THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATIONS (EU) NO. 596/2014 WHICH FORMS PART OF DOMESTIC UK LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION.

20 February 2024

Nightcap plc

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

Acquisition of certain of the assets of The Piano Works

£1.0 million share subscription and variation of convertible loan note terms

Trading update

and

Total voting rights

Introduction

Nightcap (AIM: NGHT), the owner and operator of 46 premium bars, is pleased to announce the acquisition of The Piano Works, the live entertainment concept currently operating at Nightcap's Barrio Covent Garden venue and at a venue in Farringdon, London.

The Piano Works was launched in 2015 in a large Victorian warehouse site in Farringdon, London, and this bar and entertainment venue is being acquired under The Piano Works Acquisition (as defined below). The Piano Works is an interactive live music entertainment concept, typically involving pianists, vocalists and other musicians performing an audience curated playlist, accompanied by a high-quality food, drinks and cocktail offering.  Since November 2023, The Piano Works has had a very successful residency within Nightcap's Barrio Covent Garden venue. The residency resulted in a significant uplift in revenues compared to the Board's forecasts under the Barrio brand for the four week festive period ended 31 December 2023. This made a positive contribution to Nightcap's revenue performance in the 13 weeks ended 31 December 2023, as indicated in Nightcap's announcement of 10 January 2024. Nightcap intends The Piano Works to become a permanent fixture at the Covent Garden site and for The Piano Works concept to be the rolled out along with the other successful brands in the Nightcap portfolio. 

STAMP Entertainment Limited ("STAMP"), a recently incorporated 100% owned subsidiary of Nightcap, has entered into an asset purchase agreement to acquire certain of the assets (the "Assets") of TDC Concepts Limited ("TDCC") (the "The Piano Works Acquisition").  TDCC is the operator of 'The Piano Works' live music entertainment concept.  Nightcap is paying a total consideration of £200,000 for the Assets, further details of which are described below. The Piano Works Acquisition has completed following a pre-pack administration process by TDCC.  It is intended that the current directors of TDCC will become minority shareholders in STAMP and a further announcement on this will be made in due course once the terms are finalised.

In conjunction with The Piano Works Acquisition and to provide working capital to STAMP, Nightcap has raised a total of £1.0 million, through a subscription (the "Subscription") of 16,666,666 of new ordinary shares in the Company (the "Subscription Shares") at 6 pence per share, being a premium of approximately 22% to Nightcap's last closing mid-market share price on 19 February 2024, further details of which are set out below. Nightcap has also agreed to amend and restate the terms of the convertible loan notes issued by the Company in June 2023, details of which are also set out below.

The Company is also providing a trading update in relation to its 52-week period ending 30 June 2024 ("FY 2024"), details of which are set out below. 

The Piano Works Acquisition highlights

The Piano Works Acquisition brings a number of benefits to the Group, including:

·      adding a popular, established interactive live music entertainment concept with a large and dedicated following to Nightcap's entertainment offering;

·      continuing the very successful residency of The Piano Works in Nightcap's Barrio Covent Garden venue;

·      bringing The Piano Works' existing bar, located in Farringdon, London, into the Group; and

·      providing the opportunity for Nightcap to roll out The Piano Works concept.

Commenting on The Piano Works Acquisition, Sarah Willingham, Chief Executive Officer of Nightcap, said:

"The Piano Works is another excellent addition to our Group. I very much look forward to the future of this concept.  It adds a whole new area of expertise to Nightcap and a different entertainment offer, bringing live music to our customers. 

"We have known The Piano Works concept for a long time and look forward to working with the founders and their dedicated staff. After the very successful residency in our Barrio bar in Covent Garden at Christmas we are delighted to be able to partner with them and provide the opportunities to bring this great entertainment concept to other cities across the UK."

Commenting on The Piano Works Acquisition, Alan Lorrimer, Founder of The Piano Works, said:

"Over the past eight years we have loved creating a communal and immersive experience for our many guests singing along to their favourite soundtracks.

"The past four years have been the toughest I have known in my forty years in hospitality. We survived COVID, but when the sale of our Leicester Square venue fell through, it was the last financial straw.

"We transferred into Covent Garden thanks to a great collaboration with the Nightcap team. We had an excellent Christmas which proved we could work really well together.

"We now have the potential to expand The Piano Works and prove that customers across the country will love our immersive audience requested live music experience."

For further enquiries:

Background to and reasons for The Piano Works Acquisition

The Piano Works Acquisition is in line with Nightcap's strategy of making selective acquisitions within the drinks-led premium bar segment of the UK hospitality sector.

The Piano Works is an interactive live music entertainment concept, typically involving pianists, vocalists and other musicians performing an audience curated playlist, accompanied by a high-quality food, drinks and cocktail offering.  The Piano Works currently operates from two sites, being Nightcap's Barrio Covent Garden venue and a basement site in a Victorian warehouse in Farringdon, London. The Farringdon site, which will be operated by the Group going forward, has a 7,250 sq ft area, an up to 400-person capacity, and a 2:00 a.m. license on Friday and Saturday and a 1:00 a.m. license from Sunday to Thursday. As indicated in Nightcap's announcement of 10 January 2024, the Company's recent collaboration with The Piano Works made a very positive contribution to Nightcap's revenue performance in the 13 weeks ended 31 December 2023. 

The Piano Works historically operated another site in Soho. This site had substantial rental obligations, primarily incurred during the Covid period. Following a failed sale process, the holding company of that site was placed into liquidation last year. Due to certain cross guarantees between the holding company of the Soho site and TDCC, and with the landlord being unwilling to compromise, there was a direct impact on TDCC's banking facilities. These factors led to TDCC being put into administration, which has provided Nightcap with the opportunity to acquire the Assets at an attractive price. STAMP, the Nightcap subsidiary acquiring the Assets, has employed all staff members of TDCC as part of The Piano Works Acquisition.

The Board believes that The Piano Works brand is well established and a good fit within Nightcap's existing portfolio of bars and that The Piano Works brand represents a compelling and complementary acquisition for Nightcap. The Board also believes that The Piano Works Acquisition by STAMP represents a way to maintain the benefits of the increased revenue from hosting The Piano Works concept in Nightcap's Barrio Covent Garden venue, bring the existing Farringdon The Piano Works site into the Group at an attractive valuation and provide the potential to roll out The Piano Works concept to other cities. 

Further information in relation to The Piano Works can be found at: https://pianoworks.bar/.

The terms of The Piano Works Acquisition

The Piano Works Acquisition was undertaken as part of a pre-pack administration process by TDCC. TDCC entered into administration on 19 February 2024 and Begbies Traynor plc (the "Administrator") was appointed as the administrator.

STAMP has entered into an asset purchase agreement with TDCC (as seller), the Administrator and the Company (as guarantor) to acquire the Assets for a total cash consideration of £200,000 (the "Consideration").  £100,000 of the Consideration has been settled by Nightcap with the Administrator consisting of a £60,768.50 cash payment on completion along with a £12,000 wage payment settled directly on behalf of TDCC.  £27,231.50 of trading receipts due to Nightcap have been deducted from the cash consideration as these were paid by customers to TDCC after an agreed 16 February 2024 effective transfer date. The balance of the Consideration, being £100,000, will be paid by STAMP to the Administrator in five monthly instalments of £7,500 each starting in April 2024 followed by five monthly instalments of £12,500 each, starting in September 2024. Nightcap is guaranteeing STAMP's obligation to pay the balance of the Consideration under the terms of the asset purchase agreement, and any other amounts due under the licence to occupy.

Pursuant to the terms of The Piano Works Acquisition, TDCC, acting by the Administrator, has granted STAMP a licence to occupy TDCC's Farringdon site from today for a period of up to six calendar months less one week, and Nightcap, with the assistance of the Administrator, will seek the assignment of this lease to STAMP during this period.  A further announcement in relation to this lease will be made as appropriate.

As part of The Piano Works Acquisition, STAMP has employed 147 staff transferred under TUPE. The 147 staff are those who work at The Piano Works' site in Farringdon and who perform as part of The Piano Works residency within Nightcap's Barrio Covent Garden venue, as well as head office staff.  STAMP will not be assuming any of the TDCC existing indebtedness and STAMP shall only acquire those liabilities of TDCC which transfer to it by operation of law.

The Piano Works Acquisition has been made by STAMP which is currently a 100% owned subsidiary of Nightcap.  It is intended that the current Directors of TDCC will become minority shareholders in STAMP and a further announcement on this will be made in due course following the finalisation of the terms.

Financial information on The Piano Works

Based on unaudited management accounts for the year ended 30 June 2023, TDCC generated revenue of approximately £4.6 million, site EBITDA of approximately £0.6 million, EBITDA after head office costs of approximately £0.1 million and profit before tax of nil. The TDCC Farringdon site had an unaudited total assets value of approximately £0.7 million as at 30 June 2023.

The Subscription

In order to provide working capital for STAMP to allow it to fully fund The Piano Works, the Company has raised funds totalling £1.0 million, from the issue of the Subscription Shares to existing shareholders (the "Investors").

Nightcap has entered into subscription agreements with the Investors, issuing in aggregate 16,666,666 Subscription Shares at a price of 6 pence per share, representing a premium of approximately 22% to the mid-market closing price of Nightcap's Ordinary Shares on 19 February 2024.

Variation to existing convertible loan notes

On 9 June 2023, Nightcap announced that it had executed a convertible loan note instrument creating £2.65 million of convertible loan notes (the "CLNs"). The CLNs mature on 9 September 2025 (the "Maturity Date") and are convertible, at the option of the CLN holders, into new ordinary shares in the Company subject to certain conditions, details of which were set out in the Company's announcement of 9 June 2023. 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 CLN holder notifying the Company of its intention to convert. The CLNs bear a coupon of 10% per annum which shall be rolled up and is only payable either when a conversion notice has been served or on an Exit (as defined in the Company's announcement of 9 June 2023) by the issue of the relevant number of shares at the conversion price in respect of such accrued interest amount.

In order to facilitate the Subscription at a premium to Nightcap's last closing mid-market share price, the Company has entered into an amendment and restatement agreement in relation to the CLN instrument ("ARA"), following receipt of unanimous CLN holders consent (some of which are also subscribers in the Subscription). The ARA amends and restates the conversion price of some of the convertible loan notes ("B Notes") to 10 pence per share and has provided the loan note holders who have remained on original terms the option to convert their CLNs to B Notes on the new terms at any time prior to 15 August 2024.  As such those B Notes are now convertible at the higher of 10 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 note holder notifying the Company of its intention to convert. However, the maturity date on the B Notes has been extended by a further 12 months to mature on 9 September 2026. All other terms of the B Notes remain the same.

Trading update for FY 2024

Following positive Christmas trading, as announced on 10 January 2024, the Group's trading since the start of 2024 has been far softer than the Board expected, in line with reports from across the hospitality sector. The Group faces headwinds from ongoing rail strikes, the continuation of the cost of living crisis, above inflation increases to business rates and other costs, and the impact of the forthcoming increase to the National Living Wage. In addition, as announced with the acquisition of the Adventure Bar Group on 4 May 2021, the lease on Bar Elba, held in a 50:50 owned joint venture entity, contained a break clause which has recently been exercised pending the re-development of the building. After a period of negotiation to agree a short-term extension to the lease, the Bar Elba lease will come to an end on 24 February 2024.  Finally, whilst the Board is expecting the integration of both Dirty Martini and The Piano Works to be fully completed during FY 2024, it is now anticipating greater than expected integration costs to be incurred before the end of FY 2024.

As a result of the above factors and their impact on the second half of FY 2024 in particular, the Board expects that, whilst revenues for FY 2024 will be in line with expectations, adjusted EBITDA* is expected to be in the range of £2.0 million to £2.5 million.

* IAS 17 Earnings before interest, tax, depreciation, amortisation, share based payments, exceptional items, acquisition related transaction costs and pre-opening costs.

Notice of results

The Company expects to announce the Group's interim results for the 26 weeks ended 31 December 2023 in mid-March 2024.

Future prospects

Since its IPO on AIM at the beginning of 2021 the Group has grown significantly. The Group, following The Piano Works Acquisition, will operate 46 bars, a remarkable increase over the 10 bars the Group operated at the time of the IPO.  Since the beginning of 2023, the Group has been working on integrating its four previous acquisitions into one operating entity and will now proceed with the integration of STAMP and The Piano Works concept. Over the last nine months, the Group has invested substantially in improving its management team to meet the needs and aspirations of the much larger Group, as well as investing in its existing estate.  The Board expects to see the benefit of this investment during the upcoming financial year.  The Board believes that the Group's portfolio of bars is well positioned to benefit as the cost of living crisis gradually comes to an end and views the future with confidence. 

Commenting on Nightcap's current trading and prospects, Sarah Willingham, Chief Executive Officer of Nightcap, said:

"2023 has been a tough year for the hospitality industry with numerous head winds which have impacted Nightcap and our entire industry.  Whilst we will still see the impact of these challenges continuing in the coming months, the outlook for our next financial year looks very promising. We have assembled an outstanding management team and a solid foundation for the future is now in place.  For the current year we are on track to achieve significant growth and hit our revenue growth targets but will be adversely impacted by the higher costs resulting from the acquisition and business integration of Dirty Martini and The Piano Works, train strikes, the cost of living crisis and the National Living Wage increase.

"I am very excited about the future prospects for Nightcap and look forward to next year as our synergies bed in and we start to benefit from the successful integration of all of our businesses.  Our new systems and processes will be fully functioning and optimised, and the impact of our exceptional team and their excellent work will be felt and seen widely across the business.  It's been a very important year in the life cycle of a very fast growing business; both through acquisition and through organic growth.  Now it is time to move onto the next stage and enjoy the benefits of the scale we have achieved in record time."   

Admission to AIM

Application will be made to the London Stock Exchange for the Subscription Shares to be admitted to trading on AIM ("Admission"). It is anticipated that Admission will occur, and dealings will commence in the Subscription Shares at 8:00 a.m. on or around 23 February 2024.

The Subscription Shares rank pari passu in all respects with the existing Ordinary Shares of the Company and therefore will rank equally for all dividends or other distributions declared, made or paid after their issue.

Total Voting Rights

Following the issue of the Subscription Shares, the Company's enlarged issued ordinary share capital comprises 234,550,656 Ordinary Shares with voting rights. The Company does not hold any Ordinary Shares in treasury. Therefore, the total number of Ordinary Shares in the Company with voting rights is 234,550,656.

Interests in the Company

Interests of Directors and persons discharging managerial responsibilities (PDMRs)

Following the issue of the Subscription Shares, Nightcap's directors now have the following percentage interests in the Company's issued ordinary share capital:

In addition, certain of Nightcap's persons discharging managerial responsibilities ("PDMRs") now have the following percentage interests in the Company's issued ordinary share capital:

*Includes 901,312 Ordinary Shares held by CGCC Ltd which is beneficially owned and controlled by John James Goodman.

Other interests

Following their participation in the Subscription, the individuals below have the following percentage interests in the Company's issued ordinary share capital:

Forward Looking Statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not facts. They appear in a number of places throughout this announcement and include statements regarding the Board's beliefs or current expectations. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Investors should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement.

Website hyperlinks

For the avoidance of doubt, the contents of websites and any websites accessible from hyperlinks in this announcement are not incorporated into and do not form part of this announcement.

Alternative Performance Measures

Alternative Performance Measures are financial measures of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in IFRS, being the applicable financial reporting framework in respect of the Company.

In order to make a full assessment, investors should read the whole of this announcement and not rely solely on the Alternative Performance Measure, which should be considered in addition to, and is not intended to be a substitute for, or superior to, the other historical financial information within this announcement. Certain of the components used within the Alternative Performance Measure relate to past performance.  Past performance is not an indication of future results.