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PostNL’s financial strategy is based on four pillars:

• driving business performance by using value-based performance measures,
• maintaining the right financial flexibility to support growth platforms through capital expenditures and mergers and acquisitions,
• growing its free cash flow in the medium and long term, and
• maintaining a strong and efficient capital structure, with a long-term investment grade credit rating target of BBB+/Baa1.

The primary focus will be on providing cash flow to pay out dividends to shareholders. PostNL believes that this strategy provides adequate financial flexibility, which is necessary to support the restructuring of the Dutch mail business and growth in Parcels and International.

PostNL defines free cash flow as the net cash from operating activities plus interest received, minus capital expenditure on property, plant, equipment and intangible assets, plus proceeds from sale of smaller assets.

The key components of PostNL’s financial strategy mentioned above directly relate to:

• effective risk management, internal control, and compliance,
• financial risk management and risk insurance structures,
• aligned legal and funding structures, and
• continued working capital management.

The financial strategy also directly relates to the return of excess cash from the sale of the retained shareholding of Express to shareholders and to balancing short and medium-term shareholder returns through profitable growth, dividends and incidental share repurchases or other shareholder returns from medium-term excess cash.

Capital Structure & Credit Rating

The current capital structure is based on and managed along the following components:

• maintaining an investment grade credit rating targeted at BBB+/Baa1,
• availability of €400 - €500 million of undrawn committed facilities,
• structural funding via a combination of public and bank debt, with a risk-weighted mix of fixed and floating interest,
• cash pooling systems facilitating optimised cash requirements for the Group by facilitating centralised funding and surplus cash concentration at Group level, and
• a tax-optimal internal and external funding focused on optimising the cost of capital for the Group, within long-term sustainable boundaries.

After the demerger, Mail aims to have between €400 million and €500 million of undrawn committed facilities available.

PostNL’s current long-term credit ratings are BBB+ ‘negative’ from Standard & Poor’s Ratings Services (S&P) and Baa1 ‘negative’ from Moody’s Investors Services (Moody’s). These credit ratings result from an evaluation and analysis of a variety of factors, including the financial stake of 29.9% in TNT Express, upon which S&P indicated to lower the credit rating to BBB.

PostNL manages its credit ratings along a cash flow to debt ratio and a debt to EBITDA ratio. These ratios and the ranges per ratio as indicated by the rating agencies may change over time, depending on market conditions and analytical considerations. This is illustrated by the new guidance on the key ratios for PostNL (post-demerger) as published by the rating agencies in their recent releases. An important factor in re-establishing PostNL’s targeted BBB+/Baa1 credit rating will be the ability to reduce its net debt, using part of the proceeds from the gradual sale of the retained 29.9% shareholding in Express.