Report 2015

HIGHLIGHTS

30,739

MLN €

Total revenue

880

MLN €

Operating profit

552

MLN €

Profit for the period

488

MLN €

Capex

OPERATING RESULTS

The Group saw a significant improvement in its operating performance in 2015, with operating profit of €880 million up 27% on 2014 (€691 million in 2014) and profit for the year of €552 million (€212 million in 2014).

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

	for the year ended 31 December		Increase/(decrease)
(€m)	2015	2014	Amount	%
Revenue from sales and services and insurance premium revenue	27,007	24,622	2,385	9.7%
Postal and Business Services	3,825	3,964	(139)	-3.5%
Financial Services	4,744	4,950	(206)	-4.2%
Insurance Services ^(*)	18,199	15,472	2,727	17.6%
Other Services	239	236	3	1.3%
Other income from financial and insurance activities	3,657	3,772	(115)	-3.0%
Financial Services	442	404	38	9.4%
Insurance Services	3,215	3,368	(153)	-4.5%
Other operating income	75	118	(43)	-36.4%
Postal and Business Services	68	110	(42)	-38.2%
Financial Services	2	4	(2)	-50.0%
Insurance Services	1	-	1	n/s
Other Services	4	4	-	n/s
Total revenue	30,739	28,512	2,227	7.8%
Cost of goods and services	2,590	2,648	(58)	-2.2%
Net change in technical provisions for insurance business and other claims expenses	19,683	17,883	1,800	10.1%
Other expenses from financial and insurance activities	689	76	613	n/s
Personnel expenses	6,151	6,229	(78)	-1.3%
Capitalised costs and expenses	(33)	(30)	(3)	10.0%
Other operating costs	198	344	(146)	-42.4%
Total costs	29,278	27,150	2,128	7.8%
EBITDA	1,461	1,362	99	7.3%
Depreciation, amortisation and impairments	581	671	(90)	-13.4%
Operating profit/(loss)	880	691	189	27.4%
Finance income/(costs)	50	7	43	n/s
Profit/(loss) on investments accounted for using the equity method	3	(1)	4	n/s
Profit/(Loss) before tax	933	697	236	33.9%
Income tax expense	381	485	(104)	-21.4%
Profit for the year	552	212	340	n/s

n/s: not significant
^(*) This item includes €18,197 million in insurance premiums and €2 million in revenue attributable to the SDS group, in which Poste Vita SpA acquired a controlling interest in 2015.

The contribution to operating profit from Financial Services is up 21% (€930 million in 2015, compared with €766 million in 2014). The Insurance Services segment recorded an excellent operating performance, with Poste Vita registering premium revenue of €18.2 billion (€15.5 billion in premium revenue in the previous year).

GROUP – TOTAL REVENUE BY OPERATING SEGMENT
(DATA IN MILLION EURO)

GROUP – TOTAL REVENUE BY OPERATING SEGMENT

The Poste Italiane Group’s total revenue for the year amounts to €30,739 million, marking an increase of 7.8% on 2014.

Postal and Business Services: the growing popularity of digital media and communication has led to a progressive reduction in demand for traditional products and services, the operating performance has, for the first time in many years, seen a slowdown in the pace of decline in total revenue, which is down from the €4,074 million of 2014 to €3,893 million in 2015 (a reduction in revenue of €181 million compared with 2014, whilst the reduction in 2014, compared with the previous year, was €378 million).
Financial Services: total revenue amounts to €5,188 million, marking a reduction of 3.2%. This reflects the reduction in average interest rates on deposits invested in securities and on deposits with the Ministry of the Economy and Finance, in line with market trends, as well as a decrease in income from the distribution of postal savings products on behalf of Cassa Depositi e Prestiti SpA, linked to the agreed mechanism tying fees to the achievement of net savings inflow targets. The impact of the above was only partially offset by the positive performance of other income from financial activities, which is up from €404 million in 2014 to €442 million in 2015. This was primarily generated by the sale of available-for-sale financial assets, in the form of euro area government securities or, up to a maximum of 50%, of securities guaranteed by the Italian government8, in which the postal current account deposits of BancoPosta RFC’s private customers are invested.
Insurance Services: the segment delivered excellent results during the period, with Group companies (represented by Poste Vita and its subsidiary, Poste Assicura) recording premium revenue of €18.2 billion (premium revenue of €15.5 billion in 2014). This primarily reflects the performances of traditional Class I investment and savings products, where the Group has built up a strong presence. Other income from financial and insurance activities is, however, down from the €3,368 million of 2014 to €3,215 million in 2015, reflecting fair value losses on the financial instruments held to cover obligations to policyholders.
Other Services: total revenue is up €3 million (€243 million in 2015, compared with €240 million in 2014). This reflects improved operating results from Poste Mobile, making an important contribution to the Group’s operating result.

FINANCIAL POSITION AND CASH FLOW

The Poste Italiane Group’s net invested capital at 31 December 2015 amounts to €999 million, amply financed by equity.

NET FUNDS

Net funds amount to €8,659 million at 31 December 2015, marking a significant improvement on the figure for 31 December 2014 (when net funds totalled €4,741 million). This reflects, among other things:

the component linked to fair value measurement of investments in securities, primarily by BancoPosta RFC, and,
to a lesser extent, by the subsidiary, Poste Vita, amounting to approximately €3,775 million (€2,651 million at 31 December 2014).

Balance at 31 December 2015	Postal and Business Services	Financial Services	Insurance Services	Other Services	Eliminations	Consolidated amounts
Financial liabilities	(2,442)		(1,218)	(4)	1,596	(57,478)
Postal current accounts	-		-	-	287	(43,468)
Bonds	(811)		(758)	-	-	(2,048)
Borrowings from financial institutions	(917)		-	-	-	(7,018)
Other borrowings	(1)		-	-	-	(1)
Finance leases	(6)		-	(4)	-	(10)
Derivative financial instruments	(52)		-	-	-	(1,599)
Other financial liabilities	(14)		(6)	-	-	(3,334)
Intersegment financial liabilities	(641)		(454)	-	1,309	-
Technical provisions for insurance business	-		(100,314)	-	-	(100,314)
Financial assets	1,390		102,350	26	(1,309)	160,090
Loans and receivables	141		66	-	-	10,508
Held-to-maturity financial assets	-		-	-	-	12,886
Available-for-sale financial assets	581		83,871	-	-	117,869
Financial assets at fair value through profit or loss	-		18,132	-	-	18,132
Derivative financial instruments	-		245	-	-	695
Intersegment financial assets	668		36	26	(1,309)	-
Technical provisions for claims attributable to reinsurers	-		58	-	-	58
Net financial assets/(liabilities)	(1,052)		876	22	287	2,356
Cash and deposits attributable to BancoPosta	-		-	-	-	3,161
Cash and cash equivalents	1,316	489	1,608	16	(287)	3,142
Net funds/(debt)	264	5,873	2,484	38	-	8,659

Balance at 31 December 2014	Postal and Business Services	Financial Services	Insurance Services	Other Services	Eliminations	Consolidated amounts
Financial liabilities	(3,434)	(52,529)	(1,305)	(6)	1,915	(55,359)
Postal current accounts	-	(40,927)	-	-	312	(40,615)
Bonds	(809)	(479)	(757)	-	-	(2,045)
Borrowings from financial institutions	(1,751)	(6,660)	-	-	-	(8,411)
Other borrowings	(3)	-	-	-	-	(3)
Finance leases	(8)	-	-	(6)	-	(14)
Derivative financial instruments	(58)	(1,721)	-	-	-	(1,779)
Other financial liabilities	(15)	(2,474)	(3)	-	-	(2,492)
Intersegment financial liabilities	(790)	(268)	(545)	-	1,603
Technical provisions for insurance business	-	-	(87,220)	-	-	(87,220)
Financial assets	1,648	52,521	90,102	21	(1,603)	142,689
Loans and receivables	256	8,618	23	-	-	8,897
Held-to-maturity financial assets	-	14,100	-	-	-	14,100
Available-for-sale financial assets	581	29,553	77,013	-	-	107,147
Financial assets at fair value through profit or loss	-	-	12,155	-	-	12,155
Derivative financial instruments	-	182	208	-	-	390
Intersegment financial assets	811	68	703	21	(1,603)	-
Technical provisions for claims attributable to reinsurers	-	-	54	-	-	54
Net financial assets/(liabilities)	(1,786)	(8)	1,631	15	312	164
Cash and deposits attributable to BancoPosta	-	2,873	-	-	-	2,873
Cash and cash equivalents	305	1,040	656	15	(312)	1,704
Net funds/(debt)	(1,481)	3,905	2,287	30	-	4,741

FINANCIAL POSITION

at 31 December (€m)	2015	2014	Increase/(decreas
Non-current assets:
Property, plant and equipment	2,190	2,296	(106)	-4.6%
Investment property	61	67	(6)	-9.0%
Intangible assets	545	529	16	3.0%
Investments accounted for using the equity method	214	1	213	n/s
Total non-current assets (a)	3,010	2,893	117	4.0%
Working capital:
Inventories	134	139	(5)	-3.6%
Trade receivables and other receivables and assets	5,546	7,247	(1,701)	-23.5%
Trade payables and other liabilities	(4,398)	(4,080)	(318)	7.8%
Current tax assets and liabilities	19	635	(616)	-97.0%
Total working capital: (b)	1,301	3,941	(2,640)	-67.0%
Gross invested capital (a+b)	4,311	6,834	(2,523)	-36.9%
Provisions for risks and charges	(1,397)	(1,334)	(63)	4.7%
Provisions for employee termination benefits and pension plans	(1,361)	(1,478)	117	-7.9%
Deferred tax assets/(liabilities)	(554)	(345)	(209)	60.6%
Net invested capital	999	3,677	(2,678)	-72.8%
Equity	9,658	8,418	1,240	14.7%
Net funds	8,659	4,741	3,918	82.6%

AREAS OF BUSINESS

The Group's operations are divided into four operating segments: Postal and Business Services, Financial Services, Insurance Services and Other Services, which are managed by dedicated Group functions and/or companies. The organisation is also based on two distribution channels for retail customers, on the one hand, and business and Public Administration customers, on the other. These channels operate alongside a series of Corporate functions responsible for policy, governance, controls and the provision of services supporting business processes.
The organisational model, which ensures the development of synergies within the Group as part of an integrated approach to operations, is applied via governance and operating models, characterised by:

coherent and integrated management of the Group, ensuring a uniform and coordinated approach to the market, whilst taking into account the central importance of customers and exploiting potential synergies, assigning responsibility for coordinating subsidiaries to the relevant functions within the Parent Company according to business sector;
an organisational structure focused on the core businesses: postal logistics, finance and insurance;
Corporate functions capable of ensuring, through coordination and integration of their respective areas of expertise, coherent fulfilment of their assigned roles at Group level and the provision of shared services closely aligned with business needs, thus guaranteeing efficiency, economies of scale, quality and effective support for the different businesses.

CONSOLIDATED FINANCIAL STATEMENTS AND REPORT

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