Auditors, considering the content of the reports prepared by the Independent Auditor and having noted the attestations issued jointly by the Chief Executive Officer and the Manager responsible for financial reporting, is not aware, to the extent of the scope of its activities, of any reasons preventing the approval of the financial statements of Poste Italiane S.p.A. and the consolidated financial statements of the Poste Group for the year ended 31 December 2019, as well as the proposal for dividend distribution by the Board of Directors.
Independent auditor’s report in accordance with article 14 of Legislative Decree No. 39 of 27 January 2010 and article 10 of Regulation (EU) No. 537/2014
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of this report. We are independent of Poste Italiane SpA (the Company) pursuant to the regulations and standards on ethics and independence applicable to audits of financial statements under Italian law. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Note 2.5 to the consolidated financial statements as of 31 December 2019 “Use of estimates”, paragraphs “Impairment test of goodwill, cash generating units and equity investments” and “Impairment test of the CGU Mail, Parcels and Distribution”
The persistent decline of the postal market in which the Poste Italiane Group operates, makes the ability to forecast future cash flows and the related prospective operating results of the “Mail, Parcels and Distribution” business segment of the Parent Company significantly complex. Within this context, based on the Group Business Plan for the period 2018 – 2022 (the “Business Plan”) and on the 2020 Budget approved by the Board of Directors on 5 March 2020 (the “Budget”), the Cash Generating Unit (“CGU”) represented by the “Mail, Parcels and Distribution” business segment of the Parent Company was subject to an impairment test, in compliance with IAS36 “Impairment of assets”. Such test was aimed at verifying that the book value of the assets allocated to the CGU, which also includes properties used as post offices and sorting centres, can be recovered through their use in operations. In this regard, the “value in use” of the CGU was calculated, which represented the
As part of our audit activities, also supported by experts within the PwC network, we carried out the following main activities in order to address this key audit matter: • in-depth technical analysis of the principal hypotheses and assumptions of the Business Plan and of the Budget with reference to the “Mail, Parcels and Distribution” business segment of the Parent Company, also through discussions with management of Poste Italiane SpA; analysis of the final results compared with the forecasts, verification of the events after the end of the reporting period and reading of the minutes of the corporate governance bodies’ meetings; • update of our understanding of the method to identify the CGU “Mail, Parcels and Distribution” at the level of the parent company Poste Italiane SpA and the method to determine the related recoverable amount in compliance with IAS36 “Impairment of assets” and valuation best practices, verifying that the criteria adopted in prior years have continued to be applied; • obtainment and critical analysis of the impairment test prepared by Poste Italiane SpA based on the aforementioned method, as well as verification of the consistency between the cash flows considered in the abovementioned test with the related book values and data in the Business Plan and in the Budget; Annual Report 2019 Poste Italiane Group
Therefore, as part of our audit for the financial year 2019, we focused on the determination of the recoverable amount of the “Mail, Parcels and Distribution” business segment of the Parent Company, as well as the reasonableness of the most significant underlying assumptions and hypotheses.
• verification of the logical and mathematical correctness of the determination of the cash flows in the context of the impairment test mentioned above, as well as of the overall reasonableness of the calculation of the weighted average cost of capital (“WACC”) and of the consistency of the assumptions related to the “terminal value”, that is the value that represents the ability of the company to generate cash flows, estimated beyond the explicit forecast period 2018 – 2022 in the Business Plan; • verification of the sensitivity analyses prepared by Poste Italiane SpA vis-à-vis any change in key assumptions, comparing the reasonableness of the related results with those deriving from the sensitivity analyses performed by us independently; • verification of disclosures provided in the consolidated financial statements as of 31 December 2019.
Note B5 to the consolidated financial statements as of 31 December 2019 “Liabilities – Technical provisions for insurance business”
Note C4 to the consolidated financial statements as of 31 December 2019 “Statement of profit or loss – Revenue from insurance services net of changes in technical provisions for insurance business and cost of claims”
As part of our audit activities, also supported by experts within the PwC network, we carried out the following main activities in order to address this key audit matter: • update of our understanding and of the walkthrough analysis of the insurance “provisioning” process, that is the corporate process aimed at determining the liabilities representing the contractual obligations undertaken at the reporting date and in relation to the issued premiums, on the part of an insurance company towards its policyholders; • update of the analysis of the design and effectiveness, on a sample basis, of the key controls performed on said provisioning process, also with reference to the quality of the input data used and the consistency between information in the IT systems used by the Companies
The technical provisions for the insurance business, equal to about Euro 140,261 million, represent about 59% of total liabilities and equity of the Poste Italiane Group as of 31 December 2019. In particular, the mathematical provisions for life insurance amount approximately to Euro 123,820 million, thus constituting almost all of the abovementioned technical provisions for the insurance business recognised in the consolidated financial statements of the Poste Italiane Group as of 31 December 2019.
The technical provisions for the insurance business represent an item the estimate of which is predominant and requires a significant level of professional judgement, depending on diverse and significant assumptions of a technical, actuarial, demographic and financial nature, as well as on the forecasts of future cash flows deriving from the insurance contracts entered into by the Companies and existing at the reporting date.
Therefore, as part of our audit activity, we paid particular attention to the analysis of the measurement techniques and methods of the technical provisions for the insurance business in the consolidated financial statements as of 31 December 2019.
Note 7 to the consolidated financial statements as of 31 December 2019 “Risk management”
As part of our audit activities, also supported by experts within the PwC network, we carried out the following main activities in order to address this key audit matter: • update of the analyses of the design and the effectiveness of the internal control system and the specific corporate
guidelines governing IT systems and applications used by the Group for the calculation of the fair value under levels 2 and 3; • verification, on a sample basis, of the reasonableness of the input assumptions and parameters underlying the valuation techniques used to determine level 2 and level 3 fair value of the financial instruments; • autonomous recalculation of the fair value for a sample of instruments and comparison with the values determined by the Company; • requests for confirmation and for information from external banks and financial counterparties about financial instrument transactions carried out in 2019; • verification of disclosures provided in the consolidated financial statements as of 31 December 2019, in compliance with IFRS7 “Financial instruments: disclosures”.
The board of statutory auditors is responsible for overseeing, in the terms prescribed by law, the Group’s financial reporting process.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.
As part of an audit conducted in accordance with International Standards on Auditing (ISA Italia), we exercised professional judgement and maintained professional scepticism throughout the audit. Furthermore: • We identified and assessed the risks of material misstatement of the consolidated financial statements, whether due to fraud or error; we designed and performed audit procedures responsive to those risks; we obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; • We obtained an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control; • We evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors; • We concluded on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern; • We evaluated the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation; • We obtained sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of
The directors of Poste Italiane SpA are responsible for the preparation of the non-financial disclosure statement pursuant to Legislative Decree No. 254 of 30 December 2016.
Key Audit Matters Auditing procedures performed in response to key audit matters
Note C1 to the financial statements as of 31 December 2019 “Statement of profit or loss – Revenue from sales and services – Revenue for postal services”
Note A6 to the financial statements as of 31 December 2019 “Financial assets attributable to BancoPosta - Fair value hierarchy of financial assets attributable to BancoPosta”
Note 7 to the financial statements as of 31 December 2019 “Risk management”
Note 15 to the financial statements as of 31 December 2019 “Other information – Use of estimates – Fair value of unquoted financial instruments”
Financial assets attributable to BancoPosta, classified in levels 2 and 3 of the fair value hierarchy were recognised for an amount of approximately Euro 366 million and Euro 71 million respectively in the financial statements as of 31 December 2019; moreover, financial liabilities attributable to BancoPosta, represented by derivative financial instruments, classified in level 2 of the fair value hierarchy were recognised for an amount of approximately Euro 5,567 million.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit conducted in accordance with International Standards on Auditing (ISA Italia), we exercised our professional judgement and maintained professional scepticism throughout the audit. Furthermore: • We identified and assessed the risks of material misstatement of the financial statements, whether due to fraud or error; we designed and performed audit procedures responsive to those risks; we obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; • We obtained an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control; • We evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors; • We concluded on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern; • We evaluated the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicated with those charged with governance, identified at an appropriate level as required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identified during our audit.
From the matters communicated with those charged with governance, we determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We described these matters in our auditor’s report.
On 14 April 2011, during the annual general meeting, the shareholders of Poste Italiane SpA appointed us to perform the statutory audit of the Company’s consolidated and separate financial statements for the years ending 31 December 2011 to 31 December 2019.
This report has been translated into English from the Italian original solely for the convenience of international readers. We have not examined the translation of the financial statements referred to in this report.
Independent auditor’s report on the consolidated non-financial statement pursuant to article 3, paragraph 10, of Legislative Decree 254/2016 and article 5 of Consob Regulation adopted with resolution no. 20267 of January 2018
Responsibility of the Directors and the Board of Statutory Auditors for the NFS
The directors are responsible for identifying the content of the NFS, within the matters mentioned in article 3, paragraph 1, of the Decree, considering the activities and characteristics of the Group and to the extent necessary to ensure an understanding of the Group’s activities, its performance, its results and related impacts.
The board of statutory auditors is responsible for overseeing, in the terms prescribed by law, compliance with the Decree.
We are independent in accordance with the principles of ethics and independence set out in the Code of Ethics for Professional Accountants published by the International Ethics Standards Board for Accountants, which are based on the fundamental principles of integrity, objectivity, competence and professional diligence, confidentiality and professional behaviour. Our audit firm adopts International Standard on Quality Control 1 (ISQC Italy 1) and, accordingly, maintains an overall quality control system which includes processes and procedures for compliance with ethical and professional principles and with applicable laws and regulations.
The procedures performed on the NFS were based on our professional judgement and consisted in interviews, primarily of company personnel responsible for the preparation of the information presented in the NFS, analyses of documents, recalculations and other procedures designed to obtain evidence considered useful.
With reference to those matters, we compared the information obtained with the information presented in the NFS and carried out the procedures described under point 4, a) below; 4. Understanding of the processes underlying the preparation, collection and management of the significant qualitative and quantitative information included in the NFS. In particular, we held
meetings and interviews with the personnel of the management units of Poste Italiane SpA and with the personnel of Postel SpA, Poste Vita SpA, BancoPosta Fondi SpA SGR and Poste Air Cargo Srl and we performed limited analyses of documentary evidence, to gather information about the processes and procedures for the collection, consolidation, processing and submission of the non-financial information to the function responsible for the preparation of the NFS.