INTERVIEW: SEC S.p.A. Definitely a stock to watch out for says WH Ireland Analyst

Sec SpA (LON:SECG) is the topic of conversation with WH Ireland research analyst Brendan D’Souza when he caught up with DirectorsTalk. Brendan provides some background on the company, explains the effect Brexit has had, SEC’s UK acquisition and newsflow for the next 3 to 6 months.

SEC S.p.A., the largest independent advocacy, public relations and integrated communications agency in the Italian market, has acquired a majority shareholding in Bellenden Limited (trading as Newington) (“Newington”) (the “Acquisition”) in line with its stated acquisition strategy and specifically referred to in the Admission document dated 20 July 2016. The initial consideration, for 60% of the issued share capital of Newington, comprises a completion cash payment of GBP 1,223,000 and a further cash payment of GBP 174,877.   Under the terms of the Acquisition, SEC will make two further cash payments of deferred consideration through an earn out mechanism linked to Newington’s EBITDA over the three financial years ending on 31 March 2018.  The consideration payable under the earn out will be calculated using an EBITDA multiple based on Newington’s reported EBITDA (subject to certain adjustments).  The adjusted EBITDA and amounts payable by SEC under the earn out will be agreed between the parties or determined by independent accountants.  The amount payable under the earn out mechanism has been capped at GBP 3,871,000. The directors of the Company anticipate that the Acquisition will be earnings enhancing based on the current share price of the Company. This statement regarding earnings enhancement is not a profit forecast and should not be interpreted to mean that the Company’s earnings per share will necessarily match or exceed the historic earnings of the Company.

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