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  • Writer's pictureMark Watson-Mitchell

Nightcap – Trading Update declares that the challenging macro environment has resulted in more sites

Sarah Willingham is an ambitious and very hospitable lady – she wants to offer drinks across the country.

She was one of the Dragon’s Den entrepreneurs and is a serial investor.

But, more importantly, she is the Chief Executive of the Nightcap (LON:NGHT) group, which last week announced a Trading Update for the year to 3 July.

Defined strategy

Her aim is to build up the UK’s leading bar group and, with such determination and ability, she is progressing at quite a pace.

The company owns and operates a number of brands, taking in the London Cocktail Club, the Adventure Bar group, and Barrio Familia, each with various venue names.

The group, which floated on AIM in January last year in a £4m fund raising, valuing it at £13.5m, has already seen quite an advance in its strategy, through a number of acquisitions and new openings.

Removal of Russian Vodka

In a very canny and nationalistic move in early March this year, Nightcap removed Russian Vodka from all of its then 27 venues, then replacing Ukrainian Vodka across its entire estate.

Trading Update

The year to 3 July has seen the group expand significantly, it is now up to an estate of 34 venues across the country, following the launch of its Nightcap Bar Academy and the Bristol opening of its Tonight Josephine brand.

It has not only been building up organically by way of a number of new openings, but also through a number of very sensible and strategic acquisitions.

It currently has another 22 premises under offer or in legal negotiations for all of its various brands.

It is a massive pointer to the expanding group’s scalability, which helps to get better margins but also gains a very useful supply edge.

That shows through from the Update with a good fourth quarter’s trading.

Group revenues for the year are expected to rise to £35.9m, comparing very well with the figure of just £6.0m in 2021, but that was when it was suffering from Covid closures.

As for its adjusted EBITDA for the year it is expected to come up to market expectations and that is despite restricted trade over the very important Christmas period and suffering from the recent transport strikes.

Group cash was £6.1m, with bank debt of £5.5m of which £0.9m is due to be repaid during the current trading year to July 2023.

The Group has strengthened its focus on offering good times and good value to its resilient Millennial customer base.

It is also backed by an unparalleled property pipeline giving it confidence in its management’s decision to continue to invest in growth during FY2023.

So, what does Sarah say?

Sarah Willingham, CEO, stated that:

"We are absolutely delighted with these results. Nightcap is going from strength to strength and I am so proud of the business that we are building. Finishing the year with 31 sites, with a number of openings to follow and a significant new site pipeline is a great achievement. Despite recent transport strikes and significant Covid-19 interruptions during the important 2021 Christmas period we have managed to deliver against our expectations thanks to our wonderful teams and loyal customers.

"Strong growth delivered by exceptional people with a real desire to continue to build a leading business in the bar sector in the UK, is setting us up well for another year of significant growth as we continue to bring on board and open more new sites in prime locations across the country.

"We always thought we would have a short window to sign and open the best sites across the UK when we were admitted to AIM last year, but the challenging macro environment has resulted in more sites being available on very attractive terms and with a simple to replicate business model across four distinctive brands, all led by motivated and engaged managements teams, serving a customer base with continued high disposable income, we feel confident about the year ahead despite the economic pressures facing the UK today.

"We are well placed to mitigate inflationary rises as we grow and increase our buying power and we will continue to throw the best parties offering exceptional quality and value, ensuring that our lovely customers can still enjoy their great nights out."

Market expectations

For the current year to end June 2023 analyst Matt Butlin at Allenby Capital, the group’s broker, had pencilled in £54.39m revenues, £5.27m profits and 2.53p of earnings per share.

For the 2023/2024 year the estimates are for £70.8m revenues, £7.53m profits and 3.40p of earnings per share.

Reaction to the Update

The shares have yet to react to the positive Trading Update, but they will do so in due course.

They touched 35.5p in April last year but have since been down to 13.65p in mid-March this year.

Now at 14.5p that puts the shares of this £29m market capitalised hospitality group out on an estimated current year 5.73 times ratio.

But for the coming year they trade on a mere 4.26 times price-to-earnings ratio.

That makes them look highly attractive and capable of at least a 50% rise within the year and, even then, they would look cheap.

Thank you Sarah – we will drink to that - cheers.


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