SEC Newgate Annual Report 2019

FY2019 Annual Report · SEC Newgate

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SEC Newgate S.p.A.
Annual Report & Accounts for the
year ended 31 December 2019

Katarzyna Hajdan
Office Manager, Martis Consulting
Warsaw, Poland

SEC Newgate S.p.A. - Annual Report 2019

The theme of the SEC Newgate S.p.A.
annual report & accounts for 2019
revolves around two of the Group’s core values
– ‘difference’ and ‘excellence’.

SEC Newgate celebrates the difference we make
when we bring our individual life experience to
our work.

Each member of our team is passionate and takes
pride in their ambition to be the best – excellence,
every day in every way.

We are a Group of people with great personality
both inside and outside of the office; the images in
this year’s Report & Accounts aim to capture the spirit
of SEC Newgate S.p.A.

SEC Newgate S.p.A
Consolidated Financial
Statements 2019

SEC Newgate S.p.A. - Annual Report 2019

Contents.

About Us ____________________________________________________ 6

Highlights ____________________________________________________ 10

Chairman’s Statement ________________________________________ 14

Chief Executive’s Review _____________________________________ 22

Group Agencies ______________________________________________ 28

Group CFO’s Review _________________________________________ 41

Corporate Governance Statement ____________________________ 48

The Board of Directors ________________________________________ 62

Consolidated Financial Statements ___________________________ 66

Independent Auditor’s Report _________________________________ 68

Consolidated Income Statement ______________________________ 74

Consolidated Statement of Comprehensive Income ___________ 75

Consolidated Statement of Financial Position __________________ 76

Consolidated Statement of Changes in Equity _________________ 78

Consolidated Statement of Cash Flows ________________________ 80

Notes to the Financial Statements _____________________________ 82

Notice of Annual General Meeting ___________________________ 128

Form of Proxy _________________________________________________ 131

Key Information ______________________________________________ 134

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

About Us.

SEC Newgate S.p.A. - Annual Report 2019

Our Values

.
s
e
u
a
V

u
O

Difference
We celebrate difference and what our individual life
experience brings to our work.

Respect
We value our colleagues, clients, partners, communities
and environment and are responsible for our actions.

Fun
We place great importance on physical and mental
health and making work fun.

Curious
We are open to new ideas and better ways of
achieving the best results.

Excellence
We hire passionate people, each committed to
delivering work to the highest standards.

Collaborative
We work as a team to achieve the best outcome.

6
6

Our Business

We are a strategic communications
group offering a fresh approach locally,
nationally and internationally inspired by
our entrepreneurial heritage and by our
philosophy of constructive dialogue across
all stakeholders.

We’re the people you come to, to build and
protect your brand, reputation and business
using strategic communications, advocacy
and research. Our difference is that we
achieve positive change for our clients.

With over 600 people working across five
continents, we are able to manage even the
most complex crisis communication issues
around the clock.

SEC Newgate S.p.A. - Annual Report 2019

Our Story
On 3 September 2019, SEC S.p.A. and Porta Communications Plc
merged to create SEC Newgate S.p.A. Together we created
a top 30 global communications group with approximately 600
SEC Newgate entrepreneurs based at 34 offices, in 15 countries
and five continents – from London to Sydney, from Milan to Bogota,
and Berlin to Shanghai.

The enlarged group is listed on the Alternative Investment Market (AIM)
of the London Stock Exchange under the symbol SECG.

UNITED
KINGDOM

Brussels,
Belgium

Madrid,
Spain

Paris,
France

Berlin,
Germany

Birmingham
Bristol
Cardiff
Chelmsford
Edinburgh
Leeds
London
Manchester

Milan
HEADQUARTERS

MIDDLE
EAST

Abu Dhabi,
UAE

Warsaw,
Poland

Adelaide
Brisbane
Canberra
Melburne
Perth
Sydney

GREATER
CHINA

Australia

Greater
China

Beijjing
Hong Kong
Shanghai

Bogotá,
Colombia

Rabat,
Morocco

Singapore

SOUTH
AMERICA

Italy

Bari
Bolzano
Catania
Milan
Rome
Turin
Udine
Venice

MAINLAND
EUROPE

AUSTRALIA

RESEARCH

SINGAPORE

NORTH
AFRICA

SEC Newgate S.p.A. - Annual Report 2019

Highlights.

OUR PURPOSE

TO CREATE POSITIVE CHANGE FOR OUR
PEOPLE, CLIENTS AND SHAREHOLDERS
BY BUILDING AND PROTECTING BRANDS,
REPUTATIONS AND BUSINESS.

SEC Newgate S.p.A. - Annual Report 2019

Our Financial Highlights

2019 results include the consolidated results of SEC S.p.A. until 3 September 2019 and the
consolidated results of the enlarged SEC Newgate S.p.A. for the final four months of 2019. This
coupled with the change in accounting treatment under IFRS16 (which primarily impacts the
treatment of leases in our case) means that the relevance of the prior year’s results is limited.

Our financial highlights are (€’000):

Revenues

Gross profit

Operating profit

Profit before Tax

Net debt (excl. leases)

2019

47,550

37,605

1,812

1,271

8,740

2018

28,972

22,192

2,309

2,211

1,743

• Annualised cost savings of c. €0.5m

• New banking facility of €3m secured with

achieved within first four months following
merger.

Deutsche Bank S.p.A. to replace Revolving
Credit Facility with Clydesdale Bank to
Porta Communications in 2017; preferable
terms and no covenants reflecting
improved financial stability of the Group.

Cost savings
• Immediately following the merger, the

Group’s management team started work
on driving revenues and delivering costs
synergies. Among the first areas identified
for improvement were the operations and
functions at the UK headquarters (Porta
Communications). These were streamlined
and this resulted in c. €0.45m of net
annualised savings in terms of employment
costs. The refinancing of the Revolving
Credit Facility provided by Clydesdale
Bank to Porta Communications Plc in 2017
was replaced by a new 48-month facility.
This was provided by Deutsche Bank with
interest payable quarterly at 3-month
EURIBOR (with a floor at 0%) + 1.70%;
this action resulted - based on current
exchange, LIBOR and 3M EURIBOR rates
- in yearly savings of approximately €70k
per annum.

• The management team is continuing to
work on other areas of potential savings,
primarily related to the UK and Italian
offices; if achieved, these would further
improve the Group’s margins.

SEC Newgate S.p.A. - Annual Report 2019

Our Operational
Highlights

Branding
The Group was renamed SEC Newgate S.p.A
on 4 September 2019.

Governance structure
Shortly after the merger, the Group’s
governance framework was established:

• The Board – the new Group board
appointed (see pages 62-65) is
focused on overall control and financial
management tasks, it meets 11 times
a year.

• Executive Committee – the Committee
focuses on all key strategic operational
matters and comprises seven senior
managers from both original groups and
includes all the executive directors who
sit on the Group’s Board. The Committee
meets monthly and has been instrumental
in a number of key initiatives such as
the definition of the three-year Strategic
Plan, and the formation of strategic
committees in areas such as positioning
and marketing.

• Management Committee – comprises all

agency heads and focuses on the Group’s
global commercial effort. Its scope is to
implement the global strategy, adapting
it for each region. It first met in November
2019 after the approval of the Strategic
Plan by SEC Newgate’s Board. A two-day
meeting was held at the Group’s HQ in
Milan where the priorities, targets and
strategies were shared for both global
and local levels. The Committee set the
rationale for the Group’s positioning,
discussed the global service offerings and
innovative tools, as well as how best to
manage and train our talent under the
new global framework. This Committee
meets twice a year (once in person and
once virtually). The exceptional event of
the Covid-19 pandemic resulted in virtual
meetings being held every three weeks
from April 2020.

OUR GOAL

TO BE THE MOST DESIRED
COMMUNICATIONS
AGENCY IN THE WORLD.

Best practice sharing
and cross selling initiatives
• A consistent feature of the output from the
Group’s new executive committees is the
sharing ways to improve best practice and
commercial capabilities across the Group.
Some of the key decisions taken (and
approved by the Executive Committee)
before the end of 2019 included:

Best practice

– The reorganization of a central

commercial function reporting directly
with the Group’s CEO

– The launch of two permanent committees

focused on positioning and marketing
issues respectively

– Creation of a log of all the products and

services offered by every agency at each
location (operation on going)

– Definition of a global case history

template and collection of credential
decks from each of the Group’s agencies
(action to be completed by Q2 2020)

KPI setting
• The Group’s Strategic Plan includes specific
targets for each agency at a Group level
such as: Gross Profit (GP) and Profit Before
Tax (PBT). These targets were set over the
next three years (2020-2022) and subject to
yearly update/revision. Growth KPIs for 2020
were +3.5% in terms of GP and +3% for PBT

Customer wins
and retention rates
• Every one of the Group’s agencies has

benefitted from the synergies and enlarged
scale that the merger delivered. Examples
of significant new business wins include
Amazon and Bridgestone in France, Apple
in Hong Kong, Avexis Pharma in Belgium
and Aia the major poultry business in Italy

• Client retention rates have remained stable

Geographical
expansion
• Establishment of a start-up operation in

Morocco; the first step in SEC Newgate’s
plan to achieve a strong presence on the
African continent

Product & service
innovations
• AI investment in excess of €1.2m completed
and soft launch of AI tool to clients in Italy

• Definition of new global offerings such as
seamless crisis communications, internal
communications, international trade
diplomacy, research and ESG under the
coordination of a global practice leader

Cross selling

– Significant new business has been

generated from cross referrals such as
Italian real estate listed company COIMA
and Nestlé’s Baci Perugina brand both
cross selling from Italy to other entities in
the Group. Some of these actions were
completed during Q1 2020 while some
others are still under development given
their ongoing nature

– The following are examples of some of the

most significant events:

- Nomination of a network of commercial
back stops across the whole Group to
tackle joint new business opportunities

- Definition of a tracking tool to record

all new business and commercial
opportunities at each operation level

- Tracking of all agencies’ client lists to

address new business approaches towards
clients existing in some market/regions
aiming at promoting SEC Newgate on a
global scale (action to be completed
by Q2 2020)

- Identification of international corporations
to target to secure introductory meetings
(action to be completed by Q2 2020)

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

Chairman’s
Statement.

It is a rare opportunity to be
able to bring together two like-
minded groups with entirely
complementary geographical
footprints, products, services and
client bases. It is even rarer to find
that they share a similar culture,
outlook and passion to succeed.
This is what was achieved on
3 September 2019 through the
merger of the two AIM-quoted
companies, SEC S.p.A. and
Porta Communications Plc
(whose primary trading business
was Newgate) and the creation
of SEC Newgate S.p.A.

2019 was truly a transformational year.
The Group is now of a scale to provide
research backed strategic consultancy and
advocacy services seamlessly across our
extensive, owned footprint in five continents
with 34 offices in 15 countries and with the
professional support of nearly 600 people -
global excellence through local experts.

IT IS A RARE OPPORTUNITY TO BRING
TOGETHER TWO LIKE-MINDED GROUPS
WITH ENTIRELY COMPLEMENTARY
FOOTPRINTS, PRODUCTS, SERVICES
AND CLIENT BASES.

14
14

15
15

John Foley

SEC Newgate S.p.A. - Annual Report 2019

Financial
and Operational
Overview

Our 2019 results were in line with management’s expectations which were formulated as part
of the merger evaluation process. Prior year comparisons only include results of the previous
SEC S.p.A Group; results for the year ended 31 December 2019 only contain four months of the
enlarged Group’s trading performance. Results for the year ended 31 December 2019 also
reflect the impact of IFRS16;

Our financial highlights are (€’ 000):

Revenues

Gross profit

Operating profit

Profit before Tax

Net debt (excl. leases)

2019

47,550

37,605

1,812

1,271

8,740

2018

28,972

22,192

2,309

2,211

1,743

• As at 31 December 2019, the Group’s net

debt was €8.7m

• Annualised cost savings of €0.5m achieved

within first four months following merger

• New committed banking facility of €3m
secured with Deutsche Bank S.p.A. to
replace Revolving Credit Facility with
Clydesdale Bank to Porta Communications
in 2017; the new facility has preferable
terms and no financial covenants
reflecting the improved financial stability
of the Group

Strategy

On 21 November 2019, we announced that the SEC Newgate Board had approved the new
Group’s Strategic Plan for the years 2020 to 2022. Our Plan will be updated annually and will be
our navigation system to direct towards financial results which we are confident we can achieve.
The core areas in our Plan are:

• Improved profitability and strengthening of

• Establishing centres of excellence around

the balance sheet

• Cultural integration and harmonisation

of SEC and Porta organisations, now SEC
Newgate

• Raising of the Group’s visibility and

reputation worldwide

• Developing a carefully selected acquisition

plan to strengthen and increase
capabilities in key markets

• Implementing incentives and reward

schemes to retain key talent

• A focus on high margin and/or high growth
opportunities across our global footprint, as
defined by service offering and geography

practice areas where the Group has
market distinguishing expertise or where we
anticipate significant growth opportunity
– (social and market research, global 24/7
crisis communications offering)

• Investing across the Group in our digital

offering with a particular focus on AI, hiring
people with non-traditional communication
backgrounds and expanding our digital
toolkit

• Seeking to lead the market at the interface
of business, politics, markets and media,
our proven methodology is based around
objective research, which guides strategy
and campaign development and
implementation

IN NOVEMBER 2019, THE
BOARD APPROVED THE NEW
GROUP’S STRATEGIC PLAN
FOR THE YEARS 2020 TO 2022

SEC Newgate S.p.A. - Annual Report 2019

Board Changes

Following completion of the merger, the
Board now comprises, six executive and four
non-executive directors; a full list of directors
who were all appointed to the board in
September, is set out on pages 62-65.

Subsequent to this, Federico Vecchio was
appointed non-board Group CFO with effect
from 30 September and Andrea Cornelli was
appointed to the board as Chief Innovation
Officer with effect from 9 December 2019.

People

I would like to thank our wonderful team
whose hard work is equally matched by
their ambitions. It has been a year of
positive change and our success would
not be possible without the commitment
of everyone across the organisation at
every level. We are proud of the diversity
we benefit from across our teams and are
committed to ensuring that our team reflects
the diversity of the communities we are
communicating with.

Post Balance
Sheet Events

On 25 February 2020, SEC Newgate secured
a €2.5 million convertible bond with the
Spanish institutional investor Inveready
which was subscribed on 4 March 2020.
Additionally, the subscription of another
€1 million facility with a leading Italian bank
in February 2020 and the refinancing of
Clydesdale facility in December 2019, the
Group has committed banking facilities
available with maintainable covenants and
continues to enjoy excellent relationships with
its lenders to support the Group through this
difficult period.

Acquisitions
& Disposals

On 15 November 2019, SEC Newgate, via
subsidiary Newgate PR Holdings Limited,
acquired a further 5% of the equity in
Newgate Greater China under the terms
of the shareholders’ agreement for that
business.

On 4 December 2019, SEC Newgate
established a new office in Morocco under
the brand Cambre Maroc.

Markets and the
Environment

There were a number of external national
factors during the year that impacted our
agencies such as Brexit, Elections and the
ongoing civil unrest in Hong Kong. Our
businesses have, however, showed their
resilience, as evidenced by Newgate
Australia where the business experienced a
significant uplift in trading at the conclusion
of the May 2019 Federal election.

Since the outbreak of the global pandemic,
Covid-19, the Group’s agencies have all
implemented business continuity plans,
working remotely under varying levels of
lockdowns in their markets around the world.
The Group has taken all necessary steps to
reduce any discretionary spend and ensure
strong cashflow generation whilst ensuring
it continues to develop and support its
600 people around the world, service its
clients and build market share. The Group
continues to operate profitably with teams
working collaboratively and sharing best
practice initiatives and experiences. All
businesses have quickly adapted to the
changed working environment and continue
to provide first class service to clients through
online and digital engagement capabilities.

On 6 April 2020, the Group announced the
appointment of Sergio Penna as Group
Financial Officer. This followed the decision
of Federico Vecchio to step down from
the role for personal reasons. Mr Vecchio
was not a member of the Group Board. Mr
Penna will join the Group on 1 June 2020 in
order to ensure an effective handover with
Mr Vecchio, who will be leaving on 30 June
2020. It is intended Mr Penna will join the
Board of SEC Newgate during the Autumn
of 2020. Mr Penna qualified as a chartered
auditor in 2005 with Mazars S.p.A. and holds
a degree in economics from Luigi Bocconi
University in Milan. He brings to the Group
extensive financial experience gained in a
number of multinational organisations.

Outlook

The Group formulated its three-year Strategic
Plan after extensive dialogue had taken place
amongst our senior management team. The
creation of a new Group, which is already
within the top 30 global communications
service providers, is a great opportunity to build
a strong, profitable Group for the benefit of all
our stakeholders.

Covid-19 certainly makes it harder
to achieve our goals and we recognise that
timescales may need to change from the
original plan. However, the direction of travel is
clear to us and that certainty will prove to be
of great benefit especially in uncertain
economic times.

The first quarter of 2020 started very
well, and the Group’s profitability
was ahead of our budget.
The Group’s liquidity position
is strong enough to withstand
uncertain business demand for the
foreseeable future. Our acquisition
plans can be scaled accordingly
to reflect the availability of finance.
We therefore remain confident and
enthusiastic about the prospects for
the recently enlarged Group.

John Foley
Chairman
28 May 2020

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

ACROSS OUR GLOBAL
FOOTPRINT WE ARE
BUILDING A DISTINCTIVE
BUSINESS MODEL THAT
CREATES VALUE WITHIN
OUR GROUP.

20
20

21
21

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

Chief Executive’s
Review.

I WOULD LIKE TO THANK
OUR WONDERFUL PEOPLE
WHOSE HARD WORK IS
EQUALLY MATCHED BY
THEIR AMBITION.

Fiorenzo Tagliabue

22
22

23
23

Group Chief
Executive’s
Review

4 September 2019 was a historic milestone
marking the creation of a fresh and exciting
entity in strategic communications on the
world stage. SEC Newgate, the merger of SEC
S.p.A. and Porta Communications Plc, brought
together two strong and successful businesses
with complementary skill sets to create a top
30 global brand with ambitions to become a
world leader.

As the Chairman has noted in his introduction,
2019 was indeed a crucial and very
significant year in our combined history. As a
consequence, today SEC Newgate ranks 26th
in the PRovoke (formerly Holmes Report) 2020
Global Top 250 PR Agency Rankings which
was released at the beginning of May. It is an
impressive result that exceeds the estimate we
made at the time of the merger in September
last year. Since we began working as a
combined group, both former entities have
benefitted through increased scale and
reach, as well as shared experience and
expanded services in every region. Reaching
the 26th position from 53rd in 2019, is a long
journey to have made within a single year.
Today’s table, in fact, demonstrates that all
the potential we identified in the merger is
already bearing fruition, turning the rationale
and reasons behind the deal into concrete
facts and growth.

After successfully bringing together the two
entities and some early achievements as a
united group, within months the world was hit
by Covid-19. As a result, it would be remiss of
me not to reference the current year, at the
start of my statement, given its significance to
us will undoubtedly be as crucial as the prior
year given it is the greatest crisis the whole
world has faced in decades.

SEC Newgate S.p.A. - Annual Report 2019

Covid-19
outbreak
and our business

The Covid-19 outbreak has refocused our
attention and efforts from our original plan
onto delivering the best response and
preparing the Group for the aftermath
of the pandemic. Whilst, at this stage, it is
almost impossible to predict and measure
with any certainty what the overall impact
of this emergency will have on our industry
and more specifically on our business, across
our agencies, we responded quickly and
implemented a consistent set of protective
measures and new initiatives.

These measures were our top priority and
once we had achieved our primary objective
of ensuring the safety and wellbeing of our
people, I am pleased to say all operations
successfully applied technology and
embraced home working with positivity
and a significant amount of creativity.

LOCAL.

NATIONAL.

INTERNATIONAL.

The main goal of our emergency measures
programme was to define a strategy to
put a ‘handbrake’ on spending across
all our operations. The aim was to secure
savings, protect the Group’s cash position
and liquidity, assess costs and renegotiate
payment schedules wherever possible.
Moreover, we are taking advantage of all
the initiatives offered by different national
governments to help companies facing this
crisis with the objective of reducing costs,
preserving liquidity and being well positioned
for the recovery. This sound strategy was also
underpinned by a number of key principles
such as enhancing our service delivery
levels to support our clients while protecting
jobs to maintain a focus on commercial
opportunities for both the crisis and recovery
period ahead.

I am confident the Group will
navigate these difficult times
safely and with a united and
shared vision. It is clear the
quality and level of our response
has benefitted from the strong
foundations established as a result
of the incredibly positive work
during Q4 of 2019, shortly after the
merger was completed.

The scale of our efforts has prepared us well
to tackle 2020 – the first full operational year
for the new Group. We have in place a
clear vision and sound foundation to move
forward.

2019: preparing
for the future of
our new Group

From 4 September, the new governance
structure became effective: the board
of directors comprises four non-executive
directors, including the Chairman, John Foley,
and six executive directors, some of the key
Group’s managers: Emma Kane, Tom Parker,
Brian Tyson were appointed Deputy Group
CEOs and Mark Glover, Andrea Cornelli and
Anna Milito as Executive Directors. Eric Giuily,
Chairman of CLAI, the French partner, now
chairs the Group’s Management Committee
on which all the regional Managing Directors sit.

Our senior team was ready to hit the ground
running in 2020, our first full year together, and
roll out our business strategy and engage with
the market. During the last quarter of 2019, the
management team focused on three areas of
activity:

• Drafting a three-year Strategic Plan for the

years 2020-2022

• Identifying all synergies and savings to be
implemented within the shortest timeframe

• Setting a development plan to improve the
Group’s footprint in strategic markets that
were missing at the time of the merger

The Strategic Plan was approved on 5
November after extensive discussion with
the management team. The Plan provides
the Group and its subsidiaries with a roadmap
to establish SEC Newgate in the top 20 global
PR groups in the world. The Plan’s main focus is
increasing profitability from the first full financial
year. The Plan includes detailed targets,
the strategy by which we meet those targets,
namely organic growth, improved efficiency
and acquisitions, and the human resources
policies by which we manage and reward
our staff. Outside the company it will be the
main tool used to promote a new offering
to the market.

The majority of the Plan is in the process
of being implemented and is driving the
Group’s activities, despite the Covid-19
emergency.

On the synergies and savings side, the
work was immediate and extensive. Results
were not limited to short term savings, with
emphasis also on medium term issues in order
to generate the greatest possible impact. In
the short term, the substitution of the Porta
credit facility with Clydesdale to a new one
secured with Deutsche Bank S.p.A. that
offered lower interest rates, cancelled all
covenants and released security over Porta
subsidiaries’ shares is worthy of mention.
In the medium term, an example worth
mentioning is the proposed merger of our
UK operations Newgate and Newington into
the Group’s primary London offices in
Basinghall Street. This will be executed once
the Covid-19 lockdown is behind us.

Finally, regarding the acquisition
strategy the aim is to fill in gaps in
SEC Newgate’s global footprint,
beginning with the US, key markets
in the Far East and expanding into
Africa, which has commenced
with the establishment of a new
entity in Morocco. In addition to
these targets, the strategy seeks
to improve and strengthen the
Group’s presence in several of
our existing key geographic areas
such as Latin America, the Middle
East and Greater China.

Due to Covid-19 investments have, however,
been put on hold with the significant
exception of the US given the crucial
strategic nature of this market. Discussions
are consequently still ongoing with potential
partners there.

For our Greater China offering, we are
continuing our search for a potential key
individual to enable the business to fully
exploit our well-established presence in Hong
Kong, Shanghai and Beijing.

SEC Newgate S.p.A. - Annual Report 2019

A distinctive
business model

Across our global footprint we are building
a distinctive business model that creates
value within our group while recognising that
our world of peer-to-peer communication
requires flexible partnership and networks
to mobilise the expertise our clients’ need.
Based on the peer-to-peer relationships
with our clients, we seek to be advisors and
partners rather than just another service
provider. Coupled with our unique culture,
we are a group of entrepreneurs and local
business leaders that value difference and
embrace diversity. Our focus on building
leadership in emerging areas that are
profoundly changing communication e.g.
AI, market research and political risk puts
us on an exciting and ambitious path that
differentiates ourselves in the market.

We have prioritised the development of
proprietary technologies, research and
analytics in which we have made significant
investments over the recent years, such as:

• The Artificial intelligence platform in Milan

• The new release of the “EUessential” app in

Brussels

• The rollout of Australia’s Newgate Research

business into the UK and Europe

The intelligence and the broader tool
base that these have generated will
further strengthen our competitive edge.
In particular, the application of Artificial
Intelligence models to our core services, are
now going through the pre-sale testing phase
and are already beginning to generate
promising results.

More broadly, the commercial strategy is
being implemented across three parallel
pillars:

• The commencement of a Group marketing

plan

• Growth in inter-company business and

cross-selling

• Raising awareness among larger potential

clients at a global level

At the end of November 2019, the first
Management Committee took place at
the Group’s Milan headquarters, bringing
together managing directors from across the
Group’s operations. At the summit, internal
discussions were held with the aim of refining
the position and mission for the Group, to
set commercial strategy and build a plan to
leverage all the skills and know-how across
our 34 offices, in the 15 countries where we
operate.

Post Balance
Sheet Events

Since the year end, in line with the objectives
set out at the time of the merger and
reiterated in the Strategic Plan, the Group
has been successful in:

• Restructuring its €3 million debt facility with

Unicredit Bank

• Negotiating a new loan facility with BPM

Bank, an Italian Financial institution, that is
worth €1 million

• On 25 February 2020, SEC Newgate

secured a €2.5 million convertible bond
with Inveready Convertible Finance Capital
I FCR with a maturity of seven years from
issuance, with interest payable quarterly at
3.50%

Outlook

The Group’s growth plans, both organic and
by acquisition, remain contingent on the
Group’s ability to achieve the positive results
expected from the implementation of its
Strategic Plan in the year ahead.

Q1 2020 numbers are positive, but as with the
wider economy Covid-19 will have an impact
on the business. Steps to reduce our exposure
and reposition our offering within this context
have been proactively taken as previously
mentioned.

As we grow, our vision is getting
more clearly focused: to build a
worldwide group that pairs the skills
of our talent with the strength of
technology to be at the side of our
customers to increase, measure
and defend their reputation.

We believe that the Covid-19 crisis will bring
significant and lasting changes impacting
everyday life, the way we work as well as the
communications industry itself. However, with
our strength of culture and resilient attitude,
openness to change and innovation, and
forward-thinking business model, we are
confident we will not only cope with this
change but will be ready to move forward
with strength and a positive outlook.

Fiorenzo Tagliabue
Group CEO
28 May 2020

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

Group
Agencies.

TOGETHER WE CREATED A TOP 30
GLOBAL COMMUNICATIONS GROUP
WITH APPROXIMATELY 600 SEC NEWGATE
ENTREPRENEURS BASED AT 34 OFFICES, IN 15
COUNTRIES AND FIVE CONTINENTS – FROM
LONDON TO SYDNEY, FROM MILAN TO
BOGOTA, AND BERLIN TO SHANGHAI.

Chief Executive’s
Review.

28
28

29
29

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

SEC Newgate S.p.A. - Annual Report 2019

ASIA PACIFIC

NEWGATE AUSTRALIA
ACHIEVED ITS HIGHEST
EVER NET REVENUE OF
AUD$21.4 MILLION.

On the business front, providing
communications for the delivery of large
infrastructure projects continued to be a
significant part of the business – Sydney
Metro, Cleanaway Energy from Waste,
Snowy Hydro 2.0, one of the world’s largest
pumped hydro renewable energy projects
amongst our biggest clients of 2019. After
a slow start leading up to the two major
elections (NSW in March and Federal in
May), the return of the incumbent political
parties signalled a back to business surge in
new client projects and increased activity
on those that were in a pre-election holding
pattern.

The Financial Communications team had a
very strong year as well taking advantage
of an uptick in M&A activity post the
elections. A key cross border transaction that
reflected the benefit both of our network
as well as our integrated offering was a
highlight of the year. Working for Mengui,
a Hong Kong listed Chinese company with
significant state-owned shareholding, we
managed to gain FIRB approval for the
takeover of two Australian companies in the
beverage industry. Continuing from our 2018
performance we were again represented
(alongside our colleagues in Singapore and
Hong Kong/China) in the Holmes Report
APAC Financial Communications and
Merger Market awards.

Newgate Research continued to develop
new products, with a specialised social
media audit product and undertook a large
piece of research into the ABC, Australia’s
national broadcaster.

A large crisis brief for one of the major
domestic banks in November and December
turned a historically breakeven summer
Christmas period profitable.

Looking forward, the strong finish
to 2019 has led to a strong new
business pipeline into 2020 with a
large stakeholder engagement
project for Air Services Australia and
the opening of a new stadium in
North Queensland.

We assisted the Minderoo Foundation
which is independent, forward thinking and
seeks effective, scalable solutions and one
of Asia’s largest philanthropies, with AUD
$1.5 billion committed to a range of global
initiatives. We also supported a number of
companies advancing the Uluru Statement
on constitutional recognition of Aboriginal
and Torres Strait Islanders.

On the pro-bono front, we continued to
support a number of organisations including
Thrive, Ovarian Cancer Australia, Aurora and
the Clontarf Foundation.

Deputy Group CEO
Brian Tyson

Australia

Newgate

Newgate Australia achieved its highest
ever net revenue of AUD$21.4 million in the
sixth year of its operation as the leading
integrated communications company in the
Australian market.

With the addition of an Adelaide office, the
business now operates out of six offices across
the continent (Sydney, Melbourne, Canberra,
Brisbane, Perth and Adelaide) with total staff
numbers now over 90.

30
30

SEC Newgate S.p.A. - Annual Report 2019

Greater China
Newgate

Newgate’s business in Greater China had a
slow start to 2019, as trade tensions between
the US and China noticeably impacted
corporate investment activity and decision
making. This situation worsened in the
middle of the year when protests in Hong
Kong cast a further shadow over investment
decisions involving assets or businesses in the
city. In particular this caused much work
on M&A deals and lucrative brand-building
mandates, which the company had won,
either to be halted mid-process or
indefinitely postponed.

Notwithstanding this exceptionally tough
trading environment the Hong Kong business
achieved a single digit profit margin for
the full year, particularly benefitting from a
marked improvement in performance in the
second half when it won several new retainer
and project mandates, across a diverse
range of areas including litigation, private
equity and government relations.

Notable new mandates for the Hong Kong
office included work for funds in connection
with a fraudulent creditor default in Vietnam,
litigation support for a global fashion brand
around intellectual property abuse in
China, work in China for insurance group
AXA, whom the company supported on
its acquisition of Tianping and with a major
corporate brand-building campaign,
research work for Apple, as well as a
variety of projects in the technology
and fintech sectors.

In Shanghai, however, the business was
unable to gain traction beyond a few small
mandates and consequently incurred
significant losses. Since the year end this
situation has resolved itself with the departure
of the Shanghai office head, allowing the
company to stem those losses and focus on
identifying new leadership for that business
with the necessary network, skills and
experience required to establish a
successful offering.

ADVISED ON SOME
OF THE LARGEST M&A
TRANSACTIONS
FOR THE YEAR.

We also advised on a number of privatisation
bids, as well as on the successful restructuring
of one of the largest regional property
groups. Also building on experience from the
past year, we advised on another successful
bond issuance during the middle of 2019.

On the corporate communications front,
we further diversified our service offering to
our core groups of real estate and financial
services. During the year, we also won a
number of new litigation support and crisis
communications mandates.

With the advent of Covid-19
and an effective shut-down of
all relevant business activity in
China the timing of this significant
reduction in cost has enabled the
firm to avoid the significant losses
being experienced by many others
operating in that market.

From a broader regional perspective
Newgate continues to be recognised for the
quality of its work, being shortlisted for the PR
Week Asia-Pacific PR Consultancy of the
Year award.

Singapore
Newgate

In 2019, Newgate Singapore continued
to build on its track record as the leading
communications advisor on capital markets
transactions, advising on a number of high-
profile M&A, fundraising and shareholder
engagement mandates during the year.
Towards the end of 2019, we decided to
consolidate some of our service and product
offerings, as well as restructure part of our
team, with a view to increasing our digital
and research capabilities and staffing
in 2020.

Building on the experience we gained from
advising on the first, ground-breaking merger
of two Singapore-listed REITs in 2018, we won
two additional mandates during 2019 for
mergers of other Singapore-listed REITs, which
were amongst the largest M&A transactions
for the year.

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

SEC Newgate S.p.A. - Annual Report 2019

EUROPE,
MIDDLE EAST,
AFRICA.

FROM A BROADER REGIONAL
PERSPECTIVE NEWGATE CONTINUES
TO BE RECOGNISED FOR THE QUALITY
OF ITS WORK, BEING SHORTLISTED
FOR THE PR WEEK ASIA-PACIFIC PR
CONSULTANCY OF THE YEAR AWARD.

Deputy Group CEO
Tom Parker

Abu Dhabi

Newgate

Newgate Abu Dhabi, in its sixth year,
experienced a shifting market environment
in the Middle East region. Despite this, the
agency was successful in winning some
prestigious client accounts: United Nations/
World Urban Forum, the UAE Embassy to
China and Abu Dhabi Securities Exchange.

These client wins resulted from a concerted
effort emanating from a strategic plan
focused on driving growth and profitability in
areas where the agency has true expertise
and a proven track record - expanding the
agency’s core business with Government
entities; developing business opportunities
cross border; and, consolidation of the
agency’s team of experts.

Belgium and EU
Cambre

2019 was a year of consolidation for Cambre,
after a challenging 2017 and recovery in
2018. Cambre experienced a steady flow
of new business across sectors and retained
or grew existing client assignments (notably
in the external relations and trade areas).
The tech, trade and energy practices
gained market recognition and association
management services are back on track.
Sustainability and competition practices are
emerging and look promising for 2020. The
SEC Newgate launch upped the agency’s
profile and drew attention to its global
footprint.

The consultancy’s fee income was
significantly ahead of the prior year and
ahead of forecast; EBITDA also almost
doubled. Covid-19 aside, the outlook for
2020 is good and the focus will be on reviving
Cambre’s healthcare practice, showcasing
its climate/sustainability expertise, including
strengthening its chemical industry practice
and enhancing its digital capabilities.

France
CLAI

Despite a slow start to 2019, activity levels for
the last nine months of the year rose and the
recovery was such that the last quarter was
40% ahead of the first quarter. The decisive
action taken by the team to reduce costs
resulted in significant improvements year
on year at both EBITDA and gross margin
levels. Key highlights for the year included
winning long-term contracts from Acoss
(the financial agency for all public welfare
institutions in France), ANSM (the public
agency controlling medicines), and being
hired by prestigious international clients
such as Amazon, International Papers and
Bridgestone.

“How to make others speak
for yourself”, a book written by
Elisabeth Coutureau and Eric Giuily,
which explains and develops their
specific strategic approach to
communication, the “Corporate
Advocacy ®”, was published in April
and received widespread, positive
endorsements in the media. It is now the key
element of the agency’s marketing strategy
with a “Monthly point of view” published on
the agency’s blog.

3434

SEC Newgate S.p.A. - Annual Report 2019

Germany
Kohl PR

2019 marked the turnaround of the agency
following a difficult situation in 2018. The
agency was repositioned with the change
of its General Manager, a new corporate
design and the recruitment of new high-
profile senior consultants. These actions laid
the foundations for positive developments
in 2019 and triggered new business
opportunities.

A number of important new assignments
were secured and the financial situation
recovered despite the strained economic
situation in Germany due to market
insecurities relating to Brexit and strained
international trade relations.

New client wins included Edwards
Lifesciences and Blauer Engel and 12 project
assignments. As a result, the consultancy
was profitable on revenues significantly
ahead of the prior year supported by a
reduction in operating expenses.

Italy

SEC celebrated its 30th anniversary in 2019,
in the same year that the group merged
to create SEC Newgate whilst retaining its
premium market positioning in Italy and with
revenues significantly ahead of the previous
year. Across the different local businesses
highlights included: SEC Mediterranea S.r.l
saw significant improvement in top and bot-
tom line financials through projects such as
the Edison Group IGI Poseidon gas pipeline
project; SEC and Partners S.r.l worked on
major projects including LVMH, the ongo-
ing dispute between Vivendi and Telecom
Italia and the acquisition of ABB solar in-
verter business by Fimer; SEC & Associati
S.r.l delivered a positive performance from
both ongoing and new clients, much of this
growth coming from the agency’s expan-
sion in the ICT and Health sectors; Finally, HIT
S.r.l. significantly improved performance in
2019 with activities including ongoing work
at Milan Malpensa and Linate airports and
services in La Triennale.

Other key highlights during the year
included: Management of significant
infrastructure (Terna, A2A) and urban
requalification projects including being
appointed by AC Milan and FC Inter to
advise on community relations; handling
major crisis communication situations such
as restructuring at Ikea and the rail disaster
for Trenord; financial communications
for organisations such as the Chartered
Accountant fund; and client wins for brands
such as Maxi Zoo and Autotorino. Our
events business successfully handled the
Linate Air Show on behalf of SEA, the airport
management company in Milan, attended
by over 200,000 people.

2019 was also a crucial year
with respect to the finalization of
our Artificial Intelligence based
proprietary tool to deliver new to
market applications for reputation
and advocacy services. Closing
a very time-consuming project
initiated nearly two years ago, and
with an investment of nearly €1.5
million, we ended 2019 ready to
pre-market test the first applications
at the beginning on 2020.

Along the same path of innovation and
digital integration, at the end of 2019 a
dedicated team of PR, digital and visual
professionals underpinned by software
engineers was incorporated to create a
new business division named Accelerate.
The team took on board staff and know-
how from our existing event division which
had, earlier in 2019, incorporated the staff
and business of Curious Design, our visual
and content agency which was liquidated
at the end of the year. This large and
multidisciplinary team will work across all
divisions to develop innovative integrated
solutions in the digital, brand experience and
e-marketing fields for organisations that aim
to improve their engagement capabilities.

Morocco

Cambre Advocacy Maroc was established
on 4 December 2019 following a successful
initial project with Cambre supporting the
Kingdom of Morocco in engaging with the
European Union. The new agency is owned
by SEC Newgate and AvantScene, the
leading event and communications agency
in Morocco. The agency is led by Driss
Benhima, former member of the Moroccan
Government and former CEO of some of the
biggest state-owned companies in Morocco.

The agency is focused on strategic
communications and advocacy for public
and private decision makers in Morocco
as well as consultancy services to foreign
investors and organisations wishing to
focus on Morocco, the wider French
speaking Africa market and those who
need assistance with their stakeholder
engagement programmes.

Poland
Martis Consulting

In 2019 Martis focused on crisis consultancy
in relation to the deepening decline
in trust in institutions and companies
operating on Polish capital markets. In the
wake of this crisis, which started with the
Get Back scandal, all those investing in
shares, bonds and investment fund units
suffered considerable losses. The agency’s
consultants provided communications
support to both banks and investment fund
companies, as well as distressed businesses.

The Company continued to develop its
research and market analysis activities and
published a report “Analysis of European
Public Listed Companies with (Partial)
State Ownership” in May 2019. The report
was very well received by the market and
commentators. It was published in both Polish
and English and included comments
of experts representing different SEC
Newgate Group companies.

In December 2019, Martis Consulting
presented the results of its second report
“Valuation of Polish Managers”. The
publication of this edition of the report was
widely covered in the nationwide media,
including on the front pages of two leading
general and business dailies “Rzeczpospolita”
and “Gazeta Parkiet”.

Spain

ACH

During 2019, ACH focused on restructuring
the business including the creation of a
market leading Digital & Creative team
focused on social media, influencer
campaigns, advertising and reputation
management. The agency continued to
be highly regarded for its Public Affairs and
institutional and media relations skills.

The agency was successful in securing new
client project mandates from organisations
such as Afinity, Knight Frank, ProColombia
and Silicones.

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

SEC Newgate S.p.A. - Annual Report 2019

UK AND AMER
(NORTH, CENTRAL
AND SOUTH AMERICA)

INVESTMENT IN MORE
SOPHISTICATED MANAGEMENT
INFORMATION SYSTEMS HAS
SIGNIFICANTLY ENHANCED THE
QUALITY OF THE WORK DELIVERED
AND HAS IMPROVED THE
PROFITABILITY OF THE BUSINESS.

Deputy Group CEO
Emma Kane

Colombia
SEC Newgate Colombia

The agency is now the second largest PR
agency in the country and, in 2019, was
successful in sustaining the growth it had
achieved in 2018.

Revenues were positively impacted by the
consolidation of the healthcare practice with
the entry of Sanofi Pasteur and Cruz Verde
which is one of the most important pharmacy
networks in the region.

The agency’s expertise in the extractive
industry was also strengthened as AngloGold
Ashanti and Continental Gold joined our
portfolio in the second semester.

The Brand PR business unit delivered strong
results through key clients such as Diageo,
Huawei and AB Inbev, with an increased
scope during the year.

In addition, the Creative and Digital unit
led important projects complementing our
service offer in the market.

The agency’s focus on generating new
business through international clients with
pan regional potential was successful and
will be a key focus for the business going
forward.

United Kingdom

The UK market remained challenging during
2019 due to the uncertainty surrounding the
timing of Britain’s exit from the European
Union. Despite this, the overall performance
of the majority of the UK agencies was
significantly improved on the prior year.

Newgate Communications

2019 was the first full year for combined entities
of the former Redleaf Communications,
Publicasity and Newgate Communications
which were all merged under Newgate
Communications in November 2018.

The focus during the year was very much on
improving bottom line performance rather
than purely on fees billed. A fundamental
branch and root review was undertaken
across all areas of the business following the
merger.

A new way of working, under one P&L was
implemented to ensure that the best team
for the client challenge is always used which
often comprises people working together
from across the agency, in different teams,
with different skill sets. This approach coupled
with investment in more sophisticated
management information systems has
significantly enhanced the quality of the work
delivered and improved the profitability of
the business – the combined business is now
trading profitably and margins are improving.

A strategic review was undertaken of
Newgate’s community engagement business
and new leadership was also put in place. This
business areas has since gone from strength
to strength winning numerous important
mandates included several significant
Development Consent Orders, an area in
which the agency has significant expertise.

New mandates secured during the year
included: Ballymore, JM Finn, Jury’s Inn,
Leonardo Hotels, Openreach, Urban & Civic,
and Vanguard.

The business is now trading profitably and has
a clear path continuing to drive performance
over the coming year.

3838

SEC Newgate S.p.A. - Annual Report 2019

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

Group CFO’s
Review.

This year, the creation of SEC Newgate,
which is the result of the merger of leading
European communications firm SEC with
Porta, has represented a turning point for the
entire Group, which can now rely on c.600
people working out of 15 countries and five
continents.

Following the merger, we have immediately
focused on aligning reporting procedures
throughout the enlarged Group and have
worked towards achieving savings, especially
with regards to the UK business and its
headquarters, where, after the merger,
€0.5m of net annualised costs were removed.
Moreover, thanks to the restructuring, even
before the merger, of the UK companies
during 2019 (which led to €0.8m of net
savings related to employment and other
operating expenses), these entities were able
to join SEC Newgate with a much stronger
and more profitable position.

We have also worked on our three-year
Strategic Plan, focusing on key goals for the
coming years including, but not limited to,
a return to profitability for the former Porta
group, cultural integration of the enlarged
Group and increased visibility and reputation
in the market which will represent our main
guidance for the coming years.

For the year ended 31 December 2019, the
Group delivered another year of positive
Operating Profits and Profit before Tax (PBT).
These figures are not easily comparable to
the prior year due to the implementation of
IFRS 16, the consolidation of the Porta Group
from 4 September 2019 and the full-year
contribution of our French subsidiary CLAI
(which was acquired in November of 2018).

Federico Vecchio

Newington Communications

2112

Newington’s revenues and thus profitability
were impacted by wider market issues and
a major client’s decision, at the start of the
year, to take its public affairs activity in-
house. The agency’s management team
took the necessary steps to reduce its costs
commensurate with the reduction in fees.
By the end of the year, fees had risen to
their target levels as a result of the team
securing significant new mandates across
all consultancy practice areas – for both
retained and project work.

New clients include Energy Networks
Association, Cadent Gas, Harlow and Gilston
Garden Town, Office of the Rail Regulator,
Keolis, Sodexo, Swansea University, Transport
for London and Taylor Woodrow.

Newington won the Public Affairs
Europe Award 2019 for its
campaign with the Crisis
Prevention Institute.

During 2019, 2112 Communications
continued to strengthen relationships with key
clients, attract new clients, build reputation
and expand capabilities to be able to deliver
exceptional creative solutions. The agency’s
client base was solidified by blue chip clients
such as HSBC Asset Management, Lombard
International Assurance, Alliance Bernstein,
T Rowe Price and The United Nations all
engaging 2112 during the year.

The senior management team was
strengthened with the appointment of
Andrew Golding in November 2019. Andrew
joined the agency as Head of Strategy and
Innovation and has been appointed to the
Board.

2112 continued to expand its reach and
increase its revenues from international
activities with the establishment of 2112
Asia, a joint venture with Hong Kong based
agency, Chord Asia.

The quality of 2112’s work was recognised
by receiving the award for best content
at The Financial Services Forum Awards for
Marketing Effectiveness 2019.

41
41

SEC Newgate S.p.A. - Annual Report 2019

Key financials

GROSS PROFIT
WAS €37.6M
(2018: €22.2M)

OPERATING PROFIT
WAS €1.8M
(2018: €2.3M)

PBT WAS €1.3M
(2018: €2.2M)

In 2019 we updated the Consolidated
Income Statement to disclose gross profit as
this is a measure used internally to monitor
our performance at a Group and subsidiary
level (please refer to the explanatory note
included in the Consolidated Income
Statement). Furthermore, we have moved
away from using EBITDA as a performance
metric since the transition to IFRS 16 on
1 January 2019. The main impact of IFRS
16 is to increase EBITDA in 2019 as the
rental expenses have now been replaced
by depreciation and interest which falls
below EBITDA. Given that the Group has
not restated comparatives for the 2018
reporting period, as permitted under the
specific transitional provisions, EBITDA is less
comparable between the years. For this
reason, and given that EBITDA no longer
includes a key operating expense (rentals),
our focus has shifted towards PBT. Further
details on the impact of IFRS 16 can be
found in note 33.

Gross profit was up by c. €15.4m with the
increase mainly attributable to the following:

CONSOLIDATION OF THE
NEWLY ACQUIRED PORTA
GROUP AND ITS SUBSIDIARIES
FROM SEPTEMBER 2019
(EXPLAINING C.70% OF
THE INCREASE)

FULL YEAR CONSOLIDATION
OF CLAI (ACQUIRED
IN NOVEMBER 2018)
(EXPLAINING C.20%
OF THE INCREASE)

ORGANIC GROWTH OF THE
OTHER COMPANIES WITHIN
OUR GROUP (EXPLAINING C.
10% OF THE INCREASE)

Employee expenses were up both in absolute
terms (by c. €10.8m, €8.8 of which related
to the consolidation of Porta entities) and
in relative terms when compared to GP (by
6%). This increase was partially due to the
fact that on average former Porta entities
had a much higher employee expense to
GP ratio (c. 78%, including however some
ceasing expenses as described in the section
“Subsidiaries Restructuring”) compared to
SEC companies (c. 56%). In terms of total
staff, the Group employed 592 people at the
end of 2019 (327 at the end of 2018).

Service costs were up by €2.2m (33% increase)
even though this class of costs has been
impacted by the implementation of IFRS
16 which has seen a decrease in rental
expenses (since the long-term lease effect
is now allocated to depreciation and
interest expenses). Most of the increase in
service costs is attributable to an increase
in overhead expenses (which include items
such as utilities, marketing expenses and
staff travel) which increased by almost
€2.3m in 2019. Also, other operating costs
(which include, among the others, listing
costs and software licences costs) have
increased in 2019
by c. €1.0m.

Whilst amortisation of intangibles
was in line with 2018 (€0.1m),
depreciation was €1.9m higher
than in 2018 mainly due to the
implementation of IFRS 16. After
performing impairment tests
on each of our subsidiaries, we
concluded that no impairment or
write-off was needed.

Finance expenses were up in the year;
however c. €0.5m of this increase was as
a result of the implementation of IFRS 16.
The other main reasons were a net loss
on foreign exchange movements by c.
€0.1m1 and an increase in Group financial

debts (part of which was as a result of the
merger). As part of the merger, there was
a deed of variation with Hawk in relation
to the deep discounted bond granted
to Porta Communications extending the
redemption date referred to in the bond
from 14 April 2021 to 14 April 2023 and, as
a consequence, to increase the nominal
value of the Hawk Bond to £4.8m. Whilst this
reduced the implied interest rate from 8% to
6% per annum the interest incurred on this
bond is now consolidated within the Group’s
results. Moreover, in December 2019, SEC
Newgate signed a new four-year €3.0m
banking facility with Deutsche Bank S.p.A.
which was used to replace the Revolving
Credit Facility provided by Clydesdale Bank
to Porta Communications Plc in 2017. There
has been a significant saving in terms of
interest expenses since the new facility has
an interest rate of 3-month 1.70%+EURIBOR
(while Clydesdale RCF had an interest rate
of 3.85%+LIBOR).

As a consequence of the comments
highlighted above, the Group PBT in
2019 decreased to €1.3m (40% fall on 2018).

Also the total comprehensive income
for the year, due to the items above
and also due to losses on investments held
at fair value (as a result of the revaluation
of Porta Communications shares held by
SEC before the merger) and losses on
exchange rates movements, registered
a decrease of c. €0.8m.

1Given the expansion of the Group and the increased interborder trading, the size of this movement is likely to occur
going forward

SEC Newgate S.p.A. - Annual Report 2019

Subsidiaries
restructuring

We are aware that some of our subsidiaries
have a huge growth potential and,
throughout 2019, we have been working on
setting up a clear strategy and the necessary
resources in order to deliver it.

Among these subsidiaries includes Newgate
Communications in the UK, which has
undergone significant restructuring, started in
2018 (when the merger between Newgate
Communications, Redleaf and Publicasity
happened) and completed towards the end
of 2019. In terms of net annualised savings for
this company (related to staff costs, one-off
expenses and other operating expenses),
management has been able to save c.
€0.8m in 2019, which, combined with the net
annualised savings realised in 2018 (c. €2.9m),
brings the total figure over the last two years
to €3.7m.

2112, another UK subsidiary, has substantially
completed its restructuring process, which
has been an ongoing activity which
started at the end of 2016. In particular,
the company has completely reshuffled
its management team and reduced its
staff numbers from 44 to 28, which has led
to a net annualised saving at the end of
2019 (compared to 2016 when the process
started) equal to c. €0.6m while focusing on
maintaining a constant level of fees.

Another company which has faced a
profound restructuring is our Spanish
subsidiary ACH SEC Newgate. Indeed,
starting from mid-2019, the local
management has implemented a strong
reduction of the company’s labour costs
(which are now c. 23% lower), incurring one-
off costs in terms of compensations. However,
also thanks to the creation of a Digital
& Creative department during 2019, the
company is now better positioned to be able
to return to profitability going forward.

2019 has also marked the
turnaround for our German
subsidiary Kohl, which, thanks to the
change of its General Manager,
a new corporate design and the
recruitment of a new high-profile
senior consultant has been able to
secure important new assignments
and recover its financial situation,
delivering a positive PBT in 2019
despite the strained economic
prospect in Germany due
to insecurities of the markets
regarding Brexit and burdened
international trade relations.

Post-merger, Porta Communications has also
undergone the first phase of its restructuring
process, which led to net annualised savings
of c. €0.45m. Management has decided to
simplify the operations and activities of this
company and this ongoing process, which
will continue into 2020, has the clear goal
to turn Porta Communications into a purely
centralised finance function for the enlarged
Group.

Finally, in Italy the Group also streamlined its
activities during 2019, with Della Silva (which
has not traded throughout 2019) and Curious’
(which has stopped its business activity in the
second half of 2019) operations and activities
now transferred to SEC Newgate.

Group finance
operations

Following the merger, we have focused on
improving the operating effectiveness of the
financial reporting within the Group to enable
the board of directors and management
to make quicker informed decisions based
on true underlying performance and data.
On top of that, the Group finance function
has immediately started to work on the
implementation of new processes throughout
the enlarged Group in order to align
reporting and facilitate the collaboration
among all the subsidiaries in sharing
information and best practice.

Whilst a significant amount of work has
already been done in terms of aligning the
management accounts reported monthly
by each subsidiary, the next step, in terms
of Group reporting, is to implement a new
consolidation system for the enlarged Group
in order to produce timely consolidated
reports and KPIs whilst also ensuring the
consistent use of the same chart of accounts
across the Group. This will result in a quicker
turnaround of information enabling decisions,
both internally and externally, to be made
more efficiently and timely.

WE HAVE WORKED ON
OUR THREE-YEAR STRATEGIC
PLAN, FOCUSING ON
KEY GOALS FOR THE
COMING YEARS.

Net debt

Following the merger in September 2019,
the Group’s debt position has reached a
considerable level (c. €8.7m of net debt as at
31 December 2019), even though a relevant
portion (£5.3m) of former Porta group’s
debt has been converted in shares upon
completion of the merger.

Besides what has been highlighted above
in relation with the Hawk discounted capital
bond, after the completion of the merger,
the Group has also focused on refinancing
the Clydesdale facility and it has been able
to do so in December 2019 thanks to a new
financing facility from Deutsche Bank S.p.A.,
which also allowed SEC Newgate to obtain
important savings in terms of interest. The
new facility has an interest rate of 3-month
EURIBOR (with a floor at 0%) + 1.70%, while
the previous revolving credit facility with
Clydesdale Bank included a margin of 3.85%
over a 3-month LIBOR.

The increase in debt outstanding, part of
which, as explained above, was linked to the
high level of Porta’s net debt pre-merger,
caused a negative net debt impact of
€7.0m. From a total capital perspective,
the merger and the movement in retained
earnings in the year have resulted in an
increase of c. 65% of total equity, which
when taken in conjunction with the net debt
movement, has caused the Group’s debt to
equity ratio to increase from 0.1 in 2018 to 0.4
at the end of 2019.

Whilst the Group is now in a better position
to compete in international markets, the
condition of the net debt position cannot be
ignored, and now that the merger is effective
it is the immediate focus of management to
improve and strengthen the Group’s capital
structure.

SEC Newgate S.p.A. - Annual Report 2019

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

Post Balance
Sheet Events

On 25 February 2020 SEC Newgate secured
a €2.5 million convertible bond which was
subscribed on 4 March 2020 by Inveready
Convertible Finance Capital I FCR and
Inveready Convertible Finance Capital SCR
S.A., each a fund set up or managed by
Inveready Asset Management S.G.E.I.C., S.A
(“Inveready”).

This convertible bond, together with the further
financing from an Italian bank secured in
February 2020, will help the Group in financing
the implementation of its strategic plan,
announced in November 2019, as well as in
supporting the Company’s working capital
requirements.

The convertible bond has a maturity of seven
years from issuance, with interest payable
quarterly at 3.50%. The bond, which has been
issued as 25 bonds with a nominal value of
€100,000 each and are freely transferable,
may be converted (at a conversion price of
approximately 55 pence per SEC Newgate
share) starting from the 3rd anniversary from
the issuance. If the conversion of any of the
bonds does not occur prior to maturity, an
additional non-conversion fee is payable by
SEC Newgate equivalent to a 2.5% annual
return on top of the interest paid.

Another important event which has impacted
the Group in the first few months of 2020
is the Covid-19 outbreak, which affected
markets all across the world. The Group and
its subsidiaries, after a good start to the year
in line with management expectations,
have inevitably been impacted by this,
mainly in terms of delays in cash receipts
and temporary suspension of contracts by
clients, even though normal origination and
execution activity has continued throughout
all the offices as far as possible.

All of the companies in the Group have
implemented specific actions to reduce the
impact of Covid-19 by using measures such
as reducing all discretionary spend in order to
cope with this extraordinary situation, as well
as taking advantage of all possible measures
provided by the governments around the
world.

As highlighted above, the Group has
the benefit of the recently issued €2.5m
Convertible Bond, together with available
committed banking facilities, with
maintainable covenants, and good
relationships with its lenders, as highlighted
by the new €3m four-year banking facility
with Deutsche Bank S.p.A. announced
in December 2019, to support the Group
through this difficult time.

Conclusion

Thanks to the actions already implemented
at the end of 2019, the Group is well
positioned to deliver operationally and
financially and, whilst Group management is
aware of the further improvements needed
in terms of processes and systems and of the
ongoing work needed to drive bottom line
growth together with top line growth, the
operating foundations of the Group are firm,
despite the short-term issues caused by the
Covid-19 outbreak.

In the short-term, our focus will be to
implement all necessary processes to
make the Group operate smoothly and
to potentially review the Group’s capital
structure to provide a solution that works for
both shareholders and other stakeholders
so that the performance and quality of the
underlying businesses can be converted in a
stronger bottom line.

Following the merger, we
are confident that the newly
established Group is now in a
much stronger position to improve
operating performances going
forward than it has ever been
before.

Federico Vecchio
Group CFO

28 May 2020

THE NEWLY ESTABLISHED GROUP IS NOW
IN A MUCH STRONGER POSITION.

47
47

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

Corporate
Governance
Statement.

AIM companies are required to comply
with a recognized corporate governance
code. SEC Newgate has chosen the Quoted
Companies Alliance (“QCA”) Corporate
Governance Code published in April 2018
for this purpose.

High standards of corporate governance
are a priority for the Board. A prescribed
set of rules does not itself determine good
governance or stewardship of a company
and, in fulfilling their responsibilities, the
Directors believe that they govern the
Company in the best interests of the
shareholders, whilst having due regard to the
interests of all the ‘stakeholders’ in the Group.

Details of how SEC Newgate addresses
the QCA Code’s ten key governance
principles are published on the Investors
section of the SEC Newgate website,
which can be found
www.secnewgate.com/investors

48
48

49
49

SEC Newgate S.p.A. - Annual Report 2019

Principal
Risks and
Uncertainties

The Group is exposed to various risks which
may affect its performance. The Group’s
management team performs regular
exercises to identify and evaluate new risks
facing the business as well as reviewing the
appropriateness and progress of previously
identified risks. The process is designed to
manage these risks and ensure all necessary
steps taken to mitigate them are considered
and undertaken in a timely manner. However,
no system of control or mitigation can
completely eliminate the risks inherent in
achieving the Group’s business objectives.
The existing risk management process
adopted by the Board of Directors can
therefore provide only reasonable, and
not absolute, assurance against material
misstatement or potential loss.

The Directors identified a number of risks and
uncertainties which they believe may affect
the Group’s ability to deliver its strategic goals
in the future. A list of these risks is summarised
below. This list does not purport to be an
exhaustive summary of the risks affecting the
Group, is given in no particular order of priority
and contains risks considered to be outside
the control of the Directors.

Additionally, there may be risks not mentioned
in this document of which the board are
not aware or believe to be immaterial, but
which may, in the future, adversely affect the
Group’s business and the market price of the
Company’s ordinary shares.

Before making a final investment decision,
prospective investors should consider carefully
whether an investment in the Company
is suitable for them and, if they are in any
doubt, should consult with an independent
financial adviser authorised under FSMA
which specialises in advising on the acquisition
of shares and other securities in the UK or
another appropriate financial adviser in the
jurisdiction in which such investor is located
who specialises in advising on the acquisition
of shares and other securities.

The below scale has been used to indicate the estimated level associated with each specific risk:

LOW – 1

HIGH – 5

LEVEL OF RISK
Acquisitions and disposals (strategic risk)

RISK DESCRIPTION

POTENTIAL IMPACT

KEY MITIGATIONS

The Group acquires
companies which are
not complementary and/
or result in a negative
impact to the Group once
integrated

Potential strain on the
Group’s financial resources
as a result of acquisitions

Companies are disposed
of, leaving the Group
exposed to gaps in its
service offering

• Reputational damage

• The Group’s focus is

• Negative impact on
the Group’s financial
performance

• Additional support and
funding being required

• Unable to raise sufficient
funds for the acquisition

• Diversion of

management resources
whilst integrating new
subsidiaries

• Loss of clients and

negative impact on
revenue and profitability
due to disposal

both on organic growth
and acquisitions. In
the event of a new
acquisition, rigorous
internal and external
due diligence would
be performed on the
company and its market
in order to identify
potential risks and to
ensure the acquisition
is complementary
and in markets
where the Group is
currently not present or
underperforming

• Where a new service
of integrated offering
is required, the Group
would initially look to hire
key staff and to develop
the service internally
before considering
the acquisition of an
external company

• Earn-out mechanisms will
be used in the majority
of future acquisitions
made by the Group in
order to reduce cash
tensions

• Only non-core or risk
exposed companies
would be considered
for sale, and only done
so after careful analysis
as to the impact of
divestment

SEC Newgate S.p.A. - Annual Report 2019

LEVEL OF RISK

RISK DESCRIPTION

POTENTIAL IMPACT

KEY MITIGATIONS

Management of growth (strategic risk)

LEVEL OF RISK
RISK DESCRIPTION
Future funding and existing debt (strategic risk)

POTENTIAL IMPACT

KEY MITIGATIONS

The Group is unable to
support the growth areas
of the business sufficiently,
through either lack of
funds, resources or focus

• Hiring decisions that

• Processes and systems

lead to the recruitment
of staff misaligned with
strategy or ahead of
revenue

• Staff leave through

lack of support and/or
resources

in place to help identify
need and fulfilment of
resource

• The production and

monitoring of budgets
against performance
and hiring plans

• Incur unnecessary costs

• Targeted and specific

• Required systems and

processes aren’t in place
leading to inefficiencies
and inaccurate
information reported to
management

staff training

• Systems implemented

to support staff in
maintaining visibility on
key metrics

• Company and Group

KPIs monitored by
Executive Directors on
a monthly and, where
possible, weekly basis

New markets and channels of service offering (strategic risk)

New market and/or
channel of service offering
isn’t sufficiently understood
or researched prior to
entry

Achieving lower than
expected revenues and/or
higher costs and resource
requirements when setting
up new operations

A new offering doesn’t
gain sufficient traction,
is loss making or not
complementary to other
Group services

• Negative impact on

• Fully research and

Group profitability and
cash flows

• Negative impact on
integrated offering

• Reputational and brand

damage

market test any new
services before formally
launching

• The Board pursues a
strategy of organic
growth in existing
companies

• Any entry into a new

market would be with
the support of local
expertise

• Use of qualified and

experienced advisers
where necessary

• Continuously assess

performance in new
markets and the related
opportunities and risks

• Unattractive for

• Executive Directors

The Group net debt
position increases at a rate
in excess of the Group’s
performance

subordinated debt or
equity funding

• Creates a problematic
platform from which to
grow

• Working capital diverted

to interest payments

• Difficult to find further

funding at a competitive
rate or without restrictive
covenants

Restructuring activities (strategic risk)

Business units, teams or
individuals deemed not to
be adequately supporting
their cost base are exited
from the business without
sufficient analysis being
undertaken

• Incorrect decisions are

made in the restructuring
process causing a
negative impact on
revenues and/or staff
morale, as well as
incurring unnecessary
additional costs

closely monitor net debt
position and continue
negotiations with lenders

• Closely manage costs
so to de-risk the Group
creating a more
manageable platform
from which to drive
profitability

• Improve the internal

structure and strategic
direction of the business
to make it more
investable

• Where further financing
is required, the Board
looks to achieve this in
a manner that is best
suited to the Group and
shareholders

• The Group performs
ongoing detailed
analysis of companies,
business units and
individuals’ performance
against approved
budgets and KPIs

• Any restructurings

undertaken are signed
off by the Group and/or
company boards after
detailed discussions and
presentation of analysis
and with the support
of external consultants
where necessary

• Group seeks to remain

fair towards all members
of staff affected by
the changes through
transparent and regular
consultation

SEC Newgate S.p.A. - Annual Report 2019

LEVEL OF RISK

RISK DESCRIPTION

POTENTIAL IMPACT

KEY MITIGATIONS

Overseas operation (strategic and economic risk)

A significant proportion
of the Group’s revenues
is generated overseas.
The Group’s business is
therefore susceptible to
adverse changes in local
and regional economic,
political and social
conditions as well as the
policies of the relevant
government, including
changes in laws and
regulations, taxation
and the imposition of
restrictions on currency
conversion

• 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 from
recovering its investment
in whole or in part

• SEC Newgate maintains
a balanced portfolio in
terms of geographical
locations to minimise the
impact on the Group’s
overall results

• Group performs a

thorough analysis of
economic, political
and social conditions
before entering new
markets to minimise any
unexpected turmoil

LEVEL OF RISK
Global economic trends and political instability (economic risk)

POTENTIAL IMPACT

RISK DESCRIPTION

KEY MITIGATIONS

Local and political
landscape causes
a slowdown in client
spending

In 2020 particularly, Brexit in
the UK, the political tensions
in the Middle East and the
trade war between the USA
and China could contribute
to significant uncertainty in
key markets for the Group

Covid-19

The pandemic which
impacted businesses and
their employees around the
world

• A reduction in new client

• The Group disperses its

contracts

• Resource heavy

procurement processes

• Margin pressure

• Regulatory changes

• New tax and other

legislation

• Fall in market confidence

• A reduction in client

contracts

• A reduction in new client

contracts

• Fall in market confidence

• Significant disruption to

operations

risk and reliance on any
particular economic
environment through a
wide and diverse client
base in both industry and
geography

• Significant political events

have been factored
into 2020 budgets and
company strategies have
been re-focussed as a
result

• The Group and subsidiary

boards monitor new
business wins/losses
and track committed
fees and new business
pipeline against budgets
on a monthly and, where
possible, a weekly basis
and manage expenditure
accordingly

• The Group has business
continuity plans in place

• All employees are able to

work remotely

• All discretionary spend

cancelled

• All government schemes

accessed where
appropriate

SEC Newgate S.p.A. - Annual Report 2019

LEVEL OF RISK

RISK DESCRIPTION

POTENTIAL IMPACT

KEY MITIGATIONS

LEVEL OF RISK

RISK DESCRIPTION

POTENTIAL IMPACT

KEY MITIGATIONS

Client dependency (economic risk)

Revenue growth and profitability (economic and operational risk)

The Group cannot
guarantee that it will be
able to achieve or sustain
revenue growth and/or
profitability in the future

• Fluctuation of operating
results as a result of a
number of factors, many
of which are beyond
Group’s control (growth
rate of markets in which
the Group operates,
market acceptance
of and demand of its
services and products
and those of its
customers, problems in
the introduction of its
services or products)

• Requirement of

additional working
capital and financing in
the medium term, which
may not be available on
attractive terms or at all

• The Group has
budgeting and
reforecasting processes
in place and continually
monitors expectations
highlighting any cost
control or financing
needs

• As soon as results,

and especially fees,
appear to be lower
than budgeted, Group
and local management
immediately implements
specific actions in order
to drive business (for
instance encouraging
new pitches, training
and hiring of new staff)
and, when necessary,
reviews the cost
structure in order to
minimise the impact on
Group’s profitability

That the Group, or any
subsidiary, is overly
dependent

Competition (economic risk)

• The Group may
face significant
competition from
both domestic and
international competitors
who have greater
capital, greater
resources and superior
brand recognition and
who may be able to
provide better services,
adopt more aggressive
pricing policies or
pay higher prices to
acquire businesses
and resources. There is
no assurance that the
Group will be able to
compete successfully in
such an environment

• Loss of a client materially

• The Group performs

impacts overall
profitability

• Company becomes too
focussed or specialised
in a single industry

• The client monopolises
company resources

weekly reviews of new
business wins/losses across
all Group companies
which highlights any client
dependencies

• Systems have been put
in place to enable staff
to monitor profitability,
servicing and staffing of
clients

• Continued diversification

of industry expertise
across the Group resulting
in specialisms but no
reliance on a single sector

• No single client represents

more than 5% of the
Group’s total Gross Profit

• Lower margins and

• The Group provides

profitability

• Loss of key employees

and/or clients

• Inability to provide
appealing services

tailored and highly value-
added services in order
to minimise the pricing
competition from bigger
players

• SEC Newgate focuses on
retaining employees and
is constantly committed
to enhancing retention
by employing the key
mitigations discussed
below under the retention
of key employees risk

• The Group focuses on

anticipating major trends
in the industry and on
being among the first
players in the industry to
invest in new services and
technologies (evidenced
by the investment and
development of its AI
platform)

SEC Newgate S.p.A. - Annual Report 2019

LEVEL OF RISK

RISK DESCRIPTION

POTENTIAL IMPACT

KEY MITIGATIONS

LEVEL OF RISK

RISK DESCRIPTION

POTENTIAL IMPACT

KEY MITIGATIONS

Attraction and retention of key employees (operational risk)

Reliance on subcontractors (operational risk)

The key to a Group
of communications,
marketing and advertising
businesses is its
employees. An inability
to successfully attract
and/or retain key staff is
therefore fundamental to
the Group’s longevity

Working capital (operational risk)

Poor or delayed cash
collections from clients

Rapid organic growth at
Group or subsidiary level
leading to the tying up of
working capital

• High staff turnover

• Recruit senior

impacting client service

• Additional unplanned
cost and time incurred
to replace staff

• Competitors benefit
through staff moving

• Loss of key staff-client

relationships and
resulting impact on
revenue

• Loss of key skills,
knowledge and
expertise

management and staff
of the highest quality
through a robust and
thorough process,
and remunerate them
accordingly and, where
possible, succession
plans are developed in
advance

• Create an ethos of

being “proud to work
for” the Group

• Promotion opportunities
and long-term career
plans are available

• Continued review of all
employment benefits
and training and
development needs

• Mental and physical

health is taken seriously,
with appropriate
resources and processes
in place to monitor
and address any issues
accordingly

• Reduced liquidity

• Ensure strict credit terms

• Working capital shortfalls

in the short-term

• Difficulty in maintaining

supplier terms

• Breach bank covenants

as part of contract
negotiations and agree
advanced billing terms
whenever possible

• Strong credit control

processes are in place
with dedicated credit
controllers

• The Group monitors and
manages cash flow on
a weekly basis and for
some of the subsidiaries a
13-week rolling forecast is
performed and submitted
on a weekly basis. Where
potential shortfalls are
identified, the Group will
work with the relevant
finance team to help
ensure sufficient funds are
available

The Group utilises
subcontractors on a
project-by-project basis
to meet its contractual
obligations. Such projects
rely on subcontractors
to perform in a timely
manner and in line with
the project’s performance
obligations. There is a risk
of this not being met

• Non-performance may

result in time and/or cost
over-runs on projects
reducing expected
margins

• Reputational damage
which could lead to
client and/or staff losses

• Group minimises reliance
on subcontractors by
utilising internal staff
where possible and by
hiring full time employees
as replacements where
feasible

• Subcontractors are

carefully selected (in
most cases through
tender processes) with
their performance being
periodically reviewed

Timing of large contracts (operational risk)

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;
hence the Group may
experience downtime
between orders and/or
receive an abundance of
orders at once

• Material fluctuations in

actual results compared
with expectations

• Adverse impact on cash
collectability, profitability
and staff utilisation

• Employees being

overworked to meet
demands impacting staff
welfare and potential
reputational damage if
performance is poor

• Alternatively, a loss of
clients due to internal
capacity not being able
to satisfy demands

• The Group constantly
monitors its project
pipeline in order to avoid
an excessive reliance on
large projects

• Periodic assessment of
internal resources to
assess capacity within
teams, bringing work
forwards where possible
during quiet periods,
and alternatively using
subcontractors during
busy periods

SEC Newgate S.p.A. - Annual Report 2019

LEVEL OF RISK

RISK DESCRIPTION

POTENTIAL IMPACT

KEY MITIGATIONS

Information systems (IT) and data security (operational and business risks)

• Delays to client work
and compromise to
client relationships

• Opportunity for potential

fraud

• Data loss

• Confidentiality breaches

The Group’s business
operations, like most
other businesses, are
highly dependent upon
IT. Therefore, any IT
failure could present a
considerable risk

Access to confidential
information due to
inadequate security of
data by unauthorised
persons either internally or
externally

• Third party IT specialists,
monitored by internal
resources maintain
Group IT systems

• Business and IT disaster
recovery plans exist in
each company and
are tested frequently to
minimise any disruption
in the event of an IT
failure

• Anti-malware and other

IT security software
is used to prevent
cyberattacks and
computer viruses. This
software is constantly
updated and tested

• Staff training is provided,

and IT updates
communicated to staff

• Access to data is

restricted internally on a
person by person basis
as appropriate

LEVEL OF RISK
KEY MITIGATIONS
Failure to maintain an acceptable standard of business ethics (business risk)

POTENTIAL IMPACT

RISK DESCRIPTION

The Group engaging
in actual or perceived
unethical client work

Staff violating the Group’s
Code of Business Conduct
and Ethics

• External reputational

• New business

damage which could
affect future and existing
client relationships

• Staff dissatisfaction if

clients’ work is not aligned
with their personal ethics

opportunities are shared
with all, creating a
culture of openness and
transparency

• Code of Business

Conduct and Ethics is
communicated to all
employees, in addition
to having appropriate
training programmes in
place

• Confidential

communication channels
to management or Group
HR are in place to support
staff reporting violations

• Any perception or

questions over ethical
standards in relation to
potential client work or
behaviour is immediately
raised to the relevant
company board, and if
deemed relevant, the
Group board also

Legal and regulatory compliance (compliance risk)

The risk of breaching an
Italian, UK or international
law, AIM listing rule or any
regulatory rules to which
the Group, or any of its
subsidiaries, must adhere to

• Penalties and fines

• External legal counsel in

• Reputational damage

which could lead to client
and/or staff losses

each country is sought as
necessary

• A SEC Newgate staff

hand-book and share
dealing code is in place
and is communicated to
all staff

• Regular staff training is

provided

• Nominated advisors are

consulted with respect to
any actions taken which
are regulated by the AIM
listing rules

Financial risk management

Details of the Group’s approach to financial risk management are disclosed in detail in note 10 to the
financial statements.

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

The Board
of Directors.
BIOGRAPHIES

EMMA VICTORIA KANE
(ROSENBLATT)

AGE 53
SEC Newgate Deputy Group CEO
and Chief Executive of Newgate
Communications Ltd
Emma has over 30 years of
communications’ experience
gained working both in agencies
and in-house at organisations
such as ProShare as its first Head
of Marketing Communications,
and as Head of Investor Services
at Charles Schwab. She founded
Redleaf in January 2000 and led
the agency until 2018 when its sale
to Porta was completed.

She specialises in financial and
corporate communications
and crisis management. She is
also the Chair of Target Ovarian
Cancer, Chair of the Barbican
Centre Trust and a trustee of
Nightingale Hammerson. She
was awarded the Freedom of
the City of London in 2017.

Emma is Chief Executive of
Newgate Communications Ltd.
Emma was appointed Deputy
Chief Executive of SEC Newgate
in September 2019.

Luigi Roth is also a Knight Grand
Cross of Merit of the Italian
Republic, Knight of Labour and a
Papal Gentleman.

FIORENZO VITTORIO TAGLIABUE

AGE 70
CHIEF EXECUTIVE OFFICER
Fiorenzo is the founder and
largest individual shareholder
of SEC Newgate. He has been
in this business for thirty years
transforming a one-man PR
agency into a multinational
Group.

He has significant expertise
in different industries and
practices; more specifically he
was the advisor to many urban
regeneration projects, such as
Porta Nuova in Milan (for Coima
Group), regeneration of the Fiera
di Milano area, today Citylife
(for Generali-Allianz Group),
development plan for Bovisa (for
Euromilano) and construction of
Fiera in Rho-Pero (for Fiera Milano
Foundation).

He was the CEO of Nuova
Editoriale Italiana S.p.A. from 1983
to 1989 and, in 1985, he founded
and became General Secretary
for the first three years of Centro
Televisivo Vaticano.

Fiorenzo was a member of the
Board of Directors of Teatro La
Scala (Milan) Foundation from
2005 until January 2015 and is a
member of the board of directors
of Banco Alimentare Foundation
and of Venice University Institute of
Architecture.

JOHN FOLEY

AGE 63
NON-EXECUTIVE CHAIRMAN
John is a Chartered Accountant
and barrister. John is a co-
founder and Chairman of AIM
quoted niche services provider,
Premier Technical Services Group
Plc.

John is also Chairman of Servoca
plc, the AIM quoted staffing
solutions and outsourcing
provider.

He was previously Chief Executive
of MacLellan Group plc, a
facilities services company, from
1994 until it was acquired by
Interserve plc for an enterprise
value of £130 million in June 2006.
John was appointed as Non-
Executive Chairman of Porta in
May 2017.

LUIGI PIERGIUSEPPE FERDINANDO
ROTH

AGE 79
DEPUTY NON-EXECUTIVE
CHAIRMAN
Luigi was appointed to the Board
as its Non-Executive Chairman
in June 2016. He has significant
board experience and his current
roles include being President
of Alba Leasing S.p.A. (since 20
May 2012), President of Equita
SIM S.p.A. (since October 2014),
President of Italiana Valorizzazioni
Immobiliari S.r.l. (since September
2013), President of Arriva Italia Srl
(since June 2017), President of
Fincantieri SI (since August 2019).

Noteworthy previous experience
includes roles as President of
Terna S.p.A., Consorzio Città
della Salute e della Ricerca
di Milano, Fondazione Fiera
Milano and Ferrovie Nord Milano
Esercizio S.p.A., as well as various
positions held on the boards of
Pirelli, Cassa Depositi e Prestiti
S.p.A., Ansaldo Trasporti S.p.A.
and Breda Costruzioni Ferroviarie
S.p.A..

62
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SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

BRIAN WILLIAM TYSON

THOMAS EDWARD PARKER

AGE 56
SEC Newgate Deputy Group
CEO & Managing Partner
Newgate Australia
Brian is Deputy CEO of SEC
Newgate and the Managing
Partner of Newgate
Australia (being Newgate
Communications Pty Limited)
and co-founder of Newgate
Research (the market and
social research arm of Newgate
Communications).

In a consulting career spanning
three decades, Brian has
come to be regarded as
one of Australia’s leading
communications practitioners
with expertise in crisis and
strategic issues management,
financial transactions,
government relations, media
management and community
campaigning. He has led a
number of high profile and
complex public affairs campaigns
and financial transactions in the
infrastructure, transport, banking,
energy, agriculture and media
sporting/arts sectors.

Brian is a Director on the
board of the Sydney Swans
Australian Football Club and
the Committee for Sydney as
well the Clontarf Foundation,
supporting educational
opportunities for young
Indigenous Australians.

Prior to his career in consultancy
Brian was a media and
political adviser to the Greiner
Government in New South
Wales. He started his career
as a journalist with The Land
newspaper. Brian was appointed
Deputy Chief Executive of SEC
Newgate in September 2019.

AGE 47
SEC Newgate Deputy Group
CEO and Chairman of Cambre
Associates – Brussels
Tom co-founded Cambre
Associates SA in 2013, based
in Brussels, and was appointed
to the SEC Board in June 2016.
Mr Parker was the Managing
Director at Interel PR & PA from
2006 to 2007 and the Managing
Director of Interel Cabinet
Stewart in 2008.

Mr Parker is the President of the
British Chamber of Commerce
in Brussels. He is a regular
commentator on lobbying
practice and the future of the
advocacy profession. Mr Parker
works with organizations at the
highest levels across a wide
range of Sectors, counselling on
EU affairs and pan–European
advocacy campaigns and has
advised on some of Europe’s
highest profile reputational
challenges and counselled on
issues management and crisis
communication at European
and global levels.

Mr Parker is also on the boards of
the SEC subsidiaries Kohl PR and
ACH Cambre.

MARK HENRY GLOVER

AGE 53
SEC Newgate Executive
Director and Chief Executive of
Newington
Mark founded the award-
winning consultancy Newington
in 2006. For over 20 years Mark
has provided senior counsel to a
range of corporate clients. Mark
sits on the PRCA Public Affairs
Board, is a former Chairman
of the Board, is a Fellow of the
PRCA and sits on the PRCA
PR Council. A member of the
Executive of SME4Labour, Mark
was a Labour Councillor in
Southwark 2002-14, including six
years as Chairman of the Labour

Group. He is a published author
of articles on Labour, Politics,
Public Affairs and Business. He
also sat on the Federal Executive
of the Liberal Democrats in the
early 1990s.

Mark was an expert witness
to the Council of Europe on
lobbying transparency and is
a regular conference speaker
and awards judge. He sits on the
fundraising board of Humanity
and Inclusion, a member of
the Court of the Company of
Communicators and spent five
years as a Non-Exec on Marston
Holding Group’s Ethical Advisory
Board.

ANDREA CORNELLI

AGE 57
Executive Director and CIO of
SEC Newgate
Andrea joined the Board as
Chief Innovation Officer in
December 2019. His experience
spans communications
technology systems, design
information, PR and strategic
advice.

Throughout his career, Andrea
has led some of Italy’s leading
firms at the forefront of digital
marketing and transformation.

In 1981, Andrea founded C&T,
one of the first Italian companies
dedicated to design information
and communication technology
systems. He was appointed
CEO of Digital Market Strategy
business, Telemacus, in 1995. He
has collaborated with leading
PR firm, Ketchum Italy (formerly
RP Partners), since 1986, and
was appointed Vice President
and CEO in 1999. In 2013 he was
appointed Global Partner of the
Ketchum international network.
After the merger between
Ketchum, Fleishmann Hillard and
Porter Novelli, in June 2017, he
became Executive President of
the new entity, Omnicom Public
Relations Group (OPRG).

main market of the London
Stock Exchange during his
tenure.

Prior to being Finance Director,
he was a Non-Executive
Director and chaired the
audit and risk committees
of Playtech plc. David is a
member of the Institute of
Chartered Accountants of
Scotland. He is currently
Chairman of ECSC Group plc,
also listed on AIM.

PAOLA BRUNO

AGE 53
Non-Executive Director
Paola is the founder and
Managing Director of
Augmented Finance Ltd, an
advisory company based
in London and specialising
in M&A, financial and
corporate advisory for financial
institutions, investment funds
and European/North America
industrial and tech companies.
She is an independent
Director, Chairman of
Remuneration Committee, and
a member of the Nomination
Committee in Banca Creval
S.p.A.; independent Director,
Chairman of Control and Risk
Committee, and a member of
the Remuneration Committee
and Related Party Committee
in Alerion Clean Power S.p.A.;
and, independent Director,
Chair of the Nomination and
Remuneration Committee,
Member of the Risk Committee
and Related Party Committee
and Investment Committee in
Retelit S.p.A..

Paola joined the Board as Non-
Executive Director in February
2017.

From 2014 to 2015 he was
President of Assorel. From
2019, Vice President of UNA,
the most important Italian
Association of Communication
Agencies.

ANNA MILITO

AGE 48
Deputy Group Chief Financial
Officer, Italy
Anna Milito joined SEC in
2003 and since then has
worked in the administrative
team, becoming Chief
Financial Officer in 2014. Her
role includes coordinating
a team composed of seven
finance and administration
professionals.

Prior to joining SEC, Mrs
Milito worked for an Italian
accountancy firm from
1998-1999 and from 2000-
2002 she was consultant
to a provincial consortium
on regional, national and
communitarian financing laws
for enterprises in Parma. Anna
Milito has a degree in Business
Economics from the University
of Parma and is a chartered
accountant.

DAVID CARR MATHEWSON

AGE 72
Non-Executive Director
David was appointed to the
Board in June 2016. David has
experience in advising private
and public companies on
strategy plus implementation
of mergers, acquisitions,
debt and equity fund raising
and capital reconstructions.
David has spent much of his
executive career as Senior
Director of Noble Grossart Ltd,
a leading Scottish merchant
bank. More recently, he was
Finance Director of Playtech
plc, between 2010 and 2013,
which moved from AIM to the

64
64

65
65

SEC Newgate S.p.A. - Annual Report 2019
SEC Newgate S.p.A. - Annual Report 2019

Consolidated
Financial
Statements.

Company information

SEC Newgate S.p.A. (the Company) was
incorporated in March 1989 and is based in
Milan. On 4 September 2019, the Company
name was changed from SEC S.p.A to SEC
Newgate S.p.A. The registered office and
principal executive office of SEC Newgate S.p.A.
is located at Via Ferrante Aporti 8, Milano 20125.

The Consolidated financial statements for the
two years ended 31 December 2019, represent
the result of the Company and its subsidiaries
(together referred to as Sec Newgate Group or
the Group).

The principal business of the Group is a
comprehensive range of public relations,
advocacy, communications and public affairs
services provided to national and multinational
clients.

The subsidiaries of the Company included in
the Consolidated financial information, can be
found in note 29.

SEC Newgate S.p.A
and subsidiaries

66
66

67
67

SEC Newgate S.p.A. - Annual Report 2019

Tel: +39 02 58.20.10

Viale Abruzzi n. 94

Opinion

Fax: +39 02 58.20.14.03

20131 Milano

www.bdo.it

Independent
Auditor’s Report
to the members
of SEC Newgate S.p.A.

Bari, Bergamo, Bologna, Brescia, Cagliari, Firenze, Genova, Milano, Napoli, Padova, Palermo, Pescara, Roma, Torino, Treviso, Trieste,
Verona, Vicenza

BDO Italia S.p.A. – Sede Legale: Viale Abruzzi, 94 – 20131 Milano – Capitale Sociale Euro 1.000.000 i.v. Codice Fiscale, Partita IVA e Registro
Imprese di Milano n. 07722780967 - R.E.A. Milano 1977842 Iscritta al Registro dei Revisori Legali al n. 167911 con D.M. del 15/03/2013 G.U. n.
26 del 02/04/2013

BDO Italia S.p.A., società per azioni italiana, è membro di BDO International Limited, società di diritto inglese (company limited by
guarantee), e fa parte della rete internazionale BDO, network di società indipendenti.

We have audited the financial statements of SEC Newgate S.p.A. and its subsidiaries (The
“Group”) for the year ended 31 December 2019 which comprise the consolidated statement
of comprehensive income, the consolidated statement of changes in equity, the consolidated
statement of financial position, the consolidated cash flow statement and notes to the financial
statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the Group
financial statements is applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union.

In our opinion:

• the Group financial statements give a true and fair view of the state of the Group’s affairs as at

31 December 2019 and of the Group’s profit for the year then ended; and

• the Group financial statements have been properly prepared in accordance with IFRSs as

adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements section of our report. We are
independent of the Group in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK)
require us to report to you where:

• the directors’ use of the going concern basis of accounting in the preparation of the financial

statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties
that may cast significant doubt about the Group’s or the parent company’s ability to continue
to adopt the going concern basis of accounting for a period of at least twelve months from
the date when the financial statements are authorised for issue.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance
in our audit of the financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) we identified, including
those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed
in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

This is not a complete list of all risks identified by our audit.

SEC Newgate S.p.A. - Annual Report 2019

Key audit matter

How we addressed the matter in our audit

Key audit matter

How we addressed the matter in our audit

Revenues

See accounting policy in note G, and
Revenues note (note 3).

We considered there to be a significant audit
risk arising from inappropriate or incorrect
recognition of revenue, including relating
to management override, appropriate
application of agent verses principal
accounting, cut-off of revenue transactions
at the year end and whether the accounting
policy is not aligned with IFRS. Furthermore,
the presumed risk of improper recognition
of revenue due to fraud has also been
identified as a significant risk.

Revenue recognition is one of the primary
focuses of the engagement team. Due to this
focus, revenue recognition is considered to
be a key audit matter.

Impairment of goodwill

See accounting policy in note H, and the
Intangibles Assets note (note 11).

The group has material intangible assets,
mainly goodwill, arising from acquisitions as
part of business combinations. The group
has determined that the single subsidiaries
that generated goodwill are a single cash
generating unit.

We considered there to be a significant audit
risk arising in relation to the accuracy and
valuation of all intangibles.

The group is required to assess, at each
reporting date, such assessment should
include consideration of information from
both internal and external sources.

Further, notwithstanding whether indicators
exist, the recoverability of Goodwill and
intangible assets with indefinite useful lives
are required to be tested at least annually.

Due to the inherent uncertainty involved
in forecasting and discounting future cash
flows, we therefore identified the impairment
of goodwill as a Key audit matter.

Our procedures included reviewing the
group’s adopted revenue recognition policy
to ensure that it complies with accounting
standards and has been consistently applied
throughout the year giving particular
attention to IFRS 15.

We tested material revenue transactions
recorded near the end of the year and
subsequent to the year end to confirm
appropriate recognition in the year under
audit.

We selected a sample of key contracts for
testing. We assessed whether the revenue
recognised was in line with the contractual
terms, the group’s revenue recognition policy
and the relevant accounting standards.

Our audit procedures over the impairment
of goodwill included general procedures on
the methodology adopted and the related
controls, in addition to substantive testing:

General procedures included, but were not
limited to:

• review of the methodology used by the
Directors for the impairment review, and

• consideration of the review and approval

processes adopted.

Substantive procedures included, but were
not limited to:

• review of the financial projections

underpinning the impairment review,
including consideration of the key
assumptions on revenue and cost, and the
discount rate used;

• testing, on a sample basis the calculations;

• sensitivity analysis.

We also evaluated the Group’s disclosures
relating to its evaluation of impairment
indicators and the annual impairment testing
as provided in “Note 11 – Intangible assets”.

Business Combination

See accounting policy in note E and H, and
the Intangibles Assets note (note 11)

Our audit procedures regarding the business
combination included:

• analysis of all the relevant documents

about the transaction;

• discussions with the company’s

management regarding the valuation
methods used to determine the fair value
of the net assets transferred;

• assessment of the valuation methods used

by the company to identify the fair value of
the net assets transferred;

• the analysis of the transaction’s accounting

treatment and of the related notes as
required by IFRS 3;

• check on the adequacy and

appropriateness of the information
provided in the Notes to the Consolidated
Financial Statements.

The management reported that in
September 2019 SEC Newgate (“SEC”),
who previously held 16,9% of Porta
Communication PLC (*Porta”), purchased
the remaining share capital resulting in 100%
of Porta. As a result, SEC Newgate, also
indirectly controls the subsidiaries of Porta
which have been consolidate at the year
end.

As said by the management of the group,
the consideration transferred consists
entirely of SEC issuing equity interests to
Porta shareholders calculated at the fair
value of the SEC equity interests transferred.
On 3 September 2019, n. 420.810.829 Porta
shares were exchanged at a rate of 88.495
into n. 4.755.162 new SEC shares as well
as n. 5.993.212 SEC shares being issued to
Retro Grand Limited (“RGL”), a shareholder
of Porta, following the conversion of a
convertible loan currently owned by RGL. In
total, n. 10.748.374 SEC shares were issued as
a result of the acquisition at a fair value of
Euro 1,0174 per share.

The management said that goodwill of Euro
14.995 thousands arising on the acquisition
of the Porta group represents the strategic
benefits of the acquisition that will help to
enhance the Group’s ability to strengthen
its media presence through expansion
into other geographical areas as well as
the economies of scale expected from
combining the operations of the group.
Goodwill has been attributed by the
management to each CGU of the Porta
Group based on the anticipated future
profitability of each CGU. The mentioned
business combination represented a key
audit matter due to the complexity of
the valuation methods adopted and the
consequent accounting treatment.

SEC Newgate S.p.A. Independent Audit Report

SEC Newgate S.p.A. - Annual Report 2019

Our application of materiality

Other information

We apply the concept of materiality both in planning and performing our audit, and in
evaluating the effect of misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic decisions of reasonable
users that are taken on the basis of the financial statements. Importantly, misstatements below
these levels will not necessarily be evaluated as immaterial as we also take into account of the
nature of identified misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole

We determined materiality for the Group financial statements as a whole to be Euro 713
thousands which represents 1.5% of revenues. We agreed with the audit committee that we
would report to them misstatements identified during our audit above Euro 36 thousands.

Revenue has been concluded as the most relevant performance measure to the stakeholders
of the Group, while also providing a more stable measure year on year when compared to the
Group profit before tax.

Performance materiality is the application of materiality at the individual account or balance
level set at an amount to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality for the financial
statements as a whole. Performance materiality was set as a percentage of materiality. In setting
the level of performance materiality we considered a number of factors including the expected
total value of known and likely misstatements (based on past experience and other factors) and
management’s attitude towards proposed adjustments.

An overview of the scope of our audit

We tailored the scope of our audit to ensure that we performed enough work to be able to give
an opinion on the financial statements as a whole, taking into account the geographic structure
of the Group, the accounting processes and controls, and the industry in which the Group
operates.

In establishing the overall approach to the Group audit, we assessed the audit significance
of each reporting unit in the Group by reference to both its financial significance and other
indicators of audit risk, such as the complexity of operations and the degree of estimation and
judgement in the financial results. We also considered the changes to the overall Group because
of the acquisition of Porta Communication PLC and where the key business activities and
transactions reside.

We instructed BDO UK, BDO Poland, BDO Colombia, BDO Germany, BDO Spain, BDO Belgium,
ESV Business Advice and Accounting, Karen Chung & CO., Rohan Mah & Partners LLP, Mrs
Naulin - Chartered Certified Accountants and Hewitt Card - Chartered Certified Accountants
as component auditors, to perform full scope audits of financial information of the significant
components accounted for locally in those territories.

We performed specific procedures of financial information of the non-significant reporting units
accounted for locally in Italy. This, together with the additional procedures performed at Group
level over the acquisition accounting and consolidation process gave us the evidence we
needed for our opinion on the financial statements as a whole.

Summary of audit scope

The directors are responsible for the other information. The other information comprises the
information included in the annual report, other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to
fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located
on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.

Alessandro Fabiano (Partner – Chartered Accountatns)

For and on behalf of BDO Italia S.p.A., Statutory Auditor

Based on the above scope we were able to conclude that sufficient and appropriate audit
evidence had been obtained as a basis to form our opinion on the Group financial statements
as a whole.

Milan, 28 May 2020

SEC Newgate S.p.A. Independent Audit Report

SEC Newgate S.p.A. - Annual Report 2019

Consolidated Income Statement
For the year ended 31 December 2019

Continuing operations

Revenue

Cost of sales

Gross profit

Employees expenses

Service costs

Depreciation & amortisation

Other operating costs

Operating profit

Finance income

Finance expense

Profit before taxation

Taxation

Profit for the year

(Loss)/Profit for the year attributable to:

Owners of the Company

Non-controlling interests

(Loss)/Earnings per share attributable to the equity holders
of the Company

Basic, per share

Diluted, per share

2019

€' 000

47,550

(9,945)

37,605

(23,386)

(8,982)

(2,154)

(1,271)

1,812

188

(729)

1,271

(1,271)

(99)

Restated1

2018

€' 000

28,972

(6,780)

22,192

(12,560)

(6,749)

(260)

(314)

2,309

(195)

2,211

(639)

1,572

1,232

340

1,572

(€0.006)

(€0.005)

€0.091

€0.083

Notes

1 As a result of the acquisition of Porta Communications Plc detailed in note 29, the Board has decided to report cost of sales and
gross profit as a separate line item going forwards. This is to ensure consistent reporting across all group entities and as a result the
comparative has been restated. Costs recharged to clients are now recorded within cost of sales. Costs recharged to clients at the
same rate as the cost incurred were previously recorded in revenue (4,378 €’000). Costs recharged to clients at a different rate than
the cost incurred were previously recorded in service costs (1,829 €’000) and other operating costs (573 €’000). These costs have been
reclassified to cost of sales (6,780 €’000). Historically, ‘other operating income and charges’ and ‘other operating costs’ were disclosed
separately. Going forward these amounts will be combined within the single line item ‘other operating costs’ above. The breakdown of
this figure can still be found within note 7.

Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019

SEC Newgate S.p.A. - Annual Report 2019

Continuing operations

Profit for the year

Notes

2019

€' 000

2018

€' 000

1,572

Items that may be subsequently reclassified to profit or loss:

Loss on revaluation of investments held at FVOCI

Loss on exchange rates

Items that will not be reclassified to profit or loss:

Actuarial (loss)/gain on defined benefit pension plans

Total comprehensive income for the year attributable to:

Owners of the Company

Non-controlling interests

(625)

(346)

(84)

(1,055)

(1,120)

(1,055)

(1,747)

(44)

(218)

(551)

333

(218)

There were no discontinued operations in the year.

The accompanying notes are an integral part of these consolidated financial statements.

The Group has initially applied IFRS 16 at 1 January 2019 and the impact on comparative information can be
found in note 33. The accompanying notes are an integral part of these consolidated financial statements.

SEC Newgate S.p.A. - Annual Report 2019

Consolidated Statement of Financial Position
For the year ended 31 December 2019

Non-current assets

Intangible assets

Tangible assets

Investments

Other financial assets

Other assets

Total non-current assets

Current assets

Trade receivables

Other receivables

Financial investments

Cash and cash equivalents

Total current assets

Total assets

Current liabilities

Trade payables

Other payables

Borrowings

Lease liabilities

Provisions

Total current liabilities

Non-current liabilities

Employee benefits

Borrowings

Lease liabilities

Other non-current liabilities

Total non-current liabilities

Total liabilities

Net assets

Notes

2019

€' 000

30,768

8,984

3,490

43,279

15,094

4,562

280

6,138

26,074

69,353

7,462

9,399

2,447

2,861

1,645

23,814

2,013

12,431

5,607

5,637

25,688

49,502

Restated1

2018

€' 000

15,614

780

1,252

971

18,683

9,630

1,822

583

5,220

17,255

35,938

4,953

2,739

2,371

565

10,628

1,950

4,592

6,803

13,345

23,973

19,851

11,965

SEC Newgate S.p.A. - Annual Report 2019

Notes

2019

€' 000

2,425

12,456

148

(3,076)

6,321

(99)

18,175

1,676

19,851

Restated1

2018

€' 000

1,350

3,741

(2,030)

5,681

1,232

10,032

1,933

11,965

Equity

Share capital

Share premium

Legal reserve

Revaluation reserve

Retained earnings

(Loss)/profit for the year

Total equity shareholders’ funds

Non-controlling interests

Total equity

1 Previously share premium, legal reserve, other reserves and retained earnings were all combined within one line item called
‘Reserves’. Going forward these reserves will be shown separately in the Consolidated Statement of Financial Position.

The Group has initially applied IFRS 16 at 1 January 2019 and the impact on comparative information can be
found in note 33.

The accompanying notes are an integral part of these consolidated financial statements.

The financial statements were approved by the Board of Directors on 28 May 2020 and authorised for issue
on 1 June 2020.

Fiorenzo Tagliabue

Director

SEC Newgate S.p.A (09628510159)

SEC Newgate S.p.A. - Annual Report 2019

Consolidated Statement of Changes in Equity
For the year ended 31 December 2019

Issue of Ordinary shares in relation to business combinations
Issue of Ordinary shares in relation to business combinations

1,075
1,075

At 1 January 2019
At 1 January 2019

Total comprehensive income
Total comprehensive income

Profit for the year
Profit for the year

Other comprehensive income
Other comprehensive income

Total comprehensive income
Total comprehensive income

Transactions with owners
Transactions with owners

Issue costs
Issue costs

Dividends declared to non-controlling interests
Dividends declared to non-controlling interests

Dividends declared to non-controlling interests (CLAI)1
Dividends declared to non-controlling interests (CLAI)1

Share based payments
Share based payments

Transfer between reserves
Transfer between reserves

Acquisition of non-controlling interest
Acquisition of non-controlling interest

Acquisition of non-controlling interest without a change in control
Acquisition of non-controlling interest without a change in control

Total transactions with owners
Total transactions with owners

At 31 December 2019
At 31 December 2019

At 1 January 2018
At 1 January 2018

Total comprehensive income
Total comprehensive income

Profit for the year
Profit for the year

Other comprehensive income
Other comprehensive income

Total comprehensive income
Total comprehensive income

Transactions with owners
Transactions with owners

Proceeds from shares issued
Proceeds from shares issued

Dividends declared to non-controlling interests
Dividends declared to non-controlling interests

Others
Others

Total transactions with owners
Total transactions with owners

At 31 December 2018
At 31 December 2018

Share capital
Share capital

Share premium
Share premium

€' 000
€' 000

1,350
1,350

€' 000
€' 000

3,741
3,741

Legal reserve
Legal reserve
premium
premium

€' 000
€' 000

58
58

-
-

1,075
1,075

2,425
2,425

-
-

9,861
9,861

(1,146)
(1,146)

-
-

8,715
8,715

12,456
12,456

-
-

90
90

-
-

90
90

148
148

Retained earnings
Retained earnings

Other reserves
Other reserves

Total equity
Total equity
shareholders’ funds
shareholders’ funds

Non-controlling
Non-controlling
interests
interests

€' 000
€' 000

6,913
6,913

(99)
(99)

25
25

(74)
(74)

-
-

(429)
(429)

32
32

(90)
(90)

-
-

(130)
(130)

(617)
(617)

6,222
6,222

€' 000
€' 000

(2,030)
(2,030)

-
-

(1,046)
(1,046)

-
-

(3,076)
(3,076)

€' 000
€' 000

10,032
10,032

(99)
(99)

(1,021)
(1,021)

(1,120)
(1,120)

10,936
10,936

(1,146)
(1,146)

-
-

(429)
(429)

32
32

-
-

(130)
(130)

9,263
9,263

18,175
18,175

€' 000
€' 000

1,933
1,933

99
99

(34)
(34)

65
65

-
-

(406)
(406)

-
-

98
98

(14)
(14)

(322)
(322)

1,676
1,676

Total equity
Total equity

€' 000
€' 000

11,965
11,965

-
-

(1,055)
(1,055)

10,936
10,936

(1,146)
(1,146)

(406)
(406)

(429)
(429)

32
32

-
-

98
98

(144)
(144)

8,941
8,941

19,851
19,851

Share capital
Share capital

Share premium
Share premium

Legal reserve
Legal reserve

Retained earnings
Retained earnings

Other reserves
Other reserves

Total equity
Total equity
shareholders’ funds
shareholders’ funds

Non-controlling interests
Non-controlling interests

Total equity
Total equity

€' 000
€' 000

1,222
1,222

-
-

128
128

-
-

128
128

1,350
1,350

€' 000
€' 000

2,627
2,627

-
-

1,114
1,114

-
-

1,114
1,114

3,741
3,741

€' 000
€' 000

58
58

-
-

58
58

€' 000
€' 000

5,693
5,693

1,232
1,232

-
-

1,232
1,232

-
-

(12)
(12)

€' 000
€' 000

(246)
(246)

-
-

(1,784)
(1,784)

-
-

€' 000
€' 000

9,354
9,354

1,232
1,232

(1,784)
(1,784)

(552)
(552)

1,242
1,242

-
-

(12)
(12)

1,230
1,230

6,913
6,913

(2,030)
(2,030)

10,032
10,032

€' 000
€' 000

2,042
2,042

340
340

(7)
(7)

333
333

-
-

(444)
(444)

2
2

(442)
(442)

1,933
1,933

€' 000
€' 000

11,396
11,396

1,572
1,572

(1,791)
(1,791)

(219)
(219)

1,242
1,242

(444)
(444)

(10)
(10)

788
788

11,965
11,965

1 SEC Newgate S.p.A holds preferred shares in CLAI SAS which represent 10% of the ordinary share capital and 50% + 0.1 of the voting
rights. SEC Newgate also holds options which would allow the company to acquire the remaining 90% of the share capital in CLAI SAS
within the earn out period. The financial statements of the subsidiary have been consolidated at 100% on this basis. Given that there is
no non-controlling equity interests attributable to CLAI, the dividend declared to the the 90% minority has been allocated to retained
earnings. See note 29 for more details.

The accompanying notes are an integral part of these consolidated financial statements.

Notes

2019

€' 000

2018

€' 000

1,271

2,211

Interest paid

Cash flows from financing activities

Notes

SEC Newgate S.p.A. - Annual Report 2019

2019

€' 000

(248)

(121)

(1,907)

7,323

(7,414)

(835)

(1,160)

(1,155)

(5,517)

841

5,220

6,138

2018

€' 000

(152)

984

(1,701)

(444)

1,242

(10)

(81)

548

4,672

5,220

Acquisition of non-controlling interests

Payments of finance lease liabilities

Proceeds from loans and borrowings

Repayment of loans and borrowings

Dividends paid to non-controlling interests

Loan issued to related company

Proceeds from issue of share capital

Issue costs relating to business combinations

Minorities

Net cash outflow from financing activities

Net cash increase in cash and cash equivalents

Cash and cash equivalents at 1 January

Effect of exchange rate changes

Cash and cash equivalents at 31 December

The accompanying notes are an integral part of these company financial statements.

SEC Newgate S.p.A. - Annual Report 2019

Consolidated Statement of Cash Flows
For the year ended 31 December 2019

Cash flows from operating activities

Profit before tax on continuing activities

Adjusted for:

Changes in fair value investments to profit or loss

Finance expense

Finance income

Depreciation of tangible assets

Amortisation of intangible assets

Impairment of trade receivables

Pension provisions

Long-term provisions

Share based payment expense

Other non-cash movements

Loss on disposal of tangible assets

Changes in working capital:

Decrease in trade and other receivables

Increase in trade and other payables

Cash generated from operating activities

Income tax paid

Net cash inflow from operating activities

Cash flows from investing activities

Acquisition of tangible assets

Proceeds from sale of tangible assets

Acquisition of intangible assets

Acquisition and earn-out payments

Cash from acquisitions

Proceeds from sale of financial assets

Proceeds from sale/(acquisition) of investments

Interest received

(119)

729

(69)

2,059

243

(69)

(460)

2,525

6,243

(1,149)

5,094

(355)

(94)

(577)

1,824

409

(55)

195

(43)

142

118

123

351

4,668

(44)

(1,589)

6,121

(753)

5,368

(427)

(892)

(5,359)

999

2,131

(1,191)

Net cash inflow/(outflow) from investing activities

1,264

(4,739)

SEC Newgate S.p.A. - Annual Report 2019

Notes to
the Finance
Statements.

1. Accounting policies

A. BASIS OF PREPARATION

The principal accounting policies adopted in the preparation of the financial information are set out below.
The policies have been consistently applied to all the years presented, unless otherwise stated.

The financial information has been prepared in accordance with International Financial Reporting Standards
and International Accounting Standards and Interpretations (collectively IFRSs) issued by the International
Accounting Standards Board (IASB) and adopted by the European Union (adopted IFRSs).

The financial information has been prepared under the historical cost convention, except for financial
instruments that have been measured at fair value.

The Consolidated financial statements are presented in Euros (EUR), the Company’s functional and presentation
currency.

The financial statements have been prepared on a going concern basis in accordance with IFRS and IFRIC
interpretations issued and effective or issued and early adopted as at the time of preparing these statements.

The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates
are significant to the Consolidated financial statements are disclosed under accounting policy (u).

B. GOING CONCERN

The Directors are required to consider whether it is appropriate to prepare the financial statements on the basis
that the Group is a going concern. As part of its normal business practice, the Group prepares annual plans
and Directors believe that the Group has adequate resources to continue in operational existence for the
foreseeable future. Notwithstanding the impact of Covid-19, the Group continues to adopt the going concern
basis in preparing the Consolidated financial statements.

C. BASIS OF CONSOLIDATION

The Consolidated Statement of Comprehensive Income and Consolidated Statement of Financial Position
include the financial statements of the Company and its subsidiary undertakings made up to 31 December
2019 and present comparative information for the year ended 31 December 2018.

Subsidiaries are all entities over which the Group has control. A company is classified as a subsidiary when the
Group has the following:

• power over the investee;

• exposure, or rights, to variable returns from its involvement with the investee;

• the ability to use its power over the investee to affect the amount of the investor’s returns.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases. The financial information includes the results of the Company
and its subsidiary undertakings made up to the same accounting date.

Profit or loss and each component of other comprehensive income (‘OCI’) are attributed to the equity holders
of the parent of the Group and to non-controlling interests. All intra-group assets, liabilities, equity, income,
expenses and cash flows relating to transactions between members of the Group are eliminated in full on
consolidation.

A change in ownership interest of a subsidiary without a loss of control is accounted for as an equity transaction.

New and amended standards adopted by the Group

D. FOREIGN CURRENCY TRANSLATION

The Group has applied the following standards, amendment and interpretation for the first time for their annual
reporting period commencing 1 January 2019:

IFRS 16 Leases – replacing IAS 17 Leases.

• The Group has amended its accounting policies following the adoption of IFRS 16 and has provided
additional disclosures, as required, which can be found in note 23. The impact of adopting IFRS 16 has
been further explained in note 33.

The adoption of the above did not have any impact on the amounts recognised in prior periods.

Standards, interpretations and amendments to published standards that are not yet effective
and have not been adopted early by the Group

Certain new standards, amendments to standards and interpretations have been published that are effective
for annual periods beginning after 1 January 2020, and have not been applied in preparing these Consolidated
financial statements. These standards are not expected to have a material impact on the entity in the current
or future reporting periods and on foreseeable future transactions.

Amounts included in the financial statements of each of the Group’s entities are measured using the currency
of the primary economic environment in which the entity operates (the functional currency).

The Consolidated financial statements are presented in Euros, the Company’s functional and presentation
currency. Transactions in foreign currencies are translated into the functional currency using the exchange
rate prevailing at the date of the transaction. Foreign exchange gains and losses resulting from settlement
of such transactions, and from the translation at year end exchange rates of monetary assets and liabilities
denominated in foreign currencies, are recognised in the Consolidated Statement of Comprehensive Income.

The results and financial position of all Group companies that have a functional currency other than euros are
translated as follows:

• income and expenses are translated at average exchange rates;

• assets and liabilities are translated at the closing exchange rate at the Consolidated Statement of

Financial Position date; and

• all resulting exchange differences are recognised as other comprehensive income which is a separate

component of equity.

SEC Newgate S.p.A. - Annual Report 2019

1. Accounting policies (continued)

E. BUSINESS COMBINATIONS

Website development costs and software

The results of subsidiary undertakings acquired during the period are included in the Consolidated Income
Statement from the effective date of acquisition.

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred, measured at fair value at the date of acquisition, and the
amount of any non-controlling interest in the acquired entity.

Non-controlling interest are initially measured at the non-controlling interests’ proportionate share of the
recognized amounts of the acquiree’s identifiable net assets. Acquisitions costs incurred are expensed and
included in operating expenses except where they relate to the issue of debt or equity instruments in connection
with the acquisition.

When the business combination is achieved in stages, any previously held equity interest is re-measured at its
acquisition date fair value and any resulting gain or loss is recognised in profit or loss. It is then considered in
determination of goodwill.

F. SEGMENT REPORTING

Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker has been identified as the Board of Directors
that makes strategic decisions.

The Board considers that the Group’s activity constitutes one operating and one reporting segment, as defined
under IFRS 8. Management reviews the performance of the Company and its subsidiaries by reference to total
results against budget.

G. REVENUE

Revenue is recognized to the extent that it is probable that economic benefits will flow to the Group and the
revenue can be reliably measured. Revenue represents the fees derived from services provided to clients and
is reported net of discounts, VAT and other taxes.

Revenue is recognized in the period in which the service is performed, in accordance with the terms of the
contractual arrangements. Income billed in advance of the performance of the service is deferred and
recognized in the Consolidated Income Statement when the service takes place. Income in respect of work
carried out but not billed at period end is accrued.

H. INTANGIBLE ASSETS

Intangible assets comprise goodwill, website development costs, software and licences.

Goodwill

Goodwill represents the excess of fair value attributed to investments in businesses or subsidiary undertakings over
the fair value of the identifiable assets, liabilities and contingent liabilities acquired at the date of acquisition.
Goodwill on acquisition of an entity is included in intangible assets.

Goodwill has an indefinite useful life and therefore not amortized. Impairment reviews are undertaken annually
or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value
of goodwill is compared to the net present value of future cash flows derived from the underlying assets using
a projection period of up to five years for each cash-generating unit. After the projection period a steady
growth rate representing an appropriate long-term growth rate for the industry is applied. Any impairment in
carrying value is recognized as an expense and is not subsequently reversed.

Expenditure on website development and software is initially stated at cost. Amortisation is calculated to write
down the cost of these assets to their estimated residual value over their expected useful lives of 3 years on a
straight-line basis.

Licenses: Research and development costs

Expenditure on internally developed products is capitalised if it can be demonstrated that:

• it is technically feasible to develop the product for it to be available for use or sold;

• adequate technical, financial and other resources are available to complete the development;

• there is an intention to complete and sell or use the product;

• there is an ability for the Group to sell the product;

• sale of the product will generate future economic benefits;

• expenditure on the project can be measured reliably.

Capitalised development costs are amortised over 3 years. The amortisation expense is included within the
depreciation and amortisation expenses line in the Consolidated Income Statement.

Development costs previously recognised as an expense are not recognised as an asset in a subsequent
period. Development expenditure not satisfying the above criteria and expenditure on the research phase of
internal projects are recognised in the Consolidated Income Statement as incurred.

Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount
and are included in the Consolidated Income Statement.

Licenses: Other

Externally acquired intangible assets are initially recognized at cost and subsequently amortized on a straight-
line basis over their useful economic lives. Licenses are amortized over the term of the license agreement.

I. TANGIBLE ASSETS

Property, furniture and equipment are initially recognized at cost and subsequently stated at cost less
accumulated depreciation and, where appropriate, impairment losses.

Depreciation is calculated to write down the cost of all tangible fixed assets to estimated residual value over
their expected useful lives as follows:

• Furniture and machinery 12%

• Office equipment

20%

• Computer equipment

20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying value is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount
and are recognized within “other operating costs” in the Consolidated Income Statement.

For right-of-use assets recognised see accounting policy (n) for details on initial and subsequent recognition.

SEC Newgate S.p.A. - Annual Report 2019

1. Accounting policies (continued)

J. INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

Impairment of financial assets

Investments included in non-current assets are stated at cost less any impairment charges.

K. FINANCIAL ASSETS

Recognition and initial measurement

Trade receivables are initially recognised when they originate. All other financial assets are initially recognised
when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) is initially measured
at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly
attributable to its acquisition or issue. A trade receivable without a significant financing component is initially
measured at the transaction price.

Classification and subsequent measurement

Impairment provisions are recognized when there is objective evidence (such as significant financial difficulties
on the part of the counterparty or default or significant delay in payment) that the Group will be unable
to collect all of the amounts due under the terms of the receivable, the amount of such a provision being
the difference between the net carrying amount and the present value of the future expected cash flows
associated with the impaired receivable.

For trade receivables, which are reported net of any provision for impairment, the provision is recorded in a
separate allowance account with the loss being recognized within other operating costs in the Consolidated
Income Statement. Trade receivables are written off when there is no reasonable expectation of recovery.
The gross carrying value of the asset is written off against the associated provision. Subsequent recoveries of
amounts previously written off are credited against the same line item.

L. CASH AND EQUIVALENTS

Cash and cash equivalents comprise cash, deposits held at call with banks and other short-term liquid
investments with an original maturity of up to three months or less.

Financial assets are classified on initial recognition and subsequently measured at amortised cost, fair value
through other comprehensive income (FVOCI), or FVTPL.

In the Consolidated Statement of Financial Position, bank overdrafts are shown within borrowings in current
liabilities.

Financial assets at amortised cost - these assets are subsequently measured at amortised cost using the effective
interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains
and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in
profit or loss.

Financial assets at FVTPL - these assets are subsequently measured at fair value. Net gains and losses, including
any interest or dividend income, are recognised in profit or loss.

Equity investments at FVOCI - these assets are subsequently measured at fair value. Dividends are recognised
as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment.
Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

The Group classifies its financial assets into one of the categories above, depending on the purpose for which
the asset was acquired. The Group has not classified any of its financial assets at fair value through profit or
loss, except for financial investments.

Investments

Financial investments (note 18) are categorised as a Level 1 investment for the purpose of the IFRS 13 fair value
hierarchy and are valued using quoted prices in active markets for these investments at the reporting date.

IFRS 13 sets out the framework for determining the measurement of fair value and the disclosure of information
relating to fair value measurement, when fair value measurements are required/used.

IFRS 13 requires certain disclosures which require the classification of assets and liabilities measured at fair
value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value
measurement.

Other investments (note 13) are designated as FVOCI and are shown at fair value with any movements in fair
value taken to equity. On disposal, the cumulative gain or loss previously recognized in this equity reserve is
not recycled to retained earnings.

Trade and other receivables

Trade receivables arise through the provision of services to customers. Other receivables incorporate other
types of contractual monetary assets. These assets are initially recognized at fair value plus transaction costs
that are directly attributable to their acquisition or issue and are subsequently measured at amortized cost
using the effective interest rate method, less any provision for impairment.

M. FINANCIAL LIABILITIES

Recognition and initial measurement

Financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of
the instrument.

A financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL),
transaction costs that are directly attributable to its acquisition or issue.

Classification and subsequent measurement

Financial liabilities are classified as measured at amortised cost or fair value through the profit or loss (FVTPL).
A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated
as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses,
including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently
measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains
and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

The Group’s loans and trade and other payables are measured at amortized cost using the effective interest
method.

The fair value of financial liabilities of the Group together with their carrying values can be found in note 10.

N. LEASES

The Group has applied IFRS 16 using the modified retrospective approach and therefore comparative
information has not been restated and continues to be reported under IAS 17. The details of accounting policies
under IAS 17 are disclosed separately below. The effect of initially applying IFRS 16 is described in note 33.

The Group leases various offices and equipment. Rental contracts are typically for fixed periods of 1 to 10 years
but may have extension and termination options.

SEC Newgate S.p.A. - Annual Report 2019

1. Accounting policies (continued)

N. LEASES (CONTINUED)

Policy applicable from 1 January 2019

At the inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys, throughout the period of use, the right to obtain substantially all
of the economic benefits from use of the identified asset and the right to direct the use of the identified asset.

This policy is applied to contracts entered into, on or after 1 January 2019.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The cost
of the right-of-use asset is comprised of the amount of the initial measurement of the lease liability adjusted
for any lease payments made at or before the commencement date plus any initial direct costs incurred by
the Group and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying
asset and site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated over the length of the lease term from the commencement
date if the asset is not retained by the Group. Otherwise the estimated useful lives of the right-of-use assets
are determined on the same basis as tangible assets (see accounting policy (i)). The right-of-use assets are
periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are unpaid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, including in-substance fixed payments;

• variable lease payments that depend on an index or a rate initially measured using the index or rate as

at the commencement date;

• amount expected to be payable under a residual value guarantee; and

• the exercise price under a purchase option that the Group is reasonably certain to exercise;

• payments of penalties for terminating the lease, if the lease term reflects the Group exercising an option

to terminate the lease.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, if there is a change in the
Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group
changes its original assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.

The Group presents right-of-use assets within “Tangible assets”. Lease liabilities are presented in its own separate
line item in the Consolidated Statement of Financial Position.

Lease payments for short-term leases, leases payments for leases of low-value assets and variable lease
payments not included in the measurement of the lease liability are classified as cash flows from operating
activities. For all other lease liability payments, the Group has classified the principal portion of lease payments
within financing activities and the interest portion within operating activities.

Short-term leases and leases of low value

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have
a lease term of 12 months of less and leases of low-value assets. The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis over the lease term.

Policy applicable before 1 January 2019

For contracts entered into before 1 January 2019, leases where the lessor retains a significant portion
of the risks and rewards of ownership were classified as operating leases. Rentals payable under operating
leases (net of any incentives received) were charged as operating costs to the Consolidated Statement
of Comprehensive Income on a straight-line basis over the lease term.

O. SHARE CAPITAL AND SHARE PREMIUM

SEC Newgate S.p.A.’s Ordinary shares are classified as equity. Share premium represents the amounts received
in excess of the nominal value of the Ordinary shares less costs of the shares issued and is classified as equity.

P. DIVIDENDS

Dividends are recognized when they become legally payable, which is when they are approved for distribution.
In the case of interim dividends to equity shareholders, this is when declared by the directors and paid.

Q. TAXATION

The tax expense for the period comprises current and deferred tax.

Current income tax

The current tax is based upon the taxable profit for the year together with adjustments, where necessary, in
respect of prior periods, and calculated using tax rates that have been enacted or substantively enacted at
the end of the financial year. Italian Corporate entities are subject to a corporate income tax (IRES) and to a
regional production tax (IRAP).

Current tax is recognized in the Consolidated Income Statement, except to the extent that it relates to items
recognized in other comprehensive income or directly in equity.

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid
to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted
at the reporting date in the countries where the Group operates and generates taxable income.

Deferred tax

Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability in the
Consolidated Statement of Financial Position differs from its tax base.

Deferred tax assets are recognised to the extent that the Group believes it is probable that future taxable
profit will be available against which temporary timing differences and carry forward of unused tax credits/
losses can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively
enacted by the reporting date and are expected to apply when the deferred tax liabilities/assets are settled/
recovered.

SEC Newgate S.p.A. - Annual Report 2019

1. Accounting policies (continued)

R. EMPLOYEE BENEFITS

Impairment of goodwill

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:

(i). 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;

(ii). Lor 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.

The carrying value of goodwill is subject to an impairment review both annually and when there are indications
that the carrying value may not be recoverable, in accordance with accounting policies (h) stated above.
The recoverable amounts of cash-generating units have been determined based on value-in-use calculations
which require the use of estimates. See note 11 for further details.

Impairment of trade receivables

Management performs an assessment of the recoverability of debtors when evidence arises that demonstrates
the collection is uncertain. Management periodically reassesses the adequacy of the allowance for doubtful
debts in conjunction with its credit policy and discussions with each specific customer. Judgement is applied at
the point where recoverability is deemed uncertain and thus when a provision is to be recognized (see note 16).

Fair value measurements and valuation processes

Some of the Group’s assets and liabilities are measured at fair value for financial reporting purposes. In
estimating the fair value of an asset or a liability, the Group uses market observable data to the extent it is
available (see note 10).

S. PROVISIONS

Useful lives of depreciable assets

Provisions comprise liabilities where there is uncertainty about the timing of settlement, but where a reliable
estimate can be made of the amount.

Useful lives of depreciable assets are based on the expected utilization of each asset. Changes to estimates
can result in significant variations in the carrying value and amounts charged to the Consolidated Statement
of Comprehensive Income in specific periods (see notes 11 and 12).

T. SHARE BASED PAYMENTS

The cost of stock options, together with the corresponding increase in shareholders’ equity, is recognized
under personnel costs over the period in which the conditions relating to the achievement of objectives and
/ or provision of the service are met. The cumulative costs recognized for these operations at the end of each
year up to the vesting date are commensurate with the expiry of the vesting period and with the best estimate
of the number of participating instruments that will actually mature. The cost or revenue in the Consolidated
Income Statement for the year represents the change in the cumulative cost recorded at the beginning and
end of the year.

Service or performance conditions are not taken into consideration when the fair value of the plan is defined
at the grant date. However, the probability that these conditions will be satisfied in defining the best estimate
of the number of capital instruments that will accrue is taken into account. Market conditions are reflected in
the fair value at the grant date. Any other condition related to the plan, which does not involve an obligation
of service, is not considered as a condition of vesting. The non-vesting conditions are reflected in the fair value
of the plan and involve the immediate accounting of the cost of the plan, unless there are also conditions of
service or performance.

U. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgments are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. The Group
makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. Areas subject to estimation uncertainty and judgments that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are combined and discussed below.

Employee benefits

For actuarial assumptions on severance indemnity refer to note 25.

Lease liabilities

Lease payments are discounted at the incremental borrowing rate where the interest rate implicit in the lease
cannot be readily determined. To determine the incremental borrowing rate, the Group:

• where possible, uses recent third-party financing received by the individual lessee as a starting point,

adjusted to reflect changes in financing conditions since third party financing was received

• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by

the Group, which does not have recent third party financing, and

• makes adjustments specific to the lease, e.g. term, country, currency and security.

For further details on lease liabilities refer to note 23.

SEC Newgate S.p.A. - Annual Report 2019

2. Segmental reporting
Business segments

The Board considers that the principal activity of the SEC Newgate Group constitutes one operating and one
reporting segment, as defined under IFRS 8. Management reviews the performance of the SEC Newgate
Group by reference to total actual result against the total budgeted result in order to make strategic decisions.

Geographical segments

Services provided by Group entities located in each of the following countries are as follows:

Italy

United Kingdom

Belgium

Colombia

Spain

Poland

France

Germany

Australia

Hong Kong

China

Singapore

Abu Dhabi

Morocco

€’ 000

16,879

9,111

4,205

4,052

941

965

4,148

674

5,152

651

431

299

2019

35%

19%

11%

€’ 000

12,838

4,441

4,064

4,347

1,204

1,080

545

453

2018

44%

15%

14%

15%

No individual client sales were greater than 10% of Group revenue (2018: None).

47,550

100%

28,972

100%

3. Revenue

SEC Newgate S.p.A. - Annual Report 2019

The nature of services provided can vary significantly depending on the requirements of the customer. The
Group provides a range of communications, public affairs and integrated services specialising in corporate
and financial communications, consumer PR, investor relations, financial communications, B2B PR, public affairs,
digital services, research, analytics and media planning and buying.

Services provided by Group entities has been split into the following categories:

Communications

Advocacy and public affairs

Integrated services

2019

€' 000

23,678

13,038

10,834

47,550

Restated1

2018

€' 000

14,467

7,946

6,559

28,972

Communications and public relations revenue includes services relating to mergers and acquisitions, crisis
communications and planning, corporate positioning, consumer PR, IPOs, investor relations and media training
to name a few.

Advocacy and public affairs revenue relates to positioning events and strategies, policy development,
government relations and national and local government coverage amongst other services offered.

Integrated services revenue which includes research, innovation and digital relates to a number of services
including reputation research, advanced modelling and analytics, creative design and concepts, digital
development and video animation and production.

The split of client based revenue as a percentage of Group revenue for the year was as follows:

Client based revenue

Europe

Australia & Oceania

South America

Asia

North America

Africa

€' 000

35,418

4,914

3,669

2,232

944

373

2019

74%

10%

47,550

100%

SEC Newgate S.p.A. - Annual Report 2019

4. Employees expenses

Wages, salaries and non-executive fees

Social security costs

Severance indemnity and pension contributions

Share based payments1

Other employment related welfare costs

2019

€' 000

18,414

3,087

1,473

380

2018

€' 000

10,059

1,924

461

23,386

12,560

1On 28 of May 2018, the Board of Directors, in line with resolutions passed at the shareholders’ meeting on 27 October 2017, established
a stock option plan for managers of the investee companies and the parent company. Stock option costs, previously included in ‘other
employment related welfare costs’, of circa 32 €’000 (2018: 37 €’000) above have a corresponding tax impact of 8 €’000
(2018: 9 €’000).

The average monthly number of employees during the year, including Executive Directors, was as follows:

2019

Number

2018

Number

Fee earners

Management

Administration

464

592

Salaries to key managers of the Group, including the Board of Directors’ fees, was:

Salaries of key managers

End of mandate allowance

2019

€' 000

1,010

1,028

250

327

2018

€' 000

3,611

3,656

Directors’ remuneration

31 December 2019

Executive Directors

Fiorenzo Tagliabue

Emma Kane1

Brian Tyson1

Anna Milito

Thomas Parker

Mark Glover1

Andrea Cornelli

Non-executive Directors

John Foley1

Luigi Roth

David Mathewson

Paola Bruno

31 December 2018

Executive Directors

Fiorenzo Tagliabue

Cesare Valli

Anna Milito

Thomas Parker

Mark Glover

Non-executive Directors

Luigi Roth

David Mathewson

Paola Bruno

SEC Newgate S.p.A. - Annual Report 2019

Fees and
Salaries

Pension
Contributions

Bonus Other benefits2

€' 000

145

152

124

140

160

920

Fees and
Salaries

Pension
Contributions

Bonus Other benefits2

€' 000

145

202

139

216

877

146

Total

€' 000

168

160

128

105

165

160

1,010

Total

€' 000

168

299

179

254

1,101

In the prior year key managers included a number of managers from each subsidiary, however given the
growth of the Group and the recent acquisition (see note 29) key managers who have the responsibility of
directing the Group are now considered to be the Board of Directors seen below.

1 Remunerated in British pounds and Australian dollars, figures above have been translated into Euros at the year to date average
exchange rate.

2 Other benefits comprise of payments in respect of healthcare, life insurance and other similar benefits.

SEC Newgate S.p.A. - Annual Report 2019

5. Service costs

Consulting

Internal Consulting and Directors

Overheads

Rental expenses

Services

2019

€' 000

1,645

908

4,030

721

1,678

8,982

Restated1

2018

€' 000

1,488

1,105

1,688

1,287

1,181

6,749

7. Other operating costs

Impairment of trade receivables

Tax local

Other operating costs

Other operating income

Other operating charges

SEC Newgate S.p.A. - Annual Report 2019

2019

€' 000

243

139

1,004

(164)

1,271

Restated1

2018

€' 000

123

113

790

(733)

314

Overheads principally comprise costs incurred with subcontractors in order to manage extraordinary workload
activity not directly provided internally, as well as other costs such as utilities, insurance, subscriptions and
general office costs.

Services comprise professional fees, marketing and advertising, travel expenses, phone costs, office
maintenance expenses, car expenses and bank charges.

Other operating costs include subscriptions, magazines, books and newspapers, consumption of materials.

Other operating income and charges in 2019 and 2018 are mainly generated by non-recurring adjustments
and miscellaneous items. In 2018, other operating income includes an extraordinary income for 502 €’000 tax
credit reimbursement on the investment made from SEC in an Artificial Intelligence project.

Tax local primarily includes chamber of trade costs and stamp duty taxes; the remaining costs comprise waste
tax, motor vehicle tax and irrecoverable VAT.

6. Depreciation and amortisation

Amortisation of intangible assets

Depreciation of tangible assets

2019

€' 000

2,059

2,154

2018

€' 000

118

142

260

8. Finance expense and finance income

Interest income on bank deposits

Dividend income

Fair value gains on financial assets at fair value through profit or loss

Finance income

Interest expense

Interest on lease liabilities

Fair value losses on financial assets at fair value through profit or loss

Net foreign exchange loss

Finance expense

Net finance expense

2019

€' 000

2018

€' 000

119

188

337

265

127

729

541

151

195

SEC Newgate S.p.A. - Annual Report 2019

9. Taxation

Current tax charge

Deferred tax (credit)/charge

Total income tax charge

2019

€' 000

1,366

(95)

1,271
1,271

2018

€' 000

596

639

Deferred tax balances were as follows:

Deferred tax assets

Deferred tax liabilities

Notes

The activities of the Group are located across a number of geographical locations including Italy, UK, Spain,
Germany, Belgium, Poland, Columbia, France, Australia, Hong Kong, China, Singapore and Abu Dhabi.
Activities within Italy are subject to the two following corporate taxation regimes:

- IRES is the state tax which was levied at 24% of taxable income

- IRAP is a regional income tax, for which the standard rate is 3.9%, with certain local variations permitted.

The tax assessed for the year differs from the standard rate of tax in Italy at 24% (2018: 24%) for the reasons set
out in the following table:

Profit before taxation on continuing activities

Income tax expense computed at the statutory tax rate on loss
before taxation on all activities

Temporary differences subject to tax @ 24.0%

Non-deductible expenses subject to tax @ 24.0%

Non-taxable incomes subject to tax @ 24.0%

Tax loss carry forward (use) subject to tax @ 24.0%

Tax loss carry forward (set-up) subject to tax @ 24.0%

Recovery of IRAP taxable amounts on IRES purposes subject to tax
@ 24.0%

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 loss

Total current income taxation

Deferred tax expense

Total tax charge for the year

2019

€' 000

1,271

(305)

(533)

(411)

254

(225)

(94)

(12)

(1,271)
(1,271)

(1,271)

2018

€' 000

2,211

(508)

(126)

(88)

240

120

(105)

(7)

(166)

(596)

(43)

(639)

SEC Newgate S.p.A. - Annual Report 2019

2019

€' 000

2,053

(224)

2019

€' 000

1,088

456

155

1,829

2018

€' 000

483

605

2018

€' 000

267

339

Movements in deferred tax balances during the year were as follows:

At 1 January

Recognised in income statement

Acquisition through business combination

Other movements

Translation differences

At 31 December

10. Financial instruments and risk management

FINANCIAL INSTRUMENTS

Financial assets are classified on initial recognition and subsequently measured at amortised cost, fair value
through other comprehensive income (OCI), or fair value through profit or loss depending on the purpose for
which the asset was acquired. The Group has classified its financial investments (note 18) as fair value through
profit or loss, its other investments (note 13) as fair value through OCI and all other financial assets are held at
amortised cost.

Financial liabilities are classified as measured at amortised cost or fair value through profit or loss (FVTPL). A
financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated
as such on initial recognition.

Financial investment at fair value

IFRS 13 sets out the framework for determining the measurement of fair value and the disclosure of information
relating to fair value measurement, when fair value measurements are required/used.

The fair value used for evaluating the financial investments are based on quoted prices in an active market
(level 1). The Group has estimated relevant fair values on the basis of publicly available information from
outside sources.

Other investments are designated as fair value through other comprehensive income and are shown at fair
value with any movements in fair value taken to equity. On disposal, the cumulative gain or loss previously
recognized in equity is included in the profit or loss for the year.

SEC Newgate S.p.A. - Annual Report 2019

10. Financial instruments and risk management (continued)

The Group’s financial assets and liabilities, as defined by IAS 32, are as follows:

FINANCIAL RISK MANAGEMENT

Notes

2019

€’ 000

Fair

Value

Carrying

Value

1,437

Investments

Other financial assets

Other assets

Trade and other receivables

16, 17

16,467

Financial investments

Cash and cash equivalents

Financial assets

Trade and other payables

20, 21

Lease liabilities

Provisions

Other non-current liabilities

Borrowings

Financial liabilities

2222

280

6,138

24,359

8,876

8,468

1,645

5,344

280

6,138

24,359

8,876

8,468

1,645

5,344

14,878
14,878

2018

€’ 000

Fair

Value

1,252

488

9,720

582

5,220

17,329

5,173

565

6,786

6,963

Carrying

Value

1,252

488

9,720

582

5,220

17,329

5,173

565

6,786

6,963

39,211
39,211

19,487

Management have assessed that the fair value of cash and short term deposits, trade receivables, trade
payables, bank overdrafts and other current liabilities approximate to their carrying amounts as those items
have short term maturities.

Maturity profile of financial liabilities

Due in six months or less

Due between six months and 1 year

Due between 1 year and 2 years

Due between 2 and 5 years

Due in 5 years or more

2019

€' 000

13,221

2,609

3,741

16,041

3,599

39,211

2018

€' 000

7,132

977

4,905

1,664

4,809

19,487

The Group’s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation,
acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial
business, and the operational risks are an inevitable consequence of being in business. The Group’s aim is
therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects
on the Group’s financial performance.

The Group’s risk management policies are designed to identify and analyse these risks, to set appropriate
risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-todate
information systems. The Group regularly reviews its risk management policies and systems to reflect changes
in markets, products and emerging best practice.

Risk management is carried out by the Board of Directors. The Board is responsible for the identification of the
major business risks faced by the Group and for determining the appropriate courses of action to manage those
risks. The most important types of risk are credit risk, liquidity risk, and market risk. Market risk includes currency
risk, interest rate and other price risk.

Credit risk

Credit risk is the risk of financial loss to the Group if a client or counterparty to a financial instrument fails to meet
its contractual obligation and arises principally from the Group’s trade receivables. As at 31 December 2019 the
Group had amounts due from sixteen major customers amounting to 20% (2018: ten amounting to 20%) of the trade
receivables balance.

The Group is exposed to credit risk in respect of these balances such that, if one or more of these customers encounters
financial difficulties, this could materially and adversely affect the Group’s financial results. Management addresses
the Group’s exposure to credit risk by assessing the credit rating of new customers prior to entering contracts and by
entering contracts with customers on agreed terms. Management consider all relevant facts and circumstances,
including past experiences with a customer or customer class when assessing the credit risk of clients. See accounting
policy (k) for details on the impairment methodology of trade receivables. The maximum exposure to credit risk at
the reporting date is the carrying value of each class of financial assets disclosed above.Management reviews the
recoverability of trade receivables regularly and based on this analysis a provision for trade receivables is recognised
to cover any expected credit loss. Details of exposure to trade receivables is given in note 16.

Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities
when they fall due.The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities
when they become due. To achieve this, the Group finances its operations through a mix of equity and borrowings.
The Group’s objective is to provide funding for future growth and to achieve a balance between continuity and
flexibility through its bank facilities and future intergroup loans.

The Board receives cash flow projections on a regular basis as well as information regarding cash balances. At the
end of the financial year, these projections indicated that the Group is expected to have sufficient liquid resources
to meet its obligations under all reasonably expected circumstances.

Market risk

(a) Currency translation risk

The Group’s subsidiaries operate in Europe, Australia, Singapore, Hong Kong, Columbia, Poland and Abu Dhabi and
revenues and expenses are denominated in Euro (EUR), Pound Sterling (GBP), Australian Dollar (AUD), Singapore
Dollar (SGD), Hong Kong Dollar (HKD), United Arab Emirates Dirham (AED), Colombian Peso (COP), Polish Zloty (PLN)
and United States Dollar (USD). The Group’s Euro (EUR) Consolidated Statement of Financial Position is not protected
from movements in the exchange rate between these currencies and Euros. The overall exposure to foreign currency
risk is considered by management to be low.

100

101

SEC Newgate S.p.A. - Annual Report 2019

10. Financial instruments and risk management (continued)

FINANCIAL RISK MANAGEMENT (continued)

The following table demonstrates the sensitivity to reasonable possible change in significant currencies to the
Group such as GBP, AUD, SGD, HKD, AED, COP, PLN and USD to EUR exchange rates, with all other variables
held constant. The impact on the Group profit before tax is due to changes in the fair value of monetary
assets and liabilities. The Group exposure to possible changes in all other foreign exchange currencies is not
deemed material.

Effect on profit before tax

British Pound

Australian Dollar

Singapore Dollar

Hong Kong Dollar

UAE Dirham

Colombian Peso

Polish Zloty

Chinese Yuan

US Dollar

Effect on equity

British Pound

Australian Dollar

Singapore Dollar

Hong Kong Dollar

UAE Dirham

Colombian Peso

Polish Zloty

Chinese Yuan

US Dollar

(b) Interest rate risk

+5%

€' 000

(56)

(8)

+5%

€' 000

1,311

(2)

2019

-5%

€' 000

(55)

(2)

(1)

(6)

(4)

(1)

(19)

2019

-5%

€' 000

(1,311)

(78)

(61)

(7)

(8)

(12)

(7)

(29)

SEC Newgate Group has previously been funded through borrowings from UBS (Italy) S.p.A., Deutsche Bank S.p.A.,
Unicredit S.p.A., BPM Banco Popolare di Milano, Carige. Please refer to note 22 for details of the facilities including
interest rates, repayment dates and repayment terms.

Capital Management

The capital structure of the Group comprises the equity attributable to equity holders of the parent company, which
includes issued share capital, reserves and retained earnings. Quantitative data on these is set out in the Consolidated
Statement of Changes in Equity.

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.

11. Intangible assets

Cost

At 1 January 2018

Additions in the year

At 31 December 2018

Additions in the year

Acquisition through business combination

Disposals in the year

Translation differences

At 31 December 2019

Depreciation

At 1 January 2018

Charge for the year

At 31 December 2018

Charge for the year

Acquisition through business combination

Eliminated on disposal

Translation differences

At 31 December 2019

Net book Value

At 1 January 2018

At 31 December 2018

At 31 December 2019

Goodwill

Websites, software
and licences

€’ 000

9,205

5,154

14,359

14,995

€’ 000

322

1,176

1,498

568

(4)

Total

€’ 000

9,527

6,330

15,857

15,089

568

(4)

29,354

2,193

31,547

9,205

14,359

29,354

(125)

(118)

(243)

(95)

(417)

(28)

(779)

197

1,255

1,414

(125)

(118)

(243)

(95)

(417)

(28)

(779)

9,402

15,614

30,768

Refer to note 29 for details of business acquisitions during the year.

102

103

SEC Newgate S.p.A. - Annual Report 2019

11. Intangible assets (continued)

IMPAIRMENT TESTING FOR CASH-GENERATING UNITS CONTAINING GOODWILL

For the purpose of impairment testing, the aggregate carrying amount of goodwill is allocated to each cash
generating unit (CGU). Management identifies each subsidiary as a single CGU. The carrying value of goodwill
is compared to the net present value of future cash flows derived from the underlying assets for each CGU.

The information required by paragraph 134 of IAS 36 is provided below. The recoverable amount of each
CGU has been verified by comparing its net assets carrying amount to its value in use calculated using the
Discounted Cash Flow method. The main assumptions for determining the value in use are reported below:

The aggregate carrying amount of goodwill is allocated to each CGU as follows:

ACH Sec Global (previously known as ACH Cambre SL)

CLAI SAS

Cambre Associates SA

Kohl PR & Partners GMBH

Martis Consulting Sp. z o.o.

Newington Communications Limited1

Sec & Partners S.r.l.

SEC+Latam Communications Estrategica SAS

Newgate Communications Pty Limited

Newington Communications Limited

Newgate Communications (HK) Limited

21:12 CommunicationsLimited

Newgate Communications (Singapore) Pte. Ltd

Newgate CommunicationsFZ-LLC

CLAI SAS (local ledger goodwill)2

Martis Consulting Sp. z o.o. (local ledger goodwill)

Entity acquired

2014

2018

2013

2015

2017

2016

2014

2017

2019

N/A

2019

€' 000

492

5,010

1,548

761

1,196

2,058

100

2,143

8,235

4,411

976

713

617

418

Sec & Partners S.r.l. (local ledger goodwill)

N/A

632

2018

€' 000

492

5,010

1,548

761

1,196

2,058

100

2,143

418

632

29,354

14,359

1Goodwill relating to the Newington acquisition of 1,806 €’000 in 2016 was revised to 2,058 €’000 in 2017 based on the second earn-
out.

2Additions in 2018 also included local goodwill in CLAI of 418 €’000 resulting from a previous acquisition.

Additions in 2014 also included goodwill in ACH of 275 €’000 resulting from a previous merger . This was fully
impaired in 2018.

Average market rate

Discount rate

ACH

8.8%

6.4%

CLA

8.8%

5.3%

CAM

8.8%

5.5%

KOHL

8.8%

5.5%

Average market rate

Discount rate

SEC-L

8.8%

15.6%

NGAS

NGCL

NGHK

8.8%

7.8%

8.8%

8.2%

8.8%

8.7%

MRT

8.8%

8.0%

2112

8.8%

8.2%

NEW

8.8%

8.2%

SEC-P

8.8%

8.2%

NGSN

8.8%

8.4%

NGAD

8.8%

48.6%

The discount rate has been determined on the basis of market information on the cost of money and the
specific risk of the industry. In particular, the Group used a methodology to determine the discount rate which
considered the average capital structure of a group of comparable companies.

The recoverable amount of CGUs has been determined by utilizing cash flow forecasts based on the 2020 to
2024 five year plan approved by management, on the basis of the results attained in previous years as well as
management expectations regarding future trends in the public relations market. At the end of the five-year
projected cash flow period, a terminal value was estimated in order to reflect the value of the CGUs in future
years. The terminal values were calculated as a perpetuity at the same growth rate as described above and
represent the present value, in the last year of the forecast, of all future perpetual cash flows. The impairment
test performed as of the balance sheet date resulted in a recoverable value greater than the carrying amount
(net operating assets) of the above-mentioned CGUs.

Acquisition of SEC Latam is subject to an earn-out based on company EBITDA over three years (2018 – 2019 -
2020); total consideration for the acquisition of the 51% share of the company has been calculated based on
conservative and reasonable estimates, consequently an earn-out liability for 408 €’000 was accrued as of 31
December 2019 (see note 24 and note 26). The final total consideration is subject to uncertainty and depends
on the company performance over the ongoing financial year.

Acquisition of CLAI is subject to an earn out based on company EBITDA over seven years (2019 - 2020 - 2021
- 2022 - 2023 - 2024- 2025); SEC holds preferred shares in Clai that represent the 10% of the share capital that
allow 50% + 0.1 voting rights and a set of options allows SEC Newgate to escalate to 100% of Clai within the
end of the earn out period; total consideration for the acquisition of 100% share of the company has been
calculated based on conservative and reasonable estimates, consequently an earn-out liability for 5,962 €’000
was accrued as of 31 December 2019 (see note 24 and note 26). The final total consideration is subject to
uncertainty and depends on the company performance over the ongoing financial year.

104

105

Acquisition through business combination

4,049

1,549

SEC Newgate S.p.A. - Annual Report 2019

12. Tangible Assets

Cost

At 1 January 2018

Additions in the year

Acquisition through business combination

Disposals in the year

At 31 December 2018

Adjustment on transition to IFRS 16

Additions in the year

Transfers between categories

Disposals in the year

Revaluation increase

Translation differences

At 31 December 2019

Leasehold
property

Leasehold
improvements

Equipment

Furniture and
fittings

€' 000

5,375

379

325

(1)

703

351

161

107

282

143

713

113

Total

€' 000

1,307

453

260

(77)

1,943

5,749

823

6,779

767

114

153

(76)

958

231

329

468

194

(557)

(162)

(113)

(703)

322

(106)

(15)

(67)

(188)

(134)

(537)

(62)

159

(23)

(561)

(68)

(136)

(894)

(142)

(203)

(689)

(1,163)

(189)

(2,059)

(348)

(2,904)

(18)

(22)

289

(148)

(53)

148

(50)

(2,660)

(1,336)

(785)

(1,204)

(5,985)

152

417

777

408

207

269

717

412

780

8,984

7,082

106

Depreciation

At 1 January 2018

Charge for the year

Acquisition through business combination

Eliminated on disposal

At 31 December 2018

Charge for the year

(1,614)

(227)

(59)

(286)

(122)

Acquisition through business combination

(993)

(1,026)

Transfers between categories

Eliminated on disposal

Translation differences

At 31 December 2019

Net book value

At 1 January 2018

At 31 December 2018

At 31 December 2019

SEC Newgate S.p.A. - Annual Report 2019

Included in the amounts above are the following in relation to right-of-use assets:

Leasehold property

Leasehold improvements

Equipment

Furniture and fittings

Depreciation charge for the year

Net book value

2019

€' 000

1,594

1,725

2018

€' 000

2019

€' 000

7,082

206

7,422

2018

€' 000

Additions to the right-of-use assets during the year were 68 € ‘000.

Amounts included in revaluations above relates to an adjustment to office leases recognised under IFRS 16.
See note 23 for the lease liability revaluation.

For further details on the adoption of IFRS 16 on 1 January 2019, please refer to note 33.

Owned

Porta Communications Plc

SEC Newgate

Sec & Partners S.r.l.

SEC Newgate

Other equity investments

Ownership

16.9

95.0

2019

€' 000

2018

€' 000

1,245

1,252

In September 2019, the entire share capital of Porta Communications PLC (Porta) was acquired by SEC Newgate
S.p.A. As a result, Porta and all of its subsidiaries have been consolidated into the SEC Newgate group financial
statements. For further details please refer to note 29.

14. Other financial assets

Rental deposits

Other financial investments

2019

€' 000

2018

€' 000

Rental deposits include bank deposits to guarantee office leases. Rental deposits directly held by the landlord
can be found in note 15.

107

9,742

2,113

1,193

1,921

14,969

13. Investments

SEC Newgate S.p.A. - Annual Report 2019

15. Other assets

Deferred tax assets

Rental deposits

Directors benefits

2019

€' 000

2,053

1,076

361

3,490

2018

€' 000

483

149

339

971

Director benefits is the asset coverage provided by an external insurance company in order to fulfil the end of
mandate obligations for a Board Director (see note 26).

16. Trade receivables

Trade receivables

Less: provision for impairment

2019

€' 000

15,685

(591)

15,094

2018

€' 000

10,063

(433)

9,630

Management considers that the carrying amount of trade receivables approximates to their fair values due
to their short-term nature.

A summary of trade receivables, excluding impaired balances, categorised by due date for payment is as
follows:

Neither past due nor impaired

Past due but not impaired:

Past due up to 3 months

Past due more than 3 months not more than 6 months

Past due more than 6 months not more than 1 year

Past due more than 1 year

2019

€' 000

6,874

6,466

680

357

717

15,094

2018

€' 000

5,603

2,283

219

620

905

9,630

The following analysis was made in order to estimate unexpected credit losses:

Expected credit loss rate

Estimated carrying value amount at default (€’000)

Lifetime ECL (€’000)

Maturity analysis (Days)

0 - 365

365 -730

730 - 1826

1,826

30%

443

- 133

70%

224

157

80%

391

313

SEC Newgate S.p.A. - Annual Report 2019

The movement on impairment for the year in respect of trade receivables was as follows:

At 1 January

Provision made during the year

Acquired on business combinations

Amounts written off during the year

Amounts recovered during the year

Translation differences

At 31 December

17. Other receivables

Accrued income

Prepayments

Tax on income

VAT receivable

Other receivables

2019

€' 000

433

126

131

(2)

(106)

591

2019

€' 000

1,373

1,915

478

574

222

4,562

2018

€' 000

365

123

(55)

433

2018

€' 000

520

503

668

1,822

Management considers that the carrying amount of other receivables approximates to their fair values due
to their short-term nature.

In 2018, other receivables included tax credits receivable of 502 €’000 relating to the development of artificial
intelligence software by SEC Newgate. There is no such receivable in 2019.

108

109

SEC Newgate S.p.A. - Annual Report 2019

18. Financial Investments

UBS S.A. investment

19. Cash and cash equivalents

2019

€' 000

280

2018

€' 000

583

Cash at bank and in hand

Restricted cash

SEC Newgate S.p.A. - Annual Report 2019

2019

€' 000

5,817

321

6,138

2018

€' 000

5,220

The table below provides an analysis of financial instruments that are initially recognised at fair value (level 1)
based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities.

2019

Bonds

Equities

Other

Investments

2018

Bonds

Equities

Other

Investments

Purchase
cost

Fair value
against P&L

€' 000

170

€' 000

280

Accrued
interest

€' 000

Purchase
cost

Fair value
against P&L

Accrued
interest

€' 000

458

551

500

583

At 1 January 2018

Acquisitions

Disposals during the year

Changes in fair value

At 31 December 2018

Acquisitions

Disposals during the year

Changes in fair value

At 31 December 2019

Debt
securities

€' 000

(53)

Equities

€' 000

Funds

€' 000

1,068

(461)

(24)

583

(379)

280

Loans

€' 000

Total

€' 000

280

Total

€' 000

500

583

Total

€' 000

1,121

(514)

(24)

583

(379)

280

Cash at bank and in hand are included in cash and cash equivalents disclosed above and in the Consolidated
Statement of Cash Flows. These balances have an original maturity of 90 days or less.

The restricted cash deposits above are restricted cash amounts and are included within cash and cash
equivalents disclosed above and in the Consolidated Statement of Cash Flows. These deposits are subject to
restrictions and therefore not available for general use by the Group.

20. Trade payables

Trade payables

21. Other payables

Accrued expenses

Income received in advance

Employee and payroll-related liabilities

Government institutions

Tax on income

Deferred tax liabilities

VAT payable

Other payables

2019

€' 000

7,462

2018

€' 000

4,953

2019

€' 000

1,414

1,412

2,699

368

397

224

1,466

1,419

9,399

Restated1

2018

€' 000

220

1,507

367

191

(605)

349

709

2,739

1Deferred tax liabilities have been disclosed as a separate line item. This was previously included within tax on income.

Management considers that the carrying amount of other payables approximates to their fair values due
to their short-term nature.

Other payables includes 142 €’000 (2018: 142 €’000) due to a director of SEC and Partners.

110

111

SEC Newgate S.p.A. - Annual Report 2019

22. Borrowings

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings,
which are measured at amortised cost. The Group has both long-term borrowings in order to fund business
acquisitions and short-term credit facilities for working capital requirements.

DETAILS OF BANK LOANS

SEC Newgate S.p.A. - Annual Report 2019

Deutsche Bank

Banco Popolare di Milano

Unicredit

Carige

KBC Bank

Bankinter

Itau Corpbanca

National Westminster Bank PLC

Banco Colpatria Red Multibanca SA

Total loans

Interest payable

Total current liabilities

UBS

Deutsche Bank

Banco Popolare di Milano

Unicredit

Carige

Hawk Investment Holdings

Retro Grand Limited

Total non-current liabilities

Total borrowings

2019

€' 000

784

919

401

141

100

2,404

2,447

1,762

2,242

3,275

4,703

449

12,431

14,878

2018

€' 000

459

199

1,031

391

2,332

2,371

1,762

200

2,173

401

4,592

6,963

UBS (Italy) S.p.A

Deutsche Bank

Banco Popolare di
Milano

Unicredit

Carige

KBC Bank

EUR

Currency Outstanding
€'000

Total
facility
€'000

Interest rate Maturity date

Repayment
term

Security

1,762

Euribor +1.25% Open ended

Open
ended

Pledge on Silvia
Anna Mazzucca
financial
instruments

1,000

Euribor +1% March 2020

Monthly

2,970

3,000 Euribor 3 months
+ 1.7%

November
2023

Every three
months

1,000

1.1% February 2020

Monthly

200

1,000

1.2%

3,966

4,000 Euribor 3 months
+1.95%

401

1,000

1.4%

December
2020

March 2025

December
2020

Monthly

Three
months

Every six
months

0.95%

July 2020

Monthly

0.95% October 2020

Monthly

0.95%

December
2020

Monthly

None

Itau Corpbanca

COP

DTF + 9.5% March 2020

Monthly

DETAILS OF OTHER BORROWINGS

Currency Type of

borrowing

Carrying amount
€'000

Face
Value
€'000

Interest rate Maturity date Repayment term

Hawk Investment
Holdings

GBP

Retro Grand

GBP

Deep
Discounted
bond

Convertible
loan

5,673

4,703

5.87% 14 April 2023

449

0% 10 April 2024

Lump sum at
maturity date

112

113

SEC Newgate S.p.A. - Annual Report 2019

22. Borrowings (continued)

DETAILS OF OTHER BORROWINGS (continued)

23. Leases

Further details of the above loans can be found below:

This note provides information for leases where the group is a lessee.

a. UBS (Italy) S.p.A. - an open-ended revolving credit facility of 1,762 € ‘000 was obtained during the year

ended 31 December 2013 at an interest rate of Euribor 12 month plus a margin of 1.25 per cent.

b. Deutsche Bank S.p.A. - a loan of 1,000 € ‘000 at an interest rate of 1-month Euribor plus a margin of 1,00

per cent. Repayments are on a monthly basis between April 2017 and March 2020.

c. Deutsche Bank S.p.A - new of 3,000 € ‘000 was obtained during 2019 at an interest rate of Euribor 3

months repayable every three months between November 2019 and November 2023.

Lease liabilities

Current

Non-current

SEC Newgate S.p.A. - Annual Report 2019

2019

€'000

2,861

5,607

8,468

2018

€'000

d. BPM Banco Popolare di Milano - a loan of 1,000 € ‘000 at an interest rate of 1,1% repayable in monthly

instalments between February 2016 and February 2020.

Additions and carrying amount for right-of-use assets included in the Consolidated Statement of Financial
Position has been disclosed in note 12.

e. Unicredit S.p.A -a loan of 1,000 € ‘000 at an interest rate of 1.2% repayable every six months between

June 2016 and December 2020.

f. Unicredit S.p.A - a loan of 4,000 € ‘000 was obtained during 2019 at an interest rate of Euribor 3 months

repayable every three months between October 2019 and March 2025.

Depreciation charged on right-of-use assets in the Consolidated Statement of Comprehensive Income has also
been disclosed in note 12. The Consolidated Statement of Comprehensive Income also shows the following
amounts relating to leases:

g. Carige - a loan of 1,000 € ‘000 at an interest rate of 1.20% with instalments payable every six months

between December 2018 and January 2021

Interest expense

Expense relating to short-term leases

h. KBC bank - a loan of 29 € ‘000 at an interest rate of 0.95% repayable monthly until July 2020.

Expense relating to leases of low value assets

i. KBC bank - a loan of 42 € ‘000 at an interest rate of 0.95% repayable monthly until October 2020.

KBC bank - a loan of 70 € ‘000 at an interest rate of 0.95% repayable monthly until December 2020.

k. Itau Corpbanca - a revolving credit facility of 54 € ‘000 at an interest rate of DTF+9.5% repayable

monthly until March 2020.

Hawk Investment Holdings - a deep discounted bond with an effective interest rate of 5.87% repayable
in April 2023 with a redemption amount of £4,841,748.

m. Retro Grand - a convertible loan at 0% interest of £383,600 repayable in April 2024.

Total cash outflows for leases can be found as a separate line item in the Consolidated Statement of Cash
Flows.

Maturity profile of lease liabilities

Due in six months or less

Due between six months and 1 year

Due between 1 year and 2 years

Due between 2 and 5 years

Due in 5 years or more

2019

€'000

1,405

1,456

2,268

1,879

1,460

8,468

2018

€'000

114

115

2019

€'000

265

2018

€'000

SEC Newgate S.p.A. - Annual Report 2019

24. Provisions

Earn out provisions

The current earn out provision relates to SEC Latam and CLAI.

25. Employee benefits

Severance indemnity

2019

€'000

1,645

2019

€'000

2,013

2018

€'000

565

2018

€'000

1,950

The liability represents the amount for future severance payments to employees. Movements relating to the
severance indemnity provision can be found below:

At 1 January 2018

Service cost

Net interest

Benefit paid

Actuarial loss

Additions through business combinations

At 31 December 2018

Service cost

Net interest

Benefit paid

Actuarial gain

Translation differences

At 31 December 2019

€' 000

1,680

228

(73)

(1)

1,950

(196)

133

2,013

26. Other non-current liabilities

Directors benefits

Earn out liability

Dilapidation provisions

Other non-current liabilities

SEC Newgate S.p.A. - Annual Report 2019

2019

€'000

397

4,754

293

193

5,637

2018

€'000

375

6,411

6,803

Directors benefits above relates to an obligation that SEC Newgate S.p.A. has for the end of mandate allowance
in relation to a Board Director. This obligation is covered by an insurance asset (see note 15).

The non-current earn out provision relates to the acquisitions of SEC Latam and CLAI.

Other non-current liabilities relates to a long service leave accrual required by certain Australian states and
territories for long serving employees.

27. Share capital

AUTHORISED, ISSUED AND FULLY PAID CAPITAL

At 31 December 2019

Ordinary shares of 0.10 EUR each

At 31 December 2018

Ordinary shares of 0.10 EUR each

Number

€

24,250,907

2,425,090.70

Number

€

13,502,533

1,350,253.30

All shares are fully issued and paid up. The ordinary shareholders are then entitled to receive dividends in
proportion to their percentage ownership in the Company.

On 17 July 2018 (closed on the 3rd August 2018), SEC Newgate issued 1,280,558 Ordinary shares of 0.10 EUR
each following the announcement of a shareholder offer and placing made. On 3 September 2019, SEC
Newgate issued 10,748,374 ordinary shares as detailed:

(a) 4,755,162 ordinary shares for a total value of €4,837,902, were issued in exchange for the 420,810,829 shares
of Porta Communications Plc. Per the Scheme of Arrangement a ratio of 1 newly issued share for each
88.495575 shares of Porta Communications Plc was agreed;

(b) 5,993,212 ordinary shares for a total value of €6,097,494, were issued in exchange for the 530,372,743 shares
of Porta Communications Plc held by Retro Grand Limited at the date of execution of the capital increase,
following the conversion of a convertible loan currently owned by Retro Grand Limited;

The Transaction was carried out by means of a Scheme of Arrangement as provided for in Part 26 of the
Companies Act 2006 of the United Kingdom to acquire Porta Communications Plc.

116

117

SEC Newgate S.p.A. - Annual Report 2019

27. Share capital (continued)

28. Reserves

AUTHORISED, ISSUED AND FULLY PAID CAPITAL (continued)

The movement in Ordinary shares for the year reconciles as follows:

The following table describes the nature of each reserve:

2019

€'000

12,456

148

(3,076)

6,222

15,750

Restated1

2018

€'000

3,741

(2,030)

6,913

8,682

At 1 January 2018

Additions during the year

At 31 December 2018

Additions during the year

At 31 December 2019

EARNINGS PER SHARE

Number

12,221,975

1,280,558

€

1,222,197.50

128,055.80

13,502,533

1,350,253.30

10,748,374

1,074,837.40

24,250,907

2,425,090.70

Share premium reserve

Legal reserve

Revaluation reserve

Retained earnings

The basic and diluted earnings per share are determined by dividing the profit attributable to the equity
holders of the parent by the number of shares outstanding during the period. Earnings per share, basic, is
determined as follows:

2019

2018

1The prior year comparative has been restated to ensure that both the legal reserve and retained earnings agrees to the carry forward
position stated in the Consolidated Statement of Changes in Equity.

(Loss)/profit for the year attributable to owners of the company

(€99,000)

€1,232,000

Share premium reserves

Weighted average number of shares

Earnings per share, basic

17,036,245

13,502,533

(€0.006)

€0.091

On 9 June 2016 the General Assembly resolved to issue a maximum of 134,000 shares to be assigned to WH Ireland
Limited as a warrant, and a maximum of 675,000 shares as part of a stock grant plan to the employees.

On 28 March 2018, the Board of Directors, in line with resolutions passed at the shareholders’ meeting on
27 October 2017, established a stock option plan for managers of the investee companies and the parent
company. A maximum of 480,000 shares could be issued.

As of today, neither warrant nor stock grant plan were subscribed, however the potential additional shares should
be considered as dilutive instruments. Earnings per share, diluted, is determined as follows:

At 1 January 2018

New issues during the year

Issue costs

At 31 December 2018

New issues during the year

Issue costs

At 31 December 2019

€’000

2,627

1,261

(147)

3,741

9,861

(1,146)

12,456

Profit for the year attributable to owners of the company

(€99,000)

€1,232,000

Weighted average number of shares

Earnings per share, diluted

18,325,245

14,791,533

(€0.005)

€0.083

On 3 September 2019, SEC Newgate S.p.A issued 10,748,374 Ordinary shares as detailed in note 27. The fair
value of consideration paid resulted in share premium of 9,861 €’000. The company incurred issue costs of 1,146
€’000 in relation to the issue of shares which has been deducted from share premium in the year.

2019

Restated1

2018

On 17 July 2018, SEC Newgate S.p.A issued 1,280,558 Ordinary shares for proceeds in excess of the nominal
value by 1,261 €’000. The company incurred issue costs of 147 €’000 (net of taxes) in relation to the issue of
shares which has been deducted from share premium in the year.

1The prior year comparative has been updated to include the potential 480,000 shares that could be issued as a result of the stock
option plan granted in 2018 as mentioned above.

118

119

SEC Newgate S.p.A. - Annual Report 2019

28. Reserves(continued)

Legal reserve

This reserve is required by law, and is not distributable.

Revaluation reserve

Gains/losses arising on financial assets classified as FVOCI, actuarial evaluation on pension allowance and
exchange rates differences.

Retained earnings

Retained earnings includes all current and prior period net gains and losses attributable to the owners of the
company which are not recognised elsewhere. This includes a Stock Option reserve dedicated to the managers
of the subsidiaries and the parent company.

29. Interests in subsidiaries

SUMMARY OF ACQUISITIONS

Acquisitions over the two-year period are as follows:

• In November 2018, SEC Newgate acquired 10% of the share capital of CLAI SAS.

• In September 2019, SEC Newgate, who previously held 16.9% of Porta Communications Plc (Porta),
purchased the remaining share capital resulting in 100% ownership of Porta. As a result, SEC Newgate, also
indirectly controls the subsidiaries of Porta which have been consolidated at year end.

The consideration transferred consists entirely of SEC issuing equity interests to Porta shareholders calculated
at the fair value of the SEC equity interests transferred. On 3 September 2019, 420,810,829 Porta shares were
exchanged at a rate of 88.4955752 into 4,755,162 new SEC shares as well as 5,993,212 SEC shares being
issued to Retro Grand Limited (RGL), a shareholder of Porta, following the conversion of a convertible loan
currently owned by RGL. In total, 10,748,374 SEC shares were issued as a result of the acquisition at a fair
value of €1.0174 per share.

SEC Newgate S.p.A. - Annual Report 2019

Goodwill of 14,995 €’000 (note 11) arising on the acquisition of the Porta group represents the strategic
benefits of the acquisition that will help to enhance the Group’s ability to strengthen its media presence
through expansion into other geographical areas as well as the economies of scale expected from combining
the operations of the group. Goodwill has been attributed to each CGU of the Porta Group based on the
anticipated future profitability of each CGU. Management identifies each subsidiary as a single CGU and
the split of goodwill can be found in note 11.

Details surrounding the acquisitions can be found below:

2019
Porta Group
€’000

Notes

Trade receivables

Cash and cash equivalents

Other assets

Trade payables

Other liabilities

Net (liabilities)/assets acquired

% acquired

Fair value of consideration

Fair value of previously held equity interests

Net assets attributable to non-controlling interests

Goodwill

Further details can be found in note 11.

5,413

1,824

7,935

(870)

(17,864)

(3,562)

100%

10,935

423

14,995

2018
CLAI
€’000

478

999

661

(148)

(548)

1,442

10%

6,452

5,010

Details surrounding further acquisitions of interests in existing subsidiaries can be found below:

Company

Date of acquisition

% acquired in year % owned at year end

Consideration

Newgate Hong Kong

15/11/2019

85%

148,324

120

121

SEC Newgate S.p.A. - Annual Report 2019

29. Interests in subsidiaries (continued)

In addition to the above acquisitions, on 4 December 2019, Cambre Maroc Advocacy was set up in Morocco.
The cost of the 51% equity interest held by SEC Newgate was 24 €’000.

Set out below are details of the subsidiaries held directly, unless otherwise stated, by the Group at 31 December
2019:

Name

Key

Country of
incorporation

Percentage
held

Principal activity

13 Communications Limited

13CO

London (UK)

100%*

Dormant

21:12 CommunicationsLimited

2112

London (UK)

ACH Sec Global SL (previously known as
ACH Cambre SL)

ACH

Madrid (Spain)

100%* A
Ordinary 35%*
B Ordinary
65.7%

Cambre Associates SA

CAM

Bruxelles (Belgium)

76%

Cambre Advocacy Maroc

MAR

Rabat (Morocco)

51%

CLAI SAS

CLA

Paris (France)

10%

Marketing & advertising agency

Public relations & corporate
affairs consultancy

Corporate advocacy &
communications consultancy

Corporate advocacy & public
affairs consultancy

Curious Design S.r.l.

CUR

Milano (Italy)

75%

Marketing & advertising agency

Della Silva Communication Consulting S.r.l.

Milano (Italy)

51%

Dormant

EngageComm Pty Limited

ENG

Sydney (Australia)

51%*

HIT S.r.l.

HIT

Milano (Italy)

57.71%

Public relations & corporate
affairs consultancy

Events management & human
resources provider

ICAS Limited

ICAS

London (UK)

100%*

Public relations consultancy

Impact PR Limited

IMPA

London (UK)

100%*

Kohl PR und Partner GMBH

KOHL

Berlin (Germany)

75%

Martis Consulting Sp. z o.o.

MRT

Warsaw (Pol&)

60%

Public relations & corporate
affairs consultancy

Newgate Brussels SPRL

NGBR

Bruxelles (Belgium)

100%*

Non-trading

Newgate Communications (HK) Limited

NGHK

Hong Kong

85%*

Newgate Communications (Singapore)
Pte. Ltd

NGSN

Singapore

51%*

Public relations & corporate
affairs consultancy

Newgate Communications Germany
GmbH

NGGE Hamburg (Germany)

100%*

Non-trading

Newgate Communications Pty Limited

NGAS

Sydney (Australia)

66.72%*

Public relations, corporate affairs
& research consultancy

Name

Key

Country of
incorporation

Percentage
held

Principal activity

Newgate Communications(Beijing) Limited NGCB

Beijing (China)

85%*

Public relations & corporate
affairs consultancy

Newgate Communications FZ-LLC

NGAD

AbuDhabi (United
Arab Emirates)

76%*

Public relations consultancy

Newgate CommunicationsLimited

NGCL

London (UK)

100%*

Public relations, corporate affairs
& research consultancy

Newgate Media Holdings Limited

NMHL

London (UK)

100%*

Intermediate holding company

Newgate PR Holdings Limited

NPRH

London (UK)

100%*

Intermediate holding company

Newgate Public Affairs Limited

NGPA

London (UK)

100%*

Dormant

Newgate Public Relations Limited

NGPR

London (UK)

100%*

Dormant

Newgate Sponsorship Limited

NGSL

London (UK)

85%*

Non-trading

Newington Communications Limited

NEW

London (UK)

60%

Public relations & corporate
affairs consultancy

Porta Australia Holdings Pty Limited

PAHP

Sydney (Australia)

51%*

Intermediate holding company

Porta Communications Midco Holdings
Limited

MIDC

London (UK)

100%*

Intermediate holding company

Porta Communications Plc

PORT

London (UK)

100%

Intermediate holding company

PPS (Local & Regional) Limited

PPS

London (UK)

100%*

Dormant

Redleaf Polhill Limited

REDL

London (UK)

100%*

Public relations consultancy

Sec & Associati S.r.l.

SEC-A

Torino (Italy)

51%

Sec & Partners S.r.l.

SEC-P

Roma (Italy)

50.5%

Public relations & corporate
affairs consultancy

Sec Mediterranea S.r.l.

MED

Bari (Italy)

51%

Public relations consultancy

SEC+Latam Communications Estrategica
SAS

SEC-L

Bogota (Colombia)

51%

Public relations & corporate
affairs consultancy

Springall Gbr

SPRG Hamburg (Germany)

100%*

Dormant

Velvet Consultancy Limited

VELV

London (UK)

100%*

Dormant

*Indirectly held

122

123

SEC Newgate S.p.A. - Annual Report 2019

29. Interests in subsidiaries (continued)

30. Non-controlling interests

SIGNIFICANT JUDGEMENTS AND ASSUMPTIONS

SEC Newgate S.p.A holds preferred shares in CLAI SAS which represent 10% of the ordinary share capital and
50% + 0.1 of the voting rights. SEC Newgate also holds options which would allow the company to acquire
the remaining 90% of the share capital in CLAI SAS within the earn out period. The financial statements of the
subsidiary have been consolidated at 100% on this basis.

Audit exemptions:

The following Group entities are exempt from audit by virtue of Section 479A of the Companies Act 2006:

• 13 Communications Limited
• Impact PR Limited
• Newgate Media Holdings Limited
• Newgate PR Holdings Limited
• Newgate Public Affairs Limited
• Newgate Public Relations Limited
• Newgate Sponsorship Limited
• PPS (Local and Regional) Limited
• Redleaf Polhill Limited
• Porta Communications Midco Holdings Limited
• ICAS Limited

Preparation & filing exemptions:

The following Group entity is exempt from preparing/filing individual accounts by virtue of Sections 394A or
448A of the Companies Act 2006:

• Velvet Consultancy Limited

Statutory guarantees:

Set out below is summarised financial information for each subsidiary that has non-controlling interests that
are material to the group. The amounts disclosed for each subsidiary are before inter-company eliminations.

SUMMARISED STATEMENTS OF FINANCIAL POSITION

At 31 December 2019
€'000

ACH CAM

CLA

HIT

KOHL

MRT

NEW NGSN NGHK NGAS

SEC-L

SEC-P

2112

Non-current assets

557

849

670

163

678

951

292

1,593

206

1,021

200

Current assets

372

1,628

2,358

405

160

236

1,371

526

345

5,164

852

1,173

992

Non-current liabilities

(156)

(497)

(111)

(139)

(57)

(131)

(423)

(76)

(58) (1,936)

(84)

(129) (4,392)

Current liabilities

(324)

(866) (1,399)

(270)

(103)

(136) (1,017)

(170)

(258) (3,877)

(631)

(644)

(764)

Net assets/(liabilities)

(19)

822

1,697

666

Non-controlling interest

(7)

197

282

132

609

1,231

321

944

343

1,421 (3,964)

244

603

314

168

703 (1,031)

At 31 December 2018
€'000

ACH CAM

CLA

HIT

KOHL

MRT

NEW SEC-L

SEC-P

Non-current assets

549

Current assets

399

1,656

1,918

941

251

762

259

1,679

1,163

1,486

Non-current liabilities

(111)

(88)

(14)

(42)

(98)

Current liabilities

(313)

(626)

(784)

(203)

(50)

(174)

(1,103)

(802)

(733)

Net assets/(liabilities)

165

1,108

1,572

659

Non-controlling interest

266

279

102

827

403

1,417

331

198

701

SEC Newgate S.p.A has provided statutory guarantees to the following entities in accordance with Section
479C of the Companies Act 2006:

SUMMARISED INCOME STATEMENTS

At 31 December 2019

SEC Newgate S.p.A has provided a statutory guarantee to the following entity in accordance with Section
394C of the Companies Act 2006:

• Velvet Consultancy Limited

€'000

ACH CAM

CLA

HIT

KOHL

MRT

NEW NGSN NGHK NGAS

SEC-L

SEC-P

2112

Revenue

988

4,229

4,162

1,633

678

969

3,508

431

667

5,141

4,052

1,682

1,318

(Loss)/Profit for the period

(202)

364

548

(248)

(69)

(99)

341

261

129

(818)

113

128

(213)

(Loss)/Profit attributable
to non-controlling interest

At 31 December 2018
€'000

ACH CAM

CLA

HIT

KOHL

MRT

NEW SEC-L

SEC-P

Revenue

902

4,064

545

1,112

401

1,080

4,100

2,618

1,388

(Loss)/Profit for the period

(94)

351

129

(254)

345

299

(Loss)/Profit attributable
to non-controlling interest

(32)

(63)

169

148

124

125

SEC Newgate S.p.A. - Annual Report 2019

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 4. For payables to related parties, please refer to note 21; for
borrowings please refer to note 22.

During the year, Newgate Communications Limited paid Barbican Centre Trust Ltd, a registered charity and
a company of which Emma Kane is the Chairman, €14,060 (£12,000) for corporate membership. As at 31
December 2019, this amount was due to the Barbican Centre Trust Ltd.

During the year, the Group was invoiced €6,742 (A$10,835) for flowers by Buds and Poppies, a florist company
owned by the wife of Brian Tyson. An annual membership fee of €5,134 (A$8,250) was paid to the Committee
for Sydney, of which Brian Tyson is also a director. No amounts were outstanding to either party at the year end.

All related party transactions were on normal commercial terms.

32. Ultimate controlling party
There is no ultimate controlling party. At 1 January 2019, SEC Newgate S.p.A was 66.06% controlled by Fiorenzo
Tagliabue. Following the acquisition of Porta Communications Plc, SEC Newgate S.p.A is 36.03% controlled by
Fiorenzo Tagliabue.

33. Impact of adopting IFRS 16 Leases
This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements.

Cumulative effect of initially applying IFRS 16

The Group has adopted IFRS 16 from 1 January 2019 which resulted in changes to the accounting policies and
adjustments to the amounts recognised in the financial statements. The Group has applied the cumulative
effect method in accordance with IFRS 16.C5(b) and has elected to apply IFRS 16 retrospectively with the
cumulative effect of initially applying the Standard recognised at the date of initial application.

The Group has not restated comparatives for the 2018 reporting period, as permitted under the specific
transition provisions in the Standard.

For additional information about the Group’s current and historical accounting policies relating to leases see
note 1.

Impact of adoption

The following summarises the impact of adopting IFRS 16 on the Consolidated Statement of Financial Position
and the Consolidated Statement of Comprehensive Income.

(i) Adjustments to assets and liabilities related to adoption of IFRS 16

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been
classified as ‘operating leases’ under the principles of IAS 17 Leases. Theses liabilities were measured at the
present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as
of 1 January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities
on 1 January 2019 was 3%.

The Group did not recognise any finance leases in accordance with IAS 17 in the previous accounting period.
Therefore lease liabilities at the date of initial application were recognised for leases previously classified as
operating leases in accordance with IAS 17.

The associated right-of-use assets were measured at the amount equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as
at 31 December 2018. There were no onerous lease contracts that would have required an adjustment to the
right-of-use assets at the date of initial application.

(ii) Explanation of adjustment to profit or loss

EBITDA, amortisation and depreciation, and finance expense have all increased as a result of the change in
accounting policy. Rental costs relating to operating leases under IAS 17 were previously included in rental
expenses (note 5). These are no longer expensed under IFRS 16 and the costs are accounted for through the
lease liability and associated interest expenses, which have been included in finance costs. Amortisation and
depreciation has increased due to the additional right-of-use assets recognised under IFRS 16.

(iii) Practical expedients applied

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the
Standard:

• the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;

• reliance on previous assessments on whether leases are onerous;

• the accounting for operating leases with a remaining term of less than 12 months as at 1 January 2019 as

short-term leases;

• the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application,

and;

• the use of hindsight in determining the lease term where the contract contains options to extend or terminate

the lease.

34. Subsequent events

There are no significant subsequent events which require disclosure up to the date that the financial statements
were approved 28 May 2020.

Please refer to the Post Balance Sheet Events in the Chief Executive’s Review for further details on the impact
of Covid-19 on the Group.

126

127

SEC Newgate S.p.A. - Annual Report 2019

SEC Newgate S.p.A.

Registered Office in Milan, Via Ferrante Aporti, 8

Share capital Euro 2,425,090.70 fully paid up

Tax code/ VAT registration number and Milan Business Registered Number 09628510159

R.E.A. (“Administrative and Economic Repertory”) no. 1308438 of the CCIAA (“Chamber of
Commerce, Industry, Crafts and Agriculture”) of Milan

NOTICE OF CALL OF THE ORDINARY SHAREHOLDERS’ MEETING OF SEC NEWGATE S.P.A.

Shareholders are hereby invited to attend the Shareholders’ Meeting of SEC Newgate S.p.A., with
registered office in Milan, Via Ferrante Aporti, 8, share capital of Euro 2,425,090.70, fully paid-up, VAT
no. 09628510159, REA no. 1308438 (the “Company”), in ordinary and extraordinary session, in first call
on 18 June 2020, at 11.00 a.m., at the registered office, and, if necessary, in second call on 19 June
2020, at 11.00 a.m., at the registered office, to discuss and resolve on the following

Agenda

1. Approval of the financial statements of SEC Newgate S.p.A. for the year ended 31 December 2019,
supplemented by the report of the Board of Directors, of the Board of Statutory Auditors and of the
Independent Auditors. Presentation of the consolidated financial statements for the year ended 31
December 2019. Related and consequent resolutions.

2. Approval of the allocation of the result for the year. Related and consequent resolutions.

The terms and conditions of the participation at the Shareholders’ Meeting described in this notice
of call may be subject to changes and/or additions in relation to the COVID-19 (CoronaVirus) health
emergency measures. Any change and/or addition to the information contained in this notice of
call will be made available through the website www.secnewgate.com (section “Investors” / in
Shareholders’ Meetings) and in the other ways required by law.

INTEGRATION OF THE AGENDA, PRESENTATION OF NEW PROPOSALS FOR RESOLUTIONS
AND RIGHT TO ASK QUESTIONS PRIOR TO THE MEETING

Pursuant to Article 14 of the Company’s By-laws, Shareholders representing at least 10% (ten per cent)
of the share capital with voting rights in the ordinary Shareholders’ Meeting may request, within 5 (five)
days from the publication of the notice of call of the Shareholders’ Meeting, the addition of items to
the agenda, indicating in such request, the additional items proposed. The supplementary notice of
the Agenda shall be published in at least one of the daily newspapers specified in this By-laws, no
later than the seventh day prior to the date of the meeting on first call.

Requests for additions to the Agenda must be accompanied by an explanatory report to be filed at
the registered office, to be delivered to the Administrative Body by the deadline for submission of the
request for integration.

Additions to the list of items on the agenda are not allowed for items on which the shareholders’
meeting is required, by law, to resolve at the proposal of the directors, or on the basis of a project or
a report prepared by them.

Shareholders may ask questions about the items on the Agenda even before the Shareholders’
Meeting, by sending them by registered mail to SEC Newgate S.p.A., via Ferrante Aporti, 8, 20125 Milan,
or to the certified mail address secrp@legalmail.it; or by fax to +39026592475. The parties shall provide
the information necessary to allow their identification. Questions must reach the Company in time
for them to be discussed at the Shareholders’ Meeting. Questions received before the Shareholders’
Meeting shall be answered during the Meeting, at latest. The Company may provide a single answer
to questions having the same content.

ENTITLEMENT TO PARTICIPATE IN THE SHAREHOLDERS’ MEETING AND REPRESENTATION AT
THE SHAREHOLDERS’ MEETING

Shareholders with voting rights have the right to attend the Shareholders’ Meeting.

The entitlement to vote of the Company’s shares admitted to trading on regulated markets or
multilateral trading facilities in Italy or other European Union Countries is subject to applicable laws
and regulations.

Pursuant to article 83-sexies of Legislative Decree no. 58/98, the entitlement to participate in the
Shareholders’ Meeting and to vote of the Company’s shares is subject to the receipt by the Company
of the notice issued by an authorised intermediary in accordance with current legislation, attesting the
ownership of the shares on the basis of the accounting records relating to the end of the accounting
day of the seventh trading day prior to the date of the Shareholders’ Meeting in first call (i.e. June 9th,
2020, the so-called record date). Debit and credit entries made after that date will not be taken into
account for the purpose of establishing the right to vote at the Shareholders’ Meeting.

Those who become shareholders of the Company only after that date will not be entitled to attend
and vote at the Shareholders’ Meeting of the single call. Therefore, we invite the Shareholders holder
of CDIs, representing SEC Newgate S.p.A. ordinary shares, listed on AIM - alternative investment market
- to contact the intermediary where the abovementioned CDIs are deposited.

In any case, the communication from the intermediary shall reach the Company by the end of the
third trading day prior to the date set for the Shareholders’ Meeting on first call and, therefore, by
June 15th, 2020. However, the right to attend and vote remains unaffected if the communications are
received by the Company after the aforesaid deadline, provided that they are received before the
beginning of the proceedings of the shareholders’ meeting of the single call.

The Company informs that, pursuant to art. 106, D. L. no. 18/2020, containing measures related
to the epidemiological emergency by COVID-19, the participation and the exercise of the vote
of those entitled to vote at the Shareholders’ Meeting will be allowed exclusively by means of
telecommunications.

The Company will provide the shareholders’ entitled to attend the Shareholders’ Meeting and exercise
their voting rights with appropriate instructions to allow access to the meeting after identifying the
participants. Those entitled to participate in the Shareholders’ Meeting and exercise their voting rights
must send a request to the address secrp@legalmail.it enclosing the aforementioned documentation
certifying their entitlement to participate in the Shareholders’ Meeting and exercise their voting rights
pursuant to Article 83-sexies of Legislative Decree no. 58/98. To facilitate the verification activities, the
Company recommends that the documentation should be sent promptly and in any case by June
15th, 2020.

128

129

SEC Newgate S.p.A. - Annual Report 2019

VOTING BY PROXY

Those entitled to vote may appoint a representative in the Shareholders’ Meeting by providing a written
proxy, in accordance with the laws and regulations in force. To this end, a proxy form is available on
the website www.secnewgate.com (section “Investors”/ in RECENT SHAREHOLDER COMMUNICATIONS)
or at the Company’s registered office.

The proxy may be notified to the Company, in sufficient time to enable to collect the proxies, by
sending it by registered mail to the Company’s registered office, via Ferrante Aporti 8, 20125 Milan, or
by sending it to the certified mail address secrp@legalmail.it

SHARE CAPITAL AND SHARES WITH VOTING RIGHTS

At the date of publication of this notice of call, the subscribed and paid-up share capital of SEC
Newgate S.p.A., equal to Euro 2,425,090.70, is divided into 24,250,907 ordinary shares with no express
nominal value.

Each of the 24,250,907 ordinary shares, with no par value, gives the right to vote.

As of today, the Company does not hold any of its own shares.

DOCUMENTATION

The full text of the draft resolutions, together with the explanatory reports, and the documents that will
be submitted to the Shareholders’ Meeting, will be made available to the public at the Company’s
registered office and on the Company’s website at the following address: www.secnewgate.com
(section “Investors”/ in RECENT SHAREHOLDER COMMUNICATIONS) within the terms provided for by
the regulations in force.

In compliance with the COVID-19 (CoronaVirus) health emergency containment measures issued
by the competent authorities, the public is asked to avoid access to the registered office for the
acquisition of the aforementioned documentation until these measures are exhausted.

Milan, 28 May 2020

For the Board of Directors

The Chairman

John Foley

PROXY FORM (1) TO ATTEND THE SHAREHOLDERS’ MEETING

With reference to the Shareholders’ Meeting of SEC NEWGATE S.p.A., convened in Milan, via Ferrante
Aporti, no. 8, at the Company’s registered office, on June 18th 2020, at 11:00 CET on first call and, if
necessary, on second call on June 19th 2020 (“Shareholders’ Meeting”) at the same time 11:00 CET
and same place, as per the notice of call published in the daily newspaper MF Milano Finanza on
June 2th 2020 and, in the extended version, on the Company’s website at www.secnewgate.com,,
in the Investor section, on the same date, to discuss and resolve on the following

Agenda

1. Approval of the financial statements of SEC Newgate S.p.A. for the year ended 31 December 2019,
supplemented by the report of the Board of Directors, of the Board of Statutory Auditors and of the
Independent Auditors. Presentation of the consolidated financial statements for the year ended
31 December 2019. Related and consequent resolutions.

2. Approval of the allocation of the result for the year. Related and consequent resolutions.

The undersigned (the person signing the proxy) (2)

with the present proxy form

Surname*

Born in*

whose address is in

via

Name*

the*

Tax code

Valid identity document (to be attached as a copy)

no.

(tick the relevant box)

Person to whom the voting right is attributed relating to no. *

ordinary shares of SEC

NEWGATE S.p.A. in its capacity as (tick the relevant box)*

shareholder

the pledgee

borrower (riportatore)

usufructuary (usufruttuario)

custodian

manager

other (please specify)

legal representative or person with appropriate powers of representation of (name of the legal entity

holding the voting right)*(3)

with

registered office in*
tax code
of representation to be attached) to which the voting right is attributed relating to n.*
- ordinary shares of SEC NEWGATE S.p.A., represented by CDI listed on the AIM market, organized
and managed by London Stock Exchange plc.

(copies of the documentation proving the powers

via*

130

131

SEC Newgate S.p.A. - Annual Report 2019

Footnotes:

(*) Mandatory field.

(1) Any person entitled to attend the Shareholders’ Meeting may be represented by a person of his/her choice, by means of
a written proxy in accordance with the provisions of the law in force, by signing this proxy form.

(2) Indicate the name and surname of the delegating person (as it appears on the copy of the communication
for participation in the shareholders’ meeting pursuant to Article 83-sexies, Legislative Decree 58/1998) or the legal
representative of the delegating legal entity.

(3) Delegating legal entity as it appears on the copy of the communication for participation in the shareholders’ meeting
pursuant to art. 83-sexies, TUF issued by intermediaries in accordance with current regulations: name, surname or company
name, tax code or VAT number, full address of domicile or registered office.

(4) Indicate: name, surname or company name of the delegated person.

(5) The delegated person is invited to appear at the Shareholders’ Meeting with a copy of the notice issued by the
intermediaries in accordance with current regulations and his/her own identity document.

(6) The represented party may indicate one or more substitutes for the represented party pursuant to Article 2373,
paragraph 3, of the Italian Civil Code. Replacement of the representative by a substitute in conflict of interest is permitted
only if the substitute has been indicated by the shareholder.

In its capacity as (tick the relevant box)

shareholder

the pledgee

borrower (riportatore)

usufructuary (usufruttuario)

custodian

manager

other (please specify)

referred to in communication (ex art. 83-sexies of the TUF) no.
made by the intermediary
ABI

CAB

Mr/Mrs (delegated person (4))

Surname*

Born in*

whose address is in

via

delegate

Name*

the*

Tax code

to attend and represent him/her at the Extraordinary Shareholders’ Meeting in question

for all the shares for which it has the right to vote at the Shareholders’ Meeting (5), fully approving its
actions and with the right to be replaced by (6):

Mr/Mrs (person designated by the delegating person)

Surname*

Born in*

whose address is in

via

In faith.

Name*

the*

Tax code

Signature of the delegating Shareholder

Place and date of signature of the delegation

For any further information or clarification, SEC NEWGATE S.p.A. shareholders are requested to
contact the Company. The e-mail address, telephone number and fax number to which requests
may be sent are as follows: e-mail: secrp@legalmail.it; telephone: 02/6249991; fax: 02/6592475.

The undersigned also declares that the right to vote will be exercised by the delegate (tick the
relevant box).

discretionarily in the absence of specific instructions from the undersigned delegating person

in compliance with specific voting instructions given by the undersigned delegating person

(Place and Date)

(Signature of the delegating person)

132

133

SEC Newgate S.p.A. - Annual Report 2019

secnewgate.com

SEC Newgate S.p.A. - Annual Report 2019

KEY INFORMATION

Directors:

John Foley (Chair)*

Luigi Roth (NED, Deputy Chair))

Paola Bruno(NED)

David Mathewson

Fiorenzo Tagliabue (Group CEO)

Emma Kane (Deputy CEO)*

Tom Parker (Deputy CEO)

Brian Tyson (Deputy CEO)*

Mark Glover (Executive Director)

Anna Milito (interim group CFO)

Andrea Cornelli (Chief Innovation Officer) **

Cesare Valli***

* effective from 3 September

**appointed 9 December 2019

*** resigned 10 June 2019

Board Secretary:

Maurizio Maione

Registered Office:

Via F Aporti 8 – 20125 Milan, Italy

Registered Number:

09628510159

Auditors:

BDO Italia S.p.A.

Registrars:

Computershare S.p.A.

Solicitors:

Osborne Clarke LLP

One London Wall

London EC2N 2AX

Financial Communications:

Newgate Communications Ltd

Sky Light City Tower

50 Basinghall Street

London EC2M 5DE

Company website:
www.secnewgate.com

EPIC Code:
AIM: SECG

THE GROUP’S
PRINCIPAL BRANDS
ARE:

•ACH (Spain)

•Cambre Associates (Belgium)

•Cambre Maroc (Morocco)

•Clai (France)

•Kohl PR un Partner (Germany)

•Martis Consulting (Poland)

•SEC Newgate Colombia

• Newgate Communications (Abu Dhabi,
Australia, Greater China, Singapore, UK)

•Newgate Research (Australia, UK)

•Newington (UK)

•Publicasity (UK)

Via L. Mascheroni 19 20145, Milan, Italy

•SEC Newgate S.p.A. (Italy)

•2112 (UK)

Nominated Adviser
& Broker:

Arden & Partners

134

135

SEC Newgate S.p.A. - Annual Report 2019

investors@secnewgate.com

+39 (02) 624999907
+44 (0)20 7680 6500

secnewgate.com

136