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lavenonews, I hope you will be taking your full entitlement to the open offer?
In addition, in order to provide Shareholders who do not take part in the Placing with an opportunity to participate in the proposed issue of New Ordinary Shares, the Company is providing all Qualifying Shareholders with the opportunity to subscribe for Open Offer Shares, to raise up to a further GBP0.5 million (before expenses), on the basis of 1 Open Offer Share for every 4 Ordinary Shares held on the Record Date, at the Issue Price. Qualifying Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility. The Open Offer is not being underwritten.
No change to my view on the long term opportunity for the business.
Any news on re-opening?
Would seem rather promising if they can time the re-opening with lots of kids still off school. School holidays have always been strong trading times.
Seems to me quite well suited to a safe opening in a 1m distancing world, with some cleaning and time for changeover between games.
You would go there at your own risk, I suppose, but their core client base is not elderly, is it?
Interesting where the next fundraising goes in terms of amount and structure. I'd like to see a confident, big raise as the opportunities to expand faster with much better rental deals and weaker competition are presenting a golden opportunity for a model that has proven itself up until March.
What are your thoughts playful - I will go into hibernation again soon!
Nope, went into it with a 3 year horizon and this sort of thing happens. It's called investment and risk, and what these markets are meant to be for, rather than the emotional casino that they actually are.
Obviously, not great for trading at the moment but as a small business, Esc should at least benefit from the budget support from gov't which will help mitigate some costs.
But if there is less revenue then I guess we may well be putting our hand in our pocket. However, imagine how tough things might be for 'mom and pop' small operators of escape rooms over the next 6-8 weeks if they haven't built up cash and don't have shareholders to tap?
It's a delicate situation that could go either way. Yes, the outlook is murky and there is a material risk of failure, but on the other hand there is also a possibility that Esc survives (with some shareholder help) and comes out in a very interesting and stronger market position. Eventually, life will return to normal and people will want to restart their leisure.
Which will it be?!
Hope you’re not selling Lavenonews
No and it’s not punt money
He's not playing around any more.
Stuart Hawthorne is building his stake. 2 mil shares now
thank danvers, good to read some counter views and be challenged. It is high risk and I agree it is not a straight and easy road ahead but the valuation probably fairly reflects that. Much rests on good management execution and a supportive shareholder base.
In any case, I agree that their best bet is to focus on owner-operated expansion. As this segment of their business is still net-negative, for now they must work harder to retain their remaining profit-generating franchise relationships to avoid shortening their cash runway further. A concern I have with their owner-operated segment is game shelf-life. Unlike other entertainment options such as bowling, escape games do not attract repeat customers. Once a customer has played a game, they are not going to go back to play the same game. They may come back 2-3 more times to play the other games on offer, but then they are lost as customers until a new game is installed. In theory they could visit other Escape Hunt locations, but unfortunately the same few games have been installed at all their UK locations, eliminating the opportunity of crossover customers. I would imagine it wouldn't take long to reach market peak before fill rates start to decline, similar to a film's run in theatres (although some films do attract repeat viewers). In addition, due to the physical nature of these games, wear-and-tear must be a factor in game shelf-life. I may explore typical escape room game shelf-life a bit further to project when Escape Hunt will need to begin replacing their games, and how much cash they may need at that time to do so. Or I may not; I'm beginning to lose interest in this project and may move on at the end of the month. Good luck to you all regardless!
Thank you for your analysis, lavenonews. I wonder whether some of the other escape room chains are employing the strategy you suggested of easier rollout while still private, then listing later. I'm not convinced that Escape Hunt is taking things to a new level; I checked several escape room aficionado blogs to see which brands they thought were best and Escape Hunt rarely receives a mention: https://topescaperoomsproject.com/, https://escapetheroomz.com/top-100-escape-rooms-in-the-world-march-2019/, https://escapethereview.co.uk/best-escape-games/, https://thelogicescapesme.com/uk-guide/, https://unlockandroll.com/tag/recommended/, http://www.reallyfun.uk/best-escape-rooms-in-the-world/. Interestingly, one of Escape Hunt's top master franchisers has launched her own VR escape room company outside of the brand, while leveraging her relationship with Escape Hunt in marketing: https://enterthemission.com/about/#gref. Her NZ sub-franchise recently rebranded and is now operating as Escape HQ, the most recent of several former franchises to rebrand. I agree that it is expected to see some franchise attrition, but there is reason to pause when former franchises continue operating under different names or when master franchises launch related side businesses cutting out Escape Hunt's revenue share potential. Perhaps this master franchiser was ready to take things to the next level before Escape Hunt was, or perhaps Escape Hunt's franchise management and support services are weak?
I reckon you can safely assume this 5% is now completely out of circulation and not coming back anytime soon.
L&G still have a few available but once that’s gone, I see a strong & supportive shareholder register.
I am not Stuart Hawthorne... so is this you putting your head above the parapet, Playful?!
On a serious note, this looks good news, we needed some shares to be bought up by other investeors who see this through the lens of longer term investment and not just the hot money speculators. Once you get a few hundred thousand shares there is not really a short term way out at the moment, so anyone buying this number of shares must be in it as an investor and seeing a very attractive valuation entry point.
Lavenonews, excellent post as always.
Having counted bookings this week for the Leeds venue the half term is showing weekend bookings levels so that’s encouraging and they seem to have a pop-up escape room at the event detailed below:
hTtps://www.yorkshireeveningpost.co.uk/whats-on/things-to-do/****tails-city-sample-leeds-best-bars-under-one-roof-1386408
I think rolling out VR rooms is the next step it will only add to the attraction and from what I understand the Scottish design grants resume processing applications in April.
My concern is Harwood Capital will be banging on the door soon enough promising the world, but I don’t think the Chairman is going to let Mr. Mills run away with this and reap all the benefits especially having put in so much time & effort.
Soon be time to put my head above the parapet!
Yes, not my scene when it goes nuts like that.
Hopefully we can have a sensible information share and challenge each other.
Agree that the numbers will tell a fuller story, but what we do know right now is that current market cap of £3.5m gets you the growing UK sites doing run rate revenues somewhere between £4.5-5m p.a. and generating EBITDA at site level, and an ex growth existing franchise business. That's enough to keep me interested.
Agree there are questions over cash (this is where the grant and tax credits matter) and how long to achieve breakeven to cover central costs and halt operating cash burn, but the mature units are trading well enough to suggest that this can be achieved and that they now have a successful site operating formula. They are pulling the right levers to reduce site build out costs, learning from experience. The Resorts World site, embedded into a retail centre, is very interesting to follow.
I don't care much about the loss of single site franchisees, that is not the equity story and the old EH business which was all franchise is bound to show some churn. That is not the business plan - it is about multi site franchises and most importantly the UK owned sites.
Competition - yes it's a fair observation. I think they are pointing to a lack of competition at the premium end, which is where this whole escape / immersive experience business may be going. It's a bit like saying Cineworld had masses of single site competitors in the late 90's when it started to 'premiumise' the cinema experience but true competition was actually quite low where it was pitching its product. Or Hollywood Bowl (or whatever they called themselves at the start) had a lot of local single site competitors when it took 10 pin bowling up to a new level. I think that is what they are getting at.
Are they reading the opportunity correctly? Quite possibly. The market has plenty enough small single site operators that have started on a low cost almost anywhere. Where this goes next is up a level in terms of amenity and product - it is a well trodden path in leisure businesses.
Personally, I don't think immersive rooms will be faddish, they offer a good quality leisure experience that can be changed and developed (e.g. VR, new games etc) that has a very wide appeal across many potential client segments. As long as the product, people and locations are good, then I see this becoming an established segment of leisure, that lends itself quite well to scale and brand.
All said though it is a high risk micro business. My leaning is that it could well be high reward ... for someone. If the market behaves like a casino then it will be high reward in private hands, where this sort of roll out is easier without all the noise. Then it will be relisted when all the serious money has been made. That would be a shame.
The lad that wrote the article runs a half decent website so it might help you with your investing journey, especially the interview section: https://www.shiftingshares.com/
Thank you, Playful. I saw that and felt the author made a fair attempt to give a neutral view, albeit with limited information. He is right of course that a key issue is whether management can deliver. But I was surprised by his view that Escape Hunt has 'little to no competition' as there are roughly 1500 escape rooms in Britain, 50 in London alone, and many brands are more established than Escape Hunt: https://www.theguardian.com/games/2019/apr/01/get-out-how-escape-rooms-became-a-global-craze. As for Escape Hunt's anticipated expansion in the US, it seems the market there may have plateaued and already identified its key players: https://roomescapeartist.com/2019/08/08/5-year-us-escape-room-industry-report-august-2019/. Escape Hunt's upcoming annual report will hopefully answer some questions.
Feedback from last weeks Growth & Innovation Forum:
“At a valuation of £4 million, the upside for the business is staggering. Whether management can deliver is another question. I currently hold no position at the moment, but will be digging into this further.”
htTps://www.valuethemarkets.com/2020/02/17/the-shifting-shares-review-of-this-years-growth-and-innovation-forum-part-2-2/
lavenonews, you can come out from behind the sofa they have all gone now.