TIDMNGHT
RNS Number : 3899U
Nightcap PLC
23 November 2023
23 November 2023
Nightcap plc
("Nightcap" or the "Company" or the "Group")
Results for the 52 weeks to 2 July 2023
Nightcap (AIM: NGHT), the owner of The Cocktail Club, the
Adventure Bar Group, Barrio Familia and the Dirty Martini group of
bars, is pleased to announce its audited full year results for the
52 weeks to 2 July 2023. The Company's Annual Report and Accounts
for the 52 weeks to 2 July 2023 ("Annual Report") and the Notice of
Annual General Meeting ("AGM") will be posted to shareholders
today.
The Company's Annual Report and the Notice of AGM will be
available shortly on the Company's website at:
www.nightcapplc.com
The AGM will be held at 10:00 am on Monday 18 December 2023 at
the offices of Allenby Capital Limited, 5 St. Helen's Place,
London, EC3A 6AB.
Sarah Willingham, Chief Executive Officer of Nightcap,
commented:
"At Nightcap we believe that everyone deserves a great night out
and with this belief at our core, we are fast becoming one of the
UK's leading bar groups. During the year, we grew our revenue by
29% from GBP35.9 million to GBP46.4 million whilst increasing the
number of bars we operate from 31 to 46.
Unaudited Group revenue was GBP14.7 million for the 13-weeks
ended 1 October 2023 ("Q1 FY2024") resulting in a 42.7% increase
compared to Group revenue of GBP10.3 million for the equivalent
period in FY2023. Whilst trading in October 2023 has continued on
the same trend as Q1 FY2024, we are focussing on the important
Christmas period. Christmas bookings and enquiries across the whole
estate including Dirty Martini are in line with the strong 2022
Christmas period."
For further enquiries:
Nightcap plc
Sarah Willingham / Toby Rolph / Gareth Edwards email@nightcapplc.com
Allenby Capital Limited (Nominated Adviser +44 (0) 20 3328
and Broker) 5656
Nick Naylor / Alex Brearley / Piers Shimwell www.allenbycapital.com
(Corporate Finance)
Jos Pinnington / Amrit Nahal (Sales and Corporate
Broking)
Bright Star Digital (PR) https://www.brightstardigital.co.uk/
Pam Lyddon +44 (0) 7534 500
829
pamlyddon@brightstardigital.co.uk
CHAIRMAN'S STATEMENT
Since our last annual report, Nightcap has continued to grow
both organically and by acquisition. Sarah and her excellent team
have integrated the different businesses, optimising their unique
characters and streamlining the efficiency of the business
operations behind the innovative cocktails and the magnetic social
experiences. In keeping with our strategy, I am extremely pleased
we have acquired the Dirty Martini chain of bars over the summer of
2023.
Everyone in the hospitality sector breathed a sigh of relief as
the strictures imposed by COVID were relaxed. Unfortunately, the
respite was short lived as it was quickly followed by a seemingly
endless run of transport strikes, rapid inflation and a "cost of
living crisis". The longer-term effects of COVID have changed the
way people manage their working week and impacted our traditional
trading patterns. The COVID years have made us more flexible and
creative. Sarah and the wider executive team at Nightcap have shown
exceptional leadership to navigate through the continuing
uncertainties. I am pleased that, despite the challenges and
uncertainties that have been thrown at us, we have continued to
focus on the growth opportunities of the business.
Our medium-term focus continues to be on growth, however having
made several significant acquisitions in the last couple of years,
a lot of attention, time and energy has been put into their
integration into the Nightcap family and making sure the economies
of scale, that can be achieved from a larger commercial base, are
realised. Those advantages will be seen in the short term, but the
longer-term benefits of creating a platform that make future
expansion easier, faster and more efficient are even more
exciting.
Our senior management have identified a number of new sites that
will enhance our geographical reach as well as scanning the horizon
for potential acquisitions that will add value and strength to the
existing Nightcap portfolio. In light of the difficult trading
environment and the UK's uncertain economic outlook, the Board is
continuing to approach both organic growth and potential
acquisition opportunities with caution. The Board continues to be
mindful of the importance of immediate cash and profit generating
capabilities of such acquisitions, as well as any new brands being
in harmony with the existing Nightcap portfolio.
It is a continuing theme, with good reason, that we continue to
invest in, and prioritise, our staff (both in recruitment and
training). Our people are the core of our business. They create the
welcome and experience that our customers enjoy and that keeps them
coming back. Last year we launched the Nightcap Bar Academy to
provide in-depth training and improve skills. This has proved to be
such a success that further resource is being directed towards
it.
I have no doubt that Sarah and the senior management team have
all the skills and personal attributes to overcome the challenges
ahead. Sarah, our CEO continues to build a strong, cohesive and
focused team to power the business on to new and exciting
prospects. I am very pleased with the Group's performance and
expect the long-term growth to continue in establishing Nightcap as
one of the leading bar businesses in the UK.
Gareth Edwards
Chairman
CHIEF EXECUTIVE'S STATEMENT
INTRODUCTION
I am pleased to present another year of significant growth for
Nightcap plc, despite the painful ongoing impact of train strikes.
These audited results for the 52 weeks to 2 July 2023 represent
Nightcap's second full year of trading.
When we founded Nightcap less than three years ago we didn't
expect to be so far ahead of our plan in such a short space of
time. At Nightcap we believe that everyone deserves a great night
out and with this belief at our core, we are fast becoming one of
the UK's leading bar groups. The activities undertaken during the
year saw us taking several steps to get closer to achieving our
goals.
To be closing the financial year with the impressive acquisition
of Dirty Martini, bringing our total number of bars to 46 is an
incredible achievement. I'm immensely grateful to our teams who
continue to work tirelessly and brilliantly amidst the backdrop of
a tough trading environment caused mainly by challenging economic
conditions and the ruthless continuation of train strikes, targeted
to cause maximum damage to businesses across the country. I am
impressed by how our teams have embraced the many internal changes
from our rapid growth.
During the year, we grew our revenue by 29% from GBP35.9 million
to GBP46.4 million whilst increasing the number of bars we operate
from 31 to 46. The strong growth during the year is once again
driven by our continued focus on both new site openings for our
core brands alongside the addition of complementary acquisitions.
The majority of growth in the number of sites came towards the end
of the financial year, leaving significant additional annualised
revenue from those bars to be achieved in the current year.
In June 2023, we welcomed Dirty Martini to the Group, which
included ten Dirty Martini branded bars and the Tuttons French
bistro restaurant located in Covent Garden. These final results
therefore include Dirty Martini's results for three weeks. Dirty
Martini was acquired out of administration and I am very pleased
with how quickly the business has been integrated, considering the
complexity of the acquisition. We are delighted with how Dirty
Martini has settled into the Nightcap family alongside our The
Cocktail Club, Tonight Josephine, Blame Gloria and Barrio brands.
We are excited to continue our focus on rolling out these brands
alongside our continued search for additional acquisitions that
will complement our journey to become the UK's leading bar
group.
Throughout the year we have relied on the support and loyalty of
our rapidly expanding group of customers and without them our
significant growth simply would not have been possible. For the
first time in years they managed to enjoy unrestricted social
nights out with friends and loved ones in the safe and fun
environments that we continue to offer, only disrupted by the
ongoing rail strikes. Once again I would like to take this
opportunity to thank our guests for welcoming our brands into their
towns and cities across the UK, as we continue our expansion. What
makes our industry so great and why so many of us are drawn to it,
is the fun and the joy brought by our staff and our customers to
create memorable magic moments across our 46 bars. When our bars
are busy, filled with people enjoying themselves, there is simply
no better place to be.
LIKE-FOR-LIKE GROWTH
Whilst like-for-like* growth is becoming an increasingly
difficult measure to rely on, due to the significant changes in the
macro environment caused by the aftermath of COVID-19, rail
strikes, inflation, energy prices and higher interest rates leading
to a cost of living crisis, we have tried to give some measure of
the Company's financial performance during the period.
On the back of record breaking like-for-like growth in 2022 of
23.6% we saw like-for-like revenue growth normalise in 2023 through
a 12.5% decline. As a result overall like-for-like revenue remains
ahead of 2019. The main driver of the reduction in like-for-like
revenue growth for the year was by far the impact of the ongoing
rail strikes. There were a total of 28 strike days in the financial
year, mostly targeting holiday periods and pay day weekends to
ensure they cause as much damage to the hospitality sector as
possible. In total we estimate that GBP2.9 million** in revenue and
GBP1.9 million** in company EBITDA (IAS 17) was lost during the
strike days and so had the biggest impact on the like-for-like
revenue growth during the year. We do not believe that Nightcap
will be in a position to reach its fullest trading potential until
the industrial action has been settled.
ENTERTAINMENT AND DIGITAL
During the previous financial year our major focus was
developing our successful pre-sold daytime events such as
"bottomless brunches" and transferring them across the rest of our
bars, where relevant. This was done very successfully in order to
maximise utilisation of our properties during times when our bars
are otherwise not trading. This year we have focussed on ensuring
that all events align with the individual brands and their
audiences, to optimise how we continue to market events to each
brand's loyal customer base.
As part of our strategic direction it is clear to us that
entertainment, experiences and events are becoming a significantly
more important factor when our Millennial and Gen Z customers
decide how to curate their nights out. During the year 48% of our
revenue came from pre-sold or pre-booked events and parties. As a
result, understanding the digital journey customers go through to
reach their decisions is becoming the heartbeat of how we fill our
venues every night. Whether it relates to becoming an important
part of that special birthday party, or the once in a lifetime hen
do, the decisions are made digitally and they are made in
advance.
At Nightcap we have decided to make digital a fundamental part
of our investment programme, in terms of both people, resources and
technology, to drive a deeper automated understanding of all of the
touch points on our customers' journeys. We expect that when we
reach our next level of capability and match digital to our already
developing cluster operating model, we will gradually see an
improved ability to offer relevant, targeted and diversified nights
out for our customers across all of our brands wherever they live,
study or work. As we make investments in technology and digital
capabilities a core part of our approach over the coming three
years, we expect to launch market leading customer centric
technology to continue to bring new improved timely offers to a
generation of customers who are expecting a seamless connection and
interaction between their on- and offline experience.
ROLL-OUT
In the first half of the financial year we continued the roll
out of our brands, opening a further six bars before the important
Christmas period in 2022. As a result of the impact of rail strikes
as well as the uncertainty for our customers caused by the cost of
living crisis, we decided to slow down our roll-out programme. We
are focussing on allowing Dirty Martini to settle into the Group,
maximising returns from our existing business and newly opened
sites and driving synergies and efficiencies across the enlarged
Group. We plan to continue our roll out programme and have an
exciting pipeline of sites to progress when market conditions
improve.
CLUSTER MODEL
With the addition of Dirty Martini we consolidated our existing
site clusters in Bristol (five bars), Cardiff (three bars),
Birmingham (four bars) and parts of London such as Shoreditch (four
bars), the City (five bars) and Covent Garden (four bars) all
operating well within a short distance of each other enhancing the
late night offering in the local city centre areas. We also
acquired Dirty Martini sites in new northern locations Leeds and
Manchester, adding to our first Tonight Josephine site in
Liverpool, all cities with significant potential for us to build
new clusters.
Bristol and Birmingham are both great examples of the potential
for expansion using our diversified brand cluster strategy. In
Birmingham we operate four bars and would expect to generate
annualised revenue in excess of GBP8.5 million based on our budget
for the 52 weeks ended 30 June 2024. In addition we have identified
at least another three locations that would be suitable for
Nightcap brands in Birmingham.
In Bristol, Nightcap currently operates five bars across The
Cocktail Club, Tonight Josephine, Blame Gloria and Dirty Martini
brands. We would expect to generate annualised revenue in excess of
GBP6 million based on our budget for the 52 weeks ended 30 June
2024 and we have identified at least another two locations that
would be suitable for Nightcap brands in Bristol.
As we break the Nightcap bars into clusters both inside and
outside of London it becomes clear just how great the potential is
for a multi-brand bar operator like Nightcap with dozens of cities
being suitable for our multi-site operation. Nightcap has
identified sites and cities using its cluster strategy and believes
there is the opportunity to reach well above 150 sites across its
existing brands during the next phase of growth.
We are excited to combine our multi brand cluster approach by
taking significant steps to digitally connect our loyal and engaged
consumers across our clusters, to provide them with fresh,
innovative and differentiated ways of enjoying their best nights
out with us wherever they live, study or work.
ACQUISITIONS UPDATE - DIRTY MARTINI
With the acquisition, on 9 June 2023, of Dirty Martini via a
pre-pack acquisition out of administration, we continued to deliver
on our ambition to create the leading bar group in the UK,
consisting of the most loved brands and concepts, with the highest
potential for roll-out across the country.
Dirty Martini is one of the leading cocktail bar brands in the
UK. 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, very much in keeping with the ethos across the
rest of the Nightcap brands.
With their mix of Martini cocktails and popular mini burgers and
chicken slider birdcages, Dirty Martini has created a great
relaxing atmosphere to enjoy corporate and private events. This is
often followed by a DJ led party atmosphere, ending in selfies
taken by groups of friends in front of the signature angel wings,
epitomising the Dirty Martini night out.
The acquisition of Dirty Martini is in keeping with the Group's
strategy of targeting millennial and Gen Z customers who are moving
away from generic mid-market chains and sticky floored nightclubs,
and are instead favouring late night bars where they can have a
great time, drink high quality drinks and enjoy an experience-led,
memorable, safe and fun night out in unique venues.
REVENUE GROWTH
The 29% increase in revenue from GBP35.9 million to GBP46.4
million represents another year of impressive revenue growth.
Importantly, Dirty Martini was not acquired until 9 June 2023, so
the Board anticipates significant annualised growth during this
current financial year as the acquisition beds in and becomes a
core part of the Nightcap Group. In addition to the acquisition and
the new sites opened during the year, what is really exciting is
the foundation of the well-defined brands that we have created,
spread across clusters and locations with great additional
potential. These are operated by our talented and engaged
colleagues, working in inclusive and safe environments that allow
them to grow as professionals and make hospitality a proper career
path. Taking this triangle of brands, clusters and strong
operations and overlaying a focus on experiences and a stronger
digital journey across the Group is key to unlocking even more
potential in each location, whilst we continue to look at both
organic and acquisitive ways to continue our rapid expansion.
ECONOMIC CLIMATE
Nightcap was created during the COVID pandemic, a distressing
time for the hospitality industry and before the roll out of the
first vaccine, with an unprecedented opportunity ahead of us.
Lockdowns were followed by a period of significant downturn in
the property market as a result of record closures and no demand
for new openings. Nightcap took advantage and we successfully
opened a string of highly attractive bar locations across the
UK.
This was followed by inflation caused by post-COVID-19 supply
chain disruption and was compounded by the war in Ukraine, and its
impact on energy prices and interest rates. The resulting cost of
living crisis and reduced consumer spending has impacted most
hospitality businesses across the UK.
With inflation falling and energy prices, site fit out costs,
supply chain costs and wage inflation coming under control, a more
predictable trading environment was becoming visible only to be
significantly disrupted by the ongoing rail strikes that started in
June 2022 and have affected us for nearly every month of trading
since. With a total estimated impact of GBP2.9 million** of lost
revenue and GBP1.9 million** of lost company EBITDA (IAS 17) the
impact is significant for Nightcap and debilitating for the
industry as a whole.
We are well shielded from the increase in prices in our supply
chain, with 90% of our sales being drinks sales. We have an
excellent ongoing relationship with a small number of suppliers
with annual fixed cost contracts. As we add more and more volume we
see these prices decreasing and supplier led incentives
improving.
We have continued our work to mitigate against the cost of
energy, with the introduction of a sustainability consultancy
partner and the objective of saving 20% from usage, combined with
having fixed the majority of our utilities at competitive rates.
These actions along with our interest rate cap on the reference
base rate (SONIA) fixed at 3% until August 2025, taken out as
interest rates started to rise, ensure that we continue to
effectively mitigate the impact of a number of these macro
influences.
FINANCIAL POSITION
We started the year with net debt of GBP0.2 million (excluding
IFRS 16 leases liabilities) which included cash of GBP5.4 million.
A proportion of this cash was earmarked for capital expenditure on
six new sites as we finalised our initial roll out programme.
Dirty Martini was acquired on 9 June 2023 out of administration
as a pre-pack deal for a payment of GBP4.15 million with an
additional GBP0.5 million due on successful assignment to Nightcap
of certain sites, the completion of which was announced on 9
November 2023. The Group will make a further announcement in due
course in relation to deferred consideration for the acquisition.
The transaction was financed through the raising of GBP5 million of
capital from existing and new investors. GBP2.65 million was raised
as new convertible loan notes along with GBP2.35 million of new
shares issued at 12 pence per share on the date of the
transaction.
We continue our great relationship with HSBC where we are
gradually paying down our GBP10 million facility. We ended the year
with net debt of GBP4.0 million (excluding IFRS 16 leases and
convertible loan notes) which includes GBP5.0 million of cash.
The current financial position, alongside the cash generation
from operations, puts Nightcap in a good financial position as we
continue to deliver on our promise to create the leading bar group
in the UK over the coming years.
PEOPLE
With the recent acquisition of Dirty Martini, the Nightcap Group
has expanded to include over 1,000 colleagues. A large majority of
our workforce is comprised of individuals at the early stages of
their careers, and we are committed to providing them with a clear
path for growth within our business. Retention of talent in our
industry is challenging, but we firmly believe that our people are
at the core of our success and progress. Our rapid growth has made
Nightcap an attractive workplace for top talent, and we have the
privilege of working with exceptionally skilled individuals at all
levels.
Investing in the training and development of our employees is a
top priority. We have increased our efforts in this area, providing
comprehensive training programs for trainers, leadership
development opportunities for managers, and performance management
strategies across the board. These initiatives are essential in
order for us to achieve our goal of becoming the leading bar group
in the UK. We are committed to offering the best parties, drinks,
and music, as well as maintaining the highest standards of venue
management nationwide. None of this would be possible without our
deep commitment to developing the skills and talents of our
workforce.
I would like to extend my gratitude to all of our dedicated and
enthusiastic colleagues for another year filled with great fun,
parties, and laughter, both for ourselves and our customers. Their
hard work and spirit have truly made Nightcap a remarkable
place.
Last year, we achieved a significant increase in the number of
women working across our business, and our senior executive team
now consists of 50% women. This year, the gender split across the
entire business is approximately 47% women and 53% men. We are
proud to have so many talented women shining in traditionally
male-dominated roles within our industry. Furthermore, we are
committed to embracing diversity in all its forms, including
welcoming LGBTQ individuals and individuals from diverse religious
and racial backgrounds. Nightcap will always be a home for anyone
who wants to work with the best in the hospitality industry,
offering a high-energy, rewarding, and fun environment.
To ensure the safety of both our staff and customers in our
bars, we have launched the highly successful "Safer Together"
campaign. This initiative, featured across national press,
encourages people to stay together and look out for each other
during nights out. As part of this campaign, all Nightcap bars now
stock free spiking testing kits behind the bar, phone chargers for
customers and our managers and staff have received training to
identify and assist individuals who may find themselves alone or
confused. We are dedicated to ensuring that everyone gets home
safely after enjoying a great night out.
I am proud to announce the progress of our latest project, the
harmonisation of contracts and terms of employment within the
Nightcap group. This initiative not only safeguards the existing
benefits enjoyed by our employees, but also establishes a fairer
and more consistent organisational structure. In addition, we are
excited to launch our new careers website,
www.nightcapcareers.co.uk, which we believe will significantly
enhance our retention, recruitment and hiring process.
Together, these accomplishments and initiatives should propel
Nightcap forward as a leading force in the hospitality industry. We
are honoured to have such a fantastic team supporting our mission,
and we look forward to even greater success in the future.
SUSTAINABILITY
Nightcap is committed to continuing our work to reduce our
carbon footprint and for the first time we will report against TCFD
(Task Force on Climate-related Financial Disclosures) which sets
out a more comprehensive range of initiatives than ever before,
which we believe will eventually lead to best in class progress
through our sustainability efforts. We continue to make good
progress in the reduction of energy consumption, which, other than
the purchase and sale of spirits, is the largest part of our carbon
footprint. This includes working with our sustainability partner,
who have installed energy consumption devices across the entire
estate except for the recently acquired Dirty Martini venues. As
consumption of alcohol is the largest component of our carbon
footprint, we will continue to assess what steps can be taken to
reduce or offset the impact of alcohol on our carbon footprint over
the coming year.
CURRENT TRADING AND PROSPECTS
Due to the acquisition of Dirty Martini on 9 June 2023, only a
few weeks prior to the beginning of the new financial year, we have
been extremely busy, welcoming colleagues from the new sites,
onboarding everyone into the Nightcap way of working. We have
finalised the assignment of all the Dirty Martini leases except for
one unprofitable Dirty Martini site at Hanover Square which, due to
unreasonably high rent, had not operated profitably for a long
time. This site was handed back on 13 October 2023. After positive
discussion relating to the future of the Tuttons and Dirty Martini
sites in Covent Garden, we have agreed a new lease of up to three
years on more attractive commercial terms, which leaves Nightcap
with a total of 46 bars.
Trading in the first 13 weeks of the new financial year (period
to 1 October 2023) has been adversely impacted by September's
record warm weather, the ongoing cost of living crisis and
significant train strikes deliberately targeting payday weekends to
cause maximum damage. Warm weather in September (which reduced the
demand for socialising in basement bars) led to record weeks at our
outdoor venues, Bar Elba and in particular Luna Springs, which had
its strongest summer yet, as customers enjoyed our large outdoor
spaces.
Unaudited Group revenue was GBP14.7 million for the 13-weeks
ended 1 October 2023 ("Q1 FY2024") resulting in a 42.7% increase
compared to Group revenue of GBP10.3 million for the equivalent
period in FY2023. Revenue for this 13-week period represents a
16.7% like-for-like* decrease compared to the equivalent period for
FY2023, mostly caused by additional rail strikes and extremely warm
weather throughout September.
Whilst trading in October 2023 has continued on the same trend
as Q1 FY2024, we are focussing on the important Christmas period.
Christmas bookings and enquiries across the whole estate including
Dirty Martini are in line with the strong 2022 Christmas
period.
The Board remains cautious about the near term future trading
due to the challenges presented by continuing train strikes. The
Nightcap estate is of a higher quality, better operated and with
better trained and more engaged teams than ever before. We
therefore remain optimistic about the future potential of the Group
and remain excited about building the UK's leading bar group.
The Group's balance sheet remains strong. As at 1 October 2023,
the Group's cash at bank was GBP2.6 million with bank debt of
GBP9.1 million prior to entering the important and lucrative
Christmas period.
Sarah Willingham
Chief Executive Officer
* Like-for-like revenue is same site revenue defined as revenue
at only those venues that traded in the same week in both the
current year and comparative reporting periods.
** These estimates have been derived from the average weekly
revenues in the weeks preceding and following the week impacted by
the industrial action. EBITDA has been estimated based on gross
margins adjusted for variable costs.
FINANCIAL REVIEW
The 52-week period ended 2 July 2023 represents a full year of
trading for The Cocktail Club, the Adventure Bar Group, and Barrio
Familia Group, and three weeks of trading for Dirty Martini, which
was acquired on 9 June 2023.
As the Group accounts on a weekly basis, the full year results
report on a 52-week period ended 2 July 2023, with the prior year
comparative being the 53 weeks ended 3 July 2022.
Nightcap's performance for these periods is summarised in the
table below.
52 weeks 53 weeks
ended ended
2 July 2023 3 July 2022
GBPm GBPm
------------------------------------------------- ------------ ------------
Sites trading at year end 47** 31
Revenue 46.4 35.9
Adjusted EBITDA (IFRS 16)* 6.6 6.0
Adjusted EBITDA (IAS 17)* 2.6 3.3
(Loss) / Profit from operations (2.8) 1.4
(Loss) / Profit before tax (4.9) 0.2
Cash and equivalents 5.4 5.4
Net Debt (including IFRS 16 lease liabilities) (44.5) (27.8)
Net (Debt) (excluding IFRS 16 lease liabilities) (6.7) (0.2)
Net Assets 14.5 16.2
------------------------------------------------- ------------ ------------
The Group uses a range of financial and non-financial measures
to assess its performance. Several of these (for example Adjusted
EBITDA and Adjusted earnings / (losses) per share) are considered
to be Alternative Performance Measures ("APMs"), as they are not
defined under IFRS. The Board believes that these APMs provide
stakeholders with additional useful information on the underlying
trends, performance and position of the Group and are consistent
with how its business performance is measured internally and across
the wider hospitality sector.
Adjusted EBITDA / EBITDAR (EBITDA before rental costs) is also
the measure used by the Group's banks for the purposes of assessing
covenant compliance.
* The table below shows the reconciliation between adjusted
EBITDA and statutory figures within these accounts. Further
definitions of the APMs can be found on page 93 of the Annual
Report.
** As at year end, we have included Dirty Martini Hanover Square
as a trading site. The lease for this site was handed back to the
landlord on 13(th) October 2023. Further information is provided in
the Chief Executive's Statement.
52 weeks 53 weeks
ended ended 03
02 July 2023 July 2022
Note GBP'000 GBP'000
------------------------------------------------ ------ --------------------- -----------------
(Loss) / profit from operations (2,812) 1,407
Exceptional items 10 792 84
Acquisition related transaction costs 11 734 (866)
Pre-opening costs 12 1,013 442
Share based payment charge 7 181 345
Impairment 6 565 143
------------------------------------------------ ------ --------------------- -----------------
Adjusted profit from operations 473 1,555
Depreciation and amortisation (pre IFRS 16
Right of use asset depreciation) 6 3,094 2,256
IFRS 16 Right of use asset depreciation 6 3,278 2,224
IFRS 16 Right of use asset / liability disposal 6 (220) -
------------------------------------------------ ------ --------------------- -----------------
Adjusted EBITDA (IFRS 16) 6,625 6,036
IAS 17 Rent charge (3,997) (2,727)
Adjusted EBITDA (IAS 17) 2,627 3,309
------------------------------------------------ ------ --------------------- -----------------
RESULTS FOR THE YEAR
This year Nightcap has continued to grow at pace, with the
addition of six new sites across the three brands and the
acquisition of the Dirty Martini group of bars which contributed
three weeks of trading in this financial year. This has taken the
estate to 46 bars across the UK. The Group has achieved revenues of
GBP46.4 million, an increase of 29% over the previous year, driven
by new openings and the full year effect of the Barrio Familia
group.
On 9 June 2023, Nightcap acquired the Dirty Martini group of
bars (including Tuttons restaurant) for an initial consideration of
GBP4.15 million which will increase to GBP4.65 million on the
successful assignment of the property leases of four key sites, the
completion of which was announced on 9 November 2023. Nightcap is
currently the operator of nine Dirty Martini bars and the Tuttons
brasserie restaurant in Covent Garden. There are four Dirty Martini
bars located in London with an additional five bars located in
Cardiff, Bristol, Birmingham, Leeds and Manchester.
The single biggest impact in the last financial year has been
the continued industrial action from transport worker unions that
has significantly impacted the whole of the hospitality industry.
There were 28 days of industrial action last year, targeted mainly
on Thursdays and Saturdays. This action has cost us an estimated
GBP2.9 million(1) of lost revenue and GBP1.9 million(1) of lost
EBITDA (IAS 17) and has cost the hospitality industry an estimated
GBP3.25 billion(2) overall. On a like--for--like(3) basis, this
industrial action impacted the Group negatively resulting in a
12.5% decline when compared to the previous year where we saw 23.6%
growth in like-for-like(3) revenue.
1 These estimates have been derived from the average weekly
revenues in the weeks preceding and following the week impacted by
the industrial action. EBITDA has been estimated based on gross
margins adjusted for variable costs.
2 Source: UK Hospitality - "Rail strikes to cause half-term havoc"
3 Like-for-like revenue is same site revenue defined as revenue
at only those venues that traded in the same week in both the
current year and comparative reporting periods.
Revenue for the 52-week period ended 2 July 2023 incorporated a
full year of trading for The Cocktail Club, Adventure Bar Group and
Barrio Familia, and three weeks of trading from the Dirty Martini
group of bars that were acquired on 9 June 2023. The Group's brands
trade in similar geographical locations and are subject to the same
risks as described in the principal risks and uncertainties section
of the Annual Report. The brands are also part of the cluster model
as described in the Chief Executive's report, where several brands
operate in the same geographical area. Therefore, the Group's
revenue is reported as one segment. Further information can be
found in Note 4.
The Group delivered an Adjusted EBITDA of GBP6.6 million under
IFRS 16 and an Adjusted EBITDA of GBP2.6 million under IAS 17.
Taking into account the financial impact of the industrial action,
management estimates that Adjusted EBITDA (IAS 17) would have been
GBP4.5 million for the 52 weeks ended 2 July 2023. As highlighted
above, the industrial action impacted the Group by an estimated
GBP1.9 million at the EBITDA level.
Group depreciation increased from GBP3.9 million to GBP5.7
million, which reflects a full year's contribution in relation to
the sites opened in 2021-22 together with the Barrio Familia Group
bars, and a further six bars opened in 2022-23. Group amortisation
increased to GBP0.6 million in the year due to the amortisation of
intangibles associated with the Adventure Bar Group and Barrio
Familia Group transactions.
Exceptional items over the period of GBP0.8 million are detailed
in Note 10. The Group incurred acquisition related transaction
costs in respect of Dirty Martini of GBP0.7 million. In the prior
year, the Group incurred acquisition related transaction costs,
being a net credit, of GBP0.9 million. Transaction costs relating
to the Barrio Familia Group transaction of GBP0.4 million were
offset by a GBP1.2 million credit that related to the deferred
contingent liability relating to the Adventure Bar Group
consideration - see Note 11.
The Group has a reported tax credit for the year of GBP0.9
million (2022: credit of GBP0.3 million). The Group has utilised
capital allowances, tax losses and Group relief where available to
mitigate corporation tax payable. The Group has benefited from the
introduction of the 130% capital allowance super deduction due to
the capital expenditure incurred on the new sites.
In June 2023, the Group made the decision to temporarily cease
trading at the Barrio Watford site. The Group retains the lease for
this site and is considering whether to either launch an
alternative brand on the site, partner with another operator or
dispose of the lease. As a consequence, the Group has recognised an
impairment charge of GBP565,000 in relation to the property, plant
and equipment.
With the Group continuing to execute its roll out strategy,
during parts of the financial year there were preopening costs that
relate to the fixed and training costs in delivering the new sites
ready for opening. In the 52-week period ended 2 July 2023, the
Group incurred GBP1.0 million of preopening costs relating to the
six sites opened in the year.
The Group reported a loss from operations of GBP2.8 million for
the 52-week period ended 2 July 2023, compared to a profit of
GBP1.4 million in the previous year. The Group also reported a loss
before tax of GBP4.9 million compared to a profit of GBP0.2 million
for the 2022 financial year.
The table below sets out our basic and diluted (loss) / earnings
per share.
52 weeks 53 weeks
ended ended
Earnings per share attributable to the ordinary equity 02 July 2023 03 July 2022
holders of the parent Note pence pence
------------------------------------------------------- ---- ------------- -------------
(Loss) / earnings per share 13
- Basic (2.09) 0.06
- Diluted (2.09) 0.06
------------------------------------------------------- ---- ------------- -------------
Financing
The Group incurred total interest costs of GBP2.1 million
compared to GBP1.2 million in the previous financial year. Interest
on bank loans was GBP0.5 million compared to GBP0.2 million in the
previous period. Further information can be found in Note 8.
During the year, the Group refinanced its borrowings from three
individual lenders under multiple tranches with new debt facilities
from HSBC Bank to provide support to the business on its roll out
strategy. The new GBP10 million HSBC Bank facility, replaced GBP5.5
million of legacy debt that we acquired from acquisitions, which
had a blended interest margin of 4%. The remaining GBP4.5 million
has supported the fit out of the sites opened in the financial
year. The new facility carries a margin of 3% above SONIA on a GBP3
million term loan and 3.25% above SONIA on a GBP7 million Revolving
Credit Facility. Further details of the loans can be found in Note
22. At the same time, the Group has taken out an interest rate cap
on the reference base rate (SONIA) fixed at 3% giving certainty
over interest costs until August 2025.
In order to fund the acquisition of Dirty Martini, the Company
raised new funds, totalling GBP5.0 million, through a combination
of new shares and convertible loan notes ("CLNs"). 19,583,333 new
shares were issued at a price of 12 pence per share totalling
GBP2.35 million, which represented a premium of 26.3% to the
mid-market closing price of Nightcap's Ordinary Shares on 8 June
2023. In addition, the Company issued CLNs totalling GBP2.65
million to existing shareholders and new investors.
The CLNs mature on 9 September 2025 and are convertible at the
option of the investors subject to certain conditions. The CLNs are
only convertible following a period of 12 months from issue, at the
higher of 12 pence per share 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 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. In this context, an Exit is
defined as being a change of control in the Company or the sale of
substantially all of the business and assets of the Company.
Cash flow and financial position
The Group's cash flow from operating activities was GBP6.7
million compared to GBP2.2 million in the prior year. We continued
to invest in our estate and invested GBP6.7 million (2022: GBP6.0
million) before right of use asset additions, in new site capital
expenditure. This was spent bringing six new sites into the
business and investing in IT systems to improve the reporting of
management information. In addition, we acquired Dirty Martini via
a pre-pack acquisition out of administration for an initial
consideration of GBP4.15 million (excluding acquisition related
transaction costs).
The table below sets out the Group's year end cash and net
(debt) position.
At
2 July 2023
------------------------------------------------- ---------- ------------
Cash Note 19 GBP5.0m
Cash in transit Note 2.13, GBP0.4m
18
------------------------------------------------- ---------- ------------
Cash including cash in transit GBP5.4m
------------------------------------------------- ---------- ------------
Net (debt) - pre IFRS 16 leases Note 29 GBP(6.7m)
Cash in transit Note 2.13, GBP0.4m
18
------------------------------------------------- ---------- ------------
Net (debt) - pre IFRS 16 leases including cash in GBP(6.3m)
transit
------------------------------------------------- ---------- ------------
IFRS 16 leases Note 21 GBP(37.9m)
------------------------------------------------- ---------- ------------
Net (debt) - including IFRS 16 leases and cash in GBP(44.2m)
transit
------------------------------------------------- ---------- ------------
As part of the refinancing completed in August 2022, the
majority of the Group's bank debt is repayable via a bullet payment
in August 2025, with a further 1-year option to extend.
Lease liabilities increased to GBP37.9 million from GBP27.6
million and reflect the addition of the new sites opened during the
year. This liability is expected to increase further as the Dirty
Martini leases are assigned to Nightcap.
Market overview and opportunities
The Group continues to enjoy a property landscape and a
corporate landscape that presents considerable opportunities to
secure sites on attractive terms in prime city centre locations.
The current macroeconomic environment has reduced competition so
more sites are available. The significant headwinds in the UK
economy, including the rise in interest rates to 5.25% has left
many companies struggling to manage their debt burden and as a
result they are looking for ways to re--structure their balance
sheets. The acquisition of Dirty Martini as a pre-pack acquisition
out of administration is one such example.
The Group faces a number of challenges as a consequence of
ongoing industrial action, inflationary price pressures and the
ongoing cost of living crisis.
Train strikes - Industrial action
With a loss to the industry of an estimated GBP3.25 billion, the
ongoing train strikes, started in June 2022, continue to have a
profoundly negative effect on the late night industry in
particular. Industrial action has continuously targeted Thursdays,
Saturdays, bank holidays and other celebratory holidays to ensure
the biggest possible impact on consumers and businesses. The
ongoing train strikes significantly impacted the Company's trading
on these rail strike action days throughout the financial year,
particularly affecting the business' ability to convert high margin
evening trade during weekends, resulting in an estimated loss of
GBP1.9 million** of EBITDA (IAS 17). We do not believe that
Nightcap will be in a position to reach its fullest trading
potential until the industrial action has been settled.
Inflation
Early on in the year, inflationary pressures resulted in
increased fit out costs for new sites, significantly increased
energy costs and increased wage cost pressures. Towards the end of
the financial year we saw fit out pricing pressures subside and
energy costs have continued to reduce with the Group locking into a
new fixed one year deal in September 2023. This has resulted in
significant additional savings as well as an easing of wage
pressures as inflation has continued to reduce during the course of
the year. However, inflation continues to have an impact on
consumers' disposable income.
Interest rates
Given the turbulent nature of inflation and its link to interest
rates as a key tool of the Bank of England to control inflation, in
September 2022 the Group had hedged 80% of its bank debt interest
costs for three years by taking out an interest rate cap, so that
there is certainty that whilst interest rates remain high the
majority of our bank interest costs will be fixed due to the
interest rate cap on the reference base rate (SONIA) at 3% (Note
22).
Whilst the combination of the above factors makes the trading
environment challenging, our focus on building a market leading
portfolio of bars continues. We continue our focus on providing
good value for everyone and a best in class customer experience and
we believe that our bars operate better than ever, with management
and staff that are well trained and deliver better experiences in
our bars than ever before.
During FY2023, we have invested GBP6.7 million into new sites
and refurbishments (including pre-opening costs), creating a
significant number of new jobs in the year. The increase in drink
sales has allowed us to secure new competitively fixed price
supplier contracts for all key spirits along with enhanced
retrospective volume rebates and ongoing marketing support, which
has allowed us to continue to maintain our profit margin and be
able to re-invest in our team and our guest experience.
As part of the integration of all subsidiary head offices into
one during the financial year, there has been an increased focus on
recruiting best in class subject matter experts from across the
industry to strengthen the Group's senior management team as our
Company continues its rapid growth. This is an important step in
the Group's pursuit of recruiting and retaining a talented and
committed management team, which in turn serves to mitigate
operational execution risks in all departments across the
business.
Further details around our risk mitigation strategies can be
found in the principal risks and uncertainties section of the
Annual Report.
Going Concern
The Board has considered the Group's ability to continue to
operate as a going concern in the current challenging economic
conditions and with the impact that the rail strikes have had on
the business. As at 2 July 2023 the Group had cash balances of
GBP5.4 million including cash in transit. During the financial year
under review the Group refinanced its legacy debt with an
amortising term loan (GBP3m) and a Revolving Credit Facility (up to
GBP7m) repayable in August 2025.
Management has prepared forecasts for the next 15 months in
three scenarios- a base case, a normalised case and a downside
case.
The base case scenario was prepared ahead of the end of the
financial year in the final quarter of FY2023 and included an
assumption that rail strikes continue throughout the FY2024
forecast period with a negative EBITDA impact of GBP1.9 million.
This scenario has been adjusted for trading performance in Q1
FY2024 and the cash position until the end of October 2023. The
base case has been further adjusted for additional known
contractual changes.
A normalised scenario was created to take into account a
potential end to the rail strikes from January 2024. It further
takes into account the launch of the Group's new collaboration with
PianoWorks at its Barrio Covent Garden site which launched on 16
November2023.
A significant, but plausible downside case scenario was
developed to stress the forecasts. This assumes continued rail
strikes and no benefit from any new initiatives or partnerships. It
furthermore anticipates a worsening macro-economic environment
resulting in an additional significant reduction in EBITDA. To
mitigate the modelled deterioration in trading, the significant but
plausible downside case reduces CAPEX and includes cost savings
across the Group. This downside scenario continues to show the
Group meeting all borrowing covenants and having sufficient
liquidity to operate the business.
The Group continues to trade in line with its revised base case
model, in which the Group would meet all borrowing covenants over
the next 15 months and retain sufficient headroom above the cash
balances required to run the business.
The covenant with the lowest headroom in all three scenarios is
the fixed cover charge covenant. The Board recognises that this
cash flow forecast relies on important factors such as ongoing
trading performance, which is currently volatile and impacted by
the challenging macroeconomic environment, as well as the delivery
of conversion into site and company EBITDA along with the
implementation of a number of cash and cost improvement actions.
The Board continually monitors its forecasts and the potential
impacts the above factors may have.
Based on the Group's forecasts, the Directors have adopted the
going concern basis in preparing the Financial Statements. The
Directors have made this assessment after consideration of the
Group's cash flows and related assumptions and in accordance with
the Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting 2014 published by the UK Financial
Reporting Council.
By order of the Board
Toby Rolph
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 52 WEEKSED 2 JULY 2023
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
Note GBP'000 GBP'000
----------------------------------------------------- ------ -------- --------
Revenue 4 46,414 35,943
Cost of sales (9,029) (7,297)
----------------------------------------------------- ------ -------- --------
Gross profit 37,386 28,646
Administrative expenses (40,643) (27,404)
Other income 5 446 165
----------------------------------------------------- ------ -------- --------
Adjusted EBITDA 6,625 6,036
Share based payments 7, 26 (181) (345)
Profit on disposal of right of use asset / liability 6 220 -
6, 15,
Depreciation 16 (5,745) (3,931)
Amortisation of intangible assets 6, 14 (627) (549)
Exceptional items 10 (792) (84)
Acquisition related transaction costs 11 (734) 866
Pre opening costs 12 (1,013) (442)
Impairment 6 (565) (143)
----------------------------------------------------- ------ -------- --------
(Loss) / profit from continuing operations (2,812) 1,407
Net finance expense 8 (2,052) (1,169)
----------------------------------------------------- ------ -------- --------
(Loss) / profit before taxation (4,863) 238
Tax credit on (loss) / profit 9 931 262
----------------------------------------------------- ------ -------- --------
(Loss) / profit and total comprehensive (loss)
/ profit for the period (3,932) 500
----------------------------------------------------- ------ -------- --------
(Loss) / profit for the period attributable to:
- Owners of the parent (4,169) 114
- Non-controlling interest 237 386
----------------------------------------------------- ------ -------- --------
(3,932) 500
----------------------------------------------------- ------ -------- --------
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
Note pence pence
------------------------------------------------ ------ -------- --------
Earnings per share attributable to the ordinary
equity holders of the parent
(Loss) / earnings per share
- Basic 13 (2.09) 0.06
------------------------------------------------ ------ -------- --------
- Diluted 13 (2.09) 0.06
------------------------------------------------ ------ -------- --------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 2 JULY 2023
02 July 03 July
2023 2022
Note GBP'000 GBP'000
----------------------------------------- ---- -------- --------
Non-current assets
Goodwill 14 12,144 9,751
Intangible assets 14 6,971 4,604
Property, plant and equipment 15 12,723 9,109
Deferred tax asset 25 1,489 -
Right of use assets 16 35,905 26,462
Derivative financial asset 361 -
Other receivable 18 914 699
----------------------------------------- ---- -------- --------
Total non-current assets 70,507 50,625
----------------------------------------- ---- -------- --------
Current assets
Inventories 17 1,154 554
Trade and other receivables 18 3,266 2,005
Cash and cash equivalents 19 5,017 5,353
----------------------------------------- ---- -------- --------
Total current assets 9,438 7,911
----------------------------------------- ---- -------- --------
Total assets 79,945 58,537
----------------------------------------- ---- -------- --------
Current liabilities
Loans and borrowings 22 (1,000) (800)
Trade and other payables 20 (12,980) (7,889)
Lease liabilities due less than one year 21 (3,281) (2,374)
----------------------------------------- ---- -------- --------
Total current liabilities (17,261) (11,062)
----------------------------------------- ---- -------- --------
Non-current liabilities
Borrowings 22 (10,687) (4,723)
Lease liabilities due more than one year 21 (34,594) (25,254)
Provisions 23 (683) (366)
Deferred tax provision 25 (2,200) (891)
----------------------------------------- ---- -------- --------
Total non-current liabilities (48,164) (31,233)
----------------------------------------- ---- -------- --------
Total liabilities (65,425) (42,295)
----------------------------------------- ---- -------- --------
Net assets 14,520 16,241
----------------------------------------- ---- -------- --------
Called up share capital 27 2,179 1,983
Share premium 27 23,527 21,372
Share based payment reserve 661 543
Reverse acquisition reserve (2,513) (2,513)
Retained earnings (10,066) (5,639)
13,788 15,746
----------------------------------------- ---- -------- --------
Non-controlling interest 732 495
----------------------------------------- ---- -------- --------
Total equity 14,520 16,241
----------------------------------------- ---- -------- --------
The financial statements on pages 50 to 85 of the Annual Report
were approved and authorised for issue by the Board and were signed
on its behalf by:
Toby Rolph Sarah Willingham-Toxvaerd
Chief Financial Officer Chief Executive Officer
22 November 2023 22 November 2023
Company Number: 12899067
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEKSED 2 JULY 2023
Total
attributable
Share to equity
Called based Reverse holders Non-
up share Share payment acquisition Retained of controlling Total
capital premium reserve reserve earnings parent interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- -------- -------- ------------ --------- ------------- ------------ ---------
At 27 June 2021 1,855 19,267 216 (2,513) (5,753) 13,073 109 13,181
Issue of shares on
acquisition
- Barrio Bar Group 57 1,051 - - - 1,108 - 1,108
Issue of shares -
Adventure
Bar Group contingent
consideration 71 1,054 - - - 1,125 - 1,125
Share based payments
and
related deferred tax
recognised
directly in equity - - 326 - - 326 - 326
---------------------- --------- -------- -------- ------------ --------- ------------- ------------ ---------
Total transactions
with
owners recognised
directly
in equity 1,983 21,372 543 (2,513) (5,753) 15,632 109 15,741
---------------------- --------- -------- -------- ------------ --------- ------------- ------------ ---------
Total comprehensive
income
for the 53 week
period - - - - 114 114 386 500
---------------------- --------- -------- -------- ------------ --------- ------------- ------------ ---------
At 3 July 2022 1,983 21,372 543 (2,513) (5,639) 15,746 495 16,241
Shares issued for cash
subscription - 8 June
2023 196 2,154 - - - 2,350 - 2,350
Share based payments
and
related deferred tax
recognised
directly in equity - - 118 - - 118 - 118
Dividends paid - non
controlling
interest portion - - - - (257) (257) - (257)
---------------------- --------- -------- -------- ------------ --------- ------------- ------------ ---------
Total transactions
with
owners recognised
directly
in equity 2,179 23,527 661 (2,513) (5,896) 17,957 495 18,452
---------------------- --------- -------- -------- ------------ --------- ------------- ------------ ---------
Total comprehensive
expense
for the 52 week
period - - - - (4,169) (4,169) 237 (3,932)
---------------------- --------- -------- -------- ------------ --------- ------------- ------------ ---------
At 2 July 2023 2,179 23,527 661 (2,513) (10,066) 13,788 732 14,520
---------------------- --------- -------- -------- ------------ --------- ------------- ------------ ---------
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE 52 WEEKSED 2 JULY 2023
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Cash flows from operating activities
(Loss) / profit for the period (3,932) 500
Adjustments for:
Depreciation 5,745 3,931
Amortisation 627 549
Profit on disposal of right of use asset / liability (220) -
Share based payments 181 345
Interest on lease liabilities 1,699 917
Interest on borrowings 714 252
Net change in fair value of interest rate cap (361) -
Impairment 565 143
Tax expense (931) (262)
(Increase) in trade and other receivables (1,377) (1,214)
Increase / (decrease) in trade and other payables 4,387 (2,785)
(Increase) in inventories (255) (113)
----------------------------------------------------------- -------- --------
Cash generated from operations 6,840 2,264
Corporation taxes (paid) (184) (72)
----------------------------------------------------------- -------- --------
Net cash flows from operating activities 6,656 2,192
----------------------------------------------------------- -------- --------
Investing activities
Acquisition of Dirty Martini (Note 32) (4,150) -
Acquisition of Barrio Bar Group, net of cash - (991)
Purchase of property, plant and equipment (6,658) (6,008)
Purchase of intangible assets (45) (48)
----------------------------------------------------------- -------- --------
Net cash used in investing activities (10,853) (7,048)
----------------------------------------------------------- -------- --------
Financing activities
Issue of ordinary shares 2,350 -
Proceeds from borrowings (net of repayments of GBP500,000) 12,030 -
Issue costs in connection with borrowings (479) -
Repayment of loans and borrowings (5,597) (941)
Principal paid on lease liabilities (2,255) (906)
Interest paid on lease liabilities (1,699) (917)
Interest paid on loans and borrowings (489) (215)
----------------------------------------------------------- -------- --------
Net cash inflow / (outflow) from financing activities 3,861 (2,979)
----------------------------------------------------------- -------- --------
Net (decrease) in cash and cash equivalents (336) (7,835)
Cash and cash equivalents at beginning of the period 5,353 13,187
----------------------------------------------------------- -------- --------
Cash and cash equivalents at end of the period 5,017 5,353
----------------------------------------------------------- -------- --------
Basis of Preparation
The financial information included in this announcement does not
constitute statutory accounts of the Group for the 52 weeks to 2
July 2023 and 53 weeks ended 3 July 2022 but is derived from those
accounts. Statutory accounts for the 52 weeks to 2 July 2023 will
be delivered to the Registrar of Companies following the Group's
Annual General Meeting. The auditors have reported on those
accounts: their reports were (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 52 WEEKSED 2 JULY 2023
1. GENERAL INFORMATION
Nightcap plc ("the Company") and its subsidiaries ("the Group")
is an award-winning independent operator of 46 themed bars.
At 22 November 2023 the Group operates 16 bars under The
Cocktail Club brand, 13 under the Adventure Bar Group ("ABG")
brand, seven under Barrio Familia Group brand and ten under the
newly acquired Dirty Martini brand.
On 9 June 2023, Nightcap plc acquired the trade and assets for
certain bars and one restaurant relating to the Dirty Martini
business, for a total consideration of up to GBP4.65m. Nightcap is
currently the operator of nine Dirty Martini bars and the Tuttons
brasserie restaurant in Covent Garden. There are four Dirty Martini
bars located in London with an additional five bars located in
Cardiff, Bristol, Birmingham, Leeds and Manchester. Further
information on this acquisition is provided in Note 32.
The Company is a public limited company whose shares are
publicly traded on the AIM market of the London Stock Exchange and
is incorporated and registered in England and Wales.
The registered office address of the Company is c/o Locke Lord
(UK) LLP, 201 Bishopsgate, London, EC2M 3AB.
2. ACCOUNTING POLICIES
2.1. Basis of preparation of financial statements
The consolidated financial statements of Nightcap plc have been
prepared in accordance with International Accounting Standards as
adopted for use in the United Kingdom ("UK adopted IAS") and with
the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards.
The accounting policies adopted in the preparation of the
Financial Statements have been consistently applied to all years
presented, unless otherwise stated. The Group has not early adopted
any other standard, interpretation or amendment that has been
issued but is not yet effective.
The financial statements have been prepared under the historical
cost convention. The financial statements are presented in pounds
Sterling ('GBP') rounded to the nearest thousand, except where
otherwise indicated.
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below.
Judgements made by the Directors in the application of the
accounting policies that have a significant effect on the
consolidated financial statements and estimates with significant
risk of material adjustment in the next year are discussed in Note
3.
Due to rounding, numbers presented in the Financial Statements
may not add up precisely to the totals provided and percentages may
not precisely reflect the presented figures as the underlying
calculations are referenced from absolute values, whereas numbers
presented have been rounded to thousands.
2.2. Going concern
Management have prepared forecasts for the next 15 months in
three scenarios- a base case, a normalised case and a downside
case. More detail on these scenarios has been provided in the going
concern section of the Financial Review. There remains uncertainty
over whether the Group will continue to meet these forecasts. This
will be dependent upon the underlying economic conditions and
whether there is any increase in the level of industrial action
impacting the sector.
The Group continues to trade in line with the revised base case
model. In all three scenario's the Group has sufficient cash to
successfully operate the business and will continue to meet all
bank covenants. As a result the Board is satisfied that the Group
has sufficient liquidity to support the assessment that it is
appropriate to prepare the financial statements for the 52 weeks
ended 2 July 2023 on the going concern basis.
2.3. Basis of consolidation
A subsidiary is an entity controlled by the Group. Control is
the power to govern the financial and operating policies of an
entity to obtain benefits from its activities. Subsidiaries are
fully consolidated from the date on which control is transferred to
the Group.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
2.4. Alternative performance measures
The Group has identified certain measures that it believes will
assist the understanding of the performance of the business. These
alternative performance measures ("APMs") are not defined or
specified under the requirements of UK adopted IAS.
The Group believes that these APMs, which are not considered to
be a substitute for, or superior to, UK adopted IAS measures,
provide stakeholders with additional useful information on the
underlying trends, performance and position of the Group and are
consistent with how business performance is measured internally.
Adjusted EBITDA is also one of the measures used by the Group's
banks for the purposes of assessing covenant compliance. The APMs
are not defined by UK adopted IAS and therefore may not be directly
comparable with other companies' alternative performance
measures.
The key APM that the Group uses is Adjusted EBITDA. This APM is
set out on page 93 of the Annual Report including an explanation of
how it is calculated and how it reconciles to a statutory measure
where relevant.
These measures exclude exceptional items, as defined below,
non-cash share-based payment charges, pre-opening costs and
acquisition related costs.
Exceptional items
Exceptional items are those where, in management's opinion,
their separate reporting provides a better understanding of the
Group's underlying business performance; and which are significant
by virtue of their size and nature. In considering the nature of an
item, management's assessment includes, both individually and
collectively, whether the item is outside the principal activities
of the business; the specific circumstances which have led to the
item arising; the likelihood of recurrence; and if the item is
likely to recur, whether it is unusual by virtue of its size.
No single criterion classifies an item as exceptional, and
therefore management must exercise judgement when determining
whether, on balance, presenting an item as exceptional will help
users of the financial statements understand the Group's underlying
business performance.
Non-cash share based payment charges
Charges/credits relating to share-based payments arising from
the Group's long-term incentive schemes are not considered to be
exceptional but are separately identified due to the scope for
significant variation in charges/credits.
Pre-opening costs
Pre-opening costs can vary significantly depending on the number
of new sites acquired and opened in any period, and so do not
reflect the costs of the day-to-day operations of the business.
These costs are therefore split out in order to aid comparability
with prior periods. Site pre-opening costs refer to costs incurred
in getting new sites operational, and primarily include costs
incurred before opening and in preparing for launch.
Acquisition-related costs
Acquisition-related costs are costs incurred to effect a
business combination. Those costs include advisory, legal,
accounting, valuation and other professional or consulting fees
including employees bonuses in connection with the successful
completion of a transaction. Acquisition-related costs are expensed
in the period in which the costs are incurred and the services are
received.
2.5. Revenue
IFRS 15 requires revenue to be recognised when goods or services
are transferred to customers and the entity has satisfied its
performance obligations under the contract, and at an amount that
reflects the consideration to which an entity expects to be
entitled in exchange for those goods or services. Revenue
predominantly arises from the sale of food and drink to customers
in the Group's bars for which payment in cash or cash equivalents
is received immediately and as such revenue is recognised at point
of sale.
The Group operates in a single geographical region (the UK) and
hence all revenues are impacted by the same economic factors.
Retrospective volume rebates ('retro' payments) and listing fees
are spread over the life of the contract. The income is recognised
as a credit within cost of sales.
Revenue is shown net of value added tax, returns and
discounts.
Customer deposits received in advance of events and bookings are
recorded as deferred revenue on the balance sheet. They are
recognised as revenue along with any balancing payment from the
customer when the associated event / booking occurs.
2.6. Government grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attaching
to them and that the grants will be received. Government grants
that are receivable as compensation for losses already incurred or
for the purpose of giving immediate financial support to the Group
with no future related costs are recognised in profit or loss in
the period in which they become receivable. This income is
recognised within Other income. Where the income relates to a
distinct identifiable expense, the income is offset against the
relevant expense for example, income received under the Coronavirus
Job Retention Scheme has been offset against staff costs.
2.7. Finance costs
Finance costs are charged to the Statement of Comprehensive
Income over the term of the debt using the effective interest rate
method so that the amount charged is at a constant rate on the
carrying amount. Issue costs are initially recognised as a
reduction in the proceeds of the associated capital instrument.
2.8. Intangible assets goodwill
Goodwill represents the difference between amounts paid on the
cost of a business combination and the acquirer's interest in the
fair value of the identifiable assets and liabilities of the
acquiree at the date of acquisition.
Goodwill is not subject to amortisation and is tested annually
for impairment, or more frequently if events or changes in
circumstances indicated that they may be impaired.
2.9. Intangible assets - trademarks, licenses and brands
Separately acquired trademarks and licences are shown at
historical cost. Trademarks and licences have a finite useful life
and are carried at cost less accumulated amortisation and any
accumulated impairment losses.
Intangible assets acquired as part of a business combination are
only recognised separately from goodwill when they arise from
contractual or other legal rights, are separable, the expected
future economic benefits are probable and the cost or value can be
measured reliably.
Asset class Amortization method and rate
Trademarks 10%- straight-line
Licenses Straight line over the life of the lease
Brand Straight-line over the expected useful economic life of
the brand being 7.5 to 10 years
2.10. Property, plant and equipment
Property, plant and equipment is stated at historical cost less
accumulated depreciation and any accumulated impairment losses.
Historical cost includes expenditure that is directly attributable
to bringing the asset to the location and condition necessary for
it to be capable of operating in the manner intended by
management.
Depreciation is charged so as to allocate the cost of assets
less their residual value over their estimated useful lives, using
the straight-line method.
Depreciation is provided on the following basis:
Leasehold building improvements - straight-line over the life of the lease
Plant and machinery - 25% straight-line
Fixtures and fittings - 25% straight-line
Computer equipment - 33% straight-line
The assets' residual values, useful lives and depreciation
methods are reviewed, and adjusted prospectively if appropriate, or
if there is an indication of a significant change since the last
reporting date.
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised in the
Consolidated Statement of Comprehensive Income.
2.11. Inventories
Stocks are stated at the lower of cost and net realisable value,
being the estimated selling price less costs to complete and sell.
Cost is based on the cost of purchase on a first in, first out
basis.
At each reporting date, stocks are assessed for impairment. If
stock is impaired, the carrying amount is reduced to its selling
price. The impairment loss is recognised immediately in profit or
loss.
2.12. Impairment
Goodwill is tested annually for impairment, or more frequently
if events or changes in circumstances indicated that it might be
impaired. Goodwill is not allocated to individual cash generating
units ("CGUs") but to a group of CGUs encompassing all bars
operating under certain brands, including any additional new sites.
The brands that make up that group of CGUs is defined by the
original acquisition group.
The recoverable amount is the higher of an asset's fair value
less costs of disposal and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups
of assets (cash-generating units).
Other assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable
amount.
2.13. Cash and cash equivalents
Cash is represented by cash in hand and deposits with financial
institutions repayable without penalty on notice of not more than
24 hours. Payments taken from customers on debit and credit cards
for which cash remains outstanding at any reporting date ("cash in
transit") are recognised as trade receivables. The trade receivable
is converted to cash within 3 days of processing. The Directors
view these trade receivables as cash when monitoring cash flows and
forecasts internally.
2.14. Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Initial recognition
The Group initially recognises trade receivables, trade
payables, deposits, loans and borrowings on the date on which they
are originated. All other instruments are recognised on the trade
date, which is the date on which the Group becomes party to the
contractual provisions of the instrument.
All financial instruments are recognised initially at fair value
plus or minus, in the case of assets not at fair value through the
Statement of comprehensive income, transaction costs that are
attributable to the acquisition of the financial asset or
liability.
Financial assets
The Group financial assets are measured at amortised cost.
A financial asset is measured at amortised cost when assets that
are held for collection of contractual cash flows and where those
cash flows represent solely payments of principal and interest.
Interest income from these financial assets is included in finance
income using the effective interest rate method.
The derivative financial asset / liability comprises the Group's
interest rate cap. It is carried in the statement of financial
position at fair value with changes in fair value recognised in the
consolidated statement of comprehensive income in the finance
expense line. The fair value of the interest rate cap is determined
using the market standard methodology of discounting the future
expected cash flow that would occur if variable interest rates rise
above the strike rate of the interest rate cap. The variable
interest rates used in the calculation of projected cash flow on
the interest rate cap is based on an expectation of future interest
rates derived from observable market interest rate curves and
volatilities.
Trade and other receivables are recognised initially at the
amount of consideration that is unconditional, unless they contain
significant financing components, when they are recognised at fair
value. The Group holds the trade and other receivables with the
objective of collecting the contractual cash flows and therefore
measures them subsequently at amortised cost using the effective
interest method.
Payments taken from customers on debit and credit cards for
which cash remains outstanding at any reporting date ("cash in
transit") are recognised as trade receivables. The trade receivable
is converted to cash within 3 days of processing.
Impairment losses are presented as a separate line item in the
statement of profit or loss.
The Group assesses on a forward-looking basis the expected
credit losses associated with its financial assets carried at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk. For
trade and other receivables, the Group applies the simplified
approach permitted by IFRS 9, which requires expected lifetime
losses to be recognised from initial recognition of the
receivables.
Loss allowances for expected credit loss ("ECLs") are presented
in the statement of financial position as a deduction from the
gross carrying amount of the assets. In the profit or loss, the
amount of ECL is recognised as an Impairment gain or loss.
Financial assets are derecognised when the rights to receive
cash flows have expired or have been transferred and the Group has
transferred substantially all risks and rewards of ownership.
Financial liabilities
Financial liabilities
Financial liabilities are classified as financial liabilities at
fair value through profit or loss or as financial liabilities
measured at amortised cost, as appropriate. The Group determines
the classification of its financial liabilities at initial
recognition.
The Group's financial liabilities include trade and other
payables, loans and borrowing and other financial liabilities and
accrued liabilities that are classified as measured at amortised
cost.
Short-term creditors are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method. Other financial liabilities, including bank loans,
are measured initially at fair value, net of transaction costs, and
are measured subsequently at amortised cost using the effective
interest rate method.
Amortised cost is calculated by taking into account any issue
costs, and any discount or premium on settlement. Gains and losses
arising on the repurchase, settlement or cancellation of
liabilities are recognised respectively in interest and other
revenues and finance costs. For substantial and non-substantial
modifications the Group derecognises a financial liability from the
statement of financial position when the obligation specified in
the contract or arrangement is discharged, cancelled or
expires.
2.15. Leased assets
Under IFRS 16, the Group recognises right-of-use assets at the
commencement date of the lease (i.e. the date the underlying asset
is available for use). Right-of-use assets are measured at cost,
less any accumulated depreciation and impairment losses, and
adjusted for any remeasurement of lease liabilities. Unless the
Group is reasonably certain to obtain ownership of the leased
assets at the end of the lease term, the recognised right-of-use
assets are depreciated over the shorter of its estimated useful
life and lease term. Right- of-use assets are subject to impairment
testing as described further in Note 15. At the commencement date
of the lease, the Group recognises lease liabilities measured at
the present value of lease payments to be made over the lease term.
The lease payments include fixed payments less any lease incentives
receivable. In calculating the present value of lease payments, the
Group uses its incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for lease payments made. In addition, the carrying amount
of lease liabilities is remeasured if there is a modification or a
change in the lease term. The Group applies the short-term lease
recognition exemption to its short-term leases of equipment (i.e.
those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to
leases that are considered of low value. Lease payments on
short-term leases and leases of low- value assets are recognised as
an expense in the Statement of Comprehensive Income.
For leases acquired as part of a business combination the lease
liability is measured at the present value of the remaining lease
payments at the acquisition date with the right of use asset being
measured at the same value. The discount rate applied to the
remaining lease payments is the incremental borrowing rate of the
acquiree.
2.16. Pensions
The Group operates a defined contribution plan for its
employees. A defined contribution plan is a pension plan under
which the Group pays fixed contributions into a separate entity.
Once the contributions have been paid the Group has no further
payment obligations.
The contributions are recognised as an expense in the
Consolidated Statement of Comprehensive Income when they fall due.
Amounts not paid are shown in accruals as a liability in the
Statement of Financial Position. The assets of the plan are held
separately from the Group in independently administered funds.
2.17. Provisions
Provisions are made where an event has taken place that gives
the Group a legal or constructive obligation that probably requires
settlement by a transfer of economic benefit, and a reliable
estimate can be made of the amount of the obligation.
Provisions are charged as an expense to the Consolidated
Statement of Comprehensive Income in the period that the Group
becomes aware of the obligation, and are measured at the best
estimate at the Statement of Financial Position date of the
expenditure required to settle the obligation, taking into account
relevant risks and uncertainties. When payments are eventually
made, they are charged to the provision carried in the Statement of
Financial Position.
2.18. Share based payments
Equity-settled share-based payments to employees are measured at
the fair value of the equity instruments at the grant date. The
fair value excludes the effect of non-market-based vesting
conditions. Details regarding the determination of the fair value
of equity-settled share-based transactions are set out in Note
26.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting year, based on the Group's estimate of
equity instruments that will eventually vest. At each balance sheet
date, the Group revises its estimate of the number of equity
instruments expected to vest as a result of the effect of
non-market-based vesting conditions.
The impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
equity reserve.
2.19. Current and deferred taxation
The tax expense for each reporting period comprises current and
deferred tax. Tax is recognised in the Consolidated Statement of
Comprehensive Income, except that a charge attributable to an item
of income and expense recognised as other comprehensive income or
to an item recognised directly in equity is also recognised in
other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax
rates and laws that have been enacted or substantively enacted by
the reporting date.
Deferred tax balances are recognised in respect of all timing
differences that have originated but not reversed by the Statement
of Financial Position date, except that:
-- The recognition of deferred tax assets is limited to the
extent that it is probable that they will be recovered against the
reversal of deferred tax liabilities or other future taxable
profits;
-- Any deferred tax balances are reversed if and when all
conditions for retaining associated tax allowances have been met;
and
-- Where they relate to timing differences in respect of
interests in subsidiaries, associates, branches and joint ventures
and the Group can control the reversal of the timing differences
and such reversal is not considered probable in the foreseeable
future.
Deferred tax balances are not recognised in respect of permanent
differences except in respect of business combinations, when
deferred tax is recognised on the differences between the fair
values of assets acquired and the future tax deductions available
for them and the differences between the fair values of liabilities
acquired and the amount that will be assessed for tax. Deferred tax
is determined using tax rates and laws that have been enacted or
substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset where there is a
legally enforceable right to offset current tax assets and
liabilities and where the deferred tax balances relate to the same
tax authority. Current tax assets and tax liabilities are offset
where the entity has a legally enforceable right to offset and
intends either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
2.20. Related party transactions
The Group discloses transactions with related parties which are
not consolidated and not wholly owned within the Group. Where
appropriate, transactions of a similar nature are aggregated
unless, in the opinion of the Directors, separate disclosure is
necessary to understand the effect of the transactions on the Group
Financial Statements.
2.21. New standards, amendments and interpretations adopted
The Group has applied the same accounting policies and methods
of computation in its Financial Statements as in the prior
period.
There are a number of standards, amendments to standards, and
interpretations, which have been issued by the IASB that are
effective in future accounting periods that the Group has decided
not to adopt early.
The following amendments are effective for the period beginning
on or after 1 January 2023:
-- Definition of Accounting Estimate (Amendments to IAS 8)
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
-- Classification of liabilities as current or non-current (amendments to IAS 1).
In January 2020, the IASB issued amendments to IAS 1, which
clarify the criteria used to determine whether liabilities are
classified as current or non-current. The Group has reviewed this
standard and does not believe that the amendments to IAS 1 will
have a significant impact on the classification of its
liabilities.
Other
The Group does not expect any other standards issued by the
IASB, but not yet effective, to have a material impact on the
Group.
The following is a list of other new and amended standards
which, at the time of writing, had been issued by the IASB but
which are effective in future periods. The amount of quantitative
and qualitative detail to be given about each of the standards will
depend on each entity's own circumstances.
-- IFRS 17 Insurance Contracts (effective 1 January 2023)- in
June 2020, the IASB issued amendments to IFRS 17, including a
deferral of its effective date to 1 January 2023.
-- Deferred tax related to assets and liabilities arising from a
single transaction (Amendments to IAS 12 Income taxes--effective 1
January 2023).
-- Lease liability in a Sale and Leaseback (Amendments to IFRS 16- effective 1 January 2024).
3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY
The preparation of consolidated financial information in
conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses.
Estimates and underlying assumptions are reviewed on an on-going
basis and are based on historical experience and other factors
including expectations of future events that are believed to be
reasonable under the circumstances. Although these judgements,
estimates and associated assumptions are based on management's best
knowledge of current events and circumstances, the actual results
may differ. Revisions to accounting estimates are recognised in the
period in which the revision takes place and in any future periods
affected.
The key assumptions concerning the future and other key sources
of estimation and uncertainty at the date of the statement of
financial position that have a significant risk of causing material
adjustments to the carrying amounts of assets and liabilities
within the next financial period are set out below.
The Directors consider the principal judgements made in the
Financial Statements to be:
KEY JUDGEMENTS
Operating Segments
The Directors have taken a judgement that individual bars meet
the aggregation criteria in IFRS 8 and hence have concluded that
the Group only has a single reporting segment, as discussed in Note
4.
Determining the rate used to discount lease payments
At the commencement date of property leases the lease liability
is calculated by discounting the lease payments. The discount rate
used should be the interest rate implicit in the lease. However, if
that rate cannot be readily determined, which is generally the case
for property leases, the lessee's incremental borrowing rate is
used, being the rate that the individual lessee would have to pay
to borrow the funds necessary to obtain an asset of similar value
to the right-of-use asset in a similar economic environment with
similar terms, security and conditions. As the Group has external
borrowings, judgement is required to compute an appropriate
discount rate which was calculated based on UK bank borrowings and
adjusted by an indicative credit premium that reflects the credit
risk of the Group. The weighted average discount rate applied to
those leases that pre-dated the Group's IPO was 4.75%. Leases
entered into post IPO have been discounted with a weighted average
discount rate of 4.68%. For the lease liabilities at 2 July 2023 a
0.1% increase in the discount rate used would have reduced the
total liabilities by GBP227,000.
Consolidation of Waterloo Sunset Limited
Waterloo Sunset Limited ("Waterloo Sunset") is a subsidiary that
runs and operates the Bar Elba bar in Waterloo, London. The Group
has a 50% economic interest in Waterloo Sunset with each partner
holding 50% of the voting rights. The Group maintains an agreement
to operate Waterloo Sunset and charges a management fee of 10% of
revenue to Waterloo Sunset.
The Directors have determined that the Company exerts
significant influence and control because it has the power to
direct all significant activities of Waterloo Sunset and has a
higher economic interest in it as compared to its unrelated venture
partner, and as a result consolidates Waterloo Sunset in these
financial statements with a 50% non-controlling interest
representing the 50% of the equity the Group does not own.
Exceptional items
Exceptional items are those where, in management's opinion,
their separate reporting provides a better understanding of the
Group's underlying business performance; and which are significant
by virtue of their size and nature. In considering the nature of an
item, management's assessment includes, both individually and
collectively, whether the item is outside the principal activities
of the business; the specific circumstances which have led to the
item arising; the likelihood of recurrence; and if the item is
likely to recur, whether it is unusual by virtue of its size.
No single criterion classifies an item as exceptional, and
therefore management must exercise judgement when determining
whether, on balance, presenting an item as exceptional will help
users of the financial statements understand the Group's underlying
business performance.
Valuation of intangible assets and goodwill
Allocation of the purchase price affects the results of the
Group as finite lived intangible assets are amortised, whereas
indefinite lived intangible assets, including goodwill, are not
amortised and could result in differing amortisation charges based
on the allocation to indefinite lived and finite lived intangible
assets.
During the period, the Group acquired the trade and assets of
the business known as Dirty Martini for total consideration of
GBP4.65m. Details of the acquisition is set out in Note 32. In
accordance with IFRS 3, the identifiable assets acquired and
liabilities and contingent liabilities assumed should be measured
at fair value at the acquisition date in order to determine the
difference between the cost of acquisition and the fair value of
the Group's share of net assets acquired, which should then be
recognised as goodwill on the balance sheet or recognised in the
income statement.
In determining the fair value, management has recognised brand
value totalling GBP2.95m in respect of the business acquired. Key
estimates used in arriving at the brand valuation include growth
rates, discount rate, cashflow assumptions including working
capital estimates, appropriate royalty rates and useful economic
lives. Further information is provided in Notes 14 and 32.
Valuation of intangible assets and goodwill
The amount of goodwill initially recognised as a result of a
business combination is dependent on the allocation of the purchase
price to the fair value of the identifiable assets acquired and the
liabilities assumed. The determination of the fair value of the
assets and liabilities is based, to a considerable extent, on
management's judgement.
Legal and Other Claims
The Group considers all legal or other claims against it. Where
appropriate provision is made for management's best estimate of any
liability arising. These provisions are reviewed regularly by
management and the audit and risk committee and amended to reflect
any new information. Where a claim has been received but management
consider that it is unlikely that any liability will result this is
disclosed as a contingent liability. The Group receives a number of
employment or accident related claims that, having sought
appropriate advice, it believes have no merit and, as a
consequence, the likelihood of any payout is remote. No provision
is included in the financial statements for any amounts that are
considered remote.
KEY ESTIMATES
Impairment of non current assets
Annually, the Group considers whether non current assets are
impaired. Where an indication of impairment is identified the
estimation of recoverable value requires estimation of the
recoverable value of the cash generating units (CGUs). This
requires estimation of the future cash flows from the CGUs and also
selection of appropriate discount rates and the longer term growth
rate in order to calculate the net present value of those cash
flows. Individual bars are viewed as separate CGUs in respect of
the impairment of property, plant and equipment. Details of the
sensitivity of the estimates used in the impairment exercise are
provided in Notes 14 and 15.
Forecast business cashflows
For purposes of the going concern assessment and as an input
into the impairment assessment, the Group make estimates of likely
future cash flows which are based on assumptions in the base case,
normalised case and significant but plausible downside case, given
the uncertainties involved. The assumptions as outlined in the
going concern section of the Financial Review include a
deterioration of the macro environment as well as reduced
profitability for the Group along with a range of mitigating
factors within the Boards control. These assumptions are made by
management based on recent performance and management's knowledge
and expertise of the cashflow drivers going forward.
Share-based payments
The charge for share based payments in respect of the Nightcap
plc Share Option Plan is calculated in accordance with the
methodology described in Note 26. The model requires subjective
assumptions to be made including the future volatility of the
Company's share price, expected dividend yield, risk-free interest
rates, expected time of exercise and employee attrition rates.
Changes in such estimates may have a significant impact on the
original fair value calculation at the date of grant and therefore
the share based payments charge.
Amortisation of intangible assets
Amortisation is recorded to write down intangible assets to a
residual value of nil over their useful economic lives (UELs).
Management must therefore estimate the appropriate UELs to apply to
each class of intangible asset. Changes in the estimated UELs would
alter the amount of amortisation charged each year, which could
materially impact the carrying value of the assets in question over
the long term. UELs are therefore reviewed on an annual basis to
ensure that they are in line with policy and that those policies
remain appropriate.
4. SEGMENTAL REPORTING
The Group's continuing operating businesses are organized and
managed as reportable business segments according to the
information used by the Group's Chief Operating Decision maker
("CODM") in its decision making and reporting structure. The CODM
is regarded as the Chief Executive together with other Board
Members who receive financial information at a bar-by-bar
level.
The Group's internal management reporting is focused
predominantly on revenue and adjusted EBITDA, as these are the
principal performance measures and drive the allocation of
resources. The CODM receives information by trading venue, each of
which is considered to be an operating segment. All operating
segments have similar characteristics and, in accordance with
paragraph 12 of IFRS 8, are aggregated to form an 'Ongoing
business' reportable segment. Economic indicators assessed in
determining that the aggregated operating segments share similar
economic characteristics include expected future financial
performance, operating and competitive risks and return on
investment. These common risks include, but are not limited to,
cost inflation, recruitment and retention, Brexit and supply chain
disruption, consumer confidence, availability of new sites, impact
of national industrial action, health and safety and food and drink
safety. These risks are discussed in more detail in the "Principal
Risks and Uncertainties" section of this Annual Report. The risks
are managed, discussed and monitored at a Board level across
the
Group.
The Group performs all of its activities in the United Kingdom.
All the Group's non-current assets are located in the United
Kingdom. Revenue is earned from the sale of drink and food with a
small amount of admission income.
Revenue
Revenue arises from the sale of food and drink to customers in
the Group's bars for which payment in cash or cash equivalents is
received immediately. The Group operates in a single geographical
region (the UK) and hence all revenues are impacted by the same
economic factors. Accordingly, revenue is presented as a single
category and further disaggregation is not appropriate or necessary
to gain an understanding of the risks facing the business.
5. OTHER INCOME
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Business interruption insurance proceeds - COVID related - 10
Government grants - 155
Insurance claims 446 -
--------------------------------------------------------- -------- --------
446 165
--------------------------------------------------------- -------- --------
6. OPERATING (LOSS) / PROFIT
The operating (loss) / profit is stated after charging/
(crediting):
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
Note GBP'000 GBP'000
----------------------------------------------------- ------ -------- --------
(Loss) / profit from operations is stated after
charging / (crediting):
Share based payments 7, 26 181 345
Depreciation of tangible fixed assets 15 2,467 1,707
Depreciation of right of use assets 16 3,278 2,224
Amortisation of intangible assets:
- Trademarks 14 30 21
- Brands 14 597 528
Auditors' remuneration
- for statutory audit services 176 106
- for other assurance services - 25
Exceptional costs 10 792 84
Acquisition related transaction costs 11 734 (866)
Pre-opening costs 12 1,013 442
Profit on disposal of right of use asset / liability (220) -
Impairment of tangible fixed assets 15 565 47
Impairment of right of use asset 16 - 96
----------------------------------------------------- ------ -------- --------
7. EMPLOYEES AND DIRECTORS
The average monthly number of employees, including the
Directors, during the period was as follows:
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
----------- -------- --------
Management 85 49
Operations 669 510
----------- -------- --------
754 559
----------- -------- --------
Staff costs were as follows:
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
Note GBP'000 GBP'000
----------------------------------- ---- -------- --------
Wages and salaries 15,798 11,549
Social security costs 1,339 1,156
Defined contribution pension costs 183 128
Other employment costs 48 109
----------------------------------- ---- -------- --------
17,368 12,942
Share based payments 26 181 345
----------------------------------- ---- -------- --------
17,549 13,287
----------------------------------- ---- -------- --------
All of the Group's employees were based in the United Kingdom in
the current and prior periods.
The following table shows a breakdown of the remuneration of
individual Directors who served in all or part of the period.
Transaction
Salary Annual Related Pension
and Fees Bonus Bonus Contribution Total
Name GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- -------- ----------- ------------- --------
Sarah Willingham-Toxvaerd 260 - - 13 273
Toby Rolph 175 - 9 184
Michael Willingham-Toxvaerd 325(1) - 100(2) 9 434
Gareth Edwards 75 - - - 75
Tobias Van der Meer - - - - -
Lance Moir 29 - - - 29
Thi-Hanh Jelf 29 - - - 29
---------------------------- --------- -------- ----------- ------------- --------
Total 893 - 100 31 1,023
---------------------------- --------- -------- ----------- ------------- --------
1 Salary includes fees relating to the share placing for the
Dirty Martini acquisition, in line with his service agreement as
described within the AIM admission document.
2 Relates to the acquisition of certain of the assets of DC Bars
Limited, the operator of the 'Dirty Martini' chain of cocktail
bars, on 9 June 2023, in line with the framework in his service
agreement as described within the Company's AIM admission
document.
Further information in respect of Directors' remuneration is
provided in the Remuneration Committee Report.
Key management personnel compensation
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group, including the Directors of the Company
listed above.
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
GBP'000 GBP'000
-------------------------- -------- --------
Key management emoluments 1,192 1,617
Pension contribution 40 25
-------------------------- -------- --------
1,233 1,642
-------------------------- -------- --------
8. FINANCE COSTS
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
Note GBP'000 GBP'000
----------------------------------------------- ---- -------- --------
Interest on bank overdrafts and loans 503 205
Interest on lease liabilities 21 1,699 917
Net change in fair value of hedging instrument
in a fair value hedge (361) -
Amortisation of debt issue costs - HSBC 136 -
Amortisation of debt issue costs - legacy debt 74 47
----------------------------------------------- ---- -------- --------
2,052 1,169
----------------------------------------------- ---- -------- --------
9. TAX (CREDIT) / CHARGE ON LOSS
The income tax credit is applicable on the Group's operations in
the UK.
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
Note GBP'000 GBP'000
--------------------------------------------------------- ---- -------- --------
Taxation charged / (credited) to the income statement
Current income taxation 61 131
Adjustments for current taxation of prior periods (12) (54)
--------------------------------------------------------- ---- -------- --------
Total current income taxation 49 77
--------------------------------------------------------- ---- -------- --------
Deferred Taxation
Origination and reversal of temporary timing differences
Current period (988) (372)
Adjustments in respect of prior periods 37 56
Adjustment in respect of change of rate of corporation
tax (29) (23)
--------------------------------------------------------- ---- -------- --------
Total deferred tax 25 (980) (339)
--------------------------------------------------------- ---- -------- --------
Total taxation credit in the consolidated income
statement (931) (262)
The above is disclosed as:
Income tax (credit) - current period (956) (264)
Income tax charge - prior period 25 2
--------------------------------------------------------- ---- -------- --------
(931) (262)
--------------------------------------------------------- ---- -------- --------
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
GBP'000 GBP'000
----------------------------------------------------------------- -------- --------
Factors affecting the tax credit for the period (Loss) / profit
before tax (4,863) 238
At UK standard rate of corporation taxation of 20.5% (2022: 19%) (997) 45
Income not assessable for tax purposes - (231)
Expenses not deductible for tax purposes 175 14
Fixed asset differences 161 (33)
Timing differences on leases - 34
Deferred tax (charged)/credited directly to equity (63) -
Other temporary differences 100 -
Movement in unrecognised deferred tax (215) 23
Adjustments to current tax charge in respect of prior periods (12) (54)
Adjustments to deferred tax charge in respect of prior periods 37 56
Adjustment in respect of change of rate of corporation tax (116) (117)
----------------------------------------------------------------- -------- --------
Total tax credit for the period (931) (262)
----------------------------------------------------------------- -------- --------
10. EXCEPTIONAL ITEMS
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
GBP'000 GBP'000
------------------------------------- -------- --------
Included in administrative expenses:
Legal cost accrual 300 -
Site closure costs 81 -
Reorganisation costs 411 84
------------------------------------- -------- --------
792 84
------------------------------------- -------- --------
In the 52 weeks ended 3 July 2023 the Group has made an accrual
for legal costs in relation to a claim - see Note 34 for further
details.
In the 52 weeks ended 3 July 2023 the Group closed its previous
legacy, The Cocktail Club site in Bethnal Green. This site had no
material impact on the Group's trading in the period.
In the 52 weeks ended 3 July 2023 and 53 weeks ended 3 July
2022, reorganisation costs were incurred in relation to the
restructuring and reorganisation of certain employees in the
Group.
11. ACQUISITION RELATED TRANSACTION COSTS
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
Note GBP'000 GBP'000
--------------------------------------------- ---- -------- --------
Acquisition related transaction costs 734 352
Adventure Bar Group contingent consideration - (1,218)
--------------------------------------------- ---- -------- --------
2.4 734 (866)
--------------------------------------------- ---- -------- --------
The acquisition related transaction costs in the 52 weeks ended
2 July 2023 relate to costs incurred directly in connection with
the acquisition of the trade and assets relating to Dirty Martini.
For the 53 weeks ended 3 July 2022 these costs relate to the
acquisition of Barrio Familia Limited.
The acquisition of Adventure Bar Group in May 2021 included
contingent deferred consideration to be settled with the issue of
shares. Certain estimates had been used in valuing the
consideration including share price volatility, enterprise
value/EBITDA multiples, risk free rates and estimates on
probabilities and timing for the satisfaction of the shares to be
issued. In June 2022, the Group issued 7,142,856 new ordinary
shares relating to the deferred consideration and the difference
between the issue price of 15.75p and the estimate used in the
prior year to value the consideration has been taken as a gain to
the prior year Consolidated Statement of Comprehensive Income in
accordance with IFRS 3.
12. PRE OPENING COSTS
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
Note GBP'000 GBP'000
------------------ ---- -------- --------
Pre opening costs 2.4 1,013 442
------------------ ---- -------- --------
13. EARNINGS PER SHARE
Basic earnings / (loss) per share is calculated by dividing the
profit/(loss) attributable to equity shareholders by the weighted
average number of shares outstanding during the year, excluding
unvested shares held pursuant to The Nightcap plc Share Option
Plan. Further details of the share options that could potentially
dilute basic earnings per share in the future are provided in Note
26.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all potential dilutive ordinary shares. During the 52
weeks ended 2 July 2023 and the 53 weeks ended 3 July 2022 the
Group had potentially dilutive shares in the form of unvested
shares options pursuant to the above long-term incentive plan.
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
GBP'000 GBP'000
------------------------------------------------------------------- -------- --------
(Loss) / profit for the period after tax for the purposes of basic
and diluted earnings per share (4,169) 114
Non-controlling interest 237 386
Taxation credit (931) (262)
Finance cost 2,052 1,169
Exceptional items 792 84
Acquisition related costs 734 (866)
Pre-opening costs 1,013 442
Share based payment charge 181 345
Impairment 565 143
Depreciation and amortisation 6,372 4,480
Profit on disposal of right of use asset / liability (220) -
------------------------------------------------------------------- -------- --------
Profit for the period for the purposes of Adjusted EBITDA (IFRS
16) basic and diluted earnings per share 6,625 6,036
------------------------------------------------------------------- -------- --------
IAS 17 Rent charge (3,997) (2,727)
------------------------------------------------------------------- -------- --------
Profit for the period for the purposes of Adjusted EBITDA (IAS
17) basic and diluted earnings per share 2,627 3,309
------------------------------------------------------------------- -------- --------
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
Number Number
--------------------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares in issue for the purposes
of basic earnings per share 199,591,866 189,008,260
Effect of dilutive potential ordinary shares from share options 950,758 6,529,509
--------------------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares in issue for the purposes
of diluted earnings per share 200,542,623 195,537,769
--------------------------------------------------------------------- ----------- -----------
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
pence pence
---------------------------------- -------- --------
Earnings per share:
---------------------------------- -------- --------
Basic (2.09) 0.06
---------------------------------- -------- --------
Diluted (2.09) 0.06
---------------------------------- -------- --------
Adjusted EBITDA (IFRS 16) basic 3.32 3.19
---------------------------------- -------- --------
Adjusted EBITDA (IFRS 16) diluted 3.30 3.09
---------------------------------- -------- --------
Adjusted EBITDA (IAS 17) basic 1.32 1.75
---------------------------------- -------- --------
Adjusted EBITDA (IAS 17) diluted 1.31 1.69
---------------------------------- -------- --------
During a period where the Group or Company makes a loss,
accounting standards require that 'dilutive' shares for the Group
be excluded in the earnings per share calculation, because they
will reduce the reported loss per share.
14. INTANGIBLE ASSETS
Trademarks
and
licenses Brand Total Goodwill
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ---------- -------- -------- --------
(i) Cost or valuation
At 28 June 2021 155 2,982 3,137 6,573
Additions 48 - 48 -
On acquisition - Barrio Familia Group 101 1,936 2,037 3,178
----------------------------------------- ---------- -------- -------- --------
At 3 July 2022 304 4,918 5,222 9,751
----------------------------------------- ---------- -------- -------- --------
At 4 July 2022 304 4,918 5,222 9,751
Additions 45 - 45 -
On acquisition - Dirty Martini (Note 32) - 2,950 2,950 2,393
----------------------------------------- ---------- -------- -------- --------
At 2 July 2023 349 7,868 8,217 12,144
----------------------------------------- ---------- -------- -------- --------
(ii) Amortisation
At 28 June 2021 4 49 53 -
Provided for the period 21 528 549 -
On acquisition - Barrio Familia Group 16 - 16 -
----------------------------------------- ---------- -------- -------- --------
At 3 July 2022 41 577 618 -
----------------------------------------- ---------- -------- -------- --------
At 4 July 2022 41 577 618 -
Provided for the period 30 597 627 -
----------------------------------------- ---------- -------- -------- --------
At 2 July 2023 71 1,174 1,245 -
----------------------------------------- ---------- -------- -------- --------
(iii) Net book value
At 28 June 2021 151 2,933 3,084 6,573
----------------------------------------- ---------- -------- -------- --------
At 3 July 2022 263 4,341 4,604 9,751
----------------------------------------- ---------- -------- -------- --------
At 2 July 2023 278 6,694 6,971 12,144
----------------------------------------- ---------- -------- -------- --------
Goodwill of GBP2,393,000 arose on the acquisition of Dirty
Martini in June 2023 - see Note 32 (03 July 2022 - GBP3,178,000
arose on the acquisition of the Barrio Familia Group).
Goodwill is not amortised, but an impairment test is performed
annually by comparing the carrying amount of the goodwill to its
recoverable amount. The recoverable amount is represented by the
greater of the business's fair value less costs of disposal and its
value in use.
For the purposes of its impairment test for goodwill and
intangible assets, the CGU is determined by the acquisition that
generated the respective goodwill and intangible assets. Our CGUs
with related goodwill and brand intangibles are Adventure Bar
Group, Barrio Familia and Dirty Martini. The value in use is
calculated based upon the Group's latest five--year forecast to
June 2028, incorporating the assumptions concerning the rate at
which business unit level cash flows are generated and ongoing
capital expenditure. The value in use calculations use an annual
growth rate of 2% in the initial period, with the exception of
Dirty Martini. Dirty Martini's calculation uses a rate of 7% in
year 1, and 2% thereafter. A higher rate was used for Dirty Martini
to reflect managements expectations of an one off uplift in trade
following the acquisition of the business from administration The
discount rate used to determine the present value of projected
future cash flows is based on the Group's Weighted Average Cost of
Capital ("WACC") and the Group's current view of achievable
long-term growth. The pre-tax discount rate and terminal growth
rate used in the discounted cash flow model were 14% and 2%
respectively.
The estimation of value in use involves significant judgement in
the determination of inputs to the discounted cash flow model and
is most sensitive to changes in future cash flows, discount rates
and terminal growth rates applied to cash flows beyond the forecast
year. The sensitivity of key inputs and assumptions used was tested
by recalculating the recoverable amount using reasonably possible
variances to those assumptions. The discount rate was increased by
1%, the terminal growth rate was decreased by 1%, and future cash
flows were reduced by 20%. As at 2 July 2023, no reasonably
possible change in an individual key input or assumption, as
described, would result in the carrying amount exceeding its
recoverable amount based on value in use.
15. PROPERTY, PLANT AND EQUIPMENT
Furniture,
Plant and fixtures
Leasehold computer and Computer
improvements equipment fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------------- ---------- ---------- ---------- --------
(i) Cost or valuation
At 28 June 2021 3,933 2,115 814 161 7,023
Additions 3,939 1,405 887 - 6,231
On acquisition - Barrio
Familia Group 1,835 775 1,050 - 3,661
Reclassification - 134 27 (161) -
Impairment (27) (19) - - (47)
------------------------ ------------- ---------- ---------- ---------- --------
At 3 July 2022 9,680 4,411 2,778 - 16,869
------------------------ ------------- ---------- ---------- ---------- --------
At 4 July 2022 9,680 4,411 2,778 - 16,869
Additions 2,708 1,842 1,652 - 6,202
On acquisition - Dirty
Martini 306 136 - - 442
Disposals (40) (1,102) (1,063) - (2,205)
------------------------ ------------- ---------- ---------- ---------- --------
At 2 July 2023 12,655 5,288 3,367 - 21,309
------------------------ ------------- ---------- ---------- ---------- --------
(ii) Depreciation
At 28 June 2021 1,728 1,263 395 90 3,476
Provided for the period 573 742 392 - 1,707
On acquisition - Barrio
Familia Group 1,029 698 850 - 2,577
Reclassification - 85 6 (90) -
------------------------ ------------- ---------- ---------- ---------- --------
At 3 July 2022 3,329 2,788 1,643 - 7,760
------------------------ ------------- ---------- ---------- ---------- --------
At 4 July 2022 3,329 2,788 1,643 - 7,760
Provided for the period 1,024 761 681 - 2,467
Disposal (40) (1,102) (1,063) - (2,205)
Impairment 294 17 254 - 565
------------------------ ------------- ---------- ---------- ---------- --------
At 2 July 2023 4,608 2,465 1,514 - 8,587
------------------------ ------------- ---------- ---------- ---------- --------
(iii) Net book value
At 27 June 2021 2,205 853 419 71 3,548
------------------------ ------------- ---------- ---------- ---------- --------
At 3 July 2022 6,351 1,623 1,136 - 9,109
------------------------ ------------- ---------- ---------- ---------- --------
At 2 July 2023 8,047 2,822 1,853 - 12,723
------------------------ ------------- ---------- ---------- ---------- --------
Impairment of property, plant and equipment and right of use
assets
The Group has determined that each bar is a separate CGU for
impairment testing purposes. Each CGU is tested for impairment at
the balance sheet date if there exists at that date any indicators
of impairment.
The value in use of each CGU is calculated based upon the
Group's latest five-year forecast. The bar cash flows include an
allocation of central costs and ongoing capital expenditure. Cash
flows beyond the initial FY23/24 budget period are extrapolated
using the Group's estimate of the long-term growth rate, currently
2%.
The key assumptions in the value in use calculations are the
like-for-like sales projections for each bar, changes in the
operating cost base, the long-term growth rate and the pre-tax
discount rate. The pre-tax discount rate is derived from the
Group's WACC and is currently 14%.
In June 2023, the Group made the decision to temporarily cease
trading at the Barrio Watford site. The Group retains the lease for
this site and is considering whether to either launch an
alternative brand on the site, partner with another operator or
dispose of the lease. As a consequence, the Group has recognised an
impairment charge of GBP565,000 in relation to the tangible fixed
assets.
The cash flows used within the impairment model are based upon
assumptions which are sources of estimation uncertainty. Management
has performed sensitivity analysis on the key assumptions in the
impairment model using reasonably possible changes in the key
assumptions. A reduction in cash flows of 20% in each year does not
result in any additional impairment charge. A 100 basis point
increase in the discount rate does not result in any additional
impairment charge and a 50 basis point reduction in the terminal
growth rate does not result in any additional impairment
charge.
16. RIGHT OF USE ASSETS
Right of
use assets
GBP'000
-------------------------------------- -----------
(i) Cost
At 28 June 2021 15,491
Additions 10,070
Impairment (96)
On acquisition - Barrio Familia Group 5,265
-------------------------------------- -----------
At 3 July 2022 30,730
-------------------------------------- -----------
At 4 July 2022 30,730
Additions 12,746
Disposals (312)
Revaluations -
-------------------------------------- -----------
At 2 July 2023 43,164
-------------------------------------- -----------
(ii) Depreciation
At 28 June 2021 2,045
Provided for the period 2,224
-------------------------------------- -----------
At 3 July 2022 4,269
-------------------------------------- -----------
At 4 July 2022 4,269
Provided for the period 3,278
Disposals (288)
-------------------------------------- -----------
At 2 July 2023 7,259
-------------------------------------- -----------
(iii) Net book value
At 28 June 2021 13,447
-------------------------------------- -----------
At 3 July 2022 26,462
-------------------------------------- -----------
At 2 July 2023 35,905
-------------------------------------- -----------
17. INVENTORIES
02 July 03 July
2023 2022
GBP'000 GBP'000
------------------------------- -------- --------
Food, beverage and consumables 1,154 554
------------------------------- -------- --------
There is no material difference between the replacement cost of
inventories and the amounts stated above. Inventories are charged
to cost of sales in the consolidated statement of comprehensive
income.
18. TRADE AND OTHER RECEIVABLES
02 July 03 July
2023 2022
GBP'000 GBP'000
----------------------------------- -------- --------
Included within Current assets
Trade receivables 1,277 981
Other receivables 169 50
Prepayments and accrued income 1,820 974
----------------------------------- -------- --------
3,266 2,005
----------------------------------- -------- --------
Included within Non-current assets
Other receivables - rent deposits 914 699
----------------------------------- -------- --------
Included within trade receivables is GBP349,000 (3 July 2022 -
GBP649,000) relating to credit card receivables (Note 2.13).
Receivables are denominated in Sterling.
The Group held no collateral against these receivables at the
balance sheet dates. The Directors consider that the carrying
amounts of receivables are recoverable in full and that any
expected credit losses are immaterial.
At each period end, there were no overdue receivable
balances.
19. CASH AND CASH EQUIVALENTS
02 July 03 July
2023 2022
GBP'000 GBP'000
------------------------- -------- --------
Cash at bank and in hand 5,017 5,353
------------------------- -------- --------
Cash and cash equivalents comprise cash at bank and in hand. The
fair value of cash and cash equivalents is the same as the carrying
value.
20. TRADE AND OTHER PAYABLES
02 July 03 July
2023 2022
GBP'000 GBP'000
-------------------------------- -------- --------
Trade payables 4,628 2,841
Social security and other taxes 2,458 1,272
Corporation tax 288 423
Other payables 2,048 370
Accruals and deferred income 3,559 2,983
-------------------------------- -------- --------
12,980 7,889
-------------------------------- -------- --------
Trade payables were all denominated in Sterling and comprise
amounts outstanding for trade purchases and ongoing costs and are
non-interest bearing.
The Directors consider that the carrying amount of trade
payables approximate to their fair value.
21. LEASES
This note provides information for leases where the Group is the
lessee.
The Group leases the entire The Cocktail Club, Adventure Bar
Group and Barrio Familia Group estates as well as its Head Office.
The leases are non-cancellable operating leases with varying terms,
escalation clauses and renewal rights and in some cases include
variable payments that are not fixed in amount but based upon a
percentage of sales. Lease agreements are typically made for fixed
years of between 5 and 25 years. At year end the weighted average
lease term remaining is 14 years (03 July 2022 - 14 years).
In accordance with IFRS 16, leases of property, plant and
equipment are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable, and
-- variable lease payment that are based on an index or a rate,
initially measured using the index or rate as at the commencement
date
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the lessee's
incremental borrowing rate is used, being the rate that the Group
would have to pay to borrow the funds necessary to obtain an asset
of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
Lease liability
GBP'000
-------------------------------------- ---------------
At 28 June 2021 13,903
Additions 10,070
On acquisition - Barrio Familia Group 5,265
Interest expense 917
Lease payments (2,528)
-------------------------------------- ---------------
At 3 July 2022 27,627
-------------------------------------- ---------------
At 4 July 2022 27,627
Additions 12,746
Disposals (244)
Interest expense 1,699
Lease payments (3,954)
-------------------------------------- ---------------
At 2 July 2023 37,875
-------------------------------------- ---------------
02 July 03 July
2023 2022
GBP'000 GBP'000
----------------- -------- --------
Lease liability:
Current 3,281 2,374
Non-current 34,594 25,254
----------------- -------- --------
37,875 27,627
----------------- -------- --------
Amounts recognised in the consolidated statement of
comprehensive income
02 July 03 July
2023 2022
GBP'000 GBP'000
-------------------------------------------- -------- --------
Depreciation charge of right of use assets 3,278 2,224
Interest expense (included in finance cost) 1,699 917
-------------------------------------------- -------- --------
22. BORROWINGS
02 July 03 July
2023 2022
GBP'000 GBP'000
--------------------- -------- --------
Short-term borrowing
Secured bank loans 1,000 793
Unsecured bank loan - 7
--------------------- -------- --------
1,000 800
--------------------- -------- --------
02 July 03 July
2023 2022
GBP'000 GBP'000
----------------------- -------- --------
Long term borrowings
Secured bank loans 8,037 4,723
Convertible loan notes 2,650 -
----------------------- -------- --------
10,687 4,723
----------------------- -------- --------
Secured bank loans
In August 2022, the Group refinanced its borrowings from three
individual lenders under multiple tranches with a new GBP10.0m debt
facility from HSBC Bank, comprised of a GBP3m term loan and a GBP7m
Revolving Credit Facility, to provide support to the business as it
executes on its roll out strategy. The new GBP10.0m HSBC facility,
replaced GBP5.5m of legacy debt that was acquired from
acquisitions, which had a blended interest margin of 4%, with the
new facility bearing a margin of 3% above SONIA on the GBP3m term
loan and 3.25% above SONIA on the GBP7m Revolving Credit Facility.
The Group has taken out an interest rate cap on its reference base
rate at 3% on GBP8m out of GBP10m of its HSBC facility.
The Group's borrowings are secured on a fixed and floating
charge basis over the assets of the Company and its wholly owned
subsidiaries.
In order to fund the acquisition of Dirty Martini, the Company
raised new funds, totalling GBP5.0 million, through a combination
of the issue of new shares and convertible loan notes ("CLNs").
19,583,333 new shares were issued at a price of 12 pence per share
totalling GBP2.35 million - see Note 27.
The Company issued CLNs totalling GBP2.65 million to existing
shareholders and new investors. The CLNs mature on 9 September 2025
and are convertible at the option of the investors subject to
certain conditions. The CLNs are only convertible following a
period of 12 months from issue, at the higher of 12 pence per share
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 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. In this context, an Exit is defined as being a change of
control in the Company or the sale of substantially all of the
business and assets of the Company.
23. PROVISIONS
Dilapidations
provisions
GBP'000
----------------------------------------- -------------
At 28 June 2021 150
On acquisition - Barrio Familia Group 216
----------------------------------------- -------------
At 3 July 2022 366
----------------------------------------- -------------
On acquisition - Dirty Martini (Note 32) 317
----------------------------------------- -------------
At 2 July 2023 683
----------------------------------------- -------------
The Group expects the dilapidations provision to reverse over
the underlying lease term.
24. FINANCIAL INSTRUMENTS
The Group is exposed to the risks that arise from its use of
financial instruments. Derivative instruments may be transacted
solely for risk management purposes. The management consider that
the key financial risk factors of the business are liquidity risks,
interest rate risk and market risks. The Group operates solely
within the UK and therefore has limited exposure to foreign
exchange risk. The Group's exposure to credit risk is limited due
to insignificant receivables balances.
This note describes the objectives, policies and processes of
the Group for managing those risks and the methods used to measure
them.
Interest rate risk
The Group is exposed to cash flow interest rate risk from
long-term borrowings at variable rates.
Given the turbulent nature of inflation and its link to interest
rates as a key tool of the Bank of England to control inflation,
the Group has hedged over 80% of its debt interest costs for three
years by taking out an interest rate cap, so that there is
certainty that whilst interest rates increase, the majority of our
interest costs will be fixed based on the reference base rate at
3%.
Commodity price risk
The Group is exposed to movements in the wholesale prices of
foods and drinks. Although the Group sources a majority of products
in the UK there is a risk that disruption to supply caused by
Brexit or the conflict in Ukraine will cause a significant increase
in wholesale food and drink prices. Prices for drinks typically
rise once a year to provide short term protection to the Group. The
Group benchmarks and verifies any potential cost changes from
suppliers and also has the ability to flex its offering to
customers to mitigate specific product related cost pressures.
Liquidity risk
The Group's primary objective is to ensure that it has
sufficient funds available to meet its financial obligations as
they fall due. Following the Company's IPO in January 2021, the
placement of additional shares in May 2021 and June 2023 and the
refinance with HSBC Bank (Note 22), the Group believes it has
sufficient liquidity, along with a cash generative business
model.
Capital risk
The Group manages its capital to ensure it will be able to
continue as a going concern while maximising the return to
shareholders through optimising the debt and equity balance.
The Group monitors cash balances and prepares regular forecasts,
which are reviewed by the board. In order to maintain or adjust the
capital structure, the Group may, in the future, issue new shares
for future acquisition opportunities.
Financial assets and liabilities
Financial assets and liabilities consist of the following:
02 July 03 July
2023 2022
GBP'000 GBP'000
---------------------------------------- -------- --------
Financial Assets at amortised cost
Trade receivables 1,277 981
Cash and cash equivalents 5,017 5,353
---------------------------------------- -------- --------
6,294 6,334
---------------------------------------- -------- --------
Financial liabilities at amortised cost
Trade payables 4,628 2,841
Borrowings 11,687 5,523
---------------------------------------- -------- --------
16,315 8,364
---------------------------------------- -------- --------
There are no material differences between the carrying values of
financial assets and liabilities held at amortised cost and their
fair values.
Maturity analysis
The maturity analysis table below analyses the Group's
contractual undiscounted cash flows for the Group's financial
liabilities:
Less than 1 - 2 2 - 3 3 - 4 4 - 5 More than
1 year years years years years 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- -------- -------- -------- -------- --------- --------
02 July 2023
Secured bank loans 1,000 1,500 6,537 - - - 9,037
Convertible loan notes - - 2,650 - - - 2,650
Trade and other payables 4,628 - - - - - 4,628
------------------------- --------- -------- -------- -------- -------- --------- --------
5,628 1,500 9,187 - - - 16,315
------------------------- --------- -------- -------- -------- -------- --------- --------
03 July 2022
Secured bank loans 793 3,712 591 299 120 - 5,515
Other loans 7 - - - - - 7
Trade and other payables 2,841 - - - - - 2,841
------------------------- --------- -------- -------- -------- -------- --------- --------
3,641 3,712 591 299 120 - 8,364
------------------------- --------- -------- -------- -------- -------- --------- --------
The maturity profile of the Group's lease liabilities as at 2
July 2023 was as follows:
02 July 03 July
2023 2022
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Within one year 4,956 3,563
In more than one year but less than two years 3,938 3,200
In more than two years but less than three years 3,812 2,816
In more than three years but less than four years 3,785 2,691
In more than four years but less than five years 3,744 2,664
In more than five years 31,661 22,463
-------------------------------------------------- -------- --------
51,897 37,397
Effects of discounting (14,023) (9,769)
-------------------------------------------------- -------- --------
Lease liabilities 37,875 27,627
-------------------------------------------------- -------- --------
There are no committed lease liabilities not yet commenced at 2
July 2023.
25. DEFERRED TAXATION
Fixed
asset
timing Acquisition Share
differences Losses accounting Schemes Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------------ -------- ----------- -------- -------- --------
At 28 June 2021 46 (350) 1,084 (105) (8) 667
On acquisition - Barrio Familia
Group (48) - 593 - - 545
Recognised in income statement
(Note 9) (180) - (159) - - (339)
Change in deferred tax rate
(Note 9) - - - - - -
Recognised in equity - - - 18 - 18
-------------------------------- ------------ -------- ----------- -------- -------- --------
At 3 July 2022 (182) (350) 1,518 (86) (8) 891
-------------------------------- ------------ -------- ----------- -------- -------- --------
On acquisition - Dirty Martini
(Note 32) - - 738 - - 738
Reclassification 127 (91) (24) (12) - -
Recognised in income statement
(Note 9) 704 (1,489) (188) - (8) (980)
Transferred to deferred tax
asset - 1,489 - - - 1,489
Recognised in equity - - - 63 - 63
-------------------------------- ------------ -------- ----------- -------- -------- --------
At 2 July 2023 649 (441) 2,044 (36) (16) 2,200
-------------------------------- ------------ -------- ----------- -------- -------- --------
26. SHARE BASED PAYMENTS
The Group currently uses one equity settled share plan to
incentivise its Executive Directors and employees - The Nightcap
plc Share Option Plan (the "Plan").
In accordance with IFRS 2 Share Based Payments, the value of the
awards is measured at fair value at the date of the grant. The fair
value is expensed on a straight-line basis over the vesting period,
based on management's estimate of the number of shares that will
eventually vest. The vesting period on the Plan is between 1 and 3
years with an expiration date of 10 years from the date of grant.
Furthermore, share options are forfeited if the employee leaves the
Group before the options vest unless forfeiture is waived at the
discretion of the Board of Directors.
The Group recognised a total charge of GBP181,000 (53 weeks
ended 03 July 2022 - GBP345,000) in respect of the Group's share
based payment plans and related employer's national insurance of
GBP21,000) (53 weeks ended 03 July 2022 - GBP(18,000)).
The Nightcap
plc
Share Option
Plan
Number
------------------------------------------ -------------
Outstanding at 28 June 2021 20,079,988
Granted during the period - November 2021 1,350,000
Granted during the period - March 2022 3,864,406
Lapsed / forfeited during the period (1,790,169)
------------------------------------------ -------------
Outstanding at 3 July 2022 23,504,225
------------------------------------------ -------------
Granted during the period - December 2022 2,770,000
Granted during the period - June 2023 1,160,000
Lapsed / forfeited during the period (3,574,946)
------------------------------------------ -------------
Outstanding at 2 July 2023 23,859,279
------------------------------------------ -------------
Nightcap Share Option Plan
The Nightcap plc Share Option Plan (the "Plan") is a
discretionary executive and management share option plan. One-off
Plan awards were granted at the time of the IPO, and subsequently
post IPO. The vesting conditions of the Plan are set out in the
Remuneration Committee report.
The fair value of the options granted in the period have been
calculated using the Black Scholes option pricing model assuming
the inputs shown below. The fair value of the option awards was
estimated at the grant date taking into account the terms and
conditions upon which the awards were granted. This model uses
historic dividends and share price fluctuations to predict the
distribution of relative share price performance. The shares are
potentially dilutive for the purposes of calculating diluted
earnings per share.
The following assumptions were used:
15 December
2022 29 June 2023
------------------------------------- ----------- ------------
Number of options granted 2,770,000 1,160,000
Share price at date of grant (pence) 8.5 11
Exercise price (pence) 10 11
Option life in years 10 years 10 years
Risk free rate (%) 3.21% 4.71%
Expected dividend yield (%) 0.00% 0.00%
Fair value of options (pence) 3.3 5.2
------------------------------------- ----------- ------------
The fair value of the options granted in the comparative period
have been calculated using the Black Scholes option pricing model
assuming the inputs shown below.
23 November 15 March
2021 2022
------------------------------------- ----------- ---------
Number of options granted 1,350,000 3,864,406
Share price at date of grant (pence) 20 14.75
Exercise price (pence) 20 14.75
Option life in years 10 years 10 years
Risk free rate (%) 0.74% 1.44%
Expected dividend yield (%) 0.00% 0.00%
Fair value of options (pence) 7.56 5.92
------------------------------------- ----------- ---------
The weighted average exercise price for options outstanding at
the year end was 12p (03 July 2022 - 14p).
27. CALLED-UP SHARE CAPITAL
02 July 2023 03 July 2022
GBP'000 GBP'000
--------------------------------------------------- ------------ ------------
Allotted, called up and fully paid ordinary shares 2,179 1,983
--------------------------------------------------- ------------ ------------
02 July 2023 03 July 2022
Number Number
-------------------------------- ------------ ------------
Ordinary shares at GBP0.01 each 217,883,990 198,300,657
-------------------------------- ------------ ------------
The table below summarises the movements in share capital for
Nightcap plc during the periods ended 2 July 2023 and 3 July
2022:
Ordinary Shares
Ordinary GBP0.01 Nominal Ordinary Shares
Shares Number Value Share Premium
of shares GBP'000 GBP'000
------------------------------------------- -------------- ---------------- ---------------
At 27 June 2021 185,475,192 1,855 19,267
Shares issued in connection with Barrio
Bar Group acquisition - 21 November 2021 5,682,609 57 1,051
Shares issued in connection with Adventure
Bar Group contingent consideration -
29 June 2022 7,142,856 71 1,054
------------------------------------------- -------------- ---------------- ---------------
At 3 July 2022 198,300,657 1,983 21,372
Shares issued for cash subscription -
8 June 2023 19,583,333 196 2,154
------------------------------------------- -------------- ---------------- ---------------
At 2 July 2023 217,883,990 2,179 23,527
------------------------------------------- -------------- ---------------- ---------------
- On 21 November 2022 the Company acquired the Barrio Familia
Group for initial consideration comprising 5,682,609 Ordinary
Shares
- On 29 June 2022 the Company issued 7,142,856 Ordinary shares
in connection with the settlement of the contingent consideration
arising from the Adventure Bar Group acquisition in May 2021.
- On 8 June 2023 the Company raised new funds, totalling GBP5.0
million, through a combination of new ordinary shares and
convertible loan notes ("CLNs") in order to fund the acquisition of
Dirty Martini. 19,583,333 new shares were issued at a price of 12
pence per share totalling GBP2.35 million alongside CLNs totalling
GBP2.65 million.
28. EQUITY
The Group's Equity comprises the following:
Called-up share capital
Called-up share capital represents the nominal value of the
shares issued.
Share premium account
The share premium account records the amount above the nominal
value received for shares sold.
Share based payment reserve
The share option reserve represents the cumulative amounts
charged to profit in respect of employee share option arrangements
where the scheme has not yet been settled by means of an award of
shares to an individual.
Reverse acquisition reserve
The reverse acquisition reserve arose on the share for share
exchange between Nightcap plc and London Cocktail Club Limited on
13 January 2021
Retained earning
Retained earnings represents cumulative profits or losses, net
of dividends paid and other adjustments.
Non-controlling interest
Non controlling interest represents the portion of equity
ownership in a subsidiary's net assets not attributable to the
parent company.
29. ANALYSIS OF CHANGES IN NET DEBT
Reclass
long
At term to At
28 June short Non cash 3 July
2021 Cash flows Acquisitions term movement 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- ---------- ------------ -------- --------- --------
Cash at bank 13,187 (10,822) 2,988 - - 5,353
------------------------------- -------- ---------- ------------ -------- --------- --------
Bank loans falling due within
1 year (1,424) 914 (277) (73) 67 (793)
Bank loans falling due greater
than 1 year (3,256) - (1,540) 73 - (4,723)
Other loans falling due
within 1 year (35) 28 - - - (7)
Lease liabilities falling
due within 1 year (1,441) 1,611 (421) (2,124) - (2,374)
Lease liabilities falling
due greater than 1 year (12,463) - (4,845) 2,124 (10,070) (25,254)
------------------------------- -------- ---------- ------------ -------- --------- --------
Total debt (18,617) 2,553 (7,082) - (10,003) (33,150)
------------------------------- -------- ---------- ------------ -------- --------- --------
Net debt (5,430) (8,270) (4,094) - (10,003) (27,797)
------------------------------- -------- ---------- ------------ -------- --------- --------
Net (debt) / cash - pre
IFRS 16 leases 8,473 (9,881) 1,171 - 67 (170)
------------------------------- -------- ---------- ------------ -------- --------- --------
Reclass
long term
At 4 July to short Non cash At 2 July
2022 Cash flows Acquisitions term movement 2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- ---------- ------------ ---------- --------- ---------
Cash at bank 5,353 (336) - - - 5,017
------------------------------- --------- ---------- ------------ ---------- --------- ---------
Bank loans falling due within
1 year (793) 794 - (1,000) (1) (1,000)
Bank loans falling due greater
than 1 year (4,723) (4,105) - 1,000 (209) (8,037)
Other loans falling due
within 1 year (7) 7 - - - -
Other loans falling due
greater than 1 year - (2,650) - - - (2,650)
Lease liabilities falling
due within 1 year (2,374) 2,255 - (3,162) - (3,281)
Lease liabilities falling
due greater than 1 year (25,254) - - 3,162 (12,502) (34,594)
------------------------------- --------- ---------- ------------ ---------- --------- ---------
Total debt (33,150) (3,699) - - (12,713) (49,562)
------------------------------- --------- ---------- ------------ ---------- --------- ---------
Net debt (27,797) (4,035) - - (12,713) (44,545)
------------------------------- --------- ---------- ------------ ---------- --------- ---------
Net (debt) / cash - pre
IFRS 16 leases (170) (6,289) - - (211) (6,670)
------------------------------- --------- ---------- ------------ ---------- --------- ---------
30. PENSION COMMITMENTS
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
GBP'000 GBP'000
------------- -------- --------
Pension cost 183 128
------------- -------- --------
The following contributions were payable to the fund and are
included in creditors:
02 July 03 July
2023 2022
GBP'000 GBP'000
------------------------------ -------- --------
Pension contributions payable 132 44
------------------------------ -------- --------
31. RELATED PARTY TRANSACTIONS
Related parties are considered to be the directors and former
directors of Nightcap plc, The Cocktail Club, Adventure Bar Group
and Barrio Familia Group and substantial shareholders. Transactions
with them are detailed below:
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
GBP'000 GBP'000
---------------------------------------------- -------- --------
Purchase of inventories - D&H Spirits Limited 33 85
Purchase of inventories - CGCC Limited 11 41
Consultancy fees - CGCC Limited 30 -
Consultancy fees - Ferdose Ahmed 44 24
Consultancy fees - James Hopkins 16 24
---------------------------------------------- -------- --------
133 174
---------------------------------------------- -------- --------
The companies listed below are deemed to be related parties due
to having common shareholders with the Company. These transactions
are split by related party as follows:
52 weeks 53 weeks
ended ended
02 July 03 July
2023 2022
GBP'000 GBP'000
------------------------------------------------------- -------- --------
CGCC Limited - a company controlled by JJ Goodman 41 41
Ferdose Ahmed 44 24
James Hopkins 16 24
D&H Spirits Limited - a company co-controlled by James
Hopkins 33 85
------------------------------------------------------- -------- --------
133 174
------------------------------------------------------- -------- --------
Amounts owed to related parties were as follows:
02 July 03 July
2023 2022
GBP'000 GBP'000
-------------- -------- --------
James Hopkins - 2
-------------- -------- --------
- 2
-------------- -------- --------
32. BUSINESS COMBINATIONS
On 9 June 2023, Nightcap plc acquired the trade and assets for
certain bars and one restaurant relating to the Dirty Martini
business, for a total consideration of up to GBP4.65m. Nightcap is
currently the operator of nine Dirty Martini bars and the Tuttons
brasserie restaurant in Covent Garden. There are four Dirty Martini
bars located in London with an additional five bars located in
Cardiff, Bristol, Birmingham, Leeds and Manchester.
The total consideration of GBP4.65m comprised cash of GBP4.15m
with an additional GBP0.5 million due on the successful assignment
of the property leases of four key sites, the completion of which
was announced on 9 November 2023.
The acquired business contributed revenues of GBP1,308,000 and
loss before tax of GBP138,000 (in accordance with IFRS) to the
consolidated Group for the period from 9 June 2023 to 2 July 2023.
As a result of acquiring the trade and certain assets out of
administration, the Group is unable to report the pre-acquisition
trading results of the business.
Fair Value
Book Value Adjustments Fair Value
GBP'000 GBP'000 GBP'000
------------------------------ ---------- ------------ ----------
Property, plant and equipment 442 - 442
Intangible assets - 2,950 2,950
Inventories 345 - 345
Receivables 99 - 99
Payables (525) - (525)
Provisions - (317) (317)
Deferred tax liability - (738) (738)
------------------------------ ---------- ------------ ----------
Total net assets acquired 362 1,895 2,257
------------------------------ ---------- ------------ ----------
Fair value of consideration paid GBP'000
------------------------------------------------------- -------
- Cash paid to vendor 4,150
- Contingent consideration 500
--------------------------------------------------------- -------
Acquisition date fair value of the total consideration
transferred 4,650
--------------------------------------------------------- -------
Goodwill (Note 14) 2,393
--------------------------------------------------------- -------
The Group has made certain estimates and judgements in arriving
at the valuation of intangible assets and goodwill.
In accordance with IFRS 3, the identifiable assets acquired and
liabilities and contingent liabilities assumed should be measured
at fair value at the acquisition date in order to determine the
difference between the cost of acquisition and the fair value of
the Group's share of net assets acquired, which should then be
recognised as goodwill on the balance sheet or recognised in the
income statement. In determining the fair value, management has
recognised brand values totalling GBP2.95m in respect of the brand
acquired. Key estimates used in arriving at the brand valuation
include growth rates, discount rate, cashflow assumptions including
working capital estimates, appropriate royalty rates and useful
economic lives.
The Group has not recognised a right of use asset on acquisition
of Dirty Martini as a result of the granting of licenses to trade
while the lease assignments where being negotiated with landlords.
As noted in the Chief Executive's Report, Nightcap successfully
completed the assignments, which was announced on 9 November 2023.
As a result, the Group will recognise right of use assets in its
next reporting period.
The main factors leading to the recognition of goodwill are:
-- The presence of certain intangible assets, such as the
assembled workforce of the acquired entity, which do not qualify
for separate recognition
-- Cost savings and synergies through better buying and
enhancing the customer offering, which result in the Group being
prepared to pay a premium, and
-- The fact that a lower cost of capital is ascribed to the
expected future cash flows of the entire operation acquired than
might be to individual assets.
Acquisition costs of GBP734,000 arose as a result of the
transaction (Note 11). These have been included as transaction
related costs as part of administrative expenses in the statement
of comprehensive income.
33. LEGAL ENTITIES
The following table presents the investments in which the Group
owns a portion of the nominal value of any class of share
capital:
Direct Subsidiary Holding % Owned Nature of Business
---------------------------- ------------- -----------------------------------------
London Cocktail Club Limited Ordinary 100% The development, operation and management
of individually themed cocktail bars
+Venture Battersea Limited Ordinary 100% The development, operation and management
of individually themed bars
Adventure Bars Mid Limited Ordinary 100% The development, operation and management
of individually themed bars
Adventure Bars Luna Digbeth Ordinary 100% The development, operation and management
Limited of individually themed bars
Barrio Familia Limited Ordinary 100% The development, operation and management
of individually themed bars
DMN Bars Limited Ordinary 100% The development, operation and management
of individually themed bars
---------------------------- ------------- -----------------------------------------
Indirect Subsidiary Holding % Owned Nature of Business
-------------------------------- ------------- -----------------------------------------
London Cocktail Club Trading Ordinary 100% Dormant
Limited
London Cocktail Events Limited Ordinary 100% Dormant
The London Cocktail School Ordinary 100% Dormant
Limited
The Craft Cocktail Club Limited Ordinary 100% Dormant
Adventure Bars Group CHS Limited Ordinary 100% The development, operation and management
of individually themed bars
Adventure Bars Waterloo Limited Ordinary 100% The development, operation and management
of individually themed bars
Waterloo Sunset Limited Ordinary 50% The development, operation and management
of individually themed bars
Barworks (Electric) Limited Ordinary 100% The development, operation and management
of individually themed bars
Adventure Bars Cardiff Limited Ordinary 100% Dormant
Adventure Bars Bristol Limited Ordinary 100% Dormant
Adventure Bars Liverpool Limited Ordinary 100% Dormant
Barrio Central Limited Ordinary 100% The development, operation and management
of individually themed bars
Barrio Bars Limited Ordinary 100% The development, operation and management
of individually themed bars
Barrio East Limited Ordinary 100% The development, operation and management
of individually themed bars
Barrio South Limited Ordinary 100% The development, operation and management
of individually themed bars
Barrio Regio Limited Ordinary 100% The development, operation and management
of individually themed bars
-------------------------------- ------------- -----------------------------------------
34. CONTINGENT LIABILITY
Nightcap plc and DMN Bars Limited, a subsidiary company of
Nightcap, have received notification that 18 individuals wish to
bring proceedings to an employment tribunal where Nightcap and DMN
Bars Limited have been listed as second and third respondents. The
nature of their claim is in relation to the acquisition of certain
assets of Dirty Martini out of administration where they were not
included in the acquisition of those assets. The claimants are
alleging to have been employed by DC Bars Limited and that they
should have transferred to DMN Bars Limited or Nightcap under the
Transfer of Undertakings Protection of Employment rights ("TUPE")
regulations. The total amount claimed is GBP338,000 together with
further unquantified amounts. Management has sought legal advice on
the matter and management believes that there are no grounds for
such claims. Given the uncertainty involved and the strength of
legal opinion, no provision has been made in these financial
statements as management believes that the most likely outcome is
no liability. We have no indication of the likely timescales
involved.
35. POST BALANCE SHEET EVENTS NOTE
On 9 November 2023, the Group completed the process of assigning
the Dirty Martini leases from the administrator.
When Nightcap acquired certain assets of DC Bars Limited and
Tuttons Brasserie Limited, the operator of the 'Dirty Martini'
chain of cocktail bars and Tuttons Brasserie, a critical part of
the process was securing the assignment of leases for the key sites
from the administrator, with the consent from the relevant
landlords.
As a result the Group will continue trading in nine of the ten
sites. Eight out of ten leases have been assigned on existing terms
(only subject to rent reviews) and these assigned leases have
expiry dates between 2030 and 2047.
One site has not been assigned. This is the Hanover Square site,
where the Group could not agree with the landlord on reduced rental
costs to make the site profitable, and therefore no agreement could
be reached to keep trading at the site.
The Group has entered into a new three year lease for the
Tuttons restaurant and Dirty Martini Covent Garden site. This lease
covers a restaurant lease as well as the small downstairs cocktail
bar. The new lease is on considerably more favourable commercial
terms and is in line with Nightcap's objective to not remain as a
restaurant operator in the long term.
RECONCILIATION OF STATUTORY RESULTS TO ALTERNATIVE PERFORMANCE
MEASURES ("APMS")
53 weeks 52 weeks
ended ended
02 July 03 July
2023 2022
Note GBP'000 GBP'000
------------------------------------------------- ---- -------- --------
(Loss) / profit from operations (2,812) 1,407
Exceptional items 10 792 84
Acquisition related transaction costs 11 734 (866)
Pre-opening costs 12 1,013 442
Share based payment charge 7 181 345
Impairment 6 565 143
------------------------------------------------- ---- -------- --------
Adjusted profit from operations 473 1,555
Depreciation and amortisation (pre IFRS 16 Right
of use asset depreciation) 6 3,094 2,256
IFRS 16 Right of use asset depreciation 6 3,278 2,224
IFRS 16 Right of use asset / liability disposal 6 (220)
------------------------------------------------- ---- -------- --------
Adjusted EBITDA (IFRS 16) 6,625 6,036
IAS 17 Rent charge (3,997) (2,727)
------------------------------------------------- ---- -------- --------
Adjusted EBITDA (IAS 17) 2,627 3,309
------------------------------------------------- ---- -------- --------
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END
FR UUOKRONUAUAA
(END) Dow Jones Newswires
November 23, 2023 02:00 ET (07:00 GMT)
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