• Results that are a sharp break with the recent past:
a) after three consecutive fiscal years at an operating loss, this year ends with a positive bottom line of 22 million euros;
b) the process of drawing down capital has been halted, giving net assets of 723 million euros, a substantial gain over last year (673 million);
c) the foundations have been laid for broad diversification, with a fixed financial stake in Banca MPS projected not to exceed 25% of equity, but remaining an important presence in the corporate structure, thanks also to the shareholders’ agreement entered into with Fintech and BTG Pactual.
• Significant reduction of costs
• Limited resources destined to grants, with the primary objective of safeguarding the economic and social value of the organization’s in-house projects
A sound financial basis and renewed prospects for the future
The year-end statement for the 2013 fiscal year, the nineteenth since the creation of the banking corporation, is unquestionably a watershed moment for the Foundation in the complex financial story that has characterized the last five years.
Even though the fundamental actions that have put the foundation back on a sound financial basis and renewed its prospects for the future, i.e., the sale of 31% of the capital stock in Banca MPS and complete repayment of the financial debt, occurred in the first four months of 2104, some of their effects are already evident in the year-end statement for the preceding year.
Thanks to the sale of the FRESH 2008 hybrid securities and the rechanneling of the Grant Stabilization Fund, 2013 is the first year that has ended with a gain and an increase in net equity after three years of constant operating and asset losses.
The effects of the sales of Banca MPS shares were entered, in valuational terms, in the assets column at the end of 2013, in keeping with applicable accounting principles.
In this regard, in relation to Banca MPS, it must be noted that the decisions made in the special assembly of 28 December 2013 allowed the Foundation to manage the stock sales in a profitable manner, enabling, besides the turnaround in its financial situation:
– a higher potential level of diversification of assets, with the weight of its investment in Banca MPS (after the capital increase) no higher than 25%, despite the increase from 3 to 5 billion;
– the creation of the proper context of reference for the bank to proceed with implementation of its capital increase to 5 billion euros with the necessary tranquility;
– a meaningful stake in the capital stock of the bank by means of the shareholders’ agreement entered into with share purchasers Fintech and BTG Pactual, a pact which could become a unifying pole, since it is potentially open also to other investors.
The structure of liabilities in 2013 shows significant cost-cutting in the various categories, in a process of rationalization which will manifest its full effects in the current and in future fiscal years.
In this sense, 2014 will be another year of transition, with the current accounting period influenced by the interest on first-quarter debt and the profitability of assets tied to the implementation now in progress of the process of asset allocation of the cash reserves resulting from the stock sales, for a tendential total of more than 400 million euros. Another pending question is the management of certain complex situations like the Foundation’s investments in Sansedoni and Siena Biotech.
A sound financial basis and the consequent constant grant-making ability, albeit at significantly lower levels than in the past, should become fully manifest starting in 2015.
The profit and loss statement
The Monte dei Paschi Foundation closed fiscal year 2013 with an operating gain of 21.98 million euros, its first gain since 2009 (in 2012 the operating loss was 193.7 million euros, in 2011 331.7 million, and in 2010 128.4 million).
The Foundation succeeded in achieving this result, despite the difficult international and Italian economic and financial context of 2013 and the particular situation of Banca MPS, primarily thanks to the capital gain of 62.6 million euros realized with the sale of FRESH 2008 hybrid securities (entered as one-time revenues) carried out in the final part of the year to take advantage of a sudden rise in price.
The Foundation’s final balance is characterized by a prudential approach taken in the evaluation of various items on the balance sheet: noteworthy in particular is the further write-down, compared to 2012, of the investment in Sansedoni, now valued at about 35.1 million euros as opposed to 45.6 in the last fiscal year (in 2011 its value was appraised at 117.9 million euros), as well as other, more marginal adjustments to the value of other investments and private funds.
Current revenues, amounting to about 1.05 million euros, deriving from investment of cash and cash equivalents, declined from the preceding year as a result of a lower average balance of available cash and the loss of interest from the FRESH 2008 shares (which did not pay a dividend in 2013).
Costs were greatly reduced compared to 2012 in almost all areas:
– Costs of the administrative bodies were about 40% lower than in 2012 (from 1.7 million euros to about 1 million) and 50% lower than in 2011 (2 million euros), thanks above all to the reduction in pay voted by the board. The overall cost for 2014 should be around 800,000 euros.
– Personnel costs, in light of the process of reorganization in progress, declined 30% in 2012 (from 4 million to about 2.8 million) and 51% with respect to 2011 (5.7 million euros). Personnel costs for 2014 should come in around 2.6 million euros and reach 2.2 million in 2015.
– Consultants’ fees (about 2 million euros), also considering some provisions for fees (another 1.6 million euros) charged for the sales of Banca MPS shares carried out in 2014, show a reduction of 72% over the preceding year (from about 12.8 million to 3.6 million euros);
– Interest payments declined (from 27.1 to about 22 million) as a function of the lower total debt which, as opposed to 2012, for the entire 2013 fiscal year was 350 million euros, before prepayment at the end of the year of about 11 million euros with the sale of FRESH 2008.
– Reserves and other charges also declined, while the only item moving in the other direction was amortization costs (up from 500,000 euros to about 1.9 million), resulting from the capitalized additional charges of the financing underwritten in 2011, which as a result of its repayment were completely amortized – in the residual amount – in fiscal year 2013.
It should be noted that the Foundation had to sustain as a liability, in keeping with current regulations, total charges of 1.2 million euros for taxes, including withholding taxes, value-added tax, local regional and other taxes.
The allotment of the surplus generated gave priority, on the basis of directives approved by the board, to strengthening the Foundation’s equity. To this end, the maximum allowed by current regulations was set aside as required reserves (1.8 million euros) and to cover earlier deficits (13.2 million), earmarking 400,000 euros for the volunteer sector and destining 6.6 million, as the residual gain, exclusively to the major sectors indicated in the Foundation’s programmatic statements (scientific research, art, health care, education, and economic development).
The balance sheet
In the Assets column in particular we note the transfer of the stake in Banca MPS sold in the course of 2014 from Financial Fixed Assets to Current Financial Instruments and the simultaneous valuation of the average unit sale price at € 23.52 (the equivalent of about € 1.47 when adjusted to reflect the capital increase in progress).
The “strategic” stake of 2.5% in Banca MPS (about 71 million euros, to which another 125 million will be added as a result of the capital increase in progress) remains among the Fixed Assets at a unit value of €24.33 (the equivalent of about € 1.53 when adjusted for the capital increase).
The variations in the other investments and funds reflect the write-downs mentioned above and new commitment drawdown on private equity.
At the end of 2013, cash on hand almost doubled (from about 47 to 90 million euros) as a result of the sale of FRESH 2008.
On the Liabilities side, we note the increase in net equity of about 50 million euros (from 673 million to 723), interrupting the strong downward trend that began in 2010 (the amount for 2009 was 5,572 million euros). This amount is due not only to the operating gain but also to the shift of 60 million euros to cover losses from earlier years, as part of the above-mentioned efforts to strengthen the foundation’s equity, from the Grant Stabilization Fund, which was considered excessive in view of the organization’s long-term prospects for grant distribution. These increases more than offset the capital loss resulting from the sale of Banca MPS shares.
Also noteworthy is the reduction of about 20 million euros in payables for grants (as a result of scheduled payments and the revocation of grants that had been awarded in earlier fiscal years) and of the financial debt, which at the end of 2013 went down from 350 to 339 million euros because of the prepayment effected by the sale of FRESH 2008 securities, concluded in March 2014. With the discharge of the debt, the collar implemented to hedge the risk of rate changes on the debt (which had already been restructured) was also closed out, with an expenditure of 12.7 million euros (with no impact on the 2014 profit-loss statement because fully covered by the provisions reserves).
Institutional Activity
Given the foundation’s complex financial situation, its institutional activity has focused on one side on the scheduling of payments of already-assigned grants mainly for third-party projects, and on the other on the management of its own in-house projects, with the primary aim of protecting as much as possible the investments already made and maintaining current levels of employment.
In this sense, the Foundation has severely curtailed the awarding of new grants in fiscal 2013 (13.7 million euros), funneling them mainly to its operational arms (Siena Biotech, about 10.3 million euros, and Vernice, 250,000 euros) and the foundations it finances (Accademia Musicale Chigiana and Toscana Life Sciences, which received 1 million euros each), and in the volunteer sector.
Moreover, the Foundation has provided, as a form of “non-monetary” grant, further important support to its operational arms and financed organizations and to its area of reference by making available the professional skills and experience of its employees as well as its technological infrastructures and the network of national and international relationships it has built up over the years.
The Final Accounts for fiscal 2013, including the Mission Balance Sheet, is available in the on the Foundation’s website: 2013 Year-end Statement
