TIDMSECG
RNS Number : 6052O
SEC Newgate S.p.A.
02 June 2020
SEC Newgate S.p.A.
("SEC Newgate", "the Company" or "the Group")
Audited results for the year ended 31 December 2019
and
Notice of AGM
SEC Newgate S.p.A (AIM: SECG), the international communications,
advocacy and research group, is pleased to announce its audited
results for the year ended 31 December 2019.
2019 Highlights
-- Revenues for the combined Group were EUR47.55 million (FY2018: EUR28.97 million)*
-- Gross profit EUR37.6 million (FY 2018: EUR22.2 million)*
-- Profit Before Tax EUR1.27 million (FY 2018: EUR2.21 million)*
-- Net debt EUR8.7 million (FY 2018: EUR1.7 million)*
-- Completed merger of SEC S.p.A and Porta Communications Plc in September 2019
-- Creation of SEC Newgate S.p.A - a global group of 34 offices
operating in 15 countries across 5 continents
-- Group three-year Strategic Plan announced in November 2019
-- New committed banking facility of EUR3m secured with Deutsche
Bank S.p.A. on preferable terms and no financial covenants
reflecting the improved financial stability of the Group
-- Annualised cost savings of EUR0.5m achieved following merger
-- Acquired a further 5% of the equity in Newgate Greater China
-- Established a new office in Morocco under the brand Cambre Maroc
Post Year End Highlights
-- EUR2.5 million convertible bond with the Spanish
institutional investor Inveready, secured in February 2020
-- Appointment of Sergio Penna as Group Financial Officer, effective 1 June 2020
-- Q1 2020 profits ahead of budget
* Prior year comparisons include results of the previous SEC
S.p.A Group; 2019 results include four months of the enlarged
Group's trading performance. 2019 results also reflect the impact
of IFRS16 from 1st January 2019.
John Foley, Chairman, commented:
"2019 was truly a transformational year. The Group is now of a
scale to provide research backed strategic consultancy and advocacy
services seamlessly across five continents with 34 offices in 15
countries and nearly 600 people.
"The creation of the new Company, which is already within the
top thirty global communications service providers, is a great
opportunity to build a strong, profitable business for the benefit
of all our stakeholders.
"The first quarter of 2020 started very well with the Group's
profitability ahead of budget. The Company's liquidity position is
strong enough to withstand uncertain business demand for the
foreseeable future and we remain confident and enthusiastic about
the prospects for the enlarged Group."
Fiorenzo Tagliabue, Group Chief Executive, further
commented:
"The success of the most significant corporate event of 2019 is
clear in our results and we continued to reap the benefits of the
enlarged Group in the first four months of the current year.
Despite the challenges of the coronavirus emergency the Group's
performance is stable and remains in line with budget.
"This is not happening by chance; rather it is the result of
significant work undertaken in merging two excellent businesses to
create SEC Newgate; and secondly, it is the result of tremendous
work at Group and subsidiary levels to cut costs, relaunching the
business and telling the market the story of a new global player
operating in 15 countries over 5 continents. Furthermore, the
merger has been further validated by SEC Newgate being ranked as
26(th) in the PRovoke Global Top 250 PR Agency Rankings for 2020.
This is just recognition of the work we have done so far and is a
great stepping-stone as we prepare to achieve even more ambitious
goals.
"Not only is the Group's financial performance encouraging but
we also have a liquidity position that allows us to plan for future
developments with confidence.
"All this is the output of a clear vision, strong management, a
shared sense of ownership throughout the Group and an incredible
team of world class professionals. All these strengths were
immediately clear when the Coronavirus emergency struck. As a Group
we initiated clear actions to protect the finances of the business
and each or our subsidiary businesses developed effective
commercial initiatives to retain existing clients and continue
winning new mandates to expand the client base.
"I am confident that 2020 will confirm the consistent excellence
of our work."
The 2019 Report and Accounts will be made available to
shareholders shortly and may be viewed or downloaded from the
Company's investor relations website
(https://www.secnewgate.com/investors/).
The Company is today publishing a Notice of Annual General
Meeting ("AGM"), to be held at the Company's registered office at
Via Ferrante Aporti 8, 20125 Milan, Italy"), in ordinary and
extraordinary session, in first call on 18 June 2020, at 11.00 CET,
at the registered office, and, if necessary, in second call on 19
June 2020, at 11.00 CET, at the registered office. As detailed in
the Notice of AGM, due to the present effects of COVID-19,
including Italian Government restrictions on public gatherings, the
participation and the exercise of the vote of those entitled to
vote at the AGM will be allowed exclusively by means of
telecommunications. The Company will provide shareholders' entitled
to attend the AGM and exercise their voting rights with appropriate
instructions to allow access to the meeting after identifying the
participants. Those entitled to participate in the AGM and exercise
their voting rights must send a request in any case by 15 June 2020
to the address secrp@legalmail.it enclosing relevant documentation
certifying their entitlement to participate in the AGM and exercise
their voting rights pursuant to Article 83-sexies of Legislative
Decree no. 58/98. It is specified that the entitlement to
participate in the AGM and to vote is subject to the receipt by the
Company of a notice issued by an authorised intermediary attesting
the ownership of the shares on the basis of the accounting records
relating to the end of the accounting day of the seventh trading
day prior to the date of the AGM in first call (i.e. 9 June 2020,
the record date). Debit and credit entries made after that date
will not be taken into account for the purpose of establishing the
right to vote at the AGM. For detailed information please refer to
the notice of call published on the Company's website
https://www.secnewgate.com/investors/.
- ends -
For further information please contact:
SEC Newgate S.p.A.
Fiorenzo Tagliabue (Group CEO) Tel: +39 335 6008858
tagliabue@secrp.com
Emma Kane (Deputy Group CEO, Tel: +44 (0) 7876 338339
CEO Newgate Communications UK) emma.kane@newgatecomms.com
Federico Vecchio (Group CFO) Tel: +44 (0) 20 7680 6500
federico.vecchio@secnewgate.co
m
Arden Partners (Nominated Adviser
and Broker)
Richard Johnson / Benjamin Cryer Tel: +44 207 614 5900
Notes to Editors about SEC Newgate
-- Further information is available at www.secnewgate.com
-- On 3 September 2019, SEC S.p.A. and Porta Communications Plc
merged to create SEC Newgate S.p.A.
-- The Group's principal brands are: ACH SEC Global (Spain);
Cambre Associates (Belgium); Cambre Maroc (Morocco); Clai (France);
Kohl PR (Germany); Martis Consulting (Poland); Newgate
Communications (Abu Dhabi, Australia, Greater China, Singapore,
UK); Newington (UK); Publicasity (UK); SEC Latam (Colombia); SEC
Newgate S.p.A. (Italy); and 2112 (UK).
Chairman's statement
For the year ended 31 December 2019
It is a rare opportunity to be able to bring together two
like-minded groups with entirely complementary geographical
footprints, products, services and client bases. It is even rarer
to find that they share a similar culture, outlook and passion to
succeed. This is what was achieved on 3 September 2019 through the
merger of the two AIM-quoted companies, SEC S.p.A. and Porta
Communications Plc (whose primary trading business was Newgate) and
the creation of SEC Newgate S.p.A.
2019 was truly a transformational year. The Group is now of a
scale to provide research backed strategic consultancy and advocacy
services seamlessly across our extensive, owned footprint in five
continents with 34 offices in 15 countries and with the
professional support of nearly 600 people - global excellence
through local experts.
Financial and Operational Overview
Our 2019 results were in line with management's expectations
which were formulated as part of the merger evaluation process.
Prior year comparisons only include results of the previous SEC
S.p.A Group; results for the year ended 31 December 2019 only
contain four months of the enlarged Group's trading performance.
Results for the year ended 31 December 2019 also reflect the impact
of IFRS16.
2019 2018
------------------------- --------- ---------
EUR' 000 EUR' 000
------------------------- --------- ---------
Revenues 47,550 28,972
Gross profit 37,605 22,192
Operating profit 1,812 2,309
Profit before Tax 1,271 2,211
Net debt (excl. leases) 8,740 1,743
------------------------- --------- ---------
-- As at 31 December 2019, the Group's net debt was EUR8.7m
-- Annualised cost savings of EUR0.5m achieved within first four months following merger
-- New committed banking facility of EUR3m secured with Deutsche
Bank S.p.A. to replace Revolving Credit Facility with Clydesdale
Bank to Porta Communications in 2017; the new facility has
preferable terms and no financial covenants reflecting the improved
financial stability of the Group
Strategy
On 21 November 2019, we announced that the SEC Newgate Board had
approved the new Group's Strategic Plan for the years 2020 to 2022.
Our Plan will be updated annually and will be our navigation system
to direct towards financial results which we are confident we can
achieve. The core areas in our Plan are:
-- Improved profitability and strengthening of the balance sheet
-- Cultural integration and harmonisation of SEC and Porta organisations, now SEC Newgate
-- Raising of the Group's visibility and reputation worldwide
-- Developing a carefully selected acquisition plan to
strengthen and increase capabilities in key markets
-- Implementing incentives and reward schemes to retain key talent
-- A focus on high margin and/or high growth opportunities
across our global footprint, as defined by service offering and
geography
-- Establishing centres of excellence around practice areas
where the Group has market distinguishing expertise or where we
anticipate significant growth opportunity - (social and market
research, global 24/7 crisis communications offering)
-- Investing across the Group in our digital offering with a
particular focus on AI, hiring people with non-traditional
communication backgrounds and expanding our digital toolkit
-- Seeking to lead the market at the interface of business,
politics, markets and media, our proven methodology is based around
objective research, which guides strategy and campaign development
and implementation
Acquisitions & Disposals
On 15 November 2019, SEC Newgate, via subsidiary Newgate PR
Holdings Limited, acquired a further 5% of the equity in Newgate
Greater China under the terms of the shareholders' agreement for
that business.
On 4 December 2019, SEC Newgate established a new office in
Morocco under the brand Cambre Maroc.
Markets and the Environment
There were a number of external national factors during the year
that impacted our agencies such as Brexit, Elections and the
ongoing civil unrest in Hong Kong. Our businesses have, however,
showed their resilience, as evidenced by Newgate Australia where
the business experienced a significant uplift in trading at the
conclusion of the May 2019 Federal election.
Board Changes
Following completion of the merger, the Board now comprises, six
executive and four non-executive directors; a full list of
directors who were all appointed to the board in September, is set
out in the 2019 Report and Accounts which are available on the
company's investor relations website
(https://www.secnewgate.com/investors/).
Subsequent to this, Federico Vecchio was appointed as non-board
Group CFO with effect from 30 September and Andrea Cornelli was
appointed to the board as Chief Innovation Officer with effect from
9 December 2019.
People
I would like to thank our wonderful team whose hard work is
equally matched by their ambitions. It has been a year of positive
change and our success would not be possible without the commitment
of everyone across the organisation at every level. We are proud of
the diversity we benefit from across our teams and are committed to
ensuring that our team reflects the diversity of the communities we
are communicating with.
Post Balance Sheet Events
On 25 February 2020, SEC Newgate secured a EUR2.5 million
convertible bond with the Spanish institutional investor Inveready
which was subscribed on 4 March 2020. Additionally, the
subscription of another EUR1 million facility with a leading
Italian bank in February 2020 and the refinancing of Clydesdale
facility in December 2019, the Group has committed banking
facilities available with maintainable covenants and continues to
enjoy excellent relationships with its lenders to support the Group
through this difficult period.
Since the outbreak of the global pandemic, Covid-19, the Group's
agencies have all implemented business continuity plans, working
remotely under varying levels of lockdowns in their markets around
the world. The Group has taken all necessary steps to reduce any
discretionary spend and ensure strong cashflow generation whilst
ensuring it continues to develop and support its 600 people around
the world, service its clients and build market share. The Group
continues to operate profitably with teams working collaboratively
and sharing best practice initiatives and experiences. All
businesses have quickly adapted to the changed working environment
and continue to provide first class service to clients through
online and digital engagement capabilities.
On 6 April 2020, the Group announced the appointment of Sergio
Penna as Group Financial Officer. This followed the decision of
Federico Vecchio to step down from the role for personal reasons.
Mr Vecchio was not a member of the Group Board. Mr Penna will join
the Group on 1 June 2020 in order to ensure an effective handover
with Mr Vecchio, who will be leaving on 30 June 2020. It is
intended Mr Penna will join the Board of SEC Newgate during the
Autumn of 2020. Mr Penna qualified as a chartered auditor in 2005
with Mazars S.p.A. and holds a degree in economics from Luigi
Bocconi University in Milan. He brings to the Group extensive
financial experience gained in a number of multinational
organisations.
Outlook
The Group formulated its three-year Strategic Plan after
extensive dialogue had taken place amongst our senior management
team. The creation of a new Group, which is already within the top
30 global communications service providers, is a great opportunity
to build a strong, profitable Group for the benefit of all our
stakeholders.
Covid-19 certainly makes it harder to achieve our goals and we
recognise that timescales may need to change from the original
plan. However, the direction of travel is clear to us and that
certainty will prove to be of great benefit especially in uncertain
economic times.
The first quarter of 2020 started very well, and the Group's
profitability was ahead of our budget. The Group's liquidity
position is strong enough to withstand uncertain business demand
for the foreseeable future. Our acquisition plans can be scaled
accordingly to reflect the availability of finance. We therefore
remain confident and enthusiastic about the prospects for the
recently enlarged Group.
John Foley
Chairman
28 May 2020
Group Chief Executive's Review
For the year ended 31 December 2019
4 September 2019 was a historic milestone marking the creation
of a fresh and exciting entity in strategic communications on the
world stage. SEC Newgate, the merger of SEC S.p.A. and Porta
Communications Plc, brought together two strong and successful
businesses with complementary skill sets to create a top 30 global
brand with ambitions to become a world leader.
As the Chairman has noted in his introduction, 2019 was indeed a
crucial and very significant year in our combined history. As a
consequence, today SEC Newgate ranks 26th in the PRovoke (formerly
Holmes Report) 2020 Global Top 250 PR Agency Rankings which was
released at the beginning of May. It is an impressive result that
exceeds the estimate we made at the time of the merger in September
last year. Since we began working as a combined group, both former
entities have benefitted through increased scale and reach, as well
as shared experience and expanded services in every region.
Reaching the 26th position from 53rd in 2019, is a long journey to
have made within a single year. Today's table, in fact,
demonstrates that all the potential we identified in the merger is
already bearing fruition, turning the rationale and reasons behind
the deal into concrete facts and growth.
After successfully bringing together the two entities and some
early achievements as a united group, within months the world was
hit by Covid-19. As a result, it would be remiss of me not to
reference the current year, at the start of my statement, given its
significance to us will undoubtedly be as crucial as the prior
year, given it is the greatest crisis the whole world has faced in
decades.
Covid-19 outbreak and our business
The Covid-19 outbreak has refocused our attention and efforts
from our original plan onto delivering the best response and
preparing the Group for the aftermath of the pandemic. Whilst, at
this stage, it is almost impossible to predict and measure with any
certainty what the overall impact of this emergency will have on
our industry and more specifically on our business, across our
agencies, we responded quickly and implemented a consistent set of
protective measures and new initiatives.
These measures were our top priority and once we had achieved
our primary objective of ensuring the safety and wellbeing of our
people, I am pleased to say all operations successfully applied
technology and embraced home working with positivity and a
significant amount of creativity.
The main goal of our emergency measures programme was to define
a strategy to put a 'handbrake' on spending across all our
operations. The aim was to secure savings, protect the Group's cash
position and liquidity, assess costs and renegotiate payment
schedules wherever possible. Moreover, we are taking advantage of
all the initiatives offered by different national governments to
help companies facing this crisis with the objective of reducing
costs, preserving liquidity and being well positioned for the
recovery. This sound strategy was also underpinned by a number of
key principles such as enhancing our service delivery levels to
support our clients while protecting jobs to maintain a focus on
commercial opportunities for both the crisis and recovery period
ahead.
I am confident the Group will navigate these difficult times
safely and with a united and shared vision. It is clear the quality
and level of our response has benefitted from the strong
foundations established as a result of the incredibly positive work
during Q4 of 2019, shortly after the merger was completed.
The scale of our efforts has prepared us well to tackle 2020 -
the first full operational year for the new Group. We have in place
a clear vision and sound foundation to move forward.
2019: preparing for the future of our new Group
From 4 September, the new governance structure became effective:
the board of directors comprises four non-executive directors,
including the Chairman, John Foley, and six executive directors,
some of the key Group's managers: Emma Kane, Tom Parker, Brian
Tyson were appointed Deputy Group CEOs and Mark Glover, Andrea
Cornelli and Anna Milito as Executive Directors. Eric Giuily,
Chairman of CLAI, the French partner, now chairs the Group's
Management Committee on which all the regional Managing Directors
sit.
Our senior team was ready to hit the ground running in 2020, our
first full year together, and roll out our business strategy and
engage with the market. During the last quarter of 2019, the
management team focused on three areas of activity:
-- Drafting a three-year strategic plan for the years 2020-2022
-- Identifying all synergies and savings to be implemented within the shortest timeframe
-- Setting a development plan to improve the Group's footprint
in strategic markets that were missing at the time of the
merger
The Strategic Plan was approved on 5 November after extensive
discussion with the management team. The Plan provides the Group
and its subsidiaries with a roadmap to establish SEC Newgate in the
top 20 global PR groups in the world. The Plan's main focus is
increasing profitability from the first full financial year. The
Plan includes detailed targets, the strategy by which we meet those
targets, namely organic growth, improved efficiency and
acquisitions, and the human resources policies by which we manage
and reward our staff. Outside the company it will be the main tool
used to promote a new offering to the market. The majority of the
Plan is in the process of being implemented and is driving the
Group's activities, despite the Covid-19 emergency.
On the synergies and savings side, the work was immediate and
extensive. Results were not limited to short term savings, with
emphasis also on medium term issues in order to generate the
greatest possible impact. In the short term, the substitution of
the Porta credit facility with Clydesdale to a new one secured with
Deutsche Bank S.p.A. that offered lower interest rates, cancelled
all covenants and released security over Porta subsidiaries'
shares, is worthy of mention. In the medium term, an example worth
mentioning is the proposed merger of our UK operations Newgate and
Newington into the Group's primary London offices in Basinghall
Street. This will be executed once the Covid-19 lockdown is behind
us.
Finally, regarding the acquisition strategy, the aim is to fill
in gaps in SEC Newgate's global footprint, beginning with the US,
key markets in the Far East and expanding into Africa, which has
commenced with the establishment of a new entity in Morocco. In
addition to these targets, the strategy seeks to improve and
strengthen the Group's presence in several of our existing key
geographic areas such as Latin America, the Middle East and Greater
China.
Due to Covid-19 investments have, however, been put on hold with
the significant exception of the US given the crucial strategic
nature of this market. Discussions are consequently still ongoing
with potential partners there.
For our Greater China offering, we are continuing our search for
a potential key individual to enable the business to fully exploit
our well-established presence in Hong Kong, Shanghai and
Beijing.
A distinctive business model
Across our global footprint we are building a distinctive
business model that creates value within our group, while
recognising that our world of peer-to-peer communication requires
flexible partnership and networks to mobilise the expertise our
clients need. Based on the peer-to-peer relationships with our
clients, we seek to be advisors and partners rather than just
another service provider. Coupled with our unique culture, we are a
group of entrepreneurs and local business leaders that value
difference and embrace diversity. Our focus on building leadership
in emerging areas that are profoundly changing communication e.g.
AI, market research and political risk puts us on an exciting and
ambitious path that differentiates ourselves in the market.
We have prioritised the development of proprietary technologies,
research and analytics in which we have made significant
investments over the recent years, such as:
-- The Artificial intelligence platform in Milan
-- The new release of the "EUessential" app in Brussels
-- The rollout of Australia's Newgate Research business into the UK and Europe
The intelligence and the broader tool base that these have
generated will further strengthen our competitive edge. In
particular, the application of Artificial Intelligence models to
our core services, are now going through the pre-sale testing phase
and are already beginning to generate promising results.
More broadly, the commercial strategy is being implemented
across three parallel pillars:
-- The commencement of a Group marketing plan
-- Growth in inter-company business and cross-selling
-- Raising awareness among larger potential clients at a global level
At the end of November 2019, the first Management Committee took
place at the Group's Milan headquarters, bringing together managing
directors from across the Group's operations. At the summit,
internal discussions were held with the aim of refining the
position and mission for the Group, to set commercial strategy and
build a plan to leverage all the skills and know-how across our 34
offices, in the 15 countries where we operate.
Post Balance Sheet Events
Since the year end, in line with the objectives set out at the
time of the merger and reiterated in the Strategic Plan, the Group
has been successful in:
-- Restructuring its EUR3 million debt facility with Unicredit Bank
-- Negotiating a new loan facility with BPM Bank, an Italian
Financial institution, that is worth EUR1 million
-- On 25 February 2020, SEC Newgate secured a EUR2.5 million
convertible bond with Inveready Convertible Finance Capital I FCR
with a maturity of seven years from issuance, with interest payable
quarterly at 3.50%
Outlook
The Group's growth plans, both organic and by acquisition,
remain contingent on the Group's ability to achieve the positive
results expected from the implementation of its Strategic Plan in
the year ahead.
Q1 2020 numbers are positive, but as with the wider economy
Covid-19 will have an impact on the business. Steps to reduce our
exposure and reposition our offering within this context have been
proactively taken as previously mentioned.
As we grow, our vision is getting more clearly focused: to build
a worldwide group that pairs the skills of our talent with the
strength of technology to be at the side of our customers to
increase, measure and defend their reputation.
We believe that the Covid-19 crisis will bring significant and
lasting changes impacting everyday life, the way we work, as well
as the communications industry itself. However, with our strength
of culture and resilient attitude, openness to change and
innovation, and forward-thinking business model, we are confident
we will not only cope with this change but will be ready to move
forward with strength and a positive outlook.
Asia Pacific - Deputy Group CEO, Brian Tyson
Australia - Newgate
Newgate Australia achieved its highest ever net revenue of AUD
21.4 million in the sixth year of its operation as the leading
integrated communications company in the Australian market.
With the addition of an Adelaide office, the business now
operates out of six offices across the continent (Sydney,
Melbourne, Canberra, Brisbane, Perth and Adelaide) with total staff
numbers now over 90.
On the business front, providing communications for the delivery
of large infrastructure projects continued to be a significant part
of the business - Sydney Metro, Cleanaway Energy from Waste, Snowy
Hydro 2.0, one of the world's largest pumped hydro renewable energy
projects amongst our biggest clients of 2019. After a slow start
leading up to the two major elections (NSW in March and Federal in
May), the return of the incumbent political parties signalled a
back to business surge in new client projects and increased
activity on those that were in a pre-election holding pattern.
The Financial Communications team had a very strong year as well
taking advantage of an uptick in M&A activity post the
elections. A key cross border transaction that reflected the
benefit both of our network as well as our integrated offering was
a highlight of the year. Working for Mengui, a Hong Kong listed
Chinese company with significant state-owned shareholding, we
managed to gain FIRB approval for the takeover of two Australian
companies in the beverage industry. Continuing from our 2018
performance we were again represented (alongside our colleagues in
Singapore and Hong Kong/China) in the Holmes Report APAC Financial
Communications and Merger Market awards.
Newgate Research continued to develop new products, with a
specialised social media audit product and undertook a large piece
of research into the ABC, Australia's national broadcaster.
A large crisis brief for one of the major domestic banks in
November and December turned a historically breakeven summer
Christmas period profitable.
Looking forward, the strong finish to 2019 has led to a strong
new business pipeline into 2020 with a large stakeholder engagement
project for Air Services Australia and the opening of a new stadium
in North Queensland.
We assisted the Minderoo Foundation, which is independent,
forward thinking and seeks effective, scalable solutions and one of
Asia's largest philanthropies, with AUD $1.5 billion committed to a
range of global initiatives. We also supported a number of
companies advancing the Uluru Statement on constitutional
recognition of Aboriginal and Torres Strait Islanders.
On the pro-bono front, we continued to support a number of
organisations including Thrive, Ovarian Cancer Australia, Aurora
and the Clontarf Foundation.
Greater China - Newgate
Newgate's business in Greater China had a slow start to 2019, as
trade tensions between the US and China noticeably impacted
corporate investment activity and decision making. This situation
worsened in the middle of the year when protests in Hong Kong cast
a further shadow over investment decisions involving assets or
businesses in the city. In particular this caused much work on
M&A deals and lucrative brand-building mandates, which the
company had won, either to be halted mid-process or indefinitely
postponed.
Notwithstanding this exceptionally tough trading environment the
Hong Kong business achieved a single digit profit margin for the
full year, particularly benefitting from a marked improvement in
performance in the second half when it won several new retainer and
project mandates, across a diverse range of areas including
litigation, private equity and government relations.
Notable new mandates for the Hong Kong office included work for
funds in connection with a fraudulent creditor default in Vietnam,
litigation support for a global fashion brand around intellectual
property abuse in China, work in China for insurance group AXA,
whom the company supported on its acquisition of Tianping and with
a major corporate brand-building campaign, research work for Apple,
as well as a variety of projects in the technology and fintech
sectors.
In Shanghai, however, the business was unable to gain traction
beyond a few small mandates and consequently incurred significant
losses. Since the year end this situation has resolved itself with
the departure of the Shanghai office head, allowing the company to
stem those losses and focus on identifying new leadership for that
business with the necessary network, skills and experience required
to establish a successful offering.
With the advent of Covid-19 and an effective shut-down of all
relevant business activity in China the timing of this significant
reduction in cost has enabled the firm to avoid the significant
losses being experienced by many others operating in that
market.
From a broader regional perspective Newgate continues to be
recognised for the quality of its work, being shortlisted for the
PR Week Asia-Pacific PR Consultancy of the Year award.
Singapore - Newgate
In 2019, Newgate Singapore continued to build on its track
record as the leading communications advisor on capital markets
transactions, advising on a number of high-profile M&A,
fundraising and shareholder engagement mandates during the year.
Towards the end of 2019, we decided to consolidate some of our
service and product offerings, as well as restructure part of our
team, with a view to increasing our digital and research
capabilities and staffing in 2020.
Building on the experience we gained from advising on the first,
ground-breaking merger of two Singapore-listed REITs in 2018, we
won two additional mandates during 2019 for mergers of other
Singapore-listed REITs, which were amongst the largest M&A
transactions for the year. We also advised on a number of
privatisation bids, as well as on the successful restructuring of
one of the largest regional property groups. Also building on
experience from the past year, we advised on another successful
bond issuance during the middle of 2019.
On the corporate communications front, we further diversified
our service offering to our core groups of real estate and
financial services. During the year, we also won a number of new
litigation support and crisis communications mandates.
Europe, Middle East, Africa - Deputy Group CEO, Tom Parker
Abu Dhabi - Newgate
Newgate Abu Dhabi, in its sixth year, experienced a shifting
market environment in the Middle East region. Despite this, the
agency was successful in winning some prestigious client accounts:
United Nations/World Urban Forum, the UAE Embassy to China and Abu
Dhabi Securities Exchange.
These client wins resulted from a concerted effort emanating
from a strategic plan focused on driving growth and profitability
in areas where the agency has true expertise and a proven track
record - expanding the agency's core business with Government
entities; developing business opportunities cross border; and,
consolidation of the agency's team of experts.
Belgium and EU - Cambre
2019 was a year of consolidation for Cambre, after a challenging
2017 and recovery in 2018. Cambre experienced a steady flow of new
business across sectors and retained or grew existing client
assignments (notably in the external relations and trade areas).
The tech, trade and energy practices gained market recognition and
association management services are back on track. Sustainability
and competition practices are emerging and look promising for 2020.
The SEC Newgate launch upped the agency's profile and drew
attention to its global footprint.
The consultancy's fee income was significantly ahead of the
prior year and ahead of forecast; EBITDA also almost doubled.
Covid-19 aside, the outlook for 2020 is good and the focus will be
on reviving Cambre's healthcare practice, showcasing its
climate/sustainability expertise, including strengthening its
chemical industry practice and enhancing its digital
capabilities.
France - CLAI
Despite a slow start to 2019, activity levels for the last nine
months of the year rose and the recovery was such that the last
quarter was 40% ahead of the first quarter. The decisive action
taken by the team to reduce costs resulted in significant
improvements year on year at both EBITDA and gross margin levels.
Key highlights for the year included winning long-term contracts
from Acoss (the financial agency for all public welfare
institutions in France), ANSM (the public agency controlling
medicines), and being hired by prestigious international clients
such as Amazon, International Papers and Bridgestone.
"How to make others speak for yourself", a book written by
Elisabeth Coutureau and Eric Giuily, which explains and develops
their specific strategic approach to communication, the "Corporate
Advocacy (R)", was published in April and received widespread,
positive endorsements in the media. It is now the key element of
the agency's marketing strategy with a "Monthly point of view"
published on the agency's blog.
Germany - Kohl PR
2019 marked the turnaround of the agency following a difficult
situation in 2018. The agency was repositioned with the change of
its General Manager, a new corporate design and the recruitment of
new high-profile senior consultants. These actions laid the
foundations for positive developments in 2019 and triggered new
business opportunities.
A number of important new assignments were secured and the
financial situation recovered despite the strained economic
situation in Germany due to market insecurities relating to Brexit
and strained international trade relations.
New client wins included Edwards Lifesciences and Blauer Engel
and 12 project assignments. As a result, the consultancy was
profitable on revenues significantly ahead of the prior year
supported by a reduction in operating expenses.
Italy
SEC celebrated its 30th anniversary in 2019, in the same year
that the group merged to create SEC Newgate whilst retaining its
premium market positioning in Italy and with revenues significantly
ahead of the previous year. Across the different local businesses
highlights included: SEC Mediterranea S.r.l saw significant
improvement in top and bottom line financials through projects such
as the Edison Group IGI Poseidon gas pipeline project; SEC and
Partners S.r.l worked on major projects including LVMH, the ongoing
dispute between Vivendi and Telecom Italia and the acquisition of
ABB solar inverter business by Fimer; SEC & Associati S.r.l
delivered a positive performance from both ongoing and new clients,
much of this growth coming from the agency's expansion in the ICT
and Health sectors; Finally, HIT S.r.l. significantly improved
performance in 2019 with activities including ongoing work at Milan
Malpensa and Linate airports and services in La Triennale.
Other key highlights during the year included: Management of
significant infrastructure (Terna, A2A) and urban requalification
projects including being appointed by AC Milan and FC Inter to
advise on community relations; handling major crisis communication
situations such as restructuring at Ikea and the rail disaster for
Trenord; financial communications for organisations such as the
Chartered Accountant fund; and client wins for brands such as Maxi
Zoo and Autotorino. Our events business successfully handled the
Linate Air Show on behalf of SEA, the airport management company in
Milan, attended by over 200,000 people.
2019 was also a crucial year with respect to the finalization of
our Artificial Intelligence based proprietary tool to deliver new
to market applications for reputation and advocacy services.
Closing a very time-consuming project initiated nearly two years
ago, and with an investment of nearly EUR1.5 million, we ended 2019
ready to pre-market test the first applications at the beginning on
2020.
Along the same path of innovation and digital integration, at
the end of 2019 a dedicated team of PR, digital and visual
professionals underpinned by software engineers was incorporated to
create a new business division named Accelerate. The team took on
board staff and know-how from our existing event division which
had, earlier in 2019, incorporated the staff and business of
Curious Design, our visual and content agency which was liquidated
at the end of the year. This large and multidisciplinary team will
work across all divisions to develop innovative integrated
solutions in the digital, brand experience and e-marketing fields
for organisations that aim to improve their engagement
capabilities.
Morocco
Cambre Advocacy Maroc was established on 4 December 2019
following a successful initial project with Cambre supporting the
Kingdom of Morocco in engaging with the European Union. The new
agency is owned by SEC Newgate and AvantScene, the leading event
and communications agency in Morocco. The agency is led by Driss
Benhima, former member of the Moroccan Government and former CEO of
some of the biggest state-owned companies in Morocco.
The agency is focused on strategic communications and advocacy
for public and private decision makers in Morocco as well as
consultancy services to foreign investors and organisations wishing
to focus on Morocco, the wider French speaking Africa market and
those who need assistance with their stakeholder engagement
programmes.
Poland - Martis Consulting
In 2019 Martis focused on crisis consultancy in relation to the
deepening decline in trust in institutions and companies operating
on Polish capital markets. In the wake of this crisis, which
started with the Get Back scandal, all those investing in shares,
bonds and investment fund units suffered considerable losses. The
agency's consultants provided communications support to both banks
and investment fund companies, as well as distressed
businesses.
The Company continued to develop its research and market
analysis activities and published a report "Analysis of European
Public Listed Companies with (Partial) State Ownership" in May
2019. The report was very well received by the market and
commentators. It was published in both Polish and English and
included comments of experts representing different SEC Newgate
Group companies.
In December 2019, Martis Consulting presented the results of its
second report "Valuation of Polish Managers". The publication of
this edition of the report was widely covered in the nationwide
media, including on the front pages of two leading general and
business dailies "Rzeczpospolita" and "Gazeta Parkiet".
Spain - ACH
During 2019, ACH focused on restructuring the business including
the creation of a market leading Digital & Creative team
focused on social media, influencer campaigns, advertising and
reputation management. The agency continued to be highly regarded
for its Public Affairs and institutional and media relations
skills.
The agency was successful in securing new client project
mandates from organisations such as Afinity, Knight Frank,
ProColombia, and Silicones.
UK and AMER (North, Central and South America) - Deputy Group
CEO, Emma Kane
Colombia - SEC Newgate Colombia
The agency is now the second largest PR agency in the country
and, in 2019, was successful in sustaining the growth it had
achieved in 2018.
Revenues were positively impacted by the consolidation of the
healthcare practice with the entry of Sanofi Pasteur and Cruz Verde
which is one of the most important pharmacy networks in the
region.
The agency's expertise in the extractive industry was also
strengthened as AngloGold Ashanti and Continental Gold joined our
portfolio in the second semester.
The Brand PR business unit delivered strong results through key
clients such as Diageo, Huawei and AB Inbev, with an increased
scope during the year.
In addition, the Creative and Digital unit led important
projects complementing our service offer in the market.
The agency's focus on generating new business through
international clients with pan regional potential was successful
and will be a key focus for the business going forward.
United Kingdom
The UK market remained challenging during 2019 due to the
uncertainty surrounding the timing of Britain's exit from the
European Union. Despite this, the overall performance of the
majority of the UK agencies was significantly improved on the prior
year.
Newgate Communications
2019 was the first full year for combined entities of the former
Redleaf Communications, Publicasity and Newgate Communications
which were all merged under Newgate Communications in November
2018.
The focus during the year was very much on improving bottom line
performance rather than purely on fees billed. A fundamental branch
and root review was undertaken across all areas of the business
following the merger.
A new way of working, under one P&L was implemented to
ensure that the best team for the client challenge is always used
which often comprises people working together from across the
agency, in different teams, with different skill sets. This
approach coupled with investment in more sophisticated management
information systems has significantly enhanced the quality of the
work delivered and improved the profitability of the business - the
combined business is now trading profitably and margins are
improving.
A strategic review was undertaken of Newgate's community
engagement business and new leadership was also put in place. This
business areas has since gone from strength to strength winning
numerous important mandates included several significant
Development Consent Orders, an area in which the agency has
significant expertise.
New mandates secured during the year included: Ballymore, JM
Finn, Jury's Inn, Leonardo Hotels, Openreach, Urban & Civic,
and Vanguard.
The business is now trading profitably and has a clear path
continuing to drive performance over the coming year.
Newington Communications
Newington's revenues and thus profitability were impacted by
wider market issues and a major client's decision, at the start of
the year, to take its public affairs activity in-house. The
agency's management team took the necessary steps to reduce its
costs commensurate with the reduction in fees. By the end of the
year, fees had risen to their target levels as a result of the team
securing significant new mandates across all consultancy practice
areas - for both retained and project work.
New clients include Energy Networks Association, Cadent Gas,
Harlow and Gilston Garden Town, Office of the Rail Regulator,
Keolis, Sodexo, Swansea University, Transport for London and Taylor
Woodrow.
Newington won the Public Affairs Europe Award 2019 for its
campaign with the Crisis Prevention Institute.
2112
During 2019, 2112 Communications continued to strengthen
relationships with key clients, attract new clients, build
reputation and expand capabilities to be able to deliver
exceptional creative solutions. The agency's client base was
solidified by blue chip clients such as HSBC Asset Management,
Lombard International Assurance, Alliance Bernstein, T Rowe Price
and The United Nations all engaging 2112 during the year.
The senior management team was strengthened with the appointment
of Andrew Golding in November 2019. Andrew joined the agency as
Head of Strategy and Innovation and has been appointed to the
Board.
2112 continued to expand its reach and increase its revenues
from international activities with the establishment of 2112 Asia,
a joint venture with Hong Kong based agency, Chord Asia.
The quality of 2112's work was recognised by receiving the award
for best content at The Financial Services Forum Awards for
Marketing Effectiveness 2019.
Group Chief Financial Officer's Review
For the year ended 31 December 2019
This year, the creation of SEC Newgate, which is the result of
the merger of leading European communications firm SEC with Porta,
has represented a turning point for the entire Group, which can now
rely on c.600 people working out of 15 countries and five
continents.
Following the merger, we have immediately focused on aligning
reporting procedures throughout the enlarged Group and have worked
towards achieving savings, especially with regards to the UK
business and its headquarters, where, after the merger, EUR0.5m of
net annualised costs were removed. Moreover, thanks to the
restructuring, even before the merger, of the UK companies during
2019 (which led to EUR0.8m of net savings related to employment and
other operating expenses), these entities were able to join SEC
Newgate with a much stronger and more profitable position.
We have also worked on our three-year Strategic Plan, focusing
on key goals for the coming years including, but not limited to, a
return to profitability for the former Porta group, cultural
integration of the enlarged Group and increased visibility and
reputation on the market which will represent our main guidance for
the coming years.
For the year ended 31 December 2019, the Group delivered another
year of positive Operating Profits and Profit before Tax (PBT).
These figures are not easily comparable to the prior year due to
the implementation of IFRS 16, the consolidation of the Porta Group
from 4 September 2019 and the full-year contribution of our French
subsidiary CLAI (which was acquired in November of 2018).
Key financials
-- Gross profit was EUR37.6m (2018: EUR22.2m)
-- Operating profit was EUR1.8m (2018: EUR2.3m)
-- PBT was EUR1.3m (2018: EUR2.2m)
In 2019 we updated the Consolidated Income Statement to disclose
gross profit as this is a measure used internally to monitor our
performance at a Group and subsidiary level (please refer to the
explanatory note included in the Consolidated Income Statement).
Furthermore, we have moved away from using EBITDA as a performance
metric since the transition to IFRS 16 on 1 January 2019. The main
impact of IFRS 16 is to increase EBITDA in 2019 as the rental
expenses have now been replaced by depreciation and interest which
falls below EBITDA. Given that the Group has not restated
comparatives for the 2018 reporting period, as permitted under the
specific transitional provisions, EBITDA is less comparable between
the years. For this reason, and given that EBITDA no longer
includes a key operating expense (rentals), our focus has shifted
towards PBT. Further details on the impact of IFRS 16 can be found
in note 33.
Gross profit was up by c. EUR15.4m with the increase mainly
attributable to the following:
-- Consolidation of the newly acquired Porta group and its
subsidiaries from September 2019 (explaining c.70% of the
increase)
-- Full year consolidation of CLAI (acquired in November 2018)
(explaining c.20% of the increase)
-- Organic growth of the other companies within our Group (explaining c. 10% of the increase)
Employee expenses were up both in absolute terms (by c.
EUR10.8m, EUR8.8 of which related to the consolidation of Porta
entities) and in relative terms when compared to GP (by 6%). This
increase was partially due to the fact that on average former Porta
entities had a much higher employee expense to GP ratio (c. 78%,
including however some ceasing expenses as described in the section
"Subsidiaries Restructuring") compared to SEC companies (c. 56%).
In terms of total staff, the Group employed 592 people at the end
of 2019 (327 at the end of 2018).
Service costs were up by EUR2.2.m (33%) even though this class
of costs has been impacted by the implementation of IFRS 16 which
has seen a decrease in rental expenses (since the long-term lease
effect is now allocated to depreciation and interest expenses).
Most of the increase in service costs is attributable to an
increase in overhead expenses (which include items such as
utilities, marketing expenses and staff travel) which increased by
almost EUR2.3m in 2019. Also, other operating costs (which include,
among the others, listing costs and software licences costs) have
increased in 2019 by c. EUR1.0m.
Whilst amortisation of intangibles was in line with 2018
(EUR0.1m), depreciation was EUR1.9m higher than in 2018 mainly due
to the implementation of IFRS 16. After performing impairment tests
on each of our subsidiaries, we concluded that no impairment or
write-off was needed.
Finance expenses were up in the year; however c. EUR0.5m of this
increase was as a result of the implementation of IFRS 16. The
other main reasons were a net loss on foreign exchange movements by
c. EUR0.1m and an increase in Group financial debts (part of which
was as a result of the merger). As part of the merger, there was a
deed of variation with Hawk in relation to the deep discounted bond
granted to Porta Communications extending the redemption date
referred to in the bond from 14 April 2021 to 14 April 2023 and, as
a consequence, to increase the nominal value of the Hawk Bond to
GBP4.8m. Whilst this reduced the implied interest rate from 8% to
6% per annum the interest incurred on this bond is now consolidated
within the Group's results. Moreover, in December 2019, SEC Newgate
signed a new four-year EUR3.0m banking facility with Deutsche Bank
S.p.A. which was used to replace the Revolving Credit Facility
provided by Clydesdale Bank to Porta Communications Plc in 2017.
There has been a significant saving in terms of interest expenses
since the new facility has an interest rate of 3-month
1.70%+EURIBOR (while Clydesdale RCF had an interest rate of
3.85%+LIBOR). As a consequence of the comments highlighted above,
the Group PBT in 2019 decreased to EUR1.3m (40% fall on 2018).
Also the total comprehensive income for the year, due to the
items above and also due to losses on investments held at fair
value (as a result of the revaluation of Porta Communications
shares held by SEC before the merger) and losses on exchange rates
movements, registered a decrease of c. EUR0.8m.
Subsidiaries restructuring
We are aware that some of our subsidiaries have a huge growth
potential and, throughout 2019, we have been working on setting up
a clear strategy and the necessary resources in order to deliver
it.
Among these subsidiaries includes Newgate Communications in the
UK, which has undergone significant restructuring, started in 2018
(when the merger between Newgate Communications, Redleaf and
Publicasity happened) and completed towards the end of 2019. In
terms of net annualised savings for this company (related to staff
costs, one-off expenses and other operating expenses), management
has been able to save c. EUR0.8m in 2019, which, combined with the
net annualised savings realised in 2018 (c. EUR2.9m), brings the
total figure over the last two years to EUR3.7m.
2112, another UK subsidiary, has substantially completed its
restructuring process, which has been an ongoing activity which
started at the end of 2016. In particular, the company has
completely reshuffled its management team and reduced its staff
numbers from 44 to 28, which has led to a net annualised saving at
the end of 2019 (compared to 2016 when the process started) equal
to c. EUR0.6m while focusing on maintaining a constant level of
fees.
Another company which has faced a profound restructuring is our
Spanish subsidiary ACH SEC Newgate. Indeed, starting from mid-2019,
the local management has implemented a strong reduction of the
company's labour costs (which are now c. 23% lower), incurring
one-off costs in terms of compensations. However, also thanks to
the creation of a Digital & Creative department during 2019,
the company is now better positioned to be able to return to
profitability going forward.
2019 has also marked the turnaround for our German subsidiary
Kohl, which, thanks to the change of its General Manager, a new
corporate design and the recruitment of a new high-profile senior
consultant has been able to secure important new assignments and
recover its financial situation, delivering a positive PBT in 2019
despite the strained economic prospect in Germany due to
insecurities of the markets regarding Brexit and burdened
international trade relations.
Post-merger, Porta Communications has also undergone the first
phase of its restructuring process, which led to net annualised
savings of c. EUR0.45m. Management has decided to simplify the
operations and activities of this company and this ongoing process,
which will continue into 2020, has the clear goal to turn Porta
Communications into a purely centralised finance function for the
enlarged Group.
Finally, in Italy the Group also streamlined its activities
during 2019, with Della Silva (which has not traded throughout
2019) and Curious' (which has stopped its business activity in the
second half of 2019) operations and activities now transferred to
SEC Newgate.
Group finance operations
Following the merger, we have focused on improving the operating
effectiveness of the financial reporting within the Group to enable
the board of directors and management to make quicker informed
decisions based on true underlying performance and data. On top of
that, the Group finance function has immediately started to work on
the implementation of new processes throughout the enlarged Group
in order to align reporting and facilitate the collaboration among
all the subsidiaries in sharing information and best practice.
Whilst a significant amount of work has already been done in
terms of aligning the management accounts reported monthly by each
subsidiary, the next step, in terms of Group reporting, is to
implement a new consolidation system for the enlarged Group in
order to produce timely consolidated reports and KPIs whilst also
ensuring the consistent use of the same chart of accounts across
the Group. This will result in a quicker turnaround of information
enabling decisions, both internally and externally, to be made more
efficiently and timely.
Net debt
Following the merger in September 2019, the Group's debt
position has reached a considerable level (c. EUR8.7m of net debt
as at 31 December 2019), even though a relevant portion (GBP5.3m)
of former Porta group's debt has been converted in shares upon
completion of the merger.
Besides what has been highlighted above in relation with the
Hawk discounted capital bond, after the completion of the merger,
the Group has also focused on refinancing the Clydesdale facility
and it has been able to do so in December 2019 thanks to a new
financing facility from Deutsche Bank S.p.A., which also allowed
SEC Newgate to obtain important savings in terms of interest. The
new facility has an interest rate of 3-month EURIBOR (with a floor
at 0%) + 1.70%, while the previous revolving credit facility with
Clydesdale Bank included a margin of 3.85% over a 3-month
LIBOR.
The increase in debt outstanding, part of which, as explained
above, was linked to the high level of Porta's net debt pre-merger,
caused a negative net debt impact of EUR7.0m. From a total capital
perspective, the merger and the movement in retained earnings in
the year have resulted in an increase of c. 65% of total equity,
which when taken in conjunction with the net debt movement, has
caused the Group's debt to equity ratio to increase from 0.1 in
2018 to 0.4 at the end of 2019.
Whilst the Group is now in a better position to compete in
international markets, the condition of the net debt position
cannot be ignored, and now that the merger is effective it is the
immediate focus of management to improve and strengthen the Group's
capital structure.
Post Balance Sheet Events
On 25 February 2020 SEC Newgate secured a EUR2.5 million
convertible bond which was subscribed on 4 March 2020 by Inveready
Convertible Finance Capital I FCR and Inveready Convertible Finance
Capital SCR S.A., each a fund set up or managed by Inveready Asset
Management S.G.E.I.C., S.A ("Inveready").
This convertible bond, together with the further financing from
an Italian bank secured in February 2020, will help the Group in
financing the implementation of its strategic plan, announced in
November 2019, as well as in supporting the Company's working
capital requirements.
The convertible bond has a maturity of seven years from
issuance, with interest payable quarterly at 3.50%. The bond, which
has been issued as 25 bonds with a nominal value of EUR100,000 each
and are freely transferable, may be converted (at a conversion
price of approximately 55 pence per SEC Newgate share) starting
from the 3rd anniversary from the issuance. If the conversion of
any of the bonds does not occur prior to maturity, an additional
non-conversion fee is payable by SEC Newgate equivalent to a 2.5%
annual return on top of the interest paid.
Another important event which has impacted the Group in the
first few months of 2020 is the Covid-19 outbreak, which affected
markets all across the world. The Group and its subsidiaries, after
a good start to the year in line with management expectations, have
inevitably been impacted by this, mainly in terms of delays in cash
receipts and temporary suspension of contracts by clients, even
though normal origination and execution activity has continued
throughout all the offices as far as possible. All of the companies
in the Group have implemented specific actions to reduce the impact
of Covid-19 by using measures such as reducing all discretionary
spend in order to cope with this extraordinary situation, as well
as taking advantage of all possible measures provided by the
governments around the world.
As highlighted above, the Group has the benefit of the recently
issued EUR2.5m Convertible Bond, together with available committed
banking facilities, with maintainable covenants, and good
relationships with its lenders, as highlighted by the new EUR3m
four-year banking facility with Deutsche Bank S.p.A. announced in
December 2019, to support the Group through this difficult
time.
Conclusion
Thanks to the actions already implemented at the end of 2019,
the Group is well positioned to deliver operationally and
financially and, whilst Group management is aware of the further
improvements needed in terms of processes and systems and of the
ongoing work needed to drive bottom line growth together with top
line growth, the operating foundations of the Group are firm,
despite the short-term issues caused by the Covid-19 outbreak.
In the short-term, our focus will be to implement all necessary
processes to make the Group operate smoothly and to potentially
review the Group's capital structure to provide a solution that
works for both shareholders and other stakeholders so that the
performance and quality of the underlying businesses can be
converted in a stronger bottom line.
Following the merger, we are confident that the newly
established Group is now in a much stronger position to improve
operating performances going forward than it has ever been
before.
Federico Vecchio
Group CFO
28 May 2020
Corporate Governance Statement
AIM companies are required to comply with a recognized corporate
governance code. SEC Newgate has chosen the Quoted Companies
Alliance ("QCA") Corporate Governance Code published in April 2018
for this purpose.
High standards of corporate governance are a priority for the
Board. A prescribed set of rules does not itself determine good
governance or stewardship of a company and, in fulfilling their
responsibilities, the Directors believe that they govern the
Company in the best interests of the shareholders, whilst having
due regard to the interests of all the 'stakeholders' in the
Group.
Details of how SEC Newgate addresses the QCA Code's ten key
governance principles are published on the Investors section of the
SEC Newgate website, which can be found at:
www.secnewgate.com/investors.
Principal Risks and Uncertainties
The Group is exposed to various risks which may affect its
performance. The Group's management team performs regular exercises
to identify and evaluate new risks facing the business as well as
reviewing the appropriateness and progress of previously identified
risks. The process is designed to manage these risks and ensure all
necessary steps taken to mitigate them are considered and
undertaken in a timely manner. However, no system of control or
mitigation can completely eliminate the risks inherent in achieving
the Group's business objectives. The existing risk management
process adopted by the Board of Directors can therefore provide
only reasonable, and not absolute, assurance against material
misstatement or potential loss.
The Directors identified a number of risks and uncertainties
which they believe may affect the Group's ability to deliver its
strategic goals in the future. A list of these risks is summarised
below. This list does not purport to be an exhaustive summary of
the risks affecting the Group, is given in no particular order of
priority and contains risks considered to be outside the control of
the Directors.
Additionally, there may be risks not mentioned in this document
of which the board are not aware or believe to be immaterial, but
which may, in the future, adversely affect the Group's business and
the market price of the Company's ordinary shares.
Before making a final investment decision, prospective investors
should consider carefully whether an investment in the Company is
suitable for them and, if they are in any doubt, should consult
with an independent financial adviser authorised under FSMA which
specialises in advising on the acquisition of shares and other
securities in the UK or another appropriate financial adviser in
the jurisdiction in which such investor is located who specialises
in advising on the acquisition of shares and other securities.
Level Risk description Potential impact Key mitigations
of
risk
=================== ================================================================
Acquisitions and disposals (strategic risk)
The Group acquires
companies which * Reputational damage * The Group's focus is both on organic growth and
are not acquisitions. In the event of a new acquisition,
complementary rigorous internal and external due diligence would be
and/or result * Negative impact on the Group's financial performance performed on the company and its market in order to
in a negative identify potential risks and to ensure the
impact to the acquisition is complementary and in markets where the
Group once * Additional support and funding being required Group is currently not present or underperforming
integrated
Potential strain * Unable to raise sufficient funds for the acquisition * Where a new service of integrated offering is
3 on the Group's required, the Group would initially look to hire key
financial staff and to develop the service internally before
resources * Diversion of management resources whilst integrating considering the acquisition of an external company
as a result new subsidiaries
of acquisitions
* Earn-out mechanisms will be used in the majority of
Companies are * Loss of clients and negative impact on revenue and future acquisitions made by the Group in order to
disposed of, profitability due to disposal reduce cash tensions
leaving the
Group exposed
to gaps in its * Only non-core or risk exposed companies would be
service offering considered for sale, and only done so after careful
analysis as to the impact of divestment
=================== ================================================================ =======================================================================
Management of growth (strategic risk)
The Group is
unable to support * Hiring decisions that lead to the recruitment of * Processes and systems in place to help identify need
the growth areas staff misaligned with strategy or ahead of revenue and fulfilment of resource
of the business
sufficiently,
3 through either * Staff leave through lack of support and/or resources * The production and monitoring of budgets against
lack of funds, performance and hiring plans
resources or
focus * Incur unnecessary costs
* Targeted and specific staff training
* Required systems and processes aren't in place
leading to inefficiencies and inaccurate information * Systems implemented to support staff in maintaining
reported to management visibility on key metrics
* Company and Group KPIs monitored by Executive
Directors on a monthly and, where possible, weekly
basis
=================== ================================================================ =======================================================================
New markets and channels of service offering (strategic risk)
New market and/or
channel of service * Negative impact on Group profitability and cash flows * Fully research and market test any new services
offering isn't before formally launching
sufficiently
understood or * Negative impact on integrated offering
researched prior * The Board pursues a strategy of organic growth in
to entry existing companies
2 * Reputational and brand damage
Achieving lower
than expected * Any entry into a new market would be with the support
revenues and/or of local expertise
higher costs
and resource
requirements * Use of qualified and experienced advisers where
when setting necessary
up new operations
A new offering * Continuously assess performance in new markets and
doesn't gain the related opportunities and risks
sufficient
traction,
is loss making
or not
complementary
to other Group
services
=================== ================================================================ =======================================================================
Future funding and existing debt (strategic risk)
The Group net
4 debt position * Unattractive for subordinated debt or equity funding * Executive Directors closely monitor net debt position
increases at and continue negotiations with lenders
a rate in excess
of the Group's * Creates a problematic platform from which to grow
performance * Closely manage costs so to de-risk the Group creating
a more manageable platform from which to drive
* Working capital diverted to interest payments profitability
* Difficult to find further funding at a competitive * Improve the internal structure and strategic
rate or without restrictive covenants direction of the business to make it more investable
* Where further financing is required, the Board looks
to achieve this in a manner that is best suited to
the Group and shareholders
=================== ================================================================ =======================================================================
Restructuring activities (strategic risk)
Business units,
teams or * Incorrect decisions are made in the restructuring * The Group performs ongoing detailed analysis of
2 individuals process causing a negative impact on revenues and/or companies, business units and individuals'
deemed not to staff morale, as well as incurring unnecessary performance against approved budgets and KPIs
be adequately additional costs
supporting their
cost base are * Any restructurings undertaken are signed off by the
exited from Group and/or company boards after detailed
the business discussions and presentation of analysis and with the
without sufficient support of external consultants where necessary
analysis being
undertaken
* Group seeks to remain fair towards all members of
staff affected by the changes through transparent and
regular consultation
=================== ================================================================ =======================================================================
Overseas operation (strategic and economic risk)
A significant
proportion of * The occurrence of war, public disorder, economic * SEC Newgate maintains a balanced portfolio in terms
the Group's sanctions, terrorism and local or national strikes or of geographical locations to minimise the impact on
3 revenues is labour unrest in any of the overseas locations in the Group's overall results
generated which the Group operates may disrupt or permanently
overseas. prevent the Group from operating in these locations
The Group's or from recovering its investment in whole or in part * Group performs a thorough analysis of economic,
business is political and social conditions before entering new
therefore markets to minimise any unexpected turmoil
susceptible
to adverse changes
in local and
regional economic,
political and
social conditions
as well as the
policies of
the relevant
government,
including changes
in laws and
regulations,
taxation and
the imposition
of restrictions
on currency
conversion
=================== ================================================================ =======================================================================
Global economic trends and political instability (economic risk)
Local and
political * A reduction in new client contracts * The Group disperses its risk and reliance on any
landscape causes particular economic environment through a wide and
a slowdown in diverse client base in both industry and geography
client spending * Resource heavy procurement processes
4 In 2020 * Significant political events have been factored into
particularly, * Margin pressure 2020 budgets and company strategies have been
Brexit in the re-focussed as a result
UK, the political
tensions in * Regulatory changes
the Middle East * The Group and subsidiary boards monitor new business
and the trade wins/losses and track committed fees and new business
war between * New tax and other legislation pipeline against budgets on a monthly and, where
the USA and possible, a weekly basis and manage expenditure
China could accordingly
contribute to * Fall in market confidence
significant
uncertainty
in key markets
for the Group * The Group has business continuity plans in place
Covid-19
The pandemic * All employees are able to work remotely
which impacted * A reduction in client contracts
businesses and
their employees * All discretionary spend cancelled
around the world * A reduction in new client contracts
* All government schemes accessed where appropriate
* Fall in market confidence
* Significant disruption to operations
=================== ================================================================ =======================================================================
Client dependency (economic risk)
That the Group,
or any subsidiary, * Loss of a client materially impacts overall * The Group performs weekly reviews of new business
is overly profitability wins/losses across all Group companies which
dependent highlights any client dependencies
upon fees from
a single client * Company becomes too focussed or specialised in a
2 single industry * Systems have been put in place to enable staff to
monitor profitability, servicing and staffing of
clients
* The client monopolises company resources
* Continued diversification of industry expertise
across the Group resulting in specialisms but no
reliance on a single sector
* No single client represents more than 5% of the
Group's total Gross Profit
=================== ================================================================ =======================================================================
Competition (economic risk)
The Group may
face significant * Lower margins and profitability * The Group provides tailored and highly value-added
2 competition services in order to minimise the pricing competition
from both domestic from bigger players
and international * Loss of key employees and/or clients
competitors
who have greater * SEC Newgate focuses on retaining employees and is
capital, greater * Inability to provide appealing services constantly committed to enhancing retention by
resources and employing the key mitigations discussed below under
superior brand the retention of key employees risk
recognition
and who may
be able to provide * The Group focuses on anticipating major trends in the
better services, industry and on being among the first players in the
adopt more industry to invest in new services and technologies
aggressive (evidenced by the investment and development of its
pricing policies AI platform)
or pay higher
prices to acquire
businesses and
resources. There
is no assurance
that the Group
will be able
to compete
successfully
in such an
environment
=================== ================================================================ =======================================================================
Revenue growth and profitability (economic and operational risk)
The Group cannot
guarantee that * Fluctuation of operating results as a result of a * The Group has budgeting and reforecasting processes
3 it will be able number of factors, many of which are beyond Group's in place and continually monitors expectations
to achieve or control (growth rate of markets in which the Group highlighting any cost control or financing needs
sustain revenue operates, market acceptance of and demand of its
growth and/or services and products and those of its customers,
profitability problems in the introduction of its services or * As soon as results, and especially fees, appear to be
in the future products) lower than budgeted, Group and local management
immediately implements specific actions in order to
drive business (for instance encouraging new pitches,
* Requirement of additional working capital and training and hiring of new staff) and, when necessary
financing in the medium term, which may not be ,
available on attractive terms or at all reviews the cost structure in order to minimise the
impact on Group's profitability
=================== ================================================================ =======================================================================
Attraction and retention of key employees (operational risk)
The key to a
Group of * High staff turnover impacting client service * Recruit senior management and staff of the highest
communications, quality through a robust and thorough process, and
3 marketing and remunerate them accordingly and, where possible,
advertising * Additional unplanned cost and time incurred to succession plans are developed in advance
businesses is replace staff
its employees.
An inability * Create an ethos of being "proud to work for" the
to successfully * Competitors benefit through staff moving Group
attract and/or
retain key staff
is therefore * Loss of key staff-client relationships and resulting * Promotion opportunities and long-term career plans
fundamental impact on revenue are available
to the Group's
longevity
* Loss of key skills, knowledge and expertise * Continued review of all employment benefits and
training and development needs
* Mental and physical health is taken seriously, with
appropriate resources and processes in place to
monitor and address any issues accordingly
=================== ================================================================ =======================================================================
Working capital (operational risk)
Poor or delayed
cash collections * Reduced liquidity * Ensure strict credit terms as part of contract
3 from clients negotiations and agree advanced billing terms
whenever possible
Rapid organic * Working capital shortfalls in the short-term
growth at Group
or subsidiary * Strong credit control processes are in place with
level leading * Difficulty in maintaining supplier terms dedicated credit controllers
to the tying
up of working
capital * Breach bank covenants * The Group monitors and manages cash flow on a weekly
basis and for some of the subsidiaries a 13-week
rolling forecast is performed and submitted on a
weekly basis. Where potential shortfalls are
identified, the Group will work with the relevant
finance team to help ensure sufficient funds are
available
=================== ================================================================ =======================================================================
Reliance on subcontractors (operational risk)
The Group utilises
subcontractors * Non-performance may result in time and/or cost * Group minimises reliance on subcontractors by
2 on a over-runs on projects reducing expected margins utilising internal staff where possible and by hiring
project-by-project full time employees as replacements where feasible
basis to meet
its contractual * Reputational damage which could lead to client and/or
obligations. staff losses * Subcontractors are carefully selected (in most cases
Such projects through tender processes) with their performance
rely on being periodically reviewed
subcontractors
to perform in
a timely manner
and in line
with the project's
performance
obligations.
There is a risk
of this not
being met
=================== ================================================================ =======================================================================
Timing of large contracts (operational risk)
The Group's
revenues are * Material fluctuations in actual results compared with * The Group constantly monitors its project pipeline in
2 generated from expectations order to avoid an excessive reliance on large
a mix of longer projects
and shorter
lead time orders * Adverse impact on cash collectability, profitability
and staff utilisation * Periodic assessment of internal resources to assess
The timing of capacity within teams, bringing work forwards where
order placement possible during quiet periods, and alternatively
and delivery * Employees being overworked to meet demands impacting using subcontractors during busy periods
of the larger staff welfare and potential reputational damage if
orders are performance is poor
inherently
difficult to
predict; hence * Alternatively, a loss of clients due to internal
the Group may capacity not being able to satisfy demands
experience
downtime
between orders
and/or receive
an abundance
of orders at
once
=================== ================================================================ =======================================================================
Information systems (IT) and data security (operational and business
risks)
The Group's
business * Delays to client work and compromise to client * Third party IT specialists, monitored by internal
operations, relationships resources maintain Group IT systems
3 like most other
businesses,
are highly * Opportunity for potential fraud * Business and IT disaster recovery plans exist in each
dependent company and are tested frequently to minimise any
upon IT. disruption in the event of an IT failure
Therefore, * Data loss
any IT failure
could present * Anti-malware and other IT security software is used
a considerable * Confidentiality breaches to prevent cyberattacks and computer viruses. This
risk software is constantly updated and tested
Access to
confidential * Staff training is provided, and IT updates
information communicated to staff
due to inadequate
security of
data by * Access to data is restricted internally on a person
unauthorised by person basis as appropriate
persons either
internally or
externally
=================== ================================================================ =======================================================================
Failure to maintain an acceptable standard of business ethics (business
risk)
The Group engaging
in actual or * External reputational damage which could affect * New business opportunities are shared with all,
perceived future and existing client relationships creating a culture of openness and transparency
2 unethical
client work
* Staff dissatisfaction if clients' work is not aligned * Code of Business Conduct and Ethics is communicated
Staff violating with their personal ethics to all employees, in addition to having appropriate
the Group's training programmes in place
Code of Business
Conduct and
Ethics * Confidential communication channels to management or
Group HR are in place to support staff reporting
violations
* Any perception or questions over ethical standards in
relation to potential client work or behaviour is
immediately raised to the relevant company board, and
if deemed relevant, the Group board also
=================== ================================================================ =======================================================================
Legal and regulatory compliance (compliance risk)
The risk of
breaching an * Penalties and fines * External legal counsel in each country is sought as
2 Italian, UK necessary
or international
law, AIM listing * Reputational damage which could lead to client and/or
rule or any staff losses * A SEC Newgate staff hand-book and share dealing code
regulatory rules is in place and is communicated to all staff
to which the
Group, or any
of its * Regular staff training is provided
subsidiaries,
must adhere
to * Nominated advisors are consulted with respect to any
actions taken which are regulated by the AIM listing
rules
=================== ================================================================ =======================================================================
Financial risk management
Details of the Group's approach to financial risk management are
disclosed in detail in note 10 to the financial statements.
Consolidated financial statements - SEC Newgate S.p.A. and
subsidiaries
Company information
SEC Newgate S.p.A. (the "Company") was incorporated in March
1989 and is based in Milan. On 4 September 2019, the Company name
was changed from SEC S.p.A to SEC Newgate S.p.A. The registered
office and principal executive office of SEC Newgate S.p.A. is
located at Via Ferrante Aporti 8, Milano 20125.
The Consolidated financial statements for the two years ended 31
December 2019, represent the result of the Company and its
subsidiaries (together referred to as "Sec Newgate Group" or the
"Group").
The principal business of the Group is a comprehensive range of
public relations, advocacy, communications and public affairs
services provided to national and multinational clients.
The subsidiaries of the Company included in the Consolidated
financial information, can be found in note 29.
Independent Auditor's Report to the members of SEC Newgate
S.p.A.
Opinion
We have audited the financial statements of SEC Newgate S.p.A.
and its subsidiaries (The "Group") for the year ended 31 December
2019 which comprise the consolidated statement of comprehensive
income, the consolidated statement of changes in equity, the
consolidated statement of financial position, the consolidated cash
flow statement and notes to the financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion:
-- the Group financial statements give a true and fair view of
the state of the Group's affairs as at 31 December 2019 and of the
Group's profit for the year then ended; and
-- the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Group
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial
statements is not appropriate; or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Group's or the parent company's ability to continue
to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our
audit.
Key audit matter How we addressed the matter in our
audit
--------------------------------------------- --------------------------------------------
Revenues
See accounting policy in note G, and
Revenues note (note 3). Our procedures included reviewing
We considered there to be a significant the group's adopted revenue recognition
audit risk arising from inappropriate policy to ensure that it complies
or incorrect recognition of revenue, with accounting standards and has
including relating to management override, been consistently applied throughout
appropriate application of agent verses the year giving particular attention
principal accounting, cut-off of revenue to IFRS 15.
transactions at the year end and whether We tested material revenue transactions
the accounting policy is not aligned recorded near the end of the year
with IFRS. Furthermore, the presumed and subsequent to the year end to
risk of improper recognition of revenue confirm appropriate recognition in
due to fraud has also been identified the year under audit.
as a significant risk. We selected a sample of key contracts
Revenue recognition is one of the for testing. We assessed whether
primary focuses of the engagement the revenue recognised was in line
team. Due to this focus, revenue recognition with the contractual terms, the group's
is considered to be a key audit revenue recognition policy and the
matter. relevant accounting standards.
Impairment of goodwill Our audit procedures over the impairment
See accounting policy in note H, and of goodwill included general procedures
the Intangibles Assets note (note on the methodology adopted and the
11). related controls, in addition to
The group has material intangible substantive testing:
assets, mainly goodwill, arising from General procedures included, but
acquisitions as part of business combinations. were not limited to:
The group has determined that the * review of the methodology used by the Directors for
single subsidiaries that generated the impairment review, and
goodwill are a single cash generating
unit.
We considered there to be a significant * consideration of the review and approval processes
audit risk arising in relation to adopted.
the accuracy and valuation of all
intangibles.
The group is required to assess, at Substantive procedures included,
each reporting date, such assessment but were not limited to:
should include consideration of information * review of the financial projections underpinning the
from both internal and external sources. impairment review, including consideration of the key
Further, notwithstanding whether indicators assumptions on revenue and cost, and the discount
exist, the recoverability of Goodwill rate used;
and intangible assets with indefinite
useful lives are required to be tested
at least annually. * testing, on a sample basis the calculations;
Due to the inherent uncertainty involved
in forecasting and discounting future
cash flows, we therefore identified * sensitivity analysis.
the impairment of goodwill as a Key
audit matter.
We also evaluated the Group's disclosures
relating to its evaluation of impairment
indicators and the annual impairment
testing as provided in "Note 11
- Intangible assets".
----------------------------------------------- -------------------------------------------------------------------
Business Combination Our audit procedures regarding the
See accounting policy in note E and business combination included:
H, and the Intangibles Assets note * analysis of all the relevant documents about the
(note 11) transaction;
The management reported that in September
2019 SEC Newgate ("SEC"), who previously
held 16,9% of Porta Communication * discussions with the company's management regarding
PLC (*Porta"), purchased the remaining the valuation methods used to determine the fair
share capital resulting in 100% of value of the net assets transferred;
Porta. As a result, SEC Newgate, also
indirectly controls the subsidiaries
of Porta which have been consolidate * assessment of the valuation methods used by the
at the year end. company to identify the fair value of the net assets
As said by the management of the group, transferred;
the consideration transferred consists
entirely of SEC issuing equity interests
to Porta shareholders calculated at * the analysis of the transaction's accounting
the fair value of the SEC equity interests treatment and of the related notes as required by
transferred. On 3 September 2019, IFRS 3;
n. 420.810.829 Porta shares were exchanged
at a rate of 88.495 into n. 4.755.162
new SEC shares as well as * check on the adequacy and appropriateness of the
n. 5.993.212 SEC shares being issued information provided in the Notes to the Consolidated
to Retro Grand Limited ("RGL"), a Financial Statements.
shareholder of Porta, following the
conversion of a convertible loan currently
owned by RGL. In total, n. 10.748.374
SEC shares were issued as a result
of the acquisition at a fair value
of Euro 1,0174 per share.
The management said that goodwill of Euro 14.995 thousands
arising on the acquisition of the Porta group represents the
strategic benefits of the acquisition that will help to enhance the
Group's ability to strengthen its media presence through expansion
into other geographical areas as well as the economies of scale
expected from combining the operations of the group. Goodwill has
been attributed by the management to each CGU of the Porta Group
based on the anticipated future profitability of each CGU. The
mentioned business combination represented a key audit matter due
to the complexity of the valuation methods adopted and the
consequent accounting treatment.
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
into account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole
We determined materiality for the Group financial statements as
a whole to be Euro 713 thousands which represents 1.5% of revenues.
We agreed with the audit committee that we would report to them
misstatements identified during our audit above Euro 36
thousands.
Revenue has been concluded as the most relevant performance
measure to the stakeholders of the Group, while also providing a
more stable measure year on year when compared to the Group profit
before tax.
Performance materiality is the application of materiality at the
individual account or balance level set at an amount to reduce to
an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for
the financial statements as a whole. Performance materiality was
set as a percentage of materiality. In setting the level of
performance materiality we considered a number of factors including
the expected total value of known and likely misstatements (based
on past experience and other factors) and management's attitude
towards proposed adjustments.
An overview of the scope of our audit
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the geographic structure
of the Group, the accounting processes and controls, and the
industry in which the Group operates.
In establishing the overall approach to the Group audit, we
assessed the audit significance of each reporting unit in the Group
by reference to both its financial significance and other
indicators of audit risk, such as the complexity of operations and
the degree of estimation and judgement in the financial results. We
also considered the changes to the overall Group because of the
acquisition of Porta Communication PLC and where the key business
activities and transactions reside.
We instructed BDO UK, BDO Poland, BDO Colombia, BDO Germany, BDO
Spain, BDO Belgium, ESV Business Advice and Accounting, Karen Chung
& CO., Rohan Mah & Partners LLP, Mrs Naulin - Chartered
Certified Accountants and Hewitt Card - Chartered Certified
Accountants as component auditors, to perform full scope audits of
financial information of the significant components accounted for
locally in those territories.
We performed specific procedures of financial information of the
non-significant reporting units accounted for locally in Italy.
This, together with the additional procedures performed at Group
level over the acquisition accounting and consolidation process
gave us the evidence we needed for our opinion on the financial
statements as a whole.
Summary of audit scope
Based on the above scope we were able to conclude that
sufficient and appropriate audit evidence had been obtained as a
basis to form our opinion on the Group financial statements as a
whole.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Alessandro Fabiano (Partner - Chartered Accountatns)
For and on behalf of BDO Italia S.p.A., Statutory Auditor
Milan, 28 May 2020
Consolidated Income Statement
For the year ended 31 December 2019
Restated(1)
2019 2018
Notes EUR' 000 EUR' 000
----------------------------------------- ------ ----------- ------------
Continuing operations
Revenue 3 47,550 28,972
Cost of sales (9,945) (6,780)
----------------------------------------- ------ ----------- ------------
Gross profit 37,605 22,192
Employees expenses 4 (23,386) (12,560)
Service costs 5 (8,982) (6,749)
Depreciation & amortisation 6 (2,154) (260)
Other operating costs 7 (1,271) (314)
----------------------------------------- ------ ----------- ------------
Operating profit 1,812 2,309
Finance income 8 188 97
Finance expense 8 (729) (195)
----------------------------------------- ------ ----------- ------------
Profit before taxation 1,271 2,211
Taxation 9 (1,271) (639)
----------------------------------------- ------ ----------- ------------
Profit for the year - 1,572
----------------------------------------- ------ ----------- ------------
(Loss)/profit for the year attributable
to:
Owners of the Company (99) 1,232
Non-controlling interests 30 99 340
----------------------------------------- ------ ----------- ------------
- 1,572
----------------------------------------- ------ ----------- ------------
(Loss)/Earnings per share attributable
to the equity holders of the Company
----------------------------------------- ------ ----------- ------------
Basic, per share 27 (EUR0.006) EUR0.091
Diluted, per share 27 (EUR0.005) EUR0.083
----------------------------------------- ------ ----------- ------------
(1) As a result of the acquisition of Porta Communications Plc
detailed in note 29, the Board has decided to report cost of sales
and gross profit as a separate line item going forwards. This is to
ensure consistent reporting across all group entities and as a
result the comparative has been restated. Costs recharged to
clients are now recorded within cost of sales. Costs recharged to
clients at the same rate as the cost incurred were previously
recorded in revenue (4,378 EUR'000). Costs recharged to clients at
a different rate than the cost incurred were previously recorded in
service costs (1,829 EUR'000) and other operating costs (573
EUR'000). These costs have been reclassified to cost of sales
(6,780 EUR'000). Historically, 'other operating income and charges'
and 'other operating costs' were disclosed separately. Going
forward these amounts will be combined within the single line item
'other operating costs' above. The breakdown of this figure can
still be found within note 7.
There were no discontinued operations in the year.
The accompanying notes are an integral part of these
consolidated financial statements.
The Group has initially applied IFRS 16 at 1 January 2019 and
the impact on comparative information can be found in note 33. The
accompanying notes are an integral part of these consolidated
financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
2019 2018
Notes EUR' 000 EUR' 000
--------------------------------------------- ------ --------- ---------
Continuing operations
Profit for the year - 1,572
Items that may be subsequently reclassified
to profit or loss:
Loss on revaluation of investments
held at FVOCI (625) (1,747)
Loss on exchange rates (346) (44)
Items that will not be reclassified
to profit or loss:
Actuarial (loss)/gain on defined benefit
pension plans 25 (84) 1
--------------------------------------------- ------ --------- ---------
Total comprehensive income, net of
tax (1,055) (218)
--------------------------------------------- ------ --------- ---------
Total comprehensive income for the
year attributable to:
Owners of the Company (1,120) (551)
Non-controlling interests 65 333
--------------------------------------------- ------ --------- ---------
(1,055) (218)
--------------------------------------------- ------ --------- ---------
The Group has initially applied IFRS 16 at 1 January 2019 and
the impact on comparative information can be found in note 33. The
accompanying notes are an integral part of these consolidated
financial statements.
Consolidated Statement of Financial Position
As at 31 December 2019
Restated(1)
2019 2018
Notes EUR' 000 EUR' 000
---------------------------------- ------ --------- ------------
Non-current assets
Intangible assets 11 30,768 15,614
Tangible assets 12 8,984 780
Investments 13 16 1,252
Other financial assets 14 21 66
Other assets 15 3,490 971
---------------------------------- ------ --------- ------------
Total non-current assets 43,279 18,683
---------------------------------- ------ --------- ------------
Current assets
Trade receivables 16 15,094 9,630
Other receivables 17 4,562 1,822
Financial investments 18 280 583
Cash and cash equivalents 19 6,138 5,220
---------------------------------- ------ --------- ------------
Total current assets 26,074 17,255
---------------------------------- ------ --------- ------------
Total assets 69,353 35,938
---------------------------------- ------ --------- ------------
Current liabilities
Trade payables 20 7,462 4,953
Other payables 21 9,399 2,739
Borrowings 22 2,447 2,371
Lease liabilities 23 2,861 -
Provisions 24 1,645 565
---------------------------------- ------ --------- ------------
Total current liabilities 23,814 10,628
---------------------------------- ------ --------- ------------
Non-current liabilities
Employee benefits 25 2,013 1,950
Borrowings 22 12,431 4,592
Lease liabilities 23 5,607 -
Other non-current liabilities 26 5,637 6,803
---------------------------------- ------ --------- ------------
Total non-current liabilities 25,688 13,345
---------------------------------- ------ --------- ------------
Total liabilities 49,502 23,973
---------------------------------- ------ --------- ------------
Net assets 19,851 11,965
---------------------------------- ------ --------- ------------
Equity
Share capital 27 2,425 1,350
Share premium 28 12,456 3,741
Legal reserve 28 148 58
Revaluation reserve 28 (3,076) (2,030)
Retained earnings 28 6,321 5,681
(Loss)/profit for the year (99) 1,232
---------------------------------- ------ --------- ------------
Total equity shareholders' funds 18,175 10,032
---------------------------------- ------ --------- ------------
Non-controlling interests 30 1,676 1,933
---------------------------------- ------ --------- ------------
Total equity 19,851 11,965
---------------------------------- ------ --------- ------------
(1) Previously share premium, legal reserve, other reserves and
retained earnings were all combined within one line item called
'Reserves'. Going forward these reserves will be shown separately
in the Consolidated Statement of Financial Position.
The Group has initially applied IFRS 16 at 1 January 2019 and
the impact on comparative information can be found in note 33. The
accompanying notes are an integral part of these consolidated
financial statements.
The financial statements were approved by the Board of Directors
on 28 May 2020 and authorised for issue on 1 June 2020.
Fiorenzo Tagliabue
Director
SEC Newgate S.p.A. (09628510159)
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Share Share Legal Retained Other Total Non-controlling Total
capital premium reserve earnings reserves equity interests equity
share-holders'
funds
EUR' EUR' EUR' EUR' EUR' EUR' EUR'
000 000 000 000 000 000 EUR' 000 000
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
At 1 January
2019 1,350 3,741 58 6,913 (2,030) 10,032 1,933 11,965
Total
comprehensive
income
Profit for the
year - - - (99) - (99) 99 -
Other
comprehensive
income - - - 25 (1,046) (1,021) (34) (1,055)
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Total
comprehensive
income - - - (74) (1,046) (1,120) 65 (1,055)
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Transactions
with
owners
Issue of
Ordinary
shares in
relation
to business
combinations 1,075 9,861 - - - 10,936 - 10,936
Issue costs - (1,146) - - - (1,146) - (1,146)
Dividends
declared
to
non-controlling
interests - - - - - - (406) (406)
Dividends
declared
to
non-controlling
interests
(CLAI)(1) - - - (429) - (429) - (429)
Share based
payments - - - 32 - 32 - 32
Transfer between
reserves - - 90 (90) - - - -
Acquisition of
non-controlling
interest - - - - - - 98 98
Acquisition of
non-controlling
interest
without
a change in
control - - - (130) - (130) (14) (144)
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Total
transactions
with owners 1,075 8,715 90 (617) - 9,263 (322) 8,941
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
At 31 December
2019 2,425 12,456 148 6,222 (3,076) 18,175 1,676 19,851
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Share Share Legal Retained Other Total Non-controlling Total
capital premium reserve earnings reserves equity interests equity
share-holders'
funds
EUR' EUR' EUR' EUR' EUR' EUR' EUR'
000 000 000 000 000 000 EUR' 000 000
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
At 1 January
2018 1,222 2,627 58 5,693 (246) 9,354 2,042 11,396
Total
comprehensive
income
Profit for the
year - - - 1,232 - 1,232 340 1,572
Other
comprehensive
income - - - - (1,784) (1,784) (7) (1,791)
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Total
comprehensive
income - - - 1,232 (1,784) (552) 333 (219)
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Transactions
with
owners
Proceeds from
shares
issued 128 1,114 - - - 1,242 - 1,242
Dividends
declared
to
non-controlling
interests - - - - - - (444) (444)
Others - - - (12) - (12) 2 (10)
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Total
transactions
with owners 128 1,114 - (12) - 1,230 (442) 788
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
At 31 December
2018 1,350 3,741 58 6,913 (2,030) 10,032 1,933 11,965
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
(1) SEC Newgate S.p.A holds preferred shares in CLAI SAS which
represent 10% of the ordinary share capital and 50% + 0.1 of the
voting rights. SEC Newgate also holds options which would allow the
company to acquire the remaining 90% of the share capital in CLAI
SAS within the earn out period. The financial statements of the
subsidiary have been consolidated at 100% on this basis. Given that
there is no non-controlling equity interests attributable to CLAI,
the dividend declared to the 90% minority has been allocated to
retained earnings. See note 29 for more details.
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2019
2019 2018
Notes EUR' 000 EUR' 000
-------------------------------------------- ------ --------- ---------
Cash flows from operating activities
Profit before tax on continuing activities 1,271 2,211
Adjusted for:
Changes in fair value investments
to profit or loss 8 (119) (55)
Finance expense 8 729 195
Finance income 8 (69) (43)
Depreciation of tangible assets 6 2,059 142
Amortisation of intangible assets 6 95 118
Impairment of trade receivables 7 243 123
Pension provisions (69) 351
Long-term provisions - 4,668
Share based payment expense 4 32 -
Other non-cash movements - (44)
Loss on disposal of tangible assets 6 -
Changes in working capital:
Decrease in trade and other receivables (460) (1,589)
Increase in trade and other payables 2,525 44
-------------------------------------------- ------ --------- ---------
Cash generated from operating activities 6,243 6,121
-------------------------------------------- ------ --------- ---------
Income tax paid (1,149) (753)
-------------------------------------------- ------ --------- ---------
Net cash inflow from operating activities 5,094 5,368
-------------------------------------------- ------ --------- ---------
Cash flows from investing activities
Acquisition of tangible assets (355) (427)
Proceeds from sale of tangible assets 8 -
Acquisition of intangible assets (94) (892)
Acquisition and earn-out payments (577) (5,359)
Cash from acquisitions 1,824 999
Proceeds from sale of financial assets - 2,131
Proceeds from sale/(acquisition)
of investments 409 (1,191)
Interest received 49 -
-------------------------------------------- ------ --------- ---------
Net cash inflow/(outflow) from investing
activities 1,264 (4,739)
-------------------------------------------- ------ --------- ---------
Cash flows from financing activities
Interest paid (248) (152)
Acquisition of non-controlling interests 29 (121) -
Payments of finance lease liabilities (1,907) -
Proceeds from loans and borrowings 7,323 984
Repayment of loans and borrowings (7,414) (1,701)
Dividends paid to non-controlling
interests (835) (444)
Loan issued to related company (1,160) -
Proceeds from issue of share capital - 1,242
Issue costs relating to business (1,155) -
combinations
Minorities - (10)
-------------------------------------------- ------ --------- ---------
Net cash outflow from financing activities (5,517) (81)
-------------------------------------------- ------ --------- ---------
Net cash increase in cash and cash
equivalents 841 548
Cash and cash equivalents at 1 January 5,220 4,672
Effect of exchange rate changes 77 -
-------------------------------------------- ------ --------- ---------
Cash and cash equivalents at 31 December 19 6,138 5,220
-------------------------------------------- ------ --------- ---------
The accompanying notes are an integral part of these company
financial statements.
Notes to the Financial Statements
For the year ended 31 December 2019
1. Accounting policies
a. Basis of preparation
The principal accounting policies adopted in the preparation of
the financial information are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
The financial information has been prepared in accordance with
International Financial Reporting Standards and International
Accounting Standards and Interpretations (collectively "IFRSs")
issued by the International Accounting Standards Board (IASB) and
adopted by the European Union ("adopted IFRSs").
The financial information has been prepared under the historical
cost convention, except for financial instruments that have been
measured at fair value.
The Consolidated financial statements are presented in Euros
(EUR), the Company's functional and presentation currency.
The financial statements have been prepared on a going concern
basis in accordance with IFRS and IFRIC interpretations issued and
effective or issued and early adopted as at the time of preparing
these statements.
The preparation of financial statements in accordance with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions
and estimates are significant to the Consolidated financial
statements are disclosed under accounting policy (u).
New and amended standards adopted by the Group
The Group has applied the following standards, amendments and
interpretations for the first time for their annual reporting
period commencing 1 January 2019:
-- IFRS 16 Leases - replacing IAS 17 Leases: The Group has
amended its accounting policies following the adoption of IFRS 16
and has provided additional disclosures, as required, which can be
found in note 23. The impact of adopting IFRS 16 has been further
explained in note 33.
The adoption of the above did not have any impact on the amounts
recognised in prior periods.
Standards, interpretations and amendments to published standards
that are not yet effective and have not been adopted early by the
Group
Certain new standards, amendments to standards and
interpretations have been published that are effective for annual
periods beginning after 1 January 2020, and have not been applied
in preparing these Consolidated financial statements. These
standards are not expected to have a material impact on the entity
in the current or future reporting periods and on foreseeable
future transactions.
b. Going concern
The Directors are required to consider whether it is appropriate
to prepare the financial statements on the basis that the Group is
a going concern. As part of its normal business practice, the Group
prepares annual plans and Directors believe that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Notwithstanding the impact of Covid-19 the
Group continues to adopt the going concern basis in preparing the
Consolidated financial statements.
c. Basis of consolidation
The Consolidated Statement of Comprehensive Income and
Consolidated Statement of Financial Position include the financial
statements of the Company and its subsidiary undertakings made up
to 31 December 2019 and present comparative information for the
year ended 31 December 2018.
Subsidiaries are all entities over which the Group has control.
A company is classified as a subsidiary when the Group has the
following:
-- power over the investee;
-- exposure, or rights, to variable returns from its involvement with the investee;
-- the ability to use its power over the investee to affect the
amount of the investor's returns.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from
the date that control ceases. The financial information includes
the results of the Company and its subsidiary undertakings made up
to the same accounting date.
Profit or loss and each component of other comprehensive income
('OCI') are attributed to the equity holders of the parent of the
Group and to non-controlling interests. All intra-group assets,
liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on
consolidation.
A change in ownership interest of a subsidiary without a loss of
control is accounted for as an equity transaction.
d. Foreign currency translation
Amounts included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the functional
currency).
The Consolidated financial statements are presented in Euros,
the Company's functional and presentation currency. Transactions in
foreign currencies are translated into the functional currency
using the exchange rate prevailing at the date of the transaction.
Foreign exchange gains and losses resulting from settlement of such
transactions, and from the translation at year end exchange rates
of monetary assets and liabilities denominated in foreign
currencies, are recognised in the Consolidated Statement of
Comprehensive Income.
The results and financial position of all Group companies that
have a functional currency other than euros are translated as
follows:
-- income and expenses are translated at average exchange rates;
-- assets and liabilities are translated at the closing exchange
rate at the Consolidated Statement of Financial Position date;
and
-- all resulting exchange differences are recognised as other
comprehensive income which is a separate component of equity.
e. Business combinations
The results of subsidiary undertakings acquired during the
period are included in the Consolidated Income Statement from the
effective date of acquisition.
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, measured at fair value at the date
of acquisition, and the amount of any non-controlling interest in
the acquired entity.
Non-controlling interest are initially measured at the
non-controlling interests' proportionate share of the recognized
amounts of the acquiree's identifiable net assets. Acquisitions
costs incurred are expensed and included in operating expenses
except where they relate to the issue of debt or equity instruments
in connection with the acquisition.
When the business combination is achieved in stages, any
previously held equity interest is re-measured at its acquisition
date fair value and any resulting gain or loss is recognised in
profit or loss. It is then considered in determination of
goodwill.
f. Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker has been identified as the Board
of Directors that makes strategic decisions.
The Board considers that the Group's activity constitutes one
operating and one reporting segment, as defined under IFRS 8.
Management reviews the performance of the Company and its
subsidiaries by reference to total results against budget.
g. Revenue
Revenue is recognized to the extent that it is probable that
economic benefits will flow to the Group and the revenue can be
reliably measured. Revenue represents the fees derived from
services provided to clients and is reported net of discounts, VAT
and other taxes.
Revenue is recognized in the period in which the service is
performed, in accordance with the terms of the contractual
arrangements. Income billed in advance of the performance of the
service is deferred and recognized in the Consolidated Income
Statement when the service takes place. Income in respect of work
carried out but not billed at period end is accrued.
h. Intangible assets
Intangible assets comprise goodwill, website development costs,
software and licences.
Goodwill
Goodwill represents the excess of fair value attributed to
investments in businesses or subsidiary undertakings over the fair
value of the identifiable assets, liabilities and contingent
liabilities acquired at the date of acquisition. Goodwill on
acquisition of an entity is included in intangible assets.
Goodwill has an indefinite useful life and therefore not
amortized. Impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of goodwill is compared to
the net present value of future cash flows derived from the
underlying assets using a projection period of up to five years for
each cash-generating unit. After the projection period a steady
growth rate representing an appropriate long-term growth rate for
the industry is applied. Any impairment in carrying value is
recognized as an expense and is not subsequently reversed.
Website development costs and software
Expenditure on website development and software is initially
stated at cost. Amortisation is calculated to write down the cost
of these assets to their estimated residual value over their
expected useful lives of 3 years on a straight-line basis.
Licenses: Research and development costs
Expenditure on internally developed products is capitalised if
it can be demonstrated that:
-- it is technically feasible to develop the product for it to be available for use or sold;
-- adequate technical, financial and other resources are available to complete the development;
-- there is an intention to complete and sell or use the product;
-- there is an ability for the Group to sell the product;
-- sale of the product will generate future economic benefits;
-- expenditure on the project can be measured reliably.
Capitalised development costs are amortised over 3 years. The
amortisation expense is included within the depreciation and
amortisation expenses line in the Consolidated Income
Statement.
Development costs previously recognised as an expense are not
recognised as an asset in a subsequent period. Development
expenditure not satisfying the above criteria and expenditure on
the research phase of internal projects are recognised in the
Consolidated Income Statement as incurred.
Gains and losses on disposals are determined by comparing the
disposal proceeds with the carrying amount and are included in the
Consolidated Income Statement.
Licenses: Other
Externally acquired intangible assets are initially recognized
at cost and subsequently amortized on a straight-line basis over
their useful economic lives. Licenses are amortized over the term
of the license agreement.
i. Tangible assets
Property, furniture and equipment are initially recognized at
cost and subsequently stated at cost less accumulated depreciation
and, where appropriate, impairment losses.
Depreciation is calculated to write down the cost of all
tangible fixed assets to estimated residual value over their
expected useful lives as follows:
-- Furniture and machinery 12%
-- Office equipment 20%
-- Computer equipment 20%
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period. An
asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying value is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the
disposal proceeds with the carrying amount and are recognized
within "other operating costs" in the Consolidated Income
Statement.
For right-of-use assets recognised see accounting policy (n) for
details on initial and subsequent recognition.
j. Investment in subsidiaries, associates and joint ventures
Investments included in non-current assets are stated at cost
less any impairment charges.
k. Financial assets
Recognition and initial measurement
Trade receivables are initially recognised when they originate.
All other financial assets are initially recognised when the Group
becomes a party to the contractual provisions of the
instrument.
A financial asset (unless it is a trade receivable without a
significant financing component) is initially measured at fair
value plus, for an item not at fair value through profit or loss
(FVTPL), transaction costs that are directly attributable to its
acquisition or issue. A trade receivable without a significant
financing component is initially measured at the transaction
price.
Classification and subsequent measurement
Financial assets are classified on initial recognition and
subsequently measured at amortised cost, fair value through other
comprehensive income (FVOCI), or fair value through profit or
loss.
Financial assets at amortised cost - these assets are
subsequently measured at amortised cost using the effective
interest method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and
impairment are recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.
Financial assets at FVTPL - these assets are subsequently
measured at fair value. Net gains and losses, including any
interest or dividend income, are recognised in profit or loss.
Equity investments at FVOCI - these assets are subsequently
measured at fair value. Dividends are recognised as income in
profit or loss unless the dividend clearly represents a recovery of
part of the cost of the investment. Other net gains and losses are
recognised in OCI and are never reclassified to profit or loss.
The Group classifies its financial assets into one of the
categories above, depending on the purpose for which the asset was
acquired. The Group has not classified any of its financial assets
at fair value through profit or loss, except for financial
investments.
Investments
Financial investments (note 18) are categorised as a Level 1
investment for the purpose of the IFRS 13 fair value hierarchy and
are valued using quoted prices in active markets for these
investments at the reporting date.
IFRS 13 sets out the framework for determining the measurement
of fair value and the disclosure of information relating to fair
value measurement, when fair value measurements are
required/used.
IFRS 13 requires certain disclosures which require the
classification of assets and liabilities measured at fair value
using a fair value hierarchy that reflects the significance of the
inputs used in making the fair value measurement.
Other investments (note 13) are designated as FVOCI and are
shown at fair value with any movements in fair value taken to
equity. On disposal, the cumulative gain or loss previously
recognized in this equity reserve is not recycled to retained
earnings.
Trade and other receivables
Trade receivables arise through the provision of services to
customers. Other receivables incorporate other types of contractual
monetary assets. These assets are initially recognized at fair
value plus transaction costs that are directly attributable to
their acquisition or issue and are subsequently measured at
amortized cost using the effective interest rate method, less any
provision for impairment.
Impairment of financial assets
Impairment provisions are recognized when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts due under
the terms of the receivable, the amount of such a provision being
the difference between the net carrying amount and the present
value of the future expected cash flows associated with the
impaired receivable.
For trade receivables, which are reported net of any provision
for impairment, the provision is recorded in a separate allowance
account with the loss being recognized within other operating costs
in the Consolidated Income Statement. Trade receivables are written
off when there is no reasonable expectation of recovery. The gross
carrying value of the asset is written off against the associated
provision. Subsequent recoveries of amounts previously written off
are credited against the same line item.
l. Cash and equivalents
Cash and cash equivalents comprise cash, deposits held at call
with banks and other short-term liquid investments with an original
maturity of up to three months or less.
In the Consolidated Statement of Financial Position, bank
overdrafts are shown within borrowings in current liabilities.
m. Financial liabilities
Recognition and initial measurement
Financial liabilities are initially recognised when the Group
becomes a party to the contractual provisions of the
instrument.
A financial liability is initially measured at fair value plus,
for an item not at fair value through profit or loss (FVTPL),
transaction costs that are directly attributable to its acquisition
or issue.
Classification and subsequent measurement
Financial liabilities are classified as measured at amortised
cost or fair value through the profit or loss (FVTPL). A financial
liability is classified as at FVTPL if it is classified as
held-for-trading, it is a derivative or it is designated as such on
initial recognition. Financial liabilities at FVTPL are measured at
fair value and net gains and losses, including any interest
expense, are recognised in profit or loss. Other financial
liabilities are subsequently measured at amortised cost using the
effective interest method. Interest expense and foreign exchange
gains and losses are recognised in profit or loss. Any gain or loss
on derecognition is also recognised in profit or loss.
The Group's loans and trade and other payables are measured at
amortized cost using the effective interest method.
The fair value of financial liabilities of the Group together
with their carrying values can be found in note 10.
n. Leases
The Group has applied IFRS 16 using the modified retrospective
approach and therefore comparative information has not been
restated and continues to be reported under IAS 17. The details of
accounting policies under IAS 17 are disclosed separately below.
The effect of initially applying IFRS 16 is described in note
33.
The Group leases various offices and equipment. Rental contracts
are typically for fixed periods of 1 to 10 years but may have
extension and termination options.
Policy applicable from 1 January 2019
At the inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys, throughout the period of use, the
right to obtain substantially all of the economic benefits from use
of the identified asset and the right to direct the use of the
identified asset.
This policy is applied to contracts entered into, on or after 1
January 2019.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The cost of the right-of-use asset
is comprised of the amount of the initial measurement of the lease
liability adjusted for any lease payments made at or before the
commencement date plus any initial direct costs incurred by the
Group and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset and site on
which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated over the
length of the lease term from the commencement date if the asset is
not retained by the Group. Otherwise the estimated useful lives of
the right-of-use assets are determined on the same basis as
tangible assets (see accounting policy (i)). The right-of-use
assets are periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are unpaid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the incremental borrowing
rate.
Lease payments included in the measurement of the lease
liability comprise the following:
-- fixed payments, including in-substance fixed payments;
-- variable lease payments that depend on an index or a rate
initially measured using the index or rate as at the commencement
date;
-- amount expected to be payable under a residual value guarantee; and
-- the exercise price under a purchase option that the Group is reasonably certain to exercise;
-- payments of penalties for terminating the lease, if the lease
term reflects the Group exercising an option to terminate the
lease.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate,
if there is a change in the Group's estimate of the amount expected
to be payable under a residual value guarantee, or if the Group
changes its original assessment of whether it will exercise a
purchase, extension or termination option.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the
right-of-use asset, or is recorded in profit or loss if the
carrying amount of the right-of-use asset has been reduced to
zero.
The Group presents right-of-use assets within "Tangible assets".
Lease liabilities are presented in its own separate line item in
the Consolidated Statement of Financial Position.
Lease payments for short-term leases, leases payments for leases
of low-value assets and variable lease payments not included in the
measurement of the lease liability are classified as cash flows
from operating activities. For all other lease liability payments,
the Group has classified the principal portion of lease payments
within financing activities and the interest portion within
operating activities.
Short-term leases and leases of low value
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases that have a lease term of
12 months of less and leases of low-value assets. The Group
recognises the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.
Policy applicable before 1 January 2019
For contracts entered into before 1 January 2019, leases where
the lessor retains a significant portion of the risks and rewards
of ownership were classified as operating leases. Rentals payable
under operating leases (net of any incentives received) were
charged as operating costs to the Consolidated Statement of
Comprehensive Income on a straight-line basis over the lease
term.
o. Share capital and share premium
SEC Newgate S.p.A.'s Ordinary shares are classified as equity.
Share premium represents the amounts received in excess of the
nominal value of the Ordinary shares less costs of the shares
issued and is classified as equity.
p. Dividends
Dividends are recognized when they become legally payable, which
is when they are approved for distribution. In the case of interim
dividends to equity shareholders, this is when declared by the
Directors and paid.
q. Taxation
The tax expense for the period comprises current and deferred
tax.
Current income tax
The current tax is based upon the taxable profit for the year
together with adjustments, where necessary, in respect of prior
periods, and calculated using tax rates that have been enacted or
substantively enacted at the end of the financial year. Italian
Corporate entities are subject to a corporate income tax (IRES) and
to a regional production tax (IRAP).
Current tax is recognized in the Consolidated Income Statement,
except to the extent that it relates to items recognized in other
comprehensive income or directly in equity.
Current income tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount
are those that are enacted at the reporting date in the countries
where the Group operates and generates taxable income.
Deferred tax
Deferred tax assets and liabilities are recognized where the
carrying amount of an asset or liability in the Consolidated
Statement of Financial Position differs from its tax base.
Deferred tax assets are recognised to the extent that the Group
believes it is probable that future taxable profit will be
available against which temporary timing differences and carry
forward of unused tax credits/losses can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
reporting date and are expected to apply when the deferred tax
liabilities/assets are settled/recovered.
r. Employee benefits
The only form of post-employment benefit provided to staff by
Group companies is represented by Staff Termination Benefits "TFR".
In light of the amendments made to the relevant regulations by the
"2007 Finance Act" (law no. 296 of 27 December 2006) with regard to
enterprises with more than 50 employees, staff termination benefits
are accounted for in accordance with the following rules:
1. For defined benefit plans, as regards the portion of staff
termination benefits accrued as at 31 December 2006, through
actuarial calculations which do not include the item related to
future salary increases;
2. For defined contribution plans, as regards the portion of
staff termination benefits accrued from 1 January 2007, both in
case of election of supplementary pension scheme, and in the event
of allocation to the INPS Treasury Fund.
Staff termination benefits for Group companies with fewer than
50 employees are recognized in accordance with the regulations for
defined benefit plans in accordance with IAS 19; liabilities are
measured on an actuarial basis using the projected unit method and
discounted at a rate equivalent to the current rate of return on a
high-quality corporate bond of equivalent currency and term to the
plan liabilities.
s. Provisions
Provisions comprise liabilities where there is uncertainty about
the timing of settlement, but where a reliable estimate can be made
of the amount.
t. Share based payments
The cost of stock options, together with the corresponding
increase in shareholders' equity, is recognized under personnel
costs over the period in which the conditions relating to the
achievement of objectives and / or provision of the service are
met. The cumulative costs recognized for these operations at the
end of each year up to the vesting date are commensurate with the
expiry of the vesting period and with the best estimate of the
number of participating instruments that will actually mature. The
cost or revenue in the Consolidated Income Statement for the year
represents the change in the cumulative cost recorded at the
beginning and end of the year.
Service or performance conditions are not taken into
consideration when the fair value of the plan is defined at the
grant date. However, the probability that these conditions will be
satisfied in defining the best estimate of the number of capital
instruments that will accrue is taken into account. Market
conditions are reflected in the fair value at the grant date. Any
other condition related to the plan, which does not involve an
obligation of service, is not considered as a condition of vesting.
The non-vesting conditions are reflected in the fair value of the
plan and involve the immediate accounting of the cost of the plan,
unless there are also conditions of service or performance.
u. Critical accounting estimates and judgements
Estimates and judgments are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. The Group makes estimates and assumptions concerning
the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. Areas subject to
estimation uncertainty and judgments that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are combined and
discussed below.
Impairment of goodwill
The carrying value of goodwill is subject to an impairment
review both annually and when there are indications that the
carrying value may not be recoverable, in accordance with
accounting policies (h) stated above. The recoverable amounts of
cash-generating units have been determined based on value-in-use
calculations which require the use of estimates. See note 11 for
further details.
Impairment of trade receivables
Management performs an assessment of the recoverability of
debtors when evidence arises that demonstrates the collection is
uncertain. Management periodically reassesses the adequacy of the
allowance for doubtful debts in conjunction with its credit policy
and discussions with each specific customer. Judgement is applied
at the point where recoverability is deemed uncertain and thus when
a provision is to be recognized (see note 16).
Fair value measurements and valuation processes
Some of the Group's assets and liabilities are measured at fair
value for financial reporting purposes. In estimating the fair
value of an asset or a liability, the Group uses market observable
data to the extent it is available (see note 10).
Useful lives of depreciable assets
Useful lives of depreciable assets are based on the expected
utilization of each asset. Changes to estimates can result in
significant variations in the carrying value and amounts charged to
the Consolidated Statement of Comprehensive Income in specific
periods (see notes 11 and 12).
Employee benefits
For actuarial assumptions on severance indemnity refer to note
25.
Lease liabilities
Lease payments are discounted at the incremental borrowing rate
where the interest rate implicit in the lease cannot be readily
determined. To determine the incremental borrowing rate, the
Group:
-- where possible, uses recent third-party financing received by
the individual lessee as a starting point, adjusted to reflect
changes in financing conditions since third party financing was
received
-- uses a build-up approach that starts with a risk-free
interest rate adjusted for credit risk for leases held by the
Group, which does not have recent third party financing, and
-- makes adjustments specific to the lease, e.g. term, country, currency and security.
For further details on lease liabilities refer to note 23.
2. Segmental reporting
Business segments
The Board considers that the principal activity of the SEC
Newgate Group constitutes one operating and one reporting segment,
as defined under IFRS 8. Management reviews the performance of the
SEC Newgate Group by reference to total actual result against the
total budgeted result in order to make strategic decisions.
Geographical segments
Services provided by Group entities located in each of the
following countries are as follows:
2019 2018
--------- ----- --------- -----
EUR' 000 % EUR' 000 %
---------------- --------- ----- --------- -----
Italy 16,879 35% 12,838 44%
United Kingdom 9,111 19% 4,441 15%
Belgium 4,205 9% 4,064 14%
Colombia 4,052 9% 4,347 15%
Spain 941 2% 1,204 4%
Poland 965 2% 1,080 4%
France 4,148 9% 545 2%
Germany 674 1% 453 2%
Australia 5,152 11% - 0%
Hong Kong 651 1% - 0%
China 42 0% - 0%
Singapore 431 1% - 0%
Abu Dhabi 299 1% - 0%
Morocco - 0% - 0%
---------------- --------- ----- --------- -----
47,550 100% 28,972 100%
---------------- --------- ----- --------- -----
No individual client sales were greater than 10% of Group
revenue (2018: none).
3. Revenue
The nature of services provided can vary significantly depending
on the requirements of the customer. The Group provides a range of
communications, public affairs and integrated services specialising
in corporate and financial communications, consumer PR, investor
relations, financial communications, B2B PR, public affairs,
digital services, research, analytics and media planning and
buying.
Services provided by Group entities has been split into the
following categories:
Restated(1)
2019 2018
EUR' 000 EUR' 000
----------------------------- --------- ------------
Communications 23,678 14,467
Advocacy and public affairs 13,038 7,946
Integrated services 10,834 6,559
------------------------------- --------- ------------
47,550 28,972
----------------------------- --------- ------------
(1) As a result of the acquisition of Porta Communications Plc
detailed in note 29, the Board has decided to report cost of sales
and gross profit as a separate line item going forwards. This is to
ensure consistent reporting across all group entities and as a
result the comparative has been restated. Costs recharged to
clients are now recorded within cost of sales. Costs recharged to
clients at the same rate as the cost incurred were previously
recorded in revenue (4,378 EUR'000). These costs have been
reclassified to cost of sales.
Communications and public relations revenue includes services
relating to mergers and acquisitions, crisis communications and
planning, corporate positioning, consumer PR, IPOs, investor
relations and media training to name a few.
Advocacy and public affairs revenue relates to positioning
events and strategies, policy development, government relations and
national and local government coverage amongst other services
offered.
Integrated services revenue which includes research, innovation
and digital relates to a number of services including reputation
research, advanced modelling and analytics, creative design and
concepts, digital development and video animation and
production.
The split of client based revenue as a percentage of Group
revenue for the year was as follows:
2019
--------- --------
Client based revenue EUR' 000 %
------------------------- --------- --------
Europe 35,418 74%
Australia & Oceania 4,914 10%
South America 3,669 8%
Asia 2,232 5%
North America 944 2%
Africa 373 1%
------------------------- --------- --------
47,550 100%
----------------------- --------- --------
4. Employee expenses
2019 2018
EUR' 000 EUR' 000
----------------------------------- --------- ---------
Wages, salaries and non-executive
fees 18,414 10,059
Social security costs 3,087 1,924
Severance indemnity and pension
contributions 1,473 461
Share based payments(1) 32 37
Other employment related welfare
costs 380 79
------------------------------------ --------- ---------
23,386 12,560
----------------------------------- --------- ---------
(1) On 28 March 2018, the Board of Directors, in line with
resolutions passed at the shareholders' meeting on 27 October 2017,
established a stock option plan for managers of the investee
companies and the parent company. Stock option costs, previously
included in 'other employment related welfare costs', of circa 32
EUR'000 (2018: 37 EUR'000) above have a corresponding tax impact of
8 EUR'000 (2018: 9 EUR'000).
The average monthly number of employees during the year,
including Executive Directors, was as follows:
2019 2018
Number Number
---------------- ------- -------
Fee earners 464 250
Management 44 28
Administration 84 49
------------------ ------- -------
592 327
---------------- ------- -------
Salaries to key managers of the Group, including the Board of
Directors' fees, was:
2019 2018
EUR' 000 EUR' 000
-------------------------- --------- ---------
Salaries of key managers 1,010 3,611
End of mandate allowance 18 45
---------------------------- --------- ---------
1,028 3,656
-------------------------- --------- ---------
In the prior year key managers included a number of managers
from each subsidiary, however given the growth of the Group and the
recent acquisition (see note 29) key managers who have the
responsibility of directing the Group are now considered to be the
Board of Directors seen below.
Directors' remuneration
31 December 2019 Fees and Pension Bonus Other benefits(2) Total
Salaries Contributions
EUR' 000 EUR' 000 EUR' 000 EUR' 000 EUR' 000
------------------------- ---------- --------------- --------- ------------------ ---------
Executive Directors
Fiorenzo Tagliabue 145 23 - - 168
Emma Kane(1) 152 7 - 1 160
Brian Tyson(1) 124 4 - - 129
Anna Milito 76 29 - - 104
Thomas Parker 140 - 25 - 165
Mark Glover(1) 160 - - - 160
Andrea Cornelli 5 - - - 5
Non-executive Directors
John Foley(1) 11 - - - 11
Luigi Roth 38 1 - - 39
David Mathewson 34 - - - 34
Paola Bruno 35 - - - 35
------------------------- ---------- --------------- --------- ------------------ ---------
920 63 25 1 1,010
------------------------- ---------- --------------- --------- ------------------ ---------
31 December 2018 Fees and Pension Bonus Other benefits(2) Total
Salaries Contributions
EUR' 000 EUR' 000 EUR' 000 EUR' 000 EUR' 000
------------------------- ---------- --------------- --------- ------------------ ---------
Executive Directors
Fiorenzo Tagliabue 145 23 - - 168
Cesare Valli 202 97 - - 299
Anna Milito 65 26 - - 92
Thomas Parker 139 - 40 - 179
Mark Glover 216 - 38 - 254
Non-executive Directors
Luigi Roth 42 - - - 42
David Mathewson 34 - - - 34
Paola Bruno 34 - - - 34
------------------------- ---------- --------------- --------- ------------------ ---------
877 146 77 - 1,100
------------------------- ---------- --------------- --------- ------------------ ---------
(1) Remunerated in British pounds and Australian dollars,
figures above have been translated into euros at the year to date
average exchange rate.
(2) Other benefits comprise of payments in respect of
healthcare, life insurance and other similar benefits.
5. Service costs
Restated(1)
2019 2018
EUR' 000 EUR' 000
----------------------------------- --------- ------------
Consulting 1,645 1,488
Internal Consulting and Directors 908 1,105
Overheads 4,030 1,688
Rental expenses 721 1,287
Services 1,678 1,181
------------------------------------ --------- ------------
8,982 6,749
----------------------------------- --------- ------------
(1) As a result of the acquisition of Porta Communications Plc
detailed in note 29, the Board has decided to report cost of sales
and gross profit as a separate line item going forwards. This is to
ensure consistent reporting across all group entities and as a
result the comparative has been restated. Costs recharged to
clients are now recorded within cost of sales. Costs recharged to
clients at a different rate than the cost incurred were previously
recorded in service costs (1,829 EUR'000). These costs have been
reclassified to cost of sales.
Overheads principally comprise costs incurred with
subcontractors in order to manage extraordinary workload activity
not directly provided internally, as well as other costs such as
utilities, insurance, subscriptions and general office costs.
Services comprise professional fees, marketing and advertising,
travel expenses, phone costs, office maintenance expenses, car
expenses and bank charges.
6. Depreciation and amortisation
2019 2018
EUR' 000 EUR' 000
----------------------------------- --------- ---------
Amortisation of intangible assets 95 118
Depreciation of tangible assets 2,059 142
------------------------------------ --------- ---------
2,154 260
----------------------------------- --------- ---------
7. Other operating costs
Restated(1)
2019 2018
EUR' 000 EUR' 000
--------------------------------- --------- ------------
Impairment of trade receivables 243 123
Tax local 139 113
Other operating costs 1,004 790
Other operating income (164) (733)
Other operating charges 49 21
---------------------------------- --------- ------------
1,271 314
--------------------------------- --------- ------------
(1) As a result of the acquisition of Porta Communications Plc
detailed in note 29, the Board has decided to report cost of sales
and gross profit as a separate line item going forwards. This is to
ensure consistent reporting across all group entities and as a
result the comparative has been restated. Costs recharged to
clients are now recorded within cost of sales. Costs recharged to
clients at a different rate than the cost incurred were previously
recorded in other operating costs (573 EUR'000). These costs have
been reclassified to cost of sales.
Other operating costs include subscriptions, magazines, books
and newspapers, consumption of materials.
Other operating income and charges in 2019 and 2018 are mainly
generated by non-recurring adjustments and miscellaneous items. In
2018, other operating income includes an extraordinary income for
502 EUR'000 tax credit reimbursement on the investment made from
SEC in an Artificial Intelligence project.
Tax local primarily includes chamber of trade costs and stamp
duty taxes; the remaining costs comprise waste tax, motor vehicle
tax and irrecoverable VAT.
8. Finance expense and finance income
2019 2018
EUR' 000 EUR' 000
----------------------------------------- --------- ---------
Interest income on bank deposits 68 -
Dividend income 1 11
Fair value gains on financial assets at
fair value through profit or loss 119 86
------------------------------------------ --------- ---------
Finance income 188 97
------------------------------------------ --------- ---------
Interest expense 337 151
Interest on lease liabilities 265 -
Fair value losses on financial assets at
fair value through profit or loss - 43
Net foreign exchange loss 127 1
------------------------------------------- ---- ----
Finance expense 729 195
------------------------------------------- ---- ----
Net finance expense 541 98
------------------------------------------- ---- ----
9. Taxation
2019 2018
EUR' 000 EUR' 000
------------------------- --------- ---------
Current tax charge 1,366 596
Deferred tax credit (95) 43
-------------------------- --------- ---------
Total income tax charge 1,271 639
-------------------------- --------- ---------
The activities of the Group are located across a number of
geographical locations including Italy, UK, Spain, Germany,
Belgium, Poland, Columbia, France, Australia, Hong Kong, China,
Singapore and Abu Dhabi. Activities within Italy are subject to the
two following corporate taxation regimes:
-- IRES is the state tax which was levied at 24% of taxable income
-- IRAP is a regional income tax, for which the standard rate is
3.9%, with certain local variations permitted.
The tax assessed for the year differs from the standard rate of
tax in Italy at 24% (2018: 24%) for the reasons set out in the
following table.
2019 2018
EUR' 000 EUR' 000
----------------------------------------------------- --------- ---------
Profit before taxation on continuing activities 1,271 2,211
------------------------------------------------------- --------- ---------
Income tax expense computed at the statutory
tax rate on loss before taxation on all activities (305) (508)
Temporary differences subject to tax @ 24.0% (533) (126)
Non-deductible expenses subject to tax @ 24.0% (411) (88)
Non-taxable incomes subject to tax @ 24.0% 31 240
Tax loss carry forward (use) subject to tax
@ 24.0% 254 120
Tax loss carry forward (set-up) subject to (225) -
tax @ 24.0%
Recovery of IRAP taxable amounts on IRES purposes
subject to tax @ 24.0% 7 11
Tax incentives (tax allowance on retained
earnings increases - ACE) 17 33
IRAP on Italian entities (94) (105)
Non-Italian jurisdictions tax rates reconciliation (12) (7)
Differences on non-Italian jurisdictions taxable
loss - (166)
------------------------------------------------------- --------- ---------
Total current income taxation (1,271) (596)
------------------------------------------------------- --------- ---------
Deferred tax charge - (43)
------------------------------------------------------- --------- ---------
Total tax charge for the year (1,271) (639)
------------------------------------------------------- --------- ---------
Deferred tax balances were as follows:
2019 2018
Notes EUR' 000 EUR' 000
-------------------------- ------ --------- ---------
Deferred tax assets 15 2,053 483
Deferred tax liabilities 21 (224) 605
-------------------------- ------ --------- ---------
Movements in deferred tax balances during the year were as
follows:
2019 2018
EUR' 000 EUR' 000
------------------------------------------ --------- ---------
At 1 January 1,088 267
Recognised in income statement 95 37
Acquisition through business combination 456 -
Other movements 155 35
Translation differences 35 -
------------------------------------------ --------- ---------
At 31 December 1,829 339
------------------------------------------- --------- ---------
10. Financial instruments and risk management
Financial instruments
Financial assets are classified on initial recognition and
subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), or fair value through profit or loss
depending on the purpose for which the asset was acquired. The
Group has classified its financial investments (note 18) as fair
value through profit or loss, its other investments (note 13) as
fair value through OCI and all other financial assets are held at
amortised cost.
Financial liabilities are classified as measured at amortised
cost or fair value through profit or loss (FVTPL). A financial
liability is classified as at FVTPL if it is classified as
held-for-trading, it is a derivative or it is designated as such on
initial recognition.
Financial investment at fair value
IFRS 13 sets out the framework for determining the measurement
of fair value and the disclosure of information relating to fair
value measurement, when fair value measurements are
required/used.
IFRS 13 requires certain disclosures which require the
classification of assets and liabilities measured at fair value
using a fair value hierarchy that reflects the significance of the
inputs used in making the fair value measurement.
The fair value used for evaluating the financial investments are
based on quoted prices in an active market (level 1). The Group has
estimated relevant fair values on the basis of publicly available
information from outside sources.
Other investments are designated as fair value through other
comprehensive income and are shown at fair value with any movements
in fair value taken to equity. On disposal, the cumulative gain or
loss previously recognized in equity is included in the profit or
loss for the year.
The Group's financial assets and liabilities, as defined by IAS
32, are as follows:
2019 2018
------------------ ------------------
Carrying Fair Carrying Fair
Value Value Value Value
Notes EUR' 000 EUR' 000
----------------------- ------- ------------------ ------------------
Financial assets
Investments 13 16 16 1,252 1,252
Other financial
assets 14 21 21 66 66
Other assets 15 1,437 1,437 488 488
Trade and other
receivables 16, 17 16,467 16,467 9,720 9,720
Financial investments 18 280 280 583 583
Cash and cash
equivalents 19 6,138 6,138 5,220 5,220
----------------------- ------- --------- ------- --------- -------
24,359 24,359 17,329 17,329
----------------------- ------- --------- ------- --------- -------
Financial liabilities
Trade and other
payables 20, 21 8,876 8,876 5,173 5,173
Lease liabilities 23 8,468 8,468 - -
Provisions 24 1,645 1,645 565 565
Other non-current
liabilities 26 5,344 5,344 6,786 6,786
Borrowings 22 14,878 14,878 6,963 6,963
----------------------- ------- --------- ------- --------- -------
39,211 39,211 19,487 19,487
----------------------- ------- --------- ------- --------- -------
Management have assessed that the fair value of cash and short
term deposits, trade receivables, trade payables, bank overdrafts
and other current liabilities approximate to their carrying amounts
as those items have short term maturities.
2019 2018
Maturity profile
of financial liabilities EUR'000 EUR'000
-------------------------------- -------- --------
Due in six months
or less 13,221 7,132
Due between six months
and 1 year 2,609 977
Due between 1 year
and 2 years 3,741 4,905
Due between 2 and
5 years 16,041 1,664
Due in 5 years or
more 3,599 4,809
--------------------------------
39,211 19,487
---------------------------- -------- --------
Financial risk management
The Group's activities expose it to a variety of financial risks
and those activities involve the analysis, evaluation, acceptance
and management of some degree of risk or combination of risks.
Taking risk is core to the financial business, and the operational
risks are an inevitable consequence of being in business. The
Group's aim is therefore to achieve an appropriate balance between
risk and return and minimise potential adverse effects on the
Group's financial performance.
The Group's risk management policies are designed to identify
and analyse these risks, to set appropriate risk limits and
controls, and to monitor the risks and adherence to limits by means
of reliable and up-to-date information systems. The Group regularly
reviews its risk management policies and systems to reflect changes
in markets, products and emerging best practice.
Risk management is carried out by the Board of Directors. The
Board is responsible for the identification of the major business
risks faced by the Group and for determining the appropriate
courses of action to manage those risks. The most important types
of risk are credit risk, liquidity risk, and market risk. Market
risk includes currency risk, interest rate and other price
risk.
Credit risk
Credit risk is the risk of financial loss to the Group if a
client or counterparty to a financial instrument fails to meet its
contractual obligation and arises principally from the Group's
trade receivables. As at 31 December 2019, the Group had amounts
due from sixteen major customers amounting to 20% (2018: ten
amounting to 20%) of the trade receivables balance.
The Group is exposed to credit risk in respect of these balances
such that, if one or more of these customers encounters financial
difficulties, this could materially and adversely affect the
Group's financial results. Management addresses the Group's
exposure to credit risk by assessing the credit rating of new
customers prior to entering contracts and by entering contracts
with customers on agreed terms. Management consider all relevant
facts and circumstances, including past experiences with a customer
or customer class when assessing the credit risk of clients. See
accounting policy (k) for details on the impairment methodology of
trade receivables. The maximum exposure to credit risk at the
reporting date is the carrying value of each class of financial
assets disclosed above. Management reviews the recoverability of
trade receivables regularly and based on this analysis a provision
for trade receivables is recognised to cover any expected credit
loss. Details of exposure to trade receivables is given in note
16.
Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its
payment obligations associated with its financial liabilities when
they fall due. The Group's policy is to ensure that it will always
have sufficient cash to allow it to meet its liabilities when they
become due. To achieve this, the Group finances its operations
through a mix of equity and borrowings. The Group's objective is to
provide funding for future growth and to achieve a balance between
continuity and flexibility through its bank facilities and future
intergroup loans.
The Board receives cash flow projections on a regular basis as
well as information regarding cash balances. At the end of the
financial year, these projections indicated that the Group is
expected to have sufficient liquid resources to meet its
obligations under all reasonably expected circumstances.
Market risk
(a) Currency translation risk
The Group's subsidiaries operate in Europe, Australia,
Singapore, Hong Kong, Columbia, Poland and Abu Dhabi and revenues
and expenses are denominated in Euro (EUR), Pound Sterling (GBP),
Australian Dollar (AUD), Singapore Dollar (SGD), Hong Kong Dollar
(HKD), United Arab Emirates Dirham (AED), Colombian Peso (COP),
Polish Zloty (PLN) and United States Dollar (USD). The Group's Euro
(EUR) Consolidated Statement of Financial Position is not protected
from movements in the exchange rate between these currencies and
Euros. The overall exposure to foreign currency risk is considered
by management to be low.
The following table demonstrates the sensitivity to reasonable
possible change in significant currencies to the Group such as GBP,
AUD, SGD, HKD, AED, COP, PLN and USD to EUR exchange rates, with
all other variables held constant. The impact on the Group profit
before tax is due to changes in the fair value of monetary assets
and liabilities. The Group exposure to possible changes in all
other foreign exchange currencies is not deemed material.
2019
Effect on profit
before tax +5% -5%
EUR' 000 EUR' 000
------------------- --------- ---------
British Pound (56) 56
Australian Dollar 55 (55)
Singapore Dollar 2 (2)
Hong Kong Dollar (8) 8
UAE Dirham 1 (1)
Colombian Peso 6 (6)
Polish Zloty 4 (4)
Chinese Yuan 1 (1)
US Dollar 19 (19)
--------------------- --------- ---------
2019
Effect on equity +5% -5%
EUR' 000 EUR' 000
------------------- --------- ---------
British Pound 1,311 (1,311)
Australian Dollar 78 (78)
Singapore Dollar 61 (61)
Hong Kong Dollar 7 (7)
UAE Dirham 8 (8)
Colombian Peso 12 (12)
Polish Zloty 7 (7)
Chinese Yuan (2) 2
US Dollar 29 (29)
--------------------- --------- ---------
(b) Interest rate risk
SEC Newgate Group has previously been funded through borrowings
from UBS (Italy) S.p.A., Deutsche Bank S.p.A., Unicredit S.p.A.,
BPM Banco Popolare di Milano, Carige. Please refer to note 22 for
details of the facilities including interest rates, repayment dates
and repayment terms.
Capital Management
The capital structure of the Group comprises the equity
attributable to equity holders of the parent company, which
includes issued share capital, reserves and retained earnings.
Quantitative data on these is set out in the Consolidated Statement
of Changes in Equity.
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or
sell assets to reduce debt.
11. Intangible assets
Goodwill Websites, Total
software
and licences
Cost EUR' 000 EUR' 000 EUR' 000
--------------------------- --------- -------------- ---------
At 1 January 2018 9,205 322 9,527
Additions in the
year 5,154 1,176 6,330
--------------------------- --------- -------------- ---------
At 31 December 2018 14,359 1,498 15,857
Additions in the
year 14,995 94 15,089
Acquisition through
business combination - 568 568
Disposals in the
year - (4) (4)
Translation differences - 37 37
--------------------------- --------- -------------- ---------
At 31 December 2019 29,354 2,193 31,547
--------------------------- --------- -------------- ---------
Amortisation and
impairment
At 1 January 2018 - (125) (125)
Charge for the year - (118) (118)
--------------------------- --------- -------------- ---------
At 31 December 2018 - (243) (243)
--------------------------- --------- -------------- ---------
Charge for the year - (95) (95)
Acquisition through
business combination - (417) (417)
Eliminated on disposal - 4 4
Translation differences - (28) (28)
--------------------------- --------- -------------- ---------
At 31 December 2019 - (779) (779)
--------------------------- --------- -------------- ---------
Net book value
At 1 January 2018 9,205 197 9,402
At 31 December 2018 14,359 1,255 15,614
--------------------------- --------- -------------- ---------
At 31 December 2019 29,354 1,414 30,768
--------------------------- --------- -------------- ---------
Refer to note 29 for details of business acquisitions during the
year.
Impairment testing for cash-generating units containing
goodwill
For the purpose of impairment testing, the aggregate carrying
amount of goodwill is allocated to each cash generating unit (CGU).
Management identifies each subsidiary as a single CGU. The carrying
value of goodwill is compared to the net present value of future
cash flows derived from the underlying assets for each CGU.
The aggregate carrying amount of goodwill is allocated to each
CGU as follows:
Entity 2019 2018
acquired EUR' 000 EUR' 000
---------------------------------------------------- --------- ---------
ACH Sec Global (previously known as
ACH Cambre SL) 2014 492 492
CLAI SAS 2018 5,010 5,010
Cambre Associates SA 2013 1,548 1,548
Kohl PR & Partners GMBH 2015 761 761
Martis Consulting Sp. z o.o. 2017 1,196 1,196
Newington Communications Limited(1) 2016 2,058 2,058
Sec & Partners S.r.l. 2014 100 100
SEC+Latam Communications Estrategica
SAS 2017 2,143 2,143
Newgate Communications Pty Limited 2019 8,235 -
Newgate Communications Limited 2019 4,411 -
Newgate Communications (HK) Limited 2019 976 -
21:12 Communications Limited 2019 713 -
Newgate Communications (Singapore) Pte. 2019 617 -
Ltd
Newgate Communications FZ-LLC 2019 43 -
CLAI SAS (local ledger goodwill)(2) N/A 418 418
Martis Consulting Sp. z o.o. (local
ledger goodwill) N/A 1 1
Sec & Partners S.r.l. (local ledger
goodwill) N/A 632 632
------------------------------------------- -------- --------- ---------
29,354 14,359
---------------------------------------------------- --------- ---------
(1) Goodwill relating to the Newington acquisition of 1,806
EUR'000 in 2016 was revised to 2,058 EUR'000 in 2017 based on the
second earn-out.
(2) Additions in 2018 also included local goodwill in CLAI of
418 EUR'000 resulting from a previous acquisition.
Additions in 2014 also included goodwill in ACH of 275 EUR'000
resulting from a previous merger. This was fully impaired in
2018.
The information required by paragraph 134 of IAS 36 is provided
below. The recoverable amount of each CGU has been verified by
comparing its net assets carrying amount to its value in use
calculated using the Discounted Cash Flow method. The main
assumptions for determining the value in use are reported
below:
ACH CLA CAM KOHL MRT NEW SEC-P
Average market
rate 8.8% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8%
Discount rate 6.4% 5.3% 5.5% 5.5% 8.0% 8.2% 8.2%
---------------- ------ ----- ----- ----- ----- ----- ------
SEC-L NGAS NGCL NGHK 2112 NGSN NGAD
---------------- ------ ----- ----- ----- ----- ----- ------
Average market
rate 8.8% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8%
Discount rate 15.6% 7.8% 8.2% 8.7% 8.2% 8.4% 48.6%
---------------- ------ ----- ----- ----- ----- ----- ------
The discount rate has been determined on the basis of market
information on the cost of money and the specific risk of the
industry. In particular, the Group used a methodology to determine
the discount rate which considered the average capital structure of
a group of comparable companies.
The recoverable amount of CGUs has been determined by utilizing
cash flow forecasts based on the 2020 to 2024 five year plan
approved by management, on the basis of the results attained in
previous years as well as management expectations regarding future
trends in the public relations market. At the end of the five-year
projected cash flow period, a terminal value was estimated in order
to reflect the value of the CGUs in future years. The terminal
values were calculated as a perpetuity at the same growth rate as
described above and represent the present value, in the last year
of the forecast, of all future perpetual cash flows. The impairment
test performed as of the balance sheet date resulted in a
recoverable value greater than the carrying amount (net operating
assets) of the above-mentioned CGUs.
Acquisition of SEC Latam is subject to an earn-out based on
company EBITDA over three years (2018 - 2019 - 2020); total
consideration for the acquisition of the 51% share of the company
has been calculated based on conservative and reasonable estimates,
consequently an earn-out liability for 408 EUR'000 was accrued as
of 31 December 2019 (see note 24 and note 26). The final total
consideration is subject to uncertainty and depends on the company
performance over the ongoing financial year.
Acquisition of CLAI is subject to an earn out based on company
EBITDA over seven years (2019 - 2020 - 2021 - 2022 - 2023 - 2024-
2025); SEC holds preferred shares in Clai that represent the 10% of
the share capital that allow 50% + 0.1 voting rights and a set of
options allows SEC Newgate to escalate to 100% of Clai within the
end of the earn out period; total consideration for the acquisition
of 100% share of the company has been calculated based on
conservative and reasonable estimates, consequently an earn-out
liability for 5,962 EUR'000 was accrued as of 31 December 2019 (see
note 24 and note 26). The final total consideration is subject to
uncertainty and depends on the company performance over the ongoing
financial year.
12. Tangible assets
Leasehold Leasehold Equipment Furniture Total
property improvements and fittings
Cost EUR' 000 EUR' 000 EUR' 000 EUR' 000 EUR' 000
-------------- ---------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ---------
At 1 January
2018 - 379 161 767 1,307
Additions in
the year - 325 14 114 453
Acquisition
through
business
combination - - 107 153 260
Disposals in
the year - (1) - (76) (77)
-------------- ---------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ---------
At 31
December
2018 - 703 282 958 1,943
Adjustment on
transition
to IFRS 16 5,375 - 143 231 5,749
Additions in
the year 68 351 75 329 823
Acquisition
through
business
combination 4,049 1,549 713 468 6,779
Transfers
between
categories - - 113 (113) -
Disposals in
the year - (557) (162) 16 (703)
Revaluation
increase 56 - - - 56
Translation 194 67 29 32 322
differences
-------------- ---------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ---------
At 31
December
2019 9,742 2,113 1,193 1,921 14,969
-------------- ---------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ---------
Depreciation
-------------- ---------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ---------
At 1 January
2018 - (227) (106) (561) (894)
Charge for
the year - (59) (15) (68) (142)
Acquisition
through
business
combination - - (67) (136) (203)
Eliminated on
disposal - - - 76 76
-------------- ---------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ---------
At 31
December
2018 - (286) (188) (689) (1,163)
Charge for
the year (1,614) (122) (134) (189) (2,059)
Acquisition
through
business
combination (993) (1,026) (537) (348) (2,904)
Transfers
between
categories - - (62) 62 -
Eliminated on
disposal - 148 159 (18) 289
Translation
differences (53) (50) (23) (22) (148)
-------------- ---------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ---------
At 31
December
2019 (2,660) (1,336) (785) (1,204) (5,985)
-------------- ---------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ---------
Net book
value
At 1 January
2018 - 152 55 207 412
At 31
December
2018 - 417 94 269 780
-------------- ---------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ---------
At 31
December
2019 7,082 777 408 717 8,984
-------------- ---------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ---------
Included in the amounts above are the following in relation to
right-of-use assets:
Depreciation charge Net book value
for the year
2019 2018 2019 2018
EUR' 000 EUR' 000 EUR' 000 EUR' 000
------------------------ ---------- ---------- --------- ---------
Leasehold property 1,594 - 7,082 -
Leasehold improvements 31 - 47 -
Equipment 41 - 87 -
Furniture and fittings 59 - 206 -
------------------------- ---------- ---------- --------- ---------
1,725 - 7,422 -
------------------------ ---------- ---------- --------- ---------
Additions to the right-of-use assets during the year were 68 EUR
'000.
Amounts included in revaluations above relates to an adjustment
to office leases recognised under IFRS 16. See note 23 for the
lease liability revaluation.
For further details on the adoption of IFRS 16 on 1 January
2019, please refer to note 33.
13. Investments
Owned Ownership 2019 2018
by % EUR' 000 EUR' 000
---------------------------------------- ---------- --------- ---------
Porta Communications Plc SEC Newgate 16.9 - 1,245
Sec & Partners S.r.l. SEC Newgate 95.0 5 5
Other equity investments - 11 2
----------------------------------------- ---------- --------- ---------
16 1,252
---------------------------------------- ---------- --------- ---------
14. Other financial assets
2019 2018
EUR' 000 EUR' 000
----------------------------- --------- ---------
Rental deposits 21 56
Other financial investments - 10
------------------------------ --------- ---------
21 66
----------------------------- --------- ---------
Rental deposits include bank deposits to guarantee office
leases. Rental deposits directly held by the landlord can be found
in note 15.
15. Other assets
2019 2018
EUR' 000 EUR' 000
--------------------- --------- ---------
Deferred tax assets 2,053 483
Rental deposits 1,076 149
Directors benefits 361 339
----------------------- --------- ---------
3,490 971
--------------------- --------- ---------
Director bene ts is the asset coverage provided by an external
insurance company in order to ful l the end of mandate obligations
for a Board Director (see note 26).
16. Trade receivables
2019 2018
EUR' 000 EUR' 000
-------------------------------- --------- ---------
Trade receivables 15,685 10,063
Less: provision for impairment (591) (433)
---------------------------------- --------- ---------
15,094 9,630
-------------------------------- --------- ---------
Management considers that the carrying amount of trade
receivables approximates to their fair values due to their
short-term nature.
A summary of trade receivables, excluding impaired balances,
categorised by due date for payment is as follows:
2019 2018
EUR' 000 EUR' 000
----------------------------------------- --------- ---------
Neither past due nor impaired 6,874 5,603
Past due but not impaired:
Past due up to 3 months 6,466 2,283
Past due more than 3 months not more
than 6 months 680 219
Past due more than 6 months not more
than 1 year 357 620
Past due more than 1 year 717 905
------------------------------------------- --------- ---------
15,094 9,630
----------------------------------------- --------- ---------
The following analysis was made in order to estimate unexpected
credit losses:
Maturity analysis EUR'000s
---------------------------------------
0 - 365 365 -730 730 - 1826 1826
--------------------------------- -------- --------- ----------- -----
Expected credit loss rate 0% 30% 70% 80%
Estimated carrying value amount
at default - 443 224 391
--------------------------------- -------- --------- ----------- -----
Lifetime ECL - 133 157 313
--------------------------------- -------- --------- ----------- -----
The movement on impairment for the year in respect of trade
receivables was as follows:
2019 2018
EUR' 000 EUR' 000
----------------------------------- --------- ---------
At 1 January 433 365
Provision made during the
year 126 123
Acquired on business combinations 131 -
Amounts written off during
the year (2) (55)
Amounts recovered during the (106) -
year
Translation differences 9 -
----------------------------------- --------- ---------
At 31 December 591 433
------------------------------------- --------- ---------
17. Other receivables
2019 2018
EUR' 000 EUR' 000
------------------- --------- ---------
Accrued income 1,373 90
Prepayments 1,915 520
Tax on income 478 503
VAT receivable 574 41
Other receivables 222 668
--------------------- --------- ---------
4,562 1,822
------------------- --------- ---------
Management considers that the carrying amount of other
receivables approximates to their fair values due to their
short-term nature.
In 2018, other receivables included tax credits receivable of
502 EUR'000 relating to the development of artificial intelligence
software by SEC Newgate. There is no such receivable in 2019.
18. Financial investments
2019 2018
EUR' 000 EUR' 000
--------------------- --------- ---------
UBS S.A. investment 280 583
----------------------- --------- ---------
The table below provides an analysis of financial instruments
that are initially recognised at fair value (level 1) based on the
degree to which the fair value is observable.
Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
2019
Purchase Fair value Accrued Total
cost against interest
P&L
EUR' 000 EUR' 000 EUR' 000 EUR' 000
-------------- --------- ----------- ---------- ---------
Bonds 170 280 - 280
Equities - - - -
Other - - - -
-------------- --------- ----------- ---------- ---------
Investments 170 280 - 280
---------------- --------- ----------- ---------- ---------
2018
Purchase Fair value Accrued Total
cost against interest
P&L
EUR' 000 EUR' 000 EUR' 000 EUR' 000
------------- --------- ----------- ---------- ---------
Bonds 63 59 - 59
Equities 458 500 - 500
Other 30 24 - 24
--------------- --------- ----------- ---------- ---------
Investments 551 583 - 583
--------------- --------- ----------- ---------- ---------
Debt Equities Funds Loans Total
securities
EUR' 000 EUR' 000 EUR' 000 EUR' 000 EUR' 000
----------------------- ------------ --------- --------- --------- ---------
At 1 January 2018 53 - 1,068 - 1,121
Acquisitions - - - - -
Disposals during the
year (53) - (461) - (514)
Changes in fair value - (24) - (24)
------------------------ ------------ --------- --------- --------- ---------
At 31 December 2018 - - 583 - 583
Acquisitions - - - - -
Disposals during the
year - - (379) - (379)
Changes in fair value - - 76 - 76
------------------------ ------------ --------- --------- --------- ---------
At 31 December 2019 - - 280 - 280
------------------------ ------------ --------- --------- --------- ---------
19. Cash and cash equivalents
2019 2018
EUR' 000 EUR' 000
-------------------------- --------- ---------
Cash at bank and in hand 5,817 5,220
Restricted cash 321 -
-------------------------- --------- ---------
6,138 5,220
-------------------------- --------- ---------
Cash at bank and in hand are included in cash and cash
equivalents disclosed above and in the Consolidated Statement of
Cash Flows. These balances have an original maturity of 90 days or
less.
The restricted cash deposits above are restricted cash amounts
and are included within cash and cash equivalents disclosed above
and in the Consolidated Statement of Cash Flows. These deposits are
subject to restrictions and therefore not available for general use
by the Group.
20. Trade payable
2019 2018
EUR' 000 EUR' 000
---------------- --------- ---------
Trade payables 7,462 4,953
------------------ --------- ---------
21. Other payables
Restated(1)
2019 2018
EUR' 000 EUR' 000
------------------------------ --------- ------------
Accrued expenses 1,414 220
Income received in advance 1,412 1
Employee and payroll-related
liabilities 2,699 1,507
Government institutions 368 367
Tax on income 397 191
Deferred tax liabilities 224 (605)
VAT payable 1,466 349
Other payables 1,419 709
-------------------------------- --------- ------------
9,399 2,739
------------------------------ --------- ------------
(1) Deferred tax liabilities have been disclosed as a separate
line item. This was previously included within tax on income.
Management considers that the carrying amount of other payables
approximates to their fair values due to their short-term
nature.
Other payables includes 142 EUR'000 (2018: 142 EUR'000) due to a
Director of SEC and Partners.
22. Borrowings
This note provides information about the contractual terms of
the Group's interest-bearing loans and borrowings, which are
measured at amortised cost. The Group has both long-term borrowings
in order to fund business acquisitions and short-term credit
facilities for working capital requirements.
2019 2018
EUR' 000 EUR' 000
----------------------------------- --------- ---------
Deutsche Bank 784 459
Banco Popolare di Milano 57 199
Unicredit 919 1,031
Carige 401 391
KBC Bank 141 88
Bankinter 100 81
Itau Corpbanca 2 -
National Westminster Bank PLC - 33
Banco Colpatria Red Multibanca SA - 50
------------------------------------ --------- ---------
Total loans 2,404 2,332
Interest payable 43 39
------------------------------------ --------- ---------
Total current liabilities 2,447 2,371
------------------------------------ --------- ---------
UBS 1,762 1,762
Deutsche Bank 2,242 56
Banco Popolare di Milano - 200
Unicredit 3,275 2,173
Carige - 401
Hawk Investment Holdings 4,703 -
Retro Grand Limited 449 -
----------------------------------- --------- ---------
Total non-current liabilities 12,431 4,592
------------------------------------ --------- ---------
Total borrowings 14,878 6,963
------------------------------------ --------- ---------
Details of bank loans
Currency Outstanding Total Interest Maturity Repayment term Security
EUR'000 facility rate date
EUR'000
---------------- ---------- ------------ ---------- ---------- ---------- ------------------ ------------------
UBS (Italy) EUR 1,762 1,762 Euribor Open Open ended Pledge on Silvia
S.p.A +1.25% ended Anna Mazzucca
financial
instruments
Euribor March
Deutsche Bank EUR 56 1,000 +1% 2020 Monthly None
Euribor
3 months November Every three
Deutsche Bank EUR 2,970 3,000 +1.7% 2023 months None
Banco Popolare February
di Milano EUR 43 1,000 1.1% 2020 Monthly None
December
Unicredit EUR 200 1,000 1.2% 2020 Monthly None
Euribor
3 months March
Unicredit EUR 3,966 4,000 +1.95% 2025 Three months None
December
Carige EUR 401 1,000 1.4% 2020 Every six months None
KBC Bank EUR 29 29 0.95% July 2020 Monthly None
October
KBC Bank EUR 42 42 0.95% 2020 Monthly None
December
KBC Bank EUR 70 70 0.95% 2020 Monthly None
DTF + March
Itau Corpbanca COP 2 54 9.5% 2020 Monthly None
---------------- ---------- ------------ ---------- ---------- ---------- ------------------ ------------------
Details of other borrowings
Currency Type of Face Value Carrying Interest Maturity Repayment
borrowing EUR'000 amount rate date term
EUR'000
----------------- ----------- ----------------- ----------- --------- --------- --------- -------------
Lump sum
Hawk Investment Deep Discounted 14 April at maturity
Holdings GBP bond 5,673 4,703 5.87% 2023 date
Lump sum
Convertible 10 April at maturity
Retro Grand GBP loan 449 449 0% 2024 date
------------------ ---------- ----------------- ----------- --------- --------- --------- -------------
Further details of the above loans can be found below;
a) UBS (Italy) S.p.A. - an open-ended revolving credit facility
of 1,762 EUR '000 was obtained during the year ended 31 December
2013 at an interest rate of Euribor 12 month plus a margin of 1.25
per cent.
b) Deutsche Bank S.p.A. - a loan of 1,000 EUR '000 at an
interest rate of 1-month Euribor plus a margin of 1,00 per cent.
Repayments are on a monthly basis between April 2017 and March
2020.
c) Deutsche Bank S.p.A - new of 3,000 EUR '000 was obtained
during 2019 at an interest rate of Euribor 3 months repayable every
three months between November 2019 and November 2023.
d) BPM Banco Popolare di Milano - a loan of 1,000 EUR '000 at an
interest rate of 1,1% repayable in monthly instalments between
February 2016 and February 2020.
e) Unicredit S.p.A -a loan of 1,000 EUR '000 at an interest rate
of 1.2% repayable every six months between June 2016 and December
2020.
f) Unicredit S.p.A - a loan of 4,000 EUR '000 was obtained
during 2019 at an interest rate of Euribor 3 months repayable every
three months between October 2019 and March 2025.
g) Carige - a loan of 1,000 EUR '000 at an interest rate of
1.20% with instalments payable every six months between December
2018 and January 2021
h) KBC bank - a loan of 29 EUR '000 at an interest rate of 0.95%
repayable monthly until July 2020.
i) KBC bank - a loan of 42 EUR '000 at an interest rate of 0.95%
repayable monthly until October 2020.
j) KBC bank - a loan of 70 EUR '000 at an interest rate of 0.95%
repayable monthly until December 2020.
k) Itau Corpbanca - a revolving credit facility of 54 EUR '000
at an interest rate of DTF+9.5% repayable monthly until March
2020.
l) Hawk Investment Holdings - a deep discounted bond with an
effective interest rate of 5.87% repayable in April 2023 with a
redemption amount of GBP4,841,748.
m) Retro Grand - a convertible loan at 0% interest of GBP383,600 repayable in April 2024.
23. Leases
This note provides information for leases where the group is a
lessee.
Lease liabilities 2019 2018
EUR'000 EUR'000
Current 2,861 -
Non-current 5,607 -
----------------------- -------- --------
8,468 -
------------------- -------- --------
Additions and carrying amount for right-of-use assets included
in the Consolidated Statement of Financial Position has been
disclosed in note 12.
Depreciation charged on right-of-use assets in the Consolidated
Statement of Comprehensive Income has also been disclosed in note
12. The Consolidated Statement of Comprehensive Income also shows
the following amounts relating to leases:
2019 2018
EUR'000 EUR'000
-------------------------------- -------- -------------
Interest expense 265 -
Expense relating to short-term 20 -
leases
Expense relating to leases 2 -
of low value assets
------------------------------------ -------- -------------
Total cash outflows for leases can be found as a separate line
item in the Consolidated Statement of Cash Flows.
2019 2018
Maturity profile of lease
liabilities EUR'000 EUR'000
------------------------------- -------- --------
Due in six months or 1,405 -
less
Due between six months 1,456 -
and 1 year
Due between 1 year and 2,268 -
2 years
Due between 2 and 5 years 1,879 -
Due in 5 years or more 1,460 -
------------------------------- -------- --------
8,468 -
--------------------------- -------- --------
24. Provisions
2019 2018
EUR' 000 EUR' 000
--------------------- --------- ---------
Earn out provisions 1,645 565
---------------------- --------- ---------
The current earn out provision relates to SEC Latam and
CLAI.
25. Employee benefits
2019 2018
EUR' 000 EUR' 000
--------------------- --------- ---------
Severance indemnity 2,013 1,950
---------------------- --------- ---------
The liability represents the amount for future severance
payments to employees. Movements relating to the severance
indemnity provision can be found below:
EUR' 000
----------------------------------------- ---------
At 1 January 2018 1,680
Service cost 228
Net interest 21
Benefit paid (73)
Actuarial loss (1)
Additions through business combinations 94
------------------------------------------- ---------
At 31 December 2018 1,950
Service cost 97
Net interest 29
Benefit paid (196)
Actuarial gain 133
Translation differences -
------------------------------------------- ---------
At 31 December 2019 2,013
------------------------------------------- ---------
26. Other non-current liabilities
2019 2018
EUR' 000 EUR' 000
------------------------------- --------- ---------
Directors benefits 397 375
Earn out liability 4,754 6,411
Dilapidation provisions 293 -
Other non-current liabilities 193 17
-------------------------------- --------- ---------
5,637 6,803
------------------------------- --------- ---------
Directors benefits above relate to an obligation that SEC
Newgate S.p.A. has for the end of mandate allowance in relation to
a Board Director. This obligation is covered by an insurance asset
(see note 15).
The non-current earn out provision relates to the acquisitions
of SEC Latam and CLAI.
Other non-current liabilities relates to a long service leave
accrual required by certain Australian states and territories for
long serving employees.
27. Share capital
Authorised, issued and fully paid capital
At 31 December 2019 Number EUR
------------------------- ----------- -------------
Ordinary shares of 0.10
EUR each 24,250,907 2,425,090.70
--------------------------- ----------- -------------
At 31 December 2018 Number EUR
------------------------- ----------- -------------
Ordinary shares of 0.10
EUR each 13,502,533 1,350,253.30
--------------------------- ----------- -------------
All shares are fully issued and paid up. The ordinary
shareholders are then entitled to receive dividends in proportion
to their percentage ownership in the Company.
On 17 July 2018 (closed on the 3rd August 2018), SEC Newgate
issued 1,280,558 Ordinary shares of 0.10 EUR each following the
announcement of a shareholder offer and placing made.
On 3 September 2019, SEC Newgate issued 10,748,374 Ordinary
shares as detailed:
(a) 4,755,162 ordinary shares for a total value of EUR4,837,902,
were issued in exchange for the 420,810,829 shares of Porta
Communications Plc. Per the Scheme of Arrangement a ratio of 1
newly issued share for each 88.495575 shares of Porta
Communications Plc was agreed;
(b) 5,993,212 ordinary shares for a total value of EUR6,097,494,
were issued in exchange for the 530,372,743 shares of Porta
Communications Plc held by Retro Grand Limited at the date of
execution of the capital increase, following the conversion of a
convertible loan currently owned by Retro Grand Limited.
The Transaction was carried out by means of a Scheme of
Arrangement as provided for in Part 26 of the Companies Act 2006 of
the United Kingdom to acquire Porta Communications Plc.
The movement in Ordinary shares for the
year reconciles as follows:
Number EUR
----------------------------------------- ----------- -------------
At 1 January 2018 12,221,975 1,222,197.50
Additions during the year 1,280,558 128,055.80
------------------------------------------- ----------- -------------
At 31 December 2018 13,502,533 1,350,253.30
------------------------------------------- ----------- -------------
Additions during the year 10,748,374 1,074,837.40
------------------------------------------- ----------- -------------
At 31 December 2019 24,250,907 2,425,090.70
------------------------------------------- ----------- -------------
Earnings per share
The basic and diluted earnings per share are determined by
dividing the profit attributable to the equity holders of the
parent by the number of shares outstanding during the period.
Earnings per share, basic, is determined as follows:
2019 2018
---------------------------------- ------------ -------------
Profit for the year attributable
to owners of the company (EUR99,000) EUR1,232,000
Weighted average number
of shares 17,036,245 13,502,533
------------------------------------ ------------ -------------
Earnings per share, basic (EUR0.006) EUR0.091
------------------------------------ ------------ -------------
On 9 June 2016 the General Assembly resolved to issue a maximum
of 134,000 shares to be assigned to WH Ireland Limited as a
warrant, and a maximum of 675,000 shares as part of a stock grant
plan to the employees.
On 28 March 2018, the Board of Directors, in line with
resolutions passed at the shareholders' meeting on 27 October 2017,
established a stock option plan for managers of the investee
companies and the parent company. A maximum of 480,000 shares could
be issued.
As of today, neither warrant nor stock grant plan were
subscribed, however the potential additional shares should be
considered as dilutive instruments. Earnings per share, diluted, is
determined as follows:
Restated(1)
2019 2018
---------------------------------- ------------ -------------
Profit for the year attributable
to owners of the company (EUR99,000) EUR1,232,000
Weighted average number
of shares 18,325,245 14,791,533
Earnings per share, diluted (EUR0.005) EUR0.083
------------------------------------ ------------ -------------
(1) The prior year comparative has been updated to include the
potential 480,000 shares that could be issued as a result of the
stock option plan granted in 2018 as mentioned above.
28. Reserves
The following table describes the nature of each reserve:
Restated(1)
2019 2018
EUR'000 EUR'000
----------------------- -------- ------------
Share premium reserve 12,456 3,741
Legal reserve 148 58
Revaluation reserve (3,076) (2,030)
Retained earnings 6,222 6,913
------------------------- -------- ------------
15,750 8,682
----------------------- -------- ------------
(1) The prior year comparative has been restated to ensure that
both the legal reserve and retained earnings agrees to the carry
forward position stated in the Consolidated Statement of Changes in
Equity.
Share premium reserves
EUR'000
---------------------------- -----------------
At 1 January 2018 2,627
New issues during the year 1,261
Issue costs (147)
------------------------------ -----------------
At 31 December 2018 3,741
New issues during the year 9,861
Issue costs (1,146)
------------------------------ -----------------
At 31 December 2019 12,456
------------------------------ -----------------
On 17 July 2018, SEC Newgate S.p.A issued 1,280,558 Ordinary
shares for proceeds in excess of the nominal value by 1,261
EUR'000. The company incurred issue costs of 147 EUR'000 (net of
taxes) in relation to the issue of shares which has been deducted
from share premium in the year.
On 3 September 2019, SEC Newgate S.p.A issued 10,748,374
Ordinary shares as detailed in note 27. The fair value of
consideration paid resulted in share premium of 9,861 EUR'000. The
company incurred issue costs of 1,146 EUR'000 in relation to the
issue of shares which has been deducted from share premium in the
year.
Legal reserve
This reserve is required by law, and is not distributable.
Revaluation reserve
Gains/losses arising on financial assets classified as FVOCI,
actuarial evaluation on pension allowance and exchange rates
differences.
Retained earnings
Retained earnings includes all current and prior period net
gains and losses attributable to the owners of the company which
are not recognised elsewhere. This includes a Stock Option reserve
dedicated to the managers of the subsidiaries and the parent
company.
29. Interests in subsidiaries
Summary of acquisitions
Acquisitions over the two-year period are as follows:
-- In November 2018, SEC Newgate acquired 10% of the share capital of CLAI SAS.
-- In September 2019, SEC Newgate, who previously held 16.9% of
Porta Communications Plc ("Porta"), purchased the remaining share
capital resulting in 100% ownership of Porta. As a result, SEC
Newgate, also indirectly controls the subsidiaries of Porta which
have been consolidated at year end.
The consideration transferred consists entirely of SEC issuing
equity interests to Porta shareholders calculated at the fair value
of the SEC equity interests transferred. On 3 September 2019,
420,810,829 Porta shares were exchanged at a rate of 88.4955752
into 4,755,162 new SEC shares as well as 5,993,212 SEC shares being
issued to Retro Grand Limited ("RGL"), a shareholder of Porta,
following the conversion of a convertible loan currently owned by
RGL. In total, 10,748,374 SEC shares were issued as a result of the
acquisition at a fair value of EUR1.0174 per share.
Goodwill of 14,995 EUR'000 (note 11) arising on the acquisition
of the Porta group represents the strategic benefits of the
acquisition that will help to enhance the Group's ability to
strengthen its media presence through expansion into other
geographical areas as well as the economies of scale expected from
combining the operations of the group. Goodwill has been attributed
to each CGU of the Porta Group based on the anticipated future
profitability of each CGU. Management identifies each subsidiary as
a single CGU and the split of goodwill can be found in note 11.
Details surrounding the acquisitions can be found below:
2019 2018
Porta Group CLAI
Notes EUR' 000 EUR' 000
------------------------------------------------ ------ ------------ ---------
Trade receivables 5,413 478
Cash and cash equivalents 1,824 999
Other assets 7,935 661
Trade payables (870) (148)
Other liabilities (17,864) (548)
------------------------------------------------- ------ ------------ ---------
Net (liabilities)/assets acquired (3,562) 1,442
------------------------------------------------- ------ ------------ ---------
% acquired 100% 10%
Fair value of consideration 10,935 6,452
Fair value of previously held equity interests 423 -
Net assets attributable to non-controlling 74 -
interests
Goodwill 11 14,995 5,010
------------------------------------------------- ------ ------------ ---------
Further details can be found in note 11.
Details surrounding further acquisitions of interests in
existing subsidiaries can be found below:
Company Date of-acquisition % acquired % owned at Consideration
in year year end
------------------- --------------------- ----------- ----------- --------------
Newgate Hong Kong 15/11/2019 5% 85% 148,324
------------------- --------------------- ----------- ----------- --------------
In addition to the above acquisitions, on 4 December 2019,
Cambre Maroc Advocacy was set up in Morocco. The cost of the 51%
equity interest held by SEC Newgate was 24 EUR'000.
Set out below are details of the subsidiaries held directly,
unless otherwise stated, by the Group at 31 December 2019:
Name Key Country of Percentage Principal activity
incorporation held
------------------------------ ------ ------------------- ----------------- ------------------------
13 Communications Limited 13CO London (UK) 100%* Dormant
21:12 Communications 2112 London (UK) 100%* A Ordinary Marketing & advertising
Limited 35%* B Ordinary agency
ACH Sec Global SL (previously ACH Madrid (Spain) 65.7% Public relations
known as ACH Cambre & corporate
SL) affairs consultancy
Cambre Associates SA CAM Bruxelles 76% Public relations
(Belgium) & corporate
affairs consultancy
Cambre Advocacy Maroc MAR Rabat (Morocco) 51% Corporate advocacy
& Communications
consultancy
CLAI SAS CLA Paris (France) 10% Corporate advocacy
& public affairs
consultancy
Curious Design S.r.l. CUR Milano (Italy) 75% Marketing & advertising
agency
Della Silva Communication DS Milano (Italy) 51% Dormant
Consulting S.r.l.
EngageComm Pty Limited ENG Sydney (Australia) 51%* Public relations
& corporate
affairs consultancy
HIT S.r.l. HIT Milano (Italy) 57.71% Events management
& human resources
provider
ICAS Limited ICAS London (UK) 100%* Public relations
consultancy
Impact PR Limited IMPA London (UK) 100%* Public relations
& corporate
affairs consultancy
Kohl PR und Partner KOHL Berlin (Germany) 75% Public relations
GMBH & corporate
affairs consultancy
Martis Consulting Sp. MRT Warsaw (Poland) 60% Public relations
z o.o. & corporate
affairs consultancy
Newgate Brussels SPRL NGBR Bruxelles 100%* Non-trading
(Belgium)
Newgate Communications NGHK Hong Kong 85%* Public relations
(HK) Limited & corporate
affairs consultancy
Newgate Communications NGSN Singapore 51%* Public relations
(Singapore) Pte. Ltd & corporate
affairs consultancy
Newgate Communications NGGE Hamburg (Germany) 100%* Non-trading
Germany GmbH
Newgate Communications NGAS Sydney (Australia) 66.72%* Public relations,
Pty Limited corporate affairs
& research consultancy
Newgate Communications NGCB Beijing (China) 85%* Public relations
(Beijing) Limited & corporate
affairs consultancy
Newgate Communications NGAD Abu 76%* Public relations
FZ-LLC Dhabi (United consultancy
Arab Emirates)
Newgate Communications NGCL London (UK) 100%* Public relations,
Limited corporate affairs
& research consultancy
Newgate Media Holdings NMHL London (UK) 100%* Intermediate holding
Limited company
Newgate PR Holdings NPRH London (UK) 100%* Intermediate holding
Limited company
Newgate Public Affairs NGPA London (UK) 100%* Dormant
Limited
Newgate Public Relations NGPR London (UK) 100%* Dormant
Limited
Newgate Sponsorship NGSL London (UK) 85%* Non-trading
Limited
Newington Communications NEW London (UK) 60% Public relations
Limited & corporate
affairs consultancy
Porta Australia Holdings PAHP Sydney (Australia) 51%* Intermediate holding
Pty Limited company
Porta Communications MIDC London (UK) 100%* Intermediate holding
Midco Holdings Limited company
Porta Communications PORT London (UK) 100% Intermediate holding
Plc company
PPS (Local and Regional) PPS London (UK) 100%* Dormant
Limited
Redleaf Polhill Limited REDL London (UK) 100%* Public relations
consultancy
Sec & Associati S.r.l. SEC-A Torino (Italy) 51% Public relations
& corporate
affairs consultancy
Sec & Partners S.r.l. SEC-P Roma (Italy) 50.5% Public relations
& corporate
affairs consultancy
Sec Mediterranea S.r.l. MED Bari (Italy) 51% Public relations
consultancy
SEC+Latam Communications SEC-L Bogota (Colombia) 51% Public relations
Estrategica SAS & corporate
affairs consultancy
Springall Gbr SPRG Hamburg (Germany) 100%* Dormant
Velvet Consultancy Limited VELV London (UK) 100%* Dormant
------------------------------ ------ ------------------- ----------------- ------------------------
*Indirectly held
------------------------------ ------ ------------------- ----------------- ------------------------
Significant judgements and assumptions
SEC Newgate S.p.A holds preferred shares in CLAI SAS which
represent 10% of the ordinary share capital and 50% + 0.1 of the
voting rights. SEC Newgate also holds options which would allow the
company to acquire the remaining 90% of the share capital in CLAI
SAS within the earn out period. The financial statements of the
subsidiary have been consolidated at 100% on this basis.
Audit exemptions
The following Group entities are exempt from audit by virtue of
Section 479A of the Companies Act 2006:
13 Communications Limited
Impact PR Limited
Newgate Media Holdings Limited
Newgate PR Holdings Limited
Porta Communications Midco Holdings
Limited
ICAS Limited
Newgate Public Affairs Limited
Newgate Public Relations Limited
Newgate Sponsorship Limited
PPS (Local and Regional) Limited
Redleaf Polhill Limited
Preparation & filing exemptions
The following Group entity is exempt from preparing/filing
individual accounts by virtue of Sections 394A or 448A of the
Companies Act 2006:
Velvet Consultancy Limited
Statutory guarantees
SEC Newgate S.p.A has provided statutory guarantees to the
following entities in accordance with Section 479C of the Companies
Act 2006:
13 Communications Limited
Impact PR Limited
Newgate Media Holdings Limited
Newgate PR Holdings Limited
Porta Communications Midco Holdings
Limited
ICAS Limited
Newgate Public Affairs Limited
Newgate Public Relations Limited
Newgate Sponsorship Limited
PPS (Local and Regional) Limited
Redleaf Polhill Limited
SEC Newgate S.p.A has provided a statutory guarantee to the
following entity in accordance with Section 394C of the Companies
Act 2006:
Velvet Consultancy Limited
30. Non-controlling interests
Set out below is summarised financial information for each
subsidiary that has non-controlling interests that are material to
the group. The amounts disclosed for each subsidiary are before
inter-company eliminations.
Summarised statements of financial position
At 31 December 2019
EUR'000 ACH CAM CLA HIT KOHL MRT NEW NGSN NGHK NGAS SEC-L SEC-P 2112
--------------------- ------ ------ -------- ------ ------ ------ -------- ------ ------ -------- ------ ------ --------
Non-current
assets 89 557 849 670 77 163 678 951 292 1,593 206 1,021 200
Current
assets 372 1,628 2,358 405 160 236 1,371 526 345 5,164 852 1,173 992
Non-current
liabilities (156) (497) (111) (139) (57) (131) (423) (76) (58) (1,936) (84) (129) (4,392)
Current
liabilities (324) (866) (1,399) (270) (103) (136) (1,017) (170) (258) (3,877) (631) (644) (764)
--------------------- ------ ------ -------- ------ ------ ------ -------- ------ ------ -------- ------ ------ --------
Net
assets/(liabilities) (19) 822 1,697 666 77 132 609 1,231 321 944 343 1,421 (3,964)
--------------------- ------ ------ -------- ------ ------ ------ -------- ------ ------ -------- ------ ------ --------
Non-controlling
interest (7) 197 - 282 19 53 244 603 48 314 168 703 (1,031)
--------------------- ------ ------ -------- ------ ------ ------ -------- ------ ------ -------- ------ ------ --------
At 31 December 2018
EUR'000 ACH CAM CLA HIT KOHL MRT NEW SEC-L SEC-P
-------------------------- ------ ------ ------ ------ ----- ------ -------- ------ ------
Non-current
assets 79 78 549 9 24 17 251 84 762
Current
assets 399 1,656 1,918 941 85 259 1,679 1,163 1,486
Non-current
liabilities - - (111) (88) (14) - - (42) (98)
Current
liabilities (313) (626) (784) (203) (50) (174) (1,103) (802) (733)
-------------------------- ------ ------ ------ ------ ----- ------ -------- ------ ------
Net assets/(liabilities) 165 1,108 1,572 659 45 102 827 403 1,417
-------------------------- ------ ------ ------ ------ ----- ------ -------- ------ ------
Non-controlling
interest 57 266 - 279 11 41 331 198 701
-------------------------- ------ ------ ------ ------ ----- ------ -------- ------ ------
Summarised income statements
At 31 December 2019
EUR'000 ACH CAM CLA HIT KOHL MRT NEW NGSN NGHK NGAS SEC-L SEC-P 2112
------------------- ------ ------ ------ ------ ----- ---- ------ ----- ----- ------ ------ ------ ------
Revenue 988 4,229 4,162 1,633 678 969 3,508 431 667 5,141 4,052 1,682 1,318
(Loss)/Profit
for the
period (202) 364 548 53 32 70 (248) 5 44 341 261 129 (818)
------------------- ------ ------ ------ ------ ----- ---- ------ ----- ----- ------ ------ ------ ------
(Loss)/Profit
attributable
to non-controlling
interest (69) 87 - 22 8 28 (99) 2 7 113 128 64 (213)
------------------- ------ ------ ------ ------ ----- ---- ------ ----- ----- ------ ------ ------ ------
At 31 December 2018
EUR'000 ACH CAM CLA HIT KOHL MRT NEW SEC-L SEC-P
--------------------- ----- ------ ---- ------ ------ ------ ------ ------ ------
Revenue 902 4,064 545 1,112 401 1,080 4,100 2,618 1,388
(Loss)/Profit
for the
period (94) 351 129 39 (254) 20 42 345 299
--------------------- ----- ------ ---- ------ ------ ------ ------ ------ ------
(Loss)/Profit
attributable
to non-controlling
interest (32) 84 - 16 (63) 8 17 169 148
--------------------- ----- ------ ---- ------ ------ ------ ------ ------ ------
31. Related parties
From time to time the Group enters into transactions with its
associate undertakings. For amounts paid to key managers please
refer to the table within note 4. For payables to related parties,
please refer to note 21; for borrowings please refer to note
22.
During the year, Newgate Communications Limited paid Barbican
Centre Trust Ltd, a registered charity and a company of which Emma
Kane is the Chairman, 14 EUR'000 (GBP12,000) for corporate
membership. As at 31 December 2019, this amount was due to the
Barbican Centre Trust Ltd.
During the year, the Group was invoiced 6 EUR'000 (A$10,000) for
flowers by Buds and Poppies, a florist company owned by the wife of
Brian Tyson. An annual membership fee of 5 EUR'000 (A$8,000) was
paid to the Committee for Sydney, of which Brian Tyson is also a
Director. No amounts were outstanding to either party at the year
end.
All related party transactions were on normal commercial
terms.
32. Ultimate controlling party
There is no ultimate controlling party. At 1 January 2019, SEC
Newgate S.p.A was 66.06% controlled by Fiorenzo Tagliabue.
Following the acquisition of Porta Communications Plc, SEC Newgate
S.p.A is 36.03% controlled by Fiorenzo Tagliabue.
33. Impact of adopting IFRS 16 Leases
This note explains the impact of the adoption of IFRS 16 Leases
on the Group's financial statements.
Cumulative effect of initially applying IFRS 16
The Group has adopted IFRS 16 from 1 January 2019 which resulted
in changes to the accounting policies and adjustments to the
amounts recognised in the financial statements. The Group has
applied the cumulative effect method in accordance with IFRS
16.C5(b) and has elected to apply IFRS 16 retrospectively with the
cumulative effect of initially applying the Standard recognised at
the date of initial application.
The Group has not restated comparatives for the 2018 reporting
period, as permitted under the specific transition provisions in
the Standard.
For additional information about the Group's current and
historical accounting policies relating to leases see note 1.
Impact of adoption
The following summarises the impact of adopting IFRS 16 on the
Consolidated Statement of Financial Position and the Consolidated
Statement of Comprehensive Income.
(i) Adjustments to assets and liabilities related to adoption of
IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. Theses
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 3%.
The Group did not recognise any finance leases in accordance
with IAS 17 in the previous accounting period. Therefore lease
liabilities at the date of initial application were recognised for
leases previously classified as operating leases in accordance with
IAS 17.
The associated right-of-use assets were measured at the amount
equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognised in the
balance sheet as at 31 December 2018. There were no onerous lease
contracts that would have required an adjustment to the
right-of-use assets at the date of initial application.
(ii) Explanation of adjustment to profit or loss
EBITDA, amortisation and depreciation, and finance expense have
all increased as a result of the change in accounting policy.
Rental costs relating to operating leases under IAS 17 were
previously included in rental expenses (note 5). These are no
longer expensed under IFRS 16 and the costs are accounted for
through the lease liability and associated interest expenses, which
have been included in finance costs. Amortisation and depreciation
has increased due to the additional right-of-use assets recognised
under IFRS 16.
(iii) Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the Standard:
-- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics;
-- reliance on previous assessments on whether leases are onerous;
-- the accounting for operating leases with a remaining term of
less than 12 months as at 1 January 2019 as short-term leases; the
exclusion of initial direct costs for the measurement of the
right-of-use asset at the date of initial application, and;
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
34. Subsequent events
There are no significant subsequent events which require
disclosure up to the date that the financial statements were
approved 28 May 2020.
Please refer to the Post Balance Sheet Events in the Chief
Executive's Review for further details on the impact of Covid-19 on
the Group.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UAORRRKUNRUR
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June 02, 2020 02:00 ET (06:00 GMT)
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