SEC Newgate 'ahead of budget' in Q1; outlines COVID-19 impact after 'transformational' year

SEC Newgate's profitability is "ahead of budget" despite the coronavirus crisis, the group said in its full-year results announcement, adding that most of its UK agencies "significantly improved" their performance in 2019.

The company reported revenue of €47.6m and pre-tax profit of €1.3m in 2019, a "truly transformational year" that saw the merger of Italian group SEC and Newgate owner Porta. Revenue and pre-tax profit in 2018 were €29m and €2.2m respectively - the 2019 numbers contain four month's trading for the new, combined entity.

Net debt, which also includes four months as the combined group, moved from €1.7m to €8.7m.

The company sounded an optimistic tone about the impact of the coronavirus, saying the "operating foundations of the group are firm" despite the "short-term issues" caused by the pandemic.

For the UK, deputy group CEO Emma Kane said the market "remained challenging" during 2019 due to uncertainty over Brexit timings. "Despite this, the overall performance of the majority of the UK agencies was significantly improved on the prior year."

She said Newgate is "now trading profitably" after investments and changes in 2019, "and has a clear path continuing to drive performance over the coming year". According to the PRWeek UK Top 150 Consultancies table, the agency's revenue rose 29 per cent in 2019 to £11.7m. New work included briefs with Ballymore, JM Finn, Jury's Inn, Leonardo Hotels, Openreach, Urban & Civic, and Vanguard.

The agency saved around €0.8m last year from the 2018 merger of Newgate, Redleaf and Publicasity - savings over two years totalled €3.7m.

Public affairs specialist Newington's revenues and 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", Kane said.

"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 included 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.

COVID-19

Chief financial officer Federico Vecchio said after a "good start to the year in line with management expectations", SEC Newgate has "inevitably been impacted" by the pandemic. This has appeared "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".

Chairman John Foley said the coronavirus "certainly makes it harder to achieve our goals" and "timescales may need to change from the original plan". The group's three-year Strategic Plan, devised in November 2019, includes steps such as cultural integration of the former SEC and Porta businesses and improved profiability.

"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."

Last month the company said it had implemented "business continuity plans" amid the pandemic, including reducing discretionary spend.

PRWeek reported in April that SEC Newgate had paused new hires and was looking into a range of programmes for employers in its various markets, but did not plan to furlough staff.

Foley said this morning: "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."

He added: "2019 was truly a transformational year. The group is now of a scale to provide research backed strategic consultancy and advocacy services seamlessly across five continents with 34 offices in 15 countries and nearly 600 people.

"The creation of the new company, which is already within the top thirty global communications service providers, is a great opportunity to build a strong, profitable business for the benefit of all our stakeholders.

"The first quarter of 2020 started very well with the group's profitability ahead of budget. The company's liquidity position is strong enough to withstand uncertain business demand for the foreseeable future and we remain confident and enthusiastic about the prospects for the enlarged group."

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