Related Articles
Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Royal Mail still struggles to deliver on its privatisation promises. This week it asked regulators to allow it to reduce second-class deliveries to every other day. Shares in its holding company International Distributions Services languish below the October 2013 initial public offering price. The weight of its public service obligations weighs heavily.
Over in Italy, things could not be more different. The share price of Poste Italiane has almost doubled since listing in 2015. Crucially, Poste Italiane kept its post office network and financial services, unlike Royal Mail.
Chief executive, and former JPMorgan banker, Matteo Del Fante has used both to good effect. He has weaned Poste Italiane off the unsustainable gains from its bond holdings, making up the shortfall from its retail payments business, says Michael Huttner at Berenberg.
Postepay prepaid debit cards are now one of Italy’s largest payments networks. Operating profits from payments and mobile services have almost doubled in the past five years to €440mn last year, about 17 per cent of total.
Britain established the world’s first postal savings system in the 1860s, today known as National Savings and Investments. The Post Office, which remained under public ownership when Royal Mail was privatised, made just £500mn of revenues from financial services last year. Poste Italiane made almost four times that in operating profits from banking and insurance last year alone.
That meant, in February, Poste Italiane could promise shareholders more dividends, in contrast to IDS which has recently struggled to pay one. Poste Italiane has excess insurance capital and has hedge protection from interest rate volatility.
As a result Del Fante decided he could increase the dividend payout ratio to 65 per cent of net profits. Poste’s yield of 8 per cent, with another 30 per cent dividend growth anticipated by 2026, suggests its shares have further to run.
Its success may even mean that a €1.4bn four-year subsidy, which runs out this year, is not renewed. Indeed, the Italian government hopes to sell down its remaining 29.9 per cent stake, worth €4.4bn. However this initiative to move completely into private hands has gone down poorly with staff, with threats of strikes to come.
Strife with staff is something Italy’s service and the Royal Mail share. But with fewer letters and parcels than the UK, Italian posties already only deliver every other day. This division broke even for the first time last year. Unlike at Royal Mail, these other earnings have helped Poste Italiane cope with the burden of last-mile deliveries.
andrew.whiffin@ft.com
Source link
