TIDMNGHT
RNS Number : 2923C
Nightcap PLC
09 June 2023
This announcement contains Inside Information for the purposes
of Article 7 of EU Regulation 596/2014 (which forms part of
domestic UK law pursuant to the European Union (Withdrawal) Act
2018). Upon the publication of this announcement this Inside
Information is now considered to be within the public domain.
9 June 2023
Nightcap plc
("Nightcap", the "Company" or the "Group")
Acquisition of certain of the assets of Dirty Martini
Share subscription and issue of convertible loan notes
Trading update
and
Total voting rights
Introduction
Nightcap (AIM: NGHT) is pleased to announce that it has entered
into an asset purchase agreement to acquire certain of the assets
(the "Assets") of DC Bars Limited, the operator of the 'Dirty
Martini' chain of cocktail bars ("Dirty Martini"), and Tuttons
Brasserie Limited (together the "Companies") (the "Acquisition")
for a consideration of up to GBP4.65 million (GBP4.15 million in
cash on completion and a further GBP0.5m payable based on certain
conditions being met). The Acquisition is being undertaken as part
of a pre-pack administration process by the Companies.
In conjunction with the Acquisition, Nightcap has raised a total
of GBP5.0 million, through a subscription of 19,583,333 of new
ordinary shares in the Company (the "Subscription Shares") at 12
pence per share, being a premium of 26.3% to Nightcap's last
closing mid-market share price on 8 June 2023, to raise GBP2.35
million and the issue of GBP2.65 million new convertible loan
notes.
The Company is also providing a trading update in relation to
its 52-week period ending 2 July 2023.
Acquisition highlights
-- Complementary acquisition of 10 Dirty Martini bars and the
Dirty Martini brand which has significant roll-out potential
-- Strong opportunity for material synergies to be recognised across the enlarged business
-- Five bars located across London (in Bishopsgate, St Paul's,
Monument, Hanover Square and Covent Garden) and five bars located
in Birmingham, Bristol, Leeds, Manchester and Cardiff
-- Dirty Martini provides a new complementary customer offering
and the Group's first expansion into Manchester and Leeds, key
future markets for the Group
-- With sites located in Birmingham, Bristol and Cardiff the
Acquisition complements and expands the Group's cluster model
strategy
-- Consideration of up to GBP4.65 million for venues that
generated aggregated unaudited site level revenue and EBITDA of
GBP23.7 million and GBP3.9 million respectively for 2022
Sarah Willingham, Chief Executive Officer of Nightcap,
commented:
"We couldn't be happier to welcome Dirty Martini to the Nightcap
family. These are long-established, well-run bars that fit well
with our existing portfolio and our model of running multiple
brands in clusters in London and around the country.
"Dirty Martini's late-night bars operate in a similar way to
ours. They have great bars in excellent locations with impressive
fitouts, following over GBP10 million of capital investment.
"We will embed the Dirty Martini site operations into our
existing head office infrastructure and expect to see synergies
across the business as we continue to grow.
"This is the fourth acquisition in under three years and marks
yet another important strategic step toward building the UK's
leading bar group."
"Whilst the rail strikes have been detrimental to our current
year performance, we are extremely proud of Nightcap's successful
new openings, the growth we have achieved and the foundation we
have built for the future. Without the impact of rail strikes we
would have had an exceptional year, which bodes well for next
year."
"With the acquisition of Dirty Martini, we have a sizeable late
night bar group with significant potential for further growth in
the years ahead and we therefore look to FY 2024 with increased
confidence."
Background to and reasons for the Acquisition
Following the acquisitions of The Cocktail Club (formerly The
London Cocktail Club) in January 2021, the Adventure Bar Group in
May 2021 and the Barrio Bar Group in November 2021, the Board is
pleased to announce the acquisition of the Dirty Martini brand, in
line with Nightcap's strategy of making selective acquisitions
within the drinks-led premium bar segment of the UK hospitality
sector.
Dirty Martini experienced tough trading conditions over the last
year, in line with the hospitality industry in general, including
the negative consequences of train strikes, the cost-of-living
crisis and inflation. The Dirty Martini business has also struggled
with significant indebtedness. These factors have now led to the
business being put into administration and providing Nightcap with
the opportunity to acquire the Assets at an attractive price. The
Board considers the 10 Dirty Martini sites to be sound operating
venues, which will benefit significantly from being part of the
larger Nightcap bar group.
The Board believes that the Dirty Martini brand is a good fit
with Nightcap's existing portfolio, increasing the Group's presence
in its already established locations and expanding Nightcap's
portfolio of bars into further key cities. There has been extensive
capital investment into the Assets of over GBP10 million and
Nightcap expects to realise a strong level of short-term synergies
together with further synergies across major cost lines once the
integration has completed.
The Board believes that the Dirty Martini brand is a compelling
and complementary acquisition for Nightcap. It is well established
and has further significant roll out potential.
Nightcap has employed all staff working at the 10 Dirty Martini
bars and Tuttons restaurant as part of the Acquisition. Nightcap
will not be assuming any of the Companies' existing indebtedness
and Nightcap shall only acquire those liabilities of the Companies
which transfer to it by operation of law.
Acquisition terms
The Companies entered into administration on 9 June 2023 and
Leonard Curtis Recovery Limited (the "Administrator") was appointed
as the administrator. An initial consideration of GBP4.15 million
(the "Initial Consideration") has been paid to the Administrator in
cash. Nightcap, via its wholly owned subsidiary, DMN Bars Limited
("DMN"), has agreed to pay a further deferred consideration of up
to GBP0.5 million, subject to the successful assignment to Nightcap
of the leases of four key sites. Nightcap is guaranteeing DMN's
obligation to pay such amounts under the terms of the asset
purchase agreement. Pursuant to the terms of the Acquisition, the
Companies, acting by the Administrator, have granted Nightcap a
licence to occupy the 10 leases from today for a period of up to
180 days and Nightcap, with the assistance of the Administrator,
will seek the assignment of all of the leases to the Group during
this period. Further announcements in relation to the longer-term
position with the leases will be made as appropriate.
The Initial Consideration has been satisfied fully in cash and
funded by Nightcap from a combination of the issue of: (i) the
Subscription Shares at a price of 12 pence per share to new and
existing shareholders in Nightcap; and (ii) GBP2.65 million of new
convertible loan notes ("CLNs"), raising a total of GBP5.0 million
for Nightcap.
The sites being acquired
Dirty Martini is a leading cocktail bar brand, known for its
bespoke cocktail menu specialising in martinis, spirited
atmosphere, brunch and its 'happy hours'. The Dirty Martini ethos
is to create an environment which operates successfully at brunch,
after work, through a popular happy hour, and into the night as a
late-night cocktail bar.
Dirty Martini operates 11 sites, including Tuttons, across 10
leases in sought-after locations in the UK, from Covent Garden to
Leeds. Nightcap considers that Dirty Martini has significant
potential for further roll-out in key identified cities.
Tuttons is a British Brasserie that serves a wide demographic as
a result of its location in Covent Garden. Tuttons is popular with
theatregoers given its proximity to the West End, offering
traditional British menus.
Dirty Martini has a complementary food offering that has been
specifically tailored to be served alongside its signature drinks,
with flavours designed not to overpower the cocktails. Dirty
Martini's 'Martini Brunch' remains a strong revenue contributor,
attracting customers earlier in the day. Dirty Martini's core
customer demographic is considered to be broadly similar to that of
Nightcap's existing brands.
Through the Acquisition, Nightcap will operate the following
bars and restaurant:
-- Dirty Martini, Bishopsgate
Situated in the heart of the City, Dirty Martini Bishopsgate was
opened in 2013 and refurbished in 2020. The venue is based over an
area of 3,627 square feet and has an up to 325-person capacity.
-- Dirty Martini, St Paul's
Situated in the City, Dirty Martini, St Paul's represents the
biggest Dirty Martini venue in London. The venue was opened in 2014
and was refurbished in 2016. It is based over an area of 7,175
square feet and has an up to 400-person capacity.
-- Dirty Martini, Hanover Square
Situated in the West End, Dirty Martini, Hanover Square opened
in 2011, the second site to be opened under the Dirty Martini brand
and was refurbished in 2015. The venue is based over an area of
3,713 square feet and has an up to 250-person capacity.
-- Dirty Martini, Monument
Situated close to London Bridge, Dirty Martini Monument was
opened in 2014 and refurbished in 2020. The venue is based over an
area of 3,466 square feet and has an up to 350-person capacity.
-- Dirty Martini, Covent Garden
Dirty Martini, Covent Garden was the first site to be opened in
2010, under the Dirty Martini brand, and was refurbished in 2016.
The venue is based over an area of 1,002 square feet and has an up
to 150-person capacity.
-- Dirty Martini, Cardiff
Situated in close proximity to Cardiff Central, Dirty Martini,
Cardiff, opened in 2016, is the largest site by size in the Dirty
Martini portfolio. The venue is based over an area of 10,086 square
feet and has an up to 600-person capacity.
-- Dirty Martini, Birmingham
Situated on Waterloo Street, Dirty Martini Birmingham was opened
in 2018 and the most recent site to be refurbished in 2022. The
venue is based over an area of 6,888 square feet and has an up to
350-person capacity.
-- Dirty Martini, Bristol
Situated in Bristol City Centre, Dirty Martini Bristol is the
latest site to open, having opened in 2021. The venue is based over
an area of 3,305 square feet and has an up to 250-person
capacity.
-- Dirty Martini, Manchester
Situated in Spinningfields, Dirty Martini Manchester was opened
in 2017. The venue is based over an area of 6,954 square feet and
has an up to 400-person capacity.
-- Dirty Martini, Leeds
Situated in Leeds city centre, Dirty Martini Leeds was opened in
2017 and refurbished in 2018. The venue is based over an area of
6,480 square feet and has an up to 290-person capacity.
Further information in relation to the above venues can be found
at: https://dirtymartini.uk.com/
-- Tuttons British Brasserie
Tuttons is a restaurant which operated from its Covent Garden
location for over 45 years. It is one of a select few sites in
Covent Garden with a large, permanent, outdoor seating area with
views of the famous Covent Garden Market and Piazza. The restaurant
is based over an area of 5,630 square feet and has an up to
202-person capacity. Tuttons shares a kitchen with Dirty Martini
Covent Garden and the leases of these two sites are linked.
Further information can be found at:
https://www.tuttons.com/
Financial information on the Acquisition
Based on unaudited management accounts for the year ended 31
December 2022, at the aggregated site level, the Assets generated
revenue of GBP23.7 million, EBITDA of GBP3.9 million and profit
before tax of GBP3.1 million. The Assets had an unaudited asset
value of approximately GBP4 million at 31 December 2022. The
associated costs of the Companies' head office and the asset value
of its lease have been excluded, as these will not be acquired.
Acquisition funding
In order to fund the Acquisition, the Company has raised funds
totalling GBP5.0 million, from a combination of the issue of the
Subscription Shares for GBP2.35 million and the issue of the CLNs
(totalling GBP2.65 million) to existing shareholders and new
investors (the "Investors").
Nightcap has entered into subscription agreements with the
Investors, issuing in aggregate 19,583,333 Subscription Shares at a
price of 12 pence per share (the "Issue Price"), representing a
premium of 26.3% to the mid-market closing price of Nightcap's
Ordinary Shares on 8 June 2023.
Further details of the CLNs
On 9 June 2023, Nightcap executed a convertible loan note
instrument creating GBP2.65 million of CLNs. The CLNs mature on 9
September 2025 (the "Maturity Date") and are convertible at the
option of the investors subject to: (i) as a result of any
conversion notice(s) being served, at least 33% of the principal
amount of CLNs outstanding immediately prior to such notice being
served will be converted; and (ii) the Company's shareholders
having passed resolutions enabling the Directors to allot and issue
the resulting shares on a non pre-emptive basis. The CLNs are only
convertible following a period of 12 months from issue, at the
higher of the Issue Price or a 15% discount to the volume weighted
average share price of the Company's shares for the five business
day period prior to the Investor notifying the Company of its
intention to convert. The CLNs will bear a coupon of 10% per annum
which shall be rolled up and settled either when a conversion
notice has been served or on an Exit (as defined below) by the
issue of such the relevant number of shares at the conversion price
in respect of such accrued interest amount. The CLNs are
non-transferable and are unsecured.
The CLNs shall convert automatically in the event of: (a) a
change of control in the Company; and (b) the sale of substantially
all of the business and assets of the Company (each an "Exit"). If
the share price upon Exit is lower than the conversion price, then
any amounts outstanding in respect of the CLN shall be converted
into shares at the Exit share price.
Prior to any conversion notice having been served and in
relation to any outstanding CLNs prior to the Maturity Date, the
Company has the right to repay the noteholders. In the case of
early repayment of the CLNs (within the 12-month period following
the issue of the CLNs), the interest payable shall be equivalent to
12 months accrued interest on the principal amount of the CLNs
outstanding immediately prior to such repayment. Any amount of the
CLNs outstanding at the Maturity Date will be repaid by the Company
together with accrued interest up to such date.
Trading update
Whilst the cost-of-living crisis has affected the entire
hospitality industry, as indicated in Nightcap's previous updates,
the influence of train strikes has been the main source of
disruption to the Group's trading in the 52-week period ending 2
July 2023 ("FY 2023"). Recovering the lost revenues and EBITDA from
the significant level of train strikes held across the UK,
particularly during the key 2022 Christmas trading weeks, has
proved a particular challenge. Management currently estimates that
the 28 train strike days over FY 2023 have cost the Group a total
of approximately GBP2.9 million in revenue and GBP1.9 million in
EBITDA. In relation to FY 2023, the Board currently expects to
report revenues that are broadly in line with current market
expectations, with adjusted EBITDA* expected to be below current
market expectations.
Despite macroeconomic and train strike related challenges, the
Board continues to be impressed with the resilience of Nightcap's
brands and its customers. This provides assurance of the strength
and full potential of Nightcap's business when allowed to trade
uninterruptedly, especially when combined with the Dirty Martini
Assets, and the Board looks forward to the future with confidence.
In the absence of further rail strikes or other major
interruptions, the Board remains positive about the outcome for the
52 week period ending 30 June 2024 due to the organic growth they
anticipate in all of the Group's bar brands and the positive
contribution from the Dirty Martini Assets.
* IAS 17 Earnings before interest, tax, depreciation,
amortisation, share based payments, exceptional items, acquisition
related transaction costs and pre-opening costs.
Admission to AIM
Application will be made to the London Stock Exchange for the
Subscription Shares to be admitted to trading on AIM ("Admission").
It is anticipated that Admission will occur, and dealings will
commence in the Subscription Shares at 8:00 a.m. on or around 15
June 2023.
The Subscription Shares rank pari passu in all respects with the
existing Ordinary Shares of the Company and therefore will rank
equally for all dividends or other distributions declared, made or
paid after the Completion Date.
Total Voting Rights
Following the issue of the Subscription Shares, the Company's
enlarged issued ordinary share capital comprises 217,883,990
Ordinary Shares with voting rights. The Company does not hold any
Ordinary Shares in treasury. Therefore, the total number of
Ordinary Shares in the Company with voting rights is 217,883,990
.
Interests in the Company
Interests of Directors and persons discharging managerial
responsibilities (PDMRs)
Following the issue of the Subscription Shares, Nightcap's
Directors now have the following percentage interests in the
Company's issued ordinary share capital:
Following the issue of the Subscription
Shares
Number of Ordinary Percentage of issued
Shares held ordinary share capital
Director
Michael Willingham-Toxvaerd 12,552,501 5.76%
Sarah Willingham-Toxvaerd 21,686,584 9.95%
Tobias Van der Meer 9,050,000 4.15%
Lance Moir 360,000 0.17%
Thi-Hanh Jelf 180,000 0.08%
In addition, certain of Nightcap's persons discharging
managerial responsibilities ("PDMRs") now have the following
percentage interests in the Company's issued ordinary share
capital:
Following the issue of the Subscription
Shares
Number of Percentage of issued
Ordinary Shares ordinary share capital
held
PDMR
John James Goodman* 16,032,157 7.36%
James Hopkins 8,105,810 3.72%
Thomas Kidd 3,936,594 1.81%
Jim Robertson 111,484 0.05%
*Includes 901,312 Ordinary Shares held by CGCC Ltd which is
beneficially owned and controlled by John James Goodman.
Other interests
Following their participation in the Subscription, individuals
below have the following percentage interests in the Company's
issued ordinary share capital:
Following the issue of the Subscription
Shares
Number of Percentage of issued
Ordinary Shares ordinary share capital
held
Name
Mark Irwin 10,291,667 4.72%
Michael Wainwright 6,658,333 3.06%
A Minto 12,976,024 5.96%
For further enquiries:
Nightcap plc
Sarah Willingham / Toby Rolph / Gareth Edwards email@nightcapplc.com
Allenby Capital Limited (Nominated Adviser +44 (0) 20 3328 5656
and Broker) www.allenbycapital.com
Nick Naylor / Alex Brearley / Piers Shimwell
(Corporate Finance)
Jos Pinnington / Amrit Nahal / Tony Quirke
(Sales and Corporate Broking)
Bright Star Digital (PR) https://www.brightstardigital.co.uk/
Pam Lyddon +44 (0) 7534 500 829
pamlyddon@brightstardigital.co.uk
Forward Looking Statements
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"anticipates", "targets", "aims", "continues", "expects",
"intends", "hopes", "may", "will", "would", "could" or "should" or,
in each case, their negative or other variations or comparable
terminology. These forward-looking statements include matters that
are not facts. They appear in a number of places throughout this
announcement and include statements regarding the Board's beliefs
or current expectations. By their nature, forward-looking
statements involve risk and uncertainty because they relate to
future events and circumstances. Investors should not place undue
reliance on forward-looking statements, which speak only as of the
date of this announcement.
Website hyperlinks
For the avoidance of doubt, the contents of websites and any
websites accessible from hyperlinks in this announcement are not
incorporated into and do not form part of this announcement.
Alternative Performance Measures
Alternative Performance Measures are financial measures of
historical or future financial performance, financial position, or
cash flows, other than a financial measure defined or specified in
IFRS, being the applicable financial reporting framework in respect
of the Company.
In order to make a full assessment, investors should read the
whole of this announcement and not rely solely on the Alternative
Performance Measure, which should be considered in addition to, and
is not intended to be a substitute for, or superior to, the other
historical financial information within this announcement. Certain
of the components used within the Alternative Performance Measure
relate to past performance. Past performance is not an indication
of future results.
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