Back on track. That is how Roger van Boxtel, the Chairman and CEO, described 2016 for NS. NS is back on the rails and the Executive Board is looking to the future with confidence. “We are now starting to win back passengers' confidence,” says Van Boxtel. According to him, the key to that is good performance, dedicated staff and satisfied customers. In addition, NS is making substantial investments in improvements for passengers.

Performance is going in the right direction. Almost all the performance figures for the main rail network were above the required baseline values at the end of 2016, with customer satisfaction rising to 77. “Everyone deserves a big compliment for that, given the challenges NS had to overcome in 2016 too,” says Van Boxtel, looking back. “We have responded well to these challenges and anticipated them: we have taken measures for the crowded trains, even if we haven't quite got there yet. We kept running while doing all the work, for instance at Utrecht Centraal. We are not happy about the nuisance that this creates for the passengers, but they too can see that we want to make the railways better for the future. That understanding also comes from our open way of communicating. We prefer to tell it like it is, rather than hide behind glib words. Which is something our passengers value, I have been told.”

New attitude

This new attitude is a logical outcome for NS of the strategic reorientation that was presented by NS in March 2016. NS is focusing on the passengers and on its social role. Van Boxtel says, “We are concentrating on our core activities, which will make us better at doing them and avoid us getting bogged down with things that other market parties can now do well.” The core activities are the performance on the main rail network and the HSL, world-class stations and the door-to-door journey. “What won't change is that the top priorities are passengers, passengers and passengers. But we may be making other choices. Choices that are appropriate for an enterprise that is right in the heart of society. We have taken a critical look at our role in the commercial operation of retail outlets at stations and our interests in urban and district transport, such as Qbuzz and HTM. The interests of the public are paramount, even though we have to earn money so that travelling by train can be made better in the future.”

Progress

NS made progress in all three core activities in 2016. Passengers arrived on time more often and caught their connecting trains more often. The access gates made passengers feel safer at the stations, although the number of reports of physical aggression against staff did rise. We believe that every aggressive incident is one too many. “Safety is an important matter for the Executive Board,” says Susi Zijderveld, the Risk Management director. “That includes making sure that NS employees can work safely. NS holds exercises and training regularly for this and the Executive Board carries out what are known as ‘safety walks’ at working locations throughout the country.”
More and newer public transport and bicycles were added in 2016 and splendid new stations were delivered once again, including Den Haag Centraal, Breda and Utrecht Centraal. “Genuine gifts for these cities and for our passengers,” says Zijderveld. The new stations are often part of larger-scale urban renovation projects, meaning that they help improve the quality of the public spaces and social cohesion. “That's why we also remain involved in retail at stations. Our aim is that we will increasingly have these operated through franchises, but our passengers' perceptions are the most important thing.”
The Operations Director, Marjan Rintel, says that 2016 was an important year for the services of the future. “NS started the completely redesigned, future-proof the new timetable in December, which meant to changes for almost all passengers. The introduction of the new Sprinters in December went smoothly thanks to careful preparation, among other things. The new Pitstop working method, inspired by Formula 1, ensures that trains that fail can get back into service again more quickly. The Instapzone (Boarding Zone) that we prepared in 2016 and introduced at the beginning of 2017 is how NS is progressing towards safer and faster boarding. That will in turn make it possible to run trains more frequently, which improves the chance of passengers getting a seat.” NS has introduced the customer relations programme NS Extra, through which it is aiming to bind customers closer by offering services such as a checkout alert service and special offers such as a Joint Journey Discount. In addition, the social media team is providing more and more advice to passengers, 24 hours a day and 7 days a week. Ms Rintel says, “NS staff are ready and waiting every day to serve our passengers – at the stations, on the trains, at the workshops and in the offices. It may be the conductor who has a friendly word with you as you go, the barista making you a coffee in the Kiosk or the technician who maintains the trains: their efforts all improve satisfaction levels among our customers.”

Strengths

NS has used the experiences of 2015 to improve the organisation. “We haven't been contemplating our own navels and haven’t been negative. Instead, we've turned that energy into strength and progress,” says Van Boxtel. “NS and all our colleagues have had to go through a period of grieving. We had to get things off our chest. And then we picked up the pieces together again. All our staff remain critical. They have asked for attention to be paid to keeping a second conductor on the DDZ6 and for better work packages in the new timetable. It is important for us that we always keep talking and take criticism seriously. In general, our colleagues are once again proud of this company – they are staying positive and looking towards the future.”
‘The Hague’ and the other stakeholders are seeing that energy too, he is starting to notice. “Asking for help if there is something we can't resolve is not a good feeling. We would like passengers' organisations and other carriers to help us think things through and take action together to resolve problems for the passengers. That makes discussions easier. We take our passengers' complaints and questions very seriously.”

Measures

After the irregularities in the tender in Limburg and the Fyra inquiry, integrity and compliance were emphatically present last year. The recommendations from the investigation carried out by Alvarez & Marsal provided the baseline. NS has been reorganising its processes and structures and is encouraging a culture of openness and addressability. Numerous measures are being taken to ensure compliance, guarantee a level playing field and manage the risks better. “Decisions must be carefully considered and taken by the right people throughout NS. They must be based on the correct information, so that the risks can be properly estimated,” says Susi Zijderveld, the Risk Management Director. “We have configured the processes with that in mind and we check whether what we want to do and have promised is feasible in practice.”
Although processes and procedures can keep the business operations on the right course, the credibility of NS is ultimately determined by human choices, conduct and integrity. “What NS staff have had to deal with in 2015 is painful but certainly not typical of the entire organisation,” emphasises Zijderveld. Nevertheless, recurrences must be avoided: “We are aiming high. We are working on greater awareness of the norms among all NS staff. Everyone should know what is ‘the right way’, what the rules are and what ought to be done. That is why we set up an integrity portal in 2016 that staff can turn to if they have questions or if they see something that is unacceptable. At the same time, we want our colleagues to have the freedom and security within that framework to feel they can take the initiative, be flexible and take on responsibilities. And they also have to be critical and be prepared to tackle each other – and the management – about such things.” The Executive Board must lead by example, create clarity, encourage dialogue and be open to ideas. “The Executive Board is there for the company and its staff, not vice versa.”

Abellio

Modified governance and compliance are also expected to create clearer decision-making and responsibilities at the subsidiary Abellio too. The directors of the United Kingdom and Germany will shortly be appointed as statutory directors of Abellio Transport Holding, reporting to the new NS Director of Finance, Bert Groenewegen. “As a result of the events in Limburg, the due care taken and legality of foreign bids were assessed in 2015 and no irregularities were found,” he says. “The principle is that we will not take any major risks for new franchises. We have made agreements with our shareholder about growth abroad with respect to returns, the available capital and a controlled risk profile.”
Abellio is doing well abroad. We have won several new franchises. All the franchises are profitable; only ScotRail is lagging behind the targets. Reasons for this include disappointing economic developments, industrial action about driver-controlled operations and work to improve the infrastructure. This has increased pressure from the media and political circles. As part of the NS strategy, Abellio divested its shares in HTML in 2016. The sale of Qbuzz is being prepared.

New structure at the top

A revamped strategy, a new way of working, a new culture: these are preconditions that are intended to lead to improved performance. This also includes a change to the structure of the top, defining responsibilities more clearly and treating policy themes cohesively. Henceforth, NS will be managed by a five strong Executive Board. “It's a relatively new team,” says Van Boxtel. “So it's important that you listen carefully to the people with experience and expertise.” New roles in the Executive Board are the Operations Director (Marjan Rintel), the Director of Commerce and Development (post temporarily filled by Maurice Unck; as of 1 April 2017 it will be Tjalling Smit) and the Director of Risk Management (Susi Zijderveld). “I'm also pleased that we've found a good person for the CFO position in the organisation: Bert Groenewegen. The new Operations section was a logical step in the logistical setup of the organisation for good basic performance,” explains Van Boxtel. Marjan Rintel and her team have been working on the operational integration of NedTrain and NS Reizigers. Ms Rintel says, “Our aim is to set up the organisation so that we can start the morning scheduled timetable at the right time, with the right trains in the right places – and with the right level of quality. In addition, we have decoupled the daily operations from the development of future timetables and services.” These are a natural link with market demand in the new Commerce and Development section.

Financial results

In financial terms, NS has a reasonable year under its belt. Groenewegen says, “Thanks to a positive contribution from foreign activities and one-off windfalls such as the sale of the Vastgoedfonds, among other things, we made a profit. The contribution from the main rail network in the Netherlands is not yet sufficient. The turnover of NS in the Netherlands was €3 billion and for Abellio the figure was €2.1 billion. The turnover for Abellio was lower than budgeted, primarily because of the fall of the value of sterling and lower economic growth in Scotland. The exchange rate of the British pound, partly a consequence of Brexit, has had a negative impact of €221 million on the turnover of our activities in Great Britain, as compared to 2015. But because this is balanced to some extent by expenditure in pounds sterling, the impact on the result is limited.”
Over the coming years, the main rail network franchise KPIs for 2019 as agreed with the Ministry of Infrastructure and the Environment will be the main determinant of the NS business plan. “We are investing a lot in programmes for helping realise the KPIs for the main Dutch rail network, for instance in new trains, upgrades to rolling stock and IT. These are genuine improvements for passengers. We invested €791 million in 2016 and a further €3 billion of investment is planned in the period through to 2019, largely in expansions to the rolling stock fleet.”
The income from the main rail network must be increased structurally and the costs of the indirect activities and staff offices must come down, according to the financial director. “We are busy organising tighter control mechanisms for the operational chains and tuning the internal processes better to each other, which will let us carry more passengers. We have already realised some significant improvements in that during 2016. It costs money when trains don’t run, so it’s important to get them back onto the tracks as quickly as possible.” Combined with the increased frequencies and the influx of new rolling stock, we think we will be able to handle growth in passenger numbers and perform better. In the longer term, that should lead to improvements in the results, so that NS complies with the yield norm of over 5%, as required by the shareholder.

Sustainable journeys

Major steps were taken in 2016, but Van Boxtel emphasises that NS is by no means finished. “The whole company must feel the urgency of achieving the ambitious agreements made for the interim assessment in 2019. That means improvements on all fronts, better cooperation internally and externally and in the transport chain, as well as increasing our innovation capabilities. That’s something that’s by no means always obvious for a company like NS with a long tradition. We will have to get an even better picture of what passengers want and respond to it. They must get their money’s worth.”
Achieving these goals is not something that NS does alone. Examples of this are the cooperation with the four large urban carriers, setting up the sector association OVNL and the mobility alliance that includes the ANWB and RAI. “The Netherlands is at a standstill more and more often and there’s pressure on how nice it is to live in the densely populated areas,” observes Van Boxtel. “We at NS want to grasp hold of our social role and be one of the leaders – or even one of the controlling parties – in a rapid, pleasant and sustainable door-to-door journey, made possible by good cooperation with our public transport partners. We will only be accepted in that role if we perform well and give a good example; think of our joint purchases of wind energy with our partners on the railways, for instance, so that all electric NS trains in the Netherlands will be running entirely on green power in 2017. The transition to a modern, flexible carrier takes time.”