Poste Italiane SpA

MIL:PST

Earnings Call Transcript 2022-Q1

[Matteo del Fante, executive]

Good afternoon, and thank you for joining us. Beginning on Slide 3. The first quarter results are solid, paving the way for a successful full year 2022. In particular, we reported positive overall group revenues and a healthy growth in EBITDA with the payments and mobile businesses and insurance services for drivers of recovering growth. In an uncertain market environment, our diversified income streams are providing a strong base to deliver our targets, also considering our proven track record in managing the cost base in a flexible way.

Let's move to Group financial results on Slide 4, please. The numbers on this slide speak for themselves. Poste had a solid financial performance in Q1. Overall results are just shy of EUR 3 billion and up 1.4% from last year. We remain committed to efficiency with total cost of EUR 2.3 billion, down 1.4% year-on-year, reflecting lower FTEs and despite cost inflation. Q1 of '22, EBIT is almost EUR 700 million, up an impressive 12% with net income of a little under EUR 500 million, increasing almost 11% from last year.

Let's go segment by segment on Slide 5, starting from Mail, Parcel & Distribution. Revenues were down 2% with both mail and parcel in line with our projections. Parcel volumes are going through a normalization phase while remaining structurally above prepandemic levels and driven by solid fundamentals.

The year-on-year comparison is unfair since in Q1 2021, extraordinary volumes were achieved when 2/3 of Italian regions were under strict movement restrictions. Moreover, mail is no longer impacted by changes in perimeter as the Nexive consolidation has been effective since January last year. However, our results confirm our flexibility to address unfavorable market trends, giving us visibility on our 2022 EBIT target.

Financial services are showing positive commercial trends with strong contribution from NII offsetting lower capital gains. We will cover it in more detail later.

Our insurance services business enjoyed a successful quarter even compared to last year, which in itself was a very strong quarter. This growth was driven by higher average technical reserves and margin as well as positive commercial trends in P&C.

For the first time, Payment & Mobile, which is the smallest segment of the company, has shown the biggest revenue increase in absolute terms. This remarkable achievement proves that our strategy was right. Back in 2018 when we established this growth-oriented segment, car payments revenues continue to increase and our market share continued to increase with higher transaction both on physical and e-commerce channels.

Let's move to a more detailed review of our numbers by segment, and let me hand over to our CFO, Camillo Greco. Please, Camillo.

[Camillo Greco, executive]

Thank you, Matteo, and good afternoon, everyone. Let's start the quarterly review with Mail, Parcel & Distribution on Slide 7.

Mail revenues remained stable year-on-year. This is a positive result when considering that last year's quarter already benefited from Nexive contribution and that the pandemic-related mix backlog is gradually fading out. The lower margin and recorded mail revenue's decline was compensated by higher value-added integrated services such as notification from public administration services. As expected, parcel revenues were down 10% year-on-year as a result of normalizing volumes after lockdown-driven growth in Q1 '21.

If you look back at this period last year, 2/3 of Italian regions were still under severe movement restrictions. Therefore, e-commerce trends were affected by the consumer behavior and our propensity to buy online. Let me highlight that most postal and logistic operators are experiencing the same anticipated market dynamics.

Having said that, in line with the business seasonality, we expect parcel revenues to be more positive in the second half of the year. Also, as you may recall, in July last year, new regulations came into effect introducing extra new VAT on low-value imports. This has affected inbound volumes coming from China, which is struggling with a new wave of pandemic-related lockdowns.

Other revenues were significantly higher, reaching EUR 58 million, mainly driven by growing fees on new businesses, including digital identities. Finally, financial product distribution fees were flat, mirroring financial services revenues. As you can see, we were able to mitigate the impact of market headwinds and lower revenues with a rigorous cost discipline with EBITDA resilient year-on-year.

This confirms our flexibility to address unfavorable market environment, giving us full flexibility on our 2022 EBIT target. Let me also highlight that we're progressing as planned with our contractual logistic rollout. And earlier this month, we closed the acquisition of Plurima healthcare logistics company.

Let's now look at Mail parcel volumes and tariffs on Slide #8. Parcel volumes were down 13% in Q1, in line with wider market trends, which all postal operators are currently experiencing, we have just mentioned. Looking at pricing, the average parcel tariff was up 3% in the quarter, supported by B2C tariffs, mitigating declining volumes. Moving to mail, volumes remained stable year-on-year, supported by resumed notification from public administrations offsetting a recorded mail decline.

Let's now take a closer look at parcel revenues and volumes evolution on Slide #9. Looking back from 2017, you can appreciate the steady increase over time, peaking in 2021 against the tremendous growth supported by movement restrictions. We're now experiencing a normalization phase. Volumes remain high, structurally above prepandemic levels, confirming that the strategic direction we took in the logistics formation was the right one.

Nevertheless, we are not hiding from the facts. Latest market data shows that leisure and travel expenditure is increasing with -- while e-commerce is underperforming, highlighting changing consumer behavior of whom restrictions are lifted.

However, we believe that the fundamental growth drivers for e-commerce are still intact. And in fact, we have been working to be fully able to manage our volumes in second half of the year. In any case, allow me to be frank and say that we have several levers and maximum flexibility to offset any potential impact at operating level, maintaining full visibility on our original EBIT target.

Moving to Financial Services, Slide #10. Gross revenues remained stable in the first quarter thanks to NII growth, which increased 16% year-on-year, benefiting from tax credit investment and higher interest rates, which we'll cover in more detail in the next slide.

Let's review the other items one by one. We booked EUR 176 million this quarter and already secured all the active portfolio management contribution planned for 2022 with settlement dates in Q2 and Q3.

Postal saving distribution fees declined 4% year-on-year. The contribution to EBIT from postal savings remained stable year-on-year, although we're experiencing higher-than-expected net outflows. Traditional payments lifts continue to decline in line with market trends with transaction banking fees down 9% in Q1 partially offset by increasing revenues booked in payments and mobile.

Loan and mortgage distribution revenues were up 7%, driven by higher volumes and pricing. Asset management revenues continue to increase, supported by higher average volumes year-on-year. EBIT registered a healthy growth of 12%, supported by NII and coupled with lower provisions and intersegment costs.

Let's now take a look at NII evolution on Slide #11, focusing on the quarterly progression on the top chart. As of March, we have purchased tax credit for EUR 8.6 million. This activity has helped to mitigate low interest rate headwinds, resulting in EUR 23 million in incremental income. We expect to see a similar contribution over the next quarters in 2022.

Moving to the BTP investment portfolio. Volumes remained flat. In Q1, we invested in EUR 2.6 billion BTP with around 40 basis points yield pickup compared to the BTP sold and matured in the quarter. We expect this net positive impact on revenue stream to continue throughout the year.

Moving on to the NII component from investing in public administration deposits. We have EUR 14 billion of deposits in those accounts with the remuneration linked for 60% to the near BTPs and 40% 6-month [ BOPs. ] The increase in 10-year BTP yields led to a EUR 24 million NII improvement year-to-date. Going forward, we expect Q1 NII to be a representative of the upcoming quarters.

Obviously, higher rates are impacting our portfolio mark-to-market. As of today, unrealized capital gains amount to a negative EUR 1 billion with the 10-year BTP swap rate at around 175 basis points and BTP swap spread circa 100 basis points. As a reminder, we have already secured capital gains for 2022 and 2023. Therefore, the upcoming 18 months only represent a buying opportunity at these higher rates.

Moving to Slide #12. TFAs reached EUR 582 billion, down 4% since December related to the impact of higher interest rates. Since the beginning of the year, net inflows amounted to EUR 2 billion.

Looking at each component. Postal savings were down EUR 4.6 billion due to higher-than-expected net outflows, partially compensated by market effect. Looking in more detail, Postal saving bonds experienced positive gross inflows compensated by high early redemptions. Postal saving books were affected by the scheduling of pension payment scheme following then of the emergency decrease and impacted by lower saving propensity.

Net technical reserves declined negatively affected by higher interest rates despite positive net inflows with strong contribution from multiclass products now representing 61% of new production. Deposits grew by EUR 4 billion, increasing across all categories, mainly driven by public administration accounts. Finally, mutual funds recorded positive net inflows more than offset by negative market effect.

Moving to Slide #13. Insurance revenues were up 7% in the quarter with positive contribution from both Life and P&C segments. Life Insurance revenues posted very strong results, considering that last year's quarter already recorded solid revenues. In particular, we recorded positive contribution from both increased average technical reserves and a growth share of our profitability multiclass products. The investment margin also benefited from inflation-linked bond exposure.

In nonlife, revenues grew 12% thanks to increasing gross written premiums, which were up 19% on an annual basis supported by the new modular offer and welfare policies. The P&C combined ratio remained stable year-on-year. The lapse rate increased year-on-year but is still very well below the market average. In terms of EBIT, we had a strong growth of 14% with both life and nonlife revenues contributed to the top line.

Let's now look at the solvency ratio evolution on Slide 14. PosteVita Group's Solvency II ratio remains well above the 200% managerial ambition through the cycle. The Solvency II ratio is up 11 percentage points to 272% benefiting from stable BTP spreads and increasing interest rates. Traditional measures provide additional 24 percentage points. As of today, Solvency II ratio is currently between 235% and 250%.

Moving to payments & mobile on Slide #15. This quarter, we can see yet another strong set of results in our payments & mobile business with revenues growing by 20% and all business lines providing an outstanding contribution. Card payments are up a significant 18% to EUR 120 million thanks to higher margin Postepay Evolution cards.

More importantly, for all of us, as pandemic restrictions are lifted, we continue to see increased transactions up 15% year-on-year, reaching over EUR 0.5 billion in the first quarter, growing well above the market average and embedding a remarkable 14% increase in e-commerce transactions. On top of that, let me remind you that we have a positive contribution from debit cards, which were previously accounted through financial services.

Other payments doubled in the quarter mainly driven by increased payment transactions now directly managed by Postepay as payment service provider, successfully mitigating the accelerated decline in payment slips. Telco revenues grew 3% in the quarter, yet another positive result in a traditionally high-churn market. The new fiber offer is picking up momentum but is also bringing new higher-margin customers. EBIT grew 12% in Q1, impacted by the energy project start-up cost for EUR 2 million.

On Slide #16, you can appreciate how Poste Italiane's work for transformation is progressing. Over the year, our average headcount decreased by around 3,700 employees to below 120,000 FTEs for the first time despite 2,700 new hirings in the quarter, which we expect to further grow in the second half of the year. This, once again, demonstrates our ability to effectively adjust our workforce in a flexible way. HR cost per FTE are up 1% year-on-year to just under EUR 45,000. But more importantly, the value added per FTE is growing at a faster rate of 5% year-on-year, reaching EUR 77,000 per FTE.

Moving to group HR costs on Slide #17. Overall, HR costs are slightly down year-on-year with lower FTEs compensating higher employee benefits. An important KPI to highlight here is the ordinary HR costs on revenue down to 45% from 46% in Q1 '21.

On Slide #18, let's review non-HR costs. COGS are down EUR 12 million year-on-year, still embedding high transaction fees for EUR 4 million to support the payment business growth. Our focus on cost discipline allowed us to absorb an inflation-related cost increase of circa EUR 14 million due to higher full transportation and delivery costs, in line with our expectations. Let me also remind you that the hedges we put in place for corporate energy cost and jet fuel contributed to shielding us from price ranges until 2023.

Thank you for your time. Let me hand over back to Matteo for a wrap-up.

[Matteo del Fante, executive]

Thank you, Camillo. Our operating profitability progression across business segments is paving the way to reaching our ambitious 24SI targets. We have been able to maintain a resilient EBIT in Mail and Parcel offsetting the impact from Parcel volume normalization supported by our cost discipline. EBIT in Financial Services increased, thanks to higher NII and lower cost. Insurance Services has confirmed itself as the biggest contributor to group profitability with positive performance in both Life and P&C. Finally, in Payments and Mobile, double-digit EBIT growth comes as a result of successfully leveraging on market trends.

And before taking your questions, let me conclude with some key messages on Slide 20. On May 5, Poste Italiane celebrated its 160th anniversary with an event in Rome highlighting how our unique heritage has allowed us to address today's challenges and guide the future of our communities and company.

As you know, the pandemic has impacted everyone with some emerging more weakened than others. We, though, have constantly been working hard to evolve into a platform company, leading to a structural upward shift in Poste's growth trajectory. We have consistently improved performance since 2020. And after recovery in 2021, in the first quarter of this year, we continue to grow, paving the way to a successful 2022.

Thank you for your time today. And let's now move on to the Q&A session. Over to you, Massi.

[Massimiliano Riggi, executive]

So the first question is from Domenico Santoro, HSBC.

[Domenico Santoro, analyst]

A couple of questions from my side. First of all, on the NII, where it looks like your quarterly run rate is much better than the one implied in the guidance that you just gave a couple of months ago. So I just want to understand how should we look at the evolution of net interest income from this level? Maybe you can break it up, all the improvements or the headwinds that you see from here in terms of rates, in terms of tax credits and also in terms of income from the TA deposits and, at the end of the day, whether this EUR 420 million is sustainable and how it can evolve also over the next couple of years, given the rate environment now is much better compared probably to the last time that we have spoken in March?

Related to this, did I understand correctly that you expect the capital gains from your portfolio to be around EUR 400 million for this year and the next so the target that you gave in the business plan, which is a little bit counterintuitive, one, probably would expect NII going up and gross capital gains be a little bit softer going forward?

And the other question that I have is on the cost, in particular in Mail and Parcel, where you're going very well ahead of the -- I mean, even here, the run rate is much better. It doesn't seem like you have downgraded the target in Mail and Parcel because my understanding is that you expect certain improvement in the second part of the year. So net-net, I just wonder whether given the evolution in terms of cost at the end, there is some upside on the EBIT target that you gave for 2022.

[Matteo del Fante, executive]

Thank you, Domenico. I'll take the first question, NII, and then let Camillo take in the second one. The EUR 420 million NII for Q1 is certainly an improvement versus our forecast of only a few weeks ago. We've been spending a lot of time in the last few weeks on the fixed income portfolio. And I think we reach the conclusion that we can consider this quarterly performance as a good guidance for the rest of the year. This is based on the consideration that the readjustment of the rate environment, which has been dramatic, historical in the last few weeks, is allowing us to reinvest at much higher rates the portfolio that is coming to maturity.

So just to give you an example from second, third and fourth quarter of 2022, we have a couple of billion of BTPs going to maturity. We had an assumption of reinvesting this at short of 1% in 10 years BTP. We're now closer to 3%. And the 2% pickup is giving us, obviously, as simple as EUR 40 million pickup. And if you project this over the course of the plan, it's clearly positive also beyond 2022. This, for the first time, this structural change of the rate environment is allowing us for, I think, at least since I have taken the helm of the company 5 years ago to see the average yield of the portfolio going up. So we were breaking through the 2% threshold.

And for the first time, and you have it in the presentation, we have a positive or a nonnegative impact quarter over quarter for the first time in -- I'm referring to Page 11 to the top quarter-over-quarter evolution. You see that, versus last year, we still bring EUR 37 million rate effect in the portfolio negative. But if you compare this quarter to last quarter of last year, you have it plus EUR 6 million. So we are marginally increasing the yield of the portfolio thanks to the ability to invest at higher rates. And we are estimating that this increase in the portfolio going forward to give you a feel in current market environment. And obviously, we will have to observe market developments. But in current market environment could be as much as 10 basis point per annum pickup in yield.

Tax credit, you mentioned is also giving a strong contribution. The average -- the implied duration equivalent of the tax credit, EUR 8.5 billion is 3.9 modified duration. So we're investing at above 4% in less than 5-year maturity equivalent, which means that we have currently a 2.53% pickup versus rate.

And moreover, it allow us to go and invest even beyond 10 years because we lower the risk exposure investing in the short term with the tax credit. So the two things put together are an additional grade on the NII that will go through our income statement in the future. Please, Camillo.

[Camillo Greco, executive]

Thank you, Matteo. So with respect to the first question, Domenico, on capital gains or how we call it active portfolio management, we do confirm that in 2022, there's going to be EUR 0.4 billion of contribution of active portfolio management. As a matter of fact, we repeat also what we said at the Capital Markets Day, which is that those active portfolio management benefits have already been locked in, and I would look at the lower end of the EUR 0.4 billion. The other thing that we did say and we reconfirm is that we have already locked in a portion of the capital gains we intend to target for 2023, and those are already locked in to the extent that the rate environment remains the one that it is. We probably will stop there, but we are monitoring the situation.

With respect to the question around breakeven of Mail, Parcel & Distribution, we did upgrade our guidance back in March when we said that 2024 will be a year with a positive contribution. At this stage, we won't change that guidance. And with respect to the contribution of Mail, Parcel & Distribution for 2022, we have given a number of EUR 0.2 billion negative, i.e., from EUR 151 million to EUR 249 million negative. We stick to those numbers for the time being.

[Massimiliano Riggi, executive]

The next question is from Ashik Musaddi, Morgan Stanley.

[Ashik Musaddi, analyst]

I just have couple of questions. I mean, sorry for being a bit greedy. I mean, Matteo, you gave a very clear answer on NII but sorry for being a bit more greedy on that. I mean, EUR 420 million is the current run rate for this quarter. If I look at the progression, your underlying progression for first quarter, I mean, you have got a reasonable amount of flows quarter-on-quarter coming from public administration but still good amount of flows. At the same time, interest rates have gone further in second quarter.

Now if interest rates remain here, would you say that there is even more upside to this EUR 420 million, and most likely, that number is going to stay in the future as it is or would you say that, okay, it might go to EUR 450 million, but then it will drop for X, Y, Z reasons. I mean, the reason why we are trying to understand this is because clearly, NII is something which matters a lot. It's a long-term revenue profile. For you, it's not a one-off like a capital gain. I mean, if NII stays at EUR 500 million level, I mean, it's a material difference versus your guidance and versus what people are expecting, and it stays with you for much, much, much longer. So that's the reason going back into this topic. Sorry for this. But that's the first one.

And secondly, I mean, you mentioned again that Parcels is most likely to pick up in second half. I mean, is there any early signs you're seeing this quarter that things are getting better year-on-year? Or would you say that second quarter most likely would remain similar to first quarter and then it gets better? Yes. So these two questions would be more than helpful.

[Matteo del Fante, executive]

Okay. You are allowed to be greedy when you're in the business. No, I think -- and you're right, since we closed the quarter at EUR 420 million, April was another step up for the rate environment, a meaningful one. So I think that we gave EUR 420 million as a base, you want to call it, target. Maybe you want to be a bit more optimist and is a base, but our ambition is exactly the one you mentioned. So if we could reach a level where we don't need capital gains. We have been telling for the last 5 years that we would have balanced capital gains versus NII to fulfill our financial services portfolio revenues. And I agree with you. If we could get to the same level, maybe slightly higher, without touching capital gains, we would be a different company. And we're not far from that result.

And as I just said, we are investing a lot of time. We consider this to be a relatively unique opportunity for the firm to do a change of skin into a different mindset versus the portfolio. At the end of the day, we've been working for many years in a rate environment where we had no opportunity to invest with decent returns, and we were only benefiting of all the investments or opportunistic investment when there were some spread rates widening. We leave thanks to hedging our investments, so as you know, more or less 50% of our portfolio. Thank god it was hedge floating, and this was clearly important. Now that the market has moved in our direction, we have to be smart and fast to acknowledge it and change the profile of our portfolio returns.

In terms of Q2, as far as April and the first week of May is concerned, not a big change versus Q1. We're working very hard on some key clients. We're working very hard on dynamic pricing to adjust at least the top line if the volumes are not supporting. So that's an area where we keep a lot of focus internally.

[Massimiliano Riggi, executive]

And the next question is from Manuela Meroni of Banca Imi.

[Manuela Meroni, analyst]

Three questions on my side. The first one is on Parcel. I'm wondering if we can consider the current level of revenues in Parcel as a normalized one, and therefore, we can apply the usual seasonality that we had in the prepandemic period for the remaining part of the year or if you expect a further normalization path in the next few quarters? The second question is a clarification on NII. I'm wondering in an increasing interest rate scenario if the investments in tax credit still makes sense. If you can elaborate a little bit more compared to what you already said before. And third question, you recently made a small investment in Scalapay. Possibly, it is just a financial investment, but I'm wondering if you have any ambition in the buy now, pay later segment.

[Matteo del Fante, executive]

Okay. I'll take the second and third and let Camillo answer on the parcel seasonality normalization. Now tax credit, we reached EUR 8.6 billion investments. As you know, we have platform of EUR 9.5 billion. It still makes a lot of sense from a return. Obviously, you need to adjust it for liquidity. Owning government security is not like owning a tax credit that has 5-years installment or sometimes 10-year installment. But from a rate and return perspective, we are today investing at 4% to 4.5%. BTP in 5 years is 1.5%. So we're close to 3% pickup and the addition or the deduction to the risk profile in terms of our target and our limits on average duration of the portfolio also benefits because when you can buy with a pickup medium term or a short-dated tax credit, you create room to buy more long dated without impacting the average life of your portfolio.

Scalapay, we don't do with financial investments by our own decision. We always want to make investments in company that are helping Poste to accelerate our road map. Some of those companies, we -- become client immediately. I think the example of Tink, the payment company that we bought 5% and then we were bought out by Visa last year with -- after 18 months, with a very good return on the investment. But more importantly, we spent 18 months as a shareholder developing our open banking platform with the company. Scalapay is an interesting player in the buy now, pay later, which is a market that is not sure it will open in Italy, but as any player in payments, we are spending time, understanding whether this is a market where we can offer something more to our clients.

[Camillo Greco, executive]

Thank you, Matteo. With respect to Manuela to your question on parcel volumes being normalized, I think we will not yet characterize Q1 2022 as a normalized level. There have been a number of things that have played in different ways. First and foremost, China was in lockdown, and that has had an impact on some of the inbound volumes into Italy. Secondly, and equally importantly, there is a very significant environment of price increase, which we think could lead to a different mix of volumes and pricing between our end of the year. And lastly, as we already said, we are working very hard with some key clients to try to broaden the services we offer to such clients. In this vein, let me also add that we have closed the acquisition of Plurima, which we talked about before. Plurima will be under the parcel banner. So you will see also some perimeter change as a result of the acquisition.

[Massimiliano Riggi, executive]

The next question is from Elena Perini from Banca Imi.

[Elena Perini, analyst]

Yes, I've got only one question on insurance services. Well, considering the very good levels of net in closing in life and of gross written premiums in nonlife as regards the first quarter, I was wondering if you can give us some indication on your expectations for the remaining part of the year for both life and nonlife, considering that, well, the scenario is very challenging. So I was wondering if you should expect any slowdown ahead.

[Matteo del Fante, executive]

Please, Camillo.

[Camillo Greco, executive]

Thank you. With respect to financial services and specifically insurance services, I think we're not at this stage going to change what we said a few weeks ago. We still target a total revenue of EUR 2.2 billion and EBITDA EUR 1.2 billion for the year. We had a good first quarter, but there is still a long way to the end of the year. So at this point, we stick to our original guidance.

[Matteo del Fante, executive]

Yes. I think the rate environment -- if I may add just one quick comment. Also on the equity side, what's happening on markets should be a relative versus peer good news for us. You're aware that basically 93% of our assets under management are capital guaranteed. So our clients are much more protected than others. So in such a volatile equity environment, we are less exposed. The other element that is helping our insurance space is the fact that, on the liability side, we still have an important capital protection and minimum yields in our portfolio and those protections, when you move from a 1% to a 3% rate environment, becomes, obviously, much easier to achieve. So all in all, we were looking at our also margins on the Life business, and it's growing quarter-on-quarter. It's growing both on the capital guaranteed and noncapital guaranteed, and the second one is growing even more. And as you have seen, the mix is also holding an interesting level in the quarter. So I think positive also on the commercial side of the insurance space.

[Massimiliano Riggi, executive]

So we have a couple of questions from our platform. So allow me just to read the ones we haven't addressed during the call, if I may. So first, other revenues in Mail, Parcel & Distribution reported for EUR 58 million. Can we take this as a run rate for 2022?

Then card payments and other payments, which are the growth expectations for the year?

And last on the Energy business, can you guide us on an update on the timing of the launch of the business? And what contributions, if any, do you expect from the business in revenues on '22 and '23?

[Matteo del Fante, executive]

Okay. Camillo, you want to take the first two, and then I'll wrap up with the energy?

[Camillo Greco, executive]

So with respect to the first question on other in Mail, Parcel & Distribution, yes, we believe that number of EUR 58 million is a reasonable indicator of what we expect for the rest of the year on a quarterly basis, probably towards the -- I would point towards -- between 0.1 and 0.2 for the full year.

With respect to card payments and other payments, so other payments is been growing mainly as a result of the switch from payment slips to the form of payment [indiscernible] which has been recorded in payments and mobile. So that has been the tool through which we have recaptured some of the volumes that we lost in payment slips that are under transaction banking in Financial Services.

[Matteo del Fante, executive]

On the energy, we already in beta test, so from the first of April, now it's the second month that we have a number of employees of Poste Italiane that are on a pilot. So they are using electricity and gas at home provided by Poste Energia. We're doing the fine-tuning of the product as we speak. And in the next few weeks, we will proceed with an internal official launch of the product. Internal means an offer dedicated to employees and related parties.

And then based on the result and also the market environment, we will do the official public launch. I say market environment because, as you know, we have built an end-to-end sale -- energy sale platform, but that platform needs the hedges. So we will periodically hedge and go and buy forward the energy that we're actually selling to our clients. So we need forward markets to be open. They're open as we speak. They've been open all the way through. These are international markets, wholesale markets, energy exchanges. And that seems to hold. But before we push the public -- the go-to-market in the public environment that we want to be absolutely sure that we have no surprises.

In terms of contribution to our bottom line, for the time being, we have only seen the cost of this 2022. I'm afraid we will not see a lot of revenues. But from next year onwards, this will certainly show in our income statement, even though I believe that energy is a really, really important step for the firm with a medium to long-term perspective. So we're adding one pillar product to our franchise. And I think this will -- over time, will prove to be an extremely solid component down the road for the bottom line of the company. Thank you.

[Massimiliano Riggi, executive]

Okay. We have another question from our web platform, and it is related to our projects with the public administration with reference to Polis. Can you please elaborate on that, please?

[Matteo del Fante, executive]

Yes. Polis is the name of next-generation EU-related government program came at offering public administration services to general public to citizens in -- around 7,000 of our postal offices that will be refurbished, that will be upgraded from an IT standpoint in order to offer public services to Italian clients. The 7,000 postal offices are located all around the country, and the focus is mainly in the smaller cities where there is less presence of public offices. It is EUR 800 million that will be funded by the state in favor of Poste Italiane for the program. And there is a second component in the plan, which is developing around 250 locations of co-working in real estate premises that are owned by the company already that there will be, again, refurbish and put in the market to activate co-working spaces open to entrepreneurs and individuals all around the country.

And on this, I thank everybody for the time, and I look forward to meeting you in person hopefully very soon. Thank you very much.