We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Sec Newgate S.p.a. | LSE:SECG | London | Ordinary Share | IT0005200453 | ORD NPV (CDI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 48.50 | 45.00 | 52.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
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 ------------ ------------ Revenues 65.33 47.55 ------------ ------------ Gross profit 56.11 37.60 ------------ ------------ Operating profit 4.18 1.81 ------------ ------------ Profit before tax 3.05 1.27 ------------ ------------ Net debt (1) (13.03) (17.21) ------------ ------------ Net cash inflow from operating activities 7.22 5.09 ------------ ------------
-- 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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
END
FR SEFESSEFSEFI
(END) Dow Jones Newswires
May 21, 2021 02:00 ET (06:00 GMT)
1 Year Sec Newgate S.p.a Chart |
1 Month Sec Newgate S.p.a Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions