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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?
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.
Yes, that is all in line with what I said. Unaudited revenue stagnated, same as last year's. Fewer active franchisees, so shrinking. I mentioned in another comment that their Houston location has been open for years, so it's odd that they mention it here as though it is part of some new rollout. It sounds like a simple game change to me. Interestingly, they used to have 4 US locations and now they only have 2 as the other 2 went out of business. I'm curious to see when they actually announce a new US location, as they have been talking about this new partnership for nearly a year and officially signed 5 months ago, yet still no mention of specific expansion locations.
faze1 I have discussed their expansion elsewhere, but to summarise here their owner-operated sites are indeed expanding, albeit far below projections, and their franchise operations are actually shrinking atm.
From their last trading statement, their revenues from owner-operated sites have increased and their revenues from franchisees have stagnated, but there is no mention of profit or cashflow. No numbers on EBITDA, only vague statements. In their unaudited half-yearly results, EBITDA was well in the red despite decent revenues, with net cash position revealing they were almost completely tapped out when they placed more shares to raise cash. Gross profit was 27% of revenue, but overall net loss was 145% of revenue. Their administrative expenses are 67% higher than their revenues.
Phiggy87, where have you seen information on new US franchises being rolled out? The latest trading statement curiously mentioned the US franchise partnership signed 5 months ago and then a new game for Houston as though Houston is part of that partnership, but their Houston location has been open for years. I've seen no mention of any new US locations. From their website they currently have 2 active US locations (Houston and Miami) but they used to have 4 until 2 of them went out of business.
My approach is I'm sure quite different from most others as I'm on the autism spectrum. Please don't take offense if this comes out wrong... I understand some look for situational opportunities to manipulate prices through hype and spin and such (rampers and derampers and I'm guessing share bears?) and I would be useless at that as my default is to say it exactly as I see it to a fault. Others look to influencers with loads of followers for analysis and hot tips; I consider what they say but with a huge grain of salt. My strength is in examining things thoroughly, so if I'm interested in a company I read all of the RNS from float onwards (skimming the annual reports and such for key information). I check fundamentals and trading trends from float onwards. I use Google Alerts for news updates beyond RNS. I look for inconsistencies and gaps, claims vs evidence. In this case, I also checked the Wayback Machine to answer some questions about how the business had evolved. Overkill for most I'm sure but that's what is helping me learn.
Sorry, faze1, I didn't mean to cause offense. I wasn't refering to anyone in particular and didn't think P&D was a pejorative term, just a strategy people use. I'll add 'share bear' to my list of new terminology to look up. Different from a deramper I take it?
Haha yes, you're probably right when it comes to trading but not for learning. I'm taking it nice and slow and researching the hell out of stocks before forming opinions, then watching to see how well I did. Like I said earlier, I'm trying to develop a nuanced intuition. AIM is actually great for that because I can see my predictions pan out more quickly and can get a sense of sound fundamentals in early stage SMEs. This is the first one I felt confident enough in to publicly voice my analysis and so far I'm still feeling pretty good about it. I can see why 'P&Ds' would feel good today about their analysis as well.
Thanks, smacks. This conversation has actually been enlightening for me, so thanks for your time everyone. I'm risk averse so still watching and learning before putting my quid on the line. I'm sure some of you have done well this morning so congrats on that! I'll definitely be watching out for rampers when I'm ready to start trading :)
I know some of the terminology, I wouldn't say a lot but thanks. I've been watching for a short while now before joining. Now I've got a new thing to learn: deramping. Not sure what the play would be for that though? Try to drive down the price again to buy more shares at a lower price?
I don't know why other people bothered to create their accounts, but I created mine to document my opinion so I could compare later to results. It's part of my learning process. Once this ESC wave passes I'll try opining on another stock. I'm not even trading at this point, just watching and researching and analysing. Why did you create your account? In any case, it's looking like I was right about the buys slowing and flava was right about the Friday dumps.
Hmm... I didn't think I was being negative, just looking at the situation critically. This is my first time creating an account on any sites like this because it's the first time I felt I might have something to contribute. So most newbies start commenting on several shares right away?
I saw that guy getting dumped on and figured I'd eventually get it too for being new. Not much I can do about that. Does everyone get hazed when they first join or just those with opinions? Serious question.
Buys are already slowing down, so best get your dumps in soon if that's your play. Smacks, I found out that 2 of their 4 US locations have already gone out of business. One was in Texas (Dallas IIRC) and the other Cleveland.
Yes I read it and much more. I take what companies say in their trading statements with a huge grain of salt as they cherry-pick and sugar-coat and spin. I look for what they are not telling and what they are being vague about and investigate to see if I can fill in the blanks and get a fuller picture. That's what led me to my view. Perhaps I do a deeper dive than most because I'm trying to develop a nuanced intuition for stock picks and I'm not yet there. You're of course entitled to come to your own conclusion based on your own analysis. Good luck to you!
Honest mistake lol. But I'm not convinced the company is fundamentally sound or that it will jump back up to 50p...it's been in freefall almost since IPO. Seems most of the ramping brigade are only looking at the immediate Arrowgrass situation and not the big picture, which is fine for those dumping their stock now but not for anyone looking to get in on a solid medium- to long-term investment. They've got a two-prong business model: owner-operated locations and franchised locations. Up til now most of their revenue (and their only profit) has been from franchisees but there are troubling signs of poor franchise management, with franchisees going it alone or shutting down and no new ones signing up in over a year. Instead the company is pouring its attention and money into owner-operated locations but they are way behind in their projected growth and I suspect cash must be stretching thin. I bet those who paid 110p 2 years ago after the company's first plunge thought they were striking while the iron's hot too, same with those who paid 60p a year ago.
Playful, this is you on ADVFN:
playful
31 Jan '20 - 09:58 - 15 of 33
0 2 0
I am monitoring all UK owner operated sites and totting up the bookings before 10am each morning to tally up a week’s minimum revenue based on a £75 average booking value.
I seem to have forgotten about Birmingham Resorts World so will include them from 2/2
Bookings taken before 10am
Thursday 30/01 : 79 > £5925
Friday 31/01 : 124 > £9300
Saturday 01/02 315 > £23625 (almost sold out everywhere!)
Sunday 02/02 : 218 > £16350
Monday 03/02 : 63 > £4725
Tuesday 04/02 : 73 > £5475
This is you as 'iain'tgotaclu' here:
iaintgotaclu
Tue 10:46
Posts: 8,598
Price: 14.50
Strong Buy
I am monitoring all UK owner operated sites and totting up the bookings before 10am each morning to tally up a week’s minimum revenue based on a £75 average booking value.
I seem to have forgotten about Birmingham Resorts World so will include them from 2/2
Bookings taken before 10am
Thursday 30/01 : 79 > £5925
Friday 31/01 : 124 > £9300
Saturday 01/02 315 > £23625 (almost sold out everywhere!)
Sunday 02/02 : 218 > £16350
Monday 03/02 : 63 > £4725
Tuesday 04/02 : 73 > £5475