GROUP OPERATING RESULTS
RECLASSIFIED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Operating profit for the first half of 2017 amounts to €847 million, slightly up on the figure for the same period of the previous year (€843 million in the first half of 2016). This essentially reflects the positive contribution to operating profit from the Insurance Services and Asset Management segment, having benefitted from, among other things, the performance of inflows into mutual investment funds.
Profit for the period of €510 million is down 9.7% on the same period of the previous year (a profit of €565 million in the comparative period). This reflects an increase in finance costs (up from the €9 million in the first half of 2016 to €84 million in the first half of 2017), reflecting the impairment loss of €82 million on the Contingent Convertible Notes subscribed for by Poste Italiane in 2014 and issued by Midco SpA. This company’s performance is described in the section on the Group’s financial position. In addition, the comparative period benefitted from non-recurring income of €121 million, following the sale of the investment in Visa Europe Ltd, which took place as part of Visa Inc.’s acquisition of this company.
Reclassified consolidated statement of profit or loss
| for the six months ended 30 June (€m) | 2017 | 2016 | Increase/(decrease) | |
|---|---|---|---|---|
| Revenue from sales and services and insurance premium revenue | 15,335 | 14,867 | 488 | 3.1% |
| Postal and Business Services | 1,786 | 1,855 | (69) | -3.7% |
| Financial Services | 2,298 | 2,315 | (17) | -0.7% |
| Insurance Services and Asset Management | 11,148 | 10,583 | 565 | 5.3% |
| Other Services | 103 | 114 | (11) | -9.6% |
| Other income from financial and insurance activities | 2,665 | 2,781 | (116) | -4.2% |
| Financial Services | 540 | 512 | 28 | 5.5% |
| Insurance Services and Asset Management | 2,125 | 2,269 | (144) | -6.3% |
| Other operating income | 29 | 34 | (5) | -14.7% |
| Postal and Business Services | 26 | 29 | (3) | -10.3% |
| Financial Services | 2 | 3 | (1) | -33.3% |
| Insurance Services and Asset Management | 1 | 2 | (1) | -50.0% |
| Total revenue | 18,029 | 17,682 | 347 | 2.0% |
| Cost of goods and services | 1,197 | 1,215 | (18) | -1.5% |
| Net change in technical provisions for insurance business and other claims expenses | 12,171 | 11,944 | 227 | 1.9% |
| Other expenses from financial and insurance activities | 380 | 309 | 71 | 23.0% |
| Personnel expenses | 2,934 | 2,985 | (51) | -1.7% |
| Capitalised costs and expenses | (13) | (8) | (5) | 62.5% |
| Other operating costs | 232 | 95 | 137 | n/s |
| Total costs | 16,901 | 16,540 | 361 | 2.2% |
| EBITDA | 1,128 | 1,142 | (14) | -1.2% |
| Depreciation, amortisation and impairments | 281 | 299 | (18) | -6.0% |
| Operating profit/(loss) | 847 | 843 | 4 | 0.5% |
| Finance income/(costs) | (84) | 9 | (93) | n/s |
| Profit/(loss) on investments accounted for using the equity method | 9 | 6 | 3 | 50.0% |
| Profit/(Loss) before tax | 772 | 858 | (86) | -10.0% |
| Income tax expense | 262 | 293 | (31) | -10.6% |
| Profit for the period | 510 | 565 | (55) | -9.7% |
n/s: not significant
Total revenue by operating segment
| for the six months ended 30 June (€m) | 2017 | 2016 | Increase/(decrease) | |
|---|---|---|---|---|
| Postal and Business Services | 1,812 | 1,884 | (72) | -3.8% |
| Financial Services | 2,840 | 2,830 | 10 | 0.4% |
| Insurance Services and Asset Management | 13,274 | 12,854 | 420 | 3.3% |
| Other Services | 103 | 114 | (11) | -9.6% |
| Total revenue | 18,029 | 17,682 | 347 | 2.0% |
Total revenue of €18.0 billion is up 2% on the first half of 2016, primarily due to the previously mentioned positive performance of insurance services and asset management and the stable performance of Financial Services.
A more detailed look shows that Postal and Business Services contributed total revenue of €1,812 million, registering a reduction of 3.8% compared with the first half of 2016, due to a decline in traditional letter post.
Total revenue from Financial Services is up from the €2,830 million of the first half of 2016 to €2,840 million, benefitting from an increase in “Other income from financial activities”, amounting to €540 million (up 5.5% on the €512 million of the first half of 2016).
The Insurance Services and Asset Management segment contributed €13.3 billion to total revenue (€12.9 billion in the same period of the previous year), with premium revenue amounting to €11.1 billion (premium revenue of €10.6 billion in the same period of 2016). This represents a solid performance for the period, given the sharp decline in the Life market compared with the positive performance of 2016 (market data for new business to June 2017 shows a contraction of approximately 12.9% at national level).
Total revenue from Other Services, provided by PosteMobile and Consorzio per i Servizi di Telefonia Mobile, amounts to €103 million (€114 million in the same period of 2016), marking a reduction due to a decline in mobile service revenue, reflecting tough competition in the market.
Operating costs
Total costs, not including depreciation, amortisation and impairments, amount to €16.9 billion, having increased 2.2% compared with the first half of the previous year (when the figure was €16.5 billion). This is essentially due to an increase in the change in technical provisions, which are closely linked with the performance of premium revenue at the subsidiary, Poste Vita. This item is up from €11.9 billion in the first half of 2016 to €12.2 billion in the first half of 2017.
Other expenses from financial and insurance activities are up from the €309 million of the first half of 2016 to €380 million and, among other things, reflect the impairment loss recognised by PosteVita on its investment in the Atlante fund, amounting to €93 million. As this is an investment allocated to separately managed accounts, this amount has been deducted from deferred liabilities due to policyholders. The impact of the impairment on the Group’s profit or loss for the period amounts to €12 million and relates to management of the company’s free capital (further details are provided in the section on “Insurance Services and Asset Management”).
Personnel expenses
| for the six months ended 30 June (€m) | 2017 | 2016 | Increase/(decrease) | |
|---|---|---|---|---|
| Salaries, social security contributions and sundry expenses (*) | 2,944 | 2,980 | (36) | -1.2% |
| Redundancy payments | 4 | 11 | (7) | -63.6% |
| Net provisions (uses) for disputes | (10) | (1) | (9) | n/s |
| Amounts recovered from staff due to disputes | (4) | (5) | 1 | -20.0% |
| Total personnel expenses | 2,934 | 2,985 | (51) | -1.7% |
n/s: not significant
(*) This includes the follow ing items: salaries and w ages; social security contributions; employee termination benef its; temporary w ork; Directors’ fees and expenses; share-based payments; other costs (cost recoveries).
Personnel expenses are down 1.7% from €2,985 million in the first half of 2016 to €2,934 million in the same period of 2017, largely due to a reduction in the ordinary component, linked to salaries, contributions and sundry expenses (down €36 million or 1.2%). This reflects a reduction in the average workforce employed during the period (approximately 4,000 fewer full-time equivalents or FTEs compared with the same period of the previous year), which has offset the increased costs resulting from provisions linked to the expected increase in pay in the renewed national collective labour contract, and a rise in the average salary payable (linked primarily to the fact that staff cuts have mainly affected logistics and postal operations, where salaries are below the average for the Group as a whole).
The cost of early retirement incentives incurred during the period amounts to €4 million (€11 million in the first half of 2016) and regards management personnel. The cost of early retirement incentives for non-management staff was covered by a portion of the provisions for restructuring charges, made at the end of the previous year to cover the estimated costs to be incurred by the Parent Company for early retirement incentives, under the current redundancy scheme for employees leaving the Company by 31 December 2018.
Finally, personnel expenses benefitted by €10 million due to the net release of provisions for disputes, following a revision of the estimated liabilities and of the related legal expenses.