REG - Nightcap PLC - Acquisition of The Piano Works and other matters

NightcapAnnouncement

20/02/2024 07:00

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RNS Number : 6775D  Nightcap PLC  20 February 2024

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:

 Nightcap plc

 Sarah Willingham / Richard Haley / Gareth Edwards                          email@nightcapplc.com

 Allenby Capital Limited (Nominated Adviser and Broker)                     +44 (0) 20 3328 5656

 Nick Naylor / Alex Brearley / Piers Shimwell (Corporate Finance)           www.allenbycapital.com (http://www.allenbycapital.com/)

 Jos Pinnington / Amrit Nahal / Tony Quirke (Sales and Corporate Broking)

 Bright Star Digital (PR)                                                   https://www.brightstardigital.co.uk/ (https://www.brightstardigital.co.uk/)

 Pam Lyddon                                                                 +44 (0) 7534 500 829

                                                                            pamlyddon@brightstardigital.co.uk (mailto:pamlyddon@brightstardigital.co.uk)

 

 

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/ (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:

                              Following the issue of the Subscription Shares

                              Number of Ordinary Shares held  Percentage of issued ordinary share capital
 Director
 Michael Willingham-Toxvaerd  12,552,501                      5.35%
 Sarah Willingham-Toxvaerd    21,686,584                      9.25%
 Tobias Van der Meer          9,050,000                       3.86%
 Lance Moir                   360,000                         0.15%
 Thi-Hanh Jelf                180,000                         0.08%

 

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

                      Following the issue of the Subscription Shares

                      Number of Ordinary Shares held  Percentage of issued ordinary share capital
 PDMR
 John James Goodman*  16,032,157                      6.84%
 Jim Robertson        111,484                         0.05%

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

Other interests

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

                     Following the issue of the Subscription Shares

                     Number of Ordinary Shares held  Percentage of issued ordinary share capital
 Name
 Mark Irwin          18,625,000                      7.94%
 Michael Wainwright  14,991,666                      6.39%

 

 

 

 

Forward Looking Statements

 

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

 

Website hyperlinks

 

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

 

Alternative Performance Measures

 

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

 

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

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