Financial results

Another negative underlying result from operating activities

Below, we present the income statement plus explanatory notes, up to the result from operating activities, differentiating between our activities in the Netherlands and those in Germany. In the income statement, revenue and expenses were adjusted for government compensation provided to help us continue the timetable when there were significantly fewer passengers and other non-recurring and exceptional accounting items such as HRN franchise impairments, and were then reconciled to the result from operating activities as reported in the financial statements.

The result from operating activities amounts to -€540 million (2022: €391 million). However, this result is heavily influenced by non-recurring and exceptional accounting items. This is why the development of the underlying result from operating activities is a more reliable measure of our financial performance. The underlying result from operating activities reflects the result from operating activities net of non-recurring and exceptional accounting items and amounted to -€191 million in 2023 (2022: -€421 million). While less negative than in previous years since the outbreak of COVID-19, the result remains far too low.

The following chart shows the changes in the underlying result from operating activities in the period 2019–2023, in millions of euros.

An important note on the underlying result from operating activities is that, to better reflect current IT developments, NS has changed the way it works within the IT domain. Since 2022, this has reduced the amount of IT expenditure that can be capitalised. This has temporarily led to higher costs (estimate for 2023: €120 million, 2022: €117 million) compared with previous years, but due to lower depreciation, the cumulative effect of this change on the result will fall to zero in the next few years.

Passenger numbers after the COVID-19 pandemic

NS was granted compensation by the Dutch government over the period 2021–2023 to continue the timetable as fully as possible while passenger numbers were significantly lower than before the start of the COVID-19 pandemic. In 2023, this compensation (TVOV) was recognised in the amount of €45 million. An adjustment to the 2022 BVOV of €14 million has also been recognised. The State Secretary for Infrastructure and Water Management imposed a financial measure on NS, in the form of a €1.5 million fine, for its decision to scale down the timetable in the second half of 2022. A provision was made for the fine at year-end 2023. NS is required to use the amount for the benefit of passengers. NS has drawn up a plan for this and will report on it following implementation.

Ordinary revenue in the Netherlands from passenger transport increased by 22% to €2.887 billion (2022: €2.362 billion) and revenue from Stations increased to €483 million (2022: €437 million). The increase is mainly due to the fact that 2023 was the first full year without COVID-19 measures, which were still in force in 2022 (until February of that year). The number of passenger kilometres in 2023 was 89% of the figure for 2019, the last year before the COVID-19 crisis (2022: 76%). This appears to be the new normal in terms of passenger numbers since COVID-19. Now that working from home has become commonplace, passenger numbers, especially for commuters, remain behind 2019 levels.

Inflation

The inflation rate in the Netherlands for 2023 was 3.8%. Over the same period, we increased the price of most train tickets and season tickets by an average of 4.3%. This slightly reduced the ‘indexation gap’ incurred over the period 2021–2022, from 9.4% to 8.9%. The indexation gap widened sharply in 2021–2022 as inflation significantly outpaced the increase in the price of train tickets and season tickets.

Adjusted for non-recurring items, operating expenses in the Netherlands increased by approximately 10% to €3.545 billion (2022: €3.217 billion). Personnel expenses, which account for almost half of operating expenses, rose to €1.587 billion (2022: €1.412 billion) due to the filling of the many vacancies, especially among onboard staff, that were still open at the end of 2022 (the average staffing level increased by 930 FTEs), in addition to the increase in wages in the collective labour agreement (5% on 1 July 2022 and 3.45% on 1 January 2023). In addition, the recognised franchise fee and high-speed line fee payable to the Ministry of Infrastructure and Water Management increased to €192 million (2022: €172 million) and the infrastructure fee payable to ProRail increased to €271 million (2022: €249 million). Finally, 2023 saw sharply rising energy prices in relation to stations, workshops and offices, with energy costs rising to €25 million (2022: €9 million). As regards traction energy for its rolling stock at €108 million (2022: €102 million), NS had limited exposure to the sharp rise in market prices. This limited increase in spite of the significantly higher energy prices is due to a hedging strategy under which we purchased much of the required traction electricity for the period up to 2024. From 2025, the cost of traction electricity will be sharply higher.

HRN franchise impairment

In December 2023, the Ministry of Infrastructure and Water Management awarded NS the main rail network (HRN) franchise for 2025–2033. This award, combined with the adjusted outlook regarding passenger development and increased interest rates, necessitated a reassessment of the HRN franchise impairment. This reassessment of the HRN franchise agreement up to 2033 resulted in an HRN franchise impairment on non-current assets of €402 million. This impairment is mainly due to the limited earning capacity of the new HRN franchise for the period 2025–2033 compared with the market return. Together with the lower depreciation due to the HRN franchise impairment recognised in 2020, which NS had to recognise due to the impact of the COVID-19 pandemic on NS, the combined net effect of the HRN franchise impairment amounts to -€318 million. The HRN franchise impairment does not generate any cash flows.

Limited negative operating result in Germany

The situation in Germany is challenging. Many fines are being imposed for train cancellations and low punctuality. To a large extent, this poor operational performance is caused by infrastructure outages and extensive trackwork. Abellio is only partly compensated for these fines. Staff shortages and a high sickness absence rate also cause train cancellations and thus keep Abellio from running a full schedule.

The result from operating activities in Germany before non-recurring and exceptional accounting items is -€5 million (2022: -€2 million). Due to the restructuring operation in Germany, the results for 2023 and 2022 cannot be compared because NS regained control over the various companies during 2022, and they were therefore not recognised for the whole of 2022. The expected future results have been revised downwards. This is partly due to higher penalties for train cancellations and low punctuality resulting from large-scale infrastructure work. Sharply increased costs due to inflation and increased energy prices, for which only partial compensation is provided, will also negatively affect future results. Finally, future results have also been negatively affected by the reduction of the working week from 38 to 35 hours as a result of the new collective labour agreement for train staff, for which NS will not be compensated. Due to the sharp downward revision of the expected results for the current franchises up to 2030, an asset impairment of €121 million was recognised. Including this impairment, and various other exceptional items with a net positive effect of €13 million, the result from operating activities is -€114 million (2022: €2 million).

Provisions made in 2021 for restructuring and write-downs have been partially released. This involves an amount of €74 million (2022: €77 million), most of which is recognised under finance income. This follows an agreement with creditors and the trustee in relation to the insolvency proceedings of the holding company Abellio GmbH. The final insolvency plan is yet to be determined and approved by creditors and the court.

Net loss

The second part of the income statement is presented below.

The result from discontinued operations relates to Abellio in the UK. In 2018, NS changed its foreign strategy, deciding that foreign activities should always contribute to the interests of Dutch passengers. Due to the considerable uncertainties in the UK railway market and the impact of COVID-19 on passenger numbers, the exit from the UK market took a long time. In August 2022, NS agreed that Abellio UK would be sold to its UK management. Following approval by the commissioning parties in the UK, including the Department for Transport, and various agencies, the sale process was completed on 28 February 2023. This means that the focus of NS is now mainly on Dutch passengers, in both the domestic and international context. The net effect on the result of the discontinued operations for the first two months was €10 million.

Thanks to the result from operating activities and the exceptional items it includes, in combination with the above, NS is reporting a net loss of -€380 million (2022: €574 million profit).