NS Annual report 2020 See www.nsannualreport.nl for the online version The NS Annual Report 2020 is published in Dutch and English. In the event of discrepancies between the versions, the Dutch version prevails. Table of contents 3 In Brief 4 Foreword by the CEO 7 2020: A year dominated by COVID-19 15 Our strategy 19 Expected developments in the long term 21 How NS adds value to society 25 Our impact on the Netherlands 31 The profile of NS 36 Compensation for victims of WWII transports Our activities and achievements in the Netherlands 38 Our performance on the main rail network and the high-speed line 40 Customer satisfaction with the main rail network and the high-speed line 44 Performance on the main rail network and the high-speed line 49 Door-to-door journey 53 Stations and their environment 59 Travelling and working in safety 63 Performance on sustainability 71 Attractive and inclusive employer Our activities and achievements abroad 78 Abellio 84 Abellio UK 99 Abellio Germany Financial performance 108 Finance in brief NS Group 116 Report of the Supervisory Board 129 Corporate governance 134 Risk management 141 Organisational improvements 145 Dialogue with our stakeholders in the Netherlands 160 Notes to the material themes 162 About the scope of this report 164 Scope and reporting criteria Financial statements 167 Consolidated financial statements 244 Company financial statements Other information 248 Other information 248 Combined independent auditor’s report and assurance report 263 NS ten-year summary 265 Disclaimer 2 | In Brief 3 | Foreword by the CEO Over the past year, NS has proved to be a healthy company that is able to keep the Netherlands moving despite huge setbacks. Due to the COVID-19 crisis, we are facing a stiff challenge for the years ahead. However, we will continue to invest the accessibility of the Netherlands and build on the excellent results achieved in the period before COVID-19. Thanks in part to those good results, the government intends to award the main rail network franchise to NS from 2025. The pandemic hit NS extremely hard. Colleagues fell ill and while many recovered, others have died. This has caused immense grief to us all. Right from day one, however, all NS colleagues have done everything it takes to keep our trains running and provide passenger transport services, despite the considerable uncertainties in the environment in which we operate. I am grateful to them all, and we are very proud of this achievement. NS has received major blows both in an operational and a financial sense. At the low point of the crisis, we carried only 10% of the normal number of passengers and our trains, our stations and the shops at the stations were empty. By taking a host of measures at the stations and on the trains, we ensured that those who depended on the train could still travel safely. Thanks to the efforts and flexibility of all our NS colleagues, we have been able to keep the Netherlands moving throughout the year. We have worked in strong partnership with all other carriers, ProRail and the Ministry of Infrastructure and Water Management throughout the crisis. However, the pandemic is not over yet; it has merely entered a new phase. Despite the start of the vaccination programme, we are aware that it may take until 2025 at the earliest before we return to the passenger volumes seen in 2019. Uncertainties as regards the economy and passenger behaviour have increased. For example, working from home is a trend that will remain, and people will more often take their e-bike or car instead of the train. Towards financial health The loss of passengers has a major impact on our income from passenger transport and station retail activities. Without the availability payment (beschikbaarheidsvergoeding) we receive from the government, we incurred a severe loss of revenue in the Netherlands over 2020 amounting to €1.3 billion. There is no doubt that we will also need the availability payment in 2021. In order to maintain the timetable set for this year, and the new timetable for 2022 and thereafter, we will need to make new financial agreements in light of the reduced passenger numbers. Over the period up to and including 2024, the loss of income in the Netherlands could increase to approximately €4.7 billion. To regain our financial health and keep train fares affordable, NS will adapt to the new situation. We will do so by scaling down both our organisation and our investments, in view of the expected fall in passenger numbers. This should permanently reduce our costs by €250 million a year from 2024. The organisational changes entail a great deal of uncertainty for all colleagues. In consultation with, and reaching out to, the employee participation bodies, we aim to absorb most of the shock through natural wastage, by guiding our people to a new job and by offering an employment guarantee until 2025 as agreed in the new CLA. At the same time, will we continue to invest in ensuring sustainable accessibility for the Netherlands in the future, maintaining high-quality services for passengers and guaranteeing safe travel. We also urge the government to use part of the National Growth Fund resources (which total €20 billion) to strengthen the Dutch infrastructure. 4 | Safety Safe travel is our top priority. Tragically, three serious accidents happened in the past year. One of our train drivers died in a collision at an uncontrolled level crossing at Hooghalen, the Netherlands. In an accident in Scotland three people died, including two of our colleagues at Abellio ScotRail. These were shocking events for the surviving relatives, for colleagues and for the passengers who witnessed it. Railway safety and personal safety of passengers and staff will remain top priorities for us going forward. Every incident is one too many and is, and will remain, unacceptable. Unfortunately, last year the fall in passenger numbers was not accompanied by a proportional drop in the number of reported cases of aggression. There were protests in the Netherlands on 24 January 2021, including in Eindhoven, where the station building was severely damaged and shops at the station were looted – a terrible and unacceptable situation. Stations must be a safe place for our colleagues and our passengers. Regaining passengers The Netherlands is beginning to prepare for the period of recovery that will follow the COVID-19 pandemic. For NS, our first task is to get our passengers back into the train as soon as the COVID-19 measures allow. In addition, we will have to attract new passengers. A broad range of mobility options allows us to do just that, by making public transport attractive to a large group of people. Our strategy is to ensure maximum convenience for customers throughout their journey from door to door, for example by simplifying season ticket options, introducing new payment methods and facilitating the ‘first and last mile’ to and from the station. Our stations are important hubs in this strategy. By spreading passenger numbers more evenly during the day and the week, we have an opportunity to ensure optimum deployment of rolling stock while also ending super-peak congestion. Sustainable travel Our contribution to the climate policy targets and ensuring high-quality accessibility to support the housing construction challenge in the Netherlands will remain major pillars of our sustainability strategy. To secure our position as a front runner in sustainable mobility, we aim for zero-emission, circular and green growth. This philosophy also underlies our international ambitions. Together with our partners, we work to improve cross-border rail traffic, in the border regions but also on longer-distance routes to major cities in Europe. On routes of up to 700 km, rail has excellent opportunities to develop into a sustainable alternative to air travel. However, this calls for significant investments in infrastructure. One example is the direct Eurostar service from Amsterdam to London, which was launched at the end of October. We are also developing a proposal for a high-quality connection between The Hague and Aachen. We already provide high-speed links to Frankfurt, Brussels, Paris and London and are also committed to offering faster services to Berlin to connect with the further European network. As 2021 is the European Year of Rail, we intend to seize this opportunity and make a joint effort with all parties involved to move rail travel higher up the European agenda. Foreign operations The operations of our subsidiary Abellio must serve the interests of passengers in the Netherlands, by contributing to higher-quality international and regional cross-border connections and to a positive financial result. Our subsidiaries Abellio UK and Abellio Germany are likewise suffering from the COVID-19 crisis, which has resulted in financial losses due to impairments of assets and provisions for potential termination payments. In Germany, the financial consequences have remained limited as the public transport authorities compensate us for the loss of income. We expect to receive the full details of 5 | these compensatory payments from our clients in the near future. These payments are essential for us to continue our operations in Germany. Over the next few years, we expect to be able expand and improve cross-border traffic between the Netherlands and Germany, thanks to the strong position of Abellio Germany in North-Rhine Westphalia and Lower Saxony and with obvious benefits for Dutch passengers. Abellio UK is facing a different set of challenges. In response to a study into the privatised British railway system and urged by the COVID-19 pandemic, the UK government has decided to end the current fragmented franchise system.