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 company traded strongly in the first couple of months after the UK’s first lockdown, can you give us an update on trading since then?
A1: Trading’s been very strong in the last seven weeks, the half-term week and in particular, during half term, total sales for the company were up 25% year on year and EBITDA margins in the UK owner operating sites have been substantially better than in prior periods
In the six weeks prior to half term, EBITDA before central costs was positive and ahead of management expectations.
So, things are going in terms of trading and it indicates to us that the company is well positioned to deliver high returns to investors post the expected second lockdown.
Q2: The company raised funds in July to expand its sites, how will the second lockdown delay its built out plans?
A2: They have been steadily rolling out sites and their expectation is that the build out will not be impacted by the lockdown, the company completed its 12th site in October and expect to complete its 13th site in November, without any impact from the lockdown. The 14th site, which is expected in December, the company plans to start fit out this month.
So, all seems to be going on track without any expectations of delays due to the second lockdown.
Q3: Now, the UK has a second lockdown, how will the company’s trading be impacted?
A3: The second lockdown does require the company to close its UK owner operated sites, however, the impact of remote games and some good cost management should moderate the impact of the second lockdown.
The company now has a range of digital and remote play games, that it did not have six months ago, they’ve all been growing very, very rapidly and also the margins coming from them are substantially above average. So, the company’s trading should also be helped by the government’s furlough scheme and the company’s cost controls, which have been quite effective to date.
I think the overall impact during the second lockdown down in terms of cash outflows should be marginal.
Looking longer term, and we believe the company is very well positioned to take market share in the fast-growing experiential entertainment sector, the company’s got a very diverse product suite, some aggressive marketing plans, and a premium branding. All these things we think will position it well against a lot of their competitors, which are lot of independent, not well resourced players in the market.
We also see that Escape Hunt probably will benefit from some of the dynamics and the commercial property market where I think it should be able to get, now, premium locations at relatively attractive rates.
So, we think it’s very well positioned on both these sort of costs and market share side of things as well.