Annual Report
2016
“In the monotony
of simply continuing
we would suffocate”
Romano Guardini
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2
INDEX
Highlights, SEC at a glance
Information on the group
Chairman’s Statement
Chief Executive’s Statement
2016, a year of turning points
Outlook
The Board
Principal risks and uncertainties
Financial Highlights
Financial information of SEC Spa for the two years ended 31 December 2016
p. 4
p. 5
p. 11
p. 13
p. 16
p. 18
p. 21
p. 22
p. 25
p. 26
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HIGHLIGHTS, SEC AT A GLANCE
Revenues: 18,49 € millions
Gross profit: 1,05 € millions
Equity: 9.16 € millions
(attributable to Equity holders)
Cash flow: 6,78 € millions
OUR OBJECTIVES
1. Re-launch organic growth through a new model for new business
2. Attract talent and retain valuable people
3. Continue acquisitions plan, complete European step with France, start in North and
South America
5. Invest in technology to take advantage of the digital revolution
4. Add consultancy value to our offer
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INFORMATION ON THE GROUP
1. INTRODUCTION
SEC S.p.A. is a holding company and head office for a public relations and advocacy business,
headquartered in Milano with operations across western Europe. The business was originally
founded in 1989 and has subsequently grown both organically and by acquisition.
In recent years the Group has acquired a number of majority stakes in companies, leaving
existing management incentivised with minority shareholdings. The Group’s Italian operation
is now the largest independent PR agency in the country. Accordingly the Directors consider
that the Company is ideally positioned to become a consolidator in the growing public
relations and advocacy sectors. The strategy of the Group is to become a global PR business,
differentiated from its competitors (most of whom are US based) by its European roots. The
Placing and Admission to AIM are an important part of executing this strategy.
2. BACKGROUND
SEC was founded by the current Chief Executive, Fiorenzo Tagliabue. It subsequently grew
organically focusing on media relations, institutional and B2B events, publishing and
institutional relations. From 1997, the Company expanded across Italy opening offices in
Torino, Naples, Roma and Bari. Following consistent growth over a number of years, in 2013
the Group began to expand internationally with a series of acquisitions in Germany, Spain,
Belgium, United Kingdom and Poland. The Group currently comprises ten subsidiaries in
which the Company holds stakes ranging between 51 per cent. and 75 per cent. of the share
capital.
The Company’s activities comprise Public Relations, Advocacy and Integrated Services.
Typically clients will engage the Company on a retained basis with an annual or semi-annual
rolling contract.
Public Relations services, which made up 58.6% of revenue in the financial year ended 31
December 2016, include:
• Brand Equity Management – The development of strategies to preserve and/or raise the
brand value of a client, be it a company and its brand(s), a cultural institution or large real
estate projects. This is typically based on detailed understanding of perception and uses
various communication levers and processes of perception analysis.
• Corporate and Financial Communication - Provision of consulting and communication
services for companies and financial institutions related to mergers and acquisitions,
capital markets and investor relations.
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• Reputation Safeguard: Issues & Crisis Management – The development of strategies
to help companies and institutions rapidly and effectively combat potential or actual crises,
which could cause severe damage to their reputation and ultimately their business
operations.
• Corporate Social Responsibility - Services related to every aspect of social engagement
and reputation of a client.
• External and Internal Relations - Professional communication focusing on Customer
Relationship Management (CRM), social and content management and projects addressed
at employees to align and reenergise.
• Media Relations - Services designed to enhance relations with journalists, bloggers and
editors.
• Digital Relations - New age digital communications including social media audits and
analysis, digital press office and digital PR, social media strategies, video reporting,
monitoring of local media networks and facilitating training sessions to clients.
Advocacy activities, which made up 26.4% of revenue in the financial year ended 31
December 2016, include:
• Government Relations - Services aimed at enabling companies to interact effectively
with local, national and international governments.
• Public Affairs - Assisting clients, ranging from local interest communities to global
opinion leaders, through research and campaigning, to mobilise opinion across regions.
• Community Relations and Consensus Building - Helping companies manage potential
or actual conflicts related to its goods, services or projects, building reputation in the
communities where they operate.
• Issue Management - Helping organisations prioritize and proactively address public
policy and reputation issues that can affect their success.
• Political Communication - Services provided to political parties during election periods,
ranging from communication management and strategy to media coverage.
Integrated Services, which made up 15.0% of revenue in the financial year ended 31
December 2016, include:
• Social Media Management - Covering all the stages of social media communication,
from strategic and editorial decisions to direct administration of social media channels.
• Event Management - Services focused on organising events, assisting the clients in every
step of the process, including design, promotion and organisation of an event, and budget
management, in order to deliver a strong return on client spend.
• Association Management - Services ranging from the launch and day-to day management
of an association to providing the back office of an industry coalition. Association
management services help clients to ensure legal and financial compliance and represent
clients’ industries and advocate on clients’ issues.
• Integrated Communication - Encompasses advertising campaigns coordination and
multidisciplinary projects, leveraging synergies with artists, screenwriters and advertising
agencies.
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3. SUBSIDIARIES
SEC S.p.A.
SEC S.p.A. is the base of the Milano operations as well as the Group’s head office. The Group
intends to establish the Group CFO office and a marketing department in London following
Admission. The Company also has a team based in Roma, which is solely focused on
advocacy.
SEC Group in 2016
SEC & Associati S.r.l. (Italy)
SEC & Associati S.r.l., based in Torino, was incorporated in 1997 and represents SEC’s first
operations outside of Milano. SEC & Associati provides a wide range of PR services to various
types of clients, including large corporates, trade associations and regional governments and
municipalities. It also has the capability to offer basic advocacy services, with more complex
advocacy needs referred to SEC’s Milano office. SEC owns a 51% stake in SEC & Associati.
The remaining 49% is owned by a group of senior partners that include Mr Maurizio Ravidà,
who is Managing Director.
SEC Mediterranea S.r.l. (Italy)
SEC Mediterranea S.r.l., based in Bari in Southern Italy, provides a wide comprehensive range
of PR and community relations services to clients which include corporates and trade
associations. SEC Meditteranea also has a community relations presence in cities such as
Venice, Udine and Messina through “correspondent” freelance consultants who report directly
in to SEC. SEC S.p.A. owns a 51% interest in SEC Mediterranea, with the remaining 49%
held by the Managing Director, Mr. Gianluigi Conese.
SEC and Partners S.r.l. (Italy)
SEC and Partners S.r.l. principally provide its clients, including a number of large
corporations, with corporate and financial PR services from its office in Roma, where it was
incorporated in 2014. SEC S.p.A. has a 51% interest in SEC and Partners S.r.l., with the
remaining 49% owned by the Managing Director, Mr Giancarlo Frè.
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Curious Design S.r.l. (Italy)
Curious Design S.r.l., located in Milano, is a corporate identity and graphic design agency. In
2010 Mr. Alberto Scotti, the President and Creative Director, joined the company. SEC
acquired its holding in Curious Design (75%) in 2011 with Alberto Scotti owning the
remaining 25%. It provides its clients, which include a number of large well-known businesses
and brands, with a wide range of design services including website design and layout, product
packaging design, branding and corporate image design.
HIT S.r.l. (Italy)
HIT was established in 1994, and provides human resources for the different enterprise
communication activities. The company has a database of over 10,000 contacts from which it
can supply its clients’ events throughout Italy with stewards, promoters, entertainers, event
hosts, interpreters and security operators on a 24 hours a day, 7 days a week basis. It also
offers highly specialised administrative communication services such as recall services,
mailing lists, email and telephone hotlines as well as professional technical services (audio,
video and lighting) for corporate events. SEC S.p.A. owns a 57.7% interest in HIT, with the
remaining 42.3% owned by a group of senior partners.
Cambre Associates SA (Bruxelles)
Cambre Associates SA is an advocacy business based in Bruxelles where it has operated since
2001. SEC acquired its stake in 2013. The team at Cambre have an understanding of European
Union Government issues and specialise in government relations, public affairs and public
relations. Cambre assists its clients to mobilise opinion across Europe from local interest
communities to global opinion leaders. Cambre skills are based around research,
understanding legislative procedure, networks, search engine optimisation, infographics,
personal profiling, polling, online campaigning or multimedia. Cambre’s clients include
governments, industry associations and multinational companies. SEC S.p.A. owns a 76.0%
interest in Cambre Associates SA, 22.0% is held by Outcom SPRL (a company controlled by
Tom Parker) and the remaining 2.0% of the issued share capital is held by Cambre Associates
SA in itself (but with voting rights suspended).
ACH Cambre, Consejeros De Relaciones Públicas S.L. (Spain)
ACH Cambre was formed when SEC bought the Cambre group (including Cambre Associates
SA) in 2013, as part of which it integrated Cambre Madrid and ACH Spain. Its main office is
in Madrid and it also operates from Barcelona. ACH Cambre provides reputation services,
media and investor relations, opinion analysis, CSR projects and reports, and financial PR.
ACH Cambre has a track record spanning over 30 years and is therefore very well known. The
Directors consider that ACH Cambre has a strong reputation in Spain because the founder and
now minority shareholder, Antonio Hernando Pinilla, has been influential in the history of its
market. SEC S.p.A. owns a 50.8% interest in ACH Cambre, with the remaining 49.2% is
owned by a group of senior partners.
Kohl PR & Partner Unternehmensberatung für Kommunikation GmbH (Germany)
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Kohl PR was founded in 1984 and has been owner-managed since. It was one of the first PR
agencies in Germany to focus on political communication, which is its core strength, along
with government relations. The business is headquartered in Berlin, close to the Reichstag,
leading media outlets and offices of the members of the German Bundestag. SEC S.p.A. owns
a 75% interest in Kohl PR, with 20% owned by Mr. Peter Rall and the remaining 5% owned
by Invester Private Equity GmbH.
an
Newington Communications Limited
Newington Communications Limited
award-winning, multi-disciplinary
is
communications consultancy specialising in Corporate and Public Affairs for the UK and
European markets. The team of up to 50 experienced consultants is based across offices in
London, Edinburgh, Manchester, Birmingham and Chelmsford. Newington is the fifth largest
public affairs consultancy in the UK as measured by PR Week (2016). Its continued success,
noted by the industry and recognised in domestic and international awards, and considerable
growth is down to its strong emphasis on client care, ethics and delivering tangible outcomes.
From 2016 SEC S.p.A. owns a 60.0% interest in Newington and the remaining 40.0% owned
by founders Mark Glover and Phil Briscoe.
At end of 2016 SEC decided to wind up Della Silva Srl, whilst, in April 2017, SEC bought the
Polish agency Martis Consulting.
Martis Consulting(Poland)
Founded in Warsaw in 2001 by Ewa Baldyga and Dariusz Jarosz, professionals with over
twenty years in corporate communications, Martis had a significant development that has
brought the company among the first ten of the sector in Poland, and to position as agency of
reference for most of listed blue chips at the Warsaw Stock Exchange.
Moreover Martis Consulting has a strong track record in public and corporate affairs in Poland
and throughout Europe. Its specialist consultants work in a range of sectors including oil and
gas, energy and environment, financial services, healthcare, housing, justice and legal, as well
as property development and transport. Revenues for the year ending December 2016 were
EUR 1,442,530 (unaudited) with profit before tax of EUR 223,689 (unaudited).
Martis Consulting is run by existing management who retain equity in the business and are
incentivised to deliver strong growth.
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SEC Group in 2017
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CHAIRMAN’S STATEMENT
In a very busy year that has seen the company
quoted on the London AIM, we have increased
our presence on two new European markets.
It has been a very busy year, which has seen the Company successfully list on AIM, the market
for growth companies on the London Stock Exchange. When the finish line was in view, the
UK’s Brexit vote certainly made that last leg an uphill struggle. Despite this, the Company
brought the journey to conclusion and continued its development and growth plan following
the acquisitions plan presented to the market.
On 12 September 2016, the acquisition of Newington,
London was finalised, a leading company in the corporate
and public affairs sector, with a turnover of more than £3
million. With Newington, the Group achieves two
objectives: presence in a key market like that of the UK
and partnership with a company that is capable of better
interpreting the consequences, good or bad, of Brexit. On
21 December 2016, a binding agreement was written for
the acquisition of the majority of quotas of Polish Martis
Consulting, Warsaw. The deal was completed on 20 April
2017.
The Company’s quotation has also brought changes to the
Board, which is currently comprised of seven members:
as well as myself, two other Non-Executive Directors,
David Mathewson and Paola Bruno, both with solid
experience on Boards of quoted companies; main
shareholder Fiorenzo Tagliabue in the role of CEO; two
managing directors: Cesare Valli for Italy and Tom
Parker for Europe, and CFO Anna Milito
During the listing process, a 5% Stock Grant has been made available to employees (sign up
from 26 August 2018, two years after the quotation) in order to incentivise their efforts and
permanence in the Group’s companies. Attracting and retaining talent is one of our priorities
in which we plan to invest during the following years.
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The Group has had a difficult year on the market for the reasons that are discussed below,
attributable to the whole macroeconomic picture as well as some specific factors that were
verified in some European countries, particularly Italy.
The current year, however, will represent a more decisive recovery and will contribute to the
consolidation of the Group’s results.
All of us have great trust in the upcoming months.
Luigi Roth
SEC Spa
Chairman
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CHIEF EXECUTIVE’S STATEMENT
The Global economic outlook has slightly deteriorated
in 2016 compared to 2015 with a decrease in global GDP
at 3.1% according to the IMF.
Advanced economies are suffering most from the lack of
growth with only 1.6% GDP growth in 2016. European
GDP has grown in the region of 1.7% and has been
affected by the post-2008 crisis that has not yet been
fully overcome, and more recently by the uncertainty
posed by Brexit.
The best performer in Continental Europe is Spain with GDP growth exceeding 3% followed
by Germany, which is aligned to the EU average of 1.7%, France with 1.3% growth and Italy
with less than 1% growth.
The global sentiment towards the future, even if slowly improving, is still not oriented towards
boosting investments and consumption. This is reflected in the lack of growth and the
unhealthy labour market.
The approaching round of elections in the four major European Countries beginning with
France, followed by Germany, Spain and Italy, which are characterised by fear of increasing
populism, booming immigration and terrorism have not contributed.
In these circumstances and in the absence of major global events like the Olympics or similar,
the Global Communication sector has been characterised mostly by stability or minimal
growth. In particular, the growth has been concentrated on digital and social media
development with the most traditional media, apart from television and radio, continuing to
suffer.
Communication and Media companies have therefore been competing in a slowly improving
market where performances have not been boosted by market expansion but affected by
competition, with some relative growth and some reductions.
This has negatively impacted on the development in communication investments in Italy as
well, limited to +1.7% growth in total. It is interesting to note how one of the largest global
operators has merged its PR operations in four markets including Italy in response to limited
growth.
This situation not only affects Italian operations but also, at a global level, the reported growth
of top ten operators has been limited to an aggregated +3.3%, which is approximately 25%
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less buoyant than the previous year. As reported to the most accredited ranking: “Yet many of
the big PR agency networks still struggled to grow”. The largest worldwide operator has had
the lowest growth since 2009.
SEC has coped with the above described situation by continuing to successfully implement its
expansion project and by working hard to boost organic growth to regain the volume of
business reduced by the lack of major events that boosted its 2015 figures.
In particular, our performance has suffered from the fact that we have been a major beneficiary
of large investments linked to the Expo 2015 activities in Italy, especially in Milan; having
won multiple assignments spanning from the global Communication assignment in association
with another firm, the Expo Media Centre, Columbia Pavilion, Mexican Pavilion, France
Pavilion, Coca Cola Pavilion, Expo uniforms design and supply, hostess service, and so on.
Replacing that amount of income, €2.7M, proved to be difficult in spite of a massive new
business effort which has helped mitigate the impact. The above is valid for the entire line of
subsidiaries, which have all suffered equally from the described situation.
New business generated in 2016, just for SEC main Italian operations in Milan amount to
€3.6M and have formed the base for further development in 2017.
On the cost line of the holding company, we also acknowledge the large investment to continue
to boost the expansion process via acquisition and the related cost for M&A activities, which
account for approximately €294,000.
Without those investments that are strategically important to pave the way for the future
growth of the operation, the theoretical profit would have been approximately €1M.
Revenues
In particular, at SEC Spa revenues were declining by 25% compared to 2015 actual and total
operating costs were reduced by 28% reflecting management’s efforts to contain cost despite
continuing investment in the development of the international expansion, which has impacted
over €1.3M on the profit and loss account. Revenues have declined to €18,487 million from
the previous year at €21,244 million due to the lack of the one-off contribution of large events
in Italy, Germany and Spain which have not been repeated. Solid new business activities have
partially offset, but not entirely, the difference.
Profit
As a consequence of the above, the profit from operation is €795,000 vs. €3,279M previous
year. Profit before tax is €734,000 vs. €3,248M last year. The year end Net Profit is therefore
€445,000 € vs. €2,045M last year.
This reconfirms the solid profit of the Group while we keep investing management time and
resources in investments aimed at increasing the critical mass of the Group and aiming to
provide additional services to our clients and therefore revenues.
In this area we can quote the investment in Stake (registered), which a sophisticated
consultancy tool to boost our Community Relations and Public Affairs offer and is
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increasingly utilized and appreciated by major multinationals or large utilities, or our
investment in Big Data Advisory Unit in Spain.
These developments are still operating in only one single company of the Group and, once
completed and fully operational can be leveraged in all of the Group’s operating Countries.
Others are in the development pipeline. These developments are now contributing to the cost
of personnel employed in their development but will repay over the year to come both in
Reputational terms and in boosting additional revenues for the Group.
Net asset
Equity (attributable to Equity holders) has increased from €6,617M to €9,157M due to the
admission of 222,000 new shares and the IPO of the Company on the AIM UK Market with
share premium of €3,777M in excess of share face value, net of €1,150M cost of listing net
tax.
Group Cash position
The group Cash position remains strong with a solid €6,776M at the end of the period vs.
€5,036M in the previous year. This represents an enhancement of 1,739M € on 2015.
This was contributed to by €445,000. Net cash flow from operations and €3,071M from
financing activities.
The increase in cash position has been partially utilized to finance the first instalment of the
Newington (ex Bellenden) acquisition, to finance an increased position in Cambre and to
finance its shares buyback (€1,778M).
Outlook
New business generated in 2016, just for SEC main Italian operations in Milano amount to
€3.6M and have formed the base for further development in 2017.
The current year, thanks to a huge effort in new business, has started well, in line with our
expectations.
I would like to thank our employees for their continued efforts.
Fiorenzo Tagliabue
SEC Spa CEO
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2016, A YEAR OF TURNING POINTS
2016 has been the year of quotation on the Stock Market and has required a lot of energy from
company management who were aiming to make the Group more efficient.
This has meant:
• The creation of the Management Committee (MC), in which all the Group companies’
managing directors take part, with the scope of evaluating every possible synergy starting
with commercial ones. Chaired by Tom Parker, the MC has started work, in particular, on
the creation of an international marketing unit. The unit will promote the group, intercept
multinational group challenges, build an identity based on the strategic choice of our
business model: a group of entrepreneurs, before a group of companies.
• The strengthening of the finance department with the nomination of a deputy CFO with
the aim of making the Group’s financial management more solid.
• The purchase of the management system NetSuite, one of the most sophisticated and
diffuse in the world for service companies, for the group at a central level but also for all
the subsidiaries. This will permit a more punctual and rigorous management of monthly
reports under the profile of the economic accounts and asset situation. As well as providing
a series of instruments to improve the efficiency of the service supply process by
measuring timings and profitability, these interventions, in the respective areas, will start
to produce results in 2017, to become fully functioning in 2018.
In 2016, the acquisition was finalised of Newington, London, a leading company in the
corporate and public affairs area, with a turnover of more than £3 million. With Newington,
the group completes two objectives: presence on a key market like that of the UK and
partnering with a company that is capable of better interpreting the consequences, good or
bad, of Brexit. On December 21st 2016, a binding letter was written for the acquisition of the
majority of quotes of Polish Martis Consulting, a leader in corporate communication and
financial communication.
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Lastly, in the final months of 2016 a working group made up of the holding company and
coordinated by the CEO came up with a strategic investment plan in the area of technology
with the aim of taking advantage of the benefits of the digital revolution in an industry that
appears closed off to the use of advanced technologies. It is not possible here to describe the
five projects developed by the group, but all of the tools generated by these projects will be
able to be used in linguistic contexts other than Italian (starting with the principal languages
spoken in Europe) in order that they become assets of every company in the Group. The
investments, moreover, will be able to benefit from financing and benefits from the Italian
governmental programme “Piano Industria 4.0” [“Industry Plan 4.0”] promised by the
Economy Minister to stimulate Italian SMEs in the use of new technologies.
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OUTLOOK
2017, also thanks to a huge effort in new business, has started well, in line with our
expectations.
GROUP OVERVIEW
Latin name, European vocation, Italian DNA. This is SEC, an independent agency born in
Milano in 1989 and today the first Italian agency in the world-ranking list (Holmes Report
2016), with offices and subsidiaries throughout Italy and Europe. To strengthen the
international placement and to finance the business development plan, SEC was listed on AIM
at London Stock Exchange on 26th July 2016. Identification, integration and proximity are the
basis of a strategic daily consulting crossing traditional, digital and complete communication.
THE STRATEGY
The Group’s strategy develops four main factors.
1) To create the conditions to attract talent and put into place politics of retention; thus, after
the quotation a 5% Stock Grant has been made available to employees who have certain
prerequisites (two years with the company) will vest two years after the quotation, on July
26th 2018.
2) Invest in technology to take advantage of opportunities offered by the digital revolution.
3) Overcome the “commoditization” of certain practices in this industry through the
acquisition of a solid leadership in the areas most subject to this process and, moreover,
increase the consulting capacities of the Group through strategic partnerships.
4) The seize. The Group must grow even faster in order to be competitive in large
commercial challenges at a global level. To intercept the big multi-Country competitors,
we must build a network of agencies, owned or associated, that will allow us to respond
to our potential Clients’ needs in the five continents of the world. The Group is strongly
committed to reaching this goal.
OUR VALUES
Certain principles guide our actions and behaviours towards our clients, our shareholders, our
providers and the communities we live in.
For many years, we have adopted a deontological code that brings together the main ethics
and rules that collaborators, consultants, providers, and all the external subjects who operate
on behalf of the Company are held to observing when undertaking their activities.
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1) People are at the centre of our professional work with our clients. Therefore, we take care
of the selection, training and retention of our people.
2) Reliability is the key to our work with our clients. That is: capability of strategy and
execution, realism and concreteness in projects, flexibility and orientation of the outcome.
3) Capacity for intelligence in deciphering complex situations, defining priorities and
mobilising relations and necessary resources.
4) Proximity to the Client to share in their growth step by step.
5) Capacity to involve the stakeholders so that they become our Clients’ advocates.
PERSPECTIVE OF THE MARKET IN EUROPE
There is reasonable optimism in terms of growth (already visible in last year’s study and
reports.) The main topics:
• PR consulting is finally developing in the Eastern part of the region. After years of basic
brand PR and stunts, local agencies are becoming more sophisticated services.
• There is still a limited number of networks operating across the borders of Central and
Eastern Europe (SEC is one of these after the acquisition of Martis Consulting).
• Strategic communications, public affairs and lobbying are growing in importance,
becoming new areas of consulting for many agencies as the institutional landscape
becomes more complex. Our strong presence in Bruxelles allows us to provide consultancy
and services both at a national and European level.
• More sophisticated services are required, due to a more and more demanding business
context: the role and status of PR is getting bigger in all industries.
• There is no doubt that creativity is an asset today, as standards improve and clients are
observing their agency’s performance in terms of international awards.
• Digital is everywhere. There is still a lot to do around integration. Also, smart data analysis
and measurement are still key challenges for PR agencies in Europe.
OUR SOCIAL RESPONSIBILITIES
“It takes a village to educate a child”. In this African proverb is the reason SEC supports
Portofranco Onlus, an organization that created in Milano (and replicated in other cities) an
extraordinarily effective and beautiful place for high school students to get support with
studying.
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Here, working and retired teachers, professionals,
university students volunteer their time to help
children with difficulties with individual lessons,
and it is the children themselves who book the
lessons and choose to come and study, with no
obligation from the school or their family. Here,
spontaneously, they have generated one of the most
meaningful experiences in Italy, which integrates
immigrant students of different generations.
SEC’s involvement will support the organization’s
fundraising and the involvement of some of its
directors.
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THE BOARD
The Board, composed of 7 members, was completely renewed during the quotation and has
been enriched by
•
three Non-Executive Directors, the Italian Luigi Roth as Chairman, who has prestigious
experience as CEO and/or President of many other quoted companies; David Mathewson
and Paola Bruno, both with significant experience on the boards of companies quoted on
the London AIM;
• and, as executive directors, Cesare Valli, already managing director of Hill & Knowlton
Strategy for South Europe, Tom Parker, the managing director of Cambre, the second
company in the Group, and the CFO, Anna Milito. The board is completed by CEO,
Fiorenzo Tagliabue.
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PRINCIPAL RISKS AND UNCERTAINTIES
An investment in ordinary shares is highly speculative and involves a high degree of risk. the
attention of prospective investors is drawn to the fact that the company is subject to a variety
of risks which, if any were to materialise, could have a significant adverse effect on the
company's business and/or financial condition, results or future operations. in such case, the
market price of the ordinary shares could decline and investors might lose some or all of their
investment.
In addition to the information set out in the rest of this document, the following risk factors
in this part i should be considered carefully in evaluating whether to make an investment in
the company. the following factors do not purport to be an exhaustive list or explanation of
all the risk factors involved in investing in the company and they are not set out in any order
of priority. Additionally, there may be risks not mentioned in this document of which the
board are not aware or believes to be immaterial but which may, in the future, adversely affect
the group’s business and the market price of the 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.
1. RISKS RELATING TO THE GROUP
1.1. Exposure of the Group to economic conditions
Demand for the Group’s services may be significantly affected by the general level of
economic activity and economic conditions in the regions and sectors in which the Group
operates. Therefore, an actual or perceived economic downturn, especially in regions or
sectors where the Group’s operations are focused, could have a material adverse effect on the
Group’s business and financial results. In addition, there may be a delay between the
occurrence of an actual or perceived threat of economic downturn and the impact this could
have on the Group’s financial results.
1.2. The Group is reliant on key executives and personnel
The Group’s business, development and prospects are dependent upon the continued services
and performance of its Directors, in particular Mr. Fiorenzo Tagliabue, Paola Ambrosino,
Tom Parker and other key personnel. The experience and commercial relationships of the
Group’s Directors and key personnel help provide the Group with a competitive edge. The
Directors believe that the loss of services of any existing key executives for any reason, or
failure to attract and retain necessary personnel, could adversely impact the business,
development, financial condition, results of operations and prospects of the Group.
Annual Report 2016 |
22
1.3 Acquisition strategy
The Group employs an acquisition strategy whereby it seeks bolt-on acquisitions. A result of
this is an ever-increasing number of management teams within the Group which require
oversight by the Board. Additionally, and despite following the acquisition criteria outlined
in this document, there remains the risk that all acquisitions may not be accretive. There is a
risk related to the Group’s ability to accurately identify suitable targets and to successfully
execute transactions for such a strategy. As consideration for such acquisitions, the Company
may seek to issue Ordinary Shares. There can be no guarantee that sellers of target companies,
businesses or assets will be prepared to accept shares traded on AIM as consideration, and
this may limit the Group’s ability to grow its activities and pursue its strategy. The difficulties
involved in integrating any companies, businesses or assets acquired by the Group may divert
financial and management resources from the Group’s core business, which could adversely
affect the Group’s business, financial condition and operating results.
1.4 New management team
Several members of the Company’s senior management team have recently been appointed
to their positions. Whilst the Directors are confident that these individuals have the skills
required for their roles, the management team itself is only relatively recently established.
1.5 Reliance on subcontractors
The Group utilises subcontractors on a project-by-project basis to meet its contractual
obligations. Such projects will rely on the subcontractors performing their duties and
obligations, not only in terms of timely delivery but also in terms of their performance
obligations. Any such non-performance may result in time and cost over-run of the Group’s
projects and reduce the value of the Group’s returns.
1.6 Timing of large contracts
The Group’s revenues are generated from a mix of longer and shorter lead time orders. The
timing of order placement and delivery of the larger orders are inherently difficult to predict
potentially causing material fluctuations in actual results compared with expectations or
plans.
1.7 Competition for investment
The Group may face significant competition from both domestic and international
competitors who have greater capital, greater resources and superior brand recognition that
the Group and who may be able to provide better services, adopt more aggressive pricing
policies or pay higher prices to acquire businesses. There is no assurance that the Group will
be able to compete successfully in such an environment.
Annual Report 2016 |
23
1.8 Internal controls
Future growth and prospects for the Company will depend on the Directors’ ability to manage
the business of the Group and to continue to expand and improve operational, financial and
management information and quality control systems on a timely basis, whilst at the same
time maintaining effective cost controls. Any failure to expand and improve operational,
financial and management information and quality control systems in line with the Group’s
growth could have a material adverse effect on the Group’s business, financial condition and
results of operations.
1.9 Quality of the Group
The Group’s success is correlated to the reputation of its services by its clients. The Group’s
results, therefore, depend on its ability to maintain the quality of its services, as well as on the
maintenance of a strong image of its brands. Any failure to guarantee the quality of its services
could have material adverse effects on the Group’s reputation, which could harm its business,
financial condition, and operating results.
2. RISKS RELATING TO THE GROUP’S OPERATIONS OVERSEAS
2.1 General
It is expected that a significant proportion of the Group’s revenues – not the majority - will be
generated overseas. The Group’s business could therefore be adversely affected by changes in
local and regional economic, political and social conditions or the policies of the relevant
government, such as changes in laws and regulations, taxation and imposition of restrictions
on currency conversion. In addition, the occurrence of war, public disorder, economic
sanctions, terrorism and local or national strikes or labour unrest in any of the overseas
locations in which the Group operates may disrupt or permanently prevent the Group from
operating in these locations or recovering its investment in whole or in part. The Group’s
investments may be denominated in currencies other than Euro. Accordingly, fluctuations in
exchange rates between Euro and the relevant local currency and the costs of conversion and
exchange control may have an unfavourable effect on the profitability of such operations.
2.2 Financial risks
Revenue and profitability
The Company cannot guarantee that the Group will be able to achieve or sustain revenue
growth and achieve or sustain profitability in the future. If the Company is unable to achieve
or sustain profitability, the business could be severely harmed. The Group’s operating results
may fluctuate as a result of a number of factors, many of which are beyond its control. These
factors include, amongst others, the growth rate of markets into which the Group sells its
services or products, market acceptance of and demand of its services and products and those
of its customers and unanticipated delays, problems in the introduction of its services or
products. If the Company does not realise sufficient revenue levels to sustain profitability, it
may require additional working capital and financing in the medium term, which may not be
available on attractive terms, or at all.
Exchange rate risk
Annual Report 2016 |
24
The Company and the Group will be exposed to several exchange risks. The Company is
raising funds in Sterling pursuant to the Placing and the Subscription. Most of the Group’s
expenses and the sale of its products will be denominated in Euros. Exchange rate fluctuations
could adversely affect the Company’s profitability or the price competitiveness of its products.
Fluctuations in exchange rates between currencies in which the Group operates may cause
fluctuations in its financial results which are not necessarily related to its underlying
operations. The Group does not currently have a foreign currency hedging policy.
FINANCIAL HIGHLIGHTS
Revenue
EBITDA
EBIT
Profit Before Tax
Net Profit
Net Profit to the Group
Net Profit to minorities
Net Financial position
Year ended
31 December 2015
Year ended
31 December 2016
21.244
18.487
3.366
3.271
3.248
2.045
1.373
672
3.115
916
788
734
445
182
263
3.571
FULL YEAR HIGHLIGHTS
The information contained within this announcement is deemed to constitute inside
information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the
publication of this announcement, this inside information is now considered to be in the public
domain.
Annual Report 2016 |
25
FINANCIAL INFORMATION OF SEC S.P.A.
FOR THE TWO YEARS ENDED 31 DECEMBER 2016
Consolidated income statement
Continuing Operations
Note
Revenue
Employees expenses
Service costs
Depreciation & amortization
Other operating income and charges
Other operating costs
Profit from operations
Finance income and expense
Profit before taxation
Taxation
Profit for the year
Profit for the year attributable to
owners of the company
Non-controlling interest
Profit for the year
Earnings per share attributable to
the equity holders of the Company
Basic, per share
Diluted, per share
5
6
7
8
9
10
11
12
28
Year ended
31 December 2015
€’000
Year ended
31 December2016
€’000
21,244
(6,704)
(10,442)
(95)
104
(828)
3.279
(31)
3,248
(1,203)
2,045
1,373
672
2,045
1.37
1.37
18,487
(8,296)
(8,699)
(128)
77
(646)
795
(61)
734
(289)
445
182
263
445
0.01
0.01
Consolidated statement of comprehensive income
Continuing Operations
Note
Profit for the year
Items that may be subsequently reclassified to profit or loss:
Gain /(loss) on exchange rates
Gain/(loss) on revaluation of available for sale investments
Gain /(loss) on exchange rates
Items that will not be reclassified to profit or loss:
Actuarial gain/(loss) on defined benefit pension plans
Total comprehensive income for the year
Total comprehensive income for the year attributable to:
Owners of the Company
Non-controlling interest
Net Group comprehensive income for the year
Year ended
31 December 2015
€’000
Year ended
31 December2016
€’000
2,045
(8)
-
49
2,086
1,410
676
2,086
445
36
(6)
(1)
474
216
258
474
Annual Report 2016 |
26
Consolidated statement of financial position
Note
Year ended
31 December 2015
€’000
Year ended
31 December2016
€’000
Intangible assets
Tangible assets
Investments
Other financial assets
Other assets
Non-current assets
Trade receivables
Other receivables
Financial investments
Cash and cash equivalents
Current assets
Total assets
Trade payables
Borrowings
Other payables
Provisions
Current liabilities
Employee benefits
Borrowings
Other non-current liabilities
Non-current liabilities
Total liabilities
Net assets
Share capital
Reserves
13
14
15
16
17
18
19
20
21
22
23
24
25
26
23
27
28
29
Profit of the year
Equity attributable to equity holders
Of the Company
Equity non-controlling interests
30
Total equity
Total equity and liabilities
3,813
232
7
5,703
454
7
16
16
489
917
4,557
7,097
7,595
7,304
471
657
1,003
1,049
5,036
6,776
14,105
18,662
15,786
22,883
2,429
2,261
764
901
2,974
22
2,911
651
6,189
6,724
1,436
1,504
2,160
3,353
411
4,007
256
5,113
10,196
11,837
8,466
11,046
1,000
1.222
4,244
1,373
6,617
1,849
8,466
18,662
7,753
182
9,157
1,889
11,046
22,883
Annual Report 2016 |
27
Consolidated cash flow statement
Year ended
31 December 2015
€’000
Year ended
31 December2016
€’000
Operating activities
Profit for the year
Adjusted for:
Corporation tax
Impairment charges
Net interest
Depreciation tangible assets
Amortization intangible assets
Other depreciations
Pension provisions
Long-term provisions
Other non- cash movements
Changes in working capital:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations
Income tax paid
Net cash flow from operating activities
Investing activities
(Purchase)/sale tangible assets
Acquisitions and earn-outs
(Purchase)/sale of other intangibles assets
Cash from acquisitions
(Purchase)/Sale of financial assets
(Purchase)/Sale of investment
Net cash used in investing activities
Financing activities
Interest paid
Increase in financial borrowings
Decrease in financial borrowings
Dividend payments
Share issues
Own shares operation
Minorities
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at the end of period
2,045
1,203
33
31
93
2
40
332
(163)
4
444
(711)
3.353
(815)
2,538
(168)
(1,283)
(7)
194
(147)
(67)
(1,478)
(31)
1,030
(573)
(176)
0
0
65
315
1,375
3,661
5,036
445
289
0
61
123
5
121
359
(528)
99
1,579
(667)
1,885
(1,439)
446
(169)
(1,653)
(89)
143
(10)
0
(1.779)
(61)
2,150
(819)
(341)
2,849
(404)
(303)
3,071
1,739
5,036
6,776
Annual Report 2016 |
28
Consolidated statement of changes in equity
Share
capital
€’000
Legal
reserve
€’000
Other
reserves
€’000
Retained
earnings
€’000
Total equity
shareholders’
funds
€’000
Non-
controlling
interest
€’000
Total
equity
€’000
Balance at 1 January 2015
Net profit for the year
Other comprehensive income
Ordinary shares issued
Dividends paid
Others
Acquisition of subsidiaries
with non-controlling interest
Balance at 31 December
2015
Net profit for the year
Other comprehensive income
Ordinary shares issued
Dividends paid
Others
Own shares operations
Acquisition of subsidiaries
with non-controlling interest
Balance at 31 December
2016
100
-
-
900
-
-
-
1,000
-
-
222
-
-
-
-
1,222
20
-
-
-
-
-
-
20
-
-
-
-
38
-
-
58
(75)
-
37
-
-
-
-
(38)
-
34
-
-
-
-
-
5.194
1,373
-
(900)
(50)
-
18
5,635
182
-
2,627
(100)
(41)
(422)
-
5.239
1,373
37
-
(50)
-
18
6,617
182
34
2,849
(100)
(3)
(422)
-
1,173
672
4
-
(126)
33
93
6,412
2,045
41
-
(176)
33
111
1,849
8,466
263
(6)
-
(241)
9
(275)
290
445
28
2,849
(341)
6
(697)
290
(4)
7,881
9,157
1,889
11,045
CORPORATE INFORMATION
SEC S.p.A. (the “Company”) was incorporated in March 1989 and is based in Milano. The
registered office and principal executive office of SEC S.p.A. is located at Via Panfilo
Castaldi, 11, Milano 20100.
The consolidated financial statements for the two years ended 31 December 2016, represent
the result of the Company and its subsidiaries (together referred to as “Sec Group” or the
“Group”).
The principal business of the Group is a comprehensive range of Public relations, advocacy,
communications and public affairs services provided to national and multinational clients.
The subsidiaries of the Company included in the consolidated financial information, are as
follows:
Annual Report 2016 |
29
Company
Hit S.r.l.
Sec & Associati S.r.l.
Sec Mediterranea S.r.l.
Della Silva Communication Consulting
S.r.l
Curious Design S.r.l.
Cambre Associates SA
ACH Cambre SL
Sec and Partners S.r.l.
Kohl PR & Partners GMBH
Newington Communications LTD
Key
Location
Milano (Italy)
HIT
SEC-A Torino (Italy)
MED
DS
Bari (Italy)
CUR
CAM
ACH
SEC-P
KOHL
NEW
Milano (Italy)
Milano (Italy)
Bruxelles (Belgium)
Madrid (Spain)
Roma (Italy)
Berlin (Germany)
London (UK)
SEC shareholdings
as of December 31, 2016
57.71%
51.00%
51.00%
51.00%
75.00%
76.00%
51.00%
50.50%
75.00%
60.00%
The acquisitions completed during the two years ended 31 December 2016 were as follows:
• August 2015: Kohl PR & Partners GMBH
• September 2016: Newington Communications LTD
•
In January 2016, Sec Spa acquired additional shares of 10% in Cambre Associates SA,
and during the year Cambre Associates SA acquired 8% of its own shares, increasing
ownership of Sec Spa to 76% at 31 December 2016.
ACCOUNTING POLICIES
a. Basis of preparation
The principal accounting policies adopted in the preparation of the financial information are
set out below. The policies have been consistently applied to all the years presented, unless
otherwise stated.
The financial information has been prepared in accordance with International Financial
Interpretations
Reporting Standards and
(collectively “IFRSs”) issued by the International Accounting Standards Board (IASB) and
adopted by the European Union (“adopted IFRSs”). The Group adopted IFRS for the first
time for the period from 1 January 2013.
The financial information has been prepared under the historical cost convention, except for
the “financial instruments” that have been measured at fair value.
The functional currency of the Group is Euro (EUR), and all amounts are presented in
functional currency.
International Accounting Standards and
a (bis). Translation of the Financial Statements of foreign companies
• The Group records transactions denominated in foreign currency in accordance with IAS
21 - The Effect of Changes in Foreign Exchange Rates. The results and financial position
of all the Group entities that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
• Assets and liabilities for each consolidated statement of financial position presented are
translated at the closing rate at the date of that consolidated statement of financial position;
Annual Report 2016 |
30
•
Income and expenses for each consolidated statement of income are translated at average
exchange rates.
• All resulting exchange differences are recognized in other comprehensive income.
• Goodwill and fair value adjustments arising from the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at the closing rate.
• The final exchange rate of Euro vs. Great Britain Pound used on Newington
Communication LTD as of 31 December 2016 is 0.856; the average exchange rate for the
period considered was 0,866.
b. New standards, interpretations and amendments not yet effective
At the date of this financial information, certain new standards, amendments and
interpretations to existing standards have been published but are not yet effective, and have
not been adopted early by the SEC Group. These are listed below:
•
IFRS 9: Financial Instruments (effective 1 January 2018)
•
IFRS 15 standards and clarifications: Revenue from Contracts with Customers (effective
1 January 2018)
IFRS 16: Leases (effective 1 January 2019)
•
• Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses
(effective 1 January 2017)
• Amendments to IAS 7: disclosure initiative (effective 1 January 2017)
• Amendments to IFRS 12: Disclosure of Interests in Other Entities (effective 1 January
2017)
• Amendments to IFRS 1 and IAS 28: First-time Adoption of International Financial
Reporting Standards and Investments in Associates and Joint Ventures (effective 1
January 2018)
• Amendments to IFRS 2: Classification and Measurement of Share-based Payment
Transactions (effective 1 January 2018)
• Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance
•
Contracts (effective 1 January 2018)
IFRIC interpretation 22: Foreign Currency Transactions and Advance Consideration
(effective 1 January 2018)
• Amendments to IAS 40: Transfers of Investment Property (effective 1 January 2018)
The adoption of these standards, interpretations and amendments are not expected to have
a material impact on SEC Group in the period they are applied.
c. 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 for the future. Therefore, the Group continues to adopt the going concern basis in
preparing the financial information.
d. Basis of consolidation
A company is classified as a subsidiary when the SEC Group has the following:
Annual Report 2016 |
31
• power over the investee;
• exposure, or rights, to variable returns from its involvement with the investee; and
•
the ability to use its power over the investee to affect the amount of the investor’s
returns.
• The financial information presents the results of the company and its subsidiary
undertakings as if they formed a single entity. Intercompany transactions and balances
between Group companies are therefore eliminated in full.
• The financial information includes the results of the Company and its subsidiary
undertakings made up to the same accounting date. All intra-Group balances, transactions,
income and expenses are eliminated in full on consolidation.
e. Business combinations
The results of subsidiary undertakings acquired during the period are included from the
consolidated income statement from the effective date of acquisition.
Business combinations are accounted for using the acquisition method. The cost of an
acquisition is measured as the aggregate of the consideration transferred, measured at fair
value at the date of acquisition, and the amount of any non-controlling interest in the acquired
entity. Non-controlling interest are initially measured at the non-controlling interests’
proportionate share of the recognized amounts of the acquiree’s identifiable net
assets. Acquisitions costs incurred are expensed and included in administrative expenses
except where they relate to the issue of debt or equity instruments in connection with the
acquisition.
f. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided
to the chief operating decision maker. The chief operating decision maker has been identified
as the board of directors that makes strategic decisions.
The Board considers that SEC Group’s protect activity constitutes one operating and one
reporting segment, as defined under IFRS 8. Management reviews the performance of the SEC
Group by reference to total result against Budget.
Services provided by Group entities located in each geography are as follows:
Italy
Belgium
Spain
Germany
United Kingdom
Total revenue
Year ended
31 December 2015
Year ended
31 December 2016
€’000
13,879
4,710
2,179
476
-
%
65%
22%
10%
3%
-
€’000
9,933
4,736
1,584
1,245
989
%
54%
25%
9%
7%
5%
21,244
100%
18,487
100%
Annual Report 2016 |
32
g. Revenue
Revenue is recognized to the extent that it is probable that economic benefits will flow to the
Group and the revenue can be reliably measured. Revenue represents the fees derived from
the services provided to and invoiced to clients and is reported net of discounts, VAT and
other taxes.
Revenue is recognized in the period in which the service is performed, in accordance with the
terms of the contractual arrangements. Income billed in advance of the performance of the
service is deferred and recognized in the income statement when the service takes
place. Income in respect of work carried out but not billed at period end is accrued.
Costs incurred with external suppliers on behalf of the clients are excluded from revenue.
h. Intangibles Assets
Goodwill
Goodwill represents the excess of fair value attributed to investments in businesses and
subsidiary under taking over the fair value of the identifiable net assets, liabilities and
contingent liabilities acquired. Goodwill on acquisition of an entity is included in intangible
assets. Goodwill has indefinite useful life and therefore not amortized. Impairment reviews
are undertaken annually or more frequently if events or changes in circumstances indicate a
potential impairment. Any impairment in carrying value is recognized as an expense and is
not subsequently reversed.
The valuation of the CGUs for goodwill impairment testing has been prepared on a discounted
cash flow basis.
Other
Externally acquired intangible assets are initially recognized cost and subsequently amortized
on a straight-line basis over their useful economic lives. Licenses are amortized over the term
of the license agreement.
i. Tangible assets
Property, furniture and equipment are initially recognized at cost and subsequently stated at
cost less accumulated depreciation and, where appropriate, impairment losses.
Depreciation is provided on all items of property and equipment so as to write off their
carrying value, less its residual value, over their expected useful economic lives. It is
provided at the following rates:
• Furniture and machinery
• Office equipment
• Computer equipment
12%
20%
20%
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the
end of each reporting period. An asset 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 proceeds with the carrying
amount and are recognized within “other operating income and changes”.
j. Investments
Investments included in non-current assets are stated at cost less any impairment charges.
Annual Report 2016 |
33
k. Financial assets
The Group classifies its financial assets into one of the categories discussed below, 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, as available for sale or held to maturity
except for financial investments.
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
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 ‘available for sale’ and are shown at fair value with any
movements in fair value taken to equity. On disposal, the cumulative gain or loss previously
recognized in equity is included in the profit or loss for the year.
The fair values of the primary financial assets and liabilities of the company together with
their carrying values are as follows:
Financial assets
Trade and other receivables
Financial investments
Cash and cash equivalents
Financial liabilities
Trade and other payables
Financial liabilities
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
Carrying
value
8,066
1,003
5,036
Fair
value
8,066
1,003
5,036
Carrying
value
7,961
1,049
6,776
Fair
value
7,961
1,049
6,776
5,403
2,924
5,403
2,924
5,171
4,254
5,171
4,254
Trade and other receivables
These assets are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They arise principally through the provision of services to
customers (e.g. trade receivables), but also incorporate other types of contractual monetary
asset. They are initially recognized at fair value plus transaction costs that are directly
attributable to their acquisition or issue, and are subsequently carried at amortized cost using
the effective interest rate method, less provision for bad debts and doubtful account.
Impairment provisions are recognized when there is objective evidence (such as significant
financial difficulties on the part of the counterparty or default or significant delay in payment)
that the Group will be unable to collect all of the amounts due under the terms receivable, the
amount of such a provision being the difference between the net carrying amount and the
Annual Report 2016 |
34
present value of the future expected cash flows associated with the impaired receivable. For
trade receivables, which are reported net, such bad debt provisions are recorded in a separate
allowance account with the loss being recognized within other operating costs in the
Consolidated income statement. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off against the associated
provision.
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 over draft are shown within borrowings in
current liabilities.
m. Financial liabilities
Financial liabilities comprise loans and trade and other payables, which are initially
recognized at fair value and subsequently carried at amortized cost using the effective interest
method. The interest element of the borrowings and short-term financial liabilities is
expensed over the repayment period at a constant rate. In accordance with IAS 39 Financial
Instruments: “Recognition and Measurement, a financial liability of the Group is only
released to the consolidated income statement when the underlying legal obligation is
extinguished”.
n. Operating leases
Assets leased under operating leases are not recorded in the statement of financial position.
Rental payments are charged directly to the income statement on a straight-line basis.
o. Share capital
SEC S.p.A.’s ordinary shares are classified as equity instruments.
p. Dividends
Dividends are recognized when they become legally payable, which is when they are
approved for distribution. In the case of interim dividends to equity shareholders, this is when
declared by the directors and paid.
q. Taxation
Income tax for each period comprises current and deferred tax.
The current tax is based upon the taxable profit for the year together with adjustments, where
necessary, in respect of prior periods, and calculated using tax rates that have been enacted
or substantively enacted at the end of the financial year. Italian Corporate entities are subject
to a corporate income tax (IRES) and to a regional production tax (IRAP).
Current tax is recognized in the consolidated income statement, except to the extent that it
relates to items recognized in other comprehensive income or directly in equity.
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or
liability in the consolidated statement of financial position differs from its tax base.
Recognition of deferred tax assets is restricted to those instances where it is probable that
Annual Report 2016 |
35
taxable profit will be available against which the difference can be utilized.
The amount of the asset or liability is determined using tax rates that have been enacted or
substantively enacted by the reporting date and are expected to apply when the deferred tax
liabilities/assets are settled/recovered.
r. Employee benefits
The only form of post-employment benefit provided to staff by Group companies is
represented by Staff Termination Benefits “TFR”. In light of the amendments made to the
relevant regulations by the “2007 Finance Act” (law no. 296 of 27 December 2006), with
regard to enterprises with more than 50 employees, staff termination benefits are accounted
for in accordance with the following rules:
1. for defined benefit plans, as regards the portion of staff termination benefits accrued as at
31 December 2006, through actuarial calculations which do not include the item related to
future salary increases;
2. for defined contribution plans, as regards the portion of staff termination benefits accrued
from 1 January 2007, both in case of election of supplementary pension scheme, and in
the event of allocation to the INPS Treasury Fund.
Staff termination benefits for Group companies with fewer than 50 employees are recognized
in accordance with the regulations for defined benefit plans in accordance with IAS 19;
liabilities are measured on an actuarial basis using the projected unit method and discounted
at a rate equivalent to the current rate of return on a high-quality corporate bond of equivalent
currency and term to the plan liabilities.
s. Provisions
Provisions comprise liabilities where there is uncertainty about the timing of settlement, but
where a reliable estimate can be made of the amount.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
SEC Group makes certain estimates and assumptions regarding the future. Estimates and
judgements are continually evaluated based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from these estimates and
assumptions. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
Useful lives of depreciable assets
Useful lives of depreciable assets are based on the expected utilization of each asset. Changes
to estimates can result in significant variations in the carrying value and amounts charged to
the Statement of Comprehensive Income in specific periods.
Annual Report 2016 |
36
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, SEC Group uses market
observable data to the extent it is available.
Provision for doubtful debts
Management performs an assessment of the recoverability of debtors when evidence arises
that demonstrates the collection is uncertain. Management periodically reassesses the
adequacy of the allowance for doubtful debts in conjunction with its credit policy and
discussions with each specific customer. Judgement is applied at the point where
recoverability is deemed uncertain and thus when a provision is to be recognized.
Employee benefits
For actuarial assumptions on severance indemnity refer to note 26.
Impairment of Goodwill
Disclosure included in note 2 (h).
4. FINANCIAL INSTRUMENTS – RISK MANAGEMENT
The Board has overall responsibility for the determination of the Group’s risk management
objectives and policies. The overall objective of the Board is to set policies that seek to reduce
risk as far as possible without unduly affecting the Group’s competitiveness and flexibility.
All funding requirements and financial risks are managed based on policies and procedures
adopted by the Board of Directors. The Group does not currently use derivative financial
instruments and does not issue or use financial instruments of a speculative nature.
Through its operations SEC Group is exposed to the following financial risks:
a. Credit risk
b. Market price risk
c. Fair value and cash flow interest rate risk
d. Liquidity risk
trade and other receivables;
Principal financial instruments
The principal financial instruments used by Sec Group, from which financial instrument risk
arises, include:
•
• cash and cash equivalents;
•
trade and other payables.
This note describes Sec Group’s objectives, policies and processes for managing those risks
and the methods used to measure them. Further quantitative information in respect of these
risks is presented throughout these financial statements. There have been no substantive
changes in Sec Group’s exposure to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure them from previous periods
unless otherwise stated in this note.
Annual Report 2016 |
37
a. Credit risk
Credit risk is the risk of financial loss to SEC Group if a customer or a counterparty to a
financial instrument fails to meet its contractual obligations. The Company is mainly exposed
to credit risk from credit sales. Sec Group has trade receivables of € 7,304,000 (2015:
€7,595,000) net of any write-off and allowance for doubtful receivables.
As at 31 December 2016, the Group had amounts due from ten major customers amounting to
20 per cent. of the trade receivables balance.
Sec Group is exposed to credit risk in respect of these balances such that, if one or more of the
customers encounters financial difficulties, this could materially and adversely affect the Sec
Group financial results.
Sec Group attempts to mitigate credit risk by assessing the credit rating of new costumers prior
to entering into contracts and by entering contracts with costumers with agreed credit terms.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial
institutions. Sec Group does not enter into derivatives to manage credit risk.
The Directors are unaware of any factors affecting the recoverability of outstanding balances
at 31 December 2016 and consequently no further provisions have been made for bad and
doubtful debts.
b. Market risk
Market risk arises from SEC Group’s use of interest bearing, tradable. It is the risk that the
fair value or future cash flows of a financial instrument will fluctuate because of changes in
interest rates (interest rate risk) or other market factors (i.e. price risk).
c. Fair value and cash flow interest rate risk
Sec Group has previously been funded through borrowings from a UBS (Italy) S.p.A.,
Deutsche Bank S.p.A. and Unicredit Banca S.p.A. Sec Group obtained the following loans:
1. UBS (Italy) S.p.A. € 1,762,000 during the year ended 31 December 2013 at an interest
rate of Euribor 12 month plus a margin of 1.25 per cent as Revolving credit facility open
ended.
2. Deutsche Bank S.p.A. € 1,000,000 at an interest rate of 1-month Euribor plus a margin
of 1,20 per cent. On amortizing basis with monthly basis instalment between July 2015
and June 2019.
3. Unicredit S.p.A, € 30,000, at an interest rate of 4,1 per cent payable in monthly
instalment between February 2015 and February 2020.
4. Unicredit S.p.A, €1.000.000 at an interest rate of 1.2% payable every six months
between June 2016 and December 2020
5. BPM Banca Popolare di Milano € 1.000.000 at an interest rate of 1,1% payable in
monthly instalments between February 2016 and February 2020.
6. Natwest GBP 100.000 at an interest rate of 4.69% payable in monthly instalments
between October 2016 and October 2019
7. Directors Loan (Mark Glover – director in Newington) for 100.000 GBP at an interest
rate of 4% per annum accruing daily and payable monthly in arrears on the last business
day of each month (see note 31).
Annual Report 2016 |
38
d. Liquidity risk
Sec 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 aim, Sec Group finances its operations
through a mix of equity and borrowings. Sec Group’s objective is to provide funding for future
growth and achieve a balance between continuity and flexibility through its bank facilities and
future intergroup loans.
The Board receives cash flow projections on a regular basis as well as information regarding
cash balances. At the end of the financial year, these projections indicated that Sec Group is
expected to have sufficient liquid resources to meet its obligations under all reasonably
expected circumstances.
Capital management
SEC Group monitors capital, which is made up of share capital, retained earnings and other
reserves.
SEC Group’s objectives when maintaining capital are:
•
to safeguard the entity’s ability to continue as a going concern, so that it can continue to
provide returns for shareholders and benefits for other stakeholders; and
to provide an adequate return to shareholders by pricing services commensurately with the
level of risk.
•
SEC Group sets the amount of capital it requires in proportion to risk. Sec Group manages its
capital structure and makes adjustments to it in the light of changes in economic conditions
and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, SEC may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
5. REVENUE
Revenue of services
Total
Year ended
31 December 2015
€’000
21,244
Year ended
31 December 2016
€’000
18,487
21,244
18,487
Revenues are primarily generated by a comprehensive range of communications, relations and
public affairs services provided to national and multinational clients.
Revenues for services are composed by: public relation activities for € 11,782,000; (2015: €
10,496,000) advocacy activities for € 4,796,000; (2015: € 6,249,000) and integrated services
of 1,909,000; (2015: € 4,499,000).
Annual Report 2016 |
39
6. EMPLOYEES EXPENSES
Salaries
Social contributions
Severance indemnity
Other costs
Total employee expenses
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
5,170
1,170
287
77
6,704
6,782
1,241
314
39
8,296
The average monthly number of employees during the period was as follows:
Directors
Staff
Total average monthly employees
8
160
168
19
204
226
Salaries to key managers of the Group, including Board of Directors’ fees have been the
following:
Salaries to key managers
End of mandate allowance
Total salaries to key managers
2,192
45
2,237
2,101
45
2,146
No bonuses were paid to Directors during the period.
7. SERVICE COSTS
Consulting
Internal Consulting & Directors
Overheads
Rent/Lease
Services
Total service costs
1,412
1,812
2,010
491
4,717
10,442
1,271
1,814
1,367
663
3,584
8,699
Overheads principally comprise costs incurred with subcontractors in order to manage extraordinary
workload activity not directly provided internally. Services principally comprise marketing,
advertising and other services incurred by the Group in its operating activities (respectively for €
2,873,000 in 2016 and € 4,064,000 in 2015); other amounts are related to phone costs, travel expenses,
office maintenance expenses, freight costs, car expanses and bank charges.
Annual Report 2016 |
40
8. DEPRECIATIONS AND AMORTIZATIONS
Amortization of intangibles
Depreciation of tangible assets
Total depreciation and amortization
OTHER OPERATING INCOME AND CHARGES
Other Charges
Other Income
Total other operating income and charges
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
2
93
95
(115)
219
104
5
123
128
(32)
109
77
Other operating income and expenses in 2015 and 2016 are mainly generated by non-
recurring adjustments and miscellaneous.
10. OTHER OPERATING COSTS
Bad debts write-off
Bad debts allowance
Impairment of investment
Tax local
Others
Total other operating costs
123
40
33
61
571
828
107
121
0
26
392
646
Other costs primarily include the purchase of goods and materials for managing events; the
remaining costs comprise subscriptions, magazines, books and newspapers, consumption of
materials.
11. FINANCE INCOME AND EXPENSE
Financial income
Interest income
Finance income
Financial expenses
Interest expense
Other expenses
Finance expenses
Net Finance income and expense
24
24
17
17
(47)
(8)
(53)
(31)
(71)
(7)
(78)
(61)
Annual Report 2016 |
41
12. TAXATION
Current tax expense
Deferred tax income
Total income tax expense
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
1,193
10
1,203
454
(165)
289
2016 Applicable tax rates (Italy)
The SEC Group’s activities are both in Italy and abroad (Spain, Germany, Belgium, United
Kingdom). Activities within Italy are subject to two corporate taxation regimes:
•
IRES is the state tax which was levied at 24 per cent. (27.5 per cent. in 2015) of taxable
income.
IRAP is a regional income tax, for which the standard rate is 3.9 per cent., with certain
local variations permitted.
•
The reconciliation between the theoretical income taxes calculated on the basis of the
theoretical tax rate and income taxes recognized was as follows:
Profit before taxes
3,248
734
Expected tax charge based on Italian corporate tax rate (IRES 27,5%)
Temporary differences subject to tax @ 27.5%
Non-deductible expenses subject to tax @ 27.5%
Non-taxable incomes subject to tax @ 27.5%
Tax loss carry forward (use) subject to tax @ 27.5%
Tax loss carry forward (set-up) subject to tax @ 27.5%
recovery of IRAP taxable amounts on IRES purposes subject to tax @
27.5%
Tax incentives (tax allowance on retained earnings increases –ACE)
IRAP on Italian entities
Non Italian jurisdictions tax rates reconciliation
Differences on non-Italian jurisdictions taxable income/(loss) basis
Total current income taxation
Deferred tax Income/(Expense)
Total taxation
(893)
(14)
(116)
70
6
(1)
21
41
(213)
(33)
(61)
(1,193)
(10)
(1,203)
(202)
(92)
(103)
107
6
(23)
-
-
(47)
(47)
(53)
(454)
165
(289)
Annual Report 2016 |
42
13. INTANGIBLE ASSETS
COST
At 1 January 2015
Additions
At 31 December 2015
Additions
At 31 December 2016
AMORTISATION
At 1 January 2015
Charge for the year
At 31 December 2015
Charge for the year
At 31 December 2016
NET BOOK VALUE
At 31 December 2015
At 31 December 2016
Licenses
€’000
66
6
72
89
161
Goodwill
€’000
3,047
761
3,808
1,806
5.614
Total
€’000
3,113
767
3,880
1,895
5,775
(65)
- (65)
(2)
(67)
(2)
---
-
(67)
(5)
(72)
5
89
-
--
(5)
(72)
3,808
5,614
3,813
5,703
Additions in Goodwill over the two-year period are generated as follows:
•
•
in 2015, € 761,000 from acquisition of Kohl PR & Partners GMBH.
In 2016, € 1,806,000 from acquisition of Newington Communications LTD.
€’000
Trade receivables
Cash and cash equivalents
Other assets
Trade payables
Other liabilities
Net Assets acquired
% ownership SEC Group
Ownership SEC Group
FV consideration
Goodwill
Kohl
114
194
84
(33)
(37)
322
75%
242
1,003
761
Newington
1,128
143
211
(178)
(541)
763
60%
458
2,264
1,806
The evaluation of the CGUs for goodwill impairment testing has been prepared on a
Discounted Cash Flow basis value.
In 2016 management identified the aggregation of cash generating units (“CGUs”) for testing
the impairment of its goodwill in light of the business of the year. As a result of the analysis,
Annual Report 2016 |
43
management identified as CGUs the single subsidiaries that generated goodwill.
Total goodwill at 31 December 2016 is € 5.340,000 related to Cambre (€ 1,547,000), acquired
in 2013, ACH (€ 492,000) and Sec and Partners (€ 100,000) acquired in 2014, Kohl (€
761,000) acquired in 2015 and Newington (€ 1,532,000) acquired in 2016. Additions of 2014
also included goodwill in ACH resulting from a previous merger (€ 275,000) and goodwill
in Sec and Partners resulting from a previous acquisition (€ 632,000).
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 Discounted Cash Flow method. The main assumptions for
determining the value in use are reported below:
Average market rate
Discount rate
Cambre
8.47%
6.98%
ACH
10.79%
10.06%
Sec and
Partners
11.31%
11.31%
Kohl
9.82%
7.86%
Newington
8.47%
7.23%
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 2017 to 2021 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 CGU 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 Newington is subject to an earn-out based on company EBITDA over three
years (2016 - 2018); total consideration for the acquisition of the 60% share of the company
has been calculated based on conservative and reasonable estimates, consequently an earn-
out liability for 612k has been accrued as of 31 December 2016. The final total consideration
is subject to uncertainty and depends on the company performance over the ongoing financial
year (see note 25).
Annual Report 2016 |
44
14. TANGIBLE ASSETS
COST
At 1 January 2015
Additions
Additions from acquired
business
Disposals
At 31 December 2015
Additions
Additions from acquired
business
Disposals
At 31 December 2016
DEPRECIATION
At 31 January 2015
Charge for the year
Disposals
At 31 December 2015
Charge for the year
Disposals
At 31 December 2016
Net Book Value
At 31 December 2015
At 31 December 2016
Leasehold
improvements
€’000
Equipment
€’000
Furniture and fittings
€’000
Total
€’000
132
39
-
-
171
19
173
-
363
(106)
(25)
-
(131)
(36)
-
(157)
40
196
109
6
-
(3)
112
24
-
-
136
(80)
(8)
3
(85)
(10)
-
(95)
27
41
420
125
14
(10)
549
68
44
(1)
660
(334)
(60)
10
(384)
(76)
17
(439)
165
217
661
170
14
(13)
832
111
217
(1)
1,159
(520)
(93)
13
(600)
(93)
17
(691)
232
454
Annual Report 2016 |
45
15. INVESTMENTS
Owned by
%
SEC
95%
-
-
Sec & Partners S.r.l.
Others
Total investments
16. OTHER FINANCIAL ASSETS
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
5
2
7
5
2
7
Other financial assets include € 10,000 of bank deposits to guarantee the ACH Cambre SL (Madrid)
office lease and other financial investments of ACH Cambre SL € 6,000 in both 2016 and 2015.
17. OTHER ASSETS
Deferred tax assets
Rental deposits
Directors benefits
Other
Total other assets
52
505
26
411
-
489
164
246
2
917
Director benefits is the asset coverage provided by an external insurance company in order to
fulfill the end of mandate obligations for the Board director (net balance is zero, see note 27).
The movement on the deferred tax account is shown below:
Opening balance
Movements in statement of financial position
Recognized in income statement: taxation
Closing balance
61
52
(19)
10
52
288
165
505
18. TRADE RECEIVABLES
Trade receivables
Total trade receivables
7,595
7,595
7,304
7,304
Annual Report 2016 |
46
There is no material difference between the net book value and the fair-values of trade
receivables due to their short-term nature.
The ageing analysis of accounts receivables by due date is as follows:
Trade
receivables
not yet due
€’000
3,206
43%
≤120
€’000
2,601
35%
Days from due date
>120≤180
>180≤365
€’000
221
3%
€’000
580
8%
>365
€’000
857
11%
Total trade
receivables
€’000
7,465
100%
The amounts presented in the consolidated statement of financial position are net of an
allowance for doubtful receivables of € 161,000 (2015: €40,000) based on prior experience
and their assessment of the current economic ongoing.
19. OTHER RECEIVABLES
Prepaid expenses
Tax on income
VAT
Others
Total other receivables
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
32
268
65
106
471
120
347
-
190
657
There is no material difference between the net book value and the fair values of other
receivables due to their short-term nature. Others mainly include advance prepayments to
suppliers of € 21,000 (2015: €37,000) and € 12,000 (2015: €50,000) of receivables from
minority shareholders.
20. FINANCIAL INVESTMENTS
UBS S.A. investment
Total other
receivables
1,003
1,003
1,049
1,049
The table above provides an analysis of financial instruments that are initially recognised at
fair value (level 1) based on the degree to which the fair value is observable.
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Annual Report 2016 |
47
31 December 2015
Investments
Bonds
Equities
Other
Total
Purchase Cost
€’000
428
545
30
1,003
Fair Value
€’000
Accrued interest
€’000
402 1
-
571
29
-
1,002 1
Total
€’000
403
571
29
1,003
31 December 2016
Investments
Bonds
Equities
Other
Total
Purchase Cost
€’000
428
545
30
1,003
Fair Value
€’000
424
597
27
Accrued interest
€’000
1
-
-
1,048 1
Total
€’000
425
597
27
1,049
Investments at fair value
Available for sale
Debt securities:
- Government bonds
- Other bonds
Total
Equities and mutual
funds under
management:
- Equity Funds
- Bond Funds
- Balanced Funds
Total
Total Investments
31 December 2015
31 December 2016
Level
2
1
3
1
Level
2
3
€'000
€'000
€'000
€'000
€'000
€'000
-
53
53
571
350
29
950
1,003
-
-
-
-
-
-
-
-
-
-
-
-
53
53
597
-
372
-
27
-
-
996
- 1.049
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Annual Report 2016 |
48
Financial Assets Available for
sale
Annual changes
Opening Balance January 1
2015
Purchases
Positive changes in fair value
Other changes
Sales
Negative changes in fair value
Closing Balance December 31
2015
Purchases
Positive changes in fair value
Other changes
Sales
Negative changes in fair value
Closing Balance December 31
2016
Debt
securities
Equities
Funds
Loans
Total
€'000
€'000
€'000
€'000
86
52
1
-
(86)
-
53
-
-
-
-
-
53
-
-
-
-
-
-
-
-
-
-
-
-
-
773
704
-
-
(515)
(12)
950
70
-
-
-
(24)
996
-
-
-
-
-
-
-
-
-
-
-
-
-
€'000
859
756
1
1
(601)
(12)
1.003
70
-
-
-
(24)
1.049
21. CASH AND CASH EQUIVALENTS
For the purpose of the cash flow statement, cash and cash equivalents comprise the following
balances with original maturity of 90 days or less:
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
Cash at bank
Total cash and cash equivalents
5,036
5,036
6,776
6,776
22. TRADE PAYABLES
Trade payables
Total trade payables
2,429
2,429
2,261
2,261
Annual Report 2016 |
49
23. BORROWINGS
The Group has both long-term borrowings funding business acquisitions and short-term credit
facilities for working capital. Borrowings shown on current and noncurrent liabilities are as
follows:
Deutsche Bank
Banca Popolare di Milano
Unicredit
Banca Intesa
KBC Bank
Banca Popolare di Bari
UBS
National Westminster Bank PLC
Santander
Total current liabilities
UBS
Deutsche Bank
Banca Popolare di Milano
Unicredit
National Westminster Bank PLC
Total non-current liabilities
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
500
7
85
47
27
11
-
87
250
245
325
26
-
4
13
38
-
764
901
1,762
379
-
19
-
1,762
375
544
598
74
2,160
3,353
Total borrowings
2,924
4,254
Details of non-current liabilities
Outstanding
€’000
Total facilities
€’000
Interest
rate
UBS
1,762
Deutsche
Bank
Banca
Popolare di
Milano
Unicredit
National
Westminster
PLC
625
923
19
111
1,762 Euribor +
1.25%
1,000 Euribor +
1.20%
1,1%
1000
30
4.1%
100
4.69%
Maturity
date
Open
ended
23 June
2019
February
2020
February
2020
October
2019
Repayment
Security
Open ended
Two month
installment
Monthly
Monthly
Monthly
Pledge on Silvia
Anna Mazzucca
financial instruments
None
None
None
None
Annual Report 2016 |
50
24. OTHER PAYABLES
Accrued Expenses
Advances from customers
Employees and payroll-related
Government institutions
Tax on Income
VAT
Other
Total other payables
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
78
79
1,142
258
847
313
257
2,974
178
53
1,195
294
216
538
437
2,911
There is no material difference between the net book value and the fair values of current other
payables due to their short-term nature.
Other includes € 142,000 in both 2016 and 2015 related to the payable due to a SEC and
Partners director, for payment made by the latter on behalf of SEC Group and €116.000
payable to a Newington director (amount settled by the company in 2017).
Maturity analysis of the financial liabilities, classified as financial liabilities measured at
amortized cost, is as follows (the amounts shown are undiscounted and represent the
contractual cash-flows):
Up to 3 months
2,974
2,911
25. PROVISION
Provisions
Total provisions
22
22
651
651
Increase in provisions versus 2015 is mainly due to accounting for the earn out liability on
the acquisition of Newington (see note 13).
26. EMPLOYEE BENEFITS
Severance indemnity
Total severance indemnity
1,436
1,436
1,504
1,504
The liability represents the amount for future severance payments to employees.
Annual Report 2016 |
51
Opening Balance January 1 2015
Service Cost
Net Interest
Benefit Paid
Actuarial Gain/Loss
Closing Balance 31 December 31 2015
Service Cost
Net Interest
Benefit Paid
Actuarial Gain/Loss
Closing Balance 31 December 2016
27. OTHER NON-CURRENT LIABILITIES
Directors benefits
Other non current liabilities
Total other non-current liabilities
Severance indemnity
€'000
1,361
224
19
(93)
(75)
1,436
224
29
(194)
9
1,504
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
411
-
411
246
10
256
SEC S.P.A. has an obligation in relation to a Board Director for end of mandate allowance as
per the above amounts on each year end date. Such obligation is covered by an insurance asset
(note 17).
28. SHARE CAPITAL
At 31 December 2016, the share capital comprises:
12,221,975 ordinary shares of 0.1 EUR each.
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.
At 31 December 2015 the share capital comprised 1,000,000 ordinary shares of 1 EUR each.
The general assembly held on 9 June 2016 changed the number and the amount of the sharers
into 10,000,000 ordinary shares of 0.1 EUR each.
At 26 July 2016, following the IPO on AIM UK market, the share capital changed into
12,221,975 ordinary shares of 0.1 EUR each, with an increase of 2,221,975 shares and €
222,197.50.
Annual Report 2016 |
52
2016 Authorized, issued and fully paid capital
As at 1 January
Additions during the year
31 December
As at
31 December 2015
As at
31 December 2016
€ 1,000,000
-
€1,000,000
€ 222,197.50
€ 1,000,000
€ 1,222,197.50
Earnings per share
The basic and diluted earnings per share for 2016 were 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:
Year ended
31 December 2015
€’000
Year ended
31 December 2016
€’000
Profit for the year attributable to owners of the company
Number of shares
Earnings per share, basic
€ 1,373,000
1,000,000
€ 1.37
€ 182,000
12,221,975
€ 0.01
The General Assembly held on 9 June 2016 resolved to issue a maximum of 134,000 shares
to be assigned to WH Ireland Limited as warrant, and a maximum of 675,000 shares as stock
grant plan to the employees. As of today, neither warrant nor stock grant plan were subscribed,
however the potential additional shares should be considered as dilutive instruments. Earnings
per share, diluted, is determined as follows:
Profit for the year attributable to owners of the company
Number of shares
Earnings per share, diluted
€ 1,373,000
1,000,000
€ 1.37
€ 182,000
13,031,000
€ 0.01
29. RESERVES
The following table describes the nature of each reserve:
Legal reserve
Evaluation reserve
Share premium reserve
Retained earnings
Total Reserves
20
(38)
-
4,262
4,244
58
(4)
2,627
5,071
7,752
Annual Report 2016 |
53
Legal reserve
This reserve required by law, not distributable.
Evaluation reserve
Gains/losses arising on financial assets classified as available for sale, actuarial evaluation on
pension allowance and exchange rates differences.
Share premium reserve
The share premium reserve includes € 3,777,000 related to the IPO of Sec S.p.A. on the AIM
UK market occurred on 26 July 2016, for amounts paid in excess of share face value, net of €
1,150,000 generated by the costs of listing, net of tax.
Retained earnings
All other net gains and losses and transactions with owners not recognized elsewhere.
30. NON-CONTROLLING EQUITY
The equity non-controlling interests refers to the net value of the assets and liabilities
attributable to minority investments not held by the Group. Summarized financial information
in relation to the subsidiaries before intra-group eliminations is presented below, together with
the indication of the minority share of the net assets and the related results for the year.
The summarized company statements of financial position for the Two year ended 31
December 2016 are as follows:
As at 31
December
2016 €’000
Non-current
assets
Current
assets
Noncurrent
liabilities
Current
liabilities
Equity
Equity to
non-
controlling
interest
HIT
CUR
CAM
ACH
SEC-A MED
DS
SEC-P KOHL
NEW
8
9
102
306
7
25
3
716
14
361
796
215
1,690
566
456
146
87
1,455
460
1,187
73
8
-
-
21
13
8
69
-
74
115
191
698
159
395
72
95
932
146
749
617
25
1,094
713
261
6
263
350
47
23
86
(13)
1,170
328
725
42
(6)
579
82
290
Annual Report 2016 |
54
As at 31
December
2015 €’000
Non-current assets
HIT
CUR
CAM
ACH
SEC-
A
MED
DS SEC-P KOHL
16
10
70
303
8
25
4
644
17
Current assets
1,463
301
1,966
929
369
169
197
1,613
377
Noncurrent
liabilities
63
2
-
-
12
9
6
63
-
Current liabilities
568
279
779
533
312
Equity
Equity to non-
controlling
interest
848
359
30
1,257
7
503
699
342
53
26
99
87
42
124
1,239
142
70
34
954
473
252
63
The summarized income statement of the companies for the two-year ended 31 December
2016 are as follows:
For the
period
ended 31
December
2016
€’000
HIT
CUR
CAM
ACH SEC-A MED
DS
SEC-P KOHL
NEW
Revenue
729
369
4,736
1,584
340
229
146
1,775
1,245
989
(765)
(372)
(4,036)
(1,461)
(313)
(211)
(240)
(1,469)
(1,153)
(1,018)
20
(16)
(2)
(18)
(14)
4
1
-
1
-
-
(4)
(5)
12
30
19
-
699
123
23
13
(82)
337
111
(28)
(4)
8
(16)
(2)
-
(2)
(2)
-
696
131
7
11
(82)
335
109
(28)
(4)
(249)
(15)
(3)
(11)
-
(41)
(33)
(3)
(32)
(3)
447
116
4
-
(82)
293
76
(31)
(13)
(1)
107
57
2
-
(40)
145
19
(12)
Cost of Sale
Other
operating
income and
charges
Profit from
operations
Finance
income and
expenses
Profit
before
taxation
Taxation
Profit (loss)
for the
period
Profit (loss)
for the
period to
non-
controlling
interest
Annual Report 2016 |
55
For the period
ended 31
December 2015
€’000
HIT
CUR
CAM
ACH
SEC-
A
MED
DS
SEC-P KOHL
Revenue
2,834
413
4,710
2,179
227
269
214
1,756
476
Cost of Sale
(2,108)
(398)
(3,962)
(1,891)
(212)
(243)
(221)
(1,231)
(520)
5
2
-
-
-
-
-
63
-
731
17
748
288
15
26
(7)
588
(44)
7
(1)
(2)
(2)
(15)
(1)
-
-
-
Other operating
income and
charges
Profit from
operations
Finance income
and expenses
Profit before
taxation
Taxation
(261)
(9)
(259)
(80)
738
16
746
286
-
-
-
25
(8)
588
(44)
(12)
-
(212)
(26)
13
(7)
376
(70)
487
206
195
101
1
7
(3)
189
(17)
Profit (loss) for
the period
Profit (loss) for
the period to
non-controlling
interest
477
201
7
2
31. RELATED PARTY TRANSACTIONS
From time to time the Group enters into transactions with its associate undertakings. For
amounts paid to key managers please refer to the table within note 6. For payables to related
parties, please refer to note 24; for borrowings please refer to note 4 (d.7).
32. CONTINGENCIES AND COMMITMENTS
SEC Group has no contingent liabilities and or commitments.
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56
33. EVENTS AFTER THE REPORTING DATE
In May 2017, SEC S.p.A. bought 60% of Martis Consulting, a Polish company specialized in
corporate communication and public affairs.
In May 2017 the General assembly of Kohl, ACH and Sec and Partners S.r.l. approved the
distribution of dividends for respectively € 60,000; € 73,000 and € 100,000.
34. ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party of the Company. Sec S.p.A. is 69% controlled by
Fiorenzo Tagliabue.
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57
ENQUIRIES
SEC spa
Fiorenzo Tagliabue, CEO
Anna Milito, CFO, www.secglobalnetwork.com
+39 02 62499946
WH Ireland (Nominated Adviser)
Paul Shackleton, Nick Prowing
+44 0207 220 1666
Peterhouse (Broker)
Charles Goodfellow, Duncan Vasey, Heena Karani and Paul Brown
Peterhouse Corporate Finance Limited
+44 (0)20 7220 9791
IFC Advisory and SEC spa (Media Enquiries)
Graham Herring +44 07793 839 024
Marco Fraquelli +39 02 624999.1
NOTES TO EDITORS
SEC Spa is an advocacy, PR and strategy advisory group with specialisms including Corporate, Public affairs,
Financial , Stakeholder engagement and Consumer Public Relations.
The Group has offices in Milano, Roma, Bruxelles, London, Berlin, Madrid and Warsaw.
The brand and companies it owns are the following:
In Italy: SEC and Partners (Roma), SEC & Associati (Torino), SEC Mediterranea (Bari), HIT (Milano),
Curious Design (Milano)
In Europe: Cambre Associates SA (Bruxelles), ACH Cambre - Consejeros De Relaciones Públicas S.L (Spain),
Kohl PR & Partner Unternehmensberatung für Kommunikation GmbH (Germany), Newington
Communications Limited (UK) Martis Consulting (Poland)
SEC spa’s corporate website are:
www.secrp.com
www.secglobalnetwork.com
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