February 27, 2018 / 8:05 AM / 9 months ago

UPDATE 2-Italy's Poste bets on insurance, parcels to boost profits, dividends

* Poste sees EBIT rising 10 pct p/a on average in 2018-2022

* Plans to boost parcel delivery with weekend working

* To expand insurance business with new P&C products

* Shares jump on generous dividend pledge

* (Adds more quotes from CEO, stock reaction, analyst comments)

By Francesca Landini and Massimiliano Di Giorgio

MILAN, Feb 27 (Reuters) - Poste Italiane said on Tuesday it would raise dividends and boost profits through new insurance products and parcel deliveries under a five-year business plan, sending its shares up more than 5 percent.

Under newly-appointed CEO Matteo Del Fante, the state-controlled group’s business plan included a cut in labour costs and a pledge to bring its loss-making mail & parcel division to nearly break-even by 2022.

The former postal services monopoly, in which the Treasury and state lender Cassa Depositi e Prestiti are the main investors, is now a conglomerate whose insurance arm is its main driver of growth. It is Italy’s largest domestic employer.

The group, which has a network of 13,000 post offices around Italy, said it would offer a wide range of property and casualty products and gradually enter the car insurance business.

“We will expand in non-life insurance business, including car insurance,” Del Fante said speaking at the group’s Capital Markets Day at Milan’s stock exchange.

It also plans to increase parcel deliveries to compensate for a fall in letters and aims to boost revenue coming from this business by more than 70 percent over the 5-year plan.

The company will do this with joint mail and parcel delivery and also parcel delivery at weekends, made possible after the signing of a new labour contract with unions this year.

“We see a strong growth in e-commerce in Italy in the next three years: this is a great opportunity we want to exploit,” Del Fante said, adding the group was already delivering an increasing number of parcels on the behalf of e-commerce giant Amazon.

Asked about the fact Amazon was also expanding its owns delivery services through its Amazon Prime offer, Del Fante said Poste was getting ready to delivery parcels on the same day of order.

“Until now we have developed a very positive relationship with Amazon and its competition is a reason to be more efficient,” he said.

Shares in the group rose 5.9 percent at 1055 GMT, approaching an all-time high of 7.20 euros recorded at the beginning of 2016, few months after the company’s stock market listing at a price of 6.75 euros a share.

“The plan is based on conservative assumptions with a very low execution risk,” Del Fante also said. He added it was based on small changes at each of the group’s four divisions: insurance, mail&parcel, digital payments and banking.

The group forecast an increase in operating profit by 10 percent on average per year over the next five years to reach 1.8 billion euros ($2.22 billion) by 2022.

Del Fante said the company did not currently envisage any acquisitions over the duration of the plan, and that his assumptions were based on organic growth.

The group said it would increase dividend payouts by 5 percent each year between 2018 and 2020, starting from a floor of 0.42 euros per share on 2017 results. The payout will be at least 60 percent from 2021 onward.

Mediobanca Securities said in a research note the dividend policy put Poste at a 6.6 percent yield on 2018 expected earnings and 7.0 percent yield on 2019. “A strong positive remuneration if compared to the major European diversified financials and insurance companies.”

Overall net profit is projected to grow to 1.2 billion euros in 2022 from 0.7 billion euros last year thanks also to a reduction of labour costs achieved through an projected fall in staff numbers of 3,000 every year over the 5-year plan, which are expected to be achieved mainly through early retirement. The group plans to hire 10,000 skilled workers in the next five years. Poste had 141,000 employees at end 2016.

$1 = 0.8116 euros Editing by John Stonestreet and Jane Merriman

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