Group operating results

EBIT amounts to €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.

A particularly significant contributions came from the Financial Services Strategic Business Unit, where EBIT is up 33% from €646 million in 2017 to €859 million in 2018, and from the Payments, Mobile and Digital Strategic Business Unit, where EBIT is up 5% from €194 million in 2017 to €204 million in 2018.

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.

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.

Operating results by operating segment

2018 (€m)	Mail, Parcels & Distribution	Payments, Mobile and Digital	Financial Services	Insurance Services	Adjustments and eliminations	Total
Total revenue	8,210	952	5,871	1,472	(5,641)	10,864
External revenue	3,580	592	5,221	1,470	-	10,864
Intersegment revenue	4,630	360	649	2	(5,641)	-
Total costs	8,641	748	5,011	606	(5,641)	9,365
Total personnel expenses	5,989	31	80	38	-	6,137
of which personnel expenses	5,381	31	70	37	-	5,519
of which early retirement incentives	608	-	10	1	-	619
Other operating costs	2,056	304	214	84	-	2,659
Depreciation, amortisation and impairments	528	24	0	17	-	570
Intersegment costs	67	390	4,718	467	(5,641)	-
EBIT	(430)	204	859	866	-	1,499
EBIT MARGIN	-5.2%	21.4%	14.6%	58.8%		13.8%
Finance income/(costs)	(31)	4	(32)	51	-	(8)
Profit/(Loss) before tax	(462)	208	827	917	-	1,490
Income tax expense	(89)	55	210	(84)	-	92
Net profit	(372)	153	617	1,001	-	1,399

Mail, parcels and distribution segment profit or loss

(€m)	2018	2017	Increase/(decrease)
Mail	2,621	2,689	(68)	-2.5%
Parcels	761	693	68	9.8%
Other revenue	198	249	(51)	-20.6%
Intersegment revenue	4,630	4,497	133	3.0%
Total revenue	8,210	8,129	82	1.0%
Personnel expenses	5,989	5,922	67	1.1%
of which personnel expenses	5,381	5,430	(49)	-0.9%
of which early retirement incentives	608	492	116	23.6%
Other operating costs	2,056	2,154	(98)	-4.6%
Intersegment costs	67	64	3	4.2%
Total Costs	8,112	8,141	(28)	-0.3%
EBITDA	98	(12)	110	917.9%
Depreciation, amortisation and impairments	528	505	24	4.7%
EBIT	(430)	(517)	86	16.7%
EBIT MARGIN	-5.2%	-6.4%	1.1%
Finance income/(costs)	(31)	(112)	81	72.2%
Profit/(Loss) before tax	(462)	(629)	167	26.6%
Income tax expense	(89)	(127)	38	29.8%
Net profit	(372)	(502)	129	25.8%

The Mail, Parcels and Distribution Strategic Business unit reports negative EBIT of €430 million, an improvement of €86 million compared with negative EBIT of €517 million for the previous year.

External revenue is down from €3,632 million to €3,580 million, a decline of 1.4% due to lower revenue from traditional letter post (down €68 million) and a fall in other revenue (down €51 million). Among other things, this includes the revenue generated by the airline, Mistral Air, which in 2018 progressively withdrew from the passenger transport market to focus exclusively on its cargo business. On the other hand, revenue from the parcels segment grew 9.8% (up €68 million compared with 2017), especially in the B2C segment, thanks to the ongoing expansion of e-commerce.

Total costs of €8,112 million are down compared with 2017 (a decline of €28 million), reflecting a reduction in other operating costs (down €98 million). This is primarily linked to a reduction in variable costs at the airline, Mistral Air, as a result of its previously mentioned withdrawal from the passenger transport market, at Postel due to a decline in the volume of printing, and a decrease in other costs following the release of provisions for disputes with third parties, as the related liabilities for which provision had been made in previous years failed to materialise.

Ordinary personnel expenses are down €49 million, reflecting a decrease in the average workforce. In contrast, provisions for early retirement incentives are up €116 million, in relation to the Company’s decision to accelerate generational turnover through voluntary early retirement for employees who are close to retirement.

Net finance costs of €31 million represent a 72.2% improvement compared with the previous year, when the figure was impacted by the impairment loss (€82 million) on the Contingent Convertible Notes issued by Midco (the company that owns 51% of Alitalia SAI).

Payments, mobile and digital segment profit or loss*

(€m)	2018	2017	Increase/(decrease)
Card payments	291	238	53	22.3%
Other payments	85	83	2	2.9%
Telecoms	217	211	5	2.6%
Intersegment revenue	360	361	(1)	-0.3%
Total revenue	952	892	60	6.7%
Personnel expenses	31	31	(0)	-0.9%
of which personnel expenses	31	31	(0)	-0.9%
of which early retirement incentives		-	-	-
Other operating costs	304	281	23	8.2%
Intersegment costs	390	363	27	7.3%
Total costs	725	675	49	7.3%
EBITDA	227	217	10	4.8%
Depreciation, amortisation and impairments	24	22	1	6.1%
EBIT	204	194	9	4.7%
EBIT MARGIN	21.4%	21.8%	-0.4%
Finance income/(costs)	4	7	(3)	-38.3%
Profit/(Loss) before tax	208	201	6	3.2%
Income tax expense	55	55	(1)	-1.1%
Net profit	153	146	7	4.8%

The Payments, Mobile and Digital segment reports EBIT of €204 million for 2018, an increase of 4.7% compared with the previous year.

Total revenue of €952 million (up 6.7%) benefitted from the positive performance of card payments, which recorded growth of 22.3% (€53 million), and a 2.6% increase in mobile revenue (up €5.4 million).

Card payments also includes revenue from acquiring services, which doubled compared with 2017, rising from €3.6 million to €7.5 million (an increase of 109%) thanks to growth in the value of transactions due to an increase in prepaid cards.

At 31 December 2018, there are approximately 19 million Postepay cards in circulation (17.7 million in 2017), including 6.3 million Postepay Evolution cards, an increase of 33.0% compared with 31 December 2017.

Revenue from other payments totals approximately €85 million (up 2.9% compared with 2017) and reflects the positive performance of revenue from bank transfers (up 56% compared with 2017) and from the processing of tax payments using forms F23/F24 (up 1.6%), which offset the reduction in revenue from international transfers (down 14% compared with 2017).

The reduction in mobile service revenue, after taking into account intersegment items (down €6.4 million), reflects a decline in revenue from product sales, offset by an increase in fixed line revenue (up €13.8 million), due to strong growth in the PosteMobile Casa customer base, which is up from 42,000 lines in 2017 to 118,000 in 2018.

The segment’s total costs amount to €725 million, an increase of 7.3% compared with 2017 and in line with the growth in revenue. Intersegment costs are up 7.3% and primarily include the cost of distribution, IT management, back office, customer care activities involved in monitoring fraud and customer communication services provided by other segments within Poste Italiane to the card payments and payment services business.

After income tax expense for the year (€55 million), the segment’s net profit amounts to €153 million, up 4.8% on 2017.

Financial services segment profit or loss*

(€m)	2018	2017	Increase/(decrease)
Gross capital gains	404	547	(143)	-26.2%
Interest income	1,555	1,477	78	5.3%
Postal savings	1,827	1,566	261	16.6%
Transaction banking	965	1,063	(98)	-9.2%
Distribution of third-party products	263	272	(9)	-3.4%
Asset management	209	85	123	144.5%
Intersegment revenue	649	695	(46)	-6.6%
Total revenue	5,871	5,705	165	2.9%
Personnel expenses	80	103	(24)	-23.0%
of which personnel expenses	70	97	(27)	-27.7%
of which early retirement incentives	10	6	3	48.0%
Other operating costs	214	349	(135)	-38.7%
Depreciation, amortisation and impairments	0	1	(0)	-54.6%
Intersegment costs	4,718	4,607	111	2.4%
Total costs	5,011	5,060	(49)	-1.0%
EBIT	859	646	214	33.1%
EBIT MARGIN	14.6%	11.3%	3.3%
Finance income/(costs)	(32)	6	(38)	-641.0%
Profit/(Loss) before tax	827	651	176	27.0%
Income tax expense	210	152	58	38.0%
Net profit	617	499	118	23.6%

The Financial Services Strategic Business Unit generated EBIT of €859 million in 2018, an increase of 33.1% compared with the previous year (€646 million).

Total revenue of €5,871 million is up 2.9% on the €5,705 million of 2017, reflecting the good performance of postal savings (up 16.6% or €261 million), partly reflecting the mechanisms established in the new agreement with Cassa depositi e prestiti, applied from 1 January 2018, the performance of interest earned on the investment of current account deposits, which is up €78 million (up 5.3% compared with 2017) as a result of an increase in deposits during the period (up from €55.0 billion in 2017 to €58.7 billion in 2018), and the positive contribution from asset management (up €123 million), linked to the partnership between Poste Italiane and Anima Holding.

Gross gains during the period total €404 million, compared with €547 million in 2017, in line with the goal set in the Deliver 2022 Plan of reducing the dependence on non-recurring items.

Transaction banking revenue is down 9.2% from €1,063 million in 2017 to €965 million, primarily due to the sale of shares in Mastercard during 2017 for €91 million and a downturn in the volume of payment slips processed.

The modest reduction in income from the distribution of third-party financial products, amounting to €263 million in 2018 compared with €272 million in 2017 (down 3.4%), is primarily due to the loss of revenue linked to the sale of BDM-MCC on 7 August 2017. Despite adoption of the new accounting standard, IFRS 15, as a result of which fees to be passed on to partners, following the early repayment of loans, are to be accounted for as a direct reduction in revenue from 1 January 2018, this category of revenue is up as a result of the increased volume of loans and salary loans arranged in 2018.

The segment’s total costs €5,011 million are down €49 million (1.0%) compared with the previous year, primarily due to a decrease in other operating costs (down €135 million or 38.7%), partially offset by an increase in intersegment costs of

€111 million (up 2.4%). The change in other operating costs is above all due to a reduction in net provisions for risks and charges compared with 2017, relating to potential liabilities resulting from the sale of investment products in the period between 2003 and 2005 whose performance was not in line with customers’ expectations. Personnel expenses are also down, declining from €103 million to €80 million (a decrease of 23.0%), reflecting the sale of BdM and the reorganisation of BancoPosta from 1 October 2018.

After net finance costs, broadly relating to the impairment loss recognised on the investment in Anima Holding at 31 December 2018, following the conduct of an impairment test, and income tax expense, the segment ended 2018 with net profit of €617 million, up 23.6% (€118 million) on the €499 million of 2017.

Insurance services segment profit or loss

(€m)	2018	2017	Increase/(decrease)
Upfront Life	341	422	(81)	-19.2%
Net investment result Life	1,011	993	18	1.8%
Technical margin Life	30	14	16	112.5%
Change in other technical provisions and other technical costs/income	(46)	(73)	27	37.1%
Net Life revenue	1,336	1,356	(20)	-1.5%
Premium revenue	168	131	37	28.4%
Change in technical provisions and claims expenses	(35)	(29)	(6)	-20.3%
Result from reinsurance	(8)	(8)	0	4.2%
Net Non-life income^*	(1)	(4)	3	67.0%
Net Non-life revenue	123	89	34	38.5%
Other operating income	11	11	1	6.2%
Intersegment revenue	2	1	1	-91.7%
Total revenue	1,472	1,457	15	1.1%
Personnel expenses	38	36	1	4.0%
of which personnel expenses	37	35	1	4.2%
of which early retirement incentives	1	1	(0)	-0.6%
Other operating costs	84	84	0	0.1%
Depreciation, amortisation and impairments	17	17	(0)	-1.1%
Intersegment costs	467	519	(53)	-10.2%
di cui provvigioni	431	483	(52)	-10.7%
Total costs	606	657	(51)	-7.8%
EBIT	866	799	67	8.4%
EBIT MARGIN	58.8%	54.9%	4.0%
Finance income/(costs)	51	44	7	14.8%
Profit/(Loss) before tax	917	843	73	8.7%
Income tax expense	(84)	297	(382)	-128.3%
Net profit	1,001	546	455	83.3%

* Includes finance income from investments by the Non-life business and other income and expenses from insurance activities.

The Insurance Services Strategic Business Unit generated EBIT of €866 million in 2018, an increase of 8.4% compared with the previous year (€799 million).

Total revenue amounts to €1,472 million (€1,457 million in 2017), essentially reflecting the performance of the Life business, which contributed €1,336 million, whilst the contribution from the Non-life business is €123 million.

Net Life revenue is down 1.5% from €1,356 million in 2017 to €1,336 million in 2018, primarily due to a reduction in gross premium revenue of compared with the previous year (down €3.7 billion). This resulted in a reduction in upfront fees of €81 million, partially offset by an increase of €18 million in the net investment result which, on the other hand, benefitted from the greater volume of assets under management.

Net Non-life revenue is up 38.5% compared with the previous year (an increase of €34 million), driven by the growth of the business, with total gross premium revenue amounting to €187 million, a 33% increase compared with 2017 (€141 million). This was accompanied by a positive technical performance as a result of a reduced volume of claims with respect to the growth in sales.

Total costs of €606 million are down €51 million compared with 2017. They primarily consist of intersegment costs, amounting to €467 million (€519 million in 2017), mainly regarding fees paid for distribution, collection and maintenance services, totalling €431 million. This figure is down from the €483 million of the previous year, reflecting the reduction in gross premium revenue.

Net finance income amounts to €51 million, marking a 14.8% (€7 million) increase compared with the previous year, when the impairment loss of €12 million on the investment of in the Atlante fund weighed.

Net profit of €1,001 million is higher than the pre-tax result (€917 million) and compared with the previous year (€546 million, up 83.3%). This reflects the positive impact in 2018 of deferred tax income on the non-deductible change in technical provisions, amounting to €385 million. This reflects application of paragraph 1-bis of art. 111 of the Consolidated Law on Income Tax (introduced by art. 38, paragraph 13-bis of Law Decree 78 of 31 May 2010). This legislation provides for a partial exemption (based on a specific percentage deduction) of the movement in the obligatory technical provisions relating to the Life business from taxation, whereas the full amount of such movements was previously included in the tax base for the purposes of IRES. In Poste Vita’s case, the percentage deduction is 98.5%.

In keeping with its strategic objectives, in 2018, the Poste Vita insurance group primarily focused its efforts on:

strengthening its leadership in the life insurance market, with a greater focus on Class III policies and pensions;
boosting its position in the protection and welfare segment.

Key performance indicators for principal Poste Italiane Group companies

The figures shown in the tables below reflect the financial and operational indicators (as deduced from the related reporting packages) of the principal Group companies, prepared in accordance with International Financial Reporting Standards (IFRS) and approved by the boards of directors of the respective companies.

POSTEL S.p.A.

(€000)	2018	2017	Increase/(decrease)
Revenue from sales and services	195,725	213,230	(17,505)	-8.2%
Operating profit/(loss)	(20,134)	1,672	(21,806)	n/s
Profit/(loss) for the period	(16,141)	118	(16,259)	n/s
Investment	6,706	7,607	(901)	-11.8%
Equity	83,962	101,459	(17,497)	-17.2%
Permanent workforce - average	1,052	1,069	(17)	-1.6%
Flexible workforce - average	25	20	5	25.0%

n/s: not significant

SDA EXPRESS COURIER S.p.A.

(€000)	2018	2017	Increase/(decrease)
Revenue from sales and services	578,164	549,173	28,991	5.3%
Operating profit/(loss)	(51,155)	(42,114)	(9,041)	-21.5%
Profit/(loss) for the period	(39,711)	(31,990)	(7,721)	-24.1%
Investment	19,813	8,288	11,525	139.1%
Equity^*	22,514	(22,876)	45,390	198.4%
Permanent workforce - average	1,309	1,347	(38)	-2.8%
Flexible workforce - average	111	85	26	30.6%

* Equity for 2018 includes capital of €90 million injected by the Parent Company during the year.

EUROPA GESTIONI IMMOBILIARI S.p.A.

(€000)	2018	2017	Increase/(decrease)
Revenue from sales and services	91,234	94,240	(3,006)	-3.2%
Operating profit/(loss)	3,068	4,639	(1,571)	-33.9%
Profit/(loss) for the period	431	1,843	(1,412)	-76.6%
Investment	271	681	(410)	-60.2%
Equity	237,674	237,263	411	0.2%
Permanent workforce - average	28	28	-	n/s
Flexible workforce - average	1	-	1	n/s

n/s: not significant

MISTRAL AIR SRL

(€000)	2018	2017	Increase/(decrease)
Revenue from sales and services	59,015	100,472	(41,457)	-41.3%
Operating profit/(loss)	(5,182)	(8,950)	3,768	42.1%
Profit/(loss) for the period	(4,279)	(7,611)	3,332	43.8%
Investment	73	172	(99)	-57.6%
Equity ^*	845	(1,895)	2,740	144.6%
Permanent workforce - average	105	129	(24)	-18.6%
Flexible workforce - average	18	56	(38)	-67.9%

* Equity for 2018 includes capital of €7million injected by the Parent Company during the year.

POSTE VITA S.p.A. ^(*)

(€000)	2018	2017	Increase/(decrease)
Insurance premium revenue ^**	16,609,902	20,263,356	(3,653,454)	-18.0%
Profit/(loss) for the period	949,761	510,172	439,589	86.2%
Financial assets	126,263,345	125,626,314	637,031	0.5%
Technical provisions for insurance business	124,965,928	123,489,910	1,476,018	1.2%
Equity ^***	3,862,261	3,323,728	538,533	16.2%
Permanent workforce - average	396	388	8	2.1%
Flexible workforce - average	3	5	(2)	-40.0%

* The figures shown have been prepared in accordance with IFRS and therefore may not coincide with those in the financial statements prepared in accordance with the Italian Civil Code and under Italian GAAP.
** Insurance premium revenue is reported gross of outward reinsurance premiums.
*** During the year, the company paid dividends totalling €238 million.

POSTE ASSICURA S.p.A. ^(*)

(€000)	2018	2017	Increase/(decrease)
Insurance premium revenue ^**	168,157	131,099	37,058	28.3%
Profit/(loss) for the period	45,658	28,609	17,049	59.6%
Financial assets	281,905	233,498	48,407	20.7%
Technical provisions for insurance business	183,077	160,005	23,072	14.4%
Equity	139,723	104,359	35,364	33.9%
Permanent workforce - average	59	57	2	3.5%
Flexible workforce - average	1	-	1	n/s

BANCOPOSTA FONDI S.p.A. SGR

(€000)	2018	2017	Increase/(decrease)
Fee income	104,491	101,954	2,537	2.5%
Net fee income	45,432	54,501	(9,069)	-16.6%
Profit/(loss) for the period	22,529	29,134	(6,605)	-22.7%
Financial assets (liquidity and securities)	70,827	71,372	(545)	-0.8%
Equity ^*	60,709	53,886	6,823	12.7%
Permanent workforce - average	54	58	(4)	-6.3%

* During the year, the company paid dividends totalling €15 million.

POSTEPAY S.p.A.

(€000)	2018	2017	Increase/(decrease)
Revenue from sales and services	431,931	234,543	197,388	84.2%
Operating profit/(loss)	76,719	26,837	49,882	185.9%
Profit/(loss) for the period	54,509	18,659	35,850	192.1%
Investment	30,613	26,583	4,030	15.2%
Equity ^*	243,059	57,905	185,154	319.8%
Permanent workforce - average	232	213	19	8.9%
Flexible workforce - average	-	4	(4)	n/s

* During the year, the company declared dividends totalling €9 million. Equity includes the capital increase of €140 million carried out via the contribution of the card payments and payment services business unit from BancoPosta RFC, effective for legal, accounting and tax purposes from 1 October 2018. On the same date, PosteMobile SpA changed its name to PostePay SpA.
n/s: not significant