XP Factory (LSE:XPF) — 2021 Interim Results

0:01 Good morning, ladies and gentlemen. Welcome to the Skate Pump PLC Investor Presentation for the 2021 Interim Results. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and could be submitted any time via the Q and A tab situated on the right hand corner of your screen. Simply click Q and A, scroll to the bottom, type your question and press end. Company may not be in a position to answer every question received during the meeting itself. However, the company review questions submitted today and we'll publish responses where appropriate to do so. These will be available on the Investor Meet company dashboard and you'll be notified once they're ready for your review. I'd

0:32 also like to remind you this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Richard Harbon, CEO and Graham Bird, CFO of Escape Hunt PLC. Good morning. Well, good morning. And Paul, thanks for the introduction. And good morning, everybody, and thank you for dialing in to give us the opportunity to talk a little bit about Escape Pump and indeed about our results to the half year. So for any of you that are not yet familiar with our business, we as Escape Pun are the world's leading escape room provider. And over the last eighteen months, we've actually broadened out somewhat and now consider ourselves to be very much a three sixty gaming company. That is to say, at our core, we're still very much focused on our physical escape rooms that we offer in venue, and we've broadened those out with virtual reality experiences, which we'll talk a little bit about further into this meeting.

1:23 But moreover, we've broadened into outdoor games now and as well to games which we refer to as being location neutral. That is digital offerings that allow our customers to enjoy our experiences really from anywhere in the world. I think at our core, we're a business that is loved by the customers we serve. So we're we're we're in a privileged position where our TripAdvisor reviews are five star absolutely completely across the board at every one of our sites in The UK. And and moreover, we've become a trusted partner to the likes of the BBC and the likes of Netflix to develop games in conjunction with with with their studio teams and indeed making their IP come to life. In terms of our business model, we are basically operating in two fashions. We have an owner operated business in The UK, and we'll talk to the specifics of that further into this presentation.

2:18 But as we stand, 14 sites are currently trading in The UK owner operated. Moreover, we have bought three sites internationally. We've bought in the last year Dubai, Paris, Brussels, and that brings our owner operated estate to 17 units.

2:34 Outside that owner operated estate, we run a franchise business internationally, and you can see that we have presence now in 12 countries. In terms of our core offer in venue, we are very much the premium operator in our space, and that that is predicated in our premium locations. We are the escape room operator that is able to get into some of the very best shopping centers certainly in The UK and take prime positions in a market which historically was a little bit more niche y. In a market where escape rooms were historically slightly out of town, perhaps on industrial estates, we sit proud and prime in the center of very strong cities. Our experience across the customer journey is premium in every regard, and that's very much our positioning.

3:23 In terms of our digital offerings, as we've talked about, we have really developed this. And as we've already referenced, the likes of Netflix and indeed the BBC supporting us and allowing us to bring their content to light, I think gives real credence to what it is and as well has allowed us to quite dramatically build our customer base over the last couple of years. So with that as given, if that serves as an intro, I'd like to pass you over to Graham. Graham Bird is our CFO, and he's going to talk you talk to you about the results to the half year. That's fine. We'll just skip over. Yeah. Straight into the performance in the period under review, I think I would just characterize the start here just saying, I think we have reached an inflection point in the consumer psyche where escape escape rooms have become a much more mainstream thing to think about, and people actually see that as a natural option when they're looking for leisure activities.

4:25 If you go back two or three years when escape hunt first came to market, Those of you who were sort of involved at that time might remember that there were surveys done which showed that very small percentage of people had ever played as as an escape room, let alone even heard of one. So,

4:43 in fact, that that position has changed, and we see that very much more part of the consumer psyche. As a result of which, we've seen a very strong bounce back in The UK since we reopened in the seventeenth on the May 17. Revenue was just under 1,200,000, and that compares to 1,300,000 in the same period last year. However, I would point out that there was only six weeks of trade in The UK in our first half year compared to eleven weeks of trading roughly eleven weeks of trading in 2020. So underlying very, very strong growth, and we'll come back to that later on in the presentation. We measure site level EBITDA, which is the contribution from our owner operated sites and then also the contribution directly from our franchise estate before any of our central head office costs.

5:30 That site EBITDA was at 440,000, slightly down on on last year, again, really reflecting the fact that we were only open for those six weeks. Downloadable and printed play games, which Richard mentioned there, launched last year and continue to play a very meaningful role for us. We expect them to continue to be a a core part of what we offer. Of course, the revenue from those products drops through to very high margin. So they they are certainly certainly contributing the equivalent of, you know, a couple certainly, two or three owner managed sites based on the profitability that they dropped through. We made a £151,000 from that. We did see a drop off over the summer as people started coming back towards sites, but we are again seeing a pickup in those games as people come back to work and businesses are again looking to engage amongst themselves.

6:23 The adjusted EBITDA loss at group level level was slightly lower this year than it was last year, modestly down at £796,000 versus 816 last year. The other two features in the in the period, we if you remember, we acquired the Dubai site back in September, October last year, effective, I think it was the October 1. The Dubai site itself and that region is performing ahead of our original expectations. In fact, done it's very well. We bought it at a very attractive price, but it's already fully paid back the investment. In fact, it's almost double paid the the the investment just from the profits that have been generated from that site in in the current year. So a very pleasing return on investment we've generated for shareholders there.

7:12 Of course, we also completed a £1,400,000 fundraising in January this year, which was partly used to fund the acquisition of the French and the Belgian master franchise. Those two sites are also performing very well. The balance of that fundraiser was used to provide working capital, which has helped us through the remainder of the lockdown period. And we still have a very healthy cash balance at the at the current state, and we'll come back to that as well. In terms of strategic progress, as I said, we were only open on the May 17 when lockdown lifted, but pleasingly, we're able to open two brand new sites, one at Watford and one at Kingston, which we previously mentioned. We've also got sites in build at both Lakeside and Milton Keynes. Lakeside site should is expected to open on or around the October 20, and the Milton Keynes site is now in build as well. So that's bodes well for the continued growth of our owner operated estate.

8:09 Beyond that, we have a healthy pipeline of further sites, a number in

8:14 very sort of detailed discussions, and we are confident that we can continue to build on our on our strategy of rolling out and operated sites. I think what's more interesting is probably going beyond the period under under review, and I'll hand over to Richard just to give us an update in the periods in in the recent trading. Oops. Sorry. I think we both jumped forward there. So And we'll we'll see next six weeks of half one. But moreover, it has seen an increase in the trajectory of that customer return. And so in numbers, what you can see over the sixteen week period to the September 5, our like for like sales, that is the sales from our units which have been opened for more than one year when compared to twenty twenty nineteen, which in our view is the most relevant comparator.

9:14 Those like for like sales were up 17%. But as I say, that trajectory has continued to grow and increase. And so if you take the most recent nine weeks to September 5, the like for like sales were actually up 31%. Now when you combine that with the additional units which we've opened, you can see the total sales being up 92% on those sixteen weeks to the beginning of September when compared to 2019 shows really a very significant step change in the business. And you know, there are lots of reasons to be very positive about that continued customer uptake. But, of course, sales in and of themselves are it is wonderful to see the like for like sales coming back in our core estate. But actually, it's almost more exciting to see the extent to which our new sites, you know, as Graham's mentioned, Watford, Cheltenham, Basingstoke, Norwich, and others, they have hit the ground running for us much faster than any of our original tranche.

10:12 So where previously, we had imagined that you would have a six month build to get to a mature level of sales, where a mature sales for us is around about £10,000 a week. What we've seen in these new sites is that they're hitting the ground running incredibly quickly, and then certainly through July and August, not only hit that mature level, but well well exceeded it in in a very small number of weeks. So lots to be very excited about. Not not not exactly a trading line, but but in terms of other income, we've also very recently, two days ago, received £950,000 of r and d credits. So that is that is cash which has flown into the business as other income, recognizing the very significant work that we've put into innovation and technology development over the last few years. So specifically, we've been building a software platform that will allow us to better leverage our teams insights to better create more engaging customer experiences.

11:12 And that work has allowed us to really see some quite significant growth in our EBITDA conversion. So so when we get into that profitability at a site level and we start talking about EBITDA, you'll see that on those like for like sales, EBITDA again versus 2019 was a 172% ahead of where it had been previously. But at total EBITDA at a site level was 326% ahead. So as we say, that is born firstly of the significant increase in sales, but secondly, in that enhanced leverage that we're seeing through labor particularly supported by the software platform which we've invested in. So with that as given, very excitingly for us, we've hit a quite significant milestone in July.

11:58 And for the first time, Escape Hunt was EBITDA profitable at a group level after head office costs. And indeed, that performance carried on into and through August. And so in round numbers, we delivered around a £100,000 of EBITDA at a group level in July, 250,000 in August. And what that does is gives us real confidence that the assertion we made

12:23 a number of months ago that once we got to 15 owner operated sites, we would have scale and density enough to be able to cover and exceed our central head office costs. It it is playing out to be true. That performance in and of itself is obviously very encouraging and gives us great reason to be excited to the future. But, actually, for me, I'm most excited about the fact we're doing that against the backdrop of wonderful customer reviews. For for me as an operator at heart, if we look to the future, I think the biggest marker of Lightly's success is the is the extent to which customers truly understand and truly are delighted by the experiences that we offer. So so we're we're in a privileged position where every one of our sites is five star rated and indeed every one of our eligible sites, that is sites that have been trading for more than one year, now sit within TripAdvisor's Traveler's Choice category, which highlight the top 10% of entertainment attractions globally.

13:24 I'm gonna pass through back to to Graham to just get into a little more detail about the specifics of the period under review. These slides as they sort of backward looking. But, nevertheless, just to go through what's in here, as I mentioned, very strong bounce back in performance once we reopened. In the six odd weeks of trading, we did at an owner operated level, we did £936,000 of revenue, which compared to just over a million pound in approximately eleven weeks of trading in 2020. So as I said, you know, good evidence of bouncing back there. Franchise revenues were sustained during the period, slightly down again on 2020, many of that affected by substantial closures.

14:17 Our biggest network, for example, in France, closed almost for the entire period. They only opened in June, so just a month's worth of trading coming from the the French network. By contrast, the Australian network did reasonably well at the start of the year, but as come we into the autumn, they've also seen some further some further lockdown. So sort of mixed performance across different countries, but nevertheless, a sustained performance. I mentioned adjusted EBITDA loss was reduced. That did have the benefits of government grants. We were able to obviously use the furlough scheme during the lockdown, and that's helped us enable us enabled us to keep all of our excellent staff. And it's been a testament to operations team that since reopening, we've not had any loss of capacity as a result of staff shortages, notwithstanding the pandemic that was going on. So that's all been managed very, very well.

15:11 We also were the recipient of rates related grants from the government, which which helped us going and was able to enabled us to continue to pay the service charge and other things that we needed to do. I mentioned the franchise revenue. Franchise EBITDA was slightly down on 2020, again, notwithstanding a lot of the closures and a couple of a couple of sites which have come out of the network, although they weren't really contributors in the past, who've who've been lost as a result of financial difficulty. Increasingly, we have obviously been focusing on central costs. If you remember this time last year, we talked about a substantial cost reduction that we had to go through at head office, notably closing down the the head office itself and and working from home. That's actually worked extremely well, and we continue to do that.

16:04 So there are some enduring savings which have come out of that that effort that we made just to to cut costs and a number of the ongoing other costs in head office, also, we've managed to keep under control as a result of which you can see that overall, they've come down. As we grow, I would expect that cost base to rise modestly, but not anywhere near in proportion to to revenue. In fact, it'll be very, very small compared to the growth in revenue. We should have fantastic operating leverage as the business goes forward. I mentioned the downloadable games, which contributed a £151,000 of revenue at high margin. You can estimate if you're doing your your your maths, it's roughly sort of 8085% margin drop through on those games. It depends on the mix of Zoom in the room and pure downloadable, but, again, a very attractive line of business which we see growing again in the second half of the year as businesses return.

17:00 We've invested to that end, we have actually invested in business development and is focusing very much on those b to b sales, not just for downloadables, but, of course, also for corporate events in our existing sites. So moving to the next slide. Yep. There we go. In terms of cash flow, focus was really around careful management of cash, particularly down through the the lockdown period, which I think we did quite successfully. You can see throughout the period, just a £100,000 of cash used in operating activities, boosted obviously by a significant working capital favorable movement there. Partly that is really from property related creditors where we were able to defer and in some cases get full exemption from rents in particular.

17:48 We've obviously on the rates holiday with the government, so that won't that won't be repayable at all. But as we swing from having been paid paying rent in arrears to rent in advance again, about 500,000 of that was expected to unwind in the second half of the year. £1,000,000 on on CapEx during the period. Mostly that is to do with the completion of the Kingston and the Watsford sites. We continue to invest in those sites. However, we've also preordered games. A chunk of that million pounds is payment for some of the some of the preordered games for both Milton Keynes and Lakeside. And indeed, a few additional games, we're just building up some preorders so that the timelines to being able to open new sites as and when we sign them can be shortened by having those games on preorder.

18:41 Finally, I mentioned the fundraise, which obviously boosted our cash in January. That closed on on the the January 28 where we raised 1,400,000 to finance the acquisition of the French and Belgian master franchise and a bit of working capital. So that meant we landed up at the end of the period with £2,400,000 still still in the bank.

19:04 Onto the balance sheet. I mentioned there again the cash, which I think is really the important thing. I'm not gonna spend too much time on here other than to point out the receipt at literally at the beginning of this week where we received a r and d credit from HMRC of 1,200,000. We will have fees to pay on that as we had an adviser helping us. He has a contingent fee on that. Net net, just about £1,000,000, which we will we will have for use in the business going forward. So as of today's date, our cash balance is in excess of 3,400,000, and that puts us in a very good state now to continue to, well, to compete on the sites that we've got and to continue to roll out those owner operated sites that we've spoken about.

19:55 You will notice a a loan balance on the balance sheet. Most of that is the convertible loan note, which we regard as equity. If you remember, that was implemented when we raised money in the summer last year. We have a right to force conversion later on in early next year, and I would expect to be able to do that. So that shouldn't have any impact on our cash. The other loan is a vendor loan note, which when we purchased the French business, deferred payment of a €100,000, and that's repaid over two years in equal tranches in March next year and in 2023. So that basically accounts for all of the the the loan balance that you see on the balance sheet. I'm gonna hand back to Richard who can give you a bit more flavor on these recent performance, and I'll move this slide, Richard.

20:46 Thank thank you. So so again, picking back up on some of the points which you made initially, but then actually representing them graphically, I think in in the the top right hand corner shows quite a stark increase in performance. And I guess really the point that we're trying to make here is that the business we have today

21:04 is a materially better and materially stronger business than the one that went into the COVID period. I suppose that's most evidence in the red line on the top of the chart, where you can see that actually that sales trajectory through 2021 post reopening has really quite dramatically exceeded where we were, the sort of darker red color line, which was the 2019 performance. And in numbers, what that's showing you is that our sales through August and into early September, we're hitting around £200,000 a week in The UK alone.

21:41 And, you know, compare that back to 2019 where we would have been about 85,000 over the same period. Obviously, given that we've opened some more sites as well, it is nonetheless a step change. And I just want to reference that £200,000 in the context of the box economics that we expect to be able to deliver on average for the business. We talked about it a moment back, but as I say, for us, our target box economics see us delivering £10,000

22:07 a week of sales and creating £3,000 a week of EBITDA. And if we can do that, we have a business that pays back in less than three years given that we'll have 400,000 perhaps in a in a new build unit pre any capital contributions that we might go on to receive. So when you look at that £200,000 a week and you set it against the 14 UK owner operated sites that we have, I'd suggest that shows a very, very strong performance. You you know, clearly, was summer. Clearly, there's a lot of family participation at that point, but nonetheless stands us in very, very good stead. Just to reiterate again on those new sites that we've opened, hitting the ground running much, much faster than any of the sites that we've opened previously. I think for me, that's a reinforcement of our property strategy.

22:55 It's a reinforcement that we are getting access now to better higher quality schemes, and all of the benefits that come with that are flowing through into our numbers. And when you look to the bottom graph and and reference that cumulative site level EBITDA, the dotted line shows you what the trajectory for us would look like were we to hit our target box economics where we'd be generating a £150,000 of profit per site. What you can see of course is that the red line is quite significantly overachieving that. Again, really making the point that we're leveraging the business well and we've had a very strong recovery to this point.

23:35 If I move through to, as I say, the slide that probably makes me proudest, it's recognition that all of our sites are five star rated. And for for me, this is, as I've said before, the most important marker for a business which will hopefully create significant value in the future. And aside from just being five star rated, you'll also see that of the 14 UK sites we have, nine are ranked at number one of in in their fun and games category within their areas. And indeed, all of our sites sit within the top four. So again, it's a strong performance for customers and definitely something which we are extremely proud of.

24:16 Getting into a little bit more detail now about a couple of the points we touched on, particularly around our international owned sites. If we take Dubai first, Graham's already mentioned that Dubai has been a a really strong acquisition for us. It's an acquisition that paid back very quickly. It's now, as Graham's already said, almost paid back twice.

24:36 And that in and of itself is, of course, a very good thing. But what's more interesting for me is the extent to which we can start to see additional traction in the territory, and we can start to see what we might do next. So as we dip our toes into expansion in the region, the first the the first kind of point to note is that we'll now, for the first time, be exhibiting at the Riyadh season in Saudi. And that brings together some of the very best international entertainment businesses. And for us, it's a really wonderful thing to be able to exhibit there. We will generate it'll be quite profitable for us to do so. But aside from that, it also allows us to test truly one of the more operational facets which we've been working on for the last year, and that is our modular games rooms.

25:24 We we've talked before about this movement into modular games. And what we mean by that are games rooms which we can literally pick up, move, and build, almost like Big Boys Mechano. And this is gonna be the first proper test of that system insofar as we will be putting these games into Riyadh. In fact, we're in the process of doing it as we speak. But once that season has run-in three months time, we'll be taking those games down, bringing them back to The UK, and installing them in a future unit here, really kinda adding weight to that transferability content that we've talked about previously. In France and Belgium, you're aware that the Paris site we bought, so that is now an owner operated unit, and indeed Brussels in Belgium is also an owner operated unit for us. And now that they're reopened, both of those sites are contributing meaningfully, and both of those sites are delivering economics very much in line with those target box economics that we've just referred to. So we're very pleased with performance there. It's absolutely in line with expectations, arguably a little ahead.

26:26 And In the region more broadly in France where we now own the master franchise of that territory, again, has been, know, of late affected by the COVID restrictions. But again, now that that territory is reopening, we're starting to see performance getting back to its pre COVID levels, is which extremely encouraging. Aside from Europe, internationally, our largest territory is Australia. And Australia has been a really key sort of cornerstone of our business through our darkest hours in The UK when we were when we were shut. And we've almost had an asymmetric relationship with Australia insofar as they've been

27:03 open and trading strongly at points when we've been closed. But so so whilst their performance is very, very strong and coming through h one, you know, really generating significant numbers and, in fact, perversely a lot of record weeks, as we sit right now, they have been affected by further lockdowns. So the so the territory is not quite generating where it has been generating before, but these are strong businesses. We know they'll come through, and we'll get back to the position that we were in pre COVID. In The US, this is where we've had a significant delay due to due to COVID. We've talked about it before, so this is not new news. But we've been in the process of building in conjunction with our area representative in The US, a supercenter in Houston.

27:48 And in order to do that, it's really important to us that we send out our very best and finest games that we take control initially of the quality of installation, the quality of content, and we really own that process. The downside to that has been that with

28:02 travel restrictions, will completely completely eliminate it pretty much. That, you know, it has not been possible to get into The US. We have not until very recently been able to finish the installation of those rooms. I think encouraging that we do now have a team who are en route, so we will now be finishing Houston, and we will be very much looking forward to getting back into discovery days in order to grow the prospective franchise business there in The US. So I guess if I were to summarize, you know, the the kind of key points that I would like you to take away today. I suppose more than anything, it is that we truly are a materially better and stronger business today than we were when we went into lockdown in 2020.

28:50 I say that because our trading has come back very much stronger at a unit level and combined with the fact we now have quite significantly more units, that is nine when we went into nine owner operated units when we went into lockdown to 17 owner operated units as we've come out. Those things together, I think, give us real cause for optimism. And when you combine that with the fact that our box economics are not only exceeding their targets, but they're generating cash enough to cover our central costs and deliver group profitability, both evidenced in July and August, then I think we have, again, reason to believe that the foundation is now firmly set for significant future expansion. And I suppose the the final point there is just to re reference our current cash balance.

29:37 You know, we we feel, again, privileged to be sat at the moment with 300 and £33,500,000 of cash, which we anticipate using clearly to accelerate our rollout to roll into new sites. Now that that foundation is truly set, now that those economics are coming good. So I I would expect us to, over the next over the next year, to really accelerate that rollout to build much more density and to start leveraging further and further and further our relatively fixed head office space. And that's that's it from me. Fantastic. Indeed. Thank you, Richard. Thank you, Graham, indeed for the presentation. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated on the top right corner of your screen. I'd like to remind you that recording of the presentation, along with a copy of the slides and the published Q and A can be accessed via dashboard on the Investor Meet Company platform. Also, I'd to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback in order the company can better understand your views and expectations.

30:44 Richard Graham, perhaps before we go into some of the pre submitted questions, we did have several questions submitted ahead of the event today. If I may, I'll read out the first one, and I think I can probably address these to you actually, Richard. Now augmented reality seems to be finally finding mainstream usage. Do you have any plans to integrate into the settings, I. E, lounges, outdoor games, homes, games, etcetera? Certainly. So we talked a little bit about our, for want of a better word, diversification into into product. And already, as you know, we've moved away from just physical rooms into outdoor games, digital games, so on and so forth. So actually, within our outdoor games, already there are elements of augmented reality being integrated. And certainly, it's something that we expect to do a lot more with.

31:31 For us at the moment, the focus is more actually on virtual reality, and we're just dipping our toes into that market. There are a lot of very good strategic reasons why that is an interesting place for us to play. But But augmented reality is becoming much more a part of our outdoor games already, and you will continue to see more in this space. Thank you very much indeed, Richard. Next one we've got here read as follows. Could you give an update on the performance of digital VR experiences? And how much of a proportion does this contribute to sales? It's a relatively new type of leisure experience. What's been your customer feedback? Certainly. So so so VR for us as exactly as you've said is relatively new in all sites. So our initial sites don't yet have any VR rooms. But the new sites that we're building all have at least one.

32:22 And so for us, it is a very natural it's a very natural next step for customers who enjoy our physical rooms. It is very logical that they will enjoy our VR rooms as well. And indeed feedback has been fantastic. We've gone through, you know, before you launch a a product like VR, you go through a very significant period of testing. And, of course, when you're launching something like this, you you know you have to test because there are likely to be hardware issues, software issues, etcetera. So we took a very long time making sure that we've gone through that process such that our customer experiences were fabulous. So so I think we're we're delighted now to have, you know, a very, very kind of glitch free touch wood experience that customers just get wowed by. If you haven't experienced VR before, it truly does take you into a new world in a way that is almost magical.

33:12 So it's a very, very good customer customer add on. In terms of the specifics around what it will generate for us as a business, the way typically our units work is that we will have five or six games of physical escape rooms and now one room of VR. So we would expect, you know, in round numbers, VR to contribute something around 10%, 10 to 12% of the revenues from a site, all being equal where it exists. But actually, that's not so much the driving force for us. The thing that we really like about VR strategically is that it allows us to target specific occasions with content. So what do I mean by that? If we are we we in October, we're coming into Halloween.

33:58 If we wanted to have a Halloween specific escape room, it would be hugely cost prohibitive because we'd have to take out one of our physical sets, build something else, it runs for a couple of weeks, and it's and, you know, it's just uneconomic uneconomic to do that. So with VR, we can, in that one room, have multiple contents. And so when we want to talk about something that is seasonal, so it might be Halloween, it might be Christmas, it might be whatever, we get content specifically for those available. We can push that through our marketing channels. We increase awareness for the business per se, and it allows us to talk to our customers in a slightly different fashion. That's fantastic. That actually concludes the presubmitted with questions we've had in there. So if I may, if you could just click on that q and a tab just to the right of the slides in front of you and just where appropriate to do so, just read out the question and give your response. That'd be wonderful. Thank you. Sure.

34:54 Of course. So so we have a question. So so should should we take those in order? So we the first question we have, what is your definition of cash flow breakeven? So so when we're talking about cash flow breakeven, I suppose we're really talking about it in two chunks. The sort of the the cash that we're generating as we refer to it is the cash from the sites. So so within that, we have the site level EBITDA and that is fully loaded for all of the property costs, the lease costs, our staff costs, our marketing costs to run them, etcetera, obviously, sales being the income on the top. Beneath that beneath that site level, we obviously have our central costs, and that is our head office. That's Graham.

35:42 It's me. It's the team. It's it's basically our cost base, which doesn't get allocated back to units. So when we talk about cash flow breakeven, we're saying that the site EBITDA we generate plus the franchise income we make at least covering our central head office costs. Shall I take the second question, which I think follows the natural from that? So the second question is what is the working capital effect on cash flow for h I mentioned earlier on that there's about £500,000 of property accruals, which we benefited from. That that will largely unwind in the second half, so that's a £500,000. Of the CapEx that we spent, it was a million pound of CapEx in the half year.

36:29 There was about 390,000 of that. We're still sitting in creditors at the end of June. That has now been paid, but, obviously, we are still spending more CapEx as we run into July, August. So the working capital effect based on the June end is that there was about 858 to 900,000 that we would see reversed. As I say, 390 of that's come out, and a good chunk of that 500,000 of property arrears has been paid as well. So the cash balance at the end of August had already reflected probably half of that unwind. Hopefully, that answers the question. Perfect. Shall I take the next one? So the next question is, who do you compete with directly, and what is the most effective marketing group for new customers, and how many customers are repeat? Is that possible to monitor?

37:16 So if we take those part if we take those parts in order, I I suppose you might expect me to to list a load of other escape room operators as being the most direct form of competition. Clearly clearly, strong independent operators in towns where we exist are always going to be a very direct competition, and that is something that we that we, of course, are aware of. But, actually, we consider our direct competition to be somewhat broader than that. And, really, it is any operator who is vying for that same kind of social pound, if you like. So that might be the monies that you spend with your friends and family. It might be the monies that you spend on a corporate payout. And so, actually, we would be competing in that arena with anybody, you know, be it bowling, cinemas, even to kind of more experiential restaurants.

38:07 So we think that the competitive set is fairly broad. Our most effective marketing route for new customers is by a stretch digital. So we get significant traction through our channels, be it Facebook, TripAdvisor drives a lot. Clearly, we're buying, know, we're doing a lot of PPC. And so that that digital channel is really, really important. But it's also very important that this premium estate we have, I've referenced it a few times, but this premium estate we have where our sites are in the best shopping centers in town centers, and moreover, they have significant frontage that attracts significant ped flow, That is a very, very effective marketing group. It's not always easy to qualify what the last kind of click attribution is. So, you know, is it that 15 people have walked past the window today and then it's prompted some form of awareness, but they've gone on to book via one of the online channels? Or is it that actually they've been attracted to it online and they've come and walked past? Don't know. Very hard to ascertain. But nonetheless, predominantly, our marketing routes are are the traditional online ones as you would expect.

39:14 In terms of customers being repeat, it it it's relatively difficult to give an accurate figure for what percentage of our customers are repeat customers. And the reason for that is that typically our teams will play as groups of four to six people. And so if two of you come along in a team and then rebook, if somebody else within the team rebooks for the second time, it's a little bit harder to pick up what that repeat customer looks like. So we consider it in a slightly different way. We can understand the way our corporate business repeats, and we see this a lot. So for example, if we're doing if we've just hosted 10 teams from company x, it is not at all unusual that we then get another 10 teams from a different department of company x that have come by word-of-mouth.

40:03 And when we have tried to get into the analysis of understanding what our repeat customer rate looks like, we we've sort of got to a point where we think it's two, two and a half visits a year, something in that sort of ballpark, which would be very consistent with other operators such, you know, bowling operators would would talk to the same kind of numbers. And and and if that is true, it gives us, again, quite significant scope because within a within a one site, we will have six different contents playing. We have multiple contents playing through VR. So that gives us really quite a significant runway of opportunity for repeat customers to come back and enjoy their experiences with us. If I move on to the next question, we've been asked whether or not there is any further fundraising planned.

40:49 I I would refer back to the point that we made that we have, as we stand today, 3,500,000 in the bank and a business which is, you know, not not requiring of anything like the same sort of working capital aside from CapEx going into new sites as we had previously. Obviously, we have a pipeline of sites, and we would expect to accelerate that pipeline quite dramatically. And and we can we can certainly build out a number of sites with the cash that we have, and clearly, we would expect to clearly, we would expect to generate more cash from those sites. I think, you know, if we were to look to do something truly transformational, then there would be an inflection point at which we might look to raise additional funding. But the money we have today is certainly sufficient to allow us to build on, you know, the the next sites that we have in our pipeline.

41:39 Shall I take the one? Yeah. If you say the next one, Graham. Yeah. So the next the next The next question is what is the maximum dilution on the conversion of loan note? Assuming that we convert at the end of the year, which we have the cash to to buy it out, but we can serve notice on the holder and force conversion. And, obviously, where the share price is today, one would assume that they would convert. And at that date, it would convert into 4,300,000 shares. So it's a little less than 5%. Great. Why don't you take the next two, Richard? I think they're both the two questions can probably be answered. Yeah. I think there's a few questions that sort of can probably get grouped in. And basically, the questions are around what are we gonna announce next on new sites? And indeed, is there going to be a site potentially in London?

42:30 So in terms of the new sites, so you're already aware that we are in build in Lake Site and we are in build in Milton Keynes. We have, as we've already mentioned, a significant pipeline that is being basically in various stages. So a number of sites in very advanced legal, several sites in heads of terms exactly as you would expect. We we will be in a position to announce more of those sites in the relatively near future. And as always, London is very much on our radar. If I move to the next if I move to the next question, if Dubai has been so successful, can we expect more sites to be open there? I suppose the the very obvious answer to that is, you know, yes, it has been very successful for us, and we have a wonderful a wonderful guy working for us in the territory who is very ambitious.

43:22 So the extent to which we find good opportunities, we would certainly look to capitalize on those. As I said, the Riyadh season is gonna be our next participation in the territory, and then post that, who knows? But certainly, it's a good it's a very good territory, and we think there's a lot of runway there. We've been asked what the average life of a game is. This this this is a really hard question to answer because if I'm brutally honest, we don't yet know. I I'd refer us back to the like for like numbers that we offered up. So we said that in the nine weeks to September 5, like for like sales in our oldest estate were growing at 31%. Now when you bear in mind that a number of those sites have been open since 2017, and they're still growing at that rate, It clearly would suggest that we're nowhere near approaching the the the life end, if you like, of one of our game rooms.

44:20 I I referenced a moment ago that if our repeat customers are two, two and a half times per year, and actually the contents available within a site are six physical rooms and then a number of different contents in VR, you've probably got at least a five year runway, I'd suggest, on average. But just just to, again, reiterate a further point that we've already made around modular games rooms. The reason that we are now building our games rooms in this modular fashion is so that at a point, we would expect to be able to move them around the estate. So we can take one out of site a, put it into site b, and get a content rotation without needing to start from scratch. Then next question. Just wondering what the split of pre booked and walk in bookings are, and how do you have a feel oh, sorry. And do you have a feel for how much percentage split you would say is general public versus corporate bookings?

45:14 So, again, if we take those in point, I I think the answer to that in part is similar to the answer around the the marketing channels. Clearly, last click attribution would suggest that the vast majority of our business is digital. And indeed, true walk ins, that is unprompted walk ins that have not had any idea of what we were before and have just got interested by the site, I would think is probably around 10%. We don't have the most accurate data on that. But definitely, you know, the the majority of business is being driven through those online marketing channels. In terms of the corporate percentage, as you would imagine, it varies by site. So for example, one of our units in Birmingham is very much in the corporate district and that can be doing up 20% corporate business. Across the estate per se, we would expect to normalize somewhere around 10%.

46:10 I think if I can just add one further point that to Richard's comment there around walk in and digital. Whilst it is absolutely true that, you know, 90% plus of our sales are done are booked through the Internet and through our online channels, it is clear that sites where we have good visibility do do better than sites where we don't have good visibility. So it is quite clear that the combination between being in a visible high footfall location and having effective online marketing is the winning combination, and that's what we're looking to do. Guys, Yeah. Thank you very much, Richard Graham. You've covered all the questions that we've had through. And, of course, if any further questions submitted by investors today, we'll give the company the opportunity to review those and publish responses where appropriate to do so.

46:57 Richard, if I may just ask you just for a sort of closing snapshot, please, that would be great. Certainly. So the risk of repeating myself, escape hunt today is a materially stronger business than it was when we went into COVID. It's materially stronger because our customer bounce back has seen trading levels quite significantly surpass our own internal expectations and indeed trading levels that have generated profits for the first time at a group level after head office costs. We have a very strong pipeline of sites. And with £3,500,000 of cash in the bank today, you should expect to see us looking to accelerate our trajectory quite significantly from this point on. That's absolutely fantastic indeed, Richard Graham. Thank you indeed for updating investors today. Could I please ask investors not to close this session? You'll be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations.

47:51 So only take a few moments to complete, and it's greatly valued by the company. On behalf of the management team of Escape Hunt PLC, we'd like to thank you for attending today's presentation. Thank you, and good afternoon.