This announcement contains Inside Information for the purposes of Article 7 of EU Regulation 596/2014 (which forms part of domestic UK law pursuant to the European Union (Withdrawal) Act 2018).  Upon the publication of this announcement this Inside Information is now considered to be within the public domain.

NIGHTCAP

13 March 2023

Nightcap plc
("Nightcap", the "Company" or the "Group")

Interim results for the 26-week period ended 1 January 2023

"Strong trading results despite significant rail strike disruptions"

Key highlights for unaudited results for the 26-week period ended 1 January 2023:

·          Revenue growth of 48.7% to £23.5 million as the Company's strategy to build the leading UK premium bar group continues successfully.

·         Like-for-like* revenue increase of 4.7% for Q2 FY2023 against Q2 FY2022 and 10.1% increase for H1 FY2023 against equivalent period in FY2019, however, a 5.8% like-for-like*decrease occurred in H1 FY2023 against H1 FY2022, largely due to the ongoing rail strikes. 

·          IAS17 Adjusted EBITDA increased by 25% to £2.0 million, despite significant rail strikes held across the UK.  Management estimates that the 13 rail strike days over the period have cost the Company approximately £1.2 million in EBITDA.

·         30 bars traded throughout the half year period, with 36 bars being operated at the end of the half year period, reflecting the openings of six new sites - two The Cocktail Club bars, two Tonight Josephine venues and two Barrio bars during September and October 2022.

·         Christmas trading period exceeded expectations with record amount of corporate Christmas parties, pre-sold events and New Year's Eve almost entirely sold out across all bars.

·         The six additions to the estate during the half year period along with maturity of the 13 new bars opened since November 2021, will have a significant impact on both the Group's expected revenue and EBITDA as the sites reach maturity.

·         13 new sites have traded on average just over six months at the end of the period, with an early trading and maturity profile that puts them on track to deliver the Group's target of 75% annual return on investment (ROI) on total capital invested in new bars in their third year of operation. Several sites are on track to beat the 75% ROI target in their first year of operation.

·          Cash generated from operations increased by 273% to £4.1 million during the period as the business focussed on maximising returns from existing and recently opened bars.

·          As at 1 January 2023, the Group's net debt was £4.1 million with £0.75 million of the Group's total bank debt scheduled for repayment during FY2023.

·         Management continues to see extremely attractive opportunities within the property market and look forward to the ongoing roll-out of all of its key brands.

·      Integrated subsidiary operations into one Group structure from January 2023 resulting in £1.4 million in anticipated annualised efficiency savings.

·          The millennial and Gen Z crowd remain resilient consumers, with high disposable income, as they continue to enjoy great nights out.

·      Trading has remained resilient since the start of 2023. The Group continues to trade in line with market expectations and the outlook is encouraging. Board welcomes potential resolution regarding rail strikes, although is conscious of the impact that further rail strikes could have.

Sarah Willingham, CEO of Nightcap, commented:

"Nightcap has had a fantastic half year. Our incredible team opened six bars in six weeks across the country, whilst also delivering a Christmas that exceeded expectations and records in terms of corporate parties, pre-sold events and a nearly sold out New Year's Eve across all 36 sites. This was followed by a significant business integration and streamlining process, resulting in expected Group savings of £1.4 million annually, whilst preserving the much loved individual identities of our brands. The new sites have opened well with trading continuing to build week-on-week all the way through to the end of February 2023.

"Whilst rapidly building the leading premium bar group in the UK in a very attractive market for property deals, we continue our focus on strong cost controls, proven by our impressive cash generation of £4.1 million from operations during the period thanks to the unwavering dedication of our talented and highly motivated team.

"We look forward to the second half of the year with confidence and once again we thank our customers for coming to our sites and enjoying themselves with friends in a fun, relaxed party atmosphere and leaving knowing they have had a night to remember."

Investor presentation

Sarah Willingham, Michael Toxvaerd and Toby Rolph will provide a live presentation relating to the interim results via the Investor Meet Company platform on 15 March 2023 at 3:00pm GMT.

The presentation is open to all existing and potential shareholders. Investors can sign up to Investor Meet Company for free and add to meet Nightcap via: https://www.investormeetcompany.com/nightcap-plc/register-investor

Investors who already follow Nightcap on the Investor Meet Company platform will automatically be invited.

For further enquiries:

Nightcap plc

* 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 period and comparative reporting periods.

CHIEF EXECUTIVE OFFICER'S STATEMENT

I am pleased to present Nightcap's unaudited interim results for the 26-week period from 4 July 2022 to 1 January 2023 (the "Half Year").

TRADING

During the Half Year, the Group's reported revenues increased by 48.7% to £23.5 million. This represents a like-for-like* revenue increase of 4.7% for Q2 FY2023 against Q2 FY2022 and a 10.1% increase for H1 FY2023 against the equivalent period in FY2019, however, it resulted in a 5.8% like-for-like* decrease for H1 FY2023 against H1 FY2022 largely due to the ongoing train strikes.

The Board considers that the 10.1% increase in like-for-like* trading against FY2019, across the businesses acquired since 2021, demonstrates the successful implementation of the Company's strategy to acquire drinks-led hospitality groups that are considered to have significant potential for additional value creation through roll-out and efficiency savings.

As well as rapid, sustainable growth, we continue to focus on our profit conversion, and in this respect, we are delighted to report a strong Adjusted EBITDA of £4.1 million (IAS17 Adjusted EBITDA: £2.0 million) for the Half Year. Whilst this is an increase of over 25% on the comparable period in 2021, we estimate that the rail strikes had an impact of approximately £1.2 million on the business at the EBITDA level during the Half Year.

Through very strong Q2 FY2023 trading, led by Christmas, we saw, for the first time, the underlying long-term potential of the Group's portfolio of 36 bars. We achieved a 60.9% increase in revenue compared to Q2 FY2022 and a 4.7% increase on a like-for-like* basis and delivered a Christmas trading period exceeding expectations with a record amount of corporate Christmas parties, pre-sold events and New Year's Eve almost entirely sold out across all bars.

FINANCIAL POSITION

As at 1 January 2023, the Group had unaudited cash resources of approximately £5.5 million (including cash in transit). As at 1 January 2023, the Group had total bank debt of approximately £9.6 million giving a net debt position of £4.1 million (excluding lease liabilities). Only £0.75 million of the Group's total bank debt is scheduled for repayment during FY2023 and the Group put in place an interest rate cap on the reference base rate (SONIA) fixed at 3% on £7.8 million out of £9.6 million of its total HSBC bank facility.

The Group generated £4.1 million of cash from operations during the Half Year period, which is an increase of 273% versus the comparative period. Since we took the decision to slow the rollout and focus on maximising returns from existing and recently opened bars, the business has enjoyed a significant improvement in cash generation.

BRANDS

Since the inception of Nightcap in January 2021, we have delivered on our strategy to acquire strong brands, aimed at the resilient Millennial and Gen Z market, with simple, replicable business models and nationwide appeal.

As a Group, the recent operational focus has been the integration of subsidiaries into one Group structure from January 2023, resulting in £1.4 million in anticipated annualised efficiency savings. The focus of the integration has been to maximise synergies and efficiencies across the three businesses we had acquired and we now operate as one, much more streamlined and capable organisation under the Nightcap umbrella. The new structure allows Nightcap to better manage the continued roll-out, share areas of excellence across the brands whilst maintaining their individual identities, as well as simplifying the integration of any potential future acquisitions. We are confident about the new integrated senior management structure and excited to see how the positive energy and team dynamic will impact the business through increased clarity, focus, collaboration and leadership.

During the Half Year, we opened six new sites across The Cocktail Club, Tonight Josephine and Barrio brands.

Tonight Josephine has now grown to six venues, following the openings of new sites in Bristol during September 2022 and in Liverpool during October 2022. In Bristol, Tonight Josephine was the Group's fourth site in the city and trading has been positive since launch, further proving the success of the Company's cluster model of trading several different concepts within a very short walk of each other, increasing footfall to the areas, cross selling our brunches and nights out - without cannibalizing trade.  

Barrio opened two sites during October 2022. These included our Tequila and Tacos bar in Covent Garden which is now one of the world's largest Tequila-focused bars with a capacity of 600 guests, as well as a venue in Watford spread across two-floors. These were the first openings since Barrio was acquired in November 2021. As at the end of the Half Year period, both bars had each traded for less than three months with trading building well in both sites.

The Cocktail Club opened two new bars during the Half Year, an incredible venue designed by world-famous Matthew Williamson in Birmingham during September 2022, and our first bar located in the heart of Canary Wharf during October 2022. Both sites have been trading well ahead of expectations since opening.

The six additions to the estate during the reporting period along with maturity of the 13 new bars opened since November 2021, will provide an increase in expected run rate revenues for the second half of this financial year.

RAIL STRIKES

Management estimates that the 13 rail strike days over the Half Year will have cost the Company approximately £1.2 million in EBITDA as a consequence of the deliberate targeting of mainly Thursdays and Saturdays as strike days, two of the three most lucrative weekly trading days for the Company and the hospitality industry as a whole.

PROPERTY

Management continues to see very attractive opportunities within the property market having opened bars in some of the best placed sites in its target cities.  We have received a number of significant financial contributions from landlords and believe that this property landscape will continue for a lot longer.  With the strong financial performance of the Half Year, alongside a more granular understanding of the short-term impact of rail strikes, we look forward to the ongoing roll-out of all our key brands.

As a result of the maturity profile associated with the opening of new bars, the Group's management is expecting to achieve the Group's target of 75% ROI on total capital invested in new bars in their third year of operation.

The Group has opened a total of 13 new sites since listing in January 2021, investing £10.3 million in new site openings. On average these sites had been open for just over six months at the end of the period. Early trading has been positive, with several being on track to beat the 75% third year ROI target already in their first year of operation.

COSTS

As previously reported, we continue to be exposed to ongoing macro-economic pressures which are mitigated against as follows:

·    Energy - The Group is on fixed electricity rates on the majority of the estate with very low gas consumption. Electricity prices have been reducing in recent months and in recent weeks we are now able to fix new contracts below our forecasted rates as sites come out of fixed contracts.

·   Supply chain price pressures - The Group has fixed supplier contracts entered into during 2022 protecting profit margins which remain stable. The significant increase in revenue continues to improve the Group's negotiating position with key suppliers.

·     Wage inflation - Labour shortages have reduced along with upward wage pressures as we are already paying National Living Wage across the Company.

·     Rail Strikes - These continue to have the most significant short-term impact on our sales. Rail strikes have been ongoing since the beginning of the period. Whilst these may  continue throughout H2 FY2023 the Company is now better positioned to manage labour costs on strike days with the hope and expectation that a resolution will be found over the coming period.  

CURRENT TRADING AND MARKET OUTLOOK

Trading has remained resilient since the start of 2023. The Group continues to trade in line with market expectations and the outlook is encouraging. Whilst the Board welcomes a potential resolution regarding rail strikes, we are conscious of the impact that further rail strikes or other major interruptions could have.

The challenges facing the economy persist, but the outlook for the industry is stabilising with only the potential for further rail strikes currently providing significant disruptions to trading. Whilst our teams are working tirelessly to mitigate cost pressures, we are pleased that our core market of Millennial and Generation Z customers are still showing strong demand.

The business has a premium and well invested portfolio of bars which is well positioned in the market to see continued trading growth and weather any challenges it faces.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE 26 WEEKS ENDED 1 JANUARY 2023

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 1 JANUARY 2023

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE 26 WEEKS ENDED 1 JANUARY 2023

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE 26 WEEKS ENDED 1 JANUARY 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

The Directors of Nightcap plc (the "Company") and its subsidiaries (the "Group") present their interim report and the unaudited condensed consolidated financial statements for the 26 weeks ended 1 January 2023 ("Interim Financial Statements").

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.

The Interim Financial Statements were approved by the Board of Directors on 10 March 2023.

2. ACCOUNTING POLICIES

2.1. Basis of preparation

The Interim Financial Statements have been prepared in accordance with IAS34, 'Interim Financial Reporting'. They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last financial statements.

The Interim Financial Statements are presented in Pounds Sterling (£'000), except where otherwise indicated; and under the historical cost convention. Due to rounding, numbers presented in the Interim 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.

The Directors consider that the principal risks and uncertainties faced by the Group are as set out in the Group's Annual Report and Financial Statements for the period ended 3 July 2022.

The accounting policies adopted in the preparation of the Interim Financial Statements are consistent with those applied in the preparation of the Group's consolidated financial statements for the period ended 3 July 2022. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

2.2. Going concern

In concluding that it is appropriate to prepare these Interim Financial Statements for the 26 weeks ended 1 January 2023 on the going concern basis, the Directors have considered the Group's cash flows, liquidity and business activities.

As at 1 January 2023 the Group had cash balances of £5.5m including cash in transit. During the period the Group refinanced its legacy debt with an amortising term loan (£3m) and a Revolving Credit Facility (up to £7m) repayable in August 2025.

Based on the Group's forecasts, the Directors have adopted the going concern basis in preparing the Financial Statements. In making the assessment the Directors have made a current consideration of the current economic and inflationary cost pressures facing consumers. The Directors have considered the impact of these on the cash flows and liquidity of the Group over the next 12-month period and has sensitised these forecasts accordingly.

Based on these assessments the Group forecasts to comply with its banking covenant obligations, and accordingly the Directors have concluded that it is appropriate to prepare the financial statements on the going concern basis.

2.3. Alternative Performance Measures

The Interim Financial Statements include both statutory and alternative performance measures ("APMs"). Further background to the use of APMs and reconciliations between statutory measures and APMs are presented in Note 13.

2.4. Accounting estimates and judgements

In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the Group's consolidated financial statements for the period ended 3 July 2022 and are set out in the Group's Annual Report and Financial Statements for that period.

2.5. Seasonality

The Group has a variety of brands and concepts within its business. The demand across our sites is well spread throughout the financial year. Historically the lead up to Christmas has always been a busy period for hospitality businesses but with our well diversified range of brands, the seasonal impact of Christmas is balanced with strong summer periods due to the outdoor venues in the Group, particularly Luna Springs and Bar Elba which provide large outdoor bar and event space.

3. EXCEPTIONAL ITEMS

4. NET FINANCE EXPENSE

5. TAX (CREDIT) / CHARGE ON LOSS

The following income tax (credit)/charge is applicable on the Group's operations.

The taxation credit on loss for the interim period is £169,000 (26 weeks ended 26 December 2021 - credit £33,000). The effective tax rate of 18.1% (26 weeks ended 26 December 2021 - 6.8%) differs from the UK corporation tax rate (19%) as a result of permanent disallowable costs (depreciation of non-qualifying fixed assets, exceptional items, accounting share based payment charges) and the differential between the rate at which items impact current tax compared with deferred tax, all reducing the effective tax rate for the year. The rate reduction is partially offset by the 23% permanent element of the 130% capital allowances 'super deduction' on new qualifying plant and machinery additions

The full year effective tax rate is expected to be c.18.1%. The full year effective tax rate at 26 December 2021 was expected to be 5.7%

6. 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 share options granted pursuant to The Nightcap plc Share Option Plan.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. During the 26 weeks ended 1 January 2023 the Group had potentially dilutive shares in the form of unvested share options pursuant to the above long-term incentive plan.

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; consequently, all per-share measures in the current period are based on the weighted number of ordinary shares in issue.

7. PROPERTY, PLANT AND EQUIPMENT

8. TRADE AND OTHER PAYABLES

9. BORROWINGS

In August 2022, the Group refinanced its borrowings from three individual lenders under multiple tranches with a new £10.0m debt facility from HSBC Bank, comprised of a £3m term loan and a £7m Revolving Credit Facility, to provide support to the business as it executes on its roll out strategy. The new £10.0m HSBC facility, replaced £5.5m 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 £3m term loan and 3.25% above SONIA on the £7m Revolving Credit Facility. The Group has taken out an interest rate cap on its reference base rate at 3% on £8m out of £10m of its HSBC facility.

10. CALLED UP SHARE CAPITAL

11. ANALYSIS OF CHANGES IN NET DEBT

12. RELATED PARTY TRANSACTIONS

Related parties are considered to be the directors of Nightcap plc, The Cocktail Club, Adventure Bar Group and Barrio Familia. Transactions with them are detailed below:

The companies listed below are deemed to be related parties due to having common shareholders with the Company. The people listed below are shareholders of the Company and therefore deemed to be related parties. These transactions are split by related party as follows:

Amounts owed to related parties were as follows:

13. RECONCILIATION OF STATUTORY RESULTS TO ALTERNATIVE PERFORMANCE MEASURES