Poste Italiane full year 2016 records strong revenue and margin growth and a recommended dividend of € 0.39 per share
Rome, 15 March 2017 - The Board of Directors of Poste Italiane S.p.A. (“Poste Italiane”), chaired by Luisa Todini, reviewed and approved today the 2016 Annual Financial Statements, drawn up in compliance with the measurement, recognition and classification criteria laid down by international accounting standards (IAS/IFRS).
Mr. Francesco Caio, Chief Executive Officer and General Manager, commented on the results as follows:
“Poste Italiane closed 2016 with strong revenue and margin growth to consolidate the direction of change and development begun in 2014. At Group level revenues exceeded 33 billion euros with growth of 7.7% compared to 2015; operating profit exceeded one billion euros (1,041 mln) with growth of 18.3%. Net profits grew by 12.7% to 622 million euros. As announced when the company was listed, we will pay again for 2016 a dividend equivalent to 80% of net profits, or € 0.39 per share, representing growth of 15%.
The Group's results saw contributions from all business areas which have effectively pursued the priorities of investment and development laid out in the Business Plan: postal services launched a new delivery model, while Poste gained market share in the parcels segment with volume growth of over 12%. BancoPosta achieved an ROE (Return On Equity) of 29%. Meanwhile in insurance Poste Vita grew by 9% in terms of premiums collected.
Total client assets under management/administration reached € 493 billion, up 3.7%.
Since the Five-Year Business Plan was presented in 2014, the company has grown its revenues by nearly 50%, operating profit by 50% and net profit has almost tripled.
These results demonstrate the validity of the company's strategic decisions and its capacity, through the actions of the management team and the efforts of all its people, to turn them into business and financial results; as well as continual dialogue and relations with the institutions, the regulators and the local territories in which it is deeply rooted.
As announced with the presentation of the 2020 Poste Business Plan, Poste Italiane has in recent years embarked on a development path that combines two directions of travel: on the one hand growth, innovation and customer focus - subscribed by Italian and foreign investors at the stock exchange listing; on the other, confirmation of the social mission which has always marked the company's character, preserving and strengthening Poste's widespread local presence guaranteeing proximity and inclusion to communities and citizens across the whole country.
These latest results represent a very robust basis on which to proceed with implementation of the 2020 Plan”.
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In addition to the standard financial indicators required by IFRS, Poste Italiane also utilises a number of alternative performance indicators, with a view to providing a clearer assessment of the business performance and financial position. The meaning and makeup of such indicators are described in the annex, in line with the ESMA/2015/1415 Guidelines of 5 October 2015.
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In financial year 2016, the Group’s total revenue, inclusive of insurance premiums, registered a 7.7% growth compared with the previous year, rising to € 33.1 billion. The positive performance of the Insurance Services and Asset Management business, with revenues up 10.8% to € 23.8 billion compared with the previous year, and the steady performance of Financial Services generating revenues for € 5.3 billion, more than offset the anticipated decline in revenues from Postal and Business Services (-1.5% to € 3.8 billion), mainly driven by a reduction in mail volumes (-10.9%) and in any case slower than the previous year. Revenues for the parcel service grew by 6.4% compared with the previous financial year to € 649 million.
The operating profit recorded a sharp rise of 18.3% from the previous year (€ 880 million) to stand at € 1,041 million. This increase is due to the aforementioned positive performance of revenues together with a containment of operating costs.
The net profit is € 622 million, an increase on the € 552 million of the previous year.
The Board of Directors proposed a dividend of € 0.39 per share, for submission to the approval of the shareholders’ meeting, in line with the Company's dividend pay-out policy of least 80% of Poste Italiane's 2016 consolidated net profit.
The group net financial position presents a surplus of € 6.2 billion. The variation, compared with a surplus of € 8.7 billion at 31 December 2015, while benefiting from a positive cash flow of non-financial operations for more than € 1.4 billion, suffered from the generalised contraction in the fair value of the financial instruments (of € -2.3 billion) and from the reclassification (for € -0.6 billion) of the financial assets and liabilities of BdM-MCC SpA and BancoPosta Fondi SpA SGR in the items specified in IFRS 5.
The net industrial financial position presents a surplus of € 893 million, an improvement on the surplus of € 307 million at the end of 2015.
Capital Expenditure comes to € 451 million for the year, and is primarily related to the computerisation of telecommunication networks and to property renovation and restructuring.
During 2016, client assets under management/administration rose to € 493 billion, up 3.7% from € 476 billion at 31 December 2015. The result can be ascribed mainly to a growth in technical provisions in the life insurance business, the investment funds and BancoPosta’s current account deposits.
As regards the distribution networks, the process of modernisation and digitalisation of post offices continued during 2016 via the roll-out of wi-fi connectivity in 3,200 post offices from the start of the project and the installation of a “new queue management” system already present in over 1,700 offices: the average waiting time in offices with queue management was 8.6 minutes in 2016, down 27% on the previous year. These initiatives continue to further improve the quality of customer services, including the opening of 23 multilingual offices across the nation to simplify access to the Group’s services for “new Italians".
Pursuant to the Business Plan's provisions in terms of increasing the efficiency and promoting the requalification of human resources, about 1,500 new resources were hired (including over 500 transformations from part-time to full-time contracts), while the total average headcount of the Group fell by about 2,500 units compared to 2015. In addition, 5,700 employees have signed up to the pre-retirement plan, and, at 31 December 2016, have left the Group. Group personnel received over 3 million hours of training.
Information on the main operating segments is reported below.
Total revenues equal € 5.8 billion, up from € 5.6 billion in 2015 due to non-recurring proceeds of € 121 million generated by the divestiture of the Group’s shareholding in Visa Europe Ltd and fees received for the distribution of loan products. The increase in income from the active management of the securities portfolio held by BancoPosta offset the lower revenues and earnings in large part due to the decline in market returns.
Operating profit fell by -10.4% compared with 2015 (€ 907 million) and amounted to € 813 million. Despite the rise in revenues, the contraction was mainly ascribable to higher costs of distribution, linked to the Company's remunerating policy on services rendered by the sales network, and the higher provisions following the initiative to protect customers who invested in the real estate funds offered by Poste Italiane in the period 2002 to 2005.
BancoPosta’s average deposits (including long-term repos) amount to € 49.6 billion, up 10% from € 45.2 billion in 2015.
Postepay Evolution – the personal rechargeable prepaid card with IBAN code – at the end of February 2017 topped the major target of 3.8 million cards issued since launch (July 2014).
Poste Italiane, through BancoPosta, has continued to strengthen its services for Italian households by expanding the range of consumer loans and mortgages, with a range of solutions in terms of length, amount and repayment flexibility, as well as offering the possibility of subrogation and additional liquidity on mortgages.
INSURANCE SERVICES AND ASSET MANAGEMENT
Total revenues, inclusive of other income from insurance operations, amounted to € 23.8 billion, registering a 10.8% increase on the previous year (€ 21.5 billion), € 1.7 billion due to a higher total for insurance premiums collected. More specifically, Poste Vita, the leading Italian insurance provider with technical provisions amounting to € 113.5 billion (€ 100.2 billion at the end of December 2015) collected premiums for approximately € 19.8 billion (€ 18.1 billion in 2015), mainly through the sale of Class I, and to a lesser extent, Class III and V products. The above increase in premium revenues had a physiological offset in the increase in insurance technical provisions.
Operating profit amounted to € 636 million, up 24.7% compared with financial year 2015 (€ 510 million) mainly thanks to the increase in insurance investments on which Poste Vita earns partly recurrent fees.
POSTAL AND BUSINESS SERVICES
Total revenues amount to € 8.4 billion (inclusive of € 4.5 billion in captive revenue, mainly due to distribution services), which grew 1.8% compared with 2015 (€ 8.2 billion). The fall in external revenue for mail services, which was less steep than the previous year (-1.9%, as against -5.4% in 2015), is ascribable to the anticipated reduction in the volumes of postal products. Financial year 2016 benefited from the effects of the new tariffs introduced from December 2014 and from the recognition of amounts (€ 109 million) to partially cover of the costs of the Universal Postal Service, suspended in previous years and foreseen by the new provisions in the government's budget following the previous contractual undertakings of the Ministry of Economy and Finance - MEF. This slowing in the decline in revenues is also linked to steps taken by management to improve the quality of traditional postal services and increase the efficiency of the related business processes.
On 1 October 2015 the transformation of the Universal Postal Service was launched, with a new offering of more articulated and flexible services, and a new delivery model, envisaging the gradual introduction of alternate day delivery for up to 25% of the Italian population. The new regulatory framework will allow the Group to provide a better response to changed customer needs and accelerate implementation of the Business Plan.
The parcel service posted a 12.8% growth compared to 2015, for a total number of 97 million parcels handled in the year, also thanks to the developing growth of e-commerce in Italy.
Operating profit was a negative € -436 million (€ -568 million in 2015) and, with respect to the slide in revenues mentioned above, was mitigated by the containment of external costs, and by the higher contribution paid by BancoPosta for the activities of the sales network and regulated by the internal executive policy.
RECENT EVENTS AND BUSINESS OUTLOOK
Key events during the period
A partial demerger deed regarding the fixed line telecommunication business (“Rete Fissa TLC”) of the subsidiary PosteMobile S.p.A. in favour of Poste Italiane was executed on 27 April 2016. The operation, whose accounting and tax implications took effect from 1 May 2016, was completed on schedule in accordance with the Group's strategic plan.
On 31 May 2016 the Council of Ministers approved, on the recommendation of the Ministry of Economy and Finance, the draft Decree of the President of the Council of Ministers (DPCM) which defines the privatisation criteria and disposal procedure for a further share of the Ministry of the Economy and Finance’s holding in Poste Italiane S.p.A., so as to maintain a public interest through Cassa Depositi e Prestiti SpA (CDP) in the share capital of Poste Italiane SpA, to be allocated to CDP’s segregated assets, in relation to which the guidance and management function will continue to be exercised by MEF (Ministry of the Economy and Finance). On 24 June 2016, the Extraordinary General Meeting of CDP approved an increase in the share capital reserved to MEF for an amount of € 2.93 billion inclusive of share premiums. On the paying in of the capital increase, on 20 October 2016 MEF awarded CDP a share in Poste Italiane consisting of 457,138,500 ordinary shares equal to 35% of the share capital.
In addition, on 30 December 2016, the MEF assigned around 5.7 million shares to subscribers of the IPO of 27 October 2015 who had maintained full ownership of the securities uninterrupted for 12 months.
On 31 December 2016, therefore, as a result of the above operations, MEF holds a share equal to around 29.3% of the capital of Poste Italiane.
On 21 June 2016, Poste Italiane SpA, as principal member of Visa Europe Ltd, transferred its shareholding in Visa Europe as part of the global transaction for the acquisition and merger of said company into the US based company Visa Incorporated. The total fair value of the amount received was € 121 million with a corresponding positive impact on the consolidated income statement for the financial year.
On 12 September 2016 Poste Italiane, Postecom and Postel approved a breakup and merger plan as part of the corporate reorganization of Postecom, in two stages: (i) partial spin-off of Postecom in favour of Postel of the business unit responsible for activities relating to the shareholdings in PatentiViaPoste ScpA and in the Consortium Poste Motori; (ii) merger by incorporation of Postecom in Poste Italiane. The operation will have legal, accounting and tax effect from 1 April 2017.
On 10 November 2016, as part of a strategy to grow the asset management sector, Poste Italiane and Anima Holding signed a framework agreement by which Poste Italiane will in the course of 2017 pass its stake in BancoPosta Fondi SpA SGR to Anima Holding. Following this operation, Poste Italiane will increase its shareholding in Anima, today 10.32%, to a maximum 24.9%. Within the terms and the undertakings made in 2016, the operation will amount to a share exchange by which Poste Italiane will strengthen its stake in Anima Holding without however assuming control, based on the conditions in place at the date of drafting of the 2016 Annual Financial Statements.
Main events subsequent to 31 December 2016
Within the framework of the Business Plan focused on the three main business areas (mail and logistics, payments and financial services, asset management and insurance), following negotiations during the last quarter of 2016, on 8 February 2017 Poste Italiane concluded an agreement to transfer to Invitalia - the national agency for the attraction of investment and business development - the entire equity package of Banca del Mezzogiorno-Medio Credito Centrale (BdM-MCC) for a total value of € 390 million. The operation is expected to close during the first half of 2017, subject to approval by the Ministry of Economic Development, the Bank of Italy and the European Central Bank. Since Poste Italiane and Invitalia are subject to common control by MEF, in accordance with the law and applicable regulations, the operation was approved by the Board of Directors of Poste, after hearing favourable opinions from the Related Parties Committee and the Connected Parties within it.
On 15 February 2017 - in execution of the preliminary agreement signed on 16 September 2016 between Poste Italiane and CDP for the transfer from FSI Investimenti SpA (controlled by CDP Equity SpA via a 77% stake) to Poste of an indirect shareholding in SIA SpA (amounting to 14.85%), business leader in e-payments, payments and online services - Poste completed the acquisition of a 30% stake in FSIA Investimenti Srl (holder of 49.5% of SIA), owned 100% by FSI Investimenti SpA. With the operation finalised, following the issue of the due authorizations by the antitrust authority and the Bank of Italy, Poste paid 80% of the price of the transaction – with a total expected value of € 278 million. The final price might be adjusted, up or down, depending on the values established for SIA's net financial position at 31 December 2016 and its business results for financial year 2017. With the closure of the deal, the shareholder agreement between Poste Italiane and CDP Equity takes effect concerning the governance and ownership structure of FSIA and SIA over which the parties exercise joint control. The operation amounts to a transaction between related parties (since Poste Italiane and FSI Investimenti are subject to joint control by the Ministry of Economy and Finance) of lower importance.
In the Postal and Business Services segment the Group will continue the restructuring process begun in recent years, leveraging the new regulatory framework and the greater efficiency achieved by implementing the new delivery model. It will also continue to review the structure of logistics-production to increase efficiency and quality and improve its competitive position in the express delivery and parcel markets.
With regard to Financial Services the Company particular attention will be paid to its position in the transaction banking segment, consolidation of digital banking, and management of postal savings, where negotiations will continue in 2017 to define the conditions of the agreement governing the provision of intermediation services in favour of CDP.
In the Insurance segment, besides consolidating its leadership position in the Life market and further increasing its client base, the Group will work to develop a new “integrated” Savings, Protection and Services offering. In Asset Management, it will continue to pursue consolidation of its business on Class I products and the increasing penetration on Funds products and Class III policies, in line with the Strategic Plan in compliance with prevailing regulation, guaranteeing transparency and the fullest response to customers' needs in a zero interest environment. In addition, in 2017 negotiations will continue to examine the possibility of further growth in Anima Holding share capital.
The digital channel will represent a further vehicle of growth alongside the traditional physical distribution through the post offices, which will continue to evolve towards a more complete offering of simple and effective products to meet the changing needs of Poste customers.
SHAREHOLDERS' MEETING AND DIVIDEND
The Board of Directors has convened an Ordinary Shareholders' Meeting for 27 April 2017, in a single convocation. The Shareholders' Meeting will be called to approve the separate financial statements and examine the consolidated financial statements for the year ending 31 December 2016 and deliberate on the distribution of a dividend of € 0.39 per share, paid entirely out of the net profits of the Parent for financial year 2016. The distributable cash amounts to around € 509 million against a 2016 consolidated net profit for Poste Italiane Group of € 622 million, in line with the announced dividend policy for financial year 2016, which foresees a pay-out of at least 80% of the consolidated net profit of Poste Italiane Group. The Board of Directors recommends a coupon date of 19 June 2017, a registration date of 20 June 2017 (i.e. the date the dividend payment becomes legal) and 21 June 2017 as the payment date.
The Shareholders' Meeting will also be called to deliberate on:
The Shareholders' Meeting will be also called to pass a non-binding resolution on the question of remuneration outlining Poste Italiane's policy with regard to the salaries of the Directors, the Director General and Executives with strategic responsibility. Similarly, the remuneration policy for staff in charge of BancoPosta assets will be submitted to the Shareholders' Meeting.
Documentation regarding the matters on the Shareholders' Meeting agenda, foreseen by the applicable regulations, will be made available to the public within the terms laid down by law.
18 June 2018 is the expiry date of the bond loan issued by Poste Italiane SpA on 18 June 2013 for a nominal value of 750 million euros. At 31 December 2016 the loan bond had a book value of 761 million euros.
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A conference call will be held at 6 p.m. today, 15 March 2017, in order to present the results for financial year 2016 to financial analysts and institutional investors. Journalists will be able to listen to the call. Supporting material will be made available in the “Investors” section of the website www.posteitaliane.it as the conference call begins.
Tables showing the results of the individual business units (before intersegment eliminations) are provided below, together with the statement of financial position, statement of profit/loss for the year, statement of comprehensive income, statement of changes in equity and the consolidated statement of cash flows of Poste Italiane Group and the equivalent statements for Poste Italiane S.p.A. We should point out that these statements and the related notes have been presented to the Board of Statutory Auditors and will be subject to auditing by the Independent Auditors of Poste Italiane.
A brief description of the “alternative performance indicator” used is also provided.
The manager responsible for financial reporting, Luciano Loiodice, pursuant to art. 154 bis, paragraph 2 of the Consolidated Law on Finance, declares that the accounting information contained in this release is consistent with the underlying documents, accounting books and records.
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Condensed financial information on the operating segments.
In compliance with the provisions of IFRS 8 – Operating Segments, an operating segment is a component of an entity: a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity) and b) whose operating results are reviewed regularly by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Following is the key financial information on the operating segments of the Poste Italiane Group.
ALTERNATIVE PERFORMANCE INDICATORS
We are reporting below the meaning and content of the “alternative performance indicators”, which are not required by IAS/IFRS but have been used in this release with a view to providing a clearer assessment of the Group’s operating performance and financial position.
GROUP NET FINANCIAL POSITION: the sum of financial liabilities, insurance technical provisions, financial assets, reinsurers’ share of technical provisions, BancoPosta cash and deposits and cash and cash equivalents (NB: for financial year 2016, as a result of application of IFRS 5, net financial position does not include the financial assets and liabilities of BdM-MCC SpA and BancoPosta Fondi SpA SGR, classified under the item “Non-current assets and disposal groups held for sale and liabilities related to assets held for sale”).
NET INDUSTRIAL FINANCIAL POSITION: the sum of the net financial position of the Postal and Business Services segment and the net financial position of the Other Services segment, before adjusting for intersegment transactions.
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For further information:
Poste Italiane S.p.A. - Press Office
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Tel. +39 06 59589008
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Poste Italiane S.p.A. - Investor Relations
Head of Investor Relations
Tel. +39 06 59589421
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