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4 May 2021

Nightcap plc

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

Acquisition of the Adventure Bar Group

and

proposed placing to raise approximately £4 million

Nightcap (AIM: NGHT) is pleased to announce that it has agreed to acquire the Adventure Bar Group including the entire issued share capital of +Venture Battersea Limited, Adventure Bars Mid Limited and Adventure Bars Luna Digbeth Ltd (the "Target Companies" and, together, the "Acquisition").  Upon completion of the Acquisition, Nightcap will become the operator of an additional nine bars. The bars being acquired are seven established themed bars located in popular London locations, a large outdoor bar, food and entertainment venue in Birmingham, a bar site opening in Birmingham on 17 May 2021 and a 50% interest in a central London roof-top bar (together the "Target Bars" and each a "Target Bar"). 

The nine Target Bars include all of the bars branded 'Tonight Josephine', 'Bar Elba', 'Luna Springs' and 'Blame Gloria', which predominantly provide a cocktail-orientated drinks offering. The Adventure Bar Group has a pipeline of additional sites and the board of Nightcap (the "Board") believes that the Target Bar brands have significant potential for national expansion to up to 40 locations.  

In order to fund the UK roll out of the Target Bars' 'Tonight Josephine', 'Bar Elba' and 'Luna Springs' bar brands and pay down part of the debt associated with the Acquisition, Nightcap announces that it is currently seeking to raise approximately £4 million (before expenses) by way of a proposed placing (the "Proposed Placing") of new ordinary shares of 1p each in the Company ("Ordinary Shares") (the "Placing Shares") at a price that is to be determined (the "Placing Price"). Allenby Capital Limited ("Allenby Capital") is acting as broker in connection with the Proposed Placing. 

The maximum aggregate consideration payable to the Vendors is £2.5 million and comprises an initial consideration of £1.0 million payable on completion and up to £1.5 million of deferred consideration, dependent upon the financial performance of the Target Bars.  The consideration will be satisfied by the issue of up to 11,904,761 new Ordinary Shares at a price of 21p (being 4,761,905 new Ordinary shares as initial consideration and up to 7,142,856 new Ordinary Shares as deferred consideration).  In addition, approximately £0.41 million of the Target Bars' creditors have agreed to convert loans into new Ordinary Shares at 21p per new Ordinary Share.

Highlights:

·      Complementary acquisition of multi-brand, premium bar group with locations in London and Birmingham

·      Nine bar sites, with seven established themed bar sites in popular London locations, two bar sites in Birmingham and pipeline of additional sites

·      Includes key outdoor trading opportunities which have shown strong post-lock down trading

·      Acquisition provides Nightcap with new customer offerings and significant brand roll out opportunities

·      The Board believes Target Bars have significant potential for national expansion to up to 40 locations

·      Outdoor venues, Bar Elba and Luna Springs, which together have a combined outdoor capacity of over 1,000 (under the current Covid restrictions), reopened from 12 April 2021 and generated combined unaudited total net sales of approximately £334,000 in their first week of trading

·      Proposed Placing to raise approximately £4 million to partially repay debt which Nightcap will assume in making the Acquisition and to fund the UK roll out of the 'Tonight Josephine', 'Luna Springs' and 'Bar Elba' brands

Current trading

Five of The London Cocktail Club bars which have access to outside seating areas reopened on 12 April 2021 and, in line with other UK bar operators, these bars have since traded well and in line with management's expectations.  The remaining five London Cocktail Club bars are scheduled to reopen on 17 May 2021 and the Board is encouraged by the level of bookings received for the post-17 May 2021 period. Nightcap is currently in negotiations in respect of opening a number of additional London Cocktail Club sites.

As at 30 April 2021, the Group had unaudited cash balances of approximately £3.5 million and had total borrowings of approximately £1.3 million.

Sarah Willingham, Chief Executive Officer of Nightcap, commented:

"I am delighted to announce the acquisition of Adventure Bar Group, so soon after our IPO and initial acquisition of The London Cocktail Club. Tom and Toby have built an enviable portfolio of amazing brands and venues which have delighted their customers for years. Bringing Adventure Bar Group into the Nightcap family was a logical step for them in pursuit of their ambition to realise the full potential of their brands. I am truly looking forward to working with them to realise that ambition.

"The further expansion of Adventure Bar Group will take place during a time where the opportunity to acquire first class property at attractive rates is unmatched by anything I have seen during my 25 years in hospitality. The acquisition furthermore expands the opportunity to take on different types of property, particularly with the Bar Elba and Luna Springs concepts trading as large outdoor venues, benefitting significantly when trade is restricted indoors and during the summer period.

"We are all looking forward with much excitement to 17 May 2021 when our entire estate will be able to welcome back customers."

Background to and reasons for the Acquisition and the Proposed Placing

Nightcap was established to take advantage of the significant changes taking place within the premium bars segment, and the hospitality industry more generally, in the UK.  As stated in the Company's AIM admission document dated 7 January 2021, the Board believes that the Company will be able to take advantage of an exceptional opportunity to acquire and grow 'drinks-led' hospitality concepts that focus on the consumers' social experience over the coming years.

The Board believes that the Target Bars are a compelling and complementary acquisition for Nightcap as the Target Bars represent a multi brand, premium bar group with locations in London and Birmingham. The Board believes that the Target Bars have significant roll out potential, with the ability for the existing nine sites to be scaled to up to 40 nationwide.  The Board believes that, once completed, the Acquisition will be materially earnings enhancing for Nightcap. 

The Board believes that the Acquisition will provide Nightcap with new customer offerings and significant brand roll out opportunities.  The Board also believes that, in the medium term, there will be opportunities for synergies between the Target Bars and Nightcap's existing London Cocktail Club family of bars, especially in relation to opportunities for purchasing synergies across major alcohol lines. 

The key senior executive management of the Adventure Bar Group are to continue leadership through Nightcap group employment and incentivisation.  As part of the Acquisition, Thomas (Tom) Kidd, Tobias (Toby) Jackson and Bryan Lloyd will enter into employment agreements with +Venture Battersea Limited.  Tom Kidd and Toby Jackson are Co-Managing Directors of Adventure Bar Group, having founded this group of bars in 2005.  Tom Kidd has over 20 years of experience in the hospitality sector, having previously worked for TGI Fridays, cocktail bar chain Be At One and ManjoBars consulting.  Toby Jackson is co-founder of Adventure Bar Group.  He has over 20 years of experience in the hospitality sector, having previously worked at Be At One and fast casual restaurant shack Dub Jam. 

The Target Bars

Through the Acquisition, Nightcap will become the owner (in the case of Bar Elba, joint owner with a 50% shareholding) and operator of the following bars:

·      Tonight Josephine

Tonight Josephine is a cocktail bar which currently has two established sites in the Waterloo and Shoreditch areas of London.  The Waterloo venue was opened in 2017, with the Shoreditch venue being opened in 2019.  The Waterloo site is based over an area of 3,080 square feet and the Shoreditch site is based over an area of 2,072 square feet.

A further Tonight Josephine site, which forms part of the Acquisition, is due to be opened in Central Birmingham on 17 May 2021.  This venue is based over an area of 3,936 square feet. 

Further information can be found at: https://www.tonightjosephine.co.uk 

·      Bar Elba

Through the Acquisition, Nightcap will acquire a 50% interest in Bar Elba, an established rooftop bar in the Waterloo area of London.  This site was established in 2017 and is based over an area of 4,712 square feet (plus an additional area of 2,100 square feet).  The site provides cocktails, daytime 'bottomless brunches', beers and burgers.

Bar Elba is owned via a 50%:50% joint venture with Bourne Capital, although the Adventure Bar Group has historically received a 10% management fee which has equated to a 60% overall profit contribution.  

Further information can be found at: https://bar-elba.co.uk/ 

·      Luna Springs

Luna Springs is a recently opened outdoor bar, food and entertainment venue based in the Digbeth area of Birmingham.  The site currently provides 'bottomless brunch' food and drink offerings as well as an evening cinema experience.  The site opened in April 2021. 

Further information can be found at: https://www.lunasprings.co.uk/ 

·      Blame Gloria

Blame Gloria is a cocktail and wine bar in the Covent Garden area of London which was opened in 2010 although was significantly refurbished more recently.  This site is based over an area of 2,424 square feet. 

Further information can be found at: https://blamegloria.co.uk/ 

·      Adventure Bar

Adventure Bars serve cocktails, craft and draft beers and wines and currently have two sites in the Clapham High Street and Clapham Junction areas of London.  The Clapham Junction site was opened in 2004 (rebranded in 2014), with the Clapham High Street site being opened in 2012. The Clapham High Street site is based over an area of 1,568 square feet, with the Clapham Junction site being based over an area of 1,717 square feet.

Further information can be found at: https://www.adventurebar.co.uk 

·      The Escapologist

The Escapologist is a cocktail and pizza venue in the Covent Garden area of London which was opened in 2016.  This site is based over an area of 2,203 square feet. 

Further information can be found at: https://www.escapologistbar.co.uk/ 

·      Nikki's Bar

Nikki's Bar is a cocktail bar in the Shoreditch area of London which was opened in 2018.  This site is based over an area of 2,112 square feet. 

Further information can be found at: https://www.nikkisbar.co.uk/ 

The Target Bars' support office is also being acquired pursuant to the Acquisition. 

The Board believes that Luna Springs and Bar Elba represent significant outdoor trading opportunities, which will be ideal for the environment following the recent reopening of the hospitality sector. As outdoor venues, Bar Elba and Luna Springs, which together have a combined outdoor capacity of over 1,000 (under the current UK Government Covid restrictions), reopened from 12 April 2021 and generated combined unaudited total net sales of approximately £334,000 in their first week of trading. It is anticipated that the remaining Target Bar venues will reopen from 17 May 2021, in line with the Government guidance.

Nightcap is not acquiring two bars currently operated by the Adventure Bar Group under the 'Lost Alhambra' and 'Jimi Loves Gloria' brands.

Financial information on the Target Bars

The unaudited historic financial information for the Target Bars being acquired, plus the support office, is as follows:

As at 31 January 2021, the unaudited total assets of the Target Bars, plus support office, were approximately £6.9 million (31 January 2020: £5.8 million).  These asset values include the entire total assets of the Bar Elba joint venture. 

Proposed Placing and use of proceeds

Nightcap is in the process of seeking to raise approximately £4.0 million (before expenses) by way of the Proposed Placing. It is intended that the net proceeds of the Proposed Placing will be used:

·      to fund the UK roll out of the Target Bars to up to 40 sites nationwide; and

·      to repay a minimum of £1.28 million of the ABG Loans (as defined below).

A further announcement will be made in relation to the Proposed Placing and the Placing Price in due course once the Proposed Placing has been finalised.

Acquisition structure, consideration and debt

Nightcap has entered into an agreement to acquire the entire issued share capital of the Target Companies (the "Share Purchase Agreement").  The Target Companies and their subsidiaries are the holding companies for the Target Bars (in the case of Bar Elba, held by +Venture Battersea Limited ultimately owning 50% of Waterloo Sunset Limited). The consideration payable to the Vendors pursuant to the Share Purchase Agreement is a maximum aggregate amount of 11,904,761 new Ordinary Shares (the "Consideration") all of which are to be issued at 21p per new Ordinary Share.  The Consideration comprises an initial tranche of 4,761,905 new Ordinary Shares (the "Initial Consideration Shares") to be issued to the Vendors, being Thomas Kidd, Tobias Jackson, Bryan Lloyd and Kieron Botting. 

Further deferred Consideration (the "Earn Out Consideration") may be paid to the Vendors, dependent on the level of growth in certain of the Target Bar's adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) over an up to two-year period commencing on 1 July 2021.  Any Earn Out Consideration will be satisfied by the issue of a maximum of 7,142,856 new Ordinary Shares (the "Earn Out Consideration Shares").

OakNorth Bank plc ‎‎("OakNorth") has currently made available secured loans to the Adventure Bar Group, under the Government's Coronavirus Business Interruption Loan Scheme, known as "CBILS", and a "help to grow" facility, in an aggregate, principal amount of £4,278,764 (the "ABG Loans").  

In order to obtain OakNorth's consent to the Acquisition, it has been agreed that Nightcap will assume responsibility for the ABG Loans, which comprise the following:

·        CBILS facility A with outstanding principal of £‎1,027,840‎ and current interest rate of 5.5% per annum;

·        CBILS facility B with outstanding principal of £‎2,286,341‎ and current interest rate of 5.79% per annum; and

·        "Help to Grow" facility with outstanding principal of £964,583 and current interest rate of 6.64% per annum;

Nightcap has agreed to repay a minimum of £1.28 million (and up to £1.78 million) of the principal and interest outstanding on the ABG Loans to OakNorth, on completion of the Acquisition.  The remaining balance of the CBILS Loans (the "Remaining Balance") will bear ‎interest payable in cash at an "all-in" reduced rate of 3% per annum.

OakNorth and Nightcap have also agreed to a reduction in the overall interest payable in respect of the Remaining Balance in an amount of ‎‎£0.11 million, in consideration for Nightcap issuing a convertible loan note to OakNorth, which is convertible into Nightcap's Ordinary Shares at 21p per new Ordinary Share at OakNorth's option from the date of issue and in any event within 12 months of the earlier to occur of repayment of the Remaining Balance or the expiry of a 3 year period from completion of the Acquisition. 

As part of the revised arrangements with OakNorth, new security and guarantee arrangements will be entered into between it, the Target Companies and Nightcap (in Nightcap's case, on a strictly limited recourse basis and with Nightcap providing no guarantees). Furthermore, the terms of the revised arrangements with OakNorth include a waiver in relation to, and has also re-set the financial covenants (at a lower level to reflect the group's improved post-acquisition financial condition) ‎attached to the CBILS facilities, which were put in place prior to the Covid pandemic.  Going ‎forward, the next financial covenant test date in relation to the CBILS facilities will be on 30 September 2022.

Nightcap has also agreed with Italian Continental Stores Limited ("ICS"), a supplier to the Adventure Bar Group, that ICS will agree to waive Adventure Bar Mid Limited's outstanding debt due to ICS in the sum of £300,000 in return for the issue to it of a number of new Ordinary Shares, equivalent to the outstanding debt divided by 21p per new Ordinary Share (the "ICS Conversion Shares"). 

Nightcap has also agreed with Bryan Lloyd that he will agree to waive repayment of a director's loan made by him to +Venture Battersea Limited in the sum of £115,000 in return for the issue to him of a number of new Ordinary Shares, equivalent to the outstanding debt divided by 21p per new Ordinary Share (the "BL Conversion Shares" and, together with the ICS Conversion Shares, the "Debt Conversion Shares").

The Acquisition is not conditional upon the Proposed Placing.  Completion of the Acquisition will occur on admission of the Initial Consideration Shares and the Debt Conversion Shares to trading on AIM.

Lock in and orderly market arrangements

The Initial Consideration Shares, any Earn Out Consideration Shares that are issued and the ICS Conversion Shares will be subject to undertakings being given to Nightcap not to dispose of such Ordinary Shares at any time prior to the first anniversary of the admission of each of the Initial Consideration Shares, any Earn Out Consideration Shares and the ICS Conversion Shares to trading on AIM, as the case may be (the "Lock-in Period"). Certain specified and customary exceptions apply to this obligation. Furthermore, the Initial Consideration Shares and any Earn Out Consideration Shares that are issued will be subject to undertakings to Nightcap to only dispose of such Ordinary Shares through the Company's broker or as the Company's broker may reasonably require, so as to ensure an orderly market in the Ordinary Shares, for the period of 12 months following the expiry of the Lock-in Period. Bryan Lloyd has entered into similar undertakings not to dispose of the BL Conversion Shares at any time prior to the expiry of six months from the admission of the BL Conversion Shares to trading on AIM, with a corresponding orderly market period of six months.

Property and lease schedule of the Target Bars

Admission to AIM

It is anticipated that an application will be made, in due course, to the London Stock Exchange plc for the Placing Shares, the Initial Consideration Shares and the Debt Conversion Shares to be admitted to trading on AIM ("Admission"). A further announcement will be made in relation to the proposed timing of Admission. 

The Placing Shares, the Initial Consideration Shares and the Debt Conversion Shares, when issued and fully paid, will rank pari passu in all respects with the existing Ordinary Shares of the Company and therefore will rank equally for all dividends or other distributions declared, made or paid after Admission.

For further enquiries:

Forward Looking Statements

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

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