Italian post office, all accounts (sector by sector) for the first half of 2020

Italian post office, all accounts (sector by sector) for the first half of 2020

Two sectors confirmed a strong growth trend: parcel delivery linked to e-commerce and digital payments. Numbers, comparisons, trends and slides from the half-yearly report of the Poste Italiane group

"Despite the Covid challenge" net profit of 546 million in the first half, down 28.5% compared to the same period of 2019, and in the second quarter net profit fell by 26.2% to 239 million .

So Poste Italiane underlined by presenting the accounts for the first half of the year on 31 July, highlighting the "group performance recovering from June".

Revenues "affected by the lockdown" in the first half show a drop of 7.9% to 5.1 billion; in the second quarter -13.1% to 2.3 billion.

All the business sectors of Poste Italiane were affected by the lockdown, especially the financial and insurance activities whose revenues are related to commissions. Although clearly positive signs for insurance and financial services arrived in June, when they returned to last year's levels.

Two sectors confirmed a strong growth trend: parcel delivery linked to e-commerce and digital payments. The increase in the distribution of parcels was record: + 54% compared to the second quarter of 2019, with deliveries made by postmen increasing by 70% in the same period.

Revenues related to this business segment in the second quarter increased by 32.6%, to 262 million. Certainly considering the weight of all correspondence, in which traditional deliveries continue to decline (-16% year on year, to 1.5 billion in the first half of 2020), the parcel sector still does not have the dimensions to reverse the overall decline .

In the payments sector, the news is that due to the lockdown, 2 million of Poste's customers have used their credit card for the first time to make digital payments. Revenues from the payments and mobile segment grew by 10.3% in the first half of 2020 (to 338 million) and by 3.5% in the second quarter.

"We keep our dividend strategy unchanged in view of the update" of the Deliver 2022 business plan "expected in the fourth quarter", commented Matteo Del Fante, CEO of the group: "We are evaluating and implementing important cost reduction initiatives with the 'aim to preserve long-term profitability, with the second quarter already benefiting from some of these actions, "he explains. And he underlines: “The long-term strategic trends, at the heart of our Deliver 2022 plan, have been confirmed. Thanks to the ongoing transformation plan, we are able to seize new market opportunities. "

HERE IS THE FOLLOWING PRESS RELEASE OF POSTE ITALIANE ON THE FIRST HALF OF 2020:

  • second quarter 2020 revenues of € 2.3 billion, -13.1% yoy (-7.9% compared to the first half of 2019, € 5.1 billion in the first half of 2020), impacted by the lockdown with the activities commercials gaining momentum in June:
      • mail, parcel and distribution revenues of € 701 million in the second quarter of 2020, -19.9% ​​yoy (-16.1% compared to the first half of 2019, equal to € 1.5 billion in the first half of 2020), with a sharp drop in correspondence mitigated by the increase in volumes of b2c parcels
      • payment and mobile revenues of € 172 million in the second quarter of 2020, + 3.5% yoy (+ 10.3% compared to the first half of 2019, equal to € 338 million in the first half of 2020), highlight the importance acquired from the digital channel and the loyalty of the customer base to telco services
      • financial services revenues of € 1.1 billion in the second quarter of 2020, -9.2% yoy (-4.9% compared to the first half of 2019, equal to € 2.5 billion in the first half of 2020), with the distribution of central postal savings for recovery from June
      • insurance services revenues of € 384 million, -16.2% yoy (-7.2% compared to the first half of 2019, equal to € 739 million in the first half of 2020), with an effective reduction in exposure to market volatility thanks to multiclass products

Main Group financial data for the second quarter and first half of 2020

  • Revenues impacted by the lockdown: in the second quarter of 2020 equal to 2.3 billion (-13.1% A / A) and in the first half of € 5.1 billion (-7.9% compared to the first half of 2019)
  • Total operating costs show clear signs of reduction in the second quarter of 2020: € 2.0 billion (-9.6% compared to the second quarter of 2019): personnel costs of € 1.2 billion (-12.0% compared in the second quarter of 2019) thanks to lower FTE and performance-related costs; Costs for goods and services (CBS) of € 580 million (+ 5.2% compared to the second quarter of 2019): quarterly increase related to one-off costs to cope with the emergency, while the higher variable costs related to growth the volumes of parcels, telco services and payments are offset by effective cost reduction initiatives; Depreciation and write-downs (D&A) reduced by € 57 million to € 136 million (-29.5% compared to the second quarter of 2019), following the review of the criteria for estimating the residual useful life and the residual value of some real estate assets of the Group in accordance with accounting principles. Total costs of € 4.3 billion in the first half of 2020 (-2.8% compared to the first half of 2019)
  • Operating result (EBIT): € 325 million in the second quarter of 2020 (-29.9% compared to the second quarter of 2019) with lower costs that absorb 60% of the impact deriving from lower revenues. EBIT in the first half of 2020 at € 766 million (-29.2% compared to the first half of 2019)
  • Total Financial Activities (TFA) of € 548 billion (+ € 12.2 billion compared to December 2019), with solid retail net deposits of € 8.9 billion, across the entire product range, in a market scenario volatile
  • Solid capital position: CET1 ratio of BancoPosta equal to 17.6% and Solvency II ratio of the Poste Vita Insurance Group equal to 216%, above managerial ambitions of 200% throughout the plan period

Main operating trends of the segments

  • CORRESPONDENCE, PACKAGES AND DISTRIBUTION: STRONG DECREASE IN CORRESPONDENCE VOLUMES DUE TO TEMPORARY LOCKDOWN MEASURES, AND PERMANENT EFFECTS DUE TO THE E-SUBSTITUTION PHENOMENON. RECORD INCREASE IN PACKAGE VOLUMES SUCCESSFULLY MANAGED IN THE SECOND QUARTER (+ 54% COMPARED TO THE SECOND QUARTER OF 2019), WITH ALMOST 19 MILLION PACKAGES DELIVERED BY THE POSTS (+ 70.5% COMPARED TO THE SECOND QUARTER OF 2019)
  • Payments and mobile: over 2 million existing customers have used the card for the first time to make digital payments, with an expansion of the type of e-commerce transactions and low touch payments
  • Financial services: the renewed commercial focus has increased network sales, with a recovery since June of the average daily gross deposits and the volumes of personal loans distributed
  • Insurance services: gross premiums higher in June than in the same month of 2019 and daily sales of Non-Life products supported by the modular offer

CRISIS MANAGEMENT THANKS TO BUSINESS DIVERSIFICATION AND RESILIENT OPERATING ACTIVITIES – STRENGTHENED BRAND AND REPUTATION

WE TAKEN CARE OF THE REQUIREMENTS OF OUR STAKEHOLDERS DURING THE EMERGENCY

  • Customers: we guaranteed business continuity, despite a voluntary reduction of non-essential activities and promoted the use of third party networks and digital channels
  • Employees: we have reduced some services in order to protect the health and safety of our people
  • Community: we have cooperated with the main institutions to facilitate the implementation of the social and economic initiatives promoted by the state and we have supported government institutions thanks to the capillarity and competence of our logistics network

WIDE RECOGNITION OF THE SOCIAL ROLE OF POSTE ITALIANE

  • BEST IN MEDIA COMMUNICATION (BIC) AWARD IN THE CORPORATE SOCIAL RESPONSIBILITY SECTION FOR EXCELLENT COMMUNICATION AND IMPACT ON THE MEDIA, WITH A SPECIAL MENTION TO THE ACTIVITIES PERFORMED DURING THE PEAK PERIOD OF THE LOCKDOWN FROM COVID-19
  • First classified in the Integrated Governance Index 2020, confirming the importance of ESG issues within the Deliver 2022 Plan
  • Best ESG Digital Governance Award for the use of digital platforms in ESG data management
  • UNI ISO 26000 certification of reliability obtained, which certifies the adoption of ESG policies and UNI EN ISO 14001: 2015 certification for environmentally friendly policies pursued throughout the company

Rome, 31 July 2020. Yesterday, the Board of Directors of Poste Italiane SpA ("Poste Italiane" or "the Group"), chaired by Maria Bianca Farina, approved the financial results for the first half of 2020.

Matteo Del Fante, CEO and General Manager of Poste Italiane, commented:
“The first half of the year was a decisive moment in the history of the country and the company. The benefits of business diversification and operational resilience have been confirmed in a challenging context. Poste Italiane ensured uninterrupted service, while supporting all stakeholders. The extensive collaboration with national institutions continues, with our operational know-how to support the logistical activities of the Civil Protection.
Revenues were penalized by the sharp drop in correspondence, mitigated by the record of B2C parcels delivered, also thanks to the fully completed Joint Delivery Model and our state-of-the-art automated sorting center in Bologna.
Our distribution channels, digital and third party networks, have effectively integrated the physical network of our post offices, both during the lockdown phase and in the subsequent phase.
We are witnessing an increasingly consistent recovery in revenues, we have managed to preserve a solid balance sheet and, as expected, we paid the 2019 dividend. We also keep our dividend strategy unchanged in view of the update of Deliver 2022 expected in the fourth quarter.
We are evaluating and implementing important cost reduction initiatives with the aim of preserving long-term profitability, with the second quarter already benefiting from some of these actions.
The long-term strategic trends at the heart of our Deliver 2022 plan have been confirmed. Thanks to the ongoing transformation plan, we are able to seize new market opportunities.
I am confident in our ability to drive change and create value for all our stakeholders. The daily hard work of our people and the resilience they have shown are materially contributing to the gradual recovery in business that we expect to continue in the second half of the year. "

Correspondence, Parcel and Distribution sector revenues in the second quarter of 2020 decreased by 19.9% ​​compared to the second quarter of 2019, to € 701 million (-16.1% year on year to € 1.5 billion in the first half 2020), mainly due to lower correspondence volumes, mitigated by an increase in parcel volumes. During the lockdown some higher margin products were temporarily suspended and the e-substitution trend accelerated. As a result, correspondence revenues decreased by 35% year on year in the second quarter to € 407 million (-27.2% compared to the first half of 2019, equal to € 924 million in the first half of 2020). Parcel revenues increased 32.6% in the second quarter of 2020, to € 262 million (+ 18.7% compared to the first half of 2019, equal to € 473 million in the first half of 2020), supported by growth in the 79.7% of the B2C sector, at € 145 million (+ 52.3% compared to the first half of 2019, equal to € 254 million in the first half of 2020).

Parcel volumes increased by 53.9% to 51.8 million units in the second quarter (+ 31.5% compared to the first half of 2019, equal to 89.9 million units in the first half of 2020), supported activity in the B2C sector, which reached 36.3 million parcels delivered (+ 50.3% compared to the first half of 2019, equal to 61.6 million units in the first half of 2020). The transformation of the logistics chain of Poste Italiane, through investments in long-haul transport, automatic sorting and the Joint Delivery Model, allows us to benefit from the growing trend of e-commerce and to manage peaks effectively. Segment operating profit (EBIT) in the second quarter of 2020 fell by € 90.2 million to – € 157 million (- € 274.6 million compared to the first half of 2019, to – € 194 million in the first half of 2020 ).

Revenues of the Payments and Mobile segment grew by 3.5% year on year and amounted to € 172 million in the second quarter of the year (+ 10.3% on an annual basis in the first half of 2020 to € 338 million). Revenues from card payments increased by 0.5% in the quarter to € 86 million (+ 5.8% in the first half of 2020 to € 170 million), with a different mix that includes lower international transactions and ATM withdrawals. Other payments decreased by 35% in the second quarter to € 16 million (-23.2% compared to the first half of 2019, to € 28 million), mainly due to the postponement of the deadlines for tax payments.

Revenues from Telco services increased year-on-year by 24.3% to € 71 million in the second quarter (+ 28.3% in the first half of 2020, to € 139 million), thanks to a wider customer base, at a faster pace. higher than competitors. The validity of our digital payment infrastructure is confirmed. We are witnessing a digital switchover with over 2 million existing customers using their digital payment cards for the first time. Segment operating result (EBIT) up 10% in the second quarter of € 59 million (+ 14.2% on an annual basis in the first half of 2020, equal to € 126 million).

Segment revenues decreased in the second quarter of 2020, on an annual basis, by 9.2% to € 1.1 billion (-4.9% in the first half of 2020 to € 2.5 billion), due to the temporary suspension during the lockdown of commercial activities. Commissions for distribution of postal savings have returned to full capacity, with an annualized growth of 4.5% to € 451 million in the second quarter of 2020 (-0.1% year-on-year to € 896 million in the first half of 2020) , thanks to new countryside products, activated from June on both physical and digital channels.

Interest income down 2.9% year on year to € 401 million in the second quarter of 2020 (-2.2% compared to the first half of 2019 equal to € 805 million in the first half of 2020), with the growth in volumes of the retail customers who mitigated the impact of lower returns. Commissions from the distribution of personal loans and mortgage loans were heavily affected by the lockdown, further weighed down by a one-off provision of € 18 million for potential penalties related to early repayment in a context characterized by lower interest rates. However, volumes increased in June to € 332 million (+ 21.8% compared to June 2019), with volumes recovering in a downward market.

Transaction fees decreased by 21.5% in the second quarter of 2020 to € 183 million (-14.3% year-on-year in the first half of 2020 to € 410 million), mainly due to the lower volumes of bulletins during the lockdown mitigated by the growth in volumes transacted on third party networks and digital channels.

Asset management fees decreased by 7.3% to € 23 million in the second quarter of 2020 (-4.3% year on year in the first half of 2020 to € 48 million), due to lower placement fees. Average managed assets are resilient at € 8.7 billion at the end of June. Total financial assets at the end of June reached € 548 billion (an increase of € 12.2 billion compared to December 2019), following higher total net inflows of € 9.0 billion, distributed across all classes of product, and a positive effect on the market values ​​of the assets of € 3.3 billion. Customers confirm their trust in Poste and continue to rely on a wide range of products with limited market volatility. Segment operating profit (EBIT) increased by 1.1% in the second quarter to € 175 million (-8.4%, on an annual basis, in the first half of 2020, to € 398 million).

Insurance sector revenues decreased by 16.2% in the second quarter of 2020 and amounted to € 384 million (-7.2% year on year in the first half of 2020, equal to € 739 million), influenced by lower premiums and lower releases on technical reserves. There were visible signs of recovery in terms of average daily deposits which generates gross deposits on Multiclass products and the Non-Life business modular offer. Operating result (EBIT) down 18.4% compared to the second quarter of 2019, equal to € 248 million in the second quarter of 2020 (-4.3% compared to the first half of 2019 at € 435 million). At the end of June 2020, the Solvency II Ratio of the Poste Vita Insurance Group stood at 216%. The transitional measures provide an additional buffer of an additional 34 pp to absorb market volatility. The coefficient remains above the managerial ambition of 200% over the plan period.

BUSINESS OUTLOOK

The ongoing health emergency linked to the spread of Coronavirus has had significant economic and financial impacts on the country system and therefore also on the Poste Italiane Group. The months of March and April have been characterized by government restrictive measures progressively reduced in the following months but, to date, it is still not possible to accurately outline what will be the "new normal"; this makes it premature to make realistic forecasts on the economic and financial evolution of the Group during 2020. In the health and humanitarian emergency that Covid-19 has represented in recent months, the Group's priority was immediately to protect health its employees and customers, supporting communities and national institutions in crisis management, guaranteeing a continuous level of public utility services on a national scale.

The huge organizational and economic effort made has enabled the Group to adapt the network of post offices and delivery to the new security standards, often anticipating the Government's indications, to guarantee business continuity. Poste Italiane constitutes an asset for institutions in emergency management and has established itself as a point of reference for all national companies in what will be the "new normal". Poste Italiane has gone through the period of crisis and is facing the new context by leveraging its characteristics as a systemic company, a fundamental backbone for the country's business continuity, especially in times of emergency.

The diversified business model highlighted segments penalized by the crisis, such as correspondence, but also growing segments such as parcels, where demand received a strong stimulus from e-commerce orders. The Group's digital properties (website and APP) and third party networks offer customers a valid alternative to the post office, increasing their relevance and impact. The ability to generate cash remained solid and the net financial position was largely positive.

BancoPosta and Poste Vita enjoy a high level of capital solidity, as demonstrated by BancoPosta's CET1 and the Insurance Group Solvency II Ratio. BancoPosta's business model, whose uses are limited to the underwriting of securities issued by institutional investors, is resilient to credit risk fluctuations, as well as capital light. In terms of costs and investments, the Group has activated a large and severe reduction program, with the main objective of obtaining medium and long-term structural savings.

In particular, the Group used the levers of labor cost flexibility to reduce the workforce and adopted extraordinary measures on costs related to commercial performance and managerial incentives (50% less the MBO bonus). The Group also made use of the Solidarity Fund in relation to the staff against whom, during the emergency health period, the reduction / suspension of work was ordered. In the emergency, the Group activated smart working in record time for all resources applied to compatible activities (over 16,000 people).

This measure has led to positive impacts on productivity and cost containment. Finally, the Group has launched a program that will aim to structure interventions to enhance its real estate assets; the strategic lines of these initiatives will be outlined within the Industrial Plan, whose finalization is expected in the fourth quarter of 2020. The main development initiatives underway in the individual SBUs are shown below.

As regards the Mail, Parcels and Distribution segment, the emergency led to a sharp acceleration towards the future, albeit on the basis of trends already outlined: the drop in correspondence and the growth of parcels related to e-commerce. To cope with and support this decisive increase in parcels, the Group is accelerating the construction of two new sorting centers, in the north and central Italy, and is strengthening its partnership with Chinese operators active in inbound e-commerce. With the end of the lockdown, activities to strengthen the green fleet resumed, which represents one of the objectives of the Italian Post Office to significantly reduce polluting emissions.

In the field of Financial and Insurance Services, the Group will continue to support the Institutions, also pro-actively agreeing on the implementation of all the measures useful for the management of the emergency, as already done since March for the advance payment of pensions . Poste Italiane will make new customer services available on the digital channel, such as the possibility of signing consultancy contracts and profiling for MiFID II purposes and of signing Accumulation Plans on Asset Management. With regard to investment insurance products, in July 2020, a new multi-branch policy was launched that allows gradual access to the markets, with the aim of safeguarding the profitability of our clients' investment from market volatility, and responsible investment according to the Enviromental Social Governance (ESG) criteria. In addition, Poste Italiane, in partnership with a primary banking institution, will continue to offer customers with credited salaries the possibility of receiving in advance, without additional costs, the redundancy benefits (CIG).

Among the actions supporting the country's economic recovery, within the framework of the provisions of the "Relaunch" Decree, Poste Italiane will offer its customers, through physical and digital channels, a service for the transfer of the tax credit as assignee . With regard to the Payments and Mobile sector, PostePay SpA continues to pursue its strategic mission to become the main payment ecosystem in Italy and ensure the convergence between payments and telco and between physical and digital channels, trying to guide the change in customer habits. In line with the evolution of the offer towards digital solutions, a full digital prepaid card is expected to be launched during the year which can be requested directly from the Postepay App. The acquiring side is expected to expand the sales channels of the Postepay Code, thanks to the launch of online sales and remote sales from call centers and the strengthening of partnerships with ENI and Lottomatica LIS by expanding the affiliated sales points and the features / services offered . In the field of telephony, investments will be made in the development of the offer by enhancing the online channels, in order to intercept a complementary target to the regular visitors of the post office.

ALTERNATIVE PERFORMANCE INDICATORS

Poste Italiane, in line with the guidelines published on October 5, 2015 by the European Securities and Markets Authority (ESMA / 2015/1415), presents in this Report, in addition to the economic-equity and financial data required by the International Financial Reporting Standards (IFRS ), some indicators from the latter derivatives, which provide management with an additional parameter for evaluating the Group's performance. The alternative performance indicators used are:

EBIT (Earning before interest and taxes) – indicator that highlights the result before the effects of financial and tax management. EBIT margin – represents an indicator of operating performance and is calculated as the ratio between the Operating Margin (EBIT) and Total Revenues. This indicator is also presented separately for each Strategic Business Unit.

NET FINANCIAL POSITION OF THE GROUP – is the sum of the financial assets, the Cassa and Depositi BancoPosta, the cash and cash equivalents, the insurance technical reserves (shown net of the technical reserves charged to reinsurers) and financial liabilities. This indicator is also presented separately for each Strategic Business Unit.

NET FINANCIAL POSITION OF THE STRATEGIC BUSINESS UNIT CORRESPONDENCE, PARCELS AND DISTRIBUTION is the sum of the items listed below, shown according to the scheme recommended by the ESMA European Securities and Markets Authority (document No. 319 of 2013): Financial liabilities net of intersectoral relations , Current financial assets net of intersectoral transactions, Cash and cash equivalents.

STANDARDIZED EBIT AND NET PROFIT – to allow for a better evaluation and greater comparability of the data, the reconciliation between EBIT and Reported Net Profit and EBIT and Normalized Net Profit is shown below.


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/poste-italiane-tutti-i-conti-settore-per-settore-del-primo-semestre-2020/ on Mon, 03 Aug 2020 05:20:24 +0000.