REG - Nightcap PLC - Final Results
15/11/2021 07:05
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RNS Number : 3110S Nightcap PLC 15 November 2021
15 November 2021
Nightcap plc
("Nightcap" or the "Company" or the "Group")
Results for the 52 week financial year ended 27 June 2021
Nightcap (AIM: NGHT) is pleased to announce its audited full year results for
the 52 weeks ended 27 June 2021. The Company's Annual Report and Accounts for
the 52 weeks ended 27 June 2021 ("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 (http://www.nightcapplc.com)
The AGM will be held at 10 a.m. at the offices of Allenby Capital Limited, 5
St. Helen's Place, London, EC3A 6AB on 9 December 2021.
Sarah Willingham, Chief Executive Officer of Nightcap, commented:
"I am delighted to present Nightcap's first Annual Report and Accounts.
Nightcap's winning strategy is well under way.
Nightcap was built during the Covid-19 global pandemic to acquire and expand
leading brands in the drinks-led bar sector. We are acquiring fundamentally
strong businesses that have been weakened by the impact of the pandemic.
The rapid roll out of these brands has been aided by a unique opportunity
within the property market and we have made excellent progress so far, as we
continue to build the property pipelines in key strategic locations across the
country.
We are really pleased with the performance of The Cocktail Club and the
Adventure Bar Group since reopening. Most of our sites have posted record
sales weeks and our teams have worked tirelessly to meet the demand from
customers.
I would like to thank all of our stakeholders for their continued support, and
especially our wonderful customers."
For further enquiries:
Nightcap plc
Sarah Willingham / Toby Rolph / Gareth Edwards c/o We Are The Romans
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/)
Matt Butlin / Amrit Nahal / Tony Quirke (Sales and Corporate Broking)
We Are The Romans (Financial PR) https://www.wearetheromans.com/ (https://www.wearetheromans.com/)
Courtney Hamilton-Foad (Account Manager) +44 (0)7402 911 817
Nightcap@wearetheromans.com (mailto:Nightcap@wearetheromans.com)
CHAIRMAN'S STATEMENT
The COVID-19 pandemic has been an extraordinary time for all of us and
unprecedented in terms of its severe and often unpredictable impact on the
hospitality sector and the wider economy. Sarah and Nightcap's executive team
have dealt with the uncertainties arising from the constantly changing health
requirements affecting the hospitality sector in a very professional and
commercial fashion. I believe that the Group's businesses have significantly
benefitted from the Board and management team's extensive experience in the
hospitality and public markets sectors, and agile and entrepreneurial
approach. We are grateful for Government support during the times when our
bars have been forced to close.
A silver lining of the pandemic's exacerbation of the longstanding structural
difficulties in the UK hospitality sector is the increasing availability of
prime sites usually seen only infrequently on the market. It has also had the
effect of introducing a degree of reality to the rents being sought by
landlords, resulting in sites with lower rents being offered. New sites will
mean the creation of more jobs and we will be focused on maintaining the same
high quality of staff employed in our existing bars. We are conscious of the
competition for staff in the market but expect the pressure to ease following
the closure of other hospitality sites. This provides an undeniable
opportunity for an operator like Nightcap, which is undertaking a
"buy-and-build" strategy and is well-funded following its initial public
offering in January 2021 and the May/June 2021 secondary placing. We are proud
of the way in which Nightcap is playing its part in the recovery of the UK's
hospitality sector
The acquisitions of The Cocktail Club and the Adventure Bar Group are in line
with our strategy and both offer exciting expansion opportunities as we look
to grow the number of sites. Over August 2021 to September 2021, The Cocktail
Club has entered into leases for new sites in Reading, Bristol and the City of
London, with all these new sites expected to be open before the end of the
calendar year. Nightcap currently has a further 23 sites in legal
negotiations or under offer across several of the Group's brands
For the foreseeable future, the COVID restrictions have been lifted and COVID
vaccination boosters are being offered, so we can approach the end of the year
with optimism. However, the last 18 months have shown us that nothing can be
taken for granted and the executive team has honed its ability to respond to
new challenges quickly and effectively
I would like to thank all of my colleagues at Nightcap for their loyalty and
perseverance in the face of this pandemic and their enthusiasm to get back to
their roles of welcoming and entertaining our customers.
Gareth Edwards
Chairman
CHIEF EXECUTIVE'S STATEMENT
INTRODUCTION
I am delighted to present Nightcap's audited results for the 52 week period to
27 June 2021. The Group results include the results of The Cocktail Club for
the full 52 week period, together with Nightcap plc from 13 January 2021 to 27
June 2021 and the Adventure Bar Group from 14 May 2021 to 27 June 2021. The
opportunity to create significant value through the creation and AIM listing
of the Nightcap business was a direct result of the COVID-19 pandemic. Its
devastating impact on the hospitality and leisure industry gave rise to an
opportunity to acquire well-run drinks-led bar and late night businesses, with
compelling roll-out propositions and to support leading hospitality
entrepreneurs. Nightcap's winning strategy is well under way. We are acquiring
fundamentally strong businesses that have been weakened by the impact of the
pandemic, working with the existing management teams to stabilise them and
recapitalise their balance sheets. With the support of a very experienced
executive team within Nightcap, these businesses will be able to achieve their
full potential, not just within their existing estates but as they roll out
nationally, whilst giving heavily incentivised and invested founders a chance
to realise additional value as we grow.
The rapid roll out of these brands has been aided by a unique opportunity
within the property market. Sites in top locations are available on more
compelling terms than they have been over the past many years; landlords are
favouring stronger covenants and there is far less competition for sites and
therefore lower premiums to pay, if any. Nightcap is well placed to make the
most of this opportunity and we have made excellent progress so far, as we
continue to build the property pipelines in key strategic locations across the
country.
ACQUISITIONS
Over the last few years the millennial customers that we target have moved
away from generic mid-market chains and sticky floored nightclubs and instead
are favouring late night bars where they can have a great time, drink good
quality drinks and enjoy an experience-led, memorable and fun night out in
unique venues. In addition we have seen huge growth in the demand for events
from this target market - sometimes ticketed and always pre-booked. The growth
in the popularity of the bottomless brunch has given rise to an opportunity to
pre sell periods of the day which otherwise would have been empty.
In the first six months of 2021, Nightcap acquired two outstanding
businesses, both of which we believe are best in class, to meet the demands of
the millennial market. Firstly, The Cocktail Club, the purchase of which
coincided with our IPO on AIM in January 2021, which was followed by the
acquisition of the Adventure Bar Group, in May 2021. Both businesses are built
on providing fantastic guest experiences, centred on premium cocktails,
high-energy and fun environments, curated by exceptional teams, including
talented and highly trained bar tenders.
The Cocktail Club is a premium bar business built on the skill of the hosts
and their ability to create a high quality and fun experience for guests as
well as of course serving exceptional quality drinks. Testament to this is the
very strong consumer demand we have experienced since reopening, which gives
us confidence as we continue to seek and secure more bar locations for this
business. We believe there is potential to roll out The Cocktail Club from the
current 10 locations to 40 sites across the UK over approximately the next
four years.
The Cocktail Club chain of bars was formerly known as 'The London Cocktail
Club', although following a recent re-branding decision it is now known as The
Cocktail Club London in London and The Cocktail Club nationally.
The Adventure Bar Group, founded in 2005, has built a reputation for creating
fun and highly-differentiated bar environments, via a group of leading and
individually themed unique brand concepts with a focus on 'late night cocktail
parties in striking venues', including Tonight Josephine, Blame Gloria, Bar
Elba and Luna Springs. They are famous for their brunches and pre-sold events.
Like The Cocktail Club, the Adventure Bar Group venues are mainly located in
London and, similarly to The Cocktail Club, we strongly believe there is
significant scope to expand the number of locations it operates in key cities
and towns across the UK.
The Adventure Bar Group acquisition brought nine bars into Nightcap, one being
a 50:50 joint venture. Two of the acquired bars are located in Covent Garden,
two are in Waterloo, with other sites being located in Shoreditch, Clapham
Junction and Clapham High Street. Additionally, two new bars were opened in
Birmingham in April and May 2021, including a Tonight Josephine site based
over an area of almost 4,000 square feet and the substantial outdoor bar, food
and entertainment venue, Luna Springs with a capacity of 3,000 people.
The performance of the Tonight Josephine and Blame Gloria brands, has led to
us narrowing our focus on finding sites for these two brands. We think both
brands have a large untapped demand for female-led socialising in welcoming,
safe environments around the country. These large indoor venues are
complemented by Bar Elba and Luna Springs, which fit our strategy to add
additional large outdoor bar and event spaces to the Group. The business has a
number of sites in legal negotiations or under offer across the country and I
am excited to see the roll out of these iconic brands into more and more
cities across the UK. Whilst we are pleased with our acquisitions to date we
continue to seek additional high-quality businesses in the bar and latenight
space to add to the portfolio . We are looking for well run businesses and
brands, who with additional investment can realise their national roll-out
potential.
COVID-19 LOCKDOWN
The Cocktail Club was forced to stop trading as a result of the UK
Government's hospitality closures in response to the pandemic.
Management, who had experience from the previous COVID-19 closures, were able
to use this time constructively to assess the impact of COVID-19 on the
changing marketplace, engage with their teams, adapt and make improvements to
the business and prepare for the re-opening. I am very pleased with the
progress that was made within the Group during this period of closure.
In addition, The Cocktail Club and the Adventure Bar Group have benefited from
certain UK Government support schemes including, amongst others, the
Coronavirus Job Retention Scheme, the Coronavirus Business Interruption Loan
Scheme, VAT deferral and hospitality business rates relief at applicable
locations. We are, of course, extremely thankful to the Government for the
various forms of support to the sector and firmly maintain that the
hospitality sector will not only play a vital role in the UK's economic
recovery, but also in providing places for people to be able to socialise
again and have fun.
TRADING PERFORMANCE POST LOCKDOWN
We are really pleased with the performance of the businesses since reopening.
Most of our sites have posted record sales weeks and our teams have worked
tirelessly to meet the demand from customers.
Some of our sites with outdoor space were able to open on 12 April 2021, when
outdoor trading was permitted. The full relaunch began in earnest when all of
our businesses were fully reopened, when indoor trading recommenced on 17 May
2021, albeit with some significant capacity and other restrictions remaining
in place.
The success of the UK vaccination programme means that our consumers are now
more confident about going out for a drink and enjoying themselves. Since the
start of September 2021, we are also benefitting from the significant increase
in the number of people returning to their offices, given that many of our
bars are located in city centres. In particular our sites in and near to the
City of London are trading better than ever.
In recent months the media has highlighted a number of challenges with the
potential to impact the hospitality sector. I am pleased to note that The
Cocktail Club and the Adventure Bar Group have been substantially unaffected
by most of these. Potential shortages of carbon dioxide are not an issue for
the Group, as our bars mostly serve non-carbonated drinks.
Thus far, the Group has not experienced issues from the disruption of freight
logistics, and I am especially pleased by the way that the Adventure Bar Group
and The Cocktail Club have worked with our key supplier partners to ensure
that we have already secured the necessary stocks of key cocktail ingredients
and bottled beer ahead of the important busy Christmas trading period.
The biggest challenge has been recruitment of staff. Our experience so far
means that we are confident in our ability to attract and retain the best
staff. We are resolutely determined to maintain our position as an employer of
choice, off the back of the excellent training and progression opportunities
that our team members are offered within the Group's businesses. However, we
know that the lack of staff availability is affecting peer group companies and
is a material challenge for our industry. This pressure is likely to feed
through in wage inflation and into a squeeze on labour costs. That being said,
I consider that we have some of the most loyal and talented people in the
industry working across the Group, who are motivated and happy to be part of
our journey. I am very proud of the effort that everyone has made over the
past few months in allowing the businesses to trade again and in meeting
unprecedented demand.
FINANCIAL POSITION
The Group has a strong liquidity position with a cash position as of the
latest quarter ended 26 September 2021, of over £12.2m, principally as a
result of the equity fundraisings, excellent performance across the Group and
tight cash control. This is sufficient liquidity to execute our expansion
strategy and to support potential future acquisitions.
Since the start of the COVID-19 pandemic, The Cocktail Club and the Adventure
Bar Group have re-negotiated the majority of their property leases, securing
rent-free periods and rent reductions for other periods when the estate has
been closed. In some cases we have also managed to reduce the rent liability
going forward. I would like to express our thanks to the landlords that
participated in this process and their support for us and the hospitality
sector. By far the majority have chosen to support us in a significant way and
I am grateful to be working with people and businesses who are committed to
our long-term success.
Post period end, The Cocktail Club received a waiver in relation to the
financial covenants attached to certain of its bank loans for the 52 week
period ended 27 June 2021. These covenants were put in place prior to the
COVID-19 pandemic. Based on the strong initial and forecasted trading, the
Board believes that the Group will comply with all of its covenants for the
financial period ending 3 July 2022. We are grateful to our banks for their
support.
Nightcap also took other important steps to mitigate the effects of the UK
Government's hospitality closures and national lockdowns, which has included
salary sacrifices by the Directors and senior executive team and cost
reductions where necessary.
NEW SITE PIPELINE
We have made extremely good progress on building a pipeline of new bar sites
for both businesses. Our management teams have been travelling around the UK
looking for new properties. I remain extremely positive and excited about our
future and our ability for rapid and sustainable growth.
We are starting to see some of these new site openings for The Cocktail Club,
with sites in Bristol, Reading and in the City of London all opening their
doors to customers during November 2021.
In addition, post year-end, the business launched its second Blame Gloria site
in London, replacing the Group's original Adventure Bar site in Clapham
Junction and bringing one of Covent Garden's most unique cocktail bars to the
heart of South-West London. The rebrand has resulted in a significant uplift
in sales, re-enforcing our commitment to the roll out of this brand. We are
currently rebranding the other Adventure Bar in Clapham to a Tonight Josephine
which will not only soak up some excess demand from the Waterloo sister site,
but we also anticipate another additional uplift in sales from this site as a
direct result of the rebrand.
In addition to the three new sites we have a further 23 sites in legal
negotiations or under offer across the Group's brands. I am very happy with
the rate at which we are progressing our organic growth.
PEOPLE
Having backed some of the industry-leading entrepreneurs behind two
exceptional businesses, we have taken the opportunity to strengthen the wider
senior team ahead of a period of substantial growth and expansion, to ensure
that we have the right team in place to deliver on our strategy. I am very
proud of the team that we have put together and the strong collaboration
between the two businesses. This collaboration means that we are able to
easily identify best practices, find synergies in each business and roll these
out across the Group.
At The Cocktail Club, we have appointed a highly experienced Managing Director
in Dawn Donahue. She brings more than 20 years' hospitality experience with a
strong track record in the late-night sector running premium bars and
nightclubs as well as pub and restaurant brands, private members clubs and
international franchises. Dawn continues to a team of talented people around
her with years of experience and success in the sector.
At the same time, the Adventure Bar Group's founders Thomas Kidd and Tobias
Jackson, two of the most talented operators in the bar and late-night sector,
continue to be at the heart of the business and extremely passionate about
continuing to drive it forward. Since acquisition, the business has
strengthened the senior team around Thomas and Tobias, appointing a new senior
Finance Director in Robb Harris, and promoting Amanda Ebbs to Sales Director.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
As we emerge from the pandemic, the Environmental, Social and Governance (ESG)
agenda has become increasingly important for all businesses and their
stakeholders. In response, we have taken a number of actions to ensure that we
are a responsible business and play a positive role in the industry's
recovery. We are taking our responsibilities seriously and understand the
importance of these themes, and believe that those that succeed in this area
will have a long-term competitive advantage. Please see the Board's ESG report
within the Strategic Report of the Annual Report for further details.
INNOVATIONS
COVID-19 has impacted all businesses in different ways. One of the innovations
that we have seen across our businesses is the proliferation of events. We
have in some ways become a capacity-management business, seeking to optimise
trading levels through every trading part of the day and evening, through
bookings and advance sales.
Many of our venues now offer day-time events such as brunches and some of our
locations, notably Luna Springs in Birmingham, offer a huge variety of
different events throughout the week, including music shows, food and drink
festivals, comedy nights, film screenings and live sport broadcasts.
MARKET OUTLOOK
The significant demand we continue to experience gives us great confidence in
the widespread and enduring appeal of the premium late night bar concepts
operated by both The Cocktail Club and the Adventure Bar Group. We have seen
record sales in recent weeks and expect this to continue as we move into the
winter and as we seek new locations for these businesses across the UK.
There are evidently still some challenges facing both the UK economy and the
hospitality industry and it is difficult to predict the exact timing and
profile of the recovery and whether any setbacks will occur. That said, whilst
there are no guarantees that our bars will not be subject to further
interruptions from COVID-19 related restrictions from future waves of
infection, the business is trading strongly and is well positioned for growth.
In addition, we have proven our ability to react swiftly to any restrictions
imposed on us, with the knowledge that our bars are able to remain profitable
with restricted trading.
2020 and 2021 to date has been an extraordinary period and the Board
particularly acknowledges the contribution of our staff, suppliers,
shareholders, landlords, advisers and bankers. I cannot emphasise enough how
grateful we are to these key stakeholders who, as well as assisting us through
unparalleled times, will also help us achieve our ambitions over the course of
the next few years.
Above all I feel we must mention our customers. Our customers have continued
to support us from the minute we were allowed to reopen our doors, turn the
music up and serve great drinks. They have remained loyal, introduced their
friends and continue to come back time and time again. Thank you! We look
forward to continuing to do what we do best - looking after our customers,
showing them a great time, throwing the best parties, opening new sites and
giving great people meaningful careers whilst being part of a team to be proud
of.
Sarah Willingham
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Revenue 5,968,667 5,196,710
Cost of sales (1,414,419) (1,074,931)
Gross profit 4,554,248 4,121,779
Administrative expenses (10,008,896) (4,525,817)
Other income 565,748 125,000
Adjusted EBITDA 958,076 763,945
Share based payments (3,823,642) -
Depreciation (1,258,637) (1,037,417)
Amortisation of intangible assets (51,099) (1,577)
Exceptional costs:
- IPO and acquisition related transaction costs (546,068) -
- Corporate finance fees (167,530) (3,989)
Loss from operations (4,888,900) (279,038)
Finance expense (407,537) (337,263)
Loss before taxation (5,296,437) (616,301)
Tax credit/(charge) on loss 32,098 (15,888)
Loss and total comprehensive loss for the period (5,264,339) (632,189)
Loss for the period attributable to:
- Owners of the parent (5,373,111) (632,189)
- Non-controlling interest 108,772 -
(5,264,339) (632,189)
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
pence pence
Earnings per share attributable to the ordinary equity holders of the parent
Loss per share
- Basic and diluted (5.55) (1.14)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
27 June 2021 28 June 2020
£ £
Non-current assets
Goodwill 6,572,920 -
Intangible assets 3,084,034 7,318
Property, plant and equipment 3,547,573 2,219,508
Right of use assets 13,446,863 4,711,230
Other receivable 271,150 257,620
Total non-current assets 26,922,540 7,195,676
Current assets
Inventories 329,350 139,726
Trade and other receivables 804,411 474,437
Cash and cash equivalents 13,187,479 264,488
Total current assets 14,321,240 878,651
Total assets 41,243,780 8,074,327
Current liabilities
Loans and borrowings (1,458,652) (1,230,725)
Trade and other payables (8,628,163) (1,227,491)
Lease liabilities due less than one year (1,440,525) (524,408)
Total current liabilities (11,527,340) (2,982,624)
Non-current liabilities
Borrowings (3,255,620) (488,070)
Lease liabilities due more than one year (12,462,624) (4,703,184)
Provisions (150,054) -
Deferred tax provision (666,662) (92,240)
Total non-current liabilities (16,534,960) (5,283,494)
Total liabilities (28,062,300) (8,266,118)
Net assets/(liabilities) 13,181,480 (191,791)
Called up share capital 1,854,752 55,379
Share premium 19,267,483 178,017
Share based payment reserve 216,230 92,429
Reverse acquisition reserve (2,512,590) (45,131)
Retained earnings (5,753,167) (472,485)
13,072,708 (191,791)
Non-controlling interest 108,772 -
Total equity 13,181,480 (191,791)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reverse Total
acquisition Retained attributable
reserve earnings to equity
Share holders of
based parent
payment
reserve
Called Non-
up share Share controlling Total
capital premium interest equity
£ £ £ £ £ £ £ £
At 29 June 2019 55,379 178,017 92,429 (45,131) 159,704 440,398 - 440,398
Total comprehensive expense for the 52 week period - - - - (632,189) (632,189) - (632,189)
At 28 June 2020 55,379 178,017 92,429 (45,131) (472,485) (191,791) - (191,791)
Issue of share capital 300 50,700 (92,429) - 92,429 51,000 - 51,000
Transfer to reverse acquisition reserve (55,679) (228,717) - 284,396 - - - -
Recognition of Nightcap plc equity at reverse 398,800 845,200 - (2,751,855) - (1,507,855) - (1,507,855)
acquisition
Issue of shares - IPO 400,000 3,600,000 - - - 4,000,000 - 4,000,000
Transaction fees related to issue of shares - (628,588) - - - (628,588) - (628,588)
Issue of shares on acquisition - The Cocktail Club 553,788 4,984,096 - - - 5,537,884 - 5,537,884
Issue of shares on acquisition - Adventure Bar Group 47,619 1,142,857 - - - 1,190,476 - 1,190,476
Issue of shares - placing shares 434,783 9,565,217 - - - 10,000,000 - 10,000,000
Transaction fees related to placing shares - (636,537) - - - (636,537) - (636,537)
Issue of shares - debt conversion 19,762 395,238 - - - 415,000 - 415,000
Share based payments and related deferred - - 216,230 - - 216,230 - 216,230
tax recognised directly in equity
Total transactions with owners recognised 1,854,752 19,267,483 216,230 (2,512,590) (380,056) 18,445,819 - 18,445,819
directly in equity
Total comprehensive expense for the - - - - (5,373,111) (5,373,111) 108,772 (5,264,339)
52 week period
At 27 June 2021 1,854,752 19,267,483 216,230 (2,512,590) (5,753,167) 13,072,708 108,772 13,181,480
CONSOLIDATED STATEMENT OF CASH FLOW
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Cash flows from operating activities
Loss for the period (5,264,339) (632,189)
Adjustments for:
Depreciation 1,258,637 1,037,417
Amortisation 51,099 1,577
Losses on disposal of property plant and equipment - 8,761
Share based payments 3,823,642 -
Interest on lease liabilities 297,215 278,729
Interest on borrowings 110,322 58,534
Tax expense (32,098) 15,888
(Increase)/decrease in trade and other receivables 19,436 166,092
Increase in trade and other payables 2,112,687 176,057
Decrease/(increase) in inventories 42,744 (18,494)
Cash generated from operations 2,419,345 1,092,372
Corporation taxes repaid/(paid) 30,901 (62,770)
Net cash flows from operating activities 2,450,246 1,029,602
Investing activities
Acquisition of Adventure Bar Group, net of cash 657,088 -
Acquisition of The Cocktail Club - transaction costs and pre IPO expenses (902,401) -
Purchase of property, plant and equipment (508,865) (297,175)
Net proceeds from sale of property, plant and equipment - 1,550
Purchase of intangible assets (9,275) (1,100)
Net cash used in investing activities (763,453) (296,725)
Financing activities
Issue of ordinary shares 15,295,000 -
Share issue costs (1,265,125) -
Loans granted - 500,000
Repayment of loans and borrowings (1,418,023) (217,706)
Principal paid on lease liabilities (744,081) (759,629)
Interest paid on lease liabilities (297,215) -
Interest paid on loans and borrowings (104,495) (58,535)
Shareholder loan repayments (229,863) (170,821)
Net cashflow in financing activities 11,236,198 (706,691)
Net increase in cash and cash equivalents 12,922,991 26,186
Cash and cash equivalents at beginning of the period 264,488 238,302
Cash and cash equivalents at end of the period 13,187,479 264,488
Basis of Preparation
The financial information included in this announcement does not constitute
statutory accounts of the Group for the 52 weeks ended 27 June 2021 and 28
June 2020 but is derived from those accounts. Statutory accounts for the 52
weeks ended 27 June 2021 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
1. GENERAL INFORMATION
Nightcap plc ("the Company") and its subsidiaries ("the Group") is an award
winning independent operator of ten individually themed cocktail bars through
The Cocktail Club brand and nine other cocktail-led drinks offerings through
the Adventure Bar Group brands.
On 13 January 2021, the Company acquired 100% of the issued share capital of
The London Cocktail Club Limited and its subsidiaries ("The Cocktail Club").
Further information on this transaction is provided in Note 4 of the Annual
report. On 14 May 2021, the Company acquired 100% of the issued share capital
of +Venture Battersea Limited, Adventure Bars Mid Limited and Adventure Bars
Luna Digbeth Limited (together referred to as the "Adventure Bar Group").
Further information on this acquisition is provided in Note 31 of the Annual
Report.
The Company is a public limited company whose shares are publicly traded on
AIM 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 the Nightcap plc have been prepared
in accordance with International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee (IFRS IC) interpretations as adopted by the European
Union applicable to companies reporting under IFRS.
The Company was incorporated on 23 September 2020 as the vehicle for the
purposes of achieving admission to trading on the AIM market of the London
Stock Exchange ("Admission") and the Company had no significant transactions
prior to Admission on 13 January 2021. The Company acquired the entire share
capital of The London Cocktail Club Limited in a share for share exchange. The
introduction of the Company into the Group has been accounted for as a reverse
acquisition - see Note 4 of the Annual Report. In doing so the comparatives
for the 52 weeks ended 28 June 2020 have been presented as if the Group had
always existed in its current form.
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 principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below. The policies have been
consistently applied to all periods presented, unless otherwise stated.
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 of the Annual Report.
2.2. Going concern
In concluding that it is appropriate to prepare the 2021 financial statements
on the going concern basis, the Directors have considered the Group's cash
flows, liquidity and business activities. Particular attention has been paid
to the impact of Covid-19 on the business, both experienced to date and
potentially foreseeable in the future.
As at 27 June 2021 the Group had cash balances of £13.2m. While some of the
Group's sites with outdoor space were able to open on 12 April 2021, when
outdoor trading was permitted, the full relaunch began in earnest when all
businesses were reopened, when indoor trading recommenced on 17 May 2021,
albeit with some significant capacity and other restrictions remaining in
place.
The performance of our businesses has been particularly strong compared to the
equivalent period in 2019, since further restrictions fell away post year-end,
on 19 July 2021, since when many of the venues have posted record sales weeks
against the same weeks in 2019.
Further detail is provided in the Chief Executive's Statement under "Trading
performance post lockdown".
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.
In making this assessment the Directors have made a current consideration of
any future potential impact of the Covid-19 pandemic on the cash flows and
liquidity of the Group over the next 12 month period. This assessment has
considered:
• the impact of historic measures put in place during previous
lockdowns to preserve and to increase liquidity, and the Group's ability to
put similar actions in place again
• The continued availability of Government measures to support
industry, and in particular the hospitality industry. These measures have
previously included the Coronavirus Job Retention Scheme, the business rates
holiday, the temporary VAT reduction to 5% on food and non-alcoholic drinks
•
Initial trading during the period post the resumption of trading on 17 May 2021
• New sites where the Group has confirmed agreements for lease in
place and the potential for opening further sites
• Banking covenant waivers received from the bank subsequent to the year in respect of certain loans - see Note 21
of the Annual Report
Based on these assessments the Group forecasts to be in compliance 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. If further lockdowns are mandated there is a risk that a
reduction in trade could cause the group to breach future EBITDA based bank
covenants. However, given the strong relationship the group has with its
bankers, the Board anticipates that its bankers would continue to be
supportive.
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 APMs are not defined
or specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered to be a
substitute for, or superior to, IFRS 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 IFRS 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 81 of the Annual Report including an explanation of how it is calculated
and it reconciles to a statutory measure where relevant.
These measures exclude exceptional items, as defined below, and non-cash
share-based payment charges.
Exceptional items
The Group classifies certain one-off charges or credits that have a material
impact on the Group's financial results as 'exceptional items'. These are
disclosed separately to provide further understanding of the financial
performance of the Group. Management splits out these costs for internal
purposes when reviewing the business.
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 due to this being the Group's first period operating the share
option plan, appointment of senior management during the year and the
probability of share options vesting amongst other factors.
2.5. Revenue
The Group has recognised revenue in accordance with IFRS 15. The standard
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 sites 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.
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
Amortisation 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 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. Trade and other receivables
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.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade and other
receivables.
To measure the expected credit losses, trade receivables and other assets are
grouped based on shared credit risk characteristics and the days past due.
2.13. 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 CGUs but to a group of CGUs. As the business has a
single operating segment as disclosed in Note 5 of the Annual Report, and
goodwill is not disaggregated for internal management purposes, goodwill
impairment testing is performed for the business as a whole, in accordance
with IAS 36.
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.
2.14. 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. Cash
equivalents are highly liquid investments that mature in no more than three
months from the date of acquisition and that are readily convertible to known
amounts of cash with insignificant risk of change in value. Payments taken
from customers on debit and credit cards are recognised as cash.
2.15. 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 assets 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 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.
Any gain or loss arising on de-recognition is recognised directly in profit or
loss and presented in other gains/(losses) together with foreign exchange
gains and losses.
Impairment losses are presented as 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 ("ECL's") 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 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.
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.
2.16. Trade and other payables
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.
2.17. Leased assets
The Group has adopted IFRS 16 for the first time using the fully retrospective
method with the date of initial application being 3 July 2017. In applying
IFRS 16 for the first time, the Group has used the following practical
expedients permitted by the standard:
· the use of a single discount rate to a portfolio of leases with
reasonably similar characteristics
· relying on previous assessment of whether a lease is onerous
· measurement of a right-of-use asset at the date of transition to IFRS
Standards by choosing on a lease-by-lease basis, to measure that right-of-use
asset at an amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to that lease recognised in the
statement of financial position immediately before the date of transition to
IFRS Standards
· the exclusion of initial direct costs for the measurement of the
right-of-use asset at the date of initial application, and
· the use of hindsight in determining the lease term where the contract
contains options to extend or terminate the lease.
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. 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.
At the reporting date the Group has applied the practical relief available
during the Covid-19 pandemic, which provides lessees with relief from applying
lease modification accounting to Covid-19 related rent concessions.
2.18. 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.
2.19. 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.
2.20. 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 25 of the Annual Report.
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.
2.21. 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.
2.22. Related party transactions
The Group discloses transactions with related parties which are 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.
2.23. New standards, amendments and interpretations adopted
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
1 January 2022:
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37);
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16);
· Annual Improvements to IFRS Standards 2018-2020 (Amendments to
IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
· References to Conceptual Framework (Amendments to IFRS 3).
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. These amendments clarify that current or non-current
classification is based on whether an entity has a right at the end of the
reporting period to defer settlement of the liability for at least twelve
months after the reporting period. The amendments also clarify that
'settlement' includes the transfer of cash, goods, services, or equity
instruments unless the obligation to transfer equity instruments arises from a
conversion feature classified as an equity instrument separately from the
liability component of a compound financial instrument. The amendments were
originally effective for annual reporting periods beginning on or after 1
January 2022.
However, in May 2020, the effective date was deferred to annual reporting
periods beginning on or after 1 January 2023.
Nightcap plc is currently assessing the impact of these new accounting
standards and amendments. The Group 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.
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 sites meet the
aggregation criteria in IFRS 8 and hence have concluded that the Group only
has a single reporting segment, as discussed in Note 5 of the Annual Report.
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 4.25%. For the lease liabilities at 27 June 2021 a
0.1% increase in the discount rate used would have reduced the total
liabilities by £196,736.
Reverse acquisition accounting
On 13 January 2021, the Company acquired the entire issued share capital of
London Cocktail Club Limited through a share for share exchange resulting in a
transaction that has been accounted for as reverse acquisition. In arriving at
its conclusion for treating the acquisition as a reverse acquisition, the
Company has considered various factors in determining which party was the
accounting acquirer. The key determining factor was that the former
shareholders of the entity whose shares were acquired owned the majority of
shares, and controlled the majority of votes, in the combined entity
immediately following the acquisition.
The second key judgement the Company applied relates to determining whether
the accounting acquiree, in this case, Nightcap plc constituted a business
(and hence applying IFRS 3 "Business Combinations" or did not constitute a
business (and hence applying IFRS 2 "Share based payments"). The Company
concluded that the main purpose of the IPO for Nightcap was to raise funds and
acquire The Cocktail Club, and as a result, the Directors' view is that the
Company was purely a cash shell with its only asset being the cash it raised
on IPO. In addition, the acquisition of The Cocktail Club was conditional on
Nightcap plc shares being admitted to trading on AIM.
The transaction has been described in full in Note 4 of the Annual Report.
Consolidation of joint venture
Waterloo Sunset Limited ("Waterloo Sunset") is a joint venture that runs and
operates a 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% 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 represent 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 criteria 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
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.
KEY ESTIMATES
Impairment of property plant and equipment
Annually, the Group considers whether tangible 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 in order to calculate the net
present value of those cash flows. Individual sites 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 Note 14 of the Annual Report.
Useful economic lives of property, plant and equipment
The depreciation charge in each period is sensitive to the assumptions used
regarding the economic lives of assets and their respective depreciation
rates.
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
25 of the Annual Report. 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.
Valuation of intangible assets and goodwill
Allocation of the purchase price affects the results of the Group as finite
lived intangible assets are amortized, whereas indefinite lived intangible
assets, including goodwill, are not amortized 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 businesses collectively known as the
Adventure Bar Group for total consideration of £3.5m (including contingent
deferred consideration). Details of the acquisitions are set out in Note 31 of
the Annual Report. 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 totaling
£3.0m in respect of the various brands 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 13 and 31 of the Annual Report.
Valuation of contingent deferred consideration
As described above the acquisition of Adventure Bar Group included contingent
deferred consideration to be settled with the issue of shares. Certain
estimates have 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.
Further information is provided in Note 31 of the Annual Report.
Amortisation
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.
Impairment
As part of their impairment reviews, management must assess whether intangible
assets will continue to deliver economic benefits in the future. Where a
significant reduction in estimated future economic benefits occurs, it could
result in a material impairment charge. Although the risk of a material
impairment is reduced by capping intangible UELs at a maximum of 10 years and
not applying residual values, intangibles are assessed at least annually for
indications of impairment, which requires a degree of subjectivity on the part
of management.
4. REVERSE ACQUISITION AND AIM ADMISSION
On 13 January 2021, the Company acquired the entire issued share capital of
The London Cocktail Club Limited and its subsidiaries ("The Cocktail Club"), a
private company incorporated in England and Wales, by way of a share-for-share
exchange. Although the transaction resulted in The Cocktail Club becoming a
wholly owned subsidiary of the Company, the transaction constitutes a reverse
acquisition in as much as the shareholders of The Cocktail Club owned, post
transaction, a majority of the issued ordinary shares of the Company.
In substance, the shareholders of The Cocktail Club acquired a controlling
interest in the Company and the transaction has therefore been accounted for
as a reverse acquisition.
Accordingly, this reverse acquisition does not constitute a business
combination and was accounted for in accordance with IFRS 2 Share-based
payment and IFRIC guidance, with the difference between the equity value given
up by The Cocktail Club's shareholders and the share of the fair value of net
assets gained by The Cocktail Club's shareholders charged to the statement of
comprehensive income as the cost of acquiring an AIM quoted listing in the
form of a share based payment expense.
In accordance with reverse acquisition accounting principles, these
consolidated financial statements represent a continuation of the consolidated
financial statements of The Cocktail Club and include:
a. the assets and liabilities of The Cocktail Club at their preacquisition carrying amounts and the results for both periods; and
b. the assets and liabilities of the Company as at 27 June 2021 and its results from 13 January 2021 to 27 June 2021.
On 13 January 2021, the Company issued 55,378,838 shares for the 10,247,990
shares of The Cocktail Club. In addition the Company paid cash consideration
of £162,116 for an additional 300,000 shares in The Cocktail Club arising on
exercise of share options and £421,943 contingent deferred consideration.
On 13 January 2021, the quoted share price of Nightcap plc was £0.10 and
therefore this valued the investment in The Cocktail Club at £6,121,943,
including cash and contingent consideration.
Because the legal subsidiary, The London Cocktail Club Limited, was treated as
the accounting acquirer and the legal Parent Company, Nightcap plc, was
treated as the accounting subsidiary, the fair value of the shares deemed to
have been issued by The Cocktail Club was calculated at £7,988,000 based on
an assessment of the purchase consideration for a 100% holding in Nightcap
plc.
The fair value of net assets of Nightcap plc at the date of acquisition was as follows:
£
Cash and cash equivalents 4,584,456
Other assets 128,985
Liabilities (413,871)
Net assets 4,299,570
The difference between the deemed cost and the fair value of the net assets
acquired of £3,688,430 has been expensed in accordance with IFRS 2, Share
based payments, reflecting the economic cost to The Cocktail Club shareholders
of acquiring a quoted entity.
The reverse acquisition reserve that arose from the reverse takeover is
made up as follows:
52 weeks ended
27 June 2021
£
As at start of year -
Pre-acquisition losses of Nightcap plc (1) (318,342)
The Cocktail Club issued capital at acquisition (2) 239,265
Investment in The Cocktail Club (3) (6,121,943)
Reverse acquisition expense (4) 3,688,430
As at end of year (2,512,590)
The movements on the Reverse acquisition reserve are as follows:
(1) These consolidated financial statements present the legal capital
structure of the Company. However, under reverse acquisition accounting rules,
the Company was not acquired until 13 January 2021 and therefore the entry
above is required to eliminate the initial retained losses of the Company.
(2) The Cocktail Club had issued share capital of equivalent to £239,265 as
at 13 January 2021. As these financial statements present the capital
structure of the parent entity, the issue of equity by The Cocktail Club has
been recorded in this reserve.
(3) The Company issued 55,378,838 shares at £0.10 each, totaling
£5,537,884 for the entire issued capital of The Cocktail Club plus £584,059
of cash and contingent cash consideration. The above entry is required to
eliminate the balance sheet impact of this transaction.
(4) The reverse acquisition accounting is described in detail above. The
entry above represents the difference between fair value of net assets of
Nightcap plc at the date of acquisition, and the deemed consideration given by
The Cocktail Club to acquire the Company.
5. 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 site-by-site level.
The Group's internal management reporting is focused predominantly on revenue
and adjusted EBITDA, as these are the principal performance measures and
drives 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 8 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, Covid-19, cost
inflation, recruitment and retention, Brexit and supply chain disruption,
consumer confidence, availability of new sites, health and safety and food and
drink safety, These risks are discussed in more detail in the "Principal Risks
and Uncertainties" section on pages 15 and 16 of the Annual Report. The risks
are managed, discussed and monitored at a Board level across the Group. Within
the ongoing business, assets and liabilities cannot be allocated to individual
operating segments and are not used by the CODM for making operating and
resource allocation decisions.
The Group performs all 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
sites 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.
6. OTHER INCOME
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Business interruption insurance proceeds - COVID related 250,000 -
Government grants - COVID related 315,748 125,000
565,748 125,000
7. OPERATING LOSS
The operating profit is stated after charging/(crediting):
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Loss from operations is stated after charging:
Craft manufacturing operations (now ceased) - 11,479
Craft head office costs - 29,767
Share based payments 135,212 -
Shared based payments relating to The Cocktail Club 3,688,430 -
Depreciation of tangible fixed assets 567,445 478,078
Depreciation of right of use assets 691,192 559,339
Amortisation of intangible assets:
- Trademarks 2,080 1,577
- Brands 49,019 -
Loss on disposal of fixed assets - 8,761
Inventories - amounts charged as an expense 1,414,419 1,093,423
Auditors' remuneration
- for statutory audit services 70,000 -
- for other assurance services 190,500 10,795
- for tax compliance services 1,477 1,460
- for tax advisory services 9,845 -
Pre-opening costs - 30,251
Exceptional costs 713,598 3,989
8. EMPLOYEES AND DIRECTORS
The average monthly number of employees, including the Directors, during the period was as follows:
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
Management 65 4
Operations 283 85
Administration 5 8
353 97
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Wages and salaries 3,077,128 2,280,330
Social security costs 313,073 228,191
Defined contribution pension costs 35,292 28,941
Other employment costs 65,975 17,898
3,491,468 2,555,360
Coronavirus Job Retention Scheme grants (729,159) (518,591)
2,762,309 2,036,769
Share based payments 135,212 -
Shared based payments relating to Adventure Bar Group acquisition 3,688,430 -
Total share based payment expense 3,823,642 -
6,585,981 2,036,769
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 Pension Contribution
Salary and Fees Annual Bonus Related Bonus £ Total
Name £ £ £ £
Sarah Willingham-Toxvaerd 103,786 1 105,375 - 5,625 214,786
Michael Willingham-Toxvaerd 129,206 2 - 200,000 3 2,500 331,706
Tobias Van der Meer - - - - -
Lance Moir 45,819 4 - 15,000 5 - 60,819
Thi-Hanh Jelf 10,198 - - - 10,198
Gareth Edwards 20,397 - - - 20,397
Toby Rolph 58,532 58,532 25,000 5 3,125 145,189
Total 367,938 163,907 240,000 11,250 783,095
1 Includes consultancy fees to The Cocktail Club prior to its acquisition by Nightcap.
2 Salary includes fees relating to the share placing for the IPO and The
Adventure Bar Group acquisition, in line with his service agreement described
within the AIM admission document.
3 Relates to the acquisition of The Cocktail Club on 13 January 2021 and the
acquisition of the Adventure Bar Group on 14 May 2021, in line with his
service agreement described within the AIM admission document.
4 Includes salary as Chairman of The London Cocktail Club prior to its acquisition by Nightcap.
5 Relates to the successful IPO on 13 January 2021
Further information in respect of Directors' remuneration is provided in the
Remuneration Committee Report on pages 27 and 28 of the Annual 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 ended 52 weeks ended
27 June 2021 28 June 2020
Key management emoluments 967,240 180,122
Pension contribution 13,880 2,630
981,120 182,752
9. FINANCE COSTS
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Interest on bank overdrafts and loans 110,322 58,534
Interest on lease liabilities 297,215 278,729
407,537 337,263
10. TAX (CREDIT)/CHARGE ON LOSS
The income tax (credit)/charge is applicable on the Group's operations in the
UK.
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Taxation (credited)/charged to the income statement
Current income taxation 18,585 24,552
Adjustments for current taxation of prior periods - 38,047
Research & development claim - (30,825)
Total current income taxation 18,585 31,774
Deferred Taxation
Origination and reversal of temporary timing differences
Current period (303,947) (15,886)
Adjustments in respect of prior periods (3,168) -
Adjustment in respect of change of rate of corporation tax 256,432 -
Total deferred tax (50,683) (15,886)
Total taxation (credit)/expense in the consolidated income statement (32,098) 15,888
The above is disclosed as:
Income tax (credit)/expense - current period (28,930) 8,666
Income tax (credit)/expense - prior period (3,168) 7,222
(32,098) 15,888
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Factors affecting the tax charge for the period
Loss before tax (5,296,437) (616,301)
At UK standard rate of corporation taxation of 19% (2020: 19%) (1,006,323) (117,097)
Income not assessable for tax purposes (12,537) -
Expenses not deductible for tax purposes - -
- Share based payments 700,802 -
- Other 245,132 12,822
Fixed asset differences 42,349 98,341
Research and development claims - (30,825)
Timing differences on leases (114,071) 9,143
Deferred tax (charged)/credited directly to equity 81,018 -
Temporary differences in respect of share options (104,847) -
Other temporary differences (19,476) -
Unused losses carried forward - 43,561
Movement in unrecognised deferred tax (97,409)
Adjustments to tax charge in respect of prior periods (3,168) (57)
Adjustment in respect of change of rate of corporation tax 256,432 -
Total tax (credit)/charge for the period (32,098) 15,888
11. EXCEPTIONAL ITEMS
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Included in administrative expenses:
IPO and acquisition related transaction costs 546,068 -
Aborted corporate finance fees 167,530 3,989
713,598 3,989
The IPO and acquisition related transaction costs in the 52 weeks ended 27
June 2021 relate to costs incurred in the IPO and reverse acquisition of The
Cocktail Club which completed on 13 January 2021, along with the acquisition
of Adventure Bar Group on 14 May 2021. The costs include employee bonuses and
professional fees. The costs incurred in the 52 weeks ended 28 June 2020
relate to costs incurred in the preparation for the IPO of the business.
The aborted corporate finance fees in both periods relate to costs incurred in
relation to the aborted sale of The Cocktail Club in 2019, which was settled
by the Group in 2021.
12. EARNINGS PER SHARE
Basic (losses)/earnings 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 and contingently issuable shares in connection
with the acquisition of the Adventure Bar Group. Further details of the share
options that could potentially dilute basic earnings per share in the future
are provided in Note 25 of the Annual Report.
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 52 weeks ended 27 June 2021 the Group
had potentially dilutive shares in the form of unvested shares options
pursuant to the above long-term incentive plan.
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Loss for the period after tax for the purposes of basic and diluted earnings (5,373,111) (632,189)
per share
Non-controlling interest 108,772 -
Taxation (credit)/charge (32,098) 15,888
Interest (income)/expense 407,537 337,263
Exceptional items 713,598 3,989
Share based payment charge 3,823,642 -
Depreciation and amortisation 1,309,736 1,038,994
Profit for the period for the purposes of Adjusted EBITDA (IFRS 16) basic and 958,076 763,945
diluted earnings per share
IAS 17 Rent charge (777,042) (692,193)
Profit for the period for the purposes of Adjusted EBITDA (IAS 17) basic and 181,034 71,752
diluted earnings per share
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
Number Number
Weighted average number of ordinary shares in issue for the purposes of 96,859,609 55,378,837
basic
Effect of dilutive potential ordinary shares from share 3,746,721 -
options
Weighted average number of ordinary shares in issue for the purposes of 100,606,330 55,378,837
diluted
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
pence pence
Earnings per share:
Basic and (5.55) (1.14)
diluted
Adjusted EBITDA (IFRS 16) basic and 0.99 1.38
diluted
Adjusted EBITDA (IAS 17) basic and 0.19 0.13
diluted
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.
13. INTANGIBLE ASSETS
Trademarks and
licenses Brand Total Goodwill
£ £ £ £
(i) Cost or valuation -
At 29 June 2019 8,278 - 8,278 -
Additions 1,100 - 1,100 -
At 28 June 2020 9,378 - 9,378 -
At 29 June 2020 9,378 - 9,378 -
Additions 9,275 - 9,275
On acquisition (Note 31 of the Annual Report) 136,540 2,982,000 3,118,540 6,572,920
At 27 June 2021 155,193 2,982,000 3,137,193 6,572,920
(ii) Amortisation
At 29 June 2019 483 - 483 -
Provided for the period 1,577 - 1,577 -
At 28 June 2020 2,060 - 2,060 -
At 29 June 2020 2,060 - 2,060 -
Provided for the period 2,080 49,019 51,099
At 27 June 2021 4,140 49,019 53,159 -
(iii) Net book value
At 29June 2019 7,795 - 7,795 -
At 28 June 2020 7,318 - 7,318 -
At 27 June 2021 151,053 2,932,981 3,084,034 6,572,920
Goodwill of £6,572,920 arose on the acquisition by the Group of the Adventure
Bar Group on 14 May 2021 - see Note 31 of the Annual Report.
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.
The value in use is calculated based upon the Group's latest five-year
forecast to June 2026, incorporating the impact of the Covid-19 lockdown and
assumptions concerning the rate at which business unit level cash flows will
recover and ongoing capital expenditure. The value in use calculations use an
annual growth rate of 2% in the initial period. 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 13% 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 27 June 2021, 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.
14. LEASES
This note provides information for leases where the Group is the lessee.
The Group leases the entire The Cocktail Club and Adventure Bar 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 12 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
£
At 29 June 2019 5,483,723
Additions 224,769
Interest expense 278,729
Lease payments (759,629)
At 28 June 2020 5,227,592
At 29 June 2020 5,227,592
On acquisition (Note 31 of the Annual Report) 9,430,804
Interest expense 297,215
Lease payments (1,041,296)
Revaluations (11,166)
At 27 June 2021 13,903,149
In accordance with Covid-19-Related Rent Concessions - Amendment to IFRS 16
Leases (the 2020 amendment), where leases have been renegotiated as a result
of Covid-19 the gain has been taken to the income statement. In applying this
amendment, the company has taken into consideration the conditions described
in IFRS 16 paragraph 46B.
Revaluations in the period to 27 June 2021 are as a result of rent reviews and lease extensions.
27 June 2021 28 June 2020
£ £
Lease liability:
Current 1,440,525 524,408
Non-current 12,462,624 4,703,184
13,903,149 5,227,592
Amounts recognised in the consolidated statement of comprehensive income
27 June 2021 28 June 2020
£ £
Depreciation charge of right of use assets 691,192 559,339
Interest expense (included in finance cost) 297,215 278,729
15.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 £135,212 in respect of the Group's
share based payment plans and related employer's national insurance of
£27,615.
Granted during Lapsed during Outstanding at
the period the period Number 27 June 2021
Number Number
The Nightcap plc Share Option Plan 20,079,988 - 20,079,988
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.
16. BUSINESS COMBINATIONS
On 14 May 2021, Nightcap plc acquired 100% of the shares of +Venture Battersea
Limited, Adventure Bars Mid Limited and Adventure Bars Luna Digbeth Ltd
(together referred to as "Adventure Bar Group"), for the total consideration
of £3,533,476. Upon completion of the acquisition, Nightcap became the
operator of an additional nine bars. The bars acquired were seven established
themed bars located in popular London locations, a large outdoor bar, food and
entertainment venue in Birmingham, a bar site which opened in Birmingham on 17
May 2021.
The acquired business contributed revenues of £2,381,381 and profit after tax
of £216,043 (in accordance with IFRS) to the consolidated Group for the
period from 14 May 2021 to 27 June 2021.
The values identified in relation to the acquisition are provisional as at 27
June 2021.
Fair Value
Book Value Adjustments Fair Value
£ £ £
Property, plant and equipment 1,384,960 - 1,384,960
Intangible assets 136,540 2,982,000 3,118,540
Right-of-use assets 9,430,804 - 9,430,804
Inventories 232,369 - 232,369
Receivables 393,618 - 393,618
Cash 657,088 - 657,088
Payables (2,911,479) - (2,911,479)
Bank loans and borrowings (5,058,363) - (5,058,363)
Lease liabilities (9,430,804) - (9,430,804)
Provisions (150,054) - (150,054)
Deferred tax liability (139,543) (566,580) (706,123)
Total net assets acquired (5,454,864) 2,415,420 (3,039,444)
Fair value of consideration paid £
- Cash paid to vendor -
- Initial Consideration Shares issued 1,190,476
- Contingently issuable ordinary shares 2,343,000
Acquisition date fair value of the total consideration transferred 3,533,476
Goodwill 6,572,920
The Company settled the initial consideration by the issue of 4,761,905 new
Ordinary Shares as initial consideration with a fair value of £1,190,476.
Further deferred consideration (the "Earn Out Consideration") may be paid to
the Vendors.
The contingent consideration to be settled in new ordinary shares is dependent
on the level of growth in certain of Adventure Bar Group's bars' adjusted
earnings before interest, tax, depreciation and amortisation (EBITDA) over an
up to two-year period commencing on 1 July 2021. In the event of the target
being achieved, the Company is obliged to issue up to a maximum 7,142,856
million new ordinary shares to the vendors. The fair value of the contingent
consideration has been estimated based on a Monte-Carlo option pricing model
which derives a future share price using assumptions including the Group's
future profitability, the Company's share price and probabilities on achieving
the likely target and the timing of the issue of the shares.
The main factors leading to the recognition of goodwill are:
· The expected future benefit the Group expects from the roll out
and growth of the existing sites
· 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.
The goodwill recognised will not be deductible for tax purposes.
Acquisition costs of £311,021 arose as a result of the transaction. These
have been recognised included as exceptional items as part of administrative
expenses in the statement of comprehensive income.
RECONCILIATION OF STATUTORY RESULTS TO ALTERNATIVE PERFORMANCE MEASURES
("APMS")
52 weeks ended 52 weeks ended
27 June 2021 28 June 2020
£ £
Loss from operations (4,888,900) (279,038)
Exceptional items 713,598 3,989
Share based payment charge 3,823,642 -
Adjusted loss from operations (351,660) (275,049)
Depreciation and amortisation (pre IFRS 16 right of use asset charge) 479,655
618,544
IFRS 16 Right of use asset depreciation 691,192 559,339
Adjusted EBITDA (IFRS 16) 958,076 763,945
IAS 17 Rent charge (777,042) (692,193)
Adjusted EBITDA (IAS 17) 181,034 71,752
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