United Utilities
Group PLC
Annual Report and Financial Statements
for the year ended 31 March 2022
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Contents
Business overview
A snapshot of our report
Chair and Chief Executive
Officer's review
2021/22 highlights
Our approach as a responsible business
Reporting methodology
Strategic report
Our purpose, vision, strategy,
values and culture
How we operate
Our business model
– Our key resources
– Our external drivers
– S172(1) Statement
– Our approach
– Our planning horizons
– The value we generate
Our performance in 2021/22
Alignment to wider goals
Our approach to climate change
Our approach to Task Force on Nature-
related Financial Disclosures (TNFD)
Our risk management
Governance
Corporate governance report
– Board of directors
– Letter from the Chair
– Nomination committee report
– Audit committee report
– Treasury committee report
– Corporate responsibility
committee report
– Remuneration committee report
– Tax policies and objectives
Directors’ report
Statement of directors’ responsibilities
Financial statements
Independent auditor’s report
to the members of United Utilities
Group PLC only
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated and company
statements of financial position
Consolidated statement of changes
in equity
Company statement of changes in equity
Consolidated and company
statements of cash flows
Guide to detailed financial statements
disclosures
Accounting policies
Notes to the financial statements
Notes to the financial statements –
appendices
Five-year summary – unaudited
Shareholder information
02
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Look out for our key icons throughout this report
Our strategic themes
The best service to customers
At the lowest sustainable cost
In a responsible manner
Read more about our strategic themes on pages 16 to 17
Our strategy is broken down into these three themes, which form
the framework through which we provide great water and more for
the North West.
Key stakeholders for whom we generate value
Communities
Customers
Customers
Employees
Environment
Communities
Customers
Employees
Environment
Shareholders
Media
Environment
Investors
Suppliers
Read more about our stakeholders on pages 29 to 33
There are six key stakeholder groups for whom we create long-term
value and it is essential we understand what matters most to them.
Keep in touch with us
Visit our corporate website at unitedutilities.com/corporate
twitter.com/unitedutilities
youtube.com/user/unitedutilities
linkedin.com/company/united-utilities/posts
unitedutilities.com/corporate
Contents
Business overview
A snapshot of our report
Chair and Chief Executive
Officer's review
2021/22 highlights
Our approach as a responsible business
Reporting methodology
Strategic report
Our purpose, vision, strategy,
values and culture
How we operate
Our business model
– Our key resources
– Our external drivers
– S172(1) Statement
– Our approach
– Our planning horizons
– The value we generate
Our performance in 2021/22
Alignment to wider goals
Our approach to climate change
Our approach to Task Force on Nature-
related Financial Disclosures (TNFD)
Our risk management
Governance
Corporate governance report
– Board of directors
– Letter from the Chair
– Nomination committee report
– Audit committee report
– Treasury committee report
– Corporate responsibility
committee report
– Remuneration committee report
– Tax policies and objectives
Directors’ report
Statement of directors’ responsibilities
Financial statements
Independent auditor’s report
to the members of United Utilities
Group PLC only
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated and company
statements of financial position
Consolidated statement of changes
in equity
Company statement of changes in equity
Consolidated and company
statements of cash flows
Guide to detailed financial statements
disclosures
Accounting policies
Notes to the financial statements
Notes to the financial statements –
appendices
Five-year summary – unaudited
Shareholder information
02
04
08
12
13
16
18
20
24
26
40
42
46
50
52
84
86
98
100
112
116
130
143
155
156
160
192
194
198
202
210
211
212
213
214
215
216
217
220
237
263
264
Look out for our key icons throughout this report
Our strategic themes
The best service to customers
At the lowest sustainable cost
In a responsible manner
Read more about our strategic themes on pages 16 to 17
Our strategy is broken down into these three themes, which form
the framework through which we provide great water and more for
the North West.
Key stakeholders for whom we generate value
Communities
Environment
Communities
Customers
Customers
Employees
Environment
Customers
Employees
Environment
Shareholders
Media
Investors
Suppliers
Read more about our stakeholders on pages 29 to 33
There are six key stakeholder groups for whom we create long-term
value and it is essential we understand what matters most to them.
Welcome to our
Annual Report 2022
Our purpose is to
provide great water
and more for the
North West.
As the water and wastewater
service provider for the North
West region of England, our
purpose is why we exist and
it drives us to focus on what
matters to our stakeholders.
Our approach to reporting
Being open, honest and transparent in our reporting is key
to building trust and confidence in what we do.
Read more about our approach as a responsible business
on pages 12 to 13
We’re committed to being
a responsible business.
We are in a unique position to make a real,
positive contribution to society. We have proven
to be resilient over the past year and will continue
to rise to the challenges that lie ahead, playing our
part in contributing to a sustainable water future.
Our purpose drives us to deliver ‘more’ for our stakeholders,
which means creating value by understanding what matters
to them through strong and constructive relationships.
We do this by:
•
supporting communities to be stronger;
• caring for customers through trusted relationships;
• protecting and enhancing the environment;
• creating a great place to work for all our employees;
• delivering a sustainable return to investors; and
•
innovating in partnership with suppliers.
Keep in touch with us
Visit our corporate website at unitedutilities.com/corporate
twitter.com/unitedutilities
youtube.com/user/unitedutilities
linkedin.com/company/united-utilities/posts
See our report online
Use the link below or scan the QR code to view our online
report and download the full annual report and financial
statements.
Our annual performance report
We report our regulatory performance in a format that helps
customers and other stakeholders understand it and compare
it with other companies in the sector.
unitedutilities.com/corporate
Stock Code: UU.
Visit our online report at unitedutilities.annualreport2022.com
`Read our annual performance report at unitedutilities.com/
corporate/about-us/performance/annual-performance-report
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A snapshot of our report
Highlights of our annual report and financial statements.
As well as the usual overview of how we operate, our performance in the year to
31 March 2022, and a section in line with the Task Force on Climate-related Financial
Disclosures (TCFD) guidance, this year’s report includes a new section in line with the
Task Force on Nature-related Financial Disclosures (TNFD) guidance on pages 98 to
99. Several business insight case studies are included to help bring to life some of the
ways we are delivering long-term value for stakeholders.
OUR PURPOSE,
VISION, STRATEGY,
VALUES AND
CULTURE
16
Through our purpose,
vision and strategic themes,
responsible business is a
core part of who we are as
a business and has been for
many years.
WHAT
MATTERS MOST
34
OUR APPROACH TO
CLIMATE CHANGE
86
We actively engage with stakeholders to
understand what matters most to them
through strong, open and constructive
relationships.
We plan for the long term to ensure our activities,
investment and innovation enhance the long-term
resilience of the environment for future generations.
02
unitedutilities.com/corporate
A snapshot of our report
Highlights of our annual report and financial statements.
As well as the usual overview of how we operate, our performance in the year to
31 March 2022, and a section in line with the Task Force on Climate-related Financial
Disclosures (TCFD) guidance, this year’s report includes a new section in line with the
Task Force on Nature-related Financial Disclosures (TNFD) guidance on pages 98 to
99. Several business insight case studies are included to help bring to life some of the
ways we are delivering long-term value for stakeholders.
OUR PURPOSE,
VISION, STRATEGY,
VALUES AND
CULTURE
16
OUR PERFORMANCE
IN 2021/22
52
To measure how we are
delivering our purpose,
we monitor operational
performance for each
stakeholder group,
as well as financial
performance.
Through our purpose,
vision and strategic themes,
responsible business is a
core part of who we are as
a business and has been for
many years.
Our value chain
outlines our key
resources and how
we respond to
challenges and plan
for the future to
deliver value to our
stakeholders.
OUR BUSINESS
MODEL
20
WHAT
MATTERS MOST
34
OUR APPROACH TO
CLIMATE CHANGE
86
We actively engage with stakeholders to
We plan for the long term to ensure our activities,
understand what matters most to them
investment and innovation enhance the long-term
through strong, open and constructive
resilience of the environment for future generations.
relationships.
OUR RISK
MANAGEMENT
100
02
unitedutilities.com/corporate
Stock Code: UU.
CORPORATE
GOVERNANCE REPORT
112
Behaving in a responsible manner is one
of our core values and is crucial to the
long-term success of our business.
Successful management of risks and
uncertainties, as well as seizing new
opportunities that arise, enables us to
deliver our purpose to provide great
water and more for the North West.
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Chair and Chief Executive Officer’s review
Our team has sustained a strong level of operational
performance this year, delivering value for all our
stakeholders. Customer satisfaction and employee
engagement remain high, and we have achieved our
best ever performance against customer outcome
delivery incentives (ODIs). We are on track to deliver
our environmental improvement programme for the
2020–25 regulatory period (AMP7), which will improve
river and bathing water quality in the North West, and
have made good progress against our carbon pledges.
We are upper quartile across a suite of environmental,
social and governance (ESG) indices, and our robust
balance sheet provides long-term financial resilience.
Helping customers struggling with bills
Many people across the country are facing real
challenges as we emerge from a global pandemic and
are faced with significant rises in the cost of living. We
serve many of the most deprived areas in England and
Wales, so it is more important than ever that we are
doing what we can to help customers.
Our average household bill for 2022/23 is not
increasing, and we are offering more support than ever
before through our extensive range of affordability
and vulnerability schemes, helping over 200,000
households this year and providing around
£280 million(1) of affordability support over AMP7.
There is still more we would like to be able to do,
and we are a passionate supporter of the Consumer
Council for Water’s drive to introduce a national social
tariff, which would help deliver a more equitable
sharing of support for customers struggling to pay
their bill regardless of where they live in the country.
Sustained high levels of operational and
environmental performance
We were a sector-leading company on outcome
delivery in Ofwat’s Service Delivery Report for 2020/21,
with nine of 11 outcomes(2) being at or better than
target, and were recognised as a top performer on
supply interruptions and pollution incidents – two
areas where we are now seeing the benefits of
targeted investment we made in AMP6. On the two
outcomes(2) where our performance was poorer than
target we have plans in place to improve this.
Our customer ODI performance has been strong
across the board this year, meeting or beating over
80 per cent of our performance commitments. Based
on our anticipated reward this year, we will have
earned rewards in both the first two years of AMP7
against Ofwat’s customer satisfaction measure,
C-MeX, and we have achieved our lowest ever level of
written complaints this year.
We were pleased to achieve a 4 star rating in the
2020 Environmental Performance Assessment from
the Environment Agency (EA), meaning we were
categorised as an industry-leading company in the
most recent annual assessment by the EA, taking
into account performance across a broad range of
environmental metrics. It reflected our best ever
performance, and we were the first water company to
achieve green status across all measures since 2015.
We continue to be at the sector frontier on pollution
performance, having reduced overall pollution by a
third since the start of the AMP. Our treatment works
compliance remains strong and we expect to remain
green on this measure in the EA’s assessment for 2021.
Sir David Higgins
Chair
Steve Mogford
Chief Executive
Officer
We are helping over 200,000
households currently struggling with
their bills, and maintaining a high level
of service for customers.
We are earning higher outperformance
thanks to strong operational
performance against customer
outcome delivery incentives as well as
financial outperformance.
As a responsible company, we are
sharing our success with customers,
like we did in 2010–20, by investing
an additional £765 million to help
accelerate further enhancements for
customers and the environment.
(1) 50 per cent company funded.
(2) Excluding per capita consumption, which Ofwat will
be revisiting at the next price review once there is
a better understanding of the impact of COVID-19
and any enduring effects.
(3) On a real, RPI/CPIH blended basis.
04
unitedutilities.com/corporate
Chair and Chief Executive Officer’s review
Our team has sustained a strong level of operational
performance this year, delivering value for all our
stakeholders. Customer satisfaction and employee
engagement remain high, and we have achieved our
best ever performance against customer outcome
delivery incentives (ODIs). We are on track to deliver
our environmental improvement programme for the
2020–25 regulatory period (AMP7), which will improve
river and bathing water quality in the North West, and
have made good progress against our carbon pledges.
We are upper quartile across a suite of environmental,
social and governance (ESG) indices, and our robust
balance sheet provides long-term financial resilience.
Helping customers struggling with bills
Many people across the country are facing real
challenges as we emerge from a global pandemic and
are faced with significant rises in the cost of living. We
serve many of the most deprived areas in England and
Wales, so it is more important than ever that we are
doing what we can to help customers.
Our average household bill for 2022/23 is not
increasing, and we are offering more support than ever
before through our extensive range of affordability
and vulnerability schemes, helping over 200,000
households this year and providing around
£280 million(1) of affordability support over AMP7.
There is still more we would like to be able to do,
and we are a passionate supporter of the Consumer
Council for Water’s drive to introduce a national social
tariff, which would help deliver a more equitable
sharing of support for customers struggling to pay
their bill regardless of where they live in the country.
Sustained high levels of operational and
environmental performance
We were a sector-leading company on outcome
delivery in Ofwat’s Service Delivery Report for 2020/21,
with nine of 11 outcomes(2) being at or better than
target, and were recognised as a top performer on
supply interruptions and pollution incidents – two
areas where we are now seeing the benefits of
targeted investment we made in AMP6. On the two
outcomes(2) where our performance was poorer than
target we have plans in place to improve this.
Our customer ODI performance has been strong
across the board this year, meeting or beating over
80 per cent of our performance commitments. Based
on our anticipated reward this year, we will have
earned rewards in both the first two years of AMP7
against Ofwat’s customer satisfaction measure,
C-MeX, and we have achieved our lowest ever level of
written complaints this year.
We were pleased to achieve a 4 star rating in the
2020 Environmental Performance Assessment from
the Environment Agency (EA), meaning we were
categorised as an industry-leading company in the
most recent annual assessment by the EA, taking
into account performance across a broad range of
environmental metrics. It reflected our best ever
performance, and we were the first water company to
achieve green status across all measures since 2015.
We continue to be at the sector frontier on pollution
performance, having reduced overall pollution by a
third since the start of the AMP. Our treatment works
compliance remains strong and we expect to remain
green on this measure in the EA’s assessment for 2021.
Performance improvements earning
outperformance
We earned a reported return on regulated equity
(RoRE) of 7.9 per cent for 2021/22(3), driven by our
continued improvements in operational performance
together with high levels of inflation, which increases
financing outperformance, and tax outperformance.
Underlying RoRE is slightly lower at 7.7 per cent, and
excludes the tax that will be recovered through the
regulatory sharing mechanism.
Cumulative RoRE for the first two years of AMP7 is 6.2
per cent on both a reported and underlying basis.
Our strong performance this year earned a £25 million
reward against customer ODIs(2), the highest annual
reward we have achieved to date. We anticipate
earning total customer ODI rewards over AMP7 of
£200 million, a third higher than we estimated in last
year’s report.
We consistently issue debt at efficient rates, and we
earned financing outperformance of 1.6 per cent of
regulated equity this year. We also performed strongly
on tax as a result of optimising government tax
incentives. The economic environment as we emerge
from a global pandemic, as well as the war in Ukraine,
has driven higher costs in our supply chain and we are
starting to see significant cost increases in power and
chemicals. We continue to seek efficiencies and exploit
technology and innovation to help us deliver our total
expenditure (totex) efficiently.
Sharing our success with customers
As a responsible company it is right that we should
share our success with customers, and we feel the
best way for us to create more value for customers and
other stakeholders is through investing to accelerate
improvements in performance. This is in line with the
approach we have taken historically, sharing over
£600 million over the 2010–20 period.
We have increased the investment we are making by a
further £400 million meaning that, over the 2020–25
period, we are investing £765 million beyond the
scope of our final determination allowance to help us
accelerate environmental and customer outcomes.
Investing to improve service for customers
£250 million of the additional investment is helping us
deliver further improvements to service for customers
and better performance against our customer ODIs.
As mentioned above, our performance has been strong
across the majority of our customer outcomes, but
this investment is targeted at delivering sustainable
improvements for customers in two specific areas
where we want to do better – sewer flooding and
water quality (specifically discolouration).
It includes investment in Dynamic Network
Management (DNM), an advancement of Systems
Thinking in our wastewater network that will help us
reduce sewer flooding and pollution incidents using
real-time performance data from a network of sensors
to enable predictive and preventative optimisation.
Investing outperformance for environmental
improvements
A further £250 million of the additional investment is
being used to deliver environmental outcomes. This
includes delivering elements of the new Environment
Act requirements earlier, and improving the health of
rivers across the North West.
In July 2021, we launched a collaborative partnership
with The Rivers Trust, a first for any water company
in the United Kingdom. To help kickstart a river
revival in the North West we published ‘Better Rivers:
Better North West’, our plan to improve the health of
rivers across our region in the next three years. We
are delivering improvements that support at least
a one-third sustainable reduction in the number of
spills recorded from our storm overflows between
2020 and 2025, with all storm overflows monitored
by 2023 and real-time data on their operation made
publicly available. Our plans will lead to 184 kilometres
of improved waterways across the region. We also
continue to engage with the ongoing industry-wide
investigations by Ofwat and the EA into possible
unpermitted sewage discharges.
The remaining £265 million of the £765 million of
additional investment is for projects where regulatory
allowances and mechanisms have been secured, much
of which will deliver further environmental benefits.
For example, around £90 million will fund a project
in Bolton that is part of our Water Industry National
Environment Programme (WINEP), and £65 million will
go towards supporting the country’s green economic
recovery in the wake of the pandemic.
Long-term investment needs for the
environment
Protecting and enhancing the natural environment
has always been a key priority for us and many of our
stakeholders. In the last 12 months this has received
increased public interest, particularly the health of
rivers and the part the water industry can play in
helping to improve this.
New and emerging requirements reflect the increased
importance being given by the Government to the
environmental agenda and we share the Government’s
ambitious improvement plans.
Read more about
our £765 million
investment on
page 71
Read more
about Dynamic
Network
Management on
page 43
Read more about
our Better Rivers:
Better North
West plan on
page 67
£280m
£765m
affordability support being
provided over 2020–25,
helping 200,000 households
in the North West
additional investment
being made over 2020–25
to deliver customer and
environmental improvements
£25m
net reward earned this year
against customer ODIs(1),
the highest we have
achieved in any year to date
Sir David Higgins
Chair
Steve Mogford
Chief Executive
Officer
We are helping over 200,000
households currently struggling with
their bills, and maintaining a high level
of service for customers.
We are earning higher outperformance
thanks to strong operational
performance against customer
outcome delivery incentives as well as
financial outperformance.
As a responsible company, we are
sharing our success with customers,
like we did in 2010–20, by investing
an additional £765 million to help
accelerate further enhancements for
customers and the environment.
(1) 50 per cent company funded.
(2) Excluding per capita consumption, which Ofwat will
be revisiting at the next price review once there is
a better understanding of the impact of COVID-19
and any enduring effects.
(3) On a real, RPI/CPIH blended basis.
04
unitedutilities.com/corporate
Stock Code: UU.
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Chair and Chief Executive Officer’s review
The North West is home
to some beautiful natural
landscapes and we take our
role in protecting them very
seriously. We have published
our plan to help improve the
health of our rivers over the
next three years.”
Read our TCFD
and TNFD
disclosures on
pages 86 to 99
Read more about
our financial risk
management
policies on pages
242 to 249
Read more about
our approach
to diversity and
inclusion on
pages 44 to 45
* The dividend
increase is based
on the CPIH
element included
within allowed
regulated revenue
for the 2021/22
financial year (i.e.
the movement in
CPIH between
November 2019
and November
2020).
The Environment Act 2021 introduces several new
challenges for the sector, including a requirement
for water companies to secure a progressive but
very substantial reduction in the average number of
spills from storm overflows, and controlling nutrient
pollution by reducing phosphate release from
wastewater treatment works. The Industrial Emissions
Directive broadens the scope of activities covered
by compliance requirements, and the EA’s recent
interpretation of Farming Rules for Water restricts
the application of biosolids to land in certain areas
at certain times, requiring more storage capacity or
alternative means of disposal.
We have delivered significant improvements in
environmental performance in recent years, and
through our original plans for AMP7 we will deliver
further improvements, with good progress already
having been made. The additional investment we are
making will help accelerate improvements, but there is
more that the industry will need to do.
Specific targets for the next regulatory period have
not yet been agreed, but it is already clear that there
is an ambition to deliver a fundamental change in
the way drainage network systems were originally
configured. The investment needed to deliver these
changes will be significant for the industry as a whole,
but particularly for the North West, where we have
a much higher proportion of combined sewers. We
are working with the Government and regulators to
determine how these bold ambitions can be met and
by when, recognising that the pace of change must
consider customer affordability.
Resilience to climate change and population growth
remains a material issue for many stakeholders,
even more so since COP26, and this is something
that will need to be addressed by water companies
both regionally and nationally. Our Systems Thinking
approach and investment are helping to deliver
increased resilience across the North West, and
longer term we are involved in strategic planning for a
national water transfer scheme.
We have committed to achieve net zero by 2030
with six pledges to reduce our carbon footprint,
underpinned by ambitious science-based targets for
reducing our greenhouse gas emissions, and we are
making good progress against these. We are linking
executive remuneration more tightly to our carbon
commitments with four targets added to the Long
Term Plan, and in this year’s report we also include
nature-related financial disclosures.
Haweswater Aqueduct Resilience Programme
(HARP)
We have continued to develop HARP, an industry-first
Direct Procurement for Customers (DPC) programme
to design and build six replacement tunnel sections
of the Haweswater Aqueduct, which transports water
from Cumbria to Manchester.
We have undertaken extensive market engagement
throughout the process – challenging for a project of
this scale during the pandemic – and used innovative
ways to manage stakeholder engagement, including
the use of digital channels and a virtual exhibition
giving people access to information and the ability to
ask questions remotely.
We developed the initial design following extensive
ground investigation work to plot the best route, and
planning applications have all been submitted with
decisions expected later this year. During early 2022,
we have been finalising tender documents, and we
expect to start procurement in the summer of 2022.
Strong financial performance in a turbulent
economic climate
We have delivered another good financial performance
this year, underpinned by a strong balance sheet.
Underlying earnings per share is 53.8 pence, a
decrease of 4 per cent primarily due to the inflationary
impact on our underlying net finance expense. With
inflation increasing, this impacts interest charges and
therefore earnings, but our regulatory capital value
will benefit from higher indexation. This higher finance
expense is partially offset by a tax credit following a
review of our innovation-related capital expenditure.
Reported earnings per share is (8.3) pence, with the
difference mainly due to a one-off deferred taxation
charge which occurs from a restatement of the liability
following a change in the headline rate of corporation
tax from 19 per cent to 25 per cent, effective from
1 April 2023. Adjusting items are outlined in the
reconciliation table on pages 82 and 83.
The board has proposed a final dividend of
29.0 pence per ordinary share, taking the total
dividend for 2021/22 to 43.5 pence. This is an increase
of 0.6 per cent*, in line with our AMP7 policy of
targeting an annual growth rate of CPIH inflation
through to 2025.
Our balance sheet remains one of the strongest in
the sector as a result of the responsible and prudent
approach we take to financial risk management.
Gearing, measured as net debt to regulatory capital
value, is 61 per cent, remaining comfortably within our
target range of 55 to 65 per cent. This supports United
Utilities Water Limited’s A3 credit rating with Moody’s,
and at year end we have liquidity to February 2025,
giving us a high level of flexibility and resilience.
While we are not immune to the effects of the current
high inflation environment, our risk management
policies have been effective at helping to shield us
in certain areas. Our fully funded, low dependency
pension schemes protect employees and shareholders
from the risk and deficit repair contributions that come
with having a large pension deficit.
06
unitedutilities.com/corporate
Chair and Chief Executive Officer’s review
The North West is home
to some beautiful natural
landscapes and we take our
role in protecting them very
seriously. We have published
our plan to help improve the
health of our rivers over the
next three years.”
Read our TCFD
and TNFD
disclosures on
pages 86 to 99
Read more about
our financial risk
management
policies on pages
242 to 249
Read more about
our approach
to diversity and
inclusion on
pages 44 to 45
* The dividend
increase is based
on the CPIH
element included
within allowed
regulated revenue
for the 2021/22
financial year (i.e.
the movement in
CPIH between
November 2019
and November
2020).
The Environment Act 2021 introduces several new
challenges for the sector, including a requirement
for water companies to secure a progressive but
very substantial reduction in the average number of
spills from storm overflows, and controlling nutrient
pollution by reducing phosphate release from
wastewater treatment works. The Industrial Emissions
Directive broadens the scope of activities covered
by compliance requirements, and the EA’s recent
interpretation of Farming Rules for Water restricts
the application of biosolids to land in certain areas
at certain times, requiring more storage capacity or
alternative means of disposal.
We have delivered significant improvements in
environmental performance in recent years, and
through our original plans for AMP7 we will deliver
further improvements, with good progress already
having been made. The additional investment we are
making will help accelerate improvements, but there is
more that the industry will need to do.
Specific targets for the next regulatory period have
not yet been agreed, but it is already clear that there
is an ambition to deliver a fundamental change in
the way drainage network systems were originally
configured. The investment needed to deliver these
changes will be significant for the industry as a whole,
but particularly for the North West, where we have
a much higher proportion of combined sewers. We
are working with the Government and regulators to
determine how these bold ambitions can be met and
by when, recognising that the pace of change must
consider customer affordability.
Resilience to climate change and population growth
remains a material issue for many stakeholders,
even more so since COP26, and this is something
that will need to be addressed by water companies
both regionally and nationally. Our Systems Thinking
approach and investment are helping to deliver
increased resilience across the North West, and
longer term we are involved in strategic planning for a
national water transfer scheme.
We have committed to achieve net zero by 2030
with six pledges to reduce our carbon footprint,
underpinned by ambitious science-based targets for
reducing our greenhouse gas emissions, and we are
making good progress against these. We are linking
executive remuneration more tightly to our carbon
commitments with four targets added to the Long
Term Plan, and in this year’s report we also include
nature-related financial disclosures.
Haweswater Aqueduct Resilience Programme
(HARP)
We have continued to develop HARP, an industry-first
Direct Procurement for Customers (DPC) programme
to design and build six replacement tunnel sections
of the Haweswater Aqueduct, which transports water
from Cumbria to Manchester.
We have undertaken extensive market engagement
throughout the process – challenging for a project of
this scale during the pandemic – and used innovative
ways to manage stakeholder engagement, including
the use of digital channels and a virtual exhibition
giving people access to information and the ability to
ask questions remotely.
We developed the initial design following extensive
ground investigation work to plot the best route, and
planning applications have all been submitted with
decisions expected later this year. During early 2022,
we have been finalising tender documents, and we
expect to start procurement in the summer of 2022.
Strong financial performance in a turbulent
economic climate
We have delivered another good financial performance
this year, underpinned by a strong balance sheet.
Underlying earnings per share is 53.8 pence, a
decrease of 4 per cent primarily due to the inflationary
impact on our underlying net finance expense. With
inflation increasing, this impacts interest charges and
therefore earnings, but our regulatory capital value
will benefit from higher indexation. This higher finance
expense is partially offset by a tax credit following a
review of our innovation-related capital expenditure.
Reported earnings per share is (8.3) pence, with the
difference mainly due to a one-off deferred taxation
charge which occurs from a restatement of the liability
following a change in the headline rate of corporation
tax from 19 per cent to 25 per cent, effective from
1 April 2023. Adjusting items are outlined in the
reconciliation table on pages 82 and 83.
The board has proposed a final dividend of
29.0 pence per ordinary share, taking the total
dividend for 2021/22 to 43.5 pence. This is an increase
of 0.6 per cent*, in line with our AMP7 policy of
targeting an annual growth rate of CPIH inflation
through to 2025.
Our balance sheet remains one of the strongest in
the sector as a result of the responsible and prudent
approach we take to financial risk management.
Gearing, measured as net debt to regulatory capital
value, is 61 per cent, remaining comfortably within our
target range of 55 to 65 per cent. This supports United
Utilities Water Limited’s A3 credit rating with Moody’s,
and at year end we have liquidity to February 2025,
giving us a high level of flexibility and resilience.
While we are not immune to the effects of the current
high inflation environment, our risk management
policies have been effective at helping to shield us
in certain areas. Our fully funded, low dependency
pension schemes protect employees and shareholders
from the risk and deficit repair contributions that come
with having a large pension deficit.
Our energy hedging policy locked in commodity
prices on the majority of our estimated power
consumption for AMP7 prior to the recent significant
increases. We have over 90 per cent of our AMP7
base capital programme on contract under target
price arrangements, with sharing of cost overruns
incentivising our partners to deliver within budget.
Supported by a diverse and highly
motivated workforce
We pride ourselves on being a quality employer,
and are committed to maintaining a diverse and
inclusive team of people, recruiting from every
part of our community. We scored equal to the UK
high performance norm with 87 per cent employee
engagement this year, are rated 4.6 out of five by
Glassdoor, and were the leading utility company in The
Inclusive Top 50 UK Employers List 2021/22.
We believe in the importance of developing younger
generations to keep the talent pool flowing. We have
active graduate and apprentice schemes, including
30 green apprentices helping us work towards our
climate and environmental ambitions. We support
young people not in education, employment or training
(NEETs), as well as being part of the Government’s
Kickstart Scheme providing opportunities to
unemployed 16–24 year olds claiming universal credit.
Our commitment to health, safety and wellbeing has
been recognised with our tenth consecutive Royal
Society for the Prevention of Accidents (RoSPA) gold
standard medal, meaning we have achieved the RoSPA
President’s award.
Outlook
We have continued a momentum of performance
improvement in recent years, giving us confidence in
our ability to continue to create value for customers,
the environment, and other stakeholders.
The additional investment we are making will help
us deliver even more sustainable improvements in
customer and environmental performance, and to get
ahead of the requirements coming into force through
the Environment Act.
Our Systems Thinking approach, digital advancements,
and financial risk management give us robust
long-term resilience.
Thank you to our stakeholders
We are grateful to our employees for their continued
hard work, and as we look forward at the many new
challenges we and the rest of the sector will be
meeting in the next AMP and beyond, we are delighted
to have such a great team behind us. We would also
like to extend our gratitude to our customers and other
stakeholders for their continued support.
Sir David Higgins
Chair
Steve Mogford
Chief Executive Officer
The strategic report on pages 14 to 109 was approved at a
meeting of the board on 25 May 2022 and signed on its behalf
by Steve Mogford, Chief Executive Officer.
Read more about our performance in 2021/22
on pages 52 to 83
06
unitedutilities.com/corporate
Stock Code: UU.
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07
Integrated Report and TCFD disclosure
This annual report contains information
consistent with the recommendations of the Task
Force on Climate-related Financial Disclosures
(TCFD), and is an Integrated Report prepared and
presented in accordance with the International
Framework published by the International
Integrated Reporting Council in December 2013,
as applicable to the year ended 31 March 2022.
The board, which is responsible for the integrity
of this report, has considered the preparation and
presentation of this report and concluded that it
has been prepared and presented in accordance
with the Framework.
Materiality
Our annual report and financial statements aim
to meet the information needs of our investors to
help them make informed decisions regarding their
participation – for example, whether to buy, hold
or sell our shares or bonds, whether to engage
with management on issues, and how to vote
their shares. We have included information that
we believe is material to these decisions, which is
presented in a way that we believe is fair, balanced
and understandable. We engage with – and
recognise that this report will be read by – a wide
variety of other stakeholders including customers,
suppliers, employees, analysts, regulators,
community bodies, politicians, non-governmental
organisations, and devolved authorities. Where we
believe that a topic is material to a large number of
them, which is assessed in part through a matrix
approach to stakeholder materiality as set out on
pages 34 and 35, we either include it in this report
or refer the reader to other reports and information
(such as our regulatory reports, customer
communications, or corporate responsibility
web pages). We believe this approach meets the
requirements of company law, the UK Corporate
Governance Code, IFRS and the International
Framework, and that we go beyond those
requirements where we feel it is particularly helpful
to do so and where that can be done without
making the report unnecessarily lengthy or difficult
to read.
2021/22 highlights
Operational highlights
In line with our purpose, we measure our operational performance by reference to
the value we have created for each of our stakeholder groups, and we monitor one
operational key performance indicator (KPI) for each of these groups.
Investors
Suppliers
We aim to deliver a sustainable
We strive to innovate in
return, exercising prudent
financial risk management and
strong ESG performance
partnership with suppliers
to find ways to improve our
services for customers
Our target
RoRE
elements
Our target
95%
Prompt Payment Code
Our progress this year
Communities
Our work places us at the heart
of communities and we strive
to engage fully with them and
work closely in partnership
Customers
We aim to deliver the best
service and to give targeted
support to any customers in
vulnerable circumstances
Our target
10%
Our target
Positive
Employees
Having a diverse and inclusive
workforce where everyone goes
home safe and well is one of our
key priorities
Our target
Upper quartile
Environment
We work hard to protect
and enhance the natural
environment across the
North West
Our target
Upper quartile
increase in community investment
compared with the average of £2.56
million per annum between 2010–20
Our progress this year
• Our direct community investment
totalled £2.82 million (calculated
using the B4SI method), higher than
last year as a result of increased
activity with partners and returning
to customer-facing events such as the
RHS Tatton Flower Show.
• We contributed to our Trust Fund
to help those struggling to pay their
bills, with further support available
through our social tariff. The
additional £15 million per annum of
social tariff support provided during
COVID-19 has been extended to 2025
to help those customers struggling to
pay their bills.
reward territory on Ofwat’s customer
measure of experience (C-MeX)
score against UK utilities norm for
engagement
in the water industry in the EA’s
guidance will be updated throughout the
as the minimum of invoices paid within
Environmental Performance Assessment
period in line with guidance on individual
60 working days of issue, in line with the
Our progress this year
• For 2021/22, we expect to receive a
reward of £2.3 million on C-MeX.
• We continue to be the
highest-performing listed company,
ranked fourth out of the water and
wastewater companies and seventh
overall out of all 17 companies.
• We have reduced written complaints
to our lowest ever level this year.
• On Ofwat’s D-MeX measure, for
developer customer satisfaction, we
are consistently in the top half and
expect to receive a small reward for
2021/22.
Our progress this year
• Our overall engagement is at
87 per cent, equal to the UK high
performance norm, which we have
now been equal to or above for the
last three years.
• We are 11 per cent better than the UK
norm and 5 per cent better than the
UK utilities norm.
• We are rated 4.6 out of 5 by former
and current employees on Glassdoor,
and 92 per cent of our employees
would recommend United Utilities as
a great place to work.
Our progress this year
Our progress this year
• The most recent annual assessment
• Reported RoRE for 2021/22 was
• Over 99 per cent of our invoices were
from the Environment Agency (EA)
was for 2020, and we were awarded
the maximum 4 star rating, meaning
we were classed by the EA as an
industry-leading company.
7.9 per cent on a real, RPI/CPIH
paid within 60 days this year, and our
blended basis.
average time to pay is 13 days.
• This includes outperformance in
• We act fairly and transparently with
customer outcome delivery incentives
all our suppliers and are a signatory
(ODIs), financing and tax, slightly
to the Prompt Payment Code,
• We achieved our best ever
offset by underperformance on total
fully complying with the reporting
performance, as we were green
across all measures –the first water
company to achieve this level of
performance since 2015.
expenditure (totex).
• Underlying RoRE was slightly lower
at 7.7 per cent, and excludes the tax
that will be recovered through the
• The EA will publish their annual
regulatory sharing mechanism.
performance assessment for 2021 in
July 2022.
• Cumulative RoRE for the first two
years of AMP7 is 6.2 per cent on both
a reported and underlying basis.
requirements. As a signatory to this
Code, we are also working to pay
95 per cent of our small and
medium-sized enterprise (SME)
suppliers within 30 days, a new
guideline that came into effect in
July 2021.
Read more about our performance for
communities on page 52 to 54
Read more about our performance for
customers on page 56 to 58
Read more about our performance for
employees on page 60 to 62
Read more about our performance for the
Read more about our performance for
Read more about our performance for
environment on page 64 to 66
investors on page 68 to 70
suppliers on page 72 to 74
KPI performance
KPI performance
KPI performance
KPI performance
KPI performance
KPI performance
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Link to remuneration
• n/a
Link to remuneration
• Our C-MeX ranking features as a
Link to remuneration
• n/a
Link to remuneration
Link to remuneration
Link to remuneration
• Our EPA rating features within the
• RoRE is a performance measure in
• n/a
measure in both our annual bonus and
in the customer basket component of
our Long Term Plan
customer basket measures in the
Long Term Plan, and environmental
performance is indirectly linked to
the Long Term Plan, and is indirectly
linked to the annual bonus as it is
influenced by our performance on
the annual bonus as many of our ODIs
two bonusable measures: C-MeX
have an environmental impact
and ODIs
08
unitedutilities.com/corporate
2021/22 highlights
Operational highlights
In line with our purpose, we measure our operational performance by reference to
the value we have created for each of our stakeholder groups, and we monitor one
operational key performance indicator (KPI) for each of these groups.
Many of our operational KPIs are considered in executive
remuneration through the annual bonus and/or Long Term Plan
KPI status key
Met expectation/target
Read our remuneration report on pages 160 to 191
Close to meeting expectation/target
Behind expectation/target
Communities
Communities
Customers
Customers
Employees
Employees
Our work places us at the heart
Our work places us at the heart
We aim to deliver the best
We aim to deliver the best
of communities and we strive
of communities and we strive
to engage fully with them and
to engage fully with them and
work closely in partnership
work closely in partnership
service and to give targeted
service and to give targeted
support to any customers in
support to any customers in
vulnerable circumstances
vulnerable circumstances
Our target
Our target
10%
10%
Our target
Our target
Positive
Positive
Having a diverse and inclusive
Having a diverse and inclusive
workforce where everyone goes
workforce where everyone goes
home safe and well is one of our
home safe and well is one of our
key priorities
key priorities
Our target
Our target
Upper quartile
Upper quartile
increase in community investment
increase in community investment
reward territory on Ofwat’s customer
reward territory on Ofwat’s customer
score against UK utilities norm for
score against UK utilities norm for
compared with the average of £2.56
compared with the average of £2.56
measure of experience (C-MeX)
measure of experience (C-MeX)
engagement
engagement
million per annum between 2010–20
million per annum between 2010–20
Our progress this year
Our progress this year
Our progress this year
Our progress this year
Our progress this year
Our progress this year
• Our direct community investment
• Our direct community investment
• For 2021/22, we expect to receive a
• For 2021/22, we expect to receive a
• Our overall engagement is at
• Our overall engagement is at
totalled £2.82 million (calculated
totalled £2.82 million (calculated
using the B4SI method), higher than
using the B4SI method), higher than
last year as a result of increased
last year as a result of increased
activity with partners and returning
activity with partners and returning
to customer-facing events such as the
to customer-facing events such as the
RHS Tatton Flower Show.
RHS Tatton Flower Show.
reward of £2.3 million on C-MeX.
reward of £2.3 million on C-MeX.
• We continue to be the
• We continue to be the
highest-performing listed company,
highest-performing listed company,
ranked fourth out of the water and
ranked fourth out of the water and
87 per cent, equal to the UK high
87 per cent, equal to the UK high
performance norm, which we have
performance norm, which we have
now been equal to or above for the
now been equal to or above for the
last three years.
last three years.
wastewater companies and seventh
wastewater companies and seventh
• We are 11 per cent better than the UK
• We are 11 per cent better than the UK
overall out of all 17 companies.
overall out of all 17 companies.
norm and 5 per cent better than the
norm and 5 per cent better than the
• We contributed to our Trust Fund
• We contributed to our Trust Fund
• We have reduced written complaints
• We have reduced written complaints
UK utilities norm.
UK utilities norm.
to our lowest ever level this year.
to our lowest ever level this year.
• We are rated 4.6 out of 5 by former
• We are rated 4.6 out of 5 by former
• On Ofwat’s D-MeX measure, for
• On Ofwat’s D-MeX measure, for
developer customer satisfaction, we
developer customer satisfaction, we
are consistently in the top half and
are consistently in the top half and
expect to receive a small reward for
expect to receive a small reward for
2021/22.
2021/22.
and current employees on Glassdoor,
and current employees on Glassdoor,
and 92 per cent of our employees
and 92 per cent of our employees
would recommend United Utilities as
would recommend United Utilities as
a great place to work.
a great place to work.
to help those struggling to pay their
to help those struggling to pay their
bills, with further support available
bills, with further support available
through our social tariff. The
through our social tariff. The
additional £15 million per annum of
additional £15 million per annum of
social tariff support provided during
social tariff support provided during
COVID-19 has been extended to 2025
COVID-19 has been extended to 2025
to help those customers struggling to
to help those customers struggling to
pay their bills.
pay their bills.
Environment
Environment
We work hard to protect
We work hard to protect
and enhance the natural
and enhance the natural
environment across the
environment across the
North West
North West
Our target
Our target
Upper quartile
Upper quartile
in the water industry in the EA’s
in the water industry in the EA’s
Environmental Performance Assessment
Environmental Performance Assessment
Our progress this year
Our progress this year
• The most recent annual assessment
• The most recent annual assessment
from the Environment Agency (EA)
from the Environment Agency (EA)
was for 2020, and we were awarded
was for 2020, and we were awarded
the maximum 4 star rating, meaning
the maximum 4 star rating, meaning
we were classed by the EA as an
we were classed by the EA as an
industry-leading company.
industry-leading company.
• We achieved our best ever
• We achieved our best ever
performance, as we were green
performance, as we were green
across all measures –the first water
across all measures –the first water
company to achieve this level of
company to achieve this level of
performance since 2015.
performance since 2015.
• The EA will publish their annual
• The EA will publish their annual
performance assessment for 2021 in
performance assessment for 2021 in
July 2022.
July 2022.
Investors
Investors
We aim to deliver a sustainable
We aim to deliver a sustainable
return, exercising prudent
return, exercising prudent
financial risk management and
financial risk management and
strong ESG performance
strong ESG performance
Suppliers
Suppliers
We strive to innovate in
We strive to innovate in
partnership with suppliers
partnership with suppliers
to find ways to improve our
to find ways to improve our
services for customers
services for customers
Our target
Our target
RoRE
RoRE
Our target
Our target
95%
95%
guidance will be updated throughout the
guidance will be updated throughout the
period in line with guidance on individual
period in line with guidance on individual
elements
elements
as the minimum of invoices paid within
as the minimum of invoices paid within
60 working days of issue, in line with the
60 working days of issue, in line with the
Prompt Payment Code
Prompt Payment Code
Our progress this year
Our progress this year
• Reported RoRE for 2021/22 was
• Reported RoRE for 2021/22 was
7.9 per cent on a real, RPI/CPIH
7.9 per cent on a real, RPI/CPIH
blended basis.
blended basis.
• This includes outperformance in
• This includes outperformance in
customer outcome delivery incentives
customer outcome delivery incentives
(ODIs), financing and tax, slightly
(ODIs), financing and tax, slightly
offset by underperformance on total
offset by underperformance on total
expenditure (totex).
expenditure (totex).
• Underlying RoRE was slightly lower
• Underlying RoRE was slightly lower
at 7.7 per cent, and excludes the tax
at 7.7 per cent, and excludes the tax
that will be recovered through the
that will be recovered through the
regulatory sharing mechanism.
regulatory sharing mechanism.
• Cumulative RoRE for the first two
• Cumulative RoRE for the first two
years of AMP7 is 6.2 per cent on both
years of AMP7 is 6.2 per cent on both
a reported and underlying basis.
a reported and underlying basis.
Our progress this year
Our progress this year
• Over 99 per cent of our invoices were
• Over 99 per cent of our invoices were
paid within 60 days this year, and our
paid within 60 days this year, and our
average time to pay is 13 days.
average time to pay is 13 days.
• We act fairly and transparently with
• We act fairly and transparently with
all our suppliers and are a signatory
all our suppliers and are a signatory
to the Prompt Payment Code,
to the Prompt Payment Code,
fully complying with the reporting
fully complying with the reporting
requirements. As a signatory to this
requirements. As a signatory to this
Code, we are also working to pay
Code, we are also working to pay
95 per cent of our small and
95 per cent of our small and
medium-sized enterprise (SME)
medium-sized enterprise (SME)
suppliers within 30 days, a new
suppliers within 30 days, a new
guideline that came into effect in
guideline that came into effect in
July 2021.
July 2021.
Read more about our performance for
Read more about our performance for
Read more about our performance for
Read more about our performance for
Read more about our performance for
Read more about our performance for
communities on page 52 to 54
communities on page 52 to 54
customers on page 56 to 58
customers on page 56 to 58
employees on page 60 to 62
employees on page 60 to 62
Read more about our performance for the
Read more about our performance for the
environment on page 64 to 66
environment on page 64 to 66
Read more about our performance for
Read more about our performance for
investors on page 68 to 70
investors on page 68 to 70
Read more about our performance for
Read more about our performance for
suppliers on page 72 to 74
suppliers on page 72 to 74
KPI performance
KPI performance
KPI performance
KPI performance
KPI performance
KPI performance
KPI performance
KPI performance
KPI performance
KPI performance
KPI performance
KPI performance
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Link to remuneration
Link to remuneration
• n/a
• n/a
Link to remuneration
Link to remuneration
Link to remuneration
Link to remuneration
• Our C-MeX ranking features as a
• Our C-MeX ranking features as a
• n/a
• n/a
Link to remuneration
Link to remuneration
• Our EPA rating features within the
• Our EPA rating features within the
Link to remuneration
Link to remuneration
• RoRE is a performance measure in
• RoRE is a performance measure in
Link to remuneration
Link to remuneration
• n/a
• n/a
measure in both our annual bonus and
measure in both our annual bonus and
in the customer basket component of
in the customer basket component of
our Long Term Plan
our Long Term Plan
customer basket measures in the
customer basket measures in the
Long Term Plan, and environmental
Long Term Plan, and environmental
performance is indirectly linked to
performance is indirectly linked to
the annual bonus as many of our ODIs
the annual bonus as many of our ODIs
have an environmental impact
have an environmental impact
the Long Term Plan, and is indirectly
the Long Term Plan, and is indirectly
linked to the annual bonus as it is
linked to the annual bonus as it is
influenced by our performance on
influenced by our performance on
two bonusable measures: C-MeX
two bonusable measures: C-MeX
and ODIs
and ODIs
08
unitedutilities.com/corporate
Stock Code: UU.
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09
2021/22 highlights
Financial highlights
We have delivered a solid set of financial results in a volatile market over the year to 31 March 2022,
helped by our prudent financial risk management and efficient operational performance.
Our financial KPIs
Underlying operating
profit*
Underlying earnings
per share (EPS)*
Dividend
per share
43.5p
Our target
CPIH inflation
growth per annum over AMP7 (2020–25)
Our progress this year
• The board has proposed a final
dividend of 29 pence per ordinary
share, taking the total dividend for
2021/22 to 43.5 pence per ordinary
share. This is an increase of 0.6 per
cent, in line with our policy in this
regulatory period of targeting an
annual growth rate of CPIH inflation
through to 2025.
Definition
This measure divides total dividends
declared by the average number of shares
in issue during the year.
£610m
53.8p
Reported: £610m
Reported: (8.3)p
Our target
No externally disclosed target (see note 1)
Our target
No externally disclosed target (see note 1)
Our progress this year
• Underlying operating profit increased
by £8 million, as a 3 per cent increase
in revenue was largely offset by
inflationary pressures increasing our
underlying cost base, predominantly
in respect of power, materials and
labour.
• There were no adjusting items
therefore underlying was the same as
reported operating profit this year.
Definition
This measure excludes from reported
operating profit any significant
non-recurring items. We determine
adjusted items in the calculation
of underlying operating profit by
reference to a framework that considers
significance by reference to profit before
tax, in addition to other qualitative factors
such as whether the item is deemed to
be within the normal course of business,
its assessed frequency of recurrence,
and its volatility, which is either outside
of the control of management and/or
not representative of the current year
performance. A reconciliation is shown
on pages 82 and 83.
Our progress this year
• Underlying EPS decreased by 4 per
cent, primarily due to the impact of
higher inflation on our index-linked
debt. This was partially offset by a
net tax credit of £66 million due to
capital allowance super deductions
and a review of innovation-related
expenditure in prior years.
• Reported EPS was (8.3) pence,
with the main adjusted items being
deferred tax and net fair value gains
on debt and derivative instruments.
Definition
This measure deducts underlying net
finance expense, underlying share of joint
venture losses, and underlying taxation
from underlying operating profit to
calculate underlying profit after tax, and
divides this by the average number of
shares in issue during the year. Underlying
net finance expense makes adjustments
to reported net finance expense, including
stripping out fair value movements.
Underlying taxation strips out deferred
tax (including any tax credits or debits
arising from changes in the tax rate) and
any exceptional tax from reported taxation.
Reconciliations to the underlying measures
are shown on pages 82 and 83.
Our performance
Our performance
Our performance
Our performance
Our performance
Our performance
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Close to meeting expectation/target
Met expectation/target
Link to remuneration
• Underlying operating profit is one of
the measures for the annual bonus. It
is indirectly linked to the Long Term
Plan as financial performance impacts
relative total shareholder return
Link to remuneration
• Underlying earnings per share is
indirectly linked to the Long Term
Plan as financial performance impacts
relative total shareholder return
Link to remuneration
• Delivery of our dividend policy is an
underpin that applies to the Long
Term Plan outcomes
2021/22
2020/21
2019/20
2018/19
2017/18
£610m
£602m
£732m
£678m
£639m
2021/22
2020/21
2019/20
2018/19
2017/18
53.8p
56.2p
71.3p
65.9p
57.1p
2021/22
2020/21
2019/20
2018/19
2017/18
43.50p
43.24p
42.60p
41.28p
39.73p
A guide to alternative performance measures (APMs) and a reconciliation between underlying profit and reported profit is shown on pages 82 to 83.
* Underlying profit measures have been re-presented for prior years so they are presented on a consistent basis to the years ended 31 March 2021
and 31 March 2022.
10
unitedutilities.com/corporate
Gearing: net debt
Total shareholder
to RCV
61%
Our target
55–65%
gearing range
return
+27%
Low dependency
pension scheme
£nil
deficit repair contributions
Our target
Our target
We assess our performance each year
Maintaining low dependency pension
against listed peers in the utility sector
schemes, meaning no deficit repair
and against the FTSE 100
payments are needed
Our progress this year
Our progress this year
Our progress this year
• Gearing at 61 per cent remains
• Total shareholder return for the year
• Our defined benefit pension schemes
comfortably within our target range,
supporting an A3 credit rating with
Moody’s and giving us financial
flexibility and resilience.
to 31 March 2022 was 27 per cent
positive. This was higher than the
average return for the FTSE 100, but
was not as high as some listed peers
in the utility sector.
are fully funded on a low dependency
basis. This means we do not need
to make deficit repair contributions,
and it means our employees and
shareholders are protected from
a worsening position that would
otherwise have likely been felt as
a result of recent high levels of
inflation.
Definition
This measure divides group net debt by
United Utilities Water Limited’s (UUW)
shadow (adjusted for actual spend and
timing difference) regulatory capital
value (RCV).
Definition
Definition
This measure calculates the return to
shareholders based on the movement
This measure considers The Pensions
Regulator’s definition of low dependency
in share price plus dividends over each
being “where a scheme’s funding and
financial year.
investment strategies are such that
there is a low chance of requiring further
employer support and, to the extent that
such support is required, the amount of
support is low relative to the size of the
scheme”.
Link to remuneration
• n/a
Link to remuneration
Link to remuneration
• Relative total shareholder return is a
measure applying to Long Term Plan
• n/a
awards vesting this year
2021/22 highlights
Financial highlights
We have delivered a solid set of financial results in a volatile market over the year to 31 March 2022,
helped by our prudent financial risk management and efficient operational performance.
Our financial KPIs
Our financial KPIs
Underlying operating
Underlying operating
Underlying earnings
Underlying earnings
profit*
profit*
£610m
£610m
per share (EPS)*
per share (EPS)*
53.8p
53.8p
Dividend
Dividend
per share
per share
43.5p
43.5p
Reported: £610m
Reported: £610m
Reported: (8.3)p
Reported: (8.3)p
Our target
Our target
Our target
Our target
Our target
Our target
No externally disclosed target (see note 1)
No externally disclosed target (see note 1)
No externally disclosed target (see note 1)
No externally disclosed target (see note 1)
Our progress this year
Our progress this year
Our progress this year
Our progress this year
Our progress this year
Our progress this year
• Underlying operating profit increased
• Underlying operating profit increased
• Underlying EPS decreased by 4 per
• Underlying EPS decreased by 4 per
• The board has proposed a final
• The board has proposed a final
CPIH inflation
CPIH inflation
growth per annum over AMP7 (2020–25)
growth per annum over AMP7 (2020–25)
dividend of 29 pence per ordinary
dividend of 29 pence per ordinary
share, taking the total dividend for
share, taking the total dividend for
2021/22 to 43.5 pence per ordinary
2021/22 to 43.5 pence per ordinary
share. This is an increase of 0.6 per
share. This is an increase of 0.6 per
cent, in line with our policy in this
cent, in line with our policy in this
regulatory period of targeting an
regulatory period of targeting an
annual growth rate of CPIH inflation
annual growth rate of CPIH inflation
through to 2025.
through to 2025.
by £8 million, as a 3 per cent increase
by £8 million, as a 3 per cent increase
in revenue was largely offset by
in revenue was largely offset by
inflationary pressures increasing our
inflationary pressures increasing our
underlying cost base, predominantly
underlying cost base, predominantly
in respect of power, materials and
in respect of power, materials and
labour.
labour.
• There were no adjusting items
• There were no adjusting items
cent, primarily due to the impact of
cent, primarily due to the impact of
higher inflation on our index-linked
higher inflation on our index-linked
debt. This was partially offset by a
debt. This was partially offset by a
net tax credit of £66 million due to
net tax credit of £66 million due to
capital allowance super deductions
capital allowance super deductions
and a review of innovation-related
and a review of innovation-related
expenditure in prior years.
expenditure in prior years.
with the main adjusted items being
with the main adjusted items being
deferred tax and net fair value gains
deferred tax and net fair value gains
on debt and derivative instruments.
on debt and derivative instruments.
therefore underlying was the same as
therefore underlying was the same as
• Reported EPS was (8.3) pence,
• Reported EPS was (8.3) pence,
reported operating profit this year.
reported operating profit this year.
operating profit any significant
operating profit any significant
non-recurring items. We determine
non-recurring items. We determine
adjusted items in the calculation
adjusted items in the calculation
of underlying operating profit by
of underlying operating profit by
from underlying operating profit to
from underlying operating profit to
calculate underlying profit after tax, and
calculate underlying profit after tax, and
reference to a framework that considers
reference to a framework that considers
divides this by the average number of
divides this by the average number of
significance by reference to profit before
significance by reference to profit before
shares in issue during the year. Underlying
shares in issue during the year. Underlying
tax, in addition to other qualitative factors
tax, in addition to other qualitative factors
net finance expense makes adjustments
net finance expense makes adjustments
such as whether the item is deemed to
such as whether the item is deemed to
to reported net finance expense, including
to reported net finance expense, including
be within the normal course of business,
be within the normal course of business,
stripping out fair value movements.
stripping out fair value movements.
its assessed frequency of recurrence,
its assessed frequency of recurrence,
and its volatility, which is either outside
and its volatility, which is either outside
of the control of management and/or
of the control of management and/or
not representative of the current year
not representative of the current year
performance. A reconciliation is shown
performance. A reconciliation is shown
on pages 82 and 83.
on pages 82 and 83.
Underlying taxation strips out deferred
Underlying taxation strips out deferred
tax (including any tax credits or debits
tax (including any tax credits or debits
arising from changes in the tax rate) and
arising from changes in the tax rate) and
any exceptional tax from reported taxation.
any exceptional tax from reported taxation.
Reconciliations to the underlying measures
Reconciliations to the underlying measures
are shown on pages 82 and 83.
are shown on pages 82 and 83.
Many of our operational KPIs are considered in executive
remuneration through the annual bonus and/or Long Term Plan
KPI status key
Met expectation/target
Read our remuneration report on pages 160 to 191
Close to meeting expectation/target
Behind expectation/target
Gearing: net debt
Gearing: net debt
to RCV
to RCV
Total shareholder
Total shareholder
return
return
Low dependency
Low dependency
pension scheme
pension scheme
61%
61%
Our target
Our target
55–65%
55–65%
gearing range
gearing range
+27%
+27%
£nil
£nil
deficit repair contributions
deficit repair contributions
Our target
Our target
We assess our performance each year
We assess our performance each year
against listed peers in the utility sector
against listed peers in the utility sector
and against the FTSE 100
and against the FTSE 100
Our target
Our target
Maintaining low dependency pension
Maintaining low dependency pension
schemes, meaning no deficit repair
schemes, meaning no deficit repair
payments are needed
payments are needed
Our progress this year
Our progress this year
• Gearing at 61 per cent remains
• Gearing at 61 per cent remains
comfortably within our target range,
comfortably within our target range,
supporting an A3 credit rating with
supporting an A3 credit rating with
Moody’s and giving us financial
Moody’s and giving us financial
flexibility and resilience.
flexibility and resilience.
Our progress this year
Our progress this year
• Total shareholder return for the year
• Total shareholder return for the year
to 31 March 2022 was 27 per cent
to 31 March 2022 was 27 per cent
positive. This was higher than the
positive. This was higher than the
average return for the FTSE 100, but
average return for the FTSE 100, but
was not as high as some listed peers
was not as high as some listed peers
in the utility sector.
in the utility sector.
Definition
Definition
Definition
Definition
Definition
Definition
This measure excludes from reported
This measure excludes from reported
This measure deducts underlying net
This measure deducts underlying net
This measure divides total dividends
This measure divides total dividends
finance expense, underlying share of joint
finance expense, underlying share of joint
declared by the average number of shares
declared by the average number of shares
venture losses, and underlying taxation
venture losses, and underlying taxation
in issue during the year.
in issue during the year.
Definition
Definition
This measure divides group net debt by
This measure divides group net debt by
United Utilities Water Limited’s (UUW)
United Utilities Water Limited’s (UUW)
shadow (adjusted for actual spend and
shadow (adjusted for actual spend and
timing difference) regulatory capital
timing difference) regulatory capital
value (RCV).
value (RCV).
Definition
Definition
This measure calculates the return to
This measure calculates the return to
shareholders based on the movement
shareholders based on the movement
in share price plus dividends over each
in share price plus dividends over each
financial year.
financial year.
Our progress this year
Our progress this year
• Our defined benefit pension schemes
• Our defined benefit pension schemes
are fully funded on a low dependency
are fully funded on a low dependency
basis. This means we do not need
basis. This means we do not need
to make deficit repair contributions,
to make deficit repair contributions,
and it means our employees and
and it means our employees and
shareholders are protected from
shareholders are protected from
a worsening position that would
a worsening position that would
otherwise have likely been felt as
otherwise have likely been felt as
a result of recent high levels of
a result of recent high levels of
inflation.
inflation.
Definition
Definition
This measure considers The Pensions
This measure considers The Pensions
Regulator’s definition of low dependency
Regulator’s definition of low dependency
being “where a scheme’s funding and
being “where a scheme’s funding and
investment strategies are such that
investment strategies are such that
there is a low chance of requiring further
there is a low chance of requiring further
employer support and, to the extent that
employer support and, to the extent that
such support is required, the amount of
such support is required, the amount of
support is low relative to the size of the
support is low relative to the size of the
scheme”.
scheme”.
Our performance
Our performance
Our performance
Our performance
Our performance
Our performance
Our performance
Our performance
Our performance
Our performance
Our performance
Our performance
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Met expectation/target
Close to meeting expectation/target
Close to meeting expectation/target
Met expectation/target
Met expectation/target
Link to remuneration
Link to remuneration
Link to remuneration
Link to remuneration
Link to remuneration
Link to remuneration
• Underlying operating profit is one of
• Underlying operating profit is one of
• Underlying earnings per share is
• Underlying earnings per share is
• Delivery of our dividend policy is an
• Delivery of our dividend policy is an
Link to remuneration
Link to remuneration
• n/a
• n/a
the measures for the annual bonus. It
the measures for the annual bonus. It
is indirectly linked to the Long Term
is indirectly linked to the Long Term
Plan as financial performance impacts
Plan as financial performance impacts
relative total shareholder return
relative total shareholder return
indirectly linked to the Long Term
indirectly linked to the Long Term
underpin that applies to the Long
underpin that applies to the Long
Plan as financial performance impacts
Plan as financial performance impacts
Term Plan outcomes
Term Plan outcomes
relative total shareholder return
relative total shareholder return
Link to remuneration
Link to remuneration
• Relative total shareholder return is a
• Relative total shareholder return is a
measure applying to Long Term Plan
measure applying to Long Term Plan
awards vesting this year
awards vesting this year
Link to remuneration
Link to remuneration
• n/a
• n/a
2021/22
2020/21
2019/20
2018/19
2017/18
£610m
£602m
£732m
£678m
£639m
2021/22
2020/21
2019/20
2018/19
2017/18
53.8p
56.2p
71.3p
65.9p
57.1p
2021/22
2020/21
2019/20
2018/19
2017/18
43.50p
43.24p
42.60p
41.28p
39.73p
2021/22
2020/21
2019/20
2018/19
2017/18
61%
62%
61%
61%
61%
2021/22
2020/21
2019/20
2018/19
2017/18
+27%
+7%
+17%
+20%
-25%
A guide to alternative performance measures (APMs) and a reconciliation between underlying profit and reported profit is shown on pages 82 to 83.
* Underlying profit measures have been re-presented for prior years so they are presented on a consistent basis to the years ended 31 March 2021
and 31 March 2022.
10
Notes:
Note 1: For both our operational and financial KPIs, where we have
declared external targets we assess our performance against the most
recent public targets. Where there are no externally declared targets we
assess our performance against our internal budget; however, our internal
budget is not disclosed.
Note 2: In some instances, the remuneration committee has used
metrics with similar names but calculation methodologies which they
consider more appropriate for executive remuneration, as set out in the
remuneration report on pages 160 to 191.
unitedutilities.com/corporate
Stock Code: UU.
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Our approach as a responsible business
The way we act has a profound
influence on the social, economic and
environmental wellbeing of the region.
A purpose-led organisation
Our purpose drives us to deliver our services in an
environmentally sustainable, economically beneficial
and socially responsible manner. We have a
long-standing commitment to environmental, social
and governance (ESG) matters.
Over the past 20 years we have measured ourselves
against national and international benchmarks of
responsible business practice, often breaking new
ground in the way the water sector approaches
challenges such as catchment management and
helping customers struggling to pay their bills through
affordability schemes. Our consistent performance
across a range of external ESG indices and rankings
over that time has demonstrated our commitment to
operating in a responsible manner.
This strong track record has provided a solid
foundation upon which to evolve existing programmes,
develop new initiatives, and respond to the changing
world in which we operate.
Our approach
We focus on operating in a responsible manner
throughout the organisation. This enables us to provide
the best possible service to customers and ensures
we are well placed to continue to create long-term,
sustainable value for all stakeholders. This value comes
from understanding what matters most to them and
balancing these different perspectives in our
decision-making. We are currently integrating
six-capital thinking (manufactured, financial, natural,
social, human and intellectual capital) into business
processes as we believe this will better inform our
decision-making processes and enable us to create and
protect value for all stakeholders. This includes how we
might report publicly against these capitals.
Our approach isn’t just about what we do, but how we
do it. Open, honest and transparent reporting has been
at the core of our approach, underpinned by a clear
purpose and strategic objectives.
Increasingly, stakeholders assess how companies
approach responsible business through the lens of
ESG. We believe there is a close relationship between
ESG performance and investor value.
Demonstrating how we act responsibly and
create value
Our stakeholders are ultimately the ones who will
judge whether we are delivering on our purpose so
it is up to us to provide the evidence that we are
providing great water and more for the North West.
Having tangible, externally recognised measures of our
behaviour and performance helps retain the trust of
those who take an interest in the way we do business.
It enables us to demonstrate that we are operating in
our stakeholders’ interests.
We collate, monitor and report on a wide range of
performance measures, linked to what stakeholders
tell us matter most, and align ourselves to recognised
management standards and accreditations to give
confidence in the way we are operating. We report
these publicly so stakeholders can assess our progress.
Read more about how we deliver value for our
stakeholders on pages 52 to 75.
Alongside this, we actively participate in a range
of global ESG ratings, indices and frameworks to
benchmark our approach against best practice and
emerging sustainability challenges. Read more on
page 13.
As responsible business practice evolves, we look
constantly at how we can improve. For instance, as
challenges to the natural environment become more
pressing we are embracing the move to report more
on our dependencies and impacts on nature through
the Task Force on Nature-related Financial Disclosures.
Read more on pages 98 to 99.
12
unitedutilities.com/corporate
Our approach as a responsible business
Reporting methodology
The way we act has a profound
influence on the social, economic and
environmental wellbeing of the region.
A purpose-led organisation
Our purpose drives us to deliver our services in an
environmentally sustainable, economically beneficial
and socially responsible manner. We have a
long-standing commitment to environmental, social
and governance (ESG) matters.
Over the past 20 years we have measured ourselves
against national and international benchmarks of
responsible business practice, often breaking new
ground in the way the water sector approaches
challenges such as catchment management and
helping customers struggling to pay their bills through
affordability schemes. Our consistent performance
across a range of external ESG indices and rankings
over that time has demonstrated our commitment to
operating in a responsible manner.
decision-making processes and enable us to create and
protect value for all stakeholders. This includes how we
might report publicly against these capitals.
Our approach isn’t just about what we do, but how we
do it. Open, honest and transparent reporting has been
at the core of our approach, underpinned by a clear
purpose and strategic objectives.
Increasingly, stakeholders assess how companies
approach responsible business through the lens of
ESG. We believe there is a close relationship between
ESG performance and investor value.
Demonstrating how we act responsibly and
create value
Our stakeholders are ultimately the ones who will
judge whether we are delivering on our purpose so
it is up to us to provide the evidence that we are
providing great water and more for the North West.
Having tangible, externally recognised measures of our
behaviour and performance helps retain the trust of
those who take an interest in the way we do business.
It enables us to demonstrate that we are operating in
This strong track record has provided a solid
foundation upon which to evolve existing programmes,
our stakeholders’ interests.
develop new initiatives, and respond to the changing
world in which we operate.
Our approach
We focus on operating in a responsible manner
throughout the organisation. This enables us to provide
the best possible service to customers and ensures
we are well placed to continue to create long-term,
We collate, monitor and report on a wide range of
performance measures, linked to what stakeholders
tell us matter most, and align ourselves to recognised
management standards and accreditations to give
confidence in the way we are operating. We report
these publicly so stakeholders can assess our progress.
Read more about how we deliver value for our
sustainable value for all stakeholders. This value comes
stakeholders on pages 52 to 75.
from understanding what matters most to them and
balancing these different perspectives in our
decision-making. We are currently integrating
six-capital thinking (manufactured, financial, natural,
social, human and intellectual capital) into business
processes as we believe this will better inform our
Alongside this, we actively participate in a range
of global ESG ratings, indices and frameworks to
benchmark our approach against best practice and
emerging sustainability challenges. Read more on
page 13.
As responsible business practice evolves, we look
constantly at how we can improve. For instance, as
challenges to the natural environment become more
pressing we are embracing the move to report more
on our dependencies and impacts on nature through
the Task Force on Nature-related Financial Disclosures.
Read more on pages 98 to 99.
Evolving market ESG expectations
The frameworks and standards by which companies report ESG
issues are developing rapidly, through organisations such as
the International Sustainability Standards Board (ISSB). This is
in response to increasing interest in how companies respond
to sustainability challenges and growing expectations on how
they disclose relevant information and data on their responsible
business activities. For example, there is more interest in the
disclosure of the ESG performance of companies and, last year, we
published a summary of our ESG performance in More than Water.
Read more on our website at
unitedutilities.com/globalassets/z_corporate-site/cr-images/
cr-pdfs/stakeholder-esg-booklet-2021-final.pdf
We have evolved the way we report by presenting more ESG
data alongside our financial reporting. We have looked to do
this without making this report unnecessarily lengthy or difficult
to read. We use our purpose-led approach as the framework to
disclose performance and data for each of the stakeholders we
create value for. Read more on pages 52 to 75. Many of the ESG
indices in which we participate (see right-hand column) draw their
data from this report.
As the reporting landscape develops further we will continue to
adapt our reporting to take account of international best practice
in the presentation of ESG performance and data.
We do recognise that some stakeholders prefer to have specific
data provided in one place. The following indicates where further
information on certain frameworks can be found:
World Economic Forum (WEF) International Business
Council (IBC)
The WEF IBC has proposed a set of common metrics for the
consistent reporting of sustainable value creation in mainstream
annual reports. We already integrate many of these metrics in our
annual report and to make this easier for those searching for the
information we have collated them into one place on our website.
Read more on our website at
unitedutilities.com/wef
Sustainability Accounting Standards Board (SASB)
SASB standards aim to standardise disclosure of material
sustainability information mainly for companies based in the
United States. As many of our shareholders are located in
North America we are publishing comparable SASB data on our
corporate website. This covers the main SASB data points for the
water utilities industry, of which we are part.
External recognition and benchmarking
United Utilities Group PLC
has been included in the
FTSE4Good Index Series since
27 June 2001. Latest review
December 2021.
In the annual review of
November 2021 our status was
assessed as Prime.(1)
We received an overall
Advanced ESG score by
Moody’s ESG of 64/100 and
United Utilities Group PLC has
been confirmed as a constituent
of the Euronext Vigeo UK 20
and Europe 120 indices in year
2021.(2)
As of September 2021, United
Utilities Group PLC received an
MSCI ESG rating of AA.(3)
We continue to participate
in the S&P Global Corporate
Sustainability Assessment. For
2021, our overall performance
was 76% and we were included
in the S&P Global Sustainability
Yearbook 2022.
In March 2022, United Utilities
Group PLC received an ESG
Risk Rating of 12.8 and was
assessed by Sustainalytics to
be at low risk of experiencing
material financial impacts from
ESG factors.(4)
Read more on our website at
unitedutilities.com/sasb
Key frameworks to look out for
Sustainable Development Goals (SDGs)
We have identified six SDGs that are material to our business.
More details can be found on pages 84 to 85.
We complete a variety of issue and stakeholder-specific rankings
and benchmarks such as the CDP. Disclosure of these performance
scores can be found on our website.
Read more about ESG metrics of interest to
our stakeholders on our website at
unitedutilities.com/corporate/responsibility/
our-approach/cr--performance
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Stock Code: UU.
The Task Force on Climate-
related Financial Disclosures
sets out a framework to provide
stakeholders with an assessment
of the financial implications of
climate change and what this
means for governance, strategy,
risk and metrics.
The Task Force on Nature-
related Financial Disclosures
is in its beta stage. It aims to
provide a risk and disclosure
framework for organisations
interacting with the natural
environment.
Read more about TCFD on pages 86 to 97
issgovernance.com/esg/ratings/badge
(1)
(2) moodys.com/esg
(3) msci.com/notice-and-disclaimer
(4) sustainalytics.com/legal-disclaimers
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Enhancing the
environment
in the North West
We will deliver long-term environmental improvements through delivery of our AMP7
targets, our Better Rivers: Better North West plan, reinvestment of outperformance
we have earned, and addressing new and emerging requirements such as the
Environment Act 2021, which is likely to drive substantial future investment.
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Strategic report
Our purpose, vision, strategy,
values and culture
How we operate
Our business model
– Our key resources
– Our external drivers
– S172(1) Statement
– Our approach
– Our planing horizons
– The value we generate
Our performance in 2021/22
Alignment to wider goals
Our approach to climate change
Our approach to Task Force on Nature-
related Financial Disclosures (TNFD)
Our risk management
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Enhancing the
environment
in the North West
We will deliver long-term environmental improvements through delivery of our AMP7
targets, our Better Rivers: Better North West plan, reinvestment of outperformance
we have earned, and addressing new and emerging requirements such as the
Environment Act 2021, which is likely to drive substantial future investment.
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Our purpose, vision, strategy, values and culture
Our purpose is the reason we exist. Our strategic themes
define the way we operate in order to deliver our purpose
and work towards our vision, and our core values provide
the cultural framework within which we operate.
OUR PURPOSE
Why we exist
To provide
great water...
Providing great water means delivering our core water,
wastewater and customer services, reliably and to the highest
quality. It is what our customers expect and deserve.
...and more
Providing ‘more’ means creating value for our stakeholders
by understanding what matters to them through strong and
constructive relationships. We do this by:
•
supporting communities to be stronger;
• caring for customers through trusted relationships;
• creating a great place to work for all our employees;
• protecting and enhancing the environment;
• delivering a sustainable return to investors; and
•
innovating in partnership with suppliers.
...for the
North West
We are singularly focused on the North West.
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Our purpose, vision, strategy, values and culture
Our purpose is the reason we exist. Our strategic themes
define the way we operate in order to deliver our purpose
and work towards our vision, and our core values provide
the cultural framework within which we operate.
OUR PURPOSE
Why we exist
To provide
great water...
Providing great water means delivering our core water,
wastewater and customer services, reliably and to the highest
quality. It is what our customers expect and deserve.
...and more
Providing ‘more’ means creating value for our stakeholders
by understanding what matters to them through strong and
constructive relationships. We do this by:
•
supporting communities to be stronger;
• caring for customers through trusted relationships;
• creating a great place to work for all our employees;
• protecting and enhancing the environment;
• delivering a sustainable return to investors; and
•
innovating in partnership with suppliers.
...for the
North West
We are singularly focused on the North West.
OUR VISION
What we want to achieve
To be the best UK water
and wastewater company
This is what motivates us to improve our services and deliver more. To achieve this vision, our strategy has three
themes – the best service to customers, at the lowest sustainable cost, in a responsible manner.
OUR STRATEGIC THEMES
How we deliver our purpose and vision
The best service
to customers
We put customers at the heart
of everything we do. As well as
delivering a reliable service of
great tasting water and removing
wastewater, we proactively keep
customers informed about any
work we are doing in their area and
communicate with them in ways
that meet their individual needs. For
example, we now use ‘push texts’ to
send updates and alerts to customers
within a specified location.
The best service to customers means
being available when they need
to contact us, always interacting
in a friendly and helpful manner,
and offering tailored support and
assistance for customers when they
need it. As well as these day-to-day
interactions, it means consulting
on what matters to them. This
shapes what we do; for example,
we redesigned our bills based on
customer research and feedback.
At the lowest
sustainable cost
To run a resilient business, it is
important to ensure cost reductions
are sustainable so that we can keep
them down without compromising
on resilience or the quality of service
we deliver.
When we develop our plans and
assess different options, we look to
minimise the whole-life cost. This
fits with the total expenditure (totex)
model, because the most
cost-effective option can vary
between traditional operating
expenditure (opex) or capital
expenditure (capex) solutions.
Our Systems Thinking approach helps
us look holistically at all options, and
operating our entire network as a
system rather than discrete assets
opens up new avenues that otherwise
would not have been available.
In a responsible
manner
We will only deliver our purpose
and create and maintain value for
our stakeholders if we act in a
responsible manner.
This means protecting and enhancing
the natural environment, using
natural solutions where possible, and
reducing our carbon footprint and
waste. It means promoting a safe,
healthy and engaging workplace
for our employees, supporting their
physical and mental health. It drives
us to support local communities on
issues that matter to them, and to
work with local schools and training
facilities to promote skills for the
future.
Above all, it means we are open,
honest and transparent in our
dealings and in reporting our
performance.
Our strategic themes run through everything we do
How we manage the water cycle, our risk assessment, and our remuneration policy are aligned to these strategic themes.
Read more about our water cycle
on pages 18 to 19
Read more about our risk management
on pages 100 to 109
Read our remuneration report on pages
160 to 191
OUR CORE VALUES AND CULTURE
Fundamental values that drive decision-making
Customer focused
Customers are at the heart
of everything we do, and
we aim to provide a great
and resilient service at the
most efficient cost.
Innovative
We continually look for
new ways to make our
services better, safer,
faster and cheaper.
Trustworthy
We make promises
knowingly and keep
them, behaving with
integrity towards all
of our stakeholders.
Culture at United Utilities
As well as our purpose,
strategy and core values,
we monitor our culture
against key categories
relating to our people, such
as engagement, health and
wellbeing, diversity, and
development. Read more
on pages 125 to 126.
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How we operate
Collect
Type of impact
Our impact
We collect water from open reservoirs,
lakes, rivers and boreholes, which we
manage in a sustainable way, protecting
and enhancing local habitats. We own and
manage 56,000 hectares of land, which we
open to the public to enjoy access to nature.
Relevant material issues
• Water resources and leakage
• Drinking water quality
• Climate change
• Land management, access and recreation
Treat
Type of impact
Our impact
The water we extract needs a lot of work
in one of our 88 water treatment works
before it is safe and clean for customers to
drink. We then store the treated water in
covered reservoirs ready to be delivered to
customers’ taps when they need it.
Relevant material issues
• Drinking water quality
• Climate change
Return
Type of impact
Our impact
Once the water is clean enough to meet
stringent environmental consents, we return
it to the natural environment through rivers
and streams so that the water cycle can
begin again.
Relevant material issues
• Political and regulatory environment
• Natural capital and biodiversity
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How we operate
Our strategic themes
The best service
to customers
At the lowest
sustainable cost
In a responsible
manner
Increasing
positive impact
Minimising
negative impact
Type of impact
Collect
Type of impact
Our impact
We collect water from open reservoirs,
lakes, rivers and boreholes, which we
manage in a sustainable way, protecting
and enhancing local habitats. We own and
manage 56,000 hectares of land, which we
open to the public to enjoy access to nature.
Relevant material issues
• Water resources and leakage
• Drinking water quality
• Climate change
• Land management, access and recreation
Treat
Type of impact
Our impact
The water we extract needs a lot of work
in one of our 88 water treatment works
before it is safe and clean for customers to
drink. We then store the treated water in
covered reservoirs ready to be delivered to
customers’ taps when they need it.
Relevant material issues
• Drinking water quality
• Climate change
Deliver
Type of impact
Our impact
We maintain over 42,000 kilometres of
water pipes and deliver an average of 1.8
billion litres of water each day to 7.4 million
people across the North West. Our main
Haweswater Aqueduct uses gravity to
transfer water from Cumbria to Manchester,
and our integrated supply network enables
us to move water around the region.
Relevant material issues
• Water resources and leakage
• Customer service and operational
performance
• Drinking water quality
Remove
Type of impact
Our impact
Wastewater from customers’ drains and
rain water from roads and rooftops flows
into our combined sewers to be taken for
cleaning. In excessive rainfall, when sewer
capacity is overloaded, storm overflows
allow rain water, mixed with wastewater, to
flow directly into rivers or the sea through
a separate pipe to help prevent flooding of
streets, homes and businesses.
Relevant material issues
• Sewer flooding and storm overflows
• Customer service and operational
performance
• Climate change
Return
Type of impact
Our impact
Once the water is clean enough to meet
stringent environmental consents, we return
it to the natural environment through rivers
and streams so that the water cycle can
begin again.
Relevant material issues
• Political and regulatory environment
• Natural capital and biodiversity
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performance
Clean
Type of impact
Our impact
We maintain over 78,000 kilometres of
wastewater pipes to transport wastewater
from sewers to one of our 566 wastewater
treatment works, where it requires
separation and treatment before it is
returned to the natural environment.
Relevant material issues
• Sewage sludge to land
• Customer service and operational
Generate
Type of impact
Our impact
We waste nothing, turning sludge by-
product into compost for farmers and
capturing gas to generate renewable energy
from bioresources. We self-generate around
25 per cent of our energy, helping to reduce
our carbon footprint and energy costs.
Relevant material issues
• Energy management
• Environmental impacts
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Our business model
We deliver our water and wastewater
services in a way that generates long-term
value for a range of stakeholders.
Our key resources
Our external drivers
Our approach
Natural capital
We rely on natural resources to
supply water and take back wastewater
after treatment, as well as to generate
renewable energy.
Natural environment
We must be resilient to changes such as
climate change and population growth,
and ensure our impact on the natural
environment is positive.
Human capital
We rely on skilled and engaged
employees and suppliers to deliver our
services, and skills must be maintained
through training and development.
Manufactured capital
We invest to maintain and enhance our
assets and build long-term resilience,
and we use telemetry to monitor and
control many assets remotely.
Stakeholders
Our work and the huge areas of land
we manage impacts a wide variety of
stakeholders and we consult them to
help develop and execute our plans.
Technology and innovation
New technology and innovations create
opportunities for improvements in
service and efficiency, but can also
create risks such as cyber attacks.
Financial capital
Efficient financing allows us to preserve
intergenerational equity for customers
while funding necessary long-term
capital investment projects.
Economic environment
The economy impacts our financing
through market rate movements such
as interest rates and inflation, and our
customers’ ability to pay their bills.
Social capital
The constructive relationships we have
built with regulators, suppliers, and
other stakeholders are fundamental to
our ability to deliver our purpose.
Regulatory environment
Environmental and drinking water
standards set by our regulators drive
what we do, both now and in the long
term through future market reforms.
Intellectual capital
Innovation helps us continually improve,
and understanding performance trends
in our network helps us spot potential
issues early and fix them proactively.
Political environment
This includes regional and national
politicians as well as policymakers,
and we must understand the key policy
issues affecting our industry.
Our purpose is to provide great water
and more for the North West.
Our strategy and core values
Our strategy sets out how we deliver
our purpose, and is broken down into
three strategic themes, which govern
everything we do.
The best service to customers
At the lowest sustainable cost
In a responsible manner
Our core values – customer
focused, innovative and trustworthy –
provide the cultural framework within
which we operate.
Materiality and risk management
We produce a materiality matrix to help
us prioritise issues based on the level of
stakeholder interest and the potential to
affect our ability to create value.
Read more about what matters most to
stakeholders on pages 34 to 39
We manage a wide variety of risks to
enable us to deliver a sustainable and
resilient service for the long term.
Read more about our risk management on
pages 100 to 109
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Our business model
We deliver our water and wastewater
services in a way that generates long-term
value for a range of stakeholders.
Our key resources
Our external drivers
Our approach
Natural capital
Natural environment
Our purpose is to provide great water
We rely on natural resources to
We must be resilient to changes such as
and more for the North West.
supply water and take back wastewater
climate change and population growth,
after treatment, as well as to generate
and ensure our impact on the natural
renewable energy.
Human capital
environment is positive.
Stakeholders
Our strategy and core values
Our strategy sets out how we deliver
our purpose, and is broken down into
three strategic themes, which govern
We rely on skilled and engaged
Our work and the huge areas of land
everything we do.
Financial capital
Economic environment
Efficient financing allows us to preserve
The economy impacts our financing
which we operate.
employees and suppliers to deliver our
we manage impacts a wide variety of
services, and skills must be maintained
stakeholders and we consult them to
through training and development.
help develop and execute our plans.
Manufactured capital
Technology and innovation
We invest to maintain and enhance our
New technology and innovations create
assets and build long-term resilience,
opportunities for improvements in
and we use telemetry to monitor and
service and efficiency, but can also
control many assets remotely.
create risks such as cyber attacks.
intergenerational equity for customers
through market rate movements such
while funding necessary long-term
as interest rates and inflation, and our
capital investment projects.
customers’ ability to pay their bills.
Social capital
Regulatory environment
The constructive relationships we have
Environmental and drinking water
built with regulators, suppliers, and
standards set by our regulators drive
other stakeholders are fundamental to
what we do, both now and in the long
our ability to deliver our purpose.
term through future market reforms.
Intellectual capital
Political environment
Innovation helps us continually improve,
This includes regional and national
and understanding performance trends
politicians as well as policymakers,
in our network helps us spot potential
and we must understand the key policy
issues early and fix them proactively.
issues affecting our industry.
The best service to customers
At the lowest sustainable cost
In a responsible manner
Our core values – customer
focused, innovative and trustworthy –
provide the cultural framework within
Materiality and risk management
We produce a materiality matrix to help
us prioritise issues based on the level of
stakeholder interest and the potential to
affect our ability to create value.
Read more about what matters most to
stakeholders on pages 34 to 39
We manage a wide variety of risks to
enable us to deliver a sustainable and
resilient service for the long term.
Read more about our risk management on
pages 100 to 109
Systems Thinking
We operate our network as a system
rather than discrete assets, and
we have a network of telemetry
across our system that enables us to
remotely monitor and control many
of our assets, providing real-time
performance data and helping us
deliver an efficient, proactive and
modern service for customers.
Our commitment to
ESG matters
We operate in an environmentally
and socially conscious manner and
uphold the highest standards of
corporate governance. Behaving in
a responsible manner is one of our
strategic themes, and we actively
participate in a broad range of global
ESG ratings, indices and frameworks
to benchmark our approach
against best practice and emerging
sustainability challenges.
Read more about our approach as a
responsible business on page 12
Read more about diversity and
inclusion on pages 44 to 45
Read our corporate governance report
on pages 112 to 193
Our planning
horizons
We undertake long, medium, and
short-term planning, taking into account
our external drivers and what matters to
stakeholders.
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Our core activities are to deliver essential
water and wastewater services for
household and business customers across
the North West.
Read more about how we operate on
pages 18 to 19
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The value we generate
Communities
We build partnerships to support communities
to be stronger. We work with schools and
young people to develop skills and help people
get back to work. Our land is open to the public
and we encourage people to use it responsibly.
Customers
We put customers at the heart of everything
we do, providing a continually improving
service at an efficient, low cost, and supporting
thousands of vulnerable customers through a
wide range of assistance schemes.
How we measure this
• KPI – community investment
• Other metrics include partnership
leverage, provision of education, and visitor
satisfaction
How we measure this
• KPI – customer experience (C-MeX)
• Other metrics include developer
experience (D-MeX), complaints, and
vulnerability support
Employees
We focus on attracting, developing and
retaining a diverse workforce, and ensuring we
look after their health, safety and wellbeing.
We pay the Living Wage and have a secure
pension provision.
Environment
We protect and enhance reservoirs,
catchments, rivers and bathing waters
that provide a home for wildlife, areas for
recreation, and a major pull for tourism, and
we aim to reduce our environmental impact.
How we measure this
• KPI – employee engagement
• Other metrics include diversity and
inclusion, learning and development, and
accident frequency rate
How we measure this
• KPI – EA performance assessment
• Other metrics include leakage,
clean air, carbon footprint, and
natural capital value added
Investors
Many of our investors are pension funds and
charities, so millions rely on the income we
provide. We manage risk prudently and provide
an appropriate return, investing in our assets for
growth and resilience.
How we measure this
• KPI – return on regulated equity (RoRE)
• Other metrics include performance across
investor indices, gearing and the Fair
Tax Mark
Suppliers
We invest in the North West’s infrastructure
and generate jobs, skills and income in the local
economy through our capital programme. We
act fairly and transparently with suppliers and
are a signatory to the Prompt Payment Code.
How we measure this
• KPI – percentage of invoices paid within 60 days
• Other metrics include average time taken
to pay invoices, and suppliers signed up to
our United Supply Chain
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Open the page to see how we
deliver our purpose and create
value for all our stakeholders
Our business model – our key resources
The six capitals
Natural capital
Human capital
Manufactured capital
We rely on water sources, such as
reservoirs, rivers and boreholes, from
Our people are essential in delivering
services for customers. We believe the
which abstraction licences permit us to
most effective decision-making comes
take water in a safe and sustainable way
from a diverse range of people who feel
to be treated and supplied to customers.
encouraged to share their views. Having
We rely on natural watercourses to take
a skilled, engaged and motivated team
wastewater back into the environment.
of employees, suppliers and contractors
We use bioresources from wastewater
is fundamental to the performance we
and break it down into biogas (which we
deliver and to employee retention, which
use to generate renewable energy) and
helps ensure efficient training and better
biosolids (which we treat to provide a
high-quality fertiliser for farmers). We
face risks from both severe dry weather,
when we must manage resilience of
water supply, and from severe rainfall,
when we must cope with the risk of
flooding.
performance.
How we manage this key resource
We support thousands of jobs in the
North West, including graduate and
apprenticeship programmes, helping
to secure a legacy for the future in our
region. We are an accredited Living Wage
How we manage this key resource
Foundation employer, providing our
Much of the water we abstract originates
employees with competitive salaries and
on land before running off into water. We
benefits, an attractive pension offering,
are stewards of large areas of this land,
and the opportunity to join the employee
much of which is managed by tenant
healthcare scheme and share incentive
farmers or in partnership. We ensure it is
plan. We provide comprehensive training
well managed to improve water quality
and development opportunities, including
and help protect habitats.
We plan and invest for the long term to
ensure we have resilient water resources.
digital skills to help with our Systems
Thinking approach, and enable remote
working where practical.
In the short term, we can bring more
We promote diversity, equality and
supplies online to meet demand, and our
inclusion, recruiting from all areas of the
integrated supply zone allows us to move
communities we serve and supporting
water efficiently around the region. We
our employees with equal opportunities.
also encourage customers to use water
Employee networks, representing groups
more efficiently with tips, free water-
of employees that may face specific
saving devices, and metering initiatives.
challenges, are overseen by an executive
When rainfall exceeds the capacity of
sewers, storm overflows allow heavily
diluted wastewater to be released
directly to the environment to minimise
the risk of sewer flooding in streets or
sponsor and support employees through
their career progression.
Read more about diversity and inclusion
on pages 44 to 45
people’s homes. We now need to reduce
We are committed to protecting the
the use of storm overflows, so we must
health, safety and wellbeing of our
find alternative ways to cope with excess
people, and have been awarded the
surface water whilst avoiding flooding.
workplace wellbeing charter.
Traditional interventions, such as storage
tanks and enlarging sewers, are costly,
carbon intensive and subject to space
constraints. We are innovating with
sustainable drainage and other nature-
based solutions that use the urban and
rural environment as part of the solution.
We manage the waste from our activities,
including sludge, in a sustainable way,
with the vast majority going to beneficial
use such as recycling or fertiliser for land.
We measure employee engagement
through an annual survey, and regularly
achieve results higher than UK norms.
We monitor and measure employee
performance through annual reviews.
Employees at all levels of the company
participate in the bonus scheme, with
the same bonus performance measures
as the executive directors, so everyone
benefits from the success of the
company.
Link to risks
5 7
Our network assets and treatment works
are essential to delivering our services for
customers and protecting public health.
Our energy assets enable us to generate
renewable energy, which helps reduce costs
and minimise our environmental impact. It
is important we have the right systems and
procedures in place to monitor and control
our assets efficiently and effectively.
Many of our assets are very long term in
nature, such as our impounding reservoirs
that can last hundreds of years. We must
invest to maintain these assets in good
condition so they can continue to provide
for customers in the long term. We need
to make improvements to ensure we can
meet the needs of a growing population,
and increasingly high quality standards and
tighter environmental consents driven by
our quality and environmental regulators.
How we manage this key resource
Since privatisation, the significant
investment we have made in our assets
has provided substantial benefits to
customers, including reduced supply
interruptions, reduced sewer flooding
incidents, and improved water quality,
and we expect to continue with a
substantial investment programme
for the foreseeable future as current
environmental legislation is expected to
drive significant investment needs.
Long-term planning helps us understand
where and when we need to invest in our
assets, and we monitor the condition,
performance and health of our assets.
We manage our assets in a holistic way that
seeks to minimise whole-life costs, and we
embrace new technology and innovation,
which is at the heart of our Systems
Thinking approach. This helps us deliver
efficient total expenditure (totex) without
compromising on quality of service or long-
term resilience, saving future operating
costs and reducing future customer bills.
Our assets and infrastructure projects
can affect people who live nearby. We
consult with these communities in the
planning stage and work hard to minimise
any negative impact, including odours
from our wastewater treatment works.
Link to risks
1 2 5 8
Link to risks
1 2 7
Our principal risks
1 Water service
2 Wastewater service
3 Retail and commercial
4 Supply chain and programme delivery
9 Conduct and compliance
5 Resource
10 Political and regulatory
6 Finance
8 Security
7 Health, safety and environmental
23
24
unitedutilities.com/corporate
Open the page to see how we
deliver our purpose and create
value for all our stakeholders
Our business model – our key resources
The six capitals
Natural capital
Human capital
Manufactured capital
We rely on water sources, such as
reservoirs, rivers and boreholes, from
which abstraction licences permit us to
take water in a safe and sustainable way
to be treated and supplied to customers.
We rely on natural watercourses to take
wastewater back into the environment.
We use bioresources from wastewater
and break it down into biogas (which we
use to generate renewable energy) and
biosolids (which we treat to provide a
high-quality fertiliser for farmers). We
face risks from both severe dry weather,
when we must manage resilience of
water supply, and from severe rainfall,
when we must cope with the risk of
flooding.
How we manage this key resource
Much of the water we abstract originates
on land before running off into water. We
are stewards of large areas of this land,
much of which is managed by tenant
farmers or in partnership. We ensure it is
well managed to improve water quality
and help protect habitats.
We plan and invest for the long term to
ensure we have resilient water resources.
In the short term, we can bring more
supplies online to meet demand, and our
integrated supply zone allows us to move
water efficiently around the region. We
also encourage customers to use water
more efficiently with tips, free water-
saving devices, and metering initiatives.
When rainfall exceeds the capacity of
sewers, storm overflows allow heavily
diluted wastewater to be released
directly to the environment to minimise
the risk of sewer flooding in streets or
people’s homes. We now need to reduce
the use of storm overflows, so we must
find alternative ways to cope with excess
surface water whilst avoiding flooding.
Traditional interventions, such as storage
tanks and enlarging sewers, are costly,
carbon intensive and subject to space
constraints. We are innovating with
sustainable drainage and other nature-
based solutions that use the urban and
rural environment as part of the solution.
We manage the waste from our activities,
including sludge, in a sustainable way,
with the vast majority going to beneficial
use such as recycling or fertiliser for land.
Link to risks
1 2 7
Our principal risks
1 Water service
2 Wastewater service
3 Retail and commercial
Our people are essential in delivering
services for customers. We believe the
most effective decision-making comes
from a diverse range of people who feel
encouraged to share their views. Having
a skilled, engaged and motivated team
of employees, suppliers and contractors
is fundamental to the performance we
deliver and to employee retention, which
helps ensure efficient training and better
performance.
How we manage this key resource
We support thousands of jobs in the
North West, including graduate and
apprenticeship programmes, helping
to secure a legacy for the future in our
region. We are an accredited Living Wage
Foundation employer, providing our
employees with competitive salaries and
benefits, an attractive pension offering,
and the opportunity to join the employee
healthcare scheme and share incentive
plan. We provide comprehensive training
and development opportunities, including
digital skills to help with our Systems
Thinking approach, and enable remote
working where practical.
We promote diversity, equality and
inclusion, recruiting from all areas of the
communities we serve and supporting
our employees with equal opportunities.
Employee networks, representing groups
of employees that may face specific
challenges, are overseen by an executive
sponsor and support employees through
their career progression.
Read more about diversity and inclusion
on pages 44 to 45
We are committed to protecting the
health, safety and wellbeing of our
people, and have been awarded the
workplace wellbeing charter.
We measure employee engagement
through an annual survey, and regularly
achieve results higher than UK norms.
We monitor and measure employee
performance through annual reviews.
Employees at all levels of the company
participate in the bonus scheme, with
the same bonus performance measures
as the executive directors, so everyone
benefits from the success of the
company.
Our network assets and treatment works
are essential to delivering our services for
customers and protecting public health.
Our energy assets enable us to generate
renewable energy, which helps reduce costs
and minimise our environmental impact. It
is important we have the right systems and
procedures in place to monitor and control
our assets efficiently and effectively.
Many of our assets are very long term in
nature, such as our impounding reservoirs
that can last hundreds of years. We must
invest to maintain these assets in good
condition so they can continue to provide
for customers in the long term. We need
to make improvements to ensure we can
meet the needs of a growing population,
and increasingly high quality standards and
tighter environmental consents driven by
our quality and environmental regulators.
How we manage this key resource
Since privatisation, the significant
investment we have made in our assets
has provided substantial benefits to
customers, including reduced supply
interruptions, reduced sewer flooding
incidents, and improved water quality,
and we expect to continue with a
substantial investment programme
for the foreseeable future as current
environmental legislation is expected to
drive significant investment needs.
Long-term planning helps us understand
where and when we need to invest in our
assets, and we monitor the condition,
performance and health of our assets.
We manage our assets in a holistic way that
seeks to minimise whole-life costs, and we
embrace new technology and innovation,
which is at the heart of our Systems
Thinking approach. This helps us deliver
efficient total expenditure (totex) without
compromising on quality of service or long-
term resilience, saving future operating
costs and reducing future customer bills.
Our assets and infrastructure projects
can affect people who live nearby. We
consult with these communities in the
planning stage and work hard to minimise
any negative impact, including odours
from our wastewater treatment works.
Link to risks
5 7
Link to risks
1 2 5 8
6 Finance
7 Health, safety and environmental
8 Security
4 Supply chain and programme delivery
9 Conduct and compliance
5 Resource
10 Political and regulatory
23
24
unitedutilities.com/corporate
Our business model – our key resources
The six capitals
We rely on water sources, such as
reservoirs, rivers and boreholes, from
Our people are essential in delivering
services for customers. We believe the
which abstraction licences permit us to
most effective decision-making comes
take water in a safe and sustainable way
from a diverse range of people who feel
to be treated and supplied to customers.
encouraged to share their views. Having
We rely on natural watercourses to take
a skilled, engaged and motivated team
wastewater back into the environment.
of employees, suppliers and contractors
We use bioresources from wastewater
is fundamental to the performance we
and break it down into biogas (which we
deliver and to employee retention, which
use to generate renewable energy) and
helps ensure efficient training and better
biosolids (which we treat to provide a
high-quality fertiliser for farmers). We
face risks from both severe dry weather,
when we must manage resilience of
water supply, and from severe rainfall,
when we must cope with the risk of
flooding.
performance.
How we manage this key resource
We support thousands of jobs in the
North West, including graduate and
apprenticeship programmes, helping
to secure a legacy for the future in our
region. We are an accredited Living Wage
How we manage this key resource
Foundation employer, providing our
Much of the water we abstract originates
employees with competitive salaries and
on land before running off into water. We
benefits, an attractive pension offering,
are stewards of large areas of this land,
and the opportunity to join the employee
much of which is managed by tenant
healthcare scheme and share incentive
farmers or in partnership. We ensure it is
plan. We provide comprehensive training
well managed to improve water quality
and development opportunities, including
and help protect habitats.
We plan and invest for the long term to
ensure we have resilient water resources.
digital skills to help with our Systems
Thinking approach, and enable remote
working where practical.
In the short term, we can bring more
We promote diversity, equality and
supplies online to meet demand, and our
inclusion, recruiting from all areas of the
integrated supply zone allows us to move
communities we serve and supporting
water efficiently around the region. We
our employees with equal opportunities.
also encourage customers to use water
Employee networks, representing groups
more efficiently with tips, free water-
of employees that may face specific
saving devices, and metering initiatives.
challenges, are overseen by an executive
When rainfall exceeds the capacity of
sewers, storm overflows allow heavily
diluted wastewater to be released
directly to the environment to minimise
the risk of sewer flooding in streets or
sponsor and support employees through
their career progression.
Read more about diversity and inclusion
on pages 44 to 45
people’s homes. We now need to reduce
We are committed to protecting the
the use of storm overflows, so we must
health, safety and wellbeing of our
find alternative ways to cope with excess
people, and have been awarded the
surface water whilst avoiding flooding.
workplace wellbeing charter.
Traditional interventions, such as storage
tanks and enlarging sewers, are costly,
carbon intensive and subject to space
constraints. We are innovating with
sustainable drainage and other nature-
based solutions that use the urban and
rural environment as part of the solution.
We manage the waste from our activities,
including sludge, in a sustainable way,
with the vast majority going to beneficial
use such as recycling or fertiliser for land.
We measure employee engagement
through an annual survey, and regularly
achieve results higher than UK norms.
We monitor and measure employee
performance through annual reviews.
Employees at all levels of the company
participate in the bonus scheme, with
the same bonus performance measures
as the executive directors, so everyone
benefits from the success of the
company.
Link to risks
5 7
Our network assets and treatment works
are essential to delivering our services for
customers and protecting public health.
Our energy assets enable us to generate
renewable energy, which helps reduce costs
and minimise our environmental impact. It
is important we have the right systems and
procedures in place to monitor and control
our assets efficiently and effectively.
Many of our assets are very long term in
nature, such as our impounding reservoirs
that can last hundreds of years. We must
invest to maintain these assets in good
condition so they can continue to provide
for customers in the long term. We need
to make improvements to ensure we can
meet the needs of a growing population,
and increasingly high quality standards and
tighter environmental consents driven by
our quality and environmental regulators.
How we manage this key resource
Since privatisation, the significant
investment we have made in our assets
has provided substantial benefits to
customers, including reduced supply
interruptions, reduced sewer flooding
incidents, and improved water quality,
and we expect to continue with a
substantial investment programme
for the foreseeable future as current
environmental legislation is expected to
drive significant investment needs.
Long-term planning helps us understand
where and when we need to invest in our
assets, and we monitor the condition,
performance and health of our assets.
We manage our assets in a holistic way that
seeks to minimise whole-life costs, and we
embrace new technology and innovation,
which is at the heart of our Systems
Thinking approach. This helps us deliver
efficient total expenditure (totex) without
compromising on quality of service or long-
term resilience, saving future operating
costs and reducing future customer bills.
Our assets and infrastructure projects
can affect people who live nearby. We
consult with these communities in the
planning stage and work hard to minimise
any negative impact, including odours
from our wastewater treatment works.
Link to risks
1 2 5 8
Link to risks
1 2 7
Our principal risks
1 Water service
2 Wastewater service
3 Retail and commercial
4 Supply chain and programme delivery
9 Conduct and compliance
5 Resource
10 Political and regulatory
6 Finance
8 Security
7 Health, safety and environmental
Natural capital
Human capital
Manufactured capital
Financial capital
Social capital
Intellectual capital
As a result of the long-term nature
of our assets, and the need to ensure
affordability by spreading the cost fairly
between the generations of customers
that benefit, it is necessary to raise
financing to fund investment in building,
maintaining and improving our assets,
networks and services. It is important that
we are able to raise finance when needed
to preserve adequate liquidity, and that we
manage financial risks such as our exposure
to movements in interest rates and
inflation, to ensure we maintain long-term
financial resilience.
How we manage this key resource
We maintain a robust capital structure,
with a responsible mix of equity and debt
financing. We monitor our performance
against key credit ratios to help us
maintain strong and stable investment
grade credit ratings, which gives us
efficient access to debt capital markets
across the economic cycle.
We maintain relationships with a range
of banks and retain access to a broad
and diverse range of sources of financing
in a number of markets, across which
we seek the best relative value when
issuing new debt. We periodically refresh
our medium-term note programme to
enable efficient debt issuance under pre-
agreed contractual terms, and the board
delegates authority to the CFO, allowing
us to respond quickly to attractive
financing opportunities. This helps us to
consistently raise efficient financing. Our
sustainable finance framework allows us
to raise debt based on our strong ESG
credentials.
We aim to avoid a concentration of
refinancing in any one year, and fund long
term where possible. Our debt portfolio
has a very long average life, and we
monitor liquidity forecasts with a policy
of having resources available to cover the
next 15–24 months of projected cash flows
to ensure forward funding needs are met.
We have clear and transparent hedging
policies covering credit, liquidity, interest
rate, inflation and currency risk, and these
are aligned with the regulatory model.
We work with several capital delivery
partners, often on large infrastructure
projects that can span multiple years,
and these partner organisations form
part of the public face of our business.
It is important that we build constructive
working relationships with our supply
chain partners to ensure the smooth
delivery of projects and a good all-round
service for customers.
Maintaining positive relationships with
other stakeholders is really important,
such as regulators and community bodies
across our region.
How we manage this key resource
We have contracted for around 80 per
cent of our base capital programme for
the 2020–25 regulatory period, with
arrangements in place for sharing of cost
overruns to incentivise efficient delivery
against the target price.
Our supplier relationship management
process ensures regular discussions
between our commercial team and
existing suppliers to help identify issues
and opportunities for a smooth and
productive relationship, and we engage
suppliers on sustainable and ethical
issues through our United Supply Chain
(USC) approach.
We actively engage with all our
stakeholders, including our regulators
with whom we discuss short-term and
longer-term priorities and objectives
and respond to consultations so we are
influencing where we are able to.
Our stakeholder engagement extends to
various environmental interest groups
and community bodies, whom we keep
informed, collaborate and in some
instances form partnerships with.
This engagement helps us develop
a matrix of the issues that are most
material to stakeholders and to our ability
to create value, and our assessment of
these issues is a key part of our planning
approach.
Read more about engaging with our
stakeholders on pages 30 to 33 and
working in partnerships on page 55
The knowledge and systems we have
across our business are critical to
effectively running our treatment works
and maintaining our assets to ensure a
long-term resilient service.
It is important that we keep up to date
with new advances in technology. With
a growing population, changing climate,
finite resources and space constraints, we
need to find innovative solutions to help
us deliver the best service to customers,
protect and enhance the environment,
and keep bills affordable.
How we manage this key resource
Innovation is one of our core values, and
we use a variety of methods to find novel
ideas and solutions – idea scouting, using
ideas from other water companies across
the world and from other industries. We
invite companies to bring innovative
solutions to us through our Innovation
Lab programme, and we encourage
innovation at all levels inside the
business, including our CEO Challenge
programme where our graduates work
in groups to find novel ways to tackle
challenges that we face as a business.
These initiatives are a source of
fantastic new ideas and often lead to the
development of products and software
that give us a competitive advantage
against our peers in the water industry.
Occasionally, new ideas are worth
protecting with copyrights, trademarks
and patents, and we manage this
intellectual property portfolio for short
and long-term benefit.
Our Systems Thinking approach involves
remote monitoring and control, taking a
‘whole system’ view of our network and
assets, and proactive and preventative
optimisation to spot and resolve issues
before they impact customers. This
requires a network of systems and
processes, and at the higher maturity
levels we use artificial intelligence to
optimise the way we operate. With
sensors in our network sending real-time
data to our Integrated Control Centre,
we develop an understanding of the
signature and can predict patterns that
enable us to spot anomalies that could
signal issues we can then proactively fix.
Link to risks
4 6
Link to risks
4
Link to risks
5
Risk exposure
An indication of the current exposure of each principal risk relative to the prior year.
Decreased
Stable
Increased
24
unitedutilities.com/corporate
Stock Code: UU.
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Our business model – our external drivers
The way we work is impacted by a number of factors external to our business that we
must consider and manage.
Natural
environment
Economic
environment
Regulatory
environment
Our use and return of water to the
environment is a continuous cycle, and
returning water cleanly and safely, as
well as managing our catchment land
effectively, allows this cycle to begin
again from the best starting point.
The natural environment is constantly
changing, and we must adapt and
prepare for future impacts such as
climate change and population growth.
We can help mitigate climate change
by minimising our own environmental
impact, and we must also adapt the
way we work to meet the anticipated
changes in climate and population
across our region to ensure long-term
resilience.
Our costs are impacted by market
rate movements, such as interest
rates and inflation, but we seek to
manage these prudently to reduce the
risk as far as practical. Our financial
risk management policies include
the fixing of interest rates and target
levels of inflation-linked debt. Read
more about the impacts inflation has
on our business on page 81. As well as
these direct impacts on the company,
the economic climate impacts our
customers and their ability to pay
their bills. We operate in an area with
high levels of extreme deprivation,
so helping vulnerable customers is
particularly important for us.
Sustainable business means
preparing for future market reforms
as well as meeting current regulatory
commitments. We place great value
on our relationships with economic,
quality and environmental regulators.
We engage actively and regularly,
both on our ongoing plans, and on
consultations for future reforms where
we offer our views and influence where
we can. The need to monitor and
assess the regulatory environment, and
proactively engage with the direction
of travel and changing priorities, is
constant regardless of where we are in
the regulatory cycle at any particular
point in time.
Link to material issues
• Natural capital and biodiversity
Link to material issues
• Affordability and vulnerability
Link to material issues
• Trust, transparency and legitimacy
• Water resources and leakage
• Financial risk management
• Resilience
• Climate change
• North West regional economy
• Political and regulatory environment
Technology and
innovation
Political
environment
New technologies and innovative
ideas present opportunities for us to
make things faster, better, safer and
cheaper. These can come from a variety
of places – across different industries
and countries as well as within our
business. We encourage innovation
externally and internally at all levels,
from our Innovation Lab to our annual
CEO Challenge. Technology can also
create risks, particularly the threat
of cyber attacks on critical national
infrastructure such as ours, therefore,
it is critical that we maintain a stringent
approach to cyber security that evolves
with new technological advances.
Link to material issues
• Customer service and
operational performance
• Cyber security
• Data security
Political decisions have the potential to
significantly impact on our operations.
As a responsible business, we ensure
that we abide by the directions set by
government, and stay flexible to adapt
to new developments, such as the
requirements of the Environment Act
2021, in particular in relation to river
health and the use of storm overflows.
We engage closely with politicians
and other policymakers to understand
developments that will affect our
business, and to communicate the
value that United Utilities delivers to the
North West, and the UK as a whole.
Stakeholders
There are many stakeholders who take
an interest in the water sector and its
role in society. These stakeholders can
have conflicting views on priorities
for the sector and the region, which
can influence what we do. It is
important that we understand what
matters to these stakeholders and
develop constructive relationships
built on mutual trust. The nature of
our work means we are at the heart
of communities across our region,
and interact with a large variety of
stakeholders, from communities and
environmental interest bodies to
suppliers and regulators.
Link to material issues
• Trust, transparency and legitimacy
Link to material issues
• Trust, transparency and legitimacy
• Political and regulatory
• Land management, access and
environment
recreation
• Sewer flooding and storm overflows
• Supporting communities
26
unitedutilities.com/corporate
Our business model – our external drivers
The way we work is impacted by a number of factors external to our business that we
must consider and manage.
Natural
environment
Economic
environment
Regulatory
environment
Our use and return of water to the
Our costs are impacted by market
Sustainable business means
environment is a continuous cycle, and
rate movements, such as interest
returning water cleanly and safely, as
rates and inflation, but we seek to
preparing for future market reforms
as well as meeting current regulatory
well as managing our catchment land
manage these prudently to reduce the
commitments. We place great value
effectively, allows this cycle to begin
risk as far as practical. Our financial
on our relationships with economic,
again from the best starting point.
risk management policies include
quality and environmental regulators.
The natural environment is constantly
the fixing of interest rates and target
We engage actively and regularly,
changing, and we must adapt and
prepare for future impacts such as
levels of inflation-linked debt. Read
both on our ongoing plans, and on
more about the impacts inflation has
consultations for future reforms where
climate change and population growth.
on our business on page 81. As well as
we offer our views and influence where
We can help mitigate climate change
these direct impacts on the company,
we can. The need to monitor and
by minimising our own environmental
the economic climate impacts our
assess the regulatory environment, and
impact, and we must also adapt the
customers and their ability to pay
proactively engage with the direction
way we work to meet the anticipated
their bills. We operate in an area with
of travel and changing priorities, is
changes in climate and population
high levels of extreme deprivation,
constant regardless of where we are in
across our region to ensure long-term
so helping vulnerable customers is
the regulatory cycle at any particular
resilience.
particularly important for us.
point in time.
Link to material issues
Link to material issues
Link to material issues
• Natural capital and biodiversity
• Affordability and vulnerability
• Trust, transparency and legitimacy
• Water resources and leakage
• Financial risk management
• Resilience
• Climate change
• North West regional economy
• Political and regulatory environment
Technology and
innovation
Political
environment
Stakeholders
New technologies and innovative
Political decisions have the potential to
There are many stakeholders who take
ideas present opportunities for us to
significantly impact on our operations.
an interest in the water sector and its
make things faster, better, safer and
As a responsible business, we ensure
role in society. These stakeholders can
cheaper. These can come from a variety
that we abide by the directions set by
have conflicting views on priorities
of places – across different industries
government, and stay flexible to adapt
for the sector and the region, which
and countries as well as within our
business. We encourage innovation
to new developments, such as the
can influence what we do. It is
requirements of the Environment Act
important that we understand what
externally and internally at all levels,
2021, in particular in relation to river
matters to these stakeholders and
from our Innovation Lab to our annual
health and the use of storm overflows.
develop constructive relationships
CEO Challenge. Technology can also
We engage closely with politicians
built on mutual trust. The nature of
and other policymakers to understand
our work means we are at the heart
create risks, particularly the threat
of cyber attacks on critical national
developments that will affect our
infrastructure such as ours, therefore,
business, and to communicate the
of communities across our region,
and interact with a large variety of
it is critical that we maintain a stringent
value that United Utilities delivers to the
stakeholders, from communities and
approach to cyber security that evolves
North West, and the UK as a whole.
environmental interest bodies to
with new technological advances.
suppliers and regulators.
Link to material issues
• Customer service and
operational performance
• Cyber security
• Data security
Link to material issues
Link to material issues
• Trust, transparency and legitimacy
• Trust, transparency and legitimacy
• Political and regulatory
• Land management, access and
environment
recreation
• Sewer flooding and storm overflows
• Supporting communities
Regulatory environment
To provide great water and more for the North West, we must
consider our economic, quality and environmental regulation and
create medium and long-term plans that meet the priorities of
each of our regulators.
Our industry and market
Most customers in England and Wales
are served by one of 11 large water
and wastewater companies or smaller
companies providing only water services.
Our regulated entity, United Utilities Water
Limited, is the second largest company
as measured by Regulatory Capital Value
(RCV). RCV represents the net value of
accumulated investment in the company’s
asset base. We serve over seven million
people, with over three million household
customers making up around two-thirds of
our revenue, and over 200,000 businesses.
In the non-household marketplace, we
provide wholesale services to retailers.
As a monopoly provider of essential
services, we are regulated by various
bodies (as set out below), and we are
subject to sector-specific legislation
alongside this regulation.
Our regulators assess our comparative
operating performance against the other
water and wastewater companies in
England and Wales, with the Drinking
Water Inspectorate (DWI) assessing
performance in water, the Environment
Agency (EA) assessing performance
in wastewater, and Ofwat assessing
customer satisfaction. Both Ofwat’s
customer satisfaction assessment and
the EA’s annual performance assessment
are included in our operational key
performance indicators (KPIs).
Ofwat sets total revenues, service levels
that must be provided, and the incentive
package for companies for five-year
periods, known as Asset Management Plan
periods (AMPs).
These packages are based on Ofwat’s
methodology, which reflects stakeholder
and customer priorities, and are confirmed
following detailed scrutiny of business
plans proposed by the companies. We
must, therefore, engage constructively
with Ofwat on future priorities and its
methodology development and submit
high-quality plans to help ensure we
receive a determination that targets
the best outcomes for us to continue
creating value for customers and all our
stakeholders, and effectively incentivises
us to continue improving performance.
To ensure our plan is robust and
balanced, we consult with customers and
other stakeholders (including quality and
environmental regulators) and factor in
long-term planning and resilience needs.
This was the second year of AMP7,
covering the 2020–25 period, and our
focus has been on delivering and trying
to outperform our final determination
through:
• achieving higher customer
satisfaction than our peers;
• beating the outcome delivery
incentive (ODI) targets for operational
performance;
• delivering efficient total expenditure
(totex); and
•
raising debt finance at a cost below
the industry allowed cost of debt.
Our vision is to be the best UK water and
wastewater company, so we regularly
benchmark our performance against our
peers, and we benchmark our customer
service performance against other leading
service providers in our region.
Since privatisation, the water industry
has invested a significant amount,
contributing to improvements in public
health and environmental standards,
better quality of services, and superior
quality drinking water. In its final
determinations for AMP7, Ofwat allowed
a further £51 billion across the industry to
deliver further improvements, and since
this, Ofwat has allowed a further
£2.7 billion for green economic recovery.
11
large licensed water and
wastewater companies
2nd
largest waste and wastewater
company in England and Wales
>£50bn
allowance across the industry to
deliver further improvements over
the 2020–25 period
Our regulators
We are subject to regulation of our price
and performance by economic, quality
and environmental regulators, as shown
in the diagram.
These bodies exist to help protect
the interests of customers and the
environment, but they can have
competing interests. For example, in
agreeing environmental improvements
and over what time frame these will be
delivered, we must consider how much
it will cost and the need to protect
customers from bill shocks. Balancing
these interests requires open and
continuous dialogue.
n o m i c r egulation
o
c
E
*
The regulatory framework can
change significantly in the
long term and we have seen
substantial tightening of
laws and regulations since
privatisation.
While much is outside
our direct control,
maintaining good
relationships enables us
to engage positively with
regulators to influence
future policy, aiming to
achieve the best outcome for
all our stakeholders.
Q
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stakeholders on pages 29 to 32
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Stock Code: UU.
* Partnership made up of Ofwat, the Environment Agency and DWI.
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Social factors
We are leading the sector on
supporting customers with
affordability and vulnerability.
54%
of the most deprived areas in
the country
47%
of households have less than
£100 savings to cope with
unexpected bills
12%
of households are affected by
water poverty, more than 50 per
cent higher than the national
average
Our business model – our external drivers
The North West region
What we do is influenced by several key
factors that make our region unique.
We are committed to understanding
and actively responding to these.
Carlisle
Workington
Whitehaven
Kendal
Barrow-in-Furness
Lancaster
Blackpool
Preston
Burnley
Blackburn
Bolton
Liverpool
Manchester
Warrington
Stockport
Chester
Crewe
Economic factors
We are building resilience to continue
serving our growing population and
support jobs and the tourism industry.
7.4m
population expected to grow
significantly in the next 25 years
22,700(1)
jobs actively supported by our work,
with over 5,000 direct employees
Tourism
relied on by Lake District, Manchester,
Liverpool and coastal areas
(1) Based on our 2020–25 business plan.
Environmental factors
We have a long coastline, protected rural
areas and dense urban areas, all of which
create different demands.
30%
of land is National Park or Area of
Outstanding Natural Beauty or Sites of
Special Scientific Interest
designated coastal bathing waters
25
830mm
rainfall each year, higher than the
UK average
28
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Our business model – our external drivers
The North West region
Engaging with our stakeholders
We actively engage with stakeholders to understand what matters most to them through
strong and constructive relationships.
To create longer-term value for all it is essential that we identify
and engage with our stakeholders to understand what matters
most to them.
We do not operate in isolation and it is not for us alone to
determine what the region needs us to deliver. Engaging with
stakeholders across the North West enables us to identify
shared solutions to shared challenges. We value the diverse
perspectives that a broad range of stakeholders, representing
different and often competing interests, can bring to our
decision-making.
Understanding what matters to stakeholders will only be
achieved by building strong, constructive relationships and
engaging regularly. This is important to building and maintaining
trust. These relationships are subject to robust governance
to ensure the insights generated are taken into account in
decision-making at executive and board level. The board’s
corporate responsibility committee meets four times a year, with
stakeholder engagement as one of its standing agenda items,
and the chair of the independent customer challenge group
(YourVoice) attends board meetings to provide its perspective.
The following pages detail how we engage with, and are
influenced by, each of our key stakeholder groups. Our analysis
of what matters most to stakeholders, and how these issues
affect our ability to create long-term value, is set out in our
material issues matrix on page 35.
As shown below, there are nine key stakeholder groups that
influence our planning and activities, and six of these groups
benefit from the value we create.
Social factors
We are leading the sector on
supporting customers with
affordability and vulnerability.
of the most deprived areas in
54%
the country
47%
unexpected bills
12%
of households have less than
£100 savings to cope with
of households are affected by
water poverty, more than 50 per
cent higher than the national
average
What we do is influenced by several key
factors that make our region unique.
We are committed to understanding
and actively responding to these.
Carlisle
Workington
Whitehaven
Kendal
Barrow-in-Furness
Lancaster
Economic factors
We are building resilience to continue
serving our growing population and
support jobs and the tourism industry.
7.4m
population expected to grow
significantly in the next 25 years
22,700(1)
jobs actively supported by our work,
with over 5,000 direct employees
Tourism
relied on by Lake District, Manchester,
Liverpool and coastal areas
(1) Based on our 2020–25 business plan.
Blackpool
Preston
Burnley
Blackburn
Bolton
Liverpool
Manchester
Warrington
Stockport
Chester
Crewe
Environmental factors
We have a long coastline, protected rural
areas and dense urban areas, all of which
create different demands.
30%
of land is National Park or Area of
Outstanding Natural Beauty or Sites of
Special Scientific Interest
25
designated coastal bathing waters
830mm
rainfall each year, higher than the
UK average
E m p loyee
s
Employees
u s t omers
C
Customers
E
Environment
Who are our
stakeholders?
o m munitie
s
Communities
C
Customers
Media
Shareholders
Medi a
Employees
Politici a n s
Influence what we do
Communities
Regula t
o rs
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Stock Code: UU.
Environment
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I n v estors
Shareholders
S u ppliers
Media
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Influence what we do and benefit from the value we create
Our business model – our external drivers
Engaging with our stakeholders
Our approach to engagement extends across all of our stakeholders, from those who influence what
we do and benefit from the value we create, to those who just influence what we do.
Communities
Customers
Customers
Employees
Environment
Environment
Shareholders
Communities
Customers
Employees
Environment
Investors
Media
Suppliers
Why we engage
We seek to support communities to be
stronger based on mutual trust, respect
and understanding the impact and
contribution our work has on everyday
life. Our work puts us at the heart of local
communities, places where customers
and employees live and work. We play
a constructive role in tackling issues
through engagement and investment,
and by identifying what matters
most to communities we can develop
collaborative solutions.
Why we engage
We actively seek feedback on what
domestic and wholesale customers think
about us so we can make our services
better and address the issues that matter.
To provide a great service in a way that
customers value, we need to listen and
engage with them to understand both
short-term issues, and longer-term
expectations of us as their water company.
As customer expectations change, we
need to evolve our own services to ensure
we meet those expectations.
Why we engage
Our employees are the face of the
company and we simply could not deliver
our services without them. Employees
know our business better than anyone,
with a diverse range of views and
experience, making them well placed to
identify opportunities for improvement.
It is essential we build productive
relationships with our employees based
on trust. In a world of work that is rapidly
changing, employee engagement is
crucial to develop new ways of working.
How we engage
• Face-to-face meetings with local and
parish councils to discuss projects.
How we engage
• Contacts through our operational call
centre and social media channels.
How we engage
• Annual opinion survey enabling
confidential feedback.
• Online portals for large capital
projects to get the views of
communities where we are working.
• Visits to customer properties to
resolve issues.
• Direct customer research on our
• Regular manager one-to-one
meetings providing two-way
engagement.
Why we engage
Why we engage
Why we engage
We depend on the environment and play
It is important that investors have
Good relationships with suppliers help
a key role in protecting and enhancing it
confidence in the company and how it is
ensure that we get projects delivered on
across the region. Given the environment
managed, given their investment in our
time, to good quality, at efficient costs
has no voice of its own, we engage with
business. We provide regular updates
and can identify and realise innovative
interested groups such as environmental
to debt and equity investors so they can
approaches and solutions. Awareness
regulators, non-governmental
be assured that the company is being
of issues throughout the supply chain
organisations, campaigners and local
managed responsibly. Increasingly,
means we can address them together
communities to find the best ways to
this includes environmental, social and
and become more resilient. We rely on
tackle environmental issues, like climate
governance updates alongside financial
suppliers to deliver our services and
change and land management. Working
and performance data as investors take a
create value for all.
together is often the best way to find the
broader view of value and risk.
right solution.
How we engage
How we engage
How we engage
• Meetings with national and regional
• Capital market days and investor
• Directly through supplier relationship
environmental regulators, such as the
roadshows.
management process.
Environment Agency.
• Annual General Meeting open to all
• Setting challenges through our
• Customer research to shape our
shareholders.
Innovation Lab.
environmental investment plans.
• Direct dialogue with relationship
• Supplier databases such as Achilles,
• Facilitated workshops with partners
service provision.
• Employee Voice panel providing a link
• Workshops with environmental
banks and credit agencies.
to assess market opportunities.
to scope out solutions.
• Public events across the North West to
promote sustainable use of our services.
• Face-to-face engagement with groups
representing vulnerable customers,
such as MIND.
to the board.
• Monthly trade union forums.
• Partnerships where we have common
ratings and indices.
Supply Chain (USC).
• Participation in investor-led ESG
• Direct discussion through United
stakeholders.
interests.
Top three material issues
• Land management,
access and recreation
• Supporting communities
Top three material issues
• Drinking water quality
• Customer service and
operational performance
• Trust, transparency and legitimacy
• Affordability and vulnerability
Top three material issues
• Employee engagement
• Diverse and skilled workforce
• Health, safety and wellbeing
What we are doing
• Balancing decisions based on often
competing interests of stakeholders.
What we are doing
•
Improving services for customers such
as GetWaterFit and Priority Services.
What we are doing
• Acting on survey results to create a
better place to work.
•
Identifying common issues where
partnerships could provide a solution.
• Helping customers who are struggling
• Delivering our people plan and
to pay their bills.
encouraging action on inclusivity.
Top three material issues
Top three material issues
Top three material issues
• Sewer flooding and storm overflows
• Customer service and
• Trust, transparency and legitimacy
• Climate change
• Water resources and leakage
• North West regional economy
• Responsible supply chain
operational performance
• Financial risk management
• Corporate governance and
business conduct
What we are doing
What we are doing
What we are doing
• Working with partners to deliver
• Maintaining high levels of corporate
• Consistently paying suppliers on time.
improvements to rivers.
governance.
• Providing access to innovative new
• Delivering our carbon and
• Performing well across a range of
products and services.
Better Rivers: Better North West
respected ESG indices and ratings.
commitments.
30
unitedutilities.com/corporate
Our business model – our external drivers
Engaging with our stakeholders
Our approach to engagement extends across all of our stakeholders, from those who influence what
we do and benefit from the value we create, to those who just influence what we do.
Why we engage
Why we engage
Why we engage
Why we engage
Why we engage
Why we engage
We seek to support communities to be
We seek to support communities to be
We actively seek feedback on what
We actively seek feedback on what
Our employees are the face of the
Our employees are the face of the
stronger based on mutual trust, respect
stronger based on mutual trust, respect
domestic and wholesale customers think
domestic and wholesale customers think
company and we simply could not deliver
company and we simply could not deliver
and understanding the impact and
and understanding the impact and
about us so we can make our services
about us so we can make our services
our services without them. Employees
our services without them. Employees
contribution our work has on everyday
contribution our work has on everyday
better and address the issues that matter.
better and address the issues that matter.
know our business better than anyone,
know our business better than anyone,
life. Our work puts us at the heart of local
life. Our work puts us at the heart of local
To provide a great service in a way that
To provide a great service in a way that
with a diverse range of views and
with a diverse range of views and
communities, places where customers
communities, places where customers
customers value, we need to listen and
customers value, we need to listen and
experience, making them well placed to
experience, making them well placed to
and employees live and work. We play
and employees live and work. We play
engage with them to understand both
engage with them to understand both
identify opportunities for improvement.
identify opportunities for improvement.
a constructive role in tackling issues
a constructive role in tackling issues
short-term issues, and longer-term
short-term issues, and longer-term
It is essential we build productive
It is essential we build productive
through engagement and investment,
through engagement and investment,
expectations of us as their water company.
expectations of us as their water company.
relationships with our employees based
relationships with our employees based
and by identifying what matters
and by identifying what matters
As customer expectations change, we
As customer expectations change, we
on trust. In a world of work that is rapidly
on trust. In a world of work that is rapidly
most to communities we can develop
most to communities we can develop
need to evolve our own services to ensure
need to evolve our own services to ensure
changing, employee engagement is
changing, employee engagement is
collaborative solutions.
collaborative solutions.
we meet those expectations.
we meet those expectations.
crucial to develop new ways of working.
crucial to develop new ways of working.
How we engage
How we engage
How we engage
How we engage
How we engage
How we engage
• Face-to-face meetings with local and
• Face-to-face meetings with local and
• Contacts through our operational call
• Contacts through our operational call
• Annual opinion survey enabling
• Annual opinion survey enabling
parish councils to discuss projects.
parish councils to discuss projects.
centre and social media channels.
centre and social media channels.
confidential feedback.
confidential feedback.
• Online portals for large capital
• Online portals for large capital
• Visits to customer properties to
• Visits to customer properties to
• Regular manager one-to-one
• Regular manager one-to-one
projects to get the views of
projects to get the views of
communities where we are working.
communities where we are working.
resolve issues.
resolve issues.
• Direct customer research on our
• Direct customer research on our
meetings providing two-way
meetings providing two-way
engagement.
engagement.
Communities
Communities
Customers
Customers
Employees
Employees
Environment
Environment
Customers
Customers
Environment
Environment
Shareholders
Shareholders
Communities
Communities
Customers
Customers
Employees
Employees
Environment
Environment
Investors
Investors
Media
Media
Suppliers
Suppliers
Why we engage
Why we engage
We depend on the environment and play
We depend on the environment and play
a key role in protecting and enhancing it
a key role in protecting and enhancing it
across the region. Given the environment
across the region. Given the environment
has no voice of its own, we engage with
has no voice of its own, we engage with
interested groups such as environmental
interested groups such as environmental
regulators, non-governmental
regulators, non-governmental
organisations, campaigners and local
organisations, campaigners and local
communities to find the best ways to
communities to find the best ways to
tackle environmental issues, like climate
tackle environmental issues, like climate
change and land management. Working
change and land management. Working
together is often the best way to find the
together is often the best way to find the
right solution.
right solution.
Why we engage
Why we engage
It is important that investors have
It is important that investors have
confidence in the company and how it is
confidence in the company and how it is
managed, given their investment in our
managed, given their investment in our
business. We provide regular updates
business. We provide regular updates
to debt and equity investors so they can
to debt and equity investors so they can
be assured that the company is being
be assured that the company is being
managed responsibly. Increasingly,
managed responsibly. Increasingly,
this includes environmental, social and
this includes environmental, social and
governance updates alongside financial
governance updates alongside financial
and performance data as investors take a
and performance data as investors take a
broader view of value and risk.
broader view of value and risk.
Why we engage
Why we engage
Good relationships with suppliers help
Good relationships with suppliers help
ensure that we get projects delivered on
ensure that we get projects delivered on
time, to good quality, at efficient costs
time, to good quality, at efficient costs
and can identify and realise innovative
and can identify and realise innovative
approaches and solutions. Awareness
approaches and solutions. Awareness
of issues throughout the supply chain
of issues throughout the supply chain
means we can address them together
means we can address them together
and become more resilient. We rely on
and become more resilient. We rely on
suppliers to deliver our services and
suppliers to deliver our services and
create value for all.
create value for all.
How we engage
How we engage
• Meetings with national and regional
• Meetings with national and regional
How we engage
How we engage
• Capital market days and investor
• Capital market days and investor
How we engage
How we engage
• Directly through supplier relationship
• Directly through supplier relationship
roadshows.
roadshows.
management process.
management process.
• Annual General Meeting open to all
• Annual General Meeting open to all
• Setting challenges through our
• Setting challenges through our
shareholders.
shareholders.
Innovation Lab.
Innovation Lab.
environmental regulators, such as the
environmental regulators, such as the
Environment Agency.
Environment Agency.
• Customer research to shape our
• Customer research to shape our
environmental investment plans.
environmental investment plans.
• Direct dialogue with relationship
• Direct dialogue with relationship
• Facilitated workshops with partners
• Facilitated workshops with partners
service provision.
service provision.
• Employee Voice panel providing a link
• Employee Voice panel providing a link
• Workshops with environmental
• Workshops with environmental
banks and credit agencies.
banks and credit agencies.
• Supplier databases such as Achilles,
• Supplier databases such as Achilles,
to assess market opportunities.
to assess market opportunities.
to scope out solutions.
to scope out solutions.
• Face-to-face engagement with groups
• Face-to-face engagement with groups
to the board.
to the board.
stakeholders.
stakeholders.
• Participation in investor-led ESG
• Participation in investor-led ESG
• Direct discussion through United
• Direct discussion through United
• Public events across the North West to
• Public events across the North West to
representing vulnerable customers,
representing vulnerable customers,
• Monthly trade union forums.
• Monthly trade union forums.
• Partnerships where we have common
• Partnerships where we have common
ratings and indices.
ratings and indices.
Supply Chain (USC).
Supply Chain (USC).
promote sustainable use of our services.
promote sustainable use of our services.
such as MIND.
such as MIND.
interests.
interests.
Top three material issues
Top three material issues
• Land management,
• Land management,
access and recreation
access and recreation
• Supporting communities
• Supporting communities
Top three material issues
Top three material issues
• Drinking water quality
• Drinking water quality
• Customer service and
• Customer service and
operational performance
operational performance
• Trust, transparency and legitimacy
• Trust, transparency and legitimacy
• Affordability and vulnerability
• Affordability and vulnerability
Top three material issues
Top three material issues
• Employee engagement
• Employee engagement
• Diverse and skilled workforce
• Diverse and skilled workforce
• Health, safety and wellbeing
• Health, safety and wellbeing
What we are doing
What we are doing
What we are doing
What we are doing
What we are doing
What we are doing
• Balancing decisions based on often
• Balancing decisions based on often
•
•
Improving services for customers such
Improving services for customers such
• Acting on survey results to create a
• Acting on survey results to create a
competing interests of stakeholders.
competing interests of stakeholders.
as GetWaterFit and Priority Services.
as GetWaterFit and Priority Services.
better place to work.
better place to work.
•
•
Identifying common issues where
Identifying common issues where
• Helping customers who are struggling
• Helping customers who are struggling
• Delivering our people plan and
• Delivering our people plan and
partnerships could provide a solution.
partnerships could provide a solution.
to pay their bills.
to pay their bills.
encouraging action on inclusivity.
encouraging action on inclusivity.
Top three material issues
Top three material issues
Top three material issues
Top three material issues
Top three material issues
Top three material issues
• Sewer flooding and storm overflows
• Sewer flooding and storm overflows
• Customer service and
• Customer service and
• Trust, transparency and legitimacy
• Trust, transparency and legitimacy
• Climate change
• Climate change
• Water resources and leakage
• Water resources and leakage
operational performance
operational performance
• Financial risk management
• Financial risk management
• Corporate governance and
• Corporate governance and
business conduct
business conduct
• North West regional economy
• North West regional economy
• Responsible supply chain
• Responsible supply chain
What we are doing
What we are doing
• Working with partners to deliver
• Working with partners to deliver
What we are doing
What we are doing
• Maintaining high levels of corporate
• Maintaining high levels of corporate
What we are doing
What we are doing
• Consistently paying suppliers on time.
• Consistently paying suppliers on time.
improvements to rivers.
improvements to rivers.
governance.
governance.
• Delivering our carbon and
• Delivering our carbon and
Better Rivers: Better North West
Better Rivers: Better North West
commitments.
commitments.
• Performing well across a range of
• Performing well across a range of
respected ESG indices and ratings.
respected ESG indices and ratings.
• Providing access to innovative new
• Providing access to innovative new
products and services.
products and services.
30
unitedutilities.com/corporate
Stock Code: UU.
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31
Our business model – our external drivers
Engaging with our stakeholders
We maintain close relationships with three stakeholder groups that influence
what we do and how we do it.
Media
Shareholders
Employees
Communities
Media
Politicians
Regulators
Why we engage
The media is influenced by the issues
that matter most to our stakeholders as
well as influencing them through what
it reports. Many of our stakeholders
receive their information about us and
our activities from both traditional media
and social media. Given the nature of our
services, it is important that coverage is
fair, balanced and accurate. This requires
effective two-way dialogue between the
company and the media.
Why we engage
Politicians influence the long-term
national water strategy and environmental
priorities, matters that affect how all
businesses operate, and champion issues
raised by their constituents.
Local government, elected
representatives and devolved
administrations provide insight into
shared social, environmental, economic
and governance issues across the
North West.
Why we engage
Through proactive, constructive
engagement with economic, quality
and environmental regulators, we agree
commitments over specified time periods
and finalise the expectations they have of
our business planning and performance.
We actively engage to shape the policy
and regulatory framework within
which we operate, covering customer,
economic, environmental, social and
governance matters.
How we engage
• 24/7 press office available to respond
to media requests and publish
content for direct media use.
How we engage
• Direct engagement with regional
and national politicians across the
political spectrum.
How we engage
• Regular meetings with all regulators
on objectives and performance.
• Responses to consultations where we
• Dedicated social media team covering
• Working groups with devolved
have something to contribute.
multiple channels.
• Active media and social monitoring
focused on the company and sector.
administrations and local authorities
on common interests.
• Direct engagement with parish councils
linked to planning applications.
• Joint working on projects to explore
how regulation could evolve.
• Support the work of the independent
customer challenge group, YourVoice.
Top three material issues
Top three material issues
Top three material issues
• Sewer flooding and storm overflows
• Political and regulatory environment
• Political and regulatory environment
• Customer service and operational
• Customer service and operational
• Customer service and operational
performance
performance
performance
• Trust, transparency and legitimacy
• Affordability and vulnerability
• Resilience
What we are doing
• Regular press releases and social
posts on key activities.
What we are doing
• National and constituency level
engagement on common issues.
What we are doing
• Direct engagement with regulators on
emerging issues.
• Providing media training to key senior
• Responding to enquiries through
• Responses to regulatory consultations
managers.
corporate affairs team.
on the future of the sector.
32
unitedutilities.com/corporate
Our business model – our external drivers
Engaging with our stakeholders
We maintain close relationships with three stakeholder groups that influence
what we do and how we do it.
Media
Shareholders
Media
Why we engage
Employees
Communities
Politicians
Regulators
Why we engage
Why we engage
The media is influenced by the issues
Politicians influence the long-term
Through proactive, constructive
that matter most to our stakeholders as
national water strategy and environmental
engagement with economic, quality
well as influencing them through what
priorities, matters that affect how all
and environmental regulators, we agree
it reports. Many of our stakeholders
businesses operate, and champion issues
commitments over specified time periods
receive their information about us and
raised by their constituents.
our activities from both traditional media
and social media. Given the nature of our
services, it is important that coverage is
fair, balanced and accurate. This requires
effective two-way dialogue between the
company and the media.
Local government, elected
representatives and devolved
and finalise the expectations they have of
our business planning and performance.
We actively engage to shape the policy
administrations provide insight into
and regulatory framework within
shared social, environmental, economic
which we operate, covering customer,
and governance issues across the
economic, environmental, social and
North West.
governance matters.
How we engage
How we engage
How we engage
• 24/7 press office available to respond
• Direct engagement with regional
• Regular meetings with all regulators
to media requests and publish
content for direct media use.
and national politicians across the
on objectives and performance.
political spectrum.
• Responses to consultations where we
• Dedicated social media team covering
• Working groups with devolved
have something to contribute.
multiple channels.
• Active media and social monitoring
administrations and local authorities
on common interests.
focused on the company and sector.
• Direct engagement with parish councils
linked to planning applications.
• Joint working on projects to explore
how regulation could evolve.
• Support the work of the independent
customer challenge group, YourVoice.
Top three material issues
Top three material issues
Top three material issues
• Sewer flooding and storm overflows
• Political and regulatory environment
• Political and regulatory environment
• Customer service and operational
• Customer service and operational
• Customer service and operational
performance
performance
performance
• Trust, transparency and legitimacy
• Affordability and vulnerability
• Resilience
What we are doing
What we are doing
What we are doing
• Regular press releases and social
• National and constituency level
• Direct engagement with regulators on
posts on key activities.
engagement on common issues.
emerging issues.
• Providing media training to key senior
• Responding to enquiries through
• Responses to regulatory consultations
managers.
corporate affairs team.
on the future of the sector.
We believe that this
engagement, alongside
community and woodland
funds totalling over
£1 million, will leave a
lasting legacy long after
the pipeline is finished,
benefiting people and
communities across
Cumbria for years to come.”
Managing multiple stakeholder
interests in West Cumbria
In 2022, we will stop abstracting water
from Ennerdale Water and the River
Ehen in West Cumbria to avoid the risk
of damage to the protected species that
rely on these water bodies. To achieve
this, we’re linking West Cumbria to our
regional water network by building a
major new pipeline from Thirlmere.
Community involvement and stakeholder engagement
have been at the heart of the strategy for West
Cumbria. This is the single biggest project to go
through the Lake District National Park in recent times
and required a sector-leading approach to stakeholder
management to ensure a success.
Engagement with stakeholders began in 2013,
allowing parties to come together and collaboratively
formulate the plan. Core to our stakeholder approach
was a planning performance agreement funded by
us and created in conjunction with Natural England,
the Environment Agency, the three local planning
authorities, and Cumbria County Council. We
submitted a planning application in January 2016 and
in November 2016, four months ahead of schedule, all
three local planning authorities voted unanimously to
grant full planning permission.
We were clear from the outset that local communities
and stakeholders would be encouraged to have
their say on any plans, creating opportunities for
communities to give their views. It was key that
during planning and construction our stakeholders
were on the journey with us and could raise concerns
easily. Engagement took many forms, from individual
meetings to workshop events, as well as formal
consultation and attendance at community events such
as agricultural shows.
COVID-19 led to an urgent review of our engagement,
as traditional face-to-face exhibitions could not take
place. We developed a hybrid engagement plan
unique to Cumbria, accounting for the geography and
technology challenges across the county. A virtual
consultation was developed alongside webinars with
real-time, live chat functionality that proved a huge
success. As lockdown eased, the virtual sessions were
supplemented with a return to face-to-face meetings.
The hybrid approach resulted in better overall
engagement and will be considered on all future large
projects.
As the project approaches completion, and we
return the land back to how we found it, engagement
continues. By the time the project is complete we will
have attended over 150 parish council meetings and
held 50 public exhibitions. Continuous engagement
has helped minimise the impact that construction
inevitably brings to local communities. We believe that
this engagement, alongside community and woodland
funds totalling over £1 million, will leave a lasting
legacy long after the pipeline is finished, benefiting
people and communities across Cumbria for years
to come.
Delivering value for:
Communities
Customers
Communities
Customers
Environment
Customers
Environment
32
unitedutilities.com/corporate
Stock Code: UU.
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Our business model – our external drivers
What matters most to our stakeholders
We continuously challenge ourselves to make sure we understand what matters most regarding our
role in society, the impact that we have and the value we create.
Our approach to materiality
Understanding what matters most
to our stakeholders is fundamental
to being a purpose-driven
organisation. We consider these
stakeholder priorities alongside our
own assessment of what has the
biggest impact on the company
and its ability to create value, and
the output is presented in the
material issues matrix.
This stakeholder materiality
assessment informs decisions
about what we report in
documents such as this annual
report. Setting out issues in this
way helps ensure we understand
key stakeholder priorities and
consider their interests in strategic
decision-making, helping us create
long-term value.
In defining the strategic relevance
of an issue to the company, we
have adopted the integrated
reporting framework definition of
materiality, which states: “a matter
is material if it could substantively
affect the organisation’s ability to
create value in the short, medium
or long term”. Value, in this context,
may be created internally (for the
company and employees) and
there can be external value (for
customers, communities, investors,
suppliers and the environment).
Value may be financial or non-
financial.
Our 2021/22 assessment
This year we carried out a thorough
review of our material issues and
matrix design.
Striking the right balance between
different interests and views is not
easy but our assessment process
consolidated feedback based on a
balance of views obtained from all
our stakeholders.
Material matters in 2021/22
The assessment process
identified 28 material issues.
More information about the most
material issues can be found on
the following pages. We describe
the issue, provide our response to
managing the issue, explain how
the issue links to our strategic
themes and how it is included in
our plans for the future.
Materiality matrix
Issues are plotted on the matrix
from lower to higher in terms of
level of interest to stakeholders and
how much it can affect our ability
to create value.
Independent review
Our approach has been reviewed
by responsible business
consultancy Corporate Citizenship,
which commented that “United
Utilities has set out the orderly,
balanced and comprehensive
process by which it has arrived
at its refreshed materiality
assessment. The detailed coverage
of the six most material issues
fosters public understanding.
It sets out the links to strategic
themes, risks and future actions.
It shows how United Utilities
recognises the most important
issues and acts upon them”.
Our materiality assessment process
1. Define
We reviewed current best practice in materiality
reporting. The assessment criteria for stakeholder
interest and our ability to create value was
confirmed. Building on our existing matrix we
brought in more stakeholder views and evolved
the matrix design. We committed to provide more
detailed commentary on the most material issues.
2. Engage
Views were obtained from across all our
stakeholder groups. Insight from consultations and
data was made available through the engagement
processes described on pages 30 to 33. Key internal
subject matter experts and stakeholder relationship
managers provided further insight on issues.
3. Assess
Comments and data were drawn together to form
an initial view of the issues. The rationale for issue
selection and its significance was presented to
senior management for discussion. This included
potential new issues, removal of issues and
movement of existing issues.
4. Align
We cross-referenced and aligned identified issues
with our principal risks and uncertainties, as set
out on pages 104 to 105. Matrix visuals were then
created to easily communicate the prioritisation of
issues. For the first time an indication of how issues
have moved since the previous review has been
included.
United Utilities
recognises the most
important issues and
acts upon them.”
34
unitedutilities.com/corporate
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Higher
Effect on our ability to create value
Based on the potential effect on our ability to create value over the short, medium and
long term. Value can be created for United Utilities and our stakeholders. Value can be
financial and non-financial.
Material issue
Key
=
Issue with no change in significance
Movement relative to
previous review
I
S
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Material issue
Movement relative to
previous review
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Trust, transparency and legitimacy
Customer service and operational
Resilience
performance
Climate change
Political and regulatory environment
Affordability and vulnerability
Drinking water quality
Sewer flooding and storm overflows
Water resources and leakage
Financial risk management
Corporate governance and business
Nature capital and biodiversity
conduct
Innovation
Cyber security
Health, safety and wellbeing
North West regional economy
Land management, access and
recreation
Sewage sludge to land
Energy management
Environmental impacts
Data security
Diverse and skilled workforce
Responsible supply chain
Employee engagement
Supporting communities
Competitive markets
COVID-19
Human rights
=
=
=
=
=
N
N
=
=
=
=
=
=
=
=
=
=
=
=
Our business model – our external drivers
What matters most to our stakeholders
We continuously challenge ourselves to make sure we understand what matters most regarding our
role in society, the impact that we have and the value we create.
r
e
h
g
H
i
Our approach to materiality
Understanding what matters most
to our stakeholders is fundamental
to being a purpose-driven
organisation. We consider these
Striking the right balance between
different interests and views is not
easy but our assessment process
consolidated feedback based on a
balance of views obtained from all
stakeholder priorities alongside our
our stakeholders.
Material matters in 2021/22
The assessment process
identified 28 material issues.
More information about the most
material issues can be found on
the following pages. We describe
the issue, provide our response to
managing the issue, explain how
the issue links to our strategic
themes and how it is included in
our plans for the future.
Materiality matrix
Issues are plotted on the matrix
from lower to higher in terms of
level of interest to stakeholders and
how much it can affect our ability
to create value.
Independent review
Our approach has been reviewed
by responsible business
consultancy Corporate Citizenship,
which commented that “United
Utilities has set out the orderly,
balanced and comprehensive
process by which it has arrived
at its refreshed materiality
3
1
4
6
7
Our materiality assessment process
1. Define
We reviewed current best practice in materiality
reporting. The assessment criteria for stakeholder
interest and our ability to create value was
confirmed. Building on our existing matrix we
brought in more stakeholder views and evolved
the matrix design. We committed to provide more
detailed commentary on the most material issues.
2. Engage
Views were obtained from across all our
stakeholder groups. Insight from consultations and
data was made available through the engagement
processes described on pages 30 to 33. Key internal
subject matter experts and stakeholder relationship
managers provided further insight on issues.
3. Assess
Comments and data were drawn together to form
an initial view of the issues. The rationale for issue
selection and its significance was presented to
senior management for discussion. This included
potential new issues, removal of issues and
movement of existing issues.
4. Align
We cross-referenced and aligned identified issues
with our principal risks and uncertainties, as set
out on pages 104 to 105. Matrix visuals were then
created to easily communicate the prioritisation of
issues. For the first time an indication of how issues
have moved since the previous review has been
included.
own assessment of what has the
biggest impact on the company
and its ability to create value, and
the output is presented in the
material issues matrix.
This stakeholder materiality
assessment informs decisions
about what we report in
documents such as this annual
report. Setting out issues in this
way helps ensure we understand
key stakeholder priorities and
consider their interests in strategic
decision-making, helping us create
long-term value.
In defining the strategic relevance
of an issue to the company, we
have adopted the integrated
reporting framework definition of
materiality, which states: “a matter
is material if it could substantively
affect the organisation’s ability to
create value in the short, medium
or long term”. Value, in this context,
may be created internally (for the
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assessment. The detailed coverage
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15
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It sets out the links to strategic
themes, risks and future actions.
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It shows how United Utilities
16
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3
1
4
2
5
10
11
12
13
14
6
7
15
16
17
8
9
18
23
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20
21
22
24
25
26
27
6
28
7
8
9
15
16
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Lower
20
21
22
Effect on our ability to create value
Based on the potential effect on our ability to create value over the short, medium and
long term. Value can be created for United Utilities and our stakeholders. Value can be
financial and non-financial.
18
12
13
11
17
3
1
4
2
5
10
14
1
2
5
4
19
Key
Material issue
=
24
Movement relative to
Issue with no change in significance
previous review
23
25
Issue with increased significance
26
6
Issue with decreased significance
3
New issue in 2021/22 assessment
=
=
=
Effect on our ability to create value
14
Based on the potential effect on our ability to create value over the short, medium and
12
long term. Value can be created for United Utilities and our stakeholders. Value can be
13
financial and non-financial.
25
14
=
=
=
23
1
7
2
5
3
8
4
6
9
21
22
10
Lower
11
Trust, transparency and legitimacy
27
Resilience
N
Customer service and operational
performance
Climate change
Political and regulatory environment
Affordability and vulnerability
28
20
Drinking water quality
Sewer flooding and storm overflows
Water resources and leakage
Financial risk management
Corporate governance and business
conduct
Nature capital and biodiversity
Innovation
Cyber security
Health, safety and wellbeing
26
27
North West regional economy
Land management, access and
recreation
Issue with decreased significance
Sewage sludge to land
New issue in 2021/22 assessment
Energy management
Environmental impacts
Data security
28
Diverse and skilled workforce
Responsible supply chain
Employee engagement
Supporting communities
Competitive markets
COVID-19
Human rights
Issue with no change in significance
Issue with increased significance
24
Lower
25
26
19
20
24
23
18
15
22
16
21
17
Key
=
N
r
e
w
o
L
15
7
8
9
17
18
=
=
N
16
=
=
10
12
13
11
Higher
=
N
=
=
=
=
19
Higher
1
7
2
5
3
8
4
6
9
11
10
15
1
4
18
27
22
23
28
24
16
2
17
3
25
26
5
19
20
6
21
7
Higher
19
Trust, transparency and legitimacy
20
Resilience
Customer service and operational
21
performance
Climate change
Political and regulatory environment
Affordability and vulnerability
Drinking water quality
Sewer flooding and storm overflows
Water resources and leakage
Financial risk management
Corporate governance and business
conduct
Nature capital and biodiversity
12
Material issue
Innovation
13
14
Cyber security
Health, safety and wellbeing
Trust, transparency and legitimacy
North West regional economy
Resilience
Land management, access and
Customer service and operational
recreation
performance
Sewage sludge to land
Climate change
Energy management
Political and regulatory environment
Environmental impacts
Affordability and vulnerability
Data security
Drinking water quality
Diverse and skilled workforce
Sewer flooding and storm overflows
Responsible supply chain
Water resources and leakage
Employee engagement
Financial risk management
Supporting communities
Corporate governance and business
Competitive markets
conduct
COVID-19
Nature capital and biodiversity
Human rights
Innovation
Cyber security
Health, safety and wellbeing
North West regional economy
Land management, access and
recreation
Sewage sludge to land
Energy management
Environmental impacts
Data security
Diverse and skilled workforce
Responsible supply chain
Employee engagement
Supporting communities
Competitive markets
COVID-19
Human rights
27
12
28
13
14
25
26
25
11
26
19
20
24
10
22
8
24
9
23
28
23
18
15
22
27
16
21
17
1
2
N
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Issue with increased significance
Trust, transparency and legitimacy
Resilience
Issue with decreased significance
Customer service and operational
New issue in 2021/22 assessment
performance
Climate change
Political and regulatory environment
Affordability and vulnerability
Drinking water quality
Sewer flooding and storm overflows
Water resources and leakage
Financial risk management
Corporate governance and business
conduct
Nature capital and biodiversity
Innovation
Cyber security
Health, safety and wellbeing
North West regional economy
Land management, access and
recreation
Movement relative to
Sewage sludge to land
previous review
Energy management
Environmental impacts
Data security
Diverse and skilled workforce
Responsible supply chain
Employee engagement
Supporting communities
Competitive markets
COVID-19
=
Human rights
=
=
=
N
=
=
=
=
=
=
=
=
N
=
=
=
=
=
=
N
=
=
=
=
=
=
=
Movement relative to
=
previous review
=
=
=
=
=
N
=
=
=
=
N
=
=
=
=
=
=
=
=
=
=
N
=
=
=
=
=
=
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
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r
o
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e
n
t
s
f
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a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
2
35
Lower
United Utilities
Effect on our ability to create value
Higher
recognises the most
Based on the potential effect on our ability to create value over the short, medium and
long term. Value can be created for United Utilities and our stakeholders. Value can be
financial and non-financial.
Effect on our ability to create value
27
Based on the potential effect on our ability to create value over the short, medium and
long term. Value can be created for United Utilities and our stakeholders. Value can be
28
financial and non-financial.
=
=
important issues and
Issue with no change in significance
Key
=
acts upon them.”
Issue with decreased significance
Issue with increased significance
N
New issue in 2021/22 assessment
Key
=
Issue with no change in significance
Issue with increased significance
Issue with decreased significance
N
New issue in 2021/22 assessment
34
unitedutilities.com/corporate
Stock Code: UU.
Our business model – our external drivers
What matters most to our stakeholders
Understanding and responding to the most material issues affecting our business is key to delivering
our purpose. Addressing these issues over the short, medium and long term is an integral part of our
strategic themes and risk management.
1. Trust, transparency and legitimacy
Description
Strong stakeholder relationships are
based on trust. Being open, honest
and transparent is key to building and
maintaining trust and legitimacy. As well
as reporting openly, this means setting
out commitments and delivering on them.
Our stakeholders want to know that we
are treating employees fairly, protecting
customer data, and paying our fair
amount of tax.
Cybercrime has been on the increase and,
as the holder of customer information,
it is a threat we take very seriously
through our policies and dedicated data
protection team.
We work with suppliers and contractors
whose principles, conduct and standards
align with our own. Our key suppliers
have committed to our United Supply
Chain approach (read more on page
73). We are a signatory to the Prompt
Payment Code, and fully comply with
rules on reporting payments to suppliers.
Link to strategic themes
We engage on a continual basis
with customers to understand their
expectations in relation to service
and behaviour, through activities
like our quarterly brand tracker.
We maintain stable credit ratings
with key agencies, which helps
us to retain efficient access to the
debt capital markets.
We set qualitative and quantitative
performance targets across all of
our stakeholders to evidence how
we are delivering on our purpose.
Future plans
Operating in a responsible manner is a
key driver of trust with our stakeholders.
Our continued compliance with the
corporate governance requirements
of a listed company helps ensure the
transparency of our reporting and
behaviour. We will continue to use
ESG indices as benchmarks of best
practice to drive further improvements
in transparency and disclosure.
Link to risks
1 2 3 4 5
10
6 7 8 9
The societal trend of mistrust in
governments, and media, is crossing
over into the corporate world. This has
led to growing calls for companies to
demonstrate how they are contributing
to society as a whole and operating in the
public interest.
In recent years, the UK water sector
has faced challenges to its legitimacy,
amplified by some specific issues
at a small number of companies.
Consequently, trust has been eroded and
questions raised about the ownership
structure of the sector, and Ofwat has
called for further transparency and
disclosure around board leadership
and decision-making processes, as well
as starting discussions on companies’
contribution to public value.
Our response
Being open about our purpose and
transparent about how we are delivering
for all of our stakeholders is key to
operating in a responsible manner.
We aim to maintain high ethical standards
of business conduct and corporate
governance. We apply the principles
and report against the provisions of the
2018 UK Corporate Governance Code.
Additional governance and assurance is
applied to our regulatory reporting.
We have open and transparent reporting
around all of our equity and debt
financing arrangements, do not use
offshore financing vehicles, and we have
secured the Fair Tax Mark independent
certification since 2019.
We maintain a comprehensive set
of policies, linked to and including,
human rights, modern slavery and
whistleblowing.
2. Resilience
Description
Resilience is a broad and interconnected
topic that is of interest to many of
our stakeholders. A resilient company
will embed resilience throughout its
operations, financing and corporate
systems of governance and control.
Providing essential services to customers
requires long-term planning to manage
future challenges, such as population
growth and climate change, to ensure
they are provided effectively to meet
increasing expectations.
Long-term financial resilience starts with
a robust balance sheet and management
of financial risks. Companies have to be
aware of their own financial situation
and make sure that they understand the
financial resilience of others, such as
suppliers and former employees.
As the world becomes increasingly
digital, companies need to have the
right people and skills to manage
in the modern world. Increasingly,
stakeholders are interested in the
ability of an organisation’s governance,
accountability and assurance processes
to help avoid, cope with and recover
from disruption and to anticipate trends
and variability in all aspects of their
business.
Our response
It can take many years and require
substantial investment to increase the
resilience of existing assets or build
new ones, which is why our long-term
planning is so important. We have
detailed plans in place to anticipate
future challenges and understand what
we need to do to address these. We
build these needs into our business plans
for each five-year regulatory period to
anticipate the future funding we need
to allocate in order to act at the right
time. Our Systems Thinking approach
provides opportunities for us to increase
our operational resilience further.
We have a strong balance sheet, a
secure pension position, and take a
prudent approach to financial risk
management, which delivers long-term
predictability and resilience to financial
shocks. As a public listed company,
we consistently adhere to the highest
36
unitedutilities.com/corporate
Our business model – our external drivers
What matters most to our stakeholders
Understanding and responding to the most material issues affecting our business is key to delivering
our purpose. Addressing these issues over the short, medium and long term is an integral part of our
strategic themes and risk management.
1. Trust, transparency and legitimacy
2. Resilience
2. Resilience
Description
Cybercrime has been on the increase and,
Description
Strong stakeholder relationships are
as the holder of customer information,
Resilience is a broad and interconnected
based on trust. Being open, honest
it is a threat we take very seriously
topic that is of interest to many of
and transparent is key to building and
through our policies and dedicated data
our stakeholders. A resilient company
maintaining trust and legitimacy. As well
protection team.
as reporting openly, this means setting
out commitments and delivering on them.
Our stakeholders want to know that we
are treating employees fairly, protecting
customer data, and paying our fair
amount of tax.
The societal trend of mistrust in
We work with suppliers and contractors
whose principles, conduct and standards
align with our own. Our key suppliers
have committed to our United Supply
Chain approach (read more on page
73). We are a signatory to the Prompt
Payment Code, and fully comply with
governments, and media, is crossing
rules on reporting payments to suppliers.
Link to strategic themes
We engage on a continual basis
with customers to understand their
expectations in relation to service
and behaviour, through activities
like our quarterly brand tracker.
We maintain stable credit ratings
with key agencies, which helps
us to retain efficient access to the
debt capital markets.
We set qualitative and quantitative
performance targets across all of
our stakeholders to evidence how
we are delivering on our purpose.
Future plans
Operating in a responsible manner is a
key driver of trust with our stakeholders.
Our continued compliance with the
corporate governance requirements
of a listed company helps ensure the
transparency of our reporting and
behaviour. We will continue to use
ESG indices as benchmarks of best
practice to drive further improvements
in transparency and disclosure.
Link to risks
1 2 3 4 5
6 7 8 9
10
over into the corporate world. This has
led to growing calls for companies to
demonstrate how they are contributing
to society as a whole and operating in the
public interest.
In recent years, the UK water sector
has faced challenges to its legitimacy,
amplified by some specific issues
at a small number of companies.
Consequently, trust has been eroded and
questions raised about the ownership
structure of the sector, and Ofwat has
called for further transparency and
disclosure around board leadership
and decision-making processes, as well
as starting discussions on companies’
contribution to public value.
Our response
Being open about our purpose and
transparent about how we are delivering
for all of our stakeholders is key to
operating in a responsible manner.
We aim to maintain high ethical standards
of business conduct and corporate
governance. We apply the principles
and report against the provisions of the
2018 UK Corporate Governance Code.
Additional governance and assurance is
applied to our regulatory reporting.
We have open and transparent reporting
around all of our equity and debt
financing arrangements, do not use
offshore financing vehicles, and we have
secured the Fair Tax Mark independent
certification since 2019.
We maintain a comprehensive set
of policies, linked to and including,
human rights, modern slavery and
whistleblowing.
will embed resilience throughout its
operations, financing and corporate
systems of governance and control.
Providing essential services to customers
requires long-term planning to manage
future challenges, such as population
growth and climate change, to ensure
they are provided effectively to meet
increasing expectations.
Long-term financial resilience starts with
a robust balance sheet and management
of financial risks. Companies have to be
aware of their own financial situation
and make sure that they understand the
financial resilience of others, such as
suppliers and former employees.
As the world becomes increasingly
digital, companies need to have the
right people and skills to manage
in the modern world. Increasingly,
stakeholders are interested in the
ability of an organisation’s governance,
accountability and assurance processes
to help avoid, cope with and recover
from disruption and to anticipate trends
and variability in all aspects of their
business.
Our response
It can take many years and require
substantial investment to increase the
resilience of existing assets or build
new ones, which is why our long-term
planning is so important. We have
detailed plans in place to anticipate
future challenges and understand what
we need to do to address these. We
build these needs into our business plans
for each five-year regulatory period to
anticipate the future funding we need
to allocate in order to act at the right
time. Our Systems Thinking approach
provides opportunities for us to increase
our operational resilience further.
We have a strong balance sheet, a
secure pension position, and take a
prudent approach to financial risk
management, which delivers long-term
predictability and resilience to financial
shocks. As a public listed company,
we consistently adhere to the highest
Risk exposure
An indication of the current
exposure of each principal risk
relative to the prior year.
Decreased
Stable
Increased
Our principal risks
1 Water service
5 Resource
9 Conduct and compliance
2 Wastewater service
6 Finance
10 Political and regulatory
3 Retail and commercial
4 Supply chain and
7 Health, safety and
environmental
programme delivery
8 Security
3. Customer service and operational performance
We monitor the performance and health
Description
In an increasingly digitised and instant
of our assets, with the help of sensors
economy, customers expect more from
across the network, and this allows us to
services than ever before. This includes
be proactive. For example, by monitoring
the water sector, with high expectations
pressure in the water network we can
for the reliability and responsiveness of
spot issues and fix them before we get a
services.
burst, saving costs and sparing customers
the impact.
Since the pandemic, more people have
come to appreciate the environment and
there is increasing stakeholder focus on
the operational performance of companies
that rely and impact on the environment.
Ensuring a reliable service in the face of
a growing population, changing climate
and increasing expectations of service
requires integrated long-term thinking
and targeted investment to ensure both
short and longer-term reliability.
Many of our assets are ageing compared
to other utilities. To meet the expectations
of customers and regulators, it is critical
that we combine modern technology
into our networks and management of
customer service.
Our response
To provide great water and more is reliant
on delivering good operational and
customer performance. Our pollution
incident reduction plan and reinvestment
of regulatory outperformance has
improved our environmental performance.
We have improved customer service
provision through both traditional and
digital channels, measuring ourselves
against key external benchmarks such as
securing the Institute of Customer Service
accreditation with distinction. This is
alongside making new services available
to customers, such as ‘Get Water Fit’
which is helping over 95,000 customers
learn more about their water usage.
Our culture of innovation and Systems
Thinking drives us to adapt our assets
and the way we operate to use modern
technology and the best new ways of
working. Examples include sensors across
our network that allow remote monitoring
and control from our Integrated Control
Centre, and our fleet of alternative supply
vehicles (ASVs) that can inject treated
water directly into supply while we
undertake repairs.
We have a substantially enhanced social
media presence to respond quickly to
stakeholders. Over one million customers
now engage with us digitally, whether this
is through our website, our mobile app or
on social media.
Link to strategic themes
Our Systems Thinking approach is
delivering operational excellence
– benefiting customers and the
environment.
We balance our capital and
maintenance expenditure to
ensure affordability and reliability
over the short, medium and
long term.
Our Better Rivers: Better North
West commitments and additional
£65 million investment in our
Green Recovery proposals
will deliver improvements for
customers and the environment
by 2025.
Future plans
Wider deployment of Systems Thinking,
for instance through Dynamic Network
Management (read more on page 43),
will deliver further improvements in the
reliability of services. We have a number
of challenging targets for the 2020–25
period that will help improve the reliability
of our services, including helping and
encouraging customers to use less water.
Link to risks
1 2 3 4 5
7 8 9
10
levels of governance, accountability
and assurance. We have a robust
risk management framework for the
identification, assessment and mitigation
of risk.
We maintain good relationships
with employees, and employee
representatives, to ensure an engaged
and motivated workforce, and we
continually strive to build diversity
across all types of role and all levels
within our business. We build skills
resilience internally through training and
development, including digital skills. We
have graduate and apprentice schemes,
and ambassadors that work with schools
and education institutions to encourage
the younger generation to pursue
science, technology, engineering and
mathematics (STEM) careers.
Link to strategic themes
Through innovative approaches
we are improving the reliability
and resilience of our assets,
helping to reduce unplanned
service interruptions, and
enabling us to be more proactive.
Our robust capital structure,
relatively low gearing and strong
pensions position provide long-
term financial resilience and
future financial flexibility.
We launched our Digital Skills
Academy, a new learning portal
for employees to access digital
learning content to upskill them
for their roles now and in the
future.
Future plans
Our Haweswater Aqueduct Resilience
Programme (HARP) will be progressed
through direct procurement for customers
in AMP7 and AMP8, addressing one of
our biggest operational risks in a critical
pipeline that transports water from the
Lake District to Greater Manchester. Read
more on page 106.
Link to risks
1 2 3 4 5
6 7 8
Key
36
unitedutilities.com/corporate
Stock Code: UU.
The best service to customers
At the lowest sustainable cost
In a responsible manner
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
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p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
i
i
a
l
S
t
a
t
e
m
e
n
t
s
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
2
37
Our business model – our external drivers
What matters most to our stakeholders
We work with third parties to encourage
sustainable drainage solutions to help
cope with surface water in periods of
heavy rain and are finalising a Drainage
and Wastewater Management Plan with
key authorities across the region.
We have reported against the
recommendations of the Task Force on
Climate-related Financial Disclosures
for the past three years to provide
transparency of our approach.
Link to strategic themes
We help customers use less water,
with advice and free water saving
gadgets, saving them money
and water.
Generating our own renewable
energy helps to reduce our
reliance on purchasing energy and,
therefore, saves costs.
Our six carbon pledges, including
science-based targets covering
all of our emissions, demonstrate
our commitment to reducing our
footprint.
Future plans
We have a detailed 25-year Water
Resources Management Plan, a Drought
Plan, and we published our third
adaptation report in 2021 setting out how
we aim to adapt to meet the challenges
of climate change. Read more about our
approach to climate change on pages
86 to 97.
Link to risks
1 2 4 5
10
6 7 9
4. Climate change
Description
Greenhouse gas emissions and how
they are affecting the earth’s climate is
important to many stakeholders. There
is a growing expectation on companies,
across all sectors, to take action to reduce
their carbon emissions and to adapt to the
impacts of climate change.
Weather is fundamental to the delivery
of water and wastewater services, and so
climate change will always be of strategic
and operational importance to the water
sector and its stakeholders.
Already, we are seeing the effects of
climate change on the North West’s
weather, with increasing summer
temperatures, wetter winters and more
extreme rainfall events. With these trends
set to continue, unless we take action
there will be increasing impact on the
services we provide to the communities
we serve.
Companies must plan well into the future
to understand what changes are likely to
occur, and continually adapt to meet the
risks and opportunities this presents.
Our response
Our response to climate change risk
involves mitigation (minimising our
greenhouse gas emissions) and adaptation
(ensuring our services are resilient to a
changing climate). Where practical, we
generate renewable energy on our sites
through solar panels, wind turbines, and
the use of bioresources at wastewater
treatment works, helping to reduce our
emissions. We have reduced our carbon
footprint considerably since 2005/06
and have set ambitious science-based
targets as part of our continued efforts to
reduce emissions. We have committed to
six pledges to help us achieve significant
further reductions in emissions and from
this year the long-term incentive outcomes
for our executives will be linked to these.
We have detailed plans that set out how
we will adapt our services to meet the
challenges of climate change such as the
25-year Water Resources Management
Plan, and we are targeting a 15 per cent
reduction in leakage over AMP7, one of
our actions to address the risk of water
sufficiency events.
5. Political and regulatory
environment
Description
The UK Government’s current goal is
to be the first generation to leave the
environment in a better state than
we found it. The Environment Act,
which became law in 2021, includes
commitments to improve water
management, and the water sector
has a leading role to play to implement
its requirements. This could drive
significant increases in investment in the
future which will need to be balanced
with customer affordability.
Environmental and quality regulators set
stringent consents for water company
activities to ensure the environment and
water quality is protected. In meeting
these obligations, companies need to
work hard to maintain compliance. This
requires striking a balance with other
environmental impacts, such as the use
of natural resources and emissions of
greenhouse gases. Read more about our
regulators on page 27.
Our response
We welcome the Environment Act and
the inclusion of aspects relating to
storm overflows. Many of our Better
Rivers: Better North West pledges will
be delivered over the next three years,
including investment in wastewater
systems, enhanced data monitoring and
sharing, greater innovation and more use
of nature-based solutions. Read more
about Better Rivers: Better North West
on page 67.
The Environment Agency assesses
water companies’ performance across
a basket of measures, and we are one
of the best-performing companies
over the last five years. Our regulatory
framework shapes the way we manage
natural resources and our interaction
with the environment, and we work with
our environmental regulators to agree
long-term plans.
Alongside this, we need to deliver other
core regulatory obligations – such as
those set out by Ofwat – and compliance
with ever increasing drinking water
quality standards. This year we launched
our Water Quality First programme with
38
unitedutilities.com/corporate
Our business model – our external drivers
What matters most to our stakeholders
Risk exposure
An indication of the current
exposure of each principal risk
relative to the prior year.
Decreased
Stable
Increased
Our principal risks
1 Water service
5 Resource
9 Conduct and compliance
2 Wastewater service
6 Finance
10 Political and regulatory
3 Retail and commercial
4 Supply chain and
7 Health, safety and
environmental
programme delivery
8 Security
4. Climate change
5. Political and regulatory
5. Political and regulatory
Description
We work with third parties to encourage
Greenhouse gas emissions and how
sustainable drainage solutions to help
they are affecting the earth’s climate is
cope with surface water in periods of
important to many stakeholders. There
heavy rain and are finalising a Drainage
is a growing expectation on companies,
and Wastewater Management Plan with
across all sectors, to take action to reduce
key authorities across the region.
their carbon emissions and to adapt to the
impacts of climate change.
We have reported against the
recommendations of the Task Force on
Weather is fundamental to the delivery
Climate-related Financial Disclosures
of water and wastewater services, and so
for the past three years to provide
climate change will always be of strategic
transparency of our approach.
and operational importance to the water
sector and its stakeholders.
Link to strategic themes
We help customers use less water,
with advice and free water saving
gadgets, saving them money
and water.
Generating our own renewable
energy helps to reduce our
reliance on purchasing energy and,
therefore, saves costs.
Our six carbon pledges, including
science-based targets covering
all of our emissions, demonstrate
our commitment to reducing our
footprint.
Future plans
We have a detailed 25-year Water
Resources Management Plan, a Drought
Plan, and we published our third
adaptation report in 2021 setting out how
we aim to adapt to meet the challenges
of climate change. Read more about our
approach to climate change on pages
86 to 97.
Link to risks
1 2 4 5
6 7 9
10
Already, we are seeing the effects of
climate change on the North West’s
weather, with increasing summer
temperatures, wetter winters and more
extreme rainfall events. With these trends
set to continue, unless we take action
there will be increasing impact on the
services we provide to the communities
we serve.
Companies must plan well into the future
to understand what changes are likely to
occur, and continually adapt to meet the
risks and opportunities this presents.
Our response
Our response to climate change risk
involves mitigation (minimising our
greenhouse gas emissions) and adaptation
(ensuring our services are resilient to a
changing climate). Where practical, we
generate renewable energy on our sites
through solar panels, wind turbines, and
the use of bioresources at wastewater
treatment works, helping to reduce our
emissions. We have reduced our carbon
footprint considerably since 2005/06
and have set ambitious science-based
targets as part of our continued efforts to
reduce emissions. We have committed to
six pledges to help us achieve significant
further reductions in emissions and from
this year the long-term incentive outcomes
for our executives will be linked to these.
We have detailed plans that set out how
we will adapt our services to meet the
challenges of climate change such as the
25-year Water Resources Management
Plan, and we are targeting a 15 per cent
reduction in leakage over AMP7, one of
our actions to address the risk of water
sufficiency events.
environment
environment
Description
The UK Government’s current goal is
to be the first generation to leave the
environment in a better state than
we found it. The Environment Act,
which became law in 2021, includes
commitments to improve water
management, and the water sector
has a leading role to play to implement
its requirements. This could drive
significant increases in investment in the
future which will need to be balanced
with customer affordability.
Environmental and quality regulators set
stringent consents for water company
activities to ensure the environment and
water quality is protected. In meeting
these obligations, companies need to
work hard to maintain compliance. This
requires striking a balance with other
environmental impacts, such as the use
of natural resources and emissions of
greenhouse gases. Read more about our
regulators on page 27.
Our response
We welcome the Environment Act and
the inclusion of aspects relating to
storm overflows. Many of our Better
Rivers: Better North West pledges will
be delivered over the next three years,
including investment in wastewater
systems, enhanced data monitoring and
sharing, greater innovation and more use
of nature-based solutions. Read more
about Better Rivers: Better North West
on page 67.
The Environment Agency assesses
water companies’ performance across
a basket of measures, and we are one
of the best-performing companies
over the last five years. Our regulatory
framework shapes the way we manage
natural resources and our interaction
with the environment, and we work with
our environmental regulators to agree
long-term plans.
Alongside this, we need to deliver other
core regulatory obligations – such as
those set out by Ofwat – and compliance
with ever increasing drinking water
quality standards. This year we launched
our Water Quality First programme with
the aim of providing our customers with
industry-leading water quality.
A phased, long-term approach to
address all of the concerns and interests
of our many stakeholders, including
environmental regulators, ensures that
the necessary work can be delivered
without placing too much pressure on
customer bills by spreading some of the
spend over several years.
We work with partners to improve the
quality of rivers and bathing waters
in our region, providing access to the
recreational benefits of the natural
environment and boosting the local
tourism industry.
Link to strategic themes
We balance customers’ bills
against longer-term investment.
By using natural-based solutions
and innovative markets to deliver
outcomes we are delivering more
for customers’ money.
Engaging political stakeholders
on matters relevant to the water
industry and our operations in the
North West.
Future plans
Engaging with local authorities and
devolved administrations on the
important role they play in addressing
water management issues including
surface water management and river
water quality.
New legislation, such as the Environment
Act 2021, could drive significant
increases in investment, which will
need to be balanced with customer
affordability.
Link to risks
1 2 3 5
10
6 7 9
6. Affordability and vulnerability
Description
The socioeconomic situation in the UK
remains challenging. Many people across
the region are facing real challenges as
we emerge from a global pandemic and
are faced with significant rises in the cost
of living, so water poverty continues to be
an important issue.
We led the sector in establishing our
Priority Services scheme, with dedicated
teams providing additional support to
customers with physical, mental health,
or financial difficulties during an incident.
This scheme is accredited by the British
Standards Institute and over 150,000
customers are now registered for this
support, with more joining every day.
Link to strategic themes
We will continue to invest in our
assets and people to meet the
stretching customer support
targets in our regulatory contract.
We are the first UK utility company
to harness real-time open banking
as part of our processes to verify
customer eligibility for reduced-
rate social tariffs.
Backing the Consumer Council for
Water’s drive to launch a national
social tariff.
Future plans
We will continue to provide substantial
affordability assistance through support
tariffs and other forms of support, while
extending our Priority Services offering
to over 210,000 customers by 2025,
improving the quality and scale of the
support we provide.
Link to risks
1 2 3 5
6
10
Maintaining trust and confidence in the
sector in the years ahead will be crucial.
The North West already suffers high
levels of acute deprivation with twelve
per cent of households affected by water
poverty, higher than the national average.
Research indicates that many customers
who struggle with water charges are
behind on other bills and many have a
pay-day loan.
Our stakeholders are interested in how
we provide support for customers in
vulnerable circumstances beyond just
financial distress, such as disability, first
language not being English, or temporary
vulnerability brought on by illness or a life
event.
Our response
Our industry-leading approach to
collections and innovative affordability
offerings have enabled us to respond to
the pandemic and the emerging cost of
living crisis. The temporary extension to
the social tariff we secured at the start
of the COVID-19 pandemic to support
those customers most affected has now
been made permanent, so we have an
additional £15 million of support available
per annum for each of the remaining
years of AMP7.
We have the sector’s widest range of
affordability and vulnerability schemes.
Through these schemes over 77,000
customers were lifted out of water
poverty over the past two years. Our
extensive affordability schemes are
providing £280 million of support
over AMP7.
38
unitedutilities.com/corporate
Stock Code: UU.
Key
The best service to customers
At the lowest sustainable cost
In a responsible manner
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Our business model – S172(1) Statement
Our key decisions during the year to 31 March 2022
Introduction
Throughout this annual report, we provide examples of how we have thought about
the likely consequences of long-term decisions and how we:
• build relationships with stakeholders and balance their needs and expectations
with those of the business;
• understand the importance of engaging with our employees;
• understand the impact of our operations on the communities in our region and the
environment we depend upon;
• are mindful of the interactions we have with our regulators; and
• understand the importance of behaving responsibly and being consistent with the
company’s purpose, vision and values.
Statement by the directors in
performance of their statutory
duties in accordance with S172(1)
Companies Act 2006
The board of directors of United Utilities
Group PLC consider, both individually
and together, that they have acted in the
way they consider, in good faith, would be
most likely to promote the success of the
company for the benefit of its members as
a whole and having regard (amongst other
matters) to factors (a) to (f) s172 Companies
Act 2006, in the decisions taken during the
year ended 31 March 2022 including:
Haweswater Aqueduct
Resilience Programme
Link to strategy
The decision
In December 2021, the board agreed delivery
of the replacement of six of the existing
tunnel sections of the Haweswater Aqueduct
(the aqueduct) and connections to existing
multiline siphons between the tunnel sections
and associated facilities had the potential
to be delivered as a Direct Procurement for
Customers (DPC) project rather than through
the traditional UUW procurement route. Under
DPC the CAP* will be responsible for the
detailed design and build of the project and,
crucially, for securing the project finance. The
CAP will also be responsible for maintaining
and inspecting the new tunnels for a period
of 25 years post construction. In November
2020, the replacement of the Hallbank section
of the aqueduct was successfully completed
by UUW, which was delivered via a traditional
approach working with a design and build
contractor.
How we engaged with stakeholders
Our regulator, Ofwat, has introduced the new
DPC approach for companies to consider
when delivering large infrastructure projects.
(More information on the DPC approach can be
found on Ofwat’s website.) Ofwat ‘believe that
by outsourcing the delivery of infrastructure
projects using DPC, water companies can
achieve significant benefits for customers. This
includes both through innovation and lower
whole life costs of the project’. The company
Hybrid working
Link to strategy
The decision
The COVID-19 pandemic has changed the
world of work. United Utilities is an organisation
where, pre-pandemic, the majority of our
employees routinely travelled to work on a daily
basis to attend one of the group’s offices or
sites. As the pandemic progressed, the need to
evolve our ways of working to face the future
became evident. The board was fully involved
in the development of the group’s next ways
of working, including the pilot project prior
to rolling out the hybrid way of working for
roles which fulfilled specific criteria within the
organisation.
How we engaged with stakeholders
Weekly online webinars were established
during the early stages of the pandemic in
has been working with Ofwat on developing
the detail of the DPC approach for this complex
project since proposing the delivery of HARP
via DPC in its AMP7 business plan.
In developing this project, we have sought
customers’ views and worked with their
representatives through YourVoice to develop
a solution to balance risk reduction and the
cost of delivery. We have completed initial
design work and submitted all planning
applications taking into account impacts
on local communities and the environment,
and have sought to minimise this as much
as possible. We have actively engaged
stakeholders through the planning process,
undertaking extensive public engagement
including an innovative ‘virtual public
exhibition’ when face-to-face interactions were
restricted due to the pandemic. We have also
completed environmental impact assessments
and are seeking a ten per cent biodiversity net
gain from the project.
Read more at ofwat.gov.uk/
regulated-companies/markets/direct-
procurement/direct-procurement-for-
customers/
The board’s view
The aqueduct is a critical asset in being able
to deliver our purpose to provide great water
and more for the North West. It is a major
part of our water supply network serving our
customers in parts of Cumbria, Lancashire
and Greater Manchester. The board does
not underestimate the complexities of the
project to replace six sections of tunnel in
some remote stretches of countryside and with
sections of the tunnel at a depth of up to 370
metres. As well as the technical challenges,
the complexities of the new and untested DPC
approach have added to the challenge of a
project estimated to require investment of over
£1 billion and take circa 9–10 years to complete.
The board has been kept fully apprised of
progress at key stages of the project through
regular presentations at board meetings,
‘deep-dive’ sessions and as part of strategy
discussions.
The board approved the submission of the
Outline Business Case to Ofwat under DPC
having evaluated and considered the DPC
approach and identified, and sought to
mitigate as far as possible, the known and
likely risks associated with the DPC approach.
The board is cognisant of the many challenges
ahead including amongst other things: the
appointment of the CAP through a new DPC
tender process, the implications for the group
of the different commercial construct and
financing of the project, and the critical nature
of the aqueduct to the business.
Under the current circumstances, the board
considers that the DPC delivery approach
has the potential to be most likely to promote
the long-term success of the company for
the benefit of its members as a whole. This is
based on the information currently available,
which suggests that the DPC route has the
potential to offer the best value for customers
and, therefore, supports the position that
this should be tested through the market
through progressing HARP through a DPC
procurement process.
In April 2022, Ofwat gave its consent for UUW
to procure HARP through a DPC procurement
process under Condition U of its licence.
* CAP means a limited company which has been
competitively appointed to be the provider in
accordance with a DPC Procurement Process in
respect of a DPC Delivered Project.
order to communicate with line managers
prior to the cascade of information to their
teams, and with these resources being made
available to all employees via the intranet.
Our Employee Voice panel has been a
valuable mechanism for employees to provide
feedback, particularly on how they felt they
have been supported during the pandemic.
Over 1,000 employees, including those
based out in the field or at one of our many
operational sites, provided their views, which
were taken into account when formulating the
plans for our next ways of working. Feedback
from the teams involved in the pilot project
have helped shape our current approach to
hybrid working.
The board’s view
Our employees are fundamental to fulfilling
our purpose of providing great water and
more for the North West. We have seen a
number of positive benefits relating to work
during the pandemic including: reductions in
employee sickness absences; improvements in
engagement and wellbeing; improvements in
operational performance; and reduced travel
costs and carbon emissions. Increased hybrid
working provides opportunities including: the
ability to attract employees from a wider and
potentially more diverse talent pool; being the
catalyst to improve our digital capabilities and
in time shape the workplace of the future; and
potentially make savings on accommodation.
Our plans have seen 2,000 employees
adopting hybrid ways of working. In terms
of the non-hybrid roles which are typically
directly supporting our customers and critical
operations, we are continuing to look at
providing additional flexible opportunities and
changing workplace practices to retain, attract
and stay aligned to the employment market.
The board concluded that the incorporation
of a hybrid way of working alongside the
traditional approach would be most likely
to promote the long-term success of the
company for the benefit of its members as a
whole. This way of working will be monitored
closely to ensure it remains efficient and
effective.
40
unitedutilities.com/corporate
Our business model – S172(1) Statement
Our strategic themes
Our key decisions during the year to 31 March 2022
Introduction
Throughout this annual report, we provide examples of how we have thought about
the likely consequences of long-term decisions and how we:
• build relationships with stakeholders and balance their needs and expectations
with those of the business;
• understand the importance of engaging with our employees;
• understand the impact of our operations on the communities in our region and the
environment we depend upon;
• are mindful of the interactions we have with our regulators; and
• understand the importance of behaving responsibly and being consistent with the
company’s purpose, vision and values.
Statement by the directors in
performance of their statutory
duties in accordance with S172(1)
Companies Act 2006
The board of directors of United Utilities
Group PLC consider, both individually
and together, that they have acted in the
way they consider, in good faith, would be
most likely to promote the success of the
company for the benefit of its members as
a whole and having regard (amongst other
matters) to factors (a) to (f) s172 Companies
Act 2006, in the decisions taken during the
year ended 31 March 2022 including:
Haweswater Aqueduct
Resilience Programme
Link to strategy
has been working with Ofwat on developing
project estimated to require investment of over
the detail of the DPC approach for this complex
£1 billion and take circa 9–10 years to complete.
project since proposing the delivery of HARP
via DPC in its AMP7 business plan.
In developing this project, we have sought
customers’ views and worked with their
The board has been kept fully apprised of
progress at key stages of the project through
regular presentations at board meetings,
‘deep-dive’ sessions and as part of strategy
representatives through YourVoice to develop
discussions.
The decision
In December 2021, the board agreed delivery
of the replacement of six of the existing
tunnel sections of the Haweswater Aqueduct
(the aqueduct) and connections to existing
multiline siphons between the tunnel sections
and associated facilities had the potential
to be delivered as a Direct Procurement for
Customers (DPC) project rather than through
the traditional UUW procurement route. Under
DPC the CAP* will be responsible for the
detailed design and build of the project and,
crucially, for securing the project finance. The
CAP will also be responsible for maintaining
and inspecting the new tunnels for a period
of 25 years post construction. In November
2020, the replacement of the Hallbank section
of the aqueduct was successfully completed
by UUW, which was delivered via a traditional
approach working with a design and build
contractor.
How we engaged with stakeholders
Our regulator, Ofwat, has introduced the new
DPC approach for companies to consider
when delivering large infrastructure projects.
(More information on the DPC approach can be
found on Ofwat’s website.) Ofwat ‘believe that
by outsourcing the delivery of infrastructure
projects using DPC, water companies can
achieve significant benefits for customers. This
includes both through innovation and lower
whole life costs of the project’. The company
Hybrid working
Link to strategy
The decision
The COVID-19 pandemic has changed the
world of work. United Utilities is an organisation
where, pre-pandemic, the majority of our
employees routinely travelled to work on a daily
basis to attend one of the group’s offices or
sites. As the pandemic progressed, the need to
evolve our ways of working to face the future
became evident. The board was fully involved
in the development of the group’s next ways
of working, including the pilot project prior
to rolling out the hybrid way of working for
roles which fulfilled specific criteria within the
organisation.
How we engaged with stakeholders
Weekly online webinars were established
during the early stages of the pandemic in
a solution to balance risk reduction and the
cost of delivery. We have completed initial
design work and submitted all planning
applications taking into account impacts
on local communities and the environment,
and have sought to minimise this as much
as possible. We have actively engaged
stakeholders through the planning process,
undertaking extensive public engagement
including an innovative ‘virtual public
exhibition’ when face-to-face interactions were
restricted due to the pandemic. We have also
completed environmental impact assessments
and are seeking a ten per cent biodiversity net
gain from the project.
Read more at ofwat.gov.uk/
regulated-companies/markets/direct-
procurement/direct-procurement-for-
customers/
The board’s view
The aqueduct is a critical asset in being able
to deliver our purpose to provide great water
and more for the North West. It is a major
part of our water supply network serving our
customers in parts of Cumbria, Lancashire
and Greater Manchester. The board does
not underestimate the complexities of the
project to replace six sections of tunnel in
some remote stretches of countryside and with
sections of the tunnel at a depth of up to 370
metres. As well as the technical challenges,
the complexities of the new and untested DPC
approach have added to the challenge of a
The board approved the submission of the
Outline Business Case to Ofwat under DPC
having evaluated and considered the DPC
approach and identified, and sought to
mitigate as far as possible, the known and
likely risks associated with the DPC approach.
The board is cognisant of the many challenges
ahead including amongst other things: the
appointment of the CAP through a new DPC
tender process, the implications for the group
of the different commercial construct and
financing of the project, and the critical nature
of the aqueduct to the business.
Under the current circumstances, the board
considers that the DPC delivery approach
has the potential to be most likely to promote
the long-term success of the company for
the benefit of its members as a whole. This is
based on the information currently available,
which suggests that the DPC route has the
potential to offer the best value for customers
and, therefore, supports the position that
this should be tested through the market
through progressing HARP through a DPC
procurement process.
In April 2022, Ofwat gave its consent for UUW
to procure HARP through a DPC procurement
process under Condition U of its licence.
* CAP means a limited company which has been
competitively appointed to be the provider in
accordance with a DPC Procurement Process in
respect of a DPC Delivered Project.
order to communicate with line managers
prior to the cascade of information to their
operational performance; and reduced travel
costs and carbon emissions. Increased hybrid
teams, and with these resources being made
working provides opportunities including: the
available to all employees via the intranet.
Our Employee Voice panel has been a
ability to attract employees from a wider and
potentially more diverse talent pool; being the
valuable mechanism for employees to provide
catalyst to improve our digital capabilities and
feedback, particularly on how they felt they
have been supported during the pandemic.
Over 1,000 employees, including those
based out in the field or at one of our many
operational sites, provided their views, which
were taken into account when formulating the
plans for our next ways of working. Feedback
from the teams involved in the pilot project
have helped shape our current approach to
hybrid working.
The board’s view
Our employees are fundamental to fulfilling
our purpose of providing great water and
more for the North West. We have seen a
number of positive benefits relating to work
during the pandemic including: reductions in
employee sickness absences; improvements in
engagement and wellbeing; improvements in
in time shape the workplace of the future; and
potentially make savings on accommodation.
Our plans have seen 2,000 employees
adopting hybrid ways of working. In terms
of the non-hybrid roles which are typically
directly supporting our customers and critical
operations, we are continuing to look at
providing additional flexible opportunities and
changing workplace practices to retain, attract
and stay aligned to the employment market.
The board concluded that the incorporation
of a hybrid way of working alongside the
traditional approach would be most likely
to promote the long-term success of the
company for the benefit of its members as a
whole. This way of working will be monitored
closely to ensure it remains efficient and
effective.
The best service to customers
At the lowest sustainable cost
In a responsible manner
River health
Link to strategy
The decision
The group has committed to deliver
£230 million in environmental improvements
within our base capital programme, supporting
at least a one-third sustainable reduction in
the number of spills recorded from our storm
overflows by 2025 compared to the 2020
baseline, leading to 184 kilometres of improved
waterways across the region.
How we engaged with stakeholders
There has been much negative press coverage
regarding river health and bathing water quality
aimed primarily at the wastewater sector,
with the Environment Agency (EA) and Ofwat
currently investigating whether wastewater
companies’ treatment works have been operated
in line with their environmental permits. We have
written to all our stakeholders including the EA,
Ofwat, The Consumer Council for Water and
MPs in our region. We announced that we would
be launching a community fund to support local
rivers initiatives, work alongside The Rivers Trust,
RSPB and local authorities to deliver projects,
and launch a new partnership to protect
watercourses with farmers to incentivise farming
practices that reduce impact to river health.
The board’s view
The group has co-operated fully with the EA/
Ofwat investigation. The board is cognisant that
United Utilities needs to do more to play its part
in improving river health in the North West, and
amongst other things, we will:
•
•
•
•
•
aim to publish investigations and plans for
all overflows that operate frequently;
ensure all storm overflows are monitored
by 2023;
aim to provide near real-time data when
an overflow operates and ensure this data
is easily accessible by 2023;
aim to deliver a significant reduction in
impact caused by storm overflows and
sewage treatment works by 2030; and
aim for there to be no serious pollution
incidents from our assets.
The board, in committing to playing its part in
improving river health, believes this would be
most likely to promote the long-term success
of the company for the benefit of its members
as a whole.
Non-financial information statement
The table below constitutes the company’s non-financial information statement, produced to comply with sections 414CA(1) and 414CB(1)
of the Companies Act 2006. Our purpose-driven approach, as described on pages 16 to 17, sets out how we act as a responsible business
and is applicable to the areas of disclosure required by s414CB(1). The performance tables we publish for each stakeholder that we create
value for, so that we can demonstrate we are fulfilling our purpose (see pages 52 to 75), include data in relation to the areas of disclosure
required by s414CB(1).
Read more about our purpose on our website at
unitedutilities.com/corporate/about-us/what-we-do/our-vision
Reporting requirement
Information necessary to understand
our business and its impact; policies and
due diligence activities; and outcomes
Policies, guidance and standards which
govern our approach (some of which are
only published internally)
Environmental matters
Reflecting the needs of the environment:
• Waste and resource use policy
• Natural resources – see page 24
• Natural environment – see pages 26 and 31
• Reducing our carbon footprint – see
pages 86 to 97
• Environmental policy – see the
responsibility pages on our website
• Water Resources Management Plan –
see page 48
• Emissions target – see pages 86 to 97
Employees
Reflecting the needs of our employees:
• Health and safety policy
• Health and safety – see page 62
• Mental wellbeing – see pages 61 to 62
• Competitive base salaries and benefits –
see page 183
• Mental wellbeing policy
• Equality, diversity and inclusion policy
• Flexible working arrangements
• Agency worker policy
• Gender pay report 2021 – see page 44
• Human rights policy – see page 36
• Engagement – see pages 7, 30, 60 to 62
• Board diversity policy – see pages 133 to 134
and 196
• Board diversity – see pages 133 to 134
Respect for human rights
Reflecting the needs of our stakeholders:
• Employee data protection policy
• Suppliers – see page 31
• Diversity within our workforce – see
pages 7, 44 to 45, 60 to 63, 133 to 134, and
137 to 138
• Slavery and human trafficking statement
• Human rights policy – see page 36
Social matters
Reflecting the needs of our stakeholders:
• YourVoice – see page 29
• Customers – see page 30
• Communities – see page 30
• Environment – see pages 31 and 86
• Suppliers – see page 31
• Regulators – see page 32
• Charitable matched funding guidance
• Volunteering policy
• United Supply Chain – see
pages 36 and 73
• Commercial procurement policy
Anti-corruption and
anti-bribery
Reflecting the needs of employees and
suppliers:
• Anti-bribery policy
• Fraud investigation and reporting processes
• Employees – see pages 61 and 154
• Whistleblowing policy
• Suppliers – see page 73
•
Internal financial control processes
• Commercial procurement policy
40
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Stock Code: UU.
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Our business model – our approach
Systems Thinking
Our Systems Thinking approach enables us to better manage our end-to-end water and wastewater
systems, optimising our decision-making and helping us move away from the traditional reactive
approach to address problems proactively before they affect customers. This creates long-term
value, improving our asset reliability and resilience, reducing unplanned service interruptions, and
delivering cost savings.
Systems Thinking
capability maturity
We assess new opportunities against five
capability maturity levels.
At the lower levels there is a high degree of
human intervention and reactive behaviour.
At the higher levels there is a high degree
of predictive analytics, use of artificial
intelligence to process vast amounts of data,
joined up decision-making across the system,
and higher levels of automation.
It requires time and investment to reach the
higher levels, and we are at different levels in
different areas of our business as we continue
to embed and progress our approach.
Central system management
from our Integrated Control Centre
Systems Thinking involves looking at the entire system and all of its linkages, rather
than individual assets or sites in isolation, to find the best all-round solutions. Our
digital backbone sends vast amounts of real-time data to our Integrated Control
Centre (ICC), from which we plan, monitor and control our operations. We also
factor in other source data such as weather forecasts and customer demand, and
at the higher capability maturity levels we use artificial intelligence and machine-
learning to identify trends and anomalies that could signal potential issues.
Work order created,
prioritised and sent to our
digitally enabled field team
Replacement parts
ordered automatically
Optimisation of system,
e.g. production boosted at
alternative treatment works
while work is undertaken
Customer data,
e.g. usage and
contact centre
Data from
external sources,
e.g. weather forecasts
Work and resource
scheduling
Real-time alerts from
assets/treatment works
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1 Maturity level 1
Event-led human-driven analytics
2 Maturity level 2
Centralised view of system
performance
3 Maturity level 3
Technology-enabled, standardised
analytics and insight
4 Maturity level 4
Machine-led system analytics and
system management
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5 Maturity level 5
Machine intelligence provides full
system control
Real-time performance
data from network sensors
Predictive analytics using
trends and patterns
enables us to spot
abnormal performance
and take proactive steps
to resolve issues
42
unitedutilities.com/corporate
Our business model – our approach
Systems Thinking
Our Systems Thinking approach enables us to better manage our end-to-end water and wastewater
systems, optimising our decision-making and helping us move away from the traditional reactive
approach to address problems proactively before they affect customers. This creates long-term
value, improving our asset reliability and resilience, reducing unplanned service interruptions, and
delivering cost savings.
Systems Thinking
capability maturity
Central system management
from our Integrated Control Centre
Systems Thinking involves looking at the entire system and all of its linkages, rather
than individual assets or sites in isolation, to find the best all-round solutions. Our
digital backbone sends vast amounts of real-time data to our Integrated Control
Centre (ICC), from which we plan, monitor and control our operations. We also
factor in other source data such as weather forecasts and customer demand, and
at the higher capability maturity levels we use artificial intelligence and machine-
learning to identify trends and anomalies that could signal potential issues.
We assess new opportunities against five
capability maturity levels.
At the lower levels there is a high degree of
human intervention and reactive behaviour.
At the higher levels there is a high degree
of predictive analytics, use of artificial
intelligence to process vast amounts of data,
joined up decision-making across the system,
and higher levels of automation.
It requires time and investment to reach the
higher levels, and we are at different levels in
different areas of our business as we continue
to embed and progress our approach.
Work order created,
prioritised and sent to our
digitally enabled field team
Replacement parts
ordered automatically
Optimisation of system,
e.g. production boosted at
alternative treatment works
while work is undertaken
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1 Maturity level 1
Event-led human-driven analytics
2 Maturity level 2
Centralised view of system
performance
3 Maturity level 3
Technology-enabled, standardised
analytics and insight
4 Maturity level 4
Machine-led system analytics and
system management
5 Maturity level 5
Machine intelligence provides full
system control
Customer data,
e.g. usage and
contact centre
Data from
external sources,
e.g. weather forecasts
Work and resource
scheduling
Real-time alerts from
assets/treatment works
Real-time performance
data from network sensors
Predictive analytics using
trends and patterns
enables us to spot
abnormal performance
and take proactive steps
to resolve issues
We’re harnessing
data on a huge scale
across our region, and
combining that with the
advancements in AI to
really understand that
complete system.”
Resolving potential issues proactively
with Dynamic Network Management
Dynamic Network Management (DNM)
is an innovative programme of work
that has been developed to help us
become more proactive in managing our
sewer network, by installing the latest
technology across a large number of ‘hot
spot’ areas in the North West.
A growing population, ageing infrastructure and more
erratic weather conditions due to the effects of climate
change all combine to create a challenge for our vast
sewer network. There are certain places along the
network where incidents such as blockages, flooding
and pollution are more prone to occur, and many
incidents are not traditionally detected until they are
experienced first-hand by customers. Our goal was to
create a smarter network – one that allows us to truly
understand how our drainage systems perform.
To help reduce the risks of flooding and pollution, over
20,000 digital sensors are being installed in manholes
across the expansive sewer network, and also at a
large number of pumping stations. The sensors identify
when the sewer network flow is not operating as usual
for that particular part of the network, or if a pumping
station is not working as it should. The sensors send
an alert back to a central system, meaning we can
respond in real time to any deviation in performance,
identifying and resolving issues before they impact
customers or the environment.
The artificial intelligence (AI) we use has a neural
network that learns trends in the system, predicting
future behaviour of the assets, as well as current
activity. It identifies patterns in customer behaviour, for
example, or in river levels as a response to rainfall, and
allows us to predict where and when bigger problems
might develop.
Network business manager, Sam Sloan, said: “The
programme’s combination of artificial intelligence and
machine-learning puts us in a leading position when it
comes to Systems Thinking. We’re harnessing data on
a huge scale across a large region, and combining that
with the advancements in AI to really understand that
complete system.”
We have already installed over 10,000 of the digital
sensors, and the data produced by this system means
we are finding and fixing issues within the sewer
system before they cause an incident. As a result,
our customers have seen a year-on-year reduction in
internal flooding of a third in this last year with our
performance significantly ahead of the original target
we set ourselves.
Delivering value for:
Customers
Environment
Shareholders
Customers
Environment
Investors
42
unitedutilities.com/corporate
Stock Code: UU.
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Our business model – our approach
Diversity and inclusion
Creating a diverse and inclusive culture
We want our workforce to reflect the
communities we serve by reaching and
recruiting from every part of our community,
and we want all employees to feel valued and
included, regardless of their gender, age, race,
disability, sexuality or social background.
Our customer services and people director
sponsors our overall diversity and inclusion plan
and tracks its progress with the executive team.
We have completed a further maturity audit
with our specialist inclusion partner, the Clear
Company, who has independently measured
progress against our plans and recognised our
strong focus on education.
We again ranked in the top 1 per cent of over
850 companies across Europe in the Financial
Times’ Statista Survey for Diversity and
Inclusion Leadership, and were the leading
utility company in the Top 50 Inclusive UK
Employers Index. We have been included in
the Bloomberg Gender Equality Index 2022,
showing our commitment to more equal and
inclusive workplaces.
Ethnicity
We continue to build on our diversity data,
collecting information as part of our ongoing
processes. We launched our first diversity
survey, with over 2,000 employees sharing
data about themselves beyond their role. The
percentage of employees who choose not to
disclose their ethnic origin has decreased from
15 per cent to 9 per cent. We have moved from
2.5 per cent of our workforce identifying as
from an ethnic background to 2.7 per cent.
We have become a patron member of the
BAME Apprenticeship Alliance and have an
active multicultural network that supports
colleagues and educates the wider workforce
on cultural differences. Our drive to build
an inclusive culture has seen us focus on
educating, raising awareness, and celebrating
cultural events. We recruited 25 university
students onto the 10,000 Black Interns
programme, and have committed to offering
120 placements over the next five years.
We have put efforts into developing a diverse
leadership pipeline by introducing a new talent
programme for employees from ethnic minority
backgrounds, giving them the opportunity to
develop personal and leadership skills that will
help them fast-track their careers with us.
We’ve made good progress in recruiting
apprentices from more diverse backgrounds,
with 16 per cent of new apprentices this year
from an ethnic minority background. This is
a positive result against a backdrop of low
attrition levels, regional variations in ethnic
diversity, and difficulties attracting females
for science, technology, engineering and
mathematics (STEM) roles.
Gender
Our workforce profile remains static at 66
per cent male and 34 per cent female. We
recognise the need to attract diverse and
talented individuals with an interest in STEM
44
and have a focused approach to improving
the gender diversity of our workforce. To help
us inspire young people into STEM careers,
we continue to run our ‘Engineering your
future’ competition with secondary schools
from the local area, working closely with our
apprentice ambassador, Warrington Wolves
women’s rugby captain Michelle Davis. Sixty
per cent of participants are female.
We have strong female role models succeeding
at all levels of the organisation, including the
board, executive leadership team, and key
operational roles. Sixty-two per cent of all
senior leader vacancies this year were filled by
females. We offer targeted support for future
female talent through our Female Leadership
Pipeline and Aspiring Manager Programme.
Sixty-four per cent of employees currently on
our Aspiring Manager Programme are female.
In the last 12 months, we have welcomed
26 graduates onto our schemes, and 51
apprentices have joined us on operational,
service and future-facing digital and
environmental schemes. Thirty-seven per
cent of new apprentices and 36 per cent of
new graduates are female, higher than the UK
average of 24 per cent females in STEM roles.
We are proud that 96 per cent of our current
female workforce would recommend us
as an employer and 92 per cent of female
employees say that we support diversity and
inclusion in the workplace.
Gender pay reporting
(from the 2021 gender pay report)
We’re making good progress in reducing
our gender pay gap and gender bonus gap,
continuing a positive downward trend over
the last five years. At 14.7 per cent, our
median gender pay gap is lower than the
national average of 15.4 per cent. This year,
the changes in our median gender pay gap
are mainly due to a reduction in the number
of females in lower-paid roles, which has
increased the median salary for women.
Executive team(2)
Executive team(2)
Our median gender pay gap
over the last five years
2021
2020
2019
2018
2017
14.7%
15.3%
13.8%
15.3%
15.9%
Our mean gender bonus
gap over time
2021
2020
2019
2018
2017
8.1%
10.7%
11.3%
13.2%
13.1%
Percentage of women and men
overall and in each quartile of the
pay range (figures for 2021 and
2020)
Upper
Upper middle
Lower middle
Lower
2021
30%
2020
30%
2021
23%
2020
21%
2021
32%
2020
33%
2021
48%
2020
49%
Proportion of women
Proportion of men
70%
70%
77%
79%
68%
67%
52%
51%
UU Group board(1)
UU Group board(1)
Executive team
(2)
Executive team
(2)
Senior managers(3)
Senior managers(3)
Wider employees
Wider employees
(4)
(4)
4
4
7
7
3
3
4
4
4
4
19
19
4
4
3,928
3,928
2,100
2,100
4
Our mean gender pay gap has reduced
4
significantly since 2017, mainly due to an
increase in the number of women progressing
into more senior roles within the company
and the success of our talent management
Executive team(2)
programmes. Due to changes in our
workforce, last year we also saw more men in
lower-paid roles within the company.
UU Group board(1)
UU Group board(1)
Executive team(2)
Executive team
Executive team
(2)
(2)
Senior managers(3)
Senior managers(3)
Wider employees
Wider employees
(4)
(4)
7
3
3
4
4
4
4
4
Although women are still under-represented
4
7
in the top three pay quartiles, we have seen
more women in the upper middle quartile
this year. This is mainly due to more women
than men being promoted into higher-paid
roles as a result of our talent management
programme, which has helped to reduce the
pay gap. However, there is still more work for
us to do, for example in our main operational
roles, where it is more difficult to achieve a
gender split that is representative.
4
4
19
19
4
4
3,928
3,928
2,100
2,100
(1) Group board as at 31 March 2022.
(2) Executive team excludes CEO and CFO,
who are included in group board figures.
(3) As at 31 March 2022, there were eight male
and three female employees appointed
as statutory directors of subsidiary group
companies but who do not fulfil the
Companies Act 2006 definition of ‘senior
managers’.
(4) Wider employees as at 31 March 2022.
unitedutilities.com/corporate
Our business model – our approach
Diversity and inclusion
Creating a diverse and inclusive culture
We want our workforce to reflect the
communities we serve by reaching and
and have a focused approach to improving
the gender diversity of our workforce. To help
recruiting from every part of our community,
us inspire young people into STEM careers,
and we want all employees to feel valued and
we continue to run our ‘Engineering your
included, regardless of their gender, age, race,
future’ competition with secondary schools
disability, sexuality or social background.
from the local area, working closely with our
Our customer services and people director
sponsors our overall diversity and inclusion plan
and tracks its progress with the executive team.
apprentice ambassador, Warrington Wolves
women’s rugby captain Michelle Davis. Sixty
per cent of participants are female.
We have completed a further maturity audit
We have strong female role models succeeding
with our specialist inclusion partner, the Clear
at all levels of the organisation, including the
Company, who has independently measured
board, executive leadership team, and key
progress against our plans and recognised our
operational roles. Sixty-two per cent of all
strong focus on education.
We again ranked in the top 1 per cent of over
850 companies across Europe in the Financial
Times’ Statista Survey for Diversity and
Inclusion Leadership, and were the leading
utility company in the Top 50 Inclusive UK
senior leader vacancies this year were filled by
females. We offer targeted support for future
female talent through our Female Leadership
Pipeline and Aspiring Manager Programme.
Sixty-four per cent of employees currently on
our Aspiring Manager Programme are female.
Employers Index. We have been included in
In the last 12 months, we have welcomed
the Bloomberg Gender Equality Index 2022,
26 graduates onto our schemes, and 51
showing our commitment to more equal and
apprentices have joined us on operational,
inclusive workplaces.
Ethnicity
We continue to build on our diversity data,
collecting information as part of our ongoing
processes. We launched our first diversity
service and future-facing digital and
environmental schemes. Thirty-seven per
cent of new apprentices and 36 per cent of
new graduates are female, higher than the UK
average of 24 per cent females in STEM roles.
survey, with over 2,000 employees sharing
We are proud that 96 per cent of our current
data about themselves beyond their role. The
female workforce would recommend us
percentage of employees who choose not to
as an employer and 92 per cent of female
disclose their ethnic origin has decreased from
employees say that we support diversity and
15 per cent to 9 per cent. We have moved from
inclusion in the workplace.
2.5 per cent of our workforce identifying as
from an ethnic background to 2.7 per cent.
We have become a patron member of the
BAME Apprenticeship Alliance and have an
active multicultural network that supports
colleagues and educates the wider workforce
on cultural differences. Our drive to build
an inclusive culture has seen us focus on
educating, raising awareness, and celebrating
cultural events. We recruited 25 university
students onto the 10,000 Black Interns
programme, and have committed to offering
120 placements over the next five years.
We have put efforts into developing a diverse
leadership pipeline by introducing a new talent
programme for employees from ethnic minority
backgrounds, giving them the opportunity to
develop personal and leadership skills that will
help them fast-track their careers with us.
We’ve made good progress in recruiting
apprentices from more diverse backgrounds,
with 16 per cent of new apprentices this year
from an ethnic minority background. This is
a positive result against a backdrop of low
attrition levels, regional variations in ethnic
diversity, and difficulties attracting females
for science, technology, engineering and
mathematics (STEM) roles.
Gender
Our workforce profile remains static at 66
per cent male and 34 per cent female. We
recognise the need to attract diverse and
talented individuals with an interest in STEM
Gender pay reporting
(from the 2021 gender pay report)
We’re making good progress in reducing
our gender pay gap and gender bonus gap,
continuing a positive downward trend over
the last five years. At 14.7 per cent, our
median gender pay gap is lower than the
national average of 15.4 per cent. This year,
the changes in our median gender pay gap
are mainly due to a reduction in the number
of females in lower-paid roles, which has
increased the median salary for women.
Our mean gender pay gap has reduced
significantly since 2017, mainly due to an
increase in the number of women progressing
into more senior roles within the company
and the success of our talent management
Executive team(2)
Executive team(2)
UU Group board(1)
UU Group board(1)
programmes. Due to changes in our
workforce, last year we also saw more men in
lower-paid roles within the company.
more women in the upper middle quartile
this year. This is mainly due to more women
than men being promoted into higher-paid
roles as a result of our talent management
programme, which has helped to reduce the
pay gap. However, there is still more work for
us to do, for example in our main operational
roles, where it is more difficult to achieve a
gender split that is representative.
Our median gender pay gap
over the last five years
Our mean gender bonus
gap over time
14.7%
15.3%
13.8%
15.3%
15.9%
8.1%
10.7%
11.3%
13.2%
13.1%
2021
2020
2019
2018
2017
2021
2020
2019
2018
2017
Percentage of women and men
overall and in each quartile of the
pay range (figures for 2021 and
2020)
2021
30%
2020
30%
2021
23%
2020
21%
2021
32%
2020
33%
2021
48%
2020
49%
Upper
Upper middle
Lower middle
Lower
Proportion of women
Proportion of men
70%
70%
77%
79%
68%
67%
52%
51%
LGBT+
We celebrate and value the diversity
of all our people. We are committed to
ensuring any Trans or non-binary people
are respected and valued and that we
provide a working environment free from
discrimination, harassment and victimisation
based on gender identity. We worked with
our colleagues from the LGBT+ network and
our trade union representatives to produce a
transitioning at work policy.
We are pleased to have partnered with The
Proud Trust, a north west-based LGBT+
youth charity. We have sponsored a youth
group worker to work with LGBT+ young
people in Oldham, a ‘cold spot’ as defined
by the social mobility index. We have funded
LGBT+ inclusive educational resources,
linked to the English national curriculum.
In 2021, we continued to roll out our ‘Pride
in the workplace’ training, designed to help
break down barriers and improve confidence
to talk about LGBT+ in the workplace. Over
150 employees completed the training
course. We received a Bronze award in
Stonewall’s Workplace Equality Index for our
efforts to support LGBT+ inclusivity.
Disability
We are driving forward our commitment to
The Valuable 500’s nine recommendations
for creating a disability-aware workplace.
The Value 500 is a global movement to put
disability on the business leadership agenda.
We are a Disability Confident employer, one
of over 20,000 UK employers to have signed
up to the government scheme.
Together with our ability employee network,
we have identified key focus areas,
including neurodiversity, deaf awareness
and menopause. We have also committed
to support the Employ Autism programme,
through which we will offer paid placements
to autistic students from local universities.
Supporting under-represented
communities
We are supporting those traditionally
overlooked groups in our communities, with
44 per cent of the young people we recruited
onto the Government’s Kickstart Scheme
now transitioning into employment, and a
further six being supported with applications
for our award-winning apprenticeships.
Our ‘Tap into your future’ virtual work
experience programmes targeted under-
represented communities across the North
West, offering over 500 students an exclusive
insight into our business and our fantastic
early careers opportunities. One hundred per
cent of attendees now think United Utilities
is a diverse and inclusive employer and 76
per cent said they were extremely interested
in applying for an apprenticeship after
completing the programme.
We successfully implemented an award-
winning engineering masterclass, with
around 300 students having been taken
through the curriculum, inspiring the
next generation of diverse students from
disadvantaged backgrounds to pursue a
STEM-related career.
Armed Forces
We were proud to again achieve the Ministry
of Defence’s Employer Recognition Scheme
Gold Award, the highest level of recognition
for commitment to supporting the Armed
Forces community, and have become one of
the first companies to be reaccredited. The
accolade is awarded to companies that can
demonstrate considerable commitments and
‘forces-friendly’ action, including signing the
Armed Forces Covenant, making necessary
adjustments to HR policies, and fostering
a more inclusive work culture for Armed
Forces personnel, past and present.
Our inclusion plan
Inclusive leadership
With workshops, masterclasses,
and talks on inspirational topics
from external speakers, we’re
leading a fresh approach to
diversity and inclusion.
Encouraging openness
We launched our ‘About Me’
campaign to find out more about
our employees’ needs and improve
our employee records.
Improving our policies
We have a number of policies in
place to support our employees
in achieving the balance between
home and work life, with
enhanced family-friendly leave
options and maternity benefits
that are better than those
required by UK law.
Increasing awareness
Our ‘We are better together’
video shows our employees that
we want to create and maintain a
working environment where we
value and respect one another’s
unique contribution.
Supporting inclusion
Through our gender equality
network we’ve been focusing
on normalising some tricky
conversations.
Executive team(2)
Executive team(2)
UU Group board(1)
UU Group board(1)
Executive team
Executive team
(2)
(2)
Senior managers(3)
Senior managers(3)
4
4
4
4
7
7
3
3
4
4
4
4
19
19
4
4
Executive team
Executive team
(2)
(2)
Senior managers(3)
Senior managers(3)
Wider employees
Wider employees
(4)
(4)
Although women are still under-represented
4
4
4
4
in the top three pay quartiles, we have seen
7
7
3
3
4
4
4
4
19
19
4
4
3,928
3,928
2,100
2,100
(1) Group board as at 31 March 2022.
(2) Executive team excludes CEO and CFO,
who are included in group board figures.
(3) As at 31 March 2022, there were eight male
and three female employees appointed
as statutory directors of subsidiary group
companies but who do not fulfil the
Companies Act 2006 definition of ‘senior
managers’.
(4) Wider employees as at 31 March 2022.
Wider employees
(4)
Wider employees
(4)
The percentage of employees who have
declared a disability has increased from
2.2 per cent to 8.4 per cent. Of this year’s
apprentice intake alone, 21 per cent disclosed
a disability or learning difficulty.
3,928
3,928
2,100
2,100
We have created over
£300,000
of social/local economic value
(TOMS Social Value Portal)
34% of our employees are female and
25% of these are in STEM roles
41% of our graduates and
27% of our apprentices are female
62% of those recruited to senior leader
roles in 2021 were female and
35% of our combined board and
executive team is female
15% of our graduates and
13% of our apprentices
have told us they have a
disability or learning difficulty
44
unitedutilities.com/corporate
Stock Code: UU.
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Our business model – our planning horizons
Our approach to long, medium and short-term planning horizons helps us continue
fulfilling our purpose in a sustainable and resilient way.
Our approach to planning
We take an integrated approach to
everything we do. To help us create and
prioritise our plans, we consider:
• what the material issues are, both
in terms of the level of interest to
stakeholders and the effect they may
have on our ability to create value;
• our assessment of principal risks and
uncertainties;
• our environmental, social and
governance (ESG) commitments; and
• how our plans will fit with our Systems
Thinking approach.
We undertake planning for long, medium and
short-term horizons.
Long-term (25+ years) planning helps us
identify what we need to do to address
challenges and opportunities that may arise,
building resilience so that we can ensure we
are able to provide our essential services to
customers far into the future.
These long-term plans influence our medium-
term (five to ten years) planning, which sets
out how we will deliver the commitments of
our final determination for each regulatory
period, as well as our non-regulatory
activities.
Short-term (one year) planning enables us to
monitor and measure progress against our
five-year plans and regulatory targets. We
retain flexibility in our one-year plans to meet
our five-year targets in the most effective
and efficient way as circumstances change.
Materiality and risk
assessment
Our plans take into account
the issues that have been
identified as material, and our
assessment of principal risks
and uncertainties.
Read more about what
matters most to stakeholders
on pages 34 to 39 and our
risk management on pages
100 to 109
Monitoring performance
We continuously assess our
performance against our
plans using key performance
indicators (KPIs) and other
performance metrics of interest
to our stakeholders.
Read more about how we
measure our performance
on pages 50 to 51
Our planning horizons
1
year
We set annual targets, but retain flexibility
in these to respond to challenges and
meet our five-year goals in the most
effective and efficient way possible.
5–10
years
Medium-term planning reflects our five-year regulatory periods,
and aims to help us work towards our long-term plans.
25+
years
Our business is very long term by nature and we must build resilience to
ensure we can continue to provide this essential service.
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Our business model – our planning horizons
Our approach to long, medium and short-term planning horizons helps us continue
fulfilling our purpose in a sustainable and resilient way.
Our approach to planning
We take an integrated approach to
everything we do. To help us create and
prioritise our plans, we consider:
• what the material issues are, both
in terms of the level of interest to
stakeholders and the effect they may
have on our ability to create value;
• our assessment of principal risks and
uncertainties;
• our environmental, social and
governance (ESG) commitments; and
• how our plans will fit with our Systems
Thinking approach.
Long-term (25+ years) planning helps us
identify what we need to do to address
challenges and opportunities that may arise,
building resilience so that we can ensure we
are able to provide our essential services to
customers far into the future.
These long-term plans influence our medium-
term (five to ten years) planning, which sets
out how we will deliver the commitments of
our final determination for each regulatory
period, as well as our non-regulatory
activities.
Short-term (one year) planning enables us to
monitor and measure progress against our
five-year plans and regulatory targets. We
our five-year targets in the most effective
and efficient way as circumstances change.
We undertake planning for long, medium and
retain flexibility in our one-year plans to meet
short-term horizons.
Materiality and risk
assessment
Our plans take into account
the issues that have been
identified as material, and our
assessment of principal risks
and uncertainties.
Read more about what
matters most to stakeholders
on pages 34 to 39 and our
risk management on pages
100 to 109
Monitoring performance
We continuously assess our
performance against our
plans using key performance
indicators (KPIs) and other
performance metrics of interest
to our stakeholders.
Read more about how we
measure our performance
on pages 50 to 51
Our planning horizons
1
year
We set annual targets, but retain flexibility
in these to respond to challenges and
meet our five-year goals in the most
effective and efficient way possible.
5–10
years
Medium-term planning reflects our five-year regulatory periods,
and aims to help us work towards our long-term plans.
25+
years
Our business is very long term by nature and we must build resilience to
ensure we can continue to provide this essential service.
2023
2024
2025
We will make sure all storm
overflows are monitored
and real-time data on their
operation is made available
to the general public
We will publish our
new Water Resources
Management Plan and
Drainage and Wastewater
Management Plan
We aim to have 210,000
customers registered
for our Priority
Services scheme
2025+
2025
We will work to enable
future national water
trading
We aim to improve water
quality in 1,315 kilometres
of rivers across the
North West
2030
2030
2030
We will ensure bills are
affordable for households
where bills amount to
more than five per cent of
disposable income, in line
with the industry’s Public
Interest Commitment
100 per cent of our Sites of
Special Scientific Interest
will be in favourable or
recovering status
We commit to reducing our
scope 1 and 2 greenhouse
gas (GHG) emissions by
42 per cent in line with
our ambitious science-
based target
2045
2035
We will install additional
water meters to achieve
coverage of around
75 per cent of households
We will deliver our service
using natural capital in a
sustainable, efficient and
resilient way
2050
2050
2050
We are targeting to help
reduce water demand
to 110 litres per person
per day
We aim to have reduced
leakage by 50 per cent
We aim to achieve our long-
term science-based target for
net zero GHG emissions aligned
to the Paris Agreement's
ambition to limit global
warming to 1.5°C
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Our business model – our planning horizons
25+
years
5–10
years
Long-term
planning
Our approach to long-term planning
ensures we are responding to
challenges and opportunities that may
arise far into the future.
Medium-term
planning
To maintain a reliable, high-quality service
for customers far into the future, we have
to look a long way ahead to anticipate and
plan for the changes and core issues that
are likely to impact on our activities.
This involves looking at a lot of current
and predictive data from various sources,
such as economic forecasts, expectations
for population growth, climate and
weather predictions, legal and regulatory
consultations and changes, as well as
the age and condition of our assets,
and keeping track of innovations and
technological advancements. We review
this information as part of our long-term
planning and risk management processes.
Over the next 25+ years we have
identified many challenges and
opportunities that we are likely to be
faced with, including:
• Climate change;
• Population growth;
Our last Drought Plan was published in
2018. We have a new draft on which we
have consulted with stakeholders, and the
final plan will be made available on our
website once approved by Defra and the
Environment Agency.
We will publish a Drainage and
Wastewater Management Plan (DWMP)
for the first time in 2024, and more
information will be made available on our
website as we launch this.
These long-term plans set out the
investment needed to ensure we have
sufficient water to continue supplying
our customers, taking into account the
potential impact of climate change,
the actions we will take to manage the
risk of a drought, and the risks around
flooding, pollution, storm overflows, and
wastewater treatment.
We create long-term value for
stakeholders by:
• A more open, competitive market;
• Systems Thinking and innovation;
• Water trading;
• More stringent environmental
regulations;
•
long-term planning and responding to
challenges and opportunities;
•
sustainable catchment management;
• Developments in technology; and
• disciplined investment, based on a
• Combining affordable bills with a
modern, responsive service.
There is a section of our website dealing
with our future plans, where we examine
these challenges and how we will focus
our resources and talents to meet them.
Our 25-year Water Resources
Management Plan (WRMP) covering the
2020–45 period, was developed and
published in 2019 following consultation
with stakeholders. We will publish our
new WRMP in 2024 covering the next
period.
sustainable whole-life cost modelling
approach, to ensure the resilience of
our assets and network;
•
investing in our employees to
maintain a skilled, healthy and
motivated workforce;
• close collaboration with
suppliers; and
• maintaining a robust and appropriate
mix of debt and equity financing.
Read more at unitedutilities.com/
corporate/about-us/our-future-plans
The majority of the group’s activities
sit within our regulated water and
wastewater business, therefore, our
medium-term planning predominantly
sets out how we will deliver against
the final determination (FD) we receive
from Ofwat for each five-year period.
Historically, we have submitted business
plans which were focused mainly on the
subsequent five-year asset management
plan (AMP) period, while providing a
high level view of the following AMP.
This provided medium-term planning
visibility of between five and ten years
at any one point in time, although Ofwat
is proposing a longer-term planning
approach for the next business plan
submission in 2023.
It is important that our plans deliver
for all stakeholders including customer
preferences and environmental
requirements. We, therefore, align our
plans to these priorities in line with
key published methodologies in order
to deliver the best overall approach to
stakeholder value.
Our business plans are designed to
help us work towards our long-term
plans, build and maintain resilience, and
ultimately fulfil our purpose. We engage
in extensive research to ensure the plans
we put forward are robust and balanced,
targeting the best overall outcomes for
all our stakeholders.
Following scrutiny and challenge
from Ofwat, we receive the final
determination (FD), which sets the
price (in terms of total expenditure and
customer bills), level of service, and
incentive package that we must deliver
over the five-year period, and an allowed
return we can earn.
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Our business model – our planning horizons
25+
years
5–10
years
1
year
Long-term
planning
Our approach to long-term planning
ensures we are responding to
challenges and opportunities that may
arise far into the future.
Medium-term
planning
Our medium-term planning aligns with
delivery of our plans as set out in Ofwat’s
final determination.
Short-term
planning
In the short term we set annual,
measurable targets, but we retain
flexibility to enable us to respond to
challenges that may arise.
To maintain a reliable, high-quality service
Our last Drought Plan was published in
for customers far into the future, we have
2018. We have a new draft on which we
The majority of the group’s activities
sit within our regulated water and
to look a long way ahead to anticipate and
have consulted with stakeholders, and the
wastewater business, therefore, our
plan for the changes and core issues that
final plan will be made available on our
medium-term planning predominantly
are likely to impact on our activities.
website once approved by Defra and the
sets out how we will deliver against
This involves looking at a lot of current
Environment Agency.
and predictive data from various sources,
We will publish a Drainage and
such as economic forecasts, expectations
Wastewater Management Plan (DWMP)
for population growth, climate and
for the first time in 2024, and more
weather predictions, legal and regulatory
information will be made available on our
consultations and changes, as well as
website as we launch this.
the age and condition of our assets,
and keeping track of innovations and
technological advancements. We review
this information as part of our long-term
planning and risk management processes.
Over the next 25+ years we have
identified many challenges and
These long-term plans set out the
investment needed to ensure we have
sufficient water to continue supplying
our customers, taking into account the
potential impact of climate change,
the actions we will take to manage the
risk of a drought, and the risks around
opportunities that we are likely to be
flooding, pollution, storm overflows, and
faced with, including:
• Climate change;
• Population growth;
wastewater treatment.
We create long-term value for
stakeholders by:
• A more open, competitive market;
• Systems Thinking and innovation;
• Water trading;
•
long-term planning and responding to
stakeholder value.
• More stringent environmental
challenges and opportunities;
regulations;
•
sustainable catchment management;
• Developments in technology; and
• disciplined investment, based on a
• Combining affordable bills with a
modern, responsive service.
There is a section of our website dealing
with our future plans, where we examine
these challenges and how we will focus
our resources and talents to meet them.
Our 25-year Water Resources
Management Plan (WRMP) covering the
2020–45 period, was developed and
published in 2019 following consultation
with stakeholders. We will publish our
new WRMP in 2024 covering the next
period.
sustainable whole-life cost modelling
approach, to ensure the resilience of
our assets and network;
•
investing in our employees to
maintain a skilled, healthy and
motivated workforce;
• close collaboration with
suppliers; and
• maintaining a robust and appropriate
mix of debt and equity financing.
Read more at unitedutilities.com/
corporate/about-us/our-future-plans
the final determination (FD) we receive
from Ofwat for each five-year period.
Historically, we have submitted business
plans which were focused mainly on the
subsequent five-year asset management
plan (AMP) period, while providing a
high level view of the following AMP.
This provided medium-term planning
visibility of between five and ten years
at any one point in time, although Ofwat
is proposing a longer-term planning
approach for the next business plan
submission in 2023.
It is important that our plans deliver
for all stakeholders including customer
preferences and environmental
requirements. We, therefore, align our
plans to these priorities in line with
key published methodologies in order
to deliver the best overall approach to
Our business plans are designed to
help us work towards our long-term
plans, build and maintain resilience, and
ultimately fulfil our purpose. We engage
in extensive research to ensure the plans
we put forward are robust and balanced,
targeting the best overall outcomes for
all our stakeholders.
Following scrutiny and challenge
from Ofwat, we receive the final
determination (FD), which sets the
price (in terms of total expenditure and
customer bills), level of service, and
incentive package that we must deliver
over the five-year period, and an allowed
return we can earn.
Our business plan submission for
2020–25 was awarded fast-track status
by Ofwat and we were given one of the
lowest cost challenges in the sector,
reflecting the efficient total expenditure
(totex) proposals we put forward.
The acceleration of our capital
programme during the 2015–20 period
helped us deliver improvements early
and we are adopting the same strategy
in this regulatory period, with around
£500 million of total expenditure
brought forward over the first three
years of the AMP, helping us make a
strong start to our 2020–25 plans.
Our total expenditure for this period
will be extended by £765 million
beyond the scope of the FD, with this
investment delivering improvements
in environmental performance,
accelerating delivery of the new
Environment Act, and providing an
enhanced level of service that will deliver
better performance against customer
outcome delivery incentives (ODIs).
Our strategy helps us create value for our
stakeholders by delivering or outperforming
the FD. Since 2015, we have published an
annual performance report (APR), which
reports our regulatory performance in a
format that helps customers and other
stakeholders understand it and compare
it with other companies in the sector.
This includes reporting of Return on
Regulated Equity (RoRE), which comprises
the base allowed return and any out/
underperformance, on an annual and
cumulative basis for each AMP.
Our APR is published in July each year at
unitedutilities.com/corporate/about-us/
performance/annual-performance-
report
Information on companies’ regulatory
performance can be found at
discoverwater.co.uk
Short-term planning helps us work
towards our medium and long-term
goals and provides us with measurable
targets so that we can continually monitor
and assess our progress, which helps
us ensure the long-term resilience and
sustainability of our business.
The executive directors hold quarterly
business review meetings with senior
managers across the business to monitor
and assess performance against our
annual targets, helping to ensure that we
are on track to deliver our targets for the
year, and longer term.
Before the start of each financial year,
which runs from 1 April to 31 March, we
develop a business plan for that year,
and this is reviewed and approved by the
board. This business plan sets our annual
targets, which are designed to help
deliver further improvements in service
delivery and efficiency, and to help move
us towards achievement of our five-year
and longer-term goals.
Performance against these annual targets
determines the annual bonus percentage
that is awarded. Executive directors and
employees right through the organisation
are remunerated against these same
bonus targets.
As well as these annual bonus targets,
in order to avoid encouragement of
short-term decision-making and ensure
management is focused on the long-term
performance of the company, executive
directors are remunerated through
long-term incentive plans (LTP). The LTP
assesses three-year performance, and
is measured during the 2020–25 period
through RoRE and a basket of customer
measures.
See details of the annual bonus and
Long Term Plan arrangements on
pages 178 to 182
It is vital that we retain flexibility within
this short-term planning so we can adapt
to meet challenges that may arise during
each year, and deliver high-quality and
resilient services to customers in the most
effective and cost-efficient way possible.
This may involve bringing enhancements
forward to deliver improvements for
customers early, investing further into the
business to maintain service, or delaying
projects to occur later in the regulatory
period in order to prioritise expenditure
and allow our people to spend their time
dealing with any unexpected challenges
that arise.
The challenges presented by COVID-19
were a clear example of why this
flexibility is crucial. We enacted our
robust contingency plans, enabling us to
quickly and efficiently move thousands
of our people to home working and
introduce additional safeguarding
measures for those that remained on sites
or in the field, while maintaining reliable
water and wastewater services that were
especially critical for public health at
this time.
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Our business model – the value we generate
How we measure our performance
To measure progress on delivering our purpose and creating value for our
stakeholders, we monitor and measure our performance against each of the
stakeholder groups that we create value for.
Read about how we
generated value
for communities on
pages 52 to 55
Read about how we
generated value for
customers on pages
56 to 59
C u s
t ome
r
Customers
s
o m m unit
Communities
i
e
C
s
Customers
S u p plier
s
Media
Read about how we
generated value for
suppliers on pages
72 to 75
Delivering
our purpose
p loye
e
Employees
s
E m
Environment
Read about how we
generated value for
employees on
pages 60 to 63
Shareholders
I
nvest o r s
Read about how we
generated value for
investors on pages
68 to 71
Environment
E
nviron m ent
Read about how we
generated value for
the environment on
pages 64 to 67
Find out more about our external accreditations
In addition to our KPIs and regulatory targets, we monitor our performance against
an assortment of ESG metrics that are of interest to our many stakeholders.
We report against these within this report on page 13 and on our website at
unitedutilities.com/corporate/responsibility/our-approach/
cr--performance
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Our business model – the value we generate
How we measure our performance
To measure progress on delivering our purpose and creating value for our
stakeholders, we monitor and measure our performance against each of the
stakeholder groups that we create value for.
Read about how we
generated value
for communities on
pages 52 to 55
o m m unit
Communities
i
e
s
C
Customers
Read about how we
generated value for
customers on pages
56 to 59
t ome
r
Customers
s
C u s
S u p plier
s
Media
Read about how we
generated value for
suppliers on pages
72 to 75
Delivering
our purpose
p loye
Employees
e
s
E m
Environment
Read about how we
generated value for
employees on
pages 60 to 63
Shareholders
I
nvest o r s
Read about how we
generated value for
investors on pages
68 to 71
Environment
E
nviron m ent
Read about how we
generated value for
the environment on
pages 64 to 67
Our key
performance
indicators
Our other
performance
indicators
Our annual
performance
report (APR)
We measure our performance against a
selection of key performance indicators
(KPIs), both operational and financial.
These are unchanged from last year.
Bonuses (for executive directors and
employees right through the business)
and long-term incentives for executive
directors, are closely aligned to many of
our operational and financial KPIs.
Operational KPIs
Our purpose drives us to create long-
term value for all our stakeholders, and
we report against one operational KPI for
each of the six stakeholders for whom
we create value. More detail on these
operational KPIs, including our targets
and performance this year, can be seen on
pages 8 to 9.
Financial KPIs
We have selected financial KPIs that assess
both profitability and sustainability of our
business from a financial perspective.
More detail on these financial KPIs,
including our targets and performance this
year, can be seen on pages 10 to 11.
Our six operational KPIs are by no means
the only metrics by which we monitor and
assess our performance. We report against
many other metrics both internally and
externally. As discussed on pages 29 to
33, our stakeholder engagement gives us
a view of what matters most to them. We
report on a selection of other metrics on
pages 52 to 75 of this report, based on the
measures shown to be of highest interest to
our stakeholders.
For example, on performance for
customers, our KPI is Ofwat’s measure
of customer experience, C-MeX, but on
page 58 we report on Ofwat’s measure of
developer satisfaction, D-MeX, the level of
customer complaints, vulnerability support,
customers lifted out of water poverty, and
the impact of water efficiency measures.
We regularly report on numerous corporate
responsibility performance measures
on our external website as detailed on
page 50.
All these performance indicators
have received an appropriate level of
assurance, such as independent third-party
verification, regulatory reporting assurance
processes, or through our own internal
audit team.
Performance against our regulatory
contract is monitored and assessed each
year, and reported within the annual
performance report (APR), as required by
our economic regulator Ofwat.
We cover several regulatory performance
measures within this report. Our
APR provides more details, as well as
further narrative, about our regulatory
performance during the year.
There is financial information contained
within the APR. This relates only
to the regulated company, United
Utilities Water Limited, and its
appointed activities, and is calculated
in accordance with the regulatory
accounting framework. This differs from
IFRS reporting, and a reconciliation to
IFRS reporting is provided in the APR.
For the purposes of clarification, our
financial KPIs relate to our performance
at the group level, and are calculated
within the definitions given in this report.
Our APRs for previous years are available
on our external website, and the APR for
2021/22 will be published in July 2022.
Our annual
performance reports
can be viewed
on our website at
unitedutilities.com/
corporate/about-us/
performance/annual-
performance-report
Find out more about our external accreditations
In addition to our KPIs and regulatory targets, we monitor our performance against
an assortment of ESG metrics that are of interest to our many stakeholders.
We report against these within this report on page 13 and on our website at
unitedutilities.com/corporate/responsibility/our-approach/
cr--performance
RoRE comprises a base allowed return,
which is set by Ofwat, plus or minus any
out or under performance earned. It is
reported on an annual and cumulative
basis throughout the AMP.
As well as being a key regulatory measure,
RoRE is one of our operational KPIs and is
linked to executive remuneration through
its inclusion in the Long Term Plan.
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Return on Regulated Equity (RoRE)
Return on regulatory equity (RoRE)
measures the regulatory returns (after tax
and interest) that companies have earned
by reference to the notional regulated
equity (which is calculated as 40 per cent
of the regulatory capital value (RCV),
while the other 60 per cent of the RCV is
notional net debt).
The three key areas through which we can
earn a higher RoRE are:
• delivering efficiency savings versus
our cost allowance (total expenditure
(totex) outperformance);
• earning outperformance payments
for service delivery against our
performance commitments (customer
outcome delivery incentive (ODI)
rewards); and
•
raising finance at a lower cost than
the industry allowed cost of debt
(financing outperformance).
RoRE can also be higher or lower as a
result of the outturn tax position versus
the allowance.
The main areas that could detract from
RoRE, therefore, are:
• overspending versus our total cost
allowance (totex underperformance);
•
•
incurring underperformance
payments for failure to meet our
performance commitments (customer
ODI penalties); and
incurring higher finance costs than
the industry allowed cost of debt
(financing underperformance).
Our efficient financing has given us a
history of financing outperformance.
We strive to deliver efficient costs, but our
strategy for AMP7 has been to prioritise
operating performance and ODI rewards
over totex savings, as this drives better
long-term value for all our stakeholders.
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Our performance in 2021/22
Operational performance
Communities
Customers
Communities
Supporting communities to be stronger –
our work puts us at the heart of local
communities in the North West.
How we measure performance
Our key performance indicator to measure value
created for communities during 2020–25 is community
investment, and we target increasing our investment
by at least 10 per cent compared with the average
between 2010 and 2020.
Community investment
Definition
Total community investment as measured by the
Business for Social Impact* (B4SI) method
(* previously LBG).
Target
The average community investment between 2010
and 2020 was £2.56 million per annum. We target
community investment to be at least 10 per cent
higher than this between 2020 and 2025.
Status
Achieved/confident of achieving target
Performance
This year our direct community investment
totalled £2.82 million.
This was higher than the previous year as a
result of increased activity with partners, such
as payments from our £300,000 Catchment
Systems Thinking (CaST) fund, and returning
to customer-facing events such as the RHS
Tatton Flower Show.
2021/22
£2.82m
2020/21
£2.15m
Link to material issue
• Land management, access and recreation
• Supporting communities
• Trust, transparency and legitimacy
Read more about our approach to materiality
on pages 34 to 35
Link to risks
Conduct and compliance
Read more about our principal risks on pages 104 to 105
We generate value for
communities across the
North West through
local investment,
partnerships
and educational
programmes, as well as
employee involvement.”
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Our performance in 2021/22
Operational performance
Communities
Customers
Communities
Supporting communities to be stronger –
our work puts us at the heart of local
communities in the North West.
How we measure performance
Link to material issue
Our key performance indicator to measure value
• Land management, access and recreation
created for communities during 2020–25 is community
investment, and we target increasing our investment
by at least 10 per cent compared with the average
• Supporting communities
• Trust, transparency and legitimacy
Read more about our approach to materiality
on pages 34 to 35
Link to risks
Conduct and compliance
Read more about our principal risks on pages 104 to 105
between 2010 and 2020.
Community investment
Definition
(* previously LBG).
Target
Total community investment as measured by the
Business for Social Impact* (B4SI) method
The average community investment between 2010
and 2020 was £2.56 million per annum. We target
community investment to be at least 10 per cent
higher than this between 2020 and 2025.
Status
Achieved/confident of achieving target
Performance
This year our direct community investment
totalled £2.82 million.
This was higher than the previous year as a
result of increased activity with partners, such
as payments from our £300,000 Catchment
Systems Thinking (CaST) fund, and returning
to customer-facing events such as the RHS
Tatton Flower Show.
2021/22
£2.82m
2020/21
£2.15m
We generate value for
communities across the
North West through
local investment,
partnerships
and educational
programmes, as well as
employee involvement.”
How we deliver value to communities
Short term
• We look after some beautiful rural
landscapes and pockets of urban
green space, and open much of our
land to the public, supporting regional
tourism and offering communities
health and wellbeing benefits through
access to relaxation and recreation.
• Working in partnership with others
means we can accomplish more
in tackling mutual issues, such as
partnering to develop employability
skills for those who need it most.
• Our operations and projects are often
near homes and businesses, and we
engage with these communities to
build understanding and trust.
Long term
• Early career and outreach schemes
break down barriers to employment
and increase social mobility, reducing
welfare costs.
• Managing land responsibly means we
leave the North West environment
in a better condition for future
generations.
• We work with teachers and children to
raise awareness about water and the
natural environment, giving the next
generation an understanding of the
true value water brings and how we
can all play our part in protecting the
services nature provides.
Link to strategic themes
Promoting our support services
and campaign messages places us
at the heart of communities and
builds trust with hard-to-reach
groups.
By working with community
partners we can share resources,
access new funding opportunities
and achieve more together.
Providing access to our land
enables communities to enjoy the
physical and mental wellbeing
benefits that green spaces can
bring, which in turn helps reduce
the burden on health services.
Read more about
our partnerships
on page 55
Overview
Our work puts us at the heart of local communities in
the North West of England, where our customers and
employees live and work. We understand the impact
our work can have on everyday lives across our region,
and we seek to play an active role in tackling the issues
that matter most to these communities. Our approach
is to develop strong relationships and build partnerships
where we work to generate solutions together. Our
employees also get involved in local communities
through volunteering, fundraising, and giving.
Our region has a broad mix of rural and urban
landscapes, and we look after some beautiful areas
of land, from the rolling hills of Cumbria to nature
reserves and other green spaces in towns and cities.
We open much of our land to the public, which
supports the regional tourism industry and offers
physical and mental health and wellbeing benefits
for communities through access to relaxation and
recreation. We also promote sustainable drainage
solutions to help avoid flooding in built-up urban areas.
Community investment beyond the
B4SI method of calculation
In addition to the £2.82 million of community
investment calculated using the B4SI method, we
contribute to our Trust Fund to help those struggling
to pay their bills, with further support available to
help customers reduce their water bill to an affordable
amount through our social tariff. We have extended the
additional £15 million per annum of support provided
through our social tariff during COVID-19 to 2025.
Partnerships
We invest in community partnerships to tackle issues
more effectively, to find new solutions to the challenges
we face, and to access new funding streams, driving
efficiency and a better overall outcome. Last summer
we signed two memoranda of understanding with the
Royal Society for the Protection of Birds (RSPB) and
The Rivers Trust – partners held in high esteem by local
communities with a broad membership base, enhancing
the credibility of what we do.
As part of our £300,000 CaST fund, we provided
funding to community groups across the North West
to deliver elements of our catchment management
approach, focused in particular on community
engagement with nature or helping shape and promote
natural capital markets.
One of the first projects to receive funding is led by
the Mersey Rivers Trust and focuses on establishing
community participation on the lower catchment area
of the River Bollin. It aims to increase the number of
people connecting with nature and accessing local
blue-green space for health and wellbeing. The project
will engage volunteers and landowners in restoring the
reed bed habitat at Tatton Mere, a popular recreational
site in Cheshire.
Helping young people
In addition to our ongoing graduate and apprentice
schemes, we have supported the Government’s
Kickstart programme by providing placements in
various roles across the North West. This scheme helps
support those traditionally overlooked groups in our
communities. Each Kickstarter has had a dedicated
skills coach and received job-related and employability
skills training. Since April 2021, 55 Kickstarters have
joined our business and 24 have found full-time
employment with us or our suppliers. A further six have
applied, or are being supported with applications, for
our apprentice programme.
As part of our work to promote skills for the future,
we once again joined forces with five high schools
from Warrington to help attract potential engineers.
Our partnership with The Challenge Academy
Trust (TCAT), now in its fifth year, was set up to
inspire young people to pursue a career in science,
technology, engineering and mathematics (STEM)
fields. Sixty students from the five schools, who are
part of TCAT, worked with our engineering mentors
over a period of 16 weeks, gaining a real insight into
what working life as an engineer is like.
The programme builds up to a ‘Dragons’ Den’ style
business competition to showcase the work the
students have done, in front of judges from the
business. The project provides more than just STEM
experience, as the challenges allow pupils to develop
valuable skills including teamwork, problem solving,
influencing others, and public speaking.
As the water industry deals with the challenge
of climate change, and we drive towards carbon
neutrality, attracting the next generation of creative,
skilled people is key to the success of our business.
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Our performance in 2021/22
Operational performance
Feedback from students has been positive, with 90 per
cent saying they would now pursue a STEM-related
career, and 100 per cent stating that they had a better
understanding of engineering at United Utilities.
Students rated the overall experience ten out of ten.
At Macclesfield Forest, we have joined forces with the
rural crime team from Cheshire Police and rangers
from the Peak District National Park to tackle anti-
social behaviour by undertaking joint patrols at busy
times to remind visitors to enjoy the area responsibly.
As COVID-19 restrictions have been lifted, our free ‘All
about water’ sessions have returned to classrooms
across the region. Consequently, we have seen a
reduction in the number of children benefiting from
our online education resources, which increased
significantly during lockdown. We are reviewing our
approach to education and, as part of this, we will
consider the most practical way to deliver educational
resources.
Community engagement
Direct engagement with communities provides the
opportunity to hear what customers think and to
explore ways we can work together to address issues.
For example, to highlight inappropriate use of sewers
and the problems created by that, we held a family-
friendly interactive exhibition at the Arndale Shopping
Centre in Manchester during February half term.
Engaging ‘Sewer Monster’ posters, competitions, fun
activities and free giveaways, including fat traps, were
all part of our Stop the Block campaign.
At the RHS Tatton Flower Show, we talked to
customers about water saving tips and sponsored
a garden of resilience. The garden addressed the
challenges of extremes of weather and the stresses
and strains of the pandemic. It gave visitors ideas for
making outdoor spaces better able to cope with too
much or too little rain, such as a rainwater planter
and a slimline water butt disguised as a bench, and
incorporated ideas to encourage people to take time
out and contemplate their own personal resilience.
Plants were chosen for their resilience to extremes
and prolonged spells of dry and wet weather, while
their colours complemented the hard landscaping
materials. The garden was well received by visitors
and won three awards at the show, receiving prime
time television exposure on BBC One and social media
coverage, helping to raise awareness to a much wider
audience. It will continue to inspire gardeners at its
new permanent home at RHS Bridgewater in Salford.
Access to our land for recreational use
We encourage the public to access our land and
regional bathing waters, and to enjoy them safely.
Since the first COVID-19 lockdown in spring 2020,
there has been an increase in anti-social behaviour on
our catchment land, with issues such as wild camping,
illegal fires and littering. We have been working with
local groups at several sites to address this.
In spring 2021, we launched a new podcast series
entitled ‘Acres of Nature’ to connect people with the
North West’s outdoor spaces. Each themed episode
takes an in-depth look at the land we manage – such
as the Davyhulme Millennium Nature Reserve in the
heart of Urmston, Manchester – through the eyes of
people who live, work and visit there. Available to all
on Spotify, Acres of Nature is all about bringing people
closer to nature, and podcast themes have included
history, nature and wellbeing.
Measure
KPI:
Community
investment
2025 target Performance
10% increase
(£2.82m)
£2.82m
£2.15m
Status
Annual
performance
Against 2025
target
Partnership leverage 1:4
50–60%
1:4
1:7
75%
83%
Percentage of
participants who
remain employed six
months after
completing an early
careers or outreach
scheme with United
Utilities
Number of children
benefiting from
education materials
Percentage of
visitors to our
recreation sites who
view United Utilities
more positively after
their experience
Status key:
Annual performance
20,000
12,998
19,120
Maintain
position
above 50%
57.3%
Baseline year
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
Performance key:
2021/22
2020/21
£300k
Catchment Systems
Thinking (CaST) funding for
community groups
55
Kickstarters have joined
the business through the
government programme
90%
Of students on TCAT STEM
programme say they are
more likely to pursue a
STEM-related career
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Our performance in 2021/22
Operational performance
Feedback from students has been positive, with 90 per
At Macclesfield Forest, we have joined forces with the
cent saying they would now pursue a STEM-related
rural crime team from Cheshire Police and rangers
career, and 100 per cent stating that they had a better
from the Peak District National Park to tackle anti-
understanding of engineering at United Utilities.
social behaviour by undertaking joint patrols at busy
Students rated the overall experience ten out of ten.
times to remind visitors to enjoy the area responsibly.
As COVID-19 restrictions have been lifted, our free ‘All
In spring 2021, we launched a new podcast series
about water’ sessions have returned to classrooms
entitled ‘Acres of Nature’ to connect people with the
across the region. Consequently, we have seen a
North West’s outdoor spaces. Each themed episode
reduction in the number of children benefiting from
takes an in-depth look at the land we manage – such
our online education resources, which increased
as the Davyhulme Millennium Nature Reserve in the
significantly during lockdown. We are reviewing our
heart of Urmston, Manchester – through the eyes of
approach to education and, as part of this, we will
people who live, work and visit there. Available to all
consider the most practical way to deliver educational
on Spotify, Acres of Nature is all about bringing people
closer to nature, and podcast themes have included
history, nature and wellbeing.
resources.
Community engagement
Direct engagement with communities provides the
opportunity to hear what customers think and to
explore ways we can work together to address issues.
For example, to highlight inappropriate use of sewers
and the problems created by that, we held a family-
friendly interactive exhibition at the Arndale Shopping
Centre in Manchester during February half term.
Engaging ‘Sewer Monster’ posters, competitions, fun
activities and free giveaways, including fat traps, were
all part of our Stop the Block campaign.
At the RHS Tatton Flower Show, we talked to
customers about water saving tips and sponsored
a garden of resilience. The garden addressed the
challenges of extremes of weather and the stresses
and strains of the pandemic. It gave visitors ideas for
making outdoor spaces better able to cope with too
much or too little rain, such as a rainwater planter
and a slimline water butt disguised as a bench, and
incorporated ideas to encourage people to take time
out and contemplate their own personal resilience.
Plants were chosen for their resilience to extremes
and prolonged spells of dry and wet weather, while
their colours complemented the hard landscaping
materials. The garden was well received by visitors
and won three awards at the show, receiving prime
time television exposure on BBC One and social media
coverage, helping to raise awareness to a much wider
audience. It will continue to inspire gardeners at its
new permanent home at RHS Bridgewater in Salford.
Access to our land for recreational use
We encourage the public to access our land and
regional bathing waters, and to enjoy them safely.
Since the first COVID-19 lockdown in spring 2020,
there has been an increase in anti-social behaviour on
our catchment land, with issues such as wild camping,
illegal fires and littering. We have been working with
local groups at several sites to address this.
2025 target Performance
performance
target
Status
Annual
Against 2025
10% increase
£2.82m
(£2.82m)
£2.15m
50–60%
1:4
1:7
75%
83%
Measure
KPI:
Community
investment
Partnership leverage 1:4
Percentage of
participants who
remain employed six
months after
completing an early
careers or outreach
scheme with United
Utilities
Number of children
20,000
benefiting from
education materials
12,998
19,120
Percentage of
visitors to our
Maintain
position
57.3%
Baseline year
recreation sites who
above 50%
view United Utilities
more positively after
their experience
Status key:
Annual performance
Performance key:
2021/22
2020/21
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
£300k
Catchment Systems
Thinking (CaST) funding for
community groups
55
Kickstarters have joined
the business through the
government programme
90%
Of students on TCAT STEM
programme say they are
more likely to pursue a
STEM-related career
It is the first time a
partnership has set about
designing a framework to
bring together everyone
with an interest in the
health of rivers from
source to sea.”
Working in partnerships to accomplish
more together
Working together for water, nature
and people.
We cannot change the water environment on our own.
Only by working in partnership with others can we
deliver for water, wildlife and local communities. This
year, we have committed to two major partnerships
aimed at improving the environment of the
North West.
Our ground-breaking strategic partnership with The
Rivers Trust aims to tackle the big challenges facing
rivers in the region. It is the first time a partnership
has set about designing a framework to bring together
everyone with an interest in the health of rivers from
source to sea. It will build better competence for more
urgent action to tackle challenges that are increasingly
important to society, such as pollution, flooding and
water abstraction and help deliver adaptations and
resilience to combat the extremes of climate change.
The partnership formalises the existing strong
relationship between the water company and the
non-governmental organisation, which is the umbrella
body for one of the fastest growing environmental
movements in the UK.
Both parties expect the new partnership to facilitate
longer-term planning of investment priorities, beyond
the current water sector five-year regulatory cycle,
allowing faster adoption of nature-based solutions and
other collaborative ventures.
A new shared vision with the Royal Society for the
Protection of Birds (RSPB) builds on joint work at our
Haweswater estate over the past ten years. This has
demonstrated that nature-based solutions make a
very real contribution to meeting the challenge of a
changing climate and the economic pressures facing
upland farmers.
We already work together at Bowland in Lancashire,
Dove Stone Reservoir near Oldham, and Lake Vyrnwy
in North Wales. The memorandum of understanding
signed in 2021 commits us to explore areas of
opportunity by working together, such as helping
farming tenancies, creating and managing new
wetland, peatland and woodland, and working to
improve the visitor experience. Together we intend to
tap into natural capital markets including green finance
initiatives and the Environmental Land Management
scheme to fund beneficial land management projects.
Delivering value for:
Communities
Customers
Communities
Customers
Environment
Customers
Environment
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Our performance in 2021/22
Operational performance
Customers
Customers
Caring for customers through trusted
relationships – we put customers at the
heart of everything we do.
How we measure performance
Our key performance indicator to measure value
created for customers during 2020–25 is Ofwat’s
C-MeX measure, in which we target being in positive
reward territory.
C-MeX
Definition
Ofwat’s customer measure of experience (C-MeX),
comprising two surveys – the customer service survey,
and the customer experience survey.
Target
To be in positive reward territory, following the
comparison of our C-MeX score with those our of
peers seeing us above the industry median.
Status
Achieved/confident of achieving target
Link to material issue
• Drinking water quality
• Customer service and operational performance
• Affordability and vulnerability
Read more about our approach to materiality
on pages 34 to 35
Link to risks
Water service
Wastewater service
Retail and commercial
Read more about our principal risks on pages 104 to 105
Performance
For 2021/22, we expect to receive a reward of
£2.3 million on C-MeX. We continue to be the highest
performing listed company, ranked fourth out of the
water and wastewater companies, and seventh overall
out of all 17 companies.
On Ofwat’s D-MeX measure, for developer customer
satisfaction, we are consistently in the top half and
expect to receive a small reward for 2021/22.
2021/22
£2.3m
reward
2020/21
£2.1m
reward
As we emerge from the
global pandemic, with
significant increases in
the cost of living, the
affordability support we
provide to customers
is more important than
ever before.”
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Our performance in 2021/22
Operational performance
Customers
Customers
Caring for customers through trusted
relationships – we put customers at the
heart of everything we do.
How we measure performance
Our key performance indicator to measure value
created for customers during 2020–25 is Ofwat’s
C-MeX measure, in which we target being in positive
Link to material issue
• Drinking water quality
• Customer service and operational performance
• Affordability and vulnerability
Read more about our approach to materiality
reward territory.
C-MeX
Definition
Ofwat’s customer measure of experience (C-MeX),
comprising two surveys – the customer service survey,
Water service
and the customer experience survey.
on pages 34 to 35
Link to risks
Wastewater service
Retail and commercial
Read more about our principal risks on pages 104 to 105
To be in positive reward territory, following the
comparison of our C-MeX score with those our of
peers seeing us above the industry median.
Target
Status
Achieved/confident of achieving target
Performance
For 2021/22, we expect to receive a reward of
£2.3 million on C-MeX. We continue to be the highest
performing listed company, ranked fourth out of the
water and wastewater companies, and seventh overall
out of all 17 companies.
On Ofwat’s D-MeX measure, for developer customer
satisfaction, we are consistently in the top half and
expect to receive a small reward for 2021/22.
2021/22
£2.3m
reward
2020/21
£2.1m
reward
As we emerge from the
global pandemic, with
significant increases in
the cost of living, the
affordability support we
provide to customers
is more important than
ever before.”
How we deliver value to customers
Short term
• We focus on providing continuous,
resilient and reliable water and
wastewater services for customers,
ensuring clean water is available at
their taps when they need it, and
wastewater is taken away when it goes
down their drains.
• When customers need to contact
us, we are helpful, friendly and
supportive, talking and listening to
them so that we can understand and
meet their expectations.
• We maintain bills that are good value
for money, providing help and support
for those who are struggling to pay.
Long term
• Our water and wastewater services
make a major contribution to the
long-term health and wellbeing of
customers in the North West.
• Through long-term financing and
the regulatory framework, we are
delivering multi-million pound
infrastructure projects to improve
services and resilience for the long
term. We ensure the cost of this is
shared fairly and affordably between
those that benefit now and in the
future.
• Providing additional help to vulnerable
customers builds long-term trust
relationships.
Link to strategic themes
We will continue to invest in our
assets and people to meet the
stretching customer support
targets in our regulatory contract.
By achieving sustainable cost
reductions we can provide an
efficient service, keeping bills
low and maintaining good value
for money.
We provide assistance schemes
to those who need it most and
provide practical advice on how to
manage water in the home.
Overview
We put customers at the heart of everything we do,
with one of our core values being to be customer-
focused. The continuous improvements we have driven
in recent years saw us enter the 2020–25 period as a
leading water and wastewater company, and our level
of operational performance and customer satisfaction
remain high.
Serving many of the most economically deprived areas
in England and Wales, we are always mindful of the
need to help customers who struggle to pay their bills,
and this has never been more important than it is right
now as we emerge from a global pandemic with high
levels of inflation increasing the cost of living.
We are providing sector-leading support for vulnerable
customers, supporting over 200,000 households this
year, with around £280 million(1) of affordability support
being given over the 2020–25 period (AMP7).
Operational performance for customers
We have continued to improve performance for
customers this year, earning our highest ever one-year
net reward against customer outcome delivery incentives
(ODIs) at £25 million(2) for 2021/22.
We delivered a strong performance against our ODI in
relation to voids, having reduced voids to 4.78 per cent
of billable properties, against a target of 5.24 per cent,
as a result of which we earned a £6 million reward this
year. Reducing voids not only helps economically, but
it enables us to keep bills lower for other customers
because revenue is spread between more billable
properties, making things fairer and more affordable for
all customers.
Some of the other commitments for which we achieved
rewards were our strong performance in reducing
pollution incidents, removing over 3,500 homes
completely off lead supply pipes, and lifting more than
77,000 customers out of water poverty.
In areas where we incurred penalties, such as internal
sewer flooding incidents and customer contacts in
relation to taste and smell, the additional investment we
are making over the remainder of AMP7 will help improve
our performance for customers in future years.
Our strong performance on customer service metrics
this year has helped drive a 14 per cent reduction in
written complaints, achieving our lowest ever volume.
We have achieved recertification to the new
and enhanced BSI standard 18477:2010 for our
Priority Services scheme, which supports over
180,000 customers, and we are proud to have been
reaccredited this year with the Institute of Customer
Service – Service Mark with Distinction award, one of
only 18 brands to achieve the distinction status.
Affordability
We have an extensive range of schemes available to
help customers, providing a sector-leading level of
customer support. We supported more than 200,000
households with affordability in 2021/22, with over
180,000 on discounted tariffs and grants, and a further
20,000 having received support through our payment
matching scheme.
The financial support we committed to in our AMP7
business plan was the largest of any water company,
and over the five-year period we are providing around
£280 million(1) of customer support.
We are exploring innovative ways to help customers
more efficiently. We are the first utility company
to harness open banking, which helps us identify
and support customers to get access to the right
affordability tariffs more quickly and easily. A process
that traditionally would have taken weeks can now be
done in minutes with the use of open banking, and we
have received positive feedback from customers that
used the service.
We carried out 39,000 affordability visits, taking our
financial support to the customer’s doorstep, and
we promote our Back on Track scheme via partner
organisations and the Hardship Hub, as well as directly
to customers.
There is always more we would like to be able to do,
and we are a leading supporter of the Consumer
Council for Water’s drive to introduce a national social
tariff, which would help to provide a more equitable
sharing of support for customers across the country
that are struggling to pay their bill, regardless of where
people live.
Read more about
our use of open
banking on
page 59
More information
about our ODI
performance will
be published in
July 2022 in our
APR, available on
our website at:
unitedutilities.com/
corporate/about-us/
performance/annual-
performance-report
(1) 50 per cent
company
funded.
(2) Excluding
per capita
consumption,
which Ofwat
will be revisiting
at the next price
review once
there is a better
understanding
of the impact
of COVID-19
and any
enduring
effects.
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Our performance in 2021/22
Operational performance
Cash collection
Cash collection performance has been good this year,
and our household bad debt charge has returned to
the pre-pandemic level of 1.8 per cent of regulated
revenue, reduced from 2.2 per cent in 2020/21.
We have a high level of Direct Debit penetration, with
72 per cent of customers paying by Direct Debit, and
overall we have over 80 per cent of customers on
payment plans. This helps to provide a high degree
of collection certainty and to spot any potential
affordability issues early, at the point of the first missed
payment, so that we can make contact swiftly.
For customers that need affordability support, we
can quickly get them onto the right scheme to help
them get back on track. For those customers that
can afford to pay but choose not to do so, we have
a comprehensive data-led approach to collections
that helps us to accurately pursue payment in an
efficient and timely manner. This includes a range of
techniques, such as ‘nudging’ customers through email
or text if a payment is late, enhanced credit reference
sharing, and credit reporting.
Only £4 million of our net household debtors are aged
by more than one year, indicating that we are not
storing up a problem for future bad debts.
Our best-in-class approach to collections continues to
receive external recognition. This year we have won
five awards across the Credit Awards, Utilities and
Telecoms Awards, and Utility Week Awards, including
‘Utility Team of the Year’ and ‘Best Use of Technology’
at the Credit Awards. We have been recognised for our
use of data and technology to provide financial support
to those who needed it most during the pandemic and
for the introduction of open banking.
Digital transformation
Through a significant increase in the availability and
performance of our digital channels, over 1.2 million
customers engaged with us digitally, driving both
service improvements and cost efficiencies, and we
achieved strong customer sentiment scores.
We have been proactive using targeted
communications with customers to offer support
to those impacted financially by the pandemic and
struggling to pay.
To underpin our contact centre operations, we have
implemented new technology in the form of a new
workflow system linking billing and operational
customer service activities.
2025 target
Performance
Status
Annual
performance
Against
2025
target
Measure
KPI:
C-MeX
Above
industry
median
Additional service measures:
D-MeX
Above
industry
median
Market Performance
Standards
Upper
quartile
Operational
Performance
Standards
Upper
quartile
Managing complaints:
Number of household
written complaints
compared to WASCs
Upper
quartile
Speed of resolution 5 days
Above
industry median
Above
industry median
Above industry
median
Above industry
median
Second quartile
Second quartile
Upper quartile
Upper quartile
Second
quartile(1)
Upper quartile
3.5 days
3.5 days
Vulnerability:
Number of households
registered for Priority
Services
BS18477 ‘Inclusive
service provision’
certification for
Priority Services
Affordability:
Number of customers
lifted out of water
poverty
Helping customers
look after water in
their home
Status key:
Annual performance
In excess of
220,000 (7%)
186,224 (5.9%)
128,831 (4.1%)
Maintain
certification
Maintained
Maintained
66,500
77,312
71,057
10% increase 23.85%
13.75%
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
Performance key:
2021/22
2020/21
(1) Latest comparative data available 2020/21.
£280m
Affordability support being
given in total over the
2020–25 period
>200k
Customers helped through
our extensive suite of
affordability schemes
>80%
Of our ODI performance
commitment targets met or
outperformed this year
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Our performance in 2021/22
Operational performance
Cash collection
Cash collection performance has been good this year,
and our household bad debt charge has returned to
the pre-pandemic level of 1.8 per cent of regulated
revenue, reduced from 2.2 per cent in 2020/21.
We have a high level of Direct Debit penetration, with
72 per cent of customers paying by Direct Debit, and
overall we have over 80 per cent of customers on
payment plans. This helps to provide a high degree
of collection certainty and to spot any potential
Measure
KPI:
C-MeX
affordability issues early, at the point of the first missed
payment, so that we can make contact swiftly.
D-MeX
Additional service measures:
2025 target
Performance
performance
Status
Annual
Against
2025
target
For customers that need affordability support, we
can quickly get them onto the right scheme to help
them get back on track. For those customers that
can afford to pay but choose not to do so, we have
a comprehensive data-led approach to collections
that helps us to accurately pursue payment in an
efficient and timely manner. This includes a range of
techniques, such as ‘nudging’ customers through email
or text if a payment is late, enhanced credit reference
sharing, and credit reporting.
Only £4 million of our net household debtors are aged
by more than one year, indicating that we are not
storing up a problem for future bad debts.
Our best-in-class approach to collections continues to
receive external recognition. This year we have won
five awards across the Credit Awards, Utilities and
Telecoms Awards, and Utility Week Awards, including
‘Utility Team of the Year’ and ‘Best Use of Technology’
at the Credit Awards. We have been recognised for our
use of data and technology to provide financial support
to those who needed it most during the pandemic and
for the introduction of open banking.
Digital transformation
Through a significant increase in the availability and
performance of our digital channels, over 1.2 million
customers engaged with us digitally, driving both
service improvements and cost efficiencies, and we
achieved strong customer sentiment scores.
We have been proactive using targeted
communications with customers to offer support
to those impacted financially by the pandemic and
struggling to pay.
To underpin our contact centre operations, we have
implemented new technology in the form of a new
workflow system linking billing and operational
customer service activities.
Above
industry
median
Above
industry
median
quartile
Upper
quartile
Market Performance
Upper
Standards
Operational
Performance
Standards
Managing complaints:
Number of household
Upper
written complaints
quartile
compared to WASCs
Speed of resolution 5 days
Above
Above
industry median
industry median
Above industry
Above industry
median
median
Second quartile
Second quartile
Upper quartile
Upper quartile
Second
quartile(1)
Upper quartile
3.5 days
3.5 days
Vulnerability:
Services
Number of households
In excess of
186,224 (5.9%)
registered for Priority
220,000 (7%)
128,831 (4.1%)
BS18477 ‘Inclusive
Maintain
Maintained
service provision’
certification
Maintained
certification for
Priority Services
Affordability:
lifted out of water
poverty
Number of customers
66,500
look after water in
their home
Status key:
Annual performance
77,312
71,057
13.75%
Helping customers
10% increase 23.85%
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
Performance key:
2021/22
2020/21
(1) Latest comparative data available 2020/21.
£280m
>200k
>80%
Affordability support being
Customers helped through
Of our ODI performance
given in total over the
2020–25 period
our extensive suite of
affordability schemes
commitment targets met or
outperformed this year
Open banking means we
can help customers get
the right affordability
support in minutes,
when the traditional
process would have
taken weeks.”
Using open banking to help
customers faster
Recognising the need for affordable
bills, we have implemented a range
of industry-leading support schemes
including lower tariffs, capped bills, and
payment matching schemes. Tailoring
payment plans to customer affordability
is a key goal and the advent of improved
data availability from open banking
stimulated an innovative method of
improving our customer journey.
Our idea was to utilise open banking technology to
verify customer income in real time to improve the
accuracy and efficiency of our customer affordability
assessments. We implemented an improved customer
journey in three key steps:
• Gaining agreement to use open data for the
affordability assessment;
• Obtaining customer consent via an online consent
portal; and
• Receiving a summarised view of a customer’s
income straight from their bank account, including
evidence of benefit payments.
Customer feedback on their experience of open
banking is very positive, with customers saying it was
easy to use and 88 per cent saying they would use it
again, despite never having used it before.
The use of open banking has streamlined customer
eligibility for reduced-rate social tariffs. Were it not
for this solution, customers applying for help with
payment of their water bill would have had to manually
collate their income and expenditure information,
including evidence of benefit receipt, in preparation
for their telephone affordability assessment.
What previously would have taken weeks, can now be
done in minutes, with the added benefit of increased
accuracy.
Open banking improves first-time completion rate,
meaning customers are given a decision on tariff
eligibility there and then and a sustainable payment
plan can be agreed.
Open banking could help facilitate the introduction of
a national social tariff, as proposed by the Consumer
Council for Water: the efficiency we’ve delivered
into our affordability assessment process will help
us manage the expected increases in volume of
applications for support, meaning we can help more
customers with payment of their water bill.
Open data now forms a key part of one of our most
sensitive customer journeys, and initial results showed
45 per cent of customers who were offered the option
to use open banking accepted.
Delivering value for:
Customers
Customers
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Our performance in 2021/22
Operational performance
Employees
Environment
Employees
Creating a great place to work for all our employees
– our employees are essential for us to deliver our
services, and are the face of the company.
How we measure performance
Our key performance indicator to measure value
created for employees during 2020–25 is our
engagement score, in which we target upper quartile
against UK utilities norm benchmark.
Link to material issue
• Employee engagement
• Diverse and skilled workforce
• Health, safety and wellbeing
Employment engagement
Definition
Level of employee engagement as measured by our
annual employee opinion survey.
Target
Upper quartile against UK utilities norm benchmark.
Status
Achieved/confident of achieving target
Read more about our approach to materiality
on pages 34 to 35
Link to risks
Resource
Health, safety and environmental
Read more about our principal risks on pages 104 to 105
Performance
Our overall engagement is at 87 per cent, equal to UK
high performance levels, which we have now been
equal to or above for the last three years.
We are 11 per cent better than the UK norm and 5 per
cent better than the UK utilities norm.
2021/22
87%
2020/21
89%
2019/20
84%
2018/19
81%
2017/18
79%
We are committed to
investing in training
and development,
promoting diversity and
inclusion, and focusing
on health, safety and
wellbeing.”
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Our performance in 2021/22
Operational performance
Employees
Environment
Employees
Creating a great place to work for all our employees
– our employees are essential for us to deliver our
services, and are the face of the company.
How we measure performance
Our key performance indicator to measure value
created for employees during 2020–25 is our
engagement score, in which we target upper quartile
against UK utilities norm benchmark.
Link to material issue
• Employee engagement
• Diverse and skilled workforce
• Health, safety and wellbeing
Employment engagement
Definition
Level of employee engagement as measured by our
annual employee opinion survey.
on pages 34 to 35
Link to risks
Resource
Read more about our approach to materiality
Target
Status
Upper quartile against UK utilities norm benchmark.
Achieved/confident of achieving target
Health, safety and environmental
Read more about our principal risks on pages 104 to 105
Performance
Our overall engagement is at 87 per cent, equal to UK
high performance levels, which we have now been
equal to or above for the last three years.
We are 11 per cent better than the UK norm and 5 per
cent better than the UK utilities norm.
2021/22
87%
2020/21
89%
2019/20
84%
2018/19
81%
2017/18
79%
We are committed to
investing in training
and development,
promoting diversity and
inclusion, and focusing
on health, safety and
wellbeing.”
How we deliver value to employees
Short term
• We have a strong focus on health,
safety and wellbeing. We firmly
believe that nothing we do is worth
getting hurt for, and we aim to ensure
all employees go home safe and well
at the end of the day.
• We invest in training and development
to enable our employees to grow their
skills and to keep them motivated.
• Listening to our employees helps
to create an engaged workforce,
increasing job satisfaction, and
through employee communications
and conferences we update our
people on business developments so
they feel part of a team.
Long term
•
Investing in the development of
current, and future, employees means
we will have a workforce with the right
skills for the future.
• Health, safety and wellbeing extends
to mental as well as physical health.
We promote awareness of stress and
other mental health issues, promoting
an all-round healthy lifestyle in the
long term which, in turn, reduces the
burden on healthcare services.
• We provide pension offerings that
support employees in later life.
• Promoting diversity and inclusion
means we have a workforce that truly
represents the region.
Link to strategic themes
Improving our performance
creates employee pride in a job
well done, enhancing employee
satisfaction and a desire to
do more.
Encouraging innovative ideas
from employees can lead to cost
reductions, and high employee
satisfaction reduces turnover,
which ensures training and
development costs are efficient.
We take a responsible approach
to protecting the health, safety
and wellbeing of our employees,
ensuring we send everyone home
each day safe and well.
Read more about
our approach
to diversity and
inclusion on
pages 44 to 45
Read more
about our talent
pipeline on
page 63
Overview
Our people are critical to the success of our business
and it is important we give them the opportunity to
develop their skills and knowledge and support them
with the most effective technology. We have continued
to invest in skills training and accelerate our digital
strategy. The health and wellbeing of our employees is
paramount and keeping them safe remains our primary
concern with 89 per cent of our employees believing
our organisation supports their health, safety and
wellbeing. We continue to build on our diversity and
inclusion agenda, which underpins all aspects of our
organisation. Increasing the diversity of our workforce
ensures we have access to a broader set of views and
we want colleagues to feel valued, supported and
respected in the workplace.
We facilitated a smooth return of all employees
working from home to the workplace in line with the
government roadmap out of lockdown, transitioning
around 1,800 staff into hybrid working between the
office and home. The transition was well structured
with robust governance, including a policy for
employees setting out expectations for working in
this way and upskilling and support for managers with
remote teams.
We are rated 4.6 out of 5 by former and current
employees on Glassdoor, and 92 per cent of our
employees would recommend United Utilities as a
great place to work. We are delighted to be recognised
for our efforts, ranking again in the top 1 per cent of
over 850 companies across Europe in the Financial
Times’ Statista Survey for Diversity and Inclusion
Leadership, and we were the leading utility company
in the Top 50 Inclusive UK Employers Index. We have
been included in the Bloomberg Gender Equality Index
2022, one of 418 companies, showing our commitment
to more equal and inclusive workplaces.
Committed to equality, diversity and inclusion
We want fantastic people to enable us to deliver
a great service now and into the future. We are
supporting employees to achieve their full potential
and to feel valued and included, regardless of their
gender, age, race, disability, sexual orientation or
social background, and we make sure we are reaching
and recruiting from every part of our community.
We are making good progress against our refreshed
diversity and inclusion strategy, validated by a recent
independent audit, which recognised our strong
focus on education, awareness and growing our four
employee network groups with great progress in all
audited areas.
We offer targeted support for future talent through
our focused ‘Female Leadership Pipeline’ and ‘Aspiring
Manager’ programmes, which have been designed
to support employees into leadership positions. We
have put efforts into developing a diverse leadership
pipeline by introducing a new talent programme, the
‘Stepping up programme’, for employees from ethnic
minority backgrounds, giving them the opportunity to
develop personal and leadership skills that will help
them fast-track their careers at United Utilities.
In the last 12 months, we have welcomed 28 new
graduates onto our schemes, and 52 new apprentices
have joined us on operational, service and future-
facing digital and environmental schemes. Thirty-seven
per cent of our new apprentices and 39 per cent of
our newly recruited graduates are female. This is
higher than the UK average of 24 per cent for females
in science, technology, engineering and mathematics
(STEM) roles. We have made great progress in
recruiting apprentices from more diverse backgrounds,
working with our specialist recruitment partner, with 15
per cent of apprentices who joined us this year being
from a minority ethnic background. In addition, 21
per cent of new apprentices disclosed a disability or
learning difficulty. This represents continued success in
our efforts to recruit a more diverse talent pipeline and
is a positive result against a backdrop of low attrition
levels, regional variations in ethnic diversity, and
difficulties attracting females for STEM roles.
We made a public commitment to support the 10,000
Black Interns Programme and we will be welcoming 26
university students for placements this summer, with a
further commitment for 120 placements over the next
five years. We will welcome university students with
autism as part of our support for the ‘Ambitious about
Autism’ programme.
Training and development
Our technical training academy, established in
February 2014, continues to go from strength to
strength. We are the only employer provider in the
water sector to have been inspected by Ofsted and
received an overall ‘Good’ rating. We launched our
Digital Skills Academy, a new learning portal for
employees to access digital learning content to upskill
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Our performance in 2021/22
Operational performance
them for their roles now and in the future. In the last 12
months, we have delivered 15,000 classroom training
events as well as around 40,000 e-learning modules.
We launched a new water quality awareness e-learning
module to around 4,000 employees as part of our
wider ‘Water Quality First’ programme, which has been
designed to ensure water quality remains at the heart
of our operations.
Ensuring everyone goes home safe and well
Over the last few years we have introduced ‘home safe
and well’, which focuses on the behavioural aspects
of our health, safety and wellbeing culture. Home safe
and well is a core thread that flows through our health,
safety and wellbeing strategy, which covers our sites,
assets and people using three core pillars: personal
safety; process safety; and health and wellbeing. Over
the last 12 months there has been a focus on employee
mental health, expanding our capability in this area.
Since its launch in 2018, we have trained around 5,500
colleagues in home safe and well and continue to do
so with new starters. We are now in the third year of
our cultural journey where we have seen improvements
in our health and safety performance year on year.
We continue to create an environment where we look
out for ourselves and each other to ensure all our
colleagues go home safe and well.
Our commitment to health, safety and wellbeing has
recently been externally acknowledged. In early 2022,
we were awarded our tenth consecutive Royal Society
for the Prevention of Accidents (RoSPA) gold standard
medal, which now means we have achieved the RoSPA
President’s award, which is only awarded to companies
who have “achieved a very high level of performance,
demonstrating well developed occupational health
and safety management systems and culture,
outstanding control of risk and very low levels of
error, harm and loss.”
We continued to see improvement against a number
of important performance measures, reducing the
number and the severity of accidents, and increasing
the proportion of hazards and near misses reported.
Our employee accident frequency rate for 2021/22 was
0.073 accidents per 100,000 hours worked, lower than
the previous year and amounting to nine accidents
reported. Our contractor accident frequency rate also
showed significant improvement, with 0.043 accidents
per 100,000 hours worked, another improvement on
the previous year and representing only five contractor
accidents. Our aim is that no one will be harmed while
working on our behalf, and we continue to promote,
support and improve the wellbeing of our people.
2025 target Performance
Status
Annual
performance
Against 2025
target
Measure
KPI:
Employee
engagement
Upper quartile
against UK
utilities norm
Employee opinion
survey diversity and
inclusion questions
score
UK high
performance
norm
Employee opinion
survey learning
and development
category score
UK high
performance
norm
Living Wage
accreditation
Secure and
retain
Upper quartile
against UK
utilities norm
Upper quartile
against UK
utilities norm
UK high
performance
norm
UK high
performance
norm
UK utilities
high
performance
norm
UK utilities
high
performance
norm
Retained
accreditation
Secured
accreditation
Pension Quality
Mark +
Retain
accreditation
Retained
Retained
Health and safety:
AFR employees (per
100,000)
0.064
AFR contractors (per
100,000)
Year-on-year
improvement
in score
0.073
0.094
0.043
0.087
Wellbeing Charter
accreditation
Retain
accreditation
Retained
Retained
Status key:
Annual performance
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
Performance key:
2021/22
2020/21
4.6/5
Rating on Glassdoor
by former and current
employees
Top 1%
Financial Times’ Statista
Survey for Diversity and
Inclusion Leadership
10th
Consecutive RoSPA gold
standard medal, achieving
RoSPA President’s award
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Our performance in 2021/22
Operational performance
them for their roles now and in the future. In the last 12
months, we have delivered 15,000 classroom training
events as well as around 40,000 e-learning modules.
We launched a new water quality awareness e-learning
module to around 4,000 employees as part of our
wider ‘Water Quality First’ programme, which has been
designed to ensure water quality remains at the heart
of our operations.
Ensuring everyone goes home safe and well
Over the last few years we have introduced ‘home safe
and well’, which focuses on the behavioural aspects
of our health, safety and wellbeing culture. Home safe
and well is a core thread that flows through our health,
safety and wellbeing strategy, which covers our sites,
assets and people using three core pillars: personal
safety; process safety; and health and wellbeing. Over
the last 12 months there has been a focus on employee
mental health, expanding our capability in this area.
Since its launch in 2018, we have trained around 5,500
colleagues in home safe and well and continue to do
so with new starters. We are now in the third year of
our cultural journey where we have seen improvements
in our health and safety performance year on year.
We continue to create an environment where we look
out for ourselves and each other to ensure all our
colleagues go home safe and well.
Our commitment to health, safety and wellbeing has
recently been externally acknowledged. In early 2022,
we were awarded our tenth consecutive Royal Society
for the Prevention of Accidents (RoSPA) gold standard
medal, which now means we have achieved the RoSPA
President’s award, which is only awarded to companies
who have “achieved a very high level of performance,
demonstrating well developed occupational health
and safety management systems and culture,
outstanding control of risk and very low levels of
error, harm and loss.”
We continued to see improvement against a number
of important performance measures, reducing the
number and the severity of accidents, and increasing
the proportion of hazards and near misses reported.
Our employee accident frequency rate for 2021/22 was
0.073 accidents per 100,000 hours worked, lower than
the previous year and amounting to nine accidents
reported. Our contractor accident frequency rate also
showed significant improvement, with 0.043 accidents
per 100,000 hours worked, another improvement on
the previous year and representing only five contractor
accidents. Our aim is that no one will be harmed while
working on our behalf, and we continue to promote,
support and improve the wellbeing of our people.
2025 target Performance
performance
target
Status
Annual
Against 2025
Measure
KPI:
Employee
engagement
Upper quartile
Upper quartile
against UK
against UK
utilities norm
utilities norm
Upper quartile
against UK
utilities norm
Employee opinion
UK high
UK high
survey diversity and
performance
performance
inclusion questions
norm
score
Employee opinion
UK high
UK utilities
survey learning
performance
high
and development
norm
category score
norm
UK high
performance
norm
performance
norm
UK utilities
high
norm
performance
accreditation
Secured
accreditation
Living Wage
accreditation
Secure and
Retained
retain
Pension Quality
Retain
Retained
Mark +
accreditation
Retained
Health and safety:
AFR employees (per
0.064
100,000)
0.073
0.094
AFR contractors (per
Year-on-year
0.043
100,000)
improvement
0.087
in score
Wellbeing Charter
Retain
Retained
accreditation
accreditation
Retained
Status key:
Annual performance
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
Performance key:
2021/22
2020/21
4.6/5
Rating on Glassdoor
by former and current
employees
Top 1%
Financial Times’ Statista
Survey for Diversity and
Inclusion Leadership
10th
Consecutive RoSPA gold
standard medal, achieving
RoSPA President’s award
Shahbaz, a process controller apprentice who joined
us in September 2021, is enjoying the variety an
apprenticeship brings. He’s developing new skills and
says he’s proud to work for a company that values
diversity and inclusion. “From my first day, I have felt
welcomed and part of a large extended family” he said.
“The company’s stance on diversity and inclusion is
amazing to see and be part of. Issues raised aren’t just
listened to; they’re actually heard, and small things
like being offered a halal packed lunch on my training
course make me feel included.”
We have continued to build on our award-winning
apprenticeship schemes, significantly increasing our
range of apprenticeships to align to core operational
roles and address future skills gaps. We have
created eight pathways for green jobs, a total of 31
apprenticeship vacancies for 2022/23, and these new
roles will support our ambition to become carbon-
neutral by 2030. We went from eight apprenticeships
in 2017 to 26 in 2022.
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Growing a resilient and
diverse talent pipeline
We are passionate about investing
in young people and in our local
communities. Our early careers
opportunities are focused on attracting
talent for our core operational and
technical roles and for key emerging
skills such as digital and green jobs.
We have continued
to build on our award-
winning apprenticeship
schemes, significantly
increasing our range of
apprenticeships to align
to core operational
roles and address future
skills gaps.”
New apprenticeships pathways created include
Systems Thinking, digital user experience, cyber
security and data scientists.
We are pioneering a new Heavy Goods Vehicle (HGV)
apprenticeship, and twenty-two-year-old Gabi Ord is
our first HGV apprentice. Gabi has completed many
hours of training, including fuel-efficient driving and
handling an excavator and telehandler – skills she needs
in her role transporting sludge cake from wastewater
treatment works to farmers and landowners. “Gabi is
now performing to a really high standard in terms of
safe driving style and fuel efficiency” said her manager,
Martin Shaw. “She has set a high benchmark for any
future apprentices that follow.”
We are supporting those traditionally overlooked groups
in our communities, with 44 per cent of the young
people we recruited onto the Government’s Kickstart
Scheme now transitioning into employment. A further
six Kickstarters are currently being supported with
applications for our award-winning apprenticeships. One
of them, who has recently started an apprenticeship in
our customer services department, shared the support
she’s received: “I find that, having dyslexia, it can get
quite tiring” she said. “However, I’ve been given a screen
for my monitor, documents are printed off for me, and
everyone I meet is so helpful – putting things across in a
simple way so I can fully understand.”
Delivering value for:
Communities
Customers
Communities
Customers
Customers
Employees
Environment
Employees
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Our performance in 2021/22
Operational performance
Environment
Environment
Protecting and enhancing the environment – we rely
on the natural environment and play a key role in
improving the water, land and air of the North West.
How we measure performance
Our key performance indicator to measure value
created for the environment during 2020–25 is our
performance against the Environment Agency’s annual
performance assessment (EPA), in which we target
being an upper quartile performer.
EPA
Definition
The Environment Agency’s annual assessment across
six key sector environmental performance measures.
Target
Upper quartile performance within the water industry
each year.
Status
Achieved/confident of achieving target
Link to material issue
• Resilience
• Environmental impacts
• Climate change
Read more about our approach to materiality
on pages 34 to 35
Link to risks
Water service
Retail and commercial
Resource
Read more about our principal risks on pages 104 to 105
Performance
The Environment Agency (EA) will publish its annual
performance assessment for 2021 in July 2022. The EA’s
most recent annual assessment was for 2020, and we
achieved our best ever performance, as we were green
across all measures. We are the first water company to
achieve this level of performance since 2015. We were
awarded the maximum 4 star rating, meaning we were
classed by the EA as an industry-leading company.
2020
Joint
1st
2019
Joint
3rd
2018
Joint
2nd
2017
Joint
1st
2016
Joint
1st
Our environmental
performance is strong,
but new requirements
could drive significant
investment needs,
which will need to
be balanced with
affordability.”
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Our performance in 2021/22
Operational performance
Environment
Environment
Protecting and enhancing the environment – we rely
on the natural environment and play a key role in
improving the water, land and air of the North West.
How we measure performance
Link to material issue
Our key performance indicator to measure value
• Resilience
created for the environment during 2020–25 is our
performance against the Environment Agency’s annual
performance assessment (EPA), in which we target
being an upper quartile performer.
• Environmental impacts
• Climate change
The Environment Agency’s annual assessment across
Water service
six key sector environmental performance measures.
EPA
Definition
Target
each year.
Status
Upper quartile performance within the water industry
Achieved/confident of achieving target
Read more about our approach to materiality
on pages 34 to 35
Link to risks
Retail and commercial
Resource
Read more about our principal risks on pages 104 to 105
Performance
The Environment Agency (EA) will publish its annual
performance assessment for 2021 in July 2022. The EA’s
most recent annual assessment was for 2020, and we
achieved our best ever performance, as we were green
across all measures. We are the first water company to
achieve this level of performance since 2015. We were
awarded the maximum 4 star rating, meaning we were
classed by the EA as an industry-leading company.
2020
Joint
1st
2019
Joint
3rd
2018
Joint
2nd
2017
Joint
1st
2016
Joint
1st
Our environmental
performance is strong,
but new requirements
could drive significant
investment needs,
which will need to
be balanced with
affordability.”
How we deliver value to environment
Short term
• We meet increasingly stringent
environmental consent levels, which
help to improve the quality of rivers
and bathing waters and so support
tourism in the region.
• Our investment in renewable energy
generation is reducing our carbon
footprint and contribution to climate
change.
• We have invested in new
infrastructure, such as our West
Cumbria project, to allow us to
transfer water around the region
more efficiently to avoid depletion of
individual water sources.
Long term
• Promoting campaigns to educate
the public and younger generations
on water usage helps protect this
valuable resource and reduce usage
now and for years to come.
• We innovate and invest in new
technologies to solve environmental
challenges for future generations.
• We manage our land in a way that
safeguards habitats and protects
wildlife that makes its home in rivers
and other water bodies.
• We plan far ahead to ensure our
activities and investment enhance the
long-term resilience of the rural and
urban environment in our region.
Link to strategic themes
Many customers care about the
environment, so providing the
best service to customers involves
protecting the places they live in
and love.
Many ways we protect the
environment reduce cost. For
example, renewable energy
generation reduces our energy
costs as well as our carbon
footprint.
We manage water and wastewater
in a responsible way that protects
the environment and enhances its
resilience.
Read more about
our Better Rivers:
Better North
West plan on
page 67
Read our TCFD
and TNFD
sections on
pages 86 to 99
Overview
The North West has a diverse mix of densely populated
and built-up urban areas as well as many rural areas
of outstanding natural beauty, and there are different
environmental considerations needed for each. It
is of great importance that we continue to protect
and enhance the environment across our region, and
manage our land responsibly to preserve and improve
it for future generations.
by storm overflows, one of several new and emerging
requirements. We have made good progress in many
of these areas, and launched our Better Rivers: Better
North West plan that sets out how we will deliver
further improvements. The additional investment
we are making will help accelerate environmental
outcomes, but there is more needed and this could
drive significant increases in future investment, which
will need to be balanced with customer affordability.
We delivered a number of environmental
improvements over AMP6, including improving
338.5 kilometres of rivers, significantly reducing
our carbon footprint, and increasing our renewable
energy production. We have agreed an environmental
improvement programme for AMP7 that will continue
to improve the river, bathing and shellfish water
quality in the North West. Our investment in AMP7 is
expected to result in an improvement in water quality
in 1,315 kilometres of rivers. Having completed the first
two years of the period, we remain on track to deliver
the improvements we have committed to.
Environmental Performance Assessment
and pollution reduction
In 2020, we had no serious pollution incidents for
the second year running. We have been green in
our serious incident performance for the last seven
consecutive years – the only company to have ever
achieved this. We had our best ever performance
on total number of pollution incidents (categories
1–3), with a reduction of 31 per cent compared with
the previous year. This is our largest ever reduction
in pollution incidents, and was delivered while we
maintained our excellent self-reporting performance.
We expect to be green for serious pollution incidents
and the total number of pollution incidents measure
again in 2021.
We had no wastewater treatment works classed as
failing by the EA – something that has only ever been
achieved in the sector once before. With only one failing
water treatment works, this represents our best ever
combined water and wastewater performance, and our
largest ever one-year performance improvement. We
expect to remain green on this measure for 2021.
There has been increased public interest in the use of
storm overflows across the industry this year, and the
Environment Act 2021 requires water companies to
secure a progressive reduction in the impact caused
Greenhouse gas emissions and climate change
– carbon reduction
We have committed to six carbon pledges across
priority areas of our carbon strategy, including the
setting of science-based targets to align with global
best practice, switching to low carbon electricity,
greening our fleet, restoring peatland and creating
woodland. We have made substantial progress, and
continue to mature our long-term carbon plans to
ensure we achieve our commitments by 2030 and
2050. We are part of the global movement of ‘Business
Ambition for 1.5°C: Our Only Future’, are signatories
to the UN Race to Zero campaign and are proud to be
contributing to the UK water industry’s commitment
to be net zero from 2030.
Climate resilience
In AMP6 we invested an additional £250 million to
increase resilience to climate change, and we continue
to invest to protect and enhance the climate resilience
of our assets, processes and customer services. We
are working to further develop our understanding
of climate risk. In December 2021, we published
a comprehensive assessment of our climate risks
and plans in our latest climate change adaptation
report. We are now further developing our approach
to climate resilience, including engagement with
stakeholders, as we take account of these risks in our
long-term business planning process.
Biodiversity and natural capital
We continue to develop our approach to natural capital
and improve our understanding to influence investment
decisions, allowing us to assess the full value of our
activity. We have an outcome delivery incentive (ODI)
on enhancing natural capital value for customers,
which encourages assessment of the added natural
capital value we deliver by pursuing nature-based and
catchment solutions, and we expect to outperform
against our performance commitment this year.
Understanding this value is a key element of driving
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Our performance in 2021/22
Operational performance
partnership working and our Catchment Systems
Thinking (CaST) approach, which seeks to understand
the broader needs of a catchment and deliver these
across multiple stakeholders to achieve the outcomes
that are needed. As part of this approach, we worked
with consultants and stakeholders to develop a north
west natural capital baseline to understand the natural
assets the North West has, the benefits they provide
and the value of them.
Biodiversity is a key pillar of natural capital, and
ensuring the preservation and enhancement of
biodiversity is a key element of our CaST approach. As
a large land owner, with a significant amount of land
designated as sites of special scientific interest (SSSI),
and a business delivering significant development in
the North West, we will strive to play our part in nature
recovery and the delivery of biodiversity net gain.
We have delivered significant investment to improve
the condition of habitats on our land, aiming to have
100 per cent of our SSSI land in either favourable
or recovering status by 2030. We are reviewing our
approach to biodiversity management and how we can
better manage and enhance biodiversity through our
land ownership and in the delivery of capital projects.
Leakage reduction
Water is a precious resource and reducing leakage is
important in ensuring its resilience. 2021/22 was the
sixteenth year we outperformed our leakage target
and we have reached a new low in leakage levels. We
continue to deliver leakage reductions supported by a
network of around 70,000 acoustic sensors, installed
over the last two years.
We experienced a relatively mild winter, but the
changing COVID-19 restrictions had the potential to
impact leakage performance. Resourcing became
a particular challenge through December, due to
isolation periods, so we increased contractor resources
to tackle this. The changing patterns of night use,
due to changes in working from home guidance
and the return to offices, created uncertainty with
leakage levels. We addressed this with additional
meter readings and analysis which gave better insight
into usage pattern change, enabling more efficient
targeting of leak detection activity.
Over AMP7, we plan to reduce total leakage by at least
15 per cent. We actively look to trial new techniques to
understand how these can be scaled and embedded in
the most effective way, and this gives us opportunities
to accelerate and target those interventions which
are demonstrated to be the most effective. One
such example is our smart water network trial in the
Macclesfield area, where we have linked together
hundreds of monitors and sensors on the town’s water mains. This created
a machine-learning Artificial Intelligence (AI) ‘brain’ that supported
enhanced leakage targeting, as well as detecting and preventing other
non-leakage problems. We are using the learning from these trials to
refine our approach to reducing leakage and applying this to our Dynamic
Network Management approach for wastewater.
Status
Annual
performance
Against 2025
target
Measure
KPI:
EA EPA
2025 target Performance
Upper quartile Upper
quartile(1)
Upper quartile
Leakage reduction
15%(2)
% waste to
beneficial use
98%
Enhancing natural
capital for customers
£4m
8%
5%
97.8%
97.3%
£3.234m
Delivery
scheduled
from 2022
244,639
216,601
Number of trees
planted
Better air quality:
nitrogen oxides
(NOx) emissions per
GWh of renewable
electricity generated
Climate change
mitigation: %
change scope 1 & 2
emissions(3)
Climate change
adaptation: multiple
metrics
Status key:
Annual performance
500,000
1.42 NOx/
GWh
1.19 NOx/GWh
1.3 NOx/GWh
14% decrease 2.2% decrease
1.5% increase
See TCFD section, pages 86 to 97
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
Performance key:
2021/22
2020/21
(1) Based on the latest assessment, which was for 2020.
2021 performance will be reported in July 2022.
(2) As measured against a 2017/18 baseline.
(3) As measured against Science Based Target baseline year 2019/20.
1,315km
Rivers expected to have
improved water quality from
our AMP7 investment
4 star
Industry-leading company
in the EA’s performance
assessment for 2020
6
Carbon pledges
underpinned by ambitious
science-based targets
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Our performance in 2021/22
Operational performance
partnership working and our Catchment Systems
hundreds of monitors and sensors on the town’s water mains. This created
Thinking (CaST) approach, which seeks to understand
a machine-learning Artificial Intelligence (AI) ‘brain’ that supported
the broader needs of a catchment and deliver these
enhanced leakage targeting, as well as detecting and preventing other
across multiple stakeholders to achieve the outcomes
non-leakage problems. We are using the learning from these trials to
that are needed. As part of this approach, we worked
refine our approach to reducing leakage and applying this to our Dynamic
with consultants and stakeholders to develop a north
Network Management approach for wastewater.
2025 target Performance
performance
target
Status
Annual
Against 2025
Water is a precious resource and reducing leakage is
nitrogen oxides
GWh
west natural capital baseline to understand the natural
assets the North West has, the benefits they provide
and the value of them.
Biodiversity is a key pillar of natural capital, and
ensuring the preservation and enhancement of
biodiversity is a key element of our CaST approach. As
a large land owner, with a significant amount of land
designated as sites of special scientific interest (SSSI),
and a business delivering significant development in
the North West, we will strive to play our part in nature
recovery and the delivery of biodiversity net gain.
We have delivered significant investment to improve
the condition of habitats on our land, aiming to have
100 per cent of our SSSI land in either favourable
or recovering status by 2030. We are reviewing our
approach to biodiversity management and how we can
better manage and enhance biodiversity through our
land ownership and in the delivery of capital projects.
Leakage reduction
important in ensuring its resilience. 2021/22 was the
sixteenth year we outperformed our leakage target
and we have reached a new low in leakage levels. We
continue to deliver leakage reductions supported by a
network of around 70,000 acoustic sensors, installed
over the last two years.
We experienced a relatively mild winter, but the
changing COVID-19 restrictions had the potential to
impact leakage performance. Resourcing became
a particular challenge through December, due to
isolation periods, so we increased contractor resources
to tackle this. The changing patterns of night use,
due to changes in working from home guidance
and the return to offices, created uncertainty with
leakage levels. We addressed this with additional
meter readings and analysis which gave better insight
into usage pattern change, enabling more efficient
targeting of leak detection activity.
Over AMP7, we plan to reduce total leakage by at least
15 per cent. We actively look to trial new techniques to
understand how these can be scaled and embedded in
the most effective way, and this gives us opportunities
are demonstrated to be the most effective. One
such example is our smart water network trial in the
Macclesfield area, where we have linked together
Measure
KPI:
EA EPA
Upper quartile Upper
quartile(1)
Upper quartile
Leakage reduction
15%(2)
% waste to
beneficial use
98%
Enhancing natural
£4m
capital for customers
Number of trees
500,000
planted
Better air quality:
1.42 NOx/
8%
5%
97.8%
97.3%
£3.234m
Delivery
scheduled
from 2022
244,639
216,601
1.19 NOx/GWh
1.3 NOx/GWh
Climate change
14% decrease 2.2% decrease
1.5% increase
(NOx) emissions per
GWh of renewable
electricity generated
mitigation: %
change scope 1 & 2
emissions(3)
Climate change
adaptation: multiple
metrics
Status key:
Annual performance
Performance key:
2021/22
2020/21
See TCFD section, pages 86 to 97
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
to accelerate and target those interventions which
(2) As measured against a 2017/18 baseline.
(3) As measured against Science Based Target baseline year 2019/20.
(1) Based on the latest assessment, which was for 2020.
2021 performance will be reported in July 2022.
1,315km
Rivers expected to have
4 star
improved water quality from
in the EA’s performance
underpinned by ambitious
our AMP7 investment
assessment for 2020
science-based targets
Industry-leading company
Carbon pledges
6
We have committed
to deliver £230 million
in environmental
improvements, leading
to 184 kilometres of
improved waterways.”
Better Rivers: Better North West
As more people have come to appreciate
the environment since the pandemic,
there’s a real drive to improve our rivers
and waterways. People want to swim,
to enjoy riverside walks and get back
to nature, and we have an important
role to play by upgrading the sewerage
infrastructure in the region.
In March 2022, we published a series of commitments
to kick start a river revival over the next three years.
Better Rivers: Better North West is a four-point plan
setting out our commitments to:
• make sure the company’s operations progressively
reduce impact to river health;
• be open and transparent about our performance
and plans;
• make rivers beautiful and support others to
improve and care for them; and
• create more opportunities for everyone to enjoy
rivers and waterways.
Most of these pledges will be delivered over the
next three years, including investment in wastewater
systems, enhanced data monitoring and sharing,
greater innovation and more use of nature-based
solutions.
We have committed to deliver £230 million in
environmental improvements, supporting at least a
one-third sustainable reduction in the number of spills
recorded from our storm overflows by 2025 compared
to the 2020 baseline. This investment at sites across
the region will lead to 184 kilometres of improved
waterways. We will make sure that all storm overflows
are monitored by 2023 and real-time data on their
operation is made available to the general public.
In addition to the £230 million within our base capital
programme, part of the additional investment we are
making outside the scope of our final determination
allowance will help accelerate these plans.
But that’s only part of the solution; we can’t do this
on our own. Members of the public will be able to
get involved too with the launch of a community
fund to support local river health initiatives and,
working alongside The Rivers Trust, there will be the
opportunity for people to volunteer as citizen scientists
to collect data on river health, which will help inform
further improvement work.
We also continue to engage with the ongoing industry-
wide investigations by Ofwat and the Environment
Agency into possible unpermitted sewage discharges.
Delivering value for:
Communities
Customers
Communities
Environment
Environment
More detail can be found on our website at
unitedutilities.com/corporate/responsibility/
environment/reducing-pollution
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Our performance in 2021/22
Operational performance
Shareholders
Investors
Delivering a sustainable return to investors –
through prudent financial risk management and a
strong track record of performance across a suite of
environmental, social and governance metrics.
How we measure performance
Our key performance indicator to measure value
created for investors during 2020–25 is Return on
Regulated Equity (RoRE).
Return on regulated equity (RoRE)
Definition
Key measure encompassing regulatory out/
underperformance across financial and operational
efficiency, customer satisfaction, and regulatory
performance targets. Read more on page 51.
Target
Our targets will be updated throughout the period
in line with guidance on the individual components
of RoRE.
Status
Achieved/confident of achieving target
Performance
Reported RoRE for 2021/22 was 7.9 per cent on a
real, RPI/CPIH blended basis, double the base return.
Underlying RoRE was slightly lower at 7.7 per cent, and
excludes the tax that will be recovered through the
regulatory sharing mechanism. Cumulative RoRE for
the first two years of AMP7 is 6.2 per cent on both a
reported and underlying basis.
2021/22
7.9%
reported
Cumulative
6.2%
reported
2021/22
7.7%
underlying
Cumulative
6.2%
underlying
Link to material issue
• Customer service and operational performance
• Financial risk management
• Corporate governance and business conduct
Read more about our approach to materiality
on pages 34 to 35
Link to risks
Finance
Political and regulatory
Read more about our principal risks on pages 104 to 105
As a responsible
business, we are
sharing our success
with customers, as we
have done previously
sharing over £600
million between 2010
and 2020.”
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Our performance in 2021/22
Operational performance
Shareholders
Investors
Delivering a sustainable return to investors –
through prudent financial risk management and a
strong track record of performance across a suite of
environmental, social and governance metrics.
How we measure performance
Link to material issue
Our key performance indicator to measure value
• Customer service and operational performance
created for investors during 2020–25 is Return on
Regulated Equity (RoRE).
Return on regulated equity (RoRE)
Definition
Key measure encompassing regulatory out/
underperformance across financial and operational
efficiency, customer satisfaction, and regulatory
performance targets. Read more on page 51.
• Financial risk management
• Corporate governance and business conduct
Read more about our approach to materiality
on pages 34 to 35
Link to risks
Finance
Political and regulatory
Our targets will be updated throughout the period
in line with guidance on the individual components
Read more about our principal risks on pages 104 to 105
Target
of RoRE.
Status
Achieved/confident of achieving target
Performance
Reported RoRE for 2021/22 was 7.9 per cent on a
real, RPI/CPIH blended basis, double the base return.
Underlying RoRE was slightly lower at 7.7 per cent, and
excludes the tax that will be recovered through the
regulatory sharing mechanism. Cumulative RoRE for
the first two years of AMP7 is 6.2 per cent on both a
reported and underlying basis.
2021/22
7.9%
reported
Cumulative
6.2%
reported
2021/22
7.7%
underlying
Cumulative
6.2%
underlying
As a responsible
business, we are
sharing our success
with customers, as we
have done previously
sharing over £600
million between 2010
and 2020.”
How we deliver value to investors
Short term
• Since many of our investors are
pension funds, charities and
employees, the income we provide
through dividends benefits millions of
people every year.
• We are committed to high ethical
standards of business conduct, strong
corporate governance and acting
with integrity so investors can have
confidence in the way we do business.
• We maintain a high level of quality and
transparency in what we report.
Long term
• The majority of shares in our company
are typically held for the long term,
and we provide an appropriate return
to investors through a combination of
short-term dividend income and long-
term growth.
• We plan far into the future and
invest in our infrastructure to ensure
sustainability.
• We manage risk prudently so investors
can have confidence in our stability
and resilience in the round.
• Our innovation culture drives
• We link investor returns to our
continuous improvements, enabling us
to be at the frontier of our industry.
environmental and social projects
through our sustainable finance
framework.
Link to strategic themes
By delivering better performance
for customers we are able to
achieve greater regulatory
incentives, aligning improved
service with investor returns.
By reducing costs in a sustainable
way through innovation and
efficiency, we can meet our
allowed expenditure without
compromising operational
performance.
Our strong corporate governance,
prudent risk management, and
clear and transparent reporting
create a lower risk investment and
build trust.
Read more
about our £765
million additional
investment on
page 71
More information
about our RoRE
performance will
be published in
July 2022 in our
APR, available on
our website at:
unitedutilities.com/
corporate/about-us/
performance/annual-
performance-report
Overview
We have delivered a strong Return on Regulated
Equity (RoRE) performance this year, driven by our
continued improvements in operational performance
together with good performance on financing and
tax. As a responsible company, we believe in sharing
our successes and have increased the additional
investment we are making outside the scope of our
Final Determination (FD) total expenditure (totex)
allowance by £400 million to a total of £765 million,
which will deliver environmental benefits and improved
performance against customer outcomes.
Return on Regulated Equity (RoRE)
Reported RoRE of 7.9 per cent for 2021/22 comprises
the base return of 3.9 per cent (including our 11 basis
point fast-track reward that we receive in each of
the five years of the AMP), tax outperformance of 2.7
per cent, financing outperformance of 1.6 per cent,
and customer ODI outperformance of 0.5 per cent,
partially offset by the total expenditure (totex) impact
on RoRE of -0.8 per cent as a result of our additional
investment. Underlying RoRE of 7.7 per cent has a
lower tax outperformance of 2.5 per cent as it excludes
the tax that will be recovered through the regulatory
sharing mechanism.
Total expenditure (totex)
The totex impact on RoRE of -0.8 per cent, on both
a reported and underlying basis, largely reflects the
year two impact of the additional investment we are
making outside the scope of our FD, for example our
investment in Dynamic Network Management.
Our AMP7 business plan was assessed by Ofwat as
being amongst the most efficient in the sector, and
our performance improvements over AMP6 meant
we started AMP7 at a totex run rate that supported
delivery of the stretching efficiency challenge in our
FD allowance. We are not immune to the impact of
inflation, both directly and indirectly through our
supply chain, with many of our costs rising above the
headline rate. Our totex allowance does increase with
inflation, which helps to mitigate some of this cost
pressure, and we continue to exploit technology and
innovation to help us deliver our investment efficiently.
In this second year of AMP7, we have invested £645
million in net regulatory capital expenditure (excluding
infrastructure renewals expenditure), representing
the continued acceleration of our AMP7 investment
programme and early expenditure against the
extension to our original totex plans. Cumulatively,
this is £1.3 billion in the first two years of the period,
which represents a good start to the delivery of our
AMP7 programme. We have been able to deliver
this expenditure effectively, maintaining our high
performance scores against our Time, Cost and Quality
index (TCQi) at over 95 per cent.
Our investment strategy delivers long-term efficiency
and sustainable performance improvements, and
the additional £765 million investment we are
making beyond the scope of our FD will drive further
enhancements for customer and environmental
performance. £265 million of this investment we expect
to be fully recovered through regulatory mechanisms,
including Green Recovery and projects that form part of
our Water Industry National Environment Programme
(WINEP). £250 million of this investment is improving
environmental outcomes, funded through investment
of outperformance, and subject to regulatory sharing
mechanisms. The final £250 million of this investment
will drive improved performance against customer
outcomes and is supported on a business case basis,
delivering improved customer ODI performance.
While we continue to strive to deliver our investment
efficiently, as we have demonstrated through this
additional investment, we will invest where we are
confident we can deliver improved customer or
environmental outcomes and better customer ODI
performance.
Customer outcome delivery incentives (ODIs)
Customer ODI outperformance of 0.5 per cent, on
both a reported and underlying basis, reflects a net
reward of £25 million*. This is our highest ever one-
year net reward against customer ODIs, reflecting
our continued improvements in performance for
customers.
Our customer ODI performance has been strong
across the board, meeting or beating over 80 per
cent of our performance commitments, giving us the
confidence to increase our total AMP7 ODI guidance
by a third, targeting a cumulative net ODI reward over
the five-year period of around £200 million.
* Excluding per capita consumption, which Ofwat will be
revisiting at the next price review once there is a better
understanding of the impact of COVID-19 and any enduring
effects.
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Our performance in 2021/22
Operational performance
The additional investment we are making will help
improve performance in areas where we want to
do better. This includes £100 million investment in
Dynamic Network Management, which will help us
improve performance on sewer flooding, and around
£100 million investment in improving water quality.
Customer ODI rewards and penalties in AMP7 will be
adjusted in revenues on a two-year lag in accordance
with the regulatory mechanism, therefore, the net
reward earned this year will be reflected in an increase
to revenue in 2023/24 through allowed increases in the
rates charged to customers in that financial year.
Financing outperformance
We earned financing outperformance this year of 1.6
per cent, on both a reported and underlying basis,
compared with 1.2 per cent last year. This increase
mainly results from recent high levels of inflation,
which increases the benefit of the roughly £3 billion
fixed rate debt we have locked in.
We have consistently issued debt at efficient rates
that compare favourably with the industry average,
thanks to our leading treasury management, clear and
transparent financial risk management policies, and
ability to act swiftly to access pockets of opportunity
as they arise. This delivered significant financing
outperformance during AMP6 and the rates we have
locked-in for AMP7 compare favourably with the price
review assumptions.
Tax outperformance
The 2.7 per cent outperformance on tax on a reported
basis reflects our optimisation of available government
tax incentives, including research and development
tax allowances and the temporary capital allowance
“super deductions”, net of the tax impact of financing
outperformance. The 2.5 per cent outperformance on
tax on an underlying basis excludes the tax that will be
recovered through the regulatory sharing mechanism.
ESG performance
We are upper quartile across a suite of investor
indices. With a score of 76 per cent we were proud
to again be included in the S&P Global Sustainability
Yearbook 2022, and we have been included in the
FTSE4Good Index Series, which measures the
performance of companies who demonstrate strong
ESG practices against globally recognised responsible
business standards, since June 2001. In March 2022,
we were assessed by Sustainalytics to be at low risk
of experiencing material financial impacts from ESG
factors, with our management of ESG material risk
rated as strong. We received an ESG Risk Rating
of 12.8.
2025 target Performance
Status
Annual
performance
Against 2025
target
Measure
KPI:
Underlying RoRE
Reported RoRE
UK Corporate Governance
Code
Maintain performance
across a range of trusted
investor indices
Credit rating UUW
(Moody’s, S&P, Fitch)
Gearing
Maintain sustainable
finance framework
Fair Tax mark
Sustainable dividend
Assessed
annually
Assessed
annually
Maintain
compliance
Upper
quartile
7.7%
4.6%
7.9%
4.3%
Compliant
Compliant
Upper
quartile
Upper
quartile
A3, BBB+, A- A3, BBB+,
A- (stable
outlook)
A3, BBB+, A-
61%
62%
Available
Available
55–65%
Available/
continued
issuance
Retain annual
accreditation
Grow by
CPIH
Retained
Retained
In line with
commitment
In line with
commitment
Met
expectation
Met
expectation
100%
94%
Risk maturity
Year-on-year
improvement
100%
75%
Anti-bribery:% of identified
employees completing
required training
Investor engagement:%
met or offered to meet by
value (active targetable
institutional shareholder
base)
Status key:
Annual performance
80%
81%
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
Performance key:
2021/22
2020/21
7.9%
Return on Regulated Equity
for 2021/22, double
the base return
£25m
Highest ever one-year
reward against outcome
delivery incentives (ODIs)
£200m
Anticipated total reward
against ODIs over the
2020–25 period
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2025 target Performance
performance
target
Status
Annual
Against 2025
Our performance in 2021/22
Operational performance
The additional investment we are making will help
improve performance in areas where we want to
do better. This includes £100 million investment in
Dynamic Network Management, which will help us
improve performance on sewer flooding, and around
£100 million investment in improving water quality.
Customer ODI rewards and penalties in AMP7 will be
adjusted in revenues on a two-year lag in accordance
with the regulatory mechanism, therefore, the net
reward earned this year will be reflected in an increase
to revenue in 2023/24 through allowed increases in the
Code
rates charged to customers in that financial year.
Measure
KPI:
Underlying RoRE
Reported RoRE
Assessed
annually
Assessed
annually
7.7%
4.6%
7.9%
4.3%
UK Corporate Governance
Maintain
Compliant
compliance
Compliant
Maintain performance
Upper
across a range of trusted
quartile
investor indices
Credit rating UUW
(Moody’s, S&P, Fitch)
A3, BBB+, A- A3, BBB+,
Gearing
55–65%
Maintain sustainable
finance framework
Fair Tax mark
Available/
continued
issuance
Sustainable dividend
Grow by
In line with
Upper
quartile
Upper
quartile
A- (stable
outlook)
A3, BBB+, A-
61%
62%
Available
Available
Retain annual
Retained
accreditation
Retained
CPIH
commitment
In line with
commitment
Year-on-year
Met
improvement
expectation
expectation
Met
100%
94%
80%
81%
Risk maturity
Anti-bribery:% of identified
100%
employees completing
required training
Investor engagement:%
75%
met or offered to meet by
value (active targetable
institutional shareholder
base)
Status key:
Annual performance
Performance key:
2021/22
2020/21
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
Financing outperformance
We earned financing outperformance this year of 1.6
per cent, on both a reported and underlying basis,
compared with 1.2 per cent last year. This increase
mainly results from recent high levels of inflation,
which increases the benefit of the roughly £3 billion
fixed rate debt we have locked in.
We have consistently issued debt at efficient rates
that compare favourably with the industry average,
thanks to our leading treasury management, clear and
transparent financial risk management policies, and
ability to act swiftly to access pockets of opportunity
as they arise. This delivered significant financing
outperformance during AMP6 and the rates we have
locked-in for AMP7 compare favourably with the price
review assumptions.
Tax outperformance
The 2.7 per cent outperformance on tax on a reported
basis reflects our optimisation of available government
tax incentives, including research and development
tax allowances and the temporary capital allowance
“super deductions”, net of the tax impact of financing
outperformance. The 2.5 per cent outperformance on
tax on an underlying basis excludes the tax that will be
recovered through the regulatory sharing mechanism.
ESG performance
We are upper quartile across a suite of investor
indices. With a score of 76 per cent we were proud
to again be included in the S&P Global Sustainability
Yearbook 2022, and we have been included in the
FTSE4Good Index Series, which measures the
performance of companies who demonstrate strong
ESG practices against globally recognised responsible
business standards, since June 2001. In March 2022,
we were assessed by Sustainalytics to be at low risk
of experiencing material financial impacts from ESG
factors, with our management of ESG material risk
rated as strong. We received an ESG Risk Rating
of 12.8.
7.9%
£25m
Return on Regulated Equity
for 2021/22, double
the base return
Highest ever one-year
reward against outcome
delivery incentives (ODIs)
£200m
Anticipated total reward
against ODIs over the
2020–25 period
The additional
investment we are
making will improve
services for customers
and accelerate long-term
environmental aims.”
Investing £765 million to deliver
customer and environmental outcomes
The £765 million additional investment
we are making over the 2020–25
period beyond the scope of our final
determination will help to accelerate
environmental benefits, improve
performance for customers, and deliver
growth in our regulatory capital value
(RCV), while maintaining gearing within
our target range.
The remaining £250 million will help us improve
environmental outcomes, such as accelerating
implementation of the Environment Act 2021, including
delivery of the commitments we set out in our
Better Rivers: Better North West plan, and delivering
improved water quality and resilience.
providing additional benefit and creating long-term
value for all stakeholders.
£265 million of this investment is delivering projects
that have been agreed with our regulator to help
deliver environmental and customer outcomes. These
projects are approved additions to our base investment
programme, including Green Recovery investment and
the Water Industry National Environment Programme
(WINEP), and are subject to regulatory mechanisms.
A further £250 million is being targeted at improving
performance for customers, including £100 million
investment in Dynamic Network Management, a
Systems Thinking implementation in our wastewater
network that is driving improvements in sewer flooding
and pollution performance, as well as projects that will
improve water quality.
This investment is supported on a business case basis,
and will deliver improved customer outcome delivery
incentive (ODI) performance in the current period. The
sustainable performance improvements it will deliver
also help to support better service for customers, and
therefore, better ODI performance, in future periods,
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This is reinvestment of outperformance we have
earned, and is subject to regulatory mechanisms. As
a responsible company, we believe in the importance
of sharing our successes for the benefit of all our
stakeholders. This is in line with the approach we
have taken historically, sharing over £600 million in
2010–20, and that investment has helped us to deliver
the performance improvements we have achieved
to date.
As well as delivering significant environmental and
customer benefits, this additional investment is
contributing to higher growth in our RCV, which
is now expected to grow by over 10 per cent more
on a nominal basis over the 2020–25 period than
we expected at the beginning of the period. This,
together with our financial strength and balance
sheet headroom, means we expect gearing to remain
within our target range of 55 to 65 per cent, retaining
financial flexibility and resilience.
Delivering value for:
Communities
Communities
Customers
Environment
Customers
Customers
Shareholders
Environment
Investors
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Our performance in 2021/22
Operational performance
Media
Suppliers
Innovating in partnership with suppliers – we rely
on suppliers to deliver our services and to help
identify ways to make them better.
How we measure performance
Our key performance indicator to measure value
created for suppliers during 2020–25 is payment
within 60 days, and we target at least 95 per cent
of invoices to be paid within this time frame.
Invoices paid within 60 days
Definition
Percentage of invoices paid within 60 working days
of issue.
Target
At least 95 per cent, in line with the requirements
of the Prompt Payment Code.
Status
Achieved/confident of achieving target
Link to material issue
• Trust, transparency and legitimacy
• North West regional economy
• Responsible supply chain
Read more about our approach to materiality
on pages 34 to 35
Link to risks
Supply chain and programme delivery
Read more about our principal risks on pages 104 to 105
Performance
This year continued to pay suppliers above our
target, with over 99 per cent of our invoices paid
within 60 days, and our average time to pay was
13 days.
2021/22
>99%
2020/21
>99%
2019/20
97%
2018/19
98%
2017/18
95%
We act fairly and
transparently with
all our suppliers and
are a signatory to
the Prompt Payment
Code, fully complying
with the reporting
requirements.”
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Our performance in 2021/22
Operational performance
Media
Suppliers
Innovating in partnership with suppliers – we rely
on suppliers to deliver our services and to help
identify ways to make them better.
How we measure performance
Link to material issue
Our key performance indicator to measure value
• Trust, transparency and legitimacy
created for suppliers during 2020–25 is payment
within 60 days, and we target at least 95 per cent
of invoices to be paid within this time frame.
• North West regional economy
• Responsible supply chain
Invoices paid within 60 days
Percentage of invoices paid within 60 working days
Read more about our approach to materiality
on pages 34 to 35
Link to risks
Supply chain and programme delivery
At least 95 per cent, in line with the requirements
of the Prompt Payment Code.
Read more about our principal risks on pages 104 to 105
Definition
of issue.
Target
Status
Achieved/confident of achieving target
Performance
This year continued to pay suppliers above our
target, with over 99 per cent of our invoices paid
within 60 days, and our average time to pay was
13 days.
2021/22
>99%
2020/21
>99%
2019/20
97%
2018/19
98%
2017/18
95%
We act fairly and
transparently with
all our suppliers and
are a signatory to
the Prompt Payment
Code, fully complying
with the reporting
requirements.”
How we deliver value to suppliers
Short term
• We spend significant amounts of
money with our suppliers each year
to help deliver maintenance and
enhancement projects across our asset
base, and this helps support thousands
of jobs in our region.
Long term
• Supporting jobs through our supply
chain in the short term catalyses the
development of skills and jobs in the
North West, providing a stimulus to
benefit the regional economy in the
long term.
• Paying suppliers on time gives them
• Working together to develop
confidence in us and allows companies
to maintain cash flow and become
more resilient.
technologies means we can identify
solutions that will make our services
better in the future.
• While our operations and suppliers
are mainly UK and European, they
work closely with us to address human
rights, in particular modern slavery.
• We act with integrity, giving suppliers
confidence in the way we do business,
which translates to transparency and
fairness for our suppliers.
Link to strategic themes
Suppliers work on our behalf, so
ensuring they are motivated to
deliver good quality work helps
us deliver the best service to
customers.
Developing innovations with
suppliers, and ensuring they
deliver goods and services
efficiently, contributes to
a sustainable low cost for
customers.
Working with responsible
suppliers who share our
sustainability objectives helps
us achieve more in tackling
environmental and social issues.
Read more about
the world-first
water treatment
process that
came out of our
Innovation Lab
on page 75
Overview
Our activities support around 17,700 jobs in the supply
chain, and the acceleration of around £500 million of
capital expenditure into the first three years of AMP7
will continue to play a part in helping to generate jobs
and income for the North West economy.
In September 2021, we held a USC event to
acknowledge the efforts of our suppliers and awarded
our first USC awards in Customer, Innovation and
Integrity. We worked closely with one of our partner
suppliers, Sapphire Utility Solutions Ltd, and awarded
them our first USC accreditation badge.
This comes at a critical time as the country recovers
from the effects of the COVID-19 pandemic and are
faced with significant rises in the cost of living.
Suppliers and contractors play an important role in
delivering our services and, alongside our employees,
often act as the face of our business for many
customers and communities.
The pandemic has shown the importance of our
relationships with our supply chain partners and we
want this to grow as part of our United Supply Chain
approach.
Prompt Payment Code
As a signatory to this Code, in addition to the
commitment to pay at least 95 per cent of invoices
within 60 working days, we are working to pay 95 per
cent of our small and medium-sized enterprise (SME)
suppliers within 30 days, a new guideline that came
into effect in July 2021.
Our efforts have not gone unnoticed and we were
awarded one of the first ‘Fast Payer Awards’ by Good
Business Pays. This award recognises FTSE350
companies who are fast payers of their invoices and
can demonstrate that over the past 12 months they
have paid their suppliers in less than 30 days as well as
paying 95 per cent or more of all invoices on time.
Responsible sourcing through our
United Supply Chain
Our new approach to responsible supply chain
management for AMP7, called United Supply Chain
(USC), was launched in 2020 and we continue to
embed this strategy across our supply chain.
USC recognises suppliers as an extension of the United
Utilities family and suppliers are asked, as a minimum,
to become a signatory to our Responsible Sourcing
Principles. For those suppliers that are integral to our
operations, we encourage them to become leaders and
to work jointly with us to deliver improvements across
ESG areas and to improve value for customers.
By March 2022, 90 per cent of our targeted suppliers
had signed up to our Responsible Sourcing Principles.
We continue to engage with the remaining suppliers to
reach our target of 100 per cent.
Through our partnership with Supply Chain
Sustainability School, we have been able to offer our
commercial colleagues and supply chain partners
free resources to learn more about the Responsible
Sourcing Principles.
In light of the sanctions regime introduced by the UK
Government in relation to the conflict in Ukraine, we
continue to review our supply chain on an ongoing
basis for any potential exposure, and have taken
action to mitigate this where necessary by securing
alternative sourcing.
Fostering innovation
Our Innovation Lab gives suppliers, often small
start-up businesses who might be in the early stages
of developing their idea or just starting out on
their business growth journey, the opportunity to
test solutions in a live environment over a 12-week
programme.
This helps us find ideas where others aren’t looking – in
different sectors, other countries, and with suppliers
we may not otherwise have worked with.
It does all this whilst being fully compliant with
procurement legislation – allowing for rapid idea
testing and adoption/contract award – an obstacle that
most regulated companies struggle with.
The open, collaborative nature means that feedback
is given more frequently and ideas get tailored for
adoption by us faster than traditional product testing.
We set categories for which we are looking for
solutions, all of which are designed to help develop
our Systems Thinking plans and enable us to deliver a
better service for customers.
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Operational performance
We are currently in our fourth Lab programme, which
has the following categories:
•
•
•
Ideas to help us get to the next level in digital
connections across our network;
Ideas to help us analyse data and use it to improve
our energy efficiency;
Ideas to help us reach our net zero target and use
nature-based solutions, for example in biodiversity,
natural flood management, and community
engagement; and
• Wildcard – a catch-all category for transformative
ideas that we feel are worth pursuing despite not
fitting into one of the above specific categories.
We are working with 12 suppliers in this programme,
with ideas ranging from faster ways to detect water
quality issues to drones for water sampling in hard-to-
reach areas.
We have worked with more than 20 suppliers in
this way in the past, and seen some high profile
success. FIDO, which emerged from our second
Lab programme to help tackle leakage detection, is
becoming known as a disruptor in the global water
sector, and we have first mover advantage on new
developments. Following development with Typhon,
we have recently completed installation of the world’s
first ever municipal UV LED disinfection system in
operation at one of our water treatment works near
Carlisle.
Status
Annual
performance
Against 2025
target
Measure
2025 target Performance
KPI:
Invoices paid within
60 days
Average time taken
to pay invoices
At least 95% 99.34%
99.55%
<28days
13
13
Delivery
scheduled
from 2022
Delivery
scheduled
from 2021
72%
35%
54%
69%
90%
38%
5%
% suppliers in high
risk categories,
as identified by
sustainability risk
assessments,
covered by enhanced
due diligence audits
75%
% of partner and
strategic suppliers
that have
sustainability risk
assessment in place
Supplier relationship
management score
90%
100%
% of targeted
suppliers signed up
to United Supply
Chain
CIPS ethical mark
Savings delivered
through innovation
and efficiency
Status key:
Annual performance
Retain annual
accreditation
£40m
Retained
Retained
£6.388m
cumulative
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
Performance key:
2021/22
2020/21
>17,000
Jobs in the supply chain
supported through our
activities
90%
Targeted suppliers
signed up to our United
Supply Chain
>20
Suppliers we have worked
with through our Innovation
Lab process
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Our performance in 2021/22
Operational performance
We are currently in our fourth Lab programme, which
has the following categories:
•
Ideas to help us get to the next level in digital
connections across our network;
•
Ideas to help us analyse data and use it to improve
Invoices paid within
At least 95% 99.34%
our energy efficiency;
•
Ideas to help us reach our net zero target and use
Average time taken
<28days
nature-based solutions, for example in biodiversity,
to pay invoices
natural flood management, and community
engagement; and
• Wildcard – a catch-all category for transformative
ideas that we feel are worth pursuing despite not
sustainability risk
fitting into one of the above specific categories.
assessments,
2025 target Performance
performance
target
Status
Annual
Against 2025
99.55%
13
13
Delivery
scheduled
from 2022
Delivery
scheduled
from 2021
72%
35%
54%
69%
90%
38%
£6.388m
cumulative
Measure
KPI:
60 days
% suppliers in high
5%
risk categories,
as identified by
covered by enhanced
due diligence audits
% of partner and
75%
strategic suppliers
that have
sustainability risk
assessment in place
Supplier relationship
90%
management score
% of targeted
100%
suppliers signed up
to United Supply
Chain
Savings delivered
£40m
through innovation
and efficiency
Status key:
Annual performance
Performance key:
2021/22
2020/21
CIPS ethical mark
Retain annual
Retained
accreditation
Retained
Against 2025 target
Met expectation/target
Confident of meeting target
Close to meeting expectation/target
Some work to do
Behind expectation/target
Target unobtainable
We are working with 12 suppliers in this programme,
with ideas ranging from faster ways to detect water
quality issues to drones for water sampling in hard-to-
reach areas.
We have worked with more than 20 suppliers in
this way in the past, and seen some high profile
success. FIDO, which emerged from our second
Lab programme to help tackle leakage detection, is
becoming known as a disruptor in the global water
sector, and we have first mover advantage on new
developments. Following development with Typhon,
we have recently completed installation of the world’s
first ever municipal UV LED disinfection system in
operation at one of our water treatment works near
Carlisle.
>17,000
Jobs in the supply chain
supported through our
activities
90%
>20
Targeted suppliers
signed up to our United
Suppliers we have worked
with through our Innovation
Supply Chain
Lab process
We were delighted to
help showcase what
can be achieved when
industry fully invests in
the next generation of
talent and ideas.”
Innovating with world-first water
treatment process
and the local water company have worked together to
take the idea all the way through from demonstration
scale to a marketable industrial application right here
in Cumbria.
“We explained how the process works, the challenges
involved in developing such a unique disinfection
solution, and the potential future benefits for the water
industry globally and for high skilled employment
opportunities in the North Lakes area.”
Our head of innovation, Kieran Brocklebank, said:
“United Utilities is proving to be quite a force for
innovation in the UK water sector thanks to our
Innovation Lab programme, where we identify
and incubate the best emerging technologies. Our
relationship with Typhon is a real success story and we
were delighted to help showcase what can be achieved
when industry fully invests in the next generation of
talent and ideas.”
Delivering value for:
Customers
Customers
Suppliers
Media
His Royal Highness The Prince of Wales
visited our Cumwhinton Water Treatment
Works, near Carlisle, to see how
ultraviolet LEDs are making ripples in
the field of low energy water treatment.
Developed by Penrith firm Typhon, the
technology is the only one of its kind
capable of disinfecting drinking water
supplies on a large scale.
Ultraviolet (UV) light is widely used in the drinking
water treatment process to remove bacteria or tastes
and odours caused by algae. However, until now, UV
LED treatment systems had only been effective at
treating small amounts of water for very low flows or
domestic use. This project, two years in development,
sees the world’s first ever municipal UV LED
disinfection system in operation at the site.
His Royal Highness met employees from both Typhon
and United Utilities and discussed how the award-
winning system, with its advantages of superior safety,
energy efficiency and low running costs, could help
address safe access to water globally.
Typhon CEO, Matt Simpson, said: “We were honoured
that His Royal Highness was interested to come and
learn more about this hugely important leap for UV
technology in the water industry. It was wonderful to
be able to share the story of how a small local firm
74
unitedutilities.com/corporate
Stock Code: UU.
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M
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2
2
75
Our performance in 2021/22
Financial performance
Revenue for the year to 31 March 2022 increased by
3 per cent, mainly driven by higher non-household
consumption as business activity has returned
to pre-pandemic levels. Household bad debt has
returned to 1.8 per cent of regulated revenue,
lower than the 2.2 per cent last year and consistent
with the level we were achieving prior to the
pandemic, helped by our wide ranging affordability
schemes and effective approach to managing
cash collection. Operating profit was up £8 million
as the increase in revenue was largely offset by
inflationary increases in power and other core
costs.
While inflation has increased our operating costs
and net finance expense this year, it has also led
to a higher level of financing outperformance and,
together with the £765 million additional investment
we have announced beyond the scope of our final
determination, will deliver higher regulatory capital
value (RCV) growth over the 2020–25 period.
We have doubled our base return on regulated
equity (RoRE) for 2021/22, delivering strong
performance on financing, tax and customer ODIs.
We benefit from having one of the strongest
balance sheets in the sector, with an industry-
leading, fully funded pension scheme on a low
dependency basis, a low level of customer debtor
risk, and RCV gearing supporting a stable A3 credit
rating with Moody’s.
Revenue
2021/22
2020/21
2019/20
2018/19
2017/18
£1,863m
£1,808m
£1,859m
£1,819m
£1,736m
Underlying operating profit(1)
2021/22
2020/21
2019/20
2018/19
2017/18
£610m
£602m
£732m
£678m
£639m
Reported operating profit
2021/22
2020/21
2019/20
2018/19
2017/18
£610m
£602m
£630m
£635m
£636m
£106m
£8m
£13m
£1,863m
(£14m)
(£58m)
Revenue
2,000
£1,808m
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Year to
31 March
2021
Regulatory
revenue
changes
Non-
household
consumption
Household
consumption
Property
sales
Other
Year to
31 March
2022
Revenue was up £55 million, at £1,863 million, largely reflecting higher
consumption as business activity returns to pre-pandemic levels.
In 2021/22 we have had a £14 million reduction in the revenue cap,
incorporating a 1.5 per cent real reduction in allowed wholesale revenues
partly offset by a 0.6 per cent CPIH-linked increase.
With many more businesses able to operate compared with last year, when
the impact of the initial lockdown was significant, non-household revenue
has increased by £106 million. In contrast, consumption from households,
although higher than pre-pandemic norms, has decreased £58 million this
year. This is due to significantly higher consumption particularly during the
first half of last year reflecting the initial impact of people being locked
down at home through the warm weather of late spring 2020.
Operating profit
£55m
£8m
(£17m)
(£16m)
(£16m)
(£6m)
£610m
800
£602m
600
400
200
0
Underlying and
reported year
to 31 March
2021
Revenue
COVID-related
cost decreases*
Driving ODI
performance
Power cost
increases
Other costs,
largely due
to inflation
Software as
a service costs
treated as
operating
expenses
Underlying and
reported year
to 31 March
2022
* £8m COVID-related costs was an estimate in the year ended 31 March 2021 because, with the passage of time
and as conditions brought about by the pandemic have become embedded into normal business processes,
the usefulness of tracking COVID-related costs specifically has diminished.‘
Underlying and reported operating profit at £610 million was £8 million
higher than last year. The £55 million increase in revenue was mostly offset
by higher power costs and inflationary pressures increasing our underlying
cost base, predominantly in respect of materials and labour.
We have a reduction of around £8 million in operating costs as last year
saw additional one-off costs incurred in adapting to operate through the
pandemic.
The £17 million of additional costs driving ODI performance are targeted
at improving performance against specific customer ODIs, such as spend
associated with Dynamic Network Management.
Power costs have increased by £16 million this year, largely in relation to
higher prices. Power is a significant cost for our business, which is why we
manage this risk through a progressive policy of hedging the commodity
price element of power costs to minimise short term volatility (commodity
price makes up around half of our annual power costs, with the other half
relating to the use-of-system charge and other levies). Through this hedging
policy and self-generation, we locked in the cost on the majority of our
consumption for 2021/22 before the most recent energy price rises, securing
an average rate of £65 per megawatt hour (MWh) for the year, which is
76
unitedutilities.com/corporate
Our performance in 2021/22
Financial performance
Revenue
2,000
£1,808m
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
800
400
200
0
Revenue for the year to 31 March 2022 increased by
3 per cent, mainly driven by higher non-household
consumption as business activity has returned
to pre-pandemic levels. Household bad debt has
returned to 1.8 per cent of regulated revenue,
lower than the 2.2 per cent last year and consistent
with the level we were achieving prior to the
pandemic, helped by our wide ranging affordability
schemes and effective approach to managing
cash collection. Operating profit was up £8 million
as the increase in revenue was largely offset by
inflationary increases in power and other core
costs.
While inflation has increased our operating costs
and net finance expense this year, it has also led
to a higher level of financing outperformance and,
together with the £765 million additional investment
we have announced beyond the scope of our final
determination, will deliver higher regulatory capital
value (RCV) growth over the 2020–25 period.
We have doubled our base return on regulated
equity (RoRE) for 2021/22, delivering strong
performance on financing, tax and customer ODIs.
We benefit from having one of the strongest
balance sheets in the sector, with an industry-
leading, fully funded pension scheme on a low
dependency basis, a low level of customer debtor
risk, and RCV gearing supporting a stable A3 credit
rating with Moody’s.
Revenue
2021/22
2020/21
2019/20
2018/19
2017/18
2021/22
2020/21
2019/20
2018/19
2017/18
2021/22
2020/21
2019/20
2018/19
2017/18
Underlying operating profit(1)
Reported operating profit
£1,863m
£1,808m
£1,859m
£1,819m
£1,736m
£610m
£602m
£732m
£678m
£639m
£610m
£602m
£630m
£635m
£636m
£106m
£8m
£13m
£1,863m
(£14m)
(£58m)
Year to
31 March
2021
Regulatory
revenue
changes
Non-
household
consumption
Household
consumption
Property
sales
Other
Year to
31 March
2022
Revenue was up £55 million, at £1,863 million, largely reflecting higher
consumption as business activity returns to pre-pandemic levels.
In 2021/22 we have had a £14 million reduction in the revenue cap,
incorporating a 1.5 per cent real reduction in allowed wholesale revenues
partly offset by a 0.6 per cent CPIH-linked increase.
With many more businesses able to operate compared with last year, when
the impact of the initial lockdown was significant, non-household revenue
has increased by £106 million. In contrast, consumption from households,
although higher than pre-pandemic norms, has decreased £58 million this
year. This is due to significantly higher consumption particularly during the
first half of last year reflecting the initial impact of people being locked
down at home through the warm weather of late spring 2020.
Operating profit
£55m
£8m
£602m
600
(£17m)
(£16m)
(£16m)
(£6m)
£610m
Underlying and
reported year
to 31 March
2021
Revenue
COVID-related
cost decreases*
Driving ODI
performance
Power cost
increases
Other costs,
largely due
to inflation
Software as
Underlying and
a service costs
reported year
treated as
operating
expenses
to 31 March
2022
* £8m COVID-related costs was an estimate in the year ended 31 March 2021 because, with the passage of time
and as conditions brought about by the pandemic have become embedded into normal business processes,
the usefulness of tracking COVID-related costs specifically has diminished.‘
Underlying and reported operating profit at £610 million was £8 million
higher than last year. The £55 million increase in revenue was mostly offset
by higher power costs and inflationary pressures increasing our underlying
cost base, predominantly in respect of materials and labour.
We have a reduction of around £8 million in operating costs as last year
saw additional one-off costs incurred in adapting to operate through the
pandemic.
The £17 million of additional costs driving ODI performance are targeted
at improving performance against specific customer ODIs, such as spend
associated with Dynamic Network Management.
Power costs have increased by £16 million this year, largely in relation to
higher prices. Power is a significant cost for our business, which is why we
manage this risk through a progressive policy of hedging the commodity
price element of power costs to minimise short term volatility (commodity
price makes up around half of our annual power costs, with the other half
relating to the use-of-system charge and other levies). Through this hedging
policy and self-generation, we locked in the cost on the majority of our
consumption for 2021/22 before the most recent energy price rises, securing
an average rate of £65 per megawatt hour (MWh) for the year, which is
The indexation of principal on index-linked debt,
excluding the impact of inflation swaps, amounted to
a net charge in the income statement of £228 million,
compared with a net charge of £53 million last year,
resulting in an increase of £175 million. Interest on non
index-linked debt of £110 million is consistent with last
year, while various smaller year-on-year increases and
decreases broadly offset against one another when
considered together.
The £306 million underlying net finance expense
included in the income statement for the year compares
with £118 million net cash interest paid included in the
statement of cash flows. This £188 million difference
is due to non-cash inflation uplifts on index-linked
debt and derivatives of £256 million, less capitalised
borrowing costs of £53 million and net pension interest
income of £14 million, both of which are non-cash items.
Reported net finance expense of £168 million was
£90 million higher than last year, reflecting the
£174 million increase in underlying net finance expense,
partially offset by an £84 million increase in net fair
value gains on our debt and derivative portfolio,
excluding interest on derivatives and debt under fair
value option, from £54 million last year to £138 million
this year.
Joint ventures
For the year to 31 March 2022, we recognised a
£2 million loss in the income statement relating to our
joint venture Water Plus, compared with a £9 million
net share of losses from joint ventures last year, which
included a share of profits from the AS Tallinna Vesi
joint venture prior to its disposal. In the year to
31 March 2021, we also recognised a £37 million
profit on disposal of our share in AS Tallinna Vesi,
which was completed on 31 March 2021.
Further details can be found in note 12 of the
consolidated financial statements.
significantly lower than the current market rate of over
£200 per MWh for next year and has been fundamental
to our ability to minimise the impact on our cost base.
We are also locked-in on over 90 per cent of expected
consumption for 2022/23, and around two-thirds of
expected consumption across the final two years of
AMP7, at rates that compare favourably to the current
market rate.
Cost increases of £16 million largely stem from higher
inflation in the period. We are not immune to the impact
of the current high inflation environment, but through
hedging, constructive cost challenge and commercial
negotiations, we have managed to mitigate much of the
cost increase to date.
During the year, the IFRS Interpretations Committee
(IFRIC) published clarifications on how arrangements
in respect of a specific part of cloud technology –
Software as a Service – should be accounted for,
resulting in £6 million of costs that would previously
have been accounted for as fixed asset additions now
being treated as operating costs.
Household bad debt is back at our lowest ever level of
1.8 per cent of regulated revenue, having reduced from
2.2 per cent in the year to 31 March 2021 as we return to
pre-pandemic levels.
Profit before tax
Underlying profit before tax was £302 million, £158 million
lower than last year. This reflects the £8 million increase in
underlying operating profit and a decrease in the share of
losses of joint ventures of £8 million, more than offset by
a £174 million increase in underlying net finance expense.
Underlying profit before tax reflects consistently applied
presentational adjustments as outlined on pages 82 to 83.
Reported profit before tax decreased by £111 million
to £440 million reflecting the £8 million increase in
reported operating profit and an £8 million decrease
in the share of losses of joint ventures, more than
offset by a £90 million increase in reported net finance
expense (including fair value movements), and the
inclusion last year of a £37 million profit on disposal of
our share in the joint venture AS Tallinna Vesi.
Net finance expense
The underlying net finance expense of £306 million
was £174 million higher than last year, mainly due to
the non-cash impact of significantly higher inflation on
our index-linked debt.
Regulatory capital value
(RCV) gearing(2)
61%
Total dividend per
ordinary share (pence)
43.5p
Household bad debt as a proportion
of regulated revenue
1.8%
(1) A guide to APMs and a reconciliation between underlying profit and reported profit is shown on pages 82 to 83.
(2) Gearing calculated as group net debt/United Utilities Water Limited shadow RCV (adjusted for actual spend and timing difference).
76
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Stock Code: UU.
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f
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0
2
2
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Our performance in 2021/22
Financial performance
Profit/(loss) after tax and earnings per share
£367m
£8m
£73m
£69m
(174m)
500
400
£383m
£8m
300
200
100
0
-100
Underlying
operating
profit
Underlying
net finance
expense
Share of
JV losses
Tax credit
re R&D
allowances
Underlying
profit after
tax year to
31 March
2021
* Adjusted items are set out on pages 82 and 83
(£424m)
(£57m)
Underlying
tax,
including
‘super
deductions’
Underlying
profit after
tax year to
31 March
2022
Adjusted
items*
Reported
loss after
tax year to
31 March
2022
Underlying profit after tax of £367 million was £16 million lower
than last year, and underlying earnings per share decreased
from 56.2 pence to 53.8 pence, as the £158 million reduction
in underlying profit before tax is partly offset by £142 million
lower underlying tax (moving from a charge of £77 million last
year to a net credit of £65 million this year). The reduction
in underlying tax reflects a £73 million tax credit relating to
optimising the available research and development UK tax
allowances on innovation-related expenditure we had incurred
in prior years, and the impact of the capital allowance ’super
deductions‘ announced in the March 2021 Chancellors Budget,
which lowers the current tax charge significantly in the current
period.
The group has a reported loss after tax of £57 million this year,
compared with a £453 million reported profit after tax last year.
This £510 million difference reflects the £111 million decrease
in reported profit before tax, and a £544 million increase in
deferred tax largely due to a one-off charge to restate the
brought forward deferred tax liability at the new 25 per cent
future headline rate, partially offset by a £145 million positive
movement in current tax primarily as a result of adjustments in
respect of optimising available tax incentives on our innovation-
related expenditure in prior years. Reported basic earnings per
share decreased from 66.5 pence to (8.3) pence.
Tax
The group continues to be fully committed to paying its fair
share of tax and acting in an open and transparent manner
in relation to its tax affairs and we were delighted to have
retained the Fair Tax Mark independent certification for a
third year, having been only the second FTSE 100 company
to be awarded the Fair Tax Mark in July 2019.
In addition to corporation tax, the group pays significant
other contributions to the public finances on its own behalf
as well as collecting and paying over further amounts for its
over 5,000 strong workforce. The total payments for 2021/22
were around £230 million and included business rates,
employment taxes, environmental taxes and other regulatory
service fees such as water abstraction charges as well as
corporation tax.
In 2021/22, we paid corporation tax of around £9 million,
which represents an effective cash tax rate on underlying
profits of 3 per cent, which is 16 per cent lower than
the headline rate of corporation tax of 19 per cent. The
key reconciling item to the headline rate of corporation
tax continues to be allowable tax deductions on capital
investment including the new temporary capital allowance
’super deductions‘, where the current year tax benefit was
around £40m representing a 13 per cent reduction to the
effective cash tax rate. We expect a similar tax benefit from
the temporary super deduction regime for 2023 as well.
We have expressed the effective cash tax rate in terms
of underlying profits as this measure excludes fair value
movements on debt and derivative instruments and thereby
enables a medium-term cash tax rate forecast. We expect the
average cash tax rate on underlying profits to remain below
the headline rate of tax for the medium term.
For 2021/22, the group recognised an overall current tax
credit of £66 million in 2021/22. This includes a current tax
charge relating to 2021/22 of £7 million this year, compared
with £80 million in the previous year, key reconciling items
being the lower taxable profits and the availability of capital
allowance ’super deductions‘ for 2021/22. In addition,
in the current year, there were prior period tax credits of
£73 million, compared with £1 million in 2020/21. The current
year credit mainly relates to optimising the available research
and development UK tax allowances on our innovation-
related expenditure for multiple prior years.
For 2021/22, the group recognised a deferred tax charge
of £562 million, compared with £18 million for 2020/21. For
2021/22, £403 million relates to the government’s planned
increase in the rate of corporation tax from 19 per cent to
25 per cent from 1 April 2023. Subject to any legislative or
tax practice changes, we would expect the total effective tax
rate to continue to be broadly in line with the headline rate of
corporation tax for the medium term.
In 2021/22, there are £136 million of tax adjustments recorded
within other comprehensive income, primarily relating to
remeasurement movements on the group’s defined benefit
pension schemes. As in the prior year the rate at which the
deferred tax liabilities are measured on the group’s defined
benefit pension scheme is 35 per cent, being the rate
applicable to refunds from a trust.
Dividend per share
The board has proposed a final dividend of 29.0 pence per
ordinary share in respect of the year ended 31 March 2022.
Taken together with the interim dividend of 14.5 pence
per ordinary share, paid in February, this results in a total
dividend per ordinary share for 2021/22 of 43.5 pence. This
is an increase of 0.6 per cent compared with the dividend
relating to last year, in line with the group’s dividend policy
of targeting a growth rate of CPIH inflation each year
through to 2025. The 0.6 per cent increase is based on the
CPIH element included within allowed regulated revenue
for the 2021/22 financial year (i.e. the movement in CPIH
between November 2019 and November 2020).
The final dividend is expected to be paid on 1 August 2022
to shareholders on the register at the close of business on
24 June 2022. The ex-dividend date is 23 June 2022. The
election date for the Dividend Reinvestment Plan is
11 July 2022.
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Our performance in 2021/22
Financial performance
Profit/(loss) after tax and earnings per share
400
£383m
£8m
£367m
£8m
£73m
£69m
(174m)
500
300
200
100
0
-100
Underlying
profit after
tax year to
31 March
2021
Underlying
Underlying
Share of
Tax credit
Underlying
Underlying
Adjusted
Reported
operating
net finance
JV losses
re R&D
tax,
profit after
items*
loss after
profit
expense
allowances
including
tax year to
‘super
31 March
deductions’
2022
tax year to
31 March
2022
* Adjusted items are set out on pages 82 and 83
Underlying profit after tax of £367 million was £16 million lower
than last year, and underlying earnings per share decreased
from 56.2 pence to 53.8 pence, as the £158 million reduction
in underlying profit before tax is partly offset by £142 million
In 2021/22, we paid corporation tax of around £9 million,
which represents an effective cash tax rate on underlying
profits of 3 per cent, which is 16 per cent lower than
the headline rate of corporation tax of 19 per cent. The
key reconciling item to the headline rate of corporation
tax continues to be allowable tax deductions on capital
investment including the new temporary capital allowance
’super deductions‘, where the current year tax benefit was
around £40m representing a 13 per cent reduction to the
effective cash tax rate. We expect a similar tax benefit from
We have expressed the effective cash tax rate in terms
of underlying profits as this measure excludes fair value
movements on debt and derivative instruments and thereby
enables a medium-term cash tax rate forecast. We expect the
average cash tax rate on underlying profits to remain below
the headline rate of tax for the medium term.
For 2021/22, the group recognised an overall current tax
credit of £66 million in 2021/22. This includes a current tax
charge relating to 2021/22 of £7 million this year, compared
(£424m)
(£57m)
the temporary super deduction regime for 2023 as well.
lower underlying tax (moving from a charge of £77 million last
with £80 million in the previous year, key reconciling items
year to a net credit of £65 million this year). The reduction
in underlying tax reflects a £73 million tax credit relating to
optimising the available research and development UK tax
being the lower taxable profits and the availability of capital
allowance ’super deductions‘ for 2021/22. In addition,
in the current year, there were prior period tax credits of
allowances on innovation-related expenditure we had incurred
£73 million, compared with £1 million in 2020/21. The current
in prior years, and the impact of the capital allowance ’super
year credit mainly relates to optimising the available research
deductions‘ announced in the March 2021 Chancellors Budget,
and development UK tax allowances on our innovation-
which lowers the current tax charge significantly in the current
related expenditure for multiple prior years.
The group has a reported loss after tax of £57 million this year,
compared with a £453 million reported profit after tax last year.
This £510 million difference reflects the £111 million decrease
in reported profit before tax, and a £544 million increase in
deferred tax largely due to a one-off charge to restate the
brought forward deferred tax liability at the new 25 per cent
future headline rate, partially offset by a £145 million positive
movement in current tax primarily as a result of adjustments in
respect of optimising available tax incentives on our innovation-
related expenditure in prior years. Reported basic earnings per
share decreased from 66.5 pence to (8.3) pence.
period.
Tax
For 2021/22, the group recognised a deferred tax charge
Operating activities
of £562 million, compared with £18 million for 2020/21. For
Investing activities
2021/22, £403 million relates to the government’s planned
Financing activities
increase in the rate of corporation tax from 19 per cent to
25 per cent from 1 April 2023. Subject to any legislative or
6,867.8
tax practice changes, we would expect the total effective tax
(995.5)
274.4
rate to continue to be broadly in line with the headline rate of
(1.0)
(2.2)
624.9
6.0
corporation tax for the medium term.
In 2021/22, there are £136 million of tax adjustments recorded
within other comprehensive income, primarily relating to
163.2
remeasurement movements on the group’s defined benefit
pension schemes. As in the prior year the rate at which the
deferred tax liabilities are measured on the group’s defined
share of tax and acting in an open and transparent manner
in relation to its tax affairs and we were delighted to have
retained the Fair Tax Mark independent certification for a
third year, having been only the second FTSE 100 company
to be awarded the Fair Tax Mark in July 2019.
In addition to corporation tax, the group pays significant
other contributions to the public finances on its own behalf
as well as collecting and paying over further amounts for its
at
cash flows
applicable to refunds from a trust.
capex
and
Tax
joint
disposal of
ventures
investments
31.03.18
from
joint
ventures
Dividend per share
The board has proposed a final dividend of 29.0 pence per
ordinary share in respect of the year ended 31 March 2022.
Taken together with the interim dividend of 14.5 pence
per ordinary share, paid in February, this results in a total
dividend per ordinary share for 2021/22 of 43.5 pence. This
is an increase of 0.6 per cent compared with the dividend
Operating activities
Investing activities
Financing activities
7,750
7,250
6,750
6,250
5,750
7,750
7,250
6,750
5,750
98.3
27.3
4.1
The group continues to be fully committed to paying its fair
Net debt
benefit pension scheme is 35 per cent, being the rate
Proceeds from
Operating
Interest
Loan to
Net
Dividends
Dividends
Other
Inflation
uplift on
Fair value
movements
index linked
(including
debt
foreign
exchange)
Cash flow
Net cash generated from continuing operating
activities for the year to 31 March 2022 was £934
million, £75 million higher than £859 million last year.
The group’s net capital expenditure was £627 million,
principally in the regulated water and wastewater
investment programmes. This excludes infrastructure
renewals expenditure, which is treated as an
operating cost.
Pensions
As at 31 March 2022, the group had an IAS 19 net pension
surplus of £1,017 million, compared with a surplus of
£689 million at 31 March 2021. This £328 million increase
principally reflects an increase in credit spreads during the
year, partially offset by a higher inflation assumption. The
group has de-risked its pension schemes through hedging
strategies applied to the underlying interest rate and future
inflation. The IAS 19 position remains volatile to changes
in credit spread and changes in mortality, neither of which
have been hedged at this current time. This is primarily due
to difficulties hedging against credit spread volatility over
long durations, and, for mortality, there is lower volatility
in the short term and relatively high hedging costs. The
scheme specific funding basis does not suffer volatility due
to credit spread movements to the same extent as it uses a
prudent, fixed credit spread assumption.
Further detail on pensions is provided in note 18
(‘Retirement benefits’) of the consolidated financial
statements.
7,067.3
Financing
Net debt at 31 March 2022 was £7,570 million, compared
with £7,306 million at 31 March 2021. This comprises
gross borrowings with a carrying value of £7,980 million
net of cash and short-term deposits of £241 million and
net derivative assets hedging specific debt instruments of
£169 million.
(1,005.5)
645.3
(12.0)
(4.9)
(34.5)
195.2
Underlying movements in net debt are largely a result
of net operating cash inflows offset by our net capital
expenditure, dividends, indexation and cash interest.
Cost of debt
As at 31 March 2022, the group had approximately £3.2 billion
of RPI-linked instruments and £0.4 billion of CPI or CPIH-
linked instruments held as debt. In recent years, in response
to Ofwat’s decision to transition away from RPI inflation
linkage, the group has entered into a number of transactions
swapping RPI-linked cash flows to CPI-linked cash flows or
swapping floating rate cash flows to CPI-linked cash flows.
As a result, including these swaps, the group has RPI-linked
debt exposure of £3.1 billion at an average real rate of 1.3 per
cent, and £1.1 billion of CPI or CPIH-linked debt exposure at
58.8
an average real rate of -0.6 per cent.
7,361.4
60.9
5.5
100.8
284.5
A significantly higher RPI inflation charge compared with
the same period last year contributed to the group’s average
effective interest rate of 5.1 per cent being higher than the
rate of 2.5 per cent last year. The average underlying interest
rate represents the underlying net finance expense adjusted
for capitalised borrowing costs and net pension interest
income, divided by average notional debt. More information
on this can be found on page 83.
Operating
cash flows
Net debt
at
31.03.19
Gearing, measured as group net debt divided by UUW’s
shadow (adjusted for actual spend and timing difference)
regulatory capital value of £12.4 billion, was 61 per cent at
31 March 2022. This is slightly lower than gearing of
62 per cent as at 31 March 2021, and remains comfortably
within our target range of 55 to 65 per cent.
Proceeds
from
disposal of
investments
Dividends
from
joint
ventures
Interest
and
Tax
Net
capex
Loans
to joint
ventures
Dividends
The group has fixed the interest rates on its non index-linked
Fair value
debt in line with its 10-year reducing balance basis at a net
movements
effective nominal interest rate of 2.2 to 2.4 per cent for the
(including
foreign
remainder of the AMP7 regulatory period.
exchange)
Inflation
uplift on
index linked
debt
Non-cash
movements
in lease
liabilities
Net debt
at
31.03.20
Other
over 5,000 strong workforce. The total payments for 2021/22
relating to last year, in line with the group’s dividend policy
were around £230 million and included business rates,
of targeting a growth rate of CPIH inflation each year
employment taxes, environmental taxes and other regulatory
through to 2025. The 0.6 per cent increase is based on the
98.3
service fees such as water abstraction charges as well as
6,867.8
CPIH element included within allowed regulated revenue
(995.5)
274.4
27.3
4.1
corporation tax.
for the 2021/22 financial year (i.e. the movement in CPIH
6.0
(2.2)
(1.0)
624.9
between November 2019 and November 2020).
The final dividend is expected to be paid on 1 August 2022
6,250
to shareholders on the register at the close of business on
163.2
24 June 2022. The ex-dividend date is 23 June 2022. The
election date for the Dividend Reinvestment Plan is
11 July 2022.
Operating
cash flows
Net debt
at
31.03.18
Interest
and
Tax
Net
capex
Loan to
Proceeds from
Dividends
Dividends
Other
joint
disposal of
ventures
investments
from
joint
ventures
Inflation
uplift on
Fair value
movements
index linked
(including
debt
foreign
exchange)
£118m
£29m
£13m
£9m
£7m
£7,570m
Summary of net debt movement
£228m
£296m
£627m
7,750
7,500 £7,306m
7,250
7,000
6,750
6,500
6,250
6,000
5,750
(£1,062m)
As at
31 March
2021
Cash
generated
from
operations
Net capital
expenditure
Dividends
Indexation
Interest
Fair value
movements
Extension of
loans to
joint ventures
Tax
Other
As at
31 March
2022
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Stock Code: UU.
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Our performance in 2021/22
Financial performance
Credit ratings
UUW’s senior unsecured debt obligations are rated
A3 with Moody’s Investors Service (Moody’s), A- with
Fitch Ratings (Fitch) and BBB+ with Standard & Poor’s
Ratings Services (S&P) and all on stable outlook.
United Utilities PLC’s (UU PLC’s) senior unsecured debt
obligations are rated Baa1 with Moody’s, A- with Fitch
and BBB- with S&P, all on stable outlook.
Debt financing
The group has access to the international debt capital
markets through its £10 billion medium-term note
(MTN) programme. The MTN programme is updated
at least annually and this year’s update was completed
in November 2021, at which time the previous €7
billion euro programme limit was increased and
redenominated to £10 billion. The MTN programme
does not represent a funding commitment, with funding
dependent on the successful issue of the notes.
In total over 2020–25, we expect to raise around
£2.7 billion to cover refinancing and incremental debt,
supporting our five-year investment programme. So
far in AMP7, we have raised around £1.4 billion, taking
advantage of attractive rates available and extending
our liquidity position (as at 31 March 2022) out to
February 2025.
In November 2020, we published our new sustainable
finance framework, through which we expect to raise
financing based on our strong ESG credentials alongside
conventional issuance. This replaces the green funding we
have previously secured through the European Investment
Bank (EIB), which is no longer available post-Brexit. We
issued our debut sustainable bond in January 2021, raising
£300 million maturing in October 2029 and subsequently
swapped to CPI-linkage.
In August 2021, we raised around £74 million of term funding
via the issue off our MTN programme of a JPY11 billion
privately placed note swapped to GBP with a nine-year
maturity, and in September 2021 we priced a £100 million
fixed note with a seven-year maturity, the proceeds of which
were received in early October.
In April 2022, we raised £100 million of term funding with
an eight-year maturity via a bilateral loan with Export
Development Canada (EDC). AAA-rated EDC is the
Canadian Government’s Export Development Agency that
looks to promote trade with Canadian firms worldwide.
This follows collaboration with EDC in relation to some of
the innovation activities that we have undertaken, and we
expect such collaboration to continue.
Since March 2021, we have extended £100 million of
revolving credit facilities for a further year, renewed
£100 million of revolving credit facilities for a further five-
year term and entered into £50 million of new revolving
credit facilities for a five-year term. The group has also
amended the documentation for all of its existing revolving
credit facilities to remove references to LIBOR and replace
with SONIA.
Interest rate management
Long-term borrowings are structured or hedged to match
assets and earnings, which are largely in sterling, indexed
to UK price inflation, and subject to regulatory price
reviews every five years.
Long-term sterling inflation index-linked debt provides a
natural hedge to assets and earnings. At 31 March 2022,
approximately 41 per cent of the group’s net debt was
in RPI-linked form, representing around 25 per cent of
UUW’s regulatory capital value (RCV), with an average
real interest rate of 1.3 per cent. A further 15 per cent
of the group’s net debt was in CPI or CPIH-linked form,
representing around nine per cent of UUW’s RCV, with an
average real rate of -0.6 per cent. The long-term nature of
this funding also provides a good match to the company’s
long-life infrastructure assets and is a key contributor to
the group’s average term debt maturity profile, which is
around 18 years.
A3
credit rating with Moody’s
18 years
average term debt to maturity
Liquidity to
February
2025
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unitedutilities.com/corporate
Our performance in 2021/22
Financial performance
Credit ratings
UUW’s senior unsecured debt obligations are rated
A3 with Moody’s Investors Service (Moody’s), A- with
Fitch Ratings (Fitch) and BBB+ with Standard & Poor’s
Ratings Services (S&P) and all on stable outlook.
United Utilities PLC’s (UU PLC’s) senior unsecured debt
obligations are rated Baa1 with Moody’s, A- with Fitch
and BBB- with S&P, all on stable outlook.
Debt financing
The group has access to the international debt capital
markets through its £10 billion medium-term note
(MTN) programme. The MTN programme is updated
at least annually and this year’s update was completed
in November 2021, at which time the previous €7
billion euro programme limit was increased and
redenominated to £10 billion. The MTN programme
does not represent a funding commitment, with funding
dependent on the successful issue of the notes.
In total over 2020–25, we expect to raise around
£2.7 billion to cover refinancing and incremental debt,
supporting our five-year investment programme. So
far in AMP7, we have raised around £1.4 billion, taking
advantage of attractive rates available and extending
our liquidity position (as at 31 March 2022) out to
February 2025.
In November 2020, we published our new sustainable
finance framework, through which we expect to raise
financing based on our strong ESG credentials alongside
conventional issuance. This replaces the green funding we
have previously secured through the European Investment
Bank (EIB), which is no longer available post-Brexit. We
issued our debut sustainable bond in January 2021, raising
£300 million maturing in October 2029 and subsequently
swapped to CPI-linkage.
In August 2021, we raised around £74 million of term funding
via the issue off our MTN programme of a JPY11 billion
privately placed note swapped to GBP with a nine-year
maturity, and in September 2021 we priced a £100 million
fixed note with a seven-year maturity, the proceeds of which
were received in early October.
In April 2022, we raised £100 million of term funding with
an eight-year maturity via a bilateral loan with Export
Development Canada (EDC). AAA-rated EDC is the
Canadian Government’s Export Development Agency that
looks to promote trade with Canadian firms worldwide.
This follows collaboration with EDC in relation to some of
the innovation activities that we have undertaken, and we
expect such collaboration to continue.
Since March 2021, we have extended £100 million of
revolving credit facilities for a further year, renewed
£100 million of revolving credit facilities for a further five-
year term and entered into £50 million of new revolving
credit facilities for a five-year term. The group has also
amended the documentation for all of its existing revolving
credit facilities to remove references to LIBOR and replace
with SONIA.
Interest rate management
Long-term borrowings are structured or hedged to match
assets and earnings, which are largely in sterling, indexed
to UK price inflation, and subject to regulatory price
reviews every five years.
Long-term sterling inflation index-linked debt provides a
natural hedge to assets and earnings. At 31 March 2022,
approximately 41 per cent of the group’s net debt was
in RPI-linked form, representing around 25 per cent of
UUW’s regulatory capital value (RCV), with an average
real interest rate of 1.3 per cent. A further 15 per cent
of the group’s net debt was in CPI or CPIH-linked form,
representing around nine per cent of UUW’s RCV, with an
average real rate of -0.6 per cent. The long-term nature of
this funding also provides a good match to the company’s
long-life infrastructure assets and is a key contributor to
the group’s average term debt maturity profile, which is
around 18 years.
A3
A3
credit rating with Moody’s
credit rating with Moody’s
18 years
18 years
average term debt to maturity
average term debt to maturity
Our inflation hedging policy is to target around 50 per
cent of net debt to be maintained in index-linked form.
This reflects a balanced assessment across a range of
factors.
Where nominal debt is raised in a currency other than
sterling and/or with a fixed interest rate, the debt is
generally swapped to create a floating rate sterling
liability for the term of the debt. To manage exposure
to medium-term interest rates, the group fixes
underlying interest costs on nominal debt out to ten
years on a reducing balance basis.
Liquidity
Short-term liquidity requirements are met from the
group’s normal operating cash flow and its short-term
bank deposits and supported by committed but undrawn
credit facilities. Our MTN programme provides further
support.
At 31 March 2022, we had liquidity out to February 2025,
comprising cash and short-term deposits, plus committed
undrawn revolving credit facilities. This gives us flexibility
in terms of when and how further debt finance is raised to
help refinance maturing debt and support the delivery of
our regulatory capital investment programme. In October
2021, UUW prepaid a £100 million floating rate loan a year
ahead of its scheduled maturity, this being efficient use of
our available liquidity.
We consider that we operate a prudent approach to
managing banking counterparty risk. Counterparty
risk, in relation to both cash deposits and derivatives, is
controlled through the use of counterparty credit limits.
Our cash is held in the form of short-term money market
deposits with prime commercial banks.
We operate a bilateral rather than a syndicated approach
to our core relationship banking facilities. This approach
spreads maturities more evenly over a longer time
period, thereby reducing refinancing risk and providing
the benefit of several renewal points rather than a large
single refinancing requirement.
Outlook
We have delivered another good year of performance,
maintaining high levels of customer satisfaction
underpinned by our Systems Thinking approach,
improving operational performance, and long-term
financial resilience, giving us confidence in our
ability to continue to create value for customers, the
environment, and other stakeholders.
Liquidity to
Liquidity to
February
February
2025
2025
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unitedutilities.com/corporate
Stock Code: UU.
Stock Code: UU.
We are accelerating our AMP7 capital programme and
investing an additional £765 million over the regulatory
period to help us deliver even more sustainable
improvements in customer and environmental
performance, and to get ahead of the requirements
coming into force through the Environment Act. This
investment, together with latest views of inflation,
contributes to RCV growth over AMP7 of 21 per cent
on a nominal basis, more than 10 per cent higher than
we expected at the beginning of the period.
Our sustained high level of operational performance
is earning outperformance, and we have increased
our target of cumulative net outperformance against
customer ODIs by a third to around £200 million in
total over AMP7. As a consequence of our performance
in AMP7 and the additional investment we are making,
we are generating around £750 million of value that we
expect to receive through an RCV uplift and additional
revenues in the 2025-30 period (AMP8).
2022/23 full-year guidance
• Revenue is expected to be around 1 per cent higher
than 2021/22, largely reflecting the November 2021
CPIH inflation of 4.6 per cent, largely offset by the
regulatory revenue reduction of 1.3 per cent and
over-recovery in the current year due to higher
than anticipated consumption.
• Underlying operating costs are expected to
be around £100 million higher year-on-year.
Approximately half of this increase relates to
inflationary cost pressures on labour, chemicals
and other contract costs, while the other half
largely reflects the 2022/23 operating cost impact
of the £765 million additional investment.
• Underlying finance expense is expected to be around
£150 million higher year-on-year based on our current
inflation forecast. As at 31 March 2022, we had
£4.3 billion of index-linked debt exposure, therefore
every 1 per cent increase in inflation equates to an
around £43 million higher interest charge. Our cash
interest in 2021/22 was £118 million and we expect
this to be broadly the same in 2022/23, with the
overall increase in underlying net finance expense
largely relating to the non-cash indexation of our
index-linked debt. Our cash metrics therefore remain
strong and the higher inflation will also apply to our
RCV, of which 70 per cent is exposed to the benefits
of higher inflation, giving shareholders around a
1.75 times leveraged position to inflation.
• Underlying tax is expected to be a small charge
of up to £10 million in 2022/23, as we continue
to optimise the use of capital allowance ’super
deductions’.
• Capital expenditure (capex) in 2022/23 is expected
to be in the range of £640 million to £690 million,
including the 2022/23 element of incremental
capital expenditure in relation to the £765 million
additional investment.
• We are targeting a net customer ODI reward of
around £30 million, which is consistent with our
updated investment plans and guidance of around
£200 million reward in total over AMP7.
• Our AMP7 dividend policy is to grow the dividend
in line with CPIH inflation out to 2025, which for
2022/23 would equate to an increase of 4.6 per
cent based on November 2021 CPIH inflation.
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Our performance in 2021/22
Financial performance
Guide to Alternative Performance
Measures (APMs)
The underlying profit measures in the
following table represent alternative
performance measures (APMs) as defined
by the European Securities and Markets
Authority (ESMA). These measures
are linked to the group’s financial
performance as reported in accordance
with UK-adopted international accounting
standards and the requirements of the
Companies Act 2006 in the group’s
consolidated income statement, which
can be found on page 210. As such, they
represent non-GAAP measures.
These APMs have been presented in
order to provide a more representative
view of business performance. The
group determines adjusted items in the
calculation of its underlying measures
against a framework which considers
significance by reference to profit before
tax, in addition to other qualitative
factors such as whether the item is
deemed to be within the normal course
of business, its assessed frequency of
reoccurrence and its volatility which is
either outside the control of management
and/or not representative of current year
performance.
In addition, a reconciliation of the group’s
average effective interest rate has been
presented, together with a prior period
comparison. In arriving at net finance
expense used in calculating the group’s
effective interest rate, underlying net
finance expense is adjusted to add
back net pension interest income and
capitalised borrowing costs in order to
provide a view of the group’s cost of debt
that is better aligned to the return on
capital it earns through revenue.
Adjusted item
Rationale
Adjustments not expected to recur
Profit on disposal of joint
ventures
This relates to the disposal of the group’s 35.3% stake in its Estonian joint venture, AS Tallinna Vesi, which
represents a significant, atypical event and as such is not considered to be part of the normal course of
business.
Consistently applied presentational adjustments
Fair value (gains)/losses
on debt and derivative
instruments, excluding
interest on derivatives
and debt under fair value
option
Fair value movements on debt and derivative instruments can be both very significant and volatile from
one period to the next, and are therefore excluded in arriving at underlying net finance expense as they
are determined by macro-economic factors which are outside of the control of management and relate
to instruments that are purely held for funding and hedging purposes (not for trading purposes). Included
within fair value movement on debt and derivatives is interest on derivatives and debt under fair value
option. In making this adjustment it is appropriate to add back interest on derivatives and debt under fair
value option to provide a view of the group’s cost of debt which is better aligned to the return on capital
it earns through revenue. Taking these factors into account, management believes it is useful to adjust for
these fair value movements to provide a more representative view of performance.
Deferred tax adjustment Management adjusts to exclude the impact of deferred tax in order to provide a more representative
view of the group’s profit after tax and tax charge for the year given that the regulatory model allows
for cash tax to be recovered through revenues, with future revenues allowing for cash tax including the
unwinding of any deferred tax balance as it becomes current. By making this adjustment, the group’s
underlying tax charge does not include tax that will be recovered through revenues in future periods,
thus reducing the impact of timing differences.
Tax in respect of
adjustments to underlying
profit before tax
Management adjusts for the tax impacts of the above adjusted items to provide a more representative
view of current year performance.
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Our performance in 2021/22
Financial performance
Measures (APMs)
The underlying profit measures in the
following table represent alternative
performance measures (APMs) as defined
by the European Securities and Markets
Authority (ESMA). These measures
are linked to the group’s financial
performance as reported in accordance
with UK-adopted international accounting
standards and the requirements of the
Companies Act 2006 in the group’s
consolidated income statement, which
can be found on page 210. As such, they
order to provide a more representative
average effective interest rate has been
view of business performance. The
presented, together with a prior period
group determines adjusted items in the
comparison. In arriving at net finance
calculation of its underlying measures
expense used in calculating the group’s
against a framework which considers
effective interest rate, underlying net
significance by reference to profit before
finance expense is adjusted to add
tax, in addition to other qualitative
factors such as whether the item is
back net pension interest income and
capitalised borrowing costs in order to
deemed to be within the normal course
provide a view of the group’s cost of debt
of business, its assessed frequency of
that is better aligned to the return on
reoccurrence and its volatility which is
capital it earns through revenue.
either outside the control of management
and/or not representative of current year
represent non-GAAP measures.
performance.
Adjusted item
Rationale
Adjustments not expected to recur
Consistently applied presentational adjustments
business.
Profit on disposal of joint
This relates to the disposal of the group’s 35.3% stake in its Estonian joint venture, AS Tallinna Vesi, which
ventures
represents a significant, atypical event and as such is not considered to be part of the normal course of
Fair value (gains)/losses
Fair value movements on debt and derivative instruments can be both very significant and volatile from
on debt and derivative
instruments, excluding
interest on derivatives
one period to the next, and are therefore excluded in arriving at underlying net finance expense as they
are determined by macro-economic factors which are outside of the control of management and relate
to instruments that are purely held for funding and hedging purposes (not for trading purposes). Included
and debt under fair value
within fair value movement on debt and derivatives is interest on derivatives and debt under fair value
option
option. In making this adjustment it is appropriate to add back interest on derivatives and debt under fair
value option to provide a view of the group’s cost of debt which is better aligned to the return on capital
it earns through revenue. Taking these factors into account, management believes it is useful to adjust for
these fair value movements to provide a more representative view of performance.
Deferred tax adjustment Management adjusts to exclude the impact of deferred tax in order to provide a more representative
view of the group’s profit after tax and tax charge for the year given that the regulatory model allows
for cash tax to be recovered through revenues, with future revenues allowing for cash tax including the
unwinding of any deferred tax balance as it becomes current. By making this adjustment, the group’s
underlying tax charge does not include tax that will be recovered through revenues in future periods,
thus reducing the impact of timing differences.
Tax in respect of
Management adjusts for the tax impacts of the above adjusted items to provide a more representative
adjustments to underlying
view of current year performance.
profit before tax
Guide to Alternative Performance
These APMs have been presented in
In addition, a reconciliation of the group’s
Underlying profit
Operating profit
Operating profit per published results
Underlying operating profit
Net finance expense
Finance expense
Investment income
Net finance expense per published results
Net fair value (gains) on debt and derivative instruments, excluding interest on swaps and debt under
fair value option
Underlying net finance expense
Share of (losses) of joint ventures per published results
Profit on disposal of joint ventures per published results
Profit on disposal of AS Tallinna Vesi joint venture
Underlying profit on disposal of joint ventures
Profit before tax per published results
Adjustments in respect of operating profit
Adjustments in respect of net finance expense
Adjustments in respect of profit on disposal of joint ventures
Underlying profit before tax
(Loss)/Profit after tax per published results
Adjustments in respect of profit before tax
Deferred tax adjustment
Tax in respect of adjustments to underlying profit before tax
Underlying profit after tax
Earnings per share
(Loss)/profit after tax per published results (a)
Underlying profit after tax (b)
Weighted average number of shares in issue, in millions (c)
Earnings per share per published results, in pence (a/c)
Underlying earnings per share, in pence (b/c)
Dividend per share, in pence
Year ended
31 March
2022
£m
Year ended
31 March
2021
£m
610.0
610.0
(187.7)
19.4
(168.3)
(138.0)
(306.3)
(1.8)
–
–
–
439.9
–
(138.0)
–
301.9
(56.8)
(138.0)
562.5
(0.7)
367.0
£m
(56.8)
367.0
681.9m
(8.3)
53.8
43.50p
602.1
602.1
(103.5)
25.0
(78.5)
(54.3)
(132.8)
(9.3)
36.7
(36.7)
–
551.0
–
(54.3)
(36.7)
460.0
453.4
(91.0)
18.4
2.2
383.0
£m
453.4
383.0
681.9m
66.5
56.2
43.24p
Average effective interest rate
In arriving at net finance expense used in calculating the group’s effective interest rate, management adjusts underlying net finance
expense to add back pension income and capitalised borrowing costs in order to provide a view of the group’s cost of debt that is
better aligned to the return on capital it earns through revenue.
Underlying net finance expense
Net pension interest income
Adjustment for capitalised borrowing costs
Net finance expense for effective interest rate (a)
Average notional net debt (b)
Average effective interest rate (a/b)
31 March
2022
31 March
2021
(306.3)
(14.3)
(52.7)
(373.3)
(7,368)
5.1%
(132.8)
(17.5)
(30.4)
(180.7)
(7,315)
2.5%
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Stock Code: UU.
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Alignment to wider goals
The Sustainable Development Goals (SDGs) comprises
17 global goals to be achieved by the year 2030, and were adopted
by a summit of the United Nations (UN) in 2015. They are designed
to be the blueprint to achieve a better and more sustainable future
for all.
Our approach to responsible business aligns quite naturally with the goals and we have
identified six that are most material to our business and where we contribute the most.
We contribute to the delivery of a wider selection of the SDGs through our investment
projects and these are described in our sustainable finance framework.
Read our sustainable finance framework on our website at
unitedutilities.com/globalassets/z_corporate-site/investor-pdfs/
sustainable-finance-framework-2020-final.pdf
Decent work and economic
growth
Our daily operations provide direct,
indirect and induced employment for
22,700 people, and we are a significant
contributor to the north west economy.
We provide training and development
opportunities in safe, secure working
environments, graduate and apprentice
opportunities, programmes for young
people experiencing difficulties
securing employment, offer equal
opportunities to all and value diversity
among our employees.
Delivering value for:
Communities
Employees
Customers
Environment
Media
Industry, innovation and
infrastructure
We invest heavily in infrastructure,
including plans for over £4 billion
between 2020 and 2025 to improve
the performance and resilience of our
assets and operations to impacts such
as those arising from climate change.
We embrace innovation, especially
in an increasingly digital world, to
ensure the region where we operate
has reliable, sustainable and resilient
infrastructure, now and into the future.
Delivering value for:
Customers
Shareholders
Media
Clean water and sanitation
Part of our purpose is to provide
great water and is the reason we
exist, ensuring customers in the
North West have safe, resilient and
affordable water and wastewater
services.
This includes avoiding wasting water,
and we promote water efficiency
through campaigns, advice,
education and free water saving
gadgets for customers.
We protect and enhance water-
related ecosystems across our
region through initiatives such as
our Catchment Systems Thinking
approach.
Delivering value for:
Communities
Customers
Environment
Customers
84
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Alignment to wider goals
The Sustainable Development Goals (SDGs) comprises
17 global goals to be achieved by the year 2030, and were adopted
by a summit of the United Nations (UN) in 2015. They are designed
to be the blueprint to achieve a better and more sustainable future
for all.
Our approach to responsible business aligns quite naturally with the goals and we have
identified six that are most material to our business and where we contribute the most.
We contribute to the delivery of a wider selection of the SDGs through our investment
projects and these are described in our sustainable finance framework.
Read our sustainable finance framework on our website at
unitedutilities.com/globalassets/z_corporate-site/investor-pdfs/
sustainable-finance-framework-2020-final.pdf
Clean water and sanitation
Part of our purpose is to provide
great water and is the reason we
exist, ensuring customers in the
Decent work and economic
Industry, innovation and
growth
infrastructure
Our daily operations provide direct,
We invest heavily in infrastructure,
indirect and induced employment for
including plans for over £4 billion
North West have safe, resilient and
22,700 people, and we are a significant
between 2020 and 2025 to improve
affordable water and wastewater
contributor to the north west economy.
the performance and resilience of our
services.
This includes avoiding wasting water,
opportunities in safe, secure working
and we promote water efficiency
environments, graduate and apprentice
We embrace innovation, especially
We provide training and development
assets and operations to impacts such
as those arising from climate change.
opportunities, programmes for young
in an increasingly digital world, to
people experiencing difficulties
securing employment, offer equal
ensure the region where we operate
has reliable, sustainable and resilient
opportunities to all and value diversity
infrastructure, now and into the future.
among our employees.
Delivering value for:
Communities
Employees
Customers
Environment
Media
Delivering value for:
Customers
Shareholders
Media
through campaigns, advice,
education and free water saving
gadgets for customers.
We protect and enhance water-
related ecosystems across our
region through initiatives such as
our Catchment Systems Thinking
approach.
Delivering value for:
Communities
Customers
Environment
Customers
Sustainable cities and
communities
We use our understanding of customer
needs and priorities to deliver services
that meet their expectations and
engage with communities to enhance
participation in what we do. We plan at
least 25 years into the future to prepare
for increases in the population and new
housing that will need connections for
water and wastewater services. We
are exploring ways to do this using
natural solutions to manage water
and wastewater, such as Sustainable
Drainage Systems (SuDS).
Delivering value for:
Communities
Customers
Environment
Customers
Climate action
Responding to the climate emergency
is an imperative for us all.
Delivering against our six carbon
pledges and science-based targets
whilst ensuring that we, and the region
we serve, are resilient to the impacts
that a changing climate might bring, is
key to our long-term planning.
Read more about our approach to
climate change on pages 86 to 97
Delivering value for:
Communities
Customers
Environment
Customers
Peace, justice and strong
institutions
We run our business in a responsible
manner, and being trustworthy is one
of our core values.
We maintain high standards in
corporate governance and ethical
standards of business conduct – those
systems and processes through
which our organisation is managed,
controlled and held accountable. We
are committed to open, honest and
transparent corporate reporting.
Delivering value for:
Employees
Shareholders
Environment
Media
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Our approach to climate change
Task Force on Climate-related Financial Disclosures (TCFD)
Climate change and extreme weather events are critical to our service delivery because of our reliance on a
stable climate and the natural environment. Here we report on our latest progress and plans on cutting emissions
to reduce future climate change, known as climate mitigation, and how we are maintaining and improving our
resilience to climate change, known as climate adaptation.
Our business, and the communities we serve, has already
experienced the impacts of climate change, including several
record-breaking weather events that caused impacts such as
flooding, power cuts and travel disruption. Risks associated
with flooding are heightened in the North West because it is the
wettest region in the country, and this is projected to increase
with climate change. There is overwhelming evidence that we
need to prepare for more severe weather events more often, as
well as gradual trends for wetter winters, hotter drier summers
and rising sea levels. We integrate past and projected climate
data throughout our plans to ensure an effective and evolving
response. We are committed to playing our part in securing the
global goal to curb climate change to no more than 1.5oC.
In the following pages we share our greenhouse gas emissions
(GHGs) and progress towards meeting our six carbon pledges
and science-based targets (SBTs). We present our six most
sensitive climate risks and our new adaptation report. In this
section, supported with content elsewhere in this integrated
report and on our website, we include disclosures consistent
with the TCFD Recommended Disclosures all sector guidance.
Pledge 1
Reduce scope 1 & 2
emissions
↓2.2% compared to baseline
We are making good progress towards our science-
based target to reduce scope 1 and 2 emissions by
42 per cent from our baseline by 2030.
2021/22: 135,936 tCO₂e
2019/20: 138,961 tCO₂e (baseline year)
Pledge 2
100% of electricity
used from renewable sources
We achieved this pledge
from October 2021
From October 2021 the electricity we purchased was
from guaranteed renewable sources. In addition, we
generated a record 210 GWh of renewable energy
in 2021/22, equivalent to 26 per cent of our total
electricity consumption.
Pledge 4
1,000 hectares of peatland
restoration by 2030
Restoration activity
well underway
We have restoration projects across the North West
at different stages of maturity. As well as continuing
our site work to completion, we aim to become an
early pioneer in applying the Peatland Code at scale to
independently verify the carbon benefits.
Pledge 5
Create 550 hectares
of woodland by 2030
9 hectares planted
and validated to the Woodland
Carbon Code
Planting in 2021 was postponed due to weather and
tree disease. The remaining 541 hectares have been
planned and the funding identified.
Transparency and disclosures
We have a long track record of public carbon and climate
change disclosures having estimated and reported our carbon
footprint since 2006 and participated in CDP’s Climate Change
Programme for 12 years. Our reporting is fully compliant with
UK Government Environmental reporting guidelines and applies
international best practice such as Greenhouse Gas Protocol
Corporate Accounting and Reporting Standards (2015). The
Science Based Targets initiative (SBTi) assessed and verified our
four science-based targets in July 2021 and commended our
ambitious 1.50C aligned scope 1 and 2 target.
We confirm that our annual report includes all climate-related
financial disclosures required to be consistent with the TCFD
recommendations and recommended disclosures and is in
line with the current Listing Rules requirements (as referred
to in Listing Rule 9.8.6R(8)). Corporate Citizenship, a leading
sustainability consultancy, has reviewed this disclosure
and provided an ISAE assurance against the Principles of
Effective Disclosure to ensure that consistency with TCFD
recommendations including the implementation guidance
published in the 2021 Annex.
86
unitedutilities.com/corporate
Our approach to climate change
Task Force on Climate-related Financial Disclosures (TCFD)
Climate change and extreme weather events are critical to our service delivery because of our reliance on a
stable climate and the natural environment. Here we report on our latest progress and plans on cutting emissions
to reduce future climate change, known as climate mitigation, and how we are maintaining and improving our
resilience to climate change, known as climate adaptation.
Our business, and the communities we serve, has already
response. We are committed to playing our part in securing the
experienced the impacts of climate change, including several
global goal to curb climate change to no more than 1.5oC.
record-breaking weather events that caused impacts such as
flooding, power cuts and travel disruption. Risks associated
with flooding are heightened in the North West because it is the
wettest region in the country, and this is projected to increase
with climate change. There is overwhelming evidence that we
need to prepare for more severe weather events more often, as
well as gradual trends for wetter winters, hotter drier summers
and rising sea levels. We integrate past and projected climate
data throughout our plans to ensure an effective and evolving
In the following pages we share our greenhouse gas emissions
(GHGs) and progress towards meeting our six carbon pledges
and science-based targets (SBTs). We present our six most
sensitive climate risks and our new adaptation report. In this
section, supported with content elsewhere in this integrated
report and on our website, we include disclosures consistent
with the TCFD Recommended Disclosures all sector guidance.
Pledge 1
Reduce scope 1 & 2
emissions
↓2.2% compared to baseline
We are making good progress towards our science-
based target to reduce scope 1 and 2 emissions by
42 per cent from our baseline by 2030.
2021/22: 135,936 tCO₂e
2019/20: 138,961 tCO₂e (baseline year)
Pledge 2
100% of electricity
used from renewable sources
We achieved this pledge
from October 2021
From October 2021 the electricity we purchased was
from guaranteed renewable sources. In addition, we
generated a record 210 GWh of renewable energy
in 2021/22, equivalent to 26 per cent of our total
electricity consumption.
Pledge 4
1,000 hectares of peatland
restoration by 2030
Restoration activity
well underway
We have restoration projects across the North West
at different stages of maturity. As well as continuing
our site work to completion, we aim to become an
early pioneer in applying the Peatland Code at scale to
independently verify the carbon benefits.
Pledge 5
Create 550 hectares
of woodland by 2030
9 hectares planted
and validated to the Woodland
Carbon Code
Planting in 2021 was postponed due to weather and
tree disease. The remaining 541 hectares have been
planned and the funding identified.
Where to find our TCFD recommended disclosures
Governance
Pages Topic
Risk management
Pages Topic
Board’s oversight of climate-related
risks and opportunities.
88
120
TCFD governance
Governance structure
Processes for identifying and assessing
climate-related risks.
89–90
100–109
TCFD risk management
Our risk management
Management’s role in assessing and
managing climate-related risks and
opportunities.
Strategy
Pages Topic
Climate-related risks and opportunities
identified over the short, medium, and
long term.
Impact of climate-related risks and
opportunities on our businesses,
strategy, and financial planning.
Resilience of our strategies, taking
into consideration different climate-
related scenarios, including a 2°C or
lower scenario.
24–25
34
46–49
86–87
90
91–93,
94
100–109
Creating value
Our approach to materiality
Business planning horizons
Pledges and targets
Climate sensitive risks
TCFD strategy
TCFD metrics and targets
Our risk management
Processes for managing climate-
related risks.
How processes identifying, assessing,
and managing climate-related risks
are integrated into the organization’s
overall risk management
Metrics and targets
Pages Topic
Metrics used to assess climate-related
risks and opportunities in line with our
strategy and risk management processes.
Scope 1, Scope 2, and Scope 3 GHG
emissions, and related risks.
52–83
86–87
94
95–97
161–191
Our performance
Pledge progress
TCFD metrics and targets
Energy and carbon report
Remuneration
Targets used to manage climate related
risks and opportunities and performance
against targets.
Pledge 3
100% green fleet by 2028
27 fully electric vehicles (EV)
now deployed in our fleet with plans
for 200 low carbon vehicles by
31 March 2025
We have installed advanced telematics to improve
understanding of travel patterns and are trialling options
for larger vehicles. We are enabling employees to shift
to EV through changes to the company car policies and
launch of a salary sacrifice scheme ‘EVolve’.
Pledge 6
Set scope 3
science-based target
Targets verified by SBTi
Emissions from our value chain are the most
challenging to address so we are working with our
supply chain. We are exploring how to improve our
calculation methods for scope 3 emissions so that
we can consider and openly report the impact of our
management choices.
Transparency and disclosures
We have a long track record of public carbon and climate
change disclosures having estimated and reported our carbon
footprint since 2006 and participated in CDP’s Climate Change
Programme for 12 years. Our reporting is fully compliant with
We confirm that our annual report includes all climate-related
financial disclosures required to be consistent with the TCFD
recommendations and recommended disclosures and is in
line with the current Listing Rules requirements (as referred
to in Listing Rule 9.8.6R(8)). Corporate Citizenship, a leading
UK Government Environmental reporting guidelines and applies
sustainability consultancy, has reviewed this disclosure
international best practice such as Greenhouse Gas Protocol
Corporate Accounting and Reporting Standards (2015). The
Science Based Targets initiative (SBTi) assessed and verified our
and provided an ISAE assurance against the Principles of
Effective Disclosure to ensure that consistency with TCFD
recommendations including the implementation guidance
four science-based targets in July 2021 and commended our
published in the 2021 Annex.
ambitious 1.50C aligned scope 1 and 2 target.
2021 performance
CDP is known for setting the standard for companies
on their environmental leadership. In 2021 we achieved
an overall B rating, with category scores of A in targets,
governance and risk management. We are working to
improve the other categories towards achieving an overall
A list rating. We were proud to be recognized as a 2021
Supplier Engagement Leader, raising the level of climate
action across our value chain.
86
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Stock Code: UU.
Examples of our activities to
respond to climate change
Haweswater Aqueduct Resilience
Programme (HARP)
The Haweswater Aqueduct plays an important
role in moving large volumes of water from the
Lake District to supply Greater Manchester.
The aqueduct was originally completed in 1950
and since 2005 we have been planning how to
secure its continued and long-term resilience.
Following extensive planning and stakeholder
engagement we are ready to start delivery of
a solution designed to meet future demand
whilst maintaining a gravity-fed, low carbon
water supply. The proposed tunnelling solution
has been assessed as having one of the lowest
environmental and carbon impacts of all options
considered, with further opportunities identified
to recycle materials to local sites thus reducing
impacts from vehicle movements.
Surface water separation –
Blackpool south
We have invested over £30 million to address
the combined challenges of climate change, an
ageing Victorian sewer network, and increasing
urbanisation in Blackpool.
The primary objective of this project was to
separate surface water from the combined
sewer system. New infrastructure was
constructed, including a storm water
interception tank, pumping stations, and a new
sea outfall to provide a sustainable discharge
point for surface waters. This will prevent over
800,000m3 of surface water from entering the
combined sewer system during wet weather. By
diverting the surface water away, the flooding
risks posed by storms due to the resulting
excess volume of wastewater have been
significantly reduced.
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Our approach to climate change
Task Force on Climate-related Financial Disclosures
Board oversight of climate-
related risk and opportunities
2021 saw increased global attention
on the climate change emergency
culminating at the COP26 climate
summit in Glasgow. As board
members, our Chief Executive
Officer and Chief Financial Officer
both show personal leadership
for the impact of climate change
on our capacity and capability
to deliver our services. Climate
change-related matters have always
been of interest to the corporate
responsibility committee in its role
to scrutinise environmental topics
and initiatives. This year, climate
change matters have also been
discussed by the audit committee
(review of carbon commitments
risk) and remuneration committee
(linking long-term incentive
outcomes to the delivery of carbon
pledges).
Management role
CEO Steve Mogford has ultimate
responsibility for the group’s
preparedness for adapting to
climate change and driving our
mitigation strategy. CFO Phil Aspin
has executive responsibility for risk
management and is supported in
this role by the head of audit and
risk and the corporate risk manager.
Along with the executive team, they
are tasked with managing the risks
and mitigating actions, for example
by ensuring the company has the
necessary financial resources and
skilled people are in place to achieve
its climate-related objectives.
Our climate change mitigation
strategy starts with 'vision
and visibility', reflecting that
consideration of climate is
becoming an essential factor in
both day-to-day and strategic
decision-making and behaviours.
All of the principal management
committees have discussed
climate-related matters this year.
For example, our leadership team
has tracked the delivery of our
carbon pledges as part of the
quarterly business reviews and
initiated a trial of a low emission
fuel HVO as a result. The capital
investment committee is working
to integrate climate issues into
its decision-making processes
including a carbon reduction
incentive for capital programme
delivery partners.
In 2021/22, we held two deep-
dive workshops to build executive
team knowledge and awareness of
carbon. This resulted in a refresh
of our climate change mitigation
governance and the creation of new
director-led working groups. These
focus on maturing our decision-
making and delivering reductions of
all greenhouse gas (GHG) emissions
while developing our future climate-
related strategy and engagement.
Governance
TCFD definition
The organisation’s governance around climate-
related risks and opportunities.
Progress this year
• Oversight and scrutiny of climate change
matters by the board and its committees,
including approval of our new science-based
targets, and review of the adaptation progress
report and carbon commitments risk.
• Strengthened governance by expanding
our director-led climate change mitigation
steering group and introduced six new cross-
business working groups.
Introduced carbon measures into the executive
remuneration framework.
•
• Expanded our internal carbon and climate
change teams.
• Supplemented public disclosures through
conversations with investors and participation
in new climate-related indices and assessments.
Future focus
• Communication and engagement programme
with all stakeholder groups.
• Deploy whole-life carbon costing using an
internal carbon price aligned to government
carbon values.
Read more about the governance structure of the
board, its committees and management committees
on page 120
Read more about the board and management
committees’ responsibilities and activities on
pages 120 to 123
Introducing carbon to our
executive remuneration
Four carbon measures have been agreed by the
remuneration committee for the three-year period
ending 31 March 2025, together forming ten
per cent of the Long Term Plan (LTP) against
which stretching targets have been set. These
measures are:
• green fleet vehicles;
• woodland creation;
• peatland restoration; and
•
supply chain engagement.
Including targets within our executive
remuneration arrangements recognises the
importance of our carbon commitments. We have
designed these measures to reinforce delivery of
our ambitious carbon pledges and science-based
targets. We are working to mature these incentive
measures in future years, ultimately to align with
our science-based emission reduction targets for
2030 and beyond.
Read our remuneration report on pages 160 to 191
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Board oversight of climate-
related risk and opportunities
2021 saw increased global attention
on the climate change emergency
culminating at the COP26 climate
summit in Glasgow. As board
members, our Chief Executive
Officer and Chief Financial Officer
both show personal leadership
for the impact of climate change
on our capacity and capability
to deliver our services. Climate
change-related matters have always
been of interest to the corporate
responsibility committee in its role
to scrutinise environmental topics
and initiatives. This year, climate
change matters have also been
discussed by the audit committee
(review of carbon commitments
risk) and remuneration committee
(linking long-term incentive
outcomes to the delivery of carbon
pledges).
Management role
CEO Steve Mogford has ultimate
responsibility for the group’s
preparedness for adapting to
climate change and driving our
mitigation strategy. CFO Phil Aspin
has executive responsibility for risk
management and is supported in
this role by the head of audit and
risk and the corporate risk manager.
Along with the executive team, they
are tasked with managing the risks
and mitigating actions, for example
by ensuring the company has the
necessary financial resources and
skilled people are in place to achieve
its climate-related objectives.
Our climate change mitigation
strategy starts with 'vision
and visibility', reflecting that
consideration of climate is
becoming an essential factor in
both day-to-day and strategic
decision-making and behaviours.
All of the principal management
committees have discussed
climate-related matters this year.
For example, our leadership team
has tracked the delivery of our
carbon pledges as part of the
quarterly business reviews and
initiated a trial of a low emission
fuel HVO as a result. The capital
investment committee is working
to integrate climate issues into
its decision-making processes
including a carbon reduction
incentive for capital programme
delivery partners.
In 2021/22, we held two deep-
dive workshops to build executive
team knowledge and awareness of
carbon. This resulted in a refresh
of our climate change mitigation
governance and the creation of new
director-led working groups. These
focus on maturing our decision-
making and delivering reductions of
all greenhouse gas (GHG) emissions
while developing our future climate-
related strategy and engagement.
Our approach to climate change
Task Force on Climate-related Financial Disclosures
Governance
TCFD definition
The organisation’s governance around climate-
related risks and opportunities.
Progress this year
• Oversight and scrutiny of climate change
matters by the board and its committees,
including approval of our new science-based
targets, and review of the adaptation progress
report and carbon commitments risk.
• Strengthened governance by expanding
our director-led climate change mitigation
steering group and introduced six new cross-
business working groups.
•
Introduced carbon measures into the executive
remuneration framework.
• Expanded our internal carbon and climate
change teams.
• Supplemented public disclosures through
conversations with investors and participation
in new climate-related indices and assessments.
Future focus
• Communication and engagement programme
with all stakeholder groups.
• Deploy whole-life carbon costing using an
internal carbon price aligned to government
carbon values.
Read more about the governance structure of the
board, its committees and management committees
on page 120
Read more about the board and management
committees’ responsibilities and activities on
pages 120 to 123
Introducing carbon to our
executive remuneration
Four carbon measures have been agreed by the
remuneration committee for the three-year period
ending 31 March 2025, together forming ten
per cent of the Long Term Plan (LTP) against
which stretching targets have been set. These
measures are:
• green fleet vehicles;
• woodland creation;
• peatland restoration; and
•
supply chain engagement.
Including targets within our executive
remuneration arrangements recognises the
importance of our carbon commitments. We have
designed these measures to reinforce delivery of
our ambitious carbon pledges and science-based
targets. We are working to mature these incentive
measures in future years, ultimately to align with
our science-based emission reduction targets for
2030 and beyond.
Read our remuneration report on pages 160 to 191
Risk management
TCFD definition
How the organisation identifies, assesses and
manages climate-related risks.
Progress this year
• Published our third adaptation report,
including the outcome of a progress review of
climate-related risks across the organisation.
• Greater recognition of transitional risks in
our corporate risk management system, in
particular the investment needed to meet our
carbon commitments and the potential costs to
the business if we do not.
Future focus
• Produce our PR24 business plan with full
integration of carbon reduction and climate
resilience priorities.
• Finalise and publish our 2022 Drought Plan.
•
Improve our long-term strategic plans for
water resources and drainage, integrating
advanced climate change analysis to shape our
investment and operational approaches in the
short, medium and long term (up to 80 years).
• Embed climate change impacts into corporate
decision-making tools and processes.
Read more about how we are managing the risks
that are sensitive to climate change on page 90, with
more detail in our adaptation progress report
P l a n n i n g f o r C l i m a t e C h a n g e
A d a p t a t i o n P r o g r e s s R e p o r t 2 0 2 1
Climate risk identification and
assessment
We have a mature risk and
resilience framework for the
identification, assessment and
mitigation of risks, as described on
pages 100 to 101. This framework is
used to identify and assess climate-
related risks. We consider both
physical risks, identified as those
related to climate change impacts
on our operations or assets, and
transitional risks, which are those
associated with the necessary
transition to a low-carbon economy
(e.g. changes to policies, regulation
and legislation).
We use a variety of approaches
to assess risks, such as risk
breakdown structures and PESTLE.
We use complex modelling of
the physical impacts of climate
change in our water resources
and drainage management
planning, and incorporate Met
Office UK climate projections. In
our assessment of materiality we
recognise that some risk events
may happen multiple times so we
compare impacts over a long-term
(40-year) horizon. This accentuates
where climate change, and other
demographic changes, influence
the frequency of events as well as
the consequences.
We have found that horizon
scanning for industry research
and emerging legal and regulatory
changes are particularly useful
when considering transitional
risks. In our revision of the
carbon commitments risk, we
incorporated the updated carbon
values provided by the department
for Business, Energy and Industrial
strategy (BEIS). Applying these
values resulted in an escalation
of the risk to the executive team
and board who re-evaluated our
response to ensure we continue
to effectively manage the risk.
Incorporating longer-term climate
change impacts explicitly in
our corporate risk framework
has raised the profile of climate
change, allowing the board
to consider our appetite and
capacity to mitigate and control
the risks from within existing risk
management processes and with
the same thresholds for materiality.
Managing climate-
related risks
By recognising the causes and
consequences, and assessing
the likelihood and the severity
of impact (both financial and
reputational) should the event
occur, we are able to prioritise
climate-related risks and take
proactive and early action to
reduce the frequency and severity.
As climate change is a common
causal factor for our principal
risks (see pages 104 to 105), a
review of all event-based risks
in our business risk profile was
undertaken to assess their
sensitivity to climate change. The
most sensitive risks are outlined
on page 90 and more details,
including discussion and examples
of activities to mitigate and control
for these risks, can be found in our
latest adaptation progress report.
Organisational resilience to
climate change
In preparing each of our three
adaptation progress reports,
we assessed the organisation’s
resilience to specific outcomes
of climate change, such as
hotter, drier summers and more
extreme weather events. We
identified over 90 risks that could
impact a single business area,
for instance wastewater, but we
also noted business-wide risks,
interdependencies and transitional
risks. The outcome of the latest
assessment was 79 new or existing
mitigating actions listed in our
adaptation report along with an
update on what has been done to
manage the risk to date.
We are maturing our understanding
of risk and uncertainty to build
and maintain long-term resilience
across the corporate, financial
and operational structures of the
group. Looking ahead, we will
explore how innovation can help
us to learn more about the profile
of risk events, their causes and
consequences, and to identify
opportunities to improve our
capacity and capability. This
will help us to identify where
climate risks remain uncertain or
where existing controls might be
inadequate to manage the risk in
the long term. This will help us to
be better prepared by prioritising
issues.
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Our adaptation progress reports can be viewed
on our website at unitedutilities.com/corporate/
responsibility/environment/climate-change/
climate-change-adaptation
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89
Our approach to climate change
Task Force on Climate-related Financial Disclosures
Our risks most sensitive to climate change
Last year, we presented the outcome of a special risk assessment on the sensitivity of all our event-based risks to climate change. We
have updated this assessment through our corporate risk process and the results are shown below. Likelihood and impact are based
on the Met Office climate projections using the most likely global emissions scenario known as RCP 6.0, in which emissions peak
around 2080 and average temperatures will have risen to between 3 and 3.5oC by 2100.
Risk categorisation
Chronic physical risk – changing trends in weather patterns, such as rising
temperatures, sea level and rainfall.
Acute physical risk – chance of severe weather events, such as storms, heat
waves and floods.
* One of the most significant event-based group risks (see pages 106 to 107).
Control effectiveness
Controls are the activities we undertake to
reduce risk or realise an opportunity.
Largely insufficient to mitigate risk
Somewhat sufficient
Mostly sufficient
Water sufficiency event
Prolonged dry periods can cause supply
challenges. Warmer temperatures intensify
these pressures because of increased water
usage and evapo-transpiration.
Controls
• Reduce leakage.
•
•
Support customers to use less water.
Install more meters in domestic
properties.
• Develop new sources of water,
•
•
particularly boreholes.
Long-term water resources
management planning.
Facilitate water trading between the
North West and other regions of the UK.
Failure of wastewater network
(sewer flooding)*
More frequent and intense storms can
overload the wastewater network and lead to
severe sewer flooding. Urbanisation makes this
worse due to quick run-off from hard surfaces.
Controls
•
Implement and encourage ‘slow the
flow’ and sustainable drainage solutions.
Support customers to use sewers
responsibly.
Increase sewer capacity and build storm
water holding tanks.
•
•
• Use technology to monitor and better
control flows in the sewer system.
Install flood protection devices to at-risk
properties.
•
Land management*
Deterioration in land quality due to climate
change has both direct and indirect impacts.
Hotter, drier summers lead to fire, flood,
subsidence and landslip events which in
turn have associated health, safety and
environmental impacts.
Controls
• Catchment Systems Thinking and
proactive land management, including
nature-based solutions.
• Deliver net gain in biodiversity from our
construction projects.
• Directly restore peatland and woodland.
• Work in partnership with farmers,
regulators and others to improve upland
watercourses.
Likelihood (%)
Impact (NPV £m)
Likelihood (%)
Impact (NPV £m)
Likelihood (%)
Impact (NPV £m)
2022
£174m
2022
£198m
2022
£31m
2050
£232m
2050
£262m
2050
£76m
2100
£464m
2100
£381m
2100
£153m
0
200
300
400
500
0
200
300
400
500
0
200
300
400
500
Failure to adequately treat
wastewater
Failure of above-ground water and
wastewater assets (flooding)
Recycling biosolids to
agriculture*
Extremely heavy rainfall, which is projected
to happen more often, can exceed our
wastewater treatment works capacity and
result in use of overflows to prevent flooding
of assets, streets and homes.
Controls
•
Investment to meet legislated
environment and treatment capacity
requirements.
•
Inclusion of climate change growth
parameters in long-term adaptive plans.
• Controls for failure of wastewater
network will support this risk.
Average winter rainfall is projected to rise,
increasing the frequency of extreme events
where operational sites are flooded from
sea, river or surface water sources.
Controls
•
Install permanent flood defences at
most flood-prone sites.
•
•
•
Improve flood forecasting capabilities.
Build better network connectivity to
maintain water supplies during floods.
Invest in quick recovery once flooding
subsides.
Likelihood (%)
Impact (NPV £m)
Likelihood (%)
Impact (NPV £m)
2022
£60m
2050
£84m
2100
£96m
2022
£16m
2050
£24m
2100
£30m
0
200
300
400
500
0
200
300
400
500
Water logging resulting from more
persistent rainfall will limit options for
recycling biosolids to land for a greater
part of the year. Uncovered sludge stores
and stockpiles will be more vulnerable in
persistent wet, winter weather, increasing
the risk of environmental pollution from
run-off.
We are currently updating our assessment
of this risk following recently proposed
legislative changes included within the
Farming Rules for Water. We expect this
will significantly restrict the window
of permitted recycling of biosolids to
agriculture, and therefore exceed the
climate change impact we have previously
assessed.
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Our approach to climate change
Task Force on Climate-related Financial Disclosures
Our risks most sensitive to climate change
Last year, we presented the outcome of a special risk assessment on the sensitivity of all our event-based risks to climate change. We
have updated this assessment through our corporate risk process and the results are shown below. Likelihood and impact are based
on the Met Office climate projections using the most likely global emissions scenario known as RCP 6.0, in which emissions peak
around 2080 and average temperatures will have risen to between 3 and 3.5oC by 2100.
Risk categorisation
Chronic physical risk – changing trends in weather patterns, such as rising
temperatures, sea level and rainfall.
Acute physical risk – chance of severe weather events, such as storms, heat
waves and floods.
* One of the most significant event-based group risks (see pages 106 to 107).
Control effectiveness
Controls are the activities we undertake to
reduce risk or realise an opportunity.
Largely insufficient to mitigate risk
Somewhat sufficient
Mostly sufficient
Water sufficiency event
Prolonged dry periods can cause supply
challenges. Warmer temperatures intensify
these pressures because of increased water
usage and evapo-transpiration.
Controls
• Reduce leakage.
•
•
Support customers to use less water.
Install more meters in domestic
properties.
• Develop new sources of water,
particularly boreholes.
•
Long-term water resources
management planning.
•
Facilitate water trading between the
North West and other regions of the UK.
Failure of wastewater network
(sewer flooding)*
More frequent and intense storms can
overload the wastewater network and lead to
severe sewer flooding. Urbanisation makes this
worse due to quick run-off from hard surfaces.
Controls
•
Implement and encourage ‘slow the
flow’ and sustainable drainage solutions.
•
Support customers to use sewers
responsibly.
Land management*
Deterioration in land quality due to climate
change has both direct and indirect impacts.
Hotter, drier summers lead to fire, flood,
subsidence and landslip events which in
turn have associated health, safety and
environmental impacts.
Controls
• Catchment Systems Thinking and
proactive land management, including
nature-based solutions.
•
Increase sewer capacity and build storm
• Deliver net gain in biodiversity from our
water holding tanks.
construction projects.
• Use technology to monitor and better
control flows in the sewer system.
•
Install flood protection devices to at-risk
properties.
• Directly restore peatland and woodland.
• Work in partnership with farmers,
regulators and others to improve upland
watercourses.
Likelihood (%)
Impact (NPV £m)
Likelihood (%)
Impact (NPV £m)
Likelihood (%)
Impact (NPV £m)
2022
£174m
2022
£198m
2022
£31m
2050
£232m
2050
£262m
2050
£76m
2100
£464m
2100
£381m
2100
£153m
0
200
300
400
500
0
200
300
400
500
0
200
300
400
500
Failure to adequately treat
Failure of above-ground water and
Recycling biosolids to
wastewater
wastewater assets (flooding)
agriculture*
Extremely heavy rainfall, which is projected
Average winter rainfall is projected to rise,
Water logging resulting from more
to happen more often, can exceed our
increasing the frequency of extreme events
persistent rainfall will limit options for
wastewater treatment works capacity and
where operational sites are flooded from
recycling biosolids to land for a greater
result in use of overflows to prevent flooding
sea, river or surface water sources.
part of the year. Uncovered sludge stores
•
Investment to meet legislated
most flood-prone sites.
of assets, streets and homes.
Controls
environment and treatment capacity
requirements.
•
Inclusion of climate change growth
parameters in long-term adaptive plans.
• Controls for failure of wastewater
network will support this risk.
Controls
•
Install permanent flood defences at
•
•
Improve flood forecasting capabilities.
Build better network connectivity to
maintain water supplies during floods.
•
Invest in quick recovery once flooding
subsides.
Likelihood (%)
Impact (NPV £m)
Likelihood (%)
Impact (NPV £m)
2022
£60m
2050
£84m
2100
£96m
2022
£16m
2050
£24m
2100
£30m
0
200
300
400
500
0
200
300
400
500
and stockpiles will be more vulnerable in
persistent wet, winter weather, increasing
the risk of environmental pollution from
run-off.
We are currently updating our assessment
of this risk following recently proposed
legislative changes included within the
Farming Rules for Water. We expect this
will significantly restrict the window
of permitted recycling of biosolids to
agriculture, and therefore exceed the
climate change impact we have previously
assessed.
Strategy
TCFD definition
How climate-related risks and opportunities
impact the organisation’s businesses, strategy and
financial planning.
Progress this year
• Built relationships with key suppliers to reduce
environmental impact by sharing best practice
and collaborating on how to reduce GHGs.
• Further developed our multi-capital approach
to enhance decision-making processes,
integrating both GHG impact and attributes of
climate resilience.
•
Implemented climate change resilience plans
(both physical and transitional) across AMP7,
incorporating natural capital solutions.
Future focus
• Further develop our mitigation and adaptation
strategies and delivery plans.
•
Include low carbon and climate adjustable
approaches in our PR24 business plan.
• Assess and limit the carbon impact of our PR24
business plan.
Read more about how our climate-related risks,
opportunities and commitments are shaping our
strategy and financial planning on pages 91 to 93
I T Y
D VISIB I L
Demonstrate
integrity and
leadership in
carbon reporting
and disclosure
N
A
N
O
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S
I
V
Verified
science-based
targets across
all 3 scopes
A M B I T I ON AND CO
M
M
I
T
M
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N
T
We will lower
our greenhouse gas
emissions in line
with the expectations
for a leading UK water
and wastewater
company
O
M
E
D
T I N G A C T ION
A
N S T R
Consistent and
prolonged reduction
of our environmental
impacts through delivery
of transformational
strategies and
culture change
Long-term
net zero
ambition
B E YOND H
E
R
E
Innovation
across our
processes,
technology,
culture
A
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Our climate change mitigation strategy
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Stock Code: UU.
weather in the North West.
There are four main pathways
used for climate modelling and
research, each describing climate
futures related to the volume of
greenhouse gases emitted. For
our climate sensitivity assessment
we chose the Met Office climate
projections for the representative
concentration pathway, RCP 6.0,
which has an emissions peak
occurring in 2080 and an expected
3.0–3.5oC increase in global mean
temperatures from pre-industrial
levels.
Impact of climate-related
risks and opportunities on
our business strategy and
planning
We have taken a twin track
approach to addressing climate
change in our business strategy
and planning (see page 93). We
account for the costs and benefits,
of both mitigation and adaptation
and in this way manage both
physical and transitional climate
risks as we deliver our services in a
sustainable and resilient way.
Adapting to physical risks
All six of the risks most sensitive
to climate change are physical
risks, meaning they are disruptive
or destructive to our operations
or assets. This means there
are tangible controls that can
be put in place to improve our
resistance to weather events,
enhance our response and
recovery preparations and realise
opportunities.
We are applying a systems thinking
approach which recognises the
complex interdependencies
within our business functions
and externally across society.
This means that interventions to
address one risk have multiple
benefits. For instance, sustainable
drainage systems (SuDS) to slow
down or divert rainwater run-off
both reduce the risk of sewer
flooding and optimise wastewater
treatment capacity. Green
infrastructure solutions such as
SuDS provide an opportunity to
deliver wider social value in the
community and local environment.
Planning horizons
Our assets typically have long,
even very long, lifespans so we are
vulnerable to physical climate risks
over the long term, and we are
already experiencing the impacts
of climate change in the North
West. We undertake planning for
long (25+ years), medium (5–10
years), and short-term (one year)
horizons, enabling us to account
for external drivers including
climate change, while continuing
to fulfil our purpose in a resilient
and adaptable way. Our planning
horizons are further described on
pages 48 to 49.
Short-term climate issues
Extreme weather events such as
periods of hot and dry weather,
cold snaps and heavy rain events
impact our ability to deliver our
services. Climate change is already
increasing the frequency of these
events (see page 93), exacerbating
the impact of existing risks such as
sewer flooding, asset flooding and
asset deterioration as can be seen
in the current top ten event-based
risks shown on pages 106 to 107.
The North West has felt the
significant damage caused by
numerous extreme storms over
recent years. The region has 28
per cent more rainfall than the
average for England and Wales
and climate change will further
increase the likelihood and severity
of intense storms. There is also a
significantly higher proportion of
combined sewers so, together, this
means more pressure on sewerage
and treatment infrastructure, and
relatively more risk from sewer
flooding and/or pollution from
storm overflows. Managing the risk
of flooding is a priority for us and
other agencies in the North West.
Medium and long-term impact of
climate change
Predicting the effects of climate
change is complex, with greater
uncertainty about how our
infrastructure will respond to the
challenges presented by both
climate and demographic changes.
We considered the implications
of climate change to our business
risk profile to ascertain which
risks were sensitive to climate
change in that climate change
would increase their likelihood or
severity. To quantify the risk we
used the highly respected and
relevant Met Office UK Climate
Projections 2018 (UKCP18) for
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Task Force on Climate-related Financial Disclosures
Strategies for a changing climate
Alongside our focus to address the climate-related
risks to our service delivery, we recognise the critical
need to secure a stable climate and minimise the
need for adaptation over the long term. We are part
of the global leadership community that is working
to encourage everyone to contribute to achieving the
global goal to curb emissions.
In response, our climate change mitigation strategy has
four pillars (see page 91). Our focus this year has been
to consolidate our ambition and commitments and to
enhance the visibility and understanding of climate
impacts both within the organisation and to our
external stakeholders. We were proud to be the first
UK water company to have its targets verified by the
Science Based Targets initiative (SBTi) and used this to
drive communication and engagement. We held deep-
dive sessions with the executive team, developed and
launched an employee e-learning module, and had net
zero as a theme in our latest Innovation Lab, in which
we challenge and collaborate with new suppliers.
Climate change was a topic in our CEO graduate
challenge. A team of graduates focused on helping
mature plans towards a net zero future by developing
a tool to estimate process emissions on a site-by-site
basis, promoting our carbon pledges to employees
through a social media campaign, and compiling a
database of over 200 potential emission reduction
opportunities that we are now exploring as part of our
mitigation delivery plans.
Resilience of our strategies
Weather is fundamental to how our water, wastewater
and bioresources operations function so it is critical we
make our assets, systems and strategies climate-ready.
More frequent extreme weather events increase the
risk of cascade impacts. Multiple different extreme
weather events can occur in a single short time frame,
such as storms Dudley, Eunice and Franklin in February
2022. Our ability to recognise the compound physical
impacts to our system, and have various recovery
tactics, is increasingly vital in effective climate change
adaptation.
Our public Water Resources Management Plan
(WRMP) and Drainage and Wastewater Management
Plan (DWMP) are examples of where adaptive
planning, incorporating climate change scenarios and
advanced modelling, are used to shape our plans for
the long term (25+ years) whilst staying aligned with
our short-term needs. In these plans we describe how
we have used complex models to test how resilient our
services would be against a range of possible future
climate change and demand scenarios (population
growth and movement, economic trends and patterns
of water use). Understanding these impacts allows
us to adapt our plans to improve performance and
resilience across key topic areas such as water supply,
leakage, sewer flooding and pollution. For example,
we have decided to invest to ensure certain drought
options are always available, minimising the time
it takes to bring them online during dry weather
conditions. This will enable us to react more quickly
and make supplies more resilient during dry weather.
Together with reducing demand through leakage and
water efficiency, this has reduced the likelihood of
requiring drought permits and temporary use bans.
As well as targeted scenario analysis in WRMP
and DWMP, we have developed three company-
wide alternative scenarios for 2050, incorporating
combinations of key factors that are both highly
relevant and uncertain. These scenarios, named
‘climate chaos’, ‘green guardianship’ and ‘public
purpose’, have associated metrics to define possible
futures for water and wastewater services in the North
West. The scenarios recognise climate change as one
of the most critical factors shaping future services
and use RCPs 2.6, 4.5 and 8.5 (GHG concentration
pathways adopted by the Intergovernmental Panel
for Climate Change) to describe how well climate
change has been mitigated by society in each case.
These different scenarios have provided a simple
way to understand the interaction of multiple factors
so we can enhance resilience, help manage future
uncertainty and shape long-term decisions.
Note: The forward-looking scenario analyses above reflect
uncertainties about the timing and magnitude of climate
change in specific contexts and efforts to mitigate and adapt
to climate change, which are without historical precedent.
Scenarios are hypothetical constructs and are not intended or
designed to represent a full description of the future or deliver
precise outcomes; they are not forecasts or predictions, nor
are they sensitivity analyses.
92
unitedutilities.com/corporate
Twin track approach to climate change
We have been managing adaptation and mitigation for many years, aligning our approach to become
more efficient and effective in our response. Our twin track approach to climate change is central to
our purpose to provide great water and more for the North West.
Adaptation
The climate of the North West
will be significantly different in
2050, with further climate change
now inevitable in response to past
emissions and global activity on
a pathway for a 2 to 4oC rise in
average global temperature. We
are working to secure resilient
services by taking a flexible
planning approach that remains
agile to changing customer
and legislative expectations,
the changing climate we see in
practice, and the latest climate
science, called adaptive planning.
n
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a
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a
d
A
Our approach to climate change
Task Force on Climate-related Financial Disclosures
Strategies for a changing climate
Our public Water Resources Management Plan
Alongside our focus to address the climate-related
(WRMP) and Drainage and Wastewater Management
risks to our service delivery, we recognise the critical
Plan (DWMP) are examples of where adaptive
need to secure a stable climate and minimise the
need for adaptation over the long term. We are part
of the global leadership community that is working
to encourage everyone to contribute to achieving the
global goal to curb emissions.
In response, our climate change mitigation strategy has
four pillars (see page 91). Our focus this year has been
to consolidate our ambition and commitments and to
enhance the visibility and understanding of climate
impacts both within the organisation and to our
external stakeholders. We were proud to be the first
UK water company to have its targets verified by the
Science Based Targets initiative (SBTi) and used this to
drive communication and engagement. We held deep-
dive sessions with the executive team, developed and
launched an employee e-learning module, and had net
zero as a theme in our latest Innovation Lab, in which
we challenge and collaborate with new suppliers.
Climate change was a topic in our CEO graduate
challenge. A team of graduates focused on helping
mature plans towards a net zero future by developing
a tool to estimate process emissions on a site-by-site
basis, promoting our carbon pledges to employees
through a social media campaign, and compiling a
database of over 200 potential emission reduction
opportunities that we are now exploring as part of our
mitigation delivery plans.
Resilience of our strategies
Weather is fundamental to how our water, wastewater
and bioresources operations function so it is critical we
make our assets, systems and strategies climate-ready.
More frequent extreme weather events increase the
risk of cascade impacts. Multiple different extreme
weather events can occur in a single short time frame,
such as storms Dudley, Eunice and Franklin in February
2022. Our ability to recognise the compound physical
impacts to our system, and have various recovery
tactics, is increasingly vital in effective climate change
adaptation.
planning, incorporating climate change scenarios and
advanced modelling, are used to shape our plans for
the long term (25+ years) whilst staying aligned with
our short-term needs. In these plans we describe how
we have used complex models to test how resilient our
services would be against a range of possible future
climate change and demand scenarios (population
growth and movement, economic trends and patterns
of water use). Understanding these impacts allows
us to adapt our plans to improve performance and
resilience across key topic areas such as water supply,
leakage, sewer flooding and pollution. For example,
we have decided to invest to ensure certain drought
options are always available, minimising the time
it takes to bring them online during dry weather
conditions. This will enable us to react more quickly
and make supplies more resilient during dry weather.
Together with reducing demand through leakage and
water efficiency, this has reduced the likelihood of
requiring drought permits and temporary use bans.
As well as targeted scenario analysis in WRMP
and DWMP, we have developed three company-
wide alternative scenarios for 2050, incorporating
combinations of key factors that are both highly
relevant and uncertain. These scenarios, named
‘climate chaos’, ‘green guardianship’ and ‘public
purpose’, have associated metrics to define possible
futures for water and wastewater services in the North
West. The scenarios recognise climate change as one
of the most critical factors shaping future services
and use RCPs 2.6, 4.5 and 8.5 (GHG concentration
pathways adopted by the Intergovernmental Panel
for Climate Change) to describe how well climate
change has been mitigated by society in each case.
These different scenarios have provided a simple
way to understand the interaction of multiple factors
so we can enhance resilience, help manage future
uncertainty and shape long-term decisions.
Note: The forward-looking scenario analyses above reflect
uncertainties about the timing and magnitude of climate
change in specific contexts and efforts to mitigate and adapt
to climate change, which are without historical precedent.
Scenarios are hypothetical constructs and are not intended or
designed to represent a full description of the future or deliver
precise outcomes; they are not forecasts or predictions, nor
are they sensitivity analyses.
2022 Latest climate change data
(UKCP18) incorporated into long-
term water resource planning
and adaptive pathways
2021 Third climate change
adaptation report published
2020 Risk and resilience review
of wastewater asset base to
climate change effects to inform
long term adaptive planning
2016 Triggered by storms
Desmond and Eva – flood risk
reduction strategy to reduce
risk at key vulnerable sites and
updated asset standards to be
more flood resilient
2005–15 Pioneered catchment
management under SCaMP,
our sustainable catchment
management programme
2004 Effects of climate change
on future water supplies
included in WRMP
Extreme weather events
2011
Hot and dry
Dry weather events occur when below average
rainfall is paired with hotter weather, for
example the notable periods of dry weather in
2018, 2020 and 2021.
92
unitedutilities.com/corporate
Stock Code: UU.
2050
2045
2040
2035
2030
2025
2020
2015
2010
2005
Mitigation
We are signatories of the UN
Race to Zero and members
of the global leadership
Business Ambition for 1.5oC
community, working to the
global goal to limit average
global warming to 1.5oC. This
is critical to the long-term
affordability and resilience
of water and wastewater
services.
2030 SBT targets for scopes 1, 2
and 3 emissions
2023 100% of annual purchased
electricity will be from
guaranteed renewable sources
2021 Our SBTs verified by the
Science Based Targets initiative
2018 Made ten-year green fleet
commitment
2014 Start of extensive
renewable energy installation
programme. Now have 70 solar,
wind and hydro installations,
including Europe’s first
commercial floating solar array
on Godley Reservoir
2010 Returned first climate
change questionnaire to CDP
2006 Began annual disclosures
of carbon emissions, strategy
and targets
M
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n
Heavy rain
Storms and prolonged wet weather can cause
flooding of our sewer network. In 2020 and 2021,
three storms contributed to a notable increase in
the overall number of sewer flooding incidents,
with 40 per cent of our incidents relating to
extreme rain occurring on just six days in 2020.
2022
Cold snaps
We have experienced significant cold snaps;
including 2010, 2011 and the ‘Beast from the
East’ in 2018.
I
S
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R
A
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E
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C
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P
O
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2
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2
2
93
Our approach to climate change
Task Force on Climate-related Financial Disclosures
Metrics and
targets
TCFD definition
The metrics and targets used to assess and
manage climate-related risks and opportunities.
Progress this year
• The first UK water company to have targets
verified by the SBTi, including for scope 3
emissions. Achieved our pledge 6.
• Delivered pledge 2: 100 per cent of electricity
purchased has been renewable since
October 2021.
• Reduced scope 1 and 2 emissions by 2.2 per
cent (gross) and 3.5 per cent (net) compared to
our baseline year 2019/20.
•
Improved data collection and tracking of fuel
use enabling targeted interventions.
Future focus
• Data improvements for scope 3 emissions with
more supplier and product-based estimates,
rather than spend-based.
• Work to validate our long-term net zero
ambition to the new SBTi Net Zero Standard.
• Use BEIS carbon values as an internal carbon
price in our planning for medium and long-term
investments, including PR24 (e.g. for 2030 we
use the low case value of £140/tCO₂e).
Read more about delivery of our six carbon pledges
on pages 86 to 87
Read more about 2021/22 greenhouse gas emissions
and performance against our SBTs on pages 96 to 97
Read more about our 2021/22 operational
performance on pages 52 to 75 and also in our annual
performance report on our website
Metrics to assess
climate-related risks
Our vulnerability to climate-related
risks is determined by two factors:
the physical and transitional
impacts we experience and the
control measures we have put
in place to manage the risks and
realise opportunities. To manage
our physical risks effectively we
must track and understand patterns
of weather, and weather events,
and learn how they can affect us
operationally. To do this we have
been working with the Met Office to
use both their short-term forecasts
and longer-term projections,
planning for up to a 4°C change in
global temperature. We monitor
factors relating to transitional
risks, including energy pricing (of
both fossil fuels and low carbon
alternatives), carbon pricing (through
purchasable credits, offsets and
certificates), and the marketplace for
the availability and cost of alternative
fuelled vehicles, batteries and for
emerging technologies to reduce
process and fugitive emissions.
Metrics to manage
climate-related risks
We manage our climate-related risks
by putting in place controls such as
those as set out on page 90 and in
Appendix A.3 of the climate change
adaptation report. The effectiveness
of these controls is seen in our
operational performance metrics.
The following metrics are recognised
as key to our resilience to a changing
climate and are reported in the
annual performance report:
SBT 1 – scope 1 and 2
Reduce scope 1 and 2
emissions by
42%
2030
66%
construction
services suppliers
by emissions have
SBTs by 2025
N e a r - t erm science-
b a s ed targets
SBT 2 – scope 2 electricity
100%
renewable
electricity
NET ZERO
BY 2050
Reduce other scope
3 emissions by
25%
2030
Long-term n e t z e r o
ambition
SBT 3 – scope 3 supplier engagement
SBT 4 – scope 3 emissions reductions
94
• External flooding incidents;
• Hydraulic external flood risk
resilience;
• Hydraulic internal flood risk
resilience;
•
Internal sewer flooding;
• Leakage;
• Per capita consumption;
• Raising customer awareness
to reduce the risk of
flooding;
• Areas of low water pressure;
• Risk of severe restrictions in
a drought;
• Risk of sewer flooding in
a storm;
• Sewer collapses;
• Unplanned outages;
• Water service resilience; and
• Water supply interruptions.
Science-based targets
We have a strong track
record of playing our part to
mitigate climate change and
have reduced scope 1 and 2
emissions by over 70 per cent
since 2005/06, largely through
our substantial investment in
renewable power generation
and green energy procurement.
Our ambition and commitments
are based on international
guidance and climate science
and we were delighted in July
2021 that our four near-term
science-based targets were
verified by the Science Based
Targets initiative (SBTi). In
October, the remainder of our
purchased electricity switched
to a renewable tariff backed by
Renewable Energy Guarantees
of Origin certificates, meaning
that in the future 100 per cent
of our purchased electricity
will be from renewable sources
enabling us to deliver on our
carbon pledge and our SBT. The
SBTi Net Zero Standard was
launched in late 2021 and we
have committed to validate our
2050 ambition to this standard
when we revise and revalidate
our near-term targets in advance
of 2025.
As well as our company-specific
science-based targets, we share
the UK water sector ambition for
key operational emissions to be
net zero from 2030. Note that
this target has a smaller scope
than SBTi and allows use of
purchased credits, using agreed
offsetting principles.
unitedutilities.com/corporate
Energy and carbon report
The Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations require us to publish this
energy and carbon report applying the 2019 UK Government Environmental Reporting Guidelines, including
the Streamlined Energy and Carbon Reporting Guidance (SECR).
We use the financial control approach so our energy and carbon accounting is aligned with the consolidated
financial statements for United Utilities Group PLC for 1 April 2021 to 31 March 2022. This includes subsidiaries
listed in section A8 on page 260.
Energy strategy
Our energy management strategy has four objectives:
• Efficient use of energy;
•
Maximising self-generation and direct supply
opportunities;
• Reducing costs (through time of use); and
•
Supply resilience to ensure we can deliver our
services.
In 2021/22, we set a record for renewable energy
generation of 210 GWh through focus on end-to-
end performance of our bioresources operations,
which produce electricity, heat and biomethane. We
completed more solar installations during the year.
Each year we serve a growing population, driving
increased energy use as we strive to achieve
environmental performance targets. We seek to
mitigate this through our energy management
programme and in recent years have maintained
consistent energy use in the face of these considerable
upward pressures.
Energy efficiency actions taken
Our approach to energy efficiency is based on
continuous improvement of:
Electricity use, purchase and self generation(1)
h
W
G
900
800
700
600
500
400
300
200
100
0
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
Generated: CHP plus gas to grid
Generated: solar, wind and hydro
Purchased: non renewable
Purchased: renewable
Total electricity used
(1)
Electricity purchased plus self generated is in excess of that used. The difference is
what was exported to the grid.
• people – optimising ways of working;
•
•
systems – improving visibility of use and analysis of
data systems; and
technology – targeted investment to remove
technological inefficiencies.
Energy use
Electricity
Natural gas
Other fuels(1)
Total energy use
Our approach to climate change
Task Force on Climate-related Financial Disclosures
Metrics and
targets
TCFD definition
The metrics and targets used to assess and
manage climate-related risks and opportunities.
Progress this year
• The first UK water company to have targets
verified by the SBTi, including for scope 3
emissions. Achieved our pledge 6.
• Delivered pledge 2: 100 per cent of electricity
purchased has been renewable since
October 2021.
• Reduced scope 1 and 2 emissions by 2.2 per
cent (gross) and 3.5 per cent (net) compared to
our baseline year 2019/20.
•
Improved data collection and tracking of fuel
use enabling targeted interventions.
Future focus
Metrics to assess
climate-related risks
Our vulnerability to climate-related
risks is determined by two factors:
the physical and transitional
impacts we experience and the
control measures we have put
in place to manage the risks and
realise opportunities. To manage
our physical risks effectively we
must track and understand patterns
of weather, and weather events,
and learn how they can affect us
operationally. To do this we have
been working with the Met Office to
use both their short-term forecasts
and longer-term projections,
planning for up to a 4°C change in
global temperature. We monitor
factors relating to transitional
risks, including energy pricing (of
both fossil fuels and low carbon
alternatives), carbon pricing (through
purchasable credits, offsets and
• Data improvements for scope 3 emissions with
certificates), and the marketplace for
more supplier and product-based estimates,
the availability and cost of alternative
rather than spend-based.
• Work to validate our long-term net zero
ambition to the new SBTi Net Zero Standard.
fuelled vehicles, batteries and for
emerging technologies to reduce
process and fugitive emissions.
• Use BEIS carbon values as an internal carbon
price in our planning for medium and long-term
Metrics to manage
climate-related risks
investments, including PR24 (e.g. for 2030 we
We manage our climate-related risks
use the low case value of £140/tCO₂e).
Read more about delivery of our six carbon pledges
on pages 86 to 87
Read more about 2021/22 greenhouse gas emissions
and performance against our SBTs on pages 96 to 97
Read more about our 2021/22 operational
performance on pages 52 to 75 and also in our annual
performance report on our website
by putting in place controls such as
those as set out on page 90 and in
Appendix A.3 of the climate change
adaptation report. The effectiveness
of these controls is seen in our
operational performance metrics.
The following metrics are recognised
as key to our resilience to a changing
climate and are reported in the
annual performance report:
SBT 1 – scope 1 and 2
Reduce scope 1 and 2
emissions by
42%
2030
66%
construction
services suppliers
by emissions have
SBTs by 2025
N e a r - t erm science-
b a s ed targets
SBT 2 – scope 2 electricity
100%
renewable
electricity
NET ZERO
BY 2050
Reduce other scope
3 emissions by
of 2025.
25%
2030
Long-term n e t z e r o
ambition
• External flooding incidents;
• Hydraulic external flood risk
• Hydraulic internal flood risk
resilience;
resilience;
•
Internal sewer flooding;
• Leakage;
• Per capita consumption;
• Raising customer awareness
to reduce the risk of
flooding;
• Areas of low water pressure;
• Risk of severe restrictions in
• Risk of sewer flooding in
a drought;
a storm;
• Sewer collapses;
• Unplanned outages;
• Water service resilience; and
• Water supply interruptions.
Science-based targets
We have a strong track
record of playing our part to
mitigate climate change and
have reduced scope 1 and 2
emissions by over 70 per cent
since 2005/06, largely through
our substantial investment in
renewable power generation
and green energy procurement.
Our ambition and commitments
are based on international
guidance and climate science
and we were delighted in July
2021 that our four near-term
science-based targets were
verified by the Science Based
Targets initiative (SBTi). In
October, the remainder of our
purchased electricity switched
to a renewable tariff backed by
Renewable Energy Guarantees
of Origin certificates, meaning
that in the future 100 per cent
of our purchased electricity
will be from renewable sources
enabling us to deliver on our
carbon pledge and our SBT. The
SBTi Net Zero Standard was
launched in late 2021 and we
have committed to validate our
2050 ambition to this standard
when we revise and revalidate
our near-term targets in advance
As well as our company-specific
science-based targets, we share
the UK water sector ambition for
key operational emissions to be
net zero from 2030. Note that
this target has a smaller scope
than SBTi and allows use of
purchased credits, using agreed
offsetting principles.
Our Energy Management Programme is now firmly
established and working well after activities were
restricted during COVID-19. The programme carries
out site-based workshops and develops ways of
working to optimise operations at sites and local
area and is underpinned by e-learning packages and
a comprehensive energy performance reporting and
analysis capability.
To support reporting and analysis, we have invested
over recent years to capture data from our fiscal
meters and have installed thousands of sub-meters.
The resulting data is used to identify opportunities,
assess impacts and benefits of trials and maintain good
performance. We are piloting analytics to support
pump optimisation interventions.
We have a dedicated investment programme to
implement targeted energy saving opportunities for
existing operations and we focus on ensuring efficient
outcomes from our capital programme. Examples of
invest-to-save projects include pump optimisation,
time-of-use actions and improved control of
wastewater treatment.
SBT 3 – scope 3 supplier engagement
SBT 4 – scope 3 emissions reductions
94
unitedutilities.com/corporate
Stock Code: UU.
Total renewable energy generated
209.5
205.3
190.8
Renewable energy exported
Electricity(5)
Biomethane(4)
Total renewable energy exported
23.5
15.9
39.4
22.4
14.8
37.2
18.1
14.2
32.3
(1) Other fuels includes liquid fuel purchased for processing and transport plus
business mileage in private vehicles converted to GWh using 2021 UK Government
GHG Conversion Factors for Company Reporting.
(2) Half hourly supply has been on a renewable tariff with 0g CO2e/kWh emissions
since June 2017.
(3) Non half hourly metered supplies were on a standard tariff up to the end of September
2021. The emissions were 289g CO2e/kWh in 2019/20, 178g CO2e/kWh in 2020/21 and
188g CO2e/kWh in 2020/21. Non half hourly supplies moved to a new supplier on a
0g CO2e/kWh renewable tariff on 1 October 2021.
(4) Biomethane generated and exported to grid is expressed as an electricity
equivalent.
(5) Electricity exported was generated by solar, wind and hydro.
2021/22
GWh
2020/21
GWh
2019/20
GWh
803.3
33.8
123.1
960.2
589.4
22.3
21.6
633.3
133.8
47.8
4.8
7.2
15.9
807.3
40.0
104.0
951.3
591.4
47.8
–
639.2
127.6
50.7
5.3
6.9
14.8
802.3
38.3
116.3
956.9
602.9
40.8
–
643.7
121.5
42.6
5.7
6.8
14.2
Electricity purchased
Renewable tariff – half hourly(2)
Standard tariff – non-half hourly(3)
Renewable tariff – non-half hourly(3)
Total electricity purchased
Renewable energy generated
CHP
Solar
Wind
Hydro
Biomethane(4)
I
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T
R
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T
E
G
C
R
E
P
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2
2
95
Our approach to climate change
Greenhouse gas emissions
Our carbon footprint is calculated by estimating the individual greenhouse gases that result from all United Utilities’ activities, converted
into a carbon dioxide equivalent (tCO2e). We report scope 1, 2 and all relevant scope 3 emissions. Emissions have been estimated using
the UK water industry Carbon Accounting Workbook v16 (CAW v16), the 2021 UK Government GHG conversion factors for company
reporting and CEDA (Comprehensive Environmental Data Archive) factors. Our greenhouse gas inventory has been independently
verified and certified by Toitu carbonreduce programme, as aligned to the GHG Protocol Corporate Accounting and Reporting Standard
(2015) and the international carbon reporting standard ISO 14064, Part 1:2018.
–
Scope 1
Emissions from
activities we own or
control, e.g. burning
fossil fuels, wastewater
and sludge processing.
SCOPE 1 & 2 GREENHOUSE GAS EMISSIONS
Scope 1 Direct emissions
Direct emissions from burning of fossil fuels
Process and fugitive emissions from our treatment
works – including refrigerants
Transport: company-owned or leased vehicles
2021/22
tCO2e
2020/21
tCO2e
SBT baseline
2019/20
tCO2e
19,207
17,371
15,247
96,020
16,507
131,735
4,201
134,492
4,201
134,492
135,936
266,226
-4,317
0
-10,283
n/a
-128,604
-14,600
131,619
118,429
98,569
16,634
132,574
8,507
149,030
8,507
149,030
141,082
281,604
-4,184
0
-9,725
n/a
-154,095
-13,909
136,897
129,680
96,186
15,739
127,172
11,789
164,521
11,789
164,521
138,961
291,693
-3,979
0
-9,302
n/a
-136,644
-13,281
134,982
114,202
Total scope 1
Scope 2 Energy indirect emissions
Grid electricity purchased
Total scope 2
TOTAL SCOPE 1 & 2 (GROSS)
Avoided emissions
Renewable electricity exported
Biomethane exported
Market-based(1)
Location-based(2)
Market-based
Location-based
Market-based
Location-based
Market-based(3)
Location-based
Green tariff electricity purchased Market-based
Location-based
Market-based(3)
Market-based(3)
Location-based
Total avoided emissions
TOTAL SCOPE 1 & 2 (NET)
(1) Market-based figures use emission factors specific to the actual electricity purchased. If electricity is on a
standard grid tariff they are calculated using factors from suppliers’ public fuel mix disclosures, as shown in
energy use table on page 95.
(2)
Location-based figures use average grid emissions to calculate electricity emissions and are shown in blue.
(3) Exported biomethane sold with green gas certificates so has zero avoided emissions in market based
accounts. Note in 2022 we have improved disclosure to report both location and market-based methods so
the net totals for 2019/20 and 2020/21 have been restated.
SCOPE 3 GREENHOUSE GAS EMISSIONS
Scope 3 Other indirect emissions
Category 1: Purchased goods and services(1)
Category 2: Capital goods(1)
Category 3: Fuel and energy-related emissions
Category 4: Upstream transportation and distribution
(sludge transport)
Category 5: Waste generated in operations
(including sludge disposal to land)
Category 6: Business travel (public transport, private
vehicles and hotel accommodation)
Category 7: Employee commuting and home working
TOTAL SCOPE 3
Scope 3 SBT measure (excluding category 2)
2021/22
tCO₂e
2020/21
tCO2e
SBT baseline
2019/20
tCO2e
292,946
112,498
58,948
103
271,871
95,968
42,599
1,119
213,442
128,286
45,262
3,374
25,458
26,333
27,936
1,138
1,226
3,508
4,066
495,145
382,647
4,108
443,224
347,256
4,231
426,039
297,753
Scope 2
Emissions from
purchased electricity.
Scope 3
Emissions from our
value chain, e.g. sludge
disposal, business
travel and products and
services.
96
(1)
For Category 1 and 2 we use CEDA (an EEIO (environmentally-extended input-output) inventory) to estimate
emissions. Other categories use actual activity records and UK government conversion factors.
unitedutilities.com/corporate
Our approach to climate change
Greenhouse gas emissions
Our carbon footprint is calculated by estimating the individual greenhouse gases that result from all United Utilities’ activities, converted
into a carbon dioxide equivalent (tCO2e). We report scope 1, 2 and all relevant scope 3 emissions. Emissions have been estimated using
the UK water industry Carbon Accounting Workbook v16 (CAW v16), the 2021 UK Government GHG conversion factors for company
reporting and CEDA (Comprehensive Environmental Data Archive) factors. Our greenhouse gas inventory has been independently
verified and certified by Toitu carbonreduce programme, as aligned to the GHG Protocol Corporate Accounting and Reporting Standard
–
(2015) and the international carbon reporting standard ISO 14064, Part 1:2018.
United Utilities’ greenhouse gas emissions intensity
As in previous years, we state our emissions as tonnes CO2
equivalent per £million revenue. We include scope 1 and 2
(market-based) emissions only in this measure. We also report
the regulated emissions kilograms CO2 equivalent per megalitre
treated (using the location-based method as calculated in the
CAW v16), as these are common metrics for our industry.
Scope 1 emissions
Wastewater and sludge processes
cause 73 per cent of our scope 1 emissions
as the gases released, nitrous oxide (N20)
and methane (CH4) have much greater global
warming potentials than carbon dioxide (CO2).
Our process emissions are currently
estimated as a direct function of the amount
of wastewater we treat. We are undertaking
research with other UK water companies to
better quantify these emissions from measured
values and to find ways to reduce or capture
those emissions for beneficial use.
We are investigating and trialling ways to
reduce our use of fossil fuels, including for
transport, through both efficiencies and use of
alternative fuels.
Scope 2 emissions
Our market-based scope 2 emissions have
halved this year because we switched our
remaining non-renewable purchased electricity
to a renewable tariff in October 2021. Next year
these emissions will be negligible.
Regulated emissions per megalitre water treated
Regulated emissions per megalitre sewage treated
2021/22
2020/21
2019/20
106.91
118.51
131.98
2021/22
2020/21
2019/20
144.21
152.26
168.51
Scope 1 and 2 emissions (gross) per £m revenue
Scope 1 and 2 emissions (net) per £m revenue
2021/22
2020/21
2019/20
73.0
2021/22
78.0
2020/21
74.7
2019/20
70.7
75.7
72.6
55,850
Mechanical treatment and
storage of wastewater
Sludge processing
40,034
Burning of fossil fuels
19,207
Fuels used for transport
16,507
Grid electricity purchased
4,201
Refrigerants
136
Exported renewable
electricity
Exported
biomethane
-4,317
-10,283
Carbon dioxide
Methane
Nitrous oxide
Refrigerants
R407C & HFC 134a
-20,000
0
20,000
tCO2e
40,000
60,000
Scope 3 emissions
Like most organisations, most of our scope
3 emissions are in GHG Protocol category 1
(products and services) and category 2 (capital
goods); the latter being those provided by our
construction services suppliers. We currently
calculate category 1 and 2 emissions using
records of the amount we have spent. This
provides an indicative estimate but does
not show the GHG impact of management
choices, instead fluctuating with the scale of
our investment programme. This can be seen
in our increase in reported emissions this year
compared to last. We are working internally and
with supply chain partners to enhance relevant
data and systems so that we can calculate these
emissions based on types and quantities of
materials used, thereby showing the full impact
of our management choices.
Capital goods
construction
services
112,498
Fuel and
energy
related
58,948
Upstream transportation
and distribution
(sludge transport)
103
Business travel
1,138
Employee commuting
and home working
4,066
Purchased
goods and
services
292,946
Waste generated
in operations
(including sludge
disposal to land)
25,458
96
unitedutilities.com/corporate
Stock Code: UU.
(1)
For Category 1 and 2 we use CEDA (an EEIO (environmentally-extended input-output) inventory) to estimate
emissions. Other categories use actual activity records and UK government conversion factors.
Scope 1
Emissions from
activities we own or
control, e.g. burning
fossil fuels, wastewater
and sludge processing.
SCOPE 1 & 2 GREENHOUSE GAS EMISSIONS
Scope 1 Direct emissions
Process and fugitive emissions from our treatment
works – including refrigerants
Transport: company-owned or leased vehicles
Direct emissions from burning of fossil fuels
19,207
17,371
15,247
2021/22
tCO2e
2020/21
tCO2e
SBT baseline
2019/20
tCO2e
96,020
16,507
131,735
4,201
134,492
4,201
134,492
135,936
266,226
-4,317
-10,283
0
n/a
-14,600
131,619
118,429
98,569
16,634
132,574
8,507
149,030
8,507
149,030
141,082
281,604
-4,184
0
-9,725
n/a
96,186
15,739
127,172
11,789
164,521
11,789
164,521
138,961
291,693
-3,979
0
-9,302
n/a
-13,909
136,897
129,680
-13,281
134,982
114,202
Total scope 1
Scope 2 Energy indirect emissions
Grid electricity purchased
Total scope 2
TOTAL SCOPE 1 & 2 (GROSS)
Avoided emissions
Renewable electricity exported
Biomethane exported
Total avoided emissions
TOTAL SCOPE 1 & 2 (NET)
Market-based(1)
Location-based(2)
Market-based
Location-based
Market-based
Location-based
Market-based(3)
Location-based
Market-based(3)
Market-based(3)
Location-based
Scope 2
Emissions from
purchased electricity.
Green tariff electricity purchased Market-based
Location-based
-128,604
-154,095
-136,644
(1) Market-based figures use emission factors specific to the actual electricity purchased. If electricity is on a
standard grid tariff they are calculated using factors from suppliers’ public fuel mix disclosures, as shown in
energy use table on page 95.
(2)
Location-based figures use average grid emissions to calculate electricity emissions and are shown in blue.
(3) Exported biomethane sold with green gas certificates so has zero avoided emissions in market based
accounts. Note in 2022 we have improved disclosure to report both location and market-based methods so
the net totals for 2019/20 and 2020/21 have been restated.
Scope 3
Emissions from our
value chain, e.g. sludge
disposal, business
travel and products and
services.
SCOPE 3 GREENHOUSE GAS EMISSIONS
Scope 3 Other indirect emissions
Category 1: Purchased goods and services(1)
Category 2: Capital goods(1)
Category 3: Fuel and energy-related emissions
2021/22
tCO₂e
292,946
112,498
58,948
SBT baseline
2020/21
2019/20
tCO2e
tCO2e
271,871
95,968
42,599
1,119
213,442
128,286
45,262
3,374
25,458
26,333
27,936
Category 4: Upstream transportation and distribution
103
(sludge transport)
Category 5: Waste generated in operations
(including sludge disposal to land)
Category 6: Business travel (public transport, private
1,138
1,226
3,508
vehicles and hotel accommodation)
Category 7: Employee commuting and home working
TOTAL SCOPE 3
Scope 3 SBT measure (excluding category 2)
4,066
495,145
382,647
4,108
443,224
347,256
4,231
426,039
297,753
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97
Our approach to Task Force on Nature-related
Financial Disclosures (TNFD)
Launching in 2023, the Task Force on Nature-related Financial Disclosure (TNFD) aims to provide
a risk and disclosure framework for organisations interacting with the natural environment. It will
adopt a four-pillar approach similar to that of TCFD covering governance, strategy, risk management,
metrics and targets.
Overview
We are dependent upon, and impact, the natural environment from the quality and quantity of water we abstract for treatment and
supply of drinking water, through to treated wastewater we return to rivers and biosolids we recycle to land. We are responsible for
over 56,000 hectares of water catchment land.
Given the pressures from climate change and population growth on the natural environment, we do not underestimate the
contribution we can make in restoring healthy and resilient ecosystems. We need to work collaboratively with like-minded
organisations to deliver nature-based solutions as these offer many benefits including carbon sequestration, cleaner water and
improved biodiversity. This is at the heart of our Catchment Systems Thinking Approach (CaST).
We’ve joined the TNFD forum as a contributing member to help us as we become an early adopter of TNFD reporting.
Governance
Our interactions with the natural environment are broad
and complex. Overall accountability rests with executive
management who strive to comply with the legal and regulatory
requirements as set out in our environmental policy. Matters
are regularly reviewed at the board’s corporate responsibility
committee. The environmental advisory group is a management
group with a remit to ensure the delivery of the environmental
policy commitments including nature-related strategies (e.g.
land, catchment, clean air, plastics, waste, water quality,
water resources, and natural capital). Governance for these
strategies is through cross-departmental working groups
comprised of subject matter experts and decision makers to
drive implementation. Governance around investment in nature-
related risks and opportunities is applied as part of our Internal
Control Manual.
Strategy
Protecting and enhancing the natural environment is a
key part of the ‘and more’ of our purpose. We protect
the environment through maintaining compliance and
meeting regulatory requirements. We enhance by driving
performance, adopting best asset management practices,
and investing in nature-based and other environmental
solutions. Our environmental policy is underpinned by a
framework of strategies and long term plans in response to
nature-related risks and opportunities. Some of these plans
are statutory requirements, such as the Water Resources
Management Plan, and are reviewed every five years as part
of the price review process. Our company business plan
details the delivery plans for the five years up to 2025.
Our CaST approach enables individual project decisions
to be made in the context of the catchment, or system, in
which they are situated. This encourages goals to be set
in a collaborative way, maximising the benefits that can
be achieved and delivering ecosystem resilience through
improvements to water quality, flood risk reduction, access to
green space, nature recovery, and carbon sequestration.
Read more at unitedutilities.com/corporate/
responsibility/stakeholders/catchment-systems-
thinking
Much of the land that we own is designated as Sites of
Special Scientific Interest (SSSI), which indicates the
importance of the habitat for biodiversity. Ninety-four
per cent of SSSIs on our land now meet favourable or
unfavourable recovering condition status, in part because
we pioneered the use of nature-based solutions to address
raw water quality when we started our SCaMP programme in
2005. Designated habitats include blanket bog, moorland and
heath and are home to many important species. We recognise
our role as a steward of our land and make decisions based on
the benefits and impacts our operations have on the natural
environment. The land we own is made up of different land
cover types, such as grassland and woodland.
Land cover types across our land holding
Arable
Bog
Woodland
Grassland
1%
14%
11%
48%
Mountain, moorland and heath
18%
Fresh water
Urban area
Other
6%
2%
0%
Innovation is embedded in our approach to solving
environmental challenges. By understanding and engaging
in relevant research we can integrate new technologies and
practices to drive environmental enhancements.
Risk management
Many key risks in our risk management assessments are
linked to the natural environment. The risk breakdown
structure that underpins our operational risk assessment
framework includes consequences related to biodiversity,
flooding, drought, water quality, recreational access, carbon
storage, air quality and waste. Through our longer-term
planning processes, we model a range of environmental
risks such as a one in 100-year storm or drought and take
appropriate action to include mitigation options in the plans.
Read more about our risk and resilience framework on pages
100 to 102.
98
unitedutilities.com/corporate
There is a close link between nature and climate
change with many pressures on the natural
environment becoming more acute as the climate
changes. Our climate change adaptation report
highlights key physical risks related to the natural
environment. Two of our carbon pledges – on tree
planting and peatland restoration – are intrinsically
linked to the natural environment.
In 2022, we published a discussion document jointly
with The Rivers Trust on barriers to nature-based
solutions, entitled PR24: Unlocking nature-based
solutions to deliver greater value. This identifies
some of the key risks associated with the transition
to a nature-positive economy and recommendations
for collaborative working with the Government and
others to address these barriers. We are working
with regulators, other water companies and non-
governmental organisations to take forward proposals
to address these risks.
Read more at unitedutilities.com/globalassets/
documents/pdf/pr24---unlocking-nature-based-
solutions-to-deliver-greater-value.pdf
Metrics and targets
To measure our performance we demonstrate delivery
against contributing targets from a number of statutory
requirements such as the condition of protected sites,
biodiversity net gain, environmental performance and
supporting strategies. Our long-term nature-based
targets align with government expectations such as
achieving 75 per cent favourable condition for SSSI
locations by 2042. We are committed to improving
surface, groundwater and bathing water quality in
the immediate term and beyond. We will input to the
consultation on the Environment Act water targets in
2022 as these will be an important mechanism to drive
environmental improvement and meet the objectives
for the water environment in the Government’s 25-year
environment plan.
We are the only water company to set a natural
capital outcome delivery incentive in our business
plan for 2020–25. This is measured by demonstrating
additional value created through ecosystem services
for customers and the environment. We achieve this
by implementing nature-based solutions where they
offer best value compared against a hard-engineered
solution (e.g. to improve water quality). Read more
about our environmental performance on pages
64 to 67.
We were a key contributor to the North West’s first
natural capital account developed in collaboration
with many regional organisations. By considering
this baseline value, we can benchmark the impact
of future changes to our natural assets and quantify
improvements. It is helping to understand how valuable
the region’s natural capital assets are. In 2022, we will
update our own corporate natural capital account as
part of a five-yearly review cycle and we will report on
this next year.
Next steps
In March 2022, the TNFD unveiled the first version
of its nature-related risk-management and disclosure
framework. The framework, which will be modified
over the next 18 months, is designed to align with the
International Sustainability Standards Board, which
was officially unveiled at COP26. Working with the
Taskforce we will continue to develop how we disclose
nature-related information.
Our approach to Task Force on Nature-related
Financial Disclosures (TNFD)
Launching in 2023, the Task Force on Nature-related Financial Disclosure (TNFD) aims to provide
a risk and disclosure framework for organisations interacting with the natural environment. It will
adopt a four-pillar approach similar to that of TCFD covering governance, strategy, risk management,
metrics and targets.
Overview
We are dependent upon, and impact, the natural environment from the quality and quantity of water we abstract for treatment and
supply of drinking water, through to treated wastewater we return to rivers and biosolids we recycle to land. We are responsible for
over 56,000 hectares of water catchment land.
Given the pressures from climate change and population growth on the natural environment, we do not underestimate the
contribution we can make in restoring healthy and resilient ecosystems. We need to work collaboratively with like-minded
organisations to deliver nature-based solutions as these offer many benefits including carbon sequestration, cleaner water and
improved biodiversity. This is at the heart of our Catchment Systems Thinking Approach (CaST).
We’ve joined the TNFD forum as a contributing member to help us as we become an early adopter of TNFD reporting.
Governance
Our interactions with the natural environment are broad
and complex. Overall accountability rests with executive
heath and are home to many important species. We recognise
our role as a steward of our land and make decisions based on
the benefits and impacts our operations have on the natural
management who strive to comply with the legal and regulatory
environment. The land we own is made up of different land
cover types, such as grassland and woodland.
Land cover types across our land holding
requirements as set out in our environmental policy. Matters
are regularly reviewed at the board’s corporate responsibility
committee. The environmental advisory group is a management
group with a remit to ensure the delivery of the environmental
policy commitments including nature-related strategies (e.g.
land, catchment, clean air, plastics, waste, water quality,
water resources, and natural capital). Governance for these
strategies is through cross-departmental working groups
comprised of subject matter experts and decision makers to
drive implementation. Governance around investment in nature-
related risks and opportunities is applied as part of our Internal
Control Manual.
Strategy
Protecting and enhancing the natural environment is a
key part of the ‘and more’ of our purpose. We protect
the environment through maintaining compliance and
meeting regulatory requirements. We enhance by driving
performance, adopting best asset management practices,
and investing in nature-based and other environmental
solutions. Our environmental policy is underpinned by a
framework of strategies and long term plans in response to
nature-related risks and opportunities. Some of these plans
are statutory requirements, such as the Water Resources
Management Plan, and are reviewed every five years as part
of the price review process. Our company business plan
details the delivery plans for the five years up to 2025.
Our CaST approach enables individual project decisions
to be made in the context of the catchment, or system, in
which they are situated. This encourages goals to be set
in a collaborative way, maximising the benefits that can
be achieved and delivering ecosystem resilience through
improvements to water quality, flood risk reduction, access to
green space, nature recovery, and carbon sequestration.
Read more at unitedutilities.com/corporate/
responsibility/stakeholders/catchment-systems-
thinking
Much of the land that we own is designated as Sites of
Special Scientific Interest (SSSI), which indicates the
importance of the habitat for biodiversity. Ninety-four
per cent of SSSIs on our land now meet favourable or
unfavourable recovering condition status, in part because
we pioneered the use of nature-based solutions to address
raw water quality when we started our SCaMP programme in
2005. Designated habitats include blanket bog, moorland and
Arable
Bog
Woodland
Grassland
Fresh water
Urban area
Other
1%
14%
11%
48%
6%
2%
0%
Mountain, moorland and heath
18%
Innovation is embedded in our approach to solving
environmental challenges. By understanding and engaging
in relevant research we can integrate new technologies and
practices to drive environmental enhancements.
Risk management
Many key risks in our risk management assessments are
linked to the natural environment. The risk breakdown
structure that underpins our operational risk assessment
framework includes consequences related to biodiversity,
flooding, drought, water quality, recreational access, carbon
storage, air quality and waste. Through our longer-term
planning processes, we model a range of environmental
risks such as a one in 100-year storm or drought and take
appropriate action to include mitigation options in the plans.
Read more about our risk and resilience framework on pages
100 to 102.
98
unitedutilities.com/corporate
Stock Code: UU.
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Our risk management
Our risk and resilience framework
We have a robust risk and resilience framework for the identification, assessment
and mitigation of risk.
Our approach to risk and resilience
Successful management of risks and uncertainties enables us to
deliver on our purpose to provide great water and more for the
North West, and be more resilient across our corporate, financial
and operational structures. A key objective of our approach is
to support the sustainable achievement of the strategic themes
that underpin our vision to be the best UK water and wastewater
company delivering:
•
the best service to customers;
• at the lowest sustainable cost; and
•
in a responsible manner.
Our risk and resilience framework provides the foundation for the
business to anticipate threats to delivering an effective service in
these challenging times, and to respond and recover effectively
when risks materialise. Key components of the framework include:
• an embedded group-wide risk management process, which
is aligned to ISO 31000:2018 risk management guidelines;
• a board-led approach to risk appetite, based on
strategic goals;
• a strong and well-established governance structure giving
the board oversight of the nature and extent of risks the
group faces, as well as the effectiveness of risk management
processes and controls; and
• a portfolio of policies, procedures, guidance and training to
enable consistent, group-wide participation by our people.
Continuous improvement is a key feature of the framework, which
incorporates a maturity assessment model to identify areas to
enhance. Based on risk management capabilities relative to five levels
of maturity, a recent assessment has supported the development of
a road map of improvements. This includes further enhancement
to risk appetite and tolerance, greater focus and analysis of cross-
cutting themes and improved escalation of data from operational risk
management systems.
Risk appetite and tolerance
Focused on supporting decision-making, the risk appetite and
tolerance framework consists of a package of measures. The
General Risk Appetite represents financial limits against which
event-based risks are compared at each full and half-year
assessment and reporting cycle. In parallel are a series of strategic
statements which align directly to the principal risks (see pages
104 to 105). Each statement reflects the strategic intent, strategic
theme, relevant stakeholders and governance, but fundamentally
emphasises the attitude to risk taking and control relative to four
descriptors:
• Averse: A strong opposition to accept risk within business
strategy or operational activity.
• Prudent: A reluctance to accept risk within business strategy
or operational activity, but careful acceptance within tight
boundaries.
• Moderate: Willingness to accept risk with regard to business
strategy or operational activity provided this is within
reasonable limits.
• Accepting: Willingness to accept risk with regard to
business strategy or operational activity.
As a regulated company providing essential public services none
of the principal risks have risk accepting as a strategic direction
or approach.
Underpinning each strategic statement, and currently under
development, are a series of more tangible, tactical statements
with specific levels and limits.
How we identify and assess risk
Identify &
assess
Monitor &
review
Consult &
communicate
Control &
mitigate
Record &
update
We have a number of mechanisms in place to identify risk. These
include a risk universe, cross-business horizon scanning forums,
consultation with third parties and comparison with National
Risk Registers.
Each risk is event based and is sponsored by a senior manager who
is responsible for the analysis of the corresponding causal factors,
consequences and the control effectiveness, taking account of
both the internal and external business environment. This process
quantifies the likelihood of the event occurring and the full range of
potential impacts from a minimum (best case) to a maximum (worst
case). Comparing this position against the desired target state,
in combination with the strengths, weaknesses and gaps of the
control environment, supports the decisions for further mitigation
as appropriate. This ongoing analysis culminates in the biannual
business unit risk assessment (BURA) which forms part of the
governance and reporting process (as outlined opposite) to ensure
consistency of approach and a true reflection of the risk facing the
company. It also serves to calibrate the most significant risks from a
financial and reputational context and to assess how these relate to
our risk appetite.
Governance and reporting process
The board ensures that its oversight of risk remains effective, and
in compliance with the UK Corporate Governance Code, through
a number of established reporting routes.
Twice yearly the board receives an extensive update on the risk
profile as part of the full and half-year reporting cycle. This provides
an overview of the nature and extent of risk exposure in the context
of the group’s principal risks (as detailed on pages 104 to 105), and
emphasises the most significant event-based risks (summarised
on pages 106 to 108) in both their current state relative to the risk
appetite, and target state of acceptable exposure. The board is also
advised of new and emerging risks (see page 109). In addition to the
biannual risk reporting, specific risk topics are reported to the board
to support decision-making. The board is, therefore, able to:
• make decisions on the level of risk it is prepared to manage
relative to risk appetite and tolerance in order to deliver on
the group’s strategy;
• engage with the business to ensure appropriate controls and
mitigation are in place, and test the appropriateness of plans;
•
report externally on the long-term viability of the company in
an informed manner; and
• monitor and review the effectiveness of risk management
procedures and internal control systems.
100
unitedutilities.com/corporate
Our risk management
Our risk and resilience framework
We have a robust risk and resilience framework for the identification, assessment
and mitigation of risk.
Our approach to risk and resilience
How we identify and assess risk
• a strong and well-established governance structure giving
the board oversight of the nature and extent of risks the
Risk Registers.
group faces, as well as the effectiveness of risk management
Each risk is event based and is sponsored by a senior manager who
We have a number of mechanisms in place to identify risk. These
include a risk universe, cross-business horizon scanning forums,
consultation with third parties and comparison with National
Successful management of risks and uncertainties enables us to
deliver on our purpose to provide great water and more for the
North West, and be more resilient across our corporate, financial
and operational structures. A key objective of our approach is
to support the sustainable achievement of the strategic themes
that underpin our vision to be the best UK water and wastewater
company delivering:
•
the best service to customers;
• at the lowest sustainable cost; and
•
in a responsible manner.
Our risk and resilience framework provides the foundation for the
business to anticipate threats to delivering an effective service in
these challenging times, and to respond and recover effectively
when risks materialise. Key components of the framework include:
• an embedded group-wide risk management process, which
is aligned to ISO 31000:2018 risk management guidelines;
• a board-led approach to risk appetite, based on
strategic goals;
processes and controls; and
• a portfolio of policies, procedures, guidance and training to
enable consistent, group-wide participation by our people.
Continuous improvement is a key feature of the framework, which
incorporates a maturity assessment model to identify areas to
enhance. Based on risk management capabilities relative to five levels
of maturity, a recent assessment has supported the development of
a road map of improvements. This includes further enhancement
to risk appetite and tolerance, greater focus and analysis of cross-
cutting themes and improved escalation of data from operational risk
management systems.
Risk appetite and tolerance
Focused on supporting decision-making, the risk appetite and
tolerance framework consists of a package of measures. The
General Risk Appetite represents financial limits against which
event-based risks are compared at each full and half-year
assessment and reporting cycle. In parallel are a series of strategic
statements which align directly to the principal risks (see pages
104 to 105). Each statement reflects the strategic intent, strategic
theme, relevant stakeholders and governance, but fundamentally
emphasises the attitude to risk taking and control relative to four
descriptors:
• Averse: A strong opposition to accept risk within business
strategy or operational activity.
• Prudent: A reluctance to accept risk within business strategy
or operational activity, but careful acceptance within tight
• Moderate: Willingness to accept risk with regard to business
strategy or operational activity provided this is within
boundaries.
reasonable limits.
As a regulated company providing essential public services none
of the principal risks have risk accepting as a strategic direction
or approach.
Underpinning each strategic statement, and currently under
development, are a series of more tangible, tactical statements
with specific levels and limits.
Monitor &
review
Consult &
communicate
Control &
mitigate
Identify &
assess
Record &
update
is responsible for the analysis of the corresponding causal factors,
consequences and the control effectiveness, taking account of
both the internal and external business environment. This process
quantifies the likelihood of the event occurring and the full range of
potential impacts from a minimum (best case) to a maximum (worst
case). Comparing this position against the desired target state,
in combination with the strengths, weaknesses and gaps of the
control environment, supports the decisions for further mitigation
as appropriate. This ongoing analysis culminates in the biannual
business unit risk assessment (BURA) which forms part of the
governance and reporting process (as outlined opposite) to ensure
consistency of approach and a true reflection of the risk facing the
company. It also serves to calibrate the most significant risks from a
financial and reputational context and to assess how these relate to
our risk appetite.
Governance and reporting process
The board ensures that its oversight of risk remains effective, and
in compliance with the UK Corporate Governance Code, through
a number of established reporting routes.
Twice yearly the board receives an extensive update on the risk
profile as part of the full and half-year reporting cycle. This provides
an overview of the nature and extent of risk exposure in the context
of the group’s principal risks (as detailed on pages 104 to 105), and
emphasises the most significant event-based risks (summarised
on pages 106 to 108) in both their current state relative to the risk
appetite, and target state of acceptable exposure. The board is also
advised of new and emerging risks (see page 109). In addition to the
biannual risk reporting, specific risk topics are reported to the board
to support decision-making. The board is, therefore, able to:
• make decisions on the level of risk it is prepared to manage
relative to risk appetite and tolerance in order to deliver on
• engage with the business to ensure appropriate controls and
mitigation are in place, and test the appropriateness of plans;
•
report externally on the long-term viability of the company in
an informed manner; and
• monitor and review the effectiveness of risk management
procedures and internal control systems.
• Accepting: Willingness to accept risk with regard to
the group’s strategy;
business strategy or operational activity.
Risk-specific governance and steering groups
manage ongoing individual risks. The operational
risk and resilience board provides oversight of
asset and operational process, risk and resilience
capability, escalates risks and issues to the group
audit and risk board (GARB) and contributes to
the BURA process.
The executive-led GARB focuses on: the adequacy,
effectiveness and performance of governance
processes; risk management and internal control;
monitoring compliance and assurance activities;
identification of emerging themes and trends; and
resilience across the group.
The audit committee is also a fundamental
component of the governance structure.
Supported by company secretariat and the
corporate audit teams, the audit committee reviews
the effectiveness of risk management and internal
controls before these are agreed by the board.
Risk profile
The business risk profile is based on the value
chain of the company, with the ten principal
risks representing inherent risk areas (primary
and supportive) where value can be gained,
preserved or lost relative to the performance,
future prospects or reputation of the company.
Underpinning the principal risks, the profile
consists of approximately 100 event-based
risks, each of which is allocated to one of the
ten inherent risk areas based on the context of
the event, enabling the company to consider
interdependency and correlation of common
themes (see page 102) and control effectiveness.
The governance and reporting process
Group board
Reviews the nature and
extent of risk, confirms the
company’s viability and
reports on effectiveness of
risk management and
internal control systems
Group audit and
Group audit and
risk board
risk board
Reviews governance,
Reviews governance,
risk and compliance
risk and compliance
matters
matters
Audit committee
Reviews the effectiveness
of risk management and
internal control systems
Operational risk and
Operational risk and
resilience board
resilience board
Monitors status of risk,
Monitors status of risk,
controls and actions
controls and actions
associated with water,
associated with water,
wastewater and bioresources
wastewater and bioresources
Corporate
risk team
Second line framework
development, advisory,
assurance and reporting
Corporate
audit team
Third line review and
assurance of risk
management and internal
control
Operational and
Operational and
project risk
project risk
First line identification,
First line identification,
analysis, evaluation and
analysis, evaluation and
management of operational
management of operational
and project risk
and project risk
Group strategic
and tactical risk
First line identification,
analysis, evaluation and
management of
strategic/tactical risk
Board/board committee
Management committee/activity
Business unit risk assessment (BURA)
High
Principal risk heat map
The heat map provides an indicative only view of
the current risk exposure (likelihood of occurrence
and most likely impact) of each of the principal
risks relative to each other.
Six of the principal risks have remained relatively
stable in the last twelve months with the following
four demonstrating an increase in exposure:
• Wastewater service associated with change in
legislation;
Impact
• Supply chain and programme delivery due to
economic conditions;
• Health, safety and environmental due to the
uncertainty of achieving the net zero carbon
commitments; and
• Political and regulatory due to the challenge
of delivering customer and environmental
improvements whilst maintaining fair value
to customers
See pages to 104 to 105 for further details of the
principal risks.
10
2
4
1
6
7
3
8
5
9
Low
Low
Likelihood
High
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Stock Code: UU.
Risk exposure
An indication of the current
exposure of each principal risk
relative to the prior year.
Decreased
Stable
Increased
Principal risks
1 Water service
2 Wastewater service
3 Retail and commercial
6 Finance
7 Health, safety and environmental
8 Security
9 Conduct and compliance
4 Supply chain and programme delivery
10 Political and regulatory
5 Resource
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101
Our risk management
Common themes
As illustrated in the bow-tie diagram below, each of the event-based risks has multiple causes and consequences, which in turn lead
to financial and/or reputational impact. Preventative and responsive controls, which incorporate the four components of resilience
(resistance; reliability; redundancy; and response/recovery), are applied to reduce the likelihood of the event occurring and limit the
impact if the event were to materialise. New and emerging circumstances in respect of causes, consequences and controls make
the profile multifaceted and dynamic. Analysis of the profile highlights common themes, notably associated with the causes and
consequences. These common themes can then be considered more holistically, which combined with the analysis of the strengths,
weaknesses, gaps and interdependency of control across the business, enables a more integrated approach to risk mitigation.
Cause
Cause
Cause
Cause
Event
Consequence
Consequence
Consequence
Consequence
Financial
impact
Reputational
impact
£
Preventative controls
Responsive controls
Resistance
Reliability
Redundancy
Response/
Recovery
• Economic conditions: Macro
events can have multiple financial
implications, including: lower
revenue; increased bad debt;
increased operational cost; increased
cost of borrowing; and a reduction
in the Regulatory Capital Value. The
events can also impact the wider
supply chain with knock-on effects to
our service delivery and cost to serve.
• Asset health: General use, exposure
to natural hazards, pressure and load
all contribute to the deterioration of
assets. In addition, other factors such
as technological obsolescence and
operating assets beyond their optimal
capacity to cope with increased
demand (population growth and/
or climate change) also affect asset
health. Ageing assets, therefore,
provide an underlying and
cross-business risk and uncertainty
both to efficiency and for the
long-term resilience of asset integrity
and the associated service capability.
• Culture: Embedded through
processes, reward mechanisms,
values and behaviours, corporate
culture is important to maintain high
performance and cuts across the
majority of risks in the profile. In an
increasingly challenging business
environment, our focus is to continue
to embed a culture of innovation,
customer service and behaving in a
responsible manner at the same time
as being open and transparent.
Common consequence themes
Each consequence is analysed for the
financial and reputational implications
relative to multiple stakeholders.
Categorisation of the consequences
illustrates four common impact themes:
• Customers: Customers are impacted
through our service offering, the
quality of their experience when
dealing with us, and how our
operational and capital schemes
affect them in the community.
• Environment: Our assets, operations
•
and capital programmes can have a
significant impact on the environment
in both rural and urban settings. As
a major land owner and operator of
a large fleet of vehicles, the way we
manage these also has environmental
implications.
Investors: The vast majority of risks in
the profile have financial implications
that could affect shareholder
investment in the short and long term.
Reputational impact associated with
ethics, environmental protection
and efficiency is also relevant for
investors’ interest in the company.
• Employees: Our employees are
fundamental to delivering our service
requirements as well as our strategic
objectives. Equally, our employees
can be affected by multiple risks
across the business, but primarily in
relation to employment and health,
safety and wellbeing risks.
Common causal themes
The event-based risks include multiple
causal factors, which individually or in
combination, could trigger the risk event
to occur. Categorisation illustrates six
common causal themes:
• Extreme weather/climate change:
In the majority of cases our water
resources, asset base and operations
can cope with extreme weather
conditions, although these can become
overwhelmed in intense situations.
Climate change projections highlight
increased temperatures, rainfall, wind
and more frequent extreme variations
in weather patterns. This means that
climate change remains a key focus
for us, because of its impact on our
capacity and capability for service
delivery, and because of the effect
on the environment that we strive
to protect and enhance. We are
committed to the principles set by the
Financial Stability Board’s Task Force on
Climate-related Financial Disclosures
(TCFD) – see pages 86 to 97.
• Demographic changes: Demographic
changes, including population growth
and evolving age profiles, can impact
the capacity and capability of water
and wastewater treatment and network
assets; can affect demand on water
resources; and increase uncertainty in
relation to pension obligations.
• Legislative and regulatory change:
Changes in legislation and/or regulation
can have implications for the business
model, asset base and ways of working.
For example: post-Brexit changes in law
bring an element of uncertainty; and
the introduction of competition, while
positive to customers and markets,
can affect ongoing revenue and the
asset base.
102
unitedutilities.com/corporate
Our risk management
Common themes
As illustrated in the bow-tie diagram below, each of the event-based risks has multiple causes and consequences, which in turn lead
to financial and/or reputational impact. Preventative and responsive controls, which incorporate the four components of resilience
(resistance; reliability; redundancy; and response/recovery), are applied to reduce the likelihood of the event occurring and limit the
impact if the event were to materialise. New and emerging circumstances in respect of causes, consequences and controls make
the profile multifaceted and dynamic. Analysis of the profile highlights common themes, notably associated with the causes and
consequences. These common themes can then be considered more holistically, which combined with the analysis of the strengths,
weaknesses, gaps and interdependency of control across the business, enables a more integrated approach to risk mitigation.
Cause
Cause
Cause
Cause
Event
Preventative controls
Responsive controls
Resistance
Reliability
Redundancy
Financial
Reputational
impact
impact
£
Consequence
Consequence
Consequence
Consequence
Response/
Recovery
• Economic conditions: Macro
events can have multiple financial
implications, including: lower
revenue; increased bad debt;
Common consequence themes
Each consequence is analysed for the
financial and reputational implications
relative to multiple stakeholders.
increased operational cost; increased
Categorisation of the consequences
cost of borrowing; and a reduction
in the Regulatory Capital Value. The
events can also impact the wider
supply chain with knock-on effects to
our service delivery and cost to serve.
• Asset health: General use, exposure
to natural hazards, pressure and load
all contribute to the deterioration of
assets. In addition, other factors such
as technological obsolescence and
operating assets beyond their optimal
capacity to cope with increased
demand (population growth and/
or climate change) also affect asset
health. Ageing assets, therefore,
provide an underlying and
cross-business risk and uncertainty
both to efficiency and for the
long-term resilience of asset integrity
and the associated service capability.
processes, reward mechanisms,
values and behaviours, corporate
culture is important to maintain high
performance and cuts across the
majority of risks in the profile. In an
increasingly challenging business
environment, our focus is to continue
to embed a culture of innovation,
customer service and behaving in a
responsible manner at the same time
as being open and transparent.
illustrates four common impact themes:
• Customers: Customers are impacted
through our service offering, the
quality of their experience when
dealing with us, and how our
operational and capital schemes
affect them in the community.
• Environment: Our assets, operations
and capital programmes can have a
significant impact on the environment
in both rural and urban settings. As
a major land owner and operator of
a large fleet of vehicles, the way we
manage these also has environmental
implications.
•
Investors: The vast majority of risks in
the profile have financial implications
that could affect shareholder
investment in the short and long term.
Reputational impact associated with
ethics, environmental protection
and efficiency is also relevant for
investors’ interest in the company.
• Employees: Our employees are
fundamental to delivering our service
requirements as well as our strategic
objectives. Equally, our employees
can be affected by multiple risks
across the business, but primarily in
relation to employment and health,
safety and wellbeing risks.
Common causal themes
The event-based risks include multiple
causal factors, which individually or in
combination, could trigger the risk event
to occur. Categorisation illustrates six
common causal themes:
• Extreme weather/climate change:
In the majority of cases our water
resources, asset base and operations
can cope with extreme weather
conditions, although these can become
overwhelmed in intense situations.
Climate change projections highlight
increased temperatures, rainfall, wind
and more frequent extreme variations
in weather patterns. This means that
climate change remains a key focus
for us, because of its impact on our
capacity and capability for service
delivery, and because of the effect
on the environment that we strive
to protect and enhance. We are
committed to the principles set by the
Financial Stability Board’s Task Force on
Climate-related Financial Disclosures
• Demographic changes: Demographic
changes, including population growth
and evolving age profiles, can impact
the capacity and capability of water
and wastewater treatment and network
assets; can affect demand on water
resources; and increase uncertainty in
relation to pension obligations.
• Legislative and regulatory change:
Changes in legislation and/or regulation
can have implications for the business
model, asset base and ways of working.
For example: post-Brexit changes in law
bring an element of uncertainty; and
the introduction of competition, while
positive to customers and markets,
can affect ongoing revenue and the
asset base.
(TCFD) – see pages 86 to 97.
• Culture: Embedded through
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Stock Code: UU.
103
Our risk management
Our principal risks
Inherent risk
area (principal
risk)(1)
Strategic
theme
1
Water service
Sponsor(s)
• Water, wastewater
and digital services
director
Principal risk description
A failure to provide a secure supply of clean, safe
drinking water and the potential for a negative impact
on public confidence in water supply.
2
Wastewater
service
3
Retail and
commercial
4
Supply chain
and programme
delivery
5
Resource
6
Finance
• Water, wastewater
and digital services
director
The failure to remove, treat and return water to the
environment and recycle sludge to land.
• Customer and
people director
• General counsel and
company secretary
Failing to provide good and fair service to domestic
customers and third-party retailers or a failure of or
issue in relation to non-regulated interests.
• Commercial,
capital delivery and
engineering director
The potential ineffective delivery of capital, operational
or functional processes/programmes including change.
• Customer and
people director
• Health, safety and
wellbeing and estate
services director
• Water, wastewater
and digital services
director
• Chief financial
officer
The potential failure to provide appropriate resources
(human, technological or physical) required to support
business activity.
The potential inability to finance the business
appropriately.
Causal factors themes
(Drivers/influences of risk)
• Climate change
• Demographic change
•
• Asset health
Legal and regulatory change
• Climate change
• Demographic change
•
• Asset health
Legal and regulatory change
Legal and regulatory change
Economic conditions
•
•
• Asset health
• Culture
Legal and regulatory change
Economic conditions
•
•
• Culture
Legal and regulatory change
• Climate change
•
•
• Asset health
• Culture
Economic conditions
Legal and regulatory change
• Demographic change
•
•
• Asset health
Economic conditions
7
Health, safety and
environmental
•
Environment,
planning and
innovation director
• Health, safety and
wellbeing and estate
services director
The potential harm to employees, contractors, the
public or the environment.
• Climate change
• Asset health
• Culture
8
Security
9
Conduct and
compliance
10
Political and
regulatory
• General counsel and
company secretary
The potential for malicious activity (physical or
technological) against people, assets or operations.
Economic conditions
•
• Asset health
• Culture
• Corporate affairs
director
• General counsel and
company secretary
The failure to adopt or apply ethical standards, or
to comply with legal and regulatory obligations and
responsibilities.
Developments connected with the political, regulatory
and legislative environment.
• Corporate affairs
director
• General counsel and
company secretary
•
Strategy, policy and
regulation director
Legal and regulatory change
Economic conditions
• Climate change
• Demographic change
•
•
• Asset health
• Culture
•
•
Economic conditions
Legal and regulatory change
Risk exposure
An indication of the current exposure of each principal risk
relative to the prior year.
Decreased
Stable
Increased
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•
•
•
•
•
•
•
•
•
•
Consequence
themes and
stakeholder
groups
• Customers
•
•
Environment
Investors
Appetite and
tolerance(2)
Water
Averse
• Customers
•
•
Environment
Investors
Wastewater
Prudent
Bioresources
Moderate
Top five event-based business risks
(*most significant group risks – see pages
Control/mitigation
106 to 108)
•
Strict quality controls and sampling regime
Failure of Haweswater Aqueduct*
• Physical and chemical treatment with automation
• Water sufficiency*
• Cleaning, maintenance and replacement of assets
Failure to treat water
• Water resources and production planning
Failure of the distribution system (leakage)
• Pressure/flow management and leak detection
• Dam failure*
•
Integrated network and response capability
• Physical and chemical treatment
• Odour management systems
• Wastewater network failure (sewer flooding)*
•
Failure to treat sludge*
• Drainage and wastewater management plans
• Recycling biosolids to agriculture*
• Wastewater network operating model
• Wastewater treatment (permits)
• Cleaning, maintenance and replacement of assets
• Mersey Valley Sludge Pipeline
• Customers
•
Investors
Retail
Prudent
• Customer campaigns
• Customer-focused initiatives
• Best practice collection techniques
Commercial
Moderate
• Customer segmentation
• Priority Services scheme
• Data management and data sharing
• Non-regulated operation governance
• Customer experience
• Cash collection
• Billing accuracy
• Wholesale revenue collection
• Developer services
• Communities
• Customers
Supply chain
Prudent
Programme delivery
Moderate
management
• Category management
• Price volatility*
•
Supplier relationship management
• Unfunded developer programmes
• Capital, change and operational programme
•
Security of the supply chain
• Portfolio, programme and project risk management
• Dispute with supplier
• Capital delivery programme
Resource
Moderate
• Adoption of effective technology
• Multiple communication channels
Land management
IT asset support
Training and personal development
Loss or failure of NIS systems
Talent, apprentice and graduate schemes
• Business critical data
• Change programmes and innovative strategies
Employee relations
• Maintenance, replacement or renovation of assets
•
•
•
•
•
Environment
Investors
Suppliers
• Customers
Employees
Investors
• Customers
•
•
Employees
Investors
Finance
Prudent
Long-term refinancing
Liquidity reserves
• Hedging strategies
Sensitivity analysis
• Monitoring of the markets
• Credit ratings*
• Pension scheme funding deficit*
Tax efficiency/fair share*
Totex efficiency challenge*
• Counterparty credit exposure and settlement limits
Financial outperformance*
• Communities
Health, safety and
Strong governance and management systems
• Carbon commitments*
•
•
•
Employees
Environment
Investors
wellbeing
Averse
Environment
Averse
• Certification to ISO 45001 and ISO 14001
• Disease pandemic*
• Benchmarking, auditing and inspections
• Occupational health exposure
Targeted engagement and improvement programmes
• Minor injuries
• Carbon reduction initiatives
Self-generation of energy
• Process safety (bioresources and wastewater)
• Communities
• Customers
•
•
Employees
Investors
CNI and SEMD
Averse
Other
Prudent
• Physical and technological security measures
• Cyber*
Strong governance, inspections and audits
Security authority liaison and NIS compliance
System and network integration
•
•
Terrorism*
• Criminality
Fraud
• Business continuity and disaster recovery
• Data protection
Insurance
• Communities
• Customers
Legislation
Averse
Ethical supply chain, diversity and inclusivity policies
• Water Plus
• Data classification and levels of authorisation
• Bribery
Other
Prudent
Stakeholder engagement activities
• Audits and peer reviews
• Non-regulated assets
• Procurement compliance
•
•
•
•
•
•
•
Employees
Environment
Investors
Suppliers
Employees
Environment
Investors
• Customers
Appetite or tolerance
cannot be determined
due to no genuine
choice or control
• Governance, risk assessment and horizon scanning
• Corporate governance and listing rules compliance
• Brand comparisons and dashboard of culture metrics
• Consultation with government and regulators
• Price Review 2024 outcome*
• Communication with customers
• Upstream competition (bioresources)
• DPC exit – HARP
• ASHE index
• Upstream competition (water resource)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Our risk management
Our principal risks
Our strategic themes
The best service to customers
At the lowest sustainable cost
In a responsible manner
Consequence
Consequence
themes and
themes and
stakeholder
stakeholder
groups
groups
• Customers
• Customers
•
•
•
•
Environment
Environment
Investors
Investors
• Customers
• Customers
•
•
•
•
Investors
Investors
Environment
Environment
Appetite and
Appetite and
tolerance(2)
tolerance(2)
Water
Water
Averse
Averse
Wastewater
Wastewater
Prudent
Prudent
Bioresources
Bioresources
Moderate
Moderate
• Customer and
• Customer and
Failing to provide good and fair service to domestic
Failing to provide good and fair service to domestic
Legal and regulatory change
Legal and regulatory change
people director
people director
customers and third-party retailers or a failure of or
customers and third-party retailers or a failure of or
issue in relation to non-regulated interests.
issue in relation to non-regulated interests.
• General counsel and
• General counsel and
company secretary
company secretary
Economic conditions
Economic conditions
• Asset health
• Asset health
• Culture
• Culture
• Customers
• Customers
•
•
Investors
Investors
Retail
Retail
Prudent
Prudent
Commercial
Commercial
Moderate
Moderate
Control/mitigation
Control/mitigation
•
•
Strict quality controls and sampling regime
Strict quality controls and sampling regime
• Physical and chemical treatment with automation
• Physical and chemical treatment with automation
• Cleaning, maintenance and replacement of assets
• Cleaning, maintenance and replacement of assets
• Water resources and production planning
• Water resources and production planning
• Pressure/flow management and leak detection
• Pressure/flow management and leak detection
•
•
Integrated network and response capability
Integrated network and response capability
• Physical and chemical treatment
• Physical and chemical treatment
• Odour management systems
• Odour management systems
• Drainage and wastewater management plans
• Drainage and wastewater management plans
• Wastewater network operating model
• Wastewater network operating model
• Cleaning, maintenance and replacement of assets
• Cleaning, maintenance and replacement of assets
• Customer campaigns
• Customer campaigns
• Customer-focused initiatives
• Customer-focused initiatives
• Best practice collection techniques
• Best practice collection techniques
• Customer segmentation
• Customer segmentation
• Priority Services scheme
• Priority Services scheme
• Data management and data sharing
• Data management and data sharing
• Non-regulated operation governance
• Non-regulated operation governance
Failure of Haweswater Aqueduct*
Failure of Haweswater Aqueduct*
Top five event-based business risks
Top five event-based business risks
(*most significant group risks – see pages
(*most significant group risks – see pages
106 to 108)
106 to 108)
•
•
• Water sufficiency*
• Water sufficiency*
•
•
•
•
• Dam failure*
• Dam failure*
Failure of the distribution system (leakage)
Failure of the distribution system (leakage)
Failure to treat water
Failure to treat water
Failure to treat sludge*
Failure to treat sludge*
• Wastewater network failure (sewer flooding)*
• Wastewater network failure (sewer flooding)*
•
•
• Recycling biosolids to agriculture*
• Recycling biosolids to agriculture*
• Wastewater treatment (permits)
• Wastewater treatment (permits)
• Mersey Valley Sludge Pipeline
• Mersey Valley Sludge Pipeline
• Customer experience
• Customer experience
• Cash collection
• Cash collection
• Billing accuracy
• Billing accuracy
• Wholesale revenue collection
• Wholesale revenue collection
• Developer services
• Developer services
• Communities
• Communities
• Customers
• Customers
•
•
•
•
•
•
Environment
Environment
Investors
Investors
Suppliers
Suppliers
Supply chain
Supply chain
Prudent
Prudent
Programme delivery
Programme delivery
Moderate
Moderate
• Category management
• Category management
•
•
• Capital, change and operational programme
• Capital, change and operational programme
Supplier relationship management
Supplier relationship management
management
management
• Portfolio, programme and project risk management
• Portfolio, programme and project risk management
• Price volatility*
• Price volatility*
• Unfunded developer programmes
• Unfunded developer programmes
•
•
Security of the supply chain
Security of the supply chain
• Dispute with supplier
• Dispute with supplier
• Capital delivery programme
• Capital delivery programme
• Customers
• Customers
•
•
Employees
Employees
•
•
Investors
Investors
Resource
Resource
Moderate
Moderate
• Customers
• Customers
•
•
Employees
Employees
•
•
Investors
Investors
Finance
Finance
Prudent
Prudent
• Communities
• Communities
•
•
Employees
Employees
•
•
•
•
Environment
Environment
Investors
Investors
Health, safety and
Health, safety and
wellbeing
wellbeing
Averse
Averse
Environment
Environment
Averse
Averse
• General counsel and
• General counsel and
The potential for malicious activity (physical or
The potential for malicious activity (physical or
•
•
Economic conditions
Economic conditions
company secretary
company secretary
technological) against people, assets or operations.
technological) against people, assets or operations.
• Asset health
• Asset health
• Culture
• Culture
• Communities
• Communities
• Customers
• Customers
•
•
Employees
Employees
•
•
Investors
Investors
CNI and SEMD
CNI and SEMD
Averse
Averse
Other
Other
Prudent
Prudent
Investors
Investors
Environment
Environment
• Communities
• Communities
• Customers
• Customers
•
•
Employees
Employees
•
•
•
•
•
•
• Customers
• Customers
•
•
Employees
Employees
•
•
•
•
Environment
Environment
Suppliers
Suppliers
Investors
Investors
Legislation
Legislation
Averse
Averse
Other
Other
Prudent
Prudent
Appetite or tolerance
Appetite or tolerance
cannot be determined
cannot be determined
due to no genuine
due to no genuine
choice or control
choice or control
• Adoption of effective technology
• Adoption of effective technology
• Multiple communication channels
• Multiple communication channels
•
•
Training and personal development
Training and personal development
•
•
Talent, apprentice and graduate schemes
Talent, apprentice and graduate schemes
• Change programmes and innovative strategies
• Change programmes and innovative strategies
• Maintenance, replacement or renovation of assets
• Maintenance, replacement or renovation of assets
Liquidity reserves
Liquidity reserves
Long-term refinancing
Long-term refinancing
Strong governance and management systems
Strong governance and management systems
Targeted engagement and improvement programmes
Targeted engagement and improvement programmes
•
•
•
•
• Counterparty credit exposure and settlement limits
• Counterparty credit exposure and settlement limits
• Hedging strategies
• Hedging strategies
•
•
Sensitivity analysis
Sensitivity analysis
• Monitoring of the markets
• Monitoring of the markets
•
•
• Certification to ISO 45001 and ISO 14001
• Certification to ISO 45001 and ISO 14001
• Benchmarking, auditing and inspections
• Benchmarking, auditing and inspections
•
•
• Carbon reduction initiatives
• Carbon reduction initiatives
•
•
Self-generation of energy
Self-generation of energy
• Physical and technological security measures
• Physical and technological security measures
•
•
Strong governance, inspections and audits
Strong governance, inspections and audits
•
•
•
•
• Business continuity and disaster recovery
• Business continuity and disaster recovery
•
•
•
•
• Data classification and levels of authorisation
• Data classification and levels of authorisation
•
•
• Audits and peer reviews
• Audits and peer reviews
• Governance, risk assessment and horizon scanning
• Governance, risk assessment and horizon scanning
• Brand comparisons and dashboard of culture metrics
• Brand comparisons and dashboard of culture metrics
• Consultation with government and regulators
• Consultation with government and regulators
• Communication with customers
• Communication with customers
Ethical supply chain, diversity and inclusivity policies
Ethical supply chain, diversity and inclusivity policies
Security authority liaison and NIS compliance
Security authority liaison and NIS compliance
Stakeholder engagement activities
Stakeholder engagement activities
System and network integration
System and network integration
Insurance
Insurance
IT asset support
IT asset support
Land management
Land management
•
•
•
•
•
•
• Business critical data
• Business critical data
•
•
Employee relations
Employee relations
Loss or failure of NIS systems
Loss or failure of NIS systems
• Credit ratings*
• Credit ratings*
• Pension scheme funding deficit*
• Pension scheme funding deficit*
•
•
Financial outperformance*
Financial outperformance*
•
•
•
•
Totex efficiency challenge*
Totex efficiency challenge*
Tax efficiency/fair share*
Tax efficiency/fair share*
• Carbon commitments*
• Carbon commitments*
• Disease pandemic*
• Disease pandemic*
• Occupational health exposure
• Occupational health exposure
• Minor injuries
• Minor injuries
• Process safety (bioresources and wastewater)
• Process safety (bioresources and wastewater)
• Cyber*
• Cyber*
•
•
Terrorism*
Terrorism*
• Criminality
• Criminality
•
•
Fraud
Fraud
• Data protection
• Data protection
• Water Plus
• Water Plus
• Bribery
• Bribery
• Non-regulated assets
• Non-regulated assets
• Procurement compliance
• Procurement compliance
• Corporate governance and listing rules compliance
• Corporate governance and listing rules compliance
• Price Review 2024 outcome*
• Price Review 2024 outcome*
• Upstream competition (bioresources)
• Upstream competition (bioresources)
• DPC exit – HARP
• DPC exit – HARP
• ASHE index
• ASHE index
• Upstream competition (water resource)
• Upstream competition (water resource)
An indication of the current exposure of each principal risk
relative to the prior year.
Decreased
Stable
Increased
Notes
(1) Principal risks: Based on the value chain of the company, principal risks represent
inherent areas where value can be gained, preserved or lost. Water, wastewater
(including bioresources) and retail and commercial areas are the primary
activities, with all other areas as supportive/contributing activities.
104
unitedutilities.com/corporate
Stock Code: UU.
(2) Appetite and tolerance: Averse: A strong opposition to accept risk within
business strategy or operational activity. Prudent: A reluctance to accept risk
within business strategy or operational activity, but careful acceptance within
tight boundaries. Moderate: Willingness to accept risk with regard to business
strategy or operational activity provided this is within reasonable limits.
Accepting: Willingness to accept risk with regard to business strategy or operational
activity. (NB As a regulated company providing essential public services none of the
principal risks have risk accepting as a strategic direction or approach).
Inherent risk
Inherent risk
area (principal
area (principal
Strategic
Strategic
risk)(1)
risk)(1)
1
1
Water service
Water service
theme
theme
Sponsor(s)
Sponsor(s)
Principal risk description
Principal risk description
• Water, wastewater
• Water, wastewater
A failure to provide a secure supply of clean, safe
A failure to provide a secure supply of clean, safe
and digital services
and digital services
drinking water and the potential for a negative impact
drinking water and the potential for a negative impact
director
director
on public confidence in water supply.
on public confidence in water supply.
• Water, wastewater
• Water, wastewater
The failure to remove, treat and return water to the
The failure to remove, treat and return water to the
and digital services
and digital services
environment and recycle sludge to land.
environment and recycle sludge to land.
director
director
Causal factors themes
Causal factors themes
(Drivers/influences of risk)
(Drivers/influences of risk)
• Climate change
• Climate change
• Demographic change
• Demographic change
•
•
Legal and regulatory change
Legal and regulatory change
• Asset health
• Asset health
• Climate change
• Climate change
• Demographic change
• Demographic change
•
•
Legal and regulatory change
Legal and regulatory change
• Asset health
• Asset health
• Commercial,
• Commercial,
capital delivery and
capital delivery and
engineering director
engineering director
The potential ineffective delivery of capital, operational
The potential ineffective delivery of capital, operational
Legal and regulatory change
Legal and regulatory change
or functional processes/programmes including change.
or functional processes/programmes including change.
Economic conditions
Economic conditions
• Culture
• Culture
• Customer and
• Customer and
The potential failure to provide appropriate resources
The potential failure to provide appropriate resources
• Climate change
• Climate change
people director
people director
(human, technological or physical) required to support
(human, technological or physical) required to support
business activity.
business activity.
• Health, safety and
• Health, safety and
wellbeing and estate
wellbeing and estate
services director
services director
• Water, wastewater
• Water, wastewater
and digital services
and digital services
director
director
• Chief financial
• Chief financial
officer
officer
The potential inability to finance the business
The potential inability to finance the business
• Demographic change
• Demographic change
appropriately.
appropriately.
Legal and regulatory change
Legal and regulatory change
Economic conditions
Economic conditions
• Asset health
• Asset health
• Culture
• Culture
Legal and regulatory change
Legal and regulatory change
Economic conditions
Economic conditions
• Asset health
• Asset health
7
7
Health, safety and
Health, safety and
environmental
environmental
•
•
Environment,
Environment,
planning and
planning and
innovation director
innovation director
• Health, safety and
• Health, safety and
wellbeing and estate
wellbeing and estate
services director
services director
The potential harm to employees, contractors, the
The potential harm to employees, contractors, the
public or the environment.
public or the environment.
• Climate change
• Climate change
• Asset health
• Asset health
• Culture
• Culture
• Corporate affairs
• Corporate affairs
director
director
• General counsel and
• General counsel and
company secretary
company secretary
The failure to adopt or apply ethical standards, or
The failure to adopt or apply ethical standards, or
to comply with legal and regulatory obligations and
to comply with legal and regulatory obligations and
responsibilities.
responsibilities.
• Climate change
• Climate change
• Demographic change
• Demographic change
Legal and regulatory change
Legal and regulatory change
Economic conditions
Economic conditions
• Asset health
• Asset health
• Culture
• Culture
• Corporate affairs
• Corporate affairs
Developments connected with the political, regulatory
Developments connected with the political, regulatory
Legal and regulatory change
Legal and regulatory change
director
director
and legislative environment.
and legislative environment.
Economic conditions
Economic conditions
• General counsel and
• General counsel and
company secretary
company secretary
•
•
Strategy, policy and
Strategy, policy and
regulation director
regulation director
Wastewater
Wastewater
service
service
Retail and
Retail and
commercial
commercial
2
2
3
3
4
4
Supply chain
Supply chain
and programme
and programme
delivery
delivery
5
5
Resource
Resource
6
6
Finance
Finance
8
8
Security
Security
9
9
Conduct and
Conduct and
compliance
compliance
10
10
Political and
Political and
regulatory
regulatory
Risk exposure
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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S
T
R
A
T
E
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C
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105
Our risk management
The company’s most significant event-based risks
The most significant event-based risks represent the ten highest-ranked risks by exposure (likelihood of occurrence of the event multiplied
by the most likely financial impact) and those risks which have been assessed as having a significantly high impact, but low likelihood.
Depending on the circumstances, financial impacts will include loss of revenue, additional or extra cost, fines, regulatory penalties and
compensation. Reputational impact relative to our multiple stakeholders is also assessed, reported and considered as part of the mitigation.
Summarised below are the top ten ranking risks (1–10), and those assessed as having high impact, but low likelihood (A–F):
1. Price Review 2024 outcome
2. Failure of the
Haweswater Aqueduct
3. Wastewater network failure
(sewer flooding)
4. Cyber
5. Water sufficiency
6. Carbon commitments
Risk exposure: This risk focuses on the capacity
and capability to develop a business plan that
creates value for customers, communities,
and the environment that is sustainable and
resilient for the long term relative to the unique
characteristics of the region we serve, in
light of multiple influencing factors – notably
changing demographics, climate change and
asset health.
Control/mitigation: We have established
cross-cutting work streams and theme owners
to identify the products and evidence required
for the submission and we will maintain a close
dialogue with Ofwat throughout the process.
Assurance: Extensive customer research
and several external providers have been
commissioned for technical optioneering.
Second line assurance is provided through
a dedicated price review team and a PR24
programme board. An internal audit is
scheduled and external assurance is currently
under procurement.
Risk exposure: The Haweswater Aqueduct
is a key asset with current low resilience
due to deterioration, with failure potentially
resulting in water quality issues and/or supply
interruptions to a large proportion of the United
Utilities customer base.
Control/mitigation: A capital project to replace
the tunnel sections of the aqueduct has already
commenced with the completion in November
2020 of one section. The remaining sections
are due to be replaced as part of Haweswater
Aqueduct Resilience Programme (HARP)
by 2029.
Assurance: Technical and geological advice
and modelling have been sought throughout
the programme development, with second
line assurance including engineering technical
governance. Independent assurance is
provided by cyclical internal audits and external
assurance over the competitively appointed
provider.
7. Failure to treat sludge
Risk exposure: This risk relates to the
interdependency between wastewater and
bioresource treatment activity in light of
changing demographics, asset health and
legislative/regulatory change. Industrial
Emissions Directive (IED) now applying to
biological treatment of sewage sludge within
AMP 7, with no investment assigned to this
requirement is a key factor.
Control/mitigation: The Throughput,
Reliability, Availability, and Maintainability
(T-RAM) of our facilities is a key area
of mitigation, with formal service level
agreements between the two core activities.
In relation to IEDs, discussions at national level
are being held to move the high capital cost
improvements into PR24.
Assurance: Wholesale assurance and
engineering technical governance provide
second line assurance. Subject to cyclical
internal audit and ad-hoc external strategic
reviews.
8. Recycling of biosolids to
agriculture
Risk exposure: This risk represents various
impact scenarios including operational failures,
increased restrictions or total ban of recycling
biosolids to agriculture. Referencing the EA’s
interpretation of the Farming Rules for Water
(FRfW) regulations and the increasing threat to
recycling a large proportion of biosolids.
Control/mitigation: United Utilities is
accredited to the UK Biosolids Assurance
Scheme (BAS), which certifies that our
treatment and recycling activities meet
regulatory requirements and best practice. We
also work closely with farmers and landowners
and have robust standard operating procedures
established with contractors.
Assurance: Wholesale assurance and
engineering technical governance provide
second line assurance. Subject to both cyclical
internal and external audit.
Risk exposure: Equipment failure, collapses/
bursts or inadequate hydraulic/operational
capacity to cope with extreme weather and
population growth, resulting in sewer flooding.
Control/mitigation: Preventative maintenance
and inspection regimes, customer campaigns
and sewer rehabilitation programmes.
Assurance: Second line assurance provided
by wholesale assurance, engineering technical
governance and flood review panel. Subject to
regular internal audits and external assurance
of regulatory reporting.
Risk exposure: Data and technology assets
compromised due to malicious or accidental
activity, leading to a major impact to key
business processes and operations.
Control/mitigation: Multiple layers of control,
including a secure perimeter, segmented
internal network zones, access controls,
constant monitoring and forensic response
capability.
Assurance: Security stance reflects multiple
sources of threat intelligence. The security
steering group provides second line assurance,
with independent assurance provided by
cyclical internal audits and various technical
audits by external specialists.
Risk exposure: Water sufficiency is one
of the most sensitive risks to climate,
with the frequency of recent periods of
extended hot, dry weather being evidence of
changing circumstance and the potential for
implementation of water use restrictions on
customers.
Control/mitigation: We produce a Water
Resources Management Plan (WRMP) every
five years, which forecasts future demand and
water availability under repeats of historic
droughts, adjusted for climate change. A
statutory Drought Plan is also developed every
five years, setting out the actions we will take in
a drought situation.
Assurance: The WRMP and Drought Plan
are subject to various second and third line
assurance activities prior to publication.
Risk exposure: This risk focuses on the
capacity and capability to decarbonise water
and wastewater activity relevant to the Public
Interest Commitments (PIC) to achieve net zero
by 2030 in light of the growth pressures, lack of
technological advances or innovation and the
fundamental change of approach required.
Control/mitigation: We will continue to
develop near-term initiatives to address process
and energy emissions, and create woodland
and restore peatland, while responding to an
evolving policy and technological landscape.
We are also developing a long-term strategy to
reduce emissions and to fully understand and
optimise potential decarbonisation initiatives
and pathways.
Assurance: Water industry research and
technical support combined with a climate
change mitigation steering group provides
second line assurance. An internal audit is
scheduled and external assurance of emissions,
regulatory reporting lines and science-based
targets has been established.
9. Price volatility
10. Credit rating
Risk exposure: This risk reflects the inflationary
pressures across all commodities, notably
energy, associated with the post COVID-19
economic bounce back which have been
exacerbated further by the conflict in Ukraine.
Control/mitigation: Contract provision
with suppliers, hedging policy and supply
agreements manage volatility and minimise
vulnerability in the contract and price risk with
the suppliers including periods of agreed fixed
pricing and negotiation of CPI/H uplift on an
annual basis.
Assurance: Market analysis and supplier
engagement, combined with quarterly business
reviews provide second line assurance. Due to
the scale of procurement an energy governance
panel has oversight over procurement and use.
Risk exposure: Credit ratings below internal
targets, due to deterioration in financial and/
or operational performance and/or external
factors (such as inflation) resulting in more
expensive funding.
Control/mitigation: Continuous monitoring of
markets, and the management of key financial
risks within defined policy parameters
Assurance: Second line assurance provided
by financial control and quarterly business
reviews, with oversight provided by the
treasury committee. The treasury function is
subject to regular internal audits.
A. Pension deficit
B. Financial outperformance
C. Dam failure
D. Fair payment of tax
E. Disease pandemic
F. Terrorism
Risk exposure: The potential for the pension
scheme funding deficit to increase because
of life expectancy rates leading to additional
contributions.
Control/mitigation: Constant monitoring
combined with hedging against interest rates,
inflation and growth asset risk.
Assurance: Policy and oversight is led by the
pensions review management group, taking
into account advice from accountancy and law
firms. Pension governance is subject to periodic
internal audits.
Risk exposure: Failure to achieve financial
outperformance due to macro economic
conditions and efficiency challenges, impacting
the cost of debt and delivery of the company
business plan.
Risk exposure: Uncontrolled release of a
significant volume of water from reservoirs
due to flood damage, overtopping, earthquake
or erosion leading to catastrophic impacts
downstream.
Control/mitigation: Interest rate and inflation
management, ongoing monitoring of markets
and regulatory developments, and company
business planning.
Control/mitigation: Each reservoir is regularly
inspected by engineers. Where appropriate,
risk reduction interventions are implemented
through a prioritised investment programme.
Assurance: Second line assurance and
oversight is provided by the board and treasury
committee in addition to executive quarterly
business reviews. Subject to cyclical internal
audit reviews.
Assurance: Various sources of second line
assurance, including supervising engineers,
dam safety group, wholesale assurance and
regular board reviews. Independent assurance
is provided by panel engineers and internal
audit.
Risk exposure: Failure to maximise the
available tax efficiencies and reliefs due to
changing mechanisms.
Control/mitigation: Tax policies and objectives
cover: efficient structuring of commercial
activities; maintaining a robust governance and
risk management framework; and an open and
transparent relationship with tax authorities.
Assurance: Tax policies are based on advice
from multiple sources, including accountancy
firms. Third-party assurance is provided by
internal audit and accountancy firms.
Risk exposure: Serious illness in a large
proportion of the UK population and
consequences to our workforce, the wider
supply chain and macro economy.
Control/mitigation: The incident management
process would be invoked, supported by
the Pandemic Response Plan. This includes
the implementation of multi-channel
communication with non-pharmaceutical
interventions as per government guidance.
Assurance: Wholesale assurance provides
second line assurance, with internal audit
undertaking various reviews.
Risk exposure: A significant asset to be
compromised by terrorist activity leading to
loss of supply, contamination and/or pollution.
Control/mitigation: A risk-based protection of
assets in line with the Security and Emergency
Measures Direction (SEMD) and close liaison
with the Centre for the Protection of National
Infrastructure (CPNI), regional counter terrorist
units, local agencies and emergency services.
Assurance: Security posture is based on
various threat advisors. Second line assurance
is provided by the security steering group. In
addition, internal audit undertakes cyclical
audits with external technical assurance being
delivered by specialists.
106
unitedutilities.com/corporate
Our risk management
The company’s most significant event-based risks
The most significant event-based risks represent the ten highest-ranked risks by exposure (likelihood of occurrence of the event multiplied
by the most likely financial impact) and those risks which have been assessed as having a significantly high impact, but low likelihood.
Depending on the circumstances, financial impacts will include loss of revenue, additional or extra cost, fines, regulatory penalties and
compensation. Reputational impact relative to our multiple stakeholders is also assessed, reported and considered as part of the mitigation.
Summarised below are the top ten ranking risks (1–10), and those assessed as having high impact, but low likelihood (A–F):
Key:
Top ten ranking risks relative to
likelihood and impact
High impact, low likelihood risks
1. Price Review 2024 outcome
1. Price Review 2024 outcome
2. Failure of the
2. Failure of the
Haweswater Aqueduct
Haweswater Aqueduct
3. Wastewater network failure
3. Wastewater network failure
(sewer flooding)
(sewer flooding)
Risk exposure: This risk focuses on the capacity
Risk exposure: This risk focuses on the capacity
and capability to develop a business plan that
and capability to develop a business plan that
creates value for customers, communities,
creates value for customers, communities,
and the environment that is sustainable and
and the environment that is sustainable and
Risk exposure: The Haweswater Aqueduct
Risk exposure: The Haweswater Aqueduct
is a key asset with current low resilience
is a key asset with current low resilience
due to deterioration, with failure potentially
due to deterioration, with failure potentially
Risk exposure: Equipment failure, collapses/
Risk exposure: Equipment failure, collapses/
bursts or inadequate hydraulic/operational
bursts or inadequate hydraulic/operational
capacity to cope with extreme weather and
capacity to cope with extreme weather and
resulting in water quality issues and/or supply
resulting in water quality issues and/or supply
population growth, resulting in sewer flooding.
population growth, resulting in sewer flooding.
resilient for the long term relative to the unique
resilient for the long term relative to the unique
interruptions to a large proportion of the United
interruptions to a large proportion of the United
characteristics of the region we serve, in
characteristics of the region we serve, in
light of multiple influencing factors – notably
light of multiple influencing factors – notably
changing demographics, climate change and
changing demographics, climate change and
asset health.
asset health.
Control/mitigation: We have established
Control/mitigation: We have established
cross-cutting work streams and theme owners
cross-cutting work streams and theme owners
to identify the products and evidence required
to identify the products and evidence required
for the submission and we will maintain a close
for the submission and we will maintain a close
dialogue with Ofwat throughout the process.
dialogue with Ofwat throughout the process.
Assurance: Extensive customer research
Assurance: Extensive customer research
and several external providers have been
and several external providers have been
commissioned for technical optioneering.
commissioned for technical optioneering.
Second line assurance is provided through
Second line assurance is provided through
a dedicated price review team and a PR24
a dedicated price review team and a PR24
programme board. An internal audit is
programme board. An internal audit is
Utilities customer base.
Utilities customer base.
Control/mitigation: A capital project to replace
Control/mitigation: A capital project to replace
the tunnel sections of the aqueduct has already
the tunnel sections of the aqueduct has already
commenced with the completion in November
commenced with the completion in November
2020 of one section. The remaining sections
2020 of one section. The remaining sections
are due to be replaced as part of Haweswater
are due to be replaced as part of Haweswater
Aqueduct Resilience Programme (HARP)
Aqueduct Resilience Programme (HARP)
by 2029.
by 2029.
Assurance: Technical and geological advice
Assurance: Technical and geological advice
and modelling have been sought throughout
and modelling have been sought throughout
the programme development, with second
the programme development, with second
line assurance including engineering technical
line assurance including engineering technical
governance. Independent assurance is
governance. Independent assurance is
provided by cyclical internal audits and external
provided by cyclical internal audits and external
assurance over the competitively appointed
assurance over the competitively appointed
scheduled and external assurance is currently
scheduled and external assurance is currently
provider.
provider.
under procurement.
under procurement.
Control/mitigation: Preventative maintenance
Control/mitigation: Preventative maintenance
and inspection regimes, customer campaigns
and inspection regimes, customer campaigns
and sewer rehabilitation programmes.
and sewer rehabilitation programmes.
Assurance: Second line assurance provided
Assurance: Second line assurance provided
by wholesale assurance, engineering technical
by wholesale assurance, engineering technical
governance and flood review panel. Subject to
governance and flood review panel. Subject to
regular internal audits and external assurance
regular internal audits and external assurance
of regulatory reporting.
of regulatory reporting.
Risk exposure: This risk relates to the
Risk exposure: This risk relates to the
interdependency between wastewater and
interdependency between wastewater and
bioresource treatment activity in light of
bioresource treatment activity in light of
changing demographics, asset health and
changing demographics, asset health and
legislative/regulatory change. Industrial
legislative/regulatory change. Industrial
Emissions Directive (IED) now applying to
Emissions Directive (IED) now applying to
biological treatment of sewage sludge within
biological treatment of sewage sludge within
AMP 7, with no investment assigned to this
AMP 7, with no investment assigned to this
requirement is a key factor.
requirement is a key factor.
Control/mitigation: The Throughput,
Control/mitigation: The Throughput,
Reliability, Availability, and Maintainability
Reliability, Availability, and Maintainability
(T-RAM) of our facilities is a key area
(T-RAM) of our facilities is a key area
of mitigation, with formal service level
of mitigation, with formal service level
agreements between the two core activities.
agreements between the two core activities.
In relation to IEDs, discussions at national level
In relation to IEDs, discussions at national level
are being held to move the high capital cost
are being held to move the high capital cost
improvements into PR24.
improvements into PR24.
Assurance: Wholesale assurance and
Assurance: Wholesale assurance and
engineering technical governance provide
engineering technical governance provide
second line assurance. Subject to cyclical
second line assurance. Subject to cyclical
internal audit and ad-hoc external strategic
internal audit and ad-hoc external strategic
reviews.
reviews.
8. Recycling of biosolids to
8. Recycling of biosolids to
agriculture
agriculture
Risk exposure: This risk represents various
Risk exposure: This risk represents various
impact scenarios including operational failures,
impact scenarios including operational failures,
increased restrictions or total ban of recycling
increased restrictions or total ban of recycling
biosolids to agriculture. Referencing the EA’s
biosolids to agriculture. Referencing the EA’s
interpretation of the Farming Rules for Water
interpretation of the Farming Rules for Water
(FRfW) regulations and the increasing threat to
(FRfW) regulations and the increasing threat to
recycling a large proportion of biosolids.
recycling a large proportion of biosolids.
Control/mitigation: United Utilities is
Control/mitigation: United Utilities is
accredited to the UK Biosolids Assurance
accredited to the UK Biosolids Assurance
Scheme (BAS), which certifies that our
Scheme (BAS), which certifies that our
treatment and recycling activities meet
treatment and recycling activities meet
regulatory requirements and best practice. We
regulatory requirements and best practice. We
also work closely with farmers and landowners
also work closely with farmers and landowners
and have robust standard operating procedures
and have robust standard operating procedures
established with contractors.
established with contractors.
Assurance: Wholesale assurance and
Assurance: Wholesale assurance and
engineering technical governance provide
engineering technical governance provide
second line assurance. Subject to both cyclical
second line assurance. Subject to both cyclical
internal and external audit.
internal and external audit.
Risk exposure: This risk reflects the inflationary
Risk exposure: This risk reflects the inflationary
pressures across all commodities, notably
pressures across all commodities, notably
energy, associated with the post COVID-19
energy, associated with the post COVID-19
economic bounce back which have been
economic bounce back which have been
exacerbated further by the conflict in Ukraine.
exacerbated further by the conflict in Ukraine.
Control/mitigation: Contract provision
Control/mitigation: Contract provision
with suppliers, hedging policy and supply
with suppliers, hedging policy and supply
agreements manage volatility and minimise
agreements manage volatility and minimise
vulnerability in the contract and price risk with
vulnerability in the contract and price risk with
the suppliers including periods of agreed fixed
the suppliers including periods of agreed fixed
pricing and negotiation of CPI/H uplift on an
pricing and negotiation of CPI/H uplift on an
annual basis.
annual basis.
Assurance: Market analysis and supplier
Assurance: Market analysis and supplier
engagement, combined with quarterly business
engagement, combined with quarterly business
reviews provide second line assurance. Due to
reviews provide second line assurance. Due to
the scale of procurement an energy governance
the scale of procurement an energy governance
panel has oversight over procurement and use.
panel has oversight over procurement and use.
4. Cyber
4. Cyber
5. Water sufficiency
5. Water sufficiency
6. Carbon commitments
6. Carbon commitments
Risk exposure: Data and technology assets
Risk exposure: Data and technology assets
compromised due to malicious or accidental
compromised due to malicious or accidental
activity, leading to a major impact to key
activity, leading to a major impact to key
business processes and operations.
business processes and operations.
Control/mitigation: Multiple layers of control,
Control/mitigation: Multiple layers of control,
including a secure perimeter, segmented
including a secure perimeter, segmented
internal network zones, access controls,
internal network zones, access controls,
constant monitoring and forensic response
constant monitoring and forensic response
capability.
capability.
Assurance: Security stance reflects multiple
Assurance: Security stance reflects multiple
sources of threat intelligence. The security
sources of threat intelligence. The security
steering group provides second line assurance,
steering group provides second line assurance,
with independent assurance provided by
with independent assurance provided by
cyclical internal audits and various technical
cyclical internal audits and various technical
audits by external specialists.
audits by external specialists.
Risk exposure: Water sufficiency is one
Risk exposure: Water sufficiency is one
of the most sensitive risks to climate,
of the most sensitive risks to climate,
with the frequency of recent periods of
with the frequency of recent periods of
extended hot, dry weather being evidence of
extended hot, dry weather being evidence of
changing circumstance and the potential for
changing circumstance and the potential for
implementation of water use restrictions on
implementation of water use restrictions on
customers.
customers.
Control/mitigation: We produce a Water
Control/mitigation: We produce a Water
Resources Management Plan (WRMP) every
Resources Management Plan (WRMP) every
five years, which forecasts future demand and
five years, which forecasts future demand and
water availability under repeats of historic
water availability under repeats of historic
droughts, adjusted for climate change. A
droughts, adjusted for climate change. A
statutory Drought Plan is also developed every
statutory Drought Plan is also developed every
five years, setting out the actions we will take in
five years, setting out the actions we will take in
a drought situation.
a drought situation.
Assurance: The WRMP and Drought Plan
Assurance: The WRMP and Drought Plan
are subject to various second and third line
are subject to various second and third line
assurance activities prior to publication.
assurance activities prior to publication.
Risk exposure: This risk focuses on the
Risk exposure: This risk focuses on the
capacity and capability to decarbonise water
capacity and capability to decarbonise water
and wastewater activity relevant to the Public
and wastewater activity relevant to the Public
Interest Commitments (PIC) to achieve net zero
Interest Commitments (PIC) to achieve net zero
by 2030 in light of the growth pressures, lack of
by 2030 in light of the growth pressures, lack of
technological advances or innovation and the
technological advances or innovation and the
fundamental change of approach required.
fundamental change of approach required.
Control/mitigation: We will continue to
Control/mitigation: We will continue to
develop near-term initiatives to address process
develop near-term initiatives to address process
and energy emissions, and create woodland
and energy emissions, and create woodland
and restore peatland, while responding to an
and restore peatland, while responding to an
evolving policy and technological landscape.
evolving policy and technological landscape.
We are also developing a long-term strategy to
We are also developing a long-term strategy to
reduce emissions and to fully understand and
reduce emissions and to fully understand and
optimise potential decarbonisation initiatives
optimise potential decarbonisation initiatives
and pathways.
and pathways.
Assurance: Water industry research and
Assurance: Water industry research and
technical support combined with a climate
technical support combined with a climate
change mitigation steering group provides
change mitigation steering group provides
second line assurance. An internal audit is
second line assurance. An internal audit is
scheduled and external assurance of emissions,
scheduled and external assurance of emissions,
regulatory reporting lines and science-based
regulatory reporting lines and science-based
targets has been established.
targets has been established.
7. Failure to treat sludge
7. Failure to treat sludge
9. Price volatility
9. Price volatility
10. Credit rating
10. Credit rating
Risk exposure: Credit ratings below internal
Risk exposure: Credit ratings below internal
targets, due to deterioration in financial and/
targets, due to deterioration in financial and/
or operational performance and/or external
or operational performance and/or external
factors (such as inflation) resulting in more
factors (such as inflation) resulting in more
expensive funding.
expensive funding.
Control/mitigation: Continuous monitoring of
Control/mitigation: Continuous monitoring of
markets, and the management of key financial
markets, and the management of key financial
risks within defined policy parameters
risks within defined policy parameters
Assurance: Second line assurance provided
Assurance: Second line assurance provided
by financial control and quarterly business
by financial control and quarterly business
reviews, with oversight provided by the
reviews, with oversight provided by the
treasury committee. The treasury function is
treasury committee. The treasury function is
subject to regular internal audits.
subject to regular internal audits.
A. Pension deficit
A. Pension deficit
B. Financial outperformance
B. Financial outperformance
C. Dam failure
C. Dam failure
D. Fair payment of tax
D. Fair payment of tax
E. Disease pandemic
E. Disease pandemic
F. Terrorism
F. Terrorism
Risk exposure: The potential for the pension
Risk exposure: The potential for the pension
scheme funding deficit to increase because
scheme funding deficit to increase because
of life expectancy rates leading to additional
of life expectancy rates leading to additional
contributions.
contributions.
Control/mitigation: Constant monitoring
Control/mitigation: Constant monitoring
combined with hedging against interest rates,
combined with hedging against interest rates,
inflation and growth asset risk.
inflation and growth asset risk.
Assurance: Policy and oversight is led by the
Assurance: Policy and oversight is led by the
pensions review management group, taking
pensions review management group, taking
Risk exposure: Failure to achieve financial
Risk exposure: Failure to achieve financial
outperformance due to macro economic
outperformance due to macro economic
Risk exposure: Uncontrolled release of a
Risk exposure: Uncontrolled release of a
significant volume of water from reservoirs
significant volume of water from reservoirs
conditions and efficiency challenges, impacting
conditions and efficiency challenges, impacting
due to flood damage, overtopping, earthquake
due to flood damage, overtopping, earthquake
the cost of debt and delivery of the company
the cost of debt and delivery of the company
or erosion leading to catastrophic impacts
or erosion leading to catastrophic impacts
business plan.
business plan.
downstream.
downstream.
Control/mitigation: Interest rate and inflation
Control/mitigation: Interest rate and inflation
management, ongoing monitoring of markets
management, ongoing monitoring of markets
and regulatory developments, and company
and regulatory developments, and company
business planning.
business planning.
Control/mitigation: Each reservoir is regularly
Control/mitigation: Each reservoir is regularly
inspected by engineers. Where appropriate,
inspected by engineers. Where appropriate,
risk reduction interventions are implemented
risk reduction interventions are implemented
through a prioritised investment programme.
through a prioritised investment programme.
into account advice from accountancy and law
into account advice from accountancy and law
Assurance: Second line assurance and
Assurance: Second line assurance and
firms. Pension governance is subject to periodic
firms. Pension governance is subject to periodic
oversight is provided by the board and treasury
oversight is provided by the board and treasury
internal audits.
internal audits.
committee in addition to executive quarterly
committee in addition to executive quarterly
business reviews. Subject to cyclical internal
business reviews. Subject to cyclical internal
audit reviews.
audit reviews.
Assurance: Various sources of second line
Assurance: Various sources of second line
assurance, including supervising engineers,
assurance, including supervising engineers,
dam safety group, wholesale assurance and
dam safety group, wholesale assurance and
regular board reviews. Independent assurance
regular board reviews. Independent assurance
is provided by panel engineers and internal
is provided by panel engineers and internal
audit.
audit.
Risk exposure: Failure to maximise the
Risk exposure: Failure to maximise the
available tax efficiencies and reliefs due to
available tax efficiencies and reliefs due to
changing mechanisms.
changing mechanisms.
Control/mitigation: Tax policies and objectives
Control/mitigation: Tax policies and objectives
cover: efficient structuring of commercial
cover: efficient structuring of commercial
activities; maintaining a robust governance and
activities; maintaining a robust governance and
risk management framework; and an open and
risk management framework; and an open and
transparent relationship with tax authorities.
transparent relationship with tax authorities.
Assurance: Tax policies are based on advice
Assurance: Tax policies are based on advice
from multiple sources, including accountancy
from multiple sources, including accountancy
firms. Third-party assurance is provided by
firms. Third-party assurance is provided by
internal audit and accountancy firms.
internal audit and accountancy firms.
Risk exposure: Serious illness in a large
Risk exposure: Serious illness in a large
proportion of the UK population and
proportion of the UK population and
consequences to our workforce, the wider
consequences to our workforce, the wider
supply chain and macro economy.
supply chain and macro economy.
Control/mitigation: The incident management
Control/mitigation: The incident management
process would be invoked, supported by
process would be invoked, supported by
the Pandemic Response Plan. This includes
the Pandemic Response Plan. This includes
the implementation of multi-channel
the implementation of multi-channel
communication with non-pharmaceutical
communication with non-pharmaceutical
interventions as per government guidance.
interventions as per government guidance.
Assurance: Wholesale assurance provides
Assurance: Wholesale assurance provides
second line assurance, with internal audit
second line assurance, with internal audit
undertaking various reviews.
undertaking various reviews.
Risk exposure: A significant asset to be
Risk exposure: A significant asset to be
compromised by terrorist activity leading to
compromised by terrorist activity leading to
loss of supply, contamination and/or pollution.
loss of supply, contamination and/or pollution.
Control/mitigation: A risk-based protection of
Control/mitigation: A risk-based protection of
assets in line with the Security and Emergency
assets in line with the Security and Emergency
Measures Direction (SEMD) and close liaison
Measures Direction (SEMD) and close liaison
with the Centre for the Protection of National
with the Centre for the Protection of National
Infrastructure (CPNI), regional counter terrorist
Infrastructure (CPNI), regional counter terrorist
units, local agencies and emergency services.
units, local agencies and emergency services.
Assurance: Security posture is based on
Assurance: Security posture is based on
various threat advisors. Second line assurance
various threat advisors. Second line assurance
is provided by the security steering group. In
is provided by the security steering group. In
addition, internal audit undertakes cyclical
addition, internal audit undertakes cyclical
audits with external technical assurance being
audits with external technical assurance being
delivered by specialists.
delivered by specialists.
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Stock Code: UU.
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Our risk management
The company’s most significant event-based risks
Mapping of common themes to the most significant group risks
The diagram below illustrates how the common themes (causal and consequence) relate to the company’s most significant event-
based risks, demonstrating how new and emerging circumstances can not only influence the risk exposure, but also focus attention
for control and mitigation.
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Top ten ranking risks relative to
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High impact, low likelihood risks
4 Cyber
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B Financial outperformance
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F Terrorism
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Our risk management
The company’s most significant event-based risks
Mapping of common themes to the most significant group risks
The diagram below illustrates how the common themes (causal and consequence) relate to the company’s most significant event-
based risks, demonstrating how new and emerging circumstances can not only influence the risk exposure, but also focus attention
for control and mitigation.
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High impact, low likelihood risks
4 Cyber
5 Water sufficiency
6 Carbon commitments
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B Financial outperformance
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F Terrorism
New and emerging risks
Following horizon scanning activity undertaken by
the business, a watching brief is held over risks/issues
which are worthy of note due to their new, emerging or
reputational status, and typically have too high levels
of uncertainty or complexity to quantify.
• Plastics: Attention on single-use plastic and
microplastic (plastics less than 5 mm) pollution is
ongoing, with their presence in the environment
being linked to the water cycle. We are responding
proactively and have formed a two pillar approach
to addressing plastics, focusing on operational
plastic waste and plastic in the water cycle.
• Perfluoroalkyl and polyfluoroalkyl substances
(PFAS): There is a growing focus on PFAS
chemicals including from our public liability
insurers who are looking to exclude related liability
claims. PFAS are manufactured chemicals used in
everyday products. Known as ‘forever chemicals’,
they are persistent, bioaccumulate and may be
toxic even at low levels. We have completed
an assessment of the likely presence of PFAS
in raw water sources, the results of which are
incorporated into the Drinking Water Safety Plan
and aligned to the requirements set out by the
Drinking Water Inspectorate.
Material litigation
The group robustly defends litigation where
appropriate and seeks to minimise its exposure by
establishing provisions and seeking recovery wherever
possible. Litigation of a material nature is regularly
reported to the group board.
In relation to the Manchester Ship Canal Company
matter reported in previous years, a hearing was held
in the Court of Appeal at the end of March 2022. A
decision is expected during summer 2022, which may
provide further clarity in relation to the rights and
remedies afforded to the parties and others in relation
to discharges by water companies into the canal and
other watercourses.
Beyond this, there is nothing to report regarding
material litigation, including in respect of the Argentina
multiparty ‘class action’ reported on in previous
years, and to which there have been no material
developments.
Conflict in Ukraine
The conflict in Ukraine has led to a number of
risks emerging (growing, developing or becoming
more prominent) from a security and economic
perspective.
Legislative/regulatory change
In addition to the emerging economic conditions
exacerbated by the conflict in Ukraine, legislative
and regulatory change is also a prominent emerging
theme which impacts a number of event-based risks.
Relatively recent developments include uncertainty
associated with the Environment Agency’s
interpretation of the Industrial Emissions Directive
(IED) and Farming Rules for Water (FRfW) and
implications for ongoing compliance, process and
investment across wastewater and bioresources risk.
As a responsible company, United Utilities is
committed to the protection and enhancement of the
environment and can demonstrate many previous and
current initiatives, the most recent being the road
map to ‘better river health’ including a pledge to invest
£230 million into 184 kilometres of rivers by 2025. We
will continue to work closely with all our regulators
and partners to deliver better solutions including
full cooperation with the ongoing industry wide
investigation by Ofwat and the Environment Agency
into possible unpermitted sewage discharges into
rivers and watercourses.
The Environment Act, which was enacted in November
2021, has potentially far more significant implications
for the water sector, due to it being the UK’s new
framework of environmental protection. Depending
on how the new legislation will be interpreted and
applied, meeting its requirements may demand a
fundamental shift in the water industry’s approach to
environmental risks, requiring significant investment
across multiple AMPs.
• Cyber: The likelihood of the cyber risk has been
increased to reflect the rising tensions between
Russia and the west, while taking into account the
adoption of increased security measures which
include security operations teams on extended
high alert and the rapid deployment of technical
blocking of critical indicators of compromise.
• Price volatility: This risk reflects inflationary
uplift across multiple commodities with energy
the most volatile.
• Security of the supply chain: This risk reflects
the knock on impact of inflationary pressure on
manufacturing output with some production
facilities reducing operations. It also reflects
sanctions imposed against Russia and Belarus and
the restriction or prevention of access to certain
goods.
• Cash collection: Inflationary pressure is having a
significant impact on the cost of living, affecting
customers’ ability to pay bills.
• Supplier viability: This risk reflects the impact
the unprecedented price increases are having
on suppliers who cannot honour locked prices
in contracts and the threat of suppliers going
into administration with a knock-on effect to
operations and the capital delivery programme.
• Credit rating: Whilst underlying credit quality
is not a concern, the impact of high inflation
on finance expense results in the potential for
Credit Agency thresholds to be breached when
combined with other factors such as additional
investment spend to meet environmental and
service improvements over and above price
review allowances.
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Stock Code: UU.
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Promoting a
diverse and
inclusive culture
We are committed to promoting diversity, inclusion and equality right across our business.
We recruit from all areas of our community to help ensure our business reflects the
customers we serve, and we strive to make sure all our people feel valued regardless of their
gender, age, race, disability, sexuality or social background.
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Governance
Corporate governance report
– Board of directors
– Letter from the Chair
– Nomination committee report
– Audit committee report
– Treasury committee report
– Corporate responsibility
committee report
– Remuneration committee report
– Tax policies and objectives
Directors’ report
Statement of directors’ responsibilities
11 2
1 1 6
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143
155
156
160
192
194
198
Promoting a
diverse and
inclusive culture
We are committed to promoting diversity, inclusion and equality right across our business.
We recruit from all areas of our community to help ensure our business reflects the
customers we serve, and we strive to make sure all our people feel valued regardless of their
gender, age, race, disability, sexuality or social background.
110
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Stock Code: UU.
111
Corporate governance report
Board of directors
N
C
T
Sir David Higgins
Chair
Steve Mogford
Chief Executive Officer (CEO)
Phil Aspin
Chief Financial Officer (CFO)
Responsibilities: Responsible for the
leadership of the board, setting its
agenda and ensuring its effectiveness on
all aspects of its role.
Qualifications: BEng Civil Engineering,
Diploma Securities Institute of Australia,
Fellow of the Institute of Civil Engineers
and the Royal Academy of Engineering.
Appointment to the board: May 2019;
appointed as Chair in January 2020.
Skills and experience: Sir David has
spent his career overseeing high profile
infrastructure projects, including: the
delivery of the Sydney Olympic Village
and Aquatics centre; Bluewater Shopping
Centre, Kent; and the delivery of the 2012
London Olympic Infrastructure Project.
Career experience: Sir David was
previously chief executive of: Network
Rail Limited; The Olympic Delivery
Authority; and English Partnerships. He
has held non-executive roles as chair
of both High Speed Two Limited and
Sirius Minerals plc. In December 2019 he
stepped down as non-executive director
and chair of the remuneration committee
at the Commonwealth Bank of Australia.
Current directorships/business
interests: Chair of Gatwick Airport
Limited and a member of the Council at
the London School of Economics. He is
Chair of United Utilities Water Limited.
Independence: Sir David met the 2018
UK Corporate Governance Code’s
independence criteria (provision 10) on his
appointment as a non-executive director
and chair designate.
Specific contribution to the company’s
long-term success: Sir David’s experience
of major infrastructure projects and his
knowledge and understanding of the role of
regulators will be invaluable in meeting the
challenges of the current regulatory period
and beyond. As chair of the nomination
committee he is responsible for ensuring the
succession plans for the board and senior
management identify the right skillsets to
face the challenges of the business.
Responsibilities: To manage the group’s
business and to implement the strategy
and policies approved by the board.
Qualifications: BSc (Hons) Astrophysics/
Maths/Physics.
Appointment to the board: January 2011.
Skills and experience: Steve’s
experience of the highly competitive
defence market and of complex
design, manufacturing and support
programmes has driven forwards the
board’s strategy of improving customer
service and operational performance
at United Utilities. His perspective of
the construction and infrastructure
sector provides valuable experience and
insight to support United Utilities’ capital
investment programme.
Career experience: Steve was previously
chief executive of SELEX Galileo, the
defence electronics company owned
by Italian aerospace and defence
organisation Finmeccanica, chief
operating officer of BAE Systems PLC
and a member of its PLC board. His early
career was spent with British Aerospace
PLC. He is a former non-executive
director of G4S plc.
Current directorships/business
interests: He is Chief Executive Officer
of United Utilities Water Limited and a
non-executive director of Water Plus, a
joint venture with Severn Trent serving
business customers. With effect from
1 August 2022, he will join the board of
QinetiQ Group plc as a non-executive
director.
Specific contribution to the company’s
long-term success: As the Chief
Executive Officer, Steve has driven a step
change in the company’s operational
performance, and has implemented a
Systems Thinking approach to underpin
future operational activities and improved
performance.
Responsibilities: To manage the group’s
financial affairs, to contribute to the
management of the group’s business and
to the implementation of the strategy and
policies approved by the board.
Qualifications: BSc (Hons) Mathematics,
Chartered Accountant (ACA), Fellow
of the Association of Corporate
Treasurers (FCT).
Appointment to the board: July 2020.
Skills and experience: Phil has extensive
experience of financial and corporate
reporting, having qualified as a chartered
accountant with KPMG and more latterly
through his role as group controller. He
has a comprehensive knowledge of capital
markets and corporate finance underpinned
through his previous role as group treasurer
and his FCT qualification. Having been
actively engaged in the last four regulatory
price reviews he has a strong understanding
of the economic regulatory environment.
Career experience: Phil has over 25 years’
experience working for United Utilities. Prior
to his appointment as CFO in July 2020,
he was group controller with responsibility
for the group’s financial reporting and
prior to that he was group treasurer with
responsibility for funding and financial risk
management. He has been a member of
EFRAG TEG and chaired the EFRAG Rate
Regulated Activities Working Group.
Current directorships/business
interests: Phil was appointed as a
member of the UK Accounting Standards
Endorsement Board in March 2021.
He is chair of the 100 Group pensions
committee and a member of both
the 100 Group main committee and
the stakeholder communications and
reporting committee. He is Chief
Financial Officer of United Utilities Water
Limited and a non-executive director of
Water Plus, a joint venture with Severn
Trent serving business customers.
Specific contribution to the company’s
long-term success: Phil has driven forward
the financial performance of the group
and delivered the group’s competitive
advantage in financial risk management
and excellence in corporate reporting.
unitedutilities.com/corporate
112
Louise Beardmore
Chief Executive Officer designate
(CEO designate)
Mark Clare
Senior independent
non-executive director
Liam Butterworth
Independent
non-executive director
Responsibilities: To work with, and
support, the Chief Executive Officer
in managing the group’s business and
to lead the creation of UUW’s PR24
business plan, covering the next five-year
regulatory period.
Qualifications: BSc (Hons) Business
Management, Fellow of the Chartered
Institute of Personnel Development, Vice-
President of the Institute of Customer
Services.
Appointment to the board: May 2022
Skills and experience: Louise has extensive
experience working in utility companies
both in the UK and internationally and she
consistently demonstrates the ability to
successfully design, drive and implement
organisational strategy in different operating
environments. She has a strong strategic
mind set and a track record of delivering
major transformational change within
regulated utility and service structures,
improving performance for all stakeholders.
Career experience: Louise joined United
Utilities on its graduate programme
and has comprehensive experience
of the company, its customers and
its regulators. She was appointed as
customer service and people director in
2016, prior to which she held a number of
senior positions across the United Utilities
group. She has led teams in business
transformation, water operations,
electricity and telecoms as well as
customer service and people capabilities
both in the UK and internationally. She
has recently completed the corporate
director programme at Harvard Business
School.
Current directorships/business
interests: Louise is Chief Executive
Officer designate of United Utilities Water
Limited. She is a non-executive director
of Engage for Success and named on
the Northern Power Women’s ‘Power
List’ in recognition of her contribution to
diversity, inclusion and talent, paving the
way for female leaders in business.
Specific contribution to the company’s
long-term success: Louise’s strategic
vision and constant customer focus will
continue to build on the group’s significant
performance and delivery for customers,
communities and the environment.
Responsibilities: Responsible, in addition
Responsibilities: To challenge
to his role as an independent non-
executive director, for discussing any
constructively the executive directors
and monitor the delivery of the strategy
concerns with shareholders that cannot
within the risk and control framework
be resolved through the normal channels
set by the board.
of communication with the Chair or Chief
Executive Officer.
Qualifications: Chartered Management
Accountant (FCMA).
Qualifications: MBA Business
Administration and Management,
CIM Marketing, HND Mechanical
Production Engineering.
Appointment to the board:
November 2013.
Appointment to the board:
January 2022
Skills and experience: Through his
previous roles at British Gas and BAA,
Skills and experience: As a serving
CEO, Liam brings strong engineering
Mark has a strong background operating
and industrial technology experience
within regulated environments. His
to the board, with a track record of
extensive knowledge of customer-facing
managing performance and enhancing
businesses is particularly valuable for
United Utilities in the pursuit of our
strategy to improve customer service.
corporate culture.
Career experience: Liam has over 30
years’ experience in the automotive
Career experience: Mark was previously
industry. He started his career at Lucas
chief executive of Barratt Developments
Industries as an apprentice toolmaker,
plc. He is a former trustee of the Building
before moving into marketing, sales
Research Establishment and the UK
Green Building Council. Mark held
and purchasing at FCI Automotive.
Joining Delphi Technologies plc in 2012,
senior executive roles in Centrica plc and
he became CEO in December 2017. He
British Gas. He is a former non-executive
joined GKN Automotive Limited, owned
director at BAA plc, Ladbrokes Coral PLC
by Melrose plc, as CEO in 2018.
Current directorships/business
interests: Liam is CEO of GKN
Automotive Limited. He is also a
non-executive director of United
Utilities Water Limited.
Specific contribution to the company’s
long-term success: Liam’s operational
experience contributes to the board’s
continuing focus on the performance of
the business via the Systems Thinking
approach.
and Aggreko plc.
Current directorships/business
interests: Mark was appointed as senior
independent non-executive director at
Wickes Group plc and as chair of the
remuneration committee in April 2021.
He is non-executive chair at Grainger plc
and a non-executive director at Premier
Marinas Holdings Limited. He is an
independent non-executive director of
United Utilities Water Limited.
Specific contribution to the company’s
long-term success: As senior
independent non-executive director,
Mark applies his own considerable board
experience gained during his career to
United Utilities and provides a sounding
board to the executive in many areas.
Corporate governance report
Board of directors
Board role
Chair
Committee membership
N Nomination committee
R Remuneration committee
Executive director
C Corporate responsibility committee
A Audit committee
Senior independent non-executive director
T Treasury committee
Chair of the committee
Independent non-executive director
N
C
T
Phil Aspin
Phil Aspin
Sir David Higgins
Sir David Higgins
Chair
Chair
Steve Mogford
Steve Mogford
Chief Executive Officer (CEO)
Chief Executive Officer (CEO)
Chief Financial Officer (CFO)
Chief Financial Officer (CFO)
Responsibilities: Responsible for the
Responsibilities: Responsible for the
leadership of the board, setting its
leadership of the board, setting its
Responsibilities: To manage the group’s
Responsibilities: To manage the group’s
Responsibilities: To manage the group’s
Responsibilities: To manage the group’s
business and to implement the strategy
business and to implement the strategy
financial affairs, to contribute to the
financial affairs, to contribute to the
agenda and ensuring its effectiveness on
agenda and ensuring its effectiveness on
and policies approved by the board.
and policies approved by the board.
all aspects of its role.
all aspects of its role.
Qualifications: BEng Civil Engineering,
Qualifications: BEng Civil Engineering,
Diploma Securities Institute of Australia,
Diploma Securities Institute of Australia,
Fellow of the Institute of Civil Engineers
Fellow of the Institute of Civil Engineers
and the Royal Academy of Engineering.
and the Royal Academy of Engineering.
Appointment to the board: May 2019;
Appointment to the board: May 2019;
appointed as Chair in January 2020.
appointed as Chair in January 2020.
Skills and experience: Sir David has
Skills and experience: Sir David has
Qualifications: BSc (Hons) Astrophysics/
Qualifications: BSc (Hons) Astrophysics/
Maths/Physics.
Maths/Physics.
Appointment to the board: January 2011.
Appointment to the board: January 2011.
Skills and experience: Steve’s
Skills and experience: Steve’s
experience of the highly competitive
experience of the highly competitive
defence market and of complex
defence market and of complex
design, manufacturing and support
design, manufacturing and support
programmes has driven forwards the
programmes has driven forwards the
management of the group’s business and
management of the group’s business and
to the implementation of the strategy and
to the implementation of the strategy and
policies approved by the board.
policies approved by the board.
Qualifications: BSc (Hons) Mathematics,
Qualifications: BSc (Hons) Mathematics,
Chartered Accountant (ACA), Fellow
Chartered Accountant (ACA), Fellow
of the Association of Corporate
of the Association of Corporate
Treasurers (FCT).
Treasurers (FCT).
Appointment to the board: July 2020.
Appointment to the board: July 2020.
Skills and experience: Phil has extensive
Skills and experience: Phil has extensive
spent his career overseeing high profile
spent his career overseeing high profile
board’s strategy of improving customer
board’s strategy of improving customer
experience of financial and corporate
experience of financial and corporate
infrastructure projects, including: the
infrastructure projects, including: the
delivery of the Sydney Olympic Village
delivery of the Sydney Olympic Village
service and operational performance
service and operational performance
at United Utilities. His perspective of
at United Utilities. His perspective of
and Aquatics centre; Bluewater Shopping
and Aquatics centre; Bluewater Shopping
the construction and infrastructure
the construction and infrastructure
reporting, having qualified as a chartered
reporting, having qualified as a chartered
accountant with KPMG and more latterly
accountant with KPMG and more latterly
through his role as group controller. He
through his role as group controller. He
Centre, Kent; and the delivery of the 2012
Centre, Kent; and the delivery of the 2012
sector provides valuable experience and
sector provides valuable experience and
has a comprehensive knowledge of capital
has a comprehensive knowledge of capital
London Olympic Infrastructure Project.
London Olympic Infrastructure Project.
insight to support United Utilities’ capital
insight to support United Utilities’ capital
markets and corporate finance underpinned
markets and corporate finance underpinned
Career experience: Sir David was
Career experience: Sir David was
investment programme.
investment programme.
previously chief executive of: Network
previously chief executive of: Network
Career experience: Steve was previously
Career experience: Steve was previously
Rail Limited; The Olympic Delivery
Rail Limited; The Olympic Delivery
Authority; and English Partnerships. He
Authority; and English Partnerships. He
has held non-executive roles as chair
has held non-executive roles as chair
of both High Speed Two Limited and
of both High Speed Two Limited and
chief executive of SELEX Galileo, the
chief executive of SELEX Galileo, the
defence electronics company owned
defence electronics company owned
by Italian aerospace and defence
by Italian aerospace and defence
organisation Finmeccanica, chief
organisation Finmeccanica, chief
through his previous role as group treasurer
through his previous role as group treasurer
and his FCT qualification. Having been
and his FCT qualification. Having been
actively engaged in the last four regulatory
actively engaged in the last four regulatory
price reviews he has a strong understanding
price reviews he has a strong understanding
of the economic regulatory environment.
of the economic regulatory environment.
Career experience: Phil has over 25 years’
Career experience: Phil has over 25 years’
Sirius Minerals plc. In December 2019 he
Sirius Minerals plc. In December 2019 he
operating officer of BAE Systems PLC
operating officer of BAE Systems PLC
experience working for United Utilities. Prior
experience working for United Utilities. Prior
stepped down as non-executive director
stepped down as non-executive director
and a member of its PLC board. His early
and a member of its PLC board. His early
to his appointment as CFO in July 2020,
to his appointment as CFO in July 2020,
and chair of the remuneration committee
and chair of the remuneration committee
career was spent with British Aerospace
career was spent with British Aerospace
he was group controller with responsibility
he was group controller with responsibility
at the Commonwealth Bank of Australia.
at the Commonwealth Bank of Australia.
PLC. He is a former non-executive
PLC. He is a former non-executive
Current directorships/business
Current directorships/business
interests: Chair of Gatwick Airport
interests: Chair of Gatwick Airport
director of G4S plc.
director of G4S plc.
Current directorships/business
Current directorships/business
Limited and a member of the Council at
Limited and a member of the Council at
interests: He is Chief Executive Officer
interests: He is Chief Executive Officer
the London School of Economics. He is
the London School of Economics. He is
Chair of United Utilities Water Limited.
Chair of United Utilities Water Limited.
Independence: Sir David met the 2018
Independence: Sir David met the 2018
UK Corporate Governance Code’s
UK Corporate Governance Code’s
independence criteria (provision 10) on his
independence criteria (provision 10) on his
appointment as a non-executive director
appointment as a non-executive director
and chair designate.
and chair designate.
Specific contribution to the company’s
Specific contribution to the company’s
long-term success: Sir David’s experience
long-term success: Sir David’s experience
of major infrastructure projects and his
of major infrastructure projects and his
knowledge and understanding of the role of
knowledge and understanding of the role of
regulators will be invaluable in meeting the
regulators will be invaluable in meeting the
challenges of the current regulatory period
challenges of the current regulatory period
and beyond. As chair of the nomination
and beyond. As chair of the nomination
committee he is responsible for ensuring the
committee he is responsible for ensuring the
succession plans for the board and senior
succession plans for the board and senior
management identify the right skillsets to
management identify the right skillsets to
face the challenges of the business.
face the challenges of the business.
of United Utilities Water Limited and a
of United Utilities Water Limited and a
non-executive director of Water Plus, a
non-executive director of Water Plus, a
joint venture with Severn Trent serving
joint venture with Severn Trent serving
business customers. With effect from
business customers. With effect from
1 August 2022, he will join the board of
1 August 2022, he will join the board of
QinetiQ Group plc as a non-executive
QinetiQ Group plc as a non-executive
director.
director.
Specific contribution to the company’s
Specific contribution to the company’s
long-term success: As the Chief
long-term success: As the Chief
Executive Officer, Steve has driven a step
Executive Officer, Steve has driven a step
change in the company’s operational
change in the company’s operational
performance, and has implemented a
performance, and has implemented a
Systems Thinking approach to underpin
Systems Thinking approach to underpin
future operational activities and improved
future operational activities and improved
performance.
performance.
for the group’s financial reporting and
for the group’s financial reporting and
prior to that he was group treasurer with
prior to that he was group treasurer with
responsibility for funding and financial risk
responsibility for funding and financial risk
management. He has been a member of
management. He has been a member of
EFRAG TEG and chaired the EFRAG Rate
EFRAG TEG and chaired the EFRAG Rate
Regulated Activities Working Group.
Regulated Activities Working Group.
Current directorships/business
Current directorships/business
interests: Phil was appointed as a
interests: Phil was appointed as a
member of the UK Accounting Standards
member of the UK Accounting Standards
Endorsement Board in March 2021.
Endorsement Board in March 2021.
He is chair of the 100 Group pensions
He is chair of the 100 Group pensions
committee and a member of both
committee and a member of both
the 100 Group main committee and
the 100 Group main committee and
the stakeholder communications and
the stakeholder communications and
reporting committee. He is Chief
reporting committee. He is Chief
Financial Officer of United Utilities Water
Financial Officer of United Utilities Water
Limited and a non-executive director of
Limited and a non-executive director of
Water Plus, a joint venture with Severn
Water Plus, a joint venture with Severn
Trent serving business customers.
Trent serving business customers.
Specific contribution to the company’s
Specific contribution to the company’s
long-term success: Phil has driven forward
long-term success: Phil has driven forward
the financial performance of the group
the financial performance of the group
and delivered the group’s competitive
and delivered the group’s competitive
advantage in financial risk management
advantage in financial risk management
and excellence in corporate reporting.
and excellence in corporate reporting.
N
R
N
A
Mark Clare
Mark Clare
Senior independent
Senior independent
non-executive director
non-executive director
Responsibilities: Responsible, in addition
Responsibilities: Responsible, in addition
to his role as an independent non-
to his role as an independent non-
executive director, for discussing any
executive director, for discussing any
concerns with shareholders that cannot
concerns with shareholders that cannot
be resolved through the normal channels
be resolved through the normal channels
of communication with the Chair or Chief
of communication with the Chair or Chief
Executive Officer.
Executive Officer.
Qualifications: Chartered Management
Qualifications: Chartered Management
Accountant (FCMA).
Accountant (FCMA).
Liam Butterworth
Liam Butterworth
Independent
Independent
non-executive director
non-executive director
Responsibilities: To challenge
Responsibilities: To challenge
constructively the executive directors
constructively the executive directors
and monitor the delivery of the strategy
and monitor the delivery of the strategy
within the risk and control framework
within the risk and control framework
set by the board.
set by the board.
Qualifications: MBA Business
Qualifications: MBA Business
Administration and Management,
Administration and Management,
CIM Marketing, HND Mechanical
CIM Marketing, HND Mechanical
Production Engineering.
Production Engineering.
Appointment to the board:
Appointment to the board:
November 2013.
November 2013.
Appointment to the board:
Appointment to the board:
January 2022
January 2022
Skills and experience: As a serving
Skills and experience: As a serving
CEO, Liam brings strong engineering
CEO, Liam brings strong engineering
and industrial technology experience
and industrial technology experience
to the board, with a track record of
to the board, with a track record of
managing performance and enhancing
managing performance and enhancing
corporate culture.
corporate culture.
Career experience: Liam has over 30
Career experience: Liam has over 30
years’ experience in the automotive
years’ experience in the automotive
industry. He started his career at Lucas
industry. He started his career at Lucas
Industries as an apprentice toolmaker,
Industries as an apprentice toolmaker,
before moving into marketing, sales
before moving into marketing, sales
and purchasing at FCI Automotive.
and purchasing at FCI Automotive.
Joining Delphi Technologies plc in 2012,
Joining Delphi Technologies plc in 2012,
he became CEO in December 2017. He
he became CEO in December 2017. He
joined GKN Automotive Limited, owned
joined GKN Automotive Limited, owned
by Melrose plc, as CEO in 2018.
by Melrose plc, as CEO in 2018.
Current directorships/business
Current directorships/business
interests: Liam is CEO of GKN
interests: Liam is CEO of GKN
Automotive Limited. He is also a
Automotive Limited. He is also a
non-executive director of United
non-executive director of United
Utilities Water Limited.
Utilities Water Limited.
Specific contribution to the company’s
Specific contribution to the company’s
long-term success: Liam’s operational
long-term success: Liam’s operational
experience contributes to the board’s
experience contributes to the board’s
continuing focus on the performance of
continuing focus on the performance of
the business via the Systems Thinking
the business via the Systems Thinking
approach.
approach.
Skills and experience: Through his
Skills and experience: Through his
previous roles at British Gas and BAA,
previous roles at British Gas and BAA,
Mark has a strong background operating
Mark has a strong background operating
within regulated environments. His
within regulated environments. His
extensive knowledge of customer-facing
extensive knowledge of customer-facing
businesses is particularly valuable for
businesses is particularly valuable for
United Utilities in the pursuit of our
United Utilities in the pursuit of our
strategy to improve customer service.
strategy to improve customer service.
Career experience: Mark was previously
Career experience: Mark was previously
chief executive of Barratt Developments
chief executive of Barratt Developments
plc. He is a former trustee of the Building
plc. He is a former trustee of the Building
Research Establishment and the UK
Research Establishment and the UK
Green Building Council. Mark held
Green Building Council. Mark held
senior executive roles in Centrica plc and
senior executive roles in Centrica plc and
British Gas. He is a former non-executive
British Gas. He is a former non-executive
director at BAA plc, Ladbrokes Coral PLC
director at BAA plc, Ladbrokes Coral PLC
and Aggreko plc.
and Aggreko plc.
Current directorships/business
Current directorships/business
interests: Mark was appointed as senior
interests: Mark was appointed as senior
independent non-executive director at
independent non-executive director at
Wickes Group plc and as chair of the
Wickes Group plc and as chair of the
remuneration committee in April 2021.
remuneration committee in April 2021.
He is non-executive chair at Grainger plc
He is non-executive chair at Grainger plc
and a non-executive director at Premier
and a non-executive director at Premier
Marinas Holdings Limited. He is an
Marinas Holdings Limited. He is an
independent non-executive director of
independent non-executive director of
United Utilities Water Limited.
United Utilities Water Limited.
Specific contribution to the company’s
Specific contribution to the company’s
long-term success: As senior
long-term success: As senior
independent non-executive director,
independent non-executive director,
Mark applies his own considerable board
Mark applies his own considerable board
experience gained during his career to
experience gained during his career to
United Utilities and provides a sounding
United Utilities and provides a sounding
board to the executive in many areas.
board to the executive in many areas.
Louise Beardmore
Louise Beardmore
Chief Executive Officer designate
Chief Executive Officer designate
(CEO designate)
(CEO designate)
Responsibilities: To work with, and
Responsibilities: To work with, and
support, the Chief Executive Officer
support, the Chief Executive Officer
in managing the group’s business and
in managing the group’s business and
to lead the creation of UUW’s PR24
to lead the creation of UUW’s PR24
business plan, covering the next five-year
business plan, covering the next five-year
regulatory period.
regulatory period.
Qualifications: BSc (Hons) Business
Qualifications: BSc (Hons) Business
Management, Fellow of the Chartered
Management, Fellow of the Chartered
Institute of Personnel Development, Vice-
Institute of Personnel Development, Vice-
President of the Institute of Customer
President of the Institute of Customer
Services.
Services.
Appointment to the board: May 2022
Appointment to the board: May 2022
Skills and experience: Louise has extensive
Skills and experience: Louise has extensive
experience working in utility companies
experience working in utility companies
both in the UK and internationally and she
both in the UK and internationally and she
consistently demonstrates the ability to
consistently demonstrates the ability to
successfully design, drive and implement
successfully design, drive and implement
organisational strategy in different operating
organisational strategy in different operating
environments. She has a strong strategic
environments. She has a strong strategic
mind set and a track record of delivering
mind set and a track record of delivering
major transformational change within
major transformational change within
regulated utility and service structures,
regulated utility and service structures,
improving performance for all stakeholders.
improving performance for all stakeholders.
Career experience: Louise joined United
Career experience: Louise joined United
Utilities on its graduate programme
Utilities on its graduate programme
and has comprehensive experience
and has comprehensive experience
of the company, its customers and
of the company, its customers and
its regulators. She was appointed as
its regulators. She was appointed as
customer service and people director in
customer service and people director in
2016, prior to which she held a number of
2016, prior to which she held a number of
senior positions across the United Utilities
senior positions across the United Utilities
group. She has led teams in business
group. She has led teams in business
transformation, water operations,
transformation, water operations,
electricity and telecoms as well as
electricity and telecoms as well as
customer service and people capabilities
customer service and people capabilities
both in the UK and internationally. She
both in the UK and internationally. She
has recently completed the corporate
has recently completed the corporate
director programme at Harvard Business
director programme at Harvard Business
School.
School.
Current directorships/business
Current directorships/business
interests: Louise is Chief Executive
interests: Louise is Chief Executive
Officer designate of United Utilities Water
Officer designate of United Utilities Water
Limited. She is a non-executive director
Limited. She is a non-executive director
of Engage for Success and named on
of Engage for Success and named on
the Northern Power Women’s ‘Power
the Northern Power Women’s ‘Power
List’ in recognition of her contribution to
List’ in recognition of her contribution to
diversity, inclusion and talent, paving the
diversity, inclusion and talent, paving the
way for female leaders in business.
way for female leaders in business.
Specific contribution to the company’s
Specific contribution to the company’s
long-term success: Louise’s strategic
long-term success: Louise’s strategic
vision and constant customer focus will
vision and constant customer focus will
continue to build on the group’s significant
continue to build on the group’s significant
performance and delivery for customers,
performance and delivery for customers,
communities and the environment.
communities and the environment.
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Corporate governance report
Board of directors
N A C
N R
N R C
Stephen Carter CBE
Independent
non-executive director
Responsibilities: To challenge
constructively the executive directors and
monitor the delivery of the strategy within
the risk and control framework set by the
board and to lead the board’s agenda on
acting responsibly as a business.
Qualifications: Bachelor of Laws (Hons).
Kath Cates
Independent
non-executive director
Responsibilities: To challenge
constructively the executive directors
and monitor the delivery of the strategy
within the risk and control framework set
by the board.
Qualifications: Solicitor of England and
Wales.
Appointment to the board:
September 2014.
Appointment to the board:
September 2020.
Skills and experience: As the chief
executive of a FTSE 100 listed company,
Stephen brings current operational
experience to the board. His public sector
experience provides additional insight in
regulation and government relations. His
day-to-day experience in the information
and technology industries ensures that
the board is kept abreast of these areas of
the company’s operating environment.
Career experience: Stephen previously
held senior executive roles at Alcatel
Lucent Inc. and a number of public
sector/service roles, including serving
a term as the founding chief executive
of Ofcom. He stepped down as a non-
executive director at the Department for
Business Energy and Industrial Strategy
in December 2020. He is a former chair
of Ashridge Business School. A Life Peer
since 2008.
Current directorships/business
interests: Stephen is group chief
executive of Informa plc. He is an
independent non-executive director of
United Utilities Water Limited.
Skills and experience: Kath has spent
most of her career working in a regulated
environment in the financial services
industry. Since 2014, she has focused on
her non-executive roles, chairing all the
main board committees and undertaking
the role of senior independent director.
Career experience: Kath previously
was chief operating officer at Standard
Chartered plc before which she held
a number of roles at UBS Limited over
a 22-year period, prior to which she
qualified as a solicitor. She is a former
non-executive director at Brewin Dolphin
Holdings plc and RSA Insurance Group
plc, where she chaired the remuneration
committee.
Current directorships/business
interests: Kath is a non-executive
director at Columbia Threadneedle
Investments where she chairs the TPEN
audit committee. She is a non-executive
director of TP ICAP Group Plc and
Brown Shipley. She is an independent
non-executive director of United Utilities
Water Limited.
Specific contribution to the company’s
long-term success: Stephen’s experience
as a current chief executive and his
previous work in the public sector and
government provides valuable insight for
board discussions on regulatory matters.
Specific contribution to the company’s
long-term success: Kath’s broad board
experience and knowledge of different
regulated sectors enables her to
contribute to board governance and risk
management at United Utilities.
Alison Goligher
Independent
non-executive director
Responsibilities: To challenge
constructively the executive directors and
monitor the delivery of the strategy within
the risk and control framework set by the
board and to lead the board’s activities
concerning directors’ remuneration.
Qualifications: BSc (Hons) Mathematical
Physics, MEng Petroleum Engineering.
Appointment to the board: August 2016.
Skills and experience: Alison has strong
technical and capital project management
skills, having been involved in large
projects and the production side of Royal
Dutch Shell’s business. This experience
of engineering and industrial sectors
provides the board with additional insight
into delivering United Utilities’ capital
investment programme.
Career experience: Royal Dutch Shell
(2006 to 2015), where Alison’s most
recent executive role was Executive
Vice President Upstream International
Unconventionals. Prior to that she
spent 17 years with Schlumberger, an
international supplier of technology,
integrated project management and
information solutions to the oil and gas
industry.
Current directorships/business
interests: Alison is a non-executive
director and chair of the remuneration
committee at Meggitt PLC and a part-
time executive chair at Silixa Ltd. In
February 2021 she was appointed as
a non-executive director of Technip
Energies NV. She is an independent
non-executive director of United Utilities
Water Limited.
Specific contribution to the
company’s long-term success: Alison’s
understanding of the operational
challenges of large capital projects and
the benefits of deploying technology
provides valuable insight into addressing
the longer-term strategic risks faced by
the business. Her role as the designated
non-executive director for workforce
engagement provides the board with
a better understanding of the views of
employees and greater clarity on the
culture of the company.
unitedutilities.com/corporate
114
Paulette Rowe
Independent
non-executive director
Doug Webb
Independent
non-executive director
Responsibilities: To challenge
Responsibilities: To challenge
constructively the executive directors
constructively the executive directors and
and monitor the delivery of the strategy
monitor the delivery of the strategy within
within the risk and control framework set
the risk and control framework set by the
by the board.
board and to lead the audit and treasury
Qualifications: MEng + Man (Hons), MBA.
Appointment to the board: July 2017.
Skills and experience: Paulette has
spent most of her career in the regulated
finance industry and so provides the
board with additional perspective
and first-hand regulatory experience.
Her experience of technology-driven
transformation contributes to United
committees.
Qualifications: MA Geography and
Management Science, Chartered
Accountant (FCA).
Appointment to the board:
September 2020.
Skills and experience: Doug has
extensive career experience in finance
from qualifying as a chartered accountant
Utilities’ customer experience programme
with Price Waterhouse, his executive
and its Systems Thinking approach.
Career experience: Previously held
senior executive roles in banking and
technology at Facebook, Barclays and the
roles as CFO of major listed companies
and more recently through his non-
executive positions and focus on audit
committee activities.
Royal Bank of Scotland/NatWest. Former
Career experience: Doug was previously
trustee and chair of children’s charity The
chief financial officer at Meggitt PLC
Mayor’s Fund for London.
Current directorships/business
interests: CEO of Integrated and
Ecommerce Solutions and member
of the Paysafe Group executive since
January 2020. Paysafe, a former FTSE
from 2013 to 2018 and prior to that, he
was chief financial officer at the London
Stock Exchange Group plc and QinetiQ
Group plc. He is a former non-executive
director and audit committee chair at
SEGRO plc, having stepped down in 2019.
250 company, is now privately owned by
Current directorships/business
PE firms CVC and Blackstone. She is an
interests: Doug currently serves as a non-
independent non-executive director of
executive director and audit committee
United Utilities Water Limited.
chair at Johnson Matthey plc, BMT Group
Specific contribution to the company’s
long-term success: Paulette’s wide-
ranging experience in regulated sectors,
profit and loss management, technology
Ltd and the Manufacturing Technology
Centre Ltd. He is an independent non-
executive director of United Utilities
Water Limited.
and innovation enables her to provide a
Specific contribution to the company’s
first-hand contribution to many board
topics of discussion. In her current
executive role she often faces many of
the same issues, and has been able to
long-term success: Doug applies his
financial capabilities and his technical
knowledge and experience covering
audit and treasury matters in his role as
provide support to senior management at
chair of both the audit and the treasury
United Utilities.
committee strengthen the board’s
financial expertise.
Corporate governance report
Board of directors
N A C
N R
N R C
N A
N A T
Stephen Carter CBE
Stephen Carter CBE
Independent
Independent
non-executive director
non-executive director
Kath Cates
Kath Cates
Independent
Independent
non-executive director
non-executive director
Alison Goligher
Alison Goligher
Independent
Independent
non-executive director
non-executive director
Responsibilities: To challenge
Responsibilities: To challenge
Responsibilities: To challenge
Responsibilities: To challenge
Responsibilities: To challenge
Responsibilities: To challenge
constructively the executive directors and
constructively the executive directors and
constructively the executive directors
constructively the executive directors
monitor the delivery of the strategy within
monitor the delivery of the strategy within
and monitor the delivery of the strategy
and monitor the delivery of the strategy
constructively the executive directors and
constructively the executive directors and
monitor the delivery of the strategy within
monitor the delivery of the strategy within
the risk and control framework set by the
the risk and control framework set by the
within the risk and control framework set
within the risk and control framework set
the risk and control framework set by the
the risk and control framework set by the
board and to lead the board’s agenda on
board and to lead the board’s agenda on
by the board.
by the board.
acting responsibly as a business.
acting responsibly as a business.
Qualifications: Bachelor of Laws (Hons).
Qualifications: Bachelor of Laws (Hons).
Wales.
Wales.
Qualifications: Solicitor of England and
Qualifications: Solicitor of England and
Appointment to the board:
Appointment to the board:
September 2014.
September 2014.
Appointment to the board:
Appointment to the board:
September 2020.
September 2020.
board and to lead the board’s activities
board and to lead the board’s activities
concerning directors’ remuneration.
concerning directors’ remuneration.
Qualifications: BSc (Hons) Mathematical
Qualifications: BSc (Hons) Mathematical
Physics, MEng Petroleum Engineering.
Physics, MEng Petroleum Engineering.
Appointment to the board: August 2016.
Appointment to the board: August 2016.
Skills and experience: As the chief
Skills and experience: As the chief
Skills and experience: Kath has spent
Skills and experience: Kath has spent
Skills and experience: Alison has strong
Skills and experience: Alison has strong
executive of a FTSE 100 listed company,
executive of a FTSE 100 listed company,
most of her career working in a regulated
most of her career working in a regulated
technical and capital project management
technical and capital project management
Stephen brings current operational
Stephen brings current operational
environment in the financial services
environment in the financial services
skills, having been involved in large
skills, having been involved in large
experience to the board. His public sector
experience to the board. His public sector
industry. Since 2014, she has focused on
industry. Since 2014, she has focused on
projects and the production side of Royal
projects and the production side of Royal
experience provides additional insight in
experience provides additional insight in
her non-executive roles, chairing all the
her non-executive roles, chairing all the
Dutch Shell’s business. This experience
Dutch Shell’s business. This experience
regulation and government relations. His
regulation and government relations. His
main board committees and undertaking
main board committees and undertaking
of engineering and industrial sectors
of engineering and industrial sectors
day-to-day experience in the information
day-to-day experience in the information
the role of senior independent director.
the role of senior independent director.
provides the board with additional insight
provides the board with additional insight
and technology industries ensures that
and technology industries ensures that
the board is kept abreast of these areas of
the board is kept abreast of these areas of
the company’s operating environment.
the company’s operating environment.
Career experience: Kath previously
Career experience: Kath previously
was chief operating officer at Standard
was chief operating officer at Standard
into delivering United Utilities’ capital
into delivering United Utilities’ capital
investment programme.
investment programme.
Chartered plc before which she held
Chartered plc before which she held
Career experience: Royal Dutch Shell
Career experience: Royal Dutch Shell
Career experience: Stephen previously
Career experience: Stephen previously
a number of roles at UBS Limited over
a number of roles at UBS Limited over
a 22-year period, prior to which she
a 22-year period, prior to which she
(2006 to 2015), where Alison’s most
(2006 to 2015), where Alison’s most
recent executive role was Executive
recent executive role was Executive
held senior executive roles at Alcatel
held senior executive roles at Alcatel
Lucent Inc. and a number of public
Lucent Inc. and a number of public
sector/service roles, including serving
sector/service roles, including serving
a term as the founding chief executive
a term as the founding chief executive
of Ofcom. He stepped down as a non-
of Ofcom. He stepped down as a non-
Business Energy and Industrial Strategy
Business Energy and Industrial Strategy
in December 2020. He is a former chair
in December 2020. He is a former chair
of Ashridge Business School. A Life Peer
of Ashridge Business School. A Life Peer
since 2008.
since 2008.
Current directorships/business
Current directorships/business
interests: Stephen is group chief
interests: Stephen is group chief
executive of Informa plc. He is an
executive of Informa plc. He is an
qualified as a solicitor. She is a former
qualified as a solicitor. She is a former
Vice President Upstream International
Vice President Upstream International
non-executive director at Brewin Dolphin
non-executive director at Brewin Dolphin
Unconventionals. Prior to that she
Unconventionals. Prior to that she
Holdings plc and RSA Insurance Group
Holdings plc and RSA Insurance Group
spent 17 years with Schlumberger, an
spent 17 years with Schlumberger, an
plc, where she chaired the remuneration
plc, where she chaired the remuneration
international supplier of technology,
international supplier of technology,
Current directorships/business
Current directorships/business
interests: Kath is a non-executive
interests: Kath is a non-executive
director at Columbia Threadneedle
director at Columbia Threadneedle
integrated project management and
integrated project management and
information solutions to the oil and gas
information solutions to the oil and gas
industry.
industry.
Current directorships/business
Current directorships/business
Investments where she chairs the TPEN
Investments where she chairs the TPEN
interests: Alison is a non-executive
interests: Alison is a non-executive
audit committee. She is a non-executive
audit committee. She is a non-executive
director and chair of the remuneration
director and chair of the remuneration
director of TP ICAP Group Plc and
director of TP ICAP Group Plc and
Brown Shipley. She is an independent
Brown Shipley. She is an independent
committee at Meggitt PLC and a part-
committee at Meggitt PLC and a part-
time executive chair at Silixa Ltd. In
time executive chair at Silixa Ltd. In
executive director at the Department for
executive director at the Department for
committee.
committee.
independent non-executive director of
independent non-executive director of
non-executive director of United Utilities
non-executive director of United Utilities
February 2021 she was appointed as
February 2021 she was appointed as
United Utilities Water Limited.
United Utilities Water Limited.
Water Limited.
Water Limited.
Specific contribution to the company’s
Specific contribution to the company’s
Specific contribution to the company’s
Specific contribution to the company’s
long-term success: Stephen’s experience
long-term success: Stephen’s experience
long-term success: Kath’s broad board
long-term success: Kath’s broad board
as a current chief executive and his
as a current chief executive and his
experience and knowledge of different
experience and knowledge of different
previous work in the public sector and
previous work in the public sector and
regulated sectors enables her to
regulated sectors enables her to
Specific contribution to the
Specific contribution to the
government provides valuable insight for
government provides valuable insight for
contribute to board governance and risk
contribute to board governance and risk
company’s long-term success: Alison’s
company’s long-term success: Alison’s
board discussions on regulatory matters.
board discussions on regulatory matters.
management at United Utilities.
management at United Utilities.
a non-executive director of Technip
a non-executive director of Technip
Energies NV. She is an independent
Energies NV. She is an independent
non-executive director of United Utilities
non-executive director of United Utilities
Water Limited.
Water Limited.
understanding of the operational
understanding of the operational
challenges of large capital projects and
challenges of large capital projects and
the benefits of deploying technology
the benefits of deploying technology
provides valuable insight into addressing
provides valuable insight into addressing
the longer-term strategic risks faced by
the longer-term strategic risks faced by
the business. Her role as the designated
the business. Her role as the designated
non-executive director for workforce
non-executive director for workforce
engagement provides the board with
engagement provides the board with
a better understanding of the views of
a better understanding of the views of
employees and greater clarity on the
employees and greater clarity on the
culture of the company.
culture of the company.
Paulette Rowe
Paulette Rowe
Independent
Independent
non-executive director
non-executive director
Responsibilities: To challenge
Responsibilities: To challenge
constructively the executive directors
constructively the executive directors
and monitor the delivery of the strategy
and monitor the delivery of the strategy
within the risk and control framework set
within the risk and control framework set
by the board.
by the board.
Qualifications: MEng + Man (Hons), MBA.
Qualifications: MEng + Man (Hons), MBA.
Appointment to the board: July 2017.
Appointment to the board: July 2017.
Skills and experience: Paulette has
Skills and experience: Paulette has
spent most of her career in the regulated
spent most of her career in the regulated
finance industry and so provides the
finance industry and so provides the
board with additional perspective
board with additional perspective
and first-hand regulatory experience.
and first-hand regulatory experience.
Her experience of technology-driven
Her experience of technology-driven
transformation contributes to United
transformation contributes to United
Utilities’ customer experience programme
Utilities’ customer experience programme
and its Systems Thinking approach.
and its Systems Thinking approach.
Career experience: Previously held
Career experience: Previously held
senior executive roles in banking and
senior executive roles in banking and
technology at Facebook, Barclays and the
technology at Facebook, Barclays and the
Royal Bank of Scotland/NatWest. Former
Royal Bank of Scotland/NatWest. Former
trustee and chair of children’s charity The
trustee and chair of children’s charity The
Mayor’s Fund for London.
Mayor’s Fund for London.
Current directorships/business
Current directorships/business
interests: CEO of Integrated and
interests: CEO of Integrated and
Ecommerce Solutions and member
Ecommerce Solutions and member
of the Paysafe Group executive since
of the Paysafe Group executive since
January 2020. Paysafe, a former FTSE
January 2020. Paysafe, a former FTSE
250 company, is now privately owned by
250 company, is now privately owned by
PE firms CVC and Blackstone. She is an
PE firms CVC and Blackstone. She is an
independent non-executive director of
independent non-executive director of
United Utilities Water Limited.
United Utilities Water Limited.
Specific contribution to the company’s
Specific contribution to the company’s
long-term success: Paulette’s wide-
long-term success: Paulette’s wide-
ranging experience in regulated sectors,
ranging experience in regulated sectors,
profit and loss management, technology
profit and loss management, technology
and innovation enables her to provide a
and innovation enables her to provide a
first-hand contribution to many board
first-hand contribution to many board
topics of discussion. In her current
topics of discussion. In her current
executive role she often faces many of
executive role she often faces many of
the same issues, and has been able to
the same issues, and has been able to
provide support to senior management at
provide support to senior management at
United Utilities.
United Utilities.
Doug Webb
Doug Webb
Independent
Independent
non-executive director
non-executive director
Responsibilities: To challenge
Responsibilities: To challenge
constructively the executive directors and
constructively the executive directors and
monitor the delivery of the strategy within
monitor the delivery of the strategy within
the risk and control framework set by the
the risk and control framework set by the
board and to lead the audit and treasury
board and to lead the audit and treasury
committees.
committees.
Qualifications: MA Geography and
Qualifications: MA Geography and
Management Science, Chartered
Management Science, Chartered
Accountant (FCA).
Accountant (FCA).
Appointment to the board:
Appointment to the board:
September 2020.
September 2020.
Skills and experience: Doug has
Skills and experience: Doug has
extensive career experience in finance
extensive career experience in finance
from qualifying as a chartered accountant
from qualifying as a chartered accountant
with Price Waterhouse, his executive
with Price Waterhouse, his executive
roles as CFO of major listed companies
roles as CFO of major listed companies
and more recently through his non-
and more recently through his non-
executive positions and focus on audit
executive positions and focus on audit
committee activities.
committee activities.
Career experience: Doug was previously
Career experience: Doug was previously
chief financial officer at Meggitt PLC
chief financial officer at Meggitt PLC
from 2013 to 2018 and prior to that, he
from 2013 to 2018 and prior to that, he
was chief financial officer at the London
was chief financial officer at the London
Stock Exchange Group plc and QinetiQ
Stock Exchange Group plc and QinetiQ
Group plc. He is a former non-executive
Group plc. He is a former non-executive
director and audit committee chair at
director and audit committee chair at
SEGRO plc, having stepped down in 2019.
SEGRO plc, having stepped down in 2019.
Current directorships/business
Current directorships/business
interests: Doug currently serves as a non-
interests: Doug currently serves as a non-
executive director and audit committee
executive director and audit committee
chair at Johnson Matthey plc, BMT Group
chair at Johnson Matthey plc, BMT Group
Ltd and the Manufacturing Technology
Ltd and the Manufacturing Technology
Centre Ltd. He is an independent non-
Centre Ltd. He is an independent non-
executive director of United Utilities
executive director of United Utilities
Water Limited.
Water Limited.
Specific contribution to the company’s
Specific contribution to the company’s
long-term success: Doug applies his
long-term success: Doug applies his
financial capabilities and his technical
financial capabilities and his technical
knowledge and experience covering
knowledge and experience covering
audit and treasury matters in his role as
audit and treasury matters in his role as
chair of both the audit and the treasury
chair of both the audit and the treasury
committee strengthen the board’s
committee strengthen the board’s
financial expertise.
financial expertise.
Board role
Chair
Executive director
Senior independent non-executive
director
Independent non-executive director
Committee membership
N Nomination committee
C Corporate responsibility committee
T Treasury committee
R Remuneration committee
A Audit committee
Chair of the committee
Changes to the board
Brian May left the board at the end
of the company’s AGM in July 2021,
he ceased to be a director of United
Utilities Water Limited at that time.
Neither Mark Clare nor Stephen Carter
are seeking reappointment at the AGM
in July 2022 having served on the board
for nearly nine and nearly eight years
respectively. As a result, at that time
both will cease to be directors of United
Utilities Water Limited.
Louise Beardmore was appointed after
the year-end as a director and CEO
designate on 1 May 2022 and, at that
time, as a director of United Utilities
Water Limited.
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Corporate governance report
Letter from the Chair
Sir David Higgins
Chair
Quick facts
• Sir David Higgins met the independence
criteria as set out in provision 10 of the 2018 UK
Corporate Governance Code (the code) when
he was appointed.
• The code requires that at least half of the board,
excluding the Chair, should be non-executive
directors whom the board considers to be
independent. At 31 March 2022, seven out of
the remaining nine directors were independent
non-executive directors.
• The company secretary attends all board and
committee meetings and advises the Chair on
governance matters. The company secretariat
team provides administrative support.
• The directors’ biographies (see pages 112 to 115)
include specific reasons why each director’s
contribution is, and continues to be, important
to the company’s long-term sustainable
success.
• All directors are subject to annual election at
the annual general meeting (AGM) held in July.
The board concluded, following the completion
of the evaluation of the effectiveness of
the board, that each director continues to
contribute effectively.
• The board recommends that shareholders
vote in favour of those directors standing for
a further term at the forthcoming AGM, as
they will be doing in respect of their individual
shareholdings.
Quick links
Schedule of matters reserved for the board:
unitedutilities.com/corporate-governance
A copy of the Financial Reporting Council’s 2018
UK Corporate Governance Code can be found at
frc.org.uk
116
The board is proud to serve customers
in the North West and keen to work with
organisations operating in our region that
share our values.
Dear shareholder
As I write, and cast my thoughts back to the early part
of the year, our way of life and world of work was still
very much dominated by restrictions associated with
the pandemic. By the end of our financial year, we have
transitioned at pace in some respects to the normality
of our working lives before COVID-19. Virtual board
meetings became a necessity during the pandemic,
and, notwithstanding the usual electronic hiccups that
we are all now so familiar with, provided an efficient
alternative enabling us to ensure the usual governance
mechanisms were adhered to. Still, it is good now to
be again sitting alongside colleagues in meetings – and
to be joined by Liam Butterworth, who was appointed
as an independent non-executive director in January
2022. More detail on his appointment can be found on
page 133.
Listening to our employees
Our Employee Voice panel (the panel) is chaired by
Alison Goligher. The panel’s work has been insightful
in helping the board understand how management
was responding to employees’ needs and wellbeing
during the pandemic. Having myself attended a
meeting of the panel during the year, as did Kath
Cates and Paulette Rowe, I saw first-hand that Alison’s
style as chair encourages open and interactive
debate and meetings are very well attended. Panel
meetings provide a rich source of employee-derived
information for Alison to bring back to contribute to
board discussions, and a view on whether there is any
misalignment between the culture that the board sees
and hears about from interactions and reporting by
management, and the culture at grassroots level within
the business.
The panel was involved in the planning and
implementation of the hybrid working model which
has now been applied to suitable roles across the
organisation, a move undoubtedly accelerated as
an outcome of the pandemic and now very much an
important element for prospective employees in the
employment market.
Proving our purpose
Throughout last year our employees were unstinting
in their efforts to support our purpose to provide great
water and more for the North West. The board extends
its gratitude for their considerable commitment in
serving customers, particularly during the additional
challenges of the pandemic. We experienced
unprecedented household consumption of water,
putting immense pressure on water stocks, particularly
in the Lake District during the summer of 2021, adding
to the impact on our operational teams.
Diversity, equality and inclusion
As a board we are mindful of the benefits across the
organisation of being a diverse, equitable and inclusive
employer, and seek to bring about change to the
demographics of our employees so that they better
represent the traditionally overlooked groups within
the communities we serve. The progress against our
plans that has been achieved during the year is set
out on pages 44 to 45. There are a number of limiting
factors to the pace of change, particularly given the
locations of our major hubs of employment, the large
unitedutilities.com/corporate
Corporate governance report
Letter from the Chair
Sir David Higgins
Chair
Quick facts
• Sir David Higgins met the independence
criteria as set out in provision 10 of the 2018 UK
Corporate Governance Code (the code) when
he was appointed.
• The code requires that at least half of the board,
excluding the Chair, should be non-executive
directors whom the board considers to be
independent. At 31 March 2022, seven out of
the remaining nine directors were independent
non-executive directors.
• The company secretary attends all board and
committee meetings and advises the Chair on
governance matters. The company secretariat
team provides administrative support.
• The directors’ biographies (see pages 112 to 115)
include specific reasons why each director’s
contribution is, and continues to be, important
to the company’s long-term sustainable
success.
• All directors are subject to annual election at
the annual general meeting (AGM) held in July.
The board concluded, following the completion
of the evaluation of the effectiveness of
the board, that each director continues to
contribute effectively.
• The board recommends that shareholders
vote in favour of those directors standing for
a further term at the forthcoming AGM, as
they will be doing in respect of their individual
shareholdings.
Quick links
Schedule of matters reserved for the board:
unitedutilities.com/corporate-governance
A copy of the Financial Reporting Council’s 2018
UK Corporate Governance Code can be found at
frc.org.uk
The board is proud to serve customers
in the North West and keen to work with
organisations operating in our region that
share our values.
Dear shareholder
As I write, and cast my thoughts back to the early part
of the year, our way of life and world of work was still
very much dominated by restrictions associated with
the pandemic. By the end of our financial year, we have
transitioned at pace in some respects to the normality
of our working lives before COVID-19. Virtual board
meetings became a necessity during the pandemic,
and, notwithstanding the usual electronic hiccups that
we are all now so familiar with, provided an efficient
alternative enabling us to ensure the usual governance
mechanisms were adhered to. Still, it is good now to
be again sitting alongside colleagues in meetings – and
to be joined by Liam Butterworth, who was appointed
as an independent non-executive director in January
2022. More detail on his appointment can be found on
page 133.
Listening to our employees
Our Employee Voice panel (the panel) is chaired by
Alison Goligher. The panel’s work has been insightful
in helping the board understand how management
was responding to employees’ needs and wellbeing
during the pandemic. Having myself attended a
meeting of the panel during the year, as did Kath
Cates and Paulette Rowe, I saw first-hand that Alison’s
style as chair encourages open and interactive
debate and meetings are very well attended. Panel
meetings provide a rich source of employee-derived
information for Alison to bring back to contribute to
board discussions, and a view on whether there is any
misalignment between the culture that the board sees
and hears about from interactions and reporting by
management, and the culture at grassroots level within
the business.
The panel was involved in the planning and
implementation of the hybrid working model which
has now been applied to suitable roles across the
organisation, a move undoubtedly accelerated as
an outcome of the pandemic and now very much an
important element for prospective employees in the
employment market.
Proving our purpose
Throughout last year our employees were unstinting
in their efforts to support our purpose to provide great
water and more for the North West. The board extends
its gratitude for their considerable commitment in
serving customers, particularly during the additional
challenges of the pandemic. We experienced
unprecedented household consumption of water,
putting immense pressure on water stocks, particularly
in the Lake District during the summer of 2021, adding
to the impact on our operational teams.
Diversity, equality and inclusion
As a board we are mindful of the benefits across the
organisation of being a diverse, equitable and inclusive
employer, and seek to bring about change to the
demographics of our employees so that they better
represent the traditionally overlooked groups within
the communities we serve. The progress against our
plans that has been achieved during the year is set
out on pages 44 to 45. There are a number of limiting
factors to the pace of change, particularly given the
locations of our major hubs of employment, the large
Read more about
working in
partnerships
on page 55
Read more about
investing £765
million to deliver
customer and
environmental
outcomes on
page 71
number of traditionally male-dominated STEM roles in
the business and our low rate of employee churn, but
we are working hard to make the group an attractive
employer across the gender and ethnic spectrum.
We have recently updated our board diversity policy
(see page 133), explicitly setting out my role, as Chair
of the board, of collectively fostering an inclusive and
belonging environment in the boardroom, enabling
open and frank contributions from all board members.
The policy was further amended: increasing the target
for female representation on the board to at least 40
per cent and by including a target for the appointment
of a female to one of the senior board positions.
Environmental, social and governance (ESG)
On pages 86 to 94 of this annual report we have
included climate-related financial disclosures
consistent with the recommendations and
recommended disclosures of the Task Force on
Climate-related Financial Disclosures (TCFD). For
a number of years we have reported against the
TCFD, and for the first time at the forthcoming 2022
annual general meeting in July, the notice of meeting
includes a resolution seeking an advisory vote on our
climate-related financial reporting. Our stakeholders
and other interested parties are increasingly seeking
more reassurance on our environmental credentials.
Proposing a resolution to shareholders at the annual
general meeting, on an advisory basis, seems a
logical next step as part of our strategy to deliver
our services in an environmentally sustainable,
economically beneficial and socially responsible
manner. Furthermore, as part of the remuneration
committee’s review of the directors’ remuneration
policy, opportunities were sought to better reflect
environmental matters in our executive remuneration
arrangements. From 2022, our long-term incentives
will include carbon measures, and in the new policy
that will be put to shareholders for approval at the
AGM there is an increased focus on environmental
outcomes. See pages 163 and pages 169 to 176 for
details about the policy review and the proposed new
policy.
As a regionally-based company we are keen to develop
strong collaborative working relationships with
organisations that share our values and work in our
geographic region, such as the joint initiative recently
announced with The Rivers Trust, as part of our plan for
Better Rivers: Better North West. Along with ensuring
our operations progressively reduce impact to river
health, our plan includes creating more opportunities
for everyone to enjoy rivers and waterways. More
information on our plan can be found on page 67.
In the following pages of this corporate governance
report we have set out how the board has applied the
principles and reported against the provisions of the
2018 UK Corporate Governance Code (the code). On
page 177 we have explained our proposals in relation to
code provision 38.
Looking ahead
With the second year of the 2020–25 asset
management period behind us, the board is beginning
to focus on the early stages of the next price review
process for the 2025–30 asset management period.
Louise Beardmore will take the lead in the creation
of the company’s PR24 business plan, following her
appointment as CEO designate with effect from
1 May 2022. Further information on the CEO designate
appointment process can be found on page 130.
After 12 years, and leading the transformation of
the group into one of the top performing water and
wastewater businesses, Steve Mogford has expressed
his wish to step down from the board and retire in
early 2023. Until that time, he will continue to lead the
business and in doing so provide a transition period for
the leadership to pass to Louise.
In my time as Chair, I have found Steve to be a
remarkable individual, and I look forward to continue
working with him over the coming months.
Both Mark Clare and Stephen Carter will step down
at the conclusion of the 2022 AGM, on behalf of the
board I wish to thank them both for their valuable
support and wish them well for the future.
Sir David Higgins
Chair
UK Corporate Governance Code
Reporting on the application of principles and
against the provisions of the 2018 UK Corporate
Governance Code
1
2
3
4
5
Board leadership and company purpose
See page 118
Division of responsibilities
See page 129
Composition, succession and evaluation
See page 133
Audit, risk and internal control
See page 139
Remuneration
See page 164
We have included
climate-related financial
disclosures consistent with
the recommendations and
recommended disclosures
of the Task Force on Climate-
related Financial Disclosures.”
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Board leadership and
company purpose
1
Principle A:
A successful company is led by
an effective and entrepreneurial
board, whose role is to promote
the long-term sustainable success
of the company, generating value
for shareholders and contributing
to wider society.
We set out our application of
principle A and provision 1 on
pages 118 and 119, our reporting
against risk as part of provision 1
on pages 100 to 109. The S172(1)
Statement is on page 40.
Principle B:
The board should establish the
company’s purpose, values and
strategy, and satisfy itself that
these and its culture are aligned.
All directors must act with
integrity, lead by example and
promote the desired culture.
The board is satisfied it has
applied principle B - see page 16.
See pages 125 to 126 and 183 for
our reporting against provisions
2 and 5.
Principle C:
The board should ensure that
the necessary resources are in
place for the company to meet
its objectives and measure
performance against them. The
board should also establish
a framework of prudent and
effective controls, which enable
risk to be assessed and managed.
Application of principle C to
identify the resource within
the business is delegated to
management, but monitored
by the board through the
measurement of performance.
See page 137 regarding our
succession pipeline, and page 139
for the board’s approach to risk
management and internal control.
Principle D:
In order for the company to
meet its responsibilities to
shareholders and stakeholders,
the board should ensure effective
engagement with, and encourage
participation from, these parties.
Engagement of stakeholders
fulfilling the application of
principle D, and our reporting
against provision 3 is set out on
pages 127 to 128 in relation to our
engagement with shareholders
and stakeholders.
importance of employees having
the facilities to raise matters
of concern. See pages 30, 60
and 126 to 127 in relation to
engagement with employees for
our reporting against provisions
5 and 6.
Principle E:
The board should ensure that
workforce policies and practices
are consistent with the company’s
values and support its long-
term sustainable success. The
workforce should be able to raise
any matters of concern.
The board recognises the
importance of a two-way flow
of communication and the
Providing great water and more for
the North West
Embedding our purpose
Board members, individually and collectively, are
cognisant of their statutory duties as set out in the
Companies Act 2006 (the Act). In accordance with
section 172 of the Act, directors are individually
required to act in the way they consider, in good
faith, would be most likely to promote the success
of the company for the benefit of its members as a
whole. In doing so, the directors must have regard
to the likely consequences of any decision in the
long term and the interests of, among other matters,
employees, customers, suppliers, the community and
the environment, and on the company’s reputation.
By virtue of the long-term nature of the water and
wastewater industry, thinking about our stakeholders
is an integral part of our decision-making process
and underpinned by our regulatory contract. The
board’s 2021/22 S172(1) Statement can be found on
page 40, and provides examples of how our purpose is
embedded in board decisions.
Incorporating sustainability in our stewardship along
side creating value
Long-term sustainability is a key component of the
way in which the board manages the business. With
many parts of the water and wastewater network
across the North West built over 100 years ago, the
board continues to apply the ethos of sustainability
and building assets that last, and, crucially, operate
efficiently and effectively to serve customers’ needs.
The group’s planning horizons can be found on pages
46 to 49. During the year, the board held deep-dive
sessions to consider the group’s Water Resources
Management Plan and its Drainage and Wastewater
Management Plan. Sustainability and environmental
protection drivers underpin both these plans.
Set out on page 22, as part of our business model, is
how value is created for our shareholders and other
stakeholders in a sustainable manner. The board’s
governance approach, its culture and the way it
operates the business is to behave responsibly towards
all of the group’s stakeholders.
Being a guardian for future generations
Environmental issues are high on the list of matters
considered by the board. The corporate responsibility
committee takes the lead in overseeing management’s
development of our climate change mitigation strategy,
and reports regularly to the board on the matter.
Plans are progressing to drive the group’s transition
to a low carbon future by minimising our contribution
to global warming through a reduction in our carbon
emissions. Carbon has been incorporated as a factor to
be considered in:
• our investment appraisal and decision-making
processes;
• our land management practices to enhance/
improve natural capital;
•
the innovation that we encourage both within our
operations and through working with our partners
and suppliers; and
• our implementation of a ‘circular’ mindset.
The board is kept fully informed by management on
the impacts of climate change from an operational
perspective. Extreme weather events impacting
our region and our operations in recent years are
increasingly common. When such incidents occur,
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Corporate governance report
Board leadership and
company purpose
1
Principle A:
A successful company is led by
an effective and entrepreneurial
board, whose role is to promote
the long-term sustainable success
of the company, generating value
for shareholders and contributing
to wider society.
We set out our application of
principle A and provision 1 on
pages 118 and 119, our reporting
against risk as part of provision 1
on pages 100 to 109. The S172(1)
Statement is on page 40.
Principle B:
The board should establish the
company’s purpose, values and
strategy, and satisfy itself that
The board is satisfied it has
applied principle B - see page 16.
See pages 125 to 126 and 183 for
our reporting against provisions
these and its culture are aligned.
2 and 5.
All directors must act with
integrity, lead by example and
promote the desired culture.
Principle C:
The board should ensure that
the necessary resources are in
place for the company to meet
its objectives and measure
performance against them. The
board should also establish
a framework of prudent and
effective controls, which enable
risk to be assessed and managed.
Application of principle C to
identify the resource within
the business is delegated to
management, but monitored
by the board through the
measurement of performance.
See page 137 regarding our
succession pipeline, and page 139
for the board’s approach to risk
management and internal control.
Principle D:
In order for the company to
meet its responsibilities to
shareholders and stakeholders,
the board should ensure effective
engagement with, and encourage
participation from, these parties.
Engagement of stakeholders
fulfilling the application of
principle D, and our reporting
against provision 3 is set out on
pages 127 to 128 in relation to our
engagement with shareholders
and stakeholders.
Principle E:
The board should ensure that
workforce policies and practices
importance of employees having
the facilities to raise matters
of concern. See pages 30, 60
are consistent with the company’s
and 126 to 127 in relation to
values and support its long-
term sustainable success. The
engagement with employees for
our reporting against provisions
workforce should be able to raise
5 and 6.
any matters of concern.
The board recognises the
importance of a two-way flow
of communication and the
Providing great water and more for
the North West
Embedding our purpose
Board members, individually and collectively, are
cognisant of their statutory duties as set out in the
Companies Act 2006 (the Act). In accordance with
section 172 of the Act, directors are individually
required to act in the way they consider, in good
faith, would be most likely to promote the success
of the company for the benefit of its members as a
whole. In doing so, the directors must have regard
to the likely consequences of any decision in the
long term and the interests of, among other matters,
employees, customers, suppliers, the community and
the environment, and on the company’s reputation.
By virtue of the long-term nature of the water and
wastewater industry, thinking about our stakeholders
is an integral part of our decision-making process
and underpinned by our regulatory contract. The
board’s 2021/22 S172(1) Statement can be found on
page 40, and provides examples of how our purpose is
embedded in board decisions.
Incorporating sustainability in our stewardship along
side creating value
Long-term sustainability is a key component of the
way in which the board manages the business. With
many parts of the water and wastewater network
across the North West built over 100 years ago, the
board continues to apply the ethos of sustainability
and building assets that last, and, crucially, operate
efficiently and effectively to serve customers’ needs.
The group’s planning horizons can be found on pages
46 to 49. During the year, the board held deep-dive
sessions to consider the group’s Water Resources
Management Plan and its Drainage and Wastewater
Management Plan. Sustainability and environmental
protection drivers underpin both these plans.
Set out on page 22, as part of our business model, is
how value is created for our shareholders and other
stakeholders in a sustainable manner. The board’s
governance approach, its culture and the way it
operates the business is to behave responsibly towards
all of the group’s stakeholders.
Being a guardian for future generations
Environmental issues are high on the list of matters
considered by the board. The corporate responsibility
committee takes the lead in overseeing management’s
development of our climate change mitigation strategy,
and reports regularly to the board on the matter.
Plans are progressing to drive the group’s transition
to a low carbon future by minimising our contribution
to global warming through a reduction in our carbon
emissions. Carbon has been incorporated as a factor to
be considered in:
processes;
• our investment appraisal and decision-making
• our land management practices to enhance/
improve natural capital;
•
the innovation that we encourage both within our
operations and through working with our partners
and suppliers; and
• our implementation of a ‘circular’ mindset.
The board is kept fully informed by management on
the impacts of climate change from an operational
perspective. Extreme weather events impacting
our region and our operations in recent years are
increasingly common. When such incidents occur,
the CEO keeps board members fully apprised of the
impact on operations via virtual meetings and other
forms of communication. The board would be informed
of any material points of learning identified in the
post-incident review process, and progress with the
implementation of material actions. Our reporting
against TCFD can be found on pages 86 to 94.
Improving river health and recreation
During the year, the board has been fully engaged in
considering the criticism aimed at the group for its
part in the health of some of the rivers in our region.
This criticism has also been widely made in relation
to a number of other companies operating in the
wastewater sector. The sewerage network in the
North West carries sewage and rainwater. Storm
overflows are incorporated into the wastewater
network to help to prevent the flooding of streets,
homes and businesses during periods of heavy rainfall.
When sewers and treatment plants are operating at
full capacity they can spill storm water (including
diluted sewage) into rivers via the storm overflow.
The board has committed to £230m in environmental
improvements, supporting at least a one third
sustainable reduction in the number of spills recorded
from our storm overflows by 2025 compared to the
2020 baseline.
Working with our regulators
Ofwat has introduced a new approach for major capital
construction projects, namely Direct Procurement for
Customers (DPC). The group’s first project that has
been approved for procurement via the DPC method
is the Haweswater Aqueduct Resilience Programme
(HARP), which the board considered during the year.
The information currently available suggests that the
DPC route has the potential to offer the best value for
customers and therefore supports the position that
this should be tested by progressing HARP through a
DPC procurement process. Given the importance of
this asset to the business, this decision is included in
the statement by the directors in performance of their
statutory duties in accordance with S172(1) of the Act
and set out on page 40.
Diversity, equality and inclusion
The board recognises the need to recruit and retain
fantastic people to enable the delivery of a great
service as part of the long-term sustainable success
of the business. Good progress has been made
on the journey to drive forward diversity, equality
and inclusion within the business, as evidenced
by the findings of the specialist inclusion partner
who conducted a progress review during the
year, observing that there was now much greater
recognition of the strategic importance of diversity,
equality and inclusion within the business with
‘great progress in all audited areas’, since their initial
engagement in October 2020. Further information on
diversity, equality and inclusion can be found on pages
44 to 45. Furthermore, as part of the board diversity
policy (see page 133) the ‘tone from the top’ by the
Chair has been set, by including the requirement
for an inclusive and belonging environment being
fostered in the boardroom encouraging open and frank
contributions from all board members.
Delivering against our regulatory contract
Under the current regulatory model, we are a monopoly
supplier of water and wastewater services to our
domestic customers. Simplistically, the opportunities
for improving our financial performance are based on
outperforming our five-year contract. Underlying this is
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Stock Code: UU.
Overview of the board’s responsibilities
• Sets the strategy of the group, ensuring the long-term success
of the group for customers, investors and wider stakeholders.
•
Is responsible for challenging and encouraging the executive
team in its interpretation and implementation of how it
manages the business, and that it is doing so in accordance
with the strategic goals the board has set.
• Has responsibility for ensuring the company’s internal control
systems (including financial, operational and compliance) and
processes are sound and fit for purpose (see pages 154 to 155).
• Must ensure that the company has the necessary financial
resources and people with the necessary skills to achieve its
objectives. It reviews managerial performance annually.
• Approves appointments to and removals from the board and
membership of the committees.
• Applies the principles of the code and reports against the
provisions.
• Has oversight of major capital expenditure projects within UUW
that exceed £150 million, and any project which materially
increases the group’s risk profile or is not in the ordinary course of
the group’s business.
Quick link
Terms of reference: unitedutilities.com/corporate-governance
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a complex set of regulatory key performance indicators,
including total expenditure (totex) outperformance,
the outcome delivery incentive (ODI) mechanism,
customer measure of experience (C-MeX) and financing
expenditure (see pages 50 to 83) which are managed
and monitored by the business.
Governance structure for the board and its
committees
The board has responsibility for establishing the
strategy, which is broken down into the three strategic
themes. The governance structure encompassing
the board, its principal committees and the principal
management committees (and set out in the diagram
below) contributes to ensuring that the group focuses
on its strategic themes.
In line with the code, the board delegates certain roles
and responsibilities to its principal board committees.
While the board retains overall responsibility, a sub-
committee structure allows these committees to probe
the subject matters more deeply and gain a greater
understanding of the detail. The committees then
report back to the board on the matters discussed,
decisions taken, and, where appropriate, make
recommendations to the board on matters requiring
its approval. The reports of the principal board
committees required by the code can be found on the
subsequent pages. Minutes of the board and principal
board committee meetings (with the exception of the
remuneration committee) are tabled at board meetings
and the chairs of each of the board committees report
verbally to the board on their activities. The Chair
chairs the nomination committee; all other principal
board committees are chaired by independent
non-executive directors who have particular skills or
interests in the activities of those committees.
The executive team is chaired by the CEO, and its
members are the senior managers who have a direct
reporting line to the CEO. The executive team meets
monthly. It is responsible for the day-to-day running
of the business and other operational matters and
implementing the strategies that the board has set.
The diagram below shows the principal management
committees and a brief description of their roles. These
committees are vital to the implementation of the group’s
strategic themes, enabling senior management to meet
together to discuss the needs of the business, raise
issues, identify and delegate appropriate actions, and
monitor progress. The board receives reports providing
an updated overview of the business, and its financial and
operational performance at every scheduled meeting,
Short biographies of the executive team can be found
on the company’s website at unitedutilities.com/
executive-team
Governance structure of the board and its principal committees and the principal management committees
Group board
Chair – Sir David Higgins
Principal board committees
Principal management committees
Chief Executive Officer – Steve Mogford
Audit committee
Chair: Doug Webb
Contribution to our strategy:
See pages 143 to 154
Remuneration committee
Chair: Alison Goligher
Contribution to our strategy:
See pages 160 to 194
Nomination committee
Chair: Sir David Higgins
Contribution to our strategy:
See pages 130 to 138
Corporate responsibility committee
Chair: Stephen Carter
Contribution to our strategy:
See pages 156 to 159
Treasury committee
Chair: Doug Webb
Contribution to our strategy:
See page 155
Key
The best service
to customers
At the lowest
sustainable cost
In a responsible
manner
Executive team
Chair: Steve Mogford, CEO
Contribution to our strategy:
This forum is responsible for implementing the board’s
strategy and the day-to-day operation of running the
business and the CEO will cascade decisions made by
the board to the business via this forum.
Group audit and risk board
Chair: Steve Mogford, CEO
Contribution to our strategy:
See page 101
Quarterly business review
Chair: Steve Mogford, CEO
Contribution to our strategy:
This forum is responsible for the quarterly review
of operational, financial and health and safety
performance.
Political and regulatory group
Chair: Gaynor Kenyon,
corporate affairs director
Contribution to our strategy:
This forum is responsible for discussing political and
regulatory issues affecting the company, where any
‘horizon scanning’ issues are raised and business
responses to consultations are agreed.
Capital investment committee
Chair: Steve Mogford, CEO
Contribution to our strategy:
The committee is responsible for authorising expenditure
relating to the capital investment programme.
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a complex set of regulatory key performance indicators,
board committee meetings (with the exception of the
including total expenditure (totex) outperformance,
remuneration committee) are tabled at board meetings
the outcome delivery incentive (ODI) mechanism,
and the chairs of each of the board committees report
customer measure of experience (C-MeX) and financing
verbally to the board on their activities. The Chair
expenditure (see pages 50 to 83) which are managed
chairs the nomination committee; all other principal
and monitored by the business.
Governance structure for the board and its
committees
board committees are chaired by independent
non-executive directors who have particular skills or
interests in the activities of those committees.
The board has responsibility for establishing the
The executive team is chaired by the CEO, and its
strategy, which is broken down into the three strategic
members are the senior managers who have a direct
themes. The governance structure encompassing
reporting line to the CEO. The executive team meets
the board, its principal committees and the principal
monthly. It is responsible for the day-to-day running
management committees (and set out in the diagram
of the business and other operational matters and
below) contributes to ensuring that the group focuses
implementing the strategies that the board has set.
on its strategic themes.
In line with the code, the board delegates certain roles
and responsibilities to its principal board committees.
While the board retains overall responsibility, a sub-
committee structure allows these committees to probe
the subject matters more deeply and gain a greater
understanding of the detail. The committees then
report back to the board on the matters discussed,
decisions taken, and, where appropriate, make
The diagram below shows the principal management
committees and a brief description of their roles. These
committees are vital to the implementation of the group’s
strategic themes, enabling senior management to meet
together to discuss the needs of the business, raise
issues, identify and delegate appropriate actions, and
monitor progress. The board receives reports providing
an updated overview of the business, and its financial and
operational performance at every scheduled meeting,
recommendations to the board on matters requiring
Short biographies of the executive team can be found
its approval. The reports of the principal board
on the company’s website at unitedutilities.com/
committees required by the code can be found on the
executive-team
subsequent pages. Minutes of the board and principal
Governance structure of the board and its principal committees and the principal management committees
Group board
Chair – Sir David Higgins
Principal board committees
Principal management committees
Chief Executive Officer – Steve Mogford
Audit committee
Chair: Doug Webb
Contribution to our strategy:
See pages 143 to 154
Remuneration committee
Chair: Alison Goligher
Contribution to our strategy:
See pages 160 to 194
Nomination committee
Chair: Sir David Higgins
Contribution to our strategy:
See pages 130 to 138
Corporate responsibility committee
Chair: Stephen Carter
Contribution to our strategy:
See pages 156 to 159
Treasury committee
Chair: Doug Webb
Contribution to our strategy:
See page 155
Key
The best service
to customers
At the lowest
sustainable cost
In a responsible
manner
Executive team
Chair: Steve Mogford, CEO
Contribution to our strategy:
This forum is responsible for implementing the board’s
strategy and the day-to-day operation of running the
business and the CEO will cascade decisions made by
the board to the business via this forum.
Group audit and risk board
Chair: Steve Mogford, CEO
Contribution to our strategy:
See page 101
Quarterly business review
Chair: Steve Mogford, CEO
Contribution to our strategy:
This forum is responsible for the quarterly review
of operational, financial and health and safety
performance.
Political and regulatory group
Chair: Gaynor Kenyon,
corporate affairs director
Contribution to our strategy:
This forum is responsible for discussing political and
regulatory issues affecting the company, where any
‘horizon scanning’ issues are raised and business
responses to consultations are agreed.
Capital investment committee
Chair: Steve Mogford, CEO
Contribution to our strategy:
The committee is responsible for authorising expenditure
relating to the capital investment programme.
Summary of board activity in 2021/22
Actions
Outcomes
Cross
reference
Link to strategic
themes
Leadership and employees
Review of health, safety and wellbeing
activities and consideration of health and
safety incidents of employees and contractors.
Review of board succession plans.
Reviewed progress with our aspiration for
a diverse and inclusive workforce.
People deep-dive session.
Reviewed and discussed the results of the
annual employee engagement survey and
received updates on employee voice workforce
engagement mechanisms, including the
Employee Voice panel chaired by Alison Goligher,
the non-executive director designated for
engagement with the workforce.
Reviewed the company's dashboard of culture
metrics and associated analysis.
Strategy
Continued focus on the ‘home safe and well’
programme embedding a health and safety
culture within the business, with added focus
being placed on process safety improvements at
operational sites.
See pages 60
to 62
Succession plans for the appointment of a CEO
designate and a non-executive director during the
year and approved changes to the membership of
the board committees.
See pages 130
to 134
Board kept apprised of programme of work to
increase diversity of the workforce and improve
inclusivity, with progress independently assessed.
See pages 44
to 45
Provide the board with an in-depth view of the
group’s comprehensive people plan focusing on
optimising next ways of working; accelerating
digital capability; rewarding for outcomes;
improving change and leadership capability;
talent management and the effective employee
experience.
See pages 60
to 62
Board kept informed of the activities and insight
provided by the Employee Voice panel and its
links to the employee network groups, and the
panel’s contribution to the work on diversity and
inclusion and the ‘next ways of working’ project.
See page 126
Monitored and assessed culture and agreed
it was aligned with the company's purpose,
values and strategy.
See page 125
Reviewed and monitored the progress against
the climate change mitigation/carbon reduction
strategy.
Board apprised of the maturing governance
structures and options being considered to
reduce the group’s carbon footprint.
See pages 86
to 97
Price Review 2024 (PR24) deep-dive session –
developing strategy for PR24 relating to
customers, stakeholders and financial matters.
Discussed the timeline for PR24 and the
overlap with related price review submissions,
including the Drainage and Wastewater
Management Plan, the Water Resources
Management Plan and the Water Industry
National Environment Plan.
Received regular updates at each meeting of
items with a strategic component, such
as emerging changes to regulation, major
capital expenditure and business structuring
decisions.
Bioresource, energy and carbon deep dive
session.
Held a full day meeting to consider the strategic
development of the group and its long-term
priorities.
Provided the board with an in-depth view on the
price review process to facilitate the provision of
strategic guidance.
See pages 48
to 49
Facilitated more informed board discussion and
planning.
–
Provided an in-depth review of progress to
develop a northern hub for sewage sludge
treatment and consideration of the non-
appointed business strategy for the bioresources
market and reviewed the bioresources asset
strategy.
In-depth review of the Haweswater Aqueduct
Resilience Programme and Direct Procurement
for Customers approach, water and wastewater
strategy and the 2025–30 price review.
See pages 95
to 97
See page 40
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Actions
Governance
Outcomes
Cross
reference
Link to strategic
themes
Reviewed and debated the overall risk profile of
the group, and in particular the principal risks,
emerging risks and risk appetite, including a
review of the most significant operational risks.
Endorsed the nature, extent and management of
key business risks and endorsed the view that the
risk appetite approach and framework remained fit
for purpose.
See page 100
Reviewed the risk management systems,
including financial, operational and compliance
controls and reviewed the effectiveness of the
internal control systems.
The risk management and internal control
systems were considered to be effective.
See page 139
Reviewed and discussed developments in
cyber crime.
Approved the activities undertaken to enhance the
effectiveness of the group’s security controls.
See page 107
Reviewed the terms of reference for the
audit, remuneration, treasury and corporate
responsibility committees and received
post-meeting reports from the chairs of each
committee summarising discussions and actions.
Reviewed biannual updates on changes and
developments in corporate governance.
Reviewed and discussed the internal evaluation
of the board, its committees and individual
directors and conflicts of interest.
Approved amendments to the terms of reference
of the company’s committees as appropriate.
–
Matters implemented as considered appropriate. –
Identified action points and any ongoing training
needs.
See page 136
Reviewed the performance of the statutory
auditor and recommendation for reappointment
at the 2022 AGM.
Accepted the recommendation from the audit
committee that KPMG be reappointed at the 2022
AGM.
See page 150
Reviewed the resolutions and notice of
meeting for the 2022 AGM.
Approved the resolutions to be proposed at the
AGM, and convened the AGM.
See page 197
Reviewed the approach and progress of work
to identify areas where there is any risk of
modern slavery occurring in our supply chain.
Reviewed the effectiveness of the whistleblowing
policies and processes and incidents under
investigation and noted the activities within the
business to prevent and detect fraud.
Approved the 2022/23 slavery and human
trafficking statement.
See page 197
Concluded that the whistleblowing policies and
processes were effective and noted the activities
within the business to protect and detect fraud.
See pages 127
and 154
Reviewed the BEIS consultation on ‘Restoring
trust in audit and corporate governance’.
Approved the submission of the group’s response
to the BEIS consultation.
See page 151
Considered the impact of the Russian invasion
of Ukraine on the supply chain.
Sought to mitigate the impact on the supply chain
and source alternative suppliers where possible.
See page 109
Regulated business and its stakeholders
Regular review of the progress of the Direct
Procurement for Customers (DPC) approach
and readiness of UUW as part of the project to
replace sections of the Haweswater Aqueduct.
Water resources deep dive.
Board kept fully apprised of progress at key stages
of the project through regular presentations at
board meetings, deep-dive sessions and as part of
strategy discussions. The UUW board approved the
submission of the Outline Business Case to Ofwat
under DPC.
See page 40
Provided an in-depth view of the strategy for
managing water resources and consideration of
the opportunities to deliver new sources along
with the planning process for the Water Resource
Management Plan.
See page 48
Reviewed customer service performance
measures.
In-year customer performance measures monitored
against regulatory targets.
See page 58
Drainage and Wastewater Management Plan
deep dive.
Considered the final capital sanction to close
out the West Cumbria supplies project to
provide a long-term sustainable water supply
to customers on the west coast of Cumbria.
Provided an in-depth review of the submission and the
opportunity for the board to challenge management’s
approach and provide strategic guidance prior to
submission of the plan in June 2022.
See page 48
Approved the final capital sanction.
See page 33
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Actions
Governance
Outcomes
Cross
reference
Link to strategic
themes
Actions
Other group business
Outcomes
Cross
reference
Link to strategic
themes
Considered the opportunities to dispose of
United Utilities Renewable Energy Limited
(UURE) and its non-regulated renewable asset
portfolio.
Considered the consolidation of credit
support in the form of guarantees to Water
Plus to comply with the requirements of the
Wholesale-Retail Code.
Shareholder relations
Received and discussed a presentation by
Rothschild Investor Advisory on investors’ views
and perceptions of the group in relation to,
among other things: strategy; the group’s unique
selling proposition; performance; and how the
company compares with other listed water and
wastewater companies.
Regularly received and discussed feedback
from roadshows, presentations and face-to-face
meetings between investors and the Chair, CEO
and/or the CFO and other communications
received from large investors.
Financial
Endorsed the marketing of UURE for sale.
See page 152
Approved the consolidation of credit support
facilities, aligning with those provided by Severn
Trent, the joint venture partner.
See page 256
Provided the board with an indirect view of
investor perceptions.
See page 127
Provided the board with a direct view of investor
perceptions and provided a point of comparison
with the indirect approach.
See page 127
Reviewed the 2020–25 business plan and the
2022/23 budget.
Noted the 2020–25 business plan and approved
the 2022/23 budget.
Reviewed and approved the half and full-year
results and associated announcements and
applicable dividend payments.
Approved the half and full-year results and
associated announcements and considered and
approved the interim and final dividend payments
to be paid to shareholders.
–
–
Reviewed management's proposed going
concern and long-term viability statement.
Approved the going concern and long-term
viability statement.
Reviewed tax policies and objectives proposed
by management for 2021/22.
Approved tax policies and objectives for
2021/22.
See pages 140
to 142
See page 192
Reviewed the annual pensions update.
Reviewed the annual treasury update.
Pensions strategy affirmed and endorsed the
preferred methodology for Guaranteed Minimum
Pension equalisation.
See page 232
Approved the treasury policies; the group’s funding
requirements for the year and the potential sources
to meeting these funding requirements; and
managing the group’s interest rate and other
market risk exposure.
See page 155
Reviewed the annual insurance programme
for 2022/23.
Approved the annual insurance programme
for 2022/23.
–
Reviewed progress with material litigation
involving the group.
Strategy to defend claims robustly affirmed.
See page 109
Corporate governance report
Reviewed and debated the overall risk profile of
Endorsed the nature, extent and management of
See page 100
the group, and in particular the principal risks,
key business risks and endorsed the view that the
emerging risks and risk appetite, including a
risk appetite approach and framework remained fit
review of the most significant operational risks.
for purpose.
Reviewed the risk management systems,
The risk management and internal control
See page 139
including financial, operational and compliance
systems were considered to be effective.
controls and reviewed the effectiveness of the
internal control systems.
Reviewed and discussed developments in
Approved the activities undertaken to enhance the
See page 107
cyber crime.
effectiveness of the group’s security controls.
Reviewed the terms of reference for the
Approved amendments to the terms of reference
–
audit, remuneration, treasury and corporate
of the company’s committees as appropriate.
responsibility committees and received
post-meeting reports from the chairs of each
committee summarising discussions and actions.
Reviewed biannual updates on changes and
Matters implemented as considered appropriate. –
developments in corporate governance.
Reviewed and discussed the internal evaluation
Identified action points and any ongoing training
See page 136
of the board, its committees and individual
needs.
directors and conflicts of interest.
Reviewed the performance of the statutory
Accepted the recommendation from the audit
See page 150
auditor and recommendation for reappointment
committee that KPMG be reappointed at the 2022
at the 2022 AGM.
AGM.
Reviewed the resolutions and notice of
Approved the resolutions to be proposed at the
See page 197
meeting for the 2022 AGM.
AGM, and convened the AGM.
Reviewed the approach and progress of work
Approved the 2022/23 slavery and human
See page 197
to identify areas where there is any risk of
trafficking statement.
modern slavery occurring in our supply chain.
Reviewed the effectiveness of the whistleblowing
Concluded that the whistleblowing policies and
See pages 127
policies and processes and incidents under
processes were effective and noted the activities
and 154
investigation and noted the activities within the
within the business to protect and detect fraud.
business to prevent and detect fraud.
Reviewed the BEIS consultation on ‘Restoring
Approved the submission of the group’s response
See page 151
trust in audit and corporate governance’.
to the BEIS consultation.
Considered the impact of the Russian invasion
Sought to mitigate the impact on the supply chain
See page 109
of Ukraine on the supply chain.
and source alternative suppliers where possible.
Regulated business and its stakeholders
Regular review of the progress of the Direct
Board kept fully apprised of progress at key stages
See page 40
Procurement for Customers (DPC) approach
of the project through regular presentations at
and readiness of UUW as part of the project to
board meetings, deep-dive sessions and as part of
replace sections of the Haweswater Aqueduct.
strategy discussions. The UUW board approved the
Water resources deep dive.
Provided an in-depth view of the strategy for
See page 48
submission of the Outline Business Case to Ofwat
under DPC.
managing water resources and consideration of
the opportunities to deliver new sources along
with the planning process for the Water Resource
Management Plan.
Reviewed customer service performance
In-year customer performance measures monitored
See page 58
against regulatory targets.
Drainage and Wastewater Management Plan
Provided an in-depth review of the submission and the
See page 48
measures.
deep dive.
opportunity for the board to challenge management’s
approach and provide strategic guidance prior to
submission of the plan in June 2022.
Considered the final capital sanction to close
Approved the final capital sanction.
See page 33
Key
out the West Cumbria supplies project to
provide a long-term sustainable water supply
to customers on the west coast of Cumbria.
The best service to customers
At the lowest sustainable cost
In a responsible manner
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Attendance at board and committee meetings
Eight scheduled board meetings were planned and
held during the year (2021: eight). A number of other
board meetings and telephone conferences were held
during the year, as the need arose. The table below
shows the number of scheduled meetings attended
and the maximum number of scheduled meetings that
the directors could have attended. Only in exceptional
circumstances would directors not attend board and
committee meetings. Similarly, every effort is made to
attend ad hoc meetings either in person or via the use
of video or telephone conferencing facilities if needs
be. None of the non-executive directors has raised
concerns over the time commitment required of them
to fulfil their duties. Scheduled meetings are normally
held face to face, but due to the COVID-19 restrictions
impacting the early part of the year, meetings were
held virtually.
On the evening before most scheduled board
meetings all the non-executive directors meet either
by themselves, or together with just the CEO, or
with the entire board and the company secretary.
This time is usefully spent enabling board members
to build a rapport with each other and a relationship
on a personal level, share views and consider issues
impacting the company, resulting in better board
dynamics and decision-making. In the early part of the
year, due to the COVID-19 restrictions, these informal
pre-board meeting sessions were held virtually.
Board
meetings(1)
Audit
committee
Remuneration
committee
Nomination
committee
Corporate
responsibility
committee
Treasury
committee
Sir David Higgins
8
8
Steve Mogford
Phil Aspin
Mark Clare
Liam Butterworth
Stephen Carter
Kath Cates
Alison Goligher
8
8
8
8
8
8
1(2)
1
8
8
8 8
8
8
1(2)
1
3(3) 4
5 5
5 5
5 5
6 6
6 6
2(2) 2
4(3) 6
6 6
6 6
Brian May
4(4)
4
1(4) 1
2(4) 2
1(4) 1
Paulette Rowe
Doug Webb
8
8
8 8
4 4
4 4
3(6) 3
6 6
6 6
4 4
4 4
4 4
1(5) 1
3 3
1(4) 1
2(6) 2
Meetings attended
Possible meetings
(1) Actual number of meetings attended/maximum number of scheduled meetings which the directors could have attended during the financial year
ended 31 March 2022.
(2) Liam Butterworth was appointed to the board and as a member of the audit committee and the nomination committee on 1 January 2022.
(3) Stephen Carter was unable to attend one meeting of the audit committee and two meetings of the nomination committee due to other
commitments.
(4) Brian May stepped down from the board at the AGM held in July 2021.
(5) Paulette Rowe was appointed as a member of the corporate responsibility committee with effect from 26 October 2021.
(6) Doug Webb was appointed as chair of the audit committee, as a member and chair of the treasury committee and as a member of the remuneration
committee on Brian May stepping down from the board in July 2021.
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Corporate governance report
Attendance at board and committee meetings
Eight scheduled board meetings were planned and
held face to face, but due to the COVID-19 restrictions
impacting the early part of the year, meetings were
held during the year (2021: eight). A number of other
held virtually.
board meetings and telephone conferences were held
during the year, as the need arose. The table below
shows the number of scheduled meetings attended
and the maximum number of scheduled meetings that
the directors could have attended. Only in exceptional
circumstances would directors not attend board and
committee meetings. Similarly, every effort is made to
attend ad hoc meetings either in person or via the use
of video or telephone conferencing facilities if needs
be. None of the non-executive directors has raised
concerns over the time commitment required of them
to fulfil their duties. Scheduled meetings are normally
On the evening before most scheduled board
meetings all the non-executive directors meet either
by themselves, or together with just the CEO, or
with the entire board and the company secretary.
This time is usefully spent enabling board members
to build a rapport with each other and a relationship
on a personal level, share views and consider issues
impacting the company, resulting in better board
dynamics and decision-making. In the early part of the
year, due to the COVID-19 restrictions, these informal
pre-board meeting sessions were held virtually.
Board
Audit
Remuneration
Nomination
responsibility
meetings(1)
committee
committee
committee
committee
Treasury
committee
Corporate
Sir David Higgins
8
8
8
8
8
8
8
8
1(2)
1
8
8
8 8
8
8
8
8
8 8
5 5
5 5
5 5
3(6) 3
1(2)
1
3(3) 4
4 4
4 4
6 6
6 6
2(2) 2
4(3) 6
6 6
6 6
6 6
6 6
4 4
4 4
4 4
1(5) 1
3 3
1(4) 1
2(6) 2
Brian May
4(4)
4
1(4) 1
2(4) 2
1(4) 1
Meetings attended
Possible meetings
(1) Actual number of meetings attended/maximum number of scheduled meetings which the directors could have attended during the financial year
(2) Liam Butterworth was appointed to the board and as a member of the audit committee and the nomination committee on 1 January 2022.
(3) Stephen Carter was unable to attend one meeting of the audit committee and two meetings of the nomination committee due to other
(4) Brian May stepped down from the board at the AGM held in July 2021.
(5) Paulette Rowe was appointed as a member of the corporate responsibility committee with effect from 26 October 2021.
(6) Doug Webb was appointed as chair of the audit committee, as a member and chair of the treasury committee and as a member of the remuneration
committee on Brian May stepping down from the board in July 2021.
Steve Mogford
Phil Aspin
Mark Clare
Liam Butterworth
Stephen Carter
Kath Cates
Alison Goligher
Paulette Rowe
Doug Webb
ended 31 March 2022.
commitments.
Purpose, vision, values and culture
Our purpose is to provide great water and more for the North
West. Our vision is to be the best UK water and wastewater
company through providing the best service to customers, at the
lowest sustainable cost and in a responsible manner. In setting
the company’s purpose, the board took into account information
and views from stakeholders, utilising much of the research and
engagement that contributed to our 2020–25 business plan
submission and feedback obtained from customers as part of
the company’s brand refresh undertaken during 2019/20. For
the year ended 31 March 2022, the board is satisfied that the
formulation of our aspirations in terms of our purpose, values and
culture have been informed by our stakeholders and we operate
our business in such a way that will create long-term value for all.
Our values demonstrate how we behave individually and
collectively as the board and how we ask our employees to
behave. Our employees are fundamental to delivering our
strategy and achieving our purpose. Our values of being
customer focused, trustworthy and innovative underpin our
culture of behaving as a responsible business in the way we
interact with all the stakeholders we serve. We must continually
reinforce these values so that the right behaviours cascade
throughout the organisation, ensuring our culture of behaving
responsibly drives what we do.
Monitoring our culture
Throughout the organisation, our culture is monitored to ensure
behaving responsibly drives what we do. Key to this is taking
action to address any issues where there is misalignment with
the company’s culture.
We are pleased to have received external validation of our approach
to monitoring culture, featuring as a best practice case study
with the Financial Reporting Council ‘Creating Positive Culture
Opportunities and Challenges Report’, December 2021. A recent
independent audit found our approach to be a “pragmatic and
effective model” for supporting the board in their role of monitoring
and assessing culture and a “useful framework for driving
improvements and interventions” (PwC, February 2021).
United Utilities culture model
01
Dashboard of cultural metrics
In addition to the existing reporting, management has
developed a dashboard of cultural metrics, providing
a comprehensive overview to support the board in
fulfilling its role in monitoring and assessing culture.
The dashboard comprises relevant metrics derived
from: the annual employee engagement survey; human
resources policies in relation to diversity, equality and
inclusion along with associated training; whistleblowing
reporting; health, safety and wellbeing policies and
practices; and other key performance indicators relating
to how we behave as a responsible business. During the
year, the United Utilities culture model was developed
as set out below.
02
Existing reporting structures
for discussion
There are a number of existing reporting structures that
allow these cultural metrics to be measured, discussed
and challenged by the board and its committees, many
of which are regularly provided to the board at its
scheduled board meetings.
03
Alignment with purpose,
values and strategy
The board was satisfied that policies, practices and
behaviours within the business were aligned with the
company’s purpose, values and strategy.
• We have agreed four categories which are key
for setting our culture – people, values, strategy
and purpose.
• There is a supporting dashboard of cultural
metrics, many of which are presented and
considered by the board and its committees
throughout the year.
• We have separate board updates on our
Employee Voice panel to share the ‘lived
experience’ of employees, together with an
update on our annual employee opinion survey.
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3
1
M
a
r
c
h
2
0
2
2
125
Corporate governance report
Read more about
our employees
on pages 60 to 63
Read more
about diversity,
equality and
inclusion on
pages 44 to 45
Listening to our employees
Our employees are at the heart of the culture of our
business and their ‘lived experience’, is a key part of the
board’s assessment and monitoring of culture. Alison
Goligher, the current designated non-executive director
for engagement with the workforce, facilitates two-way
dialogue between the board and employees. There is an
open invite to all board members to attend meetings of
the panel and during this year, Sir David and Kath Cates
have participated and answered questions from panel
members on board strategy.
Alison chairs the Employee Voice panel (the panel)
formed from representatives of a number of employee
groups and employee networks from within the business
and with representatives drawn from across the
geographical region. Alison has met the panel virtually
four times throughout the year. In order to ensure
two-way communication, Alison provides updates to
the panel from the perspective of the board and its
committees, and similarly she provides feedback to the
board on the work of the panel. Alison also has regular
meetings with senior trade union representatives as part
of the agreed panel approach.
The panel has adapted its approach during the pandemic
and moved from face-to-face and site meetings to
The board
Employee voice panel
Chair: Alison Goligher (non-executive director)
Employee
networks
groups:
Employee
champion
groups:
Early
careers and
management:
Union
partners
• Multicultural
•
•
•
•
•
GENEq
Armed Forces
LGBT+
Ability
•
•
•
•
•
•
•
•
The Early
Careers board
Aspiring
managers
Apprentices
Graduates
Bands 3 and 4
managers
Health, safety
and wellbeing
champions
Engagement
champions
Colleague
engagement
group
Career
development
forums
•
•
•
•
UNISON
Unite
GMB
Prospect
virtual meetings. These have proved popular with panel
members, particularly field-based operational staff who
find it much easier to attend virtually than travel from their
operational sites. There are 30 members of the panel and
membership rotates approximately every two years.
The panel has been provided with business updates and
information sessions to broaden their knowledge of the
board and corporate governance. The three key
sub-groups have focused on the continual improvement
of the employee opinion survey, supporting our employee
networks to promote diversity and inclusion across the
company, and to explore in more detail the drivers and
measures of organisation culture. The culture sub-group
has focused its energies on obtaining a grass-roots view of
the changes to the ways of working during the pandemic
and contributed to the ‘next ways of working’ project. It
also contributed to discussions on topical issues relating to
culture, such as the focus on racial inequality.
Employees’ views are measured annually through the
employee engagement survey with the objective of
taking any required action to improve how permanent
employees feel about the company and understand
its direction. Employees are provided with information
through briefings and access to online materials, to
enable them to understand the financial and economic
factors affecting the group’s performance. Along with our
employee relations team, our CEO holds regular face-to-
face meetings with senior trade union representatives to
facilitate two-way communication and engagement with
the views of employees’ representatives.
The group has a commercial arrangement with a third
party for the provision of agency staff and contractors.
Engagement and communication in relation to these
members of the wider workforce is managed directly
by the third party via a dedicated third party account
manager who liaises directly with the company’s human
resources team. If there is any significant change activity,
a representative of the third party joins the project team,
thereby ensuring consistency when communicating key
information to employees, agency staff and contractors.
Set out on page 30 is the company’s approach
to our engagement with and creating value for
employees, with health, safety and wellbeing a priority.
Furthermore, an explanation of the company’s approach
to rewarding the workforce can be found in the report of
the remuneration committee on page 183.
Employee Voice panel
Outcomes from the work since the panel was
established to strengthen the ‘employee voice’ in
the boardroom include:
• The transfer of the governance of the annual
employee survey to the Employee Voice panel.
The panel enhanced the underlying anonymity
of the survey for employees and provided more
opportunities to provide free text comments.
Survey questions were updated to reflect key
topics, including: wellbeing; inclusivity; and
working differently;
• Additional administrative and communications
resource was made available for network
groups and executive sponsors identified; and
• Panel members’ views were sought on the
‘next ways of working’ project, the ‘home
safe and well’ project and the ‘diversity and
inclusion’ audit.
126
unitedutilities.com/corporate
Corporate governance report
Read more about
our employees
on pages 60 to 63
Listening to our employees
Our employees are at the heart of the culture of our
virtual meetings. These have proved popular with panel
members, particularly field-based operational staff who
business and their ‘lived experience’, is a key part of the
find it much easier to attend virtually than travel from their
board’s assessment and monitoring of culture. Alison
operational sites. There are 30 members of the panel and
Goligher, the current designated non-executive director
membership rotates approximately every two years.
Read more
about diversity,
equality and
inclusion on
pages 44 to 45
for engagement with the workforce, facilitates two-way
dialogue between the board and employees. There is an
open invite to all board members to attend meetings of
the panel and during this year, Sir David and Kath Cates
have participated and answered questions from panel
members on board strategy.
Alison chairs the Employee Voice panel (the panel)
The panel has been provided with business updates and
information sessions to broaden their knowledge of the
board and corporate governance. The three key
sub-groups have focused on the continual improvement
of the employee opinion survey, supporting our employee
networks to promote diversity and inclusion across the
company, and to explore in more detail the drivers and
formed from representatives of a number of employee
measures of organisation culture. The culture sub-group
groups and employee networks from within the business
has focused its energies on obtaining a grass-roots view of
and with representatives drawn from across the
geographical region. Alison has met the panel virtually
four times throughout the year. In order to ensure
two-way communication, Alison provides updates to
the panel from the perspective of the board and its
committees, and similarly she provides feedback to the
board on the work of the panel. Alison also has regular
meetings with senior trade union representatives as part
of the agreed panel approach.
the changes to the ways of working during the pandemic
and contributed to the ‘next ways of working’ project. It
also contributed to discussions on topical issues relating to
culture, such as the focus on racial inequality.
Employees’ views are measured annually through the
employee engagement survey with the objective of
taking any required action to improve how permanent
employees feel about the company and understand
its direction. Employees are provided with information
The panel has adapted its approach during the pandemic
through briefings and access to online materials, to
and moved from face-to-face and site meetings to
enable them to understand the financial and economic
factors affecting the group’s performance. Along with our
employee relations team, our CEO holds regular face-to-
face meetings with senior trade union representatives to
facilitate two-way communication and engagement with
the views of employees’ representatives.
The group has a commercial arrangement with a third
party for the provision of agency staff and contractors.
Engagement and communication in relation to these
members of the wider workforce is managed directly
by the third party via a dedicated third party account
manager who liaises directly with the company’s human
resources team. If there is any significant change activity,
a representative of the third party joins the project team,
thereby ensuring consistency when communicating key
information to employees, agency staff and contractors.
Set out on page 30 is the company’s approach
to our engagement with and creating value for
employees, with health, safety and wellbeing a priority.
Furthermore, an explanation of the company’s approach
to rewarding the workforce can be found in the report of
the remuneration committee on page 183.
Employee Voice panel
Outcomes from the work since the panel was
established to strengthen the ‘employee voice’ in
the boardroom include:
• The transfer of the governance of the annual
employee survey to the Employee Voice panel.
The panel enhanced the underlying anonymity
of the survey for employees and provided more
opportunities to provide free text comments.
Survey questions were updated to reflect key
topics, including: wellbeing; inclusivity; and
working differently;
• Additional administrative and communications
resource was made available for network
groups and executive sponsors identified; and
• Panel members’ views were sought on the
‘next ways of working’ project, the ‘home
safe and well’ project and the ‘diversity and
inclusion’ audit.
The board
Employee voice panel
Chair: Alison Goligher (non-executive director)
Employee
networks
groups:
Employee
champion
groups:
Early
careers and
management:
Union
partners
• Multicultural
•
Health, safety
•
The Early
UNISON
•
•
•
•
GENEq
Armed Forces
LGBT+
Ability
•
•
and wellbeing
champions
Engagement
champions
Colleague
engagement
group
•
•
•
•
Careers board
Aspiring
managers
Apprentices
Graduates
Bands 3 and 4
managers
•
Career
development
forums
•
•
•
•
Unite
GMB
Prospect
Whistleblowing policy
The following sets out the company’s compliance
with code provision 6.
As part of our two-way communication the board has
responsibility for reviewing the group’s arrangements
for individuals to raise matters of concern and the
arrangements for the investigation of such matters.
The group’s whistleblowing policy (the policy) supports
the culture within the group where genuine concerns
may be reported and investigated without reprisals
for whistleblowers. A confidential telephone helpline
and a web portal are available to enable employees
(including agency workers and contractors) to raise
matters of concern in relation to possible incidents of
fraud, dishonesty, corruption, theft, security and bribery.
Furthermore, employees are encouraged to raise any
matters relating to health and safety and any activities of
the business that have caused or may cause damage to
the environment, such as pollution or other contamination.
Both the helpline and web portal are operated by a third
party, enabling any concerns to be reported anonymously.
The policy states that no employee will be victimised for
raising a matter in accordance with the policy. Matters
raised with the helpline/portal are in the first instance
raised with the relevant director and investigated by
senior managers independent of any involvement of
the issues being considered. Details of the findings of
the investigation and proposed solution are considered
by the whistleblowing committee (whose membership
comprises the company secretary, the customer services
and people director, the strategy, policy and regulation
director, the head of internal audit and the commercial,
engineering and capital delivery director) and which meets
quarterly. The board routinely reviews matters considered
by the whistleblowing committee, the outcome of the
investigation and the ways in which the matters were
brought to a conclusion, thus ensuring that the core value
of integrity is upheld and fostering an environment where
employees feel it is ‘safe to speak up’ and to do so without
fear of reprisal.
Board engagement with shareholders and
other stakeholders
The board as a whole accepts its responsibility for
engaging with shareholders and is kept fully informed
about information in the marketplace through the
following channels:
• The investor relations adviser produces an annual
survey of investors’ views and perceptions about
United Utilities, the results of which are presented
and discussed by the board;
• The board receives regular updates and feedback
on investor meetings involving the CEO, CFO and/
or investor relations team and reports from sector
analysts to ensure that the board maintains an
understanding of investors’ priorities; and
• The executive and non-executive directors are
available to meet with major shareholders and
institutional investors. When revising the directors’
remuneration policy, the chair of the remuneration
committee invited engagement from the company’s
major shareholders. Feedback from any such
engagement would be shared with all board members.
Institutional investors
As well as current investors, we engage actively with
institutional investors who do not currently hold shares
in United Utilities, as we are keen to ensure our business
is well understood across the investment community,
and to hear and discuss the views of all investors.
We have an active investor relations programme,
which includes:
• An invitation to major shareholders to meet with
the Chair;
• A regular schedule of meetings between the CEO
and CFO and representatives from our major
shareholders, supplemented with meetings hosted
by our investor relations team;
•
•
Presentations by the CEO and CFO to groups
of institutional investors, both on an ad hoc
basis and linked to our half and full-year results
announcements and at our ‘Capital Markets Days’
and an event focusing on ESG matters;
The programme covers a range of major global
financial centres, typically including the UK,
Europe, North America and the Asia Pacific region;
• Regular feedback provided to the board on the
views of our institutional investors following these
meetings; and
• Close contact maintained between the investor
relations team and a range of City analysts that
conduct research on United Utilities.
In 2021/22, our investor relations activities were
conducted through a combination of virtual and face-
to-face meetings. We met or offered to meet with
80 per cent (2020/21: 81 per cent), by value, of the
active targetable institutional shareholder base (after
adjusting for shareholders who do not typically meet
with companies, such as indexed funds).
Frequent areas of common interest arising in meetings
with investors include operational and environmental
performance, customer service, capital investment,
efficiency initiatives, regulatory performance,
regulatory changes and ESG matters. Investors are
always keen to observe financial stability and are
interested in: the level of gearing versus regulatory
assumptions; cost of finance; our debt portfolio and
debt maturity profile; future financing requirements;
and dividends. Investors are keen to understand how
the company is performing relative to the price review
allowances and targets each year, along with the
potential implications of regulatory change.
Retail shareholders
Despite the privatisation process being around
30 years ago, we have retained a large number of
individual shareholders with registered addresses in
the North West – in fact, over 50 per cent of registered
shareholdings on the share register. We have
historically held our AGM in our region in Manchester,
which enables our more local shareholders, many
of whom are customers, to attend the meeting. The
2022 AGM will be held in a hybrid format. There is a
considerable amount of information on our website,
which provides information on our key social and
Investor dialogue with the Chair
During the year, the Chair offered to meet with 13 institutional
investors, and nine meetings were held. Common themes from
these discussions were:
• our corporate reporting of ESG matters;
• board governance topics;
• board succession; and
•
the recent Ofwat/Environment Agency investigation into the
operation of storm overflows.
126
unitedutilities.com/corporate
Stock Code: UU.
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127
Corporate governance report
Read more about
engaging with
our stakeholders
on pages 30 to 32
Read more about
our treasury
committee on
page 155
This requires long-term support from our credit
investors who invest in the company by making term
funding available in return for receiving interest
on their investment and repayment of principal on
maturity of the loans or bonds. We arrange term debt
finance in the debt capital markets (with maturities
typically ranging from seven years to up to 50 years at
issue). Debt finance is primarily raised via the group’s
London listed multi-issuer Euro Medium Term Note
Programme (the programme limit was increased and
redenominated from EUR7 billion to £10 billion in
November 2021), which gives us access to the sterling
and euro public bond markets and privately arranged
note issues. Committed credit facilities are arranged
with our relationship banks on a bilateral basis.
Additionally, the European Investment Bank (EIB),
which is the financing arm of the European Union (EU),
remains a significant lender to United Utilities Water,
currently providing around £1.1 billion of loan funding
supporting past capital investment programmes, with
our existing EIB loan portfolio expected to ‘run-off’ in
line with the scheduled maturities of each loan.
A greater proportion of the group’s term finance is
therefore likely to come from the debt capital markets,
including funding raised under the group’s sustainable
finance framework that was established in November
2020. In July 2021, the group published its inaugural
sustainable finance framework allocation and impact
report, which provides credit investors with details on the
use of proceeds of our debut sustainable bond issue, along
with the selected case studies on eligible projects funded.
The group currently has gross borrowings of circa
£7,979.8 million. Given the importance of debt funding to
our group, we have an active credit investor programme
coordinated by our group treasury team, which provides
a first point of contact for credit investors’ queries and
maintains a dedicated area of the company’s website. One-
to-one meetings are held with credit investors through a
programme aimed at the major European fund managers
known to invest in corporate bonds that may be existing
holders of the group’s debt or potential holders. Regular
mailings of company information are sent to keep credit
investors informed of significant events. The treasury team
has regular dialogue with the group’s relationship banks,
the EIB and the credit rating agencies.
More information can be found on our website
at unitedutilities.com/corporate/investors/
credit-investors
Rating agency services continue to be provided to
the group by Moody’s Investors Service Limited,
Fitch Ratings Ltd and S&P Ratings UK Limited under
contracts signed at the beginning of 2020 for an
initial three-year term. Debt capital markets issuance
by the group has therefore been made on a solicited
basis by all three rating agencies during the 2021/22
financial year.
environmental impacts and performance during the
year. Together with the annual and half-yearly results
announcements, our annual report and financial
statements are also available on our website; these
are the principal ways by which we communicate
with our retail shareholders. Our company secretariat
and investor relations teams, along with our registrar,
Equiniti, are on hand to help our retail shareholders
with any queries. Information for shareholders can also
be found on the inside back cover of this document,
with a number of useful website addresses.
Other stakeholders
The board has direct contact with other stakeholder
representatives, including: Ofwat and YourVoice (the
independent customer challenge group). The chair of
YourVoice attends a UUW board meeting to provide an
opportunity for discussion, in-depth customer insight
and the sharing of views.
The remuneration committee regularly engages with
stakeholders, including employees. During the year,
a consultation exercise was undertaken to gather
stakeholders’ views on the proposed directors’
remuneration policy and the intention to introduce
carbon measures in to the long-term incentive
arrangements, with supportive feedback being
received.
Engagement with representatives of all our stakeholder
groups occurs widely across many aspects of the
business, and more information can be found on
pages 30 to 32.
Further information on stakeholder engagement can
be found in the report of the corporate responsibility
committee on page 156 and in the measures reported
on pages 52 to 74.
Relations with banks and credit investors
Running a water and wastewater business, by its
very nature, requires a long-term outlook. Our
regulatory cycle is based on five-year periods, and
we raise funding to build and improve our water and
wastewater treatment works and associated network
of pipes for each five-year cycle and beyond. We
are heavily reliant on successfully raising long-term
funding from banks and credit investors to fund
our capital investment programme and refinance
upcoming debt maturities.
Outcome of 2021 AGM
At the 2021 AGM, votes were cast in relation to
approximately 70 per cent of the issued share
capital (2020: 69 per cent; 2019: 67 per cent). All 21
resolutions proposed by the board were passed by the
required majority; there were no significant votes cast
against the board’s recommendations.
Votes cast in favour of the election/reappointment of
the board directors were as follows:
Sir David Higgins 99.72% Kath Cates
99.91%
Steve Mogford
99.96% Alison Goligher
99.74%
Phil Aspin
99.91% Paulette Rowe
99.74%
Mark Clare
91.59% Doug Webb
99.91%
Stephen Carter
99.74%
128
unitedutilities.com/corporate
Corporate governance report
Read more about
engaging with
our stakeholders
on pages 30 to 32
Read more about
our treasury
committee on
page 155
environmental impacts and performance during the
This requires long-term support from our credit
year. Together with the annual and half-yearly results
investors who invest in the company by making term
announcements, our annual report and financial
funding available in return for receiving interest
statements are also available on our website; these
on their investment and repayment of principal on
are the principal ways by which we communicate
maturity of the loans or bonds. We arrange term debt
with our retail shareholders. Our company secretariat
finance in the debt capital markets (with maturities
and investor relations teams, along with our registrar,
typically ranging from seven years to up to 50 years at
Equiniti, are on hand to help our retail shareholders
issue). Debt finance is primarily raised via the group’s
with any queries. Information for shareholders can also
London listed multi-issuer Euro Medium Term Note
be found on the inside back cover of this document,
Programme (the programme limit was increased and
with a number of useful website addresses.
redenominated from EUR7 billion to £10 billion in
Other stakeholders
The board has direct contact with other stakeholder
representatives, including: Ofwat and YourVoice (the
independent customer challenge group). The chair of
November 2021), which gives us access to the sterling
and euro public bond markets and privately arranged
note issues. Committed credit facilities are arranged
with our relationship banks on a bilateral basis.
YourVoice attends a UUW board meeting to provide an
Additionally, the European Investment Bank (EIB),
opportunity for discussion, in-depth customer insight
which is the financing arm of the European Union (EU),
and the sharing of views.
The remuneration committee regularly engages with
stakeholders, including employees. During the year,
a consultation exercise was undertaken to gather
stakeholders’ views on the proposed directors’
remains a significant lender to United Utilities Water,
currently providing around £1.1 billion of loan funding
supporting past capital investment programmes, with
our existing EIB loan portfolio expected to ‘run-off’ in
line with the scheduled maturities of each loan.
remuneration policy and the intention to introduce
A greater proportion of the group’s term finance is
carbon measures in to the long-term incentive
therefore likely to come from the debt capital markets,
arrangements, with supportive feedback being
including funding raised under the group’s sustainable
finance framework that was established in November
2020. In July 2021, the group published its inaugural
sustainable finance framework allocation and impact
report, which provides credit investors with details on the
use of proceeds of our debut sustainable bond issue, along
with the selected case studies on eligible projects funded.
The group currently has gross borrowings of circa
£7,979.8 million. Given the importance of debt funding to
our group, we have an active credit investor programme
coordinated by our group treasury team, which provides
a first point of contact for credit investors’ queries and
maintains a dedicated area of the company’s website. One-
to-one meetings are held with credit investors through a
programme aimed at the major European fund managers
known to invest in corporate bonds that may be existing
holders of the group’s debt or potential holders. Regular
mailings of company information are sent to keep credit
investors informed of significant events. The treasury team
has regular dialogue with the group’s relationship banks,
the EIB and the credit rating agencies.
More information can be found on our website
at unitedutilities.com/corporate/investors/
credit-investors
Rating agency services continue to be provided to
the group by Moody’s Investors Service Limited,
Fitch Ratings Ltd and S&P Ratings UK Limited under
contracts signed at the beginning of 2020 for an
initial three-year term. Debt capital markets issuance
by the group has therefore been made on a solicited
basis by all three rating agencies during the 2021/22
financial year.
received.
Engagement with representatives of all our stakeholder
groups occurs widely across many aspects of the
business, and more information can be found on
pages 30 to 32.
Further information on stakeholder engagement can
be found in the report of the corporate responsibility
committee on page 156 and in the measures reported
on pages 52 to 74.
Relations with banks and credit investors
Running a water and wastewater business, by its
very nature, requires a long-term outlook. Our
regulatory cycle is based on five-year periods, and
we raise funding to build and improve our water and
wastewater treatment works and associated network
of pipes for each five-year cycle and beyond. We
are heavily reliant on successfully raising long-term
funding from banks and credit investors to fund
our capital investment programme and refinance
upcoming debt maturities.
Outcome of 2021 AGM
At the 2021 AGM, votes were cast in relation to
approximately 70 per cent of the issued share
capital (2020: 69 per cent; 2019: 67 per cent). All 21
resolutions proposed by the board were passed by the
required majority; there were no significant votes cast
against the board’s recommendations.
Votes cast in favour of the election/reappointment of
the board directors were as follows:
Sir David Higgins 99.72% Kath Cates
99.91%
Steve Mogford
99.96% Alison Goligher
99.74%
Phil Aspin
99.91% Paulette Rowe
99.74%
Mark Clare
91.59% Doug Webb
99.91%
Stephen Carter
99.74%
Division of
responsibilities
2
Principle F:
The Chair leads the board and
is responsible for its overall
effectiveness in directing
the company. They should
demonstrate objective
judgement throughout their
tenure and promote a culture
of openness and debate. In
addition, the Chair facilitates
constructive board relations and
the effective contribution of all
non-executive directors, and
Principle G:
The board should include an
appropriate combination of
executive and non-executive
(and, in particular, independent
non-executive) directors, such
that no one individual or small
group of individuals dominates
the board’s decision-making.
There should be a clear division
of responsibilities between the
leadership of the board and
the executive leadership of the
company’s business.
The internal board evaluation
(see pages 135 to 137) tested and
Principle H:
Non-executive directors should
have sufficient time to meet
their board responsibilities. They
should provide constructive
challenge, strategic guidance,
offer specialist advice and hold
management to account.
As part of the annual review
of conflicts of interest, the
board was satisfied that, after
taking into account the other
commitments of directors, board
members had sufficient time to
ensure that directors receive
accurate, timely and clear
information.
The internally facilitated board
evaluation (see pages 135 to
137) tested and confirmed the
Chair’s application of principle
F. Sir David was independent
on appointment when assessed
against the circumstances set out
in provision 10, his biography is
on page 112.
confirmed the application of
principle G, concluding that the
skills and experience of executive
and independent non-executives
were appropriate with the board
working together as a cohesive
unit, but maintaining the clear
division of responsibility between
the board and the executive
management team. See pages 112
to 115 for our reporting against
provision 10; and the governance
structure of the board and
its principal committees on
page 120.
meet their board responsibilities
and principle H had been applied
(see page 129). The board
demonstrated constructive
challenge and offered strategic
guidance and advice to
management in relation to the
delivery of the Haweswater
Aqueduct Resilience Programme
using the Direct Procurement
for Customers approach (see
page 40).
Principle I:
The board, supported by the
company secretary, should
ensure that it has the policies,
processes, information, time
and resources it needs in order
to function effectively and
efficiently.
The internally facilitated board
evaluation tested and confirmed
the application of principle I, the
views of board members were
sought on whether the necessary
support and information
was provided effectively and
efficiently, see page 136.
Chair of the board
The role and behaviour of the Chair is fundamental
to the effective operation and decision-making of
the board and in creating an atmosphere where open
and frank discussion is facilitated and encouraged.
The roles and responsibilities of the Chair are set out
as part of the company’s governance framework.
Sir David was independent on appointment when
assessed against the circumstances set out in provision
10 of the code.
It is the role of the Chair, supported by the company
secretary, to drive forward the business agenda of
board meetings to ensure that the board is kept
abreast of the regulatory drivers and strategic needs of
the business, and to ensure that the directors receive
accurate, timely and clear information. The Chair and
company secretary hold regular meetings to discuss
agenda items and board materials. Board packs are
distributed electronically five days before the meeting.
Ensuring board materials are of an appropriate length,
on what can be particularly complex and technical
issues, is a constant challenge, and progress has been
made during the year by the introduction of a revised
board paper template.
Conflicts of interest and time commitment
The following section sets out the company’s
compliance with provision 7.
The company’s articles of association contain
provisions which permit unconflicted directors to
authorise conflict situations. Each director is required
to notify the Chair of any potential conflict or potential
new appointment or directorship. Additionally, the
board reviews the position of each director annually.
No changes were recorded that would impact the
independence of any of the directors. No conflicts of
interest had arisen during the year.
The board does not specify the precise time
commitment it requires from its non-executive
directors in taking on the role as they are expected
to fulfil it and manage their diaries accordingly.
The board is content that none of its directors is
overcommitted and unable to fulfil their responsibilities
as a board director for United Utilities. Each individual’s
circumstances are different, as is their ability to take
on the responsibilities of a non-executive directorship
role. Should a director be unable to attend meetings on
a regular basis, not be preparing appropriately or not
contributing appropriately to board discussions, the
Chair would be responsible for discussing the matter
with them and agreeing a course of action.
During the year, permission was sought from the board
to take on additional non-executive responsibilities
by: Kath Cates as a non-executive director of Brown
Shipley, and by Steve Mogford who will join the board
of QinetiQ Group plc as a non-executive director with
effect from 1 August 2022.
Executive directors are not normally allowed to take
on more than one non-executive position, a non-
executive role is considered to be beneficial from a
developmental perspective.
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Corporate governance report
Nomination committee
The appointment of a new chief
executive officer for any company is an
important decision, and a responsibility
that the nomination committee must
think long and hard about to ensure it
appoints the best person to fit the role,
the company and its culture, and meet
the expected challenges ahead.
Dear shareholder
During the year, the committee has spent considerable
time on improving and developing a more structured
approach to executive succession planning, a need
highlighted during the 2020/21 evaluation of the
committee’s performance. We announced on 27 April
2022 that Steve Mogford had expressed his wish
to step down as CEO in early 2023, and that Louise
Beardmore, customer service and people director,
would be appointed as a director and CEO designate
with effect from 1 May 2022. The committee engaged
Lygon Group to undertake the CEO succession
process, further information on the process can be
found on page 133.
During his tenure as CEO, Steve has led the
transformation of the group to become one of the top
performers in the water and wastewater sector. Steve
has championed the company’s ethos of behaving
as a responsible business for so many years. The
committee was acutely aware that Steve’s successor
would need to demonstrate the same passion and
commitment to ensuring the continued implementation
of the group’s strategic themes; providing the best
service to customers; at the lowest sustainable cost
and in a responsible manner. Since her appointment
in 2016 as customer service and people director,
Louise has spearheaded the customer initiatives on
affordability and looking after the needs of vulnerable
customers. She has a strong strategic mind set, and
a track record of leading teams that have delivered
major transformational change within regulated
utility and service structures, improving profitability
and delivering enhanced outcomes for multiple
stakeholders. Louise is a passionate advocate of United
Utilities. Suffice to say, the company and its ethos are
in her DNA and she was a natural fit to succeed Steve.
Nomination committee members:
Sir David Higgins
Chair of the nomination
committee
Mark Clare
Liam Butterworth
Stephen Carter
Kath Cates
Alison Goligher
Paulette Rowe
Doug Webb
Sir David Higgins
Chair of the nomination committee
Quick facts
• All members of the committee are independent,
thus fulfilling the code requirement that
a ‘majority of members of the nomination
committee should be independent non-
executive directors’. On joining the board, all
independent non-executive directors become
members of the nomination committee.
• The role of the committee is to lead the process
for appointments to the board and ensure plans
are in place for orderly succession to both the
board and senior management positions and
oversee a diverse pipeline for succession.
• The company secretary attends all meetings of
the committee.
• The customer services and people director
has responsibility for human resources, she
regularly attends meetings and is responsible
for engaging with executive search recruitment
advisers.
• The CEO is not a member of the committee, but
from time to time is invited to attend. Neither
the Chair nor the CEO would participate in the
recruitment of their own successor.
Quick link
Terms of reference:
unitedutilities.com/corporate-governance
130
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Corporate governance report
Nomination committee
The appointment of a new chief
executive officer for any company is an
important decision, and a responsibility
that the nomination committee must
think long and hard about to ensure it
appoints the best person to fit the role,
the company and its culture, and meet
the expected challenges ahead.
Dear shareholder
During the year, the committee has spent considerable
time on improving and developing a more structured
approach to executive succession planning, a need
highlighted during the 2020/21 evaluation of the
committee’s performance. We announced on 27 April
2022 that Steve Mogford had expressed his wish
to step down as CEO in early 2023, and that Louise
Beardmore, customer service and people director,
would be appointed as a director and CEO designate
with effect from 1 May 2022. The committee engaged
Lygon Group to undertake the CEO succession
process, further information on the process can be
found on page 133.
During his tenure as CEO, Steve has led the
transformation of the group to become one of the top
performers in the water and wastewater sector. Steve
has championed the company’s ethos of behaving
as a responsible business for so many years. The
committee was acutely aware that Steve’s successor
would need to demonstrate the same passion and
commitment to ensuring the continued implementation
of the group’s strategic themes; providing the best
service to customers; at the lowest sustainable cost
and in a responsible manner. Since her appointment
in 2016 as customer service and people director,
Louise has spearheaded the customer initiatives on
affordability and looking after the needs of vulnerable
customers. She has a strong strategic mind set, and
a track record of leading teams that have delivered
major transformational change within regulated
utility and service structures, improving profitability
and delivering enhanced outcomes for multiple
stakeholders. Louise is a passionate advocate of United
Utilities. Suffice to say, the company and its ethos are
in her DNA and she was a natural fit to succeed Steve.
Nomination committee members:
Sir David Higgins
Chair of the nomination
committee
Mark Clare
Liam Butterworth
Stephen Carter
Sir David Higgins
Chair of the nomination committee
Quick facts
• All members of the committee are independent,
thus fulfilling the code requirement that
a ‘majority of members of the nomination
committee should be independent non-
executive directors’. On joining the board, all
independent non-executive directors become
members of the nomination committee.
• The role of the committee is to lead the process
for appointments to the board and ensure plans
are in place for orderly succession to both the
board and senior management positions and
oversee a diverse pipeline for succession.
• The company secretary attends all meetings of
the committee.
• The customer services and people director
has responsibility for human resources, she
regularly attends meetings and is responsible
for engaging with executive search recruitment
advisers.
• The CEO is not a member of the committee, but
from time to time is invited to attend. Neither
the Chair nor the CEO would participate in the
recruitment of their own successor.
Quick link
Terms of reference:
unitedutilities.com/corporate-governance
Furthermore, the committee was particularly pleased
that Louise will have the opportunity to work alongside
Steve prior to his retirement next year.
In making the appointment, the committee took into
account the importance of the CEO:CFO dynamic,
concluding that Louise and Phil Aspin, with their
combined skills and experience, would be a strong team,
having extensive knowledge of the group, its culture
and an in-depth understanding of the water sector and
the regulatory framework it operates within. As was
the case with Phil’s appointment in 2021, Louise has
been a core part of Steve’s team in implementing the
group’s transformational journey over the last 11 years.
After the rigorous external and internal appointment
process, identifying Louise as the outstanding candidate,
the committee was particularly pleased to promote an
internal candidate to the CEO designate role, and it
demonstrates the strength in the senior management
team that Steve, as CEO, has developed and fostered.
The committee, as part of the planned board
succession, conducted a search during the year for
the appointment of a new independent non-executive
director to replace Mark Clare who is approaching nine
years’ service on the board. Serving beyond a nine-year
term for a non-executive director is identified in the
code as being one of the reasons that could affect a
non-executive director’s independence. For this reason,
we say a fond farewell to Mark, our senior independent
director since 2014, at the annual general meeting
in July 2022. Furthermore, Stephen Carter, chair of
the corporate responsibility committee, informed the
board that he would not be seeking re-election at the
annual general meeting after nearly an eight-year term.
We express our thanks and gratitude to both Mark
and Stephen for their considerable contribution to
the group. The committee’s search concluded in the
appointment of Liam Butterworth as an independent
non-executive director in January 2022. As a serving
CEO, Liam brings strong engineering and industrial
technology experience to the board and his experience
of managing performance will provide additional
commercial focus as we embark on the 2025–30
regulatory price review process. Having grown up in
the North West, he has a close affinity with our region.
Main responsibilities
• Lead the process for board appointments and
make recommendations to the board about filling
vacancies on the board, including the company
secretary.
• Consider the succession planning of directors and
members of the executive team.
• Make recommendations to the board on
refreshing the membership of the board’s principal
committees.
Kath Cates
Alison Goligher
• Review directors’ conflict authorisations.
Paulette Rowe
Doug Webb
• Consider requests from executive directors for
election to the boards of other companies and
make a recommendation to the board.
• Consider requests from non-executive directors
for election to the boards of other companies; this
role has been delegated to the Chair (other than in
respect of his own requests).
130
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Stock Code: UU.
Read more about
our approach
as a responsible
business on
page 12
Read more
about diversity,
equality and
inclusion on
pages 44 to 45
As a consequence of the various board changes, the
committee reviewed the membership and diversity of
the board committees (more information can be found
on page 133).
With Mark Clare stepping down, the committee
needed to consider who among its members was best
placed to succeed Mark as the senior independent
director (SID). Alison Goligher was felt to be best
placed to fulfil this important role. Her board
colleagues recognise that she is an outstanding leader
and her communication style, approach and values
fit well with the ethos of the company. Furthermore,
with this as her first SID role, it would provide a new
challenge for Alison.
At 31 March 2022, 30 per cent of the board were
female. At the conclusion of the annual general
meeting in July 2022, subject to all board directors
receiving the required number of votes, our board
diversity policy targets will be met, namely that: at
least 40 per cent of the board be female, at least one
of the senior board positions be held by a female
and that at least one member of the board is from a
minority ethnic background.
As a collective, and with some relatively new board
members among us, we are working hard to prepare
for the forthcoming price review process.
Sir David Higgins
Chair of the nomination committee
Steve has championed
the company’s ethos
of behaving as a
responsible business
for so many years.”
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Corporate governance report
Nomination committee
Directors’ tenure as at 31 March 2022
Age and gender profile as at 31 March 2022
Sir David Higgins
Steve Mogford
Phil Aspin
Mark Clare
Liam Butterworth
Stephen Carter
Kath Cates
Alison Goligher
Paulette Rowe
Doug Webb
2 yr 10m
11yrs 3m
1 yr 9m
8yrs 5m
3mths
7yrs 7m
1 yr 7m
5yrs 8m
4yrs 8m
1yr 7m
1
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51–54
20%
55–60
40%
61–67
40%
Chair
Senior independent non-executive director
Executive director
Independent non-executive director
Male
Female
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Corporate governance report
Nomination committee
Directors’ tenure as at 31 March 2022
Age and gender profile as at 31 March 2022
Sir David Higgins
Steve Mogford
Phil Aspin
Mark Clare
Liam Butterworth
Stephen Carter
Kath Cates
Alison Goligher
Paulette Rowe
Doug Webb
51–54
20%
55–60
40%
61–67
40%
2 yr 10m
11yrs 3m
1 yr 9m
8yrs 5m
3mths
7yrs 7m
1 yr 7m
5yrs 8m
4yrs 8m
1yr 7m
Chair
Senior independent non-executive director
Executive director
Independent non-executive director
Male
Female
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3
Composition, success
and evaluation
3
Principle J:
Appointments to the board
should be subject to a formal,
rigorous and transparent
procedure, and an effective
succession plan should be
maintained for board and
senior management. Both
appointments and succession
plans should be based on merit
and objective criteria and, within
this context, should promote
diversity of gender, social and
ethnic backgrounds, cognitive
and personal strengths.
The board is satisfied it has
applied principle J. An explanation
of the board appointment and
succession planning activities can
be found on pages 133 to 134 and
forms our disclosure as part of
provision 23, our policy on board
diversity is on set out below and
details of the gender balance of
senior management on page 134.
Information on the company’s
approach to diversity, equality
and inclusion is set out on pages
44 to 45. Our disclosure against
provision 20 is on page 133.
Principle K:
The board and its committees
should have a combination
of skills, experience and
knowledge. Consideration
should be given to the length
of service of the board as a
whole and membership regularly
refreshed.
The board is satisfied it has
applied principle K. Biographies
of the board can be found on
pages 112 to 115. An overview of
directors’ areas of expertise is set
out in the skills matrix on page 134
and the length of service of board
members on page 132. Board
biographies include our reporting
against provision 18.
Principle L:
Annual evaluation of the board
should consider its composition,
diversity and how effectively
members work together to
achieve objectives. Individual
evaluation should demonstrate
whether each director continues
to contribute effectively.
The board is satisfied it has
applied principle L. Details of the
board evaluation and disclosure
against provision 23 can be
found on pages 135 to 137.
Summary of the board diversity policy
• Ensure the selection process for board appointments provides
access to a range of candidates. Any such appointments will be
made on the basis of merit and objective criteria, and within this
context should promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.
• Ensure that the policies adopted by the group will promote
diversity in the broadest sense among senior managers who will in
turn aspire to a board position.
• Ensure that the board, led by the Chair, collectively fosters an inclusive
and belonging environment in the boardroom, enabling open and frank
contributions from all board members.
In selecting candidates for board positions, only use the services of
executive search firms who have signed up to the voluntary code of
conduct for executive search firms.
•
• Adopt measurable objectives from time to time for achieving diversity
on the board, which shall be to maintain at least 40 per cent female
representation, to have at least one director from a minority ethnic
background*, and to have at least one of the positions of: chair, CEO,
senior independent director or CFO held by a female.
* Defined by reference to categories recommended by the Office for National
Statistics (ONS) excluding those listed by ONS as coming from a white ethnic
background.
What has been on the committee’s agenda
during the year?
Board succession
The succession planning matrix tool and skills matrix
(see page 134) for board directors is used to support
the planning process for board appointments. The
skills matrix captures the skills and experience board
directors’ need as a collective, to be able to deliver the
company’s purpose and strategic themes. The succession
planning matrix tool highlights the code governance
requirements; existing directors’ terms of appointment
and a forecast/anticipated time frame when an individual
might leave the business; the projected strategic needs
of the business and resulting preferred experience of
any potential new board member; existing potential
internal successors to a role (where identified) and those
who could act as an interim should the need arise. A
candidate suitable for the role of CEO would need to
demonstrate that their management approach would fit
with the company’s culture of behaving responsibly. The
committee would seek to consult with the incumbent
CEO, given his unique knowledge and perspective of
the group, on his view of the needs of the business
going forward. Neither the Chair nor the CEO would be
involved in the appointment process of their successor.
Board succession – non-executive
In line with the board succession plan, and the
approximate timescales therein, the process of the
appointment of Liam Butterworth as an independent
non-executive director was undertaken during the year
with a view to replacing Mark Clare as he approached
almost nine years on the board. The committee is
supported during any non-executive director recruitment
process by the customer services and people director,
Louise Beardmore, as part of her human resources
responsibilities. The executive search firm Lygon Group
were engaged as part of the recruitment process.
Board succession – executive
As stated above, the committee sought the views of
Steve Mogford on the attributes of the candidate best
placed to succeed him in the CEO role, but he was not
involved in the final decision. The Chair, supported
by the company secretary, led the process to identify
suitable candidates for the CEO role and the executive
search firm Lygon Group were engaged as part of
the recruitment process, having demonstrated, of
the executive search firms considered, that they had
the best understanding and knowledge of the group
and its culture. Against the brief for the role, Lygon
Group undertook the internal appraisal process for a
number of internal candidates and identified a number
of potential external candidates for the committee to
consider. Louise Beardmore, in relation to her human
resources responsibilities, had no involvement in the
process other than being an internal candidate.
Other than providing executive search services
on previous occasions Lygon Group have no other
connection with the company.
Membership of the principal board committees
Doug Webb took over the role as chair of the audit
committee and of the treasury committee when Brian
May left the board in July 2021. Doug had served as a
member of the audit committee since his appointment
in September 2020 and chairs the audit committee
at Johnson Matthey plc. Prior to his appointment as
chair of the treasury committee, Doug had attended a
meeting of the committee. Doug also replaced Brian
as a member of the remuneration committee. On his
appointment, Liam Butterworth was appointed as a
member of the audit committee.
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Corporate governance report
Nomination committee
Paulette Rowe, having being appointed as a member of
the corporate responsibility committee during the year,
will succeed Stephen Carter as the committee’s chair at
the conclusion of the annual general meeting. Having
been a significant contributor to the work on diversity,
equality and inclusion, and with an interest in social
matters, and as a former trustee and chair of a children’s
charity, Paulette is well placed to lead the committee.
On Alison Goligher’s appointment as SID at the
conclusion of the AGM she will step aside as chair of the
remuneration committee, although remaining as a member
of the committee, to be succeeded by Kath Cates. Kath
has considerable experience as a remuneration committee
chair, having held the role for three years at RSA Insurance
Group plc.
The board has applied the board diversity policy
to the board committees, thereby ensuring female
representation on each committee. Furthermore, it is
satisfied that the membership of the audit committee
is in accordance with provision 24, and that the
membership of the remuneration committee is in
accordance with provision 32.
Board diversity
The board diversity policy is to “ensure the selection
process for board appointments provides access to a
range of candidates. Any appointments will be made on
the basis of merit and objective criteria, and within this
context, should promote diversity of gender, social and
ethnic backgrounds, cognitive and personal strengths,
but with due regard for the benefits of diversity on the
board, including gender diversity.” The objective of the
policy is for new directors to bring something different
Skills matrix of board directors
to the board table, be it in terms of experience, skills,
perspective, interests or other attributes. The selection
process and application of the board diversity policy aims
to attract board members whose values reflect those of
the company and that of our strategic theme of behaving
in a responsible manner. As referred to above, our board
diversity policy would be brought to the attention of any
executive search firm used as part of the selection and
appointment process for a board position. Feedback would
be sought from the search firm in terms of their success in
attracting potential candidates in terms of their diversity
of attributes. Feedback would also be gathered first hand
through the interview process with candidates conducted
by other board members and taken into consideration in
identifying those suitable for the role in question.
As a board, the benefits of diversity and inclusion and
associated benefits to the decision-making process are
widely recognised and is a topic regularly discussed with
major investors. When Mark Clare and Stephen Carter
step down from the board at the annual general meeting,
the measurable targets of at least 40 per cent female
representation on the board and one director from an
minority ethnic background will be met. On the board at
31 March 2022, female representation was 30 per cent and
there was 10 per cent representation by a director from
a minority ethnic background. Amongst the workforce,
employees from a minority ethnic background represented
2.7 per cent (9 per cent of employees choose not to
disclose). We recognise the benefits of diversity across
our business with initiatives in place to support women
in the workplace and tackle the ethnic imbalance of our
workforce, thereby aligning with our strategic theme
of operating our business in a responsible manner (see
page 12).
Sir David
Higgins
Steve
Mogford
Phil
Aspin
Louise
Beardmore
Mark
Clare
Liam
Butterworth
Stephen
Carter
Kath
Cates
Alison
Goligher
Paulette
Rowe
Doug
Webb
Finance/
accounting
Utilities
Regulation
Government
Construction/
engineering
Industrial
Customer-
facing
FTSE
companies
Digital/
technology
ESG
Current CEO/
CFO of FTSE
350 *
Former CEO/
FTSE
CFO of
350
* Excludes UU
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Corporate governance report
Nomination committee
Paulette Rowe, having being appointed as a member of
to the board table, be it in terms of experience, skills,
the corporate responsibility committee during the year,
will succeed Stephen Carter as the committee’s chair at
the conclusion of the annual general meeting. Having
been a significant contributor to the work on diversity,
equality and inclusion, and with an interest in social
matters, and as a former trustee and chair of a children’s
charity, Paulette is well placed to lead the committee.
On Alison Goligher’s appointment as SID at the
conclusion of the AGM she will step aside as chair of the
remuneration committee, although remaining as a member
of the committee, to be succeeded by Kath Cates. Kath
has considerable experience as a remuneration committee
chair, having held the role for three years at RSA Insurance
Group plc.
The board has applied the board diversity policy
to the board committees, thereby ensuring female
representation on each committee. Furthermore, it is
satisfied that the membership of the audit committee
is in accordance with provision 24, and that the
membership of the remuneration committee is in
accordance with provision 32.
Board diversity
The board diversity policy is to “ensure the selection
process for board appointments provides access to a
range of candidates. Any appointments will be made on
the basis of merit and objective criteria, and within this
context, should promote diversity of gender, social and
ethnic backgrounds, cognitive and personal strengths,
but with due regard for the benefits of diversity on the
board, including gender diversity.” The objective of the
policy is for new directors to bring something different
Skills matrix of board directors
perspective, interests or other attributes. The selection
process and application of the board diversity policy aims
to attract board members whose values reflect those of
the company and that of our strategic theme of behaving
in a responsible manner. As referred to above, our board
diversity policy would be brought to the attention of any
executive search firm used as part of the selection and
appointment process for a board position. Feedback would
be sought from the search firm in terms of their success in
attracting potential candidates in terms of their diversity
of attributes. Feedback would also be gathered first hand
through the interview process with candidates conducted
by other board members and taken into consideration in
identifying those suitable for the role in question.
As a board, the benefits of diversity and inclusion and
associated benefits to the decision-making process are
widely recognised and is a topic regularly discussed with
major investors. When Mark Clare and Stephen Carter
step down from the board at the annual general meeting,
the measurable targets of at least 40 per cent female
representation on the board and one director from an
minority ethnic background will be met. On the board at
31 March 2022, female representation was 30 per cent and
there was 10 per cent representation by a director from
a minority ethnic background. Amongst the workforce,
employees from a minority ethnic background represented
2.7 per cent (9 per cent of employees choose not to
disclose). We recognise the benefits of diversity across
our business with initiatives in place to support women
in the workplace and tackle the ethnic imbalance of our
workforce, thereby aligning with our strategic theme
of operating our business in a responsible manner (see
page 12).
Sir David
Steve
Phil
Louise
Mark
Liam
Stephen
Kath
Alison
Paulette
Doug
Higgins
Mogford
Aspin
Beardmore
Clare
Butterworth
Carter
Cates
Goligher
Rowe
Webb
Evaluation of the effectiveness of the board,
board committees and individual directors
An annual evaluation of the board, its committees,
the Chair and the individual directors is conducted as
recommended by the code. This year the evaluation
was facilitated internally by the company secretary, in
consultation with the Chair and the board committee
chairs. The most recent external evaluation was
conducted by Independent Audit Limited during
2020/21. The process of how the evaluation was
conducted is set out below.
Overall, the self assessment evaluation completed by the
directors and others attending and supporting the board
committees, concluded that the board and its committees
functioned well, were well chaired and the position was
positive. Members of the committees had the appropriate
skills, experience and a particular interest in the work of
the committee to debate issues and provide challenge to
management. All of the individual directors demonstrated
the expected level of commitment to the role and
contributed effectively during board discussions.
Non-executive director’s induction programme
Since joining the board in January 2022, Liam
Butterworth has spent time with members of the
executive team and met with representatives from the
company’s advisers as follows:
• The CFO and members of the finance function and
gained external perspective from representatives
of the group’s statutory auditor, KPMG;
• The water, wastewater and digital services director
to gain an understanding of the company’s
operations and digital monitoring and control of the
group’s water and wastewater network and assets
and insight into the group’s IT systems;
• The company secretary to gain an understanding
of the group’s corporate structure, governance
arrangements and associated processes and met
with Slaughter and May, the group’s legal advisers,
to receive an external perspective on governance
best practice;
• The commercial, engineering and capital delivery
director to gain an understanding of the group’s capital
delivery programme and, in particular, insight into the
Haweswater Aqueduct Resilience Programme;
• The customer services and people director to
discuss the actions undertaken by the business to
improve services to customers, and along with the
director of health, safety, wellbeing and estates,
a number of topics in relation to the group’s
employee agenda were discussed;
• The strategy, policy and regulation director and the
director of environment, planning and innovation
to discuss the requirements of the economic and
quality regulators; and
• The corporate affairs director to gain an
understanding of the group’s engagement with
political stakeholders.
Finance/
accounting
Utilities
Regulation
Government
Construction/
engineering
Industrial
Customer-
facing
FTSE
companies
Digital/
technology
ESG
Current CEO/
CFO of FTSE
350 *
Former CEO/
CFO of
FTSE
350
* Excludes UU
134
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Stock Code: UU.
Internally facilitated self-assessment evaluation process
1 Questionnaires
The evaluation was based on the completion of questionnaires (including
questions to be scored and free text questions) by board members
assessing both the performance of the board and each of its principal
committees, as well as that of the Chair. Each director also completed a
self-assessment questionnaire assessing their own performance.
Board members were also asked to provide a view on how well the
actions identified in the 2020/21 evaluation had been addressed.
In addition to board members, other members of the executive team and
representatives of external advisers who regularly attend and support the
committee meetings were asked to participate in the evaluation process.
2 Appraisal
The results were collated by the company secretary.
3 Consultation
The results were then shared and reviewed with the Chair and each
of the chairs of the relevant committees and presented at a meeting
of the relevant committee and discussed. The results of the board
evaluation were presented to the board for discussion.
The Chair reviewed the performance of the individual directors.
Mark Clare, as the senior independent non-executive director (SID) led
the review of the Chair. He held a discussion with the non-executive
directors without the Chair present. The SID also discussed the Chair’s
performance with the CEO and CFO. Detailed feedback was provided
to the Chair.
4 Evaluation and actions
The conclusions of the evaluation were reached and actions identified
as set out on page 136.
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Corporate governance report
Nomination committee
A summary of the review of the responses of the self-assessment questionnaire process is set out below:
2021/22 areas of
assessment
Strategic oversight
Commentary and actions
Responses indicated the need for the board to be kept aligned with progress and developments on
the PR24 plan; and ensuring board members understood the strategic drivers of the group’s various
regulators and focused on climate change and improving asset resilience.
Board composition,
dynamics and expertise
It was felt there was an appropriate mix of skills and experience with members drawn from a range of
backgrounds. The diversity among the personalities provided a good mix, and there was a good dynamic
between members. Meetings were generally conducted in a way that encouraged open communication
and the proper resolution of issues.
Board agenda
Managing risk
Support and
information
Responses indicated there was a good coverage of the items of strategic importance, but board time
must be made sufficiently available to consider strategic matters where non-executive directors could
add most value.
Risk was considered to be well managed and the board had a clear overview of the principal risks. Deep
dives on risk topics (see pages 121 to 123) provided during the year had been particularly well received.
Respondents felt meetings were well chaired and the board arrangements and administration provided
by the company secretary and his team were effective. Views were sought on the use of virtual
meetings, with the consensus being that, whenever possible, board members and key contributors
should be present either all virtually or all face to face. From time to time, it would be satisfactory for
guests attending for just a short section of the meeting to attend virtually.
Committees
• Audit committee: there was a good balance in meetings over in-depth discussions and time
management. More focus on risk management, processes and controls would be beneficial and on
the growing importance of non-financial/ESG reporting.
• Remuneration committee: the committee worked well with all views being heard and debates focused
and inclusive. The committee should ensure any future ESG metrics were understood and incorporated in
a meaningful way into the new directors’ remuneration policy and long-term plan.
• Nomination committee: there was a good level of debate and discussion, and it would be helpful
to expand discussion on all aspects of diversity of any potential candidates. Improved focus on
long-term succession planning was needed along with ensuring talent management and retention
of senior management was debated.
• Corporate responsibility committee: given the broad range of ESG activities within the
committee’s remit, respondents felt the committee should focus on the areas where it could add
greater value and link in with the PR24 process.
• Treasury committee: respondents felt the committee should continue to test the existing policies
to ensure they remained relevant and consider the treasury-related challenges of PR24.
The responses from the questionnaires completed by each director assessing their own effectiveness
were reviewed by the Chair. Individual directors were asked, among other things, to identify how they
could improve their overall contribution to the board and its committees and if they had any skill or
knowledge gaps that could be addressed. The following were identified: to attend more site visits and
interactions with specific areas of the business and more interaction and engagement opportunities
with the senior management team and employees.
The review supported the view that all the directors were considered to be contributing effectively to
the board and all demonstrated the expected level of commitment to their roles.
The responses from the questionnaires completed by each director assessing the Chair’s performance
were reviewed by the senior independent director (SID) and discussed at a session with the non-
executive directors without the Chair present. The SID also discussed the Chair’s performance with
the CEO and CFO. Detailed feedback was provided to the Chair.
It was concluded that the Chair had fulfilled the expected commitment to the role and was an effective
leader of the board.
Individual directors
Chair
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Corporate governance report
Nomination committee
A summary of the review of the responses of the self-assessment questionnaire process is set out below:
2021/22 areas of
assessment
Commentary and actions
Strategic oversight
Responses indicated the need for the board to be kept aligned with progress and developments on
the PR24 plan; and ensuring board members understood the strategic drivers of the group’s various
regulators and focused on climate change and improving asset resilience.
Board composition,
dynamics and expertise
It was felt there was an appropriate mix of skills and experience with members drawn from a range of
backgrounds. The diversity among the personalities provided a good mix, and there was a good dynamic
between members. Meetings were generally conducted in a way that encouraged open communication
and the proper resolution of issues.
Board agenda
Responses indicated there was a good coverage of the items of strategic importance, but board time
must be made sufficiently available to consider strategic matters where non-executive directors could
add most value.
Managing risk
Support and
information
Risk was considered to be well managed and the board had a clear overview of the principal risks. Deep
dives on risk topics (see pages 121 to 123) provided during the year had been particularly well received.
Respondents felt meetings were well chaired and the board arrangements and administration provided
by the company secretary and his team were effective. Views were sought on the use of virtual
meetings, with the consensus being that, whenever possible, board members and key contributors
should be present either all virtually or all face to face. From time to time, it would be satisfactory for
guests attending for just a short section of the meeting to attend virtually.
Committees
• Audit committee: there was a good balance in meetings over in-depth discussions and time
management. More focus on risk management, processes and controls would be beneficial and on
Individual directors
The responses from the questionnaires completed by each director assessing their own effectiveness
the growing importance of non-financial/ESG reporting.
• Remuneration committee: the committee worked well with all views being heard and debates focused
and inclusive. The committee should ensure any future ESG metrics were understood and incorporated in
a meaningful way into the new directors’ remuneration policy and long-term plan.
• Nomination committee: there was a good level of debate and discussion, and it would be helpful
to expand discussion on all aspects of diversity of any potential candidates. Improved focus on
long-term succession planning was needed along with ensuring talent management and retention
of senior management was debated.
• Corporate responsibility committee: given the broad range of ESG activities within the
committee’s remit, respondents felt the committee should focus on the areas where it could add
greater value and link in with the PR24 process.
• Treasury committee: respondents felt the committee should continue to test the existing policies
to ensure they remained relevant and consider the treasury-related challenges of PR24.
were reviewed by the Chair. Individual directors were asked, among other things, to identify how they
could improve their overall contribution to the board and its committees and if they had any skill or
knowledge gaps that could be addressed. The following were identified: to attend more site visits and
interactions with specific areas of the business and more interaction and engagement opportunities
with the senior management team and employees.
The review supported the view that all the directors were considered to be contributing effectively to
the board and all demonstrated the expected level of commitment to their roles.
The responses from the questionnaires completed by each director assessing the Chair’s performance
were reviewed by the senior independent director (SID) and discussed at a session with the non-
executive directors without the Chair present. The SID also discussed the Chair’s performance with
the CEO and CFO. Detailed feedback was provided to the Chair.
It was concluded that the Chair had fulfilled the expected commitment to the role and was an effective
leader of the board.
Chair
2020/21 evaluation recommendations
Actions taken during 2021/22
Greater visibility of the people skills, characteristics
and diversity for the future needs of the business
along with enhancing the oversight of culture.
Resourcing strategies, where appropriate, are being adapted to address
emerging risks around resourcing and skills particularly in entry level and
digital and technology roles and in building robust early careers talent pools.
Provide more opportunities to consider IT security
and other emerging risks.
The board received two specific updates on information technology and
operational technology security activities and matters concerning cyber
security regulation and legislative compliance.
Nomination committee: develop a more structured
approach towards the executive succession pipeline.
The committee has spent considerable time on improving and developing a
more structured approach to executive succession planning.
Remuneration committee: consider the employee’s
perspective on how remuneration and wider policies
align with the group’s values and impact culture.
Audit committee: provide better insight on how the
key risk and control functions operated together.
Corporate responsibility committee: ensure the focus
on areas where the committee could add greatest
value to the ESG debate and seek more feedback
from the board on its activities.
Ongoing board development and training
Board directors regularly receive updates to improve
their understanding and knowledge about the business
and, in particular, its regulatory environment. As
part of the individual director’s element of the board
evaluation exercise, directors are asked to identify any
skills or knowledge gaps they would like to address.
Directors made a number of suggestions, as set out on
page 136.
Consideration of ESG issues are fundamental to the
way in which we operate as a responsible business
at United Utilities; such matters are central to board
discussions (see the summary of board activity on
pages 121 to 123 and the report of the corporate
responsibility committee on pages 156 to 159). The
board’s approach to these matters is reflected in
our strategic themes, and our corporate culture
of behaving in a responsible manner as reflected
throughout the strategic report. Through presentations
and discussions with representatives of YourVoice, the
independent customer challenge group, whose role
is predicated on protecting customer interests in how
the group goes about its business, the board is kept
informed of customer, in-region environmental affairs
and social matters.
In addition to this less formal approach to board
development, during the year the board received
briefings from both Slaughter and May (legal and
governance matters) and KPMG (governance changes
relating to reporting requirements), along with a
number of other advisers. Non-executive directors
completed an in-house online training course on
water quality awareness. A number of board members
attended events organised by Ofwat for non-executive
directors.
Our non-executive directors are conscious of the
need to keep themselves properly briefed and
informed about current issues and to deepen their
understanding of the business. During the year, Alison
Goligher has again chaired the Employee Voice panel
as part of the ongoing work to ensure the board has
a direct link to understanding the views of employees
Through its engagement with the employee voice panel, including when
consulting with stakeholders on the proposed remuneration policy, the
committee was able to consider how the executive remuneration approach
was perceived by employees, and the extent to which the principles
cascaded through the company. See page 183 for details on the cascade of
remuneration through the organisation.
Progress made in this area in particular in relation to the joint project between
the risk and control functions to update the RADAR system and the fraud risk
management review (see page 154).
The committee concluded that its role was to ensure that the PR24 submission
was aligned with the group’s purpose and that its contents focused on, for
example, carbon, resilience and affordability.
(see page 126) of the business. Paulette Rowe has
contributed to the work on diversity, equality and
inclusion (see pages 44 to 45).
Induction of new non-executive directors
An induction programme is arranged for new
non-executive directors. The programme for Liam
Butterworth is set out on page 135. On joining the
board, non-executive directors would meet members
of the operational teams and visit some of the key
operational sites and capital projects to ensure
they get a first-hand understanding of the water
and wastewater business. New directors receive
information on the key duties of being a director of a
regulated water company. They are required to meet
with representatives of Ofwat prior to appointment.
Wider succession pipeline and
talent management
For a number of years, the group has had a written
succession plan for the executive directors and other
members of the executive team, which includes outline
timescales. The plan was developed further during
the year and a more structured approach adopted
towards the executive succession pipeline. The plan
identifies an interim internal successor to fill a role in
the short term should the need arise, and the longer-
term development needs of potential successors to
be able to fulfil a role on a more permanent basis. As
with all board appointments, in aiming to appoint the
best person to fulfil a role, it would be common when
recruiting for a senior role, for an external search to be
conducted alongside an internal candidate recruitment
process.
Any changes that are required to the profile of the
management team to reflect the changing needs of the
business are considered by the board in the executive
succession plan. Succession and development
initiatives for senior executives include executive
mentoring and coaching and/or participating in an
executive business school programme, as appropriate.
Leadership development centres have been delivered
to identify and validate potential for future director
and senior leader positions and develop a number of
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Corporate governance report
Nomination committee
Read more about
our apprenticeship
schemes on page 63
Read more about
our employees
on pages 60 to 62
role-ready diverse candidates to provide the group
with leadership capacity in an increasingly complex
environment. Senior managers are encouraged to
take on a non-executive directorship role as part of
their personal development, but it is recognised that
this is very much a personal commitment for each
individual. The current talent programme at a senior
level is well embedded and we believe a non-executive
appointment for senior managers provides an excellent
opportunity for both personal and career development,
and is a way of gaining valuable experience that may
be applied at United Utilities so long as no conflicts of
interest occur.
During the year, board directors had a number of
opportunities to meet with members of the executive
team, both formally when senior managers were
required to present at board meetings on matters
related to their responsibilities, and on more informal
occasions.
Our graduate and apprentice programmes are thriving
and from time to time, board members have the
opportunity to attend events and meet with members
of these programmes and other employees identified
as potential talent within the business.
Historically, our industry has been male dominated,
but measures are in place to increase diversity in broad
terms among our employees (see pages 44 to 45). At
present fifty per cent of our executive team (excluding
the CEO and CFO) is female, as yet there is no ethnic
diversity among the team. The gender balance of the
direct reports of the executive team is 65 per cent
male and 35 per cent female, representation of ethnic
minorities is 3 per cent. Gender pay data can be found
on page 44.
Along with the wider employee population, we
continue to work towards improving the diversity of
our succession pipeline as part of our ongoing diversity
and inclusion plans.
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Corporate governance report
Nomination committee
Read more about
our apprenticeship
schemes on page 63
Read more about
our employees
on pages 60 to 62
role-ready diverse candidates to provide the group
Historically, our industry has been male dominated,
with leadership capacity in an increasingly complex
but measures are in place to increase diversity in broad
environment. Senior managers are encouraged to
terms among our employees (see pages 44 to 45). At
take on a non-executive directorship role as part of
present fifty per cent of our executive team (excluding
their personal development, but it is recognised that
the CEO and CFO) is female, as yet there is no ethnic
this is very much a personal commitment for each
diversity among the team. The gender balance of the
individual. The current talent programme at a senior
direct reports of the executive team is 65 per cent
level is well embedded and we believe a non-executive
male and 35 per cent female, representation of ethnic
appointment for senior managers provides an excellent
minorities is 3 per cent. Gender pay data can be found
opportunity for both personal and career development,
on page 44.
and is a way of gaining valuable experience that may
be applied at United Utilities so long as no conflicts of
interest occur.
Along with the wider employee population, we
continue to work towards improving the diversity of
our succession pipeline as part of our ongoing diversity
During the year, board directors had a number of
and inclusion plans.
opportunities to meet with members of the executive
team, both formally when senior managers were
required to present at board meetings on matters
related to their responsibilities, and on more informal
occasions.
Our graduate and apprentice programmes are thriving
and from time to time, board members have the
opportunity to attend events and meet with members
of these programmes and other employees identified
as potential talent within the business.
Financial oversight responsibilities of the board
Audit, risk and
internal control
4
Principle M:
The board should establish
formal and transparent policies
and procedures to ensure the
independence and effectiveness
of internal and external audit
functions and satisfy itself on the
integrity of financial and narrative
statements.
Our application of principle M
is formalised in our non-audit
services policy and terms of
engagement with the auditor as
agreed by the committee. The
head of internal audit and risk
reports to the committee and to
the CFO but only on a functional
basis, thereby ensuring a direct
line of communication between
internal audit and the committee.
In accordance with provision
25, an explanation of the
independence and effectiveness
of the external audit process
can be found on pages 148 to
149, and the reappointment of
the statutory auditor on page
150. The board considered and
was satisfied on the integrity
of the financial and narrative
statements, as advised by the
audit committee in accordance
with DTR 7.1.3(5).
Principle N:
The board should present a fair,
balanced and understandable
assessment of the company’s
position and prospects.
We have applied principle N, as
confirmed by our disclosure against
provision 27, which can be found on
page 198 and is supported by our
disclosure against provision 25 on
pages 147 to 148.
Principle O:
The board should establish
procedures to manage risk,
oversee the internal control
framework, and determine the
nature and extent of the principal
risks the company is willing to
take in order to achieve its long-
term strategic objectives.
Our risk management framework
and principal risks are on pages
100 to 109. Further information
on the company’s internal audit
function and controls can be
found on pages 153 to 154 and
together set out our application
of principle O.
Board’s responsibility for financial oversight
One of the fundamental roles of the board is to oversee the financial
performance of the business. The board is supported in this role by the audit
committee whose activities are described on pages 143 to 154. The board
reviews the financial performance of the company at every scheduled board
meeting, receiving a report from the CFO which provides the board with the
up-to- date position of the consolidated financial statements, interpretative
analysis and other key performance indicators, metrics and ratios. The board
takes into account the review by the audit committee of the financial and
narrative statements, and the auditor’s views on the key risks and judgements
identified and given particular focus in their audit work and set out in their
report (see pages 202 to 209), and the information and explanations provided
by management in relation to their key judgements and adjustments to
APMs (see page 82). The board considered the review and assurance process
undertaken by management, and considered by the audit committee to
support the application of principle N. The board concluded that in the 2021/22
annual report and financial statements it had presented a fair, balanced and
understandable assessment of the company’s position and prospects, and the
board was satisfied on the integrity of the financial and narrative statements.
Furthermore, the board approved the accounts and provision of the directors’
responsibility statement at its meeting on 25 May 2022, see page 198.
Oversight of financial aspects of ESG
ESG, and behaving responsibly, has been a long-term
commitment and part of the board ethos for many
years and is embedded throughout the business. It
naturally flows through into the board’s approach
to the integrity of the group’s financial reporting.
Recognising that climate change is a key risk to the
group’s provision of water and wastewater services
(see page 102), 2021/22 is the third year that the group
has reported against the TCFD recommendations.
As part of the processes supporting the provision of
the ‘fair, balanced and understandable’ statement,
the board took into account the existing processes of
review and assurance of the TCFD and wider narrative
reporting. Management reviewed the assurance
processes relating to narrative reporting and ESG
matters, particularly those relating to TCFD reporting,
and determined that the levels of assurance provided
by the combination of the work by internal audit and
of the various third parties was satisfactory at this
time – a stance endorsed by the audit committee. The
TCFD report addresses the TCFD recommendations
and includes, for the second year, scenario analysis
(see page 92). Inclusion of climate-related information
in accordance with the TCFD is mandatory for the
company in its 31 March 2023 annual report.
Board’s approach to risk management and
internal control
The board discharges its responsibility for determining
the nature and extent of the risks that it is willing to
take to achieve its strategic objectives through the risk
appetite framework. As a key part of the risk management
framework, risk appetite (see page 100) captures the
board’s desire to take and manage risk relative to the
company’s obligations, stakeholder interests and the
capacity and capability of our key resources.
The board is responsible for ensuring that the company’s
risk management and internal control systems are
effectively managed across the business and that they
receive an appropriate level of scrutiny and board time.
The risk profile is reviewed in conjunction with the full and
half-year reporting cycle alongside deep dives and routine
performance reviews.
The group’s risks predominantly reflect those of all
regulated water and wastewater companies. These
generally relate to the failing of regulatory performance
targets or failing to fulfil our obligations in any five-year
planning cycle, potentially leading to the imposition of
fines and penalties, in addition to reputational damage.
Climate change is a causal risk theme that underpins our
core operations and provision of water and wastewater
services to customers (see page 102).
Review of the effectiveness of the risk
management and internal control systems
During the year, the board reviewed the effectiveness
of the risk management systems and internal
control systems, including financial, operational and
compliance controls. Taking into account the principal
risks and uncertainties set out on pages 100 to 109, the
ongoing work of the audit committee in monitoring
the risk management and internal control systems
(see pages 153 and 154) on behalf of the board, (and
to whom the committee provides regular updates),
the board:
• was satisfied that it had carried out a robust
assessment of the emerging and principal risks
facing the company, including those that would
threaten its business model, future performance,
solvency or liquidity; and
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Corporate governance report
Financial oversight responsibilities of the board
• had reviewed the effectiveness of the risk
management and internal control systems,
including all material financial, operational and
compliance controls (including those relating to
the financial reporting process) and no significant
failings or weaknesses were identified.
After review, the board concluded that through a
combination of the work of the board, the audit
committee and the UUW board (which has particular
responsibility for operational and compliance controls),
the company’s risk management and internal controls
were indeed effectively monitored throughout the year.
The board’s review of the effectiveness of risk
management and internal control systems took into
account:
•
•
•
•
•
•
•
•
•
•
the biannual review of significant risks
and emerging risks (see pages 100 to 109);
the assurance (both internal and external) of the
most significant business and operational risks of the
group;
the review of matters correlating to specific event
based operational risks (see pages 106 to 107);
the outcome of the biannual business unit risk
assessment process (see page 100);
the activities and review of the effectiveness of the
internal audit function (see page 153);
the opinion provided by internal audit in relation to
their work, that “the governance, risk management
and internal control framework was suitably designed
and effectively applied within the areas under
review”;
the self-assessment provided by management
confirmed compliance with a range of key internal
policies, processes and controls (see page 154);
the review of reports from the group audit and risk
board (see page 101);
the oversight of treasury matters, in particular debt
financing and interest rate management (see page
155); and
the review of the business risk management
framework and management’s approach and
tolerance towards risk (see page 100).
Going concern and long-term viability
The following section sets out the company’s
compliance with part of provisions 30 and 31.
The board, following the review by the audit committee,
concluded that it was appropriate to adopt the going
concern basis of accounting (see page 217). Similarly, in
accordance with the principles of the code, the board
concluded, following the recommendation from the audit
committee, that it was appropriate to provide the long-
term viability statement based on an assessment period
of seven years. Assurance supporting these statements
was provided by the review of: the group’s key financial
measures and contingent liabilities; the key credit financial
ratios; and the group’s liquidity and ongoing ability to meet
its financial covenants. As part of the assurance process,
the board also took into account the principal risks and
uncertainties facing the company, and the actions taken
to mitigate those risks, and include emerging and more
topical risks.
These principal risks and uncertainties are detailed
on pages 100 to 109, as are the risk management
processes and structures used to monitor and manage
them. Biannually, the board receives a report detailing
management’s assessment of the most significant risks
facing the company. The report gives an indication of
the level of exposure, subject to the mitigating controls
in place, for the risk profile of the group, while also
highlighting the reputational and customer service impact.
This provides the board with information in two categories:
group-wide business risks; and operational risks. The
board also receives information during the year from the
treasury committee (to which the board has delegated
matters of a treasury nature – see page 155), including
such matters as liquidity policy, the group’s capital funding
requirements and interest rate management.
Long-term viability statement
The directors have assessed the viability of the group,
taking account of the group’s current position, the
potential impact of the principal risks facing the business
in severe but reasonable scenarios, and the effectiveness
of any mitigating actions. This assessment has been
performed in the context of the group’s prospects as
considered over the longer term. Based on this viability
assessment, the directors have a reasonable expectation
that the group will be able to continue in operation and
meet its liabilities as they fall due over the seven-year
period to March 2029.
Basis of assessment
This viability statement is based on the fundamental
assumption that the current regulatory and statutory
framework does not substantively change. The long-
term planning detailed on page 46 assesses the group’s
prospects and establishes its strategy over a 25-year time
horizon consistent with its rolling 25-year licence and its
published long-term strategy. This provides a framework
for the group’s strategic planning process, and is key to
achieving the group’s aim of providing the best service
to customers at the lowest sustainable cost and in a
responsible manner over the longer term, underpinning
our business model set out on pages 20 to 83.
In order to achieve this aim and promote the
sustainability and resilience of the business, due
consideration is given to the management of risks
over the long term that could impact on the business
model, future performance, credit ratings, solvency
and liquidity of the group. Specifically, risks associated
with current levels of economic uncertainty and
climate change have been incorporated into the
baseline position and factored into the various
scenarios modelled as part of the group’s assessment.
An overview of our risk management approach that
supports the group’s long-term planning and prospects,
together with the principal risks and uncertainties
facing the business, can be found on pages 100 to 109.
This approach considers the full range of categories
of risk that could impact the company, such as
financial, operational and regulatory risks. In addition,
consideration is given to the adequacy of workforce
policies and practices, all liabilities including pension
liabilities, any exposure to revenue variations, and
expectations of future performance taking account of
past performance in delivering for customers.
Within the context of this long-term planning and
management of risks, the group’s principal business
operates within five-year regulatory price control cycles.
Medium-term planning considers the current price
control period, over which there is typically a high degree
of certainty, and looks beyond this in order to facilitate
smooth transitions between price control periods. This
results in the board concluding a recurring period of seven
years to be an appropriate period over which to perform a
robust assessment of the group’s long-term viability.
unitedutilities.com/corporate
140
security breaches; current economic uncertainties
including high levels of inflation and a squeeze on the
cost of living impacting the group’s customer base;
and the potential for a restriction to the availability of
financing resulting from a capital markets crisis.
The scenarios considered are underpinned by the group’s
established risk management processes, taking into
account those risks with a greater than 10 per cent (1 in
10) cumulative likelihood of occurrence. Risks associated
with current economic conditions are reflected within the
baseline position, with further potential downside risks
(most notably in relation to bad debt and low inflation)
covered by the individual scenarios modelled, and
collectively within a combined scenario.
Read more about
significant issues
on pages 151 to 152
Read more about
relations with
banks and credit
investors on
page 128
Corporate governance report
Financial oversight responsibilities of the board
• had reviewed the effectiveness of the risk
management’s assessment of the most significant risks
management and internal control systems,
facing the company. The report gives an indication of
including all material financial, operational and
the level of exposure, subject to the mitigating controls
compliance controls (including those relating to
in place, for the risk profile of the group, while also
the financial reporting process) and no significant
highlighting the reputational and customer service impact.
failings or weaknesses were identified.
This provides the board with information in two categories:
After review, the board concluded that through a
combination of the work of the board, the audit
committee and the UUW board (which has particular
responsibility for operational and compliance controls),
the company’s risk management and internal controls
were indeed effectively monitored throughout the year.
The board’s review of the effectiveness of risk
management and internal control systems took into
account:
•
the biannual review of significant risks
and emerging risks (see pages 100 to 109);
•
the assurance (both internal and external) of the
most significant business and operational risks of the
group;
•
the review of matters correlating to specific event
based operational risks (see pages 106 to 107);
•
the outcome of the biannual business unit risk
assessment process (see page 100);
•
the activities and review of the effectiveness of the
internal audit function (see page 153);
group-wide business risks; and operational risks. The
board also receives information during the year from the
treasury committee (to which the board has delegated
matters of a treasury nature – see page 155), including
such matters as liquidity policy, the group’s capital funding
requirements and interest rate management.
Long-term viability statement
The directors have assessed the viability of the group,
taking account of the group’s current position, the
potential impact of the principal risks facing the business
in severe but reasonable scenarios, and the effectiveness
of any mitigating actions. This assessment has been
performed in the context of the group’s prospects as
considered over the longer term. Based on this viability
assessment, the directors have a reasonable expectation
that the group will be able to continue in operation and
meet its liabilities as they fall due over the seven-year
period to March 2029.
Basis of assessment
This viability statement is based on the fundamental
assumption that the current regulatory and statutory
framework does not substantively change. The long-
•
the opinion provided by internal audit in relation to
term planning detailed on page 46 assesses the group’s
their work, that “the governance, risk management
prospects and establishes its strategy over a 25-year time
and internal control framework was suitably designed
horizon consistent with its rolling 25-year licence and its
and effectively applied within the areas under
published long-term strategy. This provides a framework
review”;
•
the self-assessment provided by management
confirmed compliance with a range of key internal
policies, processes and controls (see page 154);
•
the review of reports from the group audit and risk
board (see page 101);
•
the oversight of treasury matters, in particular debt
financing and interest rate management (see page
155); and
•
the review of the business risk management
framework and management’s approach and
tolerance towards risk (see page 100).
Going concern and long-term viability
The following section sets out the company’s
compliance with part of provisions 30 and 31.
The board, following the review by the audit committee,
concluded that it was appropriate to adopt the going
concern basis of accounting (see page 217). Similarly, in
accordance with the principles of the code, the board
concluded, following the recommendation from the audit
committee, that it was appropriate to provide the long-
term viability statement based on an assessment period
of seven years. Assurance supporting these statements
was provided by the review of: the group’s key financial
measures and contingent liabilities; the key credit financial
ratios; and the group’s liquidity and ongoing ability to meet
its financial covenants. As part of the assurance process,
the board also took into account the principal risks and
uncertainties facing the company, and the actions taken
to mitigate those risks, and include emerging and more
topical risks.
These principal risks and uncertainties are detailed
on pages 100 to 109, as are the risk management
processes and structures used to monitor and manage
them. Biannually, the board receives a report detailing
for the group’s strategic planning process, and is key to
achieving the group’s aim of providing the best service
to customers at the lowest sustainable cost and in a
responsible manner over the longer term, underpinning
our business model set out on pages 20 to 83.
In order to achieve this aim and promote the
sustainability and resilience of the business, due
consideration is given to the management of risks
over the long term that could impact on the business
model, future performance, credit ratings, solvency
and liquidity of the group. Specifically, risks associated
with current levels of economic uncertainty and
climate change have been incorporated into the
baseline position and factored into the various
scenarios modelled as part of the group’s assessment.
An overview of our risk management approach that
supports the group’s long-term planning and prospects,
together with the principal risks and uncertainties
facing the business, can be found on pages 100 to 109.
This approach considers the full range of categories
of risk that could impact the company, such as
financial, operational and regulatory risks. In addition,
consideration is given to the adequacy of workforce
policies and practices, all liabilities including pension
liabilities, any exposure to revenue variations, and
expectations of future performance taking account of
past performance in delivering for customers.
Within the context of this long-term planning and
management of risks, the group’s principal business
operates within five-year regulatory price control cycles.
Medium-term planning considers the current price
control period, over which there is typically a high degree
of certainty, and looks beyond this in order to facilitate
smooth transitions between price control periods. This
results in the board concluding a recurring period of seven
years to be an appropriate period over which to perform a
robust assessment of the group’s long-term viability.
Viability assessment: resilience of the group
The viability assessment is based upon the group’s
medium-term business planning process, which sits within
the overarching strategic planning process and considers:
•
•
•
•
the group’s current liquidity position – with
£1.1 billion of available liquidity at March 2022
providing a significant buffer to absorb short-term
cash flow impacts;
the group’s robust capital solvency and credit
rating positions – with a debt to regulatory capital
value (RCV) ratio of circa 60 per cent, a robust
pension position and current credit ratings of A3/
BBB+/A- with Moody’s, S&P and Fitch respectively,
this provides considerable headroom supporting
access to medium-term liquidity where required;
the group’s expected performance, underpinned by
its historical track-record; and
the current regulatory framework within which the
group operates – which provides a high degree of
cash flow certainty over the regulatory period and
the broader regulatory protections outlined below.
The group has a proven track-record of being able to
raise new finance in most market conditions, and expects
to continue to do so into the future. This is despite the
group no longer having access to future EIB funding
following the UK’s exit from the EU.
From a regulatory perspective, the group benefits from a
rolling 25-year licence and a regulatory regime in which
regulators – including the economic regulator, Ofwat
– are required to have regard to the principles of best
regulatory practice. These include that regulation should
be carried out in a way that is transparent, accountable,
proportionate, consistent and targeted. Ofwat’s primary
duties provide that it should protect consumers’ interests,
by promoting effective competition wherever appropriate;
secure that the company properly carries out its statutory
functions; secure that the company can finance the proper
carrying out of these functions – in particular through
securing reasonable returns on capital; and secure that
water and wastewater supply systems have long-term
resilience and that the company takes steps to meet
long-term demands for water supplies and wastewater
services.
In addition, from an economic perspective, given the
market structure of water and wastewater services, threats
to the group’s viability from risks such as reduced market
share, substitution of services and reduced demand are
low compared to those faced by many other industries.
Viability assessment: resilience to
principal risks facing the business
The directors have assessed the group’s viability based
on the resilience of the group and its ability to absorb
a number of ‘severe but reasonable’ scenarios, derived
from the principal risks facing the group, as set out on
pages 100 to 109. The baseline plan against which the
viability assessment has been performed incorporates
the estimated impact of current high levels of inflation
which are expected to endure in the near term before
falling to more normal levels. This baseline plan is
then subject to further stress scenarios and reverse
stress testing that takes into account the potential
impact of the group’s principal risks. Such risks include:
environmental risks such as the occurrence of extreme
weather events and other impacts of climate change,
further details of which are included in the group’s TCFD
disclosures on pages 86 to 94; political and regulatory
risks; the risk of critical asset failure; significant cyber
140
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Corporate governance report
Financial oversight responsibilities of the board
Read more about
our principal
risks on pages
104 to 109
Read more
about going
concern basis of
accounting on
page 217
Based on these risks, the following six largest impacting scenarios were identified and applied as downside stress
scenarios to the group’s baseline plan:
Scenario modelled
Link to risk factors
Scenario 1: Totex £500m one-off
impact in 2022/23
Broadly representing the largest ‘severe but reasonable’ risk which is a
critical asset failure, all assumed to be operating costs
Scenario 2: Totex
underperformance of 10%
(c£120m–c£140m) per annum
for 2022/23–2028/29
Scenario 3: CPIH inflation of 2.0%
below baseline plan for 2022/23 and
2023/24, and 1.0% below baseline
plan for 2024/25–2028/29
Scenario 4: An increase in bad
debt of £15m per annum from
2022/23 to 2028/29
Representing more than the cumulative total expected NPV totex
impact of the remaining top 10 ‘severe but reasonable’ risks (including
environmental, cyber security and network failure risks)
Consistent with quantum of inflation impacts modelled within top 10
severe but reasonable risks
Aligned to internal risk factor on debt collection.
Scenario 5: Additional ODI penalty
of c£50m per annum
Assumes mid-point of UUW’s baseline and final determination P90 ODI
position
Scenario 6: Combined scenario –
50% of scenarios 2-5
50% of scenarios 2-5
Example mitigations (of which none are required to remain viable under the scenarios modelled):
•
Issuing of new finance
• Reduction in discretionary totex spend
• Capital programme deferral
• Closing out of derivative asset position
• Restriction of dividend
• Raising of new equity
The assessment has considered the impact of these
scenarios on the group’s business model, future
performance, credit ratings, solvency and liquidity
over the course of the viability assessment period.
This assessment has demonstrated the group’s ability
to absorb the impact of all severe but reasonable
scenarios modelled, without the need to rely on the
key mitigating actions detailed below.
As well as the protections that exist from the regulatory
environment within which the group operates, a
number of actions are available to mitigate more severe
scenarios, which include: the raising of new finance,
including hybrid debt; capital programme deferral;
reduction in other discretionary totex spend; the
close-out of derivative asset positions; the restriction of
dividend payments; and access to additional equity.
Governance
The analysis underpinning this assessment has been
through a robust internal review process, which
has included scrutiny and challenge from the audit
committee and board, and has been reviewed by the
group’s external auditor, KPMG, as part of their normal
audit procedures.
Going concern
The directors also considered it appropriate to prepare
the financial statements on the going concern basis, as
explained in the basis of preparation note to the accounts.
The most extreme of the severe but reasonable
scenarios modelled, without any mitigating action,
resulted in: the group comfortably retaining investment
grade credit ratings; liquidity of more than one year;
and no projected breaches of financial debt covenants.
Viability assessment: reverse stress testing
As part of the assessment, reverse stress testing of
two extreme theoretical scenarios focusing on totex
overspend and persisting low inflation have been
performed to understand the extent to which the
group could further absorb financial stress before it
reaches a sub-investment grade credit rating. This
reverse stress testing demonstrated that these extreme
conditions would have to be significantly outside what
would be considered ‘severe but reasonable’ scenarios
before the group’s long-term viability would be at risk.
Viability assessment: key mitigating actions
In the event of more extreme but low likelihood
scenarios occurring, there are a number of key
mitigations available to the group, the effectiveness of
which are underpinned by the strength of the group’s
capital solvency position.
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Corporate governance report
Financial oversight responsibilities of the board
Corporate governance report
Audit committee
Read more about
our principal
risks on pages
104 to 109
Read more
about going
concern basis of
accounting on
page 217
Based on these risks, the following six largest impacting scenarios were identified and applied as downside stress
scenarios to the group’s baseline plan:
Scenario modelled
Link to risk factors
Scenario 1: Totex £500m one-off
Broadly representing the largest ‘severe but reasonable’ risk which is a
critical asset failure, all assumed to be operating costs
Representing more than the cumulative total expected NPV totex
underperformance of 10%
impact of the remaining top 10 ‘severe but reasonable’ risks (including
(c£120m–c£140m) per annum
environmental, cyber security and network failure risks)
impact in 2022/23
Scenario 2: Totex
for 2022/23–2028/29
Scenario 3: CPIH inflation of 2.0%
Consistent with quantum of inflation impacts modelled within top 10
below baseline plan for 2022/23 and
severe but reasonable risks
2023/24, and 1.0% below baseline
plan for 2024/25–2028/29
debt of £15m per annum from
2022/23 to 2028/29
Scenario 4: An increase in bad
Aligned to internal risk factor on debt collection.
Scenario 5: Additional ODI penalty
Assumes mid-point of UUW’s baseline and final determination P90 ODI
of c£50m per annum
position
Scenario 6: Combined scenario –
50% of scenarios 2-5
50% of scenarios 2-5
•
Issuing of new finance
• Reduction in discretionary totex spend
• Capital programme deferral
• Closing out of derivative asset position
• Restriction of dividend
• Raising of new equity
The assessment has considered the impact of these
As well as the protections that exist from the regulatory
scenarios on the group’s business model, future
environment within which the group operates, a
performance, credit ratings, solvency and liquidity
number of actions are available to mitigate more severe
over the course of the viability assessment period.
scenarios, which include: the raising of new finance,
This assessment has demonstrated the group’s ability
including hybrid debt; capital programme deferral;
to absorb the impact of all severe but reasonable
reduction in other discretionary totex spend; the
scenarios modelled, without the need to rely on the
close-out of derivative asset positions; the restriction of
key mitigating actions detailed below.
dividend payments; and access to additional equity.
The most extreme of the severe but reasonable
Governance
scenarios modelled, without any mitigating action,
The analysis underpinning this assessment has been
resulted in: the group comfortably retaining investment
through a robust internal review process, which
grade credit ratings; liquidity of more than one year;
has included scrutiny and challenge from the audit
and no projected breaches of financial debt covenants.
committee and board, and has been reviewed by the
group’s external auditor, KPMG, as part of their normal
Viability assessment: reverse stress testing
As part of the assessment, reverse stress testing of
audit procedures.
two extreme theoretical scenarios focusing on totex
Going concern
overspend and persisting low inflation have been
The directors also considered it appropriate to prepare
performed to understand the extent to which the
the financial statements on the going concern basis, as
group could further absorb financial stress before it
explained in the basis of preparation note to the accounts.
reaches a sub-investment grade credit rating. This
reverse stress testing demonstrated that these extreme
conditions would have to be significantly outside what
would be considered ‘severe but reasonable’ scenarios
before the group’s long-term viability would be at risk.
Viability assessment: key mitigating actions
In the event of more extreme but low likelihood
scenarios occurring, there are a number of key
mitigations available to the group, the effectiveness of
which are underpinned by the strength of the group’s
capital solvency position.
Example mitigations (of which none are required to remain viable under the scenarios modelled):
Doug Webb
Chair of the audit committee
Quick facts
• Doug Webb has chaired the committee since
July 2021. He is a chartered accountant and
is considered by the board to have recent and
relevant financial experience, having served as
chief financial officer of a number of listed FTSE
companies. He retired from his most recent
executive role at Meggitt PLC in 2018.
• All members of the committee are independent
non-executive directors and the board is
satisfied that the committee as a whole has
competence relevant to the sector. Attendance
at audit committee meetings is set out on page
124, and the relevant directors’ biographies can
be found on pages 112 to 115.
• Other regular attendees at meetings at the
invitation of the committee include the CEO,
the CFO, the company secretary, the head
of audit and risk, the group controller, and
representatives from the statutory auditor,
KPMG LLP (KPMG). None of these attendees
are members of the committee.
• The representatives from KPMG and the head
of audit and risk each have time with the
committee and the company secretary to raise
freely any concerns they may have without
management being present.
• The committee is authorised to seek outside
legal or other independent professional advice
as it sees fit, but has not done so during
the year.
Quick link
Terms of reference:
unitedutilities.com/corporate-governance
Audit quality has again been high on
the committee’s list of priorities, in
particular, its scrutiny of the findings of
the Financial Reporting Council’s 2021
audit quality review which, as applicable
to the group, it challenged the auditor to
address.
Dear shareholder
This is my first report to you as chair of the audit
committee, having succeeded Brian May who stepped
down at the AGM in July 2021. I joined the board
as a non-executive director and as a member of the
committee in September 2020, which enabled me,
prior to taking over as chair, to experience a year
in the group’s audit cycle (see the diagram on page
145). My background is in finance, having qualified
as a chartered accountant with Price Waterhouse.
I currently serve as chair of the audit committee at
Johnson Matthey plc and I previously chaired the audit
committee at SEGRO plc, until stepping down as a
non-executive director in 2019. I was chief financial
officer at Meggitt PLC from 2013 to 2018, I believe my
financial experience has prepared me well to lead the
committee in providing challenge both to management
and to the external auditor.
This is a time of considerable change and evolution in
the role of the audit committee – with the increasing
demands for greater assurance in areas of narrative
and non-financial reporting which have not traditionally
been part of the committee’s role. This is the third
year the company has reported against the TCFD’s
recommendations (see pages 86 to 94), and ahead
of the mandatory climate-related financial disclosure
for the company for the year ending 31 March 2023.
The statement, as required by Listing Rule 9.8, can
be found on page 86. In readiness for next year, the
committee asked management to further enhance the
assurance processes (see page 148) underpinning the
provision of the TCFD report along with other elements
of the narrative reporting, further contributing to the
assessment of whether “the annual report and accounts,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the company’s position and performance,
business model and strategy”.
Audit committee members:
Doug Webb
Chair of the audit
committee
Stephen Carter
Paulette Rowe
Liam
Butterworth
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Corporate governance report
Audit committee
Read more about
accounting
policies on
page 219
Read more about
the impact of
climate change
on page 206
The increasing focus of investors on the impact
of climate change has again been reflected in the
viability assessment underpinning the long-term
viability statement (see page 140) which the committee
endorses prior to approval by the board.
Following the publication of the BEIS consultation on
‘Restoring Trust in Audit and Corporate Governance’,
to which the company formally responded in July 2021,
management reviewed the group’s internal control
environment in preparation to address the likely
evolution of the UK regulatory landscape as it relates to
financial reporting. Management was supported in this
review by an independent third party who commented
that the current maturity of the group’s capabilities,
governance and operating model pertaining to
internal controls over financial reporting was higher
that was typically seen currently within other UK
listed businesses. However, further enhancements
could be made to address the evolving landscape.
The committee was reassured by this review and
its contribution to enhancing the group’s audit and
assurance processes, and to steps taken during the
year towards the formulation of an audit and assurance
policy (see page 151). Management has also discussed
with the committee the group’s preparedness toward
the provision of a resilience statement, if required, in
future years (see page 147). Based on assessments of
the group’s viability, resilience and long-term prospects
that are currently formed, the group is well positioned
to address developments in this area.
Audit quality has again been high on the committee’s
list of priorities, in particular its scrutiny of the
findings of the FRC’s 2021 audit quality review (AQR)
published in July 2021 (and available on the FRC’s
website). The committee’s challenge to KPMG was
to address the lessons of the 2021 AQR’s findings
as they were applicable to the group, as well as
enhancing the quality and transparency of the services
provided as auditor. Ian Griffiths, KPMG’s lead audit
partner, responded to the committee’s challenge by
committing to provide to the committee the details of
the independent partner’s review of the audit, as part
of the 2022 year-end sign-off processes. Other audit
quality processes (see page 148) included a technical
review and a second-line of defence review by another
team independent of the audit team.
In its assessment of the effectiveness of the statutory
audit process relating to the year ended 31 March
2021, the committee committed to assessing whether
the additional audit quality processes that had
been proposed for the 31 March 2021 audit such as:
improving the communication between the KPMG
audit team and the internal audit team through regular
discussion sessions; raising audit points in a timely
manner and improved project management of the
year-end process, had been effectively implemented.
The findings of the assessment (see page 149) were
presented to the committee in September 2021, which
concluded that the additional processes had been
effectively implemented, and would be retained for
the 31 March 2022 year-end audit.
Auditor independence is a key principle and
contributing factor to audit quality. It is reviewed as
part of the audit scope and re-examined prior to the
accounts being approved and signed by the board.
The auditor must be independent of the company. The
committee has time set aside during its meetings to
meet with the auditor without management in order
that they can speak freely and raise any concerns.
Independence is a key focus for the auditor, whose
staff must comply with their firm’s own ethics and
independence criteria which must be consistent with
the FRC’s Revised Ethical Standard (2019). Information
on how the committee assesses the independence of
the auditor can be found on page 149. The statutory
auditor presents its audit findings to the shareholders
as the owners of the business (see pages 202 to 209).
The evaluation of the committee’s performance for
2021/22 was facilitated internally by the company
secretary and his team, which has provided some
useful feedback and points for action (see page 136)
and reiteration of the need for the committee to stay
abreast of developments, particularly the work of
the International Sustainability Standards Board as it
develops reporting standards for sustainability topics
encompassing many aspects of ESG.
I am pleased to welcome Liam Butterworth, who
joined the board on 1 January 2022, as a member of
the committee. The membership of the committee will
be revised after the forthcoming AGM in July 2022
(details can be found on page 133).
This report was approved by the committee at its
meeting held on 17 May 2022.
Doug Webb
Chair of the audit committee
Main responsibilities
• Make a recommendation to the board for the
appointment or reappointment of the auditor, and
to be responsible for the tender of the audit from
time to time and to agree the fees paid to the
auditor.
• Establish policies for the provision of any non-audit
services by the auditor.
• Challenge the auditor on the scope and the results
of the annual audit and report to the board on the
effectiveness of the audit process and how the
independence and objectivity of the auditor has
been safeguarded.
• Review the half-year and annual financial
statements and any announcements relating to
financial performance, including reporting to
the board on the significant issues proposed by
management and in particular those challenged
by the committee in relation to the financial
statements and how these were addressed.
• Approve the scope, remit and effectiveness of the
internal audit function and the group’s internal
control and risk management systems.
• Review the group’s procedures for reporting fraud
and other inappropriate behaviour and to receive
reports relating thereto.
• Report to the board on how it has discharged its
responsibilities.
• Apply the principles of the code and report against
the provisions.
144
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Corporate governance report
Audit committee
Read more about
accounting
policies on
page 219
The increasing focus of investors on the impact
the additional audit quality processes that had
of climate change has again been reflected in the
been proposed for the 31 March 2021 audit such as:
viability assessment underpinning the long-term
improving the communication between the KPMG
viability statement (see page 140) which the committee
audit team and the internal audit team through regular
endorses prior to approval by the board.
Following the publication of the BEIS consultation on
‘Restoring Trust in Audit and Corporate Governance’,
Read more about
to which the company formally responded in July 2021,
the impact of
climate change
on page 206
management reviewed the group’s internal control
environment in preparation to address the likely
evolution of the UK regulatory landscape as it relates to
financial reporting. Management was supported in this
discussion sessions; raising audit points in a timely
manner and improved project management of the
year-end process, had been effectively implemented.
The findings of the assessment (see page 149) were
presented to the committee in September 2021, which
concluded that the additional processes had been
effectively implemented, and would be retained for
the 31 March 2022 year-end audit.
review by an independent third party who commented
Auditor independence is a key principle and
that the current maturity of the group’s capabilities,
contributing factor to audit quality. It is reviewed as
governance and operating model pertaining to
part of the audit scope and re-examined prior to the
internal controls over financial reporting was higher
accounts being approved and signed by the board.
that was typically seen currently within other UK
The auditor must be independent of the company. The
listed businesses. However, further enhancements
committee has time set aside during its meetings to
could be made to address the evolving landscape.
meet with the auditor without management in order
The committee was reassured by this review and
that they can speak freely and raise any concerns.
its contribution to enhancing the group’s audit and
assurance processes, and to steps taken during the
year towards the formulation of an audit and assurance
policy (see page 151). Management has also discussed
with the committee the group’s preparedness toward
the provision of a resilience statement, if required, in
future years (see page 147). Based on assessments of
the group’s viability, resilience and long-term prospects
that are currently formed, the group is well positioned
to address developments in this area.
Audit quality has again been high on the committee’s
list of priorities, in particular its scrutiny of the
findings of the FRC’s 2021 audit quality review (AQR)
published in July 2021 (and available on the FRC’s
website). The committee’s challenge to KPMG was
to address the lessons of the 2021 AQR’s findings
as they were applicable to the group, as well as
enhancing the quality and transparency of the services
provided as auditor. Ian Griffiths, KPMG’s lead audit
partner, responded to the committee’s challenge by
committing to provide to the committee the details of
the independent partner’s review of the audit, as part
of the 2022 year-end sign-off processes. Other audit
quality processes (see page 148) included a technical
review and a second-line of defence review by another
team independent of the audit team.
In its assessment of the effectiveness of the statutory
audit process relating to the year ended 31 March
2021, the committee committed to assessing whether
Independence is a key focus for the auditor, whose
staff must comply with their firm’s own ethics and
independence criteria which must be consistent with
the FRC’s Revised Ethical Standard (2019). Information
on how the committee assesses the independence of
the auditor can be found on page 149. The statutory
auditor presents its audit findings to the shareholders
as the owners of the business (see pages 202 to 209).
The evaluation of the committee’s performance for
2021/22 was facilitated internally by the company
secretary and his team, which has provided some
useful feedback and points for action (see page 136)
and reiteration of the need for the committee to stay
abreast of developments, particularly the work of
the International Sustainability Standards Board as it
develops reporting standards for sustainability topics
encompassing many aspects of ESG.
I am pleased to welcome Liam Butterworth, who
joined the board on 1 January 2022, as a member of
the committee. The membership of the committee will
be revised after the forthcoming AGM in July 2022
(details can be found on page 133).
This report was approved by the committee at its
meeting held on 17 May 2022.
Doug Webb
Chair of the audit committee
• Establish policies for the provision of any non-audit
control and risk management systems.
Main responsibilities
• Make a recommendation to the board for the
appointment or reappointment of the auditor, and
to be responsible for the tender of the audit from
time to time and to agree the fees paid to the
auditor.
services by the auditor.
• Challenge the auditor on the scope and the results
of the annual audit and report to the board on the
effectiveness of the audit process and how the
independence and objectivity of the auditor has
been safeguarded.
• Review the half-year and annual financial
statements and any announcements relating to
financial performance, including reporting to
the board on the significant issues proposed by
management and in particular those challenged
by the committee in relation to the financial
statements and how these were addressed.
• Approve the scope, remit and effectiveness of the
internal audit function and the group’s internal
• Review the group’s procedures for reporting fraud
and other inappropriate behaviour and to receive
reports relating thereto.
• Report to the board on how it has discharged its
• Apply the principles of the code and report against
responsibilities.
the provisions.
Business on the committee’s agenda during the year
The committee has an extensive agenda of items of business focusing on the audit, assurance and risk processes within the business
which it deals with in conjunction with senior management, the auditor, the internal audit function and the financial reporting team.
The committee’s role is to ensure that management’s disclosures reflect the supporting detail provided to the committee or challenge
them to explain and justify their interpretation and, if necessary, re-present the information. The committee reports its findings and
makes recommendations to the board accordingly. The committee is supported in this role by using the expertise of the statutory
auditor, who, in the course of the audit, considers whether the financial statements have been prepared in accordance with IFRS
and whether adequate accounting records have been kept. In doing so it ensures that high standards of financial governance, in
line with the regulatory framework along with market practice for audit committees going forward, are maintained. Furthermore,
the company’s own internal audit team contributes to the assurance process by reviewing compliance with internal processes.
The committee’s financial reporting cycle, which starts each year in September, is shown below. There were four meetings of the
committee held during the year, the committee intends to continue to hold the two meetings in September and March virtually.
Items of business considered by the committee are set out on pages 146 to 147.
Audit committee financial reporting cycle
• Review of the effectiveness
of the external process
• Auditor presents their audit strategy
for forthcoming year
• Committee agrees the audit fee
for the forthcoming year
S e p tember
N
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Audit committee:
principal statutory
reporting matters
Marc h
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• Management
presents their key
accounting issues
and judgements for
approval by committee and
recommendation to board
• Auditor presents the findings
of the audit and their auditor’s
report and provides confirmation
of their independence
• Committee makes a
recommendation to the board
on whether the annual report
and financial statements are
fair, balanced and
understandable and on the
reappointment of the
auditor at the AGM
• Management presents
the half-year financial
statements
• Auditor presents the
review of half-year
financial statements
• Auditor confirms
their independence
• Management presents their proposed
key accounting issues and judgements
at the full year
• Auditor provides an update on their
audit processes and confirmation
of their independence
144
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Stock Code: UU.
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Corporate governance report
Audit committee
Actions
Outcomes
Cross reference
Annual and half-year reporting
Reviewed, discussed and challenged the financial
reporting team’s reports on the financial statements,
management’s significant accounting judgements, the
policies being applied both at the full and half year and
how the statutory audit contributed to the integrity
of the year-end financial reporting.
The committee challenged management on a
number of its judgements and sought detailed
explanations of its interpretation. The committee
was satisfied with the explanations provided by
management. Recommendations were made to
the board, supporting the approval of the financial
statements.
See pages 151 to
152
Reviewed and challenged the regulatory reporting
process relating to the annual performance report
(APR) for UUW, including the assurance provided by the
technical auditor, as required to be submitted to Ofwat,
and noted the differences between the regulatory and
statutory accounts.
The committee met with the technical auditor
to provide an opportunity for challenge by the
committee whose overview contributes to the
assurance process of the regulatory reporting
prior to the approval of the APR by the UUW
board.
–
Assessed management’s presentation of APMs to enable
comparability with other companies.
Reviewed and challenged the proposed audit strategy
for the 2021/22 statutory audit, including the level of
materiality applied by KPMG, audit reports from KPMG
on the financial statements and the areas of particular
focus for the 2021/22 audit.
Reviewed and challenged the basis of preparation of the
financial statements as a going concern as set out in the
accounting policies.
Reviewed and challenged the long-term viability
statement proposed by management and reasons why a
seven-year assessment period was appropriate.
Reviewed the results of the committee’s assessment of
the effectiveness of the 2020/21 audit.
Concurred with management’s approach that
the APMs as defined were satisfactory enabling
comparability with other companies.
The committee monitored progress made by the
statutory audit team against the agreed plan, and
challenged the auditor in the resolution of any
issues as they arose.
See page 82
See page 202
Recommendation made to the board to support
the going concern statement.
See page 217
The committee challenged management that the
length of the period was appropriate, particularly
in light of assessment timeframes used by peer
companies, but were satisfied with management’s
preference to continue to provide a statement with
greater certainty over a shorter period of time.
The committee concluded that the audit was
effective and a recommendation was made to
the board on the reappointment of KPMG as the
auditor for the year ending 31 March 2023 at the
forthcoming annual general meeting.
Reviewed whether the company’s position and
prospects as presented in the 31 March 2022 annual
report and financial statements were considered to be
a fair, balanced and understandable assessment of the
company’s position and prospects.
Recommendation made to the board that the
31 March 2022 annual report and financial
statements was a fair, balanced and understandable
assessment of the company’s position and
prospects.
Reviewed the non-audit services and related fees
provided by the auditor for 2021/22 and the policy on
non-audit services provided by the auditor for 2022/23.
Negotiated and agreed the statutory audit fee for the
year ended 31 March 2022.
Approved the non-audit services and related fees
provided by KPMG for 2021/22 and concluded that
no changes were required to the policy for non-audit
services provided by the auditor.
The committee approved the fee for the 2021/22
audit, including a small additional fee in respect of
the limited assurance work relating to the group’s
sustainable financing framework.
See page 140
See page 148
See pages 139
and 147
See page 149
See pages 149 to
150
Challenged management to enhance the assurance
processes supporting certain aspects of the TCFD, SECR
and wider ESG sections in the narrative reporting in the
2021/22 annual report.
The committee concluded that the enhanced
assurance processes supporting the narrative
reporting in the annual report were satisfactory.
See page 148
146
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Corporate governance report
Audit committee
Annual and half-year reporting
Reviewed, discussed and challenged the financial
The committee challenged management on a
See pages 151 to
reporting team’s reports on the financial statements,
number of its judgements and sought detailed
152
management’s significant accounting judgements, the
explanations of its interpretation. The committee
policies being applied both at the full and half year and
was satisfied with the explanations provided by
how the statutory audit contributed to the integrity
management. Recommendations were made to
of the year-end financial reporting.
the board, supporting the approval of the financial
statements.
Reviewed and challenged the regulatory reporting
The committee met with the technical auditor
–
process relating to the annual performance report
to provide an opportunity for challenge by the
(APR) for UUW, including the assurance provided by the
committee whose overview contributes to the
technical auditor, as required to be submitted to Ofwat,
assurance process of the regulatory reporting
and noted the differences between the regulatory and
prior to the approval of the APR by the UUW
statutory accounts.
board.
Assessed management’s presentation of APMs to enable
Concurred with management’s approach that
See page 82
comparability with other companies.
the APMs as defined were satisfactory enabling
comparability with other companies.
Reviewed and challenged the proposed audit strategy
The committee monitored progress made by the
See page 202
for the 2021/22 statutory audit, including the level of
statutory audit team against the agreed plan, and
materiality applied by KPMG, audit reports from KPMG
challenged the auditor in the resolution of any
on the financial statements and the areas of particular
issues as they arose.
Reviewed and challenged the long-term viability
The committee challenged management that the
See page 140
statement proposed by management and reasons why a
length of the period was appropriate, particularly
seven-year assessment period was appropriate.
in light of assessment timeframes used by peer
Reviewed the results of the committee’s assessment of
The committee concluded that the audit was
See page 148
the effectiveness of the 2020/21 audit.
companies, but were satisfied with management’s
preference to continue to provide a statement with
greater certainty over a shorter period of time.
effective and a recommendation was made to
the board on the reappointment of KPMG as the
auditor for the year ending 31 March 2023 at the
forthcoming annual general meeting.
Reviewed whether the company’s position and
Recommendation made to the board that the
See pages 139
prospects as presented in the 31 March 2022 annual
31 March 2022 annual report and financial
and 147
report and financial statements were considered to be
statements was a fair, balanced and understandable
a fair, balanced and understandable assessment of the
assessment of the company’s position and
company’s position and prospects.
prospects.
Reviewed the non-audit services and related fees
Approved the non-audit services and related fees
See page 149
provided by the auditor for 2021/22 and the policy on
provided by KPMG for 2021/22 and concluded that
non-audit services provided by the auditor for 2022/23.
no changes were required to the policy for non-audit
services provided by the auditor.
Negotiated and agreed the statutory audit fee for the
The committee approved the fee for the 2021/22
See pages 149 to
year ended 31 March 2022.
audit, including a small additional fee in respect of
150
the limited assurance work relating to the group’s
sustainable financing framework.
Challenged management to enhance the assurance
The committee concluded that the enhanced
See page 148
processes supporting certain aspects of the TCFD, SECR
assurance processes supporting the narrative
and wider ESG sections in the narrative reporting in the
reporting in the annual report were satisfactory.
2021/22 annual report.
Actions
Outcomes
Cross reference
Actions
Outcomes
Cross reference
Risk management and internal control
Reviewed the effectiveness of the risk management
and internal control systems including an overview of
the output from the independent third party review of
internal controls around financial reporting.
Considered changes to internal control weaknesses
brought to the attention of the committee by KPMG.
Considered the third party review of the group’s fraud risk
management framework and challenged management to
implement a fraud risk management action plan.
Monitored fraud reporting.
Recommendation made to the board that the risk
management and internal control systems were
effective.
See pages 153 to
154
Challenged management to resolve any issues
relating to internal controls and risk management
systems.
A number of enhancements were recommended
and a fraud risk management action plan was
implemented and updates provided to monitor
progress.
See page 202
See page 154
Reviewed the company’s anti-fraud policies and
processes and alleged incidents of fraud and the
outcome of their investigation.
See page 154
Biannual oversight and monitoring of compliance with
the group’s anti-bribery policy.
Reviewed compliance with the company’s ongoing
anti-bribery programme.
See page 154
focus for the 2021/22 audit.
accounting policies.
Reviewed and challenged the basis of preparation of the
Recommendation made to the board to support
See page 217
financial statements as a going concern as set out in the
the going concern statement.
Considered the issues and findings brought to the
committee’s attention by the internal audit team.
Approved the strategic internal audit planning approach
on the work of the internal audit function from the head
of audit and risk.
Reviewed the quality and effectiveness of internal
audit and the effectiveness of the current co-source
arrangements.
Reviewed and challenged the strategic internal audit
planning approach and internal audit plan for 2022/23.
Governance
Review of the committee’s terms of reference
As a consequence of the Brydon and Kingman Reviews
and the BEIS consultation report ‘Restoring trust in audit
and corporate governance’, management undertook
to develop: an audit and assurance policy following a
review of the existing approach to audit and assurance,
and a review of internal controls that impact the group’s
financial reporting.
Reviewed the conclusions of the committee’s annual
evaluation. The evaluation was internally facilitated
by the company secretary. The review explored
the effectiveness of: the committee’s composition,
meetings and time management; committee processes
and support, the areas of work of the committee and
priorities for change.
Monitored the implementation of the 2021/22
internal audit plan. Reviewed findings of specific
internal audit and implementation of any resulting
actions by management.
The committee was satisfied that management
had resolved or was in the process of resolving
any outstanding issues or concerns in relation to
matters scrutinised by the internal audit team.
The committee reviewed the process of
assessment of internal audit and made
recommendations for enhancement,
notwithstanding the recommendations it was
concluded that the internal audit team, supported
by the PwC co-source resource, was effective.
See page 153
See page 153
See page 153
Approved the internal audit plan for 2022/23.
See page 153
No changes were made to the committee’s terms
of reference during the year.
-
The committee reviewed the existing approach to
audit and assurance and the outcome of the review
of the maturity of the internal control framework
over financial reporting undertaken by PwC. While
awaiting the publication of the outcome of the
BEIS consultation, key matters under development
include the audit and assurance policy, a resilience
statement and fraud risk management.
All elements of the self-assessment reviewed
indicated the committee was working well. The
board considered the results of the review of the
committee and concluded that the committee
continued to be effective.
See page 151
See page 136
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Stock Code: UU.
How we assessed whether “the annual report
and accounts, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the company’s position and
performance, business model and strategy”
The following section sets out the company’s
compliance with part of provision 25. The directors’
responsibility for preparing the annual report and
financial statements is set out on page 198.
The board delegates to the committee, in the first
instance, the review of the annual report and financial
statements with the intention of providing advice
to the board on whether, as required by the code,
“the annual report and accounts, taken as a whole,
is fair, balanced and understandable and provides
the information necessary for shareholders to assess
the company’s position and performance, business
model and strategy”. To make this assessment, the
committee received copies of the annual report and
financial statements to review during the drafting process
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Corporate governance report
Audit committee
to ensure that the key messages being followed in the
annual report were aligned with the company’s position,
performance and strategy being pursued and that the
narrative sections of the annual report were consistent
with the financial statements. The committee also
considered whether the significant issues considered
by the committee in relation to the financial statements
include those identified by the auditor in their report on
pages 202 to 209.
Management has again considered and sought to
enhance the review processes to provide support to
the board in forming its view on whether the accounts
and financial statements were fair, balanced and
understandable, as it concluded they were and set out on
page 198. In particular, a member of the executive team
not involved in the drafting process was appropriately
briefed to review and challenge the content to ensure
that the activities and issues faced by the business were
reported in a fair and balanced manner.
The committee received updates on the calculation
of underlying operating profit measures as one of the
principal alternative performance measures (APMs)
used by management, a full guide to APMs can be
found on page 82.
Many of our regulatory performance commitments are
used by management as key performance indicators
and are monitored by our regulators, who set the
methodology against which we report. As part of their
role as auditor of UUW’s annual performance, KPMG
provides assurance on many of these performance
commitments along with Jacobs, the technical
auditor. During the year, the committee met with
representatives from Jacobs, providing an opportunity
for the committee to understand the specifics of
Jacobs’ role as technical auditor of the UUW regulatory
annual performance report.
KPMG is required (under ISA(UK) 720) to consider
whether there are any material inconsistencies
between the ‘other information’ and ‘statutory other
information’ presented in the annual report (i.e. in the
Audit quality
Additional audit quality processes and interactions
KPMG introduced a number of additional elements as part of its action
plan to enhance audit quality for the 2020/21 audit. The effectiveness of
these enhancements were reviewed and agreed to have had a positive
contribution to the audit, and so were retained and further enhanced for
the 2021/22 audit. As part of its review of the 2021/22 audit in July 2022,
the committee will seek to review the effectiveness of these processes
and interactions.
The processes and interactions included:
• providing sight of their interim control findings to the committee
early in the audit process and sharing their knowledge and best
practice recommendations;
•
•
improving communication and sharing of information and insight
between the external and internal audit teams by implementing regular
discussion sessions prior to the scheduled committee meetings;
raising audit points in a more timely manner with the financial
reporting team during the audit process by holding regular
discussions with the external audit team and financial
reporting team;
• using a project manager to assist with the delivery of the year-end
audit cycle; and
• enhanced visibility of the key challenges and findings of the
second-line of defence review performed by another team
independent of the audit team, and of the independent KPMG
partner’s review of the audit.
strategic report, the directors’ report and the corporate
governance statement), and the financial statements,
taking into account the auditor’s knowledge obtained
in the audit, or the auditor’s understanding of the legal
and regulatory requirements applicable to the ‘other
information’ and ‘statutory other information’. The TCFD
and Streamlined Energy and Carbon Reporting (SECR)
disclosures are deemed to be ‘other information’ as
they are included in the company’s strategic report, as
they are important to the company. Other assurance of
the TCFD and SECR disclosures (see pages 86 to 97) is
undertaken both by third parties and our internal audit
team. Our disclosures against the code are reviewed by
the internal audit team and reported to the committee.
Additionally, the committee was satisfied that all the key
events and issues which had been reported to the board
in the executive team’s monthly board reports during
the year, both good and bad, had been adequately
referenced or reflected within the annual report.
How we assessed the effectiveness of the
statutory audit process
The committee, on behalf of the board, is responsible
for the relationship with the auditor, and part of that role
is to examine the effectiveness of the statutory audit
process. Audit quality is regarded by the committee as
the principal requirement of the annual audit process.
KPMG presented the strategy and scope of the audit
for the forthcoming financial year at the meeting of the
committee held in September, highlighting any areas
which would be given special consideration (these key
audit matters are included in the auditor’s report on
pages 202 to 209). KPMG reported against their audit
scope at subsequent committee meetings, providing
an opportunity for the committee to monitor progress
and raise questions, and challenge both KPMG and
management.
Throughout the year, management presents its
up-to-date view of the key accounting issues and its
resulting judgements to the committee. In response,
KPMG informs the committee whether, in its professional
view, the judgements management proposes, or has
taken, are appropriate. A number of these issues manifest
themselves as the significant issues considered by the
committee in relation to the financial statements, which
are set on pages 151 to 152 in respect of 2021/22. As
required by auditors’ professional standards, KPMG
exercise their professional scepticism in their audit of
these significant issues.
Private meetings are held at committee meetings
between the committee and representatives of
the auditor without management being present to
encourage open and transparent feedback by both
parties on any matters they wish to raise, and provide
the committee with an opportunity to obtain from
the auditor greater insight on the extent to which the
auditor has challenged management’s analysis and
presentation of information.
Prior to the board’s approval of the year-end financial
statements, the committee provides its view to
the board on the outcome of the statutory audit,
explaining: management’s key accounting issues and
judgements; the outcome of the auditor’s assessment
of key audit matters; other areas of audit focus and
control deficiencies (if any), and how the statutory
audit contributed to the integrity of the financial
reporting process. The independent nature and
financial expertise of committee members further
contributes to the integrity of the process.
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Audit committee
to ensure that the key messages being followed in the
strategic report, the directors’ report and the corporate
annual report were aligned with the company’s position,
governance statement), and the financial statements,
performance and strategy being pursued and that the
taking into account the auditor’s knowledge obtained
narrative sections of the annual report were consistent
in the audit, or the auditor’s understanding of the legal
with the financial statements. The committee also
and regulatory requirements applicable to the ‘other
considered whether the significant issues considered
information’ and ‘statutory other information’. The TCFD
by the committee in relation to the financial statements
and Streamlined Energy and Carbon Reporting (SECR)
include those identified by the auditor in their report on
disclosures are deemed to be ‘other information’ as
pages 202 to 209.
Management has again considered and sought to
enhance the review processes to provide support to
the board in forming its view on whether the accounts
and financial statements were fair, balanced and
understandable, as it concluded they were and set out on
they are included in the company’s strategic report, as
they are important to the company. Other assurance of
the TCFD and SECR disclosures (see pages 86 to 97) is
undertaken both by third parties and our internal audit
team. Our disclosures against the code are reviewed by
the internal audit team and reported to the committee.
page 198. In particular, a member of the executive team
Additionally, the committee was satisfied that all the key
not involved in the drafting process was appropriately
events and issues which had been reported to the board
briefed to review and challenge the content to ensure
in the executive team’s monthly board reports during
that the activities and issues faced by the business were
the year, both good and bad, had been adequately
reported in a fair and balanced manner.
referenced or reflected within the annual report.
The committee received updates on the calculation
How we assessed the effectiveness of the
of underlying operating profit measures as one of the
statutory audit process
principal alternative performance measures (APMs)
The committee, on behalf of the board, is responsible
used by management, a full guide to APMs can be
for the relationship with the auditor, and part of that role
found on page 82.
Many of our regulatory performance commitments are
used by management as key performance indicators
and are monitored by our regulators, who set the
methodology against which we report. As part of their
role as auditor of UUW’s annual performance, KPMG
provides assurance on many of these performance
commitments along with Jacobs, the technical
auditor. During the year, the committee met with
representatives from Jacobs, providing an opportunity
for the committee to understand the specifics of
Jacobs’ role as technical auditor of the UUW regulatory
annual performance report.
KPMG is required (under ISA(UK) 720) to consider
whether there are any material inconsistencies
between the ‘other information’ and ‘statutory other
information’ presented in the annual report (i.e. in the
Audit quality
Additional audit quality processes and interactions
KPMG introduced a number of additional elements as part of its action
plan to enhance audit quality for the 2020/21 audit. The effectiveness of
these enhancements were reviewed and agreed to have had a positive
contribution to the audit, and so were retained and further enhanced for
the 2021/22 audit. As part of its review of the 2021/22 audit in July 2022,
the committee will seek to review the effectiveness of these processes
and interactions.
The processes and interactions included:
• providing sight of their interim control findings to the committee
early in the audit process and sharing their knowledge and best
practice recommendations;
•
improving communication and sharing of information and insight
between the external and internal audit teams by implementing regular
discussion sessions prior to the scheduled committee meetings;
•
raising audit points in a more timely manner with the financial
reporting team during the audit process by holding regular
discussions with the external audit team and financial
• using a project manager to assist with the delivery of the year-end
reporting team;
audit cycle; and
• enhanced visibility of the key challenges and findings of the
second-line of defence review performed by another team
independent of the audit team, and of the independent KPMG
partner’s review of the audit.
is to examine the effectiveness of the statutory audit
process. Audit quality is regarded by the committee as
the principal requirement of the annual audit process.
KPMG presented the strategy and scope of the audit
for the forthcoming financial year at the meeting of the
committee held in September, highlighting any areas
which would be given special consideration (these key
audit matters are included in the auditor’s report on
pages 202 to 209). KPMG reported against their audit
scope at subsequent committee meetings, providing
an opportunity for the committee to monitor progress
and raise questions, and challenge both KPMG and
management.
Throughout the year, management presents its
up-to-date view of the key accounting issues and its
resulting judgements to the committee. In response,
KPMG informs the committee whether, in its professional
view, the judgements management proposes, or has
taken, are appropriate. A number of these issues manifest
themselves as the significant issues considered by the
committee in relation to the financial statements, which
are set on pages 151 to 152 in respect of 2021/22. As
required by auditors’ professional standards, KPMG
exercise their professional scepticism in their audit of
these significant issues.
Private meetings are held at committee meetings
between the committee and representatives of
the auditor without management being present to
encourage open and transparent feedback by both
parties on any matters they wish to raise, and provide
the committee with an opportunity to obtain from
the auditor greater insight on the extent to which the
auditor has challenged management’s analysis and
presentation of information.
Prior to the board’s approval of the year-end financial
statements, the committee provides its view to
the board on the outcome of the statutory audit,
explaining: management’s key accounting issues and
judgements; the outcome of the auditor’s assessment
of key audit matters; other areas of audit focus and
control deficiencies (if any), and how the statutory
audit contributed to the integrity of the financial
reporting process. The independent nature and
financial expertise of committee members further
contributes to the integrity of the process.
Statutory auditor’s fees
600
500
400
300
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0
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200
5
5
3
8
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5
6
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2020
2021
2022
Statutory audit – group and company
Regulatory audit services provided by the statutory auditor
Statutory audit – subsidiaries
Other non-audit services
KPMG updated the committee on its ongoing Audit Quality Transformation
Plan (AQTP). KPMG’s AQTP includes: a more standardised audit approach;
holding companies to account for the quality of the information provided in
the audit process; providing more feedback to companies on the findings of
their audit and providing additional senior-level support to the KPMG audit
teams during the audit; all of which are well embedded in the audit process.
In planning for the 2021/22 audit, KPMG provided a report to the committee
on the quality interventions that they had implemented during the 2020/21
audit. Each year the committee considers the annual review by the FRC’s
Audit Quality Review Team and challenges KPMG to ensure continuous
improvement.
On completion of the annual audit process the views of those involved in
the audit on how well KPMG performed the audit are sought. All members
of the committee, key members of the senior management team and
those who regularly provide input into the audit committee or have regular
contact with the auditor, complete a feedback questionnaire, thereby
ensuring a wide range of views are taken into account. The questionnaire
reviewing the 2021 audit process was issued in July 2021.
Views of the respondents were sought in terms of:
•
the robustness of the external audit process and degree of challenge to
matters of significant audit risk and areas of management subjectivity;
• whether the scope of the audit and the planning process were
appropriate for the delivery of an effective and efficient audit;
•
•
the quality of the delivery of the audit and whether planned quality
improvements had been delivered and whether the committee had
insight into the auditor’s internal quality procedures;
the expertise of the audit team conducting the audit and their
understanding of the company’s business risks to assess if there was
an impact on the audit;
• whether the auditor made appropriate use of the work of the internal
audit team;
•
•
•
•
that the degree of professional scepticism applied by the auditor was
appropriate;
the appropriateness of the communication between the committee
and the auditor in terms of technical issues;
the quality of the service provided by the auditor;
their views on the quality of the interaction between the audit
engagement partner, the audit senior manager and the company;
• whether the audit process had been kept on schedule, despite the remote
working due to COVID-19 restrictions of both the audit and management
teams; and
• whether the statutory audit contributed to the integrity of the group’s
financial reporting.
The feedback was collated and presented to the committee’s meeting
in September 2021. The committee noted KPMG’s quality interventions
as part of its AQTP to improve audit quality, including: the additional
oversight provided by senior KPMG personnel during the 2020/21 audit.
The committee concluded that the statutory audit process and services
provided by KPMG were satisfactory and effective, with additional
measures for further enhancement encouraged.
How we assessed the independence of the
statutory auditor
The following section sets out the company’s
compliance with part of provision 26.
There are two aspects to auditor independence that
the committee monitors to ensure that the auditor
remains independent of the company.
First, in assessing the independence of the auditor from
the company, the committee takes into account the
information and assurances provided by the auditor
confirming that all its partners and staff involved
with the audit are independent of any links to United
Utilities. KPMG confirmed that all its partners and
staff complied with their ethics and independence
policies and procedures which are fully consistent with
the FRC’s Ethical Standard, including that none of its
employees working on our audit hold any shares in
United Utilities Group PLC. KPMG is required to provide
written disclosure at the planning stage of the audit in
the form of an independence confirmation letter. Their
letter discloses matters relating to their independence
and objectivity, including any relationships that
may reasonably be thought to have an impact on its
independence and the integrity and objectivity of the
audit engagement partner and the audit staff. The audit
engagement partner must change every five years and
other senior audit staff rotate at regular intervals.
Secondly, the committee develops and recommends
to the board the company’s policy on non-audit
services and associated fees that are paid to KPMG.
In accordance with the FRC’s Revised Ethical Standard
(2019), an auditor is only permitted to provide certain
non-audit services to public interest entities (i.e. United
Utilities Group PLC) that are closely linked to the audit
itself or that are required by law or regulation, as such
services could impede their independence. Permitted
non-audit services fees paid to the statutory auditor
are subject to a fee cap of no more than 70 per cent
of the average annual statutory audit fee for the three
consecutive financial periods preceding the financial
period in which the cap applies.
The 70 per cent non-audit services fee cap has been
applied to the group for the year ended 31 March 2022.
The average of audit fees is £447,000 (calculated as the
average of the audit fees for the three preceding financial
years (2021: £430,000; 2020: £474,000; 2019: £437,000).
Non-audit services fees during the year were £130,500,
(2021: £119,500; 2020: £77,000; 2019: £66,000) so well
below the cap of £313,900 (70 per cent of £447,000).
In 2022, fees for non-audit services represent 19.3 per
cent of the average audit fees on which the cap is based.
Permitted services (which remain subject to the 70
per cent cap, apart from the regulatory audit) can be
approved by the CFO subject to a cap of £10,000 applied
for individual items. Individual items in excess of £10,000
require the approval of the committee. Auditor-provided
permitted services include the non-audit fees paid to the
statutory auditor for: the interim review; the regulatory
audit; agreed-upon procedures for regulatory reporting;
limited assurance work relating to the group’s sustainable
financing framework; the Euro Medium Term Note
Programme and Law Debenture Trust compliance work.
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Read more about
our annual
performance
report on page 51
Read more about
our treasury
committee on
page 155
Fees for non-audit services paid to KPMG include the cost
of the UUW regulatory assurance work they undertake,
which is separate to the regulatory audit. While this work
could be performed by a different firm, the information is
in fact more granular breakdowns of data that form part of
the statutory audit, and by KPMG undertaking the work it
reduces duplication and saves considerable cost.
During the year, the committee agreed a small
additional fee in respect of the limited assurance work
relating to the group’s sustainable financing framework.
Taking into account our findings in relation to the
effectiveness of the audit process and in relation to the
independence of KPMG, the committee was satisfied
that KPMG continues to be independent, and free from
any conflicting interest with the group.
Statutory auditor reappointment
for the year ending 31 March 2023
The following section sets out the company’s
compliance with part of provision 26.
The 2021/22 year-end audit has been KPMG’s eleventh
consecutive year in office as auditor; they were
reappointed after the committee conducted a formal
tender process in December 2019 and as reported by
the committee in the 2020 annual report. Prior to this, a
formal tender was last undertaken in 2011, and resulted
in the appointment of KPMG who thereafter presented
their report to shareholders for the year ended 31 March
2013. An audit tender review was held in September
2015. The diagram shown below shows the historical
tendering and rotation of the role of statutory auditor.
The company, as a public interest entity, is required to
conduct a competitive tender process every ten years,
and rotate auditors after 20 years at most. As a matter
of good practice, the committee continually keeps the
performance of the auditor under review.
The 2021/22 audit has been the second year for Ian
Griffiths as audit engagement partner. The audit
engagement partner changes at least every five years.
United Utilities has complied fully with the provisions
of The Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities)
Order 2014 for the year ended 31 March 2022.
At its meeting on 17 May 2022, the committee
recommended to the board that KPMG be proposed for
reappointment for the year ending 31 March 2023 at the
forthcoming AGM in July 2022. There are no contractual
obligations that restrict the committee’s choice of auditor;
the recommendation is free from third-party influence
and no auditor liability agreement has been entered into.
Rotation of external auditor to the group
1989
31 March
1994
First Auditor
appointed on
formation of group:
Price Waterhouse
Price Waterhouse
retired after
completion of audit
31 March
2006
April
2011
Audit
tender
1993–
1994
Audit
tender
31 March
2003
31 March
1995
KPMG
Peat Marwick
audit
May
2002
Audit
tender
Audit partner
rotation
Deloitte &
Touche LLP audit
31 March
2012
September
2015
31 March
2017
December
2019
31 March
2021
KPMG Audit Plc
audit
Audit
tender review
Audit partner
rotation
Audit
tender
KPMG LLP audit
and audit partner
rotation
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Audit committee
Fees for non-audit services paid to KPMG include the cost
their report to shareholders for the year ended 31 March
of the UUW regulatory assurance work they undertake,
2013. An audit tender review was held in September
which is separate to the regulatory audit. While this work
2015. The diagram shown below shows the historical
could be performed by a different firm, the information is
tendering and rotation of the role of statutory auditor.
in fact more granular breakdowns of data that form part of
The company, as a public interest entity, is required to
the statutory audit, and by KPMG undertaking the work it
conduct a competitive tender process every ten years,
reduces duplication and saves considerable cost.
and rotate auditors after 20 years at most. As a matter
Read more about
During the year, the committee agreed a small
additional fee in respect of the limited assurance work
of good practice, the committee continually keeps the
performance of the auditor under review.
Read more about
our annual
performance
report on page 51
our treasury
committee on
page 155
relating to the group’s sustainable financing framework.
The 2021/22 audit has been the second year for Ian
Taking into account our findings in relation to the
effectiveness of the audit process and in relation to the
Griffiths as audit engagement partner. The audit
engagement partner changes at least every five years.
independence of KPMG, the committee was satisfied
United Utilities has complied fully with the provisions
that KPMG continues to be independent, and free from
of The Statutory Audit Services for Large Companies
any conflicting interest with the group.
Statutory auditor reappointment
for the year ending 31 March 2023
Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities)
Order 2014 for the year ended 31 March 2022.
The following section sets out the company’s
At its meeting on 17 May 2022, the committee
compliance with part of provision 26.
recommended to the board that KPMG be proposed for
The 2021/22 year-end audit has been KPMG’s eleventh
reappointment for the year ending 31 March 2023 at the
consecutive year in office as auditor; they were
forthcoming AGM in July 2022. There are no contractual
reappointed after the committee conducted a formal
obligations that restrict the committee’s choice of auditor;
tender process in December 2019 and as reported by
the recommendation is free from third-party influence
the committee in the 2020 annual report. Prior to this, a
and no auditor liability agreement has been entered into.
formal tender was last undertaken in 2011, and resulted
in the appointment of KPMG who thereafter presented
Rotation of external auditor to the group
1989
31 March
1994
First Auditor
appointed on
formation of group:
Price Waterhouse
Price Waterhouse
retired after
completion of audit
31 March
2006
April
2011
Audit
tender
1993–
1994
Audit
tender
31 March
2003
31 March
1995
KPMG
Peat Marwick
audit
May
2002
Audit
tender
Audit partner
rotation
Deloitte &
Touche LLP audit
31 March
2012
September
2015
31 March
2017
December
2019
31 March
2021
KPMG Audit Plc
audit
Audit
tender review
Audit partner
rotation
Audit
tender
KPMG LLP audit
and audit partner
rotation
Audit and assurance policy
During the year, management took steps, prompted by the BEIS consultation and with a view to providing a more standardised
approach, to begin to develop an audit and assurance policy as a means of tailoring proportionate assurance relating to the narrative
disclosures in the annual report and referencing the assurance of the regulatory reporting relating to UUW. Feedback from the
committee was incorporated into the drafting process.
Going concern and long-term viability
The committee challenged and scrutinised management’s detailed assessment of the group’s long-term viability and its ability to
continue as a going concern. In doing this the committee took into account the risks facing the business, and its ability to withstand
a number of severe but reasonable scenarios. Having considered management’s assessment, the committee approved the long-term
viability statement set out on page 140. Management apprised the committee of its preparedness to provide a resilience statement in
future years, which would encompass the going concern and long-term viability statement should this be a recommendation of the
BEIS Consultation on ‘Restoring trust in audit and corporate governance’.
Significant issues considered by the committee in relation to the financial statements
Material and/or judgemental areas of the financial statements
Significant issues considered
How these were addressed by the committee
Revenue recognition and allowance for doubtful
receivables (see pages 218, 220, 229 to 230, 257 and 259)
– due to the nature of the group’s business, the extent to
which revenue is recognised and expected credit losses
are recognised in relation to doubtful customer debts is an
area of considerable judgement and estimation. This has
particularly been the case in the current year as the cost
of living has increased and is forecast to increase further
into the next year. The future economic situation is highly
uncertain, but it is expected that this could impact the ability
of some customers to pay their bills as they become due.
• The committee reviewed the approach taken by management in estimating the impact
that increases in the cost of living could have on future cash collection under a range
of scenarios, recognising that the situation is highly uncertain. Having challenged
management’s approach, the committee concluded that while cash collection
rates during the year have been good, the rate at which expected credit losses
are accounted for needs to consider future cash collection risk and that the rates
proposed by management are reasonable given the scenario analysis undertaken; and
• The committee challenged management’s judgement around the appropriate period
over which to consider cash collection history in assessing the level of expected
future credit losses, and concurred that the judgement around the period chosen was
appropriate.
Capitalisation of fixed assets (see pages 203, 218 to 219,
226 to 228 and 258 to 259) – fixed assets represents a
subjective area, particularly in relation to costs permitted
for capitalisation and depreciation policy.
• The committee assessed the reasonableness of the group’s capitalisation policy
and the basis on which expenditure is determined to relate to enhancement or
maintenance of assets and, having also considered the work performed by KPMG in
this area, deemed both to be appropriate; and
• The committee also challenged the controls around ensuring the accuracy of capital
accruals making up part of the total amount of fixed assets capitalised during the year,
and satisfied itself that controls in this area were adequate.
Retirement benefits (see pages 204, 219, 232 to 244, 250
to 255 and 260) – the group’s defined benefit retirement
schemes is an area of considerable judgement, the
performance and position of which is sensitive to the
assumptions made. The group employs the services of an
external actuary to determine the calculation of the net
retirement benefit surplus and determine the appropriate
assumptions to make.
• The committee sought from management an understanding of changes to the
assumptions used in calculating the defined benefit scheme surplus and how data
from the latest triennial valuation that concluded during the year is incorporated into
the final analysis. This included an assessment of the appropriateness of the inclusion
of a ‘w2021’ parameter in the demographic assumptions adopted to take account of
the expected impact of the COVID-19 pandemic on life expectancy in the medium
term given the indirect impacts of the pandemic on the likes of waiting lists and delays
in diagnoses of conditions.
• Having challenged the rationale for making these changes and considered how it
compares with market practice and the requirements of the relevant accounting
standards, the committee concluded that the resulting assumptions were appropriate
and balanced in estimating the level of defined benefit obligations and therefore the
net retirement benefit surplus. The committee was also satisfied that data from the
latest triennial valuation had been appropriately factored into the valuation.
• The committee noted that the periodic checks performed by management had been
completed at the year-end reporting date and, having also noted that KPMG had
undertaken their testing in this area, was satisfied that no significant issues were
identified.
• The committee also considered management’s update on the controls in place around
the rebooking of financial instruments and was satisfied that these were appropriate
and that the impact of the cessation of LIBOR had been appropriately accounted for.
Derivative financial instruments (see pages 219, 242 to
249 and 260) – the group has a significant value of swap
instruments, the valuation of which is based upon models
which require certain judgements and assumptions to be
made. Management performs periodic checks to ensure
that the model-derived valuations agree back to third-
party valuations and KPMG check a sample against their
own valuation models. This process has been complicated
slightly during the year by the rebooking of financial
instruments that were linked to LIBOR following the
cessation of LIBOR as an interest rate benchmark after
31 December 2022.
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Material and/or judgemental areas of the financial statements
Significant issues considered
How these were addressed by the committee
Provisions and contingent liabilities (see pages 234,
236 and 260) – the group provides for contractual, legal
and environmental claims brought against it based on
management’s best estimate of the value of settlement,
the timing of which is dependent on the resolution of
the relevant legal claims. Judgement is also required in
determining when contingent liabilities exist that require
disclosure in the financial statements.
• The committee assessed and challenged the appropriateness of the basis on which
provisions are recognised, and management’s estimate of the value applied to
individual claims, focusing particularly on instances where new provisions were
required or where the likelihood of financial outflow was deemed to have diminished
such that provisions were no longer needed and were therefore released. The
committee concluded that the approach to provisioning was appropriate and that
management’s best estimates were reasonable;
• The committee also considered the reasonableness of disclosures made in respect
of contingent liabilities, challenging management as to whether any provision should
be recognised in the financial statements and concluding that the recognition criteria
had not been met and therefore that disclosure as contingent liabilities was the most
appropriate approach.
Taxation (see pages 224 to 225, 233 and 257) – judgement
is required in assessing provisions for potential tax
liabilities and in considering the recoverability of
deferred tax assets.
• The committee considered the tax risks that the group faces and the key judgements
made by management underpinning the provisions for potential tax liabilities and
deferred tax assets, and noted that KPMG have also assessed these provisions. Based
on the above, the committee was satisfied with the judgements made by management.
Other topical areas
Impact of COVID-19 – the impact of the COVID-19
pandemic resulted in higher levels of estimation
uncertainty and considerably more judgement being
required in preparing the financial statements for the
years ended 31 March 2020 and 31 March 2021. During the
year ended 31 March 2022 the committee has considered
how the situation has developed in order to revisit these
significant estimates and judgements.
Impact of increases in the cost of living – while the level
of judgement and estimation uncertainty associated with
the COVID-19 pandemic has receded during the year, this
has been superseded by economic circumstances that
have resulted in increases in the cost of living for much
of the group’s customer base. As there is a high degree
of uncertainty around how the economic situation may
develop, this gives rise to a higher level of judgement
and estimation uncertainty in this area.
Impact of the war in Ukraine – Russia’s invasion of
Ukraine in the early part of 2022 has had profound
geopolitical and economic consequences, which the
committee has considered in determining whether the
group’s accounting for the year ended 31 March 2022 is
materially affected.
• The committee also considered the nature of significant refunds of tax paid in prior
years that were recognised in the financial statements in the current year, and
concluded that it is appropriate for these to be treated as part of the underlying tax
expense in the year in arriving at the group’s alternative performance measures.
• The impacts of the pandemic on the issues considered were considerably lower for
the year ended 31 March 2022 compared with previous years, and judgements and
estimates were subject to what are now well-established processes. With the passage
of time and as more data relating to the key areas impacted by the pandemic has
become available, together with an increasing return towards pre-pandemic norms
during the year, the committee satisfied itself that the level of estimation uncertainty
has fallen compared with previous and that, going forward and subject to any further
developments, there may be less of a requirement for the impact of COVID-19 to be
considered as a discrete item, having been superseded by other developments such as
increases in the cost of living.
• The committee concurred with management’s assessment that the impact of
increases in
the cost of living on the group’s significant accounting judgements and areas of
uncertainty
is felt most acutely in relation to revenue recognition and allowances for expected
credit losses in relation to doubtful receivables. Considerations in this area are
therefore set out more fully above.
• The committee considered management’s assessment of the impact of the war in
Ukraine, and was satisfied that neither the operations nor the assets of the group are
directly impacted, notwithstanding some exposure to the conflict’s broader effects
such as cost increases due to supply chain risk relating to certain materials and
chemicals sourced from the region.
Accounting for the proposed sale of United Utilities
Renewable Energy Limited (UURE) (see pages 236 and
259) – during the year ended 31 March 2022 the board
approved the commencement of a process to sell the
group’s renewable energy business, UURE.
• The committee considered the stage of the sales process as at the year-end reporting
date along with management’s assessment of the application of the requirements of
IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ in terms of
the assets and liabilities of UURE, and challenged management’s view that criteria for
presenting these as ‘Held for sale’ had not been met as at the reporting date; and
Accounting for ‘Software as a Service’ (SaaS)
arrangements (see pages 222 and 258) – following the
publication of IFRIC agenda decisions relating to SaaS
arrangements, management has considered the extent
to which these affect the way in which such arrangement
are accounted for by the group.
• After due consideration, the committee agreed with management’s assessment that
as at 31 March 2022 the sale could not be considered “highly probable”, and that this
hurdle was met subsequently. The committee therefore reviewed the draft disclosure
relating to the sale as an event after the reporting period and endorsed the wording
included on page 236 of the financial statements.
• The committee reviewed the processes undertaken by management to determine the
level of SaaS arrangements that may be affected by recent IFRIC agenda decisions and
the conclusions reached, focusing on the extent of customisation and configuration
costs incurred in implementing SaaS solutions and whether these could be considered
to give rise to intangible software assets. Having sought to understand management’s
thought processes, together with the challenge applied by KPMG as part of their audit
procedures, the committee was satisfied that the majority of such costs should be
treated as operating expenditure rather than be capitalised; and
• Having satisfied itself over the accounting for SaaS arrangements, the committee also
reviewed management’s assessment of the extent to which costs incurred in prior
periods may also be affected, and concluded that prior year costs were not material
and therefore that there was no change in accounting policy in relation to these costs
that would require any prior year restatement.
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Audit committee
Material and/or judgemental areas of the financial statements
Significant issues considered
How these were addressed by the committee
Provisions and contingent liabilities (see pages 234,
• The committee assessed and challenged the appropriateness of the basis on which
236 and 260) – the group provides for contractual, legal
provisions are recognised, and management’s estimate of the value applied to
and environmental claims brought against it based on
individual claims, focusing particularly on instances where new provisions were
management’s best estimate of the value of settlement,
required or where the likelihood of financial outflow was deemed to have diminished
the timing of which is dependent on the resolution of
such that provisions were no longer needed and were therefore released. The
the relevant legal claims. Judgement is also required in
committee concluded that the approach to provisioning was appropriate and that
determining when contingent liabilities exist that require
management’s best estimates were reasonable;
disclosure in the financial statements.
• The committee also considered the reasonableness of disclosures made in respect
of contingent liabilities, challenging management as to whether any provision should
be recognised in the financial statements and concluding that the recognition criteria
had not been met and therefore that disclosure as contingent liabilities was the most
appropriate approach.
Taxation (see pages 224 to 225, 233 and 257) – judgement
• The committee considered the tax risks that the group faces and the key judgements
is required in assessing provisions for potential tax
made by management underpinning the provisions for potential tax liabilities and
liabilities and in considering the recoverability of
deferred tax assets, and noted that KPMG have also assessed these provisions. Based
deferred tax assets.
on the above, the committee was satisfied with the judgements made by management.
• The committee also considered the nature of significant refunds of tax paid in prior
years that were recognised in the financial statements in the current year, and
concluded that it is appropriate for these to be treated as part of the underlying tax
expense in the year in arriving at the group’s alternative performance measures.
Other topical areas
Impact of COVID-19 – the impact of the COVID-19
pandemic resulted in higher levels of estimation
• The impacts of the pandemic on the issues considered were considerably lower for
the year ended 31 March 2022 compared with previous years, and judgements and
uncertainty and considerably more judgement being
estimates were subject to what are now well-established processes. With the passage
required in preparing the financial statements for the
of time and as more data relating to the key areas impacted by the pandemic has
years ended 31 March 2020 and 31 March 2021. During the
become available, together with an increasing return towards pre-pandemic norms
year ended 31 March 2022 the committee has considered
during the year, the committee satisfied itself that the level of estimation uncertainty
how the situation has developed in order to revisit these
has fallen compared with previous and that, going forward and subject to any further
significant estimates and judgements.
developments, there may be less of a requirement for the impact of COVID-19 to be
considered as a discrete item, having been superseded by other developments such as
increases in the cost of living.
Impact of increases in the cost of living – while the level
• The committee concurred with management’s assessment that the impact of
of judgement and estimation uncertainty associated with
increases in
the COVID-19 pandemic has receded during the year, this
the cost of living on the group’s significant accounting judgements and areas of
has been superseded by economic circumstances that
uncertainty
have resulted in increases in the cost of living for much
is felt most acutely in relation to revenue recognition and allowances for expected
of the group’s customer base. As there is a high degree
credit losses in relation to doubtful receivables. Considerations in this area are
of uncertainty around how the economic situation may
therefore set out more fully above.
develop, this gives rise to a higher level of judgement
and estimation uncertainty in this area.
Impact of the war in Ukraine – Russia’s invasion of
Ukraine in the early part of 2022 has had profound
• The committee considered management’s assessment of the impact of the war in
Ukraine, and was satisfied that neither the operations nor the assets of the group are
geopolitical and economic consequences, which the
directly impacted, notwithstanding some exposure to the conflict’s broader effects
committee has considered in determining whether the
such as cost increases due to supply chain risk relating to certain materials and
group’s accounting for the year ended 31 March 2022 is
chemicals sourced from the region.
materially affected.
Accounting for the proposed sale of United Utilities
• The committee considered the stage of the sales process as at the year-end reporting
Renewable Energy Limited (UURE) (see pages 236 and
date along with management’s assessment of the application of the requirements of
259) – during the year ended 31 March 2022 the board
IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ in terms of
approved the commencement of a process to sell the
the assets and liabilities of UURE, and challenged management’s view that criteria for
group’s renewable energy business, UURE.
presenting these as ‘Held for sale’ had not been met as at the reporting date; and
• After due consideration, the committee agreed with management’s assessment that
as at 31 March 2022 the sale could not be considered “highly probable”, and that this
hurdle was met subsequently. The committee therefore reviewed the draft disclosure
relating to the sale as an event after the reporting period and endorsed the wording
included on page 236 of the financial statements.
Accounting for ‘Software as a Service’ (SaaS)
• The committee reviewed the processes undertaken by management to determine the
arrangements (see pages 222 and 258) – following the
level of SaaS arrangements that may be affected by recent IFRIC agenda decisions and
publication of IFRIC agenda decisions relating to SaaS
the conclusions reached, focusing on the extent of customisation and configuration
arrangements, management has considered the extent
costs incurred in implementing SaaS solutions and whether these could be considered
to which these affect the way in which such arrangement
to give rise to intangible software assets. Having sought to understand management’s
are accounted for by the group.
thought processes, together with the challenge applied by KPMG as part of their audit
procedures, the committee was satisfied that the majority of such costs should be
treated as operating expenditure rather than be capitalised; and
• Having satisfied itself over the accounting for SaaS arrangements, the committee also
reviewed management’s assessment of the extent to which costs incurred in prior
periods may also be affected, and concluded that prior year costs were not material
and therefore that there was no change in accounting policy in relation to these costs
that would require any prior year restatement.
Read more
about financial
oversight
responsibilities
of the board on
pages 139 to 140
Read more
about our risk
and resilience
framework on
pages 100 to 102
Internal controls and risk management systems
The main features of the group’s internal controls and
risk management systems are summarised below:
Internal audit function
The internal audit function is a key element of the
group’s corporate governance framework. Its role
is to provide independent and objective assurance,
advice and insight on governance, risk management
and internal control to the audit committee, the
board and to senior management. It supports the
organisation’s vision and objectives by evaluating
and assessing the effectiveness of risk management
systems, business policies and processes, systems
and key internal controls. In addition to reviewing the
effectiveness of these areas and reporting on aspects
of the group’s compliance with them, internal audit
makes recommendations to address any key issues and
improve processes and, as such, provides an indication
of the behaviours being exhibited by employees in the
areas under review. Once any recommendations are
agreed with management, the internal audit function
monitors their implementation and reports to the
committee on progress made at every meeting.
A five-year strategic audit planning approach is applied.
This facilitates an efficient deployment of internal audit
resource in providing assurance coverage over time
across the whole business, as well as greater variation
in the nature, depth and breadth of audit activities.
This strategic approach supports the annual audit plan,
which is then endorsed by management, and which
the committee reviews, challenges and approves. The
plan focuses the team’s work on those areas of greatest
risk to the business. Building on the strategic planning
approach, the development of the plan considers risk
assessments, issues raised by management, areas of
business and regulatory change, prior audit findings and
the cyclical review programme. The purpose, scope and
authority of internal audit is defined within its charter
which is approved annually by the audit committee.
As set out in the charter, internal audit perform their
work in accordance with the mandatory aspects of
the International Professional Practice Framework of
the Chartered Institute of Internal Auditors; and with
integrity (honestly, diligently and responsibly) and
objectively (without conflicts of interest).
Internal audit, led by the head of audit and risk, covers
the group’s principal activities and reports to the
committee and functionally to the CFO, both of whom
approve the head of audit’s annual personal objectives.
The head of audit and risk attends all scheduled
meetings of the audit committee, and has the
opportunity to raise any matters with the members of
the committee at these meetings without the presence
of management. He is also in regular contact with the
chair of the committee outside of committee meetings.
The in-house team is expanded as and when required
with additional resource and skills co-sourced from
external providers ensuring that the internal audit
function has sufficient resources and expertise to
deliver the annual audit plan. The committee keeps the
relationship with co-source providers under review to
ensure the independence of the internal audit function
is maintained and there is a documented process to
manage possible conflicts of interest with the co-
sourced resource. Ensuring that any co-source resource
remains independent in the course of its work is crucial
to the integrity of its work. Following a competitive
tender process, PwC was last re-appointed as co-source
resource provider during 2020/21.
The internal audit function liaises with the statutory
auditor, discussing relevant aspects of their respective
activities which ultimately supports the assurance
provided to the audit committee and board.
Assessing the effectiveness of the internal
audit function
The effectiveness of the internal audit function’s work
is continually monitored using a variety of inputs,
including the ongoing audit reports received, the audit
committee’s interaction with the head of audit and risk,
an annual review of the department’s internal quality
assurance report, a quarterly summary dashboard
providing a snapshot of the progress against the
internal audit plan tabled at each committee meeting
as well as any other periodic quality reporting
requested.
An annual stakeholder survey in the form of a feedback
questionnaire is circulated to committee members,
senior management and other managers who have
regular contact with the internal audit function,
including representatives from the auditor KPMG
and the co-source audit provider PwC. The responses
were anonymous to encourage open and honest
feedback, and were consistently favourable, as were
previous surveys.
Periodically, the quality and effectiveness of the internal
audit function is also assessed externally, with the most
recent review being undertaken in early 2019.
Taking all these elements into account, the committee
concluded that the internal audit function was an
effective provider of assurance over the organisation’s
risks and controls and appropriate resources were
available as required.
Risk management systems
The group designs its risk management activities to
manage rather than eliminate the risk of failure to
achieve its strategic objectives.
The committee receives updates and reports from the
head of audit and risk on key activities relating to the
company’s risk management systems and processes
at every meeting. These are then reported to the
board, as appropriate. A diagram and explanation
of the risk management governance and reporting
process can be found on page 101. The CFO has
executive responsibility for risk management and is
supported in this role by the head of audit and risk
and the corporate risk manager and his team. The
group audit and risk board (GARB) is a sub-committee
of the executive team. The GARB meets quarterly
and reviews the governance processes and the
effectiveness and performance of these processes
along with the identification of emerging trends and
themes within and across the business. The work of the
GARB then feeds into the information and assurance
processes of the audit committee and into the board’s
assessment of risk exposures and the strategies to
manage these risks.
Supplementing the more detailed ongoing risk
management activities within each business area,
the biannual business unit risk assessment process
(BURA) seeks to identify how well risk management
is embedded across the different teams in the
business. The BURA involves a high-level review
of the effectiveness of the controls that each
business unit has in place to mitigate risks relating
to activities in their business area, while identifying
new and emerging risks and generally to facilitate
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Corporate governance report
Audit committee
improvements in the way risks are managed. The
outcome of the BURA process is communicated to
the executive team and the board. This then forms the
basis of the determination of the most significant risks
that the company faces which are then reviewed by the
board. The group utilises risk management software in
order to maintain an up to date view of the assessment
of risk. The maturity of the risk management
framework and its application across the business is
assessed on an annual basis against a defined maturity
model. This assessment provides an objective appraisal
of the degree of maturity in how the risk management
system is being applied against the key elements
of ISO 31000:2018 Risk Management Standard. The
results of the maturity assessment are reported to the
GARB, and actions agreed with business units.
An external assessment of the risk management
framework last took place in 2017/18.
Internal controls
The committee reviews the group’s internal control
systems and receives updates on the findings of
internal audit’s investigations at every meeting, prior
to reporting any significant matters to the board.
Internal control systems are part of our ‘business as
usual’ activities and are documented in the company’s
internal control manual which covers financial,
operational and compliance controls and processes.
Internal control systems are the responsibility of the
CFO, with the support of the GARB, the financial
control team and the internal audit team, although
the head of audit and risk and his team are directly
accountable to the audit committee.
Confirmation that the controls and processes are
being adhered to throughout the business is the
responsibility of managers, but is continually tested
by the work of the internal audit team as part of its
annual plan of work which the committee approves
each year as well as aspects being tested by other
internal assurance providers. Compliance with the
internal control system is monitored annually by the
completion of a self-assessment checklist by senior
managers in consultation with their teams. The results
are then reviewed and audited on a sample basis by the
internal audit team and reported to the committee.
During the year, the committee asked management to
commission an independent review of the maturity of
the group’s internal control framework over financial
reporting in light of the recent BEIS consultation,
and the likely evolution of the UK internal control
requirements, in general terms but also more
specifically in relation to controls over financial
reporting. The key findings of the independent
Independent review of the fraud risk management structure
During the year, the committee asked management to commission an
independent review of the group’s fraud risk management framework
to assess its maturity and identify any enhancements required
given the evolving nature of business processes and the working
environment. This was felt to be timely, particularly in light of the
need for remote working during the pandemic and the subsequent
move to hybrid working in some areas of the business. An action
plan to strengthen the approach to fraud risk assessment has been
implemented, overseen in the first instance by the security steering
group forum and with the final report presented to the committee.
review were that: there was a high level of coverage
of the financial statement line items in both the
consolidated income statement and the balance
sheet; risk and control matrices were in operation;
and the fundamental building blocks underpinning an
internal control framework over financial reporting
were in place which would contribute to an audit and
assurance policy (see page 151).
Anti-fraud and anti-bribery
The audit committee is responsible for reviewing
the group’s procedures for detecting fraud, and
the systems and controls for preventing other
inappropriate behaviour. In the first instance of an
incident being reported, a summary of the allegations
is passed to the fraud and whistleblowing committee
(consisting of the company secretary, the customer
services and people director, the strategy, policy and
regulation director, the commercial, engineering and
capital delivery director and the head of internal audit
and risk) to decide on the appropriate course of action
and investigation and by whom.
During the year, the audit committee was kept fully
apprised in regular updates on the progress and
findings of investigations of cases of alleged fraud and
any remedial actions taken.
In line with the group’s anti-fraud culture and zero-
tolerance attitude towards fraud, a fraud incident
forum has been established to identify and understand
potential threats, and optimise the group’s response
and mitigation and ensure consistency across the
business.
The company has an anti-bribery policy to prevent
bribery being committed on its behalf, which all
employees must follow, and processes in place to
monitor compliance with the policy. Employees in
certain roles are required to complete anti-bribery
training materials. As part of the anti-bribery
programme, employees must comply with the group’s
hospitality policy. The hospitality policy permits
employees to accept proportionate and reasonable
hospitality for legitimate business purposes only and all
hospitality (and gifts) offered and accepted has to be
logged, and approved when accepted. Employees and
representatives of the group’s suppliers must comply
with the group’s responsible sourcing principles and
United Supply Chain approach. The group will not
tolerate corruption, bribery and anti-competitive
actions and suppliers are expected to comply with
applicable laws and regulations, and in particular
never to offer or accept any undue payment or other
consideration, directly or indirectly, for the purposes
of inducing any person or entity to act contrary to their
prescribed duties.
As part of the internal control self-assessment
checklist (part of the group’s internal control
processes), senior managers in consultation with their
teams are required to confirm, among other things,
that they have complied with the group’s anti-bribery
and hospitality policies. The anti-bribery programme is
monitored and reviewed biannually by the committee.
154
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Corporate governance report
Audit committee
Corporate governance report
Treasury committee
improvements in the way risks are managed. The
review were that: there was a high level of coverage
outcome of the BURA process is communicated to
of the financial statement line items in both the
the executive team and the board. This then forms the
consolidated income statement and the balance
basis of the determination of the most significant risks
sheet; risk and control matrices were in operation;
that the company faces which are then reviewed by the
and the fundamental building blocks underpinning an
board. The group utilises risk management software in
internal control framework over financial reporting
order to maintain an up to date view of the assessment
were in place which would contribute to an audit and
of risk. The maturity of the risk management
assurance policy (see page 151).
framework and its application across the business is
assessed on an annual basis against a defined maturity
model. This assessment provides an objective appraisal
of the degree of maturity in how the risk management
system is being applied against the key elements
of ISO 31000:2018 Risk Management Standard. The
results of the maturity assessment are reported to the
GARB, and actions agreed with business units.
Anti-fraud and anti-bribery
The audit committee is responsible for reviewing
the group’s procedures for detecting fraud, and
the systems and controls for preventing other
inappropriate behaviour. In the first instance of an
incident being reported, a summary of the allegations
is passed to the fraud and whistleblowing committee
(consisting of the company secretary, the customer
An external assessment of the risk management
services and people director, the strategy, policy and
framework last took place in 2017/18.
Internal controls
The committee reviews the group’s internal control
systems and receives updates on the findings of
regulation director, the commercial, engineering and
capital delivery director and the head of internal audit
and risk) to decide on the appropriate course of action
and investigation and by whom.
internal audit’s investigations at every meeting, prior
During the year, the audit committee was kept fully
to reporting any significant matters to the board.
apprised in regular updates on the progress and
Internal control systems are part of our ‘business as
findings of investigations of cases of alleged fraud and
usual’ activities and are documented in the company’s
any remedial actions taken.
internal control manual which covers financial,
operational and compliance controls and processes.
Internal control systems are the responsibility of the
CFO, with the support of the GARB, the financial
control team and the internal audit team, although
the head of audit and risk and his team are directly
accountable to the audit committee.
Confirmation that the controls and processes are
being adhered to throughout the business is the
responsibility of managers, but is continually tested
by the work of the internal audit team as part of its
annual plan of work which the committee approves
each year as well as aspects being tested by other
internal assurance providers. Compliance with the
internal control system is monitored annually by the
completion of a self-assessment checklist by senior
managers in consultation with their teams. The results
are then reviewed and audited on a sample basis by the
internal audit team and reported to the committee.
In line with the group’s anti-fraud culture and zero-
tolerance attitude towards fraud, a fraud incident
forum has been established to identify and understand
potential threats, and optimise the group’s response
and mitigation and ensure consistency across the
business.
The company has an anti-bribery policy to prevent
bribery being committed on its behalf, which all
employees must follow, and processes in place to
monitor compliance with the policy. Employees in
certain roles are required to complete anti-bribery
training materials. As part of the anti-bribery
programme, employees must comply with the group’s
hospitality policy. The hospitality policy permits
employees to accept proportionate and reasonable
hospitality for legitimate business purposes only and all
hospitality (and gifts) offered and accepted has to be
logged, and approved when accepted. Employees and
representatives of the group’s suppliers must comply
During the year, the committee asked management to
with the group’s responsible sourcing principles and
commission an independent review of the maturity of
United Supply Chain approach. The group will not
the group’s internal control framework over financial
tolerate corruption, bribery and anti-competitive
reporting in light of the recent BEIS consultation,
actions and suppliers are expected to comply with
and the likely evolution of the UK internal control
applicable laws and regulations, and in particular
requirements, in general terms but also more
never to offer or accept any undue payment or other
specifically in relation to controls over financial
consideration, directly or indirectly, for the purposes
reporting. The key findings of the independent
of inducing any person or entity to act contrary to their
prescribed duties.
As part of the internal control self-assessment
checklist (part of the group’s internal control
processes), senior managers in consultation with their
teams are required to confirm, among other things,
that they have complied with the group’s anti-bribery
and hospitality policies. The anti-bribery programme is
monitored and reviewed biannually by the committee.
Independent review of the fraud risk management structure
During the year, the committee asked management to commission an
independent review of the group’s fraud risk management framework
to assess its maturity and identify any enhancements required
given the evolving nature of business processes and the working
environment. This was felt to be timely, particularly in light of the
need for remote working during the pandemic and the subsequent
move to hybrid working in some areas of the business. An action
plan to strengthen the approach to fraud risk assessment has been
implemented, overseen in the first instance by the security steering
group forum and with the final report presented to the committee.
Doug Webb
Chair of the treasury committee
Quick facts
• The committee meets three times a year.
• The committee operates under terms of
reference and delegated authorities approved
by the board.
• The company secretary attends all meetings of
the committee.
• The treasurer is a member of the committee.
• The members of the committee undertook a self
evaluation in February 2022 facilitated internally
by the company secretary. The review of the
responses indicated that the committee was
effective and its members had the appropriate
skills and experience to fulfil the committee’s
responsibilities.
Quick link
Terms of reference:
unitedutilities.com/corporate-governance
Treasury management is fundamental to
the group’s business model ensuring that
sufficient funding is available to meet the
group’s foreseeable needs, while managing
the liquidity market and capital risks.
Dear shareholder
During the year, with the board’s delegated authority,
the committee oversaw the successful execution of the
group’s funding programme. Approximately £425 million
of new term funding was raised, with financial market
conditions being closely monitored as central banks
began tightening monetary policy in response to surging
inflation, amidst heightened geopolitical tensions.
The continuation of our funding programme, on top of
the £900 million of term funding raised in 2020/21, has
positioned the group well with regard to its circa £2.7 billion
financing requirement across the AMP7 regulatory period.
The committee also completed a ‘deep dive’ review of the
group’s inflation and interest rate hedging policies.
The committee oversaw the group’s successful
implementation of the transition of benchmark reference
rates used in the group’s financial derivatives and loan
and credit facilities, from GBP LIBOR to replacement
‘risk free rates’, with SONIA replacing GBP LIBOR
effective from the end of 2021.
In November 2021, we increased the size, and
redenominated the group’s multi-issuer, London listed, Euro
Medium Term Note Programme from EUR7 billion to £10
billion to facilitate future debt issuance. This programme,
in conjunction with our sustainable finance framework
launched in November 2020, is expected to continue to be
the primary vehicle for the group accessing funding in the
debt capital markets. In July 2021, the group published its
inaugural sustainable finance framework allocations and
impact report. Details of the group’s engagement with banks
and credit investors can be found on page 128.
Doug Webb
Chair of the treasury committee
Treasury committee members:
Doug Webb
Chair of the treasury
committee
Brendan Murphy
Treasurer
Phil Aspin
CFO
Main responsibilities
• Review of the group’s treasury policies in relation to: financing; liquidity;
hedging of market risks (interest rates; inflation; currency and electricity
hedging); financial counterparty credit risk; credit ratings and capital structure.
• Execution of the financing plan and evaluation of funding opportunities.
• Liquidity management and review of forecasts.
• Execution of hedging transactions and programmes in relation to
the management of market risks in accordance with treasury policy
parameters.
• Developments in relation to the credit ratings agencies.
• Credit investor relations.
• Banking relationships.
• Treasury delegated authorities, internal controls and governance.
• Reporting to the board on matters relating to the group’s treasury activities,
including board approval of the annual treasury update and associated
financing plan and board delegated authorities.
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Corporate governance report
Corporate responsibility committee
The long standing commitment to clear
and transparent disclosure has ensured
the company’s performance in ESG has
remained strong.
Dear shareholder
I am pleased to introduce the report on the activities of
the corporate responsibility committee in 2021/22.
The company’s approach to carbon emission mitigation
and adaptation to a changing climate was a topic of
particular focus, with the CRC encouraged to see it is
making good progress in delivering its carbon pledges
including the incorporation of carbon into long-term
performance incentives. The committee supported
steps to strengthen internal carbon governance,
recognising the company has a clear plan to 2030. It
welcomed the increased regulatory focus on climate
change.
The committee commented on the company’s third
adaptation report ahead of its publication in December
2021 with particular attention on how the company
is improving the management of climate change risk
and raising its profile within the organisation and with
external stakeholders. The committee noted how
the report addressed the expected impact of global
warming at around 2⁰C and that a more extreme
scenario of up to 4⁰C is being considered for PR24 and
beyond to stress test the plan.
River water quality and storm overflows have been
prominent political and societal issues this year,
embodied by an amendment to the Environment Act
that requires water companies to progressively reduce
the impact from overflows. The committee considered
how the management team was handling this important
reputational matter and supported its approach, in
particular the emphasis on developing partnership
opportunities alongside actions to be taken by the
company. It was clear to committee members that
the water sector alone cannot deliver good ecological
status in rivers and that collaboration with regional
stakeholders is a vital part of any approach.
Over the course of the COVID-19 pandemic, the
committee discussed the public’s changing attitude
to the environment as more people connect to green
Corporate responsibility committee members:
Stephen Carter
Chair of the corporate
responsibility committee
Steve Mogford
Alison Goligher
Paulette Rowe
Stephen Carter
Chair of the corporate responsibility committee
Quick facts
• The committee comprises four directors
appointed by the Board, three of whom are
independent non-executive directors.
• The company secretary, corporate affairs
director and customer services and people
director attend all meetings of the committee.
• Senior operational directors attend the
committee to report on the environmental,
social and governance aspects of particular
topics and initiatives.
• The corporate responsibility committee has
existed for over fourteen years.
Quick links
Terms of reference
unitedutilities.com/corporate-governance
Schedule of matters reserved for the board
unitedutilities.com/corporate-governance
A copy of the Financial Reporting Council’s 2018
UK Corporate Governance Code can be found at
frc.org.uk
156
unitedutilities.com/corporate
Corporate governance report
Corporate responsibility committee
The long standing commitment to clear
and transparent disclosure has ensured
the company’s performance in ESG has
remained strong.
Dear shareholder
I am pleased to introduce the report on the activities of
the corporate responsibility committee in 2021/22.
The company’s approach to carbon emission mitigation
and adaptation to a changing climate was a topic of
particular focus, with the CRC encouraged to see it is
making good progress in delivering its carbon pledges
including the incorporation of carbon into long-term
performance incentives. The committee supported
steps to strengthen internal carbon governance,
recognising the company has a clear plan to 2030. It
welcomed the increased regulatory focus on climate
change.
The committee commented on the company’s third
adaptation report ahead of its publication in December
2021 with particular attention on how the company
is improving the management of climate change risk
and raising its profile within the organisation and with
external stakeholders. The committee noted how
the report addressed the expected impact of global
warming at around 2⁰C and that a more extreme
scenario of up to 4⁰C is being considered for PR24 and
beyond to stress test the plan.
River water quality and storm overflows have been
prominent political and societal issues this year,
embodied by an amendment to the Environment Act
that requires water companies to progressively reduce
the impact from overflows. The committee considered
how the management team was handling this important
reputational matter and supported its approach, in
particular the emphasis on developing partnership
opportunities alongside actions to be taken by the
company. It was clear to committee members that
the water sector alone cannot deliver good ecological
status in rivers and that collaboration with regional
stakeholders is a vital part of any approach.
Over the course of the COVID-19 pandemic, the
committee discussed the public’s changing attitude
to the environment as more people connect to green
Corporate responsibility committee members:
Stephen Carter
Chair of the corporate
responsibility committee
Steve Mogford
Alison Goligher
Paulette Rowe
Stephen Carter
Chair of the corporate responsibility committee
Quick facts
• The committee comprises four directors
appointed by the Board, three of whom are
independent non-executive directors.
• The company secretary, corporate affairs
director and customer services and people
director attend all meetings of the committee.
• Senior operational directors attend the
committee to report on the environmental,
social and governance aspects of particular
topics and initiatives.
• The corporate responsibility committee has
existed for over fourteen years.
Quick links
Terms of reference
unitedutilities.com/corporate-governance
Schedule of matters reserved for the board
unitedutilities.com/corporate-governance
A copy of the Financial Reporting Council’s 2018
UK Corporate Governance Code can be found at
frc.org.uk
spaces and nature. The growing visitor pressure at the
company’s recreational sites, coupled with an increase
in anti-social behaviour, have led to local stakeholder
concerns. The committee was presented with an
update on the company’s land management approach,
appreciating the challenge of balancing the sometimes
competing demands of water, wildlife and access.
While the majority of COVID-19 measures eased over
the year, the committee considered the company’s
response to social issues amplified by the pandemic.
Support provided to customers as part of the
company’s affordability and vulnerability response is
monitored through regular review of the lower income
dashboard. Given the North West’s high levels of social
and economic deprivation, the committee welcomed
the company’s support for the Consumer Council for
Water’s recommendation that a national social tariff is
introduced.
It was pleasing to see the results of the Employee
Opinion Survey 2021, in particular the high levels of
employee engagement. Efforts to bring the employee
voice to the boardroom and to provide a two-way flow
of communication have played their part alongside the
additional support provided during the pandemic.
In recent years, there has been greater investor
interest in Environmental, Social and Governance
(ESG) matters. The committee discussed investor
views of ESG and performance in ESG indices. The
long standing commitment to clear and transparent
disclosure has ensured the company’s performance in
ESG has remained strong. The committee endorsed
a targeted approach to engage with the most
relevant independently assessed indices so that
the company can demonstrate to investors that its
strong responsible business credentials are externally
evaluated.
The committee reviewed performance against the suite
of measures and targets adopted by the company to
provide evidence to its stakeholders that it is fulfilling
its purpose to provide great water and more for the
North West. These form part of the performance
section of this report on pages 52 to 75. Publishing a
set of performance measures and targets in this way
enables stakeholders to judge for themselves whether
or not the company is delivering on its purpose.
Main responsibilities
The committee approved a slightly modified set of
terms of reference in February 2022. Its main duties
are to:
• consider and recommend to the board the broad
corporate responsibility (CR) policy, taking into
account the company’s desired CR positioning;
• keep under review the group’s approach to CR
and ensure it is aligned with the group strategy
including the company purpose and values;
•
review CR issues and objectives material to the
group’s stakeholders and identify and monitor
the extent to which they are reflected in group
strategies, plans and policies;
• monitor and review the status of the company’s
reputation and examine the contribution the
group’s corporate responsibility activities make
towards protecting and enhancing this;
Read more about
our approach
as a responsible
business on
pages 12 to 13
Read more
about Dynamic
Network
Management
on page 43
In addition, specific papers on gender pay and
community investment expenditure were presented to
the committee.
The committee sought insight on how the company’s
approach to purpose and responsible business is
integrated. It received reports on how digital/data
and the AMP7 investment programme are embracing
a purpose-led approach. The committee supported
plans to launch a digital academy and the digital
contribution to major transformation activities such
as the wastewater Dynamic Network Management
programme. It praised progress in implementing
sustainability in all aspects of capital delivery activities
and the contribution to the company’s net zero carbon
commitment.
From a committee governance perspective, members
agreed to a minor amendment to its terms of reference
to refer to ‘purpose’ and ‘values’ in a clause under
Policy Direction. As part of its annual evaluation of
performance the committee sought a discussion to
ensure it focuses its efforts on the right topics given
the rapidly evolving interest in ESG.
On behalf of the board, it has been a real privilege to
oversee the company’s responsible business agenda
for the past six years. I am confident that the company
has built the right foundations so it can deliver on its
purpose and to create value for all of its stakeholders.
As I prepare to hand over chair of the corporate
responsibility committee to Paulette Rowe, I know that
she will ensure it continues to champion corporate
responsibility on behalf of the board. I wish Paulette,
and the company, every success.
As a listed company, United Utilities complies with
the UK Corporate Governance Code and continues to
drive for the highest standards of board leadership,
transparency and governance.
Stephen Carter
Chair of the corporate responsibility committee
• monitor and review compliance with the board’s
CR policy and scrutinise the effectiveness of the
delivery of the CR policy requirements;
• develop and recommend to the board CR targets
and key performance indicators and receive
and review reports on progress towards the
achievement of such targets and indicators;
• monitor and review the steps taken by the
company to support customers in vulnerable
circumstances; and
•
review all approved specific giving where the
aggregate financial contribution exceeds £100,000
over the period of the proposed funding and to
review all community giving expenditure annually.
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Corporate governance report
Corporate responsibility committee
Read more about
our approach to
climate change
on pages 86 to 97
Read more about
Employee Voice
on page 126
The committee’s agenda during the year:
Environmental
Climate change mitigation
The committee discussed progress against the
company’s carbon pledges and related matters such
as the outcomes from COP26 and the impact to
the business, strengthening internal governance,
incorporating carbon into long-term performance
incentives and the potential introduction of
performance commitments for operational and
embedded emissions.
Climate change adaptation
Ahead of the publication of the company’s third
adaptation report the committee reviewed progress
on climate resilience. The committee welcomed
steps to capture key climate change risks in the
corporate risk framework and the use of the latest
UK Climate Projections (2018) in developing the
Water Resources Management Plan (WRMP24). It
supported strengthening the Task Force on Climate-
related Financial Disclosures in the 2021 Annual Report
through the inclusion of an assessment of the financial
impact of climate risk.
Land management update
The committee was updated on the strategic review
of the group’s land management approach, reflecting
on the challenge to balance changing expectations
of stakeholders and the behaviour of some visitors
with the drivers of water quality and quantity. The
committee discussed applying strategies such as
adopting an asset management approach, exploring
opportunities to invest in the estate and connecting
customers to the company’s land ownership.
Approach to clean air
An overview of the company’s approach to clean air
was discussed by the committee. It noted plans to
undertake further research to understand the scope of
the risk posed by poor air quality, to baseline activity
to capture the total extent of the company’s emissions
and the opportunity to engage with government and
regulators on the topic.
Social
National social tariff
The committee discussed the recommendation by the
Consumer Council for Water to introduce a national
social tariff for customers struggling to pay their water
bills. It noted plans by Defra to consult on this in 2022
and commented that similarities could be drawn with
the implementation of a national social tariff in the
electricity sector and how lessons could be learnt. The
committee requested an update in September 2022.
Affordability and vulnerability: lower income groups
Two updates were provided to the committee on
the company’s performance in assisting customers
on low incomes. The committee noted the positive
performance across many measures.
Next ways of working
As pandemic restrictions eased, the committee
discussed the ‘next ways of working’ project and
welcomed the return to office for hybrid roles. The
potential disadvantages of hybrid working for those
in the early stages of their careers and maintaining
engagement for those not in hybrid roles were debated
alongside methods for meeting these challenges.
Gender pay report
The committee commented on the draft gender pay
report and commended the work undertaken to attract
more women to the company to address, in particular,
middle and upper senior manager roles. It welcomed
the use of leading indicators and the success of the
company’s aspiring manager programme to nurture a
pipeline of talent for senior roles.
Community investment expenditure 2020/21
The annual update on community giving expenditure
was presented to the committee. It noted that total
expenditure was lower than usual due to restrictions
on community activity arising from COVID-19
lockdown measures. Lessons to be learnt from other
companies were discussed.
Governance
Employee Voice
Twice a year the committee reviews progress on
employee and board engagement. It noted how
the Employee Voice panel had met virtually while
COVID-19 restrictions were in place, providing a
valuable mechanism for employees to give feedback,
particularly on how they had been supported
throughout the pandemic. Topics presented to the
panel included the company’s reward strategy, HR
support for people managers and progress updates
from each sub-group: employee opinion survey;
employee networks; and culture. The committee noted
that the company was satisfied that activities and
progress enabled it to demonstrate compliance with
the UK Corporate Governance Code.
Employee opinion survey 2021
The committee welcomed the results of the annual
employee opinion survey and the high levels
of engagement. It noted that the values of the
organisation, the approach to health and safety and
reward had a direct correlation to the employment
relationship and support for employees during the
pandemic. Committee members were updated
on plans by the company to ensure high levels of
engagement were retained through local action
planning.
Stakeholder engagement and reputation
Engagement and reputation remained a standing
agenda item allowing time to examine the relationship
between responsible business and reputation.
Each paper provided an update on national and
regional political and regulatory engagement, and
interaction with people and organisations representing
regulatory, social and environmental interests. In
particular, the committee sought to understand the
role of environmental NGOs and the media in driving
awareness of storm overflows and it welcomed the
company’s first investor ESG webinar.
Progress against demonstrating purpose
The committee endorsed a set of stakeholder value
measures and targets through which the company
will demonstrate how it is fulfilling its purpose.
Performance updates were provided on two occasions
and members asked that consideration be given to how
improvements over AMP7 are made evident and to
ensure that the measures stay relevant.
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Corporate governance report
Corporate responsibility committee
The committee’s agenda during the year:
Gender pay report
Read more about
our approach to
climate change
on pages 86 to 97
Read more about
Employee Voice
on page 126
Environmental
Climate change mitigation
The committee discussed progress against the
company’s carbon pledges and related matters such
as the outcomes from COP26 and the impact to
the business, strengthening internal governance,
incorporating carbon into long-term performance
incentives and the potential introduction of
performance commitments for operational and
embedded emissions.
Climate change adaptation
The committee commented on the draft gender pay
report and commended the work undertaken to attract
more women to the company to address, in particular,
middle and upper senior manager roles. It welcomed
the use of leading indicators and the success of the
company’s aspiring manager programme to nurture a
pipeline of talent for senior roles.
Community investment expenditure 2020/21
The annual update on community giving expenditure
was presented to the committee. It noted that total
expenditure was lower than usual due to restrictions
Ahead of the publication of the company’s third
on community activity arising from COVID-19
adaptation report the committee reviewed progress
lockdown measures. Lessons to be learnt from other
on climate resilience. The committee welcomed
steps to capture key climate change risks in the
corporate risk framework and the use of the latest
UK Climate Projections (2018) in developing the
Water Resources Management Plan (WRMP24). It
supported strengthening the Task Force on Climate-
related Financial Disclosures in the 2021 Annual Report
through the inclusion of an assessment of the financial
impact of climate risk.
Land management update
The committee was updated on the strategic review
of the group’s land management approach, reflecting
on the challenge to balance changing expectations
of stakeholders and the behaviour of some visitors
with the drivers of water quality and quantity. The
committee discussed applying strategies such as
adopting an asset management approach, exploring
opportunities to invest in the estate and connecting
customers to the company’s land ownership.
Approach to clean air
An overview of the company’s approach to clean air
was discussed by the committee. It noted plans to
undertake further research to understand the scope of
the risk posed by poor air quality, to baseline activity
regulators on the topic.
Social
National social tariff
companies were discussed.
Governance
Employee Voice
Twice a year the committee reviews progress on
employee and board engagement. It noted how
the Employee Voice panel had met virtually while
COVID-19 restrictions were in place, providing a
valuable mechanism for employees to give feedback,
particularly on how they had been supported
throughout the pandemic. Topics presented to the
panel included the company’s reward strategy, HR
support for people managers and progress updates
from each sub-group: employee opinion survey;
employee networks; and culture. The committee noted
that the company was satisfied that activities and
progress enabled it to demonstrate compliance with
the UK Corporate Governance Code.
Employee opinion survey 2021
The committee welcomed the results of the annual
employee opinion survey and the high levels
of engagement. It noted that the values of the
organisation, the approach to health and safety and
reward had a direct correlation to the employment
relationship and support for employees during the
on plans by the company to ensure high levels of
engagement were retained through local action
planning.
Stakeholder engagement and reputation
to capture the total extent of the company’s emissions
pandemic. Committee members were updated
and the opportunity to engage with government and
The committee discussed the recommendation by the
Engagement and reputation remained a standing
Consumer Council for Water to introduce a national
social tariff for customers struggling to pay their water
bills. It noted plans by Defra to consult on this in 2022
and commented that similarities could be drawn with
the implementation of a national social tariff in the
agenda item allowing time to examine the relationship
between responsible business and reputation.
Each paper provided an update on national and
regional political and regulatory engagement, and
interaction with people and organisations representing
electricity sector and how lessons could be learnt. The
regulatory, social and environmental interests. In
committee requested an update in September 2022.
Affordability and vulnerability: lower income groups
Two updates were provided to the committee on
the company’s performance in assisting customers
on low incomes. The committee noted the positive
performance across many measures.
Next ways of working
As pandemic restrictions eased, the committee
discussed the ‘next ways of working’ project and
welcomed the return to office for hybrid roles. The
potential disadvantages of hybrid working for those
in the early stages of their careers and maintaining
engagement for those not in hybrid roles were debated
alongside methods for meeting these challenges.
particular, the committee sought to understand the
role of environmental NGOs and the media in driving
awareness of storm overflows and it welcomed the
company’s first investor ESG webinar.
Progress against demonstrating purpose
The committee endorsed a set of stakeholder value
measures and targets through which the company
will demonstrate how it is fulfilling its purpose.
Performance updates were provided on two occasions
and members asked that consideration be given to how
improvements over AMP7 are made evident and to
ensure that the measures stay relevant.
CR committee terms of reference
The committee approved a minor amendment to its
terms of reference to refer explicitly to ‘purpose’ and
‘values’ as part of its duty to ensure alignment with the
group’s overall approach to corporate responsibility.
This reflected the increasing interest from ESG
stakeholders that companies demonstrate they are
‘purpose-led’ and generate public value. The amended
terms of reference were recommended for approval
to the group board.
CR committee evaluation
The committee reviewed the external evaluation
results, in particular points about ensuring papers
were succinct and future topics for committee
discussion given the rapidly evolving ESG landscape.
The committee discussed its membership in this
context and it was agreed that it would be reviewed by
the nomination committee for approval by the board.
Cross cutting
Responsible business digital and data framework
An update on the company’s approach to digital and
its alignment with purpose and responsible business
was presented to the committee. This included
the ‘next ways of working’ project, shaped by the
company’s pandemic response, and updates on major
transformation projects such as the wastewater
Dynamic Network Management programme and the
West Cumbria Operating Strategy. The committee
discussed issues such as seeking user consent in
relation to their data, plans to baseline digital skills and
the launch of a digital skills academy.
Investors and ESG
The committee was updated on investors’ views of
ESG and agreed with the company’s approach to
demonstrate its responsible business credentials
through continued transparency and engagement with
selected investor ESG indices and ratings. Members
discussed investor interest in diversity and inclusion
and nature and endorsed early disclosure on these
topics.
Brexit and regulatory convergence – environmental
and employment legislation
Following conclusion of the Brexit transition period,
an overview of UK environmental and employment
legislation was discussed. It focused in particular
on the Environment Act and statutory targets on air
quality, biodiversity, water and waste; new duties
for water companies; the Office for Environmental
Protection which will hold public bodies including
UUW to account on their environmental obligations;
and governance mechanisms such as regional water
groups and internal drainage boards. The committee
agreed that no further updates in relation to Brexit
are required.
Capital programme: delivery of sustainability
objectives
How the company’s purpose, and ESG in general, is
being implemented across its capital programme was
presented to the committee. It welcomed progress in
implementing sustainability in all aspects of the capital
programme, especially on the West Cumbria project,
and the contribution to the company’s net zero carbon
commitment. The committee discussed whether,
looking ahead to PR24, there was scope to be more
ambitious in realising ESG objectives.
Looking to the next year, the committee will:
•
review new or updated responsible business strategies including
the company’s approach to education, its community strategy and
approach to smart metering;
• consider the responsible business themes emerging for PR24;
•
•
return to several issues to review progress including land
management, air quality, waste and circular economy including
plastics, embedding multi-capital thinking, diversity and inclusion
and talent and young people;
review performance on how the company is fulfilling its purpose,
ESG rating performance and the dashboard tracking the
company’s efforts to support customers on low incomes;
• on behalf of the board, review progress and issues arising from the
Employee Voice panel and the company’s approach to culture;
• continue to examine the interaction between purpose, ESG and
reputation and review the approach to stakeholder engagement
and the management of reputational risks;
• oversee matters of general governance such as reviewing the
gender pay report; and
• undertake matters of committee governance such as reviewing its
rolling calendar of agenda items, the annual committee evaluation
and examination of the committee’s terms of reference.
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Annual statement from the remuneration committee chair
Our executive pay arrangements are
aligned to our purpose, vision and
strategy, thereby incentivising great
customer service and the creation of
long-term value for all.
Dear shareholder
I am pleased to introduce the directors’ remuneration
report for the year ended 31 March 2022, which
includes the annual report on remuneration and
a revised director’s remuneration policy which is
intended to take effect from the date of our 2022
AGM (subject to shareholder approval).
Remuneration policy review
Our current remuneration policy was approved
by shareholders at our AGM in 2019 following a
comprehensive stakeholder consultation process, and
sought to make sure that the executives’ remuneration
arrangements (and the incentive elements in particular)
would be well-aligned with the business plan for the
regulatory period from 2020–25, and the expectations
of investors and Ofwat.
We are required to submit a new policy for shareholder
approval at our AGM in 2022, and so in the summer of
2021 we started a review to identify aspects of our overall
approach to executive remuneration which should be
addressed in the new policy. Being less than two years
into the regulatory period, the committee was satisfied
that, overall, our current approach remained appropriate
for at least the next three years and that there was no
need to make material changes to the current policy.
A key area of focus however, was how the committee
might strengthen the extent to which environmental,
social and governance matters are reflected in executive
remuneration arrangements, and the incentive plans in
particular. Additionally, with only one year remaining
before the current mechanism for delivering long-term
incentives (our Long Term Plan 2013) would require
renewal or replacement, there was an opportunity for us
to make sure that the rules of any revised plan reflected
contemporary corporate governance best practice and
the expectations of shareholders.
Between January and March 2022, we consulted
directly with major shareholders and other key
stakeholders, including our employees via our employee
voice panel, about our proposals on these and a number
of other matters. That process was valuable, confirming
stakeholder support for the changes and enhancements
we proposed, and in particular supporting our intention
to introduce carbon measures into our long-term
incentive arrangements. Having considered the
feedback received through the consultation process
we were able to finalise our proposed new policy, and
further information about the policy review, along with
full details of the proposed policy, are shown on page
163 and pages 169 to 176.
We will also use our AGM to ask shareholders to approve
a revised version of our Long Term Plan that will operate
on a similar basis to the current plan. Details of the new
plan will be included in our Notice of AGM 2022.
Remuneration committee members:
Alison Goligher
Chair of the remuneration
committee
Mark Clare
Kath Cates
Doug Webb
Alison Goligher
Chair of the remuneration committee
Quick facts
• The code requires that “the board should establish
a remuneration committee of at least three
independent non-executive directors”.
• The role of the committee is to set
remuneration terms for all executive directors,
other senior executives and the Chair.
• By invitation of the committee, meetings are
attended by the Chair, the CEO, the company
secretary, the customer services and people
director, the head of reward and the external
adviser to the committee.
• Our current remuneration policy was approved
by shareholders at the 2019 AGM.
• Our proposed remuneration policy will be put
to shareholders for approval at the 2022 AGM
and is intended to apply until the 2025 AGM.
Quick link
Terms of reference:
unitedutilities.com/corporate-governance
Index
Read about how our remuneration approach complies
with the UK Corporate Governance Code on pages
164 to 165
Read our at a glance summary: executive directors’
remuneration on pages 166 to 168
Read about our review of the directors’ remuneration
policy on page 163 and our proposed new policy on
pages 169 to 176
Read our annual report on remuneration on pages 177
to 190
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Corporate governance report
Annual statement from the remuneration committee chair
Our executive pay arrangements are
aligned to our purpose, vision and
strategy, thereby incentivising great
customer service and the creation of
long-term value for all.
Dear shareholder
I am pleased to introduce the directors’ remuneration
report for the year ended 31 March 2022, which
includes the annual report on remuneration and
a revised director’s remuneration policy which is
intended to take effect from the date of our 2022
AGM (subject to shareholder approval).
Remuneration policy review
Our current remuneration policy was approved
by shareholders at our AGM in 2019 following a
comprehensive stakeholder consultation process, and
sought to make sure that the executives’ remuneration
arrangements (and the incentive elements in particular)
would be well-aligned with the business plan for the
regulatory period from 2020–25, and the expectations
of investors and Ofwat.
We are required to submit a new policy for shareholder
approval at our AGM in 2022, and so in the summer of
2021 we started a review to identify aspects of our overall
approach to executive remuneration which should be
addressed in the new policy. Being less than two years
into the regulatory period, the committee was satisfied
that, overall, our current approach remained appropriate
for at least the next three years and that there was no
need to make material changes to the current policy.
A key area of focus however, was how the committee
might strengthen the extent to which environmental,
social and governance matters are reflected in executive
remuneration arrangements, and the incentive plans in
particular. Additionally, with only one year remaining
before the current mechanism for delivering long-term
incentives (our Long Term Plan 2013) would require
renewal or replacement, there was an opportunity for us
to make sure that the rules of any revised plan reflected
contemporary corporate governance best practice and
the expectations of shareholders.
Between January and March 2022, we consulted
directly with major shareholders and other key
stakeholders, including our employees via our employee
voice panel, about our proposals on these and a number
of other matters. That process was valuable, confirming
stakeholder support for the changes and enhancements
we proposed, and in particular supporting our intention
to introduce carbon measures into our long-term
incentive arrangements. Having considered the
feedback received through the consultation process
we were able to finalise our proposed new policy, and
further information about the policy review, along with
full details of the proposed policy, are shown on page
163 and pages 169 to 176.
We will also use our AGM to ask shareholders to approve
a revised version of our Long Term Plan that will operate
on a similar basis to the current plan. Details of the new
plan will be included in our Notice of AGM 2022.
Remuneration committee members:
Alison Goligher
Chair of the remuneration
committee
Mark Clare
Kath Cates
Doug Webb
Alison Goligher
Chair of the remuneration committee
Quick facts
• The code requires that “the board should establish
a remuneration committee of at least three
independent non-executive directors”.
• The role of the committee is to set
remuneration terms for all executive directors,
other senior executives and the Chair.
• By invitation of the committee, meetings are
attended by the Chair, the CEO, the company
secretary, the customer services and people
director, the head of reward and the external
adviser to the committee.
• Our current remuneration policy was approved
by shareholders at the 2019 AGM.
• Our proposed remuneration policy will be put
to shareholders for approval at the 2022 AGM
and is intended to apply until the 2025 AGM.
Quick link
Terms of reference:
unitedutilities.com/corporate-governance
Index
164 to 165
Read about how our remuneration approach complies
with the UK Corporate Governance Code on pages
Read our at a glance summary: executive directors’
remuneration on pages 166 to 168
Read about our review of the directors’ remuneration
policy on page 163 and our proposed new policy on
pages 169 to 176
to 190
Read our annual report on remuneration on pages 177
Improving transparency and clarity
In February 2022, I received David Black’s (Ofwat interim
Chief Executive) letter concerning performance related
executive pay for 2021/22, a copy of which was sent
to the remuneration committee chairs of all regulated
water and wastewater and water-only companies and
which was published on Ofwat’s website.
The committee recognises the scrutiny and concern
that has been focussed on the water sector during
the year, and agrees that incentive outcomes for
executives should be aligned with performance across
the range of stakeholder groups – including customers
and the environment – to demonstrate legitimacy.
We also agree that companies should provide clear
and accessible explanations about their executive
remuneration arrangements so that customers and
other stakeholders can understand how they operate
and how incentive outcomes are determined. This
is something we have consistently sought to do
in our annual remuneration reports, evolving and
improving our reporting wherever possible. We
aspire to be a leader in the development, application
and transparency of our approach to executive
remuneration and to help drive strong standards both
within the water sector and the FTSE100 more broadly.
In my response to Ofwat’s letter I set out the ways in
which the committee could demonstrate that it took
its responsibilities seriously, including in regard to
the concerns raised. Making sure that our incentive
arrangements are aligned with the interests of all of our
stakeholders is fundamental to our approach, and this is
summarised on page 166. Our incentive arrangements
are based on measures which are heavily weighted
to the delivery of stretching performance outcomes
for customers and the environment, and our plan to
introduce carbon measures into our long-term incentive
from 2022 will enhance this further. Our remuneration
policy enables the committee to override formulaic
outcomes and to exercise discretion on incentive
outcomes if deemed necessary. Indeed, the committee
has exercised and disclosed the use of such discretion
in recent years by applying downward adjustments
to the executive directors’ bonuses on two occasions,
recognising performance issues that became apparent
during the year. Noting that performance or other issues
might become known after incentives have already been
paid, the remuneration policy includes withholding and
recovery provisions (malus and clawback) so that the
committee is able to respond appropriately in certain
circumstances. These provisions have been reviewed
during the year and the circumstances in which they can
be used will be extended for future incentive awards, as
detailed on page 163, and on page 171. This will provide
all stakeholders with greater clarity over such key
matters.
Alignment with stakeholder interests
As a committee we continue to be mindful of the extent
to which the remuneration of the executives aligns with
the experience of our customers, the environment, and
other stakeholder groups.
As outlined above and on page 166 the outcomes of our
executive incentive arrangements are materially influenced
by our performance for customers and the environment.
With regards to employees, my role as the designated
non-executive director for workforce engagement
enables me to gain direct feedback across a wide
range of topics, including pay and conditions. It is
also helpful that the committee has a well-established
practice of receiving updates on relevant matters
affecting the workforce from our customer services
and people director and head of reward at each
meeting. Insights received from the workforce are
of real value to the committee and can certainly
influence our decision-making processes. Indeed,
when engaging with the employee voice panel as part
of our consultation on the new directors’ remuneration
policy it was clear that, in particular, the workforce
was supportive of the proposal to introduce carbon
measures to our long-term incentive arrangement.
Implementation of the director’s remuneration
policy during 2021/22
Salary
Board members did not receive salary increases in
September 2020 in recognition of the COVID-19
pandemic but in 2021 the committee judged that the
personal performance and contributions of Steve
Mogford and Phil Aspin justified each receiving a
base salary increase of 2 per cent with effect from 1
September 2021, which was the same as the headline
increase applied across the wider workforce.
Annual bonus
The same bonus scorecard applies throughout the
company, to ensure a shared focus on the business
plan at all levels. As outlined in the strategic report,
we have seen another good year of performance,
maintaining high levels of customer satisfaction,
improving operational performance, and long-term
financial resilience.
Our customer performance has been strong across
the board, achieving or exceeding over 80 per cent
of our performance commitments and earning our
highest ever one-year outcome delivery incentives
(ODIs). Strong performance on customer service this
year has helped drive a 14 per cent reduction in written
complaints, achieving our lowest ever volume.
Underlying operating profit was up compared to
last year, and the good start to the delivery of our
AMP7 programme has continued, with our Time,
Cost and Quality index (TCQi) score of 95.6 per cent
demonstrating that we are managing our capital
programmes effectively.
Overall company results have led to an annual bonus
scorecard out-turn of 86 per cent compared to around
82 per cent last year, and has resulted in a company-
wide bonus pool totalling around £20 million (it was
c£18 million in the prior year). Prior to the committee
determining the individual bonus outcomes for the
executive directors, Steve Mogford informed us of his
wish to unconditionally waive £150,000 of his bonus,
and this is reflected in the details shown on page
178. The company has decided to use the funds to
support students from the North West to pursue STEM
subjects at university.
Long-term incentives
The Long Term Plan (LTP) awards granted in 2019 were
the last awards to be based on three equally-weighted
measures, namely relative total shareholder return,
return on regulated equity (RoRE), and customer
service excellence. The outcome will be confirmed in
the summer of 2022 and the awards are estimated to
vest in full, reflecting performance above the stretch
level on each of the three measures.
Relative total shareholder return over the three-year
performance period was 48.1 per cent, compared to
the stretch target of 39.3 per cent. RoRE performance
160
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Corporate governance report
Annual statement from the remuneration committee chair
has been strong, with the company’s average RoRE
exceeding the average allowed return set by Ofwat by
around 1.6 per cent. The customer service excellence
measure is based on Ofwat’s C-MeX (contacts)
measure and written complaints. The final outcome
of this element will not be known until the volume of
written complaints received by other companies are
available later in 2022 and the overall vesting level can
be confirmed, but we estimate that we will be ranked
2nd out of the water and wastewater companies,
which is one position better than the stretch target of
3rd position. The award for Steve Mogford will vest
only after the completion of a holding period taking
the overall vesting period to five years from the grant
date, during which the shares will remain subject to
withholding provisions. Phil Aspin was granted his
award prior to his appointment as an executive director
and so in line with the policy his award will be treated
according to its original terms, with no holding period
applying. In line with the shareholding guidelines, Phil
will be required to hold the shares upon vesting (net of
tax) and they will vest into a nominee account.
Remuneration committee oversight
ln addition to reviewing performance against the
specific targets set under the annual bonus and LTP,
the committee carefully consider the outcomes to be
delivered in the context of the wider performance of the
business and the experience of our stakeholders. Taking
account of performance in areas such as those outlined
on pages 52 to 75, the committee was satisfied that the
overall results reflected the exceptional efforts and high
levels of performance of the company and therefore no
discretion was used to adjust the formulaic outcome
under the bonus or provisional LTP vesting. As stated
above, Steve Mogford’s request to waive part of his
bonus was actioned.
Chief executive officer succession
In April 2022, the company announced that Steve
Mogford had expressed his wish to retire in early
2023, and that following a comprehensive internal
and external evaluation process, Louise Beardmore
would be appointed as his successor. As a committee,
we are delighted at Louise’s appointment, and have
particularly valued her excellent contributions to the
work of the committee in her role as customer services
and people director.
To enable a smooth transition Louise was appointed
to the board on 1 May 2022 as CEO designate, leading
the creation of the company’s PR24 business plan
Our policy review focused on
how we might strengthen the
extent to which environmental,
social and governance matters
are reflected in our executive
remuneration arrangements.”
covering the next five-year regulatory period. The
committee determined that on her appointment to
the board her salary should be set at £425,000 and
her other remuneration arrangements would be set in
line with the current remuneration policy, including
pension arrangements in line with those available to
the wider workforce. However, in anticipation that the
proposed policy will be approved at the forthcoming
AGM, Louise agreed that her notice period would be 12
months for each party (rather than the differing periods
stipulated under the existing policy).
Later in the year, the committee will consider the salary
and remuneration arrangements that should apply on
Louise’s appointment as CEO in 2023. Full details about
her remuneration during 2022/23 and her package as
CEO will be provided in next year’s report.
Agenda for 2022/23
We are confident that the annual bonus measures
used in 2021/22 will continue to support the business
strategy in 2022/23, but that it is also the right time
to supplement the bonus scorecard with some new
performance measures. We have introduced two new
measures for the year, one focusing on improving
the appearance of drinking water, and the other on
delivering our Better Rivers commitments. We have
also revised our existing TCQi measure to place
renewed emphasis on the efficiency of our capital
programme delivery, and also to take account of the
carbon impact of enhancement projects. Further
information about these measures and the overall
bonus scorecard is shown on page 181.
The 2022 LTP awards will operate similarly to those
granted in 2021, with four new carbon measures being
included in the customer basket. We have accelerated
the target-setting process compared to previous years
so that the measures and targets that are expected
to apply to the awards can be included in this report,
with full details being shown on pages 181 to 182. As
referred to earlier in this letter, we are seeking approval
of the new Long Term Plan 2022 at the AGM, and so
we will wait until late July to grant the LTP awards in
order that they might be granted under this new plan
if it is approved. If it is not approved, the awards will
again be granted under the existing LTP 2013.
In March, the company announced that after nearly
nine years on the board Mark Clare will not seek
reappointment at the 2022 AGM. I would like to thank
Mark for all of his contributions to the committee
over the years. Having reviewed the membership
of board committees we have confirmed that I will
succeed Mark in the role of senior independent non-
executive director, and so I will step down as chair of
the remuneration committee, although I will remain a
member of the committee. I am delighted that Kath
Cates, who has been a member of the committee since
September 2020, will take over as committee chair
when these changes take effect from 22 July 2022.
We hope we will continue to receive your support
again this year for the remuneration resolutions at the
forthcoming AGM.
Alison Goligher
Chair of the remuneration committee
162
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Corporate governance report
Annual statement from the remuneration committee chair
Corporate governance report
Review of the directors’ remuneration policy
has been strong, with the company’s average RoRE
covering the next five-year regulatory period. The
exceeding the average allowed return set by Ofwat by
committee determined that on her appointment to
around 1.6 per cent. The customer service excellence
the board her salary should be set at £425,000 and
measure is based on Ofwat’s C-MeX (contacts)
her other remuneration arrangements would be set in
measure and written complaints. The final outcome
line with the current remuneration policy, including
of this element will not be known until the volume of
pension arrangements in line with those available to
written complaints received by other companies are
the wider workforce. However, in anticipation that the
available later in 2022 and the overall vesting level can
proposed policy will be approved at the forthcoming
be confirmed, but we estimate that we will be ranked
AGM, Louise agreed that her notice period would be 12
2nd out of the water and wastewater companies,
months for each party (rather than the differing periods
which is one position better than the stretch target of
stipulated under the existing policy).
3rd position. The award for Steve Mogford will vest
only after the completion of a holding period taking
the overall vesting period to five years from the grant
date, during which the shares will remain subject to
withholding provisions. Phil Aspin was granted his
award prior to his appointment as an executive director
and so in line with the policy his award will be treated
according to its original terms, with no holding period
applying. In line with the shareholding guidelines, Phil
will be required to hold the shares upon vesting (net of
tax) and they will vest into a nominee account.
Remuneration committee oversight
ln addition to reviewing performance against the
specific targets set under the annual bonus and LTP,
the committee carefully consider the outcomes to be
delivered in the context of the wider performance of the
business and the experience of our stakeholders. Taking
account of performance in areas such as those outlined
on pages 52 to 75, the committee was satisfied that the
overall results reflected the exceptional efforts and high
levels of performance of the company and therefore no
discretion was used to adjust the formulaic outcome
under the bonus or provisional LTP vesting. As stated
above, Steve Mogford’s request to waive part of his
bonus was actioned.
Chief executive officer succession
In April 2022, the company announced that Steve
Mogford had expressed his wish to retire in early
2023, and that following a comprehensive internal
and external evaluation process, Louise Beardmore
would be appointed as his successor. As a committee,
we are delighted at Louise’s appointment, and have
particularly valued her excellent contributions to the
work of the committee in her role as customer services
and people director.
To enable a smooth transition Louise was appointed
to the board on 1 May 2022 as CEO designate, leading
the creation of the company’s PR24 business plan
Later in the year, the committee will consider the salary
and remuneration arrangements that should apply on
Louise’s appointment as CEO in 2023. Full details about
her remuneration during 2022/23 and her package as
CEO will be provided in next year’s report.
Agenda for 2022/23
We are confident that the annual bonus measures
used in 2021/22 will continue to support the business
strategy in 2022/23, but that it is also the right time
to supplement the bonus scorecard with some new
performance measures. We have introduced two new
measures for the year, one focusing on improving
the appearance of drinking water, and the other on
delivering our Better Rivers commitments. We have
also revised our existing TCQi measure to place
renewed emphasis on the efficiency of our capital
programme delivery, and also to take account of the
carbon impact of enhancement projects. Further
information about these measures and the overall
bonus scorecard is shown on page 181.
The 2022 LTP awards will operate similarly to those
granted in 2021, with four new carbon measures being
included in the customer basket. We have accelerated
the target-setting process compared to previous years
so that the measures and targets that are expected
to apply to the awards can be included in this report,
with full details being shown on pages 181 to 182. As
referred to earlier in this letter, we are seeking approval
of the new Long Term Plan 2022 at the AGM, and so
we will wait until late July to grant the LTP awards in
order that they might be granted under this new plan
if it is approved. If it is not approved, the awards will
again be granted under the existing LTP 2013.
In March, the company announced that after nearly
nine years on the board Mark Clare will not seek
reappointment at the 2022 AGM. I would like to thank
Mark for all of his contributions to the committee
over the years. Having reviewed the membership
of board committees we have confirmed that I will
succeed Mark in the role of senior independent non-
executive director, and so I will step down as chair of
the remuneration committee, although I will remain a
member of the committee. I am delighted that Kath
Cates, who has been a member of the committee since
September 2020, will take over as committee chair
when these changes take effect from 22 July 2022.
We hope we will continue to receive your support
again this year for the remuneration resolutions at the
forthcoming AGM.
Alison Goligher
Chair of the remuneration committee
Our policy review focused on
how we might strengthen the
extent to which environmental,
social and governance matters
are reflected in our executive
remuneration arrangements.”
Around seven million people in the North
West of England rely on United Utilities
to provide reliable and affordable year-
round water supplies to their homes,
businesses and recreational spaces.
Over the five-year regulatory period from
2020 to 2025, our business plan commits
us to delivering affordable bills and
excellent service to customers, alongside a
programme of careful investment to sustain
the region’s water quality, reduce leakage
and ensure reliability of water supply.
At the same time, the company is laying
foundations for longer-term resilience and
the provision of water in an environmentally
sensitive and sustainable way.
When setting the remuneration
arrangements for executive directors,
the committee has always adopted a
prudent and responsible approach,
which aligns to company strategy. We
received significant shareholder support
in 2019 for our current remuneration
policy, having carefully considered how
we should align our pay arrangements
(and the incentive elements in particular)
with the agreed business plan for the
current five-year regulatory period. At
the time, we undertook a comprehensive
consultation process to make sure that
the policy introduced would reflect the
expectations of investors, the regulator
and other stakeholders.
January and March 2022 involving major
shareholders and other stakeholders,
including our employee voice panel, we
are satisfied that, overall, our current
approach remains appropriate and that
there is no need to make material changes
to the current policy. The committee has
sought to make sure that our executive
pay arrangements remain well-aligned
to providing high standards of customer
service, and protecting and enhancing
the environment, and are in line with best
practice corporate governance standards
and the expectations of shareholders.
We are required to submit a new
remuneration policy at our 2022 AGM.
Being less than two years into the
regulatory period, and having taken
account of views that were sought
during a consultation exercise between
A summary of the key elements of the
policy review and its outcome are shown
in the table below, with full details of the
proposed policy shown on pages 169 to 176.
If approved by shareholders, the new policy
will take effect from the July 2022 AGM.
Element of policy
Focus/rationale for review
Position following consultation
Updating our mechanism
for delivery of long-term
incentives
Inclusion of carbon measures
in our long-term incentives
Withholding and recovery
provisions
Notice periods
Benefits
Our current long-term incentive arrangement
is the ‘Long Term Plan 2013’ (the LTP). It was
adopted by shareholders on 26 July 2013 so
in line with shareholder expectations and in
recognition of the Investment Association’s
Principles of Remuneration, the LTP will expire
on 25 July 2023.
The committee is mindful that corporate
governance best practice and the expectations of
shareholders have evolved significantly since 2013.
As such, we propose to replace the current LTP
with a new plan whose rules better reflect those
contemporary practices and expectations, and
provide shareholders and participants with further
clarity over key matters, including withholding and
recovery, and change of control provisions.
We intend to seek shareholder approval of the
new Long Term Plan 2022 at our 2022 AGM,
and our notice of AGM will provide further
details. If approved, the 2022 LTP awards will
be issued under this new plan.
The committee recognises that providing
dividend sustainability to shareholders
remains important, and so when granting
awards under the new plan we will retain our
practice of making delivery of our dividend
policy an overall underpin, alongside the
existing underpin of the committee being
satisfied that the company’s performance on
these measures is consistent with underlying
business performance.
The committee proposes to keep the overall
structure of the LTP the same, but to evolve the
customer basket to include new measures that
are based on our relevant, publicly disclosed and
measurable climate change related targets.
Shareholders and other stakeholders, including
employees, were supportive of the inclusion of
carbon measures in the LTP and so they will be
included in the 2022 LTP awards as part of the
customer basket. See page 182 for details.
For the 2022 LTP awards we propose to use our
carbon pledges to define delivery targets for the
end of the three-year performance period, and
this approach could be extended and expanded
in future years with the ultimate aspiration being
an LTP measure that is directly aligned to our
Science Based Targets initiative (SBTs) for 2030.
Our current incentive plan rules already include
provisions that enable the committee to
withhold or recover payments from participants
in certain circumstances. The withholding
provisions can be applied in a wider range of
circumstances than the recovery provisions.
We have considered the Financial Reporting
Council’s Guidance on Board Effectiveness and
taken note of the Business, Energy and Industrial
Strategy’s (BEIS) consultation on ‘Restoring trust
in audit and corporate governance’ and propose
to extend the circumstances in which our
provisions might be applied.
Our intention is to dedicate 10 per cent of
the total LTP to these new carbon measures.
Stretching targets will be set, and the
inclusion of these measures will mean that the
whole of the customer basket component of
the LTP is focused on areas of performance
that are in the interests of customers, and
have an environmental or social impact.
Going forward, the circumstances in which
the withholding and recovery provisions can
be applied will be aligned and will include:
material misstatement of audited financial
results; an error in the calculation; gross
misconduct; serious reputational damage;
serious failure of risk management; corporate
failure; or other circumstances that the
committee may determine.
The extended provisions will first apply to
Deferred Bonus Plan awards granted in 2022
and annual bonuses paid in 2023.
If the new Long Term Plan 2022 is approved by
shareholders at the 2022 AGM the extended
provisions will first apply to Long Term Plan
awards granted in 2022.
Executive directors’ service contracts are
subject to up to one year’s notice period when
terminated by the company and at least six
months’ notice when terminated by the director.
For executive directors appointed on or after
1 May 2022 the notice period will be one year
whether terminated by the company or the
director.
The current policy provides for executive
directors to receive a car or car allowance as
part of their benefits package.
The committee supports the use of
sustainable methods of travel, such as public
transport or the company’s new all-employee
electric car scheme, so in the new policy this
benefit will be replaced by a green travel
allowance.
There is no change to the underlying value
of this benefit.
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Corporate governance report
Code principle – remuneration
Remuneration
Principle P:
Remuneration policies and
practices should be designed to
support strategy and promote
long-term sustainable success.
Executive remuneration should
be aligned to company purpose
and values, and be clearly linked
to the successful delivery of the
company’s long-term strategy.
Principle Q:
A formal and transparent
procedure for developing policy
on executive remuneration and
determining director and senior
management remuneration
should be established. No
director should be involved
in deciding their own
remuneration outcome.
Principle R:
Directors should exercise
independent judgement and
discretion when authorising
remuneration outcomes, taking
account of company and
individual performance, and
wider circumstances.
The following table summarises how our
shareholder-approved remuneration policy fulfils
the factors set out in provision 40 of the 2018 UK
Corporate Governance Code.
Clarity
5
We describe how our
remuneration approach aligns
with our business strategy on
page 166.
This is detailed in the
committee’s terms of reference
which are available on the
company website. The
committee consults with
shareholders when changes to
policy are being considered.
The shareholder-approved
directors’ remuneration policy
outlines the ways in which
the committee may exercise
discretion.
The committee is committed to providing
transparent disclosures to shareholders and
the workforce about executive remuneration
arrangements and, to this end, the directors’
remuneration report sets out the remuneration
arrangements for the executive directors in a
clear and transparent way. At least annually the
committee chair engages with the employee voice
panel about our executive remuneration approach.
Our AGM allows shareholders to ask any questions
on the remuneration arrangements, and we
welcome any queries on remuneration practices
from shareholders throughout the year.
Predictability
Payouts under the annual bonus and LTP schemes are
dependent on the performance of the company over
the short and long-term, and a significant proportion
of executive director remuneration is performance-
linked. These schemes have strict maximum
opportunities, with the potential value at threshold,
target and maximum performance scenarios provided
in the directors’ remuneration report.
Proportionality
Payments from variable incentive schemes require
strong performance against challenging conditions
over the short and longer term. Performance conditions
have been selected to support group strategy and
consist of both financial and non-financial metrics.
The committee retains discretion to override formulaic
outcomes in both schemes to ensure that they are
appropriate and reflective of overall performance.
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Corporate governance report
Code principle – remuneration
5
We describe how our
remuneration approach aligns
with our business strategy on
page 166.
Remuneration
Principle P:
Remuneration policies and
practices should be designed to
support strategy and promote
long-term sustainable success.
Executive remuneration should
be aligned to company purpose
and values, and be clearly linked
to the successful delivery of the
company’s long-term strategy.
Principle Q:
A formal and transparent
procedure for developing policy
on executive remuneration and
determining director and senior
management remuneration
should be established. No
director should be involved
in deciding their own
remuneration outcome.
This is detailed in the
committee’s terms of reference
which are available on the
company website. The
committee consults with
shareholders when changes to
policy are being considered.
Principle R:
Directors should exercise
independent judgement and
discretion when authorising
The shareholder-approved
directors’ remuneration policy
outlines the ways in which
the committee may exercise
remuneration outcomes, taking
discretion.
account of company and
individual performance, and
wider circumstances.
The following table summarises how our
shareholder-approved remuneration policy fulfils
the factors set out in provision 40 of the 2018 UK
Corporate Governance Code.
The committee is committed to providing
transparent disclosures to shareholders and
the workforce about executive remuneration
arrangements and, to this end, the directors’
remuneration report sets out the remuneration
arrangements for the executive directors in a
clear and transparent way. At least annually the
committee chair engages with the employee voice
panel about our executive remuneration approach.
Our AGM allows shareholders to ask any questions
on the remuneration arrangements, and we
welcome any queries on remuneration practices
from shareholders throughout the year.
Predictability
Payouts under the annual bonus and LTP schemes are
dependent on the performance of the company over
the short and long-term, and a significant proportion
of executive director remuneration is performance-
linked. These schemes have strict maximum
opportunities, with the potential value at threshold,
target and maximum performance scenarios provided
in the directors’ remuneration report.
Payments from variable incentive schemes require
strong performance against challenging conditions
over the short and longer term. Performance conditions
have been selected to support group strategy and
consist of both financial and non-financial metrics.
The committee retains discretion to override formulaic
outcomes in both schemes to ensure that they are
appropriate and reflective of overall performance.
Clarity
Simplicity
Remuneration approach
There are three key principles of our approach to executive remuneration.
Our remuneration arrangements for executive
directors, as well as those throughout the group,
are simple in nature and understood by all
participants, having been operated in a similar
manner for a number of years. Executive directors
receive fixed pay (salary, benefits, pension), and
participate in a single short-term incentive (the
annual bonus) and a single long-term incentive (the
Long Term Plan).
Risk
The committee has designed incentive
arrangements that do not encourage inappropriate
risk-taking. The committee retains overarching
discretion in both the annual bonus and LTP
schemes to adjust payouts where the formulaic
outcomes are not considered reflective of
underlying business performance and individual
contributions. Robust withholding and recovery
provisions apply to variable incentives.
Proportionality
Alignment to culture
Performance measures used in our variable
incentive schemes are selected to be consistent
with the company’s purpose, values and strategy.
The use of annual bonus deferral, LTP holding
periods and our shareholding requirements provide
a clear link to the ongoing performance of the
group and ensure alignment with shareholders,
which continues after employment.
1
2
3
Align
to our purpose, vision
and strategy
Incentivise
great customer service
Create long-term
value
for all of our stakeholders
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Corporate governance report
At a glance summary: executive director’s remuneration
Aligning our remuneration approach to business strategy
Our remuneration approach is aligned to our purpose, vision and strategy, thereby incentivising great customer service and the
creation of long-term value for all of our stakeholders.
The following table provides a summary of how our incentive framework in 2021/22 aligned with our business strategy and the results
that it delivers for each of our stakeholder groups, including customers and the environment. Many of the performance measures
are key performance indicators (KPIs) for the regulatory period 2020–25 (see pages 50 to 51). Details about how our approach to
executive remuneration is aligned with the approach to remuneration across the wider workforce are shown on pages 183 to 184.
Element
Why it’s important to our remuneration approach
Alignment
to purpose
reflecting
views of
different
stakeholders
Link to
strategic
themes
Annual bonus
Underlying operating
profit
Customer service in year
• C-MeX ranking
• Written complaints
Maintaining and
enhancing services for
customers
• Outcome delivery
incentive (ODI)
composite
• Time, cost and
quality of the capital
programme (TCQi)
Compulsory deferral of
bonus
Long Term Plan (LTP)
Return on Regulated
Equity (RoRE)
Customer basket
of measures
Additional holding period
(at least two years)
Shareholding guidelines
Underlying operating profit is a key measure of shareholder value.
By using Ofwat’s measure of customer experience alongside a measure which
focuses on reducing the number of complaints made by customers, executive
directors are incentivised to deliver the best service to customers.
Ofwat can apply financial incentives or penalties depending on our customer
service performance.
The ODI composite measure is calculated by summing the outperformance
payments earned and financial penalties incurred by the company based on its
delivery of the performance targets embedded in the AMP7 final determination.
The performance targets and the financial incentives associated with them are
determined by Ofwat in the expectation that achieving them means that stretching
outcomes have been delivered for customers and the environment. Bonus awards
to executives are only made where the value of these payments exceeds a
predetermined level which the committee sets relative to the AMP7 determination.
Non-delivery of our performance commitments can result in financial penalties
being applied and therefore reduces the likelihood of this target being achieved.
The TCQi measure incentivises the executive directors to keep tight control of
our capital programmes to ensure we can provide a reliable and environmentally
conscious service to our customers at the lowest sustainable cost.
Requiring executive directors to defer part of their bonus into shares provides
reassurance that the company is being run in the longer-term interests of
shareholders and customers, including beyond the annual bonus period. It also
reassures shareholders and customers that some/all of the deferred bonus could
ultimately be withheld if during the deferral period this is deemed necessary.
RoRE is a key regulatory measure of performance against the final
determination. Outperformance will result in an increase to RoRE which should
translate into higher returns for shareholders through share price performance.
Outperformance also benefits customers through strong delivery against
stretching performance commitments, efficiencies in the capital investment
programme and lower long-term financing costs.
The customer basket is made up of specific performance commitments
embedded in the AMP7 final determination, focusing on areas which customers
have identified via our research as being most important to them. Strong
delivery of the commitments benefits our customers, communities and the
environment, and can result in outperformance payments from Ofwat which is
positive for shareholders.
Requiring the executive directors to wait a further period after the performance
outcome of their award is known ensures continued longer-term alignment with
shareholder interests and delivery for stakeholders, including customers and
the environment. It also reassures shareholders and customers that some/all of
the deferred bonus could ultimately be withheld if during the holding period
this is deemed necessary.
It is important that each executive director builds and maintains a significant
shareholding in shares of the company to provide alignment with shareholder
interests (during and after employment) and as a demonstration that the
company is being run for the long-term benefit of all its stakeholders, including
customers and the environment.
Key:
The best service to customers
At the lowest sustainable cost
In a responsible manner
Communities
Customers
Customers
Environment
Communities
Customers
Environment
Shareholders
Media
Investors
Suppliers
Shareholders
Customers
Communities
Customers
Shareholders
Customers
Communities
Customers
Shareholders
Environment
Media
Shareholders
Customers
Communities
Customers
Shareholders
Environment
Customers
Communities
Customers
Shareholders
Environment
Shareholders
Shareholders
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Corporate governance report
At a glance summary: executive director’s remuneration
Aligning our remuneration approach to business strategy
Executive directors’ remuneration policy
Our remuneration approach is aligned to our purpose, vision and strategy, thereby incentivising great customer service and the
creation of long-term value for all of our stakeholders.
The following table provides a summary of how our incentive framework in 2021/22 aligned with our business strategy and the results
that it delivers for each of our stakeholder groups, including customers and the environment. Many of the performance measures
are key performance indicators (KPIs) for the regulatory period 2020–25 (see pages 50 to 51). Details about how our approach to
executive remuneration is aligned with the approach to remuneration across the wider workforce are shown on pages 183 to 184.
Elements of executive directors’ pay
A significant proportion of executive directors’ pay is performance-linked, long term and remains ‘at risk’ (i.e. subject to withholding
and recovery provisions for a period over which the committee can withhold vesting or recover sums paid):
Fixed vs performance-linked (%)(1)
Short-term vs long-term (%)(1)
Alignment
to purpose
reflecting
views of
different
stakeholders
Link to
strategic
themes
Element
Why it’s important to our remuneration approach
Underlying operating
Underlying operating profit is a key measure of shareholder value.
Annual bonus
profit
Customer service in year
• C-MeX ranking
• Written complaints
Maintaining and
enhancing services for
customers
• Outcome delivery
incentive (ODI)
composite
• Time, cost and
quality of the capital
programme (TCQi)
Compulsory deferral of
bonus
Long Term Plan (LTP)
Equity (RoRE)
Customer basket
of measures
Additional holding period
(at least two years)
Shareholding guidelines
By using Ofwat’s measure of customer experience alongside a measure which
focuses on reducing the number of complaints made by customers, executive
directors are incentivised to deliver the best service to customers.
Ofwat can apply financial incentives or penalties depending on our customer
service performance.
The ODI composite measure is calculated by summing the outperformance
payments earned and financial penalties incurred by the company based on its
delivery of the performance targets embedded in the AMP7 final determination.
The performance targets and the financial incentives associated with them are
determined by Ofwat in the expectation that achieving them means that stretching
outcomes have been delivered for customers and the environment. Bonus awards
to executives are only made where the value of these payments exceeds a
predetermined level which the committee sets relative to the AMP7 determination.
Non-delivery of our performance commitments can result in financial penalties
being applied and therefore reduces the likelihood of this target being achieved.
The TCQi measure incentivises the executive directors to keep tight control of
our capital programmes to ensure we can provide a reliable and environmentally
conscious service to our customers at the lowest sustainable cost.
Requiring executive directors to defer part of their bonus into shares provides
reassurance that the company is being run in the longer-term interests of
shareholders and customers, including beyond the annual bonus period. It also
reassures shareholders and customers that some/all of the deferred bonus could
ultimately be withheld if during the deferral period this is deemed necessary.
determination. Outperformance will result in an increase to RoRE which should
translate into higher returns for shareholders through share price performance.
Outperformance also benefits customers through strong delivery against
stretching performance commitments, efficiencies in the capital investment
programme and lower long-term financing costs.
The customer basket is made up of specific performance commitments
embedded in the AMP7 final determination, focusing on areas which customers
have identified via our research as being most important to them. Strong
delivery of the commitments benefits our customers, communities and the
environment, and can result in outperformance payments from Ofwat which is
positive for shareholders.
Requiring the executive directors to wait a further period after the performance
outcome of their award is known ensures continued longer-term alignment with
shareholder interests and delivery for stakeholders, including customers and
the environment. It also reassures shareholders and customers that some/all of
the deferred bonus could ultimately be withheld if during the holding period
this is deemed necessary.
It is important that each executive director builds and maintains a significant
shareholding in shares of the company to provide alignment with shareholder
interests (during and after employment) and as a demonstration that the
company is being run for the long-term benefit of all its stakeholders, including
customers and the environment.
Return on Regulated
RoRE is a key regulatory measure of performance against the final
Key:
The best service to customers
At the lowest sustainable cost
In a responsible manner
Communities
Customers
Customers
Environment
Communities
Customers
Environment
Shareholders
Media
Investors
Suppliers
Customers
Communities
Customers
Communities
Shareholders
Environment
Customers
Communities
Shareholders
Environment
Customers
Communities
Shareholders
Environment
Customers
Customers
Customers
Customers
Shareholders
Shareholders
Media
Shareholders
Shareholders
Shareholders
Fixed
Base salary
31%
27%
Pension and
other benefits
4%
Performance-linked
69%
Annual bonus – cash
17%
Annual bonus – shares
17%
Long Term Plan (LTP)
35%
Short-term
Base salary
48%
27%
Pension and
other benefits
Annual bonus – cash
4%
17%
Long-term
Annual bonus – shares
Long Term Plan (LTP)
52%
17%
35%
(1) Based on maximum payout scenario for executive directors in line with the current remuneration policy, assuming the normal maximum award level of
130 per cent of salary for the Long Term Plan (LTP).
Pay at risk
Key element
Annual bonus –
cash
Time frame
Performance
period
Period subject to
recovery provisions
Annual bonus –
shares
Performance
period
Period subject to withholding
and recovery provisions
Long Term Plan
(LTP)
Performance period
Period subject to withholding
and recovery provisions
Year -1
Award date
Year 1
Year 2
Year 3
Year 4
Year 5
Further details on what triggers the withholding and recovery provisions can be found on page 171.
Implementation of directors’ remuneration policy in 2021/22
The table below summarises the implementation of the directors’ remuneration policy for executive directors in 2021/22. For further
details see the annual report on remuneration on pages 177 to 190.
Key element
Base salary
Implementation of policy in 2021/22
• Salary increase of 2.0 per cent from 1 September 2021 in line with the headline increase for the
wider workforce.
Benefits and pension
• Market competitive benefits package.
• Steve Mogford has a cash pension allowance of 22 per cent of base salary. His pension
arrangements will be aligned to those of the wider workforce with effect from 1 January 2023.
See page 177 for further details. Phil Aspin has a cash pension allowance of 12 per cent of base
salary in line with the arrangement in place for the wider workforce.
Annual bonus
• Maximum opportunity of 130 per cent of base salary.
• 2021/22 annual bonus scorecard outcome of 86.0 per cent.
• 50 per cent of 2021/22 annual bonus deferred in shares for three years.
• Withholding and recovery provisions apply.
Long Term Plan
• Award of 130 per cent of base salary.
• Estimated long-term incentive vesting of 100 per cent for the performance period 1 April 2019 to
31 March 2022. These awards will vest after an additional holding period which ends no earlier than
five years from the date of grant.
• Withholding and recovery provisions apply.
Shareholding guidelines
• Personal shareholding for Steve Mogford remains above the 200 per cent of salary minimum
guideline. Phil Aspin is building his shareholding and is expected to reach the minimum guideline
within five years of his appointment to the board. Post-employment shareholding requirements
apply. See page 186 for further details.
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Corporate governance report
At a glance summary: executive director’s remuneration
Single total figure of remuneration for executive directors
for 2021/22
Fixed pay comprises base salary, benefits and pension. Further information on the single figure
of remuneration can be seen on page 177.
£’000
£0
£500
£1,000
£1,500
£2,000
£2,500
£3,000
£3,500
Steve Mogford CEO
Total: £3,178
£980
£727
£1,471
£475
£452
£113
Phil Aspin CFO
Total: £1,040
Fixed pay
Annual bonus
Long-term incentives
Annual bonus and long term plan (LTP) outcomes
The charts below show the results of the performance against targets for the annual bonus and
LTP. Further information about the annual bonus is shown on page 178 and about the LTP on
page 179.
2021/22 Annual bonus outcome
Estimated 2019 Long Term Plan (LTP)
outcome
Aligning pay with
performance. See pages
178 and 179 for details.
Annual bonus – year ended
31 March 2022.
Underlying operating profit(1)
£768.2m
C-MeX ranking versus the other
water companies
7th out of 17
Written complaints (per 10,000
customers)
17.65
Outcome delivery incentive (ODI)
composite
£23.1m
Time, Cost and Quality index
(TCQi)
95.6%
33.3%
33.3%
33.3%
33.3%
Estimated
Estimated
total: 100%
total: 100%
of award
of award
vests
vests
Long term plan – three years
ended 31 March 2022
Relative total shareholder return(2)
100%
100%
90%
90%
80%
80%
25.0%
25.0%
70%
70%
10.0%
10.0%
60%
60%
10.0%
10.0%
50%
50%
40%
40%
35.0%
35.0%
Actual total:
86.0% of maximum
Actual total:
86.0% of maximum
25.0%
25.0%
3.8%
3.8%
10.0%
10.0%
27.2%
27.2%
30%
30%
20%
20%
10%
10%
0%
0%
20.0%
20.0%
20.0%
20.0%
Maximum
Maximum
Actual
Actual
Underlying operating profit
Underlying operating profit
C-MeX ranking
C-MeX ranking
Written complaints
Written complaints
Outcome delivery incentive (ODI) composite
Outcome delivery incentive (ODI) composite
TCQi
TCQi
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
33.3%
33.3%
33.3%
33.3%
33.3%
33.3%
33.3%
33.3%
Maximum
Maximum
Estimated
Estimated
Relative total shareholder return (TSR)
Relative total shareholder return (TSR)
Return on Regulated Equity (RoRE)
Return on Regulated Equity (RoRE)
Customer service excellence
Customer service excellence
48.1%
Return on regulated equity (RoRE)(3)
+1.64%
Customer service excellence(4)
2nd out of 11
Key:
At or above stretch target
Between threshold and stretch targets
Below threshold target
(1) For the purpose of annual bonus,
underlying operating profit
excludes infrastructure renewals
expenditure and property trading.
(2) Above stretch versus the
comparator group.
(3) Average RoRE compared to average
allowed RoRE over 2019/20, 2020/21
and 2021/22.
(4) The estimated ranking versus
the other WASCs in a combined
customer service measure
comprising C-MeX and written
complaints.
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Corporate governance report
At a glance summary: executive director’s remuneration
Single total figure of remuneration for executive directors
for 2021/22
Fixed pay comprises base salary, benefits and pension. Further information on the single figure
of remuneration can be seen on page 177.
£’000
£0
£500
£1,000
£1,500
£2,000
£2,500
£3,000
£3,500
Steve Mogford CEO
Total: £3,178
£980
£727
£1,471
£475
£452
£113
Phil Aspin CFO
Total: £1,040
Fixed pay
Annual bonus
Long-term incentives
Annual bonus and long term plan (LTP) outcomes
The charts below show the results of the performance against targets for the annual bonus and
LTP. Further information about the annual bonus is shown on page 178 and about the LTP on
page 179.
Time, Cost and Quality index
2021/22 Annual bonus outcome
Estimated 2019 Long Term Plan (LTP)
Actual total:
Actual total:
86.0% of maximum
86.0% of maximum
33.3%
33.3%
33.3%
33.3%
Estimated
Estimated
total: 100%
total: 100%
of award
of award
vests
vests
Long term plan – three years
ended 31 March 2022
Relative total shareholder return(2)
25.0%
25.0%
70%
70%
10.0%
10.0%
60%
60%
10.0%
10.0%
40%
40%
35.0%
35.0%
100%
100%
90%
90%
80%
80%
50%
50%
30%
30%
20%
20%
10%
10%
0%
0%
25.0%
25.0%
3.8%
3.8%
10.0%
10.0%
27.2%
27.2%
outcome
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
20.0%
20.0%
20.0%
20.0%
33.3%
33.3%
33.3%
33.3%
Maximum
Maximum
Actual
Actual
Maximum
Maximum
Estimated
Estimated
Underlying operating profit
Underlying operating profit
C-MeX ranking
C-MeX ranking
Written complaints
Written complaints
Outcome delivery incentive (ODI) composite
Outcome delivery incentive (ODI) composite
TCQi
TCQi
Relative total shareholder return (TSR)
Relative total shareholder return (TSR)
Return on Regulated Equity (RoRE)
Return on Regulated Equity (RoRE)
Customer service excellence
Customer service excellence
33.3%
33.3%
33.3%
33.3%
Aligning pay with
performance. See pages
178 and 179 for details.
Annual bonus – year ended
31 March 2022.
Underlying operating profit(1)
£768.2m
C-MeX ranking versus the other
water companies
7th out of 17
Written complaints (per 10,000
Outcome delivery incentive (ODI)
customers)
17.65
composite
£23.1m
(TCQi)
95.6%
48.1%
+1.64%
Return on regulated equity (RoRE)(3)
Customer service excellence(4)
2nd out of 11
Key:
At or above stretch target
Between threshold and stretch targets
Below threshold target
(1) For the purpose of annual bonus,
underlying operating profit
excludes infrastructure renewals
expenditure and property trading.
(2) Above stretch versus the
comparator group.
(3) Average RoRE compared to average
allowed RoRE over 2019/20, 2020/21
and 2021/22.
(4) The estimated ranking versus
the other WASCs in a combined
customer service measure
comprising C-MeX and written
complaints.
Directors’ remuneration policy
Directors’ remuneration policy
This part of the directors’ remuneration report sets out the remuneration policy for the company and has been prepared in accordance
with the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The policy in this
report will be put to a binding shareholder vote at the AGM on 22 July 2022 and will take formal effect from that date, subject to
shareholder approval. It is intended that the policy will apply for three years beginning on the date of approval.
Overview of remuneration policy
The company’s remuneration arrangements are designed to promote the long-term success of the company. The company does not
pay more than is necessary for this purpose. The committee recognises that the company operates in the North West of England in a
regulated environment and therefore needs to ensure that the structure of executive remuneration reflects both the practices of the
markets in which its executives operate, and stakeholder expectations of how the company should be run.
The committee monitors the remuneration arrangements to ensure that there is an appropriate balance between risk and reward and
that the long-term performance of the business is not compromised by the pursuit of short-term value. There is a strong direct link
between incentives and the company’s strategy, and if the strategy is delivered within an acceptable level of risk, senior executives
will be rewarded through the annual bonus and long-term incentives. If it is not delivered, then a significant part of their potential
remuneration will not be paid.
The committee also understands that listening to the views of the company’s key stakeholders plays a vital role in formulating and
implementing a successful remuneration policy over the long term. The committee thus actively seeks the views of shareholders and
other key stakeholders to inform the development of the remuneration policy, particularly where any changes to policy are envisaged.
Account is taken of employee views when consulting on the policy, typically via the employee voice panel. Additionally, the company
carries out annual employee engagement surveys and regular discussion takes place with union representatives on matters of pay and
remuneration for employees covered by collective bargaining or consultation arrangements, all of which can provide insight which is
of value to the committee. The general base salary increase and broader remuneration arrangements, including pension provision, for
the wider employee population are considered by the committee when determining remuneration policy for the executive directors.
As outlined on page 184 processes are in place for the committee to regularly review and consider any remuneration-related matters
that may arise from the activities undertaken by the board to take account of the ‘employee voice’.
Future policy for directors
Base salary
Purpose and link to strategy: To attract and retain executives of the experience and quality required to deliver the company’s
strategy.
Operation
Maximum opportunity
Normally reviewed annually, typically effective 1 September.
Significant increases in salary should only take place
infrequently, for example where there has been a material
increase in:
•
•
•
the size of the individual’s role;
the size of the company (through mergers and
acquisitions); or
the pay market for directly comparable companies (for
example, companies of a similar size and complexity).
On recruitment or promotion to executive director, the
committee will take into account previous remuneration, and
pay levels for comparable companies, when setting salary levels.
This may lead to salary being set at a lower or higher level than
for the previous incumbent.
Current salary levels are shown in the annual report on
remuneration.
Executive directors will normally receive a salary increase that
is generally no greater than the increase awarded to the general
workforce, unless one or more of the conditions outlined under
‘Operation’ is met.
Where the committee has set the salary of a new hire at a
discount to the market level initially, a series of planned increases
can be implemented over the following few years to bring the
salary to the appropriate market position, subject to individual
performance.
Performance measures
None
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Directors’ remuneration policy
Pension
Purpose and link to strategy: To provide a level of benefits that allow for personal retirement planning.
Operation
Maximum opportunity
Executive directors are offered the choice of:
• a company contribution into a defined contribution pension
The maximum opportunity is aligned to the approach available
to the wider workforce, currently:
scheme;
• up to 14 per cent of salary into a defined contribution
• a cash allowance in lieu of pension; or
• a combination of a company contribution into a defined
contribution pension scheme and a cash allowance.
scheme;
• cash allowance of broadly equivalent cost to the company
(up to 14 per cent of salary less employer National Insurance
contributions at the prevailing rate, i.e. up to 12 per cent of
base salary for 2022/23); or
• a combination of both such that the cost to the company is
broadly the same.
For executive directors appointed to role before 26 July 2019 a cash
allowance of 22 per cent of salary is payable until 31 December
2022. From 1 January 2023 arrangements for such executive
directors will be aligned to the approach available to the wider
workforce.
Performance measures
None
Benefits
Purpose and link to strategy: To provide market competitive benefits to help recruit and retain high-calibre executives.
Maximum opportunity
As it is not possible to calculate in advance the cost of all
benefits, a maximum is not predetermined.
Performance measures
None
Operation
Provision of benefits such as:
• health benefits;
• green travel allowance;
•
•
relocation assistance;
life assurance;
• group income protection;
• all employee share schemes (e.g. opportunity to join the
ShareBuy scheme);
•
travel; and
• communication costs.
Any reasonable business-related expenses can be reimbursed
(and any tax thereon met if determined to be a taxable benefit).
Executives will be eligible for any other benefits that are
introduced for the wider workforce on broadly similar terms and
additional benefits might be provided from time to time if the
committee decides payment of such benefits is appropriate and
in line with emerging market practice.
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Directors’ remuneration policy
Pension
Operation
Purpose and link to strategy: To provide a level of benefits that allow for personal retirement planning.
Maximum opportunity
Executive directors are offered the choice of:
The maximum opportunity is aligned to the approach available
• a company contribution into a defined contribution pension
to the wider workforce, currently:
scheme;
• up to 14 per cent of salary into a defined contribution
• a cash allowance in lieu of pension; or
• a combination of a company contribution into a defined
contribution pension scheme and a cash allowance.
scheme;
• cash allowance of broadly equivalent cost to the company
(up to 14 per cent of salary less employer National Insurance
contributions at the prevailing rate, i.e. up to 12 per cent of
base salary for 2022/23); or
• a combination of both such that the cost to the company is
broadly the same.
For executive directors appointed to role before 26 July 2019 a cash
allowance of 22 per cent of salary is payable until 31 December
2022. From 1 January 2023 arrangements for such executive
directors will be aligned to the approach available to the wider
workforce.
Performance measures
None
Maximum opportunity
As it is not possible to calculate in advance the cost of all
benefits, a maximum is not predetermined.
Performance measures
None
Benefits
Operation
Provision of benefits such as:
• health benefits;
• green travel allowance;
•
•
relocation assistance;
life assurance;
• group income protection;
ShareBuy scheme);
•
travel; and
• communication costs.
• all employee share schemes (e.g. opportunity to join the
Any reasonable business-related expenses can be reimbursed
(and any tax thereon met if determined to be a taxable benefit).
Executives will be eligible for any other benefits that are
introduced for the wider workforce on broadly similar terms and
additional benefits might be provided from time to time if the
committee decides payment of such benefits is appropriate and
in line with emerging market practice.
Annual bonus
Purpose and link to strategy: To incentivise performance against selected financial and operational KPIs that are directly linked to
business strategy. Deferral of part of bonus into shares aligns the interests of executive directors and shareholders.
Operation
Maximum opportunity
A maximum of 50 per cent of bonus awarded paid as cash.
A minimum of 50 per cent of bonus awarded deferred into
company shares under the Deferred Bonus Plan (DBP) for a
period of at least three years.
Dividends or dividend equivalents accrue during the DBP
deferral period and are paid upon vesting.
Not pensionable.
Bonuses and DBP shares are subject to withholding and recovery
provisions in cases of: material misstatement of audited financial
results; an error in the calculation; gross misconduct; serious
reputational damage; serious failure of risk management;
corporate failure; or other circumstances that the committee
may determine.
Maximum award level of up to 130 per cent of salary, for the
achievement of stretching performance objectives.
Performance measures
Payments predominantly based on financial and operational
performance, with the possibility of a minority to be based
on achievement of personal objectives if determined by the
committee.
Targets and weightings set by reference to the company’s
financial and operating plans.
Bonus outcomes are subject to the committee being satisfied that
the company’s performance on the measures is consistent with
underlying business performance and individual contributions.
The committee will exercise discretion on bonus outcomes if it
deems necessary.
100 per cent of maximum bonus potential for stretch
performance; up to 50 per cent of maximum for target
performance; and up to 25 per cent of maximum for threshold
performance. No payout for below-threshold performance.
Purpose and link to strategy: To provide market competitive benefits to help recruit and retain high-calibre executives.
Long Term Plan (LTP)
Purpose and link to strategy: To incentivise long-term value creation and alignment with the long-term interests of shareholders,
customers, and other stakeholders.
Operation
Maximum opportunity
Awards under the Long Term Plan are rights to receive company
shares, subject to certain performance conditions.
The normal maximum award level will be up to 130 per cent of
salary per annum.
Each award is measured over at least a three-year performance
period.
An additional holding period applies after the end of the three-
year performance period so that the total vesting and holding
period is at least five years.
Dividends or dividend equivalents accrue until awards are
released to participants, to the extent that such awards vest for
performance.
Shares under the LTP are subject to withholding and recovery
provisions in cases of: material misstatement of audited financial
results; an error in the calculation; gross misconduct; serious
reputational damage; serious failure of risk management;
corporate failure; or other circumstances that the committee may
determine.
The overall policy limit is 200 per cent of salary. It is not currently
anticipated that awards above the normal level will be made to
executive directors and any such increase on an ongoing basis
will be subject to prior consultation with major shareholders.
Performance measures
The two performance conditions are Return on Regulated Equity
and a basket of customer measures. The weighting of each of
these two components is 50 per cent.
Any vesting is subject to the delivery of the dividend policy
applicable to each year of the respective performance
period, and the committee being satisfied that the company’s
performance on these measures is consistent with underlying
business performance. The committee will exercise discretion on
LTP outcomes if it deems it necessary.
The committee has discretion to set alternative performance
measures and/or weightings for future awards but will consult
with major shareholders before making any material changes to
the currently applied measures and/or weightings.
100 per cent of awards vest for stretch performance; and up to
25 per cent of awards vest for threshold performance. No awards
vest for below-threshold performance.
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Directors’ remuneration policy
Shareholding requirements
Purpose and link to strategy: The committee believes that it is important for each executive director to build and maintain a
significant investment in shares of the company to provide alignment with shareholder interests during and after employment.
Maximum opportunity
None
Performance measures
None
Operation
Executive directors are expected to reach a shareholding
requirement of 200 per cent of salary, normally within five years
of appointment.
The following post-employment shareholding requirements
apply in the event of an executive director leaving the company:
• Executive directors must continue to hold the lower of
200 percent of salary in shares or their shareholding on
departure, for two years after ceasing employment with
the group.
• Executive directors appointed on or after 19 May 2020
must retain shares vesting (net of tax) from all share awards
(including in-flight awards) if not doing so would take their
shareholding below the requirement.
• As the only current executive director in role before 19 May
2020, Steve Mogford must retain shares vesting (net of tax)
from share awards relating to performance periods beginning
on or after 1 April 2020 if not doing so would take his
shareholding below the requirement.
Nominee accounts are used to enable the post-employment
shareholding requirements to be robustly enforced.
Non-executive directors’ fees and benefits
Purpose and link to strategy: To attract non-executive directors with a broad range of experience and skills to oversee the
development and implementation of our strategy.
Operation
Maximum opportunity
Current fee levels are shown in the annual report on
remuneration.
The value of benefits may vary from year to year according to the
cost to the company.
Performance measures
Non-executive directors are not eligible to participate in any
performance-related arrangements.
The remuneration policy for the non-executive directors (with
the exception of the Chair) is set by a separate committee
of the board. The policy for the Chair is determined by the
remuneration committee (of which the Chair is not a member).
Fees are reviewed annually taking into account the salary
increase for the general workforce and the levels of fees paid
by companies of a similar size and complexity. Any changes are
normally effective from 1 September. Additional fees are paid
in relation to extra responsibilities undertaken, such as chairing
certain board sub-committees, and to the senior independent
non-executive director.
In exceptional circumstances, if there is a temporary yet material
increase in the time commitments for non-executive directors,
the board may pay extra fees on a pro rata basis to recognise the
additional workload.
No eligibility for bonuses, long-term incentive plans, pension
schemes, healthcare arrangements or employee share schemes.
The company repays any reasonable expenses that a non-
executive director incurs in carrying out their duties as a
director, including travel, hospitality-related and other modest
benefits and any tax liabilities thereon, if appropriate.
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Shareholding requirements
Purpose and link to strategy: The committee believes that it is important for each executive director to build and maintain a
significant investment in shares of the company to provide alignment with shareholder interests during and after employment.
Operation
Maximum opportunity
Executive directors are expected to reach a shareholding
None
requirement of 200 per cent of salary, normally within five years
of appointment.
Performance measures
None
Notes to the policy table
Selection of performance measures and targets
Performance measures for the annual bonus are selected annually to align with the company’s key strategic goals for the year and
reflect financial, operational and personal objectives. ‘Target’ performance is typically set in line with the business plan for the year,
following rigorous debate and approval of the plan by the board. Threshold to stretch targets are then typically set based on a sliding
scale on the basis of relevant commercial factors.
Only modest rewards are available for delivering threshold performance levels, with rewards at stretch normally requiring
substantial outperformance of the business plan. Details of the measures used for the annual bonus are given in the annual report
on remuneration.
The current Long Term Plan (LTP) measures were selected by the committee following an extensive review and shareholder
consultation in 2018/19, to align with the company’s key strategic goals for the five-year regulatory period which began in 2020,
and be closely linked to the creation of long-term shareholder value as follows:
Measure
What is it?
Key reasons for selection
Return on Regulated Equity
(RoRE)
RoRE is the return that the company is
expected to earn relative to the equity portion
of its Regulatory Capital Value.
•
Increasingly used by investors and analysts
as it is a good proxy for value (i.e. premium
to Regulatory Capital Value) in the sector.
The return is comprehensive in that it is
composed of the company’s performance
on expenditure, investment and financing
decisions, and operational and customer
initiatives undertaken over the regulatory
period.
Outperformance (or underperformance)
in these areas will result in an increase (or
reduction) to RoRE which should translate
into higher (or lower) returns for shareholders
through share price performance.
Purpose and link to strategy: To attract non-executive directors with a broad range of experience and skills to oversee the
development and implementation of our strategy.
Operation
Maximum opportunity
The remuneration policy for the non-executive directors (with
Current fee levels are shown in the annual report on
the exception of the Chair) is set by a separate committee
remuneration.
The value of benefits may vary from year to year according to the
Customer basket
cost to the company.
Performance measures
Non-executive directors are not eligible to participate in any
performance-related arrangements.
A basket of customer measures comprising
operational, service, resilience and
carbon measures to capture the delivery
of performance for customers and the
environment. Customer priorities are reflected
in the measures selected.
• Directly linked to the allowable return set by
the regulator, and is comparable across the
sector.
• Captures financial, operational and customer
performance.
• Motivates management as they have strong
line of sight to the outcome, for which
stretching but achievable targets can be set.
• Outperformance will result in an increase
to RoRE which should translate into higher
returns for investors through share price
performance.
• Outperformance also benefits customers
through strong delivery against stretching
performance commitments, efficiencies in
the capital investment programme and lower
long-term financing costs.
•
Investors will be impacted by financial
rewards resulting from delivery on service
commitments, and through investments
made to ensure the long-term health and
sustainability of our assets.
• Customers will benefit from improvements
in key performance areas of importance to
them, and from long-term reliability in the
quality of their water supplies, and ways
of working that protect and improve the
environment.
The policy provides for committee discretion to alter the LTP measures and weightings to ensure they continue to facilitate an
appropriate measurement of performance over the life of the policy (taking into account any evolution of the strategic goals of the
company). LTP targets are set taking into account a number of factors, including reference to market practice, the company business
plan and analysts’ forecasts where relevant. The LTP will only vest in full if stretching business performance is achieved.
Annual bonus and long-term incentives – flexibility, discretion and judgement
The committee will operate the company’s incentive plans according to their respective rules and consistent with normal market
practice, the Listing Rules and HMRC rules where relevant, including flexibility in a number of regards.
These include making awards and setting performance criteria each year, dealing with leavers, and adjustments to awards and
performance criteria following acquisitions, disposals, changes in share capital and to take account of the impact of other merger
and acquisition activity.
The committee retains discretion within the policy to adjust the targets, set different measures and/or alter weightings for the annual
bonus and long-term incentive plans, pay dividend equivalents on vested shares up to the date those shares can first reasonably be
exercised and, in exceptional circumstances, under the rules of the annual bonus and long-term incentive plans to adjust performance
conditions to ensure that the awards fulfil their original purposes (for example, if an external benchmark or measure is no longer
available). All assessments of performance are ultimately subject to the committee’s judgement. Any discretion exercised, and the
rationale, will be disclosed in the annual remuneration report.
All historic awards that were granted under any current or previous bonus or share schemes operated by the company and remain
outstanding remain eligible to vest based on their original award terms.
The following post-employment shareholding requirements
apply in the event of an executive director leaving the company:
• Executive directors must continue to hold the lower of
200 percent of salary in shares or their shareholding on
departure, for two years after ceasing employment with
the group.
• Executive directors appointed on or after 19 May 2020
must retain shares vesting (net of tax) from all share awards
(including in-flight awards) if not doing so would take their
shareholding below the requirement.
• As the only current executive director in role before 19 May
2020, Steve Mogford must retain shares vesting (net of tax)
from share awards relating to performance periods beginning
on or after 1 April 2020 if not doing so would take his
shareholding below the requirement.
Nominee accounts are used to enable the post-employment
shareholding requirements to be robustly enforced.
Non-executive directors’ fees and benefits
of the board. The policy for the Chair is determined by the
remuneration committee (of which the Chair is not a member).
Fees are reviewed annually taking into account the salary
increase for the general workforce and the levels of fees paid
by companies of a similar size and complexity. Any changes are
normally effective from 1 September. Additional fees are paid
in relation to extra responsibilities undertaken, such as chairing
certain board sub-committees, and to the senior independent
non-executive director.
In exceptional circumstances, if there is a temporary yet material
increase in the time commitments for non-executive directors,
the board may pay extra fees on a pro rata basis to recognise the
additional workload.
No eligibility for bonuses, long-term incentive plans, pension
schemes, healthcare arrangements or employee share schemes.
The company repays any reasonable expenses that a non-
executive director incurs in carrying out their duties as a
director, including travel, hospitality-related and other modest
benefits and any tax liabilities thereon, if appropriate.
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Directors’ remuneration policy
Alignment of executive director remuneration with the wider workforce
The remuneration approach is consistently applied at levels below the executive directors. Key features include:
• market competitive levels of remuneration, incentives and benefits to attract and retain employees;
• employees at all levels participate in a bonus scheme with the same corporate performance measures as for executive
directors; and
• all employees have the opportunity to participate in the HMRC-approved share incentive plan, ShareBuy.
At senior levels, remuneration is increasingly long term, and ‘at risk’ with an increased emphasis on performance-related pay and
share-based remuneration.
Scenarios for total remuneration
The charts below show the payout under the remuneration policy for each executive director under four different scenarios.
Steve Mogford CEO
£’000s
1)
2)
3)
Fixed
Target
Maximum
4) Maximum plus
50% share
price growth
100%
968
48.5%
25.8% 25.8% 1,996
32.0%
34.0%
34.0%
3,023
27.4%
29.1%
29.1%
14.5% 3,537
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Louise Beardmore CEO designate
£’000s
1)
2)
3)
4)
Fixed
Target
Maximum
Maximum plus
50% share
price growth
100%
492
47.1%
26.4% 26.4% 1,045
30.8%
34.6%
34.6%
1,597
26.3%
29.5%
29.5%
14.7%
1,874
0
200
400
600
800 1,000 1,200 1,400 1,600 1,800
Phil Aspin CFO
£’000s
1)
2)
3)
4)
Fixed
Target
Maximum
Maximum plus
50% share
price growth
100%
478
47.4%
26.3% 26.3% 1,008
31.0%
34.5%
34.5%
1,538
26.5%
29.4%
29.4%
14.7% 1,804
0
200
400
600
800 1,000 1,200 1,400 1,600 1,800
External directorships
Notes on the scenario methodology:
•
•
•
•
‘Fixed’ is base salary effective 31 March 2022 plus
the applicable cash allowance in lieu of pension
and the value of benefits as shown in the single
total figure of remuneration table for 2021/22;
‘Target’ performance is the level of performance
required for the annual bonus and Long Term Plan
to pay out at 50 per cent of maximum;
‘Maximum’ performance would result in 100 per
cent vesting of the annual bonus and Long Term
Plan (i.e. 260 per cent of salary in total);
‘Maximum performance plus 50 per cent share
price growth’ shows maximum performance
plus the impact on the Long Term Plan of
a hypothetical 50 per cent increase in the
share price;
• Annual bonus includes amounts compulsorily
deferred into shares;
• Long Term Plan is measured at face value, i.e.
no assumption for dividends or changes in share
price (except in the fourth scenario); and
• Amounts relating to all-employee share schemes
have, for simplicity, been excluded from the
charts.
Fixed
Annual bonus
Long Term Plan
Additional Long Term Plan value if share price
grows by 50 per cent
The company recognises that its executive directors may be invited to become non-executive directors of other companies outside
the company and exposure to such non-executive duties can broaden experience and knowledge, which would be of benefit to the
company. Any external appointments are subject to board approval (which would not be given if the proposed appointment was with
a competing company, would lead to a material conflict of interest or could have a detrimental effect on a director’s performance).
Directors will be allowed to retain any fees received in respect of such appointments.
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Alignment of executive director remuneration with the wider workforce
Service contracts and letters of appointment
Copies of executive directors’ service contracts and non-executive directors’ letters of appointment are available for inspection at the
company’s registered office during normal hours of business and will be available at the company’s AGM. Copies of non-executive
directors’ letters of appointment can also be viewed on the company’s website.
The notice period in the service contracts for executive directors’ appointed on or after 1 May 2022 is one year. For executive directors
appointed prior to 1 May 2022 the notice period is up to one year when terminated by the company and at least six months’ notice
when terminated by the director. The policy on payments for loss of office is set out in the next section.
The Chair and other non-executive directors have letters of appointment rather than service contracts. Their appointments may be
terminated without compensation at any time. All non-executive directors are subject to re-election at each AGM.
Date of service contracts
Executive directors
Steve Mogford
Phil Aspin
Approach to recruitment remuneration
Date of service contract
5.1.11
24.7.20
The remuneration package for a new executive director would be set in accordance with the terms of the company’s approved
remuneration policy in force at the time of appointment.
Buy-out awards
The committee may offer additional cash and/or share-based elements (on a one-time basis or ongoing) when it considers these to be
in the best interests of the company (and therefore shareholders). Any such payments would be limited to a reasonable estimate of
value of remuneration lost when leaving the former employer and would reflect the delivery mechanism (i.e. cash and/or share-based),
time horizons and whether performance requirements are attached to that remuneration. Shareholders will be informed of any such
payments at the time of appointment.
Maximum level of variable pay
The maximum level of long-term incentives that may be awarded to a new executive director will be limited to the maximum Long
Term Plan limit of 200 per cent of salary per annum. Therefore, the maximum level of overall variable pay that may be offered will be
330 per cent of salary (i.e. 130 per cent annual bonus plus 200 per cent Long Term Plan). These limits are in addition to the value of
any buyout arrangements which are governed by the policy above.
In the case of an internal appointment, any variable pay element awarded in respect of the prior role would be allowed to pay
out according to its terms, adjusted as relevant to take into account the appointment. In addition, any other previously awarded
entitlements would continue, and be disclosed in the next annual report on remuneration.
Base salary and relocation expenses
Base salary levels for new executive directors will be set in accordance with the policy, taking into account the experience of the
individual recruited and the market rate for the role. The committee has the flexibility to set the salary of a new appointee at a
discount to the market level initially, with a series of planned increases implemented over the following years to bring the salary
to the appropriate market position, subject to individual performance in the role.
The committee may agree that the company will meet certain relocation and/or incidental expenses as appropriate.
Annual bonus performance conditions
Where a new executive director is appointed part way through a financial year, the committee may set different annual bonus
measures and targets for the new executive director from those used for other executive directors (for the initial part-year only).
Appointment of non-executive directors
For the appointment of a new Chair or non-executive director, the fee arrangement would be set in accordance with the approved
remuneration policy in force at that time. Non-executive directors’ fees are set by a separate committee of the board; the Chair’s
fees are set by the remuneration committee.
Corporate governance report
Directors’ remuneration policy
The remuneration approach is consistently applied at levels below the executive directors. Key features include:
• market competitive levels of remuneration, incentives and benefits to attract and retain employees;
• employees at all levels participate in a bonus scheme with the same corporate performance measures as for executive
directors; and
• all employees have the opportunity to participate in the HMRC-approved share incentive plan, ShareBuy.
At senior levels, remuneration is increasingly long term, and ‘at risk’ with an increased emphasis on performance-related pay and
share-based remuneration.
Scenarios for total remuneration
The charts below show the payout under the remuneration policy for each executive director under four different scenarios.
27.4%
29.1%
29.1%
14.5% 3,537
Plan (i.e. 260 per cent of salary in total);
100%
968
48.5%
25.8% 25.8% 1,996
32.0%
34.0%
34.0%
3,023
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Louise Beardmore CEO designate
£’000s
100%
492
47.1%
26.4% 26.4% 1,045
Steve Mogford CEO
£’000s
Fixed
Target
Maximum
4) Maximum plus
50% share
price growth
1)
2)
3)
1)
2)
3)
1)
2)
3)
Fixed
Target
Maximum
4)
Maximum plus
50% share
price growth
Phil Aspin CFO
£’000s
Fixed
Target
Maximum
4)
Maximum plus
50% share
price growth
26.3%
29.5%
29.5%
14.7%
1,874
0
200
400
600
800 1,000 1,200 1,400 1,600 1,800
100%
478
47.4%
26.3% 26.3% 1,008
31.0%
34.5%
34.5%
1,538
26.5%
29.4%
29.4%
14.7% 1,804
0
200
400
600
800 1,000 1,200 1,400 1,600 1,800
Notes on the scenario methodology:
•
‘Fixed’ is base salary effective 31 March 2022 plus
the applicable cash allowance in lieu of pension
and the value of benefits as shown in the single
total figure of remuneration table for 2021/22;
•
‘Target’ performance is the level of performance
required for the annual bonus and Long Term Plan
to pay out at 50 per cent of maximum;
•
‘Maximum’ performance would result in 100 per
cent vesting of the annual bonus and Long Term
•
‘Maximum performance plus 50 per cent share
price growth’ shows maximum performance
plus the impact on the Long Term Plan of
a hypothetical 50 per cent increase in the
share price;
• Annual bonus includes amounts compulsorily
deferred into shares;
• Long Term Plan is measured at face value, i.e.
no assumption for dividends or changes in share
price (except in the fourth scenario); and
have, for simplicity, been excluded from the
charts.
Fixed
Annual bonus
Long Term Plan
Additional Long Term Plan value if share price
grows by 50 per cent
30.8%
34.6%
34.6%
1,597
• Amounts relating to all-employee share schemes
External directorships
The company recognises that its executive directors may be invited to become non-executive directors of other companies outside
the company and exposure to such non-executive duties can broaden experience and knowledge, which would be of benefit to the
company. Any external appointments are subject to board approval (which would not be given if the proposed appointment was with
a competing company, would lead to a material conflict of interest or could have a detrimental effect on a director’s performance).
Directors will be allowed to retain any fees received in respect of such appointments.
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Corporate governance report
Directors’ remuneration policy
Payment for loss of office
The circumstances of the termination, including the individual’s performance and an individual’s duty and opportunity to mitigate losses,
are taken into account in every case. Our policy is to stop or reduce compensatory payments to former executive directors to the extent
that they receive remuneration from other employment during the compensation period. A robust line on reducing compensation is
applied and payments to departing employees may be phased to mitigate loss. Our policy is shown in the table below:
Provision
Summary terms
Compensation for loss of office • An executive director’s service contract may be terminated without notice and without any
Treatment of annual bonus
on termination
further payment or compensation, except for sums earned up to the date of termination, on
the occurrence of certain contractually specified events such as gross misconduct.
• No termination payment if full notice is worked.
• Otherwise, a payment in respect of the period of notice not worked of basic salary, plus
pension and green travel allowance for that period.
• Half of the termination payment will be paid within 14 days of date of termination.
• The other half will be paid in monthly instalments over what would have been the second half
of the notice period. This will be reduced by the value of any salary, pension contribution and
green travel allowance earned in new paid employment in that period.
• Normally, eligibility for any bonus payment will be forfeited where the annual performance
period has not yet been completed. However, in certain circumstances, such as death, disability,
mutually agreed retirement or other circumstances at the discretion of the committee, a time
prorated bonus may be payable for the period of active service. There is no automatic entitlement
to payments under the bonus scheme. Any payment is at the discretion of the committee and is
subject to withholding and recovery provisions as detailed in the policy table.
• Performance targets would apply in all circumstances.
•
If it is not possible for legal reasons to grant a deferred share award (for example, if the director is
no longer employed by the company at the point of payment), the committee will seek to effect the
normal deferred element in the form of a deferred cash award, but may ultimately use its discretion
to pay the bonus wholly in cash.
Treatment of deferred bonus
on termination
• Determined on the basis of the relevant plan rules. Full details can be found on the company’s website.
• The default treatment is that any outstanding awards will vest in full on the originally intended
Treatment of unvested long-
term incentives on termination
vesting date with no time prorating applying.
• Deferred bonuses are subject to withholding and recovery provisions as detailed in the policy table.
• Determined on the basis of the relevant plan rules. Full details can be found on the company’s
website.
• Normally, any outstanding awards where the performance period has not yet been completed
will lapse on date of cessation of employment (awards which are in a holding period following
the completion of the performance period will not lapse).
• However, under the rules of the plans, in certain prescribed circumstances, such as death,
disability, mutually agreed retirement or other circumstances at the discretion of the
committee, ‘good leaver’ status can be applied. In these circumstances, a participant’s awards
vest on a time prorated basis subject to the satisfaction of relevant performance criteria, with
the balance of awards lapsing.
• The committee retains the discretion not to time prorate if it is inappropriate to do so in particular
circumstances. The committee will take into account the individual’s performance and the
reasons for their departure when determining whether ‘good leaver’ status can be applied.
Treatment of pensions on
termination
• On redundancy, an augmentation may apply in relation to benefits accrued under a United
Utilities defined benefit pension scheme, in line with the trust deed and rules of the appropriate
section.
Outplacement services, reimbursement of legal costs and any other incidental expenses may be provided where appropriate. Any
statutory entitlements or compromise claims in connection with a termination of employment would be paid as necessary. Outstanding
savings/ shares under all-employee share plans would be transferred in accordance with the terms of the plans as approved by HMRC.
Change of control
On a change of control, executive directors’ incentive awards will be treated in accordance with the rules of the applicable plans. In
summary:
• Bonus payments will take into account the extent to which the performance measures have been satisfied between the start of the
performance period and the date of the change of control, and the value will typically be prorated to reflect the same period. Any
such payments would normally be paid entirely in cash.
• Deferred bonuses will generally vest on the date of a change of control. Awards may alternatively be exchanged for new
equivalent awards in the acquirer, where appropriate.
• Long Term Plan awards will generally vest on the date of a change of control taking into account the extent to which the committee
assesses that any performance condition has been satisfied at that point. Time prorating will normally apply unless the committee
determines otherwise. Awards may alternatively be exchanged for new equivalent awards in the acquirer, where appropriate.
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Corporate governance report
Directors’ remuneration policy
Payment for loss of office
The circumstances of the termination, including the individual’s performance and an individual’s duty and opportunity to mitigate losses,
are taken into account in every case. Our policy is to stop or reduce compensatory payments to former executive directors to the extent
that they receive remuneration from other employment during the compensation period. A robust line on reducing compensation is
applied and payments to departing employees may be phased to mitigate loss. Our policy is shown in the table below:
Provision
Summary terms
Compensation for loss of office • An executive director’s service contract may be terminated without notice and without any
Treatment of annual bonus
• Normally, eligibility for any bonus payment will be forfeited where the annual performance
on termination
period has not yet been completed. However, in certain circumstances, such as death, disability,
further payment or compensation, except for sums earned up to the date of termination, on
the occurrence of certain contractually specified events such as gross misconduct.
• No termination payment if full notice is worked.
• Otherwise, a payment in respect of the period of notice not worked of basic salary, plus
pension and green travel allowance for that period.
• Half of the termination payment will be paid within 14 days of date of termination.
• The other half will be paid in monthly instalments over what would have been the second half
of the notice period. This will be reduced by the value of any salary, pension contribution and
green travel allowance earned in new paid employment in that period.
mutually agreed retirement or other circumstances at the discretion of the committee, a time
prorated bonus may be payable for the period of active service. There is no automatic entitlement
to payments under the bonus scheme. Any payment is at the discretion of the committee and is
subject to withholding and recovery provisions as detailed in the policy table.
• Performance targets would apply in all circumstances.
•
If it is not possible for legal reasons to grant a deferred share award (for example, if the director is
no longer employed by the company at the point of payment), the committee will seek to effect the
normal deferred element in the form of a deferred cash award, but may ultimately use its discretion
to pay the bonus wholly in cash.
Treatment of deferred bonus
• Determined on the basis of the relevant plan rules. Full details can be found on the company’s website.
on termination
• The default treatment is that any outstanding awards will vest in full on the originally intended
vesting date with no time prorating applying.
• Deferred bonuses are subject to withholding and recovery provisions as detailed in the policy table.
Treatment of unvested long-
• Determined on the basis of the relevant plan rules. Full details can be found on the company’s
term incentives on termination
website.
• Normally, any outstanding awards where the performance period has not yet been completed
will lapse on date of cessation of employment (awards which are in a holding period following
the completion of the performance period will not lapse).
• However, under the rules of the plans, in certain prescribed circumstances, such as death,
disability, mutually agreed retirement or other circumstances at the discretion of the
committee, ‘good leaver’ status can be applied. In these circumstances, a participant’s awards
vest on a time prorated basis subject to the satisfaction of relevant performance criteria, with
the balance of awards lapsing.
• The committee retains the discretion not to time prorate if it is inappropriate to do so in particular
circumstances. The committee will take into account the individual’s performance and the
reasons for their departure when determining whether ‘good leaver’ status can be applied.
Treatment of pensions on
• On redundancy, an augmentation may apply in relation to benefits accrued under a United
termination
Utilities defined benefit pension scheme, in line with the trust deed and rules of the appropriate
section.
Outplacement services, reimbursement of legal costs and any other incidental expenses may be provided where appropriate. Any
statutory entitlements or compromise claims in connection with a termination of employment would be paid as necessary. Outstanding
savings/ shares under all-employee share plans would be transferred in accordance with the terms of the plans as approved by HMRC.
Change of control
summary:
On a change of control, executive directors’ incentive awards will be treated in accordance with the rules of the applicable plans. In
• Bonus payments will take into account the extent to which the performance measures have been satisfied between the start of the
performance period and the date of the change of control, and the value will typically be prorated to reflect the same period. Any
such payments would normally be paid entirely in cash.
• Deferred bonuses will generally vest on the date of a change of control. Awards may alternatively be exchanged for new
equivalent awards in the acquirer, where appropriate.
• Long Term Plan awards will generally vest on the date of a change of control taking into account the extent to which the committee
assesses that any performance condition has been satisfied at that point. Time prorating will normally apply unless the committee
determines otherwise. Awards may alternatively be exchanged for new equivalent awards in the acquirer, where appropriate.
Corporate governance report
Annual report on remuneration
Single total figure of remuneration for executive directors (audited information)
Fixed pay
Base salary
£’000
Pension
£’000
Benefits
£’000
Subtotal
£’000
Annual
bonus
£’000
Variable pay
Long-term
incentives
£’000
Subtotal
£’000
Total
£’000
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021 2022(1) 2021(2)
2022
2021
2022
2021
784
736(3)
173
405
275
49
171
33
23
21
30
980
937
727(4)
824
1,471
1,562
2,198 2,386
3,178 3,323
13
475
321
452
293
113
108
565
401
1,040
722
Year
ended
31
March
Steve
Mogford
Phil
Aspin(5)
(1) The long-term incentive is in respect of the Long Term Plan (LTP) award which was granted in June 2019 for which the outcome is based on performance
over the three-year period from 1 April 2019 to 31 March 2022. The LTP amount is estimated as the vesting percentage for the one-third relating to customer
service excellence will not be known until later in 2022, and the award for Steve Mogford will not vest until the end of an additional holding period. Phil
Aspin’s award was granted prior to his appointment to the board and so no holding period applies. For the purpose of this table the value of LTP awards
has been calculated using an average share price over the three-month period from 1 January 2022 to 31 March 2022 of 1,064.4 pence per share. This is
greater than the share price at the time these awards were made to participants and accordingly some of the value shown is attributable to share price
appreciation. See page 179 for further details.
(2) The long-term incentive amount for the year ended 31 March 2021 is in respect of the LTP award that was granted in June 2018 and whose performance
period ended on 31 March 2021. The figure stated in last year’s report was based on a latest best estimate (LBE) for the customer service excellence measure
which indicated an overall vesting outcome of 89.6 per cent. The final confirmed outcome for the measure was better than the LBE which meant the actual
overall vesting outcome was 97.9 per cent. The figures for 2021 have been updated to reflect this. The award for Steve Mogford is not due to vest until the
end of an additional holding period, and for the purpose of this table dividend equivalents accrued to 31 March 2022 have been added, and the value of the
award has been calculated using an average share price over the three-month period from 1 January 2022 to 31 March 2022 of 1,064.4 pence per share. Phil
Aspin’s award was granted prior to his appointment to the board so no holding period applied, and for the purpose of this table the value of the award has
been calculated using the share price on the vesting date of 1,037.0 pence per share.
(3)
In the context of the COVID-19 pandemic, in the year ended 31 March 2021 Steve Mogford took a salary reduction of 20 per cent of salary for three months,
which was donated to charity.
(4) Steve Mogford informed the committee that he wished to unconditionally waive £150,000 of his 2021/22 bonus. This is reflected in the details shown.
(5) Salary, benefits, pension and annual bonus figures in 2021 for Phil Aspin reflect part-year earnings and are for the period from 24 July 2020 when he was
first appointed to the board. A bonus of around £53,000 was earned by Phil Aspin in respect of the period 1 April 2020 to 23 July 2020 prior to him joining
the board. This is not included in the table.
Base salary
Executive director salaries were increased by 2.0 per cent with effect from 1 September 2021, in line with the headline increase applied across
the wider workforce. The committee judged that the increase was supported by very good individual and business performance.
Executive director
Steve Mogford
Phil Aspin
Base salary £’000
1 September 2021
1 September 2020
790.7
408.0
775.2
400.0
Pensions
Steve Mogford has a contractual entitlement to receive a cash allowance of 22 per cent of base salary in lieu of pension. In accordance
with Code provision 38, his pension arrangements will be aligned to those of the wider workforce with effect from 1 January 2023 and
will reduce to 12 percent of base salary from that date. Phil Aspin receives a cash allowance of 12 per cent of base salary in lieu of pension
which aligns with the workforce rate, and again illustrates the committee’s intention to reposition the overall executive remuneration
package. For employees, the company doubles any contributions that employees make up to a maximum of 14 per cent of salary.
Benefits
For executive directors, benefits included: a car allowance of £14,000; health, life cover and income protection insurance; travel costs;
and communication costs. Aside from the transition from a car allowance to a green travel allowance under the proposed policy no
material changes are expected to benefits during the year commencing 1 April 2022.
External appointments
Phil Aspin was a member of the UK Endorsement Board during the year ended 31 March 2022 for which he received and retained an
annual fee of £14,000.
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Corporate governance report
Annual report on remuneration
Annual bonus
Deferred Bonus Plan awards made in the year ended 31 March 2022 (audited information)
Bonuses are earned by reference to performance in the financial year and paid in June following the end of the financial year. Fifty
per cent of any bonus is deferred into shares under the Deferred Bonus Plan. These awards vest after three years and are subject to
withholding provisions. There are no service or additional performance conditions attached.
The table below provides details of share awards made on 16 June 2021 to the executive directors as at that date in respect of deferred
share bonus payments for the 2020/21 financial year.
Executive director
Steve Mogford
Phil Aspin
Type of
award
Conditional shares
Conditional shares
Basis of
award
50% of bonus
50% of bonus(2)
Number of
shares
39,987
16,246
Face value of award(1)
(£’000)
£412
End of
deferral period
17.6.2023
£167
17.6.2023
(1) The face value has been calculated using the closing share price on 15 June 2021 (the dealing day prior to the date of grant), which was 1,030.8 pence
per share.
(2) As stated in last year’s report, a bonus of around £293,000 was earned by Phil Aspin in respect of the period 24 July 2020 to 31 March 2021 (following
his appointment to the board), along with a bonus of around £53,000 in respect of the period 1 April 2020 to 23 July 2020 (prior to his appointment to
the board). He received one overall Deferred Bonus Plan award in respect of both bonus payments, where the overall award value was based on 50 per
cent of the bonus earned since his appointment to the board plus 40 per cent of the bonus earned prior to his appointment.
Annual bonus in respect of financial year ended 31 March 2022 (audited information)
The performance measures, targets and outcomes in respect of the executive directors’ annual bonus for the year ended 31 March
2022 are set out below. The table on page 166 summarises how the performance measures are linked to our business strategy,
including delivery for customers and the environment. As disclosed in last year’s report, the annual bonus for 2021/22 was wholly
aligned to the group bonus scorecard with no specific personal performance element, although when determining the overall
outcomes and whether any discretion should be exercised the committee takes into account the personal contributions of each
individual. The committee was satisfied that the bonus scorecard outcome was reflective of overall company performance during the
year and was aligned with the delivery of outcomes for our stakeholders (including those detailed on pages 52 to 75) and, as such, it
would not seek to exercise its discretion over the bonuses for the executive directors. As outlined on page 161, prior to the committee
determining the individual bonus outcomes for the executive directors, Steve Mogford expressed his wish to unconditionally waive
£150,000 of any bonus that would otherwise have been due, and so this is reflected in the details shown in the table below.
Measure
% weighting
of measure
Threshold
(25% vesting)
Target
(50% vesting)
Stretch
(100% vesting)
Vesting
as a % of
maximum
Outcome
Underlying operating profit(1)
25.0%
£708.8m
£738.8m
£758.8m
100%
25.0.%
Actual: £768.2m
Customer service in year
C-MeX ranking out of the 17
water companies
Written complaints
(per 10,000 customers)
10.0%
8th position
6th position
4th position
37.5%
3.8%
Actual: 7th
position
10.0%
20.50
20.25
20.00
100%
10.0%
Actual: 17.65
Maintaining and enhancing services for customers
Outcome delivery incentive
(ODI) composite(2)
35.0%
£10.0m
£18.4m
£26.9m
77.6%
27.2%
Actual: £23.1m
Time, cost and quality of capital
programme (TCQi)(3)
Total scorecard outcome
20.0%
85.0%
90.0%
95.0%
100%
20.0%
Actual: 95.6%
Steve
Mogford(4)
71.3%
130%
92.7%
727
86.0.%
Phil
Aspin
86.0%
130%
111.7%
452
Actual award (% of maximum)
Maximum award (% of salary)
Actual award (% of salary)
Actual award (£’000 – shown in single figure table)(5)
(1) The underlying operating profit figure for bonus purposes is based on the underlying operating profit on page 83 and excludes infrastructure
renewals expenditure and property trading.
(2) The outcome of the ODI composite measure has been subject to independent external assurance.
(3) TCQi is an internal measure which measures the extent to which we deliver our capital projects on time, to budget and to the required quality
standard. It is expressed as a percentage, with a higher percentage representing better performance.
(4) Steve Mogford informed the committee that he wished to unconditionally waive £150,000 of his 2021/22 bonus. This is reflected in the details shown.
(5) Under the Deferred Bonus Plan, 50 per cent of the annual bonus will be deferred in shares for three years.
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Corporate governance report
Annual report on remuneration
Deferred Bonus Plan awards made in the year ended 31 March 2022 (audited information)
Bonuses are earned by reference to performance in the financial year and paid in June following the end of the financial year. Fifty
per cent of any bonus is deferred into shares under the Deferred Bonus Plan. These awards vest after three years and are subject to
withholding provisions. There are no service or additional performance conditions attached.
The table below provides details of share awards made on 16 June 2021 to the executive directors as at that date in respect of deferred
share bonus payments for the 2020/21 financial year.
Executive director
Type of
award
Basis of
award
Steve Mogford
Conditional shares
50% of bonus
Phil Aspin
Conditional shares
50% of bonus(2)
shares
39,987
16,246
Number of
Face value of award(1)
End of
(£’000)
£412
£167
deferral period
17.6.2023
17.6.2023
(1) The face value has been calculated using the closing share price on 15 June 2021 (the dealing day prior to the date of grant), which was 1,030.8 pence
per share.
(2) As stated in last year’s report, a bonus of around £293,000 was earned by Phil Aspin in respect of the period 24 July 2020 to 31 March 2021 (following
his appointment to the board), along with a bonus of around £53,000 in respect of the period 1 April 2020 to 23 July 2020 (prior to his appointment to
the board). He received one overall Deferred Bonus Plan award in respect of both bonus payments, where the overall award value was based on 50 per
cent of the bonus earned since his appointment to the board plus 40 per cent of the bonus earned prior to his appointment.
Annual bonus in respect of financial year ended 31 March 2022 (audited information)
The performance measures, targets and outcomes in respect of the executive directors’ annual bonus for the year ended 31 March
2022 are set out below. The table on page 166 summarises how the performance measures are linked to our business strategy,
including delivery for customers and the environment. As disclosed in last year’s report, the annual bonus for 2021/22 was wholly
aligned to the group bonus scorecard with no specific personal performance element, although when determining the overall
outcomes and whether any discretion should be exercised the committee takes into account the personal contributions of each
individual. The committee was satisfied that the bonus scorecard outcome was reflective of overall company performance during the
year and was aligned with the delivery of outcomes for our stakeholders (including those detailed on pages 52 to 75) and, as such, it
would not seek to exercise its discretion over the bonuses for the executive directors. As outlined on page 161, prior to the committee
determining the individual bonus outcomes for the executive directors, Steve Mogford expressed his wish to unconditionally waive
£150,000 of any bonus that would otherwise have been due, and so this is reflected in the details shown in the table below.
Measure
% weighting
of measure
Threshold
Target
Stretch
(25% vesting)
(50% vesting)
(100% vesting)
maximum
Outcome
Underlying operating profit(1)
25.0%
£708.8m
£738.8m
£758.8m
100%
25.0.%
Vesting
as a % of
C-MeX ranking out of the 17
10.0%
6th position
4th position
37.5%
3.8%
8th position
Actual: 7th
position
10.0%
20.50
20.25
20.00
100%
10.0%
Maintaining and enhancing services for customers
Outcome delivery incentive
35.0%
£10.0m
£18.4m
£26.9m
77.6%
27.2%
Time, cost and quality of capital
20.0%
85.0%
90.0%
95.0%
100%
20.0%
Customer service in year
water companies
Written complaints
(per 10,000 customers)
(ODI) composite(2)
programme (TCQi)(3)
Total scorecard outcome
Actual: £768.2m
Actual: 17.65
Actual: £23.1m
Actual: 95.6%
Annual bonus
Long-term incentives
2019 Long Term Plan (LTP) awards with a performance period ended 31 March 2022 (audited information)
The 2019 LTP awards were granted in June 2019 and performance was measured over the three-year period from 1 April 2019 to 31 March
2022. As Steve Mogford was an executive director when his award was granted in 2019 it will normally vest following an additional
holding period so that the overall vesting period is at least five years from the grant date, and the unvested shares will remain subject to
withholding provisions during this holding period. Phil Aspin was not an executive director when his award was granted and so in line
with the remuneration policy this historic award will vest once the final outcome is confirmed. Under the shareholding guidelines he will
be required to hold the vesting shares (on a net of tax basis).
Performance against each of the three measures applicable to the 2019 LTP has been very strong as shown in the table below. Note that
the final outcome for the customer service excellence measure (which forms one-third of the award) will not be known until the customer
service scores for the other water and wastewater companies are published in late summer 2022. The values of the 2019 LTP awards in
the single total figure of remuneration table are therefore estimated and will be restated if necessary in next year’s report.
Once the final outcome of the customer service excellence measure is known, before approving the final vesting outcome for the awards
the committee will determine whether the underpins have been met and will also consider whether there should be any discretion
applied.
% weighting
of measure
Threshold
(25%
vesting)
Achieved
Intermediate
Stretch
(100%
vesting)
Vesting
as a % of
maximum Outcome
33.3% Median
TSR
Straight-line between
threshold and stretch
Median
TSR 5 1.15
100%
33.3%
Actual: TSR above stretch
Company TSR of 48.1% was above stretch TSR
of 39.3%
(50% vesting)
33.3% Average RoRE
of -0.50% below
the average
allowed return
Average RoRE equal to the
average allowed return set by
the regulator
Average RoRE
of 1.00% above
the average
allowed return
100%
33.3%
Actual: Average RoRE of 6.10% was 1.64%
above the average allowed return
33.3% Median rank
(6th position)
Straight-line between
threshold and stretch
100%
33.3%
Upper
quartile
rank (3rd
position)
Estimate: 2nd position(2)
✓ Assumed met.
The committee will make a final assessment of
the company’s performance once the outcome
of the customer service excellence measure is
known.
Measure
Relative total shareholder return (TSR)
TSR versus median TSR of FTSE 100
companies (excluding financial services, oil
and gas, and mining companies)(1)
Return on Regulated Equity (RoRE)
Average RoRE compared to the average
allowed return set by the regulator across the
three-year performance period
Customer service excellence
Ranking for the year ended 31 March 2022 out of
the 11 water and wastewater companies using a
combined customer service measure comprising
C-MeX performance and customer complaints
Overall underpin
Overall vesting is subject to the committee
being satisfied that the company’s
performance on these measures is consistent
with underlying business performance and
that the company’s dividend policy has been
delivered in respect of each financial year of
the performance period
Estimated vesting (% of award)
Actual award (% of maximum)
Maximum award (% of salary)
Actual award (% of salary)
Actual award (£’000 – shown in single figure table)(5)
Steve
Mogford(4)
71.3%
130%
92.7%
727
86.0.%
Phil
Aspin
86.0%
130%
111.7%
452
Number of shares granted
Number of dividend equivalent shares
Number of shares before performance conditions applied
Estimated number of shares after performance conditions applied
Three-month average share price at end of performance period (pence)(3)
Estimated value at end of performance period (£’000 – shown in single figure table)(4)
(1) The underlying operating profit figure for bonus purposes is based on the underlying operating profit on page 83 and excludes infrastructure
renewals expenditure and property trading.
(1) For the purposes of calculating TSR, the TSR index is averaged over the three months prior to the start and end of the performance period. TSR is
independently calculated by the committee’s advisers.
(2) This is an estimate as the final outcome will not be known until the volume of written complaints received by other companies are available later
(2) The outcome of the ODI composite measure has been subject to independent external assurance.
in 2022.
(3) TCQi is an internal measure which measures the extent to which we deliver our capital projects on time, to budget and to the required quality
(3) Average share price over the three-month period from 1 January 2022 to 31 March 2022.
standard. It is expressed as a percentage, with a higher percentage representing better performance.
(4) 25.8 per cent of the value vesting is attributable to share price appreciation which equates to £380,000 for Steve Mogford and £29,000 for
(4) Steve Mogford informed the committee that he wished to unconditionally waive £150,000 of his 2021/22 bonus. This is reflected in the details shown.
Phil Aspin.
(5) Under the Deferred Bonus Plan, 50 per cent of the annual bonus will be deferred in shares for three years.
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Stock Code: UU.
Steve
Mogford
125,126
13,096
138,222
138,222
1,064.4
1,471
100%
Phil
Aspin
9,595
1,002
10,597
10,597
1,064.4
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Corporate governance report
Annual report on remuneration
2021 LTP awards with a performance period ending 31 March 2024 (audited information)
The table below provides details of share awards made to executive directors on 30 June 2021 in respect of the 2021 LTP:
Executive director
Type of award
Basis of award
Steve Mogford
Conditional shares
130% of salary
Phil Aspin
Conditional shares
130% of salary
Face value
of award
(£’000)(1)
Number of
shares under
award
£1,008
£520
102,539
52,910
% vesting at
threshold
End of
performance
period(2)
25%
25%
31.3.2024
31.3.2024
(1) The face value has been calculated using the closing share price on 29 June 2021 (the dealing day prior to the date of grant) which was 982.8 pence
per share.
(2) An additional holding period applies after the end of the performance period such that the overall vesting period is five years from the grant date.
LTP awards made during the year were based on two equally weighted components: Return on Regulated Equity (RoRE) and a customer
basket of measures.
Stretching targets were set for the RoRE measure taking into account the allowed return over the period (as set out in the final
determination) and the expected returns to be generated through financial and operational performance. When determining the
measures that should form the customer basket component of the awards the committee took into account feedback received
from customer research and focus groups (as to which areas of service and performance they considered the highest priority) and
the performance commitments agreed with Ofwat in the final determination for the regulatory period, thereby ensuring that the
measures selected reflected the views and priorities of key stakeholders. The committee is pleased that alongside focusing on areas of
performance that will have meaningful and tangible outcomes for customers, the measures chosen reflect its commitment to recognising
evolving expectations in regard to environmental, social and governance matters.
Details about the 2021 LTP performance measures and targets are shown in the following table. Performance is measured over the three-
year period 1 April 2021 to 31 March 2024. The table on page 166 summarises how these performance measures are linked to our business
strategy, including delivery for customers and the environment.
Threshold (25% vesting)
Stretch (100% vesting)
Weighting
Targets(1)
Equal to the average of Ofwat’s allowed
RoRE over the three financial years of
the performance period
1.5% (or more) above the
average of Ofwat’s allowed RoRE over
the three financial years of the
performance period
50.0%
Ranked 8th
Ranked 4th (or better)
5.0%
Measure
Return on Regulated Equity (RoRE)
Company RoRE
Customer basket of measures(2)
C-MeX ranking out of all the
other water and wastewater
companies(3)
Water poverty(3)
Priority services(3)
Sewer flooding incidents(3)
Pollution incidents(4)
Treatment works compliance(4)
Water quality contacts(4)
Leakage(3)
64,300 customers have been lifted
out of water poverty
No threshold target.
Stretch target must be achieved for
any vesting on this measure
A combined total of 26.38
sewer flooding incidents per
10,000 connected properties
22.40 pollution incidents per 10,000km
of our wastewater network
83,900 (or more) customers have
been lifted out of water poverty
6.3% (or more) of our
customers are listed on the Priority
Services Register
A combined total of 19.89 (or fewer)
sewer flooding incidents per 10,000
connected properties
12.21 (or fewer) pollution incidents
per 10,000km of our wastewater network
97.9% compliance
99.0% (or greater) compliance
13.5 customer contacts per
10,000 customers
A three-year average of 97.7 megalitres
of leakage per 10,000km of our
water network per day
CRI score of 3.27
3 star rating
12.0 (or fewer) customer contacts per
10,000 customers
A three-year average of 94.3 megalitres (or
less) of leakage per 10,000km of our water
network per day
CRI score of 2.00 (or less)
4 star rating
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
100%
Compliance risk index (CRI)(4)
The Environment Agency’s
Environmental Performance
Assessment (EPA) rating(5)
Total
Overall underpin
Overall vesting is subject to the committee being satisfied that the company’s performance on these measures is consistent with
underlying business performance and that the company’s dividend policy has been delivered in respect of each financial year of the
performance period.
(1) Straight-line vesting applies between the threshold and stretch targets, with nil vesting below threshold performance
(2) The customer basket of measures are based on the performance commitment definitions as per the AMP7 final determination
(3) Outcome based on performance in respect of the financial year ending 31 March 2024 as published in our own and/or the other water companies’
Annual Performance Reports for 2023/24
(4) Outcome based on performance in respect of the calendar year ending 31 December 2023 as published in our own and/or the other water
companies’ Annual Performance Reports for 2023/24
(5) Outcome based on performance in respect of the calendar year ending 31 December 2023 as published in the Environment Agency’s published
report in 2024
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Corporate governance report
Annual report on remuneration
2021 LTP awards with a performance period ending 31 March 2024 (audited information)
The table below provides details of share awards made to executive directors on 30 June 2021 in respect of the 2021 LTP:
Incentives in 2022/23
Ensuring alignment with our business plan
The performance measures used in our incentive schemes during 2022/23 will remain aligned directly with the business plan, with
a material weighting on measures that are linked to delivery for customers and the environment.
Annual bonus in respect of the financial year commencing 1 April 2022
The maximum bonus opportunity for the year commencing 1 April 2022 will remain unchanged at 130 per cent of base salary.
As is outlined on page 166, the measures used in our annual bonus arrangements for executive directors demonstrate significant
alignment to stakeholder interests, including customers and the environment. In 2022/23 we will retain many of those measures
but have also decided to introduce a number of new measures which further demonstrate our intention to incentivise stretching
performance delivery for customers, including on our environmental commitments and obligations.
New annual bonus measures for 2022/23
Measure
Why it’s being introduced
Water quality contacts (appearance)
Better Rivers commitments
Capital programme delivery incentive
(CPDi)
Customers expect the water that comes out of their tap to be clear, and when it is
discoloured it can affect public confidence in the water supply. This new measure will
drive improvements in our performance in this aspect of our service, as we know it is a
priority for our customers.
Improving river health and recreation in the North West is a priority for the company.
We have published a four-part plan setting out how we will achieve this for the benefit
of customers, the environment and other stakeholders, and details are shown on page
67. This new measure will focus on the delivery of our programme milestones.
The new CPDi measure is an evolution of the Time, Cost and Quality (TCQi) measure
we have used in recent years, in which the time, cost and quality of our capital
programme delivery remains important, but with an increased emphasis on efficiency.
CPDi also takes account of the carbon impact of our enhancement projects, providing a
further environmental element to the annual bonus arrangements.
The table below summarises the measures, weightings and targets for the 2022/23 bonus. Targets that are considered commercially
sensitive will be disclosed retrospectively in the 2022/23 annual report on remuneration.
Leakage(3)
A three-year average of 97.7 megalitres
A three-year average of 94.3 megalitres (or
(1) Underlying operating profit for bonus purposes excludes infrastructure renewals expenditure and property trading.
Outcome delivery incentive (ODI) composite
Commercially sensitive
Capital programme delivery incentive (CPDi)
80.0%
85.0%
95.0%
Total
Measure
Underlying operating profit(1)
Customer service in year
C-MeX ranking out of the 17 water companies
Written complaints (per 10,000 customers)
Water quality contacts (appearance)
Maintaining and improving services for customers
and the environment
Better Rivers commitments (% of 2022/23 programme
milestones delivered)
Targets
Threshold
(25% vesting)
Target
(50% vesting)
Stretch
(100% vesting)
Commercially sensitive
Weighting
(% of award)
25.0%
8th position
7th position
5th position
17.50
7,604
17.10
6,974
16.80
6,344
90.0%
95.0%
100%
10.0%
5.0%
10.0%
10.0%
25.0%
15.0%
100%
In line with policy the executive directors will be required to defer at least 50 per cent of any bonus received into shares and these
only become available after a period of three years. This provides the committee with time to consider and respond appropriately
to any matters that were not known at the end of the relevant performance period but become apparent during the deferral period.
This could include the use of the withholding and recovery provisions.
2022 LTP awards with a performance period ending 31 March 2025
The 2022 LTP award level for executive directors will remain unchanged at 130 per cent of base salary. As outlined on page 163 the committee is
seeking approval of the new Long Term Plan 2022 at the 2022 AGM, and so we will wait until late July to grant the LTP awards in order that they
might be granted under this new plan if it is approved. If it is not approved, the awards will again be granted under the existing LTP 2013.
While awards will not be granted until after the AGM, the committee has accelerated the target-setting process compared to previous years so
that the measures and targets that are expected to apply to the awards are available to shareholders in this directors’ remuneration report.
Consistent with the approach in 2020 and 2021 the awards will be based on Return on Regulated Equity and a customer basket of
measures, with each component being equally weighted at 50 per cent.
Stretching targets have been set for the RoRE measure taking into account the allowed return over the period (as set out in the final
determination) and the expected returns to be generated through financial and operational performance.
In respect of the customer basket, the approach used to date means that award outcomes are directly attributable to clearly identified
customer, environmental and social measures, including those which are within scope of our key regulators.
unitedutilities.com/corporate
Stock Code: UU.
Executive director
Type of award
Basis of award
Steve Mogford
Conditional shares
130% of salary
Phil Aspin
Conditional shares
130% of salary
Face value
Number of
shares under
% vesting at
performance
of award
(£’000)(1)
£1,008
£520
award
102,539
52,910
threshold
25%
25%
End of
period(2)
31.3.2024
31.3.2024
(1) The face value has been calculated using the closing share price on 29 June 2021 (the dealing day prior to the date of grant) which was 982.8 pence
(2) An additional holding period applies after the end of the performance period such that the overall vesting period is five years from the grant date.
LTP awards made during the year were based on two equally weighted components: Return on Regulated Equity (RoRE) and a customer
per share.
basket of measures.
Stretching targets were set for the RoRE measure taking into account the allowed return over the period (as set out in the final
determination) and the expected returns to be generated through financial and operational performance. When determining the
measures that should form the customer basket component of the awards the committee took into account feedback received
from customer research and focus groups (as to which areas of service and performance they considered the highest priority) and
the performance commitments agreed with Ofwat in the final determination for the regulatory period, thereby ensuring that the
measures selected reflected the views and priorities of key stakeholders. The committee is pleased that alongside focusing on areas of
performance that will have meaningful and tangible outcomes for customers, the measures chosen reflect its commitment to recognising
evolving expectations in regard to environmental, social and governance matters.
Details about the 2021 LTP performance measures and targets are shown in the following table. Performance is measured over the three-
year period 1 April 2021 to 31 March 2024. The table on page 166 summarises how these performance measures are linked to our business
strategy, including delivery for customers and the environment.
Measure
Return on Regulated Equity (RoRE)
Threshold (25% vesting)
Stretch (100% vesting)
Weighting
Targets(1)
Company RoRE
Equal to the average of Ofwat’s allowed
1.5% (or more) above the
50.0%
RoRE over the three financial years of
average of Ofwat’s allowed RoRE over
the performance period
the three financial years of the
performance period
Ranked 8th
Ranked 4th (or better)
5.0%
Pollution incidents(4)
22.40 pollution incidents per 10,000km
12.21 (or fewer) pollution incidents
64,300 customers have been lifted
83,900 (or more) customers have
out of water poverty
No threshold target.
been lifted out of water poverty
6.3% (or more) of our
Stretch target must be achieved for
customers are listed on the Priority
any vesting on this measure
A combined total of 26.38
sewer flooding incidents per
10,000 connected properties
A combined total of 19.89 (or fewer)
5.0%
Services Register
sewer flooding incidents per 10,000
connected properties
of our wastewater network
per 10,000km of our wastewater network
97.9% compliance
99.0% (or greater) compliance
13.5 customer contacts per
12.0 (or fewer) customer contacts per
10,000 customers
10,000 customers
of leakage per 10,000km of our
less) of leakage per 10,000km of our water
water network per day
CRI score of 3.27
3 star rating
network per day
CRI score of 2.00 (or less)
4 star rating
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
100%
Customer basket of measures(2)
C-MeX ranking out of all the
other water and wastewater
companies(3)
Water poverty(3)
Priority services(3)
Sewer flooding incidents(3)
Treatment works compliance(4)
Water quality contacts(4)
Compliance risk index (CRI)(4)
The Environment Agency’s
Environmental Performance
Assessment (EPA) rating(5)
Total
Overall underpin
performance period.
Overall vesting is subject to the committee being satisfied that the company’s performance on these measures is consistent with
underlying business performance and that the company’s dividend policy has been delivered in respect of each financial year of the
(1) Straight-line vesting applies between the threshold and stretch targets, with nil vesting below threshold performance
(2) The customer basket of measures are based on the performance commitment definitions as per the AMP7 final determination
(3) Outcome based on performance in respect of the financial year ending 31 March 2024 as published in our own and/or the other water companies’
(4) Outcome based on performance in respect of the calendar year ending 31 December 2023 as published in our own and/or the other water
Annual Performance Reports for 2023/24
companies’ Annual Performance Reports for 2023/24
(5) Outcome based on performance in respect of the calendar year ending 31 December 2023 as published in the Environment Agency’s published
report in 2024
180
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As outlined on page 163 the committee has decided to introduce carbon measures in the LTP from 2022, linked to the company’s
efforts to continually strengthen the way we govern the resilience and sustainability of our business and public services. This runs to
the heart of living our purpose to provide great water and more for the North West.
Climate change is a priority risk to the company and its stakeholders because the affordability and resilience of our operations and services
fundamentally rely on a stable climate and a healthy natural environment. You can find out more about our long-standing approach to both
carbon reduction (mitigation) and climate resilience (adaptation) as detailed in our TCFD on pages 86 to 99.
We have recently enhanced our carbon commitments and governance after achieving previous goals to further grow our renewable
energy generation capabilities and purchase only certified green electricity. We made six new carbon pledges in 2020, and in 2021 we
became the first UK water company to independently verify that we have international best practice Science-Based Targets (SBTs).
This means that our targets have been assessed to ensure they follow a reduction trajectory sufficient to help prevent the most
damaging effects of climate change by limiting average global warming to no more than 1.5oC.
In our 2022 LTP we will introduce four measures covering four priority areas of our carbon agenda, each with an equal weighting of 2.5
per cent, so that 10 per cent of the overall LTP outcome is directly related to carbon-related performance. In the longer term, as we further
mature our carbon plan, we aspire to introducing one or two holistic carbon measures that are directly aligned to our SBTs for 2030.
To create space for the new carbon measures we have removed the C-MeX and water quality contacts measures used in previous LTP
awards on the basis that they are both covered under the 2022/23 annual bonus. With these new carbon measures, the whole of the
customer basket now focuses executives on areas of performance that are in the interests of customers and have an environmental or social
impact.
Measure
Return on Regulated Equity (RoRE)
Company RoRE
Threshold (25% vesting)
Stretch (100% vesting)
Weighting
Targets(1)
0.25% above the average of Ofwat’s
allowed RoRE over the three financial
years of the performance period
2.00% (or more) above the
average of Ofwat’s allowed RoRE over
the three financial years of the
performance period
50.0%
Customer basket of measures(2)
Carbon – green fleet
Carbon – peatland restoration
Carbon – woodland creation
Carbon – supply chain
engagement
Water poverty(3)
Priority services(3)
Sewer flooding incidents(3)
Pollution incidents(4)
Treatment works compliance(4)
Compliance risk index (CRI)(4)
Leakage(3)
170 electric or other low carbon vehicles
will be deployed in our fleet by
31 March 2025
527 hectares of peatland will be
restored and certified to the Peatland
Carbon Code (or equivalent standard)
by 31 March 2025
77 hectares of woodland will be created
and certified to the Woodland Carbon
Code (or equivalent standard)
by 31 March 2025
No threshold target.
Stretch target must be achieved for
any vesting on this measure
66,500 customers have been lifted
out of water poverty
No threshold target.
Stretch target must be achieved for
any vesting on this measure
A combined total of 26.38
sewer flooding incidents per
10,000 connected properties
19.50 pollution incidents per 10,000km
of our wastewater network
200 (or more) electric or other low
carbon vehicles will be deployed in our
fleet by 31 March 2025
644 hectares (or more) of peatland will
be restored and certified to the Peatland
Carbon Code (or equivalent standard) by
31 March 2025
94 hectares (or more) of woodland will
be created and certified to the Woodland
Carbon Code (or equivalent standard)
by 31 March 2025.
66% (or more) of suppliers, by emissions
within scope 3 capital goods, will have
science-based targets by 31 March 2025
83,900 (or more) customers have
been lifted out of water poverty
7.0% (or more) of our
customers are listed on the Priority
Services Register
A combined total of 18.85 (or fewer)
sewer flooding incidents per
10,000 connected properties
11.80 (or fewer) pollution incidents
per 10,000km of our wastewater network
97.9% compliance
CRI score of 2.75
A three-year average of 93.1 megalitres
of leakage per 10,000km of our
water network per day
3 star rating
99.0% (or greater) compliance
CRI score of 2.00 (or less)
A three-year average of 90.5 megalitres
(or less) of leakage per 10,000km of
our water network per day
4 star rating
2.5%
2.5%
2.5%
2.5%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
The Environment Agency’s
Environmental Performance
Assessment (EPA) rating(5)
Total
Overall underpin
Overall vesting is subject to the committee being satisfied that the company’s performance on these measures is consistent with underlying
business performance and that the company’s dividend policy has been delivered in respect of each financial year of the performance period.
100%
5.0%
(1) Unless indicated otherwise, straight-line vesting applies between the threshold and stretch targets, with nil vesting below threshold performance
(2) The customer basket of measures are based on the performance commitment definitions as per the AMP7 final determination
(3) Outcome based on performance in respect of the financial year ending 31 March 2025 as published in our own and/or the other water companies’
Annual Performance Reports for 2024/25
(4) Outcome based on performance in respect of the calendar year ending 31 December 2024 as published in our own and/or the other water
companies’ Annual Performance Reports for 2024/25
(5) Outcome based on performance in respect of the calendar year ending 31 December 2024 as published in the Environment Agency’s published report in 2025
In line with policy, any LTP outcome for executive directors will only become available following the end of a holding period such that the
total vesting period is at least five years from the date of grant. This provides the committee with time to consider and respond appropriately
to any matters that were not known at the end of the relevant performance period but become apparent during the holding period.
182
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Corporate governance report
Annual report on remuneration
As outlined on page 163 the committee has decided to introduce carbon measures in the LTP from 2022, linked to the company’s
efforts to continually strengthen the way we govern the resilience and sustainability of our business and public services. This runs to
the heart of living our purpose to provide great water and more for the North West.
Climate change is a priority risk to the company and its stakeholders because the affordability and resilience of our operations and services
fundamentally rely on a stable climate and a healthy natural environment. You can find out more about our long-standing approach to both
carbon reduction (mitigation) and climate resilience (adaptation) as detailed in our TCFD on pages 86 to 99.
We have recently enhanced our carbon commitments and governance after achieving previous goals to further grow our renewable
energy generation capabilities and purchase only certified green electricity. We made six new carbon pledges in 2020, and in 2021 we
became the first UK water company to independently verify that we have international best practice Science-Based Targets (SBTs).
This means that our targets have been assessed to ensure they follow a reduction trajectory sufficient to help prevent the most
damaging effects of climate change by limiting average global warming to no more than 1.5oC.
In our 2022 LTP we will introduce four measures covering four priority areas of our carbon agenda, each with an equal weighting of 2.5
per cent, so that 10 per cent of the overall LTP outcome is directly related to carbon-related performance. In the longer term, as we further
mature our carbon plan, we aspire to introducing one or two holistic carbon measures that are directly aligned to our SBTs for 2030.
To create space for the new carbon measures we have removed the C-MeX and water quality contacts measures used in previous LTP
awards on the basis that they are both covered under the 2022/23 annual bonus. With these new carbon measures, the whole of the
customer basket now focuses executives on areas of performance that are in the interests of customers and have an environmental or social
impact.
Measure
Return on Regulated Equity (RoRE)
Company RoRE
0.25% above the average of Ofwat’s
2.00% (or more) above the
50.0%
Threshold (25% vesting)
Stretch (100% vesting)
Weighting
Targets(1)
allowed RoRE over the three financial
average of Ofwat’s allowed RoRE over
years of the performance period
the three financial years of the
performance period
Customer basket of measures(2)
Carbon – green fleet
170 electric or other low carbon vehicles
200 (or more) electric or other low
2.5%
Carbon – peatland restoration
527 hectares of peatland will be
644 hectares (or more) of peatland will
2.5%
will be deployed in our fleet by
carbon vehicles will be deployed in our
31 March 2025
fleet by 31 March 2025
restored and certified to the Peatland
be restored and certified to the Peatland
Carbon Code (or equivalent standard)
Carbon Code (or equivalent standard) by
by 31 March 2025
31 March 2025
Carbon – woodland creation
77 hectares of woodland will be created
94 hectares (or more) of woodland will
2.5%
Carbon – supply chain
engagement
Water poverty(3)
Priority services(3)
Sewer flooding incidents(3)
and certified to the Woodland Carbon
be created and certified to the Woodland
Code (or equivalent standard)
Carbon Code (or equivalent standard)
by 31 March 2025
by 31 March 2025.
No threshold target.
66% (or more) of suppliers, by emissions
2.5%
Stretch target must be achieved for
within scope 3 capital goods, will have
any vesting on this measure
science-based targets by 31 March 2025
66,500 customers have been lifted
83,900 (or more) customers have
out of water poverty
No threshold target.
been lifted out of water poverty
7.0% (or more) of our
Stretch target must be achieved for
customers are listed on the Priority
any vesting on this measure
A combined total of 26.38
sewer flooding incidents per
10,000 connected properties
A combined total of 18.85 (or fewer)
5.0%
Services Register
sewer flooding incidents per
10,000 connected properties
Pollution incidents(4)
19.50 pollution incidents per 10,000km
11.80 (or fewer) pollution incidents
Treatment works compliance(4)
Compliance risk index (CRI)(4)
of our wastewater network
per 10,000km of our wastewater network
97.9% compliance
CRI score of 2.75
99.0% (or greater) compliance
CRI score of 2.00 (or less)
Leakage(3)
A three-year average of 93.1 megalitres
A three-year average of 90.5 megalitres
of leakage per 10,000km of our
(or less) of leakage per 10,000km of
water network per day
3 star rating
our water network per day
4 star rating
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
100%
The Environment Agency’s
Environmental Performance
Assessment (EPA) rating(5)
Total
Overall underpin
Overall vesting is subject to the committee being satisfied that the company’s performance on these measures is consistent with underlying
business performance and that the company’s dividend policy has been delivered in respect of each financial year of the performance period.
(1) Unless indicated otherwise, straight-line vesting applies between the threshold and stretch targets, with nil vesting below threshold performance
(2) The customer basket of measures are based on the performance commitment definitions as per the AMP7 final determination
(3) Outcome based on performance in respect of the financial year ending 31 March 2025 as published in our own and/or the other water companies’
(4) Outcome based on performance in respect of the calendar year ending 31 December 2024 as published in our own and/or the other water
Annual Performance Reports for 2024/25
companies’ Annual Performance Reports for 2024/25
(5) Outcome based on performance in respect of the calendar year ending 31 December 2024 as published in the Environment Agency’s published report in 2025
In line with policy, any LTP outcome for executive directors will only become available following the end of a holding period such that the
total vesting period is at least five years from the date of grant. This provides the committee with time to consider and respond appropriately
to any matters that were not known at the end of the relevant performance period but become apparent during the holding period.
Cascade of remuneration through the organisation
Consistent with best practice, the remuneration committee spends considerable time on matters relating to remuneration arrangements
in the wider organisation. Details of pay trends for the wider employee base provide important context when making decisions regarding
remuneration for the executive directors as well as ensuring that consistent approaches are being adopted across the organisation.
The table below summarises how remuneration compares across the different groups of employees throughout the company.
Employee
group (number
of employees
covered)
Employees at all
levels
(around 6,000)
Element of
pay
Salary
Health and
wellbeing
benefits
Policy
Implementation
We want to attract and retain employees of
the experience and quality required to deliver
the company’s strategy. Salaries are reviewed
annually, with executive directors normally
receiving a salary increase generally no greater
than the increase awarded to the general
workforce.
We want to create an environment that
promotes healthy behaviours and ensure that
employees have access to early and effective
treatment, advice and information to improve
their health and wellbeing.
In 2021 the base salary increase for employees
was 2.0 per cent. As a Living Wage accredited
employer all our employees (except those on a
training scheme such as apprentices) receive
at least the voluntary living wage rate.
All employees are eligible for company-funded
healthcare and an enhanced company sick pay
scheme. Employees have access to a medical
advice and information service (Best Doctors)
service for them and their families. All employees
have free 24/7 access to our employee assistance
programme which provides counselling and
support to employees and their households. We
have around 250 trained mental health first aiders
who can listen to and signpost employees to
relevant support services, and a similar number
of wellbeing champions who help promote our
wellbeing campaigns. Financial wellbeing is a
key focus, with financial education tools and
awareness courses available for all employees
covering a broad range of money management
topics such as financial planning, managing debt
and pensions.
Around 50 per cent of employees take up at
least one of these flexible options.
The company doubles any contributions that
employees make up to a maximum of 14 per
cent of salary. As part of the pension scheme
employees receive company-funded life
assurance and income protection.
Around half of the workforce participate in
our ShareBuy scheme.
Employees at all levels participate in the annual
bonus scheme, receiving financial rewards
based on the performance of the company and
their personal contribution. Specific weightings
and award levels vary by grade.
Flexible
benefits
Pension
ShareBuy
All employees have access to a variety of
additional voluntary benefits to suit their
lifestyle, and can choose from a range of deals
and discounts all year round. Employees can
donate to their chosen charities directly from
their pay if they want to.
Employees at all levels can participate in our
award-winning pension arrangements and
almost all of our employees choose to do so.
Any employee can become a shareholder
in our company and share in our success by
participating in our ShareBuy scheme. For every
five shares an employee buys the company
gives another one free.
Annual bonus
– cash
This provides a strong alignment to strategy
throughout the organisation, with the same
scorecard applying at all levels.
182
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Stock Code: UU.
CEO, CFO and
executives (10)
Annual bonus
– deferred
shares
Deferral of part of bonus into shares aligns
the interests of executive directors and
shareholders.
Each of the executive directors and executives
is required to defer a proportion of their bonus
into shares for three years.
CEO, CFO,
executives and
other senior leaders
(around 55)
Long Term
Plan (LTP)
To incentivise long-term value creation
and alignment with the long-term interests
of shareholders, customers, and other
stakeholders.
Executives and other senior leaders may be
invited to participate in the LTP. Performance
conditions are the same for all participants but
award sizes vary.
CEO, CFO and
executives (10)
Shareholding
guidelines
The committee believes that it is important for
each executive director to build and maintain a
significant investment in shares of the company
to provide alignment with shareholder interests.
All executives are subject to shareholding
guidelines, aligning their interests with those
of shareholders.
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183
Corporate governance report
Annual report on remuneration
Alignment of executive pay approach with that of the wider workforce and listening to the employee voice
The committee is always mindful of the alignment of executive pay arrangements with those of the wider workforce, and as is
demonstrated in the table on page 183 there is a high level of alignment and consistency of approach.
When reviewing salaries and assessing incentive outcomes for the executives, the committee takes account of how those elements
of remuneration have been (or will be) applied across the wider workforce in respect of the same periods. At each of its meetings the
committee receives an update on notable matters affecting pay and benefits among the wider workforce since its previous meeting,
and at least annually the committee formally reviews and discusses a report detailing all elements of the workforce’s pay and benefits.
The committee has mechanisms through which it hears from and engages with the workforce on executive pay. As chair of the committee,
insights related to remuneration that arise via Alison Goligher in her role as designated non-executive director for workforce engagement
can be quickly and appropriately considered, and a formal report is presented to the committee at least annually in this respect. Alison
hosts sessions with the Employee Voice panel which cover topics including the alignment of our executive pay approach with that of the
wider workforce, providing valuable opportunities for open discussions and feedback. See page 126 for further details. During the year, the
committee sought views from the Employee Voice panel as part of the consultation on the proposed directors’ remuneration policy.
The figures below show how the percentage change in the CEO’s salary, benefits and bonus earned in 2020/21 and 2021/22 compares
with the percentage change in the average of each of those components for a group of employees. The table below that shows the
same information in respect of each board member.
Change in CEO remuneration
Base salary(1)
+6.5%
Change in employee remuneration(4)
Base salary(5)
+3.7
Bonus(2)
-11.8%
Bonus
+11.6%
Change in other board member remuneration
Benefits(3)
-23.9%
Benefits
+5.0%
Year ended 31 March
Executive directors
Steve Mogford
Phil Aspin(7)
Non-executive directors(8)
Sir David Higgins
Liam Butterworth(9)
Stephen Carter
Kath Cates(9)
Mark Clare
Alison Goligher(10)
Brian May(7)
Paulette Rowe
Doug Webb(9) (11)
Salary/Total Fees(1)
Benefits(6)
Bonus
2022 versus
2021
2021 versus
2020
2022 versus
2021
2021 versus
2020
2022 versus
2021
2021 versus
2020
6.5%
1.2%
6.5%
n/a
6.3%
6.5%
6.3%
11.5%
6.5%
6.5%
23.6%
-4.2%
n/a
111.1%
n/a
-4.4%
n/a
-4.4%
9.4%
-4.4%
-4.2%
n/a
-23.9%
61.6%
1,555.9%
n/a
1,556.3%
1,555.9%
1,555.9%
708.6%
5,076.4%
782.1%
1,418.0%
-14.1%
n/a
-96.6%
n/a
-93.0%
n/a
-96.6%
-81.0%
-96.6%
-95.2%
n/a
-11.8%
7.6%
16.7%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(1)
In 2020/21 Steve Mogford and the non-executive directors in role at that time received no salary/fee increases and the salary/fees they received
reflected a voluntary reduction of 20 per cent for three months which was donated to charity. The actual salary/fee increase in 2021/22 was 2 per
cent in line with the headline increase for employees. The annual percentage changes shown are therefore greater than they would have been had
their 2020/21 salary/fees not been reduced.
(2) Steve Mogford informed the committee that he wished to unconditionally waive £150,000 of his 2021/22 bonus. This has resulted in a material
reduction in bonus value compared to 2020/21.
(3) During the year Steve Mogford ceased to be eligible for group income protection and so the value of his benefits reduced compared to 2020/21.
(4) To aid comparison, the group of employees selected by the committee are all those members of the workforce who were employed over the
complete two-year period.
Includes promotional increases. The headline salary increase for employees was 2.0 per cent.
(5)
(6) For non-executive directors, taxable benefits relate primarily to certain travel expenses and accommodation which, given the relatively small
numbers involved, can produce sizeable percentage changes from year to year. The significant change for 2021/22 versus 2020/21 primarily reflects
the fact that as a result of the COVID-19 pandemic, in 2020/21 the value of benefits received (typically less than £100) were materially less than
normal. Face-to-face meetings resumed during 2021/22, with travel related expenses increasing towards their normal levels.
(7) Phil Aspin was appointed to the board on 24 July 2020. Brian May stepped down from the board on 23 July 2021. To enable a meaningful year-on-
year comparison their salary/fees and bonus (for Phil Aspin) reflect hypothetical full-year earnings in 2020/21 and 2021/22 respectively.
(8) Calculated using the fees and taxable benefits shown in the table on page 188.
(9) Kath Cates and Doug Webb were appointed to the board on 1 September 2020. To enable a meaningful year-on-year comparison their salary/fees
for 2020/21 reflect hypothetical full-year earnings. Liam Butterworth was appointed to the board on 1 January 2022 so no year-on-year comparison is
possible.
(10) The fee increases for Alison Goligher reflects her appointment as remuneration committee chair with the associated fee effective from 24 July 2020.
(11) The fee increase for Doug Webb reflects his appointment as audit and treasury committee chair with the associated fee effective from 23 July 2021.
184
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Corporate governance report
Annual report on remuneration
The committee is always mindful of the alignment of executive pay arrangements with those of the wider workforce, and as is
demonstrated in the table on page 183 there is a high level of alignment and consistency of approach.
When reviewing salaries and assessing incentive outcomes for the executives, the committee takes account of how those elements
of remuneration have been (or will be) applied across the wider workforce in respect of the same periods. At each of its meetings the
committee receives an update on notable matters affecting pay and benefits among the wider workforce since its previous meeting,
and at least annually the committee formally reviews and discusses a report detailing all elements of the workforce’s pay and benefits.
The committee has mechanisms through which it hears from and engages with the workforce on executive pay. As chair of the committee,
insights related to remuneration that arise via Alison Goligher in her role as designated non-executive director for workforce engagement
can be quickly and appropriately considered, and a formal report is presented to the committee at least annually in this respect. Alison
hosts sessions with the Employee Voice panel which cover topics including the alignment of our executive pay approach with that of the
wider workforce, providing valuable opportunities for open discussions and feedback. See page 126 for further details. During the year, the
committee sought views from the Employee Voice panel as part of the consultation on the proposed directors’ remuneration policy.
The figures below show how the percentage change in the CEO’s salary, benefits and bonus earned in 2020/21 and 2021/22 compares
with the percentage change in the average of each of those components for a group of employees. The table below that shows the
same information in respect of each board member.
Change in CEO remuneration
Base salary(1)
+6.5%
Base salary(5)
+3.7
Change in employee remuneration(4)
Bonus(2)
-11.8%
Bonus
+11.6%
Change in other board member remuneration
Benefits(3)
-23.9%
Benefits
+5.0%
Year ended 31 March
Executive directors
Steve Mogford
Phil Aspin(7)
Non-executive directors(8)
Sir David Higgins
Liam Butterworth(9)
Stephen Carter
Kath Cates(9)
Mark Clare
Alison Goligher(10)
Brian May(7)
Paulette Rowe
Doug Webb(9) (11)
Salary/Total Fees(1)
Benefits(6)
Bonus
2022 versus
2021 versus
2022 versus
2021 versus
2022 versus
2021 versus
2021
2020
2021
2020
2021
2020
6.5%
1.2%
6.5%
n/a
6.3%
6.5%
6.3%
11.5%
6.5%
6.5%
23.6%
-4.2%
n/a
111.1%
n/a
-4.4%
n/a
-4.4%
9.4%
-4.4%
-4.2%
n/a
-23.9%
61.6%
1,555.9%
n/a
1,556.3%
1,555.9%
1,555.9%
708.6%
5,076.4%
782.1%
1,418.0%
-14.1%
n/a
-96.6%
-93.0%
n/a
n/a
-96.6%
-81.0%
-96.6%
-95.2%
n/a
-11.8%
7.6%
16.7%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
their 2020/21 salary/fees not been reduced.
reduction in bonus value compared to 2020/21.
complete two-year period.
(1)
In 2020/21 Steve Mogford and the non-executive directors in role at that time received no salary/fee increases and the salary/fees they received
reflected a voluntary reduction of 20 per cent for three months which was donated to charity. The actual salary/fee increase in 2021/22 was 2 per
cent in line with the headline increase for employees. The annual percentage changes shown are therefore greater than they would have been had
(2) Steve Mogford informed the committee that he wished to unconditionally waive £150,000 of his 2021/22 bonus. This has resulted in a material
(3) During the year Steve Mogford ceased to be eligible for group income protection and so the value of his benefits reduced compared to 2020/21.
(4) To aid comparison, the group of employees selected by the committee are all those members of the workforce who were employed over the
(5)
Includes promotional increases. The headline salary increase for employees was 2.0 per cent.
(6) For non-executive directors, taxable benefits relate primarily to certain travel expenses and accommodation which, given the relatively small
numbers involved, can produce sizeable percentage changes from year to year. The significant change for 2021/22 versus 2020/21 primarily reflects
the fact that as a result of the COVID-19 pandemic, in 2020/21 the value of benefits received (typically less than £100) were materially less than
normal. Face-to-face meetings resumed during 2021/22, with travel related expenses increasing towards their normal levels.
(7) Phil Aspin was appointed to the board on 24 July 2020. Brian May stepped down from the board on 23 July 2021. To enable a meaningful year-on-
year comparison their salary/fees and bonus (for Phil Aspin) reflect hypothetical full-year earnings in 2020/21 and 2021/22 respectively.
(8) Calculated using the fees and taxable benefits shown in the table on page 188.
(9) Kath Cates and Doug Webb were appointed to the board on 1 September 2020. To enable a meaningful year-on-year comparison their salary/fees
for 2020/21 reflect hypothetical full-year earnings. Liam Butterworth was appointed to the board on 1 January 2022 so no year-on-year comparison is
possible.
(10) The fee increases for Alison Goligher reflects her appointment as remuneration committee chair with the associated fee effective from 24 July 2020.
(11) The fee increase for Doug Webb reflects his appointment as audit and treasury committee chair with the associated fee effective from 23 July 2021.
Alignment of executive pay approach with that of the wider workforce and listening to the employee voice
CEO pay ratios
The table below sets out the ratio of the CEO’s pay to that of the 25th percentile (P25), median (P50) and 75th percentile (P75) full-
time equivalent employees. The ratios have been calculated in accordance with the regulations which provide for three different
approaches to determine the pay ratio (Options A, B and C).
The data in the tables below has been calculated using Option A which is considered to be the most accurate methodology and uses
the same calculation basis as required for the CEO’s total remuneration as shown in the single figure table on page 177.
• We identified all employees who received base salary during the year ended 31 March 2022 and who were still employed on that date.
• The calculations were carried out using their total pay and benefits received in respect of the year ended 31 March 2022, including bonuses
earned by reference to performance in the financial year and paid in June following the end of the financial year.
• For employees who were employed on a part-time basis, or who were not employed for the full year, their remuneration has been
annualised to reflect the full-time equivalent.
• No other estimates or adjustments have been used in the calculations and no other remuneration items have been omitted.
Methodology used
Average number of employees
Ratio of CEO single figure total remuneration:(1)
– To employee at the 25th percentile
– To employee at the 50th percentile
– To employee at the 75th percentile
Ratio of CEO base salary plus annual bonus:
– To employee at the 25th percentile
– To employee at the 50th percentile
– To employee at the 75th percentile
Ratio of CEO base salary:
– To employee at the 25th percentile
– To employee at the 50th percentile
– To employee at the 75th percentile
Additional details
CEO total single figure (£’000)
CEO base salary plus annual bonus (£’000)
CEO base salary (£’000)
Employees total pay and benefits (£’000)
– at the 25th percentile
– at the 50th percentile
– at the 75th percentile
Employees base salary plus annual bonus (£’000)
– at the 25th percentile
– at the 50th percentile
– at the 75th percentile
Employees base salary (£’000)
– at the 25th percentile
– at the 50th percentile
– at the 75th percentile
Financial year
2020/21
A
5,570
2021/22
A
5,866
2019/20
A
5,461
92:1
69:1
54:1
44:1
37:1
30:1
24:1
20:1
17:1
3,178
1,511
784
35
46
59
34
41
51
32
39
47
97:1
72:1
57:1
52:1
38:1
30:1
26:1
19:1
15:1
3,323
1,560
736
34
46
58
30
42
52
29
39
50
87:1
66:1
53:1
47:1
37:1
31:1
26:1
20:1
17:1
2,925
1,476
769
33
44
56
32
40
48
30
38
44
(1) The figures for 2020/21 have been restated to reflect the final vesting outcome, additional dividend equivalents and updated share price for Steve
Mogford’s 2018 LTP as shown in the single figure table on page 177. The figures for 2019/20 have also been restated to reflect additional dividend
equivalents and closing share price on the date of vesting for Steve Mogford’s 2017 LTP.
Along with the ratios comparing total remuneration, the committee keeps under review the ratios for salary and salary plus annual bonus,
and tracks how these change over time. With a significant proportion of the remuneration of the CEO linked to company performance
and share price movements over the longer term, it is expected that the headline ratios will depend primarily on the Long Term Plan
(LTP) outcome, and, accordingly, may fluctuate from year to year. Participation in the LTP is currently limited to around 55 executives
and senior leaders, with none of the individuals identified as P25, P50 and P75 in this group. On the other hand, employees at all levels
participate in the annual bonus scheme, and so the committee considers this ratio as well as the ratio comparing only salary, to provide
helpful additional context.
This year the pay ratio of CEO single figure total remuneration to the median employee (P50) has reduced slightly compared to last year
at 69:1, with a reduction also being noticeable at P25 and P75. The committee observes a similar picture across the other reported ratios,
which is to be expected given our approach to cascading the annual bonus and having aligned executive director salary increases with
the broader workforce. The committee will continue to consider the pay ratios in the context of other important metrics such as the
gender pay gap and employee engagement levels.
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Stock Code: UU.
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185
Corporate governance report
Annual report on remuneration
Relative importance of spend on pay
The table below shows the relative importance of spend on pay compared to distributions to shareholders.
£324m
+9.0%
2021/22
2020/21
Employee
costs(1)
Dividends paid to
shareholders
£297m
£296m
+1.2%
£292m
£0m
£50m
£100m
£150m
£200m
£250m
£300m
£350m
£400m
(1) Employee costs includes wages and salaries, social security costs, and post-employment benefits.directors’ interests in shares
Executive directors’ shareholding (audited information)
Details of beneficial interests in the company’s ordinary shares as at 31 March 2022 held by each of the executive directors and their
connected persons are set out in the charts below along with progress against the target shareholding requirement level. Steve
Mogford continues to exceed the target shareholding requirement level of 200 per cent of salary. Phil Aspin is expected to reach the
minimum guideline by 24 July 2025 (within five years of his appointment to the board).
391
s
e
r
a
h
s
f
o
s
0
0
0
’
400
350
300
250
200
150
100
50
0
286
149
29
14
77
2022
2021
2022
2021
Year ended 31 March
Steve Mogford (CEO)
Year ended 31 March
Phil Aspin (CFO)
Unvested shares not subject to performance
conditions after tax and National Insurance
Shares owned outright
Number of shares required to achieve
shareholding requirement at 31 March 2022
Further details of the executive directors’ shareholdings and share plan interests are given in the table below and in the appendix on
page 191.
Number
of shares
required
to meet
share-
holding
require-
ment(1)
Share-
holding
require-
ment (%
of salary)
200% 148,572
200%
76,663
Director
Steve
Mogford(5)(6)
Phil Aspin(5)
Number of
shares owned
outright (including
connected
persons)
Unvested shares
not subject to
performance
conditions(2)
Total shares
counting towards
shareholding
requirements(3)
Share-
holding
as %
of base
salary at
31 March
Share-
holding
require-
ment
met at
31 March
Unvested shares
subject to
performance
conditions(4)
2022
2021
2022
2021
2022
2021
2022(1)
2022
2022
2021
181,144 110,630 395,160 331,476 390,595 286,331
13,736
11,439
4,299
21,367
17,440
28,781
526%
75%
Yes 363,303 390,702
79,794
No 126,738
(1) Share price used is the average share price over the three months from 1 January 2022 to 31 March 2022 (1,064.4 pence per share).
(2) Unvested shares subject to no further performance conditions such as matching shares under the ShareBuy scheme. Includes shares subject only to
withholding provisions such as Deferred Bonus Plan shares in the three-year deferral period and Long Term Plan shares in the applicable holding period.
(3)
Includes unvested shares not subject to performance conditions (on a notional net of tax and National Insurance basis), plus the number of shares
owned outright.
(4)
Includes unvested shares under the Long Term Plan.
(5)
In the period 1 April 2022 to 22 May 2022, additional shares were acquired by Steve Mogford (27 ordinary shares) and Phil Aspin (27 ordinary shares)
in respect of their regular monthly contributions to the all-employee ShareBuy scheme. These will be matched by the company on a one-for-five
basis. Under the scheme, matching shares vest one year after grant provided the employee remains employed by the company.
(6) On 1 April 2022, shares granted on 27 June 2017 under the Long Term Plan vested for Steve Mogford following an additional two-year holding period.
Steve Mogford had 110,948 shares vesting, of which 52,277 shares were sold to cover tax and National Insurance. Steve retained the remaining
balance of 58,671 shares.
186
unitedutilities.com/corporate
Corporate governance report
Annual report on remuneration
The table below shows the relative importance of spend on pay compared to distributions to shareholders.
£324m
+9.0%
2021/22
2020/21
Employee
costs(1)
Dividends paid to
shareholders
£297m
£296m
+1.2%
£292m
£0m
£50m
£100m
£150m
£200m
£250m
£300m
£350m
£400m
(1) Employee costs includes wages and salaries, social security costs, and post-employment benefits.directors’ interests in shares
Executive directors’ shareholding (audited information)
Details of beneficial interests in the company’s ordinary shares as at 31 March 2022 held by each of the executive directors and their
connected persons are set out in the charts below along with progress against the target shareholding requirement level. Steve
Mogford continues to exceed the target shareholding requirement level of 200 per cent of salary. Phil Aspin is expected to reach the
minimum guideline by 24 July 2025 (within five years of his appointment to the board).
Unvested shares not subject to performance
conditions after tax and National Insurance
Shares owned outright
Number of shares required to achieve
shareholding requirement at 31 March 2022
391
286
149
29
14
77
2022
2021
2022
2021
Year ended 31 March
Steve Mogford (CEO)
Year ended 31 March
Phil Aspin (CFO)
s
e
r
a
h
s
f
o
s
0
0
0
’
400
350
300
250
200
150
100
50
0
page 191.
Further details of the executive directors’ shareholdings and share plan interests are given in the table below and in the appendix on
Number
of shares
required
Number of
Share-
Share-
holding
holding
shares owned
Unvested shares
Total shares
as %
require-
Unvested shares
Share-
to meet
outright (including
not subject to
counting towards
of base
connected
persons)
performance
conditions(2)
shareholding
salary at
requirements(3)
31 March
31 March
ment
met at
subject to
performance
conditions(4)
holding
require-
share-
holding
ment (%
require-
Director
of salary)
ment(1)
2022
2021
2022
2021
2022
2021
2022(1)
2022
2022
2021
Steve
Mogford(5)(6)
Phil Aspin(5)
200% 148,572
181,144 110,630 395,160 331,476 390,595 286,331
200%
76,663
17,440
11,439
21,367
4,299
28,781
13,736
526%
75%
Yes 363,303 390,702
No 126,738
79,794
(1) Share price used is the average share price over the three months from 1 January 2022 to 31 March 2022 (1,064.4 pence per share).
(2) Unvested shares subject to no further performance conditions such as matching shares under the ShareBuy scheme. Includes shares subject only to
withholding provisions such as Deferred Bonus Plan shares in the three-year deferral period and Long Term Plan shares in the applicable holding period.
(3)
Includes unvested shares not subject to performance conditions (on a notional net of tax and National Insurance basis), plus the number of shares
owned outright.
(4)
Includes unvested shares under the Long Term Plan.
(5)
In the period 1 April 2022 to 22 May 2022, additional shares were acquired by Steve Mogford (27 ordinary shares) and Phil Aspin (27 ordinary shares)
in respect of their regular monthly contributions to the all-employee ShareBuy scheme. These will be matched by the company on a one-for-five
basis. Under the scheme, matching shares vest one year after grant provided the employee remains employed by the company.
(6) On 1 April 2022, shares granted on 27 June 2017 under the Long Term Plan vested for Steve Mogford following an additional two-year holding period.
Steve Mogford had 110,948 shares vesting, of which 52,277 shares were sold to cover tax and National Insurance. Steve retained the remaining
Relative importance of spend on pay
Other information
Dilution limits
Awards granted under the company’s share plans are satisfied by market purchased shares bought on behalf of the company by
United Utilities Employee Share Trust immediately prior to the vesting of a share plan. The company does not make regular purchases
of shares into the Trust nor employ a share purchase hedging strategy, and shares are bought to satisfy the vesting of share plans.
The rules of the Deferred Bonus Plan do not permit awards to be satisfied by newly issued shares and must be satisfied by market
purchased shares. The rules of the Long Term Plan permit the awards to be satisfied by newly issued shares but the company has
decided to satisfy awards by market purchased shares.
Should the company’s method of satisfying share plan vestings change (i.e. issuing new shares) then the company would monitor the
number of shares issued and their impact on dilution limits set by the Investment Association in respect of all share plans (10 per cent
in any rolling ten-year period) and executive share plans (5 per cent in any rolling ten-year period). No treasury shares were held or
utilised in the year ended 31 March 2022.
Company performance and CEO remuneration comparison
The total shareholder return (TSR) chart below illustrates the company’s performance against the FTSE 100 over the past ten years.
The FTSE 100 is an appropriate comparator as the company is a member of the FTSE 100 and it is a widely published benchmark
for this purpose. The chart shows the growth in the value of a hypothetical £100 holding invested in the company over the ten-year
period. The chart also shows the CEO’s single total figure remuneration over the ten years ended 31 March 2022 for comparison. The
table below the TSR chart shows the remuneration data for the CEO over the same period. Steve Mogford was the CEO over the
whole period.
100
124
115
145
123
179
184
131
124
206
153
186
165
155
153
233
164
217
135
United Utilities
Group PLC
FTSE 100 Index
£
e
u
a
V
l
300
250
200
150
100
50
0
295
3,500
3,000
2,500
191
2,000
1,500
1,000
500
0
’
0
0
0
£
n
o
i
t
a
r
e
n
u
m
e
r
f
o
e
r
u
g
fi
e
g
n
i
s
O
E
C
l
2013
2014
2015
2016
2017
2018
2019
2020 2021
2022
Year ended 31 March
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Steve Mogford
CEO single figure of
remuneration (£’000)
Annual bonus payment (% of
maximum)
LTP vesting (% of maximum)(5)
1,549
2,378
2,884
2,760(1)
2,233
2,221
2,448 2,925(2) 3,323(3)
3,178
84.4
78.2
77.4
54.5
83.7
74.9
79.0
70.7
81.8
71.3(4)
n/a(6)
93.5
97.5
33.6
54.5
55.4
64.4
87.3
97.9(3)
100(7)
(1) This includes the payout from the 2013 Long Term Plan (LTP) as well as £1.028 million in respect of Steve Mogford’s one-off Matched Share
Investment Scheme that ended on 5 January 2016 (vested at 100 per cent).
(2) The payout from the 2017 LTP, which vested on 1 April 2022 after the end of a two-year holding period, has been updated to reflect the additional
dividends accruing on this award and the closing share price on the date of vesting of 1,122.2 pence per share.
(3) The payout and vesting percentage for the 2018 LTP have been restated to reflect the additional dividend equivalents accruing on the award, the
final vesting outcome and updated share price. See page 177 for further details.
(4) Steve Mogford unconditionally waived part of his 2021/22 bonus. The actual bonus scorecard outcome was 86.0 per cent.
(5) For performance periods ended on 31 March, unless otherwise stated.
(6) Steve Mogford was not a participant in any long-term incentive plans that had performance periods ending during 2013. For those who did
participate in those plans, the vesting as a percentage of maximum was 35.3 per cent for those vesting in 2013.
(7) The 2019 Long Term Plan amount vesting percentage is estimated. See page 179 for further details.
Exit payments and payments to former directors made in the year
There have been no exit payments or payments to former directors in respect of their roles as directors during the year ended
31 March 2022 other than the vesting of legacy share awards. See page 191.
balance of 58,671 shares.
186
unitedutilities.com/corporate
Stock Code: UU.
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187
Corporate governance report
Annual report on remuneration
Non-executive directors
Single total figure of remuneration for non-executive directors (audited information)
Year ended 31 March
Sir David Higgins
Liam Butterworth(2)
Stephen Carter
Kath Cates(3)
Mark Clare
Alison Goligher
Brian May(4)
Paulette Rowe
Doug Webb(3) (5)
Salary/fees £’000
Taxable benefits £’000
Total £’000
2022
304
17
81
69
83
83
26
69
80
2021(1)
285
n/a
76
40
78
74
80
65
40
2022
2
0
2
2
2
1
5
1
1
2021
0
n/a
0
0
0
0
0
0
0
2022
306
17
83
71
85
84
31
70
81
2021
285
n/a
76
40
78
74
80
65
40
(1)
In the context of the COVID-19 pandemic it was determined that fees should not increase in the year ended 31 March 2021. The fees received by the
non-executive directors reflect a voluntary reduction of 20 per cent for three months, the total value of which was donated to charity.
(2) Liam Butterworth joined the board on 1 January 2022.
(3) The fees for Kath Cates and Doug Webb in respect of year ending 31 March 2021 reflect part-year earnings as they both joined the board on
1 September 2020.
(4) Brian May stepped down from the board on 23 July 2021. The benefits value shown for 2022 includes the cost of a retirement gift he received,
alongside other expenses.
(5) Doug Webb was appointed as chair of the audit and treasury committees with effect from 23 July 2021 and received the applicable additional fees
from that date.
Fees
Non-executive director base fees were reviewed and increased with effect from 1 September 2021 as shown below. Base fees were
increased by 2.0 per cent which is the same as the increase applying to the general workforce in 2021. Additional fees for the senior
independent non-executive director and the chairs of committees were not increased.
Role
Base fee: Chair(1)
Base fee: other non-executive directors(2)
Senior independent non-executive director(2)
Chair of audit and treasury committees(2)
Chair of remuneration committee(2)
Chair of corporate responsibility committee(2)
(1) Approved by the remuneration committee.
(2) Approved by a separate committee of the board.
Fees £’000
1 Sept 2021
1 Sept 2020
306.0
300.0
69.6
13.5
16.0
13.5
12.0
68.2
13.5
16.0
13.5
12.0
Non-executive directors’ shareholdings (audited information)
Details of beneficial interests in the company’s ordinary shares as at 31 March 2022 held by each of the non-executive directors and
their connected persons are set out in the table below.
Non-executive directors
Date first appointed to the board
Number of shares owned outright
(including connected persons) at
31 March 2022(1)
Sir David Higgins
Liam Butterworth
Stephen Carter
Kath Cates
Mark Clare
Alison Goligher
Brian May(2)
Paulette Rowe
Doug Webb
13.5.19
1.1.22
1.9.14
1.9.20
1.11.13
1.8.16
1.9.12
1.7.17
1.9.20
3,000
3,000
3,075
2,135
7,628
3,000
3,000
3,000
5,700
(1) From 1 April 2022 to 24 May 2022 there have been no movements in the shareholdings of the non-executive directors.
(2) Brian May had 3,000 shares when he stepped down from the board with effect from 23 July 2021.
188
unitedutilities.com/corporate
Non-executive directors
The remuneration committee
Summary terms of reference
The committee’s terms of reference were last reviewed in November 2021 and are available on our website at:
corporate.unitedutilities.com/corporate-governance
The committee’s main responsibilities include:
• Determining and recommending to the board the policy for executive director remuneration, having reviewed and taken into
account workforce remuneration and related policies and the alignment of incentives and reward with culture;
• Setting the individual employment and remuneration terms for executive directors and other senior executives, including:
recruitment and severance terms, bonus plans and targets, and the achievement of performance against targets;
• Approving the general employment and remuneration terms for selected senior employees;
• Setting the remuneration of the Chair of the company;
• Proposing all new long-term incentive schemes for approval of the board, and for recommendation by the board to
shareholders; and
• Assisting the board in reporting to shareholders and undertaking appropriate discussions as necessary with institutional
shareholders on aspects of executive remuneration.
Composition of the remuneration committee as at 31 March 2022
Member
Alison Goligher (chair since 24.7.20)
Kath Cates
Mark Clare
Doug Webb
Member since
1.8.16
1.9.20
1.9.14
23.7.21
The committee’s members have no personal financial interest in the company other than as shareholders and the fees paid to them as
non-executive directors.
Activities of the remuneration committee over the past year
The committee met five times in the year ended 31 March 2022 and carried out a number of key activities:
• Approved the 2020/21 directors’ remuneration report;
• Reviewed the pay comparator group;
• Reviewed the base salaries of executive directors and other members of the executive team;
• Reviewed the base fee for the Chair;
• Assessed the achievement of targets for the 2020/21 annual bonus scheme, reviewed progress against the targets for the 2021/22
annual bonus scheme, and considered the targets for the 2022/23 annual bonus;
• Assessed the achievement of targets for the Long Term Plan (LTP) awards made in 2018, reviewed progress against the targets for
the 2019 and 2020 LTP awards, and set the measures and targets for the 2021 LTP awards;
• Reviewed and approved awards made under the annual bonus, Deferred Bonus Plan (DBP) and LTP;
• Monitored progress against shareholding guidelines for executive directors and other members of the executive team;
• Reviewed the committee’s performance during the period;
• Considered the remuneration arrangements of the wider workforce and their alignment with those of the executives, alongside
feedback received from the workforce via Alison Goligher in her role as the non-executive director for workforce engagement;
• Considered governance developments and market trends in executive remuneration, including in the wider utilities sector;
• Noted progress on the company’s gender pay gap reporting;
• Reviewed the executive pay arrangements and consulted with shareholders and other stakeholders on the proposed remuneration
policy; and
• Reviewed the rules of the executive incentive plans.
Corporate governance report
Annual report on remuneration
Single total figure of remuneration for non-executive directors (audited information)
Year ended 31 March
Sir David Higgins
Liam Butterworth(2)
Stephen Carter
Kath Cates(3)
Mark Clare
Alison Goligher
Brian May(4)
Paulette Rowe
Doug Webb(3) (5)
Salary/fees £’000
Taxable benefits £’000
Total £’000
2022
2021
2022
304
17
81
69
83
83
26
69
80
2021(1)
285
n/a
76
40
78
74
80
65
40
2
0
2
2
2
1
5
1
1
n/a
0
0
0
0
0
0
0
0
2022
306
17
83
71
85
84
31
70
81
2021
285
n/a
76
40
78
74
80
65
40
(1)
In the context of the COVID-19 pandemic it was determined that fees should not increase in the year ended 31 March 2021. The fees received by the
non-executive directors reflect a voluntary reduction of 20 per cent for three months, the total value of which was donated to charity.
(2) Liam Butterworth joined the board on 1 January 2022.
(3) The fees for Kath Cates and Doug Webb in respect of year ending 31 March 2021 reflect part-year earnings as they both joined the board on
(4) Brian May stepped down from the board on 23 July 2021. The benefits value shown for 2022 includes the cost of a retirement gift he received,
(5) Doug Webb was appointed as chair of the audit and treasury committees with effect from 23 July 2021 and received the applicable additional fees
1 September 2020.
alongside other expenses.
from that date.
Fees
Non-executive director base fees were reviewed and increased with effect from 1 September 2021 as shown below. Base fees were
increased by 2.0 per cent which is the same as the increase applying to the general workforce in 2021. Additional fees for the senior
independent non-executive director and the chairs of committees were not increased.
Role
Base fee: Chair(1)
Base fee: other non-executive directors(2)
Senior independent non-executive director(2)
Chair of audit and treasury committees(2)
Chair of remuneration committee(2)
Chair of corporate responsibility committee(2)
(1) Approved by the remuneration committee.
(2) Approved by a separate committee of the board.
Sir David Higgins
Liam Butterworth
Stephen Carter
Kath Cates
Mark Clare
Alison Goligher
Brian May(2)
Paulette Rowe
Doug Webb
Fees £’000
1 Sept 2021
1 Sept 2020
306.0
300.0
69.6
13.5
16.0
13.5
12.0
68.2
13.5
16.0
13.5
12.0
13.5.19
1.1.22
1.9.14
1.9.20
1.11.13
1.8.16
1.9.12
1.7.17
1.9.20
3,000
3,000
3,075
2,135
7,628
3,000
3,000
3,000
5,700
Non-executive directors’ shareholdings (audited information)
Details of beneficial interests in the company’s ordinary shares as at 31 March 2022 held by each of the non-executive directors and
their connected persons are set out in the table below.
Non-executive directors
Date first appointed to the board
31 March 2022(1)
Number of shares owned outright
(including connected persons) at
(1) From 1 April 2022 to 24 May 2022 there have been no movements in the shareholdings of the non-executive directors.
(2) Brian May had 3,000 shares when he stepped down from the board with effect from 23 July 2021.
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Stock Code: UU.
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Corporate governance report
Annual report on remuneration
Support to the remuneration committee
By invitation of the committee, meetings are attended by the Chair, the Chief Executive Officer, the company secretary (who acts
as secretary to the committee), the customer services and people director and the head of reward, who are consulted on matters
discussed by the committee, unless those matters relate to their own remuneration. Advice or information is also sought directly from
other employees where the committee feels that such additional contributions will assist the decision-making process.
The committee is authorised to take such internal and external advice as it considers appropriate in connection with carrying out its
duties, including the appointment of its own external remuneration advisers.
During the year, the committee was assisted in its work by the following external advisers:
Adviser
Appointed by
How appointed
Services provided
to the committee
in year ended
31 March 2022
Additional services
provided in
year ended
31 March 2022
Fees paid by
company for these
services in respect
of year and basis of
charge
Ellason LLP
Committee
Appointed January
2021; services retained
during the financial
year
General advice on
remuneration matters
including analysis
of the remuneration
policy and regular
market and best
practice updates
Advice and
benchmarking
on non-executive
director and senior
leader remuneration
£54,000 on a time/
cost basis as set out in
terms and conditions
in the relevant
engagement letter
Ellason are signatories to the Remuneration Consultant Group’s Code of Conduct which sets out guidelines to ensure that any advice
is independent and free of undue influence (which can be found at www.remunerationconsultantsgroup.com). None of the individual
directors have a personal connection with Ellason. The committee is satisfied that the advice it receives is objective and independent
and confirms that Ellason do not have any connection with the company that may impair their independence.
In addition, during the year, the law firm Eversheds Sutherland provided advice to the company in relation to the company’s share
schemes.
2021 AGM: statement of voting
At the last annual general meeting on 23 July 2021, votes on the 2021/22 directors’ remuneration report (other than the part containing
the directors’ remuneration policy) were cast as follows:
Votes for 466,214,257
(97.32% of votes cast)
Votes against 12,828,512
(2.68% of votes cast)
479,042,769
Total votes cast
2,205,642
Votes withheld
(abstentions)
At the annual general meeting on 26 July 2019, votes on the directors’ remuneration policy were cast as follows:
Votes for 458,175,960
(99.41% of votes cast)
Votes against 2,709,122
(0.59% of votes cast)
460,885,082
Total votes cast
667,337
Votes withheld
(abstentions)
The directors’ remuneration report was approved by the board of directors on 24 May 2022 and signed on its behalf by:
Alison Goligher
Chair of the remuneration committee
190
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Corporate governance report
Annual report on remuneration
Support to the remuneration committee
By invitation of the committee, meetings are attended by the Chair, the Chief Executive Officer, the company secretary (who acts
as secretary to the committee), the customer services and people director and the head of reward, who are consulted on matters
discussed by the committee, unless those matters relate to their own remuneration. Advice or information is also sought directly from
other employees where the committee feels that such additional contributions will assist the decision-making process.
The committee is authorised to take such internal and external advice as it considers appropriate in connection with carrying out its
duties, including the appointment of its own external remuneration advisers.
During the year, the committee was assisted in its work by the following external advisers:
Adviser
Appointed by
How appointed
Ellason LLP
Committee
Appointed January
General advice on
Advice and
£54,000 on a time/
Services provided
Additional services
company for these
to the committee
in year ended
31 March 2022
provided in
year ended
services in respect
of year and basis of
31 March 2022
charge
Fees paid by
2021; services retained
remuneration matters
benchmarking
cost basis as set out in
during the financial
including analysis
on non-executive
terms and conditions
year
of the remuneration
director and senior
in the relevant
policy and regular
leader remuneration
engagement letter
market and best
practice updates
Ellason are signatories to the Remuneration Consultant Group’s Code of Conduct which sets out guidelines to ensure that any advice
is independent and free of undue influence (which can be found at www.remunerationconsultantsgroup.com). None of the individual
directors have a personal connection with Ellason. The committee is satisfied that the advice it receives is objective and independent
and confirms that Ellason do not have any connection with the company that may impair their independence.
In addition, during the year, the law firm Eversheds Sutherland provided advice to the company in relation to the company’s share
schemes.
2021 AGM: statement of voting
At the last annual general meeting on 23 July 2021, votes on the 2021/22 directors’ remuneration report (other than the part containing
the directors’ remuneration policy) were cast as follows:
At the annual general meeting on 26 July 2019, votes on the directors’ remuneration policy were cast as follows:
Votes for 466,214,257
(97.32% of votes cast)
Votes against 12,828,512
(2.68% of votes cast)
479,042,769
2,205,642
Total votes cast
Votes withheld
(abstentions)
Votes for 458,175,960
(99.41% of votes cast)
Votes against 2,709,122
(0.59% of votes cast)
460,885,082
Total votes cast
667,337
Votes withheld
(abstentions)
Appendix 1: Executive directors’ share plan interests 1 April 2021 to 31 March 2022
Awards held
at 1 April
2021
Award date
Granted in
year
Vested
in year
Lapsed/
forfeited in
year
Notional
dividends
accrued in
year(1)
Awards
held at
31 March
2022(1)
Steve Mogford
Shares not subject to performance conditions at 31 March 2022
DBP
54,457
18.6.18
DBP
DBP
DBP(2)
LTP
LTP
LTP
17.6.19
17.6.20
16.6.21
28.6.16
27.6.17
25.6.18
ShareBuy matching
shares(3)
Subtotal
1.4.21 to 31.3.22
51,576
40,561
–
78,203
106,640
144,046
39
475,522
Shares subject to performance conditions at 31 March 2022
LTP
132,854
28.6.19
LTP
LTP(4)
Subtotal
TOTAL
Phil Aspin
30.11.20
30.6.21
113,802
–
246,656
722,178
–
–
–
39,987
–
–
–
35
40,022
–
–
102,539
102,539
142,561
Shares not subject to performance conditions at 31 March 2022
DBP
DBP(2)
17.6.20
16.6.21
4,259
–
–
16,246
LTP
ShareBuy matching
shares(3)
Subtotal
25.6.18
10,886
1.4.21 to 31.3.22
40
15,185
Shares subject to performance conditions at 31 March 2022
LTP
28.6.19
10,186
LTP
LTP(4)
Subtotal
TOTAL
30.11.20
30.6.21
58,722
–
68,908
84,093
–
35
16,281
–
–
52,910
52,910
69,191
54,457
–
–
–
78,203
–
–
39
132,699
–
–
–
–
–
–
–
–
–
–
3,106
–
3,106
–
–
–
–
132,699
3,106
–
–
10,408
40
10,448
–
–
–
–
–
–
768
–
768
–
–
–
–
10,448
768
–
2,083
1,638
1,614
–
4,308
5,778
–
15,421
5,368
4,597
4,143
14,108
29,529
171
656
290
–
1,117
411
2,372
2,137
4,920
6,037
–
53,659
42,199
41,601
–
110,948
146,718
35
395,160
138,222
118,399
106,682
363,303
758,463
4,430
16,902
–
35
21,367
10,597
61,094
55,047
126,738
148,105
(1) Note that these are subject to performance conditions where applicable.
(2) See page 178 for further details.
(3) Under ShareBuy, matching shares vest provided the employee remains employed by the company one year after grant. During the year, Steve
Mogford purchased 173 partnership shares and was awarded 35 matching shares (at an average share price of 1,038.5 pence per share). Phil Aspin
purchased 173 partnership shares and was awarded 35 matching shares (at an average share price of 1,038.8 pence per share).
(4) See page 180 for further details
Vesting of legacy share awards for former directors
Russ Houlden retired from the board and left the company in July 2020. In line with policy he retained a number of awards under the
DBP and, as a ‘good leaver’, the LTP. On 1 April 2021, 49,356 shares arising from his 2016 LTP vested. On 18 June 2021, 34,157 shares
arising from his 2018 DBP vested.
Steve Fraser left the board and company in August 2019. In line with policy he retained a number of awards under the DBP, and his
outstanding LTP awards lapsed. On 18 June 2021, 25,509 shares arising from his 2018 DBP vested.
The directors’ remuneration report was approved by the board of directors on 24 May 2022 and signed on its behalf by:
Alison Goligher
Chair of the remuneration committee
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Corporate governance report
UK tax policies and objectives
Consistent with our wider business objectives, we are
committed to acting in a responsible manner in relation
to our tax affairs.
Our tax policies and objectives, which are approved by
the board on an annual basis, ensure that we:
• only engage in reasonable tax planning aligned
with our commercial activities and we always
comply with what we believe to be both the letter
and the spirit of the law;
• do not engage in marketed, aggressive or abusive
tax avoidance;
• do not use tax havens for tax avoidance purposes
including not taking advantage of any related
secrecy rules which can apply to tax havens;
• are committed to an open, transparent and
professional relationship with HMRC based on
mutual trust and collaborative working; and
• maintain a robust governance and risk
management framework to ensure that these
policies and objectives are fully complied with and
applied at all levels.
We expect to fully adhere to the HMRC framework for
co-operative compliance.
Our Chief Financial Officer (CFO) has responsibility
for tax governance with oversight from the board.
The CFO is supported by a specialist team of tax
professionals with many years of tax experience within
the water sector and led by the head of tax.
The head of tax has day-to-day responsibility for
managing the group’s tax affairs and engages regularly
with key stakeholders from around the group in
ensuring that tax risk is proactively managed. Where
appropriate, he will engage with both external advisers
and HMRC to provide additional required certainty
with the aim of ensuring that any residual risk is
typically low. All significant tax issues are reported to
the board regularly.
Consistent with the group’s general risk management
framework, all tax risks are assessed for the
likelihood of occurrence and the negative financial or
reputational impact on the group and its objectives,
should the event occur. In any given period, the key
tax risk is likely to be the introduction of unexpected
legislative or tax practice changes which lead to
increased cash outflow which has not been reflected
in the current regulatory settlement. The group
is committed to actively engaging with relevant
authorities to manage any such risk.
In any given year, the group’s effective cash tax rate
on underlying profits may fluctuate from the standard
UK rate mainly due to the available tax deductions on
capital investment. These deductions are achieved as
a result of utilising tax incentives, which have been
explicitly put in place by successive governments
precisely to encourage such investment. This reflects
responsible corporate behaviour in relation to tax.
Taxes/contributions to public finances for 2022
Total taxes and contributions to public finances
£230m
£92m
Business rates
£9m
£27m
£59m
£12m
£31m
Corporation tax*
Employment taxes:
company
Employment taxes:
employees
Environmental taxes
and other duties
* The corporation tax paid for 2022 and 2023 will be lower due to
benefits accruing from the temporary capital allowances super
deductions rules introduced in 2021.
Regulatory services fees
(e.g. water extraction charges)
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Under the regulatory framework the group operates
within, the majority of any benefit from reduced tax
payments will typically not be retained by the group
but will pass to customers; reducing their bills. For
2021/22, the impact of tax deductions on capital
investment alone reduced average household bills by
around £20.
The group’s principal subsidiary, United Utilities Water
Limited (UUW), operates solely in the UK and its
customers are based here. All of the group’s profits
are taxable in the UK and the group’s one remaining
overseas subsidiary, a non-trading former holding
company in the Netherlands, is currently in liquidation.
Every year, the group pays significant contributions
to the public finances on its own behalf as well as
collecting and paying further amounts for its 5,000
strong workforce. Details of the total payments for
2022 of around £230 million are set out opposite.
The above tax policy disclosure meets the group’s
statutory requirement under Paragraph 16(2) of
Schedule 19 of Finance Act 2016 to publish its UK tax
strategy for the year ended 31 March 2022.
See our website for our latest separate annual tax
report, which includes further details in relation to the
following key areas:
• How much tax we pay;
• How we ensure that we pay the right tax at the
right time; and
• How we ensure that our tax affairs are transparent
for all our stakeholders.
Recognising the group’s ongoing commitment to
paying its fair share of tax and acting in an open and
transparent manner in relation to its tax affairs, we
were delighted to have retained the Fair Tax Mark
independent certification for a third year, having been
only the second FTSE 100 company to be awarded the
Fair Tax Mark in July 2019.
Corporate governance report
UK tax policies and objectives
Consistent with our wider business objectives, we are
The head of tax has day-to-day responsibility for
committed to acting in a responsible manner in relation
managing the group’s tax affairs and engages regularly
to our tax affairs.
Our tax policies and objectives, which are approved by
the board on an annual basis, ensure that we:
• only engage in reasonable tax planning aligned
with our commercial activities and we always
comply with what we believe to be both the letter
and the spirit of the law;
• do not engage in marketed, aggressive or abusive
tax avoidance;
• do not use tax havens for tax avoidance purposes
including not taking advantage of any related
secrecy rules which can apply to tax havens;
• are committed to an open, transparent and
professional relationship with HMRC based on
mutual trust and collaborative working; and
• maintain a robust governance and risk
management framework to ensure that these
policies and objectives are fully complied with and
applied at all levels.
We expect to fully adhere to the HMRC framework for
co-operative compliance.
Our Chief Financial Officer (CFO) has responsibility
for tax governance with oversight from the board.
The CFO is supported by a specialist team of tax
professionals with many years of tax experience within
the water sector and led by the head of tax.
with key stakeholders from around the group in
ensuring that tax risk is proactively managed. Where
appropriate, he will engage with both external advisers
and HMRC to provide additional required certainty
with the aim of ensuring that any residual risk is
typically low. All significant tax issues are reported to
the board regularly.
Consistent with the group’s general risk management
framework, all tax risks are assessed for the
likelihood of occurrence and the negative financial or
reputational impact on the group and its objectives,
should the event occur. In any given period, the key
tax risk is likely to be the introduction of unexpected
legislative or tax practice changes which lead to
increased cash outflow which has not been reflected
in the current regulatory settlement. The group
is committed to actively engaging with relevant
authorities to manage any such risk.
In any given year, the group’s effective cash tax rate
on underlying profits may fluctuate from the standard
UK rate mainly due to the available tax deductions on
capital investment. These deductions are achieved as
a result of utilising tax incentives, which have been
explicitly put in place by successive governments
precisely to encourage such investment. This reflects
responsible corporate behaviour in relation to tax.
Taxes/contributions to public finances for 2022
Total taxes and contributions to public finances
£230m
£9m
£27m
£59m
£12m
£31m
£92m
Business rates
Corporation tax*
Employment taxes:
company
Employment taxes:
employees
Environmental taxes
and other duties
* The corporation tax paid for 2022 and 2023 will be lower due to
benefits accruing from the temporary capital allowances super
deductions rules introduced in 2021.
Regulatory services fees
(e.g. water extraction charges)
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Directors’ report
Statutory and other information
Our directors present their management report, including the strategic report, on pages 16 to 109 and the audited financial statements
of United Utilities Group PLC (the company) and its subsidiaries (together referred to as the group) for the year ended 31 March 2022.
Business model
Dividends
Directors
Reappointment
A description of the company’s business model can be found within the strategic report on pages
20 to 51.
Our directors are recommending a final dividend of 29.0 pence per ordinary share for the year ended
31 March 2022, which, together with the interim dividend of 14.50 pence, gives a total dividend for the year
of 43.50 pence per ordinary share (the interim and final dividends paid in respect of the 2020/21 financial
year were 14.41 pence and 28.83 pence per ordinary share respectively). Subject to approval by our
shareholders at our AGM, the final dividend will be paid on 1 August 2022 to shareholders on the register
at the close of business on 24 June 2022.
The names of our directors who served during the financial year ended 31 March 2022 can be found on
pages 112 to 115 and on page 124.
Our articles of association provide that our directors must retire at every annual general meeting
following their last election or reappointment by our shareholders which is consistent with the
recommendation contained within the 2018 UK Corporate Governance Code (the code) that all
directors should be subject to annual election by shareholders. This has been the case at all the
AGMs since 2011. Information regarding the appointment of our directors is included in our corporate
governance report on pages 130 to 137.
Interests
Details of the interests in the company’s shares held by our directors and persons connected with
them are set out in our directors’ remuneration report on pages 160 to 191 which is hereby incorporated
by reference into this directors’ report.
Corporate governance
statement
Share capital
Voting
Transfers
The corporate governance report on pages 112 to 191 is hereby incorporated by reference into this
directors’ report and includes details of our application of the principles and reporting against the
provisions of the code. Our statement includes a description of the main features of our internal
control and risk management systems in relation to the financial reporting process and forms part of
this directors’ report. A copy of the 2018 version of the code, as applicable to the company for the year
ended 31 March 2022, can be found at the Financial Reporting Council’s website frc.org.uk. Copies of
the matters reserved for the board and the terms of reference for each of the main board committees
can be found on our website.
At 31 March 2022, the issued share capital of the company was £499,819,926 divided into 681,888,418
ordinary shares of 5 pence each and 273,956,180 deferred shares of 170 pence each. Details of our share
capital and movements in our issued share capital are shown in note 23 to the financial statements on
page 235. The ordinary shares represented 71.3 per cent and the deferred shares represented 28.7 per cent
respectively of the shares in issue as at 31 March 2022.
All our ordinary shares have the same rights, including the rights to one vote at any of our general
meetings, to an equal proportion of any dividends we declare and pay, and to an equal amount of any
surplus assets which are distributed in the event of a winding-up.
Our deferred shares convey no right to income, no right to vote and no appreciable right to participate
in any surplus capital in the event of a winding-up. The rights attaching to our shares in the company
are provided by our articles of association, which may be amended or replaced by means of a special
resolution of the company in general meeting. The company renews annually its power to issue and buy
back shares at our AGM and such resolutions will be proposed at our 2022 AGM. Our directors’ powers are
conferred on them by UK legislation and by the company’s articles. At the AGM of the company held on
21 July 2021, the directors were authorised to issue relevant securities up to an aggregate nominal amount
of £11,364,806 and were empowered to allot equity securities for cash on a non-pre-emptive basis to an
aggregate nominal amount of £1,704,721.
Electronic and paper proxy appointment and voting instructions must be received by our registrars
(EQ) no less than 48 hours before a general meeting and when calculating this period, the directors
can decide not to take account of any part of a day that is not a working day.
There are no restrictions on the transfer of our ordinary shares in the company, nor any limitations
on the holding of our shares in the company, save: (i) where the company has exercised its right to
suspend their voting rights or to prohibit their transfer following the omission of their holder or any
person interested in them to provide the company with information requested by it in accordance with
Part 22 of the Companies Act 2006; or (ii) where their holder is precluded from exercising voting rights
by the Financial Conduct Authority’s Listing Rules or the City Code on Takeovers and Mergers.
There are no agreements known to us between holders of securities that may result in restrictions on
the transfer of securities or on voting rights. All our issued shares are fully paid.
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Major shareholdings
At 25 May 2022, our directors had been notified of the following interests in the company’s issued
ordinary share capital in accordance with the Disclosure and Transparency Rules of the Financial
Conduct Authority:
Purchase of own shares
Change of control
Lazard Asset Management LLC
BlackRock Inc.
Norges Bank
Per cent of issued
share capital
Direct or indirect nature of
holding
9.93
10.03
2.95
Indirect
Indirect
Direct
At our AGM held on 21 July 2021, our shareholders authorised the company to purchase, in the market,
up to 68,188,841 of our ordinary shares of 5 pence each. We did not purchase any shares under this
authority during the year. We normally seek such an authority from our shareholders annually. At our
2022 AGM, we will again seek authority from our shareholders to purchase up to 68,188,841 of our
ordinary shares of 5 pence each with such authority expiring at the end of our AGM held in 2023.
As at 31 March 2022, Ocorian Corporate Services (UK) Limited was the trustee that administered our
executive share plans and had the ability to exercise voting rights at its discretion which related to
shares that it held under the trust deed constituting the trust. In the event of a takeover offer which
could lead to a change of control of the company, the trustee must consult with the company before
accepting the offer or voting in favour of the offer. Subject to that requirement, the trustee may take
into account a prescribed list of interests and considerations prior to making a decision in relation to
the offer, including the interests of the beneficiaries under the trust.
In the event of a change of control, the participants in our all-employee share incentive plan (ShareBuy)
would be able to direct the trustee of ShareBuy, Equiniti Share Plan Trustees Limited, how to act on their
behalf.
Information required by
UK Listing Rule 9.8.4
Details of the amount of interest capitalised by the group during the financial year can be found in
note 6 to the financial statements on page 223. In line with current UK tax legislation, the amount is
fully deductible against the group’s corporation tax liability, resulting in tax relief of £5.8 million.
Share capital
At 31 March 2022, the issued share capital of the company was £499,819,926 divided into 681,888,418
Directors’ indemnities and
insurance
There are no other disclosures to be made under Listing Rule 9.8.4.
We have in place contractual entitlements for the directors of the company and of its subsidiaries
to claim indemnification by the company in respect of certain liabilities which might be incurred
by them in the course of their duties as directors. These arrangements, which constitute qualifying
third-party indemnity provision and qualifying pension scheme indemnity provision, have been
established in compliance with the relevant provisions of the Companies Act 2006 and have been in
force throughout the financial year. They include provision for the company to fund the costs incurred
by directors in defending certain claims against them in relation to their duties as directors of the
company or its subsidiaries. The company maintains an appropriate level of directors’ and officers’
liability insurance.
Directors’ report
Statutory and other information
Our directors present their management report, including the strategic report, on pages 16 to 109 and the audited financial statements
of United Utilities Group PLC (the company) and its subsidiaries (together referred to as the group) for the year ended 31 March 2022.
Business model
A description of the company’s business model can be found within the strategic report on pages
20 to 51.
Dividends
Our directors are recommending a final dividend of 29.0 pence per ordinary share for the year ended
31 March 2022, which, together with the interim dividend of 14.50 pence, gives a total dividend for the year
of 43.50 pence per ordinary share (the interim and final dividends paid in respect of the 2020/21 financial
year were 14.41 pence and 28.83 pence per ordinary share respectively). Subject to approval by our
shareholders at our AGM, the final dividend will be paid on 1 August 2022 to shareholders on the register
at the close of business on 24 June 2022.
Directors
The names of our directors who served during the financial year ended 31 March 2022 can be found on
pages 112 to 115 and on page 124.
Reappointment
Our articles of association provide that our directors must retire at every annual general meeting
following their last election or reappointment by our shareholders which is consistent with the
recommendation contained within the 2018 UK Corporate Governance Code (the code) that all
directors should be subject to annual election by shareholders. This has been the case at all the
AGMs since 2011. Information regarding the appointment of our directors is included in our corporate
governance report on pages 130 to 137.
Interests
Details of the interests in the company’s shares held by our directors and persons connected with
them are set out in our directors’ remuneration report on pages 160 to 191 which is hereby incorporated
by reference into this directors’ report.
Corporate governance
The corporate governance report on pages 112 to 191 is hereby incorporated by reference into this
statement
directors’ report and includes details of our application of the principles and reporting against the
provisions of the code. Our statement includes a description of the main features of our internal
control and risk management systems in relation to the financial reporting process and forms part of
this directors’ report. A copy of the 2018 version of the code, as applicable to the company for the year
ended 31 March 2022, can be found at the Financial Reporting Council’s website frc.org.uk. Copies of
the matters reserved for the board and the terms of reference for each of the main board committees
can be found on our website.
ordinary shares of 5 pence each and 273,956,180 deferred shares of 170 pence each. Details of our share
capital and movements in our issued share capital are shown in note 23 to the financial statements on
page 235. The ordinary shares represented 71.3 per cent and the deferred shares represented 28.7 per cent
respectively of the shares in issue as at 31 March 2022.
All our ordinary shares have the same rights, including the rights to one vote at any of our general
meetings, to an equal proportion of any dividends we declare and pay, and to an equal amount of any
surplus assets which are distributed in the event of a winding-up.
Our deferred shares convey no right to income, no right to vote and no appreciable right to participate
in any surplus capital in the event of a winding-up. The rights attaching to our shares in the company
are provided by our articles of association, which may be amended or replaced by means of a special
resolution of the company in general meeting. The company renews annually its power to issue and buy
back shares at our AGM and such resolutions will be proposed at our 2022 AGM. Our directors’ powers are
conferred on them by UK legislation and by the company’s articles. At the AGM of the company held on
21 July 2021, the directors were authorised to issue relevant securities up to an aggregate nominal amount
of £11,364,806 and were empowered to allot equity securities for cash on a non-pre-emptive basis to an
aggregate nominal amount of £1,704,721.
Voting
Electronic and paper proxy appointment and voting instructions must be received by our registrars
(EQ) no less than 48 hours before a general meeting and when calculating this period, the directors
can decide not to take account of any part of a day that is not a working day.
Transfers
There are no restrictions on the transfer of our ordinary shares in the company, nor any limitations
on the holding of our shares in the company, save: (i) where the company has exercised its right to
suspend their voting rights or to prohibit their transfer following the omission of their holder or any
person interested in them to provide the company with information requested by it in accordance with
Part 22 of the Companies Act 2006; or (ii) where their holder is precluded from exercising voting rights
by the Financial Conduct Authority’s Listing Rules or the City Code on Takeovers and Mergers.
There are no agreements known to us between holders of securities that may result in restrictions on
the transfer of securities or on voting rights. All our issued shares are fully paid.
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Directors’ report
Statutory and other information
Political donations
Trade associations
Employees
It is the company’s policy position that we do not support any political party and do not make what
are commonly regarded as donations to any political party or other political organisations. The
wide definition of donations in the Political Parties, Elections and Referendums Act 2000, however,
covers activities which form part of the necessary relationship between the group and our political
stakeholders. This can include promoting United Utilities’ activities at the main political parties’ annual
conferences, as well as occasional stakeholder engagement in Westminster. The group incurred
expenditure of £15,834 (2021: £5,801; 2020: £23,627) as part of this process. At the 2021 AGM, an
authority was taken to cover such expenditure.
A similar resolution will be put to shareholders at the 2022 AGM to authorise the company and its
subsidiaries to make such expenditure.
As the provider of services to seven million people across the North West, customers can sometimes
contact their constituency MP and ask that they raise an issue with the company on their behalf. In
2021/22, we received 378 such MP contacts covering a wide variety of topics, including flooding,
water supply and land management. As part of our work to build constructive relationships with all
our stakeholders, we encourage MPs and members of their offices to work closely with us to address
constituency concerns and arrange case work events to discuss such issues in detail. Throughout the
year, when COVID-19 guidelines allowed, we held face-to-face meetings with key MPs to discuss a
number of topics, including river water quality, storm overflows and recreational land management.
We engage regularly with the two devolved administrations in the North West – the Greater
Manchester Combined Authority (GMCA) and the Liverpool City Region (LCR) – as well as the region’s
local authorities, on a range of topics of shared interest, such as tackling flooding risk and enhancing
the North West’s natural capital. Our sponsorship of the All Party Political Groups for GMCA and LCR
helps bring MPs and peers of all parties together with key leaders to help maximise future investment
in these area for the benefit of local communities.
In addition, the company’s activities to engage with political stakeholders on matters relevant to the
water industry and its operating footprint of North West England extend to its membership of trade
associations. This is described in the section below.
We are members of a small number of trade associations. Some have a national focus, such as Water UK,
the representative body of the UK water industry, and the Confederation of British Industry. Others focus on
specific professions such as the 100 Group representing the views of the finance directors of FTSE 100 and
large UK private companies and the GC 100, the voice of general counsel and company secretaries in FTSE
100 companies. The company is a member of regional bodies, such as the North West Business Leadership
Team which encourages engagement across the public and private sectors. Our total contribution to these
associations in 2021/22 was £408,441 (2020/21:£420,403; 2019/20: £400,916).
Through Water UK, the company has supported efforts to interact with parliamentary bodies, such as
Select Committees and Chairs of specific committees, to provide information on topics such as the
performance of storm overflows in relation to river water quality. The company supported Water UK in its
effort to engage the Government as the Environment Bill passed through its parliamentary stages, including
preparation of the 21st century rivers report.
Through our membership with both the CBI, in particular as a member of its North West regional council,
and the North West Business Leadership Team, we have engaged with regional MPs and political
stakeholders, such as local authorities and metro mayors, to explore how the business community can
work more effectively with the public sector to drive economic growth in the region and tackle some of
the North West’s pressing social issues. For example, we have participated in discussions as part of the
unlocking regional growth/levelling up agenda, and employee resilience and wellbeing.
Our policies on employee consultation and on equal opportunities for all employees can be found
on pages 22 and 24. Applicants with disabilities are given equal consideration in our application
process, and disabled colleagues have equipment and working practices modified for them as far as
possible and where it is safe and practical to do so. Importance is placed on strengthening employees’
engagement (see page 30). The effect of our regard towards employees in relation to the decisions
taken during the financial year is included in our S172(1) Statement on pages 40 to 41.
Employees are encouraged to own shares in the company through the operation of an all employee
share incentive plan (ShareBuy).
Information on our average number of employees during the year can be found in note 3 on page 221.
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Directors’ report
Statutory and other information
Political donations
It is the company’s policy position that we do not support any political party and do not make what
Trade associations
We are members of a small number of trade associations. Some have a national focus, such as Water UK,
are commonly regarded as donations to any political party or other political organisations. The
wide definition of donations in the Political Parties, Elections and Referendums Act 2000, however,
covers activities which form part of the necessary relationship between the group and our political
stakeholders. This can include promoting United Utilities’ activities at the main political parties’ annual
conferences, as well as occasional stakeholder engagement in Westminster. The group incurred
expenditure of £15,834 (2021: £5,801; 2020: £23,627) as part of this process. At the 2021 AGM, an
authority was taken to cover such expenditure.
A similar resolution will be put to shareholders at the 2022 AGM to authorise the company and its
subsidiaries to make such expenditure.
As the provider of services to seven million people across the North West, customers can sometimes
contact their constituency MP and ask that they raise an issue with the company on their behalf. In
2021/22, we received 378 such MP contacts covering a wide variety of topics, including flooding,
water supply and land management. As part of our work to build constructive relationships with all
our stakeholders, we encourage MPs and members of their offices to work closely with us to address
constituency concerns and arrange case work events to discuss such issues in detail. Throughout the
year, when COVID-19 guidelines allowed, we held face-to-face meetings with key MPs to discuss a
number of topics, including river water quality, storm overflows and recreational land management.
We engage regularly with the two devolved administrations in the North West – the Greater
Manchester Combined Authority (GMCA) and the Liverpool City Region (LCR) – as well as the region’s
local authorities, on a range of topics of shared interest, such as tackling flooding risk and enhancing
the North West’s natural capital. Our sponsorship of the All Party Political Groups for GMCA and LCR
helps bring MPs and peers of all parties together with key leaders to help maximise future investment
in these area for the benefit of local communities.
In addition, the company’s activities to engage with political stakeholders on matters relevant to the
water industry and its operating footprint of North West England extend to its membership of trade
associations. This is described in the section below.
the representative body of the UK water industry, and the Confederation of British Industry. Others focus on
specific professions such as the 100 Group representing the views of the finance directors of FTSE 100 and
large UK private companies and the GC 100, the voice of general counsel and company secretaries in FTSE
100 companies. The company is a member of regional bodies, such as the North West Business Leadership
Team which encourages engagement across the public and private sectors. Our total contribution to these
associations in 2021/22 was £408,441 (2020/21:£420,403; 2019/20: £400,916).
Through Water UK, the company has supported efforts to interact with parliamentary bodies, such as
Select Committees and Chairs of specific committees, to provide information on topics such as the
performance of storm overflows in relation to river water quality. The company supported Water UK in its
effort to engage the Government as the Environment Bill passed through its parliamentary stages, including
preparation of the 21st century rivers report.
Through our membership with both the CBI, in particular as a member of its North West regional council,
and the North West Business Leadership Team, we have engaged with regional MPs and political
stakeholders, such as local authorities and metro mayors, to explore how the business community can
work more effectively with the public sector to drive economic growth in the region and tackle some of
the North West’s pressing social issues. For example, we have participated in discussions as part of the
unlocking regional growth/levelling up agenda, and employee resilience and wellbeing.
on pages 22 and 24. Applicants with disabilities are given equal consideration in our application
process, and disabled colleagues have equipment and working practices modified for them as far as
possible and where it is safe and practical to do so. Importance is placed on strengthening employees’
engagement (see page 30). The effect of our regard towards employees in relation to the decisions
taken during the financial year is included in our S172(1) Statement on pages 40 to 41.
Employees are encouraged to own shares in the company through the operation of an all employee
share incentive plan (ShareBuy).
Information on our average number of employees during the year can be found in note 3 on page 221.
Employees
Our policies on employee consultation and on equal opportunities for all employees can be found
Environmental, social and
community matters
Details of our approach, as a responsible business, is set out in the strategic report, in particular where
we describe our approach to purpose and stakeholder value on pages 16 to 17 and 22. Further information
is available on our website at unitedutilities.com/corporate/responsibility Our approach to engagement
with our environmental stakeholders and those in the communities we serve can be found on pages 29
to 35. The effect of our regard towards the environment, social and community matters in relation to the
decisions taken during the financial year is included in our S172(1) Statement on pages 40 to 41.
Customers and suppliers
and key stakeholders
Our approach to engagement with customers, suppliers, regulators and other key stakeholders can be
found on pages 29 to 35. The effect of our regard towards customers, suppliers, regulators and other key
stakeholders in relation to the decisions taken during the financial year is included in our S172(1) Statement
on pages 40 to 41.
Our United Supply Chain approach sets out how we work with our suppliers, which can be found
on our website at unitedutilities.com/corporate/about-us/governance/suppliers/delivering-value/
united-supply-chain We are a signatory to the Prompt Payment Code. We publish key statistics and
other information on our payment practices in line with the Duty to Report on Payment Practices and
Performance on the Department for Business, Energy & Industrial Strategy’s website. Information is
published on a six-monthly basis. For the six months to 31 March 2022, our average time taken to pay
invoices was 13 days; in the previous six months it was 13 days.
Energy and carbon report Our TCFD reporting includes our energy and carbon report on pages 86 to 97 and is hereby
incorporated by reference into this directors’ report.
Approach to technology
development
We are committed to using innovative, cost-effective and practical solutions for providing high-quality
services and we recognise the importance of ensuring that we focus our investment on the development
of technology and that we have the right skills to apply technology to achieve sustainable competitive
advantage and that we continue to be alert to emerging technological opportunities.
Financial instruments
Our risk management objectives and policies in relation to the use of financial instruments can be
found in note A4 on page 242.
Events occurring after the
reporting period
Slavery and human
trafficking statement
Details of events after the reporting period are included in note 25 on page 236.
Our statement can be found on our website at unitedutilities.com/human-rights
Annual General Meeting
Our 2022 annual general meeting (AGM) will be held on 22 July. Full details of the resolutions to be proposed to our shareholders, and
explanatory notes in respect of these resolutions, can be found in our notice of AGM. A copy can be found on our website.
At our 2022 AGM, resolutions will be proposed, among other matters:
•
•
to receive the annual report and financial statements; to approve the directors’ remuneration report; to approve the directors’
remuneration policy; to declare a final dividend; and
to approve the company’s climate-related financial disclosures; to approve the directors’ general authority to allot shares; to grant the
authority to issue shares without first applying statutory rights of pre-emption; to authorise the company to make market purchases of
its own shares; to authorise the making of limited political donations by the company and its subsidiaries; to approve a new directors’
long-term plan; and to enable the company to continue to hold general meetings on not less than 14 clear days’ notice.
Information given to the auditor
Each of the persons who is a director at the date of approval of this report confirms that:
•
•
so far as they are aware, there is no relevant audit information of which the company’s auditor is unaware; and
they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit
information and to establish that the company’s auditor is aware of that information. This confirmation is given, and should be
interpreted, in accordance with the provisions of s418 of the Companies Act 2006.
Reappointment of the auditor
Our board is proposing that our shareholders reappoint KPMG LLP as our auditor at the forthcoming AGM and authorises the audit
committee of the board to set the auditor’s remuneration.
Approved by the board on 25 May 2022 and signed on its behalf by:
Simon Gardiner
Company Secretary
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Statement of directors’ responsibilities in respect of
the annual report and the financial statements
The directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the company’s website. Legislation in the
UK governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
In accordance with Disclosure Guidance and
Transparency Rule 4.1.14R, the financial statements
will form part of the annual financial report prepared
using the single electronic reporting format under the
TD ESEF Regulation. The auditor’s report on these
financial statements provides no assurance over the
ESEF format.
Responsibility statement of the directors in
respect of the annual financial report
We confirm that to the best of our knowledge:
•
•
the financial statements, prepared in accordance
with the applicable set of accounting standards,
give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company
and the undertakings included in the consolidation
taken as a whole; and
the strategic report/directors’ report includes a
fair review of the development and performance
of the business and the position of the issuer and
the undertakings included in the consolidation
taken as a whole, together with a description of the
principal risks and uncertainties that they face.
We consider the annual report and accounts, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to
assess the group’s position and performance, business
model and strategy.
Approved by the board on 25 May 2022 and signed on
its behalf by:
Sir David Higgins
Chair
Phil Aspin
Chief Financial Officer
The directors are responsible for preparing the annual
report and the group and parent company financial
statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare group
and parent company financial statements for each
financial year. Under that law they are required to
prepare the group financial statements in accordance
with UK-adopted international accounting standards
and applicable law and have elected to prepare
the parent company financial statements on the
same basis.
Under company law the directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
group and parent company and of the group’s profit or
loss for that period. In preparing each of the group and
parent company financial statements, the directors are
required to:
•
select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are
reasonable, relevant and reliable;
•
state whether they have been prepared in
accordance with UK-adopted international
accounting standards;
• assess the group and parent company’s ability
to continue as a going concern, disclosing, as
applicable, matters related to going concern; and
• use the going concern basis of accounting unless
they either intend to liquidate the group or the
parent company or to cease operations, or have no
realistic alternative but to do so.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the parent company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the parent company and enable them to
ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such
internal control as they determine is necessary to
enable the preparation of financial statements that are
free from material misstatement, whether due to fraud
or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the
assets of the group and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the directors
are also responsible for preparing a strategic report,
directors’ report, directors’ remuneration report and
corporate governance statement that complies with
that law and those regulations.
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unitedutilities.com/corporate
Statement of directors’ responsibilities in respect of
the annual report and the financial statements
The directors are responsible for preparing the annual
The directors are responsible for the maintenance and
report and the group and parent company financial
integrity of the corporate and financial information
statements in accordance with applicable law and
included on the company’s website. Legislation in the
regulations.
UK governing the preparation and dissemination of
financial statements may differ from legislation in other
Company law requires the directors to prepare group
and parent company financial statements for each
jurisdictions.
financial year. Under that law they are required to
In accordance with Disclosure Guidance and
prepare the group financial statements in accordance
Transparency Rule 4.1.14R, the financial statements
with UK-adopted international accounting standards
will form part of the annual financial report prepared
and applicable law and have elected to prepare
using the single electronic reporting format under the
the parent company financial statements on the
TD ESEF Regulation. The auditor’s report on these
same basis.
financial statements provides no assurance over the
Under company law the directors must not approve the
ESEF format.
financial statements unless they are satisfied that they
Responsibility statement of the directors in
give a true and fair view of the state of affairs of the
respect of the annual financial report
group and parent company and of the group’s profit or
We confirm that to the best of our knowledge:
loss for that period. In preparing each of the group and
parent company financial statements, the directors are
required to:
•
the financial statements, prepared in accordance
with the applicable set of accounting standards,
give a true and fair view of the assets, liabilities,
•
select suitable accounting policies and then apply
financial position and profit or loss of the company
them consistently;
and the undertakings included in the consolidation
• make judgements and estimates that are
taken as a whole; and
reasonable, relevant and reliable;
•
the strategic report/directors’ report includes a
applicable, matters related to going concern; and
We consider the annual report and accounts, taken
fair review of the development and performance
of the business and the position of the issuer and
the undertakings included in the consolidation
taken as a whole, together with a description of the
principal risks and uncertainties that they face.
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to
assess the group’s position and performance, business
model and strategy.
Approved by the board on 25 May 2022 and signed on
its behalf by:
Sir David Higgins
Chair
Phil Aspin
Chief Financial Officer
•
state whether they have been prepared in
accordance with UK-adopted international
accounting standards;
• assess the group and parent company’s ability
to continue as a going concern, disclosing, as
• use the going concern basis of accounting unless
they either intend to liquidate the group or the
parent company or to cease operations, or have no
realistic alternative but to do so.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the parent company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the parent company and enable them to
ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such
internal control as they determine is necessary to
enable the preparation of financial statements that are
free from material misstatement, whether due to fraud
or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the
assets of the group and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the directors
are also responsible for preparing a strategic report,
directors’ report, directors’ remuneration report and
corporate governance statement that complies with
that law and those regulations.
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Managing short-term
volatility to create
long-term value
We take a prudent approach to financial risk management, with clear and transparent hedging policies
that look through short-term volatility driven by market movements, such as the recent significant rise in
inflation, to create a resilient long-term business that delivers sustainable value for all our stakeholders.
Financial statements
Independent auditor’s report to
the members of United Utilities
Group PLC only
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated and company statements
of financial position
Consolidated statement of
changes in equity
Company statement of changes
in equity
Consolidated and company statements
of cash flows
Guide to detailed financial
statements disclosures
Accounting policies
Notes to the financial statements
Notes to the financial statements –
appendices
Five-year summary – unaudited
Shareholder information
202
210
211
212
213
214
215
216
217
220
237
263
264
Managing short-term
volatility to create
long-term value
We take a prudent approach to financial risk management, with clear and transparent hedging policies
that look through short-term volatility driven by market movements, such as the recent significant rise in
inflation, to create a resilient long-term business that delivers sustainable value for all our stakeholders.
Independent auditor’s report to the members of
United Utilities Group PLC only
1. Our opinion is unmodified
We have audited the financial statements of United Utilities
Group PLC (‘the company’) for the year ended 31 March
2022 which comprise the Consolidated income statement,
the Consolidated statement of comprehensive income, the
Consolidated and Company statements of financial position,
the Consolidated statement of changes in equity, the Company
statement of changes in equity, the Consolidated and Company
statements of cash flows, and the related notes, including the
accounting policies on pages 217 to 219 and 257 to 261.
In our opinion:
•
•
•
the financial statements give a true and fair view of the state
of the group’s and of the parent company’s affairs as at 31
March 2022 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared
in accordance with UK-adopted international accounting
standards;
the parent company financial statements have been properly
prepared in accordance with UK-adopted international
accounting standards and as applied in accordance with the
provisions of the Companies Act 2006; and
•
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
audit committee.
We were first appointed as auditor by the shareholders on
22 July 2011. The period of total uninterrupted engagement
is for the 11 financial years ended 31 March 2022.
We have fulfilled our ethical responsibilities under, and we
remain independent of the group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited
by that standard were provided.
Overview
Materiality:
group financial
statements as a
whole
£16.5m (2021: £19.0m)
5.6% (2021: 4.1%) of normalised group profit
before tax
Coverage
100% (2021: 100%) of group profit before tax
Key audit matters
Recurring
Revenue recognition and
allowance for customer debts
Change in
risk vs 2021
Capitalisation of costs relating to
the capital programme
Valuation of retirement benefit
obligations
Recoverability of parent
company’s investment in
United Utilities PLC
2. Key audit matters: our assessment of risks of
material misstatements
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise
below the key audit matters, in decreasing order of audit
significance, in arriving at our audit opinion above, together
with our key audit procedures to address those matters and,
as required for public interest entities, our results from those
procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely
for the purpose of, our audit of the financial statements as a
whole, and in forming our opinion thereon, and consequently
are incidental to that opinion, and we do not provide a separate
opinion on these matters.
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Independent auditor’s report to the members of
United Utilities Group PLC only
1. Our opinion is unmodified
We have audited the financial statements of United Utilities
Group PLC (‘the company’) for the year ended 31 March
2022 which comprise the Consolidated income statement,
the Consolidated statement of comprehensive income, the
Consolidated and Company statements of financial position,
the Consolidated statement of changes in equity, the Company
statement of changes in equity, the Consolidated and Company
statements of cash flows, and the related notes, including the
accounting policies on pages 217 to 219 and 257 to 261.
In our opinion:
We have fulfilled our ethical responsibilities under, and we
remain independent of the group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited
by that standard were provided.
Overview
whole
Coverage
Materiality:
£16.5m (2021: £19.0m)
group financial
5.6% (2021: 4.1%) of normalised group profit
statements as a
before tax
100% (2021: 100%) of group profit before tax
•
the financial statements give a true and fair view of the state
of the group’s and of the parent company’s affairs as at 31
Key audit matters
March 2022 and of the group’s loss for the year then ended;
Recurring
Revenue recognition and
Change in
risk vs 2021
•
the group financial statements have been properly prepared
in accordance with UK-adopted international accounting
standards;
•
the parent company financial statements have been properly
prepared in accordance with UK-adopted international
accounting standards and as applied in accordance with the
provisions of the Companies Act 2006; and
•
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
audit committee.
We were first appointed as auditor by the shareholders on
22 July 2011. The period of total uninterrupted engagement
is for the 11 financial years ended 31 March 2022.
allowance for customer debts
Capitalisation of costs relating to
the capital programme
Valuation of retirement benefit
obligations
Recoverability of parent
company’s investment in
United Utilities PLC
2. Key audit matters: our assessment of risks of
material misstatements
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise
below the key audit matters, in decreasing order of audit
significance, in arriving at our audit opinion above, together
with our key audit procedures to address those matters and,
as required for public interest entities, our results from those
procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely
for the purpose of, our audit of the financial statements as a
whole, and in forming our opinion thereon, and consequently
are incidental to that opinion, and we do not provide a separate
opinion on these matters.
The risk
Our response
Revenue recognition and
provisions for household
customer debt
Revenue not recognised: £26.6
million (2021: £27.1 million)
Provision for customer debts:
£78.3 million (2021: £74.9
million)
Refer to page 151 (Audit
committee report), pages 218
and 257 (accounting policy)
and pages 220 and 229 to 230
(financial disclosures)
Subjective estimate:
At each balance sheet date:
•
judgement is required to identify
properties where there is little
prospect that cash will be received
for revenue that has been billed due
to either the occupier not being able
to be identified or a past history of
non-payment of bills relating to that
property and therefore whether the
revenue should be recognised; and
• assumptions involving a high degree
of estimation uncertainty are required
to assess the recoverability of trade
receivables.
The effect of these matters is that,
as part of our risk assessment, we
determined that the recoverability of
trade receivables has a high degree of
estimation uncertainty, with a potential
range of reasonable outcomes greater
than our materiality for the financial
statements as a whole. The financial
statements (see accounting policies
on page 218) disclose the sensitivity
estimated by the group.
Capitalisation of costs relating
to the capital programme
Property, plant and equipment
additions: £728.5 million (2021:
£677.5 million)
Refer to page 151 (Audit
committee report), pages 218 to
219 and 258 (accounting policy)
and pages 226 to 227 (financial
disclosures)
Subjective classification:
The group has a substantial capital
programme which has been agreed with
the Water Services Regulation Authority
(Ofwat) and therefore incurs significant
annual expenditure in relation to the
development and maintenance of both
infrastructure and non-infrastructure assets.
The determination of in-year project costs
as capital or operating expenditure is
inherently judgemental. We determined
that the costs capitalised has a high
degree of judgement, with a potential
range of reasonable outcomes greater
than our materiality for the financial
statements as a whole. The financial
statements (see accounting policies on
pages 218 to 219) disclose the sensitivity
estimated by the group.
We performed the tests below rather than seeking to
rely on the group’s controls because the nature of the
balance is such that we would expect to obtain audit
evidence primarily through the detailed procedures
described.
Our procedures included:
• Accounting analysis: assessed the derecognition
of revenue for compliance with relevant
accounting standards where the collection of
consideration is not probable on the date of initial
recognition;
• Methodology choice: assessed the
appropriateness of the customer debt provisioning
policy based on historical cash collections,
credits, re-bills and write-off information, and
estimates of future economic scenarios and their
impact on credit losses;
• Sensitivity analysis: considered the sensitivity of
the key assumptions; and
• Assessing transparency: assessed the adequacy
of the group’s disclosures of its revenue
recognition and customer debt provisioning
policies, including the judgement involved in
recording revenue and estimation uncertainty of
the doubtful debts provision.
Our results:
• We found the amount of the revenue recognised
to be acceptable (2021: acceptable); and
• We considered the level of doubtful debt
provisioning to be acceptable (2021: acceptable).
We performed the detailed tests below rather than
seeking to rely on any of the group’s controls because our
knowledge of the design of these controls indicated that
we would not be able to obtain the required evidence to
support reliance on controls.
Our procedures included:
• Accounting analysis: assessed the group’s
capitalisation policy for compliance with relevant
accounting standards;
• Tests of details: critically assessed the capital
nature of a sample of projects against the
capitalisation policy focusing on new projects
approved, project overspend, forecast cost to
complete; and
• Assessing transparency: assessed the adequacy
of the group’s disclosures of its capitalisation
policy including the judgement involved in
assessing expenditure as capital.
Our results:
• We found the group’s classification of expenditure
as capital or operating to be acceptable (2021:
acceptable).
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202
unitedutilities.com/corporate
Stock Code: UU.
203
Independent auditor’s report to the members of
United Utilities Group PLC only
The risk
Our response
Valuation of retirement benefit
obligations
£3,018.9 million (2021: £3,295.7
million)
Refer to page 151 (Audit
committee report), pages 219
and 260 (accounting policy) and
pages 232 to 233 and 250 to 255
(financial disclosures)
Subjective valuation:
The valuation of the retirement benefit
obligations depends on a number of
estimates, including the discount rates
used to calculate the current value of the
future payments to pensioners, the rate of
inflation that must be incorporated in the
estimate of the future pension payments,
and the life expectancy of pension
scheme members.
There is a considerable amount of
estimation uncertainty involved in setting
the above assumptions and a small
change in the assumptions and estimates
may have a significant impact on the
retirement benefit obligations.
The effect of these matters is that,
as part of our risk assessment, we
determined that the gross defined benefit
pension obligations has a high degree of
estimation uncertainty, with a potential
range of reasonable outcomes greater
than our materiality for the financial
statements as a whole, and possibly
many times that amount. The financial
statements (see page 253) disclose the
sensitivity estimated by the group.
Recoverability of parent
company’s investment in
United Utilities PLC
Investment in United Utilities
PLC – £6,326.8 million (2021:
£6,326.8 million)
Refer to page 257 (accounting
policy), and page 229 (financial
disclosures).
Low risk, high value:
The carrying amount of the parent
company’s investment in United Utilities
PLC represents 100 per cent (2021: 99
per cent) of the company’s total assets.
The recoverability is not at a high risk
of significant misstatement or subject
to significant judgement. However, due
to the materiality in the context of the
parent company financial statements,
this is considered to be the area that had
the greatest effect on our overall parent
company audit.
We performed the tests below rather than seeking to
rely on the group’s controls because the nature of the
balance is such that we would expect to obtain audit
evidence primarily through the detailed procedures
described.
Our procedures included:
• Our actuarial expertise: used our own actuarial
specialists to challenge key assumptions and
estimates used in the calculation of the retirement
benefit obligations; and perform a comparison
of key assumptions against our own benchmark
ranges derived from externally-available data and
against those used by other companies reporting
on the same period;
• Methodology assessment: used our own
actuarial specialists to assess the appropriateness
and consistency of the methodology applied by
management in setting the key assumptions;
• Assessing external actuary’s credentials:
assessed competence and independence of the
external actuary engaged by the group; and
• Assessing transparency: considered the
adequacy of the group’s disclosure in respect
of retirement benefits, in particular the gross
defined benefit obligation and the assumptions
used, which are set out in notes 18 and A5 to the
financial statements.
Our results:
• We found the resulting estimate of the retirement
benefit obligations to be acceptable (2021:
acceptable).
We performed the tests below rather than seeking to
rely on any of the company’s controls because testing
for recoverability through detailed testing is inherently
the most effective means of obtaining audit evidence.
Our procedures included:
• Tests of detail: compared the carrying amount
of the investment with the draft balance sheet of
United Utilities PLC to identify whether the net
assets, being an approximation of the minimum
recoverable amount, is in excess of the carrying
amount and, if not, comparing it with the expected
value of the business based on a suitable premium
to the regulatory capital value.
Our results:
• We found the group’s assessment of the
recoverability of the investment in United Utilities
PLC to be acceptable (2021: acceptable).
In the previous year the capitalisation of overheads was included in the capitalisation of costs relating to the capital programme key
audit matter. We continue to perform procedures over the capitalisation of overheads but we’ve excluded it from the key audit matter
as the size of the balance is less significant than the judgement around the capitalisation of project costs.
204
unitedutilities.com/corporate
Independent auditor’s report to the members of
United Utilities Group PLC only
Valuation of retirement benefit
Subjective valuation:
We performed the tests below rather than seeking to
The risk
Our response
obligations
million)
£3,018.9 million (2021: £3,295.7
Refer to page 151 (Audit
committee report), pages 219
and 260 (accounting policy) and
pages 232 to 233 and 250 to 255
(financial disclosures)
Recoverability of parent
company’s investment in
United Utilities PLC
Investment in United Utilities
PLC – £6,326.8 million (2021:
£6,326.8 million)
Refer to page 257 (accounting
policy), and page 229 (financial
disclosures).
The valuation of the retirement benefit
rely on the group’s controls because the nature of the
obligations depends on a number of
balance is such that we would expect to obtain audit
estimates, including the discount rates
evidence primarily through the detailed procedures
used to calculate the current value of the
described.
future payments to pensioners, the rate of
inflation that must be incorporated in the
estimate of the future pension payments,
and the life expectancy of pension
scheme members.
There is a considerable amount of
Our procedures included:
• Our actuarial expertise: used our own actuarial
specialists to challenge key assumptions and
estimates used in the calculation of the retirement
benefit obligations; and perform a comparison
of key assumptions against our own benchmark
estimation uncertainty involved in setting
ranges derived from externally-available data and
the above assumptions and a small
against those used by other companies reporting
change in the assumptions and estimates
on the same period;
may have a significant impact on the
retirement benefit obligations.
The effect of these matters is that,
as part of our risk assessment, we
• Methodology assessment: used our own
actuarial specialists to assess the appropriateness
and consistency of the methodology applied by
management in setting the key assumptions;
determined that the gross defined benefit
• Assessing external actuary’s credentials:
pension obligations has a high degree of
assessed competence and independence of the
estimation uncertainty, with a potential
external actuary engaged by the group; and
range of reasonable outcomes greater
than our materiality for the financial
statements as a whole, and possibly
many times that amount. The financial
statements (see page 253) disclose the
sensitivity estimated by the group.
• Assessing transparency: considered the
adequacy of the group’s disclosure in respect
of retirement benefits, in particular the gross
defined benefit obligation and the assumptions
used, which are set out in notes 18 and A5 to the
financial statements.
Our results:
• We found the resulting estimate of the retirement
benefit obligations to be acceptable (2021:
acceptable).
Low risk, high value:
We performed the tests below rather than seeking to
The carrying amount of the parent
rely on any of the company’s controls because testing
company’s investment in United Utilities
for recoverability through detailed testing is inherently
PLC represents 100 per cent (2021: 99
the most effective means of obtaining audit evidence.
per cent) of the company’s total assets.
The recoverability is not at a high risk
of significant misstatement or subject
to significant judgement. However, due
to the materiality in the context of the
parent company financial statements,
this is considered to be the area that had
the greatest effect on our overall parent
company audit.
Our procedures included:
• Tests of detail: compared the carrying amount
of the investment with the draft balance sheet of
United Utilities PLC to identify whether the net
assets, being an approximation of the minimum
recoverable amount, is in excess of the carrying
amount and, if not, comparing it with the expected
value of the business based on a suitable premium
to the regulatory capital value.
Our results:
• We found the group’s assessment of the
recoverability of the investment in United Utilities
PLC to be acceptable (2021: acceptable).
In the previous year the capitalisation of overheads was included in the capitalisation of costs relating to the capital programme key
audit matter. We continue to perform procedures over the capitalisation of overheads but we’ve excluded it from the key audit matter
as the size of the balance is less significant than the judgement around the capitalisation of project costs.
3. Our application of materiality and an overview
of the scope of our audit
Materiality for the group financial statements as a whole was set
at £16.5 million (2021: £19.0 million), determined with reference
to a benchmark of group profit before tax of £297.0 million,
normalised to exclude this year’s net fair value gains or losses on
debt and derivative instruments as disclosed in note 6, of which
it represents 5.6 per cent (2021: 4.1 per cent).
Materiality for the parent company financial statements as a
whole was set at £8.5 million (2021: £9.0 million), determined
with reference to a benchmark of company total assets, of which
it represents 0.1 per cent (2021: 0.0 per cent).
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to reduce
to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a
material amount across the financial statements as a whole.
Performance materiality was set at 75 per cent (2021: 75 per
cent) of materiality for the financial statements as a whole, which
equates to £12.3 million (2021: £14.2 million) for the group and
£6.4 (2021: £6.7 million) for the parent company. We applied
this percentage in our determination of performance materiality
because we did not identify any factors indicating an elevated
level of risk.
We agreed to report to the Audit committee any corrected or
uncorrected identified misstatements exceeding £0.5 million
(2021: £0.5 million), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Of the group’s 34 (2021: 34) reporting components, we subjected
five (2021: five) to full scope audits for group purposes and none
(2021: one) to specified risk-focused audit procedures.
The components within the scope of our work accounted for the
percentages illustrated opposite.
For the residual components, we performed analysis at an
aggregated group level to re-examine our assessment that there
were no significant risks of material misstatement within these.
The group team approved the component materialities, which
ranged from £6.0 million to £15.8 million (2021: £8.0 million to
£17.5 million), having regard to the mix of size and risk profile of
the group across the components. The work on all components,
including the audit of the parent company, was performed by the
group team.
The scope of the audit work performed was predominately
substantive as we placed limited reliance upon the group’s
internal control over financial reporting.
Normalised group profit before tax
£297.0m (2021: £476.5m)
Group materiality
£16.5m (2021: £19.0m)
£16.5m
Whole financial
statements materiality
(2021: £19.0m)
£12.3m
Whole financial statements
performance materiality
(2021: £14.2m)
£15.8m
Range of materiality at 5
components (£6.0m to £15.8m)
(2021: £8.0m to £17.5m)
£0.5m
Misstatements reported to the audit
committee (2021: £0.5m)
Normalised PBT
Group materiality
Group revenue
Group profit before tax
1
1
99%
(2021: 99%)
99
99
0
1
100%
(2021: 99%)
99
100
Group total assets
Group normalised profit
before tax
0
1
100%
(2021: 99%)
99
100
0
0
100%
(2021: 100%)
100
100
Full scope for group audit purposes 2022
Specified risk-focused audit procedures 2022
Full scope for group audit purposes 2021
Specified risk-focused audit procedures 2021
Residual components
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204
unitedutilities.com/corporate
Stock Code: UU.
205
Independent auditor’s report to the members of
United Utilities Group PLC only
4. The impact of climate change on our audit
We have considered the potential impacts of climate change on
the financial statements as part of planning our audit.
The group has set out its climate targets in line with limiting
global warming to 1.5ºC by 2030, and to be climate net zero by
2050. The majority of the group’s carbon emissions are from
the burning of fossil fuels, fuels used for transport and the
grid electricity purchased. The group continues to develop its
assessment of climate change. Climate change initiatives impact
the group in a variety of ways including opportunities and risks
relating to renewable energy sources and extreme weather
events. Further information is provided on pages 86 to 97. While
the group has set out its targets, it is continually developing
its assessment of the impact of climate change on capital
expenditure, the cost base and impacts on cash flows. The group
considered the impact of climate change and the group’s targets
in the preparation of the financial statements, including an
evaluation of critical accounting estimates and judgements. The
group concluded that this did not have a material effect on the
consolidated financial statements, as described on page 219.
As part of our audit, we have made enquiries of directors
and operational managers to understand the extent of the
potential impact of climate change risks on the group’s financial
statements, including their assessment of critical accounting
estimates and judgements, and the effect on our audit. We have
performed a risk assessment to evaluate the potential impact,
including the estimates made regarding useful economic lives
of property, plant and equipment, and the valuation of certain
unquoted pension assets.
We held discussions with our own climate change professionals
to challenge our risk assessment. Taking into account the
expected remaining useful lives of property, plant and
equipment, and the nature of unquoted pension assets, we
assessed that there is not a significant impact on our audit for
this financial year. There was no significant impact of climate on
our key audit matters.
We have read the group’s disclosure of climate-related
information in the front half of the annual report as set out on
pages 86 to 97 and considered consistency with the financial
statements and our audit knowledge.
5. Going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the group
or the company or to cease their operations, and as they have
concluded that the group’s and the company’s financial position
means that this is realistic. They have also concluded that there
are no material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for at
least a year from the date of approval of the financial statements
(‘the going concern period’).
We used our knowledge of the group, its industry, and the
general economic environment to identify the inherent risks to
its business model and analysed how those risks might affect
the group’s and company’s financial resources or ability to
continue operations over the going concern period. The risk that
we considered most likely to adversely affect the group’s and
company’s available financial resources and metrics related to a
one-off total expenditure impact.
We considered whether these risks could plausibly affect the
liquidity or covenant compliance in the going concern period by
assessing the directors’ sensitivities over the level of available
financial resources and covenant thresholds indicated by
the group’s financial forecasts taking account of severe, but
plausible, adverse effects that could arise from these risks
individually and collectively.
Our procedures included:
• Assessing key assumptions in the forecasts: critically
assessing assumptions in base case and downside scenarios
relevant to liquidity and covenant metrics such as inflation
rate growth compared to market forecasts, forecast bonus
payments compared to historical bonus payments and
forecast dividend payments compared to group dividend
policy. This included assessing whether downside scenarios
applied assumptions which are mutually consistent, using
our assessment of the possible range of each key assumption
and our knowledge of inter-dependencies;
• Funding assessment: considering the availability of existing
debt arrangements and committed loan facilities, including
testing compliance with covenants and expected maturity
dates;
• Historical accuracy of managements forecasts: comparing
historical budgets to actual results to assess the directors’
track record of budgeting accurately;
• Evaluating directors’ intent: evaluating the achievability
of the actions the directors consider they would take to
improve the position should the risks materialise, including
assessment of mitigating actions within their control; and
• Assessing the completeness and accuracy of the matters
covered in the going concern disclosure: considering
whether the going concern disclosure in the accounting
policies to the financial statements gives a full and accurate
description of the directors’ assessment of going concern,
including the identified risks and related sensitivities.
Our conclusions based on this work:
• we consider that the directors’ use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate;
• we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty related
to events or conditions that, individually or collectively, may
cast significant doubt on the group’s or company’s ability to
continue as a going concern for the going concern period;
• we have nothing material to add or draw attention to in
relation to the directors’ statement in the accounting policies
to the financial statements on the use of the going concern
basis of accounting with no material uncertainties that may
cast significant doubt over the group and company’s use of
that basis for the going concern period, and we found the
going concern disclosure in the accounting policies to be
acceptable; and
•
the related statement under the Listing Rules set out on page
140 is materially consistent with the financial statements and
our audit knowledge.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time
they were made, the above conclusions are not a guarantee that
the group or the company will continue in operation.
206
unitedutilities.com/corporate
Independent auditor’s report to the members of
United Utilities Group PLC only
4. The impact of climate change on our audit
We considered whether these risks could plausibly affect the
We have considered the potential impacts of climate change on
liquidity or covenant compliance in the going concern period by
the financial statements as part of planning our audit.
The group has set out its climate targets in line with limiting
global warming to 1.5ºC by 2030, and to be climate net zero by
2050. The majority of the group’s carbon emissions are from
the burning of fossil fuels, fuels used for transport and the
assessing the directors’ sensitivities over the level of available
financial resources and covenant thresholds indicated by
the group’s financial forecasts taking account of severe, but
plausible, adverse effects that could arise from these risks
individually and collectively.
grid electricity purchased. The group continues to develop its
Our procedures included:
assessment of climate change. Climate change initiatives impact
• Assessing key assumptions in the forecasts: critically
the group in a variety of ways including opportunities and risks
relating to renewable energy sources and extreme weather
events. Further information is provided on pages 86 to 97. While
the group has set out its targets, it is continually developing
its assessment of the impact of climate change on capital
expenditure, the cost base and impacts on cash flows. The group
considered the impact of climate change and the group’s targets
in the preparation of the financial statements, including an
evaluation of critical accounting estimates and judgements. The
group concluded that this did not have a material effect on the
consolidated financial statements, as described on page 219.
assessing assumptions in base case and downside scenarios
relevant to liquidity and covenant metrics such as inflation
rate growth compared to market forecasts, forecast bonus
payments compared to historical bonus payments and
forecast dividend payments compared to group dividend
policy. This included assessing whether downside scenarios
applied assumptions which are mutually consistent, using
our assessment of the possible range of each key assumption
and our knowledge of inter-dependencies;
• Funding assessment: considering the availability of existing
debt arrangements and committed loan facilities, including
testing compliance with covenants and expected maturity
As part of our audit, we have made enquiries of directors
and operational managers to understand the extent of the
dates;
potential impact of climate change risks on the group’s financial
• Historical accuracy of managements forecasts: comparing
statements, including their assessment of critical accounting
estimates and judgements, and the effect on our audit. We have
performed a risk assessment to evaluate the potential impact,
including the estimates made regarding useful economic lives
of property, plant and equipment, and the valuation of certain
unquoted pension assets.
historical budgets to actual results to assess the directors’
track record of budgeting accurately;
• Evaluating directors’ intent: evaluating the achievability
of the actions the directors consider they would take to
improve the position should the risks materialise, including
assessment of mitigating actions within their control; and
We held discussions with our own climate change professionals
• Assessing the completeness and accuracy of the matters
to challenge our risk assessment. Taking into account the
expected remaining useful lives of property, plant and
equipment, and the nature of unquoted pension assets, we
assessed that there is not a significant impact on our audit for
covered in the going concern disclosure: considering
whether the going concern disclosure in the accounting
policies to the financial statements gives a full and accurate
description of the directors’ assessment of going concern,
this financial year. There was no significant impact of climate on
including the identified risks and related sensitivities.
our key audit matters.
We have read the group’s disclosure of climate-related
information in the front half of the annual report as set out on
pages 86 to 97 and considered consistency with the financial
statements and our audit knowledge.
5. Going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the group
or the company or to cease their operations, and as they have
concluded that the group’s and the company’s financial position
means that this is realistic. They have also concluded that there
are no material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for at
least a year from the date of approval of the financial statements
(‘the going concern period’).
general economic environment to identify the inherent risks to
its business model and analysed how those risks might affect
the group’s and company’s financial resources or ability to
continue operations over the going concern period. The risk that
we considered most likely to adversely affect the group’s and
company’s available financial resources and metrics related to a
one-off total expenditure impact.
Our conclusions based on this work:
• we consider that the directors’ use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate;
• we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty related
to events or conditions that, individually or collectively, may
cast significant doubt on the group’s or company’s ability to
continue as a going concern for the going concern period;
• we have nothing material to add or draw attention to in
relation to the directors’ statement in the accounting policies
to the financial statements on the use of the going concern
basis of accounting with no material uncertainties that may
cast significant doubt over the group and company’s use of
that basis for the going concern period, and we found the
going concern disclosure in the accounting policies to be
•
the related statement under the Listing Rules set out on page
140 is materially consistent with the financial statements and
our audit knowledge.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time
they were made, the above conclusions are not a guarantee that
the group or the company will continue in operation.
We used our knowledge of the group, its industry, and the
acceptable; and
6. Fraud and breaches of laws and regulations –
ability to detect
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to fraud (‘fraud
risks’) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity
to commit fraud. Our risk assessment procedures included:
• enquiring of directors, the audit committee, internal audit
and inspection of policy documentation as to the group’s
high level policies and procedures to prevent and detect
fraud, including the internal audit function, and the group’s
channel for ‘whistleblowing’, as well as whether they have
knowledge of any actual, suspected or alleged fraud;
•
reading board/audit committee minutes; and
• considering remuneration incentive schemes and
performance targets for directors including Long Term Plan
awards.
We communicated identified fraud risks throughout the audit
team and remained alert to any indications of fraud throughout
the audit.
As required by auditing standards, and taking into account
possible pressures to meet profit targets and our overall
knowledge of the control environment, we perform procedures
to address the risk of management override of controls and
the risk of fraudulent revenue recognition, the risk that group
management may be in a position to make inappropriate
accounting entries, and the risk of bias in accounting estimates
and judgements such as revenue recognition and provisions for
household customer debt and capitalisation of costs relating to
the capital programme. Further detail in respect of the above
accounting estimates and judgements is set out in the key audit
matter disclosures in section 2 of this report.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the group is subject to laws and regulations that directly affect
the financial statements including financial reporting legislation
(including related companies legislation), distributable profits
legislation, pension legislation and taxation legislation and we
assessed the extent of compliance with these laws and regulations as
part of our procedures on the related financial statement items.
Secondly, the group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for
instance through the imposition of fines or litigation. We identified
the following areas as those most likely to have such an effect: Ofwat,
Environment Agency, Drinking Water Inspectorate, health and safety,
anti-bribery, employment law, regulatory capital and liquidity and
certain aspects of company legislation recognising the financial
and regulated nature of the group’s activities and its legal form.
Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of the
directors and inspection of regulatory and legal correspondence, if
any. Therefore, if a breach of operational regulations is not disclosed
to us or evident from relevant correspondence, an audit will not
detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-
compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely
the inherently limited procedures required by auditing standards
would identify it.
We also performed procedures including:
•
identifying journal entries to test based on risk criteria
and comparing the identified entries to supporting
documentation. These included journals relating to revenue,
capitalised costs and treasury posted to unexpected or
unrelated accounts; and
• assessing significant accounting estimates for bias.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect non-
compliance with all laws and regulations.
Identifying and responding to risks of material misstatement
due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our general commercial and sector experience, through
discussion with the directors and other management (as required
by auditing standards), from inspection of the group’s regulatory
and legal correspondence and discussed with the directors
and other management the policies and procedures regarding
compliance with laws and regulations.
As the group is regulated, our assessment of risks involved gaining
an understanding of the control environment including the entity’s
procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout
our team and remained alert to any indications of non-
compliance throughout the audit.
7. We have nothing to report on the other information
in the annual report
The directors are responsible for the other information presented
in the annual report together with the financial statements. Our
opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated
or inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
206
unitedutilities.com/corporate
Stock Code: UU.
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207
Independent auditor’s report to the members of
United Utilities Group PLC only
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the
strategic report and the directors’ report;
•
•
in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of emerging and principal risks and
longer-term viability
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
disclosures in respect of emerging and principal risks and the
viability statement, and the financial statements and our audit
knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
•
•
•
the directors’ confirmation within the long-term viability
statement on pages 140 to 141 that they have carried out a
robust assessment of the emerging and principal risks facing
the group, including those that would threaten its business
model, future performance, solvency and liquidity;
the Principal Risks disclosures describing these risks and
how emerging risks are identified, and explaining how they
are being managed and mitigated; and
the directors’ explanation in the long-term viability statement
of how they have assessed the prospects of the group, over
what period they have done so and why they considered
that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the group
will be able to continue in operation and meet its liabilities,
including any related disclosures drawing liabilities, as
they fall due over the period of their assessment drawing
attention to any necessary qualifications or assumptions.
We are also required to review the long-term viability statement,
set out on pages 140 to 141, under the Listing Rules. Based on the
above procedures, we have concluded that the above disclosures
are materially consistent with the financial statements and our
audit knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were
made, the absence of anything to report on these statements
is not a guarantee as to the group’s and company’s longer-term
viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there
is a material inconsistency between the directors’ corporate
governance disclosures and the financial statements and our
audit knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements
and our audit knowledge:
•
•
•
the directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess the group’s position and
performance, business model and strategy;
the section of the annual report describing the work of
the Audit committee, including the significant issues that
the Audit committee considered in relation to the financial
statements, and how these issues were addressed; and
the section of the annual report that describes the review
of the effectiveness of the group’s risk management and
internal control systems.
We are required to review the part of the Corporate Governance
Statement relating to the group’s compliance with the provisions
of the UK Corporate Governance Code specified by the Listing
Rules for our review. We have nothing to report in this respect.
8. We have nothing to report on the other matters
on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
•
the parent company financial statements and the part of
the Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 198,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and
fair view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the group and parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the group or the parent company or
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue our opinion in an auditor’s report. Reasonable assurance is
a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
208
unitedutilities.com/corporate
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The company is required to include these financial statements
in an annual financial report prepared using the single electronic
reporting format specified in the TD ESEF Regulation. This
auditor’s report provides no assurance over whether the annual
financial report has been prepared in accordance with that
format.
10. The purpose of our audit work and to whom
we owe our responsibilities
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and
the company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Ian Griffiths
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square, Manchester, M2 3AE
25 May 2022
Independent auditor’s report to the members of
United Utilities Group PLC only
Strategic report and directors’ report
Based solely on our work on the other information:
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements
• we have not identified material misstatements in the
strategic report and the directors’ report;
•
in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
•
in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
and our audit knowledge:
•
the directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess the group’s position and
performance, business model and strategy;
•
the section of the annual report describing the work of
the Audit committee, including the significant issues that
In our opinion the part of the Directors’ remuneration report to
the Audit committee considered in relation to the financial
be audited has been properly prepared in accordance with the
statements, and how these issues were addressed; and
Companies Act 2006.
Disclosures of emerging and principal risks and
longer-term viability
•
the section of the annual report that describes the review
of the effectiveness of the group’s risk management and
internal control systems.
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
We are required to review the part of the Corporate Governance
Statement relating to the group’s compliance with the provisions
disclosures in respect of emerging and principal risks and the
of the UK Corporate Governance Code specified by the Listing
viability statement, and the financial statements and our audit
Rules for our review. We have nothing to report in this respect.
•
the directors’ explanation in the long-term viability statement
law are not made; or
knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
•
the directors’ confirmation within the long-term viability
statement on pages 140 to 141 that they have carried out a
robust assessment of the emerging and principal risks facing
the group, including those that would threaten its business
model, future performance, solvency and liquidity;
•
the Principal Risks disclosures describing these risks and
how emerging risks are identified, and explaining how they
are being managed and mitigated; and
of how they have assessed the prospects of the group, over
what period they have done so and why they considered
that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the group
will be able to continue in operation and meet its liabilities,
including any related disclosures drawing liabilities, as
they fall due over the period of their assessment drawing
attention to any necessary qualifications or assumptions.
We are also required to review the long-term viability statement,
set out on pages 140 to 141, under the Listing Rules. Based on the
above procedures, we have concluded that the above disclosures
are materially consistent with the financial statements and our
audit knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were
made, the absence of anything to report on these statements
is not a guarantee as to the group’s and company’s longer-term
viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there
is a material inconsistency between the directors’ corporate
governance disclosures and the financial statements and our
audit knowledge.
8. We have nothing to report on the other matters
on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
•
the parent company financial statements and the part of
the Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
• we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 198,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and
fair view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the group and parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the group or the parent company or
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue our opinion in an auditor’s report. Reasonable assurance is
a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
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3
1
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2
0
2
2
208
unitedutilities.com/corporate
Stock Code: UU.
209
Consolidated income statement
for the year ended 31 March
Revenue
Staff costs
Other operating costs
Allowance for expected credit losses – trade and other receivables
Other income
Depreciation and amortisation expense
Infrastructure renewals expenditure
Total operating expenses
Operating profit
Investment income
Finance expense
Allowance for expected credit losses – loans to joint ventures
Investment income and finance expense
Share of losses of joint ventures
Profit on disposal of joint venture
Profit before tax
Current tax credit/(charge)
Deferred tax charge
Tax
(Loss)/profit after tax
Earnings per share
Basic
Diluted
Dividend per ordinary share
All of the results shown above relate to continuing operations.
Note
2
3
4
4
4
4
5
6
A6
12
12
7
7
7
8
8
9
2022
£m
2021
£m
1,862.7
1,808.0
(184.3)
(461.7)
(23.4)
4.4
(418.2)
(169.5)
(173.4)
(420.3)
(28.7)
3.6
(422.3)
(164.8)
(1,252.7)
(1,205.9)
610.0
19.4
(187.8)
0.1
(168.3)
(1.8)
–
439.9
65.8
(562.5)
(496.7)
(56.8)
602.1
25.0
(107.2)
3.7
(78.5)
(9.3)
36.7
551.0
(79.2)
(18.4)
(97.6)
453.4
(8.3)p
(8.3)p
66.5p
66.3p
43.50p
43.24p
210
unitedutilities.com/corporate
Consolidated income statement
for the year ended 31 March
Consolidated statement of comprehensive income
for the year ended 31 March
Allowance for expected credit losses – trade and other receivables
Revenue
Staff costs
Other operating costs
Other income
Depreciation and amortisation expense
Infrastructure renewals expenditure
Total operating expenses
Operating profit
Investment income
Finance expense
Allowance for expected credit losses – loans to joint ventures
Investment income and finance expense
Share of losses of joint ventures
Profit on disposal of joint venture
Profit before tax
Current tax credit/(charge)
Deferred tax charge
Tax
(Loss)/profit after tax
Earnings per share
Basic
Diluted
Dividend per ordinary share
All of the results shown above relate to continuing operations.
(Loss)/profit after tax
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods:
Cash flow hedges – effective portion of fair value movements
Tax on items recorded within other comprehensive income
Foreign exchange adjustments
Foreign exchange adjustments reclassified to profit on disposal of joint ventures
(1,252.7)
(1,205.9)
Other comprehensive income that may be reclassified to profit or loss
Items that will not be reclassified to profit or loss in subsequent periods:
Remeasurement gains/(losses) on defined benefit pension schemes
Change in credit assumptions for debt reported at fair value through profit or loss
Cost of hedging – cross-currency basis spread adjustment
Deferred tax adjustments in respect of prior years on net fair value gains
Tax on items recorded within other comprehensive income
Other comprehensive income that will not be reclassified to profit or loss
Total comprehensive income
2022
£m
(56.8)
106.7
(26.8)
–
–
79.9
313.6
(4.1)
–
–
(109.4)
200.1
223.2
2021
£m
453.4
9.3
(1.8)
(1.6)
4.0
9.9
(82.7)
(43.3)
(12.7)
–
36.6
(102.1)
361.2
Note
1,862.7
1,808.0
2022
£m
(184.3)
(461.7)
(23.4)
4.4
(418.2)
(169.5)
610.0
19.4
(187.8)
0.1
(168.3)
(1.8)
–
439.9
65.8
(562.5)
(496.7)
(56.8)
2021
£m
(173.4)
(420.3)
(28.7)
3.6
(422.3)
(164.8)
602.1
25.0
(107.2)
3.7
(78.5)
(9.3)
36.7
551.0
(79.2)
(18.4)
(97.6)
453.4
(8.3)p
(8.3)p
66.5p
66.3p
43.50p
43.24p
5
6
A6
12
12
2
3
4
4
4
4
7
7
7
8
8
9
210
unitedutilities.com/corporate
Stock Code: UU.
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2
2
211
Consolidated and company statements of
financial position at 31 March
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Interests in joint ventures and other investments
Inventories
Trade and other receivables
Retirement benefit surplus
Derivative financial instruments
Current assets
Inventories
Trade and other receivables
Current tax asset
Cash and short-term deposits
Derivative financial instruments
Total assets
LIABILITIES
Non-current liabilities
Trade and other payables
Borrowings
Deferred tax liabilities
Derivative financial instruments
Current liabilities
Trade and other payables
Borrowings
Provisions
Derivative financial instruments
Total liabilities
Total net assets
EQUITY
Share capital
Share premium account
Other reserves
Retained earnings
Shareholders’ equity
Note
2022
£m
Group
2021
£m
2022
£m
Company
2021
£m
10
11
12
13
14
18
A4
13
14
15
A4
21
16
19
A4
21
16
20
A4
23
22
12,147.5
160.8
16.6
0.4
81.7
1,016.8
399.4
13,823.2
17.8
222.7
74.4
240.9
58.0
613.8
14,437.0
11,799.0
181.1
0.1
–
86.7
689.0
410.3
–
–
–
–
6,326.8
6,326.8
–
75.0
–
–
–
–
–
–
13,166.2
6,401.8
6,326.8
18.3
229.2
6.9
744.1
14.4
1,012.9
14,179.1
–
20.2
–
–
–
20.2
6,422.0
–
91.9
–
–
–
91.9
6,418.7
(835.2)
(7,671.0)
(2,148.1)
(136.7)
(798.3)
(7,797.0)
(1,449.5)
(107.8)
–
–
(1,799.9)
(1,780.6)
–
–
–
–
(10,791.0)
(10,152.6)
(1,799.9)
(1,780.6)
(365.8)
(308.8)
(13.5)
(0.5)
(688.6)
(11,479.6)
2,957.4
499.8
2.9
416.2
2,038.5
2,957.4
(322.7)
(654.8)
(11.1)
(6.9)
(995.5)
(11,148.1)
3,031.0
499.8
2.9
336.3
2,192.0
3,031.0
(13.1)
(10.8)
–
–
–
(13.1)
(1,813.0)
4,609.0
499.8
2.9
1,033.3
3,073.0
4,609.0
–
–
–
(10.8)
(1,791.4)
4,627.3
499.8
2.9
1,033.3
3,091.3
4,627.3
These financial statements for the group and United Utilities Group PLC (company number: 6559020) were approved by the board of
directors on 25 May 2022 and signed on its behalf by:
Steve Mogford
Chief Executive Officer
Phil Aspin
Chief Financial Officer
212
unitedutilities.com/corporate
Interests in joint ventures and other investments
6,326.8
6,326.8
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Inventories
Trade and other receivables
Retirement benefit surplus
Derivative financial instruments
Current assets
Inventories
Trade and other receivables
Current tax asset
Cash and short-term deposits
Derivative financial instruments
Total assets
LIABILITIES
Non-current liabilities
Trade and other payables
Borrowings
Deferred tax liabilities
Derivative financial instruments
Current liabilities
Trade and other payables
Borrowings
Provisions
Derivative financial instruments
Total liabilities
Total net assets
EQUITY
Share capital
Share premium account
Other reserves
Retained earnings
Shareholders’ equity
Note
2022
£m
Group
2021
£m
2022
£m
Company
2021
£m
10
11
12
13
14
18
A4
13
14
15
A4
21
16
19
A4
21
16
20
A4
23
22
12,147.5
160.8
16.6
0.4
81.7
1,016.8
399.4
13,823.2
17.8
222.7
74.4
240.9
58.0
613.8
14,437.0
(835.2)
(7,671.0)
(2,148.1)
(136.7)
(365.8)
(308.8)
(13.5)
(0.5)
(688.6)
(11,479.6)
2,957.4
499.8
2.9
416.2
2,038.5
2,957.4
13,166.2
6,401.8
6,326.8
11,799.0
181.1
0.1
–
86.7
689.0
410.3
18.3
229.2
6.9
744.1
14.4
1,012.9
14,179.1
(798.3)
(7,797.0)
(1,449.5)
(107.8)
(322.7)
(654.8)
(11.1)
(6.9)
(995.5)
(11,148.1)
3,031.0
499.8
2.9
336.3
2,192.0
3,031.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20.2
91.9
20.2
6,422.0
91.9
6,418.7
(1,799.9)
(1,780.6)
(13.1)
(10.8)
(13.1)
(1,813.0)
4,609.0
499.8
2.9
1,033.3
3,073.0
4,609.0
(10.8)
(1,791.4)
4,627.3
499.8
2.9
1,033.3
3,091.3
4,627.3
(10,791.0)
(10,152.6)
(1,799.9)
(1,780.6)
These financial statements for the group and United Utilities Group PLC (company number: 6559020) were approved by the board of
directors on 25 May 2022 and signed on its behalf by:
Steve Mogford
Chief Executive Officer
Phil Aspin
Chief Financial Officer
Consolidated and company statements of
financial position at 31 March
Consolidated statement of changes in equity
for the year ended 31 March
At 1 April 2021
Loss after tax
Other comprehensive income
Remeasurement gains on defined benefit pension schemes (see note 18)
Change in credit assumption for debt reported at fair value through
profit or loss
Cash flow hedges – effective portion of fair value movements
Tax on items recorded within other comprehensive income (see note 7)
Total comprehensive income
Dividends (see note 9)
Equity-settled share-based payments (see note 3)
Purchase of shares to satisfy exercise of share options
Share
capital
£m
499.8
Share
premium
account
£m
Other
reserves*
£m
Retained
earnings
£m
Total
£m
2.9
336.3
2,192.0
3,031.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
106.7
(26.8)
79.9
–
–
–
(56.8)
(56.8)
313.6
313.6
(4.1)
–
(109.4)
143.3
(295.5)
4.8
(6.1)
(4.1)
106.7
(136.2)
223.2
(295.5)
4.8
(6.1)
At 31 March 2022
499.8
2.9
416.2
2,038.5
2,957.4
At 1 April 2020
Profit after tax
Other comprehensive income
Remeasurement gains on defined benefit pension schemes (see note 18)
Change in credit assumption for debt reported at fair value through
profit or loss
Cash flow hedges – effective portion of fair value movements
Cost of hedging – cross-currency basis spread adjustment
Tax on items recorded within other comprehensive income (see note 7)
Foreign exchange adjustments
Foreign exchange adjustments reclassified to profit on disposal of
joint ventures
Total comprehensive income
Dividends (see note 9)
Equity-settled share-based payments (see note 3)
Purchase of shares to satisfy exercise of share options
Share
capital
£m
499.8
–
–
–
–
–
–
–
–
–
–
–
–
Share
premium
account
£m
Other
reserves*
£m
Retained
earnings
£m
Total
£m
2,962.1
453.4
2,122.7
453.4
(82.7)
(82.7)
(43.3)
–
–
34.2
–
–
361.6
(291.9)
3.6
(4.0)
(43.3)
9.3
(12.7)
34.8
(1.6)
4.0
361.2
(291.9)
3.6
(4.0)
2.9
336.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9.3
(12.7)
0.6
(1.6)
4.0
(0.4)
–
–
–
At 31 March 2021
499.8
2.9
336.3
2,192.0
3,031.0
* Other reserves comprise the group’s cumulative exchange reserve, capital redemption reserve, merger reserve, cost of hedging reserve and cash flow
hedging reserve. Further detail of movements in these reserves is included in note 22.
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Company statement of changes in equity
for the year ended 31 March
At 1 April 2021
Profit after tax
Total comprehensive income
Dividends (see note 9)
Equity-settled share-based payments (see note 3)
Purchase of shares to satisfy exercise of share options
Share
capital
£m
499.8
–
–
–
–
–
Share
premium
account
£m
Other
reserves
£m
Retained
earnings
£m
Total
£m
2.9
1,033.3
3,091.3
4,627.3
–
–
–
–
–
–
–
–
–
–
278.5
278.5
(295.5)
4.8
(6.1)
278.5
278.5
(295.5)
4.8
(6.1)
At 31 March 2022
499.8
2.9
1,033.3
3,073.0
4,609.0
At 1 April 2020
Profit after tax
Total comprehensive income
Dividends (see note 9)
Equity-settled share-based payments (see note 3)
Purchase of shares to satisfy exercise of share options
Share
capital
£m
499.8
–
–
–
–
–
Share
premium
account
£m
Other
reserves
£m
Retained
earnings
£m
2.9
1,033.3
–
–
–
–
–
–
–
–
–
–
3,105.1
278.5
278.5
(291.9)
3.6
(4.0)
Total
£m
4,641.1
278.5
278.5
(291.9)
3.6
(4.0)
At 31 March 2021
499.8
2.9
1,033.3
3,091.3
4,627.3
At 31 March 2022, 31 March 2021 and 31 March 2020, the company’s entire retained earnings balance was distributable to
shareholders.
The company’s other reserves comprise a capital redemption reserve that arose as a result of a return of capital to shareholders
following the reverse acquisition of United Utilities PLC by United Utilities Group PLC in the year ended 31 March 2009.
As permitted by section 408 of the Companies Act 2006, the company has not presented its own income statement. The result of the
company for the financial year was a profit after tax of £278.5 million (2021: £278.5 million).
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Company statement of changes in equity
for the year ended 31 March
Consolidated and company statements of cash flows
for the year ended 31 March
At 31 March 2022
499.8
2.9
1,033.3
3,073.0
4,609.0
At 1 April 2021
Profit after tax
Total comprehensive income
Dividends (see note 9)
Equity-settled share-based payments (see note 3)
Purchase of shares to satisfy exercise of share options
At 1 April 2020
Profit after tax
Total comprehensive income
Dividends (see note 9)
Equity-settled share-based payments (see note 3)
Purchase of shares to satisfy exercise of share options
Share
capital
£m
499.8
Share
premium
account
£m
2.9
Other
reserves
£m
Retained
earnings
£m
1,033.3
3,091.3
4,627.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Share
capital
£m
499.8
Share
premium
account
£m
2.9
Other
reserves
£m
1,033.3
Total
£m
278.5
278.5
(295.5)
4.8
(6.1)
Total
£m
4,641.1
278.5
278.5
(291.9)
3.6
(4.0)
–
–
–
–
–
–
–
–
–
–
278.5
278.5
(295.5)
4.8
(6.1)
Retained
earnings
£m
3,105.1
278.5
278.5
(291.9)
3.6
(4.0)
At 31 March 2021
499.8
2.9
1,033.3
3,091.3
4,627.3
At 31 March 2022, 31 March 2021 and 31 March 2020, the company’s entire retained earnings balance was distributable to
shareholders.
The company’s other reserves comprise a capital redemption reserve that arose as a result of a return of capital to shareholders
following the reverse acquisition of United Utilities PLC by United Utilities Group PLC in the year ended 31 March 2009.
As permitted by section 408 of the Companies Act 2006, the company has not presented its own income statement. The result of the
company for the financial year was a profit after tax of £278.5 million (2021: £278.5 million).
Operating activities
Cash generated from operations
Interest paid
Interest received and similar income
Tax paid
Tax received
Net cash generated from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Grants and contributions received
Extension of loans to joint ventures
Dividends received from joint ventures
Proceeds from disposal of investments
Net cash used in investing activities
Financing activities
Proceeds from borrowings net of issuance costs
Repayment of borrowings
Dividends paid to equity holders of the company
Purchase of shares to satisfy exercise of share options
Net cash used in financing activities
Effects of exchange rate changes
Net (decrease)/increase in cash and cash
equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
2022
£m
1,061.6
(121.9)
3.6
(8.9)
–
934.4
(609.0)
(19.5)
1.8
(13.0)
–
–
Group
2021
£m
1,037.2
(136.7)
7.4
(75.4)
26.9
859.4
(610.4)
(33.6)
5.0
(2.0)
6.4
85.3
(639.7)
(549.3)
173.7
(681.8)
(295.5)
(6.1)
(809.7)
1.5
(513.5)
733.6
220.1
909.7
(703.5)
(291.9)
(4.0)
(89.7)
–
220.4
513.2
733.6
2022
£m
301.2
(19.7)
–
–
–
281.5
–
–
–
–
–
–
–
20.1
–
(295.5)
(6.1)
(281.5)
–
–
–
–
Company
2021
£m
296.0
(28.9)
–
–
6.2
273.3
–
–
–
–
–
–
–
23.4
–
(291.9)
(4.0)
(272.5)
–
0.8
(0.8)
–
Note
A1
A1
A1
21
A6
12
12
9
15
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Guide to detailed financial statements disclosures
In the interest of providing clear and relevant information to the users of our financial statements we have included summary
information within the notes to the financial statements, with additional detailed information included in appendices where required.
These notes and appendices can be grouped as follows:
Notes and appendices
Page
Notes and appendices
Page
Operations – information relating to our operating results
1
2
3
Segmental reporting
Revenue
Directors and employees
220
220
220
4
17
A1
Operating profit
Leases
Consolidated statement of cash flows – further
analysis
222
231
237
Financing – information relating to how we finance our business
5
6
8
9
15
Investment income
Finance expense
Earnings per share
Dividends
Cash and cash equivalents
223
223
225
226
230
16
23
A2
A3
A4
Borrowings
Share capital
Net debt
Borrowings
Financial risk management
Working capital – information relating to the day-to-day working capital of our business
13
14
15
Inventories
Trade and other receivables
Cash and cash equivalents
229
229
230
21
A6
Trade and other payables
Related party transactions
Tax – information relating to our current and deferred taxation
7
Tax
224
19 Deferred tax liabilities
Employees – information relating to the costs associated with employing our people
3
18
Directors and employees
Retirement benefits
220
232
A5 Retirement benefits
Long-term assets – information relating to our long-term operational and investment assets
10
11
12
Property, plant and equipment
Intangible assets
Joint ventures and other investments
Other – other useful information
20
22
24
Provisions
Other reserves
Contingent liabilities
226
228
228
234
235
236
18
A5
Retirement benefits
Retirement benefits
25
A7
A8
Events after the reporting period
Accounting policies
Subsidiaries and other group undertakings
231
235
238
240
242
234
255
233
250
232
250
236
257
262
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Accounting policies
In the interest of providing clear and relevant information to the users of our financial statements we have included summary
information within the notes to the financial statements, with additional detailed information included in appendices where required.
These notes and appendices can be grouped as follows:
Notes and appendices
Page
Notes and appendices
Operations – information relating to our operating results
Financing – information relating to how we finance our business
Segmental reporting
Revenue
Directors and employees
Investment income
Finance expense
Earnings per share
Dividends
Cash and cash equivalents
Inventories
Trade and other receivables
Cash and cash equivalents
Operating profit
Leases
analysis
Consolidated statement of cash flows – further
4
17
A1
16
23
A2
A3
A4
Borrowings
Share capital
Net debt
Borrowings
Financial risk management
21
A6
Trade and other payables
Related party transactions
Working capital – information relating to the day-to-day working capital of our business
Tax – information relating to our current and deferred taxation
7
Tax
224
19 Deferred tax liabilities
Employees – information relating to the costs associated with employing our people
Directors and employees
Retirement benefits
A5 Retirement benefits
Long-term assets – information relating to our long-term operational and investment assets
Property, plant and equipment
Intangible assets
Joint ventures and other investments
Other – other useful information
Provisions
Other reserves
Contingent liabilities
18
Retirement benefits
A5
Retirement benefits
25
A7
A8
Events after the reporting period
Accounting policies
Subsidiaries and other group undertakings
220
220
220
223
223
225
226
230
229
229
230
220
232
226
228
228
234
235
236
1
2
3
5
6
8
9
15
13
14
15
3
18
10
11
12
20
22
24
Page
222
231
237
231
235
238
240
242
234
255
233
250
232
250
236
257
262
The principal accounting policies adopted in the preparation of
these financial statements are set out below. Further detail can
be found in note A7.
Basis of preparation
The financial statements have been prepared in accordance
with the requirements of the Companies Act 2006, and with
UK-adopted international accounting standards. They have been
prepared on the historical cost basis, except for the revaluation of
financial instruments, accounting for the transfer of assets from
customers, and the revaluation of infrastructure assets to fair
value on transition to IFRS.
The preparation of financial statements, in conformity with IFRS,
requires management to make estimates and assumptions that
affect the amounts of assets and liabilities at the date of the
financial statements and the amounts of revenues and expenses
during the reporting periods presented. Although these estimates
are based on management’s best knowledge of the amount,
event or actions, actual results, ultimately, may differ from these
estimates.
The financial statements have been prepared on the going
concern basis as the directors have a reasonable expectation
that the group has adequate resources for a period of at least 12
months from the date of the approval of the financial statements
and that there are no material uncertainties to disclose.
In assessing the appropriateness of the going concern basis of
accounting the directors have reviewed the resources available
to the group in the form of cash and committed facilities as well
as consideration of the group’s capital adequacy, along with
a baseline plan that incorporates latest views of the current
economic climate, including high levels of inflation in the near
term. The directors have considered the magnitude of potential
impacts resulting from uncertain future events or changes in
conditions, and the likely effectiveness of mitigating actions
that the directors would consider undertaking. The baseline
position has been subjected to a number of severe but reasonable
downside scenarios in order to assess the group’s ability to
operate within the amounts and terms (including relevant
covenants) of existing facilities. These scenarios consider: the
potential impacts of increased totex costs, including a significant
one-off totex impact arising in the assessment period; lower CPIH
inflation; elevated levels of bad debt; outcome delivery incentive
penalties; and the impact of these factors materialising on a
combined basis. Mitigating actions were considered to include
deferral of capital expenditure; a reduction in other discretionary
totex spend; the close out of derivative asset balances; and the
deferral or suspension of dividend payments.
Consequently, the directors are satisfied that the group will
have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the
financial statements, and that the severe but reasonable downside
scenarios indicate that the group will be able to operate within
the amounts and terms (including relevant covenants) of existing
facilities. The financial statements have therefore been prepared
on a going concern basis.
Adoption of new and revised standards
There were no new standards, interpretations and amendments,
effective for the year ended 31 March 2022, that were relevant
to the group or would have a material impact on the group’s
financial statements, or that were not early adopted in previous
years.
‘Phase II’ – IBOR reform
In January 2021, the Secretary of State for BEIS and the EU
endorsed the IASB-published amendments to IFRS 9 ‘Financial
Instruments’, and IFRS 7 ‘Financial Instruments: Disclosures’ in
respect of interest rate benchmark reform, effective for annual
periods beginning on or after 1 January 2021 with early adoption
permitted (‘Phase II’ IBOR Reform). The group chose to early-
adopt the Phase II reforms for the year ended 31 March 2021,
though this has had no impact on the financial statements for the
year then ended.
The group also subscribed to the ISDA 2020 IBOR fallbacks
protocol in the previous financial year, with these protocols
embedding fallback provisions into the group’s interest rate
derivative contracts enabling a contractual replacement
of LIBOR as a benchmark with SONIA. All of the group’s
derivative counterparties subscribed to the protocol and from
1 January 2022 the group’s derivative portfolio transitioned
from referencing LIBOR to referencing SONIA as the underlying
floating interest rate.
As part of the transition, where applicable, the group has applied
the relevant practical expedients from certain requirements in
IFRS 9 and IFRS 7 relating to changes in the basis for determining
contractual cash flows of financial assets, financial liabilities and
hedge accounting.
On 31 December 2021, the group had a balance of £501.6 million
loan instruments, along with an additional £800.0 million of
undrawn committed facilities that transitioned away from
referencing LIBOR as the floating benchmark rate.
Derivatives with a notional value of £5,166.0 million also
transitioned on this date, with this figure being inclusive of
£2,117.8 million notional value of derivatives designated within
fair value hedge relationships. Immaterial hedge effectiveness
was recorded in the group’s income statement through the
transition as a result of maintaining economic equivalence within
the fair value hedge relationships.
Detail on the derivation of this net balance can be found in note
A4, along with further information on the group’s transition to
alternative benchmarks.
Critical accounting judgements and key sources
of estimation uncertainty
In the process of applying its accounting policies set out in
note A7, the group is required to make certain estimates,
judgements and assumptions that it believes are reasonable
based on the information available. These judgements, estimates
and assumptions affect the carrying amounts of assets and
liabilities at the date of the financial statements and the amounts
of revenues and expenses recognised during the reporting
periods presented. Changes to these estimates, judgements
and assumptions could have a material effect on the financial
statements.
On an ongoing basis, the group evaluates its estimates using
historical experience, consultation with experts and other
methods considered reasonable in the particular circumstances.
As estimates carry with them an inherent level of uncertainty,
the group performs sensitivity analysis where this is practicable
and where, in management’s opinion, it provides useful and
meaningful information. This sensitivity analysis is performed
to understand a range of outcomes that could be considered
reasonably possible based on experience and the facts and
circumstances associated with individual areas of the financial
statements that are subject to estimates. Actual results may
differ significantly from the estimates, the effect of which is
recognised in the period in which the facts that give rise to the
revision become known.
As part of the evaluation of critical accounting judgements and
key sources of estimation uncertainty, the group has considered
the implications of climate change on its operations and
activities, further details of which are set out below.
The following paragraphs detail the estimates and judgements
the group believes to have the most significant impact on
the annual results as reported in accordance with IFRS,
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Accounting policies
including specific considerations in light of current economic
circumstances such as the cost of living experienced by
customers.
Revenue recognition and allowance for doubtful
receivables
Accounting estimate – The group recognises revenue generally
at the time of delivery and when collection of the resulting
receivable has been deemed probable. In estimating the amount
of revenue to recognise, where the group considers that the
criteria for revenue recognition are not met for a transaction,
revenue recognition is delayed until such time as collectability
is deemed probable. There are two different criteria whereby
management does not recognise revenue for amounts
which have been billed to those customers on the basis that
collectability is not probable. These are as follows:
• The customer has not paid their bills for a period of at least
two years; and
• The customer has paid their bills in the preceding two years,
but has previously had bills de-recognised and has more than
their current year debt outstanding.
This two-criteria approach resulted in a £26.6 million reduction
in revenue compared with what would have been recognised had
no adjustment been made for amounts where collectability is not
probable. Had management made an alternative judgement that
where customers have paid in the preceding two years, and have
more than their current year debt outstanding, the recoverability
of the entirety of their debt was deemed to be probable (i.e. the
second criteria were disapplied), the required adjustment to
revenue would have been £12.4 million lower.
Accounting estimate – At each reporting date, the company and
each of its subsidiaries evaluate the estimated recoverability of
trade receivables and record allowances for expected credit losses
based on experience. Estimates associated with these allowances
are based on, among other things, a consideration of actual
collection history. The actual level of receivables collected may
differ from the estimated levels of recovery, which could impact
operating results positively or negatively. At 31 March 2022,
an allowance for expected credit losses relating to household
customer debt of £78.3 million was supported by a six-year cash
collection projection. Based on a five-year or seven-year cash
collection projection the allowance for doubtful receivables
would have increased by £1.1 million or reduced by £0.5 million
respectively.
Since early 2020, the group’s expected credit loss assessment
in respect of trade receivables has been significantly impacted
by the economic uncertainty brought about as a result of the
COVID-19 pandemic. Whilst economic uncertainty linked to the
COVID-19 pandemic has receded somewhat during the year
ended 31 March 2022, with households and businesses adjusting
to a new post-pandemic norm, a high level of economic
uncertainty remains due largely to increases in the cost of living
during the year and that are forecast to continue in the near
future. This could have a significant impact on many of the
group’s customers that could in turn affect the ability of some
customers to pay their bills.
In recognition of this ongoing future uncertainty, the basis on
which the allowance for expected credit losses covering the
group’s household customer base is assessed has been updated
during the year. Whereas in the prior year the allowance for
expected credit losses was determined based on the assumption
that cash collection experienced over the last two years continues
into the future, this would no longer be expected to give a
reasonable view of cash collection risk. This is because cash
collection for the year has performed strongly and therefore
may overstate future cash collection forecasts when considering
the current economic climate, while cash collection for the year
ended 31 March 2021 was impacted by the COVID-19 pandemic
and resulted in much lower levels of cash collection than might be
expected on an ongoing basis.
In light of this, a longer run four-year average of cash collection
has been modelled and is deemed to give a more realistic
forecast for future collection taking into account all of the above
factors, including expected increases in the cost of living. This
assumption supports the reported household bad debt charge
of 1.8 per cent of household revenue. Had future cash collection
been assessed based on the average cash collection during the
current year only, the bad debt charge would have been 1.6 per
cent of household revenue resulting in a reduction in the charge
of £2.7 million, with similar results based on using average cash
collection from the last two or last three years. If average cash
collection from the prior year only was used the bad debt charge
would have been 2.0 per cent of household revenue resulting in
an increase in the charge of £3.4 million. Consideration of this
range of reasonably possible scenarios indicates that, based
on current levels of economic uncertainty, the allowance for
expected credit losses is within a reasonable range, and that a
longer run four year average results in a balanced position in
light of current levels of uncertainty.
Accounting estimate – United Utilities Water Limited raises bills
in accordance with its entitlement to receive revenue in line with
the limits established by the periodic regulatory price review
processes. For household water and wastewater customers with
water meters, the receivable billed is dependent on the volume
supplied, including the sales value of an estimate of the units
supplied between the dates of the last water meter reading and
the billing date. Meters are read on a cyclical basis and the group
recognises revenue for unbilled amounts based on estimated
usage from the last billing through to each reporting date. The
estimated usage is based on historical data, judgement and
assumptions; actual results could differ from these estimates,
which would result in operating revenues being adjusted in the
period that the revision to the estimates is determined.
Revenue recognised for unbilled amounts for these customers at
31 March 2022 was £145.8 million. Had actual consumption been
5 per cent higher or lower than the estimate of units supplied,
this would have resulted in revenue recognised for unbilled
amounts being £5.0 million higher or lower respectively. For
customers who do not have a meter, the receivable billed and
revenue recognised is dependent on the rateable value of the
property as assessed by an independent rating officer.
Property, plant and equipment
Accounting judgement – The group recognises property,
plant and equipment (PP&E) on its water and wastewater
infrastructure assets where such expenditure enhances or
increases the capacity of the network, whereas any expenditure
classed as maintenance is expensed in the period as incurred.
Determining enhancement from maintenance expenditure
requires an accounting judgement, particularly when projects
have both elements within them. Enhancement spend was
57 per cent of total spend in relation to infrastructure assets
during the year. A change of +/- 1 per cent would have resulted
in £3.9 million less/more expenditure being charged to the
income statement during the period. In addition, management
capitalises time and resources incurred by the group’s support
functions on capital programmes, which requires accounting
judgements to be made in relation to the appropriate
capitalisation rates. Support costs allocated to PP&E represent
40 per cent of total support costs. A change in allocation of
+/- 5 per cent would have resulted in £2.3 million less/more
expenditure being charged to the income statement during the
period.
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Accounting policies
including specific considerations in light of current economic
the current economic climate, while cash collection for the year
circumstances such as the cost of living experienced by
ended 31 March 2021 was impacted by the COVID-19 pandemic
customers.
receivables
Revenue recognition and allowance for doubtful
Accounting estimate – The group recognises revenue generally
at the time of delivery and when collection of the resulting
receivable has been deemed probable. In estimating the amount
of revenue to recognise, where the group considers that the
criteria for revenue recognition are not met for a transaction,
revenue recognition is delayed until such time as collectability
is deemed probable. There are two different criteria whereby
management does not recognise revenue for amounts
which have been billed to those customers on the basis that
collectability is not probable. These are as follows:
• The customer has not paid their bills for a period of at least
two years; and
• The customer has paid their bills in the preceding two years,
but has previously had bills de-recognised and has more than
their current year debt outstanding.
This two-criteria approach resulted in a £26.6 million reduction
in revenue compared with what would have been recognised had
no adjustment been made for amounts where collectability is not
probable. Had management made an alternative judgement that
where customers have paid in the preceding two years, and have
more than their current year debt outstanding, the recoverability
of the entirety of their debt was deemed to be probable (i.e. the
second criteria were disapplied), the required adjustment to
revenue would have been £12.4 million lower.
Accounting estimate – At each reporting date, the company and
each of its subsidiaries evaluate the estimated recoverability of
trade receivables and record allowances for expected credit losses
based on experience. Estimates associated with these allowances
are based on, among other things, a consideration of actual
collection history. The actual level of receivables collected may
differ from the estimated levels of recovery, which could impact
operating results positively or negatively. At 31 March 2022,
an allowance for expected credit losses relating to household
customer debt of £78.3 million was supported by a six-year cash
collection projection. Based on a five-year or seven-year cash
collection projection the allowance for doubtful receivables
would have increased by £1.1 million or reduced by £0.5 million
respectively.
Since early 2020, the group’s expected credit loss assessment
in respect of trade receivables has been significantly impacted
by the economic uncertainty brought about as a result of the
COVID-19 pandemic. Whilst economic uncertainty linked to the
COVID-19 pandemic has receded somewhat during the year
ended 31 March 2022, with households and businesses adjusting
to a new post-pandemic norm, a high level of economic
uncertainty remains due largely to increases in the cost of living
during the year and that are forecast to continue in the near
future. This could have a significant impact on many of the
group’s customers that could in turn affect the ability of some
customers to pay their bills.
In recognition of this ongoing future uncertainty, the basis on
which the allowance for expected credit losses covering the
group’s household customer base is assessed has been updated
during the year. Whereas in the prior year the allowance for
expected credit losses was determined based on the assumption
that cash collection experienced over the last two years continues
into the future, this would no longer be expected to give a
reasonable view of cash collection risk. This is because cash
collection for the year has performed strongly and therefore
may overstate future cash collection forecasts when considering
and resulted in much lower levels of cash collection than might be
expected on an ongoing basis.
In light of this, a longer run four-year average of cash collection
has been modelled and is deemed to give a more realistic
forecast for future collection taking into account all of the above
factors, including expected increases in the cost of living. This
assumption supports the reported household bad debt charge
of 1.8 per cent of household revenue. Had future cash collection
been assessed based on the average cash collection during the
current year only, the bad debt charge would have been 1.6 per
cent of household revenue resulting in a reduction in the charge
of £2.7 million, with similar results based on using average cash
collection from the last two or last three years. If average cash
collection from the prior year only was used the bad debt charge
would have been 2.0 per cent of household revenue resulting in
an increase in the charge of £3.4 million. Consideration of this
range of reasonably possible scenarios indicates that, based
on current levels of economic uncertainty, the allowance for
expected credit losses is within a reasonable range, and that a
longer run four year average results in a balanced position in
light of current levels of uncertainty.
Accounting estimate – United Utilities Water Limited raises bills
in accordance with its entitlement to receive revenue in line with
the limits established by the periodic regulatory price review
processes. For household water and wastewater customers with
water meters, the receivable billed is dependent on the volume
supplied, including the sales value of an estimate of the units
supplied between the dates of the last water meter reading and
the billing date. Meters are read on a cyclical basis and the group
recognises revenue for unbilled amounts based on estimated
usage from the last billing through to each reporting date. The
estimated usage is based on historical data, judgement and
assumptions; actual results could differ from these estimates,
which would result in operating revenues being adjusted in the
period that the revision to the estimates is determined.
Revenue recognised for unbilled amounts for these customers at
31 March 2022 was £145.8 million. Had actual consumption been
5 per cent higher or lower than the estimate of units supplied,
this would have resulted in revenue recognised for unbilled
amounts being £5.0 million higher or lower respectively. For
customers who do not have a meter, the receivable billed and
revenue recognised is dependent on the rateable value of the
property as assessed by an independent rating officer.
Property, plant and equipment
Accounting judgement – The group recognises property,
plant and equipment (PP&E) on its water and wastewater
infrastructure assets where such expenditure enhances or
increases the capacity of the network, whereas any expenditure
classed as maintenance is expensed in the period as incurred.
Determining enhancement from maintenance expenditure
requires an accounting judgement, particularly when projects
have both elements within them. Enhancement spend was
57 per cent of total spend in relation to infrastructure assets
during the year. A change of +/- 1 per cent would have resulted
in £3.9 million less/more expenditure being charged to the
income statement during the period. In addition, management
capitalises time and resources incurred by the group’s support
functions on capital programmes, which requires accounting
judgements to be made in relation to the appropriate
capitalisation rates. Support costs allocated to PP&E represent
40 per cent of total support costs. A change in allocation of
+/- 5 per cent would have resulted in £2.3 million less/more
expenditure being charged to the income statement during the
period.
of depreciation of assets that are deemed to be commercially
obsolete or for which no further use is planned, in part as a result
of the group’s decarbonisation strategy. In recent years this has
resulted in material accelerations in respect of bioresources
facilities impacted by changes in environmental legislative
requirements. No further material accelerations were required in
the current financial year, however this is subject to continuous
assessment.
The group is exposed to potential asset write-downs following
flooding resulting from extreme weather events, the frequency
of which are expected to increase as the effects of climate
change become more apparent. Following large-scale flooding,
items are identified that have been damaged beyond repair and
require immediate accounting write-downs. No such charges
were required in the current financial year.
In addition to the risks posed by an increased likelihood of
large-scale flooding events in future years, climate change also
presents challenges relating to prolonged periods of hot and
dry weather, the frequency of which is expected to increase.
This could potentially impact the viability of certain types of
assets in future years such as those associated with the intake
of water from the natural environment, or require a strategic
reconfiguration of assets to respond to such challenges. It is
expected that if any such impact were to materialise this would
be over a longer period of time rather than within a single
financial year, and no financial impact has been identified in the
current year.
In recent years the group has sought to further enhance the
accuracy of its useful life assessments through the introduction
of more forward-looking information in asset life reviews. This
includes the use of disposal data to identify trends that may
inform the group’s view of useful lives into the future. This
information is used alongside other decommissioning data and
data from strategic asset planning systems to inform useful asset
lives.
The group mitigates the exposure that the carrying value of its
book asset base has to climate-related risks through strategic
planning activities that incorporate defined climate scenarios,
climate change mitigation pledges, and long-term climate
projections. The group installs permanent flood defences and
other resilience measures at the most vulnerable facilities to
protect its assets.
Accounting estimate – The estimated useful economic lives
of PP&E and intangible assets is based on management’s
experience. When management identifies that actual useful
economic lives differ materially from the estimates used to
calculate depreciation, that charge is adjusted prospectively.
Due to the significance of PP&E and intangibles investment
to the group, variations between actual and estimated useful
economic lives could impact operating results both positively
and negatively. As such, this is a key source of estimation
uncertainty. The depreciation and amortisation expense for the
year was £418.2 million. A 10 per cent increase in average asset
lives would have resulted in a £38.2 million reduction in this
figure and a 10 per cent decrease in average asset lives would
have resulted in a £41.6 million increase in this figure.
Retirement benefits
Accounting estimate – The group operates two defined
benefit pension schemes which are independent of the group’s
finances. Actuarial valuations of the schemes are carried out
as determined by the trustees at intervals of not more than
three years. Profit before tax and net assets are affected by
the actuarial assumptions used. The key assumptions include:
discount rates, pay growth, mortality, and increases to pensions
in payment and deferred pensions. It should be noted that
actual rates may differ from the assumptions used due to
changing market and economic conditions and longer or
shorter lives of participants and, as such, this represents a key
source of estimation uncertainty. Sensitivities in respect of the
assumptions used during the year are disclosed in note A5.
Accounting estimate – Included within the group’s defined
benefit pension scheme assets are assets with a fair value
estimated to be £271.7 million that are categorised as ‘level 3’
assets within the IFRS 13 ‘Fair value measurement’ hierarchy,
meaning that the value of the assets is not observable at 31
March 2022. Estimates of the fair value of these assets have been
performed by the investment managers’ valuation specialists
using the latest available statements of each of the funds
that make up the total level 3 asset balance, updated for any
subsequent cash movements between the statement date and
the year end reporting date.
Derivative financial instruments
Accounting estimate – The model used to fair value the group’s
derivative financial instruments requires management to
estimate future cash flows based on applicable interest rate
curves. Projected cash flows are then discounted back using
discount factors that are derived from the applicable interest
rate curves adjusted for management’s estimate of counterparty
and own credit risk, where appropriate. Sensitivities relating to
derivative financial instruments are included in note A4.
Climate change
The group is continually developing its assessment of the impact
that climate change has on the assets and liabilities recognised
and presented in its financial statements.
The natural environment within which the group operates is
constantly changing, and this influences how its water and
wastewater services are to be delivered in the future. In addition,
the group has embedded ambitious climate-related targets
within its own operations, with this affecting the portfolio of
assets required to deliver such services.
The impact of climate change has been considered in the
preparation of these financial statements across a number of
areas, predominantly in respect of the valuation of the property,
plant and equipment held by the group.
Asset life reviews are undertaken regularly for facilities impacted
by climate change, environmental legislation or the group’s
decarbonisation measures. This can result in the acceleration
218
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Notes to the financial statements
Segmental reporting
1
The board of directors of United Utilities Group PLC (the board) is provided with information on a single-segment basis for the
purposes of assessing performance and allocating resources. The group’s performance is measured against financial and operational
key performance indicators which align with its three strategic themes to deliver the best service to customers, at the lowest
sustainable cost, in a responsible manner. The board reviews revenue, operating profit and gearing, along with operational drivers at a
consolidated level (see pages 50 to 83). In light of this, the group has a single segment for financial reporting purposes.
2 Revenue
The group’s revenue arises from the provision of services within the United Kingdom.
Wholesale water charges
Wholesale wastewater charges
Household retail charges
Other
2022
£m
776.5
946.3
68.9
71.0
2021
£m
751.0
941.5
64.1
51.4
1,862.7
1,808.0
In accordance with IFRS 15, revenue has been disaggregated based on what is recognised in relation to the core services of supplying
clean water and the removal and treatment of wastewater. Each of these services is deemed to give rise to a distinct performance
obligation under the contract with customers, although following the same pattern of transfer to the customer who simultaneously
receives and consumes both of these services over time.
Wholesale water and wastewater charges relate to services provided to household customers and non-household retailers. Household
retail charges relate solely to the margin applied to the wholesale amounts charged to residential customers. These wholesale charges
and the applicable retail margin are combined in arriving at the total revenues relating to water and wastewater services provided to
household customers. No margin is applied to wholesale water and wastewater services provided to non-household retailers.
Other revenues comprise a number of smaller non-core income streams, including those relating to energy generation and export,
property sales, and those associated with activities, typically performed opposite property developers, which impact the group’s
capital network assets, including diversions works to relocate water and wastewater assets, and activities that facilitate the creation
of an authorised connection through which properties can obtain water and wastewater services.
3 Directors and employees
Directors’ remuneration
Fees to non-executive directors
Salaries
Benefits
Bonus
Share-based payment charge
2022
£m
0.8
1.2
0.3
0.7
1.8
4.8
2021
£m
0.8
1.2
0.2
0.7
1.7
4.6
Further information about the remuneration of individual directors and details of their pension arrangements are provided in the
Directors’ remuneration report on pages 166 to 182.
Remuneration of key management personnel
Salaries and short-term employee benefits
Share-based payment charge
2022
£m
6.2
2.6
8.8
2021
£m
6.3
3.0
9.3
Key management personnel comprises all directors and certain senior managers who are members of the executive team.
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Notes to the financial statements
1
Segmental reporting
The board of directors of United Utilities Group PLC (the board) is provided with information on a single-segment basis for the
purposes of assessing performance and allocating resources. The group’s performance is measured against financial and operational
key performance indicators which align with its three strategic themes to deliver the best service to customers, at the lowest
sustainable cost, in a responsible manner. The board reviews revenue, operating profit and gearing, along with operational drivers at a
consolidated level (see pages 50 to 83). In light of this, the group has a single segment for financial reporting purposes.
2 Revenue
The group’s revenue arises from the provision of services within the United Kingdom.
Wholesale water charges
Wholesale wastewater charges
Household retail charges
Other
In accordance with IFRS 15, revenue has been disaggregated based on what is recognised in relation to the core services of supplying
clean water and the removal and treatment of wastewater. Each of these services is deemed to give rise to a distinct performance
obligation under the contract with customers, although following the same pattern of transfer to the customer who simultaneously
receives and consumes both of these services over time.
Wholesale water and wastewater charges relate to services provided to household customers and non-household retailers. Household
retail charges relate solely to the margin applied to the wholesale amounts charged to residential customers. These wholesale charges
and the applicable retail margin are combined in arriving at the total revenues relating to water and wastewater services provided to
household customers. No margin is applied to wholesale water and wastewater services provided to non-household retailers.
Other revenues comprise a number of smaller non-core income streams, including those relating to energy generation and export,
property sales, and those associated with activities, typically performed opposite property developers, which impact the group’s
capital network assets, including diversions works to relocate water and wastewater assets, and activities that facilitate the creation
of an authorised connection through which properties can obtain water and wastewater services.
3 Directors and employees
Directors’ remuneration
Fees to non-executive directors
Salaries
Benefits
Bonus
Share-based payment charge
Directors’ remuneration report on pages 166 to 182.
Remuneration of key management personnel
Salaries and short-term employee benefits
Share-based payment charge
Further information about the remuneration of individual directors and details of their pension arrangements are provided in the
Key management personnel comprises all directors and certain senior managers who are members of the executive team.
2022
£m
776.5
946.3
68.9
71.0
2021
£m
751.0
941.5
64.1
51.4
1,862.7
1,808.0
2022
£m
0.8
1.2
0.3
0.7
1.8
4.8
2022
£m
6.2
2.6
8.8
2021
£m
0.8
1.2
0.2
0.7
1.7
4.6
2021
£m
6.3
3.0
9.3
3 Directors and employees continued
Staff costs (including directors)
Group
Wages and salaries(1)(2)
Employee-related taxes and levies
Severance
Post-employment benefits:
Defined benefit pension expense (see note 18)
Defined contribution pension expense (see note 18)
Charged to other areas including regulatory capital schemes(2)
Staff costs
2022
£m
302.9
28.2
0.4
9.6
26.1
367.2
(182.9)
184.3
2021
£m
275.0
25.2
1.3
8.5
23.4
333.4
(160.0)
173.4
Notes:
(1) Wages and salaries excluding non-permanent staff was £260.3 million (2021: £240.4 million).
(2)
In order to give a clearer view of the group’s total staff costs, wages and salaries and amounts charged to other areas including regulatory capital
schemes now include the costs of non-permanent staff who have worked for the group, whose costs were previously included within hired and
contracted services presented within other operating costs. Accordingly, these amounts for the year ended 31 March 2021 have been re-presented to
show information on a consistent basis, which has resulted in an increase in staff costs and a reduction in the costs of hired and contracted services
of £11.6 million compared with what was presented in the financial statements published for that year.
Included within staff costs were £0.4 million (2021: £1.9 million) of restructuring costs.
The total expense included within staff costs in respect of equity-settled share-based payments was £4.8 million (2021: £3.6 million).
The company operates several share option schemes, details of which are given on pages 166 to 182 in the Directors’ remuneration
report.
Average number of staff employed by the group during the year (full-time equivalent including directors):
Average number of staff employed by the group during the year
Company
The company has no staff.
2022
number
2021
number
5,728
5,354
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Notes to the financial statements
4 Operating profit
The following items have been charged/(credited) to the income statement in arriving at the group’s operating profit:
Other operating costs
Power
Hired and contracted services(1)
Materials
Property rates
Regulatory fees
Insurance
Accrued innovation costs
Loss on disposal of property, plant and equipment
Cost of properties disposed
Other expenses
Allowance for expected credit losses – trade and other receivables
Allowance for expected credit losses – trade and other receivables (see note 14)
Other income
Other income
Depreciation and amortisation expense
Depreciation of property, plant and equipment (see note 10)
Amortisation of other intangible assets (see note 11)
2022
£m
99.6
95.4
90.8
90.5
28.4
16.9
5.9
3.9
3.0
27.3
461.7
23.4
23.4
(4.4)
(4.4)
377.0
41.2
418.2
2021
£m
83.6
84.7
82.2
89.4
28.0
13.1
6.2
10.7
2.6
19.8
420.3
28.7
28.7
(3.6)
(3.6)
379.8
42.5
422.3
Note:
(1)
As explained in note 3, costs associated with non-permanent staff that were previously included within hired and contracted services are now
included within staff costs. Accordingly, the prior year non-permanent staff costs included within hired and contracted services presented within
other operating costs in the prior year have also been re-presented. This resulted in an increase in staff costs and a reduction in the costs of hired and
contracted services of £11.6 million compared with what was presented in the financial statements published for that year.
During the year ended 31 March 2022, the group experienced inflationary pressures across much of its operating cost base. This was
most notable in relation to power costs, which increased by £16.0 million compared with the prior year, largely due to price increases.
Through its progressive hedging policy the group was able to lock in the commodity price on the majority of its consumption for
the year ended 31 March 2022 before the most recent energy price rises, and therefore secured an average rate over the year of £78
per MWh. This compares favourably with the market rate of over £200 per MWh as at the year end reporting date and has been
fundamental to the group’s ability to minimise the impact of price rises on its cost base.
Incremental costs totalling £5.8 million have been incurred during the year in relation to the implementation of Software as a Service
(SaaS) arrangements, which are increasingly expected to be recognised within operating costs in accordance with clarifications on
the appropriate accounting treatment issued by the IFRS Interpretations Committee (IFRIC) during the year. The majority of SaaS
implementation costs in previous years have been accounted for as intangible asset additions. These prior year amounts have not
been restated to reflect the group’s updated approach as they are not material.
Research and development expenditure for the year ended 31 March 2022 was £1.2 million (2021: £1.0 million). In addition, £5.9 million
(2021: £6.2 million) of costs have been accrued by United Utilities Water Limited in relation to the Innovation in Water Challenge
scheme operated by Ofwat for AMP7. These expenses directly offset amounts recognised in revenue during each year intended to
fund innovation projects across England and Wales as part of an industry-wide scheme to promote innovation in the sector. The
amounts accrued will either be spent on innovation projects that the group successfully bids for or will be transferred to other
successful water companies in accordance with the scheme rules.
During the year, the group obtained the following services from its auditor:
Audit services
Statutory audit – group and company
Statutory audit – subsidiaries
Non-audit services
Regulatory audit services provided by the statutory auditor
Other non-audit services
Total audit and non-audit services
222
2022
£’000
2021
£’000
169
506
675
64
116
855
170
508
678
71
120
869
unitedutilities.com/corporate
Notes to the financial statements
Other operating costs
Power
Hired and contracted services(1)
Materials
Property rates
Regulatory fees
Insurance
Accrued innovation costs
Loss on disposal of property, plant and equipment
Cost of properties disposed
Other expenses
Allowance for expected credit losses – trade and other receivables
Allowance for expected credit losses – trade and other receivables (see note 14)
Other income
Other income
Note:
Depreciation and amortisation expense
Depreciation of property, plant and equipment (see note 10)
Amortisation of other intangible assets (see note 11)
(1)
As explained in note 3, costs associated with non-permanent staff that were previously included within hired and contracted services are now
included within staff costs. Accordingly, the prior year non-permanent staff costs included within hired and contracted services presented within
other operating costs in the prior year have also been re-presented. This resulted in an increase in staff costs and a reduction in the costs of hired and
contracted services of £11.6 million compared with what was presented in the financial statements published for that year.
During the year ended 31 March 2022, the group experienced inflationary pressures across much of its operating cost base. This was
most notable in relation to power costs, which increased by £16.0 million compared with the prior year, largely due to price increases.
Through its progressive hedging policy the group was able to lock in the commodity price on the majority of its consumption for
the year ended 31 March 2022 before the most recent energy price rises, and therefore secured an average rate over the year of £78
per MWh. This compares favourably with the market rate of over £200 per MWh as at the year end reporting date and has been
fundamental to the group’s ability to minimise the impact of price rises on its cost base.
Incremental costs totalling £5.8 million have been incurred during the year in relation to the implementation of Software as a Service
(SaaS) arrangements, which are increasingly expected to be recognised within operating costs in accordance with clarifications on
the appropriate accounting treatment issued by the IFRS Interpretations Committee (IFRIC) during the year. The majority of SaaS
implementation costs in previous years have been accounted for as intangible asset additions. These prior year amounts have not
been restated to reflect the group’s updated approach as they are not material.
Research and development expenditure for the year ended 31 March 2022 was £1.2 million (2021: £1.0 million). In addition, £5.9 million
(2021: £6.2 million) of costs have been accrued by United Utilities Water Limited in relation to the Innovation in Water Challenge
scheme operated by Ofwat for AMP7. These expenses directly offset amounts recognised in revenue during each year intended to
fund innovation projects across England and Wales as part of an industry-wide scheme to promote innovation in the sector. The
amounts accrued will either be spent on innovation projects that the group successfully bids for or will be transferred to other
successful water companies in accordance with the scheme rules.
During the year, the group obtained the following services from its auditor:
Audit services
Statutory audit – group and company
Statutory audit – subsidiaries
Non-audit services
Regulatory audit services provided by the statutory auditor
Other non-audit services
Total audit and non-audit services
2022
£m
99.6
95.4
90.8
90.5
28.4
16.9
5.9
3.9
3.0
27.3
461.7
23.4
23.4
(4.4)
(4.4)
377.0
41.2
418.2
2021
£m
83.6
84.7
82.2
89.4
28.0
13.1
6.2
10.7
2.6
19.8
420.3
28.7
28.7
(3.6)
(3.6)
379.8
42.5
422.3
2022
£’000
2021
£’000
169
506
675
64
116
855
170
508
678
71
120
869
4 Operating profit
The following items have been charged/(credited) to the income statement in arriving at the group’s operating profit:
5
Investment income
Interest receivable on short-term bank deposits held at amortised cost
Interest receivable on loans to joint ventures held at amortised cost (see note A6)
Net pension interest income (see note 18)
Other interest receivable
6 Finance expense
Interest payable
Interest payable on borrowings held at amortised cost(1)
Fair value (gains)/losses on debt and derivative instruments
Fair value hedge relationships:
Borrowings(2)
Designated swaps(2)(3)
Financial instruments at fair value through profit or loss:
Borrowings designated at fair value through profit or loss(4)
Associated swaps
Fixed interest rate swaps(5)
Net receipts on derivatives and debt under fair value option
Inflation swaps(5)
Other
Net fair value gains on debt and derivative instruments(6)
2022
£m
1.3
2.8
14.3
1.0
19.4
2022
£m
330.7
330.7
(199.4)
194.0
(5.4)
(7.9)
9.7
1.8
(139.7)
(31.5)
29.7
2.2
(139.3)
(142.9)
187.8
2021
£m
2.7
3.7
17.5
1.1
25.0
2021
£m
181.7
181.7
(155.1)
132.8
(22.3)
(67.3)
67.8
0.5
(36.0)
(17.6)
3.4
(2.5)
(52.7)
(74.5)
107.2
Notes:
(1)
(2)
(3)
(4)
(5)
(6)
Includes a £227.9 million (2021: £52.6 million) non-cash inflation uplift expense repayable on maturity in relation to the group’s index-linked debt and
£1.6 million (2021: £1.8 million) interest expense on lease liabilities, representing the unwinding of the discounting applied to future lease payments.
Includes foreign exchange losses of £4.3 million (2021: £43.9 million gains). These gains/losses are largely offset by fair value losses/gains on
derivatives.
Under the provisions of IFRS 9 ‘Financial Instruments’, a £1.8 million gain (2021: £12.7 million loss) resulting from changes to the foreign currency
basis spread are recognised in other comprehensive income rather than profit or loss as they relate to items designated in an accounting hedge
relationship.
Under the provisions of IFRS 9 ‘Financial Instruments’, a nil gain or loss (2021: £43.3 million loss) due to changes in the group’s own credit risk is
recognised in other comprehensive income rather than within profit or loss.
These swap contracts are not designated within an IFRS 9 hedge relationship and are classed as ‘held for trading’ under the accounting standard.
These derivatives form economic hedges and, as such, management intends to hold these through to maturity.
Includes £33.2 million income (2021: £21.5 million) due to net interest on derivatives and debt under fair value option and £28.3 million expense (2021:
£1.3 million expense) due to non-cash inflation uplift on index-linked derivatives. Fair value movements excluding this net income are deducted to
reach underlying finance expense, which forms part of the group’s alternative performance measures (APMs) as set out on pages 82 to 83.
Interest payable is stated net of £52.7 million (2021: £30.4 million) borrowing costs capitalised in the cost of qualifying assets within
property, plant and equipment and intangible assets during the year. This has been calculated by applying an average capitalisation
rate of 4.2 per cent (2021: 2.3 per cent) to expenditure on such assets as prescribed by IAS 23 ‘Borrowing Costs’.
Underlying finance expense, which forms part of the group’s APMs set out on pages 82 to 83, is calculated by adjusting net finance
expense and investment income of £168.3 million (2021: £78.5 million) reported in the income statement to exclude the £138.0 million
of fair value gains (2021: £54.3 million fair value gains) on debt and derivative instruments in the above table.
222
unitedutilities.com/corporate
Stock Code: UU.
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
i
i
a
l
S
t
a
t
e
m
e
n
t
s
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
2
223
Notes to the financial statements
7 Tax
Current tax
UK corporation tax
Adjustments in respect of prior years
Total current tax (credit)/charge for the year
Deferred tax
Current year
Adjustments in respect of prior years
Change in tax rate
Total deferred tax charge for the year
Total tax charge for the year
2022
£m
6.7
(72.5)
(65.8)
92.9
66.9
159.8
402.7
562.5
496.7
2021
£m
79.8
(0.6)
79.2
20.2
(1.8)
18.4
–
18.4
97.6
The deferred tax charge of £402.7 million (2021: nil) reflects the Government’s planned increase in the rate of corporation tax from 19
per cent to 25 per cent from 1 April 2023.
The adjustments in respect of prior years mainly relate to optimising the available research and development UK tax allowances on our
innovation related expenditure, for multiple prior years.
The table below reconciles the notional tax charge at the UK corporation tax rate to the total tax charge and total effective tax rate
for the year:
Profit before tax
Tax at the UK corporation tax rate
Deferred tax rate adjustment
Adjustments in respect of prior years
Change in tax rate
Net income not taxable
Total tax charge and effective tax rate for the year
2022
£m
439.9
83.6
22.3
(5.6)
402.7
(6.3)
496.7
2022
%
19.0
5.1
(1.3)
91.5
(1.4)
112.9
2021
£m
551.0
104.7
–
(2.4)
–
(4.7)
97.6
2021
%
19.0
–
(0.4)
–
(0.9)
17.7
The deferred tax rate adjustment reflects the fact that the current year deferred tax charge is at the future tax rate of 25 per cent,
rather than the 19 per cent current year rate.
The table below reconciles the notional tax charge at the UK corporation tax rate to the total current tax charge for the year:
Profit before tax
Profit before tax multiplied by the standard rate of UK corporation tax of 19%
Relief for capital allowances in place of depreciation
Disallowance of depreciation charged in the accounts
Adjustments to tax charge in respect of prior years
Financial transactions timing differences
Pension timing differences
Relief for capitalised interest
Other timing differences
Joint ventures net losses
Profit on disposal of joint venture
Income not taxable
Depreciation charged on non-qualifying assets
Current year tax losses carry forward
Current tax (credit)/charge for the year
2022
£m
439.9
83.6
(108.0)
68.8
(72.5)
(26.9)
(3.9)
(10.0)
2.0
0.3
–
(9.1)
2.5
7.4
(65.8)
2021
£m
551.0
104.7
(78.6)
70.0
(0.6)
(7.8)
–
(5.8)
2.0
1.8
(7.0)
(1.8)
2.3
–
79.2
The group's current tax charge is typically lower than the UK headline rate of 19 per cent, primarily due to a range of adjustments
which are simply timing differences between recognition of the income or expense in the accounts and in the related tax
computations submitted to HMRC. These include deductions in relation to capital spend, pension timing differences, unrealised
profits or losses in relation to financing and related treasury derivatives and capitalised interest.
224
unitedutilities.com/corporate
Notes to the financial statements
7 Tax
Current tax
UK corporation tax
Adjustments in respect of prior years
Total current tax (credit)/charge for the year
Deferred tax
Current year
Adjustments in respect of prior years
Change in tax rate
Total deferred tax charge for the year
Total tax charge for the year
2022
£m
6.7
(72.5)
(65.8)
92.9
66.9
159.8
402.7
562.5
496.7
2021
£m
551.0
104.7
(2.4)
–
–
(4.7)
97.6
2022
£m
439.9
83.6
(108.0)
68.8
(72.5)
(26.9)
(3.9)
(10.0)
2.0
0.3
–
(9.1)
2.5
7.4
(65.8)
2021
£m
79.8
(0.6)
79.2
20.2
(1.8)
18.4
–
18.4
97.6
2021
%
19.0
(0.4)
–
–
(0.9)
17.7
2021
£m
551.0
104.7
(78.6)
70.0
(0.6)
(7.8)
–
(5.8)
2.0
1.8
(7.0)
(1.8)
2.3
–
79.2
innovation related expenditure, for multiple prior years.
The table below reconciles the notional tax charge at the UK corporation tax rate to the total tax charge and total effective tax rate
for the year:
Profit before tax
Tax at the UK corporation tax rate
Deferred tax rate adjustment
Adjustments in respect of prior years
Change in tax rate
Net income not taxable
Total tax charge and effective tax rate for the year
2022
£m
439.9
83.6
22.3
(5.6)
402.7
(6.3)
496.7
2022
%
19.0
5.1
(1.3)
91.5
(1.4)
112.9
The deferred tax rate adjustment reflects the fact that the current year deferred tax charge is at the future tax rate of 25 per cent,
rather than the 19 per cent current year rate.
The table below reconciles the notional tax charge at the UK corporation tax rate to the total current tax charge for the year:
Profit before tax
Profit before tax multiplied by the standard rate of UK corporation tax of 19%
Relief for capital allowances in place of depreciation
Disallowance of depreciation charged in the accounts
Adjustments to tax charge in respect of prior years
Financial transactions timing differences
Pension timing differences
Relief for capitalised interest
Other timing differences
Joint ventures net losses
Profit on disposal of joint venture
Income not taxable
Depreciation charged on non-qualifying assets
Current year tax losses carry forward
Current tax (credit)/charge for the year
The group's current tax charge is typically lower than the UK headline rate of 19 per cent, primarily due to a range of adjustments
which are simply timing differences between recognition of the income or expense in the accounts and in the related tax
computations submitted to HMRC. These include deductions in relation to capital spend, pension timing differences, unrealised
profits or losses in relation to financing and related treasury derivatives and capitalised interest.
7 Tax continued
The current year net timing differences in relation to capital spend, i.e. capital allowances less depreciation, was higher than the prior
year mainly due to the temporary super-deductions introduced in 2021.
The adjustments to tax charge in respect of prior years of £72.5 million mainly relates to optimising the available research and
development UK tax allowances on our innovation-related expenditure, for multiple prior years.
The year-on-year movement in financial transactions timing differences is sensitive to fair value movements on treasury derivatives
and can therefore fluctuate significantly from year to year.
The current year pension timing differences was higher than the prior year mainly due to the required accounting reallocation to
equity of £3.3 million in the prior year, due to there being a prior year actuarial loss.
The relief for capitalised interest relates to amounts which are immediately deductible under the UK tax rules notwithstanding the
amounts being capitalised for accounting purposes. The year-on-year amount will depend on the amount capitalised.
Other timing differences includes a range of small value items where there is a timing difference between the accounting and tax
recognition.
The decrease in joint venture losses is due to a reduction in our share of the losses in relation to Water Plus.
The deferred tax charge of £402.7 million (2021: nil) reflects the Government’s planned increase in the rate of corporation tax from 19
per cent to 25 per cent from 1 April 2023.
The increase in income not taxable is mainly due to the additional 30 per cent element of the temporary capital allowances super-
deductions introduced in 2021.
The adjustments in respect of prior years mainly relate to optimising the available research and development UK tax allowances on our
Depreciation charged on non-qualifying assets relates to accounting depreciation where there is no corresponding tax deduction.
Where permitted under HMRC rules, any available UK tax losses will be carried forward and utilised in future periods, when the tax
rate is at 25 per cent.
Tax on items recorded within other comprehensive income
Current tax
Relating to other pension movements
Deferred tax (see note 19)
On remeasurement gains/(losses) on defined benefit pension schemes
Relating to other pension movements
On net fair value gains/(losses) on credit assumptions for debt reported at fair value through
profit and loss and cost of hedging
Share-based payments
Total tax charge on items recorded within other comprehensive income
2022
£m
–
111.1
–
26.1
(1.0)
136.2
2021
£m
(3.3)
(26.0)
3.3
(8.8)
–
(34.8)
The prior year current tax amount of £3.3 million relating to other pension movements is the contributions in excess of the amounts in
the profit and loss account which has to be allocated against the actuarial loss. No adjustment is required in the current year due to the
actuarial gain.
The tax adjustments taken to other comprehensive income primarily relate to remeasurement movements on the group’s defined benefit
pension schemes. Management considers that the most likely method of realisation would be through a refund, which would be taxed at
the rate applicable to refunds from a trust (currently 35 per cent).
8 Earnings per share
(Loss)/profit after tax attributable to equity holders of the company – continuing operations
Earnings per share
Basic
Diluted
2022
£m
(56.8)
2022
pence
(8.3)
(8.3)
2021
£m
453.4
2021
pence
66.5
66.3
Basic earnings per share is calculated by dividing profit after tax for the financial year attributable to equity holders of the company
by 681.9 million being the weighted average number of shares in issue during the year (2021: 681.9 million). Diluted earnings per share
is calculated by dividing profit after tax for the financial year attributable to equity holders of the company by 683.8 million, being the
weighted average number of shares in issue during the year, including dilutive shares (2021: 683.5 million).
The difference between the weighted average number of shares used in the basic and the diluted earnings per share calculations
represents those ordinary shares deemed to have been issued for no consideration on the conversion of all potential dilutive ordinary
shares in accordance with IAS 33 ‘Earnings Per Share’. Potential dilutive ordinary shares comprise outstanding share options awarded
to directors and certain employees (see note 3).
224
unitedutilities.com/corporate
Stock Code: UU.
I
F
I
N
A
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A
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A
T
E
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E
N
T
S
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
i
i
a
l
S
t
a
t
e
m
e
n
t
s
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
2
225
Notes to the financial statements
8 Earnings per share continued
The weighted average number of shares can be reconciled to the weighted average number of shares, including dilutive shares, as
follows:
Average number of ordinary shares – basic
Effect of potential dilutive ordinary share options
Average number of ordinary shares – diluted
9 Dividends
Amounts recognised as distributions to equity holders of the company in the year comprise:
Ordinary shares
Final dividend for the year ended 31 March 2021 at 28.83 pence per share (2020: 28.40 pence)
Interim dividend for the year ended 31 March 2022 at 14.50 pence per share (2021: 14.41 pence)
Proposed final dividend for the year ended 31 March 2022 at 29.00 pence per share (2021: 28.83 pence)
2022
million
681.9
1.9
683.8
2022
£m
196.6
98.9
295.5
197.8
2021
million
681.9
1.6
683.5
2021
£m
193.6
98.3
291.9
196.6
The proposed final dividends for the years ended 31 March 2022 and 31 March 2021 were subject to approval by equity holders of
United Utilities Group PLC as at the reporting dates, and hence have not been included as liabilities in the consolidated financial
statements at 31 March 2022 and 31 March 2021.
10 Property, plant and equipment
Property, plant and equipment comprises owned and leased assets.
Property, plant and equipment – owned
Right of use assets – leased
Net book value
Property, plant and equipment – owned
2022
£m
12,087.7
59.8
12,147.5
2021
£m
11,739.7
59.3
11,799.0
Land and
buildings
£m
Infra-
structure
assets
£m
Operational
assets
£m
Fixtures,
fittings, tools
and
equipment
£m
Assets in
course of
construction
£m
Group
Cost
At 1 April 2020
Additions
Transfers
Disposals
At 31 March 2021
Additions
Transfers
Disposals
At 31 March 2022
Accumulated depreciation
At 1 April 2020
Charge for the year
Transfers
Disposals
At 31 March 2021
Charge for the year
Transfers
Disposals
At 31 March 2022
Net book value at 31 March 2021
Net book value at 31 March 2022
226
353.9
5,730.5
7,686.8
1.7
9.7
(1.6)
363.7
2.5
6.4
(0.3)
372.3
122.2
8.2
–
(1.5)
128.9
8.4
–
(0.2)
137.1
234.8
235.2
100.8
66.5
–
136.7
418.3
(167.1)
5,897.8
8,074.7
84.8
48.8
(0.1)
181.2
241.9
(136.1)
6,031.3
8,361.7
434.5
42.6
–
–
477.1
45.0
0.2
–
522.3
5,420.7
5,509.0
3,450.2
299.1
–
(155.7)
3,593.6
294.7
(0.1)
(130.1)
3,758.1
4,481.1
4,603.6
559.0
8.4
(3.9)
(47.6)
515.9
7.6
4.7
(14.5)
513.7
420.5
28.8
(1.0)
(47.0)
401.3
26.5
–
(14.1)
413.7
114.6
100.0
Total
£m
15,881.0
677.9
(2.0)
(216.3)
1,550.8
430.3
(492.6)
–
1,488.5
16,340.6
452.4
(300.9)
(0.1)
728.5
0.9
(151.1)
1,639.9
16,918.9
–
–
–
–
–
–
–
–
–
1,488.5
1,639.9
4,427.4
378.7
(1.0)
(204.2)
4,600.9
374.6
0.1
(144.4)
4,831.2
11,739.7
12,087.7
unitedutilities.com/corporate
Notes to the financial statements
8 Earnings per share continued
follows:
The weighted average number of shares can be reconciled to the weighted average number of shares, including dilutive shares, as
Average number of ordinary shares – basic
Effect of potential dilutive ordinary share options
Average number of ordinary shares – diluted
9 Dividends
Ordinary shares
Amounts recognised as distributions to equity holders of the company in the year comprise:
Final dividend for the year ended 31 March 2021 at 28.83 pence per share (2020: 28.40 pence)
Interim dividend for the year ended 31 March 2022 at 14.50 pence per share (2021: 14.41 pence)
2022
million
681.9
1.9
683.8
2022
£m
196.6
98.9
295.5
197.8
2021
million
681.9
1.6
683.5
2021
£m
193.6
98.3
291.9
196.6
2022
£m
12,087.7
59.8
12,147.5
2021
£m
11,739.7
59.3
11,799.0
£m
1,550.8
430.3
(492.6)
–
452.4
(300.9)
(0.1)
–
–
–
–
–
–
–
–
–
1,488.5
1,639.9
Total
£m
15,881.0
677.9
(2.0)
(216.3)
728.5
0.9
(151.1)
4,427.4
378.7
(1.0)
(204.2)
4,600.9
374.6
0.1
(144.4)
4,831.2
11,739.7
12,087.7
Proposed final dividend for the year ended 31 March 2022 at 29.00 pence per share (2021: 28.83 pence)
The proposed final dividends for the years ended 31 March 2022 and 31 March 2021 were subject to approval by equity holders of
United Utilities Group PLC as at the reporting dates, and hence have not been included as liabilities in the consolidated financial
statements at 31 March 2022 and 31 March 2021.
10 Property, plant and equipment
Property, plant and equipment comprises owned and leased assets.
Property, plant and equipment – owned
Right of use assets – leased
Net book value
Property, plant and equipment – owned
At 31 March 2021
5,897.8
8,074.7
1,488.5
16,340.6
At 1 April 2020
353.9
5,730.5
7,686.8
Group
Cost
Additions
Transfers
Disposals
Additions
Transfers
Disposals
Accumulated depreciation
At 1 April 2020
Charge for the year
Transfers
Disposals
At 31 March 2021
Charge for the year
Transfers
Disposals
At 31 March 2022
Net book value at 31 March 2021
Net book value at 31 March 2022
structure
Operational
Fixtures,
fittings, tools
Assets in
course of
assets
equipment
construction
Land and
buildings
£m
Infra-
assets
£m
100.8
66.5
–
84.8
48.8
(0.1)
434.5
42.6
–
–
477.1
45.0
0.2
–
522.3
5,420.7
5,509.0
£m
136.7
418.3
(167.1)
181.2
241.9
(136.1)
3,450.2
299.1
–
(155.7)
3,593.6
294.7
(0.1)
(130.1)
3,758.1
4,481.1
4,603.6
1.7
9.7
(1.6)
363.7
2.5
6.4
(0.3)
372.3
122.2
8.2
–
(1.5)
128.9
8.4
–
(0.2)
137.1
234.8
235.2
and
£m
559.0
8.4
(3.9)
(47.6)
515.9
7.6
4.7
(14.5)
513.7
420.5
28.8
(1.0)
(47.0)
401.3
26.5
–
(14.1)
413.7
114.6
100.0
At 31 March 2022
6,031.3
8,361.7
1,639.9
16,918.9
10 Property, plant and equipment continued
During the year, there was a net transfer of £0.9 million cost from intangible assets to property, plant and equipment relating to the
reclassification of assets following a data cleanse in respect of the fixed assets register. The overall impact of these reclassifications on
the purchase of property, plant and equipment and intangible assets in the statement of cash flows (note A1) is nil.
Right of use assets – leased
Group
Cost
At 1 April 2020
Additions
Disposals
At 31 March 2021
Additions
Disposals
At 31 March 2022
Accumulated depreciation
At 1 April 2020
Charge for the year
Disposals
At 31 March 2021
Charge for the year
Disposals
At 31 March 2022
Net book value at 31 March 2021
Net book value at 31 March 2022
Land and
buildings
£m
Operational
assets
£m
Fixtures,
fittings
tools and
equipment
£m
52.8
2.4
(0.1)
55.1
2.1
(0.3)
56.9
1.0
1.2
(0.1)
2.1
1.5
(0.4)
3.2
53.0
53.7
6.5
1.5
(0.2)
7.8
0.7
(1.4)
7.1
1.0
0.9
(0.2)
1.7
0.9
(1.4)
1.2
6.1
5.9
–
0.2
–
0.2
–
–
0.2
–
–
–
–
–
–
–
0.2
0.2
Total
£m
59.3
4.1
(0.3)
63.1
2.8
(1.7)
64.2
2.0
2.1
(0.3)
3.8
2.4
(1.8)
4.4
59.3
59.8
In order to carry out its activities, the group enters into leases of assets from time to time, typically in relation to items such as land,
buildings and vehicles. Due to the nature of the group’s operations, many of the group’s leases have extremely long terms, ranging
from one year to 999 years. The group does not typically lease assets on a short-term basis or enter into leases for low value asset
and therefore no material costs were incurred during the year, either individually or in aggregate, in relation to lease contracts with a
duration of less than 12 months or for low value assets.
At 31 March 2022, the group had entered into contractual commitments for the acquisition of property, plant and equipment
amounting to £280.8 million (2021: £355.8 million). In addition to these commitments, the group has long-term expenditure plans
which include investments to achieve improvements in performance required by regulators and to provide for future growth.
Company
The company had no property, plant and equipment or contractual commitments for the acquisition of property, plant and equipment
at 31 March 2022 or 31 March 2021.
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U
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i
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i
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i
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G
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o
u
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P
L
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A
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u
a
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R
e
p
o
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t
a
n
d
F
n
a
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c
i
i
a
l
S
t
a
t
e
m
e
n
t
s
f
o
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t
h
e
y
e
a
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e
n
d
e
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3
1
M
a
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2
0
2
2
227
Notes to the financial statements
11
Intangible assets
Group
Cost
At 1 April 2020
Additions
Transfers
Disposals
At 31 March 2021
Additions
Transfers
Disposals
At 31 March 2022
Accumulated amortisation
At 1 April 2020
Charge for the year
Transfers
Disposals
At 31 March 2021
Charge for the year
Transfers
Disposals
At 31 March 2022
Net book value at 31 March 2021
Net book value at 31 March 2022
Total
£m
441.4
32.7
2.0
(51.0)
425.1
20.1
0.9
(13.2)
432.9
252.4
41.5
1.0
(50.9)
244.0
41.2
–
(13.1)
272.1
181.1
160.8
The group’s intangible assets relate mainly to computer software.
At 31 March 2022, the group had entered into contractual commitments for the acquisition of intangible assets amounting to £1.8
million (2021: £0.9 million).
Company
The company had no intangible assets or contractual commitments for the acquisition of intangible assets at 31 March 2022 or
31 March 2021.
12 Joint ventures and other investments
Joint ventures at the start of the period
Additions(1)
Share of losses of joint ventures
Less: Share of losses allocated to other components of long-term interest in joint ventures
Dividends received from joint ventures
Currency translation differences
Disposal of joint venture
Joint ventures at the end of the period
Other investments
Interests in joint ventures and other investments
2022
£m
–
18.3
(1.8)
–
–
–
–
16.5
0.1
16.6
2021
£m
46.8
–
(9.3)
14.2
(6.4)
(1.6)
(43.7)
–
0.1
0.1
Note:
(1)
Additions of £18.3 million comprise a £32.5 million subscription in the equity share capital of Water Plus during the year, net of £14.2 million of the
group’s share of joint venture losses recognised in prior years that were allocated against its long-term interest in Water Plus previously recognised
within amounts owed by related parties.
Following the disposal of the group’s overseas investment in AS Tallinna Vesi (Tallinn Water) in March 2021, which resulted in a profit on
disposal of £36.7 million, the group’s interests in joint ventures mainly comprises its 50 per cent interest in Water Plus Group Limited
(Water Plus), which is jointly owned and controlled by the group and Severn Trent PLC under a joint venture agreement.
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Notes to the financial statements
11
Intangible assets
At 1 April 2020
Group
Cost
Additions
Transfers
Disposals
Additions
Transfers
Disposals
At 31 March 2021
At 31 March 2022
Accumulated amortisation
At 1 April 2020
Charge for the year
Transfers
Disposals
At 31 March 2021
Charge for the year
Transfers
Disposals
At 31 March 2022
Net book value at 31 March 2021
Net book value at 31 March 2022
million (2021: £0.9 million).
Company
31 March 2021.
12 Joint ventures and other investments
Joint ventures at the start of the period
Additions(1)
Share of losses of joint ventures
Dividends received from joint ventures
Currency translation differences
Disposal of joint venture
Joint ventures at the end of the period
Other investments
Interests in joint ventures and other investments
Note:
Total
£m
441.4
32.7
2.0
(51.0)
425.1
20.1
0.9
(13.2)
432.9
252.4
41.5
1.0
(50.9)
244.0
41.2
–
(13.1)
272.1
181.1
160.8
2021
£m
46.8
–
(9.3)
14.2
(6.4)
(1.6)
(43.7)
–
0.1
0.1
2022
£m
18.3
(1.8)
–
–
–
–
–
16.5
0.1
16.6
12 Joint ventures and other investments continued
The group’s total share of Water Plus losses for the year was £1.8 million (2021: £8.9 million share of losses), all of which has been
recognised in the income statement. As reported in the group’s annual report for the year ended 31 March 2021, at that date a fully drawn
£32.5 million revolving credit facility extended to Water Plus by United Utilities PLC, which was presented within amounts owed by
related parties included within trade and other receivables, was considered to form part of the group’s long-term interest in the Water
Plus joint venture as there was a clear expectation that it would be converted to additional equity share capital. As such, the group’s £14.2
million share of losses recognised in the income statement for the year then ended (comprising the group’s share of Water Plus losses
for the year of £8.9 million and £5.3 million of the group’s previously unrecognised share of losses relating to prior years) was allocated
against this fully drawn facility, resulting in a net reported balance of £18.3 million at 31 March 2021, which was included in amounts owed
by related parties.
The conversion of this facility to equity share capital was executed on 23 April 2021 and therefore the brought forward balance of £18.3
million has been included as an addition to the group’s joint ventures balance during the period.
Details of transactions between the group and its joint ventures and other investments are disclosed in note A6.
Company
At 31 March 2022, the company’s investments related solely to its investments in United Utilities PLC, which was recorded at a cost of
£6,326.8 million (2021: £6,326.8 million).
13
Inventories
Group
Properties held for resale
Other inventories
2022
£m
1.6
16.6
18.2
2021
£m
2.5
15.8
18.3
Included within other inventories are £0.4 million (2021: nil) of assets that are held for sale in the ordinary course of business, but
where sales are not expected to occur within 12 months of the reporting date. These items are therefore classified within non-current
assets in the statement of financial position.
The group’s intangible assets relate mainly to computer software.
At 31 March 2022, the group had entered into contractual commitments for the acquisition of intangible assets amounting to £1.8
Company
The company had no inventories at 31 March 2022 or 31 March 2021.
14 Trade and other receivables
The company had no intangible assets or contractual commitments for the acquisition of intangible assets at 31 March 2022 or
Less: Share of losses allocated to other components of long-term interest in joint ventures
(1)
Additions of £18.3 million comprise a £32.5 million subscription in the equity share capital of Water Plus during the year, net of £14.2 million of the
group’s share of joint venture losses recognised in prior years that were allocated against its long-term interest in Water Plus previously recognised
within amounts owed by related parties.
Following the disposal of the group’s overseas investment in AS Tallinna Vesi (Tallinn Water) in March 2021, which resulted in a profit on
disposal of £36.7 million, the group’s interests in joint ventures mainly comprises its 50 per cent interest in Water Plus Group Limited
(Water Plus), which is jointly owned and controlled by the group and Severn Trent PLC under a joint venture agreement.
Trade receivables
Amounts owed by subsidiary undertakings
Amounts owed by related parties (see note A6)
Other debtors and prepayments
Accrued income
Group
Company
2022
£m
61.7
–
116.4
37.7
88.6
304.4
2021
£m
63.5
–
113.8
34.3
104.3
315.9
2022
£m
–
95.2
–
–
–
2021
£m
–
91.9
–
–
–
95.2
91.9
At 31 March 2022, the group had £81.7million (2021: £86.7 million) of trade and other receivables classified as non-current, all of which
was owed by related parties.
The carrying amounts of trade and other receivables approximate to their fair value at 31 March 2022 and 31 March 2021.
Trade receivables do not carry interest and are stated net of allowances for bad and doubtful receivables, an analysis of which is as
follows:
Group
At the start of the year
Amounts charged to operating expenses (see note 4)
Trade receivables written off
Amounts charged to deferred income
At the end of the year
2022
£m
80.4
23.4
(19.2)
–
84.6
2021
£m
71.4
28.7
(20.2)
0.5
80.4
Amounts charged to deferred income relate to amounts invoiced for which revenue has not yet been recognised in the income
statement.
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a
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m
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f
o
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229
Notes to the financial statements
14 Trade and other receivables continued
At each reporting date, the group evaluates the recoverability of trade receivables and records allowances for expected credit losses
which are measured in a way that reflects an unbiased and probability-weighted amount that is determined by evaluating a range of
possible outcomes and considers past events, current conditions and forecasts of future conditions.
At 31 March 2022 and 31 March 2021, the group had no trade receivables that were past due and not individually impaired.
The following table provides information regarding the ageing of net trade receivables that were past due and individually impaired:
At 31 March 2022
Gross trade receivables
Allowance for expected credit losses
Net trade receivables
At 31 March 2021
Gross trade receivables
Allowance for expected credit losses
Net trade receivables
Aged
less than one
year
£m
Aged
between one
year and two
years
£m
Aged
greater than
two years
£m
68.7
(20.3)
48.4
26.1
(13.1)
13.0
51.4
(51.2)
0.2
Aged
less than one
year
£m
Aged
between one
year and two
years
£m
Aged
greater than
two years
£m
61.9
(19.9)
42.0
35.3
(16.5)
18.8
44.4
(43.9)
0.5
Carrying
value
£m
146.2
(84.6)
61.6
Carrying
value
£m
141.7
(80.4)
61.3
At 31 March 2022, the group had £0.1 million (2021: £2.2 million) of trade receivables that were not past due.
The majority of accrued income balances represent contract assets arising from timing differences between the billing cycle and
the usage of water by customers. They therefore typically reverse in subsequent months, with all amounts held in relation to these
contract assets at the beginning of the reporting period having subsequently reversed into the income statement during the year.
At 31 March 2022 and 31 March 2021, the group had no accrued income that was past due. In instances where the collection of
consideration is not considered probable at the point services are delivered, no accrued income balance is recognised, as the criteria
to recognise revenue in accordance with IFRS 15 has not been met.
Company
At 31 March 2022 and 31 March 2021, the company had no trade receivables that were past due. Of the £95.2 million (2021: £91.9
million) owed by subsidiaries, £75.0 million (2021: nil) was classified as non-current at the reporting date. This follows an exercise
performed during the year to reassess the nature of the intercompany receivable balances. As a result, the group executed an
agreement to split the existing intercompany receivable balance owed by United Utilities PLC, which had been classified as a current
asset in prior years, into an intercompany term loan of £75.0 million that is repayable at 31 March 2027 with the remaining amount
continuing to form part of the intercompany cash pooling arrangements presented within current assets.
The carrying amount of trade and other receivables approximates to their fair value at 31 March 2022 and 31 March 2021.
15 Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
Cash and short-term deposits
Book overdrafts (included in borrowings, see note 16)
Cash and cash equivalents in the statement of cash flows
2022
£m
9.9
231.0
240.9
(20.8)
220.1
Group
2021
£m
88.9
655.2
744.1
(10.5)
733.6
2022
£m
Company
2021
£m
–
–
–
–
–
–
–
–
–
–
Cash and short-term deposits include cash at bank and in hand, deposits, and other short-term highly liquid investments which are
readily convertible into known amounts of cash and have a maturity of three months or less. The carrying amounts of cash and cash
equivalents approximate their fair value.
Book overdrafts, which result from normal cash management practices, represent the value of cheques issued and payments initiated
that had not cleared as at the reporting date.
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Notes to the financial statements
14 Trade and other receivables continued
At each reporting date, the group evaluates the recoverability of trade receivables and records allowances for expected credit losses
which are measured in a way that reflects an unbiased and probability-weighted amount that is determined by evaluating a range of
possible outcomes and considers past events, current conditions and forecasts of future conditions.
At 31 March 2022 and 31 March 2021, the group had no trade receivables that were past due and not individually impaired.
The following table provides information regarding the ageing of net trade receivables that were past due and individually impaired:
At 31 March 2022
Gross trade receivables
Allowance for expected credit losses
Net trade receivables
At 31 March 2021
Gross trade receivables
Allowance for expected credit losses
Net trade receivables
Aged
between one
Aged
less than one
year and two
greater than
Carrying
Aged
years
£m
26.1
(13.1)
13.0
Aged
£m
35.3
(16.5)
18.8
two years
£m
51.4
(51.2)
0.2
£m
44.4
(43.9)
0.5
year
£m
68.7
(20.3)
48.4
year
£m
61.9
(19.9)
42.0
value
£m
146.2
(84.6)
61.6
value
£m
141.7
(80.4)
61.3
Aged
between one
Aged
less than one
year and two
greater than
Carrying
years
two years
At 31 March 2022, the group had £0.1 million (2021: £2.2 million) of trade receivables that were not past due.
The majority of accrued income balances represent contract assets arising from timing differences between the billing cycle and
the usage of water by customers. They therefore typically reverse in subsequent months, with all amounts held in relation to these
contract assets at the beginning of the reporting period having subsequently reversed into the income statement during the year.
At 31 March 2022 and 31 March 2021, the group had no accrued income that was past due. In instances where the collection of
consideration is not considered probable at the point services are delivered, no accrued income balance is recognised, as the criteria
to recognise revenue in accordance with IFRS 15 has not been met.
Company
At 31 March 2022 and 31 March 2021, the company had no trade receivables that were past due. Of the £95.2 million (2021: £91.9
million) owed by subsidiaries, £75.0 million (2021: nil) was classified as non-current at the reporting date. This follows an exercise
performed during the year to reassess the nature of the intercompany receivable balances. As a result, the group executed an
agreement to split the existing intercompany receivable balance owed by United Utilities PLC, which had been classified as a current
asset in prior years, into an intercompany term loan of £75.0 million that is repayable at 31 March 2027 with the remaining amount
continuing to form part of the intercompany cash pooling arrangements presented within current assets.
The carrying amount of trade and other receivables approximates to their fair value at 31 March 2022 and 31 March 2021.
15 Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
Cash and short-term deposits
Book overdrafts (included in borrowings, see note 16)
Cash and cash equivalents in the statement of cash flows
2022
£m
9.9
231.0
240.9
(20.8)
220.1
Group
2021
£m
88.9
655.2
744.1
(10.5)
733.6
2022
£m
Company
2021
£m
–
–
–
–
–
–
–
–
–
–
Cash and short-term deposits include cash at bank and in hand, deposits, and other short-term highly liquid investments which are
readily convertible into known amounts of cash and have a maturity of three months or less. The carrying amounts of cash and cash
equivalents approximate their fair value.
that had not cleared as at the reporting date.
Book overdrafts, which result from normal cash management practices, represent the value of cheques issued and payments initiated
16 Borrowings
Group
Non-current liabilities
Bonds
Bank and other term borrowings
Lease obligations
Current liabilities
Bonds
Bank and other term borrowings
Book overdrafts (see note 15)
Lease obligations
Company
Non-current liabilities
Amounts owed to subsidiary undertakings
2022
£m
6,168.4
1,445.0
57.6
7,671.0
–
284.7
20.8
3.3
308.8
7,979.8
2022
£m
1,799.9
1,799.9
2021
£m
6,029.9
1,710.4
56.7
7,797.0
388.5
252.5
10.5
3.3
654.8
8,451.8
2021
£m
1,780.6
1,780.6
Amounts owed to subsidiary undertakings relate to an intercompany loan from United Utilities PLC to the company, which bears
interest calculated with reference to the Bank of England base rate plus a credit margin, and is repayable with twelve months’ notice
upon written request by a director of either party, with the repayment date not falling less than 366 days after the date of the request.
For further details of the principal economic terms and conditions of outstanding borrowings see note A3.
Borrowings are unsecured and are measured at amortised cost. The carrying amounts of borrowings approximate their fair value.
17 Leases
The maturity profile of lease liabilities recognised at the balance sheet date is:
Less than 1 year
1 to 5 years
5 to 10 years
10 to 25 years
25 to 50 years
50 to 100 years
100 to 500 years
Longer than 500 years
Total undiscounted cash payments
Effect of discounting
Present value of cash payments
2022
£m
3.3
10.4
8.1
25.5
42.0
81.5
106.9
3.2
280.9
(220.0)
60.9
2021
£m
3.3
10.5
7.8
25.5
41.0
81.0
107.6
3.2
279.9
(219.9)
60.0
During the year ended 31 March 2022, £1.6 million (2021: £1.8 million) of interest expense on lease liabilities was recognised,
representing the unwinding of the discounting applied to future lease payments (see note 6).
The total cash outflow for leases for the year ended 31 March 2022 was £3.7 million; of this, £1.6 million was payment of interest and
£2.1 million payment of principal.
Payment of interest forms part of cash flows from operating activities and payment of principal is included within repayment of
borrowings, which forms part of cash flows from financing activities in the group’s statement of cash flows.
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2
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Notes to the financial statements
18 Retirement benefits
The group participates in two major funded defined benefit pension schemes in the United Kingdom – the United Utilities Pension
Scheme (UUPS) and the United Utilities PLC group of the Electricity Supply Pension Scheme (ESPS) – as well as a defined contribution
scheme which is part of the UUPS, and a series of historic unfunded, unregistered retirement benefit schemes operated for the benefit
of certain former employees.
Both defined benefit schemes are closed to new employees, and since 1 April 2018 the majority of active members in the defined
benefit section of the UUPS have been part of a hybrid section comprising both defined benefit and defined contribution elements in
order to reduce the overall costs and risk to the group resulting from increases in future service costs, while balancing the interests of
employees by maintaining an element of defined benefit pension provision.
Information about the pension arrangements for executive directors is contained in the directors’ remuneration report.
Defined benefit schemes
As similar financial and demographic assumptions are used in accounting for both of the group’s defined benefit pension schemes,
and given they have similar risk profiles, the information below and further detail provided in note A5 is presented on an aggregated
basis unless otherwise stated.
The net pension income before tax recognised in the income statement in respect of the defined benefit pension schemes is
summarised as follows:
Group
Current service cost
Curtailments/settlements
Administrative expenses
Pension expense charged to operating profit
Net pension interest income credited to investment income (see note 5)
Net pension income credited to the income statement before tax
2022
£m
7.5
–
2.1
9.6
(14.3)
(4.7)
2021
£m
4.9
0.6
3.0
8.5
(17.5)
(9.0)
Defined benefit pension costs excluding curtailments/settlements included within employee benefit expense were £9.6 million
(2021: £7.9 million) comprising current service costs and administrative expenses. Total post-employment benefits expense excluding
curtailments/settlements charged to operating profit of £35.7 million (2021: £31.3 million) comprise the defined benefit costs
described above of £9.6 million (2021: £7.9 million) and defined contribution costs of £26.1 million (2021: £23.4 million) (see note 3).
Included within curtailments/settlements in the prior year is £0.5 million relating to the equalisation of GMP benefits (see note A5 for further
details).
The reconciliation of the opening and closing net pension surplus included in the statement of financial position is as follows:
Group
At the start of the year
Income recognised in the income statement
Contributions
Remeasurement gains/(losses) gross of tax
At the end of the year
2022
£m
689.0
4.7
9.5
313.6
1,016.8
2021
£m
754.1
9.0
8.6
(82.7)
689.0
Included in the contributions paid of £9.5 million (2021: £8.6 million), which are included as cash outflows in arriving at net cash
generated from operations in the consolidated statement of cash flows, enhancements to benefits provided on redundancy of
£0.5 million (2021: £0.9 million), payments in relation to historic unfunded, unregistered retirement benefit schemes of £2.5 million
(2021: £0.7 million), and administration expenses of £0.4 million (2021: £0.4 million). Contributions in relation to current service cost
remained broadly stable at £6.1 million (2021: £6.6 million).
Remeasurement gains and losses are recognised directly in the statement of comprehensive income.
Group
The return on plan assets, excluding amounts included in interest
Actuarial gains/(losses) arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Actuarial (losses)/gains arising from experience
Remeasurement gains/(losses) on defined benefit pension schemes
2022
£m
102.2
164.0
52.4
(5.0)
313.6
2021
£m
241.0
(429.7)
80.6
25.4
(82.7)
232
unitedutilities.com/corporate
Notes to the financial statements
18 Retirement benefits
of certain former employees.
The group participates in two major funded defined benefit pension schemes in the United Kingdom – the United Utilities Pension
Scheme (UUPS) and the United Utilities PLC group of the Electricity Supply Pension Scheme (ESPS) – as well as a defined contribution
scheme which is part of the UUPS, and a series of historic unfunded, unregistered retirement benefit schemes operated for the benefit
Both defined benefit schemes are closed to new employees, and since 1 April 2018 the majority of active members in the defined
benefit section of the UUPS have been part of a hybrid section comprising both defined benefit and defined contribution elements in
order to reduce the overall costs and risk to the group resulting from increases in future service costs, while balancing the interests of
employees by maintaining an element of defined benefit pension provision.
Information about the pension arrangements for executive directors is contained in the directors’ remuneration report.
As similar financial and demographic assumptions are used in accounting for both of the group’s defined benefit pension schemes,
and given they have similar risk profiles, the information below and further detail provided in note A5 is presented on an aggregated
The net pension income before tax recognised in the income statement in respect of the defined benefit pension schemes is
Defined benefit schemes
basis unless otherwise stated.
summarised as follows:
Group
Current service cost
Curtailments/settlements
Administrative expenses
Pension expense charged to operating profit
Net pension interest income credited to investment income (see note 5)
Net pension income credited to the income statement before tax
Defined benefit pension costs excluding curtailments/settlements included within employee benefit expense were £9.6 million
(2021: £7.9 million) comprising current service costs and administrative expenses. Total post-employment benefits expense excluding
curtailments/settlements charged to operating profit of £35.7 million (2021: £31.3 million) comprise the defined benefit costs
described above of £9.6 million (2021: £7.9 million) and defined contribution costs of £26.1 million (2021: £23.4 million) (see note 3).
Included within curtailments/settlements in the prior year is £0.5 million relating to the equalisation of GMP benefits (see note A5 for further
The reconciliation of the opening and closing net pension surplus included in the statement of financial position is as follows:
details).
Group
At the start of the year
Income recognised in the income statement
Contributions
Remeasurement gains/(losses) gross of tax
At the end of the year
Included in the contributions paid of £9.5 million (2021: £8.6 million), which are included as cash outflows in arriving at net cash
generated from operations in the consolidated statement of cash flows, enhancements to benefits provided on redundancy of
£0.5 million (2021: £0.9 million), payments in relation to historic unfunded, unregistered retirement benefit schemes of £2.5 million
(2021: £0.7 million), and administration expenses of £0.4 million (2021: £0.4 million). Contributions in relation to current service cost
remained broadly stable at £6.1 million (2021: £6.6 million).
Remeasurement gains and losses are recognised directly in the statement of comprehensive income.
Group
The return on plan assets, excluding amounts included in interest
Actuarial gains/(losses) arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Actuarial (losses)/gains arising from experience
Remeasurement gains/(losses) on defined benefit pension schemes
2022
£m
7.5
–
2.1
9.6
(14.3)
(4.7)
2022
£m
689.0
4.7
9.5
313.6
1,016.8
2022
£m
102.2
164.0
52.4
(5.0)
313.6
2021
£m
4.9
0.6
3.0
8.5
(17.5)
(9.0)
2021
£m
754.1
9.0
8.6
(82.7)
689.0
2021
£m
241.0
(429.7)
80.6
25.4
(82.7)
18 Retirement benefits continued
Deferred tax on the movement in the defined benefit surplus during the year has been recognised at a rate of 35 per cent, being the
rate applicable to refunds from a trust, reflecting the most likely method by which the defined benefit surplus would be realised (see
notes 7 and 19).
For more information in relation to the group’s defined benefit pension schemes, including changes in financial and demographic
assumptions, see note A5.
Defined contribution schemes
During the year, the group made £26.1 million (2021: £23.4 million) of contributions to defined contribution schemes which are
included in employee benefits expense in the consolidated income statement (see note 3), and as cash outflows in arriving at net cash
generated from operating activities in the consolidated statement of cash flows.
Company
The company did not participate in any of the group’s pension schemes during the years ended 31 March 2022 and 31 March 2021.
19 Deferred tax liabilities
The following are the major deferred tax liabilities and assets recognised by the group, and the movements thereon, during the current
and prior year:
Group
At 1 April 2020
Charged to the income statement (see note 7)
Credited to equity (see note 7)
At 31 March 2021
Credited to the income statement (see note 7)
Change in tax rate
Charged to other comprehensive income (see note 7)
At 31 March 2022
Accelerated
tax
depreciation
£m
Retirement
benefit
obligations
£m
1,217.4
9.2
–
1,226.6
149.3
414.7
–
1,790.6
263.9
–
(22.7)
241.2
3.5
–
111.1
355.8
Other
£m
(18.7)
9.2
(8.8)
(18.3)
6.9
(12.0)
25.1
1.7
Total
£m
1,462.6
18.4
(31.5)
1,449.5
159.7
402.7
136.2
2,148.1
Certain deferred tax assets and liabilities have been offset in accordance with IAS 12 ‘Income Taxes’.
The £562.5 million deferred tax charge includes £402.7 million (2020: nil) reflecting the Government’s planned increase in the rate of
corporation tax from 19 per cent to 25 per cent from 1 April 2023.
The accelerated tax depreciation represents the difference between capital allowances and accounting depreciation on the group’s
property, plant and equipment. Capital allowances are tax reliefs provided in law and spread the tax relief due over a pre-determined
standard number of years. This contrasts with the accounting treatment, where the expenditure is treated as an asset with the cost
being depreciated over the useful life of the asset, or impaired if the value of such assets is considered to have reduced materially.
Due to the group’s continued significant annual capital expenditure, the deductions for capital allowances are expected to exceed
depreciation for the medium term and continue to impact future corporation tax payments.
Given the fully funded nature of the group’s defined benefit pension schemes, the retirement benefit obligations primarily relate to
deferred taxation on the pensions schemes surplus position. This amount is significantly impacted by financial market conditions and
long-term inflation expectations and therefore it is difficult to forecast future movements. However, these movements have no impact
on medium-term future corporation tax payments as they only impact year-on-year deferred tax movement.
Deferred tax on retirement benefit obligations can also arise where there are year-on-year differences between the contributions paid
and the associated amounts charged to the profit and loss account. However, given the fully funded nature of our pension schemes,
any such deferred tax movements, together with the associated impact on future corporation tax payments, are not expected to be
significant for the medium term.
The other net short-term temporary differences of £1.7 million includes £35 million relating to tax losses which have been carried
forward, where permitted under HMRC rules, to be utilised in future periods when the tax rate is at 25 per cent. Also included are
other short-term timing differences in relation to the year-on-year movement in financial transactions which are sensitive to fair value
movement on treasury derivatives and can therefore fluctuate significantly from year to year. However, these fair value movements
have no impact on future corporation tax payments as they only impact the year-on-year deferred tax movement.
Company
The company had no deferred tax assets or liabilities at 31 March 2022 or 2021.
232
unitedutilities.com/corporate
Stock Code: UU.
I
F
I
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A
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A
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S
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A
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E
M
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2
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2
2
233
Notes to the financial statements
20 Provisions
Group
At 1 April 2020
Charged/(credited) to the income statement
Utilised in the year
At 31 March 2021
Charged to the income statement
Utilised in the year
At 31 March 2022
Severance
£m
Other
£m
4.9
1.3
(4.6)
1.6
0.3
(0.7)
1.2
11.5
(0.9)
(1.1)
9.5
4.7
(1.9)
12.3
Total
£m
16.4
0.4
(5.7)
11.1
5.0
(2.6)
13.5
The group had no provisions classed as non-current at 31 March 2022 or 31 March 2021.
The severance provision as at 31 March 2022 and 31 March 2021 relates to severance costs as a result of group reorganisation.
Other provisions principally relate to contractual, legal and environmental claims against the group and represent management’s best
estimate of the value of settlement, the timing of which is dependent on the resolution of the relevant legal claims.
Company
The company had no provisions at 31 March 2022 or 31 March 2021.
21 Trade and other payables
Non-current
Deferred grants and contributions
Other creditors
Current
Trade payables
Amounts owed to subsidiary undertakings
Amounts owed to related parties
Other tax and social security
Deferred grants and contributions
Accruals and other creditors
Deferred income
2022
£m
818.2
17.0
835.2
2022
£m
28.3
–
–
6.6
16.0
266.8
48.1
365.8
Group
2021
£m
780.4
17.9
798.3
Group
2021
£m
33.3
–
2.4
5.9
15.4
221.1
44.6
322.7
2022
£m
–
–
–
2022
£m
–
9.5
–
–
–
3.6
–
13.1
Company
2021
£m
–
–
–
Company
2021
£m
–
7.6
–
–
–
3.2
–
10.8
The average credit period taken for trade purchases is 13 days (2021: 13 days).
The carrying amounts of trade and other payables approximates to their fair value at 31 March 2022 and 31 March 2021.
The majority of deferred income balances represent contract liabilities arising from timing differences between customer payments,
the billing cycle, and the usage of water by customers. They therefore typically reverse in subsequent months, with all amounts held in
relation to these contract liabilities at the beginning of the reporting period having subsequently reversed into the income statement
during the year.
Deferred grants and contributions
Group
At the start of the year
Amounts capitalised during the year
Transfers of assets from customers
Credited to the income statement – revenue
Credited to the income statement – other operating expenses
Credited to allowance for bad and doubtful receivables
At the end of the year
2022
£m
795.8
1.8
52.4
(15.4)
(0.4)
–
834.2
2021
£m
751.3
5.0
55.0
(14.6)
(0.4)
(0.5)
795.8
234
unitedutilities.com/corporate
The group had no provisions classed as non-current at 31 March 2022 or 31 March 2021.
The severance provision as at 31 March 2022 and 31 March 2021 relates to severance costs as a result of group reorganisation.
Other provisions principally relate to contractual, legal and environmental claims against the group and represent management’s best
estimate of the value of settlement, the timing of which is dependent on the resolution of the relevant legal claims.
Company
The company had no provisions at 31 March 2022 or 31 March 2021.
Notes to the financial statements
20 Provisions
Group
At 1 April 2020
Utilised in the year
At 31 March 2021
Utilised in the year
At 31 March 2022
Charged/(credited) to the income statement
Charged to the income statement
21 Trade and other payables
Non-current
Deferred grants and contributions
Other creditors
Current
Trade payables
Amounts owed to subsidiary undertakings
Amounts owed to related parties
Other tax and social security
Deferred grants and contributions
Accruals and other creditors
Deferred income
Severance
Other
Total
£m
4.9
1.3
(4.6)
1.6
0.3
(0.7)
1.2
£m
11.5
(0.9)
(1.1)
9.5
4.7
(1.9)
12.3
£m
16.4
0.4
(5.7)
11.1
5.0
(2.6)
13.5
2022
£m
818.2
17.0
835.2
2022
£m
28.3
–
–
6.6
16.0
266.8
48.1
365.8
Group
2021
£m
780.4
17.9
798.3
Group
2021
£m
33.3
–
2.4
5.9
15.4
221.1
44.6
322.7
2022
£m
Company
2021
£m
Company
–
–
–
–
–
–
–
–
2022
£m
9.5
3.6
13.1
2022
£m
795.8
1.8
52.4
(15.4)
(0.4)
–
834.2
–
–
–
2021
£m
–
7.6
–
–
–
–
3.2
10.8
2021
£m
751.3
5.0
55.0
(14.6)
(0.4)
(0.5)
795.8
The average credit period taken for trade purchases is 13 days (2021: 13 days).
The carrying amounts of trade and other payables approximates to their fair value at 31 March 2022 and 31 March 2021.
The majority of deferred income balances represent contract liabilities arising from timing differences between customer payments,
the billing cycle, and the usage of water by customers. They therefore typically reverse in subsequent months, with all amounts held in
relation to these contract liabilities at the beginning of the reporting period having subsequently reversed into the income statement
during the year.
Deferred grants and contributions
Group
At the start of the year
Amounts capitalised during the year
Transfers of assets from customers
Credited to the income statement – revenue
Credited to the income statement – other operating expenses
Credited to allowance for bad and doubtful receivables
At the end of the year
22 Other reserves
Group
At 1 April 2021
Other comprehensive income
Changes in fair value recognised in other comprehensive
income
Amounts reclassified from other comprehensive income
to profit or loss
Tax on items recorded within other comprehensive
income
At 31 March 2022
Group
At 1 April 2020
Other comprehensive income
Changes in fair value recognised in other comprehensive
income
Tax on items recorded within other comprehensive
income
Foreign exchange adjustments
Foreign exchange adjustments reclassified to profit on
disposal of joint ventures
At 31 March 2021
Cumulative
exchange
reserve
£m
Capital
redemp-
tion
reserve
£m
Merger
reserve
£m
Cost of
hedging
reserve
£m
Cash flow
hedging
reserve
£m
Total
£m
–
–
–
–
–
1,033.3
(703.6)
0.4
6.2
336.3
–
–
–
–
–
–
–
–
–
1,033.3
(703.6)
0.4
106.7
106.7
(26.8)
(26.8)
–
86.1
–
416.2
Cumulative
exchange
reserve
£m
Capital
redemp-
tion
reserve
£m
Merger
reserve
£m
Cost of
hedging
reserve
£m
Cash flow
hedging
reserve
£m
(2.4)
1,033.3
(703.6)
10.7
(1.3)
–
–
(1.6)
4.0
–
–
–
–
–
–
–
–
–
1,033.3
(703.6)
(12.7)
2.4
–
–
0.4
9.3
(1.8)
–
–
6.2
Total
£m
336.7
(3.4)
0.6
(1.6)
4.0
336.3
The capital redemption reserve arose as a result of a return of capital to shareholders following the reverse acquisition of United
Utilities PLC by United Utilities Group PLC in the year ended 31 March 2009. The merger reserve arose in the same year on
consolidation and represents the capital adjustment to reserves required to effect the reverse acquisition.
The group recognises the cost of hedging reserve as a component of equity. This reserve reflects accumulated fair value movements
on cross-currency swaps resulting from changes in the foreign currency basis spread, which represents a liquidity charge inherent
in foreign exchange contracts for exchanging currencies and is excluded from the designation of cross-currency swaps as hedging
instruments.
The group designates a number of swaps hedging non-financial risks in cash flow hedge relationships to give a more representative
view of operating costs. Fair value movements relating to the effective part of these swaps are recognised in other comprehensive
income and accumulated in the cash flow hedging reserve.
Company
The company’s other reserves at 31 March 2022, 31 March 2021 and 1 April 2020, were comprised entirely of a £1,033.3 million capital
redemption reserve that arose as a result of a return of capital to shareholders following the acquisition of United Utilities PLC by the
company in the year ended 31 March 2009.
23 Share capital
Group and company
Issued, called up and fully paid
Ordinary shares of 5.0 pence each
Deferred shares of 170.0 pence each
2022
million
681.9
274.0
955.9
2022
£m
34.1
465.7
499.8
2021
million
681.9
274.0
955.9
2021
£m
34.1
465.7
499.8
Details of the voting rights of each category of shares can be found within the directors’ report on pages 194 to 195.
The 170.0 pence deferred shares were created to facilitate a return of capital to shareholders following the reverse acquisition of
United Utilities PLC by United Utilities Group PLC in the year ended 31 March 2009 (see company statement of changes in equity
on page 214), and represent the amount of a special dividend paid on B shares at that time. The deferred shares convey no right to
income, no right to vote and no appreciable right to participate in any surplus capital in the event of a winding up.
234
unitedutilities.com/corporate
Stock Code: UU.
I
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A
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A
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T
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U
n
i
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d
U
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i
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i
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i
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s
G
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o
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P
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p
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a
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F
n
a
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a
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S
t
a
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e
m
e
n
t
s
f
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a
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3
1
M
a
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h
2
0
2
2
235
Notes to the financial statements
24 Contingent liabilities
At 31 March 2022, there were commitments for future capital expenditure and infrastructure renewals expenditure contracted but not
provided for of £292.8 million (2021: £336.7 million).
Since 2016, the group has received indications from a number of property search companies (PSCs) that they intend to claim
compensation for amounts paid in respect of CON29DW water and drainage search reports, which they allege should have been
provided to them either free of charge or for a nominal fee in accordance with the Environmental Information Regulations. In April
2020, a group of over 100 PSCs, comprising companies within the groups that had previously issued notice of intended claims, served
proceedings on all of the water and sewerage undertakers in England and Wales, including United Utilities Water Limited, for an
unspecified amount of compensation. This is an industry-wide issue, and while the litigation has progressed during the year it remains
in its early stages. The litigation’s likely direction and the quantum of any compensation being claimed is uncertain at this stage;
however, based on the information currently available, the likelihood of the claim’s success is considered to be low, and any potential
outflow is not expected to be material.
The group has credit support guarantees as well as general performance commitments and potential liabilities under contract that
may give rise to financial outflow. The group has determined that the possibility of any outflow arising in respect of these potential
liabilities is remote and, as such, there are no contingent liabilities to be disclosed in this regard (2021: none).
The company has not entered into performance guarantees as at 31 March 2022 or 31 March 2021.
25 Events after the reporting period
In March 2022, the process to market the group’s renewable energy business, United Utilities Renewable Energy Limited (UURE), for
sale commenced having been approved by the group’s board of directors earlier in the year. As at the 31 March 2022 reporting date,
the criteria for presenting the assets and liabilities of the UURE disposal group as held for sale in accordance with IFRS 5 ‘Non-current
Assets Held for Sale and Discontinued Operations’ had not yet been met as the active programme to locate a buyer and complete
the planned sale was only subsequently initiated in May 2022. The assets that are subject to the sales process primarily comprise
property, plant and equipment with a carrying value of £64.6 million in the group’s consolidated statement of financial position as
at 31 March 2022.
In addition to this, in April 2022 the group issued a £100 million term loan facility to Export Development Canada due April 2030, and
entered into a further two undrawn committed borrowing facilities with a total amount available of £50 million.
236
unitedutilities.com/corporate
Notes to the financial statements
Notes to the financial statements – appendices
24 Contingent liabilities
provided for of £292.8 million (2021: £336.7 million).
At 31 March 2022, there were commitments for future capital expenditure and infrastructure renewals expenditure contracted but not
Since 2016, the group has received indications from a number of property search companies (PSCs) that they intend to claim
compensation for amounts paid in respect of CON29DW water and drainage search reports, which they allege should have been
provided to them either free of charge or for a nominal fee in accordance with the Environmental Information Regulations. In April
2020, a group of over 100 PSCs, comprising companies within the groups that had previously issued notice of intended claims, served
proceedings on all of the water and sewerage undertakers in England and Wales, including United Utilities Water Limited, for an
unspecified amount of compensation. This is an industry-wide issue, and while the litigation has progressed during the year it remains
in its early stages. The litigation’s likely direction and the quantum of any compensation being claimed is uncertain at this stage;
however, based on the information currently available, the likelihood of the claim’s success is considered to be low, and any potential
outflow is not expected to be material.
The group has credit support guarantees as well as general performance commitments and potential liabilities under contract that
may give rise to financial outflow. The group has determined that the possibility of any outflow arising in respect of these potential
liabilities is remote and, as such, there are no contingent liabilities to be disclosed in this regard (2021: none).
The company has not entered into performance guarantees as at 31 March 2022 or 31 March 2021.
25 Events after the reporting period
In March 2022, the process to market the group’s renewable energy business, United Utilities Renewable Energy Limited (UURE), for
sale commenced having been approved by the group’s board of directors earlier in the year. As at the 31 March 2022 reporting date,
the criteria for presenting the assets and liabilities of the UURE disposal group as held for sale in accordance with IFRS 5 ‘Non-current
Assets Held for Sale and Discontinued Operations’ had not yet been met as the active programme to locate a buyer and complete
the planned sale was only subsequently initiated in May 2022. The assets that are subject to the sales process primarily comprise
property, plant and equipment with a carrying value of £64.6 million in the group’s consolidated statement of financial position as
at 31 March 2022.
entered into a further two undrawn committed borrowing facilities with a total amount available of £50 million.
A1 Consolidated statement of cash flows – further analysis
Cash generated from operations
Profit before tax
Adjustment for investment income and finance expense
(see notes 5, 6 and A6)
Adjustment for share of profits of joint ventures (see note 12)
Adjustment for profit on disposal of joint ventures
Operating profit
Adjustments for:
Depreciation of property, plant and equipment (see note 10)
Amortisation of intangible assets (see note 11)
Loss on disposal of property, plant and equipment (see note 4)
Amortisation of deferred grants and contributions (see note 21)
Equity-settled share-based payments charge (see note 3)
Changes in working capital:
Increase in inventories (see note 13)
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Decrease in provisions (see note 20)
2022
£m
439.9
168.3
1.8
–
610.0
377.0
41.2
3.9
(15.8)
4.8
0.1
13.2
24.7
2.4
Group
2021
£m
551.0
78.5
9.3
(36.7)
602.1
379.8
42.5
10.7
(15.0)
3.6
(1.7)
18.1
2.5
(5.3)
In addition to this, in April 2022 the group issued a £100 million term loan facility to Export Development Canada due April 2030, and
Pension contributions paid less pension expense charged
to operating profit
Cash generated from operations
0.1
1,061.6
(0.1)
1,037.2
2022
£m
274.5
21.0
–
–
295.5
–
–
–
–
–
–
5.5
0.2
–
–
301.2
Company
2021
£m
267.7
24.2
–
–
291.9
–
–
–
–
–
–
3.0
1.1
–
–
296.0
The group has received property, plant and equipment of £52.4 million (2021: £55.0 million) in exchange for the provision of future
goods and services (see notes 21 and A7).
Reconciliation of fixed asset purchases to fixed asset additions
Owned property, plant and equipment(1)
Purchase of property, plant and equipment in statement of cash flows
Non-cash additions:
Transfers of assets from customers (see note 21)
IAS 23 capitalised borrowing costs (see note 6)
Net book value transfers to intangible assets
Timing differences on cash paid(2)
Property, plant and equipment additions
2022
£m
609.0
52.4
52.1
–
15.0
728.5
2021
£m
610.4
55.0
30.3
1.0
(18.8)
677.9
Notes:
(1) This reconciliation relates to property, plant and equipment owned by the group and therefore excludes right-of-use assets recognised in accordance
with IFRS 16 ‘Leases’, for which cash flows relating to the associated lease liabilities are included within repayment of borrowings and interest paid in
the statement of cash flows.
(2) Timing differences arise and reverse when additions are recognised in the statement of financial position in a different period to when cash payments
for capital expenditure are made. Capital accruals recognised in relation to these timing differences are included in ‘Accruals and other creditors’ within
trade and other payables (note 21).
Intangible assets
Purchase of intangible assets in statement of cash flows
IAS 23 capitalised borrowing costs – non-cash additions (see note 6)
Net book value transfers from property, plant and equipment
Intangible asset additions
2022
£m
19.5
0.6
–
20.1
2021
£m
33.6
0.1
(1.0)
32.7
For the year ended 31 March 2022, the group has enhanced its disclosures relating to the statement of cash flows in respect of
relevant accounting policies, judgements taken, and how items can be reconciled to other areas of the financial statements. Please
see note A7 for further details.
236
unitedutilities.com/corporate
Stock Code: UU.
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
i
i
a
l
S
t
a
t
e
m
e
n
t
s
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
2
237
Notes to the financial statements – appendices
A2 Net debt
Net debt comprises borrowings, net of cash and short-term deposits and derivatives. As such, movements in net debt during the year
are impacted by changes in liabilities from financing activities as detailed in the tables below. The tables below should be read in
conjunction with the consolidated statement of cash flows.
Borrowings
Derivatives
Bank and
other term
borrowings
£m
Lease
liabilities
£m
in a fair
value
hedge
£m
Bonds
£m
at fair
value
through
profit or
loss
£m
Total
liabilities
from
financing
activities
£m
Cash
and cash
equivalents
£m
Adjust-
ments in
calculating
net debt(2)
£m
Net
debt
£m
At 31 March 2021
(6,418.4)
(1,962.9)
(60.0)
263.0
40.5
(8,137.8)
733.6
98.4 (7,305.8)
Non-cash movements:
Inflation uplift on
index-linked debt
Fair value movements
Foreign exchange
Other
Cash flows used in
financing activities:
Receipts in respect
of borrowing
and derivatives(1)
Payments in respect
of borrowings and
derivatives(1)
Dividends paid
Exercise of share options
–purchase of shares
Other
Changes arising from
financing activities
Cash flows used in
investing activities
Cash flows generated from
operating activities
(150.4)
203.3
(5.6)
1.4
(78.2)
5.1
1.3
–
–
–
–
(4.6)
(173.7)
–
–
375.0
304.8
2.1
–
–
–
–
–
–
–
–
–
–
(194.1)
–
99.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(228.6)
114.1
(4.3)
(3.2)
–
–
–
–
(173.7)
173.7
681.9
–
–
–
(681.9)
(295.5)
(6.1)
1.6
–
(228.6)
(138.5)
(24.4)
–
–
–
–
–
–
–
(4.3)
(3.2)
–
–
(295.5)
(6.1)
1.6
250.0
233.0
(2.5)
(194.1)
99.8
386.2
(808.2)
(138.5)
(560.5)
At 31 March 2022
(6,168.4)
(1,729.9)
(60.9)
68.9
140.3
(7,750.0)
–
–
–
–
–
1.6
–
–
–
–
–
1.6
(639.7)
934.4
220.1
–
–
(639.7)
936.0
(40.1) (7,570.0)
Notes:
(1) Where derivatives are in an economic hedge of borrowings, derivative cash flows are shown netted with the net payment or receipt being reported
against the underlying borrowing cash flow to provide a more faithful representation of the substance of the transaction.
(2) The fair value of the derivatives reported in financing liabilities that are not hedging specific debt instruments are removed in calculating the group’s
net debt position. These derivatives correspond to the group’s fixed interest rate swaps and inflation swaps, neither of which are designated within
an IFRS 9 hedging relationship and both of which are classified as ‘held for trading’ under the accounting standard. The fair value movements on
those derivatives that are not excluded from the revised definition of net debt (being derivatives in fair value hedge relationships) are expected to
be materially equal and opposite in value to the fair value movement included in borrowings, resulting in materially all fair value movements being
excluded.
Fair value movements includes the indexation expense relating to the group’s inflation swap portfolio of £29.9 million (2021: a credit
of £0.7 million). The remaining fair value and foreign exchange movements in the year on the group’s bond and bank borrowings are
materially hedged by the fair value swap portfolio.
238
unitedutilities.com/corporate
Notes to the financial statements – appendices
A2 Net debt
Net debt comprises borrowings, net of cash and short-term deposits and derivatives. As such, movements in net debt during the year
are impacted by changes in liabilities from financing activities as detailed in the tables below. The tables below should be read in
conjunction with the consolidated statement of cash flows.
Borrowings
Derivatives
at fair
Total
value
liabilities
Bank and
in a fair
through
from
Cash
other term
Lease
value
profit or
financing
and cash
calculating
Bonds
borrowings
liabilities
hedge
activities
equivalents
net debt(2)
£m
£m
£m
£m
£m
£m
loss
£m
Net
debt
£m
Adjust-
ments in
At 31 March 2021
(6,418.4)
(1,962.9)
(60.0)
263.0
40.5
(8,137.8)
98.4 (7,305.8)
(78.2)
5.1
1.3
–
(194.1)
99.8
(228.6)
114.1
(4.3)
(3.2)
(228.6)
(138.5)
(24.4)
(4.3)
(3.2)
Non-cash movements:
Inflation uplift on
index-linked debt
Fair value movements
Foreign exchange
Other
Cash flows used in
financing activities:
Receipts in respect
of borrowing
and derivatives(1)
Payments in respect
of borrowings and
derivatives(1)
Dividends paid
Exercise of share options
–purchase of shares
Other
Changes arising from
financing activities
Cash flows used in
investing activities
Cash flows generated from
operating activities
(150.4)
203.3
(5.6)
1.4
(173.7)
–
–
–
–
–
(4.6)
–
–
–
–
–
–
–
–
1.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.6
375.0
304.8
2.1
681.9
(173.7)
173.7
£m
733.6
–
–
–
–
(681.9)
(295.5)
(6.1)
1.6
(639.7)
934.4
220.1
–
–
–
–
–
–
–
–
–
–
–
–
(295.5)
(6.1)
1.6
(639.7)
936.0
At 31 March 2022
(6,168.4)
(1,729.9)
(60.9)
68.9
140.3
(7,750.0)
(40.1) (7,570.0)
Notes:
excluded.
(1) Where derivatives are in an economic hedge of borrowings, derivative cash flows are shown netted with the net payment or receipt being reported
against the underlying borrowing cash flow to provide a more faithful representation of the substance of the transaction.
(2) The fair value of the derivatives reported in financing liabilities that are not hedging specific debt instruments are removed in calculating the group’s
net debt position. These derivatives correspond to the group’s fixed interest rate swaps and inflation swaps, neither of which are designated within
an IFRS 9 hedging relationship and both of which are classified as ‘held for trading’ under the accounting standard. The fair value movements on
those derivatives that are not excluded from the revised definition of net debt (being derivatives in fair value hedge relationships) are expected to
be materially equal and opposite in value to the fair value movement included in borrowings, resulting in materially all fair value movements being
Fair value movements includes the indexation expense relating to the group’s inflation swap portfolio of £29.9 million (2021: a credit
of £0.7 million). The remaining fair value and foreign exchange movements in the year on the group’s bond and bank borrowings are
materially hedged by the fair value swap portfolio.
250.0
233.0
(2.5)
(194.1)
99.8
386.2
(808.2)
(138.5)
(560.5)
A2 Net debt continued
Borrowings
Derivatives
Bank and
other term
borrowings
£m
Lease
liabilities
£m
in a fair
value
hedge
£m
Bonds
£m
at fair
value
through
profit or
loss
£m
Total
liabilities
from
financing
activities
£m
Cash
and cash
equivalents
£m
Adjust-
ments in
calculating
net debt(2)
£m
Net
debt
£m
At 31 March 2020
(5,648.5)
(2,642.1)
(57.6)
395.7
80.1
(7,872.4)
513.2
131.7
(7,227.5)
Non-cash movements:
Inflation uplift on
index-linked debt
Fair value movements
Foreign exchange
Other
Cash flows used in
financing activities:
Receipts in respect
of borrowing
and derivatives(1)
Payments in respect
of borrowings and
derivatives(1)
Dividends paid
Exercise of share
options – purchase
of shares
Other
Changes arising from
financing activities
Cash flows used in
investing activities
Cash flows generated
from operating activities
(32.4)
123.8
38.7
0.7
(20.2)
11.3
5.2
–
–
–
–
(5.9)
–
–
–
–
(140.6)
(39.6)
(900.7)
(6.1)
–
(2.9)
–
–
–
–
689.0
–
–
–
1.7
–
–
–
10.8
–
–
–
(52.6)
(45.1)
43.9
(5.2)
–
–
–
–
(909.7)
909.7
701.5
–
–
–
(701.5)
(291.9)
(4.0)
(2.0)
–
(33.3)
–
–
–
–
–
–
–
(52.6)
(78.4)
43.9
(5.2)
–
–
(291.9)
(4.0)
(2.0)
–
–
–
–
–
–
–
(769.9)
679.2
(4.2)
(132.7)
(39.6)
(267.2)
(89.7)
(33.3)
(390.2)
At 31 March 2021
(6,418.4)
(1,962.9)
(60.0)
263.0
40.5
(8,137.8)
–
–
–
–
–
1.8
–
–
–
–
–
1.8
(549.3)
859.4
733.6
–
–
(549.3)
861.3
98.4 (7,305.8)
Notes:
(1) Where derivatives are in an economic hedge of borrowings, derivative cash flows are shown netted with the net payment or receipt being reported
against the underlying borrowing cash flow to provide a more faithful representation of the substance of the transaction.
(2) The fair value of the derivatives reported in financing liabilities that are not hedging specific debt instruments are removed in calculating the group’s net
debt position. These derivatives correspond to the group’s fixed interest rate swaps and inflation swaps, neither of which are designated within an IFRS 9
hedging relationship and both of which are classified as ‘held for trading’ under the accounting standard. The fair value movements on those derivatives
that are not excluded from the revised definition of net debt (being derivatives in fair value hedge relationships) are expected to be materially equal and
opposite in value to the fair value movement included in borrowings, resulting in materially all fair value movements being excluded.
238
unitedutilities.com/corporate
Stock Code: UU.
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
i
i
a
l
S
t
a
t
e
m
e
n
t
s
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
2
239
Notes to the financial statements – appendices
A3 Borrowings
Terms and debt repayment schedule
The principal economic terms and conditions of outstanding borrowings, along with fair value and carrying value, were as follows:
Currency
Year of final
repayment
Fair
value
2022
£m
Carrying
value
2022
£m
Fair
value
2021
£m
Carrying
value
2021
£m
2,511.5
2,494.0
2,913.6
2,895.5
Borrowings in fair value hedge relationships
5.75% 375m bond
2.0% 450m bond
2.867% 320m bond
2.92% 739m bond
1.129% 52m bond
2.37% 830m bond
5.625% 300m bond
1.43% 100m bond
GBP
GBP
HKD
HKD
EUR
HKD
GBP
GBP
5.02% JPY 10bn dual currency loan
JPY/USD
0.875% 300m bond
2.058% 30m bond
0.175% 11bn bond
2.625% 425m bond
1.641% 30m bond
2.9% 600m bond
1.474% 35m bond
1.707% 28m bond
1.653% 26m bond
1.70% 30m bond
2.0% 100m bond
5.0% 200m bond
GBP
EUR
JPY
GBP
EUR
HKD
USD
EUR
EUR
EUR
GBP
GBP
Borrowings designated at fair value through profit or loss
6.875% 400m bond
USD
Borrowings measured at amortised cost
Short-term bank borrowings – fixed
0.80%+LIBOR 100m loan(1)
0.47%+RPI 100m IL loan
0.49%+RPI 100m IL loan
0.013%+RPI 25m IL bond
0.1275%+RPI 100m IL loan
0.01%+RPI 20m IL bond
1.23%+RPI 50m EIB (amortising) IL loan
0.288%+CPI 100m IL loan
1.29%+RPI 50m EIB (amortising) IL loan
1.12%+RPI 50m EIB (amortising) IL loan
1.10%+RPI 50m EIB (amortising) IL loan
0.75%+RPI 50m EIB (amortising) IL loan
0.76%+RPI 50m EIB (amortising) IL loan
1.15%+RPI 50m EIB (amortising) IL loan
1.11%+RPI 50m EIB (amortising) IL loan
0.178%+RPI 35m IL bond
0.245%+CPI 20m IL bond
0.01%+RPI 38m bond
3.375%+RPI 50m IL bond
0.986%+SONIA 100m EIB (amortising) loan(2)
0.968%SONIA 150m EIB (amortising) loan(2)
0.850%+SONIA 100m EIB (amortising) loan(2)
0.788%+SONIA 150m EIB (amortising) loan(2)
2% 250m bond
0.01%+RPI 100m EIB (amortising) IL loan
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
2022
2025
2026
2026
2027
2027
2027
2028
2029
2029
2030
2030
2031
2031
2031
2031
2032
2032
2033
2033
2035
2028
2022
2022
2023
2025
2025
2026
2028
2029
2029
2029
2029
2029
2029
2030
2030
2030
2030
2031
2031
2032
2032
2032
2033
2033
2033
2033
–
450.1
30.8
71.0
43.4
77.0
356.4
95.4
80.9
269.0
26.4
64.5
428.5
25.6
58.4
22.4
23.8
21.0
25.3
94.8
246.8
369.9
369.9
–
441.2
31.3
72.4
43.9
80.4
346.9
94.1
83.9
274.6
25.7
67.6
407.8
24.5
55.1
22.8
24.0
21.9
25.7
91.7
258.5
369.9
369.9
394.6
470.6
31.7
73.2
46.9
79.6
388.0
–
87.2
284.8
28.9
–
460.8
28.0
60.4
23.5
26.1
24.0
27.8
103.8
273.7
373.6
373.6
6,283.7
5,115.9
6,568.1
49.2
–
132.3
134.3
33.2
133.3
26.6
37.6
117.0
40.2
39.7
39.7
41.2
41.1
41.5
41.6
49.7
24.5
50.8
142.2
61.6
96.8
67.1
104.9
236.9
97.6
49.2
–
129.1
124.2
31.0
122.5
25.3
34.7
107.6
36.9
36.6
36.6
38.2
38.1
37.9
38.0
43.3
22.7
47.6
86.4
62.5
98.4
68.8
107.8
245.6
91.8
150.7
101.1
125.2
126.6
30.7
125.0
25.0
40.5
113.9
42.9
42.4
42.3
43.6
43.6
44.1
44.2
46.1
24.0
48.6
140.2
68.7
107.6
74.2
115.7
259.4
100.3
388.6
465.3
32.0
74.1
46.6
81.9
380.4
–
90.2
295.8
28.6
–
440.5
27.4
56.4
22.7
27.0
24.7
29.0
98.4
285.9
373.6
373.6
5,182.7
150.7
100.0
119.7
115.2
28.7
113.6
23.7
36.8
102.1
38.8
38.5
38.5
39.8
39.7
39.6
39.7
40.2
21.5
44.5
83.1
68.8
107.8
75.0
117.2
245.7
92.2
240
unitedutilities.com/corporate
Notes to the financial statements – appendices
Borrowings in fair value hedge relationships
2,511.5
2,494.0
2,913.6
2,895.5
5.02% JPY 10bn dual currency loan
JPY/USD
5.75% 375m bond
2.0% 450m bond
2.867% 320m bond
2.92% 739m bond
1.129% 52m bond
2.37% 830m bond
5.625% 300m bond
1.43% 100m bond
0.875% 300m bond
2.058% 30m bond
0.175% 11bn bond
2.625% 425m bond
1.641% 30m bond
2.9% 600m bond
1.474% 35m bond
1.707% 28m bond
1.653% 26m bond
1.70% 30m bond
2.0% 100m bond
5.0% 200m bond
0.80%+LIBOR 100m loan(1)
0.47%+RPI 100m IL loan
0.49%+RPI 100m IL loan
0.013%+RPI 25m IL bond
0.1275%+RPI 100m IL loan
0.01%+RPI 20m IL bond
1.23%+RPI 50m EIB (amortising) IL loan
0.288%+CPI 100m IL loan
1.29%+RPI 50m EIB (amortising) IL loan
1.12%+RPI 50m EIB (amortising) IL loan
1.10%+RPI 50m EIB (amortising) IL loan
0.75%+RPI 50m EIB (amortising) IL loan
0.76%+RPI 50m EIB (amortising) IL loan
1.15%+RPI 50m EIB (amortising) IL loan
1.11%+RPI 50m EIB (amortising) IL loan
0.178%+RPI 35m IL bond
0.245%+CPI 20m IL bond
0.01%+RPI 38m bond
3.375%+RPI 50m IL bond
0.986%+SONIA 100m EIB (amortising) loan(2)
0.968%SONIA 150m EIB (amortising) loan(2)
0.850%+SONIA 100m EIB (amortising) loan(2)
0.788%+SONIA 150m EIB (amortising) loan(2)
2% 250m bond
0.01%+RPI 100m EIB (amortising) IL loan
value
2022
£m
–
450.1
30.8
71.0
43.4
77.0
356.4
95.4
80.9
269.0
26.4
64.5
428.5
25.6
58.4
22.4
23.8
21.0
25.3
94.8
246.8
369.9
369.9
49.2
–
132.3
134.3
33.2
133.3
26.6
37.6
117.0
40.2
39.7
39.7
41.2
41.1
41.5
41.6
49.7
24.5
50.8
142.2
61.6
96.8
67.1
104.9
236.9
97.6
value
2022
£m
–
441.2
31.3
72.4
43.9
80.4
346.9
94.1
83.9
274.6
25.7
67.6
407.8
24.5
55.1
22.8
24.0
21.9
25.7
91.7
258.5
369.9
369.9
49.2
–
129.1
124.2
31.0
122.5
25.3
34.7
107.6
36.9
36.6
36.6
38.2
38.1
37.9
38.0
43.3
22.7
47.6
86.4
62.5
98.4
68.8
107.8
245.6
91.8
Fair
value
2021
£m
394.6
470.6
31.7
73.2
46.9
79.6
388.0
87.2
284.8
28.9
–
–
460.8
28.0
60.4
23.5
26.1
24.0
27.8
103.8
273.7
373.6
373.6
150.7
101.1
125.2
126.6
30.7
125.0
25.0
40.5
113.9
42.9
42.4
42.3
43.6
43.6
44.1
44.2
46.1
24.0
48.6
140.2
68.7
107.6
74.2
115.7
259.4
100.3
value
2021
£m
388.6
465.3
32.0
74.1
46.6
81.9
380.4
–
90.2
295.8
28.6
–
440.5
27.4
56.4
22.7
27.0
24.7
29.0
98.4
285.9
373.6
373.6
5,182.7
150.7
100.0
119.7
115.2
28.7
113.6
23.7
36.8
102.1
38.8
38.5
38.5
39.8
39.7
39.6
39.7
40.2
21.5
44.5
83.1
68.8
107.8
75.0
117.2
245.7
92.2
GBP
GBP
HKD
HKD
EUR
HKD
GBP
GBP
GBP
EUR
JPY
GBP
EUR
HKD
USD
EUR
EUR
EUR
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
2022
2025
2026
2026
2027
2027
2027
2028
2029
2029
2030
2030
2031
2031
2031
2031
2032
2032
2033
2033
2035
2022
2022
2023
2025
2025
2026
2028
2029
2029
2029
2029
2029
2029
2030
2030
2030
2030
2031
2031
2032
2032
2032
2033
2033
2033
2033
Borrowings designated at fair value through profit or loss
6.875% 400m bond
USD
2028
Borrowings measured at amortised cost
Short-term bank borrowings – fixed
6,283.7
5,115.9
6,568.1
A3 Borrowings
Terms and debt repayment schedule
The principal economic terms and conditions of outstanding borrowings, along with fair value and carrying value, were as follows:
Year of final
Fair
Carrying
Carrying
Currency
repayment
A3 Borrowings continued
Currency
Year of final
repayment
Fair
value
2022
£m
Carrying
value
2022
£m
Fair
value
2021
£m
Borrowings measured at amortised cost (continued)
0.01%+RPI 75m EIB (amortising) IL loan
0.01%+RPI 75m EIB (amortising) IL loan
0.01%+RPI 75m EIB (amortising) IL loan
1.9799%+RPI 100m IL bond
1.150%SONIA 100m EIB (amortising) loan(2)
1.117%0+SONIA 75m EIB (amortising) loan(2)
0.01%+RPI 26.5m IL bond
0.379%+CPI 20m IL bond
0.01%+RPI 29m IL bond
0.093%+CPI 60m IL bond
1.66%+RPI 35m IL bond
1.75% 250m bond
2.40%+RPI 70m IL bond
1.7829%+RPI 100m IL bond
0.01%+CPI 125m IL bond
1.3258%+RPI 50m IL bond
1.5802%+RPI 100m IL bond
1.875% 300m bond
1.5366%+RPI 20m IL bond
1.397%+RPI 50m IL bond
0.359%+CPI 32m IL bond
1.7937%+RPI 50m IL bond
Commission for New Towns (amortising) loan – fixed
1.847%+RPI 100m IL bond
1.815%+RPI 100m IL bond
1.662%+RPI 100m IL bond
1.5865%+RPI 50m IL bond
1.591%+RPI 25m IL bond
1.556%+RPI 50m IL bond
1.435%+RPI 50m IL bond
1.3805%+RPI 35m IL bond
1.585%+RPI 100m IL bond
0.387%+CPI 33m IL bond
1.702%+RPI 50m IL bond
Book overdrafts (see note 15)
Lease obligations
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
2034
2034
2034
2035
2035
2035
2036
2036
2036
2037
2037
2038
2039
2040
2040
2041
2042
2042
2043
2046
2048
2049
2053
2056
2056
2056
2056
2056
2056
2056
2056
2057
2057
2057
2022
various
73.2
76.0
75.9
242.4
83.5
66.6
36.3
25.4
39.5
73.2
70.6
215.0
152.2
255.2
143.9
120.1
248.9
257.1
51.1
126.0
40.7
143.8
46.3
252.7
250.8
244.6
120.1
60.7
122.2
119.1
81.7
241.2
42.6
122.8
20.8
60.9
68.8
71.3
71.3
161.1
84.4
65.6
35.1
22.7
36.6
67.6
53.5
248.2
104.4
159.4
151.3
79.6
158.9
295.5
31.7
79.5
35.6
79.1
25.5
161.5
160.8
160.5
80.2
40.0
79.8
79.5
55.7
154.5
36.4
77.9
20.8
60.9
75.3
75.3
75.3
243.9
91.6
71.2
35.7
25.6
38.9
73.7
67.1
239.0
148.3
241.3
144.5
117.8
205.1
287.7
49.6
113.6
41.0
122.4
52.6
255.0
251.9
241.6
122.0
60.5
121.6
119.4
82.4
311.2
44.4
124.5
10.5
60.0
Carrying
value
2021
£m
69.1
71.4
71.4
155.2
90.6
70.3
33.0
21.5
34.2
64.1
49.6
248.1
96.8
153.5
145.6
76.6
153.1
295.3
30.6
76.5
33.8
76.2
26.2
149.8
149.1
148.8
74.4
37.1
74.0
73.7
51.6
143.2
34.5
72.2
10.5
60.0
9,165.1
7,979.8
9,855.3
8,451.8
Notes:
(1) Loan repaid in October 2021. As such, the floating reference rate through to repayment was LIBOR.
(2) Rates on these loans have been affected by the IBOR transition. The LIBOR/SONIA credit adjustment spread, finalised as a spread adjustment at
27.66bps in each instance, has been added to the fixed rate component referenced in the table to reflect the underlying fixed interest payable post
IBOR reform. The loans all referenced LIBOR as the floating rate in the prior year. See accounting policies (’Phase II’ – IBOR Reform) and note A4
(Interest rate benchmark reform) for further details of the financial and accounting impacts of the IBOR rate reform.
IL
CPI
RPI
EIB
Index-linked debt – this debt is adjusted for movements in the Consumer or Retail Prices Indices with reference to a base
CPI or RPI established at trade date.
The UK general index of consumer prices (for all items) as published by the Office for National Statistics (May 2015 = 100).
The UK general index of retail prices (for all items) as published by the Office for National Statistics (Jan 1987 = 100).
Borrowings that are held with the European Investment Bank.
Borrowings in the above table are unsecured. Funding raised in foreign currencies is swapped to sterling to match funding costs to
income and assets.
240
unitedutilities.com/corporate
Stock Code: UU.
I
F
I
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A
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A
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S
T
A
T
E
M
E
N
T
S
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
i
i
a
l
S
t
a
t
e
m
e
n
t
s
f
o
r
t
h
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y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
2
241
Notes to the financial statements – appendices
A4 Financial risk management
Risk management
The board is responsible for treasury strategy and governance, which is reviewed on an annual basis.
The treasury committee, a subcommittee of the board, has responsibility for setting and monitoring the group’s adherence to treasury
policies, along with oversight in relation to the activities of the treasury function.
Treasury policies cover the key financial risks: liquidity risk, credit risk, market risk (inflation, interest rate, electricity price and
currency) and capital risk. As well as managing our exposure to these risks, these policies help the group maintain compliance with
relevant financial covenants, which are in place primarily in relation to borrowings from the European Investment Bank (EIB) and
include interest cover and gearing metrics. These policies are reviewed by the treasury committee for approval on at least an annual
basis, or following any major changes in treasury operations and/or financial market conditions.
Day-to-day responsibility for operational compliance with the treasury policies rests with the treasurer. An operational compliance
report is provided monthly to the treasury committee, which details the status of the group’s compliance with the treasury policies
and highlights the level of risk against the appropriate risk limits in place.
The group’s treasury function does not act as a profit centre and does not undertake any speculative trading activity.
Liquidity risk
The group looks to manage its liquidity risk by maintaining liquidity within a board-approved duration range. Liquidity is actively monitored
by the group’s treasury function and is reported monthly to the treasury committee through the operational compliance report.
At 31 March 2022, the group had £1,040.9 million (2021: £1,444.1 million) of available liquidity, which comprised £240.9 million (2021:
£744.1 million) of cash and short-term deposits and £800.0 million (2021: £700.0 million) of undrawn committed borrowing facilities.
The group had available committed borrowing facilities as follows:
Group
Expiring within one year
Expiring after one year but in less than two years
Expiring after more than two years
Total borrowing facilities
Facilities drawn
Total borrowing facilities
2022
£m
100.0
150.0
550.0
800.0
–
800.0
2021
£m
100.0
100.0
600.0
800.0
(100.0)
700.0
These facilities are arranged on a bilateral rather than a syndicated basis, which spreads the maturities more evenly over a longer time
period, thereby reducing the refinancing risk by providing several renewal points rather than a large single refinancing point.
Company
The company did not have any committed facilities available at 31 March 2022 or 31 March 2021.
Maturity analysis
Concentrations of risk may arise if large cash flows are concentrated within particular time periods. The maturity profile in the following
table represents the forecast future contractual principal and interest cash flows in relation to the group’s financial liabilities on an
undiscounted basis. Derivative cash flows have been shown net where there is a contractual agreement to settle on a net basis; otherwise
the cash flows are shown gross. This table does not include the impact of lease liabilities for which the maturity profile has been
disclosed in note 17.
Group
At 31 March 2022
Bonds
Bank and other term borrowings
Adjustment to carrying value(2)
Borrowings
Derivatives:
Payable
Receivable
Adjustment to carrying value(2)
Derivatives – net assets(3)
Total(1)
£m
11,289.3
2,041.2
Adjust-
ment(2)
£m
1 year or
less
£m
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
More than
5 years
£m
137.6
332.3
138.6
133.4
589.7
268.9
267.2
269.5
130.0
131.4
10,026.2
905.7
(5,411.6)
(5,411.6)
7,918.9
(5,411.6)
469.9
272.0
858.6
536.7
261.4
10,931.9
1,209.5
(1,756.0)
226.3
(320.2)
226.3
226.3
42.5
(123.0)
59.5
(141.7)
58.9
(122.2)
146.3
(193.5)
41.1
861.2
(86.5)
(1,089.1)
(80.5)
(82.2)
(63.3)
(47.2)
(45.4)
(227.9)
242
unitedutilities.com/corporate
Notes:
(1)
At 31 March 2022, the group had £1,040.9 million (2021: £1,444.1 million) of available liquidity, which comprised £240.9 million (2021:
£744.1 million) of cash and short-term deposits and £800.0 million (2021: £700.0 million) of undrawn committed borrowing facilities.
(2)
The group had available committed borrowing facilities as follows:
Forecast future cash flows are calculated, where applicable, using forward interest rates based on the interest environment at year end and are
therefore susceptible to changes in market conditions. For index-linked debt it has been assumed that RPI will be 3 per cent and CPI will be 2 per
cent over the life of each instrument.
The carrying value of debt is calculated following various methods in accordance with IFRS 9 ‘Financial Instruments’ and therefore this adjustment
reconciles the undiscounted forecast future cash flows to the carrying value of debt in the statement of financial position, excluding £60.9 million
(2021: £60.0 million) of lease liabilities.
A4 Financial risk management continued
Group
At 31 March 2021
Bonds
Bank and other term borrowings
Adjustment to carrying value(2)
Borrowings
Derivatives:
Payable*
Receivable*
Adjustment to carrying value*(2)
Derivatives – net assets(3)
* Re-presented (see footnote 3).
Total(1)
£m
Adjust-
ment(2)
£m
11,368.2
2,274.8
(5,251.2)
8,391.8
1,001.2
(1,659.5)
200.2
(310.0)
(5,251.2)
(5,251.2)
200.2
200.2
1 year
or less
£m
528.1
280.4
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
More than
5 years
£m
132.6
348.7
133.6
122.4
584.7
254.3
255.6
257.3
9,733.6
1,011.7
808.5
481.3
256.0
839.0
512.9
10,745.3
133.4
(186.0)
43.1
(88.8)
39.4
(86.8)
38.3
(87.0)
133.1
762.0
(175.4)
(1,035.5)
(52.6)
(45.7)
(47.4)
(48.7)
(42.3)
(273.5)
Notes to the financial statements – appendices
A4 Financial risk management
Risk management
The board is responsible for treasury strategy and governance, which is reviewed on an annual basis.
The treasury committee, a subcommittee of the board, has responsibility for setting and monitoring the group’s adherence to treasury
policies, along with oversight in relation to the activities of the treasury function.
Treasury policies cover the key financial risks: liquidity risk, credit risk, market risk (inflation, interest rate, electricity price and
currency) and capital risk. As well as managing our exposure to these risks, these policies help the group maintain compliance with
relevant financial covenants, which are in place primarily in relation to borrowings from the European Investment Bank (EIB) and
include interest cover and gearing metrics. These policies are reviewed by the treasury committee for approval on at least an annual
basis, or following any major changes in treasury operations and/or financial market conditions.
Day-to-day responsibility for operational compliance with the treasury policies rests with the treasurer. An operational compliance
report is provided monthly to the treasury committee, which details the status of the group’s compliance with the treasury policies
and highlights the level of risk against the appropriate risk limits in place.
The group’s treasury function does not act as a profit centre and does not undertake any speculative trading activity.
Liquidity risk
The group looks to manage its liquidity risk by maintaining liquidity within a board-approved duration range. Liquidity is actively monitored
by the group’s treasury function and is reported monthly to the treasury committee through the operational compliance report.
Expiring after one year but in less than two years
Expiring after more than two years
Group
Expiring within one year
Total borrowing facilities
Facilities drawn
Total borrowing facilities
2022
£m
100.0
150.0
550.0
800.0
–
800.0
2021
£m
100.0
100.0
600.0
800.0
(100.0)
700.0
These facilities are arranged on a bilateral rather than a syndicated basis, which spreads the maturities more evenly over a longer time
period, thereby reducing the refinancing risk by providing several renewal points rather than a large single refinancing point.
The company did not have any committed facilities available at 31 March 2022 or 31 March 2021.
Company
Maturity analysis
disclosed in note 17.
At 31 March 2022
Group
Bonds
Borrowings
Derivatives:
Payable
Receivable
Concentrations of risk may arise if large cash flows are concentrated within particular time periods. The maturity profile in the following
table represents the forecast future contractual principal and interest cash flows in relation to the group’s financial liabilities on an
undiscounted basis. Derivative cash flows have been shown net where there is a contractual agreement to settle on a net basis; otherwise
the cash flows are shown gross. This table does not include the impact of lease liabilities for which the maturity profile has been
Bank and other term borrowings
Adjustment to carrying value(2)
(5,411.6)
(5,411.6)
Adjust-
1 year or
Total(1)
£m
ment(2)
£m
less
£m
137.6
332.3
1–2 years
2–3 years
3–4 years
4–5 years
5 years
£m
138.6
133.4
£m
589.7
268.9
£m
267.2
269.5
£m
130.0
131.4
£m
10,026.2
905.7
More than
7,918.9
(5,411.6)
469.9
272.0
858.6
536.7
261.4
10,931.9
Adjustment to carrying value(2)
Derivatives – net assets(3)
226.3
226.3
(80.5)
(82.2)
(63.3)
(47.2)
(45.4)
(227.9)
42.5
(123.0)
59.5
(141.7)
58.9
(122.2)
146.3
(193.5)
41.1
861.2
(86.5)
(1,089.1)
11,289.3
2,041.2
1,209.5
(1,756.0)
226.3
(320.2)
(3) The derivative balance includes swaps with a carrying value of £32.5 million (2021: nil) subject to optional break clauses that could be exercised
within one year of the reporting date, and £107.6 million (2021: £204.3 million) subject to optional break clauses that could be exercised in later
periods. At the reporting date it was considered highly unlikely that these break clauses would be exercised and so cash flows that could arise from
the exercise of these optional break clauses are not included in this table. Prior year figures have been re-presented to similarly exclude such cash
flows in order to provide more comparable information.
Company
The company has total borrowings of nil (2021: nil), which are payable within one year, and £1,799.9 million (2021: £1,780.6 million),
which are payable within one to two years.
Credit risk
Credit risk arises principally from trading (the supply of services to customers) and treasury activities (the depositing of cash and
holding of derivative instruments). While the opening of the non-household retail market to competition from 1 April 2017 has
impacted on the profile of the group’s concentration of credit risk, as discussed further below, the group does not believe it is exposed
to any material concentrations that could have an impact on its ability to continue as a going concern or its longer-term viability.
The group manages its risk from trading through the effective management of customer relationships. Concentrations of credit risk
with respect to trade receivables from household customers are limited due to the customer base being comprised of a large number
of unrelated households. However, collection can be challenging as the Water Industry Act 1991 (as amended by the Water Industry
Act 1999) prohibits the disconnection of a water supply and the limiting of supply with the intention of enforcing payment for certain
premises, including domestic dwellings.
Following the non-household retail market opening to competition, credit risk in this area is now concentrated in a small number of
retailers to whom the group provides wholesale water and wastewater services. Retailers are licensed and monitored by Ofwat and as
part of the regulations they must demonstrate that they have adequate resources available to supply services. The credit terms for the
group’s retail customers are set out in market codes.
In reaction to the impact of the COVID-19 pandemic, changes were made to the payment terms set out within the market codes.
These changes provided the option for extended credit terms for retailers. However, this has now ended and all outstanding payments
have been made. As at 31 March 2022, Water Plus was the group’s single largest debtor, with amounts outstanding in relation to
wholesale services of £28.6 million (2021: £27.2 million). During the year, sales to Water Plus in relation to wholesale services were
£363.1 million (2021: £362.9 million). Details of transactions with Water Plus can be found in note A6.
Under the group’s revenue recognition policy, revenue is only recognised when collection of the resulting receivable is reasonably
assured. Considering the above, the directors believe there is no further credit risk provision required in excess of the allowance for
doubtful receivables (see note 14).
The group manages its credit risk from treasury activities by establishing a total credit limit by counterparty, which comprises a
counterparty credit limit and an additional settlement limit to cover intra-day gross settlement of cash flows. In addition, potential
derivative exposure limits are established to take account of potential future exposure which may arise under derivative transactions.
These limits are calculated by reference to a measure of capital and credit ratings of the individual counterparties and are subject to a
maximum single counterparty limit.
Credit limits are refreshed annually and reviewed in the event of any credit rating action. Additionally, a control mechanism to trigger
a review of specific counterparty limits, irrespective of credit rating action, is in place. This entails daily monitoring of counterparty
credit default swap levels and/or share price volatility. Credit exposure is monitored daily by the group’s treasury function and is
reported monthly to the treasury committee through the operational compliance report.
242
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Stock Code: UU.
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d
U
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i
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i
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s
G
r
o
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P
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p
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F
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a
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a
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s
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
2
243
Notes to the financial statements – appendices
A4 Financial risk management continued
At 31 March 2022 and 31 March 2021, the maximum exposure to credit risk for the group and company is represented by the carrying
amount of each financial asset in the statement of financial position:
Cash and short-term deposits (see note 15)
Trade and other receivables (see note 14)
Investments (see note 12)*
Derivative financial instruments
2022
£m
240.9
304.4
0.1
457.4
1,002.8
Group
2021
£m
744.1
315.9
0.1
424.7
1,484.8
2022
£m
–
95.2
–
–
95.2
Company
2021
£m
–
91.9
–
–
91.9
* Group investments relate to preference share holdings, which are financial instruments under IFRS 7 and should be included. Company investments relate
to ordinary shares held in subsidiaries, which are not financial instruments under IFRS 7 and should not be included.
The credit exposure on derivatives is disclosed gross of any collateral held. At 31 March 2022, the group held £49.2 million (2021: £50.7
million) as collateral in relation to derivative financial instruments.
Market risk
The group’s exposure to market risk primarily results from its financing arrangements and the economic return which it is allowed on
the regulatory capital value (RCV).
The group uses a variety of financial instruments, including derivatives, to manage the exposure to these risks.
Inflation risk
The group earns an economic return on its RCV, comprising a real return through revenues and an inflation return as an uplift to its RCV.
For the 2020–2025 regulatory period, from 1 April 2020 the group's RCV is 50 per cent linked to RPI inflation and 50 per cent linked to
CPIH inflation, with any new additions being added to the CPIH portion of the RCV.
The group’s inflation hedging policy aims to have around half of the group’s net debt in index-linked form (where it is economic to do
so), by issuing index-linked debt and/or swapping a portion of nominal debt. This is currently weighted towards RPI-linked form, with
circa 75 per cent of the hedge linked to RPI and circa 25 per cent linked to CPI and/or CPIH. These weightings are consistent with the
prior financial year.
The group believes this is an appropriate inflation hedging policy, taking into account a balanced assessment of the following factors:
economic hedge of United Utilities Water Limited’s (UUW) RCV and revenues; cash flow timing mismatch between allowed cost of
debt and the group’s incurred cost of debt; the inflation risk premium that is generally incorporated into nominal debt costs; income
statement volatility; hedging costs; debt maturity profile mismatch risk; and index-linked hedging positioning relative to the water
sector.
As a result of the evaluation of the above factors, the group continues to identify opportunities to maintain around 50 per cent of the
group’s net debt being hedged for inflation, which can be evidenced by the increase in the CPI/CPIH-linked hedge proportion over the
past few years. Inflation risk is reported monthly to the treasury committee in the operational compliance report.
The carrying value of index-linked debt held by the group, including the carrying value of the nominal debt swapped to CPI, was
£4,220.4 million at 31 March 2022 (2021: £4,093.3 million).
Sensitivity analysis
The following table details the sensitivity of profit before tax to changes in the RPI and CPI on the group’s index-linked borrowings.
The sensitivity analysis has been based on the amount of index-linked debt held at the reporting date and, as such, is not indicative
of the years then ended. In addition, it excludes the impact of inflation on revenues and other income statement costs as well as the
hedging aspect of the group’s regulatory assets and post-retirement obligations.
Increase/(decrease) in profit before tax and equity
1% increase in RPI/CPI
1% decrease in RPI/CPI
2022
£m
(37.0)
37.0
2021
£m
(35.4)
35.4
The sensitivity analysis assumes a 1 per cent change in RPI and CPI having a corresponding 1 per cent impact on this position over a
12-month period. It should be noted, however, that there is a time lag by which current RPI and CPI changes impact on the income
statement, and the analysis does not incorporate this factor. The portfolio of index-linked debt is calculated on either a three- or eight-
month lag basis. Therefore, at the reporting date the index-linked interest and principal adjustments impacting the income statement
are fixed and based on the annual RPI or CPI change either three or eight months earlier.
Company
The company had no material exposure to inflation risk at 31 March 2022 or 31 March 2021.
Interest rate risk
The group’s policy is to structure debt in a way that best matches its underlying assets and cash flows. The group currently earns an
economic return on its RCV, comprising a real return through revenues, determined by the real cost of capital fixed by the regulator
for each five-year regulatory pricing period, and an inflation return as an uplift to its RCV (see inflation risk section for changes being
introduced by Ofwat to inflation indexation from 2020).
244
unitedutilities.com/corporate
Notes to the financial statements – appendices
A4 Financial risk management continued
At 31 March 2022 and 31 March 2021, the maximum exposure to credit risk for the group and company is represented by the carrying
amount of each financial asset in the statement of financial position:
Cash and short-term deposits (see note 15)
Trade and other receivables (see note 14)
Investments (see note 12)*
Derivative financial instruments
2022
£m
240.9
304.4
0.1
457.4
1,002.8
Group
2021
£m
744.1
315.9
0.1
424.7
1,484.8
2022
£m
95.2
–
–
–
95.2
Company
2021
£m
91.9
–
–
–
91.9
* Group investments relate to preference share holdings, which are financial instruments under IFRS 7 and should be included. Company investments relate
to ordinary shares held in subsidiaries, which are not financial instruments under IFRS 7 and should not be included.
The credit exposure on derivatives is disclosed gross of any collateral held. At 31 March 2022, the group held £49.2 million (2021: £50.7
million) as collateral in relation to derivative financial instruments.
The group’s exposure to market risk primarily results from its financing arrangements and the economic return which it is allowed on
The group uses a variety of financial instruments, including derivatives, to manage the exposure to these risks.
Market risk
the regulatory capital value (RCV).
Inflation risk
The group earns an economic return on its RCV, comprising a real return through revenues and an inflation return as an uplift to its RCV.
For the 2020–2025 regulatory period, from 1 April 2020 the group's RCV is 50 per cent linked to RPI inflation and 50 per cent linked to
CPIH inflation, with any new additions being added to the CPIH portion of the RCV.
The group’s inflation hedging policy aims to have around half of the group’s net debt in index-linked form (where it is economic to do
so), by issuing index-linked debt and/or swapping a portion of nominal debt. This is currently weighted towards RPI-linked form, with
circa 75 per cent of the hedge linked to RPI and circa 25 per cent linked to CPI and/or CPIH. These weightings are consistent with the
prior financial year.
sector.
The group believes this is an appropriate inflation hedging policy, taking into account a balanced assessment of the following factors:
economic hedge of United Utilities Water Limited’s (UUW) RCV and revenues; cash flow timing mismatch between allowed cost of
debt and the group’s incurred cost of debt; the inflation risk premium that is generally incorporated into nominal debt costs; income
statement volatility; hedging costs; debt maturity profile mismatch risk; and index-linked hedging positioning relative to the water
As a result of the evaluation of the above factors, the group continues to identify opportunities to maintain around 50 per cent of the
group’s net debt being hedged for inflation, which can be evidenced by the increase in the CPI/CPIH-linked hedge proportion over the
past few years. Inflation risk is reported monthly to the treasury committee in the operational compliance report.
The carrying value of index-linked debt held by the group, including the carrying value of the nominal debt swapped to CPI, was
£4,220.4 million at 31 March 2022 (2021: £4,093.3 million).
Sensitivity analysis
The following table details the sensitivity of profit before tax to changes in the RPI and CPI on the group’s index-linked borrowings.
The sensitivity analysis has been based on the amount of index-linked debt held at the reporting date and, as such, is not indicative
of the years then ended. In addition, it excludes the impact of inflation on revenues and other income statement costs as well as the
hedging aspect of the group’s regulatory assets and post-retirement obligations.
Increase/(decrease) in profit before tax and equity
1% increase in RPI/CPI
1% decrease in RPI/CPI
2022
£m
(37.0)
37.0
2021
£m
(35.4)
35.4
The sensitivity analysis assumes a 1 per cent change in RPI and CPI having a corresponding 1 per cent impact on this position over a
12-month period. It should be noted, however, that there is a time lag by which current RPI and CPI changes impact on the income
statement, and the analysis does not incorporate this factor. The portfolio of index-linked debt is calculated on either a three- or eight-
month lag basis. Therefore, at the reporting date the index-linked interest and principal adjustments impacting the income statement
are fixed and based on the annual RPI or CPI change either three or eight months earlier.
The company had no material exposure to inflation risk at 31 March 2022 or 31 March 2021.
Company
Interest rate risk
The group’s policy is to structure debt in a way that best matches its underlying assets and cash flows. The group currently earns an
economic return on its RCV, comprising a real return through revenues, determined by the real cost of capital fixed by the regulator
for each five-year regulatory pricing period, and an inflation return as an uplift to its RCV (see inflation risk section for changes being
introduced by Ofwat to inflation indexation from 2020).
A4 Financial risk management continued
From 1 April 2020 for the regulatory period to 2025, Ofwat has continued to set a fixed real cost of debt in relation to embedded debt
(80 per cent of net debt), but has introduced a debt indexation mechanism in relation to new debt (20 per cent of net debt), where
the allowed rate on new debt will vary in line with specific debt indices. The debt indexation mechanism will be settled as an end of
regulatory period adjustment.
Therefore, sterling index-linked debt is left unswapped at inception, in accordance with our inflation hedging policy goal to maintain
around half of the group’s net debt in index-linked form. Conventional nominal debt is hedged as set out below.
Where conventional long-term debt is raised in a fixed-rate form, to manage exposure to long-term interest rates, the debt is generally
swapped at inception to create a floating rate liability for the term of the liability through the use of interest rate swaps. These
instruments are typically designated within a fair value accounting hedge.
To manage the exposure to medium-term interest rates, the group fixes underlying interest rates on nominal debt out to 10 years in
advance on a reducing balance basis. As such, at the start of each regulatory period, a proportion of the projected nominal net debt
representing new debt for that regulatory period, will remain floating until it is fixed via the above 10-year reducing balance basis,
which should approximate Ofwat’s new debt indexation mechanism.
This interest rate hedging policy dovetails with our inflation hedging policy should we need to swap a portion of nominal debt to real
rate form to maintain our desired mix of nominal and index-linked debt.
The group seeks to manage its risk by maintaining its interest rate exposure within a board-approved range. Interest rate risk is
reported to the treasury committee through the operational compliance report.
Sensitivity analysis
The following table details the sensitivity of the group’s profit before tax and equity to changes in interest rates. The sensitivity
analysis has been based on the amount of net debt and the interest rate hedge positions in place at the reporting date and, as such, is
not indicative of the years then ended.
Increase/(decrease) in profit before tax and equity
1% increase in interest rate
1% decrease in interest rate
2022
£m
89.5
(94.3)
Group
2021
£m
130.7
(134.7)
2022
£m
(18.0)
18.0
Company
2021
£m
(17.8)
17.8
The sensitivity analysis assumes that both fair value hedges and borrowings designated at fair value through profit or loss are
effectively hedged and it excludes the impact on post-retirement obligations. The exposure largely relates to fair value movements
on the group’s fixed interest rate swaps which manage the exposure to medium-term interest rates. Those swaps are not included in
hedge relationships.
Hedge accounting
Details regarding the interest rate swaps designated as hedging instruments to manage interest rate risk are summarised below:
Notional principal amount £m
Average contracted fixed interest rate %
1 year or less
1 to 2 years
2 to 5 years Over 5 years
–
–
–
–
450.0
1.00
1.425.0
2.15
This table represents the derivatives that are held in fair value hedging relationships, with the weighted average net fixed rate
receivable across both legs to the swap disclosed. The SONIA/LIBOR credit adjustment spread has been assumed to form part of the
fixed rate element of the payable leg which is to be netted off against the fixed rate receivable leg for the purposes of the rates shown
here. Further detail on the fair value hedging relationships is provided below:
Nominal
amount of
the hedging
instruments
£m
Carrying
amount of
the hedging
instruments
£m
Accumulated
fair value
(gains)/losses
on hedged
items
£m
Fair value (gains)/losses*
used for calculating hedge
ineffectiveness for the year
ended 31 March 2022(1)
Hedged items
£m
Hedging
instruments
£m
Hedge
ineffective-
ness
recognised
in the income
statement
£m
Nominal
amount of
hedging
instruments
directly
impacted by
IBOR reform
£m
1,875.0
45.8
33.9
(164.6)
162.7
(1.9)
1,675.0
Risk
exposure
Interest
rate risk on
borrowings
Note:
(1) The change in fair value of the hedging instruments used to measure hedge ineffectiveness exclude interest accruals and credit spread adjustments.
The full impact of fair value movements on the income statement is disclosed in note 6.
Currency risk
Currency exposure principally arises in respect of funding raised in foreign currencies. To manage exposure to currency rates, foreign
currency debt is hedged into sterling through the use of cross-currency swaps and these are often designated within a fair value
accounting hedge. The group seeks to manage its risk by maintaining currency exposure within board-approved limits. Currency
risk in relation to foreign currency denominated financial instruments is reported monthly to the treasury committee through the
operational compliance report. The group and company have no material net exposure to movements in currency rates.
244
unitedutilities.com/corporate
Stock Code: UU.
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
i
i
a
l
S
t
a
t
e
m
e
n
t
s
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
2
245
Notes to the financial statements – appendices
A4 Financial risk management continued
Hedge accounting
Details regarding the cross-currency interest rate swaps designated as hedging instruments to manage currency and interest rate risk
are summarised below:
Notional principal amount £m
Average contracted fixed interest rate %
1 year or less
1 to 2 years
2 to 5 years Over 5 years
–
–
–
–
99.9
1.92
442.9
0.96
This table represents the derivatives that are held in fair value hedging relationships, with only the weighted average net receivable for
the fixed interest rate elements of the swap disclosed. The SONIA/LIBOR credit adjustment spread has been assumed to form part of
the fixed rate payable which is to be netted off against the fixed rate receivable for the purposes of the rates shown here.
Further detail on the fair value hedging relationships is provided below:
Nominal
amount of
the hedging
instruments
£m
Carrying
amount of
the hedging
instruments
£m
Accumulated
fair value
(gains)/losses
on hedged
items
£m
Fair value (gains)/losses*
used for calculating hedge
ineffectiveness for the year
ended 31 March 2022(1)
Hedged items
£m
Hedging
instruments
£m
Hedge
ineffective-
ness
recognised
in the income
statement
£m
Nominal
amount of
hedging
instruments
directly
impacted by
IBOR reform
£m
542.8
23.0
31.8
(34.8)
36.7
1.9
442.8
Risk
exposure
Foreign
currency
and interest
rate risk on
borrowings
Note:
(1) The change in fair value of the hedging instruments used to measure hedge ineffectiveness excludes interest accruals and credit spread adjustments.
The full impact of fair value movements on the income statement is disclosed in note 6.
Interest rate benchmark reform
Globally, financial regulators are requiring that market participants cease using certain financial market benchmark reference rates
(i.e. interbank offered rates, IBORs), and transition to the use of alternative nearly risk-free rates (RFRs).
The only benchmark reference rate that the group was exposed to was GBP LIBOR, which ceased on 31 December 2021. In the run up
to 31 December 2021, the group fully transitioned all of its financial instruments away from GBP LIBOR.
Floating rate loans payable were re-documented to replace references to GBP LIBOR with appropriate sterling risk free rates or, where
the maturity date was sufficiently short, repaid early to avoid re-documentation. Derivatives were transitioned away from GBP LIBOR
by the group and all of its counterparties adhering to the ISDA 2020 IBOR fall-backs protocol, which has automatically replaced
references in derivatives to GBP LIBOR with risk free rates, and systems were upgraded to enable accurate recording and valuation
of transitioned financial instruments. Inter-company loans and loans receivable with the group’s principal joint venture have also been
restructured to reference the Bank of England Base Rate.
The group is not exposed to any other benchmark reference rate and so its activities in relation to interest rate benchmark reform are
now complete.
In August 2020, the IASB issued Interest Rate Benchmark Reform Phase II, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
(the Phase II Amendments), and the group has applied all relevant amendments when accounting for the impact of the IBOR transition
in the year.
Applying the ISDA fall-back provisions in transitioning the group’s derivative portfolio has maintained economic equivalence across
the financial instruments held in fair value hedges and, as a result, immaterial hedge ineffectiveness was recorded in the group’s
income statement in the year.
The amount of financial instruments that transitioned to alternative benchmarks is set out below. Non-derivative financial instruments
are presented at their carrying value, with the derivatives at their nominal value, in order to give the fairest representation of the
magnitude of instruments that transitioned to RFRs. In addition to the below, the group held £800 million of undrawn committed
facilities as at 31 December 2021 that transitioned away from referencing LIBOR to reference sterling risk free rates.
Type of financial instrument
Non-derivative financial liabilities (pay GBP LIBOR)
Derivative instruments (pay GBP LIBOR)
Derivative instruments (receive GBP LIBOR)
Net position
Amounts
transitioned
to RFR
£m
501.6
2,343.9
(2,822.1)
23.4
246
unitedutilities.com/corporate
Risk
exposure
Foreign
currency
and interest
rate risk on
borrowings
Note:
Notes to the financial statements – appendices
A4 Financial risk management continued
Hedge accounting
are summarised below:
Details regarding the cross-currency interest rate swaps designated as hedging instruments to manage currency and interest rate risk
Notional principal amount £m
Average contracted fixed interest rate %
1 year or less
1 to 2 years
2 to 5 years Over 5 years
–
–
–
–
99.9
1.92
442.9
0.96
This table represents the derivatives that are held in fair value hedging relationships, with only the weighted average net receivable for
the fixed interest rate elements of the swap disclosed. The SONIA/LIBOR credit adjustment spread has been assumed to form part of
the fixed rate payable which is to be netted off against the fixed rate receivable for the purposes of the rates shown here.
Further detail on the fair value hedging relationships is provided below:
Fair value (gains)/losses*
Nominal
used for calculating hedge
Hedge
amount of
Accumulated
ineffectiveness for the year
ineffective-
hedging
Nominal
Carrying
fair value
ended 31 March 2022(1)
ness
instruments
amount of
amount of
(gains)/losses
the hedging
the hedging
on hedged
recognised
directly
Hedging
in the income
impacted by
instruments
instruments
items
Hedged items
instruments
statement
IBOR reform
£m
£m
£m
£m
£m
£m
£m
542.8
23.0
31.8
(34.8)
36.7
1.9
442.8
(1) The change in fair value of the hedging instruments used to measure hedge ineffectiveness excludes interest accruals and credit spread adjustments.
The full impact of fair value movements on the income statement is disclosed in note 6.
Interest rate benchmark reform
Globally, financial regulators are requiring that market participants cease using certain financial market benchmark reference rates
(i.e. interbank offered rates, IBORs), and transition to the use of alternative nearly risk-free rates (RFRs).
The only benchmark reference rate that the group was exposed to was GBP LIBOR, which ceased on 31 December 2021. In the run up
to 31 December 2021, the group fully transitioned all of its financial instruments away from GBP LIBOR.
Floating rate loans payable were re-documented to replace references to GBP LIBOR with appropriate sterling risk free rates or, where
the maturity date was sufficiently short, repaid early to avoid re-documentation. Derivatives were transitioned away from GBP LIBOR
by the group and all of its counterparties adhering to the ISDA 2020 IBOR fall-backs protocol, which has automatically replaced
references in derivatives to GBP LIBOR with risk free rates, and systems were upgraded to enable accurate recording and valuation
of transitioned financial instruments. Inter-company loans and loans receivable with the group’s principal joint venture have also been
restructured to reference the Bank of England Base Rate.
The group is not exposed to any other benchmark reference rate and so its activities in relation to interest rate benchmark reform are
In August 2020, the IASB issued Interest Rate Benchmark Reform Phase II, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
(the Phase II Amendments), and the group has applied all relevant amendments when accounting for the impact of the IBOR transition
now complete.
in the year.
Applying the ISDA fall-back provisions in transitioning the group’s derivative portfolio has maintained economic equivalence across
the financial instruments held in fair value hedges and, as a result, immaterial hedge ineffectiveness was recorded in the group’s
income statement in the year.
The amount of financial instruments that transitioned to alternative benchmarks is set out below. Non-derivative financial instruments
are presented at their carrying value, with the derivatives at their nominal value, in order to give the fairest representation of the
magnitude of instruments that transitioned to RFRs. In addition to the below, the group held £800 million of undrawn committed
facilities as at 31 December 2021 that transitioned away from referencing LIBOR to reference sterling risk free rates.
Type of financial instrument
Non-derivative financial liabilities (pay GBP LIBOR)
Derivative instruments (pay GBP LIBOR)
Derivative instruments (receive GBP LIBOR)
Net position
Amounts
transitioned
to RFR
£m
501.6
2,343.9
(2,822.1)
23.4
A4 Financial risk management continued
Repricing analysis
The following tables categorise the group’s borrowings, derivatives and cash deposits on the basis of when they reprice or, if earlier,
mature. The repricing analysis demonstrates the group’s exposure to floating interest rate risk.
Our largest concentration of floating interest rate risk is with index-linked instruments. This has been classified as repricing in one year
or less due to the refixing of the interest charge with changes in RPI and CPI.
Group
At 31 March 2022
Borrowings in fair value hedge
relationships
Fixed rate instruments
Effect of swaps
Borrowings designated at fair value
through profit or loss
Fixed rate instruments
Effect of swaps
Borrowings measured at amortised cost
Fixed rate instruments
Floating rate instruments
Index-linked instruments
Effect of fixed hedge for the term of the
regulatory period
Total borrowings
Cash and short-term deposits
Net borrowings
Group
At 31 March 2021
Borrowings in fair value hedge
relationships
Fixed rate instruments
Effect of swaps
Borrowings designated at fair value
through profit or loss
Fixed rate instruments
Effect of swaps
Borrowings measured at amortised cost
Fixed rate instruments
Floating rate instruments
Index-linked instruments
Effect of fixed interest rate swaps
Total borrowings
Cash and short-term deposits
Net borrowings
Total
£m
1 year
or less
£m
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
More than
5 years
£m
2,494.0
–
2,494.0
–
2,494.0
2,494.0
369.9
–
369.9
924.9
508.3
3,682.7
5,115.9
–
369.9
369.9
50.1
508.3
3,682.7
4,241.1
–
–
–
–
–
–
1.1
–
–
1.1
441.2
(441.2)
103.7
(103.7)
–
–
–
–
1.9
–
–
1.9
–
–
–
–
3.2
–
–
3.2
–
(2,267.8)
7,979.8
4,837.2
(240.9)
(240.9)
7,738.9
4,596.3
575.0
576.1
–
576.1
350.0
351.9
–
200.0
203.2
–
351.9
203.2
–
–
–
–
–
–
1.4
–
–
1.4
–
1.4
–
1.4
1,949.1
(1,949.1)
–
369.9
(369.9)
–
867.2
–
–
867.2
1,142.8
2,010.0
–
2,010.0
Total
£m
1 year
or less
£m
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
More than
5 years
£m
2,895.5
–
2,895.5
388.6
2,506.9
2,895.5
373.6
–
373.6
1,026.0
640.2
3,516.5
5,182.7
–
373.6
373.6
51.2
640.2
3,516.5
4,207.9
–
(2,332.3)
8,451.8
(744.1)
5,144.7
(744.1)
7,707.7
4,400.6
–
–
–
–
–
–
1.0
–
–
1.0
164.5
165.5
–
165.5
–
–
–
–
–
–
1.1
–
–
1.1
575.0
576.1
–
576.1
465.3
(465.3)
106.1
1,935.5
(106.1)
(1,935.5)
–
–
–
–
0.9
–
–
0.9
350.0
350.9
–
–
–
–
–
3.7
–
–
3.7
200.0
203.7
–
–
373.6
(373.6)
–
968.1
–
–
968.1
1,042.8
2,010.9
–
350.9
203.7
2,010.9
246
unitedutilities.com/corporate
Stock Code: UU.
I
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247
Notes to the financial statements – appendices
A4 Financial risk management continued
Company
Borrowings measured at amortised cost
Floating rate instruments
Total borrowings
2022
1 year or less
£m
Total
£m
2021
1 year or less
£m
Total
£m
1,799.9
1,799.9
1,799.9
1,799.9
1,780.6
1,780.6
1,780.6
1,780.6
Electricity price risk
The group is allowed a fixed amount of revenue by the regulator, in real terms, to cover electricity costs for each five-year regulatory
pricing period. To the extent that electricity prices remain floating over this period, this exposes the group to volatility in its operating
cash flows. The group’s policy, therefore, is to manage this risk by fixing a proportion of electricity commodity prices in a cost-
effective manner. The group has fixed the price on a proportion of its anticipated net electricity usage out to the end of the regulatory
period from 2020 to 2025, partially through entering into electricity swap contracts.
Hedge accounting
Details of electricity swaps designated as hedging instruments to manage electricity price risk are summarised below:
Notional amount MWh
Average contracted fixed price £/MWh
1 year or less
1 to 2 years
2 to 5 years Over 5 years
306,480
46.52
329,400
46.35
350,280
45.95
–
–
Electricity swaps have been designated in cash flow hedge relationships. This means that only the impact of any hedging
ineffectiveness is recognised through fair value in the income statement, with movements in the effective portion of the hedge
being recognised in other comprehensive income.
Nominal amount
of the hedging
instrument
£m
Carrying
amount of
the hedging
instrument
£m
Risk exposure
Fair value (gains)/
losses used for
calculating
hedge
ineffectiveness
for the year
ended 31 March
2022(1)
£m
Hedge
ineffectiveness
recognised
in the income
statement
£m
Cash flow
hedge reserve
excluding
effects of tax
£m
Amount
reclassified
from the cash
flow hedge
reserve to
the income
statement
£m
Electricity price risk
45.6
111.1
106.7
–
86.3
(1.3)
Note:
(1) The change in fair value of the hedging instruments used to measure hedge ineffectiveness excludes credit spread adjustments. The full impact of fair
value movements on the income statement is disclosed in note 6.
Capital risk management
The group’s objective when managing capital is to maintain efficient access to debt capital markets throughout the economic cycle.
The board therefore believes that it is appropriate to maintain RCV gearing, measured as group consolidated net debt (including
derivatives) to regulatory capital value (RCV) of UUW, within a target range of 55 per cent to 65 per cent. As at 31 March 2022, RCV
gearing was within the range at 61 per cent (2021: 62 per cent).
Assuming no significant changes to existing rating agencies’ methodologies or sector risk assessments, the group aims to maintain
long-term issuer credit ratings for UUW of at least A3 with Moody’s Investors Service (Moody’s) and BBB+ with S&P Global Ratings
(S&P) and a senior unsecured debt rating for UUW of at least A- with Fitch Ratings (Fitch). Debt issued by UUW’s financing subsidiary,
United Utilities Water Finance PLC, is guaranteed by UUW and is therefore rated in line with UUW.
To maintain its targeted credit ratings, the group needs to manage its capital structure with reference to the ratings methodology
and measures used by Moody’s, S&P and Fitch. The ratings methodology is normally based on a number of key ratios (such as RCV
gearing, adjusted interest cover, post maintenance interest cover (PMICR), Funds from Operations (FFO) to debt, and debt to EBITDA)
and threshold levels as updated and published from time to time by Moody’s, S&P and Fitch. The group looks to manage its risk by
maintaining the relevant key financial ratios used by the credit ratings agencies to determine a corporate’s credit rating, within the
thresholds approved by the board. Capital risk is reported monthly to the treasury committee through the operational compliance
report.
Further detail on the precise measures and methodologies used to assess water companies’ credit ratings can be found in the
methodology papers published by the rating agencies.
248
unitedutilities.com/corporate
Notes to the financial statements – appendices
A4 Financial risk management continued
Company
Borrowings measured at amortised cost
Floating rate instruments
Total borrowings
Electricity price risk
Total
1 year or less
Total
1 year or less
2022
£m
1,799.9
1,799.9
£m
1,780.6
1,780.6
2021
£m
1,780.6
1,780.6
£m
1,799.9
1,799.9
The group is allowed a fixed amount of revenue by the regulator, in real terms, to cover electricity costs for each five-year regulatory
pricing period. To the extent that electricity prices remain floating over this period, this exposes the group to volatility in its operating
cash flows. The group’s policy, therefore, is to manage this risk by fixing a proportion of electricity commodity prices in a cost-
effective manner. The group has fixed the price on a proportion of its anticipated net electricity usage out to the end of the regulatory
period from 2020 to 2025, partially through entering into electricity swap contracts.
Hedge accounting
Details of electricity swaps designated as hedging instruments to manage electricity price risk are summarised below:
Notional amount MWh
Average contracted fixed price £/MWh
1 year or less
1 to 2 years
2 to 5 years Over 5 years
306,480
46.52
329,400
46.35
350,280
45.95
–
–
Electricity swaps have been designated in cash flow hedge relationships. This means that only the impact of any hedging
ineffectiveness is recognised through fair value in the income statement, with movements in the effective portion of the hedge
being recognised in other comprehensive income.
Fair value (gains)/
losses used for
calculating
hedge
Hedge
Amount
reclassified
from the cash
flow hedge
reserve to
the income
statement
£m
(1.3)
Carrying
ineffectiveness
ineffectiveness
Cash flow
Nominal amount
amount of
for the year
recognised
hedge reserve
of the hedging
the hedging
ended 31 March
in the income
excluding
instrument
instrument
statement
effects of tax
2022(1)
£m
106.7
£m
–
£m
86.3
Risk exposure
Electricity price risk
£m
45.6
£m
111.1
(1) The change in fair value of the hedging instruments used to measure hedge ineffectiveness excludes credit spread adjustments. The full impact of fair
Note:
value movements on the income statement is disclosed in note 6.
Capital risk management
The group’s objective when managing capital is to maintain efficient access to debt capital markets throughout the economic cycle.
The board therefore believes that it is appropriate to maintain RCV gearing, measured as group consolidated net debt (including
derivatives) to regulatory capital value (RCV) of UUW, within a target range of 55 per cent to 65 per cent. As at 31 March 2022, RCV
gearing was within the range at 61 per cent (2021: 62 per cent).
Assuming no significant changes to existing rating agencies’ methodologies or sector risk assessments, the group aims to maintain
long-term issuer credit ratings for UUW of at least A3 with Moody’s Investors Service (Moody’s) and BBB+ with S&P Global Ratings
(S&P) and a senior unsecured debt rating for UUW of at least A- with Fitch Ratings (Fitch). Debt issued by UUW’s financing subsidiary,
United Utilities Water Finance PLC, is guaranteed by UUW and is therefore rated in line with UUW.
To maintain its targeted credit ratings, the group needs to manage its capital structure with reference to the ratings methodology
and measures used by Moody’s, S&P and Fitch. The ratings methodology is normally based on a number of key ratios (such as RCV
gearing, adjusted interest cover, post maintenance interest cover (PMICR), Funds from Operations (FFO) to debt, and debt to EBITDA)
and threshold levels as updated and published from time to time by Moody’s, S&P and Fitch. The group looks to manage its risk by
maintaining the relevant key financial ratios used by the credit ratings agencies to determine a corporate’s credit rating, within the
thresholds approved by the board. Capital risk is reported monthly to the treasury committee through the operational compliance
report.
Further detail on the precise measures and methodologies used to assess water companies’ credit ratings can be found in the
methodology papers published by the rating agencies.
A4 Financial risk management continued
Fair values
The table below sets out the valuation basis of financial instruments held at fair value and financial instruments where fair value has
been separately disclosed in the notes as the carrying value is not a reasonable approximation of fair value.
Group
2022
Level 1
£m
Level 2
£m
Level 3
£m
Financial assets at fair value through profit or loss
Derivative financial assets – fair value hedge
Derivative financial assets – held for trading(1)
Derivative financial assets – cash flow hedge
Investments
Financial liabilities at fair value through profit or loss
Derivative financial liabilities – fair value hedge
Derivative financial liabilities –held for trading(1)
Derivative financial liabilities – cash flow hedge
Financial liabilities designated as fair value through profit or loss
Financial instruments for which fair value has been disclosed
Financial liabilities in fair value hedge relationships
Other financial liabilities
–
–
–
–
–
–
–
–
156.3
190.1
111.0
0.1
(87.4)
(49.8)
–
(369.9)
(2,206.6)
(2,383.8)
(4,590.4)
(304.9)
(3,899.9)
(4,254.4)
–
–
–
–
–
–
–
–
–
–
–
Group
2021
Level 1
£m
Level 2
£m
Level 3
£m
Financial assets at fair value through profit or loss
Derivative financial assets – fair value hedge
Derivative financial assets – held for trading(1)
Derivative financial assets – cash flow hedge
Investments
Financial liabilities at fair value through profit or loss
Derivative financial liabilities – fair value hedge
Derivative financial liabilities –held for trading(1)
Derivative financial liabilities – cash flow hedge
Financial liabilities designated as fair value through profit or loss
Financial instruments for which fair value has been disclosed
Financial liabilities in fair value hedge relationships
Other financial liabilities at amortised cost
–
–
–
–
–
–
–
–
275.6
142.6
6.5
0.1
(12.6)
(102.1)
–
(373.6)
(2,766.0)
(2,321.6)
(5,087.6)
(147.6)
(4,246.5)
(4,457.6)
–
–
–
–
–
–
–
–
–
–
–
Total
£m
156.3
190.1
111.0
0.1
(87.4)
(49.8)
–
(369.9)
(2,511.5)
(6,283.7)
(8,844.8)
Total
£m
275.6
142.6
6.5
0.1
(12.6)
(102.1)
–
(373.6)
(2,913.6)
(6,568.1)
(9,545.2)
Note:
(1) These derivatives form economic hedges and, as such, management intends to hold these through to maturity. Derivatives forming an economic
hedge of the currency exposure on borrowings included in these balances were £130.1 million (2021: £141.5 million).
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable).
The group has calculated fair values using quoted prices where an active market exists, which has resulted in £4,590.4 million (2021:
£5,087.6 million) of ‘level 1’ fair value measurements. In the absence of an appropriate quoted price, the group has applied discounted
cash flow valuation models utilising market available data in line with prior years. The £497.2 million decrease (2021: £2,906.2 million
increase) in level 1 fair value measurements primarily reflects the maturity of the 5.75 per cent £375 million bond in March 2022, which
was classified as a level 1 fair value measurement in the prior financial year, and a reduction in the number of observable quoted bond
prices in active markets at 31 March 2022.
During the year, changes in the fair value of financial liabilities designated at fair value through profit or loss resulted in a £0.4 million
loss (2021: £23.9 million loss). Included within this was a £4.2 million gain (2021: £43.3 million loss) attributable to changes in own
credit risk, recognised in other comprehensive income. The cumulative amount due to changes in credit spread was £39.9 million
profit (2021: £35.7 million profit). The carrying amount is £143.8 million (2021: £147.5 million) higher than the amount contracted to
settle on maturity.
Company
The company does not hold any financial instruments that are measured subsequent to initial recognition at fair value or where fair
value has been separately disclosed in the notes as the carrying value is not a reasonable approximation of fair value.
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248
unitedutilities.com/corporate
Stock Code: UU.
249
Notes to the financial statements – appendices
A5 Retirement benefits
Defined benefit schemes
Under the group’s defined benefit pension schemes – the United Utilities Pension Scheme (UUPS) and the United Utilities PLC group
of the Electricity Supply Pension Scheme (ESPS) – employees are entitled to annual pensions on retirement. Benefits are payable on
death and following other events such as withdrawing from active service. No other post-retirement benefits are provided to these
employees.
The assets of these schemes are held in trust funds independent of the group’s finances. The trustees are composed of representatives
of both the employer and employees, who are required by law to act in the interests of all relevant beneficiaries and are responsible
for the investment policy with regards to the assets plus the day-to-day administration of the benefits.
As at 31 March, the total fair value of the schemes’ assets, and the present value of the defined benefit obligations, and therefore the
value of the net retirement benefit surplus included in the consolidated statement of financial position, was as follows:
Group
Total fair value of schemes’ assets
Present value of defined benefit obligations
Net retirement benefit surplus
2022
£m
4,035.7
(3,018.9)
1,016.8
2021
£m
3,984.7
(3,295.7)
689.0
Estimated future benefits payable
The defined benefit obligation includes benefits for current employees, former employees and current pensioners as analysed in the
table below:
Group
Total value of current employees’ benefits
Deferred members’ benefits
Pensioner members’ benefits
Total defined benefit obligation
Movements in the present value of the defined benefit obligations are as follows:
Group
At the start of the year
Interest cost on schemes’ obligations
Actuarial gains/(losses) arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Actuarial (losses)/gains arising from experience
Curtailments/settlements arising on reorganisation
Member contributions
Benefits paid
Current service cost
At the end of the year
2022
£m
504.7
602.1
1,912.1
3,018.9
2021
£m
783.5
574.4
1,937.8
3,295.7
2022
£m
2021
£m
(3,295.7)
(3,057.6)
(66.5)
164.0
52.4
(5.0)
–
(2.3)
141.7
(7.5)
(68.5)
(429.7)
80.6
25.4
(0.6)
(2.4)
162.0
(4.9)
(3,018.9)
(3,295.7)
The duration of the combined schemes is around 17 years. The schemes’ duration is an indicator of the weighted-average time until
benefit payments are settled, taking account of the split of the defined benefit obligation between current employees, deferred
members and the current pensioners of the schemes.
The estimated profile of cash flows out of the schemes as retirement benefits are paid is as follows:
UUPS
)
m
£
(
150
125
100
75
50
25
0
ESPS
30
25
20
15
10
5
0
)
m
£
(
2022
2038
2054
2070
2086
2102
2022
2038
2054
2070
2086
2102
Pensioners
Deferreds
Actives
Future service
Pensioners
Deferreds
Actives
Future service
250
unitedutilities.com/corporate
Notes to the financial statements – appendices
A5 Retirement benefits
Defined benefit schemes
employees.
Under the group’s defined benefit pension schemes – the United Utilities Pension Scheme (UUPS) and the United Utilities PLC group
of the Electricity Supply Pension Scheme (ESPS) – employees are entitled to annual pensions on retirement. Benefits are payable on
death and following other events such as withdrawing from active service. No other post-retirement benefits are provided to these
The assets of these schemes are held in trust funds independent of the group’s finances. The trustees are composed of representatives
of both the employer and employees, who are required by law to act in the interests of all relevant beneficiaries and are responsible
for the investment policy with regards to the assets plus the day-to-day administration of the benefits.
As at 31 March, the total fair value of the schemes’ assets, and the present value of the defined benefit obligations, and therefore the
value of the net retirement benefit surplus included in the consolidated statement of financial position, was as follows:
The defined benefit obligation includes benefits for current employees, former employees and current pensioners as analysed in the
Group
Total fair value of schemes’ assets
Present value of defined benefit obligations
Net retirement benefit surplus
Estimated future benefits payable
table below:
Group
Total value of current employees’ benefits
Deferred members’ benefits
Pensioner members’ benefits
Total defined benefit obligation
Movements in the present value of the defined benefit obligations are as follows:
Group
At the start of the year
Interest cost on schemes’ obligations
Actuarial gains/(losses) arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Actuarial (losses)/gains arising from experience
Curtailments/settlements arising on reorganisation
Member contributions
Benefits paid
Current service cost
At the end of the year
UUPS
)
m
£
(
150
125
100
75
50
25
0
ESPS
30
25
20
15
10
5
0
)
m
£
(
2022
£m
4,035.7
(3,018.9)
1,016.8
2021
£m
3,984.7
(3,295.7)
689.0
2022
£m
504.7
602.1
1,912.1
3,018.9
2022
£m
(66.5)
164.0
52.4
(5.0)
–
(2.3)
141.7
(7.5)
2021
£m
783.5
574.4
1,937.8
3,295.7
2021
£m
(68.5)
(429.7)
80.6
25.4
(0.6)
(2.4)
162.0
(4.9)
(3,295.7)
(3,057.6)
(3,018.9)
(3,295.7)
The duration of the combined schemes is around 17 years. The schemes’ duration is an indicator of the weighted-average time until
benefit payments are settled, taking account of the split of the defined benefit obligation between current employees, deferred
members and the current pensioners of the schemes.
The estimated profile of cash flows out of the schemes as retirement benefits are paid is as follows:
A5 Retirement benefits continued
Funding of future benefits payable
Under UK legislation there is a requirement that pension schemes are funded prudently, and that funding plans are agreed by pension
scheme trustees. The defined benefit schemes are subject to funding valuations carried out by independent qualified actuaries, in
conjunction with the schemes’ trustees, on a triennial basis. These valuations inform the level of future contributions to be made by
the group in order to ensure that the schemes are appropriately funded and therefore that benefits can be paid. The latest finalised
funding valuation was carried out as at 31 March 2021, and determined that the schemes were fully funded on a low-dependency basis
without any funding deficit that requires additional contributions from the company over and above those related to current service
and expenses.
The schemes’ funding plans are reviewed regularly, including between funding valuations. The group expects to make further
contributions of £9.1 million in the year ending 31 March 2023, £8.0 million in respect of current service contributions and £1.1 million in
respect of expenses. Annual contributions are expected to be broadly similar to this until at least the point at which the next triennial
valuation (due as at 31 March 2024), is finalised, which is expected to be towards the end of the year ending 31 March 2025. At this
point a detailed re-evaluation of the level of annual contributions, and the basis on which these are made, will take place.
The group and trustees have agreed long-term strategies for reducing investment risk in each scheme. This includes an asset-liability
matching policy which aims to reduce the volatility of the funding level of the pension plan by investing in assets, such as corporate
bonds and gilts, supplemented by swap and gilt long-term hedges of interest and inflation rates, which perform in line with the
liabilities so as to hedge against changes in interest and inflation rates. Both the UUPS and ESPS schemes are fully hedged for inflation
exposure through external market swaps and gilts. Further details of the derivatives used in reducing investment risk are disclosed in
the ‘Schemes’ assets’ section of this appendix.
In addition to the strategies implemented to date, the group and trustees are committed to exploring further de-risking options that
may be implemented in the future, including in relation to longevity risk.
The basis on which scheme liabilities are valued for funding purposes differs from the basis required under IAS 19 ‘Employee Benefits’,
with liabilities on a funding basis being subject to assumptions at the valuation date that are not updated between revaluations.
Funding deficits vary significantly from company to company, but neither the deficits, the assumptions on which they are based,
the associated sensitivities, nor the risk exposures are disclosed by many companies and, therefore, meaningful cross-company
comparisons are not possible. Conversely, scheme liabilities are valued on a consistent basis between companies under IAS 19 and are
subject to assumptions and sensitivities that are required to be disclosed. Consequently, the relative economic positions of companies
are comparable only on an IAS 19 basis, subject to normalisation of assumptions used between companies.
A retirement benefit surplus was recognised as an asset in the consolidated statement of financial position at both 31 March 2022
and 31 March 2021 as, under both the UUPS and ESPS scheme rules, the group has an unconditional right to a refund of the surplus
assuming the gradual settlement of plan liabilities over time until all members have left the plans.
Impact of scheme risk management on IAS 19 disclosures
Under the prescribed IAS 19 basis, pension scheme liabilities are calculated based on current accrued benefits. Expected cash flows
are projected forward allowing for RPI and CPI and the current member mortality assumptions. These projected cash flows are then
discounted using a high-quality corporate bond rate, which comprises an underlying interest rate and a credit spread.
The group has de-risked its pension schemes through hedging strategies applied to the underlying interest rate and future inflation.
Both UUPS and ESPS fully hedge RPI inflation exposure along with underlying interest rates through external market swaps and gilts
(including gilt repurchase instruments), the value of which is included in the schemes’ assets (net of associated derivative liabilities).
Consequently, the reported statement of financial position under IAS 19 remains volatile due to changes in credit spread and changes
in mortality, neither of which have been hedged at the current time.
Changes in credit spreads have not been hedged primarily due to difficulties in doing so over long durations. In contrast, the schemes’
specific funding bases are unlikely to suffer from significant volatility due to credit spread, because a prudent, fixed credit spread
assumption is applied.
Changes in mortality have not been hedged due to this exposure being subject to lower volatility in the short term and relatively high
hedging costs, though the group and scheme trustees are committed to exploring options to de-risk changes in mortality, or pension
longevity, in future periods, as outlined above.
Pension benefits under the defined benefit element of the UUPS hybrid section, which represents a relatively small proportion of total
defined benefit obligations, are linked to CPI rather than RPI.
In the year ended 31 March 2022, the discount rate increased by 0.75 per cent (2021: 0.25 per cent decrease), which includes a 0.35
per cent increase in credit spreads and a 0.4 per cent increase in gilt yields over the year. The IAS 19 remeasurement gain of £313.6
million (2021: £82.7 million loss) reported in note 18 has largely resulted from an increase in credit spreads during the year partially
offset by an RPI inflation assumption increase of 0.4 per cent (2021: 0.55 per cent increase). The impact of movements in credit
spreads is less pronounced on a scheme funding basis compared with the remeasurement loss recognised on an IAS 19 accounting
basis as the discount rate used for valuing obligations utilises a fixed credit spread assumption.
2022
2038
2054
2070
2086
2102
2022
2038
2054
2070
2086
2102
Pensioners
Deferreds
Actives
Future service
Pensioners
Deferreds
Actives
Future service
250
unitedutilities.com/corporate
Stock Code: UU.
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Notes to the financial statements – appendices
A5 Retirement benefits continued
Reporting and assumptions
The results of the latest funding valuation at 31 March 2021 have been used to inform the group’s best estimate assumptions to use in
calculating the defined benefit pension position reported on an IAS 19 basis at 31 March 2022. The results of the funding valuation have been
adjusted to take account of experience over the period, changes in market conditions, and differences in the financial and demographic
assumptions. The present value of the defined benefit obligation, and the related current service costs, were measured using the projected
unit credit method.
Member data used in arriving at the liability figure included within the overall IAS 19 surplus has been based on the finalised actuarial
valuations as at 31 March 2021 for both UUPS and ESPS.
Financial assumptions
The main financial and demographic assumptions used by the actuary to calculate the defined benefit surplus of UUPS and ESPS are
outlined below:
Group
Discount rate
Pension increases
Pensionable salary growth (pre-2018 service):
ESPS
UUPS
Pensionable salary growth (post-2018 service):
ESPS
UUPS
Price inflation – RPI
Price inflation – CPI(1)
2022
% p.a.
2021
% p.a.
2.80
3.75
3.75
3.75
3.75
3.20
3.75
3.20
2.05
3.35
3.35
3.35
3.35
2.75
3.35
2.75
Note:
(1) The CPI price inflation assumption represents a single weighted average rate derived from an assumption of 2.85 per cent pre-2030 and 3.65 per cent
post-2030 (31 March 2021: 2.45 per cent pre-2030 and 3.25 per cent post-2030).
The discount rate is consistent with a high-quality corporate bond rate, with 2.80 per cent being equivalent to gilts plus 1.10 basis
points (31 March 2021: 2.05 per cent being equivalent to gilts plus 75 basis points). The corporate bond population used in deriving this
rate comprises corporate bonds rated at least AA by one or more credit rating agencies.
In accordance with the scheme rules, pensionable salary growth is linked to RPI for UUPS for service pre-2018 and CPI for service
post-2018, for ESPS the growth is linked to RPI.
Assumed pension increases are aligned to the RPI price inflation assumption as the vast majority of benefits across the schemes have
a direct RPI linkage.
In September 2019, the Chancellor of the Exchequer highlighted the UK Statistic Authority’s proposals to change RPI to align with
CPIH (Consumer Prices Index, including housing costs). Plans to reform RPI and bring it in line with CPIH from 2030 were confirmed
on 25 November 2020, though this is subject to judicial review. Broadly CPIH increases are expected to average around 1 per cent per
annum below RPI in the long-term (about the same as CPI), so this change could have a significant impact on many pension schemes.
Demographic assumptions
At 31 March 2022, the base tables used for the mortality in retirement assumption are the Continuous Mortality Investigation’s (CMI)
S3PA (2021:S2PA) year of birth tables, with a scaling factor of 109 per cent (2021: 106 per cent) and 115 per cent (2021: 109 per cent)
for male pensioners and non-pensioners respectively and 110 per cent (2021: 104 per cent) and 111 per cent (2021: 105 per cent) for
female pensioners and non-pensioners respectively, reflecting the profile of the membership. At 31 March 2022, future improvements
in mortality are based on the extended CMI 2021 (2021: CMI 2020) projection model, with a long-term annual rate of improvement of
1.25 per cent (2021: 1.25 per cent). To adjust for the impact of circumstances arising as a result of the COVID-19 pandemic on future
mortality trends for the schemes’ membership, an adjustment has been made to reflect an expectation that the direct and indirect
consequences of the pandemic will have an adverse impact on longevity in the short to medium term. Accordingly, in arriving at the
mortality assumptions for the current year, the group has included a w2021 parameter of 10 per cent within the CMI 2021 projections,
which is a subjective estimate that has an impact of circa £30 million decrease in the defined benefit obligation. All other parameters
within the future improvements model are consistent with the prior year.
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Notes to the financial statements – appendices
A5 Retirement benefits continued
Reporting and assumptions
The results of the latest funding valuation at 31 March 2021 have been used to inform the group’s best estimate assumptions to use in
calculating the defined benefit pension position reported on an IAS 19 basis at 31 March 2022. The results of the funding valuation have been
adjusted to take account of experience over the period, changes in market conditions, and differences in the financial and demographic
assumptions. The present value of the defined benefit obligation, and the related current service costs, were measured using the projected
Member data used in arriving at the liability figure included within the overall IAS 19 surplus has been based on the finalised actuarial
valuations as at 31 March 2021 for both UUPS and ESPS.
The main financial and demographic assumptions used by the actuary to calculate the defined benefit surplus of UUPS and ESPS are
unit credit method.
Financial assumptions
outlined below:
Group
Discount rate
Pension increases
ESPS
UUPS
ESPS
UUPS
Note:
Price inflation – RPI
Price inflation – CPI(1)
Pensionable salary growth (pre-2018 service):
Pensionable salary growth (post-2018 service):
2022
% p.a.
2021
% p.a.
2.80
3.75
3.75
3.75
3.75
3.20
3.75
3.20
2.05
3.35
3.35
3.35
3.35
2.75
3.35
2.75
(1) The CPI price inflation assumption represents a single weighted average rate derived from an assumption of 2.85 per cent pre-2030 and 3.65 per cent
post-2030 (31 March 2021: 2.45 per cent pre-2030 and 3.25 per cent post-2030).
The discount rate is consistent with a high-quality corporate bond rate, with 2.80 per cent being equivalent to gilts plus 1.10 basis
points (31 March 2021: 2.05 per cent being equivalent to gilts plus 75 basis points). The corporate bond population used in deriving this
rate comprises corporate bonds rated at least AA by one or more credit rating agencies.
In accordance with the scheme rules, pensionable salary growth is linked to RPI for UUPS for service pre-2018 and CPI for service
post-2018, for ESPS the growth is linked to RPI.
Assumed pension increases are aligned to the RPI price inflation assumption as the vast majority of benefits across the schemes have
a direct RPI linkage.
In September 2019, the Chancellor of the Exchequer highlighted the UK Statistic Authority’s proposals to change RPI to align with
CPIH (Consumer Prices Index, including housing costs). Plans to reform RPI and bring it in line with CPIH from 2030 were confirmed
on 25 November 2020, though this is subject to judicial review. Broadly CPIH increases are expected to average around 1 per cent per
annum below RPI in the long-term (about the same as CPI), so this change could have a significant impact on many pension schemes.
Demographic assumptions
At 31 March 2022, the base tables used for the mortality in retirement assumption are the Continuous Mortality Investigation’s (CMI)
S3PA (2021:S2PA) year of birth tables, with a scaling factor of 109 per cent (2021: 106 per cent) and 115 per cent (2021: 109 per cent)
for male pensioners and non-pensioners respectively and 110 per cent (2021: 104 per cent) and 111 per cent (2021: 105 per cent) for
female pensioners and non-pensioners respectively, reflecting the profile of the membership. At 31 March 2022, future improvements
in mortality are based on the extended CMI 2021 (2021: CMI 2020) projection model, with a long-term annual rate of improvement of
1.25 per cent (2021: 1.25 per cent). To adjust for the impact of circumstances arising as a result of the COVID-19 pandemic on future
mortality trends for the schemes’ membership, an adjustment has been made to reflect an expectation that the direct and indirect
consequences of the pandemic will have an adverse impact on longevity in the short to medium term. Accordingly, in arriving at the
mortality assumptions for the current year, the group has included a w2021 parameter of 10 per cent within the CMI 2021 projections,
which is a subjective estimate that has an impact of circa £30 million decrease in the defined benefit obligation. All other parameters
within the future improvements model are consistent with the prior year.
A5 Retirement benefits continued
The current life expectancies at age 60 underlying the value of the accrued liabilities for the schemes are:
Group
Retired member – male
Non-retired member – male
Retired member – female
Non-retired member – female
2022
years
25.9
26.5
27.9
29.0
2021
years
26.0
26.9
28.4
29.5
Financial and demographic assumptions – further analysis
The assumptions used in measuring the group’s defined benefit surplus reflect management’s best estimates as at the reporting date.
These estimates inherently involve judgement, and the measurement of the defined benefit surplus is sensitive to changes in these key
assumptions. These sensitivities, together with further information on the judgements involved and level of estimation uncertainty, are
presented below. Sensitivity calculations allow for the specified movement in the relevant key assumption, while all other assumptions
are held constant. This approach does not take into account the interrelationship between some of these assumptions or any hedging
strategies adopted, however it demonstrates how reasonably possible changes could impact on the measurement of the defined
benefit surplus.
• Asset volatility – If the schemes’ assets underperform relative to the discount rate used to calculate the schemes’ liabilities, this
will create a deficit. The schemes hold some growth assets (equities, diversified growth funds and emerging market debt) which,
though expected to outperform the discount rate in the long term, create volatility in the short term. The allocation to growth
assets is monitored to ensure it remains appropriate given the schemes’ long-term objectives.
• Discount rate – An increase/decrease in the discount rate of 0.25 per cent would have resulted in a £119.7/£127.7 million (2021:
£142.1/£151.9 million) decrease/increase in the schemes’ liabilities at 31 March 2022, although as long as credit spreads remain
stable this will be largely offset by an increase/decrease in the value of the schemes’ bond holdings and other instruments
designed to hedge this exposure. The discount rate is based on high-quality corporate bond yields of a similar duration to the
schemes’ liabilities. High quality corporate bonds are considered to be those that have a credit rating of AA or above with at least
one rating agency. An alternative approach could be taken whereby only those bonds rated AA or higher by at least two rating
agencies are used. While this alternative approach may provide additional comfort around the quality of these corporate bonds,
management believes that the wider population of corporate bonds under a ‘single agency’ approach gives a more representative
indication of high quality corporate bonds that are aligned to the schemes’ liabilities, and therefore provides a more robust
estimate.
• Price inflation – An increase/decrease in the inflation assumption of 0.25 per cent would have resulted in a £111.5/105.2 million
(2021: £144.3/£136.1 million) increase/decrease in the schemes’ liabilities at 31 March 2022, as a significant proportion of the
schemes’ benefit obligations are linked to inflation. However, nearly all of the schemes’ liabilities were hedged for RPI in the
external market at 31 March 2022, meaning that this sensitivity is likely to be insignificant as a result. The sensitivity to price
inflation allows for the impact of changes to pensionable salary growth and pension increases, which are both assumed to be
linked to price inflation. While inflation may be volatile in the near term, as has been the case during the year ended 31 March
2022, the value of the schemes’ liabilities is based on inflation assumptions that reflect the full profile of the liabilities, in particular
the long-term nature.
• Consistent with market practice, and reflecting the possibility that inflation may rise or fall more than expected in the future,
in arriving at the company’s best estimate for RPI, an inflation risk premium of 0.2 per cent (2021: 0.2 per cent) has been
deducted from the breakeven inflation rate for the year ended 31 March 2022. The impact of this is a decrease in the defined
benefit obligation of around £90 million and therefore an increase in the net defined benefit surplus compared with no
inflation risk premium being deducted. There is no allowance for any further change in the inflation risk premium post 2030 as
a result of RPI reform. A reduction in expected RPI will result in a reduction to the value of pension scheme liabilities; however,
as our pension schemes are hedged for RPI inflation movements, this will result in a comparable reduction to the value of
pension scheme assets.
• The assumption for CPI is set by deducting a ‘wedge’ from the RPI inflation assumption to reflect structural differences. For
pre-2030 inflation this wedge has been estimated at 0.9 per cent per annum, reducing to 0.1 per cent per annum post-2030
given that RPI and CPI are expected to converge. The impact of this reduction in the post-2030 wedge as a result of RPI
reform is a circa £8 million increase to the defined benefit obligation and therefore a decrease in the net defined benefit
surplus compared with the wedge remaining at 0.9 per cent per annum after 2030.
• Mortality long-term improvement rate – An increase in the mortality long-term improvement rate from 1.25 per cent to 1.50 per
cent would have resulted in a £29.1 million decrease in the schemes’ liabilities at 31 March 2022 (2021: £33.2 million decrease in the
schemes’ liabilities).
• Life expectancy – An increase/decrease in life expectancy of one year would have resulted in a £135.0 million (2021: £152.8 million)
increase/decrease in the schemes’ liabilities at 31 March 2022. The majority of the schemes’ obligations are to provide benefits for
the life of the member and, as such, the schemes’ liabilities are sensitive to these assumptions.
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Notes to the financial statements – appendices
A5 Retirement benefits continued
Schemes’ assets
At 31 March, the fair values of the schemes’ assets recognised in the statement of financial position were as follows:
Group
At 31 March 2022
Non-equity growth assets
Gilts
Bonds
Other
Total fair value of schemes’ assets
At 31 March 2021
Non-equity growth assets
Gilts
Bonds
Other
Total fair value of schemes’ assets
Underlying
assets
£m
Fair value of
derivatives
£m
Combined
£m
Schemes’
assets
%
606.6
2,839.1
1,708.0
423.0
5,576.7
406.6
2,784.3
1,859.2
376.2
5,426.3
–
(1,657.6)
(3.7)
120.3
(1,541.0)
–
(1,409.8)
(5.8)
(26.0)
(1,441.6)
606.6
1,181.5
1,704.3
543.3
4,035.7
406.6
1,374.5
1,853.4
350.2
3,984.7
15.0
29.3
42.2
13.5
100.0
10.2
34.5
46.5
8.8
100.0
Included within the group’s defined benefit pension scheme assets are assets with a fair value estimated to be £270.2 million that
are categorised as ‘level 3’ assets within the IFRS 13 ‘Fair value measurement’ hierarchy, meaning that the value of the assets is not
observable at 31 March 2022. Estimates of the fair value of these assets have been performed by the investment managers’ valuation
specialists using the latest available statements of each of the funds that make up the total level 3 asset balance, updated for any
subsequent cash movements between the statement date and the year end reporting date.
The UUPS has entered into a variety of derivative transactions to change the return characteristics of the assets held to reduce
undesirable market and liability risks. As such, the above breakdown separates the assets of the schemes to illustrate the underlying
risk characteristics of the assets held.
The portfolio contains a proportion of assets set aside for collateral purposes linked to the derivative contracts entered into. The
collateral portfolio, comprising cash and eligible securities readily convertible to cash, provides sufficient liquidity to manage
exposure relating to the derivative transactions and is expected to achieve a return in excess of SONIA (Sterling Overnight Index
Average).
The derivative values in the table above represent the net market value of derivatives held within each of these asset categories as
follows:
Gilts
Repurchase agreements
Bonds – hedging non-sterling exposure back to sterling
Currency forwards
Interest rate swaps
Other – managing liability risks targeting a high level of interest rate and inflation hedging
Asset swaps
Interest rate swaps
RPI inflation swaps
Total return swaps
2022
£m
2021
£m
(1,657.6)
(1,657.6)
(1,409.8)
(1,409.8)
(1.4)
(2.3)
(3.7)
(32.5)
18.0
134.2
0.6
120.3
(8.9)
3.1
(5.8)
(26.6)
23.3
(21.5)
(1.2)
(26.0)
Total fair value of derivatives
(1,541.0)
(1,441.6)
The derivatives shown in the tables only cover those expressly held for the purpose of reducing certain undesirable asset and liability
risks. The schemes invest in a number of other pooled funds that make use of derivatives. No allowance is made in the figures above
for any derivatives held within these other pooled funds, as they are not held expressly for the purpose of managing risk. The total fair
value of pooled funds held within the schemes’ assets was £681.5 million (2021: £667.2 million).
The intention is that the schemes’ assets provide a full economic hedge of interest rates and RPI inflation of the schemes’ liabilities
on a scheme funding basis. As the scheme funding basis is more prudent than the IAS 19 measurement basis for the defined benefit
obligation, the schemes are more than 100 per cent hedged on an accounting basis.
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Notes to the financial statements – appendices
A5 Retirement benefits continued
Schemes’ assets
At 31 March, the fair values of the schemes’ assets recognised in the statement of financial position were as follows:
Underlying
Fair value of
assets
derivatives
Combined
Schemes’
assets
%
£m
606.6
2,839.1
1,708.0
423.0
5,576.7
406.6
2,784.3
1,859.2
376.2
5,426.3
£m
–
(1,657.6)
(3.7)
120.3
(1,541.0)
–
(1,409.8)
(5.8)
(26.0)
(1,441.6)
£m
606.6
1,181.5
1,704.3
543.3
4,035.7
406.6
1,374.5
1,853.4
350.2
3,984.7
15.0
29.3
42.2
13.5
100.0
10.2
34.5
46.5
8.8
100.0
Group
Gilts
Bonds
Other
Gilts
Bonds
Other
At 31 March 2022
Non-equity growth assets
Total fair value of schemes’ assets
At 31 March 2021
Non-equity growth assets
Total fair value of schemes’ assets
Average).
follows:
Gilts
Repurchase agreements
Currency forwards
Interest rate swaps
Asset swaps
Interest rate swaps
RPI inflation swaps
Total return swaps
Included within the group’s defined benefit pension scheme assets are assets with a fair value estimated to be £270.2 million that
are categorised as ‘level 3’ assets within the IFRS 13 ‘Fair value measurement’ hierarchy, meaning that the value of the assets is not
observable at 31 March 2022. Estimates of the fair value of these assets have been performed by the investment managers’ valuation
specialists using the latest available statements of each of the funds that make up the total level 3 asset balance, updated for any
subsequent cash movements between the statement date and the year end reporting date.
The UUPS has entered into a variety of derivative transactions to change the return characteristics of the assets held to reduce
undesirable market and liability risks. As such, the above breakdown separates the assets of the schemes to illustrate the underlying
risk characteristics of the assets held.
The portfolio contains a proportion of assets set aside for collateral purposes linked to the derivative contracts entered into. The
collateral portfolio, comprising cash and eligible securities readily convertible to cash, provides sufficient liquidity to manage
exposure relating to the derivative transactions and is expected to achieve a return in excess of SONIA (Sterling Overnight Index
The derivative values in the table above represent the net market value of derivatives held within each of these asset categories as
2022
£m
2021
£m
(1,657.6)
(1,657.6)
(1,409.8)
(1,409.8)
(1.4)
(2.3)
(3.7)
(32.5)
18.0
134.2
0.6
120.3
(8.9)
3.1
(5.8)
(26.6)
23.3
(21.5)
(1.2)
(26.0)
Bonds – hedging non-sterling exposure back to sterling
Other – managing liability risks targeting a high level of interest rate and inflation hedging
Total fair value of derivatives
(1,541.0)
(1,441.6)
The derivatives shown in the tables only cover those expressly held for the purpose of reducing certain undesirable asset and liability
risks. The schemes invest in a number of other pooled funds that make use of derivatives. No allowance is made in the figures above
for any derivatives held within these other pooled funds, as they are not held expressly for the purpose of managing risk. The total fair
value of pooled funds held within the schemes’ assets was £681.5 million (2021: £667.2 million).
The intention is that the schemes’ assets provide a full economic hedge of interest rates and RPI inflation of the schemes’ liabilities
on a scheme funding basis. As the scheme funding basis is more prudent than the IAS 19 measurement basis for the defined benefit
obligation, the schemes are more than 100 per cent hedged on an accounting basis.
A5 Retirement benefits continued
Movements in the fair value of the schemes’ assets were as follows:
Group
At the start of the year
Interest income on schemes’ assets
The return on plan assets, excluding amounts included in interest
Member contributions
Benefits paid
Administrative expenses
Company contributions
At the end of the year
2022
£m
3,984.7
80.8
102.2
2.3
(141.7)
(2.1)
9.5
2021
£m
3,811.7
86.0
241.0
2.4
(162.0)
(3.0)
8.6
4,035.7
3,984.7
The group’s actual return on the schemes’ assets was a gain of £183.0 million (2021: £327.0 million), largely as a result of the schemes’
investment strategies hedging increases in the technical provisions due to change in financial conditions.
A6 Related party transactions
Group
Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this note.
The related party transactions with the group’s joint ventures and other related parties during the period, and amounts outstanding at
the period end date, were as follows:
Sales of services
Charitable contributions advanced to related parties
Purchases of goods and services
Costs recharged at nil margin under transitional service agreements
Interest income and fees recognised on loans to related parties
Amounts owed by related parties
Amounts owed to related parties
2022
£m
363.1
0.1
–
–
2.8
116.4
–
2021
£m
362.9
–
–
–
3.7
113.8
2.4
Sales of services to related parties mainly represent non-household wholesale charges to Water Plus that were billed and accrued
during the period. These transactions were on market credit terms in respect of non-household wholesale charges, which are
governed by the wholesale charging rules issued by Ofwat.
Charitable contributions advanced to related parties during the year relate to amounts paid to Rivington Heritage Trust, a charitable
company limited by guarantee for which United Utilities Water Limited is one of three guarantors.
At 31 March 2022, amounts owed by joint ventures, as recorded within trade and other receivables in the statement of financial
position, were £116.4 million (March 2021: £113.8 million), comprising £28.5 million (March 2021: £27.1 million) of trade balances, which
are unsecured and will be settled in accordance with normal credit terms, and £80.4 million (March 2021: £86.7 million) relating to
loans. £6.1 million owed by Water Plus relating to the surrender of consortium relief tax losses is also included within the amounts
owed by joint ventures as at 31 March 2022.
Included within these loans receivable were the following amounts owed by Water Plus:
• £79.4 million (2021: £66.3 million) outstanding on a £100.0 million revolving credit facility provided by United Utilities PLC, with a
maturity date of December 2023, bearing a floating rate interest rate of the Bank of England base rate plus a credit margin. This
balance comprises £80.5 million outstanding, net of a £1.1 million allowance for expected credit losses (2021: £67.5 million net of a
£1.2 million allowance for expected credit losses); and
• £1.0 million (2021: £0.7 million) receivable being the £10.6 million (2021: £10.3 million) fair value of amounts owed in relation to a
£12.5 million unsecured loan note held by United Utilities PLC, with a maturity date of 28 March 2027, net of a £0.1 million (2021:
£0.1 million) allowance for expected credit losses and £9.5 million of the group’s share of joint venture losses relating to historic
periods as the loan note is deemed to be part of the group’s long-term interest in Water Plus. This is a zero coupon shareholder
loan with a total amount outstanding at 31 March 2022 and 31 March 2021 of £12.5 million, comprising a £10.6 million (2021: £10.3
million) receivable representing the present value of the £12.5 million payable at maturity discounted using an appropriate market
rate of interest at the inception of the loan, and £1.9 million (2021: £2.2 million) recorded as an equity contribution to Water plus
recognised within interests in joint ventures.
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Notes to the financial statements – appendices
A6 Related party transactions continued
In the prior year, amounts owed by Water Plus also included £18.3 million outstanding on a £32.5 million revolving credit facility
provided by United Utilities PLC, comprising £32.5 million outstanding net of the group’s £14.2 million share of Water Plus losses
allocated against this amount as at 31 March 2021. At that date, the facility formed part of the group’s long-term interest in the Water
Plus joint venture given that there was a clear expectation that this revolving credit facility would be replaced with additional share
capital, with this transaction subsequently executed in April 2021. Accordingly, this £18.3 million balance ceased to be treated as a
related party receivable and was recognised as an addition to the group’s joint ventures balance during the year ended 31 March 2022
(see note 12).
A further £1.4 million (2021: £1.4 million) of non-current receivables was owed by other related parties at 31 March 2022.
During the year, United Utilities PLC provided guarantees in support of Water Plus in respect of certain amounts owed to wholesalers.
The aggregate limit of these guarantees was £54.1 million, of which £32.1 million related to guarantees to United Utilities Water Limited.
At 31 March 2022, amounts owed to related parties were nil (March 2021: £2.4 million). The amount outstanding at 31 March 2021
included £1.1 million due to Water Plus for the surrender of consortium relief tax losses including other amounts due to be settled in
accordance with normal credit terms. These amounts were paid during the current year bringing this balance to a nil position.
Company
The parent company receives dividend income and pays and receives interest to and from subsidiary undertakings in the normal
course of business. Total dividend income received during the year amounted to £295.5 million (2021: £291.9 million) and total net
interest payable during the year was £21.0 million (2021: £24.2 million). Amounts outstanding at 31 March 2022 and 31 March 2021
between the parent company and subsidiary undertakings are disclosed in notes 14, 16 and 21.
At 31 March 2022 and 31 March 2021, no related party receivables and payables were secured and no guarantees were issued in
respect thereof. Balances will be settled in accordance with normal credit terms. No allowance for doubtful receivables has been
made for amounts owed by subsidiary undertakings as at 31 March 2022 and 31 March 2021.
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Notes to the financial statements – appendices
A6 Related party transactions continued
In the prior year, amounts owed by Water Plus also included £18.3 million outstanding on a £32.5 million revolving credit facility
provided by United Utilities PLC, comprising £32.5 million outstanding net of the group’s £14.2 million share of Water Plus losses
allocated against this amount as at 31 March 2021. At that date, the facility formed part of the group’s long-term interest in the Water
Plus joint venture given that there was a clear expectation that this revolving credit facility would be replaced with additional share
capital, with this transaction subsequently executed in April 2021. Accordingly, this £18.3 million balance ceased to be treated as a
related party receivable and was recognised as an addition to the group’s joint ventures balance during the year ended 31 March 2022
A further £1.4 million (2021: £1.4 million) of non-current receivables was owed by other related parties at 31 March 2022.
During the year, United Utilities PLC provided guarantees in support of Water Plus in respect of certain amounts owed to wholesalers.
The aggregate limit of these guarantees was £54.1 million, of which £32.1 million related to guarantees to United Utilities Water Limited.
At 31 March 2022, amounts owed to related parties were nil (March 2021: £2.4 million). The amount outstanding at 31 March 2021
included £1.1 million due to Water Plus for the surrender of consortium relief tax losses including other amounts due to be settled in
accordance with normal credit terms. These amounts were paid during the current year bringing this balance to a nil position.
(see note 12).
Company
The parent company receives dividend income and pays and receives interest to and from subsidiary undertakings in the normal
course of business. Total dividend income received during the year amounted to £295.5 million (2021: £291.9 million) and total net
interest payable during the year was £21.0 million (2021: £24.2 million). Amounts outstanding at 31 March 2022 and 31 March 2021
between the parent company and subsidiary undertakings are disclosed in notes 14, 16 and 21.
At 31 March 2022 and 31 March 2021, no related party receivables and payables were secured and no guarantees were issued in
respect thereof. Balances will be settled in accordance with normal credit terms. No allowance for doubtful receivables has been
made for amounts owed by subsidiary undertakings as at 31 March 2022 and 31 March 2021.
A7 Accounting policies
Of the accounting policies outlined below, those deemed to be
the most significant for the group are those that align with the
critical accounting judgements and key sources of estimation
uncertainty set out on pages 217 to 218.
Basis of consolidation
The group financial statements consolidate the financial
statements of the company and entities controlled by the
company (its subsidiaries), and incorporate the results of its
share of joint ventures using the equity method of accounting.
The results of subsidiaries and joint ventures acquired or
disposed of during the year are included in the consolidated
income statement from the date control is obtained or until the
date that control ceases, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
under the relevant local GAAP into line with those used by the
group. Amounts attributable to non-controlling interests are
presented separately in equity and total comprehensive income
where material.
Subsidiaries
Subsidiaries are entities controlled by the group. Control is
achieved where the group is exposed to, or has the rights to,
variable returns from its involvement in an entity and has the
ability to affect those returns through its power over the entity. In
the parent company accounts, investments are held at cost less
provision for impairment.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Joint ventures
Joint ventures are entities in which the group holds an interest
on a long-term basis and which are jointly controlled with one or
more parties under a contractual arrangement. The group’s share
of joint venture results and assets and liabilities is incorporated
using the equity method of accounting. Under the equity method,
an investment in a joint venture is initially recognised
at cost and adjusted thereafter to recognise the group’s share
of the profit or loss.
On losing control of a subsidiary disposed of to a joint venture, the
group recognises the gain or loss attributable to measuring the
investment retained in the former subsidiary at its fair value at the
date when control is lost.
Revenue recognition
Revenue from the sale of water, wastewater and other services
represents the fair value of the consideration receivable in the
ordinary course of business for the goods and services provided,
exclusive of value added tax and foreign sales tax. Where
relevant, this includes an estimate of the sales value of units
supplied to customers between the date of the last meter reading
and the period end.
There are two main areas of the group’s activities considered to
result in revenue being recognised:
•
the provision of core water and wastewater services,
accounting for more than 97 per cent of the group’s revenue;
and
• capital income streams relating to diversions work, and
activities, typically performed opposite property developers,
that facilitate the creation of an authorised connection through
which properties can obtain water and wastewater services.
The core water and wastewater services, which are deemed to
be distinct performance obligations under the contracts with
customers, follow the same pattern of transfer to the customer
who simultaneously receives and consumes both of these
services over time.
Revenue is generally recognised at the time of delivery, with
consideration given as to whether collection of the full amount
under the contract is considered probable. Should the group
consider that the criteria for revenue recognition has not been
met for a transaction, revenue recognition would be delayed until
such time as collectability is reasonably assured.
Payments received in advance of revenue recognition are
recorded as deferred income. This includes the revenue in
respect of connection activities, itself a district performance
obligation. The revenue in respect of these activities is released
to the income statement over a period of 60 years, which is
deemed to be the time over which the performance obligation for
providing the connection is satisfied.
Operating profit
Operating profit is stated after charging operational expenses
but before investment income and finance expense.
Borrowing costs and finance income
Except as noted below, all borrowing costs and finance income
are recognised in the income statement on an accruals basis.
Transaction costs that are directly attributable to the acquisition
or issue of a financial asset or financial liability are included in the
initial fair value of that instrument. Where borrowing costs are
attributable to the acquisition, construction or production of a
qualifying asset, such costs are capitalised as part of the specific
asset.
Tax
Tax on the profit or loss for the year comprises current and deferred
tax. Tax is recognised in the income statement except to the extent
that it relates to items recognised directly in equity, in which case
it is recognised in equity. Assessing the outcome of uncertain tax
positions requires judgements to be made regarding the application
of tax law and the result of negotiations with, and enquiries from,
tax authorities. A current tax provision is only recognised when the
group has a present obligation as a result of a past event and it is
probable that the group will be required to settle that obligation to a
taxing authority.
Current tax
Current tax is based on the taxable profit for the period and is
provided at amounts expected to be paid or recovered using
the tax rates and laws that have been enacted or substantively
enacted at each reporting date.
Taxable profit differs from the net profit as reported in the
income statement because it excludes items of income or
expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible.
Current tax is charged or credited in the income statement,
except when it relates to items charged or credited to equity, in
which case the tax is dealt with in equity.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used
in the computation of taxable profit. Deferred tax liabilities are
provided, using the liability method, on all taxable temporary
differences at each reporting date. Such assets and liabilities
are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and interests
in joint ventures, except where the group is able to control the
reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
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Notes to the financial statements – appendices
Deferred tax is measured at the average tax rates that are
expected to apply in the periods in which the temporary timing
differences are expected to reverse based on tax rates and
laws that have been enacted or substantively enacted at each
reporting date.
Freehold land and assets in the course of construction are
not depreciated. Other assets are depreciated by writing off
their cost, less their estimated residual value, evenly over their
estimated useful economic lives, based on management’s
judgement and experience.
The carrying amount of deferred tax assets is reviewed at each
reporting date and is reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is charged or credited in the income statement,
except when it relates to items charged or credited to equity, in
which case the deferred tax is dealt with in equity.
Property, plant and equipment
Property, plant and equipment comprises water and wastewater
infrastructure assets and overground assets.
The useful economic lives of these assets are primarily as follows:
• Water and wastewater infrastructure assets:
•
Impounding reservoirs 200 years;
• Mains and raw water aqueducts 30 to 300 years;
• Sewers and sludge pipelines 60 to 300 years;
• Sea outfalls 75 years;
• Buildings 10 to 60 years;
• Operational assets 5 to 80 years; and
• Fixtures, fittings, tools and equipment 3 to 40 years.
Employee and other related costs incurred in implementing the
capital schemes of the group are capitalised.
The group is required to evaluate the carrying values of property,
plant and equipment for impairment whenever circumstances
indicate, in management’s view, that the carrying value of such
assets may not be recoverable. An impairment review requires
management to make uncertain estimates concerning the cash
flows, growth rates and discount rates of the cash generating
units under review.
Costs associated with a major inspection or overhaul of an asset
or group of assets are capitalised within property, plant and
equipment and depreciated over the period of time expected to
elapse between major inspections or overhauls.
Water and wastewater infrastructure assets
Infrastructure assets comprise a network of water and wastewater
pipes and systems. Expenditure on the infrastructure assets,
including borrowing costs where applicable, relating to increases
in capacity or enhancements of the network, is treated as
additions. Amounts incurred in maintaining the operating
capability of the network in accordance with defined standards
of service are expensed in the year in which the expenditure is
incurred. Infrastructure assets are depreciated by writing off their
cost (or deemed cost for infrastructure assets held on transition
to IFRS), less the estimated residual value, evenly over their useful
economic lives.
Other assets
All other property, plant and equipment is stated at historical
cost less accumulated depreciation.
Historical cost includes expenditure that is directly attributable
to the acquisition of the items, including relevant borrowing
costs, where applicable, for qualifying assets. Subsequent costs
are included in the asset’s carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to
the group and the cost of the item can be measured reliably. All
other repairs and maintenance costs are charged to the income
statement during the financial period in which they are incurred.
Depreciation methods, residual values and useful economic lives
are reassessed annually and, if necessary, changes are accounted
for prospectively. The gain or loss arising on the disposal or
retirement of an asset is determined as the difference between
the sales proceeds and the carrying amount of the asset and is
recognised in other operating costs.
Transfer of assets from customers and developers
Where the group receives from a customer or developer an item of
property, plant and equipment (or cash to construct or acquire an
item of property, plant and equipment) that the group must then
use, either to connect the customer to the network, or to provide
the customer with ongoing access to a supply of goods or services,
or to do both, such items are capitalised at their fair value and
included within property, plant and equipment, with a credit of
the same amount to deferred grants and contributions. The assets
are depreciated over their useful economic lives and the deferred
contributions released to revenue over the 60 years, which is the
estimated period over which an average connection through which
the group provides water and wastewater services is expected to
be in place (or where the receipt of property, plant and equipment
is solely to connect the customer to the network, the deferred
contribution is released immediately to revenue). This accounting
treatment has been applied to transfers of assets from customers
received on or after 1 July 2009.
Assets transferred from customers or developers are accounted
for at fair value. If no market exists for the assets then
incremental cash flows are used to arrive at fair value.
Intangible assets
Intangible assets are measured initially at cost and are amortised
on a straight-line basis over their estimated useful economic lives.
The carrying amount is reduced by any provision for impairment
where necessary. On a business combination, as well as recording
separable intangible assets already recognised in the statement
of financial position of the acquired entity at their fair value,
identifiable intangible assets that arise from contractual or other
legal rights are also included in the acquisition statement of financial
position at fair value.
Internal expenditure is capitalised as internally generated
intangibles only if it meets the criteria of IAS 38 ‘Intangible Assets’.
Intangible assets, which relate primarily to computer software, are
generally amortised over a period of three to 10 years.
The group expenses costs incurred in the implementation and
ongoing operation of computing systems built and delivered on a
‘software as a service’ (SaaS) basis and hosted in an external cloud
environment. These do not generally give rise to an identifiable
intangible asset that the group controls. In limited circumstances,
costs incurred in association with the implementation and
customisation of a SaaS system may enhance the group’s existing
digital infrastructure and would be expected to generate broader
future economic benefit. Where this results in an identifiable
intangible asset that the group controls, the costs are capitalised in
accordance with IAS 38 and subsequently amortised over a period
of three to 10 years.
Impairment of assets
Where appropriate, assets are reviewed for impairment at each
reporting date to determine whether there is any indication that
those assets may have suffered an impairment loss. Where the
asset does not generate cash flows that are independent from
other assets, the group estimates the recoverable amount of the
cash generating unit to which the asset belongs.
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Notes to the financial statements – appendices
Deferred tax is measured at the average tax rates that are
Freehold land and assets in the course of construction are
expected to apply in the periods in which the temporary timing
not depreciated. Other assets are depreciated by writing off
differences are expected to reverse based on tax rates and
their cost, less their estimated residual value, evenly over their
laws that have been enacted or substantively enacted at each
estimated useful economic lives, based on management’s
reporting date.
judgement and experience.
The carrying amount of deferred tax assets is reviewed at each
Depreciation methods, residual values and useful economic lives
reporting date and is reduced to the extent that it is no longer
are reassessed annually and, if necessary, changes are accounted
probable that sufficient taxable profits will be available to allow
for prospectively. The gain or loss arising on the disposal or
all or part of the asset to be recovered.
Deferred tax is charged or credited in the income statement,
except when it relates to items charged or credited to equity, in
retirement of an asset is determined as the difference between
the sales proceeds and the carrying amount of the asset and is
recognised in other operating costs.
which case the deferred tax is dealt with in equity.
Transfer of assets from customers and developers
Property, plant and equipment
Property, plant and equipment comprises water and wastewater
infrastructure assets and overground assets.
The useful economic lives of these assets are primarily as follows:
• Water and wastewater infrastructure assets:
•
Impounding reservoirs 200 years;
• Mains and raw water aqueducts 30 to 300 years;
• Sewers and sludge pipelines 60 to 300 years;
• Sea outfalls 75 years;
• Buildings 10 to 60 years;
• Operational assets 5 to 80 years; and
• Fixtures, fittings, tools and equipment 3 to 40 years.
Employee and other related costs incurred in implementing the
capital schemes of the group are capitalised.
The group is required to evaluate the carrying values of property,
plant and equipment for impairment whenever circumstances
indicate, in management’s view, that the carrying value of such
assets may not be recoverable. An impairment review requires
management to make uncertain estimates concerning the cash
flows, growth rates and discount rates of the cash generating
units under review.
Costs associated with a major inspection or overhaul of an asset
or group of assets are capitalised within property, plant and
equipment and depreciated over the period of time expected to
elapse between major inspections or overhauls.
Water and wastewater infrastructure assets
Infrastructure assets comprise a network of water and wastewater
pipes and systems. Expenditure on the infrastructure assets,
including borrowing costs where applicable, relating to increases
in capacity or enhancements of the network, is treated as
additions. Amounts incurred in maintaining the operating
capability of the network in accordance with defined standards
of service are expensed in the year in which the expenditure is
incurred. Infrastructure assets are depreciated by writing off their
cost (or deemed cost for infrastructure assets held on transition
to IFRS), less the estimated residual value, evenly over their useful
economic lives.
Other assets
All other property, plant and equipment is stated at historical
cost less accumulated depreciation.
Historical cost includes expenditure that is directly attributable
to the acquisition of the items, including relevant borrowing
costs, where applicable, for qualifying assets. Subsequent costs
are included in the asset’s carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to
the group and the cost of the item can be measured reliably. All
other repairs and maintenance costs are charged to the income
statement during the financial period in which they are incurred.
Where the group receives from a customer or developer an item of
property, plant and equipment (or cash to construct or acquire an
item of property, plant and equipment) that the group must then
use, either to connect the customer to the network, or to provide
the customer with ongoing access to a supply of goods or services,
or to do both, such items are capitalised at their fair value and
included within property, plant and equipment, with a credit of
the same amount to deferred grants and contributions. The assets
are depreciated over their useful economic lives and the deferred
contributions released to revenue over the 60 years, which is the
estimated period over which an average connection through which
the group provides water and wastewater services is expected to
be in place (or where the receipt of property, plant and equipment
is solely to connect the customer to the network, the deferred
contribution is released immediately to revenue). This accounting
treatment has been applied to transfers of assets from customers
received on or after 1 July 2009.
Assets transferred from customers or developers are accounted
for at fair value. If no market exists for the assets then
incremental cash flows are used to arrive at fair value.
Intangible assets
Intangible assets are measured initially at cost and are amortised
on a straight-line basis over their estimated useful economic lives.
The carrying amount is reduced by any provision for impairment
where necessary. On a business combination, as well as recording
separable intangible assets already recognised in the statement
of financial position of the acquired entity at their fair value,
identifiable intangible assets that arise from contractual or other
legal rights are also included in the acquisition statement of financial
position at fair value.
Internal expenditure is capitalised as internally generated
intangibles only if it meets the criteria of IAS 38 ‘Intangible Assets’.
Intangible assets, which relate primarily to computer software, are
generally amortised over a period of three to 10 years.
The group expenses costs incurred in the implementation and
ongoing operation of computing systems built and delivered on a
‘software as a service’ (SaaS) basis and hosted in an external cloud
environment. These do not generally give rise to an identifiable
intangible asset that the group controls. In limited circumstances,
costs incurred in association with the implementation and
customisation of a SaaS system may enhance the group’s existing
digital infrastructure and would be expected to generate broader
future economic benefit. Where this results in an identifiable
intangible asset that the group controls, the costs are capitalised in
accordance with IAS 38 and subsequently amortised over a period
of three to 10 years.
Impairment of assets
Where appropriate, assets are reviewed for impairment at each
reporting date to determine whether there is any indication that
those assets may have suffered an impairment loss. Where the
asset does not generate cash flows that are independent from
other assets, the group estimates the recoverable amount of the
cash generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to
sell, and value in use. Value in use represents the net present
value of expected future cash flows, discounted on a pre-tax
basis, using a rate that reflects current market assessments of
the time value of money and the risks specific to the asset, for
which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash generating unit) is reduced to its
recoverable amount. Impairment losses in respect of non-current
assets are recognised in the income statement within operating
costs.
Where an impairment loss subsequently reverses, the reversal is
recognised in the income statement and the carrying amount of
the asset is increased to the revised estimate of its recoverable
amount, but not so as to exceed the carrying amount that would
have been determined had no impairment loss been recognised
in prior years.
Capitalisation of costs associated with regulatory price
review programmes
As a regulated business the group’s principal subsidiary, United
Utilities Water Limited, is required to submit business plans to its
regulator, Ofwat, on a cyclical basis. The costs to develop these
business plans, which can be significant, largely relate to the
development of material capital programmes to be delivered over
the next five-year price control period. As such, the majority of
these costs are considered to be directly attributable to bringing
capital solutions into working condition, giving rise to future
economic benefit in the form of reduced project costs as the
capital programme is delivered, and supporting the enhancement
of the company’s infrastructure network as a whole. Such costs
are therefore capitalised within property, plant and equipment
where appropriate, and depreciated over a period of five years
as the economic benefit is realised through the delivery of the
capital programme.
Non-current assets held for sale
Non-current assets classified as held for sale are measured
at the lower of carrying value and fair value less costs to sell.
Non-current assets are classified as held for sale if their carrying
amount will be recovered through a sale transaction rather
than through continuing use. This condition is regarded as
having been met only when the sale is highly probable and the
asset is available for immediate sale in its present condition.
Management must be committed to the sale, which should be
expected to qualify for recognition as a completed sale within
one year from the date of classification.
Financial instruments
Financial assets and financial liabilities are recognised and
derecognised in the group’s statement of financial position on the
trade date when the group becomes/ceases to be a party to the
contractual provisions of the instrument.
Cash and short-term deposits
Cash and short-term deposits include cash at bank and in hand,
deposits and other short-term highly liquid investments which
are readily convertible into known amounts of cash, have a
maturity of three months or less from the date of acquisition and
which are subject to an insignificant risk of change in value. In
the consolidated statement of cash flows and related notes, cash
and cash equivalents include cash and short-term deposits, net
of book overdrafts.
Financial investments
Investments (other than interests in subsidiaries, joint ventures
and fixed deposits) are initially measured at fair value, including
transaction costs. Investments classified as financial assets
measured at fair value through profit or loss (FVPL) in accordance
with IFRS 9 ‘Financial Instruments’ are measured at subsequent
reporting dates at fair value. Gains and losses arising from
changes in fair value are recognised in the net profit or loss for
the period. The business model employed in respect of financial
assets is that of a hold-to-collect model.
Trade receivables
Trade receivables are initially measured at fair value, and are
subsequently measured at amortised cost, less any impairment
for irrecoverable amounts. Estimated irrecoverable amounts are
based on historical experience of the receivables balance.
Trade payables
Trade payables are initially measured at fair value and are
subsequently measured at amortised cost.
Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences
a residual interest in the assets of the group after deducting all of
its liabilities.
Equity instruments
Equity instruments issued by the group are recorded at the
proceeds received, net of direct issue costs.
Borrowings
The group’s default treatment is that bonds and loans are initially
measured at fair value, being the cash proceeds received net
of any direct issue costs. They are subsequently measured at
amortised cost applying the effective interest method. The
difference between the net cash proceeds received at inception
and the principal cash flows due at maturity is accrued over the
term of the borrowing.
The default treatment of measuring at amortised cost, while
associated hedging derivatives are recognised at fair value,
presents an accounting measurement mismatch that has
the potential to introduce considerable volatility to both the
income statement and the statement of financial position.
Therefore, where feasible, the group takes advantage of the
provisions under IFRS 9 ‘Financial Instruments’ to make fair value
adjustments to its borrowing instruments to reduce this volatility
and better represent the economic hedges that exist between the
group’s borrowings and associated derivative contracts.
Where feasible, the group designates its financial instruments
within fair value hedge relationships. To apply fair value hedge
accounting, it must be demonstrated that there is an economic
relationship between the borrowing instrument and the hedging
derivative and that the designated hedge ratio is consistent with
the group’s risk management strategy.
Borrowings designated within a fair value hedge relationship
Where designated, bonds and loans are initially measured at
fair value, being the cash proceeds received net of any direct
issue costs. They are subsequently adjusted for any change in
fair value attributable to the risk being hedged at each reporting
date, with the change being charged or credited to finance
expense in the income statement.
Hedge accounting is discontinued prospectively when the
hedging instrument is sold, terminated or exercised, or where the
hedge relationship no longer qualifies for hedge accounting.
Under the provisions of IFRS 9 ‘Financial Instruments’,
changes in the group’s own credit risk are recognised in other
comprehensive income.
Borrowings designated at fair value through profit or loss
Designation is made where the requirements to designate within
a fair value hedge cannot be met at inception despite there
being significant fair value offset between the borrowing and
the hedging derivative. Where designated, bonds and loans are
initially measured at fair value being the cash proceeds received,
and are subsequently measured at fair value at each reporting
date, with changes in fair value being charged or credited to
finance expense in the income statement.
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Notes to the financial statements – appendices
Derivative financial instruments
The group’s default treatment is that derivative financial
instruments are measured at fair value at each reporting date,
with changes in fair value being charged or credited to finance
expense in the income statement. The group enters into financial
derivatives contracts to manage its financial exposure to changes
in market rates (see note A4).
Derivative financial instruments designated within a
cash flow hedge relationship
Gains or losses resulting from the effective portion of the hedging
instrument are recognised in other comprehensive income and in
the cash flow hedge reserve with any remaining gains or losses
recognised immediately in the income statement. The cash flow
hedge reserve is adjusted to the lower of the cumulative gain or
loss on the hedging instrument and cumulative change in fair
value of the hedged item. At the maturity date, amounts paid/
received are recognised against operating expenses in the income
statement.
Upon discontinuation of a cash flow hedge, the amount
accumulated in other comprehensive income remains in the
cash flow hedge reserve if the hedged future cash flows are
still expected to occur. Otherwise the amount is immediately
reclassified to the income statement.
Derivatives and borrowings – valuation
Where an active market exists, designated borrowings and
derivatives recorded at fair value are valued using quoted market
prices. Otherwise, they are valued using a net present value
valuation model. The model uses applicable interest rate curve
data at each reporting date to determine any floating cash
flows. Projected future cash flows associated with each financial
instrument are discounted to the reporting date using discount
factors derived from the applicable interest curves adjusted for
counterparty credit risk where appropriate. Discounted foreign
currency cash flows are converted into sterling at the spot
exchange rate at each reporting date. Assumptions are made
with regard to credit spreads based on indicative pricing data.
The valuation of debt designated in a fair value hedge
relationship is calculated based on the risk being hedged
as prescribed by IFRS 9 ‘Financial Instruments’. The group’s
policy is to hedge its exposure to changes in the applicable
underlying interest rate and it is this portion of the cash flows
that is included in the valuation model (excluding any applicable
company credit risk spread).
The valuation of debt designated at fair value through the
profit or loss incorporates an assumed credit risk spread in the
applicable discount factor. Credit spreads are determined based
on indicative pricing data.
Inventories
Inventories are stated at the lower of cost and net realisable value.
For properties held for resale, cost includes the cost of acquiring
and developing the sites, including borrowing costs where
applicable.
Net realisable value represents the estimated selling price less
all estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
Employee benefits
Retirement benefit obligations
The group operates two defined benefit pension schemes, which
are independent of the group’s finances, for its employees.
Actuarial valuations to determine the funding of the schemes,
along with future contribution rates, are carried out by the
pension scheme actuary as directed by the trustees at intervals
of not more than three years. In any intervening years, the
trustees review the continuing appropriateness of the funding
and contribution rates.
From a financial reporting perspective and in accordance with
IAS 19 ‘Employee Benefits’, defined benefit assets are measured
at fair value while liabilities are measured at present value,
using the projected unit credit method. The difference between
the two amounts is recognised as a surplus or obligation in the
statement of financial position. Where this difference results in
a defined benefit surplus, this is recognised in accordance with
IFRIC 14 ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction’, on the basis that
the group has an unconditional right to a refund of any surplus
that may exist following the full settlement of plan liabilities in a
single event.
The pension cost under IAS 19 is assessed in accordance with
the advice of a firm of actuaries based on the latest actuarial
valuation and assumptions determined by the actuary, which are
used to estimate the present value of defined benefit obligations.
The assumptions are based on information supplied to the
actuary by the company, supplemented by discussions between
the actuary and management. The assumptions are disclosed in
note A5.
The cost of providing pension benefits to employees relating
to the current year’s service (including curtailment gains and
losses) is included within employee benefits expense, while
the interest on the schemes’ assets and liabilities is included
within investment income and finance expense respectively.
Remeasurement gains/losses on scheme assets and liabilities are
presented in other comprehensive income.
In addition, the group operates a defined contribution pension
section within the United Utilities Pension Scheme. Payments are
charged as employee costs as they fall due. The group has no
further payment obligations once the contributions have been paid.
Share-based compensation arrangements
The group operates equity-settled, share-based compensation
plans, issued to certain employees. The equity-settled share-based
payments are measured at fair value at the date of grant. The fair
value determined at the grant date is expensed on a straight-line
basis over the vesting period, based on estimates of the number of
options that are expected to vest. Fair value is based on simulation
models, according to the relevant measures of performance.
The group has the option to settle some of these equity-settled
share-based payments in cash. At each reporting date, the group
revises its estimate of the number of options that are expected
to become exercisable with the impact of any revision being
recognised in the income statement, and a corresponding
adjustment to equity over the remaining vesting period.
Provisions
Provisions are recognised when the group has a present
legal or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required to
settle the obligation, and the amount can be reliably estimated.
Expenditure that relates to an existing condition caused by past
operations that does not contribute to current or future earnings
is expensed.
Foreign currency translation
Transactions and balances
Transactions in foreign currencies are recorded at the exchange
rates applicable on the dates of the transactions. At each
reporting date, monetary assets and liabilities denominated in
foreign currencies are translated into sterling at the relevant
rates of exchange applicable on that date. Gains and losses
arising on retranslation are included in net profit or loss for the
period.
Exchange differences arising on investments in equity
instruments classified as fair value through other comprehensive
income are included in the gains or losses arising from changes
in fair value which are recognised directly in equity. To hedge its
exposure to certain foreign exchange risks, the group enters into
contracts for derivative instruments (see note A4).
unitedutilities.com/corporate
260
Notes to the financial statements – appendices
Derivative financial instruments
From a financial reporting perspective and in accordance with
The group’s default treatment is that derivative financial
IAS 19 ‘Employee Benefits’, defined benefit assets are measured
instruments are measured at fair value at each reporting date,
at fair value while liabilities are measured at present value,
with changes in fair value being charged or credited to finance
using the projected unit credit method. The difference between
expense in the income statement. The group enters into financial
the two amounts is recognised as a surplus or obligation in the
derivatives contracts to manage its financial exposure to changes
statement of financial position. Where this difference results in
in market rates (see note A4).
Derivative financial instruments designated within a
cash flow hedge relationship
Gains or losses resulting from the effective portion of the hedging
instrument are recognised in other comprehensive income and in
the cash flow hedge reserve with any remaining gains or losses
a defined benefit surplus, this is recognised in accordance with
IFRIC 14 ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction’, on the basis that
the group has an unconditional right to a refund of any surplus
that may exist following the full settlement of plan liabilities in a
single event.
recognised immediately in the income statement. The cash flow
The pension cost under IAS 19 is assessed in accordance with
hedge reserve is adjusted to the lower of the cumulative gain or
the advice of a firm of actuaries based on the latest actuarial
loss on the hedging instrument and cumulative change in fair
valuation and assumptions determined by the actuary, which are
value of the hedged item. At the maturity date, amounts paid/
used to estimate the present value of defined benefit obligations.
received are recognised against operating expenses in the income
The assumptions are based on information supplied to the
statement.
Upon discontinuation of a cash flow hedge, the amount
accumulated in other comprehensive income remains in the
note A5.
actuary by the company, supplemented by discussions between
the actuary and management. The assumptions are disclosed in
cash flow hedge reserve if the hedged future cash flows are
The cost of providing pension benefits to employees relating
still expected to occur. Otherwise the amount is immediately
to the current year’s service (including curtailment gains and
reclassified to the income statement.
Derivatives and borrowings – valuation
Where an active market exists, designated borrowings and
derivatives recorded at fair value are valued using quoted market
prices. Otherwise, they are valued using a net present value
losses) is included within employee benefits expense, while
the interest on the schemes’ assets and liabilities is included
within investment income and finance expense respectively.
Remeasurement gains/losses on scheme assets and liabilities are
presented in other comprehensive income.
valuation model. The model uses applicable interest rate curve
In addition, the group operates a defined contribution pension
data at each reporting date to determine any floating cash
section within the United Utilities Pension Scheme. Payments are
flows. Projected future cash flows associated with each financial
charged as employee costs as they fall due. The group has no
instrument are discounted to the reporting date using discount
further payment obligations once the contributions have been paid.
factors derived from the applicable interest curves adjusted for
counterparty credit risk where appropriate. Discounted foreign
currency cash flows are converted into sterling at the spot
exchange rate at each reporting date. Assumptions are made
with regard to credit spreads based on indicative pricing data.
Share-based compensation arrangements
The group operates equity-settled, share-based compensation
plans, issued to certain employees. The equity-settled share-based
payments are measured at fair value at the date of grant. The fair
value determined at the grant date is expensed on a straight-line
The valuation of debt designated in a fair value hedge
basis over the vesting period, based on estimates of the number of
relationship is calculated based on the risk being hedged
options that are expected to vest. Fair value is based on simulation
as prescribed by IFRS 9 ‘Financial Instruments’. The group’s
models, according to the relevant measures of performance.
policy is to hedge its exposure to changes in the applicable
The group has the option to settle some of these equity-settled
underlying interest rate and it is this portion of the cash flows
share-based payments in cash. At each reporting date, the group
that is included in the valuation model (excluding any applicable
revises its estimate of the number of options that are expected
company credit risk spread).
The valuation of debt designated at fair value through the
profit or loss incorporates an assumed credit risk spread in the
applicable discount factor. Credit spreads are determined based
Provisions
to become exercisable with the impact of any revision being
recognised in the income statement, and a corresponding
adjustment to equity over the remaining vesting period.
on indicative pricing data.
Inventories
Inventories are stated at the lower of cost and net realisable value.
For properties held for resale, cost includes the cost of acquiring
and developing the sites, including borrowing costs where
applicable.
Net realisable value represents the estimated selling price less
all estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
Employee benefits
Retirement benefit obligations
The group operates two defined benefit pension schemes, which
are independent of the group’s finances, for its employees.
Actuarial valuations to determine the funding of the schemes,
along with future contribution rates, are carried out by the
pension scheme actuary as directed by the trustees at intervals
of not more than three years. In any intervening years, the
trustees review the continuing appropriateness of the funding
and contribution rates.
Provisions are recognised when the group has a present
legal or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required to
settle the obligation, and the amount can be reliably estimated.
Expenditure that relates to an existing condition caused by past
operations that does not contribute to current or future earnings
is expensed.
Foreign currency translation
Transactions and balances
Transactions in foreign currencies are recorded at the exchange
rates applicable on the dates of the transactions. At each
reporting date, monetary assets and liabilities denominated in
foreign currencies are translated into sterling at the relevant
rates of exchange applicable on that date. Gains and losses
arising on retranslation are included in net profit or loss for the
period.
Exchange differences arising on investments in equity
instruments classified as fair value through other comprehensive
income are included in the gains or losses arising from changes
in fair value which are recognised directly in equity. To hedge its
exposure to certain foreign exchange risks, the group enters into
contracts for derivative instruments (see note A4).
charged to the income statement on a straight-line basis over the
period of the lease.
Where leases have a term of less than 12 months from the
commencement date and do not have a purchase option, the
group applies the short-term lease recognition exemption
available under IFRS 16. The group applies the low value
recognition exemption permitted by the standard to leases of
assets with a value of less than £2,500. Payments for short-term
and low value leases are instead charged to operating costs on a
straight-line basis over the period of the lease.
Statement of cash flows
Grants and contributions received
Grants and contributions received arise from transactions
with customers, typically property developers, that result in
the expansion of the group’s water and wastewater network
and therefore its fixed asset base. Given that these grants and
contributions are used to fund expenditure that results in the
enhancement of the group’s network assets, the cash inflows are
classified within investing activities in the period.
Interest payments and receipts
IFRS allows interest payments and interest receipts to be
classified within operating activities or financing activities/
investing activities. The group classifies interest payments and
interest receipts within operating activities, with management
viewing these in conjunction with other operating cash flows
in assessing the ability of the group to maintain its operating
capability.
Support costs
Costs of time and resources incurred by the group’s support
functions that is capitalised in the period (see page 218) is
included in purchase of property, plant and equipment within
investing activities. These cash flows represent expenditures
that have been made for resources intended to generate future
income and cash flows, and the group deem these to therefore
meet the definition of an investing activity.
Cash flows on derivatives
The cash flows on derivatives as a result of the group’s hedging
activities are presented together with the cash flows relating
to the underlying hedged item to provide a more faithful
representation of the substance of the transaction.
Taxes paid
Taxes paid by the group are presented as cash flows from
operating activities. The group deem it impracticable to identify
the tax cash flows with respect to individual transactions, which
may themselves be presented in investing activities or financing
activities, and instead present total tax cash flows as operating
activities.
Dividend receipts
Dividends received from joint ventures have been presented
in investing activities, with these cash receipts deemed to
represent a return on investments previously made by the group.
Group companies
On consolidation, the statements of financial position of
overseas subsidiaries and joint ventures (none of which has the
currency of a hyperinflationary economy) are translated into
sterling at exchange rates applicable at each reporting date. The
income statements are translated into sterling using the average
rate unless exchange rates fluctuate significantly, in which
case the exchange rate at the date the transaction occurred is
used. Exchange differences resulting from the translation of
such statements of financial position at rates prevailing at the
beginning and end of the period, together with the differences
between income statements translated at average rates and
rates ruling at the period end, are dealt with as movements on
the group’s cumulative exchange reserve, a separate component
of equity. Such translation differences are recognised as income
or expense in the period in which the operation is disposed of.
Grants and contributions
Grants and contributions receivable in respect of property, plant
and equipment are treated as deferred income, which is credited
to the income statement over the estimated useful economic
lives of the related assets.
Leases
At inception of a contract the group assesses whether a contract
is, or contains, a lease. Where a lease is present, a right-of-use
asset and lease liability is recognised at the commencement
date. The lease liability is measured at the present value of future
lease payments due over the term of the lease, with the right-of-
use asset recognised as property, plant and equipment at cost.
This is generally equivalent to the initial measurement of the
lease liability.
The group has elected to apply a practical expedient permitted
by IFRS 16 whereby for the fixtures, fittings, tools and equipment
asset class of leases the lease and non-lease components of the
contracts are not separated, and instead are both accounted
for as if they were a single lease component. Where non-lease
components exist they are embedded within the lease payments,
and the group deems that separation of such contracts into
their constituent parts for this asset class would generally
not be practicable nor have a material effect on the financial
statements. IFRS 16 requires that where this practical expedient
is applied, it is applied to the entire class of similar assets. The
group has not applied this expedient to the remaining lease
asset classes. Non-lease components include service charges,
maintenance charges, and monitoring charges. For lease asset
classes where the expedient has not been applied, non-lease
components are excluded from the projection of future lease
payments and are recorded separately within operating costs on
a straight-line basis.
Lease payments are discounted using the group’s incremental
rate of borrowing if the interest rate implicit in the lease cannot
be readily determined. For materially all of the group’s leases,
the group’s incremental rate of borrowing is used. This rate is
calculated using a number of inputs, being observable risk-free
gilt rates, specific data based on bonds already in circulation
for the relevant group company, as well as data from the wider
utility sector. Further adjustments for payment profile and the
term of the lease are made.
After the commencement date, the lease liability is increased
for the accretion of interest (being the unwinding of the
discounting applied to future lease payments) and reduced by
lease payments made. In addition to this the carrying amount is
updated to reflect any remeasurement or lease modifications.
Remeasurements are typically required as a result of rent reviews
or changes to the lease term. In these cases a corresponding
adjustment to the right-of-use asset is made.
Depreciation of right-of-use assets is charged on a straight-line
basis over the term of the lease. Lease payments are instead
260
unitedutilities.com/corporate
Stock Code: UU.
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Notes to the financial statements – appendices
A8 Subsidiaries and other group undertakings
Details of the group’s subsidiary undertakings, joint ventures and associates are set out below. Unless otherwise specified, the
registered address for each entity is Haweswater House, Lingley Mere Business Park, Lingley Green Avenue, Great Sankey,
Warrington, WA5 3LP, United Kingdom. For further details of joint ventures and associates please see note 12.
Class of
share
capital held
Proportion of
share capital
owned/voting
rights %* Nature of business
Subsidiary undertakings
Great Britain
Halkyn District Mines Drainage Company Limited
Lingley Mere Management Company Limited
North West Water International Limited
North West Water Limited
United Utilities (Overseas Holdings) Limited
United Utilities Energy Limited
United Utilities Healthcare Trustee Limited
United Utilities International Limited
United Utilities North West Limited
United Utilities Pensions Trustees Limited
United Utilities Property Services Limited
United Utilities Renewable Energy Limited
United Utilities Total Solutions Limited
United Utilities Utility Solutions (Industrial) Limited
United Utilities Water Finance PLC
United Utilities Water Limited
UU (ESPS) Pension Trustee Limited
UU Group Limited
UU Secretariat Limited
YCL Transport Limited
United Utilities Bioresources Limited
The Netherlands
United Utilities (Tallinn) BV(1)
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
99.9 Dormant
87.0
Property management
100.0 Non-trading
100.0 Dormant
100.0 Holding company
100.0
Energy generation
100.0 Corporate trustee
100.0 Consulting services and project management
100.0 Holding company
100.0 Corporate trustee
100.0
100.0
Property management
Renewable energy generation
100.0 Non-trading
100.0 Holding company
100.0
Financing company
100.0 Water and wastewater services
100.0 Corporate trustee
100.0 Dormant
100.0 Dormant
100.0 Non-trading
100.0 Wastewater services
Ordinary
100.0 Non-trading
Joint ventures
All joint ventures are accounted for using the equity method and are strategic to the group’s activities to varying degrees.
Great Britain
Lingley Mere Business Park Development Company
Limited
Selectusonline Limited
Water Plus Group Limited(2)
Water Plus Limited(2)
Water Plus Select Limited(2)
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50.0 Development company
16.7
Procurement portal
50.0 Holding company
50.0 Water and wastewater retail services
50.0 Water and wastewater retail services
* Shares are held by subsidiary undertakings rather than directly by United Utilities Group PLC
Notes:
(1) Registered address: Herikerbergweg 88, 1101 CM Amsterdam, the Netherlands.
(2) Water Plus Limited and Water Plus Select Limited are wholly owned subsidiaries of Water Plus Group Limited. Registered address: South Court
Riverside Park, Campbell Road, Stoke-on-Trent, United Kingdom, ST4 4DA.
262
unitedutilities.com/corporate
Notes to the financial statements – appendices
Five-year summary – unaudited
A8 Subsidiaries and other group undertakings
Details of the group’s subsidiary undertakings, joint ventures and associates are set out below. Unless otherwise specified, the
registered address for each entity is Haweswater House, Lingley Mere Business Park, Lingley Green Avenue, Great Sankey,
Warrington, WA5 3LP, United Kingdom. For further details of joint ventures and associates please see note 12.
The financial summary (unaudited) set out below has been derived from the audited consolidated financial statements of United
Utilities Group PLC for the five years ended 31 March 2022. Underlying profit measures and net debt have been re-presented for the
years ended 31 March 2018 to 31 March 2021 so that they are presented on a consistent basis to the measures presented for the year
ended 31 March 2022. Further detail of the changes to how underlying profit measures are presented can be found on pages 82 to 83,
and further detail of the changes to how net debt is calculated can be found on page 238.
Year ended 31 March
Continuing operations
Revenue
Reported operating profit
Underlying operating profit
Reported profit before tax
Underlying profit before tax
Reported profit after tax
Underlying profit after tax
Reported earnings per share (basic)
Underlying earnings per share
2022
£m
2021
£m
2020
£m
2019
£m
2018
£m
1,862.7
1,808.0
1,859.3
1,818.5
1,735.8
610.0
610.0
439.9
301.9
(56.8)
367.0
(8.3)p
53.8p
602.1
602.1
551.0
460.0
453.4
383.0
66.5p
56.2p
630.3
732.1
303.2
534.8
106.8
486.3
15.7p
71.3p
634.9
677.6
436.2
500.9
363.4
449.5
53.3p
65.9p
636.4
639.1
432.1
411.0
354.6
389.6
52.0p
57.1p
Dividend per ordinary share
43.5p
43.24p
42.06p
41.28p
39.73p
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Total net assets and shareholders’ equity
Net cash generated from operating activities
Net cash used in investing activities
Net cash (used in)/generated from financing activities
Effects of exchange rates
Net (decrease)/increase in cash and cash equivalents
Net debt
RCV gearing(1) (%)
13,823.2
613.8
14,437.0
13,166.2
1,012.9
14,179.1
(10,791.5)
(10,152.6)
(688.1)
(11,479.6)
2,957.4
934.4
(639.7)
(809.7)
1.5
(513.5)
(995.5)
(11,148.1)
3,031.0
859.4
(549.3)
(89.7)
–
220.4
7,570.0
61%
7,305.8
62%
13,215.7
828.4
14,044.1
(9,877.3)
(1,204.7)
(11,082.0)
2,962.1
810.3
(593.9)
(27.8)
–
188.6
7,227.5
61%
12,466.4
721.4
13,187.8
(9,025.0)
(1,052.0)
(10,077.0)
3,110.8
832.3
(627.7)
(377.4)
–
(172.8)
11,853.6
1,149.9
13,003.5
(8,911.1)
(1,141.5)
(10,052.6)
2,950.9
815.6
(723.2)
184.7
–
277.1
6,990.4
60%
6,816.8
61%
Note:
(1) Regulatory capital value (RCV) gearing is calculated as group net debt (see note A2), divided by the RCV expressed in out-turn prices, of United
Utilities Water Limited.
Proportion of
Class of
share capital
share
owned/voting
capital held
rights %* Nature of business
Subsidiary undertakings
Great Britain
Halkyn District Mines Drainage Company Limited
Lingley Mere Management Company Limited
North West Water International Limited
North West Water Limited
United Utilities (Overseas Holdings) Limited
United Utilities Energy Limited
United Utilities Healthcare Trustee Limited
United Utilities International Limited
United Utilities North West Limited
United Utilities Pensions Trustees Limited
United Utilities Property Services Limited
United Utilities Renewable Energy Limited
United Utilities Total Solutions Limited
United Utilities Utility Solutions (Industrial) Limited
United Utilities Water Finance PLC
United Utilities Water Limited
UU (ESPS) Pension Trustee Limited
UU Group Limited
UU Secretariat Limited
YCL Transport Limited
United Utilities Bioresources Limited
The Netherlands
United Utilities (Tallinn) BV(1)
Joint ventures
Great Britain
Limited
Selectusonline Limited
Water Plus Group Limited(2)
Water Plus Limited(2)
Water Plus Select Limited(2)
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100.0 Consulting services and project management
99.9 Dormant
87.0
Property management
100.0 Non-trading
100.0 Dormant
100.0 Holding company
100.0
Energy generation
100.0 Corporate trustee
100.0 Holding company
100.0 Corporate trustee
100.0
100.0
Property management
Renewable energy generation
100.0 Non-trading
100.0 Holding company
100.0
Financing company
100.0 Water and wastewater services
100.0 Corporate trustee
100.0 Dormant
100.0 Dormant
100.0 Non-trading
100.0 Wastewater services
50.0 Development company
16.7
Procurement portal
50.0 Holding company
50.0 Water and wastewater retail services
50.0 Water and wastewater retail services
Ordinary
100.0 Non-trading
All joint ventures are accounted for using the equity method and are strategic to the group’s activities to varying degrees.
Lingley Mere Business Park Development Company
* Shares are held by subsidiary undertakings rather than directly by United Utilities Group PLC
Notes:
(1) Registered address: Herikerbergweg 88, 1101 CM Amsterdam, the Netherlands.
(2) Water Plus Limited and Water Plus Select Limited are wholly owned subsidiaries of Water Plus Group Limited. Registered address: South Court
Riverside Park, Campbell Road, Stoke-on-Trent, United Kingdom, ST4 4DA.
262
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Shareholder information
Key dates
− 23 June 2022
Ex-dividend date for the 2021/22 final dividend
− 24 June 2022
Record date for 2021/22 final dividend
− 11 July 2022
DRIP election date for 2021/22 final dividend
− 22 July 2022
Annual general meeting
− 1 August 2022
Payment of 2021/22 final dividend to shareholders
− 23 November 2022
Announcement of half-year results for the six months ending
30 September 2022
− 22 December 2022
Ex-dividend date for 2022/23 interim dividend
− 23 December 2022
Record date for 2022/23 interim dividend
− 11 January 2023
DRIP election date for 2022/23 interim dividend
− 1 February 2023
Payment of 2022/23 interim dividend to shareholders
− May 2023
Announce the final results for the 2022/23 financial year
− June 2023
Publish the Annual Report and Financial Statements for the
2022/23 financial year
Electronic communications
We’re encouraging our shareholders to receive their shareholder
information by email and via our website. Not only is this a
quicker way for you to receive information, it helps us to be
more sustainable by reducing paper and printing materials and
lowering postage costs.
Registering for electronic shareholder communications is very
straightforward, and is done online via shareview.co.uk which is
a website provided by our registrar, Equiniti.
Log on to shareview.co.uk and you can:
•
set up electronic shareholder communication;
• view your shareholdings;
• update your details if you change you address; and
• get your dividends paid directly into your bank account.
Please do not use any electronic address provided in this annual
report or in any related document to communicate with the
company for any purposes other than those expressly stated.
Make life easier and have your dividends paid straight
into your bank account
• The dividend goes directly into your bank account and is
available immediately;
Online annual report
Our annual report is available online. View or download the full
Annual Report and Financial Statements from:
unitedutilities.annualreport2022.com
• No need to pay dividend cheques into your bank account;
• No risk of losing cheques in the post;
• No risk of having to replace spoiled or out-of-date cheques;
and
•
It’s cost-effective for your company.
To take advantage of this, please contact Equiniti via
shareview.co.uk or complete the dividend mandate form you
receive with your next dividend cheque.
If you choose to have your dividend paid directly into your bank
account you’ll receive one tax voucher each year. This will be
issued with the interim dividend normally paid in February and
will contain details of all the dividends paid in that tax year. If
you’d like to receive a tax voucher with each dividend payment,
please contact Equiniti.
264
unitedutilities.com/corporate
Shareholder information
Key dates
− 23 June 2022
− 24 June 2022
− 11 July 2022
Ex-dividend date for the 2021/22 final dividend
Record date for 2021/22 final dividend
DRIP election date for 2021/22 final dividend
− 22 July 2022
Annual general meeting
− 1 August 2022
− 23 November 2022
30 September 2022
− 22 December 2022
Payment of 2021/22 final dividend to shareholders
Announcement of half-year results for the six months ending
Ex-dividend date for 2022/23 interim dividend
− 23 December 2022
Record date for 2022/23 interim dividend
− 11 January 2023
− 1 February 2023
− May 2023
− June 2023
DRIP election date for 2022/23 interim dividend
Payment of 2022/23 interim dividend to shareholders
Announce the final results for the 2022/23 financial year
Publish the Annual Report and Financial Statements for the
2022/23 financial year
• No need to pay dividend cheques into your bank account;
• No risk of losing cheques in the post;
• No risk of having to replace spoiled or out-of-date cheques;
and
•
It’s cost-effective for your company.
To take advantage of this, please contact Equiniti via
shareview.co.uk or complete the dividend mandate form you
receive with your next dividend cheque.
If you choose to have your dividend paid directly into your bank
account you’ll receive one tax voucher each year. This will be
issued with the interim dividend normally paid in February and
will contain details of all the dividends paid in that tax year. If
you’d like to receive a tax voucher with each dividend payment,
please contact Equiniti.
Make life easier and have your dividends paid straight
Online annual report
into your bank account
available immediately;
• The dividend goes directly into your bank account and is
Our annual report is available online. View or download the full
Annual Report and Financial Statements from:
unitedutilities.annualreport2022.com
Electronic communications
We’re encouraging our shareholders to receive their shareholder
information by email and via our website. Not only is this a
quicker way for you to receive information, it helps us to be
more sustainable by reducing paper and printing materials and
lowering postage costs.
Registering for electronic shareholder communications is very
straightforward, and is done online via shareview.co.uk which is
a website provided by our registrar, Equiniti.
Log on to shareview.co.uk and you can:
•
set up electronic shareholder communication;
• view your shareholdings;
• update your details if you change you address; and
• get your dividends paid directly into your bank account.
Please do not use any electronic address provided in this annual
report or in any related document to communicate with the
company for any purposes other than those expressly stated.
Keeping you in the picture
You can find information about United Utilities quickly and
easily on our website: unitedutilities.com/corporate. Here the
annual report and financial statements, responsible business
performance, company announcements, the half-year and
final results and presentations are published.
Registrar
The group’s registrar, Equiniti, can be contacted on:
0371 384 2041 or textphone for those with hearing difficulties:
0371 384 2255. Lines are open 8.30 am to 5.30 pm, Monday to
Friday excluding public holidays in England and Wales.
The address is:
Equiniti, Aspect House, Spencer Road,
Lancing, West Sussex, BN99 6DA.
Overseas shareholders may contact them on:
+44 (0)121 415 7048
Equiniti offers a share dealing service by telephone:
0345 603 7037 and online: shareview.co.uk/dealing
Key shareholder facts
Balance analysis as at 31 March 2022
4
9
.
1
9
7
3
,
3
5
0
0
0
,
1
-
1
5
3
.
4
7
5
8
,
2
1
-
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0
0
,
1
0
0
0
0
1
,
6
2
.
4
1
8
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Number of
holdings
Equiniti also offers a stocks and shares ISA for United Utilities
shares: call 0345 300 0430 or go to: shareview.co.uk/dealing
Geographic location of major shareholdings
21%
9%
28%
42%
United Kingdom
North America
Europe
Rest of the World
Dividend history – pence per share
Interim
Final
Total ordinary
2018
13.24
26.49
39.73
2019
13.76
27.52
41.28
2020
14.20
28.40
42.60
2021
14.41
28.83
43.24
2022
14.50
29.00
43.50
Warning to shareholders
Please be very wary of any unsolicited contact about your
investments or offers of free company reports. It may be from
an overseas ‘broker’ who could sell you worthless or high-risk
shares. If you deal with an unauthorised firm, you would not
be eligible to receive payment under the Financial Services
Compensation Scheme. Further information and a list of
unauthorised firms that have targeted UK investors is available
from the Financial Conduct Authority at:
fca.org.uk/consumers/unauthorised-firms-individuals
This document is printed on Revive 100% Recycled Silk which is made from
100% FSC® Recycled pulp and post-consumer waste paper. This reduces
waste sent to landfill, greenhouse gas emissions, as well as the amount of
water and energy consumed.
Important information
Cautionary statement:
The Annual Report and Financial Statements (the annual report) contains certain forward-looking statements with respect to the operations, performance and
financial condition of the group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments
to differ materially from those anticipated. These forward-looking statements include without limitation any projections or guidance relating to the results of
operations and financial conditions of the group as well as plans and objectives for future operations, expected future revenues, financing plans, expected
expenditure and any strategic initiatives relating to the group, as well as discussions of our business plan and our assumptions, expectations, objectives and
resilience with respect to climate scenarios. The forward-looking statements reflect knowledge and information available at the date of preparation of this annual
report and the company undertakes no obligation to update these forward-looking statements. Nothing in this annual report should be construed as a profit
forecast. Certain regulatory performance data contained in this annual report is subject to regulatory audit
Terms used in this report:
Unless expressly stated otherwise, the ‘group’, ‘United Utilities’, ‘UU’ or ‘the company’ means United Utilities Group PLC and its subsidiary undertakings;
the ‘regulated business’, ‘regulated activities’ or ‘UUW’ means the licensed water and wastewater activities undertaken by United Utilities Water Limited
(formerly United Utilities Water PLC) in the North West of England.
264
unitedutilities.com/corporate
Stock Code: UU.
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United Utilities Group PLC
Haweswater House
Lingley Mere Business Park
Lingley Green Avenue
Great Sankey
Warrington
WA5 3LP
Telephone +44 (0)1925 237000
Stock Code: UU.
Registered in England and Wales
Registered number 6559020