Shore Capital Broker Note26 Jan 2022 09:19
Shore Capital Stockbrokers
XP FACTORY+ (XPF, House Stock at 28p) –Positive FY21F trading update
We are most encouraged by XP Factory’s (XPF) trading update for H2 FY21F, which states that it expects to deliver a positive Group EBITDA (excluding R&D credits) in H2, ahead of City expectations. Following the completion on 23 November 2021 of the acquisition of the strategically-important Boom Battle Bar, owner-operated and franchised new sites have opened and are continuing to open, in line with expectations across both formats. We also note the £1.5m R&D grant XPF received in January 2022, which has bolstered the cash position. Ahead of the final results, we maintain our forecasts and reiterate our view that the site rollout being pursued will deliver a highly profitable and cash-generative experiential leisure group in due course. House stock.
Strong trading in H2 FY21F for Escape Hunt –Trading within the Escape Hunt network bounced back strongly after H1 21 and significantly exceeded the Board’s original expectations. In H2 21F, XPF expects £5.1m revenue from its owner-operated sites (133% up on the pre-pandemic H2 19 and site level EBITDA to exceed £2m in H2 (340% ahead of H2 19). This was driven by the enlarged estate, underlying like-for-like growth and improved margins.
Boom Battle Bar proceeding in line with plans-Since the acquisition, significant progress has been made in the development of the network with The O2 opening as an owner-operated site in December, and Wandsworth and Coventry opening as franchises. Eight additional sites (including two owner- operated) currently have building underway.
Investment case is intact–With the Group expected to show a positive adjusted EBITDA for H2 21, we believe that management’s strategy to build an experiential leisure group is being vindicated. Assuming sites continue to open in line with expectations we expect further strong pre-IFRS 16 EBITDA progress in FY22F, as detailed in our forecasts below. House stock.
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