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MIDAS SHARE TIPS: Daleks help profits at Escape Hunt

 

MIDAS SHARE TIPS: Accumulate! Doctor Who themed game rooms with Daleks help profits to roll in for events firm Escape Hunt


Imagine being shut in a dimly-lit room with a dalek and three friends, trying to escape by solving clues and puzzles for a jolly hour or so. It may sound less than appealing, but hundreds of thousands of people do it every week, particularly young adults between the ages of 25 and 35. 

The venues are known as escape rooms and they have earned fans from Bangkok to Birmingham. Participants are shown into a room themed to look like a film or TV set, from Alice in Wonderland to Dr Who – and they have to work out how to escape, with trained hosts on hand if they fall into difficulty. 

Escape Hunt is a pioneer in the field and the shares, at 34p, should move materially ahead in the coming months and beyond. 

Expanding: Escape Hunt’s Doctor Who themed game rooms are a hit

The company floated on the stock market in 2017. Back then it was primarily a franchise business, coming up with ideas for games and room designs but leaving the operational side to franchisees around the world. 

The franchise business is still in place today, but chief executive Richard Harpham has added sites that Escape Hunt owns and manages, with 15 in the UK and a further three overseas, each offering around six different rooms. 

Franchises make sense in far-flung parts of the world, but fully owned properties are considerably more profitable, generating earnings of at least £150,000 annually, compared with franchise income of around £40,000. 

Successive lockdowns last year and this knocked Escape Hunt back and the shares plummeted. But Harpham and his team used the time well, launching virtual games that could be played from home and plotting how they could grow once the pandemic was over. 

Their plans are starting to deliver. With high streets and shopping centres hit by store and restaurant closures, landlords have been anxious to hammer out deals with would-be tenants. 

Escape Hunt has taken full advantage, securing premium sites in towns such as Watford, Norwich and Cheltenham that it could never have afforded before. 

But Harpham was keen to do more, expanding the group beyond escape rooms to include similar businesses, which offer consumers something a little different to do in their leisure time. 

He has found the answer in Boom Battle Bars, a small but fast-growing firm that combines cocktails and bar food with competitive games, from shuffleboard to augmented reality darts. 

There is even the chance to try Bavarian axe-throwing – a popular pastime, but one that is highly supervised. 

Worthy foe: One of Doctor Who's Daleks

Worthy foe: One of Doctor Who’s Daleks

Escape Hunt is paying £10million upfront for Boom Battle, with a further £7 million to be paid out in future, provided the business lives up to its promise. The deal is being financed through the issue of up to £17million of new shares at 30p each. The transaction closes tomorrow, following which Escape Hunt will change its name to XP Factory. 

Boom Battle has just seven venues so far, but 20 more sites are expected to open over the next 12 months. Looking ahead, a further 39 sites have been earmarked, 18 of which have already agreed terms. 

More Escape Hunt sites are scheduled to open too, taking the group total to 80 by the end of 2022. 

There are co-location opportunities as well, where Escape Hunt and Boom Battle can share sites and punters can move effortlessly from one to the other. A joint site opened this month in Lakeside shopping mall in Thurrock and another is planned in London’s Oxford Street next year.

Escape Hunt has been loss-making to date but it is expected to move into profit this year with earnings of £1.2million, soaring to £5.7million in 2022 and £9.4million pencilled in for the following year.

Midas verdict: Escape Hunt has had a bumpy ride on the stock market but the group is now stronger, more established and about to become significantly bigger. At 33p, the shares are a buy. 

Traded on: AIM Ticker: ESC changing to XPF Contact: escapehunt.com/investors or 020 7846 3322 



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