Time to take a pizza of Escape Hunt?
“Just four years ago the company’s share price touched £1.50. Backed by a new set of Investors, and with the steady expansion of its franchise, Escape Hunt’s share price – currently around 7p – may have a long upwards journey ahead”
The fall and gradual recovery of the share price of experiential leisure company Escape Hunt (AIM:ESC) highlights the impact shifts in support from institutional investors can have even on the most well run business.
After a hedge fund holding 10pc of the company – a solid performer on all other fronts – went into administration last year the share price tumbled from more than 100p in January 2019 to 15p 12 months later. By the time TMS interviewed Escape Hunt CFO Graham Bird this March shares were trading at less than 3p.
But as a new set of institutional investors – including former PizzaExpress and Channel 4 head Luke Johnson – have bought into the company this summer, the price has more than tripled.
Samurai and shares
Since the company was founded 2013 Escape Hunt has pioneered the intriguing ‘escape rooms’ entertainment concept. An escape room is an immersive environment in which groups of half-a-dozen or so players are locked in for a set period, with the challenge of solving a series of puzzles to unlock the room before time is up. Themed environments set in the worlds of the Japanese samurai, the Wild West, Blackbeard’s treasure island, and Doctor Who – a concept developed in association with the BBC – have proved popular for birthday parties, family outings and even corporate team building exercises.
Founded in 2013, the company now owns nine venues in the UK, with two more on the way, and has built a network of international franchise partners operating escape rooms at more than 50 locations across 24 countries. Escape Hunt is closing in on returning a profit as the business grows: the company’s 2019 year end results showed revenue up 128pc to £4.9m from £2.2m in 2018, and an operating loss of £5.9m, down from a £10.0m loss in 2018.
During his interview with TMS Mr Bird said the primary reason for share price fall was negative momentum generated by the folding of one of its major institutional investors, the hedge fund Arrowgrass Capital, which had held a 10pc share in the company. The subsequent hit to the share price reduced the return on the placing of the Arrowgrass shares: having first tried to place the shares at around 50p administrators finally cleared the block at 10p. The fall-out took place in market conditions already challenging to smaller companies due to Brexit uncertainty and the hit to investor confidence in small caps that followed the collapse of funds associated with Neil Woodford.
But Escape Hunt’s price has rallied this summer as new supporters have come on board following a June placing to raise up £4.316m to fund the company’s continued expansion.
The new backers include the well known entrepreneur Luke Johnson, founder of the private equity house Risk Capital Partners, and perhaps best known for overseeing the rapid expansion of PizzaExpress through the 1990s, during which the business grew from 12 to more than 150 restaurants, and the share price rose from 40p to over 900p. He went on to chair Channel 4 and the Royal Society of Arts.
Escape Hunt’s other principal backers include the leading UK wealth manager Canaccord Genuity, which has a 20.7pc stake, the financial spread trading company – a new backer – Spreadex (12.4pc), and the investment management company JO Hambro (10.05pc).
The company plans to use the fundraising to open up to half-a-dozen new venues in the UK over the next 12 months, a step towards a longer term target of 50 owner-operated sites. As Escape Hunt has acknowledged, that programme will depend on the continued easing of pandemic restrictions. In July the easing of the lockdown in the UK and many of the countries in which the company operates franchises allowed venues to begin to reopen. All eight locations in England are now open for part of the week, and work has re-commenced on two new sites put on hold due to the lockdown. The company’s Edinburgh venue will re-open pending an announcement from the Scottish Government.
Escape Hunt will continue to extend the new line of business the company launched during the lockdown, its first online escape rooms, which allow customers to explore rooms through Zoom and other platforms by sending instructions to ‘a real-life expert games master’ standing by in the room ready to find clues and solve puzzles. The company’s next update on progress towards rolling out its expansion programme is due by the end of September.
It seems the gradual recovery in Escape Hunt’s share price is beginning to reflect the day-to-day progress of the company on the ground towards building a profitable, cash generative business based on a popular new entertainment concept. Just four years ago the company’s share price touched 150p: backed by a new set of investors, and with the steady expansion of its franchise, Escape Hunt’s share price – currently around 7p – may have a long upwards journey ahead.