POSTAL AND BUSINESS SERVICES

EXPRESS DELIVERY AND PARCELS

One of the segments the Company is focusing on is e-commerce, which is substantially influencing the Express Delivery and Parcels sector.
E-commerce penetration in Italy is one of the lowest in Europe, so it is reasonable to assume that in Italy too in the coming years this share is set to grow.
Therefore, in this area, Poste Italiane is keen to boost its operational and commercial logistics which, in addition to being one of the Group's traditional businesses, comprises a strategic asset for taking advantage of important opportunities in a fast growing sector.
In this regard, in 2014 the Group focused on activities aimed at further expanding the range of options on offer to customers, leveraging the widespread nature of the postal network so as to ensure that e-commerce products are increasingly flexible and complete, and to strengthen the ancillary services of key importance to the principal operators in the sector.
After a trial phase completed in 2014, one the first actions to support this market was the marketing of Promopacco, a new product specifically aimed at large account business customers operating in e-commerce. In the collection, sorting and delivery phases, using an integrated SDA-Poste Italiane logistics system, it provides a nationwide 4- to 5- day delivery service for small items and goods weighing up to 3 kg. It has been well received by the market and in 2014 around 3.5 million deliveries were handled, including some of the sector's major operators among the product's customers and senders. Moreover, logistical integration enables delivery of Promopacco parcels either to an addressee’s home or to one of the many post offices where the mailstop service is available nationwide.
The range of pre-franked and pre-paid products relating to Gammafree (which includes the Postafree and Paccofree services) was extended with the introduction of new formats (“Envelope”, “Small” and “Medium”) in addition to the existing ones (“Large” and “Extra large”); 12,000 post offices are able to handle these products (compared with 7,000 post offices in 2013).
Moreover, in November the first five APTs (Automated Parcel Terminals) were installed on a trial basis in Rome, Milan, Florence and Cantù, enabling customers to send or pick up their parcels 24 hours day, 7 days a week.
On the international front, with a view to offering solutions in line with e-commerce market requirements, a tracked service for unsigned inbound items of mail known as Exprès was rolled out. This forms part of the international PRIME¹ system and offers short delivery times (J+2/4 days, before customs clearance). Performance-related bonuses are to be paid to the most efficient partners based on the tracking messages sent overseas and the levels of service achieved.

With regard to the business segment, despite the ongoing economic crisis, the activities carried out by the subsidiary, SDA Express Courier SpA, registered a positive performance for shipments within Italy in the B2C and e-commerce market, whilst the performance of B2B shipments remained stable, reflecting the downturn in the economy. The international market also performed well, partly due to the partnerships with UPS (United Postal Service Inc) and Network Eurodis. The year also benefitted from a reduction in industrial action, which affected the cooperatives responsible for sorting activities throughout 2013, also having major repercussions in terms of higher operating costs and lost revenue. In this connection, the Company’s commitment to optimising and upgrading its IT platform continued, with the aim of ensuring it is able to take advantage of new business opportunities. This included the development of software designed to boost integration in the mixed network used by Poste Italiane and SDA for the increasingly popular Promopacco service.

Con riferimento alle attività dedicate al segmento business e condotte dalla controllata SDA Express Courier SpA, la gestione dell’esercizio, nonostante il perdurare della crisi economica, è stata caratterizzata da positive performance delle spedizioni realizzate, in ambito nazionale, nel mercato B2C ed e-Commerce, mentre rimane stabile l’andamento delle spedizioni B2B che maggiormente risentono del negativo andamento dell’economia. Anche il mercato internazionale ha registrato positivi risultati, anche per effetto della collaborazione con UPS (United Postal Service Inc.) e con il Network Eurodis. L’esercizio ha altresì beneficiato della diminuzione delle agitazioni sindacali che, per tutto il 2013, avevano coinvolto il personale delle cooperative addetto alle attività di smistamento, con ripercussioni sulla gestione in termini di maggiori costi operativi e di perdita di fatturato. In tale contesto, sono proseguiti l’impegno e l’attenzione da parte dell’Azienda, verso l’ottimizzazione e il potenziamento della piattaforma informatica, atta a supportare le nuove opportunità di business. Sono stati eseguiti, a tal riguardo, sviluppi software per potenziare l’integrazione del network misto Poste Italiane-SDA nell’ambito del Promopacco, servizio sempre più richiesto dalla clientela.

⁽¹⁾ PRIME is an initiative undertaken by a group of postal operators, in collaboration with the International Post Corporation, to develop value added services using the integrated CSS-Customer Service System.

OPERATING RESULTS FOR EXPRESS DELIVERY AND PARCELS

Poste Italiane SpA's Express Delivery

Poste Italiane SpA’s express delivery volumes were up 46.2% and revenue was up 15.1% on 2013 on the back of B2C and e-commerce expansion, bolstered by customers' growing interest in buying goods via online merchants. This positive performance is essentially due to the substantial growth of the Domestic Express Delivery segment, which registered volumes of 9.1 million and revenue of €62.9 million (volumes up 55.3% and revenue up 15.4%, compared with 2013).

SDA Express Courier SpA

The subsidiary, SDA Express Courier SpA, made a positive contribution to this segment’s results, recording growth in volumes and revenues, 12.8% and 6.1%, respectively, compared with 2013 (deliveries up 6.9 million, and revenue up €22.8 million).
The positive performance reflects strong growth in the domestic market, where volumes amounted to 47.5 million (43 million in 2013) and revenue €294.7 million (€275.1 million in 2013). As mentioned above, this reflects the positive contributions of B2C and e-commerce.
The international Express Delivery segment also performed well (volumes up 2.4 million, and revenue up €7.9 million), benefitting from the partnership agreements with UPS and Network Eurodis.
In particular, the well-established partnership with UPS (United Postal Service Inc.) led to SDA carrying out around 12 million deliveries in 2014 (around 10 million shipments on behalf of UPS in 2013), generating revenue of around €38.2 million (€31.5 million in 2013). The partnership with Network Eurodis led to around 500,000 inbound and outbound shipments (300,000 in 2013), generating revenue of approximately €5.2 million (revenue of around €3.7 million in 2013). In contrast Dedicated Services, which are tailor-made, flat-rate services, registered a 5% decrease in revenue.
Although SDA Express Courier SpA reported an operating loss of €21.1 million in 2014, this marks an improvement on the operating loss of €27.3 million registered in 2013. This result was also affected by the €3.5 million impairment loss on the investment in Italia Logistica Srl and the recognition of future losses (€3.9 million) expected to arise following the transfer of the document management business unit from Italia Logistica Srl to Postel SpA.

The company reported an overall loss of €21.3 million in 2014 (after a €20.4 million loss in 2013), requiring the company to apply art. 2446 of the Italian Civil Code (a reduction in capital due to losses).

Parcels - Universal Service

Universal Parcels Service revenue of €38.4 million (€34.8 million in 2013) reflects the positive performances of Domestic Parcels (up 14.5% in volume terms and 12% in terms of revenue) and International Outbound Parcels (up 2.7% in volume terms and 10.5% in terms of revenue compared with 2013). This made up for the reduction recorded by International Inbound Parcels.