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on the face of it, it looks like an amazing deal. definitely some risk with the leases etc, but overall a great fit and a very opportunistic buy. i do note that they needed to fund this with another raise however-which is dissapointing, they mentioned generating $4m in cash from operations in the last half...assuming this continued for this half they should've been able to fund from existing balance sheet. i appreciate it de-risks, but given its such a good deal i would imagine that was an appropriate use of funds. noting the update also mentions a miss at the ebitda level i suspect costs are rising quicker than can be accounted for and potentially some sites might be finding themselves loss making. when they announced the last opening they mentioned something like 18 sites in negotiations etc. not a single one of these has come through, i was hoping that the decision to slow the roll out notwithstanding, there would've been a site or two that was such a good offer that they would've pulled the trigger regardless (better to get in now with a great rental offer than not). this tells me that given the rising costs they're unsure of the economics of new sites and have just implemented a blanket freeze. time will tell, but xmas season 2023 is looking like a very importing trading period to gauge overall profitability and inform further roll out potential. from memory the average ****tail club at ipo was approx $350k fit out cost v $250k contribution once all up and running (the fabled ~75% annual return) - we're now up to 13 ****tail clubs. even if all the other sites purely covered costs + overheads for the group, these should be getting us $3.25m ebitda. i suspect below the surface there has been a decline in overall site economics (hence the decision to pause the roll out).
The DM deal is transformational to the company, and the deal was amazing buying out of admin. The team are experienced classy operators, and it now allows them to take their other brands into new locations alongside DM (Manchester in particular). As HighFive says - convent garden DM is an amazing location. Exciting times.
It’s a great deal, looking forward to watching the team turn it around. The Dirty Martini location on Covent Garden is one of the best on the square.
Any thoughts on the Dirty Martini acquisition. Appears a good deal.
https://www.thearmchairtrader.com/night-cap-plc-beverage-hospitality-group/
"Nightcap has reported a 48.7% revenue growth, to £23.5 million, with a 4.7% like-for-like revenue increase for Q2 FY2023, driven by the openings of six new sites. However, H1 FY2023 saw a 5.8% like-for-like decrease due to rail strikes. The adjusted EBITDA rose 25% to £2.0 million, despite rail strikes, and cash generated from operations increased by 273% to £4.1 million.
Nightcap’s net debt as of 1 January 2023 was £4.1 million, with £0.75 million of the group’s total bank debt scheduled for repayment during FY2023.
Bear in mind, 13 new sites have traded on average just over six months at the end of the period under review, with an early trading and maturity profile. It was reported that they are on track to deliver Nightcap’s target of 75% annual return on investment (ROI) on total capital invested in new bars in their third year of operation. Several sites are on track to beat the 75% ROI target in their first year of operation."
i presume you've seen the update released on 11th Jan. Headline revenue growth is good as more bars open, however, lift the bonnet and it says like for like revenues for H1 were down over 5%. When you remember 2021 xmas was covid impacted this is a concern.
I suspect the train strikes impacted city centre and late opening establishments, so Nightcap would have been hit. The train strikes the week before xmas probably had a significant impact.
Also cash is a concern. On 3/7 net debt was £200k now it is £4.1m. Whilst some of this would have been used on bar openings and refurb that's a big reduction in 6 months.
Interestingly Revolution had similar results. H1 was down on last year and they also blamed train strikes.
As the xmas period is peak trading both updates were a bit underwhelming IMHO.
Anyone have any guesses on what the trading announcement might hold?
I was fairly upbeat after the prior update but it appears everyone didnt agree as we have slowly declined since but with the mid term potential 13M Mcap seems a steal, especially since they turned a profit FY22 without all sites open
Cash - that's good to hear. Can i ask where you got this info from pre AGM?
Also when you say Q3 trading is now flat is that compared with 2019 or 2021?
Thanks in advance
Flattened now.. The only way is up.
The CFO and CEO (who is part founder and holds millions of shares and share options) were recently both awarded a 100% bonus on top of their competitive salaries.
I have no issue with a bonus being paid but based on the YE numbers recently published and the SP performance these seem excessive IMHO.
Prudent move to slow down expansion with 2023 likely to slow down for most and cash retention important, however Nightcap have the advantage of having a young fresh estate with some highly capable operators so I expect this one to buck the trend and fly along next year, and with luck we will see the squeeze easing by this time next year- there rarely seems to have been truly optimal trading conditions in the last fifteen years and Be At One for one have proved what can be achieved in such times.
Spoke to the CFO the other day nice chap they seem to be fairing well relative to others in the industry.
If they can keep their cost base neutral in the short term they should do nicely.
Agreed, a period of consolidation would be prudent, pulling back on the planned 2023 expansion. Fill the coffers before the grim economic outlook hits revenue.
YE trading has just been announced and revenues continue to grow, which is to be expected as new bars start trading.
So revenue for the year is over £35m, with growth each quarter, and it says some weeks they do £1m so with a better xmas period revenues for 2023 should be c£50m (a 50% ish increase on these numbers). Impressive growth.
All looks good other than cash. At H1 (end of Dec 2021) net cash was over £3m but now it is £600k. Maybe they need to slow down new acquisitions and let the bars just operate and generate some cash and pay down some of the borrowings.
Revolution Bar Group announced good trading numbers this week and they also appeal to a young audience. City Pub Group are also trading well. It appears the likes of Wetherspoons which as an older customer base are the ones struggling.
Agree. Like observation that their niche market is the late Gen Z, who are least affected by the cost of living crisis. No mortgages, no rent to pay. Tat market won't fall away when they are getting what they want.
Good interview they seem very enthusiastic about what they are doing and positive about the future direction.
-> vox markets podcast dd 13th May.
Worth a listen.
Good move to check out yourself, always the best way to approach an investment like this.
Here's a recent recording from Wallingham.
https://www.**********.co.uk/articles/sarah-willingham-of-nightcap-discusses-their-impressive-growth-and-expanding-pipeline-c558abf/
I looked the company up after a night out in the Exeter ****tail Club, very busy had to que to get in and ended up leaving in the early hours of the morning, fun place to be good vibe and no issues. Interested in making a investment in the buissness here so far I like what I see, doing my own research to see if it'll be a good long term move for me.
Yeah - have been in a decent selection of their bars across a number of their brands.
I like how they keep differentiated from the mainstream multi site operators - they are noticeably busier than their peer group and the bars have a real energy about them.
revenues are rising nicely each quarter - up c25% from Q2 to Q3 although with new bars opening it is difficult to get a like for like comparison.
With more bars opening in April Q4 should see a similar increase so YE revenue could be c £35m to £40m (is £25.2m after 9 months).
IMHO cash is still a concern - £7m is decent (was £9m on 26/12) but there are borrowings and also trade payables to factor in so the actual position is less clear. This was addressed in the Investor Meets presentation a month or so ago but the response was a little vague.
The positive is that current bars are cash generative - was over £1m in H1, so clearly the better the trading the more cash that is being generated. This should hopefully fund the new leases and store re-fits etc.
Has anyone been to any of the bars? I'm Manchester based so a bit far for me.
We are delighted with how Nightcap is progressing. So am I Sarah, well done Team !
Hahaha. Like there's gonna be another lockdown. Absolutely zero chance of that.