TIDMSECN
RNS Number : 2940K
SEC Newgate S.p.A.
01 September 2021
1 September 2021
SEC Newgate SpA
("SEC Newgate", "the Company" or "the Group")
Unaudited condensed consolidated Interim Results
for the six months ended 30 June 2021
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, is pleased to announce
its unaudited results for the six months ended 30 June 2021.
Financial Highlights
-- Group revenues up 15% to EUR36.3m (H1 2020: EUR31.5m) *
-- Gross profit up 9% to EUR30.6m (H1 2020: EUR28.0m) *
-- Profit before tax up 53% to EUR2.3m ** (H1 2020: EUR1.5m) *
-- Net cash flow from operating activities: inflows EUR0.4m *** (H1 2020: inflows EUR4.7m)
-- Net debt as at 30 June 2021: EUR18.9m, including EUR7.8m
lease liabilities (H1 2020: EUR13.1m, including EUR7.1m lease
liabilities)
* The numbers reported on June 2021 include 3 months of activity
of the new subsidiary Orca Affairs, based in Germany, which
starting April generated Revenues of EUR2.6m, Gross profit of
EUR1.1m and profit before tax of EUR0.4m. Like-for-like gross
profit and profit before tax are EUR29.5m (2020: EUR28.0m) and
EUR1.9m (2020: EUR1.5m)
** Profit before tax includes impairment of goodwill of EUR0.4m (2020: nil)
*** Operating cash flow was impacted by EUR3.7m increase in
trade receivables, as business activity increased under normal
trading terms.
Operational Highlights
-- Appointment of Sergio Penna, Group CFO, to the SEC Newgate Board from 1 February 2021
-- Lease signed on 28 June 2021 for new London offices for SEC
Newgate UK and part of the Group's finance and corporate function,
creating expected total cash and IFRS16 savings of more than EUR5m
over the first five years of the lease
-- Launch of a start-up in Poland - SEC Newgate CEE (Central
Eastern Europe) - founded with local partners to accelerate the
Group's development across the Eastern Europe region
-- SEC Newgate ranked 29(th) in PRovoke Global Top 250 PR Agency
Ranking 2020, and 7(th) in Europe
Post-period highlights
-- On 1 July 2021, the Italian business (people, contracts,
assets and liabilities) were transferred to a newco, SEC Newgate
Italy srl, Benefit Company. SEC Newgate S.p.A, the listed company,
now acts solely as the holding company. This will separate the
operational activities of the trading business in Italy from those
of the Italian holding company
-- On 1 July 2021, a Group Marketing Manager, Irene Ferrario,
was appointed to increase the Group's visibility globally
-- On 9 July 2021, an agreement was signed with an Italian bank,
BPER, for a EUR2m loan, as part of the Italian Government's support
to companies during the pandemic.
-- On 28 July 2021, the Group acquired 70% of Twister
Communications Middle East, the Dubai-based branch of Italian PR
firm Twister Communications Group, and rebranded it SEC Newgate ME
(Middle East); its managing partner, Elena Gramatica, retains 30%
of the shares
-- On 30 July 2021, the Group acquired an additional 40%
interest in Kohl PR & Partners GmbH (now SEC Newgate
Deutschland), increasing its interest in the German subsidiary to
100%
John Foley, Group Chairman, commented:
"These Interim Results demonstrate not only the Group's
resilience during this ongoing period of significant challenge
around the world but also that our vision and strategy in
implementing it are working and delivering excellent returns for
all our stakeholders. We have real momentum and look forward to the
year end with confidence."
Commenting on performance in the first half, Group CEO, Fiorenzo
Tagliabue, added:
"Our performance in the first half was solid and significantly
ahead of pre-pandemic levels. All the major businesses are ahead of
budget and our new start-ups are performing strongly. We are
implementing our ambitious growth plan and our industry is quickly
returning to where it was pre-pandemic. Our focus is now on
building the visibility of the SEC Newgate brand globally and
awareness of the fully integrated, insight-led, advocacy and
communications services we offer ."
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. The Agency's team consists of c.600 staff, working in 38
offices, in 15 countries, 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
Group CEO Review (Fiorenzo Tagliabue)
A quick look at the narrative from the 'Overview by Region' for
these Interim Results 2021 is sufficient to understand how
successful the Group's performance has been during this first half
of the year.
All the major businesses are ahead of budget and, in several
cases are growing significantly on a like-for-like basis compared
with the H1 2020 results.
In December 2020, the Group acquired Orca in Germany and this
has been consolidated into our numbers from 1 April 2021 - the full
benefit will be seen from the second half.
SEC Newgate CEE, launched in March this year, is performing at
break-even; SEC Newgate US is already profitable, just one year
after the launch of the start-up in New York and Washington.
All of this is not unexpected for those who know the quality of
our Senior Leadership Team and of all our teams, which consist of
talented and innovative people focused on clients.
Moreover, our clear vision makes us more attractive for the
market, boosts intercompany business, increases our visibility
resulting in several new international mandates being secured.
Meanwhile our central Marketing function, which was established on
1 July 2021, is working to on this November's launch of our first
global thought leadership initiative, which will bring further
visibility to our brand. This will be further enhanced by the
completion of the rebranding of all Group agencies under the SEC
Newgate brand. These initiatives will lay the first bricks of our
global positioning.
This will help us not only to accele rate our growth strategy
but, equally as important, it will also make the Group more
attractive to young, talented people who represent the future of
this ever-changing industry.
At a worldwide level, the industry is quickly returning to where
it was pre-pandemic and is awarding contracts to those businesses,
such as ours, that are specifically focused on corporate
communications and with a proven expertise in insights, public
affairs, crisis and reputation management, and financial
communication. Now more than ever, companies are sensitive to the
need to take care of their relationships, external and internal,
more careful to protect their business reputations, and even more
convinced of the importance of consultancy services provided by our
industry.
We have learnt many things from the pandemic: a more efficient
way of working without giving up the personal relationships that
are an essential element of consultancy; how to encourage our
creativity in terms of development and new business and last, but
not least, how to manage our overheads more efficiently.
All these different factors allow us to look to the end of this
year with confidence and, above all, push us to implement our
ambitious growth plan which will be set out in our strategic plan
when it is updated, as usual, in November.
Overview by Region
APAC (Deputy Group CEO, Brian Tyson)
The Asia Pacific region comprising Australia, Greater China and
Singapore reported a very strong half year performance highlighted
by significantly better than budget result on both revenue and
profit forecasts. While the region is dealing with a renewed
outbreak of the Delta strain of the Covid virus, our 10 offices in
the region all reported high levels of business activity.
In Greater China, business sentiment is robust, fuelled in part
by China's economy bouncing back quickly from the pandemic. The
financial markets in Hong Kong made a good start with a
record-breaking number of IPOs. Beyond transactions, the business
has also continued to deepen its exposure to the financial
services, professional services, technology, and property sectors,
securing significant new mandates in Hong Kong and mainland
China.
As a result of increased revenues and tight cost controls, the
Greater China business has moved back into profitability which is
testimony to a great team effort under the leadership of new CEO,
James Hill.
The Singapore team worked on a number M&A, restructuring and
fundraising mandates, including the acquisition of a listed REIT by
a global private equity firm. On the corporate communications
front, the Singapore team deepened its focus on professional
services and financial services clients, handling a number of
high-profile projects.
Australia, has continued on from its record 2020 performance to
report an even stronger year on year performance for the first six
months of 2021. The contribution to the strong results are shared
across all practice areas and geographies with highlights including
our role in advising on the world first agreements between media
companies and global online firms to pay for news content, our in
depth stakeholder reputational work in the energy sector with the
market regulator, operator and commission, advising on the largest
M&A transaction ever undertaken in Australia as well as ongoing
public affairs and corporate work with our more than 150
clients.
EMEA (Deputy Group CEO, Tom Parker)
Overall H1 2021 witnessed a positive performance for SEC Newgate
in the EMEA region (excluding Italy) against a highly complex
trading backdrop. Gross profit and profit before tax were both
ahead of budget. In practice performance was a mixed bag, with some
offices trading strongly and others continuing to be impacted by
the COVID situation.
After launching its operations in Q1 2021, SEC Newgate Central
Eastern Europe (CEE) got off to a flying start with a team of 20
people already in place and break-even financials putting it well
ahead of forecast. Martis in Warsaw was ahead of Gross Profit
budget but slightly down on profit before tax. After a
disappointing first quarter in France, very good new business
performance in the second quarter resulted in our Paris office CLAI
exceeding 2020 gross profit by the end of June, although still
behind budget. In Brussels, Cambre enjoyed strong momentum in H1
2021 putting it ahead of budget, with significant big-name client
wins in the sustainability area reflecting growing international
corporate attention on the EU's ambitious climate initiative, the
Green Deal. Trading in Germany was stable and strong and new and
very interesting clients including BAFIN (Bundesanstalt für
Finanzleistungsaufsicht), the Robert-Koch-Institute (responsible
for all COVID 19 and public health related issues) were won.
Meanwhile, the situations in Spain and Abu Dhabi were more
challenging. In Madrid, the ongoing difficulties due to COVID
resulted in a loss but strong new business performance has reduced
this substantially compared to 2020 and the outlook is cautiously
optimistic for H2 2021. In Abu Dhabi, ongoing business difficulties
resulted in a decision to relocate the headquarters for our
business in the Gulf region to Dubai with the acquisition of
Twister Middle East, renamed SEC Newgate ME.
Italy (General Manager, Paola Ambrosino)
For the Italian companies in the SEC Newgate group, 2021 had a
better start than the previous year, which was impacted by Covid
pandemic. The first half-year achieved a significant increase in
terms of revenues, +13%, and this growth is likely to continue
until year end.
From July 2020, we experienced signs of economic recovery, which
the following months confirmed, and the reforms and funds connected
with the European Recovery Plan amplified this.
Our teams were successful in seizing business opportunities,
with conditions favourable for investment in communications and
advocacy. The ecological transformation together with the digital
revolution, accelerated by Covid pandemic, and the related
necessity to upgrade technologies, processes, products, or to
intercept opportunities and prevent risks and threats, all need to
the support of public relations plans, advocacy projects, or crisis
management actions.
As a result, more and more organizations are seeking a reliable
partner. Our reputation, further strengthened by our international
dimension and growth, has brought in many new clients, such as
Bayer, Total, Porsche, Nescafé, Angelini Holding, and PWC.
Furthermore, significant retained clients such as Ikea, Coca-Cola
Company, Deutsche Bank, and DHL have reconfirmed their confidence
in SEC Newgate.
Moreover, SEC Newgate Italia won the G20 pitch for the
institutional events relating to the G20 Italian Presidency, and
many other authorities and corporations have also required
professional support to organize live or "phygital" events after
the long break forced by pandemic, and continue to do so during the
second half of 2021.
UK & the Americas (Deputy Group CEO, Emma Kane)
SEC Newgate UK delivered strong financial results for the first
half of 2021, despite spending much of the period in lockdown.
Gross profits and margins continued to improve month on month and
cash generation was excellent. The team focused on building its
core areas of expertise with many new business wins in areas such
as Green & Good, financial services, energy, tech, real estate,
as well as a significant number of IPOs and M&A
transactions.
At the start of the period, the Group's other UK communications
and advocacy agency, Newington, was merged into SEC Newgate UK and
its office lease successfully exited. A new London headquarters
building in Farringdon was secured for occupation in autumn 2021 to
provide a stimulating environment, able to adapt to dynamic working
whilst also achieving further savings for shareholders.
SEC Newgate Colombia delivered strong results during the first
semester of the year, following the successful contract renewal of
more than 80% of its portfolio of clients, coupled with the entry
of new ones such as Michelob, Nature's Heart and Honor. In
addition, gross profit double digit growth was achieved through
additional services and revenues from two of our top clients:
Diageo and Adidas. The agency also led important projects for USAID
and Merz Central America, capitalizing on the efforts to generate
pan-regional new business opportunities. Talent retention and
attraction was also key in H1 2021, as the agency continued to
operate almost entirely under a home-office model. SEC Newgate
Colombia almost tripled its profit before tax result compared to
last year and was above budget target.
SEC Newgate US traded profitably and performed ahead of its
gross profit and profit before tax targets for the period. The
agency, working out of its bases in New York and Washington DC,
collaborated closely with many other group offices to deliver a
fully integrated service in the US as well as securing several
significant retainers and projects of its own.
Financial Overview
The following table summarises the Group's key financial results
for the six months ended 30 June 2021.
Six months ended 30 June 2021 2020
------------------------------------------- --------- ---------
EUR' 000 EUR' 000
------------------------------------------- --------- ---------
Revenues(1) 36,295 31,494
Gross profit 30,609 28,014
Operating profit 2,802 2,366
Profit before tax 2,301 1,509
Net debt(2) 18,913 13,105
Net cash inflow from operating activities 433 4,663
------------------------------------------- --------- ---------
(1) June 2021 column include 3 months of activity of the new
subsidiary Orca Affairs, which generated Revenues EUR2,599,000,
Gross profit EUR1,157,000 and profit before tax EUR440,000.
Like-for-like numbers are Revenues EUR33,696,000 (2020:
EUR31,494,000), Gross Profit EUR29,452,000 (2020: EUR28,014,000)
and profit before tax EUR1,861,000 (2020: EUR1,509,000)
(2) At 30 June 2021 net debt included lease liabilities of
EUR7,843,000 (2020: EUR7,124,000)
Profit for the half year is EUR1,570,000 (2020: EUR680,000); the
tax charge is lower in June 2021 because of the improved
profitability across the Group's operations and the consequent
reduction in the Group's tax rate resulting from the elimination of
non utilisable trading losses.
In terms of cash flow, the six months ended 30 June 2020 were
strongly influenced by the handbrake strategy on the Group costs,
to address the Covid-19 outbreak in February 2020, leading to rent
reductions, spending cuts and deferred payments, as well as
benefits from governmental assistance in many countries. At 30 June
2021 the operating cash flow is impacted by EUR3.7m increase in
trade receivables, as the business increased under normal trading
terms.
The Group continues to report a positive result in the six
months ending 30 June 2021 as the world's markets start emerging
from the worst of the pandemic, and due to efficient business
management, the Group is able to increase spending to further
expand trade.
Condensed consolidated income statement
For the six months ended 30 June 2021
Six months ended 30
June
2021 2020
Notes EUR' 000 EUR' 000
------------------------------------ ------ ---------- ----------------------
Continuing operations
Revenue 3 36,295 31,494
Cost of sales (5,686) (3,480)
------------------------------------ ------ ---------- ----------------------
Gross profit 30,609 28,014
Other income 239 403
Operating costs 4 (27,604) (25,815)
Impairment losses(1) 5 (442) (236)
Operating profit 2,802 2,366
Net finance cost 6 (501) (857)
Profit before taxation 2,301 1,509
Taxation 7 (731) (829)
------------------------------------ ------ ---------- ----------------------
Profit for the half year 1,570 680
------------------------------------ ------ ---------- ----------------------
Profit attributable to:
Owners of the Company 726 377
Non-controlling interests 844 303
------------------------------------ ------ ---------- ----------------------
1,570 680
------------------------------------ ------ ---------- ----------------------
Earnings per share attributable to
the equity holders of the Company
------------------------------------ ------ ---------- ----------------------
Basic, per share 14 EUR0.030 EUR0.016
Diluted, per share 14 EUR0.025 EUR0.015
------------------------------------ ------ ---------- ----------------------
1 To add further clarity and transparency impairment losses have
been disclosed separately from operating costs. 2020 comparatives
reported operating costs of EUR26,051,000 including impairment
losses of EUR236,000.
There were no discontinued operations in the half year.
The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2021
Six months ended 30
June
2021 2020
Notes EUR' 000 EUR' 000
-------- -------------------------------------------- ------------------- ------------------
Continuing operations
Profit for the half year 1,570 680
Items that may be subsequently reclassified
to profit or loss:
Exchange (loss)/gain arising on translation
of foreign operations (284) 345
Items that will not be reclassified
to profit or loss:
Actuarial gain/(loss) on defined benefit
pension plans 63 (5)
Total comprehensive income, net of
tax 1,349 1,020
------------------------------------------------------- ------------------- ------------------
Total comprehensive income attributable
to:
Owners of the Company 557 680
Non-controlling interests 792 340
------------------------------------------------------- ------------------- ------------------
1,349 1,020
----------------------------------------------------- ------------------- ------------------
The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.
Condensed consolidated statement of financial position
As at 30 June 2021
30 June 31 December
2021 2020
Notes EUR' 000 EUR' 000
------------------------------- ------ --------- ------------------------
Non-current assets
Intangible assets 9 33,484 30,524
Tangible assets 10 8,361 6,000
Investments 17 16
Other assets 3,011 2,806
------------------------------- ------ --------- ------------------------
Total non-current assets 44,873 39,346
------------------------------- ------ --------- ------------------------
Current assets
Trade and other receivables 22,878 17,425
Cash and cash equivalents 8,488 12,036
------------------------------- ------ --------- ------------------------
Total current assets 31,366 29,461
------------------------------- ------ --------- ------------------------
Total assets 76,239 68,807
------------------------------- ------ --------- ------------------------
Current liabilities
Trade and other payables 18,156 14,857
Borrowings 11 2,243 2,449
Lease liabilities 1,731 2,217
Provisions(1) 13 291 78
Other liabilities(1) 2,067 1,903
------------------------------- ------ --------- ------------------------
Total current liabilities 24,488 21,504
------------------------------- ------ --------- ------------------------
Non-current liabilities
Employee benefits 2,034 2,152
Borrowings 11 17,315 17,138
Lease liabilities 6,112 3,410
Provisions(1) 13 - 277
Other liabilities(1) 6,642 4,799
Total non-current liabilities 32,103 27,776
------------------------------- ------ --------- ------------------------
Total liabilities 56,591 49,280
------------------------------- ------ --------- ------------------------
Net assets 19,648 19,527
------------------------------- ------ --------- ------------------------
1 Previously provisions and other liabilities had been reported
as a single classification.
The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.
30 June 31 December
2021 2020
Notes EUR' 000 EUR' 000
---------------------------------- ------ --------- ------------------------
Equity
Share capital 14 2,471 2,452
Share premium 12,578 12,456
Legal reserve 220 187
Other reserves (2,905) (3,202)
Retained earnings 5,868 6,630
Total equity shareholders' funds 18,232 18,523
---------------------------------- ------ --------- ------------------------
Non-controlling interests 1,416 1,004
---------------------------------- ------ --------- ------------------------
Total equity 19,648 19,527
---------------------------------- ------ --------- ------------------------
The financial statements were approved by the Board of Directors
and authorised for issue on 31 August 2021.
Fiorenzo Tagliabue
Director
SEC Newgate S.p.A (09628510159)
The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2021
Share Share Legal Other Retained Total Non-controlling Total
capital premium reserve reserves earnings equity interests equity
share-holders'
funds
EUR' EUR' EUR' EUR' EUR'
000 000 000 EUR' 000 000 EUR' 000 EUR' 000 000
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
At 1 January
2021 2,452 12,456 187 (3,202) 6,630 18,523 1,004 19,527
Total comprehensive
income
Profit for the
half year - - - - 726 726 844 1,570
Other
comprehensive
income - - - (169) - (169) (52) (221)
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Total
comprehensive
income - - - (169) 726 557 792 1,349
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Transactions with
owners
Issue of
Ordinary
shares as
consideration
for business
combination 19 122 - - - 141 - 141
Dividends paid - - - - (143) (143) (688) (831)
Dividends
declared
to
non-controlling
interests CLAI
(1) - - - - (484) (484) - (484)
Share based
payments - - - 115 - 115 - 115
Transfer between
reserves - - 33 351 (384) - - -
Acquisition
of
non-controlling
interest
without
a change in
control - - - - (477) (477) 53 (424)
Acquisition
of subsidiary
with
non-controlling
interest - - - - - - 255 255
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Total
transactions
with owners 19 122 33 466 (1,488) (848) (380) (1,228)
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
At 30 June 2021 2,471 12,578 220 (2,905) 5,868 18,232 1,416 19,648
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
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 15 for more details.
The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.
Share Share Legal Other Retained Total Non-controlling Total
capital premium reserve reserves earnings equity interests equity
share-holders'
funds
EUR' EUR' EUR' EUR' EUR'
000 000 000 EUR' 000 000 EUR' 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
half year - - - - 377 377 303 680
Other
comprehensive
income - - - 303 - 303 37 340
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Total
comprehensive
income - - - 303 377 680 340 1,020
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Transactions
with owners
Dividends
declared
to
non-controlling
interests - - - - - - (266) (266)
Transfer between
reserves - - 38 - (38) - - -
Movement in
non-controlling
interest
without
a change in
control - - - - 311 311 (311) -
Equity
components
of loans - - - 34 - 34 - 34
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
Total
transactions
with owners - - 38 34 273 345 (577) (232)
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
At 30 June 2020 2,425 12,456 186 (2,739) 6,872 19,200 1,439 20,639
----------------- --------- --------- --------- --------- ---------- --------------- ---------------- --------
The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.
Condensed consolidated statement of cash flows
For the six months ended 30 June 2021
Six months ended 30
June
2021 2020
Notes EUR' 000 EUR' 000
-------------------------------------------- ------ ----------------- ----------------
Cash flows from operating activities
Profit before tax on continuing activities 2,301 1,509
Adjusted for:
Net finance costs 6 501 857
Net exchange differences (254) (249)
Amortisation of intangible assets 4 243 200
Depreciation of tangible assets 4 1,381 1,615
Impairment of intangible assets 5 395 -
Impairment of trade receivables 5 47 -
Provisions (64) 465
Other liabilities (429) -
Share based payment expense 115
Gain on disposal of intangible assets - 3
Loss on disposal of tangible assets 11 -
Disposal and revaluation of lease (7) -
liabilities
Changes in working capital:
(Increase)/Decrease in trade and other
receivables (3,763) 2,748
Increase/(Decrease) in trade and other
payables 596 (1,850)
-------------------------------------------- ------ ----------------- ----------------
Cash generated from operating activities 1,073 5,298
-------------------------------------------- ------ ----------------- ----------------
Interest received 36 63
Income tax paid (676) (635)
-------------------------------------------- ------ ----------------- ----------------
Net cash generated from operating
activities 433 4,726
-------------------------------------------- ------ ----------------- ----------------
Cash flows from investing activities
Acquisition of intangible assets (89) (86)
Acquisition of tangible assets (192) (133)
Acquisition and earn-out payments 15 (700) (62)
Cash from acquisitions 15 205 -
Acquisition of non-controlling interest 15 (1) 261
Net cash outflow from investing activities (777) (20)
-------------------------------------------- ------ ----------------- ----------------
Cash flows from financing activities
Interest paid (164) (370)
Lease liabilities interest paid (115) -
Lease payments (principal) (1,237) (1,387)
Proceeds from loans and borrowings 861 5,386
Repayment of loans and borrowings (1,346) (1,219)
Dividends paid to non-controlling
interests (1,315) (266)
Net cash (outflow)/inflow from financing
activities (3,316) 2,144
-------------------------------------------- ------ ----------------- ----------------
Net cash (outflow)/inflow (3,660) 6,850
Cash and cash equivalents at 1 January 12,036 6,138
Effect of exchange rate changes 112 (175)
-------------------------------------------- ------ ----------------- ----------------
Cash and cash equivalents at 30 June 12 8,488 12,813
-------------------------------------------- ------ ----------------- ----------------
The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.
Notes to the condensed consolidated interim financial
statements
For the six months ended 30 June 2021
1. Corporate Information
SEC Newgate S.p.A. (the "Company") was incorporated in March
1989 and is based in Milan. The registered office and principal
executive office is located at Via Ferrante Aporti 8, Milano
20125.
The unaudited condensed consolidated interim financial
statements (the "interim financial statements") for the six months
ended 30 June 2021, represent the result of the Company and its
subsidiaries (together referred to as the "Group").
The principal business of the Group is a comprehensive range of
public relations, advocacy, communications and public affairs
services provided to national and multinational clients.
The most relevant operating subsidiaries of the Company included
in the consolidated financial information, are as follows:
Name Location Percentage held
------------------------------------------ ------------------------ ----------------
21:12 Communications Ltd London (UK) 67%
ACH SEC Global SL(1) Madrid (Spain) 92.31%
Cambre Associates SA Brussels (Belgium) 76%
CLAI SAS Paris (France) 10%
EngageComm Pty Limited Sydney (Australia) 51%
HIT S.r.l. Milan (Italy) 57.71%
Kohl PR & Partners GMBH Berlin (Germany) 75%
Martis Consulting Sp. z o. o. Warsaw (Poland) 60%
Newgate Communications (HK) Limited Hong Kong 100%
Newgate Communications (Singapore) Ltd Singapore 51%
Newgate Communications Pty Limited Sydney (Australia) 75.57%
Newgate Communications (Beijing) Limited Beijing (China) 100%
Newgate Communications FZ-LLC Abu Dhabi (UAE) 76%
Newington Communications Limited(2) London (UK) 100%
Orca Affairs GmbH* Berlin (Germany) 15%
SEC Newgate UK Limited London (UK) 100%
SEC Newgate CEE* Warsaw (Poland) 51%
Sec & Associati S.r.l. Turin (Italy) 51%
Sec Mediterranea S.r.l. Bari (Italy) 51%
Sec & Partners S.r.l. Rome (Italy) 50.5%
SEC Latam Comunicaciones SAS Bogotà (Colombia) 51%
------------------------------------------ ------------------------ ----------------
During the half year, % held changes were as follows:
1. Increased holding by 26.61% from 65.7%
2. Increased holding by 40% from 60% prior to the trade being
acquired by SEC Newgate UK Limited effective 1 January 2021
* New subsidiaries (see note 15 Business combinations for
further details)
2. Accounting policies
a. Basis of preparation
The principal accounting policies adopted in the preparation of
the financial information are set out below. The policies have been
consistently applied to all the periods presented, unless otherwise
stated.
These interim financial statements for the six months ended 30
June 2021 have been prepared in accordance with IAS 34 Interim
Financial Reporting, and should be read in conjunction with the
Group's last annual consolidated financial statements, SEC Newgate
S.p.A. annual report and accounts for the year ended 31 December
2021 (found www.secnewgate.com/investors ), which have been
prepared in accordance with the International Financial Standards
and International Accounting Standards and Interpretations
(collectively IFRSs) as adopted by the European Union. These
interim financial statements do not include all of the information
required for a complete set of financial statements prepared in
accordance with IFRS Standards.
However, selected explanatory notes are included to explain
events and transactions that are significant to an understanding of
the changes in the Group's financial position and performance since
the Group's last annual consolidated financial statements.
The financial information has been prepared under the historical
cost convention, except for financial instruments that have been
measured at fair value.
The interim financial statements are presented in Euros (EUR),
the Company's functional and presentation currency.
These interim financial statements have been prepared on a going
concern basis in accordance with IFRS and IFRIC interpretations
issued and effective or issued and early adopted as at the time of
preparing these statements.
The preparation of financial statements in accordance with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions
and estimates are significant to the condensed consolidated interim
financial statements are disclosed under section d. Critical
accounting estimates and judgements.
New and amended standards adopted by the Group
The amendments to accounting standards that are effective for
annual periods beginning on 1 January 2021 have not had a
significant impact on the Group's results.
Further details of new or revised accounting standards,
interpretations or amendments which are effective for periods
beginning on or after 1 January 2021 and their impact on the Group
can be found in the SEC Newgate S.p.A. annual report and accounts
for the year ended 31 December 2020.
The Group has initially adopted Interest Rate Benchmark Reform
Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
(the Phase 2 amendments) from 1 January 2021.
The Phase 2 amendments provide temporary reliefs which address
the financial reporting effects when an interbank offered rate
(IBOR) is replaced with an alternative nearly risk-free interest
rate (RFR). The amendments include the following practical
expedients:
-- A practical expedient to require contractual changes, or
changes to cash flows that are directly required by the reform, to
be treated as changes to a floating interest rate, equivalent to a
movement in a market rate of interest
-- Permit changes required by IBOR reform to be made to hedge
designations and hedge documentation without the hedging
relationship being discontinued
-- Provide temporary relief to entities from having to meet the
separately identifiable requirement when an RFR instrument is
designated as a hedge of a risk component
These amendments have not impacted on the interim condensed
consolidated financial statements of the Group. The Group
anticipates its main exposure to the IBOR reform will be to
financial liabilities, mainly borrowings which are currently linked
to IBOR benchmarks. The Group plans to review and amend contractual
terms or implement provisions (as appropriate) in response to the
reform by the end of 2021. The Group intends to use the practical
expedients as they become applicable.
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
interim financial statements.
Since the outbreak of the global pandemic, the Group's agencies
have adapted to the changed working environment and have continued
to provide a first class service to clients. Implemented business
continuity plans and working remotely under varying levels remains
in place in locations where lockdowns continue to persist around
the world. Profitability continues to improve as the Group
navigates its way through the global pandemic.
c. Basis of consolidation
The interim financial statements includes the financial
statements of the Company and its subsidiaries for the six months
ended 30 June 2021 and present financial performance comparative
information for the six months ended 30 June 2020 and the financial
position comparative information for the year ended 31 December
2020.
Subsidiaries are all entities over which the Group has control.
A company is classified as a subsidiary when the Group has the
following:
-- power over the investee;
-- exposure, or rights, to variable returns from its involvement with the investee;
-- the ability to use its power over the investee to affect the
amount of the investor's returns.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from
the date that control ceases. The financial information includes
the results of the Company and its subsidiary undertakings made up
to the same accounting date.
Profit or loss and each component of other comprehensive income
('OCI') are attributed to the equity holders of the parent of the
Group and to non-controlling interests. All intra-group assets,
liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on
consolidation.
A change in ownership interest of a subsidiary without a loss of
control is accounted for as an equity transaction.
d. 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 the
Group's accounting policies. The recoverable amounts of
cash-generating units have been determined based on value-in-use
calculations which require the use of estimates.
At 30 June 2021 management have reviewed trading performances
against budget including any ongoing impact of the Covid-19
pandemic on the Group's cash flow forecasts. Management noted that
at the consolidated Group level there had been no such event to
indicate that a full impairment review was required. However, when
reviewing the impact and recovery of the pandemic on the trade of
ACH SEC Global SL, a business already impaired at 31 December 2020,
management considered it prudent to impair its carrying value to
nil. In the six months ending 30 June 2021 an impairment loss for
goodwill of EUR397,000 has been reported in respect of ACH, see
note 5 Impairment losses for further details.
Consolidation of Orca Global GmbH
In December 2020 the Company entered into an agreement
committing to acquire a 60% interest in Orca Global GmbH (Orca)
over a four-year period (with attached voting rights of 60%
immediately effective) starting 1 January 2021. Initially acquiring
a 15% legal interest on 1 April 2021, control was deemed to have
been established and the company consolidated from that date
following the Group enforcing its right to appoint a managing
director to the company. In doing so, the Group implemented certain
control rights that had been granted to it under the agreement but
not previously enforced. The 15% legal interest entitled Group to a
share of Orca's profits. The Group's entitlement to profits prior
to acquiring control have been treated as investment income. See
note 15 Business combinations for further details.
3. Segmental reporting and revenue
Business segments
The Board considers that the principal activity of the Group
constitutes one operating and one reporting segment, as defined
under IFRS 8. Management reviews the performance of the 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:
Revenue - Six months ended
30 June
--------- ----------------------------------
2021 2020
--------- -------- --------------- -------
EUR' 000 % EUR' 000 %
------------------- --------- -------- --------------- -------
United Kingdom 9,805 27% 9,872 31%
Australia 8,746 24% 7,905 25%
Italy 6,230 17% 5,373 17%
Germany 2,963 8% 184 1%
Colombia 2,157 6% 1,348 4%
France 1,995 5% 2,060 7%
Belgium 1,883 5% 2,276 7%
Poland 766 2% 336 1%
Rest of the world 1,750 6% 2,140 7%
36,295 100% 31,494 100%
------------------- --------- -------- --------------- -------
No individual client sales were greater than 10% of Group
revenue (2020: none).
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:
Six months ended
30 June
2021 2020
EUR' 000 EUR' 000
----------------------------- --------- ---------
Communications and public
relations 19,299 19,941
Advocacy and public affairs 10,189 8,143
Integrated services 6,807 3,410
------------------------------- --------- ---------
36,295 31,494
----------------------------- --------- ---------
4. Operating costs
Operating costs comprise of:
Six months ended
30 June
Restated(1)
2021 2020
Notes EUR' 000 EUR' 000
--------------------------------------------- ------ --------- ---------
Employee expenses 20,194 18,399
Amortisation of intangible assets 9 243 200
Depreciation of tangible assets 10 1,381 1,615
Professional and consulting fees 2,107 1,772
Marketing and advertising 752 163
Establishment costs 864 961
Other administrative and operating expenses 2,063 2,705
--------------------------------------------- ------ --------- ---------
27,604 25,815
--------------------------------------------- ------ --------- ---------
1 The operating cost note is a new note in the consolidated
financial statements introduced in the 2020 SEC Newgate SpA
consolidated financial statements. 2020 comparatives previously
reported other administrative and operating expenses of
EUR5,601,000 which included Professional and consulting fees,
Marketing and advertising and Establishment costs, now separately
analysed above. In addition, impairment losses of EUR236,000 are
separately disclosed within note 5 Impairment losses. 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 disclosure changes have no impact on the
Group's Consolidated Income Statement.
5. Impairment losses
2021 2020
Notes EUR' 000 EUR' 000
---------------------------------------- ------ --------- ---------
Impairment of goodwill 9 397 -
Impairment reversal - other intangible
assets 9 (2) -
Impairment of trade receivables 47 236
---------------------------------------- ------ --------- ---------
442 236
---------------------------------------- ------ --------- ---------
Goodwill is required to be tested at least annually. Indicators
of impairment may appear as a result of widespread adverse economic
conditions such as the impact of the spread of COVID-19. As
previously mentioned COVID-19 has not had a significant adverse
impact on the Group's performance and as such management have
judged that a full impairment review is not required before the
annual assessment at the end of the year. Management have noted
that one subsidiary had been severely impacted by the pandemic and
had already been impaired in the 2020 SEC Newgate Consolidated
Financial Statements. The Board have decided that the goodwill
carrying value for ACH SEC Global SL should be fully impaired.
Impairment losses on goodwill cannot be reversed.
6. Net finance costs
Six months ended
30 June
2021 2020
EUR' 000 EUR' 000
----------------------------------------- --------- ---------
Interest income on bank deposits 36 63
Fair value gains on financial assets at
fair value through profit or loss 11 22
------------------------------------------ --------- ---------
Finance income 47 85
------------------------------------------ --------- ---------
Interest expense (357) (352)
Interest on lease liabilities (117) (196)
Net foreign exchange loss (74) (394)
-------------------------------- ------ ------
Finance expense (548) (942)
-------------------------------- ------ ------
Net finance expense (501) (857)
-------------------------------- ------ ------
7. Taxation
Income tax expense is recognised based on management's estimate
of the weighted average effective annual income tax rate expected
for the full financial year. The estimated average annual tax rate
used for the six months ended 30 June 2021 is 28%.
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.
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 instruments at fair value
IFRS 13 sets out the framework for determining the measurement
of fair value of financial assets and liabilities, as categorised
in a fair value hierarchy:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly or
indirectly; and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The Group has classified its financial investments and earn out
liabilities as fair value through profit or loss, its other
investments as fair value through OCI and all other financial
assets and liabilities are held at amortised cost or cost
(undiscounted cash flows).
The Group's financial assets and liabilities are as follows:
2021 2020
----------------------------------------- ------- -----------
Notes Fair value Carrying Carrying
hierarchy and fair and fair
value value
EUR' 000 EUR' 000
Financial assets held at fair value through other comprehensive
income
Investments Level 2 17 16
Financial assets held at amortised cost
or cost
Other assets (rent deposits) Level 1 765 593
Trade and other receivables Level 1 17,987 15,150
Cash and cash equivalents Level 1 8,488 12,036
----------------------------------------- ------- ----------- ----------- -----------
27,257 27,795
----------------------------------------- ------- ----------- ----------- -----------
Financial liabilities held at fair value through other comprehensive
income
Earn out liabilities Level 3 8,395 6,337
Financial liabilities held at
amortised cost or cost
Trade payables (1) Level 1 6,279 4,464
Deferred consideration (Newington) 15 Level 2 348 -
Lease liabilities Level 2 7,843 5,627
Other liabilities Level 2 247 365
Borrowings (2) 11 Level 2 19,558 19,587
42,670 36,380
----------------------------------------- ------- ----------- ----------- -----------
1 Other payables are generally not considered to be financial
liabilities. Deferred consideration included in other payables has
been reported separately above. 2020 comparatives have removed
EUR2,168,000 of accrued expenses.
2 Borrowings include overdrafts of EUR31,000 (2020:
EUR72,000).
Management have assessed that the fair value of cash and
short-term deposits, trade receivables, trade payables, bank
overdrafts and other current assets and liabilities approximate to
their carrying amounts as those items have short term
maturities.
Earnout liabilities have been assessed to be fair value through
OCI where the contingent consideration to acquire a further
interest in a subsidiary without a change in control is deemed a
transaction between shareholders.
During the period ended 30 June 2021 no financial assets or
liabilities transferred between the fair value levels.
Due within Due between Due between Due in Total
1 year 1 and 2 2 and 5 5 years
years years or more
Maturity profile of
financial
liabilities EUR' 000 EUR' 000 EUR' 000 EUR' 000 EUR' 000
------------------------- ----------- ------------ ------------ --------- ---------
Trade Payables 6,279 - - - 6,279
Deferred consideration 121 121 121 - 363
Borrowings 2,243 2,562 10,427 4,326 19,558
Lease liabilities 1,731 1,577 4,086 924 8,318
Earn out liabilities 2,067 - 6,328 - 8,395
Other liabilities - - 247 - 247
------------------------- ----------- ------------ ------------ --------- ---------
Undiscounted cash flows 12,441 4,260 21,209 5,250 43,160
------------------------- ----------- ------------ ------------ --------- ---------
2021
Movement in level 3 financial
instruments EUR' 000
--------------------------------- ---------
At 1 January 2021 6,399
Additions 2,141
Released (145)
--------------------------------- ---------
At 30 June 2021 8,395
--------------------------------- ---------
Capital management
The capital structure of the Group comprises the equity
attributable to equity shareholders of the Company, which includes
issued share capital, reserves and retained earnings. Quantitative
data on these is set out in the condensed 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
EUR' 000 EUR' 000 EUR' 000
------------------------------- --------- -------------- ---------
Cost
At 31 December 2020 29,354 2,392 31,746
Acquisitions through business
combinations 2,802 - 2,802
Additions - 795 795
Disposals and write-offs - (111) (111)
Translation differences - 28 28
--------------------------------- --------- -------------- ---------
At 30 June 2021 32,156 3,104 35,260
--------------------------------- --------- -------------- ---------
Amortisation and impairment
At 31 December 2020 (95) (1,127) (1,222)
Charge for the period - (243) (243)
Impairment (397) 2 (395)
Disposal and write-offs - 111 111
Translation differences - (27) (27)
--------------------------------- --------- -------------- ---------
At 30 June 2021 (492) (1,284) (1,776)
--------------------------------- --------- -------------- ---------
Net book value
At 31 December 2020 29,259 1,265 30,524
--------------------------------- --------- -------------- ---------
At 30 June 2021 31,664 1,820 33,484
--------------------------------- --------- -------------- ---------
10. Tangible assets
Leasehold Leasehold Equipment Furniture Total
property improvements and fittings
EUR' 000 EUR' 000 EUR' 000 EUR' 000 EUR' 000
------------------------------ ---------- -------------- ---------- -------------- ---------
Cost
At 31 December 2020 9,369 2,067 1,422 1,654 14,512
Additions 3,073 7 303 29 3,412
Acquisition through business
combination 128 - 14 103 245
Disposals (1,296) (12) (141) (27) (1,476)
Translation differences 192 53 27 18 290
------------------------------ ---------- -------------- ---------- -------------- ---------
At 30 June 2021 11,466 2,115 1,625 1,777 16,983
------------------------------ ---------- -------------- ---------- -------------- ---------
Depreciation
At 31 December 2020 (4,773) (1,541) (925) (1,273) (8,512)
Charge for the period (1,058) (124) (128) (71) (1,381)
Eliminated on disposal 1,296 12 131 26 1,465
Translation differences (112) (45) (19) (18) (194)
------------------------------ ---------- -------------- ---------- -------------- ---------
At 30 June 2021 (4,647) (1,698) (941) (1,336) (8,622)
------------------------------ ---------- -------------- ---------- -------------- ---------
Net book value
At 31 December 2020 4,596 526 497 381 6,000
------------------------------ ---------- -------------- ---------- -------------- ---------
At 30 June 2021 6,819 417 684 441 8,361
------------------------------ ---------- -------------- ---------- -------------- ---------
Included in the amounts above are the following in relation to
right-of-use assets:
Depreciation Net Book
30 June Value
2021 30 June
2021
EUR' 000 EUR' 000
------------------------ ------------- ---------
Leasehold property 922 6,438
Leasehold improvements - (136)
Equipment 69 419
Furniture and fittings 5 4
------------------------- ------------- ---------
996 6,725
------------------------ ------------- ---------
Additions to the right-of-use assets during the half year were
EUR3,305,000 (2020: EUR257,000), including the contract signed in
June 2021 for the new UK office in London.
11. Borrowings
31 December
30 June 2021 2020
-------------------------------------
Current Non-current Total Total
EUR'
000 EUR' 000 EUR' 000 EUR' 000
---------------------------------- ---------- -------------- --------- ------------
Hawk Investment Holdings - 5,088 5,088 4,702
Unicredit(1) 632 3,460 4,092 4,057
Deutsche Bank 742 1,683 2,425 2,796
Inveready convertible bonds - 2,492 2.492 2,457
UBS - 1,762 1,762 1,762
Banca Carige 230 1,204 1,434 1,451
Banco Popolare di Milano 327 506 833 967
Retro Grand Limited - 446 446 432
Commonwealth Bank of Australia 316 316 313
Banco de Bogota 42 38 80 102
Bankinter - 100 100 100
Scotiabank Colpatria - - - 2
KBC Bank 67 - 67 140
NatWest - Coronavirus Loan - 117 117 110
Intesa Sanpaulo - 30 30 52
Banco Agrario 23 23 46 47
Bancoomeva 58 50 108 11
Overdrafts 31 - 31 -
---------------------------------- ---------- -------------- --------- ------------
Total loans 2,152 17,315 19,467 19,501
Accrued interest and transaction
costs (1) 91 - 91 86
---------------------------------- ---------- -------------- --------- ------------
Total borrowings (2) 2,243 17,315 19,558 19,587
---------------------------------- ---------- -------------- --------- ------------
1 Transaction costs relate to bank borrowings
2 Total borrowings includes overdrafts of EUR31,000 (2020:
EUR72,000)
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 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 30 June 2021.
12. Analysis of net debt
Net debt Cash flow Non-cash Net debt
as at movements movements at
1 January 30 June
2021 2021
2021 Notes EUR'000 EUR'000 EUR'000 EUR'000
--------------------------- ------ ----------- ----------- ----------- ---------
Cash, cash equivalents 12,036 (3,660) 112 8,488
Overdraft 11 (72) 41 - (31)
--------------------------- ------ ----------- ----------- ----------- ---------
11,964 (3,619) 112 8,457
Bank borrowing including
transaction costs 11 (11,924) 444 (21) (11,501)
Other borrowings 11 (7,591) - (435) (8,026)
Lease liabilities (5,627) (1,352) (864) (7,843)
--------------------------- ------ ----------- ----------- ----------- ---------
Cash and cash equivalents
net of debt (13,178) (4,527) (1,208) (18,913)
--------------------------- ------ ----------- ----------- ----------- ---------
Net debt Cash flow Non-cash Net debt
as at movements movements at
1 January 30 June
2020 2020
2020 Notes EUR'000 EUR'000 EUR'000 EUR'000
--------------------------- ------- ----------- ----------- ----------- ---------
Cash, cash equivalents 6,138 6,889 (175) 12,852
Overdraft - (39) - (39)
------------------------------------ ----------- ----------- ----------- ---------
6,138 6,850 (175) 12,813
Bank borrowing including
transaction costs (9,726) (1,629) (76) (11,431)
Other borrowings (5,152) (2,500) 289 (7,363)
Lease liabilities (8,468) 1,583 (239) (7,124)
------------------------------------ ----------- ----------- ----------- ---------
Cash and cash equivalents
net of debt (17,208) 4,304 (201) (13,105)
------------------------------------ ----------- ----------- ----------- ---------
13. Provisions
30 June 31 December
2021 2020
EUR' 000 EUR' 000
------------------------ --------- ------------
Current provisions 291 78
------------------------- --------- ------------
Non-current provisions - 277
------------------------- --------- ------------
Total provisions 291 355
------------------------- --------- ------------
Total provisions are analysed as follows:
Dilapidations
EUR' 000
---- ------------------------ ----------------
At 1 January 2021 355
Utilisation (81)
Exchange movements 17
------------------------------- ----------------
At 30 June 2021 291
------------------------------- ----------------
14. Share capital
Authorised, issued and fully paid capital
At 30 June 2021 Number EUR
------------------------- ----------- -------------
Ordinary shares of 0.10
EUR each 24,710,922 2,471,092.20
--------------------------- ----------- -------------
At 31 December 2020 Number EUR
------------------------- ----------- -------------
Ordinary shares of 0.10
EUR each 24,516,707 2,451,670.70
--------------------------- ----------- -------------
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 2020 24,250,907 2,471,091.70
Additions during the year 265,800 26,580.00
----------------------------- ----------- --------------
At 31 December 2020 24,516,707 2,451,670.70
Additions during the year 194,215 19,241.50
----------------------------- ----------- --------------
At 30 June 2021 24,710,922 2,471,092.20
----------------------------- ----------- --------------
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:
Six months ended
30 June
2021 2020
--------------------------------------- ----------- -----------
Profit for the half year attributable
to owners of the Company EUR726,000 EUR377,000
Weighted average number of shares 24,378,901 24,250,907
----------------------------------------- ----------- -----------
Earnings per share, basic EUR0.030 EUR0.016
----------------------------------------- ----------- -----------
At the 30 June 2021 unsubscribed shares available under existing
approved warrants and stock option plans for managers comprised of
1,023,200 (2020: 1,289,000 dilutive shares).
In March 2020 the Group issued 25 convertible bonds to Inveready
Convertible Finance. The bonds are convertible into a maximum of
3,821,375 ordinary shares.
Further in March 2021, the Group established a new incentive
scheme for key managers of subsidiary undertakings, gifting
beneficiaries up to a maximum of 1,212,5000 ordinary shares in the
Company (see Share based payments below).
Six months ended
30 June
2021 2020
--------------------------------------- ----------- -----------
Profit for the half year attributable
to owners of the Company EUR726,000 EUR377,000
Weighted average number of shares 28,877,924 25,539,907
----------------------------------------- ----------- -----------
Earnings per share, diluted EUR0.025 EUR0.015
----------------------------------------- ----------- -----------
Share based payment scheme
On 1 March 2021, the Group established an equity settled
incentive scheme for certain key managers of subsidiary
undertakings, gifting beneficiaries ordinary shares in the Company
after a period of 3 years' service and once certain performance
conditions have been fulfilled. A share based payment reserve of
EUR0.1 million has been included within other reserves based on a
fair value at grant date was EUR0.85 per ordinary shares, an
expectation that 90% of incentives will vest, and expected
volatility (taking into account historic average share price
volatility) is 57.01%.
15. Business combination
Summary of acquisitions and disposals
The effect of acquisitions and disposals on the in financial
position of the Group:
Acquisition
2021
Orca Global
GmbH
Notes EUR' 000
----------------------------------------------- ------ --------------
Tangible assets 10 245
Trade and other receivables 1,784
Cash and cash equivalents 205
Other assets 1
Liabilities (1,799)
Leases (142)
Goodwill 9 2,802
------------------------------------------------ ------ --------------
Gross consideration 3,096
------------------------------------------------ ------ --------------
% controlled 60%
Deferred consideration payable (undiscounted) (2,141)
Net assets attributable to non-controlling
interests (255)
------------------------------------------------ ------ --------------
Cash consideration at 30 June 2021 700
------------------------------------------------ ------ --------------
In December 2020 the Company entered into agreement committing
to acquire a 60% interest in Orca Global GmbH (Orca). Acquired in
stages, the Company agreed to purchase its 60% holding in four
instalments of 15% at a preliminary acquisition price of EUR2.2
million increasing to a maximum of EUR3.2 million providing certain
performance conditions have been met. Orca has been treated as a
subsidiary and consolidated from 1 April 2021. In accordance with
IFRS 10, the Board has determined that conditions for control had
been met (see Significant judgements note in 1. Accounting policies
for further details) on 1 April 2021. Prior to 1 April 2021 the
Company recognised investment income of EUR11,000 in the income
statement relating to its 15% interest in Orca's earnings (see note
6 Net finance income).
In March 2021, the Company established SEC Newgate CEE (SECN
CEE) and holds 51% of the share capital. SECN CEE is a start-up
communications company registered in Poland for a consideration of
2,550 PLN (EUR1,000), the nominal value of the shares acquired.
Details surrounding further acquisitions and disposals of
interests in existing subsidiaries without a change in control can
be found below:
Company Date of-acquisition % acquired % owned Consideration
in year at year
end
-------------------------- --------------------- ----------- --------- --------------
EUR 150,000
ACH SEC Global SL (ACH) 19/04/2021 20.67% 86.37% (1)
ACH SEC Global SL (ACH) 07/05/2021 5.94% 92.31% EUR 1
Newington Communications
Limited
(Newington) 01/01/2021 40% 100.00% GBP 420,799
-------------------------- --------------------- ----------- --------- --------------
(1) As a result of the capitalization of an existing
intercompany debt.
The Company agreed to acquire Newington's 40% non-controlling
interest for GBP420,799 (EUR489,748). In accordance with the
acquisition agreement, Newington's old shareholders agreed to
accept SECN shares for the value of GBP126,240 as part
consideration for their 40% non-controlling interest. On 13 May
2021 the Company issued 194,215 shares for a nominal value of
EUR19,421.50 and share premium of EUR122,355.45 (see note 14 Share
capital). The remaining cash consideration of GBP294,559
(EUR347,843) is payable in instalments between July 2021 and
January 2024. The liability is reported as deferred consideration,
see note 8.
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.
16. Related parties
From time to time the Group enters into transactions with its
associate undertakings. All related party transactions were on
normal commercial terms.
17. Ultimate controlling party
There is no ultimate controlling party. At 30 June 2021, SEC
Newgate S.p.A. is 36.0% controlled by Fiorenzo Tagliabue.
18. Subsequent events
On 1 July 2021, the Italian business (people, contracts, assets
and liabilities) were transferred to a newco, SEC Newgate Italy
srl, Benefit Company. SEC Newgate S.p.A, the listed company, now
acts solely as the holding company
On 1 July 2021, appointment of the new Group Marketing Manager,
Irene Ferrario, in order to consolidate the positioning of the
Group at worldwide level and increase its visibility.
On 9 July 2021, an agreement was signed with an Italian bank,
BPER, for a EUR2m loan with an interest rate of 1.66%, one year of
pre-amortisation and maturing in 2025, as part of the Italian
Government's support to companies during the pandemic.
On 16 July 2021, the Group acquired an additional 4.428%
interest in Newgate Communications Pty Limited, increasing its
interest in the Australian subsidiary to 80%
On 28 July 2021, the Group acquired a 70% shareholding in
Twister Communications Middle East, the Dubai-based branch of
Italian PR firm Twister Communications Group, rebranded SEC Newgate
Middle East. The managing partner, Elena Gramatica, retains 30% of
the shares.
On 30 July 2021, the Group acquired an additional 40% interest
in Kohl PR & Partners GmbH (now SEC Newgate Deutschland) for a
consideration of EUR42,000, increasing its interest in the German
subsidiary to 100%
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END
IR FLFLDTLILVIL
(END) Dow Jones Newswires
September 01, 2021 02:00 ET (06:00 GMT)
Sec Newgate S.p.a (LSE:SECN)
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