Highlights
Our contribution to Italy’s economic development
Poste Italiane is now the largest logistics operator in Italy, and is a leading player in the financial, insurance and payment services. The Company plays a vital role in Italy, and makes a substantial contribution to the production chain and the national economy. By investing and operating with the actors in its value chain, Poste Italiane produces wealth and employment through its own businesses, and also generates externalities by activating a local supply chain.
In order to fully present how the Company, through its strategy and business model, creates shared value for the community and its stakeholders, by responding to their needs and contributing to the social and environmental development of the country, Poste Italiane has drawn up a model that estimates the economic impacts generated on the community, by adding “direct”, “indirect” and “induced” impacts.
Strategy
To be sustainable for Poste Italiane means defining a clear strategy on ESG issues and structurally incorporating them within the strategic objectives set in the "Deliver 2022 Plan”. Over the period of the plan, the Company has envisaged €2.8 billion of investment in strategic assets, in order to achieve financial objectives based on realistic assumptions, with limited execution risk.
Poste Italiane intends to develop its own sustainability initiatives in order to support and move forward the Sustainable Development Goals, by structurally incorporating elements of sustainability within corporate policies, processes and long-term strategy. The starting point for the success and effectiveness of this ambition is the process undertaken which - through the involvement of all organisational areas and listening to stakeholders - enables identification and review of strategic guidelines for the management of non-financial issues, with a view to achieving continuous improvement.
Deliver 2022 Strategic plan
The Mail, Parcels and Distribution segment has been reorganised to serve the growth of e-commerce. In order to increase the market share of Parcel delivery, the Company reached an agreement with labour unions regarding an innovative delivery operating model ("Joint Delivery Model"), which provides for afternoon and weekend deliveries. Furthermore, the partnership signed with Amazon in June 2018 marks another fundamental step in the implementation of the plan. Finally, investments will be made in new sorting and automation technologies to support the development of the division. In this context, Poste Italiane has also signed a framework collaboration agreement with the Italian Tobacconists' Federation, which provides for tobacconists operating as pick-up points for mail and parcels. FINANCIAL OBJECTIVES OPERATING OBJECTIVES From October 2018, the Payments, Mobile and Digital segment, together with PostePay, has been authorised by the Bank of Italy to operate as an Electronic Money Institution in line with the Plan's objectives. Operating as an internal fintech, it will enable full advantage to be taken of the growing convergence between market segments. This division will also serve as a competence centre for the implementation of the Group's digital strategy. FINANCIAL OBJECTIVES OPERATING OBJECTIVES Regarding Financial Services, the model focuses on the distribution of third-party products without credit risk, controlled by a distribution platform. The model aims at promoting sustainable growth, through a more efficient allocation of capital and a wider range of products. Important steps in the implementation of the Plan include the renewal of the postal savings agreement signed at the end of 2017 with Cassa Depositi e Prestiti, the three-year distribution agreement signed in April 2018 with Intesa Sanpaolo, the agreement with Unicredit regarding the distribution of loans, and reaching in March 2018 a series of agreements with the Anima Group regarding closer cooperation for savings management services. FINANCIAL OBJECTIVES OPERATING OBJECTIVES In its Insurance Services, Poste Italiane aims to maintain its leadership in the life sector by rebalancing its customer portfolios and shifting from traditional life policies to unit-linked products. The objective is also to achieve significant growth in non-life insurance and private pension plans. FINANCIAL OBJECTIVES OPERATING OBJECTIVES
From October 2018, the Payments, Mobile and Digital segment, together with PostePay, has been authorised by the Bank of Italy to operate as an Electronic Money Institution in line with the Plan's objectives. Operating as an internal fintech, it will enable full advantage to be taken of the growing convergence between market segments. This division will also serve as a competence centre for the implementation of the Group's digital strategy.
Business Model
The engine driving this process of value creation over time is the distinctive business model the Company has adopted to achieve the targets the Group has set itself for each operating sector, with the ESG objectives in the Integrated Strategic Plan. In particular, as previously mentioned, Poste Italiane operates as an integrated industrial group via Strategic Business Units specialising in activities that share the Group's multi-channel distribution network and uniform governance.
The following diagram illustrates the interaction between strategy, business model and forms of financial and non-financial capital that characterises Poste Italiane's value creation process over time.
THE VALUE CREATION PROCESS AT POSTE ITALIANE
Areas of business
In line with the strategic guidelines set out in the Deliver 2022 Strategic Plan, the Group’s activities are divided into four Strategic Business Units (also referred to as operating segments in Poste Italiane’s financial statements): Mail, Parcels and Distribution; Payments, Mobile and Digital; Financial Services; Insurance Services.
These Strategic Business Units are supported by 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 business process support services.
Operating results
The performance in 2018 has enabled the Group to achieve consolidated operating profit of €1,499 million, marking an increase of 34% compared with the previous year (€1,123 million), primarily due to revenue growth in almost all the Group’s operating segments and a reduction in operating costs.
Profit for the year is up €709 million, partly reflecting deferred tax income at Poste Vita (€385 million). Capital expenditure rose significantly in order to support the transformation of the Company and the individual businesses.
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
| Results of operations for the year ended 31 December (€m) | 2018 | 2017 | Increase/(decrease) | |
|---|---|---|---|---|
| Total revenue | 10,864 | 10,629 | 236 | 2.2% |
| of which: | ||||
| Mail, Parcels & Distribution | 3,580 | 3,632 | (51) | -1.4% |
| Payments, Mobile and Digital* | 592 | 532 | 61 | 11.4% |
| Financial Services* | 5,221 | 5,010 | 211 | 4.2% |
| Insurance Services | 1,470 | 1,456 | 15 | 1.0% |
| Total costs | 8,796 | 8,961 | (165) | -1.8% |
| of which: | ||||
| Total personnel expenses | 6,137 | 6,093 | 45 | 0.7% |
| of which personnel expenses | 5,519 | 5,593 | (75) | -1.3% |
| of which early retirement incentives | 619 | 500 | 119 | 23.9% |
| Other operating costs | 2,659 | 2,868 | (209) | -7.3% |
| EBITDA | 2,068 | 1,668 | 400 | 24.0% |
| Depreciation, amortisation and impairments | 570 | 545 | 24 | 4.5% |
| EBIT | 1,499 | 1,123 | 376 | 33.5% |
| EBIT Margin | 13.8% | 10.6% | 3.2% | |
| Finance income/(costs) and profit/(loss) | (8) | (55) | 47 | 85.0% |
| Profit before tax | 1,490 | 1,067 | 423 | 39.6% |
| Income tax expense | 92 | 378 | (286) | -75.8% |
| Net profit | 1,399 | 689 | 709 | 102.9% |
| Earnings per share | 1.07 | 0.53 | 0.54 | 102.9% |
* The figures for 2018 and 2017 have been reclassified in accordance with the reorganisation following from the transfer of BancoPosta RFC’s card payments and payment services unit (the Financial Services segment) to the newly established PostePay SpA (the Payments, Mobile and Digital segment) with effect from 1 October 2018.
GROUP – TOTAL REVENUE BY OPERATING SEGMENT
(DATA IN MILLION EURO)
The Group’s total revenue of €10.9 billion is up €236 million (2.2%) compared with the previous year.
- Mail, Parcels and Distribution services: total revenue from Mail, Parcels and Distribution services amounts to €3,580 million, a reduction of 1.4% compared with 2017. This reflects a decrease in traditional letter post and in other revenue, partly offset by the performance of parcels, where volumes were up 12.6% from 113 million items in 2017 to 127 million in 2018, resulting in a 9.8% increase in revenue from €693 million to €761 million.
- Payments, Mobile and Digital: contributed €592 million to total revenue, an increase of 11.4% compared with 2017. This reflects a good performance from card payments, where revenue is up from €238 million in 2017 to €291 million.
- Financial Services: total revenue amounts to €5,221 million, marking growth of 4.2% compared with the €5,010 million of the previous year. Alongside an improvement in the interest margin, the improvement reflects a 16.6% increase in commission income on the collection of postal savings deposits, reflecting the mechanisms established in the new agreement with Cassa depositi e prestiti, as well as a positive contribution from asset management. The result also reflects a reduction in realised gains, in line with the Group’s new strategy of reducing the dependence of its results on non-recurring items, and a decrease in revenue due to the sale of Banca del Mezzogiorno–MCC, completed on 7 August 2017.
- Insurance Services: contributed €1,470 million to total revenue, an increase of €15 million despite a reduction in gross premium revenue compared with the previous year (a decline of €3.7 billion). The improvement reflects the increase in the net investment result which, in contrast, benefitted from the greater volume of assets under management, and a positive contribution from the Non-life business.
Financial position and cash flow
Poste Italiane SpA’s net invested capital amounts to €2,321 million at 31 December 2018 (€2,239 million at 31 December 2017).
NET FUNDS
The Poste Italiane Group’s non-current assets amount to €3,035 million at 31 December 2018, a reduction of €42 million compared with the figure at the end of 2017. This figure reflects investment of €538 million – offset by depreciation, amortisation and impairments, totalling €570 million – and the Parent Company’s subscription, in April 2018, for shares issued by Anima Holding SpA as a result of its rights issue, amounting to €30 million. Further movements regard impairment losses of approximately €40 million recognised following impairment tests.
The Group’s investment amounted to €538 million in 2018, an increase of 15% compared with 2017 (up €71 million).
| at 31 December (€m) | 31 December 2018 | 31 December 2017 | Change | |
|---|---|---|---|---|
| Property, plant and equipment and Investment property | 1,993 | 2,053 | (60) | -2.9% |
| Intangible assets | 545 | 516 | 29 | 5.6% |
| Investments accounted for using the equity method | 497 | 508 | (11) | -2.2% |
| Total non-current assets | 3,035 | 3,077 | (42) | -1.4% |
| Trade receivables, Other receivables and assets and Inventories | 6,914 | 6,170 | 744 | 12.1% |
| Trade payables and other liabilities | (5,282) | (4,788) | (494) | 10.3% |
| Current tax assets and liabilities | 105 | 70 | 35 | 50.0% |
| Net working capital | 1,737 | 1,452 | 285 | 19.6% |
| Gross invested capital | 4,772 | 4,529 | 243 | 5.4% |
| Provisions for risks and charges | (1,519) | (1,595) | 76 | -4.8% |
| Provisions for employee termination benefits | (1,187) | (1,274) | 87 | -6.8% |
| Deferred tax assets/(liabilities) | 666 | 323 | 343 | 106.2% |
| Net invested capital | 2,732 | 1,983 | 749 | 37.8% |
| Equity | 8,105 | 7,550 | 555 | 7.4% |
| of which: net profit | 1,399 | 689 | 709 | 102.9% |
| of which: fair value reserve | (69) | 371 | (440) | -118.6% |
| Financial liabilities | 66,929 | 63,244 | 3,685 | 5.8% |
| Technical provisions for the insurance business | 125,076 | 123,579 | 1,497 | 1.2% |
| Financial assets | (190,864) | (186,766) | (4,098) | 2.2% |
| Cash and deposits attributable to BancoPosta | (3,318) | (3,196) | (122) | 3.8% |
| Cash and cash equivalent | (3,195) | (2,428) | (767) | 31.6% |
| Net funds | (5,372) | (5,567) | 195 | -3.5% |
FINANCIAL POSITION
Total net funds at 31 December 2018 amount to €5,372 million, down from the figure at 31 December 2017 (when net funds totalled €5,567 million). The change during the period reflects the increase in net working capital and a reduction in the fair value of investments classified as FVTOCI, which is not reflected in the change in technical provisions for the insurance business (as these investments are primarily held by BancoPosta RFC).
| at 31 December 2018 (€m) | Mail, Parcels & Distribution | Payments, Mobile and Digital | Financial Services | Insurance Services | Adjustments and elimination | Total |
|---|---|---|---|---|---|---|
| Property, plant and equipment and Investment property | 1,957 | 23 | - | 12 | 1 | 1,993 |
| Intangible assets | 467 | 30 | - | 48 | - | 545 |
| Investments accounted for using the equity method | 1,434 | 280 | 214 | 157 | (1,588) | 497 |
| Total non-current assets | 3,858 | 333 | 214 | 217 | (1,587) | 3,035 |
| Trade receivables, Other receivables and assets and Inventories | 2,534 | 382 | 2,798 | 2,433 | (1,232) | 6,914 |
| Trade payables and other liabilities | (3,259) | (502) | (1,917) | (836) | 1,231 | (5,282) |
| Current tax assets and liabilities | 86 | (3) | 1 | 22 | (1) | 105 |
| Net working capital | (639) | (123) | 882 | 1,619 | (2) | 1,737 |
| Gross invested capital | 3,219 | 210 | 1,096 | 1,836 | (1,589) | 4,772 |
| Provisions for risks and charges | (980) | (16) | (512) | (11) | (1) | (1,519) |
| Provisions for employee termination benefits | (1,178) | (2) | (5) | (2) | 1 | (1,187) |
| Deferred tax assets/(liabilities) | 389 | 15 | 135 | 127 | 1 | 666 |
| Net invested capital | 1,450 | 207 | 714 | 1,950 | (1,588) | 2,732 |
| Equity | 2,581 | 243 | 2,911 | 3,958 | (1,588) | 8,105 |
| of which: net profit | (372) | 153 | 617 | 1,001 | - | 1,399 |
| of which: fair value reserve | 4 | - | (72) | (1) | - | (69) |
| Financial liabilities | 1,259 | 4,307 | 67,022 | 1,034 | (6,693) | 66,929 |
| Technical provisions for the insurance business | - | - | - | 125,076 | - | 125,076 |
| Financial assets | (1,417) | (4,097) | (64,578) | (126,545) | 5,773 | (190,864) |
| Cash and deposits attributable to BancoPosta | - | - | (3,318) | - | - | (3,318) |
| Cash and cash equivalent | (973) | (246) | (1,323) | (1,574) | 921 | (3,195) |
| Net funds | (1,131) | (36) | (2,197) | (2,008) | - | (5,372) |
|
at 31 December 2017 | Mail, Parcels & Distribution | Payments, Mobile and Digital | Financial Services | Insurance Services | Adjustments and elimination | Total |
|---|---|---|---|---|---|---|
| Property, plant and equipment and Investment property | 2,025 | 18 | 1 | 9 | - | 2,053 |
| Intangible assets | 440 | 33 | - | 43 | - | 516 |
| Investments accounted for using the equity method | 1,294 | 286 | 222 | 157 | (1,451) | 508 |
| Total non-current assets | 3,759 | 337 | 223 | 209 | (1,451) | 3,077 |
| Trade receivables, Other receivables and assets and Inventories | 2,352 | 115 | 2,454 | 1,972 | (723) | 6,170 |
| Trade payables and other liabilities | (2,892) | (171) | (1,526) | (781) | 582 | (4,788) |
| Current tax assets and liabilities | 77 | 3 | (1) | (9) | - | 70 |
| Net working capital | (463) | (53) | 927 | 1,182 | (141) | 1,452 |
| Gross invested capital | 3,296 | 284 | 1,150 | 1,391 | (1,592) | 4,529 |
| Provisions for risks and charges | (1,031) | (21) | (532) | (11) | - | (1,595) |
| Provisions for employee termination benefits | (1,253) | (3) | (16) | (3) | 1 | (1,274) |
| Deferred tax assets/(liabilities) | 388 | 10 | 94 | (170) | 1 | 323 |
| Net invested capital | 1,400 | 270 | 696 | 1,207 | (1,590) | 1,983 |
| Equity | 2,735 | 325 | 2,702 | 3,378 | (1,590) | 7,550 |
| of which: net profit | (502) | 146 | 499 | 546 | - | 689 |
| of which: fair value reserve | 12 | - | 180 | 179 | - | 371 |
| Financial liabilities | 2,249 | 3,249 | 62,274 | 1,017 | (5,545) | 63,244 |
| Technical provisions for the insurance business | - | - | - | 123,579 | - | 123,579 |
| Financial assets | (1,587) | (3,283) | (60,688) | (125,860) | 4,652 | (186,766) |
| Cash and deposits attributable to BancoPosta | - | - | (3,196) | - | - | (3,196) |
| Cash and cash equivalent | (1,997) | (21) | (396) | (907) | 893 | (2,428) |
| Net funds | (1,335) | (55) | (2,197) | (2,006) | - | (5,567) |
The first Integrated Report of Poste Italiane Group
Just one year on from finalising our “Deliver 2022” Strategic Plan, we are proud to present the first Integrated Report of Poste Italiane Group. The Integrated Report is the first tangible result of a new way of doing business that involves the entire organisation.
Sustainability has a key, aggregating role in this process. For Poste Italiane, being sustainable means, above all, defining a single Group strategy which brings together financial and operating objectives within a clear vision of environmental, social and governance issues (the so-called “ESG” - Environmental, Social and Governance).
We believe that the integration of sustainability targets within the Group’s business processes is necessary in order to deliver sustainable performance over time, reduce the risk profile and act in line with the principles of integrity and transparency.
Integrity, ethics and transparency represent the key values around which Poste Italiane has built its identity. These basic principles form the basis for the way we conduct our business which, by its nature, depends on creating trust and on the responsible management of relations with all our stakeholders. For this reason, we have effectively boosted our Anti-corruption System, becoming the first Italian company in the financial and communications sector to obtain the ISO 37000:2016 certification.
With regard to external relations, we have decided to reconfirm our support for local communities by establishing 10 commitments to small towns. We have promised 3,000 mayors that we will implement practical solutions for the development of their areas, aimed at guaranteeing the continuity and availability of services, access to infrastructure, digital transformation, security and the transfer of expertise.
Turning to environmental concerns, given the size of our organisation and of our geographical footprint, we are aware of the impact that our activities can have on the environment. For this reason, in addition to disseminating a culture of environmental protection, we have launched a series of initiatives designed to make our real estate assets and logistics activities more green-friendly, by, for instance, promoting the efficient management of our energy consumptions and the use of alternative energy sources.
