GROUP OPERATING RESULTS
FINANCIAL REVIEW
GROUP OPERATING RESULTS (*)
| (€m) | 1H 2019 | 1H 2018 | Increase/ (Decrease) | ||
|---|---|---|---|---|---|
| EXTERNAL REVENUE | Adjusted | 5,242 | 5,017 | +225 | +4.5% |
| Reported | 5,521 | 5,430 | +92 | +1.7% | |
| TOTAL COSTS | Adjusted | 4.418 | 4.316 | +102 | +2,4% |
| Reported | 4.441 | 4.377 | +64 | +1,5% | |
| EBIT | Adjusted | 825 | 701 | +123 | +17,6% |
| Reported | 1.081 | 1.053 | +28 | +2,6% | |
| EBIT margin (%) | Adjusted | 15,7% | 14,0% | ||
| Reported | 19,6% | 19,4% | |||
| NET PROFIT | Adjusted | 570 | 482 | +88 | +18,3% |
| Reported | 763 | 735 | +28 | +3,9% | |
| EARNINGS PER SHARE | Adjusted | 0.44 | 0.37 | +0.07 | +19% |
| Reported | 0.59 | 0.56 | +0.02 | +4% | |
| ROE | Adjusted | 15.3% | 15.3% | ||
| Reported | 13.3% | 18.3% | |||
| CAPEX | 230 | 151 | +79 | +53% | |
| % of revenue | Adjusted | 4,4% | 3,0% | ||
| % of revenue | Reported | 4,2% | 2,8% | ||
* The reconciliation of the Group’s adjusted and reported results is provided in the section “Alternative performance indicators of the Half-year report for the six months ended 30 june 2019”
The Group’s total revenue of €5.5 billion is up €92 million (1.7%) compared with the first half of 2018. This reflects the positive contribution of the Insurance Services Strategic Business Unit, which contributed €795 million to total revenue, marking an improvement of €111 million (up 16.2% on the first half of 2018), primarily due to the greater volume of assets under management by the Life business and an increase in P&C premium revenue.
After adjusting for non-recurring items, including gains of €261 million realised during the first half (€404 million in the first half of 2018), revenue is up €225 million (4.5%).
Total financial assets amount to €530 billion, an increase of €16 billion compared with 31 December 2018. This is linked to the positive performance of current account deposits (partly reflecting transitional factors) and the strong performance of the insurance business, thanks to the contribution from multiclass products and the effects of fair value measurement.
Total costs, including depreciation, amortisation and impairments, amount to €4.4 billion, including €2.8 billion in personnel expenses and €1.6 billion in other operating costs.
Personnel expenses are down €13 million (0.4%) compared with the first half of 2018, reflecting a reduction in the average workforce employed during the period (over 5,400 fewer FTEs compared with the first half of 2018), which more than offset the increase in the per capita cost linked to the full entry into force of the latest collective labour agreement (for 2016-2018).
Other costs are up from e1.5 billion in the first half of 2018 to €1.6 billion in the first half of 2019 (an increase of €77 million). This primarily reflects a rise in variable costs linked to business growth and above all to expansion of the parcels business.
Consolidated EBIT is up from the €1,053 million of the first half of 2018 to €1,081 million (an increase of 2.6%), reflecting the positive contributions of the Insurance Services Strategic Business Unit (up €94 million or 26%), the Financial Services Strategic Business Unit (up €27 million or 6.5%) and the Payments, Mobile and Digital Strategic Business Unit (up €10 million or 9.8%).
After income tax expense for the period, net profit for the first half totals €763 million (€735 million in 2018).
Net profit for the period after adjusting for non-recurring items, including gains on the securities portfolio, measurement of the shareholding in Visa under IFRS 9 and early retirement incentives, amounts to €570 million (€482 million for the same period of the previous year).
In this regard, and in keeping with the strategy in the Deliver 2022 Plan to reduce the dependence on non-recurring items, it should be noted that the following review of the operating results by Strategic Business Unit does not take into account such non-recurring items.
SUMMARY OF OPERATING RESULTS BY STRATEGIC BUSINESS UNIT
The chart below shows the structure of the Group in terms of the operating segments presented in the following review of the results by individual Strategic Business Unit.
Adjusted revenue is up 4.5% (€225 million), driven by growth in the multiclass products sold by the Insurance Services and in Financial Services. The Payments, Mobile and Digital unit also performed well.
The positive performance of adjusted EBIT, which is up from €701 million for the first half of 2018 to €825 million (an increase of 17.6%), reflects the contributions from all the Strategic Business Units and, above all, Insurance Services, which registered an improvement of €94 million.