RE: Growth & Innovation Forum19 Feb 2020 10:25
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.
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