The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
I merely state the obvious —- profit is important. EBITDA is interesting…. But can only drive the SP on its own so far….
By its very nature this is a capital intensive business and I only point out the depreciation not to show the long asset life but the accounting change…
The only thing that isn’t transparent is the book keeping
Its very obvious there are a couple of people who are shorting and / or have reasons to want the share price to stay low...
Attempts to undermine the investment opportunity is very transparent.
Ironically, on one hand you raise the fact that the asset life is now considered longer - yet then youargue against yourself and say its capital intensive.
The company already have about 80 venues - most on very favourable lease terms, all kitted out with 5-6 life in them.
If they chose not to grow and just spend £1-£2m on keeping them fresh per annum - the company will be delivering c£10m Revenue and £10m Free Cash Flow per annum.
I mean no offense, my i genuinely think some people are deluding themselves here.
Let me try and explain the value here....(for those who seemingly are spooked by depreciation and the movmenet between EBITDA and Net Profit)
XP have raised £37m since 2017
XP have been cash generative from operations since 2021 and not needed to raise further - generating appro £13m operating cash surplus so far
So XP have invested £50m in their assets - which in 2024 will deliver EBITDA and Cash of >£10m
The depreciation is just a way of spreading a lot of that £50m across the years - but it's already been spent and not a issue for XP Factory. They just need to focus on growing the business and keeping the estate fresh - some of that will be CAapex and a lot will be Opex.
I'm BUYING all day long a successful, popular and innovatibe business that is growing profitably and rapidly with 80 great venues - all still delivering L4L growth!!
A business built with £50m (and remember some of that was raised in 2017-19 - and think about the time-value of money) is now available at £25m - not to mention all the added vaue through it's brand journey so far
DYOR
I am very confident they are growing profitably
Central costs are not excessive and they will only reduce now as a % of earnings
Read this - talks about waht Private Equity are looking for.... EBITDA, GROWTH being the biggies
https://www.forbes.com/sites/davidwmccombie/2022/05/16/private-equitys-playbook/
EBITDA is one thing but needs to make a profit at the end of the day. Too much central costs & not enough actual profit for a capital intensive business. That can come from growth or cost saving initiatives or consolidation with other players. But I think SP will follow up any of these
I have followed X Factory for about 4 years - dating back to the days when it was just Escape Hunt
Its currently valued at a an 18 month low; valued at £25m which ionly 3x EBITDA.and valued at at c 1.5x forward EBITDA.
However with less than 10% of shares in public hands this companies shares are quite illiquid; the SP has been worked lower from one seller / shorter but I do not for one moment beleive that the small number of shareholders who own 90% of the company value the company so low - my guess is that they already see it having a triple digit market value. We'll find out if somebody wants to buy the company very quickly - and if that does not come in 2024 I think we are seeing the momentum change (at last)
I've read so many people's 'opinions' on this share - many very bullish and many who have let the SP performance put them off.
IMO - XP Factory is one of a number of UK listed companies that is stupidly cheap. I'd bet my last dollar that their are foreign suitors circling....
This is a potential 10 bagger in my book - I'm expecting to see double digit Net profit within 2-3 years and EBITDA to excced £20m in the same period. Combining the profitable growth and a more bullish UK market i can easily see this exceed £100m mCAP.
Good luck to all holders (although most won't be reading this as 55% with IIs, and another 35% wih private companies, 2x high net worth individuals and Hedge funds.
Here is the Link to the Richards Interview
https://www.youtube.com/watch?v=JEnCMTGXRLU
And we get another formal, detailed interview this week which I am very much looking forward to .
Ofcourse the cash is being eaten up by CAPEX - That is their stated strategy.
This compnay will continue to use its increasing operating cash flow to invest back in the business - i suggest you take a listen to Richard's interview with Vox Markets.
XP generated (through operations) +£3m in 2022, +£9.5m in FY23 and i expect it to be at least £15m in 2024. It will then use this cash to invest in new venues and improve existing ones - and will maintain a cash balance of c£3m based on recent updates.
PippyLS
You are correct to point out the depreciation change - but is is both very normal and 'required' for accountants and auditors to review depriation and amortisation policy on an annual basis.
ON the other side of things, FY22 benefited from a one off +£6.2m fair value adj. So the YOY improvment in profitability is bigger than than it looks.
New Profit is a historical measure because it relies on assumptions around depreciation and valuation of assets etc. That is why most compnaies focus on EBITDA and Cash which is a good indicator of how the compnay performs in a 1 year time frame.
EBITDA more than double in 2023 amd I expect it to double again in the 12mth to March 2025 by 60-70%. And operating cashflow to show a similar growth which will allow them to grow more quickly
Thanks pippi, that makes sense, 5 year rolling capex would be less than the initial on new fittings.
As for the other post, I’m here to discuss, call it a deramp, whatever, I’m here to have an open conversation. Currently
I’m not seeing the cash generation that the ceo is, and I expect neither is the market.
If it comes, then I would expect a big rerate and that’s the inflection point I’m waiting for. But currently all cash is being eaten by capex.
Questionable post in the last 24 hrs from Hitthattarget - It's very tenuous and not fabricated. They claim not to be invested, so why come onto this forum and try and post a sly, subtle, thought through de-ramp.
The Truth on Cash - XPF is cash generative and growing quickly - Cash generated from Operating activities increase by over 200% from £3.2m to £9.5m. I expect this to increase to c£15m in the next 12mth period (12mth to March 2025)
The company will then 'cut it's cloth' accordingly and invest in the business. Richard explained that they are very data driven when making investment decisions; the ROI on a refit may be higher than a new venue. It looks like the company are keen to maintain a £3m+ bank balance
Let's address the strange comments fro "Hitthetarget":
Quite ludicrous to suggest the company are massaging their numbers - ALLcompanies will make an effort to deliver / exceed their cash target towards year end. (Regardless, Dec 2023 is no longer their year End - so it was just BAU)
Their trade payables have indeed increased from £1.8m to £3.2m; an increase of 70%. This is ABSOLUTELY NORMAL and if anything slightly lower than i would expect. Their cost of sales have doubled from £8.1m to £16m. They will have 30/60 or 90 day terms so an increase in trade payables of 70% is absolutely NORMAL.
XP benefited from a reduction in Trade Recievables in 2023 by +£1.1m. This is really good news and shows they are collecting cash quicker - this wil be related to the Corporate bookings where they get a purchase order. It may also have reduced perhaps because they may have changed their payment policies and ask more groups to pay on the day.
There is NOTHING unusual about the XP cashflow - it looks normal and it looks very efficient.
My take on this —- they have focussed on affordability and as such put efforts into making existing sites as efficient as possible, building out capacity where possible. This is working at top line and makes it cash generative as well…. But they need to run it this way for a while as they don’t want capital intensive refits anytime soon… if you take off £2.3M to account the depreciation change then they were lower profit year on year… so yes they are massaging the numbers again… but think the overall strategy is the right one…. Keep it affordable and careful capex allocation
This was in the RNS….
The Board has re-assessed the useful life of certain of the Group's fixed assets, notably games and leasehold improvements. Previously, games in both Escape Hunt® and in Boom Battle Bar® were depreciated over two years, whilst leasehold improvements were depreciated over five years. The success of the early Escape Hunt sites which have continued to show strong like for like growth with the original games installed over five years ago, has provided strong evidence that the policy for games was aggressive. The games are regularly maintained with maintenance costs expensed as incurred. The Board has therefore re-assessed the useful life of games to be five years for games in both Escape Hunt® and Boom. Similarly, the leasehold improvements were being depreciated over five years on the basis that the original Escape Hunt® leases had five-year break clauses. Boom sites generally have break clauses after ten years and the success of Escape Hunt® has given confidence that the useful life of leasehold improvements is expected to be at least ten years. The change is regarded as a change in estimate rather than a change in accounting policy. As such, no change has been made to prior year numbers, but depreciation in the twelve months to 31 December 2023 reflects the new estimates. The impact in the current period has been a reduction in depreciation of approximately £2.3m compared to what would have been charged under the previous estimates.
Yes, that’s a fair point, shouldn’t be long now until an update comes on the new year end.
Any thoughts on what capex will look like on an ongoing basis, I.E. how regularly buildings will be refurbed?
See your point but this isn’t year end so let’s see how 31st March looks
First things first, I don’t have shares in XPFactory, I’ve followed it for a while and wanted to see what discussions were taking place following the results.
Everyone is bullish, but I might have an answer for why the price has gone down.
Cash at bank has increased by £1.2mil, but receivables have dropped by £0.7mil with trade payables going up by £1.3mil. So that’s a £2mil massaging of the numbers, I.E. holding off paying suppliers and trying to get receivables in at year end.
I believe the cash is artificially high due to this and should sit nearer to £2mil.
Based on this, and these sort of business being capex heavy, I don’t think the cashflow is as good as management make out.
Happy to have a sensible back and forth on here, if this turns into a typical “he’s negative therefore let’s chase him off the board” then I’ll happily comply, but I’m hoping for some proper discussion as to why I’m wrong with my numbers and that I’m missing something
My opinion - Great compnay, worth far more than the SP currently suggest
And that is my sentiment too. Unfortunately,.............. well, no need to repeat myself.
Exactly Cheers1
Their RNS talks a lot about 'Operational Leverage'
In Nov/Dec they are able to significantly increase revenue without needing to signifcantly increase cost
Christmas Party season - increases footfall + Increase average stay time + Increase rate on food / group deales
Better utilisation of assets - In the winter they are well positioned to get daytime corporate events in both brands - meaning they can signifcantly increase the daily footfall
Year end was changed as a large percentage of sales occur in December which makes it very difficult to forecast with a Dec 31 y/e and keep the market aware of progress.
Difficult to see this share staying at this level, given the apparent good results.
Can someone tell me why they decided to change the year end ?
The shares are very illiquid, only 15000 traded yesterday, which always lead to a share drifting down to extreme low levels.
Hopefully at the new yearend we can see proper full year profits. Hopefully that should start the climb in the shareprice.
It would be ideal take over candidate. Can see it being a nice fit with Hollywood Bowl,
Those who have got short positions will be looking to close I imagine if they have not already
I hope they dont though - would much prefer to see them burnt when (and If) an offer comes in :-)
My holding and my average is my business
Say what you like - but I've done nothing my post facts about the company and share some broader insight as I follow them closely
You can't blame a stock exchange for this compnay's share price.
Share prices move due to supply and demand. I think it is highly relevant who holds the shares - Most of the holders of the 90-95% shares (Those with >3% and directors) have to notify the market if they buy or sell. We've seen no RNS showing any reductions in holdings since Dec 2021.
My point is that 95% of the holders and me are happy holding this share
I cannot be sure why the share price is not much higher - but looking at some of the trades in recent days, there were some big 500k blocks that looks like a short position being closed. Hence why I would say that this share has been kept low through shorting.
My opinion - Great compnay, worth far more than the SP currently suggest
You, yourself, HH are full of sh17! It don’t matter who or what II’s are invested here as the stock is considerably down In 12 months. I need a 50% months increase from here just to breakeven. I would suggest that you need more than that. So, are u invested or just paid to pump?
Regardless of shorters, my gripe has been with the AIM in general and not the company.
So, are you invested? Y how much are you down?
Prey tell.
If you are invested Billybamboozle (which i doubt you are) you are a very poor investor.
Nothing has changed in 12mths from an adverse perspective - the company has done everything it said it would and more; 12mths ago they would not have predicted the l4l growth to be quite as strong
So if you genuinely did invest 12mth ago - i find it very strange to see you having to post multiple messages on here quite so regularly saying how corrupt things are and suggesting other investors should stay away.
We all know your game - this forum is full of scummy posters like you
The TRUTH is, c95% shares are held with he following - Not a single share has been sold by any of these holders since the start of 2022
55% of shares are in the hands of IIs
16% with private companies
9% with Hedge Funds
14% with two large individual investors John Story (8.7% including 5% through soread bets) and Stephen Lucas (4.9%)
1.6% with current directors
These holders are going nowhere - the current SP is in no way reflective of the company's progress in the last 18mth - it's just a output of a small number of shares changing hands and shorters
Would love to see forward earnings update.
At &23m market cap … if can get to £5m profit it will be less than 5 times
HH. I am invested and been here for exactly 12 month.
I would suggest that if you’re invested here (are you?) then you are probably down way more than me as you have been here longer than me and probably paid more than me.
So, how much longer are you going to pump up this company? I bet you wish you hadn’t purchased this stock when you did, if you did. I wish I hadn’t.
How long are we going to have to wait to get our money back? How long is a piece of string?