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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.
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 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/
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 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
At this market cap they are valued at net assets, so it won’t take much of an increase in net profit (not ebitda) to shift the price of this company.
The reason I’ve mentioned capex a lot is because it’s not an income statement item therefore ebitda will never be accurate for this sort of business.
When I’m talking cashflow I’m talking pure bottom line, and this year has seen debt go up and net cash drop to £0mil. Scale should improve that and once it does it’ll likely attract a lot more attention.
But if you think my comments are “keeping the share price low” then you are deluded, as none of us on these bulletin boards have any influence over the share price of a business
Yeah too many adjustments … like £2.3M depreciation !
Keep going chaps, you are both just showing your pure ignorance.
What bit do you not agree with?
That they manage the December cash position?
That they manage how they report EBITDA?
That it’s a capital intensive business?
That profit is important?
Not saying that the company isn’t interesting but simply growing the top line is not the full story.
And the full story will influence the share price.
Otherwise you may as well curl up in a ball like a HedgeHog — eyes closed to the world around
PippLongStockin - Have you not read or understood my posts?
I categorically addressd your accusation about the December Cash position - not managed at all, all very normal and it is not even their year end anymore
I do not agree that it is a capital intensive business - it's all relative, it depends what are you comparing it agains. Far less capital intenive vs Miners, Manufacturers, Mobile phone Networks and many tech businesses. (i could go on...)
I dont see your point about 'managing' EBITDA
Profit is important - they are many metrics that measure profit. EBITDA is one, as is Gross Margin as is Net profit. They all offer different perspectives. My point is Private Equality will be more focussed on EBITDA which offers a better view of how a company performed in eth current year. Let's foe one moment assume XP paid twice as much as they did from Boom - that would impact net profit but it's history now and is irrlevant.
What is important now is: The cash generation, goring the business, growing EBITDA
You seem to just keep spurting out the same stuff without acknowledging the points I have made
Bottom line, there’s no better company to do well in the leisure industry when the market recovers. Interest rates likely to drop in summer. And the stock market is forward thinking. Name me one better leisure company that will benefit when the market recovers? Amazing growth, double digit lfl growth. These boom and sites haven’t been open that long?! Imagine another 12-18months of traction compounded with their market leading reviews and growth in corporate sales.
Why are people listening to these ppl trying to control this negative narrative. It’s mental! Even Paul Scott has allowed himself to be swayed. I just listened to his podcast and he had contact from the ceo and cfo having to correct him on some of his comments and FairPlay he apologised and acknowledged he got it wrong. And even suggested he may buy back in.
These numbers have been during a cost of living crisis, interest rates rising, train strikes. Having to contend with Covid, war in Ukraine, the aim market on its knees. This company has only done one fundraise and that was for rapid growth. It hasn’t done one fundraise since! We should be championing what a fantastic performance these guys have done in this new and exciting market - experiential leisure and clearly that market is still growing. I have no doubt this will have an epic recovery… if it doesn’t get bought out before then.
The depreciation comments just show how desperate they’ve become.
I wouldn’t take it as far as to say they are desperate adjusting the depreciation. But it is a sleight of hand trick to paint the EBITDA picture you crave. No one denies the growth but don’t expect the SP to shoot up until the make some actual profit… unless one of those PE buyers come in.
Take the blinkers off and look at the full picture.
This company may make it but has a way to go yet.
Bottom drawer and wait for next year
It is desperate. Explain to me why the change in depreciation is a problem? Their explanation is perfectly reasonable. They have a better understanding of life cycles of games for example and upped them from 2 to 5 years. If you read singers broker note they said exactly that. Singers broker note also said; “This amounts to depreciation (non-IFRS16) at 6% of sales vs 12% historically. We welcome this move given the previous policy was aggressive and brings XPF in line with peers Hollywood Bowl at 5% and Ten Entertainment at 6%.“
In itself it isn’t particularly. But when you consider operating profit from £44m revenues was £1.4m and the depreciation adjustment was £2.3m then that decision swung it from operating loss. Then financing costs come off to make PBT a loss… So it’s a bit of smoke and mirrors to paint a positive picture.
What it really does is demonstrate the tightrope they walk to generate a return from their assets before they need to be renewed. Because they need the cash to reinvest to drive the top line and this is while they are careful not to push through pricing —- because they need to fill their capacity to make the economics work.
Which for me just shows they ain’t going to be a money printing machine anytime soon.
It is part of a picture that demonstrates how hard it is to be a profitable leisure business.
Doesn’t mean they haven’t done a decent job, doesn’t mean it can’t succeed…. But not an easy one for them to do —- they need a bunch more sites yet
But how is it smoke and mirrors? They’ve explained the change and it’s perfectly acceptable. So why suggest that change is the reason they’re in operating profit? They understand the lifecycles of the games more accurately for example. Do you get what I’m saying? You’re suggesting that they did that on purpose to put them into an operating profit when that simply isn’t the case.
You say it’s hard to make profit in the leisure industry. And I completely agree it’s been difficult. Hence why you have to give Xpf a lot of credit for what they’ve achieved in such tough times. BUT interest rates will fall this summer. Inflation is dropping. We’re in for an epic recovery in aim and the leisure industry and I believe Xpf is the best positioned leisure company to benefit from this. Can you name me a better one?
maimus and wavecrest - i'm in complete agreement with you both
sadly, it is just derampers fabricating a storm in a teacup.
i believe we are invested in a very special company - it has acheived everything it said it would in the years that i have followed it. and it has achieved this at a time when the economy has put so much pressure on small businesses.
i cannot emphasise enough how important their people are - people are such a key asset and seeing the culture, the energy and the creativity from their team in the field continues to blow me away. this is testament to a good leadership team.
the majority of customer reviews are great - happy customers, happy employees - a ****tail for success