Cocktail bar operator Nightcap (NGHT ) released a trading update today for the 13 and 26 weeks ended 1 January 2023 (Q2 2023 and H1 2023 respectively).

Strong growth

Q2 2023 saw continued growth for Nightcap with unaudited group revenue of £12.9m, resulting in a 60.9% increase YoY, and 4.7% on a like-for-like basis compared to the same period in FY 2022.

Nightcap recorded £5.9m in revenue in December 2022, a 71.8% increase YoY, and a 27.6% increase like-for-like compared to the same period in FY 2022.

That meant that in H1 2023, Nightcap's revenue was up 49.2% YoY to £23.2m, although on a like-for-like basis the company recorded a 5.8% revenue decrease compared to the same period in FY 2021, primarily due to rail strikes during the period. Sales grew 10.1% on a like-for-like basis compared to the same period in FY 2019.

Nightcap had a cash position of £5.5m on 1 January 2023, with total debt of £9.6m, resulting in a net debt position of £4.1m owed to HSBC. £750k of that debt is scheduled to be repaid in FY 2023. The interest rate on £7.8m of the company's debt is capped at 3%.

 

View from Vox

Overall, a positive trading update from Nightcap. While like-for-like the company recorded a 5.8% revenue decrease in H1 2023 compared to the same period in FY 2021, that can be largely attributed to temporary economic setbacks, most notably the rail strikes last year. In Q2 2023, revenue was up 4.7% like-for-like, and in December 2022 alone revenue increased 27.6% like-for-like over December 2021, reflecting much improved trading during the key holiday season.

Moreover, strong growth compared to the same period in FY 2019 is encouraging.

Nightcap's growth in calendar 2022 was underpinned by six new site openings across its three brands, taking its total number of bars to 36. These include two "The Cocktail Club" bars in Birmingham and Canary Wharf, two "Tonight Josephine" venues in Bristol and Liverpool, and two "Barrio" openings in Covent Garden and Watford.

In the absence of further rail strikes, Nightcap is positioned for continued growth in 2023. With NGHT shares currently up almost 20% from their most recent bottom last week, and in light of today's upbeat trading update and ongoing expansion across the UK, NGHT appears undervalued with much upside potential. The company expects to trade in line with management expectations in H2 2023, and will release full interim results for H1 2023 in mid-March 2023.

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