SECG.L Regulatory News (SECG)

SEC S.p.A.

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

Audited results for the year ended 31 December 2017

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 2017. The 2017 Report and Accounts will be available from today on the Company's investor relations website www.secglobalnetwork.com.

SEC will hold its Annual General Meeting at the Company's registered office at Via Panfilo Castaldi 11, 20124 Milan, Italy on 30 May 2018 at 11:30am (CET) with the following agenda:

Ordinary Business

- Approval of the results for the period ended 31 December 2017

- Approval of a potential dividend (in accordance with Italian Law the dividend will be proposed to the meeting on the date of the General Meeting and, if approved, an announcement will be made on that date)

- Appointment of statutory board members, who seek re-appointment in accordance with Italian law and their related remuneration.

Extraordinary Business

- Proposal to increase the authority to issue shares given to the Board of Directors at the GM on 17 October 2017 up to a maximum authority of € 5.000.000,00

- A proposal to authorise the Board of Directors, in accordance with article 2443 of Italian Civil Code, to increase the share capital of the Company , without option in accordance with article N. 2441 - part one of paragraph four paragraph five of the Italian Civil Code up to a maximum amount of € 5.000.000,00

Highlights

· Acquisition of Martis Consulting, Warsaw

· Acquisition of Newlink Comunicaciones Estrategica SAS, Bogotà

· Strongly positioned to continue to act as an industry consolidator

· Group cash position remains strong at €4.7 million

Luigi Roth, Chairman of SEC, commented: "After the IPO in July 2016 we believe we have delivered on our stated strategy by making two new acquisitions in 2017".

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

After our admission to AIM in July 2016 we completed two acquisitions (Martis Consulting in Warsaw, Newlink, now SEC Latam in Bogotà, Colombia) and we continue to seek acquisition opportunities. Moreover, on August 3rd 2017, SEC Group acquired 19.3% of Porta Communication plc. shares, a communication and marketing group listed on AIM, a market of the London Stock Exchange. This deal was an investment which provided SEC with the opportunity to acquire the capital of another listed communication Group and expand SEC's footprint with limited overlaps, to expand know how and market reach, and to consolidate our management skills. Today the platform Porta-SEC operates in 5 continents with a great offer and development perspective.

According to the latest rankings published by @theHolmesReport[1] SEC is Italy's first international Group in the Global PR rankings 2018. 

SEC is now ranked 75th in these listings, in a market with volumes rising over the last 12 months[2] … 

Finally, during the period under review we have strengthened the Board appointing Mark Glover, Newington founder and Managing Director, as executive director..

We are optimistic for the year ahead.

Luigi Roth

SEC Spa

Chairman

Chief Executive's Statement

During the period under review, global economic outlook has been stronger than expected reaching, in 2017, the best growth since 2011 (an increase of 3% against 2,4% growth in 2016) [3]. According to the World Bank, growth has been stronger in emerging economies, which reached 4.3% growth against advanced economies which grew less. Meanwhile, European figures for 2017 showed a 2% increase against a 1.8% growth rate in 2016[4].

European forecasts suggest that the global economic outlook will continue positively for the next couple of years[5]. This in spite of increasing volatility in the financial markets where we recognise a degree of uncertainty exists around inflation rates, particularly dependent on interest rates and quantative easing. We also believe that trade tariff negotiations are a concern for the world trading system and their conclusion could have an important effect on global trade and as a consequence on GDP. We will continue to monitor this situation. Finally, we have noted the recent round of elections in the four major European countries of France, Germany, Spain and Italy and do not believe they have contributed to EU stability, we believe further changes will need to be made to the European Union. At the same time, Brexit also represents a challenge, whilst increasing populism, immigration and terrorist attacks continue to be a destabilizing factor.

Despite this, the global communication market is forecasted to growth 3.6% in 2018 up from 3.1% in 2017[6]

. In Italy, the same market is forecasted to grow 0.4% against the previous year[7]

 We believe this forecasted global growth is partly supported by ongoing economic growth and a number of major sport events which are due to occur this year. In addition, the majority of the growth is linked with digital and social media which continues to develop at a higher rate than more traditional forms of media such as television and radio.

Public Relation, Public Affairs and Advocacy market, our specific sector are forecasted to grow 5% in 2017[8] . We also believe larger players have more difficulty capitalising on this growing trend than less structured and more lean companies, such as SEC. We believe the latter are more able to adapt to a constantly changing market where the ability to react quickly, without bureaucracy, is key.

The directors believe SEC has structured itself to respond to these changes by consolidating operations and maintaining a very lean chain of decision taking. SEC continues to implement its expansion plans by seeking appropriate acquisition targets and looking to boost organic growth.

Business Summary

During the year the SEC Group have seen very good performances, particularly in Italy, with Sec S.p.a., Sec & partners and Hit beating budget. In the UK, Newington's also had a strong performance after rebranding and moving to larger premises. Some of our operations have faced management changes like Spain, where a new stronger management team is now in place boosting growth for 2018 and Brussels is also now back on track.

In the mean time we believe we have seen the growth of synergies across offices to service our clients in more than one market. The list of clients served in more than one market include Autogrill, CES, IKEA, Medtronic, Tesla and Federlegno.

New business generated in 2017 was more than €3 million at a Group level. The Company has also recruited a new Chief Sales Officer, to boost activities and to market our services to global large multinationals. With regards to costs, we continue to apply great attention to cost control specially increasing efficiency of our processes and reducing our staff-to-revenues ratio in accordance with our strategic plan. The SEC Group holding company continues to implement investments to continue the expansion process by way of acquisition and the related cost for the M&A activities.

Furthermore, as already outlined, in 2017 SEC became the largest single shareholder of Porta Communication Plc, also AIM quoted, with SEC CEO Fiorenzo Tagliabue appointed as Vice-Chairman on the Porta board. The collaboration plan between the two entities is expected to produce increasing commercial opportunities for both operations and we look forward to providing updates in due course

Financials

The positive financial result of the Group is summarised below:

· Total Group Turnover reached € 24.442.392,85;

· Revenues are at € 20.964.302,35 up 13,4% against 2016 (€ 18.486.777,24)

· EBITDA is at €1.695.188,09 vs. €1.130.080,00 last year, up 50,0%.

· Net Profit is € 772.937,48 vs. € 445.471,69 last year. A 73,5% increase.

· Equity (attributable to Equity holders) has increased from €9,157M to € 9,354M.

· The group Cash position remains strong at €4,672M at the end of the period.

Outlook

Overall, the directors believe that new business generated in 2017 and the pipeline of all the Group's companies for the year ahead give the board confidence for SEC's performance in 2018.

I would like to thank all the partners and 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 30 May 2018 at 11:30am (CET).

FINANCIAL HIGHLIGHTS

FINANCIAL INFORMATION OF SEC S.P.A.

FOR THE TWO YEARS ENDED 31 DECEMBER 2017

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 2017, 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 2017 were as follows:

· 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.

· April 2017: Martis Consulting sp z o.o

· December 2017: Newlink Comunicaciones Estrategica SAS

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 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.

a (bis). Translation of the Financial Statements of foreign companies

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

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

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

· 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.

b. New standards, interpretations and amendments not yet effective

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

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

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

· IFRS 16: Leases (effective 1 January 2019)

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

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

· Amendments to IFRS 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.

· IFRIC interpretation 23: Uncertainty over Income Tax Treatments (effective 1 January 2019)

· Amendments to IFRS 9 Financial Investments and to IAS 28 Investments in Associates and Joint Ventures (clarifications on how to combine IFRS 9 and IAS 28)

· Amendments to IAS 12 Income Taxes, IAS 23 Borrowing Costs, IFRS 3 Business Combination and to IFRS 11 Joint arrangements (effective 1 January 2019)

· Amendment to IAS 19 Employees Benefits (effective 1 January 2019)

c. Going Concern

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

d. Basis of consolidation

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

· power over the investee;

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

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

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

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

e. Business combinations

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

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

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

f. Segment reporting

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

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

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

g. Revenue

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

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

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

h. Intangibles Assets

Goodwill

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

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

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

Other

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

i. Tangible assets

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

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

· Furniture and machinery 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..

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.

o. Share capital

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

p. Dividends

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

q. Taxation

Income tax for each period comprises current and deferred tax.

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

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

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

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

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

r. Employee benefits

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

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

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

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

s. Provisions

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

3. 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

Principal financial instruments

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.

a. Credit risk

Credit risk is the risk of financial loss to SEC Group if a customer or a counterparty to a financial instrument fails to meet its contractual obligations. The Company is mainly exposed to credit risk from credit sales. Sec Group has trade receivables of € 8,436,000 (2016: €7,304,000) net of any write-off and allowance for doubtful receivables.

As at 31 December 2017, the Group had amounts due from ten major customers amounting to 20 per cent. of the trade receivables balance.

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

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

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. Sec Group does not enter into derivatives to manage credit risk.

The Directors are unaware of any factors affecting the recoverability of outstanding balances at 31 December 2017 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

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.

4. 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 for10.820.000 (2016 € 11,782,000); advocacy activities for € 5.735.000 (2016 € 4,796,000); and integrated services of 4.410.000 (2016 € 1,909,000).

5. 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.

6.Directors retributions

figures exepressed in €

7. Service costs

Overheads principally comprise costs incurred with subcontractors in order to manage workload activity not directly provided internally. Services principally comprise marketing, advertising and other services incurred by the Group in its operating activities (respectively for2,044,000 € in 2017 and € 2,873,000 in 2016); other amounts are related to phone costs, travel expenses, office maintenance expenses, freight costs, car expanses and bank charges.

8. Depreciations and amortizations

9. Other operating income and charges

Other operating income and expenses in 2016 and 2017 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 for € 533.000 in 2017; the remaining costs comprise subscriptions, magazines, books and newspapers, consumption of materials.

11. Finance income and expense

12. Taxation

2017 Applicable tax rates (Italy)

The SEC Group's activities are both in Italy and abroad (Spain, Germany, Belgium, United Kingdom, Poland and Colombia). 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.

· In 2017, € 1,196,000 from acquisition of Martis, € 2,143,000 from Newlink and €252,000 from Newington

·

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

In 2017 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 2017 is 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 (€ 1,806,000, revised in 2017 to 2,052,000 based on second earn-out) acquired in 2016; to Martis (€1,196,000) and to Newlink (€2,269,000) acquired in 2017. 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 discount 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 562K has been accrued as of 31 December 2017. The final total consideration is subject to uncertainty and depends on the company performance over the ongoing financial year (see note 24).

Acquisition of Newlink is subject to an earn-out based on company EBITDA over three years (2017 - 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 €1,594 has been accrued as of 31 December 2017. The final total consideration is subject to uncertainty and depends on the company performance over the ongoing financial years (see note 24). The Newlink business combination has been determined only provisionally at the end of 2017 as per IFRS3.45 considered that earn outs are based on 2018, 2019, 2020 Newlink effective EBITDA and that this is expected to impact the amount of consideration transferred and used in order calculate goodwill (IFRS3.46).

14. Tangible assets

15. 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 2017 and 2016.

16. Other assets

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

The movement on the deferred tax account is shown below:

17. 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 € 365,000 (2016: €161,000) based on prior experience and their assessment of the current economic ongoing.

During 2017, the group accrued 229.000 € and utilized 25.000 € for bad debts

18. 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 includes tax refunds expected from tax authorities for € 127,000, advance prepayments to suppliers of € 24,000 (2016: €21,000) and € 12,000 (in both 2017 and 2016) of receivables from minority shareholders.

19. 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.

20. 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: