SECG.L Regulatory News (SECG)

12 June 2017

SEC S.p.A.

("SEC", "the Company" or "the Group")

Audited results for the year ended 31 December 2016

Notice of AGM

SEC, the largest independent advocacy, public relations and integrated communications agency in the Italian market, is pleased to announce its audited results for the year ended 31 December 2016. The 2016 Report and Accounts are available on the Company's investor relations Website.

SEC will hold its Annual General Meeting at the Company's registered office at Via Panfilo Castaldi 11, 20124 Milan, Italy on 26 June 2017 at 11:30am (CET).

Highlights

· Successful Admission to AIM, raising £3.4 million (before expenses)

· Acquisition of Newington Communications, London strengthens corporate and public affairs capabilities

· Acquisition of Martis Consulting, Warsaw

· Strongly positioned to continue to act as an industry consolidator

· Group cash position remains strong at €6.8 million

Luigi Roth, Chairman of SEC, commented: "It was a very busy year, which has seen the Company successfully list on AIM, the market for growth companies on the London Stock Exchange. When the finish line was in view, the UK's Brexit vote made that last leg an uphill struggle. Despite this, the Company brought the journey to conclusion and has since continued its stated plan of development and growth through acquisition ."

For more information:

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

CHAIRMAN'S STATEMENT

It has been a very busy year, which has seen the Company successfully list on AIM, the market for growth companies on the London Stock Exchange. When the finish line was in view, the UK's Brexit vote made that last leg an uphill struggle. Despite this, the Company brought the journey to conclusion and has since continued its stated plan of development and growth through acquisition ."

On 12 September 2016, the acquisition of Newington, London was finalised, a leading company in the corporate and public affairs sector, with a turnover of more than £3 million. With Newington, the Group achieves two objectives: presence in the UK, a key market and a partnership with a company that is capable of better interpreting the consequences, good or bad, of Brexit. On 21 December 2016, a binding agreement was written for the acquisition of the majority of Martis Consulting, Warsaw. The deal was completed on 20 April 2017.

The Company's quotation has also brought changes to the Board, which currently comprises seven members: three Non-Executive Directors, David Mathewson,Paola Bruno and me, who all have solid experience on Boards of quoted companies; main shareholder Fiorenzo Tagliabue in the role of CEO; two managing directors: Cesare Valli for Italy and Tom Parker for Europe, and CFO Anna Milito.

During the listing process, a 5% Stock Grant was made available) in order to allow the directors to incentivise and retain employees within the Group's companies. Attracting and retaining talent is one of our priorities in which we plan to invest during the following years.

The Group has had a difficult year on the market for the reasons that are discussed below, attributable to the whole macroeconomic picture as well as some specific factors experienced in some European countries, particularly Italy.

The current year, however, will represent a more decisive recovery and will contribute to the consolidation of the Group's results.

The Board looks to the upcoming months with optimism.

Luigi Roth

SEC Spa Chairman

CHIEF EXECUTIVE'S STATEMENT

The Global economic outlook has slightly deteriorated in 2016 compared to 2015 with a decrease in global GDP at 3.1% according to the IMF.

Advanced economies are suffering most from the lack of growth with only 1.6% GDP growth in 2016. European GDP has grown in the region of 1.7% and has been affected by the post-2008 crisis that has not yet been fully overcome, and more recently by the uncertainty posed by Brexit.

The best performer in Continental Europe is Spain with GDP growth exceeding 3% followed by Germany, which is aligned to the EU average of 1.7%, France with 1.3% growth and Italy with less than 1% growth.

The global sentiment towards the future, even if slowly improving, is still not oriented towards boosting investments and consumption. This is reflected in the lack of growth and the unhealthy labour market.

The approaching round of elections in the four major European Countries beginning with France, followed by Germany, Spain and Italy, which have been characterised by fear of increasing populism, booming immigration and terrorism have not helped.

In these circumstances and in the absence of major global events like the Olympics or similar, the Global Communication sector has been characterised mostly by stability or minimal growth. In particular, the growth has been concentrated on digital and social media development, with the most traditional media, apart from television and radio, continuing to suffer.

Communication and Media companies have therefore been competing in a slowly improving market where performances have not been boosted by market expansion but affected by competition, with some relative growth and some reductions.

This has negatively impacted on the development in communication investments in Italy as well, limited to +1.7% growth in total. It is interesting to note how one of the largest global operators has merged its PR operations in four markets including Italy in response to limited growth.

This situation not only affects Italian operations but also, at a global level, the reported growth of top ten operators has been limited to an aggregated +3.3%, which is approximately 25% less buoyant than the previous year. As reported to the most accredited ranking: "Yet many of the big PR agency networks still struggled to grow". The largest worldwide operator has had the lowest growth since 2009.

SEC has coped with this by successfully continuing to implement its expansion project and by working hard to boost organic growth to regain the volume of business reduced by the lack of major events that boosted its 2015 figures.

In particular, our performance suffered from the fact that we have been a major beneficiary of large investments linked to the Expo 2015 activities in Italy, especially in Milan; having won multiple assignments spanning from the global Communication assignment in association with another firm, the Expo Media Centre, Columbia Pavilion, Mexican Pavilion, France Pavilion, Coca Cola Pavilion, Expo uniforms design and supply, stewarding services, and so on. Replacing that amount of income, €2.7M, proved to be difficult in spite of a massive new business effort which has helped mitigate the impact. The above is valid for the entire line of subsidiaries, which have all suffered equally from the described situation.

New business generated in 2016, just for SEC main Italian operations in Milan amount to €3.6M and have formed the base for further development in 2017.

On the cost line of the holding company, we also acknowledge the large investment to continue to boost the expansion process via acquisition and the related cost for M&A activities, which account for approximately €294,000.

Without those investments that are strategically important to pave the way for the future growth of the operation, the theoretical profit would have been approximately €1M.

Revenues

In particular, at SEC SpA revenues declined by 25% compared to 2015 actual and total operating costs were reduced by 28% reflecting management's efforts to contain cost despite continuing investment in the development of the international expansion, which had an impact of over €1.3M on the profit and loss account. Revenues have declined to €18,487 million from the previous year at €21,244 million due to the lack of the one-off contribution of large events in Italy, Germany and Spain which were not repeated. Solid new business activities have partially offset the difference.

Profit

As a consequence of the above, the profit from operations is €795,000 vs. €3,279M previous year. Profit before tax is €734,000 vs. €3,248M last year. The year end Net Profit is therefore €445,000 € vs. €2,045M last year.

This reconfirms the solid profit of the Group while we keep investing management time and resources in investments aimed at increasing the critical mass of the Group and aiming to provide additional services to our clients and therefore revenues.

In this area we can quote the investment in Stake (registered), which a sophisticated consultancy tool to boost our Community Relations and Public Affairs offer and is increasingly utilized and appreciated by major multinationals or large utilities, or our investment in Big Data Advisory Unit in Spain.

These developments are still operating in only one single company of the Group and, once completed and fully operational can be leveraged in all of the Group's operating Countries.

Others are in the development pipeline. These developments are now contributing to the cost of personnel employed in their development but will repay over the year to come both in Reputational terms and in boosting additional revenues for the Group.

Net assets

Equity (attributable to Equity holders) has increased from €6,617M to €9,157M due to the admission of 222,000 new shares and the IPO of the Company on the AIM UK Market with share premium of €3,777M in excess of share face value, net of €1,150M cost of listing net tax.

Group cash position

The group Cash position remains strong with a solid €6,776M at the end of the period vs. €5,036M in the previous year. This represents an enhancement of 1,739M € on 2015.

This was contributed to by €445,000. Net cash flow from operations and €3,071M from financing activities.

The increase in cash position has been partially utilized to finance the first instalment of the Newington (formerly Bellenden) acquisition, to finance an increased position in Cambre and to finance its shares buyback (€1,778M).

Outlook

New business generated in 2016, just for SEC main Italian operations in Milan amounted to €3.6M and have formed the base for further development in 2017.

The current year, thanks to a huge effort in new business, has started well, in line with our expectations.

I would like to thank our employees for their continued efforts.

Fiorenzo Tagliabue

SEC Spa CEO

Notice of Annual General Meeting

SEC will hold its Annual General Meeting at the Company's registered office at Via Panfilo Castaldi 11, 20124 Milan, Italy on 26 June 2017 at 11:30am (CET).

FINANCIAL HIGHLIGHTS

FINANCIAL INFORMATION OF SEC S.P.A.

FOR THE TWO YEARS ENDED 31 DECEMBER 2016

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated cash flow statement

Consolidated statement of changes in equity

Corporate information

SEC S.p.A. (the "Company") was incorporated in March 1989 and is based in Milan. The registered office and principal executive office of SEC S.p.A. is located at Via Panfilo Castaldi, 11, Milan 20100.

The consolidated financial statements for the two years ended 31 December 2016, represent the result of the Company and its subsidiaries (together referred to as "Sec Group" or the "Group").

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

The subsidiaries of the Company included in the consolidated financial information, are as follows:

The acquisitions completed during the two years ended 31 December 2016 were as follows:

· August 2015: Kohl PR & Partners GMBH

· September 2016: Newington Communications LTD

· In January 2016, Sec Spa acquired additional shares of 10% in Cambre Associates SA, and during the year Cambre Associates SA acquired 8% of its own shares, increasing ownership of Sec Spa to 76% at 31 December 2016.

Accounting policies

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 Group adopted IFRS for the first time for the period from 1 January 2013.

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

The functional currency of the Group is Euro (EUR), and all amounts are presented in functional currency.

· The Group records transactions denominated in foreign currency in accordance with IAS 21 - The Effect of Changes in Foreign Exchange Rates. The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

· Assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate at the date of that consolidated statement of financial position;

· Income and expenses for each consolidated statement of income are translated at average exchange rates.

· All resulting exchange differences are recognized in other comprehensive income.

· Goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

· The final exchange rate of Euro vs. Great Britain Pound used on Newington Communication LTD as of 31 December 2016 is 0.856; the average exchange rate for the period considered was 0,866.

At the date of this financial information, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the SEC Group. These are listed below:

· IFRS 9: Financial Instruments (effective 1 January 2018)

· IFRS 15 standards and clarifications: Revenue from Contracts with Customers (effective 1 January 2018)

· IFRS 16: Leases (effective 1 January 2019)

· Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (effective 1 January 2017)

· Amendments to IAS 7: disclosure initiative (effective 1 January 2017)

· Amendments to IFRS 12: Disclosure of Interests in Other Entities (effective 1 January 2017)

· Amendments to IFRS 1 and IAS 28: First-time Adoption of International Financial Reporting Standards and Investments in Associates and Joint Ventures (effective 1 January 2018)

· Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions (effective 1 January 2018)

· Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (effective 1 January 2018)

· IFRIC interpretation 22: Foreign Currency Transactions and Advance Consideration (effective 1 January 2018)

· Amendments to IAS 40: Transfers of Investment Property (effective 1 January 2018)

The adoption of these standards, interpretations and amendments are not expected to have a material impact on SEC Group in the period they are applied.

The directors are required to consider whether it is appropriate to prepare the financial statements on the basis that the Group is a going concern. As part of its normal business practice, the Group prepares annual plans and directors believe that the Group has adequate resources for the future. Therefore, the Group continues to adopt the going concern basis in preparing the financial information.

d. Basis of consolidation

A company is classified as a subsidiary when the SEC Group has the following:

· power over the investee;

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

· the ability to use its power over the investee to affect the amount of the investor's returns.

· The financial information presents the results of the company and its subsidiary undertakings as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

· The financial information includes the results of the Company and its subsidiary undertakings made up to the same accounting date. All intra-Group balances, transactions, income and expenses are eliminated in full on consolidation.

The results of subsidiary undertakings acquired during the period are included from the consolidated income statement from the effective date of acquisition.

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

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

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

The Board considers that SEC Group's protect activity constitutes one operating and one reporting segment, as defined under IFRS 8. Management reviews the performance of the SEC Group by reference to total result against Budget.

Services provided by Group entities located in each geography are as follows:

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

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

Costs incurred with external suppliers on behalf of the clients are excluded from revenue.

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

Goodwill has indefinite useful life and therefore not amortized. Impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. Any impairment in carrying value is recognized as an expense and is not subsequently reversed.

The valuation of the CGUs for goodwill impairment testing has been prepared on a discounted cash flow basis.

Other

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

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

Depreciation is provided on all items of property and equipment so as to write off their carrying value, less its residual value, over their expected useful economic lives. It is provided at the following rates:

· Furniture and machinery 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 carrying amount is written down immediately to its recoverable amount if the asset's carrying value is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within "other operating income and changes".

j. Investments

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

k. Financial assets

The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Group has not classified any of its financial assets at fair value through profit or loss, as available for sale or held to maturity except for financial investments.

Financial investment at fair value

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

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

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

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

The fair values of the primary financial assets and liabilities of the company together with their carrying values are as follows:

Trade and other receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost using the effective interest rate method, less provision for bad debts and doubtful account.

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

For trade receivables, which are reported net, such bad debt provisions are recorded in a separate allowance account with the loss being recognized within other operating costs in the Consolidated income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

l. Cash and equivalents

Cash and cash equivalents comprise cash, deposits held at call with banks and other short-term liquid investments with an original maturity of up to three months or less. In the consolidated statement of financial position, bank over draft are shown within borrowings in current liabilities.

m. Financial liabilities

Financial liabilities comprise loans and trade and other payables, which are initially recognized at fair value and subsequently carried at amortized cost using the effective interest method. The interest element of the borrowings and short-term financial liabilities is expensed over the repayment period at a constant rate. In accordance with IAS 39 Financial Instruments: "Recognition and Measurement, a financial liability of the Group is only released to the consolidated income statement when the underlying legal obligation is extinguished".

n. Operating leases

Assets leased under operating leases are not recorded in the statement of financial position. Rental payments are charged directly to the income statement on a straight-line basis.

SEC S.p.A.'s ordinary shares are classified as equity instruments.

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.

Income tax for each period comprises current and deferred tax.

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

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

Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilized.

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

The only form of post-employment benefit provided to staff by Group companies is represented by Staff Termination Benefits "TFR". In light of the amendments made to the relevant regulations by the "2007 Finance Act" (law no. 296 of 27 December 2006), with regard to enterprises with more than 50 employees, staff termination benefits are accounted for in accordance with the following rules:

1. for defined benefit plans, as regards the portion of staff termination benefits accrued as at 31 December 2006, through actuarial calculations which do not include the item related to future salary increases;

2. for defined contribution plans, as regards the portion of staff termination benefits accrued from 1 January 2007, both in case of election of supplementary pension scheme, and in the event of allocation to the INPS Treasury Fund.

Staff termination benefits for Group companies with fewer than 50 employees are recognized in accordance with the regulations for defined benefit plans in accordance with IAS 19; liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high-quality corporate bond of equivalent currency and term to the plan liabilities.

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

3. Critical accounting estimates and judgements

SEC Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Useful lives of depreciable assets

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

Fair value measurements and valuation processes

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

Provision for doubtful debts

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

Employee benefits

For actuarial assumptions on severance indemnity refer to note 26.

Impairment of Goodwill

Disclosure included in note 2 (h).

4. Financial instruments - risk management

The Board has overall responsibility for the determination of the Group's risk management objectives and policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of Directors. The Group does not currently use derivative financial instruments and does not issue or use financial instruments of a speculative nature.

Through its operations SEC Group is exposed to the following financial risks:

a. Credit risk

b. Market price risk

c. Fair value and cash flow interest rate risk

d. Liquidity risk

The principal financial instruments used by Sec Group, from which financial instrument risk arises, include:

· trade and other receivables;

· cash and cash equivalents;

· trade and other payables.

This note describes Sec Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in Sec Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Credit risk is the risk of financial loss to SEC Group if a customer or a counterparty to a financial instrument fails to meet its contractual obligations. The Company is mainly exposed to credit risk from credit sales. Sec Group has trade receivables of € 7,304,000 (2015: €7,595,000) net of any write-off and allowance for doubtful receivables.

As at 31 December 2016, the Group had amounts due from ten major customers amounting to 20 per cent. of the trade receivables balance.

Sec Group is exposed to credit risk in respect of these balances such that, if one or more of the customers encounters financial difficulties, this could materially and adversely affect the Sec Group financial results.

Sec Group attempts to mitigate credit risk by assessing the credit rating of new costumers prior to entering into contracts and by entering contracts with costumers with agreed credit terms.

The Directors are unaware of any factors affecting the recoverability of outstanding balances at 31 December 2016 and consequently no further provisions have been made for bad and doubtful debts.

b. Market risk

Market risk arises from SEC Group's use of interest bearing, tradable. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) or other market factors (i.e. price risk).

c. Fair value and cash flow interest rate risk

Sec Group has previously been funded through borrowings from a UBS (Italy) S.p.A., Deutsche Bank S.p.A. and Unicredit Banca S.p.A. Sec Group obtained the following loans:

1. UBS (Italy) S.p.A. € 1,762,000 during the year ended 31 December 2013 at an interest rate of Euribor 12 month plus a margin of 1.25 per cent as Revolving credit facility open ended.

2. Deutsche Bank S.p.A. € 1,000,000 at an interest rate of 1-month Euribor plus a margin of 1,20 per cent. On amortizing basis with monthly basis instalment between July 2015 and June 2019.

3. Unicredit S.p.A, € 30,000, at an interest rate of 4,1 per cent payable in monthly instalment between February 2015 and February 2020.

4. Unicredit S.p.A, €1.000.000 at an interest rate of 1.2% payable every six months between June 2016 and December 2020

5. BPM Banca Popolare di Milano € 1.000.000 at an interest rate of 1,1% payable in monthly instalments between February 2016 and February 2020.

6. Natwest GBP 100.000 at an interest rate of 4.69% payable in monthly instalments between October 2016 and October 2019

7. Directors Loan (Mark Glover - director in Newington) for 100.000 GBP at an interest rate of 4% per annum accruing daily and payable monthly in arrears on the last business day of each month (see note 31).

d. Liquidity risk

Sec Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, Sec Group finances its operations through a mix of equity and borrowings. Sec Group's objective is to provide funding for future growth and achieve a balance between continuity and flexibility through its bank facilities and future intergroup loans.

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

Capital management

SEC Group monitors capital, which is made up of share capital, retained earnings and other reserves.

SEC Group's objectives when maintaining capital are:

· to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

· to provide an adequate return to shareholders by pricing services commensurately with the level of risk.

SEC Group sets the amount of capital it requires in proportion to risk. Sec Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, SEC may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

5. Revenue

Revenues are primarily generated by a comprehensive range of communications, relations and public affairs services provided to national and multinational clients.

Revenues for services are composed by: public relation activities for € 11,782,000; (2015: € 10,496,000) advocacy activities for € 4,796,000; (2015: € 6,249,000) and integrated services of 1,909,000; (2015: € 4,499,000).

6. Employees expenses

The average monthly number of employees during the period was as follows:

Salaries to key managers of the Group, including Board of Directors' fees have been the following:

No bonuses were paid to Directors during the period.

7. Service costs

Overheads principally comprise costs incurred with subcontractors in order to manage extraordinary workload activity not directly provided internally. Services principally comprise marketing, advertising and other services incurred by the Group in its operating activities (respectively for € 2,873,000 in 2016 and € 4,064,000 in 2015); other amounts are related to phone costs, travel expenses, office maintenance expenses, freight costs, car expanses and bank charges.

8. Depreciations and amortizations

Other operating income and charges

Other operating income and expenses in 2015 and 2016 are mainly generated by non-recurring adjustments and miscellaneous.

10. Other operating Costs

Other costs primarily include the purchase of goods and materials for managing events; the remaining costs comprise subscriptions, magazines, books and newspapers, consumption of materials.

11. Finance income and expense

12. Taxation

2016 Applicable tax rates (Italy)

The SEC Group's activities are both in Italy and abroad (Spain, Germany, Belgium, United Kingdom). Activities within Italy are subject to two corporate taxation regimes:

· IRES is the state tax which was levied at 24 per cent. (27.5 per cent. in 2015) of taxable income.

· IRAP is a regional income tax, for which the standard rate is 3.9 per cent., with certain local variations permitted.

The reconciliation between the theoretical income taxes calculated on the basis of the theoretical tax rate and income taxes recognized was as follows:

13. Intangible assets

Additions in Goodwill over the two-year period are generated as follows:

· in 2015, € 761,000 from acquisition of Kohl PR & Partners GMBH.

· In 2016, € 1,806,000 from acquisition of Newington Communications LTD.

The evaluation of the CGUs for goodwill impairment testing has been prepared on a Discounted Cash Flow basis value.

In 2016 management identified the aggregation of cash generating units ("CGUs") for testing the impairment of its goodwill in light of the business of the year. As a result of the analysis, management identified as CGUs the single subsidiaries that generated goodwill.

Total goodwill at 31 December 2016 is € 5.340,000 related to Cambre (€ 1,547,000), acquired in 2013, ACH (€ 492,000) and Sec and Partners (€ 100,000) acquired in 2014, Kohl (€ 761,000) acquired in 2015 and Newington (€ 1,532,000) acquired in 2016. Additions of 2014 also included goodwill in ACH resulting from a previous merger (€ 275,000) and goodwill in Sec and Partners resulting from a previous acquisition (€ 632,000).

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

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

The recoverable amount of CGUs has been determined by utilizing cash flow forecasts based on the 2017 to 2021 five year plan approved by management, on the basis of the results attained in previous years as well as management expectations regarding future trends in the public relations market. At the end of the five-year projected cash flow period, a terminal value was estimated in order to reflect the value of the CGU in future years. The terminal values were calculated as a perpetuity at the same growth rate as described above and represent the present value, in the last year of the forecast, of all future perpetual cash flows. The impairment test performed as of the balance sheet date resulted in a recoverable value greater than the carrying amount (net operating assets) of the above-mentioned CGUs.

Acquisition of Newington is subject to an earn-out based on company EBITDA over three years (2016 - 2018); total consideration for the acquisition of the 60% share of the company has been calculated based on conservative and reasonable estimates, consequently an earn-out liability for 612k has been accrued as of 31 December 2016. The final total consideration is subject to uncertainty and depends on the company performance over the ongoing financial year (see note 25).

14. Tangible assets

15. Investments

16. Other financial assets

Other financial assets include € 10,000 of bank deposits to guarantee the ACH Cambre SL (Madrid) office lease and other financial investments of ACH Cambre SL € 6,000 in both 2016 and 2015.

17. Other assets

Director benefits is the asset coverage provided by an external insurance company in order to fulfil the end of mandate obligations for the Board director (net balance is zero, see note 27).

The movement on the deferred tax account is shown below:

18. Trade receivables

There is no material difference between the net book value and the fair-values of trade receivables due to their short-term nature.

The ageing analysis of accounts receivables by due date is as follows:

The amounts presented in the consolidated statement of financial position are net of an allowance for doubtful receivables of € 161,000 (2015: €40,000) based on prior experience and their assessment of the current economic ongoing.

19. Other receivables

There is no material difference between the net book value and the fair values of other receivables due to their short-term nature. Others mainly include advance prepayments to suppliers of € 21,000 (2015: €37,000) and € 12,000 (2015: €50,000) of receivables from minority shareholders.

20. Financial Investments

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

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

21. Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise the following balances with original maturity of 90 days or less:

22. Trade payables

23. Borrowings

The Group has both long-term borrowings funding business acquisitions and short-term credit facilities for working capital. Borrowings shown on current and noncurrent liabilities are as follows:

Details of non-current liabilities

24. Other payables

There is no material difference between the net book value and the fair values of current other payables due to their short-term nature.

Other includes € 142,000 in both 2016 and 2015 related to the payable due to a SEC and Partners director, for payment made by the latter on behalf of SEC Group and €116.000 payable to a Newington director (amount settled by the company in 2017).

Maturity analysis of the financial liabilities, classified as financial liabilities measured at amortized cost, is as follows (the amounts shown are undiscounted and represent the contractual cash-flows):

25. Provision

Increase in provisions versus 2015 is mainly due to accounting for the earn out liability on the acquisition of Newington (see note 13).

26. Employee benefits

The liability represents the amount for future severance payments to employees.

27. Other non-current liabilities

SEC S.P.A. has an obligation in relation to a Board Director for end of mandate allowance as per the above amounts on each year end date. Such obligation is covered by an insurance asset (note 17).

28. Share capital

At 31 December 2016, the share capital comprises:

12,221,975 ordinary shares of 0.1 EUR each.

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

At 31 December 2015 the share capital comprised 1,000,000 ordinary shares of 1 EUR each.

The general assembly held on 9 June 2016 changed the number and the amount of the sharers into 10,000,000 ordinary shares of 0.1 EUR each.

At 26 July 2016, following the IPO on AIM UK market, the share capital changed into 12,221,975 ordinary shares of 0.1 EUR each, with an increase of 2,221,975 shares and € 222,197.50.

Earnings per share

The basic and diluted earnings per share for 2016 were determined by dividing the profit attributable to the equity holders of the parent by the number of shares outstanding during the period. Earnings per share, basic, is determined as follows:

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

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

29. Reserves

The following table describes the nature of each reserve:

Legal reserve

This reserve required by law, not distributable.

Evaluation reserve

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

Share premium reserve

The share premium reserve includes € 3,777,000 related to the IPO of Sec S.p.A. on the AIM UK market occurred on 26 July 2016, for amounts paid in excess of share face value, net of € 1,150,000 generated by the costs of listing, net of tax.

Retained earnings

All other net gains and losses and transactions with owners not recognized elsewhere.

30. Non-controlling equity

The equity non-controlling interests refers to the net value of the assets and liabilities attributable to minority investments not held by the Group. Summarized financial information in relation to the subsidiaries before intra-group eliminations is presented below, together with the indication of the minority share of the net assets and the related results for the year.

The summarized company statements of financial position for the Two year ended 31 December 2016 are as follows:

The summarized income statement of the companies for the two-year ended 31 December 2016 are as follows: