Our financial position and results need to be sound if we are to achieve our ambitions. Investments must produce sufficient returns to ensure the company’s survival. This is also in the public interest. The development in the underlying result from operating activities is a good yardstick for assessing whether the company is able to achieve healthy returns on its business operations. The underlying result shows the result from operating activities after eliminating exceptional items.

• * The 2017 figures have been adjusted to allow proper comparison

The underlying operating result rose by €74 million in 2018 to €205 million (from €131 million in 2017). The CLE (Correction for Central London Employment) mechanism concerns our Greater Anglia franchise agreement with the Department of Transport in the United Kingdom. The aim of the CLE mechanism is to prevent external economic factors affecting passenger revenues. The mechanism assumes an association between growing employment in central London and growing passenger revenues. However, it has become clear that this association does not exist, probably because commuter travel is changing in nature and working from home is becoming more popular. This means there is a risk that Greater Anglia, like other franchises in and around London, will have to pay more to the Department of Transport for an assumed substantial increase in passengers and sales without seeing an actual increase in the number of passengers or in revenue. Efforts are currently being made to resolve the CLE issue. The outcomes currently generated by the CLE mechanism will have a significant effect on the future profitability of Greater Anglia. An appeal has been lodged against the ACM fine recorded in the income statement for 2017. The fine was paid in 2017 and charged to the income statement in 2017. Given that the outcome of the appeal proceedings is uncertain and any receivables from the ACM as a result of the outcome of the appeal do not satisfy the IFRS criterion of ‘virtually certain’, NS has not recognised any associated receivables.

ROE

The return on equity (ROE) increased to 3.0% in 2018 (1.3% in 2017). The ROE based on the underlying result rose from 2.7% in 2017 to 4.0% in 2018. In the long term, NS aims to achieve a norm return on invested capital as agreed with its shareholder, the Ministry of Finance. That norm return in combination with a sound financial position will enable NS to independently obtain the financing it needs to make its investments through the market. The return on investment achieved in 2018 is still insufficient, and the financial outlook for the longer term remains challenging given the foreseen increase in fixed costs due to the influx of new rolling stock, and the possible consequences of Brexit and the discussions with the Department of Transport about the CLE risk-sharing mechanism for the results of our Greater Anglia franchise in the United Kingdom.