Escape Hunt plc (LON:ESC) Chief Executive Officer Richard Harpman caught up with DirectorsTalk to discuss their latest trading update, actions taken to mitigate site closures, progress in establishing digital and other play at home products, the acquisition of its French master franchise partner and what we can expect from the company over the next year.
Q1: Escape Hunt recently released a trading update announcement. Can you just talk us through the highlights?
A1: So, I suppose there were three key highlights that we wanted to draw attention to.
Firstly, was the management of our cost base over 2020, clearly against the backdrop where the vast majority of our sites were closed for the lion share within the year, the cost management schemes that we had in place at least allowed us to sort of fit in into the year with an EBITDA position marginally ahead of the prior year. So, we feel very good about how we manage those costs.
Secondly, we highlighted that we had used it as a year, really, to quite dramatically expand our owner operated footprint so in the UK going into 2020, we had nine owner operated sites and coming out, we will have 17 including the site that we purchased in Dubai and two in the French Benelux region. So, that further cements our facility to really turn this into a cash generative, profitable business once demand presumes.
Thirdly, the highlight that we wanted to draw attention to, was the launch, and indeed the progress, of our digital offering, which was initially a response to our physical sites being locked down but actually now is going to become very much more part of our strategy as we go forwards.
Q2: You’re certainly well positioned, especially for lockdown has certainly eased. You mentioned traded in 2020 was severely impacted by the COVID-19 pandemic, what actions did company take to mitigate the impact of the site closures?
A2: Initially, we did, as you would imagine, what everyone in our space would do, and we looked for every cost that we could possibly take out of the business or indeed every payment that we could possibly defer.
So, for us, we made use of the very, very generous government schemes that were available to us, particularly furlough so we were able to put all of our site teams on furlough, such that we didn’t have to lose anybody. As you can imagine, our teams are critical to us and will be absolutely critical to us as we reopen again so being able to support them through the furlough scheme was very, very important.
We cut all non-essential expenditure, we cut all non-essential spend pretty much everywhere in the business and so that was very much stage one.
Stage two was, if you like, ripping up the rule book, it was thinking about what can we do to generate revenue today, despite the fact our sites are closed, and so for us, that was pivoting towards digital. So, we set up a, what became a quite significant suite of digital propositions and those proved to be very, very successful and very popular with our customers. They started to drive revenue in year and a moreover, as I said before, will become very much part of our strategy as we go forwards.
I guess the third piece was very much about how we drive revenue tomorrow, if you like, and so, as I mentioned again, previously that for us was expanding our owner operated estate, really setting ourselves up with a decent platform for growth and for scale, buying in our French master franchise and our Dubai master franchise. Really giving ourselves the best possible opportunity to be a profitable cash generative business, once demand returns and once our new sites get to normalised levels of trading.
Q3: Now the company, as you mentioned, has established digital and other play at home products, how have they been progressing then?
A3: Well, it’s been a really lovely progression actually, back in April/May, so very soon after we were locked down, we launched quite quickly a series of play at home games so downloadable play at home games. Those are really well received and so we moved from there iteratively through what we refer to a zoom into the room so a collection of games where you are using our games masters as avatars, essentially. You’re at home with your team, playing with your teams, but you’re using our games most as avatars.
We then progressed further and did a license deal with IT company who allow us to now use their platform to host our own digital content so much, much larger scale games, which we can now host on these platforms. That culminated in December in really a very, very good month for digital revenue and indeed included some events which were catering to 350 or so players at a time, which was really quite significant, we think, in terms of highlighting where this opportunity can go.
Q4: As you mentioned earlier, you’ve exchanged contracts with your French master partner, can you just expand on that a little bit? Can you tell us more about that?
A4: We actually completed that deal yesterday, so we put out an announcement yesterday afternoon just referencing the completion of that deal.
Our French master franchise has done a fantastic job over the last five or six years, really establishing the company in the territory and that business incorporates both two owner operated sites, a site in Paris and a site in Belgium, both of which now will be part of our owner operated portfolio, and then an additional 11 franchise sites spread around the country.
So, as I say, very much that footprint was already established, there was a great business there, and we’ve been very excited to be able to take that on and bring it a little bit closer to us as the brand owner.
We are very much looking forward to growing that business in that territory.
Q5: Just looking forward with then, what can we expect to see from Escape Hunt in the next year?
A5: We’ve laid out, on a number of occasions, our five-point plan for value creation as we refer to it, and so really you will see us continue along each of those points.
To reference back, the first of those is this continued development of our owner operated estate here in the UK so we will continue to make the absolute best use of the property deals, which we’re receiving right now, the site availability, which is a mark of the market right now, and we will continue to grow that UK estate.
We will continue to support and nurture the existing franchise business that we have, clearly in relatively small businesses, everybody’s been hit very, very hard through COVID so being there to support that business, get it back to the great cash generative business that it was is front of mind. Within that now, also we are very much considering the best way to integrate the French business now into our overall estate.
Point 3 is to continue the relationship that we have in place already with PCH – Proprietors Capital Holdings – in the US, who are essentially our US master franchise partners. So, we’ve made really good headway with PCH over the last few months, we are now at that stage where we’re really quite actively starting to sell franchises there. So, growing our position in the US market becomes a really key part of our value creation over the next two to three years.
Then we also have our product reach and breadth so for us, we’ve been looking to use digital very much as a way to offer a broader range of products to our consumers. Also, to offer that range of products to a wider range of consumers, particularly in the digital space to corporates who might have global teams that couldn’t come together physically, or they might have teams of 200, 300, 400 people who, again, couldn’t come together physically. So, for us continuing the good work we’ve made on that digital proposition will be very much a mark of the coming 12 to 18 months.