Financial structure and credit rating
TNT's financial standing as at the end of 2009 was solid and based on a balanced and long term secured funding position. During 2009, TNT maintained its BBB+ S&P credit rating and maintained a one notch stronger rating at Moody's of A3, which was placed on negative outlook on 26 November 2008.
TNT has a €1.1 billion syndicated committed revolving credit facility, which also functions as 'back-stop' for redemptions under its €1 billion commercial paper programme fully undrawn. The first bond redemption is not until 2015.
At the end of 2009, net debt of the group stood at €1,106 million and free cash flow (see definition in Financial strategy) was €840 million, both particularly strong compared to 2008's €1,744 million and €683 million respectively.
The following chart shows the net debt development for the period 2005 - 2009, which includes the 2009 cash interim dividend of €34 million.
Net debt development (€ million)
Credit rating agents apply various corrections on the reported debt to determine their own 'adjusted' debt figures used for ratio analyses. The main debt corrections typically include corrections for operating leases, pensions and restricted cash. The below chart illustrates the difference between the 2008/2009 reported debt and the adjusted debt as applied by S&P.
Debt adjustments per S&P (€ million)
During 2009, TNT has been able to strengthen its financial basis by, among other things, careful management of working capital, pensions, capital expenditures and taxes paid.
S&P and Moody's publish their full credit report over 2009 only after publication of TNT's annual report.
TNT substantially improved working capital as a percentage of revenue in 2009. The prime areas of focus have been trade payables and trade receivables. As a percentage of revenue, the trade working capital improved to 8.7%, down from 9.9% in the prior year.
Improved working capital Year-on-year changes in working capital
Trade working capital as % of revenues;
As a result of the drop in the coverage ratio of TNT's largest Dutch pension fund to around 93% at 31 December 2008, well below the 105% minimum funding requirement as prescribed by De Nederlandsche Bank (DNB), TNT's largest Dutch pension fund had to submit a short term and long term recovery plan before 1 April 2009 to the DNB. The recovery plan, which was approved by the DNB in July 2009, resulted in an increased contribution by TNT, compared to the 2008 contribution level, of around €50 million in 2009. This is a significant improvement over the expected €140 million at the beginning of 2009. Based on the IFRS convention, the charge to the income statement for the defined benefit obligations in 2009 amounted to €60 million (2008: €24 million) in total. The total cash contributions for defined benefit obligations was €286 million, compared to €233 million in 2008.
By the end of 2009, the coverage ratio of the main Dutch pension fund increased to around 113%, well ahead of the recovery plan and in particular due to the recovery of the worldwide stock markets. It is expected, however, that increasing longevity, based on recent statistical studies performed by the Central Bureau of Statistics in the Netherlands, might result in a drop of around 4% in the coverage ratio as at the end of December 2009 if the main Dutch pension fund decides to apply the new mortality outlook.
Corporate responsibility is a demonstrably significant feature of TNT pension fund's investment criteria. According to analysis conducted by the VBDO (Vereniging van Beleggers voor Duurzame Ontwikkeling) published 8 December 2009, TNT's pension fund scores 3.2 out of a maximum of 5. This score puts TNT's fund in tenth-best position among 34 Dutch funds, and reflects the fund's relatively high score on key ESG criteria.
In 2009, TNT's cash taxes received were €83 million, which compares with €225 million taxes paid in 2008. The net tax cash inflow is mainly the result of TNT's reached agreement with the Dutch tax authorities in the second quarter of 2009. The received substantial tax refunds are on a preliminary basis without having reached an agreement on the final tax positions of the underlying years. As a consequence, the current income tax payable increased by €218 million from €47 million as per 31 December 2008 to €265 million as per 31 December 2009.
The proposed 2009 dividend has been set at €53 cents per ordinary share of €48 cents nominal value. After adjusting for the 2009 interim dividend of €18 cents per ordinary share as paid out partly in cash and shares in August 2009 and based on the outstanding number of 370,988,519 ordinary shares as per 31 December 2009, the final dividend will be €35 cents per ordinary share. It is proposed that, at the election of the shareholder, the final dividend will be made available in cash or in ordinary shares.
To the extent the final dividend is paid out in shares, the shares issued as stock dividend are paid up from additional paid in capital, free from withholding tax in the Netherlands. Where shareholders have opted to receive their dividend in shares, the corresponding cash value of 35 cents per share will be deducted from the profit attributable to shareholders and added to the reserves.
The final dividend represents a total value of €130 million, ignoring the premium for stock election.
An interim dividend over 2009, optional for the shareholder in cash or shares, of €18 cents per share was paid in August 2009. Approximately 50% of the dividend was paid in shares and the rest in cash, leading to a cash out of €34 million and the issuance of almost 2.0 million shares with a corresponding nominal value of €1 million for interim dividend in 2009.
TNT paid a final dividend in shares over 2008. For every 40 shares, based on the volume weighted average share prices of 11-13 February 2009 (€14.66) one share was paid, which equalled a value of €37 cents per share. Together with the interim cash dividend of 2008, the total pro forma dividend for 2008 was €71 cents per share.