Escape Hunt plc (LON:ESC) is the topic of conversation when Zeus Capital’s Technology Analyst Bob Liao caught up with DirectorsTalk for an exclusive interview.
Q1: Escape Hunt, the operator of escape rooms and other games, released their interim results this week. Bob, can you tell us how the reopening of their sites post-lockdown has gone?
A1: The company has seen a recovery of revenue levels that really does indicate to us that fundamental consumer demand for escape rooms remains solid.
In the first weeks after reopening, sales grew from about 25% of sales a year ago to about 90% in the last two weeks so it’s really seeing a recovery to nearly where we were a year ago from now so a very strong showing.
When you look at the EBITDA, that performance is even stronger because it’s been helped by some of the UK government furloughs teams and also the ability for the company to reduce some of their operating hours.
So, things are looking very, very promising in these early days of reopening.
Q2: The company was expanding size prior to lockdown, can you give us an update on how the expansion plans are progressing now?
A2: They do seem to be on track to expand the portfolio and breakeven sometime, hopefully, in the middle of next year, they opened their tenth site on 23rd September and the eleventh site is substantially complete and should be opened up in October. So, they’re on track in that trend to get to about thirteen sites by the end of this year and adding another couple sites, which hopefully would get them to a breakeven, they should be able to do by the middle of next year.
So, it’s looking quite promising in terms of their rollout.
Q3: Now, lockdown measures appear to be tightening again, how is the company positioned for that?
A3: Obviously, you’re right, the continued recovery of the company and their growth depends partially on the government lockdown measures that are introduced but what we think is that the company now is much better positioned than it was previously.
It’s increased its efficiency, it’s got more flexibility on cost and it’s introducing new games that aren’t physical games but actually remote and digital games.
So, on the first point, the company’s investing in a whole load of new software that should allow it to operate more efficiently. In addition to that, the company has been able to lower the minimum hours per week that it gives its employees and the minimum hours that it gives per shift as well so it’s going to result in more flexibility on cost, depending on what happens with lockdown measures.
Secondly, the company continues to make progress on diversifying its products towards digital and remote games so they’ve introduced new downloadable print and play games, they’ve got license agreements to develop the remote multiplayer games on digital platforms. Also, they’ve introduced remote play of existing physical escape rooms as well so lots of different ways of approaching the product other than getting people physically together in their sites.
Finally, Escape Hunt is now very well-funded, the cash position was at £4.3 million at the end of August, which is not down too much from its £5.2 million after the capital raise in Jul so they’re managing the cash quite well. All that is being helped by some of the new governments furlough employment schemes as well.
So, overall, the company is seeing a strong recovery, it’s successfully rolling out its expansion plans and they seem to be much more resilient to any further lockdown measures.