GROUP OPERATING RESULTS
FINANCIAL REVIEW
| For the nine months ended 30 September | ||||
|---|---|---|---|---|
| Results of operations (€m) | 2018 | 2017 | Increase/(decrease) | |
| Revenue | 7,951 | 7,893 | 58 | 0.7% |
| of which: | ||||
| Mail, Parcels and Distribution | 2,589 | 2,661 | (72) | -2.7% |
| Payments, Mobile and Digital | 470 | 422 | 48 | 11.4% |
| Financial Services | 3,844 | 3,779 | 65 | 1.7% |
| Insurance Services | 1,048 | 1,031 | 17 | 1.6% |
| Total costs | 6,037 | 6,304 | (267) | -4.2% |
| of which: | ||||
| Total personnel expenses | 4,151 | 4,241 | (90) | -2.1% |
| of which personnel expenses | 4,122 | 4,229 | (107) | -2.5% |
| of which early retirement incentives | 29 | 12 | 17 | n/s |
| Other operating costs | 1,886 | 2,063 | (177) | -8.6% |
| EBITDA | 1,914 | 1,589 | 325 | 20.5% |
| Depreciation, amortisation and impairments | 405 | 413 | (8) | -1.9% |
| EBIT | 1,509 | 1,176 | 333 | 28.3% |
| EBIT Margin | 19.0% | 14.9% | 4.1% | |
| Finance income/(costs) and profit/(loss) on investments accounted for using equity method | 43 | (69) | 112 | n/s |
| Profit before tax | 1,552 | 1,107 | 445 | 40.2% |
| Income tax expense | 496 | 383 | 113 | 29.5% |
| Net profit | 1,056 | 724 | 332 | 45.9% |
| Earnings per share | 0.809 | 0.554 | 0.255 | 45.9% |
n/s: not significant
| Group workforce in the nine months ended 30 September | 2018 | 2017 | Increase/(decrease) | |
|---|---|---|---|---|
| Average workforce * | 134,575 | 137,869 | (3,294) | -2.4% |
| Ordinary unit cost of labour (€000) | 40.8 | 41.0 | (0.2) | -0.5% |
* Shown in full-time equivalent terms.
| Capital expenditure in the nine months ended 30 September (€m) | 2018 | 2017 | Increase/(decrease) | |
|---|---|---|---|---|
| Capital expenditure | 260 | 283 | (23) | -8.1% |
| of which | ||||
| Mail, Parcels and Distribution | 194 | 230 | (36) | -15.7% |
| Payments, Mobile and Digital | 33 | 28 | 5 | 17.9% |
| Financial Services | 22 | 17 | 5 | 29.4% |
| Insurance Services | 11 | 8 | 3 | 37.5% |
| Financial position (€m) | At 30 September 2018 | At 31 December 2017 | Increase/(decrease) | |
|---|---|---|---|---|
| Non-current assets | 2,957 | 3,077 | (120) | -3.9% |
| Net working capital | 1,903 | 1,452 | 451 | 31.1% |
| Gross invested capital | 4,860 | 4,529 | 331 | 7.3% |
| Sundry provisions and other assets/liabilities | (2,088) | (2,546) | 458 | -18.0% |
| Net invested capital | 2,772 | 1,983 | 789 | 39.8% |
| Equity | 7,300 | 7,550 | (250) | -3.3% |
| Net funds | (4,528) | (5,567) | 1,039 | -18.7% |
| Net debt/(funds) of the Mail, Parcels and Distribution segment | (459) | (845) | 386 | -45.7% |
Consolidated operating results
The performance in the first nine months of 2018 has resulted in consolidated operating profit of €1,509 million, an increase of 28.3% compared with the same period of the previous year (€1,176 million). This primarily reflects reductions in operating costs and personnel expenses.
The Group’s total revenue amounts to €8 billion, marking growth of €58 million (0.7%) compared with the same period of the previous year.
In detail, total revenue from Mail, Parcels and Distribution services amounts to €2,589 million, a reduction of 2.7% compared with the first nine months of 2017. This reflects a decrease in traditional letter post, partially offset by the performance of parcels, where volumes were up 9.2% from 81 million items in the first nine months of 2017 to 89 million, resulting in a 5.2% increase in revenue from €501.7 million to €527.7 million.
The Payments, Mobile and Digital segment contributed €470 million to total revenue, up 11.4% on the first nine months of 2017. This figure includes revenue from payment services, card payments and PosteMobile SpA’s telecommunications services.
Total revenue from Financial Services amounts to €3,844 million, an increase of 1.7% compared with the €3,779 million of the same period of the previous year. Alongside an improvement in the interest margin and a 14.6% increase in commission income on the collection of postal savings deposits, reflecting the mechanisms established in the new Agreement with Cassa Depositi e Prestiti, the figure 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.
The Insurance Services segment contributed €1,048 million to total revenue, marking an increase of €17 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.
As anticipated, total costs are down from the €6.3 billion of 2017 to €6.0 billion, marking a decline of 4.2%.
Other operating costs are down from €2,063 million in the first nine months of 2017 to €1,886 million in 2018, a reduction of 8.6%. This reflects higher provisions for risks and charges in the first nine months of 2017, for the most part linked to the operational risk associated with real estate funds.
Personnel expenses are down 2.1% from €4,241 million in the first nine months of 2017 to €4,151 million in 2018, primarily reflecting a decrease in the average workforce (approximately 3,300 fewer FTEs compared with the same period of the previous year).
The cost of early retirement incentives during the first nine months of 2018 amounts to €29 million (€12 million in 2017) and primarily regards management personnel, with the remaining personnel being covered by the pre-existing scheme.
After depreciation, amortisation and impairments for the period (€405 million in the first nine months of 2018, compared with €413 million in the first nine months of 2017), the improvement in net finance income and the profit/(loss) on investments accounted for using equity method in 2018 (compared with 2017, when the result reflected the impairment loss of €82 million on the Contingent Convertible Notes issued by Alitalia in 2014, and the impairment loss of €12 million on the Atlante fund), and income tax expense for the period, net profit amounts to €1,056 million, marking an increase of 45.9% compared with the figure for the first nine months of 2017 (net profit of €724 million).
OPERATING RESULTS BY OPERATING SEGMENT
| Nine months ended 30 September 2018 | Mail, Parcels & Distribution | Payments, Mobile & Digital | Financial Services | Insurance Services | Adjustments and eliminations | Total |
|---|---|---|---|---|---|---|
| Total revenue | 6,115 | 713 | 4,593 | 1,049 | (4,519) | 7,951 |
| External revenue | 2,589 | 470 | 3,844 | 1,048 | - | 7,951 |
| Intersegment revenue | 3,526 | 243 | 749 | 1 | (4,519) | - |
| Total costs | 5,938 | 558 | 4,007 | 458 | (4,519) | 6,442 |
| Total personnel expenses | 4,029 | 23 | 71 | 28 | - | 4,151 |
| of which personnel expenses | 4,010 | 23 | 62 | 27 | - | 4,122 |
| of which early retirement incentives | 19 | - | 9 | 1 | - | 29 |
| Other operating costs | 1,482 | 128 | 217 | 59 | - | 1,886 |
| Depreciation, amortisation and impairments | 376 | 17 | - | 12 | - | 405 |
| Intersegment costs | 51 | 390 | 3,719 | 359 | (4,519) | - |
| EBIT | 177 | 155 | 586 | 591 | - | 1,509 |
| EBIT MARGIN | 2.9% | 21.7% | 12.8% | 56.3% | - | 19.0% |
| Finance income/(costs) | (17) | 2 | 8 | 50 | - | 43 |
| Profit/(Loss) before tax | 160 | 157 | 594 | 641 | - | 1,552 |
| Income tax expense | 66 | 40 | 166 | 224 | - | 496 |
| Net profit | 94 | 117 | 428 | 417 | - | 1,056 |