TIDMSECN
RNS Number : 3641Z
SEC Newgate S.p.A.
21 May 2021
21 May 2021
SEC Newgate S.p.A.
("SEC Newgate", "the Company" or "the Group")
Audited results for the year ended 31 December 2020
SEC Newgate S.p.A (AIM:SECN)., the insight-driven global
strategic communications group that works at the nexus of business,
politics, communities, markets and media, today announces its
audited final results for the year ended 31 December 2020.
Financial Highlights
FY 2020 FY 2019
EUR million EUR million
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Revenues 65.33 47.55
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Gross profit 56.11 37.60
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Operating profit 4.18 1.81
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Profit before tax 3.05 1.27
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Net debt (1) (13.03) (17.21)
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Net cash inflow from
operating activities 7.22 5.09
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-- Prior year comparatives include the results of the previous
SEC S.p.A. and for Porta Communications Plc and its subsidiaries
from the date of acquisition 3 September 2019; 2020 results are for
the enlarged SEC Newgate S.p.A. group
-- (1) including EUR5.63m leases in 2020 and EUR8.47m in 2019
Operational and Strategic Highlights
-- Launch of TRUE, our proprietary, innovative AI reputation monitoring and assessment system
-- Establishment of SEC Newgate US LLC in the United States in
partnership with Mike Holtzman, Bellwether Strategies
-- Expansion into Greater China, led through appointment of
James Hill as a new Managing Director in Hong Kong
-- Agreement signed in December 2020 for acquisition of majority
holding in Orca Affairs GmbH, Berlin, in line with the Group's
acquisition strategy, recognised from April 2021
-- top 30 global PR group ranking (PRovoke Awards, 2020)
Post year-end Highlights
-- Development of a new brand identity and Group positioning launched January 2021
-- Establishment of SEC Newgate CEE in March 2021, to accelerate
the Group's development across the Eastern Europe Region
-- Declaration of maiden final dividend of 0.5p
Commenting, John Foley, Chairman, said:
"The fact that the new Group delivered results in line with
management expectations is a testament to the proactive steps taken
to manage and mitigate the impact of the pandemic. The results
demonstrate the power of the team's adaptive entrepreneurial
spirit, collaborative approach and constant focus on the quality of
the services we provide. The Group is in a strong financial
position with a significant secured pipeline and a strong
leadership team. The Group's turnover, profitability, margins and
retention rates remain high. The outlook is, therefore, exciting
despite the uncertainties caused by Covid-19 and we face the future
with both confidence and enthusiasm."
Fiorenzo Tagliabue, Group Chief Executive, said:
" After the positive results of 2020, a strong start to the
2021, the financial consolidation of the Group, and achieving the
targets in terms of savings and synergies after 2019's business
combination, we are now ready for an even more demanding step
forwards which will be to expand our geographical reach, our
knowhow - above all in the digital environment - and our financial
solidity. In other words, we are set to continue our
transformational evolution and to achieve the new targets and
objectives that would go with that. "
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 338 339
emma.kane@secnewgate.co.uk
Sergio Penna (Group CFO) Tel: +39 338 8357936
penna@secrp.com
Arden Partners (Nominated Adviser Tel: +44 ( 0) 20 7614 5900
and Broker)
Richard Johnson
Notes to Editors
-- SEC Newgate is an award winning strategic communications
firm, which ranks in the Top 30 groups in the world. The Agency's
team consists of about 600 staff, working in 37 offices across five
continents.
-- SEC Newgate's focus is on achieving positive outcomes through
communications, advocacy and research, helping clients clearly
demonstrate their purpose, value, and impact locally, nationally
and internationally.
-- Further information is available at the Group's website: www.secnewgate.com
Chairman's Statement
2020 was the first full year of reporting for SEC Newgate S.p.A.
following the acquisition and the creation of the enlarged group in
September 2019. It is a year that started with great energy, a
significant pipeline, and with all businesses performing in line
with or ahead of budget and management expectations.
On 11 March 2020, the World Health Organization (WHO) declared
the outbreak of Covid-19 a pandemic; its impact was felt across
Group. Despite the huge challenge presented, we did not standstill.
With a clear vision, the Group forged ahead achieving its strategic
objectives for the year ended 31 December 2020. The fact that the
new Group delivered results in line with management expectations is
a testament to the proactive steps taken to manage and mitigate the
impact of the pandemic. The results demonstrate the power of the
team's adaptive entrepreneurial spirit, collaborative approach and
constant focus on the quality of the services we provide.
People
This year, it is right that our people come first. I would like
to thank every single member of our team for all that has been
achieved. Their resilience has been fully tested and the excellent
results are a testament to the diversified, dynamic group that we
have created.
The Group's agencies quickly adapted to the changed working
environment and all implemented business continuity plans, working
remotely under varying levels of lockdowns in their markets around
the world.
Our strength has been rooted in our collaborative approach,
sharing best practice initiatives and experiences, cohesive
culture, the quality of the service we provide, the innovation that
has been applied, and the bond that has been created by supporting
each other in these times of great adversity.
I would also like to thank our partners - some 1,500 clients -
who we have worked with to find new ways to use communications,
advocacy and research, to clearly demonstrate their purpose, value
and impact locally, nationally and internationally. Never has it
been more essential to be able to communicate effectively with
every stakeholder - internally and externally.
Financial & Operational Review
Our financial results are reported in EUR '000; prior year
comparisons only include results of the previous SEC S.p.A.
Group.
2020 2019
EUR '000 EUR '000
Revenues 65,332 47,550
Gross profit 56,111 37,605
Operating profit 4,183 1,812
Profit before tax 3.045 1,271
Net debt (excl. leases) 7,407 8,740
Net Cash Inflow from Operating Activities
A more detailed commentary on the 2020 financial results can be
found in the Group CFO's Review but the net cash inflow of EUR7.2m
from operating activities has strengthened the Group's financial
position. This was the result of a constant focus on both the
Group's liquidity position and its cost base.
Dividends
Given the very positive result of end year 2020, the Board has
recommended a final dividend of 0.5 pence per fully paid ordinary
share to be approved at the General Assembly. The aggregate amount
of the proposed dividend is GBP 123,554.61 out of retained earnings
at 31 December 2020, the amount was not recognized as liability at
year end.
The dividend reflects the growth of the Group and the Board's
confidence in the outlook. If approved at the General Assembly to
be held on 8 June 2021, the dividend will be paid on 25 June 2021
to those shareholders on the register at the close of business on
11 June 2021. The shares will become ex-dividend on 10 June
2021.
Acquisitions & Disposals
In line with the Group's Strategic Plan 2021/2023 and stated
acquisition strategy, the Group took the following key strategic
steps:
SEC Newgate US LLC - In July 2020, SEC Newgate was established,
operating from New York and Washington. This represented the
Group's first expansion into the North American market. The US is a
key strategic market for the Group as it strengthens its geographic
presence and ambitions to act as a global player in the
communications market. The Group has a 55% ownership with the
balance held by the US executive partner Bellwether Strategies.
Orca Affairs GmbH - On 23 December 2020, the Group committed to
acquire a 60% shareholding in four tranches (15% per annum until
2024) in Orca Affairs GmbH ("Orca Affairs") Orca Affairs, based in
Berlin, has a strong track record in public and corporate affairs
at a national level.
Post Balance Sheet Events
On 18 January 2021, the Group announced the restructuring and
rebranding of its largest UK agencies; as part of this combination,
SEC Newgate is increasing its stake in Newington from 60% to 100%,
and the business and assets of Newington were transferred to SEC
Newgate UK Ltd.
On 2 February 2021, Sergio Penna was appointed to the Board of
SEC Newgate as Group CFO; Anna Milito, Deputy Group CFO, stepped
down from the Board.
Outlook
The Group is in a strong financial position with a significant
secured pipeline and a strong leadership team. There is no doubt
that over one year on, the impact of Covid-19 continues to be felt
both personally and professionally but the fear of uncertainty
which was felt at the start of the pandemic has been replaced with
a cautious sense of confidence that our business model is robust
enough to withstand the worst effects of Covid-19.
The Group's senior leadership team continues to work tirelessly
to protect the finances of the business and each of our subsidiary
businesses and to ensure that service levels remain high. The team
is winning exciting new mandates and is increasingly cross-selling
services across its geographic footprint. The Group's turnover,
profitability, margins and retention rates remain high. The outlook
is, therefore, exciting despite the uncertainties caused by
Covid-19 and we face the future with both confidence and
enthusiasm.
Group Chief Executive's Review
The worldwide pandemic catapulted almost everyone in business
into a very tough year. For SEC Newgate, there was the added
complexity that 2020 was our first full year following 2019's
business combination and therefore a period during which we would
be testing how well the two groups could work together as one
entity.
The results, as evidenced by our numbers, are more than
satisfactory, indeed they are brilliant: we achieved the Profit
Before Tax targets that we forecast before the Covid-19 emergency
struck. Above all, the Group has demonstrated great resilience, and
a strong ability to react to the crisis by developing new
opportunities within the market, getting closer to our clients
without putting the health and safety of our colleagues at
risk.
For this reason, the first word I wish to share here is
gratitude: to all our people, regardless of their seniority or age,
who accepted the challenge with bravery and positivity; and, to all
our clients which have continued to trust us and our work.
As significant, is the route we have taken (and continue to
take) in order to integrate our culture and vision and establish a
more solid market position.
The quarterly meetings of our Managers' Committee (comprising
all the agencies' managing directors), and the experience of our
monthly Executive Committee (our executive Board sessions), have
all contributed to a constant exchange of ideas and sharing of
projects. These have in turn improved our culture and allowed us to
fine-tune our governance at the end of the year. This now
comprises: three regional areas, each managed by one of the three
Deputy Group CEOs (UK and Americas, APAC and EMEA), and the
constitution of the Senior Leadership Team (SLT) composed of the
three Deputies, the Chairman of the Managers' Committee and the
General Manager of our business in Italy.
The work undertaken on our positioning and the resultant
rebranding - which will be fully rolled out by the end of 2021 -
will provide greater visibility of the Group on the market and an
improved awareness of our brand, highlighting even more effectively
our business model that is unique at a worldwide level.
In spite of the pandemic and the consequent "handbrake strategy"
(in terms of costs) that we initiated as soon as Covid-19 cases
started soaring, the Group grew significantly in 2020.
Specific performance against our Strategic Pillars
Despite the impact of Covid-19, the Group successfully achieved
the goals set out in its Strategic Plan, unveiled in November 2019.
The steps taken since have put the Group on a stronger and more
sustainable financial foundation.
Financial:
-- Cash generation: excellent cash generation achieved at the
operational level (inflow EUR7.2m)
-- Savings : EUR3.1m through the combined effect of local
governments' assistance and operational cost reductions realised by
the management
-- Facilities : during the year, the Group secured a EUR2.5m through a Convertible Bond
Brand:
-- Branding : Developed new SEC Newgate brand identity which
will be adopted by all Group agencies by the end of 2021
-- Rankings : Ranked 30th in the PRovoke Global Top 250 PR
Agency Ranking 2020, rising from 53rd in 2019; placing the business
7th in Europe
-- Awards : The Group's agencies won many awards including Best
Integrated Campaign (PRCA DARE Awards 2020) and Planning Campaign
of the Year (PRCA Public Affairs Awards 2020)
Expansion:
-- United States : launch of SEC Newgate US, our start up based in New York and Washington.
-- Germany : committed to acquire Orca Affairs in April 2021, an
important acquisition in Germany making that market the Group's
third largest, after UK and Australia. Following this acquisition,
Italy, which was the Group's initial market, is expected to account
for 15.6% of the Group's total turnover. We now have a truly
international identity.
Innovation & Research:
-- AI : Launch of TRUE(R), SEC Newgate's Artificial Intelligence
powered platform to continually gauge the reputation of brands and
institutions . Following investment of EUR1.5m and development with
Bocconi, Italy's leading business school, and Imperial College
London. First commercial client, TreNord, secured.
After the positive results of 2020, a strong start to the 2021,
the financial consolidation of the Group, and achieving the targets
in terms of savings and synergies after 2019's business
combination, we are now ready for an even more demanding step
forwards which will be to expand our geographical reach, our
knowhow - above all in the digital environment - and our financial
solidity. In other words, we are set to continue our
transformational evolution and to achieve the new targets and
objectives that would go with that.
ASIA PACIFIC
Brian Tyson, Deputy Group CEO
Despite the extraordinary challenges wrought by the Covid
pandemic, the APAC region of SEC Newgate more than weathered the
storm and recorded its strongest ever performances as a group.
Our three key markets of Greater China (including Hong Kong),
Singapore and Australia faced different challenges throughout the
year but combined to deliver a 13% increase in revenue year-on-year
over 2019 and increased profit before tax by 100% year-on-year.
In our Greater China business, we successfully transitioned the
leadership of the group to welcome on board James Hill from
Sandpiper group who hit the ground running and produced a resilient
end to the year to set up a strong foundation for 2021. In
Singapore, Terence Foo and his team produced their highest profit
since inception back in 2013 while our Australian business overcame
both the pandemic disruption but also the worst bushfire season in
Australian history to report a record result.
Individual market summaries follow:
Australia
Newgate Australia continued its strong track record of
performance achieving its higher ever revenues, a 13.5% increase on
2019's year-on-year performance which itself was a record revenue
figure. The margin achieved was also significant ahead of
forecasts, and, while this was boosted by a saving of in travel and
marketing costs linked to the Covid lockdowns, the result was
nevertheless a highlight within the group.
All six offices and our practice areas of financial and
corporate communications, public affairs, community engagement and
the research business all contributed to the performance as the
business quickly adjusted to the new environment which saw all
staff working from home for extended periods.
A key feature of the year was the instigation of a weekly Covid
sentiment community Tracker research study which kicked off in
mid-March just as the virus was starting to take hold and continued
each week right up until Christmas - a total of 42 weeks. The
tracker research was market leading and provided great insights for
government and the corporate sector into how community sentiment
was trending on a weekly basis.
Another highlight for the year involved our crisis
communications and advocacy work to government and health
authorities on behalf of a number of leading Australian businesses
including Bunnings Hardware, Officeworks Thrifty and the Star Group
seeking to obtain "Economy Essential" status and successfully avoid
being shut down in the early months of the pandemic.
Our engagement team was deeply involved in the government
bushfire recovery works assisting Laing O'Rourke which won the
tender to manage large components of the clean-up of towns and
communities ravaged by the unprecedented fire season in NSW. Our
financial comms team enjoyed another busy year which included work
on a number of significant transactions such as the Resolution
Life/AMP deal and the Village Roadshow acquisition by private
equity firm BGH Capital along with the regular financial calendar
reporting for many of our listed clients.
Other highlights included our ongoing work supporting Google,
Minderoo, Luerssen, Snowy Hydro, Amex, Mondelez, the Heart
Foundation and Diageo in the media, stakeholder and public affairs
space.
EngageComm, our conflict brand in the engagement field was very
busy working on a project for LendLease around remediation works
for a housing development throughout 2020, with consultants from
both Newgate and EngageComm working across briefs of both
businesses.
2021, which could be an election year in Australia, has
commenced in the same vein as 2020 and the group is gearing up for
the transition of its brand from Newgate to SEC Newgate by year end
and a new focus on targeting corporate clients at the Board and
Executive level with new offerings in the risk management, trust
and reputation space.
Greater China
2020 was a year of transition for the business in Greater China.
Its proximity to the epicentre of the Covid-19 pandemic, continuing
political uncertainty in Hong Kong and escalating trade tensions
between the United States of America and China, coupled with senior
departures at the business, significantly weighed on its
performance. These factors resulted in a reduction in revenues and
a widening of losses on a pre-tax basis, as a number of clients
deferred spending or brought public relations activities
in-house.
Notwithstanding this very challenging trading environment, the
business secured a number of high-profile fundraising, shareholder
activist and restructuring projects, including work for 8F Asset
Management, Green Monday, Third Point and Qiming Venture Partners.
In addition, the business expanded its scope of work with its two
largest retained clients in the technology and professional
services sectors.
During the year, the business successfully focused on
implementing tighter cost controls, stabilising its client base and
retaining its core team. Late in the third quarter, the business
appointed a new Managing Partner, based in Hong Kong, to oversee
the firm's expansion in Greater China.
This year has started well, with the business extending the
scope of work and fee levels for three major clients, including a
leading Asia based private equity firm, and securing a significant
new government affairs mandate with leading US technology and
mobility firm.
Singapore
2020 was a challenging year, but the Newgate Singapore team
acquitted itself well, managing a sustained high volume of work and
producing the highest level of profitability since inception.
The first quarter of the year was a difficult time, with client
projects delayed as the Covid-19 pandemic started to take root and
we moved to remote working from the beginning of February.
Fortunately, the team was able to adjust quickly to the challenges
of working from home by March, when Singapore implemented a
"circuit breaker" with heightened restrictions on movements and
requiring most residents to stay at home most of the time.
Work volume ramped up quickly during the second quarter and
remained high for the rest of the year. We handled a wide diversity
of projects, winning several new M&A, fund raising and
litigation support mandates, as well as interesting crisis
communications briefs related to Covid-19.
2020 also led to a renewed focus and commitment to staff
well-being and team cohesiveness, as well as to training and
development going forward.
EMEA Region (excluding Italy)
Tom Parker, Deputy Group CEO
Consistent with the wider Group, the performance of the EMEA
region was marked by the uncertainty created by the Covid-19
pandemic and determination, resilience and a spirit of
entrepreneurship in adapting to the new reality. By the end of the
first quarter 2020 forecasts were rapidly being reassessed and
practical steps taken to move client servicing and business
development online and realign costs.
Our businesses in Abu Dhabi, Germany, Poland and Spain were
rapidly confronted with the reality of projects being put on
standby, clients cancelling contracts, and the new business
pipeline slowing. Market conditions in France were less dramatic
but sluggish in the first half of the year while Brussels
experienced sustained client demand, driven primarily by its
sustainability, digital and trade practices. In the second semester
business conditions remained difficult in Abu Dhabi, Germany,
Poland and Spain but picked up significantly in France, as a result
of crisis communication and training missions. Brussels continued
its strong performance and enjoyed PBT at record levels.
Abu Dhabi
At the start of the 2020, the outlook was extremely positive
with open tenders, promising leads and positive feedback from
existing clients looking to renew contracts. Then in mid-March with
the outbreak of the Covid-19, UAE Governments immediately stopped
their budgets and the communications business in the region went
into lockdown.
Measures were immediately taken to reduce costs with a view to
dealing with the situation both in the short term but also with a
longer-term outlook, as little perspective was given as to when the
UAE would exit the lockdown. The region continued to be paralysed
by the pandemic to the end of the financial year which had a
significant impact on the agency's financial performance.
Belgium (Brussels)
Thanks to a very strong start to 2020 and a prudent approach to
costs, the impact of the Covid-19 pandemic was not as severe as
initially feared. Robust client demand was experienced through the
year and, with careful ongoing cost management, Cambre posted
financial results which were well above 2020 forecast.
Cambre adapted swiftly to the new virtual reality, moving client
servicing and business development online and extending our impact
beyond Brussels. Bright spots in 2020 were sustainability, trade,
and tech, and Cambre has a robust pipeline in these sectors, as
well as in healthcare, going into 2021. Investment in our digital
offer, new hires and smart tools, positions well Cambre for another
positive year in the competitive Brussels market.
France
CLAI saw its best year in 2020 in terms of Gross Profit with PBT
also ahead of budget. Following a slow start in the first semester,
complicated by the first lock down, activity was boosted in the
second half of the year, with crisis communication missions,
training sessions and a lot of work for ACOSS, (the public national
Health financial agency).
The migration to new ways of working internally and with clients
was key to the success in 2020 and bodes positively for 2021, with
60% of the 2021 budget already confirmed, interesting tenders
ahead, and a market situation where many competing agencies have
been seriously impacted during the crisis.
Germany
In Germany, as with other markets, the Covid crisis had a
dramatic impact on business sentiment and the pipeline. A cost
saving program and work plan for new business were rapidly put in
place to boost agency growth in the fields of social media, health
care, education, transformation and finance. New business
activities were difficult in the first semester but in the second
half of the year prospects were converted into new clients,
providing a more positive outlook for 2021.
Further to the investment in Orca Affairs in the autumn of 2020,
SEC Newgate's position on the German market has been significantly
boosted. Both agencies will benefit from complementary expertise
and networks in the public and governmental sphere and will work
closely together to further strengthen SEC Newgate's position on
the German market in 2021.
Poland
Company Gross Profit was in line with the budget despite Martis
falling victim to major cost-cutting amongst its clients, with
cancelled contracts and others significantly reducing their
budgets. In response, the company reduced direct costs.
Despite the pandemic, the Warsaw office remained open and
operated normally throughout the year, with consultants making
little use of the possibility to work remotely. In the second half
of the year, business started to pick up with new clients and some
existing clients returning to pre-pandemic levels of service. The
turn of the year has marked an improvement in financial performance
and with the expected economic recovery in 2021, the outlook for
the year ahead is optimistic.
Spain
2020 was a challenging year in Spain. The Covid pandemic had a
dramatic impact on the domestic Spanish market, however in the last
three months of the year, business did pick up, with a number of
client wins including Campinggaz, grupo SICOR and Bodegas
Yzaguirre.
With the ongoing pandemic uncertainty in Spain, the market
conditions continue to look difficult in 2021. Strong focus will
need to be given to consolidating existing clients such as Acciona,
John Deere and Edwards but opportunities for growth will be focused
on potential new business from the SEC Newgate international
footprint.
SEC Newgate Italy
Paola Ambrosino, Partner e Direttore Generale
2020 started with three lines of development: the new digital
and creative area called "Accelerate"; the presentation to the
public of TRUE, the platform that monitors reputation; and, the
enhancement of the international dimension consolidated in 2019
with the establishment of SEC Newgate. The outbreak of the pandemic
in Italy and then in the world has not held these challenges back
but has instead strengthened them and immersed them in a more
complex horizon, which however provided more opportunities.
For instance, Accelerate immediately offered a significant
contribution to the immense effort that the whole agency made, from
the months of the lockdown onwards, to imagine new ways of
communicating, to provide consultancy in areas complementary to PR
and advocacy, and to gain accreditation in less-traveled product
sectors. This is the case with our event streaming platform
LiveeXperience, which has enabled us to enhance our thirty years of
experience in event planning thanks to the digital skills provided
by Accelerate. This solution has been chosen by many of our
clients, but has also enabled us to find new ones, such as CGIL,
Italy's largest trade union, which selected it for its most
important events. It is also emblematic that an exclusive luxury
brand such as Vhernier, a long-standing client of the agency,
entrusted Accelerate with its transition to e-commerce, with the
design of a new website as well as innovative storytelling and
shopping experiences for its jewels, in order to tackle the impasse
of the closure of its showrooms around the world.
As for TRUE, the presentation to the public on 9 July was a
moment of extraordinary visibility not only for the Italian agency,
but for the entire Group, as the rise in the stock price
demonstrated. The meetings that took place in the following months
with high-profile companies confirmed that today there is no other
similar profound vision of reputation and allowed us to receive
valuable indications in order to make our product closer to budgets
and operational needs. For this reason, in January we started
working on the new release with a team from the University of
Milano-Bicocca, and we expect to market it in the summer.
The pandemic, due to its global nature, has made our
international dimension much more pressing and "hot". The crisis
allowed us to share with our colleagues of other Group agencies in
an easier way our choices, numbers, information and knowledge and
it intensified inter-group business opportunities.
Our international position and innovation have further
consolidated SEC Newgate's reputation and visibility in Italy. And
in a difficult context, which has nevertheless brought out the
necessary, if not indispensable, nature of communications and in
particular of PR and advocacy (considered in the emergency decree
as "strategic professions"), expanding and intensifying demand for
them, they have made possible an extraordinary growth in clients
and opportunities.
Crisis and reputation recovery, national and local advocacy,
marketing, and corporate communication are the areas of greatest
growth. In terms of product communication, it is mainly the food
industry that is driving the demand, while in the corporate sector
an important impulse comes from banks and financial services, legal
profession, and high-tech. The trend in infrastructure and urban
redevelopment projects is stable: in the recent weeks SEC Newgate
has been chosen in Milan by the owners of a railway area, including
Prada Holding, for the public consultation ("débat publique").
As a result, we were able to end 2020 with gross profit ahead of
the prior year.
UK and The Americas
Emma Kane,
Deputy Group CEO
There has never been a time when a clear vision and strong
values have been needed more. For the agencies and their clients,
the need to communicate clearly, regularly and to ensure that every
member of the team is supported has been essential. I would like to
thank the almost two hundred people who have given so much to each
other, their clients and the Group over the year under review.
Decisions have been taken with all stakeholders' needs being
taken into consideration. They have been taken with a medium-term
view not as a short-term, knee-jerk reaction and always through the
lens of our purpose, vision and values.
UK
In 2020, the UK agencies comprised 2112, Newgate Communications
and Newington Communications.
The start of the new decade delivered UK businesses not only
with the intense challenge that was inextricably linked to the
coronavirus pandemic but also the impact of the uncertainty
surrounding Brexit.
All SEC Newgate's UK agencies had enjoyed a strong, in most
cases record, first quarter. When the pandemic hit and the first
lockdown was enforced, their prior investment in infrastructure,
particularly in the IT required to work remotely, enabled them all
to transition seamlessly to an alternate working environment. The
challenges that came along with this change of environment were met
with enthusiasm by the teams, and ultimately contributed to the
great client work delivered during the year, as well as the overall
financial performance.
All UK agencies benefit from a strong retainer base which
provides good visibility of revenues and the ability to control
costs accordingly. This, coupled with the significant focus on the
improvement of margins over the prior year put them in a strong
position to withstand the impact of the turmoil that they all found
themselves in.
Of particular note, was 2112 which delivered its best financial
performance since its inception in 2012. The Agency benefits from
established clients such as Federated Hermes International, T Rowe
Price International, BNY Mellon and Janus Henderson all of which
pushed forward with additional projects during the year. The Agency
also launched a new brand positioning, "work with purpose", as well
as a new website and was the beneficiary of an increased demand for
digital advertising and web-based media. This provided a great
platform to drive new business with a focus across Asset and
Investment Management spaces and a new business drive which
attracted a number of new, significant clients - these included
Nuveen Real Estate, Mirabuad Asset Management, Metfriendly and
Pacific Asset Management amongst others.
Newgate Communications delivered a very strong performance with
PBT significantly ahead of the prior year. The results achieved
during the year under review reflect the restructuring of the
business and an intense focus on margin improvement.
Newington Communications had its high-quality work focused on
corporate and public affairs with local, national and European
representation recognised during the year with two PRCA Public
Affairs Awards. Whilst the Agency managed to maintain its fee
levels in line with the prior year, its pipeline was significantly
impacted by pandemic.
As of the 1 January 2021, Newington Communications became a
wholly owned Group subsidiary and was merged with Newgate
Communications to create a single entity - SEC Newgate UK. The
combined force will now offer its clients a seamless and fully
integrated service across Communications, Advocacy and
Research.
The Americas
2020 was a year of change and adaptation in the region.
In both North and South America, the communications industry
largely ground to a halt during the pandemic. In North America, the
pandemic coincided with the US elections whilst Colombia was
subject to a widespread lockdown from March to August.
Despite the challenging economic and political climate, SEC
Newgate S.p.A. pushed ahead with its strategic plan and entered the
North American market, opening SEC Newgate US offices in New York
and Washington DC in July 2020. This was a fundamental move by the
Group to strengthen its geographic presence and ambitions to act as
a global player in the communications market.
Colombia
SEC Newgate Colombia is a long-established business that had
enjoyed four years of sustained growth. Its 2020 results were
affected by the pandemic which had a serious effect on the local
and global economy and on the creation of jobs, a situation that
was aggravated by limited public resources to provide significant
support to the business sector.
Despite this difficult juncture, the agency managed to retain
more than 90% of its clients and generate new business
opportunities, mainly by offering additional services to existing
clients. In fact, the agency was at its most proactive in terms of
sales since its creation.
As a result, the scopes of work with Didi, Adidas and Diageo
were expanded during the second half of the year. The agency also
led and executed campaigns that involved creativity, design, and
digital work, such as the Crea Sonidos campaign carried out
together with Fundación Barco and Innpulsa (a public entity
attached to the Ministry of Trade, Industry and Tourism).
Costs were tightly controlled, and a number of significant cost
savings were secured.
US
SEC Newgate US was launched in July 2020 creating a platform for
further expansion over the coming years. The new entity, led by
Michael Holtzman, is a commercial venture with Bellwether
Strategies, in which the Group has 55% ownership. This structure
has enabled SEC Newgate to have a low risk, local presence with
well-established key professionals in a market which is of
paramount importance to the Group.
While the "start-up" nature of the operation was undeniable, the
US team nonetheless found themselves part of a dynamic, global
network of colleagues that created new opportunities for growth.
The close connection with international colleagues and the ability
to provide seamless working relationships across the global network
resulted in new business and a pipeline of new business for the
year ahead which was important as the domestic US market was not
only impacted by the pandemic and the dramatic scaling back of
budgets but also the long shadow cast by the US presidential
elections over public affairs work with many foreign embassies
taking a "wait and see approach" towards communications in the US.
Traditional sources of international accounts - such as tourism and
direct investment - evaporated. The nature of consultancy work
during the second half of 2020 was more project orientated with
short-term projects than the team would typically do.
Group CFO's Review
Sergio Penna
2020 was the first full year of trading for the newly merged SEC
Newgate Group, and of course, it was also a notable year because of
the outbreak of the worldwide Covid-19 pandemic. Both events
presented the Group with new and unexpected challenges resulting in
a unified global business focused on achieving its strategic goals
and positive about its future under the new SEC Newgate brand.
The finance team ensured the coordination of the reporting of
the single units, the delivery of internal and external
high-quality reports and analysis, as well as the support for many
extraordinary operations worldwide.
The most relevant operations in terms of acquisitions and
start-up were in line with the Group's Strategic Plan 2020/2022,
with a focus on North American, Asian and European markets:
-- In July 2020, the Group established SEC Newgate US LLC, a new
commercial venture based in New York City and Washington D.C. in
which the Group has a 55% ownership, expanding the footprint in the
United States for the first time,
-- In September, the Group hired a new Managing Partner in
Newgate Greater China in charge of the Far East business
development,
-- In December, the Group signed an agreement to acquire a 60%
shareholding in four tranches (15% per annum until 2024) in Orca
Affairs GmbH, based in Berlin, with a strong track record in public
and corporate affairs in Germany.
For the year ended 31 December 2020, the Group delivered its
first full year of positive Operating Profits and Profit before Tax
(PBT). These figures are not easily comparable to the prior year,
due the consolidation of the Group signed on 4 September 2019,
partially affecting the financial results.
Despite the impact of Covid-19, the Group successfully achieved
the goals set out in its Strategic Plan 2020/2022 released before
the pandemic outbreak, an impressive result made possible by the
reaction of the Group in term of business development and costs
control. On the revenue side, the Group provided a full spectrum of
high-quality additional services, while on the costs the "handbrake
strategy" guaranteed a strong basis, partially forced by external
factors in terms of travel, entertaining and office costs, but
primarily due to the proactive steps taken to manage and mitigate
the problem, proving the vision and the commitment of the SEC
Newgate team.
Key financials
-- Gross profit was EUR56.1m (2019: EUR37.6m)
-- Operating Profit was EUR4.1m (2019: EUR1.8m)
-- PBT was EUR3.0m (2019: EUR1.3m)
-- Net Debt Position was EUR13.0m, including EUR5.6m Lease
Liabilities (2019: EUR17.2m, including EUR8.4m Lease
Liabilities)
-- Cash Balance was EUR12.1m (2019: EUR6.1m)
Gross Profit is used to monitor our performance at a Group and
subsidiary level, netting the effect of the pass-through costs that
could be differently reported at local level (please refer to the
explanatory note included in the Consolidated Income
Statement).
Gross Profit was up by c. EUR18.5m with the increase mainly
attributable to the following consolidation of the new Group from
September 2019, with subsidiaries (mainly based in UK and
Australia) reporting four months results in 2019 while a full year
impact was included in 2020.
Employee expenses were up both in absolute terms (by c.
EUR13.7m, partially related to the full consolidation effect
mentioned above) and in relative terms when compared to GP (by 4%).
In terms of total staff, the Group employed 600+ people at the end
of 2020.
Amortisation of intangibles was higher than 2019 (by EUR300,000)
mainly due to the investment in Artificial Intelligence performed
over the last years, leading to the release in July 2020 of TRUE(R)
, SEC Newgate's Artificial Intelligence powered platform to
investigate the reputation of brands and institutions.
Depreciation is strongly influenced by the IFRS 16, that
requests to consider every long-term rent as an investment in fixed
assets supported by a financial lease, with monthly depreciation
instead of the rent costs. The amount was EUR1.0m higher than in
2019 mainly due to the full consolidation of those subsidiaries
(especially in UK) that were included only for four months in the
previous year.
Regarding the goodwill, after performing impairment tests on
each of our subsidiaries, we concluded that the only impairment
needed was on ACH (EUR95,000), mainly due to the critical situation
of the Spanish market strongly affected by Covid-19, that
influenced the performance of the company.
Other operating costs were c. EUR11.6m (2019: EUR10.7m) and
presented on a different and more transparent classification
respect to last year, with focus on the nature of the costs. The
increase by c EUR1.4m is mainly attributable to an increase in
professional and consulting fees (by EUR1.5m) and office expenses
(by EUR0.6m) partially offset by a decrease in marketing fees (by
EUR0.5m) and other administrative expenses (by EUR0.2m).
Finance expenses were up in the year by EUR0.5m, of which
EUR0.4m due to interest expense on financial loans and around
EUR0.1m due on financial leases related to IFRS 16 implementation.
The net loss on foreign exchange movements at the end 2020 was
partially mitigated by a GBP vs Euro currency forward signed in
November with the major Italian bank UniCredit to offset the
exchange rate effect and neutralize the risk.
Adjusted Profit
Since 2019, once IFRS 16 became effective, the Group moved away
from using EBITDA as a performance metric, now that rental expenses
have been replaced by depreciation and interest which falls below
EBITDA. For this reason, our focus has shifted towards PBT which
remains the main performance indicator.
This year the Group would like to introduce the use of the
non-GAAP measurement of adjusted profit. The Group believes that
the consistent presentation of adjusted profit, operating profit
and profit before tax provides a clearer representation of the
Group's business performance.
Adjusted profit is defined as profit after adding back
exceptional and/or non-operational items including amortisation of
acquired intangible assets (excluding software) and share-based
payment adjustments, as well as items considered exceptional due to
size or nature including business combination acquisition costs,
restructuring costs, impairment of goodwill, intangible assets and
investments and profit or loss arising on disposal of subsidiaries.
In 2020 the "Covid-19 income" is considered exceptional, and for
this reason excluded from the Group's adjusted profits:
Profit before
Operating profit tax
2020 2019 2020 2019
EUR'000 EUR'000 EUR'000 EUR'000
--------- -------- -------- --------
Reported 4,183 1,812 3,045 1,271
Impairment of goodwill 95 - 95 -
Acquisition costs (1) - 455 - 455
COVID income (2) (850) - (850) -
Share-based payments (3) - 32 - 32
Loss on disposal of subsidiary
(4) 2 - 2 -
Adjusted 3,430 2,299 2,292 1,758
(1) Acquisition costs include legal and advisory costs relating
to business combinations, earn-out acquisitions, and other similar
operations. In 2019 acquisition costs related to the acquisition of
the Porta Group.
(2) Covid income (reported within Other Income in the
Consolidated Financial Statements, see details in accounting policy
note g. Other income) is the income received as a direct
consequence of the Covid pandemic, comprising government salary
assistance and grants.
(3) Share-based payments relates to the impact of the accounting
stand for share-based compensations.
(4) Loss on disposal of subsidiary relates to the loss
recognised in 2020 as a result of the disposal of Cambre Advocacy
Maroc.
Cash Flow
The cash balance of SEC Newgate is EUR12.1 at the end of 2020
(EUR6.1m in 2019), and it was constantly monitored during the year
by weekly reports and monthly analysis reported to the Board of
Directors.
In 2020, the Group generated an outstanding net cash inflow from
operating activities of EUR7.2m (EUR5.1m in 2019). This positive
performance was the result of efficient business and financial
management. Since Covid-19 first outbreak, our team worked hard to
adapt quickly to protect the Group's cash position and liquidity,
secure savings, and take advantage of local government
initiatives.
We secured EUR105,000 rent reductions, EUR566,000 of other
permanent spending cuts and received the benefit of EUR850,000
non-refundable governmental assistance (including EUR590,000 of
salary assistance and grant schemes and EUR260,000) and EUR578,000
of deferred VAT payments.
On the other side, the Group generated a net cash outflow from
financial activities of EUR430,000 (outflow EUR5.3m in 2019).
During the year, SEC Newgate S.p.A. secured new bank loan
facilities including EUR1.0m from Banca Carige and EUR1.0m from
Banca Popolare di Milano, while other new borrowings include
EUR2.5m convertible bonds issued in February 2020 by Inveready.
Besides, the local finance teams worked on the government
assistance obtaining available forms of support, including
bounce-back loans and long-term loans renegotiation for a total of
EUR700,000.
The Group acquisition structure for new investments is usually
based on a three to five years Earn-out model. At the end of 2020,
the most important provisions are related to the acquisition of the
remaining part of the French subsidiary CLAI (EUR1.5m in 2021 and
EUR4.4m in 2026), the investment in the Colombian subsidiary SEC
Latam (EUR0.4m in 2022). The cash balance at the end of the year is
sufficient to cover these expected payments.
Group Finance Operations
During the first half of the year, the Group appointed the
current Group Finance Controller (in April 2020) and the current
Group CFO (in June), which worked together since the release of the
Consolidated Half Year results.
In addition to that, due to Covid-19 restrictions, starting
March 2020 the finance management of the Group was entirely
performed in remote working.
I personally wish to thank all the people involved in the 15
countries and 37 offices where we operate, starting from the local
CFOs and their teams, for delivering such a great effort and
results despite the critical situation, accepting the challenge
with positive attitude.
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 better informed decisions based on
true underlying performance and data.
Following the process after the acquisition at the end of 2019,
the Group finance function has implemented a process that now works
throughout the enlarged Group 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 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
The Net debt position as of 31 December 2020 was EUR13.0m
(including EUR5.6m Lease Liabilities), with a positive EUR4.1m
difference compared to 31 December 2019, reporting EUR17.2m
(including EUR8.4m Lease Liabilities). Please refer to note 18 of
the Consolidated Financial Statements for further details.
The EUR6m increase in cash and cash equivalents from EUR6.1m to
EUR12.1m is mainly due to the quality of the management and its
choices that ensured a strong cash inflow from operating
activities, as mentioned above.
New bank loans and other borrowings increased by EUR4.7m during
the year from EUR14.8m to EUR19.5m, Lease Liabilities decreased by
EUR2.8m from EUR8.4m to EUR5.6m.
Regarding the most important new bank loans and borrowings:
-- on 20 February 2020 the Group signed a bank facility with
Banca Popolare di Milano for EUR1.0m, at Euribor 3 month + 1.65
interest rate, payable in 36 months with maturity in 2023
-- on 25 February 2020, SEC Newgate S.p.A. secured a EUR2.5m
convertible bond with the Spanish institutional investor Inveready
which was subscribed on 4 March 2020, with a maturity of seven
years from issuance (in 2027) and interest payable quarterly at
3.50%
-- on 4 March 2020 the Group signed a bank facility with Banca
Carige for EUR1.0m, at Euribor 6 month + 1.20 interest rate,
payable over 48 months starting June 2022 with maturity in 2026
Lease Liabilities are related to IFRS 16 application, effective
since January 2019. IFRS 16 requires a lessee to recognise assets
and liabilities for all leases with a term of more than 12 months;
the lessee is required to recognise a right-of-use asset
representing its right to use the underlying leased asset and a
lease liability representing its obligation to make lease
payments.
SEC Newgate Group is strongly affected by the IFRS 16 that is
applied to all the rent agreements related to office facilities
worldwide; in 2021, due to a new contract signed for the UK
headquarter, our Business Plan already included a strong increase
of both right-of-use asset and lease liability that is going to
decrease over the years in line with monthly lease payments.
Whilst the Group is now in a better position to compete in
international markets, the condition of the net debt cannot be
ignored, and now that the business combination is effective and the
effect of the government support on Covid-19 is decreasing, it is
the immediate focus of management to improve and strengthen the
Group's capital structure.
Post Balance Sheet Events
The Strategic Plan 2021/2023 will represent our main guidance
for the coming years, with key goals including, but not limited to,
an increased visibility and reputation of the Group, a better level
of profitability and cultural integration.
During 2020, we united the teams of the main UK agencies in one
premise, preparing the ground for the upcoming reorganisation and
rebranding. On 15 January 2021, the Group acquired the 40% minority
stake not already owned of Newington, taking the holding up from
40% to 100%. The total consideration for the acquisition was around
EUR485,000, 30% satisfied by SEC Newgate issuing and allotting new
ordinary shares to the vendors and the remaining 70% payable in
over three years. The same day, the Group announced that the
business and the assets of Newington were transferred to SEC
Newgate UK Ltd (previously known as Newgate Communication Ltd).
Regarding the UK headquarters, we gave notice to both the
previous offices based in Great Suffolk Street and Basinghall
Street, with a total EUR300,000 saving expected in 2021 with
respect to the previous year, and an additional saving of around
EUR1.0m per annum from January 2022, once SEC Newgate UK Ltd
officially moves to a new premise, with a 10-year lease (with a
five year break clause) whose heads of terms were signed the on 9
April 2021.
The IFRS 16 treatment of this operation was already included in
the Business Plan 2021/2023: the cost of the rent is booked as
depreciation, with an increase of this amount in Q4 2021 when a
shot-term overlapping of the two contracts will occur - during the
fit out of the new office - but with a strong decrease of the rent
cost (therefore, the depreciations) from 2022 on.
On the other side, we included in the Business Plan c. EUR6.0m
as capex in 2021 related to the new UK office (EUR5.0m of rent and
EUR1.0m of fittings).
On 26 January 2021, our Nomad, Arden Partners, finalised and
released to the market a Research Note on SEC Newgate; this
analysis, along with other positive announcements in terms of
M&A and estimated 2020 results, led to an increase in the SEC
Newgate share price up to 95 pence at the end of the first quarter
of 2021, compared to 43 pence at the beginning of 2020.
On 22 March 2021, the Group announced the establishment of a new
commercial venture, SEC Newgate CEE, in Poland, to accelerate the
business development across the Central Eastern Europe Region; the
cost for the operation was represented by an intercompany loan of
EUR200,000 in favour of the start-up.
On 29 March 2021, the Board of Directors approved the "Incentive
Scheme Plan for Managers and key employees", with immediate effect
for the beneficiaries included in the list. The Incentive is
calculated on the next three years basis, in terms of both Group
and local subsidiaries' results; the Incentive Plan was included in
the Intention Statement announced after the acquisition in
September 2019 and confirmed in September 2020.
On 14 April 2021, SEC Newgate performed the first payment of
EUR700,000 to Orca Affairs GmbH, as part of the agreement signed on
23 December 2020; the initial consideration comprises the 15% of
the issued share capital of the target, with attached voting rights
of 60% passing to SEC Newgate (sufficient to guarantee the control
and full consolidation of the results). In 2019, Orca Affairs'
turnover was around EUR10.5m, in part influenced by extraordinary
business. The acquisition will be earnings enhancing in 2021.
Conclusion
Thanks to the actions promptly implemented in March 2020 and
following months, SEC Newgate was able to overcome with impressive
results the Covid-19 pandemic 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. It was the most difficult challenge of the year in terms
of business development, execution, client management and financial
strategy.
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.
The Group closed the 2020 with some self-assurances in terms of
costs control, spending review, internal organization of the
offices, potential expansion in new countries, and excellent
results on specific markets like Australia over the year. The key
element for the finance team was a constant analysis of the cash
balance.
At the end of the year, 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, and the vision of the Board of Directors is
clear.
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 to a stronger bottom line.
We are confident that, approaching the second year of trading as
an enlarged Group, based on the response to the challenges of this
unique year and the recent results evidenced by the share price
trend, SEC Newgate is now in a much stronger position to improve
operating performances going forwards than it has ever been
before.
SEC Newgate Corporate Purpose and Responsibility Statement
SEC Newgate's mission is to create positive outcomes for clients
and communities in a connected world, where companies increasingly
need communication partners with strong local roots, global reach
and true entrepreneurial spirit, driven forward by talented
people.
As such the integrity of our advice, the ethical approach of our
people and our role as a purpose-driven business consultancy are
critical to our success.
We have analysed the 17 Global UN Sustainable Development Goals
and taken steps to ensure that the way we conduct our business,
recruit and safeguard our people, ensure we play a positive role in
our communities and drive sustainable behaviours through our
business to reflect these objectives.
We are also currently making strong progress through the B Corp
audit process with SEC Newgate UK seeking to achieve B Corp status
as a foundation for wider uptake around the SEC Newgate group.
We have detailed our approach to delivering our corporate goals
under the following headings of purpose and governance, people and
planet:
Purpose and governance
SEC Newgate's purpose is to: Help our clients achieve positive
outcomes through communications, advocacy and research and to help
them to clearly demonstrate their purpose, value and impact
locally, nationally and internationally.
Our 37 offices, based in 15 countries all adhere to our global
standards for ethical consulting. All offices follow best practice
in their markets, and we are members of the Public Relations
Consultants Association. We have senior executives who sit on the
PRCA Management Board and the PRCA Public Affairs Board and we are
signed-up to the PRCA Public Affairs Register covering our advocacy
activities. Similarly, Andrea Cornelli, the Group Chief Innovation
Officer, is Vice President of UNA (the Association for the whole
communications industry in Italy) and Chair of PRHub, the section
dedicated to the PR business. We also helped to establish the APGRA
(Australian Professional Government Relations Association) in
Australia which has set the standard for ethical government
relations practice. Feyi Akindoyeni from our Melbourne office is
also on the global Board of the International Association of
Political Consultants which supports democratic process including
through the annual global Democracy Medal award.
We have an Ethics Committee and compliance process to vet
potential clients and ensure that we have transparency on their
ownership structure, business operations and corporate and social
purpose.
Our offices run community programmes and charity activities as
set by local teams. We offer a range of initiatives including: Time
off for charitable work, office charity events and nominated
charities, pro-bono work for charities (including work undertaken
in the past 12 months: for example, in the UK we provided pro-bono
support to MicroLoan Foundation, HIV Commission and St Paul's
Cathedral's Remember Me initiative). In Italy, we support "Parole
Ostili", a non-profit association of researchers, communications
professionals and social experts; the association is engaged in
promoting a social and political reflection on the social effects
of communications and banning hostile communications on the media.
The team also provides some time consultancy time to support
Portofranco, a famous initiative based in Milan dealing with the
right to study and supporting disadvantaged young people in their
studies. Newgate Australia is a strong supporter of the Clontarf
Foundation, which aims to end indigenous disadvantage by
encouraging Aboriginal children to attend and complete secondary
education.
We have also continued to win and be shortlisted for numerous
industry awards for the quality of our consulting, including: PR
Week Awards Best Ethical Initiative During the Coronavirus Crisis;
DARE Awards Best Integrated Campaign; PRCA City & Financial
Awards Best Communications in Support of a Transaction. In
addition, work we have undertaken for our clients has resulted in
them winning the 2020 ESG Investment Awards, Best ESG Investment
Fund, Private Capital and The IR Society 2020 for Best
Communication of ESG.
In Italy in 2020 we were awarded Assorel Award in the Non-profit
Organization category for the initiative we developed during the
first wave of Covid "Primum Vivere" a space provided to
institutions, companies and ONGs to tell their stories of
resilience and positive response during the pandemic.
In 2021 we launched a new service, SEC Newgate UK Green &
Good which advises a portfolio of clients in the sustainable
industries and social enterprise and investment sectors. In
addition, we work extensively with companies in the renewable
energy sector.
The Holding Company is managed by the Board of Directors
composed of 11 members, four of whom are independent (the rest all
being executives). The Directors are drawn from backgrounds which
the Board believes provides an appropriate mix to conduct the
Company's business. The Company has adopted the Quoted Companies
Alliance Corporate Governance Code.
People
Our people are the heart of our business and building a culture
that places equality, inclusion and promotes a diverse, dynamic and
merit-based culture is critical to our success.
All our people are empowered to speak up, contribute and
challenge and our business model is based on the honesty and
professional judgement that our teams bring to their work and our
business.
We have whistle blowing policies in place covering all our teams
and we regularly conduct staff surveys covering moral, what we can
do better, ideas for building the business and feedback on ways of
working.
We conduct 360 appraisals for staff at all levels of the
business and use meetings, closed social media groups and regular
team meetings and socials to communicate and bring people
together.
The Group employed 580 people in 2020, of whom 348 identified as
women (2019: 342). We seek to implement greater levels of equality
and diversity at senior levels of our business and we currently
have 39% of leaders at director level and above globally who
identify as women, and 5% from non-white ethnic groups (7%
Group-wide).
In seven countries out of the 15 across our footprint, women
lead agencies that rank in the top positions in each local market
such as in UK, Italy, Brussels, Germany, Poland, SEC Newgate CEE,
and Colombia. In Australia, where Newgate is a market leader across
sectors such as financial communication, public affairs and market
research, the majority of partners are women and women lead four of
six state offices.
While the Covid-19 pandemic has created significant challenges
for our teams around the world, we have risen to that and found new
ways of working that still maintain a strong, collaborative culture
and recognise that many people want to work more flexibly. Despite
the pandemic we have continued to provide good jobs and careers for
our people.
We pay the living wage as a minimum for all members of our team,
all members of our team have the ability to work flexibly and our
ability to work remotely has been tested and proven to be highly
successful throughout the pandemic.
We have introduced Mental Health First Aiders across a number of
our offices to ensure that our people are able to seek appropriate
support and help should they need to. In addition, all our offices
have introduced localised programmes of social activities, sports
and professional development programmes for our staff to provide
the tools to enable them to fulfil their career ambitions.
We regularly review our diversity and recruitment policies and
actively monitor both to ensure that we are providing equal
opportunities.
Respect for human rights is a fundamental principle for our
business and we aim to prevent, identify and address any negative
impacts on human rights associated with our business activities. We
look for opportunities to promote human rights, in areas such as
our pro bono work. We reflect international standards and
principles, including the International Bill of Human Rights, the
UN Guiding Principles on Business and Human Rights. We do not
tolerate any form of modern slavery in our business or supply
chain. We aim to implement appropriate measures to mitigate the
risk of modern slavery occurring, either in our own operations or
those of our partners.
Planet
As a professional services business our environmental impact is
relatively low, however we encourage all our people to take staps
to reduce the impact that they and our operations have on the
planet.
We have 37 offices globally with each taking local
responsibility for reducing their carbon footprint and boosting
sustainability. Initiatives undertaken within our office network
include: Recycling points for paper, printer cartridges, plastics
and food wherever possible; low energy and timed lighting,
rainwater harvesting systems in key offices; cycle to work schemes
and changing and shower facilities. We also take steps to manage
our server capacity and use to reduce the footprint of our IT
operations. We source our energy from renewable tariffs where
possible.
We work with a large number of clients within the environmental
and sustainability industries sectors and actively promote the
benefits of sustainable living and a sustainable lifestyle through
our activities and through staff training and our core marketing
activities, including the SEC Newgate newsletter.
We aim to identify and report on our carbon footprint and
publish a plan for how we will reduce and off-set our carbon
output, in line with ambitions to achieve NetZero by 2050.
As communications advisers our key stakeholders are our staff,
our suppliers, our clients and the communities around our
offices.
We regularly survey our staff for their opinions on the way we
are conducting our business and for their views on how we can do
better. Alternatively, their feedback is collected through forums
such as team meetings, personal development meetings and team
reviews. All decisions are taken by the senior leadership team in
consultation with any affected staff members and communicated to
our people through a variety of means: All-team meetings,
Workspace, specialist team meetings, and one-on-one meetings with
managers.
We have a relatively small group of suppliers who provide
services in each of our countries of operation including media and
political monitoring, office supplies, catering, energy and venue
services. We have contractual relationships with our suppliers and
regularly review their activities and the contractual relationship
we have with them. The financial and operational managers in each
office provide a point of contact for all suppliers and we engage
with them on any decision that will impact them or the services
they provide to us.
All our clients have a client relationship management team that
will be headed by a senior consultant (usually at MD or Director
level). We have contracts and scope of work covering the agreed
communications programmes which have relevant break clauses and
notice periods within them that enables clients to change the basis
of our relationship if they wish. We also regularly hold review
meetings with clients to review progress against agreed KPIs. Any
changes to the service we provide (e.g. team members, programme
delivery or fees) are discussed and agreed with clients before
action is taken.
We remain fully committed to advancing the environmental, social
and governance standards that we currently adhere to and to meeting
our commercial and social purpose.
In response to the egregious incidents of racial injustice in
2020 we actively sought to elevate diversity and inclusion in the
workplace. We held discussions with our colleagues and conducted
independently accredited research to understand feelings and
solicit suggestions on how we could do better. We shared thought
leadership pieces with our clients, colleagues and contacts through
our blogs. We provided pro bono consultancy services to charities
providing support to black communities and in particular those
empowering black women to set up their own business
enterprises.
Corporate Governance Statement
AIM companies are required to comply with a recognised 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
secnewgate.com/investors
Principal Risks and Uncertainties
For the year ended 31 December 2020
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 key risks and uncertainties
which they believe may affect the Group's ability to deliver its
strategic goals in the future. The Covid pandemic presented an
unprecedented global challenge in 2020, which continues to impact
many of the Group's key risks and uncertainties. The Directors have
made the decision to present the pandemic as a separate strategic
risk, as a way of highlighting its direct consequences but also to
show how the Group has been able to successfully understand and
quickly adapt to mitigate risks arising in this challenging
environment. 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.
The below scale (from Low-1 to High-5) has been used to indicate
the estimated level associated with each specific risk:
Level Risk Potential impact Key mitigations
of description
risk
================ ================================================================
Covid-19 pandemic (strategic risk)
The Covid-19 As the global Throughout the pandemic
pandemic rollout of the the Group has adhered
(current vaccination campaign to local government regulation
and/or future progresses, we and advise, developing
waves) may have expect to see robust procedures and
a long-term a lowering of controls for managing
4 negative this risk level. the risks associated with
macroeconomic However, due to the pandemic, including:
impact or current uncertainty * The Executive Committee regularly monitors the
impact and differing economic environment and reviews our strategic
the Group's rollout timetables objectives and cash flow projections to identify
operations, across our different opportunities, protect critical services and to
growth international mitigate against the adverse impact of the pandemic
opportunities markets, we may
or ability to still experience
fulfil our the impact of * Regular cash monitoring and management, and vetting
strategic a short-term increased the creditworthiness of potential clients mitigates
objectives risk level, including: against the negative impact to sales activity
* A prolonged negative impact on the global economy may
impact profitability and strategic delivery
* The Group's large and diverse client base avoids any
dependency on any individual client, particular
* The increased potential for client contract deferrals market sector or geographical territory
or cancellations to impact liquidity
* Implementing business continuity plans which allowed
* The potential for high employee absence disrupting our people to continue operational activities while
day-to-day operations working remotely
* Operational challenges associated with increased * Encouraging practices that promote and protect the
health and safety risks for staff health and wellbeing of our people during the
prolonged periods of remote working, as well as
supporting their return to the office
================ ================================================================ ======================================================================
M&A activity (strategic risk)
The risk that
rapid expansion * Reputational damage * The Group's focus is both on organic growth and
into new acquisitions. In the event of a new acquisition,
geographical rigorous internal and external due diligence is
territories * Difficulties integrating new subsidiaries increases performed on the company and its market in order to
or market pressure on Group financial and operational support identify potential risks and to ensure the
sectors acquisition complements and does not compete directly
might have a with the existing businesses in a geographical
negative impact * Increased pressure on cash resources to find territory
on the Group's sufficient funds for new acquisitions
financial
3 performance * Where a new service of integrated offering is
and result on * Management's focus is divided if new acquisitions or required, the Group would initially look to hire key
a strain on markets do not fit in with the Group's ability to staff and to develop the service internally before
resources deliver its strategic objectives considering the acquisition of an external company
* Withdrawal from markets where expansion has been * Earn-out mechanisms will be used in the majority of
undertaken too hastily resulting in loss of sunk future acquisitions in order to assist cash
costs and market opportunities management
* Should a company no longer fit in with the Group's
Strategic Plan, the company may be considered for
sale, following careful analysis as to the impact of
the divestment
================ ================================================================ ======================================================================
Management of growth (strategic risk)
Failure to
manage * Hiring decisions that lead to the recruitment of * Processes and systems in place to help identify need
growth in line staff misaligned with strategy or ahead of revenue and fulfilment of resource
with the
Group's
3 Strategic Plan * Staff leave through lack of support and/or resources * The production and monitoring of budgets against
resulting in performance and hiring plans
additional and
unnecessary * Inadequate systems and processes leading to
costs inefficiencies and inaccurate management reporting * Targeted and specific staff training
* Systems implemented to support staff in maintaining
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)
Lack of
understanding * Reputational and brand damage where the new offering * Fully research and market test any new services
of new market is not complimentary to other Group services before formally launching
and/or channels
of service
offering * Lower than expected sales revenues coupled with * The Board pursues a strategy of organic growth in
prior to entry higher cost requirements of setting up new operations existing companies
2 have a negative impact on the Group's cash position
* Entry into a new market would be with the support of
local expertise
* Use of qualified and experienced advisers where
necessary
* Continuously assessing performance in new markets and
their related opportunities and risks
================ ================================================================ ======================================================================
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 * Creates a problematic platform from which to grow
of the Group's * Costs are closely managed, helping to de-risk the
performance Group and to create a more manageable platform from
* Working capital diverted to interest payments which to drive profitability
* Failing bank covenants may result in debts being * Improve the internal structure and strategic
recalled and/or higher cost of debt direction of the business to make it more investable
* Difficulty finding further funding at a competitive * Where further financing is required, the Board looks
rate or without restrictive covenants 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 * Any restructurings undertaken are signed off by the
cost base are Executive Board and/or company boards after detailed
exited from discussions and presentation of analysis with the
the business support of external consultants where necessary
without
sufficient
analysis being * Group seeks to remain fair towards all members of
undertaken 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 * The Group maintains a balanced portfolio in terms of
the Group's sanctions, terrorism and local or national strikes or geographical locations to minimise the negative
3 revenues is labour unrest in any of the overseas locations in impact of any one jurisdiction on the Group's overall
generated which the Group operates may disrupt or permanently results
overseas. prevent the Group from operating in these locations
The Group's or from recovering its investment in whole or in part
business is * The Board performs a thorough analysis of economic,
therefore political and social conditions before entering new
susceptible * Currency fluctuations may have a negative impact on markets to minimise the impact of any unexpected
to adverse the Group's cross-border cash flows and profits turmoil
changes
in local and
regional * The majority of foreign currency transactions are
economic, carried out by businesses with the same reporting
political and currency
social
conditions
as well as the * The Group uses a limited number of financial
policies of instruments to hedge currency fluctuations in
the relevant intergroup loan notes. The Group continues to review
government, its currency exposure to identify ways to mitigate
including currency risk
changes
in laws and
regulations,
taxation and
the imposition
of restrictions
on currency
conversion
================ ================================================================ ======================================================================
Global economic trends and political instability (economic
risk)
Economic and
political * A reduction in new client contracts * The Group disperses its risk and reliance on any
landscape particular economic environment through a wide and
causes a diverse client base in both industry and geography
slowdown * Resource heavy procurement processes
in client
4 spending * Significant local economic and political events are
* Margin pressure monitored and factored into budgets and reforecasts
as they emerge
* Regulatory changes
* The Group and subsidiary boards monitor new business
wins/losses and track committed fees and new business
* New tax and other legislation pipeline against budgets on a monthly and, where
possible, a weekly basis and manage expenditure
accordingly
* Fall in market confidence
* The Group has in place business continuity plans
* A reduction in client contracts including remote working, reducing discretionary
spend, and assessing the appropriateness of local
government incentives
* A reduction in new client contracts
* Fall in market confidence
* Significant disruption to operations
================ ================================================================ ======================================================================
Client dependency (economic risk)
That the Group,
or any * Loss of a client materially impacts overall * The Group performs regular reviews of new business
subsidiary, profitability wins/losses across all Group companies which
is overly highlights any client dependencies
dependent
upon fees from * Company becomes too focussed or specialised in a
2 a single client 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 * Lower margins and profitability * The Group provides tailored and highly value-added
2 significant services in order to minimise the pricing competition
competition from bigger players
from both * Loss of key employees and/or clients
domestic
and * Focus remains on retaining employees and the Group is
international * Inability to attract new clients and further constantly committed to enhancing retention by
competitors diversify client base employing the key mitigations discussed below under
who have the retention of key employee risk
greater
capital,
greater * The Group focuses on anticipating major trends in the
resources and industry and on being among the first players in the
superior brand industry to invest in new services and technologies
recognition
and who may
be able to
provide
better
services,
adopt more
aggressive
pricing
policies
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)
3 The Group
cannot * Fluctuation of operating results may be caused by a * The Group has budgeting and reforecasting processes
guarantee that number of factors, many of which are beyond Group's in place and continually monitors expectations
it will be able control (growth rate of markets in which the Group highlighting any cost control or financing needs
to achieve or operates, market demand volatility, or difficulties
sustain revenue encountered launching new services or products)
growth and/or * Where budget shortfalls consistently occur, Group an
profitability d
in the future * Requirement of additional working capital and local management work together to develop actions to
financing in the medium term, which may not be improve financial performance (for instance
available on attractive terms or at all encouraging new pitches, training and hiring of new
staff) and, should it be necessary, review the cost
structure of the business in order to minimise the
impact on Group's profitability
================ ================================================================ ======================================================================
Attraction and retention of key employees (operational risk)
An inability
to attract, * High staff turnover impacting client service * Recruit senior management and staff of the highest
develop or quality through a robust and thorough process, and
3 retain remunerate them accordingly and, where possible,
key employees * Additional unplanned cost and time incurred to succession plans are developed in advance
could adversely replace staff
affect the
Group's * Create an ethos of being "proud to work for" the
business * Competitors benefit through staff moving Group
performance
* Loss of key employee-client relationships and * Promotion opportunities and long-term career plans
resulting impact on revenue are available
* 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
* Promote a culture of diversity and inclusion in the
workforce
================ ================================================================ ======================================================================
Working capital (operational risk)
Failure to
adequately * Reduced liquidity * Ensure strict credit terms as part of contract
3 manage cash negotiations and agree advanced billing terms
flow whenever possible
requirements * Working capital shortfalls in the short-term
due to falls
in debt * Strong credit control processes are in place with
recoveries * Difficulty in maintaining supplier terms dedicated credit controllers
or rapid
organic
growth placing * Breach bank covenants * Suspend or end working relationships where the client
pressures on has a history of non-payment
working capital
demands
* 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)
2 An
over-dependence * Non-performance may result in time and/or cost * Group minimises reliance on subcontractors by
or inability over-runs on projects reducing expected margins utilising internal staff where possible and by hiring
to adequately full time employees as replacements where feasible
manage the
contributions * Lowering of quality of service or product provided
of adversely impacting market competitiveness * Subcontractors are carefully selected (in most cases
subcontractors through tender processes) with their performance
were used to being periodically reviewed
fulfil the * Reputational damage which could lead to client and/or
performance staff losses
obligations
of client
contracts
================ ================================================================ ======================================================================
Timing of large contracts (operational risk)
2 The timing of
order placement * Material fluctuations in actual results compared with * The Group's revenues are generated from a mix of
and delivery expectations longer and shorter lead times providing flexibility
of the larger to manage demand
orders are
inherently * Adverse impact on cash collectability, profitability
difficult to and staff utilisation * The Group constantly monitors its project pipeline in
predict; hence order to avoid an excessive reliance on large
the Group may projects
experience * Employees being overworked to meet demands impacting
downtime staff welfare and potential reputational damage if
between orders performance is poor * Periodic assessment of internal resources to assess
and/or receive capacity within teams, bringing work forward where
an abundance possible during quiet periods, and alternatively
of orders at * Alternatively, a loss of clients due to internal using subcontractors during busy periods
once capacity not being able to satisfy demands
================ ================================================================ ======================================================================
Information systems (IT) and data security (operational and
business risks)
A cyber-attack
or IT failure * Delays to client work and compromise to client * Third party IT specialists, monitored by internal
could result relationships resources maintain Group IT systems
3 in major
operational
and business * Opportunity for potential fraud * Business and IT disaster recovery plans exist in each
disruption and company and are tested frequently to minimise any
loss of disruption in the event of an IT failure
customer * Data loss
and business
data * Anti-malware and other IT security software is used
* Confidentiality breaches to prevent cyberattacks and computer viruses. This
software is constantly updated and tested
* Reputational damage as a result of loss of client
confidence * Regular staff training is provided, and IT updates
are communicated to all
* Access to data is restricted internally on a
person-by-person basis as appropriate
================ ================================================================ ======================================================================
Failure to maintain an acceptable standard of business ethics
(business risk)
Failure to
continually * External reputational damage which could affect * New business opportunities are shared with all,
maintain an future and existing client relationships creating a culture of openness and transparency
2 acceptable
level
of business * Staff dissatisfaction if clients' work is not aligned * Code of Business Conduct and Ethics is communicated
ethics by with their personal ethics to all employees, in addition to having appropriate
engaging training programmes in place
in actual or
perceived
unethical * Confidential communication channels to management or
client work Group HR are in place to support staff reporting
or by employees violations
violating the
Group's Code
of Business * Any perception or questions over ethical standards in
Conduct and relation to potential client work or behaviour is
Ethics immediately raised to the relevant company board, and
if deemed relevant, the Group board also
================ ================================================================ ======================================================================
Legal and regulatory compliance (compliance risk)
Failure to
comply * Financial penalties and fines * External legal counsel in each country is sought as
2 with Italian, necessary
UK or
international * Reputational damage which could lead to client and/or
law, AIM staff losses * A SEC Newgate staff handbook and share dealing code
listing is in place and is communicated to all staff
rule or other
applicable * Suspension of trading of AIM securities
regulation * Regular staff training is provided on compliance
issues
* Nominated advisors are consulted with respect to any
actions taken which are regulated by the AIM listing
rules
================ ================================================================ ======================================================================
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
2020 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 20 20 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
9). 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.
During our work, we were assisted
by our valuation experts. They were
called upon to perform an independant
calculation and to conduct a sensitivity
analysis on the key assumptions
in order to determine whether any
changes to these assumptions could
significantly affect the measurement
of recoverable amount.
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".
----------------------------------------------- --------------------------------------------------------------
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 817 thousands which represents 1.25% of
revenues. We agreed with the audit committee that we would report
to them misstatements identified during our audit above Euro 41
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 instructed BDO UK, BDO Poland, BDO Colombia, BDO Germany, BDO
Spain, BDO Belgium, BDO Australia, 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 Accountants)
For and on behalf of BDO Italia S.p.A., Statutory Auditor
Milan, 20 May 2021
Consolidated Income Statement
For the year ended 31 December 2020
2020 2019
Notes EUR' 000 EUR' 000
----------------------------------------- ------ --------- -----------
Continuing operations
Revenue 3 65,332 47,550
Cost of sales (9,221) (9,945)
----------------------------------------- ------ --------- -----------
Gross profit 56,111 37,605
Operating costs 4 (52,829) (35,957)
Other income 901 164
Operating profit 4,183 1,812
Net finance costs 6 (1,138) (541)
----------------------------------------- ------ --------- -----------
Profit before taxation 3,045 1,271
Taxation 7 (1,669) (1,271)
----------------------------------------- ------ --------- -----------
Profit for the year 1,376 -
----------------------------------------- ------ --------- -----------
(Loss)/profit for the year attributable
to:
Owners of the Company 813 (99)
Non-controlling interests 25 563 99
----------------------------------------- ------ --------- -----------
1,376 -
----------------------------------------- ------ --------- -----------
(Loss)/Earnings per share attributable
to the equity shareholders of the
Company
----------------------------------------- ------ --------- -----------
Basic, per share 22 EUR0.034 (EUR0.006)
Diluted, per share 22 EUR0.030 (EUR0.005)
----------------------------------------- ------ --------- -----------
There were no discontinued operations in the year.
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
2020 2019
Notes EUR' 000 EUR' 000
--------------------------------------------- ------ --------- ---------
Continuing operations
Profit for the year 1,376 -
Items that may be subsequently reclassified
to profit or loss:
Loss on revaluation of investments
held at fair value through profit
or loss (16) (625)
Equity component of convertible loan
notes 17 34 -
Exchange losses/(gains) arising on
translation of foreign operations 223 (346)
Items that will not be reclassified
to profit or loss:
Actuarial loss on defined benefit
pension plans 21 (16) (84)
--------------------------------------------- ------ --------- ---------
Total comprehensive income, net of
tax 1,601 (1,055)
--------------------------------------------- ------ --------- ---------
Total comprehensive income for the
year attributable to:
Owners of the Company 1,041 (1,120)
Non-controlling interests 560 65
--------------------------------------------- ------ --------- ---------
1,601 (1,055)
--------------------------------------------- ------ --------- ---------
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated Statement of Financial Position
As at 31 December 2020
2020 2019
Notes EUR' 000 EUR' 000
---------------------------------- ------ --------- ---------
Non-current assets
Intangible assets 9 30,524 30,768
Tangible assets 10 6,000 8,984
Investments 11 16 16
Other assets 12 2,806 3,511
---------------------------------- ------ --------- ---------
Total non-current assets 39,346 43,279
---------------------------------- ------ --------- ---------
Current assets
Trade and other receivables 13 17,425 19,656
Financial investments 14 - 280
Cash and cash equivalents 15 12,036 6,138
---------------------------------- ------ --------- ---------
Total current assets 29,461 26,074
---------------------------------- ------ --------- ---------
Total assets 68,807 69,353
---------------------------------- ------ --------- ---------
Current liabilities
Trade and other payables 16 14,857 16,861
Borrowings 17 2,449 2,447
Lease liabilities 19 2,217 2,861
Provisions 20 1,981 1,645
---------------------------------- ------ --------- ---------
Total current liabilities 21,504 23,814
---------------------------------- ------ --------- ---------
Non-current liabilities
Employee benefits 21 2,152 2,013
Borrowings 17 17,138 12,431
Lease liabilities 19 3,410 5,607
Other non-current liabilities 20 5,076 5,637
---------------------------------- ------ --------- ---------
Total non-current liabilities 27,776 25,688
---------------------------------- ------ --------- ---------
Total liabilities 49,280 49,502
---------------------------------- ------ --------- ---------
Net assets 19,527 19,851
---------------------------------- ------ --------- ---------
Equity
Share capital 22 2,452 2,425
Share premium 23 12,456 12,456
Legal reserve 23 187 148
Revaluation reserve 23 (3,202) (3,076)
Retained earnings 23 6,630 6,222
Total equity shareholders' funds 18,523 18,175
---------------------------------- ------ --------- ---------
Non-controlling interests 25 1,004 1,676
---------------------------------- ------ --------- ---------
Total equity 19,527 19,851
---------------------------------- ------ --------- ---------
The accompanying notes are an integral part of these
consolidated financial statements.
The financial statements were approved by the Board of Directors
on 4 May 2021 and authorised for announcement on 20 May 2021
Fiorenzo Tagliabue
Director
SEC Newgate S.p.A. (09628510159)
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Share Share Legal Revaluation Retained Total Non-controlling Total
capital premium reserve reserves earnings 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
2020 2,425 12,456 148 (3,076) 6,222 18,175 1,676 19,851
Total
comprehensive
income
Profit for the
year - - - - 813 813 563 1,376
Other
comprehensive
income - - - 216 12 228 (3) 225
----------------- -------- -------- --------- ------------ --------- --------------- ---------------- --------
Total
comprehensive
income - - - 216 825 1,041 560 1,601
----------------- -------- -------- --------- ------------ --------- --------------- ---------------- --------
Transactions
with
owners
Issue of
Ordinary
shares 27 - - - (27 ) - - -
Dividends
declared
to
non-controlling
interests - - - - - - (918) (918)
Dividends
declared
to
non-controlling
interests
(CLAI)(1) - - - - (515) (515) - (515)
Transfer between
reserves - - 39 (342) 303 - - -
Disposal of
non-controlling
interest - - - - - - 21 21
Acquisition of
non-controlling
interest
without
a change in
control - - - - (178) (178) (335) (513)
----------------- -------- -------- --------- ------------ --------- --------------- ---------------- --------
Total
transactions
with owners 27 - 39 (342) (417) (693) (1,232) (1,925)
----------------- -------- -------- --------- ------------ --------- --------------- ---------------- --------
At 31 December
2020 2,452 12,456 187 (3,202) 6,630 18,523 1,004 19,527
----------------- -------- -------- --------- ------------ --------- --------------- ---------------- --------
Share Share Legal Revaluation Retained Total Non-controlling Total
capital premium reserve reserves earnings 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 (2,030) 6,913 10,032 1,933 11,965
Total
comprehensive
income
Profit for the
year - - - - (99) (99) 99 -
Other
comprehensive
income - - - (1,046) 25 (1,021) (34) (1,055)
----------------- -------- -------- --------- ------------ --------- --------------- ---------------- --------
Total
comprehensive
income - - - (1,046) (74) (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 (3,076) 6,222 18,175 1,676 19,851
----------------- -------- -------- --------- ------------ --------- --------------- ---------------- --------
(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 24 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 2020
2020 2019
Notes EUR' 000 EUR' 000
--------------------------------------------- ------ --------- ---------
Cash flows from operating activities
Profit before tax on continuing activities 3,045 1,271
Adjusted for:
Net finance costs 6 1,138 541
Net exchange differences 59 -
Amortisation of intangible assets 4 407 95
Depreciation of tangible assets 4 3,121 2,059
Impairment of intangible assets 95 -
Impairment of trade receivables 4 485 243
Pension provisions 118 (69)
Provision and other liabilities 78 -
Share based payment expense - 32
Loss on disposal of tangible assets 9 6
Disposal and revaluation of lease (27) -
liabilities
Changes in working capital:
Decrease/(increase) in trade and
other receivables 2,202 (460)
(Decrease)/Increase in trade and
other payables (1,823) 2,525
--------------------------------------------- ------ --------- ---------
Cash generated from operating activities 8,886 6,243
--------------------------------------------- ------ --------- ---------
Interest received 133 49
Income tax paid (1,804) (1,149)
--------------------------------------------- ------ --------- ---------
Net cash inflow from operating activities 7,215 5,143
--------------------------------------------- ------ --------- ---------
Cash flows from investing activities
Acquisition of intangible assets (149) (94)
Acquisition of tangible assets (181) (355)
Proceeds from sale of tangible assets - 8
Acquisition and earn-out payments (62) (577)
Cash from (disposal)/acquisitions (25) 1,824
Acquisition of non-controlling interests 24 (514) (121)
Proceeds from sale of financial investments 260 409
Net cash inflow/(outflow) from investing
activities (538) 1,264
--------------------------------------------- ------ --------- ---------
Cash flows from financing activities
Payments of finance lease liabilities (2,818) (1,907)
Interest paid (864) (248)
Proceeds from loans and borrowings 6,270 7,323
Repayment of loans and borrowings (1,585) (7,414)
Dividends paid to non-controlling
interests (1,433) (835)
Loan issued to related company - (1,160)
Issue costs relating to business
combinations - (1,155)
Net cash outflow from financing activities (430) (5,517)
--------------------------------------------- ------ --------- ---------
Net cash increase in cash and cash
equivalents 6,114 841
Cash and cash equivalents at 1 January 6,138 5,220
Effect of exchange rate changes (144) 77
--------------------------------------------- ------ --------- ---------
Cash and cash equivalents at 31 December 18 12,108 6,138
--------------------------------------------- ------ --------- ---------
The accompanying notes are an integral part of these company
financial statements.
Notes to the Financial Statements
For the year ended 31 December 2020
1. Accounting policies
a. Basis of preparation
SEC Newgate S.p.A. (the Company) is domiciled in Italy. These
consolidated financial statements comprise the Company and its
subsidiaries (together referred to as the 'Group' or 'SEC Newgate
Group').
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 the consolidated 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 2020:
-- Definition of a Business (Amendments to IFRS 3) - The Group
applied the revised definition of a business for acquisitions
occurring on or after 1 January 2020 in determining whether an
acquisition is accounted for in accordance with IFRS 3 Business
Combinations. The amendments do not permit the Group to reassess
acquisitions occurring prior to 1 January 2020. See note 24 for
details of the Group's business combinations.
-- Covid-19-Related Rent Concessions (Amendments to IFRS 16) -
Effective 1 June 2020, IFRS 16 was amended to provide a practical
expedient for lessees accounting in certain circumstances where the
rent concession had been awarded as a direct consequence of the
Covid-19 pandemic. The Group elected to early adopt these
amendments for leases that fulfil the specific criteria. The
amendments did not have a material impact on the Group's
results.
-- IAS 1 Presentation of Financial Statements and IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment - Disclosure Initiative - Definition of Material);
and
-- Revisions to the Conceptual Framework for Financial Reporting.
The adoption of the above did not have a significant impact on
reported results or 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 2021, and have not been applied
in preparing these consolidated financial statements:
-- Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments to IFRS 9, IAS 39 and IFRS 7);
The new standard is expected to impact the Group's borrowings
detailed in note 17 with contractual terms based on EURIBOR. The
impact of the new standard is under review and practical expedients
to reduce the immediate impact are being considered.
The following amendments are effective for the period beginning
1 January 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
These amendments to the standards are under review, but are not
expected to have a material impact on the Group in the current or
future reporting periods.
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.
Since the outbreak of the global pandemic, the Group's agencies
have all implemented business continuity plans, working remotely
under varying levels of lockdowns in their markets around the
world. The aim of the Group was to secure savings, protect the cash
position and liquidity, assess costs, renegotiate payment schedules
and taking advantage of all the initiatives offered by different
national governments. The Group continues to operate profitably.
All businesses have quickly adapted to the changed working
environment and continue to provide first class service to
clients.
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 2020 and present comparative information for the
year ended 31 December 2019.
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; or
-- 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 recognised
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. Revenue
Revenue is recognised 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.
Revenues recognised in any period are based on the delivery of
performance obligations and an assessment of when control is
transferred to the customer. Revenue is measured based on the
consideration specified in a contract with a customer and excludes
amounts collected on behalf of third parties. Income billed in
advance of the performance of the service is deferred and
recognised 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.
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. Other income
Other income includes local geographical governments Covid-19
support payments, Covid income. These payments have been received
in respect of employment costs and are accounted for as grants as
they are not repayable. Grants are accounted for under the accruals
model as permitted by IAS 20. Grants of a revenue nature are
recognised in other income in the Consolidated Income Statement in
the same period as the related expenditure. In 2020 Covid income
recognised in other income amounted to EUR850,000 (2019:
EURnil).
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
amortised. Goodwill is carried at cost less accumulated impairment
losses. Impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. An impairment loss is recognised when the
carrying value exceeds the recoverable amount. The recoverable
amount is the higher of value-in-use measured as the net present
value of future cash flows derived from the underlying asset and
the fair value less cost of disposal for each cash-generating unit.
Any impairment in carrying value is recognised 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 three to five 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; and
-- expenditure on the project can be measured reliably.
Capitalised development costs are amortised on a straight-line
basis over their expected lives of three to five years. The
amortisation expense is included within the depreciation and
amortisation expenses line in the Consolidated Income
Statement.
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 recognised
at cost and subsequently amortised on a straight-line basis over
their useful economic lives. Licenses are amortised over the term
of the license agreement.
i. Tangible assets
Property, furniture and equipment are initially recognised 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:
-- Equipment: 2 - 5 years
-- Furniture and fittings5 - 10 years
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 recognised
within 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,
transaction costs that are directly attributable to its acquisition
or issue. A trade receivable without a significant financing
component is initially measured at its 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
(FVTPL).
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 11) 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.
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 recognised at fair
value plus transaction costs that are directly attributable to
their acquisition or issue and are subsequently measured at
amortised cost using the effective interest rate method, less any
provision for impairment.
Impairment of financial assets
Impairment provisions are recognised 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.
The Group applies the simplified approach to providing for
expected credit losses prescribed by IFRS 9, which permits the use
of the lifetime expected loss provision for all trade and other
receivables.
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 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 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
amortised 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 8.
n. Leases
The Group leases various offices and equipment. Rental contracts
are typically for fixed periods of two to ten years but may have
extension and termination options.
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.
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; and
-- 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 subsequently 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,
and lease liabilities are presented in its own separate line item
in the Consolidated Statement of Financial Position.
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 in the
Consolidated Statement of Cash Flows.
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.
Covid 19 rent concessions
The Group has elected to utilise the practical expedient for all
rent concessions that meet the specific criteria of the practical
expedient introduced in June 2020 (see accounting policy note
(c)).
Accounting for the rent concessions as lease modifications would
have resulted in the Group remeasuring the lease liability to
reflect the revised consideration using a revised discount rate,
with the effect of the change in the lease liability recorded
against the right-of-use asset.
o. Share capital and share premium
The Company'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 recognised 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 recognised in the Consolidated Income Statement,
except to the extent that it relates to items recognised 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 recognised 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 recognised 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 recognised 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 recognised 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 9 for
further details.
Recoverability 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 expected
credit loss 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 recognised (see note
13).
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 8).
Employee benefits
For actuarial assumptions on severance indemnity refer to note
21.
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 19.
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:
2020 2019
--------- ----- --------- -----
EUR' 000 % EUR' 000 %
---------------- --------- ----- --------- -----
Italy 11,470 18% 16,879 35%
United Kingdom 19,162 29% 9,111 19%
Belgium 4,218 6% 4,205 9%
Colombia 3,326 5% 4,052 9%
Spain 829 1% 941 2%
Poland 642 1% 965 2%
France 4,614 7% 4,148 9%
Germany 512 1% 674 1%
Australia 17,320 27% 5,152 11%
Hong Kong 1,047 2% 651 1%
China 22 0% 42 0%
Singapore 1,390 2% 431 1%
Abu Dhabi 391 1% 299 1%
United States 70 0% - 0%
Morocco 319 0% - 0%
---------------- --------- ----- --------- -----
65,332 100% 47,550 100%
---------------- --------- ----- --------- -----
No individual client sales were greater than 10% of Group
revenue (2019: 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:
2020 2019
EUR' 000 EUR' 000
----------------------------- --------- ---------
Communications 35,092 23,678
Advocacy and public affairs 18,716 13,038
Integrated services 11,524 10,834
------------------------------- --------- ---------
65,332 47,550
----------------------------- --------- ---------
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.
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:
2020 2019
------- -------- --------- --------
EUR'
Client based revenue 000 % EUR' 000 %
------------------------- ------- -------- --------- --------
Europe 39,191 60% 35,418 74%
Australia & Oceania 17,498 27% 4,914 10%
South America 3,119 5% 3,669 8%
Asia 3,297 5% 2,232 5%
North America 1,499 2% 944 2%
Africa 728 1% 373 1%
------------------------- ------- -------- --------- --------
65,332 100% 47,550 100%
----------------------- ------- -------- --------- --------
4. Operating costs
2020 2019(1)
Notes EUR' 000 EUR' 000
--------------------------------- ------ --------- ---------
Employee expenses 37,322 23,386
Amortisation of intangible
assets 9 407 95
Depreciation of tangible
assets 10 3,121 2,059
Impairment of goodwill 9 95 -
Impairment of trade receivables 485 243
Loss on disposal of subsidiary 2 -
Professional and consulting
fees 4,161 2,827
Marketing and advertising 1,565 2,486
Establishment costs 1,426 721
Other administrative and
operating expenses 4,245 4,140
---------------------------------- ------ --------- ---------
52,829 35,957
--------------------------------- ------ --------- ---------
(1) The operating cost note is a new note in the consolidated
financial statements, combining totals of the following notes
previously disclosed in the SEC Newgate S.p.A. Annual Report &
Accounts for the year ending 31 December 2019. 2019 comparative
combines employee expenses (EUR23,386,000), service costs
(EUR8,982,000), depreciation and amortisation (EUR2,154,000) and
other operating costs (EUR1,271,000) notes, excluding other
operating income (164,000) which is presented on the face of the
Group's Consolidated Income statement. The new operating cost
disclosure is considered by the Board to be a more transparent and
simplified reflection of the SEC Newgate Group's operating
activities. The 2019 disclosure changes have no impact on the
Group's profit presented in the Consolidated Income statement.
5. Employee expenses
2020 2019
EUR' 000 EUR' 000
----------------------------------- --------- ---------
Wages, salaries and non-executive
fees 31,380 18,414
Social security costs 3,855 3,087
Severance indemnity and pension
contributions 1,748 1,473
Share based payments(1) - 32
Other employment related welfare
costs 339 380
------------------------------------ --------- ---------
37,322 23,386
----------------------------------- --------- ---------
(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
EURnil (2019: EUR32,000) above have a corresponding tax impact of
EURnil (2019: EUR8,000).
The average monthly number of employees during the year,
including Executive Directors, was as follows:
2020 2019
Number Number
---------------- ------- -------
Fee earners 460 464
Management 30 44
Administration 79 84
------------------ ------- -------
570 592
---------------- ------- -------
Salaries to key managers of the Group, including the Board of
Directors' fees, was:
2020 2019
EUR' EUR'
000 000
-------------------------- ------ ------
Salaries of key managers 1,860 1,010
End of mandate allowance - 18
---------------------------- ------ ------
1,860 1,028
-------------------------- ------ ------
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 2020 Fees and Pension Bonus Other Total
Salaries Contributions benefits(2)
EUR' EUR' EUR' EUR'
EUR' 000 000 000 000 000
------------------------- ---------- --------------- ------ ------------- ------
Executive Directors
Fiorenzo Tagliabue 109 - - - 109
Emma Kane(1) 476 20 - 6 502
Brian Tyson(1) 375 13 - - 388
Anna Milito 85 - - - 85
Thomas Parker 244 - 144 - 388
Mark Glover(1) 134 - - - 134
Andrea Cornelli 128 - - - 128
Non-executive Directors
John Foley(1) 25 - - - 25
Luigi Roth 33 - - - 33
David Mathewson 34 - - - 34
Paola Bruno 34 - - - 34
------------------------- ---------- --------------- ------ ------------- ------
1,677 33 144 6 1,860
------------------------- ---------- --------------- ------ ------------- ------
31 December 2019 Fees and Pension Bonus Other Total
Salaries Contributions benefits(2)
EUR' EUR' EUR' EUR'
EUR' 000 000 000 000 000
------------------------- ---------- --------------- ------ ------------- ------
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
------------------------- ---------- --------------- ------ ------------- ------
(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.
6. Net finance costs
2020 2019
EUR' EUR'
000 000
----------------------------------------- ----- -----
Interest income on bank deposits 104 68
Dividend income - 1
Fair value gains on financial assets at
fair value through profit or loss 22 119
Net gain on modifying lease assets 7 -
----------------------------------------- ----- -----
Finance income 133 188
------------------------------------------ ----- -----
Interest expense (735) (337)
Interest on lease liabilities (348) (265)
Net foreign exchange loss (188) (127)
-------------------------------- -------- ------
Finance expense (1,271) (729)
-------------------------------- -------- ------
Net finance expense (1,138) (541)
-------------------------------- -------- ------
7. Taxation
2020 2019
EUR' 000 EUR' 000
-------------------------------------- --------- ---------
Current tax charge (1,814) (1,366)
Adjustment in respect of prior years 8 -
Deferred tax credit 137 95
--------------------------------------- --------- ---------
Total tax charge for the year (1,669) (1,271)
--------------------------------------- --------- ---------
The activities of the Group are located across a number of
geographical locations including Italy, UK, Spain, Germany,
Belgium, Poland, Columbia, US, 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 effective tax rate for the Group is 50% (2019:100%) and is
the taxation charge for the year recognised in the Income Statement
expressed as a percentage of profit before taxation. The
significantly higher tax rate in 2019 primarily related to tax
incurred on the acquisition of the Porta Group (see note 24 for
details of the acquisition).
The tax assessed for the year differs from the standard rate of
tax in Italy at 24% (2019: 24%) for the reasons set out in the
following table.
2020 2019
EUR'
000 EUR' 000
---------------------------------------------------- -------- ---------
Profit before taxation on continuing activities 3,045 1,271
------------------------------------------------------ -------- ---------
Tax using the Company's domestic tax rate
of 24% (2019: 24%) (731) (305)
Tax effect of:
Temporary timing differences (506) (533)
Non-deductible expenses (175) (411)
Non-taxable income (69) 31
Utilisation of tax losses in current period 251 254
Tax losses carried forward (250) (225)
Recovery of IRAP taxable amounts on IRES
purposes (94) 7
Tax incentives - 17
IRAP on Italian entities (15) (94)
Adjustment in respect of prior years (8) -
Non Italian jurisdictions tax rates reconciliation (93) (12)
Taxable profits allocated to partnership interests 21 -
---------------------------------------------------- -------- ---------
Total tax charge for the year (1,669) (1,271)
------------------------------------------------------ -------- ---------
Deferred tax balances were as follows:
2020 2019
Notes EUR' 000 EUR' 000
-------------------------- ------ --------- ---------
Deferred tax assets 12 2,213 2,053
Deferred tax liabilities 16 (188) (224)
-------------------------- ------ --------- ---------
Movements in deferred tax balances during the year were as
follows:
2020 2019
EUR' 000 EUR' 000
------------------------------------------ --------- ---------
At 1 January 1,829 1,088
Recognised in income statement 137 95
Acquisition through business combination - 456
Other movements 45 155
Translation differences 45 35
------------------------------------------- --------- ---------
At 31 December 2,025 1,829
------------------------------------------- --------- ---------
The Group believes that its accruals for tax liabilities are
adequate for all open tax years based on its assessment of many
factors, including interpretations of tax law and prior
experience.
8. 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 14) as fair
value through profit or loss, its other investments (note 11) 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 recognised 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:
2020 2019(1)
--------- ---------
Carrying Carrying
Value Value
EUR'
Notes 000 EUR' 000
--------------------------- ------ --------- ---------
Financial assets
Investments 11 16 16
Other assets 12 593 1,458
Trade and other
receivables 13 15,150 16,467
Financial investments 14 - 280
Cash and cash equivalents 15 12,036 6,138
------------------------------ ------ --------- ---------
27,795 24,359
--------------------------- ------ --------- ---------
Financial liabilities
Trade and other
payables 16 6,632 8,876
Lease liabilities 19 5,627 8,468
Earn out liabilities(1) 20 6,337 6,399
Other liabilities 20 365 590
Borrowings(2) 17 19,587 14,878
------------------------------ ------ --------- ---------
38,548 39,211
--------------------------- ------ --------- ---------
(1) Earn out liabilities (current and non-current) have been
aggregated. 2019 comparatives have been restated to ensure
consistent reporting. Earn out liabilities of EUR4,754,000 have
been reclassified from other liabilities (reducing 2019 balance of
EUR5,344,000 non-current liabilities) to earn out liabilities
(increasing 2019 balance of EUR1,645,000).
(2) Borrowings include overdrafts of EUR72,000 (2019:
EUR31,000).
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.
2020 2019
Maturity profile
of financial liabilities EUR'000 EUR'000
-------------------------------- -------- --------
Due in six months
or less 10,591 13,221
Due between six
months and 1 year 2,610 2,609
Due between 1 year
and 2 years 7,879 3,741
Due between 2 and
5 years 12,207 16,041
Due in 5 years or
more 5,261 3,599
--------------------------------
38,548 39,211
---------------------------- -------- --------
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 2020, the Group had amounts due from 12 major
customers amounting to 14% (2019: 16 amounting to 20%) of the trade
receivables balance. Major customers are defined as customers with
outstanding trade receivable balances of more than EUR100,000.
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 13.
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. Generally the Group maintains long-term borrowing
facilities to fund acquisition activity and short term borrowing
facilities for working capital requirements.
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.
Effect on profit/(loss)
before tax +5% -5% +5% -5%
2020 2020 2019 2019
EUR' EUR'
000 000 EUR' 000 EUR' 000
----------------------------------- ------ -------- --------- ---------
British Pound 56 (56) (56) 56
Australian Dollar 243 (243) 55 (55)
Singapore Dollar 24 (24) 2 (2)
Hong Kong Dollar (16) 16 (8) 8
UAE Dirham (10) 10 1 (1)
Colombian Peso - - 6 (6)
Polish Zloty (2) 2 4 (4)
Chinese Yuan - - 1 (1)
US Dollar 11 (11) 19 (19)
------------------------------------- ------ -------- --------- ---------
Effect on equity +5% -5% +5% -5%
2020 2020 2019 2019
EUR' EUR'
000 000 EUR' 000 EUR' 000
----------------------------------- ------ -------- --------- ---------
British Pound 1,952 (1,952) 1,311 (1,311)
Australian Dollar 107 (107) 78 (78)
Singapore Dollar 43 (43) 61 (61)
Hong Kong Dollar 7 (7) 7 (7)
UAE Dirham (2) 2 8 (8)
Colombian Peso 15 (15) 12 (12)
Polish Zloty 6 (6) 7 (7)
Chinese Yuan - - (2) 2
US Dollar 28 (28) 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 17 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.
9. Intangible assets
Goodwill Websites, Total
software
and licences
Cost EUR' 000 EUR' 000 EUR' 000
--------------------------- --------- -------------- ---------
At 1 January 2019 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
Additions in the
year - 241 241
Disposals in the
year - (8) (8)
Translation differences - (34) (34)
--------------------------- --------- -------------- ---------
At 31 December
2020 29,354 2,392 31,746
--------------------------- --------- -------------- ---------
Amortisation and
impairment
At 1 January 2019 - (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)
Charge for the
year - (407) (407)
Impairment (95) - (95)
Eliminated on
disposal - 31 31
Translation differences - 28 28
--------------------------- --------- -------------- ---------
At 31 December
2020 (95) (1,127) (1,222)
--------------------------- --------- -------------- ---------
Net book value
At 1 January 2019 14,359 1,255 15,614
At 31 December
2019 29,354 1,414 30,768
--------------------------- --------- -------------- ---------
At 31 December
2020 29,259 1,265 30,524
--------------------------- --------- -------------- ---------
Refer to note 24 for details of business acquisitions and
disposals 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 2020 2019
acquired EUR' 000 EUR' 000
------------------------------------------------- --------- ---------
ACH Sec Global SL 2014 397 492
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 8,235
Newgate Communications Limited 2019 4,411 4,411
Newgate Communications (HK) Limited 2019 976 976
21:12 Communications Limited 2019 713 713
Newgate Communications (Singapore)
Pte. Ltd 2019 617 617
Newgate Communications FZ-LLC 2019 43 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
---------------------------------------- -------- --------- ---------
29,259 29,354
------------------------------------------------- --------- ---------
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 7.3% 7.3% 7.3% 7.3% 7.3% 7.3% 7.3%
Discount rate 4.5% 3.5% 4.0% 3.9% 5.2% 4.0% 5.4%
---------------- ------ ----- ------- ----- ----- ----- ------
SEC-L NGAS SEC UK NGHK 2112 NGSN NGAD
---------------- ------ ----- ------- ----- ----- ----- ------
Average market
rate 7.3% 7.3% 7.3% 7.3% 7.3% 7.3% 7.3%
Discount rate 11.0% 7.8% 4.0% 7.2% 4.0% 7.1% 4.9%
---------------- ------ ----- ------- ----- ----- ----- ------
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 2021 to 2025 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 to 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 EUR348,000 was accrued as of
31 December 2020 (2019: EUR408,000) (see note 20).
Acquisition of CLAI is subject to an earn out based on company
EBITDA over seven years (2019 to 2025); SEC holds preferred shares
in CLAI that represent the 10% of the share capital and entitling
the Group to 51% of voting rights with the option to increase
ownership to 100% 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 EUR5,989,000 was accrued as
of 31 December 2020 (2019: EUR5,962,000) (see note 20). The final
total consideration is subject to uncertainty and depends on the
company performance over the ongoing financial year.
10. Tangible assets
Leasehold Leasehold Equipment Furniture Total
property improvements and fittings
EUR'
Cost 000 EUR' 000 EUR' 000 EUR' 000 EUR' 000
------------------------------ ---------- -------------- ---------- -------------- ---------
At 1 January 2019 - 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)
Revaluations 56 - - - 56
Translation differences 194 67 29 32 322
------------------------------ ---------- -------------- ---------- -------------- ---------
At 31 December 2019 9,742 2,113 1,193 1,921 14,969
Additions in the year 310 15 328 61 714
Disposals in the year (354) - (53) (278) (685)
Revaluations (84) - - (3) (87)
Translation differences (254) (61) (46) (47) (399)
------------------------------ ---------- -------------- ---------- -------------- ---------
At 31 December 2020 9,369 2,067 1,422 1,654 14,512
------------------------------ ---------- -------------- ---------- -------------- ---------
Depreciation
------------------------------ ---------- -------------- ---------- -------------- ---------
At 1 January 2019 - (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)
Charge for the year (2,441) (251) (217) (212) (3,121)
Eliminated on disposal 223 - 44 110 377
Translation differences 105 46 33 33 217
------------------------------ ---------- -------------- ---------- -------------- ---------
At 31 December 2020 (4,773) (1,541) (925) (1,273) (8,512)
------------------------------ ---------- -------------- ---------- -------------- ---------
Net book value
At 1 January 2019 - 417 94 269 780
At 31 December 2019 7,082 777 408 717 8,984
------------------------------ ---------- -------------- ---------- -------------- ---------
At 31 December 2020 4,596 526 497 381 6,000
------------------------------ ---------- -------------- ---------- -------------- ---------
Included in the amounts above are the following in relation to
right-of-use assets:
Depreciation charge Net book value
for the year
2020 2019 2020 2019
EUR' 000 EUR' 000 EUR' 000 EUR' 000
------------------------ ---------- ---------- --------- ---------
Leasehold property 2,445 1,594 4,596 7,082
Leasehold improvements 30 31 200 47
Equipment 135 41 238 87
Furniture and fittings 13 59 24 206
------------------------- ---------- ---------- --------- ---------
2,623 1,725 5,058 7,422
------------------------ ---------- ---------- --------- ---------
Additions to the right-of-use assets during the year were
EUR533,000 (2019: EUR68,000).
Amounts included in revaluations above relates to an adjustment
to office leases recognised under IFRS 16.
11. Investments
Owned Ownership 2020 2019
by % EUR' 000 EUR' 000
---------------------------------------- ---------- --------- ---------
Sec & Partners S.r.l. SEC Newgate 95.0 5 5
Other equity investments Various n/a 11 11
-------------------------- ------------- ---------- --------- ---------
16 16
---------------------------------------- ---------- --------- ---------
12. Other assets
2020 2019
EUR' 000 EUR' 000
--------------------- --------- ---------
Deferred tax assets 2,213 2,053
Rental deposits 564 1,097
Directors benefits 29 361
----------------------- --------- ---------
2,806 3,511
--------------------- --------- ---------
Rental deposits include bank deposits of EUR59,000 (2019:
EUR21,000) to guarantee office leases.
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 20).
13. Trade and other receivables
2020 2019
EUR' 000 EUR' 000
-------------------------------- --------- ---------
Trade receivables 14,463 15,685
Less: provision for impairment (840) (591)
---------------------------------- --------- ---------
13,623 15,094
-------------------------------- --------- ---------
Accrued income 1,527 1,373
Prepayments 1,170 1,915
Tax on income 458 478
VAT receivables 79 574
Other receivables 568 222
---------------------------------- --------- ---------
17,425 19,656
-------------------------------- --------- ---------
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:
2020 2019
EUR' 000 EUR' 000
----------------------------------------- --------- ---------
Neither past due nor impaired 6,787 6,874
Past due but not impaired:
Past due up to 3 months 5,388 6,466
Past due more than 3 months not more
than 6 months 654 680
Past due more than 6 months not more
than 1 year 410 357
Past due more than 1 year 384 717
------------------------------------------- --------- ---------
13,623 15,094
----------------------------------------- --------- ---------
The following analysis was made in order to estimate unexpected
credit losses:
Maturity analysis EUR'000s
-----------------------------------
730 -
0 - 365 365 -730 1826 1826+
--------------------------------- -------- --------- ------ ------
Expected credit loss rate 0% 30% 70% 80%
Estimated carrying value amount
at default - 403 99 367
Lifetime ECL - 121 69 367
--------------------------------- -------- --------- ------ ------
The movement on impairment for the year in respect of trade
receivables was as follows:
2020 2019
EUR' 000 EUR' 000
----------------------------------- --------- ---------
At 1 January 591 433
Provision made during the
year 409 126
Acquired on business combinations - 131
Amounts written off during
the year (171) (2)
Amounts recovered during the
year 21 (106)
Translation differences (10) 9
------------------------------------- --------- ---------
At 31 December 840 591
------------------------------------- --------- ---------
14. Financial investments
2020 2019
Level 1 fair value investments
- measured FVTPL EUR' 000 EUR' 000
---------------------------------- --------- ---------
UBS S.A. investment (bonds) - 280
---------------------------------- --------- ---------
Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
Funds
EUR' 000
----------------------- ---------
At 1 January 2019 583
Acquisitions -
Disposals during
the year (379)
Changes in fair value 76
---------------------------- ---------
At 31 December 2019 280
Acquisitions -
Disposals during
the year (302)
Changes in fair value 22
---------------------------- ---------
At 31 December 2020 -
---------------------------- ---------
15. Cash and cash equivalents
2020 2019
EUR' 000 EUR' 000
-------------------------- --------- ---------
Cash at bank and in hand 11,738 5,817
Restricted cash 298 321
---------------------------- --------- ---------
12,036 6,138
-------------------------- --------- ---------
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.
16. Trade and other payables
Restated(1)
2020 2019
EUR' 000 EUR' 000
------------------------------- --------- ------------
Trade payables 4,464 7,462
Accrued expenses 2,168 1,414
Deferred income 1,527 1,412
Deferred tax liabilities 188 224
VAT payable 2,014 1,466
Other taxes and institutional
payables 3,561 3,464
Other payables 935 1,419
--------------------------------- --------- ------------
14,857 16,861
------------------------------- --------- ------------
(1) 2019 comparatives have been restated to aggregate employee
and payroll related liabilities EUR2,699,000, government
institutions EUR368,000 and tax on income EUR397,000 and disclose
as other taxes and institutional payables.
Management considers that the carrying amount of other payables
approximates to their fair values due to their short-term
nature.
Other payables includes EURnil (2019: EUR142,000) due to a
Director of SEC and Partners.
17. 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.
2020 2020 2020 2019 2019 2019
Current Non-current Total Current Non-current Total
EUR' EUR' EUR' EUR' EUR'
EUR' 000 000 000 000 000 000
----------------------- --------- ------------ ------- -------- ------------ -------
UBS - 1,762 1,762 - 1,762 1,762
Deutsche Bank 742 2,054 2,796 784 2,242 3,026
Banco Popolare di
Milano 298 669 967 57 - -
Inveready convertible
bonds - 2,457 2,457 - - -
UniCredit 948 3,109 4,057 919 3,275 4,194
Banca Carige 134 1,317 1,451 401 - 401
Hawk Investment
Holdings - 4,702 4,702 - 4,703 4,703
Retro Grand Limited - 432 432 - 449 449
CommBank - 313 313 - - -
KBC Bank 140 - 140 141 - 141
Bankinter 18 82 100 100 - 100
Itau Corpbanca - - - 2 - 2
Intesa Sanpaolo 22 30 52 - - -
Banco de Bogatá 41 61 102 - - -
Banco Agrario 12 35 47 - - -
Bancoomeva 6 5 11 - - -
Scotiabank Colpatria 2 - 2 - - -
NatWest - 110 110 - - -
Total loans 2,363 17,138 19,501 2,404 12,431 14,835
Transaction costs(1) 86 - 86 43 - 43
------------------------ --------- ------------ ------- -------- ------------ -------
Total borrowings(2) 2,449 17,138 19,587 2,447 12,431 14,878
------------------------ --------- ------------ ------- -------- ------------ -------
(1) Transaction costs relate to bank borrowings
(2) Total borrowings includes overdrafts.
Analysed as below, excluding transaction costs:
Details of bank borrowings
Total
Type of facility Balance Interest Maturity Repayment
Currency borrowing EUR'000 EUR'000 rate date term
------------------------ ---------- --------------- ---------- --------- ----------- -------------- -----------
UBS (Italy) Euribor
S.p.A(1) EUR Bank loan 1,762 1,762 +1.25% Open ended Open ended
Euribor August
Deutsche Bank EUR Bank loan 3,000 2,796 +1.7% 2024 Quarterly
Banco Popolare Euribor December
di Milano EUR Bank loan 1,000 967 +1.65% 2023 Monthly
UniCredit EUR Bank loan 4,000 3,804 Euribor July 2026 Quarterly
UniCredit EUR Bank loan 1,000 200 1.2% June 2022 Monthly
Euribor
Banca Carige(2) EUR Bank loan 1,000 993 +1% May 2026 Monthly
Euribor
Banca Carige EUR Bank loan 1,000 458 +1.2% May 2023 Biannually
Bank Inter EUR Bank loan 100 100 1.7% April 2025 Monthly
June-December
KBC Bank EUR Bank loans 140 143 0.85% 2021 Monthly
Intesa Sanpaolo EUR Bank loan 30 30 1.13% April 2026 Monthly
December
Scotiabank Colpatria COP Bank loan 126 2 0% 2021 Monthly
Banco Agrario COP Bank loan 47 47 DTF +6.57% June 2023 Monthly
Banco de Bogatá COP Bank loan 102 102 DTF +4.3% June 2023 Monthly
November
Bancoomeva COP Bank loan 117 11 DTF +8.58% 2022 Monthly
Commonwealth November
Bank of Australia AUD Bank loan 313 313 6.0% 2025 5 years
Business
interruption
NatWest GBP loan 110 110 0% July 2026 Monthly
Overdrafts EUR Overdraft - 72 0% N/A N/A
------------------------ ---------- --------------- ---------- --------- ----------- -------------- -----------
Total bank borrowings(3) 11,910
----------------------------------------------------- ---------- --------- ----------- -------------- -----------
(1) Pledge on Silvia Anna Mazzucca financial instruments has
been provided as security
(2) 90% guaranteed by Guarantee Fund as determined by "Decreto
Liquidità" for Coronavirus disease
(3) Total bank borrowings includes overdrafts and excludes
transaction costs
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 April at maturity
Holdings GBP bond 5,673 4,702 5.87% 2023 date
Lump sum
Inveready convertible Convertible March at maturity
bonds EUR bonds 2,500 2,457 3.50% 2027 date
Lump sum
Convertible 10 April at maturity
Retro Grand GBP loan 432 432 0% 2024 date
------------------------ ----- ----------------- ----------- --------- --------- --------- -------------
The Group's principal borrowing activity is set out below:
In March 2020 the Group issued convertible bonds to Inveready
Convertible Finance (Inveready), a Spanish joint venture, in a
single tranche of EUR2,500,000 of 25 bonds with a nominal value of
EUR100,000 each. The bonds are convertible into a maximum of
3,821,375 Ordinary shares representing 152,855 Ordinary shares per
bond in March 2027 at the option of the holder. Any unconverted
bond notes become payable on demand. The equity component of
EUR34,000 (net of transaction costs of EUR63,000) is recognised in
the Statement of Comprehensive Income.
In January 2020 the Group secured a new bank loan for
EUR1,000,000 from Banco BPM S.p.A. In June 2020 a further
EUR1,000,000 bank loan was secured from Banca Carige.
The UniCredit bank loans are subject to bank covenants, whereby
the Group is required to meet certain key financial performance
requirements in relation to debt/equity and debt/EBITDA ratios. In
cases of a breach of these bank covenants the bank is entitled to
demand immediate repayment of the outstanding loans. In June and
December 2020 the Group reported a breach of the debt/EBITDA ratio.
UniCredit did not request repayment of the outstanding loans, and
has agreed to waive the breach. In 2021 the Group has renegotiated
with UniCredit a revised covenant criteria more reflective of the
Group's current situation. Based on these new criteria, no breach
has been reported at 31 December 2020; the loans have been
disclosed as non-current liabilities.
18. Consolidated reconciliation of net debt
Net debt Cash flow Non-cash Net debt
as at movements movements at 31 December
1 January 2020
2020
2020 Notes EUR'000 EUR'000 EUR'000 EUR'000
--------------------------- ------ ----------- ----------- ----------- ----------------
Cash, cash equivalents 15 6,138 6,042 - 12,180
Overdraft 17 - (72) - (72)
--------------------------- ------ ----------- ----------- ----------- ----------------
6,138 5,970 - 12,108
Bank borrowing including
transaction costs 17 (9,726) (2,008) (190) (11,924)
Other borrowings 17 (5,152) (2,500) 61 (7,591)
Lease liabilities 19 (8,468) 3,166 (325) (5,627)
--------------------------- ------ ----------- ----------- ----------- ----------------
Cash and cash equivalents
net of debt (17,208) 4,628 (454) (13,034)
--------------------------- ------ ----------- ----------- ----------- ----------------
Net debt Cash flow Non-cash Net debt
as at movements movements at 31 December
1 January 2020
2020
2019 EUR'000 EUR'000 EUR'000 EUR'000
--------------------------- --- ----------- ----------- ----------- ----------------
Cash, cash equivalents 15 5,220 918 - 6,138
Bank borrowing including
transaction costs 17 (6,963) (2,672) (91) (9,726)
Other borrowings 17 - (5,359) 207 (5,152)
Lease liabilities 19 (5,749) (2,172) (547) (8,468)
--------------------------- --- ----------- ----------- ----------- ----------------
Cash and cash equivalents
net of debt (7,492) (9,285) (431) (17,208)
--------------------------- --- ----------- ----------- ----------- ----------------
19. Leases
This note provides information for leases where the group is a
lessee.
Lease liabilities 2020 2019
EUR'000 EUR'000
Current 2,217 2,861
Non-current 3,410 5,607
----------------------- -------- --------
5,627 8,468
------------------- -------- --------
Additions and carrying amount for right-of-use assets included
in the Consolidated Statement of Financial Position has been
disclosed in note 10.
Depreciation charged on right-of-use assets in the Consolidated
Statement of Comprehensive Income has also been disclosed in note
10. The Consolidated Statement of Comprehensive Income also shows
the following amounts relating to leases:
2020 2019
EUR'000 EUR'000
Interest expense 348 265
Expense relating to short-term
leases 101 20
Expenses related to variable
lease payments not included
in lease liabilities 46 -
Expense relating to leases
of low value assets 39 2
Total cash outflows for leases can be found as a separate line
item in the Consolidated Statement of Cash Flows.
2020 2019
Maturity profile of
lease liabilities EUR'000 EUR'000
Due in six months or
less 1,251 1,405
Due between six months
and 1 year 966 1,456
Due between 1 year
and 2 years 953 2,268
Due between 2 and 5
years 1,391 1,879
Due in 5 years or more 1,066 1,460
5,627 8,468
20. Provisions and other liabilities
2020 2019
EUR' 000 EUR' 000
Earn out liabilities 1,903 1,645
Dilapidation provisions 78 -
Current provisions and other liabilities 1,981 1,645
Directors' benefits 66 397
Earn out liabilities 4,434 4,754
Dilapidation provisions 277 293
Other non-current liabilities 299 193
Non-current and other liabilities 5,076 5,637
Directors' benefits above relates 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 12).
Non-current earn out liabilities relates to the acquisitions of
SECL and CLAI and are valued at fair value through profit or loss
(see note 8).
Other non-current liabilities relates to a long service leave
accrual required by certain Australian states and territories for
long serving employees.
21. Employee benefits
2020 2019
EUR' 000 EUR' 000
Severance indemnity 2,152 2,013
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 2019 1,950
Service cost 97
Net interest 29
Benefit paid (196)
Actuarial loss 133
Additions through business combinations -
---------
At 31 December 2019 2,013
Service cost 239
Net interest 16
Benefit paid (137)
Actuarial loss 21
At 31 December 2020 2,152
22. Share capital
Authorised, issued and fully paid capital
At 31 December 2020 Number EUR
----------- -------------
Ordinary shares of 0.10
EUR each 24,516,707 2,451,670.70
----------- -------------
At 31 December 2019 Number EUR
----------- -------------
Ordinary shares of 0.10
EUR each 24,250,907 2,425,090.70
----------- -------------
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.
The movement in Ordinary shares for the
year reconciles as follows:
Number EUR
At 1 January 2019 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
Additions during the year 265,800 26,580.00
At 31 December 2020 24,516,707 2,451,670.70
On 3 September 2019, the Group 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 UKFH Limited,
formerly Porta Communications Plc (""Porta""). Per the scheme of
arrangement a ratio of 1 newly issued share for each 88.495575
shares of Porta 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 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.
On 9 June 2016 the General Assembly resolved to issue a maximum
of 675,000 shares as part of a stock grant plan to the employees.
In accordance with the approvals, on 26 December 2020, 265,800
shares were granted to the Group's employees for EUR0.10 each under
the stock grant plan. A further 409,200 remained unsubscribed at 31
December 2020 (2019: 675,000 shares unsubscribed).
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:
2020 2019
Profit for the year attributable
to owners of the company EUR813,000 (EUR99,000)
Weighted average number
of shares 24,255,264 17,036,245
Earnings per share, basic EUR0.034 (EUR0.006)
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.
At 31 December 2020 only 265,800 shares under the stock grant
plan had been granted (2019: none), with the remaining approved
shares under the warrant and stock plans unsubscribed, representing
dilutive shares of 1,023,200 (2019: 1,289,000 dilutive shares).
In addition, in March 2020 the Group issued 25 convertible bonds
to Inveready Convertible Finance, see note 17 for details. The
bonds are convertible into a maximum of 3,821,375 Ordinary shares
representing 152,855 Ordinary shares per bond in March 2027 at the
option of the holder.
For diluted earnings per share, the weighted average number of
shares in issue is adjusted to assume conversion of dilutive
shares. Earnings per share, diluted, is determined as follows:
2019 2018
----------- ------------
Profit for the year attributable
to owners of the company EUR813,000 (EUR99,000)
Weighted average number
of shares 27,319,873 18,325,245
Earnings per share, diluted EUR0.030 (EUR0.005)
23. Other equity and reserves
The following table describes the nature of each reserve:
2020 2019
EUR'000 EUR'000
Share premium 12,456 12,456
Legal reserve 187 148
Revaluation reserve (3,202) (3,076)
Retained earnings 6,630 6,222
16,071 15,750
Share premium
EUR'000
--------
At 1 January 2019 3,741
New issues during the year 9,861
Issue costs (1,146)
--------
At 31 December 2019 and 31 December
2020 12,456
--------
On 3 September 2019, SEC Newgate S.p.A. issued 10,748,374
Ordinary shares as detailed in note 22. The fair value of
consideration paid resulted in share premium of EUR9,861,000. The
company incurred issue costs of EUR1,146,000 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.
Dividends not recognized at year end
Given the very positive result of financial year ended 31
December 2020, the Board has recommended a final dividend of 0.5
pence per fully paid ordinary share to be approved at the General
Assembly. The aggregate amount of the proposed dividend is GBP
123,554.61.
24. Interests in subsidiaries
Summary of acquisitions
The effect of acquisitions and disposals on the in financial
position of the Group:
Disposal Acquisition
2020 2019
Cambre Advocacy Porta
Maroc Group
Notes EUR' 000 EUR' 000
Tangible assets 88 -
Trade receivables 379 5,413
Cash and cash equivalents 25 1,824
Other assets - 7,935
Trade payables (155) (870)
Other liabilities (380) (17,864)
Goodwill 9 - 14,995
Loss on disposal 4 (2) -
Gross consideration (45) 11,433
% acquired (51%) 100%
Fair value of consideration - 10,935
Fair value of previously
held equity interests - 423
Deferred consideration
payable (24) -
Net (liabilities)/assets
attributable to non-controlling
interests (21) 74
Cash consideration at - -
31 December
In December 2020 the Group disposed of a small loss making
subsidiary Cambre Advocacy Maroc. The Group invested in the
start-up business in late 2019 and has agreed to pay the
non-controlling interest 51% share of the losses incurred to the
date of disposal.
In September 2019, the Company, who previously held 16.9% of
UKFH Limited, formerly 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 EUR14,995,000 (note 9) 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 9.
Details surrounding further acquisitions and disposals of
interests in existing subsidiaries can be found below:
Company Date of-acquisition % acquired % owned at Consideration
in year year end
Newgate Hong Kong 09/04/2020 15.0% 100% 20
Newgate Communications
Pty Limited 01/07/2020 8.8% 76% 508,334
Company Date of-disposal % disposed % owned Consideration
in year at year
end
21:12 Communications
Limited 21/02/2020 7.0% 67% 460
In addition to the above acquisitions, on 1 July 2020 the Group
established SEC Newgate US LLC, a new commercial venture based in
the USA in which the Group has a 55% interest.
Set out below are details of the subsidiaries held directly,
unless otherwise stated, by the Group at 31 December 2020:
Name Key Country of Percentage Principal activity
incorporation held
-----------
13 Communications Limited 13CO London (UK) 100%* Dormant
21:12 Communications Marketing & advertising
Limited 2112 London (UK) 67% agency
ACH Sec Global SL ACH Madrid (Spain) 65.7% Public relations
& corporate
affairs consultancy
Cambre Associates SA CAM Bruxelles 76% Public relations
(Belgium) & corporate
affairs 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) 100%** 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 100%* 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) 75.57%* Public relations,
Pty Limited corporate affairs
& research consultancy
Newgate Communications NGCB Beijing (China) 100%* Public relations
(Beijing) Limited & corporate
affairs consultancy
Newgate Communications NGAD Abu 76%* Public relations
FZ-LLC Dhabi (United consultancy
Arab Emirates)
SEC Newgate UK Limited NGUK London (UK) 100%* Public relations,
(formerly Newgate Communications corporate affairs
Limited) & 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) 100%* Intermediate holding
Pty Limited company
Porta Communications MIDC London (UK) 100%* Intermediate holding
Midco Holdings Limited company
UKFH Limited (formerly PORT London (UK) 100% Intermediate holding
Porta Communications company
Plc)
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
SEC Newgate US LLC SECUS New York (USA) 55% Public relations
& corporate
affairs consultancy
SEC Newgate US Holdings SECUS New York (USA) 100% Public relations
Corporation Holdings & corporate
affairs consultancy
Springall Gbr SPRG Hamburg (Germany) 100%* Dormant
Velvet Consultancy Limited VELV London (UK) 100%* Dormant
-----------
*Indirectly held
** Indirectly held with
an economic interest
of 51%
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
25. Non-controlling interests
The total non-controlling interest (NCI) at the year end is
EUR563,000 (2019: EUR99,000). The NCI is in respect of those
subsidiaries (as listed in note 24) that the Group does not own a
holding of 100%.
Set out below is summarised financial information for each
subsidiary that has NCI 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 2020
EUR'000 ACH CAM CLA HIT KOHL MRT NEW NGSN NGHK NGAS SEC-L SEC-P 2112
Non-current
assets 237 482 723 308 49 102 290 536 129 1,146 65 940 224
Current
assets 192 1,942 2,390 582 150 163 1,468 932 185 5,607 1,048 1,229 1,103
Non-current
liabilities (469) (303) (119) (141) (28) (78) (382) - (35) (1,710) (229) (141) (4,202)
Current
liabilities (243) (1,263) (1,394) (139) (68) (75) (1,275) (182) (102) (3,845) (670) (622) (773)
Net
(liabilities)/assets (283) 858 1,600 610 103 112 101 1,286 177 1,198 214 1,406 (3,648)
NCI (97) 207 - 258 26 45 40 630 - 293 105 696 (1,204)
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
(liabilities)/assets (19) 822 1,697 666 77 132 609 1,231 321 944 343 1,421 (3,964)
NCI (7) 197 - 282 19 53 244 603 48 314 168 703 (1,031)
Summarised income statements
At 31 December 2020
EUR'000 ACH CAM CLA HIT KOHL MRT NEW NGSN NGHK NGAS SEC-L SEC-P 2112
Revenue 836 4,326 4,614 796 513 662 3,394 1,433 1,055 17,398 3,326 1,575 3,732
(Loss)/Profit
for the
period (264) 386 477 2 26 (12) (483) 393 (126) 1,899 146 34 101
(Loss)/Profit
attributable
to NCI (91) 93 - 1 7 (5) (193) 193 (5) 548 72 16 32
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 NCI (69) 87 - 22 8 28 (99) 2 7 113 128 64 (213)
26. Related parties
Compensation paid to key management personnel has been set out
in the directors' remuneration table within note 5. In addition,
from time to time the Group enters into transactions with its
associate undertakings.
During the year, Newgate Communications Limited paid Barbican
Centre Trust Ltd, a registered charity and a company of which Emma
Kane is the Chairman, EUR27,000 (GBP24,000) (2019: EUR14,000
(GBP12,000)) for corporate membership. As at 31 December 2020, this
amount was due to the Barbican Centre Trust Ltd.
During the year, the Group was invoiced EUR13,000 (A$12,000)
(2019: EUR6,000 (A$10,000)) for flowers by Buds and Poppies, a
florist company owned by the wife of Brian Tyson. An annual
membership fee of EUR10,000 (A$16,500) (2019: EUR5,000 (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.
27. Ultimate controlling party
There is no ultimate controlling party. SEC Newgate S.p.A. is
36.03% controlled by Fiorenzo Tagliabue.
28. Subsequent events
On 18 January 2021, the Group announced the restructuring and
rebranding of its largest UK agencies; the Group increased its
stake in Newington from 60% to 100%, and the business and assets of
Newington were transferred to SEC Newgate UK Ltd.
On 2 February 2021, Sergio Penna was appointed to the Board of
SEC Newgate S.p.A. as Group CFO; Anna Milito, Deputy Group CFO,
stepped down from the Board.
On 22 March 2021, the Group announced the establishment of a new
commercial venture, SEC Newgate CEE (SECN CEE), in Poland, to
accelerate the business development across the Central Eastern
Europe Region. SECN CEE has been established as a 51% owned
subsidiary.
Regarding the UK headquarters, notice has been given to both the
London offices, SEC Newgate UK Ltd will move to new premises, heads
of terms were signed the on 9 April 2021 for a 10-year lease (with
a five year break clause).
In accordance with the agreement signed on 23 December 2020, the
Group acquired a 60% interest in Orca Affairs GmbH (Orca) in April
2021 for an initial consideration of EUR2.2m, with the
consideration potentially increasing to a maximum of EUR3.5m
contingent on Orca's performance. The consideration is payable in
four instalments between 2021 to 2024, the first instalment of
EUR700,000 was paid on 14 April 2021 acquiring 15% of the issued
share capital of the target, with attached voting rights of 60%
passing to SEC Newgate S.p.A.
On 19 May 2021 the Group agreed with UniCredit a revised
covenant criteria related to the bank loan of EUR4.0m signed in
2019, more reflective of the Group's current situation. Based on
these new criteria, no breach has been reported at 31 December
2020; the loan has been disclosed as a non-current liability.
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