REG - Nightcap PLC - Results for the 52 weeks to 2 July 2023
23/11/2023 07:00
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RNS Number : 3899U Nightcap PLC 23 November 2023
23 November 2023
Nightcap plc
("Nightcap" or the "Company" or the "Group")
Results for the 52 weeks to 2 July 2023
Nightcap (AIM: NGHT), the owner of The Cocktail Club, the Adventure Bar Group,
Barrio Familia and the Dirty Martini group of bars, is pleased to announce its
audited full year results for the 52 weeks to 2 July 2023. The Company's
Annual Report and Accounts for the 52 weeks to 2 July 2023 ("Annual Report")
and the Notice of Annual General Meeting ("AGM") will be posted to
shareholders today.
The Company's Annual Report and the Notice of AGM will be available shortly on
the Company's website at: www.nightcapplc.com (http://www.nightcapplc.com)
The AGM will be held at 10:00 am on Monday 18 December 2023 at the
offices of Allenby Capital Limited, 5 St. Helen's Place, London, EC3A 6AB.
Sarah Willingham, Chief Executive Officer of Nightcap, commented:
"At Nightcap we believe that everyone deserves a great night out and with this
belief at our core, we are fast becoming one of the UK's leading bar groups.
During the year, we grew our revenue by 29% from £35.9 million to £46.4
million whilst increasing the number of bars we operate from 31 to 46.
Unaudited Group revenue was £14.7 million for the 13-weeks ended 1 October
2023 ("Q1 FY2024") resulting in a 42.7% increase compared to Group revenue of
£10.3 million for the equivalent period in FY2023. Whilst trading in October
2023 has continued on the same trend as Q1 FY2024, we are focussing on the
important Christmas period. Christmas bookings and enquiries across the whole
estate including Dirty Martini are in line with the strong 2022 Christmas
period."
For further enquiries:
Nightcap plc
Sarah Willingham / Toby Rolph / Gareth Edwards email@nightcapplc.com (mailto:email@nightcapplc.com)
Allenby Capital Limited (Nominated Adviser and Broker) +44 (0) 20 3328 5656
Nick Naylor / Alex Brearley / Piers Shimwell (Corporate Finance) www.allenbycapital.com (http://www.allenbycapital.com/)
Jos Pinnington / Amrit Nahal (Sales and Corporate Broking)
Bright Star Digital (PR) https://www.brightstardigital.co.uk/ (https://www.brightstardigital.co.uk/)
Pam Lyddon +44 (0) 7534 500 829
pamlyddon@brightstardigital.co.uk (mailto:pamlyddon@brightstardigital.co.uk)
CHAIRMAN'S STATEMENT
Since our last annual report, Nightcap has continued to grow both organically
and by acquisition. Sarah and her excellent team have integrated the different
businesses, optimising their unique characters and streamlining the efficiency
of the business operations behind the innovative cocktails and the magnetic
social experiences. In keeping with our strategy, I am extremely pleased we
have acquired the Dirty Martini chain of bars over the summer of 2023.
Everyone in the hospitality sector breathed a sigh of relief as the strictures
imposed by COVID were relaxed. Unfortunately, the respite was short lived as
it was quickly followed by a seemingly endless run of transport strikes, rapid
inflation and a "cost of living crisis". The longer-term effects of COVID have
changed the way people manage their working week and impacted our traditional
trading patterns. The COVID years have made us more flexible and creative.
Sarah and the wider executive team at Nightcap have shown exceptional
leadership to navigate through the continuing uncertainties. I am pleased
that, despite the challenges and uncertainties that have been thrown at us, we
have continued to focus on the growth opportunities of the business.
Our medium-term focus continues to be on growth, however having made several
significant acquisitions in the last couple of years, a lot of attention, time
and energy has been put into their integration into the Nightcap family and
making sure the economies of scale, that can be achieved from a larger
commercial base, are realised. Those advantages will be seen in the short
term, but the longer-term benefits of creating a platform that make future
expansion easier, faster and more efficient are even more exciting.
Our senior management have identified a number of new sites that will enhance
our geographical reach as well as scanning the horizon for potential
acquisitions that will add value and strength to the existing Nightcap
portfolio. In light of the difficult trading environment and the UK's
uncertain economic outlook, the Board is continuing to approach both organic
growth and potential acquisition opportunities with caution. The Board
continues to be mindful of the importance of immediate cash and profit
generating capabilities of such acquisitions, as well as any new brands being
in harmony with the existing Nightcap portfolio.
It is a continuing theme, with good reason, that we continue to invest in, and
prioritise, our staff (both in recruitment and training). Our people are the
core of our business. They create the welcome and experience that our
customers enjoy and that keeps them coming back. Last year we launched the
Nightcap Bar Academy to provide in-depth training and improve skills. This has
proved to be such a success that further resource is being directed towards
it.
I have no doubt that Sarah and the senior management team have all the skills
and personal attributes to overcome the challenges ahead. Sarah, our CEO
continues to build a strong, cohesive and focused team to power the business
on to new and exciting prospects. I am very pleased with the Group's
performance and expect the long-term growth to continue in establishing
Nightcap as one of the leading bar businesses in the UK.
Gareth Edwards
Chairman
CHIEF EXECUTIVE'S STATEMENT
INTRODUCTION
I am pleased to present another year of significant growth for Nightcap plc,
despite the painful ongoing impact of train strikes. These audited results for
the 52 weeks to 2 July 2023 represent Nightcap's second full year of trading.
When we founded Nightcap less than three years ago we didn't expect to be so
far ahead of our plan in such a short space of time. At Nightcap we believe
that everyone deserves a great night out and with this belief at our core, we
are fast becoming one of the UK's leading bar groups. The activities
undertaken during the year saw us taking several steps to get closer to
achieving our goals.
To be closing the financial year with the impressive acquisition of Dirty
Martini, bringing our total number of bars to 46 is an incredible achievement.
I'm immensely grateful to our teams who continue to work tirelessly and
brilliantly amidst the backdrop of a tough trading environment caused mainly
by challenging economic conditions and the ruthless continuation of train
strikes, targeted to cause maximum damage to businesses across the country. I
am impressed by how our teams have embraced the many internal changes from our
rapid growth.
During the year, we grew our revenue by 29% from £35.9 million to £46.4
million whilst increasing the number of bars we operate from 31 to 46. The
strong growth during the year is once again driven by our continued focus on
both new site openings for our core brands alongside the addition of
complementary acquisitions. The majority of growth in the number of sites came
towards the end of the financial year, leaving significant additional
annualised revenue from those bars to be achieved in the current year.
In June 2023, we welcomed Dirty Martini to the Group, which included ten Dirty
Martini branded bars and the Tuttons French bistro restaurant located in
Covent Garden. These final results therefore include Dirty Martini's results
for three weeks. Dirty Martini was acquired out of administration and I am
very pleased with how quickly the business has been integrated, considering
the complexity of the acquisition. We are delighted with how Dirty Martini has
settled into the Nightcap family alongside our The Cocktail Club, Tonight
Josephine, Blame Gloria and Barrio brands. We are excited to continue our
focus on rolling out these brands alongside our continued search for
additional acquisitions that will complement our journey to become the UK's
leading bar group.
Throughout the year we have relied on the support and loyalty of our rapidly
expanding group of customers and without them our significant growth simply
would not have been possible. For the first time in years they managed to
enjoy unrestricted social nights out with friends and loved ones in the safe
and fun environments that we continue to offer, only disrupted by the ongoing
rail strikes. Once again I would like to take this opportunity to thank our
guests for welcoming our brands into their towns and cities across the UK, as
we continue our expansion. What makes our industry so great and why so many of
us are drawn to it, is the fun and the joy brought by our staff and our
customers to create memorable magic moments across our 46 bars. When our bars
are busy, filled with people enjoying themselves, there is simply no better
place to be.
LIKE-FOR-LIKE GROWTH
Whilst like-for-like* growth is becoming an increasingly difficult measure to
rely on, due to the significant changes in the macro environment caused by the
aftermath of COVID-19, rail strikes, inflation, energy prices and higher
interest rates leading to a cost of living crisis, we have tried to give some
measure of the Company's financial performance during the period.
On the back of record breaking like-for-like growth in 2022 of 23.6% we saw
like-for-like revenue growth normalise in 2023 through a 12.5% decline. As a
result overall like-for-like revenue remains ahead of 2019. The main driver of
the reduction in like-for-like revenue growth for the year was by far the
impact of the ongoing rail strikes. There were a total of 28 strike days in
the financial year, mostly targeting holiday periods and pay day weekends to
ensure they cause as much damage to the hospitality sector as possible. In
total we estimate that £2.9 million** in revenue and £1.9 million** in
company EBITDA (IAS 17) was lost during the strike days and so had the biggest
impact on the like-for-like revenue growth during the year. We do not believe
that Nightcap will be in a position to reach its fullest trading potential
until the industrial action has been settled.
ENTERTAINMENT AND DIGITAL
During the previous financial year our major focus was developing our
successful pre-sold daytime events such as "bottomless brunches" and
transferring them across the rest of our bars, where relevant. This was done
very successfully in order to maximise utilisation of our properties during
times when our bars are otherwise not trading. This year we have focussed on
ensuring that all events align with the individual brands and their audiences,
to optimise how we continue to market events to each brand's loyal customer
base.
As part of our strategic direction it is clear to us that entertainment,
experiences and events are becoming a significantly more important factor when
our Millennial and Gen Z customers decide how to curate their nights out.
During the year 48% of our revenue came from pre-sold or pre-booked events and
parties. As a result, understanding the digital journey customers go through
to reach their decisions is becoming the heartbeat of how we fill our venues
every night. Whether it relates to becoming an important part of that special
birthday party, or the once in a lifetime hen do, the decisions are made
digitally and they are made in advance.
At Nightcap we have decided to make digital a fundamental part of our
investment programme, in terms of both people, resources and technology, to
drive a deeper automated understanding of all of the touch points on our
customers' journeys. We expect that when we reach our next level of capability
and match digital to our already developing cluster operating model, we will
gradually see an improved ability to offer relevant, targeted and diversified
nights out for our customers across all of our brands wherever they live,
study or work. As we make investments in technology and digital capabilities a
core part of our approach over the coming three years, we expect to launch
market leading customer centric technology to continue to bring new improved
timely offers to a generation of customers who are expecting a seamless
connection and interaction between their on- and offline experience.
ROLL-OUT
In the first half of the financial year we continued the roll out of our
brands, opening a further six bars before the important Christmas period in
2022. As a result of the impact of rail strikes as well as the uncertainty for
our customers caused by the cost of living crisis, we decided to slow down our
roll-out programme. We are focussing on allowing Dirty Martini to settle into
the Group, maximising returns from our existing business and newly opened
sites and driving synergies and efficiencies across the enlarged Group. We
plan to continue our roll out programme and have an exciting pipeline of sites
to progress when market conditions improve.
CLUSTER MODEL
With the addition of Dirty Martini we consolidated our existing site clusters
in Bristol (five bars), Cardiff (three bars), Birmingham (four bars) and parts
of London such as Shoreditch (four bars), the City (five bars) and Covent
Garden (four bars) all operating well within a short distance of each other
enhancing the late night offering in the local city centre areas. We also
acquired Dirty Martini sites in new northern locations Leeds and Manchester,
adding to our first Tonight Josephine site in Liverpool, all cities with
significant potential for us to build new clusters.
Bristol and Birmingham are both great examples of the potential for expansion
using our diversified brand cluster strategy. In Birmingham we operate four
bars and would expect to generate annualised revenue in excess of £8.5
million based on our budget for the 52 weeks ended 30 June 2024. In addition
we have identified at least another three locations that would be suitable for
Nightcap brands in Birmingham.
In Bristol, Nightcap currently operates five bars across The Cocktail Club,
Tonight Josephine, Blame Gloria and Dirty Martini brands. We would expect to
generate annualised revenue in excess of £6 million based on our budget for
the 52 weeks ended 30 June 2024 and we have identified at least another two
locations that would be suitable for Nightcap brands in Bristol.
As we break the Nightcap bars into clusters both inside and outside of London
it becomes clear just how great the potential is for a multi-brand bar
operator like Nightcap with dozens of cities being suitable for our multi-site
operation. Nightcap has identified sites and cities using its cluster strategy
and believes there is the opportunity to reach well above 150 sites across its
existing brands during the next phase of growth.
We are excited to combine our multi brand cluster approach by taking
significant steps to digitally connect our loyal and engaged consumers across
our clusters, to provide them with fresh, innovative and differentiated ways
of enjoying their best nights out with us wherever they live, study or work.
ACQUISITIONS UPDATE - DIRTY MARTINI
With the acquisition, on 9 June 2023, of Dirty Martini via a pre-pack
acquisition out of administration, we continued to deliver on our ambition to
create the leading bar group in the UK, consisting of the most loved brands
and concepts, with the highest potential for roll-out across the country.
Dirty Martini is one of the leading cocktail bar brands in the UK. Known for
its bespoke cocktail menu specialising in martinis, spirited atmosphere,
brunch and its 'happy hours'. The Dirty Martini ethos is to create an
environment which operates successfully at brunch, after work, through a
popular happy hour, and into the night, very much in keeping with the ethos
across the rest of the Nightcap brands.
With their mix of Martini cocktails and popular mini burgers and chicken
slider birdcages, Dirty Martini has created a great relaxing atmosphere to
enjoy corporate and private events. This is often followed by a DJ led party
atmosphere, ending in selfies taken by groups of friends in front of the
signature angel wings, epitomising the Dirty Martini night out.
The acquisition of Dirty Martini is in keeping with the Group's strategy of
targeting millennial and Gen Z customers who are moving away from generic
mid-market chains and sticky floored nightclubs, and are instead favouring
late night bars where they can have a great time, drink high quality drinks
and enjoy an experience-led, memorable, safe and fun night out in unique
venues.
REVENUE GROWTH
The 29% increase in revenue from £35.9 million to £46.4 million represents
another year of impressive revenue growth. Importantly, Dirty Martini was not
acquired until 9 June 2023, so the Board anticipates significant annualised
growth during this current financial year as the acquisition beds in and
becomes a core part of the Nightcap Group. In addition to the acquisition and
the new sites opened during the year, what is really exciting is the
foundation of the well-defined brands that we have created, spread across
clusters and locations with great additional potential. These are operated by
our talented and engaged colleagues, working in inclusive and safe
environments that allow them to grow as professionals and make hospitality a
proper career path. Taking this triangle of brands, clusters and strong
operations and overlaying a focus on experiences and a stronger digital
journey across the Group is key to unlocking even more potential in each
location, whilst we continue to look at both organic and acquisitive ways to
continue our rapid expansion.
ECONOMIC CLIMATE
Nightcap was created during the COVID pandemic, a distressing time for the
hospitality industry and before the roll out of the first vaccine, with an
unprecedented opportunity ahead of us.
Lockdowns were followed by a period of significant downturn in the property
market as a result of record closures and no demand for new openings. Nightcap
took advantage and we successfully opened a string of highly attractive bar
locations across the UK.
This was followed by inflation caused by post-COVID-19 supply chain disruption
and was compounded by the war in Ukraine, and its impact on energy prices and
interest rates. The resulting cost of living crisis and reduced consumer
spending has impacted most hospitality businesses across the UK.
With inflation falling and energy prices, site fit out costs, supply chain
costs and wage inflation coming under control, a more predictable trading
environment was becoming visible only to be significantly disrupted by the
ongoing rail strikes that started in June 2022 and have affected us for nearly
every month of trading since. With a total estimated impact of £2.9 million**
of lost revenue and £1.9 million** of lost company EBITDA (IAS 17) the impact
is significant for Nightcap and debilitating for the industry as a whole.
We are well shielded from the increase in prices in our supply chain, with 90%
of our sales being drinks sales. We have an excellent ongoing relationship
with a small number of suppliers with annual fixed cost contracts. As we add
more and more volume we see these prices decreasing and supplier led
incentives improving.
We have continued our work to mitigate against the cost of energy, with the
introduction of a sustainability consultancy partner and the objective of
saving 20% from usage, combined with having fixed the majority of our
utilities at competitive rates. These actions along with our interest rate cap
on the reference base rate (SONIA) fixed at 3% until August 2025, taken out as
interest rates started to rise, ensure that we continue to effectively
mitigate the impact of a number of these macro influences.
FINANCIAL POSITION
We started the year with net debt of £0.2 million (excluding IFRS 16 leases
liabilities) which included cash of £5.4 million. A proportion of this cash
was earmarked for capital expenditure on six new sites as we finalised our
initial roll out programme.
Dirty Martini was acquired on 9 June 2023 out of administration as a pre-pack
deal for a payment of £4.15 million with an additional £0.5 million due on
successful assignment to Nightcap of certain sites, the completion of which
was announced on 9 November 2023. The Group will make a further announcement
in due course in relation to deferred consideration for the acquisition. The
transaction was financed through the raising of £5 million of capital from
existing and new investors. £2.65 million was raised as new convertible loan
notes along with £2.35 million of new shares issued at 12 pence per share on
the date of the transaction.
We continue our great relationship with HSBC where we are gradually paying
down our £10 million facility. We ended the year with net debt of £4.0
million (excluding IFRS 16 leases and convertible loan notes) which includes
£5.0 million of cash.
The current financial position, alongside the cash generation from operations,
puts Nightcap in a good financial position as we continue to deliver on our
promise to create the leading bar group in the UK over the coming years.
PEOPLE
With the recent acquisition of Dirty Martini, the Nightcap Group has expanded
to include over 1,000 colleagues. A large majority of our workforce is
comprised of individuals at the early stages of their careers, and we are
committed to providing them with a clear path for growth within our business.
Retention of talent in our industry is challenging, but we firmly believe that
our people are at the core of our success and progress. Our rapid growth has
made Nightcap an attractive workplace for top talent, and we have the
privilege of working with exceptionally skilled individuals at all levels.
Investing in the training and development of our employees is a top priority.
We have increased our efforts in this area, providing comprehensive training
programs for trainers, leadership development opportunities for managers, and
performance management strategies across the board. These initiatives are
essential in order for us to achieve our goal of becoming the leading bar
group in the UK. We are committed to offering the best parties, drinks, and
music, as well as maintaining the highest standards of venue management
nationwide. None of this would be possible without our deep commitment to
developing the skills and talents of our workforce.
I would like to extend my gratitude to all of our dedicated and enthusiastic
colleagues for another year filled with great fun, parties, and laughter, both
for ourselves and our customers. Their hard work and spirit have truly made
Nightcap a remarkable place.
Last year, we achieved a significant increase in the number of women working
across our business, and our senior executive team now consists of 50% women.
This year, the gender split across the entire business is approximately
47% women and 53% men. We are proud to have so many talented women shining in
traditionally male-dominated roles within our industry. Furthermore, we are
committed to embracing diversity in all its forms, including welcoming LGBTQ
individuals and individuals from diverse religious and racial backgrounds.
Nightcap will always be a home for anyone who wants to work with the best in
the hospitality industry, offering a high-energy, rewarding, and fun
environment.
To ensure the safety of both our staff and customers in our bars, we have
launched the highly successful "Safer Together" campaign. This initiative,
featured across national press, encourages people to stay together and look
out for each other during nights out. As part of this campaign, all Nightcap
bars now stock free spiking testing kits behind the bar, phone chargers for
customers and our managers and staff have received training to identify and
assist individuals who may find themselves alone or confused. We are dedicated
to ensuring that everyone gets home safely after enjoying a great night out.
I am proud to announce the progress of our latest project, the harmonisation
of contracts and terms of employment within the Nightcap group. This
initiative not only safeguards the existing benefits enjoyed by our employees,
but also establishes a fairer and more consistent organisational structure. In
addition, we are excited to launch our new careers website,
www.nightcapcareers.co.uk, (http://www.nightcapcareers.co.uk/) which we
believe will significantly enhance our retention, recruitment and hiring
process.
Together, these accomplishments and initiatives should propel Nightcap forward
as a leading force in the hospitality industry. We are honoured to have such a
fantastic team supporting our mission, and we look forward to even greater
success in the future.
SUSTAINABILITY
Nightcap is committed to continuing our work to reduce our carbon footprint
and for the first time we will report against TCFD (Task Force on
Climate-related Financial Disclosures) which sets out a more comprehensive
range of initiatives than ever before, which we believe will eventually lead
to best in class progress through our sustainability efforts. We continue to
make good progress in the reduction of energy consumption, which, other than
the purchase and sale of spirits, is the largest part of our carbon footprint.
This includes working with our sustainability partner, who have installed
energy consumption devices across the entire estate except for the recently
acquired Dirty Martini venues. As consumption of alcohol is the largest
component of our carbon footprint, we will continue to assess what steps can
be taken to reduce or offset the impact of alcohol on our carbon footprint
over the coming year.
CURRENT TRADING AND PROSPECTS
Due to the acquisition of Dirty Martini on 9 June 2023, only a few weeks prior
to the beginning of the new financial year, we have been extremely busy,
welcoming colleagues from the new sites, onboarding everyone into the Nightcap
way of working. We have finalised the assignment of all the Dirty Martini
leases except for one unprofitable Dirty Martini site at Hanover Square which,
due to unreasonably high rent, had not operated profitably for a long time.
This site was handed back on 13 October 2023. After positive discussion
relating to the future of the Tuttons and Dirty Martini sites in Covent
Garden, we have agreed a new lease of up to three years on more attractive
commercial terms, which leaves Nightcap with a total of 46 bars.
Trading in the first 13 weeks of the new financial year (period to 1 October
2023) has been adversely impacted by September's record warm weather, the
ongoing cost of living crisis and significant train strikes deliberately
targeting payday weekends to cause maximum damage. Warm weather in September
(which reduced the demand for socialising in basement bars) led to record
weeks at our outdoor venues, Bar Elba and in particular Luna Springs, which
had its strongest summer yet, as customers enjoyed our large outdoor spaces.
Unaudited Group revenue was £14.7 million for the 13-weeks ended 1 October
2023 ("Q1 FY2024") resulting in a 42.7% increase compared to Group revenue of
£10.3 million for the equivalent period in FY2023. Revenue for this 13-week
period represents a 16.7% like-for-like* decrease compared to the equivalent
period for FY2023, mostly caused by additional rail strikes and extremely warm
weather throughout September.
Whilst trading in October 2023 has continued on the same trend as Q1 FY2024,
we are focussing on the important Christmas period. Christmas bookings and
enquiries across the whole estate including Dirty Martini are in line with the
strong 2022 Christmas period.
The Board remains cautious about the near term future trading due to the
challenges presented by continuing train strikes. The Nightcap estate is of a
higher quality, better operated and with better trained and more engaged teams
than ever before. We therefore remain optimistic about the future potential of
the Group and remain excited about building the UK's leading bar group.
The Group's balance sheet remains strong. As at 1 October 2023, the Group's
cash at bank was £2.6 million with bank debt of £9.1 million prior to
entering the important and lucrative Christmas period.
Sarah Willingham
Chief Executive Officer
* Like-for-like revenue is same site revenue defined as revenue at only
those venues that traded in the same week in both the current year and
comparative reporting periods.
** These estimates have been derived from the average weekly revenues in
the weeks preceding and following the week impacted by the industrial action.
EBITDA has been estimated based on gross margins adjusted for variable costs.
FINANCIAL REVIEW
The 52-week period ended 2 July 2023 represents a full year of trading for The
Cocktail Club, the Adventure Bar Group, and Barrio Familia Group, and three
weeks of trading for Dirty Martini, which was acquired on 9 June 2023.
As the Group accounts on a weekly basis, the full year results report on a
52-week period ended 2 July 2023, with the prior year comparative being the 53
weeks ended 3 July 2022.
Nightcap's performance for these periods is summarised in the table below.
52 weeks 53 weeks
ended ended
2 July 2023 3 July 2022
£m £m
Sites trading at year end 47** 31
Revenue 46.4 35.9
Adjusted EBITDA (IFRS 16)* 6.6 6.0
Adjusted EBITDA (IAS 17)* 2.6 3.3
(Loss) / Profit from operations (2.8) 1.4
(Loss) / Profit before tax (4.9) 0.2
Cash and equivalents 5.4 5.4
Net Debt (including IFRS 16 lease liabilities) (44.5) (27.8)
Net (Debt) (excluding IFRS 16 lease liabilities) (6.7) (0.2)
Net Assets 14.5 16.2
The Group uses a range of financial and non-financial measures to assess its
performance. Several of these (for example Adjusted EBITDA and Adjusted
earnings / (losses) per share) are considered to be Alternative Performance
Measures ("APMs"), as they are not defined under IFRS. The Board believes that
these APMs provide stakeholders with additional useful information on the
underlying trends, performance and position of the Group and are consistent
with how its business performance is measured internally and across the wider
hospitality sector.
Adjusted EBITDA / EBITDAR (EBITDA before rental costs) is also the measure
used by the Group's banks for the purposes of assessing covenant compliance.
* The table below shows the reconciliation between adjusted EBITDA and
statutory figures within these accounts. Further definitions of the APMs can
be found on page 93 of the Annual Report.
** As at year end, we have included Dirty Martini Hanover Square as a
trading site. The lease for this site was handed back to the landlord on
13(th) October 2023. Further information is provided in the Chief Executive's
Statement.
52 weeks 53 weeks
Note ended ended 03 July 2022
02 July 2023 £'000
£'000
(Loss) / profit from operations (2,812) 1,407
Exceptional items 10 792 84
Acquisition related transaction costs 11 734 (866)
Pre-opening costs 12 1,013 442
Share based payment charge 7 181 345
Impairment 6 565 143
Adjusted profit from operations 473 1,555
Depreciation and amortisation (pre IFRS 16 Right of use asset depreciation) 6 3,094 2,256
IFRS 16 Right of use asset depreciation 6 3,278 2,224
IFRS 16 Right of use asset / liability disposal 6 (220) -
Adjusted EBITDA (IFRS 16) 6,625 6,036
IAS 17 Rent charge (3,997) (2,727)
Adjusted EBITDA (IAS 17) 2,627 3,309
RESULTS FOR THE YEAR
This year Nightcap has continued to grow at pace, with the addition of six new
sites across the three brands and the acquisition of the Dirty Martini group
of bars which contributed three weeks of trading in this financial year. This
has taken the estate to 46 bars across the UK. The Group has achieved revenues
of £46.4 million, an increase of 29% over the previous year, driven by new
openings and the full year effect of the Barrio Familia group.
On 9 June 2023, Nightcap acquired the Dirty Martini group of bars (including
Tuttons restaurant) for an initial consideration of £4.15 million which will
increase to £4.65 million on the successful assignment of the property leases
of four key sites, the completion of which was announced on 9 November 2023.
Nightcap is currently the operator of nine Dirty Martini bars and the Tuttons
brasserie restaurant in Covent Garden. There are four Dirty Martini bars
located in London with an additional five bars located in Cardiff, Bristol,
Birmingham, Leeds and Manchester.
The single biggest impact in the last financial year has been the continued
industrial action from transport worker unions that has significantly impacted
the whole of the hospitality industry. There were 28 days of industrial action
last year, targeted mainly on Thursdays and Saturdays. This action has cost us
an estimated £2.9 million(1) of lost revenue and £1.9 million(1) of lost
EBITDA (IAS 17) and has cost the hospitality industry an estimated £3.25
billion(2) overall. On a like‑for‑like(3) basis, this industrial action
impacted the Group negatively resulting in a 12.5% decline when compared to
the previous year where we saw 23.6% growth in like-for-like(3) revenue.
1 These estimates have been derived from the average weekly revenues in
the weeks preceding and following the week impacted by the industrial action.
EBITDA has been estimated based on gross margins adjusted for variable costs.
2 Source: UK Hospitality - "Rail strikes to cause half-term havoc"
3 Like-for-like revenue is same site revenue defined as revenue at only
those venues that traded in the same week in both the current year and
comparative reporting periods.
Revenue for the 52-week period ended 2 July 2023 incorporated a full year of
trading for The Cocktail Club, Adventure Bar Group and Barrio Familia, and
three weeks of trading from the Dirty Martini group of bars that were acquired
on 9 June 2023. The Group's brands trade in similar geographical locations
and are subject to the same risks as described in the principal risks and
uncertainties section of the Annual Report. The brands are also part of the
cluster model as described in the Chief Executive's report, where several
brands operate in the same geographical area. Therefore, the Group's revenue
is reported as one segment. Further information can be found in Note 4.
The Group delivered an Adjusted EBITDA of £6.6 million under IFRS 16 and an
Adjusted EBITDA of £2.6 million under IAS 17. Taking into account the
financial impact of the industrial action, management estimates that Adjusted
EBITDA (IAS 17) would have been £4.5 million for the 52 weeks ended 2 July
2023. As highlighted above, the industrial action impacted the Group by an
estimated £1.9 million at the EBITDA level.
Group depreciation increased from £3.9 million to £5.7 million, which
reflects a full year's contribution in relation to the sites opened in 2021-22
together with the Barrio Familia Group bars, and a further six bars opened in
2022-23. Group amortisation increased to £0.6 million in the year due to the
amortisation of intangibles associated with the Adventure Bar Group and Barrio
Familia Group transactions.
Exceptional items over the period of £0.8 million are detailed in Note 10.
The Group incurred acquisition related transaction costs in respect of Dirty
Martini of £0.7 million. In the prior year, the Group incurred acquisition
related transaction costs, being a net credit, of £0.9 million. Transaction
costs relating to the Barrio Familia Group transaction of £0.4 million were
offset by a £1.2 million credit that related to the deferred contingent
liability relating to the Adventure Bar Group consideration - see Note 11.
The Group has a reported tax credit for the year of £0.9 million (2022:
credit of £0.3 million). The Group has utilised capital allowances, tax
losses and Group relief where available to mitigate corporation tax payable.
The Group has benefited from the introduction of the 130% capital allowance
super deduction due to the capital expenditure incurred on the new sites.
In June 2023, the Group made the decision to temporarily cease trading at the
Barrio Watford site. The Group retains the lease for this site and is
considering whether to either launch an alternative brand on the site, partner
with another operator or dispose of the lease. As a consequence, the Group has
recognised an impairment charge of £565,000 in relation to the property,
plant and equipment.
With the Group continuing to execute its roll out strategy, during parts of
the financial year there were preopening costs that relate to the fixed and
training costs in delivering the new sites ready for opening. In the 52-week
period ended 2 July 2023, the Group incurred £1.0 million of preopening
costs relating to the six sites opened in the year.
The Group reported a loss from operations of £2.8 million for the 52-week
period ended 2 July 2023, compared to a profit of £1.4 million in the
previous year. The Group also reported a loss before tax of £4.9 million
compared to a profit of £0.2 million for the 2022 financial year.
The table below sets out our basic and diluted (loss) / earnings per share.
Earnings per share attributable to the ordinary equity holders of the parent Note 52 weeks ended 53 weeks ended
02 July 2023 03 July 2022
pence pence
(Loss) / earnings per share 13
- Basic (2.09) 0.06
- Diluted (2.09) 0.06
Financing
The Group incurred total interest costs of £2.1 million compared to £1.2
million in the previous financial year. Interest on bank loans was £0.5
million compared to £0.2 million in the previous period. Further information
can be found in Note 8.
During the year, the Group refinanced its borrowings from three individual
lenders under multiple tranches with new debt facilities from HSBC Bank to
provide support to the business on its roll out strategy. The new £10 million
HSBC Bank facility, replaced £5.5 million of legacy debt that we acquired
from acquisitions, which had a blended interest margin of 4%. The remaining
£4.5 million has supported the fit out of the sites opened in the financial
year. The new facility carries a margin of 3% above SONIA on a £3 million
term loan and 3.25% above SONIA on a £7 million Revolving Credit Facility.
Further details of the loans can be found in Note 22. At the same time, the
Group has taken out an interest rate cap on the reference base rate (SONIA)
fixed at 3% giving certainty over interest costs until August 2025.
In order to fund the acquisition of Dirty Martini, the Company raised new
funds, totalling £5.0 million, through a combination of new shares and
convertible loan notes ("CLNs"). 19,583,333 new shares were issued at a price
of 12 pence per share totalling £2.35 million, which represented a premium
of 26.3% to the mid-market closing price of Nightcap's Ordinary Shares on 8
June 2023. In addition, the Company issued CLNs totalling £2.65 million to
existing shareholders and new investors.
The CLNs mature on 9 September 2025 and are convertible at the option of the
investors subject to certain conditions. The CLNs are only convertible
following a period of 12 months from issue, at the higher of 12 pence per
share or a 15% discount to the volume weighted average share price of the
Company's shares for the five business day period prior to the investor
notifying the Company of its intention to convert. The CLNs bear a coupon of
10% per annum which shall be rolled up and settled either when a conversion
notice has been served or on an Exit. In this context, an Exit is defined as
being a change of control in the Company or the sale of substantially all of
the business and assets of the Company.
Cash flow and financial position
The Group's cash flow from operating activities was £6.7 million compared to
£2.2 million in the prior year. We continued to invest in our estate and
invested £6.7 million (2022: £6.0 million) before right of use asset
additions, in new site capital expenditure. This was spent bringing six new
sites into the business and investing in IT systems to improve the reporting
of management information. In addition, we acquired Dirty Martini via a
pre-pack acquisition out of administration for an initial consideration of
£4.15 million (excluding acquisition related transaction costs).
The table below sets out the Group's year end cash and net (debt) position.
At
2 July 2023
Cash Note 19 £5.0m
Cash in transit Note 2.13, 18 £0.4m
Cash including cash in transit £5.4m
Net (debt) - pre IFRS 16 leases Note 29 £(6.7m)
Cash in transit Note 2.13, 18 £0.4m
Net (debt) - pre IFRS 16 leases including cash in transit £(6.3m)
IFRS 16 leases Note 21 £(37.9m)
Net (debt) - including IFRS 16 leases and cash in transit £(44.2m)
As part of the refinancing completed in August 2022, the majority of the
Group's bank debt is repayable via a bullet payment in August 2025, with a
further 1-year option to extend.
Lease liabilities increased to £37.9 million from £27.6 million and reflect
the addition of the new sites opened during the year. This liability is
expected to increase further as the Dirty Martini leases are assigned to
Nightcap.
Market overview and opportunities
The Group continues to enjoy a property landscape and a corporate landscape
that presents considerable opportunities to secure sites on attractive terms
in prime city centre locations. The current macroeconomic environment has
reduced competition so more sites are available. The significant headwinds in
the UK economy, including the rise in interest rates to 5.25% has left many
companies struggling to manage their debt burden and as a result they are
looking for ways to re‑structure their balance sheets. The acquisition of
Dirty Martini as a pre-pack acquisition out of administration is one such
example.
The Group faces a number of challenges as a consequence of ongoing industrial
action, inflationary price pressures and the ongoing cost of living crisis.
Train strikes - Industrial action
With a loss to the industry of an estimated £3.25 billion, the ongoing train
strikes, started in June 2022, continue to have a profoundly negative effect
on the late night industry in particular. Industrial action has continuously
targeted Thursdays, Saturdays, bank holidays and other celebratory holidays to
ensure the biggest possible impact on consumers and businesses. The ongoing
train strikes significantly impacted the Company's trading on these rail
strike action days throughout the financial year, particularly affecting the
business' ability to convert high margin evening trade during weekends,
resulting in an estimated loss of £1.9 million** of EBITDA (IAS 17). We do
not believe that Nightcap will be in a position to reach its fullest trading
potential until the industrial action has been settled.
Inflation
Early on in the year, inflationary pressures resulted in increased fit out
costs for new sites, significantly increased energy costs and increased wage
cost pressures. Towards the end of the financial year we saw fit out pricing
pressures subside and energy costs have continued to reduce with the Group
locking into a new fixed one year deal in September 2023. This has resulted in
significant additional savings as well as an easing of wage pressures as
inflation has continued to reduce during the course of the year. However,
inflation continues to have an impact on consumers' disposable income.
Interest rates
Given the turbulent nature of inflation and its link to interest rates as a
key tool of the Bank of England to control inflation, in September 2022 the
Group had hedged 80% of its bank debt interest costs for three years by taking
out an interest rate cap, so that there is certainty that whilst interest
rates remain high the majority of our bank interest costs will be fixed due to
the interest rate cap on the reference base rate (SONIA) at 3% (Note 22).
Whilst the combination of the above factors makes the trading environment
challenging, our focus on building a market leading portfolio of bars
continues. We continue our focus on providing good value for everyone and a
best in class customer experience and we believe that our bars operate better
than ever, with management and staff that are well trained and deliver better
experiences in our bars than ever before.
During FY2023, we have invested £6.7 million into new sites and
refurbishments (including pre-opening costs), creating a significant number of
new jobs in the year. The increase in drink sales has allowed us to secure new
competitively fixed price supplier contracts for all key spirits along with
enhanced retrospective volume rebates and ongoing marketing support, which has
allowed us to continue to maintain our profit margin and be able to re-invest
in our team and our guest experience.
As part of the integration of all subsidiary head offices into one during the
financial year, there has been an increased focus on recruiting best in class
subject matter experts from across the industry to strengthen the Group's
senior management team as our Company continues its rapid growth. This is an
important step in the Group's pursuit of recruiting and retaining a talented
and committed management team, which in turn serves to mitigate operational
execution risks in all departments across the business.
Further details around our risk mitigation strategies can be found in the
principal risks and uncertainties section of the Annual Report.
Going Concern
The Board has considered the Group's ability to continue to operate as a going
concern in the current challenging economic conditions and with the impact
that the rail strikes have had on the business. As at 2 July 2023 the Group
had cash balances of £5.4 million including cash in transit. During the
financial year under review the Group refinanced its legacy debt with an
amortising term loan (£3m) and a Revolving Credit Facility (up to £7m)
repayable in August 2025.
Management has prepared forecasts for the next 15 months in three scenarios- a
base case, a normalised case and a downside case.
The base case scenario was prepared ahead of the end of the financial year in
the final quarter of FY2023 and included an assumption that rail strikes
continue throughout the FY2024 forecast period with a negative EBITDA impact
of £1.9 million. This scenario has been adjusted for trading performance in
Q1 FY2024 and the cash position until the end of October 2023. The base case
has been further adjusted for additional known contractual changes.
A normalised scenario was created to take into account a potential end to the
rail strikes from January 2024. It further takes into account the launch of
the Group's new collaboration with PianoWorks at its Barrio Covent Garden site
which launched on 16 November2023.
A significant, but plausible downside case scenario was developed to stress
the forecasts. This assumes continued rail strikes and no benefit from any new
initiatives or partnerships. It furthermore anticipates a worsening
macro-economic environment resulting in an additional significant reduction in
EBITDA. To mitigate the modelled deterioration in trading, the significant but
plausible downside case reduces CAPEX and includes cost savings across the
Group. This downside scenario continues to show the Group meeting all
borrowing covenants and having sufficient liquidity to operate the business.
The Group continues to trade in line with its revised base case model, in
which the Group would meet all borrowing covenants over the next 15 months and
retain sufficient headroom above the cash balances required to run the
business.
The covenant with the lowest headroom in all three scenarios is the fixed
cover charge covenant. The Board recognises that this cash flow forecast
relies on important factors such as ongoing trading performance, which is
currently volatile and impacted by the challenging macroeconomic environment,
as well as the delivery of conversion into site and company EBITDA along with
the implementation of a number of cash and cost improvement actions. The Board
continually monitors its forecasts and the potential impacts the above factors
may have.
Based on the Group's forecasts, the Directors have adopted the going concern
basis in preparing the Financial Statements. The Directors have made this
assessment after consideration of the Group's cash flows and related
assumptions and in accordance with the Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting 2014 published by the UK
Financial Reporting Council.
By order of the Board
Toby Rolph
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 52 WEEKS ENDED 2 JULY 2023
52 weeks ended 53 weeks ended
Note 02 July 2023 03 July 2022
£'000 £'000
Revenue 4 46,414 35,943
Cost of sales (9,029) (7,297)
Gross profit 37,386 28,646
Administrative expenses (40,643) (27,404)
Other income 5 446 165
Adjusted EBITDA 6,625 6,036
Share based payments 7, 26 (181) (345)
Profit on disposal of right of use asset / liability 6 220 -
Depreciation 6, 15, 16 (5,745) (3,931)
Amortisation of intangible assets 6, 14 (627) (549)
Exceptional items 10 (792) (84)
Acquisition related transaction costs 11 (734) 866
Pre opening costs 12 (1,013) (442)
Impairment 6 (565) (143)
(Loss) / profit from continuing operations (2,812) 1,407
Net finance expense 8 (2,052) (1,169)
(Loss) / profit before taxation (4,863) 238
Tax credit on (loss) / profit 9 931 262
(Loss) / profit and total comprehensive (loss) / profit for the period (3,932) 500
(Loss) / profit for the period attributable to:
- Owners of the parent (4,169) 114
- Non-controlling interest 237 386
(3,932) 500
52 weeks ended 53 weeks ended
Note 02 July 2023 03 July 2022
pence pence
Earnings per share attributable to the ordinary equity holders of the parent
(Loss) / earnings per share
- Basic 13 (2.09) 0.06
- Diluted 13 (2.09) 0.06
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 2 JULY 2023
Note 02 July 2023 03 July 2022
£'000 £'000
Non-current assets
Goodwill 14 12,144 9,751
Intangible assets 14 6,971 4,604
Property, plant and equipment 15 12,723 9,109
Deferred tax asset 25 1,489 -
Right of use assets 16 35,905 26,462
Derivative financial asset 361 -
Other receivable 18 914 699
Total non-current assets 70,507 50,625
Current assets
Inventories 17 1,154 554
Trade and other receivables 18 3,266 2,005
Cash and cash equivalents 19 5,017 5,353
Total current assets 9,438 7,911
Total assets 79,945 58,537
Current liabilities
Loans and borrowings 22 (1,000) (800)
Trade and other payables 20 (12,980) (7,889)
Lease liabilities due less than one year 21 (3,281) (2,374)
Total current liabilities (17,261) (11,062)
Non-current liabilities
Borrowings 22 (10,687) (4,723)
Lease liabilities due more than one year 21 (34,594) (25,254)
Provisions 23 (683) (366)
Deferred tax provision 25 (2,200) (891)
Total non-current liabilities (48,164) (31,233)
Total liabilities (65,425) (42,295)
Net assets 14,520 16,241
Called up share capital 27 2,179 1,983
Share premium 27 23,527 21,372
Share based payment reserve 661 543
Reverse acquisition reserve (2,513) (2,513)
Retained earnings (10,066) (5,639)
13,788 15,746
Non-controlling interest 732 495
Total equity 14,520 16,241
The financial statements on pages 50 to 85 of the Annual Report were approved
and authorised for issue by the Board and were signed on its behalf by:
Toby
Rolph
Sarah Willingham-Toxvaerd
Chief Financial
Officer
Chief Executive Officer
22 November
2023
22 November 2023
Company Number: 12899067
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEKS ENDED 2 JULY 2023
Called up share capital Share premium Share based payment reserve Reverse acquisition Retained earnings Total attributable to equity holders of Non- controlling interest Total
£'000 £'000 £'000 reserve £'000 parent £'000 equity
£'000 £'000 £'000
At 27 June 2021 1,855 19,267 216 (2,513) (5,753) 13,073 109 13,181
Issue of shares on acquisition - Barrio Bar Group 57 1,051 - - - 1,108 - 1,108
Issue of shares - Adventure Bar Group contingent consideration 71 1,054 - - - 1,125 - 1,125
Share based payments and related deferred tax recognised directly in equity
- - 326 - - 326 - 326
Total transactions with owners recognised directly in equity
1,983 21,372 543 (2,513) (5,753) 15,632 109 15,741
Total comprehensive income for the 53 week period
- - - - 114 114 386 500
At 3 July 2022 1,983 21,372 543 (2,513) (5,639) 15,746 495 16,241
Shares issued for cash subscription - 8 June 2023 196 2,154 - - - 2,350 - 2,350
Share based payments and related deferred tax recognised directly in equity - - 118 - - 118 - 118
Dividends paid - non controlling interest portion
- - - - (257) (257) - (257)
Total transactions with owners recognised directly in equity
2,179 23,527 661 (2,513) (5,896) 17,957 495 18,452
Total comprehensive expense for the 52 week period
- - - - (4,169) (4,169) 237 (3,932)
At 2 July 2023 2,179 23,527 661 (2,513) (10,066) 13,788 732 14,520
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE 52 WEEKS ENDED 2 JULY 2023
52 weeks ended 53 weeks ended
02 July 2023 03 July 2022
£'000 £'000
Cash flows from operating activities
(Loss) / profit for the period (3,932) 500
Adjustments for:
Depreciation 5,745 3,931
Amortisation 627 549
Profit on disposal of right of use asset / liability (220) -
Share based payments 181 345
Interest on lease liabilities 1,699 917
Interest on borrowings 714 252
Net change in fair value of interest rate cap (361) -
Impairment 565 143
Tax expense (931) (262)
(Increase) in trade and other receivables (1,377) (1,214)
Increase / (decrease) in trade and other payables 4,387 (2,785)
(Increase) in inventories (255) (113)
Cash generated from operations 6,840 2,264
Corporation taxes (paid) (184) (72)
Net cash flows from operating activities 6,656 2,192
Investing activities
Acquisition of Dirty Martini (Note 32) (4,150) -
Acquisition of Barrio Bar Group, net of cash - (991)
Purchase of property, plant and equipment (6,658) (6,008)
Purchase of intangible assets (45) (48)
Net cash used in investing activities (10,853) (7,048)
Financing activities
Issue of ordinary shares 2,350 -
Proceeds from borrowings (net of repayments of £500,000) 12,030 -
Issue costs in connection with borrowings (479) -
Repayment of loans and borrowings (5,597) (941)
Principal paid on lease liabilities (2,255) (906)
Interest paid on lease liabilities (1,699) (917)
Interest paid on loans and borrowings (489) (215)
Net cash inflow / (outflow) from financing activities 3,861 (2,979)
Net (decrease) in cash and cash equivalents (336) (7,835)
Cash and cash equivalents at beginning of the period 5,353 13,187
Cash and cash equivalents at end of the period 5,017 5,353
Basis of Preparation
The financial information included in this announcement does not constitute
statutory accounts of the Group for the 52 weeks to 2 July 2023 and 53 weeks
ended 3 July 2022 but is derived from those accounts. Statutory accounts for
the 52 weeks to 2 July 2023 will be delivered to the Registrar of Companies
following the Group's Annual General Meeting. The auditors have reported on
those accounts: their reports were (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 2 JULY 2023
1. GENERAL INFORMATION
Nightcap plc ("the Company") and its subsidiaries ("the Group") is an
award-winning independent operator of 46 themed bars.
At 22 November 2023 the Group operates 16 bars under The Cocktail Club brand,
13 under the Adventure Bar Group ("ABG") brand, seven under Barrio Familia
Group brand and ten under the newly acquired Dirty Martini brand.
On 9 June 2023, Nightcap plc acquired the trade and assets for certain bars
and one restaurant relating to the Dirty Martini business, for a total
consideration of up to £4.65m. Nightcap is currently the operator of nine
Dirty Martini bars and the Tuttons brasserie restaurant in Covent Garden.
There are four Dirty Martini bars located in London with an additional five
bars located in Cardiff, Bristol, Birmingham, Leeds and Manchester. Further
information on this acquisition is provided in Note 32.
The Company is a public limited company whose shares are publicly traded on
the AIM market of the London Stock Exchange and is incorporated and registered
in England and Wales.
The registered office address of the Company is c/o Locke Lord (UK) LLP, 201
Bishopsgate, London, EC2M 3AB.
2. ACCOUNTING POLICIES
2.1. Basis of preparation of financial statements
The consolidated financial statements of Nightcap plc have been prepared in
accordance with International Accounting Standards as adopted for use in the
United Kingdom ("UK adopted IAS") and with the requirements of the Companies
Act 2006 as applicable to companies reporting under those standards.
The accounting policies adopted in the preparation of the Financial Statements
have been consistently applied to all years presented, unless otherwise
stated. The Group has not early adopted any other standard, interpretation or
amendment that has been issued but is not yet effective.
The financial statements have been prepared under the historical cost
convention. The financial statements are presented in pounds Sterling ('£')
rounded to the nearest thousand, except where otherwise indicated.
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below.
Judgements made by the Directors in the application of the accounting policies
that have a significant effect on the consolidated financial statements and
estimates with significant risk of material adjustment in the next year are
discussed in Note 3.
Due to rounding, numbers presented in the Financial Statements may not add up
precisely to the totals provided and percentages may not precisely reflect the
presented figures as the underlying calculations are referenced from absolute
values, whereas numbers presented have been rounded to thousands.
2.2. Going concern
Management have prepared forecasts for the next 15 months in three scenarios-
a base case, a normalised case and a downside case. More detail on these
scenarios has been provided in the going concern section of the Financial
Review. There remains uncertainty over whether the Group will continue to meet
these forecasts. This will be dependent upon the underlying economic
conditions and whether there is any increase in the level of industrial action
impacting the sector.
The Group continues to trade in line with the revised base case model. In all
three scenario's the Group has sufficient cash to successfully operate the
business and will continue to meet all bank covenants. As a result the Board
is satisfied that the Group has sufficient liquidity to support the assessment
that it is appropriate to prepare the financial statements for the 52 weeks
ended 2 July 2023 on the going concern basis.
2.3. Basis of consolidation
A subsidiary is an entity controlled by the Group. Control is the power to
govern the financial and operating policies of an entity to obtain benefits
from its activities. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group.
All intra-Group transactions, balances, income and expenses are eliminated on
consolidation.
2.4. Alternative performance measures
The Group has identified certain measures that it believes will assist the
understanding of the performance of the business. These alternative
performance measures ("APMs") are not defined or specified under the
requirements of UK adopted IAS.
The Group believes that these APMs, which are not considered to be a
substitute for, or superior to, UK adopted IAS measures, provide stakeholders
with additional useful information on the underlying trends, performance and
position of the Group and are consistent with how business performance is
measured internally. Adjusted EBITDA is also one of the measures used by the
Group's banks for the purposes of assessing covenant compliance. The APMs are
not defined by UK adopted IAS and therefore may not be directly comparable
with other companies' alternative performance measures.
The key APM that the Group uses is Adjusted EBITDA. This APM is set out on
page 93 of the Annual Report including an explanation of how it is calculated
and how it reconciles to a statutory measure where relevant.
These measures exclude exceptional items, as defined below, non-cash
share-based payment charges, pre-opening costs and acquisition related costs.
Exceptional items
Exceptional items are those where, in management's opinion, their separate
reporting provides a better understanding of the Group's underlying business
performance; and which are significant by virtue of their size and nature. In
considering the nature of an item, management's assessment includes, both
individually and collectively, whether the item is outside the principal
activities of the business; the specific circumstances which have led to the
item arising; the likelihood of recurrence; and if the item is likely to
recur, whether it is unusual by virtue of its size.
No single criterion classifies an item as exceptional, and therefore
management must exercise judgement when determining whether, on balance,
presenting an item as exceptional will help users of the financial statements
understand the Group's underlying business performance.
Non-cash share based payment charges
Charges/credits relating to share-based payments arising from the Group's
long-term incentive schemes are not considered to be exceptional but are
separately identified due to the scope for significant variation in
charges/credits.
Pre-opening costs
Pre-opening costs can vary significantly depending on the number of new sites
acquired and opened in any period, and so do not reflect the costs of the
day-to-day operations of the business. These costs are therefore split out in
order to aid comparability with prior periods. Site pre-opening costs refer to
costs incurred in getting new sites operational, and primarily include costs
incurred before opening and in preparing for launch.
Acquisition-related costs
Acquisition-related costs are costs incurred to effect a business combination.
Those costs include advisory, legal, accounting, valuation and other
professional or consulting fees including employees bonuses in connection with
the successful completion of a transaction. Acquisition-related costs are
expensed in the period in which the costs are incurred and the services are
received.
2.5. Revenue
IFRS 15 requires revenue to be recognised when goods or services are
transferred to customers and the entity has satisfied its performance
obligations under the contract, and at an amount that reflects the
consideration to which an entity expects to be entitled in exchange for those
goods or services. Revenue predominantly arises from the sale of food and
drink to customers in the Group's bars for which payment in cash or cash
equivalents is received immediately and as such revenue is recognised at point
of sale.
The Group operates in a single geographical region (the UK) and hence all
revenues are impacted by the same economic factors.
Retrospective volume rebates ('retro' payments) and listing fees are spread
over the life of the contract. The income is recognised as a credit within
cost of sales.
Revenue is shown net of value added tax, returns and discounts.
Customer deposits received in advance of events and bookings are recorded as
deferred revenue on the balance sheet. They are recognised as revenue along
with any balancing payment from the customer when the associated event /
booking occurs.
2.6. Government grants
Government grants are not recognised until there is reasonable assurance that
the Group will comply with the conditions attaching to them and that the
grants will be received. Government grants that are receivable as compensation
for losses already incurred or for the purpose of giving immediate financial
support to the Group with no future related costs are recognised in profit or
loss in the period in which they become receivable. This income is recognised
within Other income. Where the income relates to a distinct identifiable
expense, the income is offset against the relevant expense for example, income
received under the Coronavirus Job Retention Scheme has been offset against
staff costs.
2.7. Finance costs
Finance costs are charged to the Statement of Comprehensive Income over the
term of the debt using the effective interest rate method so that the amount
charged is at a constant rate on the carrying amount. Issue costs are
initially recognised as a reduction in the proceeds of the associated capital
instrument.
2.8. Intangible assets goodwill
Goodwill represents the difference between amounts paid on the cost of a
business combination and the acquirer's interest in the fair value of the
identifiable assets and liabilities of the acquiree at the date of
acquisition.
Goodwill is not subject to amortisation and is tested annually for impairment,
or more frequently if events or changes in circumstances indicated that they
may be impaired.
2.9. Intangible assets - trademarks, licenses and brands
Separately acquired trademarks and licences are shown at historical cost.
Trademarks and licences have a finite useful life and are carried at cost less
accumulated amortisation and any accumulated impairment losses.
Intangible assets acquired as part of a business combination are only
recognised separately from goodwill when they arise from contractual or other
legal rights, are separable, the expected future economic benefits are
probable and the cost or value can be measured reliably.
Asset
class
Amortization method and rate
Trademarks
10%- straight-line
Licenses
Straight line over the life of the lease
Brand
Straight-line over the expected useful economic life of the brand being 7.5 to
10 years
2.10. Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated
depreciation and any accumulated impairment losses. Historical cost includes
expenditure that is directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the
manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their
residual value over their estimated useful lives, using the straight-line
method.
Depreciation is provided on the following basis:
Leasehold building improvements - straight-line over the life of
the lease
Plant and machinery - 25%
straight-line
Fixtures and fittings -
25% straight-line
Computer equipment - 33%
straight-line
The assets' residual values, useful lives and depreciation methods are
reviewed, and adjusted prospectively if appropriate, or if there is an
indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with
the carrying amount and are recognised in the Consolidated Statement of
Comprehensive Income.
2.11. Inventories
Stocks are stated at the lower of cost and net realisable value, being the
estimated selling price less costs to complete and sell. Cost is based on the
cost of purchase on a first in, first out basis.
At each reporting date, stocks are assessed for impairment. If stock is
impaired, the carrying amount is reduced to its selling price. The impairment
loss is recognised immediately in profit or loss.
2.12. Impairment
Goodwill is tested annually for impairment, or more frequently if events or
changes in circumstances indicated that it might be impaired. Goodwill is not
allocated to individual cash generating units ("CGUs") but to a group of CGUs
encompassing all bars operating under certain brands, including any additional
new sites. The brands that make up that group of CGUs is defined by the
original acquisition group.
The recoverable amount is the higher of an asset's fair value less costs of
disposal and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows from other
assets or groups of assets (cash-generating units).
Other assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
2.13. Cash and cash equivalents
Cash is represented by cash in hand and deposits with financial institutions
repayable without penalty on notice of not more than 24 hours. Payments taken
from customers on debit and credit cards for which cash remains outstanding at
any reporting date ("cash in transit") are recognised as trade receivables.
The trade receivable is converted to cash within 3 days of processing. The
Directors view these trade receivables as cash when monitoring cash flows and
forecasts internally.
2.14. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
Initial recognition
The Group initially recognises trade receivables, trade payables, deposits,
loans and borrowings on the date on which they are originated. All other
instruments are recognised on the trade date, which is the date on which the
Group becomes party to the contractual provisions of the instrument.
All financial instruments are recognised initially at fair value plus or
minus, in the case of assets not at fair value through the Statement of
comprehensive income, transaction costs that are attributable to the
acquisition of the financial asset or liability.
Financial assets
The Group financial assets are measured at amortised cost.
A financial asset is measured at amortised cost when assets that are held for
collection of contractual cash flows and where those cash flows represent
solely payments of principal and interest. Interest income from these
financial assets is included in finance income using the effective interest
rate method.
The derivative financial asset / liability comprises the Group's interest rate
cap. It is carried in the statement of financial position at fair value with
changes in fair value recognised in the consolidated statement of
comprehensive income in the finance expense line. The fair value of the
interest rate cap is determined using the market standard methodology of
discounting the future expected cash flow that would occur if variable
interest rates rise above the strike rate of the interest rate cap. The
variable interest rates used in the calculation of projected cash flow on the
interest rate cap is based on an expectation of future interest rates derived
from observable market interest rate curves and volatilities.
Trade and other receivables are recognised initially at the amount of
consideration that is unconditional, unless they contain significant financing
components, when they are recognised at fair value. The Group holds the trade
and other receivables with the objective of collecting the contractual cash
flows and therefore measures them subsequently at amortised cost using the
effective interest method.
Payments taken from customers on debit and credit cards for which cash remains
outstanding at any reporting date ("cash in transit") are recognised as trade
receivables. The trade receivable is converted to cash within 3 days of
processing.
Impairment losses are presented as a separate line item in the statement of
profit or loss.
The Group assesses on a forward-looking basis the expected credit losses
associated with its financial assets carried at amortised cost. The impairment
methodology applied depends on whether there has been a significant increase
in credit risk. For trade and other receivables, the Group applies the
simplified approach permitted by IFRS 9, which requires expected lifetime
losses to be recognised from initial recognition of the receivables.
Loss allowances for expected credit loss ("ECLs") are presented in the
statement of financial position as a deduction from the gross carrying amount
of the assets. In the profit or loss, the amount of ECL is recognised as an
Impairment gain or loss.
Financial assets are derecognised when the rights to receive cash flows have
expired or have been transferred and the Group has transferred substantially
all risks and rewards of ownership.
Financial liabilities
Financial liabilities
Financial liabilities are classified as financial liabilities at fair value
through profit or loss or as financial liabilities measured at amortised cost,
as appropriate. The Group determines the classification of its financial
liabilities at initial recognition.
The Group's financial liabilities include trade and other payables, loans and
borrowing and other financial liabilities and accrued liabilities that are
classified as measured at amortised cost.
Short-term creditors are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method. Other
financial liabilities, including bank loans, are measured initially at fair
value, net of transaction costs, and are measured subsequently at amortised
cost using the effective interest rate method.
Amortised cost is calculated by taking into account any issue costs, and any
discount or premium on settlement. Gains and losses arising on the repurchase,
settlement or cancellation of liabilities are recognised respectively in
interest and other revenues and finance costs. For substantial and
non-substantial modifications the Group derecognises a financial liability
from the statement of financial position when the obligation specified in the
contract or arrangement is discharged, cancelled or expires.
2.15. Leased assets
Under IFRS 16, the Group recognises right-of-use assets at the commencement
date of the lease (i.e. the date the underlying asset is available for use).
Right-of-use assets are measured at cost, less any accumulated depreciation
and impairment losses, and adjusted for any remeasurement of lease
liabilities. Unless the Group is reasonably certain to obtain ownership of the
leased assets at the end of the lease term, the recognised right-of-use assets
are depreciated over the shorter of its estimated useful life and lease term.
Right- of-use assets are subject to impairment testing as described further in
Note 15. At the commencement date of the lease, the Group recognises lease
liabilities measured at the present value of lease payments to be made over
the lease term. The lease payments include fixed payments less any lease
incentives receivable. In calculating the present value of lease payments, the
Group uses its incremental borrowing rate at the lease commencement date if
the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the
accretion of interest and reduced for lease payments made. In addition, the
carrying amount of lease liabilities is remeasured if there is a modification
or a change in the lease term. The Group applies the short-term lease
recognition exemption to its short-term leases of equipment (i.e. those leases
that have a lease term of 12 months or less from the commencement date and do
not contain a purchase option). It also applies the lease of low-value assets
recognition exemption to leases that are considered of low value. Lease
payments on short-term leases and leases of low- value assets are recognised
as an expense in the Statement of Comprehensive Income.
For leases acquired as part of a business combination the lease liability is
measured at the present value of the remaining lease payments at the
acquisition date with the right of use asset being measured at the same value.
The discount rate applied to the remaining lease payments is the incremental
borrowing rate of the acquiree.
2.16. Pensions
The Group operates a defined contribution plan for its employees. A defined
contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. Once the contributions have been paid
the Group has no further payment obligations.
The contributions are recognised as an expense in the Consolidated Statement
of Comprehensive Income when they fall due. Amounts not paid are shown in
accruals as a liability in the Statement of Financial Position. The assets of
the plan are held separately from the Group in independently administered
funds.
2.17. Provisions
Provisions are made where an event has taken place that gives the Group a
legal or constructive obligation that probably requires settlement by a
transfer of economic benefit, and a reliable estimate can be made of the
amount of the obligation.
Provisions are charged as an expense to the Consolidated Statement of
Comprehensive Income in the period that the Group becomes aware of the
obligation, and are measured at the best estimate at the Statement of
Financial Position date of the expenditure required to settle the obligation,
taking into account relevant risks and uncertainties. When payments are
eventually made, they are charged to the provision carried in the Statement of
Financial Position.
2.18. Share based payments
Equity-settled share-based payments to employees are measured at the fair
value of the equity instruments at the grant date. The fair value excludes the
effect of non-market-based vesting conditions. Details regarding the
determination of the fair value of equity-settled share-based transactions are
set out in Note 26.
The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting year, based on
the Group's estimate of equity instruments that will eventually vest. At each
balance sheet date, the Group revises its estimate of the number of equity
instruments expected to vest as a result of the effect of non-market-based
vesting conditions.
The impact of the revision of the original estimates, if any, is recognised in
profit or loss such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to equity reserve.
2.19. Current and deferred taxation
The tax expense for each reporting period comprises current and deferred tax.
Tax is recognised in the Consolidated Statement of Comprehensive Income,
except that a charge attributable to an item of income and expense recognised
as other comprehensive income or to an item recognised directly in equity is
also recognised in other comprehensive income or directly in equity
respectively.
The current income tax charge is calculated on the basis of tax rates and laws
that have been enacted or substantively enacted by the reporting date.
Deferred tax balances are recognised in respect of all timing differences that
have originated but not reversed by the Statement of Financial Position date,
except that:
• The recognition of deferred tax assets is limited to the
extent that it is probable that they will be recovered against the reversal of
deferred tax liabilities or other future taxable profits;
• Any deferred tax balances are reversed if and when all
conditions for retaining associated tax allowances have been met; and
• Where they relate to timing differences in respect of
interests in subsidiaries, associates, branches and joint ventures and the
Group can control the reversal of the timing differences and such reversal is
not considered probable in the foreseeable future.
Deferred tax balances are not recognised in respect of permanent differences
except in respect of business combinations, when deferred tax is recognised on
the differences between the fair values of assets acquired and the future tax
deductions available for them and the differences between the fair values of
liabilities acquired and the amount that will be assessed for tax. Deferred
tax is determined using tax rates and laws that have been enacted or
substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset where there is a legally
enforceable right to offset current tax assets and liabilities and where the
deferred tax balances relate to the same tax authority. Current tax assets and
tax liabilities are offset where the entity has a legally enforceable right to
offset and intends either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
2.20. Related party transactions
The Group discloses transactions with related parties which are not
consolidated and not wholly owned within the Group. Where appropriate,
transactions of a similar nature are aggregated unless, in the opinion of the
Directors, separate disclosure is necessary to understand the effect of the
transactions on the Group Financial Statements.
2.21. New standards, amendments and interpretations adopted
The Group has applied the same accounting policies and methods of computation
in its Financial Statements as in the prior period.
There are a number of standards, amendments to standards, and interpretations,
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning on or after 1
January 2023:
• Definition of Accounting Estimate (Amendments to IAS 8)
• Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2)
• Classification of liabilities as current or non-current
(amendments to IAS 1).
In January 2020, the IASB issued amendments to IAS 1, which clarify the
criteria used to determine whether liabilities are classified as current or
non-current. The Group has reviewed this standard and does not believe that
the amendments to IAS 1 will have a significant impact on the classification
of its liabilities.
Other
The Group does not expect any other standards issued by the IASB, but not yet
effective, to have a material impact on the Group.
The following is a list of other new and amended standards which, at the time
of writing, had been issued by the IASB but which are effective in future
periods. The amount of quantitative and qualitative detail to be given about
each of the standards will depend on each entity's own circumstances.
• IFRS 17 Insurance Contracts (effective 1 January 2023)- in
June 2020, the IASB issued amendments to IFRS 17, including a deferral of its
effective date to 1 January 2023.
• Deferred tax related to assets and liabilities arising from a
single transaction (Amendments to IAS 12 Income taxes‑effective 1 January
2023).
• Lease liability in a Sale and Leaseback (Amendments to IFRS
16- effective 1 January 2024).
3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY
The preparation of consolidated financial information in conformity with IFRS
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses.
Estimates and underlying assumptions are reviewed on an on-going basis and are
based on historical experience and other factors including expectations of
future events that are believed to be reasonable under the circumstances.
Although these judgements, estimates and associated assumptions are based on
management's best knowledge of current events and circumstances, the actual
results may differ. Revisions to accounting estimates are recognised in the
period in which the revision takes place and in any future periods affected.
The key assumptions concerning the future and other key sources of estimation
and uncertainty at the date of the statement of financial position that have a
significant risk of causing material adjustments to the carrying amounts of
assets and liabilities within the next financial period are set out below.
The Directors consider the principal judgements made in the Financial
Statements to be:
KEY JUDGEMENTS
Operating Segments
The Directors have taken a judgement that individual bars meet the aggregation
criteria in IFRS 8 and hence have concluded that the Group only has a single
reporting segment, as discussed in Note 4.
Determining the rate used to discount lease payments
At the commencement date of property leases the lease liability is calculated
by discounting the lease payments. The discount rate used should be the
interest rate implicit in the lease. However, if that rate cannot be readily
determined, which is generally the case for property leases, the lessee's
incremental borrowing rate is used, being the rate that the individual lessee
would have to pay to borrow the funds necessary to obtain an asset of similar
value to the right-of-use asset in a similar economic environment with similar
terms, security and conditions. As the Group has external borrowings,
judgement is required to compute an appropriate discount rate which was
calculated based on UK bank borrowings and adjusted by an indicative credit
premium that reflects the credit risk of the Group. The weighted average
discount rate applied to those leases that pre-dated the Group's IPO was
4.75%. Leases entered into post IPO have been discounted with a weighted
average discount rate of 4.68%. For the lease liabilities at 2 July 2023 a
0.1% increase in the discount rate used would have reduced the total
liabilities by £227,000.
Consolidation of Waterloo Sunset Limited
Waterloo Sunset Limited ("Waterloo Sunset") is a subsidiary that runs and
operates the Bar Elba bar in Waterloo, London. The Group has a 50% economic
interest in Waterloo Sunset with each partner holding 50% of the voting
rights. The Group maintains an agreement to operate Waterloo Sunset and
charges a management fee of 10% of revenue to Waterloo Sunset.
The Directors have determined that the Company exerts significant influence
and control because it has the power to direct all significant activities of
Waterloo Sunset and has a higher economic interest in it as compared to its
unrelated venture partner, and as a result consolidates Waterloo Sunset in
these financial statements with a 50% non-controlling interest representing
the 50% of the equity the Group does not own.
Exceptional items
Exceptional items are those where, in management's opinion, their separate
reporting provides a better understanding of the Group's underlying business
performance; and which are significant by virtue of their size and nature. In
considering the nature of an item, management's assessment includes, both
individually and collectively, whether the item is outside the principal
activities of the business; the specific circumstances which have led to the
item arising; the likelihood of recurrence; and if the item is likely to
recur, whether it is unusual by virtue of its size.
No single criterion classifies an item as exceptional, and therefore
management must exercise judgement when determining whether, on balance,
presenting an item as exceptional will help users of the financial statements
understand the Group's underlying business performance.
Valuation of intangible assets and goodwill
Allocation of the purchase price affects the results of the Group as finite
lived intangible assets are amortised, whereas indefinite lived intangible
assets, including goodwill, are not amortised and could result in differing
amortisation charges based on the allocation to indefinite lived and finite
lived intangible assets.
During the period, the Group acquired the trade and assets of the business
known as Dirty Martini for total consideration of £4.65m. Details of the
acquisition is set out in Note 32. In accordance with IFRS 3, the identifiable
assets acquired and liabilities and contingent liabilities assumed should be
measured at fair value at the acquisition date in order to determine the
difference between the cost of acquisition and the fair value of the Group's
share of net assets acquired, which should then be recognised as goodwill on
the balance sheet or recognised in the income statement.
In determining the fair value, management has recognised brand value totalling
£2.95m in respect of the business acquired. Key estimates used in arriving at
the brand valuation include growth rates, discount rate, cashflow assumptions
including working capital estimates, appropriate royalty rates and useful
economic lives. Further information is provided in Notes 14 and 32.
Valuation of intangible assets and goodwill
The amount of goodwill initially recognised as a result of a business
combination is dependent on the allocation of the purchase price to the fair
value of the identifiable assets acquired and the liabilities assumed. The
determination of the fair value of the assets and liabilities is based, to a
considerable extent, on management's judgement.
Legal and Other Claims
The Group considers all legal or other claims against it. Where appropriate
provision is made for management's best estimate of any liability arising.
These provisions are reviewed regularly by management and the audit and risk
committee and amended to reflect any new information. Where a claim has been
received but management consider that it is unlikely that any liability will
result this is disclosed as a contingent liability. The Group receives a
number of employment or accident related claims that, having sought
appropriate advice, it believes have no merit and, as a consequence, the
likelihood of any payout is remote. No provision is included in the financial
statements for any amounts that are considered remote.
KEY ESTIMATES
Impairment of non current assets
Annually, the Group considers whether non current assets are impaired. Where
an indication of impairment is identified the estimation of recoverable value
requires estimation of the recoverable value of the cash generating units
(CGUs). This requires estimation of the future cash flows from the CGUs and
also selection of appropriate discount rates and the longer term growth rate
in order to calculate the net present value of those cash flows. Individual
bars are viewed as separate CGUs in respect of the impairment of property,
plant and equipment. Details of the sensitivity of the estimates used in the
impairment exercise are provided in Notes 14 and 15.
Forecast business cashflows
For purposes of the going concern assessment and as an input into the
impairment assessment, the Group make estimates of likely future cash flows
which are based on assumptions in the base case, normalised case and
significant but plausible downside case, given the uncertainties involved. The
assumptions as outlined in the going concern section of the Financial Review
include a deterioration of the macro environment as well as reduced
profitability for the Group along with a range of mitigating factors within
the Boards control. These assumptions are made by management based on recent
performance and management's knowledge and expertise of the cashflow drivers
going forward.
Share-based payments
The charge for share based payments in respect of the Nightcap plc Share
Option Plan is calculated in accordance with the methodology described in Note
26. The model requires subjective assumptions to be made including the future
volatility of the Company's share price, expected dividend yield, risk-free
interest rates, expected time of exercise and employee attrition rates.
Changes in such estimates may have a significant impact on the original fair
value calculation at the date of grant and therefore the share based payments
charge.
Amortisation of intangible assets
Amortisation is recorded to write down intangible assets to a residual value
of nil over their useful economic lives (UELs). Management must therefore
estimate the appropriate UELs to apply to each class of intangible asset.
Changes in the estimated UELs would alter the amount of amortisation charged
each year, which could materially impact the carrying value of the assets in
question over the long term. UELs are therefore reviewed on an annual basis to
ensure that they are in line with policy and that those policies remain
appropriate.
4. SEGMENTAL REPORTING
The Group's continuing operating businesses are organized and managed as
reportable business segments according to the information used by the Group's
Chief Operating Decision maker ("CODM") in its decision making and reporting
structure. The CODM is regarded as the Chief Executive together with other
Board Members who receive financial information at a bar-by-bar level.
The Group's internal management reporting is focused predominantly on revenue
and adjusted EBITDA, as these are the principal performance measures and drive
the allocation of resources. The CODM receives information by trading venue,
each of which is considered to be an operating segment. All operating segments
have similar characteristics and, in accordance with paragraph 12 of IFRS 8,
are aggregated to form an 'Ongoing business' reportable segment. Economic
indicators assessed in determining that the aggregated operating segments
share similar economic characteristics include expected future financial
performance, operating and competitive risks and return on investment. These
common risks include, but are not limited to, cost inflation, recruitment and
retention, Brexit and supply chain disruption, consumer confidence,
availability of new sites, impact of national industrial action, health and
safety and food and drink safety. These risks are discussed in more detail in
the "Principal Risks and Uncertainties" section of this Annual Report. The
risks are managed, discussed and monitored at a Board level across the Group.
The Group performs all of its activities in the United Kingdom. All the
Group's non-current assets are located in the United Kingdom. Revenue is
earned from the sale of drink and food with a small amount of admission
income.
Revenue
Revenue arises from the sale of food and drink to customers in the Group's
bars for which payment in cash or cash equivalents is received immediately.
The Group operates in a single geographical region (the UK) and hence all
revenues are impacted by the same economic factors. Accordingly, revenue is
presented as a single category and further disaggregation is not appropriate
or necessary to gain an understanding of the risks facing the business.
5. OTHER INCOME
52 weeks ended 53 weeks ended
02 July 2023 03 July 2022
£'000 £'000
Business interruption insurance proceeds - COVID related - 10
Government grants - 155
Insurance claims 446 -
446 165
6. OPERATING (LOSS) / PROFIT
The operating (loss) / profit is stated after charging/ (crediting):
52 weeks ended 53 weeks ended
Note 02 July 2023 03 July 2022
£'000 £'000
(Loss) / profit from operations is stated after charging / (crediting):
Share based payments 7, 26 181 345
Depreciation of tangible fixed assets 15 2,467 1,707
Depreciation of right of use assets 16 3,278 2,224
Amortisation of intangible assets:
- Trademarks 14 30 21
- Brands 14 597 528
Auditors' remuneration
- for statutory audit services 176 106
- for other assurance services - 25
Exceptional costs 10 792 84
Acquisition related transaction costs 11 734 (866)
Pre-opening costs 12 1,013 442
Profit on disposal of right of use asset / liability (220) -
Impairment of tangible fixed assets 15 565 47
Impairment of right of use asset 16 - 96
7. EMPLOYEES AND DIRECTORS
The average monthly number of employees, including the Directors, during the
period was as follows:
52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
Management 85 49
Operations 669 510
754 559
Staff costs were as follows:
Note 52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
£'000
£'000
Wages and salaries 15,798 11,549
Social security costs 1,339 1,156
Defined contribution pension costs 183 128
Other employment costs 48 109
17,368 12,942
Share based payments 26 181 345
17,549 13,287
All of the Group's employees were based in the United Kingdom in the current
and prior periods.
The following table shows a breakdown of the remuneration of individual
Directors who served in all or part of the period.
Name Salary Annual Transaction Pension Total
Bonus
Related Bonus
Contribution
£'000
and Fees
£'000
£'000
£'000
£'000
Sarah Willingham-Toxvaerd 260 - - 13 273
Toby Rolph 175 - 9 184
Michael Willingham-Toxvaerd 325(1) - 100(2) 9 434
Gareth Edwards 75 - - - 75
Tobias Van der Meer - - - - -
Lance Moir 29 - - - 29
Thi-Hanh Jelf 29 - - - 29
Total 893 - 100 31 1,023
1 Salary includes fees relating to the share placing for the
Dirty Martini acquisition, in line with his service agreement as described
within the AIM admission document.
2 Relates to the acquisition of certain of the assets of DC
Bars Limited, the operator of the 'Dirty Martini' chain of cocktail bars, on 9
June 2023, in line with the framework in his service agreement as described
within the Company's AIM admission document.
Further information in respect of Directors' remuneration is provided in the
Remuneration Committee Report.
Key management personnel compensation
Key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group, including
the Directors of the Company listed above.
52 weeks ended 53 weeks ended
02 July 2023 03 July 2022
£'000 £'000
Key management emoluments 1,192 1,617
Pension contribution 40 25
1,233 1,642
8. FINANCE COSTS
Note 52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
£'000
£'000
Interest on bank overdrafts and loans 503 205
Interest on lease liabilities 21 1,699 917
Net change in fair value of hedging instrument in a fair value hedge (361) -
Amortisation of debt issue costs - HSBC 136 -
Amortisation of debt issue costs - legacy debt 74 47
2,052 1,169
9. TAX (CREDIT) / CHARGE ON LOSS
The income tax credit is applicable on the Group's operations in the UK.
Note 52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
£'000
£'000
Taxation charged / (credited) to the income statement
Current income taxation 61 131
Adjustments for current taxation of prior periods (12) (54)
Total current income taxation 49 77
Deferred Taxation
Origination and reversal of temporary timing differences
Current period (988) (372)
Adjustments in respect of prior periods 37 56
Adjustment in respect of change of rate of corporation tax (29) (23)
Total deferred tax 25 (980) (339)
Total taxation credit in the consolidated income statement (931) (262)
The above is disclosed as:
Income tax (credit) - current period (956) (264)
Income tax charge - prior period 25 2
(931) (262)
52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
£'000
£'000
Factors affecting the tax credit for the period (Loss) / profit before tax (4,863) 238
At UK standard rate of corporation taxation of 20.5% (2022: 19%) (997) 45
Income not assessable for tax purposes - (231)
Expenses not deductible for tax purposes 175 14
Fixed asset differences 161 (33)
Timing differences on leases - 34
Deferred tax (charged)/credited directly to equity (63) -
Other temporary differences 100 -
Movement in unrecognised deferred tax (215) 23
Adjustments to current tax charge in respect of prior periods (12) (54)
Adjustments to deferred tax charge in respect of prior periods 37 56
Adjustment in respect of change of rate of corporation tax (116) (117)
Total tax credit for the period (931) (262)
10. EXCEPTIONAL ITEMS
52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
£'000
£'000
Included in administrative expenses:
Legal cost accrual 300 -
Site closure costs 81 -
Reorganisation costs 411 84
792 84
In the 52 weeks ended 3 July 2023 the Group has made an accrual for legal
costs in relation to a claim - see Note 34 for further details.
In the 52 weeks ended 3 July 2023 the Group closed its previous legacy, The
Cocktail Club site in Bethnal Green. This site had no material impact on the
Group's trading in the period.
In the 52 weeks ended 3 July 2023 and 53 weeks ended 3 July 2022,
reorganisation costs were incurred in relation to the restructuring and
reorganisation of certain employees in the Group.
11. ACQUISITION RELATED TRANSACTION COSTS
Note 52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
£'000
£'000
Acquisition related transaction costs 734 352
Adventure Bar Group contingent consideration - (1,218)
2.4 734 (866)
The acquisition related transaction costs in the 52 weeks ended 2 July 2023
relate to costs incurred directly in connection with the acquisition of the
trade and assets relating to Dirty Martini. For the 53 weeks ended 3 July 2022
these costs relate to the acquisition of Barrio Familia Limited.
The acquisition of Adventure Bar Group in May 2021 included contingent
deferred consideration to be settled with the issue of shares. Certain
estimates had been used in valuing the consideration including share price
volatility, enterprise value/EBITDA multiples, risk free rates and estimates
on probabilities and timing for the satisfaction of the shares to be issued.
In June 2022, the Group issued 7,142,856 new ordinary shares relating to the
deferred consideration and the difference between the issue price of 15.75p
and the estimate used in the prior year to value the consideration has been
taken as a gain to the prior year Consolidated Statement of Comprehensive
Income in accordance with IFRS 3.
12. PRE OPENING COSTS
Note 52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
£'000
£'000
Pre opening costs 2.4 1,013 442
13. EARNINGS PER SHARE
Basic earnings / (loss) per share is calculated by dividing the profit/(loss)
attributable to equity shareholders by the weighted average number of shares
outstanding during the year, excluding unvested shares held pursuant to The
Nightcap plc Share Option Plan. Further details of the share options that
could potentially dilute basic earnings per share in the future are provided
in Note 26.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all potential
dilutive ordinary shares. During the 52 weeks ended 2 July 2023 and the 53
weeks ended 3 July 2022 the Group had potentially dilutive shares in the form
of unvested shares options pursuant to the above long-term incentive plan.
52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
£'000
£'000
(Loss) / profit for the period after tax for the purposes of basic and diluted (4,169) 114
earnings per share
Non-controlling interest 237 386
Taxation credit (931) (262)
Finance cost 2,052 1,169
Exceptional items 792 84
Acquisition related costs 734 (866)
Pre-opening costs 1,013 442
Share based payment charge 181 345
Impairment 565 143
Depreciation and amortisation 6,372 4,480
Profit on disposal of right of use asset / liability (220) -
Profit for the period for the purposes of Adjusted EBITDA (IFRS 16) basic and 6,625 6,036
diluted earnings per share
IAS 17 Rent charge (3,997) (2,727)
Profit for the period for the purposes of Adjusted EBITDA (IAS 17) basic and 2,627 3,309
diluted earnings per share
52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
Number
Number
Weighted average number of ordinary shares in issue for the purposes of basic 199,591,866 189,008,260
earnings per share
Effect of dilutive potential ordinary shares from share options 950,758 6,529,509
Weighted average number of ordinary shares in issue for the purposes of 200,542,623 195,537,769
diluted earnings per share
52 weeks ended 53 weeks ended
02 July 2023
03 July 2022
pence
pence
Earnings per share:
Basic (2.09) 0.06
Diluted (2.09) 0.06
Adjusted EBITDA (IFRS 16) basic 3.32 3.19
Adjusted EBITDA (IFRS 16) diluted 3.30 3.09
Adjusted EBITDA (IAS 17) basic 1.32 1.75
Adjusted EBITDA (IAS 17) diluted 1.31 1.69
During a period where the Group or Company makes a loss, accounting standards
require that 'dilutive' shares for the Group be excluded in the earnings per
share calculation, because they will reduce the reported loss per share.
14. INTANGIBLE ASSETS
Trademarks and Brand Total Goodwill
licenses
£'000
£'000
£'000
£'000
(i) Cost or valuation
At 28 June 2021 155 2,982 3,137 6,573
Additions 48 - 48 -
On acquisition - Barrio Familia Group 101 1,936 2,037 3,178
At 3 July 2022 304 4,918 5,222 9,751
At 4 July 2022 304 4,918 5,222 9,751
Additions 45 - 45 -
On acquisition - Dirty Martini (Note 32) - 2,950 2,950 2,393
At 2 July 2023 349 7,868 8,217 12,144
(ii) Amortisation
At 28 June 2021 4 49 53 -
Provided for the period 21 528 549 -
On acquisition - Barrio Familia Group 16 - 16 -
At 3 July 2022 41 577 618 -
At 4 July 2022 41 577 618 -
Provided for the period 30 597 627 -
At 2 July 2023 71 1,174 1,245 -
(iii) Net book value
At 28 June 2021 151 2,933 3,084 6,573
At 3 July 2022 263 4,341 4,604 9,751
At 2 July 2023 278 6,694 6,971 12,144
Goodwill of £2,393,000 arose on the acquisition of Dirty Martini in June 2023
- see Note 32 (03 July 2022 - £3,178,000 arose on the acquisition of the
Barrio Familia Group).
Goodwill is not amortised, but an impairment test is performed annually by
comparing the carrying amount of the goodwill to its recoverable amount. The
recoverable amount is represented by the greater of the business's fair value
less costs of disposal and its value in use.
For the purposes of its impairment test for goodwill and intangible assets,
the CGU is determined by the acquisition that generated the respective
goodwill and intangible assets. Our CGUs with related goodwill and brand
intangibles are Adventure Bar Group, Barrio Familia and Dirty Martini. The
value in use is calculated based upon the Group's latest five‑year forecast
to June 2028, incorporating the assumptions concerning the rate at which
business unit level cash flows are generated and ongoing capital expenditure.
The value in use calculations use an annual growth rate of 2% in the initial
period, with the exception of Dirty Martini. Dirty Martini's calculation uses
a rate of 7% in year 1, and 2% thereafter. A higher rate was used for Dirty
Martini to reflect managements expectations of an one off uplift in trade
following the acquisition of the business from administration The discount
rate used to determine the present value of projected future cash flows is
based on the Group's Weighted Average Cost of Capital ("WACC") and the Group's
current view of achievable long-term growth. The pre-tax discount rate and
terminal growth rate used in the discounted cash flow model were 14% and 2%
respectively.
The estimation of value in use involves significant judgement in the
determination of inputs to the discounted cash flow model and is most
sensitive to changes in future cash flows, discount rates and terminal growth
rates applied to cash flows beyond the forecast year. The sensitivity of key
inputs and assumptions used was tested by recalculating the recoverable amount
using reasonably possible variances to those assumptions. The discount rate
was increased by 1%, the terminal growth rate was decreased by 1%, and future
cash flows were reduced by 20%. As at 2 July 2023, no reasonably possible
change in an individual key input or assumption, as described, would result in
the carrying amount exceeding its recoverable amount based on value in use.
15. PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements Plant and Furniture, Computer equipment Total
£'000
computer equipment
fixtures and
£'000
£'000
£'000
fittings
£'000
(i) Cost or valuation
At 28 June 2021 3,933 2,115 814 161 7,023
Additions 3,939 1,405 887 - 6,231
On acquisition - Barrio Familia Group 1,835 775 1,050 - 3,661
Reclassification - 134 27 (161) -
Impairment (27) (19) - - (47)
At 3 July 2022 9,680 4,411 2,778 - 16,869
At 4 July 2022 9,680 4,411 2,778 - 16,869
Additions 2,708 1,842 1,652 - 6,202
On acquisition - Dirty Martini 306 136 - - 442
Disposals (40) (1,102) (1,063) - (2,205)
At 2 July 2023 12,655 5,288 3,367 - 21,309
(ii) Depreciation
At 28 June 2021 1,728 1,263 395 90 3,476
Provided for the period 573 742 392 - 1,707
On acquisition - Barrio Familia Group 1,029 698 850 - 2,577
Reclassification - 85 6 (90) -
At 3 July 2022 3,329 2,788 1,643 - 7,760
At 4 July 2022 3,329 2,788 1,643 - 7,760
Provided for the period 1,024 761 681 - 2,467
Disposal (40) (1,102) (1,063) - (2,205)
Impairment 294 17 254 - 565
At 2 July 2023 4,608 2,465 1,514 - 8,587
(iii) Net book value
At 27 June 2021 2,205 853 419 71 3,548
At 3 July 2022 6,351 1,623 1,136 - 9,109
At 2 July 2023 8,047 2,822 1,853 - 12,723
Impairment of property, plant and equipment and right of use assets
The Group has determined that each bar is a separate CGU for impairment
testing purposes. Each CGU is tested for impairment at the balance sheet date
if there exists at that date any indicators of impairment.
The value in use of each CGU is calculated based upon the Group's latest
five-year forecast. The bar cash flows include an allocation of central costs
and ongoing capital expenditure. Cash flows beyond the initial FY23/24 budget
period are extrapolated using the Group's estimate of the long-term growth
rate, currently 2%.
The key assumptions in the value in use calculations are the like-for-like
sales projections for each bar, changes in the operating cost base, the
long-term growth rate and the pre-tax discount rate. The pre-tax discount rate
is derived from the Group's WACC and is currently 14%.
In June 2023, the Group made the decision to temporarily cease trading at the
Barrio Watford site. The Group retains the lease for this site and is
considering whether to either launch an alternative brand on the site, partner
with another operator or dispose of the lease. As a consequence, the Group has
recognised an impairment charge of £565,000 in relation to the tangible fixed
assets.
The cash flows used within the impairment model are based upon assumptions
which are sources of estimation uncertainty. Management has performed
sensitivity analysis on the key assumptions in the impairment model using
reasonably possible changes in the key assumptions. A reduction in cash flows
of 20% in each year does not result in any additional impairment charge. A 100
basis point increase in the discount rate does not result in any additional
impairment charge and a 50 basis point reduction in the terminal growth rate
does not result in any additional impairment charge.
16. RIGHT OF USE ASSETS
Right of use assets
£'000
(i) Cost
At 28 June 2021 15,491
Additions 10,070
Impairment (96)
On acquisition - Barrio Familia Group 5,265
At 3 July 2022 30,730
At 4 July 2022 30,730
Additions 12,746
Disposals (312)
Revaluations -
At 2 July 2023 43,164
(ii) Depreciation
At 28 June 2021 2,045
Provided for the period 2,224
At 3 July 2022 4,269
At 4 July 2022 4,269
Provided for the period 3,278
Disposals (288)
At 2 July 2023 7,259
(iii) Net book value
At 28 June 2021 13,447
At 3 July 2022 26,462
At 2 July 2023 35,905
17. INVENTORIES
02 July 2023 03 July 2022
£'000
£'000
Food, beverage and consumables 1,154 554
There is no material difference between the replacement cost of inventories
and the amounts stated above. Inventories are charged to cost of sales in the
consolidated statement of comprehensive income.
18. TRADE AND OTHER RECEIVABLES
02 July 2023 03 July 2022
£'000
£'000
Included within Current assets
Trade receivables 1,277 981
Other receivables 169 50
Prepayments and accrued income 1,820 974
3,266 2,005
Included within Non-current assets
Other receivables - rent deposits 914 699
Included within trade receivables is £349,000 (3 July 2022 - £649,000)
relating to credit card receivables (Note 2.13). Receivables are denominated
in Sterling.
The Group held no collateral against these receivables at the balance sheet
dates. The Directors consider that the carrying amounts of receivables are
recoverable in full and that any expected credit losses are immaterial.
At each period end, there were no overdue receivable balances.
19. CASH AND CASH EQUIVALENTS
02 July 2023 03 July 2022
£'000
£'000
Cash at bank and in hand 5,017 5,353
Cash and cash equivalents comprise cash at bank and in hand. The fair value of
cash and cash equivalents is the same as the carrying value.
20. TRADE AND OTHER PAYABLES
02 July 2023 03 July 2022
£'000
£'000
Trade payables 4,628 2,841
Social security and other taxes 2,458 1,272
Corporation tax 288 423
Other payables 2,048 370
Accruals and deferred income 3,559 2,983
12,980 7,889
Trade payables were all denominated in Sterling and comprise amounts
outstanding for trade purchases and ongoing costs and are non-interest
bearing.
The Directors consider that the carrying amount of trade payables approximate
to their fair value.
21. LEASES
This note provides information for leases where the Group is the lessee.
The Group leases the entire The Cocktail Club, Adventure Bar Group and Barrio
Familia Group estates as well as its Head Office. The leases are
non-cancellable operating leases with varying terms, escalation clauses and
renewal rights and in some cases include variable payments that are not fixed
in amount but based upon a percentage of sales. Lease agreements are typically
made for fixed years of between 5 and 25 years. At year end the weighted
average lease term remaining is 14 years (03 July 2022 - 14 years).
In accordance with IFRS 16, leases of property, plant and equipment are
recognised as a right-of-use asset and a corresponding liability at the date
at which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
• fixed payments (including in-substance fixed payments), less
any lease incentives receivable, and
• variable lease payment that are based on an index or a rate,
initially measured using the index or rate as at the commencement date
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case
for leases in the Group, the lessee's incremental borrowing rate is used,
being the rate that the Group would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
Lease liability
£'000
At 28 June 2021 13,903
Additions 10,070
On acquisition - Barrio Familia Group 5,265
Interest expense 917
Lease payments (2,528)
At 3 July 2022 27,627
At 4 July 2022 27,627
Additions 12,746
Disposals (244)
Interest expense 1,699
Lease payments (3,954)
At 2 July 2023 37,875
02 July 2023 03 July 2022
£'000
£'000
Lease liability:
Current 3,281 2,374
Non-current 34,594 25,254
37,875 27,627
Amounts recognised in the consolidated statement of comprehensive income
02 July 2023 03 July 2022
£'000
£'000
Depreciation charge of right of use assets 3,278 2,224
Interest expense (included in finance cost) 1,699 917
22. BORROWINGS
02 July 2023 03 July 2022
£'000
£'000
Short-term borrowing
Secured bank loans 1,000 793
Unsecured bank loan - 7
1,000 800
02 July 2023 03 July 2022
£'000
£'000
Long term borrowings
Secured bank loans 8,037 4,723
Convertible loan notes 2,650 -
10,687 4,723
Secured bank loans
In August 2022, the Group refinanced its borrowings from three individual
lenders under multiple tranches with a new £10.0m debt facility from HSBC
Bank, comprised of a £3m term loan and a £7m Revolving Credit Facility, to
provide support to the business as it executes on its roll out strategy. The
new £10.0m HSBC facility, replaced £5.5m of legacy debt that was acquired
from acquisitions, which had a blended interest margin of 4%, with the new
facility bearing a margin of 3% above SONIA on the £3m term loan and 3.25%
above SONIA on the £7m Revolving Credit Facility. The Group has taken out an
interest rate cap on its reference base rate at 3% on £8m out of £10m of its
HSBC facility.
The Group's borrowings are secured on a fixed and floating charge basis over
the assets of the Company and its wholly owned subsidiaries.
In order to fund the acquisition of Dirty Martini, the Company raised new
funds, totalling £5.0 million, through a combination of the issue of new
shares and convertible loan notes ("CLNs"). 19,583,333 new shares were issued
at a price of 12 pence per share totalling £2.35 million - see Note 27.
The Company issued CLNs totalling £2.65 million to existing shareholders and
new investors. The CLNs mature on 9 September 2025 and are convertible at the
option of the investors subject to certain conditions. The CLNs are only
convertible following a period of 12 months from issue, at the higher of 12
pence per share or a 15% discount to the volume weighted average share price
of the Company's shares for the five business day period prior to the investor
notifying the Company of its intention to convert. The CLNs bear a coupon of
10% per annum which shall be rolled up and settled either when a conversion
notice has been served or on an Exit. In this context, an Exit is defined as
being a change of control in the Company or the sale of substantially all of
the business and assets of the Company.
23. PROVISIONS
Dilapidations
provisions
£'000
At 28 June 2021 150
On acquisition - Barrio Familia Group 216
At 3 July 2022 366
On acquisition - Dirty Martini (Note 32) 317
At 2 July 2023 683
The Group expects the dilapidations provision to reverse over the underlying
lease term.
24. FINANCIAL INSTRUMENTS
The Group is exposed to the risks that arise from its use of financial
instruments. Derivative instruments may be transacted solely for risk
management purposes. The management consider that the key financial risk
factors of the business are liquidity risks, interest rate risk and market
risks. The Group operates solely within the UK and therefore has limited
exposure to foreign exchange risk. The Group's exposure to credit risk is
limited due to insignificant receivables balances.
This note describes the objectives, policies and processes of the Group for
managing those risks and the methods used to measure them.
Interest rate risk
The Group is exposed to cash flow interest rate risk from long-term borrowings
at variable rates.
Given the turbulent nature of inflation and its link to interest rates as a
key tool of the Bank of England to control inflation, the Group has hedged
over 80% of its debt interest costs for three years by taking out an interest
rate cap, so that there is certainty that whilst interest rates increase, the
majority of our interest costs will be fixed based on the reference base
rate at 3%.
Commodity price risk
The Group is exposed to movements in the wholesale prices of foods and drinks.
Although the Group sources a majority of products in the UK there is a risk
that disruption to supply caused by Brexit or the conflict in Ukraine will
cause a significant increase in wholesale food and drink prices. Prices for
drinks typically rise once a year to provide short term protection to the
Group. The Group benchmarks and verifies any potential cost changes from
suppliers and also has the ability to flex its offering to customers to
mitigate specific product related cost pressures.
Liquidity risk
The Group's primary objective is to ensure that it has sufficient funds
available to meet its financial obligations as they fall due. Following the
Company's IPO in January 2021, the placement of additional shares in May 2021
and June 2023 and the refinance with HSBC Bank (Note 22), the Group believes
it has sufficient liquidity, along with a cash generative business model.
Capital risk
The Group manages its capital to ensure it will be able to continue as a going
concern while maximising the return to shareholders through optimising the
debt and equity balance.
The Group monitors cash balances and prepares regular forecasts, which are
reviewed by the board. In order to maintain or adjust the capital structure,
the Group may, in the future, issue new shares for future acquisition
opportunities.
Financial assets and liabilities
Financial assets and liabilities consist of the following:
02 July 2023 03 July 2022
£'000
£'000
Financial Assets at amortised cost
Trade receivables 1,277 981
Cash and cash equivalents 5,017 5,353
6,294 6,334
Financial liabilities at amortised cost
Trade payables 4,628 2,841
Borrowings 11,687 5,523
16,315 8,364
There are no material differences between the carrying values of financial
assets and liabilities held at amortised cost and their fair values.
Maturity analysis
The maturity analysis table below analyses the Group's contractual
undiscounted cash flows for the Group's financial liabilities:
Less than 1 - 2 2 - 3 3 - 4 4 - 5 More than Total
1 year
years
years
years
years
5 years
£'000
£'000
£'000
£'000
£'000
£'000
£'000
02 July 2023
Secured bank loans 1,000 1,500 6,537 - - - 9,037
Convertible loan notes - - 2,650 - - - 2,650
Trade and other payables 4,628 - - - - - 4,628
5,628 1,500 9,187 - - - 16,315
03 July 2022
Secured bank loans 793 3,712 591 299 120 - 5,515
Other loans 7 - - - - - 7
Trade and other payables 2,841 - - - - - 2,841
3,641 3,712 591 299 120 - 8,364
The maturity profile of the Group's lease liabilities as at 2 July 2023 was as
follows:
02 July 2023 03 July 2022
£'000
£'000
Within one year 4,956 3,563
In more than one year but less than two years 3,938 3,200
In more than two years but less than three years 3,812 2,816
In more than three years but less than four years 3,785 2,691
In more than four years but less than five years 3,744 2,664
In more than five years 31,661 22,463
51,897 37,397
Effects of discounting (14,023) (9,769)
Lease liabilities 37,875 27,627
There are no committed lease liabilities not yet commenced at 2 July 2023.
25. DEFERRED TAXATION
Fixed asset Losses Acquisition accounting Share Schemes Other Total
timing differences
£'000
£'000
£'000
£'000
£'000
£'000
At 28 June 2021 46 (350) 1,084 (105) (8) 667
On acquisition - Barrio Familia Group (48) - 593 - - 545
Recognised in income statement (Note 9) (180) - (159) - - (339)
Change in deferred tax rate (Note 9) - - - - - -
Recognised in equity - - - 18 - 18
At 3 July 2022 (182) (350) 1,518 (86) (8) 891
On acquisition - Dirty Martini (Note 32) - - 738 - - 738
Reclassification 127 (91) (24) (12) - -
Recognised in income statement (Note 9) 704 (1,489) (188) - (8) (980)
Transferred to deferred tax asset - 1,489 - - - 1,489
Recognised in equity - - - 63 - 63
At 2 July 2023 649 (441) 2,044 (36) (16) 2,200
26. SHARE BASED PAYMENTS
The Group currently uses one equity settled share plan to incentivise its
Executive Directors and employees - The Nightcap plc Share Option Plan (the
"Plan").
In accordance with IFRS 2 Share Based Payments, the value of the awards is
measured at fair value at the date of the grant. The fair value is expensed on
a straight-line basis over the vesting period, based on management's estimate
of the number of shares that will eventually vest. The vesting period on the
Plan is between 1 and 3 years with an expiration date of 10 years from the
date of grant. Furthermore, share options are forfeited if the employee leaves
the Group before the options vest unless forfeiture is waived at the
discretion of the Board of Directors.
The Group recognised a total charge of £181,000 (53 weeks ended 03 July 2022
- £345,000) in respect of the Group's share based payment plans and related
employer's national insurance of £21,000) (53 weeks ended 03 July 2022 -
£(18,000)).
The Nightcap plc
Share Option Plan
Number
Outstanding at 28 June 2021 20,079,988
Granted during the period - November 2021 1,350,000
Granted during the period - March 2022 3,864,406
Lapsed / forfeited during the period (1,790,169)
Outstanding at 3 July 2022 23,504,225
Granted during the period - December 2022 2,770,000
Granted during the period - June 2023 1,160,000
Lapsed / forfeited during the period (3,574,946)
Outstanding at 2 July 2023 23,859,279
Nightcap Share Option Plan
The Nightcap plc Share Option Plan (the "Plan") is a discretionary executive
and management share option plan. One-off Plan awards were granted at the time
of the IPO, and subsequently post IPO. The vesting conditions of the Plan are
set out in the Remuneration Committee report.
The fair value of the options granted in the period have been calculated using
the Black Scholes option pricing model assuming the inputs shown below. The
fair value of the option awards was estimated at the grant date taking into
account the terms and conditions upon which the awards were granted. This
model uses historic dividends and share price fluctuations to predict the
distribution of relative share price performance. The shares are potentially
dilutive for the purposes of calculating diluted earnings per share.
The following assumptions were used:
15 December 2022 29 June 2023
Number of options granted 2,770,000 1,160,000
Share price at date of grant (pence) 8.5 11
Exercise price (pence) 10 11
Option life in years 10 years 10 years
Risk free rate (%) 3.21% 4.71%
Expected dividend yield (%) 0.00% 0.00%
Fair value of options (pence) 3.3 5.2
The fair value of the options granted in the comparative period have been
calculated using the Black Scholes option pricing model assuming the inputs
shown below.
23 November 2021 15 March 2022
Number of options granted 1,350,000 3,864,406
Share price at date of grant (pence) 20 14.75
Exercise price (pence) 20 14.75
Option life in years 10 years 10 years
Risk free rate (%) 0.74% 1.44%
Expected dividend yield (%) 0.00% 0.00%
Fair value of options (pence) 7.56 5.92
The weighted average exercise price for options outstanding at the year end
was 12p (03 July 2022 - 14p).
27. CALLED-UP SHARE CAPITAL
02 July 2023 03 July 2022
£'000
£'000
Allotted, called up and fully paid ordinary shares 2,179 1,983
02 July 2023 03 July 2022
Number
Number
Ordinary shares at £0.01 each 217,883,990 198,300,657
The table below summarises the movements in share capital for Nightcap plc
during the periods ended 2 July 2023 and 3 July 2022:
Ordinary Ordinary Shares Ordinary Shares
Shares Number of shares
£0.01 Nominal Value
Share Premium
£'000
£'000
At 27 June 2021 185,475,192 1,855 19,267
Shares issued in connection with Barrio Bar Group acquisition - 21 November 5,682,609 57 1,051
2021
Shares issued in connection with Adventure Bar Group contingent consideration 7,142,856 71 1,054
- 29 June 2022
At 3 July 2022 198,300,657 1,983 21,372
Shares issued for cash subscription - 8 June 2023 19,583,333 196 2,154
At 2 July 2023 217,883,990 2,179 23,527
- On 21 November 2022 the Company acquired the Barrio Familia
Group for initial consideration comprising 5,682,609 Ordinary Shares
- On 29 June 2022 the Company issued 7,142,856 Ordinary shares in
connection with the settlement of the contingent consideration arising from
the Adventure Bar Group acquisition in May 2021.
- On 8 June 2023 the Company raised new funds, totalling £5.0
million, through a combination of new ordinary shares and convertible loan
notes ("CLNs") in order to fund the acquisition of Dirty Martini. 19,583,333
new shares were issued at a price of 12 pence per share totalling £2.35
million alongside CLNs totalling £2.65 million.
28. EQUITY
The Group's Equity comprises the following:
Called-up share capital
Called-up share capital represents the nominal value of the shares issued.
Share premium account
The share premium account records the amount above the nominal value received
for shares sold.
Share based payment reserve
The share option reserve represents the cumulative amounts charged to profit
in respect of employee share option arrangements where the scheme has not yet
been settled by means of an award of shares to an individual.
Reverse acquisition reserve
The reverse acquisition reserve arose on the share for share exchange between
Nightcap plc and London Cocktail Club Limited on 13 January 2021
Retained earning
Retained earnings represents cumulative profits or losses, net of dividends
paid and other adjustments.
Non-controlling interest
Non controlling interest represents the portion of equity ownership in a
subsidiary's net assets not attributable to the parent company.
29. ANALYSIS OF CHANGES IN NET DEBT
At Cash flows Acquisitions Reclass long Non cash At
28 June 2021 term to short movement 3 July 2022
term
£'000 £'000 £'000 £'000 £'000 £'000
Cash at bank 13,187 (10,822) 2,988 - - 5,353
Bank loans falling due within 1 year (1,424) 914 (277) (73) 67 (793)
Bank loans falling due greater than 1 year (3,256) - (1,540) 73 - (4,723)
Other loans falling due within 1 year (35) 28 - - - (7)
Lease liabilities falling due within 1 year (1,441) 1,611 (421) (2,124) - (2,374)
Lease liabilities falling due greater than 1 year (12,463) - (4,845) 2,124 (10,070) (25,254)
Total debt (18,617) 2,553 (7,082) - (10,003) (33,150)
Net debt (5,430) (8,270) (4,094) - (10,003) (27,797)
Net (debt) / cash - pre IFRS 16 leases 8,473 (9,881) 1,171 - 67 (170)
At 4 July 2022 Cash flows Acquisitions Reclass long term to short Non cash movement At 2 July 2023
£'000 £'000 £'000 term £'000 £'000
£'000
Cash at bank 5,353 (336) - - - 5,017
Bank loans falling due within 1 year (793) 794 - (1,000) (1) (1,000)
Bank loans falling due greater than 1 year (4,723) (4,105) - 1,000 (209) (8,037)
Other loans falling due within 1 year (7) 7 - - - -
Other loans falling due greater than 1 year - (2,650) - - - (2,650)
Lease liabilities falling due within 1 year (2,374) 2,255 - (3,162) - (3,281)
Lease liabilities falling due greater than 1 year (25,254) - - 3,162 (12,502) (34,594)
Total debt (33,150) (3,699) - - (12,713) (49,562)
Net debt (27,797) (4,035) - - (12,713) (44,545)
Net (debt) / cash - pre IFRS 16 leases (170) (6,289) - - (211) (6,670)
30. PENSION COMMITMENTS
52 weeks ended 53 weeks ended
02 July 2023 03 July 2022
£'000 £'000
Pension cost 183 128
The following contributions were payable to the fund and are included in
creditors:
02 July 2023 03 July 2022
£'000 £'000
Pension contributions payable 132 44
31. RELATED PARTY TRANSACTIONS
Related parties are considered to be the directors and former directors of
Nightcap plc, The Cocktail Club, Adventure Bar Group and Barrio Familia Group
and substantial shareholders. Transactions with them are detailed below:
52 weeks ended 53 weeks ended
02 July 2023 03 July 2022
£'000 £'000
Purchase of inventories - D&H Spirits Limited 33 85
Purchase of inventories - CGCC Limited 11 41
Consultancy fees - CGCC Limited 30 -
Consultancy fees - Ferdose Ahmed 44 24
Consultancy fees - James Hopkins 16 24
133 174
The companies listed below are deemed to be related parties due to having
common shareholders with the Company. These transactions are split by related
party as follows:
52 weeks ended 53 weeks ended
02 July 2023 03 July 2022
£'000 £'000
CGCC Limited - a company controlled by JJ Goodman 41 41
Ferdose Ahmed 44 24
James Hopkins 16 24
D&H Spirits Limited - a company co-controlled by James Hopkins 33 85
133 174
Amounts owed to related parties were as follows:
02 July 2023 03 July 2022
£'000 £'000
James Hopkins - 2
- 2
32. BUSINESS COMBINATIONS
On 9 June 2023, Nightcap plc acquired the trade and assets for certain bars
and one restaurant relating to the Dirty Martini business, for a total
consideration of up to £4.65m. Nightcap is currently the operator of nine
Dirty Martini bars and the Tuttons brasserie restaurant in Covent Garden.
There are four Dirty Martini bars located in London with an additional five
bars located in Cardiff, Bristol, Birmingham, Leeds and Manchester.
The total consideration of £4.65m comprised cash of £4.15m with an
additional £0.5 million due on the successful assignment of the property
leases of four key sites, the completion of which was announced on 9 November
2023.
The acquired business contributed revenues of £1,308,000 and loss before tax
of £138,000 (in accordance with IFRS) to the consolidated Group for the
period from 9 June 2023 to 2 July 2023. As a result of acquiring the trade and
certain assets out of administration, the Group is unable to report the
pre-acquisition trading results of the business.
Book Value Fair Value Fair Value
£'000 Adjustments £'000
£'000
Property, plant and equipment 442 - 442
Intangible assets - 2,950 2,950
Inventories 345 - 345
Receivables 99 - 99
Payables (525) - (525)
Provisions - (317) (317)
Deferred tax liability - (738) (738)
Total net assets acquired 362 1,895 2,257
Fair value of consideration paid £'000
- Cash paid to vendor 4,150
- Contingent consideration 500
Acquisition date fair value of the total consideration transferred 4,650
Goodwill (Note 14) 2,393
The Group has made certain estimates and judgements in arriving at the
valuation of intangible assets and goodwill.
In accordance with IFRS 3, the identifiable assets acquired and liabilities
and contingent liabilities assumed should be measured at fair value at the
acquisition date in order to determine the difference between the cost of
acquisition and the fair value of the Group's share of net assets acquired,
which should then be recognised as goodwill on the balance sheet or recognised
in the income statement. In determining the fair value, management has
recognised brand values totalling £2.95m in respect of the brand acquired.
Key estimates used in arriving at the brand valuation include growth rates,
discount rate, cashflow assumptions including working capital estimates,
appropriate royalty rates and useful economic lives.
The Group has not recognised a right of use asset on acquisition of Dirty
Martini as a result of the granting of licenses to trade while the lease
assignments where being negotiated with landlords. As noted in the Chief
Executive's Report, Nightcap successfully completed the assignments, which was
announced on 9 November 2023. As a result, the Group will recognise right of
use assets in its next reporting period.
The main factors leading to the recognition of goodwill are:
• The presence of certain intangible assets, such as the
assembled workforce of the acquired entity, which do not qualify for separate
recognition
• Cost savings and synergies through better buying and enhancing
the customer offering, which result in the Group being prepared to pay a
premium, and
• The fact that a lower cost of capital is ascribed to the
expected future cash flows of the entire operation acquired than might be to
individual assets.
Acquisition costs of £734,000 arose as a result of the transaction (Note 11).
These have been included as transaction related costs as part of
administrative expenses in the statement of comprehensive income.
33. LEGAL ENTITIES
The following table presents the investments in which the Group owns a portion
of the nominal value of any class of share capital:
Direct Subsidiary Holding % Owned Nature of Business
London Cocktail Club Limited Ordinary 100% The development, operation and management of individually themed cocktail bars
+Venture Battersea Limited Ordinary 100% The development, operation and management of individually themed bars
Adventure Bars Mid Limited Ordinary 100% The development, operation and management of individually themed bars
Adventure Bars Luna Digbeth Limited Ordinary 100% The development, operation and management of individually themed bars
Barrio Familia Limited Ordinary 100% The development, operation and management of individually themed bars
DMN Bars Limited Ordinary 100% The development, operation and management of individually themed bars
Indirect Subsidiary Holding % Owned Nature of Business
London Cocktail Club Trading Limited Ordinary 100% Dormant
London Cocktail Events Limited Ordinary 100% Dormant
The London Cocktail School Limited Ordinary 100% Dormant
The Craft Cocktail Club Limited Ordinary 100% Dormant
Adventure Bars Group CHS Limited Ordinary 100% The development, operation and management of individually themed bars
Adventure Bars Waterloo Limited Ordinary 100% The development, operation and management of individually themed bars
Waterloo Sunset Limited Ordinary 50% The development, operation and management of individually themed bars
Barworks (Electric) Limited Ordinary 100% The development, operation and management of individually themed bars
Adventure Bars Cardiff Limited Ordinary 100% Dormant
Adventure Bars Bristol Limited Ordinary 100% Dormant
Adventure Bars Liverpool Limited Ordinary 100% Dormant
Barrio Central Limited Ordinary 100% The development, operation and management of individually themed bars
Barrio Bars Limited Ordinary 100% The development, operation and management of individually themed bars
Barrio East Limited Ordinary 100% The development, operation and management of individually themed bars
Barrio South Limited Ordinary 100% The development, operation and management of individually themed bars
Barrio Regio Limited Ordinary 100% The development, operation and management of individually themed bars
34. CONTINGENT LIABILITY
Nightcap plc and DMN Bars Limited, a subsidiary company of Nightcap, have
received notification that 18 individuals wish to bring proceedings to an
employment tribunal where Nightcap and DMN Bars Limited have been listed as
second and third respondents. The nature of their claim is in relation to the
acquisition of certain assets of Dirty Martini out of administration where
they were not included in the acquisition of those assets. The claimants are
alleging to have been employed by DC Bars Limited and that they should have
transferred to DMN Bars Limited or Nightcap under the Transfer of Undertakings
Protection of Employment rights ("TUPE") regulations. The total amount claimed
is £338,000 together with further unquantified amounts. Management has sought
legal advice on the matter and management believes that there are no grounds
for such claims. Given the uncertainty involved and the strength of legal
opinion, no provision has been made in these financial statements as
management believes that the most likely outcome is no liability. We have no
indication of the likely timescales involved.
35. POST BALANCE SHEET EVENTS NOTE
On 9 November 2023, the Group completed the process of assigning the Dirty
Martini leases from the administrator.
When Nightcap acquired certain assets of DC Bars Limited and Tuttons Brasserie
Limited, the operator of the 'Dirty Martini' chain of cocktail bars and
Tuttons Brasserie, a critical part of the process was securing the assignment
of leases for the key sites from the administrator, with the consent from the
relevant landlords.
As a result the Group will continue trading in nine of the ten sites. Eight
out of ten leases have been assigned on existing terms (only subject to rent
reviews) and these assigned leases have expiry dates between 2030 and 2047.
One site has not been assigned. This is the Hanover Square site, where the
Group could not agree with the landlord on reduced rental costs to make the
site profitable, and therefore no agreement could be reached to keep trading
at the site.
The Group has entered into a new three year lease for the Tuttons restaurant
and Dirty Martini Covent Garden site. This lease covers a restaurant lease as
well as the small downstairs cocktail bar. The new lease is on considerably
more favourable commercial terms and is in line with Nightcap's objective to
not remain as a restaurant operator in the long term.
RECONCILIATION OF STATUTORY RESULTS TO ALTERNATIVE PERFORMANCE
MEASURES ("APMS")
Note 53 weeks ended 52 weeks ended
02 July 2023 03 July 2022
£'000 £'000
(Loss) / profit from operations (2,812) 1,407
Exceptional items 10 792 84
Acquisition related transaction costs 11 734 (866)
Pre-opening costs 12 1,013 442
Share based payment charge 7 181 345
Impairment 6 565 143
Adjusted profit from operations 473 1,555
Depreciation and amortisation (pre IFRS 16 Right of use asset depreciation) 6 3,094 2,256
IFRS 16 Right of use asset depreciation 6 3,278 2,224
IFRS 16 Right of use asset / liability disposal 6 (220)
Adjusted EBITDA (IFRS 16) 6,625 6,036
IAS 17 Rent charge (3,997) (2,727)
Adjusted EBITDA (IAS 17) 2,627 3,309
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