SIA 2011 Annual Report Approved

Milan - 8 May 2012

  • In the first year of deployment of the Strategic Plan: growing revenues (€283.3 million), increased net profit (€25.7 million) and 70% of the three-year cost reduction plan already achieved
  • Growth in transactions managed (+8%), which in 2011 reached 8.1 billion, 5.2 billion relating to credit, debit and pre-paid cards (+6.6%) and 2.9 billion relating to payments and collections (+11.3%)
  • A portfolio of 63 million cards, 22.3 billion operations processed on financial markets, 11.2 thousand billion bytes of data carried on the network with 100% service levels
  • New projects launched to consolidate the presence in central European countries, development of e-payments and m-payments services at European level and the creation of innovative payment services for Corporates, P.A. bodies and Payment Institutions
  • Award of Network Service Provider status for TARGET2-Securities by ECB

The ordinary general shareholders’ meeting of SIA, convened with Carlo Tresoldi as Chairman, has approved the Annual Accounts at 31st December 2011.

Despite the ongoing economic downturn and fierce competition, in 2011 SIA achieved improved results compared to the previous year and the expectations of the 2011-2013 Strategic Plan, returning to

profitability also at Group level.

"In a difficult market scenario, we managed to achieve our goals through intensive activities also with nontraditional customers such as Corporates, and development projects abroad. For SIA, 2011 was the first year of implementation of the Strategic Plan and the objective was to consolidate the organization and lay the groundwork for future growth. We are particularly pleased, because for the first time in the last four years we have seen a reversal in revenue trends", declared Massimo Arrighetti, CEO of SIA.

The Positioning of the SIA Group

During the financial year, the SIA Group – made up of seven companies (the parent SIA, Italian companies Pi4Pay, RA Computer and TSP, SiNSYS in Belgium, SIA Central Europe in Hungary and Perago in South Africa) - confirmed its positioning as an international operator for the design, creation and management of technology infrastructures and services for Banks, Corporates, Public Administration Bodies, Central Institutions and Financial Intermediaries in the areas of payments, e-money, network services and capital markets.

The strategy for international growth was mainly pursued through the consolidation of the partnership with EBA Clearing, the agreement with Colt – which in turn allowed us to achieve the license of Network Service Provider for TARGET2-Securities - the development of new RTGS systems for management of the inter-bank wholesale payments of central banks and the re-launch of the subsidiary GBC (renamed SIA Central Europe) as SIA Group’s hub in the central European region. The services provided by the SIA Group are currently used in 40 countries in Europe, the Middle East, Africa and South America.

Financial Results

SIA closed the 2011 financial year with a growth in revenues and net profit compared to 2010.

More specifically, total revenues amounted to €283.3 million against €281.8 million in the previous year (+0.5%). Operating results rose significantly, with a profit of €25.7 million compared to a loss of €21.2 million in 2010, a figure which was heavily influenced by the devaluation of several partially-owned companies.

The value of production amounted to €292.3 million, while operating margin totaled €34.5 million.

At consolidated level, 2011 results recorded overall revenues of €333.3 million and a value of production of €348 million.

SIA Group’s results show a significant increase in operating margin, which reached €47.5 million compared to €23.2 million in 2010.

Growth was also recorded in the net profit, equal to €21.7 million against a loss of €9.1 million in 2010.

This improvement was mainly due to a cut (over 9%) in production costs, now amounting to €300.5 million, thanks to the progressive implementation of the reorganization plan involving the Group companies.

Business Trend

In 2011, the Group managed a total of 8.1 billion transactions (+8% compared to 2010), 5.2 billion of

which were made with debit, credit and pre-paid cards (+6.6%) and 2.9 billion relating to

payments and collections (+11.3%).

The number of operations managed (proposals and orders) on financial markets jumped to 22.3 billion

from 9.2 billion in 2010, an increase of over 140%.

SIA managed network traffic equal to 11.2 terabytes of data (11.2 thousand billion bytes), with total infrastructure availability and service levels of 100% on an annual basis.

Financial Institutions

In relation to Financial Institutions, in 2011 payment services registered significant increases in the number of transactions, the revenues of which were partially offset by a reduction in margins due to a constant competitive pressure.

Total transactions relating to payments systems and cards overtook the 7 billion mark with an increase of around 5.6% compared to 2010.

The SIA Group has confirmed its position as the only European processor capable of managing centrally on a single technology infrastructure around 63 million payment cards with international brands and almost one million merchants, providing issuing and acquiring services in 12 countries.

The trend of domestic collection and payment transactions showed a slight growth in credit transfers (+2.7% on 2010) and retail collections (+4.4%) due to the fact that the migration towards SEPA instruments is happening more slowly compared to other European countries. There was also a decrease in check volumes (-3.9%), confirming the reduced use of this payment instrument in favor of electronic instruments such as credit transfers and credit and debit cards.

SIA has also continued to develop innovative services, defining a competitive portfolio of offerings.

As far as m-payments are concerned, new projects were started up in the sectors of mobile remote payments, P2P money transfers, and proximity payments through NFC technology.

In the area of e-payments, the company is also developing competitive services for access to MyBank, the pan-European initiative of EBA Clearing for online purchases through home banking applications.

Central Institutions

With regard to Central Institutions, in 2011 the SIA Group consolidated its strategic position in the areas of clearing and settlement of payments by ACHs (Automated Clearing Houses) and central banks, post-trading (Monte Titoli), fixed income trading (MTS) and in the surveillance and risk management activities of interbank Supervisory Authorities and Associations.

Worthy of mention is the growth in transaction volumes (+24%) on the pan-European Technology Platform STEP2 managed by SIA on behalf of EBA Clearing. Over 440 million SEPA transactions were processed, with an increase compared to 2010 amounting to approximately 150%. The daily peak, with over 4 million transactions, was reached in December.

In 2011, 22.3 billion transactions were processed on financial markets, +140% compared to 2010.

MTS services in 2011 reached an increased total volume of 21.2 billion operations managed while Monte Titoli transactions were 1.1 billion, also showing an increase compared to 2010.

With regard to Central Banks, special mention should be made of the successful launch of a new technology infrastructure for the interbank payments of the Palestine Monetary Authority (PMA), created by the SIA Group through its Perago subsidiary. Thanks to the innovative multi-currency functions, this is the first platform at global level capable of managing simultaneously the four different currencies now legally recognized in Palestine (Euro, U.S. Dollar, Israeli Shekel and Jordanian Dinar). The implementation project of the RTGS, clearing and Government Payment systems for the Banque du Liban also continued.

Corporates & Public Administration

During the 2011 fiscal year, the SIA Group distinguished itself through its capacity for innovation and flexibility of technology solutions for Corporates and Public Administration bodies, leading to accessible services for citizens through an ever-wider acceptance network.

As of 1st July, Pi4Pay is among the first operators in the domestic market to be awarded the authorization to become a Payment Institution by Banca d’Italia. The SIA Group companies have concentrated the exchange of information and financial flows of transactions on a variety of consumer channels (such as ATMs, Web banking services, the tobacconist network). At the end of 2011, there were 18 banking groups using the services of Pi4Pay with a total volume of over 12 million operations.

Constant growth (+ 25%) was seen in the volumes handled in 2011 by the multi-channel and multiservice gateway of the subsidiary TSP, which have surpassed 146 million operations relating to reloads of private and bank prepaid products and travel documents, activation of gift-cards and payment of utility bills, fines, and taxes at over 187 thousand acceptance points (small and large retail outlets, ATMs etc.).

For the Large Corporates sector, the first integrated solutions were developed to manage authorization and reconciliation processes of SEPA-compliant payments. Two important projects were launched with a leading Telco operator for the issuing of co-branded prepaid cards and the installation of terminals with NFC (Near Field Communication) technology that, in addition to "tap & go" payments, allow immediate identification of customers at POS terminals and self-service kiosks.

In the Petrol sector, Fuel Card-related services have increased significantly due to the volumes generated by new prepaid products, such as the Electronic Fuel Voucher, developed in collaboration with major national operators.

In the Retail sector, the Group confirmed its leadership in the transaction processing of virtual products (for example, e-vouchers) and payment of utility bills.

The growing popularity of the Fastpay service for the payment of parking fees in major Italian cities was evident. Also being monitored closely is the development of mobile payment solutions based on NFC technology in collaboration with leading telephone operators, card issuers and local public transport companies.

For Payment Institutions, the new non-banking bodies introduced by the PSD (Payment Services Directive), SIA has developed a specific integrated platform to manage accounts, collections and payments in line with the directives of supervisory bodies.

For the Public Administration sector, SIA Group has supported the search for new standards to facilitate the interconnection and operations of P.A. bodies, banks and Corporates. At local Public Administration level, the Rome City Council project was further developed, a scheme which allows citizens to be offered new multichannel methods to pay for charges, fees and taxes through the most widespread banking and retail networks.

Network Services

As far as the SIAnet network - the multi-service, broadband infrastructure - is concerned, currently there are 574 active nodes (of which around 20% abroad) and the number of the most advanced devices, with high band capacity and low latency, has doubled. In addition, in 2011 SIAnet managed over half a billion sent messages.

To be highlighted is the high service level achieved on all network services, a level which for the second consecutive year recorded a 100% figure on an annual basis. The full availability of the network infrastructure in support of SIA services was thus assured 24/7, all year round.

SIA confirmed its position as the leading Italian provider of connectivity and messaging services for the banking and financial system and among the leaders in Europe.

This role was consolidated at European level when the company won the tender issued by the European Central Bank for the design, implementation and management of the new network infrastructure that will connect to TARGET2-Securities central depositories, central banks in the Eurosystem and the major banking groups in Europe.

The license awarded to SIA represents one of the most important achievements for the development of messaging and connectivity services in Europe.

The product portfolio of network services has been strengthened with the introduction of new connectivity services for banks and Corporates.

In response to the requirement by financial intermediaries to access the largest possible number of international stock markets through a single network infrastructure and achieve greater cost synergies and high service levels, SIA has consolidated its "Financial Ring" (with hubs in Milan and London), that today allows access to 14 European stock exchanges operating in the UK, Italy, France and Germany.

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