over the coming
months.
In November 2021, we completed the acquisition of Boom Battle
Bar, for which we successfully raised GBP16.1m after expenses, via
an equity placing and open offer. Combining a portfolio of games
with cocktails and street food, Boom is the fastest growing
competitive socialising brand, and its pipeline of 39 sites at 31
December 2021 came with the prospect GBP12.6m of landlord capital
contributions to assist with build costs. Post-acquisition, we
opened an owner-operated site at the prestigious O2 Arena, and a
further franchised site in Coventry, bringing the total to 2 owned
sites and 7 franchises by the year end. The return on capital for
Boom is expected to be extremely strong, and the aggressive roll
out plan will see the Group fast become one of the pre-eminent
leisure operators in the UK.
With an additional brand in our mix, following completion of the
acquisition of Boom, we made the decision to rename the Company XP
Factory Plc, although the trading businesses will continue to
operate under Escape Hunt and Boom Battle Bar respectively.
Escape Hunt
Over the year, we bolstered our Escape Hunt owner-operated
footprint with openings in Watford, Kingston, Milton Keynes and
Lakeside, and also bought back our sites in Paris and Brussels,
which were previously operated by our French master franchisee.
Across the board, we were delighted by the pace at which customers
returned to our venues after COVID restrictions began to lift, and
our sites delivered performances that exceeded both our
expectations, and also the comparable run-rates from 2019. In the 6
months to 31 December 2021, owner-operated revenues exceeded GBP5m
and were more than 130% ahead of the same period in 2019, driven in
part by the new sites growing much faster than their expected
maturity curves, but also by strong like-for-like sales growth in
the mature venues. Operational leverage has continued to improve,
and site level EBITDA for the same period exceeded GBP3m.
Our team members continued to delight customers and the 5 star
ratings in all sites were maintained across TripAdvisor(TM) .
Moreover, each eligible site received a TripAdvisor(TM) Traveller's
Choice award, which showcase the top 10% of leisure venues
globally. Post COVID, with recruitment of staff being harder than
previously, we have maintained our focus on retention, and were
pleased to make our 100th internal promotion in the year. The
energy and passion with which our teams have returned to the
business since furlough has been humbling, and it is this attitude
which underpins our culture.
The modular games rooms have continued to evolve, and Milton
Keynes was the first site to be built in an entirely modular
fashion - a blueprint now being followed in successive builds. This
production methodology has significantly simplified the process and
time to open and allows for whole rooms to be moved. A good example
of this would be in Riyadh, where we were paid to exhibit at the
global leisure expo held there, and our modular rooms were enjoyed
for 3 months before being taken down and shipped for installation
elsewhere in the estate.
The shape of the franchise estate changed through the year,
partly because we bought back the French business, but also because
some of the smaller, more marginal sites were unable to survive the
pandemic, notably if located within territories that offered little
to no financial support. Whilst the net effect was to see the
estate reduced from 35 sites at the end of 2020, to 27 in 2021, our
economics have not been materially affected, as the key regions
have continued to perform well. With progress significantly slowed
in the US due to the restrictions, it is pleasing to see the site
in Houston now showcasing the best of Escape Hunt with its new
games room installed, and record weeks are being set on a regular
basis. This has established a good foundation from which our
partner Proprietor's Capital Holdings can expect to grow.
Overall, Escape Hunt's performance across a challenging year,
and in H2 particularly, gave cause for optimism about its future.
We continued to demonstrate consistency in the delivery of our unit
economics, which yield circa 30% EBITDA margins and strong returns
on capital, and most importantly, we delivered a critical mass
significant enough to yield group profitability across H2. Our
opening strategy continues as set out in our November 2021 circular
to shareholders and we are excited to be bringing our experiences
to more customers around the country.
Boom Battle Bar
In November 2021, we completed the acquisition of Boom Battle
Bar, a young business in the competitive socialising sector. With a
variety of games, including axe throwing, augmented reality darts
and crazier golf, Boom is anchored by street food and cocktails,
and is a good complement to our Escape Hunt business. The elements
of hospitality and games hosting transfer across both brands, and
our ethos which brings customers together to make special memories
remains. Strategically, a further benefit in Boom is that it has
allowed us to exploit a timely opportunity in the property market,
where large sites (greater than 10k square foot), have become
available for the first time in many years, and with deals that
have not previously been seen. At the point of acquisition, the
business had only 7 sites trading - 1 owner-operated unit and 6
franchises - but had a property pipeline in excess of 40 sites that
were well progressed. Moreover, this pipeline carried capital
contributions of circa GBP13m to go towards fit out costs, and we
recognised the opportunity to seize a sizeable position in an
exciting marketplace very quickly. Indeed, we will be the fastest
growing leisure business in the UK in 2022.
An advantage of Boom being small at the point of acquisition, is
that we have been able to shape it in our own vision almost from
the beginning. Our specific approaches to customer service and
hospitality are being adopted and, whilst the operation will
continue to improve over the coming months, we are very pleased
with the direction of travel. Our team has been bolstered with some
highly experienced hires who are helping lead the opening programme
and associated training, and the overall integration has felt very
natural. Where possible, we are beginning to co-locate Boom Battle
Bar with Escape Hunt, such as in Exeter, Edinburgh and Oxford
Street, and encouragingly we are seeing our customers enjoying both
brands.
The roll out plan for Boom is aggressive, and we have stated our
target of 27 sites trading by 31 December 2022. In December 2021,
we opened an additional owner-operated site at the O2 Arena in
London, and also a further franchise site in Coventry, bringing the
total to 9 units at the year end. We imagine ending up with a ratio
of approximately a third owner-operated sites to two-thirds
franchised, and, within our existing network of franchisees, there
is already significant appetite to do more. Whilst still early
days, the sites have traded as expected, with strong operating
leverage making for a high expected return on capital. Perhaps more
importantly, the customer feedback so far has been very
encouraging, and as we continue to hone our model. We expect to be
able to deliver experiences as well rated as those which we
consistently deliver at Escape Hunt.
Strategic objectives
At the time of acquiring Boom Battle Bar, we outlined a
four-point strategy to build shareholder value. These four
strategic objectives remain our focus and, as set out above, we are
making steady progress towards their realisation.
-- Maximise the UK footprint by rolling out each brand, either
through direct investment into owner-operated sites or through
franchises
We expect to co-locate a number of Escape Hunt sites with Boom
Battle Bar as the estate of owner-operated sites grows. Our short
and medium term targets for the UK are as follows:
ESCAPE HUNT BOOM BATTLE BAR
========================= ======================= =================
Existing sites 15 UK sites 3 owner operated
10 franchise
Target: 31 December 21 UK owner operated 7 owner operated
2022 20 franchise
Potential sites (long
term - 5yrs+) 50+ 100+
As set out above, our targets have not changed since those made
at the time of the acquisition of Boom Battle Bar.
-- Accelerate growth in International territories, predominantly through franchises
Whilst we believe that there is a significant opportunity for
each brand internationally, the immediacy of international growth
will differ for each operating brand. For Boom, the focus will
initially be the UK. There are opportunities for expansion into
territories where we own and operate Escape Hunt sites, which we
are likely to explore. More broadly, international expansion is
likely to be franchise led. For Escape Hunt, our international
focus is on growing our US business in partnership with our Area
Representative, PCH.
-- Continue to develop new products and markets which facilitate the growth of B2B sales
We will continue to innovate and develop products that provide
access to a broader range of customer markets. Our direct sales
team has been expanded and is beginning to address the corporate /
business market for both Escape Hunt and Boom Battle Bar
effectively.
-- Integrate the businesses, exploit the synergies where
possible, and develop an infrastructure that supports scale and
future growth
Whilst more inward looking, the fourth objective is a critical
component for the success of our business. I have been delighted
with the progress we have made so far in embracing the cultures of
the two businesses and building on the DNA and values within the XP
Factory Group. The benefits of working together to take advantage
of the unprecedented property opportunity are evident. Where we are
co-located, we are now developing cross marketing initiatives to
ensure that we are able to exploit the natural synergies that the
businesses offer. Further work will be done over the next 12 - 24
months to upgrade and improve our systems and processes to ensure
that we have a resilient infrastructure capable of supporting the
growth we believe is possible.
Outlook
2021 was an important year in our journey. It marked the
inflexion point at which we delivered sufficient critical mass to
become profitable and was the year where we best set ourselves up
to become a key player in the leisure space with the acquisition of
Boom. The customer demand we have seen since Covid restrictions
were lifted has been overwhelmingly positive and has reinforced our
belief that businesses like ours serve an important role in
bringing people together. With the Escape Room category becoming
much more a part of the mainstream consumer psyche, and with
competitive socialising being such a fast growing sub-sector within
the leisure market, we feel that XP Factory is perfectly positioned
through its operating brands Escape Hunt and Boom respectively.
With such a well-developed pipeline of sites, such encouraging
demonstrable unit economics in both brands, and such a
well-positioned business in terms of customer demand, we have
reason to be highly optimistic about the future for XP Factory.
Richard Harpham
Chief Executive Officer
31 May 2022
Financial Review
Group Results
Revenue
Group revenue increased by 163% compared to 2020, reflecting the
strong bounce back of activity in Escape Hunt in the second half of
2021 following the COVID-19 lockdown periods in H1 2021 and for
much of 2020, and the inclusion of Boom Battle Bar only for
December 2021 following its acquisition in November 2021.
Year Year Increase
ended ended / (decrease)
31 December 31 December
2021 2020
GBP'000 GBP'000
New site upfront location
exclusivity fees, support
and administrative fees 247 268 (8%)
Escape Hunt Franchise revenues 385 309 25%
Boom Franchise revenues* 71 - nm
Escape Hunt owned branch revenues 6,004 2,070 190%
Boom owned branch revenues* 263 - nm
Other 15 11 273%
Total 6,984 2,658 163%
------------ ------------ --------------
*Boom revenue is only since its acquisition in November 2021
Owner-operated revenues include GBP263k from Boom in December
2021 and strong underlying growth within the Escape Hunt network,
up 190% year on year. The UK sites were closed between January and
mid-May 2021, and the French and Belgian sites between January and
June 2021. Whilst Dubai remained open throughout the year, it too
was affected by Covid induced reductions in footfall.
The Escape Hunt owner operated network comprised 19 sites at the
end of 2021. Our site in Edinburgh has since closed and is being
relocated in a shared location with our proposed Boom site in
Edinburgh, scheduled to open during the Summer of 2022. This
compares to 13 sites open at the end of 2020, with the estate
expanded through the acquisition of sites in Paris and Brussels,
and new sites opening for the first time in 2021 at Kingston,
Watford, Lakeside (co-located with Boom), and Milton Keynes. The
Group had two Boom owner operated sites (at Lakeside and the O2
Arena) as at 31 December 2021 (2020: nil).
Franchise revenue includes a total of GBP111 from Boom in
December 2021, comprising revenue share of GBP71k and upfront fees
recognised of GBP41k. Underlying Escape Hunt franchise revenue
share fees were up 25% compared to 2020, reflecting the bounce back
of business in the second half of the year. Note that the
conversion of Dubai (in Q4 2020), Paris and Brussels (in Q1 2021)
to owner managed sites means underlying revenue growth was stronger
still. Reductions in both new site exclusivity fees and support and
admin fees reflect these conversions as well as changes in a number
of the Escape Hunt franchise agreements and the elimination of the
amortisation of historic upfront fees on sites which have since
closed.
Following the acquisitions of sites in Paris and Brussels in the
year and some further rationalisation of our franchise estate,
largely Covid-induced closures, the number of active Escape Hunt
franchisees at 31 December 2021 was 25 which compares to 35 at 31
December 2020. In addition, following the acquisition of Boom
Battle Bars, the Group had 7 Boom franchises operating on 31
December 2021 (2020: nil).
Gross profit
Cost of sales includes the variable labour cost at sites and
other direct cost of sales, but not fixed salaries of site staff,
whose costs are included as administration costs. The Board
believes this categorisation best reflects the underlying
performance at sites and provides a more useful measure of the
business.
Gross margin rose from 70.7% in 2020 to 72.7% in 2021.
Adjusted EBITDA
The Group recorded its first Adjusted EBITDA profit of GBP2,653k
(2020: loss GBP1,445k). Adjusted EBITDA includes GBP3,236k (gross)
R&D claims received in the year. Net of associated fees, the
R&D claims totalled GBP2,589k, such that the Group achieved an
Adjusted EBITDA profit of GBP64k excluding the R&D claims for
the full year.
Escape Escape
Hunt Hunt Boom Boom Unallocated 2021
Owned Franchise Owned Franchise GBP'000
-------- ---------- ----------- ---------- ------------ --------
Site Level EBITDA
before other income 3,057 407 84 111 - 3,659
Centrally incurred
overheads (1,479) (130) (2) (30) (2,972) (4,613)
Other income 371 - - - 3,236 3,607
Adjusted EBITDA 1,949 277 82 81 264 2,653
---------------------- -------- ---------- ----------- ---------- ------------ --------
Escape Escape
Hunt Hunt Boom Boom Unallocated 2020
Owned Franchise Owned Franchise GBP'000
-------- ---------- ----------- ---------- ------------ --------
Site level EBITDA
before other income 312 539 - - 851
Centrally incurred
overheads (69) (242) - - (2,379) (2,690)
Other income 321 - - - 73 394
Adjusted EBITDA 564 297 - - (2,306) (1,445)
---------------------- -------- ---------- ----------- ---------- ------------ --------
The performance for the year reflected two very different
halves, given that Covid restrictions were in force for much of the
first half. Excluding the R&D claims, net of fees, Adjusted
EBITDA in the six months to 31 December 2021 was GBP862k on
turnover in the same period of GBP5.8m delivering an Adjusted
EBITDA margin of 15%.
On a pre-IFRS16 basis, Adjusted EBITDA in the second half of the
year was GBP480k confirming, as previously asserted, that the Group
has achieved adequate scale to operate profitably.
A reconciliation between statutory operating loss and Adjusted
EBITDA is shown below.
Year ended Year ended
31 Dec 2021 31 Dec 2020
GBP'000 GBP'000
-------------------------------------- ------------ ------------
Adjusted EBITDA 2,653 (1,445)
Amortisation of intangibles (471) (2,299)
Rent concessions recognised in the
year 148 22
Depreciation of property plant and
equipment (1,721) (1,819)
Depreciation of right-of-use assets (613) (380)
Loss on disposal of tangible assets (39) (23)
Loss on disposal of intangible assets (11) (7)
Profit on termination / change of
leases 41 -
Branch closure costs (4) (52)
Branch pre-opening costs (103) -
Provision against loan to franchisee (78) (300)
Provision for guarantee leases (8) -
Exceptional professional costs (235) (35)
Foreign currency gains / (losses) (18) -
Share-based payment expense (62) (29)
-------------------------------------- ------------ ------------
Operating loss (521) (6,367)
-------------------------------------- ------------ ------------
Operating loss
The Group made an operating profit of GBP1,702k in the six
months to 31 December 2021, offsetting a loss of GBP2,223k in the
first half of the year. For the full year, group operating loss
fell significantly to GBP521k (2020: loss GBP6,367k).
COVID-related property grants of GBP371k (2020: GBP135k) and the
Coronavirus Job Retention Scheme benefit of GBP460k (2020: GBP756k)
were received and offset a proportion of property and employment
costs incurred whilst Escape Hunt sites were closed. A total of
GBP3,236k of R&D claims in respect of 2019 and 2020 have been
recognised in the year (2020: GBP259k). The Group used a consultant
to advise on these grants and net of fees, the grants contributed
GBP2,589k (2020: GBP207k). Without the net benefit of the R&D
grants, the operating loss in the six months to 31 December 2021
would have been GBP886k.
Exceptional professional costs related to work in connection
with the acquisitions of the French and Belgian franchises and of
Boom Battle Bar in 2021. Rent concessions reflect the rent
reductions granted by landlords during Covid. Branch pre-opening
costs reflect the pre-opening costs for the sites at Milton Keynes
and the O2. Pre-opening costs for Watford, Kingston and Lakeside
have not been separated out as much of the pre-opening activity
took place during lockdown.
Central overheads
Centrally incurred overhead costs, including costs allocated to
the owner-operated and franchise segments, rose to GBP4.6m (2020:
GBP2.7m) including GBP0.6m of costs associated with R&D claims.
The increase reflects a resumption of activity which was stopped
during Covid or Government subsidy received through the CJRS
scheme, and increased headcount and other central costs as part of
and following the acquisition of Boom. Unallocated central costs,
excluding the R&D associated fees, was GBP2.4m, broadly flat on
2020.
Cashflow and capital expenditure
Cash and cash equivalents at the year-end was GBP8.2m (2020:
GBP2.7m).
Operating cashflow before working capital changes of GBP2.3m
reflects the positive group Adjusted EBITDA. The net proceeds from
R&D grants were received in January 2022 and therefore show as
a significant increase in trade receivables and also impact trade
payables at year end. The resultant cash generated by operating
activities was GBP0.7m.
Deferred rentals and HMRC payments totalling GBP299k at the end
of 2020 were all caught up in the course of 2021. All rents and
other payments are now up to date other than a few minor HMRC time
to pay arrangements relating to Boom entities, for which the Group
has back-to-back collection arrangements with the vendors of
Boom.
During the year, GBP2.7m (2020: GBP2.0m) was utilised for
capital investment, of which GBP2.6m was on property plant and
equipment, including new games and site fit out, and GBP0.1m on
intangibles, much of it capitalised staff costs. The majority of
this expenditure was for the new sites at Kingston, Watford,
Lakeside and Milton Keynes, but also includes capital expenditure
of GBP0.4m on the Boom site at O2, post-acquisition of Boom in
November 2021.
In January 2021, the Company raised GBP1.3m (net of expenses)
through a placing to fund the acquisition of the France and Belgium
master franchise and to provide further working capital. The
acquisition completed on 7 March 2021, with total consideration
paid of GBP507k, comprised GBP278k cash, GBP86k vendor loan and
GBP247k estimated earnout.
In November 2021, the Company raised a further GBP16.1m (net of
expenses) through a placing, subscription and open offer to fund
the acquisition of Boom and to finance the proposed organic
expansion of the business. The total consideration payable for Boom
was GBP19,554k, of which GBP9,606k was paid in cash, GBP8,950k is
contingent share consideration which is payable by the issue of up
to 25m shares (valued for the purposes of the accounts at 35.8p per
share) dependent on the achievement of certain financial metrics in
the first year of ownership, GBP637k payable as a working capital
and net debt adjustment post acquisition, and the balance of
GBP360k by means of a vendor loan note, repayable on the first
anniversary of completion. The acquisition gave rise to acquired
intangibles of GBP4,385k, being the Directors' assessment of the
value of franchise contracts acquired, and goodwill of GBP15,856k
which includes GBP1,096k relating to a deferred tax liability
required to be recognised on the acquired intangibles under
IFRS.
Return on capital
Return on capital is a key performance measure for the Company,
with each site being commissioned based on an anticipated cash
return on investment, payback and net present value generated. For
the 14 Escape Hunt UK sites that operated throughout the second
half of the year, the annualised cash return on investment
(calculated as site EBITDA divided by total investment in the site)
was 34%. However, as previously stated, the investment in the very
early sites was substantially higher than has been required in more
recent sites, as the benefits of our new modular games have been
realised. Using an estimate of what the revised build cost would
be, the annualised cash return on investment in the Escape Hunt UK
owner operated estate would have been 43% in the second half of
2021.
The cash return on investment for our acquisitions of the Middle
Eastern and French and Belgian master franchises is likewise
looking very attractive. The acquisition of the Middle East master
franchise paid back within six months of its acquisition, whilst
the cash on cash return to date from our France and Belgian
acquisition is running at an annualised return of 43%
notwithstanding the Covid impact in the early months of
ownership.
Balance sheet
On 31 December 2021, the Group had a total of GBP1,653k in loan
notes and other loans (2020: GBP289k). In 2020, the Group issued
GBP340k convertible loan notes of which GBP272k was regarded as
debt and the balance classed as equity. Interest is rolled up at 10
percent per annum on the principal of the convertible loan notes,
and the total outstanding as at 31 December 2021, including rolled
up interest, was GBP328k (2020: GBP289k). In early January 2022,
the Company received a Noteholder Notice of Conversion in relation
to all of its outstanding convertible loan notes. As a result,
4,378,082 new ordinary shares were issued on 2 February 2022 at
9.0p per share in respect of the principal amount and rolled up
interest on the convertible loan notes.
During the year, GBP86k (EUR100k) vendor loan notes were issued
in respect of the acquisition of the French and Belgian master
franchise which carried interest at 4 per cent. per annum. The
Belgian and French Escape Hunt business also had bank loan of which
GBP15k remained outstanding at year end. A GBP360k loan was issued
in November 2021 to the vendors of Boom Battle Bar which is held as
a retention against which any warranty claims would be offset. The
loan is repayable on the first anniversary of the acquisition of
Boom and carries interest at 5 per cent. per annum.
Other loans totalling GBP876k relate to fit-out finance within
the Boom estate. Of these, GBP494k came with the acquisition of
Boom and have back-to-back arrangements with franchisees or the
vendors such that the Company's liability is offset by a receivable
with cashflows matched accordingly. GBP367k relates to fit out
finance on the Boom O2 Arena site and is repayable over five
years.
The Company expects to use fit-out finance and other facilities
when available to facilitate the funding of new Boom and Escape
Hunt owner-operated sites in future.
Key Performance Indicators
The Directors and management have identified the following key
performance indicators ('KPIs') that the Company tracks for each of
its operating brands. These will be refined and augmented as the
Group's business matures:
-- Numbers of owner-operated sites (31 Dec 2021: 19 Escape Hunt
sites and 2 Boom Battle Bar sites)
-- Numbers of franchised sites (31 Dec 2021: 27 Escape Hunt and 7 Boom Battle Bar)
-- Site level revenue (Year to 31 Dec 2021: GBP6.2m)
-- Site level EBITDA (Year to 31 Dec 2021: GBP4.0m)
-- Franchise revenue (Year to 31 Dec: GBP0.7m)
-- Central costs (Year to 31 Dec 2021: GBP4.7m)
-- Adjusted EBITDA for the Group (Year to 31 Dec 2021: GBP2.7m)
The Company monitors performance of the owner-operated sites on
a weekly basis. The Board also receives monthly updates on the
progress on site selection, site openings and weekly as well as
monthly information on individual site revenue and site operating
costs. Monthly management accounts are also reviewed by the Board
which focuses on revenue, site profitability and adjusted EBITDA as
the key figures within the management accounts.
Both the number of franchised branches as well as their
financial performance are monitored by the management team and
assistance is provided to all branches that request it in terms of
marketing advice as well as the provision of additional games.
The key weekly KPIs by which the UK and owner-operated business
is operated are the site revenue (including UK franchise sites),
gross margins (in the case of Boom sites) marketing spend and staff
costs and consequent ratio of staff costs to revenue. Total revenue
is tracked against budget, adjusted for seasonality, number of
rooms open and the stage in the site's maturity cycle. Staff costs
are measured against target percentages of revenue. The
effectiveness of marketing is assessed by observing revenue
conversion rates and the impact on web traffic, bookings and
revenue from specific marketing campaigns. With effect from January
2021, management of digital marketing has been brought in-house
with the requisite skills being developed within the team.
The Company's systems track performance on both a weekly and a
monthly basis. These statistics provide an early and reliable
indicator of current performance. The pro tability of the business
is managed primarily via a review of revenue, adjusted EBITDA and
margins. Working capital is reviewed by measures of absolute
amounts.
Graham Bird
Chief Financial Officer
31 May 2022
Corporate Responsibility
The Company takes its responsibilities as a corporate citizen
seriously. The Board's primary goal is to create shareholder value
but in a responsible way which serves all stakeholders.
Governance
The Board considers sound governance as a critical component of
the Group's success and the highest priority. The Company has an
effective and engaged Board, with a strong Non-Executive presence
from diverse backgrounds and well-functioning governance
committees. Through the Group's compensation policies and variable
components of employee remuneration, the Remuneration Committee of
the Board seeks to ensure that the Company's values are reinforced
in employee behaviour and that effective risk management is
promoted.
More information on our corporate governance can be found
below.
Employees and their development
The Company is dependent upon the qualities and skills of its
employees and the commitment of its people plays a major role in
the Group's business success. The Company invests in training and
developing its staff through internally arranged knowledge sharing
events and through external courses.
Employees' performance is aligned to the Group's goals through a
performance review process and via incentive programmes. The Group
provides employees with information about its activities through
regular briefings and other media. The Group operates a number of
incentive schemes and a share option scheme operated at the
discretion of the Remuneration Committee. An employee share
incentive scheme has been put in place and is available to all
UK-based employees who have been employed within the Group for at
least three months.
Diversity and inclusion
The Group does not discriminate on the grounds of age, gender,
nationality, ethnic or racial origin, non-job-related-disability,
sexual orientation or marital status. The Group gives due
consideration to all applications and provides training and the
opportunity for career development wherever possible. The Board
does not support discrimination of any form, positive or negative,
and all appointments are based solely on merit.
Health and Safety
The Group endeavours to ensure that the working environment is
safe and healthy and conducive to the well-being of employees who
are able to balance work and family commitments. The Group has a
Health and Safety at Work policy which is reviewed regularly by the
Board. The Group is committed to the health and safety of its
customers, employees and sub-contractors and others who may be
affected by the Group's activities. The Group provides the
information, instruction, training and supervision necessary to
ensure that employees are able to discharge their duties
effectively. The health and safety procedures used by the Group
ensure compliance with all applicable legal and regulatory
requirements as well as its own internal standards.
Principal Risks and Uncertainties
The Directors consider that the principal risks and
uncertainties facing the Group and a summary of the key measures
taken to mitigate those risks are as follows:
Further outbreak of COVID-19 or other pandemics
COVID-19 had a dramatic impact on the leisure sector as a whole.
Measures introduced by governments around the world to combat the
spread of COVID-19 included temporary closures, the introduction of
social distancing rules, rules over the number of people permitted
in gatherings, use of face coverings, cleaning protocols, and other
measures which have a direct impact on the operation of sites for
both owned and operated sites and franchisee sites. Whilst in most
jurisdictions the most strenuous measures have now been lifted,
there can be no certainty that previous restrictions will not be
re-imposed or new restrictions introduced in the UK or in any of
the territories where franchisees operate, including full closure.
The re-imposition of such measures, or new measures could have a
materially adverse impact on the Group's ability to operate and
could result in the business model becoming unviable or forcing
closure.
During much of 2020 and 2021, whilst the UK Government's
imposition of COVID-19 restrictions were in force, the Company was
able to benefit from UK Government support through the Job
Retention Scheme, the reduction of business rates, and through
grants introduced directly as a result of COVID-19. Without this
support, the Group would have had to make much more severe
decisions regarding staffing and costs and may not have been in a
position to re-open without incurring significant additional costs.
There can be no certainty that any of these schemes, or any other
support measures provided by the UK or other governments in other
jurisdictions, would be re-introduced in the event of a further
outbreak of COVID-19 or any other pandemic. The company has taken
action to implement more flexible employment contracts and, where
possible, more flexible leases to reduce the breakeven point at
sites, as well as launching new revenue streams which are not
dependent on sites being open. These actions will serve to mitigate
some of the impact of a future outbreak.
Economic and political risks
The impact of the COVID-19 pandemic has been widely felt and all
major global economies in which the group operates experienced a
significant contraction in 2020 and depressed output in early 2021.
Whilst most economies have experienced a bounce back of activity,
inflation has risen sharply and supply chains around the world
remain disrupted. Energy prices in particular have increased
significantly. Russia's recent invasion of Ukraine has led to
significant political tension globally, further impacting energy
prices and creating significant uncertainty. Sanctions imposed by
Western economies are expected to have a severe impact on Russia,
whilst the war in Ukraine will impact the region's ability as a
major agricultural producer, both factors in turn impacting food
prices. It is possible that the combination of all these factors
leads to a broader consumer recession which might adversely impact
consumer discretionary spending. The Group's activities are exposed
directly to discretionary spend, and as a result, a consumer
recession would be expected to have an adverse impact on
performance. The Board regularly reviews the Group's ability to
cope with a downturn and the associated need for maintaining
sufficient financial headroom to be able to absorb the impact of
reduced sales activity.
Financial risks
The effective management of its financial exposures is central
to preserving the Company and Group's profitability. The Group is
exposed to financial market risks and may be impacted negatively by
fluctuations in foreign exchange rates, which may create volatility
in the Group's results from its international franchise operations
to the extent that they are not effectively hedged. The Group does
not hedge its foreign exchange rate exposures.
The Group's finance team provides support to management to
ensure accurate financial reporting and tracking of business
performance. Reporting on financial performance is provided on a
monthly basis to senior management and the Board. Weekly reports
provide high level summaries of site-by-site performance for Escape
Hunt and are now being introduced to Boom sites.
The Group has invested in the improvement of its systems and
processes in order to ensure sound financial management and
reporting during the year.
Roll-out of owner-operated sites
The XP Factory Group has opened a number of Escape Hunt
owner-operated sites. Following the recent acquisition of Boom
Battle Bar, the pipeline of sites has increased and includes a
number of larger sites which will open as owner-operated sites
under the Boom Battle Bar brand. This expansion of owner-operated
sites under the Group's two brands offer the Group growth
opportunities.
The Group plans to open more sites and was in negotiations with
a number of landlords at the end of the year. However, there is no
guarantee that the XP Factory Group will be able to locate or
secure a sufficient number of appropriate sites to meet its growth
and financial targets. As announced previously, obtaining sites,
together with appropriate planning permissions and completing legal
documentation impacted the roll-out pace in 2018 and 2019 and with
the consequent impact on revenues and profits. It is also possible
each site may take some time from its opening date to reach
profitable operating levels due to inefficiencies typically
associated with new sites, including lack of awareness,
competition, the need to hire and train sufficient staff and other
factors. Furthermore, Boom Battle Bar is a new and relatively
untested concept which may not achieve the site level performances
expected. The Group has worked to reduce this risk through strong
staff recruitment and training processes and investment in both
operational and marketing activities.
Opening new sites is capital intensive. However, in the case of
most of the proposed Boom Battle Bar sites, the Group has been able
to secure favourable lease terms which in most cases include
substantial capital contributions from the landlords. These capital
contributions significantly reduce the total capital required to
open a new site. The Board believes that the real estate market for
signing new leases has generally moved in tenants' favour,
particularly since COVID-19. As such, the Directors believe that
the future return profile for new sites will be stronger than what
has been delivered on the original Escape Hunt sites to date.
However, there is no guarantee that this will be the case and
anecdotal evidence would suggest that property conditions in
certain parts of the country are again normalising such that it is
becoming harder to achieve the level of capital contributions
achieved during COVID.
The ability of the Company to fund the capital expenditure is
dependent on access to funding in the form of internally generated
cashflow, landlord contributions, equity or debt. The Company was
able to raise GBP17.2m (before expenses) in November 2021 through a
placing, share subscription and an open offer to fund the
acquisition of Boom Battle Bar and to provide working capital to
support the roll out of new Escape Hunt and Boom Battle Bar sites.
The directors believe that by investing the cash so earmarked from
the fundraise into the network of owner-managed sites in the Group
portfolio, they will create a network able to support a profitable
and cash generative business in future. However, any expansion
beyond the immediate plans or any significant change in the costs
associated with building new sites would require additional funding
which may be more than that generated by the business and may
therefore require additional external funding. There can be no
certainty that such additional funding will be available.
Franchise estate
Revenue from the franchise estate currently accounts for a
material proportion of both revenue and operating cashflow for the
XP Factory Group. Within the Escape Hunt network, a number of the
franchisees have been materially adversely affected by COVID-19 in
their respective jurisdictions, placing them under significant
financial pressure. In a number of cases, franchisees have fallen
behind on their financial obligations to Escape Hunt. Whilst Escape
Hunt has been working with the franchise network to support them
during this unprecedented period, the Group is not in a position to
be able to provide financial support to the network and there can
be no certainty that all the franchisees will fully recover. This
could have an adverse impact on future performance and results.
Within the Boom network, franchisees are new and the Boom
concept is relatively unproven. It is therefore possible that the
performance of franchise sites may not achieve expectations and
franchisees could come under financial pressure and be unable to
make the payments for which they are contracted to companies in the
XP Factory group or in respect of property lease payments. XP
Factory is co-tenant or guarantor on the lease for most of the Boom
franchise network and, as such, could be called on by the landlord
to make any such defaulted lease payments. The Franchise contracts
have consequently been set up within Boom to allow XP Factory to
step into any franchise site which is in default and to take over
the assets and operations of the site. The directors believe that
this right substantially mitigates the risks as the site would
effectively become an owner-operated site without any significant
capital outlay. XP Factory has the know-how and resources to manage
the sites and believes that it would do so in a manner to ensure
that any financial exposure can be minimised.
While the XP Factory Group currently plans to continue to open
new franchise sites in the UK and around the world, it is more
likely that franchise agreements going forwards would be focussed
towards fewer agreements requiring a larger number of sites to be
opened in a particular territory. These potential partners include
those who already operate other leisure facilities but there is no
guarantee that these will come to fruition. The Company cannot
guarantee that the Escape Hunt Group will be able to achieve its
franchise expansion goals or that the new sites will generate the
expected levels of revenue and therefore revenue share. This may
adversely impact on the Group's ability to increase turnover.
The threat of new entrants into both the escape room market and
the market in which Boom operates is high
A single site or a small number of sites offering an escape game
experience would be relatively simple for a new entrant to
establish. The barriers to entry for such competition at that level
is relatively low and there is a risk that such entrants could
dilute the market place or adversely impact the consumer's
perception of escape game experiences in the event that the quality
of experience offered by these new entrants was poor or at worst,
attracted negative publicity related to the health and safety of
participants in escape room games or poor customer reviews which
adversely affect the perception of the industry. The escape game
experience market is in its infancy and consumer perceptions may be
more easily influenced by a poor quality offering or negative
publicity due to their limited experience which in turn could
negatively impact on the perception of the Group's business and
could adversely affect profitability and results of operations.
However, the Group's strategy is to develop an international
quality escape room experience and the Directors believe the
barriers to entry for new global entrants adopting the same
strategy are higher than a single-site opening due to the
complexities of designing games and managing them across
international operations. However, there is a risk that established
corporations in the leisure market, who may have the capital and
resources to compete with the Group's business, may wish to enter
the escape room market.
Boom Battle Bar is a competitive socialising bar concept which
is an area attracting a lot of interest and many new concepts are
being developed and opened generating growing competition for the
concept. The games operated by Boom Battle Bar are generally not
unique and the directors do not believe that they offer any
competitive advantage on an individual basis. However, the
directors believe that the combination of multiple games in a
single site, with the ability to swap out underperforming games
with different games provides flexibility to react to competitive
threats quickly and effectively. The directors also believe that
the sites that have been chosen and developed are in strong
locations capable of delivering against the competition.
Operationally, the Group is focused on customer satisfaction. These
factors lead the directors to believe that the Group is well placed
to respond to any potential competitive threats.
The market is immature and therefore forecast growth and
application of regulation is unpredictable
The market for both escape game experiences and the competitive
socialising concepts offered by Boom Battle Bar is immature and
growth will be characterised by changes in consumer needs and
expectations, continued evolution in technology and increased
competition. If the Group fails to develop new offerings or modify
or improve existing offerings in a timely and cost-effective manner
in response to these changes in technology, consumer demands and
expectations, competition or product introductions, the Group's
business, results of operations and financial condition may be
adversely affected.
Changing trends could impact on the Group's revenues and profits
as well as the Group's goodwill. Whilst the Directors believe that
the Group's own escape game designs and Boom Battle Bar concepts
have longevity and, therefore the potential to deliver substantial
growth in sales, there can be no guarantee that they will evolve to
fulfil this potential. The Group will also need to innovate and
create new experiences which are market leading. This applies to
not just the number of new experiences which are created but the
quality and reflection of consumer tastes in the experiences. If
the Group fails to anticipate, identify or react swiftly enough to
trends in consumer preferences then this could result in lower
sales, margins and profits for the Group.
The Group's owner-operated sites are leased. Increases in rental
payments or the early termination of any of the Group's leases, or
the failure to renew or extend the terms of any of the Group's
leases could adversely affect the Group's profitability
The Group's operating performance depends in part on its ability
to secure and retain leases in desired locations at rents it
believes to be reasonable. The leases for the Group's new
owner-operated sites may generally require that their annual rent
be reviewed on a periodic basis and which may be on an
"upwards-only" basis. The annual rent for the premises then becomes
the greater of such open market rental value and the previous
contractually agreed rent. As a result, the Group may be unable to
predict or control the amount of any future increases in its rental
costs arising from the review of rents it pays for its sites and
would be unable to benefit from any decline in the open market
rental value of its sites. Any substantial increase in the business
rates or rent paid by the Group on its owner-operated sites or the
early termination of any of its leases could adversely affect the
Group's business, financial and other conditions, profitability and
results of operations. However, the Group believes that the
sustained pressure on the high street, exacerbated by COVID-19
could decrease overall future lease costs as prices may be reducing
as a result of changes in the retail environment, notably as a
result of the failure of a number of large format stores such as
Debenhams and BHS.
The Group analyses the suitability of all new sites prior to
opening, however this is not a guarantee that any new site will be
a success. If a site is not successful, the Group may need to cease
its operations on that site and seek to assign or sub-let the
premises. However, suitable tenants may not be found and any lease
may have restrictions on assignment or subletting which may mean
that this is either prevented or delayed. A failure to find tenants
and/or a prohibition or delay in assigning or sub-letting
unsuccessful sites would result in the Group paying rent and
satisfying the tenant's obligations under the lease of a site which
is not operational and with total rental costs being higher than
necessary.
The Group works closely with a number of key suppliers.
Termination of any of these key relationships could adversely
affect performance in the short term
The Group has invested significant time and resource into
relationships with a number of key suppliers, notably those
involved in the production, delivery and installation of escape
games as well as the technology used to run the games and in the
production and fit-out of Boom Battle Bar sites. Whilst the Group
owns the intellectual property related to the escape games and
these relationships can be replaced, the games played in Boom sites
are mostly generic games available to competitors. The replacement
of a key supplier could take time and could adversely affect the
pace and cost at which the Group is able to execute its growth
plans in the short term. It could also adversely impact the short
term ongoing maintenance cost of existing games where the key
supplier has been involved. Within Boom in particular, the
directors believe that this risk is mitigated by the fact that the
games and fit-out is less specialised than for an Escape Hunt
site.
Performance of franchisees
The Group depends, in large part, on the Escape Hunt and Boom
Battle Bars brands. The vast majority of sites in both networks are
today owned and operated by franchisees who are responsible for
delivering the high standards of the relevant XP Factory owned
brand to consumers. Whilst franchisees are required to operate
within the Group's standards for site operation, they are given a
degree of autonomy to ensure they operate in a way that suits their
local area. The XP Factory Group provides that franchisees must
adhere to quality, safety and image regulations that the XP Factory
Group promotes through the implementation of training and careful
monitoring, funded by both the franchisees and the XP Factory
Group, and through appraisals. Despite these controls and absent a
decision to remove such franchisees from its business, the Group
may be unable to prevent its franchisees from operating outside of
the Group's operational regulations, franchise manual and business
model.
The Board has responded to these risks by appointing directors
and staff with the appropriate skills and experience and by
identifying KPIs that will show how well these risks are being
managed. In particular, the franchise agreements have been
considerably strengthened for all new franchisees which will enable
the Group to exercise greater control over new franchisees. In the
case of the Boom Battle Bar franchise agreements, a breach of
standards could result in forfeit of the franchise by the
franchisee.
A small franchisee team has now been formed for each of the
Escape Hunt and Boom Battle Bar brands to assist the respective
franchise network with better marketing advice which is expected to
raise revenue for both the franchisee and therefore the Group. The
closer collaboration also strengthens the communication and
relationship between the Group and the franchise network.
Ability to recruit and retain staff and the impact of wage
inflation
As the XP Factory Group grows, the need for experienced
personnel with specific skill is expected to grow too. Salary
expectations in certain professions have recently increased
significantly, driven by growing demand for specific skills and a
shortage of supply. XP Factory's growth plans are supported by
growth in the employee base and rely on the Group being able to
fill the positions earmarked. For certain positions, the time taken
to recruit people has become more extended and the costs have
increased. The Group has also been impacted by increases in the
minimum wage and national living wage. Tax changes have also
increased the rate of national insurance payable by employees,
adding to the total cost of employment. These increased employment
costs, coupled with the longer time taken to recruit certain roles
could have an adverse impact on the Group's financial results and
ability to execute on its strategy.
Information Technology
The Group relies on technology for the operation of its escape
games. A number of the activities offered in Boom Battle Bars also
rely on technology. Other functions within the Group, such as
marketing, finance, the Group's internal legal department,
operations at sites, bookings, e-commerce, staff rotering and other
functions all rely on technology for their efficient operation.
Failure in any one or more critical technology solution, could have
a material adverse impact on the short term performance of the
Group and / or could incur fines if as a result, GDPR regulations
were seen to have been breached. The Group regularly reviews the
risks associated with technology, has appropriate policies and
controls in place and carries cyber insurance. The directors also
believe that the overall risk associated with technology failure,
including the susceptibility to cyber-attack, is mitigated by using
cloud based solutions from different suppliers who are not
connected.
Statement by the Directors in performance of their statutory
duties in accordance with s172(1) Companies Act 2006
The Directors of the Group must act in accordance with a set of
general duties. These duties are detailed in section 172(1) of the
U.K. Companies Act 2006, which is summarised as follows:
'A Director of a Company must act in the way he/she considers,
in good faith, would be most likely to promote the success of the
Company for the benefit of its members as a whole, and in doing so
have regard (amongst other matters) to:
-- The likely consequences of any decision in the long term;
-- The interests of the Company's employees;
-- The need to foster the Company's business relationships
with suppliers, customers and others;
-- The impact of the Company's operations on the community
and the environment;
-- The desirability of the Company maintaining a reputation
for high standards of business conduct; and
-- The need to act fairly as between members of the Company.
The Board considers that it has fulfilled its duties in
accordance with section 172(1) of the UK Companies Act 2006 and
have acted in a way which is most likely to promote the success of
the Group for the benefit of its stakeholders as a whole in the
following ways:
Long term benefit
Our strategy was designed to have a long-term beneficial impact
on the Company and to contribute to its success in delivering an
engaging and enjoyable service for customers across the world. The
Board's strategy to increase the range of experiential brands
within the group through the acquisition of Boom Battle Bars and to
expand both the owner-operated and franchise estates within both
experiential brands as well as developing new digital and remote
play options is aimed at building long term value for shareholders
and other stakeholders alike.
Shareholders
The Board engages regularly with its shareholders and seeks to
build a mutual understanding of the objectives of shareholders and
those of the Board by discussing long-term strategy, shorter term
challenges and issues and to receive feedback. For further
information see page 31.
Within the practical constraints of being able to access all
shareholders directly, the Board actively seeks to treat all
shareholders equally. In November 2021 the Board opted to offer all
shareholders the opportunity to participate in the fund raising by
making an open offer available to all shareholders.
Employees
The XP Factory Group is reliant on the quality and performance
of its employees and the commitment of its staff plays a crucial
role in the success of the business. Staff in sites are given
regular training to ensure they are able to fulfil their roles
successfully and the Group maintains a regular two-way
communication with all staff both centrally and through individual
sites to ensure employee matters are identified and addressed.
The safety of our staff is of utmost importance to the Board. As
such, the Board implemented a 'work from home' policy for all
office based staff on 13(th) March 2020 in light of the COVID-19
outbreak. In each owner-operated site the board has implemented
protocols and standards to safeguard employees who are not able to
work from home. The board receives a report on all health and
safety issues on a monthly basis. Since the lifting of restrictions
related to COVID-19, many of the policies allowing more flexible
working have been retained to allow employees flexibility and
choice.
Customers
As an experiential leisure business, a primary goal is to
delight our customers and provide the best immersive experience we
can. TripAdvisor ratings is one of our key internal measures and we
continually seek to improve the user journey before, during, and
after their experience.
Suppliers
The group works closely with a number of suppliers in different
disciplines. We aim to promote collaborative engagement and to
build long term partnerships with our suppliers with an objective
to minimise risk and optimise costs through the full lifecycle of
our relationship. We seek to balance this with the need to ensure
the company is not overly reliant on any single supplier.
Community and environment
The Board has overall responsibility for Corporate Social
Responsibility ("CSR").
The Group is committed to maintaining and promoting high
standards of business integrity. The XP Factory Group's values,
which incorporate the principles of corporate social
responsibilities (CSR) and sustainability, guide the Group's
relationships with clients, employees and the communities and
environment in which it operates. The XP Factory Group's approach
to sustainability addresses both environmental and social impacts,
supporting the XP Factory Group's vision to remain an employer of
choice, while meeting client demands for socially responsible
partners.
The XP Factory Group respects laws and customs while supporting
international laws and regulations. These policies have been
integral in the way group companies have done business in the past
and continue to play a central role in influencing the Group's
practice in the future.
Specific CSR initiatives are promoted by the senior executive
management and are communicated to others in the organisation as
needed. Initiatives include matters such as recycling and
minimising waste, recognition of companies and individuals in the
community for whom we have offered discounted or free participation
in our games, as well as local community issues and interests such
as encouraging furloughed employees to volunteer locally. Many of
our employees are actively engaged with charities and other causes
for which we will allow the use of company property and
facilities.
Culture and values
The Board actively seeks to establish and maintain a corporate
culture which will attract both future employees, customers and
suppliers. The Company promotes honesty, integrity and respect and
all employees are expected to operate in an ethical manner in all
their dealings, whether internal or external. We do not tolerate
behaviour which goes against these values which could cause
reputational damage to the business or create ongoing conflict or
unnecessary tension internally.
This Strategic Report was approved by the Board on 31 May 2022
and signed by order of the Board by the Chief Executive
Officer.
Richard Harpham
Chief Executive Officer
31 May 2022
DIRECTORS' REPORT FOR THE YEARED 31 DECEMBER 2021
The Directors present their report together with the audited
financial statements of the Group for the year ended 31 December
2021.
Principal activities
The principal activities of the Group are that of operating
consumer facing leisure brands offering immersive experiences.
The Group currently operates two brands, each of which is
developing a network of locations, either owned and operated
directly or franchised. Escape Hunt is a global leader in providing
escape-the-room experiences delivered through a network of
owner-operated sites in the UK, an international network of
franchised outlets, and through digitally delivered games which can
be played remotely.
Boom Battle Bar is a fast-growing network of owner-operated and
franchise sites in the UK that combine competitive socializing
activities with themed cocktails, drinks and street food in a
setting aimed to be high energy and fun.
Cautionary statement
The review of the business and its future development in the
Strategic Report has been prepared solely to provide additional
information to shareholders to assess the Company's strategies and
the potential for these strategies to succeed. It should not be
relied on by any other party for any other purpose. The review
contains forward looking statements which are made by the Directors
in good faith based on information available to them up to the time
of the approval of the reports and should be treated with caution
due to the inherent uncertainties associated with such
statements.
Results and dividends
The results of the Company are set out in detail in the
Financial Statements.
Given the nature of the business and its growth strategy, it is
unlikely that the Board will recommend a dividend in the next few
years. The Directors believe the Company should improve performance
to generate profits to fund the Company's growth strategy over the
medium term.
Business review and future developments
Details of the business activities and developments made during
the period can be found in the Strategic Report and in Note 1 to
the Financial Statements respectively.
Disclosure of information to auditor
The Directors who held office at the date of approval of this
Directors' report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
auditor is unaware; and each director has taken all the steps that
he / she ought to have taken as a director to make himself/ herself
aware of any relevant audit information and to establish that the
Company's auditor is aware of that information.
Financial instruments and risk management
Disclosures regarding financial instruments are provided within
Note 29 to the Financial Statements.
Capital structure and issue of shares
Details of the Company's share capital, together with details of
the movements during the period are set out in Note 22 to the
Financial Statements. The Company has one class of ordinary share
which carries no right to fixed income.
Post balance sheet events
Since the year end, energy prices have risen very materially,
notably since the invasion of Ukraine by Russian armed forces. The
impact is yet to be fully felt, although inflationary pressures are
already evident. Whilst the cost of energy represents only a small
component of the Group's costs, the potential impact on consumers
from higher inflation may impact consumer spending and the
viability of certain sites, including franchised sites. These are
considered to be non-adjusting post balance sheet events and so the
measurement of assets and liabilities in the accounts have not been
adjusted for their potential impact.
On 11 January 2022, the Company announced that it had received a
Noteholder Notice of Conversion in relation to all of its
outstanding Convertible Loan Notes together with accrued interest.
As a result, the Company issued 4,378,082 new XP Factory Shares on
2 February 2022 in full settlement of the Convertible Loan Notes
and outstanding interest.
During January 2022, the Group received payments from HMRC in
relation to research and development claims made by the Company and
certain of its subsidiaries under the SME R&D Scheme in
relation to research and development expenditure incurred in 2019.
Since the grant related to a claim which was made prior to the year
end, the receipt of cash is considered an adjusting post balance
sheet event. Consequently, the receipt of the grants has been
recognised in the consolidated financial performance and position
of the Group as at the reporting date.
Board of Directors
The Directors of the Company who have served during the year and
at the date of this report are:
Director Role Date of Date of Board Committee
appointment resignation
---------------- -------------------------- ------------- ------------- ----------------
Richard Rose Independent Non-Executive 25/5/2016 N A R
Chairman
Richard Harpham Chief Executive Officer 3/5/2017
Graham Bird Chief Financial Officer 6/1/2020
Karen Bach Independent Non-Executive 3/5/2017 N A R
Director
John Story Non-Executive Director 28/9/2020 2/8/2021
Richard Harpham was first appointed on 25 May 2015 and resigned
on 15 June 2016. He was subsequently re-appointed on 3 May
2017.
Board Committee abbreviations are as follows: N = Nomination
Committee; A = Audit Committee; R = Remuneration Committee
The Board comprises two Executive and two Non-Executive
directors.
Richard Rose, Independent Non-Executive Chairman
Richard has a wealth of experience chairing high profile boards.
Previously he has been CEO of two multi-site quoted businesses
where he significantly increased shareholder value. Since then he
has held a number of Chairman roles including Booker Group plc
(retiring in 2015 after three terms) and AO World plc where he
retired in 2016. He has been Non-Executive Chairman of Watchstone
Group plc since May 2015 is also Chairman of IB Group Ltd since
October 2018.
Richard is a member of the Remuneration Committee, the Audit
Committee and the Nomination Committee of the Company.
Richard Harpham, Chief Executive Officer
Richard joined the Company on its admission to AIM in May 2017
having worked since November 2016 with the Escape Hunt (now XP
Factory) management team. Richard's prior role was with Harris +
Hoole, having been Chief Financial Officer and then Managing
Director, responsible for its turnaround. Before this, Richard
spent over four years at Pret A Manger as Global Head of Strategy.
Richard has also held a number of strategic and financial positions
at companies including Constellation Brands, Shire Pharmaceuticals
and Fujitsu Siemens Computers.
Graham Bird, Chief Financial Officer
Graham, who joined the Company in January 2020, has significant
experience in financial and City matters and in growing small
businesses. He is a chartered accountant, having qualified with
Deloitte in London, and has worked in advisory, investment,
commercial and financial roles. Prior to joining XP Factory, Graham
was one of the founding employees at Gresham House plc ("Gresham
House") where, in addition to supporting the growth of Gresham
House, he was responsible for establishing and managing the
successful strategic equity business unit which focuses on both
quoted and unquoted equity investments. Prior to joining Gresham
House, Graham spent six years in senior executive roles at PayPoint
Plc ("PayPoint"), including director of strategic planning and
corporate development and executive chairman and president of
PayByPhone. Before joining PayPoint, he was head of strategic
investment at SVG Investment Managers, having previously been at
JPMorgan Cazenove, where he served as a director in the corporate
finance department.
Karen Bach, Independent Non-Executive Director
Karen who joined the Company on its admission to AIM in May 2017
is a Chair and Non-Executive Director with strong technology,
scale-up and transactional expertise. In addition to being the
Senior Independent Non-Executive Director of XP Factory, Karen is
Chairman and non-executive director of four growing tech businesses
and is also CEO of IX Acquisition Corp., a Nasdaq-listed blank
check company.
Previously, she was Chairman of IXCellerate Limited, a
Non-Executive Director of Belvoir Lettings Plc and KRM22 plc and
trustee of the Learning Foundation. Karen gained much experience
internationally as Chief Financial Officer at growing technology
businesses IXEurope Plc, ACS Plc and Kewill Plc and with blue chip
multi-nationals. Karen is also a member of the 30% Club which
supports boards to appoint more female directors and increase the
pipeline of upcoming female talent. Karen is Chair of the
Remuneration Committee, the Audit Committee and the Nomination
Committee of the Company.
Directors' interests in shares
Directors' interests in the shares of the Company at the date of
this report are disclosed below. Directors' interests in contracts
of significance to which the Company was a party during the
financial period are disclosed in note 27 to the Financial
Statements.
Ordinary shares
Director held % held
Richard Rose 53,666 0.04
---------------- -------
Richard Harpham 874,345 0.58
---------------- -------
Graham Bird 1,790,275 1.19
---------------- -------
Karen Bach 259,067 0.17
---------------- -------
XP Factory Plc owns all the ordinary shares in its subsidiary,
Escape Hunt Group Ltd ("EHGL"). EHGL issued a total of 1,000 Growth
shares in 2017 to three directors and employees. In 2019, following
the departure of one of the individuals, 280 shares were
repurchased by the Company. In 2021, the Company purchased the
remaining Growth shares for a total GBP1 consideration. As at 31
December 2021, XP Factory owns 100% of the Growth shares. The
Growth shares carry no voting rights and are not entitled to any
dividends that may be paid by EHGL.
Directors' interests in options
The following options have been granted to certain Directors
under the Escape Hunt Plc 2020 EMI Share Option Scheme. The options
vest over three years and are subject to achieving certain
performance conditions related to share price appreciation over a
four year period.
Options Exercise Options Date of Expiry
Director held price vested Grant date
16 July
Richard Harpham 5,333,333 7.5 pence 1,777,778 16 July 2020 2025
---------- ---------- ---------- ------------- --------
16 July
Graham Bird 3,733,333 7.5 pence 1,244,444 16 July 2020 2025
---------- ---------- ---------- ------------- --------
Substantial interests
As at 31 March 2022 the Company has been advised of the
following significant interests (greater than 3%) in its ordinary
share capital:
Ordinary shares
Shareholder held % held
Canaccord Genuity Wealth Management 32,946,854 21.9
---------------- -------
Crux Asset Management 14,458,731 9.6
---------------- -------
Hargreaves Lansdown stockbrokers 13,212,266 8.8
---------------- -------
JO Hambro Capital Management 9,500,00 6.3
---------------- -------
Stephen Lucas 7,233,024 4.8
---------------- -------
John Story 5,999,999 4.0
---------------- -------
UBS Collateral account 5,124,680 3.4
---------------- -------
Allianz Global Investors 5,000,000 3.3
---------------- -------
Except as referred to above, the Directors are not aware of any
person who was interested in 3% or more of the issued share capital
of the Company or could directly or indirectly, jointly or
severally, exercise control.
Donations
No political or charitable donations have been made in the year
ended 31 December 2021.
Directors' insurance
The Company has maintained throughout the year directors' and
officers' liability insurance for the benefit of the Company, the
Directors and its Officers.
Independent auditors
A resolution formalising the appointment and proposing the
re-appointment of HW Fisher LLP as auditor of the Company is to be
proposed at the forthcoming Annual General Meeting.
Going Concern
The time horizon required for the Going Concern Statement is a
minimum of 12 months from the date of signing the financial
statements. Consistent with prior periods, the Directors have
adopted an assessment period of 18 months from the year end date of
31 December 2021.
In determining whether there are material uncertainties, the
Directors consider the Group's business activities and principal
risks. The Directors' reviewed the Group's cash flows, liquidity
positions and borrowing facilities for the going concern
period.
There has been no material uncertainty identified which would
cast significant doubt upon the Group's ability to continue using
as a going concern. As such, the Directors considered it
appropriate to adopt the going concern basis of accounting in the
preparation of the Group's financial statements.
Annual General Meeting
The Annual General Meeting (AGM) will be held on 29 June
2022.
Signed by order of the board
Graham Bird
Chief Financial Officer and Company Secretary
31 May 2022
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF XP FACTORY PLC
(FORMERLY ESCAPE HUNT PLC)
Opinion
We have audited the financial statements of XP Factory Plc
(formerly Escape Hunt Plc) (the 'Parent Company') and its
subsidiaries (the 'Group') for the year ended 31 December 2021,
which comprise the:
-- the consolidated Statement of Comprehensive Income;
-- the consolidated and Parent Company Statements of Financial
Position,
-- the consolidated and Parent Company Statement of Changes
in Equity;
-- the consolidated Statement of Cash Flows;
-- the related notes to the Consolidated and Parent Company
financial statements including significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and
UK-adopted International Accounting Standards ('IAS'). The
financial reporting framework that has been applied in the
preparation of the Parent Company financial statements is
applicable law and United Kingdom Accounting Standards, Financial
Reporting Standard 102 The Financial Reporting Standard applicable
in the UK and Republic of Ireland (United Kingdom Generally
Accepted Accounting Practice).
In our opinion;
-- the financial statements give a true and fair view of
the state of the Group's and of the Parent Company's affairs
as at 31 December 2021 and of the Group's loss for the
year then ended;
-- the Group's financial statements have been properly prepared
in accordance with UK-adopted International Accounting
Standards ('IAS');
-- the Parent Company financial statements have been prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and Parent Company in accordance
with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Context
There are twenty-eight components of the Group, twenty-two
located and operating in the United Kingdom and 6 located and
operating overseas. The audits of XP Factory Plc (formerly Escape
Hunt Plc) and its UK subsidiary undertakings requiring statutory
audits were conducted from the UK by the audit engagement team.
Financial information from other components not considered to be
individually significant was subject to limited review procedures
carried out by the audit engagement team.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
The key audit matters that we identified in the current year
were:
-- Revenue recognition arising from occurrence, completeness
and cut-off in the period;
-- Management override of controls;
-- IFRS 9 and the resultant expected credit loss from franchisees;
-- IFRS 16 and the adoption of IFRS 16;
-- Valuation and impairment of goodwill and other intangible
assets arising from business combinations;
-- Valuation of contingent consideration arising from business
combinations; and
-- Going Concern.
Our application of materiality
In planning and performing our audit we applied the concept of
materiality. An item is considered material if it could reasonably
be expected to change the economic decisions of a user of the
financial statements. We used the concept of materiality to both
focus our testing and to evaluate the impact of misstatements
identified.
Based on our professional judgement, we determined overall
materiality for the Group financial statements as a whole to be
GBP145,000, based on 1% of Group turnover.
An overview of the scope of our audit
The key audit matters identified above are discussed further in
this section. This is not a complete list of all risks identified
by our audit.
We identified going concern as a key audit matter and have
detailed our response in the conclusions relating to going concern
section below.
Area of focus How our audit addressed the area of
focus
Revenue recognition Our audit work included, but was not
arising from occurrence, restricted to the following:
completeness and cut-off
in the period * We evaluated the sales controls system in place to
determine the controls surrounding the income.
There is a presumed
risk of misstatement
arising from lack * We checked a sample of the franchise agreements and
of completeness or contracts through to the income recognised in the
inaccurate cut-off accounts and invoices.
relating to revenues.
* We checked a sample of sales from the booking system
through to the income recognised in the accounts.
* We also completed checks on deferred and accrued
income.
* We reviewed the revenue recognition accounting policy
to ensure the application was consistent.
Based on our audit work detailed above,
we confirm that we have nothing material
to report, and or draw attention to
in respect of these matters.
------------------------------------------------------------------
Management override Our audit work included, but was not
of controls restricted to the following:
Management is in a * We undertook testing on the Company and Group's
unique position to controls, we extended our audit testing to perform
override controls enhanced management override procedures.
that otherwise appear
to be operating effectively.
* We undertook a review to gain an understanding of the
overall governance and oversight process surrounding
management's review of the financial statements.
* We examined the significant accounting estimates and
judgements relevant to the financial statements for
evidence of bias by the directors.
* We reviewed the financial statements and considered
whether the accounting policies are appropriate and
have been applied consistently.
* We undertook a review of the journals posted through
the nominal ledger for significant and unusual
transactions and investigated them, reviewing and
confirming the journal entry postings.
* We undertook a review of the consolidation journals
to ensure they were reasonable.
Based on our audit work detailed above,
we confirm that we have nothing material
to report, and or draw attention to
in respect of these matters.
------------------------------------------------------------------
IFRS 9 and the resultant Our audit work included, but was not
expected credit loss restricted to the following:
from franchisees
* We obtained management's calculation of the expected
The Company is a co-tenant credit loss provision and discussed the key inputs
or has provided a into the assessment with management.
guarantee on a number
of property leases
for which a franchisee * We reviewed the lease agreements to verify the terms
is the primary lessee. of the lease which act as a basis for the
IFRS 9 requires the calculation.
recognition of expected
credit losses in respect
of financial guarantees, * We reviewed the calculation for completeness based on
including those provided our knowledge of the business.
by the Group. Where
there has been a significant
increase in credit * We reviewed the appropriateness of the disclosures
risk, the standard made and its consistency with our knowledge of the
requires the recognition agreements.
of the expected lifetime
losses on such financial
guarantees.
Based on our audit work detailed above,
The assessment of we confirm that we have nothing material
whether there has to report, and or draw attention to
been a significant in respect of these matters.
increase in credit
risk is based on whether
there has been an
increase in the probability
of default occurring
since previous recognition.
The assessment of
the probability of
default is inherently
subjective and requires
management judgement.
------------------------------------------------------------------
IFRS 16 and the adoption Our audit work included, but was not
of IFRS 16; restricted to the following:
The Group holds multiple * We obtained management's calculation of recognition
property leases and of right of use assets and lease liabilities.
judgement is required
regarding the recognition
of right of use assets * We reviewed the lease agreements and re-performed
and lease liabilities. calculations to verify the accuracy the calculation.
* We reviewed the calculation for completeness based on
our knowledge of leases within the business.
* We reviewed the significant judgements made in the
recognition of the right of use assets and lease
liabilities, particularly with respect to the
discount rate implicit in the lease based on the
Group's incremental borrowing rate, which is assessed
at 6.2%.
* We reviewed the appropriateness of the disclosures
made and its consistency with our knowledge of the
lease agreements and the application of IFRS 16.
Based on our audit work detailed above,
we confirm that we have nothing material
to report, and or draw attention to
in respect of these matters.
------------------------------------------------------------------
Valuation and impairment Our audit work included, but was not
of goodwill and other restricted to the following:
intangible assets
arising from business Valuation
combinations * We obtained management's valuation of the acquired
intangibles and discussed the key inputs into the
The Group's intangibles assessment with management.
comprise of goodwill,
trademarks, intellectual
property, franchise * We performed procedures, including challenge
agreements, and the regarding reasonableness of the inputs into the
portal. model.
Intangibles arising
from business combinations * We reviewed the significant judgements made in the
amounted to GBP21.5m. model, particularly with respect to the discount rate
applied, the calculation of tax amortisation benefits
The total carrying and the recognition of deferred tax liabilities.
value of intangible
assets was GBP22.0m
(2020: GBP0.9m). * We tested to ensure the mathematical accuracy of the
model presented.
The continued losses
and impact of COVID-19
combined with the
uncertainty of future Impairment
cash flows indicate * We obtained management's assessment of impairment and
there could be an discussed the key inputs into the assessment with
impairment in the management.
carrying value of
the intangible assets
and such as we considered * We performed procedures, including challenge
this to be a key audit regarding reasonableness of the inputs into the
matter. model.
* We considered management's sensitivity analysis and
also performed an additional range of sensitivities
to assess whether a reasonably likely change to a key
input would result in an impairment charge.
* We tested to ensure the mathematical accuracy of the
model presented.
Based on our audit work detailed above,
we confirm that we have nothing material
to report, and or draw attention to
in respect of these matters.
------------------------------------------------------------------
Valuation of contingent Our audit work included, but was not
consideration arising restricted to the following:
from business combinations
* We obtained management's calculation of the fair
There is contingent value at the date of acquisition and at the expected
consideration of GBP8.95m date of issue and discussed the key inputs into the
arising on the acquisition assessment with management.
of the Boom Group.
Contingent consideration * We performed procedures, including challenge
includes a preliminary regarding reasonableness of the inputs into the
estimate on the earnout model.
payable in respect
of the acquisition,
recognised at fair * We reviewed the significant judgements made in the
value at the date model, particularly with respect to the cost of
of acquisition. equity rate applied.
The contingent consideration
is payable by means * We tested to ensure the mathematical accuracy of the
of an issue of up model presented.
to 25,000,000 Consideration
Shares.
* We reviewed the appropriateness of the disclosures
made and its consistency with our knowledge of the
transaction.
Based on our audit work detailed above,
we confirm that we have nothing material
to report, and or draw attention to
in respect of these matters.
------------------------------------------------------------------
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors' assessment of the Company's
ability to continue to adopt the going concern basis of accounting
included obtaining and reviewing the forecast financial
projections.
Management prepared two main scenarios for the future business
following the planned opening of new sites in the UK. As part of
their assessment, the following scenarios were presented:
-- A central case for which revenue forecasts are based on
a regression analysis of previous performance for the twelve
months to February 2020, prior to the impact of COVID-19,
adjusted for seasonality. Sales are not expected to be
affected by COVID-19, following the removal of all COVID-19
related restrictions. The central case includes the planned
roll out of new sites and is based on existing property
deals which are in legal stages, heads of terms or final
negotiations and management have a high degree of visibility.
The central case represents the targets considered achievable
by divisional management.
-- A downside case which reflects a combination of downside
sensitivities in each of the Boom and Escape Hunt businesses.
Sensitivities include a sales reduction of 10% leading
to reduced margins, cost inflation of a further 3%, closure
of all sites for one month as a result of the COVID-19
pandemic with government support, a delay in the timing
of the opening of new sites by 60 days, a reduction of
the number of new sites rolled out and a 10% increase in
building costs.
In both scenarios the Group has surplus working capital to meet
its working capital requirements for the foreseeable future.
We performed audit procedures, including but was not restricted
to the following:
-- We reviewed the forecast revenues and resulting cash flows
within the assessment period;
-- We compared the forecast to available management information
for the business post year-end;
-- We considered management's sensitivity analysis and also
performed an additional range of sensitivities to assess
whether a reasonably likely change to a key input would
result in an erosion of the revised headroom on working
capital available in the downside model used by management.
-- We reviewed the announcements and considered if any items
will have a financial impact affecting the going concern;
-- We reviewed the appropriateness of the disclosures made
and its consistency with our knowledge of the business.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group or Company's ability to continue as a going concern for a
period of at least twelve months from when the financial statements
are authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Other information
The other information comprises the information included in the
annual report other than the financial statements and our auditor's
report thereon. The directors are responsible for the other
information contained within the annual report. Our opinion on the
financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the directors'
report for the financial year for which the financial statements
are prepared is consistent with the financial statements;
and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and
the Parent Company and its environment obtained in the course of
the audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by
us; or
-- the Parent Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified
by law are not made; or
-- we have not received all the information and explanations
we require for our audit.
Responsibilities of directors
As explained more fully in the Directors' responsibilities
statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
As part of our planning process:
-- We enquired of management the systems and controls the
Group and Company has in place, the areas of the financial
statements that are most susceptible to the risk of irregularities
and fraud, and whether there was any known, suspected or
alleged fraud. The Group and Company did not inform us
of any known, suspected or alleged fraud.
-- We obtained an understanding of the legal and regulatory
frameworks applicable to the Group and Company. We determined
that the following were most relevant: UK-adopted International
Accounting Standards and Companies Act 2006.
-- We considered the incentives and opportunities that exist
in the Group and Company, including the extent of management
bias, which present a potential for irregularities and
fraud to be perpetuated, and tailored our risk assessment
accordingly.
-- Using our knowledge of the Group and Company, together
with the discussions held with the Group and Company at
the planning stage, we formed a conclusion on the risk
of misstatement due to irregularities including fraud and
tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities
including fraud during the course of the audit included:
-- Identifying and testing journal entries and the overall
accounting records, in particular those that were significant
and unusual.
-- Reviewing the financial statement disclosures and determining
whether accounting policies have been appropriately applied.
-- Reviewing and challenging the assumptions and judgements
used by management in their significant accounting estimates.
-- Assessing the extent of compliance, or lack of, with the
relevant laws and regulations.
-- Testing key revenue lines, in particular cut-off, for evidence
of management bias.
-- Performing a physical verification of key assets.
-- Obtaining third-party confirmation of material bank and
loan balances.
-- Documenting and verifying all significant related party
and consolidated balances and transactions.
-- Reviewing documentation such as the Group and Company's
board minutes for discussions of irregularities including
fraud.
-- Testing all material consolidation adjustments.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements even though we have
properly planned and performed our audit in accordance with
auditing standards. The primary responsibility for the prevention
and detection of irregularities and fraud rests with the
directors.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at:
http://www.frc.org.uk/auditorsresponsibilities . This description
forms part of our auditor's report
Use of our audit report
This report is made solely to the Parent Company's members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Gary Miller (Senior Statutory Auditor)
For and on behalf of HW Fisher LLP
Chartered Accountants
Statutory Auditor
Acre House
11/15 William Road
London
NW1 3ER
United Kingdom
Date: 31 May 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Year Ended 31 December 2021
All figures in GBP'000s Year ended Year ended
31 December 31 December
Continuing operations Note 2021 2020
Revenue 4 6,984 2,658
Cost of sales 6 (1,904) (778)
Gross profit 5,080 1,880
Other income 32 3,607 394
Administrative expenses 6 (9,208) (8,641)
Operating loss 6 (521) (6,367)
Adjusted EBITDA 2,653 (1,445)
Amortisation of intangibles 12 (471) (2,299)
Rent concessions recognised in the year 11 148 22
Depreciation of property plant and equipment 10 (1,721) (1,819)
Depreciation of right-of-use assets 11 (613) (380)
Loss on disposal of tangible assets 10 (39) (23)
Loss on disposal of intangible assets 12 (11) (7)
Profit on termination / change of leases 11 41 -
Branch closure costs (4) (52)
Branch pre-opening costs (103) -
Provision against loan to franchisee 15 (78) (300)
Provision for guarantee leases 21 (8) -
Exceptional professional costs 6 (235) (35)
Foreign currency gains / (losses) (18) -
Share-based payment expense 24 (62) (29)
----------- -----------
Operating loss (521) (6,367)
--------------------------------------------- ---- ----------- -----------
Interest charged (131) (17)
Lease finance charges 11 (233) (180)
Loss before taxation (885) (6,564)
Taxation 8 11 (15)
Loss after taxation (874) (6,579)
Other comprehensive income:
Items that may or will be reclassified
to profit or loss:
Exchange differences on translation
of foreign operations (3) (62)
Total comprehensive loss (877) (6,641)
Loss attributable to:
Equity holders of XP Factory Plc (formerly
Escape Hunt plc) (877) (6,579)
Non-controlling interests - -
----------- -----------
(877) (6,579)
Total comprehensive loss attributable
to:
Equity holders of XP Factory Plc (formerly
Escape Hunt Plc) (877) (6,641)
Non-controlling interests - -
----------- -----------
(877) (6,641)
----------- -----------
Loss per share attributable to equity
holders:
Basic and diluted (Pence) 9 (0.93) (12.36)
----------- -----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
As at As at
31 December 31 December
Note 2021 2020
GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 10 5,516 3,885
Right-of-use assets 11 7,602 2,940
Intangible assets 12 22,046 913
Rent deposits 44 26
Loan to franchisee 15 84 2
35,292 7,766
Current assets
Inventories 17 24 16
Trade receivables 16 848 182
Other receivables and prepayments 16 4,142 691
Stocks and work in progress 17 438
Cash and cash equivalents 18 8,225 2,722
13,677 3,611
TOTAL ASSETS 48,969 11,377
LIABILITIES
Current liabilities
Trade payables 19 1,527 606
Contract liabilities 20 1,201 441
Loan Notes 23 404
Other loans 23 256
Lease liabilities 11 393 489
Other payables and accruals 19 2,889 815
Provisions 21 637
7,307 2,351
Consolidated Statement of Financial Position
As at 31 December 2021 (continued)
As at As at
31 December 31 December
2021 2020
Note GBP'000 GBP'000
Non-current liabilities
Contract liabilities 20 491 152
Provisions 21 9,248 128
Loan notes 23 373 289
Other loans 23 620
Deferred tax liability 8 1,101
Lease liabilities 11 8,012 3,253
19,845 3,822
TOTAL LIABILITIES 27,152 6,173
NET ASSETS 21,817 5,204
EQUITY
Capital and reserves attributable
to equity holders of XP Factory Plc
(formerly Escape Hunt Plc)
1,825 1,005
Share capital 22 44,366 27,758
Share premium account 26 27,758
Merger relief reserve 26 4,756 4,756
Convertible loan note reserve 23 68 68
Accumulated losses 26 (29,317) (28,444)
Currency translation reserve 26 (83) (81)
Capital redemption reserve 26 46 46
Share-based payment reserve 26 158 96
21,817 5,204
Non-controlling interests - -
TOTAL EQUITY 21,817 5,204
The notes are an integral part of these financial
statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 30(th) May 2021 and are signed on its
behalf by:
Graham Bird
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Attributable to owners of the parent
Year Convertible
ended Share Merger Currency Capital Share-based loan
31 Dec Share premium relief translation redemption payment note Accumulated
2021 capital account reserve reserve reserve reserve reserve losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- --------- ------------ ----------- ------------ --------
Balance
as at
1 Jan
2021 1,005 27,758 4,756 (81) 46 96 68 (28,444) 5,204
Loss for
the year - - - - - - - (874) (874)
Other
comprehensive
income - - - (3) - - - - (3)
-------- --------- --------- ------------ ----------- ------------ ------------ ------------ --------
Total
comprehensive
loss - - - (3) - - - (874) (877)
-------- --------- --------- ------------ ----------- ------------ ------------ ------------ --------
Issue
of shares 820 17,819 - - - - - - 18,639
Issue
of convertible
loan notes - - - - - - - - -
Share
issue
costs - (1,211) - - - - - - (1,211)
Share-based
Payment
Charges - - - - - 62 - - 62
Transactions
with owners 820 16,608 - - - 62 - - 17,491
-------- --------- --------- ------------ ----------- ------------ ------------ ------------ --------
Balance
as at
31 Dec
2021 1,825 44,366 4,756 (83) 46 158 68 (29,317) 21,817
-------- --------- --------- ------------ ----------- ------------ ------------ ------------ --------
Year
ended
31 Dec
2020:
Adjusted
balance
as at
1 Jan
2020 336 24,717 4,756 (19) 46 67 - (21,803) 8,100
Loss for
the year - - - - - - - (6,641) (6,641)
Other
comprehensive
income - - - (62) - - - - (62)
-------- --------- --------- ------------ ----------- ------------ ------------ ------------ --------
Total
comprehensive
loss - - - (62) - - - (6,641) (6,703)
-------- --------- --------- ------------ ----------- ------------ ------------ ------------ --------
Issue
of shares 669 3,342 - - - - - - 4,011
Issue
of
convertible
loan notes - - - - - - 68 - 68
Share
issue
costs - (301) - - - - - - (301)
Share-based
payment
charges - - - - - 29 - 29
Disposal
of subsidiary - - - - - - - - -
------------ ------------
Transactions
with owners 669 3,041 - - - 29 68 - 3,807
-------- --------- --------- ------------ ----------- ------------ ------------ --------
Balance
as at
31 Dec
2020 1,005 27,758 4,756 (81) 46 96 68 (28,444) 5,204
-------- --------- --------- ------------ ----------- ------------ ------------ ------------ --------
The notes are an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Cash flows from operating activities
Loss before income tax (885) (6,564)
Adjustments:
Depreciation of property, plant and
equipment 10 1,721 1,819
Depreciation of right-of-use assets 11 613 380
Amortisation of intangible assets 12 472 2,299
Movement in provision against franchisee
loan 15 78 300
Loss on disposal of plant and equipment 10 41 23
Loss on write off of intangibles 12 11 7
Net foreign exchange differences (3) -
Share-based payment expense 24 62 29
Lease interest charge 11 233 180
Rent concessions received 11 (148) (22)
Profit on closure / modification of
leases 11 (41) -
Interest charge / (income) 131 17
Operating cash flow before working
capital changes 2,285 (1,532)
Decrease in trade and other receivables 16 (2,628) (30)
Decrease / (increase) in inventories 17 26 (3)
Decrease in stock and work in progress 17 67 -
(Decrease) / increase in provisions 21 (270) 54
Increase / (decrease) in trade and
other payables 19 202 296
Increase / (decrease) in deferred
income 20 1,075 (30)
Cash used in operations 757 (1,245)
Income taxes paid 8 (15) (12)
Net cash generated / (used) in operating
activities 742 (1,257)
Cash flows from investing activities
Purchase of property, plant and equipment 10 (2,584) (1,809)
Purchase of intangibles 12 (119) (237)
Payment of deposits (18) -
Loan made to master franchisee 15 (187) (2)
Proceeds from new loans 23 728 -
Acquisition of subsidiaries, net of
cash acquired 14 (9,732) 35
Interest received / (charged) / - (17)
Net cash used in investing activities (11,912) (2,030)
Cash flows from financing activities
Proceeds from issue of ordinary shares 22 18,639 3,976
Proceeds from issue of convertible
loan note 23 - 340
Share issue costs 24 (1,211) (301)
Lease interest charge payment 11 - (180)
Repayment of leases 11 (759) (1)
Net cash from financing activities 16,669 3,834
Net increase in cash and cash equivalents 5,499 547
Cash and cash equivalents at beginning
of year 2,722 2,171
Effects of exchange rate changes on
the balance of cash held in foreign
currencies 4 4
Cash and cash equivalents at end
of year 8,225 2,722
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General Information
The Company was incorporated in England on 17 May 2016 under the
name of Dorcaster Limited with registered number 10184316 as a
private company with limited liability under the Companies Act
2006. The Company was re-registered as a public company on 13 June
2016 and changed its name to Dorcaster Plc on 13 June 2016. On 8
July 2016, the Company's shares were admitted to AIM.
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 Belmont House, Station Way,
Crawley, England, RH10 1JA.
The consolidated financial information represents the audited
consolidated results of the Company and its subsidiaries, (together
referred to as "the Group").
Basis of preparation
The audited consolidated financial statements have been prepared
in accordance with UK-adopted International Accounting Standards
("IFRSs").
The audited financial statements are presented in Pounds
Sterling, which is the presentational currency for the financial
statements. All values are rounded to the nearest thousand pounds
except where otherwise indicated. They have been prepared under the
historical cost convention, except for financial instruments that
have been measured at fair value through profit and loss.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Company's accounting policies.
Changes in accounting policy
a) New standards, interpretations and amendments effective from
1 January 2021
New standards impacting the Group adopted in the annual
financial statements for the year ended 31 December 2021, and which
have given rise to changes in the Group's accounting policies
are:
-- IFRS 9 - Financial Instruments
In the year ended 2021 the company has been required to report
more extensively on financial guarantee contracts.
Financial guarantee contracts relate to leases where the Group
has signed as co-tenant or has provided a guarantee for a site
operated by a franchisee.
At the end of the reporting period, the directors of the Company
have assessed the past due status of the debts under guarantee, the
financial position of the debtors as well as the economic outlook
of the industries in which the debtors operate. There has been no
change in the estimation techniques or significant assumptions made
during the reporting periods in assessing the loss allowance for
these financial assets.
The Directors do not expect any material impact on the Group's
reporting from new accounting standards, interpretations and
amendments not yet effective but currently under contemplation by
the International Accounting Standards Board.
2. Significant accounting policies
The principal accounting policies applied in the preparation of
the audited consolidated financial information set out below have,
unless otherwise stated, been applied consistently throughout.
Basis of consolidation
The audited consolidated financial information incorporates the
preliminary financial statements of the Company and its
subsidiaries. Subsidiaries are entities over which the Group has
control. The Group controls an investee if the Group has power over
the investee, exposure to variable returns from the investee, and
the ability to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
Subsidiaries are consolidated from the date on which control is
obtained by the Group up to the effective date on which control is
lost, as appropriate.
Under the acquisition method, the results of the subsidiaries
acquired or disposed of are included from the date of acquisition
or up to the date of disposal. At the date of acquisition, the fair
values of the subsidiaries' net assets are determined and these
values are reflected in the Consolidated Financial Statements. The
cost of acquisition is measured at the aggregate of the fair
values, at the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree. Any excess of the purchase
consideration of the business combination over the fair value of
the identifiable assets and liabilities acquired is recognized as
goodwill. Goodwill, if any, is not amortised but reviewed for
impairment at least annually. If the consideration is less than the
fair value of assets and liabilities acquired, the difference is
recognized directly in the statement of comprehensive income.
Acquisition-related costs are expensed as incurred.
Intra-group transactions, balances and recognized gains on
transactions are eliminated. Unrealised losses are also eliminated
unless cost cannot be recovered. Where necessary, adjustments are
made to the Financial Statements of subsidiaries to ensure
consistency of accounting policies with those of the Group.
The financial statements of the subsidiaries are prepared for
the same reporting period as that of the Company, using consistent
accounting policies. Where necessary, accounting policies of
subsidiaries are changed to ensure consistency with the policies
adopted by other members of the Group.
Changes in the Group's interest in a subsidiary that do not
result in a loss of control are accounted for as equity
transactions. The carrying amounts of the Group's interests and the
non-controlling interests are adjusted to reflect the changes in
their relative interests in the subsidiary. Any difference between
the amount by which the non-controlling interests are adjusted and
the fair value of the consideration paid or received is recognised
directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary it derecognises the
assets and liabilities of the subsidiary and any non-controlling
interest. The profit or loss on disposal is calculated as the
difference between (i) the aggregate of the fair value of the
consideration received and the fair value of any retained interest
and (ii) the previous carrying amount of the assets (including
goodwill), and liabilities of the subsidiary and any
non-controlling interests. Amounts previously recognised in other
comprehensive income in relation to the subsidiary are accounted
for (i.e. reclassified to profit or loss or transferred directly to
retained earnings) in the same manner as would be required if the
relevant assets or liabilities were disposed of.
Going Concern
The financial statements have been prepared on a going concern
basis which contemplates the continuity of normal business
activities and the realisation of assets and the settlement of
liabilities in the ordinary course of business.
The Directors have assessed the Group's ability to continue in
operational existence for the foreseeable future in accordance with
the Financial Reporting Council's Guidance on the going concern
basis of accounting and reporting on solvency and liquidity risks
issued in April 2016.
The Board has prepared detailed cashflow forecasts covering a
three year period from the reporting date.
In May 2021, the Company entered into a convertible loan note
facility with one of its then directors, through which the Company
has access to a further GBP1m in funding. The Company is able to
draw down the funds as required. Details of the convertible loan
note facility are given in note 35. This facility was entered into
to enable the Company to continue to invest in new sites
notwithstanding the continued uncertainty brought about by the
COVID-19 lockdown rules. The facility has not been drawn.
The Group plans to continue the roll out new sites under both
the Escape Hunt and Boom Battle Bar brands in the UK which are
expected to contribute to performance in future.
The central case is based on opening a number of new Escape Hunt
and Boom owner operated sites in the UK in line with the Board's
stated strategy. Sites are expected to take a period of time to
reach maturity based on previous experience. The central case does
not assume any further impact from COVID-19. In the central case
the Group does not need to utilise the convertible loan facility
and believes it has sufficient resources for its present needs.
The Group has also considered a 'downside' scenario. In this
scenario the Group has assessed the potential impact of a reduction
in sales across the group, reduced capacity within the Escape Hunt
UK sites, delays in the opening of sites, cost increases and a
substantial reduction in the pace of roll-out. The 'downside'
scenario also considers a further lockdown of one month, which
assumes that government support would be available to cover site
level salaries only. The scenario also considers a delay in
progress in the US. In the 'downside' scenario, the Group believes
it can take mitigating actions to preserve cash. Principally the
roll-out of further sites would be stopped and cost saving measures
would be introduced at head office. The Group has previously made
significant reductions in its head office property costs, and
further cost reductions could be targeted in both people and areas
such as IT, professional services and marketing. Other areas of
planned capital expenditure would also be curtailed. These include
planned expenditure on website and system improvements. Taking into
account the mitigating factors, the Group believes it would have
sufficient resources for its present needs, with or without access
to the convertible loan note facility.
Based on the above, the Directors consider there are reasonable
grounds to believe that the Group will be able to pay its debts as
and when they become due and payable, as well as to fund the
Group's future operating expenses. The going concern basis
preparation is therefore considered to be appropriate in preparing
these financial statements.
Merger relief
The issue of shares by the Company is accounted for at the fair
value of the consideration received. Any excess over the nominal
value of the shares issued is credited to the share premium account
other than in a business combination where the consideration for
shares in another company includes the issue of shares, and on
completion of the transaction, the Company has secured at least a
90% equity holding in the other company. In such circumstances the
credit is applied to the merger relief reserve.
Foreign currency transactions and translation
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity's
functional currency are recorded at the rate of exchange prevailing
on the date of the transaction.
The functional currency of the Company's formerly active
subsidiaries based overseas, namely Escape Hunt Operations Limited
and E V Development Co. Limited are the US Dollar and Thai Baht
respectively. Likewise, the functional currency of the Company's
subsidiary Escape Hunt USA Franchises Limited, which is intended to
operate franchises in North America, is the US Dollar and the
functional currency of the company's subsidiary Escape Hunt
Entertainment LLC, purchased in September 2020 and operating in the
Middle East is the Arab Emirates Dinar. The Company's subsidiaries,
BGP Escape France and BGP Entertainment Belgium, both purchased in
March 2021 both have the functional currency Euros. These
subsidiaries, when recording their own foreign transactions follow
the principles below. At the end of each financial year, monetary
items denominated in foreign currencies are retranslated at the
rates prevailing as of the end of the financial year. Non-monetary
items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing on the date
when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary
items, and on retranslation of monetary items are included in
profit or loss for the period.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations
(including comparatives) are expressed in the presentational
currency which is Pounds Sterling using exchange rates prevailing
at the end of the financial year. Income and expense items
(including comparatives) are translated at the average exchange
rates for the period, unless exchange rates fluctuated
significantly during that period, in which case the exchange rates
at the dates of the transactions are used. Exchange differences
arising are recognised initially in other comprehensive income and
accumulated in the Group's foreign exchange reserve.
On disposal of a foreign operation, the accumulated foreign
exchange reserve relating to that operation is reclassified to
profit or loss.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items of
property, plant and equipment.
Depreciation is charged to the income statement on a
straight-line basis over the estimated useful lives of each part of
an item of property, plant and equipment. Land is not depreciated.
The estimated useful lives are as follows:
Office equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements 5 years
Computers 3 years
Games 2 years
Depreciation methods, useful lives and residual values are
reviewed at each reporting date.
Research and development expenditure
Research expenditure is recognised as an expense when it is
incurred.
Development expenditure is recognised as an expense except that
costs incurred on development projects are capitalised as long-term
assets to the extent that such expenditure is expected to generate
future economic benefits. Development expenditure is capitalised
if, and only if an entity can demonstrate all of the
following:-
-- its ability to measure reliably the expenditure attributable
to the asset under development;
-- the product or process is technically and commercially
feasible;
-- its future economic benefits are probable;
-- its ability to use or sell the developed asset; and
-- the availability of adequate technical, financial and
other resources to complete the asset under development.
Capitalised development expenditure is measured at cost less
accumulated amortisation and impairment losses, if any. Certain
internal salary costs are included where the above criteria are
met. These internal costs are capitalised when they are incurred in
respect of new game designs which are produced and installed in the
UK owner-operated sites, where the ensuing revenue is tracked on a
weekly basis at each site by each game. Development expenditure
initially recognised as an expense is not recognised as assets in
subsequent periods.
Intangible assets
Expenditure on internally generated goodwill and brands is
recognised in the income statement as an expense as incurred.
With the exception of goodwill, intangible assets that are
acquired by the Group are stated at cost less accumulated
amortisation and accumulated impairment losses.
Game design and development costs are expensed as incurred
unless such expenditure meets the criteria to be capitalised as a
non-current asset.
Amortisation is charged to the income statement on a
straight-line basis over the estimated useful lives of intangible
assets unless such lives are indefinite.
The estimated useful lives are as follows:
Trademarks 3 years
Intellectual property:
- Trade names and domain names 3 years
- Rights to system and business processes 3 years
- Internally generated intellectual property 3 years
Franchise agreements Term of franchise
App development 2 years
Portal 3 years
Impairment of assets
Financial assets
A financial asset not carried at fair value through profit or
loss is assessed at each reporting date to determine whether there
is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has
occurred after the initial recognition of the asset, and that the
loss event had a negative effect on the estimated future cash flows
of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
taking into account credit risk. The present value of the future
cash flows represents the expected value of the future cash flows
discounted at the appropriate rate. Interest on the impaired asset
continues to be recognised through the unwinding of the discount.
When a subsequent event causes the amount of impairment loss to
decrease, the decrease in impairment loss is reversed through
profit or loss.
Non-financial assets
The carrying amounts of the Group's non-financial assets are
reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the
asset's recoverable amount is estimated. For goodwill, and
intangible assets that have indefinite useful lives or that are not
yet available for use, the recoverable amount is estimated each
year at the same time.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to
sell. For the purpose of impairment testing, assets that cannot be
tested individually are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or groups
of assets (the "cash-generating unit"). The goodwill acquired in a
business combination, for the purpose of impairment testing, is
allocated to cash-generating units, or ("CGU"). Subject to an
operating segment ceiling test, for the purposes of goodwill
impairment testing, CGUs to which goodwill has been allocated are
aggregated so that the level at which impairment is tested reflects
the lowest level at which goodwill is monitored for internal
reporting purposes. Goodwill acquired in a business combination is
allocated to groups of CGUs that are expected to benefit from the
synergies of the combination.
An impairment loss is recognised if the carrying amount of an
asset or its CGU exceeds its estimated recoverable amount.
Impairment losses are recognised in profit or loss. Impairment
losses recognised in respect of CGUs are allocated first to reduce
the carrying amount of any goodwill allocated to the units, and
then to reduce the carrying amounts of the other assets in the unit
(group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, impairment losses recognised in prior
periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss
is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised.
Employee benefits
Short-term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided. A liability is recognised for the amount expected to be
paid under short-term cash bonus or profit-sharing plans if the
Group has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the
obligation can be estimated reliably.
Revenue recognition
The Group is operating and developing a network of franchised,
licensed and owner-operated branches and offsite "escape the room"
type games under the Escape Hunt(TM) brand and a network of
owner-operated and franchised competitive socialising cocktail bar
venues under the Boom Battle Bar(TM) brand.. The Group receives
revenues from its directly owned branches but also from
franchisees, master-franchisees and sub-franchisees.
The Group, as franchisor, develops original escape games and
other fun competitive socialising games and supporting materials
and provides management, creative, technical and marketing services
based on its knowledge of and expertise in the relevant disciplines
to enable delivery of proprietary consumer experiences.
The Group considers that its contracts with franchisees,
master-franchisees and sub-franchisees provide a customer with a
right to access the Group's intellectual property throughout the
franchise term which is typically for a minimum term of ten years.
Accordingly, the Group satisfies each of its performance
obligations by transferring control of goods and services to the
customer over the period of the franchise agreement. Franchise
revenues are therefore recognised over time.
The Group derives "upfront exclusivity fees" as well as training
fees and documentation fees from the sale and set up of franchises
and subsequent "Service Revenues" in the form of revenue shares,
administration fees, and other related income.
New branch upfront location exclusivity fees
The initial non-refundable upfront exclusivity fees relate to
the transfer of promised goods or services which are satisfied
throughout the life of the franchise agreement. Payment of the
initial upfront exclusivity fee is due immediately on the signing
of a franchise agreement.
The Group, as franchisor, supplies a manual and grants to a
franchisee during the term of a franchise agreement, the exclusive
rights to carry on its business and to utilise the know-how,
intellectual property rights and games within a territory. The
franchise term typically provides for an initial term of 10 years,
with automatic rights for renewal of successive 10-year periods.
The Group offers to:
-- Assist the franchisee to establish, manage and operate
the business within the territory;
-- Provide advice on the choice of branch location;
-- Identify equipment, furniture, props and other items
required to conduct the business;
-- Assist in designing the layout and fit-out of any chosen
branch location;
-- Provide full game and other activity design to be installed
in each branch;
-- Provide guidance on setting up website, booking and
other online services;
-- Provide the franchisee with the franchise manual;
-- Train the franchisee and its staff;
-- Give the franchisee continuing assistance and advice
for the efficient running of the franchise business;
-- Regularly update the franchisee on any changes to the
services and know-how;
-- Design and provide territory-specific, and branch-specific,
logos for use in advertising, merchandise and uniforms;
and
-- Communicate at all times with the franchisee in a timely
manner.
The initial fee is recognised as revenue on a straight-line
basis over the period of the franchise agreement where this is 10
years (or less in case of sub-franchise agreements, where the term
of the sub-franchise agreement typically equals to the remaining
term of the master franchise agreement). Where the franchise term
is not specified or is greater than 10 years, revenue is recognised
over 10 years to reflect a lack of certainty over the actual
duration of the franchise arrangement. See Note 3 for more
details.
Fees related to future periods are carried forward as deferred
income within current and non-current liabilities, as appropriate.
The amounts of deferred revenue at each reporting date are
disclosed in Note 21 to the financial statements.
IFRS 15 also requires the Group to consider if there is a
financing element to such long-term contracts. However, it is
considered that there is no such financial element provided by the
Group to franchisees as payment is received at the time of signing
the franchise agreement and at the commencement of the delivery of
the various services under such agreement.
Under a Master Franchise Agreement, the Group is entitled to a
one-off upfront exclusivity fee representing an advance payment for
a number of branches with all branches paid at a fixed rate,
payable on signing of the Agreement. The contract is not deemed to
be fulfilled and in force until this payment is received in full by
the franchisor. This fee is recognised over the franchise term, or
10 years if this is greater than 10 years, in the same manner as in
a single franchise arrangement.
Where the Group, through a Master Franchisee, enters into
contracts with sub-franchisees, the initial fee is recognised in
the same manner as contracts with direct franchisees (i.e. spread
over 10 years), where not already covered in the fees attributed to
the Master Franchisee . In the event of termination of a franchise
agreement, any remaining deferred income related to this contract
is immediately recognised in full.
Documentation fees are recognised when the franchise agreement
and associated leases and other legal documents are exchanged and
have reached practical completion. Training fees are recognised
when the franchise site is opened.
In some instances, the Group will take on the full
responsibility on a franchise new build, fitting out a franchise
site and will have a direct relationship with the suppliers. The
cost of the build will then be billed to the franchisee in stage
payments, including a markup to cover internal costs and provide
margin. In these instances, the cost of the build is carried as
work in progress until it is invoiced to the franchisee. The total
value of the build is recognised as revenue when invoiced. Profit
is not recognised until completion of the build.
Franchise revenues
As part of each franchise agreement, the Group receives
franchise service revenues at a fixed percentage of a franchisee's
monthly revenues which are recognised as the income is earned.
Service revenues comprise:
-- An agreed share of the franchisee's monthly revenues,
payable weekly or monthly;
-- Fixed monthly fees payable quarterly in advance;
-- Extra costs in respect of site visits and website set-up
fees; and
-- Fees charged for additional services, such as management
of marketing and social media on behalf of a franchisee,
for which franchisees opt in.
Revenue shares, support and administration and other related
revenues are recognised as and when those sales occur. Amounts
billed in advance are deferred to future periods as deferred
revenue.
Owner-operated branch and offsite games
Revenues from the owner-operated branch and offsite activities
include entrance fees and the sale of food and beverages and
merchandise. Such revenues are recognised as and when those sales
occur. Where customers book in advance, the recognition of revenue
is deferred until the customer participates in the experience.
Deferred revenue
The amounts of deferred revenue at each reporting date are
disclosed in Note 21.
Contract costs
Where the game design costs relate to games for individual
franchisees, the costs are not capitalised but expensed as in line
with the delivery of services to franchisees, unless these costs
are significant and other capitalisation criteria are met.
Government Grants
Grants relating to revenue are recognised on the performance
model through the consolidated statement of comprehensive income by
netting off against the costs to which the grants were intended to
compensate. Where the grant is not directly associated with costs
incurred during the period, the grant is recognised as 'other
income'. Grants relating to assets are recognised in income on a
systematic basis over the expected useful life of the asset.
Leases
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
-- Leases of low value assets; and
-- Leases with a duration of 12 months or less.
IFRS 16 was adopted 1 January 2019 without restatement of
comparative figures. The following policies apply subsequent to the
date of initial application, 1 January 2019.
Identifying Leases
The Group accounts for a contract, or a portion of a contract,
as a lease when it conveys the right to use an asset for a period
of time in exchange for consideration. Leases are those contracts
that satisfy the following criteria:
-- There is an identified asset;
-- The Group obtains substantially all the economic
benefits from use of the asset; and
-- The Group has the right to direct use of the asset.
In determining whether the Group obtains substantially all the
economic benefits from use of the asset, the Group considers only
the economic benefits that arise use of the asset, not those
incidental to legal ownership or other potential benefits.
In determining whether the Group has the right to direct use of
the asset, the Group considers whether it directs how and for what
purpose the asset is used throughout the period of use. If there
are no significant decisions to be made because they are
pre-determined due to the nature of the asset, the Group considers
whether it was involved in the design of the asset in a way that
predetermines how and for what purpose the asset will be used
throughout the period of use. If the contract or portion of a
contract does not satisfy these criteria, the Group applies other
applicable IFRSs rather than IFRS 16.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless (as is typically the case) this is not readily
determinable, in which case the Group's incremental borrowing rate
on commencement of the lease is used.
The discount rate is the rate implicit in the lease, if readily
determinable. If not, the Company's incremental borrowing rate is
used which the Company has assessed to be 6.2%. The Group currently
has no borrowings and consequently there is no available interest
rate to use as the basis for this calculation. However, as a small
company which has been loss-making, a calculation has been
performed to include an appropriate level of risk to the risk-free
rate of borrowing.
Variable lease payments are only included in the measurement of
the lease liability if they depend on an index or rate. In such
cases, the initial measurement of the lease liability assumes the
variable element will remain unchanged throughout the lease term.
Other variable lease payments are expensed in the period to which
they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value
guarantee;
-- the exercise price of any purchase option granted in
favour of the Group if it is reasonably certain to assess
that option;
-- any penalties payable for terminating the lease, if
the term of the lease has been estimated on the basis
of termination option being exercised.
Right of use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
-- lease payments made at or before commencement of the
lease;
-- initial direct costs incurred; and
-- the amount of any provision recognised where the Group
is contractually required to dismantle, remove or restore
the leased asset (typically leasehold dilapidations
- see Note 22).
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease
(because, for example, it re-assesses the probability of a lessee
extension or termination option being exercised), it adjusts the
carrying amount of the lease liability to reflect the payments to
make over the revised term, which are discounted at the discount
rate appropriate at the time of revision. The carrying value of
lease liabilities is similarly revised when the variable element of
future lease payments dependent on a rate or index is revised. In
both cases an equivalent adjustment is made to the carrying value
of the right-of-use asset, with the revised carrying amount being
amortised over the remaining (revised) lease term.
Nature of leasing activities (in the capacity as lessee)
During the financial year, the Group leased its head office and
a number of its owner-operated escape room branches. The Group also
leases certain items of plant and equipment, but these are not
significant to the activities of the Group.
Financing income and expenses
Financing expenses comprise interest payable, finance charges on
shares classified as liabilities and finance leases recognised in
profit or loss using the effective interest method, unwinding of
the discount on provisions, and net foreign exchange losses that
are recognised in the income statement (see foreign currency
accounting policy). Borrowing costs that are directly attributable
to the acquisition, construction or production of an asset that
takes a substantial time to be prepared for use, are capitalised as
part of the cost of that asset. Financing income comprise interest
receivable on funds invested, dividend income, and net foreign
exchange gains.
Interest income and interest payable is recognised in profit or
loss as it accrues, using the effective interest method. Dividend
income is recognised in the income statement on the date the
entity's right to receive payments is established. Foreign currency
gains and losses are reported on a net basis.
Taxation
Tax on the profit or loss for the year comprises current and
deferred tax. Tax is recognised in the income statement except to
the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to
tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilised.
Share-based payment arrangements
Equity-settled share-based payments to employees are measured at
the fair value of the equity instruments at the grant date.
Equity-settled share based payments to non-employees are measured
at the fair value of services received, or if this cannot be
measured, at the fair value of the equity instruments granted at
the date that the Group obtains the goods or counterparty renders
the service. Details regarding the determination of the fair value
of equity-settled share-based transactions are set out in note 26
to the consolidated financial statements.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest, with a corresponding
increase in equity. Where the conditions are non-vesting, the
expense and equity reserve arising from share-based payment
transactions is recognised in full immediately on grant.
At the end of each reporting period, the Group revises its
estimate of the number of equity instruments expected to vest. The
impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
other reserves.
Cash and cash equivalents
For the purpose of presentation in the consolidated statement of
cash flows, cash and cash equivalents include cash on hand,
deposits held at call with financial institutions, other short-term
highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value, and
bank overdrafts.
Trade and other receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Impairment provisions for current and non-current trade
receivables are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. In the process, the probability of
the non-payment of the trade receivables is assessed. This
probability is multiplied by the amount of the expected loss
arising from default to determine the lifetime expected credit loss
for the trade receivables.
Inventories and Work in Progress
Inventories are stated at the lower of cost and net realisable
value. Cost is based on the weighted average principle and includes
expenditure incurred in acquiring the inventories and other costs
in bringing them to their existing location and condition. Work in
progress includes the cost associated with fit-out work on sites
which are subsequently sold to a franchisee and is recognised at
the point of transaction. Work in progress is derecognised when an
invoice is raised to a franchisee or when it is determined that it
is not recoverable.
Provisions
A provision is recognised when the Group has a present
obligation, legal or constructive, as a result of a past event and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation, and a reliable
estimate can be made. Provisions are reviewed at each reporting
date and adjusted to reflect the current best estimate. If it is no
longer probable that an outflow of economic resources will be
required to settle the obligation, the provision is reversed. Where
the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the liability. When discounting
is used, the increase in the provision due to the passage of time
is recognised as an interest expense.
The Group has recognized provisions for liabilities of uncertain
timing or amount including those for leasehold dilapidations,
contingent consideration and losses arising of financial guarantee
contracts.
Dilapidation provisions
Provisions for dilapidations are recognised on a lease by lease
basis over the period of time landlord assets are being used and
are based on the Group's best estimate of the likely committed cash
outflow.
Contingent and deferred consideration
Contingent consideration is consideration that is payable in
respect of acquisitions which is contingent on the achievement of
certain performance or events after the date of acquisition.
Deferred consideration is consideration payable in respect of
acquisitions which is deferred, but is not dependent on any future
performance or events.
The likely value of contingent consideration is estimated based
on the anticipated future performance of the business acquired and
a probability of the necessary performance being achieved. The
expected future value of the contingent consideration is discounted
from the anticipated date of payment to the present value. For cash
settled contingent consideration, the discount rate is the risk
free rate together with the Consumer Price index for inflation. For
Equity settled contingent consideration, the future value is
discounted using the Director's assessment of the company's cost of
equity. The present value is recognised as a liability at the date
of transaction. The implied interest is recognised over the period
between the date of acquisition and anticipated date of payment of
the contingent consideration.
Deferred consideration is recognised as a liability at its face
value at the date of acquisition.
Losses arising on financial guarantee contracts
Provision for losses on financial guarantee contracts uses the
simplified approach within IFRS 9 using a provision matrix in the
determination of the lifetime expected losses. In the process, the
probability of the guarantee being called is assessed. This
probability is multiplied by the amount of the expected loss
arising from default to determine the lifetime expected credit loss
for the financial guarantee contract.
Contingent liabilities
Contingent liabilities are possible obligations whose existence
depends on the outcome of uncertain future events or present
obligations where the outflow of resources is uncertain or cannot
be measured reliably. Contingent liabilities are not recognised in
the financial statements but are disclosed unless they are
remote.
Financial Liabilities and equity
Financial liabilities and equity ae classified according to the
substance of the financial instrument's contractual obligations
rather than the financial instrument's legal form. Financial
liabilities, excluding convertible debt and derivatives are
initially measured at transaction price (including transaction
costs) and subsequently held at amortised cost.
Financial liabilities
Basic financial liabilities, including trade and other payables,
bank and other loans and loans from fellow group companies that are
classified as debt are initially recognized at transaction price
unless the arrangement constitutes a financing transaction, where
the debt instrument is measured at the present value of the future
payments discounted at a market rate of interest.
Det instruments are subsequently carried at amortised cost,
using the effective interest rate method.
Derecognition of financial liabilities
Financial liabilities are derecognized when, and only when, the
Company's contractual obligations are discharged, cancelled or they
expire.
Equity instruments
Equity instruments including share capital issued by the Company
are recorded at the proceeds received, net of direct issue costs.
Dividends payable on equity instruments are recognized as
liabilities one they are no longer at the discretion of the
company.
3. Critical accounting estimates and judgements
In the application of the Company's accounting policies, which
are described in Note 2 above, the Directors are required to make
judgements and estimates about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors, including expectations of future
events that may have a financial impact on the entity and that are
believed to be reasonable under the circumstances. Actual results
may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period.
The key estimates and underlying assumptions concerning the
future and other key sources of estimation uncertainty at the
statement of financial position date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial period are reviewed on an
ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future periods. In
particular:
Key judgements
Initial upfront exclusivity fees
Note 2 describes the Group's policies for recognition of
revenues from initial upfront exclusivity fees. In making their
judgement, the Directors consider that the upfront non-refundable
exclusivity fee provides the customer with a right to access the
Group's intellectual property throughout the franchise term which
is typically for a minimum term of ten years. The Group's service
obligations include a requirement to advise, assist and update the
customer throughout the term of the agreement.
However, certain franchise contracts are for the unspecified
term which theoretically can run in perpetuity. Furthermore, for
term franchise contracts certain factors could reduce the franchise
term (such as early termination) whilst franchises may be extended
beyond their initial term. No franchises have yet been in place for
a full term and in the absence of sufficient track record the
Directors made a judgement that until a clear pattern of
terminations and extensions of franchises becomes clear, it is
reasonable to assume that franchises will on average run for 10
years, hence the initial upfront exclusivity fees are recognised
over this estimated period.
Recognition of deferred tax assets
The Group's tax charge on ordinary activities is the sum of the
total current and deferred tax charges.
A deferred tax asset is recognised when it has become probable
that future taxable profit will allow the deferred tax asset to be
recovered. Recognition, therefore, involves judgement regarding the
prudent forecasting of future taxable profits of the business and
in applying an appropriate risk adjustment factor.
Based on detailed forward-looking analysis and the judgement of
management, it has been concluded that a deferred tax asset should
not be recognised for the carry forward of unused tax losses and
unused tax credits totalling approximately GBP21m, as the timing
and nature of future taxable profits remains uncertain given the
relatively young stage of development of the group and the rate of
planned expansion. As such the Directors do not yet regard it
sufficiently probable that future taxable profit will be available
against which the unused tax losses and unused tax credits can be
utilised in the near term. In forming this conclusion, management
have considered the same cash flow forecasts used for impairment
testing purposes. Impairment testing adjusts for risk through the
discounting of future cash flows and focus on cash generation
rather than taxable profits.
Additionally, the owner-operated segment is in its early stages
of development, and the Directors envisage that there will be an
extended period (and thus increasing uncertainty as time
progresses) before it expects to recoup net operating losses. The
analysis indicates that the unused losses may not be used in the
foreseeable future as the Group does not yet have a history of
taxable profits nor sufficiently convincing evidence that such
profits will arise within the foreseeable future.
Recognition of R&D credits and other government grants
Research and development credits and other government grants are
recognised as an asset when it has become probable that the grant
will be received.
Companies within the Group have previously made successful
applications for grants relating to research and development and in
respect of support related to the COVID-19 pandemic.
In relation to research and development grants, no claims are
outstanding, but the company expects to make claims in respect of
activity undertaken in 2021. The amount of such potential claim is
not yet known. Notwithstanding previous success in making such
claims, recognition of these claims involves a judgement by
management. Given the uncertainty of the amount and detailed nature
of potential claims relating to 2021, Management does not consider
it sufficiently probable that claims relating to 2021 will be paid
and, as such, no claims in relation to 2021 have been recognised as
an asset.
Contingent consideration
The likely value of contingent consideration is estimated based
on the anticipated future performance of the business acquired and
a probability of the necessary performance being achieved. The
expected future value of the contingent consideration is discounted
from the anticipated date of payment to the present value. For cash
settled contingent consideration, the discount rate is the risk
free rate together with the Consumer Price index for inflation. For
Equity settled contingent consideration, the future value is
discounted using the Director's assessment of the company's cost of
equity, being 13.7 per cent. The present value is recognised as a
liability at the date of transaction. The implied interest is
recognised over the period between the date of acquisition and
anticipated date of payment of the contingent consideration.
Key estimates
Impairment of intangible assets
IFRS requires management to undertake an annual test for
impairment of indefinite lived assets and, for finite lived assets,
to test for impairment if events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable.
Impairment testing is an area involving management judgement in
determining estimates, requiring assessment as to whether the
carrying value of assets can be supported by the net present value
of future cash flows derived from such assets using cash flow
projections which have been discounted at an appropriate rate. In
calculating the net present value of the future cash flows, certain
assumptions are required to be made in respect of highly uncertain
matters including management's expectations of:
-- growth in EBITDA, calculated as adjusted operating profit
before depreciation and amortisation;
-- the forecast occupancy rate (and growth thereof) for
each escape room using regression analysis based on
historic experience from similar rooms;
-- the level of capital expenditure to open new sites and
the costs of disposals;
-- long-term growth rates; and
-- the selection of discount rates to reflect the risks
involved.
The Group prepares and approves a detailed annual budget and
strategic plan for its operations, which updated regularly to take
account of actual activity and which are used in the fair value
calculations. The forecasts perform a detailed analysis for three
years, apply an anticipated growth rate for years 4 and 5 and apply
a 2% growth rate thereafter. Further details are provided in the
sensitivity analysis below.
Changing the assumptions selected by management, in particular
the discount rate and growth rate assumptions used in the cash flow
projections, could significantly affect the Group's impairment
evaluation and hence results.
The current strategic plan for the group indicates an excess of
the net present value of future cashflows compared to the carrying
value of intangible assets.
The sensitivity of impairment tests to changes in underlying
assumptions is summarised below:
Site level EBITDA
If the site level EBITDA is 10% lower in each business
unit within the Group than as set out in the strategic
plan, this would lead to reduction in the net present
value of intellectual property of GBP13.8m (2020: not
measured) but would not result in the need for an impairment
charge.
Discount rate
The discount rate used for the fair value calculation
has been assumed at 13.7%. A 100 basis point increase
in the discount rate reduces the net present value of
intellectual property across the group by GBP5.7m (2020:
GBP1.3m) but would not result in the need for an impairment
charge.
Long-term growth rates
The growth rate used for the fair value calculation has
been assumed at 2% per annum after year five. If this
rate was decreased by 100 basis points the net present
value of intellectual property across the group would
fall by GBP3.5m (2020: GBP1.2m) but would not result in
the need for an impairment charge.
Capital expenditure
If capital expenditure over the forecast period were to
be 10% higher than in the strategic plan, the net present
value of intellectual property across the group would
fall by GBP1.8m (2020: GBP0.4m) but would not result in
the need for an impairment charge.
Estimation of useful life and amortisation rates for
intellectual property assets
The useful life used to amortise intangible assets relates to
the expected future performance of the assets acquired and
management's estimate of the period over which economic benefit
will be derived from the asset.
The estimated useful life principally reflects management's view
of the average economic life of each asset and is assessed by
reference to historical data and future expectations. Any reduction
in the estimated useful life would lead to an increase in the
amortisation charge. The average economic life of the intellectual
property has been estimated at 3 years. If the estimation of
economic lives was reduced by one year, the amortisation charge for
IP would have increased by GBP299k (year ended 31 December 2020:
GBP203k).
Estimation of useful life and depreciation rates for property,
plant and equipment of the owner- operated business
The useful life used to depreciate assets of the owner-operated
business relates to the expected future performance of the assets
acquired and management's estimate of the period over which
economic benefit will be derived from the asset.
Property, plant and equipment represent a significant proportion
of the asset base of the Group being 11% (2020: 34%) of the Group's
total assets. Therefore, the estimates and assumptions made to
determine their carrying value and related depreciation are
critical to the Group's financial position and performance.
The charge in respect of periodic depreciation is derived after
determining an estimate of an asset's expected useful life and the
expected residual value at the end of its life. Increasing an
asset's expected life or its residual value would result in a
reduced depreciation charge in the consolidated income statement.
The useful lives and residual values of the Group's assets are
determined by management at the time the asset is acquired and
reviewed annually for appropriateness. The lives are based on
historical experience with similar assets as well as anticipation
of future events which may impact their life such as changes in
technology. Historically changes in useful lives and residual
values have not resulted in material changes to the Group's
depreciation charge.
The useful economic lives of property, plant and equipment has
been estimated at between 2 and 5 years. If the estimation of
economic lives was reduced by one year, the depreciation charge for
property, plant and equipment would have increased by GBP669k (year
ended 31 December 2020: GBP1.02m).
Estimation of the value of right of use assets and lease
liabilities arising from long term leases under IFRS16
The estimation of the value of right of use assets and the
associated lease liability arising from long term leases is done by
calculating the net present value of future lease payments. In
doing so, the Directors have used a discount rate of 6.2 per
cent.
Estimation of the debt and equity components of Convertible Loan
notes
Debt securities which carry an option to convert into equity
accounted for as a debt component and an equity component.
Management are required to estimate the split by valuing the
underlying debt with reference to a similar debt instrument which
has no conversion rights and / or by reference to the value of the
option inherent in the conversion right. These calculations involve
the estimate of a number of key components such as appropriate
interest rates, the expected volatility of the company's share
price, the company's future dividend policy, and the likelihood and
future date of conversion. On 2 July 2020, the company issued
GBP340,000 convertible loan notes repayable on 3 July 2025 if not
previously converted or redeemed. Management have estimated that
GBP272,251 of the principal related to the debt component and
GBP67,749 related to the equity component.
Estimation of share base payment charges
The calculation of the annual charge in relation to share based
payments requires management to estimate the fair value of the
share-based payment on the date of the award. The estimates are
complex and take into account a number of factors including the
vesting conditions, the period of time over which the awards are
recognized, the exercise price of options which are the subject of
the award, the expected future volatility of the company's share
price, interest rates, the expected return on the shares, and the
likely future date of exercise. A new executive scheme was
established during the year ended 31 December 2020 and awards have
been made under the scheme in both 2020 and 2021, details of which
are set out in note 26. Management has estimated the annual charge
related to the awards made in the year to 31 December 2020 to be
GBP51,222 and GBP17,313 in respect of awards made in the year to 31
December 2021. The charge recognised in the year ended 31 December
2021 was GBP53,073 (2020: GBP23,477). Further details are provided
in note 24.
Estimation of liabilities arising from Financial Guarantee
Contracts - Franchise lease guarantees
The Company is a co-tenant or has provided a guarantee on a
number of property leases for which a franchisee is the primary
lessee. IFRS 9 requires the recognition of expected credit losses
in respect of financial guarantees, including those provided by the
Group. Where there has been a significant increase in credit risk,
the standard requires the recognition of the expected lifetime
losses on such financial guarantees. The assessment of whether
there has been a significant increase in credit risk is based on
whether there has been an increase in the probability of default
occurring since previous recognition. An entity may use various
approaches to assess whether credit risk has increases. The
assessment of the probability of default is inherently subjective
and requires management judgement.
In all cases where the Group is co-tenant or has provided
guarantees for underlying leases, the Group has taken security in
the form of personal guarantees from the lessee and, in addition,
has step-in rights which enable the relevant company in the group
to take over the assets and operations of the franchisee and to
operate the site as an owner-operated site. Management believes
that the personal guarantees and step in rights significantly
reduce the probability of incurring losses and provide a mechanism
to mitigate any adverse impact on the group in the event of any
guarantees being called upon.
Details of the number of lease guarantees provided, the average
length of the guarantee and the average annual rental are given in
note 22.
Each guarantee is assessed separately. Management's view of the
probability of the lessee defaulting on its lease obligations is
assigned to the specific guarantee. Lessees are categorized on a
rating of 1 - 5, which allocates a probability of default to each
banding, with category 1 representing very limited risk, and 5
representing extreme risk. Management then assesses the likelihood
of the personal guarantee from the lessee, together with the
step-in rights being insufficient to cover in full the payments
required to be made under the guarantee provided to the landlord.
This is based on historic experience of the former owner of Boom
Battle Bars which has, in a number of occasions, taken on existing
franchisees within other parts of its business which have either
been re-sold or have since become owner-operated sites. Based on
this experience and taking account of the current economic
environment, Management has judged that 1 in 6 sites where the
guarantee is called would result in a loss. Finally, management
applies an assessment as to the proportion of the future lease
liability that might be suffered in the event that the guarantee is
not fully covered by the personal guarantees and / or the step in
rights. The proportion used in the calculation was 50%. This
cumulative probability is applied to the net present value of the
future lease liability. The net present value is calculated by
reference to the expected future cash payments required under the
lease using a discount rate of 6.2%, which is consistent with the
rate used to assess the company's property lease liabilities under
IFRS 16.
In the year to December 2021, the average probability of default
used across the portfolio was assessed as 10% (2020: not
applicable). This was made on the basis that the franchisees are
all relatively new and remain inexperienced in operating Boom
sites. The overall expected loss provision at 31 December 2021 was
GBP25,548 (2020: not applicable).
Sensitivities.
The key assumptions impacting the assessment of the expected
loss provision are the discount rate used to calculate the net
present value of the leases under guarantee; the probability of
default assigned to each guaranteed lease; the proportion of
defaulted leases that would give rise to a credit loss; and the
proportion of the total liability that would not be covered by
security and step-in rights. The sensitivity to each of these
assumptions in each of the three years to 31 March is shown in the
table below:
Assumption Base case Sensitivity Increase in Expected
applied loss provision (GBP'000)
----------------------- ------------- ----------------
2021 2020
----------------------- ------------- ---------------- ------------- -------------
Discount rate 6.2% 1% decrease 1.7 na
Probability of Individually 10% increase 2.5 na
default assessed in probability
of default
Proportion of 16.67% Increase 5.1 na
defaulted leases by 3.33%
giving rise to
a loss
(1 in 6) (1 in 5)
Proportion of
liability not
covered by guarantee 10% increase
/ step-in right 50% in loss 5.1 na
----------------------- ------------- ---------------- ------------- -------------
Estimation of the value of Contingent consideration and implied
interest charges
The value of the contingent consideration in relation to Boom
Battle Bars has been estimated using a share price of 35.8p per XP
Factory share, being the share price on 23(rd) November 2021, the
date that the Acquisition of Boom Battle Bars completed, and
assuming all 25,000,000 shares potentially due under the provisions
of the sale agreement are issued. The valuation is considered a
level 2 valuation under IFRS 13, indicating that it is a financial
liability that does not have regular market pricing, but whose
value can be determined using other data values or market prices.
The future value of the contingent consideration, which is due to
be settled on completion of the audit for the group for the year
ended 31 December 2022 (assumed to be 18 months after the
acquisition) has been calculated using a cost of capital of 13.7
per cent and an implied share price of 43.4 pence per share. The
difference between the fair value at acquisition and the future
value will be recognised as a finance charge over the 18 months
between the date of acquisition and the expected date of settlement
as set out below. The estimated consideration assumes the
contingent consideration will be payable in full.
A 1% reduction in the in the discount rate used would reduce the
implied interest charge in 2021 by GBP8k and by GBP142k over the 18
month period.
Estimation of valuation of acquired intangibles
As part of the acquisition of Boom Battle Bars, the Directors
have recognised GBP4,386k as relating to franchise contracts in
place at the date of acquisition. The valuation takes into account
the forecasts revenue from the relevant franchise contracts over
the remaining life of the contracts, net of tax and allocated costs
to service the contracts, discounted at the estimated cost of
capital, 13.7 per cent.
A 1% increase in the cost of capital applied would reduce the
value of acquired intangibles in the year by GBP153k.
4. Revenue
Year Year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Upfront location exclusivity
fees, support and administration
fees 247 268
Franchise revenue share 456 309
Game revenues from owned branches 6,240 2,070
Other 41 11
6,984 2,658
------------ ------------
Revenues from contracts with customers:
Year Year
ended Ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Revenue from contracts with
franchise customers 703 577
Revenue from customers at owner
operated branches 6,281 2,081
Total revenue from contracts with customers 6,984 2,658
------------ ------------
In respect of contracts from franchise customers, the
satisfaction of performance obligations is treated as over a period
of up to 10 years. The typical timing of payment from customers is
a mixture of upfront fees, payable at the start of the contract,
fixed fees payable quarterly or monthly during the term of the
contract and variable consideration typically received shortly
after the month in which the revenue has been accrued.
Future upfront exclusivity fee income that has been deferred on
the balance sheet is certain as the amount has already been
received. Support and administrative fees and other fees are
considered to be reasonably certain and unaffected by future
economic factors, except to the extent that adverse economic
factors would result in premature franchise closure. Revenue based
service fees are dependent on and affected by future economic
factors, including the performance of franchisees.
A total of GBP6.28m (2020: GBP2.08m) of revenues relate to the
owner-operated segment. All other revenues in the table refer to
the franchise segment as detailed in Note 5 (Segment
Information).
Upfront exclusivity fees are billed and received in advance of
the performance of obligations. This generally creates deferred
revenue liabilities which are greater than the amount of revenue
recognised from each customer in a financial year.
Revenue share income is necessarily billed monthly in arrears
(and accrued on a monthly basis).
5. Segment information
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the group of executive directors
and the chief executive officer who make strategic decisions.
Management considers that the Group has four operating segments.
Revenues are reviewed based on the nature of the services provided
under each of the Escape Hunt(TM) and Boom Battle Bar(TM) brands as
follows:
-- The Escape Hunt franchise business, where all franchised
branches are operating under effectively the same model;
-- The Escape Hunt owner-operated branch business, which
as at 31 December 2021 consisted of 16 Escape Hunt
sites in the UK, one in Dubai, one in Paris and one
in Brussels; and
-- The Boom Battle Bar franchise business, where all franchised
branches operate under the same model within the Boom
Battle Bar(TM) brand.;
-- The Boom Battle Bar owner-operated branch and franchise
business comprising 2 Boom Battle Bar sites in the
UK.
The Group operates on a global basis. As at 31 December 2021,
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. The geographic split of revenue was as
follows:
Year Year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
United Kingdom 5,094 2,081
Europe 880 204
Rest of world 1,011 373
6,984 2,658
------------ ------------
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis.
The cost of sales in the owner-operated business comprise
variable site staff costs and other costs directly related to
revenue generation.
Escape Escape
Hunt Hunt Boom Boom
Owner Franchise Owner Franchise
operated operated operated operated Unallocated Total
Year ended 31 December
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 6,018 592 263 111 - 6,984
Cost of sales (1,585) (185) (134) - - (1,904)
--------- --------- --------- --------- ----------- --------
Gross profit/(loss) 4,433 407 129 111 - 5,080
Site level operating
costs (1,974) - (108) - - (2,082)
Other income 371 - - - - 371
IFRS 16 adjustment 598 - 63 - - 661
Site level EBITDA 3,428 407 84 111 - 4,030
Centrally incurred
overheads (1,479) (130) (2) (30) (3,009) (4,651)
Other income - - - - 3,236 3,236
IFRS 16 adjustment - - - - 37 37
EBITDA 1,949 277 82 81 264 2,653
Interest charges - - - - (131) (131)
Lease charges (208) - (25) - - (233)
Depreciation and
amortisation (1,706) (16) (15) - (455) (2,192)
Depreciation - right-of-use
assets (578) - (35) - - (613)
Foreign currency
losses - - - - (18) (18)
Share-based payment
expenses - - - - (62) (62)
Provision against
loan to franchisee - (78) - - - (78)
Provision for guarantee
losses - - (8) - - (8)
Loss of disposal
of assets - - - - (50) (50)
Exceptional Professional
& Branch Closure
Costs (4) - - - (235) (239)
Branch pre-opening
costs (54) - (49) - - (103)
Profit on closure
/ modification of
leases 41 - - - - 41
Rent credits recognised 148 - - - - 148
Profit/(loss) before
tax (412) 183 (50) 81 (687) (885)
Taxation - - 11 11
--------- --------- --------- --------- ----------- --------
Profit/(loss) after
tax (412) 183 (50) 81 (676) (874)
--------- --------- --------- --------- ----------- --------
Other information
:
Non-current assets 12,155 405 956 4,349 17,427 35,292
--------- --------- --------- --------- ----------- --------
Escape Escape Boom Boom
Hunt Hunt
Owner Franchise Owner Franchise Unallocated Total
operated operated operated operated
Year ended 31 December GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2020
Revenue 2,081 577 - - - 2,658
Cost of sales (740) (38) - - - (778)
--------- --------- --------- --------- ----------- -------
Gross profit/(loss) 1,341 539 - - - 1,880
Site level operating
costs (1,030) - - - - (1,030)
Other income 135 - - - - 135
Site level EBITDA 446 539 - - - 985
Centrally incurred
overheads (69) (242) - - (2,379) (2,690)
Other income 186 - - - 73 259
EBITDA 563 297 - - (2,306) (1,445)
Interest charges - - - - (17) (17)
Lease charges (168) - - - (12) (180)
Depreciation and
amortisation (1,817) (19) - - (2,282) (4,118)
Depreciation - right-of-use
assets (310) - - - (70) (380)
Share-based payment
expenses - - - - (29) (29)
Loss of disposal
of assets (30) - - - - (30)
Exceptional Professional
& Branch Closure
Costs (52) (29) - - (6) (87)
Rent credits recognised 22 - - - - 22
Provision against
loan to franchisee - - - - (300) (300)
--------- --------- --------- --------- ----------- -------
Profit/(loss) before
tax (1,792) 249 - - (5,022) (6,564)
Taxation - (15) - - - (15)
--------- --------- --------- --------- ----------- -------
Profit/(loss) after
tax (1,792) 234 - - (5,022) (6,579)
--------- --------- --------- --------- ----------- -------
Other information
:
Non-current assets 6,588 42 - - 1,136 7,766
--------- --------- --------- --------- ----------- -------
In 2020, the company made a provision against the full amount of
a loan made to a franchisee in 2018 as a result of the impact of
COVID-19. The loan was made to provide funding for the fit-out of
sites in the Nordic region, has previously been held as a
non-current asset, and is not related to trading activity. The
company does not have a policy of lending money to franchisees and
for this reason the provision is separately disclosed.
Significant customers:
No customer provided more than 10% of total revenue in either
the year ended 31 December 2021 or 2020.
6. Operating loss before taxation
Loss from operations has been arrived at after charging /
(crediting):
Year Year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Auditor's remuneration:
* Audit of the financial statements 75 33
* Review of interim financial statements 2 2
Impairment of trade receivables 56 101
Exceptional impairment of loan to franchisee - 300
Foreign exchange losses / (gains) 18 (21)
Staff costs including directors, net of amounts
capitalized 3,739 2,656
Depreciation of property, plant and equipment
(Note 10) 1,721 1,819
Depreciation of right-of-use assets (Note
11) 613 395
Amortisation of intangible assets (Note 12) 471 2,299
Impairment of intangible assets (Note 12) - -
Share-based payment costs (non-employees) 62 29
Research and development grants 3,236 259
Professional fees paid in respect of R&D
grants 647 52
Detailed information on statement of profit or loss items:
Cost of sales Year Year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Wages and salaries 1,395 608
Food and beverages 92 10
Other costs of sale 417 160
1,904 778
------------ ------------
Administrative expenses Year Year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Depreciation of property, plant and equipment 1,721 1,819
Depreciation of right-of-use assets 613 395
Amortisation 471 2,299
Write-off of assets 50 30
Staff costs including directors, net of amounts
capitalised 3,739 1,535
Share-based payments 62 29
Foreign currency (gains) / losses 18 (21)
Other administrative expenses 2,534 2,570
9,208 8,656
------------ ------------
Exceptional professional costs of GBP235k incurred during year
relate to fees paid in respect of elements of the acquisition of
Boom Battle Bars which were aborted.
7. Staff costs
Year Year
Ended Ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Wages salaries and benefits (including
directors) 3,897 2,796
Share-based payments 63 29
Social security costs 313 227
Other post-employment benefits 153 111
Less amounts capitalised (164) (286)
Less amounts received under the
CJRS scheme (460) (756)
3,802 2,121
------------ ------------
Key management personnel:
Year Year
Ended Ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Wages, salaries and benefits (including
directors) 644 544
Share-based payments 40 24
Social security costs 83 71
Pensions 23 22
Other post-employment benefits 6 13
Less amounts capitalised (56) (87)
Less amounts received under the
CJRS scheme (56) (40)
685 547
------------ ------------
Key management personnel are the directors and one member of
staff. Their remuneration was as follows:
Year ended 31 December
2021 Salary Share-based Pension Other
and fees payments contributions benefits Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ---------------- ----------- --------
Graham Bird 167 12 7 3 189
----------- -------------- ---------------- ----------- --------
Richard Rose 60 - - - 60
----------- -------------- ---------------- ----------- --------
Richard Harpham 224 17 10 1 252
----------- -------------- ---------------- ----------- --------
Karen Bach 30 - - - 30
----------- -------------- ---------------- ----------- --------
John Story 18 - - - 18
----------- -------------- ---------------- ----------- --------
Other key management 146 11 6 2 165
----------- -------------- ---------------- ----------- --------
644 40 23 6 737
----------- -------------- ---------------- ----------- --------
Amounts capitalised (56) - - - (56)
----------- -------------- ---------------- ----------- --------
Furlough claims (56) - - - (56)
----------- -------------- ---------------- ----------- --------
Profit and loss expense 533 40 23 6 602
----------- -------------- ---------------- ----------- --------
Year ended 31 December Salary Share-based Pension Other
2020 and fees payments contributions benefits Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Graham Bird 137 6 7 4 153
Richard Rose 47 - - 4 51
Richard Harpham 198 10 9 3 220
Adrian Jones 4 - - - 4
Karen Bach 26 - - - 26
John Story 8 - - - 8
Other key management 124 8 6 3 140
----------- -------------- ---------------- ----------- --------
544 24 22 13 602
Amounts capitalised (87) - - - (87)
Furlough claims (40) - (40)
----------- -------------- ---------------- ----------- --------
Profit and loss expense 417 24 22 13 476
----------- -------------- ---------------- ----------- --------
The average monthly number of employees was as follows:
Year ended Year ended
31 December 31 December
2021 2020
No. No.
Management 4 4
Administrative 27 22
Operations 191 120
222 146
------------ ------------
8. Taxation
The Group has made no provision for taxation as it has not yet
generated any taxable profits. A reconciliation of income tax
expense applicable to the loss before taxation at the statutory tax
rate to the income tax expense at the effective tax rate of the
Group is as follows:
Year Year
Ended Ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Loss before taxation (885) (6,564)
Tax calculated at the standard rate of tax
of 19% (2020:19%) (168) (1,247)
Tax effects of:
Expenses not deductible for tax purposes 53 118
Non-taxable income (597)
Enhanced relief for qualifying additions (35)
Unrecognised tax losses 625 1,113
Foreign operations (29)
Non qualifying amortisation 33
Depreciation on ineligible assets 81
Increase in dilapidation provision 14
Capital allowances in excess of depreciation - 4
Notional interest on contingent consideration 20 -
Other (8) 27
(11) 15
------------ ------------
The Group has tax losses of approximately GBP18,839k as at 31
December 2021 (GBP15,195k as at 31 December 2020) which, subject to
agreement with taxation authorities, are available to carry forward
against future profits. The tax value of such losses amounted to
approximately GBP3,579k (GBP2,887k as at 31 December 2020). A
deferred tax asset has been recognised in respect of GBP572k (2020:
GBPNil) of these losses to offset the deferred tax liability in
respect of fixed asset temporary differences. A deferred tax asset
has therefore not been recognised in respect of the remaining tax
losses of GBP18,267k (2020: GBP15,195k).
Recognised temporary differences as at 31 December
Year ended Year ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Fixed asset temporary differences 143 -
Unused tax losses (143) -
- -
------------ ------------
Tax expense (continued)
Changes in tax rates and factors affecting the future tax
charge
Changes to the UK corporation tax rates were made as part of the
2021 Budget. These were substantially enacted on 24 May 2021. This
included an increase to the main rate from 19% to 25% from April
2023. The company will be taxed at a rate of 25% unless its profits
are sufficiently low enough to qualify for a lower rate of tax, the
lowest being 19%.
A deferred tax liability arises on fixed asset temporary
differences.
On the acquisition of both the French master franchise in March
2021 and the Boom group of companies in November 2021, there were
intangibles acquired as part of the purchase. These acquired
intangibles have been deemed to create a deferred tax liability and
calculated at 25.75% for France and 25% for Boom. In total, these
amounted to GBP1,112k. These deferred tax liabilities have been
recognised in the period and are been amortised over the same
periods as the acquired intangibles in each group.
9. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to equity holders by the weighted average number of
ordinary shares in issue during the period. Diluted net loss per
share is calculated by dividing net loss by the weighted average
number of shares in issue and potential dilutive shares outstanding
during the period.
Because Escape Hunt is in a net loss position, diluted loss per
share excludes the effects of ordinary share equivalents consisting
of stock options and warrants, which are anti-dilutive. The total
number of shares subject to share options and conversion rights
outstanding excluded from consideration in the calculation of
diluted loss per share for the year ended 31 December 2021 was
19,699,481 shares (year ended 31 December 2020: 19,699,481 shares )
.
Year Year
Ended Ended
31 31 December
December
2021 2020
Loss after tax attributable
to owners of the Company (GBP'000) (874) (6,641)
Weighted average number of
shares:
* Basic and diluted 93,846,053 53,720,694
Loss per share
* Basic and diluted (Pence) (0.93) (12.36)
10. Property, plant and equipment
Leasehold Office Computers Furniture Games Total
improvements equipment and fixtures
-------------- ----------- -------------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost:
At 1 January 2020 2,776 9 75 238 3,071 6,169
Additions 793 6 35 24 980 1,838
Additions arising
from acquisition 336 - 12 - - 347
Disposals - - - - (89) (89)
As at 31 December
2020 3,905 15 122 262 3,962 8,266
Additions 965 - 32 37 1,601 2,635
Additions arising
from acquisition 617 36 19 543 12 1,227
Disposals (22) (1) (8) (18) (49) (98)
-------------- ----------- ---------- -------------- -------- --------
As at 31 December
2021 5,465 50 165 824 5,526 12,030
-------------- ----------- ---------- -------------- -------- --------
Accumulated depreciation:
As at 1 January
2020 (749) (8) (34) (50) (1,393) (2,234)
Additions arising
from acquisition (318) - (9) - - (327)
Depreciation charge (584) (5) (43) (60) (1,128) (1,820)
Disposals - - - - - -
As at 31 December
2020 (1,651) (13) (86) (110) (2,521) (4,381)
Additions arising
from acquisition (322) (34) (1) (92) - (449)
Depreciation charge (822) (3) (22) (78) (796) (1,721)
Translation differences (2) - - - (18) (20)
Disposals 12 1 8 10 26 57
-------------- ----------- ---------- -------------- -------- --------
As at 31 December
2021 (2,785) (49) (101) (270) (3,308) (6,514)
-------------- ----------- ---------- -------------- -------- --------
Net book value
As at 31 December
2021 2,680 1 64 554 2,217 5,516
-------------- ----------- ---------- -------------- -------- --------
As at 31 December
2020 2,254 2 36 152 1,441 3,885
-------------- ----------- ---------- -------------- -------- --------
The amount of expenditure recognised in the carrying value of
leasehold improvements in the course of construction at 31 December
2021 is GBPnil (2020: GBP62,000).
11. Right-of-use assets and lease liabilities
Year ended Year ended
Right-of-use assets 31 December 31 December
2021 2020
GBP'000 GBP'000
Land and buildings - right-of-use
asset cost b/f 3,884 3,127
Closures / leases ended for
renegotiation during the year (211) (336)
Additions during the year,
including through acquisition 5,400 1,034
Newly negotiated leases 86 152
Less: Accumulated depreciation
b/f (944) (657)
Depreciation charged for the
year (613) (380)
Net book value 7,602 2,940
------------ ------------
The Group leases land and buildings for its offices and escape
room and battle bar venues under agreements of between five to
fifteen years with, in some cases, options to extend. The leases
have various escalation clauses. On renewal, the terms of the
leases are renegotiated.
During the year ended 31 December 2021, GBP148k of rent
concessions have been recognised in the profit and loss (2020:
GBP22k) to reflect credits provided by landlords during the
COVID-19 pandemic. Only those rent concessions which adequately
fulfil the criteria of paragraph 46A of the amendment to IFRS 16 on
this subject have been included in the profit and loss.
Where leases have been renegotiated during the year due to the
COVID-19 pandemic, these have been treated as modifications of
leases and included as separate items in the note above.
Year ended Year ended
Lease liabilities 31 Dec 31 Dec
2021 2020
GBP'000 GBP'000
In respect of right-of-use assets
Balance at beginning of period 3,742 2,602
Closures / leases ended for renegotiation
during the year (253) (317)
Additions during the year 5,400 1,034
Newly negotiated leases 87 152
Interest incurred 233 180
Rent concessions received (148) (22)
Repayments during the period (759) (181)
Reallocated (to) / from accruals and trade
payables 103 294
Lease liabilities at end of period 8,405 3,742
----------- -----------
As at As at
31 Dec 31 Dec
2021 2020
GBP'000 GBP'000
Maturity
Current
< 1 month 42 41
1 - 3 months 84 81
3 - 12 months 290 367
Non-current 7,989 3,253
Total lease liabilities 8,405 3,742
----------- -----------
In the Escape Hunt group of companies, leases are generally 10
years with a 5 year break clause. Where the break clause is tenant
only the leases are accounted for over 10 years as it is assumed
the break clause will not be enacted, whereas where the 5 year
break clause is both ways, leases are accounted for over 5
years.
In the Boom group of companies, leases are generally over 15
years with a 10 year tenant only break clause, so leases are
accounted for over 10 years. The group has no short term leases of
properties.
None of these leases imposed restrictions or covenants.
The group also leases laptops for a small number of staff on
leases of 3 years. The charge to the profit and loss for the year
ended 31 December 2021 for these computers was GBP7k (2020: GBP1k).
These leases are all cancellable on short notice.
There are a small number of properties for which turnover rent
is payable. The amount charged to the profit and loss for these
turnover rent payments in the year ended 31 December 2021 was
GBP99k (2020: GBP14k).
As at 31 December 2021 there were no leases that had not
commenced to which the group were committed.
12. Intangible assets
Internally
Intellectual generated Franchise App
Goodwill Trademarks property IP agreements Quest Portal Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'00' GBP'000 GBP'000
Cost
At 1 January
2020 1,393 78 10,195 568 802 100 269 13,405
Additions arising
from internal
development - - - 294 - - - 294
Additions arising
from acquisition 19 - - - - - - 19
Disposals - - - (7) - - - (7)
----------- ----------- ------------- ----------- ------------ -------- -------- ---------
At 31 December
2020 1,412 78 10,195 855 802 100 269 13,711
Additions arising
from internal
development - - - 119 - - - 119
Additions arising
from acquisition 16,284 - - 752 4,446 - 47 21,529
Disposals - - - (10) - - - (10)
----------- ----------- ------------- ----------- ------------ -------- -------- ---------
As at 31 December
2021 17,696 78 10,195 1,715 6,668 100 316 35,349
----------- ----------- ------------- ----------- ------------ -------- -------- ---------
Accumulated
amortisation
/ impairment
At 1 January
2020 (1,393) (29) (8,353) (151) (306) (100) (167) (10,499)
Amortisation
for the year - (18) (1,842) (254) (114) - (72) (2,299)
Impairment
provision - - - - - - - -
----------- ----------- ------------- ----------- ------------ -------- -------- ---------
At 31 December
2020 (1,393) (47) (10,195) (404) (420) (100) (239) (12,798)
Amortisation
for the year - (13) - (265) (160) - (34) (472)
Additions arising
from acquisition - - - - - - (30) (30)
Translation
differences - - - - - - (3) (3)
Disposals - - - - - - - -
----------- ----------- ------------- ----------- ------------ -------- -------- ---------
As at 31 December
2021 (1,393) (60) (10,195) (669) (591) (100) (306) (13,303)
----------- ----------- ------------- ----------- ------------ -------- -------- ---------
Carrying amounts
At 31 December
2021 15,238 18 - 1,046 6,077 - 10 22,046
----------- ----------- ------------- ----------- ------------ -------- -------- ---------
At 31 December
2020 19 31 - 450 382 - 31 913
----------- ----------- ------------- ----------- ------------ -------- -------- ---------
Goodwill and acquisition related intangible assets recognised
have arisen from the acquisition of Experiential Ventures Limited
in May 2017, Escape Hunt Entertainment LLC in September 2020 and of
BGP Escape France and BGP Entertainment Belgium in March 2021 plus
the Boom group of companies in November 2021. Refer to Notes 13 and
14 for further details.
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units ('CGUs') that are
expected to benefit from that business combination. Management
considers that the goodwill is attributable to the owner-operated
business because that is where the benefits are expected to arise
from expansion opportunities and synergies of the business.
No value was attributed to the brand and customer relationships
as the Board's strategic review of the business and a repositioning
of our branding exercise enabled the Group to clearly define its
quality, service and values, and make it more attractive to new
customers and partners. Furthermore, the value of any existing
brand and customer relationships which was separately identifiable
from other intangible assets was insignificant.
The Group tests goodwill annually for impairment or more
frequently if there are indications that these assets might be
impaired. The recoverable amounts of the CGU are determined from
fair value less costs to sale. The value of the goodwill comes from
the future potential of the assets rather than using the assets as
they are (i.e. there is assumed expansionary capex which supports
growth in revenues and the value of the business and therefore
goodwill).
The key assumptions for the fair value less costs to sale
approach are those regarding capital expenditure which supports a
consequent growth in revenues and associated earnings and a
discount rate. The Group monitors its pre-tax Weighted Average Cost
of Capital and those of its competitors using market data. In
considering the discount rate applying to the CGU, the Directors
have considered the relative sizes, risks and the
inter-dependencies of its CGUs. The impairment reviews use a
discount rate adjusted for pre-tax cash flows. The Group prepares
cash flow forecasts derived from the most recent financial plan
approved by the Board and extrapolates revenues, net margins and
cash flows for the following three years based on forecast growth
rates of the CGU. Cash flows beyond this period are also considered
in assessing the need for any impairment provisions. A discount
rate of 13.7% and capex of GBP15.9 million over the three years has
been assumed. Growth in years 4- 6 is assumed at 3% per annum. The
growth rate used for the fair value calculation thereafter is 2%.
The directors consider these assumptions are consistent with that
which a market participant would use in determining fair value.
Intellectual property
The Intellectual Property relates to the valuation of the
Library of Game Wire Frame Templates of games, the process of games
development and the inherent know how and understanding of making
successful games.
The fair value of these assets on acquisition of GBP10,195k was
determined by discounting estimated future net cash flows generated
by the asset where no active market for the assets exists.
The Group tests intellectual property for impairment only if
there are indications that these assets might be impaired. An
impairment loss is calculated as the difference between its
carrying amount and the present value of the estimated future cash
flows.
Franchise agreements
The intangible asset of the Franchise Business was the net
present value of the net income from the franchisee agreements
acquired.
The approach selected by management to value the franchise
agreements was the Multi-Period Excess Earnings Method ("MEEM")
which is within the income approach. The multi-period excess
earnings method estimated value is based on expected future
economic earnings attributable to the agreements.
The key assumptions used within the intangible asset valuation
were as follows:
-- Economic life - The valuation did not assume income for
a period longer than the asset's economic life (the period
over which it will generate income). The contractual nature
of the Franchise Agreements (with terms typically between
6 and 10 years) means it is possible to forecast with
a reasonable degree of certainty the remaining term of
each agreement and therefore the period in which it will
generate revenue. Only contracts which were signed at
the acquisition date were included.
-- Renewal - No provision for the renewal of existing Franchise
Contracts has been included with the valuation. This reflects
the fact that potential contract renewals will only take
place several years in the future, and the stated strategy
of management has been to focus on the development of
owner-managed sites rather than renewing the franchises
when they are due for renewal - as they may be bought
out.
-- Contributory Asset Charges (CAC-) - The projections assumed
after returns are paid/charged to complementary assets
which are used in conjunction with the valued asset to
generate the earnings associated with it. The only CAC
identified by management is the charge relating to IP
- a charge has been included to take into account the
Intellectual Property used within the franchise operation.
This is considered key in generating earnings at the franchised
sites. Management has applied the same royalty rate of
10% used to value this asset.
-- Discount Rate - The Capital Asset Pricing Model ("CAPM")
has been used to calculate a discount rate of 13.7%.
-- Taxation - At the time of acquisition, the franchise profits
were earned within a group subsidiary which was incorporated
in the Labuan province of Malaysia. The tax rate applicable
in Labuan was applied to the earnings generated from franchise
operations for franchise contracts acquired at that time.
The acquisitions in France and the UK during 2021 have
used anticipated tax rates of 25.75% and 25% respectively
The carrying amount of the franchise agreements has been
considered on the basis of the value in use derived from the
expected future cash flows.
13. Subsidiaries
Details of the Company's subsidiaries as at 31 December 2021 are
as follows:
Name of subsidiary Country of Principal activity Effective Ref
incorporation equity interest
held by the
Group (%)
Former holding
Experiential Ventures company - In
Limited Seychelles dissolution 100 #2
England and Operator of
Escape Hunt Group Limited Wales escape rooms 100 #1
Escape Hunt Operations Malaysia Former operator #2
Ltd of escape rooms 100
- In dissolution
E V Development Co. Thailand Formerly game 99.9 #2
Ltd design - In
dissolution
Escape Hunt IP Limited England and IP licensing 100
Wales #1
Escape Franchises Limited England and Franchise holding 100
Wales #1
Escape Hunt Innovations England and Game design 100
Limited Wales #1
Escape Hunt Limited England and Dormant 100
Wales #1
Escape Hunt USA Franchises England and Franchise holding 100
Ltd Wales #1
Escape Hunt Entertainment United Arab Operator of 100
LLC Emirates Escape Rooms
in Dubai and
master franchise
to the Middle
East #3
BGP Escape France France Operator of 100
Escape Rooms
in Paris and
master franchise
to France, Belgium
and Luxembourg #1
BGP Entertainment Belgium Belgium Operator of 100
Escape Rooms
in Brussels #1
England and Operator of
Boom BB One Limited Wales battle bar Lakeside 100 #2
England and Operator of
BBB Seven Limited Wales battle bar O2 100 #2
Previous head
England and office for Boom
BBB UK Trading Limited Wales group 100 #2
England and Holder of Boom
BBB Seventeen Limited Wales IP 100 #2
England and
BBB Franchise Limited Wales Franchise holding 100 #1
Operator of
England and battle bar Oxford
BBB Thirteen Limited Wales Street 100 #2
England and Intermediate
BBB Ventures Limited Wales holding company 100 #2
Operator of
England and battle bar -
Boom BB Two Limited Wales location TBC 100 #2
Operator of
England and battle bar -
BBB Sixteen Limited Wales location TBC 100 #2
Operator of
England and battle bar -
BBB Six Limited Wales Edinburgh 100 #2
Operator of
England and battle bar -
BBB Eleven Limited Wales Location TBC 100 #2
Operator of
England and battle bar -
BBB Fifteen Limited Wales location TBC 100 #2
Operator of
England and battle bar -
BBB Twelve Limited Wales Manchester 100 #2
Operator of
England and battle bar -
BBB Three Limited Wales location TBC 100 #2
Operator of
England and battle bar -
BBB Fourteen Limited Wales Exeter 100 #2
Each of the companies incorporated in England and Wales have
their registered office at Belmont House, Station Way, Crawley,
RH10 1JA.
Each of the subsidiaries for which reference #1 is shown is
directly held by the Company. Those referenced #2 are held
indirectly through one of the directly held subsidiaries. Those
referenced #3 are held via nominee arrangements.
The registered address of each overseas subsidiary is as
follows:
Experiential Ventures Limited
103 Sham Peng Tong Plaza, Victoria, Mahe, Seychelles.
Escape Hunt Operations Ltd
Lot A020, Level 1, Podium Level, Financial Park Labuan, Jalan
Merdeka,8700 Labuan, Malaysia.
E V Development Co. Ltd
No. 689 Bhiraj Tower at EmQuartier, Sukhumvit (Soi 35) Road,
Klongton-Nua Sub-district, Bangkok, Thailand.
Escape Hunt Entertainment LLC
Retail Space 26, Galleria Mall, Al Wasl Road, Bur Dubai,
Dubai,
BGP Escape France
112 bis rue cardinet 75017, France
BGP Entertainment Belgium
13-15 rue de Livourne, 1060 Brussels
14. Business Combination
Acquisition of French and Belgium master franchise
On 9th March 2021, XP Factory Plc acquired 100% of the equity
interest in BGP Entertainment Belgium and BGP Escape France,
thereby obtaining control. BGP Entertainment Belgium runs an owner
operated escape room in Brussels and BGP Escape France holds the
master franchise for the territory of France, Belgium and
Luxembourg and also runs an owner operated venue in Paris.
The details of the business combination are as follows:
GBP'000
Fair value of consideration transferred
Amounts settled in cash 278
Net loan receivable (19)
Contingent consideration 248
Total purchase consideration 507
--------
Contingent consideration includes a preliminary estimate on the
earnout payable on the owned and operated sites.
There were no shares or other contingent consideration to be
included in the total purchase price.
Further acquisition related costs of GBP66k that were not
directly attributable to the issue of shares are included in
administrative expenses under the owner operated segment.
Book Value Fair Value Fair
GBP'000 Adjustment Value
GBP'000 GBP'000
Assets and liabilities recognised
as a result of the acquisition
Cash 139 - 139
Trade receivables (net of provisions) 78 - 78
Other receivables and deposits 19 - 19
Property, plant and equipment 95 - 95
Right of use assets 282 - 282
Intangible assets 17 - 17
Trade payables (161) - (161)
Lease liabilities (282) - (282)
Other payables (135) - (135)
----------- ------------ ---------
Net identifiable assets acquired 52 - 52
Valuation of acquired intangibles - 61 61
Goodwill arising on consolidation - 410 410
Deferred tax liability recognised - (16) (16)
----------- ------------ ---------
Total 52 455 507
----------- ------------ ---------
The fair value of acquired trade receivables is GBP78k. The
gross contractual amount for trade receivables due is GBP128k of
which GBP50k had been provided against as at the date of
acquisition.
The excess of the total consideration over the net identifiable
assets acquired of GBP456k has been analysed and GBP61k has been
recognised on the balance sheet as an intangible asset relating to
the future cashflows from the franchise agreements active in the
region. The remaining GBP395k of goodwill is primarily related to
growth expectations, expected future profitability and the
expertise and experience of BGP Entertainment and BGP Escape's
workforce. A further GBP16k has been recognised as Goodwill related
to the deferred tax liability recognised on the GBP61k intangible
asset. Goodwill has been allocated to the owner operated segment
and is not expected to be deductible for tax purposes. The
intangible assets have been allocated to the franchise segment and
are being amortised over 6 years to reflect the average length of
time remaining on the franchise agreements.
BGP Entertainment and BGP Escape together contributed revenues
of GBP634k and net losses of (GBP1k) in the nine months between
acquisition and 31 December 2021. If the acquisition had occurred
on 1 January 2021, consolidated revenue would have been GBP50k
higher, however consolidated net profits would have been GBP35k
lower due to the Brussels site being closed due to COVID for most
of the period.
Acquisition of Boom Battle Bars
On 22(nd) November 2021, XP Factory Plc acquired 100% of Boom
Battle Bars Group, thereby obtaining control. The group consists of
fifteen companies, their individual activities as listed in Note
13, however at the time of purchase there was one overall holding
company, one IP Holding company, one head office company, one
franchise holding company and eleven operating companies intending
to each run a Boom Battle Bar location, of which one was already
live and five more had sites allocated and intending to open.
The details of the business combination are as follows:
GBP'000
Fair value of consideration transferred
Amounts settled in cash 9,607
Vendor Loan 360
Contingent consideration 8,950
Deferred consideration 637
Total consideration 19,554
--------
Contingent consideration includes a preliminary estimate on the
earnout payable in respect of the acquisition, discounted to
present value at a rate of 4.7 per cent. Deferred consideration
represents the amount estimated to be payable as a result of the
net debt adjustment which will be finalised with the completion of
the audits of the Boom companies acquired. The contingent
consideration is payable by means of an issue of up to 25,000,000
Consideration Shares. The deferred consideration is expected to
give rise to an additional GBP637k payable to the vendors.
The issue of the Consideration Shares is conditional on the
performance of the Boom Battle Bars Group following completion of
the acquisition. The Consideration Shares are subject to an
earn-out and will only be issued if the performance of the Boom
Battle Bars Group in the financial year ending 31 December 2022
meets a combination of the turnover and site roll-out targets set
out below. The Consideration Shares are expected to be issued
during the first half of 2023 and are be subject to lock-in until
15 July 2023.
The turnover component comprises 66.7 per cent. of the earn-out
calculation and the site roll-out plan makes up the balance of 33.3
per cent, (with 20 per cent. linked to owner operated sites and
13.3 per cent. linked to franchise sites). There is a limited
ability for an over-performance against one target to compensate
for potential under-performance against another such that the
turnover component can comprise a maximum of 75% of the earn-out
calculation, if the turnover target is exceeded but the site
roll-out target is not achieved, and the site roll-out plan a
maximum of 40% of the earn-out calculation, if the site roll-out
plan is exceeded but the turnover earn-out target is not achieved.
.
The earn-out target numbers are:
-- GBP10.96 million combined turnover from the owner-operated
Boom sites and from the Boom franchise revenue share
in the year to 31 December 2022;
-- 7 owner operated sites open by 31 December 2022; and
-- 20 franchise sites open by 31 December 2022.
If each of these earn-out targets is achieved in full then the
maximum number of Consideration Shares will be issued to the
seller.
If the earn-out targets are not satisfied in full then there is
a reducing straight line sliding scale for the partial achievement
of each component of the earn-out down to the minimum criteria. If
the minimum criteria are not met in every element of the earn-out
then no Consideration Shares will be issued. The minimum criteria
for each element of the earn-out are:
-- GBP8.15 million combined turnover from the owner-operated
sites and from the franchise revenue share in the year
to 31 December 2022;
-- 13 franchise sites open by 31 December 2022; and
-- 5 owner operated sites open by 31 December 2022.
Further acquisition related costs of GBP99k that were not
directly attributable to the issue of shares are included in
administrative expenses under the owner operated segment.
Book Value Fair Value Fair
GBP'000 Adjustment Value
GBP'000 GBP'000
Assets and liabilities recognised
as a result of the acquisition
Cash 15 - 15
Inventory 34 - 34
Trade receivables (net of provisions) 351 - 351
Other receivables 1,036 - 1,036
Stock and work in progress 510 - 510
Property, plant and equipment 725 - 725
Intangible assets 752 - 752
Right of use assets 4,818 - 4,818
Trade payables (900) - (900)
Accruals, deferred income and other
payables (1,739) - (1,739)
Loans (375) - (375)
Lease liabilities (4,818) - (4,818)
Net identifiable assets acquired 409 - 409
Valuation of acquired intangibles - 4,385 4,385
Goodwill arising on consolidation - 15,874 15,874
Deferred tax liability recognised - (1,096) (1,096)
IFRS 9 provision - (18) (18)
----------- ------------ ---------
Total 409 19,145 19,554
----------- ------------ ---------
The fair value of acquired trade receivables is GBP351k. The
gross contractual amount for trade receivables due is GBP351k of
which none had been provided against as at the date of
acquisition.
The excess of the total consideration over the net identifiable
assets acquired of GBP19,145k has been analysed and GBP4,386k has
been recognised on the balance sheet as an intangible asset
relating to the future cashflows from the franchise agreements
active in the UK. The remaining GBP14,759k of goodwill is primarily
related to growth expectations, expected future profitability and
the expertise and experience of the team. A further GBP1,096k has
been recognised as Goodwill related to the deferred tax liability
recognised on the GBP4,386 intangible asset. Goodwill has been
allocated to the owner operated segment and is not expected to be
deductible for tax purposes. The intangible assets have been
allocated to the franchise segment and are being amortised over 10
years to reflect the average length of time remaining on the
franchise agreements.
The Boom Group of companies together contributed revenues of
GBP374k and net losses of (GBP76k) in period between acquisition
and 31 December 2021. If the acquisition had occurred on 1 January
2021, consolidated revenue would have been GBP2,953k higher but
consolidated net profits would have been GBP150k lower due to
pre-opening costs of both the Lakeside and O2 venues.
15. Loan to franchisee
A loan of GBP300,000 is due from a master franchisee which bears
interest at 5% per annum plus 2% of the franchisee's revenues and
is repayable in instalments between January 2020 and June 2023.
The majority of income receivable under the terms of the loan
relates to interest at a fixed rate. The impact of COVID-19 on the
borrower in 2020 has been significant, as a result of which it is
considered unlikely that the loan will be repaid. The pandemic
caused the franchisee to fall into arrears on rent and on loan
repayments. A compromise has been reached between the franchisee
and the respective landlord, but payments have not resumed. As at
31 December 2021 this loan has been provided for in full.
GBP84k has been loaned to our area representative in the US in
return for an enhanced revenue share from the Houston site. The
agreement entitles the group to an additional 25 per cent revenue
share from certain games in the Houston site and rolls up interest
at 20 per cent per annum. Repayments commence six months after the
installation of the games, which were completed in November
2021.
16. Trade and other receivables
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Trade receivables (customer contract balances) 848 182
Prepayments 666 208
Accrued income (customer contract balances) 122 20
Accrued interest - -
Deposits and other receivables 3,354 491
4,990 901
------------ ------------
The Group's exposure to credit risk and impairment losses
related to trade receivables is disclosed in Note 29.
Significant movements in customer contract assets during the
year ended 31 December 2021 are summarised below:
Year ended 31 December 2021: Trade Accrued
Receivables income
GBP'000 GBP'000
Contract assets:
Balance at 1 January 2021 182 20
Transfers from contract assets recognised at
the beginning of the period to receivables 20 (20)
Net increases as a result of changes in the
measure of progress 910 122
Provisions for doubtful amounts (264) -
Balance at 31 December 2021 848 122
------------- --------
The amount of revenue recognised from performance obligations
satisfied in previous periods is nil.
We receive payments from customers based on terms established in
our contracts. In the case of franchise revenues in Escape Hunt,
amounts are billed within five working days of a month end and
settlement is due by the 14(th) of the month. In the case of
franchise revenues in Boom Battle Bar, amounts are billed every
Tuesday and settlement is due by Friday each week.
Accrued income relates to our conditional right to consideration
for our completed performance under the contract, primarily in
respect of franchise revenues. Accounts receivable are recognised
when the right to consideration becomes unconditional.
17. Inventories
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Branch consumables (at cost) 24 16
Stocks and Work in Progress 438
Total inventories 462 16
------------ -------------
Inventories are stated at the lower of cost and net realisable
value. Cost is based on the weighted average principle and includes
expenditure incurred in acquiring the inventories and other costs
in bringing them to their existing location and condition. As items
are sold, the costs of those items are drawn down from the value of
inventory and recorded as an expense under costs of sale in the
profit and loss for the period.
Work in progress includes the cost associated with fit-out work
on sites which are subsequently sold to a franchisee and is
recognised at the point of transaction. Work in progress is
derecognised when an invoice is raised to a franchisee or when it
is determined that it is not recoverable.
The movement in stocks and work in progress was as follows:
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Balance brought forward 16 12
Utilised in the year (218) (10)
Acquired through acquisition 544 -
Purchases / const incurred 120 14
Total inventories 462 16
------------ -------------
18. Cash and cash equivalents
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Bank balances 8,225 2,722
Cash and cash equivalents in the statement of
cash flow 8,225 2,722
------------ -------------
The currency profiles of the Group's cash and bank balances are
as follows:
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Pounds Sterling 7,202 2,337
Australian Dollars 192 34
United States Dollars 350 7
Euros 339 235
Others 142 108
8,225 2,722
------------ ------------
19. Trade and other payables (current)
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Trade payables 1,527 606
Accruals 2,065 652
Deferred income 1,201 441
Taxation - 17
Loans due in < 1yr 404 -
Other taxes and social security 605 82
Other payables 219 65
6,021 1,861
------------ -------------
20. Deferred income
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Contract liabilities (deferred
income):
Balance at beginning of year 592 622
Revenue recognised in the year that was included
in the deferred income balance at the beginning
of the year (229) (335)
Increases due to cash received, excluding amounts
recognised as revenue during the period 614 343
Increases on acquisition of new businesses 754
Decreased on termination of franchises (42) (35)
Translation differences 3 (3)
Transaction price allocated to the remaining
performance obligations 1,692 592
------------ -------------
All of the above amounts relate to contracts with customers and
include amounts which will be recognised within one year and after
more than one year. The amounts on the early termination of upfront
franchise fees were recognised as revenue as all performance
obligations have been satisfied.
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Upfront exclusivity, legal and training
fees 859 212
Escape room advance bookings 356 13
Boom Battle Bar advance bookings 15 -
Gift vouchers 462 367
1,692 592
------------ ------------
As at As at
Upfront exclusivity, legal 31 December 31 December
and training fees 2021 2020
GBP'000 GBP'000
Within one year 368 60
After more than one year 491 152
859 212
------------ ------------
Deferred revenues in respect of upfront exclusivity fees are
expected to be recognised as revenues over the remaining lifetime
of each franchise agreement. Deferred legal fees are recognised on
the earlier of the date of completion of the franchise lease and
the date of occupation and training fees are recognised on the date
the franchise site is opened. The average remaining period of the
Escape Hunt franchise agreements is approximately four years. The
average remaining life on all Boom franchise leases is 10 years.
All other deferred revenue is expected be recognised as revenue
within one year.
21. Provisions
The following provisions have been recognised in the period:
Year ended Year ended
31 Dec 31 Dec
2021 2020
GBP'000 GBP'000
Provision for contingent consideration 9,056 -
Provision for deferred consideration 637 -
Dilapidations provisions 162 125
Provision for financial guarantee contracts 25 -
Other provisions 5 3
Total 9,885 128
------------- -------------
Provisions represent future liabilities and are recognised on an
item by item basis based on the Group's best estimate of the likely
committed cash outflow. No amounts have been used or reversed
during the year.
Movements on provisions can be illustrated as follows:
Contingent Deferred Dilapi-dations Financial Other Total
consideration consideration guarantee
contracts
--------------- --------------- --------------- ----------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost:
As at 31 December
2020 - - 125 - 3 128
Additions arising
from acquisition 8,950 637 - 17 - 9,604
Provisions
recognised 106 - 46 8 3 163
Releases recognised - - (10) - - (10)
--------------- --------------- --------------- ----------- -------- --------
As at 31 December
2021 9,056 637 162 25 5 9,885
--------------- --------------- --------------- ----------- -------- --------
The ageing of provisions can be split as follows:
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Within one year 637 -
After more than one year 9,248 128
9,885 128
------------ ------------
The contingent consideration is in respect of the Boom
acquisition, please see Note 14 for more details.
The value of the contingent consideration has been estimated
using a share price of 35.8p per XP Factory share, being the share
price on 23(rd) November 2021, the date that the Acquisition of
Boom Battle Bars completed, and assuming all 25,000,000 shares
potentially due under the provisions of the sale agreement are
issued. The valuation is considered a level 2 valuation under IFRS
13, indicating that it is a financial liability that does not have
regular market pricing, but whose value can be determined using
other data values or market prices. The future value of the
deferred consideration, which is due to be settled on completion of
the audit for the group for the year ended 31 December 2022
(assumed to be 18 months after the acquisition) has been calculated
using a cost of capital of 13.7 per cent and an implied share price
of 43.4 pence per share. The difference between the fair value at
acquisition and the future value will be recognised as a finance
charge over the 18 months between the date of acquisition and the
expected date of settlement as set out below.
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Fair value of contingent consideration 8,950 -
at acquisition
Financing charges recognized in year 106 -
to 31 December
Provision for contingent consideration as at 9,056 -
31 December
------------ ------------
The recognition of the financing charges is expected to be as
follows:
GBP'000
Finance charge in the year to 31 December
2021 106
Finance charge in the year to 31 December
2022 1,267
Finance charge in the year to 31 December
2023 528
--------
Total 1,901
--------
Financial guarantee contracts relate to leases where the Group
has signed as co-tenant or has provided a guarantee for a site
operated by a franchisee.
31 Dec 31 Dec
2021 2020
GBP'000 GBP'000
------- -------
Provision for financial guarantee contracts
acquired 18
Additional provision in year 8
------- -------
Provision at 31 December 2021 26 -
------- -------
Number sites for which guarantees provided 2 -
Average term of lease remaining (years) 14.8 -
Average annual rent (GBP'000) 175 -
------- -------
At the end of the reporting period, the directors of the Company
have assessed the past due status of the debts under guarantee, the
financial position of the debtors as well as the economic outlook
of the industries in which the debtors operate. There has been no
change in the estimation techniques or significant assumptions made
during the reporting periods in assessing the loss allowance for
these financial assets.
22. Share capital
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Issued and fully paid:
At beginning of the year: 80,369,044 (2020:
26,925,925) Ordinary shares of 1.25 pence
each 1,005 336
Issued during the year: 65,636,054 Ordinary
shares 820 669
As at end of period / year
- 146,005,098 (2020: 80,369,044)
Ordinary shares of 1.25 pence each 1,825 1,005
------------ ------------
XP Factory Plc (formerly Escape Hunt Plc) does not have an
authorised share capital and is not required to have one.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
During the year ended 31 December 2021, the following changes in
the issued share capital of the Company occurred:
-- On 27 January 2021 the Company issued 8,036,904 new shares at
17.5 pence per share in an equity placing raising GBP1.4m (before
expenses of GBP64,200). The expenses have been deducted from the
premium of GBP1.3m arising from the fund raise. The Company also
issued a further 89,143 new ordinary shares at 17.5 pence per share
to one of its advisers as consideration for fees connected to the
placing. The total 8,126,047 shares were admitted to trading on AIM
on 28 January 2021.
-- On 4 February 2021 the company issued 125,000 new shares at
1.25 pence per share to the trustees of the Company's Share
Incentive Scheme ("SIP") to meet anticipated demand for Matching
Shares. Details of the Company's SIP share scheme are given in note
26.
-- On 22 November 2021 the Company issued 57,385,007 new shares
at 30.0 pence per share in a fund raise comprising a placing, open
offer and share subscription, raising GBP17.2 million (before
expenses of GBP1.1m). The expenses have been deducted from the
premium of GBP16.3m arising from the fund raise. All 57,385,007 new
shares were admitted to trading on AIM on 23 November 2021.
23. Loan notes
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Amounts due within one year
Loan notes 401 -
Rolled up interest on vendor loan notes 3 -
Other loans 256
660 -
Amounts due in more than one year:
Vendor loan notes 43
Rolled up interest on vendor loan notes 2
Convertible loan notes 272 272
Rolled up interest on convertible loan notes 56 17
Other loans 620
As at end of period / year 1,653 289
------------ ------------
On 1 July 2020, the Company issued GBP340,000 convertible loan
notes ("Convertible Notes"). The Convertible Notes are unsecured
and interest rolls up at a fixed rate of 10 per cent. per annum.
The Convertible Notes are repayable in full on 3 July 2025,
inclusive of rolled up interest, although they may be prepaid in
whole or in part at the Company's discretion after the period of 18
months from the date of issue, provided that the holders of the
Convertible Notes will first be given the opportunity to serve
notice to convert their respective Convertible Notes and unpaid
interest into new Ordinary Shares.
The Convertible Notes are convertible at the election of the
holders of the Convertible Notes at any time up until and including
the date of repayment at the price which is the lower of 9 pence
for each new Ordinary Share or the placing price of the most recent
placing by the Company of new Ordinary Shares prior to
conversion.
At the date of issue, the Company determined that GBP272,251 of
the principal related to the debt component of the Convertible
Notes with the balance of GBP67,749 be classified as the equity
component of the Convertible Notes. This gives an effective
underlying interest rate on the Notes of 13.4% per annum.
Application will not be made for the Convertible Notes to be
admitted to trading on AIM or any other exchange. The Company has
adequate authority to issue the maximum number of new Ordinary
Shares which could result from the conversion of all the
Convertible Notes. Any new Ordinary Shares arising on conversion
will rank pari passu with the Ordinary Shares in issue at that time
and application for admission to trading on AIM will be made at the
appropriate time.
EUR100,000 vendor loan notes were issued on 9 March 2021
("France Notes") as part of the consideration for the acquisition
of the French and Belgian master franchise. The France Notes carry
interest at 4 per cent per annum and are repayable, together with
accrued interest, in two equal tranches on the first and second
anniversary of issue. The France Notes are secured by means of a
pledge of the shares in BGP Entertainment Belgium.
On 22 November 2021, the Company issued GBP360,000 vendor loan
notes 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. They are repayable on the first
anniversary of issue.
Convertible Loan note facility
The company has entered into a Convertible Loan Note facility
with John Story, a former non executive director. Under the terms
of the facility, John Story has undertaken to subscribe for up to
GBP1m in convertible loan notes, subject to receiving a drawdown
notice from the company. The principal terms of the notes are as
follows:
-- The term of the Convertible Loan Note facility is from
the date of issue to 30 June 2023
-- The notes can be issued in denominations of GBP50,000;
-- The notes can be issued by the company at any time during
the term, subject to providing 10 days notice of a drawdown;
John Story has undertaken to subscribe for up to GBP1m
principal notes
-- The notes carry a 7 per cent coupon, payable quarterly;
-- the notes are repayable on 30 June 2023 if not previously
repaid or converted
-- The Noteholder has the right to convert the notes into
ordinary shares on a Conversion Date
-- A Conversion Date is any date on which the company undertakes
an equity issue for cash comprising 5 per cent or more
of the company's issued share capital; 30 June 2022;
or 30 June 2023
-- The notes are convertible at the issue price of any
new equity raise undertaken before 30 September 2021
subject to a 2 per cent early redemption fee; or at
a 10 per cent discount to any new equity raise undertaken
after 30 September 2021 but before 30 June 2023.
-- If converted on 30 June 2022 or 30 June 2023, the conversion
price is calculated as a 10 per cent discount to the
volume weighted average trading price of the shares
in the 30 days before the conversion.
-- The notes are unsecured.
As at 31 December 2021, the Convertible Loan Note facility
remained undrawn.
24. Share option and incentive plans
XP Factory Plc (formerly Escape Hunt Plc) Enterprise Management
Incentive Plan
On 15 July 2020, the Company established the Escape Hunt Plc
Enterprise Management Incentive Plan ("2020 EMI Plan"). The 2020
EMI Plan is an HMRC approved plan which allows for the issue of
"qualifying options" for the purposes of Schedule 5 to the Income
Tax (Earnings and Pensions) Act 2003 ("Schedule 5"), subject to the
limits specified from time to time in paragraph 7 of Schedule 5,
and also for the issue of non qualifying options.
It is the Board's intention to make awards under the 2020 EMI
Plan to attract and retain senior employees. The 2020 EMI Plan is
available to employees whose committed time is at least 25 hours
per week or 75% of his or her "working time" and who is not
precluded from such participation by paragraph 28 of Schedule 5 (no
material
interest). The 2020 EMI Plan will expire on the 10(th) anniversary of its formation.
The Company has made three awards to date as set out in the
table below. The options are exercisable at their relevant exercise
prices and vest in three equal tranches on each of the first,
second and third anniversary of the grants, subject to the employee
not having left employment other than as a Good Leaver. The number
of options that vest are subject to a performance condition based
on the Company's share price. This will be tested on each vesting
date and again between the third and fourth anniversaries of
awards. If the Company's share price at testing equals the first
vesting price, one third of the vested options will be exercisable.
If the Company's share price at testing equals the second vesting
price, 90 per cent of the vested options will be exercisable. If
the Company's share price at testing equals or exceeds the third
vesting price, 100% of the vested options will be exercisable. The
proportion of vested options exercisable for share prices between
the first and second vesting prices will scale proportionately from
one third to 90 per cent. Similarly, the proportion of options
exercisable for share prices between the second and third vesting
prices will scale proportionately from 90 per cent to 100 per
cent.
The options will all vest in the case of a takeover. If the
takeover price is at or below the exercise price, no options will
be exercisable. If the takeover price is greater than or equal to
the second vesting price, 100 per cent of the options will be
exercisable. The proportion of options exercisable between the
first and second vesting prices will scale proportionately from nil
to 100 per cent.
If not exercised, the options will expire on the fifth
anniversary of award. Options exercised will be settled by the
issue of ordinary shares in the Company.
Awards #1 #2 #3
-------------------------------- --------------- ---------- ----------
Date of award 15-Jul-20 18-Nov-21 23-Nov-21
Date of expiry 15-Jul-25 18-Nov-26 23-Nov-26
Exercise price 7.5p 35.0p 35.0p
Qualifying awards - number of
shares under option 13,333,332 700,001 533,334
Non-qualifying awards - number
of shares under option 2,400,000 0 0
First vesting price 11.25p 43.75p 43.75p
Second vesting price 18.75p 61.25p 61.25p
Third vesting price 25.00p 70.00p 70.00p
Proportion of awards vesting
at first vesting price 33.33% 33.33% 33.33%
Proportion of awards vesting
at second vesting price 90.00% 90.00% 90.00%
Proportion of awards vesting
at third vesting price 100% 100% 100%
As at 31 December 2021, 16,966,667 options were outstanding
under the 2020 EMI Plan (2020: 15,733,332).
As at As at
31 December 31 December
2021 2020
'000 '000
Options outstanding at the beginning of 15,733 -
the period
Awards made during the year 1,233 15,733
Options exercised - -
Options lapsed or forfeited - -
------------ ------------
Options outstanding at the end of the year 16,966 15,733
------------ ------------
The sum of GBP53,073 has been recognised as a share-based
payment and charged to the profit and loss during the year (2020:
GBP23,477). The fair value of the options granted during the period
has been calculated using the Black & Scholes formula with the
following key assumptions:
Awards #1 #2 #3
------------------------------ ---------- ---------- ----------
Exercise price 7.5p 35.0p 35.0p
Volatility 34.60% 31% 31%
Share price at date of award 7.375p 33.50p 32.00p
Option exercise date 15-Jul-24 18-Nov-25 23-Nov-25
Risk free rate -0.05% 1.55% 1.55%
The performance conditions were taking into account as
follows:
The value of the options have then been adjusted to take account
of the performance hurdles by assuming a lognormal distribution of
share price returns, based on an expected return on the date of
issue. This results in the mean expected return calculated using a
lognormal distribution equalling the implied market return on the
date of issue validating that the expected return relative to the
volatility is proportionately correct. This was then used to
calculate an implied probability of the performance hurdles being
achieved within the four year window and the Black & Scholes
derived option value was adjusted accordingly.
Time based vesting: It has been assumed that there is between a
90% and 95% probability of all share option holders for each award
remaining in each consecutive year thereafter.
The weighted average remaining contractual life of the options
outstanding at 31 December 2021 is 43.7 months (2020: 54.5
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
On 25 November 2020, the Company established an employee share
incentive plan ("SIP") which is available to all employees,
including executive directors, in the Group once they have
completed three months of employment. The scheme allows employees
to acquire ordinary shares in the Company each month from pre-tax
income, such shares being 'Partnership Shares'. Shares are be
purchased monthly by the SIP trustee on behalf of the participating
employees at the prevailing market price and are funded by
deductions from payroll. For each Partnership Share so acquired,
the participant is granted a 'Matching Share'. 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. The SIP is administered by an independent
trustee who holds all Partnership and Matching shares for the
benefit of the participants.
The SIP has been adopted to promote and support the principles
of wider share ownership amongst all the Company's employees.
On 4 February 2021, the Company issued 125,000 shares to the
trustee of the scheme to be allocated to individuals as Matching
Shares during the operation of the scheme.
As at 31 December 2021, 54,073 matching shares had been awarded
and were held by the trustees for release to employees pending
satisfaction of their retention conditions. A charge of GBP9,478
(2020: GBPnil) has been recognised in the accounts in respect of
the Matching Shares awards.
25. Capital management
The Board defines capital as share capital and all components of
equity.
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business. In particular, the Company has
raised equity as a means of executing its acquisition strategy and
as a sound basis for operating the acquired Escape Hunt business in
line with the Group's strategy. The Board of Directors will also
monitor the level of dividends to ordinary shareholders.
The Company is not subject to externally imposed capital
requirements.
26. Reserves
The share premium account arose on the Company's issue of shares
and is not distributable by way of dividends.
The share-based payment reserve represents the cumulative charge
for share options over the vesting period with such charges
calculated at the fair value at the date of the grant.
The merger relief reserve arises from the issue of shares to by
the Company in exchange for shares in Experiential Ventures Limited
and is not distributable by way of dividends.
In the case of the Company's acquisition of Experiential
Ventures Limited, where certain shares were acquired for cash and
others on a share for share basis, then merger relief has been
applied to those shares issued on a share for share basis.
The convertible loan note reserve represents the equity
component of the convertible loan notes on the date of issue
The translation reserve represents cumulative foreign exchange
differences arising from the translation of the Financial
Statements of foreign subsidiaries and is not distributable by way
of dividends.
The capital redemption reserve has arisen following the purchase
by the Company of its own shares pursuant to share buy-back
agreements and comprises the amount by which the distributable
profits were reduced on these transactions in accordance with the
Companies Act 2006.
27. Related party transactions
Related parties are entities with common direct or indirect
shareholders and/or directors. Parties are considered to be related
if one party has the ability to control the other party in making
financial and operating decisions.
Details of the convertible loan note facility entered into with
John Story, who was a director during the year, are set out in note
25 of the consolidated financial statements.
During the period under review, other than those disclosed
elsewhere in the financial statements there were no significant
related party transactions.
28. Directors and key management remuneration
Details of the Directors' remuneration are set out in Note 7
above.
29. Financial risk management
General objectives, policies and processes
The overall objective of the Directors is to set policies that
seek to reduce risk as far as possible without unduly affecting the
Company's competitiveness and flexibility. Further details
regarding these policies are set out below.
The Directors review the Company's monthly reports through which
they assess the effectiveness of the processes put in place and the
appropriateness of the objectives and policies it sets.
Categories of financial assets and liabilities
The Company's activities are exposed to credit, market and
liquidity risk. The Company's overall financial risk management
policy focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on its financial
performance.
The principal financial instruments used by the Company, from
which financial instrument risk arises, are as follows:
-- cash and cash equivalents;
-- trade and other receivables; and
-- trade and other payables;
The financial assets and financial liabilities maturing within
the next 12 months approximated their fair values due to the
relatively short-term maturity of the financial instruments.
The Company had no financial assets or liabilities carried at
fair values. The Directors consider that the carrying amount of
financial assets and liabilities approximates to their fair
value.
A summary of the financial instruments held by category is
provided below:
Financial assets at amortised cost:
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Trade receivables 848 182
Other receivables and deposits 3,476 511
Cash and cash equivalents 8,225 2,722
12,550 3,415
------------ ------------
Financial liabilities at amortised cost:
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Trade payables 1,527 606
Accruals and other payables 3,930 815
Loan notes 417 3,742
Other loans 1,236 -
Deferred consideration 637
Contingent consideration 9,056 -
16,803 5,163
------------ ------------
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group's
receivables from customers.
The Group manages its exposure to credit risk by the application
of credit approvals, credit limits and monitoring procedures on an
ongoing basis. For other financial assets (including cash and bank
balances), the Group minimises credit risk by dealing exclusively
with high credit rating counterparties.
Management have assessed the increase in credit risk over the
last 12 months and have adjusted the carrying values of receivables
where appropriate. In aggregate, Management does not consider there
to have been a significant change in credit risk since initial
recognition of receivables balances. Management reviews credit risk
on an ongoing basis taking into account the circumstances at the
time.
Impairment of financial assets
As described in Note 2 above, the Group applies the "expected
loss" model which focuses on the risk that a loan or receivable
will default rather than whether a loss has been incurred.
The carrying amount of financial assets in the statement of
financial position represents the Group's maximum exposure to
credit risk, before taking into account any collateral held. The
Group does not hold any collateral in respect of its financial
assets.
Concentration of credit risk relating to trade receivables is
limited due to the Group's many varied customers. The Group's
historical experience in the collection of accounts receivable
falls within the recorded allowances. Due to these factors,
management believes that no additional credit risk beyond the
amounts provided for collection losses is inherent in the Group's
trade receivables. The ageing of trade receivables at the reporting
date was as follows:
As at As at
31 December 31 December
2021 2020
Gross amounts (before impairment): GBP'000 GBP'000
Not past due 666 94
Past due 0-30 days 32 8
Past due 31-60 days 22 7
Past due more than 60 days 402 447
1,112 556
------------ ------------
Impairment losses:
The movement in the allowance for impairment losses in respect
of trade receivables during the year was as follows:
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
At beginning of year (184) (100)
Impairment losses recognised (117) (104)
Bad debts written off 38 20
At end of year (264) (184)
------------ ------------
The allowance account for trade receivables is used to record
impairment losses unless the Group is satisfied that no recovery of
the amount owing is possible; at that point the amounts considered
irrecoverable are written off against the trade receivables
directly.
The Group assesses collectability based on historical default
rates expected credit losses to determine the impairment loss to be
recognised. Management has reviewed the trade receivables ageing
and believes that, except for certain past due receivables which
are specifically assessed and impaired, no impairment loss is
necessary on the remaining trade receivables due to the good track
records and reputation of its customers.
During the year ended 2020 the Group recognised an impairment in
full against both the capital and accrued interest potions of the
loan receivable from a master franchise. Therefore as at 31
December 2021 the net balance outstanding on this loan per these
financial statements is nil (2020: GBPnil).
Liquidity risk
The ageing of financial liabilities at the reporting date was as
follows:
As at
31 December
2021
GBP'000
Not past due 15,604
Past due 0-30 days 790
Past due 31-60 days 22
Past due more than 60 days 387
16,803
------------
As at 31 December 2021 GBP7,202k (2020: GBP2,387k) of the cash
and bank balances, as detailed in Note 18 to the financial
statements are held in financial institutions which are regulated
and located in the UK, which management believes are of high credit
quality. Management does not expect any losses arising from
non-performance by these counterparties.
The concentration of credit risk is limited due to the fact that
the customer base is large and unrelated.
Liquidity risk arises from the Company's management of working
capital. It is the risk that the Company will encounter difficulty
in meeting its financial obligations as they fall due.
The Company's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. The principal liabilities of the Group arise in respect
of trade and other payables which are all payable within 12 months.
At 31 December 2021, total trade payables within one year were
GBP1,527k (2020: GBP606k), which is considerably less than the
Group's cash held at the year-end of GBP8,225k (2020: GBP2,722k).
The Board receives and reviews cash flow projections on a regular
basis as well as information on cash balances.
Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising the return.
The Company has insignificant financial assets or liabilities
that are exposed to interest rate risks.
Foreign currency risk
The Group has exposure to foreign currency movements on trade
and other receivables, cash and cash equivalents and trade and
other payables denominated in currencies other than the respective
functional currencies of the Group entities. It also exposed to
foreign currency risk on sales and purchases that are denominated
in foreign currencies. The currencies giving rise to this risk are
primarily the United States ("US") dollar, the Euro ("EUR"),
Australian ("AUD") dollars, and Thai Baht ("THB"). Currently, the
Group does not hedge its foreign currency exposure. However,
management monitors the exposure closely and will consider using
forward exchange or option contracts to hedge significant foreign
currency exposure should the need arise.
The Group's exposure to foreign currency risk expressed in
Pounds was as follows:
UK Pound United Euro Australian Other Total
Sterling States Dollar
Dollar
As at 31 December GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2021
Financial assets:
Trade receivables 647 - 41 - 160 848
Other receivables
and deposits 3,207 130 139 - 1 3,476
Cash and bank balances 7,202 350 339 192 142 8,225
11,056 479 519 192 303 12,550
Financial liabilities:
Trade payables 1,303 7 186 0 30 1,527
Other payables and
accruals 3,474 25 220 0 211 3,930
Loan notes 417 - - - - 417
Other loans 1,236 1,236
Deferred consideration 637 637
Contingent consideration 9,056 - - - - 9,056
16,079 32 613 0 314 16,803
Foreign currency
exposure (net) 0 447 (94) 192 (12) 534
UK Pound United Thai Euro Australian Other Total
Sterling States Bhat Dollar
Dollar
As at 31 December GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2020
Financial assets:
Trade receivables 172 - - - - 10 182
Other receivables
and deposits 509 2 - - - - 511
Cash and bank balances 2,264 81 36 235 34 72 2,722
2,945 83 36 235 34 82 3,415
Financial liabilities:
Trade payables 584 6 - - - 15 606
Other payables and
accruals 771 43 - - - 1 815
Lease liabilities 3,649 - - - - 93 3,742
5,004 49 - - - 109 5,163
Foreign currency
exposure (net) - 34 36 235 34 (27) 312
Sensitivity analysis
A 10% strengthening of the Pound against the following
currencies at 31 December 2021 would increase/(decrease) profit or
loss by the amounts shown below. This analysis assumes that all
other variables, in particular interest rates, remain constant.
Increase/ Increase/
(Decrease) (Decrease)
GBP'000 GBP'000
2021 2020
Effects on profit after
taxation/equity
United States Dollar:
- strengthened by 10% (48) (8)
- weakened by 10% 48 8
Thai Bhat:
- strengthened by 10% - (4)
- weakened by 10% - 4
Euro:
- strengthened by 10% (52) (24)
- weakened by 10% 52 24
Australian Dollar:
- strengthened by 10% (19) (3)
- weakened by 10% 19 3
30. Commitments
As at 31 December 2021, the Group had capital expenditure
commitments in respect of escape rooms games and leasehold
improvements totalling GBPnil (2020: GBP152,921).
31. Contingencies
The Directors are not aware of any other contingencies which
might impact on the Company's operations or financial position.
32. Government grants
The following Government grants have been recognised during the
period:
Year ended Year ended
31 Dec 31 Dec
2021 2020
GBP'000 GBP'000
Local authority Small Business Grants 371 135
R&D Claims made under the SME Scheme 3,236 259
Total 3,607 394
------------- -------------
In addition, the Company benefitted from Business Rates Relief
introduced for the retail, hospitality and leisure industries. The
benefit in the period was GBP230k (2020: GBP188k)
The Group also benefitted from the Coronavirus Job Retention
Scheme from furloughing some of its staff. The benefit in the
period was GBP460k (2020: GBP756k)
The claim made under the SME R&D Scheme related to 2019 and
2020. As at the date of signing these accounts, GBP3,236k of these
monies had been received.
33. Events after the reporting period
Convertible Loan Notes
In early January, the Company received a Noteholder Notice of
Conversion in relation to all of its outstanding Convertible Loan
Notes. As a result, 4,378,082 new ordinary shares were issued on 2
February 2022 at 9.0p per share in respect of the principal amount
and rolled up interest on the Convertible Loan Notes. The
conversion of the loan notes is considered a non-adjusting post
balance sheet event.
34. Ultimate controlling party
As at 31 December 2021, no one entity owns greater than 50% of
the issued share capital. Therefore,
the Company does not have an ultimate controlling party.
Company Statement of Financial Position (registered company
number: 10184316)
As at As at
As at 31 December 2021 20122012 20122012
31 December 31 December
2021 2020
Note GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 4 17 17
Fixed asset investments 5 20,177 117
Loan receivable 7 105 -
Deposits 26 26
20,325 160
Current assets
Trade and other receivables 322 90
Prepayments 52 52
Amounts due from subsidiaries 6 14,311 13,333
Cash and bank balances 8 6,337 2,037
21,023 15,512
TOTAL ASSETS 41,348 15,672
LIABILITIES
Current liabilities
Trade and other payables 9 555 245
Other provisions 11 637
Loan notes 10 404
Non-current liabilities
Loan Notes 10 373 289
Other provisions 11 9,056 -
TOTAL LIABILITIES 11,025 534
NET ASSETS 30,322 15,138
EQUITY
Share capital 11 1,825 1,006
Share premium account 13 44,365 27,758
Merger relief reserve 13 4,756 4,756
Accumulated losses (20,896) (18,592)
Capital redemption reserve 13 46 46
Share-based payment reserve 13 158 96
Convertible loan note reserve 13 68 68
TOTAL EQUITY 30,322 15,138
The Company has taken advantage of Section 408 of the Companies
Act 2006 and has not included a Profit and Loss account in these
separate financial statements. The loss attributable to members of
the Company for the year ended 31 December 2021 is GBP2,306,320
(2020: GBP1,957,617).
The notes form an integral part of these Financial Statements.
The Financial Statements were authorised for issue by the board of
Directors on 30 May 2022 and were signed on its behalf by.
Richard Harpham
Director
Company Statement of Changes in Equity
For the year ended 31 December 2021
Share Merger Capital Share-based Convertible
Share premium relief redemption payment loan note Accumulated
capital account reserve reserve reserve reserve losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended
31 December 2021:
Balance as at
1 January 2021 1,006 27,758 4,756 46 96 68 (18,592) 15,138
Loss for the year - - - - - - (2,306) (2,306)
Issue of shares 819 17,819 - - - 68 - 18,638
Share-based payment
charge - - - - 62 - - 62
Share issue costs - (1,212) - - - - - (1,212)
Rounding 2 2
Transactions with
owners 819 16,607 - - 62 - (2,304) 15,184
Balance as at
31 December 2021 1,825 44,365 4,756 46 158 68 (20,896) 30,322
For the year ended 31
December
2020:
Loss for the year - - - - - - (1,958) (1,958)
Issue of shares 669 3,342 - - - 68 - 4,079
Share-based payment
charge - - - - 29 - - 29
Share issue costs - (301) - - - - - (301)
Transactions with
owners 669 3,041 - - 29 68 (1,958) 1,850
Balance as at
31 December 2020 1,006 27,758 4,756 46 96 68 (18,592) 15,138
The notes are an integral part of these financial
statements.
Notes to the Company Financial Statements for the year ended 31
December 2021
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 is the holding company of the Escape Hunt Group which is is
a global provider of live 'escape the room' experiences through a
network of franchised, licensed and owner-operated branches and
offsite "escape the room" type games.
On 2 May 2017, the Company's name was changed to Escape Hunt
Plc.
On 3rd December 2021, the Company's name was changed to XP
Factory Plc
The Company's registered office is Belmont House, Station Way,
Crawley, RH10 1JA.
2. Summary of significant accounting policies
(a) Basis of preparation
These financial statements have been prepared in accordance with
applicable United Kingdom accounting standards, including Financial
Reporting Standard 102 - 'The Financial Reporting Standard
applicable in the United Kingdom and Republic of Ireland' ('FRS
102'), and with the Companies Act 2006.
These financial statements are prepared under the historical
cost convention. Historical cost is generally based on the fair
value of the consideration given in exchange of assets. The
principal accounting policies are set out below.
The Company has taken advantage of Section 408 of the Companies
Act 2006 and has not included a Profit and Loss account in these
separate financial statements. The loss attributable to members of
the Company for the year ended 31 December 2021 is GBP2,306,309
(year ended 31 December 2020: loss of GBP1,957,617).
The Company has taken advantage of the following disclosure
exemptions in preparing these Financial Statements, as permitted by
FRS 102 "The Financial Reporting Standard applicable in the UK and
Republic of Ireland":
-- the requirements of Section 7:
Statement of Cash Flows
-- the requirements of Section 11:
Financial Instruments
-- The disclosure of the compensation of Key Management
Personnel of the Company
-- The disclosures required by Section 26 Share Based
Payments in respect of Group settled share-based
payments for its own separate financial statements.
The Company produces true and fair consolidated accounts which
include the results of the Company.
(b) 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 Company'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
three year period from the reporting date.
In May 2021, the Company entered into a convertible loan note
facility with one of its then directors, through which the Company
has access to a further GBP1m in funding. The Company is able to
draw down the funds as required. Details of the convertible loan
note facility are given in note 10. This facility was entered into
to enable the Company to continue to support investment in new
sites within its subsidiaries notwithstanding the continued
uncertainty brought about by the COVID-19 lockdown rules. The
facility has not been drawn.
The Company plans to continue to support the roll out new sites
under both the Escape Hunt and Boom Battle Bar brands in the UK
which are expected to contribute to performance in future.
The central case is based on opening a number of new Escape Hunt
and Boom owner operated sites in the UK in line with the Board's
stated strategy. Sites are expected to take a period of time to
reach maturity based on previous experience. The central case does
not assume any further impact from COVID-19. In the central case
the Group does not need to utilise the convertible loan facility
and believes it has sufficient resources for its present needs.
The Company has also considered a 'downside' scenario. In this
scenario the Directors have assessed the potential impact of a
reduction in sales across the group, reduced capacity within the
Escape Hunt UK sites, delays in the opening of sites, cost
increases and a substantial reduction in the pace of roll-out. The
'downside' scenario also considers a further lockdown of one month,
which assumes that government support would be available to cover
site level salaries only The scenario also considers a delay in
progress in the US. In the 'downside' scenario, the Directors
believe there are mitigating actions that can be taken to preserve
cash. Principally the roll-out of further sites would be stopped
and cost saving measures would be introduced at head office. The
Company has previously made significant reductions in its head
office property costs, and further cost reductions could be
targeted in both people and areas such as IT, professional services
and marketing. Other areas of planned capital expenditure within
subsidiaries would also be curtailed. These include planned
expenditure on website and system improvements. Taking into account
the mitigating factors, the Directors believe the Company has
sufficient resources for its present needs, with or without access
to the convertible loan note facility.
Based on the above, the Directors consider there are reasonable
grounds to believe that the Company will be able to pay its debts
as and when they become due and payable, as well as to fund its
future operating expenses. The going concern basis preparation is
therefore considered to be appropriate in preparing these financial
statements.
(c) Fixed asset investments
Fixed asset investments are carried at cost less, where
appropriate, any provision for impairment.
(d) Loans to subsidiaries
Loans to subsidiaries are measured at the present value of the
future cash payments discounted at a market rate of interest for a
similar debt instrument unless such amounts are repayable on
demand. The present value of loans that are repayable on demand is
equal to the undiscounted cash amount payable reflecting the
Company's right to demand immediate repayment.
(e) Foreign currencies
Transactions in foreign currencies are recorded using the rate
of exchange ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated
using the contracted rate or the rate of exchange ruling at the
reporting date and the gains or losses on translation are included
in the profit and loss account.
(f) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, bank balances,
deposits with financial institutions and short-term, highly liquid
investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in
value.
(g) Trade and other receivables
Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
(h) Income taxes
Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
statement of comprehensive income because of items of income or
expense that are taxable or deductible in other years and items
that are never taxable or deductible. The Company's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax is provided on timing differences which arise from
the inclusion of income and expenses in tax assessments in periods
different from those in which they are recognised in the financial
statements. The following timing differences are not provided for:
differences between accumulated depreciation and tax allowances for
the cost of a fixed asset if and when all conditions for retaining
the tax allowances have been met; and differences relating to
investments in subsidiaries, to the extent that it is not probable
that they will reverse in the foreseeable future and the reporting
entity is able to control the reversal of the timing difference.
Deferred tax is not recognised on permanent differences arising
because certain types of income or expense are non-taxable or are
disallowable for tax or because certain tax charges or allowances
are greater or smaller than the corresponding income or
expense.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and
tax laws) that have been enacted or substantively enacted by the
end of the reporting period. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would
follow from the manner in which the Company expects, at the end of
the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Current or deferred tax for the year is recognised in profit or
loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case, the
current and deferred tax is also recognised in other comprehensive
income or directly in equity respectively.
(i) Provisions
A provision is recognised when the Company has a present
obligation, legal or constructive, as a result of a past event and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation, and a reliable
estimate can be made. Provisions are reviewed at each reporting
date and adjusted to reflect the current best estimate. If it is no
longer probable that an outflow of economic resources will be
required to settle the obligation, the provision is reversed. Where
the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the liability. When discounting
is used, the increase in the provision due to the passage of time
is recognised as an interest expense.
The Company has recognized provisions for liabilities of
uncertain timing or amount including contingent and deferred
consideration.
Contingent and deferred consideration
Contingent consideration is consideration that is payable in
respect of acquisitions which is contingent on the achievement of
certain performance or events after the date of acquisition.
Deferred consideration is consideration payable in respect of
acquisitions which is deferred, but is not dependent on any future
performance or events.
The likely value of contingent consideration is estimated based
on the anticipated future performance of the business acquired and
a probability of the necessary performance being achieved. The
expected future value of the contingent consideration is discounted
from the anticipated date of payment to the present value. For cash
settled contingent consideration, the discount rate is the risk
free rate together with the Consumer Price index for inflation. For
Equity settled contingent consideration, the future value is
discounted using the Director's assessment of the company's cost of
equity. The present value is recognised as a liability at the date
of transaction. The implied interest is recognised over the period
between the date of acquisition and anticipated date of payment of
the contingent consideration.
Deferred consideration is recognised as a liability at its face
value at the date of acquisition.
(j) Leases
Assets that are held by the Company under leases which transfer
to the Company substantially all the risks and rewards of ownership
are classified as being held under finance leases. Leases which do
not transfer substantially all the risks and rewards of ownership
to the Company are classified as operating leases. Operating lease
rentals are charged to profit and loss on a straight-line basis
over the period of the lease.
(k) Share- based payment arrangements
Equity-settled share-based payments to employees are measured at
the fair value of the equity instruments at the grant date.
Equity-settled share based payments to non-employees are measured
at the fair value of services received, or if this cannot be
measured, at the fair value of the equity instruments granted at
the date that the Company obtains the goods or counterparty renders
the service. Details regarding the determination of the fair value
of equity-settled share-based transactions are set out in Notes 23
and 24 to the consolidated financial statements.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest, with a corresponding
increase in equity. Where the conditions are non-vesting, the
expense and equity reserve arising from share-based payment
transactions is recognised in full immediately on grant.
At the end of each reporting period, the Group revises its
estimate of the number of equity instruments expected to vest. The
impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
other reserves.
(l) Trade and other payables
Trade and other payables are initially recognised at fair value
and thereafter stated at amortised cost using the effective
interest method unless the effect of discounting would be
immaterial, in which case they are stated at cost.
(m) Share capital
Proceeds from issuance of ordinary shares are classified as
equity. Incremental costs directly attributable to the issuance of
new ordinary shares or options are shown in equity as a deduction
from the proceeds.
(n) Financial instruments
Financial instruments are recognised in the statements of
financial position when the Company has become a party to the
contractual provisions of the instruments.
Financial instruments are classified as liabilities or equity in
accordance with the substance of the contractual arrangement.
Interest, dividends, gains and losses relating to a financial
instrument classified as a liability are reported as an expense or
income. Distributions to holders of financial instruments
classified as equity are charged directly to equity.
Financial instruments are offset when the Company has a legally
enforceable right to offset and intends to settle either on a net
basis or to realise the asset and settle the liability
simultaneously.
A financial instrument is recognised initially at its fair value
plus, in the case of a financial instrument not at fair value
through profit or loss, transaction costs that are directly
attributable to the acquisition or issue of the financial
instrument.
Financial instruments recognised in the statements of financial
position are disclosed in the individual policy statement
associated with each item.
(i) Financial liabilities
Financial liabilities are recognised when, and
only when, the Company becomes a party to the contractual
provisions of the financial instrument.
All financial liabilities are recognised initially
at fair value plus directly attributable transaction
costs and subsequently measured at amortised cost
using the effective interest method other than
those categorised as fair value through profit
or loss.
Fair value through profit or loss category comprises
financial liabilities that are either held for
trading or are designated to eliminate or significantly
reduce a measurement or recognition inconsistency
that would otherwise arise. Derivatives are also
classified as held for trading unless they are
designated as hedges. There were no financial liabilities
classified under this category.
A financial liability is derecognised when the
obligation under the liability is discharged, cancelled
or expires. When an existing financial liability
is replaced by another from the same party on substantially
different terms, or the terms of an existing liability
are substantially modified, such an exchange or
modification is treated as a derecognition of the
original liability and the recognition of a new
liability, and the difference in the respective
carrying amounts is recognised in the profit or
loss.
(ii) Equity instruments
Ordinary shares are classified as equity. Dividends
on ordinary shares are recognised as liabilities
when approved for appropriation.
(iii) Other financial instruments
Other financial instruments not meeting the definition
of Basic Financial Instruments are recognised initially
at fair value. Subsequent to initial recognition
other financial instruments are measured at fair
value with changes recognised in profit or loss
except as follows:
-- investments in equity instruments that are
not publicly traded and whose fair value
cannot otherwise be measured reliably shall
be measured at cost less impairment; and
-- hedging instruments in a designated hedging
relationship shall be recognised as set out
below.
(o) Merger relief
The issue of shares by the Company is accounted for at the fair
value of the consideration received. Any excess over the nominal
value of the shares issued is credited to the share premium account
other than in a business combination where the consideration for
shares in another company includes the issue of shares, and on
completion of the transaction, the Company has secured at least a
90% equity holding in the other company. In such circumstances the
credit is applied to the merger relief reserve.
In the case of the Company's acquisition of Experiential
Ventures Limited, where certain shares were acquired for cash and
others on a share for share basis, then merger relief has been
applied to those shares issued in exchange for shares in
Experiential Ventures Limited .
(p) Government Grants
Grants relating to revenue are recognised on the performance
model through the consolidated statement of comprehensive income by
netting off against the costs to which the grants were intended to
compensate. Where the grant is not directly associated with costs
incurred during the period, the grant is recognised as 'other
income'. Grants relating to assets are recognised in income on a
systematic basis over the expected useful life of the asset.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company's accounting policies, which
are described in Note 2, management is required to make judgements,
estimates and assumptions about the carrying values of assets and
liabilities that are not readily apparent from other sources. The
estimates and underlying assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
The key sources of judgment that have a significant effect on
the amounts recognised in the financial statements are described
below.
Impairment of fixed asset investments and amounts due from
subsidiaries
As described in Note 2 to the financial statements, fixed asset
investments are stated at the lower of cost less provision for
impairment. The present value of loans to subsidiaries that are
repayable on demand is equal to the undiscounted cash amount
payable reflecting the Company's right to demand immediate
repayment.
At each reporting date fixed asset investments and loans made to
subsidiaries are reviewed to determine whether there is any
indication that those assets have suffered an impairment loss. If
there is an indication of possible impairment, the recoverable
amount of any affected asset is estimated and compared with its
carrying amount. If estimated recoverable amount is lower, the
carrying amount is reduced to its estimated recoverable amount, and
an impairment loss is recognised immediately in profit or loss. The
Directors have carried out an impairment test on the value of the
loans due from subsidiaries and have concluded that no further
impairment provision (2020: GBPNil) is required to write down the
loans to their estimated recoverable amount.
If an impairment loss subsequently reverses, the carrying amount
of the asset is increased to the revised estimate of its
recoverable amount, but not in excess of the amount that would have
been determined had no impairment loss been recognised for the
asset in prior years. A reversal of an impairment loss is
recognised immediately in profit or loss.
The investments in and loans to subsidiaries are supported by
the intangible assets in the subsidiaries, most notably
intellectual property and franchise agreements as well as tangible
fixed assets, cash and receivables.
The Company tests the receivables and intangible assets for
impairment only if there are indications that these assets might be
impaired. The Company considers that there are no such indications
of impairment and impairment testing has not been performed.
Accordingly, the Company considers that the value of investments in
and loans to subsidiaries are not impaired.
Estimation of the debt and equity components of Convertible Loan
notes
Debt securities which carry an option to convert into equity
accounted for as a debt component and an equity component.
Management are required to estimate the split by valuing the
underlying debt with reference to a similar debt instrument which
has no conversion rights and / or by reference to the value of the
option inherent in the conversion right. These calculations involve
the estimate of a number of key components such as appropriate
interest rates, the expected volatility of the company's share
price, the company's future dividend policy, and the likelihood and
future date of conversion. On 2 July 2021, the company issued
GBP340,000 convertible loan notes repayable on 3 July 2025 if not
previously converted or redeemed. Management have estimated that
GBP272,251 of the principal related to the debt component and
GBP67,749 related to the equity component.
Estimation of share base payment charges
The calculation of the annual charge in relation to share based
payments requires management to estimate the fair value of the
share-based payment on the date of the award. The estimates are
complex and take into account a number of factors including the
vesting conditions, the period of time over which the awards are
recognized, the exercise price of options which are the subject of
the award, the expected future volatility of the company's share
price, interest rates, the expected return on the shares, and the
likely future date of exercise. A new executive scheme was
established during the year ended 31 December 2021 and awards were
made under the scheme, details of which are set out in note 26.
Management has estimated the annual charge related to the awards
made in the year to 31 December 2021 to be GBP25,611 and recognized
this charge accordingly
Contingent consideration
Where acquisitions include an element of consideration which is
contingent on the performance of the business acquired, an estimate
is made of the amount which the Directors believe will become
payable based on the anticipated performance of the business
acquired and the probability of the performance requirements being
met. Where these amounts are significant, the estimated total
contingent consideration is discounted back to the present value at
the date of acquisition using the risk free rate of interest and
the consumer price inflation index at the date of acquisition for
cash settled contingent consideration and the Directors' estimate
of the cost of equity for equity settled contingent consideration.
The discounted value is recognised as part of the consideration.
The implied interest is recognised in the period between
acquisition and the expected date of payment of the contingent
consideration.
4. Property, plant and equipment
Furniture
Computer equipment and fittings Office equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2020 21 22 15 58
Additions 1 5 - 6
At 31 December 2020 22 27 15 64
Additions 16 - - 16
Disposals (6) (18) (1) (25)
At 31 December 2021 32 9 14 55
Accumulated depreciation
At 1 January 2020 15 9 8 32
Depreciation charge
for the year 5 5 5 15
At 31 December 2020 20 14 13 47
Depreciation charge
for the year 3 2 2 7
Disposals (5) (1) (1) (17)
At 31 December 2021 18 6 14 38
Carrying amounts
At 31 December 2021 14 3 - 17
At 31 December 2020 2 13 2 17
5. Fixed asset investments
As at As at
Investments in subsidiary 31 December 31 December
undertakings 2021 2020
GBP'000 GBP'000
Balance brought forward 117 1
Additions 20,060 116
Balance at end of year 20,177 117
-------------
The Company's investments comprise 100% holdings in the issued
ordinary share capital of the following companies:
-- Escape Hunt Group Limited
-- Escape Hunt Franchises Limited
-- Escape Hunt IP Limited
-- Escape Hunt Innovations Limited
-- Escape Hunt USA Limited
-- Escape Hunt USA Franchises Limited
-- Escape Hunt Entertainment LLC (registered in Dubai)
-- BGP Escape France
-- BGP Entertainment Belgium
-- Boom BB One Limited
-- BBB Seven Limited
-- BBB UK Trading Limited
-- BBB Seventeen Limited
-- BBB Franchise Limited
-- BBB Thirteen Limited
-- BBB Ventures Limited
-- Boom BB Two Limited
-- BBB Sixteen Limited
-- BBB Six Limited
-- BBB Eleven Limited
-- BBB Fifteen Limited
-- BBB Twelve Limited
-- BBB Three Limited
-- BBB Fourteen Limited
No impairment provision has been made against the investments in
subsidiaries.
Note 13 to the consolidated financial statements contains
further information on the Company's holdings in subsidiaries
including their activities and address of registered office.
6. Amounts due from subsidiaries
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Gross receivable 23,333 21,660
Provision made in prior years (10,000) (10,000)
-------------
Balance brought forward at beginning of
year 13,333 11,660
Amounts advanced 978 1,673
Balance at end of year 14,311 13,333
------------ -------------
The amounts owing from subsidiaries are unsecured, interest-free
and repayable on demand. The amounts owing are to be settled in
cash. The present value of amounts that are repayable on demand is
equal to the undiscounted cash amount payable reflecting the
Company's right to demand immediate repayment.
7. Loan to master franchisee
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Balance brought forward - 300
Trading balances converted to loan 47 31
New loans recognised 105 -
Provision against balance (47) (331)
Balance carried forward 105 -
The loan to the Norway master franchisee is unsecured, bears
interest at 5% per annum plus 2% of the franchisee's revenues.
During the year, the repayment terms of the loan were deferred and
the a repayment plan was set which would result in the loan was
agreed to be being repaid in instalments between July 2021 and
October 2023. The amounts owing are to be settled in cash.
The majority of income receivable under the terms of the loan
relates to interest at a fixed rate. The valuation of this loan
also takes account of the expected income under the revenue share;
however, the impact of this estimate is not significant to the
valuation.
8. Cash and cash equivalents
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Bank balances 6,337 2,037
Cash and cash equivalents 6,337 2,037
------------
9. Trade and other payables
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Trade payables 104 65
Accruals 363 142
Taxes and social security 84 36
Other payables 3 1
Amounts due to subsidiaries 1 1
555 245
------------
The amounts owing to subsidiaries are unsecured, interest-free
and repayable on demand. The amounts owing are to be settled in
cash.
Accruals includes an amount for the audit of the parent
financial statements for the year ended 31 December 2021 of
GBP25k.
The directors consider that the carrying amounts of amounts
falling due within one year approximate to their fair values.
10. Loan Notes
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Amounts due within one year
Loan notes 401 -
Rolled up interest on vendor 3 -
loan notes
404 -
Amounts due in more than one
year:
Vendor loan notes 43
Rolled up interest on vendor
loan notes 2
Convertible loan notes 272 272
Rolled up interest on convertible
loan notes 56 17
As at end of period / year 373 289
------------ ------------
On 1 July 2021, the Company issued GBP340,000 convertible loan
notes ("Notes"). The Notes are unsecured and interest rolls up at a
fixed rate of 10 per cent. per annum. The Notes are repayable in
full on 2 July 2025, inclusive of rolled up interest, although they
may be prepaid in whole or in part at the Company's discretion
after the period of 18 months from the date of issue, provided that
the holders of the Convertible Loan Notes will first be given the
opportunity to serve notice to convert their respective Notes and
unpaid interest into new Ordinary Shares.
The Notes are convertible at the election of the holders of the
Notes at any time up until and including the date of repayment at
the price which is the lower of 9 pence for each new Ordinary Share
or the placing price of the most recent placing by the Company of
new Ordinary Shares prior to conversion.
At the date of issue, the Company determined that GBP272,251 of
the principal related to the debt component of the loan note with
the balance of GBP67,749 be classified as the equity component of
the convertible loan note. This gives an effective underlying
interest rate on the Notes of 13.4% per annum.
Application will not be made for the Convertible Loan Notes to
be admitted to trading on AIM or any other exchange. The Company
has adequate authority to issue the maximum number of new Ordinary
Shares which could result from the conversion of all the Notes. Any
new Ordinary Shares arising on conversion will rank pari passu with
the Ordinary Shares in issue at that time and application for
admission to trading on AIM will be made at the appropriate
time.
EUR100,000 vendor loan notes were issued on 9 March 2021 as part
of the consideration for the acquisition of the French and Belgian
master franchise. The notes carry interest at 4 per cent per annum
and are repayable, together with accrued interest, in two equal
tranches on the first and second anniversary of issue.
GBP360,000 vendor loan notes were issued on 22 November 2021 as
part of the consideration for the acquisition of Boom Battle Bars.
The notes carry interest at 5 per cent per annum and are repayable,
together with accrued interest, on the first anniversary of
issue.
Convertible Loan note facility
The company has entered into a Convertible Loan Note facility
with John Story, a former non executive director. Under the terms
of the facility, John Story has undertaken to subscribe for up to
GBP1m in convertible loan notes, subject to receiving a drawdown
notice from the company. The principal terms of the notes are as
follows:
-- The term of the Convertible Loan Note facility is
from the date of issue to 30 June 2023
-- The notes can be issued in denominations of GBP50,000;
-- The notes can be issued by the company at any time
during the term, subject to providing 10 days notice
of a drawdown; John Story has undertaken to subscribe
for up to GBP1m principal notes
-- The notes carry a 7 per cent coupon, payable quarterly;
-- the notes are repayable on 30 June 2023 if not previously
repaid or converted
-- The Noteholder has the right to convert the notes
into ordinary shares on a Conversion Date
-- A Conversion Date is any date on which the company
undertakes an equity issue for cash comprising 5 per
cent or more of the company's issued share capital;
30 June 2022; or 30 June 2023
-- The notes are convertible at the issue price of any
new equity raise undertaken before 30 September 2021
subject to a 2 per cent early redemption fee; or at
a 10 per cent discount to any new equity raise undertaken
after 30 September 2021 but before 30 June 2023
-- If converted on 30 June 2022 or 30 June 2023, the
conversion price is calculated as a 10 per cent discount
to the volume weighted average trading price of the
shares in the 30 days before the conversion
-- The notes are unsecured.
As at 31 December 2021, the Convertible Loan Note facility
remained undrawn.
11. Provisions
The following provisions have been recognised in the period:
Year ended Year ended
31 Dec 31 Dec
2021 2020
GBP'000 GBP'000
Provision for contingent consideration 9,056 -
Provision for deferred consideration 637 -
Total 9,693 -
------------- -------------
Provisions represent future liabilities and are recognised on an
item by item basis based on the Group's best estimate of the likely
committed cash outflow. No amounts have been used or reversed
during the year.
The value of the contingent consideration has been estimated
using a share price of 35.8p per XP Factory share, being the share
price on 23(rd) November 2021, the date that the Acquisition of
Boom Battle Bars completed, and assuming all 25,000,000 shares
potentially due under the provisions of the sale agreement are
issued. The valuation is considered a level 2 valuation under IFRS
13, indicating that it is a financial liability that does not have
regular market pricing, but whose value can be determined using
other data values or market prices. The future value of the
contingent consideration, which is due to be settled on completion
of the audit for the group for the year ended 31 December 2022
(assumed to be 18 months after the acquisition) has been calculated
using a cost of capital of 13.7 per cent and an implied share price
of 43.4 pence per share. The difference between the fair value at
acquisition and the future value will be recognised as a finance
charge over the 18 months between the date of acquisition and the
expected date of settlement as set out below.
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Fair value of contingent consideration at 8,950 -
acquisition
Financing charges recognized in the year 106 -
to 31 December
Provision for contingent consideration as at 9,056 -
31 December
------------ ------------
The ageing of provisions can be split as follows:
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
Within one year 637 -
After more than one year 9,056 128
9,693 128
------------ ------------
12. Share capital
Details of the Company's allotted, called-up and fully paid
share capital are set out in Note 22 to the Consolidated Financial
Statements.
13. Reserves
The share premium account arose on the Company's issue of shares
and is not distributable by way of dividends.
The merger relief reserve arises from the issue of shares to by
the Company in exchange for shares in Experiential Ventures Limited
and is not distributable by way of dividends.
The share-based payment reserve arises from the requirement to
value share options and warrants in existence at the year end at
fair value (see Notes 24 and 26 to the Consolidated Financial
Statements).
The convertible loan note reserve represents the equity
component of the convertible loan notes on the date of issue.
The capital redemption reserve has arisen following the purchase
by the Company of its own shares pursuant to share buy-back
agreements and comprises the amount by which the distributable
profits were reduced on these transactions in accordance with the
Companies Act 2006.
14. Share based payments
Details of the Company's share options and warrants are
contained in Notes 24 and 26 to the Consolidated Financial
Statements.
15. Segment information
Operating segments are identified on the basis of internal
reports about components of the Company that are regularly reviewed
by the Board. 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 the
completion of the acquisition of Experiential Ventures Limited and
its subsidiaries, the Company became the holding company of the
Group. Its subsidiaries provide live 'escape the room' experiences
through a network of franchised, licensed and owner-operated
branches and offsite "escape the room" type games.
The Company has one segment, namely that of a parent company to
its subsidiaries. Accordingly, no segmental analysis has been
provided in these financial statements.
16. Employees
Year Year
Ended Ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Wages salaries and benefits (including
directors) 1,048 874
Share-based payments 52 24
Social security costs 126 108
Other post-employment benefits 6 13
Less amounts capitalized (56) (87)
Less amounts received under the
CJRS scheme (70) (56)
3,802 2,138
------------ ------------
The average monthly number of employees including directors was
as follows:
Year ended Period ended
31 December 31 December
2021 2020
No. No.
Management 3 3
Administrative 10 8
13 11
------------ -------------
17. Related party transactions
The only key management personnel of the Company are the
Directors. Details of their remuneration are contained in Note 7 to
the Consolidated Financial Statements.
Details of amounts due between the Company and its subsidiaries
are shown in Notes 6 and 9 above.
Details of the convertible loan note facility entered into with
John Story, who was a director during the year, are set out in note
10.
18. Subsequent events
Convertible Loan Notes
In early January, the Company received a Noteholder Notice of
Conversion in relation to all of its outstanding Convertible Loan
Notes. As a result, 4,378,082 new ordinary shares were issued on 2
February 2022 at 9.0p per share in respect of the principal amount
and rolled up interest on the Convertible Loan Notes. The
conversion of the loan notes is considered a non-adjusting post
balance sheet event.
19. Contingent Liabilities
For the financial year ended 31 December 2021, the below
subsidiaries are exempt from the requirements stipulating that they
be audited since they fulfil all the conditions for exemption under
section 479A of the Companies Act 2006.
Boom BB Two Limited
BBB Three Limited
BBB Six Limited
BBB Eleven Limited
BBB Twelve Limited
BBB Fourteen Limited
BBB Fifteen Limited
BBB Sixteen Limited
The outstanding liabilities at the balance sheet date of the
above subsidiary undertakings have been guaranteed by XP Factory
Plc pursuant to s479A to s479C of the Companies Act 2006. The
aggregate liabilities of these subsidiaries at 31 December 2021 was
GBP15,634.
20. Ultimate controlling party
As at 31 December 2021, no one entity owns greater than 50% of
the issued share capital. Therefore, the Company does not have an
ultimate controlling party.
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END
FR ZZGFKFGMGZZZ
(END) Dow Jones Newswires
May 31, 2022 02:01 ET (06:01 GMT)
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