United Utilities
Group PLC
Integrated Annual Report and
Financial Statements for the year
ended 31 March 2023
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Contents
Business overview
Reporting methodology
Non-financial information statement
Where to find our TCFD, TNFD and other
sustainability disclosures
Chair’s review
Strategic report
Highlights for 2022/23
– Our operational key performance
indicators
– Our financial key performance
indicators
Chief Executive Officer’s review
How we provide great water for a stronger,
greener and healthier North West
Our business model
– Our external environment
– Key resources
– Strategy
– Governance
– Risks and opportunities
– Metrics and targets
Performance in 2022/23
– Our environmental performance
– Our social performance
– Our governance performance
– Our financial performance
Governance
Corporate governance report
– Board of directors
– Letter from the Chair
– Nomination committee report
– Audit committee report
– Treasury committee report
– Remuneration committee report
– ESG committee report
– Tax policies and objectives
Directors’ report
Statement of directors’ responsibilities
02
04
05
06
10
12
14
18
20
22
34
38
50
60
76
84
96
104
112
122
126
140
153
169
170
204
208
210
215
Financial statements
Independent auditor’s report to the members
of United Utilities Group PLC only
Consolidated income statement
218
232
233
Consolidated statement of
comprehensive income
Consolidated and company
234
statements of financial position
Consolidated statement of changes in equity 235
Company statement of changes in equity
236
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
259
287
288
238
239
242
237
Welcome to
our Integrated
Annual Report
2023
The principal activities of the
group, generating more than
99 per cent of group revenue,
sit within the regulated entity
United Utilities Water Limited,
which provides water and
wastewater services for the
North West of England.
£14bn(1)
Regulatory Capital Value (RCV) making our
regulated business, United Utilities Water Limited,
the second largest water and wastewater company
in England and Wales.
7.4m
people served across the North West, with over
3 million households and 200,000 businesses.
1.8bn
litres of clean water delivered, and 3.1 billion litres
of wastewater treated, on average, every day.
100%
renewable electricity throughout our operations.
Around 24 per cent of our electricity needs are
generated directly by ourselves and on-site with
our partners, and we purchase only certified green
electricity for the remainder.
(1) RCV is a measure of the company’s historic market
value plus the value of accumulated capital investment
assumed at each price review. Our RCV has been
adjusted for actual spend, timing differences and
includes the full expected value of AMP7 ex-post
adjustment mechanisms.
unitedutilities.com/corporate
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Non-financial information statement
Where to find our TCFD, TNFD and other
Contents
Business overview
Reporting methodology
sustainability disclosures
Chair’s review
Strategic report
Highlights for 2022/23
– Our operational key performance
– Our financial key performance
indicators
indicators
Chief Executive Officer’s review
How we provide great water for a stronger,
greener and healthier North West
Our business model
– Our external environment
– Key resources
– Strategy
– Governance
– Risks and opportunities
– Metrics and targets
Performance in 2022/23
– Our environmental performance
– Our social performance
– Our governance performance
– Our financial performance
Governance
Corporate governance report
– Board of directors
– Letter from the Chair
– Nomination committee report
– Audit committee report
– Treasury committee report
– Remuneration committee report
– ESG 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 235
Company statement of changes in equity
236
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
05
06
10
12
14
18
20
22
34
38
50
60
76
84
96
104
112
122
126
140
153
169
170
204
208
210
215
218
232
233
234
237
238
239
242
259
287
288
Welcome to
our Integrated
Annual Report
2023
The principal activities of the
group, generating more than
99 per cent of group revenue,
sit within the regulated entity
United Utilities Water Limited,
which provides water and
wastewater services for the
North West of England.
£14bn(1)
Regulatory Capital Value (RCV) making our
regulated business, United Utilities Water Limited,
the second largest water and wastewater company
in England and Wales.
people served across the North West, with over
3 million households and 200,000 businesses.
litres of clean water delivered, and 3.1 billion litres
of wastewater treated, on average, every day.
7.4m
1.8bn
100%
renewable electricity throughout our operations.
Around 24 per cent of our electricity needs are
generated directly by ourselves and on-site with
our partners, and we purchase only certified green
electricity for the remainder.
(1) RCV is a measure of the company’s historic market
value plus the value of accumulated capital investment
assumed at each price review. Our RCV has been
adjusted for actual spend, timing differences and
includes the full expected value of AMP7 ex-post
adjustment mechanisms.
Our purpose is to
provide great water for
a stronger, greener and
healthier North West
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Strategic priorities
Our strategy to enable delivery of our
purpose has six priorities:
Improve our rivers
Create a greener future
Provide a safe and great place to work
Deliver great service for all our customers
Spend customers’ money wisely
Contribute to our communities
These strategic priorities permeate
everything we do, and that can be seen
throughout this report. The stages in our
water cycle, our principal risks, board and
committee activities, and the measures in
our remuneration policy are all aligned to
one or more of these themes.
This drives us to deliver our services in an
environmentally sustainable, economically
beneficial, and socially responsible
manner and create sustainable long-term
value for all. Active engagement and
strong constructive relationships help us
understand and respond to the things that
matter most to our stakeholders:
Read more on pages 56 to 57
t w e d o a n d benefit from the value w
Customers
Customers
Environment
Environment
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Influ e n
Colleagues
Employees
Communities
Communities
Environment
Customers
Who are our
stakeholders?
Investors
Shareholders
Suppliers
Suppliers
Media
Regulators
Media
Politicians
Influence what w e d o
Keep in touch with us
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 integrated annual report and
financial statements.
Our annual performance report
We report our performance in a
regulatory format that helps customers
and other stakeholders understand it
and compare it with other companies
in the sector.
Visit our corporate website at
unitedutilities.com/corporate
Visit our online report at
unitedutilities.annualreport2023.com
unitedutilities.com/corporate
Stock code: UU.
Our annual performance report will be
available from 15 July at unitedutilities.com/
corporate/about-us/performance/annual-
performance-report
01
Reporting methodology
Our purpose and strategy are intrinsically linked to ESG
We have taken the opportunity to refresh our purpose and
strategy as we look ahead and mobilise for the next investment
period between 2025 and 2030.
The below infographic demonstrates the alignment between
our purpose – to provide great water for a stronger, greener and
healthier North West – and our six strategic priorities with ESG.
We engaged with stakeholders and colleagues to define six
strategic priorities and expand our purpose, to ensure our
ambitions are clearly defined and targeted at the company
we want and need to be.
In doing so, it has become even clearer how strongly
environmental, social and governance (ESG) matters are
integrated into the way we approach our business and the way
we monitor our performance – everything aligns under the
stronger, greener and healthier ambitions within our purpose.
It shows the link between our purpose and the UN Sustainable
Development Goals (SDGs) that we contribute towards.
Our metrics and targets, including our operational key
performance indicators (KPIs), are linked to ESG and aligned to
the stronger-greener-healthier elements of our purpose, with
clear links to our strategic priorities.
Providing great water for a stronger,
greener and healthier North West
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We provide great
quality water that
people love to drink,
safely remove and
recycle used water,
while taking care of
beautiful landscapes
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Contributing to:
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We protect and
enhance urban and rural
environments, and adapt to
the challenges of climate
change, allowing people,
wildlife and nature to
thrive, making the
North West a better place
to live now and
for the future.
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We deliver an essential service,
help customers in vulnerable
situations, invest in local
communities, and support jobs
and the economy, giving the
North West resilience in
a changing world.
S
TRON G E
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Contributing to:
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Responsible business an d g o v e r n a n c e
02
unitedutilities.com/corporate
Reporting methodology
Our purpose and strategy are intrinsically linked to ESG
We have taken the opportunity to refresh our purpose and
The below infographic demonstrates the alignment between
strategy as we look ahead and mobilise for the next investment
our purpose – to provide great water for a stronger, greener and
period between 2025 and 2030.
healthier North West – and our six strategic priorities with ESG.
We engaged with stakeholders and colleagues to define six
It shows the link between our purpose and the UN Sustainable
strategic priorities and expand our purpose, to ensure our
Development Goals (SDGs) that we contribute towards.
ambitions are clearly defined and targeted at the company
we want and need to be.
Our metrics and targets, including our operational key
performance indicators (KPIs), are linked to ESG and aligned to
In doing so, it has become even clearer how strongly
the stronger-greener-healthier elements of our purpose, with
environmental, social and governance (ESG) matters are
clear links to our strategic priorities.
integrated into the way we approach our business and the way
we monitor our performance – everything aligns under the
stronger, greener and healthier ambitions within our purpose.
Providing great water for a stronger,
greener and healthier North West
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Contributing to:
E R
EE N
We protect and
R
G
enhance urban and rural
environments, and adapt to
the challenges of climate
change, allowing people,
wildlife and nature to
thrive, making the
North West a better place
to live now and
for the future.
HE
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We provide great
quality water that
people love to drink,
safely remove and
recycle used water,
while taking care of
beautiful landscapes
in the North West
every day.
L
T
H
I
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R
We deliver an essential service,
help customers in vulnerable
situations, invest in local
communities, and support jobs
and the economy, giving the
North West resilience in
a changing world.
S
TRON G E
R
Contributing to:
G
Responsible business an d g o v e r n a n c e
B
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Benchmarking our
ESG performance
For over 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.
We align ourselves to recognised management standards and
accreditations to give confidence in the way we are operating.
We continue to evolve existing programmes, develop new
initiatives, and respond to the changing world in which we
operate. For example, we have been undertaking a project
to integrate six-capitals thinking into business processes and
planning to better inform our decision-making and enable us
to create and protect value for all stakeholders.
Read more about the six capitals on page 34
We actively participate in a range of global ESG ratings,
indices and frameworks to benchmark our approach against
best practice and emerging sustainability challenges. Our
strong consistent performance against these external
benchmarks demonstrates our commitment to operating
in a responsible manner, and we monitor our performance
against a suite of trusted indices as one of our operational key
performance indicators (KPIs).
Read more about our performance against these ratings
and indices on pages 104 to 109
Many of the ESG indices in which we participate draw
their data from this report. We collate, monitor and report
publicly on a wide range of performance measures across
ESG categories, with consideration to what stakeholders tell
us matters most, as well as our contribution to wider value
and global goals such as the UN SDGs and climate change
mitigation goals.
In addition to the wealth of ESG disclosures and performance
data throughout this report, 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 integrated 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/corporate/
responsibility/our-approach/cr-reporting/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 publish comparable SASB data on our
corporate website. This covers the main SASB data points for
the water utilities industry, of which we are part.
Read more on our website at unitedutilities.com/corporate/
responsibility/our-approach/cr-reporting/sasb
Updating our report to further
integrate ESG disclosures
The frameworks and standards for ESG reporting are developing
rapidly in response to growing expectations and increasing
interest from investors and other stakeholders. For example, the
draft standards from the International Sustainability Standards
Board (ISSB) ask that all material sustainability-related risks and
opportunities be disclosed in line with the four-pillar approach
used by the Task Force on Climate-related Financial Disclosures
(TCFD), i.e. providing information on strategy, governance, risks
and opportunities, and metrics and targets.
As part of our drive to continuously improve our reporting to
meet investor and other stakeholder needs, we have evolved
our report this year to incorporate these four pillars centrally to
our business model. As a result, our sustainability disclosures
(including the required components of TCFD reporting) are
integrated much more fully across our report. Each pillar of our
business model provides general company information as well as
more specific climate and nature-related information, and other
key issues of material interest to readers.
This mirrors the integrated thinking approach we take to
running the business, with sustainability considerations integral
to everything we do. While this provides the most accurate
reflection of our business, we recognise that some readers have
targeted areas of interest and may not wish to read the report in
full to find the relevant information.
To ensure it is as easy as possible for all readers to find what
they are looking for, we use colour coding and iconography
to enable quick and easy identification of climate, nature and
other elements throughout this report, and pages 04 and 05
signpost to the pages on which non-financial information and the
requirements of TCFD and TNFD can be found.
We have also adapted the way we present our operational
performance for the year and our key performance indicators.
These are now structured across the ESG headings, in alignment
with the ‘stronger’, ‘greener’ and ‘healthier’ ambitions of our
refreshed purpose. We continue to monitor and disclose
how our activities and performance impact our stakeholders,
retaining a comprehensive spread of metrics in relation to each
stakeholder group.
Open, honest and transparent reporting is at the core of our
responsible business approach. As the reporting landscape
develops further, we will continue to adapt our disclosures to
take account of international best practice in the presentation of
ESG performance and data.
Integrated reporting
and our sustainability report
We are keen to help meet the information needs of all our
stakeholders, and have published a separate sustainability
report this year to present our ESG disclosures in a format
that some readers may find more familiar and easier to use.
For the avoidance of doubt, readers of this integrated annual
report do not need to read the sustainability report as well
as sustainability-related disclosures are already included
throughout this report. The additional sustainability report
is a presentational alternative for stakeholders who are not
interested in the financial aspects of our performance.
Read our sustainability report at unitedutilities.com/
corporate/responsibility/our-approach/esg-performance
02
unitedutilities.com/corporate
Stock code: UU.
03
Our non-financial disclosures
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 page 38, sets out how we act as a responsible
business and is applicable to the areas of disclosure required by s414CB(1). A brief description of our business model is set out on
pages 18 to 19. We demonstrate that we are fulfilling our purpose in our performance section on pages 84 to 117.
Read more about our purpose on our website at
unitedutilities.com/corporate/about-us/what-we-do/our-vision
Reporting
requirement
Environmental
matters
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)
Reflecting the needs of the environment:
• Natural resources – see pages 35 and 87
• Natural environment – see pages 20 and 24
Energy and carbon report – see pages 93
•
TCFD and TNFD reporting – see page 05
•
• Waste and resource use policy
•
Environmental policy – see the responsibility pages
on our website
• Water Resources Management Plan – see page 41
• Climate change mitigation policy
Colleagues
Reflecting the needs of our colleagues:
• Health and safety – see pages 35, 49, 53, 64, 66, 73, and
100 to 102
• Mental wellbeing – see pages 35, 49, 53, and 73
• Competitive base salaries and benefits – see page 186
• Gender pay report 2022 – see page 55
•
•
Engagement – see pages 35, 56, and 100 to 102
Board diversity – see page 143
Equity, diversity and inclusion policy
Flexible working arrangements
• Health and safety policy
• Mental wellbeing policy
•
•
• Agency worker policy
• Human rights policy – see pages 73, 76, and 108
•
Board diversity policy – see page 143
Respect for
human rights
Reflecting the needs of our stakeholders:
Suppliers – see page 108
•
• Diversity within our workforce – see pages 35, 49,
54 to 55, 65, 73, 76, 82, and 100 to 102
• Colleague data protection policy
•
• Human rights policy – see pages 73, 76, and 108
Slavery and human trafficking statement
Social matters
Reflecting the needs of our stakeholders:
• Customers – see pages 37, 57, 66, and 76 to 77
• Communities – see pages 37, 56, 66, and 77
Environment – see pages 56, 66, and 76
•
Suppliers – see pages 53, 56, 66, 73, 76, and 108
•
• Regulators – see pages 57 and 64
Anti-corruption
and anti-bribery
Reflecting the needs of colleagues and suppliers:
• Colleagues – see pages 38, 64, 137, and 167
•
Suppliers – see pages 56, 108, 167, and 107 to 108
• YourVoice – see page 138
• Charitable matched funding guidance
• Volunteering policy
• United Supply Chain – see pages 53, 108, and 213
• Commercial procurement policy
Fraud investigation and reporting processes
• Anti-bribery policy
•
• Whistleblowing policy
•
• Commercial procurement policy
Internal financial control processes
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Key frameworks to look out for throughout our report
The Task Force on Climate-related
Financial Disclosures has set out
a framework of recommended
disclosures relating to 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 developing
a framework for risk management
and disclosure for organisations to
report, and act on, evolving nature-
related risks and related governance,
strategy, risk and metrics.
04
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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 page 38, sets out how we act as a responsible
business and is applicable to the areas of disclosure required by s414CB(1). A brief description of our business model is set out on
pages 18 to 19. We demonstrate that we are fulfilling our purpose in our performance section on pages 84 to 117.
Read more about our purpose on our website at
unitedutilities.com/corporate/about-us/what-we-do/our-vision
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Information necessary to understand
Reporting
our business and its impact; policies and
requirement
due diligence activities; and outcomes
Policies, guidance and standards which
govern our approach (some of which are
only published internally)
Environmental
Reflecting the needs of the environment:
• Waste and resource use policy
matters
• Natural resources – see pages 35 and 87
• Natural environment – see pages 20 and 24
Energy and carbon report – see pages 93
TCFD and TNFD reporting – see page 05
Colleagues
Reflecting the needs of our colleagues:
•
Environmental policy – see the responsibility pages
on our website
• Water Resources Management Plan – see page 41
• Climate change mitigation policy
• Health and safety – see pages 35, 49, 53, 64, 66, 73, and
100 to 102
• Mental wellbeing – see pages 35, 49, 53, and 73
Flexible working arrangements
• Competitive base salaries and benefits – see page 186
• Agency worker policy
• Gender pay report 2022 – see page 55
• Human rights policy – see pages 73, 76, and 108
Engagement – see pages 35, 56, and 100 to 102
•
Board diversity policy – see page 143
Board diversity – see page 143
• Health and safety policy
• Mental wellbeing policy
Equity, diversity and inclusion policy
•
•
Respect for
human rights
Reflecting the needs of our stakeholders:
• Colleague data protection policy
•
Suppliers – see page 108
• Diversity within our workforce – see pages 35, 49,
54 to 55, 65, 73, 76, 82, and 100 to 102
•
Slavery and human trafficking statement
• Human rights policy – see pages 73, 76, and 108
Social matters
Reflecting the needs of our stakeholders:
• YourVoice – see page 138
• Customers – see pages 37, 57, 66, and 76 to 77
• Communities – see pages 37, 56, 66, and 77
Environment – see pages 56, 66, and 76
Suppliers – see pages 53, 56, 66, 73, 76, and 108
• Regulators – see pages 57 and 64
• Charitable matched funding guidance
• Volunteering policy
• United Supply Chain – see pages 53, 108, and 213
• Commercial procurement policy
Anti-corruption
and anti-bribery
Reflecting the needs of colleagues and suppliers:
• Anti-bribery policy
• Colleagues – see pages 38, 64, 137, and 167
•
Suppliers – see pages 56, 108, 167, and 107 to 108
•
Fraud investigation and reporting processes
• Whistleblowing policy
•
Internal financial control processes
• Commercial procurement policy
•
•
•
•
•
•
Key frameworks to look out for throughout our report
The Task Force on Climate-related
Financial Disclosures has set out
a framework of recommended
disclosures relating to 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 developing
a framework for risk management
and disclosure for organisations to
report, and act on, evolving nature-
related risks and related governance,
strategy, risk and metrics.
Our non-financial disclosures
Our TCFD, TNFD and other sustainability disclosures
Sustainability concerns, including climate and nature, are
fundamental to our business and integrated in everything we do.
Our activities are so reliant on the natural environment that assessing and managing the risks, opportunities, dependencies and
impacts we have in relation to climate change and nature is integral to our entire business model, therefore disclosures in relation
to these issues are integrated throughout our report to reflect the way we think about these issues. Other material matters are
integrated in the same way, including cyber security, financial risk management, affordability and vulnerability, health, safety and
wellbeing, responsible business in our supply chain, and equity, diversity and inclusion.
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As mentioned on page 03, we have adapted our business model to follow the four-pillar structure that links the Task Force on
Climate-related Financial Disclosures (TCFD), Task Force on Nature-related Financial Disclosures (TNFD) and International
Sustainability Standards Board (ISSB) recommendations. To assist readers with finding the disclosures of interest to them,
this page shows where disclosures can be found throughout the report, and these are colour-coded and icon-indicated
throughout for easy identification, as demonstrated in the table below.
TCFD
Where to find our
TCFD disclosures
Where to find our
TNFD disclosures
TNFD
OTHER
Where to find our
Other disclosures
Pages
Topic
Pages
Topic
Pages Topic
50–59
Company-wide governance
130–138
Further detail on board and management committees, including structure responsibilities and meeting frequency
Section 172(1) Statement
Board oversight of climate-related risks
and opportunities
53
Management role in assessing and
climate-related risks and opportunities
Board oversight and
management role in managing
and assessing nature-related
dependencies, impacts, risks
and opportunities
53–55
Governance around other
risk and opportunities of
material interest
Strategic priorities
Planning horizons : what we mean by short term, medium term and long term
Our approach to materiality assessment
Climate risks and opportunities identified
over short, medium and long term
49
Impact of climate-related risks on our
strategy and planning
How nature influences our
approach, strategy and planning,
and the resilience of our strategy
to different scenarios, with
adaptive planning
49
Other risk and opportunities
of material interest that
influence our approach
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39–41
28–31
42–44
43–44
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Use of climate-related scenarios
45–47
Net zero transition plan
71
241
Our risks most sensitive to climate change
Climate-related financial planning
60–69
Our approach to identifying , assessing and managing risks and opportunities including our principal risks, common themes,
most significant event-based risks, and new and emerging risks and opportunities
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How we identify and assess
climate-related risks
72
Management of climate-related risks
Integration of climate-related risks into
our risk management processes
Our risks most sensitive to climate change
How we identify, assess and
manage nature-related risks,
and how this is integrated into
our risk management processes
73
How we identify, assess
and manage other risks
other risk and opportunities
of material interest
76–83
Metrics and targets for assessing general company performance, and assurance of those metrics
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Short, medium and long-term targets
84–111
Operational performance for 2022/23
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93–95
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Metrics and targets used to assess
climate-related risks and opportunities
82
Energy and carbon report with scope 1, 2
and 3 greenhouse gas (GHG) emissions
Targets used to manage climate-
related risks
Metrics and targets used to
assess and manage nature-
related dependencies, impacts,
risks and opportunities
82
Metrics and targets in
relation to other risks and
opportunities of material
interest to stakeholders
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Stock code: UU.
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Chair’s review
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Sir David Higgins
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As we thank Steve Mogford for over 12 years
of service to the company, we are excited
to welcome Louise Beardmore as Chief
Executive Officer. Having overseen the price
review process since her appointment as CEO
designate in May 2022, Louise is ensuring
the company is mobilised and ready for the
2025–30 period.
We have taken the opportunity to refresh the
group’s purpose, strategic priorities, and core
values to ensure these clearly reflect the key
areas of focus in the current landscape, and
our ongoing commitment to environmental,
social and governance (ESG) matters.
The water industry is facing a number of
challenges and there is a need to restore public
trust, but we are committed to continuing
to drive improvements for customers, the
environment, and all our stakeholders.
The events of the last few years have tested the water
industry, just as they have challenged the economy
more widely. The COVID-19 pandemic and conflict in
Ukraine led to both operational challenges and rapidly
rising inflation, with increased prices presenting
significant cost of living pressures for customers.
At the same time as we have been adapting and
responding to these challenges, we have also seen a
surge of concern regarding the sector’s historic and
ongoing use of storm overflows. A requirement to reduce
the number of activations has now been passed into
legislation, alongside a number of other very stretching
environmental targets as part of the Environment Act.
Meeting these new requirements to reduce activations
and improve river health will require a substantial
programme of work and sustained investment over
a number of regulatory periods. In the case of storm
overflows, the regional investment requirements are
even more substantial than in some other areas of the
country, reflecting that the North West has a high number
of overflows, a higher than typical amount of rainfall,
a greater amount of surface water runoff entering our
sewers and a higher prevalence of sewers that combine
surface water and sewage. Together, these factors mean
that of £56 billion of investment projected by Defra to
achieve storm overflow targets, around £20 billion is
attributed to the North West.
United Utilities is responding well to these challenges.
To help customers facing financial challenges we have
committed more affordability support than any other
water company in the 2020–25 period. Beyond the
baseline expenditure for the current regulatory period,
we are investing an additional £765 million to deliver
customer and environmental improvements, including
around £250 million of reinvestment to support our
Better Rivers programme and other environmental
enhancements. We are already achieving significant
reductions in activations of storm overflows, helping
to improve river quality across the region, and we
recently got provisional approval to accelerate
environmental investment, starting work two years
early on over £900 million of AMP8 schemes mostly
in relation to reducing activations from overflows.
We are committed to delivering this work efficiently,
effectively and with urgency.
We have been pleased to see that the additional
investment made has also delivered improvements in
the water service, reflected in a strong performance
on key metrics – including tackling leakage – and the
company’s exit from the Drinking Water Inspectorate’s
transformation programme is demonstration of the
sustained improvement in the performance and resilience
of drinking water supplies to customers in the region.
The board is also pleased with the further progress made
this year on procurement for the Haweswater Aqueduct
Resilience Programme. We expect that this will provide an
enduring and resilient solution to replace a critical part of
our potable water network.
(1) The dividend increase is based on the CPIH element included
within allowed regulatory revenue for the 2022/23 financial
year (i.e. the movement in CPIH between November 2020 and
November 2021).
0606
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Chair’s review
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Sir David Higgins
Chair
As we thank Steve Mogford for over 12 years
of service to the company, we are excited
to welcome Louise Beardmore as Chief
Executive Officer. Having overseen the price
review process since her appointment as CEO
designate in May 2022, Louise is ensuring
the company is mobilised and ready for the
2025–30 period.
We have taken the opportunity to refresh the
group’s purpose, strategic priorities, and core
values to ensure these clearly reflect the key
areas of focus in the current landscape, and
our ongoing commitment to environmental,
social and governance (ESG) matters.
The water industry is facing a number of
challenges and there is a need to restore public
trust, but we are committed to continuing
to drive improvements for customers, the
environment, and all our stakeholders.
The events of the last few years have tested the water
industry, just as they have challenged the economy
more widely. The COVID-19 pandemic and conflict in
Ukraine led to both operational challenges and rapidly
rising inflation, with increased prices presenting
significant cost of living pressures for customers.
At the same time as we have been adapting and
responding to these challenges, we have also seen a
surge of concern regarding the sector’s historic and
ongoing use of storm overflows. A requirement to reduce
the number of activations has now been passed into
legislation, alongside a number of other very stretching
environmental targets as part of the Environment Act.
Meeting these new requirements to reduce activations
and improve river health will require a substantial
programme of work and sustained investment over
a number of regulatory periods. In the case of storm
overflows, the regional investment requirements are
even more substantial than in some other areas of the
country, reflecting that the North West has a high number
of overflows, a higher than typical amount of rainfall,
a greater amount of surface water runoff entering our
sewers and a higher prevalence of sewers that combine
surface water and sewage. Together, these factors mean
that of £56 billion of investment projected by Defra to
achieve storm overflow targets, around £20 billion is
attributed to the North West.
United Utilities is responding well to these challenges.
To help customers facing financial challenges we have
committed more affordability support than any other
water company in the 2020–25 period. Beyond the
baseline expenditure for the current regulatory period,
we are investing an additional £765 million to deliver
customer and environmental improvements, including
around £250 million of reinvestment to support our
Better Rivers programme and other environmental
enhancements. We are already achieving significant
reductions in activations of storm overflows, helping
to improve river quality across the region, and we
recently got provisional approval to accelerate
environmental investment, starting work two years
early on over £900 million of AMP8 schemes mostly
in relation to reducing activations from overflows.
We are committed to delivering this work efficiently,
effectively and with urgency.
We have been pleased to see that the additional
investment made has also delivered improvements in
the water service, reflected in a strong performance
on key metrics – including tackling leakage – and the
company’s exit from the Drinking Water Inspectorate’s
transformation programme is demonstration of the
sustained improvement in the performance and resilience
of drinking water supplies to customers in the region.
The board is also pleased with the further progress made
this year on procurement for the Haweswater Aqueduct
Resilience Programme. We expect that this will provide an
enduring and resilient solution to replace a critical part of
our potable water network.
Our first female CEO,
and other board changes
On 31 March 2023, the company said goodbye and
wished Steve Mogford a long and happy retirement after
just over 12 years as Chief Executive Officer. During that
time, Steve has transformed not only the performance of
the business, but the relationships and perceptions of the
group with many of its key stakeholders. As previously
announced, Louise Beardmore, who was appointed as
CEO designate with effect from 1 May 2022, succeeds
Steve. Steve and Louise have worked together since
May 2022, to ensure an orderly handover of the Chief
Executive’s responsibilities. Since her appointment as
CEO designate, Louise has overseen preparations for the
price review process for the 2025–30 regulatory period.
During this important time when the tone is being set
for the next five-year regulatory cycle, Louise has been
actively developing relationships and representing the
group to its regulators and other key stakeholders and
those with influence at a parliamentary level.
The nomination committee has been busy during the
year identifying a candidate to fill a vacancy for a non-
executive director brought about by Stephen Carter
stepping down from the board after the 2022 AGM,
following his appointment to the board of Vodafone.
The search culminated with the appointment of Michael
Lewis. We are delighted that Michael has accepted
the role as an independent non-executive director with
effect from 1 May 2023. He brings to the board a wealth
of experience of working in a regulatory environment,
having worked in the electricity industry for most of
his career. He has spent a considerable amount of time
focusing on sustainability issues, particularly during
his time as CEO of E.ON UK. He was appointed as a
member of the ESG committee (formerly the corporate
responsibility committee) on his appointment. Prior to
Michael’s appointment, the refocusing of the committee’s
activities was undertaken to better reflect current
stakeholder expectations, and it was renamed as the
ESG committee.
Strategic refresh
With the water industry evolving to meet new
challenges and priorities, we gained feedback from
stakeholders and colleagues on what we need to do
and how we need to do it, and took the opportunity to
refresh our purpose, strategic priorities and core values
to better reflect the business we now need to be. The
group’s purpose, to provide great water for a stronger,
greener and healthier North West, and its six strategic
priorities, reflect the key areas of focus that are needed
in the coming years, as well as demonstrating the
clear alignment of our ambitions with ESG concerns,
as can be seen on page 02. Our core values have
been redefined to reflect the responsible and high
performance culture we want to drive, both at board
level and right through the organisation, with every
one of our colleagues focused on doing the right thing,
making it happen, and being better.
Dividend and annual general meeting
The board has proposed a final dividend of 30.34 pence
per share, to be paid on 1 August 2023, taking the total
dividend for the 2022/23 financial year to 45.51 pence
per share. This is an increase of 4.6 per cent,(1) in line
with our AMP7 policy of targeting an annual growth
rate of CPIH inflation through to 2025.
I look forward to meeting shareholders at the annual
general meeting (AGM) which is being held on
21 July 2023. Historically, the meeting has taken place
at a location in Manchester. For the previous two years
we provided a virtual link for shareholders to watch
and, at our 2022 hybrid meeting, participate fully.
There was very limited takeup for virtual attendance,
therefore for 2023 we will revert to the more traditional
approach for conducting the business at the meeting.
As many companies are now doing, we will be using
our own facilities for the event, which will be held for
the first time at the group’s main offices in Warrington.
Outlook
With two years remaining in AMP7, we remain focused
on continuing to deliver a great service for customers
and driving environmental improvements, while
simultaneously preparing for AMP8.
The business plan we will submit in October will include
the most significant environmental improvement plan
of any period so far. This will bring both challenges and
opportunities for the company and the North West,
and we will need to embrace new ways of working and
collaborate with others to drive the big improvements
that we and our many stakeholders want to see over
2025–30 and beyond. This plan will represent a step
towards our longer-term plans, and our long-term
delivery strategy is embedded within our plans for
AMP8 with a number of adaptive planning pathways
considered to ensure we are prepared for the challenges
that may lie ahead. This includes our carbon pledges and
net zero transition plan, which you will find on pages 45
to 47 of this report.
We are clear on what we need to deliver and confident
in our approach and our plans to meet our ambitions.
Thank you
On behalf of the board, I want to extend our heartfelt
thanks to everyone in the company for the hard work,
dedication and enthusiasm you have shown over the
year. With the continued support of our colleagues and
all our stakeholders, we are confident in our plans to
build a stronger, greener and healthier North West.
Sir David Higgins
Chair
24 May 2023
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Read more about
our purpose
and strategic
priorities on
page 38
Read more about
our Better Rivers:
Better North
West programme
on page 90
Read more about
our net zero
transition plan on
pages 45 to 47
The strategic
report on pages
08 to 119 was
approved at a
meeting of the
board on
24 May 2023
and signed
on its behalf
by Sir David
Higgins, Chair.
(1) The dividend increase is based on the CPIH element included
within allowed regulatory revenue for the 2022/23 financial
year (i.e. the movement in CPIH between November 2020 and
November 2021).
45.51p
+4.6%
21 July
per share total dividend
in respect of the 2022/23 year
increase, in line with the annual increase
in CPIH inflation to November 2021
annual general meeting (AGM)
to be held at our headquarters
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Providing great water for
a stronger, greener and
healthier North West
Our business model set out in this strategic report reflects how we deliver our purpose, how we are
governed, how we manage risks and opportunities, our short, medium and long-term targets, and the
metrics we use to assess the value we contribute to society, the environment, and all of our stakeholders.
08
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Strategic
report
Highlights
Pages 10 to 17
Our operational
key performance
indicators
Pages 10 to 11
Our financial
key performance
indicators
Pages 12 to 13
Chief Executive
Officer’s review
Pages 14 to 17
What we do
and how we do it
Pages 18 to 83
How we provide
great water for a
stronger, greener
and healthier
North West
Our business
model diagram
Our environment
and the resources
we rely upon
– Our external
environment
– Key resources
Our approach to
generating value
– Strategy
– Governance
– Risks and
opportunities
Pages 18 to 19
Pages 20 to 21
Pages 22 to 37
– Metrics and targets
Pages 38 to 83
Our performance
in 2022/23
Pages 84 to 119
Our environmental
performance
Pages 84 to 95
Our social
performance
Pages 96 to 103
Our governance
performance
Pages 104 to 111
Our financial
performance
Pages 112 to 119
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Providing great water for
a stronger, greener and
healthier North West
Our business model set out in this strategic report reflects how we deliver our purpose, how we are
governed, how we manage risks and opportunities, our short, medium and long-term targets, and the
metrics we use to assess the value we contribute to society, the environment, and all of our stakeholders.
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Highlights for 2022/23 –
Our operational key performance indicators
Delivering our purpose is
about more than just providing
customers with water and
removing wastewater. Our
operational key performance
indicators (KPIs) provide
an overview of how we are
creating a stronger, greener
and healthier North West.
Read more about our operational
performance on pages 84 to 111
Providing
great water
We measure the provision of our core
services through a host of measures,
including how we are doing against our
regulatory performance commitments,
where we have met or exceeded
83 per cent of these targets this year
– our best ever performance. C-MeX is
a regulator-compiled assessment that
measures overall customer satisfaction
with our services, and we use this as our
KPI for customer service.
…for a stronger,
greener and
healthier
North West
Our industry-leading environmental
performance with zero serious pollution
incidents, Better Rivers programme
driving a 39 per cent reduction in storm
overflow activations, and the progress
we are making in reducing our carbon
footprint, are all helping to protect
the natural environment in the North
West. We provide an industry-leading
package of affordability support,
and have continuously improved our
colleague accident frequency rate every
year for the last five years. We invest in
communities, spend money wisely and
efficiently, and our strong governance
and responsible business approach
contribute to consistently strong
performance against a suite of investor
ESG indices.
Better Rivers commitments
KPI performance
100%
of commitments for the year achieved
Met expectation/target
Our progress this year
We have achieved all our commitments for 2022/23, making
good progress towards our targets for 2025, and we have
driven a 39 per cent reduction in reported storm overflow
activations since 2020.
Link to remuneration
Bonus
Colleague engagement
KPI performance
82%
Met expectation/target
Our progress this year
We have great engagement from colleagues across the
business, scoring 82 per cent in our latest survey. Although this
is slightly lower than the 87 per cent we scored last year, it is
higher than both the UK norm and Utilities norm.
Link to remuneration
n/a
Capital programme
delivery incentive (CPDi)
KPI performance
92.9%
Met expectation/target
Our progress this year
We exceeded our target of at least 85 per cent, delivering
strong performance against the new CPDi measure, which
places greater emphasis on efficiency compared with our
previous time:cost:quality index (TCQi) metric.
Link to remuneration
Bonus
10
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unitedutilities.com/corporate
l
Highlights for 2022/23 –
Our operational key performance indicators
l
l
KPI status key
Met expectation/target
Close to meeting expectation/target
Behind expectation/target
Delivering our purpose is
about more than just providing
customers with water and
removing wastewater. Our
operational key performance
indicators (KPIs) provide
an overview of how we are
creating a stronger, greener
and healthier North West.
Read more about our operational
performance on pages 84 to 111
Providing
great water
We measure the provision of our core
services through a host of measures,
including how we are doing against our
regulatory performance commitments,
where we have met or exceeded
83 per cent of these targets this year
– our best ever performance. C-MeX is
a regulator-compiled assessment that
measures overall customer satisfaction
with our services, and we use this as our
KPI for customer service.
…for a stronger,
greener and
healthier
North West
Our industry-leading environmental
performance with zero serious pollution
incidents, Better Rivers programme
driving a 39 per cent reduction in storm
overflow activations, and the progress
we are making in reducing our carbon
footprint, are all helping to protect
the natural environment in the North
West. We provide an industry-leading
package of affordability support,
and have continuously improved our
colleague accident frequency rate every
year for the last five years. We invest in
communities, spend money wisely and
efficiently, and our strong governance
and responsible business approach
contribute to consistently strong
performance against a suite of investor
ESG indices.
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Better Rivers commitments
KPI performance
100%
of commitments for the year achieved
Met expectation/target
Our progress this year
We have achieved all our commitments for 2022/23, making
good progress towards our targets for 2025, and we have
driven a 39 per cent reduction in reported storm overflow
activations since 2020.
Carbon pledges
KPI performance
33
green
vehicles
585ha
peatland
restored
37ha
woodland
created
23%
supplier
engagement
EA performance
KPI performance
4* industry leading
in the EA’s latest Environmental Performance
Assessment (EPA)
Met expectation/target
Met expectation/target
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Our progress this year
We have plans for 200 electric vehicles in the next 18 months.
We are more than halfway to our 2030 peatland target, and are
making good progress on woodland creation despite slower
planting this year due to weather and tree disease. We are
working with our construction partners to reduce scope 3
emissions, with 23 per cent having set science-based targets.
Our progress this year
The most recent assessment from the Environment Agency
(EA) is for 2021, when we were awarded the maximum four
stars for the second year running and classed by the EA
as an industry-leading company. The EA will publish its
Environmental Performance Assessment for 2022 in July 2023.
Link to remuneration
Bonus
Link to remuneration
LTP
Link to remuneration
LTP
Colleague engagement
KPI performance
82%
Met expectation/target
l
Our progress this year
We have great engagement from colleagues across the
business, scoring 82 per cent in our latest survey. Although this
is slightly lower than the 87 per cent we scored last year, it is
higher than both the UK norm and Utilities norm.
C-MeX
KPI performance
4th WaSC
5th of all 17 companies
Customers lifted out
of water poverty
KPI performance
84,002
Close to meeting expectation/target
Met expectation/target
Our progress this year
We were once again the top ranked listed company for
customer satisfaction, ranked fourth among the 11 water and
sewerage companies (WaSCs) and fifth overall out of all 17
companies including those that provide water-only services.
We expect to earn a £3 million reward this year.
Our progress this year
We have already surpassed our target of helping 66,500
customers out of water poverty by 2025, achieving this for
more than 80,000 customers – providing critical affordability
support in the face of an increasing cost of living.
Link to remuneration
n/a
Link to remuneration
Bonus
Link to remuneration
LTP
Capital programme
delivery incentive (CPDi)
KPI performance
92.9%
Met expectation/target
Our progress this year
We exceeded our target of at least 85 per cent, delivering
strong performance against the new CPDi measure, which
places greater emphasis on efficiency compared with our
previous time:cost:quality index (TCQi) metric.
Community investment
KPI performance
£2.88m
Investor indices
KPI performance
Upper quartile
across a suite of trusted indices
Met expectation/target
Met expectation/target
Our progress this year
We achieved our £2.82 million annual target for community
investment, contributing £2.88m. This was through increased
investment in environmental and community partnerships,
delivery of education in schools, and the contribution of time
volunteered by our colleagues across the business.
Our progress this year
Our approach to responsible business has ensured consistent
upper quartile performance across a range of ESG ratings and
indices. We are a member of the Dow Jones Sustainability
World Index, improved our latest CDP score to A-, and in the
Sustainalytics assessment we continue to be classified as low
risk and a top ten performer in the Utilities industry group.
Link to remuneration
Bonus
Link to remuneration
n/a
Link to remuneration
n/a
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unitedutilities.com/corporate
Stock code: UU.
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Highlights for 2022/23 –
Our financial key performance indicators
Strong financial performance
facilitates delivery of
our purpose. Our financial key
performance indicators (KPIs)
include income statement,
balance sheet, regulatory
and investor return metrics
to provide a snapshot of our
performance for the year.
Read more about our financial
performance on pages 112 to 119
Providing
great water
A robust and resilient financial position,
and ability to raise efficient financing,
is essential to ensure our ability to fund
the long-term infrastructure projects that
are needed so we can continue providing
great water now and in the future.
…for a stronger,
greener and
healthier
North West
We are investing to accelerate
improvements for customers and the
environment in the North West, and our
work supports thousands of jobs, both
directly and through our supply chain.
Maintaining a responsible level of gearing
helps us fund this investment efficiently
and effectively. Return on regulated
equity (RoRE) measures how we have
delivered against regulatory allowances
and targets for operational and financing
performance, and the dividends we
pay provide a reliable income for many
pension funds and charities among our
shareholder base.
(1) Underlying operating profit and underlying earnings
per share are alternative performance measures that
exclude adjusted items from their reported equivalents.
Underlying operating profit excludes any significant non-
recurring items. Underlying EPS 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 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. A description
of adjusted items, the framework by which these are assessed,
and reconciliations between reported and underlying measures,
can be found on pages 118 and 119.
Underlying operating profit
See note 1
Our target
Not externally disclosed
KPI performance
£441 million
Reported operating profit: £441 million
Behind expectation/target
Our progress this year
Operating profit has fallen £169 million compared with
last year, primarily driven by lower consumption reducing
revenue, and the impact of inflation on our core costs,
particularly power and chemicals.
2022/23
2021/22
2020/21
2019/20
2018/19
£441m
£610m
£602m
£732m
£678m
Link to remuneration
Underlying operating profit is one of the measures for the annual
bonus. It is indirectly linked to the Long Term Plan (LTP) as
financial performance impacts relative total shareholder return
Underlying earnings
per share (EPS)
See note 1
Our target
Not externally disclosed
KPI performance
-1.3 pence
Reported EPS: 30.1 pence
Behind expectation/target
Our progress this year
Underlying loss per share is primarily driven by the movement
in operating profit and a higher underlying finance expense.
Reported EPS is higher due to fair value gains, profit on disposal
of a subsidiary, and a reduction in deferred tax due to a one-off
charge in the prior year to restate at the new future headline rate.
2022/23
(1.3)p
2021/22
2020/21
2019/20
2018/19
53.8p
56.2p
71.3p
65.9p
Link to remuneration
Underlying EPS is indirectly linked to the LTP as financial
performance impacts relative TSR
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Highlights for 2022/23 –
Our financial key performance indicators
l
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KPI status key
Met expectation/target
Close to meeting expectation/target
Behind expectation/target
Underlying operating profit
Gearing
Dividend per share (EPS)
Group net debt (plus loan receivable from our joint
venture) divided by UUW’s regulatory capital value.
Total dividends declared divided by the average
number of shares in issue during the year.
Our target
55–65%
KPI performance
58%
Our target
Annual growth in line with CPIH inflation to 2025
KPI performance
45.51 pence
Met expectation/target
Met expectation/target
Our progress this year
Gearing has fallen slightly compared with 59 per cent last
year due to the increase on our RCV, driven mostly by
inflation, being proportionally higher than the increase in
our net debt.
Our progress this year
Board has proposed a final dividend of 30.34 pence which takes
the total dividend to 45.51 pence per share for 2022/23. This is
an increase of 4.6 per cent, in line with our policy of targeting
an annual growth rate of CPIH inflation through to 2025.
2022/23
2021/22
2020/21
2019/20
2018/19
Link to remuneration
n/a
58%
59%
63%
61%
60%
2022/23
2021/22
2020/21
2019/20
2018/19
45.51p
43.50p
43.24p
42.60p
41.28p
Link to remuneration
Delivery of our dividend policy is an underpin that applies to
the Long Term Plan outcomes
Return on regulated equity
(RoRE)
Total shareholder return
(TSR)
Base allowed return plus or minus any out or
underperformance.
Our target
Not externally disclosed
Based on the movement in share price
plus dividends over each financial year.
Our target
We assess our performance each year against listed peers in
the utility sector and against the FTSE 100
KPI performance
11.0%
KPI performance
-1.5%
Met expectation/target
Close to meeting expectation/target
Our progress this year
We delivered our best ever RoRE performance with financing
outperformance (net of tax) of 4.7 per cent, tax outperformance of
2.5 per cent, and customer ODI outperformance of 0.5 per cent,
partially offset by the totex impact of -0.8 per cent.
Our progress this year
TSR was a slight negative in the year to 31 March 2023,
which was behind the FTSE 100 return of 5.4 per cent and
some other utility peers, but ahead of our listed water
company peers.
2022/23
2021/22
2020/21
2019/20
2018/19
4.5%
5.8%
7.8%
7.9%
11.0%
2022/23
(1.5)%
2021/22
2020/21
2019/20
2018/19
7%
27%
17%
20%
Link to remuneration
RoRE is a performance measure in the LTP, and is indirectly
linked to the bonus as it is influenced by two bonusable
measures: C-MeX and ODIs
Link to remuneration
Relative TSR is a measure applying to LTP awards vesting
this year but is assessed over a three-year period
l
l
l
Strong financial performance
facilitates delivery of
our purpose. Our financial key
performance indicators (KPIs)
include income statement,
balance sheet, regulatory
and investor return metrics
to provide a snapshot of our
performance for the year.
Read more about our financial
performance on pages 112 to 119
Providing
great water
A robust and resilient financial position,
and ability to raise efficient financing,
is essential to ensure our ability to fund
the long-term infrastructure projects that
are needed so we can continue providing
great water now and in the future.
…for a stronger,
greener and
healthier
North West
We are investing to accelerate
improvements for customers and the
environment in the North West, and our
work supports thousands of jobs, both
directly and through our supply chain.
Maintaining a responsible level of gearing
helps us fund this investment efficiently
and effectively. Return on regulated
equity (RoRE) measures how we have
delivered against regulatory allowances
and targets for operational and financing
performance, and the dividends we
pay provide a reliable income for many
pension funds and charities among our
shareholder base.
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(1) Underlying operating profit and underlying earnings
per share are alternative performance measures that
exclude adjusted items from their reported equivalents.
Underlying operating profit excludes any significant non-
recurring items. Underlying EPS 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 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. A description
of adjusted items, the framework by which these are assessed,
and reconciliations between reported and underlying measures,
can be found on pages 118 and 119.
See note 1
Our target
Not externally disclosed
KPI performance
£441 million
Behind expectation/target
Our progress this year
Reported operating profit: £441 million
Operating profit has fallen £169 million compared with
last year, primarily driven by lower consumption reducing
revenue, and the impact of inflation on our core costs,
particularly power and chemicals.
2022/23
2021/22
2020/21
2019/20
2018/19
£441m
£610m
£602m
£732m
£678m
Link to remuneration
Underlying operating profit is one of the measures for the annual
bonus. It is indirectly linked to the Long Term Plan (LTP) as
financial performance impacts relative total shareholder return
Underlying earnings
per share (EPS)
See note 1
Our target
Not externally disclosed
KPI performance
-1.3 pence
Reported EPS: 30.1 pence
Behind expectation/target
Our progress this year
l
Underlying loss per share is primarily driven by the movement
in operating profit and a higher underlying finance expense.
Reported EPS is higher due to fair value gains, profit on disposal
of a subsidiary, and a reduction in deferred tax due to a one-off
charge in the prior year to restate at the new future headline rate.
2022/23
(1.3)p
2021/22
2020/21
2019/20
2018/19
53.8p
56.2p
71.3p
65.9p
Link to remuneration
Underlying EPS is indirectly linked to the LTP as financial
performance impacts relative TSR
12
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Stock code: UU.
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Chief Executive Officer’s review
Louise Beardmore
Chief Executive Officer
We have delivered our best ever performance for customers,
having met or exceeded more of our performance commitments
this year than ever before. We were once again the top
performing listed company for customer satisfaction as assessed
by Ofwat’s C-MeX measure. We have provided affordability
support to more than 330,000 households so far in this
regulatory period to support customers who are understandably
struggling with cost of living pressures.
We are acutely aware that this is a critical time for the water
sector, with many challenges facing us, especially around
river health. We have delivered significant environmental
improvements in recent years in areas such as improving
beaches, reducing pollution and reducing leakage, but we should
all have acted sooner to recognise and address the impact of
storm overflows.
In the North West, we have delivered a 39 per cent reduction in
reported activations from storm overflows compared to the 2020
baseline, but there is a lot more to do and we have ambitious
plans to go further and faster to drive a real step change.
This won’t happen overnight; it will take sustained effort and
investment over time, but we are committed to acting as fast as
we can. With the support of our regulators we are accelerating
investment, making a start on improvements at one third of
the overflows we are targeting in AMP8. As a result we will be
investing a further £200 million in the next two years.
In October we will be putting forward our business plan with the
biggest environmental improvement programme we will have
ever proposed. Along with all my colleagues, we are looking
forward to the opportunity to build a stronger, greener and
healthier North West.
Strengthening our industry-leading
affordability support for customers
We are passionate about protecting customers in
vulnerable circumstances through our comprehensive
suite of support schemes and an industry-leading
£280 million(1) package of affordability support. The cost
of living crisis has made things even more challenging
for deprived communities in our region. With a growing
number of customers asking for help with their water
bill, we have been working hard to increase awareness
of available support, the option of flexible payment
plans, and to provide water efficiency advice.
We are determined to play a role in making the North
West stronger. This is the fourth year we have taken
a leading role across our region, bringing together all
stakeholders and communities to focus on affordability
and vulnerability issues.
Delivering improvements in performance
for customers and the environment
Our operational performance has been strong this
year – we have met or exceeded 83 per cent of our
performance commitments, earning a net customer
ODI reward of approximately £25 million. This reflects
strong delivery for customers and the environment in
the North West.
Our investment in improving water quality – principally
to avoid discolouration – has supported a 26 per cent
improvement in water quality contacts this year. This is
contributing towards our ODI performance, alongside
other water measures such as water service resilience
and supporting the removal of lead pipes from
customers’ properties.
Reducing leakage is of huge importance for our
stakeholders and for us as an organisation. This year
we have delivered our best performance to date
against our performance commitment, resulting in an
ODI reward. While we are making great progress, we
recognise we continue to have a high absolute level of
leakage. We are challenging ourselves to go further in
reducing leakage – from our network and in customer
properties – as it is critical to helping us better manage
and conserve water resources. Alongside this we have
delivered our largest ever reduction in Per Capita
Consumption (PCC), supported by help and advice to
encourage customers to use less water and amplify the
link between heating water and energy bills.
Our basket of measures for avoiding flooding is also
delivering a net ODI reward, and we continue to
make great progress in reducing flooding incidents.
We have nearly halved the number of internal sewer
flooding incidents since the start of AMP7. This year’s
performance includes a 39 per cent reduction in
repeat internal flooding incidents.(2) This has been
supported by our investment in Dynamic Network
Management (DNM).
1414
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Chief Executive Officer’s review
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Louise Beardmore
Chief Executive Officer
We have delivered our best ever performance for customers,
having met or exceeded more of our performance commitments
this year than ever before. We were once again the top
performing listed company for customer satisfaction as assessed
by Ofwat’s C-MeX measure. We have provided affordability
support to more than 330,000 households so far in this
regulatory period to support customers who are understandably
struggling with cost of living pressures.
We are acutely aware that this is a critical time for the water
sector, with many challenges facing us, especially around
river health. We have delivered significant environmental
improvements in recent years in areas such as improving
beaches, reducing pollution and reducing leakage, but we should
all have acted sooner to recognise and address the impact of
storm overflows.
In the North West, we have delivered a 39 per cent reduction in
reported activations from storm overflows compared to the 2020
baseline, but there is a lot more to do and we have ambitious
plans to go further and faster to drive a real step change.
This won’t happen overnight; it will take sustained effort and
investment over time, but we are committed to acting as fast as
we can. With the support of our regulators we are accelerating
investment, making a start on improvements at one third of
the overflows we are targeting in AMP8. As a result we will be
investing a further £200 million in the next two years.
In October we will be putting forward our business plan with the
biggest environmental improvement programme we will have
ever proposed. Along with all my colleagues, we are looking
forward to the opportunity to build a stronger, greener and
healthier North West.
Strengthening our industry-leading
affordability support for customers
We are passionate about protecting customers in
vulnerable circumstances through our comprehensive
suite of support schemes and an industry-leading
£280 million(1) package of affordability support. The cost
of living crisis has made things even more challenging
for deprived communities in our region. With a growing
number of customers asking for help with their water
bill, we have been working hard to increase awareness
of available support, the option of flexible payment
plans, and to provide water efficiency advice.
We are determined to play a role in making the North
West stronger. This is the fourth year we have taken
a leading role across our region, bringing together all
stakeholders and communities to focus on affordability
and vulnerability issues.
Delivering improvements in performance
for customers and the environment
Our operational performance has been strong this
year – we have met or exceeded 83 per cent of our
performance commitments, earning a net customer
ODI reward of approximately £25 million. This reflects
strong delivery for customers and the environment in
the North West.
Our investment in improving water quality – principally
to avoid discolouration – has supported a 26 per cent
improvement in water quality contacts this year. This is
contributing towards our ODI performance, alongside
other water measures such as water service resilience
and supporting the removal of lead pipes from
customers’ properties.
Reducing leakage is of huge importance for our
stakeholders and for us as an organisation. This year
we have delivered our best performance to date
against our performance commitment, resulting in an
ODI reward. While we are making great progress, we
recognise we continue to have a high absolute level of
leakage. We are challenging ourselves to go further in
reducing leakage – from our network and in customer
properties – as it is critical to helping us better manage
and conserve water resources. Alongside this we have
delivered our largest ever reduction in Per Capita
Consumption (PCC), supported by help and advice to
encourage customers to use less water and amplify the
link between heating water and energy bills.
Our basket of measures for avoiding flooding is also
delivering a net ODI reward, and we continue to
make great progress in reducing flooding incidents.
We have nearly halved the number of internal sewer
flooding incidents since the start of AMP7. This year’s
performance includes a 39 per cent reduction in
repeat internal flooding incidents.(2) This has been
supported by our investment in Dynamic Network
Management (DNM).
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Read more about
our performance
and affordability
support for
customers on
pages 96 to 103
Read more about
our environmental
performance on
pages 84 to 95
Read more about
our carbon
pledges on
page 92
In the winter, we experienced a rapid and severe
freeze-thaw event that resulted in burst pipes
across the region. Our teams and partners worked
exceptionally hard to minimise the disruption and we
deployed significant resources to sustain services.
However, some customers experienced short-term
interruptions to their water supply, leading to an ODI
penalty against this performance commitment and
additional costs.
The great service we have delivered for customers
has been reflected in further improvement in our
performance against Ofwat’s measure of customer
satisfaction, C-MeX. We were the top listed company,
ranked fourth of the water and wastewater companies
and fifth out of 17 companies overall. As a result of this
performance we expect to achieve a record
£3 million reward. Customer service is hugely
important to us, and we are proud to be the first
company ever to receive 100,000 commendations from
customers through the WOW! Awards scheme, where
customers provide independent, proactive feedback on
the service we provide.
We look after important urban and rural landscapes
and we continue to stretch ourselves to improve
environmental performance, to create a greener North
West. Our environmental performance this year has
remained strong. We have also delivered all of our
Water Industry National Environment Programme
(WINEP) schemes by their planned delivery date since
the beginning of AMP7, including 137 schemes in this
year alone.
We have also achieved the top, 4 star rating in the
Environmental Performance Assessment from the
Environment Agency (EA) in five of the last seven years.
This includes being assessed as an ‘industry-leading’
company in the most recent assessment for 2021. This
was a significant achievement given that the criteria
used to assess company performance becomes more
challenging each year. We have consistently improved
our performance when it comes to minimising
pollution, having reduced the number of pollution
incidents by over 50 per cent in the last decade and
achieving zero serious pollution incidents in three of
the last four years.
Driving a step change in river health
Communities are concerned about the country’s rivers
and particularly the impact of storm overflows. We have
listened, understand the strength of feeling and we
agree that we need to go further and faster to reduce
the number of storm overflow activations.
Overflows have been a core feature of the sewer
network in the UK and around the world for more than a
century. We recognise that the time has come to change
this and a step change is needed. Achieving this will
take significant time and sustained, new investment.
The North West has more rainfall and more combined
sewers than elsewhere in the country, as well as a very
large network. We are committed to delivering the
changes needed as quickly and effectively as possible.
Last year, we announced our ‘Better Rivers: Better
North West’ programme, supported by additional
reinvestment of outperformance, to take action to
improve river health across our region. We have made
good progress so far and have delivered a 39 per cent
reduction in reported activations compared to the 2020
baseline. This will get progressively tougher as we
focus on more challenging overflows. Key to delivering
this is our improvement in monitoring and operation of
storm overflows. We currently monitor 97 per cent of
overflows and will achieve full coverage before the end
of this calendar year.
We have also won regulatory support to make an
early start on our AMP8 investment. This means we
expect to spend £200 million over the final two years
of AMP7, making an early start on improving a third of
the overflows targeted for improvement between now
and 2030.
Creating a greener future
We continue to work towards our 2050 net zero
ambition, underpinned by ambitious science-based
targets. We are making good progress against our six
carbon pledges, and have reduced our scope 1 and 2
greenhouse gas (GHG) emissions by a further 1.5 per
cent this year. Our peatland restoration and woodland
creation programmes help to protect water and
other natural resources, support nature, and enable
recreational access, as well as acting as natural carbon
‘sinks’ to help mitigate climate change.
We own and manage 56,000 hectares of land, which
provides scope for the development of renewable and
other clean technologies. Having previously delivered
a portfolio of renewable assets across the North West,
we are now moving to the next stage of the journey to
net zero.
As an initial step, we are working on plans to develop
150 megawatts of new installed capacity by 2030.
This programme could comprise a combination of
solar, wind and batteries, helping to deliver emissions
reductions and further improve both operating and
financial resilience.
(1) 50 per cent company funded, over the course of the 2020–25 regulatory period (AMP7).
(2) These are incidents affecting a customer that has already experienced a previous incident.
39%
83%
£25m
reduction in reported activations of
storm overflows since 2020 baseline
performance commitments met or
exceeded for the year
customer outcome delivery incentive
(ODI) reward
1414
unitedutilities.com/corporate
Stock code: UU.
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Chief Executive Officer’s review
Read more about
our financial
performance on
pages 112 to 119
Read more about
how we are driving
female leadership on
page 102
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Financial performance
The group reported an underlying loss after tax of
£9 million for the year, moving from underlying
earnings per share of 53.8 pence last year to an
underlying loss per share of (1.3) pence. The principal
drivers of this movement were lower consumption
leading to under-recovery of revenue,(3) inflationary
increases in our core cost base, particularly energy
and chemicals, operational incidents due to extreme
weather, and a higher underlying net finance expense.
Reported profit after tax was £205 million, with
reported basic earnings per share increased from
(8.3) pence last year to 30.0 pence. The difference
mainly reflects fair value gains on debt and derivative
instruments, profit on disposal of our subsidiary
United Utilities Renewable Energy Limited, and a
reduction in deferred tax charge largely due to a
one-off charge in the prior year to restate the brought
forward deferred tax liability at the new 25 per cent
future headline rate.
The rising cost of living increases the strain on
customer bills and therefore cash collection. However,
we have 81 per cent of household customers on
direct debit and payment plans and, with the help
of proactive engagement, innovative solutions and
tailored assistance, we have achieved our best ever
performance for cash collection. This has contributed
to bad debt remaining at an all-time low of 1.8 per cent
of household revenue.
We have delivered another year of good performance
and, despite the income statement reflecting an
underlying loss after tax, strong performance against
our regulatory contract has delivered positive returns.
Return on regulated equity (RoRE) for 2022/23 was
11.0 per cent on a real, RPI/CPIH blended basis. This
comprises the base return of 4.0 per cent (including
our 11 basis point fast track reward), financing
outperformance of 4.7 per cent, tax outperformance
of 2.5 per cent, and customer ODI outperformance of
0.5 per cent, partially offset by the total expenditure
(totex) impact on RoRE of minus 0.8 per cent as
a result of our additional investment to improve
operational and environmental performance.
Our customer ODI performance has been strong
across the board and the 0.5 per cent RoRE
outperformance for ODIs reflects a net reward of
approximately £25 million this year – our highest
annual reward to date.
Our balance sheet remains robust, our liquidity
extends out to August 2025, and our gearing of
58 per cent remains comfortably within our target
range of 55 to 65 per cent, supporting a solid A3
credit rating with Moody’s.
(3) £41 million under-recovery against regulatory
allowed revenue will be recovered in 2024/25
under the revenue control.
Supported by a talented, diverse and
engaged workforce
Our colleagues are at the heart of our current and
future success, and we are committed to providing a
safe and great place to work. Colleague engagement
has been strong this year, and at 82 per cent we
scored higher than UK norm and Utilities norm
benchmarks. We have recruited record levels of
graduates and apprentices onto our award-winning
programmes this year, and are proud that one of
our own colleagues has been awarded the UK’s
apprentice of the year. We have also launched our
new green apprenticeship scheme to recruit 100
apprentices by 2025, who will actively contribute to
our environmental delivery.
The safety of our colleagues has been, and always
will be, a top priority for us, and we are pleased to
have delivered sustained year-on-year improvements
in colleague accident frequency rates for the last
five years. In recognition of our commitment to
health and safety, we have been awarded the Royal
Society for the Prevention of Accidents (RoSPA) gold
standard medal for the 11th consecutive year.
We are ranked in the top 100 companies in the
Financial Times Inclusive Leaders Index 2023, having
improved on our position from last year, and are
the only UK utility company in the top 100. We are
recognised as one of the top 15 FTSE companies
when it comes to women in leadership, having
exceeded the 40 per cent target for Women on Board
and Women Leaders set by the FTSE 100 Women
Leaders Review.
Building an ambitious future plan
Enhanced environmental standards, population
growth and climate change are driving significant new
investment needs. Our plan for the next regulatory
period will be submitted in October with a substantial
programme of work targeting a wide range of
customer service and environmental benefits.
Reducing the use of storm overflows is a key
component of our plan, which proposes
improvements to over 400 sites by the end of
AMP8. We expect this would represent a reduction
of over 70,000 activations per annum, around a
60 per cent reduction against the 2020 baseline.
Our plan also includes investment to reduce
phosphorous and address nutrient imbalance,
delivery targets set by the Environment Act 2021,
further improving river health in the North West.
Our proposed programme of work is substantially
larger than we have ever delivered before, and we
are already working hard to prepare and mobilise to
deliver this ambitious plan. We have appointed five
new area stakeholder managers, one for each county
in our region, who are working on early engagement
with communities and planning approval. We have
also brought in additional experience and knowledge
to assist colleagues in our engineering, capital
delivery and commercial teams. Our supply chain
will be critical, and we have appointed an AMP8
mobilisation and organisational readiness partner
to ensure that we have the skills and capabilities to
successfully deliver AMP8.
16
unitedutilities.com/corporate
Chief Executive Officer’s review
Read more about
our financial
performance on
pages 112 to 119
Read more about
how we are driving
page 102
female leadership on
weather, and a higher underlying net finance expense.
Financial performance
Supported by a talented, diverse and
The group reported an underlying loss after tax of
£9 million for the year, moving from underlying
earnings per share of 53.8 pence last year to an
underlying loss per share of (1.3) pence. The principal
drivers of this movement were lower consumption
leading to under-recovery of revenue,(3) inflationary
increases in our core cost base, particularly energy
and chemicals, operational incidents due to extreme
Reported profit after tax was £205 million, with
reported basic earnings per share increased from
(8.3) pence last year to 30.0 pence. The difference
mainly reflects fair value gains on debt and derivative
instruments, profit on disposal of our subsidiary
United Utilities Renewable Energy Limited, and a
reduction in deferred tax charge largely due to a
one-off charge in the prior year to restate the brought
forward deferred tax liability at the new 25 per cent
future headline rate.
The rising cost of living increases the strain on
customer bills and therefore cash collection. However,
we have 81 per cent of household customers on
direct debit and payment plans and, with the help
of proactive engagement, innovative solutions and
tailored assistance, we have achieved our best ever
performance for cash collection. This has contributed
to bad debt remaining at an all-time low of 1.8 per cent
of household revenue.
We have delivered another year of good performance
and, despite the income statement reflecting an
underlying loss after tax, strong performance against
our regulatory contract has delivered positive returns.
Return on regulated equity (RoRE) for 2022/23 was
11.0 per cent on a real, RPI/CPIH blended basis. This
comprises the base return of 4.0 per cent (including
our 11 basis point fast track reward), financing
outperformance of 4.7 per cent, tax outperformance
of 2.5 per cent, and customer ODI outperformance of
0.5 per cent, partially offset by the total expenditure
(totex) impact on RoRE of minus 0.8 per cent as
a result of our additional investment to improve
operational and environmental performance.
Our customer ODI performance has been strong
across the board and the 0.5 per cent RoRE
outperformance for ODIs reflects a net reward of
approximately £25 million this year – our highest
annual reward to date.
Our balance sheet remains robust, our liquidity
extends out to August 2025, and our gearing of
58 per cent remains comfortably within our target
range of 55 to 65 per cent, supporting a solid A3
credit rating with Moody’s.
(3) £41 million under-recovery against regulatory
allowed revenue will be recovered in 2024/25
under the revenue control.
engaged workforce
Our colleagues are at the heart of our current and
future success, and we are committed to providing a
safe and great place to work. Colleague engagement
has been strong this year, and at 82 per cent we
scored higher than UK norm and Utilities norm
benchmarks. We have recruited record levels of
graduates and apprentices onto our award-winning
programmes this year, and are proud that one of
our own colleagues has been awarded the UK’s
apprentice of the year. We have also launched our
new green apprenticeship scheme to recruit 100
apprentices by 2025, who will actively contribute to
our environmental delivery.
The safety of our colleagues has been, and always
will be, a top priority for us, and we are pleased to
have delivered sustained year-on-year improvements
in colleague accident frequency rates for the last
five years. In recognition of our commitment to
health and safety, we have been awarded the Royal
Society for the Prevention of Accidents (RoSPA) gold
standard medal for the 11th consecutive year.
We are ranked in the top 100 companies in the
Financial Times Inclusive Leaders Index 2023, having
improved on our position from last year, and are
the only UK utility company in the top 100. We are
recognised as one of the top 15 FTSE companies
when it comes to women in leadership, having
exceeded the 40 per cent target for Women on Board
and Women Leaders set by the FTSE 100 Women
Leaders Review.
Building an ambitious future plan
Enhanced environmental standards, population
growth and climate change are driving significant new
investment needs. Our plan for the next regulatory
period will be submitted in October with a substantial
programme of work targeting a wide range of
customer service and environmental benefits.
Reducing the use of storm overflows is a key
component of our plan, which proposes
improvements to over 400 sites by the end of
AMP8. We expect this would represent a reduction
of over 70,000 activations per annum, around a
60 per cent reduction against the 2020 baseline.
Our plan also includes investment to reduce
phosphorous and address nutrient imbalance,
delivery targets set by the Environment Act 2021,
further improving river health in the North West.
Our proposed programme of work is substantially
larger than we have ever delivered before, and we
are already working hard to prepare and mobilise to
deliver this ambitious plan. We have appointed five
new area stakeholder managers, one for each county
in our region, who are working on early engagement
with communities and planning approval. We have
also brought in additional experience and knowledge
to assist colleagues in our engineering, capital
delivery and commercial teams. Our supply chain
will be critical, and we have appointed an AMP8
mobilisation and organisational readiness partner
to ensure that we have the skills and capabilities to
successfully deliver AMP8.
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Our engagement with customers shows their support
for investment in environmental improvements, but
the recent rises in cost of living are clearly putting
pressure on household budgets and a plan of this
size will inevitably drive an increase in customer bills.
We are challenging ourselves to embed the highest
levels of efficiency into the plan and identify the
best value solutions. We also recognise the need to
support customers with affordability challenges and
we are planning to strengthen our industry-leading
affordability support package as we head into AMP8.
We are confident that our strong and resilient
corporate and financial structure, together with a
highly competent and engaged team, means that we
are well positioned to continue to deliver for all our
stakeholders in AMP8 and beyond.
Thanks to our stakeholders for their
continued support
The commitment and passion of each and every
colleague within United Utilities to deliver fantastic
services for customers, for the environment, and for
each other is clear, and for that we say a huge thank
you. Looking to the opportunities that are ahead
of us in the next regulatory period and beyond,
we could not have a better team to deliver on
these opportunities. We also extend our thanks to
customers and other stakeholders for their
continued support.
Louise Beardmore
Chief Executive Officer
24 May 2023
Integrated Report and TCFD disclosure
This annual report is an Integrated Report and has been prepared
and presented in accordance with the International Framework
published by the International Integrated Reporting Council in
January 2021. 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. This report contains all
climate-related financial disclosures required to be consistent
with the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD), and in line with the Listing Rules
requirements (Listing Rule 9.8.6R(8)). Further supplementary
detail, such as our 2021 adaptation progress report, WRMP and
supporting technical documents, are available on our website.
Materiality
Our integrated 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, colleagues, 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 28
and 29, we either include it in this report or refer the reader to
other reports and information (such as our regulatory reports,
customer communications, or company 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.
Our materiality assessment identifies the issues that matter most
to our stakeholders and could impact our ability to create value,
and this feeds into our assessment of risks and opportunities.
It is through our risk management processes that we monitor
and assess the specific risks that we face, their likelihood and
impact, and ensure we have adequate controls and procedures
in place to mitigate risks and act on opportunities.
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Stock code: UU.
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How we provide great water for a stronger,
greener and healthier North West
1. Collect and treat
Providing great water:
We collect raw water from open reservoirs, lakes, rivers and boreholes.
We then treat it in one of our 86 water treatment works to ensure it is
safe and clean for customers to drink.
For a stronger, greener and healthier North West:
We own and manage 56,000 hectares of land. We are optimising the
use of this land to protect water quality, create natural carbon sinks by
restoring peatland and planting woodland, and explore potential clean
energy development. We manage our land and water resources in a
sustainable way, protecting and enhancing local habitats, and open our
land to the public to enjoy nature and its health and wellbeing benefits.
Reservoirs are the biggest source of water in the North West, and we have
more than any other UK water company. They are quick to fill when it
rains, but are more vulnerable to periods of dry weather than ground water
sources. They provide great tasting water, but have high maintenance needs
and the raw water requires more treatment than some other water sources.
Relevant material issues
• Water resources
and leakage
• Climate change
• Land management,
Relevant principal risks
• Water service
• Supply chain and
• Drinking water quality
access and recreation
programme delivery
• Resource
Retail
Providing great water:
United Utilities Water Ltd provides
metering, billing and customer
services for household customers
in the North West. Business
customers choose a water retailer,
and our joint venture, Water Plus,
operates in the competitive
non-household retail market.
For a stronger, greener and
healthier North West:
Our region has the most areas of
extreme deprivation in the country.
We have an extensive range of
affordability and vulnerability
schemes, and are helping more
than 330,000 customers with
£280 million(1) of support in AMP7.
(1) 50 per cent company funded
Relevant material issues
• Customer service and
operational performance
• Affordability and vulnerability
Relevant principal risks
• Retail and commercial
• Security
• Resource
4. Return
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Providing great water:
Once the water is clean enough to meet stringent environmental
consents, we return it through rivers and streams so that the water
cycle can begin again.
For a stronger, greener and healthier North West:
We have a long coastline and 25 designated coastal bathing waters
across the North West. We are meeting 24 of 25 standards for these
bathing waters and we are industry leading in minimising pollution,
with zero serious pollution incidents in three of the last four years.
We are going above and beyond our regulatory commitments to improve
river health, with the commitments in our Better Rivers: Better North
West programme and additional investment in the 2020–25 period to
deliver improvements faster. We are recruiting a team of river rangers
to help us look after the local rivers and streams in our communities,
and exploring other new ways of working such as how we can work
with farmers to reduce the impact of runoff, and the use of nature-
based solutions and partnerships with groups such as The Rivers
Trust, to ensure we are pursuing the best ways to improve the natural
environment and river and bathing water quality across the region.
Relevant material issues
• Political and regulatory environment
• Natural capital and biodiversity
Relevant principal risks
• Health, safety and environmental
• Conduct and compliance
18
Read more about our material issues on pages 28 to 33 and our principal risks on
unitedutilities.com/corporate
pages 64 and 65
How we provide great water for a stronger,
greener and healthier North West
Our strategic priorities
Improve
our rivers
Create a
greener future
Provide a safe and
great place to work
Deliver great service
for all our customers
Spend customers'
money wisely
Contribute to
our communities
1. Collect and treat
Providing great water:
We collect raw water from open reservoirs, lakes, rivers and boreholes.
sustainable way, protecting and enhancing local habitats, and open our
We then treat it in one of our 86 water treatment works to ensure it is
land to the public to enjoy nature and its health and wellbeing benefits.
safe and clean for customers to drink.
For a stronger, greener and healthier North West:
Reservoirs are the biggest source of water in the North West, and we have
more than any other UK water company. They are quick to fill when it
We own and manage 56,000 hectares of land. We are optimising the
rains, but are more vulnerable to periods of dry weather than ground water
use of this land to protect water quality, create natural carbon sinks by
sources. They provide great tasting water, but have high maintenance needs
restoring peatland and planting woodland, and explore potential clean
and the raw water requires more treatment than some other water sources.
energy development. We manage our land and water resources in a
2. Store and deliver
Providing great water:
The treated water goes to one of our covered storage reservoirs, ready
to be delivered to customers’ taps when they need it. We deliver an
average of 1.8 billion litres of water every day to 7.4 million people and
businesses, using 43,000 kilometres of water pipes.
For a stronger, greener and healthier North West:
Our integrated supply network enables us to move water around the
region as needed. Along with production planning and optimisation
of storage levels ahead of anticipated demand increases, and a fleet of
alternative supply vehicles, this helps us to deliver a more resilient water
supply. We use sensors and artificial intelligence, and have dedicated
teams to detect and fix leaks across our pipes as well as helping
customers identify leaks on their property, which can save them money
on their bills as well as reducing water losses. Our Haweswater Aqueduct
uses gravity to transfer water from Cumbria to Manchester, helping to
reduce our carbon footprint from energy-intensive pumping.
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Relevant material issues
Relevant principal risks
• Water resources
• Climate change
• Water service
• Resource
and leakage
• Land management,
• Supply chain and
• Drinking water quality
access and recreation
programme delivery
Relevant material issues
• Water resources and leakage
• Customer service and operational performance
• Drinking water quality
Relevant principal risks
• Water service
• Supply chain and programme delivery
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Retail
Providing great water:
United Utilities Water Ltd provides
metering, billing and customer
services for household customers
in the North West. Business
customers choose a water retailer,
and our joint venture, Water Plus,
operates in the competitive
non-household retail market.
For a stronger, greener and
healthier North West:
Our region has the most areas of
extreme deprivation in the country.
We have an extensive range of
affordability and vulnerability
schemes, and are helping more
than 330,000 customers with
£280 million(1) of support in AMP7.
(1) 50 per cent company funded
Relevant material issues
• Customer service and
operational performance
• Affordability and vulnerability
Relevant principal risks
• Retail and commercial
• Security
• Resource
4. Return
Providing great water:
cycle can begin again.
r
u
O
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O
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Generate
Providing great water:
We minimise waste from our
operations, including by turning
sludge byproduct into compost
for farmers and capturing gas to
generate renewable energy from
bioresources.
For a stronger, greener and
healthier North West:
Self-generation helps us to reduce
our carbon footprint and save
energy costs, and the remaining
electricity needs that we purchase
are 100 per cent renewable.
We are closely following the
developments in the interpretation
of Farming Rules for Water, and
the impact this could have on our
provision of compost for farmers
throughout the year.
Relevant material issues
• Energy management
• Environmental impacts
Relevant principal risks
• Health, safety and environmental
• Supply chain and
programme delivery
• Resource
Once the water is clean enough to meet stringent environmental
river health, with the commitments in our Better Rivers: Better North
consents, we return it through rivers and streams so that the water
West programme and additional investment in the 2020–25 period to
We are going above and beyond our regulatory commitments to improve
For a stronger, greener and healthier North West:
We have a long coastline and 25 designated coastal bathing waters
across the North West. We are meeting 24 of 25 standards for these
bathing waters and we are industry leading in minimising pollution,
with zero serious pollution incidents in three of the last four years.
deliver improvements faster. We are recruiting a team of river rangers
to help us look after the local rivers and streams in our communities,
and exploring other new ways of working such as how we can work
with farmers to reduce the impact of runoff, and the use of nature-
based solutions and partnerships with groups such as The Rivers
Trust, to ensure we are pursuing the best ways to improve the natural
environment and river and bathing water quality across the region.
Relevant material issues
• Political and regulatory environment
• Natural capital and biodiversity
Relevant principal risks
• Health, safety and environmental
• Conduct and compliance
3. Remove and clean
Providing great water:
We operate 79,000 kilometres of wastewater pipes to transport
wastewater from sewers to one of our 584 wastewater treatment works,
where it requires separation and treatment before it is returned to the
natural environment.
Combined sewers take a mix of wastewater and rainwater to be
cleaned. In excessive rainfall, when sewer capacity is overloaded, storm
overflows are activated, using a separate pipe to allow this heavily
diluted mix to flow directly into rivers or the sea to help prevent flooding
of streets, homes and businesses. Read more on page 22.
For a stronger, greener and healthier North West:
Urban rainfall in our region is 40 per cent higher than the average for the
rest of England and Wales, and 54 per cent of our sewers take combined
waste and rainwater, compared to an average of 33 per cent. This means
more water runs into our sewers than other parts of the country, creating
a much bigger challenge for reducing the use of storm overflows in the
North West. We are already investing substantial amounts in AMP7,
supporting our target of at least a one-third sustainable reduction in the
number of overflow activations, improving 184 kilometres of rivers. Our
ambitious plans for AMP8 target even more significant improvements.
Relevant material issues
• Recycling biosolids to land
• Customer service and
operational performance
• Storm overflows
• Climate change
Relevant principal risks
• Wastewater service
• Political and regulatory
• Health, safety and
environmental
• Supply chain and
programme delivery
18
pages 64 and 65
Read more about our material issues on pages 28 to 33 and our principal risks on
unitedutilities.com/corporate
Stock code: UU.
19
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Our business model
How our approach generates value for a broad range of stakeholders
Our environment and
the resources we rely upon
Our approach to
generating value
Our external
environment
What we do and how we do
it is influenced by a number
of factors external to our
business, all of which must
be considered and managed.
We monitor developments
and trends in our external
environment and adapt our
plans as needed to respond.
Political environment
This includes regional and
national politicians as well
as policymakers. We must
understand the key policy
issues affecting our industry.
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.
Economic environment
The economy impacts our
financing costs through
market rate movements
such as interest rates and
inflation, and customers’
ability to pay their bills.
Regulatory environment
Regulators set minimum
standards for customer
service, drinking water and
environmental performance,
and market reform can drive
change in the long term.
Technology and
innovation
New technology and
innovations can create
opportunities for
improvements in service
and efficiency, and also risks
such as cyber attacks.
Stakeholders
Our work and the huge areas
of land we manage impact a
wide variety of stakeholders
and we consult them to
help develop and execute
our plans.
Key
resources
We are reliant on each of
the six capitals to deliver
our purpose, and we strive
to have a positive impact on
those capitals through our
activities in order to support
our ongoing relationship
with them for mutual benefit
in the long term.
Natural capital
We rely on natural resources
to supply water and take
back wastewater after
treatment, as well as to
generate renewable energy.
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.
Intellectual capital
Innovation helps us
continually improve, and
understanding performance
trends in our network helps
us spot potential issues early
and fix them proactively.
Human capital
We rely on skilled and
engaged colleagues and
suppliers to deliver our
services, and skills must be
maintained through training
and development.
Social capital
The constructive
relationships we have built
with regulators, suppliers,
and other stakeholders are
fundamental to our ability to
deliver our purpose.
Financial capital
Efficient financing allows us
to preserve intergenerational
equity for customers while
funding necessary long-term
capital investment projects.
Strategy
Our six strategic priorities help us deliver
our purpose and drive sustainable long-term
improvements for customers, the environment
and society, at an efficient cost. We use adaptive
planning across short, medium and long-term
horizons to ensure flexibility and resilience.
Key differentiators
• Our rigorous planning over multiple horizons
• Our multi-stakeholder approach to value creation
Governance
We are committed to responsible business, factoring
ESG matters and stakeholder priorities into decision-
making at all levels of the business, and executive
remuneration is linked to performance against
customer, environmental and financial targets.
Key differentiators
• Our integrated thinking
• Our diverse and inclusive culture
• Our holistic remuneration approach
Risks and opportunities
We have a robust framework for identifying,
assessing and managing risks and opportunities,
with regular monitoring as well as longer-term plans
to enhance our resilience to climate change. Our
pioneering Systems Thinking approach and culture
of innovation help us to maximise opportunities to
work better, safer, and more efficiently.
Key differentiators
• Our pioneering Systems Thinking approach
• Our culture of innovation
Metrics and targets
We monitor and measure our performance against
a range of operational metrics for each of the
stakeholders we create value for, as well as financial
metrics covering the income statement, balance
sheet, and investor returns.
Key differentiators
• Our multi-stakeholder value creation approach
• Our strong credit ratings and low dependency
pension schemes with no pension deficit
20
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unitedutilities.com/corporate
Our business model
How our approach generates value for a broad range of stakeholders
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Our environment and
the resources we rely upon
Our approach to
generating value
Our external
environment
What we do and how we do
it is influenced by a number
of factors external to our
business, all of which must
be considered and managed.
We monitor developments
and trends in our external
environment and adapt our
plans as needed to respond.
Key
resources
We are reliant on each of
the six capitals to deliver
our purpose, and we strive
to have a positive impact on
those capitals through our
activities in order to support
our ongoing relationship
with them for mutual benefit
in the long term.
Political environment
Natural capital
This includes regional and
national politicians as well
as policymakers. We must
understand the key policy
We rely on natural resources
to supply water and take
back wastewater after
treatment, as well as to
issues affecting our industry.
generate renewable energy.
Economic environment
Intellectual capital
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.
The economy impacts our
financing costs through
market rate movements
such as interest rates and
inflation, and customers’
ability to pay their bills.
Regulatory environment
Regulators set minimum
standards for customer
service, drinking water and
environmental performance,
and market reform can drive
change in the long term.
Technology and
innovation
New technology and
innovations can create
opportunities for
improvements in service
and efficiency, and also risks
such as cyber attacks.
Stakeholders
Our work and the huge areas
of land we manage impact a
wide variety of stakeholders
and we consult them to
help develop and execute
our plans.
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.
Innovation helps us
continually improve, and
understanding performance
trends in our network helps
us spot potential issues early
and fix them proactively.
Human capital
We rely on skilled and
engaged colleagues and
suppliers to deliver our
services, and skills must be
maintained through training
and development.
Social capital
The constructive
relationships we have built
with regulators, suppliers,
and other stakeholders are
fundamental to our ability to
deliver our purpose.
Financial capital
Efficient financing allows us
to preserve intergenerational
equity for customers while
funding necessary long-term
capital investment projects.
Strategy
Our six strategic priorities help us deliver
our purpose and drive sustainable long-term
improvements for customers, the environment
and society, at an efficient cost. We use adaptive
planning across short, medium and long-term
horizons to ensure flexibility and resilience.
Key differentiators
• Our rigorous planning over multiple horizons
• Our multi-stakeholder approach to value creation
Governance
We are committed to responsible business, factoring
ESG matters and stakeholder priorities into decision-
making at all levels of the business, and executive
remuneration is linked to performance against
customer, environmental and financial targets.
Key differentiators
• Our integrated thinking
• Our diverse and inclusive culture
• Our holistic remuneration approach
Risks and opportunities
We have a robust framework for identifying,
assessing and managing risks and opportunities,
with regular monitoring as well as longer-term plans
to enhance our resilience to climate change. Our
pioneering Systems Thinking approach and culture
of innovation help us to maximise opportunities to
work better, safer, and more efficiently.
Key differentiators
• Our pioneering Systems Thinking approach
• Our culture of innovation
Metrics and targets
We monitor and measure our performance against
a range of operational metrics for each of the
stakeholders we create value for, as well as financial
metrics covering the income statement, balance
sheet, and investor returns.
Key differentiators
• Our multi-stakeholder value creation approach
• Our strong credit ratings and low dependency
pension schemes with no pension deficit
Building a stronger, greener and
healthier North West
We deliver our water and wastewater
services responsibly and sustainably,
which supports long-term value
creation for all our stakeholders.
S
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Affordability
£280m1
support for customers
over 2020–25
1 50% company funded
Customer satisfaction
4th
ranked water and
sewerage company in
England and Wales
Customers
• Continually improving
service at an efficient
cost to deliver best
value for money
• Supporting thousands
of vulnerable customers
through a wide range of
assistance schemes
River health
39%
reduction in reported
overflow activations
since 2020
Environment
• Reducing our
environmental impact
Carbon emissions
3.6%
reduction since 2020
(scope 1 and 2)
• Protecting and enhancing
reservoirs, catchments,
rivers and bathing waters that
provide a home for wildlife, areas
for recreation, and a major
pull for tourism
Engagement
82%
higher than UK norm
and Utilities norm
benchmarks
Pension schemes
£nil
deficit, fully funded
on a low
dependency basis
Stronger
Greener
Healthier
Colleagues
• Attracting, developing and
retaining a diverse team
• Looking after health,
safety and wellbeing
• Paying the Living Wage
and having a secure
pension provision
Suppliers
Suppliers
Media
Communities
• Building partnerships
• Working with schools and
young people to develop
skills and help people get
back to work
• Opening our land to the
public and encouraging
people to use it
responsibly
Community
investment
£2.88m
invested in the
community
Total taxes
paid
£229m
contributing towards
public finances
•
Investing in the North West’s
infrastructure and generating
jobs, skills and income in
the local economy through
our capital programme
• Acting fairly and
transparently and adhering
to the Prompt
Payment Code
99%
of invoices paid
within 60 days or less
Investors
• Managing risk prudently and
providing an appropriate
return, investing in our assets
for growth and resilience
• With pension funds and
charities among our
investors, millions rely
on the income we
provide
Return on regulated
equity (RoRE)
11.0%
outperforming the
base return of 4%
20
20
unitedutilities.com/corporate
Stock code: UU.
21
21
Jobs supported
22,700
across the value chain
through our work
Dividend
45.51p
per share for 2022/23,
increased in line with
CPIH inflation
54%
combined sewers in the
North West compared
to 33% industry
average, with some
urban centres even
higher, for example
Liverpool has 84%
Our environment and the resources we rely upon
Our external environment
Storm overflows
Storm overflows, which includes combined sewer
overflows (CSOs) and storm tank discharges, have
been an important part of the sewerage network for
over 150 years, acting as the catch-all last defence
for managing surface water in our communities.
This needs to change.
When overflows are activated they can
sometimes temporarily affect river and
bathing water quality. With more extreme
rainfall events and significant population
growth expected over the next 25 years,
more foul and rainwater will be entering
our sewers, and the need for overflows
would increase if left unaddressed.
We understand and share concerns
around this and we are committed to
driving a step-change. This will not
happen overnight. It is a long-term plan
that will need a fundamental re-plumb
of the region’s sewer system, moving us
away from the use of combined storm
pipes and creating new ways of dealing
with excess wastewater at times of
heavy rainfall.
We have made a fast start to a very
ambitious plan that is already delivering
improvement, and we are keen to go
further faster, as discussed on page 15.
In normal conditions sewage, mixed with
rainwater in wet weather, transits through
our wastewater treatment works, and only
treated water is returned to the natural
environment. If the flow is too much for
the works to deal with, it is usually stored
in tanks until the incoming flows have
returned to normal levels. Then the tanks
are emptied and the water is treated.
Our sewers are typically no more than 15
per cent full in dry conditions but, when
rainfall is very heavy and the tanks fill
to capacity, overflows act as a pressure
relief valve allowing rainwater, mixed
with sewage, to rise inside the sewer and
eventually enter a separate pipe which
flows into a river or the sea. Sewers
operate this way to help prevent the
flooding of streets, homes and businesses.
The North West has:
• A significantly higher proportion of
combined sewers, receiving a mix of
rainwater and sewage, than any other
water company;
• 28 per cent higher annual rainfall than
the average for England and Wales, so
considerably more rainwater entering
our sewers; and
• 25 per cent more overflows than the
industry average.
Storm overflow report 2022
We released a report in 2022
discussing the issue of storm overflows
and our plans to reduce their use.
Visit our online report at unitedutilities.com/globalassets/
documents/pdf/united-utilities-storm-overflow.pdf
Better Rivers report 2023
We released a report in 2023 detailing
progress against the commitments in our
Better Rivers: Better North West plan.
Visit our online report at unitedutilities.com/
globalassets/documents/corporate-documents/
united-utilities-better-rivers-report-2023.pdf
Video from our CEO
Louise Beardmore talks about
the issue with storm overflows
and how we plan to tackle it.
Watch the video at
unitedutilities.com/corporate/
responsibility/environment/
reducing-pollution/
storm-overflows
22
unitedutilities.com/corporate
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54%
combined sewers in the
North West compared
to 33% industry
average, with some
urban centres even
higher, for example
Liverpool has 84%
Our environment and the resources we rely upon
Our external environment
Storm overflows
Storm overflows, which includes combined sewer
overflows (CSOs) and storm tank discharges, have
been an important part of the sewerage network for
over 150 years, acting as the catch-all last defence
for managing surface water in our communities.
This needs to change.
In normal conditions sewage, mixed with
When overflows are activated they can
rainwater in wet weather, transits through
sometimes temporarily affect river and
our wastewater treatment works, and only
bathing water quality. With more extreme
treated water is returned to the natural
rainfall events and significant population
environment. If the flow is too much for
growth expected over the next 25 years,
the works to deal with, it is usually stored
more foul and rainwater will be entering
in tanks until the incoming flows have
our sewers, and the need for overflows
returned to normal levels. Then the tanks
would increase if left unaddressed.
are emptied and the water is treated.
We understand and share concerns
Our sewers are typically no more than 15
around this and we are committed to
per cent full in dry conditions but, when
driving a step-change. This will not
rainfall is very heavy and the tanks fill
happen overnight. It is a long-term plan
to capacity, overflows act as a pressure
that will need a fundamental re-plumb
relief valve allowing rainwater, mixed
of the region’s sewer system, moving us
with sewage, to rise inside the sewer and
away from the use of combined storm
eventually enter a separate pipe which
pipes and creating new ways of dealing
with excess wastewater at times of
heavy rainfall.
We have made a fast start to a very
ambitious plan that is already delivering
improvement, and we are keen to go
further faster, as discussed on page 15.
flows into a river or the sea. Sewers
operate this way to help prevent the
flooding of streets, homes and businesses.
The North West has:
• A significantly higher proportion of
combined sewers, receiving a mix of
rainwater and sewage, than any other
water company;
• 28 per cent higher annual rainfall than
the average for England and Wales, so
considerably more rainwater entering
• 25 per cent more overflows than the
our sewers; and
industry average.
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Storm overflow report 2022
We released a report in 2022
discussing the issue of storm overflows
and our plans to reduce their use.
Visit our online report at unitedutilities.com/globalassets/
documents/pdf/united-utilities-storm-overflow.pdf
Better Rivers report 2023
We released a report in 2023 detailing
progress against the commitments in our
Better Rivers: Better North West plan.
Visit our online report at unitedutilities.com/
globalassets/documents/corporate-documents/
united-utilities-better-rivers-report-2023.pdf
Video from our CEO
Louise Beardmore talks about
the issue with storm overflows
and how we plan to tackle it.
Watch the video at
unitedutilities.com/corporate/
responsibility/environment/
reducing-pollution/
storm-overflows
S
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Political environment
Political decisions have the potential to impact on our
operations. We engage with politicians and other policymakers
to understand developments, influence where possible, and
stay flexible to adapt as needed.
Key trends
Reducing the use of storm overflows
Recognising the need to act on storm
overflows, the Government set out
a discharge reduction plan in the
Environment Act 2021. We are already
investing significant amounts in AMP7
to improve the quality of rivers and
seas in the North West, including
£230 million leading to improvements
to 184 kilometres of watercourses and
supporting a sustainable one-third
reduction in activations of overflows.
Transparency is key and we have
committed to achieve 100 per cent
monitoring of storm overflows before
the end of 2023, with 97 per cent
already monitored.
We have ambitious plans for reducing
activations of storm overflows in AMP8
as part an environmental improvement
programme that is significantly larger
than any we have ever delivered, and we
have provisional approval from regulators
to accelerate around £200 million of
investment into the next two years, the
majority of which relates to this.
Phosphorus reduction and
nutrient neutrality
As well as addressing the use of
overflows, the Environment Act also sets
obligations to reduce phosphorus and
address nutrient imbalance, which are
reflected in our AMP8 investment plans.
National social tariff
Additional cost of living pressures on
households across the country is putting
the focus on government and companies
to do more to help those struggling to
pay. We are a strong supporter of the
Consumer Council for Water’s drive to
launch a national social tariff so water
customers across the country are not
reliant on the current postcode lottery.
Devolved regional plans
We have a part to play in the plans of
devolved regions and mayors for growth
and green energy development in the
North West, including our diversions
activity to support HS2.
Link to principal risks
• Wastewater service
• Health, safety and environmental
• Political and regulatory
Read more on pages 64 to 65
Link to material issues
• Trust, transparency and legitimacy
• Political and regulatory environment
• Storm overflows
Read more on pages 28 to 29
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unitedutilities.com/corporate
Stock code: UU.
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Our environment and the resources we rely upon
Our external environment
Natural environment
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28%
more rainfall in the
North West than
average across
England and Wales
34%
of our region is
National Park,
Area of
Outstanding
Natural Beauty or
a Site of Special
Scientific Interest
Link to principal risks
Link to material issues
• Water service
•
Climate change
• Wastewater service
• Water resources and leakage
•
Health, safety and
environmental
•
Natural capital and
biodiversity
Read more on pages 64 to 65
Read more on pages 28 to 29
The natural environment is
constantly changing. We
must adapt and prepare for
these challenges, minimising
our impact to help mitigate
climate change and support a
healthy water cycle.
Key trends
Climate change
We are already seeing prolonged dry
periods and hotter summers, wetter
winters and more extreme rainfall
events, and the challenges created by
freezing temperatures followed by rapid
thawing. This increases the level of risk
for water sufficiency, flooding and pipe
damage. The dry weather and high
temperatures last summer put much
of the country’s water supplies under
stress, and in December we experienced
a severe freeze-thaw event that put
services under pressure. With these
trends set to continue, we must plan well
into the future and continually adapt to
strengthen our operational resilience.
We have detailed long-term plans for
managing water resources, drainage
and wastewater management, and are
updating our drought plan. We have an
adaptation report setting out how we will
adapt to meet the challenges of climate
change and are developing our plans to
transition to a low-carbon economy.
Population growth
We will need to extend our services and
ensure we have sufficient resources
to meet the increased demand of an
anticipated one-million increase in
population by 2050.
Natural capital and biodiversity
Much of the landscape in the North West
is legally protected for its environmental
or cultural significance. The functioning of
these natural environments is important
to support communities and the regional
economy, but they face pressure from
climate change and population growth.
We have a role to play in restoring healthy
and resilient ecosystems, and need to
work collaboratively with like-minded
organisations to deliver nature-based
solutions that offer many benefits
including carbon sequestration, cleaner
water, and improved biodiversity.
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Our environment and the resources we rely upon
Our external environment
Natural environment
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28%
34%
more rainfall in the
of our region is
North West than
average across
National Park,
Area of
England and Wales
Outstanding
Natural Beauty or
a Site of Special
Scientific Interest
Link to principal risks
Link to material issues
• Water service
•
Climate change
• Wastewater service
• Water resources and leakage
•
Health, safety and
•
Natural capital and
environmental
biodiversity
Read more on pages 64 to 65
Read more on pages 28 to 29
The natural environment is
constantly changing. We
must adapt and prepare for
these challenges, minimising
our impact to help mitigate
climate change and support a
healthy water cycle.
Key trends
Climate change
We are already seeing prolonged dry
periods and hotter summers, wetter
winters and more extreme rainfall
events, and the challenges created by
freezing temperatures followed by rapid
thawing. This increases the level of risk
for water sufficiency, flooding and pipe
damage. The dry weather and high
temperatures last summer put much
of the country’s water supplies under
stress, and in December we experienced
a severe freeze-thaw event that put
services under pressure. With these
trends set to continue, we must plan well
into the future and continually adapt to
strengthen our operational resilience.
We have detailed long-term plans for
managing water resources, drainage
and wastewater management, and are
updating our drought plan. We have an
adaptation report setting out how we will
adapt to meet the challenges of climate
change and are developing our plans to
transition to a low-carbon economy.
Population growth
We will need to extend our services and
ensure we have sufficient resources
to meet the increased demand of an
anticipated one-million increase in
population by 2050.
Natural capital and biodiversity
Much of the landscape in the North West
is legally protected for its environmental
or cultural significance. The functioning of
these natural environments is important
to support communities and the regional
economy, but they face pressure from
climate change and population growth.
We have a role to play in restoring healthy
and resilient ecosystems, and need to
work collaboratively with like-minded
organisations to deliver nature-based
solutions that offer many benefits
including carbon sequestration, cleaner
water, and improved biodiversity.
Economic and financial market
conditions affect our business
in various ways. Our costs are
impacted by trends in inflation
and interest rates, and the
economic environment can
impact customers’ ability to
pay their bills.
Key trends
Inflation and interest rate increases
Inflation has been rising sharply, reaching
highs not seen for over 40 years. While
the peak is believed by many to have
passed, rates are still very high, and this
has driven government decisions to raise
interest rates as well. The impacts of
these market trends on our business are
complex, with significant cost increases
partly offset by increased allowances
under the regulatory mechanism. Our
activities are energy and chemical-
intensive, so we are particularly impacted
by the sharp rises we have seen in these
costs, and 55 per cent of our debt is in
index-linked form and therefore impacted
by inflation. We have increased wages
with consideration to inflation, and our
AMP7 dividend policy is growth in line
with CPIH inflation to 2025. It is worth
noting, however, that our regulatory
capital value rises with inflation, we have
£3 billion of fixed-rate debt that increases
in benefit as interest rates rise and, unlike
many, our low dependency pension
schemes are protected from market
rate movements.
Cost of living crisis
Inflationary cost increases have a big
impact on customers, and the country is
experiencing a cost of living crisis with
many households really struggling. It is
typically the most deprived communities
that are hit the hardest, and we have
more in the North West than any other
region, which makes the industry-leading
affordability support we provide to
customers even more critical.
£280m
support provided to
vulnerable customers
over 2020–25
(50% company funded)
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Economic environment
Link to principal risks
• Retail and commercial
• Supply chain and programme delivery
• Finance
Read more on pages 64 to 65
Link to material issues
• Affordability and vulnerability
• Financial risk management
• North West regional economy
Read more on pages 28 to 29
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Stock code: UU.
25
Our environment and the resources we rely upon
Our external environment
Technology and innovation
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Sensors
across our network provide
real-time data, helping us
detect and proactively fix
leaks and blockages
Link to principal risks
Link to material issues
• Security
• Retail and commercial
• Conduct and compliance
Read more on pages 64 to 65
• Customer service and
operational performance
• Cyber security
• Data security
Read more on pages 28 to 29
New technologies and
innovative ideas present
opportunities for us to adapt
the way we work to make
things better, faster, safer and
cheaper, but technology can
also create risks such as the
threat of cyber attacks.
Key trends
Artificial intelligence bolstering our
Systems Thinking approach
The use of AI and machine learning
has potential to improve infrastructure
performance and management. 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. At the
higher maturity levels we use AI to
optimise the way we operate.
Cyber security
Protecting infrastructure assets, customer
information and commercial data from
malicious activity is now a reality of
the modern world. The global political
situation in recent years with rising
tensions between Russia and the West
has added to the evolving threats. It
is critical that we maintain a stringent
approach to cyber security that evolves
with new technological advances.
Customer expectations
In an increasingly digital world, customers
expect more from services than ever
before. Technology has changed the
way customers can get in touch with
companies to access their bills, update
their information and receive updates
on services and support. As customer
expectations change, we need to evolve
our own services to ensure we meet
those expectations.
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Our environment and the resources we rely upon
Our external environment
Technology and innovation
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Sensors
across our network provide
real-time data, helping us
detect and proactively fix
leaks and blockages
Link to principal risks
Link to material issues
• Security
• Retail and commercial
• Conduct and compliance
Read more on pages 64 to 65
• Customer service and
operational performance
• Cyber security
• Data security
Read more on pages 28 to 29
5-year
regulatory cycles,
known as AMPs
>£50bn
allowance across the
industry to deliver
further improvements
over the 2020–25 period
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Regulatory environment
o m i c r e g ulation
n
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*
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m
n
Enviro
* Partnership made
up of Ofwat, the
Environment
Agency and DWI.
New technologies and
innovative ideas present
opportunities for us to adapt
the way we work to make
things better, faster, safer and
cheaper, but technology can
also create risks such as the
threat of cyber attacks.
Key trends
Artificial intelligence bolstering our
Systems Thinking approach
The use of AI and machine learning
has potential to improve infrastructure
performance and management. 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. At the
higher maturity levels we use AI to
optimise the way we operate.
Cyber security
Protecting infrastructure assets, customer
information and commercial data from
malicious activity is now a reality of
the modern world. The global political
situation in recent years with rising
tensions between Russia and the West
has added to the evolving threats. It
is critical that we maintain a stringent
approach to cyber security that evolves
with new technological advances.
Customer expectations
In an increasingly digital world, customers
expect more from services than ever
before. Technology has changed the
way customers can get in touch with
companies to access their bills, update
their information and receive updates
on services and support. As customer
expectations change, we need to evolve
our own services to ensure we meet
those expectations.
Sustainable business means
continually planning and
preparing for future service
improvements and potential
market reforms, as well as
meeting current regulatory
commitments.
Key trends
Current performance and
preparations for AMP8
We are subject to regulation of price and
performance by various bodies, as set out
in the diagram, that protect the interests
of customers and the environment and
perform comparative assessments of
companies’ performance. We must
balance incentives and requirements
that can sometimes act in tension, such
as the desire for rapid environmental
improvements and the upward pressure
this can place on customers’ bills. We
maintain constructive dialogue to agree
commitments for improvement.
The water industry national environment
programme (WINEP) sets out the
actions needed to meet environmental
obligations, the DWI can put in place
programmes of work to improve drinking
water quality, and companies must
prepare and maintain long-term plans for
managing water resources (WRMP) and
drainage and wastewater (DWMP). Ofwat
sets each company’s final determination
(FD) detailing revenue, required service
levels, and the incentive package for
five-year asset management plans
(AMPs). Performance against the FD is
reported in an annual performance report
(APR). 2022/23 was the third year in
AMP7, and in October we will submit our
plan for the 2025–30 period (AMP8).
Future market reform
There is a constant need to engage and
monitor developments across all stages
of the regulatory cycle, feeding into
consultations on potential future
market reforms for our industry.
26
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Stock code: UU.
27
Link to principal risks
Link to material issues
• Conduct and compliance
• Trust, transparency and legitimacy
• Political and regulatory
• Political and regulatory environment
Read more on pages 64 to 65
• Competitive markets
Read more on pages 28 to 29
Our environment and the resources we rely upon
Our external environment
Stakeholders
As set out on page 01, there
are many stakeholders
who take an interest in the
water industry, its role in
society, and the North West
region. Our decision-making
considers the need to balance
the often conflicting priorities
of these stakeholders.
It is important that we understand what
matters to our stakeholders and develop
constructive relationships built on mutual
trust. The nature of our work means we
are at the heart of communities across
the North West region. We interact with
a large variety of stakeholders, from
communities and environmental interest
bodies to suppliers and regulators.
Stakeholder views and priorities are
factored into our decision-making
We engage with stakeholders to
understand their views and priorities.
Read more about how we engage with
stakeholders on pages 56 to 57.
These views are factored into strategic
decision-making at board level, as set
out in our S172(1) Statement on pages 58
to 59. They also feed into our materiality
assessment, which gives rise to the
material issues matrix on page 29, and this
in turn feeds into our assessment of risks
and opportunities, as set out on pages
60 to 75.
Stakeholder materiality assessment
We consider stakeholder priorities
alongside our own assessment of what
has the biggest impact on the company
and its ability to create value. We then
present the output in a material issues
matrix, which can be found on the
next page.
This informs decisions about what we
report in documents such as this. Setting
out issues in this way helps to ensure we
understand key stakeholder priorities
and are able to consider their interests in
strategic decision-making, helping us to
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/or
colleagues) and/or created externally (for
customers, the environment, communities,
investors, and suppliers). Value may be
financial or non-financial. We view this
approach as consistent with the emerging
concept of double materiality.
2022/23 assessment of
material issues
Last 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.
This year we have completed a light
touch review of our material issues,
approved by senior management. Storm
overflows has increased in significance
while COVID-19 has decreased in
significance as the country recovers from
the pandemic. These moves are reflected
in this year’s matrix.
Based on current best practice of
reviewing material issues every two
years, we will undertake a full materiality
assessment in the coming year.
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 priorities and how it is
included in our plans for the future.
Read more about how SDGs link to our
material issues on pages 78 to 79
Read more about how six capitals link to
our material issues on pages 34 to 37
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 56 to 57.
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 64 to 65. 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.
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Stakeholder materiality assessment
2022/23 assessment of
Our environment and the resources we rely upon
Our external environment
Stakeholders
As set out on page 01, there
are many stakeholders
who take an interest in the
water industry, its role in
society, and the North West
region. Our decision-making
considers the need to balance
the often conflicting priorities
of these stakeholders.
We consider stakeholder priorities
alongside our own assessment of what
has the biggest impact on the company
and its ability to create value. We then
present the output in a material issues
matrix, which can be found on the
next page.
This informs decisions about what we
report in documents such as this. Setting
out issues in this way helps to ensure we
It is important that we understand what
understand key stakeholder priorities
matters to our stakeholders and develop
and are able to consider their interests in
constructive relationships built on mutual
strategic decision-making, helping us to
trust. The nature of our work means we
create long-term value.
are at the heart of communities across
the North West region. We interact with
a large variety of stakeholders, from
communities and environmental interest
bodies to suppliers and regulators.
Stakeholder views and priorities are
factored into our decision-making
We engage with stakeholders to
understand their views and priorities.
These views are factored into strategic
decision-making at board level, as set
out in our S172(1) Statement on pages 58
to 59. They also feed into our materiality
assessment, which gives rise to the
material issues matrix on page 29, and this
in turn feeds into our assessment of risks
and opportunities, as set out on pages
60 to 75.
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
Value, in this context, may be created
internally (for the company and/or
colleagues) and/or created externally (for
investors, and suppliers). Value may be
financial or non-financial. We view this
approach as consistent with the emerging
concept of double materiality.
Read more about how we engage with
stakeholders on pages 56 to 57.
long term”
material issues
Last 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.
This year we have completed a light
touch review of our material issues,
approved by senior management. Storm
overflows has increased in significance
while COVID-19 has decreased in
significance as the country recovers from
the pandemic. These moves are reflected
in this year’s matrix.
Based on current best practice of
reviewing material issues every two
years, we will undertake a full materiality
assessment in the coming year.
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 priorities and how it is
included in our plans for the future.
material issues on pages 78 to 79
Read more about how six capitals link to
our material issues on pages 34 to 37
Our materiality assessment process
1 Define
2 Engage
We reviewed current best
practice in materiality
Views were obtained from
across all our stakeholder
reporting. The assessment
groups. Insight from
3 Assess
Comments and data were
drawn together to form an
initial view of the issues.
4 Align
We cross-referenced and
aligned identified issues
with our principal risks and
uncertainties, as set out
criteria for stakeholder
interest and our ability to
consultations and data was
The rationale for issue
made available through
selection and its significance
on pages 64 to 65. Matrix
create value was confirmed.
the engagement processes
was presented to senior
visuals were then created
Building on our existing
described on pages 56 to 57.
management for discussion.
to easily communicate the
matrix we brought in more
Key internal subject matter
This included potential new
prioritisation of issues. For
stakeholder views and
experts and stakeholder
issues, removal of issues and
the first time an indication
evolved the matrix design.
relationship managers
movement of existing issues.
of how issues have moved
We committed to provide
provided further insight
more detailed commentary
on issues.
on the most material issues.
since the previous review
has been included.
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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. The most material
issues are highlighted in light green.
Independent review
Our 2021/22 approach was 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
priorities, risks and future actions. It
shows how United Utilities recognises
the most important issues and acts
upon them.”
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Lower
Higher
customers, the environment, communities,
Read more about how SDGs link to our
Key:
Movement based on significance
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
Material
Issue
1 Trust, transparency and legitimacy
15 Health, safety and wellbeing
2 Resilience
16 North West regional economy
3 Customer service and operational performance
17 Land management, access and recreation
4 Climate change
18 Sewage sludge to land
5 Political and regulatory environment
19 Energy management
6 Storm overflows
20 Environmental impacts
7 Affordability and vulnerability
21 Data security
8 Drinking water quality
9 Water resources and leakage
10 Financial risk management
22 Diverse and skilled workforce
23 Responsible supply chain
24 Colleague engagement
11 Corporate governance and business conduct
25 Supporting communities
12 Natural capital and biodiversity
26 Competitive markets
13 Innovation
14 Cyber security
27 Human rights
28 COVID-19
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29
Our environment and the resources we rely upon
Our external environment
Material issues, key trends,
and risks and opportunities
Key ESG trends identified in our external environment feed into our
materiality assessment. They are assessed on stakeholder interest
and their impact on our ability to create value. Our materiality
assessment identifies broad issues, and then it is through our risk
management that we identify, monitor and assess the specific
risks and opportunities that we face, their likelihood and impact,
and ensure we have adequate controls and processes in place to
mitigate risks and act on opportunities.
The following examples demonstrate how key trends, material issues, and risks and opportunities
are all interconnected.
Climate change
Key trends: Climate change will affect
the natural environment, with adaptation
needed to cope with more frequent
periods of extreme weather – and
mitigation needed to help minimise the
long-term impact on our business and on
the world as a whole.
Material issues: Our business is so
intrinsically linked to the natural
environment that climate change has
wide-reaching impacts on several of
our material issues, including resilience,
sewer flooding and storm overflows,
water resources and leakage, and energy
management, as well as being a material
issue in its own right.
Risks and opportunities: Climate change
permeates several of our principal
risks, including the top two – water
and wastewater service. It is a common
causal theme, and three of our top event-
based risks are related to climate change
– sewer flooding, water sufficiency, and
carbon commitments. National water
trading presents an opportunity to help
with the national strategy for managing
drought risk, given the higher rainfall
we receive in the North West, and this
may create opportunities to increase our
water resilience.
Storm overflows
Key trends: Communities are concerned
about the impact of storm overflow
activations on river health across the
country, and we agree that it is time
to deliver a step change. Reducing
activations of overflows will form a large
part of our investment plans for AMP8,
and we have already begun accelerating
expenditure to make a fast start on this.
Material issues: It is not surprising, given
the huge interest this topic has received
recently, that sewer flooding and storm
overflows is one of our material issues. It
feeds into environmental impacts as well,
and sentiment shows that it is an area in
which the industry needs to renew public
trust – the number one material issue.
Risks and opportunities: The
requirement to reduce the frequency
of storm overflow activations came
out of the Environment Act so this was
an element of political and regulatory
risk. The use of storm overflows plays
into wastewater service risk and health
safety and environmental risk, as well
as the sewer flooding event-based risk.
Delivering the required reductions will
take significant investment, and therefore
this is also connected with supply chain
and programme delivery risk, and finance
risk. Clearly this new driver of investment
creates an opportunity for us to deliver
further improvements to river quality in
the North West.
Affordability
Key trends: The economic climate and
the cost of living crisis it has created has
implications on customer affordability.
Discussions around a potential national
social tariff could help customers
across the country access a fair share
of affordability support that is not
dependent on the willingness and ability
of others in their specific region to
contribute towards that support.
Material issues: Affordability and
vulnerability is one of the top six material
issues, and the North West regional
economy has clear implications on
affordability for customers in our region.
The political and regulatory environment
will determine appetite for a national
social tariff, which could have a positive
impact on affordability for vulnerable
customers across the whole country.
Risks and opportunities: Customer
affordability is part of retail and
commercial risk, and the national social
tariff decision presents either a risk or an
opportunity with respect to affordability
support for customers in the North West.
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Our environment and the resources we rely upon
Our external environment
Material issues, key trends,
and risks and opportunities
Key ESG trends identified in our external environment feed into our
materiality assessment. They are assessed on stakeholder interest
and their impact on our ability to create value. Our materiality
assessment identifies broad issues, and then it is through our risk
management that we identify, monitor and assess the specific
risks and opportunities that we face, their likelihood and impact,
and ensure we have adequate controls and processes in place to
mitigate risks and act on opportunities.
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The following examples demonstrate how key trends, material issues, and risks and opportunities
are all interconnected.
Climate change
Storm overflows
Affordability
Key trends: Climate change will affect
Key trends: Communities are concerned
Key trends: The economic climate and
the natural environment, with adaptation
about the impact of storm overflow
the cost of living crisis it has created has
needed to cope with more frequent
activations on river health across the
implications on customer affordability.
periods of extreme weather – and
country, and we agree that it is time
Discussions around a potential national
mitigation needed to help minimise the
to deliver a step change. Reducing
social tariff could help customers
long-term impact on our business and on
activations of overflows will form a large
across the country access a fair share
the world as a whole.
part of our investment plans for AMP8,
of affordability support that is not
Material issues: Our business is so
intrinsically linked to the natural
and we have already begun accelerating
dependent on the willingness and ability
expenditure to make a fast start on this.
of others in their specific region to
contribute towards that support.
environment that climate change has
Material issues: It is not surprising, given
wide-reaching impacts on several of
the huge interest this topic has received
Material issues: Affordability and
our material issues, including resilience,
recently, that sewer flooding and storm
vulnerability is one of the top six material
sewer flooding and storm overflows,
overflows is one of our material issues. It
issues, and the North West regional
water resources and leakage, and energy
feeds into environmental impacts as well,
economy has clear implications on
management, as well as being a material
and sentiment shows that it is an area in
affordability for customers in our region.
issue in its own right.
which the industry needs to renew public
The political and regulatory environment
trust – the number one material issue.
will determine appetite for a national
Risks and opportunities: Climate change
permeates several of our principal
Risks and opportunities: The
risks, including the top two – water
requirement to reduce the frequency
and wastewater service. It is a common
of storm overflow activations came
social tariff, which could have a positive
impact on affordability for vulnerable
customers across the whole country.
causal theme, and three of our top event-
out of the Environment Act so this was
Risks and opportunities: Customer
based risks are related to climate change
an element of political and regulatory
affordability is part of retail and
– sewer flooding, water sufficiency, and
risk. The use of storm overflows plays
commercial risk, and the national social
carbon commitments. National water
into wastewater service risk and health
tariff decision presents either a risk or an
trading presents an opportunity to help
safety and environmental risk, as well
opportunity with respect to affordability
with the national strategy for managing
as the sewer flooding event-based risk.
support for customers in the North West.
drought risk, given the higher rainfall
Delivering the required reductions will
we receive in the North West, and this
take significant investment, and therefore
may create opportunities to increase our
this is also connected with supply chain
water resilience.
and programme delivery risk, and finance
risk. Clearly this new driver of investment
creates an opportunity for us to deliver
further improvements to river quality in
the North West.
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Regulatory developments
Key trends: Preparations for AMP8 and
the potential for future market reform are
key trends in the regulatory environment.
Material issues: The political and
regulatory environment is one of
the material issues identified, and
the preparations for AMP8 and
commitments that will be set within our
final determination in 2024 will have
implications for customer service and
operational performance in coming years.
Competitive markets was an outcome of
previous market reform for the
non-household retail market, and is a
potential subject of future reforms.
Risks and opportunities: Political
and regulatory risk is one of our top
ten principal risks, and legislative and
regulatory change is identified as a
common causal theme of event-based
risks such as the price review 2024
outcome (for AMP8). The Environment
Agency’s interpretation of Farming Rules
for Water is a driver of the event-based
risk around recycling of biosolids
to agriculture.
Technology and innovation
Key trends: The emergence of
artificial intelligence, Systems
Thinking capabilities, and the threats
to cyber security are key trends in the
technological environment.
Material issues: Innovation is identified
as one of the material issues, and our
ability to capitalise on new technologies
and innovations has potential benefits
for as customer service and operational
performance, and health, safety and
wellbeing. However, with greater use
of technology comes greater security
risk, in terms of both cyber and data
security issues.
Risks and opportunities: Technology
presents cyber security risks, identified
within principal risks and as an
event-based risk, as well as resource
risk, as we are reliant on skilled staff
and must train them in emerging
technologies. Innovation is a key
source of opportunity, through further
development of our Systems Thinking
approach, and identification of new and
better ways of working. The ability to
bid for innovation funding through our
regulatory framework also presents
an opportunity.
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Stock code: UU.
31
Our environment and the resources we rely upon
Our external environment
Responding to the most material issues
Understanding and responding to the most material issues affecting our business is key to
delivering our purpose. Addressing these issues in our short, medium and long-term planning
ensures we are responding to the things that matter most to our business and our stakeholders.
1 Trust, transparency
and legitimacy
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
colleagues fairly, protecting customer
data, and paying our fair amount of tax
as part of 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 the ongoing industry-
wide investigations by Ofwat and the
Environment Agency into possible
unpermitted sewage discharges.
Consequently, trust has been eroded and
questions raised about the ownership
structure of the sector, dividends and
links between performance and reward.
Ofwat has called for further transparency
and disclosure and demonstration of
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. We
aim to maintain high ethical standards
of business conduct and corporate
governance. We apply best practice against
our corporate and regulatory reporting,
linking performance to remuneration.
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.
Cybercrime is a threat we take very
seriously through our policies and
dedicated data protection team
protecting customer information.
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. We are a signatory to
the Prompt Payment Code, and fully
comply with rules on reporting payments
to suppliers.
2 Resilience
Resilience is a broad and interconnected
topic. 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 colleagues.
Companies need to have the right people
and skills for the modern digital world.
Increasingly, stakeholders are interested
in the ability of an organisation’s
governance 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 and
prepare for future challenges. 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.
We have a strong balance sheet, a secure
pension position, and take a prudent
approach to financial risk management,
which delivers long-term resilience
to financial shocks. As a public listed
company, we consistently adhere
to the highest 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
colleagues, and their representatives,
and we continually strive to build
diversity across our business. We build
skills resilience internally through
training and development, including
digital skills, and award-winning
graduate and apprentice schemes.
3 Customer service and
operational performance
In an increasingly digitised and instant
economy, customers expect more from
services than ever before. This includes the
water sector, with high expectations for the
reliability and responsiveness of services.
Increased appreciation of the
environment from stakeholders brings
greater 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
Delivering our purpose is reliant on 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. We
have an enhanced social media presence
to respond quickly to stakeholders with
over one million customers engaging
with us digitally. This is alongside making
new services available to customers,
such as ‘Get Water Fit’, which is helping
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.
We monitor the performance and health
of our assets, with the help of sensors
across the network, and this allows us to
be proactive. For example, by monitoring
pressure in the water network we can
spot issues and fix them before we get a
burst, saving costs and sparing customers
the impact.
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Our environment and the resources we rely upon
Our external environment
Responding to the most material issues
Understanding and responding to the most material issues affecting our business is key to
delivering our purpose. Addressing these issues in our short, medium and long-term planning
ensures we are responding to the things that matter most to our business and our stakeholders.
1 Trust, transparency
and legitimacy
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
colleagues fairly, protecting customer
data, and paying our fair amount of tax
as part of 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 the ongoing industry-
wide investigations by Ofwat and the
Environment Agency into possible
unpermitted sewage discharges.
2 Resilience
Resilience is a broad and interconnected
topic. 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 colleagues.
Consequently, trust has been eroded and
Companies need to have the right people
questions raised about the ownership
structure of the sector, dividends and
and skills for the modern digital world.
Increasingly, stakeholders are interested
links between performance and reward.
in the ability of an organisation’s
Ofwat has called for further transparency
governance and assurance processes to
and disclosure and demonstration of
companies’ contribution to public value.
Our response
help avoid, cope with and recover from
disruption and to anticipate trends and
variability in all aspects of their business.
Being open about our purpose and
Our response
transparent about how we are delivering
It can take many years and require
for all of our stakeholders is key. We
aim to maintain high ethical standards
of business conduct and corporate
substantial investment to increase the
resilience of existing assets or build
new ones, which is why our long-term
governance. We apply best practice against
planning is so important. We have
our corporate and regulatory reporting,
linking performance to remuneration.
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.
Cybercrime is a threat we take very
seriously through our policies and
dedicated data protection team
protecting customer information.
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. We are a signatory to
the Prompt Payment Code, and fully
comply with rules on reporting payments
to suppliers.
detailed plans in place to anticipate and
prepare for future challenges. 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.
We have a strong balance sheet, a secure
pension position, and take a prudent
approach to financial risk management,
which delivers long-term resilience
to financial shocks. As a public listed
company, we consistently adhere
to the highest 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
colleagues, and their representatives,
and we continually strive to build
diversity across our business. We build
skills resilience internally through
training and development, including
digital skills, and award-winning
graduate and apprentice schemes.
3 Customer service and
operational performance
In an increasingly digitised and instant
economy, customers expect more from
services than ever before. This includes the
water sector, with high expectations for the
reliability and responsiveness of services.
Increased appreciation of the
environment from stakeholders brings
greater 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
Delivering our purpose is reliant on 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. We
have an enhanced social media presence
to respond quickly to stakeholders with
over one million customers engaging
with us digitally. This is alongside making
new services available to customers,
such as ‘Get Water Fit’, which is helping
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.
We monitor the performance and health
of our assets, with the help of sensors
across the network, and this allows us to
be proactive. For example, by monitoring
pressure in the water network we can
spot issues and fix them before we get a
burst, saving costs and sparing customers
the impact.
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4 Climate change
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 greenhouse gas 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, for example, through 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 have
linked the long-term incentive outcomes
for our executives to these.
We have detailed plans, such as the
25-year Water Resources Management
Plan and Drainage and Wastewater
Management Plan, that set out how
we will adapt our services to meet the
challenges of climate change with key
authorities across the region.
We have reported against the
recommendations of the Task Force on
Climate-related Financial Disclosures
for the past four years to provide
transparency of our approach.
5 Political and regulatory
environment
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 will drive
significant increases in investment,
putting unwelcome upward pressure on
customers’ bills.
Environmental and quality regulators set
stringent consents for water company
activities to ensure the environment and
water quality are 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 pledges will be delivered by 2025,
including investment in wastewater
systems, enhanced data monitoring and
sharing, greater innovation and more use
of nature-based solutions.
The Environment Agency assesses water
companies’ performance across a basket
of measures, and we are one of the best-
performing companies over the last six
years. Our regulatory framework shapes
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. Our Water
Quality First programme has improved
our performance and reputation with
the DWI.
A phased, long-term approach to address
the concerns and interests of stakeholders,
including environmental regulators,
ensures that the necessary work can be
delivered, while providing support for
those who would otherwise find bills
unaffordable, spreading some of the spend
over several years.
6 Storm overflows
Storm overflows have been part of the
sewerage network for decades. When
rainfall exceeds the capacity of our
sewers, treatment works and storm
tanks, overflows are activated allowing
rainwater, mixed with sewage, to enter a
separate pipe that flows into a river or the
sea. This acts as a pressure relief valve,
helping to prevent the flooding of streets,
homes and businesses.
There has been increased public, political
and regulatory interest in the usage of
storm overflows across the country over
the past year. Many people have told us
they do not like the idea of untreated
sewage going into our rivers and seas, no
matter how diluted, and we understand
and share these concerns.
We are developing plans to deliver a
significant reduction in the number
of activations of overflows in the
North West.
Our response
Last year, we announced our Better
Rivers: Better North West plan to take
action to improve river health across
our region. We have made good
progress so far and have delivered a
39 per cent reduction in reported
activations since 2020.
We have draft approval from regulators
to accelerate around £900 million of
investment, with £200 million of this
expected to be delivered in the next two
years, most of which relates to reducing
overflow activations. This means we go
further and faster.
The Environment Agency requires all
water companies to fit monitors to their
storm overflows to capture information
on how they are performing. 97 per cent
of the North West’s storm overflows are
now monitored and we will achieve
100 per cent by the end of 2023. We
now have a greater understanding of our
region’s vast 79,000 kilometre wastewater
system than at any point in history,
providing a rich source of data to assess
and inform activity to improve the system.
We are committed to being open about
our performance and plans, to keep
stakeholders engaged and collaborate
on solutions. In 2022, we held our first
Environmental AGM and published our
Better Rivers report to give an insight
into how we are progressing on our
commitments.
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Our environment and the resources we rely upon
Key resources
The six capitals
To deliver our purpose we are reliant on
a broad range of resources. We use the
internationally regarded concept of the
six capitals to define our key resources,
and to help us manage our impacts and
dependencies.
Our relationship with the six capitals is
not one-way. Much as their availability
and quality have an impact on our
business, our activities also have an
impact on the capitals, and this can
be positive or negative. As a regulated
water and wastewater company that
continuously relies on, and interacts
with, nature and society to deliver
our purpose, it is especially helpful to
consider and manage our key resources
through the six capitals framework to
ensure we maximise the positive impact
we can have.
The following three pages explore
the ways that we depend and impact
on each of the capitals, and how we
manage them to ensure long-term
resilience and value creation.
To better understand and manage these
important interactions, we are creating
a six capitals account. This approach is
based on the premise that traditional
financial accounting doesn’t show the
full picture. We rely on things that
are not on our balance sheet, like our
people and the environment, and we
have an impact on things that have no
associated income statement or cash
flow value. Six capitals accounting aims
to close that gap by accounting for
these non-financial elements, which
would be viewed alongside our financial
information, to give a fuller picture of
our impacts and dependencies.
The six capitals
Financial
capital
Intellectual
capital
Manufactured
capital
Human
capital
Social, cultural,
relationship
capital
Natural
capital
We are in the process of integrating six
capitals thinking into all our business
processes and planning, including
taking a multi-capital value approach to
the formation of our business plan for
the 2025–30 period.
This expands on the natural capital
accounting method we have previously
used, and will provide a fuller picture of
the two-way value transfer between the
business and each of the capitals, and
the consequences of different strategic
options, to better inform our decision-
making and help us create and protect
value for all of our stakeholders.
Performance can also be monitored and
assessed by reference to the positive
and negative impacts on these six
capitals, and this is already well aligned
to the way we monitor our performance
by reference to value creation for
our six stakeholder groups as well as
financial performance – with strong
alignment between these stakeholders
and the capitals. The six capitals
accounting will help us identify any
other areas that are worth adding to
the way we manage and assess our
performance.
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Nature cap i t a l
Our environment and the resources we rely upon
Key resources
The six capitals
To deliver our purpose we are reliant on
The following three pages explore
We are in the process of integrating six
a broad range of resources. We use the
the ways that we depend and impact
capitals thinking into all our business
internationally regarded concept of the
on each of the capitals, and how we
processes and planning, including
six capitals to define our key resources,
manage them to ensure long-term
taking a multi-capital value approach to
and to help us manage our impacts and
resilience and value creation.
the formation of our business plan for
dependencies.
To better understand and manage these
the 2025–30 period.
Our relationship with the six capitals is
important interactions, we are creating
This expands on the natural capital
not one-way. Much as their availability
a six capitals account. This approach is
accounting method we have previously
and quality have an impact on our
based on the premise that traditional
used, and will provide a fuller picture of
business, our activities also have an
financial accounting doesn’t show the
the two-way value transfer between the
impact on the capitals, and this can
full picture. We rely on things that
business and each of the capitals, and
be positive or negative. As a regulated
are not on our balance sheet, like our
the consequences of different strategic
water and wastewater company that
people and the environment, and we
options, to better inform our decision-
continuously relies on, and interacts
have an impact on things that have no
making and help us create and protect
with, nature and society to deliver
associated income statement or cash
value for all of our stakeholders.
our purpose, it is especially helpful to
flow value. Six capitals accounting aims
consider and manage our key resources
to close that gap by accounting for
through the six capitals framework to
these non-financial elements, which
ensure we maximise the positive impact
would be viewed alongside our financial
we can have.
information, to give a fuller picture of
our impacts and dependencies.
Performance can also be monitored and
assessed by reference to the positive
and negative impacts on these six
capitals, and this is already well aligned
to the way we monitor our performance
by reference to value creation for
our six stakeholder groups as well as
financial performance – with strong
alignment between these stakeholders
and the capitals. The six capitals
accounting will help us identify any
other areas that are worth adding to
the way we manage and assess our
performance.
The six capitals
Financial
capital
Manufactured
capital
Intellectual
capital
Human
capital
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Social, cultural,
relationship
capital
Natural
capital
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Natural capital
This includes the renewable and non-renewable environmental
resources and processes that provide goods or services that
support the past, current or future prosperity of an organisation.
This includes air, water, land, minerals and forests as well as
biodiversity and ecosystem health. For example, we rely on
water sources, such as reservoirs, rivers and boreholes, to supply
water to customers and face risks from severe dry weather, when
we must manage resilience of water supply.
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.
Water can also cause issues, when rainfall exceeds the capacity
of sewers resulting in heavily diluted wastewater being released
directly to the environment to minimise the risk of sewer flooding
in streets or people’s homes. We need to reduce the use of storm
overflows, so we must find alternative ways to cope with excess
surface water while 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.
We depend on natural capital to:
•
store and clean water that we take to treatment and then to
supply customers;
Human capital
Our colleagues’ competencies, capabilities and experiences,
and their motivations to innovate. Our people are essential in
delivering services for customers, and a skilled, engaged and
motivated team of colleagues, suppliers and contractors is
fundamental to great performance and colleague 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 colleagues
with competitive salaries and benefits, an attractive pension
offering, and the opportunity to join healthcare schemes and a
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 equity, diversity and inclusion, recruiting from across
the communities we serve and supporting our colleagues with
equal opportunities. Networks, representing groups of colleagues
that may face specific challenges, are overseen by an executive
sponsor and support colleagues through their career progression.
Read more about equity, diversity and inclusion on pages 54 and 55
We are committed to protecting the health, safety and
wellbeing of our people, and have been awarded the workplace
wellbeing charter.
We measure colleague engagement through an annual survey,
and regularly achieve results higher than UK norms.
We monitor and measure performance through annual reviews.
Colleagues 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.
We depend on human capital to:
• deliver services for customers through the skills, knowledge
• attenuate water and flows in support of flood management;
and experience of our workforce;
•
receive wastewater and biosolids safely back into
the environment;
•
run a responsible business and deliver our services in an
efficient and productive way; and
• provide a location for our assets and offices, both engineered
• provide diversity of thought and a range of perspectives.
and nature-based interventions; and
• provide operational and construction resources, such as
chemicals, cement, metals and energy.
We impact on natural capital by:
•
looking after the condition of the land we own and influence,
including habitat health and biodiversity;
• managing our abstractions, final effluent quality, overflows,
pollution incidents, and our catchment programmes;
•
releasing and storing greenhouse gas (GHG) emissions that
contribute to climate change; and
• emitting air pollutants that impact the health of people
We impact on human capital by:
• prioritising health, safety and wellbeing and working conditions;
• developing, training and recruiting the workforce, including
graduate and apprentice programmes; and
• managing equity, diversity and inclusion with fair
opportunities and remuneration.
Links to principal risks
• Resource
• Health, safety and environmental
and nature.
Links to principal risks
• Water service
• Wastewater service
• Health, safety and environmental
Read more about our principal risks on pages 64 to 65.
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Nature cap i t a l
Our environment and the resources we rely upon
Key resources
Manufactured capital
Manufactured physical objects available to an organisation for
use in the production of goods and/or the provision of services,
including buildings, equipment and infrastructure. For example,
our network assets and treatment works are essential to delivering
our services for customers and protecting public health.
How we manage this key resource
Since privatisation, the significant investment made in our
assets has provided substantial benefits to customers, including
reduced supply interruptions, reduced sewer flooding incidents,
and improved water quality. 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, such as odours
from our wastewater treatment works.
We depend on manufactured capital to:
• deliver safe and reliable services; and
• keep our assets secure.
We impact on manufactured capital by:
• maintaining, protecting and improving assets
and infrastructure;
• developing new assets and infrastructure where required;
• managing the effectiveness of our capital
delivery programmes; and
•
following best practice approaches to be efficient
and effective, such as ISO 55001 - Asset Management.
Links to risks
• Water service
• Wastewater service
• Resource
• Security
Financial capital
The pool of funds that is available to an organisation for use in
the production of goods or the provision of services, or obtained
through financing, such as debt, equity or grants, or generated
through operations or investments. 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.
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 provide regular updates to debt and equity investors and
meet with many top investors to establish two-way dialogue
about matters of interest to them.
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 depend on financial capital to:
•
finance our activities and smooth out cash flows; and
• pay our operating, financing and capital delivery expenses.
We impact on financial capital by:
• being efficient in our operations;
• working with long-term investors and demonstrating good
governance for fair and sustainable returns; and
• being a responsible business that acts fairly on tax.
Links to principal risks
• Supply chain and programme delivery
• Finance
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Our environment and the resources we rely upon
Key resources
Manufactured capital
Financial capital
Manufactured physical objects available to an organisation for
The pool of funds that is available to an organisation for use in
use in the production of goods and/or the provision of services,
the production of goods or the provision of services, or obtained
including buildings, equipment and infrastructure. For example,
through financing, such as debt, equity or grants, or generated
our network assets and treatment works are essential to delivering
through operations or investments. As a result of the long-term
our services for customers and protecting public health.
nature of our assets, and the need to ensure affordability by
How we manage this key resource
spreading the cost fairly between the generations of customers
that benefit, it is necessary to raise financing to fund investment
Since privatisation, the significant investment made in our
in building, maintaining and improving our assets, networks
assets has provided substantial benefits to customers, including
and services.
reduced supply interruptions, reduced sewer flooding incidents,
and improved water quality. We expect to continue with a
How we manage this key resource
substantial investment programme for the foreseeable future as
We maintain a robust capital structure, with a responsible mix
current environmental legislation is expected to drive significant
of equity and debt financing. We monitor our performance
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
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 provide regular updates to debt and equity investors and
meet with many top investors to establish two-way dialogue
about matters of interest to them.
innovation, which is at the heart of our Systems Thinking
We maintain relationships with a range of banks and retain
approach. This helps us deliver efficient total expenditure
access to a broad and diverse range of sources of financing in
(totex) without compromising on quality of service or long-term
a number of markets, across which we seek the best relative
resilience, saving future operating costs and reducing future
value when issuing new debt. We periodically refresh our
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, such as odours
from our wastewater treatment works.
We depend on manufactured capital to:
• deliver safe and reliable services; and
• keep our assets secure.
We impact on manufactured capital by:
• maintaining, protecting and improving assets
and infrastructure;
• developing new assets and infrastructure where required;
• managing the effectiveness of our capital
delivery programmes; and
•
following best practice approaches to be efficient
and effective, such as ISO 55001 - Asset Management.
Links to risks
• Water service
• Wastewater service
• Resource
• Security
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 depend on financial capital to:
•
finance our activities and smooth out cash flows; and
• pay our operating, financing and capital delivery expenses.
We impact on financial capital by:
• being efficient in our operations;
• working with long-term investors and demonstrating good
governance for fair and sustainable returns; and
• being a responsible business that acts fairly on tax.
Links to principal risks
• Supply chain and programme delivery
• Finance
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Social capital
The institutions and relationships within and between
communities, groups of stakeholders and other networks and
the ability to share information to enhance individual and
collective wellbeing. It is really important that we maintain
positive relationships with stakeholders across our region,
such as suppliers, regulators and community bodies.
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 with 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 56 to 57
We depend on social capital to:
• maintain and grow trust with all of our stakeholders (e.g.
customers, communities, suppliers, investors) to encourage
them to act in a way that helps deliver improvements;
• understand the needs of customers and stakeholders to
shape how we best deliver for them; and
Intellectual capital
Organisational, knowledge-based intangible aspects such as
intellectual property, and systems, procedures and protocols.
For example, 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. Our understanding of the region and the people who live
here, aligned to our systems and assets, provides a key aspect of
this knowledge.
How we manage this key resource
We use a variety of methods to drive innovation and find novel
ideas and solutions such as 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.
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
signal issues we can then proactively fix.
We depend on intellectual capital to:
• provide the know-how to run our business effectively
and efficiently;
• collaborate with customers and stakeholders on shared
challenges such as leakage, flooding and water efficiency.
• deliver continuous improvement and innovation to be more
efficient and effective, e.g. real-time monitoring and analytics;
We impact on social capital by:
• managing the quality and resilience of our water, wastewater
and customer services now and for the future;
•
supporting customers who struggle to pay their bill and
those in vulnerable circumstances;
• creating spaces for access and recreation; and
• communicating and collaborating with all stakeholders.
Links to principal risks
• Supply chain and programme delivery
• give competitive advantage by developing strengths in our
processes and systems; and
• protect us from cyber attacks.
We impact on intellectual capital by:
•
investing in research, development and innovation;
• monitoring and managing our processes and systems;
• managing our digital capability; and
• collaborating with the supply chain and other partners.
Links to principal risks
• Resource
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Our approach to generating value
Strategy
In this section you will find:
Our purpose and strategic priorities
Short, medium and long-term
planning horizons
Our strategy for managing climate-
related risks and opportunities and
net zero transition plan
Our strategy for managing nature-
related and other risks
and opportunities
Our purpose
Why we are here
Providing great water for a stronger,
greener and healthier North West
Our purpose highlights how environmental, social and governance (ESG) considerations
are integral to everything we do.
As shown on pages 18 to 19, each step in our water cycle and every aspect of our
activities is aligned with delivering our purpose, and this is what drives us to create
value for all of our stakeholders.
Our strategic priorities
How we deliver our purpose
Improve our rivers
We are a sector leader in
minimising pollution, and continue
to protect bathing waters across
the North West. River health in
the UK has received a lot of public
interest. The industrial legacy and
high rainfall in our region means
we have a bigger task than many to
deliver the significant reduction in
storm overflow activations required
by the Environment Act 2021. This
will form a significant component
of our 2025–30 business plan, and
we are accelerating investment
with good progress already made.
Read our Better Rivers case study
on page 90
Create a
greener future
We are committed to protecting
nature and biodiversity, and
reducing water consumption.
We have six carbon pledges
underpinned by ambitious
science-based targets and a net
zero transition plan. We generate
around a quarter of our energy
from bioresources and through
partners. We are looking at how
we can make the best use of our
land to deliver clean energy, be
that through our pledges to create
woodland and restore peatland, or
increasing our renewable energy
generation capacity.
Provide a safe and
great place to work
We invest in our colleagues’
training and development, and
maintain high levels of health,
safety and wellbeing. We want to
attract, develop and engage great
talent across the organisation, we
support and encourage a diverse
and inclusive culture, and we want
colleagues to be empowered to
contribute to making things better.
To facilitate this, we are launching
new ‘Call it out’ and ‘Tell me’
initiatives, which enable everyone
to raise topics directly with the
CEO and receive a response within
48 hours.
Read about our performance for
colleagues on pages 96 to 102
Spend customers’
money wisely
We continuously challenge
ourselves to improve cost
efficiency in a sustainable way,
so we can keep customer bills as
low as possible in the long term
without compromising on service
or resilience. We look to minimise
whole-life cost and deliver the best
value solutions, using Systems
Thinking and innovation to find
better ways of working, leveraging
partnerships and driving value
in our supply chain, capitalising
on digital and automation
opportunities, and removing areas
of duplication or waste.
Read about our financial
performance on pages 112 to 119
Deliver great service
for all our customers
Contribute to our
communities
Delivering great service means
continually improving our ways of
working, for example, improving
water quality, minimising
interruptions, leakage and
sewer flooding, and supporting
customers with affordability and
vulnerability. Engagement helps
us understand what matters most
to customers and we act on their
feedback. This can be seen in
the way we redesigned our bills
based on customer research,
and the early investment we are
making to improve customer and
environmental performance faster.
We work closely with communities
across the North West and we
want to ensure we are visible
and trusted. We actively engage
and make use of partnerships to
drive value for communities, such
as our participation in the Love
Windermere initiative. With much
to deliver in the years ahead,
we have appointed regional
stakeholder managers for each of
the North West’s five counties to
help manage these relationships
and ensure we can deliver our
planned improvements with
minimal disruption.
Read about our net zero transition
plan on pages 45 to 47
Read about our performance for
customers on pages 96 to 103
Read about our performance for
communities on pages 104 to 111
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Our strategy for managing nature-
value for all of our stakeholders.
related and other risks
and opportunities
Our approach to generating value
Strategy
In this section you will find:
Our purpose and strategic priorities
Short, medium and long-term
planning horizons
Our strategy for managing climate-
related risks and opportunities and
net zero transition plan
Improve our rivers
We are a sector leader in
minimising pollution, and continue
to protect bathing waters across
the North West. River health in
the UK has received a lot of public
interest. The industrial legacy and
high rainfall in our region means
we have a bigger task than many to
deliver the significant reduction in
storm overflow activations required
by the Environment Act 2021. This
will form a significant component
of our 2025–30 business plan, and
we are accelerating investment
with good progress already made.
Read our Better Rivers case study
on page 90
Create a
greener future
We are committed to protecting
nature and biodiversity, and
reducing water consumption.
We have six carbon pledges
underpinned by ambitious
science-based targets and a net
zero transition plan. We generate
around a quarter of our energy
from bioresources and through
partners. We are looking at how
we can make the best use of our
land to deliver clean energy, be
that through our pledges to create
woodland and restore peatland, or
increasing our renewable energy
generation capacity.
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Our purpose
Why we are here
Providing great water for a stronger,
greener and healthier North West
Our purpose highlights how environmental, social and governance (ESG) considerations
are integral to everything we do.
As shown on pages 18 to 19, each step in our water cycle and every aspect of our
activities is aligned with delivering our purpose, and this is what drives us to create
Our strategic priorities
How we deliver our purpose
Provide a safe and
great place to work
We invest in our colleagues’
training and development, and
maintain high levels of health,
safety and wellbeing. We want to
attract, develop and engage great
talent across the organisation, we
support and encourage a diverse
and inclusive culture, and we want
colleagues to be empowered to
contribute to making things better.
To facilitate this, we are launching
new ‘Call it out’ and ‘Tell me’
initiatives, which enable everyone
to raise topics directly with the
CEO and receive a response within
48 hours.
Read about our performance for
colleagues on pages 96 to 102
Spend customers’
money wisely
We continuously challenge
ourselves to improve cost
efficiency in a sustainable way,
so we can keep customer bills as
low as possible in the long term
without compromising on service
or resilience. We look to minimise
whole-life cost and deliver the best
value solutions, using Systems
Thinking and innovation to find
better ways of working, leveraging
partnerships and driving value
in our supply chain, capitalising
on digital and automation
opportunities, and removing areas
of duplication or waste.
Read about our financial
performance on pages 112 to 119
Delivering great service means
continually improving our ways of
working, for example, improving
water quality, minimising
interruptions, leakage and
sewer flooding, and supporting
customers with affordability and
vulnerability. Engagement helps
us understand what matters most
to customers and we act on their
feedback. This can be seen in
the way we redesigned our bills
based on customer research,
and the early investment we are
making to improve customer and
environmental performance faster.
We work closely with communities
across the North West and we
want to ensure we are visible
and trusted. We actively engage
and make use of partnerships to
drive value for communities, such
as our participation in the Love
Windermere initiative. With much
to deliver in the years ahead,
we have appointed regional
stakeholder managers for each of
the North West’s five counties to
help manage these relationships
and ensure we can deliver our
planned improvements with
minimal disruption.
Read about our net zero transition
plan on pages 45 to 47
Read about our performance for
customers on pages 96 to 103
Read about our performance for
communities on pages 104 to 111
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Our planning horizons
We plan for long, medium and short-term horizons to deliver our purpose in a sustainable 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 risks and
opportunities;
• our environmental, social and
governance (ESG) commitments,
including our net zero transition
plan; and
• how our plans will fit with our
Systems Thinking approach.
Read more about our materiality matrix on
page 29, our risk management on page 60,
and our net zero transition plan on page 45
We undertake planning for long, medium
and short-term horizons.
Long-term planning looks out 25 years
and more. This helps us identify what
we need to do to manage risks and
opportunities that may arise, building
resilience to ensure we can provide our
essential services to customers far into
the future.
Medium-term planning covers how
we will deliver the commitments of
our final determination for the current
regulatory period (AMP7), as well as our
non-regulatory activities, and our plans
for the next five-year period (AMP8), so
this currently extends out to 2030.
Short-term planning, for the next financial
year, enables us to monitor and measure
progress against our longer-term 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.
Metrics and targets
We set targets across each of these
planning horizons, with our shorter-
term targets helping us to ensure we
are on track to deliver our longer-term
ones. The metrics we track include key
risk indicators, enabling us to adapt our
plans to meet changing conditions, and
performance metrics to continuously
assess how we are doing against our
targets. We use a wide variety of
performance metrics, both operational
and financial. These help us to measure
the value we are creating for all of our
stakeholders, and we have selected
three operational key performance
indicators (KPIs) for E, S and G, as well
as monitoring various other performance
metrics of interest to these stakeholders.
Read more about our metrics and targets
on pages 76 to 83
Deliver great service
for all our customers
Contribute to our
communities
Medium term
Short term
We set annual targets for operational and financial
performance, but retain flexibility in these plans to respond
to challenges and ensure we are meeting our five-year
goals in the most effective and efficient way possible.
Our AMP7 determination sets targets for the 2020–25 period,
and we are building our plan for 2025–30. Our long-term
delivery strategy is embedded into our medium-term targets
to help us work towards our long-term plans.
Long term
Our business is very long term by nature and we use
adaptive planning, looking far into the future, to ensure
we are resilient to risks that may arise and can continue
to provide this essential service for the long term.
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Our approach to generating value
Strategy
Our planning horizons continued
Our adaptive planning approach ensures we are able to respond to risks and opportunities that
may arise in the short term or far into the future.
1 year
up to
2030
up to
2080
Short-term planning
We set annual, measurable targets,
but retain flexibility to enable us to
respond to challenges that may arise.
Short-term planning helps us work towards our
medium and long-term goals and provides us with
measurable targets so we can continually monitor
and assess our progress.
Before the start of each financial year, which runs
from 1 April to 31 March, we develop a business
plan that is reviewed and approved by the board.
This sets our annual targets to deliver further
improvements in service delivery and efficiency,
and help towards our longer-term goals.
Medium-term planning
Aligned to the commitments in our
AMP7 determination and our plans
for AMP8.
The majority of the group’s activities sit in our
regulated water and wastewater business, so
our medium-term planning mostly sets out how
we will deliver against the commitments in our
final determination from Ofwat for each five-year
period, and our plans for the next one.
To ensure we deliver for all stakeholders, including
customer preferences and environmental
requirements, we align our plans to these priorities
in line with key published methodologies.
Long-term planning
We plan far into the future to
ensure we can respond to risks and
opportunities that may arise.
To maintain a reliable, high-quality service for
customers long into the future, we need to
anticipate and plan for things that may impact on
our activities. This includes monitoring the age and
health of our assets, keeping track of innovations
and advancements in technology, and looking at
current and predictive data from various sources to
track key risk indicators (e.g. economic forecasts,
expectations for population growth, climate
and weather predictions, legal and regulatory
consultations and changes).
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Our approach to generating value
Strategy
Our planning horizons continued
Our adaptive planning approach ensures we are able to respond to risks and opportunities that
may arise in the short term or far into the future.
1 year
Short-term planning
We set annual, measurable targets,
but retain flexibility to enable us to
respond to challenges that may arise.
Short-term planning helps us work towards our
medium and long-term goals and provides us with
measurable targets so we can continually monitor
and assess our progress.
Before the start of each financial year, which runs
from 1 April to 31 March, we develop a business
plan that is reviewed and approved by the board.
This sets our annual targets to deliver further
improvements in service delivery and efficiency,
and help towards our longer-term goals.
up to
2030
Medium-term planning
Aligned to the commitments in our
AMP7 determination and our plans
for AMP8.
The majority of the group’s activities sit in our
regulated water and wastewater business, so
our medium-term planning mostly sets out how
we will deliver against the commitments in our
final determination from Ofwat for each five-year
period, and our plans for the next one.
To ensure we deliver for all stakeholders, including
customer preferences and environmental
requirements, we align our plans to these priorities
in line with key published methodologies.
up to
2080
Long-term planning
We plan far into the future to
ensure we can respond to risks and
opportunities that may arise.
To maintain a reliable, high-quality service for
customers long into the future, we need to
anticipate and plan for things that may impact on
our activities. This includes monitoring the age and
health of our assets, keeping track of innovations
and advancements in technology, and looking at
current and predictive data from various sources to
track key risk indicators (e.g. economic forecasts,
expectations for population growth, climate
and weather predictions, legal and regulatory
consultations and changes).
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Performance against these annual targets
determines the bonus percentage that
is awarded to executive directors and
colleagues right through the organisation.
Executive directors hold regular business
review meetings with senior managers
across the business to track progress
against our annual targets.
To avoid encouraging short-term
decision-making and ensure management
is focused on the long-term performance
of the company, executive directors are
also remunerated through a long-term
incentive plan (LTP). This assesses
three-year performance and includes
return on regulated equity (RoRE), a
basket of customer measures, and our
carbon pledges.
Read more about the annual bonus and LTP
in our remuneration report on pages
170 to 203
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 to prioritise expenditure and focus
our time on dealing with unexpected
challenges that arise.
The severe freeze-thaw we experienced
this year demonstrates how we adapt
our short-term plans to focus efforts on
immediate challenges. Read more on
page 48 about the actions we took to
maintain services during this time, the
impact on our activities, and how we
are still managing the aftermath of this
extreme weather event.
The challenges presented by COVID-19 in
2020 were another example that showed
why this flexibility was crucial and how
effectively we managed this significant
and sudden change.
Our medium-term plans are designed
to help us work towards our long-term
delivery strategy, build and maintain
resilience, and fulfil our purpose.
We engage in extensive research to
ensure our plans are robust and balanced,
targeting the best overall outcomes for all
our stakeholders.
Following scrutiny and challenge
from Ofwat, we receive the final
determination, which sets the price (in
terms of total expenditure recovered
through customer bills), service level, and
incentive package that we must deliver
over the five-year period. This includes an
expected return to meet financing costs.
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Adaptive planning is important in meeting
our medium-term targets in the most
effective and efficient way. During the
current 2020–25 period we have adapted
our total expenditure (totex) in two ways.
First, we accelerated our capital
programme, with around £500 million of
totex brought forward over the first three
years, delivering improvements early and
making a strong start to our plans.
Second, we extended our totex by
£765 million to deliver customer
and environmental improvements,
accelerating delivery of the Environment
Act 2021 and improving performance
against customer outcome delivery
incentives (ODIs).
Our strategy helps us create value
for our stakeholders by delivering or
outperforming the final determination.
We publish an annual performance
report (APR) in July of each year, which
reports our performance in a format that
is comparable across the sector. This
includes Return on Regulated Equity
(RoRE), which comprises the base allowed
return and any out/underperformance.
Our APR will be available at unitedutilities.
com/corporate/about-us/performance/
annual-performance-report
Information on companies’ regulatory
performance can be found at
discoverwater.co.uk
We review this information as part of our
long-term planning and risk management
processes, through which we assess and
manage opportunities and risks such as
climate change, population growth, a
more open, competitive market, water
trading, more stringent environmental
regulations, developments in technology,
and combining affordable bills with a
modern, responsive service.
Our website has a dedicated section
where we examine key long-term
challenges and how we will focus our
resources and talents to meet them.
Read about our future plans at
unitedutilities.com/corporate/about-us/
our-future-plans
You can find our long-term plans, such as:
• Water Resources Management Plan
– setting out the investment needed
to ensure we have sufficient water to
continue supplying customers, taking
into account the potential impacts of
climate change, covering a 25-year
period and considering consumption
and climate forecasts out to 2080;
• Drought plan – setting out the actions
we will take to manage drought risk,
updated every five years; and
• Adaptation report – setting out the
current and future predicted impacts
of climate change on the business
and our proposals for adapting to a
changing climate.
Our long-term delivery strategy out
to 2050 is embedded into our plans
for AMP8, and we are developing a
Drainage and Wastewater Management
Plan – examining the risks around
flooding, pollution, storm overflows, and
wastewater treatment over a 25-year
period – that will be published in 2024.
We use whole-life cost modelling and
maintain a robust financing structure
to ensure we can invest efficiently to
meet our long-term plans. Our training
and development, graduate and
apprenticeship programmes, and work
with schools to encourage STEM careers,
all helps to ensure we retain the skills
we need in the North West to continue
delivering these plans.
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Our approach to generating value
Strategy
Climate strategy: How climate-related risks and opportunities impact
the organisation’s businesses, strategy and financial planning.
TCFD
Summary
• Twin track approach of adaptation and mitigation to address
climate change and manage both physical and transitional
risks in a sustainable and resilient way.
• Built relationships with key suppliers to reduce environmental
impact by sharing best practice and collaborating on how to
reduce GHGs and improve resilience.
• Further developed our strengths in long-term and adaptive
• Assessed the carbon impact of our DWMP, WRMP and
planning to manage uncertainties and ensure a low
regrets approach.
PR24 plan to minimise impact while enhancing
environmental and social value and resilience.
Most material climate-related risks – risk score(1) of 9+ in our 2021 adaptation report
We already experience the impacts of climate change with increasingly frequent or more extreme cold snaps and heatwaves and changes
to rainfall.
Horizon
TCFD risk type Climate trend
Leading to
ST MT LT Resulting in...
Physical –
acute
Cold snaps
Reduced effectiveness of biological processes
in wastewater treatment
Pollution events
Leaks and thus increased volumes of calls
Pressure on our emergency response
Extreme events
Increasing frequency and duration of loss of
power within a treatment process
Service disruption
Heatwaves
Causing work environments to
become intolerable
Risk to health, safety and wellbeing
Resulting in increased reservoir misuse
Risk to health, safety and wellbeing
Physical –
chronic
Increased
rainfall
Sewer capacity exceeded
Flooded assets
Restrictions on ability to recycle
biosolids to land
More storm overflow activations
Sewer flooding, pollution incidents,
customer impact
Service disruption and asset damage
Adverse effect on supply and demand
of biosolids to agriculture
Pollution and perception of pollution of
rivers and bathing waters
Runoff polluting water sources
Water quality deterioration
Increased soil movement causing pipe
systems to move leading to fractures
Service disruption and asset damage
More runoff from agricultural land
Raised nutrient loads in water sources
Increased use of rising mains
Supply interruptions and energy use
Decreasing raw water quality
Impact to treatment and costs
Floods, accidents and landslips
Disruption to transport and supply lines
Hotter,
drier
summers
More severe and frequent moorland/
forestry fires
Promotion of cyanobacteria and
actinomycetes growth
More NW tourism and access of UU land
Water demand and quality stresses,
risk to catchment health
Taste and odour compound formation
Increased risk of damage to land
and catchments
Lower
average
summer rainfall
Reducing water resources
Supply interruptions
Shock load from first flush when it rains
Pollution
Blockages in the sewage system
Sewer flooding and pollution
Political pressure regarding
water use priorities
Rising sea levels Coastal flooding
Supply interruptions and impact
to reputation
Asset failures
Transitional
Moving to a
net zero
economy
Decarbonisation of the UK electricity grid
More intermittent power generation
The need to adopt new technologies driven by a
change in legislation and standard practice
Legislation, taxation, and
decarbonisation targets
Change in operational processes
and capabilities
Higher energy costs and greater
regulatory duties
Changes in social expectations
Demand for further progress
Water use change including increased
abstraction by other catchment users
Pressure on water resources
(1) Risk score is the product of score (between 1 and 5) for likelihood and consequence.
Key:
Low <8
Medium 8 to 12
High 12+
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Our approach to generating value
Strategy
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Climate strategy: How climate-related risks and opportunities impact
TCFD
the organisation’s businesses, strategy and financial planning.
Summary
to rainfall.
• Twin track approach of adaptation and mitigation to address
• Built relationships with key suppliers to reduce environmental
climate change and manage both physical and transitional
impact by sharing best practice and collaborating on how to
risks in a sustainable and resilient way.
reduce GHGs and improve resilience.
• Further developed our strengths in long-term and adaptive
• Assessed the carbon impact of our DWMP, WRMP and
planning to manage uncertainties and ensure a low
regrets approach.
PR24 plan to minimise impact while enhancing
environmental and social value and resilience.
Most material climate-related risks – risk score(1) of 9+ in our 2021 adaptation report
We already experience the impacts of climate change with increasingly frequent or more extreme cold snaps and heatwaves and changes
TCFD risk type Climate trend
Leading to
ST MT LT Resulting in...
Physical –
Cold snaps
Reduced effectiveness of biological processes
in wastewater treatment
acute
Pollution events
Horizon
Leaks and thus increased volumes of calls
Pressure on our emergency response
Extreme events
Increasing frequency and duration of loss of
power within a treatment process
Service disruption
Heatwaves
Causing work environments to
become intolerable
Risk to health, safety and wellbeing
Resulting in increased reservoir misuse
Risk to health, safety and wellbeing
Physical –
chronic
Increased
rainfall
Sewer capacity exceeded
Flooded assets
Restrictions on ability to recycle
biosolids to land
More storm overflow activations
Sewer flooding, pollution incidents,
customer impact
Service disruption and asset damage
Adverse effect on supply and demand
of biosolids to agriculture
Pollution and perception of pollution of
rivers and bathing waters
Runoff polluting water sources
Water quality deterioration
Increased soil movement causing pipe
systems to move leading to fractures
Service disruption and asset damage
More runoff from agricultural land
Raised nutrient loads in water sources
Increased use of rising mains
Supply interruptions and energy use
Decreasing raw water quality
Impact to treatment and costs
Floods, accidents and landslips
Disruption to transport and supply lines
Hotter,
drier
summers
More severe and frequent moorland/
forestry fires
Promotion of cyanobacteria and
actinomycetes growth
More NW tourism and access of UU land
Water demand and quality stresses,
risk to catchment health
Taste and odour compound formation
Increased risk of damage to land
and catchments
Lower
average
summer rainfall
Reducing water resources
Supply interruptions
Shock load from first flush when it rains
Pollution
Blockages in the sewage system
Sewer flooding and pollution
Political pressure regarding
water use priorities
Rising sea levels Coastal flooding
Transitional
Moving to a
Decarbonisation of the UK electricity grid
net zero
economy
The need to adopt new technologies driven by a
change in legislation and standard practice
Legislation, taxation, and
decarbonisation targets
Supply interruptions and impact
to reputation
Asset failures
More intermittent power generation
Change in operational processes
and capabilities
Higher energy costs and greater
regulatory duties
(1) Risk score is the product of score (between 1 and 5) for likelihood and consequence.
Key:
Low <8
Medium 8 to 12
High 12+
Changes in social expectations
Demand for further progress
Water use change including increased
abstraction by other catchment users
Pressure on water resources
Climate-related risks and opportunities impacts
Climate risks and opportunities are assessed using the same
planning horizons, materiality and risk assessment as other
matters. As our assets typically have long, even very long,
lifespans, our planning horizons look longer into the future,
in some cases as far as 2080.
Our services being intrinsically linked to the natural environment,
it is not surprising that many of our most material climate risks
are physical risks. The weather directly and indirectly constrains
our ability to deliver our services which is why climate change
will exacerbate the impact of existing challenges such as sewer
flooding, asset flooding and asset deterioration.
turn creates greater risk from sewer flooding and/or activations
of storm overflows.
We have quantified the impacts of the physical climate risks (see
2021 Adaptation progress report) using the highly respected and
relevant Met Office UK Climate Projections 2018 (UKCP18). For
our 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.
We chose this as it is widely recognised to be the most likely
pathway that supports effective planning.
S
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The North West region has 28 per cent more rainfall than
the average for England and Wales. This, together with our
significantly higher proportion of combined sewers, puts more
pressure on our sewerage and treatment infrastructure, and in
To assess the magnitude of the transitional risks we have adopted
a more qualitative approach though for risk assessment and
mitigation planning we have used the carbon values (£ per tCO2e)
for use in policy appraisal, provided by the UK Government (BEIS).
Climate-related risks by business area and region and TCFD risk category – from 2021 adaptation report
The chart below shows the cumulative impact/consequence scores of the assessment of climate-related risks in the 2021 adaptation
progress report. These risks are also those that have been considered in the preparation of the financial statements, see page 241.
Percentages are of the total cumulative score for the business area and region or TCFD risk category.
Physical – acute 19%
Extreme weather events
Heatwaves
Cold snaps
Physical – chronic 71%
Rising sea levels
Lower average summer rainfall
Increased rainfall
Hotter, drier, summers
Transitional 10%
Transition to net zero economy
Water 38%
Wastewater 19%
Bioresources 2%
UU wide 31%
North West region 10%
0
20
40
Cumulative impact score
60
80
100
120
Addressing the impact of climate change in our planning
Predicting the effects of climate change is multifaceted and
complex. There is considerable uncertainty about how our
processes, people and infrastructure will respond to the
challenges of both climate and demographic changes. We address
the challenge of uncertainty by using adaptive planning to shape
our plans for the long term (25+ years) while remembering our
short-term needs and financial and regulatory constraints. An
adaptive approach allows us to prepare for the future without
knowing the exact scale and impact that climate change poses on
our services. This means we can be agile as climate science and
technology advance, as legislation develops and our customer and
stakeholder expectations evolve.
Our public Water Resources Management Plan (WRMP) and
Drainage and Wastewater Management Plan (DWMP) address
this multidimensional challenge by using detailed and extensive
models to test how resilient our services would be against a
wide range of possible future demands from population growth
and movement, economic trends and patterns of water use.
Understanding these potential 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.
Our ability to pre-empt compound physical impacts to our
system, and have various recovery tactics, is increasingly vital in
effective climate change adaptation. We are addressing how to
plan for when multiple different extreme weather events occur
in a short time frame. An example of such a cascade effect is
the dry and hot summer of 2022 being followed by a winter with
freeze-thaw challenges.
To address compound issues, we stress test our WRMP by
building weather scenarios that combine together pairs of
worst examples of weather that have happened in the past, for
instance, a dry winter like 1984 being followed by a 1995/96 style
summer. We then model how our current assets and systems
would cope.
As well as combining impacts in our modelling, we are also
attempting to deliver compound benefits in our controls by
designing interventions that have multiple benefits. For instance,
sustainable drainage systems (SuDS) to slow down or divert
rainwater runoff both reduce the risk of sewer flooding and
optimise wastewater treatment capacity and also provide an
opportunity to deliver wider social value in the community and
local environment.
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Our approach to generating value
Strategy
TCFD Climate strategy continued
Using scenario analysis to test resilience
In developing our long-term strategic plans, and seeking customer
feedback on those plans, we have used potential scenarios
of the future encompassing wide ranges of environmental,
regulatory, technological and societal possibilities. To simplify
the interaction of multiple factors while retaining an expansive
scale of uncertainty about the future, the three company-wide
alternative scenarios for 2050 have different values or descriptions
for the most relevant factors such as the water industry structure,
the North West economy, water value to customers and climate
change. These scenarios are named ‘green guardianship’,
‘centralised control’ and ‘climate chaos’.
The scenarios recognise climate change as one of the most
critical factors 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
Climate and societal scenarios
mitigated by society in each case. This in turn gives the relative
climate risks in each scenario. In the extreme climate scenario
of ‘climate chaos’ the physical risks are substantial and provide
a worst case from which to base our adaptation planning. At the
other extreme, ‘green guardianship’, the challenges of providing
water and wastewater services in the North West are determined
primarily by transitional risks. For instance, the risk from an
electricity supply from a UK grid that is based on low-carbon but
intermittent power generation and therefore is more vulnerable
to power outages.
These imagined future scenarios have brought challenges and
ambitions into sharp focus and encouraged reconsideration of the
relative priorities in our business plans. For example, our latest
plans now include even greater focus on further reducing water
use and preventing storm overflow activations and flooding.
Green
guardianship
Transition
risks
dominent
Centralised
control
Climate
chaos
Physical
risks
dominant
Scenario variables
Climate change
RCP 2.6
1.5 to 2.0oC
RCP 4.6–6.0
2.5 to 3.5oC
RCP 8.5
5oC
Future of work
Continued urbanisation
Static urbanisation
Reverse urbanisation
Value of water and
environment
High societal, and
economic value
Medium societal and
economic value
Severe degradation and
biodiversity loss
Industry structure
Collaborative
Digitisation
Moderately digitised
North West economy
Prosperous economy
Directed
Highly digitised
Poor conditions
Defensive
Highly digitised
Mixed conditions
Transitional
Physical –
chronic
Physical –
acute
Future focus
Net zero
transition plan
Potential
futures
Adaptation
plan
• Publish more details behind our net zero transition plan.
• Embed low-carbon and climate-adjustable approaches in our
• Continue to improve our assessment of climate-related risks
long-term delivery strategies and PR24 business plans.
and opportunities.
Read our adaptation progress report on our website at
unitedutilities.com/corporate/responsibility/environment/
climate-change/
Read our net zero transition plan on pages 45 to 47
44
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Our approach to generating value
Strategy
TCFD Climate strategy continued
Using scenario analysis to test resilience
In developing our long-term strategic plans, and seeking customer
mitigated by society in each case. This in turn gives the relative
feedback on those plans, we have used potential scenarios
climate risks in each scenario. In the extreme climate scenario
of the future encompassing wide ranges of environmental,
of ‘climate chaos’ the physical risks are substantial and provide
regulatory, technological and societal possibilities. To simplify
a worst case from which to base our adaptation planning. At the
the interaction of multiple factors while retaining an expansive
other extreme, ‘green guardianship’, the challenges of providing
scale of uncertainty about the future, the three company-wide
water and wastewater services in the North West are determined
alternative scenarios for 2050 have different values or descriptions
primarily by transitional risks. For instance, the risk from an
for the most relevant factors such as the water industry structure,
electricity supply from a UK grid that is based on low-carbon but
the North West economy, water value to customers and climate
intermittent power generation and therefore is more vulnerable
change. These scenarios are named ‘green guardianship’,
to power outages.
‘centralised control’ and ‘climate chaos’.
The scenarios recognise climate change as one of the most
ambitions into sharp focus and encouraged reconsideration of the
critical factors and use RCPs 2.6, 4.5 and 8.5 (GHG concentration
relative priorities in our business plans. For example, our latest
pathways adopted by the Intergovernmental Panel for Climate
plans now include even greater focus on further reducing water
Change) to describe how well climate change has been
use and preventing storm overflow activations and flooding.
These imagined future scenarios have brought challenges and
Climate and societal scenarios
Scenario variables
Climate change
Green
guardianship
Transition
risks
dominent
Centralised
control
Climate
chaos
Physical
risks
dominant
RCP 2.6
1.5 to 2.0oC
RCP 4.6–6.0
2.5 to 3.5oC
RCP 8.5
5oC
Future of work
Continued urbanisation
Static urbanisation
Reverse urbanisation
Value of water and
environment
High societal, and
economic value
Medium societal and
economic value
Severe degradation and
biodiversity loss
Industry structure
Collaborative
Digitisation
Moderately digitised
North West economy
Prosperous economy
Directed
Highly digitised
Poor conditions
Defensive
Highly digitised
Mixed conditions
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2
3
Transitional
Physical –
chronic
Physical –
acute
Future focus
and opportunities.
Net zero
transition plan
Potential
futures
Adaptation
plan
• Publish more details behind our net zero transition plan.
• Embed low-carbon and climate-adjustable approaches in our
• Continue to improve our assessment of climate-related risks
long-term delivery strategies and PR24 business plans.
Read our adaptation progress report on our website at
unitedutilities.com/corporate/responsibility/environment/
climate-change/
Read our net zero transition plan on pages 45 to 47
TCFD Our net zero transition plan
Our net zero transition plan
Our transition plan to contribute to, and prepare for, a rapid global transition towards a low-emission economy is based on our
established climate change mitigation strategy. This has four pillars: vision and visibility; ambition and commitment; demonstrating
action; and beyond here and now. Between them, these pillars define our principles, priorities and approach.
Vision and visibility
Ambition and commitment
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Demonstrating integrity and leadership in carbon reporting
and disclosure.
Vision and visibility are the foundations of our climate change
mitigation strategy and thus our net zero transition plan. We
have a strong track record of sustainability reporting, having
disclosed our GHG emissions for nearly 20 years. We are
committed to reporting in the most open and transparent way
possible, aiming to be recognised as among the best in the UK.
We have responded to the CDP climate change questionnaire
since 2010 and use this as our benchmark of leadership. We were
proud that our 2022 response was rated as A-, putting us in the
leadership category.
We publish our GHG emissions and underlying energy use in
our annual report as required under the Companies Act 2006
and follow the 2019 UK Government Environmental Reporting
Guidelines: Including streamlined energy and carbon reporting
guidance. Our reporting is supported by robust governance and
accountability mechanisms. Since 2007, our greenhouse gas
inventory has undergone independent, third-party verification by
Achilles Group, confirming our reporting is compliant with the
international carbon reporting standard (ISO 14064) and certified
as compliant with the CarbonReduce programme.
We are dedicated to understanding how every aspect of our
operations contributes to our emissions. Our vision is to ensure
we consider the climate in all our operational and strategic
decision-making and to influence strategy and behaviours by
including in remuneration schemes and carbon pricing in our six
capital value framework.
i t y
i l
d visi b
Integrity
& Leadership
n
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o
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s
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V
A m b i tion and co
N e a r - t e rm science-
b a s e d targets
NET ZERO
BY 2050
m
m
it
m
e
n
t
g a c t i on
net zero amb i t i o n
Long-ter m
onstra ti n
m
e
D
Reduce
Replace
Remove
Collaborate
Playing our part to mitigate climate change and lower our
greenhouse gas emissions to help make the North West a
better place to live now and in the future.
An important element of our approach is to demonstrate our
ambition and encourage others to contribute by making public
commitments. In 2020 we made six carbon pledges as part of
our commitment to tackling climate change and we are making
good progress. See page 92 for more details.
Central to our pledges was to set science-based targets for all
emission scopes. United Utilities is proud to be the first UK water
company to have targets approved by the Science Based Targets
initiative (SBTi), a collaboration that defines and promotes global
best practice in science-based target setting. SBTi assessed
and verified our four science-based targets in July 2021 and
commended our ambitious 1.5°C aligned scope 1 and 2 target.
Our four targets are:
SBT1 – 42 per cent reduction of scope 1 and 2 emissions by 2030
from a 2020 base year;
SBT2 – increase annual sourcing of renewable electricity to
100 per cent;
SBT3 – 66 per cent of suppliers by emissions within scope 3
capital goods will have science-based targets by 2025; and
SBT4 – 25 per cent reduction of scope 3 emissions (other
categories) by 2030 from a 2020 base year.
These near-term targets are intended to deliver an emissions
reduction pathway consistent with the 1.5° ambition of the Paris
Agreement. The SBTi Net Zero Standard was launched late 2021
and we will validate our long-term net zero ambition to this
standard when we revise and revalidate our near-term targets in
advance of 2025.
Demonstrating action
Reducing our environmental impacts through delivery of
transformation strategies and culture change.
Our action plan to achieve the long-term ambition of ‘net zero
by 2050’ (in line with the UK Government) is set out on the next
page with the hierarchy below. We are already working on, and
delivering on, actions in all themes to:
•
•
reduce through the efficient use of resources;
replace processes and resources with more sustainable
alternatives;
•
remove GHGs from the atmosphere;
• collaborate to tackle emissions in the supply chain; and
•
innovate to address current technological or market gaps.
Beyon
d
h
e
Our priority in the medium term will be to reduce our emissions
through these actions before we purchase any credits to offset
the residual emissions to net zero.
Innovate
For today and
for the future
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Stock code: UU.
45
Our approach to generating value
Strategy
TCFD Net zero transition plan
GHG emissions scopes
Our net zero transition plan addresses all three emissions scopes.
Scope 1 – emissions from
activities we own or control
Scope 2 – emissions from
electricity and heat purchased
Scope 3 – emissions from our
value chain
Wastewater and sludge processes
cause approximately 70 per cent of
our scope 1 emissions as the gases
released, nitrous oxide (N2O) 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 population whose
wastewater we treat. This means that,
even if we achieve a 100 per cent green
fleet and eradicate all fossil fuel use,
along with the global water industry
we still have the gigantic challenge of
process emissions to tackle.
Our scope 2 emissions have reduced
since we began to measure them in
2005/06 from 360 ktCO2e to 261 ktCO2e
(location-based) and 0 ktCO2e (market-
based). This is a combination of the
ongoing decarbonisation of the UK grid,
maintaining our energy requirements
in the face of substantial growth and
policy to buy REGO backed renewable
electricity supplies.
We have ambitions to substantially
increase our self generation and
energy resilience by using our land for
development of renewables and other
clean technologies.
Scope 3 emissions are proportional
to our business activities. This means
if our infrastructure development
activity increases, for instance as a
result of a prescribed environmental
programme as is expected for AMPs
8 and 9, then our emissions will
also substantially increase. This
increase could be mitigated by the
use of nature-based solutions and
low-carbon material replacements,
but it is by no means certain these
technologies and processes will be
market ready in time.
Action plan
Reduce
through the efficient
use of resources
Replace
processes and
resources with more
sustainable alternatives
Remove
GHGs from the
atmosphere
Collaborate
to tackle emissions in
the supply chain
Innovate
to address current
technological or
market gaps
Short term
including recent progress
Medium term
Long term
• Colleague campaign
'Use Less, Save More'
• Optimise wastewater
processes for GHG
• Continual search for
efficiency opportunities
• Achieved ambitious targets
for percentage of waste
to beneficial reuse
• Careful delivery of
environment improvement
programmes
• Renewable electricity
sourcing
• Grow further renewables
capabilities and capacity
• Replace fossil fuels with
alternatives e.g. hydrogen
• Substantial renewable
energy generation capacity
and capability
• Bioresources planning and
investment to increase
sludge processing capacity
• Nutrient recovery initiatives
• Continual stretch for
sustainability informed
by latest innovations
• Electric vehicles rollout
and trials for HGVs
• 60%+ sludge processing
by low GHG advanced
digestion
• Woodland creation –
planning and first
planting schemes
• Peatland restoration –
schemes started
• 550ha woodland creation
•
1000ha peatland
restoration
• Growing benefits from
created woodlands
• Carbon capture,
use and storage
• Comprehensive scope 3
•
reporting
• Encourage SBTs for capital
delivery partners
• Carbon categories
in United Utilities
Innovation Labs
• CEO challenge
Inform national approach
to water environmental
improvements
• Enriched sustainability
criteria for suppliers
• Quantify emissions using
product/activity data
• Low-carbon capital
delivery options e.g.
nature-based solutions and
low-carbon concrete
improvement projects
on carbon
• Process emissions
monitoring
• Collaborate to decarbonise
our infrastructure
programmes and wider
supply chain
• Transformation in water
and wastewater processing
e.g. nature-based solutions
• Opportunities for
circular economy
• Eradicate use of remaining
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A
ctions in green text directly link to our six carbon pledges
• Nutrient recovery research
fossil fuels
46
unitedutilities.com/corporate
Our approach to generating value
Strategy
TCFD Net zero transition plan
GHG emissions scopes
Our net zero transition plan addresses all three emissions scopes.
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Scope 1 – emissions from
activities we own or control
Scope 2 – emissions from
electricity and heat purchased
Scope 3 – emissions from our
value chain
Wastewater and sludge processes
cause approximately 70 per cent of
our scope 1 emissions as the gases
released, nitrous oxide (N2O) 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 population whose
wastewater we treat. This means that,
even if we achieve a 100 per cent green
fleet and eradicate all fossil fuel use,
along with the global water industry
we still have the gigantic challenge of
process emissions to tackle.
Our scope 2 emissions have reduced
since we began to measure them in
2005/06 from 360 ktCO2e to 261 ktCO2e
(location-based) and 0 ktCO2e (market-
based). This is a combination of the
ongoing decarbonisation of the UK grid,
maintaining our energy requirements
in the face of substantial growth and
policy to buy REGO backed renewable
electricity supplies.
We have ambitions to substantially
increase our self generation and
energy resilience by using our land for
development of renewables and other
clean technologies.
Scope 3 emissions are proportional
to our business activities. This means
if our infrastructure development
activity increases, for instance as a
result of a prescribed environmental
programme as is expected for AMPs
8 and 9, then our emissions will
also substantially increase. This
increase could be mitigated by the
use of nature-based solutions and
low-carbon material replacements,
but it is by no means certain these
technologies and processes will be
market ready in time.
Action plan
Reduce
through the efficient
use of resources
Replace
processes and
resources with more
sustainable alternatives
Remove
GHGs from the
atmosphere
Short term
including recent progress
Medium term
Long term
• Colleague campaign
• Optimise wastewater
• Continual search for
'Use Less, Save More'
processes for GHG
efficiency opportunities
• Achieved ambitious targets
• Careful delivery of
for percentage of waste
environment improvement
to beneficial reuse
programmes
• Renewable electricity
• Grow further renewables
• Replace fossil fuels with
sourcing
capabilities and capacity
alternatives e.g. hydrogen
• Substantial renewable
• Bioresources planning and
• Nutrient recovery initiatives
energy generation capacity
investment to increase
and capability
sludge processing capacity
• 60%+ sludge processing
• Electric vehicles rollout
by low GHG advanced
and trials for HGVs
• Continual stretch for
sustainability informed
by latest innovations
digestion
planning and first
planting schemes
• Peatland restoration –
schemes started
• Woodland creation –
• 550ha woodland creation
• Growing benefits from
•
1000ha peatland
restoration
created woodlands
• Carbon capture,
use and storage
Collaborate
to tackle emissions in
the supply chain
• Comprehensive scope 3
•
Inform national approach
• Collaborate to decarbonise
reporting
to water environmental
our infrastructure
• Encourage SBTs for capital
improvements
delivery partners
• Enriched sustainability
programmes and wider
supply chain
criteria for suppliers
• Quantify emissions using
product/activity data
Innovate
to address current
technological or
market gaps
in United Utilities
Innovation Labs
• CEO challenge
• Carbon categories
• Low-carbon capital
• Transformation in water
improvement projects
• Process emissions
on carbon
monitoring
delivery options e.g.
and wastewater processing
nature-based solutions and
e.g. nature-based solutions
low-carbon concrete
• Opportunities for
circular economy
• Eradicate use of remaining
• Nutrient recovery research
fossil fuels
A
ctions in green text directly link to our six carbon pledges
S
t
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e
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i
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e
p
o
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Our emissions challenge – large growth pressures from environmental obligations
Full scope 3
inventory
reported
since 2020
Scope 2 emissions
eradicated with
purchase of
renewable electricity
Water investment programmes
to meet new additional requirements,
e.g. Environment Act 2021
est.
S3
S2
S1
2006
2020
2021
2022 2023
2025
2030
2050
Our route to net zero – adopting a
science-based approach
Residual emissions
Reduce
Remove
Replace
Collaborate
Innovate
SBT
3
SBT
2
SBT
1
SBT
4
Option to offset
residual emissions
to net zero
est.
S3
S2
S1
2006
2020
2021
2022 2023
2025
2030
NET
ZERO
2050
Our plan to net zero is a science-based approach focused
on reducing emissions as the first priority whilst growing our
programmes that store carbon, such as peatland restoration
and woodland creation, and working with our supply chain to
share and develop sustainable development practice. We may
purchase credits in the medium to long term to offset residual
emissions and achieve net zero.
We will go beyond emissions reductions and include sustainable
use of natural resources and increased application of the
waste hierarchy and the principles of a circular economy in our
processes and physical infrastructure.
We will also enable, encourage and reward action to protect
and enhance the natural environment and promote the value of
ecosystem services across our business and supply chain.
Beyond here and now
Innovating across our processes, technology and culture
We are not only concerned with things we can do now to reduce
our reportable emissions. Our strategy pillar of ‘beyond here and
now’ allows us to reflect on the challenge to influence emissions
regardless of whether those emissions are part of our inventory
To deliver our net zero transition plan we will be innovative,
challenge standards and drive climate change mitigation by
understanding and joining in relevant research to develop new
technologies and practices. For instance, we are investigating
what operational interventions we can make that will reduce
process emissions.
We have recently launched our fifth Innovation Lab, a
12-week programme that provides successful applicants with the
opportunity to test their solutions to our business challenges in
a live environment. The programme is designed to ‘look for ideas
where others aren’t looking’ – in other sectors, other countries
and with suppliers that are often small, start-up businesses, just
starting on their idea development or business growth journey.
We will continue to explore opportunities to innovate across
processes, technology, standards and culture and we will lead by
example and deliver outcomes in partnership whilst we inform
and influence future developments affecting the environment.
Read more about innovation at United Utilities, including how we
are using innovative solutions to tackle the sustainability challenges
we face, at unitedutilities.com/corporate/about-us/innovation
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Our approach to generating value
Strategy
Key lessons learned
from previous incidents
meant we entered the
2022 freeze-thaw with
improved capabilities
as a result.”
Read more about
the financial
impacts of the
incident on pages
99 and 112
TCFD Climate case study
Resilience in the face of an already changing climate
With the trend of more extreme weather events set
to continue, we must plan, adapt and prepare, to
strengthen our operational resilience.
l
In December 2022 we experienced a severe cold
snap, when air temperatures fell below freezing and
remained at or below freezing for ten days, reaching
a low of -12°C on 15 December, before rising rapidly
to 14°C by 19 December. This was a more sustained
freeze and more rapid thaw than other recent freeze-
thaw events in 2009, 2010 or 2018, and tested our
preparedness, response and service recovery.
Freeze-thaw incidents present several challenges
which can threaten to disrupt the service we provide to
customers, such as frozen pipework on our mains and
in customer properties, increased leakage following the
thaw and subsequent increases in water demand.
We use Met Office data to assess the risks of weather-
related events occurring and to act as an early warning
system to trigger preparations for such an event. This
approach identified, on 5 December, the risk of a
weather-related event occurring and led to detailed
preparatory work, including:
• encouraging customers to prepare their homes,
with our ‘Prepare, Insulate, Protect, Easy’
awareness campaign;
• undertaking winter checks on targeted key assets
on our system where we expected the impact to be
greatest; and
• establishing a key task team, using our incident
management procedure, to provide central
co-ordination during events.
The immediate impact of the freeze-thaw was
significant. A total of 22,464 customers were off supply
for more than 12 hours, with the largest proportion of
them in the Lancaster and Morecambe area. We very
much regret the short-term service interruption some
customers experienced, but because of our proactive
management of the situation we were able to mitigate
the impact to some extent. For example, ahead of and
during the loss of supply we were able to provide clear
information to local stakeholders, ensure that there
were adequate bottled water supplies in the area and
take steps to protect vulnerable customers through our
Priority Services offering.
Within 48 hours of the thaw commencing, demand
for water rose to 20 per cent above normal December
levels and reached a peak of 2,200 megalitres per day,
significantly higher than the peak following the 2018
‘Beast from the East’. This was largely due to water being
lost through leakage, both from elevated leakage on
our own network and significant bursts on customer
pipework and plumbing. Our teams and partners worked
around the clock to fix damaged pipes, and we deployed
our water tankers to target sensitive non-household
customers such as schools, hospitals and prisons.
Management of the incident continued over the
Christmas period to ensure that issues were fully
resolved until the incident was formally closed on
3 January 2023. Overall, we consider that key lessons
learned from previous incidents meant we entered the
2022 freeze-thaw with improved capabilities as a result.
48
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Our approach to generating value
Strategy
Key lessons learned
from previous incidents
meant we entered the
2022 freeze-thaw with
improved capabilities
as a result.”
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TCFD Climate case study
Resilience in the face of an already changing climate
With the trend of more extreme weather events set
The immediate impact of the freeze-thaw was
to continue, we must plan, adapt and prepare, to
l
significant. A total of 22,464 customers were off supply
for more than 12 hours, with the largest proportion of
them in the Lancaster and Morecambe area. We very
much regret the short-term service interruption some
99 and 112
Read more about
the financial
impacts of the
incident on pages
strengthen our operational resilience.
In December 2022 we experienced a severe cold
snap, when air temperatures fell below freezing and
remained at or below freezing for ten days, reaching
a low of -12°C on 15 December, before rising rapidly
to 14°C by 19 December. This was a more sustained
freeze and more rapid thaw than other recent freeze-
thaw events in 2009, 2010 or 2018, and tested our
preparedness, response and service recovery.
Freeze-thaw incidents present several challenges
which can threaten to disrupt the service we provide to
customers, such as frozen pipework on our mains and
in customer properties, increased leakage following the
thaw and subsequent increases in water demand.
We use Met Office data to assess the risks of weather-
related events occurring and to act as an early warning
system to trigger preparations for such an event. This
approach identified, on 5 December, the risk of a
weather-related event occurring and led to detailed
preparatory work, including:
• encouraging customers to prepare their homes,
with our ‘Prepare, Insulate, Protect, Easy’
awareness campaign;
• undertaking winter checks on targeted key assets
on our system where we expected the impact to be
greatest; and
• establishing a key task team, using our incident
management procedure, to provide central
co-ordination during events.
customers experienced, but because of our proactive
management of the situation we were able to mitigate
the impact to some extent. For example, ahead of and
during the loss of supply we were able to provide clear
information to local stakeholders, ensure that there
were adequate bottled water supplies in the area and
take steps to protect vulnerable customers through our
Priority Services offering.
Within 48 hours of the thaw commencing, demand
for water rose to 20 per cent above normal December
levels and reached a peak of 2,200 megalitres per day,
significantly higher than the peak following the 2018
‘Beast from the East’. This was largely due to water being
lost through leakage, both from elevated leakage on
our own network and significant bursts on customer
pipework and plumbing. Our teams and partners worked
around the clock to fix damaged pipes, and we deployed
our water tankers to target sensitive non-household
customers such as schools, hospitals and prisons.
Management of the incident continued over the
Christmas period to ensure that issues were fully
resolved until the incident was formally closed on
3 January 2023. Overall, we consider that key lessons
learned from previous incidents meant we entered the
2022 freeze-thaw with improved capabilities as a result.
S
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TNFD How nature influences our approach
Protecting and enhancing the natural environment is key to
the ‘greener’ aspect of our purpose. Maintaining compliance
and meeting regulatory requirements helps us to maintain
the environment, and we enhance it by driving performance
improvements, 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 are statutory requirements,
like our Water Resources Management Plan, and are reviewed
every five years through the price review process.
How we consider nature-related risks, opportunities,
dependencies and impacts within our business strategy
and planning
Our long-term planning activity considers the uncertainty
associated with complex issues such as climate change,
population growth, technology and abstraction reduction needs.
Planning for the long term allows us to deliver further
environmental and social value. For example, prioritising
sustainable drainage and monitoring impacts before investing
in more traditional assets, or carrying out modelling and
investigations to ensure solutions are best value. This gives us
confidence that our investment plans are highly efficient.
Our Catchment Systems Thinking (CaST) approach enables
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.
An example of how we adapt to nature-related risks
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. 94 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. 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.
Resilience of our strategy
Adaptive planning allows us to test a range of future scenarios
to account for uncertainty and sets out how we might adapt
programmes in the future to meet long-term ambitions under
different circumstances. Through scenario testing, we have
been able to prioritise low regrets activities in the short
term, preparing ourselves for future needs without investing
unnecessarily or prematurely but taking action where it is clearly
necessary and good value.
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.
Progress this year
• Launched the public consultation on our draft Water
Resources Management Plan
Future focus
• Finalise our business plan for 2025–30 with details on how
this will improve the natural environment
Risks and opportunities of material interest that influence our approach
OTHER
Cyber security
Our cyber security strategy is largely focused on the security
requirements within the Cyber Assessment Framework created
by the National Cyber Security Centre (NCSC). This outlines
39 security controls that are required to achieve an industry
standard of compliance. These are driven from an EU-defined
maturity scale of best practice that is reflected across all
European operators of essential services. We have had a strong,
dedicated programme of work in place for four years aimed
at meeting and maintaining compliance, and have met regular
expectations at all times.
Our longer-term strategy and investment plan aims to bolster our
broader security posture by focusing significant effort on people,
process and technology.
We maintain a good relationship with the NCSC through our
dedicated contacts and ensure we have up-to-date visibility of
developing and long-term threats at all times, which helps shape
our approach to security.
Financial risk management
We have robust financial risk management policies, targets and
thresholds for liquidity risk, credit risk, market risk (inflation,
interest rate, electricity price and currency) and capital risk. The
strategies and limits set out within these policies are designed
to avoid excessive volatility and risk, align with the regulatory
model in which we operate, maintain strong credit ratings and
deliver efficient financing. Read more on pages 265 and 272.
Affordability and vulnerability
Our approach is based on delivering industry-leading affordability
and vulnerability support to customers with a wide range of
affordability schemes and over 290,000 customers signed up to
Priority Services. We use a variety of methods to help customers
access the best schemes for them, including our door-to-door
affordability visits. We pioneer cross-sector collaborative
approaches through our affordability summits and the Hardship
Hub platform we developed to help debt advisers access all the
help that is available across multiple sectors in one place.
Health, safety and wellbeing
Our aim is that no one will be harmed while working for us or
on our behalf, and we actively work to support and improve the
wellbeing of our colleagues, for example through our Home Safe
and Well programme.
Responsible supply chain
Our United Supply Chain (USC) strategy encourages
collaborative and responsible ways of working with our supply
chain. Through regular engagement and positive collaboration,
we will mitigate risk, improve assurance and create value.
Equity, diversity and inclusion
Our equity, diversity and inclusion plan sets out our strategy and
targets, focused on inclusive leadership, encouraging openness,
improving our policies, raising awareness, and increasing the use
of support networks. Read more on pages 54 to 55.
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Our approach to generating value
Governance
In this section you will find:
Our culture and core values
How the organisation is governed
by the board and its principal
committees
Governance of key risks and
opportunities, including nature
and climate-related disclosures,
and our commitment to equity,
diversity and inclusion
How we engage with stakeholders
and consider their views in
decision-making, including our
Section 172(1) Statement
Our culture and core values
Culture
Our culture drives the interactions we have with our stakeholders, and our commitment
to responsible business and sustainability is reflected in the way we measure and report
the value we create as a business. Metrics are monitored and targets set for the greener,
stronger and healthier ambitions within our purpose, closely aligned to ESG.
Read more about the value we create on pages 76 to 79 and our performance on pages 84 to 111
When assessing culture, we look at four categories – our core values, our purpose, our
strategic priorities, and our people. We monitor a number of key metrics relating to our
people, such as engagement, health and wellbeing, diversity, and development.
Read more about our culture and how the board monitors this throughout the year on page 135
Our culture is underpinned by three core values, which cascade down the business from
the board to every one of our colleagues, guiding how we expect our people to behave
in a way that drives a high performance and innovative culture.
Core values
Our core values demonstrate the way we work, and we want to ensure these are clear and easy for all our colleagues to apply to every
situation. We have redefined our core values to reflect the things we believe are most important to help us deliver our purpose of
providing great water for a stronger, greener and healthier North West.
Do the right thing
First and foremost, as a responsible
business, we want our people to always
focus on doing the right thing.
This means always putting safety
first, delivering for the benefit of our
stakeholders, championing fairness, acting
with courage and speaking up if they come
across anything that doesn’t feel right.
This is vital for building and maintaining
trust with the public and our stakeholders,
and for delivering our purpose: doing the
right thing for the natural environment
helps us to create a greener North West;
doing the right thing for customers,
communities, colleagues and suppliers
helps us to build a stronger and healthier
North West.
Make it happen
We are focused on supporting each other
and working as a team to make things
happen, taking accountability and putting
progress over perfection. We want to
celebrate successes, for individuals and
for the company, and learn when we don’t
get things right first time.
This can already be seen across the
business, for example:
• Enabling and fostering new ways of
working through our Innovation Lab
process.
• Being able to act quickly and
capitalise on pockets of efficient
financing opportunity.
• Our decisions to accelerate
investment where we can deliver
improvements for customers and the
environment faster.
Be better
Ultimately, everything we do is about
improving things and creating a better
tomorrow for everyone. We want to be
better as a company, and this means
encouraging our colleagues to live this
value as well.
We want our people to be curious,
ambitious, and solution-focused,
seeking out new and innovative ways
to deliver our services more efficiently
and effectively.
We want to ensure we are learning from
the best people that are available to
us, which is why we embrace equity,
diversity and inclusion, collaboration and
partnership opportunities, innovation
and best practice ideas from other
companies, other industries, and the
wider world.
Remuneration linked to sustainability performance
Part of being a responsible business and delivering our
purpose involves making sure our executive, and colleagues,
are remunerated in line with our performance for a number of
stakeholders, measuring against sustainability metrics rather
than purely financial performance.
Bonus measures drive remuneration for all colleagues, and the
executive are also remunerated against longer-term performance
targets through the Long Term Plan (LTP).
Bonus and LTP remuneration are both linked to service and
delivery for customers and the environment, as well as financial
targets. This includes customer satisfaction, customer outcome
delivery incentives (ODIs), carbon measures, and effective and
efficient delivery of our capital programme.
Read more about our bonus and LTP in the remuneration report on
pages 170 to 203
unitedutilities.com/corporate
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Our approach to generating value
Governance
How the organisation is governed
by the board and its principal
committees
Governance of key risks and
opportunities, including nature
and climate-related disclosures,
and our commitment to equity,
diversity and inclusion
How we engage with stakeholders
and consider their views in
decision-making, including our
Section 172(1) Statement
Core values
In this section you will find:
Our culture and core values
Our culture and core values
Culture
Our culture drives the interactions we have with our stakeholders, and our commitment
to responsible business and sustainability is reflected in the way we measure and report
the value we create as a business. Metrics are monitored and targets set for the greener,
stronger and healthier ambitions within our purpose, closely aligned to ESG.
Read more about the value we create on pages 76 to 79 and our performance on pages 84 to 111
When assessing culture, we look at four categories – our core values, our purpose, our
strategic priorities, and our people. We monitor a number of key metrics relating to our
people, such as engagement, health and wellbeing, diversity, and development.
Read more about our culture and how the board monitors this throughout the year on page 135
Our culture is underpinned by three core values, which cascade down the business from
the board to every one of our colleagues, guiding how we expect our people to behave
in a way that drives a high performance and innovative culture.
Our core values demonstrate the way we work, and we want to ensure these are clear and easy for all our colleagues to apply to every
situation. We have redefined our core values to reflect the things we believe are most important to help us deliver our purpose of
providing great water for a stronger, greener and healthier North West.
Do the right thing
Make it happen
Be better
First and foremost, as a responsible
We are focused on supporting each other
Ultimately, everything we do is about
business, we want our people to always
and working as a team to make things
improving things and creating a better
focus on doing the right thing.
happen, taking accountability and putting
tomorrow for everyone. We want to be
This means always putting safety
first, delivering for the benefit of our
stakeholders, championing fairness, acting
with courage and speaking up if they come
progress over perfection. We want to
better as a company, and this means
celebrate successes, for individuals and
encouraging our colleagues to live this
for the company, and learn when we don’t
value as well.
get things right first time.
across anything that doesn’t feel right.
This can already be seen across the
This is vital for building and maintaining
business, for example:
trust with the public and our stakeholders,
• Enabling and fostering new ways of
and for delivering our purpose: doing the
working through our Innovation Lab
and effectively.
right thing for the natural environment
process.
helps us to create a greener North West;
doing the right thing for customers,
communities, colleagues and suppliers
helps us to build a stronger and healthier
North West.
• Being able to act quickly and
capitalise on pockets of efficient
financing opportunity.
• Our decisions to accelerate
investment where we can deliver
improvements for customers and the
environment faster.
We want our people to be curious,
ambitious, and solution-focused,
seeking out new and innovative ways
to deliver our services more efficiently
We want to ensure we are learning from
the best people that are available to
us, which is why we embrace equity,
diversity and inclusion, collaboration and
partnership opportunities, innovation
and best practice ideas from other
companies, other industries, and the
wider world.
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Remuneration linked to sustainability performance
Part of being a responsible business and delivering our
purpose involves making sure our executive, and colleagues,
are remunerated in line with our performance for a number of
stakeholders, measuring against sustainability metrics rather
than purely financial performance.
Bonus measures drive remuneration for all colleagues, and the
executive are also remunerated against longer-term performance
targets through the Long Term Plan (LTP).
Bonus and LTP remuneration are both linked to service and
delivery for customers and the environment, as well as financial
targets. This includes customer satisfaction, customer outcome
delivery incentives (ODIs), carbon measures, and effective and
efficient delivery of our capital programme.
Read more about our bonus and LTP in the remuneration report on
pages 170 to 203
Read more in
our corporate
governance report
on pages 122 to 207,
including individual
reports of board
committees
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We are a purpose-led organisation and our strategy, which is set and governed
by the board and its committees, helps us deliver our purpose and create
sustainable value for all of our stakeholders.
Governance structure
Our governance structure is set out in the diagram
below and more information can be found on
page 130, including the roles of each committee in
ensuring progress against our six strategic priorities.
The board retains overall responsibility, but
delegates certain roles and responsibilities to its
principal board committees, allowing them to probe
deeply and develop a more detailed understanding.
The main responsibilities of board committees
can be found in the corporate governance report
on pages 126 to 207, and these pages include our
reporting against the UK Corporate Governance
Code. We operate our business in line with the
management standards to which we maintain
certification, including quality (ISO 9001),
environment (ISO 14001), asset management
(ISO 55001), health and safety (ISO 45001), and
customer vulnerability services (ISO 22458).
The board committees report back to the board on
what was discussed at their meetings, decisions taken,
and, where appropriate, make recommendations on
matters requiring board approval.
The executive team, comprised of senior managers
that report directly into the Chief Executive, is
responsible for implementing our strategy and
for the day-to-day running of the business and
other operational matters. It holds two scheduled
meetings each month, one focusing on day-to-day
performance and the other focusing on matters of a
strategic nature, along with weekly informal ‘scrums’.
Through the principal management committees,
senior managers discuss the needs of the business,
raise issues, identify and delegate appropriate actions,
monitor progress of key performance measures,
and ensure any lessons learnt are implemented. The
Chief Executive provides a report, covering financial
and operational performance, to the board at every
scheduled meeting.
There are then further layers of focus at management
and business unit level, all of which feeds up through
the committees and, ultimately, to the board
through this structure. For example, pages 52 and
60 describes how these layers operate in relation to
risk management.
Governance structure of the board and its committees and the principal management committees
Group board
Chair – Sir David Higgins
Code principal board committees
Audit committee
Remuneration committee
Nomination committee
Other board committees
ESG committee
Treasury committee
Compliance committee
Announcements committee
Chief Executive Officer – Louise Beardmore
Principal management committees
Group audit and risk board
Sustainable finance committee
Security steering group
Executive team
Political and regulatory group
Climate change mitigation steering group
Capital investment committee
Future plan strategy board
Key
inform and implement
oversight and challenge
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Our approach to generating value
Governance
Governance and reporting process for risk management
The board ensures its oversight of risk remains effective, and in
compliance with the UK Corporate Governance Code, through
a number of established reporting routes. The board receives
a comprehensive update on our risk profile every six months,
including the nature and extent of risk exposure of the most
significant event-based risks, relative to the inherent principal risks
and new and emerging risks. In addition, specific risk topics are
reported to the board to support decision-making, enabling it to:
• decide on an acceptable level of risk, relative to risk appetite
and tolerance, to deliver on the group’s strategy;
• 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.
Risk-specific governance and steering groups manage individual
risks. The operational risk and resilience board provides oversight
of asset and operational process, risk and resilience capability,
contributes to the business risk assessment process and escalates
risks and issues to the group audit and risk board (GARB). 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. 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.
TCFD Governance around climate-related risks and opportunities
Summary
• The board and its committees have oversight and scrutiny
of climate change matters, including tracking delivery of our
carbon pledges, science-based targets, and review of the
climate-related risks.
• Climate-related governance is fully integrated within board
and management committee responsibilities, supported by
our director-led climate change mitigation steering group
and cross business working groups.
• Carbon measures are included within the executive
remuneration framework and are key components of the
environmental performance metrics.
• Public disclosures are complemented through conversations
with investors and participation in climate-related indices
and assessments. Leadership ratings in both climate change
(A-) and supplier engagement (A) for CDP 2022.
Board oversight of climate-related risks
and opportunities
The climate and natural environment are critical to our purpose
to provide great water, therefore climate matters are monitored
closely by our board and the principle committees as a core part
of their duties and agenda. The role of the board of directors is
to set, review and guide the strategy of the group ensuring the
long-term success of United Utilities for customers, investors
and wider stakeholders. Climate-related issues play a significant
role in determining what is sustainable and responsible for the
environment and customers.
The board provides oversight of climate-related matters in the
business through our business model, where we:
• consult and plan for short, medium and long-term horizon;
• deliver the outcomes set out in our regulatory contract;
• create long-term value for a range of stakeholders; and
•
review and measure our progress.
Our CEO, Louise Beardmore, has responsibility to manage the
group’s business and to implement the strategy and policies
approved by the board and has accountability to the board for
climate matters. Louise, as new CEO, is an active and vocal
champion with respect to environmental topics and initiatives
and she passionately promotes the need for both pace and scale
of action to adapt and mitigate climate change.
This year, climate change matters have been discussed by
the audit committee in its review of carbon commitments risk
and the introduction of the enhanced audit and assurance
framework. The remuneration committee covered climate
through endorsing continuing the link between long-term
incentive outcomes and the delivery of carbon pledges.
Considerations in respect of the impact of climate change risk
on the measurement basis of the assets and liabilities of the
group are included within the notes to the financial statements
(Accounting Policy note, page 241).
Management role
The CEO has ultimate responsibility for the group’s
preparedness for adapting to climate change and driving
our mitigation strategy and does so through chairing all
relevant management committees. Our CFO, Phil Aspin, has
executive responsibility for risk management and has made
climate change and ESG core to the business. The executive
management team, through its groups and committees (see
structure on page 130), is tasked with assessing and managing
the climate-related risks and opportunities and enacting the
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.
The high value we place on climate and the environment is
seen by the fact that most of our board and management
committees contribute to our ‘create a greener future’ strategic
priority. This illustrates that climate-related matters influence
both day-to-day and strategic decision-making and behaviours,
for instance, how we respond to the high costs of energy by
focusing on efficiency and maximising use of our self-generated
electricity and introducing climate-related criteria into supplier
selection evaluations.
Future focus
• Continued communication and engagement programme with
all stakeholder groups.
• Deploy whole-life carbon costing using an internal carbon
price aligned to government carbon values.
See how climate-related matters are considered within our
governance structure on page 130
Read more about our committees including how often they meet and
ESG skills on pages 134 and 144
unitedutilities.com/corporate
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Our approach to generating value
Governance
Governance and reporting process for risk management
• monitor and review the effectiveness of risk management
The board ensures its oversight of risk remains effective, and in
compliance with the UK Corporate Governance Code, through
a number of established reporting routes. The board receives
a comprehensive update on our risk profile every six months,
including the nature and extent of risk exposure of the most
significant event-based risks, relative to the inherent principal risks
and new and emerging risks. In addition, specific risk topics are
reported to the board to support decision-making, enabling it to:
• decide on an acceptable level of risk, relative to risk appetite
and tolerance, to deliver on the group’s strategy;
• ensure appropriate controls and mitigation are in place, and
test the appropriateness of plans;
procedures and internal control systems.
Risk-specific governance and steering groups manage individual
risks. The operational risk and resilience board provides oversight
of asset and operational process, risk and resilience capability,
contributes to the business risk assessment process and escalates
risks and issues to the group audit and risk board (GARB). 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. Supported by company secretariat
and the corporate audit teams, the audit committee reviews the
effectiveness of risk management and internal controls before
•
report externally on the long-term viability of the company in
these are agreed by the board.
an informed manner; and
TCFD Governance around climate-related risks and opportunities
Summary
• The board and its committees have oversight and scrutiny
of climate change matters, including tracking delivery of our
carbon pledges, science-based targets, and review of the
climate-related risks.
• Climate-related governance is fully integrated within board
and management committee responsibilities, supported by
our director-led climate change mitigation steering group
and cross business working groups.
• Carbon measures are included within the executive
remuneration framework and are key components of the
environmental performance metrics.
• Public disclosures are complemented through conversations
with investors and participation in climate-related indices
and assessments. Leadership ratings in both climate change
(A-) and supplier engagement (A) for CDP 2022.
Board oversight of climate-related risks
and opportunities
The climate and natural environment are critical to our purpose
to provide great water, therefore climate matters are monitored
closely by our board and the principle committees as a core part
of their duties and agenda. The role of the board of directors is
to set, review and guide the strategy of the group ensuring the
long-term success of United Utilities for customers, investors
and wider stakeholders. Climate-related issues play a significant
role in determining what is sustainable and responsible for the
environment and customers.
The board provides oversight of climate-related matters in the
business through our business model, where we:
This year, climate change matters have been discussed by
the audit committee in its review of carbon commitments risk
and the introduction of the enhanced audit and assurance
framework. The remuneration committee covered climate
through endorsing continuing the link between long-term
incentive outcomes and the delivery of carbon pledges.
Considerations in respect of the impact of climate change risk
on the measurement basis of the assets and liabilities of the
group are included within the notes to the financial statements
(Accounting Policy note, page 241).
Management role
The CEO has ultimate responsibility for the group’s
preparedness for adapting to climate change and driving
our mitigation strategy and does so through chairing all
relevant management committees. Our CFO, Phil Aspin, has
executive responsibility for risk management and has made
climate change and ESG core to the business. The executive
management team, through its groups and committees (see
structure on page 130), is tasked with assessing and managing
the climate-related risks and opportunities and enacting the
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.
The high value we place on climate and the environment is
seen by the fact that most of our board and management
committees contribute to our ‘create a greener future’ strategic
priority. This illustrates that climate-related matters influence
both day-to-day and strategic decision-making and behaviours,
for instance, how we respond to the high costs of energy by
focusing on efficiency and maximising use of our self-generated
electricity and introducing climate-related criteria into supplier
• consult and plan for short, medium and long-term horizon;
• deliver the outcomes set out in our regulatory contract;
• create long-term value for a range of stakeholders; and
selection evaluations.
Future focus
•
review and measure our progress.
Our CEO, Louise Beardmore, has responsibility to manage the
group’s business and to implement the strategy and policies
approved by the board and has accountability to the board for
• Continued communication and engagement programme with
all stakeholder groups.
• Deploy whole-life carbon costing using an internal carbon
price aligned to government carbon values.
climate matters. Louise, as new CEO, is an active and vocal
See how climate-related matters are considered within our
champion with respect to environmental topics and initiatives
and she passionately promotes the need for both pace and scale
of action to adapt and mitigate climate change.
governance structure on page 130
Read more about our committees including how often they meet and
ESG skills on pages 134 and 144
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Governance around nature-related dependencies, impacts, risks and opportunities
TNFD
Board and committee oversight
The board provides oversight of nature-related issues through
six-monthly updates on performance. Matters are regularly
reviewed at the ESG committee such as our progress against
our Better Rivers plans.
Governance over 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.
Management role
Our interactions with the natural environment are broad and
complex. Overall accountability rests with the executive team,
who are responsible for day-to-day compliance with the legal and
regulatory requirements as set out in our environmental policy. 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).
Progress this year
• Enhanced our approach to nature-related reporting using the
beta release of the TNFD framework guidance.
Future focus
• Communication and engagement across the organisation
on the increased interest in nature-related disclosures
and reporting.
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Governance around other risks and opportunities of material interest
OTHER
Cyber security
The board is responsible for the oversight of cyber security
and updates are provided to the board at each of its scheduled
meetings, with a presentation given by the chief security officer
twice a year. The executive team is updated on performance on
a monthly basis.
The security steering group (SSG) meets monthly to consider
changes to digital and physical security risks and mitigating
actions, and to review any incidents. Members of the committee
include the company secretary, who has responsibility for
security matters and is in attendance at all board meetings, the
chief security officer, and representatives from each business
unit. The SSG reports security metrics on a quarterly basis to
the group audit and risk board, and six-monthly to the board.
As it is one of our top ten principal risks, an update on cyber
security is provided every six months to the board. The chief
security officer reports to the company secretary and, along
with the information security team, works closely with the digital
services team.
Our information security policies and compliance are aligned
to ISO 27001. As a provider of essential services for UK Critical
National Infrastructure, we are governed by The Network and
Information Systems Regulations, which came into force in
2018 and focuses on cyber security compliance. We are making
good progress with our programme of work to comply with
these regulations. We are required to comply with the Security
and Emergency Measures Direction (SEMD) to maintain plans
to provide a supply of water at all times, and this includes
security components. A SEMD report is submitted annually to
the Drinking Water Inspectorate (DWI) and this is subject to
independent attestation prior to submission.
Financial risk management
The board delegates authorities to the treasury committee,
which reviews its policies in relation to key financial risks on at
least an annual basis, or following any major changes in treasury
operations and/or financial market conditions.
As well as managing our exposure to these key financial risks,
these policies help us maintain compliance with relevant
financial covenants in our borrowings, including interest cover
and gearing metrics, and help us to maintain our credit ratings.
Day-to-day responsibility for operational compliance with the
treasury policies and the targets set therein rests with the group
treasurer. An operational compliance report is provided monthly
to the treasury committee, detailing our performance against
these policies and highlighting the level of risk against the
appropriate risk limits in place, with more detailed management
information provided quarterly.
Affordability and vulnerability
The customer services management team has responsibility
for the delivery of our affordability and vulnerability schemes,
including our certification to ISO 22458 for our Priority
Services scheme. The schemes are continuously monitored and
performance is reported to the executive performance meeting
and the board on a monthly basis. Affordability and vulnerability
are reviewed by the board twice a year.
Health, safety and wellbeing
Health, safety and wellbeing matters, including policies and our
accreditation to ISO 45001, are managed through the health,
safety and wellbeing team and reported monthly to the executive
performance meeting. Health, safety and wellbeing is reported
to the board every month, with a detailed review twice a year.
Responsible supply chain
The commercial performance team has responsibility for the
delivery of our United Supply Chain (USC) programme. Supplier
sign ups to our Responsible Sourcing Principles are reported on
a monthly basis, alongside other commercial measures, through
the executive performance meeting and on to the board.
unitedutilities.com/corporate
Stock code: UU.
53
Our approach to generating value
Governance
OTHER Governance around other continued
Equity, diversity and inclusion
We need fantastic people to help us deliver great service to
all our customers. We want our workforce to reflect the local
communities we serve, with all colleagues feeling welcomed,
valued and included, regardless of their gender, age, race,
disability, sexuality or social background.
Our award-winning ‘We are Better Together’ campaign aims to
drive a diverse and inclusive workforce. We are proud of how
far we have come and in our latest internal engagement survey
89 per cent of colleagues said that United Utilities supports
diversity and inclusion in the workplace – scoring higher
than both the UK norm and Utilities norm benchmarks and
recognising our drive to be an inclusive workplace of choice.
Our people director sponsors the overall equity, diversity and
inclusion plan, which sets out our bold, long-term targets
to be achieved by 2030, and tracks its progress with the
executive team.
We have been recognised as one of the top 15 FTSE company
performers when it comes to women in leadership, having
exceeded the 40 per cent target for Women on Boards and
Women Leaders set by the FTSE 100 Women Leaders Review,
tracking at 44.4 per cent and 43.1 per cent respectively. We have
been included once again in the Bloomberg LP Gender-Equality
Index, which tracks the performance of public companies
committed to transparency in gender-data reporting. We are one
of 484 companies across 45 countries and regions committed to
more equal and inclusive workplaces.
At the 2022 Water Industry Awards, we were Highly
Commended for our approach to recruiting a diverse
apprenticeship cohort in the Diversity & Inclusion Initiative of
the Year. We were also winner of the Inclusive Culture Initiative
Award for our ‘We Are Better Together’ campaign at the 2022
Inclusive Companies Awards, recognising our remarkable efforts
and commitment to harness and strengthen a diverse workforce.
We are proud to have been ranked 11th in the Inclusive
Companies Top 50 UK Employers list, reinforcing our pledge
to take action on diversity and inclusion and recognising our
commitment to creating a more equal and inclusive workplace.
For the second year running, we are the highest ranking water
company in this respected, cross-sector inclusion index.
We have improved our position in the Financial Times Inclusive
Leaders Index 2023, which assesses companies’ success in
promoting diversity aspects, such as gender, age, ethnicity,
disability and sexual orientation, in their workforce. We were
placed 89th out of 850 companies across Europe, and are the
only UK utilities company in the top 100.
Ethnicity
We continue to collect information to build on our diversity data.
The percentage of colleagues who choose not to disclose their
ethnic origin continues to decrease, currently at 8.2 per cent.
The proportion of our colleagues who identify as from an ethnic
background stands at 2.7 per cent.
We’ve committed to supporting the ‘10,000 Black Interns’
programme over the next five years. During the year, we
welcomed 23 students onto placements. The programme
included ‘lunch and learn’ sessions with our directors, team-
building activities with the local Army Reserves, and a CV and
interview skills workshop with specialist recruitment providers.
It was a huge success, with 56 per cent of those who were
ready for employment being offered a role with us. 54 per cent
of interns from the programme are female, and 60 per cent of
interns we offered a role to are female.
Following the success of our first ‘Stepping Up’ programme
in 2021, specifically designed for colleagues from an ethnic
minority background, we ran a second cohort for a group of
ten colleagues. Over the past two years we’ve supported 20
people, and 35 per cent of these are female. The programme
has provided participants with opportunities to network with
senior leaders, sponsors and mentors, and to develop personal
and leadership skills to help them fast track their careers with
us. Since completing the programme, 50 per cent of participants
have already secured a new role and over 40 per cent now
manage a team.
Gender
Our workforce profile remains at 65 per cent male and
35 per cent female. We recognise the need to attract diverse
and talented individuals with an interest in science, technology,
engineering and maths (STEM) and have a focused approach
to improving the gender diversity of our workforce.
To inspire young people from a wide range of backgrounds into
STEM-related careers, we continue to run our award-winning
‘Engineering Masterclass’ competition with secondary schools
from the local area – some of which have a high number of pupils
from deprived and disadvantaged backgrounds. This year, over
80 students took part and 63 per cent of them were female.
Following the masterclass, 95 per cent of students said they
were extremely interested in pursuing a STEM-related career and
100 per cent said they would recommend the session and now
have a better understanding of engineering at United Utilities.
We continue to promote and support strong female role
models at all levels of our organisation. Louise Beardmore’s
appointment as CEO means the percentage of women serving
on our board has increased to 44 per cent, while females now
make up 50 per cent of our executive leadership team. We offer
targeted support for future female talent through our Female
Leadership Pipeline and Aspiring Manager Programme, which
have been designed to support colleagues into leadership
positions. Sixty-seven per cent of colleagues currently on our
Aspiring Manager Programme are female. Overall, 42 per cent
of our graduates are female and 30 per cent of our apprentices
are female.
In the last 12 months, we have welcomed 32 graduates on our
schemes and 61 apprentices have also joined us on operational,
service and future-facing digital and environmental schemes.
Of our new intake, 41 per cent of graduates are female and
35 per cent of apprentices are female, compared to the UK
average of 24 per cent for females in STEM roles.
We are pleased that 91 per cent of our current female workforce
would recommend us as an employer and 94 per cent say that
we support diversity and inclusion in the workplace.
We remain committed to closing the gender pay gap in our
organisation. At 14.7 per cent, our median gender pay gap is
less than the national average and less than the gap in similar
STEM-industry organisations. We are confident that the work
we are doing to attract, support and develop women, to build a
‘pipeline’ of female talent, will bring long-term improvements in
our gender pay gap.
54
unitedutilities.com/corporate
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Our approach to generating value
Governance
U
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Our people director sponsors the overall equity, diversity and
manage a team.
inclusion plan, which sets out our bold, long-term targets
to be achieved by 2030, and tracks its progress with the
Gender
executive team.
OTHER Governance around other continued
Equity, diversity and inclusion
We need fantastic people to help us deliver great service to
all our customers. We want our workforce to reflect the local
communities we serve, with all colleagues feeling welcomed,
valued and included, regardless of their gender, age, race,
disability, sexuality or social background.
Our award-winning ‘We are Better Together’ campaign aims to
drive a diverse and inclusive workforce. We are proud of how
far we have come and in our latest internal engagement survey
89 per cent of colleagues said that United Utilities supports
diversity and inclusion in the workplace – scoring higher
than both the UK norm and Utilities norm benchmarks and
recognising our drive to be an inclusive workplace of choice.
We have been recognised as one of the top 15 FTSE company
performers when it comes to women in leadership, having
exceeded the 40 per cent target for Women on Boards and
Women Leaders set by the FTSE 100 Women Leaders Review,
tracking at 44.4 per cent and 43.1 per cent respectively. We have
been included once again in the Bloomberg LP Gender-Equality
Index, which tracks the performance of public companies
committed to transparency in gender-data reporting. We are one
of 484 companies across 45 countries and regions committed to
more equal and inclusive workplaces.
At the 2022 Water Industry Awards, we were Highly
Commended for our approach to recruiting a diverse
apprenticeship cohort in the Diversity & Inclusion Initiative of
the Year. We were also winner of the Inclusive Culture Initiative
Award for our ‘We Are Better Together’ campaign at the 2022
Inclusive Companies Awards, recognising our remarkable efforts
and commitment to harness and strengthen a diverse workforce.
We are proud to have been ranked 11th in the Inclusive
Companies Top 50 UK Employers list, reinforcing our pledge
to take action on diversity and inclusion and recognising our
commitment to creating a more equal and inclusive workplace.
For the second year running, we are the highest ranking water
company in this respected, cross-sector inclusion index.
We have improved our position in the Financial Times Inclusive
Leaders Index 2023, which assesses companies’ success in
promoting diversity aspects, such as gender, age, ethnicity,
disability and sexual orientation, in their workforce. We were
placed 89th out of 850 companies across Europe, and are the
only UK utilities company in the top 100.
Ethnicity
It was a huge success, with 56 per cent of those who were
ready for employment being offered a role with us. 54 per cent
of interns from the programme are female, and 60 per cent of
interns we offered a role to are female.
Following the success of our first ‘Stepping Up’ programme
in 2021, specifically designed for colleagues from an ethnic
minority background, we ran a second cohort for a group of
ten colleagues. Over the past two years we’ve supported 20
people, and 35 per cent of these are female. The programme
has provided participants with opportunities to network with
senior leaders, sponsors and mentors, and to develop personal
and leadership skills to help them fast track their careers with
us. Since completing the programme, 50 per cent of participants
have already secured a new role and over 40 per cent now
Our workforce profile remains at 65 per cent male and
35 per cent female. We recognise the need to attract diverse
and talented individuals with an interest in science, technology,
engineering and maths (STEM) and have a focused approach
to improving the gender diversity of our workforce.
To inspire young people from a wide range of backgrounds into
STEM-related careers, we continue to run our award-winning
‘Engineering Masterclass’ competition with secondary schools
from the local area – some of which have a high number of pupils
from deprived and disadvantaged backgrounds. This year, over
80 students took part and 63 per cent of them were female.
Following the masterclass, 95 per cent of students said they
were extremely interested in pursuing a STEM-related career and
100 per cent said they would recommend the session and now
have a better understanding of engineering at United Utilities.
We continue to promote and support strong female role
models at all levels of our organisation. Louise Beardmore’s
appointment as CEO means the percentage of women serving
make up 50 per cent of our executive leadership team. We offer
targeted support for future female talent through our Female
Leadership Pipeline and Aspiring Manager Programme, which
have been designed to support colleagues into leadership
positions. Sixty-seven per cent of colleagues currently on our
Aspiring Manager Programme are female. Overall, 42 per cent
of our graduates are female and 30 per cent of our apprentices
are female.
In the last 12 months, we have welcomed 32 graduates on our
schemes and 61 apprentices have also joined us on operational,
service and future-facing digital and environmental schemes.
Of our new intake, 41 per cent of graduates are female and
35 per cent of apprentices are female, compared to the UK
average of 24 per cent for females in STEM roles.
We continue to collect information to build on our diversity data.
The percentage of colleagues who choose not to disclose their
We are pleased that 91 per cent of our current female workforce
ethnic origin continues to decrease, currently at 8.2 per cent.
would recommend us as an employer and 94 per cent say that
The proportion of our colleagues who identify as from an ethnic
we support diversity and inclusion in the workplace.
background stands at 2.7 per cent.
We’ve committed to supporting the ‘10,000 Black Interns’
programme over the next five years. During the year, we
welcomed 23 students onto placements. The programme
We remain committed to closing the gender pay gap in our
organisation. At 14.7 per cent, our median gender pay gap is
less than the national average and less than the gap in similar
STEM-industry organisations. We are confident that the work
included ‘lunch and learn’ sessions with our directors, team-
we are doing to attract, support and develop women, to build a
building activities with the local Army Reserves, and a CV and
‘pipeline’ of female talent, will bring long-term improvements in
interview skills workshop with specialist recruitment providers.
our gender pay gap.
Our median gender pay gap over time
2022
2021
2020
2019
2018
14.7%
14.7%
15.3%
13.8%
15.3%
Our mean gender pay gap over time
2022
2021
2020
2019
2018
8.2%
8.1%
10.7%
11.3%
13.2%
Percentage of women and men overall and in each
quartile of the pay range (figures for 2022 and 2021)
Upper
Upper middle
Lower middle
Lower
2022
32%
2021
30%
2022
23%
2021
23%
2022
32%
2021
32%
2022
48%
2021
48%
Proportion of women
Proportion of men
68%
70%
77%
77%
68%
68%
52%
52%
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)
S
t
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Colleague networks
We are committed to providing a supportive and inclusive
working environment for all of our colleagues and we recognise
that leaders have a clear role when it comes to championing
equity, diversity and inclusion. Our leadership team has taken an
active part in sponsoring each of our colleague networks, which
support colleagues within under-represented communities
and focus on educating, raising awareness and celebrating key
events – such as Black History Month, International Women’s
Day and National Autism Week.
Through our networks we have hosted live Q&A sessions with
external speakers, including one in partnership with Northern
Power Women, and established monthly cafés around the topics
of hearing loss, neurodiversity and menopause. We introduced
menopause training that everyone in the company can access,
and 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.
We are a Disability Confident employer and we are one of over
20,000 UK employers to have signed up to the Government
scheme.
We held our inaugural ‘Better Together Inclusion Awards’, to
recognise individual colleagues and teams for their hard work and
commitments towards making United Utilities a more inclusive
workplace, and to celebrate the achievements of those colleagues
going the extra mile in our wider communities.
Attracting local diverse talent
We’ve been raising the profile of our commitment to promoting
STEM-related careers. During National Apprenticeship Week,
our apprentices and early careers team mentored students from
University Technical College Warrington, attended four different
schools and colleges and hosted the Engineering Masterclass
final, with over 80 students from schools in the local area.
(4)
Wider colleagues
Wider colleagues
(4)
on our board has increased to 44 per cent, while females now
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)
Wider colleagues
Wider colleagues
(4)
(4)
4
4
4
4
5
5
4
4
5
5
5
5
36
36
14
14
3,986 2,133
3,986 2,133
We welcomed 600 aspiring apprentices and parents to our
first ever apprenticeship open evening and delivered a series of
apprenticeship accelerator sessions for students from under-
represented communities across the North West. The sessions
aim to help students accelerate their careers – focusing on
apprenticeships and improving employability prospects and skills.
4
4
4
4
5
5
4
4
5
5
5
5
36
36
14
14
3,986 2,133
3,986 2,133
(1) Group board as at 31 March 2023. Includes Steve Mogford.
(2) Executive team excludes CEO, CEO designate and CFO, who are
included in group board figures.
(3) As at 31 March 2023, there were six male and three female colleagues
appointed as statutory directors of subsidiary group companies
but who do not fulfil the Companies Act 2006 definition of
‘senior managers’.
(4) Wider colleagues as at 31 March 2023.
Our ‘Tap into your Future’ virtual work experience programme
has offered young people in years 11 to 13 an exclusive insight
into our business and our fantastic early careers opportunities.
The sessions targeted under-represented communities across
the North West and attracted over 500 students. A hundred per
cent of attendees rate United Utilities as a diverse and inclusive
employer, and 76 per cent said they were extremely interested in
applying for an apprenticeship after completing the programme.
In the last 12 months, we have created over
£695k
of social/local economic value
(TOMS Social Value Portal)
44%
of our group board
is female
50%
of our executive team is female
54
unitedutilities.com/corporate
Stock code: UU.
55
Our approach to generating value
Governance
Engaging with our stakeholders
We actively engage with stakeholders to build and maintain trust and ensure we create long-term value for all. Strong, constructive
relationships help us understand what matters most to them. The following pages detail how we engage with stakeholders who
influence what we do and benefit from the value we create (in dark blue), and those who just influence what we do (in grey), across a
range of ESG issues. Our materiality matrix on page 29 details stakeholder priorities and how these affect our ability to create value.
Our stakeholder relationships are subject to robust governance to ensure stakeholder insights are taken into account in decision-making
at executive and board level. The board’s ESG committee has stakeholder engagement and reputation as one of its standing agenda
items, and the chair of the independent customer challenge group (YourVoice) attends board meetings to provide its perspective.
Our Section 172(1) Statement on pages 58 to 59 provides examples of some of the ways stakeholder views have influenced key board
decisions during the year.
Employees
Environment
Colleagues
Communities
Customers
Communities
Our colleagues are the face of the company and we could
not deliver our services without them, so maintaining
productive relationships built on trust is vital to delivering our
purpose. Colleagues know our business better than anyone,
with a diverse range of views and experience, making them
well placed to help us identify new ways of working and
opportunities for improvement.
Our work puts us at the heart of local communities, places where
customers and colleagues live and work. We want to support
them to be stronger and increase understanding of the impact and
contribution our work has on everyday life. We balance decisions
based on often competing stakeholder interests and look to
develop collaborative and partnership solutions where feasible.
How we engage
• Annual opinion survey enabling confidential feedback
How we engage
• Face-to-face meetings with local and parish councils to
• Regular manager one-to-one meetings providing two-way
discuss projects
engagement
• Colleague Voice panel providing a link to the board
• Monthly trade union forums
• Online portals for large capital projects to get the views of
communities where we are working
• Facilitated workshops with partners to scope out solutions
• Public events across the region to promote sustainable uses
Top three material issues
• Colleague engagement
• Diverse and skilled workforce
• Health, safety and wellbeing
Top three material issues
• Land management, access and recreation
• Supporting communities
• Trust, transparency and legitimacy
Customers
Environment
Customers
Environment
To deliver value for customers, we need to understand their
short-term issues, and longer-term expectations of us as their
water company. As expectations change, we need to evolve our
services to ensure we meet them. We actively seek feedback
on what customers think about us so we can make our services
better and address the issues that matter.
We depend on the environment and have a key role in protecting
and enhancing it across the North West. We engage with
interested groups such as environmental regulators,
non-governmental organisations, campaigners and local
communities to find the best ways to tackle environmental
issues, like climate change and land management. Working
together is often the best way to find the right solution.
How we engage
• Contacts through our operational call centre and social
media channels
How we engage
• Meetings with national and regional environmental
regulators, such as the Environment Agency
• Visits to customer properties to resolve issues. Direct
• Customer research to shape our investment plans
customer research on our service provision
• Face-to-face engagement with groups representing
vulnerable customers, such as MIND
• Events such as our Environmental AGM
• Partnerships where we have common interests
Top three material issues
• Drinking water quality
Top three material issues
• Storm overflows
• Customer service and operational performance
• Climate change
• Affordability and vulnerability
• Water resources and leakage
56
unitedutilities.com/corporate
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Our approach to generating value
Governance
U
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U
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G
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o
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3
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2
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Engaging with our stakeholders
We actively engage with stakeholders to build and maintain trust and ensure we create long-term value for all. Strong, constructive
relationships help us understand what matters most to them. The following pages detail how we engage with stakeholders who
influence what we do and benefit from the value we create (in dark blue), and those who just influence what we do (in grey), across a
range of ESG issues. Our materiality matrix on page 29 details stakeholder priorities and how these affect our ability to create value.
Our stakeholder relationships are subject to robust governance to ensure stakeholder insights are taken into account in decision-making
at executive and board level. The board’s ESG committee has stakeholder engagement and reputation as one of its standing agenda
items, and the chair of the independent customer challenge group (YourVoice) attends board meetings to provide its perspective.
Our Section 172(1) Statement on pages 58 to 59 provides examples of some of the ways stakeholder views have influenced key board
decisions during the year.
Employees
Environment
Colleagues
Communities
Customers
Communities
Our colleagues are the face of the company and we could
Our work puts us at the heart of local communities, places where
not deliver our services without them, so maintaining
customers and colleagues live and work. We want to support
productive relationships built on trust is vital to delivering our
them to be stronger and increase understanding of the impact and
purpose. Colleagues know our business better than anyone,
contribution our work has on everyday life. We balance decisions
with a diverse range of views and experience, making them
based on often competing stakeholder interests and look to
well placed to help us identify new ways of working and
develop collaborative and partnership solutions where feasible.
• Annual opinion survey enabling confidential feedback
• Face-to-face meetings with local and parish councils to
opportunities for improvement.
How we engage
• Regular manager one-to-one meetings providing two-way
engagement
• Colleague Voice panel providing a link to the board
• Monthly trade union forums
Top three material issues
• Colleague engagement
• Diverse and skilled workforce
• Health, safety and wellbeing
How we engage
discuss projects
• Online portals for large capital projects to get the views of
communities where we are working
• Facilitated workshops with partners to scope out solutions
• Public events across the region to promote sustainable uses
Top three material issues
• Land management, access and recreation
• Supporting communities
• Trust, transparency and legitimacy
Customers
Environment
Customers
Environment
To deliver value for customers, we need to understand their
We depend on the environment and have a key role in protecting
short-term issues, and longer-term expectations of us as their
and enhancing it across the North West. We engage with
water company. As expectations change, we need to evolve our
interested groups such as environmental regulators,
services to ensure we meet them. We actively seek feedback
non-governmental organisations, campaigners and local
on what customers think about us so we can make our services
communities to find the best ways to tackle environmental
better and address the issues that matter.
issues, like climate change and land management. Working
together is often the best way to find the right solution.
How we engage
media channels
• Contacts through our operational call centre and social
• Meetings with national and regional environmental
regulators, such as the Environment Agency
• Visits to customer properties to resolve issues. Direct
• Customer research to shape our investment plans
customer research on our service provision
• Face-to-face engagement with groups representing
vulnerable customers, such as MIND
• Events such as our Environmental AGM
• Partnerships where we have common interests
How we engage
Top three material issues
• Drinking water quality
• Customer service and operational performance
Top three material issues
• Storm overflows
• Climate change
• Affordability and vulnerability
• Water resources and leakage
Investors
Investors
Suppliers
Media
Suppliers
It is important that investors have confidence in the organisation
and how it is managed. We provide regular updates to debt
and equity investors and meet with many top investors to
establish two-way dialogue about matters of interest to them.
Increasingly, this includes environmental, social and governance
(ESG) updates alongside financial and performance data.
We rely on suppliers to deliver our services. Good relationships
help ensure projects are delivered on time, to good quality, at
efficient costs. Awareness of issues in the supply chain means
we can address them together and become more resilient.
Supplier engagement can also help us identify and realise
innovative approaches and solutions.
How we engage
• Capital market days and investor roadshows
• Annual general meeting open to all shareholders
• Direct dialogue with relationship banks and credit agencies
• Participation in investor-led ESG ratings and indices
How we engage
• Directly through supplier relationship management process
and United Supply Chain (USC)
• Setting challenges through our Innovation Lab
• Supplier databases such as Achilles, to assess market
opportunities
Top three material issues
• Customer service and operational performance
• Financial risk management
Top three material issues
• Trust, transparency and legitimacy
• North West regional economy
• Corporate governance and business conduct
• Responsible supply chain
S
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Media
Investors
Media
Politicians
Employees
Politicians
The media is influenced by stakeholders’ interests, and in turn
influences them through what it reports. Many people receive
their information about us and our activities from traditional and/
or social media, so it is important that coverage is fair, balanced
and accurate. This requires effective two-way dialogue between
the company and the media, and we provide media training to
key senior managers to facilitate this.
How we engage
• 24/7 press office available to respond to media requests and
publish content for direct media use
• Dedicated social media team covering multiple channels
• Active media and social monitoring focused on the company
and sector
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.
How we engage
• Direct engagement with regional and national politicians
across the spectrum, and working groups with devolved
administrations and local authorities on common interests
• Direct engagement with parish councils linked to planning
applications
• Responding to enquiries through our corporate affairs team
Top three material issues
• Storm overflows
Top three material issues
• Political and regulatory environment
• Customer service and operational performance
• Customer service and operational performance
• Trust, transparency and legitimacy
• Affordability and vulnerability
Regulators
Communities
Regulators
Through proactive, constructive engagement with economic,
quality and environmental regulators, we understand
requirements and deliver against commitments over specified
time periods, aiming to meet or exceed the expectations they
have of our business. We actively engage in events such as
workshops and respond to consultations to contribute towards
the policy and regulatory framework in which we operate,
covering customer, economic, environmental, social and
governance matters.
How we engage
• Regular meetings with all
regulators on objectives
and performance
Top three material issues
• Political and regulatory
environment
• Customer service and
• Responses to consultations
operational performance
and contributing to policy
debates on how regulation
could evolve
• Resilience
56
unitedutilities.com/corporate
Stock code: UU.
57
Our approach to generating value
Governance
We value the diverse perspectives that a broad range of stakeholders, representing different and
often competing interests, can bring to our decision-making.
S172(1) Statement
Our key decisions during the year to 31 March 2023
Introduction
Throughout this integrated annual report, we provide examples
of how the board has 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 colleagues;
• 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, values and
strategic priorities.
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 2023 including:
Our strategic priorities
Improve
our rivers
Create a
greener future
Provide a safe and
great place to work
Deliver great service
for all our customers
Spend customers'
money wisely
Contribute to
our communities
U
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Cyber security
Link to strategy
The decision
To respond to calls from investors and company commentators
on the board’s oversight of cyber issues and security. Cyber
risk ranked as a top ten risk at United Utilities and this has been
the case since 2019. The board receives presentations from the
chief security officer, who reports functionally to the company
secretary, twice a year, providing the board with insight into
mitigation activities employed by the group in response to the
evolving threat of cyber and physical security attacks. The
board is kept apprised of developments in this area, and, in
particular, matters impacting the water and other utility sectors.
During the year, the audit committee, as part of its responsibility
for financial internal controls, received a presentation on the
management and assurance of the IT controls environment and
its contribution toward mitigation of cyber crime. The board
spends time understanding the increasing threats to the group’s
cyber/digital security and overseeing management’s actions to
mitigate the risk of a serious cyber attack (see pages 53 and 69),
with board members providing their experience of similar issues
faced by other sectors to the board’s discussions. Our Systems
Thinking approach real-time digital monitoring capabilities have
produced significant operational performance improvements,
but adversely raised the risk of cyber attack, in a similar way to
that of hybrid working.
How we engaged with stakeholders
Preparedness to mitigate cyber attacks is a topic investors are
often keen to explore. As a provider of essential services for UK
Critical National Infrastructure, the group is governed by The
Network and Information Systems Regulations (NIS Regulations),
which came into force in 2018 and focus on cyber security
compliance; monitoring/enforcement of these regulations is
within the remit of the DWI. The group is required to comply
with the Security and Emergency Measures Direction (SEMD)
which directs water undertakers to maintain plans to provide a
supply of water at all times and includes security components.
A SEMD report is submitted annually to DWI and is subject to
independent attestation prior to the submission. Colleagues
are encouraged and trained to be vigilant to phishing and cyber
attacks and a variety of modern protective defence tools are
employed to protect our systems and data.
The board’s view
The group’s information security policies and compliance
are aligned to ISO 27001. Good progress is being made with
the programme of work to comply with the NIS Regulations,
although the evolving nature of the sector-specific profile
defined by the DWI can be challenging.
The board is strongly averse to accepting cyber risk within the
group’s business strategy or operational activity. The approach to
the protection of information and data held by the group about
its assets and operations, customers and colleagues is aligned
with the group’s strategic priority of delivering great service for
all customers and the board believes that this would be most
likely to promote the long-term success of the company for the
benefit of its members as a whole.
58
unitedutilities.com/corporate
Our approach to generating value
Governance
U
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We value the diverse perspectives that a broad range of stakeholders, representing different and
often competing interests, can bring to our decision-making.
S172(1) Statement
Our key decisions during the year to 31 March 2023
Introduction
Throughout this integrated annual report, we provide examples
of how the board has thought about the likely consequences of
long-term decisions and how we:
Statement by the directors in performance of
their statutory duties in accordance with S172(1)
Companies Act 2006
• build relationships with stakeholders and balance their needs
and expectations with those of the business;
The board of directors of United Utilities Group PLC consider,
both individually and together, that they have acted in the way
• understand the importance of engaging with our colleagues;
they consider, in good faith, would be most likely to promote the
• 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, values and
strategic priorities.
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 2023 including:
Our strategic priorities
Cyber security
Link to strategy
Improve
our rivers
Create a
greener future
Provide a safe and
great place to work
Deliver great service
for all our customers
Spend customers'
Contribute to
money wisely
our communities
The decision
To respond to calls from investors and company commentators
on the board’s oversight of cyber issues and security. Cyber
risk ranked as a top ten risk at United Utilities and this has been
the case since 2019. The board receives presentations from the
chief security officer, who reports functionally to the company
secretary, twice a year, providing the board with insight into
mitigation activities employed by the group in response to the
evolving threat of cyber and physical security attacks. The
board is kept apprised of developments in this area, and, in
particular, matters impacting the water and other utility sectors.
During the year, the audit committee, as part of its responsibility
for financial internal controls, received a presentation on the
management and assurance of the IT controls environment and
its contribution toward mitigation of cyber crime. The board
spends time understanding the increasing threats to the group’s
cyber/digital security and overseeing management’s actions to
mitigate the risk of a serious cyber attack (see pages 53 and 69),
with board members providing their experience of similar issues
faced by other sectors to the board’s discussions. Our Systems
Thinking approach real-time digital monitoring capabilities have
produced significant operational performance improvements,
but adversely raised the risk of cyber attack, in a similar way to
that of hybrid working.
How we engaged with stakeholders
Preparedness to mitigate cyber attacks is a topic investors are
often keen to explore. As a provider of essential services for UK
Critical National Infrastructure, the group is governed by The
Network and Information Systems Regulations (NIS Regulations),
which came into force in 2018 and focus on cyber security
compliance; monitoring/enforcement of these regulations is
within the remit of the DWI. The group is required to comply
with the Security and Emergency Measures Direction (SEMD)
which directs water undertakers to maintain plans to provide a
supply of water at all times and includes security components.
A SEMD report is submitted annually to DWI and is subject to
independent attestation prior to the submission. Colleagues
are encouraged and trained to be vigilant to phishing and cyber
attacks and a variety of modern protective defence tools are
employed to protect our systems and data.
The board’s view
The group’s information security policies and compliance
are aligned to ISO 27001. Good progress is being made with
the programme of work to comply with the NIS Regulations,
although the evolving nature of the sector-specific profile
defined by the DWI can be challenging.
The board is strongly averse to accepting cyber risk within the
group’s business strategy or operational activity. The approach to
the protection of information and data held by the group about
its assets and operations, customers and colleagues is aligned
with the group’s strategic priority of delivering great service for
all customers and the board believes that this would be most
likely to promote the long-term success of the company for the
benefit of its members as a whole.
S
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Better Rivers: Better North West
Link to strategy
The decision
Storm overflows help to minimise the risk of sewer flooding in
periods of heavy rainfall by allowing heavily diluted wastewater
to be released directly to the environment. The group committed
to four pledges in its Better Rivers: Better North West programme
to underpin a revival of rivers across the North West region.
£230 million has been committed to deliver environmental
improvements, supporting at least a one-third sustainable
reduction in the number of activations recorded from our storm
overflows by 2025 compared to the 2020 baseline, leading to
184 kilometres of improved waterways across the group’s region.
We have committed to accelerate these plans and get a head
start on future requirements through £250 million of reinvestment
funded from outperformance, to take action to improve river health
across our region and make other environmental improvements.
How we engaged with stakeholders
Collaborative action will deliver the best results for our region,
and an important step in the journey was the organisation and
participation in the Future Rivers Forum in November 2022, which
brought together representatives from environmental NGOs,
businesses, local authorities and our regulators to focus on
identifying new collaborations and collective actions to improve
river health. Customers have told us we must report on the steps
we are taking to improve river health. Our storm overflows report
was published in December 2022, coinciding with the holding
of the first Environmental AGM, which was attended by over 30
North West environmental leaders including representatives from
local nature partnerships, wildlife trusts, rivers trusts, combined
authorities and other environmental stakeholders. A new
partnership was launched with farmers to work with the farming
community to incentivise farming practices that reduce the
impact to river health, share best practice and develop sustainable
farming clusters.
Water Industry National Environment Programme
(WINEP)
Link to strategy
The decision
Approval of the 2025–30 WINEP that sets out how United
Utilities intends to meet its obligations from environmental
legislation and UK Government policy.
How we engaged with stakeholders
We have been working in collaboration with our regulators,
Ofwat, the Environment Agency, Natural England and Defra, and
our suppliers who are key to helping us deliver our programme.
The board’s view
The company has taken all reasonable steps to deliver a high-
quality WINEP programme that offers ‘best value’ as defined by
the WINEP Options Development Guidance(1) as well as the Water
Industry Strategic Environmental Requirements (WISER) based
on a sound and robust evidence base.
The board’s view
Storm overflow activations are a big area of focus for the whole
industry as part of improving river health. Following keen interest
from the public and government, and publication of the new
Environment Act 2021, ambitious targets have been set for a
progressive but substantial reduction in activation frequency
across the country. The North West receives 28 per cent more
average annual water runoff than other regions and the industrial
legacy of our region means we have a much higher proportion of
combined sewers, with 55 per cent of our network taking both
waste and surface water, compared with the industry average of
33 per cent.
We were an early adopter of activation monitoring and have one of
the largest installed bases in the sector, with 100 per cent coverage
to be achieved by 2023. Our Better Rivers programme is delivering
improvements that support our target of at least a 33 per cent
reduction in activations by 2025, from a 2020 baseline. We have
already made great headway, delivering a 39 per cent reduction
so far. We are conscious that performance can be significantly
influenced by weather and while we are extremely pleased with the
progress delivered so far, we recognise that there is more we could
do, both individually and as a sector. The Government has asked
us to go faster, and we have responded by identifying additional
investment that could be spent in AMP7 but would be fully
recovered in AMP8. We are still early in the process of scoping and
costing our environmental programme for AMP8, but as a result of
these targets and other drivers coming out of the Environment Act,
early indications point to an investment that could be significantly
higher than the average level over the last two AMP periods.
Given the size of this potential investment, we are in discussions
with regulators about balancing the pace of investment in light of
affordability and deliverability considerations, and the investment
needed to meet these new environmental requirements is likely to
run over successive AMP periods.
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.
In relation to the ‘affordable to deliver’ requirement for a best
value plan, the company has sought to make the plan as affordable
as possible. However, the WINEP and WISER requirements are
driving a programme of very significant size and scale and with an
ambitious timetable for implementation. This means that it is not
possible at the time of the WINEP final submission in January 2023
to conclude that the programme would be affordable to customers
as a whole. The company will continue to engage with the UK
Government and regulators to understand the scope to improve
this position. The WINEP programme has been subject to sufficient
processes and internal systems of control to ensure the reliability
of information and has been assured in line with the published
assurance framework. The company has appropriately considered
the feedback and recommendations from independent external
assurance partners. Notwithstanding the board’s support for the
submission, it highlighted the considerable risk associated with the
programme including the risk relating to: affordability, deliverability,
the long-term impact on operating costs, the impact on whole-life
carbon, and the impact on operational and delivery performance.
The submission of the WINEP is a statutory requirement and
having taken all reasonable steps to deliver a high-quality WINEP
programme the board believes our proposed programme is one
that would be most likely to promote the long-term success of the
company for the benefit of its members as a whole.
(1) Water industry national environment programme, Options development guidance, July 2022, version 3.
58
unitedutilities.com/corporate
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59
Our approach to generating value
Risks and opportunities
In this section you will find:
Our approach to identifying, assessing
and managing risks and opportunities
Our principal risks, common themes,
and most significant event-based risks
Our management of climate, nature
and other risks of material interest
New and emerging risks and
opportunities
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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 a stronger, greener and healthier
North West and be more resilient across
our corporate, financial and operational
structures. A key objective of our approach
to risk and resilience is to support the
sustainable achievement of the strategic
priorities that underpin our vision to be the
best UK water and wastewater company:
• Provide a safe and great place
to work;
• Deliver great service for all our
customers;
•
Improve our rivers;
• Create a greener future;
• Spend customers’ money wisely; and
• Contribute to our communities.
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 the
enhancement of non-financial assessment
criteria by aligning to the six capitals
(see page 34) to ensure a consistent
consideration of key stakeholders and
areas of value; an improved focus on
control; and the continued development of
tactical appetite and tolerance statements.
Identifying opportunities
Factors from both the internal and
external business environment may give
rise to opportunities that will positively
affect our performance and future
prospects. The identification, analysis
and management of upside as well as
down side risk will further support the
achievement of the strategic priorities,
with our Systems Thinking approach and
culture of innovation being a fundamental
component (see pages 62 to 63).
Governance and reporting process
The risk management and governance and reporting process, as summarised on page 52, can be represented by the following diagram:
Board/board committee
Management committee/activity
Business risk assessment
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 risk board
Reviews governance, risk
and compliance matters
Audit committee
Reviews the effectiveness of risk
management and internal control systems
Operational risk and resilience board
Monitors status of risk,controls and
actions associated with water,
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 project risk
First line identification, analysis,
evaluation and management of
operational and project risk
Group strategic and tactical risk
First line identification, analysis, evaluation
and management of strategic/tactical risk
60
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Our approach to generating value
Risks and opportunities
In this section you will find:
Our approach to identifying, assessing
and managing risks and opportunities
Our principal risks, common themes,
and most significant event-based risks
Our management of climate, nature
and other risks of material interest
New and emerging risks and
opportunities
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 a stronger, greener and healthier
North West and be more resilient across
our corporate, financial and operational
structures. A key objective of our approach
to risk and resilience is to support the
sustainable achievement of the strategic
priorities that underpin our vision to be the
best UK water and wastewater company:
• Provide a safe and great place
• Deliver great service for all our
to work;
customers;
•
Improve our rivers;
• Create a greener future;
• Spend customers’ money wisely; and
• Contribute to our communities.
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.
• 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 the
enhancement of non-financial assessment
criteria by aligning to the six capitals
(see page 34) to ensure a consistent
consideration of key stakeholders and
areas of value; an improved focus on
control; and the continued development of
tactical appetite and tolerance statements.
Identifying opportunities
Factors from both the internal and
external business environment may give
affect our performance and future
prospects. The identification, analysis
and management of upside as well as
down side risk will further support the
achievement of the strategic priorities,
with our Systems Thinking approach and
culture of innovation being a fundamental
component (see pages 62 to 63).
Key components of the framework include:
rise to opportunities that will positively
Governance and reporting process
The risk management and governance and reporting process, as summarised on page 52, can be represented by the following diagram:
Board/board committee
Management committee/activity
Business risk assessment
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 risk board
Reviews governance, risk
and compliance matters
Audit committee
Reviews the effectiveness of risk
management and internal control systems
Operational risk and resilience board
Monitors status of risk,controls and
actions associated with water,
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 project risk
First line identification, analysis,
evaluation and management of
operational and project risk
Group strategic and tactical risk
First line identification, analysis, evaluation
and management of strategic/tactical risk
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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
64 to 65). Each statement reflects the strategic intent, strategic priority, 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.
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Identify &
assess
Monitor &
review
Consult &
communicate
Control &
mitigate
Record &
update
How we identify and assess risk
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 ongoing 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. Risks are assessed both bottom-up, through the biannual
business assessment process, and top-down through review of the risk profile at the
executive group audit and risk board (GARB), executive performance meeting and the group
board. This approach ensures reporting reflects the risks facing the company, serves to
calibrate the most significant risks from a financial and reputational context and enables
assessment of the risks relative to our appetite.
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 pages 64 to 65) and control effectiveness.
Principal risk heat map
The heat map provides an indicative view of the current risk exposure (likelihood of
occurrence and most likely impact) of each of the principal risks relative to
each other.
Seven of the principal risks have remained relatively stable in the last 12 months
with the following principal risks demonstrating an increase in exposure:
• Finance due to current economic conditions and uncertainty;
• Conduct and compliance due to the potential for increased penalties; and
• Political and regulatory due to increased public and political interests in the
water sector and societal expectations.
Read more about our principal risks on pages 64 to 65 and new and emerging risks on
pages 74 to 75
High
Impact
Low
1
7
6
2
10
3
8
9
5
4
Low
Likelihood
High
Risk exposure
An indication of the current exposure of each principal risk relative to the prior year.
Decreased
Stable
Increased
l
l
Principal risks
1 Water service
2 Wastewater service
5 Resource
6 Finance
9 Conduct and compliance
10 Political and regulatory
3 Retail and commercial
7 Health, safety and environmental
4 Supply chain and programme delivery
8 Security
60
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61
Our approach to generating value
Risks and opportunities
Fostering a culture of innovation
We embrace technology and
seek innovative solutions to
create opportunities that help
us tackle the challenges we
face and continue improving
performance.
This is at the heart of our Systems
Thinking approach, as set out on page 63.
We use a variety of methods to find
novel ideas and solutions from different
sources, internally and externally,
including idea scouting, learning from
other water companies across the world,
and from other industries.
Culture
Our core values drive an innovative
culture, and we encourage innovation
at all levels inside the business, such as
our CEO Challenge programme where
graduates work in groups to find novel
ways to tackle challenges that we face
as a business and present these back for
consideration and implementation.
Innovation Lab
Our Innovation Lab, currently undergoing
its fifth programme, encourages
suppliers to bring us innovative ideas
and allows them to test solutions in a live
environment, helping us find solutions
where we may not otherwise have looked.
AMP7 innovation fund
Recognising the service and efficiency
improvements that innovation can offer,
Ofwat has established an innovation fund
through which companies bid for funding
for innovative projects.
We have been involved in successful bids
to influence over £80 million of projects,
leading on seven totalling £28.2 million.
This includes the Catchment Systems
Thinking Cooperative where we are
working with others to revolutionise
the way crucial data about the water
environment is shared, with a particular
focus on river health. We have already
delivered one leading project and expect
to complete a second in 2023.
Working with others to find mutual benefit solutions
We do not operate in
isolation and we recognise
that working with others
can create significant
opportunities to identify and
develop better solutions.
This co-operative approach can take many
different forms, such as summits that
bring people from a variety of different
organisations together to discuss and
formulate ideas, co-creation of solutions
with customers or other interested parties,
and forming partnerships to tackle issues
of mutual interest together.
Affordability and vulnerability
summits, and the Hardship Hub
This year we hosted our first vulnerability
summit and fourth affordability summit,
bringing together a mix of organisations
from across the North West, including
debt advice charities, the Department
for Work and Pensions (DWP), councils,
housing associations and other utility
companies, to discuss what more can
be done to support people who are
struggling. Our first affordability summit
led us to develop the Hardship Hub, a
platform that helps debt advisers gain
and share knowledge on local support
schemes, allowing them to help people
more quickly and easily.
Future rivers forum
We partnered with The Rivers Trust to
host a Future Rivers Forum in November
2022, looking at how we can address
the challenges that face rivers in the
North West, such as climate change,
population growth and pollution. This is
a problem that cannot be solved in silos;
it needs practical, collaborative action.
Industry leaders from a variety of sectors
worked together to produce solutions and
tangible actions that will progressively
reduce negative impacts to river health.
This is one of many areas where we are
working with others to improve river
water quality, including recruiting river
rangers through our Better Rivers plan.
Love Windermere
We are a part of the Love Windermere
partnership, led by the Environment
Agency, which is working to better
understand the factors affecting water
quality and develop long-term plans to
maintain and improve water quality in the
lake while balancing the needs of nature,
the community and the local economy.
This plan will set out a road map for
environmental protection that could be
replicated across the UK, and considers
the way that farmland is managed around
the lake, how rainwater drains from
built-up areas, and the way that
wastewater systems and private septic
tanks are managed.
Diversity and inclusion summit
In April 2022 we hosted our first diversity
and inclusion summit, bringing lots of
organisations and businesses together
to share ideas and best practice to help
grow more inclusive workplaces and
communities across the North West.
Severn-Thames transfer scheme
Working with others goes beyond our
region, and we are collaborating with
other water companies on a national
water trading scheme as part of the
national strategy for managing the risk
posed by increasing dry weather, and
doing so in a way that minimises the
carbon impact.
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Our approach to generating value
Risks and opportunities
Fostering a culture of innovation
We embrace technology and
Culture
AMP7 innovation fund
This is at the heart of our Systems
consideration and implementation.
seek innovative solutions to
create opportunities that help
us tackle the challenges we
face and continue improving
performance.
Thinking approach, as set out on page 63.
We use a variety of methods to find
novel ideas and solutions from different
sources, internally and externally,
including idea scouting, learning from
other water companies across the world,
and from other industries.
Our core values drive an innovative
Recognising the service and efficiency
culture, and we encourage innovation
improvements that innovation can offer,
at all levels inside the business, such as
Ofwat has established an innovation fund
our CEO Challenge programme where
through which companies bid for funding
graduates work in groups to find novel
for innovative projects.
ways to tackle challenges that we face
as a business and present these back for
Innovation Lab
Our Innovation Lab, currently undergoing
its fifth programme, encourages
suppliers to bring us innovative ideas
and allows them to test solutions in a live
environment, helping us find solutions
where we may not otherwise have looked.
We have been involved in successful bids
to influence over £80 million of projects,
leading on seven totalling £28.2 million.
This includes the Catchment Systems
Thinking Cooperative where we are
working with others to revolutionise
the way crucial data about the water
environment is shared, with a particular
focus on river health. We have already
delivered one leading project and expect
to complete a second in 2023.
Working with others to find mutual benefit solutions
We do not operate in
isolation and we recognise
that working with others
can create significant
opportunities to identify and
develop better solutions.
This co-operative approach can take many
different forms, such as summits that
bring people from a variety of different
organisations together to discuss and
formulate ideas, co-creation of solutions
with customers or other interested parties,
and forming partnerships to tackle issues
of mutual interest together.
Affordability and vulnerability
summits, and the Hardship Hub
This year we hosted our first vulnerability
summit and fourth affordability summit,
bringing together a mix of organisations
from across the North West, including
debt advice charities, the Department
for Work and Pensions (DWP), councils,
housing associations and other utility
companies, to discuss what more can
be done to support people who are
struggling. Our first affordability summit
led us to develop the Hardship Hub, a
platform that helps debt advisers gain
and share knowledge on local support
schemes, allowing them to help people
more quickly and easily.
Future rivers forum
We partnered with The Rivers Trust to
host a Future Rivers Forum in November
2022, looking at how we can address
the challenges that face rivers in the
North West, such as climate change,
population growth and pollution. This is
a problem that cannot be solved in silos;
it needs practical, collaborative action.
Industry leaders from a variety of sectors
worked together to produce solutions and
tangible actions that will progressively
reduce negative impacts to river health.
This is one of many areas where we are
working with others to improve river
water quality, including recruiting river
rangers through our Better Rivers plan.
Love Windermere
Diversity and inclusion summit
We are a part of the Love Windermere
In April 2022 we hosted our first diversity
partnership, led by the Environment
and inclusion summit, bringing lots of
Agency, which is working to better
organisations and businesses together
understand the factors affecting water
to share ideas and best practice to help
quality and develop long-term plans to
grow more inclusive workplaces and
maintain and improve water quality in the
communities across the North West.
lake while balancing the needs of nature,
the community and the local economy.
This plan will set out a road map for
environmental protection that could be
replicated across the UK, and considers
the way that farmland is managed around
the lake, how rainwater drains from
built-up areas, and the way that
wastewater systems and private septic
tanks are managed.
Severn-Thames transfer scheme
Working with others goes beyond our
region, and we are collaborating with
other water companies on a national
water trading scheme as part of the
national strategy for managing the risk
posed by increasing dry weather, and
doing so in a way that minimises the
carbon impact.
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Systems Thinking
Our Systems Thinking approach is a key area of continuing opportunity. This enables us to
better manage our end-to-end water and wastewater systems, optimising our decision-making
and moving 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.
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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.
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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
4
5
Replacement parts
ordered automatically
Optimisation of system,
e.g. production boosted at
alternative treatment works
while work is undertaken
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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
Stock code: UU.
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
63
Our approach to generating value
Risks and opportunities
Our principal risks
l
l
Risk exposure
An indication of the current exposure of each
principal risk relative to the prior year.
Inherent risk area
(principal risk)(1)
Strategic
priority
Sponsor(s)
Principal risk description
U
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3
1
M
a
r
c
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2
0
2
3
1
Water service
2
Wastewater
service
3
Retail and
commercial
4
Supply chain
and programme
delivery
5
Resource
6
Finance
7
Health,
safety and
environmental
8
Security
9
Conduct and
compliance
10
Political and
regulatory
• Capital delivery,
engineering and
commercial director
The potential ineffective delivery of capital,
operational or functional processes/
programmes including change.
• Economic conditions
•
• Technology
Legal and regulatory change
• Chief operating
officer
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.
• Chief operating
officer
The failure to remove, treat and return water
and sludge to the environment.
• Customer services
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.
• People director
• Health, safety and
wellbeing and estate
services director
• Chief operating
officer
The potential failure to provide appropriate
resources (human, technological or physical)
required to support business activity.
• Chief financial
officer
The potential inability to finance the
business appropriately.
Decreased
Stable
Increased
Causal themes
(Drivers/influences)
• Asset health
• Demographic change
• Extreme weather/
climate change
Legal and regulatory change
•
• Technology
• Asset health
• Demographic change
• Extreme weather/
climate change
Legal and regulatory change
•
• Technology
• Asset health
• Culture
• Economic conditions
•
• Technology
Legal and regulatory change
• Asset health
• Culture
• Economic conditions
• Extreme weather/
climate change
Legal and regulatory change
•
• Technology
• Asset health
• Demographic change
• Economic conditions
•
• Technology
Legal and regulatory change
• Asset health
• Culture
• Extreme weather/
climate change
The potential harm to colleagues, contractors,
the public or the environment.
• Environment,
planning and
innovation director
• Health, safety and
wellbeing and estate
services director
• General counsel and
company secretary
The potential for malicious activity (physical or
technological) against people, assets
or operations.
• Asset health
• Culture
• Economic conditions
• Technology
• 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.
• Corporate affairs
director
Developments connected with the political,
regulatory and legislative environment.
• General counsel and
company secretary
• Strategy, policy and
regulation director
• Asset health
• Culture
• Demographic change
• Economic conditions
• Extreme weather/
climate change
Legal and regulatory change
•
• Economic conditions
•
Legal and regulatory change
Notes
(1) Principal risks: based on the value chain of the company, principal risks represent inherent
areas where value can be can be gained, preserved or lost. Water, wastewater (including
bioresources) and retail and commercial areas are the primary inherent risk areas with all
other areas being supportive or contributing activities.
64
unitedutilities.com/corporate
Consequence
Appetite and
themes
tolerance(2)
Control/mitigation
Top five event-based business risks
(*most significant risks – see pages 68 to 69)
• Customers
• Environment
Water
Averse
•
Investors
• Strict quality controls and sampling regime
•
Failure of Haweswater Aqueduct*
• Physical and chemical treatment with automation
• Water sufficiency*
• Cleaning, maintenance and replacement of assets
• Dam failure*
• Water resources and production planning
Failure to treat water
• Pressure/flow management and leak detection
Failure of the distribution system (leakage)
•
•
•
Integrated network and response capability
• Customers
Wastewater
• Physical/chemical treatment and sampling/testing
• Wastewater network failure*
• Environment
Prudent
systems
•
Investors
Bioresources
Moderate
• Customer campaigns
• Odour management
• Recycling biosolids to agriculture*
•
Failure to treat sludge*
• Wastewater treatment
• Drainage and wastewater management plans
• Mersey Valley Sludge Pipeline
• Wastewater network operating model
• Cleaning, maintenance and replacement of assets
• Better Rivers programme
• Customers
Retail
• Customer-focused initiatives
•
Investors
Moderate
• Best practice collection techniques
Commercial
Moderate
• Customer segmentation
• Priority Services scheme
• Data management and data sharing
• Non-regulated operation governance
• Communities
Supply chain
• Category management
• Customers
• Environment
•
Investors
• Suppliers
Prudent
Programme
delivery
Moderate
• Colleagues
• Customers
•
Investors
Resource
Moderate
• Supplier relationship management
• Capital, change and operational
programme management
• Engineering technical specifications
• Portfolio, programme and project risk management
• Adoption of effective technology
• Multiple communication channels
• Training and personal development
• Talent, apprentice and graduate schemes
•
Failure of digital systems
• Employee relations
• Quality of critical data
•
Land management
• Change programmes and innovative strategies
• Digital licensing
• Maintenance, replacement or renovation of assets
• Cash collection
• Customer experience
• Wholesale revenue collection
•
Failure to maintain meters
• NAV market obligations
• Security of the supply chain
• Price volatility
• Unfunded developer programmes
• Dispute with supplier
• Deliver partner failure
• Colleagues
• Customers
•
Investors
Finance
Prudent
•
•
Long-term refinancing
Liquidity reserves
• Hedging strategies
• Sensitivity analysis
• Monitoring of the markets
• Totex efficiency challenge*
• Credit ratings*
•
Financial outperformance*
• Unavoidable additional taxes
• Counterparty credit exposure and settlement limits
• Erosion of pension scheme surplus*
• Colleagues
• Communities
• Environment
•
Investors
• Suppliers
Health, safety
and wellbeing
Averse
Environment
Averse
• Strong governance and management systems
• Carbon commitments*
• Certification to ISO 45001 and ISO 14001
• Benchmarking, auditing and inspections
• Disease pandemic*
• Occupational health exposure
• Targeted engagement and improvement programmes
• Process safety
• Carbon reduction initiatives
• Self-generation of green energy
• Colleagues
CNI and SEMD
• Physical and technological security measures
• Strong governance, inspections and audits
• Security authority liaison and NIS compliance
• System and network integration
• Business continuity and disaster recovery
• Data protection
•
Incident support service
• Minor injuries
• Cyber risk*
• Terrorism*
• Criminality
•
Fraud
• Colleagues
Legislation
• Ethical supply chain, diversity and inclusivity policies
• Water Plus
• Data classification and levels of authorisation
• Procurement compliance
• Stakeholder engagement activities
• Audits and peer reviews
• Bribery risk
• Non-regulated asset
• Governance, risk assessment and horizon scanning
• Corporate governance and listing
• Brand comparisons and dashboard of culture metrics
rules compliance
• Regulatory reporting
• Communities
• Customers
•
Investors
• Suppliers
Averse
Other
Prudent
• Communities
• Customers
• Environment
Averse
Other
Prudent
•
Investors
• Suppliers
• Colleagues
• Customers
• Environment
•
Investors
Cannot be
determined
due to no
genuine choice
or control
• Consultation with government and regulators
• Price Review 2024 outcome*
• Consultation and communication with customers
• Upstream competition (bioresources)
• Governance, risk assessment and horizon scanning
• DPC delivery of HARP
• Development of regulatory policy and strategy
• ASHE index
• Upstream competition (water resource)
Our approach to generating value
Risks and opportunities
Our principal risks
l
l
Inherent risk area
Inherent risk area
Strategic
Strategic
Risk exposure
An indication of the current exposure of each
principal risk relative to the prior year.
Decreased
Stable
Increased
• Chief operating
• Chief operating
A failure to provide a secure supply of clean,
A failure to provide a secure supply of clean,
• Asset health
• Asset health
officer
officer
safe drinking water and the potential for a
safe drinking water and the potential for a
• Demographic change
• Demographic change
negative impact on public confidence in
negative impact on public confidence in
• Extreme weather/
• Extreme weather/
Water service
Water service
water supply.
water supply.
• Chief operating
• Chief operating
The failure to remove, treat and return water
The failure to remove, treat and return water
• Asset health
• Asset health
officer
officer
and sludge to the environment.
and sludge to the environment.
climate change
climate change
•
•
Legal and regulatory change
Legal and regulatory change
• Technology
• Technology
• Demographic change
• Demographic change
• Extreme weather/
• Extreme weather/
climate change
climate change
•
•
Legal and regulatory change
Legal and regulatory change
• Technology
• Technology
• Customer services
• Customer services
Failing to provide good and fair service
Failing to provide good and fair service
director
director
to domestic customers and third-party
to domestic customers and third-party
• Asset health
• Asset health
• Culture
• Culture
• General counsel and
• General counsel and
company secretary
company secretary
retailers or a failure of, or issue in relation
retailers or a failure of, or issue in relation
• Economic conditions
• Economic conditions
to, non-regulated interests.
to, non-regulated interests.
•
•
Legal and regulatory change
Legal and regulatory change
• Technology
• Technology
• Capital delivery,
• Capital delivery,
The potential ineffective delivery of capital,
The potential ineffective delivery of capital,
• Economic conditions
• Economic conditions
engineering and
engineering and
operational or functional processes/
operational or functional processes/
•
•
Legal and regulatory change
Legal and regulatory change
commercial director
commercial director
programmes including change.
programmes including change.
• Technology
• Technology
• People director
• People director
The potential failure to provide appropriate
The potential failure to provide appropriate
• Asset health
• Asset health
• Health, safety and
• Health, safety and
resources (human, technological or physical)
resources (human, technological or physical)
• Culture
• Culture
wellbeing and estate
wellbeing and estate
required to support business activity.
required to support business activity.
services director
services director
• Chief operating
• Chief operating
officer
officer
• Chief financial
• Chief financial
The potential inability to finance the
The potential inability to finance the
officer
officer
business appropriately.
business appropriately.
• Economic conditions
• Economic conditions
• Extreme weather/
• Extreme weather/
climate change
climate change
•
•
Legal and regulatory change
Legal and regulatory change
• Technology
• Technology
• Asset health
• Asset health
• Demographic change
• Demographic change
• Economic conditions
• Economic conditions
•
•
Legal and regulatory change
Legal and regulatory change
• Technology
• Technology
• 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 colleagues, contractors,
The potential harm to colleagues, contractors,
• Asset health
• Asset health
the public or the environment.
the public or the environment.
• Culture
• Culture
• Extreme weather/
• Extreme weather/
climate change
climate change
• General counsel and
• General counsel and
The potential for malicious activity (physical or
The potential for malicious activity (physical or
• Asset health
• Asset health
company secretary
company secretary
technological) against people, assets
technological) against people, assets
• Culture
• Culture
or operations.
or operations.
• Economic conditions
• Economic conditions
• Technology
• Technology
• Corporate affairs
• Corporate affairs
The failure to adopt or apply ethical standards,
The failure to adopt or apply ethical standards,
• Asset health
• Asset health
director
director
or to comply with legal and regulatory
or to comply with legal and regulatory
• Culture
• Culture
• General counsel and
• General counsel and
obligations and responsibilities.
obligations and responsibilities.
company secretary
company secretary
• Demographic change
• Demographic change
• Economic conditions
• Economic conditions
• Extreme weather/
• Extreme weather/
climate change
climate change
•
•
Legal and regulatory change
Legal and regulatory change
• Corporate affairs
• Corporate affairs
Developments connected with the political,
Developments connected with the political,
• Economic conditions
• Economic conditions
director
director
regulatory and legislative environment.
regulatory and legislative environment.
•
•
Legal and regulatory change
Legal and regulatory change
• General counsel and
• General counsel and
company secretary
company secretary
• Strategy, policy and
• Strategy, policy and
regulation director
regulation director
U
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d
U
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i
t
i
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s
G
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o
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P
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I
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g
r
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d
A
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R
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F
i
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a
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c
i
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l
S
t
a
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e
m
e
n
t
s
f
o
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t
h
e
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e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
3
1
1
2
2
3
3
4
4
5
5
6
6
7
7
8
8
9
9
Wastewater
Wastewater
service
service
Retail and
Retail and
commercial
commercial
Supply chain
Supply chain
and programme
and programme
delivery
delivery
Resource
Resource
Finance
Finance
Health,
Health,
safety and
safety and
environmental
environmental
Security
Security
Conduct and
Conduct and
compliance
compliance
10
10
Political and
Political and
regulatory
regulatory
Notes
(principal risk)(1)
(principal risk)(1)
priority
priority
Sponsor(s)
Sponsor(s)
Principal risk description
Principal risk description
Causal themes
Causal themes
(Drivers/influences)
(Drivers/influences)
Consequence
Consequence
themes
themes
Appetite and
Appetite and
tolerance(2)
tolerance(2)
Control/mitigation
Control/mitigation
Top five event-based business risks
Top five event-based business risks
(*most significant risks – see pages 68 to 69)
(*most significant risks – see pages 68 to 69)
Our strategic priorities
Improve
our rivers
Create a
greener future
Provide a safe and
great place to work
Deliver great service
for all our customers
Spend customers'
money wisely
Contribute to
our communities
• Customers
• Customers
• Environment
• Environment
Investors
Investors
•
•
Water
Water
Averse
Averse
• Customers
• Customers
• Environment
• Environment
Investors
Investors
•
•
Wastewater
Wastewater
Prudent
Prudent
Bioresources
Bioresources
Moderate
Moderate
• Customers
• Customers
•
•
Investors
Investors
Retail
Retail
Moderate
Moderate
Commercial
Commercial
Moderate
Moderate
• Communities
• Communities
• Customers
• Customers
• Environment
• Environment
Investors
Investors
•
•
• Suppliers
• Suppliers
Supply chain
Supply chain
Prudent
Prudent
Programme
Programme
delivery
delivery
Moderate
Moderate
• Colleagues
• Colleagues
• Customers
• Customers
•
•
Investors
Investors
Resource
Resource
Moderate
Moderate
• 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/chemical treatment and sampling/testing
• Physical/chemical treatment and sampling/testing
systems
systems
• Customer campaigns
• Customer campaigns
• Odour management
• Odour management
• 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
• Better Rivers programme
• Better Rivers programme
• 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
• Category management
• Category management
• Supplier relationship management
• Supplier relationship management
• Capital, change and operational
• Capital, change and operational
programme management
programme management
• Engineering technical specifications
• Engineering technical specifications
• Portfolio, programme and project risk management
• Portfolio, programme and project risk management
Failure of Haweswater Aqueduct*
Failure of Haweswater Aqueduct*
•
•
• Water sufficiency*
• Water sufficiency*
• Dam failure*
• Dam failure*
•
•
•
•
Failure to treat water
Failure to treat water
Failure of the distribution system (leakage)
Failure of the distribution system (leakage)
• Wastewater network failure*
• Wastewater network failure*
• Recycling biosolids to agriculture*
• Recycling biosolids to agriculture*
Failure to treat sludge*
Failure to treat sludge*
•
•
• Wastewater treatment
• Wastewater treatment
• Mersey Valley Sludge Pipeline
• Mersey Valley Sludge Pipeline
• Cash collection
• Cash collection
• Customer experience
• Customer experience
• Wholesale revenue collection
• Wholesale revenue collection
Failure to maintain meters
Failure to maintain meters
•
•
• NAV market obligations
• NAV market obligations
• Security of the supply chain
• Security of the supply chain
• Price volatility
• Price volatility
• Unfunded developer programmes
• Unfunded developer programmes
• Dispute with supplier
• Dispute with supplier
• Deliver partner failure
• Deliver partner failure
• 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
Failure of digital systems
Failure of digital systems
•
•
• Employee relations
• Employee relations
• Quality of critical data
• Quality of critical data
Land management
Land management
•
•
• Digital licensing
• Digital licensing
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
• Colleagues
• Colleagues
• Customers
• Customers
•
•
Investors
Investors
Finance
Finance
Prudent
Prudent
• Colleagues
• Colleagues
• Communities
• Communities
• Environment
• Environment
Investors
Investors
•
•
• Suppliers
• Suppliers
Health, safety
Health, safety
and wellbeing
and wellbeing
Averse
Averse
Environment
Environment
Averse
Averse
Long-term refinancing
Long-term refinancing
Liquidity reserves
Liquidity reserves
•
•
•
•
• 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
• Strong governance and management systems
• Strong governance and management systems
• Certification to ISO 45001 and ISO 14001
• Certification to ISO 45001 and ISO 14001
• Benchmarking, auditing and inspections
• Benchmarking, auditing and inspections
• Targeted engagement and improvement programmes
• Targeted engagement and improvement programmes
• Carbon reduction initiatives
• Carbon reduction initiatives
• Self-generation of green energy
• Self-generation of green energy
• Totex efficiency challenge*
• Totex efficiency challenge*
• Credit ratings*
• Credit ratings*
• Erosion of pension scheme surplus*
• Erosion of pension scheme surplus*
Financial outperformance*
Financial outperformance*
•
•
• Unavoidable additional taxes
• Unavoidable additional taxes
• Carbon commitments*
• Carbon commitments*
• Disease pandemic*
• Disease pandemic*
• Occupational health exposure
• Occupational health exposure
• Process safety
• Process safety
• Minor injuries
• Minor injuries
• Colleagues
• Colleagues
• Communities
• Communities
• Customers
• Customers
Investors
Investors
•
•
• Suppliers
• Suppliers
• Colleagues
• Colleagues
• Communities
• Communities
• Customers
• Customers
• Environment
• Environment
Investors
Investors
•
•
• Suppliers
• Suppliers
• Colleagues
• Colleagues
• Customers
• Customers
• Environment
• Environment
Investors
Investors
•
•
CNI and SEMD
CNI and SEMD
Averse
Averse
Other
Other
Prudent
Prudent
• Physical and technological security measures
• Physical and technological security measures
• Strong governance, inspections and audits
• Strong governance, inspections and audits
• Security authority liaison and NIS compliance
• Security authority liaison and NIS compliance
• System and network integration
• System and network integration
• Business continuity and disaster recovery
• Business continuity and disaster recovery
•
•
Incident support service
Incident support service
• Cyber risk*
• Cyber risk*
• Terrorism*
• Terrorism*
• Criminality
• Criminality
Fraud
Fraud
•
•
• Data protection
• Data protection
Legislation
Legislation
Averse
Averse
Other
Other
Prudent
Prudent
• Ethical supply chain, diversity and inclusivity policies
• Ethical supply chain, diversity and inclusivity policies
• Data classification and levels of authorisation
• Data classification and levels of authorisation
• Stakeholder engagement activities
• Stakeholder engagement activities
• 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
• Regulatory reporting
• Regulatory reporting
• Water Plus
• Water Plus
• Procurement compliance
• Procurement compliance
• Bribery risk
• Bribery risk
• Non-regulated asset
• Non-regulated asset
• Corporate governance and listing
• Corporate governance and listing
rules compliance
rules compliance
Cannot be
Cannot be
determined
determined
due to no
due to no
genuine choice
genuine choice
or control
or control
• Consultation with government and regulators
• Consultation with government and regulators
• Consultation and communication with customers
• Consultation and communication with customers
• Governance, risk assessment and horizon scanning
• Governance, risk assessment and horizon scanning
• Development of regulatory policy and strategy
• Development of regulatory policy and strategy
• Price Review 2024 outcome*
• Price Review 2024 outcome*
• Upstream competition (bioresources)
• Upstream competition (bioresources)
• DPC delivery of HARP
• DPC delivery of HARP
• ASHE index
• ASHE index
• Upstream competition (water resource)
• Upstream competition (water resource)
(1) Principal risks: based on the value chain of the company, principal risks represent inherent
areas where value can be can be gained, preserved or lost. Water, wastewater (including
bioresources) and retail and commercial areas are the primary inherent risk areas with all
other areas being supportive or contributing activities.
64
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.
65
Our approach to generating value
Risks and opportunities
Common themes
As illustrated in the diagram below, each of the event-based risks has multiple causes and consequences, which in turn
lead to financial and/or reputational (non financial) 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 management.
Consequence
Financial impact
Cause
Cause
Cause
Cause
Event
Consequence
Consequence
Consequence
Preventative controls
Responsive controls
Resistance
Reliability
Redundancy
Response/Recovery
Reputational
impact
Human
Intellectual
Manufactured
Social
Natural
Common causal themes
The event-based risks include multiple causal factors, which
individually, or in combination, could drive or influence the
risk event to occur. Categorisation illustrates seven common
causal themes:
• 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. Asset health
is a cross-business risk as it can affect operational efficiency
and resilience.
• Culture: Embedded through processes, reward mechanisms,
values and behaviours, corporate culture cuts across the
majority of risks including: service delivery; recruitment and
talent management; colleague engagement; security; and
our reputation to multiple stakeholders. In an increasingly
challenging business environment, our focus is to continue
to embed a culture of delivering benefit to customers and
communities, taking accountability and seeking new and
innovative ways to deliver our services more efficiently
and effectively.
• Demographic changes: Population growth/shift 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.
• Economic conditions: Macro events can have multiple
financial implications, including: lower revenue; reduced
cash collection; increased operational cost through
inflationary pressures; and increased cost of borrowing.
• Extreme weather/climate change: Our water resources,
asset base and operations can generally cope with extreme
weather conditions, although they can become overwhelmed
in intense situations. Climate change projections highlight
increased temperatures, rainfall, wind and more frequent
extreme variations in weather patterns. Climate change will
affect both our capacity and capability for service delivery, and
the environment that we strive to protect and enhance. It is
therefore a key focus and we are committed to the principles
set by the Financial Stability Board’s Task Force on Climate-
related Financial Disclosures (TCFD) – see page 05.
• Legislative and regulatory change: Changes in, or the
interpretation of, legislation and regulation can have
implications for our business model, asset base and ways
of working.
• Technology: Increased automation, system integration
and artificial intelligence, against the backdrop of Systems
Thinking, provides competitive advantage and improves
efficiency and user experience for our colleagues, suppliers
and customers. However, there is an increased capital
requirement to keep pace with technological change,
challenges in short-term adaptability of the workforce,
and data and security threats as systems converge.
Common consequence themes:
Each consequence is analysed for the financial and reputational
(non-financial) implications relative to multiple stakeholders.
Categorisation of the consequences illustrates five common
impact themes:
• Colleagues: Our colleagues are fundamental to delivering
our service requirements as well as our strategic objectives.
Equally, our colleagues can be affected by multiple risks
across the business, but primarily in relation to employment
and health, safety and wellbeing risks.
• 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.
• Suppliers: The safety of working conditions, economic
conditions, asset health, and contractual arrangement can
all affect the effectiveness, sustainability and resilience of
our suppliers and partners who are crucial to meeting our
objectives and ensuring effective service.
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Our approach to generating value
Risks and opportunities
Common themes
As illustrated in the diagram below, each of the event-based risks has multiple causes and consequences, which in turn
lead to financial and/or reputational (non financial) 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 management.
Consequence
Financial impact
Cause
Cause
Cause
Cause
Event
Consequence
Consequence
Consequence
Preventative controls
Responsive controls
Resistance
Reliability
Redundancy
Response/Recovery
Reputational
impact
Human
Intellectual
Manufactured
Social
Natural
Common causal themes
The event-based risks include multiple causal factors, which
individually, or in combination, could drive or influence the
risk event to occur. Categorisation illustrates seven common
causal themes:
• 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. Asset health
is a cross-business risk as it can affect operational efficiency
and resilience.
• Legislative and regulatory change: Changes in, or the
interpretation of, legislation and regulation can have
implications for our business model, asset base and ways
of working.
• Technology: Increased automation, system integration
and artificial intelligence, against the backdrop of Systems
Thinking, provides competitive advantage and improves
efficiency and user experience for our colleagues, suppliers
and customers. However, there is an increased capital
requirement to keep pace with technological change,
challenges in short-term adaptability of the workforce,
and data and security threats as systems converge.
Common consequence themes:
• Culture: Embedded through processes, reward mechanisms,
Each consequence is analysed for the financial and reputational
values and behaviours, corporate culture cuts across the
(non-financial) implications relative to multiple stakeholders.
majority of risks including: service delivery; recruitment and
Categorisation of the consequences illustrates five common
talent management; colleague engagement; security; and
impact themes:
our reputation to multiple stakeholders. In an increasingly
challenging business environment, our focus is to continue
to embed a culture of delivering benefit to customers and
communities, taking accountability and seeking new and
innovative ways to deliver our services more efficiently
and effectively.
• Demographic changes: Population growth/shift 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.
• Economic conditions: Macro events can have multiple
financial implications, including: lower revenue; reduced
cash collection; increased operational cost through
inflationary pressures; and increased cost of borrowing.
• Extreme weather/climate change: Our water resources,
asset base and operations can generally cope with extreme
weather conditions, although they can become overwhelmed
in intense situations. Climate change projections highlight
increased temperatures, rainfall, wind and more frequent
extreme variations in weather patterns. Climate change will
affect both our capacity and capability for service delivery, and
the environment that we strive to protect and enhance. It is
therefore a key focus and we are committed to the principles
set by the Financial Stability Board’s Task Force on Climate-
related Financial Disclosures (TCFD) – see page 05.
• Colleagues: Our colleagues are fundamental to delivering
our service requirements as well as our strategic objectives.
Equally, our colleagues can be affected by multiple risks
across the business, but primarily in relation to employment
and health, safety and wellbeing risks.
• 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.
• Suppliers: The safety of working conditions, economic
conditions, asset health, and contractual arrangement can
all affect the effectiveness, sustainability and resilience of
our suppliers and partners who are crucial to meeting our
objectives and ensuring effective service.
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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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A s s e t h e a l th
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Investors
Most significant event-based risks
1
Price Review 2024 outcome
2 Failure of the Haweswater Aqueduct
3 Wastewater network failure
4 Totex efficiency challenge
5 Cyber
6 Water sufficiency
7 Carbon commitments
A Erosion of pension scheme surplus
B Financial outperformance
C Dam failure
D Disease pandemic
E Terrorism
8 Recycling of biosolids to agriculture
Key
9 Failure to treat sludge
10 Credit ratings
Top ten ranking risks relative to likelihood and impact
High impact, low likelihood risks
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Stock code: UU.
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Our approach to generating value
Risks and opportunities
The company’s most significant event-based risks continued
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 and the five non-financial capitals 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–E):
1. Price Review
2024 outcome
2. Failure of the
TCFD
Haweswater Aqueduct
3. Wastewater
network failure
TCFD
Risk exposure: 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. There is a blend of internal
audit and external assurance focused on the
quality of the submission.
7. Carbon commitments
TCFD
Risk exposure: The capacity and capability
to decarbonise water and wastewater activity
to meet commitments and legal obligations
across the various time horizons of 2030,
2035 and 2050 in light of expected population
growth pressures and uncertainty regarding the
required technological advances to decarbonise
operational activity.
Control/mitigation: In the near-term we are
creating woodland, restoring peatland and
have initiatives to address process and energy
emissions. We are working with suppliers and
industry partners to better understand and
optimise decarbonisation opportunities
and pathways.
Assurance: First line assurance by carbon team
using water industry team for technical support
and guidance. Climate change mitigation
steering group and corporate risk framework
provide second line assurance. Our science-
based targets, energy and carbon reporting are
subject to external assurance and verification.
A. Erosion of pension
scheme surplus
Risk exposure: The potential for the pension
scheme funding 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: 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).
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 internal audits and external assurance over
the HARP procurement process.
Risk exposure: Blockages, operational issues
or inadequate hydraulic capacity relative to
population growth, extreme weather, asset
health, and legal/regulatory change, resulting in
unpermitted storm overflow activations, sewer
flooding and environmental damage.
Control/mitigation: Preventative maintenance
and inspection regimes, customer campaigns,
sewer rehabilitation programme and Better
Rivers programme.
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.
8. Recycling of biosolids
to agriculture
TCFD
9. Failure to treat sludge
TCFD
10. Credit ratings
Risk exposure: Represents various impact
scenarios including operational failures, increased
restrictions or total ban of recycling biosolids to
agriculture. The risk considers the Environment
Agency’s interpretation of the Farming Rules for
Water regulations and the increasing threat to
recycling a large proportion of biosolid to land.
Control/mitigation: Treatment, sampling
and testing regimes ensure that sludge meets
acceptable standards for application with formal
service level agreements between wastewater
and bioresources. We work closely with
farmers, land owners and contractors to ensure
regulations such as Farming Rules for Water and
the standard operating procedures are met.
Assurance: Bioresources production planning
team undertakes first line assurance against UK
Biosolids Assurance Scheme (BAS) accreditation,
and other codes of practice such as the safe
sludge matrix which certifies our recycling
activities. Second and third line assurance is also
undertaken by the assurance and internal audit
teams respectively.
Risk exposure: Relates to the interdependency
between wastewater and bioresources
treatment activity in light of changing
demographics, asset health and legislative/
regulatory change such as the Industrial
Emissions Directive (IED) now applying to
biological treatment of sewage sludge.
Control/mitigation: We look to maximise our
treatment capacity by adopting a Throughput,
Reliability, Availability and Maintainability
(T-RAM) approach for our facilities. We also
undertake a digester and tank clean programme,
regular testing and analysis of sludge, and
balance capacity and demand through the
bioresources production planning team.
Assurance: Bioresources production planning
team undertakes first line assurance against UK
Biosolids Assurance Scheme (BAS) accreditation,
and other codes of practice such as the safe
sludge matrix which certifies our treatment.
Second and third line assurance is also
undertaken by the assurance and internal audit
teams respectively.
B. Financial outperformance
C. Dam failure
TCFD
D. Disease pandemic
E. Terrorism
Risk exposure: Failure to achieve financial
outperformance due to macroeconomic
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 sensitivity
testing as part of our company business
planning process relative to assumed periods of
low inflation both in isolation and in conjunction
with the realisation of severe but plausible risks.
Assurance: First line assurance is undertaken by
the finance team as part of the company business
planning process, with second line assurance
undertaken at monthly executive level meetings.
Further oversight is provided by the group board
and treasury committee and third line assurance
is provided through cyclical internal audit reviews.
Control/mitigation: Each reservoir is regularly
inspected by engineers. Where appropriate,
risk reduction interventions are implemented
through a prioritised investment programme.
Assurance: Various sources of second line
assurance, including supervising engineers, dam
safety group, assurance team and regular board
reviews. Independent assurance is provided by
panel engineers and internal audit.
Risk exposure: Serious illness in a large
proportion of the UK population, with
consequences to our workforce, the wider
supply chain and macro economy.
Control/mitigation: We have a pandemic
contingency plan which is regularly
reviewed and was updated to reflect lessons
learned from COVID-19. The plan includes
multi-channel communication with non-
pharmaceutical interventions.
Assurance: The assurance team undertakes
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 measures are reviewed
on a regular basis by our internal asset owners
in conjunction with the central security team.
Second line assurance is provided by the cross
business security steering group. In addition,
internal audit undertakes cyclical audits with
external technical assurance being delivered
by specialists.
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5. Cyber
6. Water sufficiency
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 measures reflect
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 change, with the increased
frequency of hot and dry weather being evidence
of changing circumstances. Extended periods of
low rainfall and exceptionally hot weather, with
accompanying increased customer demand, impacts
our water resources which can result in the need to
implement water use restrictions.
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.
4. Totex efficiency
challenge
Risk exposure: Totex efficiencies designed
for AMP7 are under significant challenge
through a combination of factors including
supply chain issues, inflationary pressures,
and additional investment to deliver
performance improvements.
Control/mitigation: Integrated Business
Planning (IBP), risk-based investment
prioritisation and the company business
planning process all contribute to efficient
delivery of services and the capital
programme. In addition, there are number
of executive led initiatives to realise
efficiency opportunities.
Assurance: First line assurance is
undertaken through monthly price control
meetings, with the strategic programme
board, monthly executive performance
review meetings and quarterly business
reviews providing second line governance
and assurance. Third line assurance is
undertaken through cyclical internal audits.
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.
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Our approach to generating value
Risks and opportunities
The company’s most significant event-based risks continued
The most significant event-based risks represent the ten highest-ranked risks by exposure (likelihood of occurrence of the event multiplied
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.
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
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 and the five non-financial capitals is also assessed, reported and
compensation. Reputational impact relative to our multiple stakeholders and the five non-financial capitals is also assessed, reported and
considered as part of the mitigation.
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–E):
Summarised below are the top ten ranking risks (1–10), and those assessed as having high impact, but low likelihood (A–E):
1. Price Review
1. Price Review
2024 outcome
2024 outcome
2. Failure of the
2. Failure of the
TCFD
Haweswater Aqueduct
Haweswater Aqueduct
3. Wastewater
3. Wastewater
network failure
network failure
TCFD
Risk exposure: The capacity and capability to
Risk exposure: The capacity and capability to
develop a business plan that creates value for
develop a business plan that creates value for
customers, communities, and the environment
customers, communities, and the environment
that is sustainable and resilient for the long
that is sustainable and resilient for the long
term relative to the unique characteristics of the
term relative to the unique characteristics of the
region we serve, in light of multiple influencing
region we serve, in light of multiple influencing
factors – notably changing demographics,
factors – notably changing demographics,
climate change and asset health.
climate change and 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. There is a blend of internal
programme board. There is a blend of internal
audit and external assurance focused on the
audit and external assurance focused on the
quality of the submission.
quality of the submission.
Risk exposure: The capacity and capability
Risk exposure: The capacity and capability
to decarbonise water and wastewater activity
to decarbonise water and wastewater activity
to meet commitments and legal obligations
to meet commitments and legal obligations
across the various time horizons of 2030,
across the various time horizons of 2030,
2035 and 2050 in light of expected population
2035 and 2050 in light of expected population
growth pressures and uncertainty regarding the
growth pressures and uncertainty regarding the
required technological advances to decarbonise
required technological advances to decarbonise
operational activity.
operational activity.
Control/mitigation: In the near-term we are
Control/mitigation: In the near-term we are
creating woodland, restoring peatland and
creating woodland, restoring peatland and
have initiatives to address process and energy
have initiatives to address process and energy
emissions. We are working with suppliers and
emissions. We are working with suppliers and
industry partners to better understand and
industry partners to better understand and
optimise decarbonisation opportunities
optimise decarbonisation opportunities
and pathways.
and pathways.
Assurance: First line assurance by carbon team
Assurance: First line assurance by carbon team
using water industry team for technical support
using water industry team for technical support
and guidance. Climate change mitigation
and guidance. Climate change mitigation
steering group and corporate risk framework
steering group and corporate risk framework
provide second line assurance. Our science-
provide second line assurance. Our science-
based targets, energy and carbon reporting are
based targets, energy and carbon reporting are
subject to external assurance and verification.
subject to external assurance and verification.
A. Erosion of pension
A. Erosion of pension
scheme surplus
scheme surplus
Risk exposure: The potential for the pension
Risk exposure: The potential for the pension
scheme funding to increase because of
scheme funding to increase because of
life expectancy rates leading to additional
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
into account advice from accountancy and law
into account advice from accountancy and law
firms. Pension governance is subject to periodic
firms. Pension governance is subject to periodic
internal audits.
internal audits.
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
resulting in water quality issues and/or supply
resulting in water quality issues and/or supply
interruptions to a large proportion of the United
interruptions to a large proportion of the United
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).
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 provided
governance. Independent assurance is provided
by internal audits and external assurance over
by internal audits and external assurance over
the HARP procurement process.
the HARP procurement process.
8. Recycling of biosolids
8. Recycling of biosolids
to agriculture
to agriculture
Risk exposure: Represents various impact
Risk exposure: Represents various impact
scenarios including operational failures, increased
scenarios including operational failures, increased
restrictions or total ban of recycling biosolids to
restrictions or total ban of recycling biosolids to
agriculture. The risk considers the Environment
agriculture. The risk considers the Environment
Agency’s interpretation of the Farming Rules for
Agency’s interpretation of the Farming Rules for
Water regulations and the increasing threat to
Water regulations and the increasing threat to
recycling a large proportion of biosolid to land.
recycling a large proportion of biosolid to land.
Control/mitigation: Treatment, sampling
Control/mitigation: Treatment, sampling
and testing regimes ensure that sludge meets
and testing regimes ensure that sludge meets
acceptable standards for application with formal
acceptable standards for application with formal
service level agreements between wastewater
service level agreements between wastewater
and bioresources. We work closely with
and bioresources. We work closely with
farmers, land owners and contractors to ensure
farmers, land owners and contractors to ensure
regulations such as Farming Rules for Water and
regulations such as Farming Rules for Water and
the standard operating procedures are met.
the standard operating procedures are met.
Risk exposure: Blockages, operational issues
Risk exposure: Blockages, operational issues
or inadequate hydraulic capacity relative to
or inadequate hydraulic capacity relative to
population growth, extreme weather, asset
population growth, extreme weather, asset
health, and legal/regulatory change, resulting in
health, and legal/regulatory change, resulting in
unpermitted storm overflow activations, sewer
unpermitted storm overflow activations, sewer
flooding and environmental damage.
flooding and environmental damage.
Control/mitigation: Preventative maintenance
Control/mitigation: Preventative maintenance
and inspection regimes, customer campaigns,
and inspection regimes, customer campaigns,
sewer rehabilitation programme and Better
sewer rehabilitation programme and Better
Rivers programme.
Rivers programme.
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: Relates to the interdependency
Risk exposure: Relates to the interdependency
between wastewater and bioresources
between wastewater and bioresources
treatment activity in light of changing
treatment activity in light of changing
demographics, asset health and legislative/
demographics, asset health and legislative/
regulatory change such as the Industrial
regulatory change such as the Industrial
Emissions Directive (IED) now applying to
Emissions Directive (IED) now applying to
biological treatment of sewage sludge.
biological treatment of sewage sludge.
Control/mitigation: We look to maximise our
Control/mitigation: We look to maximise our
treatment capacity by adopting a Throughput,
treatment capacity by adopting a Throughput,
Reliability, Availability and Maintainability
Reliability, Availability and Maintainability
(T-RAM) approach for our facilities. We also
(T-RAM) approach for our facilities. We also
undertake a digester and tank clean programme,
undertake a digester and tank clean programme,
regular testing and analysis of sludge, and
regular testing and analysis of sludge, and
balance capacity and demand through the
balance capacity and demand through the
bioresources production planning team.
bioresources production planning team.
Assurance: Bioresources production planning
Assurance: Bioresources production planning
team undertakes first line assurance against UK
team undertakes first line assurance against UK
Assurance: Bioresources production planning
Assurance: Bioresources production planning
team undertakes first line assurance against UK
team undertakes first line assurance against UK
Biosolids Assurance Scheme (BAS) accreditation,
Biosolids Assurance Scheme (BAS) accreditation,
Biosolids Assurance Scheme (BAS) accreditation,
Biosolids Assurance Scheme (BAS) accreditation,
and other codes of practice such as the safe
and other codes of practice such as the safe
sludge matrix which certifies our recycling
sludge matrix which certifies our recycling
and other codes of practice such as the safe
and other codes of practice such as the safe
sludge matrix which certifies our treatment.
sludge matrix which certifies our treatment.
activities. Second and third line assurance is also
activities. Second and third line assurance is also
Second and third line assurance is also
Second and third line assurance is also
undertaken by the assurance and internal audit
undertaken by the assurance and internal audit
undertaken by the assurance and internal audit
undertaken by the assurance and internal audit
teams respectively.
teams respectively.
teams respectively.
teams respectively.
Risk exposure: Failure to achieve financial
Risk exposure: Failure to achieve financial
outperformance due to macroeconomic
outperformance due to macroeconomic
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 sensitivity
and regulatory developments, and sensitivity
testing as part of our company business
testing as part of our company business
planning process relative to assumed periods of
planning process relative to assumed periods of
low inflation both in isolation and in conjunction
low inflation both in isolation and in conjunction
with the realisation of severe but plausible risks.
with the realisation of severe but plausible risks.
Assurance: First line assurance is undertaken by
Assurance: First line assurance is undertaken by
the finance team as part of the company business
the finance team as part of the company business
planning process, with second line assurance
planning process, with second line assurance
undertaken at monthly executive level meetings.
undertaken at monthly executive level meetings.
Further oversight is provided by the group board
Further oversight is provided by the group board
and treasury committee and third line assurance
and treasury committee and third line assurance
is provided through cyclical internal audit reviews.
is provided through cyclical internal audit reviews.
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.
Assurance: Various sources of second line
Assurance: Various sources of second line
assurance, including supervising engineers, dam
assurance, including supervising engineers, dam
safety group, assurance team and regular board
safety group, assurance team and regular board
reviews. Independent assurance is provided by
reviews. Independent assurance is provided by
panel engineers and internal audit.
panel engineers and internal audit.
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Key
Top ten ranking risks relative to likelihood and impact
High impact, low likelihood risks
TCFD Climate-related risk
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4. Totex efficiency
4. Totex efficiency
challenge
challenge
Risk exposure: Totex efficiencies designed
Risk exposure: Totex efficiencies designed
for AMP7 are under significant challenge
for AMP7 are under significant challenge
through a combination of factors including
through a combination of factors including
supply chain issues, inflationary pressures,
supply chain issues, inflationary pressures,
and additional investment to deliver
and additional investment to deliver
performance improvements.
performance improvements.
Control/mitigation: Integrated Business
Control/mitigation: Integrated Business
Planning (IBP), risk-based investment
Planning (IBP), risk-based investment
prioritisation and the company business
prioritisation and the company business
planning process all contribute to efficient
planning process all contribute to efficient
delivery of services and the capital
delivery of services and the capital
programme. In addition, there are number
programme. In addition, there are number
of executive led initiatives to realise
of executive led initiatives to realise
efficiency opportunities.
efficiency opportunities.
Assurance: First line assurance is
Assurance: First line assurance is
undertaken through monthly price control
undertaken through monthly price control
meetings, with the strategic programme
meetings, with the strategic programme
board, monthly executive performance
board, monthly executive performance
review meetings and quarterly business
review meetings and quarterly business
reviews providing second line governance
reviews providing second line governance
and assurance. Third line assurance is
and assurance. Third line assurance is
undertaken through cyclical internal audits.
undertaken through cyclical internal audits.
5. Cyber
5. Cyber
6. Water sufficiency
6. Water sufficiency
TCFD
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/mitigation: Multiple layers of
control, including a secure perimeter,
control, including a secure perimeter,
segmented internal network zones, access
segmented internal network zones, access
controls, constant monitoring and forensic
controls, constant monitoring and forensic
response capability.
response capability.
Assurance: Security measures reflect
Assurance: Security measures reflect
multiple sources of threat intelligence. The
multiple sources of threat intelligence. The
security steering group provides second
security steering group provides second
line assurance, with independent assurance
line assurance, with independent assurance
provided by cyclical internal audits and various
provided by cyclical internal audits and various
technical audits by external specialists.
technical audits by external specialists.
Risk exposure: Water sufficiency is one of the most
Risk exposure: Water sufficiency is one of the most
sensitive risks to climate change, with the increased
sensitive risks to climate change, with the increased
frequency of hot and dry weather being evidence
frequency of hot and dry weather being evidence
of changing circumstances. Extended periods of
of changing circumstances. Extended periods of
low rainfall and exceptionally hot weather, with
low rainfall and exceptionally hot weather, with
accompanying increased customer demand, impacts
accompanying increased customer demand, impacts
our water resources which can result in the need to
our water resources which can result in the need to
implement water use restrictions.
implement water use restrictions.
Control/mitigation: We produce a Water Resources
Control/mitigation: We produce a Water Resources
Management Plan (WRMP) every five years, which
Management Plan (WRMP) every five years, which
forecasts future demand and water availability under
forecasts future demand and water availability under
repeats of historic droughts, adjusted for climate
repeats of historic droughts, adjusted for climate
change. A statutory Drought Plan is also developed
change. A statutory Drought Plan is also developed
every five years, setting out the actions we will take in a
every five years, setting out the actions we will take in a
drought situation.
drought situation.
Assurance: The WRMP and Drought Plan are subject
Assurance: The WRMP and Drought Plan are subject
to various second and third line assurance activities
to various second and third line assurance activities
prior to publication.
prior to publication.
7. Carbon commitments
7. Carbon commitments
TCFD
TCFD
9. Failure to treat sludge
9. Failure to treat sludge
TCFD
10. Credit ratings
10. Credit ratings
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.
B. Financial outperformance
B. Financial outperformance
C. Dam failure
C. Dam failure
TCFD
D. Disease pandemic
D. Disease pandemic
E. Terrorism
E. Terrorism
Risk exposure: Serious illness in a large
Risk exposure: Serious illness in a large
proportion of the UK population, with
proportion of the UK population, with
consequences to our workforce, the wider
consequences to our workforce, the wider
supply chain and macro economy.
supply chain and macro economy.
Control/mitigation: We have a pandemic
Control/mitigation: We have a pandemic
contingency plan which is regularly
contingency plan which is regularly
reviewed and was updated to reflect lessons
reviewed and was updated to reflect lessons
learned from COVID-19. The plan includes
learned from COVID-19. The plan includes
multi-channel communication with non-
multi-channel communication with non-
pharmaceutical interventions.
pharmaceutical interventions.
Assurance: The assurance team undertakes
Assurance: The assurance team undertakes
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
Control/mitigation: A risk-based protection
of assets in line with the Security and
of assets in line with the Security and
Emergency Measures Direction (SEMD)
Emergency Measures Direction (SEMD)
and close liaison with the Centre for the
and close liaison with the Centre for the
Protection of National Infrastructure (CPNI),
Protection of National Infrastructure (CPNI),
regional counter terrorist units, local
regional counter terrorist units, local
agencies and emergency services.
agencies and emergency services.
Assurance: Security measures are reviewed
Assurance: Security measures are reviewed
on a regular basis by our internal asset owners
on a regular basis by our internal asset owners
in conjunction with the central security team.
in conjunction with the central security team.
Second line assurance is provided by the cross
Second line assurance is provided by the cross
business security steering group. In addition,
business security steering group. In addition,
internal audit undertakes cyclical audits with
internal audit undertakes cyclical audits with
external technical assurance being delivered
external technical assurance being delivered
by specialists.
by specialists.
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unitedutilities.com/corporate
Stock code: UU.
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69
Our approach to generating value
Risks and opportunities
How we identify, assess and manage climate-related risks and opportunities.
TCFD
Summary
• The company operates a mature risk and resilience
framework for the identification, assessment and
management of all risks.
• We have both physical and transitional climate risks in our
corporate business risk profile, including seven of our most
significant event-based risks, see pages 68 to 69.
• Climate change is fully integrated across our overall
corporate risk management system with climate change
identified as both a material issue (see page 30) and one of
our most prominent causal themes of event-based risks.
• Our 2021 climate change adaptation report available on
our website includes a comprehensive climate change
risk assessment of both physical and transition risks and
opportunities. The most material of these are presented on
page 42 and it is clear how these risks are key drivers to our
strategies and business planning.
• We published our 2022 Drought Plan.
Climate risk identification and assessment
We have a mature risk and resilience framework for the
identification, assessment and management of risks that is
described on pages 60 to 69. Following recognition of climate
change as a material issue, a special review of all event-based
risks in our business risk profile was carried out to ascertain
which risks in our business risk profile are sensitive to climate
change. The risks identified as most sensitive are outlined on
the next page, along with our 2023 assessment of their current
likelihood and impact. Long-term likelihood and impacts at 2050
and 2100 are also shown and 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.
Incorporating longer-term climate change impacts explicitly
into our corporate risk framework has raised the profile of
climate change. This enabled the board to consider our appetite
and tolerance, choosing to mitigate and control the risks from
within existing risk management processes and with the same
thresholds for materiality.
We consider both physical risks that impact our operations,
assets or resources, and transitional risks, and those associated
with the transition to a low-carbon economy, such as evolving
policies, regulation and legislation. We use a variety of
approaches to assess risks such as PESTLE, to ensure complete
coverage of external influencing factors, and complex and
detailed models to use Met Office UK climate projections to
understand the impacts on water resources and drainage and
wastewater management.
In our quantification of the significance of different risks we
also recognise that some risk events may happen multiple times
so we compare impacts over a long-term (typically 40-year)
horizon. This accentuates where interdependencies of climate
change and other demographic changes influence the frequency
of events as well as the consequences.
Managing climate-related risks
We have a clear understanding of the risks in the short and
medium term but to help us manage uncertainties and ensure
a low regrets approach, we are maturing our strengths in long-
term and adaptive planning and considering the uncertainty
associated with particularly complex issues including climate
change, but also population growth, technology and abstraction
reduction needs.
In preparing our latest climate change adaptation report, we
assessed the organisation’s resilience to physical outcomes
of climate change, such as hotter, drier summers and more
extreme weather events. Over 90 risks were noted that might
impact a single business area, for instance wastewater, and
we also identified business-wide risks, interdependencies
and transitional risks. The most material of these physical and
transitional climate risks are also presented in the table on page
42 to show how climate trends lead to business challenges and
can result in consequences to customers or the environment.
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
manage these risks and reduce the frequency and severity.
The actions being undertaken to manage these climate risks are
described in the third climate change adaptation report. We are
applying a Systems Thinking approach to provide great water
for a stronger, greener and healthier North West. This means
that interventions to address one risk have multiple benefits. For
instance, sustainable drainage systems (SuDS) to slow down or
divert rainwater runoff 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.
Our public Water Resources Management Plan (WRMP) and
Drainage and Wastewater Management Plan (DWMP) are
examples of where adaptive planning are used to shape our
plans for the long term (25+ years) while 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.
Integration of climate-related risks into our risk
management framework
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. Planning
for the long term allows us to deliver further environmental
and social value, for example, through prioritising sustainable
drainage and monitoring impacts before investing in more
traditional assets; or carrying out modelling and investigations to
ensure we spend customers’ money wisely as we look to create a
stronger, greener and healthier North West.
Future focus
• Produce our PR24 business plan with full integration of
carbon reduction and climate resilience priorities.
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.
•
• Learn more about the profile of risk events, their causes and
consequences, and to identify opportunities to improve our
capacity and capability.
• Further embed climate change impacts into corporate
decision-making tools and processes.
Read our climate change adaptation report on our website at
unitedutilities.com/corporate/responsibility/environment/
climate-change/climate-change-adaptation
70
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How we identify, assess and manage climate-related risks and opportunities.
Our approach to generating value
Risks and opportunities
TCFD
Summary
• The company operates a mature risk and resilience
framework for the identification, assessment and
management of all risks.
• We have both physical and transitional climate risks in our
corporate business risk profile, including seven of our most
significant event-based risks, see pages 68 to 69.
• Climate change is fully integrated across our overall
corporate risk management system with climate change
identified as both a material issue (see page 30) and one of
our most prominent causal themes of event-based risks.
• Our 2021 climate change adaptation report available on
our website includes a comprehensive climate change
risk assessment of both physical and transition risks and
opportunities. The most material of these are presented on
page 42 and it is clear how these risks are key drivers to our
strategies and business planning.
• We published our 2022 Drought Plan.
Climate risk identification and assessment
We have a mature risk and resilience framework for the
identification, assessment and management of risks that is
described on pages 60 to 69. Following recognition of climate
change as a material issue, a special review of all event-based
risks in our business risk profile was carried out to ascertain
which risks in our business risk profile are sensitive to climate
change. The risks identified as most sensitive are outlined on
the next page, along with our 2023 assessment of their current
likelihood and impact. Long-term likelihood and impacts at 2050
and 2100 are also shown and are based on the Met Office climate
as RCP 6.0, in which emissions peak around 2080 and average
temperatures will have risen to between 3 and 3.5oC by 2100.
Incorporating longer-term climate change impacts explicitly
into our corporate risk framework has raised the profile of
climate change. This enabled the board to consider our appetite
and tolerance, choosing to mitigate and control the risks from
within existing risk management processes and with the same
thresholds for materiality.
We consider both physical risks that impact our operations,
assets or resources, and transitional risks, and those associated
with the transition to a low-carbon economy, such as evolving
policies, regulation and legislation. We use a variety of
approaches to assess risks such as PESTLE, to ensure complete
coverage of external influencing factors, and complex and
detailed models to use Met Office UK climate projections to
understand the impacts on water resources and drainage and
wastewater management.
In our quantification of the significance of different risks we
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In preparing our latest climate change adaptation report, we
assessed the organisation’s resilience to physical outcomes
of climate change, such as hotter, drier summers and more
extreme weather events. Over 90 risks were noted that might
impact a single business area, for instance wastewater, and
we also identified business-wide risks, interdependencies
and transitional risks. The most material of these physical and
transitional climate risks are also presented in the table on page
42 to show how climate trends lead to business challenges and
can result in consequences to customers or the environment.
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
manage these risks and reduce the frequency and severity.
The actions being undertaken to manage these climate risks are
described in the third climate change adaptation report. We are
applying a Systems Thinking approach to provide great water
for a stronger, greener and healthier North West. This means
that interventions to address one risk have multiple benefits. For
instance, sustainable drainage systems (SuDS) to slow down or
divert rainwater runoff 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.
Our public Water Resources Management Plan (WRMP) and
Drainage and Wastewater Management Plan (DWMP) are
examples of where adaptive planning are used to shape our
plans for the long term (25+ years) while staying aligned with our
short-term needs. In these plans we describe how we have used
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.
Integration of climate-related risks into our risk
management framework
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. Planning
for the long term allows us to deliver further environmental
and social value, for example, through prioritising sustainable
drainage and monitoring impacts before investing in more
traditional assets; or carrying out modelling and investigations to
ensure we spend customers’ money wisely as we look to create a
stronger, greener and healthier North West.
Future focus
projections using the most likely global emissions scenario known
complex models to test how resilient our services would be against
also recognise that some risk events may happen multiple times
• Produce our PR24 business plan with full integration of
so we compare impacts over a long-term (typically 40-year)
horizon. This accentuates where interdependencies of climate
change and other demographic changes influence the frequency
of events as well as the consequences.
carbon reduction and climate resilience priorities.
•
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
Managing climate-related risks
We have a clear understanding of the risks in the short and
medium term but to help us manage uncertainties and ensure
a low regrets approach, we are maturing our strengths in long-
term and adaptive planning and considering the uncertainty
associated with particularly complex issues including climate
change, but also population growth, technology and abstraction
reduction needs.
short, medium and long term.
• Learn more about the profile of risk events, their causes and
consequences, and to identify opportunities to improve our
capacity and capability.
• Further embed climate change impacts into corporate
decision-making tools and processes.
Read our climate change adaptation report on our website at
unitedutilities.com/corporate/responsibility/environment/
climate-change/climate-change-adaptation
Our event-based risks most sensitive to climate change(2)
TCFD risk categories
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.
(1) One of the top ten ranking event-based group risks (see pages 68 to 69).
(2) Global emissions scenario RCP 6.0.
Control effectiveness
Controls are the activities we undertake
to reduce the long-term risk or realise
the opportunity.
Mostly sufficient
Somewhat sufficient
Largely insufficient to mitigate risk
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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(1)
More frequent and intense storms can
overload the wastewater network and lead
to severe sewer flooding or storm overflow
activations. Urbanisation makes this worse
due to quick runoff from hard surfaces.
Controls
Increase combined sewer capacity and
build stormwater holding tanks.
Implement and encourage ‘slow the flow’
and sustainable drainage solutions.
Support customers to use sewers
responsibly.
Use technology to monitor and better
control flows in the sewer system.
Install flood protection devices to
at-risk properties.
Land management(1)
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)
2023
2050
2100
2023
£198m
2050
£264m
2100
£528m
0
100
200 300
400
500 600
2023
2050
2100
2023
£198m
2050
£262m
2100
£381m
0
100
200 300
400
500 600
2023
2050
2100
2023
£9m
2050
£23m
2100
£45m
0
100
200 300
400
500 600
Failure to adequately
treat wastewater
Extremely heavy rainfall, which is
projected to happen more often, can
exceed our wastewater treatment works
capacity and result in activations 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.
Failure of above-ground water and
wastewater assets (flooding)
Operational sites can be flooded from sea,
river or surface water sources. Climate
change is expected to increase the
likelihood of flooding due to average winter
rainfall being projected to rise, frequent
storm events and rising sea levels.
Controls
Install permanent flood defences at most
flood-prone sites.
Recycling of biosolids to
agriculture(1)
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
runoff.
Controls
Improve flood forecasting capabilities.
Additional storage capacity.
Build better network connectivity to
maintain water supplies during floods.
Invest for quick after-flood recovery.
Contingency planning for alternative
methods for sludge disposal, e.g.
incineration.
Likelihood (%)
Impact (NPV £m)
Likelihood (%)
Impact (NPV £m)
Likelihood (%)
Impact (NPV £m)
2023
2050
2100
2023
£60m
2050
£84m
2100
£96m
2023
2050
2100
2023
£16m
2050
£24m
2100
£30m
2023
2050
2100
2023
£88m
2050
£88m
2100
£88m
0
100
200 300
400
500 600
0
100
200 300
400
500 600
0
100
200 300
400
500 600
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Our approach to generating value
Risks and opportunities
TNFD
How we identify, assess and manage
nature-related risks and opportunities.
Many key risks in our risk management assessments are linked
to the natural environment, including many of our principal risks
and significant event-based risks.
We recognise that impacts and dependencies on nature are
often location-specific and are inextricably linked to the local
environment and communities.
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. This includes a process to
make decisions that avoid, minimise or mitigate nature-related
risks. Prioritisation of risks is determined based on current risk
exposure (calculated based on likelihood of occurrence and
most likely impact) of each of the principal risks relative to each
other. Decisions are made on the level of risk we are prepared to
manage relative to risk appetite and tolerance in order to deliver
on our strategy.
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 – woodland creation
and peatland restoration – are intrinsically linked to the natural
environment and will deliver nature-related benefits beyond
their value as natural carbon sinks.
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 identified some of the key risks associated with
the transition to a nature-positive economy, alongside
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.
Links to principal risks
• Water service
• Wastewater service
• Health, safety and environmental
Links to event-based risks
• Price Review 2024 outcome
• Wastewater network failure (sewer flooding)
• Water sufficiency
• Recycling of biosolids to agriculture
Read our joint discussion document with The Rivers Trust on
nature-based solutions at unitedutilities.com/globalassets/
documents/pdf/pr24---unlocking-nature-based
-solutions-to-deliver-greater-value.pdf
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Our approach to generating value
Risks and opportunities
How we identify, assess and manage
TNFD
nature-related risks and opportunities.
Many key risks in our risk management assessments are linked
to the natural environment, including many of our principal risks
and significant event-based risks.
We recognise that impacts and dependencies on nature are
often location-specific and are inextricably linked to the local
environment and communities.
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. This includes a process to
make decisions that avoid, minimise or mitigate nature-related
risks. Prioritisation of risks is determined based on current risk
exposure (calculated based on likelihood of occurrence and
most likely impact) of each of the principal risks relative to each
other. Decisions are made on the level of risk we are prepared to
manage relative to risk appetite and tolerance in order to deliver
on our strategy.
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 – woodland creation
and peatland restoration – are intrinsically linked to the natural
environment and will deliver nature-related benefits beyond
their value as natural carbon sinks.
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 identified some of the key risks associated with
the transition to a nature-positive economy, alongside
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.
Links to principal risks
• Water service
• Wastewater service
• Health, safety and environmental
Links to event-based risks
• Price Review 2024 outcome
• Wastewater network failure (sewer flooding)
• Water sufficiency
• Recycling of biosolids to agriculture
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Read our joint discussion document with The Rivers Trust on
nature-based solutions at unitedutilities.com/globalassets/
documents/pdf/pr24---unlocking-nature-based
-solutions-to-deliver-greater-value.pdf
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How we identify, assess and manage other risks and opportunities of material interest.
Cyber security
Security is one of our ten principal risks, including cyber
security, and cyber is identified as one of our most significant
event-based risks. We have a low risk appetite in this area, and
to date have not experienced a material breach in our IT security.
We undertake number of mitigating actions, including:
• Enhanced physical security measures to counter general
criminality and potential terrorism as appropriate.
• We monitor and review alerts and guidance issued by the
National Cyber Security Centre and the US Cybersecurity
and Infrastructure Security Agency, and implement new
security technologies where needed to address growing
threats, such as upgrades to our firewalls and multi-factor
authentication to access our systems.
• We have a structured security policy framework including
detailed guidance to allow all users, administrators and
moderators to operate within a clearly communicated, best
practice ruleset. Internal audits are regularly carried out to
ensure compliance is maintained.
• Colleague training, including mandatory ‘Security Seven’
training, cyber incident training, and enhanced training
for incident first responders. We also improve colleague
awareness with regular cyber incident response exercises,
phishing tests and associated phishing training, as well as
running regular cyber-related events.
• Our Cyber Security Incident Response Plan is incorporated
into business continuity and incident management plans and
processes, and we have a dedicated business-wide Cyber
Security Incident Response Team.
• Strong, independent assurance, including a continuous
annual schedule of penetration testing, red team exercises
for both physical and cyber and regulatory audits against our
operational assets, and independent assurance and guidance
against our regulatory security commitments as part of our
annual security assessments. We have a comprehensive
supply chain security assurance process, and work with
suppliers to help them reach the required security level
where needed.
Financial risk management
Finance is one of our ten principal risks and credit ratings and
financial outperformance are identified as event-based risks. The
controls we have in place through our financial risk management
policies and processes provide a high degree of mitigation and
protection from market volatility, enabling us to raise finance
across the economic cycle. Our debt has a long average life
and maturities are spread to avoid a high concentration of risk
in any one year. We monitor financial ratios regularly as well as
considering the impact on these metrics within our business
planning processes.
Read more on pages 265 to 272
Affordability and vulnerability
Retail and commercial is one of our ten principal risks, and this
incorporates a number of underpinning event-based risks. These
include customer experience, cash collection, billing accuracy,
and affordability support, which collectively take account of
economic conditions including cost of living pressures, providing
value for money, and supporting our most vulnerable customers.
In order to achieve high levels of performance, our customer
experience and debt strategy includes multiple controls, including:
• Customer consultation (requirements and expectations);
• Customer surveys;
• Affordability schemes;
• Tariff setting policies; and
• Reconciliation processes.
Health, safety and wellbeing
Health, safety and wellbeing is part of one of our ten principal
risks: health, safety and environmental. We have an adverse
appetite and tolerance in this area.
We have identified six factors critical to our success:
• Active leadership;
• Engaged, empowered colleagues;
• Clear expectations;
• Safe, healthy working environments;
• Simple effective systems; and
• Continuous improvement.
We work relentlessly to ensure our health, safety and wellbeing
culture is built upon these six key principles.
Responsible supply chain
Supply chain and programme delivery is one of our ten principal
risks, and we have a prudent risk appetite and tolerance in this
area. We are committed to working with suppliers that share
our values. As part of our United Supply Chain approach, our
Responsible Sourcing Principles are structured around ESG
issues that are important to us as a business and in our approach
to responsible sourcing. We assess sustainability risk on partner
and strategic suppliers against our Responsible Sourcing
Principles to target our enhanced due diligence audits and to
focus on opportunities for improved performance in tackling key
issues such as modern slavery and human trafficking.
Equity, diversity and inclusion
Equity, diversity and inclusion is not directly identified as a key
risk, but having a diverse and inclusive workforce is important
to ensure we have access to a wide range of ideas and views
and to maximise colleague engagement, which has an impact
on resource risk – one of our top ten principal risks. We are
dedicated to continuing to improve in this area.
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Our approach to generating value
Risks and opportunities
New and emerging risks and opportunities
We define new risks as those which have not previously
been apparent and are expected to have long-term
implications for the group and/or sector. We consider
emerging risks to be those which are growing,
developing, becoming more apparent or prominent.
The emerging status of a risk can therefore relate to
either newly established or existing risks.
Where there are high levels of uncertainty, or the
circumstances are too complex to quantify, we classify
and retain new and emerging risks as watching briefs.
Where there is more understanding, assumptions can
be applied to the assessment of causal factors (drivers/
influencers), consequences (immediate, knock-on
and cascading outcomes), and control effectiveness
(strengths, weaknesses or gaps) which will be reflected
in the quantification of the likelihood and/or impact.
Horizon scanning activity is a key feature of the risk and
resilience framework. It is undertaken routinely as part
of external research and benchmarking, the assessment
of event-based risks, and through dedicated forums
such as the new and emerging risk forum and the
compliance working group.
Recent assessments of new and emerging risks can
be categorised into three areas, notably economic
conditions, security and legislative/regulatory change.
Economic conditions: continue to be a challenge due to high inflation and scarcity
of critical resources.
• National scarcity of resource: The AMP8 capital
programme is expected to be significantly larger
than in AMP7 across the whole water sector,
which, compounded by investment programmes
in other industries (i.e. nuclear and rail), may result
in high levels of competition for resources with
implications to delivery.
• Price volatility: Although there has been
stabilisation over the last 12 months, inflationary
pressure over multiple commodities continues to
be a factor with energy the most volatile.
• Security of the supply chain: In addition to
the increase in competition for resource and
geo-political tensions, scarcity of some critical
goods and services in the supply chain continues
to be a challenge.
• Supplier viability: The medium and long-term
sustainability of suppliers is an emerging risk due
to ongoing inflationary pressures combined with
increasing scarcity across the supply chain.
• Credit rating: While 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.
• Cash collection: Inflationary pressure is having a
significant impact on the cost of living, which may
affect customers’ ability to pay bills.
Geopolitical: in addition to influencing
economic conditions, geopolitic
tensions continue to have an emerging
effect on the security of critical national
infrastructure and energy resilience.
• Cyber: The rising tensions between Russia and
the West have been reflected in the quantification
of the cyber risk. As a result, increased security
measures have been applied which include security
operations teams on extended high alert and the
rapid deployment of technical blocking of critical
indicators of compromise.
• Energy resilience: There is an increasing external
threat of planned and unplanned outages, and
voltage quality from national grid that could
affect technological and operational assets.
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Our approach to generating value
Risks and opportunities
New and emerging risks and opportunities
We define new risks as those which have not previously
Where there are high levels of uncertainty, or the
been apparent and are expected to have long-term
circumstances are too complex to quantify, we classify
implications for the group and/or sector. We consider
and retain new and emerging risks as watching briefs.
emerging risks to be those which are growing,
Where there is more understanding, assumptions can
developing, becoming more apparent or prominent.
be applied to the assessment of causal factors (drivers/
The emerging status of a risk can therefore relate to
influencers), consequences (immediate, knock-on
either newly established or existing risks.
Horizon scanning activity is a key feature of the risk and
resilience framework. It is undertaken routinely as part
and cascading outcomes), and control effectiveness
(strengths, weaknesses or gaps) which will be reflected
in the quantification of the likelihood and/or impact.
of external research and benchmarking, the assessment
Recent assessments of new and emerging risks can
of event-based risks, and through dedicated forums
be categorised into three areas, notably economic
such as the new and emerging risk forum and the
conditions, security and legislative/regulatory change.
compliance working group.
Economic conditions: continue to be a challenge due to high inflation and scarcity
of critical resources.
• National scarcity of resource: The AMP8 capital
• Supplier viability: The medium and long-term
programme is expected to be significantly larger
sustainability of suppliers is an emerging risk due
than in AMP7 across the whole water sector,
to ongoing inflationary pressures combined with
which, compounded by investment programmes
increasing scarcity across the supply chain.
in other industries (i.e. nuclear and rail), may result
in high levels of competition for resources with
implications to delivery.
• Price volatility: Although there has been
• Credit rating: While 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
stabilisation over the last 12 months, inflationary
other factors such as additional investment spend to
pressure over multiple commodities continues to
meet environmental and service improvements over
be a factor with energy the most volatile.
and above price review allowances.
• Security of the supply chain: In addition to
• Cash collection: Inflationary pressure is having a
the increase in competition for resource and
significant impact on the cost of living, which may
geo-political tensions, scarcity of some critical
affect customers’ ability to pay bills.
goods and services in the supply chain continues
to be a challenge.
Geopolitical: in addition to influencing
economic conditions, geopolitic
tensions continue to have an emerging
effect on the security of critical national
infrastructure and energy resilience.
• Cyber: The rising tensions between Russia and
the West have been reflected in the quantification
of the cyber risk. As a result, increased security
measures have been applied which include security
operations teams on extended high alert and the
rapid deployment of technical blocking of critical
indicators of compromise.
• Energy resilience: There is an increasing external
threat of planned and unplanned outages, and
voltage quality from national grid that could
affect technological and operational assets.
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Legislative/regulatory change: Increased public and political interest in the water sector and
changes to societal expectations is leading to a number of developments.
• Storm overflow activations: Overflow activations are
subject to the environmental permitting regime, however
we understand and share the increased public and political
interest in water quality and the focus on the impact of
activations. We are therefore committed to addressing the
situation and have already reduced overflows over the last
two years. We are initially tackling those assets with the
highest frequency of activations, and have received draft
approval from Ofwat to accelerate funding to deliver further
improvements faster. We have also introduced new river
rangers to help with these important improvements and
we are in the final stages of planning for further significant
activation reductions in AMP8. However, the scale and
complexity of changing the design, configuration and
operation of process and network assets is significant and
will pose new and emerging risks in their own right.
• Pollution risks: In April 2023, Defra issued a consultation
with regards to variable monetarised penalties which
includes a potential significant increase in the penalty cap.
• Recycling of biosolids to land: A total ban on recycling
biosolids to agricultural land already exists in some European
countries. Adoption of this approach by the UK Government
would result in significant change of assets and operations.
• Plastics and forever chemicals: There is increased attention
on single-use plastic, microplastic (plastics less than 5mm)
and perfluoroalkyl and polyfluoroalkyl substances (PFAS)
commonly known as ‘forever chemicals’, with their presence
in the environment being linked to the water cycle.
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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. While our
directors remain of the opinion that the likelihood of a material
adverse impact on the group’s financial position is remote,
based on the facts currently known to us and the provisions in
our financial statements, the following three cases are worthy
of note:
•
In relation to the Manchester Ship Canal Company matter
reported in previous years, a hearing was held in the Court
of Appeal in 2022 and the main additional points raised by
MSCC were dismissed, although MSCC were granted leave
to appeal to the Supreme Court. The final appeal was heard
in early March 2023 and the Court’s decision is awaited.
This 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.
• As reported in previous years, in February 2009, United
Utilities International Limited (UUIL) was served with notice
of a multiparty ‘class action’ in Argentina related to the
issuance and payment default of a US$230 million bond by
Inversora Eléctrica de Buenos Aires S.A. (IEBA), an Argentine
project company set up to purchase one of the Argentine
electricity distribution networks which was privatised in
1997. UUIL had a 45 per cent shareholding in IEBA which
it sold in 2005. The claim is for a non-quantified amount
of unspecified damages and purports to be pursued on
behalf of unidentified consumer bondholders in IEBA. The
Argentine Court has recently scheduled various hearings to
receive the testimony of fact witnesses and experts (starting
in May).UUIL will vigorously resist the proceedings given the
robust defences that UUIL has been advised that it has on
procedural and substantive grounds.
• A Letter Before Action was received by UUW in February
2023 in respect of potential collective proceedings before
the Competition Appeal Tribunal. We are informed that the
Proposed Class Representative (PCR) is intending to bring
a claim on behalf of a class comprising consumers of UUW
(on an opt-out basis) who have allegedly been overcharged
for sewerage services as a result of an alleged abuse of a
dominant position. We have been informed that the PCR also
intends to bring the claim against United Utilities Group PLC,
as the ultimate parent company of UUW. Proceedings have
not yet been issued.
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Customers
How we create
value for 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.
How we create
value for our
stakeholders
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.
Our approach to generating value
Metrics and targets
In this section you will find:
How we create value for our
stakeholders in the short and
long term.
How we create value more widely,
including contributing to the
UN SDGs.
How we measure the value that we
create, including climate and
nature-related metrics.
Some key short, medium and long-
term sustainability-related targets.
Employees
Environment
How we create
value for colleagues
Short term
• We have a strong focus on health,
safety and wellbeing and aim to
ensure all colleagues go home safe
and well at the end of the day.
• We invest in training and
development to enable our
colleagues to grow their skills and to
keep them motivated.
• Listening to our colleagues helps
to create an engaged workforce,
increasing job satisfaction, and
through colleague communications
and conferences we update our
people on business developments so
they feel part of a team.
Suppliers
Media
How we create
value for suppliers
Long term
•
Investing in the development of
current, and future, colleagues
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 colleagues in later life.
• Promoting equity, diversity and
inclusion means we have a workforce
that truly represents the region.
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
• Working together to develop
them 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.
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How we create
How we create
value for customers
value for customers
Short term
Short term
• We focus on providing continuous,
• We focus on providing continuous,
resilient and reliable water and
resilient and reliable water and
wastewater services for customers,
wastewater services for customers,
ensuring clean water is available at
ensuring clean water is available at
their taps when they need it, and
their taps when they need it, and
wastewater is taken away when it
wastewater is taken away when it
goes down their drains.
goes down their drains.
• When customers need to contact
• When customers need to contact
us, we are helpful, friendly and
us, we are helpful, friendly and
supportive, talking and listening to
supportive, talking and listening to
them so that we can understand and
them so that we can understand and
meet their expectations.
meet their expectations.
• We maintain bills that are good
• We maintain bills that are good
value for money, providing help and
value for money, providing help and
support for those who are struggling
support for those who are struggling
to pay.
to pay.
How we create
value for our
stakeholders
Our approach to generating value
Metrics and targets
In this section you will find:
How we create value for our
stakeholders in the short and
long term.
How we create value more widely,
including contributing to the
UN SDGs.
How we measure the value that we
create, including climate and
nature-related metrics.
Some key short, medium and long-
term sustainability-related targets.
Employees
How we create
value for colleagues
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Environment
Short term
Long term
• We have a strong focus on health,
•
Investing in the development of
safety and wellbeing and aim to
current, and future, colleagues
ensure all colleagues go home safe
means we will have a workforce with
and well at the end of the day.
the right skills for the future.
• We invest in training and
development to enable our
• Health, safety and wellbeing extends
to mental as well as physical health.
colleagues to grow their skills and to
We promote awareness of stress
keep them motivated.
• Listening to our colleagues helps
to create an engaged workforce,
increasing job satisfaction, and
through colleague communications
and other mental health issues,
promoting an all-round healthy
lifestyle in the long term which,
in turn, reduces the burden on
healthcare services.
and conferences we update our
• We provide pension offerings that
people on business developments so
support colleagues in later life.
they feel part of a team.
• Promoting equity, diversity and
inclusion means we have a workforce
that truly represents the region.
Suppliers
Media
How we create
value for suppliers
Short term
Long term
• We spend significant amounts of
• Supporting jobs through our supply
money with our suppliers each year
chain in the short term catalyses the
to help deliver maintenance and
enhancement projects across our
asset base, and this helps support
thousands of jobs in our region.
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
• Working together to develop
them confidence in us and allows
technologies means we can identify
companies to maintain cash flow and
solutions that will make our services
become more resilient.
better in the future.
• While our operations and suppliers
• We act with integrity, giving suppliers
are mainly UK and European, they
confidence in the way we do business,
work closely with us to address human
which translates to transparency and
rights, in particular modern slavery.
fairness for our suppliers.
Customers
Customers
Environment
How we create
value for the environment
Long term
Long term
• Our water and wastewater services
• Our water and wastewater services
make a major contribution to the
make a major contribution to the
long-term health and wellbeing of
long-term health and wellbeing of
customers in the North West.
customers in the North West.
• Through long-term financing and
• Through long-term financing and
the regulatory framework, we are
the regulatory framework, we are
delivering multi-million pound
delivering multi-million pound
infrastructure projects to improve
infrastructure projects to improve
services and resilience for the
services and resilience for the
long term. We ensure the cost of
long term. We ensure the cost of
this is shared fairly and affordably
this is shared fairly and affordably
between those that benefit now
between those that benefit now
and in the future.
and in the future.
• Providing additional help to
• Providing additional help to
vulnerable customers builds
vulnerable customers builds
long-term trust.
long-term trust.
Short term
• We meet increasingly stringent
Long term
• Promoting campaigns to educate
environmental consent levels, which
help to improve the quality of rivers
and bathing waters and so support
tourism in the region.
the public and younger generations
on water usage helps protect this
valuable resource and reduce usage
now and for years to come.
• 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.
• 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.
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Communities
Customers
How we create
value for communities
Short term
• We look after beautiful rural
Long term
• Our graduate and apprentice
programmes ensure we have a diverse
and skilled talent pipeline providing
opportunities across the region.
• 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.
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 engage people with
nature and river improvements.
• Our operations and projects are often
near homes and businesses, and we
engage with these communities to
build understanding and trust.
Investors
How we create
value for investors
Short term
• Since many of our investors are
pension funds, charities and
colleagues, 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
doing the right thing so investors
can have confidence in the way we
do business.
• We maintain a high level of quality
and transparency in what we report.
• Our focus on innovation drives
continuous improvements, enabling
us to be at the frontier of our industry.
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.
• We link investor returns to our
environmental and social projects
through our sustainable finance
framework.
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Stock code: UU.
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Our approach to generating value
Metrics and targets
How we create
value more widely
As well as the direct value we
create for our stakeholders and
for the North West, our activities
create wider value and contribute
towards common goals.
The Sustainable Development Goals
(SDGs) comprise 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 nine 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.
Clean water
and sanitation
Part of our purpose is to provide great
water. This 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.
Links to material issues:
• Customer service and operational
performance
• Drinking water quality
• Storm overflows
Read our sustainable finance
framework on our website at
unitedutilities.com/globalassets/z_
corporate-site/investor-pdfs/
sustainable-finance-framework-2020-
final.pdf
Working with SMEs
and start ups
Our Innovation Lab process creates
a unique opportunity for small and
medium-sized enterprises (SMEs) and
start ups, who we would otherwise
not have worked with, to develop and
test their products and ideas in a live
customer environment..
Contributing to public
finances
We paid total taxes of £229 million
this year, including business rates,
employment taxes, environmental
taxes, and other regulatory service
fees such as water abstraction
charges. These help to fund essential
public services across the country.
Decent work and
economic growth
We are a significant contributor to
the North West economy. Our daily
operations provide direct, indirect and
induced employment for 22,700 people.
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 colleagues.
Dividend income for a
diverse investor base
We have a number of pension
funds and charities among our
shareholders, as well as a high
proportion of retail shareholders
and many of our colleagues holding
shares under our share scheme,
meaning the dividends we pay are
relied on by millions of people.
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.
Links to material issues:
• Resilience
•
Innovation
Links to material issues:
• North West regional
• Affordability and vulnerability
• Health, safety and wellbeing
• Diverse and skilled workforce
economy
No poverty
The North West contains more areas
of extreme deprivation than any other
region in England.
We have a sector-leading package of
affordability support, and have helped
over 330,000 households so far in the
last three years. We are also strong
supporters of the Consumer Council
for Water’s drive to implement a
national social tariff.
Links to material issues:
• Affordability and vulnerability
• North West regional economy
• Customer service and operational
performance
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78
Our approach to generating value
Metrics and targets
How we create
value more widely
As well as the direct value we
create for our stakeholders and
for the North West, our activities
create wider value and contribute
towards common goals.
The Sustainable Development Goals
(SDGs) comprise 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 nine 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.
Clean water
and sanitation
Part of our purpose is to provide great
water. This 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.
Links to material issues:
• Customer service and operational
performance
• Drinking water quality
• Storm overflows
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Read our sustainable finance
framework on our website at
unitedutilities.com/globalassets/z_
corporate-site/investor-pdfs/
sustainable-finance-framework-2020-
final.pdf
78
customer environment..
Contributing to public
finances
We paid total taxes of £229 million
this year, including business rates,
employment taxes, environmental
taxes, and other regulatory service
fees such as water abstraction
charges. These help to fund essential
public services across the country.
Decent work and
economic growth
We are a significant contributor to
the North West economy. Our daily
operations provide direct, indirect and
induced employment for 22,700 people.
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 colleagues.
• Affordability and vulnerability
• Health, safety and wellbeing
• Diverse and skilled workforce
No poverty
The North West contains more areas
of extreme deprivation than any other
region in England.
We have a sector-leading package of
affordability support, and have helped
over 330,000 households so far in the
last three years. We are also strong
supporters of the Consumer Council
for Water’s drive to implement a
national social tariff.
Links to material issues:
• Affordability and vulnerability
• North West regional economy
• Customer service and operational
performance
Working with SMEs
and start ups
Dividend income for a
diverse investor base
Our Innovation Lab process creates
We have a number of pension
a unique opportunity for small and
funds and charities among our
medium-sized enterprises (SMEs) and
shareholders, as well as a high
start ups, who we would otherwise
proportion of retail shareholders
not have worked with, to develop and
and many of our colleagues holding
test their products and ideas in a live
shares under our share scheme,
meaning the dividends we pay are
relied on by millions of people.
Charitable activities
Over the past 12 months our colleagues
have raised £52,818 for our company
charity, Macmillan Cancer Support.
We support and encourage colleagues by
providing up to three days’ paid volunteer
leave per year, matching individual
colleague fundraising efforts to any UK-
registered charity up to £200 per person
per year, and covering the admin fees of
payroll giving, or ‘Give As You Earn’.
Bringing people together
We have undertaken a number of initiatives
that bring people together across a variety
of organisations and different industries
to share ideas and best practice and drive
improvements that go wider than our
region and our customer base, like our
summits for affordability and for diversity
and inclusion, and the Hardship Hub which
enables debt advisers to help more people
and find cross-industry help more quickly
all in one accessible place.
Mitigating climate change
We are committed to playing our part in
securing the global goal to curb climate
change to no more than 1.5°C, and we
set out on pages 45 to 47 our transition
plan to reach net zero by 2050, including
our six carbon pledges underpinned by
ambitious science-based targets.
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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.
Links to material issues:
• Resilience
•
Innovation
economy
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).
Links to material issues:
• Customer service and
operational performance
• Resilience
• Supporting communities
Responsible consumption
and production
We are committed to sustainably
managing natural resources, including
reducing leakage and encouraging and
supporting customers to reduce water
consumption. We generate renewable
energy and high quality fertiliser from
bioresources, and 98 per cent of our
waste goes to beneficial use.
Links to material issues:
• Resilience
• Climate change
• Water resources and leakage
Links to material issues:
• North West regional
Climate action
Responding to the climate emergency
is an imperative for us all and building
a greener North West is a key ambition
of our purpose and one of our
strategic priorities. Delivering against
our carbon pledges and science-
based targets, while ensuring that our
activities and the North West region
are resilient to the impacts that a
changing climate might bring, is key to
our long-term planning.
Links to material issues:
• Climate change
• Resilience
• Responsible supply chain
Life below water
Peace, justice and
strong institutions
We are sector leaders in minimising
pollution, look after 29 bathing waters
in the North West, and have made
good progress, with significant further
ambitions, on improving river water
quality, which has a knock-on impact
on our oceans. This includes reducing
storm overflow activations and
addressing nutrient imbalance.
Links to material issues:
• Storm overflows
• Natural capital and biodiversity
• Environmental impacts
We run our business in a responsible
manner, and doing the right thing 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.
Links to material issues:
• Trust, transparency and legitimacy
• Political and regulatory environment
• Corporate governance and
business conduct
79
Our approach to generating value
Metrics and targets
Return on Regulated
Equity (RoRE)
Return on regulatory equity (RoRE)
relates to our regulated entity, United
Utilities Water Limited, and 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).
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 each
asset management period (AMP).
As well as being a key regulatory
measure, RoRE is one of our financial
KPIs and executive remuneration
is linked to our RoRE performance
through its inclusion in the Long
Term Plan.
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).
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).
RoRE can also be higher or lower as
a result of the outturn tax position
versus the allowance.
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.
KPIs and other stakeholder metrics
Our key performance indicators
We measure our performance against a selection of key performance indicators (KPIs),
both operational and financial. Bonuses (for executive directors and colleagues right
through the business) and long-term incentives for executive directors, are closely
aligned to many of our operational and financial KPIs.
Operational KPIs
We have redefined our operational KPIs this year to align with our purpose and strategic
priorities, and in doing so this also provides alignment with environmental, social and
governance (ESG) matters. More detail on these can be seen on pages 10 to 11.
Financial KPIs
We have selected financial KPIs that assess both profitability and financial sustainability,
including income statement, balance sheet, and shareholder performance metrics. We
have made one amendment to our financial KPIs this year, exchanging low dependency
pension schemes (which we have already fully satisfied) with return on regulated equity
(RoRE). More detail on these can be seen on pages 12 to 13.
Our other performance indicators
Our KPIs are by no means the only measures by which we monitor and assess our
performance. We report against many other metrics both internally and externally. As
discussed on pages 56 and 57, our stakeholder engagement gives us a view of what
matters most to them. We report on a selection of material ESG measures on pages 84
to 109 based on the issues shown to be of highest interest to our stakeholders, including
climate and nature-related metrics. These measures relate to the group unless stated
otherwise in the performance tables where they relate to the regulated entity, United
Utilities Water Limited. We regularly report on numerous ESG performance measures
on our website at unitedutilities.com/corporate/responsibility/our-approach
Assurance of performance metrics
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. The performance tables on pages 85 to 109 state
what level of assurance has been obtained for each metric, and the sections of this
report that have received external assurance are marked as such on the relevant pages,
including the figures in our energy and carbon report and our remuneration report.
These audit opinions can be found on our website at unitedutilities.com/corporate/
responsibility/our-approach/esg-performance
Our annual performance report (APR)
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 include 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 performance at the group level,
and are calculated within the definitions given in this report. Our previous year APRs are
available on our website, and the APR for 2022/23 will be published in July 2023.
Our annual performance report (APR) will be available on our website from 15 July at
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Our approach to generating value
Metrics and targets
Return on Regulated
KPIs and other stakeholder metrics
Our key performance indicators
We measure our performance against a selection of key performance indicators (KPIs),
both operational and financial. Bonuses (for executive directors and colleagues right
through the business) and long-term incentives for executive directors, are closely
aligned to many of our operational and financial KPIs.
We have redefined our operational KPIs this year to align with our purpose and strategic
priorities, and in doing so this also provides alignment with environmental, social and
governance (ESG) matters. More detail on these can be seen on pages 10 to 11.
Operational KPIs
Financial KPIs
We have selected financial KPIs that assess both profitability and financial sustainability,
including income statement, balance sheet, and shareholder performance metrics. We
have made one amendment to our financial KPIs this year, exchanging low dependency
pension schemes (which we have already fully satisfied) with return on regulated equity
(RoRE). More detail on these can be seen on pages 12 to 13.
Our other performance indicators
Our KPIs are by no means the only measures by which we monitor and assess our
performance. We report against many other metrics both internally and externally. As
discussed on pages 56 and 57, our stakeholder engagement gives us a view of what
matters most to them. We report on a selection of material ESG measures on pages 84
to 109 based on the issues shown to be of highest interest to our stakeholders, including
climate and nature-related metrics. These measures relate to the group unless stated
otherwise in the performance tables where they relate to the regulated entity, United
Utilities Water Limited. We regularly report on numerous ESG performance measures
on our website at unitedutilities.com/corporate/responsibility/our-approach
Assurance of performance metrics
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. The performance tables on pages 85 to 109 state
what level of assurance has been obtained for each metric, and the sections of this
report that have received external assurance are marked as such on the relevant pages,
including the figures in our energy and carbon report and our remuneration report.
These audit opinions can be found on our website at unitedutilities.com/corporate/
responsibility/our-approach/esg-performance
Our annual performance report (APR)
regulator Ofwat. We include 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 performance at the group level,
and are calculated within the definitions given in this report. Our previous year APRs are
available on our website, and the APR for 2022/23 will be published in July 2023.
Our annual performance report (APR) will be available on our website from 15 July at
unitedutilities.com/corporate/about-us/performance/annual-performance-report
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Equity (RoRE)
Return on regulatory equity (RoRE)
relates to our regulated entity, United
Utilities Water Limited, and 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).
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 each
asset management period (AMP).
As well as being a key regulatory
measure, RoRE is one of our financial
KPIs and executive remuneration
is linked to our RoRE performance
through its inclusion in the Long
Term Plan.
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, 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).
RoRE can also be higher or lower as
a result of the outturn tax position
versus the allowance.
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.
The main areas that could detract from
reported within the annual performance report (APR), as required by our economic
Performance against our regulatory contract is monitored and assessed each year, and
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Climate-related metrics and targets used to assess and
manage climate-related risks and opportunities
TCFD
Summary
• United Utilities was the first UK water company to have
targets verified by the SBTi, including for scope 3 emissions.
We have now achieved SBT 2 as 100 per cent of our annual
electricity purchased is from renewable sources.
• We have made progress on SBT 1 reducing absolute scope
1 and 2 emissions by 3.6 per cent (gross) compared to our
baseline year 2019/20 and SBT 3 where 23 per cent of our
suppliers of capital goods (by emissions) have set their own
science-based target.
• UK Government carbon values (BEIS) are used in our risk
assessments and our planning for medium and long-term
investments, including PR24.
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 in our planning,
modelling 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.
Performance metrics: climate-related
risk management
We manage our climate-related risks by putting in place controls
such as those as set out on page 71 and in Appendix A.3 of
the 2021 climate change adaptation report, published on our
corporate website. The effectiveness of these controls is seen
in our operational performance metrics. The following metrics
are recognised as examples of those key to our resilience to a
changing climate and are reported in the annual performance
report:
• Leakage;
• Per capita consumption;
• Flooding incidents, risk and resilience;
• Storm overflow activations;
• Risk of severe restrictions in a drought;
SBT 1 – scope 1 and 2 emissions
• Sewer collapses;
• Water service supply and resilience; and
• Low water pressure areas.
Note that, as a regulated business, climate-related opportunities
are limited to ways we can avoid costs, rather than generate
revenue.
Performance metrics: 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). Since
October 2021, the remainder of our purchased electricity has been
on 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 a subset of 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.
Future focus
• Continue our collaboration with suppliers so that we can
increase the proportion of our scope 3 emissions that
are estimated using volume of product purchased rather
than spend.
• Attempt to inform national approach to water investment
programmes arising from public pressure and the new
Environment Act 2021.
• Work to validate our long-term net zero ambition to the new
SBTi Net Zero Standard.
Read about progress to deliver our six carbon pledges on page 92
Read our streamlined energy and carbon report including 2022/23
greenhouse gas emissions on pages 93 to 95
Read more about our 2022/23 environmental performance on
page 89
Reduce scope 1 and 2
absolute emissions by
42%
66%
construction services
suppliers by emissions
have SBTs by 2025
2030
N e a r - t e rm science-
b a s e d targets
NET ZERO
BY 2050
net zero amb i t i o n
Long-ter m
2030
SBT 3 – scope 3 supplier engagement
SBT 2 – scope 2 electricity
100%
renewable electricity
Reduce other scope 3
absolute emissions by
25%
SBT 4 – scope 3 emissions
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Our approach to generating value
Metrics and targets
TNFD Nature-related metrics and targets
Managing nature-related risks and opportunities
Nature is fundamental to the sustainability of our business and
so we monitor a wide variety of metrics and set targets to help
monitor and assess nature-related risks and opportunities.
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. We were
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.
We are 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. This year, we have
updated our own natural capital account as part of a five-yearly
review cycle.
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Many of our targets in the short and medium term are regulatory
performance commitments for 2020–25. We also have targets
that go further, like our Better Rivers pledges and targets for
monitoring and reducing storm overflow activations. We are in
the process of preparing our business plan with targets for the
2025–30 period. Our long-term 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.
Progress this year
• Updated our corporate natural capital account so we can
track and measure trends in our impact on nature.
• Developed our long-term environmental strategy.
Future focus
• Continue to engage with the Task Force to develop our
nature-related disclosures, and work towards the global
shared vision of ‘living in harmony with nature by 2050’.
• Develop a strategy on how we will achieve the four 2030
biodiversity goals adopted by nations during COP15. By
engaging in the TNFD process early we are already working
towards achieving Target 15 to disclose on our interactions
with nature.
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OTHER
Metrics and targets in relation to areas of material interest
Cyber security
We monitor a number of security metrics and have targets
against each. Many are aimed at meeting or exceeding national
recommendations or comparative performance, such as targets
for security patching recommended by the National Cyber
Security Centre, and our phishing test platform where we
monitor comparative performance on clicks, compromises and
reports. We target zero malware outbreaks and use a series of
technical and process controls to ensure we achieve this. We aim
to have all our major suppliers security assured to our standards,
and maintain a dynamic and live assessment of our supply chain.
We are measured annually by our regulators against NIS security
targets and have remained compliant since this was introduced.
As a tier two PCI-DSS merchant, we are measured annually by
our payment industry stakeholder against PCI-DSS and have
remained compliant to requirements for many years.
Financial risk management
We operate within targets set out in our financial risk
management policies, including a range for how many months’
liquidity we maintain on a rolling basis, levels of index-linked and
fixed rate debt we want to maintain, and energy price hedging.
We set individual credit risk targets for counterparties based on
their level of risk. We target a 55 to 65 per cent gearing range,
which supports our credit rating targets. Performance against all
of these targets is monitored on a monthly basis.
Affordability and vulnerability
We monitor various metrics around cash collection, bad debt,
and the number of customers on our support schemes. Our
C-MeX score for customer satisfaction is impacted in part by
the help we provide to customers in vulnerable situations. We
have 2025 performance commitments for lifting customers out
of water poverty and signing more customers up to Priority
Services. Read more on pages 98 to 101.
Health, safety and wellbeing
We monitor various metrics for health, safety and wellbeing,
including accidents and near misses. We have targets for
accident frequency rates for both colleagues and contractors,
and we target maintaining accreditation with the Workplace
Wellbeing Charter. Read more on pages 100 to 101.
United Supply Chain
We aim to have 100 per cent of targeted suppliers signed up to
United Supply Chain by 2025. Read more on page 108.
Equity, diversity and inclusion
We monitor a number of metrics on the inclusive nature of our
workforce, including gender, ethnicity, disability, and LGBT+.
We target scoring at least in line with both the UK norm and
the Utilities norm on the diversity and inclusion questions in our
colleague engagement survey, and we seek to make progress
towards improving our diversity statistics, including closing the
gender pay gap. Read more on pages 54 to 55.
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Our approach to generating value
Metrics and targets
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TNFD Nature-related metrics and targets
Managing nature-related risks and opportunities
Nature is fundamental to the sustainability of our business and
so we monitor a wide variety of metrics and set targets to help
monitor and assess nature-related risks and opportunities.
Many of our targets in the short and medium term are regulatory
performance commitments for 2020–25. We also have targets
that go further, like our Better Rivers pledges and targets for
monitoring and reducing storm overflow activations. We are in
the process of preparing our business plan with targets for the
To measure our performance we demonstrate delivery against
2025–30 period. Our long-term targets align with government
contributing targets from a number of statutory requirements,
expectations, such as achieving 75 per cent favourable condition
such as the condition of protected sites, biodiversity net gain,
for SSSI locations by 2042. We are committed to improving
environmental performance, and supporting strategies. We were
surface, groundwater and bathing water quality in the immediate
the only water company to set a natural capital outcome delivery
term and beyond.
incentive in our business plan for 2020–25. This is measured
by demonstrating additional value created through ecosystem
Progress this year
services for customers and the environment. We achieve this by
• Updated our corporate natural capital account so we can
implementing nature-based solutions where they offer best value
track and measure trends in our impact on nature.
compared against a hard-engineered solution.
• Developed our long-term environmental strategy.
We are 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
Future focus
• Continue to engage with the Task Force to develop our
nature-related disclosures, and work towards the global
shared vision of ‘living in harmony with nature by 2050’.
valuable the region’s natural capital assets are. This year, we have
• Develop a strategy on how we will achieve the four 2030
updated our own natural capital account as part of a five-yearly
review cycle.
biodiversity goals adopted by nations during COP15. By
engaging in the TNFD process early we are already working
towards achieving Target 15 to disclose on our interactions
with nature.
Metrics and targets in relation to areas of material interest
OTHER
Cyber security
Affordability and vulnerability
We monitor a number of security metrics and have targets
We monitor various metrics around cash collection, bad debt,
against each. Many are aimed at meeting or exceeding national
and the number of customers on our support schemes. Our
recommendations or comparative performance, such as targets
C-MeX score for customer satisfaction is impacted in part by
for security patching recommended by the National Cyber
the help we provide to customers in vulnerable situations. We
Security Centre, and our phishing test platform where we
have 2025 performance commitments for lifting customers out
monitor comparative performance on clicks, compromises and
of water poverty and signing more customers up to Priority
reports. We target zero malware outbreaks and use a series of
Services. Read more on pages 98 to 101.
technical and process controls to ensure we achieve this. We aim
to have all our major suppliers security assured to our standards,
Health, safety and wellbeing
and maintain a dynamic and live assessment of our supply chain.
We monitor various metrics for health, safety and wellbeing,
We are measured annually by our regulators against NIS security
including accidents and near misses. We have targets for
targets and have remained compliant since this was introduced.
accident frequency rates for both colleagues and contractors,
As a tier two PCI-DSS merchant, we are measured annually by
and we target maintaining accreditation with the Workplace
our payment industry stakeholder against PCI-DSS and have
Wellbeing Charter. Read more on pages 100 to 101.
remained compliant to requirements for many years.
Financial risk management
United Supply Chain
We aim to have 100 per cent of targeted suppliers signed up to
We operate within targets set out in our financial risk
United Supply Chain by 2025. Read more on page 108.
management policies, including a range for how many months’
liquidity we maintain on a rolling basis, levels of index-linked and
Equity, diversity and inclusion
fixed rate debt we want to maintain, and energy price hedging.
We monitor a number of metrics on the inclusive nature of our
We set individual credit risk targets for counterparties based on
workforce, including gender, ethnicity, disability, and LGBT+.
their level of risk. We target a 55 to 65 per cent gearing range,
We target scoring at least in line with both the UK norm and
which supports our credit rating targets. Performance against all
the Utilities norm on the diversity and inclusion questions in our
of these targets is monitored on a monthly basis.
colleague engagement survey, and we seek to make progress
towards improving our diversity statistics, including closing the
gender pay gap. Read more on pages 54 to 55.
Future targets
This page sets out some of the climate-related, nature-related and other sustainability targets we
have set ourselves over the short, medium and long term.
Short term
Medium term
Long term
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2023
Monitor all storm
overflows and make
real-time data on
their operation
available to the
general public
TNFD
2025
Improve water
quality in 1,315
kilometres of
rivers across the
North West
OTHER
2025
100 per cent
of targeted
suppliers signed
up to United
Supply Chain
TCFD
2028
100 per cent
green fleet
TCFD
2025+
Work to enable
future national
water trading
OTHER
2025
Reduce scope 1 & 2
greenhouse gas
(GHG) emissions
by 42 per cent
and scope 3 GHG
emissions by
25 per cent
Help reduce water
demand to
110 litres per
person per day
Reduce leakage
by 50 per cent
TCFD
2030
TNFD
2050
TNFD
2050
TCFD
2030
TCFD
2050
TNFD
2050
Restore
1,000 hectares
of peatland
and create
550 hectares
of woodland
Net zero GHG
emissions aligned
to the Paris
Agreement’s
ambition to limit
global warming
to 1.5oC
Reduce to an
average of no
more than 10
activations per
storm overflow
>220,000
customers
registered for
our Priority
Services scheme
Deliver our
service using
natural capital
in a sustainable,
efficient and
resilient way
Install additional
water meters to
achieve coverage
of around
75 per cent
of households
TNFD
2035
OTHER
2045
OTHER
2070
Eliminate
lead pipes
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Building a greener North West
Our environmental performance in 2022/23
How we measure performance
Our key performance indicators for building a greener North West are achievement of our
Better Rivers commitments, our carbon pledges relating to renewable energy, green fleet,
peatland restoration and woodland creation, and the Environment Agency’s Environmental
Performance Assessment. We report on a selection of other environmental metrics of interest
to stakeholders on page 89.
GREENER
Protecting and enhancing the environment
Strategic priorities
Create a greener future
Improve our rivers
Contributing to
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. We will continue to protect and enhance
the environment across our region, and manage
our land responsibly to preserve and improve it
for future generations.
We delivered a number of environmental
improvements over AMP6, our current AMP7
programme is driving this even further, and in
October we will submit our business plan for
AMP8 with the largest environmental improvement
programme we have ever delivered.
Our performance this year has remained strong.
We are a sector leader at minimising pollution, have
achieved our lowest ever level of leakage despite
difficult weather conditions over the winter, and
we are making good progress against our carbon
pledges. We recognise a step change is needed
when it comes to storm overflows. We have already
delivered a 39 per cent reduction in reported
activations of storm overflows since 2020, helping
to improve river health across the region, and have
ambitious plans to go further and faster.
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Building a greener North West
Our environmental performance in 2022/23
How we measure performance
Our key performance indicators for building a greener North West are achievement of our
Better Rivers commitments, our carbon pledges relating to renewable energy, green fleet,
peatland restoration and woodland creation, and the Environment Agency’s Environmental
Performance Assessment. We report on a selection of other environmental metrics of interest
to stakeholders on page 89.
GREENER
Protecting and enhancing the environment
Strategic priorities
Create a greener future
Improve our rivers
Contributing to
Overview
The North West has a diverse mix of densely
Our performance this year has remained strong.
populated and built-up urban areas as well as many
We are a sector leader at minimising pollution, have
rural areas of outstanding natural beauty, and there
achieved our lowest ever level of leakage despite
are different environmental considerations needed
difficult weather conditions over the winter, and
for each. We will continue to protect and enhance
we are making good progress against our carbon
the environment across our region, and manage
pledges. We recognise a step change is needed
our land responsibly to preserve and improve it
when it comes to storm overflows. We have already
for future generations.
We delivered a number of environmental
improvements over AMP6, our current AMP7
programme is driving this even further, and in
October we will submit our business plan for
AMP8 with the largest environmental improvement
programme we have ever delivered.
delivered a 39 per cent reduction in reported
activations of storm overflows since 2020, helping
to improve river health across the region, and have
ambitious plans to go further and faster.
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Better Rivers: Better North West
commitments achieved
Definition
The percentage of 2022/23 milestones
delivered as part of our Better Rivers
programme.
Carbon pledges
Definition
Progress against our green fleet, peatland
restoration and woodland creation
pledges, and supplier engagement in
relation to setting science-based targets.
EA’s Environmental Performance
Assessment (EPA) rating(1)
Definition
The Environment Agency’s annual
assessment across six key sector
environmental performance measures.
Target
95% of programme milestones
delivered by 2025
Target
Individual carbon pledge targets set
out on page 92
Target
Upper quartile performance within
the water industry each year
Annual performance
100%
of 2022/23 commitments
All of this year’s milestones have been
delivered including hosting our first
Environmental AGM, publishing our
Better Rivers report and undertaking our
first citizen science event at Windermere.
2021/22: new measure
2020/21: new measure
Status
Annual performance
Annual performance
Good progress
Top 4* rating
We have plans for 200 electric vehicles in
the next 18 months, are more than halfway
to our 2030 peatland target, and are making
good progress on woodland creation. We
are working with construction partners,
with 23 per cent having set science-based
targets.
The most recent assessment is for 2021,
when we were awarded the maximum four
stars for the second year running, meaning
we were classed by the Environment
Agency as an industry-leading company.
The EA will publish its annual assessment
for 2022 in July 2023.
2021/22: Pledge 2 met
2020/21: Pledge 6 met
Status
2021: Joint first
2020: Joint first
Status
Met expectation/target
Met expectation/target
Met expectation/target
Link to stakeholder
Link to stakeholder
Link to stakeholder
Environment
Environment
Environment
Link to material issues
• Storm overflows
Link to material issues
• Climate change
• Political and regulatory environment
• Resilience
• Trust, transparency and legitimacy
• Trust, transparency and legitimacy
Link to material issues
• Customer service and operational
performance
• Trust, transparency and legitimacy
• Political and regulatory environment
Link to risks
Link to risks
Link to risks
• Wastewater service
• Political and regulatory
Link to remuneration
Bonus
• Supply chain and programme delivery
• Wastewater service
Link to remuneration
LTP
• Political and regulatory
Link to remuneration
LTP
Assurance
Independent third-party verification
Assurance
Independent third-party verification
Link to assurance
Independent third-party verification
Status key
Annual performance
Met expectation/target
(1) Measure relates to United Utilities Water Limited.
Read more about our approach to materiality on pages 28 to 29 and our principal risks
on pages 64 to 65
Close to meeting expectation/target
Behind expectation/target
Read more about the bonus and long term plan (LTP) in our remuneration report on pages
170 to 203
84
unitedutilities.com/corporate
Stock code: UU.
85
Building a greener North West
Our environmental performance in 2022/23
Our
environmental
performance
creates
value for
Communities
Environment
Customers
Investors
U
n
i
t
e
d
U
t
i
l
i
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i
e
s
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2
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2
3
See the separate report on
our website at
unitedutilities.com/
globalassets/documents/
corporate-documents/
united-utilities-better-
rivers-report-2023.pdf
Industry-leading environmental
performance and pollution reduction
The Environmental Performance Assessment
(EPA) published by the Environment Agency
(EA) consists of six metrics against which
company performance is assessed on a
red, amber or green (RAG) status. Based on
performance across all of the metrics, star
ratings (one to four) are then applied to each
water company.
Improving water quality in rivers
across the North West
Many of our stakeholders are concerned
about the country’s rivers and particularly
the impact of storm overflows. The time
has come to change this century old
practice, and we are committed to going
further and faster to reduce the number
of incidents where sewage flows into our
rivers and seas.
The EA will publish its assessment for 2022
in July 2023. The most recent assessment
is for 2021, and we were awarded the
maximum four stars, meaning we were
classed by the EA as an ‘industry-leading
company’, for the second year running.
This was a strong achievement, particularly
as the 2021 assessment used tighter
thresholds than in previous years to
assess companies’ performance.
We have delivered a sustained reduction in
pollution incidents, reducing by more than
57 per cent since 2011. In 2021, we had our
lowest ever number of pollution incidents,
and we were one of only two companies
to be rated as green status for our serious
incident (category 1 and 2 pollution)
performance. This is the 11th year running
that we have been rated as green status
for our performance on serious incidents
– the only company to have ever achieved
this. We expect to achieve green status for
serious pollution incidents and the total
number of pollution incidents measure in
the EA’s assessment for 2022.
We were rated as green status for our
discharge permits compliance, something
we have achieved for two out of the last
three years, and our performance of 99.0
per cent compliance was higher than the
sector average of 98.7 per cent.
We achieved green performance for our
delivery of the Water Industry National
Environment Programme (WINEP). We
have delivered 100 per cent of our WINEP
schemes by their planned delivery date
since the beginning of the current 2020–25
period (AMP7), delivering a total of 137
schemes in the financial year ending 2022
(562 schemes in total this AMP). These
schemes are delivering improvements to
rivers across the region.
This is a huge change, and achieving the
improvement that is needed will not happen
overnight. The North West has more rainfall
and more combined sewers than elsewhere
in the country. However, we are committed
to delivering as quickly and as effectively as
possible.
We have identified improving our rivers as
one of our six strategic priorities. Last year
we set out our commitments to improve
river health across the North West. As part
of Better Rivers: Better North West we set
out four pledges supported by 30 specific
commitments to kick-start a river revival in
the region. This plan is a critical deliverable
for our organisation, and we have made
good progress so far.
The Environment Agency requires all water
companies to fit monitors to their storm
overflows in order to capture information
on how they are performing. 97 per cent of
the North West’s storm overflows are now
monitored and we will achieve 100 per cent
by the end of 2023.
As a result of our considerable efforts
to improve monitoring and operation of
storm overflows, we have delivered a 39
per cent reduction in reported activations
since 2020.
While we are pleased with progress we
so far, we want to go further and faster to
deliver improvements.
We have received provisional approval from
regulators for over £900 million additional
investment to make an early start on our
AMP8 investment plans, mainly in relation
to reducing activations from overflows,
addressing a third of those we are targeting
for improvement between now and 2030.
We expect to spend £200 million of this
over the next two years of AMP7.
86
unitedutilities.com/corporate
Building a greener North West
Our environmental performance in 2022/23
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
Our
environmental
performance
creates
value for
Communities
Environment
Customers
Investors
U
n
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t
e
d
U
t
i
l
i
t
i
e
s
G
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d
e
d
3
1
M
a
r
c
h
2
0
2
3
See the separate report on
our website at
unitedutilities.com/
globalassets/documents/
corporate-documents/
united-utilities-better-
rivers-report-2023.pdf
Industry-leading environmental
Improving water quality in rivers
performance and pollution reduction
across the North West
The Environmental Performance Assessment
Many of our stakeholders are concerned
(EPA) published by the Environment Agency
about the country’s rivers and particularly
(EA) consists of six metrics against which
the impact of storm overflows. The time
company performance is assessed on a
has come to change this century old
red, amber or green (RAG) status. Based on
practice, and we are committed to going
performance across all of the metrics, star
further and faster to reduce the number
ratings (one to four) are then applied to each
of incidents where sewage flows into our
water company.
rivers and seas.
The EA will publish its assessment for 2022
This is a huge change, and achieving the
in July 2023. The most recent assessment
improvement that is needed will not happen
is for 2021, and we were awarded the
overnight. The North West has more rainfall
maximum four stars, meaning we were
and more combined sewers than elsewhere
classed by the EA as an ‘industry-leading
in the country. However, we are committed
company’, for the second year running.
to delivering as quickly and as effectively as
This was a strong achievement, particularly
possible.
as the 2021 assessment used tighter
thresholds than in previous years to
assess companies’ performance.
We have identified improving our rivers as
one of our six strategic priorities. Last year
we set out our commitments to improve
We have delivered a sustained reduction in
river health across the North West. As part
pollution incidents, reducing by more than
of Better Rivers: Better North West we set
57 per cent since 2011. In 2021, we had our
out four pledges supported by 30 specific
lowest ever number of pollution incidents,
commitments to kick-start a river revival in
and we were one of only two companies
the region. This plan is a critical deliverable
to be rated as green status for our serious
for our organisation, and we have made
incident (category 1 and 2 pollution)
good progress so far.
performance. This is the 11th year running
that we have been rated as green status
for our performance on serious incidents
– the only company to have ever achieved
this. We expect to achieve green status for
serious pollution incidents and the total
number of pollution incidents measure in
the EA’s assessment for 2022.
We were rated as green status for our
discharge permits compliance, something
we have achieved for two out of the last
three years, and our performance of 99.0
per cent compliance was higher than the
sector average of 98.7 per cent.
We achieved green performance for our
delivery of the Water Industry National
Environment Programme (WINEP). We
have delivered 100 per cent of our WINEP
schemes by their planned delivery date
since the beginning of the current 2020–25
period (AMP7), delivering a total of 137
schemes in the financial year ending 2022
(562 schemes in total this AMP). These
schemes are delivering improvements to
rivers across the region.
The Environment Agency requires all water
companies to fit monitors to their storm
overflows in order to capture information
on how they are performing. 97 per cent of
the North West’s storm overflows are now
monitored and we will achieve 100 per cent
by the end of 2023.
As a result of our considerable efforts
to improve monitoring and operation of
storm overflows, we have delivered a 39
per cent reduction in reported activations
since 2020.
While we are pleased with progress we
so far, we want to go further and faster to
deliver improvements.
We have received provisional approval from
regulators for over £900 million additional
investment to make an early start on our
AMP8 investment plans, mainly in relation
to reducing activations from overflows,
addressing a third of those we are targeting
for improvement between now and 2030.
We expect to spend £200 million of this
over the next two years of AMP7.
Reducing our greenhouse
gas emissions
We continue to work towards our
long-term net zero ambition. In 2020,
we committed to six carbon pledges,
underpinned by ambitious science-based
targets. These include switching to low
carbon energy, greening our fleet, restoring
peatland and creating woodland. We
have already achieved two of our pledges
in relation to 100 per cent renewable
electricity and setting scope 3 science-
based targets, and we are making good
progress with the remaining pledges.
We are delivering landscape-scale change
in our peatland restoration and woodland
creation programmes. These programmes
are not only beneficial from a carbon
perspective, creating natural ‘carbon sinks’,
but also deliver wider benefits to protect
water and other natural resources, support
nature, and enable recreational access for
communities and tourism.
As the largest corporate landowner in
England, our land assets provide an
abundant scope for the development of
renewable and other clean technologies.
We have showcased our ability in
this space, having previously grown a
portfolio of renewable assets across the
North West. Following the sale of these
assets last year, we will be recycling the
funds generated by that sale to invest in
the next stage of our journey.
As an initial step, we are working on
plans to develop up to 200 megawatts
of new installed capacity by 2030.
This programme could comprise a
combination of solar, wind and batteries,
helping to deliver emissions reductions
and further improve both operating and
financial resilience.
We have now shared our science-based
net zero transition plan to achieve our
climate change mitigation commitments.
Our scope 1 and 2 emissions target is to
reduce emissions by 42 per cent by 2030
(from our 2019/20 baseline) and to further
reduce this towards net zero by 2050.
We will also work with our supply chain
to achieve two scope 3 targets. Firstly, for
66 per cent of our capital goods suppliers
(by emissions) to have science-based
targets by 2025. And secondly, for all
other scope 3 categories, to achieve a 25
per cent reduction in emissions by 2030
(from a 2020 baseline).
We are part of the global movement of
‘Business Ambition for 1.5°C: Our Only
Future’, and proud to be contributing to
the UK water industry’s commitment to
be net zero.
For more details on our net zero transition
plan see pages 45 to 47.
Climate resilience
We continue to invest across our business
to protect and enhance the climate
resilience of our assets, processes and
customer services.
In December 2021 we published a
comprehensive overview of our climate
risks and plans in our latest climate
change adaptation progress report. We
have further integrated our approach to
understanding the impacts of climate
change in our latest Drainage and
Wastewater Management Plan and our
Water Resource Management Plan. This
is part of our long-term adaptive planning
for services that are resilient to a range of
plausible climate change scenarios.
We continue to expand our approach to
climate resilience, including engagement
with stakeholders and interdependent
service providers, such as the energy
sector. Taking account of interdependent
risks in our business planning process
allows us to maximise the value
we deliver for customers and other
stakeholders through working together on
common challenges. We are working with
electricity distribution network operators
to align investment, such as securing
resilient energy infrastructure to our sites,
as part of our business plan submission
for 2025–30 and beyond.
Our annual disclosures in line with the
recommendations of the Task Force on
Climate-related Financial Disclosures
(TCFD) provide an update on our
performance this year, and these can be
found throughout this report, as set out
on page 05.
39%
reduction in reported
storm overflow
activations since 2020
4*
>£900m
industry-leading performance
in the latest assessment from the
Environment Agency
accelerated investment to deliver
environmental improvements earlier,
mainly reducing overflow activations
86
unitedutilities.com/corporate
Stock code: UU.
87
Building a greener North West
Our environmental performance in 2022/23
Enhancing and protecting
biodiversity and natural capital
We have developed a value assessment
tool which has been used in the
development of our future plans to
incorporate broader natural capital
into our decision-making process. We
continue to deliver in line with our
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 – such as
using wetlands to treat storm water at
Southwaite wastewater treatment works.
We are currently outperforming against
this performance commitment and expect
to improve this further in the remaining
two years of AMP7.
Understanding broader value is a key
element of driving 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. This can
be seen at the UK’s first Catchment
Nutrient Balancing trial at our Calthwaite
wastewater treatment works on the
River Petteril where we have delivered
innovative treatment alongside catchment
interventions to reduce total phosphorus
entering the river. For more details see
unitedutilities.com/Transforming-the-
River-Petteril/
Following the development of the
North West natural capital baseline, we
have used it to bring together leading
organisations from sectors such as
land management, regulation, local
government, academia and industry to
form a regional natural capital governance
group. There has been good support for
this and agreement on how the group
can improve our regional approach to
management of natural capital and the
data that supports this delivery.
Biodiversity is a key pillar of natural
capital and ensuring the preservation
and enhancement of biodiversity is a
key element to our CaST approach. As
an organisation delivering significant
development in the North West we have
committed to no net loss of biodiversity
through our development for a long time,
and we are increasing our delivery in
this area.
We have a major impact on biodiversity
through the significant amount of land
we own that is designated as Site of
Special Scientific Interest (SSSI). We
have delivered significant investment
to improve the condition of habitats on
our land, aiming towards a commitment
to have 100 per cent of our SSSI land in
either favourable or recovering status
by 2030.
We have been an active member of
the Ofwat working group supporting
the development of a new common
performance commitment around
biodiversity. Through this we are now
developing our delivery programme to
maximise the value that can be delivered
for customers through this performance
commitment.
During the year we have planted 104,493
trees to boost biodiversity, protect water
quality and improve air quality. Our
catchment land at Macclesfield Forest
was one of the sites to benefit from
planting 500 broadleaf saplings including
Birch, Oak, Rowan, Hazel and Alder.
These newly established native trees will
establish themselves over the coming
seasons to become an essential part of
the forest habitat.
Over the past three years we have
planted over 500,000 trees across the
region, achieving our 2025 target ahead
of schedule. We continue to identify
suitable locations for tree planning and
work towards our commitment to plant
1 million trees by 2030.
Strong performance tackling
leakage despite challenging
weather extremes
Reducing leakage is of huge importance
for our stakeholders and for us as an
organisation.
We have met our leakage target for the
17th consecutive year. Customer ODI
performance on leakage is based on a
three-year average, and our average
leakage over the last three years is at
its lowest ever level. As a result of this
strong achievement we expect to receive
an outperformance payment this year
in relation to our leakage performance
commitment.
2022/23 has been a challenging year for
our leakage reduction programme. A very
severe freeze-thaw event in December
2022 impacted distribution-side
(company) and customer-side (private)
leakage levels, and some customers
experienced short-term interruptions to
their water supply. A recovery plan was
implemented and we reduced leakage
levels back to the levels they were at prior
to the freeze.
A number of key activities made up our
recovery plan:
• We increased our efforts to promote
leakage and used online channels
for customers to report leaks, for
example using our app;
• We used our fleet of around 70,000
acoustic sensors to identify and
pinpoint leaks more efficiently;
• We managed network pressures using
around 4,000 pressure management
valves, many of which can be
controlled remotely;
• We increased resources detecting
and repairing leaks, as well as
increasing our logger teams to detect
leaks that would not be found using
traditional manual techniques;
• We worked with our partners and
supply chain to speed up leak
repairs; and
• We used our partner and company
vehicles with digital messaging to
run specific advice across the region,
alongside existing vans which now
carry all-year-round leakage-related
messaging.
Over AMP7, we are targeting a reduction
in total leakage of at least 15 per cent,
with a delivery plan that continues to
make best use of available technologies
and is flexible to ensure that we can
embrace the heightened level of
innovation in this area. 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.
We continue to use the learning from
these pilots and trials to refine our
approach to reducing leakage and deliver
our dynamic network management
(DNM) ambition.
88
unitedutilities.com/corporate
U
n
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U
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G
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P
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n
t
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a
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n
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d
3
1
M
a
r
c
h
2
0
2
3
Building a greener North West
Our environmental performance in 2022/23
customers, which encourages assessment
We have been an active member of
to the freeze.
the Ofwat working group supporting
A number of key activities made up our
the development of a new common
recovery plan:
Enhancing and protecting
biodiversity and natural capital
We have developed a value assessment
tool which has been used in the
development of our future plans to
incorporate broader natural capital
into our decision-making process. We
continue to deliver in line with our
outcome delivery incentive (ODI) on
enhancing natural capital value for
of the added natural capital value
we deliver by pursuing nature-based
and catchment solutions – such as
using wetlands to treat storm water at
Southwaite wastewater treatment works.
We are currently outperforming against
this performance commitment and expect
to improve this further in the remaining
two years of AMP7.
Understanding broader value is a key
element of driving 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. This can
be seen at the UK’s first Catchment
wastewater treatment works on the
River Petteril where we have delivered
innovative treatment alongside catchment
interventions to reduce total phosphorus
entering the river. For more details see
unitedutilities.com/Transforming-the-
River-Petteril/
Following the development of the
North West natural capital baseline, we
have used it to bring together leading
organisations from sectors such as
land management, regulation, local
government, academia and industry to
form a regional natural capital governance
group. There has been good support for
this and agreement on how the group
can improve our regional approach to
management of natural capital and the
data that supports this delivery.
Biodiversity is a key pillar of natural
capital and ensuring the preservation
and enhancement of biodiversity is a
key element to our CaST approach. As
an organisation delivering significant
development in the North West we have
committed to no net loss of biodiversity
through our development for a long time,
and we are increasing our delivery in
this area.
We have a major impact on biodiversity
2022/23 has been a challenging year for
through the significant amount of land
our leakage reduction programme. A very
we own that is designated as Site of
severe freeze-thaw event in December
Special Scientific Interest (SSSI). We
2022 impacted distribution-side
have delivered significant investment
(company) and customer-side (private)
to improve the condition of habitats on
leakage levels, and some customers
l
our land, aiming towards a commitment
experienced short-term interruptions to
to have 100 per cent of our SSSI land in
their water supply. A recovery plan was
l
either favourable or recovering status
implemented and we reduced leakage
by 2030.
levels back to the levels they were at prior
performance commitment around
biodiversity. Through this we are now
developing our delivery programme to
maximise the value that can be delivered
for customers through this performance
commitment.
During the year we have planted 104,493
trees to boost biodiversity, protect water
quality and improve air quality. Our
catchment land at Macclesfield Forest
was one of the sites to benefit from
planting 500 broadleaf saplings including
Birch, Oak, Rowan, Hazel and Alder.
These newly established native trees will
establish themselves over the coming
seasons to become an essential part of
Over the past three years we have
planted over 500,000 trees across the
region, achieving our 2025 target ahead
of schedule. We continue to identify
suitable locations for tree planning and
work towards our commitment to plant
1 million trees by 2030.
Strong performance tackling
leakage despite challenging
weather extremes
Reducing leakage is of huge importance
for our stakeholders and for us as an
organisation.
We have met our leakage target for the
17th consecutive year. Customer ODI
performance on leakage is based on a
three-year average, and our average
leakage over the last three years is at
its lowest ever level. As a result of this
strong achievement we expect to receive
an outperformance payment this year
in relation to our leakage performance
commitment.
• We increased our efforts to promote
leakage and used online channels
for customers to report leaks, for
example using our app;
• We used our fleet of around 70,000
acoustic sensors to identify and
pinpoint leaks more efficiently;
• We managed network pressures using
around 4,000 pressure management
valves, many of which can be
controlled remotely;
• We increased resources detecting
and repairing leaks, as well as
increasing our logger teams to detect
leaks that would not be found using
traditional manual techniques;
• We worked with our partners and
supply chain to speed up leak
repairs; and
• We used our partner and company
vehicles with digital messaging to
run specific advice across the region,
alongside existing vans which now
carry all-year-round leakage-related
messaging.
Over AMP7, we are targeting a reduction
in total leakage of at least 15 per cent,
with a delivery plan that continues to
make best use of available technologies
and is flexible to ensure that we can
embrace the heightened level of
innovation in this area. 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.
We continue to use the learning from
these pilots and trials to refine our
approach to reducing leakage and deliver
our dynamic network management
(DNM) ambition.
Nutrient Balancing trial at our Calthwaite
the forest habitat.
U
n
i
t
e
d
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t
a
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a
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e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
3
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
l
l
Assurance key
ITV
Independent third-party verification
RRA
Regulatory reporting assurance
IAT
Internal audit team
Measure
2025 target
2022/23
Performance
2021/22
2020/21
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
)
2
(
n
o
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k
a
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Environment
e
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s
a
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k
n
L
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Status
e
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n
a
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o
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p
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A
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g
r
a
t
5
2
0
2
t
s
n
i
a
g
A
Pollution incidents per 10,000km
sewer network(1)
19.5
16.29
17.71
18.10
RRA
LTP
Reduction in reported storm
overflow activations
Treatment works compliance(1)
l
l
Leakage reduction(1)
Reduction in per
capita consumption(1)
l
l
Internal flooding incidents per
10,000 sewer connections(1)
l
l
33%
sustainable
reduction
100%
15%(3)
6.3%(4)
39%
28%
n/a
IAT
98.45%
98.98%
99.75%
RRA
LTP
6%
8%
5%
RRA
LTP
0.5%
increase
1.5%
increase
1.7%
increase
RRA
PC
1.34
2.32
2.98
4.47
RRA
PC
External flooding incidents(1)
5,859
5,916
6,223
6,849
RRA
PC
l
Waste to beneficial use
98%
98.3%
97.8%
97.3%
IAT
Enhancing natural capital
for customers(1)
£4 million
£0
£3.234
million
Delivery
from 2022
RRA
PC
Number of trees planted
500,000
565,733
461,240
216,601
Carbon pledge 1: reduction of
scope 1 & 2 GHG emissions
l
l
14% reduction(5)
(42% by 2030)
3.6%
reduction
2.20%
reduction
1.5%
increase
Carbon pledge 2: renewable
electricity purchased
100% by 2023
100%
96%
93%
IAT
ITV
ITV
Carbon pledge 3: green fleet
100% by 2028
33 vehicles
27 vehicles
28 vehicles
IAT
LTP
Carbon pledge 4: peatland
restoration
1,000 hectares
(ha) by 2030
585 ha
Activity
underway
Plans for
5 sites
Carbon pledge 5:
woodland created
550 hectares
(ha) by 2030
37 ha
9 ha
Construction services suppliers
with science based targets
Better air quality: nitrogen oxides
(NOx) emissions per unit of
renewable electricity generated(1)
Electricity generated directly and
with partners as % of used
66%
1.42
23%
1.07
n/a
1.19
Under review
24%
26%
25%
IAT
ITV
LTP
ITV
LTP
IAT
LTP
9 ha
n/a
1.30
RRA
PC
Environment
Environment
Environment
Environment
Customers
Customers
Environment
Environment
Communities
Customers
Communities
Customers
Environment
Environment
Environment
Environment
Suppliers
Media
Environment
Environment
88
unitedutilities.com/corporate
Stock code: UU.
89
(1) Measure relates to United Utilities Water Limited.
(2) PC = Performance commitment subject to reward and/or penalty as part of customer outcome delivery incentives (ODIs). These feed into both bonus
and LTP through inclusion of customer ODIs and return on regulated equity (RoRE) respectively. Read more about the bonus and long term plan (LTP) in
our remuneration report on pages 170 to 203.
(3) As measured against a 2017/18 baseline.
(4) As measured against a 2019/20 baseline.
(5) As measured against science based target baseline year 2019/20.
Building a greener North West
Our environmental performance in 2022/23
Better Rivers: Better North West –
working with others to improve river health
We have an important role to
play in improving river health
across the region, engaging with
local communities and interested
organisations. Our river rangers and
Future Rivers Forum are two ways in
which we are working with others to
respond to the challenge.
To protect our rivers and help to keep them healthy,
we have recruited a brand new team of six river
rangers who will be based across the region. The
rangers will be working with teams across our
catchments, forging close links and engaging
with community groups and organisations and
collaborating with them to improve the environment
and river water quality in those areas. They’ll be
proactively patrolling the banks of rivers, checking
assets to organise maintenance and cleaning litter
and debris to mitigate against the aesthetic impact of
our operations. The river rangers’ work will allow us
to further understand the quality of rivers across our
region and what more we need to do to protect their
health and help them thrive. If successful, we plan
to hire more rangers to support our activities right
across the North West.
In partnership with the Rivers Trust, we hosted
the North West’s first Future Rivers Forum to drive
awareness and address the challenges that face
rivers across the region including climate change,
population growth and pollution. The Future Rivers
Forum brought together a cross section of people and
organisations including local authority representatives,
North West businesses, environmental bodies, water
sector regulators and local community figures to
encourage greater collaboration to improve the health
of the region’s rivers.
The day consisted of a mixture of speakers as well
as networking and interactive sprint workshops
to identify new opportunities to work together.
Attendees discussed the challenges their industries
face, shared solutions and committed to put words
into actions and create a lasting impact that goes
beyond the day’s events. Collaboration, funding, and
nature-based solutions were key themes to emerge
from discussions.
Delivering value for
Environment
Communities
Customers
Customers
The river rangers
will be working
with teams across
our catchments to
forge close links
and engage with
community groups
and organisations.”
Read more about our Better Rivers commitments
on our website at unitedutilities.com/corporate/
responsibility/environment/reducing-pollution/
storm-overflows/our-commitments-to-
river-health
U
n
i
t
e
d
U
t
i
l
i
t
i
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s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
a
i
i
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
3
90
unitedutilities.com/corporate
Building a greener North West
Our environmental performance in 2022/23
Better Rivers: Better North West –
working with others to improve river health
We have an important role to
play in improving river health
across the region, engaging with
local communities and interested
organisations. Our river rangers and
Future Rivers Forum are two ways in
which we are working with others to
respond to the challenge.
To protect our rivers and help to keep them healthy,
we have recruited a brand new team of six river
rangers who will be based across the region. The
rangers will be working with teams across our
catchments, forging close links and engaging
with community groups and organisations and
collaborating with them to improve the environment
and river water quality in those areas. They’ll be
proactively patrolling the banks of rivers, checking
assets to organise maintenance and cleaning litter
and debris to mitigate against the aesthetic impact of
our operations. The river rangers’ work will allow us
to further understand the quality of rivers across our
region and what more we need to do to protect their
health and help them thrive. If successful, we plan
to hire more rangers to support our activities right
across the North West.
In partnership with the Rivers Trust, we hosted
the North West’s first Future Rivers Forum to drive
awareness and address the challenges that face
rivers across the region including climate change,
population growth and pollution. The Future Rivers
Forum brought together a cross section of people and
organisations including local authority representatives,
North West businesses, environmental bodies, water
sector regulators and local community figures to
encourage greater collaboration to improve the health
of the region’s rivers.
The day consisted of a mixture of speakers as well
as networking and interactive sprint workshops
to identify new opportunities to work together.
Attendees discussed the challenges their industries
face, shared solutions and committed to put words
into actions and create a lasting impact that goes
beyond the day’s events. Collaboration, funding, and
nature-based solutions were key themes to emerge
from discussions.
Delivering value for
Environment
Communities
Customers
Customers
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
We are focused
on improving our
energy resilience
and self-generation
capacity, with a
target of achieving
50 per cent self-
sufficiency by 2030.”
Investing in renewable energy to build resilience
and support our net zero ambition
Clean energy is a naturally adjacent
business to water and wastewater
l
services, providing us with resilience
and helping us to reduce our
greenhouse gas emissions and work
towards achieving our net zero target.
We own and manage 56,000 hectares of land, and
we plan to maximise our land bank to help us build
a greener future. We have identified 140 sites with
scope for development of renewables and other
clean technologies. We are focused on improving
our energy resilience and self-generation capacity,
with a target of achieving 50 per cent self-sufficiency
by 2030.
We have demonstrated our ability in this space,
having previously delivered a portfolio of renewable
energy assets across the North West. Through the
sale of our subsidiary, United Utilities Renewable
Energy Limited, last year we retained the benefits of
the clean energy through long-term power purchase
agreements, but have freed up capital enabling us to
accelerate deployment of our clean energy strategy.
As an initial step, we are working on plans to develop
150 megawatts of new installed capacity by 2030. This
programme will be made up of a combination of solar
and batteries.
Read our net zero
transition plan on
pages 45 to 47
With a substantial increase in the size of our capital
programme expected in AMP8 and beyond to
meet new environmental obligations, this places
significant upwards pressures on emissions with our
annual energy consumption expected to increase, as
discussed in our transition plan on pages 45 to 47.
Increased self-generation will help towards our
emission reduction targets, and it will improve
financial resilience, which is particularly important
with power markets becoming more volatile in recent
years. Investment in batteries will improve operating
resilience, protecting key assets and sites in the event
of a grid outage.
Delivering value for
Environment
Investors
Customers
The river rangers
will be working
with teams across
our catchments to
forge close links
and engage with
community groups
and organisations.”
Read more about our Better Rivers commitments
on our website at unitedutilities.com/corporate/
responsibility/environment/reducing-pollution/
storm-overflows/our-commitments-to-
river-health
90
unitedutilities.com/corporate
Stock code: UU.
91
Building a greener North West
Our environmental performance in 2022/23
Progress against our carbon pledges
In 2020 United Utilities made six pledges that set out our initial
priorities in the global goal to curb climate change to no more
than 1.5oC. Our progress meeting these pledges is below.
Pledge 1
42% reduction of scope
1 & 2 emissions from our
2020 baseline by 2030
Our progress
3.6%
Confident of
meeting pledge
Pledge 2
100% renewable
electricity by 2021
Pledge 3
100% green fleet
by 2028
Our progress
100%
Pledge met
Our progress
33 vehicles
Confident of
meeting pledge
We are making good progress towards our
pledge and SBT, having made a year-on-
year 1.5 per cent reduction from 2021/22.
Progress is not expected to be linear while
we have emerging challenges that drive
increasing emissions.
2019/20: 138,961 tCO₂e Baseline
2022/23: 133,930 tCO2e 3.6% reduction
Since October 2021 all electricity we use
is renewable. Around 25 per cent of our
needs are renewably generated directly
by us or with partners and the remainder
is purchased on a renewable tariff backed
with REGO certificates. We are working
on plans to increase the energy we can
self-supply through new investment in
renewable capacity and storage.
SBT 1 – scope 1 and 2 emissions
SBT 2 – scope 2 electricity
Reduce scope 1
and 2 absolute
emissions by
42%
2030
N e a r - t erm science-
b a s e d targets
100%
renewable
electricity
NET ZERO
BY 2050
66%
construction
services suppliers
by emissions have
SBTs by 2025
net zero am b i
Long-ter m
Reduce other
scope 3 absolute
emissions by
25%
i o n
t
2030
SBT 3 – scope 3 supplier engagement
SBT 4 – scope 3 emissions
Pledge 6
Set a scope 3 science-based target by 2021
Our progress
SBTs verified July 2021
We have two science-based targets which between them cover all our relevant scope
3 emissions. 29 per cent of our scope 3 emissions are from our construction services
partners delivering infrastructure as part of our AMP7 business plan. We are working
with our partners to reduce the emissions from building these projects by supporting
their own environmental ambitions and encouraging them to set their own science-
based targets. 23 per cent of these suppliers (by 2022/23 emissions) have set SBTi
verified science-based targets for their organisation and approximately 60 per cent
more have either made an SBTi or other public commitment statement to set targets
that are science-based.
Pledge met
Remuneration: LTP
92
Our initial focus has been on
understanding the travel patterns of our
fleet. With this insight we have begun
the delivery of the required charging
infrastructure, the purchase of an initial
200 electric vehicles and are continuing to
explore options for HGVs.
We are also supporting colleagues to switch
to electric with a salary sacrifice scheme.
Remuneration: LTP
Pledge 4
1,000 hectares of
peatland restoration
by 2030
Our progress
585ha
Confident of
meeting pledge
We have peatland restoration activities
across the North West at different stages
of maturity including the 2000ha improved
through our 2005–15 SCaMP projects. We
have 585ha currently under restoration
towards meeting this pledge.
Remuneration: LTP
Pledge 5
Plant one million trees
to create 550 hectares
of woodland by 2030
Our progress
37ha
Confident of
meeting pledge
Weather and tree disease slowed our
planting progress but we have two well
established nurseries and plans for more
and have identified hundreds of sites for
new and ‘replanted’ woodlands.
Remuneration: LTP
unitedutilities.com/corporate
U
n
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U
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s
G
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P
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C
I
n
t
e
g
r
a
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e
d
A
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a
l
R
e
p
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t
a
n
d
F
n
a
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c
a
i
i
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
3
Building a greener North West
Our environmental performance in 2022/23
Progress against our carbon pledges
In 2020 United Utilities made six pledges that set out our initial
priorities in the global goal to curb climate change to no more
than 1.5oC. Our progress meeting these pledges is below.
Pledge 1
42% reduction of scope
1 & 2 emissions from our
2020 baseline by 2030
Pledge 2
100% renewable
electricity by 2021
Our progress
3.6%
Confident of
meeting pledge
Our progress
100%
Pledge met
Pledge 3
100% green fleet
by 2028
Our progress
33 vehicles
Confident of
meeting pledge
We are making good progress towards our
Since October 2021 all electricity we use
Our initial focus has been on
pledge and SBT, having made a year-on-
year 1.5 per cent reduction from 2021/22.
is renewable. Around 25 per cent of our
understanding the travel patterns of our
needs are renewably generated directly
fleet. With this insight we have begun
Progress is not expected to be linear while
by us or with partners and the remainder
the delivery of the required charging
we have emerging challenges that drive
is purchased on a renewable tariff backed
infrastructure, the purchase of an initial
increasing emissions.
with REGO certificates. We are working
200 electric vehicles and are continuing to
on plans to increase the energy we can
explore options for HGVs.
2019/20: 138,961 tCO₂e Baseline
2022/23: 133,930 tCO2e 3.6% reduction
self-supply through new investment in
renewable capacity and storage.
We are also supporting colleagues to switch
to electric with a salary sacrifice scheme.
Remuneration: LTP
SBT 1 – scope 1 and 2 emissions
SBT 2 – scope 2 electricity
Reduce scope 1
and 2 absolute
emissions by
42%
2030
N e a r - t erm science-
b a s e d targets
NET ZERO
BY 2050
100%
renewable
electricity
1,000 hectares of
peatland restoration
Pledge 4
by 2030
Our progress
585ha
Confident of
meeting pledge
construction
net zero am b i
Long-ter m
t
i o n
66%
services suppliers
by emissions have
SBTs by 2025
2030
SBT 3 – scope 3 supplier engagement
SBT 4 – scope 3 emissions
Reduce other
scope 3 absolute
emissions by
25%
We have peatland restoration activities
across the North West at different stages
of maturity including the 2000ha improved
through our 2005–15 SCaMP projects. We
have 585ha currently under restoration
towards meeting this pledge.
Remuneration: LTP
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
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t
e
g
r
a
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e
d
A
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u
a
l
R
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p
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r
t
a
n
d
F
i
n
a
n
c
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
3
Pledge 6
Our progress
Set a scope 3 science-based target by 2021
SBTs verified July 2021
Pledge met
We have two science-based targets which between them cover all our relevant scope
3 emissions. 29 per cent of our scope 3 emissions are from our construction services
partners delivering infrastructure as part of our AMP7 business plan. We are working
with our partners to reduce the emissions from building these projects by supporting
their own environmental ambitions and encouraging them to set their own science-
based targets. 23 per cent of these suppliers (by 2022/23 emissions) have set SBTi
verified science-based targets for their organisation and approximately 60 per cent
more have either made an SBTi or other public commitment statement to set targets
Pledge 5
Plant one million trees
to create 550 hectares
of woodland by 2030
Our progress
37ha
Confident of
meeting pledge
Weather and tree disease slowed our
planting progress but we have two well
established nurseries and plans for more
and have identified hundreds of sites for
new and ‘replanted’ woodlands.
Remuneration: LTP
that are science-based.
Remuneration: LTP
92
Energy and carbon report
TCFD
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 2022 to 31 March 2023. This includes subsidiaries listed in section A8 on page 286.
Our greenhouse gas inventory, including the underlying energy data summarised below, has undergone independent third-party
verification by the Achilles Group to the requirements of Toitu CarbonReduce programme.
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
2022/23
GWh
2021/22
GWh
2020/21
GWh
2019/20
GWh
Energy use
Electricity
Natural gas
Stationary fossil fuels
(Gas oil, kerosene, diesel)
Stationary low carbon fuels
(HVO, LPG)
Energy for transport (from fuel
used or distance travelled)
818.8
33.6
59.8
803.3
33.8
50.5
807.3
40.0
36.5
802.3
38.3
50.8
<0.1
<0.1
0
0
71.7
72.6
67.5
65.5
Total energy used
983.9
960.2
951.3
956.9
Electricity purchased
Grid renewable
Grid standard tariff(1)(2)
Total purchased
Renewable energy generated
CHP
Solar
Wind
Hydro
Biomethane(3)
Total generated
Renewable energy exported
Electricity
Biomethane(3)
Total exported
655.7
<0.1
655.7
123.0
46.4
5.1
6.9
14.5
195.9
18.3
14.5
32.8
611.0
22.3
633.3
591.4
47.8
639.2
602.9
40.8
643.7
133.8
47.8
4.8
7.2
15.9
127.6
50.7
5.3
6.9
14.8
121.5
42.6
5.7
6.8
14.2
209.5
205.3
190.8
23.5
15.9
39.4
22.4
14.8
37.2
18.1
14.2
32.3
(1) 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 2021/22. Non half hourly supplies moved to a new supplier on a 0g
CO2e/kWh renewable tariff on 1 October 2021.
(2) The residual electricity on a standard tariff is associated with default tariffs for recently
adopted sites.
(3) Biomethane generated and exported to grid is expressed as an electricity equivalent.
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 a focus on end-to-end performance of our
bioresources operations, which produce electricity, heat and
biomethane.
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.
100 per cent green electricity transition
Since October 2021 100 per cent of our electricity used has
either been renewably generated on site or its purchase
backed by REGO (Renewable Energy Guarantee of Origin)
certificates.
3
2
/
2
2
0
2
2
2
/
1
2
0
2
1
2
/
0
2
0
2
0
2
/
9
1
0
2
9
1
/
8
1
0
2
80%
20%
76%
21%
73%
21%
75%
20%
74%
18%
0
20
40
60
80
100
Green: purchased
Green: generated
Not green: purchased
Energy efficiency actions taken
Our approach to energy efficiency is based on continuous
improvement of:
• people – optimising ways of working;
•
•
systems – improving visibility of use and analysis of data
systems; and
technology – targeted investment to remove
technological inefficiencies.
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 areas 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 use analytics to identify
optimisation interventions, such as pump specification.
We have a dedicated investment programme to implement
targeted energy solutions in current operations. Examples
invest-to-save projects include pump optimisation, time-of-
use actions and improved control of wastewater treatment.
We are also working to ensure energy and chemical efficient
outcomes from our capital programme.
unitedutilities.com/corporate
Stock code: UU.
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Building a greener North West
Our environmental performance in 2022/23
Greenhouse gas emissions inventory
TCFD
Our greenhouse gas inventory (including all the underlying energy data) has undergone independent third party verification by
Achilles group and is certified to the requirements of the 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. The assurance
certificate and report can be found at unitedutilities.com/corporate/responsibility/environment/climate-change
Emissions are calculated by estimating the individual greenhouse gases that result from all United Utilities’ activities, converted into
a carbon dioxide equivalent (tCO2e). Emissions have been estimated using the UK water industry Carbon Accounting Workbook.
v17 (CAW v17), the 2022 UK Government GHG conversion factors for company reporting and CEDA Global ’22 (Comprehensive
Environmental Data Archive) factors. We report scope 1, 2 and all relevant scope 3 emissions.
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 from burning of fossil fuels
Process and fugitive emissions – including refrigerants
Transport: Company-owned or leased vehicles
2022/23
tCO2e
2021/22
tCO2e
2020/21
tCO2e
SBT baseline
2019/20
tCO2e
21,339
94,915
17,665
19,207
96,020
16,507
17,371
98,569
16,634
Scope 2:
Purchased electricity – generation
Purchased electricity – vehicles
Market-based(1)
Location-based(2)
Market-based
Location-based
9.3(5)
4,201
8,507
126,813
134,492
149,030
1.7
1.7
0.04
0.04
0
0
15,247
96,186
15,739
11,789
164,521
0
0
Total scope 1 & 2 emissions (Gross) Market-based
Scope 2
Emissions from purchased electricity
including for use in vehicles.
Emissions reduction from
Renewable electricity exported(3)
Biomethane exported(4)
Green tariff electricity purchased
Location-based
Location-based
Location-based
Total scope 1 & 2 emissions (Net)
Market-based
Location-based
133,930
260,734
135,936
266,226
141,081
281,604
138,961
291,693
-1,310
-9,360
-125,746
132,620
124,318
-4,317
-10,283
-133,197
131,619
118,429
-4,184
-9,725
-3,979
-9,302
-138,015
-164,210
136,897
129,680
134,982
114,202
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Scope 3
Emissions from our value chain,
e.g. sludge disposal, business travel
and products and services.
(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’ published fuel mix disclosures.
(2) Location-based figures use average UK grid emissions to calculate electricity emissions and are shown in italics.
(3) Exported electricity emissions use the average UK grid emissions factor for both market and location-based totals.
(4) Exported biomethane was sold with green gas certificates so has zero emissions reduction benefits in market-
based accounts.
(5) The residual market-based electricity emissions is associated with default tariffs for recently adopted sites.
Scope 3 greenhouse gas emissions
Category 1: Purchased goods and services(6)
Category 2: Capital goods(6)
Category 3: Fuel and energy-related emissions(7)
Category 4: Upstream T&D – sludge transport(7)
Category 5: Waste generated in ops:
including sludge disposal(7)
Category 6: Business travel: public transport,
private vehicles and hotel stays(7)
Category 7: Employee commuting and homeworking(8)
Total scope 3
Scope 3 SBT measure (excluding category 2)
2022/23
tCO2e
2021/22
tCO2e
2020/21
tCO2e
250,189
292,946
138,182
53,487
35
112,498
58,948
103
271,871
95,968
42,599
1,119
SBT baseline
2019/20
tCO2e
213,442
128,286
45,262
3,374
27,454
25,458
26,333
27,936
1,486
5,336
476,169
337,987
1,138
4,066
1,226
4,108
3,508
4,231
495,158
443,224
426,039
382,660
347,256
297,753
(6) For Category 1 and 2 we use CEDA Global ’22 (an EEIO (environmentally-extended input-output)
inventory) to estimate emissions based on the £ spent by spend category.
(7) Category 3, 4, 5 and 6 use company activity records and UK Government conversion factors.
(8) Category 7 uses EcoAct models to estimate emissions from employee commuting and
homeworking based on company FTE figures and home, site, hybrid working patterns.
United Utilities’ greenhouse gas emissions intensity
As in previous years, we report the regulated emissions
kilograms CO2 equivalent per megalitre treated (using the
location-based method as calculated in the CAW v17),
as these are common metrics for our industry.
Regulated emissions per megalitre water treated (kg)
Regulated emissions per megalitre sewage treated (kg)
2022/23
2021/22
2020/21
101.4
106.91
118.51
2022/23
2021/22
2020/21
158.76
144.21
152.26
Scope 1 and 2 emissions (gross) per £m revenue (tCO2e)
2022/23
73.4
Scope 1 and 2 emissions (net) per £m revenue (tCO2e)
2022/23
71.4
We also state our scope 1 plus 2 emissions (market-based)
as tonnes CO2 equivalent per £million revenue.
2021/22
2020/21
73.0
78.0
2021/22
2020/21
70.7
75.7
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unitedutilities.com/corporate
Building a greener North West
Our environmental performance in 2022/23
Greenhouse gas emissions inventory
TCFD
Our greenhouse gas inventory (including all the underlying energy data) has undergone independent third party verification by
Achilles group and is certified to the requirements of the 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. The assurance
certificate and report can be found at unitedutilities.com/corporate/responsibility/environment/climate-change
Emissions are calculated by estimating the individual greenhouse gases that result from all United Utilities’ activities, converted into
a carbon dioxide equivalent (tCO2e). Emissions have been estimated using the UK water industry Carbon Accounting Workbook.
v17 (CAW v17), the 2022 UK Government GHG conversion factors for company reporting and CEDA Global ’22 (Comprehensive
Environmental Data Archive) factors. We report scope 1, 2 and all relevant scope 3 emissions.
Scope 1
Emissions from activities we own
or control, e.g. burning fossil fuels,
wastewater and sludge processing.
Scope 1:
Scope 2
Emissions from purchased electricity
including for use in vehicles.
Scope 1 & 2 greenhouse gas emissions
2022/23
2021/22
2020/21
tCO2e
tCO2e
tCO2e
SBT baseline
2019/20
tCO2e
Direct emissions from burning of fossil fuels
Process and fugitive emissions – including refrigerants
Transport: Company-owned or leased vehicles
21,339
94,915
17,665
19,207
96,020
16,507
17,371
98,569
16,634
Scope 2:
Purchased electricity – generation
Purchased electricity – vehicles
Market-based
Total scope 1 & 2 emissions (Gross) Market-based
Market-based(1)
Location-based(2)
9.3(5)
4,201
8,507
126,813
134,492
149,030
Location-based
Location-based
1.7
1.7
0.04
0.04
0
0
133,930
260,734
135,936
266,226
141,081
281,604
138,961
291,693
Emissions reduction from
Renewable electricity exported(3)
Biomethane exported(4)
Location-based
Green tariff electricity purchased
Location-based
Total scope 1 & 2 emissions (Net)
Market-based
Location-based
-1,310
-9,360
-125,746
132,620
124,318
-4,317
-10,283
-133,197
131,619
118,429
-4,184
-9,725
-3,979
-9,302
-138,015
-164,210
136,897
129,680
134,982
114,202
15,247
96,186
15,739
11,789
164,521
0
0
(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’ published fuel mix disclosures.
(2) Location-based figures use average UK grid emissions to calculate electricity emissions and are shown in italics.
(3) Exported electricity emissions use the average UK grid emissions factor for both market and location-based totals.
(4) Exported biomethane was sold with green gas certificates so has zero emissions reduction benefits in market-
based accounts.
(5) The residual market-based electricity emissions is associated with default tariffs for recently adopted sites.
Scope 3 greenhouse gas emissions
2022/23
2021/22
2020/21
tCO2e
tCO2e
tCO2e
Category 1: Purchased goods and services(6)
250,189
292,946
SBT baseline
2019/20
tCO2e
213,442
128,286
45,262
3,374
271,871
95,968
42,599
1,119
138,182
53,487
35
112,498
58,948
103
27,454
25,458
26,333
27,936
1,486
5,336
476,169
337,987
1,138
4,066
1,226
4,108
3,508
4,231
495,158
443,224
426,039
382,660
347,256
297,753
(6) For Category 1 and 2 we use CEDA Global ’22 (an EEIO (environmentally-extended input-output)
inventory) to estimate emissions based on the £ spent by spend category.
(7) Category 3, 4, 5 and 6 use company activity records and UK Government conversion factors.
(8) Category 7 uses EcoAct models to estimate emissions from employee commuting and
homeworking based on company FTE figures and home, site, hybrid working patterns.
Scope 3
Emissions from our value chain,
e.g. sludge disposal, business travel
and products and services.
Category 2: Capital goods(6)
Category 3: Fuel and energy-related emissions(7)
Category 4: Upstream T&D – sludge transport(7)
Category 5: Waste generated in ops:
including sludge disposal(7)
Category 6: Business travel: public transport,
private vehicles and hotel stays(7)
Category 7: Employee commuting and homeworking(8)
Total scope 3
Scope 3 SBT measure (excluding category 2)
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Scope 1 emissions
Wastewater and sludge processes cause
approximately 70 per cent of our scope 1
emissions as the gases released, nitrous
oxide (N2O) 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.
Scope 2 emissions
Our market-based scope 2 emissions are
negligible as our agreed supply contracts
are REGO backed renewable tariffs.
Scope 3 emissions
Most of our scope 3 emissions are in
GHG Protocol categories 1 (products
and services) and 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 is determined by the scale
of our investment programme rather
than our design choices. We are working
internally and with supply chain partners
to enhance our 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 decisions.
The next highest category is indirect
emissions from fuel and energy use.
Electricity and fuels used at our
operational sites make up 90 per cent
of this quantity, so our clean energy and
renewable generation ambitions will
reduce these as well as scope 1 emissions.
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Purchased goods and services 250,189 tCO2e
We currently estimate our emissions from purchased goods and services based
on the records of the amount we have spent using CEDA Global ’22. This gives us
a comprehensive but indicative estimate of scope 3 emissions. We are looking to
change key emission categories, such as those from chemicals, to a product-based
or supplier-based emissions factor which will enable us to make operational and
purchasing decisions based on the carbon impact. To do this, however, we are
reliant on our suppliers carrying out and publishing life-cycle carbon assessments.
Scope 1
Methane
CH4
Nitrous
oxide
N2O
Carbon
dioxide CO2
Scope 3
Fuel and energy 21,339 tCO2e + 54,487 tCO2e
Fuel and energy emissions include scope 1 emissions
from burning of fossil fuels such as kerosene in our
treatment processes and also scope 3 emissions
associated with the losses from well to tank and in
transmission and distribution. We are investigating
and trialling ways to reduce our use of fossil fuels
through both efficiencies and use of alternative low
emission fuels.
Transport 17,665 tCO2e
We made a ten-year green fleet commitment in
2018 to convert our fleet to low-carbon fuels.
We have begun our investment in electric
vehicles and are exploring options to fuel HGVs,
including hydrogen and HVO.
Sludge processing 38,886 tCO2e
Processing of sludge releases methane. Half
of our facilities use advanced digestion which
captures more of this methane to power and
heat our processes or generate electricity. This
reduces the methane lost as an emission.
Wastewater processing 55,665 tCO2e
The biological processes used in wastewater
treatment produce N2O and CH4 both
potent GHGs. Emissions are approximately
proportional to the size of the communities
producing the wastewater. Recent monitoring
studies show that they may be far higher than
the UK water industry currently estimate, but
further knowledge will enable mitigation.
United Utilities’ greenhouse gas emissions intensity
As in previous years, we report the regulated emissions
kilograms CO2 equivalent per megalitre treated (using the
location-based method as calculated in the CAW v17),
as these are common metrics for our industry.
We also state our scope 1 plus 2 emissions (market-based)
as tonnes CO2 equivalent per £million revenue.
2022/23
2021/22
2020/21
2022/23
2021/22
2020/21
Regulated emissions per megalitre water treated (kg)
Regulated emissions per megalitre sewage treated (kg)
Scope 1 and 2 emissions (gross) per £m revenue (tCO2e)
Scope 1 and 2 emissions (net) per £m revenue (tCO2e)
101.4
106.91
118.51
73.4
73.0
78.0
2022/23
2021/22
2020/21
2022/23
2021/22
2020/21
158.76
144.21
152.26
71.4
70.7
75.7
Capital goods
138,182 tCO2e
We have a significant
capital programme to
develop our water and
wastewater services
infrastructure and this
construction will drive
substantial emissions.
Employees –
commuting and
homeworking
5,336 tCO2e
Estimated based on our
colleagues numbers and
ways of working (office/
site based or hybrid) using
EcoAct’s UK models.
Business travel
1,486 tCO2e
Public transport, private
vehicles and hotel stays.
Sludge transport
35 tCO2e
Contracted sludge
transport.
Waste (biosolids to land)
27,454 tCO2e
97 per cent of these emissions are
from disposal of sludge biosolids
to agricultural land. Recent UKWIR
data shows that the industry
estimation method is likely to
be significantly overestimating
these emissions.
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Stock code: UU.
95
Building a healthier North West
Our social performance in 2022/23
How we measure performance
Our key performance indicators for building a healthier North West are colleague
engagement, customer satisfaction as measured through our ranking within Ofwat’s
C-MeX survey, and the number of customers lifted out of water poverty. We report
on a selection of other social metrics of interest to stakeholders on page 101.
HEALTHIER
Supporting society
Strategic priorities
Provide a safe and
great place to work
Deliver great service
for all our customers
Contributing to
Overview
We put customers at the heart of everything we
do and are focused on continually improving
performance and supporting customers with
affordability and vulnerability.
We met or beat 83 per cent of our performance
commitments this year – our best ever performance,
and we were the top performing listed company in
Ofwat’s measure of customer satisfaction, C-MeX.
We have supported over 330,000 households
through our affordability schemes so far in AMP7,
and this year hosted collaborative summits on
affordability and vulnerability to share best practice
ideas and work together to improve help and advice
for customers in the North West.
Our colleagues are critical to the success of our
business, their health, safety and wellbeing is
paramount, and it is important we give them the
opportunity to develop their skills and knowledge
and support them with the most effective technology.
We are committed to promoting and improving
diversity and inclusion, and our colleague
engagement score was higher than both the UK norm
and Utilities norm benchmarks.
We are committed to improving health, safety and
wellbeing, and have reduced our accident frequency
rate for colleagues every year for the last five years.
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Building a healthier North West
Our social performance in 2022/23
How we measure performance
Our key performance indicators for building a healthier North West are colleague
engagement, customer satisfaction as measured through our ranking within Ofwat’s
C-MeX survey, and the number of customers lifted out of water poverty. We report
on a selection of other social metrics of interest to stakeholders on page 101.
HEALTHIER
Supporting society
Strategic priorities
Provide a safe and
great place to work
Deliver great service
for all our customers
Contributing to
Overview
We put customers at the heart of everything we
Our colleagues are critical to the success of our
do and are focused on continually improving
performance and supporting customers with
affordability and vulnerability.
We met or beat 83 per cent of our performance
business, their health, safety and wellbeing is
paramount, and it is important we give them the
opportunity to develop their skills and knowledge
and support them with the most effective technology.
commitments this year – our best ever performance,
We are committed to promoting and improving
and we were the top performing listed company in
diversity and inclusion, and our colleague
Ofwat’s measure of customer satisfaction, C-MeX.
engagement score was higher than both the UK norm
l
and Utilities norm benchmarks.
We have supported over 330,000 households
through our affordability schemes so far in AMP7,
We are committed to improving health, safety and
and this year hosted collaborative summits on
wellbeing, and have reduced our accident frequency
affordability and vulnerability to share best practice
rate for colleagues every year for the last five years.
ideas and work together to improve help and advice
for customers in the North West.
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Colleague engagement
Definition
Level of colleague engagement as
measured by our annual colleague
opinion survey.
C-MeX ranking(1)
Definition
Ofwat’s customer measure of experience
(C-MeX), comprising two surveys – the
customer service survey, and the customer
experience survey.
Customers lifted out of water poverty
(1)
Definition
Where our support acts to lift a customer
out of water poverty which is defined as
spending more than 3 per cent of income
on their water bill.
Target
At least as high as Utilities norm
benchmark
Target
Upper quartile against water and
sewerage companies (WASCs)
Target
At least 66,500 customers lifted out
of water poverty by 2024/25
Annual performance
Annual performance
82%
We have achieved a strong set of results
this year, scoring well against external
benchmarks, and despite falling slightly
since last year our overall engagement
score is higher than both the UK norm
and Utilities norm benchmarks.
2021/22: 87%
2020/21: 89%
2nd quartile
We continue to be the highest performing
listed company, ranked fourth out of the
WASCs, and fifth out of all 17 companies.
We expect to achieve a £3 million reward
for C-MeX this year.
2021/22: 4th WASC, top listed company
and 7th overall, earning £2.3m reward
2020/21: 4th WASC, top listed company
and 5th overall, earning £2.1m reward
Annual performance
84,002
We have helped more than 80,000
customers out of water poverty. The
increase on last year has been driven by
the number of customers supported via
lower bill tariffs following wider increases
in the cost of living.
2021/22: 77,312
2020/21: 71,057
Status
Status
Status
Met expectation/target
Close to meeting expectation/target
Met expectation/target
Link to stakeholder
Link to stakeholder
Link to stakeholder
Employees
Environment
Link to material issues
• Colleague engagement
• Diverse and skilled workforce
• Health, safety and wellbeing
Customers
Customers
Link to material issues
• Customer service and operational
Link to material issues
• Affordability and vulnerability
performance
• Customer service and operational
• Trust, transparency and legitimacy
performance
• Political and regulatory environment
• North West regional economy
Link to risks
• Resources
Link to risks
• Water service
• Health, safety and environmental
• Wastewater service
Link to remuneration
n/a
Link to assurance
Independent third-party verification
Link to remuneration
Bonus
Link to assurance
Regulatory reporting assurance
Link to risks
• Retail and commercial
• Political and regulatory
Link to remuneration
LTP
Link to assurance
Regulatory reporting assurance
Status key
Annual performance
Met expectation/target
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Close to meeting expectation/target
Behind expectation/target
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(1) Measure relates to United Utilities Water Limited.
Read more about our approach to materiality on pages 28 to 29 and our principal risks
on pages 64 to 65
Read more about the bonus and long term plan (LTP) in our remuneration report on pages
170 to 203
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Stock code: UU.
97
Building a healthier North West
Our social performance in 2022/23
Our social
performance
creates
value for
Communities
Customers
Customers
Employees
Suppliers
Environment
Investors
Media
Affordability
Affordability support remains a key focus
area and over the last year we have seen a 95
per cent increase in the number of customers
asking for help with their bills. We have
supported more than 330,000 households
so far in AMP7 through our comprehensive
range of affordability schemes. We extended
the eligibility criteria for our social tariff in
2022, as part of our cost of living response,
enabling us to support low income customers
who have a change of circumstances that
reduces their income.
We’ve increased our efforts to support
customers with management of their bills,
many of whom will be disproportionately
impacted by the cost of living increases,
highlighting the support we have available.
Utilising data, we’re monitoring customer
payment behaviour to proactively identify
customers showing signs of struggling to
pay. So far we’ve sent over 300,000 early
intervention emails with tailored messaging
designed to increase customer awareness
of the support we and third-party
organisations can offer.
In January we held our fourth affordability
summit bringing together partner agencies
and key stakeholders to highlight the
importance of collaborative cross-sector
working. Attendees from councils,
charities, energy companies, housing
associations and others shared experiences
and discussed ways to be more joined up
when it comes to helping people across
the region. We remain supportive 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.
Vulnerability
We are a leader in vulnerability assistance
in the water industry, with a wide range of
support schemes for customers, many of
which are firsts for the industry.
During the year we underwent an audit of
our Priority Services offering against the
new ISO Consumer Vulnerability standard,
ISO 22458:2022. Every required standard
was achieved, with no non-conformances
or recommendations for improvement, and
we are now one of the first in the industry
to hold the accreditation. In reviewing
how we support vulnerable customers,
assessors looked at how the company
makes its services accessible to all through
a variety of communication options, the
ways it supports colleagues so they have
the skills and confidence to help customers
in the most appropriate way, and what it
does to ensure compliance with regulatory
requirements. They met people from across
the customer team and listened in to calls
to understand how the processes are put
into practice. Assessors were impressed
with how our customer care approach is
embedded right across the organisation,
the range of help we provide, and our
constant desire to improve.
In November we held our first ever
vulnerability summit. This was the first
we’ve hosted specifically on the subject
of customer vulnerability showcasing how
we support vulnerable people on Priority
Services, billing, incidents, struggling to
pay, water meters and water efficiency.
Attendees from different vulnerability
charities, the NHS, voluntary organisations,
councils, utility providers and housing
associations provided us with useful
feedback on our Priority Services scheme
and highlighted ways we could all work
together more around many of our common
challenges. Delegates told us that they
welcomed the addition of signing to
accompany the presentations, helping
to demonstrate how we’re starting to
communicate to customers via British Sign
Language during events.
Providing great customer service
Our operational performance has been strong
this year, and we have met or exceeded
83 per cent of our performance commitments
– our best ever performance – achieving a
£25 million reward against customer outcome
delivery incentives (ODIs).
Our investment in water quality, principally
avoiding discolouration, has supported
a 25 per cent reduction in discoloured
water events in the last 12 months and
a subsequent 26 per cent reduction in
customer contacts for discoloured water.
98
unitedutilities.com/corporate
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Building a healthier North West
Our social performance in 2022/23
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
Our social
performance
creates
value for
Communities
Customers
Customers
Employees
Suppliers
Environment
Investors
Media
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Affordability
Affordability support remains a key focus
area and over the last year we have seen a 95
per cent increase in the number of customers
asking for help with their bills. We have
supported more than 330,000 households
so far in AMP7 through our comprehensive
range of affordability schemes. We extended
the eligibility criteria for our social tariff in
2022, as part of our cost of living response,
enabling us to support low income customers
who have a change of circumstances that
reduces their income.
We’ve increased our efforts to support
to hold the accreditation. In reviewing
how we support vulnerable customers,
assessors looked at how the company
makes its services accessible to all through
a variety of communication options, the
ways it supports colleagues so they have
the skills and confidence to help customers
in the most appropriate way, and what it
does to ensure compliance with regulatory
requirements. They met people from across
the customer team and listened in to calls
to understand how the processes are put
into practice. Assessors were impressed
with how our customer care approach is
embedded right across the organisation,
customers with management of their bills,
the range of help we provide, and our
many of whom will be disproportionately
impacted by the cost of living increases,
highlighting the support we have available.
Utilising data, we’re monitoring customer
payment behaviour to proactively identify
customers showing signs of struggling to
pay. So far we’ve sent over 300,000 early
intervention emails with tailored messaging
designed to increase customer awareness
of the support we and third-party
organisations can offer.
In January we held our fourth affordability
summit bringing together partner agencies
and key stakeholders to highlight the
importance of collaborative cross-sector
working. Attendees from councils,
charities, energy companies, housing
associations and others shared experiences
and discussed ways to be more joined up
when it comes to helping people across
the region. We remain supportive of the
Consumer Council for Water’s drive to
introduce a national social tariff, which
the country.
Vulnerability
We are a leader in vulnerability assistance
in the water industry, with a wide range of
support schemes for customers, many of
which are firsts for the industry.
During the year we underwent an audit of
our Priority Services offering against the
ISO 22458:2022. Every required standard
was achieved, with no non-conformances
or recommendations for improvement, and
we are now one of the first in the industry
constant desire to improve.
In November we held our first ever
vulnerability summit. This was the first
we’ve hosted specifically on the subject
of customer vulnerability showcasing how
we support vulnerable people on Priority
Services, billing, incidents, struggling to
pay, water meters and water efficiency.
Attendees from different vulnerability
charities, the NHS, voluntary organisations,
councils, utility providers and housing
associations provided us with useful
feedback on our Priority Services scheme
and highlighted ways we could all work
together more around many of our common
challenges. Delegates told us that they
welcomed the addition of signing to
accompany the presentations, helping
to demonstrate how we’re starting to
communicate to customers via British Sign
Language during events.
Providing great customer service
83 per cent of our performance commitments
– our best ever performance – achieving a
£25 million reward against customer outcome
delivery incentives (ODIs).
Our investment in water quality, principally
avoiding discolouration, has supported
a 25 per cent reduction in discoloured
water events in the last 12 months and
a subsequent 26 per cent reduction in
would help to provide a more equitable
Our operational performance has been strong
sharing of support for customers across
this year, and we have met or exceeded
new ISO Consumer Vulnerability standard,
customer contacts for discoloured water.
This has been supported by our Water
Quality First programme, launched
in 2021 with the aim of providing
customers with industry-leading water
quality. Alongside improvements to our
assets, such as cleaning over 15,000
kilometres of mains to reduce the risk of
discolouration, over 5,000 colleagues and
many of our key supply chain partners
have completed an e-learning module on
water quality.
While we have seen a significant
improvement in discolouration, we know
there is still work to do to improve our
overall performance. The DWI is satisfied
we’re heading in the right direction and
we have the right people and plans in
place to continue to improve.
The reduction in water quality contacts
is contributing towards our ODI reward,
alongside other water measures such as
water service resilience and supporting
the removal of lead pipes from customers’
properties.
Reducing leakage is of huge importance
for our stakeholders and for us as an
organisation. Customer ODI performance
on leakage is based on a three-year
average, and our average leakage over the
last three years is at its lowest ever level,
for which we expect to earn a reward
this year. Reducing leakage is critical to
help us manage water resources and we
are challenging ourselves to go further in
reducing leakage from our network and in
customer properties.
Our basket of measures for avoiding
flooding is also delivering a net ODI
reward, and we have made great progress
in reducing flooding incidents. We have
nearly halved the number of internal
sewer flooding incidents since the start of
AMP7. This year’s performance includes
a 39 per cent reduction in repeat internal
flooding incidents - these are incidents
affecting a customer that has already
experienced a previous incident. This
has been supported by our investment in
Dynamic Network Management (DNM).
We have experienced periods of volatile
weather this year including a very dry
summer in 2022, but customers in the
North West experienced no temporary
use restrictions. We have delivered
our largest ever reduction in per capita
consumption (PCC), supported by
engagement activity to encourage
customers to use less water and by
talking about the link between heating
water and energy bills.
In the winter, we experienced an
extremely rapid freeze-thaw event
that resulted in burst pipes across our
region. Our teams and partners worked
exceptionally hard to minimise the
disruption. However, some customers
experienced short-term interruptions
to their water supply, which led to an
ODI penalty against this performance
commitment.
Our strong performance on customer
service metrics has helped us to drive a
14 per cent reduction in written
complaints from customers this year,
achieving our lowest ever volume.
We are also proud to have been re-
accredited with the Institute of Customer
Service – Service Mark with Distinction
award, one of only 18 brands to achieve
the distinction status.
Customer satisfaction
The great service we’ve delivered for
customers has been reflected in further
improvement this year in our performance
against Ofwat’s measure of customer
satisfaction, C-MeX. We continue to be
the highest performing listed company,
ranked fourth out of the water and
wastewater companies and fifth overall
out of all 17 companies. We expect to
achieve a record £3 million reward for our
C-MeX performance this year.
Customer service is hugely important
to us. Every month we receive fantastic
feedback from customers telling us how,
in their opinion, our colleagues have
gone the extra mile. We were proud to
become the first company ever to receive
100,000 commendations from customers
through the WOW! Awards scheme,
where customers provide independent,
proactive feedback on the service we
provide, and nine colleagues received over
500 WOW! nominations from customers.
330k
83%
100k
households helped so far in AMP7
through our affordability schemes
performance commitments
met or beaten this year
WOW! Award nominations
for great customer service
98
unitedutilities.com/corporate
Stock code: UU.
99
Building a healthier North West
Our social performance in 2022/23
Cash collection
Cash collection performance has been
good this year and our household bad
debt charge has remained stable at 1.8
per cent of regulated revenue. Only £1.6
million of our net household debtors are
aged by more than one year, showing we
are not storing up a problem for future
bad debts. We have a high level of direct
debit penetration, at 72 per cent, and
overall over 81 per cent of customers are
on payment plans. This helps to provide
a high degree of collection certainty and
enables us to spot potential affordability
issues early, at 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 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.
A safe and great place to work
We have continued to embed ‘home safe
and well’ across the business, which
focuses on the behavioural aspects of our
health, safety and wellbeing culture.
Our colleague accident frequency rate for
2022/23 was 0.072 accidents per 100,000
hours worked, lower than last year and
amounting to nine accidents reported.
We have focused risk-based plans in
place to maintain progress toward our
2025 target of a 10 per cent year-on-year
improvement in performance.
Our contractor accident frequency rate
increased slightly to 0.078 accidents
per 100,000 hours worked, following an
unusually low performance in 2021/22.
60 per cent of incidents were from
four contractors and we are increasing
our monitoring of their performance
and working together to review their
improvement plans.
In recognition of our commitment to
health and safety, we were awarded
the Royal Society for the Prevention of
Accidents (RoSPA) gold standard medal
for the 11th consecutive year. In support
of colleagues’ wellbeing we have again
retained the Workplace wellbeing charter
accreditation.
Focusing on equity, diversity and
inclusion (ED&I)
We want fantastic people to enable us
to deliver a great service now and into
the future. We are supporting colleagues
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.
Our workforce profile remains at 65
per cent male and 35 per cent female.
This year we have set measurable and
actionable ambitions on gender, ethnicity
and women in senior positions, as part
of our ED&I plan. See more on equity,
diversity and inclusion on pages 54 to 55.
Attracting and developing
future talent
We want to inspire and attract people
into STEM careers and have many
outreach activities to reach people
from the widest talent pools. We’ve
committed to supporting the ‘10,000
Black Interns’ programme over the next
five years. During the year, we welcomed
23 students onto placements, with 56
per cent of those who were ready for
employment being offered a role with
us. We continue to run events, including
our ‘Engineering Masterclass’, with
local secondary schools. 95 per cent
of students who attended this year’s
masterclass said they were extremely
interested in pursuing a STEM-related
career. All of the attendees said they
would recommend the session and
now have a better understanding of
engineering at United Utilities.
Our award-winning graduate and
apprentice programmes
In the last 12 months, 61 apprentices have
joined us on operational, service and
future-facing digital and environmental
schemes. We continue to deliver a
high-quality training provision at our
dedicated training centre and our award
winning scheme is outperforming the
UK success rate of 96.7 per cent against
a national average of 51.8 per cent. In
2022, all our apprentices passed their
qualification including 46 per cent who
received a distinction. 30 per cent of
our apprentices are female. We are
on track to demonstrate our Better
Rivers commitment of 100 new ‘green
apprenticeships’ by 2025. We look
forward to welcoming 30 graduates
and 42 apprentices in September 2023,
including 31 roles classified as green
apprenticeships. We are delighted that
22 of our apprentices to qualify this year
are leakage technicians, a key part of our
AMP7 leakage commitment.
At the 2022 North West Apprenticeship
Awards, we won the Recruitment
Excellence Award, recognising
our commitment to diversity in
apprenticeship recruitment and were
Highly Commended in the Macro
Employer of the Year category. After
winning North West Intermediate
Apprentice of the Year, our credit
controller apprentice Samuel Johnson
won the award for Intermediate
Apprentice of the Year at the National
Apprenticeship Awards.
Strengthening our leadership
talent pipeline
We continue our efforts to develop a
strong female leadership pipeline through
our leadership talent programmes. We
launched our partnership with Women
on Boards to support female colleagues’
development into senior roles.
Awards and recognition
We are proud to have been ranked 11th
in the Inclusive Companies Top 50 UK
Employers list, reinforcing our pledge to
take action on diversity and inclusion and
recognising our commitment to creating a
more equal and inclusive workplace.
We have improved our position in the
Financial Times Inclusive Leaders Index
2023, which assesses companies’ success
in promoting diversity aspects, such
as gender, age, ethnicity, disability and
sexual orientation, in their workforce. We
were placed 89th out of 850 companies
across Europe, and are the only UK
utilities company in the top 100.
We are proud to be included once again
in the Bloomberg LP Gender-Equality
Index, which tracks the performance
of public companies committed to
transparency in gender-data reporting.
Training and development
During the year, we have delivered
over 20,000 days of training, ensuring
our colleagues have the right skills,
knowledge and behaviours to safely and
effectively undertake their roles. A major
delivery this year was the water quality
awareness elearning completed by 4,500
colleagues as part of our wider Water
Quality First programme.
Supporting colleagues when they
need it most
During the year, we ran a communications
campaign aimed at reminding and
encouraging colleagues to maximise
the value of their reward package. This
included money management workshops
and support with healthcare costs.
U
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unitedutilities.com/corporate
feel valued and included, regardless of
winning North West Intermediate
their gender, age, race, disability, sexual
Apprentice of the Year, our credit
orientation or social background, and we
controller apprentice Samuel Johnson
make sure we are reaching and recruiting
won the award for Intermediate
from every part of our community.
Apprentice of the Year at the National
Building a healthier North West
Our social performance in 2022/23
Cash collection
Cash collection performance has been
good this year and our household bad
debt charge has remained stable at 1.8
per cent of regulated revenue. Only £1.6
million of our net household debtors are
aged by more than one year, showing we
are not storing up a problem for future
bad debts. We have a high level of direct
debit penetration, at 72 per cent, and
overall over 81 per cent of customers are
on payment plans. This helps to provide
a high degree of collection certainty and
enables us to spot potential affordability
issues early, at 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 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.
A safe and great place to work
We have continued to embed ‘home safe
and well’ across the business, which
focuses on the behavioural aspects of our
health, safety and wellbeing culture.
Our workforce profile remains at 65
per cent male and 35 per cent female.
This year we have set measurable and
actionable ambitions on gender, ethnicity
and women in senior positions, as part
of our ED&I plan. See more on equity,
diversity and inclusion on pages 54 to 55.
Attracting and developing
future talent
We want to inspire and attract people
into STEM careers and have many
outreach activities to reach people
from the widest talent pools. We’ve
committed to supporting the ‘10,000
Black Interns’ programme over the next
five years. During the year, we welcomed
23 students onto placements, with 56
employment being offered a role with
us. We continue to run events, including
our ‘Engineering Masterclass’, with
local secondary schools. 95 per cent
of students who attended this year’s
masterclass said they were extremely
interested in pursuing a STEM-related
career. All of the attendees said they
would recommend the session and
now have a better understanding of
engineering at United Utilities.
Our colleague accident frequency rate for
Our award-winning graduate and
2022/23 was 0.072 accidents per 100,000
hours worked, lower than last year and
amounting to nine accidents reported.
We have focused risk-based plans in
place to maintain progress toward our
2025 target of a 10 per cent year-on-year
improvement in performance.
apprentice programmes
In the last 12 months, 61 apprentices have
joined us on operational, service and
future-facing digital and environmental
schemes. We continue to deliver a
high-quality training provision at our
dedicated training centre and our award
Our contractor accident frequency rate
winning scheme is outperforming the
increased slightly to 0.078 accidents
per 100,000 hours worked, following an
unusually low performance in 2021/22.
60 per cent of incidents were from
UK success rate of 96.7 per cent against
a national average of 51.8 per cent. In
2022, all our apprentices passed their
qualification including 46 per cent who
four contractors and we are increasing
received a distinction. 30 per cent of
our monitoring of their performance
and working together to review their
our apprentices are female. We are
on track to demonstrate our Better
improvement plans.
In recognition of our commitment to
health and safety, we were awarded
the Royal Society for the Prevention of
Accidents (RoSPA) gold standard medal
for the 11th consecutive year. In support
of colleagues’ wellbeing we have again
retained the Workplace wellbeing charter
accreditation.
Focusing on equity, diversity and
inclusion (ED&I)
We want fantastic people to enable us
to deliver a great service now and into
the future. We are supporting colleagues
to achieve their full potential and to
apprenticeships. We are delighted that
22 of our apprentices to qualify this year
are leakage technicians, a key part of our
AMP7 leakage commitment.
At the 2022 North West Apprenticeship
Awards, we won the Recruitment
Excellence Award, recognising
our commitment to diversity in
apprenticeship recruitment and were
Highly Commended in the Macro
Employer of the Year category. After
U
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Apprenticeship Awards.
l
Strengthening our leadership
l
talent pipeline
We continue our efforts to develop a
strong female leadership pipeline through
our leadership talent programmes. We
launched our partnership with Women
on Boards to support female colleagues’
development into senior roles.
Awards and recognition
We are proud to have been ranked 11th
in the Inclusive Companies Top 50 UK
Employers list, reinforcing our pledge to
take action on diversity and inclusion and
recognising our commitment to creating a
more equal and inclusive workplace.
Financial Times Inclusive Leaders Index
2023, which assesses companies’ success
in promoting diversity aspects, such
as gender, age, ethnicity, disability and
sexual orientation, in their workforce. We
were placed 89th out of 850 companies
across Europe, and are the only UK
utilities company in the top 100.
We are proud to be included once again
in the Bloomberg LP Gender-Equality
Index, which tracks the performance
of public companies committed to
transparency in gender-data reporting.
Training and development
During the year, we have delivered
over 20,000 days of training, ensuring
our colleagues have the right skills,
knowledge and behaviours to safely and
effectively undertake their roles. A major
delivery this year was the water quality
awareness elearning completed by 4,500
colleagues as part of our wider Water
Quality First programme.
Supporting colleagues when they
need it most
During the year, we ran a communications
Rivers commitment of 100 new ‘green
campaign aimed at reminding and
apprenticeships’ by 2025. We look
forward to welcoming 30 graduates
encouraging colleagues to maximise
the value of their reward package. This
and 42 apprentices in September 2023,
included money management workshops
including 31 roles classified as green
and support with healthcare costs.
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
l
l
Assurance key
ITV
Independent third-party verification
RRA
Regulatory reporting assurance
IAT
Internal audit team
Measure
2025 target
2022/23
Performance
2021/22
2020/21
S
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per cent of those who were ready for
We have improved our position in the
Customer ODIs(1)
l
Water quality customer contacts
per 10,000 population(1)
£200 million
cumulative
£25 million
£25 million
£21 million
RRA
Bonus
12.2
14.1
17.9
17.7
RRA
Bonus
Supply interruptions per property
per year (hours:minutes:seconds)(1) 00:05:00
l
Unplanned outages of peak week
production capacity(1)
2.34%
l
Number of household written
complaints compared to WASCs(1) Upper quartile
l
l
00:38:44
00:07:58
00:04:46
RRA
PC
1.73%
2.07%
1.88%
RRA
PC
Second
quartile(3)
Second
quartile
Upper
quartile
RRA
Bonus
Speed of resolution(1)
5 days
3.9 days
3.5 days
3.5 days
RRA
Developer satisfaction score
(D-MeX)(1)
Above
industry
median
Number of households registered
for Priority Services(1)
In excess of
220,000 (7%)
Certification for
Priority Services(1) (4)
Maintain
certification
Above
industry
median
294,490
(9.1%)
ISO22458:
2022
Verification
achieved
Above
industry
median
186,224
(5.9%)
Above
industry
median
128,831
(4.1%)
RRA
PC
RRA
LTP
Maintained
BS18477
Maintained
BS18477
ITV
Helping customers look after
water in their home(1)
10% increase
31.60%
23.85%
13.75%
RRA
PC
Compliance Risk Index(1)
0.00
3.67
3.02
2.58
RRA
LTP
l
l
Wellbeing Charter accreditation
Retain
accreditation
Retained
Retained
Retained
ITV
Accident frequency rate for
colleagues (per 100,000 hours)
0.064
0.072
0.073
0.094
Accident frequency rate for
contractors (per 100,000 hours)
l
l
Your Opinion Survey score for
diversity and inclusion questions
Year-on-year
improvement
Upper quartile
against
Utilities norm
0.078
0.043
0.087
Upper
quartile
Upper
quartile
Upper
quartile
IAT
IAT
ITV
Customers
Customers
Customers
Customers
Customers
Customers
Customers
Customers
Customers
Customers
Employees
Environment
Employees
Environment
Employees
Environment
Employees
Environment
100
unitedutilities.com/corporate
Stock code: UU.
101
(1) Measure relates to United Utilities Water Limited.
(2) PC = Performance commitment subject to reward and/or penalty as part of customer outcome delivery incentives (ODIs). These feed into both bonus
and LTP through inclusion of customer ODIs and return on regulated equity (RoRE) respectively. Read more about the bonus and long term plan (LTP) in
our Remuneration report on pages 170 to 203.
(3) Latest comparative data available 2021/22.
(4) The new Consumer Vulnerability standard, ISO 22458:2022 replaces the previous BS18477:2010 Inclusive Service Provision standard.
Building a healthier North West
Our social performance in 2022/23
Developing a strong female talent pipeline
Our ambition is to have strong
female representation at the top
of the organisation and we want
to provide our female leaders with
opportunities to develop their
careers at United Utilities.
We are proud to have been recognised as one of the
top 15 FTSE company performers when it comes
to women in leadership, having exceeded the 40
per cent target for Women on Boards and Women
Leaders set by the FTSE 100 Women Leaders
Review and tracking at 44 per cent and 43 per cent
respectively. With Louise Beardmore becoming
the first female CEO at United Utilities and Alison
Goligher taking up the role of senior independent
non-executive director of our board, this strengthens
our female presence in key board roles.
During the year, we launched our partnership with
Women on Boards, which offers services such
as workshops, podcasts, CV writing support and
access to non-executive vacancies. Facilitating
access to these services strengthens our ambition to
support female colleagues in developing into senior
leadership roles.
Our chief digital officer, Heena Mistry, made the
Northern Power Women 2023 Power List for her drive
and passion to influence, inspire and deliver positive
change. One of the 13 per cent of female senior IT
leaders in the UK, Heena is proud of the diverse
teams she’s built while working in different cultures
and situations – often being the only female or ethnic
minority at the table. Heena was voted in the UKTech50
for 2022, which identifies the 50 most influential leaders
in the UK tech sector. She said: “It’s such a privilege
to do what I love, to feel like I make a difference and
be recognised for it. Our ambition to become a digital
utility is more than technology; it’s about working with
fantastic people every day to really accelerate the
value we provide to customers and to look after our
environment for generations to come.”
Meg Johnson (pictured below) joined our Aspiring
Manager Programme in 2021 while working as a
team leader and is currently in the final phase of
her chartered manager degree apprenticeship at
Manchester Metropolitan University. The Aspiring
Manager Programme was set up to mitigate risks
around hard-to-fill operational positions. Meg
was recently promoted to the role of wastewater
production manager; a critical role in our business
and one traditionally held by male colleagues.
Delivering value for
Employees
Environment
Our ambition is to
have strong female
representation
at the top of the
organisation.”
l
Read more about
our approach
to equity, diversity
and inclusion on
pages 54 to 55
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
a
i
i
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
3
102
unitedutilities.com/corporate
Building a healthier North West
Our social performance in 2022/23
Developing a strong female talent pipeline
Our ambition is to have strong
female representation at the top
of the organisation and we want
to provide our female leaders with
opportunities to develop their
careers at United Utilities.
We are proud to have been recognised as one of the
top 15 FTSE company performers when it comes
to women in leadership, having exceeded the 40
per cent target for Women on Boards and Women
Leaders set by the FTSE 100 Women Leaders
Review and tracking at 44 per cent and 43 per cent
respectively. With Louise Beardmore becoming
the first female CEO at United Utilities and Alison
Goligher taking up the role of senior independent
non-executive director of our board, this strengthens
our female presence in key board roles.
During the year, we launched our partnership with
Women on Boards, which offers services such
as workshops, podcasts, CV writing support and
access to non-executive vacancies. Facilitating
access to these services strengthens our ambition to
support female colleagues in developing into senior
leadership roles.
Our chief digital officer, Heena Mistry, made the
Northern Power Women 2023 Power List for her drive
and passion to influence, inspire and deliver positive
change. One of the 13 per cent of female senior IT
leaders in the UK, Heena is proud of the diverse
teams she’s built while working in different cultures
and situations – often being the only female or ethnic
minority at the table. Heena was voted in the UKTech50
for 2022, which identifies the 50 most influential leaders
in the UK tech sector. She said: “It’s such a privilege
to do what I love, to feel like I make a difference and
be recognised for it. Our ambition to become a digital
utility is more than technology; it’s about working with
fantastic people every day to really accelerate the
value we provide to customers and to look after our
environment for generations to come.”
Meg Johnson (pictured below) joined our Aspiring
Manager Programme in 2021 while working as a
team leader and is currently in the final phase of
her chartered manager degree apprenticeship at
Manchester Metropolitan University. The Aspiring
Manager Programme was set up to mitigate risks
around hard-to-fill operational positions. Meg
was recently promoted to the role of wastewater
production manager; a critical role in our business
and one traditionally held by male colleagues.
Delivering value for
Employees
Environment
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
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t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
Our ambition is to
have strong female
representation
at the top of the
organisation.”
l
Read more about
our approach
to equity, diversity
and inclusion on
pages 54 to 55
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
We continue to
develop strong
relationships with
those organisations and
charities which provide
support to customers
struggling with their
household bills.”
Read more about
affordability and
vulnerability on
page 98
Working in partnership to support more people who
are struggling financially
The rising cost of living has had an
impact on many households over
the last year, and it’s more important
than ever that we support customers
through this difficult period.
We’ve supported more than 330,000 customers with
their payments in the last three years via lower tariffs,
capped bills and payment matching schemes. When
customers get in touch with us, our team is on the
other end of the phone to offer help and do all we
can to make their bills more affordable. Our online
form also allows customers to apply for support via
our website, making it even easier to obtain the help
they need by completing a single application for all
our schemes.
We know that customers are sometimes reluctant to
speak to us directly about their water bills, especially
if they’re having payment difficulties for the first time.
So, alongside our industry-leading affordability
schemes, we continue to develop strong relationships
with those organisations and charities which provide
support to customers struggling with their household
bills. By working closely with these organisations
we can ensure they recommend our affordability
schemes to customers who would be eligible for
financial support with their water bills.
l
Our outreach and engagement team is instrumental
in helping us to achieve this objective, visiting local
organisations to increase awareness of our schemes
among those debt advisors who play a key role in
helping people obtain the support they need. Our
home visits are also extremely successful in targeting
our support at customers who need a helping hand
with their payments.
We hosted our fourth affordability summit this year,
attracting more than 100 delegates and bringing
together debt advisers from across the region to
discuss how organisations can support them in their
efforts to help people who are having difficulties
making ends meet.
The more we can do to help those debt advisers
who customers turn to for help when they’re having
money issues, the more we can continue to target
our support to help them get back on track with
their payments.
Delivering value for
Communities
Customers
Customers
102
unitedutilities.com/corporate
Stock code: UU.
103
Building a stronger North West
Our governance performance in 2022/23
How we measure performance
Our key performance indicators for building a stronger North West are our
capital programme delivery incentive, community investment, and our ratings
and rankings against a range of trusted investor indices. We report on a selection
of wider governance metrics of interest to stakeholders on page 109.
STRONGER
Responsible business and governance
Strategic priorities
Spend customers’
money wisely
Contribute to
our communities
Contributing to
Overview
Ensuring we are efficient and effective in our
investments and delivering against our commitments
and promises helps to build trust with our communities.
Our activities support thousands of jobs in the supply
chain, helping to generate employment and income
for the North West economy at a critical time when
the country faces significant rises in the cost of living.
We have strong relationships with suppliers, helped
by prompt payment and engagement through our
United Supply Chain programme, and we work
collaboratively with partners on common goals.
We continue to invest in North West communities as
well as opening our beautiful areas of land to locals
and tourists to enjoy the health and recreational
benefits linked with access to nature.
We monitor our performance against a suite of
investor indices and we continue to perform in
the upper quartile among peers across these
varied assessments.
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
a
i
i
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
3
104
unitedutilities.com/corporate
Building a stronger North West
Our governance performance in 2022/23
How we measure performance
Our key performance indicators for building a stronger North West are our
capital programme delivery incentive, community investment, and our ratings
and rankings against a range of trusted investor indices. We report on a selection
of wider governance metrics of interest to stakeholders on page 109.
STRONGER
Responsible business and governance
Strategic priorities
Spend customers’
money wisely
Contribute to
our communities
Contributing to
Overview
Ensuring we are efficient and effective in our
We continue to invest in North West communities as
investments and delivering against our commitments
well as opening our beautiful areas of land to locals
and promises helps to build trust with our communities.
and tourists to enjoy the health and recreational
Our activities support thousands of jobs in the supply
benefits linked with access to nature.
chain, helping to generate employment and income
We monitor our performance against a suite of
for the North West economy at a critical time when
investor indices and we continue to perform in
the country faces significant rises in the cost of living.
the upper quartile among peers across these
varied assessments.
We have strong relationships with suppliers, helped
by prompt payment and engagement through our
United Supply Chain programme, and we work
collaboratively with partners on common goals.
U
n
i
t
e
d
U
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i
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s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
l
l
l
l
S
t
r
a
t
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g
i
c
r
e
p
o
r
t
Capital programme
delivery incentive (CPDi)
Community
investment
Performance across a range of
trusted investor indices
Definition
Measures the extent to which we have
delivered our capital projects efficiently, on
time, and to the required quality standard.
Definition
Total community investment as measured
by the Business for Social Impact (B4SI)
method.
Definition
Company performance relative to water
and utilities sector participants in a selection
of trusted investor ESG ratings and indices.
Target
At least 85%
Annual performance
92.9%
We have delivered strong performance
of 92.9 per cent against the new
CPDi measure.
2021/22: n/a
2020/21: n/a
Status
Target
Average community investment
between 2020 and 2025 to be at
least 10 per cent higher than the
average between 2010 and 2020
of £2.56 million per annum
Annual performance
£2.88m
This year our direct community
investment calculated using the
B4SI method was above the
£2.82 million target.
2021/22: £2.82 million
2020/21: £2.15 million
Status
Target
Upper quartile
Annual performance
Upper quartile
We have maintained upper quartile
performance across our selection of
ESG ratings and indices.
2021/22: Upper quartile
2020/21: Upper quartile
Status
Met expectation/target
Met expectation/target
Met expectation/target
Link to stakeholder
Investors
Link to stakeholder
Communities
Customers
Link to stakeholder
Investors
Link to material issue
• Customer service and operational
Link to material issue
• Supporting communities
Link to material issue
• Trust, transparency and legitimacy
performance
• Financial risk management
• Trust, transparency and legitimacy
• Corporate governance and
• Land management, access and
business conduct
• Corporate governance and
recreation
• Political and regulatory environment
business conduct
Link to risks
• Finance
Link to risks
Link to risks
• Conduct and compliance
• Conduct and compliance
• Supply chain and programme delivery
• Health, safety and environmental
Link to remuneration
Bonus
Link to assurance
Internal audit team
Status key
Annual performance
Met expectation/target
Close to meeting expectation/target
Behind expectation/target
Link to remuneration
n/a
Link to remuneration
n/a
Link to assurance
Independent third-party verification
Link to assurance
Independent third-party verification
Read more about our approach to materiality on pages 28 to 29 and our principal risks
on pages 64 to 65
Read more about the bonus and long term plan (LTP) in our remuneration report
on pages 170 to 203
104
unitedutilities.com/corporate
Stock code: UU.
105
Building a stronger North West
Our governance performance in 2022/23
Our
governance
performance
creates
value for
Communities
Suppliers
Customers
Investors
Media
U
n
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e
d
U
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i
l
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s
G
r
o
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p
P
L
C
I
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t
e
g
r
a
t
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d
A
n
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u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
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c
a
i
i
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
3
Efficient and effective delivery of our
capital programmes
Our capital programme performance has
been measured in recent years based
on time, cost, and quality. This year, we
placed greater emphasis on efficiency
and reducing the carbon impact of our
enhancement projects. This has been
achieved through the application of value
engineering techniques, innovation and
reviewing opportunities in our current
supply chain.
We have delivered strong performance
of 92.9 per cent against our new capital
programme delivery incentive (CPDi)
measure, surpassing the target of 85
per cent.
Community investment
This year, our direct community investment
(calculated using the B4SI method) totalled
£2.88 million, exceeding the £2.82 million
target. This has been achieved through
increased investment in environmental
and community partnerships, delivery of
education in schools, and the contribution
of time volunteered by our colleagues
across the business.
In addition to the direct community
investment, we contributed 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.
Performance across a range of
trusted investor indices
We have participated in a range of
independently assessed global ESG ratings
and indices for many years to benchmark
our approach against best practice and
emerging sustainability challenges.
Our approach to responsible business
has ensured consistent upper quartile
performance in selected ESG ratings and
indices. After a year’s absence, we have
returned as a component of the Dow
Jones Sustainability World Index along
with just three other companies from the
Multi Utilities and Water sector. In the
Sustainalytics assessment, we continue
to be classified as low risk and a top ten
performer in the Utilities industry group.
We are proud to have maintained an MSCI
ESG rating of AA since 2014.
The external perspective provided by these
ESG ratings is beyond the UK water sector
and compares our performance against
international water utilities, wider utilities
and non-utility companies. We continue
to respond to best practice and emerging
ESG trends to maintain our performance
in these ratings and we are increasing our
engagement with investors on ESG matters.
Engaging with communities
Direct engagement with communities
provides the opportunity to hear what
customers think and to explore ways we
can work together to address issues and
make the North West stronger. During the
year we have been to some of the busiest
shopping centres in Liverpool, Manchester
and Blackpool inviting customers to drop
by and have a chat with our team about all
things water, wastewater, billing and more.
We have been engaging communities
and customers more widely on what they
care about to inform our business plan for
2025–30. See our case study on page 110.
Educating children about water
Alongside our ‘All about water’ education
sessions that inspire children on all things
water, this year we have teamed up with Mad
Science to engage children in Grime Scene
Assemblies. The fun interactive workshops
enable children to learn more about how the
sewer system works – and how problems can
arise when wet wipes and fatty food waste is
put down the drain. Overall, 23,000 children
benefited from our educational programmes
over the past 12 months – exceeding our 2025
target of 20,000.
Helping schools look after water
Work to help schools and colleges become
more water friendly has shown positive
results. The project, run in collaboration
with the Department for Education and
Groundwork Greater Manchester, visited
over 60 schools across the North West
to undertake a water efficiency visit that
included fixing leaking toilets, taps, urinals
and showers. As well as repairing leaks,
the project team also introduced water
efficiency devices, such as save-a-flush
devices, tap inserts and shower heads, to
help reduce ongoing water consumption.
106
unitedutilities.com/corporate
Building a stronger North West
Our governance performance in 2022/23
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
Our
governance
performance
creates
value for
Communities
Suppliers
Customers
Investors
Media
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
This year, our direct community investment
things water, wastewater, billing and more.
Efficient and effective delivery of our
capital programmes
Our capital programme performance has
been measured in recent years based
on time, cost, and quality. This year, we
placed greater emphasis on efficiency
and reducing the carbon impact of our
enhancement projects. This has been
achieved through the application of value
engineering techniques, innovation and
reviewing opportunities in our current
supply chain.
We have delivered strong performance
of 92.9 per cent against our new capital
programme delivery incentive (CPDi)
measure, surpassing the target of 85
per cent.
Community investment
(calculated using the B4SI method) totalled
£2.88 million, exceeding the £2.82 million
target. This has been achieved through
increased investment in environmental
and community partnerships, delivery of
education in schools, and the contribution
of time volunteered by our colleagues
across the business.
In addition to the direct community
investment, we contributed 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.
Performance across a range of
trusted investor indices
We have participated in a range of
independently assessed global ESG ratings
and indices for many years to benchmark
our approach against best practice and
emerging sustainability challenges.
Our approach to responsible business
has ensured consistent upper quartile
performance in selected ESG ratings and
indices. After a year’s absence, we have
returned as a component of the Dow
Jones Sustainability World Index along
with just three other companies from the
Multi Utilities and Water sector. In the
Sustainalytics assessment, we continue
to be classified as low risk and a top ten
performer in the Utilities industry group.
We are proud to have maintained an MSCI
ESG rating of AA since 2014.
The external perspective provided by these
ESG ratings is beyond the UK water sector
and compares our performance against
international water utilities, wider utilities
and non-utility companies. We continue
to respond to best practice and emerging
ESG trends to maintain our performance
in these ratings and we are increasing our
engagement with investors on ESG matters.
Engaging with communities
Direct engagement with communities
provides the opportunity to hear what
customers think and to explore ways we
can work together to address issues and
make the North West stronger. During the
year we have been to some of the busiest
shopping centres in Liverpool, Manchester
and Blackpool inviting customers to drop
by and have a chat with our team about all
We have been engaging communities
and customers more widely on what they
care about to inform our business plan for
2025–30. See our case study on page 110.
Educating children about water
Alongside our ‘All about water’ education
sessions that inspire children on all things
water, this year we have teamed up with Mad
Science to engage children in Grime Scene
Assemblies. The fun interactive workshops
enable children to learn more about how the
sewer system works – and how problems can
arise when wet wipes and fatty food waste is
put down the drain. Overall, 23,000 children
benefited from our educational programmes
over the past 12 months – exceeding our 2025
target of 20,000.
Helping schools look after water
Work to help schools and colleges become
more water friendly has shown positive
results. The project, run in collaboration
with the Department for Education and
Groundwork Greater Manchester, visited
over 60 schools across the North West
to undertake a water efficiency visit that
included fixing leaking toilets, taps, urinals
and showers. As well as repairing leaks,
the project team also introduced water
efficiency devices, such as save-a-flush
devices, tap inserts and shower heads, to
help reduce ongoing water consumption.
In total, the project fixed 368 leaks and
fitted 319 water efficiency devices saving
an estimated 329,000 litres per day or
5,222 litres per day per school. Over a
year, each school saved enough water
to fill an Olympic sized pool, saving
water and saving money. We are now
developing plans to offer water efficiency
visits to more non-household customers
across the whole of the North West as
part of our plans for 2025–30.
SuDS in schools
Schools across the region have benefited
from our £1 million Sustainable Drainage
for Schools programme. We have funded
the award-winning project with support
from the Department for Education and
delivered in partnership with the designer
Atkins Ltd and contractor Horticon Ltd.
As part of the pilot project, schools
have had sustainable drainage solutions
installed on playgrounds to help harvest
water and divert rainwater away from
entering the sewer system. SuDS are a
fantastic way to incorporate a multitude
of benefits into school spaces through
increased biodiversity, water quality and
carbon sequestration while reducing key
issues like flood risk and strain on the
sewer network.
Partnership working
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.
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 projects to receive funding
this year is The Land Trust’s Green Angels
project at Port Sunlight River Park on the
Wirral. The park, a former landfill site on
the banks of the River Mersey, has been
the venue for free workshops, walks
and bug hunts to find out what kinds of
creatures call the water their home. A
family summer day also brought children
and adults together for mindfulness
sessions, guided walks, treasure hunts and
craft activities. Giving people the chance
to get hands-on is not only helping the
park and improving it for the wildlife, but
it is also offering a great boost for their
physical and mental health and providing
the opportunity to learn new skills.
We have been working with communities
in Oldham to improve the local
environment and bring communities
together. See our case study on page 111.
Working with suppliers
Suppliers play an important role in
delivering our services and, alongside
our colleagues, often act as the face
of our business for many customers
and communities. Events in recent
years have shown the importance of
our relationships with our supply chain
partners and we want this to continue to
grow as part of our United Supply Chain
approach. We work constantly to improve
our processes, procurement routes and
overall market engagement to ensure that
our core service delivers maximum value
to internal stakeholders, key suppliers,
our broader supply chain and ultimately,
customers. Our activities support around
15,500 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.
External recognition and benchmarking
United Utilities Group PLC has been
included in the FTSE4Good Index
Series since June 2001. Latest review
December 2022.
In the annual review of July 2022 our
status was assessed as Prime.(1)
We received an overall Advanced ESG
score by Moody’s ESG of 64/100 in year
2021 and United Utilities Group PLC has
been reconfirmed as a constituent of the
Euronext Vigeo UK 20 and Europe 120
indices in December 2022.(2)
(1)
issgovernance.com/esg/ratings/badge
(2) moodys.com/esg
(3) msci.com/notice-and-disclaimer
(4) sustainalytics.com/legal-disclaimers
As of October 2022, United Utilities Group
PLC received an MSCI ESG rating of AA.(3)
For 2022, our overall performance was 81%
and we are proud to be a component of
the iconic Dow Jones Sustainability World
Index. Effective December 2022.
In November 2022, United Utilities Group
PLC received an ESG Risk Rating of 11.4
and was assessed by Sustainalytics to
be at low risk of experiencing material
financial impacts from ESG factors.(4)
In 2022 we achieved CDP leadership
scores in both climate change (A-) and
supplier engagement (A) assessments.
106
unitedutilities.com/corporate
Stock code: UU.
107
Building a stronger North West
Our governance performance in 2022/23
Payment practices are critical to United
Utilities and our suppliers – this can be a
critical time for suppliers, who are also
facing significant rises in the cost of living.
As a signatory to the Prompt Payment
Code and in addition to the commitment to
pay at least 95 per cent of invoices within
60 working days, we also continue to pay
95 per cent of our small and medium-sized
enterprise (SME) suppliers within 30 days.
Over the last year we have continued to
outperform our target to pay suppliers
promptly, with 99 per cent of our invoices
paid within 60 days, and an average
time to pay of 12 days. We act fairly and
transparently with all our suppliers and as
a signatory to the Code, comply fully with
the reporting requirements.
We were awarded a ‘Fast Payer Award’ by
Good Business Pays for the second year
running. 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. Alongside this, in March 2023
we took part in a cross-sector Industry
Leaders Advisory Group with Liz Barclay,
Small Business Commissioner, to discuss
the importance of the Prompt Payment
Code in supply chain management.
United Supply Chain
Our United Supply Chain (USC) approach
plays a fundamental part in achieving our
purpose. USC helps to mitigate risk, build
resilience, improve compliance, assurance
and ultimately deliver better value within
a high quality supply chain and will help to
deliver our responsible sourcing principles
effectively throughout our supply chain.
USC recognises suppliers as an extension
of United Utilities and they 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.
Through our continued membership of
the Supply Chain Sustainability School
(SCSS) we can provide additional training
and events to assist our suppliers in
their own sustainability efforts. We have
created tailored learning pathways for
over 70 of our key suppliers aligned to our
responsible sourcing principles and have
held several sponsored workshops. We
have achieved the maximum SCSS ‘Gold’
status in 2022, due largely in part to our
continued commitment through USC.
During the year the USC approach was
shortlisted for a 2022 CIPS Excellence in
Procurement Award, demonstrating how
it remains at the forefront of industry
thought leadership on collaboration with
supply partners.
Supply chain innovation
We have been leading a pilot project
in partnership with D ^ wr Cymru (Welsh
Water), Jacobs, Severn Trent Water and
International Synergies Ltd to identify
opportunities for the supply and demand
of reused and repurposed materials
to create a new test market. Benefits
include using fewer virgin materials,
which in turn will help reduce emissions
and ultimately pollution, lowering the
environmental impact of the industry and
developing a new, inclusive relationship
across the sector and supply chain. For
more information on United Utilities
Industrial Symbiosis project see https://
waterinnovation.challenges.org/
case-studies/community-creatives-
championed/.
Sustainable finance
Our sustainable finance framework allows
us to raise financing based on our strong
ESG credentials alongside conventional
issuance. During the year we secured a
£150 million loan through the framework
adding to the sustainable bond issued
in 2021. An allocation and impact report
detailing the investments made with
the proceeds of funds raised under the
framework is expected to be published in
July 2023.
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 retain the Fair Tax Mark
independent certification for a fourth
consecutive year. Every year, the group
pays significant contributions to the
public finances on its own behalf as well
as collecting and paying further amounts
for our more than 5,000 strong workforce
– see pages 208 to 209.
Business ethics
We aim to maintain high ethical
standards of business conduct and
corporate governance – those systems
and processes through which our
organisation is managed, controlled
and held accountable. This extends to
our commercial activities and we have
retained the Chartered Institute for
Procurement and Supply (CIPS) Corporate
Ethics Mark for the fourth consecutive
year. This requires all relevant commercial
colleagues to undertake online training
covering human rights and forced labour
in supply chains; the implications, the
risks and how to respond. To complete
the training, participants must reach the
required pass mark.
During the past year we have undertaken
a gap analysis of our approach to
modern slavery and human trafficking
with the help of independent social
enterprise Slave-Free Alliance. The
objective of the analysis was to assess
our modern slavery initiatives, identify
good practice and main risk areas, and
develop a set of recommendations for
continuous improvement. The report
identified several areas of best practice
and highlighted areas for focus in
our policies, due diligence and risk
mitigation approach. We are using the
recommendations to build upon our
approach over the coming year. Our anti-
slavery and human trafficking statement
2023 can be found on our website at
unitedutilities.com/human-rights.
U
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1
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a
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2
3
108
unitedutilities.com/corporate
Building a stronger North West
Our governance performance in 2022/23
Payment practices are critical to United
Through our continued membership of
Recognising the group’s ongoing
Utilities and our suppliers – this can be a
the Supply Chain Sustainability School
commitment to paying its fair share of
critical time for suppliers, who are also
(SCSS) we can provide additional training
tax and acting in an open and transparent
facing significant rises in the cost of living.
and events to assist our suppliers in
manner in relation to its tax affairs, we
As a signatory to the Prompt Payment
their own sustainability efforts. We have
were delighted to retain the Fair Tax Mark
Code and in addition to the commitment to
created tailored learning pathways for
independent certification for a fourth
l
pay at least 95 per cent of invoices within
over 70 of our key suppliers aligned to our
consecutive year. Every year, the group
60 working days, we also continue to pay
responsible sourcing principles and have
pays significant contributions to the
l
95 per cent of our small and medium-sized
held several sponsored workshops. We
public finances on its own behalf as well
enterprise (SME) suppliers within 30 days.
have achieved the maximum SCSS ‘Gold’
as collecting and paying further amounts
Over the last year we have continued to
status in 2022, due largely in part to our
for our more than 5,000 strong workforce
outperform our target to pay suppliers
continued commitment through USC.
– see pages 208 to 209.
promptly, with 99 per cent of our invoices
paid within 60 days, and an average
time to pay of 12 days. We act fairly and
transparently with all our suppliers and as
a signatory to the Code, comply fully with
the reporting requirements.
During the year the USC approach was
shortlisted for a 2022 CIPS Excellence in
Procurement Award, demonstrating how
it remains at the forefront of industry
thought leadership on collaboration with
supply partners.
We were awarded a ‘Fast Payer Award’ by
Good Business Pays for the second year
Supply chain innovation
running. This award recognises FTSE350
We have been leading a pilot project
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
in partnership with D ^ wr Cymru (Welsh
Water), Jacobs, Severn Trent Water and
International Synergies Ltd to identify
opportunities for the supply and demand
paying 95 per cent or more of all invoices
of reused and repurposed materials
on time. Alongside this, in March 2023
we took part in a cross-sector Industry
to create a new test market. Benefits
include using fewer virgin materials,
Leaders Advisory Group with Liz Barclay,
which in turn will help reduce emissions
Small Business Commissioner, to discuss
and ultimately pollution, lowering the
the importance of the Prompt Payment
environmental impact of the industry and
Business ethics
We aim to maintain high ethical
standards of business conduct and
corporate governance – those systems
and processes through which our
organisation is managed, controlled
and held accountable. This extends to
our commercial activities and we have
retained the Chartered Institute for
Procurement and Supply (CIPS) Corporate
Ethics Mark for the fourth consecutive
year. This requires all relevant commercial
colleagues to undertake online training
covering human rights and forced labour
in supply chains; the implications, the
risks and how to respond. To complete
the training, participants must reach the
required pass mark.
Code in supply chain management.
developing a new, inclusive relationship
During the past year we have undertaken
United Supply Chain
across the sector and supply chain. For
a gap analysis of our approach to
more information on United Utilities
modern slavery and human trafficking
Our United Supply Chain (USC) approach
Industrial Symbiosis project see https://
with the help of independent social
plays a fundamental part in achieving our
waterinnovation.challenges.org/
enterprise Slave-Free Alliance. The
purpose. USC helps to mitigate risk, build
case-studies/community-creatives-
resilience, improve compliance, assurance
championed/.
and ultimately deliver better value within
a high quality supply chain and will help to
Sustainable finance
objective of the analysis was to assess
our modern slavery initiatives, identify
good practice and main risk areas, and
develop a set of recommendations for
deliver our responsible sourcing principles
Our sustainable finance framework allows
continuous improvement. The report
effectively throughout our supply chain.
us to raise financing based on our strong
identified several areas of best practice
USC recognises suppliers as an extension
ESG credentials alongside conventional
and highlighted areas for focus in
of United Utilities and they 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
issuance. During the year we secured a
our policies, due diligence and risk
£150 million loan through the framework
mitigation approach. We are using the
adding to the sustainable bond issued
in 2021. An allocation and impact report
detailing the investments made with
recommendations to build upon our
approach over the coming year. Our anti-
slavery and human trafficking statement
become leaders and to work jointly with
the proceeds of funds raised under the
2023 can be found on our website at
us to deliver improvements across ESG
framework is expected to be published in
unitedutilities.com/human-rights.
areas and to improve value for customers.
July 2023.
U
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1
M
a
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c
h
2
0
2
3
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
l
l
Assurance key
ITV
Independent third-party verification
RRA
Regulatory reporting assurance
IAT
Internal audit team
Measure
2025 target
2022/23
Performance
2021/22
2020/21
S
t
r
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t
e
g
i
c
r
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p
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t
Status
n
o
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a
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n
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n
L
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i
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n
L
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2
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L
i
Credit rating UUW
(Moody's, S&P, Fitch)(1)
Maintain Sustainable
Finance framework
Anti-bribery: percentage of
identified colleagues completing
required training
Number of children benefiting
from education materials
A3, BBB+, A-
Available/
continued
issuance
A3, BBB+, A-
(Stable
outlook)
A3, BBB+, A-
(Stable
outlook)
A3, BBB+, A-
(Stable
outlook)
ITV
Available
Available
Available
IAT
100%
100%
100%
94%
20,000
23,253
12,998
19,120
IAT
ITV
Partnership leverage(1)
1:4
1:4
1:4
1:7
RRA
ITV
ITV
IAT
Invoices paid within 60 days
At least 95%
98.91%
99.34%
99.55%
Average time taken to
pay invoices
Supplier Relationship
Management score
CIPS ethical mark
<28 days
12
13
13
90%
90%
54%
69%
Retain
accreditation
Retained
Retained
Retained
ITV
Percentage of targeted suppliers
signed up to United Supply Chain
100%
89%
90%
38%
IAT
Percentage of partner and
strategic suppliers that have
sustainability risk assessment
in place
Percentage of suppliers in high
risk categories (in sustainability
risk assessments) covered by
enhanced due diligence audits
UK Corporate Governance Code
Fair Tax Mark
Living Wage accreditation
Pension Quality Mark +
75%
73%
72%
35%
IAT
5%
3%
Delivery
scheduled
from 2022
Delivery
scheduled
from 2021
IAT
Maintain
compliance
Retain
accreditation
Secure
and retain
Retain
accreditation
Compliant
Compliant
Compliant
IAT
Retained
Retained
Retained
ITV
Retained
Retained
Secured
accreditation
ITV
Retained
Retained
Retained
ITV
(1) Measure relates to United Utilities Water Limited.
Investors
Investors
Investors
Communities
Customers
Communities
Customers
Suppliers
Media
Suppliers
Media
Suppliers
Media
Suppliers
Media
Suppliers
Media
Suppliers
Media
Suppliers
Media
Investors
Investors
Employees
Environment
Employees
Environment
108
unitedutilities.com/corporate
Stock code: UU.
109
Building a stronger North West
Our governance performance in 2022/23
Engaging with customers to inform our business plan
We carried out innovative ‘immersive’ research to
inform the development of our options hierarchy for
our Drainage and Wastewater Management Plan and
our Water Resources Management Plan. A three-
week ‘pop-up’ community, made up of customers,
business users and future bill payers, gave us incredible
detail into how customers view the future of water
and wastewater management in the North West.
The research showed customers’ appetite for more
education into using water responsibly, innovation and
smarter ways of working before the more traditional
grey measures.
All of these learnings are helping to shape our plans as
we prepare for AMP8 and beyond.
Delivering value for
Customers
Engaging with customers early on in our
business planning process for 2025–30
has allowed us to understand their
priorities and determine the focus for
AMP8 to make sure our investment and
actions reflects those priorities.
Our research included over 3,000 customers from
a wide range of our key customer groups, including
household, business, vulnerable, low income, future
and digitally-excluded customers. It provided an
early view of the minimum service expectations
of customers, as well as the growing priorities for
environmental improvement, and affordability. It
showed that ‘safe water to drink’ was the most
important priority for all customers.
Using a range of our own research projects as well
as industry and regulator research and independent
consultancy, we have continued to track customer
priorities over time to see how they have evolved.
These findings have allowed us to prioritise investment
in areas which matter most to customers, focusing
on schemes which improve resilience, environmental
benefits and affordability.
Learnings from
engagement have
allowed us to prioritise
investment in areas
which matter most to
customers, focusing
on schemes that
improve resilience,
environmental benefits
and affordability.”
Read more about
engaging with
stakeholders on
pages 56 to 57
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110
unitedutilities.com/corporate
Building a stronger North West
Our governance performance in 2022/23
Engaging with customers to inform our business plan
We carried out innovative ‘immersive’ research to
inform the development of our options hierarchy for
our Drainage and Wastewater Management Plan and
our Water Resources Management Plan. A three-
week ‘pop-up’ community, made up of customers,
business users and future bill payers, gave us incredible
detail into how customers view the future of water
and wastewater management in the North West.
The research showed customers’ appetite for more
education into using water responsibly, innovation and
smarter ways of working before the more traditional
grey measures.
All of these learnings are helping to shape our plans as
we prepare for AMP8 and beyond.
Delivering value for
Customers
Engaging with customers early on in our
business planning process for 2025–30
has allowed us to understand their
priorities and determine the focus for
AMP8 to make sure our investment and
actions reflects those priorities.
Our research included over 3,000 customers from
a wide range of our key customer groups, including
household, business, vulnerable, low income, future
and digitally-excluded customers. It provided an
early view of the minimum service expectations
of customers, as well as the growing priorities for
environmental improvement, and affordability. It
showed that ‘safe water to drink’ was the most
important priority for all customers.
Using a range of our own research projects as well
as industry and regulator research and independent
consultancy, we have continued to track customer
priorities over time to see how they have evolved.
These findings have allowed us to prioritise investment
in areas which matter most to customers, focusing
on schemes which improve resilience, environmental
benefits and affordability.
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Partnership working
creates a host of new
opportunities, brings
increased benefit for
customers, for the land,
and for the water, and
ensures we’re delivering
the right solution in the
right place.”
Learnings from
engagement have
allowed us to prioritise
investment in areas
which matter most to
customers, focusing
on schemes that
improve resilience,
environmental benefits
and affordability.”
Read more about
engaging with
stakeholders on
pages 56 to 57
Read more about
our work in
communities on
pages 106 to 107
Northern Roots partnership helps us create innovative
community-led behaviour change
To deliver the best possible outcomes
for customers and the wider
community, we know we must
work together.
l
Partnership working creates a host of new
opportunities, brings increased benefit for
customers, for the land, and for the water, and
ensures we’re delivering the right solution in the
right place.
Our partnership with Northern Roots is an example
of how we’re working with organisations that are best
placed to create an innovative model of community-
led behaviour change that can be adopted by
communities elsewhere across the UK.
Northern Roots is a project to create the UK’s
largest urban farm and country park on 160 acres
of under-used green space in the heart of Oldham,
in Greater Manchester. Developed for and with
local communities, the vision for Northern Roots
is to create sustainable economic, social and
environmental benefits for those communities. This
includes working to enhance the quality of the large
volume of water that runs through the Northern
Roots site and into the River Medlock.
We identified Oldham as an area with relatively
poor performance in terms of sewer blockages, and
sewer litter impacting the receiving environment.
We partnered with Northern Roots to create a
unique new project, working with local communities
in Glodwick to better understand practices and
behaviours linked to non-flushable items, such as
wet wipes and nappies being flushed down toilets,
or fats, oils and grease being poured down drains.
The project used creative activities to empower local
residents to take simple steps to change behaviour
– which is more cost efficient and sustainable than
clearing blockages or resolving the problems caused
by unsafe sewer behaviour.
In-depth discussions, focus groups and personal
interviews were carried out with residents, with
the research highlighting a fundamental lack
of awareness of what constitutes unsafe sewer
behaviour. Residents emphasised the need for simple,
educational communication and recommended
a tailored approach to resonate with different
demographics. The research has given us a baseline
from which the impact of future campaigns in the
area can be measured, allowing us to produce
effective campaigns for sewer safety in the future.
Delivering value for
Communities
Customers
Customers
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Stock code: UU.
111
Creating long-term sustainable value
Our financial performance in 2022/23
This has been a challenging year for the
business. Revenue declined 2 per cent,
mainly driven by lower than expected
consumption while underlying operating
profit fell 28 per cent or £169 million,
primarily due to the reduction in revenue
and inflationary pressures on core costs,
particularly power and chemicals. The
higher inflation has also significantly
increased non-cash interest expense on
our index-linked debt, which alongside
the lower operating profit, has resulted
in a small underlying loss for the year of
£9 million and an underlying earnings
per share of minus 1.3 pence.
However, the inflation linkage for both
the Regulatory Capital Value (RCV)
and the allowance for total expenditure
(totex), provides additional longer term
value that is not reflected in the income
statement. This has contributed to a
robust economic performance, including
an increase in our return on regulated
equity of 11.0 per cent. This extra value
accruing to the RCV has resulted in a
reduction in RCV gearing to 58 per cent,
consistent with our strong balance sheet
and supporting our dividend policy.
Underlying operating profit(1)
2021/22
2020/21
2019/20
2018/19
2017/18
£441m
£610m
£602m
£732m
£678m
(1)
A guide to APMs and a reconciliation between underlying
profit and reported profit is shown on pages 118 to 119.
Reported operating profit
2022/23
2022/21
2021/20
2020/19
2019/18
£441m
£610m
£602m
£630m
£635m
Revenue
1,863
70
(80)
(22)
(6)
1,824
£m
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Underlying
and reported,
year to 31 March
2022
Regulatory
revenue
changes
Non-household
consumption
impact
Household
consumption
impact
Other
Underlying
and reported,
year to 31 March
2023
Revenue was down £38 million, at £1,824 million, largely reflecting lower
consumption more than offsetting the allowed regulatory revenue increase.
In 2022/23 we had a £70 million increase in the revenue cap due to
regulatory adjustments, incorporating £21 million in relation to ODI rewards
earned in 2020/21 and a 4.6 per cent CPIH-linked increase partly offset by
1.3 per cent real reduction in allowed wholesale revenues as set out in our
PR19 Final Determination.
Non-household revenue has decreased by £80 million compared with
last year and household consumption has decreased by £22 million, as
consumption across both customer groups has changed since charges and
tariffs for the year were set in December 2021. Taking into consideration the
regulatory adjustments, revenue for the year represents a £41 million under-
recovery against allowed revenue, which, under the revenue control, will be
recoverable in two years’ time.
Operating profit
610
(38)
(81)
(20)
(5)
(25)
441
27
Power
25
Chemicals
8
8
13
Labour
Regulatory fees
Other
£m
700
600
400
200
0
Underlying and
reported, year
to 31 March
2022
Revenue
decrease
Infationary
increases
Extreme
weather
costs
Costs
driving ODI
performance
Other costs,
largely due
to inflation
Underlying and
reported, year
to 31 March
2023
Operating profit at £441 million was £169 million lower than last year,
largely reflecting the decrease in revenue, inflation impacting our core
cost base, and the impact of operational incidents as a result of extreme
weather during the year.
Inflationary pressures have impacted input costs, resulting in an £81 million
increase. The largest increases have been to power, chemicals, labour costs
and regulatory fees, where we have incurred an additional £27 million,
£25 million, £8 million and £8 million respectively. We have experienced
smaller inflationary increases to other costs of £13 million, which on a cost
base of £518 million represents an inflationary impact of 3 per cent, which
was less than CPIH inflation.
Our regulatory model allows for indexation of our overall totex allowance
(including capital expenditure) and, with average CPIH of 8.9 per cent, we
are managing to contain the inflation impact on overall costs within the
totex inflation allowance.
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Creating long-term sustainable value
Our financial performance in 2022/23
This has been a challenging year for the
Revenue
1,863
70
(80)
(22)
(6)
1,824
business. Revenue declined 2 per cent,
mainly driven by lower than expected
consumption while underlying operating
profit fell 28 per cent or £169 million,
primarily due to the reduction in revenue
and inflationary pressures on core costs,
particularly power and chemicals. The
higher inflation has also significantly
increased non-cash interest expense on
our index-linked debt, which alongside
the lower operating profit, has resulted
in a small underlying loss for the year of
£9 million and an underlying earnings
per share of minus 1.3 pence.
However, the inflation linkage for both
the Regulatory Capital Value (RCV)
and the allowance for total expenditure
(totex), provides additional longer term
value that is not reflected in the income
statement. This has contributed to a
robust economic performance, including
an increase in our return on regulated
equity of 11.0 per cent. This extra value
accruing to the RCV has resulted in a
reduction in RCV gearing to 58 per cent,
consistent with our strong balance sheet
and supporting our dividend policy.
Underlying operating profit(1)
£441m
£m
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
£m
700
600
400
200
0
(1)
A guide to APMs and a reconciliation between underlying
profit and reported profit is shown on pages 118 to 119.
Reported operating profit
£441m
£610m
£602m
£732m
£678m
£610m
£602m
£630m
£635m
2021/22
2020/21
2019/20
2018/19
2017/18
2022/23
2022/21
2021/20
2020/19
2019/18
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f
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3
1
M
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2
0
2
3
Underlying
and reported,
year to 31 March
2022
Regulatory
revenue
changes
Non-household
consumption
impact
Household
consumption
impact
Other
Underlying
and reported,
year to 31 March
2023
Revenue was down £38 million, at £1,824 million, largely reflecting lower
consumption more than offsetting the allowed regulatory revenue increase.
In 2022/23 we had a £70 million increase in the revenue cap due to
regulatory adjustments, incorporating £21 million in relation to ODI rewards
earned in 2020/21 and a 4.6 per cent CPIH-linked increase partly offset by
1.3 per cent real reduction in allowed wholesale revenues as set out in our
PR19 Final Determination.
Non-household revenue has decreased by £80 million compared with
last year and household consumption has decreased by £22 million, as
consumption across both customer groups has changed since charges and
tariffs for the year were set in December 2021. Taking into consideration the
regulatory adjustments, revenue for the year represents a £41 million under-
recovery against allowed revenue, which, under the revenue control, will be
recoverable in two years’ time.
Operating profit
610
(38)
(81)
(20)
(5)
(25)
441
27
Power
25
Chemicals
8
8
13
Labour
Regulatory fees
Other
Underlying and
reported, year
to 31 March
2022
Revenue
decrease
Infationary
increases
Extreme
weather
costs
Costs
driving ODI
performance
Other costs,
Underlying and
largely due
reported, year
to inflation
to 31 March
2023
Operating profit at £441 million was £169 million lower than last year,
largely reflecting the decrease in revenue, inflation impacting our core
cost base, and the impact of operational incidents as a result of extreme
weather during the year.
Inflationary pressures have impacted input costs, resulting in an £81 million
increase. The largest increases have been to power, chemicals, labour costs
and regulatory fees, where we have incurred an additional £27 million,
£25 million, £8 million and £8 million respectively. We have experienced
smaller inflationary increases to other costs of £13 million, which on a cost
base of £518 million represents an inflationary impact of 3 per cent, which
was less than CPIH inflation.
Our regulatory model allows for indexation of our overall totex allowance
(including capital expenditure) and, with average CPIH of 8.9 per cent, we
are managing to contain the inflation impact on overall costs within the
totex inflation allowance.
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Read more about
how we responded
to the extreme
weather on page 48
Net finance expense
The underlying net finance expense of £475 million
was £169 million higher than last year mainly due
to significantly higher inflation resulting in a
£520 million increase in the non-cash indexation
on our debt and derivative portfolio, partly offset
by higher capitalised interest of £127 million
(2021/22: £53 million) and higher net pension interest
income of £29 million (2021/22: £14 million).
Cash interest of £102 million was £16 million lower
than last year. Cash interest excludes non-cash items
mainly comprising the indexation on our debt and
derivative portfolio, capitalised interest, and net
pension interest income.
Reported net finance expense of £216 million was
£48 million higher than last year, reflecting the
£169 million increase in the underlying net finance
expense, partly offset by a £123 million increase in
net fair value gains on debt and derivatives (excluding
interest on debt and derivatives under fair value
option) from £138 million last year to £261 million
this year.
Joint ventures
In the prior year we recognised a £1.8 million net share
of losses from joint ventures primarily in relation to
Water Plus. For the year to 31 March 2023, Water Plus’s
financial performance has improved to a breakeven
position, and we therefore recognise neither a share of
profit or loss in our income statement.
Extreme weather events adversely impacted not
only our ODI performance, but also drove an adverse
operating cost impact of £20 million.
The £5 million of additional expenditure driving
improvements to ODI performance was primarily in
relation to infrastructure renewals expenditure (IRE)
investment in Dynamic Network Management (DNM)
– our innovative approach to managing our sewer
network – and improving water quality.
The rising cost of living increases the strain on
customers’ ability to pay their bills and therefore
cash collection. However, we have 81 per cent of
household customers on direct debit and other
payment plans and, with the help of proactive
engagement, innovative solutions and tailored
assistance, we have achieved our best ever
performance for cash collection. This has contributed
to bad debt remaining at an all time low 1.8 per cent
of household revenue.
Profit/(loss) before tax
Underlying loss before tax of £34 million was compared
to a £302 million underlying profit before tax last year.
The £336 million difference reflects the £169 million
reduction in underlying operating profit and a
£169 million increase in underlying net finance
expense, partly offset by a decrease in the share of
losses of joint ventures of £2 million. Underlying profit
before tax reflects consistently applied presentational
adjustments as outlined on pages 118 to 119.
Reported profit before tax decreased by £184 million
to £256 million, reflecting the £169 million decrease in
reported operating profit and a £48 million increase
in reported net finance expense, partly offset by a
£31 million profit on disposal of our subsidiary United
Utilities Renewable Energy Limited, and a decrease in
the share of losses of joint ventures of £2 million.
£1.8bn
£441m
1.8%
revenue impacted by lower consumption,
with £41 million to be recovered in
2024/25
operating profit reduced due to lower
revenue and inflation on core costs,
particularly energy and chemicals
bad debt as a percentage of household
revenue remains stable with strong cash
collection despite the rising cost of living
112
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Stock code: UU.
113
Creating long-term sustainable value
Our financial performance in 2022/23
Profit/(loss) after tax and earnings per share
£m
400
300
200
100
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-100
£367m
£(169)m
£214m
£205m
£2m
£(169)m
£(40)m
£(9)m
Underlying
profit after
tax year to
31 March
2022
Underlying
operating
profit
decrease
Underlying
net finance
expense
increase
Movement
in share
of joint
ventures
Reduction in
underlying
Tax credit
Underlying
loss after
tax year to
31 March
2023
Adjusted
items*
Reported
profit after
tax year to
31 March
2023
* Adjusted items are set out on pages 118 and 119
The underlying loss after tax of £9 million is £376 million lower
than the underlying profit after tax of £367 million last year,
reflecting the £336 million reduction in underlying profit before
tax and a £40 million reduction in underlying tax credit.
Reported profit after tax is higher at £205 million and reported
earnings per share at 30.0 pence per share, with the adjusted
items between underlying and reported profit after tax set out
on pages 118 to 119.
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 are delighted to have retained
the Fair Tax Mark independent certification for a fourth year.
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 2022/23 were around
£229 million and included business rates, employment taxes,
environmental taxes, and other regulatory service fees such as
water abstraction charges.
In the current year, we received a net corporation tax repayment
of £1 million which represents an effective cash tax rate of
0 per cent. The key reconciling item to the headline rate of
corporation tax continues to be allowable tax deductions on
capital investment, including the temporary capital allowance
‘super deductions’.
The group recognised a current tax credit of £25 million due to
the utilisation a prior year adjustment to recognise the utilisation
of tax losses previously assumed to be carried forwards.
The deferred tax charge of £77 million is £486 million lower
than last year primarily due to a £403 million charge in the prior
year relating to the increase in the tax rate from 19 per cent to
25 per cent from 1 April 2023.
There are £171 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 30.34 pence per
ordinary share in respect of the year ended 31 March 2023. Taken
together with the interim dividend of 15.17 pence per ordinary
share, paid in February, this results in a total dividend per ordinary
share for 2022/23 of 45.51 pence. This is an increase of 4.6 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 4.6 per cent increase is
based on the CPIH element included within allowed regulated
revenue for the 2022/23 financial year (i.e. the movement in CPIH
between November 2020 and November 2021).
The final dividend is expected to be paid on 1 August 2023 to
shareholders on the register at the close of business on 23 June
2023. The ex-dividend date is 22 June 2023. The election date for
the Dividend Reinvestment Plan is 11 July 2023.
Cash flow
Net cash generated from continuing operating activities for the
year to 31 March 2023 was £788 million, £146 million lower than
£934 million last year, principally due to the reduced revenue of
£38 million and inflationary impacts on costs of £81 million.
The net cash generated from continuing operating activities
supports the dividends paid for the year of £301 million and partially
funds some of the group’s net capital expenditure of £690 million,
with the balance being funded by net borrowings and cash and
cash equivalents. This forms part of a £2.0 billion capital
programme undertaken in the first three years of the period,
representing 62 per cent delivery of our AMP7 programme.
We have been able to deliver this expenditure effectively, scoring
92.9 per cent against our Capital Programme Delivery incentive
(CPDi) measure this year.
Pensions
As at 31 March 2023, the group had an IAS 19 net pension surplus
of £601 million, compared with a surplus of £1,017 million at
31 March 2022. This £416 million decrease principally reflects
a decrease in the value of the schemes’ assets due to changes
in financial conditions over the course of the financial year, as
well as experience losses resulting from actual inflation being
higher than assumed at 1 April 2022. This more than offsets the
significant reduction in the schemes’ liabilities during the year
due to an increase in the average discount rate since the start
of the year and a lower long-term RPI assumption.
Further detail on pensions is provided in note 18 (‘Retirement
benefits’) of the consolidated financial statements on page 255.
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Creating long-term sustainable value
Our financial performance in 2022/23
Profit/(loss) after tax and earnings per share
£367m
£m
400
300
200
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0
-100
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£(169)m
£214m
£205m
£2m
£(169)m
£(40)m
£(9)m
Underlying
profit after
tax year to
31 March
2022
Underlying
operating
profit
decrease
Underlying
net finance
expense
increase
Movement
Reduction in
Underlying
in share
of joint
ventures
underlying
Tax credit
loss after
tax year to
31 March
2023
Adjusted
items*
Reported
profit after
tax year to
31 March
2023
* Adjusted items are set out on pages 118 and 119
Dividend per share
The underlying loss after tax of £9 million is £376 million lower
than the underlying profit after tax of £367 million last year,
reflecting the £336 million reduction in underlying profit before
tax and a £40 million reduction in underlying tax credit.
Reported profit after tax is higher at £205 million and reported
earnings per share at 30.0 pence per share, with the adjusted
items between underlying and reported profit after tax set out
on pages 118 to 119.
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 are delighted to have retained
the Fair Tax Mark independent certification for a fourth year.
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 2022/23 were around
£229 million and included business rates, employment taxes,
environmental taxes, and other regulatory service fees such as
water abstraction charges.
In the current year, we received a net corporation tax repayment
of £1 million which represents an effective cash tax rate of
0 per cent. The key reconciling item to the headline rate of
corporation tax continues to be allowable tax deductions on
capital investment, including the temporary capital allowance
‘super deductions’.
The group recognised a current tax credit of £25 million due to
the utilisation a prior year adjustment to recognise the utilisation
of tax losses previously assumed to be carried forwards.
The deferred tax charge of £77 million is £486 million lower
than last year primarily due to a £403 million charge in the prior
year relating to the increase in the tax rate from 19 per cent to
25 per cent from 1 April 2023.
There are £171 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.
The Board has proposed a final dividend of 30.34 pence per
ordinary share in respect of the year ended 31 March 2023. Taken
together with the interim dividend of 15.17 pence per ordinary
share, paid in February, this results in a total dividend per ordinary
share for 2022/23 of 45.51 pence. This is an increase of 4.6 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 4.6 per cent increase is
based on the CPIH element included within allowed regulated
revenue for the 2022/23 financial year (i.e. the movement in CPIH
between November 2020 and November 2021).
The final dividend is expected to be paid on 1 August 2023 to
shareholders on the register at the close of business on 23 June
2023. The ex-dividend date is 22 June 2023. The election date for
the Dividend Reinvestment Plan is 11 July 2023.
Cash flow
Net cash generated from continuing operating activities for the
year to 31 March 2023 was £788 million, £146 million lower than
£934 million last year, principally due to the reduced revenue of
£38 million and inflationary impacts on costs of £81 million.
The net cash generated from continuing operating activities
supports the dividends paid for the year of £301 million and partially
funds some of the group’s net capital expenditure of £690 million,
with the balance being funded by net borrowings and cash and
cash equivalents. This forms part of a £2.0 billion capital
programme undertaken in the first three years of the period,
representing 62 per cent delivery of our AMP7 programme.
We have been able to deliver this expenditure effectively, scoring
92.9 per cent against our Capital Programme Delivery incentive
(CPDi) measure this year.
Pensions
As at 31 March 2023, the group had an IAS 19 net pension surplus
of £601 million, compared with a surplus of £1,017 million at
31 March 2022. This £416 million decrease principally reflects
a decrease in the value of the schemes’ assets due to changes
in financial conditions over the course of the financial year, as
well as experience losses resulting from actual inflation being
higher than assumed at 1 April 2022. This more than offsets the
significant reduction in the schemes’ liabilities during the year
due to an increase in the average discount rate since the start
of the year and a lower long-term RPI assumption.
Further detail on pensions is provided in note 18 (‘Retirement
benefits’) of the consolidated financial statements on page 255.
Financing
Net debt at 31 March 2023 was £8,201 million,
compared with £7,570 million at 31 March 2022. This
comprises gross borrowings with a carrying value of
£8,435 million and net derivative liabilities hedging
specific debt instruments of £106 million, net of cash
and short-term deposits of £340 million.
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.
Gearing, measured as group net debt (including
a £76 million loan receivable from a joint venture)
divided by United Utilities Water Limited’s (UUW’s)
adjusted regulatory capital value (RCV, adjusted for
actual spend, timing differences, and including the
full expected value of AMP7 ex-post adjustment
mechanisms) of £14.0 billion, was 58 per cent at
31 March 2023, slightly lower than the equivalent
59 per cent at 31 March 2022, and remains within
our target range of 55 to 65 per cent.
Cost of debt
As at 31 March 2023, the group had approximately
£3.4 billion of RPI-linked instruments and £0.5 billion
of CPI or CPIH-linked instruments held as debt.
Including swaps, the group has RPI-linked debt
exposure of £3.3 billion at an average real rate of 1.3
per cent, and £1.2 billion of CPI or CPIH-linked debt
exposure at an average real rate of minus 0.6 per cent.
A significantly higher RPI inflation charge compared
with the same period last year contributed to the
group’s average effective interest rate of 8.0 per cent
being higher than the rate of 5.1 per cent last year.
More information on this can be found on page 119.
The group has fixed the interest rates on its non
index-linked debt in line with its 10-year reducing
balance basis at a net effective nominal interest rate
of 2.2 to 2.9 per cent for the remainder of the AMP7
regulatory period.
Summary of net debt movement
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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), 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.
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 £1.8 billion, taking advantage of attractive funding
opportunities available and extending our liquidity out to August 2025.
In the year to March 2023 we raised £638 million of term funding including new/
renewed bank facilities.
Following the year end we issued a further £400 million of term funding,
with the proceeds of a £300 million sustainable public bond being received on
6 April 2023 and executing a £100 million nine-year maturity bilateral loan with
one of the group’s relationship banks during April 2023.
7,570
£m
8,500
8,000
7,500
7,000
6,500
6,000
(883)
(91)
689
8,201
32
21
(3)
102
301
463
As at
31 March
2022
Cash
generated
from
operations
Proceeds
from
disposal of
subsidiary
Net
capital
expenditure
Indexation Dividends
Interest
Fair value
movements
Other
As at
31 March
2023
Exchange
rate
movements
on bonds
and term
borrowings
114
unitedutilities.com/corporate
Stock code: UU.
115
Creating long-term sustainable value
Our financial performance in 2022/23
Interest rate management
Long-term sterling inflation index-linked debt provides a natural
hedge to assets and earnings under the regulatory model. At
31 March 2023, approximately 40 per cent of the group’s net
debt was in RPI-linked form, representing around 25 per cent
of UUW’s regulatory capital value, 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 9 per cent
of UUW’s RCV, with an average real rate of minus 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 17 years.
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 2023, we had liquidity out to August 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 capital investment programme.
Return on Regulated Equity (RoRE)
Reported RoRE for 2022/23 was 11.0 per cent on a real, RPI/CPIH
blended basis.
This comprises the base return of 4.0 per cent (including our
11 basis point fast track reward that we receive in each of
the five years of the AMP), financing outperformance of
4.7 per cent, tax outperformance of 2.5 per cent, and customer
ODI outperformance of 0.5 per cent, partially offset by the total
expenditure (totex) impact on RoRE of minus 0.8 per cent as a
result of our additional investment to improve operational and
environmental performance.
Totex performance
The totex impact on RoRE of minus 0.8 per cent, largely reflects
the year three impact of the additional investment we are making
outside the scope of our Final Determination (FD) to improve
operational and environmental performance. This includes, for
example, our investment in Dynamic Network Management and
investment as part of our Better Rivers programme.
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. Our totex allowance increases
with inflation, which helps to mitigate some of the cost pressures
experienced this year, and we continue to exploit technology and
innovation to help us deliver our investment efficiently.
Customer outcome delivery incentives (ODIs)
Customer ODI outperformance of 0.5 per cent reflects a net
reward of £25 million(3). Our customer ODI performance has
been strong across the board, meeting or exceeding 83 per cent
of our performance commitments, our best ever performance.
We continue to target a total cumulative net ODI reward over
this five-year period of around £200 million.
Customer ODI rewards and penalties in AMP7 will be adjusted
in revenues on a two-year lag, therefore the net reward earned
this year will be reflected in an increase to revenues earned
in 2024/25 through allowed increases in the rates charged
to customers in that financial year, in accordance with the
regulatory mechanism.
Tax outperformance
The 2.5 per cent outperformance on tax reflects the current year
underlying tax credit, including capital allowances associated
with temporary ‘super deductions’.
Financing outperformance
We earned financing outperformance this year of 4.7 per cent.
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.
Our financing outperformance this year has also been supported
by the recent high level of inflation, which increases the benefit
of the roughly £3 billion fixed rate debt we have locked in.
(1) 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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highest ever return on regulated
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£25m
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116
unitedutilities.com/corporate
Creating long-term sustainable value
Our financial performance in 2022/23
Interest rate management
Totex performance
Long-term sterling inflation index-linked debt provides a natural
hedge to assets and earnings under the regulatory model. At
31 March 2023, approximately 40 per cent of the group’s net
debt was in RPI-linked form, representing around 25 per cent
of UUW’s regulatory capital value, 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 9 per cent
of UUW’s RCV, with an average real rate of minus 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 17 years.
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 2023, we had liquidity out to August 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 capital investment programme.
Return on Regulated Equity (RoRE)
Reported RoRE for 2022/23 was 11.0 per cent on a real, RPI/CPIH
blended basis.
This comprises the base return of 4.0 per cent (including our
11 basis point fast track reward that we receive in each of
the five years of the AMP), financing outperformance of
4.7 per cent, tax outperformance of 2.5 per cent, and customer
ODI outperformance of 0.5 per cent, partially offset by the total
expenditure (totex) impact on RoRE of minus 0.8 per cent as a
result of our additional investment to improve operational and
environmental performance.
The totex impact on RoRE of minus 0.8 per cent, largely reflects
the year three impact of the additional investment we are making
outside the scope of our Final Determination (FD) to improve
operational and environmental performance. This includes, for
example, our investment in Dynamic Network Management and
investment as part of our Better Rivers programme.
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. Our totex allowance increases
with inflation, which helps to mitigate some of the cost pressures
experienced this year, and we continue to exploit technology and
innovation to help us deliver our investment efficiently.
Customer outcome delivery incentives (ODIs)
Customer ODI outperformance of 0.5 per cent reflects a net
reward of £25 million(3). Our customer ODI performance has
been strong across the board, meeting or exceeding 83 per cent
of our performance commitments, our best ever performance.
We continue to target a total cumulative net ODI reward over
this five-year period of around £200 million.
Customer ODI rewards and penalties in AMP7 will be adjusted
in revenues on a two-year lag, therefore the net reward earned
this year will be reflected in an increase to revenues earned
in 2024/25 through allowed increases in the rates charged
to customers in that financial year, in accordance with the
regulatory mechanism.
Tax outperformance
The 2.5 per cent outperformance on tax reflects the current year
underlying tax credit, including capital allowances associated
with temporary ‘super deductions’.
Financing outperformance
We earned financing outperformance this year of 4.7 per cent.
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.
Our financing outperformance this year has also been supported
by the recent high level of inflation, which increases the benefit
of the roughly £3 billion fixed rate debt we have locked in.
(1) 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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11.0%
highest ever return on regulated
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£25m
reward for customer
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AMP7 financial framework
Our five-year financial framework captures anticipated
performance in the five years to 31 March 2025. This period
aligns with the AMP7 regulatory period.
Outlook and guidance
ODI rewards
We are targeting a net customer ODI reward of around
£200 million in total over AMP7.
Investment and regulated asset growth
We expect to deliver a number of capital programmes in
AMP7, in addition to our base totex programme. These include
Green Recovery and the recently approved AMP8 accelerated
environmental enhancement programmes. Combined with the
impact of inflation, our regulated assets are expected to grow at
a compound annual growth rate of 4 to 5 per cent across the five
years to March 2025.
Return on regulated equity
The return on regulatory equity (RoRE) metric measures returns
(after tax and interest) earned by reference to notional regulated
equity. Overall returns comprise a base return on equity plus
a contribution from outcome delivery incentives, operating
efficiency, financing efficiency and customer service. We currently
expect to deliver average returns of between 6 and 8 per cent in
AMP7, on a real RPI/CPIH blended basis.
Balance sheet
The board has set a target gearing range for the AMP7 regulatory
period of 55 to 65 per cent net debt to regulated capital value.
As at 31 March 2023 our gearing is in the lower half of this range
at 58 per cent.
Dividend policy
The group maintains a dividend policy to target a growth rate of
CPIH inflation each year through to 2025. The annual increase
in the dividend is based on the CPIH element included within
allowed regulated revenue for the current financial year. This is
calculated as using the CPIH annual rate from the November
prior (i.e. the 2022/23 dividend is equal to the 2021/22 dividend
indexed for the movement in CPIH between November 2020 and
November 2021).
Revenue
Revenue is expected to increase by around £150 million in
2023/24, largely reflecting the November 2022 CPIH inflation of
9.3 per cent, partially offset by a £20 million net impact of over/
under-recovery during 2022/23 and 2021/22.
Underlying operating costs
Operating costs are expected to be around £60 million higher
year-on-year. This increase is largely driven by inflation, with
the largest inflationary pressures impacting power and labour
costs. The remaining increase reflects the 2023/24 operating
cost impact of additional investments, including our Better Rivers
programme.
Underlying net finance expense
Underlying net finance expense is expected to be at least
£150 million lower year-on-year, due to the impact of falling
inflation. As at 31 March 2023, we had £4.5 billion of index-linked
debt exposure, giving rise to a £45 million swing in our interest
charge for every 1 per cent change in inflation. Our cash interest
in 2022/23 was £102 million and we expect this to be slightly
higher in 2023/24.
Underlying tax
Our current tax charge is expected to be zero in 2023/24,
reflecting expected benefits following the spring budget
in relation to ‘full expensing’ and the 50 per cent first year
allowances on longer-life assets.
Capital expenditure
Capex in 2023/24 is expected to be in the range of £720 million
to £800 million. In addition to our AMP7 base programme,
this reflects capital expenditure for the year in relation to our
additional investment (including Green Recovery, and investment
supporting our Better Rivers programme), and AMP8 acceleration
capital programmes.
116
unitedutilities.com/corporate
Stock code: UU.
117
Creating long-term sustainable value
Our financial performance in 2022/23
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 232. As such, they
represent non-GAAP measures.
These APMs can assist in providing
a representative view of business
performance, and may not be directly
comparable with similarly titled measures
presented by other companies. 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 subsidiary
This relates to the disposal of the group’s subsidiary United Utilities Renewable Energy Limited, 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
macroeconomic 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
Tax in respect of
adjustments to underlying
profit before tax
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.
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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118
unitedutilities.com/corporate
Creating long-term sustainable value
Our financial performance in 2022/23
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 232. As such, they
represent non-GAAP measures.
Adjusted item
Rationale
Adjustments not expected to recur
These APMs can assist in providing
a representative view of business
In addition, a reconciliation of the group’s
average effective interest rate has been
performance, and may not be directly
presented, together with a prior period
comparable with similarly titled measures
comparison. In arriving at net finance
presented by other companies. The
expense used in calculating the group’s
group determines adjusted items in the
effective interest rate, underlying net
calculation of its underlying measures
finance expense is adjusted to add
against a framework which considers
back net pension interest income and
significance by reference to profit before
capitalised borrowing costs in order to
tax, in addition to other qualitative factors
provide a view of the group’s cost of debt
such as whether the item is deemed to be
that is better aligned to the return on
within the normal course of business, its
capital it earns through revenue.
assessed frequency of reoccurrence and its
volatility which is either outside the control
of management and/or not representative
of current year performance.
Profit on disposal
of subsidiary
This relates to the disposal of the group’s subsidiary United Utilities Renewable Energy Limited, 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
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
macroeconomic factors which are outside of the control of management and relate to instruments that are purely
interest on derivatives and
held for funding and hedging purposes (not for trading purposes). Included within fair value movement on debt and
debt under fair value option
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.
adjustments to underlying
year performance.
profit before tax
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Underlying profit
Operating profit per published results
Underlying operating profit
Net finance expense
Finance expense
Investment income
Net finance expense per published results
Adjustments:
Fair value (gains) on debt and derivative instruments, excluding interest on derivatives and debt
under fair value option
Underlying net finance expense
Share of profits/(losses) of joint ventures per published results
Profit on disposal of subsidiary
Adjustments:
Profit on disposal of subsidiary
Underlying profit on disposal of subsidiary
Profit before tax per published results
Adjustments:
In respect of operating profit
In respect of net finance expense
In respect of profit on disposal of subsidiary
Underlying (loss)/profit before tax
Profit/(Loss) after tax per published results
Adjustments:
In respect of profit before tax
Deferred tax adjustment
Tax in respect of
Management adjusts for the tax impacts of the above adjusted items to provide a more representative view of current
Underlying (loss)/profit after tax
Tax in respect of adjustments to underlying profit before tax
Earnings per share
Profit/(Loss) after tax per published results (a)
Underlying (loss)/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 (loss)/earnings per share, in pence (b/c)
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Year ended
31 March 2023
£m
Year ended
31 March 2022
£m
440.8
440.8
(262.7)
47.0
(215.7)
(259.4)
(475.1)
–
31.2
(31.2)
–
610.0
610.0
(187.7)
19.4
(168.3)
(138.0)
(306.3)
(1.8)
–
–
–
256.3
439.9
–
(259.4)
(31.2)
(34.3)
204.9
(290.6)
76.6
0.4
(8.7)
£m
204.9
(8.7)
681.9m
30.0
(1.3)
–
(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
Dividend per share, in pence
45.51p
43.50p
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
Adjustments:
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)
Year ended
31 March 2023
(475.1)
(28.7)
(127.5)
(631.3)
Year ended
31 March 2022
(306.3)
(14.3)
(52.7)
(373.3)
(7,849)
(7,368)
8.0%
5.1%
118
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Stock code: UU.
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Responsible business culture
with remuneration linked
to performance
Strong governance is a core part of who we are as a business. Our values drive a high-performance culture and
our executive, and all colleagues across the business, are remunerated against customer and environmental
measures as well as financial performance.
120
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Governance
Corporate
governance
report
Pages 122 to 207
Board of
directors
Pages 122 to 125
Letter from the
chair
Pages 126 to
Nomination
committee
report
Pages 140 to 152
Audit
committee
report
Pages 153 to 167
Treasury
committee
report
Page 169
Remuneration
committee
report
Pages 170 to 203
ESG
committee
report
Pages 204 to 207
Tax policies
and objectives
Pages 208 to 209
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Directors’ report
Pages 210 to 214
Statement of directors’
responsibilities
Pages 215
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Responsible business culture
with remuneration linked
to performance
Strong governance is a core part of who we are as a business. Our values drive a high-performance culture and
our executive, and all colleagues across the business, are remunerated against customer and environmental
measures as well as financial performance.
120
unitedutilities.com/corporate
Stock code: UU.
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Corporate governance report
Board of directors
N
Sir David Higgins
Chair
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.
E
Steve Mogford
Chief Executive Officer (CEO)
(until 31 March 2023)
E
Louise Beardmore
Chief Executive Officer
(from 31 March 2023)
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. Until January 2023,
he was a non-executive director of
Water Plus, a joint venture with Severn
Trent serving business customers. Until
31 March 2023 he was Chief Executive
Officer of United Utilities Water Limited.
Current directorships/business
interests: Steve is a non-executive
director of QinetiQ Group plc.
Specific contribution to the company’s
long-term success: During his time
as the Chief Executive Officer, Steve
transformed the company’s operational
performance, and implemented the
Systems Thinking approach to underpin
future operational activities and further
improve performance.
Responsibilities: As Chief Executive Officer
Louise is responsible for managing the
group’s business and implementing the
strategies and policies approved by the
board. She is leading UUW’s PR24 business
planning process 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 a
wealth of experience leading utility and
infrastructure businesses both in the UK
and internationally. She has a strong track
record in driving transformational change
and service improvements for the benefit
of customers, stakeholders and
the environment.
Career experience: Louise joined United
Utilities on its graduate programme and
has comprehensive experience of the
company, its customers and its regulators,
having worked for the group for more
than 20 years. She was appointed as
customer service and people director in
2016, prior to which she held a number
of senior positions, leading teams in
business transformation, water operations,
electricity and telecoms. She completed
the corporate director programme at
Harvard Business School in 2022.
Current directorships/business
interests: Louise 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. She is a
non-executive director of Water UK and a
non-executive director of the UK Engage
for Success Foundation, named on the
Northern Power Women’s ‘Power List’
and a member of the 30% Club.
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.
unitedutilities.com/corporate
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Corporate governance report
Board of directors
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N
Chair
Sir David Higgins
E
Steve Mogford
Chief Executive Officer (CEO)
(until 31 March 2023)
E
Louise Beardmore
Chief Executive Officer
(from 31 March 2023)
Responsibilities: Responsible for the
leadership of the board, setting its
Responsibilities: To manage the group’s
Responsibilities: As Chief Executive Officer
agenda and ensuring its effectiveness on
business and to implement the strategy
all aspects of its role.
and policies approved by the board.
Qualifications: BEng Civil Engineering,
Qualifications: BSc (Hons) Astrophysics/
Diploma Securities Institute of Australia,
Maths/Physics.
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
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
spent his career overseeing high profile
programmes has driven forwards the
infrastructure projects, including: the
board’s strategy of improving customer
delivery of the Sydney Olympic Village
service and operational performance
and Aquatics centre; Bluewater Shopping
at United Utilities. His perspective of
Centre, Kent; and the delivery of the 2012
the construction and infrastructure
London Olympic Infrastructure Project.
sector provides valuable experience and
Career experience: Sir David was
previously chief executive of: Network
Rail Limited; The Olympic Delivery
insight to support United Utilities’ capital
investment programme.
Career experience: Steve was previously
Authority; and English Partnerships. He
chief executive of SELEX Galileo, the
has held non-executive roles as chair
of both High Speed Two Limited and
defence electronics company owned
by Italian aerospace and defence
Sirius Minerals plc. In December 2019 he
organisation Finmeccanica; chief
stepped down as non-executive director
operating officer of BAE Systems PLC;
and chair of the remuneration committee
and a member of its PLC board. His early
at the Commonwealth Bank of Australia.
career was spent with British Aerospace
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.
PLC. He is a former non-executive
director of G4S plc. Until January 2023,
he was a non-executive director of
Water Plus, a joint venture with Severn
Trent serving business customers. Until
31 March 2023 he was Chief Executive
Officer of United Utilities Water Limited.
Current directorships/business
interests: Steve is a non-executive
director of QinetiQ Group plc.
Specific contribution to the company’s
long-term success: During his time
as the Chief Executive Officer, Steve
transformed the company’s operational
performance, and implemented the
Systems Thinking approach to underpin
future operational activities and further
improve performance.
Louise is responsible for managing the
group’s business and implementing the
strategies and policies approved by the
board. She is leading UUW’s PR24 business
planning process 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 a
wealth of experience leading utility and
infrastructure businesses both in the UK
and internationally. She has a strong track
record in driving transformational change
and service improvements for the benefit
of customers, stakeholders and
the environment.
Career experience: Louise joined United
Utilities on its graduate programme and
has comprehensive experience of the
company, its customers and its regulators,
having worked for the group for more
than 20 years. She was appointed as
customer service and people director in
2016, prior to which she held a number
of senior positions, leading teams in
business transformation, water operations,
electricity and telecoms. She completed
the corporate director programme at
Harvard Business School in 2022.
Current directorships/business
interests: Louise 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. She is a
non-executive director of Water UK and a
non-executive director of the UK Engage
for Success Foundation, named on the
Northern Power Women’s ‘Power List’
and a member of the 30% Club.
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.
G
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Changes to the board
Alison Goligher succeeded Mark Clare
as senior independent non-executive
director when Mark stepped down from
the board at the conclusion of the annual
general meeting (AGM) in July 2022.
Stephen Carter also stepped down from
the board at the conclusion of the AGM
in July 2022. Steve Mogford retired from
the board on 31 March 2023.
Michael Lewis joined the board on
1 May 2023.
Board role
Chair
Executive director
Senior independent non-executive director
Independent non-executive director
Committee membership
N Nomination committee
E ESG committee
T Treasury committee
R Remuneration committee
A Audit committee
Chair of the committee
T
Phil Aspin
Chief Financial Officer (CFO)
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.
N R
E
Alison Goligher
Senior independent
non-executive director
Responsibilities: Responsible, in addition
to her role as an independent non-
executive director, for discussing any
concerns with shareholders that cannot
be resolved through the normal channels
of communication with the Chair or Chief
Executive Officer. She is the current
designated non-executive director for
workforce engagement.
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. In September
2022 she stepped down as a non-executive
director at Meggitt PLC.
Current directorships/business
interests: Alison is a part-time executive
chair at Silixa Ltd and 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
colleagues and greater clarity on the
culture of the company.
122
unitedutilities.com/corporate
Stock code: UU.
123
Corporate governance report
Board of directors
N A
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Liam Butterworth
Independent non-executive director
Kath Cates
Independent non-executive director
Michael Lewis
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: MBA Business
Administration and Management,
CIM Marketing, HND Mechanical
Production Engineering.
Appointment to the board:
January 2022
Skills and experience: As a serving
CEO, Liam brings strong engineering
and industrial technology experience
to the board, with a track record of
managing performance and enhancing
corporate culture.
Career experience: Liam has over 30
years’ experience in the automotive
industry. He started his career at Lucas
Industries as an apprentice toolmaker,
before moving into marketing, sales and
purchasing at FCI Automotive. Joining
Delphi Technologies plc in 2012, he
became CEO in December 2017. He joined
GKN Automotive Limited, owned by
Melrose plc, as CEO in 2018. During the
year, following a demerger, the Dowlais
Group plc was listed on the London Stock
Exchange, with Liam appointed as CEO.
Current directorships/business
interests: Liam is CEO of Dowlais Group
plc. He is an independent 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.
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: Solicitor of England
and Wales.
Appointment to the board:
September 2020.
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 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 the senior independent
director of TP ICAP Group Plc and a non-
executive director at Brown Shipley. She
is an independent non-executive director
of United Utilities Water Limited.
Specific contribution to the company’s
long-term success: Kath’s extensive
board experience and knowledge of
different regulated sectors enables her to
contribute to board governance and risk
management at United Utilities.
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: BEng (Hons) Engineering
Technology, MSc Pollution and Environmental
Control, MA Environmental Law.
Appointment to the board: May 2023.
Skills and experience: Michael has spent
his career in customer-facing regulated
utilities and has considerable experience
of working with both environmental
and economic regulators. He has been
responsible for managing a wide range
of capital investment projects aimed at
improving the customer experience, and
driving environmental sustainability has
been a key focus throughout his career.
Career experience: Michael started his
career at Wessex Water plc, prior to joining
PowerGen plc, which was subsequently
acquired by E.ON SE. He joined the
management board of E.ON Climate and
Renewables in 2007, and was appointed as
CEO in 2015, where he pioneered its large
scale offshore wind power capabilities. He
was appointed as CEO of E.ON UK in 2017,
where he led the company’s transformation
into a leading supplier of zero carbon energy
solutions. He became CEO of the German
listed Uniper SE, one of Europe’s leading
power generation and gas supply companies,
in June 2023. He was formerly a non-
executive director of Equinor ASA.
Current directorships/business
interests: Michael is CEO of Uniper SE,
and a Member of Council the Natural
Environment Research Council. He is an
independent non-executive director of
United Utilities Water Limited.
Specific contribution to the company’s
long-term success: Michael's extensive
experience in regulated customer-facing
utilities will assist the board in its planning
for the 2025-30 Price Review period, and
his focus on sustainability will help the
board further develop its ambitions to
reduce the group’s carbon footprint and
achieve its net zero commitment by 2030.
unitedutilities.com/corporate
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Corporate governance report
Board of directors
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set by the board.
Qualifications: MBA Business
Administration and Management,
CIM Marketing, HND Mechanical
Production Engineering.
Appointment to the board:
January 2022
N A
E
Liam Butterworth
N
A
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Kath Cates
N E
Michael Lewis
Independent non-executive director
Independent non-executive director
Independent non-executive director
Responsibilities: To challenge
Responsibilities: To challenge
Responsibilities: To challenge constructively
constructively the executive directors
constructively the executive directors and
the executive directors and monitor the
and monitor the delivery of the strategy
monitor the delivery of the strategy within
delivery of the strategy within the risk and
within the risk and control framework
the risk and control framework set by the
control framework set by the board.
board and to lead the board’s activities
concerning directors’ remuneration.
Qualifications: BEng (Hons) Engineering
Technology, MSc Pollution and Environmental
and Wales.
Appointment to the board:
September 2020.
Skills and experience: Michael has spent
his career in customer-facing regulated
Skills and experience: Kath has spent
utilities and has considerable experience
Skills and experience: As a serving
most of her career working in a regulated
of working with both environmental
CEO, Liam brings strong engineering
environment in the financial services
and economic regulators. He has been
and industrial technology experience
industry. Since 2014, she has focused on
responsible for managing a wide range
to the board, with a track record of
her non-executive roles, chairing all the
of capital investment projects aimed at
managing performance and enhancing
main board committees and undertaking
improving the customer experience, and
corporate culture.
the role of senior independent director.
driving environmental sustainability has
been a key focus throughout his career.
Career experience: Liam has over 30
Career experience: Kath was chief
years’ experience in the automotive
operating officer at Standard Chartered
Career experience: Michael started his
industry. He started his career at Lucas
plc, before which she held a number of
career at Wessex Water plc, prior to joining
Industries as an apprentice toolmaker,
roles at UBS Limited over a 22-year period
PowerGen plc, which was subsequently
before moving into marketing, sales and
prior to which she qualified as a solicitor.
acquired by E.ON SE. He joined the
purchasing at FCI Automotive. Joining
She is a former non-executive director
management board of E.ON Climate and
Delphi Technologies plc in 2012, he
at Brewin Dolphin Holdings plc and RSA
Renewables in 2007, and was appointed as
became CEO in December 2017. He joined
Insurance Group plc, where she chaired
CEO in 2015, where he pioneered its large
GKN Automotive Limited, owned by
the remuneration committee.
Melrose plc, as CEO in 2018. During the
year, following a demerger, the Dowlais
Group plc was listed on the London Stock
Exchange, with Liam appointed as CEO.
Current directorships/business
interests: Kath is a non-executive director
at Columbia Threadneedle Investments
where she chairs the TPEN audit
Current directorships/business
committee. She is the senior independent
interests: Liam is CEO of Dowlais Group
director of TP ICAP Group Plc and a non-
plc. He is an independent non-executive
executive director at Brown Shipley. She
director of United Utilities Water Limited.
is an independent non-executive director
scale offshore wind power capabilities. He
was appointed as CEO of E.ON UK in 2017,
where he led the company’s transformation
into a leading supplier of zero carbon energy
solutions. He became CEO of the German
listed Uniper SE, one of Europe’s leading
power generation and gas supply companies,
in June 2023. He was formerly a non-
executive director of Equinor ASA.
of United Utilities Water Limited.
Current directorships/business
Specific contribution to the company’s
long-term success: Liam’s operational
Specific contribution to the company’s
experience contributes to the board’s
long-term success: Kath’s extensive
continuing focus on the performance of
board experience and knowledge of
the business via the Systems Thinking
different regulated sectors enables her to
approach.
contribute to board governance and risk
management at United Utilities.
interests: Michael is CEO of Uniper SE,
and a Member of Council the Natural
Environment Research Council. He is an
independent non-executive director of
United Utilities Water Limited.
Specific contribution to the company’s
long-term success: Michael's extensive
experience in regulated customer-facing
utilities will assist the board in its planning
for the 2025-30 Price Review period, and
his focus on sustainability will help the
board further develop its ambitions to
reduce the group’s carbon footprint and
achieve its net zero commitment by 2030.
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Paulette Rowe
Independent non-executive director
Doug Webb
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
ESG matters.
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 audit and treasury
committees.
Qualifications: Solicitor of England
Control, MA Environmental Law.
Qualifications: MEng + Man (Hons),MBA.
Appointment to the board: May 2023.
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
Utilities’ customer experience programme
and its Systems Thinking approach.
Career experience: Paulette has held
senior executive roles in banking and
technology at Meta, Barclays, the Royal
Bank of Scotland/NatWest and at Paysafe
Group. She is a former trustee and chair
of children’s charity The Mayor’s Fund
for London.
Current directorships/business
interests: During the year, Paulette joined
private equity firm Greater Sum Ventures
and was appointed as a non-executive
director of Thredd, a private equity-
owned venture. She is an independent
non-executive director of United Utilities
Water Limited.
Specific contribution to the company’s
long-term success: Paulette’s wide-ranging
experience in regulated sectors, profit
and loss management, technology and
innovation enables her to provide a first-
hand contribution to many board topics of
discussion and has been instrumental in
providing challenge on the group's equity,
diversity and inclusion activities.
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
with Price Waterhouse, his executive
roles as CFO of major listed companies
and more recently through his non-
executive positions and focus on audit
committee activities.
Career experience: Doug was previously
chief financial officer at Meggitt PLC
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 and the Manufacturing
Technology Group Ltd.
Current directorships/business
interests: Doug currently serves as a non-
executive director and audit committee
chair at Johnson Matthey plc, and
the senior independent non-executive
director at BMT Group Ltd. He is an
independent non-executive director of
United Utilities Water Limited.
Specific contribution to the company’s
long-term success: Doug applies his
financial capabilities and his technical
knowledge and experience covering
audit and treasury matters in his role as
chair of both the audit and the treasury
committee strengthen the board’s
financial expertise.
Board role
Chair
Executive director
Senior independent non-executive director
Independent non-executive director
Committee membership
N Nomination committee
E ESG committee
T Treasury committee
R Remuneration committee
A Audit committee
Chair of the committee
124
unitedutilities.com/corporate
Stock code: UU.
125
Corporate governance report
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, five out of the
remaining eight 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 122 to 125) 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
Letter from the Chair
As a board we are fully engaged and
intent on playing our part in ensuring
that United Utilities delivers on its
newly adopted purpose of providing
great water for a stronger, greener and
healthier North West.
Dear shareholder
The board’s discussions have been dominated during
the year by the challenging operating environment and
the difficult times faced by many of our customers and
other stakeholders due to the increased cost of living
and the adverse economic conditions. The board was
ever more conscious of the need for the group to play its
part in the North West and deliver on its purpose both
now, and in the future, and to ensure that it fulfilled its
own oversight role to promote the long-term sustainable
success of the company.
Evolution of Better Rivers
The board has provided challenge, support and advice
to management in its navigation of a number of key
issues including the regulatory, environmental and
media focus on sewage in rivers. Our management
team are committed to respond to the enormity of the
challenge for United Utilities. As one of the three most
impacted companies, it requires considerable investment
to progressively reduce the adverse impacts of storm
overflow activations in our network. The Environment Act
2021 set legally binding environmental targets for water
companies to reduce the number of activations from
storm overflows. As a board we are fully engaged and
intent on playing our part in ensuring that United Utilities
delivers on its newly adopted purpose of providing great
water for a stronger, greener and healthier North West.
Environmental, social and governance
The board is responsible for overseeing environmental,
social and governance (ESG) issues. Many facets
of ESG have been high on the agenda for the board
and for the ESG committee (formerly the corporate
responsibility committee), which takes the lead in the
oversight of environmental (including climate change)
and social issues. The business is working hard to
achieve the six carbon pledges made in 2020 and
our four verified science-based targets. Our climate
change mitigation strategy forms the basis of our
net zero transition plan (see pages 45 to 47), which
demonstrates how we intend to contribute to, and
prepare for a rapid global transition towards, a low
greenhouse gas emissions economy.
To incentivise management, the remuneration
committee incorporated targets related to our carbon
pledges into the performance elements of 2022 award
of the long-term incentive plan. The board does not
underestimate the challenge to the business of reducing
emissions, particularly nitrous oxide and methane from
sewage - an issue likely to be further exacerbated by
the expected population growth in our region. We also
recognise the significant challenge of Scope 3 emissions
and are working closely with our supply chain partners
to manage and reduce these within the constraints of
growth, demand, resources and cost.
The extreme weather and freeze-thaw event in December
2022, was a very challenging time in our region, requiring
our incident teams to be mobilised at the highest level. As
ever, many of our colleagues and those of our contracting
partners, sacrificed time with family and friends over the
Christmas period to maintain services to customers.
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Corporate governance report
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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, five out of the
remaining eight 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 122 to 125) 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
Letter from the Chair
As a board we are fully engaged and
intent on playing our part in ensuring
that United Utilities delivers on its
newly adopted purpose of providing
great water for a stronger, greener and
healthier North West.
Dear shareholder
The board’s discussions have been dominated during
the year by the challenging operating environment and
the difficult times faced by many of our customers and
other stakeholders due to the increased cost of living
and the adverse economic conditions. The board was
ever more conscious of the need for the group to play its
part in the North West and deliver on its purpose both
now, and in the future, and to ensure that it fulfilled its
own oversight role to promote the long-term sustainable
success of the company.
Evolution of Better Rivers
The board has provided challenge, support and advice
to management in its navigation of a number of key
issues including the regulatory, environmental and
media focus on sewage in rivers. Our management
team are committed to respond to the enormity of the
challenge for United Utilities. As one of the three most
impacted companies, it requires considerable investment
to progressively reduce the adverse impacts of storm
overflow activations in our network. The Environment Act
2021 set legally binding environmental targets for water
companies to reduce the number of activations from
storm overflows. As a board we are fully engaged and
intent on playing our part in ensuring that United Utilities
delivers on its newly adopted purpose of providing great
water for a stronger, greener and healthier North West.
Environmental, social and governance
The board is responsible for overseeing environmental,
social and governance (ESG) issues. Many facets
of ESG have been high on the agenda for the board
and for the ESG committee (formerly the corporate
responsibility committee), which takes the lead in the
oversight of environmental (including climate change)
and social issues. The business is working hard to
achieve the six carbon pledges made in 2020 and
our four verified science-based targets. Our climate
change mitigation strategy forms the basis of our
net zero transition plan (see pages 45 to 47), which
demonstrates how we intend to contribute to, and
prepare for a rapid global transition towards, a low
greenhouse gas emissions economy.
To incentivise management, the remuneration
committee incorporated targets related to our carbon
pledges into the performance elements of 2022 award
of the long-term incentive plan. The board does not
underestimate the challenge to the business of reducing
emissions, particularly nitrous oxide and methane from
sewage - an issue likely to be further exacerbated by
the expected population growth in our region. We also
recognise the significant challenge of Scope 3 emissions
and are working closely with our supply chain partners
to manage and reduce these within the constraints of
growth, demand, resources and cost.
The extreme weather and freeze-thaw event in December
2022, was a very challenging time in our region, requiring
our incident teams to be mobilised at the highest level. As
ever, many of our colleagues and those of our contracting
partners, sacrificed time with family and friends over the
Christmas period to maintain services to customers.
Read more about
our core values
on page 50
Read more about
our financial
performance on
pages 112 to 119
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Affordability is key to many customers, with many parts
of the North West suffering from high levels of acute
deprivation. The board is an advocate of the Consumer
Council for Water’s pursuit of the introduction of a
national social tariff that is consistent with the group’s
own affordability schemes and core values. The group’s
approach to affordability and to those in lower income
groups who find it a struggle to pay their water bill is a
standing item overseen, in the first instance, by the ESG
committee. A comprehensive dashboard of low income
metrics enables the committee to monitor performance
and mitigating actions on household retail cash, debt and
affordability. Around 330,000 customers are supported by
the group’s affordability schemes.
At our AGM in 2022, the board proposed a resolution
on the company’s climate-related financial disclosures
in the form of our TCFD report (in this report, see TCFD
index on page 05) on a non-binding advisory basis. The
resolution attracted 80.62 per cent of the votes cast in
favour. We were disappointed in the 19.38 per cent of
the vote being withheld or cast against the resolution.
Following the AGM we engaged with the proxy voting
agency which had recommended a vote against the
resolution and responded to feedback from several
investors - clarifying the responsibilities of the then
corporate responsibility committee for environmental
matters and providing information on our climate change
mitigation strategy.
In the following pages of this corporate governance
report, we set out how the board has fully applied
the principles and fully complied and reported on
the provisions of the 2018 UK Corporate Governance
(the Code).
Cyber security
The board has regular oversight of cyber security matters.
The group’s approach to the protection of information
and holding of data about its assets and operations,
customers and colleagues is aligned with its strategic
priorities (see page 38). There are a number of regulatory
drivers in relation to cyber security that the group must
comply with. United Utilities Water is designated as a
provider of essential services for UK Critical National
Infrastructure and is governed by The Network and
Information Systems Regulations 2018, which focuses
on cyber security compliance. Good progress is being
made with our programme of work to comply with
these regulations. United Utilities Water is required to
comply with the Security and Emergency Measures
Direction (SEMD), which directs water undertakers to
maintain plans to provide a supply of water at all times
and includes security components. A report, subject
to independent attestation, is submitted annually to
the DWI. Furthermore, the group’s information security
policies and compliance are aligned to ISO 27001.
Like most companies we are facing the increasing
challenge of cyber threats. Cyber security is a principal
risk over which the board has oversight, both as part of
twice-yearly reviews of risk management supported by
the audit committee, and directly through interaction with
the chief security officer who also provides the board
with an update on cyber security twice a year. More
information on the work to mitigate the risk of cyber
security threats can be found on pages 53 and 57 and
information on the progress with enhancing the group’s
digital strategy on page 26.
Looking ahead
Focus for the board is now on the price review process
for the 2025–30 asset management period (the PR24
process). We welcomed Michael Lewis as an independent
non-executive director to the board on 1 May 2023.
Michael brings his considerable experience of working in
the regulated electricity sector, which will be invaluable to
the board as we work through the PR24 process.
On 16 March 2023, the company announced that Steve
Mogford would step down from the board with effect
from 31 March 2023 and would be succeeded by Louise
Beardmore, who was appointed to the board as CEO
designate on 1 May 2022. Since her appointment last
year, Louise has, amongst other things, been overseeing
the preparation of the group’s business plan covering the
2025–30 period. More information on Louise’s transition
into the CEO role can be found on page 145.
On behalf of the board, I wish to express our immense
gratitude to Steve for his visionary and strategic
leadership over the last 12 years. He leaves the group
in a position standing tall amongst its peers, and as an
integrated and forward-thinking business better prepared
to take on the challenges of the future. We wish him well
in his retirement.
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 128
Division of responsibilities
See page 139
Composition, succession and evaluation
See page 143
Audit, risk and internal control
See page 149
Remuneration
See page 170
The business plans we
submit in 2023 will cover
the 2025–30 period, with a
long-term delivery strategy
out to 2050.”
126
unitedutilities.com/corporate
Stock code: UU.
127
1
Corporate governance report
Board leadership and company purpose
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
128 and 129, and our reporting against risk as part of provision 1 on
pages 60 to 75. The S172(1) Statement is on page 58.
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 38.
See page 135 and 186 for our reporting against provision 2 and
pages 58 and 136 in respect of provision 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 143 regarding
our succession pipeline, and page 149 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 56 to 57
and 137 to 138 in relation to our engagement with shareholders and
stakeholders.
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 importance of colleagues having the
facilities to raise matters of concern. See pages 56, 100, and 136
to 137 in relation to engagement with colleagues for our reporting
against provisions 5 and 6.
Areas of focus for the
board in 2022/23
As part of the board’s role in promoting the long-term
sustainable success of the company, generating value
for shareholders and contributing to society the board
focused on a number of areas:
Regulatory, environmental and media focus on
sewage in rivers
The board is acutely aware of the ongoing criticism
aimed at the group and other wastewater companies
in relation to discharges from storm overflows that are
incorporated into the sewerage network in our region to
carry sewage and rainwater. The Environment Act 2021
sets out legally binding environmental targets for water
companies to progressively reduce the adverse impacts
of storm overflow activations. United Utilities has a
significantly higher proportion of combined sewers than
any other water company. Over 54 per cent of our public
sewers combine foul and surface water compared to an
average of 33 per cent. United Utilities is one of the three
most impacted companies and will face considerable
investment requirements relative to its customer base.
Combined sewers respond more quickly to a storm with
the capacity filling up more rapidly than when compared
to more separate systems, but which helps address areas
of higher rainfall like the North West. When sewers and
treatment plants are operating at full capacity they can
discharge storm water (including diluted sewage) into
rivers via the storm overflow, therefore helping to prevent
the flooding of streets, homes and businesses during
periods of heavy rainfall. We have committed to £230
million in environmental improvements, supporting at
least a one third sustainable reduction in the number of
recorded storm overflow activations by 2025 compared
to the 2020 baseline, making improvements to reduce
the use of some of the most frequently activated
storm overflows by around 10,000 hours, and making
improvements to around 184 kilometres of rivers in
our region. In May 2022 we committed £250 million
of reinvestment to support our Better Rivers: Better
North West programme and other environmental
enhancements across our region. Furthermore, working
with our regulators, we are bringing forward over £900
million of investment and expecting to spend around
£200 million over the next two years.
Environmental sustainability
Environmental issues are integral to the way our
business operates. The ESG 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 greenhouse
gas emissions. During the year, our draft strategic
carbon plan has been developed setting out the ways
in which we can achieve our science based targets
and an integrated programme of decarbonisation
interventions to 2030 and beyond. Net zero is
referenced as one of the key objectives for the 2024
price review and carbon will be fully integrated into
our price review submission.
As part of our business-as-usual activities, carbon has
been incorporated as a factor to be considered in:
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Corporate governance report
1
Board leadership and company purpose
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
128 and 129, and our reporting against risk as part of provision 1 on
pages 60 to 75. The S172(1) Statement is on page 58.
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 38.
See page 135 and 186 for our reporting against provision 2 and
pages 58 and 136 in respect of provision 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 143 regarding
our succession pipeline, and page 149 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 56 to 57
and 137 to 138 in relation to our engagement with shareholders and
stakeholders.
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 importance of colleagues having the
facilities to raise matters of concern. See pages 56, 100, and 136
to 137 in relation to engagement with colleagues for our reporting
against provisions 5 and 6.
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Areas of focus for the
board in 2022/23
As part of the board’s role in promoting the long-term
sustainable success of the company, generating value
for shareholders and contributing to society the board
focused on a number of areas:
Regulatory, environmental and media focus on
sewage in rivers
The board is acutely aware of the ongoing criticism
aimed at the group and other wastewater companies
in relation to discharges from storm overflows that are
incorporated into the sewerage network in our region to
carry sewage and rainwater. The Environment Act 2021
sets out legally binding environmental targets for water
companies to progressively reduce the adverse impacts
of storm overflow activations. United Utilities has a
significantly higher proportion of combined sewers than
any other water company. Over 54 per cent of our public
sewers combine foul and surface water compared to an
average of 33 per cent. United Utilities is one of the three
most impacted companies and will face considerable
investment requirements relative to its customer base.
Combined sewers respond more quickly to a storm with
the capacity filling up more rapidly than when compared
to more separate systems, but which helps address areas
of higher rainfall like the North West. When sewers and
treatment plants are operating at full capacity they can
discharge storm water (including diluted sewage) into
rivers via the storm overflow, therefore helping to prevent
the flooding of streets, homes and businesses during
periods of heavy rainfall. We have committed to £230
million in environmental improvements, supporting at
least a one third sustainable reduction in the number of
recorded storm overflow activations by 2025 compared
to the 2020 baseline, making improvements to reduce
the use of some of the most frequently activated
storm overflows by around 10,000 hours, and making
improvements to around 184 kilometres of rivers in
our region. In May 2022 we committed £250 million
of reinvestment to support our Better Rivers: Better
North West programme and other environmental
enhancements across our region. Furthermore, working
with our regulators, we are bringing forward over £900
million of investment and expecting to spend around
£200 million over the next two years.
Environmental sustainability
Environmental issues are integral to the way our
business operates. The ESG 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 greenhouse
gas emissions. During the year, our draft strategic
carbon plan has been developed setting out the ways
in which we can achieve our science based targets
and an integrated programme of decarbonisation
interventions to 2030 and beyond. Net zero is
referenced as one of the key objectives for the 2024
price review and carbon will be fully integrated into
our price review submission.
As part of our business-as-usual activities, 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,
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. A table of our
reporting against TCFD and TNFD recommended
disclosures can be found on page 5.
Working with our regulators
We have continued to work alongside Ofwat in its newly
introduced 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). 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. The Haweswater Aqueduct is a critical asset,
and as such the board is being kept fully apprised through
the procurement process.
In December 2022, Ofwat published its methodology
for the forthcoming 2024 price review. The board
has been fully engaged with the process during the
year including participation in deep-dive sessions and
regular discussions at scheduled board meetings.
Equity, diversity and inclusion (ED&I)
During the year, considerable progress has been made
on the journey to drive forward progress with ED&I
as part of the long-term sustainable success of the
business. During the year, a number of board members
attended the inaugural Colleague Network AGM and
Inclusion Awards, celebrating colleagues' contributions
to championing inclusion in the workplace and our local
communities. Further information on ED&I can be found
on page 54. The board diversity policy (see page 143)
promotes and encourages diversity and inclusion among
board members by fostering an inclusive and belonging
environment 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. In short, the opportunities
for improving our financial performance are based
on outperforming our five-year contract. Underlying
this is 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 84 to 119), which
are managed and monitored by the business.
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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
risk management and internal control systems
(including financial, operational and compliance)
and processes operate effectively (see pages 166
to 167).
• 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
that 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
128
unitedutilities.com/corporate
Stock code: UU.
129
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Corporate governance report
Board leadership and company purpose
Providing great water for a stronger,
greener and healthier North West
Governance structure for the board and its committees
Role of the board
The board has responsibility for establishing the purpose, values
and strategy, which is broken down into six strategic priorities
(see page 38). 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 priorities.
The CEO provides an updated overview of the business, and its
financial and operational performance at every scheduled meeting.
A rolling calendar of business is maintained to provide an
overview of the board’s annual business. The company secretary
will agree board agendas with the CEO and Chair of the board
prior to the meeting. Papers are tabled at the executive meeting
prior to inclusion on the board agenda and electronic board
packs are circulated in a timely manner in advance of the
meeting to enable board members to prepare and participate
in board discussions. A full schedule of the matters reserved
for the board can be found on the company’s website and at
unitedutilities.com/corporate-governance
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Governance structure of the board and its committees and the principal management committees
Group board
Chair – Sir David Higgins
Code principal board committees
Other board committees
Audit committee
Chair: Doug Webb
Contribution to our strategy:
See pages 153 to 167
Remuneration committee
Chair: Kath Cates
Contribution to our strategy:
See pages 170 to 203
Nomination committee
Chair: Sir David Higgins
Contribution to our strategy:
See pages 140 to 148
ESG committee
Chair: Paulette Rowe
Contribution to our strategy:
See pages 204 to 207
Treasury committee
Chair: Doug Webb
Contribution to our strategy:
See page 169
Compliance committee
Chair: Alison Goligher
Contribution to our strategy:
Reviews key regulatory submissions and underlying governance
processes.
Announcements committee
Chair: Any member of the committee
Contribution to our strategy:
Responsible for overseeing compliance with the group's
disclosure controls and considering the materiality of information.
Group audit and risk board
Chair: Louise Beardmore, CEO
Contribution to our strategy:
See page 60
Sustainable finance committee
Chair: Phil Aspin, CFO
Contribution to our strategy:
The committee is responsible for ensuring funds
raised under the sustainable finance framework
are allocated to eligible green or social projects.
Security steering group
Chair: Jon Wyatt, chief security officer
Contribution to our strategy:
The group is responsible for the oversight of cyber
and physical security matters, risks and
mitigating actions.
Chief Executive Officer – Louise Beardmore
Principal management committees
Executive team
Chair: Louise Beardmore, CEO
Contribution to our strategy:
See page 131
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.
Climate change mitigation steering group
Chair: Phil Aspin, CFO and Jo Harrison,
EP&I director
Contribution to our strategy:
Leads the ongoing development and delivery of
our strategy and activity to achieve our science-
based targets and carbon pledges.
Capital investment committee
Chair: Louise Beardmore, CEO
Contribution to our strategy:
The committee is responsible for authorising
expenditure relating to the capital investment
programme.
Future plan strategy board
Chair: Louise Beardmore, CEO
Contribution to our strategy:
This forum makes strategic decisions on scope
and outcomes to ensure the overall delivery of
the PR24 programme, and sets the risk appetite
for the programme. It retains authority for
programme monitoring and reporting and acts
as an advisory forum, and has responsibility
for oversight of the overall programme budget,
deliverables, risks and issues.
Key
130
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oversight and challenge
unitedutilities.com/corporate
Corporate governance report
1
Board leadership and company purpose
Providing great water for a stronger,
greener and healthier North West
Governance structure for the board and its committees
A rolling calendar of business is maintained to provide an
Role of the board
The board has responsibility for establishing the purpose, values
and strategy, which is broken down into six strategic priorities
(see page 38). 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 priorities.
The CEO provides an updated overview of the business, and its
financial and operational performance at every scheduled meeting.
overview of the board’s annual business. The company secretary
will agree board agendas with the CEO and Chair of the board
prior to the meeting. Papers are tabled at the executive meeting
prior to inclusion on the board agenda and electronic board
packs are circulated in a timely manner in advance of the
meeting to enable board members to prepare and participate
in board discussions. A full schedule of the matters reserved
for the board can be found on the company’s website and at
unitedutilities.com/corporate-governance
Governance structure of the board and its committees and the principal management committees
Group board
Chair – Sir David Higgins
Code principal board committees
Other board committees
ESG committee
Chair: Paulette Rowe
Contribution to our strategy:
See pages 204 to 207
Treasury committee
Chair: Doug Webb
Contribution to our strategy:
See page 169
Compliance committee
Chair: Alison Goligher
Contribution to our strategy:
Reviews key regulatory submissions and underlying governance
processes.
Announcements committee
Chair: Any member of the committee
Contribution to our strategy:
Responsible for overseeing compliance with the group's
disclosure controls and considering the materiality of information.
Audit committee
Chair: Doug Webb
Contribution to our strategy:
See pages 153 to 167
Remuneration committee
Chair: Kath Cates
Contribution to our strategy:
See pages 170 to 203
Nomination committee
Chair: Sir David Higgins
Contribution to our strategy:
See pages 140 to 148
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Chief Executive Officer – Louise Beardmore
Principal management committees
Group audit and risk board
Chair: Louise Beardmore, CEO
Contribution to our strategy:
See page 60
Sustainable finance committee
Chair: Phil Aspin, CFO
Contribution to our strategy:
Executive team
Chair: Louise Beardmore, CEO
Contribution to our strategy:
Capital investment committee
Chair: Louise Beardmore, CEO
Contribution to our strategy:
See page 131
The committee is responsible for authorising
expenditure relating to the capital investment
Political and regulatory group
programme.
Chair: Gaynor Kenyon, corporate affairs director
Contribution to our strategy:
Future plan strategy board
Chair: Louise Beardmore, CEO
Contribution to our strategy:
The committee is responsible for ensuring funds
raised under the sustainable finance framework
are allocated to eligible green or social projects.
Security steering group
Chair: Jon Wyatt, chief security officer
Contribution to our strategy:
The group is responsible for the oversight of cyber
and physical security matters, risks and
mitigating actions.
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.
Climate change mitigation steering group
Chair: Phil Aspin, CFO and Jo Harrison,
EP&I director
Contribution to our strategy:
Leads the ongoing development and delivery of
our strategy and activity to achieve our science-
based targets and carbon pledges.
This forum makes strategic decisions on scope
and outcomes to ensure the overall delivery of
the PR24 programme, and sets the risk appetite
for the programme. It retains authority for
programme monitoring and reporting and acts
as an advisory forum, and has responsibility
for oversight of the overall programme budget,
deliverables, risks and issues.
Key
Improve
our rivers
Create a
greener future
Provide a safe and
great place to work
Deliver great service
for all our customers
Spend customers'
money wisely
Contribute to
our communities
Board committees
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.
Executive team
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 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 executive team holds
two scheduled meetings each month, focusing on the day to
day performance of the business at one meeting and matters
of a strategic nature at the other, along with weekly informal
'scrums'. The principal management committees are vital to the
implementation of the group’s strategic priorities enabling senior
management to meet together to discuss the needs of the business,
raise issues, identify and delegate appropriate actions, monitor
progress of key performance measures and ensure any lessons
learnt are implemented. The board receives a report from the CEO
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
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Summary of board activity in 2022/23
During the year the board has focused on a number of strategic matters and received regular updates.
Actions
Outcomes
Cross
reference
Link to
strategic
priorities
Leadership and colleagues
Review of health, safety and wellbeing activities
and consideration of health and safety incidents of
colleagues and contractors.
Review of board succession plans.
Challenged management to heighten the focus on
embedding a health and safety culture within the
business, with added focus being placed on process
safety improvements at operational sites.
See pages
100 to 101
Succession plan implemented for the appointment of
a non-executive director during the year and approved
changes to the membership of the board committees.
See pages
143 to 144
Reviewed progress with our aspiration for
a diverse and inclusive workforce.
Board kept apprised of the programme of work to increase
diversity of the workforce and improve equity and inclusivity.
See pages
54 to 55
Reviewed and discussed the results of the annual
colleague engagement survey and received updates
on workforce engagement mechanisms, including the
Colleague Voice panel chaired by Alison Goligher, the
non-executive director designated for engagement
with the workforce.
Board kept apprised of the activities and insight
provided by the Colleague Voice panel and its links to
the colleague network groups, and the panel’s ongoing
contribution to the work on equity, diversity and
inclusion. Non-executive director attendance at panel
meetings providing further two-way insight.
See
page 136
Reviewed the company's dashboard of culture metrics
and associated analysis.
Monitored and assessed culture and agreed it was aligned
with the company's purpose, values and strategy.
See
page 135
Strategy
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 and develop a net zero transition plan.
See pages
45 to 47
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.
Guidance and challenge provided by the board as to
the progress of the plan of work to develop the draft
submission for the 2024 price review process and
consideration of the implications for the group of the
methodology published by Ofwat in December 2022.
The board have been fully engaged on progress with
the development of PR24 throughout the year through
regular updates at board meetings.
See pages
40 to 41
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.
Held a full day meeting to consider the strategic
development of the group and its long-term priorities.
Facilitated more informed board discussion and planning.
–
In-depth review of the water and wastewater strategy
and progress of work to develop the group’s Water
Industry National Environment Plan, which will inform
the 2025–30 price review submission.
See page 59
Key
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unitedutilities.com/corporate
Stock code: UU.
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Corporate governance report
Board leadership and company purpose
Providing great water for a stronger,
greener and healthier North West continued
Actions
Governance
Outcomes
Cross
reference
Link to
strategic
priorities
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.
Reviewed the risk management systems, including
financial, operational and compliance controls and
reviewed the effectiveness of the internal control systems.
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 60
The risk management and internal control systems were
considered to be effective.
See
page 150
Reviewed and discussed developments in
cyber crime.
Approved the activities undertaken to enhance the
effectiveness of the group’s security controls.
See page 73
Reviewed the terms of reference for the audit,
remuneration, treasury and ESG committees and
received post-meeting reports from the chairs of each
committee summarising discussions and actions.
Considered the proposal to establish a board committee
with delegated responsibility to oversee compliance
with regulatory assurance requirements and to be kept
abreast of any changes thereto.
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.
–
Established the compliance committee chaired by
Alison Goligher.
Matters implemented as considered appropriate.
–
Identified action points and any ongoing training needs.
Reviewed the performance of the statutory auditor and
recommendation for reappointment at the 2023 AGM.
Accepted the recommendation from the audit
committee that KPMG be proposed for reappointed at
the 2023 AGM.
Reviewed the resolutions and notice of meeting for the
2023 AGM.
Approved the resolutions to be proposed at the 2023
AGM, and convened the meeting.
Reviewed the approach and progress of work to
identify areas where there is any risk of modern slavery
occurring in our supply chain.
Approved the 2023/24 slavery and human
trafficking statement.
See
page 145
See
page 165
See
page 214
See
page 213
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.
Treasury hedging policies deep-dive session.
Concluded that the whistleblowing policies and
processes were effective and noted the activities within
the business to protect and detect fraud.
See pages
137 and 167
Provide the board with an in-depth session into the
group’s treasury hedging policies regarding interest
rates, inflation, electricity and other commodity prices.
See
page 169
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 74
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.
Board kept fully apprised of progress at key stages of the
project through regular presentations at board meetings
and the UUW board approved the issue of the tender
pre-qualification questionnaire.
See page 68
Water quality deep-dive session.
Provide the board with an in-depth view of the
strategy for managing and improving water quality; an
understanding of the importance of critical assets in the
integrated supply zone during the future construction
activity to replace sections of the Haweswater Aqueduct.
Reviewed the 2022 Annual Performance Report and
supporting assurance..
Approved the submission of the 2022 Annual
Performance Report to Ofwat.
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Corporate governance report
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Board leadership and company purpose
Key
Improve
our rivers
Create a
greener future
Provide a safe and
great place to work
Deliver great service
for all our customers
Spend customers'
money wisely
Contribute to
our communities
Providing great water for a stronger,
greener and healthier North West continued
Actions
Governance
Outcomes
Cross
reference
Link to
strategic
priorities
Actions
Outcomes
Regulated business and its stakeholders continued
Cross
reference
Link to
strategic
priorities
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Reviewed and debated the overall risk profile of the
Endorsed the nature, extent and management of key
See page 60
Reviewed customer service performance measures.
Drainage and Wastewater Management Plan
deep dive.
In-year customer performance measures monitored
against regulatory targets.
See
page 101
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 draft plan in June 2022.
Considered the capital sanction to support the project
at Oswestry water treatment works.
Approved the capital sanction.
Other group business
Considered the offer for the entire issued capital of
United Utilities Renewable Energy Limited.
Approved the disposal of United Utilities Renewable
Energy Limited.
Considered the renewal and extension of the existing
revolving credit facilities until December 2026 to
support the working capital needs of the Water Plus
Group, the joint venture with Severn Trent.
Approved the renewal and extension of revolving credit
facilities until December 2026, aligning with those
provided by Severn Trent, the joint venture partner.
See
page 246
See
page 278
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, face-to-face meetings and
correspondence between investors and the Chair, CEO
and/or the CFO, and other communications received
from large investors.
Financial
Provided the board with an indirect view of
investor perceptions.
See
page 137
Provided the board with a direct view of investor
perceptions and the opportunity for review and
discussion and review of the group’s response
as applicable.
See
page 137
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.
Regular review of the progress of the Direct
Board kept fully apprised of progress at key stages of the
See page 68
Reviewed the annual pensions update.
Reviewed the annual treasury update.
Pensions strategy affirmed and endorsed the
preferred methodology for Guaranteed Minimum
Pension equalisation.
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 pages
150 to 152
See
page 208
See
page 255
See
page 169
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Stock code: UU.
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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 75
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group, and in particular the principal risks, emerging
business risks and endorsed the view that the risk appetite
risks and risk appetite, including a review of the most
approach and framework remained fit for purpose.
significant operational risks.
Reviewed the risk management systems, including
The risk management and internal control systems were
See
financial, operational and compliance controls and
considered to be effective.
page 150
reviewed the effectiveness of the internal control systems.
Reviewed and discussed developments in
Approved the activities undertaken to enhance the
See page 73
cyber crime.
effectiveness of the group’s security controls.
Reviewed the terms of reference for the audit,
Approved amendments to the terms of reference of the
–
remuneration, treasury and ESG committees and
company’s committees as appropriate.
received post-meeting reports from the chairs of each
committee summarising discussions and actions.
Considered the proposal to establish a board committee
Established the compliance committee chaired by
with delegated responsibility to oversee compliance
Alison Goligher.
with regulatory assurance requirements and to be kept
abreast of any changes thereto.
Reviewed biannual updates on changes and
Matters implemented as considered appropriate.
–
developments in corporate governance.
Reviewed and discussed the internal evaluation of the
Identified action points and any ongoing training needs.
See
board, its committees and individual directors and
conflicts of interest.
Reviewed the performance of the statutory auditor and
Accepted the recommendation from the audit
See
recommendation for reappointment at the 2023 AGM.
committee that KPMG be proposed for reappointed at
page 165
the 2023 AGM.
Reviewed the resolutions and notice of meeting for the
Approved the resolutions to be proposed at the 2023
2023 AGM.
AGM, and convened the meeting.
Reviewed the approach and progress of work to
Approved the 2023/24 slavery and human
identify areas where there is any risk of modern slavery
trafficking statement.
occurring in our supply chain.
Reviewed the effectiveness of the whistleblowing
Concluded that the whistleblowing policies and
policies and processes and incidents under
processes were effective and noted the activities within
See pages
137 and 167
investigation and noted the activities within the
the business to protect and detect fraud.
business to prevent and detect fraud.
Treasury hedging policies deep-dive session.
Provide the board with an in-depth session into the
group’s treasury hedging policies regarding interest
rates, inflation, electricity and other commodity prices.
Considered the impact of the Russian invasion of
Sought to mitigate the impact on the supply chain and
See page 74
Ukraine on the supply chain.
source alternative suppliers where possible.
Regulated business and its stakeholders
page 145
See
page 214
See
page 213
See
page 169
Procurement for Customers (DPC) approach and
project through regular presentations at board meetings
readiness of UUW as part of the project to replace
and the UUW board approved the issue of the tender
sections of the Haweswater Aqueduct.
pre-qualification questionnaire.
Water quality deep-dive session.
Provide the board with an in-depth view of the
strategy for managing and improving water quality; an
understanding of the importance of critical assets in the
integrated supply zone during the future construction
activity to replace sections of the Haweswater Aqueduct.
Reviewed the 2022 Annual Performance Report and
Approved the submission of the 2022 Annual
supporting assurance..
Performance Report to Ofwat.
1
Corporate governance report
Board leadership and company purpose
Providing great water for a stronger,
greener and healthier North West continued
Attendance at board and committee meetings
Eight scheduled board meetings were planned and
held during the year (2022: 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 usually
held face to face, occasionally a board member may
attend virtually.
On the evening before most scheduled board meetings,
all of 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, share views and consider issues impacting the
company, resulting in improved board dynamics and
better decision-making.
Sir David Higgins
Steve Mogford
Louise Beardmore
Phil Aspin
Mark Clare
Alison Goligher
Liam Butterworth
Stephen Carter
Kath Cates
Paulette Rowe
Doug Webb
Boards
meetings(1)
Audit
committee
Remuneration
committee
Nomination
committee
ESG
committee
Treasury
committee
8
8
7
8
4
7
8
4
8
8
8
(2)
(3)
(4)
(3)
8
8
7
8
4
8
8
4
8
8
8
–
–
–
–
–
–
4
1
3
1
4
(3)
(5)
(6)
4
1
3
1
4
–
–
–
–
–
–
2
4
(3)
2
4
4
4
–
4
4
3
3
–
–
–
1
3
3
1
3
3
3
(3)
(3)
1
3
3
1
3
3
3
–
4
4
–
–
–
4
2
1
4
3
1
(7)
(3)
–
4
4
–
–
–
–
3
3
–
–
–
–
–
–
3
3
Meetings attended
Possible meetings
(1) Actual number of meetings attended/maximum number of scheduled meetings that the directors could have attended during the
financial year ended 31 March 2023.
(2) Louise Beardmore was appointed to the board on 1 May 2022.
(3) Mark Clare and Stephen Carter stepped down from the board at the conclusion of the AGM in July 2022.
(4) Alison Goligher was unable to attend one board meeting due to a personal matter.
(5) Kath Cates was appointed as a member of the audit committee in July 2022.
(6) Paulette Rowe stepped down from the audit committee in July 2022.
(7) Liam Butterworth was unable to attend a committee meeting due to a commitment arranged prior to his appointment.
U
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134
unitedutilities.com/corporate
Corporate governance report
1
Board leadership and company purpose
Providing great water for a stronger,
greener and healthier North West continued
Attendance at board and committee meetings
concerns over the time commitment required of them
Eight scheduled board meetings were planned and
held during the year (2022: eight). A number of other
board meetings and telephone conferences were held
to fulfil their duties. Scheduled meetings are usually
held face to face, occasionally a board member may
attend virtually.
during the year, as the need arose. The table below
On the evening before most scheduled board meetings,
shows the number of scheduled meetings attended
all of the non-executive directors meet either by
and the maximum number of scheduled meetings that
themselves, or together with just the CEO, or with the
the directors could have attended. Only in exceptional
entire board and the company secretary. This time
circumstances would directors not attend board and
is usefully spent enabling board members to build a
committee meetings. Similarly, every effort is made to
rapport, share views and consider issues impacting the
attend ad hoc meetings either in person or via the use
company, resulting in improved board dynamics and
of video or telephone conferencing facilities if needs
better decision-making.
be. None of the non-executive directors has raised
U
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Sir David Higgins
Steve Mogford
Louise Beardmore
Phil Aspin
Mark Clare
Alison Goligher
Liam Butterworth
Stephen Carter
Kath Cates
Paulette Rowe
Doug Webb
Boards
meetings(1)
Audit
Remuneration
committee
committee
Nomination
committee
ESG
committee
Treasury
committee
8
8
7
8
4
7
8
4
8
8
8
(2)
(3)
(4)
(3)
8
8
7
8
4
8
8
4
8
8
8
–
–
–
–
–
–
4
1
3
1
4
(3)
(5)
(6)
4
1
3
1
4
–
–
–
–
–
–
–
2
4
2
4
4
4
4
4
(3)
(3)
3
3
–
–
–
1
3
3
1
3
3
3
(3)
1
3
3
1
3
3
3
4
4
–
–
–
–
4
2
1
4
3
1
(7)
(3)
4
4
–
–
3
3
–
–
–
–
–
–
–
–
–
3
3
(1) Actual number of meetings attended/maximum number of scheduled meetings that the directors could have attended during the
Meetings attended
Possible meetings
financial year ended 31 March 2023.
(2) Louise Beardmore was appointed to the board on 1 May 2022.
(3) Mark Clare and Stephen Carter stepped down from the board at the conclusion of the AGM in July 2022.
(4) Alison Goligher was unable to attend one board meeting due to a personal matter.
(5) Kath Cates was appointed as a member of the audit committee in July 2022.
(6) Paulette Rowe stepped down from the audit committee in July 2022.
(7) Liam Butterworth was unable to attend a committee meeting due to a commitment arranged prior to his appointment.
Purpose, values and culture
Our purpose is to provide great water for a stronger,
greener and healthier North West. With the water
industry evolving to meet new challenges and
priorities, the board took into account feedback gained
from stakeholders and colleagues on what, and how,
things needed to be done and as a result, our purpose,
strategic priorities and core values were refreshed
to better reflect the future needs of the business.
Six strategic priorities (see page 38) were identified
reflecting the key areas of focus for the coming years
and the alignment of our ambitions with the ESG
concerns of our stakeholders.
Our core values demonstrate how we behave
individually and collectively as the board and how
we ask our colleagues to behave. Our colleagues are
fundamental to delivering our strategy and achieving
our purpose. Our values of 'doing the right thing',
'make it happen' and 'be better' (see page 50) 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.
For the year ended 31 March 2023, 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.
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.
To support this, we have a framework of qualitative
and quantitative cultural measures to provide the
board with insight into the culture of the group.
These measures are tracked so that any issues can
be identified and actioned. We were pleased to
have received external validation of our approach to
monitoring culture, featuring as a best practice case
study by 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).
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1 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 colleague
engagement survey; human resources policies in relation to
equity, diversity 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.
Metrics from the dashboard used to monitor culture include:
• Engagement response rate shows the level of participation in
our survey – in 2022/23 it was 87 per cent compared to the
UK norm of 76 per cent, demonstrating that colleagues are
keen to tell us how they feel about working at United Utilities.
• Engagement is at the heart of what we do and the overall
engagement score gives us a quantifiable measure of
company culture, in 2022/23 it was 82 per cent compared
to the UK norm of 78 per cent.
• Health and safety is at the heart of what we do and we want
our people to go home safe and well. In 2022/23 it was
91 per cent compared to the UK norm of 87 per cent. The
home safe and well programme training is now part of our
business as usual training programme and 88.6 per cent of
our workforce have completed this training programme.
2 Existing reporting structures for discussion
There are a number of existing reporting structures that allow
our 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.
3 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.
134
unitedutilities.com/corporate
Stock code: UU.
135
1
Corporate governance report
Board leadership and company purpose
Providing great water for a stronger,
greener and healthier North West continued
Read more about
our female
talent pipeline
on page 102
Read more about
our colleague
networks on
page 55
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3
Listening to our colleagues
Our colleagues 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 the wider workforce.
There is an open invitation to all board members to
attend meetings of the panel. During the year, Liam
Butterworth and Doug Webb each attended a panel
meeting participating in a question and answer session
with panel members.
Alison chairs the Colleague Voice panel (the panel)
formed from representatives of a number of colleague
groups and networks from across the business and with
representatives drawn from around the region. During
the year, the panel met four times including its AGM
in July 2022. Meetings alternate between in-person
and virtual, providing a flexible approach to enable
colleagues to attend.
Profile of the Colleague Voice panel
31 panel members
from 16 different
work locations
Representatives from
all 6 colleague networks
15 male and 16 female
Workington
Whitehaven
Carlisle
Kendal
Barrow-in-Furness
Lancaster
Blackpool
Preston
Burnley
Blackburn
Bolton
Liverpool Manchester
Warrington
Stockport
Chester
Crewe
Throughout the year, the panel have been provided
with business updates and information sessions to
broaden their knowledge of board and corporate
governance, including governance around executive
remuneration. A summary of the meeting content is set
out in the table opposite.
The panel has three key sub-groups focused on actively
providing business insights on the following key areas:
• continuous improvement and feedback on how we
measure colleague engagement;
• helping our colleague networks promote and support
an inclusive culture across the company; and
• exploring the drivers and measures of organisation
culture. The culture sub-group has focused its
energies on obtaining grass-roots view of changes
implemented across the organisation.
Colleagues’ views are measured annually through the
engagement Your Opinion Survey with the objective of
taking any required action to improve how permanent
colleagues feel about the company and understand its
direction. Colleagues 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.
Alison has regular meetings with senior trade union
representatives as part of the agreed panel approach.
Furthermore, 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
colleagues’ 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 colleagues, agency staff and contractors.
Set out on pages 56 and 76 respectively is the
company’s approach to our engagement with and
creating value for colleagues, 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 186.
Colleague 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
colleague engagement survey to the panel. The
panel enhanced the underlying anonymity of
the survey 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.
'Lived
experience'
Board
ESG committee
Non-executive director
Alison Goligher
Network
leads
Colleague
champion groups
Early careers
and managers
Union
partners
Panel members from
Panel members from
Panel members from
Colleague groups
• Multicultural
• Identity (LGBT)
• GENEq
• Armed Forces
• Ability
• Health, safety
and wellbeing
champions
• Engagement
champions
• Colleague
engagement
group
• The early
careers board
• Aspiring
managers
• Apprentices
• Graduates
Colleague sub-groups
Full time
trade union
representatives
• Unite
• GMB
• Unison
• Prospect
136
unitedutilities.com/corporate
Investor dialogue with the Chair
During the year, the Chair offered to meet with
20 institutional investors, and 11 meetings were held.
Common themes from these discussions included:
• affordability of customer bills and the impact of
inflation and rising interest rates;
•
the board's support for Louise Beardmore as she
transitions into the CEO role and the executive
leadership team;
• 2022 AGM vote on climate-related financial
disclosures;
• operational and ODI performance; and
•
the operation of storm overflows and related
programme of work.
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Corporate governance report
1
Board leadership and company purpose
Providing great water for a stronger,
greener and healthier North West continued
Meeting content of the panel during the year is set out in
the table below:
June 2022
November 2022
February 2023
• Board update
• Digital
• Board update
• Sub-group updates –
• Board update
• A Kickstarter’s
perspective of
life at United
Utilities
• Profile of the
workforce (part 1)
workforce (part 2)
• Updates from
each of the
sub-groups
• Q&A with
workplace update
• Monitoring and
assessing culture
• Profile of the
• Digital
academy update
• Updates from
each of the
sub-groups
• Q&A with Liam
Butterworth
Doug Webb
• Overview of colleague
benefits offering
• Annual board governance
colleague engagement;
culture and cross network
collaboration
• Digital workplace update
• Building our digital skills
• Update on totex
efficiency work to ensure
customers' money is
spent wisely
Read more about
our female
talent pipeline
on page 102
Read more about
our colleague
networks on
page 55
Listening to our colleagues
Our colleagues 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 the wider workforce.
There is an open invitation to all board members to
attend meetings of the panel. During the year, Liam
Butterworth and Doug Webb each attended a panel
meeting participating in a question and answer session
with panel members.
Alison chairs the Colleague Voice panel (the panel)
formed from representatives of a number of colleague
groups and networks from across the business and with
representatives drawn from around the region. During
the year, the panel met four times including its AGM
in July 2022. Meetings alternate between in-person
and virtual, providing a flexible approach to enable
colleagues to attend.
Profile of the Colleague Voice panel
31 panel members
from 16 different
work locations
Representatives from
all 6 colleague networks
15 male and 16 female
Workington
Whitehaven
Carlisle
Kendal
Barrow-in-Furness
Lancaster
Blackpool
Preston
Burnley
Blackburn
Bolton
Liverpool Manchester
Warrington
Stockport
Chester
Crewe
Throughout the year, the panel have been provided
with business updates and information sessions to
broaden their knowledge of board and corporate
governance, including governance around executive
remuneration. A summary of the meeting content is set
out in the table opposite.
The panel has three key sub-groups focused on actively
providing business insights on the following key areas:
• continuous improvement and feedback on how we
measure colleague engagement;
• helping our colleague networks promote and support
an inclusive culture across the company; and
• exploring the drivers and measures of organisation
culture. The culture sub-group has focused its
energies on obtaining grass-roots view of changes
implemented across the organisation.
Colleagues’ views are measured annually through the
engagement Your Opinion Survey with the objective of
taking any required action to improve how permanent
colleagues feel about the company and understand its
direction. Colleagues 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.
Alison has regular meetings with senior trade union
representatives as part of the agreed panel approach.
Furthermore, 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
colleagues’ 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 colleagues, agency staff and contractors.
Set out on pages 56 and 76 respectively is the
company’s approach to our engagement with and
creating value for colleagues, 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 186.
U
n
i
t
e
d
U
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t
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e
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3
1
M
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h
2
0
2
3
Colleague 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
colleague engagement survey to the panel. The
panel enhanced the underlying anonymity of
the survey 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.
'Lived
experience'
Board
ESG committee
Non-executive director
Alison Goligher
Colleague groups
Network
leads
Colleague
champion groups
Early careers
and managers
Union
partners
Panel members from
Panel members from
Panel members from
Full time
• Multicultural
• Health, safety
• The early
• Identity (LGBT)
• GENEq
• Armed Forces
• Ability
and wellbeing
champions
• Engagement
champions
• Colleague
engagement
group
careers board
• Aspiring
managers
• Apprentices
• Graduates
trade union
representatives
• Unite
• GMB
• Unison
• Prospect
Colleague sub-groups
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 colleagues (including agency workers and contractors) to
raise matters of concern in relation to possible incidents of fraud,
dishonesty, corruption, theft, security and bribery. Furthermore,
colleagues 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 colleague will be victimised for raising a matter
in accordance with the policy. Matters raised with the helpline/
portal are in the first instance reported to the whistleblowing
committee 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 then considered by
the whistleblowing committee (whose membership comprises the
company secretary, the 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 colleagues 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;
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
• maintaining close contact between the investor relations
team and a range of City analysts that conduct research on
United Utilities.
In 2022/23, our investor relations activities were conducted
through a combination of virtual and face-to-face meetings. We
met or offered to meet with 87 per cent (2021/22: 80 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
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 always held our AGM in our region, which enables our
more local shareholders, many of whom are customers, to attend
the meeting. The 2023 AGM will, for the first time, be held at the
company’s main offices in Warrington.
136
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Stock code: UU.
137
1
Corporate governance report
Board leadership and company purpose
Providing great water for a stronger,
greener and healthier North West continued
Read more about
creating
value for our
stakeholders on
pages 76 to 77
Read more about
our treasury
committee on
page 169
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There is a considerable amount of information on our
website, which provides information on our key social
and environmental impacts and performance during the
year. Together with the annual and half-yearly results
announcements, our integrated 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, along with a
number of useful website addresses.
Other stakeholders
The board has direct contact with other stakeholder
representatives, including: Ofwat, the DWI 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
colleagues via the Colleague Voice panel.
Engagement with representatives of all our stakeholder
groups occurs widely across many aspects of the
business, and more information can be found on
pages 56 to 57.
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.
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 £10 billion Euro Medium Term Note
Programme, 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 April 2023, the group issued its second
sustainable public bond issue, a £300 million, 15.5-year
maturity, in accordance with the group’s sustainable
finance framework. An allocation and impact report is
published annually in respect of any green/sustainable
finance raised, which provides credit investors with
details on the use of proceeds of any sustainable
finance raised, along with the selected case studies on
eligible projects funded.
The group currently has gross borrowings of circa
£8,435.4 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 Global Ratings UK Limited under
contracts that are periodically renewed or tendered.
Outcome of 2022 AGM
At the 2022 AGM, votes were cast in relation to approximately 73 per cent of the issued share capital
(2021: 70 per cent; 2020: 69 per cent). All 23 resolutions proposed by the board were passed by the required
majority. There were no significant votes cast against the board’s recommendations, resolution 16, relating to
our climate-related financial disclosures, was passed with 80.62 per cent of the votes cast favour.
Votes cast in favour of the election/reappointment of the board directors were as follows:
Sir David Higgins
Steve Mogford
Louise Beardmore
Phil Aspin
Liam Butterworth
98.14%
99.93%
99.95%
99.92%
99.97%
Kath Cates
Alison Goligher
Paulette Rowe
Doug Webb
98.19%
99.19%
98.19%
98.20%
138
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Corporate governance report
1
Board leadership and company purpose
Division of responsibilities 2
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There is a considerable amount of information on our
euro public bond markets and privately arranged note
website, which provides information on our key social
issues. Committed credit facilities are arranged with
and environmental impacts and performance during the
our relationship banks on a bilateral basis.
Providing great water for a stronger,
greener and healthier North West continued
Read more about
creating
value for our
stakeholders on
pages 76 to 77
year. Together with the annual and half-yearly results
announcements, our integrated 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
Read more about
investor relations teams, along with our registrar, Equiniti,
our treasury
committee on
page 169
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, along with a
number of useful website addresses.
Other stakeholders
The board has direct contact with other stakeholder
2020. In April 2023, the group issued its second
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
sustainable public bond issue, a £300 million, 15.5-year
maturity, in accordance with the group’s sustainable
finance framework. An allocation and impact report is
published annually in respect of any green/sustainable
finance raised, which provides credit investors with
details on the use of proceeds of any sustainable
finance raised, along with the selected case studies on
eligible projects funded.
The group currently has gross borrowings of circa
£8,435.4 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 Global Ratings UK Limited under
contracts that are periodically renewed or tendered.
representatives, including: Ofwat, the DWI 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
colleagues via the Colleague Voice panel.
Engagement with representatives of all our stakeholder
groups occurs widely across many aspects of the
business, and more information can be found on
pages 56 to 57.
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.
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 £10 billion Euro Medium Term Note
Programme, which gives us access to the sterling and
Outcome of 2022 AGM
At the 2022 AGM, votes were cast in relation to approximately 73 per cent of the issued share capital
(2021: 70 per cent; 2020: 69 per cent). All 23 resolutions proposed by the board were passed by the required
majority. There were no significant votes cast against the board’s recommendations, resolution 16, relating to
our climate-related financial disclosures, was passed with 80.62 per cent of the votes cast favour.
Votes cast in favour of the election/reappointment of the board directors were as follows:
Sir David Higgins
Steve Mogford
Louise Beardmore
Phil Aspin
Liam Butterworth
98.14%
99.93%
99.95%
99.92%
99.97%
Kath Cates
Alison Goligher
Paulette Rowe
Doug Webb
98.19%
99.19%
98.19%
98.20%
G
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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 ensure that directors receive accurate,
timely and clear information.
The internally facilitated board evaluation (see pages 145 to 147)
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 122.
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
responsibilities of each director is set out in their biographical
details set out on pages 122 to 125.
The internal board evaluation (see pages 145 to 147) tested and
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 122 to 124 for our
reporting against provision 10; and the governance structure of the
board and its principal committees on page 130.
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 meet their board
responsibilities and principle H had been applied (see page 139).
Throughout the year the board demonstrated constructive challenge
and offered strategic guidance and advice to management in
relation to storm overflows and Better Rivers: Better North West
programme (see page 59).
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 146.
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
that 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:
Paulette Rowe who was appointed as a non-executive
director of Thredd, a private equity owned venture.
Executive directors are not normally allowed to take on
more than one non-executive position.
138
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Stock code: UU.
139
Corporate governance report
2 Division of responsibilities
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 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.
Nomination committee
Louise is no stranger to colleagues
across the organisation given her
previous roles, but she is determined
to spend time going out and about,
meeting with them and listening to their
views, particularly those who work at
our many operational sites and are at
the heart of our business.
Dear shareholder
I am delighted with the progress that Louise has made
in transitioning into the role of chief executive officer,
supported throughout the period as she has been by
Steve Mogford, with her formally assuming the role
when Steve retired on 31 March 2023. She has taken
over the leadership in challenging and changing times
for both the water sector and the company. With time
of the essence, and being only one facet of her new
role, Louise has been working tirelessly on the group's
Better Rivers; Better North West programme, engaging
with key stakeholders across the sector and her peers
among the other water companies to promote a more
collaborative approach to address the underlying
issue, being the need to better manage and reduce
the volumes of rainwater entering the sewer network.
She is clear that there will be full transparency and
accountability on making inroads on United Utilities'
performance with this matter.
Louise has reset the approach to communicating with
her executive team holding two scheduled monthly
meetings and regular informal weekly 'scrum' meetings
to touch base and keep abreast of the team's activities
and share concerns and successes. Louise’s promotion
generated a vacancy in her previous role as customer
services and people director and as a member of the
executive team. The role was separated into that of
customer services director and people director and
Nomination committee members:
Sir David Higgins
Chair of the
nomination committee
Liam Butterworth
Michael Lewis
Kath Cates
Paulette Rowe
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Quick links
Terms of reference:
unitedutilities.com/corporate-governance
Alison Goligher
Doug Webb
140
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Corporate governance report
2 Division of responsibilities
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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
• The company secretary attends all meetings of
for succession.
the committee.
• The 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.
Nomination committee
Louise is no stranger to colleagues
across the organisation given her
previous roles, but she is determined
to spend time going out and about,
meeting with them and listening to their
views, particularly those who work at
our many operational sites and are at
the heart of our business.
Dear shareholder
I am delighted with the progress that Louise has made
in transitioning into the role of chief executive officer,
supported throughout the period as she has been by
Steve Mogford, with her formally assuming the role
when Steve retired on 31 March 2023. She has taken
over the leadership in challenging and changing times
for both the water sector and the company. With time
of the essence, and being only one facet of her new
role, Louise has been working tirelessly on the group's
Better Rivers; Better North West programme, engaging
with key stakeholders across the sector and her peers
among the other water companies to promote a more
collaborative approach to address the underlying
issue, being the need to better manage and reduce
the volumes of rainwater entering the sewer network.
She is clear that there will be full transparency and
accountability on making inroads on United Utilities'
performance with this matter.
Louise has reset the approach to communicating with
her executive team holding two scheduled monthly
meetings and regular informal weekly 'scrum' meetings
to touch base and keep abreast of the team's activities
and share concerns and successes. Louise’s promotion
generated a vacancy in her previous role as customer
services and people director and as a member of the
executive team. The role was separated into that of
customer services director and people director and
Nomination committee members:
Sir David Higgins
Chair of the
nomination committee
Liam Butterworth
Michael Lewis
Kath Cates
Paulette Rowe
Quick links
Terms of reference:
unitedutilities.com/corporate-governance
Alison Goligher
Doug Webb
Read more about
storm overflows
on page 22
Read more about
equity, diversity,
and inclusion on
pages 54 to 55
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external appointments were made for both roles during
the year. During the year, a further vacancy arose
for the position of capital delivery, engineering and
commercial director, for which an external appointment
was made. Biographies of the executive team can be
found at unitedutilities.com/executive-team
Louise is leading the regular sessions with the
executive team and the senior leadership team,
which have been introduced to ensure consistency
of communication throughout the organisation with
the senior leadership team thereafter cascading
information throughout the business. Louise is no
stranger to colleagues across the organisation given
her previous roles, but she is determined to spend time
going out and about, meeting with them and listening
to their views, particularly those who work at our many
operational sites and are at the heart of our business.
Information on Louise's CEO transition programme and
the stakeholder engagement activities she has been
undertaking can be found on page 145.
As previously reported, independent non-executive
directors Mark Clare and Stephen Carter stepped
down from the board at the AGM in July 2022, after
serving for nearly nine and eight years respectively.
Liam Butterworth joined the board in January 2022,
replacing Mark Clare in accordance with the
committee’s board succession plan. The committee’s
search for Stephen's replacement commenced in
July 2022. The brief for the search, conducted
by Lygon Group, was to identify a candidate with
extensive utility and regulatory experience. The search
culminated in the appointment of Michael Lewis.
On 23 January 2023, it was announced that Michael
would join the board as an independent non-executive
director with effect from 1 May 2023. Michael’s
biography can be found on page 124. He has spent
most of his career working in the electricity sector, and
was appointed as CEO of E.ON UK in 2017. He started
his career in the water industry, and having grown
up in the North West and attended the University of
Manchester, he has a close affinity with our region.
His considerable regulatory experience replaces skills
lost when Mark and Stephen left the board. He has
focused on sustainability issues throughout his career,
and his insight will be helpful as the board further
develops its ambitions to reduce the group’s carbon
footprint and achieve its net zero commitment by 2030,
on his appointment he was appointed as a member
of the ESG committee. Michael has now attended
his inaugural board meeting and I look forward to
welcoming his contribution and insight as we further
progress with our business planning for the 2025-2030
price review period.
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 144).
Alison Goligher stepped into the role of the senior
independent director succeeding Mark Clare in July
2022. Alison has also taken on the role of chairing the
newly formed compliance committee, which will take
the lead in providing initial oversight, and challenge
for regulatory assurance matters, and management
will undoubtedly find her a useful sounding board as
we progress through the drafting process for the price
review submission.
At 31 March 2023, 44 per cent of the board were
female, two of the senior board positions were held
by females and 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 continuing to work hard to
prepare for the forthcoming price review process.
Sir David Higgins
Chair of the nomination committee
Main responsibilities
• Lead the process for board appointments and
make recommendations to the board about
filling board vacancies, including the role of
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.
• Review directors’ conflict authorisations.
• 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).
Louise has been hard at
work, demonstrating her
passion and commitment
to United Utilities.”
140
unitedutilities.com/corporate
Stock code: UU.
141
2
Corporate governance report
Division of responsibilities
Nomination committee continued
Directors’ tenure as at 31 March 2023
Age and gender profile as at 31 March 2023
48–56
44%
57–60
23%
61–70
33%
Sir David Higgins
3 yr 10m
Steve Mogford
12yrs 3m
Louise Beardmore
11m
Phil Aspin
2 yr 9m
Liam Butterworth
Kath Cates
1 yr 3mths
2 yr 7m
Alison Goligher
6yrs 8m
Paulette Rowe
5yrs 8m
Doug Webb
2yr 7m
1
1
0
2
h
c
r
a
M
1
3
2
1
0
2
h
c
r
a
M
1
3
3
1
0
2
h
c
r
a
M
1
3
4
1
0
2
h
c
r
a
M
1
3
5
1
0
2
h
c
r
a
M
1
3
6
1
0
2
h
c
r
a
M
1
3
7
1
0
2
h
c
r
a
M
1
3
8
1
0
2
h
c
r
a
M
1
3
9
1
0
2
h
c
r
a
M
1
3
0
2
0
2
h
c
r
a
M
1
3
1
2
0
2
h
c
r
a
M
1
3
2
2
0
2
h
c
r
a
M
1
3
3
2
0
2
h
c
r
a
M
1
3
Non-executive directors average tenure
Executive director average career time within
the business
Average age of the non-executive directors
Average age of the executive directors
Gender identity or sex as at 31 March 2023
Chair
Executive director
Senior independent
non-executive director
Independent
non-executive director
Male
Female
At 31 March 2023
3 years 9 months
22 years 4 months
59 years
56 years
Men
Women
Not specified/prefer not to say
No. of board
members
Percentage
of the board
No. of senior
positions on
the board
(CEO, CFO,
SID, Chair)
No. in
executive
management
Percentage
of executive
management
5
4
–
55.5%
44.5%
–
3
1(1)
–
7
6
–
53.8%
46.2%
–
(1) from 31 March 2023 Louise Beardmore was appointed as CEO.
Ethnic background as at 31 March 2023
White
Mixed/multiple
Asian
Black
Other ethnic group
Not specified/prefer not to say
No. of board
members
Percentage
of the board
No. of senior
positions on
the board
(CEO, CFO,
SID, Chair)
No. in
executive
management
Percentage
of executive
management
8
–
–
1
–
–
88.9%
–
–
11.1%
–
–
4
–
–
–
–
–
13
–
–
–
–
–
100%
–
–
–
–
–
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
a
i
i
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
3
Data for the above tables is drawn from HR management information at 31 March 2023, with the directors and members of the
executive team each having completed the company's 'All about me' equity, diversity and inclusion survey.
142
unitedutilities.com/corporate
Directors’ tenure as at 31 March 2023
Age and gender profile as at 31 March 2023
48–56
44%
57–60
23%
61–70
33%
2
Corporate governance report
Division of responsibilities
Nomination committee continued
Sir David Higgins
3 yr 10m
Steve Mogford
12yrs 3m
Louise Beardmore
11m
Phil Aspin
2 yr 9m
Liam Butterworth
Kath Cates
1 yr 3mths
2 yr 7m
Alison Goligher
6yrs 8m
Paulette Rowe
5yrs 8m
Doug Webb
2yr 7m
1
1
0
2
h
c
r
a
M
1
3
2
1
0
2
h
c
r
a
M
1
3
3
1
0
2
h
c
r
a
M
1
3
4
1
0
2
h
c
r
a
M
1
3
5
1
0
2
h
c
r
a
M
1
3
6
1
0
2
h
c
r
a
M
1
3
7
1
0
2
h
c
r
a
M
1
3
8
1
0
2
h
c
r
a
M
1
3
9
1
0
2
h
c
r
a
M
1
3
0
2
0
2
h
c
r
a
M
1
3
1
2
0
2
h
c
r
a
M
1
3
2
2
0
2
h
c
r
a
M
1
3
3
2
0
2
h
c
r
a
M
1
3
Non-executive directors average tenure
Executive director average career time within
the business
Average age of the non-executive directors
Average age of the executive directors
Gender identity or sex as at 31 March 2023
Men
Women
Not specified/prefer not to say
(1) from 31 March 2023 Louise Beardmore was appointed as CEO.
Ethnic background as at 31 March 2023
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
Mixed/multiple
White
Asian
Black
Other ethnic group
Not specified/prefer not to say
Chair
Executive director
Senior independent
non-executive director
Independent
non-executive director
Male
Female
At 31 March 2023
3 years 9 months
22 years 4 months
59 years
56 years
No. of senior
positions on
the board
No. of board
Percentage
(CEO, CFO,
executive
of executive
members
of the board
SID, Chair)
management
management
No. in
Percentage
No. of senior
positions on
the board
No. of board
Percentage
(CEO, CFO,
executive
of executive
members
of the board
SID, Chair)
management
management
No. in
Percentage
5
4
–
8
–
–
1
–
–
55.5%
44.5%
–
88.9%
11.1%
–
–
–
–
3
1(1)
–
4
–
–
–
–
–
7
6
–
13
–
–
–
–
–
53.8%
46.2%
–
100%
–
–
–
–
–
Data for the above tables is drawn from HR management information at 31 March 2023, with the directors and members of the
executive team each having completed the company's 'All about me' equity, diversity and inclusion survey.
Composition, success and evaluation 3
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
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 143 to 144 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 pages 143 and 148. Information on
the company’s approach to equity, diversity and inclusion is set out on
pages 54 to 55. Our disclosure against provision 20 is on page 143.
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 122 to 125. An overview of directors’
areas of expertise is set out in the skills matrix on page 144 and the
length of service of board members on page 142. 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 145 to 147.
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
background1, and to have at least one of the positions
of: Chair, CEO, senior independent director or CFO
held by a female.
What has been on the committee’s agenda
during the year?
Board succession
The succession planning matrix tool and skills matrix
(see page 144) 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 priorities. 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 their
unique knowledge and perspective of the group, and
views on the needs of the business going forward.
Neither the Chair nor the CEO would be involved in
the appointment process of their own successor.
Board succession – non-executive
Michael Lewis was recruited as an independent
non-executive director with effect from 1 May 2023.
The committee is supported during any non-executive
director recruitment process, by the people director.
Due to the timing of the process Louise Beardmore,
as part of her then human resources responsibilities
supported the committee, as her successor was not yet
in post. 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.
(1) 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.
As required by LR 9.8.6(9), the company has met the following
board diversity targets at 31 March 2023:
a. at least 40 per cent of the individuals on the board
are women;
b. at least one of the following senior positions is held by a
woman: the chair; the CEO; the SID or the CFO ; and
c. at least one individual on the board is from a minority
ethnic background.
142
unitedutilities.com/corporate
Stock code: UU.
143
3
Corporate governance report
Composition, success and evaluation
Nomination committee continued
Membership of the principal board committees
Paulette Rowe was appointed as chair of the ESG committee
during the year, succeeding Stephen Carter who left the board at
the conclusion of the 2022 AGM. Paulette has been a significant
contributor to the work on equity, diversity and inclusion, and
she has a keen interest in social matters, as a former trustee
and chair of a children’s charity and is well placed to lead the
committee. On his appointment, Michael Lewis was appointed
as a member of the ESG committee.
Alison Goligher was appointed as the SID at the conclusion
of the 2022 AGM when she stepped aside as chair of the
remuneration committee, although she remained as a member
of the committee, and was 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 (set out
on page 143) to the audit, nomination and remuneration
committees, thereby ensuring diversity of attributes and 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 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 our culture. 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. On the board at 31 March 2023, female representation
was 44 per cent and there was 10 per cent representation
by a director from a minority ethnic background. Among the
workforce, colleagues from a minority ethnic background
represented 2.7 per cent, 8.2 per cent of colleagues 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 priority of providing a safe
and great place to work (see page 38).
Skills matrix of board directors
Sir David
Higgins
Steve
Mogford
Louise
Beardmore
Phil
Aspin
Alison
Goligher
Liam
Butterworth
Kath
Cates
Michael
Lewis
Paulette
Rowe
Doug
Webb
Finance/accounting
Utilities
Regulation
Government
Construction/
engineering
Industrial
Customer-facing
FTSE companies
Digital/technology
ESG
Current CEO/CFO
FTSE 350(1)
Former CEO/CFO
of FTSE 350
(1) Excludes United Utilities
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
a
i
i
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
3
144
unitedutilities.com/corporate
Corporate governance report
3
Composition, success and evaluation
Nomination committee continued
Membership of the principal board committees
Paulette Rowe was appointed as chair of the ESG committee
during the year, succeeding Stephen Carter who left the board at
the conclusion of the 2022 AGM. Paulette has been a significant
contributor to the work on equity, diversity and inclusion, and
she has a keen interest in social matters, as a former trustee
and chair of a children’s charity and is well placed to lead the
committee. On his appointment, Michael Lewis was appointed
as a member of the ESG committee.
Alison Goligher was appointed as the SID at the conclusion
of the 2022 AGM when she stepped aside as chair of the
remuneration committee, although she remained as a member
of the committee, and was 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 (set out
on page 143) to the audit, nomination and remuneration
committees, thereby ensuring diversity of attributes and 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 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 our culture. 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. On the board at 31 March 2023, female representation
was 44 per cent and there was 10 per cent representation
by a director from a minority ethnic background. Among the
workforce, colleagues from a minority ethnic background
represented 2.7 per cent, 8.2 per cent of colleagues 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 priority of providing a safe
and great place to work (see page 38).
Skills matrix of board directors
Sir David
Higgins
Steve
Louise
Mogford
Beardmore
Phil
Aspin
Alison
Liam
Goligher
Butterworth
Kath
Cates
Michael
Lewis
Paulette
Rowe
Doug
Webb
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
Finance/accounting
Utilities
Regulation
Government
Construction/
engineering
Industrial
Customer-facing
FTSE companies
Digital/technology
ESG
Current CEO/CFO
FTSE 350(1)
Former CEO/CFO
of FTSE 350
(1) Excludes United Utilities
CEO's transition programme
Louise Beardmore has worked for the group for more than 20
years having joined its graduate programme. She has led teams in
business transformation, water operations, electricity and telecoms
and was appointed as customer services and people director in
2016. During the year, in order to support the transition into her new
role, she has undertaken a number of activities including:
•
Investor relations: met with Rothschild & Co the group's
investor relations adviser to gain greater insight into equity
investor themes and perceptions;
• Corporate brokers: met with JPM Cazenove and Deutsche
Bank to gain a better understanding of equity markets;
• Legal adviser: met with Slaughter and May and received an
in-depth review of directors' responsibilities and corporate
governance requirements;
• Statutory auditor: met with representatives of the group’s
statutory auditor, KPMG;
• Communications adviser: met with representatives of Teneo
Communications, the group's communications adviser;
• Completed the corporate director programme at Harvard
Business School; and
• Regular feedback sessions held with the Chair and
non-executive directors.
CEO's engagement programme
Louise has undertaken an extensive stakeholder engagement
programme since her appointment to the board in May 2022
including:
• Having met with representatives from Ofwat, the DWI, Defra
and the Environment Agency;
• Holding meetings with North West MPs - having made an
invitation to do so to all 76 of the MPs in our region;
• Holding meetings with regional local authority
representatives and devolved mayors;
• Reshaping her leadership communication rhythm to include
monthly full day sessions with the executive and senior
leadership team and weekly update emails to ensure
information is cascaded throughout the business and a
monthly blog and email is sent to all colleagues to provide
important information and insight into the work that Louise
has been involved in during the month and engagement
activities with third party organisations;
• Reshaping the executive team's operating rhythm,
holding two scheduled meetings per month and a weekly
'scrum' session;
• Making regular site visits and talking to operational teams
to understand their perspective of United Utilities, including
spending time with colleagues at Blackburn, Stockport,
Warrington and Davyhulme - the group's primary wastewater
treatment site in Manchester;
• Holding regular meetings with colleague engagement
champions, trade union representatives and meetings of the
colleague network groups;
• Holding an extensive programme of investor meetings in
conjunction with the CFO; and
• Meeting with counterparts at other water and wastewater
companies.
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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.
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 2021/22 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.
Alison Goligher, as the senior independent non-executive
director (SID), led the review of the Chair. She held a
discussion with the other 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 146.
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Corporate governance report
Composition, success and evaluation
Nomination committee continued
A summary of the review of the responses of the self-assessment questionnaire process is set out below:
2022/23 areas of
assessment
Strategic oversight
Commentary and priorities for action
Responses indicated that the board felt quality time was spent considering the group’s strategic aims and reviewing
implementation of strategy. Priorities for action included the board providing robust challenge of the PR24
submission and ensuring readiness as the group transitions into the next asset management period.
Board composition, dynamics
and expertise
Board members felt that the board dynamic between members was good and the board had a cohesive approach
allowing members to provide helpful oversight and challenge to management. Priorities for action included support
for the CEO as she settles into her new role and ensuring support for the wider leadership team.
Board agenda
Managing risk
The overall board agenda was felt to be well managed and focused on the correct areas and the addition of a
regular schedule of deep-dive sessions had been welcomed providing more time for discussion on topical issues.
Priorities for action included ensuring that board papers were kept succinct and that there was benefit for board
members in allowing more time for interaction with the executive presenting the paper.
The respondents indicated that there was good visibility of risk and changes to the risk profile at board level
and risk was considered to be well managed. Priorities for action included the need for the board to gain a more
in-depth understanding of the risks associated with storm overflows and the Better Rivers programme and the
contract risk of the HARP procurement process.
Support and information
Respondents indicated that the company secretary and his team provide a good level of support to the board and
its committees. Priorities for action included greater standardisation of board papers and that contributors provided
papers for distribution in line with agreed time frames.
Committees
• Audit committee: the committee was well chaired and encouraged probing debate and contribution from all
committee members and attendees. Priorities for action included the appropriate assurance of the evolving
ESG landscape and internal control systems.
• Remuneration committee: the chair encouraged robust and probing debate and all members contributed their
views proactively and the committee was well briefed and well supported, providing members with a clear
view of regulatory and shareholder views on remuneration.
• Nomination committee: respondents indicated that the CEO succession had been well managed and all
committee members had been able to contribute effectively to the process. Priorities for action included
addressing long-term succession planning for both the board and management and there was a focus on all
aspects of diversity.
ESG committee: respondents indicated that some ESG matters would benefit from discussion at full board
meetings. Priorities for action included knowledge development and training on relevant ESG matters for
committee members.
•
• 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 to receive more subject specific deep-dives to enhance understanding.
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.
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3
Composition, success and evaluation
Nomination committee continued
A summary of the review of the responses of the self-assessment questionnaire process is set out below:
2022/23 areas of
assessment
Commentary and priorities for action
Strategic oversight
Responses indicated that the board felt quality time was spent considering the group’s strategic aims and reviewing
implementation of strategy. Priorities for action included the board providing robust challenge of the PR24
submission and ensuring readiness as the group transitions into the next asset management period.
Board composition, dynamics
Board members felt that the board dynamic between members was good and the board had a cohesive approach
and expertise
allowing members to provide helpful oversight and challenge to management. Priorities for action included support
for the CEO as she settles into her new role and ensuring support for the wider leadership team.
Board agenda
The overall board agenda was felt to be well managed and focused on the correct areas and the addition of a
regular schedule of deep-dive sessions had been welcomed providing more time for discussion on topical issues.
Priorities for action included ensuring that board papers were kept succinct and that there was benefit for board
members in allowing more time for interaction with the executive presenting the paper.
Managing risk
The respondents indicated that there was good visibility of risk and changes to the risk profile at board level
and risk was considered to be well managed. Priorities for action included the need for the board to gain a more
in-depth understanding of the risks associated with storm overflows and the Better Rivers programme and the
contract risk of the HARP procurement process.
Support and information
Respondents indicated that the company secretary and his team provide a good level of support to the board and
its committees. Priorities for action included greater standardisation of board papers and that contributors provided
papers for distribution in line with agreed time frames.
Committees
• Audit committee: the committee was well chaired and encouraged probing debate and contribution from all
committee members and attendees. Priorities for action included the appropriate assurance of the evolving
ESG landscape and internal control systems.
• Remuneration committee: the chair encouraged robust and probing debate and all members contributed their
views proactively and the committee was well briefed and well supported, providing members with a clear
view of regulatory and shareholder views on remuneration.
• Nomination committee: respondents indicated that the CEO succession had been well managed and all
committee members had been able to contribute effectively to the process. Priorities for action included
addressing long-term succession planning for both the board and management and there was a focus on all
aspects of diversity.
committee members.
•
ESG committee: respondents indicated that some ESG matters would benefit from discussion at full board
meetings. Priorities for action included knowledge development and training on relevant ESG matters for
• 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.
Individual directors
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 to receive more subject specific deep-dives to enhance understanding.
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.
Chair
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.
the board.
It was concluded that the Chair had fulfilled the expected commitment to the role and was an effective leader of
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Actions taken during 2022/23
Greater visibility of the PR24 plan and a better
understanding of the strategic drivers of the group's various
regulators and providing more focus on climate change and
improving asset resilience.
The board have received regular updates throughout the year on progress with the
drafting of the PR24 business plan submission and spent considerable time on the
matter at the annual strategy day held in October 2022. Addressing climate change
and improving asset resilience are key drivers for PR24.
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Nomination committee: improved focus on long-term
succession planning was needed along with ensuring
talent management and retention of senior management
was debated.
Remuneration committee: ensure any future ESG metrics
were understood and incorporated in a meaningful way
into the new directors’ remuneration policy and long-
term plan.
Audit committee: provide more focus on risk management,
processes and controls and non-financial/ESG reporting
and assurance.
The committee's time was spent focusing on non-executive director recruitment,
developing a more structured approach to executive succession planning supported
by the new people director.
Details of ESG metrics included in the 2022/23 incentive framework are set out on
page 184.
Progress made in this area, in particular through the development of an audit and
assurance framework, which was applied to the 2023 narrative reporting.
ESG committee: ensure the focus on areas where the
committee could add greatest value to the PR24 process.
The committee's oversight of: carbon and renewables; affordability and vulnerability;
and Better Rivers and storm overflows has contributed to the PR24 process.
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 146.
Consideration of ESG issues are fundamental to our purpose
of providing great water for a stronger, greener and healthier
North West and central to board discussions (see the summary
of board activity on pages 131 to 133 and the report of the ESG
committee on pages 204 to 207). During the year, the ESG
committee discussed the options for board and executive
training on climate change and more specific ESG training,
and agreed the approach.
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.
Similarly, during the year, the board had the opportunity to meet
with representatives from Ofwat and the DWI.
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. 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, Paulette Rowe
and Liam Butterworth attended an event organised by Ofwat for
non-executive directors. Alison Goligher has again chaired the
Colleague Voice panel as part of the ongoing work to ensure the
board has a direct link to understanding the views of colleagues
(see page 136). Paulette Rowe has contributed to the work on
equity, diversity and inclusion (see pages 54 to 55).
Induction of new non-executive directors
An induction programme is arranged for new non-executive
directors, which would include meeting members of the
executive team, members of the operational teams and visiting
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, as
Michael Lewis did in November 2022, prior to him joining the
board on 1 May 2023. An induction programme will be arranged
for Michael Lewis.
Wider succession pipeline and
talent management
The group has had a written succession plan for the executive
directors and other members of the executive team, which
includes outline timescales, and 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.
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Composition, success and evaluation
Nomination committee continued
Read more about
our apprentices
and graduates
on page 100
Read more about
our human
capital on
page 35
During the year, external appointments were made
for the roles of people director, customer services
director and that of the capital delivery, engineering
and commercial director. An additional executive role
as director of strategic programmes was fulfilled by
an internal candidate. 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 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 colleagues 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 colleagues (see pages 54 to
55). The gender and ethnic breakdown of the board
and executive team can be found on page 142. The
gender balance of the direct reports of the executive
team is 63 per cent male and 37 per cent female,
representation of ethnic minorities is 3 per cent.
Gender pay data can be found on page 55.
Along with the wider colleague population, we
continue to work towards improving the diversity of
our succession pipeline as part of our ongoing equity,
diversity and inclusion plans.
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Composition, success and evaluation
Audit, risk and internal control 4
our human
capital on
page 35
Nomination committee continued
Read more about
our apprentices
and graduates
on page 100
During the year, external appointments were made
During the year, board directors had a number of
for the roles of people director, customer services
opportunities to meet with members of the executive
director and that of the capital delivery, engineering
team, both formally when senior managers were
and commercial director. An additional executive role
required to present at board meetings on matters
as director of strategic programmes was fulfilled by
related to their responsibilities, and on more
an internal candidate. Any changes that are required
informal occasions.
Read more about
changing needs of the business are considered by the
to the profile of the management team to reflect 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 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.
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 colleagues 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 colleagues (see pages 54 to
55). The gender and ethnic breakdown of the board
and executive team can be found on page 142. The
gender balance of the direct reports of the executive
team is 63 per cent male and 37 per cent female,
representation of ethnic minorities is 3 per cent.
Gender pay data can be found on page 55.
Along with the wider colleague population, we
continue to work towards improving the diversity of
our succession pipeline as part of our ongoing equity,
diversity and inclusion plans.
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 162 to 164, and the reappointment of the
statutory auditor on page 165. The board considered, and was
satisfied, as advised by the audit committee given its oversight role,
that the statutory audit contributed to the integrity of the financial
reporting as set out in 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 215 and is supported by
our disclosure against provision 25 on page 162.
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 60
to 75. Further information on the company’s internal audit function
and controls can be found on pages 166 to 167 and together set out
our application of principle O.
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Financial oversight
responsibilities of
the board
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 153 to 167.
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 218 to
231), and the information and explanations provided
by management in relation to their key judgements
and adjustments to APMs (see page 118). 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 2022/23 integrated
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 24 May 2023, see page 215.
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. As
described on page 128, climate change is a common
theme, which poses a risk to the group’s provision of
water and wastewater services. A table of our reporting
against TCFD recommendations is set out on page 5.
As part of the processes supporting the provision of
the ‘fair, balanced and understandable’ statement, the
board 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 impact of
environmental risk and other potential risks associated
with climate change on the financial statements is kept
under review. The board’s approach for accounting for
climate change for the year ended 31 March 2023 is set
out on page 241.
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 tolerance framework. As a key part of the risk
management framework, risk appetite and tolerance
(see page 61) captures the board’s desire to take and
manage risk relative to the company’s obligations,
stakeholder interests and the capacity and capability of
its key resources.
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Financial oversight responsibilities of the board continued
Read more about
significant
issues on pages
158 to 159
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The board is responsible for ensuring that the
company’s risk management and internal control
systems operate effectively 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.
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 64 to 75, the ongoing work of the
audit committee in monitoring the risk management
and internal control systems (see pages 166 and 167)
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
• 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),
and taking into account no significant failings or
weaknesses were identified, the company’s risk
management and internal controls operated effectively
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 64 to 75);
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 67 to 69);
the outcome of the biannual business risk
assessment process (see page 60);
the activities and review of the effectiveness of the
internal audit function (see page 166);
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 167);
the review of reports from the group audit and risk
board (see page 52);
the oversight of treasury matters, in particular debt
financing and interest rate management
(see page 169);
the review of the business risk management
framework and management’s approach and
tolerance towards risk (see page 62); and
the comments made by KPMG on the operation
and effectiveness of the risk management and
control system it observed whilst undertaking the
statutory audit.
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 239).
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 64 to 75, and the risk management processes and
structures used to monitor and manage them on pages
52 to 53, and 60 to 61. 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 169), 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 2030.
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Corporate governance report
4
Audit, risk and internal control
Financial oversight responsibilities of the board continued
The board is responsible for ensuring that the
•
the self-assessment provided by management
company’s risk management and internal control
confirmed compliance with a range of key internal
systems operate effectively across the business and
policies, processes and controls (see page 167);
Read more about
significant
issues on pages
158 to 159
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.
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 64 to 75, the ongoing work of the
audit committee in monitoring the risk management
and internal control systems (see pages 166 and 167)
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
• had reviewed the effectiveness of the risk
management and internal control systems,
including all material financial, operational and
•
the review of reports from the group audit and risk
board (see page 52);
•
the oversight of treasury matters, in particular debt
financing and interest rate management
(see page 169);
•
the review of the business risk management
framework and management’s approach and
tolerance towards risk (see page 62); and
•
the comments made by KPMG on the operation
and effectiveness of the risk management and
control system it observed whilst undertaking the
statutory audit.
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 239).
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
These principal risks and uncertainties are detailed on
pages 64 to 75, and the risk management processes and
structures used to monitor and manage them on pages
52 to 53, and 60 to 61. Biannually, the board receives
compliance controls (including those relating to
topical risks.
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
a report detailing management’s assessment of the
responsibility for operational and compliance controls),
most significant risks facing the company. The report
and taking into account no significant failings or
weaknesses were identified, the company’s risk
gives an indication of the level of exposure, subject
to the mitigating controls in place, for the risk profile
management and internal controls operated effectively
of the group, while also highlighting the reputational
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 64 to 75);
•
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 67 to 69);
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 169), 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
•
the outcome of the biannual business risk
business in severe but reasonable scenarios, and the
assessment process (see page 60);
•
the activities and review of the effectiveness of the
internal audit function (see page 166);
•
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”;
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 2030.
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Read more about
relations with
banks and credit
investors on
page 138
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Basis of assessment
This viability statement is based on the fundamental
assumption that the current regulatory and statutory
framework, and interpretation thereof, does not
substantively change. The long-term planning detailed
on page 40 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 underpins
our business model set out on pages 18 to 117.
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 60 to 75. 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 policy of maintaining debt to
regulatory capital value (RCV) of between 55 per
cent and 65 per cent, which is consistent with
a robust capital structure and strong solvency
position, and which in turn supports the group’s
current credit ratings for its principal subsidiary
United Utilities Water Limited of A3/BBB+/A- with
Moody’s, S&P and Fitch respectively;
the group’s pension schemes being fully funded
on a low dependency basis and fully hedged for
market risk;
the group’s policy of maintaining a robust liquidity
position, with liquidity to cover expected cash
outflows for the next 15 – 24 months, and flexibility
to exceed the upper end of the liquidity range in
periods of greater uncertainty. At March 2023
the group had £1,190 million of available liquidity
covering expected cash outflows through to August
2025 and providing a significant buffer to absorb
short-term cash flow impacts; 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.
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.
The factors set out in this section underpin the
expectation of the group’s ability to maintain access
to equity and debt capital to the extent necessary to
maintain the group’s capital structure and liquidity
policies, which in turn provide the capital buffer and cash
liquidity considered appropriate to mitigate the potential
realisation of the principal risks facing the business.
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 plausible’ scenarios, derived from
the principal risks facing the group, as set out on pages
60 to 75. 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 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, the index
to which is set out on page 5 ; political and regulatory
risks; the risk of critical asset failure; significant cyber
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 potential
downside risks (most notably in relation to bad debt and
inflation volatility) covered by the individual scenarios
modelled, and collectively within a combined scenario.
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Stock code: UU.
151
4
Corporate governance report
Audit, risk and internal control
Financial oversight responsibilities of the board continued
Read more
about going
concern basis of
accounting on
page 239
Read more
about financial
performance on
pages 112 to 119
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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 £400 million one-off
impact in 2023/24
Broadly representing the largest ‘severe but plausible’ risk which is a critical asset
failure, all assumed to be operating costs
Scenario 2: Totex underperformance
of 10% (circa £130–£390 million) per
annum for 2023/24–2027/28
Representing more than the cumulative total expected NPV totex impact of
the remaining top 10 ‘severe but plausible’ risks (including environmental,
cyber security and network failure risks)
Scenario 3: CPIH inflation of 2.0% below
baseline plan for 2023/24–2029/30
Broadly consistent with quantum of inflation impacts modelled within top 10
'severe but plausible 'risks
Scenario 4: An increase in bad debt of
£15 million per annum from 2023/24 to
2029/30
Aligned to internal risk factor on debt collection
Scenario 5: Additional ODI penalty of
circa £70 million per annum
Assumes mid-point of UUW’s baseline and PR19 final determination
P90 ODI position
Scenario 6: Debt refinanced as it
matures, with new debt financed at
1% above the forward projections of
interest rates 2023/24–2029/30
Representing more than top 10 ‘severe but plausible’ risk on credit ratings as well
as high impact/low likelihood risk on financial outperformance
Scenario 7: Combined scenario – 50%
of scenarios 2-6
50% of scenarios 2-6
Example mitigations (of which none are required to remain viable under the scenarios modelled):
Reduction in discretionary totex spend
Capital programme deferral
Closing out of derivative asset position
•
•
•
• Restriction of dividend
all of which are considered to be within the control of management. In addition to these, it is considered that the
following mitigating actions could also be implemented:
Issuing of new finance
•
• Raising of additional 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 plausible
scenarios modelled, without the need to rely on the key
mitigating actions.
The most extreme of the severe but plausible scenarios
modelled, without any mitigating action, resulted in:
the group 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 plausible’ 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.
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, including those outlined in the above table.
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.
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Corporate governance report
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Audit, risk and internal control
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Financial oversight responsibilities of the board continued
Read more
about going
concern basis of
accounting on
page 239
Read more
about financial
performance on
pages 112 to 119
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 £400 million one-off
Broadly representing the largest ‘severe but plausible’ risk which is a critical asset
impact in 2023/24
failure, all assumed to be operating costs
Scenario 2: Totex underperformance
Representing more than the cumulative total expected NPV totex impact of
of 10% (circa £130–£390 million) per
the remaining top 10 ‘severe but plausible’ risks (including environmental,
annum for 2023/24–2027/28
cyber security and network failure risks)
Scenario 3: CPIH inflation of 2.0% below
Broadly consistent with quantum of inflation impacts modelled within top 10
baseline plan for 2023/24–2029/30
'severe but plausible 'risks
Scenario 4: An increase in bad debt of
Aligned to internal risk factor on debt collection
£15 million per annum from 2023/24 to
2029/30
Scenario 5: Additional ODI penalty of
Assumes mid-point of UUW’s baseline and PR19 final determination
circa £70 million per annum
P90 ODI position
Scenario 6: Debt refinanced as it
Representing more than top 10 ‘severe but plausible’ risk on credit ratings as well
matures, with new debt financed at
as high impact/low likelihood risk on financial outperformance
1% above the forward projections of
interest rates 2023/24–2029/30
Scenario 7: Combined scenario – 50%
50% of scenarios 2-6
of scenarios 2-6
Example mitigations (of which none are required to remain viable under the scenarios modelled):
all of which are considered to be within the control of management. In addition to these, it is considered that the
following mitigating actions could also be implemented:
•
•
•
Reduction in discretionary totex spend
Capital programme deferral
Closing out of derivative asset position
• Restriction of dividend
•
Issuing of new finance
• Raising of additional 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 plausible
scenarios modelled, without the need to rely on the key
mitigating actions.
The most extreme of the severe but plausible scenarios
modelled, without any mitigating action, resulted in:
the group 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
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.
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, including those outlined in the above table.
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 accounts.
would have to be significantly outside what would be
The directors also considered it appropriate to
considered ‘severe but plausible’ scenarios before the
prepare the financial statements on the going concern
group’s long-term viability would be at risk.
basis, as explained in the basis of preparation note to
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Audit committee
During the year the committee has paid
close attention to the financial position
being presented by management
during the current turbulent economic
conditions.
Dear shareholder
After the annual general meeting in July 2022,
Stephen Carter stepped down from the board and
the audit committee. At that time, the board took the
opportunity to review the membership of the principal
board committees. As a result, Kath Cates joined the
committee in July 2022 ahead of the 2022/23 audit
cycle, bringing her wider experience as a current
chair of the TPEN audit committee at Columbia
Threadneedle Investments. Furthermore, in July 2022,
Paulette Rowe took up the role as chair of the ESG
committee and, therefore, stood down as a member of
the audit committee.
Economic impact
During the year the committee has paid close
attention to the financial position being presented by
management during the current turbulent economic
conditions. The committee has sought comprehensive
information impacting the financial statements on
the impact of inflation and increases in core costs,
particularly those of power and chemicals and, on the
impact of the rising cost of living and the ability of
customers to pay their bills.
The accounting of additional costs incurred as a result
of three atypically large pipe bursts in the water
network due to the dry weather during the summer of
2022, were also considered. The committee considered
and concluded that management’s views were
reasonable, which aligned with the view expressed by
the external auditor.
BEIS consultation on audit and corporate
governance reform
The committee welcomed the publication in
May 2022 of the Government’s response to its
consultation on ‘Restoring Trust in Audit and
Corporate Governance’ and the publication by the
Financial Reporting Council on the steps it will take to
implement the Government’s reforms. As previously
reported, management were in the process of
drafting the group’s audit and assurance policy (see
page 165), which has been further refined during the
year and has been reviewed by the committee.
Audit committee members:
Doug Webb
Chair of the
audit committee
Kath Cates
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
134, and the relevant directors’ biographies can be found on
pages 124 to 125.
• 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 chair of the committee has regular one-to-one meetings
with the CFO, the head of audit and risk and the KPMG audit
engagement partner.
• 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 links
Terms of reference:
unitedutilities.com/corporate-governance
152
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Stock code: UU.
Liam Butterworth
153
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Corporate governance report
Audit, risk and internal control
Audit committee continued
Read more about
accounting
policies on
page 239
Read more about
the impact of
climate change
on page 241
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The assurance framework, as endorsed by the
committee and contained therein, provides a standard
approach to determine the level of assurance to be
applied to different sections of the integrated annual
report and was implemented for the year ended
31 March 2023. The committee was satisfied with the
progress made to date ahead of the expected extension
of the FRC’s powers once it transitions into the Audit,
Reporting and Governance Authority (ARGA). Among
other things, it is expected that ARGA's remit will be
to review annual reports in their entirety, reflecting
the growing expectations by investors that companies
should provide greater levels of assurance over the
narrative reporting sections of their annual report.
Audit quality
Each year the committee reviews the findings of
the FRC’s annual Audit Quality Review (AQR), most
recently published in July 2022 (and available on
the FRC’s website). The committee’s focus being
the review as pertaining to KPMG, it discussed the
findings of the AQR with representatives of KPMG. The
committee noted that, of the KPMG audits inspected
by the FRC, 84 per cent required no more than limited
improvements and none were identified as needing
significant improvement, which the committee noted
as an improvement on the 2021 AQR.
From time to time the FRC's AQR inspectors contact
a company’s auditor to undertake an inspection of
the audit. During the year, the FRC's AQR inspectors
undertook such an inspection of KPMG’s 2022 audit
of United Utilities Group PLC. The inspectors focused
their assessment on the following areas: revenue
recognition and bad debt; capitalisation of costs;
revenue; trade receivables and accrued income;
derivatives, and audit planning and completion.
KPMG discussed the inspection with the committee,
which was comfortable that no material issues had
been identified. Some incremental improvements
were identified by the inspectors, all of which were
incorporated into the 2023 audit.
As required by the Code, and as an important element
in maintaining an appropriate focus on audit quality, the
effectiveness of the statutory audit process is assessed
annually (see page 162). As part of this assessment the
committee took into account the quality interventions
implemented by KPMG during the 2022 audit and the
impact of these interventions throughout the audit
cycle, building on those implemented in previous years
(see page 162). The views of members of the committee
and management were sought, among other things,
on the degree of professional scepticism exhibited by
the auditor.
Furthermore, at each of the scheduled committee
meetings, management present an updated view of
each of the significant issues and areas over which it has
exercised its judgement (see pages 158 to 159) following
discussion between management and the auditor, many
of which correspond with KPMG’s key audit matters
(see pages 223 to 226). KPMG are present at these
meetings where they have the opportunity to critique
management’s judgements and contribute to the debate,
thereby providing an opportunity for the committee to
challenge the views of management and the auditor
on their assessments. These discussions provide an
opportunity for the committee members, drawing on
their own experience, to informally assess the degree
of professional scepticism applied by the auditor. The
committee has time set aside during its meetings to meet
with the auditor without management being present in
order that they can speak freely and raise any concerns
and to ensure the committee is kept fully informed.
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.
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 164. The statutory
auditor presents its audit findings to the shareholders
as the owners of the business (see pages 218 to 231).
Taking into account the findings of assessment of the
31 March 2022 audit presented to the committee in
September 2022, the committee concluded that the
statutory audit process for 2022 had been effective.
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.
154
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Corporate governance report
4
Audit, risk and internal control
Audit committee continued
Read more about
accounting
policies on
page 239
Read more about
the impact of
climate change
on page 241
The assurance framework, as endorsed by the
committee took into account the quality interventions
committee and contained therein, provides a standard
implemented by KPMG during the 2022 audit and the
approach to determine the level of assurance to be
impact of these interventions throughout the audit
applied to different sections of the integrated annual
cycle, building on those implemented in previous years
report and was implemented for the year ended
(see page 162). The views of members of the committee
31 March 2023. The committee was satisfied with the
and management were sought, among other things,
progress made to date ahead of the expected extension
on the degree of professional scepticism exhibited by
of the FRC’s powers once it transitions into the Audit,
the auditor.
Reporting and Governance Authority (ARGA). Among
other things, it is expected that ARGA's remit will be
to review annual reports in their entirety, reflecting
the growing expectations by investors that companies
should provide greater levels of assurance over the
narrative reporting sections of their annual report.
Audit quality
Each year the committee reviews the findings of
the FRC’s annual Audit Quality Review (AQR), most
recently published in July 2022 (and available on
the FRC’s website). The committee’s focus being
the review as pertaining to KPMG, it discussed the
findings of the AQR with representatives of KPMG. The
committee noted that, of the KPMG audits inspected
by the FRC, 84 per cent required no more than limited
improvements and none were identified as needing
significant improvement, which the committee noted
as an improvement on the 2021 AQR.
From time to time the FRC's AQR inspectors contact
a company’s auditor to undertake an inspection of
the audit. During the year, the FRC's AQR inspectors
undertook such an inspection of KPMG’s 2022 audit
of United Utilities Group PLC. The inspectors focused
their assessment on the following areas: revenue
recognition and bad debt; capitalisation of costs;
revenue; trade receivables and accrued income;
derivatives, and audit planning and completion.
KPMG discussed the inspection with the committee,
which was comfortable that no material issues had
been identified. Some incremental improvements
were identified by the inspectors, all of which were
incorporated into the 2023 audit.
As required by the Code, and as an important element
in maintaining an appropriate focus on audit quality, the
effectiveness of the statutory audit process is assessed
annually (see page 162). As part of this assessment the
Furthermore, at each of the scheduled committee
meetings, management present an updated view of
each of the significant issues and areas over which it has
exercised its judgement (see pages 158 to 159) following
discussion between management and the auditor, many
of which correspond with KPMG’s key audit matters
(see pages 223 to 226). KPMG are present at these
meetings where they have the opportunity to critique
management’s judgements and contribute to the debate,
thereby providing an opportunity for the committee to
challenge the views of management and the auditor
on their assessments. These discussions provide an
opportunity for the committee members, drawing on
their own experience, to informally assess the degree
of professional scepticism applied by the auditor. The
committee has time set aside during its meetings to meet
with the auditor without management being present in
order that they can speak freely and raise any concerns
and to ensure the committee is kept fully informed.
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.
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 164. The statutory
auditor presents its audit findings to the shareholders
as the owners of the business (see pages 218 to 231).
Taking into account the findings of assessment of the
31 March 2022 audit presented to the committee in
September 2022, the committee concluded that the
statutory audit process for 2022 had been effective.
Main responsibilities
• Make a recommendation to the board for the
management and in particular those challenged
appointment or reappointment of the auditor, and to
by the committee in relation to the financial
be responsible for the tender of the audit from time
statements and how these were addressed.
to time and to agree the fees paid to the auditor.
• Approve the scope, remit and effectiveness of the
• Establish policies for the provision of any non-audit
internal audit function and the group’s internal
services by the auditor.
control and risk management systems.
• Challenge the auditor on the scope and the results
• Review the group’s procedures for reporting fraud
of the annual audit and report to the board on the
and other inappropriate behaviour and to receive
effectiveness of the audit process and how the
reports relating thereto.
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
• Report to the board on how it has discharged its
• Apply the principles of the code and report against
responsibilities.
the provisions.
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Long-term viability statement
The committee reviewed and concurred with
management’s view that the long-term viability
statement (see page 150) should again be provided for
a seven-year period, management’s view being that a
high-quality assessment can be provided for a seven-
year period, and favouring the approach of greater
certainty over a shorter period.
The impact of climate change on the financial viability
of the group has been reflected in the viability
assessment underpinning the long-term viability
statement, which the committee reviewed and
endorsed prior to approval by the board.
During the year, the committee received an update on
the work of the International Sustainability Standards
Board (ISSB), with management evolving its approach
to the reporting of its business model in line with the
ISSB's four pillar approach.
Risk management and internal control
The committee has overseen the steps to implement
enhancements and improvements identified by
the independent review of the group’s fraud risk
management framework as reported on in last year’s
audit committee report. The main improvements being
the completion of a formal cross-business fraud risk
assessment to supplement the existing business risk
assessment process, and the subsequent internal audit
review of anti-fraud controls for the principal fraud
risks. Furthermore, the implementation of a revised
ISA (UK) 240 in order to clarify the auditor’s obligations
with respect to fraud and enhance the quality of audit
work performed in this area.
During the year, the revised ISA (UK) 315 was
implemented by KPMG in order to increase the rigour of
the risk identification and assessment process, thereby
enabling the introduction of improved mitigating
actions to counteract the risk. The revisions to the
standard require the audit to included a more detailed
consideration of the IT environment. In preparation,
the committee received a ‘deep dive’ session from
management on the group’s IT control environment.
Audit fees
The revision of the aforementioned standards has
contributed to an increase in the audit work undertaken
by KPMG and along with additional economic
inflationary pressures on KPMG’s costs, the committee
have approved an increase in the overall fees paid to
KPMG for the year ended 31 March 2023 compared to
the prior year. These fee increases were mitigated in
part, by the provision of parental company guarantees
to support an exemption from statutory audit for
certain subsidiary companies in accordance with s479C
of the Companies Act 2006. While the committee
encouraged KPMG to look for efficiencies through
innovation to offset the impact of increasing fees, it
was cognisant of the need to preserve the auditor’s
independence and of KPMG’s significant progress in
recent years in streamlining their processes and making
improvements to audit quality. As a consequence, the
committee recognised that there was limited scope for
further efficiencies at present.
Governance
The evaluation of the committee’s performance for
2022/23 was facilitated internally by the company
secretary and his team, which provided some useful
feedback and points for action (see page 146).
On page 149 the Code principles and provisions
applicable to audit, risk and internal control are set out
and our responses indexed. In its work, the committee
is intent on complying with applicable regulations and
best practice.
As chair of the committee, I would welcome any
comments you may have on this audit committee
report, I intend to be present at the AGM in
July 2023, and representatives from KPMG will
also be in attendance.
This report was approved by the committee at its
meeting held on 16 May 2023.
Doug Webb
Chair of the audit committee
154
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Stock code: UU.
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4
Corporate governance report
Audit, risk and internal control
Audit committee continued
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 160 to 161.
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
• Review of evolving ESG
reporting standards
• 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
y
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• 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
e p tember
S
Audit
committee:
principal statutory
reporting
matters
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• Management presents the
half-year financial statements
• Auditor presents the review of
half-year financial statements
• Auditor confirms their
independence
• Approved the assurance
framework for narrative reporting
• 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
• Management present planned
narrative assurance activities
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Corporate governance report
4
Audit, risk and internal control
Audit committee continued
Business on the committee’s agenda during the year
The committee has an extensive agenda of items of
whether adequate accounting records have been kept.
business focusing on the audit, assurance and risk
In doing so it ensures that high standards of financial
processes within the business, which it deals with in
governance, in line with the regulatory framework
conjunction with senior management, the auditor, the
along with market practice for audit committees going
internal audit function and the financial reporting team.
forward, are maintained. Furthermore, the company’s
The committee’s role is to ensure that management’s
own internal audit team contributes to the assurance
disclosures reflect the supporting detail provided to
process by reviewing compliance with internal
the committee or challenge them to explain and justify
processes. The committee’s financial reporting cycle,
their interpretation and, if necessary, re-present the
which starts each year in September, is shown below.
information. The committee reports its findings and
There were four meetings of the committee held during
makes recommendations to the board accordingly.
the year, the committee intends to continue to hold the
The committee is supported in this role by using the
two meetings in September and March virtually. Items
expertise of the statutory auditor, who, in the course of
of business considered by the committee are set out on
the audit, considers whether the financial statements
pages 160 to 161.
have been prepared in accordance with IFRS and
Audit committee financial reporting cycle
• 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
y
a
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• 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
e p tember
S
Audit
committee:
principal statutory
reporting
matters
Marc h
N
o
v
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m
b
er
• Management presents the
half-year financial statements
• Auditor presents the review of
half-year financial statements
• Auditor confirms their
independence
• Approved the assurance
framework for narrative reporting
• 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
• Review of evolving ESG
reporting standards
• 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
• Management present planned
narrative assurance activities
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Corporate governance report
4 Audit, risk and internal control
Audit committee continued
Significant issues considered by the committee in relation to the financial statements
Management presents its updated view of the significant issues whereby it has exercised its professional judgement to each
meeting of the committee, thereby providing an opportunity for oversight and for the committee to challenge management’s views.
Additionally, KPMG receive this information in advance of, and are present at, the committee meetings, providing KPMG with the
opportunity to contribute to the discussion both with management present, and privately with only the committee members present.
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 240, 242, 253
to 254, 280 and 282) – 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 recent years (including in the current year)
due to high levels of economic uncertainty and
increases in the cost of living, which is expected
to impact on the ability of some customers to
pay their bills as they become due.
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Capitalisation of fixed assets (see pages 241,
250 to 251, 281 to 282) – fixed assets represents
a subjective area, particularly in relation to costs
permitted for capitalisation and depreciation
policy.
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•
•
•
The committee reviewed the group’s revenue recognition policy, particularly in light of a
higher level of billing of premises registered as void during the year, and challenged whether
the criteria for de-recognising revenue relating to amounts billed to customers remains
appropriate. Having considered the impact of the de-recognition criteria as applied to
the billing of void properties, the committee satisfied itself that no change in the revenue
recognition policy is required at the present time, but noted the increased level of challenge in
recovering this debt compared with the remainder of the group’s customer base. Accordingly,
the committee also challenged the adequacy of the group’s allowance for expected credit
losses in respect of void properties and satisfied itself that, when all relevant factors are taken
into consideration, the allowance reported in the financial statements is appropriate.
The committee considered the adequacy of the group’s provisions for credit notes that
may need issuing in respect of amounts incorrectly billed, focusing particularly on non-
household customers where legacy data issues since the non-household market opened to
competition have resulted in allowances being processed going back a number of years.
The committee satisfied itself with the approach adopted by management for providing for
future allowances, and noted that the value of these should reduce over time as data for
more recent periods should not be subject to the same legacy issues as earlier periods.
The committee reviewed the approach taken by management in estimating expected credit
losses relating to household debt, taking into account estimates of the impact of cash
collection risk associated with void properties (see above) and recognising that there is a
great deal of uncertainty associated with the future duration and intensity of cost-of-living
challenges experienced by customers. Having considered cash collection rates experienced
during the year, together with what historic cash collection rates may suggest about future
cash collection prospects under a range of possible scenarios, the committee was satisfied
that the approach taken by management to accounting for expected credit losses is
reasonable and that the associated allowance as at 31 March 2023 is appropriate.
The committee undertook a 'deep dive with management to better understand, and
therefore, be able to challenge, the group’s approach to capitalisation and other key
accounting judgements in respect of property, plant and equipment. This covered
judgements relating to whether spend is considered to be enhancement or maintenance, the
commissioning of assets, ensuring the appropriateness of the estimated useful economic
lives of assets, capitalisation of support costs, and processes by which abortive costs or
asset write-downs are identified.
• Having undertaken this deep dive, the committee assessed the reasonableness of the
•
group’s capitalisation policy and, having also considered the work performed by KPMG in
this area, deemed this to be appropriate.
The committee also sought to gain a better understanding from management of the effects
of climate change on accounting for property, plant and equipment, including key controls in
this area, and satisfied itself that the controls were adequate.
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Audit committee continued
Significant issues considered by the committee in relation to the financial statements
Management presents its updated view of the significant issues whereby it has exercised its professional judgement to each
meeting of the committee, thereby providing an opportunity for oversight and for the committee to challenge management’s views.
Additionally, KPMG receive this information in advance of, and are present at, the committee meetings, providing KPMG with the
opportunity to contribute to the discussion both with management present, and privately with only the committee members present.
Revenue recognition and allowance for
•
The committee reviewed the group’s revenue recognition policy, particularly in light of a
doubtful receivables (see pages 240, 242, 253
higher level of billing of premises registered as void during the year, and challenged whether
to 254, 280 and 282) – due to the nature of the
the criteria for de-recognising revenue relating to amounts billed to customers remains
group’s business, the extent to which revenue
appropriate. Having considered the impact of the de-recognition criteria as applied to
is recognised and expected credit losses are
the billing of void properties, the committee satisfied itself that no change in the revenue
recognised in relation to doubtful customer
recognition policy is required at the present time, but noted the increased level of challenge in
debts is an area of considerable judgement and
recovering this debt compared with the remainder of the group’s customer base. Accordingly,
estimation. This has particularly been the case
the committee also challenged the adequacy of the group’s allowance for expected credit
in recent years (including in the current year)
losses in respect of void properties and satisfied itself that, when all relevant factors are taken
due to high levels of economic uncertainty and
into consideration, the allowance reported in the financial statements is appropriate.
increases in the cost of living, which is expected
to impact on the ability of some customers to
pay their bills as they become due.
•
The committee considered the adequacy of the group’s provisions for credit notes that
may need issuing in respect of amounts incorrectly billed, focusing particularly on non-
household customers where legacy data issues since the non-household market opened to
competition have resulted in allowances being processed going back a number of years.
The committee satisfied itself with the approach adopted by management for providing for
future allowances, and noted that the value of these should reduce over time as data for
more recent periods should not be subject to the same legacy issues as earlier periods.
•
The committee reviewed the approach taken by management in estimating expected credit
losses relating to household debt, taking into account estimates of the impact of cash
collection risk associated with void properties (see above) and recognising that there is a
great deal of uncertainty associated with the future duration and intensity of cost-of-living
challenges experienced by customers. Having considered cash collection rates experienced
during the year, together with what historic cash collection rates may suggest about future
cash collection prospects under a range of possible scenarios, the committee was satisfied
that the approach taken by management to accounting for expected credit losses is
reasonable and that the associated allowance as at 31 March 2023 is appropriate.
Capitalisation of fixed assets (see pages 241,
•
The committee undertook a 'deep dive with management to better understand, and
250 to 251, 281 to 282) – fixed assets represents
therefore, be able to challenge, the group’s approach to capitalisation and other key
a subjective area, particularly in relation to costs
accounting judgements in respect of property, plant and equipment. This covered
permitted for capitalisation and depreciation
judgements relating to whether spend is considered to be enhancement or maintenance, the
policy.
commissioning of assets, ensuring the appropriateness of the estimated useful economic
lives of assets, capitalisation of support costs, and processes by which abortive costs or
asset write-downs are identified.
• Having undertaken this deep dive, the committee assessed the reasonableness of the
group’s capitalisation policy and, having also considered the work performed by KPMG in
this area, deemed this to be appropriate.
•
The committee also sought to gain a better understanding from management of the effects
of climate change on accounting for property, plant and equipment, including key controls in
this area, and satisfied itself that the controls were adequate.
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Material and/or judgemental areas of the financial statements
Material and/or judgemental areas of the financial statements
Significant issues considered
How these were addressed by the committee
Significant issues considered
How these were addressed by the committee
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Derivative financial instruments (see pages 241,
265 to 272 and 283) – the group has a significant
value of swap instruments, the valuation of
which is based upon models that require certain
judgements and assumptions to be made.
Management perform 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.
Provisions and contingent liabilities (see pages
256, 258 and 284) – 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 claims. Judgement is also required in
determining when contingent liabilities exist that
require disclosure in the financial statements.
Recoverability of United Utilities Group
PLC’s (parent company) investment in United
Utilities PLC (see pages 252 and 282) – the
parent company’s investment in United Utilities
PLC makes up 98 per cent of the company’s
total assets and is therefore highly material in
the context of the parent company’s statement
of financial position. Management assess the
recoverability of this investment periodically
to ensure that its carrying value continues to
be supported.
Other matters considered
Impact of increases in the cost of living – with
continuing economic uncertainty and cost
of living challenges resulting from the likes
of the war in Ukraine, there remains ongoing
uncertainty around how this may impact the
group’s customer base going forward. As
uncertainty around how the economic situation
may develop continues, this gives rise to a higher
level of judgement and estimation uncertainty
in this area.
Accounting for the sale of United Utilities
Renewable Energy Limited – (UURE) (see pages
246 and 280) – during the year ended 31 March
2023 the group concluded the process to sell the
group’s renewable energy business, UURE.
•
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The committee noted that the periodic checks performed by management had been
completed at the year-end reporting date, and that KPMG had undertaken their testing and
challenged management as to certain inputs in respect of the fair value measurement of
cross currency swaps, resulting in the valuation approach used being refined.
The committee requested that management deliver a 'teach in' session on the group’s
hedging activity and accounting thereon during the year. This was particularly for the benefit
of those who joined the committee in the year but was an open session to which all board
members were invited. The committee found this session to be informative and that it
provided a good basis for challenging what can be a technically complex area.
The committee assessed and challenged the appropriateness of the basis on which provisions
are recognised, focusing particularly on instances where provisions are recorded for claims
where costs above an insurance deductible amount may be covered by the group’s insurance
policies. The committee challenged management to ensure that the gross value of claims,
where certain amounts may be recoverable from insurers, is provided for, and noted that
where an estimate of the gross value of the claim could be made it is provided for at this gross
amount with a separate receivable recognised for the insurance recovery.
The committee noted the greater political focus on environmental prosecutions that has
emerged during the year, and concurred with management’s assessment that, based on
current experience, the provisions recorded at the reporting date reflect the best estimate of
potential financial outflow in this regard.
The committee 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 for cases in which contingent liabilities disclosures are made. The
committee concluded that in such instances the recognition criteria had not been met and,
therefore, that disclosure as contingent liabilities, rather than the recognition of provisions,
was the most appropriate approach.
The committee sought to understand management’s approach to assessing recoverability,
and concluded that management’s assessment that an equity value based on the RCV of the
group’s regulated business, United Utilities Water Limited (UUW), is a reasonable basis for
valuing United Utilities PLC given UUW’s importance to the United Utilities PLC group.
The committee concurred with management’s assessment that the impact of the
current cost of living crisis 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 challenged management’s view that the criteria for presenting the results of
UURE as discontinued operations for the period in which it was consolidated into the group’s
financial statements were not met, and concurred with management’s judgement that UURE
did not constitute a separate major operation in the context of the group as a whole.
The committee also concurred with management’s view that, given the nature and
materiality of the transaction, it is appropriate that the sale be treated as an adjusting
item in arriving at the group’s underlying profit measures included within its Alternative
Performance Measures.
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Audit committee continued
Business on the committee’s agenda during the year
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
158 to 159
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
2022/23 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 2022/23 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.
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Reviewed the results of the committee’s assessment of the
effectiveness of the 2021/22 audit.
Reviewed whether the company’s position and prospects as
presented in the 31 March 2023 integrated annual report and
financial statements were considered to be 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 2022/23 and the policy on non-audit services
provided by the auditor for 2023/24.
Concurred with management’s approach that the APMs
as defined were satisfactory enabling comparability with
other companies.
See page 118
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 220
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 was
satisfied with management’s preference to continue to
provide a statement with greater certainty over a shorter
period of time.
See page 150
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 2024 at the forthcoming annual general meeting.
See page 162
Recommendation made to the board that the
31 March 2023 integrated annual report and financial
statements was a fair, balanced and understandable
assessment of the company’s position and prospects.
See pages 149
and 162
Approved the non-audit services and related fees
provided by KPMG for 2022/23 and concluded that
no changes were required to the policy for non-audit
services provided by the auditor.
Negotiated and agreed the statutory audit fee for the year ended
31 March 2023.
The committee approved the fee for the 2022/23 audit.
Considered management’s approach to adopt an assurance
framework to guide the assurance sought in relation to the
narrative reporting in the 2022/23 integrated annual report
encompassing the TCFD, SECR and other ESG sections.
Implemented the assurance framework to identify
particular sections within the integrated annual
report that the framework identified as higher risk of
misstatement/error and would, therefore, benefit from
independent third-party assurance namely the TCFD
report, oversight responsibilities of the board and the
remuneration committee report.
See page 165
See pages 155
and 165
See page 165
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4 Audit, risk and internal control
Audit committee continued
Business on the committee’s agenda during the year
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Reviewed, discussed and challenged the financial reporting
The committee challenged management on a number
team’s reports on the financial statements, management’s
of its judgements and sought detailed explanations
See pages
158 to 159
significant accounting judgements, the policies being applied
of its interpretation. The committee was satisfied
both at the full and half year and how the statutory audit
with the explanations provided by management.
contributed to the integrity of the year-end financial reporting.
Recommendations were made to the board, supporting
the approval of the financial statements.
Reviewed and challenged the regulatory reporting process
The committee met with the technical auditor to provide
–
relating to the annual performance report (APR) for UUW,
an opportunity for challenge by the committee whose
including the assurance provided by the technical auditor, as
overview contributes to the assurance process of the
required to be submitted to Ofwat, and noted the differences
regulatory reporting prior to the approval of the APR by
between the regulatory and statutory accounts.
the UUW board.
Assessed management’s presentation of APMs to enable
Concurred with management’s approach that the APMs
See page 118
comparability with other companies.
as defined were satisfactory enabling comparability with
other companies.
Reviewed and challenged the proposed audit strategy for the
The committee monitored progress made by the statutory
See page 220
2022/23 statutory audit, including the level of materiality applied
audit team against the agreed plan, and challenged the
by KPMG, audit reports from KPMG on the financial statements
auditor in the resolution of any issues as they arose.
and the areas of particular focus for the 2022/23 audit.
Reviewed and challenged the basis of preparation of the
Recommendation made to the board to support the going
See page 217
financial statements as a going concern as set out in the
concern statement.
accounting policies.
Reviewed and challenged the long-term viability statement
The committee challenged management that the length
See page 150
proposed by management and reasons why a seven-year
of the period was appropriate, particularly in light of
assessment period was appropriate.
assessment timeframes used by peer companies, but was
satisfied with management’s preference to continue to
provide a statement with greater certainty over a shorter
period of time.
and a recommendation was made to the board on the
reappointment of KPMG as the auditor for the year ending
31 March 2024 at the forthcoming annual general meeting.
Reviewed the results of the committee’s assessment of the
The committee concluded that the audit was effective
See page 162
effectiveness of the 2021/22 audit.
Reviewed whether the company’s position and prospects as
Recommendation made to the board that the
See pages 149
presented in the 31 March 2023 integrated annual report and
31 March 2023 integrated annual report and financial
and 162
financial statements were considered to be a fair, balanced
statements was a fair, balanced and understandable
and understandable assessment of the company’s position
assessment of the company’s position and prospects.
and prospects.
Reviewed the non-audit services and related fees provided by
Approved the non-audit services and related fees
See page 165
the auditor for 2022/23 and the policy on non-audit services
provided by KPMG for 2022/23 and concluded that
provided by the auditor for 2023/24.
no changes were required to the policy for non-audit
services provided by the auditor.
Negotiated and agreed the statutory audit fee for the year ended
The committee approved the fee for the 2022/23 audit.
See pages 155
31 March 2023.
and 165
Considered management’s approach to adopt an assurance
Implemented the assurance framework to identify
See page 165
framework to guide the assurance sought in relation to the
particular sections within the integrated annual
narrative reporting in the 2022/23 integrated annual report
report that the framework identified as higher risk of
encompassing the TCFD, SECR and other ESG sections.
misstatement/error and would, therefore, benefit from
independent third-party assurance namely the TCFD
report, oversight responsibilities of the board and the
remuneration committee report.
Actions
Outcomes
Cross reference
Actions
Outcomes
Cross reference
Annual and half-year reporting
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.
Recommendation made to the board that the
risk management and internal control systems
operated effectively.
See pages 166 to 167
Considered changes to internal control weaknesses brought to
the attention of the committee by KPMG.
Challenged management to resolve any issues relating
to internal controls and risk management systems.
See page 218
A deep-dive session was held on the IT control environment.
Considered the review by internal audit of the fraud risk
management action plan, which came about following the
independent third-party review of the fraud risk management
framework in 2021/22.
Monitored fraud reporting.
Biannual oversight and monitoring of compliance with the
group’s anti-bribery policy.
Challenged management to review the opportunity
for a more automated approach to digital access and
process controls.
–
No control weaknesses, gaps or effectiveness issues were
identified as a result of the review. The cross-business
fraud risk and control assessment will be refreshed
annually and incorporated into business-as-usual activity.
See page 166
Reviewed the company’s anti-fraud policies and
processes and alleged incidents of fraud and the outcome
of their investigation.
See page 167
Reviewed compliance with the company’s ongoing anti-
bribery programme.
See page 167
Approved the strategic internal audit planning approach on
the work of the internal audit function from the head of audit
and risk.
Monitored the implementation of the 2022/23 internal
audit plan. Reviewed findings of specific internal audit and
implementation of any resulting actions by management.
See page 166
Considered the issues and findings brought to the committee’s
attention by the internal audit team.
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 2023/24.
Governance
Review of the committee’s terms of reference.
Considered and challenged management’s formulation of an
audit and assurance policy, a resilience statement, and a review
of internal controls that impact the group’s financial reporting
ahead of further guidance being issued by the Financial
Reporting Council (FRC).
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; and the areas of work of the
committee and priorities for change.
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 certain recommendations for
enhancement, further to which it was concluded that
the internal audit team, supported by the PwC co-source
resource, was effective.
See page 166
See page 166
Approved the internal audit plan for 2023/24.
See page 166
No changes were made to the committee’s terms of
reference during the year.
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The committee were satisfied in the progress attained
ahead of guidance being published by the FRC and the
mandatory introduction for companies to disclose their
audit and assurance policy and resilience statement in
their annual report. Further to the review of the maturity
of the internal control framework over financial reporting
undertaken by PwC, a working group was established to
implement their recommendations for enhancing financial
reporting controls (and supporting IT controls).
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 165
See page 146
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Audit, risk and internal control
Audit committee continued
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 215.
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 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 the key audit matters identified by
the auditor in their report on pages 158 to 159.
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 (see page 215). 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. Following application of the assurance
framework (see page 165), third-party ‘limited assurance’
was provided in relation to our reporting against the TCFD
recommendations (see the index on page 5) and remuneration
committee report (see page 170).
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 118.
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 of the UUW 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 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 80 and 93
respectively) 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 that 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
integrated 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 KPMG the group’s statutory 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
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Audit quality
Additional audit quality processes and interventions
Since 2021 KPMG have employed a number of
additional processes as part of its action plan
to enhance audit quality. As part of its review of
the 2021/22 audit in July 2022, the committee
reviewed the effectiveness of these processes
and interactions as set out below, concluding
they were effective.
•
The processes and interventions 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;
• 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;
• greater use of technical specialists; and
• providing the details of the independent
partner’s review of the audit to the committee
as part of the year-end sign off processes.
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Key
Statutory audit – group and company
Regulatory audit services provided by the statutory auditor
Statutory audit – subsidiaries
Other non-audit services
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300
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2021
9
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2023
Audit committee continued
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 215.
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 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 the key audit matters identified by
the auditor in their report on pages 158 to 159.
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 (see page 215). 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. Following application of the assurance
framework (see page 165), third-party ‘limited assurance’
was provided in relation to our reporting against the TCFD
recommendations (see the index on page 5) and remuneration
committee report (see page 170).
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 118.
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 of the UUW 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 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 80 and 93
respectively) 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 that 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
integrated 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 KPMG the group’s statutory 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
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Audit quality
Additional audit quality processes and interventions
Since 2021 KPMG have employed a number of
•
raising audit points in a more timely manner
additional processes as part of its action plan
with the financial reporting team during the
to enhance audit quality. As part of its review of
audit process by holding regular discussions
the 2021/22 audit in July 2022, the committee
with the external audit team and financial
reviewed the effectiveness of these processes
reporting team;
and interactions as set out below, concluding
they were effective.
The processes and interventions 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;
• 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;
• greater use of technical specialists; and
• providing the details of the independent
partner’s review of the audit to the committee
as part of the year-end sign off processes.
Regulatory audit services provided by the statutory auditor
committee with an opportunity to obtain greater insight on the
extent to which KPMG has challenged management’s analysis
and presentation of information.
Statutory audit – subsidiaries
Statutory audit – group and company
principal requirement of the annual audit process. KPMG present
the strategy and scope of the audit for the forthcoming financial
year at the meeting of the committee held in September,
highlighting any areas that would be given special consideration
(these key audit matters are included in the auditor’s report on
pages 218 to 231). 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.
Other non-audit services
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 158 to 159 in respect of 2022/23. As
required by auditor's 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 KPMG’s representatives without management
being present to encourage open and transparent feedback by
both parties on any matters they wish to raise, and provide the
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.
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 2022/23 audit, KPMG
provided a report to the committee on the quality interventions
that would be utilised. Each year the committee considers the
annual review by the FRC’s Audit Quality Review Team and
challenges KPMG to ensure continuous improvement.
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Audit, risk and internal control
Audit committee continued
Read more about
our annual
performance
report on
page 80
Read more about
our treasury
committee on
page 169
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 were taken into
account. The questionnaire reviewing the 2022
audit process was issued in July 2022.
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;
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
April
2011
Audit
tender
31 March
2006
Audit partner
rotation
• whether the audit process had been kept on
schedule; 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 2022. The
committee noted KPMG’s quality interventions as
part of its AQTP to improve audit quality and the
enhancements now embedded in the company’s
audit (see page 162). 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
1993–
1994
Audit
tender
31 March
2003
Deloitte &
Touche LLP
audit
31 March
1995
KPMG
Peat Marwick
audit
May
2002
Audit
tender
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 continued
Read more about
of those involved in the audit on how well KPMG
schedule; and
On completion of the annual audit process the views
• whether the audit process had been kept on
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 were taken into
Read more about
account. The questionnaire reviewing the 2022
audit process was issued in July 2022.
our annual
performance
report on
page 80
our treasury
committee on
page 169
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
• 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 2022. The
committee noted KPMG’s quality interventions as
part of its AQTP to improve audit quality and the
enhancements now embedded in the company’s
audit (see page 162). 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
effective and efficient audit;
The following section sets out the company’s
•
the quality of the delivery of the audit and whether
compliance with part of provision 26.
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;
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
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
April
2011
Audit
tender
31 March
2006
Audit partner
rotation
1993–
1994
Audit
tender
31 March
2003
Deloitte &
Touche LLP
audit
31 March
1995
KPMG
Peat Marwick
audit
May
2002
Audit
tender
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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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 - in 2022/23 were 26.1 per cent, as set out in the table
below. 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. The 70 per cent non-audit services fee cap has been
applied to the group for the year ended 31 March 2023.
Financial year
2019/20
2020/21(1)
2021/22
Average
2022/23 proposed non-audit fees
2022/23 proposed non-audit fees as % of
average audit fees (3 year rolling average)
Audit fee
£474,000
£678,000
£675,000
£609,000
£159,000
26.1%
(1) Included £100,000 relating to audit of COVID-19 judgements in 2019/20
that were not captured within the reported audit fee for that year due
to the additional fee not having been agreed at the point the financial
statements were signed off.
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. 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.
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 2024
The following section sets out the company’s
compliance with part of provision 26.
The 2022/23 year-end audit has been KPMG’s twelfth
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 2012.
The diagram opposite 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 result,
KPMG can remain as auditor until the completion of the
31 March 2031 audit. The audit engagement partner rotates at
least every five years, the 2022/23 audit has been the third year
for Ian Griffiths in the role. On the next partner rotation, the
committee intends to assess the need and timing of the next
audit tender.
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 2023.
At its meeting on 16 May 2023, the committee recommended
to the board that KPMG be proposed for reappointment for the
year ending 31 March 2024 at the forthcoming AGM in July 2023.
As a matter of good practice, the committee continually keeps
the performance of the auditor under review and 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.
Audit and assurance policy
As reported last year, management has been formulating an
audit and assurance policy as a means of tailoring proportionate
assurance relating to the narrative disclosures in the integrated
annual report. The committee has had several opportunities
to challenge and contribute to the policy during the drafting
process. As part of the policy, an assurance framework has been
devised, providing a standardised approach to identify the risk
associated with the disclosures and the appropriate level of
assurance. In summary, our assurance framework sets out the
well established ‘three lines of assurance’ approach:
• First line of assurance – management establish the day-
to-day business operational and control processes, and
is accountable for effective risk management and control
activity, and provides management assurance;
• Second line of assurance – second line functions provide
policy, direction and frameworks as well monitoring of the
first line activities to assure compliance; and
• Third line of assurance – our internal audit team and
specialist external auditors review the effectiveness of
risk and control activities as well as providing assurance in
respect of company disclosures.
As the level of risk increases, the governance and assurance applied
to the reporting of data also increases, with material risks escalated
to the board. Thereby ensuring that the management, control and
reporting of any risks, and resulting actions identified through the
process, are proportionate to the level of risk. The approach is
broadly consistent with that used for the regulatory reporting of
UUW, and has been implemented in identifying the proposed levels
of assurance for the integrated annual report for 31 March 2023.
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, taking into account the risks facing
the business, and its ability to withstand a number of severe but
reasonable scenarios. The committee approved the long-term
viability statement set out on page 150. 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’.
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4 Audit, risk and internal control
Audit committee continued
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 colleagues in the
areas under review. Once any recommendations are
agreed with management, the internal audit function
monitors completion of associated actions 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.
Read more
about financial
oversight
responsibilities
of the board on
pages 149 to 152
Read more
about our risk
and resilience
framework on
pages 60 to 61
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Review of the fraud risk management structure
In 2021/22, 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. An action plan to strengthen the
approach to fraud risk assessment was implemented, overseen
by the security steering group, with the final report presented
to the committee in March 2022. During the year, internal audit
have reviewed the design effectiveness of controls for the most
significant fraud risks in each business area – no additional
control weaknesses, gaps or effectiveness issues were identified
as a result of the review. The cross-business fraud risk and
control assessment will be refreshed annually and incorporated
into business-as-usual activity.
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
review 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,
a biannual 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.
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4 Audit, risk and internal control
Audit committee continued
Read more
about financial
oversight
responsibilities
of the board on
pages 149 to 152
Read more
about our risk
and resilience
framework on
pages 60 to 61
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
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).
The internal audit function is a key element of the
group’s corporate governance framework. Its role
Internal audit, led by the head of audit and risk, covers
the group’s principal activities and reports to the
is to provide independent and objective assurance,
committee and functionally to the CFO, both of whom
advice and insight on governance, risk management
review the head of audit’s annual personal objectives.
and internal control to the audit committee, the
board and to senior management. It supports the
organisation’s vision and objectives by evaluating
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
and assessing the effectiveness of risk management
the committee at these meetings without the presence
systems, business policies and processes, systems
of management. He is also in regular contact with the
and key internal controls. In addition to reviewing the
chair of the committee outside of committee meetings.
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 colleagues in the
areas under review. Once any recommendations are
agreed with management, the internal audit function
monitors completion of associated actions and reports
to the committee on progress made at every meeting.
A five-year strategic audit planning approach is
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
applied. This facilitates an efficient deployment of
independent in the course of its work is crucial to the
internal audit resource in providing assurance coverage
integrity of its work. Following a competitive tender
over time across the whole business, as well as greater
process, PwC was last re-appointed as co-source
variation in the nature, depth and breadth of audit
resource provider during 2020/21.
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.
Review of the fraud risk management structure
In 2021/22, 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. An action plan to strengthen the
approach to fraud risk assessment was implemented, overseen
by the security steering group, with the final report presented
to the committee in March 2022. During the year, internal audit
have reviewed the design effectiveness of controls for the most
significant fraud risks in each business area – no additional
control weaknesses, gaps or effectiveness issues were identified
as a result of the review. The cross-business fraud risk and
control assessment will be refreshed annually and incorporated
into business-as-usual activity.
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,
a biannual 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.
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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 60. 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 risk
assessment process seeks to identify how well risk management
is embedded across the different teams in the business. The
business risk assessment process involves a high-level review of
the effectiveness of the controls that the business has in place to
mitigate risks relating to activities in each business area, while
identifying new and emerging risks and generally facilitating
improvements in the way risks are managed.
The outcome of the business risk assessment 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 subject to review and
challenge by the board. The group utilises risk management
software in order to maintain an up-to-date view of the
assessment and management 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, along with a road-map of activity to achieve a target
level of maturity.
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. During the year, work has been
undertaken by management to better evidence the operation of
existing internal controls. Internal control systems over financial
reporting 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 2021/22 an independent review of the maturity of the
group’s internal control framework over financial reporting was
conducted in light of the BEIS consultation, and the expected
evolution of the UK internal control requirements, in general
terms but also more specifically in relation to controls over
financial reporting. The findings of the independent 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. A number of
enhancements were recommended in relation to IT controls
supporting the financial reporting controls. A working group was
established to implement these recommendations, with good
progress being made against ‘no regrets’ actions.
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 people director, the strategy, policy
and regulation director, the commercial, engineering and capital
delivery director, the head of people services 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 cross-business fraud risk assessment
is carried out through the security steering group 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 help prevent bribery
being committed on its behalf, which all colleagues must follow,
and processes in place to monitor compliance with the policy.
Colleagues in certain roles are required to complete anti-bribery
training materials. As part of the anti-bribery programme,
colleagues must comply with the group’s hospitality policy. The
hospitality policy permits colleagues 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. Colleagues 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. 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.
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Treasury 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.
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.
Quick links
Terms of reference:
unitedutilities.com/corporate-governance
G
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Dear shareholder
During the year, with the board’s delegated authority,
the committee oversaw the successful execution of
the group’s funding programme. Approximately
£888 million of new term-funding was raised, including
the group’s second sustainable public bond issue, a
£300 million 15.5-year maturity issued in April 2023.
The committee has continued to monitor financial
market conditions closely as central banks continued
tightening monetary policy in response to high
inflation, amidst heightened geopolitical tensions,
and more volatile markets.
The continuation of our funding programme has
positioned the group well, with projected AMP7
financing requirements now fully covered. The
committee also completed a ‘deep dive’ review of
the group’s electricity hedging policy.
The committee also oversaw the group developing
replacement fallback provisions (applicable upon
cessation of or fundamental changes to the UK Retail
Prices Index (RPI)), in response to proposed changes
to RPI that are expected to be implemented by the UK
Statistics Authority in 2030. Those changes to RPI are
intended to more closely align RPI with the calculation
of the Consumer Prices Index including owner-
occupier housing costs (CPIH). Under the fallback
provisions contained in the group’s existing RPI-
linked notes, upon such a change to the index being
made, an Expert would be appointed to determine
what adjustments (if any) are necessary to the terms
and conditions of the notes, with the risk that the
Expert determination process could lead to an early
redemption of the RPI-linked notes at their indexed
par value in certain circumstances. The new fallback
provisions, which has been adopted in the group’s
London listed multi-issuer £10 billion Euro Medium
Term Note Programme (EMTN Programme), references
a relevant reference gilt, thereby reducing the risk
of the cessation of or a fundamental change to RPI
resulting in redemption of any future RPI-linked notes
at their indexed par value. The group is in the process
of engaging with existing RPI-linked noteholders to
discuss the new fallback and potentially amending
the terms and conditions of certain notes to adopt the
new fallback.
The group has access to debt capital markets
via its EMTN Programme or by putting bespoke
documentation in place. The EMTN 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 2022, the group
published its second sustainable finance framework
allocations and impact report. Details of the group’s
engagement with banks and credit investors can be
found on page 138.
Doug Webb
Chair of the treasury committee
Treasury committee members:
Doug Webb
Chair of the
treasury
committee
Phil Aspin
CFO
Brendan Murphy
Treasurer
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Stock code: UU.
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Corporate governance report
5 Remuneration
Kath Cates
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”.
• By invitation of the committee, meetings are attended by
the Chair, the CEO, the company secretary, the people
director, the head of reward and the external adviser to
the committee.
• Our current remuneration policy was approved by
shareholders at the 2022 AGM. The remuneration report sets
out how the remuneration policy was applied in 2022/23 and
how we intend to apply it in 2023/24.
• Certain sections of the remuneration report are audited.
The unaudited sections of the remuneration report, including
the annual statement from the remuneration committee
chair have been subject to external assurance by the
remuneration committee’s independent adviser, Ellason
LLP. The engagement was performed as a limited assurance
engagement in accordance with the requirements of the
International Standard on Assurance Engagements (ISAE)
3000 revised. Ellason’s full assurance statement is available
at unitedutilities.com/corporate/responsibility/our-
approach/esg-performance
Quick links
Terms of reference:
unitedutilities.com/corporate-governance
Annual statement from
the remuneration
committee chair
Our executive pay arrangements are
aligned to our purpose, values and
strategy, incentivising delivery for
customers and the environment, and
the creation of long-term value.
Dear shareholder
Many aspects of company performance during the year
have been strong, as detailed in the strategic report. We
are a sector leader at minimising pollution, achieved our
best ever performance against our leakage performance
commitment despite difficult weather conditions over
the winter, supported vulnerable customers during the
cost of living crisis, and delivered all of this year’s Better
Rivers programme milestones.
We recognise however, that the water sector has
been subject to significant scrutiny during the year.
As a committee we understand this, and we share
the concerns of our customers and wider society in
relation to environmental performance in particular.
On the topic of the use of storm overflows specifically,
while the company has materially reduced the number
of storm overflow activations since 2020, it is clear
there is a lot more to do and we have an ambitious plan
to improve performance in this area.
The committee has a robust track record of making
sure that executive pay outcomes are aligned with the
interests of all our stakeholders. The majority of our
performance-related pay is linked to customer-related
objectives, with 75 per cent of the annual bonus and
50 per cent of our Long Term Plan (LTP) being based on
stretching targets related to our delivery for customers,
including environmental commitments and obligations.
The company’s strong performance in key areas
meant that many of these environmental targets were
achieved. However, the executive directors informed the
committee of their intention to waive their eligibility for
environmental elements of their performance-related
pay outcomes. This was in recognition of their personal
commitment to a reset across the sector, and the board
supported their decision.
Remuneration committee members:
Kath Cates
Chair of the remuneration
committee
Alison Goligher
Doug Webb
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Corporate governance report
5 Remuneration
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Kath Cates
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”.
• By invitation of the committee, meetings are attended by
the Chair, the CEO, the company secretary, the people
director, the head of reward and the external adviser to
the committee.
• Our current remuneration policy was approved by
shareholders at the 2022 AGM. The remuneration report sets
out how the remuneration policy was applied in 2022/23 and
how we intend to apply it in 2023/24.
• Certain sections of the remuneration report are audited.
The unaudited sections of the remuneration report, including
the annual statement from the remuneration committee
chair have been subject to external assurance by the
remuneration committee’s independent adviser, Ellason
LLP. The engagement was performed as a limited assurance
engagement in accordance with the requirements of the
International Standard on Assurance Engagements (ISAE)
3000 revised. Ellason’s full assurance statement is available
at unitedutilities.com/corporate/responsibility/our-
approach/esg-performance
Quick links
Terms of reference:
unitedutilities.com/corporate-governance
Annual statement from
the remuneration
committee chair
Our executive pay arrangements are
aligned to our purpose, values and
strategy, incentivising delivery for
customers and the environment, and
the creation of long-term value.
Dear shareholder
Many aspects of company performance during the year
have been strong, as detailed in the strategic report. We
are a sector leader at minimising pollution, achieved our
best ever performance against our leakage performance
commitment despite difficult weather conditions over
the winter, supported vulnerable customers during the
cost of living crisis, and delivered all of this year’s Better
Rivers programme milestones.
We recognise however, that the water sector has
been subject to significant scrutiny during the year.
As a committee we understand this, and we share
the concerns of our customers and wider society in
relation to environmental performance in particular.
On the topic of the use of storm overflows specifically,
while the company has materially reduced the number
of storm overflow activations since 2020, it is clear
there is a lot more to do and we have an ambitious plan
to improve performance in this area.
The committee has a robust track record of making
sure that executive pay outcomes are aligned with the
interests of all our stakeholders. The majority of our
performance-related pay is linked to customer-related
objectives, with 75 per cent of the annual bonus and
50 per cent of our Long Term Plan (LTP) being based on
stretching targets related to our delivery for customers,
including environmental commitments and obligations.
The company’s strong performance in key areas
meant that many of these environmental targets were
achieved. However, the executive directors informed the
committee of their intention to waive their eligibility for
environmental elements of their performance-related
pay outcomes. This was in recognition of their personal
commitment to a reset across the sector, and the board
supported their decision.
Remuneration committee members:
Kath Cates
committee
Chair of the remuneration
Alison Goligher
Doug Webb
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This affected the Better Rivers component of the
annual bonus and five of the measures in the customer
basket component of the Long Term Plan, reducing
their performance-related pay outcomes by around
25 per cent. Furthermore, the performance-related pay
outcomes that the executive directors will receive in
respect of this year will not be paid for by customers.
Going forward, we are committed to making sure
that at least 30 per cent of performance-related pay
outcomes are related to environmental performance,
including reducing storm overflow activations.
Delivering for customers and
other stakeholders
Helping our customers cope with cost of living
challenges was a priority during the year. We have
protected customers in vulnerable circumstances
through our comprehensive suite of support schemes,
and hosted collaborative summits on affordability and
vulnerability to share best practice ideas and work
together to improve things for customers in the North
West. Recognising the increased cost of living affected
our colleagues too, we immediately implemented the
latest Living Wage increase for eligible colleagues in
September 2022 (around eight months sooner than
our Living Wage accreditation required) and helped all
colleagues by raising awareness of the full extent of
their reward package.
Last year, we announced that we would invest an
additional £250 million to deliver environmental
improvements, principally in our Better Rivers
programme. This investment has already helped us to
deliver a reduction in reported activations of 39 per cent
since 2020, together with a 41 per cent reduction in both
the average recorded frequency and duration. We are
on track with our commitment to have 100 per cent of
storm overflows monitored by the end of the year, with
97 per cent installed by the end of April.
Extreme weather events during the year tested the
resilience of our network and operating capability.
Whilst our preparation and planning meant we did
not have to place any restrictions on water use for our
customers, the increased level of ground movement
following the long, dry summer and winter freeze-thaw
resulted in a number of burst pipes. Our dedicated
teams worked round the clock to fix the damage
and minimise disruptions for customers, but the
events impacted on our ODI performance (supply
interruptions) and underlying operating profit because
of additional costs related to emergency network
repairs, customer compensation and bottled water.
Unsurprisingly, this also impacted on the level of
written complaints we received during the year.
In many other areas however, we have provided great
outcomes for customers. Our average leakage over
the last three years is at its lowest ever level, and we
have achieved our best ever performance on water
quality, with a 26 per cent reduction in taste, smell and
appearance contacts from customers. Examples like
these have been reflected in further improvement in
our C-MeX performance, Ofwat’s measure of customer
satisfaction. We were ranked fourth of the water and
wastewater companies, and fifth overall in the sector.
Read about
how our
remuneration
approach
complies
with the UK
Corporate
Governance
Code on pages
174 to 175
Read our
at a glance
summary:
executive
directors’
remuneration on
pages 176 to 179
Read our annual
report on
remuneration on
pages 180 to 194
Read our
directors’
remuneration
policy on pages
195 to 201
Main responsibilities of the committee
These 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 our purpose, values and 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, including consideration
and use of discretion as appropriate;
• Approving the general employment and remuneration
terms for selected senior colleagues;
•
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.
The committee’s terms of reference were last reviewed
in November 2022 and are available on our website at
corporate.unitedutilities.com/corporate-governance
The framework within which we reward our
executive directors is subject to approval by
our shareholders. Our Directors’ Remuneration
Policy was approved by shareholders last July
receiving over 99 per cent of votes in favour of
its adoption. Our Policy remains strongly-aligned
with our business plan for 2020–25 and we are
not proposing any changes to it this year. An
abridged version is included at the end of this
report for ease of reference. Our Annual Report
on Remuneration, set out on pages 180 to 194,
explains how the committee has applied the
Policy during the year and the rationale for the
decisions it has taken. The Annual Report on
Remuneration will be subject to an advisory vote
by shareholders at the AGM in July 2023.
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5 Remuneration
Annual statement from
the remuneration
committee chair continued
Remuneration during 2022/23
Fixed pay
Given his planned retirement in 2023, no salary
increase was awarded to Steve Mogford during the
year. Louise Beardmore’s salary on appointment as
CEO designate in May 2022 was set at £425,000
and was unchanged throughout the remainder of
the financial year.
Having considered his strong individual performance,
the committee approved a 4.75 per cent salary
increase for Phil Aspin, CFO, which took effect from
1 September 2022. This was in line with the average
increase across the wider workforce in 2022.
Steve Mogford’s contractual pension supplement of
22 per cent of salary reduced to 12 per cent of salary
with effect from 1 January 2023, meaning that the
pension arrangements for all executive directors were
fully aligned with the company’s approach for other
colleagues, and will continue to be going forward.
2022/23 annual bonus
The measures and targets for the annual bonus
were agreed by the committee at the beginning of
the financial year and as noted in last year’s report,
the committee chose to introduce a number of new
measures to further demonstrate the company’s
intention to incentivise stretching performance delivery
for customers, including environmental commitments
and obligations. A consistent bonus scorecard
continued to apply throughout the company, to ensure
a shared focus on the business plan at all levels.
As outlined earlier, the executive directors waived the
element of their bonus that related to our Better Rivers
commitments, despite good progress in the year with
all of the required milestones being achieved.
The committee also undertook an assessment to
determine whether the formulaic outcome of the bonus
scorecard was aligned with overall performance and
the experience of stakeholders, including customers
and the environment. The committee was satisfied
that the measures and targets set were robust and
stretching and that the overall payout appropriately
reflected the achievements of the company.
Accordingly, and noting the effect of the voluntary
waivers, the committee has not applied any discretion
in respect of annual bonus outcomes for 2022/23.
See page 181 for further details.
2020 Long Term Plan (LTP)
LTP awards granted in November 2020 were based
50 per cent on a customer basket of measures and
50 per cent on return on regulated equity (RoRE). The
customer basket of measures comprised ten metrics
selected to reflect customer priorities, demonstrate our
focus on customer delivery and recognise stakeholder
expectations with regard to ESG matters.
Performance against many of the LTP measures has
also been strong, as shown on pages 182 to 183. As
a result of the executive directors’ decision to waive
the environmental elements of the LTP, the estimated
overall vesting is around 69 per cent. The final outcome
for some of the measures in the customer basket will
not be known until all relevant information is available,
expected in summer 2023, and we will provide an
update in next year’s report.
The committee is not currently minded to exercise any
discretion in respect of the vesting of these awards
(again noting the impact of the executive directors’
waiving the environmental elements), believing that
the overall outcome fairly reflects the underlying
performance of the company and the experience of
stakeholders over the period.
The committee has considered whether any adjustments
or use of discretion might be warranted on vesting
to reflect the possibility of windfall gains on share
price movements over the period. Factors which the
committee considered include:
•
the share price at grant compared to that used for
previous award cycles and what the price would
have been had the grant been made on the
normal timetable (they were delayed to mitigate
the potential impact of the COVID-19 pandemic on
target-setting)
• TSR performance over the period since grant
relative to historic growth rate
•
the value of the award at vesting relative to
previous award cycles.
The committee is currently satisfied that the growth
in share price since grant is within the normal bounds
and is not indicative of a windfall gain, and therefore no
adjustment is warranted.
Steve Mogford’s and Phil Aspin’s awards will vest after
the completion of a holding period taking the overall
vesting period to five years from the grant date.
Louise Beardmore was granted her award prior to her
appointment as an executive director, so her award will
be treated according to its original terms with no holding
period applying, and she will be required to hold the
shares vesting (net of tax) as she continues to build
her shareholding.
Chief Executive Officer succession
Steve Mogford was paid his contractual salary and
benefits until he retired on 31 March 2023, and will
receive the bonus he is due in respect of 2022/23
performance in June 2023. As he will no longer be
employed when the bonus is paid, in line with the
policy, the normal deferred element will be in the form
of a deferred cash award (rather than shares), which
will vest after three years.
The committee approved that, as Steve was retiring,
it was appropriate for good leaver status to be applied
in respect of his LTP awards. His 2018 and 2019 LTP
awards will vest at the end of their respective holding
periods. Once the outcome of his 2020 LTP award is
finalised, it will move into a holding period until the
stated vesting date, five years from grant. His 2021
and 2022 LTP awards remain subject to performance,
will be pro-rated for time served in the performance
periods, and will vest at the end of the applicable
holding periods. In the two year period following his
departure the committee will consider whether good
leaver status remains appropriate before each LTP
award vests.
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5 Remuneration
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Annual statement from
the remuneration
committee chair continued
Remuneration during 2022/23
Fixed pay
Given his planned retirement in 2023, no salary
increase was awarded to Steve Mogford during the
year. Louise Beardmore’s salary on appointment as
CEO designate in May 2022 was set at £425,000
and was unchanged throughout the remainder of
the financial year.
Having considered his strong individual performance,
the committee approved a 4.75 per cent salary
increase for Phil Aspin, CFO, which took effect from
1 September 2022. This was in line with the average
increase across the wider workforce in 2022.
Steve Mogford’s contractual pension supplement of
22 per cent of salary reduced to 12 per cent of salary
with effect from 1 January 2023, meaning that the
pension arrangements for all executive directors were
fully aligned with the company’s approach for other
colleagues, and will continue to be going forward.
2022/23 annual bonus
The measures and targets for the annual bonus
were agreed by the committee at the beginning of
the financial year and as noted in last year’s report,
the committee chose to introduce a number of new
measures to further demonstrate the company’s
intention to incentivise stretching performance delivery
the environmental elements of the LTP, the estimated
overall vesting is around 69 per cent. The final outcome
for some of the measures in the customer basket will
not be known until all relevant information is available,
expected in summer 2023, and we will provide an
update in next year’s report.
The committee is not currently minded to exercise any
discretion in respect of the vesting of these awards
(again noting the impact of the executive directors’
waiving the environmental elements), believing that
the overall outcome fairly reflects the underlying
performance of the company and the experience of
stakeholders over the period.
The committee has considered whether any adjustments
or use of discretion might be warranted on vesting
to reflect the possibility of windfall gains on share
price movements over the period. Factors which the
committee considered include:
•
the share price at grant compared to that used for
previous award cycles and what the price would
have been had the grant been made on the
normal timetable (they were delayed to mitigate
the potential impact of the COVID-19 pandemic on
target-setting)
• TSR performance over the period since grant
relative to historic growth rate
•
the value of the award at vesting relative to
previous award cycles.
The committee is currently satisfied that the growth
in share price since grant is within the normal bounds
and is not indicative of a windfall gain, and therefore no
adjustment is warranted.
for customers, including environmental commitments
Steve Mogford’s and Phil Aspin’s awards will vest after
and obligations. A consistent bonus scorecard
the completion of a holding period taking the overall
continued to apply throughout the company, to ensure
vesting period to five years from the grant date.
a shared focus on the business plan at all levels.
Louise Beardmore was granted her award prior to her
As outlined earlier, the executive directors waived the
appointment as an executive director, so her award will
element of their bonus that related to our Better Rivers
be treated according to its original terms with no holding
commitments, despite good progress in the year with
period applying, and she will be required to hold the
all of the required milestones being achieved.
shares vesting (net of tax) as she continues to build
The committee also undertook an assessment to
her shareholding.
determine whether the formulaic outcome of the bonus
Chief Executive Officer succession
scorecard was aligned with overall performance and
the experience of stakeholders, including customers
and the environment. The committee was satisfied
that the measures and targets set were robust and
stretching and that the overall payout appropriately
reflected the achievements of the company.
Accordingly, and noting the effect of the voluntary
waivers, the committee has not applied any discretion
in respect of annual bonus outcomes for 2022/23.
See page 181 for further details.
2020 Long Term Plan (LTP)
LTP awards granted in November 2020 were based
50 per cent on a customer basket of measures and
50 per cent on return on regulated equity (RoRE). The
customer basket of measures comprised ten metrics
selected to reflect customer priorities, demonstrate our
focus on customer delivery and recognise stakeholder
expectations with regard to ESG matters.
Performance against many of the LTP measures has
also been strong, as shown on pages 182 to 183. As
a result of the executive directors’ decision to waive
Steve Mogford was paid his contractual salary and
benefits until he retired on 31 March 2023, and will
receive the bonus he is due in respect of 2022/23
performance in June 2023. As he will no longer be
employed when the bonus is paid, in line with the
policy, the normal deferred element will be in the form
of a deferred cash award (rather than shares), which
will vest after three years.
The committee approved that, as Steve was retiring,
it was appropriate for good leaver status to be applied
in respect of his LTP awards. His 2018 and 2019 LTP
awards will vest at the end of their respective holding
periods. Once the outcome of his 2020 LTP award is
finalised, it will move into a holding period until the
stated vesting date, five years from grant. His 2021
and 2022 LTP awards remain subject to performance,
will be pro-rated for time served in the performance
periods, and will vest at the end of the applicable
holding periods. In the two year period following his
departure the committee will consider whether good
leaver status remains appropriate before each LTP
award vests.
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Looking ahead
Executive director salaries will be reviewed during
the year with any increases taking effect from
1 September 2023. No changes are expected to
pension provisions or benefits in the year.
For 2023/24, the maximum bonus opportunity will
remain at 130 per cent of base salary for both executive
directors, and they will each receive a 2023 LTP
award of 130 per cent of salary. At least 30 per cent
of the performance-related pay schemes set this
year will be based on stretching performance against
environmental measures.
Recognising Ofwat’s expectation that initial
performance-related pay policies over the 2025–30
period should be aligned with the final methodology for
PR24, the committee is minded to accelerate its next
review of the remuneration policy and to submit this for
shareholder approval at the 2024 AGM.
This timing will ensure that we have an updated policy
which can take effect at the start of the new price
control period and also recognises the imminent review
of the UK Corporate Governance Code, with changes
expected to come into effect in 2025. As with previous
policy reviews, the committee will look to consult
with its largest shareholders to seek their views on its
proposals, and additionally welcomes any feedback
from other investors or stakeholders.
I hope that you find this report a clear account of
the committee’s decisions for the year and would be
happy to answer any questions you may have at the
upcoming AGM.
This report has been approved by the board and is
signed on its behalf by:
Kath Cates
Chair of the remuneration committee
His three DBP awards will remain unvested until their
original vesting dates. Withholding and recovery
provisions applicable to the incentive schemes
continue to apply.
Steve is required to maintain an interest in company
shares of 200 per cent of salary for two years after
ceasing employment.
The committee approved that, on her appointment
as CEO, Louise Beardmore’s salary would be set at
£690,000, with no other changes to her remuneration
arrangements. While relevant external benchmarks
were taken into account in setting her salary at this
level, which was lower than that received by Steve
Mogford, the committee reaffirmed its intent to
reposition the company’s executive remuneration
packages (as had also been the case when Phil Aspin
was appointed as CFO on a lower base salary than
his predecessor).
Engagement with Ofwat
In December 2022, David Black (Ofwat’s Chief
Executive) sent a letter concerning performance-related
executive pay to the remuneration committee chairs of
all regulated water and wastewater companies (a copy
of which is available on Ofwat’s website).
The letter focused on understanding how committees
would take into account overall performance for
customers and the environment when making
decisions around performance-related pay. As set
out above, we are committed to making sure that
executive pay outcomes are aligned with the interests
of our stakeholders, including customers and the
environment. We achieve this primarily by having the
majority of our performance-related pay directly linked
to customer and environmental objectives, and as a
listed company and compliant with the UK Corporate
Governance Code, we also have additional mechanisms
in place to help promote stakeholder alignment and
maintain a strong pay for performance culture. This
includes: the ability of the committee to override
formulaic outcomes to ensure that performance-related
pay is aligned with the underlying performance of the
business; the use of mandatory annual bonus deferral
and LTP holding period; robust and enforceable
recovery provisions for performance-related pay; and
significant shareholding requirements for executive
directors to encourage a long-term focus.
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5 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 and aligned with the interests of stakeholders.
We describe how our remuneration approach aligns with our business
strategy on pages 176 to 177.
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 remuneration outcomes, taking account of company and
individual performance, and wider circumstances.
The shareholder-approved directors’ remuneration policy outlines the
ways in which the committee may exercise discretion. Details of how
the committee has taken into account the wider context for pay and
the rationale for the use of any discretion are set out in the introductory
statement from the chair of the committee.
Compliance with the
UK Corporate
Governance Code
Code principle – remuneration
The following section summarises how our
shareholder-approved remuneration policy fulfils
the relevant principles and provisions of the 2018
UK Corporate Governance Code.
Clarity
The committee is committed to providing
transparent disclosures to all stakeholders 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 Colleague 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 Long Term Plan
(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-related. These schemes
have strict maximum opportunities, with the
potential value at threshold, target and maximum
performance scenarios provided in the directors’
remuneration report.
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5 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 and aligned with the interests of stakeholders.
We describe how our remuneration approach aligns with our business
strategy on pages 176 to 177.
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 remuneration outcomes, taking account of company and
individual performance, and wider circumstances.
The shareholder-approved directors’ remuneration policy outlines the
ways in which the committee may exercise discretion. Details of how
the committee has taken into account the wider context for pay and
the rationale for the use of any discretion are set out in the introductory
statement from the chair of the committee.
throughout the year.
Compliance with the
UK Corporate
Governance Code
Code principle – remuneration
The following section summarises how our
shareholder-approved remuneration policy fulfils
the relevant principles and provisions of the 2018
UK Corporate Governance Code.
The committee is committed to providing
transparent disclosures to all stakeholders 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 Colleague 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
Payouts under the annual bonus and Long Term Plan
(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-related. These schemes
have strict maximum opportunities, with the
potential value at threshold, target and maximum
performance scenarios provided in the directors’
remuneration report.
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Clarity
Simplicity
Risk
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 LTP).
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.
Predictability
Proportionality
Alignment to culture
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.
Performance measures used in our variable incentive
schemes are selected to be consistent with the
company’s purpose, values and strategy; with a
strong emphasis on delivering for our customers
and encouraging innovation to provide a great and
resilient service at the most efficient cost. The use of
annual bonus deferral, LTP holding periods and our
shareholding requirements promotes integrity and
provides a clear link to the ongoing performance of the
group and ensure alignment with shareholders, which
continues after employment.
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5 Remuneration
At a glance summary: executive directors’ remuneration
continued
Aligning our remuneration approach to business strategy
Our remuneration approach is aligned to our purpose, values and strategy, thereby incentivising delivery
for customers and the environment, and the creation of long-term value for all of our stakeholders.
Our purpose is to provide great water for
a stronger, greener, healthier North West
Our strategic priorities
Stakeholders
Our purpose is implemented throughout our strategy
Delivering for all our stakeholders
Improve
our rivers
Create a
greener future
Provide a safe and
great place to work
Deliver great service
for all our customers
Spend customers’
money wisely
Contribute to our
communities
Communities
Employees
Communities
Environment
Suppliers
Customers
Environment
Suppliers
Media
Environment
Customers
Investors
Colleagues
Customers
Investors
U
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Our remuneration approach supports our business and people strategy and reflect the views of different stakeholders.
There are three key principles of our approach to executive remuneration:
1 Align
to our purpose, values and strategy
2 Incentivise delivery
for customers and the environment
3 Create long-term value
for all of our stakeholders
Our incentive framework in 2022/23 was designed to align with our business strategy and delivers for each of our stakeholder groups.
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Corporate governance report
5 Remuneration
Our annual bonus and Long Term Plan (LTP) are closely aligned to our strategic themes and with
delivery for our stakeholders. They each demonstrate a clear focus on customers and the environment.
At a glance summary: executive directors’ remuneration
continued
Aligning our remuneration approach to business strategy
Our remuneration approach is aligned to our purpose, values and strategy, thereby incentivising delivery
for customers and the environment, and the creation of long-term value for all of our stakeholders.
Element
Why it’s important to our remuneration approach
2022/23 annual bonus
Underlying operating profit
Underlying operating profit is a key measure of shareholder value.
Our purpose is to provide great water for
a stronger, greener, healthier North West
Our strategic priorities
Stakeholders
Our purpose is implemented throughout our strategy
Delivering for all our stakeholders
Improve
our rivers
Create a
greener future
Provide a safe and
great place to work
Deliver great service
for all our customers
Spend customers’
Contribute to our
money wisely
communities
Communities
Employees
Communities
Environment
Suppliers
Customers
Environment
Suppliers
Media
Environment
Customers
Investors
Colleagues
Customers
Investors
Customer service in year
• C-MeX ranking
• Written complaints
• Water quality contacts
Maintaining and enhancing
outcomes for customers and
the environment
•
Better Rivers
commitments, including
reducing storm overflow
activations
• Outcome delivery
incentive (ODI) composite
• Capital programme
delivery incentive (CPDi)
Our remuneration approach supports our business and people strategy and reflect the views of different stakeholders.
There are three key principles of our approach to executive remuneration:
Compulsory deferral of bonus
1 Align
to our purpose, values and strategy
for customers and the environment
2 Incentivise delivery
3 Create long-term value
for all of our stakeholders
Our incentive framework in 2022/23 was designed to align with our business strategy and delivers for each of our stakeholder groups.
2020 Long Term Plan (LTP)
Return on Regulated
Equity (RoRE)
Customer basket of measures
Additional holding period
(so the overall vesting and
holding period is at least
five years)
Key governance mechanisms
By using Ofwat’s measure of customer experience alongside a measure that 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.
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 measure helps
drive improvements in this aspect of our performance.
We know that improving river health in the North West is a priority for customers, and
the executive directors are incentivised to deliver our ambitious plans.
The ODI composite measure includes a range of customer and environmental
commitments. It is based on 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 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, which reduces the
likelihood of this target being achieved.
The CPDi 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.
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 and the environment 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 that 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
LTP outcome could ultimately be withheld if during the holding period this is
deemed necessary.
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Discretion over outcomes
The committee retains discretion to override formulaic outcomes in both schemes
to ensure that they are appropriate and reflective of overall performance.
Shareholding guidelines
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.
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Link to
strategic
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Link to
different
stakeholders
Investors
Communities
Customers
Customers
Investors
Communities
Environment
Customers
Suppliers
Customers
Media
Investors
Investors
Communities
Environment
Customers
Customers
Investors
Communities
Environment
Customers
Customers
Investors
Investors
Customers
Communities
Investors
Customers
Environment
Suppliers
Employees
Media
Investors
Environment
176
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Corporate governance report
5 Remuneration
At a glance summary: executive directors’ remuneration
continued
Executive directors’ remuneration policy
Elements of executive directors’ pay
A significant proportion of executive directors’ pay is performance-related, 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):
Performance-related vs fixed (%)(1)
Long term vs short term (%)(1)
69%
31%
52%
48%
17%
17%
35%
27%
4%
17%
35%
27%
4%
17%
0
20
40
60
80
100
0
20
40
60
80
100
£’000
£0
£500
£1,000
£1,500
£2,000
£2,500
£971
£426
£886
£458
£210
£172
£490
£226
£457
Performance linked
Annual bonus – cash
Fixed
Annual bonus – shares
Base salary
Pension and other benefits
Long Term Plan (LTP)
Long term
Short term
Annual bonus – shares
Pension and other benefits
Long Term Plan (LTP)
Annual bonus – cash
Steve Mogford CEO
Base salary
Total: £2,283
(1) Based on maximum payout scenario for executive directors in line with the current remuneration policy, assuming the maximum award level of
130 per cent of salary for the Long Term Plan (LTP).
Single total figure of remuneration for executive directors for 2022/23
Fixed pay comprises base salary, benefits and pension. Further information on the single figure of remuneration can be seen on page 180.
Louise Beardmore
CEO designate(1)
Total: £840
£’000
£0
£500
£1,000
£1,500
£2,000
£2,500
Steve Mogford CEO
Total: £2,283
Louise Beardmore
CEO designate(1)
Total: £840
Phil Aspin CFO
Total: £1,172
£971
£426
£886
£458
£210
£172
£490
£226
£457
Phil Aspin CFO
Total: £1,172
Fixed pay
Annual bonus
Long-term incentives
(1)
For Louise Beardmore the LTP relates to awards granted prior to her appointment in her current role.
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 181 and about the LTP on pages 182 and 183.
2022/23 Annual bonus outcome
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
25.0%
Actual total:
41.4% of maximum(1)
10.0%
5.0%
10.0%
10.0%
25.0%
15.0%
10.0%
10.0%
8.0%
13.4%
Maximum
Actual
Underlying operating profit
C-MeX ranking
Written complaints
Water quality contacts
Better Rivers commitments
Outcome delivery incentive
(ODI) composite
CPDi
Estimated 2020 Long Term Plan (LTP) outcome
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
50.0%
50.0%
33.3%
Estimated
total: 68.8%
of award
vests(1)
50.0%
18.8%
Maximum
Actual
Return on Regulated Equity (RoRE)
Customer basket of measures
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(1) The outcomes before the application of the waivers of the Better Rivers commitments measure (annual bonus)
and the environmental measures (LTP) would have been 51.4% and 93.1% respectively.
178
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Corporate governance report
5 Remuneration
At a glance summary: executive directors’ remuneration
continued
Executive directors’ remuneration policy
Elements of executive directors’ pay
A significant proportion of executive directors’ pay is performance-related, 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):
Performance-related vs fixed (%)(1)
Long term vs short term (%)(1)
69%
31%
52%
48%
17%
17%
35%
27%
4%
17%
35%
27%
4%
17%
0
20
40
60
80
100
0
20
40
60
80
100
Performance linked
Fixed
Annual bonus – cash
Annual bonus – shares
Long Term Plan (LTP)
Base salary
Pension and other benefits
Long term
Short term
Annual bonus – shares
Long Term Plan (LTP)
Pension and other benefits
Annual bonus – cash
Steve Mogford CEO
Base salary
Total: £2,283
£971
£426
£’000
£0
£500
£1,000
(1) Based on maximum payout scenario for executive directors in line with the current remuneration policy, assuming the maximum award level of
130 per cent of salary for the Long Term Plan (LTP).
Single total figure of remuneration for executive directors for 2022/23
Fixed pay comprises base salary, benefits and pension. Further information on the single figure of remuneration can be seen on page 180.
£458
£210
£172
£’000
£0
£500
£1,000
£1,500
£2,000
£2,500
£490
£226
£457
Louise Beardmore
CEO designate(1)
Total: £840
Phil Aspin CFO
Total: £1,172
Fixed pay
Annual bonus
Long-term incentives
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Steve Mogford CEO
Total: £2,283
Louise Beardmore
CEO designate(1)
Total: £840
Phil Aspin CFO
Total: £1,172
£458
£210
£172
£490
£226
£457
25.0%
Actual total:
41.4% of maximum(1)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
10.0%
5.0%
10.0%
10.0%
25.0%
15.0%
10.0%
10.0%
8.0%
13.4%
Maximum
Actual
Underlying operating profit
Better Rivers commitments
C-MeX ranking
Written complaints
Outcome delivery incentive
(ODI) composite
Water quality contacts
CPDi
Maximum
Actual
Return on Regulated Equity (RoRE)
Customer basket of measures
(1) The outcomes before the application of the waivers of the Better Rivers commitments measure (annual bonus)
and the environmental measures (LTP) would have been 51.4% and 93.1% respectively.
178
(1)
For Louise Beardmore the LTP relates to awards granted prior to her appointment in her current role.
Fixed pay
Annual bonus
Annual bonus and Long Term Plan (LTP) outcomes
Long-term incentives
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 181 and about the LTP on pages 182 and 183.
2022/23 Annual bonus outcome
Estimated 2020 Long Term Plan (LTP) outcome
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
50.0%
50.0%
33.3%
l
Estimated
total: 68.8%
of award
vests(1)
50.0%
18.8%
l
l
l
£971
£426
£886
Benefits and
pension
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 197.
£2,000
Implementation of directors’ remuneration policy in 2022/23
£1,500
The table below summarises the implementation of the directors’ remuneration policy for
executive directors in 2022/23. For further details see the annual report on remuneration on
pages 180 to 184.
£2,500
£886
Key element
Implementation of policy in 2022/23
Base salary
• Given Steve Mogford’s planned retirement the committee decided not to
•
•
increase his salary in the year.
Louise Beardmore’s salary was set at £425,000 on her appointment as CEO
designate in May 2022, with the next review being on 1 April 2023, further to her
appointment as CEO.
Phil Aspin’s salary was set at £427,380 from 1 September 2022, an increase of
4.75 per cent in line with the increase for the wider workforce.
• Market competitive benefits package including a green travel allowance of
•
£14,000; health, life cover and income protection; and reimbursement of taxable
expenses.
Steve Mogford had a cash pension allowance of 22 per cent of base salary up until
31 December 2022. With effect from 1 January 2023 this reduced to 12 per cent of
base salary in line with the arrangements that apply to the wider workforce. Phil
Aspin has a cash pension allowance of 12 per cent of base salary. Louise Beardmore
has a combination of a cash pension allowance and a contribution into the
pensions scheme such that the cost to the company is broadly the same.
Annual bonus
• Maximum opportunity of 130 per cent of base salary.
2022/23 annual bonus outcome of 41.4 per cent.
•
•
50 per cent of 2022/23 annual bonus deferred 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 68.8 per cent for the performance
period 1 April 2020 to 31 March 2023. The awards for Steve Mogford and Phil
Aspin will vest after an additional holding period, which ends no earlier than five
years from the date of grant. The award for Louise Beardmore was granted prior
to her appointment as an executive director and will vest when the performance
conditions have been confirmed in the summer. She will be required to hold the
vested shares in line with the shareholding guidelines.
• Withholding and recovery provisions apply.
Shareholding
guidelines
•
Personal shareholding for Steve Mogford remained above the 200 per cent
of salary minimum guideline. Louise Beardmore and Phil Aspin are building
their respective shareholdings and are expected to reach the minimum
guidelines within five years of their respective appointments. Post-employment
shareholding requirements apply. See page 198 for further details.
Key:
At or above stretch target
Between threshold and stretch targets
Below threshold target
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Aligning pay with
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Annual bonus – year ended
31 March 2023
Underlying operating profit(1)
£633.8m
C-MeX ranking versus the
other water companies
5th out of 17
Written complaints
(per 10,000 customers)
20.70
Water quality contacts
(appearance)
5,936
Better Rivers commitments
(% of 2022/23 programme
milestones delivered)
Waived
Outcome delivery incentive
(ODI) composite
£22.2m
Capital programme delivery
incentive (CPDi)
92.9%
Long Term Plan – three years
ended 31 March 2023
Return on regulated equity
(RoRE)(2)
+7.77%
(1) For the purpose of annual bonus, underlying operating profit excludes infrastructure renewals
Customer basket of measures(3)
expenditure and property trading.
(2) Average RoRE compared to average allowed RoRE over 2020/21, 2021/22 and 2022/23.
(3) Percentage of customer basket achieved. The environmental measures were waived. See pages 182
18.8%
to 183.
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Corporate governance report
5 Remuneration
Annual report on remuneration
Single total figure of remuneration for executive directors (audited information)
Fixed pay
Variable pay
Year ended
31 March
Base salary
£’000
Pension
£’000
Benefits
£’000
Subtotal
£’000
2023 2022 2023 2022 2023 2022 2023 2022
Annual bonus
£’000
Long-term
incentives
£’000
2023 2022 2023(1) 2022(2) 2023 2022
Subtotal
£’000
Total
£’000
2023 2022
Steve Mogford
791
784
154
173
Louise
Beardmore(3)
Phil Aspin
390
419
n/a
405
48
50
n/a
49
26
20
20
23
971
980
426
727
886
1,504 1,312 2,231
2,283
3,211
n/a
21
458
490
n/a
475
210
226
n/a
452
172
457
n/a
96
382
683
n/a
548
n/a
840
1,172 1,023
(1) This relates to the Long Term Plan (LTP) award granted in November 2020. The amount is estimated as the vesting percentage for the half relating to
customer basket of measures will not be known until later in 2023. The value of LTP awards has been calculated using an average share price over the
three-month period from 1 January 2023 to 31 March 2023 of 1,045 pence per share.
(2) This relates to the Long Term Plan (LTP) award granted in June 2019. The figure stated in last year’s report was estimated but was subsequently
confirmed at 100 per cent. The award for Steve Mogford will not vest until the end of an additional holding period. Dividend equivalents accrued to
31 March 2023 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 2023 to 31 March 2023 of 1,045 pence per share. The award for Phil Aspin was granted prior to his appointment to the board so no holding
period applied. Dividend equivalents accrued to the date of vesting have been added, and the value of the award has been calculated using the share
price on the vesting date of 883.40 pence per share.
(3) Salary, benefits, pension and annual bonus figures in 2023 for Louise Beardmore reflect part-year earnings and are for the period from 1 May 2022
when she was first appointed to the board.
Annual bonus
Deferred Bonus Plan awards made in the year ended 31 March 2023 (audited information)
Bonuses are earned by reference to performance in the financial year and paid in June following the end of the financial year.
For executive directors, 50 per cent of any bonus is deferred, typically 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 2022 to the executive directors as at that date in respect of
deferred share bonus payments for the 2021/22 financial year.
Executive director
Steve Mogford
Type of
award
Conditional shares
Louise Beardmore
Conditional shares
Basis of
award
50% of bonus
40% of bonus(2)
Phil Aspin
Conditional shares
50% of bonus
Number of
shares
34,782
8,696
21,651
Face value of
award(1)
(£’000)
£363
£91
£226
End of
deferral period
16.6.2025
16.6.2025
16.6.2025
(1) The face value has been calculated using the closing share price on 15 June 2022 (the dealing day prior to the date of grant), which was 1,044.75 pence
per share.
(2) The Deferred Bonus Plan award for Louise Beardmore was in respect of the bonus she earned in 2021/22 in her previous role i.e. prior to her
appointment to the board, and in which a 40 per cent deferral requirement applied. This amount is not included in the single figure table above.
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Corporate governance report
5 Remuneration
Annual report on remuneration
Single total figure of remuneration for executive directors (audited information)
Variable pay
Long-term
incentives
£’000
Fixed pay
26
20
20
Year ended
31 March
Louise
Beardmore(3)
Phil Aspin
Base salary
£’000
Pension
£’000
Benefits
£’000
Subtotal
£’000
Annual bonus
£’000
Subtotal
£’000
Total
£’000
2023 2022 2023 2022 2023 2022 2023 2022
2023 2022 2023(1) 2022(2) 2023 2022
2023 2022
Steve Mogford
791
784
154
173
23
971
980
426
727
886
1,504 1,312 2,231
2,283
3,211
390
419
n/a
405
48
50
n/a
49
n/a
21
458
490
n/a
475
210
226
n/a
452
172
457
n/a
96
382
683
n/a
548
840
n/a
1,172 1,023
(1) This relates to the Long Term Plan (LTP) award granted in November 2020. The amount is estimated as the vesting percentage for the half relating to
customer basket of measures will not be known until later in 2023. The value of LTP awards has been calculated using an average share price over the
three-month period from 1 January 2023 to 31 March 2023 of 1,045 pence per share.
(2) This relates to the Long Term Plan (LTP) award granted in June 2019. The figure stated in last year’s report was estimated but was subsequently
confirmed at 100 per cent. The award for Steve Mogford will not vest until the end of an additional holding period. Dividend equivalents accrued to
31 March 2023 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 2023 to 31 March 2023 of 1,045 pence per share. The award for Phil Aspin was granted prior to his appointment to the board so no holding
period applied. Dividend equivalents accrued to the date of vesting have been added, and the value of the award has been calculated using the share
(3) Salary, benefits, pension and annual bonus figures in 2023 for Louise Beardmore reflect part-year earnings and are for the period from 1 May 2022
price on the vesting date of 883.40 pence per share.
when she was first appointed to the board.
Annual bonus
Deferred Bonus Plan awards made in the year ended 31 March 2023 (audited information)
Bonuses are earned by reference to performance in the financial year and paid in June following the end of the financial year.
For executive directors, 50 per cent of any bonus is deferred, typically 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 2022 to the executive directors as at that date in respect of
deferred share bonus payments for the 2021/22 financial year.
Executive director
Type of
award
Basis of
award
Steve Mogford
Conditional shares
50% of bonus
Louise Beardmore
Conditional shares
40% of bonus(2)
Phil Aspin
Conditional shares
50% of bonus
Number of
shares
34,782
8,696
21,651
Face value of
award(1)
(£’000)
£363
£91
£226
End of
deferral period
16.6.2025
16.6.2025
16.6.2025
per share.
(2) The Deferred Bonus Plan award for Louise Beardmore was in respect of the bonus she earned in 2021/22 in her previous role i.e. prior to her
appointment to the board, and in which a 40 per cent deferral requirement applied. This amount is not included in the single figure table above.
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Annual bonus in respect of financial year ended 31 March 2023 (audited information)
The performance measures, targets and outcomes in respect of the executive directors’ annual bonus for the year ended
31 March 2023 are set out below. As outlined in the Chair’s statement (pages 170 to 172) the executive directors waived the
outcome related to the Better Rivers commitments measure, which otherwise would have vested at the stretch outcome with
all milestones having been achieved. The committee was satisfied that overall outcomes are reflective of overall company
performance during the year as detailed in the strategic report.
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Measure
Underlying operating profit(1)
Customer service in year
C-MeX contractor and perception ranking out
of the 17 water companies
Written complaints
(per 10,000 customers)
%
weighting
of
measure
25.0%
Threshold
(25%
vesting)
£694.7m
Target
(50%
vesting)
£719.7m
Stretch
(100%
vesting)
£744.7m
Actual £633.8m (below threshold)
Vesting
as a
% of
maximum Outcome
0.0%
0.0%
10.0%
8th position 7th position
5th position
100%
10.0%
Actual: 5th position
5.0%
17.50
17.10
16.80
0.0%
0.0%
Actual: 20.7 (below threshold)
Water quality contacts (appearance)
10.0%
7,604
6,974
6,344
100%
10.0%
Actual: 5,936
Maintaining and enhancing outcomes for customers
and the environment
Better Rivers commitments
(% of 2022/23 programme milestones delivered)
10.0%
90.0%
95.0%
100%
100% Waived
Actual: 100%
Outcome delivery incentive (ODI) composite(2)
25.0%
£20.0m
£28.0m
£35.7m
31.9%
8.0%
Capital programme delivery incentive (CPDi)(3)
15.0%
Actual: £22.2m
80.0%
85.0%
95.0%
89.5%
13.4%
Actual: 92.9%
(1) The face value has been calculated using the closing share price on 15 June 2022 (the dealing day prior to the date of grant), which was 1,044.75 pence
Actual award (£’000 – shown in single figure table)(4)
Total:
Actual award (% of maximum)
Maximum award (% of salary)
Actual award (% of salary)
41.4%
130%
53.8%
Phil
Aspin
226
Steve
Mogford
Louise
Beardmore
426
210
(1) The underlying operating profit figure for bonus purposes is based on the underlying operating profit on page 112 and excludes infrastructure renewals
expenditure and property trading.
(2) The outcome of the ODI composite measure has been subject to independent external assurance.
(3) CPDi is an internal measure that 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) 50 per cent of the annual bonus will be deferred for three years.
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Corporate governance report
5 Remuneration
Annual report on remuneration continued
Long-term incentives
2020 Long Term Plan (LTP) awards with a performance period ended 31 March 2023 (audited information)
Measure
%
weighting
of
measure
Threshold
(25% vesting)
Achieved(1)
Stretch
(100% vesting)
Vesting
as a % of
maximum Outcome
Return on Regulated Equity (RoRE)
Average RoRE compared
to the average allowed
return set by the regulator
across the three-year
performance period
50.0%
Customer basket of measures(2)
C-MeX ranking out of all of
the other water companies(3)
Water poverty(3)
5.0%
5.0%
Equal to the average of
Ofwat’s allowed RoRE over
the three financial years of the
performance period
1.0% (or more) above
the average of Ofwat’s allowed
RoRE over the three financial
years of the performance period
100%
50.0%
Actual: Average RoRE of 7.77% was
3.83% above the average allowed return
Ranked 9th
Ranked 6th (or better)
100%
5.0%
Actual: 5th position
62,100 customers
have been lifted out
of water poverty
83,000 (or more)
customers have been lifted out
of water poverty
100%
5.0%
Actual: 84,002
Priority services(3)
5.0%
No threshold target. Stretch
target must be achieved for
any vesting on this measure
5.5% (or more) of our customers
are listed on the Priority
Services Register
100%
5.0%
Sewer flooding incidents(3)
5.0%
A combined total of
1,161 sewer flooding incidents
per 10,000km of our
wastewater network
Actual: 9.1%
A combined total of
less than, or equal to,
990 sewer flooding
incidents per 10,000km of our
wastewater network
Actual: 849.8
100% Waived
Pollution incidents(4)
5.0%
23.00 pollution incidents
per 10,000km of our
wastewater network
21.54 (or fewer) pollution
incidents per 10,000km of our
wastewater network
100% Waived
Actual: 16.29
Treatment works compliance(4)
5.0%
97.9% compliance
99.0% (or greater) compliance
100% Waived
Water quality contacts(4)
5.0%
14.7 customer contacts per
10,000 customers
13.8 (or fewer) customer
contacts per 10,000 customers
75.0%
3.8%
Actual: 99.0%
Leakage(3)
5.0%
Actual: 14.1
A three-year average of
101.60 megalitres of leakage
per 10,000km of our water
network per day
A three-year average of
97.60 megalitres (or less) of
leakage per 10,000km of our
water network per day
85.2% Waived
Compliance risk index (CRl)(4)
5.0%
CRI score of 3.27
Actual: 98.39
CRI score of 2.00
(or less)
0.0%
0.0%
The Environment Agency’s
Environmental Performance
Assessment (EPA) rating(5)
Estimate: 3.67 (below threshold)
5.0%
3 star rating
4 star rating
100% Waived
Estimate: 4 star rating
Overall underpin
✓ Assumed met.
Overall vesting is subject to the committee being satisfied that the
company’s outcome 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.
Details of the committee’s preliminary assessment on the
alignment of the vesting outcome to the underlying performance
of the business is set out in the introductory statement from
the Chair of the committee. The committee will make a final
assessment of the company’s performance once the outcome of
the customer basket of measures is known.
Estimated vesting (% of award)
68.8%
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Corporate governance report
5 Remuneration
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Annual report on remuneration continued
Long-term incentives
2020 Long Term Plan (LTP) awards with a performance period ended 31 March 2023 (audited information)
Measure
Return on Regulated Equity (RoRE)
Average RoRE compared
to the average allowed
return set by the regulator
across the three-year
performance period
Customer basket of measures(2)
C-MeX ranking out of all of
the other water companies(3)
Water poverty(3)
5.0%
5.0%
Achieved(1)
%
weighting
of
Threshold
measure
(25% vesting)
Vesting
Stretch
as a % of
(100% vesting)
maximum Outcome
50.0%
Equal to the average of
1.0% (or more) above
100%
50.0%
Ofwat’s allowed RoRE over
the average of Ofwat’s allowed
the three financial years of the
RoRE over the three financial
performance period
years of the performance period
Actual: Average RoRE of 7.77% was
3.83% above the average allowed return
Ranked 9th
Ranked 6th (or better)
100%
5.0%
62,100 customers
83,000 (or more)
100%
5.0%
have been lifted out
customers have been lifted out
of water poverty
Actual: 5th position
of water poverty
Actual: 84,002
1,161 sewer flooding incidents
per 10,000km of our
wastewater network
Priority services(3)
5.0%
No threshold target. Stretch
5.5% (or more) of our customers
100%
5.0%
target must be achieved for
any vesting on this measure
are listed on the Priority
Services Register
Sewer flooding incidents(3)
5.0%
A combined total of
100% Waived
Actual: 9.1%
A combined total of
less than, or equal to,
990 sewer flooding
incidents per 10,000km of our
wastewater network
Actual: 849.8
Actual: 16.29
Actual: 99.0%
Actual: 14.1
97.60 megalitres (or less) of
leakage per 10,000km of our
water network per day
Actual: 98.39
(or less)
Estimate: 4 star rating
Pollution incidents(4)
5.0%
23.00 pollution incidents
21.54 (or fewer) pollution
100% Waived
per 10,000km of our
wastewater network
incidents per 10,000km of our
wastewater network
Treatment works compliance(4)
5.0%
97.9% compliance
99.0% (or greater) compliance
100% Waived
Water quality contacts(4)
5.0%
14.7 customer contacts per
13.8 (or fewer) customer
75.0%
3.8%
10,000 customers
contacts per 10,000 customers
Leakage(3)
5.0%
A three-year average of
85.2% Waived
A three-year average of
101.60 megalitres of leakage
per 10,000km of our water
network per day
Compliance risk index (CRl)(4)
5.0%
CRI score of 3.27
CRI score of 2.00
0.0%
0.0%
The Environment Agency’s
Environmental Performance
Assessment (EPA) rating(5)
Estimate: 3.67 (below threshold)
5.0%
3 star rating
4 star rating
100% Waived
Overall underpin
✓ Assumed met.
Overall vesting is subject to the committee being satisfied that the
Details of the committee’s preliminary assessment on the
company’s outcome performance on these measures is consistent
alignment of the vesting outcome to the underlying performance
with underlying business performance and that the company’s
of the business is set out in the introductory statement from
dividend policy has been delivered in respect of each financial year
the Chair of the committee. The committee will make a final
of the performance period.
Estimated vesting (% of award)
assessment of the company’s performance once the outcome of
the customer basket of measures is known.
68.8%
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)(6)
Estimated value at end of performance period (£’000 – shown in single figure table)(7)
Steve
Mogford
112,097
Louise
Beardmore
21,802
11,184
123,281
84,817
1,045.0
886
2,173
23,975
16,494
1,045.0
172
Phil
Aspin
57,842
5,771
63,613
43,765
1,045.0
457
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(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 2023 as published in our own and/or the other water companies’
annual performance reports for 2022/23.
(4) Outcome based on performance in respect of the calendar year ending 31 December 2022 as published in our own annual performance reports for 2022/23.
(5) Outcome based on performance in respect of the calendar year ending 31 December 2022 as published in the Environment Agency’s published report in 2023.
(6) Average share price over the three-month period from 1 January 2023 to 31 March 2023.
(7) 13.95 per cent of the value vesting is attributable to share price appreciation, which equates to £123,663 for Steve Mogford, £24,048 for
Louise Beardmore and £63,809 for Phil Aspin.
The 2020 LTP awards were granted in November 2020. Whilst LTP awards are normally granted in June each year, due to the
uncertainties posed by the COVID-19 pandemic and particular concerns at the time about the possible extent of the disruption
caused, the committee delayed the 2020 LTP award grants until November to allow more time to settle the targets.
Performance against the measures has been strong as detailed in the strategic report, but as outlined in the Chair’s statement
(pages 170 to 172) and as shown in the table the executives decided to waive the outcomes related to five environmental measures.
Performance against each of those measures is expected to be at or near the stretch targets, so their decision to waive the outcomes
will materially reduce the value of the awards that will vest.
The final outcome for some measures will not be confirmed until summer 2023, so the values of the awards are estimated and will be
restated if necessary in next year’s report.
2022 LTP awards with a performance period ending 31 March 2025 (audited information)
The table below provides details of share awards made to executive directors on 29 July 2022 in respect of the 2022 LTP:
Executive director
Steve Mogford
Louise Beardmore
Phil Aspin
Type of award
Basis of
award
Face value
of award
(£’000)(1)
Number of
shares under
award
% vesting at
threshold
Conditional shares 130% of salary
Conditional shares 130% of salary
Conditional shares 130% of salary
£1,028
£552
£530
95,909
51,551
49,489
25%
25%
25%
End of
performance
period(2)
31.3.2025
31.3.2025
31.3.2025
(1) The face value has been calculated using the closing share price on 28 July 2022 (the dealing day prior to the date of grant), which was 1,071.75 pence per share.
(2) An additional holding period applies after the end of the performance period such that the overall vesting period is at least five years from the grant date.
Details about the measures, targets and underpins for the 2022 LTP awards made during the year were disclosed in last year’s report,
but in summary the awards were based on two equally weighted components: Return on Regulated Equity (RoRE) and a customer
basket of measures including environmental measures, four of which directly linked to our carbon pledges.
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Corporate governance report
5 Remuneration
Annual report on remuneration continued
Performance-related pay in 2023/24
Ensuring alignment with our business plan
The performance measures used in our performance-related pay schemes during 2023/24 will remain aligned directly with the business
plan, with a material weighting being linked to delivery for customers, and at least 30 per cent on environmental measures.
Annual bonus for 2023/24
The maximum bonus opportunity for the year commencing 1 April 2023 will be unchanged at 130 per cent of base salary. As is outlined on
page 177, the measures used in our annual bonus arrangements for executive directors demonstrate significant alignment to stakeholder
interests, including customers and the environment, and the table below summarises the measures, weightings and targets for the
2023/24 bonus. We have amended the composition of the bonus scorecard and introduced a new measure to reflect our commitment
to tackling storm overflow activations and improve river quality. Targets that are considered commercially sensitive will be disclosed
retrospectively in the 2023/24 annual report on remuneration.
Measure
Underlying operating profit(1)
Customer service in year
C-MeX ranking out of the 17 water companies(2)
Water quality contacts (appearance)
Maintaining and enhancing outcomes for customers
and the environment
Better Rivers commitments:
% reduction of reported storm overflow activations
Better Rivers commitments:
% of 2023/24 programme milestones delivered
Outcome delivery incentive (ODI) composite
Capital programme delivery incentive (CPDi)
Total
Targets
Threshold
(25% vesting)
Target
(50% vesting)
Commercially sensitive
Stretch
(100%
vesting)
Weighting
(% of award)
25.0%
n/a
6th position
5th position
5,800
5,550
5,300
10.0%
5.0%
8.0%
10.0%
12.0%
12.5%
90.0%
95.0%
100%
12.5%
Commercially sensitive
85 .0%
90.0%
95.0%
25.0%
10.0%
100%
(1) Underlying operating profit for bonus purposes excludes infrastructure renewals expenditure and property trading.
(2) No threshold target applies to this measure.
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.
2023 LTP awards with a performance period ending 31 March 2026
Consistent with the approach since 2020, 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. At least 30 per cent of the overall award will relate to environmental
measures, including those that are within scope of our key regulators.
The award level for executive directors will remain unchanged at 130 per cent of base salary and the performance period for the
awards will be 1 April 2023 to 31 March 2026. As work is continuing on the ambitious plan for the next regulatory period, of which the
first year will be the final year of the performance period, the committee has decided to wait until later in the summer to grant the
awards to give more time for the precise measures and stretching targets to be well-aligned with the proposed plan. We will publish
details of the measures and targets at the point of grant.
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Corporate governance report
5 Remuneration
Annual report on remuneration continued
Performance-related pay in 2023/24
Ensuring alignment with our business plan
The performance measures used in our performance-related pay schemes during 2023/24 will remain aligned directly with the business
plan, with a material weighting being linked to delivery for customers, and at least 30 per cent on environmental measures.
Annual bonus for 2023/24
The maximum bonus opportunity for the year commencing 1 April 2023 will be unchanged at 130 per cent of base salary. As is outlined on
page 177, the measures used in our annual bonus arrangements for executive directors demonstrate significant alignment to stakeholder
interests, including customers and the environment, and the table below summarises the measures, weightings and targets for the
2023/24 bonus. We have amended the composition of the bonus scorecard and introduced a new measure to reflect our commitment
to tackling storm overflow activations and improve river quality. Targets that are considered commercially sensitive will be disclosed
retrospectively in the 2023/24 annual report on remuneration.
Measure
Underlying operating profit(1)
Customer service in year
C-MeX ranking out of the 17 water companies(2)
Water quality contacts (appearance)
Maintaining and enhancing outcomes for customers
and the environment
Better Rivers commitments:
% reduction of reported storm overflow activations
Better Rivers commitments:
% of 2023/24 programme milestones delivered
Outcome delivery incentive (ODI) composite
Capital programme delivery incentive (CPDi)
Total
Targets
Threshold
Target
Weighting
(25% vesting)
(50% vesting)
vesting)
(% of award)
Stretch
(100%
Commercially sensitive
n/a
6th position
5th position
5,800
5,550
5,300
8.0%
10.0%
12.0%
12.5%
90.0%
95.0%
100%
12.5%
Commercially sensitive
85 .0%
90.0%
95.0%
25.0%
10.0%
5.0%
25.0%
10.0%
100%
(1) Underlying operating profit for bonus purposes excludes infrastructure renewals expenditure and property trading.
(2) No threshold target applies to this measure.
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.
2023 LTP awards with a performance period ending 31 March 2026
Consistent with the approach since 2020, 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. At least 30 per cent of the overall award will relate to environmental
measures, including those that are within scope of our key regulators.
The award level for executive directors will remain unchanged at 130 per cent of base salary and the performance period for the
awards will be 1 April 2023 to 31 March 2026. As work is continuing on the ambitious plan for the next regulatory period, of which the
first year will be the final year of the performance period, the committee has decided to wait until later in the summer to grant the
awards to give more time for the precise measures and stretching targets to be well-aligned with the proposed plan. We will publish
details of the measures and targets at the point of grant.
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G
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Stock code: UU.
185
Corporate governance report
5 Remuneration
Annual report on remuneration continued
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 colleague 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 colleagues throughout the company.
Colleague
group (number
of colleagues
currently
covered)
Colleagues
at all levels
(around 6,000)
Element
of pay
Salary
Policy
Implementation
We want to attract and retain colleagues of the
experience and quality required to deliver the
company’s strategy. Salaries are reviewed annually,
with executive directors normally receiving a
salary increase no greater than the increase
awarded to the general workforce.
In 2022 the base salary increase for colleagues was
4.75 per cent. As a living wage accredited employer
all our colleagues (except those on a training scheme
such as apprentices) receive at least the voluntary living
wage rate.
Health and
wellbeing
benefits
We want to create an environment that promotes
healthy behaviours and ensure that colleagues have
access to early and effective treatment, advice and
information to improve their health and wellbeing.
Colleagues at all levels are eligible for company-funded
healthcare, an enhanced company sick pay scheme, and
have access to a medical advice and information service
(Best Doctors) for them and their families. All colleagues
have free 24/7 access to our employee assistance
programme, which provides counselling and support to
them and their households. We have around 350 trained
mental health first aiders who can listen to and signpost
colleagues 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 colleagues covering a broad range of
money management topics such as financial planning,
managing debt and pensions.
Around half of the workforce take up at least one of our
flexible benefit options.
All colleagues have access to a variety of
additional voluntary benefits to suit their lifestyle,
including environmental benefits such as our
electric car scheme. Colleagues can choose from
a range of deals and discounts all year round, and
can donate to their chosen charities directly from
their pay if they want to.
Flexible
benefits
Pension
ShareBuy
Almost all colleagues participate in our company
pension arrangements, which have received
the ‘Pension Quality Mark Plus’ accreditation in
recognition of their high quality.
The company doubles any personal pension
contributions made, up to a maximum of 14 per cent of
salary. As part of the pension scheme colleagues receive
company-funded life assurance and income protection.
Any colleague can become a shareholder
in our company and share in our success by
participating in our ShareBuy scheme. For every
five shares purchased under the scheme, the
company gives another one free.
Around half of the workforce participate in our
ShareBuy scheme.
Annual
bonus –
cash
Our bonus scheme provides a strong alignment
to strategy throughout the organisation, with the
same bonus scorecard applying at all levels.
Colleagues 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.
Annual bonus
– deferred
shares
Long Term
Plan (LTP)
CEO, CFO and
executives (12)
CEO, CFO,
executives
and other
senior leaders
(around 60)
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.
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 (12)
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.
186
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Corporate governance report
5 Remuneration
U
n
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d
U
t
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s
G
r
o
u
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P
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t
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d
3
1
M
a
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2
0
2
3
Annual report on remuneration continued
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 colleague 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 colleagues throughout the company.
Colleague
group (number
of colleagues
currently
covered)
Colleagues
at all levels
(around 6,000)
Element
of pay
Policy
Implementation
Salary
We want to attract and retain colleagues of the
In 2022 the base salary increase for colleagues was
experience and quality required to deliver the
4.75 per cent. As a living wage accredited employer
company’s strategy. Salaries are reviewed annually,
all our colleagues (except those on a training scheme
with executive directors normally receiving a
such as apprentices) receive at least the voluntary living
salary increase no greater than the increase
wage rate.
awarded to the general workforce.
Health and
wellbeing
benefits
We want to create an environment that promotes
Colleagues at all levels are eligible for company-funded
healthy behaviours and ensure that colleagues have
healthcare, an enhanced company sick pay scheme, and
access to early and effective treatment, advice and
have access to a medical advice and information service
information to improve their health and wellbeing.
(Best Doctors) for them and their families. All colleagues
have free 24/7 access to our employee assistance
programme, which provides counselling and support to
them and their households. We have around 350 trained
mental health first aiders who can listen to and signpost
colleagues 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 colleagues covering a broad range of
money management topics such as financial planning,
managing debt and pensions.
Flexible
benefits
All colleagues have access to a variety of
Around half of the workforce take up at least one of our
additional voluntary benefits to suit their lifestyle,
flexible benefit options.
including environmental benefits such as our
electric car scheme. Colleagues can choose from
a range of deals and discounts all year round, and
can donate to their chosen charities directly from
their pay if they want to.
Pension
Almost all colleagues participate in our company
The company doubles any personal pension
pension arrangements, which have received
contributions made, up to a maximum of 14 per cent of
the ‘Pension Quality Mark Plus’ accreditation in
salary. As part of the pension scheme colleagues receive
recognition of their high quality.
company-funded life assurance and income protection.
ShareBuy
Any colleague can become a shareholder
Around half of the workforce participate in our
in our company and share in our success by
ShareBuy scheme.
participating in our ShareBuy scheme. For every
five shares purchased under the scheme, the
company gives another one free.
Annual
bonus –
cash
Our bonus scheme provides a strong alignment
Colleagues at all levels participate in the annual
to strategy throughout the organisation, with the
bonus scheme, receiving financial rewards based on
same bonus scorecard applying at all levels.
the performance of the company and their personal
contribution. Specific weightings and award levels vary
by grade.
Annual bonus
Deferral of part of bonus into shares aligns the
Each of the executive directors and executives is
interests of executive directors and shareholders.
required to defer a proportion of their bonus into shares
for three years.
To incentivise long-term value creation
Executives and other senior leaders may be invited to
and alignment with the long-term interests
participate in the LTP. Performance conditions are the
of shareholders, customers, and other
same for all participants but award sizes vary.
stakeholders.
Shareholding
The committee believes that it is important for
All executives are subject to shareholding guidelines,
guidelines
each executive director to build and maintain a
aligning their interests with those of shareholders.
significant investment in shares of the company to
provide alignment with shareholder interests.
– deferred
shares
Long Term
Plan (LTP)
CEO, CFO and
executives (12)
CEO, CFO,
executives
and other
senior leaders
(around 60)
CEO, CFO and
executives (12)
Supporting our colleagues during the cost-of-living crisis
In recognition of the challenging financial environment, the company has taken action during the year to support colleagues. Noting that
the lowest paid workers have particularly struggled, in September 2022 we increased the pay rates of around 120 colleagues in line with
the new living wage rates that had been announced on the same day. While technically all living wage accredited employers had until
May 2023 to implement the new rates we decided that it was right to pay the improved rates as early as possible.
As part of the 2022/23 pay settlement for collectively bargained colleagues, alongside the 4.75 per cent salary increase from
1 April 2022 the company paid a one off lump sum of £500 to around 5,000 colleagues. The company also extended this payment
to around 600 colleagues who were not covered by the collectively bargained pay arrangements.
During the year, the company delivered a campaign aimed at reminding and encouraging colleagues to maximise the value of their
reward package. This included the following activities:
G
o
v
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c
e
Money management sessions
The sessions were intended to help colleagues take control of their finances and covered the following topics:
The increasing cost of living
•
• How to review your finances and reduce your costs
• How to access extra support
Sharing regular financial/money
management information
Providing money management tips and tools to help colleagues manage their money better including the option
to borrow responsibly in appropriate circumstances via our financial wellbeing partner
Financial awareness courses
Quarterly sessions covering the following topics:
•
•
•
•
‘Planning your financial future’ – aimed at those who may benefit from learning more about financial
planning, managing debt and making the most of their money
‘Maximising your financial future’ – aimed at those who may benefit from taking stock of their finances and
understanding how they might meet their financial goals in later life
‘Planning for retirement’ – aimed typically at those aged 50 and over, who are approaching the earliest age
that they can take pension benefits
‘Pre-retirement’ – aimed at those who are within six months of retirement
Support with healthcare costs
Members of our employee healthcare scheme are able to claim back the cost of every day healthcare items such as
eye tests, glasses/contact lenses, dental check ups and prescription fees
All colleagues have been able to claim back the cost of a flu vaccination
Promotion of deals and discounts
Improving the visibility of colleague discounts on products and services including supermarket shopping
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 186 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 pay and benefits framework that
applies to the workforce.
The committee has mechanisms through which it hears from, and engages with, the workforce on executive pay. As a member 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 the last
year, Alison has hosted four sessions with the Colleague Voice panel, providing valuable opportunities for open discussions and feedback
on a variety of topics including remuneration. See page 136 for further details. During the year, on invitation from Alison, the head of
reward provided the panel members with an overview of relevant corporate governance and reporting requirements, our executive
remuneration approach and the role of the committee in setting executive remuneration, and an explanation of how executive pay is
aligned to that of the wider workforce.
Percentage change in CEO remuneration compared with other colleagues
The figures below show how the percentage change in Steve Mogford’s salary, benefits and bonus earned in 2021/22 and 2022/23
compares with the percentage change in the average of each of those components for a group of colleagues.
Base salary(2)
Bonus(3)
Benefits
% change in CEO remuneration,
2022/23 vs 2021/22
% change in colleague remuneration,
2022/23 vs 2021/22(1)
0.8%
(41.4%)
14.0%
6.6%
(27.3%)
4.1%
(1) To aid comparison, the group of colleagues selected by the committee are all those members of the workforce who were employed over the complete
two-year period.
(2) Steve Mogford received no salary increase in 2022/23. For the wider workforce this includes promotional increases. The average salary increase for
colleagues was 4.75 per cent.
(3) The decrease in bonuses is due to the payout of the company scorecard element of the bonus scheme being significantly lower than last year.
186
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Stock code: UU.
187
Corporate governance report
5 Remuneration
Annual report on remuneration continued
CEO pay ratios
The table below sets out the ratio of Steve Mogford’s pay to that of the 25th percentile (P25), median (P50) and 75th percentile (P75)
full- time equivalent colleagues. The ratios have been calculated in accordance with option A as set out in the regulations. This is
considered to be the most accurate methodology and uses the same calculation basis as required for Steve Mogford’s total remuneration
as shown in the single figure table on page 180.
• We identified all colleagues who received base salary during the year 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 2023, including
bonuses earned by reference to performance in the financial year and paid in June following the end of the financial year.
•
‘Base salary’ includes standby pay, shift pay, overtime and on-call allowances
• For colleagues 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.
Financial year
2022/23
2021/22
2020/21
2019/20
Methodology used
Average number of colleagues
Ratio of CEO single figure total remuneration:(1)
– To colleague at the 25th percentile
– To colleague at the 50th percentile
– To colleague at the 75th percentile
Ratio of CEO base salary plus annual bonus:
– To colleague at the 25th percentile
– To colleague at the 50th percentile
– To colleague at the 75th percentile
Ratio of CEO base salary:
– To colleague at the 25th percentile
– To colleague at the 50th percentile
– To colleague at the 75th percentile
Additional details
CEO total single figure (£’000)
CEO base salary plus annual bonus (£’000)
CEO base salary (£’000)
Colleagues total pay and benefits (£’000)
– at the 25th percentile
– at the 50th percentile
– at the 75th percentile
Colleagues base salary plus annual bonus (£’000)
– at the 25th percentile
– at the 50th percentile
– at the 75th percentile
Colleagues base salary (£’000)
– at the 25th percentile
– at the 50th percentile
– at the 75th percentile
A
6,171
62:1
47:1
37:1
38:1
28:1
23:1
26:1
18:1
15:1
2,283
1,216
791
37
49
61
32
44
53
31
43
52
A
5,866
A
5,570
93:1
69:1
55:1
44:1
37:1
30:1
24:1
20:1
17:1
3,211
1,511
784
35
46
59
34
41
51
32
39
47
98:1
73:1
58:1
52:1
38:1
30:1
26:1
19:1
15:1
3,381
1,560
736
34
46
58
30
42
52
29
39
50
A
5,461
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
U
n
i
t
e
d
U
t
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l
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s
G
r
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P
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t
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3
1
M
a
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0
2
3
(1) The figures for 2021/22 have been restated to reflect the final vesting outcome, additional dividend equivalents and updated share price for Steve
Mogford’s 2019 LTP as shown in the single figure table on page 180. The figures for 2020/21 have also been restated to reflect additional dividend
equivalents and the closing share price on the date of vesting for his 2018 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 60 executives
and senior leaders, with none of the individuals identified as P25, P50 and P75 in this group. On the other hand, colleagues 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 has reduced at all data points (P25,P50 and P75). This is as expected,
given that the CEO did not receive a salary increase during the year and his performance-related pay outcomes are materially less than
last year. The committee observes a similar picture across most of the other reported ratios, which is to be expected given the alignment
of our remuneration approach across the workforce. The committee will continue to consider the pay ratios in the context of other
important metrics such as the gender pay gap and colleague engagement levels.
188
unitedutilities.com/corporate
Corporate governance report
5 Remuneration
Annual report on remuneration continued
CEO pay ratios
The table below sets out the ratio of Steve Mogford’s pay to that of the 25th percentile (P25), median (P50) and 75th percentile (P75)
full- time equivalent colleagues. The ratios have been calculated in accordance with option A as set out in the regulations. This is
considered to be the most accurate methodology and uses the same calculation basis as required for Steve Mogford’s total remuneration
as shown in the single figure table on page 180.
• We identified all colleagues who received base salary during the year 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 2023, including
bonuses earned by reference to performance in the financial year and paid in June following the end of the financial year.
•
‘Base salary’ includes standby pay, shift pay, overtime and on-call allowances
• For colleagues 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.
2022/23
2021/22
2020/21
2019/20
Financial year
A
5,866
A
5,570
U
n
i
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e
d
U
t
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i
t
i
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s
G
r
o
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d
A
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a
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F
i
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a
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S
t
a
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f
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e
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a
r
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n
d
e
d
3
1
M
a
r
c
h
2
0
2
3
Methodology used
Average number of colleagues
Ratio of CEO single figure total remuneration:(1)
– To colleague at the 25th percentile
– To colleague at the 50th percentile
– To colleague at the 75th percentile
Ratio of CEO base salary plus annual bonus:
– To colleague at the 25th percentile
– To colleague at the 50th percentile
– To colleague at the 75th percentile
Ratio of CEO base salary:
– To colleague at the 25th percentile
– To colleague at the 50th percentile
– To colleague at the 75th percentile
Additional details
CEO total single figure (£’000)
CEO base salary plus annual bonus (£’000)
CEO base salary (£’000)
Colleagues total pay and benefits (£’000)
Colleagues base salary plus annual bonus (£’000)
– at the 25th percentile
– at the 50th percentile
– at the 75th percentile
– at the 25th percentile
– at the 50th percentile
– at the 75th percentile
– at the 25th percentile
– at the 50th percentile
– at the 75th percentile
Colleagues base salary (£’000)
A
6,171
62:1
47:1
37:1
38:1
28:1
23:1
26:1
18:1
15:1
2,283
1,216
791
37
49
61
32
44
53
31
43
52
93:1
69:1
55:1
44:1
37:1
30:1
24:1
20:1
17:1
3,211
1,511
784
35
46
59
34
41
51
32
39
47
98:1
73:1
58:1
52:1
38:1
30:1
26:1
19:1
15:1
3,381
1,560
736
34
46
58
30
42
52
29
39
50
A
5,461
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 2021/22 have been restated to reflect the final vesting outcome, additional dividend equivalents and updated share price for Steve
Mogford’s 2019 LTP as shown in the single figure table on page 180. The figures for 2020/21 have also been restated to reflect additional dividend
equivalents and the closing share price on the date of vesting for his 2018 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 60 executives
and senior leaders, with none of the individuals identified as P25, P50 and P75 in this group. On the other hand, colleagues 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 has reduced at all data points (P25,P50 and P75). This is as expected,
given that the CEO did not receive a salary increase during the year and his performance-related pay outcomes are materially less than
last year. The committee observes a similar picture across most of the other reported ratios, which is to be expected given the alignment
of our remuneration approach across the workforce. The committee will continue to consider the pay ratios in the context of other
important metrics such as the gender pay gap and colleague engagement levels.
Relative importance of spend on pay
The table below shows the relative importance of spend on pay compared to distributions to shareholders.
£342m
+5.6%
2022/23
2021/22
G
o
v
e
r
n
a
n
c
e
Colleague
costs(1)
Dividends paid
to shareholders
£324m
£301m
+1.9%
£296m
£0m
£50m
£100m
£150m
£200m
£250m
£300m
£350m
(1)
Colleague costs includes wages and salaries, social security costs, and post-employment benefits.
Executive directors’ shareholding (audited information)
Details of beneficial interests in the company’s ordinary shares as at 31 March 2023 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
continued to exceed the target shareholding requirement level of 200 per cent of salary. Louise Beardmore’s target shareholding changed
on her appointment to CEO on 1 April 2023 and will now be 200 per cent of her new salary. She is expected to reach that by 1 April 2028
(within five years of her appointment as CEO). Phil Aspin is expected to reach the minimum guideline by 24 July 2025 (within five years of
his appointment as CFO).
391
228
151
s
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h
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s
0
0
0
’
400
350
300
250
200
150
100
50
0
47
81
47
82
29
n/a
2023
2022
2023
2022
2023
2022
Year ended 31 March
Year ended 31 March
Year ended 31 March
Steve Mogford
(CEO)
Louise Beardmore
(CEO Designate)
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 2023
188
unitedutilities.com/corporate
Stock code: UU.
189
Corporate governance report
5 Remuneration
Annual report on remuneration continued
Further details of the executive directors’ shareholdings and share plan interests are given in the table below and in appendix 2 on pages 202
and 203.
Number
of
shares
required
to meet
share-
holding
require-
ment(1)
Share-
holding
require-
ment
(% of
salary)
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)
2023
2022
2023
2022
2023
2022
2023(1)
2022
2023
2022
200% 151,330
5,188
181,144 420,194 395,160 227,907 390,595
301%
Yes
331,654 363,303
200%
200%
81,340
81,795
33,180
23,570
n/a
17,440
26,201
44,787
n/a
21,367
47,083
47,323
n/a
28,781
116%
116%
No
No
97,872
n/a
171,132
126,738
Director
Steve
Mogford(5)(6)
Louise
Beardmore(5)
Phil Aspin(5)
(1) Share price used is the average share price over the three months from 1 January 2023 to 31 March 2023 (1,045 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 (net of tax and National Insurance), plus the number of shares owned outright.
(4) Includes unvested shares under the Long Term Plan.
(5) In the period 1 April 2023 to 24 May 2023, additional shares were acquired by Louise Beardmore (28 shares) and Phil Aspin (27 shares) in respect of their
monthly contributions to the all employee ShareBuy scheme. Steve Mogford acquired 14 additional shares relating to his ShareBuy contribution in March
2023. These will be matched by the company on a one-for-five basis. Matching shares vest one year after grant provided the colleague remains employed.
(6) On 1 April 2023, shares granted on 25 June 2018 under the Long Term Plan vested for Steve Mogford following a holding period. 152,768 shares vested,
of which 68,918 shares were sold to cover tax and National Insurance. Steve retained the remaining balance of 83,850 shares.
Other information
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 2023 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.
300
Key
CEO single
figure of
remuneration
(£000)
250
200
United
Utilities
Group
PLC
FTSE
100
Index
£
e
u
a
V
l
150
100
50
0
100
117
107
144
149
113
107
167
133
151
143
133
126
188
142
176
117
239
235
174
165
3,500
3,000
2,500
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
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fi
e
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n
i
s
O
E
C
l
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
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C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
a
i
i
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
3
2014
2015
2016
2017
2018
2019
2020 2021
2022
2023
Year ended 31 March
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
CEO single figure of
remuneration (£’000)
Annual bonus payment
(% of maximum)
LTP vesting (% of maximum)(4)
2,378
2,884
2,760(1) 2,233
2,221
2,448
2,925
3,381(2)
3,211(3) 2,283
78.2
93.5
77.4
97.5
54.5
33.6
83.7
54.5
74.9
55.4
79.0
64.4
70.7
87.3
81.8
97.9
71.3
100(3)
41.4
68.8(5)
(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 2018 LTP, which vested on 1 April 2023 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 1,060 pence per share.
190
unitedutilities.com/corporate
Further details of the executive directors’ shareholdings and share plan interests are given in the table below and in appendix 2 on pages 202
(3) The payout and vesting percentage for the 2019 LTP have been restated to reflect the additional dividend equivalents accruing on the award, the final
vesting outcome and updated share price. See page 180 for further details.
(4) For performance periods ended on 31 March, unless otherwise stated.
(5) The 2020 Long Term Plan amount vesting percentage is estimated. See page 182 and 183 for further details.
Exit payments and payments to former directors made in the year (audited information)
There have been no exit payments or payments to former directors in respect of their roles as directors during the year ended
31 March 2023 other than the vesting of legacy share awards (see page 203).
External appointments
Steve Mogford was non-executive director of QinetiQ during the year ended 31 March 2023, for which he received and retained an
annual fee of £40,000. Phil Aspin was a member of the UK Endorsement Board during the year ended 31 March 2023, for which he
received and retained an annual fee of £14,000.
Non-executive directors
Single total figure of remuneration for non-executive directors (audited information)
Salary/fees £’000
Taxable benefits £’000
Total £’000
G
o
v
e
r
n
a
n
c
e
Year ended 31 March
2023
Sir David Higgins
Liam Butterworth(1)
Stephen Carter(2)
Kath Cates(3)
Mark Clare(2)
Alison Goligher(3)
Paulette Rowe(4)
Doug Webb(5)
311
71
25
80
26
85
79
87
2022
304
17
81
69
83
83
69
80
2023
2022
1
1
3
1
4
–
1
1
2
–
2
2
2
1
1
1
2023
312
72
28
81
30
85
80
88
2022
306
17
83
71
85
84
70
81
(1) Liam Butterworth joined the board on 1 January 2022.
(2) Stephen Carter and Mark Clare both stepped down from the board on 22 July 2022.
(3) Kath Cates was appointed as chair of the remuneration committee with effect from 22 July 2022 and received the applicable additional fee from that date.
Alison Goligher stepped down as chair of the remuneration committee with effect from 22 July 2022 when she became the senior independent
non-executive director, for which she received the applicable additional fee.
(4) Paulette Rowe was appointed as chair of the ESG committee with effect from 22 July 2022 and received the applicable additional fee from that date.
(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 2022 as shown below. Base fees were
increased by 3.0 per cent, which is lower than the increase applying to the general workforce in 2022. Additional fees for the senior
independent non-executive director and the chairs of committees were also increased by 3.0 per cent.
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 ESG committee(2)
(1) Approved by the remuneration committee.
(2) Approved by a separate committee of the board.
Fees £’000
1 Sept 2022
1 Sept 2021
315.2
306.0
71.7
13.9
16.5
13.9
12.4
69.6
13.5
16.0
13.5
12.0
Corporate governance report
5 Remuneration
Annual report on remuneration continued
and 203.
Director
Steve
Louise
Beardmore(5)
Phil Aspin(5)
holding
require-
ment
(% of
salary)
to meet
share-
holding
require-
ment(1)
Number
of
Number of
shares
shares owned
Unvested shares
Total shares
Share-
required
outright (including
not subject to
counting towards
of base
connected
persons)
performance
conditions(2)
shareholding
salary at
requirements(3)
31 March
31 March
Share-
holding
as %
Share-
holding
require-
ment
met at
Unvested shares
subject to
performance
conditions(4)
2023
2022
2023
2022
2023
2022
2023(1)
2022
2023
2022
Mogford(5)(6)
200% 151,330
5,188
181,144 420,194 395,160 227,907 390,595
301%
Yes
331,654 363,303
200%
200%
81,340
81,795
33,180
23,570
n/a
17,440
26,201
44,787
n/a
21,367
47,083
47,323
n/a
28,781
116%
116%
No
No
97,872
n/a
171,132
126,738
(1) Share price used is the average share price over the three months from 1 January 2023 to 31 March 2023 (1,045 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 (net of tax and National Insurance), plus the number of shares owned outright.
(4) Includes unvested shares under the Long Term Plan.
(5) In the period 1 April 2023 to 24 May 2023, additional shares were acquired by Louise Beardmore (28 shares) and Phil Aspin (27 shares) in respect of their
monthly contributions to the all employee ShareBuy scheme. Steve Mogford acquired 14 additional shares relating to his ShareBuy contribution in March
2023. These will be matched by the company on a one-for-five basis. Matching shares vest one year after grant provided the colleague remains employed.
(6) On 1 April 2023, shares granted on 25 June 2018 under the Long Term Plan vested for Steve Mogford following a holding period. 152,768 shares vested,
of which 68,918 shares were sold to cover tax and National Insurance. Steve retained the remaining balance of 83,850 shares.
Other information
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 2023 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
117
107
144
149
113
107
167
133
151
143
133
126
188
142
176
117
239
235
174
165
3,500
3,000
2,500
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
l
g
n
i
s
O
E
C
2014
2015
2016
2017
2018
2019
2020 2021
2022
2023
Year ended 31 March
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
CEO single figure of
remuneration (£’000)
Annual bonus payment
(% of maximum)
LTP vesting (% of maximum)(4)
2,378
2,884
2,760(1) 2,233
2,221
2,448
2,925
3,381(2)
3,211(3) 2,283
78.2
93.5
77.4
97.5
54.5
33.6
83.7
54.5
74.9
55.4
79.0
64.4
70.7
87.3
81.8
97.9
71.3
41.4
100(3)
68.8(5)
(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 2018 LTP, which vested on 1 April 2023 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 1,060 pence per share.
U
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1
M
a
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2
0
2
3
Key
CEO single
250
figure of
remuneration
(£000)
United
Utilities
Group
PLC
FTSE
100
Index
£
e
u
l
a
V
300
200
150
100
50
0
190
unitedutilities.com/corporate
Stock code: UU.
191
Corporate governance report
5 Remuneration
Annual report on remuneration continued
Non-executive directors’ shareholdings (audited information)
Details of beneficial interests in the company’s ordinary shares as at 31 March 2023 held by each of the non-executive directors and their
connected persons are set out in the table below.
Non-executive directors
Sir David Higgins
Liam Butterworth
Stephen Carter(2)
Kath Cates
Mark Clare(2)
Alison Goligher
Paulette Rowe
Doug Webb
Date first appointed
to the board
13.5.19
Number of shares owned
outright (including connected
persons) at
31 March 2023(1)
3,000
1.1.22
1.9.14
1.9.20
1.11.13
1.8.16
1.7.17
1.9.20
3,000
3,075
2,135
7,628
6,000
3,000
10,200
(1) From 1 April 2023 to 24 May 2023 there have been no movements in the shareholdings of the non-executive directors.
(2) Stephen Carter and Mark Clare had 3,075 and 7,628 shares respectively when they stepped down from the board on 22 July 2022.
Change in board member and colleague remuneration
Year ended 31 March
Executive directors
Steve Mogford
Louise Beardmore(1)
Phil Aspin
Non-executive directors(3)
Sir David Higgins
Liam Butterworth
Stephen Carter
Kath Cates
Mark Clare
Alison Goligher
Paulette Rowe
Doug Webb
All colleagues
Salary/total fees %
Benefits %
Bonus %
2023
versus
2022
2022
versus
2021
2021
versus
2020
2023
versus
2022
2022
versus
2021
2021
versus
2020
2023
versus
2022
2022
versus
2021
2021
versus
2020
0.8
n/a
3.6
2.6
2.6(2)
2.5(2)
16.5(4)
2.5(2)
2.5
15.0(6)
8.8(7)
6.6
6.5
n/a
1.2
6.5
n/a
6.3
6.5
6.3
11.5(5)
6.5
23.6
3.7
(4.2)
n/a
n/a
111.1
n/a
(4.4)
n/a
(4.4)
9.4
(4.2)
n/a
4.1
14.0
n/a
(6.3)
(23.9)
n/a
67.3
(55.6)
1,555.9
n/a
123.6
(59.4)
166.3
(100.0)
(23.7)
(55.7)
4.1
n/a
1,556.3
1,555.9
1,555.9
708.6
782.1
1,418.0
5.0
(14.1)
n/a
n/a
(96.6)
n/a
(93.0)
n/a
(96.6)
(81.0)
(95.2)
n/a
6.9
(41.4)
n/a
(50.1)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(27.3)
(11.8)
n/a
6.4
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11.6
16.7
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
13.6
(1) Louise Beardmore was appointed to the board on 5 May 2022 so no year-on-year comparison is possible.
(2) Liam Butterworth joined the board on 1 January 2022. Stephen Carter and Mark Clare both stepped down from the board on 22 July 2022. To enable a
meaningful year-on-year comparison their salary/fees reflect hypothetical full-year earnings in 2021/22 and 2022/23 respectively.
(3) Calculated using the fees and taxable benefits shown in the table on page 191.
(4) The fee increase for Kath Cates reflects her appointment as remuneration committee chair with the associated fee effective from 22 July 2022.
(5) The fee increase for Alison Goligher reflects her appointment as remuneration committee chair with the associated fee effective from 24 July 2020.
Alison stepped down as remuneration committee chair and became the senior independent NED with the associated fee effective from 22 July 2022.
(6) The fee increase for Paulette Rowe reflects her appointment as ESG committee chair with the associated fee effective from 22 July 2022.
(7) The fee increase for Doug Webb reflects his role as chair of audit and treasury committees for the full year, whereas in the prior year he was only chair for
part of the year and so did not receive an additional fee.
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1
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a
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2
0
2
3
192
unitedutilities.com/corporate
Corporate governance report
5 Remuneration
Annual report on remuneration continued
Non-executive directors’ shareholdings (audited information)
Details of beneficial interests in the company’s ordinary shares as at 31 March 2023 held by each of the non-executive directors and their
connected persons are set out in the table below.
Date first appointed
to the board
Number of shares owned
outright (including connected
persons) at
31 March 2023(1)
13.5.19
1.1.22
1.9.14
1.9.20
1.11.13
1.8.16
1.7.17
1.9.20
3,000
3,000
3,075
2,135
7,628
6,000
3,000
10,200
Non-executive directors
Sir David Higgins
Liam Butterworth
Stephen Carter(2)
Kath Cates
Mark Clare(2)
Alison Goligher
Paulette Rowe
Doug Webb
Year ended 31 March
Executive directors
Steve Mogford
Louise Beardmore(1)
Phil Aspin
Non-executive directors(3)
Sir David Higgins
Liam Butterworth
Stephen Carter
Kath Cates
Mark Clare
Alison Goligher
Paulette Rowe
Doug Webb
All colleagues
U
n
i
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d
U
t
i
l
i
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s
G
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o
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P
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e
g
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a
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d
A
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F
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S
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3
1
M
a
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2
0
2
3
(1) From 1 April 2023 to 24 May 2023 there have been no movements in the shareholdings of the non-executive directors.
(2) Stephen Carter and Mark Clare had 3,075 and 7,628 shares respectively when they stepped down from the board on 22 July 2022.
Change in board member and colleague remuneration
Salary/total fees %
Benefits %
Bonus %
2023
versus
2022
2022
versus
2021
2021
versus
2020
2023
versus
2022
2022
versus
2021
2021
versus
2020
2023
versus
2022
2022
versus
2021
2021
versus
2020
0.8
n/a
3.6
2.6
2.6(2)
2.5(2)
16.5(4)
2.5(2)
2.5
15.0(6)
8.8(7)
6.6
6.5
n/a
1.2
6.5
n/a
6.3
6.5
6.3
11.5(5)
6.5
23.6
3.7
(4.2)
n/a
n/a
111.1
n/a
(4.4)
n/a
(4.4)
9.4
(4.2)
n/a
4.1
14.0
n/a
(6.3)
(23.9)
n/a
67.3
(55.6)
1,555.9
n/a
123.6
(59.4)
166.3
(100.0)
(23.7)
(55.7)
4.1
n/a
1,556.3
1,555.9
1,555.9
708.6
782.1
1,418.0
5.0
(14.1)
n/a
n/a
(96.6)
n/a
(93.0)
n/a
(96.6)
(81.0)
(95.2)
n/a
6.9
(41.4)
n/a
(50.1)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(27.3)
(11.8)
n/a
6.4
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11.6
16.7
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
13.6
(1) Louise Beardmore was appointed to the board on 5 May 2022 so no year-on-year comparison is possible.
(2) Liam Butterworth joined the board on 1 January 2022. Stephen Carter and Mark Clare both stepped down from the board on 22 July 2022. To enable a
meaningful year-on-year comparison their salary/fees reflect hypothetical full-year earnings in 2021/22 and 2022/23 respectively.
(3) Calculated using the fees and taxable benefits shown in the table on page 191.
(4) The fee increase for Kath Cates reflects her appointment as remuneration committee chair with the associated fee effective from 22 July 2022.
(5) The fee increase for Alison Goligher reflects her appointment as remuneration committee chair with the associated fee effective from 24 July 2020.
Alison stepped down as remuneration committee chair and became the senior independent NED with the associated fee effective from 22 July 2022.
(6) The fee increase for Paulette Rowe reflects her appointment as ESG committee chair with the associated fee effective from 22 July 2022.
(7) The fee increase for Doug Webb reflects his role as chair of audit and treasury committees for the full year, whereas in the prior year he was only chair for
part of the year and so did not receive an additional fee.
The remuneration committee
Composition of the remuneration committee during the year ended 31 March 2023
Member
Kath Cates (chair since 22.7.22)
Alison Goligher (chair until 22.7.22)
Mark Clare (until 22.7.22)
Doug Webb
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1.9.20
1.8.16
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 four times in the year ended 31 March 2023 and carried out a number of key activities:
• Approved the 2021/22 directors’ remuneration report;
• Reviewed the executive pay arrangements and consulted with shareholders and other stakeholders on the proposed directors’
remuneration policy;
• Wrote to major shareholders following the publication of the company’s 2022 annual report and reviewed the feedback received;
• Reviewed the pay comparator group;
• Determined the remuneration arrangements for Steve Mogford related to his retirement, and Louise Beardmore on her appointment
as CEO;
• Determined the remuneration arrangements for departing and new executives falling under the remit of the committee;
• 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 2021/22 annual bonus scheme, set the targets for the 2022/23 annual bonus scheme and
reviewed progress against the targets;
• Assessed the achievement of targets for the Long Term Plan (LTP) awards made in 2019, reviewed progress against the targets for the
2020 and 2021 LTP awards, and set the measures and targets for the 2022 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; and
• Noted progress on the company’s gender pay gap reporting.
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Annual report on remuneration continued
Support to the remuneration committee
By invitation of the committee, meetings are attended by the Chair, the CEO, the company secretary (who acts as secretary to the
committee), the 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 colleagues 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 2023
Additional services
provided
in year ended
31 March 2023
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; advice
on the company’s
share schemes; and
assurance work on the
remuneration report for
the audit committee
Fees paid by company
for services to
the remuneration
committee and basis
of charge
£52,000 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 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.
2022 AGM: Statement of voting
At the last annual general meeting on 22 July 2022, votes on the resolutions to approve the remuneration policy and annual report on
remuneration were cast as follows:
Resolution
Approval of the directors’ remuneration policy
Approval of the directors’ remuneration report
(other than the part containing the directors’ remuneration policy)
The directors’ remuneration report was approved by the board
of directors on 24 May 2023 and signed on its behalf by:
Kath Cates
Chair of the remuneration committee
Votes for Votes against
498,652,274
(99.02%)
465,131,664
(93.94%)
4,941,551
(0.98%)
30,016,180
(6.06%)
Votes
withheld
(abstentions)
Total
votes cast
203,755
503,593,825
8,649,736
495,147,844
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5 Remuneration
Annual report on remuneration continued
Support to the remuneration committee
By invitation of the committee, meetings are attended by the Chair, the CEO, the company secretary (who acts as secretary to the
committee), the 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 colleagues 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
Services provided
to the committee
in year ended
31 March 2023
provided
in year ended
31 March 2023
Additional services
for services to
Fees paid by company
the remuneration
committee and basis
of charge
£52,000 on a time/cost
basis as set out in terms
2021; services
remuneration matters
benchmarking on
retained during the
including analysis of the
non-executive director
and conditions in the
financial year
remuneration policy and
and senior leader
relevant engagement
regular market and best
remuneration; advice
letter
practice updates
on the company’s
share schemes; and
assurance work on the
remuneration report for
the audit committee
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 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.
2022 AGM: Statement of voting
remuneration were cast as follows:
Resolution
Approval of the directors’ remuneration policy
Approval of the directors’ remuneration report
(other than the part containing the directors’ remuneration policy)
498,652,274
(99.02%)
465,131,664
(93.94%)
4,941,551
(0.98%)
30,016,180
(6.06%)
Votes for Votes against
(abstentions)
votes cast
Votes
withheld
Total
203,755
503,593,825
8,649,736
495,147,844
The directors’ remuneration report was approved by the board
of directors on 24 May 2023 and signed on its behalf by:
Kath Cates
Chair of the remuneration committee
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Appendix 1: Directors’ remuneration policy (abridged)
Directors’ remuneration policy
The appendix to the directors’ remuneration report sets out an abridged version of the directors’ remuneration policy for the company,
which was approved by shareholders at the AGM on 22 July 2022. The policy took effect from the date of approval and will be reviewed
and renewed no later than the 2025 AGM.
In the interests of clarity, this abridged report includes some minor annotations to show, where appropriate, how the policy will be
implemented in 2023/24. A full version of the shareholder approved policy can be found in the annual report and financial statements for
the year ended 31 March 2022.
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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 colleague views when consulting on the policy, typically via the colleague voice panel. Additionally, the company
carries out annual colleague engagement surveys and regular discussion takes place with union representatives on matters of pay and
remuneration for colleagues covered by collective bargaining or consultation arrangements, all of which can provide insight that is of
value to the committee. The general base salary increase and broader remuneration arrangements, including pension provision, for the
wider colleague population are considered by the committee when determining remuneration policy for the executive directors. As
outlined on page 187 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 ‘colleague voice’.
Policy table for directors
Base salary
At the last annual general meeting on 22 July 2022, votes on the resolutions to approve the remuneration policy and annual report on
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).
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.
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.
Performance measures
None.
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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
The maximum opportunity is aligned to the approach available to
the wider workforce, currently:
pension scheme;
• up to 14 per cent of salary into a defined contribution scheme;
• a cash allowance in lieu of pension; or
• cash allowance of broadly equivalent cost to the company
• a combination of a company contribution into a defined
contribution pension scheme and a cash allowance.
(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 2023/24); 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 was payable until
31 December 2022. From 1 January 2023 arrangements for such
executive directors were 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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Pension
Operation
Purpose and link to strategy: To provide a level of benefits that allow for personal retirement planning.
Executive directors are offered the choice of:
The maximum opportunity is aligned to the approach available to
• a company contribution into a defined contribution
pension scheme;
• up to 14 per cent of salary into a defined contribution scheme;
• a cash allowance in lieu of pension; or
• cash allowance of broadly equivalent cost to the company
Maximum opportunity
the wider workforce, currently:
• a combination of a company contribution into a defined
contribution pension scheme and a cash allowance.
(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 2023/24); 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 was payable until
31 December 2022. From 1 January 2023 arrangements for such
executive directors were 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.
Purpose and link to strategy: To provide market competitive benefits to help recruit and retain high-calibre executives.
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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.
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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.
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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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 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 colleague 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.
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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 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 colleague 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.
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 cost to the company.
Performance measures
Non-executive directors are not eligible to participate in any
performance-related arrangements.
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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 and Long Term Plan (LTP) are given in the annual
report on remuneration.
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.
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Stock code: UU.
199
5
Corporate governance report
Remuneration
Appendix 1: Directors’ remuneration policy (abridged) continued
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 colleagues;
• colleagues at all levels participate in a bonus scheme with the same corporate performance measures as for executive directors; and
• all colleagues 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 illustrative pay-outs under the remuneration policy for each current executive director under four
different scenarios.
Louise Beardmore CEO
£’000s
1)
2)
3)
4)
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Fixed
Target
100%
792
46.9% 26.5% 26.5% 1,689
Maximum
30.6%
34.7%
34.7%
2,586
Maximum plus
50% share
price growth
26.1%
29.6%
29.6%
14.8%
14.7%3,035
0
500
1,000
1,500
2,000
2,500
3,000
3,500
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Phil Aspin CFO
£’000s
1)
2)
3)
4)
Fixed
Target
Maximum
Maximum plus
50% share
price growth
100%
499
47.3%
26.3% 26.3% 1,054
31.0%
34.5%
34.5%
1,610
26.5%
29.4%
29.4%
14.7% 1,888
0
500
1,000
1,500
2,000
Fixed
Annual bonus
Long Term Plan
Additional Long Term Plan value if share price
grows by 50 per cent
Notes on the scenario methodology:
•
•
•
•
‘Fixed’ is base salary effective 1 April 2023 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 2022/23;
‘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-colleague share schemes
have, for simplicity, been excluded from the charts.
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5
Corporate governance report
Remuneration
Appendix 1: Directors’ remuneration policy (abridged) continued
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 colleagues;
• colleagues at all levels participate in a bonus scheme with the same corporate performance measures as for executive directors; and
• all colleagues 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
The charts below show the illustrative pay-outs under the remuneration policy for each current executive director under four
share-based remuneration.
Scenarios for total remuneration
different scenarios.
Louise Beardmore CEO
£’000s
100%
792
Fixed
Target
46.9% 26.5% 26.5% 1,689
Maximum
30.6%
34.7%
34.7%
2,586
26.1%
29.6%
29.6%
14.8%
14.7%3,035
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Notes on the scenario methodology:
•
‘Fixed’ is base salary effective 1 April 2023 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 2022/23;
•
‘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-colleague share schemes
have, for simplicity, been excluded from the charts.
100%
499
47.3%
26.3% 26.3% 1,054
31.0%
34.5%
34.5%
1,610
26.5%
29.4%
29.4%
14.7% 1,888
0
500
1,000
1,500
2,000
Fixed
Annual bonus
Long Term Plan
Additional Long Term Plan value if share price
grows by 50 per cent
1)
2)
3)
1)
2)
3)
4)
Maximum plus
50% share
price growth
Phil Aspin CFO
£’000s
Fixed
Target
Maximum
4)
Maximum plus
50% share
price growth
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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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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
Louise Beardmore
Phil Aspin
Date of current
service contract
1.4.23
24.7.20
Approach to recruitment remuneration
The remuneration package for a new executive director would be set in accordance with the terms of the company’s approved directors’
remuneration policy in force at the time of appointment. Full details about our approach to recruitment remuneration is set out in the
2022 annual report.
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 colleagues may be phased to mitigate loss. Full details of the approach to payment for loss of office
and change of control is set out in the 2022 annual report.
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201
Corporate governance report
5 Remuneration
Appendix 2: Executive directors’ share plan interests
1 April 2022 to 31 March 2023 (audited information)
Awards held
at 1 April
2022
Award date
Granted in
year
Vested
in year
Lapsed/
forfeited in
year
Notional
dividends
accrued in
year(1)
Awards held
at 31 March
2023(1)
Steve Mogford
–
34,782
Shares not subject to performance conditions at 31 March 2023
DBP
53,659
17.6.19
DBP
DBP
DBP(2)
LTP
LTP
LTP
16.6.20
16.6.21
16.6.22
27.6.17
25.6.18
28.6.19
ShareBuy matching
shares(3)
Subtotal
1.4.22 to 31.3.23
42,199
41,601
110,948
146,718
138,222
35
533,382
Shares subject to performance conditions at 31 March 2023
LTP
LTP
LTP(4)
Subtotal
TOTAL
30.11.20
30.6.21
29.7.22
118,399
106,682
–
225,081
758,463
–
–
–
–
–
–
34
34,816
–
–
95,909
95,909
130,725
Louise Beardmore
Shares not subject to performance conditions at 31 March 2023
DBP
DBP
DBP(2)
LTP
16.6.20
16.6.21
16.6.22
28.6.19
ShareBuy matching
shares(3)
Subtotal
1.4.22 to 31.3.23
8,261
8,175
–
22,031
34
38,501
Shares subject to performance conditions at 31 March 2023
LTP
LTP
LTP(4)
Subtotal
TOTAL
30.11.20
30.6.21
29.7.22
23,027
20,748
–
43,775
82,276
–
–
8,696
–
35
8,731
–
–
51,551
51,551
60,282
53,659
–
–
–
110,948
–
–
35
164,642
–
–
–
–
164,642
–
–
–
22,613
34
22,647
–
–
–
–
22,647
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,739
1,715
1,434
–
6,050
5,700
–
43,938
43,316
36,216
–
152,768
143,922
–
34
16,638
420,194
4,882
4,399
1,383
10,664
27,302
340
337
357
582
–
1,616
948
855
743
2,546
4,162
123,281
111,081
97,292
331,654
751,848
8,601
8,512
9,053
–
35
26,201
23,975
21,603
52,294
97,872
124,073
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Corporate governance report
5 Remuneration
Appendix 2: Executive directors’ share plan interests
1 April 2022 to 31 March 2023 (audited information)
Awards held
at 1 April
Granted in
Award date
2022
year
Vested
in year
Lapsed/
dividends
Awards held
forfeited in
accrued in
at 31 March
year
year(1)
2023(1)
Notional
Steve Mogford
Shares not subject to performance conditions at 31 March 2023
ShareBuy matching
1.4.22 to 31.3.23
Shares subject to performance conditions at 31 March 2023
34
34,816
35
164,642
–
34
16,638
420,194
DBP
DBP
DBP
DBP(2)
LTP
LTP
LTP
shares(3)
Subtotal
LTP
LTP
LTP(4)
Subtotal
TOTAL
DBP
DBP
DBP(2)
LTP
shares(3)
Subtotal
LTP
LTP
LTP(4)
Subtotal
TOTAL
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S
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17.6.19
16.6.20
16.6.21
16.6.22
27.6.17
25.6.18
28.6.19
30.11.20
30.6.21
29.7.22
16.6.20
16.6.21
16.6.22
28.6.19
30.11.20
30.6.21
29.7.22
–
34,782
53,659
42,199
41,601
110,948
146,718
138,222
35
533,382
118,399
106,682
–
225,081
758,463
8,261
8,175
–
22,031
34
38,501
23,027
20,748
–
43,775
82,276
–
–
–
–
–
–
–
–
95,909
95,909
130,725
8,696
35
8,731
–
–
–
–
–
51,551
51,551
60,282
53,659
110,948
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
164,642
22,613
34
22,647
22,647
Louise Beardmore
Shares not subject to performance conditions at 31 March 2023
ShareBuy matching
1.4.22 to 31.3.23
Shares subject to performance conditions at 31 March 2023
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,739
1,715
1,434
–
6,050
5,700
4,882
4,399
1,383
10,664
27,302
340
337
357
582
–
1,616
948
855
743
2,546
4,162
43,938
43,316
36,216
–
–
152,768
143,922
123,281
111,081
97,292
331,654
751,848
8,601
8,512
9,053
–
35
26,201
23,975
21,603
52,294
97,872
124,073
Awards held
at 1 April
2022
Awards
Granted in
year
Vested
in year
Lapsed/
forfeited in
year
Award date
Notional
dividends
accrued in
year(1)
Awards held
at 31 March
2023(1)
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Phil Aspin
Shares not subject to performance conditions at 31 March 2023
DBP
16.6.20
4,430
DBP
DBP(2)
LTP
16.6.21
16.6.22
28.6.19
ShareBuy matching
shares(3)
Subtotal
1.4.22 to 31.3.23
16,902
–
10,597
35
31,964
Shares subject to performance conditions at 31 March 2023
LTP
LTP
LTP(4)
Subtotal
TOTAL
30.11.20
30.6.21
29.7.22
61,094
55,047
–
116,141
148,105
–
–
21,651
–
34
21,685
–
–
49,489
49,489
71,174
–
–
–
10,877
35
10,912
–
–
–
–
10,912
–
–
–
–
–
–
–
–
–
–
–
182
696
892
280
–
2,050
2,519
2,270
713
5,502
7,552
4,612
17,598
22,543
–
34
44,787
63,613
57,317
50,202
171,132
215,919
(1) Note that these are subject to performance conditions where applicable.
(2) See page 180 for further details.
(3) Under ShareBuy, matching shares vest provided the colleague remains employed by the company one year after grant. During the year, Steve Mogford
purchased 173 partnership shares and was awarded 34 matching shares (at an average share price of 1,039.6 pence per share). Louise Beardmore
purchased 173 partnership shares and was awarded 35 matching shares (at an average share price of 1,041.1 pence per share). Phil Aspin purchased 173
partnership shares and was awarded 34 matching shares (at an average share price of 1,039.5 pence per share).
(4) See page 183 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 2022, 70,046 shares arising from his 2017 LTP vested, on 1 August 2022, 74,073 shares arising
from his 2018 LTP vested and, on 28 October 2022, 39,894 shares arising from his 2019 LTP vested. On 17 June 2022, 33,689 shares
arising from his 2019 DBP vested.
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 2023.
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203
ESG committee
Paulette Rowe
Chair of the ESG committee
Quick facts
• The committee comprises four directors appointed by
the board, three of whom are independent non-executive
directors.
• The company secretary, the corporate affairs director, the
people director, and the investor relations and clean energy
strategy 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.
• A committee, with power delegated to if from the board in
relation to environmental, social and governance matters,
has been in operation for over fifteen years.
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 my first report on the
activities of the ESG committee in 2022/23.
United Utilities has operated a board committee with
a clear remit on responsible business strategy and
delivery for over fifteen years. Each year the committee
evaluates its approach to ensure the appropriate
governance is in place.
The focus on environmental, social and governance
(ESG) matters has continued to grow and, reflecting
that trend, the committee agreed to change its name
to the ESG committee. While this does not change its
terms of reference, it will help demonstrate to external
stakeholders, keen to understand how the company
performs on ESG, that board level governance is in
place. In addition to changing its name, the committee
agreed to strengthen board training on climate change
over the coming year.
The committee continued to consider a broad range
of ESG topics but two issues have dominated its
agenda from a reputational and responsible business
perspective, namely storm overflows (and their impact
on river water quality) and the cost of living.
Prioritising storm overflows
Over the course of the year, the committee reviewed
the company’s approach to storm overflows and is
encouraged that there is an ambitious plan to address
the issue. Because of the particular challenges in the
North West – a high percentage of combined sewer
systems (that collect both rain and wastewater) and
more incidents of heavy downpours sending greater
volumes of rainwater into our sewers – this will amount
to one of the largest environmental improvement
programmes of its kind in the country and the
committee will continue to track progress.
Efforts to engage with stakeholders on overflows is
delivering positive outcomes. The committee felt that
the creation of the Love Windermere partnership to
bring about a science-based plan to improve the lake’s
water quality is a potential model of best practice.
ESG committee members:
Paulette Rowe
Chair of the ESG committee
Steve Mogford
(until 31 March 2023)
Alison Goligher
Liam Butterworth
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Quick links
Terms of reference:
unitedutilities.com/corporate-governance
204
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unitedutilities.com/corporate
Louise Beardmore
(from 31 March 2023)
ESG committee
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Paulette Rowe
Chair of the ESG committee
Quick facts
directors.
• The committee comprises four directors appointed by
the board, three of whom are independent non-executive
• The company secretary, the corporate affairs director, the
people director, and the investor relations and clean energy
strategy 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.
• A committee, with power delegated to if from the board in
relation to environmental, social and governance matters,
has been in operation for over fifteen years.
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 my first report on the
activities of the ESG committee in 2022/23.
United Utilities has operated a board committee with
a clear remit on responsible business strategy and
delivery for over fifteen years. Each year the committee
evaluates its approach to ensure the appropriate
governance is in place.
The focus on environmental, social and governance
(ESG) matters has continued to grow and, reflecting
that trend, the committee agreed to change its name
to the ESG committee. While this does not change its
terms of reference, it will help demonstrate to external
stakeholders, keen to understand how the company
performs on ESG, that board level governance is in
place. In addition to changing its name, the committee
agreed to strengthen board training on climate change
over the coming year.
The committee continued to consider a broad range
of ESG topics but two issues have dominated its
agenda from a reputational and responsible business
perspective, namely storm overflows (and their impact
on river water quality) and the cost of living.
Prioritising storm overflows
Over the course of the year, the committee reviewed
the company’s approach to storm overflows and is
encouraged that there is an ambitious plan to address
the issue. Because of the particular challenges in the
North West – a high percentage of combined sewer
systems (that collect both rain and wastewater) and
more incidents of heavy downpours sending greater
volumes of rainwater into our sewers – this will amount
to one of the largest environmental improvement
programmes of its kind in the country and the
committee will continue to track progress.
Efforts to engage with stakeholders on overflows is
delivering positive outcomes. The committee felt that
the creation of the Love Windermere partnership to
bring about a science-based plan to improve the lake’s
water quality is a potential model of best practice.
ESG committee members:
Paulette Rowe
Steve Mogford
Chair of the ESG committee
(until 31 March 2023)
Alison Goligher
Liam Butterworth
Quick links
Terms of reference:
unitedutilities.com/corporate-governance
Louise Beardmore
(from 31 March 2023)
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Read more
about how our
purpose links to
ESG on page 02
Read more
about how we
are working
with others
to improve
river health on
page 90
The announcement that the company will bring
forward investment totalling £914 million ahead of
AMP8 was especially encouraging.
panel, bringing the views and opinions of colleagues
directly to the board table, as well reviewing the
annual gender pay report.
Regular updates to the committee have focused on
delivery of the company’s commitments under its
Better Rivers: Better North West programme. While
many of these require working with others to deliver
improvements, the committee welcomed how the
company has responded to customer feedback about
its Better Rivers plan, to report first on the actions
United Utilities is taking to improve river health.
Improving river water quality presents a challenge
to the entire sector so cross industry collaboration
is important. We were pleased that the company
hosted the sector’s first Pollution Summit to share
best practice on measures being taken by all water
companies to reduce the frequency of pollution events.
Sector body Water UK was present at the summit,
reinforcing that collective action is now seen as an
essential step in regaining public trust.
Committee members welcomed efforts by the company
to engage with stakeholders on other environmental
topics and were encouraged by the broad attendance
from the region’s environmental organisations at the
company’s first Environmental AGM. This provided
an opportunity to discuss the company’s recent
performance on topics such as climate change,
pollution, water use and biodiversity with the region’s
leading environmental representatives.
Supporting customers and colleagues
From a social perspective, cost of living pressures
have dominated headlines with utility and other
bills and household expenses rising with inflationary
pressures. For some time, the committee has focused
on affordability and vulnerability given the North West
has some of the most deprived neighbourhoods in the
country. During the year, progress on support schemes,
such as payment breaks and help to pay, as well as
the vital support provided by the United Utilities Trust
Fund, has been presented to the committee and it will
continue to scrutinise the company’s approach on this
important topic.
The committee scrutinised several items relating to
equity, diversity and inclusion (ED&I), in particular the
proposed measures for monitoring ED&I. We received
regular reports on the work of the Colleague Voice
A new style report
In recent years, the committee has recognised growing
interest in ESG from the investor community with
increased expectations on companies to disclose
ESG data and demonstrate action on ESG topics. It
noted the trend to consolidate ESG reporting across
international reporting standards. To ensure that
the company’s ESG performance is readily available
to stakeholders and, in particular, investors, the
committee reviewed plans to enhance engagement
through a dedicated sustainability report and direct
engagement with specific investors.
Evidencing that the company is delivering on its
responsible business goals is reviewed twice yearly
by the committee. These measures and targets are
aligned to ESG and form part of the performance
section of this report (see pages 84 to 111). 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.
As I look to the coming year, the committee will focus
on specific topics that we judge to be especially
important to the overall ESG agenda. These include
affordability, carbon and renewables, people, diversity
and inclusion, river water quality and reputation.
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.
Finally, I’d like to thank Stephen Carter for his
contribution to the work of the committee after
he stood down from the board and as chair of the
committee. Similar thanks are extended to Steve
Mogford who was a member of the committee for his
entire tenure as chief executive. I am grateful to both
of them for bringing to the committee their expert
perspectives and wise counsel on responsible business
and reputation.
Paulette Rowe
Chair of the ESG committee
Main responsibilities
The committee approved a slightly modified set of terms of
reference in March 2023. Its main duties are to:
• consider and recommend to the board the broad approach
to environmental, social and governance matters taking into
account the company’s desired ESG positioning;
• keep under review the group’s approach to environmental,
social and governance matters and ensure it is aligned with
the group strategy including the company purpose, strategy
and values;
•
review environmental, social and governance 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 of the group’s corporate
responsibility activities toward protecting and enhancing
its reputation;
• monitor and review compliance with the board’s approach to
environmental, social and governance matters and scrutinise
the effectiveness of the delivery of the ESG commitments;
• develop and recommend to the board ESG targets and key
performance indicators and receive and review reports
on progress towards the achievement of such targets and
indicators; 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.
204
204
unitedutilities.com/corporate
Stock code: UU.
Stock code: UU.
205
205
ESG committee
Read more about
our TCFD
disclosures on
page 05
Read more about
Colleague Voice
on page 136
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The committee’s agenda during the year:
Environmental
Update on carbon strategy and progress
The committee was updated on the company’s
carbon strategy and reviewed the latest investor
and stakeholder expectations for clear and formal
responsibilities on climate change and wider
environmental, social and governance (ESG) matters
at the board. It requested regular updates on climate
change mitigation and adaption, noting that this
activity would be reflected prominently in the
Integrated Annual Report and Financial Statements,
and on the company website. The committee asked
that an update on the carbon impact of PR24 be
brought to a future meeting.
Better Rivers: Better North West update
An update was given to the committee on progress in
delivering the company’s Better Rivers: Better North
West engagement pledges:
1.
2.
3.
4.
‘Ensuring our operations progressively reduce
impact to river health’;
‘Being open and transparent about our
performance and our plans’;
‘Making rivers beautiful and supporting others to
improve and care for them’; and
‘Creating more opportunities for everyone to enjoy
rivers and waterways’.
Details on important collaborations with organisations
such as The Rivers Trust and Greater Manchester
Combined Authority were shared with the committee,
reflecting the importance placed on working with others
to reduce the amount of rainfall running into sewers.
Tackling the impact of storm overflows is a high profile
reputational challenge and the committee encouraged
the company to craft messages to cut through to
specific audiences, to acknowledge that the current
system needs to change and to highlight the important
role to be played by regulators.
PR24 and natural capital
The committee discussed the company’s approach
to natural capital, noting that good progress had
been made in several areas including the addition of
natural capital within decision making tools and the
development of a methodology to use natural capital
data to inform and influence the AMP8 WINEP. It
welcomed the rising profile of nature based solutions
for projects, especially where they are the lowest
whole-life cost. The committee was encouraged by the
approach and recognised the importance of effective
collaboration on the issue, with partnerships exploring
how to implement catchment system operation.
Clean air update
An update on the company’s clean air action plan was
presented to the committee. It welcomed the decision to
become a signatory to the Business for Clean Air initiative
and that investment to address the requirements of
the Industrial Emissions Directive had been included in
the current business plan. Ahead of setting targets, the
committee recognised that further monitoring is needed
to fully understand air pollutant emissions to create a
robust baseline and enable scenario testing to prioritise
activities to reduce air pollution.
Social
Affordability and vulnerability
Given the high levels of social and economic
deprivation in the North West, this is a standing item
for the committee which received two updates on how
the company is assisting customers on low incomes.
In light of cost living pressures, the committee noted
several actions by the company including increased
efforts to support customer bill payments, the use of
data to identify customers showing signs of struggling
to pay and supplementary campaigns.
Smart metering strategy
The smart meeting strategy was presented setting out
the company’s approach to increase meter penetration
for AMPs 8 and 9, building on a trial currently underway
in Greater Manchester. Members suggested that
a clearer articulation of the benefits to individual
customers would be helpful and noted that an Ofwat
consultation on tariffs provided an opportunity to
explore new approaches.
Gender pay report
Members commented on the draft gender pay report
and welcomed continued focus and reporting against
the company’s action plan, part of its wider diversity
and inclusion strategy. Following a diversity audit by
the Clear Company, the committee supported the
planned refresh of actions identified through the audit.
Reports and innovation from others in the sector and
across industry would be reviewed to identify areas
for improvement.
Equity, diversity and inclusion
The committee discussed the proposed measures for
monitoring equity, diversity and inclusion. It suggested
that focus should be on diversity on the board, rather
than women on the board, and encouraged reporting
of ethnicity trends at all levels.
Approach to education
The committee endorsed the review of the company’s
approach to education with greater alignment to its
core purpose. Whilst the schools’ education programme
is a key part of the company’s educational activities, it
was noted that many other initiatives take place such as
apprentice and graduate schemes. Members encouraged
the company to consider other operating options and to
ensure close alignment with the school curriculum.
Access and recreation strategy
An update on the company’s approach to access
and recreation was presented to the committee. The
consequences of the pandemic through increased
visitor numbers and issues of anti-social behaviour were
discussed along with the implementation of measures at
several sites, discussed with community representatives,
to stabilise the situation. Topics such as open water
swimming and reservoir safety were explored alongside
opportunities to further connect with customers through
access and recreation.
206
unitedutilities.com/corporate
ESG committee
Read more about
our TCFD
disclosures on
page 05
Read more about
Colleague Voice
on page 136
The committee’s agenda during the year:
Social
4.
‘Creating more opportunities for everyone to enjoy
planned refresh of actions identified through the audit.
Environmental
Update on carbon strategy and progress
The committee was updated on the company’s
carbon strategy and reviewed the latest investor
and stakeholder expectations for clear and formal
responsibilities on climate change and wider
environmental, social and governance (ESG) matters
at the board. It requested regular updates on climate
change mitigation and adaption, noting that this
activity would be reflected prominently in the
Integrated Annual Report and Financial Statements,
and on the company website. The committee asked
that an update on the carbon impact of PR24 be
brought to a future meeting.
Better Rivers: Better North West update
An update was given to the committee on progress in
delivering the company’s Better Rivers: Better North
West engagement pledges:
1.
‘Ensuring our operations progressively reduce
impact to river health’;
2.
‘Being open and transparent about our
performance and our plans’;
3.
‘Making rivers beautiful and supporting others to
improve and care for them’; and
rivers and waterways’.
Details on important collaborations with organisations
such as The Rivers Trust and Greater Manchester
Combined Authority were shared with the committee,
reflecting the importance placed on working with others
to reduce the amount of rainfall running into sewers.
Tackling the impact of storm overflows is a high profile
reputational challenge and the committee encouraged
the company to craft messages to cut through to
specific audiences, to acknowledge that the current
role to be played by regulators.
PR24 and natural capital
The committee discussed the company’s approach
to natural capital, noting that good progress had
been made in several areas including the addition of
natural capital within decision making tools and the
development of a methodology to use natural capital
data to inform and influence the AMP8 WINEP. It
welcomed the rising profile of nature based solutions
for projects, especially where they are the lowest
whole-life cost. The committee was encouraged by the
approach and recognised the importance of effective
collaboration on the issue, with partnerships exploring
how to implement catchment system operation.
Clean air update
An update on the company’s clean air action plan was
presented to the committee. It welcomed the decision to
become a signatory to the Business for Clean Air initiative
and that investment to address the requirements of
the Industrial Emissions Directive had been included in
the current business plan. Ahead of setting targets, the
committee recognised that further monitoring is needed
to fully understand air pollutant emissions to create a
robust baseline and enable scenario testing to prioritise
activities to reduce air pollution.
Affordability and vulnerability
Given the high levels of social and economic
deprivation in the North West, this is a standing item
for the committee which received two updates on how
the company is assisting customers on low incomes.
In light of cost living pressures, the committee noted
several actions by the company including increased
efforts to support customer bill payments, the use of
data to identify customers showing signs of struggling
to pay and supplementary campaigns.
Smart metering strategy
The smart meeting strategy was presented setting out
the company’s approach to increase meter penetration
for AMPs 8 and 9, building on a trial currently underway
in Greater Manchester. Members suggested that
a clearer articulation of the benefits to individual
customers would be helpful and noted that an Ofwat
consultation on tariffs provided an opportunity to
explore new approaches.
Gender pay report
Members commented on the draft gender pay report
and welcomed continued focus and reporting against
the company’s action plan, part of its wider diversity
and inclusion strategy. Following a diversity audit by
the Clear Company, the committee supported the
Reports and innovation from others in the sector and
across industry would be reviewed to identify areas
for improvement.
Equity, diversity and inclusion
The committee discussed the proposed measures for
monitoring equity, diversity and inclusion. It suggested
that focus should be on diversity on the board, rather
than women on the board, and encouraged reporting
of ethnicity trends at all levels.
The committee endorsed the review of the company’s
approach to education with greater alignment to its
core purpose. Whilst the schools’ education programme
is a key part of the company’s educational activities, it
was noted that many other initiatives take place such as
apprentice and graduate schemes. Members encouraged
the company to consider other operating options and to
ensure close alignment with the school curriculum.
Access and recreation strategy
An update on the company’s approach to access
and recreation was presented to the committee. The
consequences of the pandemic through increased
visitor numbers and issues of anti-social behaviour were
discussed along with the implementation of measures at
several sites, discussed with community representatives,
to stabilise the situation. Topics such as open water
swimming and reservoir safety were explored alongside
opportunities to further connect with customers through
access and recreation.
system needs to change and to highlight the important
Approach to education
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Community investment expenditure and alignment
to community strategy
The annual update on community giving expenditure was
reviewed by the committee. Total expenditure of £2.82 million
against a 2025 target of £2.82 million was reported. Members
were encouraged that activity had returned to more normal
levels since the COVID-19 restrictions. Additional data collation
such as the inclusion of innovation expenditure which offered
a wider benefit outside of the company, had contributed to an
increase in the value of community investment.
Governance
Trends in responsible business
The committee discussed current trends in responsible business
and agreed that the most relevant responsible business trends
for the company included a just transition to a low carbon and
adapted economy, protecting fundamental rights and integrating
ESG narrative and data. Members requested that relevant items
be incorporated into the committee’s rolling calendar.
Sustainability reporting in the FTSE 100 and investor
ESG communications
A review of sustainability reporting in the FTSE 100 was
presented to the Committee which highlighted trends towards
consolidation of global reporting frameworks and current
expectations of investors. The approach for engaging investors
on ESG matters was discussed, which included the production
of a standalone sustainability report, changes to the website,
regular content on social media channels and direct engagement
with specific investors.
Colleague Voice update
Twice a year the committee reviews progress on colleague
and board engagement. Members noted the Colleague Voice
panel continued to be a valuable mechanism for colleagues to
provide feedback, returning to some face-to-face meetings post
pandemic. Data from the Your Opinion Survey was providing new
insight on employee demographics and it was suggested that
some environmental issues such as carbon be discussed at the
panel. The committee was encouraged by progress made by the
various colleague network groups and supported board member
attendance at network events. Members noted that the company
was satisfied it could demonstrate compliance with the UK
Corporate Governance Code.
Culture
Each year the committee reviews and assesses company culture
and its alignment with business purpose, strategy and values.
Members welcomed that external validation of the company’s
approach had been undertaken to assure the adequacy and
effectiveness of its governance, processes and key controls.
The audit conclusions were positive with a small number of
recommended enhancements and the company reported its
intention to include diversity demographic data in its annual update.
The committee noted that the company’s approach for monitoring
culture featured as a best practice case study with the Financial
Reporting Council.
Progress against demonstrating purpose
The committee reviewed company performance in delivering
its five year commitments that demonstrate how it is fulfilling
its purpose, noting strong performance in the second year of
reporting, with 45 out of 50 targets reporting green status.
Members discussed changes to the measures and concluded
that the matrix of measures was balanced appropriately.
Stakeholder engagement and reputational risks
Throughout the year, topics discussed by the committee related
the changing ministerial landscape, rivers and environmental
performance across the sector, price review expectations on
stakeholder engagement, sector collaboration, bathing water
results, environmental partnerships and proposals for a national
social tariff.
Committee evaluation results
The committee reviewed its external evaluation results and
matters arising including training and knowledge development,
topics for engagement at the board level and the remit of the
committee’s activities. It agreed that in 2023 it would focus on
five key topics including reputation, carbon and renewables,
affordability and vulnerability, river water quality and storm
overflows and equity, diversity and inclusion.
Committee terms of reference
The recommendation to rename the committee as the ‘ESG
committee’ was endorsed and members agreed to consequential
changes to its terms of reference. It clarified that ‘governance’
would refer to the current five key ESG topics and reporting
requirements, not corporate governance as a whole, which is a
matter reserved to the board.
Board climate change and ESG training
The committee discussed training on climate change and ESG
issues for board and committee members. Options for board
and executive training on climate change and more specific ESG
training were agreed.
Looking to the next year, the ESG committee will:
•
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 board, review progress and issues arising from
the Colleague 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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Stock code: UU.
Stock code: UU.
207207
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, artificial 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, she will also 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 in order 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.
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
2022/23, 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. In addition, all of the group’s
profits are taxable in the UK.
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
2023 of around £229 million are set out below.
Taxes/contributions to public finances for 2023
Total taxes and contributions to public finances
£229m
£88m
£0m
£29m
£59m
£13m
£40m
Business rates
Corporation tax*
Employment taxes:
company
Employment taxes:
employees
Environmental taxes
and other duties
* The corporation tax paid for 2022 and 2023 is lower due to benefit
accruing from the temporary capital allowances super deductions
rules introduced in 2021.
Regulatory services fees
(e.g. water extraction charges)
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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 2023.
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 fourth year, having been
only the second FTSE 100 company to be awarded the
Fair Tax Mark in July 2019.
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UK tax policies and objectives
Consistent with our wider business objectives, we are
Consistent with the group’s general risk management
committed to acting in a responsible manner in relation
framework, all tax risks are assessed for the
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, artificial 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, she will also 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.
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 in order 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.
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
2022/23, 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. In addition, all of the group’s
profits are taxable in the UK.
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
2023 of around £229 million are set out below.
Taxes/contributions to public finances for 2023
Total taxes and contributions to public finances
£229m
£88m
£0m
£29m
£59m
£13m
£40m
Business rates
Corporation tax*
Employment taxes:
company
Employment taxes:
employees
Environmental taxes
and other duties
* The corporation tax paid for 2022 and 2023 is lower due to benefit
accruing from the temporary capital allowances super deductions
rules introduced in 2021.
Regulatory services fees
(e.g. water extraction charges)
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Stock code: UU.
209
Directors’ report
Statutory and other information
Our directors present their management report, including the strategic report, on pages 08 to 119 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 2023.
Business model
A description of the company’s business model can be found within the strategic report on pages 20 to 83.
Dividends
Directors
Reappointment
Interests
Corporate
governance
statement
Share capital
Our directors are recommending a final dividend of 30.34 pence per ordinary share for the year ended
31 March 2023, which, together with the interim dividend of 15.17 pence, gives a total dividend for the year
of 45.51 pence per ordinary share (the interim and final dividends paid in respect of the 2021/22 financial
year were 14.50 pence and 29.00 pence per ordinary share respectively). Subject to approval by our
shareholders at our AGM, the final dividend will be paid on 1 August 2023 to shareholders on the register
at the close of business on 23 June 2022.
The names of our directors who served during the financial year ended 31 March 2023 can be found on
pages 122 to 125 and on page 134.
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 140
to 148.
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 170 to 203, which is hereby incorporated by
reference into this directors’ report.
The corporate governance report on pages 122 to 203 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 2023, 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 2023, 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 22 to the financial statements on
page 258. 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 2023.
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 2023 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 22 July 2022, 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 registrar, Equiniti,
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.
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Directors’ report
Statutory and other information
Our directors present their management report, including the strategic report, on pages 08 to 119 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 2023.
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.
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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.
Major shareholdings
At 24 May 2023, 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.
Per cent of issued
share capital
9.93
10.88
Direct or indirect
nature of holding
Indirect
Indirect
At our AGM held on 22 July 2022, 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 2023
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 2024.
As at 31 March 2023, 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 245. In line with current UK tax legislation, the amount is fully
deductible against the group’s corporation tax liability, resulting in tax relief of £24.2 million.
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.
Business model
A description of the company’s business model can be found within the strategic report on pages 20 to 83.
Dividends
Our directors are recommending a final dividend of 30.34 pence per ordinary share for the year ended
31 March 2023, which, together with the interim dividend of 15.17 pence, gives a total dividend for the year
of 45.51 pence per ordinary share (the interim and final dividends paid in respect of the 2021/22 financial
year were 14.50 pence and 29.00 pence per ordinary share respectively). Subject to approval by our
shareholders at our AGM, the final dividend will be paid on 1 August 2023 to shareholders on the register
at the close of business on 23 June 2022.
Directors
The names of our directors who served during the financial year ended 31 March 2023 can be found on
pages 122 to 125 and on page 134.
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 140
to 148.
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 170 to 203, which is hereby incorporated by
reference into this directors’ report.
Corporate
governance
statement
The corporate governance report on pages 122 to 203 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 2023, 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.
Share capital
At 31 March 2023, 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 22 to the financial statements on
page 258. 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 2023.
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 2023 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 22 July 2022, 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 registrar, Equiniti,
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.
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Stock code: UU.
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Directors’ report
Statutory and other information continued
Political donations
Trade associations
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
that 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 £11,465 (2021/22):
£15,834; 2020/21: £5,801) as part of this process. At the 2022 AGM, an authority was taken to cover such
expenditure. A similar resolution will be put to shareholders at the 2023 AGM to authorise the company
and its subsidiaries to make such expenditure.
Relationships with regional MPs is very important to United Utilities, and as the provider of an essential
service to seven million people across the North West, customers do raise issues with their constituency
MP. In 2022/23, we received 482 such MP contacts covering a wide range of topics, particularly as we face
challenging times from an economic, environmental and social perspective. Our approach is to always
have an open door policy with our MPs and members of their offices, to meet with us, visit our sites or
land at any time. We are readily available to discuss topics, whether that is about service, climate change,
environmental performance, flooding or quality, and regularly meet our MPs face to face.
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. 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 GC100, 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 2022/23
was £418,561 (2021/22 £408,441; 2020/21:£420,403).
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 a range of topics. In
the past twelve months, we have worked closely with Water UK to share data in our storm. overflow
performance and what this means for river water quality in the North West. On behalf of the sector,
we were pleased to host its first Pollution Summit to share best practice on measures being taken by
companies to reduce the frequency of pollution events. Water UK convened a session on the emerging
pollution roadmap for the sector.
Through our membership with 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 participated in discussions on
unlocking regional growth/levelling up agenda, and colleague resilience and wellbeing. We were pleased
to sponsor its North West parliamentary reception, providing a platform to update regional MPs on our
efforts to improve river water quality.
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Directors’ report
Statutory and other information continued
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
that 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 £11,465 (2021/22):
£15,834; 2020/21: £5,801) as part of this process. At the 2022 AGM, an authority was taken to cover such
expenditure. A similar resolution will be put to shareholders at the 2023 AGM to authorise the company
and its subsidiaries to make such expenditure.
Relationships with regional MPs is very important to United Utilities, and as the provider of an essential
service to seven million people across the North West, customers do raise issues with their constituency
MP. In 2022/23, we received 482 such MP contacts covering a wide range of topics, particularly as we face
challenging times from an economic, environmental and social perspective. Our approach is to always
have an open door policy with our MPs and members of their offices, to meet with us, visit our sites or
land at any time. We are readily available to discuss topics, whether that is about service, climate change,
environmental performance, flooding or quality, and regularly meet our MPs face to face.
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. 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 GC100, 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 2022/23
was £418,561 (2021/22 £408,441; 2020/21:£420,403).
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 a range of topics. In
the past twelve months, we have worked closely with Water UK to share data in our storm. overflow
performance and what this means for river water quality in the North West. On behalf of the sector,
we were pleased to host its first Pollution Summit to share best practice on measures being taken by
companies to reduce the frequency of pollution events. Water UK convened a session on the emerging
pollution roadmap for the sector.
Through our membership with 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 participated in discussions on
unlocking regional growth/levelling up agenda, and colleague resilience and wellbeing. We were pleased
to sponsor its North West parliamentary reception, providing a platform to update regional MPs on our
efforts to improve river water quality.
Trade associations
We are members of a small number of trade associations. Some have a national focus, such as Water UK,
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It is the company’s policy position that we do not support any political party and do not make what are
Colleagues
Our policies on employee consultation and on equal opportunities for all colleagues can be found on
pages 35 and 100. 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 colleagues’ engagement (see page
97). The effect of our regard towards colleagues in relation to the decisions taken during the financial year
is included in our S172(1) Statement on pages 58 to 59.
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Environmental,
social and
community matters
Colleagues 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 243.
Details of our approach, as a responsible business, is set out in the strategic report, in particular where
we describe our approach to our purpose and strategic themes on page 38, and our core values on page
50, and how we create value for stakeholders on page 76 to 77. Our approach to engagement with our
environmental stakeholders and those in the communities we serve can be found on pages 56 to 57.
Further information is available on our website at unitedutilities.com/corporate/responsibility
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 58 to 59.
Customers and
suppliers and key
stakeholders
Our approach to engagement with customers, suppliers, regulators and other key stakeholders can be
found on pages 56 to 57. 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 58 to 59.
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 2023, our average time taken to pay
invoices was 11 days; in the previous six months it was 12 days.
Energy and
carbon report
Approach to
technology
development
Our energy and carbon report can be found on page 95 and is hereby incorporated by reference into this
directors’ report.
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 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 265.
Slavery and
human trafficking
Events occurring after
the reporting period
Our statement can be found on our website at unitedutilities.com/humanrights
Details of events after the reporting period are included in note 24 on page 258.
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213
Directors’ report
Statutory and other information continued
Annual General Meeting
Our 2023 annual general meeting (AGM) will be held on 21 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 2023 AGM, resolutions will be proposed, among other
matters: to receive the integrated annual report and financial
statements; to approve the directors’ remuneration report; to
declare a final dividend; 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; 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 24 May 2023 and signed on its behalf by:
Simon Gardiner
Company Secretary
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Directors’ report
Statutory and other information continued
Statement of directors’ responsibilities in respect of
the annual report and the financial statements
Annual General Meeting
Information given to the auditor
Our 2023 annual general meeting (AGM) will be held on 21 July.
Each of the persons who is a director at the date of approval of
Full details of the resolutions to be proposed to our shareholders,
this report confirms that:
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 2023 AGM, resolutions will be proposed, among other
matters: to receive the integrated annual report and financial
statements; to approve the directors’ remuneration report; to
declare a final dividend; 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; and to enable the company to continue to hold
general meetings on not less than 14 clear days’ notice.
•
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 24 May 2023 and signed on its behalf by:
Simon Gardiner
Company Secretary
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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 international accounting standards in conformity
with the requirements of the Companies Act 2006 /
UK-adopted international accounting standards and
applicable law and have elected to prepare the parent
company financial statements on the same basis. In
addition the group financial statements are required
under the UK Disclosure Guidance and Transparency
Rules to be prepared in accordance with International
Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the
European Union (‘IFRSs as adopted by the EU’).
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.
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 24 May 2023 and signed on
its behalf by:
Sir David Higgins
Chair
Phil Aspin
Chief Financial Officer
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Our robust balance sheet
supports long-term resilience
Due to the regulatory framework within which we operate, the economic value of our activities is best
measured through performance against our determination for AMP7, but our balance sheet strength does
provide financial resilience, which is particularly important in times of economic turbulence.
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Financial
statements
Independent Auditor’s Report
to the members of United Utilities Group PLC
Pages 218 to 231
Consolidated
and company
statements of
financial position
Page 234
Guide to
detailed financial
statements
disclosures
Page 238
Consolidated
statement of
changes in equity
Page 235
Accounting
policies
Pages 239 to 241
Our financials
Pages 232 to 286
Consolidated
income statement
Page 232
Consolidated
statement of
comprehensive
income
Page 233
Company
statement of
changes in equity
Page 236
Consolidated and
company statements
of cash flows
Page 237
Notes to
the financial
statements
Pages 242 to 258
Notes to the
financial statements –
appendices
Pages 259 to 286
Additional
Pages 287 to 289
Five-year
summary –
unaudited
Page 287
Shareholder
information
Pages 288 to 289
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Our robust balance sheet
supports long-term resilience
Due to the regulatory framework within which we operate, the economic value of our activities is best
measured through performance against our determination for AMP7, but our balance sheet strength does
provide financial resilience, which is particularly important in times of economic turbulence.
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217
KPMG LLP’s Independent Auditor’s Report
to the members of United Utilities Group PLC
1. Our opinion is unmodified
In our opinion:
•
•
•
•
the financial statements of United Utilities Group PLC give a true and fair view of the state of the Group’s and of the
Parent Company’s affairs as at 31 March 2023, and of the Group’s profit 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 as applied in accordance with the provisions of the Companies Act 2006; and
the Group and Parent Company financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
What our opinion covers
We have audited the group and parent company financial statements of United Utilities Group PLC (‘the company’) for the year ended
31 March 2023 (FY23) included in the Annual Report, which comprise:
Group (United Utilities Group PLC and its subsidiaries)
Parent Company (United Utilities Group PLC)
Consolidated income statement
Company statement of financial position
Consolidated statement of comprehensive income
Company statement of changes in equity
Consolidated statement of financial position
Company statement of cash flows
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes 1 to 24 to the parent company financial statements,
including the accounting policies in note A7 and on pages 239
to 241.
Notes 1 to 24 to the group financial statements, including the
accounting policies in note A7 and on pages 239 to 241.
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 and matters included in this report are consistent with those discussed and included in our reporting to the
Audit Committee (‘AC’).
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.
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KPMG LLP’s Independent Auditor’s Report
to the members of United Utilities Group PLC
1. Our opinion is unmodified
In our opinion:
•
the financial statements of United Utilities Group PLC give a true and fair view of the state of the Group’s and of the
Parent Company’s affairs as at 31 March 2023, and of the Group’s profit for the year then ended;
•
the Group financial statements have been properly prepared in accordance with UK-adopted international
•
the Parent Company financial statements have been properly prepared in accordance with UK-adopted international
accounting standards as applied in accordance with the provisions of the Companies Act 2006; and
•
the Group and Parent Company financial statements have been prepared in accordance with the requirements of the
accounting standards;
Companies Act 2006.
What our opinion covers
We have audited the group and parent company financial statements of United Utilities Group PLC (‘the company’) for the year ended
31 March 2023 (FY23) included in the Annual Report, which comprise:
Group (United Utilities Group PLC and its subsidiaries)
Parent Company (United Utilities Group PLC)
Consolidated income statement
Company statement of financial position
Consolidated statement of comprehensive income
Company statement of changes in equity
Consolidated statement of financial position
Company statement of cash flows
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes 1 to 24 to the parent company financial statements,
including the accounting policies in note A7 and on pages 239
to 241.
Notes 1 to 24 to the group financial statements, including the
accounting policies in note A7 and on pages 239 to 241.
Basis for opinion
Audit Committee (‘AC’).
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 and matters included in this report are consistent with those discussed and included in our reporting to the
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.
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Key Audit Matters
Provisions for household
customer debt
Capitalisation of costs
relating to the capital
programme
Valuation of retirement
benefit obligations
Recoverability of parent
company’s investment in
United Utilities PLC
Vs FY22
Item
4.1
4.2
4.3
4.4
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2. Overview of our audit
Factors driving our
view of risks
Following our FY22 audit, and considering
developments affecting the United Utilities Group
since then, our assessment of risks and our view
of how these impact the audit of the financial
statements have been updated for the current year
where needed.
The group is presently operating in a high
inflationary environment, where customers (and
household customers in particular) are experiencing
a cost of living squeeze. Whilst the average increase
in water bills has not been as high as other utility
bills, the ability of customers to pay for services
provided by the company carries a greater risk. The
group offers a number of schemes and operates
many initiatives to encourage customers to pay its
bills, and recent cash collection rates have been
strong. This would suggest that the cost of living
impact has yet to impact the group, but remains
a factor as inflation remains high. The Provisions
for Household Customer Debt remains a Key Audit
Matter (KAM) and in our challenge of management
over the appropriateness of the recoverability of
the year end balance, we assessed the impact of a
deterioration of cash collection rates as one of the
sensitivities we performed.
The group’s capital programme has also been
impacted by inflation, as general contracting costs
have increased beyond that expected at the start
of the current 5-year regulatory period. This could
increase the incentive to treat operating costs as
capital items. Whilst our overall risk assessment for
the capitalisation of costs KAM did not change, our
selection of projects to test considered those that
could be more susceptible to judgement.
There was no change to our risk assessment or
approach in relation to the valuation of retirement
benefit obligations and recoverability of the parent
company’s investments.
Audit committee
interaction
During the year, the AC met four times. KPMG are invited to attend all AC meetings and are provided
with an opportunity to meet with the AC in private sessions without the Executive Directors being
present. For each Key Audit Matter, we have set out communications with the AC in section 4, including
matters that required particular judgement for each.
The matters included in the Audit Committee report on pages 158 to 159 of the Annual Report and
Accounts are materially consistent with our observations of those meetings.
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KPMG LLP’s Independent Auditor’s Report
to the members of United Utilities Group PLC
2. Overview of our audit
Our independence
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(Item 6 below)
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Total audit fee
Audit-related fees
(including interim review)
Other services
Non-audit fee as a % of total audit and
audit-related fee %
Date first appointed
Uninterrupted audit tenure
Next financial period which requires
a tender
£0.807m
£0.085m
£0.149m
16.1%
22 July 2011
12 years
2032
Tenure of group engagement partner
3 years
Materiality levels used in our audit
12.3
12.3
16.5
16.5
16.2
15.8
Group
GPM
HCM
PLC
LCM
AMPT
0.5
0.5
8
8.5
8
6
FY23 £m
FY22 £m
Group Group Materiality
GPM
Group Performance Materiality
HCM
Highest Component Materiality
PLC
Parent Company Materiality
LCM
Lowest Component Materiality
AMPT Audit Misstatement Posting Threshold
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.
We have not performed any non-audit services
during FY23 or subsequently which are prohibited
by the FRC Ethical Standard.
We were first appointed as auditor by the
shareholders for the year ended 31 March 2012.
The period of total uninterrupted engagement is
for the 12 financial years ended 31 March 2023.
The group engagement partner is required to rotate
every 5 years. As these are the third set of the
group’s financial statements signed by Ian Griffiths,
he will be required to rotate off after the FY25 audit.
The scope of our work is influenced by our view
of materiality and our assessed risk of material
misstatement.
We have determined overall materiality for the
group financial statements as a whole at £16.5m
(FY22: £16.5m) and for the parent company financial
statements as a whole at £8.0m (FY22: £8.5m).
A key judgement in determining materiality
was the most relevant metric to select as the
benchmark, by considering which metrics have the
greatest bearing on shareholder decisions.
Last year we determined our materiality to
be £16.5m based on a primary benchmark
of normalised profit before tax, of which it
represented 5.6%. United Utilities is facing rising
finance costs, as a result of the current high-
inflationary environment, which is causing profit
before tax to decline. Using the same benchmark
this year would cause a significant reduction in our
materiality. In our view, there has been no change
to the underlying operations of the business, nor
a change in investor perception around overall
performance, therefore we have determined
materiality with reference to a range of metrics.
We have determined materiality for FY23 to be
£16.5m in line with the prior year. This represents
0.9% of revenue, 0.1% of total assets and 3.7% of
operating profit (FY22: 0.9% of revenue, 0.1% of
total assets and 3.7% of operating profit).
Materiality for the parent company financial
statements was determined with reference to
a benchmark of parent company total assets of
which it represents 0.1% (FY22: 0.1%).
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KPMG LLP’s Independent Auditor’s Report
to the members of United Utilities Group PLC
We have fulfilled our ethical responsibilities
Total audit fee
under, and we remain independent of the group in
Audit-related fees
accordance with, UK ethical requirements including
(including interim review)
the FRC Ethical Standard as applied to listed public
Other services
interest entities.
Non-audit fee as a % of total audit and
We have not performed any non-audit services
during FY23 or subsequently which are prohibited
audit-related fee %
Date first appointed
by the FRC Ethical Standard.
Uninterrupted audit tenure
£0.807m
£0.085m
£0.149m
16.1%
22 July 2011
12 years
2032
Next financial period which requires
a tender
Tenure of group engagement partner
3 years
Our independence
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Materiality
(Item 6 below)
We were first appointed as auditor by the
shareholders for the year ended 31 March 2012.
The period of total uninterrupted engagement is
for the 12 financial years ended 31 March 2023.
The group engagement partner is required to rotate
every 5 years. As these are the third set of the
group’s financial statements signed by Ian Griffiths,
he will be required to rotate off after the FY25 audit.
The scope of our work is influenced by our view
of materiality and our assessed risk of material
misstatement.
We have determined overall materiality for the
group financial statements as a whole at £16.5m
GPM
(FY22: £16.5m) and for the parent company financial
statements as a whole at £8.0m (FY22: £8.5m).
A key judgement in determining materiality
was the most relevant metric to select as the
benchmark, by considering which metrics have the
greatest bearing on shareholder decisions.
Last year we determined our materiality to
be £16.5m based on a primary benchmark
of normalised profit before tax, of which it
represented 5.6%. United Utilities is facing rising
finance costs, as a result of the current high-
inflationary environment, which is causing profit
before tax to decline. Using the same benchmark
this year would cause a significant reduction in our
materiality. In our view, there has been no change
to the underlying operations of the business, nor
a change in investor perception around overall
performance, therefore we have determined
materiality with reference to a range of metrics.
We have determined materiality for FY23 to be
£16.5m in line with the prior year. This represents
0.9% of revenue, 0.1% of total assets and 3.7% of
operating profit (FY22: 0.9% of revenue, 0.1% of
total assets and 3.7% of operating profit).
Materiality for the parent company financial
statements was determined with reference to
a benchmark of parent company total assets of
which it represents 0.1% (FY22: 0.1%).
Materiality levels used in our audit
12.3
12.3
16.5
16.5
16.2
15.8
Group
HCM
PLC
LCM
AMPT
0.5
0.5
8
8.5
8
6
FY23 £m
FY22 £m
Group Group Materiality
GPM
Group Performance Materiality
HCM
Highest Component Materiality
PLC
Parent Company Materiality
LCM
Lowest Component Materiality
AMPT Audit Misstatement Posting Threshold
2. Overview of our audit
2. Overview of our audit
We have performed risk assessment and planning
procedures to determine which of the group’s
components are likely to include risks of material
misstatement to the group financial statements and
the type of procedures to be performed at these
components The work on all components (2022:
all components) including the audit of the parent
company, was performed by the group team.
Of the group’s 23 (2022: 25) reporting components,
we subjected 4 (2022: 5) to full scope audits for
group purposes and 0 (2022: 0) to specified risk-
focused audit procedures.
The components within the scope of our work
accounted for the percentages illustrated opposite.
For the FY23 audit, components within scope of our
work accounted for 99% of profit before tax, 100% of
total assets and 100% of revenue (FY22: 100% of profit
before tax, 100% of total assets and 99% of revenue).
In addition, we have performed group level analysis
on the remaining components to determine whether
further risks of material misstatement exist in
those components.
We consider the scope of our audit, as
communicated to the Audit Committee, to be
an appropriate basis for our audit opinion.
Full scope audits
Remaining components
Group scope
(Item 7 below)
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Coverage of group financial statements
1%
Profit
before
tax
99%
Total
assets
100%
Revenue
100%
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 84 to 95. 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 241.
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 84 to 95 and considered consistency with the financial statements and our audit knowledge.
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221
KPMG LLP’s Independent Auditor’s Report
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3. Going concern, viability and principal risks and uncertainties
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the group or the
parent company or to cease their operations, and as they have concluded that the group’s and the parent 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’).
Going concern
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 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 available financial
resources over this period related to a one-off total expenditure impact.
We considered whether the risk could plausibly affect the liquidity or
covenant compliance in the going concern period by assessing the degree
of downside assumption that, individually and collectively, could result in a
liquidity issue, taking into account the group’s current and projected cash
and facilities (a reverse stress test). We also assessed the completeness of
the going concern disclosure.
Accordingly, based on those procedures, we found the directors’ use of
the going concern basis of accounting without any material uncertainty for
the group and parent company to be acceptable. 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 parent company will continue in operation.
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Our conclusions
• 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
basis of preparation section of the accounting
policies note 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 parent company’s use
of that basis for the going concern period, and we
found the going concern disclosure in this note to
be acceptable; and
• The related statement under the Listing Rules set
out on page 150 is materially consistent with the
financial statements and our audit knowledge.
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
Our reporting
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:
We have nothing material to add or draw attention to
in relation to these disclosures.
We have concluded that these disclosures are
materially consistent with the financial statements
and our audit knowledge.
•
•
•
the directors’ confirmation within the long-term viability statement on
page 150 to 151 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 as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to review the long-term viability statement set out on
page 150 to 151 under the Listing Rules.
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 parent company’s
longer-term viability.
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KPMG LLP’s Independent Auditor’s Report
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3. Going concern, viability and principal risks and uncertainties
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the group or the
parent company or to cease their operations, and as they have concluded that the group’s and the parent 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’).
Going concern
We used our knowledge of the group, its industry, and the general economic
Our conclusions
environment to identify the inherent risks to its business model and analysed
how those risks might affect the group’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 available financial
resources over this period related to a one-off total expenditure impact.
We considered whether the risk could plausibly affect the liquidity or
covenant compliance in the going concern period by assessing the degree
of downside assumption that, individually and collectively, could result in a
liquidity issue, taking into account the group’s current and projected cash
and facilities (a reverse stress test). We also assessed the completeness of
the going concern disclosure.
Accordingly, based on those procedures, we found the directors’ use of
the going concern basis of accounting without any material uncertainty for
the group and parent company to be acceptable. 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 parent company will continue in operation.
• 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
basis of preparation section of the accounting
policies note 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 parent company’s use
of that basis for the going concern period, and we
found the going concern disclosure in this note to
be acceptable; and
• The related statement under the Listing Rules set
out on page 150 is materially consistent with the
financial statements and our audit knowledge.
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
Our reporting
We are required to perform procedures to identify whether there is a
We have nothing material to add or draw attention to
material inconsistency between the directors’ disclosures in respect of
in relation to these disclosures.
emerging and principal risks and the viability statement, and the financial
statements and our audit knowledge.
We have concluded that these disclosures are
materially consistent with the financial statements
Based on those procedures, we have nothing material to add or draw
and our audit knowledge.
attention to in relation to:
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•
the directors’ confirmation within the long-term viability statement on
page 150 to 151 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 as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to review the long-term viability statement set out on
page 150 to 151 under the Listing Rules.
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 parent company’s
longer-term viability.
4. Key Audit Matters
What we mean
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.
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We include below the Key Audit Matters in decreasing order of audit significance together with our key audit procedures to address
those matters and our results from those procedures. These matters were addressed, and our results are based on procedures
undertaken, for the purpose of our audit of the financial statements as a whole. We do not provide a separate opinion on these matters.
4.1 Provisions for household customer debt (group)
Financial statement elements
Our assessment of risk vs FY22
Our results
Provisions for
customer debts
FY23
FY22
£81.5m
£78.3m
We have not identified any
significant changes to our
assessment of the level of risk
relating to provisions against
household customer debt
compared to FY22
FY23: Acceptable
FY22: Acceptable
Description of the Key Audit Matter
Our response to the risk
At each balance sheet date assumptions involving a high
degree of estimation uncertainty are required to assess
the recoverability of trade receivables. Key assumptions
include current and forecast cash collection rates. Please
see the accounting policies on page 240 for more detail
on the key assumptions.
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.
We continue to perform procedures over revenue
recognition. However, due to the consistency of the
balance in recent years and low estimation uncertainty,
we have not assessed this as one of the most significant
risks in our current year audit and, therefore, it is not
separately identified in our report this year.
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 to address the risk included:
− 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;
− Recalculation: performed a recalculation of the provision, and
verifying cash collections in the billing system;
− Sensitivity analysis: considered the sensitivity of future
performance compared to historic cash collection rates; and
− Assessing transparency: assessed the adequacy of the group’s
disclosures of its customer debt provisioning policy, including the
estimation uncertainty of the doubtful debts provision.
Communications with United Utilities Group PLC’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• The change in the audit team’s risk assessment in relation to revenue recognition.
• Our approach to the audit of provisions for household customer debt.
• Our conclusions on the appropriateness of key assumptions used.
• The adequacy of the disclosures, particularly as it relates to the sensitivity of the key assumptions.
Areas of particular auditor judgement
We identified the following as the area of particular auditor judgement:
• The appropriateness of the valuation of provisions for customer debt in particular, the selection of key assumptions used
in the valuation (the period of historical cash collections, the risk associated with the impact of the increasing cost of living
experienced by customers and the risk associated with collections from void properties).
Our results
Based on the risk identified and the procedures that we performed, we found the provisions for household customer debt and
the related disclosures to be acceptable (FY22: acceptable).
Further information in the Annual Report and Accounts: See the Audit committee report on page 158 for details on how the Audit
Committee considered provisions against household customer debt as an area of significant attention, page 240 for the accounting
policy on provisions against household customer debt, and pages 253 to 254 for the financial disclosures.
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4.2 Capitalisation of costs relating to the capital programme (group)
Financial statement elements
Our assessment of risk vs FY22
Property, plant and
equipment additions
FY23
FY22
£867.7m
£728.5m
We have not identified any
significant changes to our
assessment of the level of risk
relating to the capitalisation
of costs relating to the capital
programme compared to FY22
Description of the Key Audit Matter
Our response to the risk
Our results
FY23: Acceptable
FY22: Acceptable
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,
particularly for certain projects where projects contain
both capital and operating expenditure elements. Under
IAS 16, expenditure is capitalised when it is probable that
the future economic benefits associated with the item will
flow to the entity and where such expenditure enhances or
increases the capacity of the network. 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.
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 to address the risk included:
− Accounting analysis: assessed the group’s capitalisation policy for
compliance with relevant accounting standards;
− Tests of detail: 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.
Communications with United Utilities Group PLC’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• Our approach to the audit of capitalisation of costs relating to the capital programme.
• The results of our procedures.
• The adequacy of the disclosures.
Areas of particular auditor judgement
We identified the following as the area of particular auditor judgement:
• The appropriateness of the capitalisation rates applied to capital projects, where projects have an element of both capital
and operating expenditure elements.
Our results
Based on the risk identified and the procedures that we performed, we found the capitalisation of costs relating to the capital
programme and the related disclosures to be acceptable (FY22: acceptable).
Further information in the Annual Report and Accounts: See the Audit committee report on page 158 for details on how the Audit
Committee considered the capitalisation of costs relating to the capital programme as an area of significant attention, page 241 for the
accounting policy on the capitalisation of costs relating to the capital programme, and pages 250 to 251 for the financial disclosures.
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4.2 Capitalisation of costs relating to the capital programme (group)
Financial statement elements
Our assessment of risk vs FY22
Our results
4.3 Valuation of retirement benefit obligations (group)
Financial statement elements
Our assessment of risk vs FY22
Property, plant and
equipment additions
£867.7m
£728.5m
FY23
FY22
We have not identified any
FY23: Acceptable
FY22: Acceptable
significant changes to our
assessment of the level of risk
relating to the capitalisation
of costs relating to the capital
programme compared to FY22
Retirement benefit
obligation
FY23
FY22
£2,330.5m
£3,018.9m
We have not identified any
significant changes to our
assessment of the level of risk
relating to the valuation of
retirement benefit obligations
compared to FY22
Our results
FY23: Acceptable
FY22: Acceptable
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Description of the Key Audit Matter
Our response to the risk
Description of the Key Audit Matter
Our response to the risk
The group has a substantial capital programme which
We performed the detailed tests below rather than seeking to rely
has been agreed with the Water Services Regulation
on any of the group’s controls because our knowledge of the design
Authority (Ofwat) and therefore incurs significant
annual expenditure in relation to the development
and maintenance of both infrastructure and non-
infrastructure assets.
of these controls indicated that we would not be able to obtain the
required evidence to support reliance on controls.
Our procedures to address the risk included:
The determination of in-year project costs as capital
or operating expenditure is inherently judgemental,
particularly for certain projects where projects contain
both capital and operating expenditure elements. Under
IAS 16, expenditure is capitalised when it is probable that
the future economic benefits associated with the item will
flow to the entity and where such expenditure enhances or
increases the capacity of the network. 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.
− Accounting analysis: assessed the group’s capitalisation policy for
compliance with relevant accounting standards;
− Tests of detail: 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.
Communications with United Utilities Group PLC’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• Our approach to the audit of capitalisation of costs relating to the capital programme.
• The results of our procedures.
• The adequacy of the disclosures.
Areas of particular auditor judgement
and operating expenditure elements.
Our results
We identified the following as the area of particular auditor judgement:
• The appropriateness of the capitalisation rates applied to capital projects, where projects have an element of both capital
Based on the risk identified and the procedures that we performed, we found the capitalisation of costs relating to the capital
programme and the related disclosures to be acceptable (FY22: acceptable).
Further information in the Annual Report and Accounts: See the Audit committee report on page 158 for details on how the Audit
Committee considered the capitalisation of costs relating to the capital programme as an area of significant attention, page 241 for the
accounting policy on the capitalisation of costs relating to the capital programme, and pages 250 to 251 for the financial disclosures.
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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.
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 to address the risk 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 performed 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 and
sensitivities disclosed, which are set out in notes 18 and A5 to the
financial statements.
Communications with United Utilities Group PLC’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• Our approach to the audit of the valuation of retirement benefit obligations, including the involvement of our
actuarial specialists.
• Our conclusions on the appropriateness of key assumptions used.
• The adequacy of the disclosures, particularly as it relates to the sensitivity of the key assumptions.
Areas of particular auditor judgement
We identified the following as the area of particular auditor judgement:
• The appropriateness of the valuation of retirement benefit obligations and in particular, the selection of key assumptions
used in the valuation (the discount rate, the inflation rate and the mortality rate).
Our results
Based on the risk identified and procedures performed, we found the valuation of the retirement benefit obligations to be
acceptable (FY22: acceptable).
Further information in the Annual Report and Accounts: See the Audit committee report on page 158 for details on how the Audit
Committee considered the valuation of retirement benefit obligations as an area of significant attention, page 239 for the accounting
policy on the valuation of retirement benefit obligations, and pages 255 to 256 and 273 to 278 for the financial disclosures.
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KPMG LLP’s Independent Auditor’s Report
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4.4 Recoverability of parent company’s investment in United Utilities PLC (parent company)
Financial statement elements
Our assessment of risk vs FY22
Investment in
United Utilities PLC
FY23
FY22
£6,326.8m
£6,326.8m
We have not identified any
significant changes to our
assessment of the level of risk
relating to the recoverability
of the parent company’s
investment in United Utilities
PLC compared to FY22
Our results
FY23: Acceptable
FY22: Acceptable
Description of the Key Audit Matter
Our response to the risk
The carrying amount of the parent company’s investment
in United Utilities PLC represents 98% (FY22: 99%) 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 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 to address the risk included:
− Tests of detail: compared the carrying amount of the investment
with the expected value of the business based on the regulatory
capital value (a recognised method of valuation within the industry).
Communications with United Utilities Group PLC’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• Our approach to the audit of the recoverability of the parent company’s investment in United Utilities PLC.
• Our conclusions on the appropriateness of key assumptions used.
• The adequacy of the disclosures.
Areas of particular auditor judgement
We identified the following as the area of particular auditor judgement:
• The valuation of the regulatory capital value.
Our results
Based on the risk identified and procedures performed, we concluded that the recognition of no impairment was appropriate
(FY22: no impairment).
Further information in the Annual Report and Accounts: See the Audit committee report on page 159 for details on how the Audit
Committee considered the recoverability of the parent company’s investment in United Utilities PLC as an area of significant attention,
page 282 for the accounting policy on the recoverability of the parent company’s investment in United Utilities PLC, and page 252 for
the financial disclosures.
5. Our ability to detect irregularities, and our response
Fraud – 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:
Fraud risk assessment
− 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 and Audit Committee minutes; and
− Considering remuneration incentive schemes and performance targets for directors including Long
Term Plan awards.
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significant changes to our
assessment of the level of risk
relating to the recoverability
of the parent company’s
investment in United Utilities
PLC compared to FY22
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Description of the Key Audit Matter
Our response to the risk
The carrying amount of the parent company’s investment
We performed the tests below rather than seeking to rely on any of
in United Utilities PLC represents 98% (FY22: 99%) of the
the company’s controls because testing for recoverability through
company’s total assets. The recoverability is not at a high
detailed testing is inherently the most effective means of obtaining
risk of significant misstatement or subject to significant
audit evidence.
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 to address the risk included:
− Tests of detail: compared the carrying amount of the investment
with the expected value of the business based on the regulatory
capital value (a recognised method of valuation within the industry).
Communications with United Utilities Group PLC’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• Our approach to the audit of the recoverability of the parent company’s investment in United Utilities PLC.
• Our conclusions on the appropriateness of key assumptions used.
• The adequacy of the disclosures.
Areas of particular auditor judgement
We identified the following as the area of particular auditor judgement:
• The valuation of the regulatory capital value.
Our results
(FY22: no impairment).
Based on the risk identified and procedures performed, we concluded that the recognition of no impairment was appropriate
Further information in the Annual Report and Accounts: See the Audit committee report on page 159 for details on how the Audit
Committee considered the recoverability of the parent company’s investment in United Utilities PLC as an area of significant attention,
page 282 for the accounting policy on the recoverability of the parent company’s investment in United Utilities PLC, and page 252 for
the financial disclosures.
5. Our ability to detect irregularities, and our response
Fraud – 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:
Fraud risk assessment
− 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 and Audit Committee minutes; and
− Considering remuneration incentive schemes and performance targets for directors including Long
Term Plan awards.
4.4 Recoverability of parent company’s investment in United Utilities PLC (parent company)
Fraud – identifying and responding to risks of material misstatement due to fraud
Financial statement elements
Our assessment of risk vs FY22
Our results
FY23
FY22
We have not identified any
FY23: Acceptable
Investment in
United Utilities PLC
£6,326.8m
£6,326.8m
FY22: Acceptable
Fraud risks
As required by auditing standards, and taking into account possible pressures to meet profit targets
and our overall knowledge of the control environment, we performed procedures to address the risk of
management override of controls, in particular: the risk that group management may be in a position to
make inappropriate accounting entries, and the risk of bias in accounting estimates such as provisions
for household customer debt and capitalisation of costs relating to the capital programme.
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Link to KAMS
We also identified fraud risks related to inappropriate provision for household customer debt and
inappropriate capitalisation of costs relating to the capital programme, which are set out in section 4 of
this report.
We also performed procedures including:
Procedures to
address fraud risks
− 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.
Laws and regulations – identifying and responding to risks of material misstatement relating to compliance with laws
and regulations
Laws and regulations
risk assessment
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.
Risk communications
We communicated identified laws and regulations throughout our team and remained alert to any
indications of non-compliance throughout the audit.
The potential effect of these laws and regulations on the financial statements varies considerably.
Direct laws context
and link to audit
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.
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 other management 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.
Most significant
indirect law/
regulation areas
Context
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. In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud 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.
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KPMG LLP’s Independent Auditor’s Report
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6. Our determination of materiality
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative
considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the
effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.
What we mean
A quantitative reference for the purpose of planning and performing our audit.
Basis for determining materiality and judgements applied
Materiality for the group financial statements as a whole was set at £16.5m (FY22: £16.5m). This was
determined with reference to a range of benchmarks of revenue (0.9%), total assets (0.1%) and operating
profit (3.7%).
Last year we determined our materiality to be £16.5m based on a primary benchmark of normalised
profit before tax, of which it represented 5.6%. United Utilities is facing rising finance costs, as a result of
the current high-inflationary environment, which is causing profit before tax to decline. Using the same
benchmark this year would cause a significant reduction in our materiality. In our view, there has been no
change to the underlying operations of the business, nor a change in investor perception around overall
performance, therefore we have determined materiality with reference to a range of metrics. We have
determined materiality for FY23 to be £16.5m in line with the prior year. This represents 0.9% of revenue,
0.1% of total assets and 3.7% of operating profit (FY22: 0.9% of revenue, 0.1% of total assets and 3.7% of
operating profit).
When using a benchmark of either revenue, total assets, or profit before tax to determine overall
materiality, KPMG’s approach for listed entities considers a guideline range of 0.5-1%, 0.5-1% and 3-5%
respectively.
Materiality for the parent company financial statements as a whole was set at £8.0m (FY22: £8.5m),
determined with reference to a benchmark of parent company total assets, of which it represents 0.1%
(FY22: 0.1%).
What we mean
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.
Basis for determining performance materiality and judgements applied
We have considered performance materiality at a level of 75% (FY22: 75%) of materiality for United
Utilities Group PLC group financial statements as a whole to be appropriate.
The parent company performance materiality was set at £6.0m (FY22: £6.3m), which equates to 75%
(FY22: 75%) of materiality for the parent company financial statements as a whole.
We applied this percentage in our determination of performance materiality because we did not identify
any factors indicating an elevated level of risk.
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial from
a quantitative point of view. We may become aware of misstatements below this threshold which
could alter the nature, timing and scope of our audit procedures, for example if we identify smaller
misstatements which are indicators of fraud.
This is also the amount above which all misstatements identified are communicated to United Utilities
Group PLC’s Audit Committee.
Basis for determining the audit misstatement posting threshold and judgements applied
We set our audit misstatement posting threshold at 3.0% (FY22: 3.0%) of our materiality for the group
financial statements. We also report to the Audit Committee any other identified misstatements that
warrant reporting on qualitative grounds.
£16.5m
(FY22: £16.5m)
Materiality for the
group financial
statements as a whole
£12.3m
(FY22: £12.3m)
Performance
materiality
£0.5m
(FY22: £0.5m)
Audit misstatement
posting threshold
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6. Our determination of materiality
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative
considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the
effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.
What we mean
A quantitative reference for the purpose of planning and performing our audit.
Basis for determining materiality and judgements applied
Materiality for the group financial statements as a whole was set at £16.5m (FY22: £16.5m). This was
determined with reference to a range of benchmarks of revenue (0.9%), total assets (0.1%) and operating
profit (3.7%).
£16.5m
(FY22: £16.5m)
Materiality for the
group financial
statements as a whole
Last year we determined our materiality to be £16.5m based on a primary benchmark of normalised
profit before tax, of which it represented 5.6%. United Utilities is facing rising finance costs, as a result of
the current high-inflationary environment, which is causing profit before tax to decline. Using the same
benchmark this year would cause a significant reduction in our materiality. In our view, there has been no
change to the underlying operations of the business, nor a change in investor perception around overall
performance, therefore we have determined materiality with reference to a range of metrics. We have
determined materiality for FY23 to be £16.5m in line with the prior year. This represents 0.9% of revenue,
0.1% of total assets and 3.7% of operating profit (FY22: 0.9% of revenue, 0.1% of total assets and 3.7% of
When using a benchmark of either revenue, total assets, or profit before tax to determine overall
materiality, KPMG’s approach for listed entities considers a guideline range of 0.5-1%, 0.5-1% and 3-5%
Materiality for the parent company financial statements as a whole was set at £8.0m (FY22: £8.5m),
determined with reference to a benchmark of parent company total assets, of which it represents 0.1%
operating profit).
respectively.
(FY22: 0.1%).
What we mean
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.
Basis for determining performance materiality and judgements applied
We have considered performance materiality at a level of 75% (FY22: 75%) of materiality for United
Utilities Group PLC group financial statements as a whole to be appropriate.
The parent company performance materiality was set at £6.0m (FY22: £6.3m), which equates to 75%
(FY22: 75%) of materiality for the parent company financial statements as a whole.
We applied this percentage in our determination of performance materiality because we did not identify
any factors indicating an elevated level of risk.
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial from
a quantitative point of view. We may become aware of misstatements below this threshold which
could alter the nature, timing and scope of our audit procedures, for example if we identify smaller
misstatements which are indicators of fraud.
This is also the amount above which all misstatements identified are communicated to United Utilities
Group PLC’s Audit Committee.
Basis for determining the audit misstatement posting threshold and judgements applied
We set our audit misstatement posting threshold at 3.0% (FY22: 3.0%) of our materiality for the group
financial statements. We also report to the Audit Committee any other identified misstatements that
warrant reporting on qualitative grounds.
£12.3m
(FY22: £12.3m)
Performance
materiality
£0.5m
(FY22: £0.5m)
Audit misstatement
posting threshold
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The overall materiality for the group financial statements of £16.5m (FY22: £16.5m) compares as follows to the main financial
statement caption amounts:
Financial statement caption
£1,824.4m
£1,862.7m
£256.3m
£439.9m
£14,527.2m
£14,437.0m
Group materiality as % of caption
0.90%
0.89%
6.4%
3.75%
0.11%
0.11%
Total group revenue
Group profit before tax
Total group assets
FY23
FY22
FY23
FY22
FY23
FY22
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7. The scope of our audit
What we mean
How the group audit team determined the procedures to be performed across the group.
The group has 23 (FY22: 25) reporting components. In order to determine the work performed at the
reporting component level, we identified those components which we considered to be of individual
financial significance and those remaining components on which we required procedures to be
performed to provide us with the evidence we required in order to conclude on the group financial
statements as a whole.
We determined individually financially significant components as those contributing at least 5% (FY22:
5%) of total assets or 1% (FY22: 1%) of total revenue or 3% (FY22: 3%) of total liabilities. We selected total
assets, total revenue, and total liabilities because these are the most representative of the relative size of
the components. We identified 4 (FY22: 5) components as individually financially significant components
and performed full scope audits on these components.
Group scope
The components within the scope of our work accounted for the following percentages of the group’s
results, with the prior year comparatives indicated in brackets:
Scope
Full scope audit
Number of components
Range of materiality applied
4 (5) £8.0m – £16.2m (£6.0m – £15.8m)
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 work on 4
of the 4 components (FY22: 5 of the 5 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.
The components within the scope of our work accounted for the percentages illustrated in section 2 –
Group Scope.
228
unitedutilities.com/corporate
Stock code: UU.
229
KPMG LLP’s Independent Auditor’s Report
to the members of United Utilities Group PLC
8. 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.
All other information
Our responsibility
Our reporting
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 or inconsistencies in the
other information.
Strategic report and directors’ report
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as follows:
• 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
Our responsibility
Our reporting
We are required to form an opinion as to whether the part of the Directors’
Remuneration Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Corporate governance disclosures
Our responsibility
Our reporting
We are required to perform procedures to identify whether there is a
material inconsistency between the financial statements and our audit
knowledge, and:
Based on those procedures, we have concluded that
each of these disclosures 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 also 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.
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230
unitedutilities.com/corporate
KPMG LLP’s Independent Auditor’s Report
to the members of United Utilities Group PLC
8. 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.
All other information
Our responsibility
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
Based solely on that work we have not identified
material misstatements or inconsistencies in the
other information.
or our audit knowledge.
Our reporting
Strategic report and directors’ report
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as follows:
•
•
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
Our responsibility
Our reporting
We are required to form an opinion as to whether the part of the Directors’
Remuneration Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Corporate governance disclosures
Our responsibility
Our reporting
We are required to perform procedures to identify whether there is a
material inconsistency between the financial statements and our audit
knowledge, and:
Based on those procedures, we have concluded that
each of these disclosures 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 also required to review the part of the Corporate Governance
We have nothing to report in this respect.
Statement relating to the group’s compliance with the provisions of the UK
Corporate Governance Code specified by the Listing Rules for our review.
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Other matters on which we are required to report by exception
Our responsibility
Our reporting
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
We have nothing to report in these respects.
• 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.
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• we have not identified material misstatements in the strategic report and the directors’ report;
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 215, 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.
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
24 May 2023
230
unitedutilities.com/corporate
Stock code: UU.
231
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
Profit on disposal of subsidiary
Share of losses of joint venture
Profit before tax
Current tax credit
Deferred tax charge
Tax
Profit/(loss) 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
7
13
8
8
8
9
9
10
2023
£m
2022
£m
1,824.4
1,862.7
(192.2)
(556.4)
(22.7)
4.8
(423.6)
(193.5)
(184.3)
(461.7)
(23.4)
4.4
(418.2)
(169.5)
(1,383.6)
(1,252.7)
440.8
47.0
(262.7)
–
(215.7)
31.2
–
256.3
25.2
(76.6)
(51.4)
204.9
610.0
19.4
(187.8)
0.1
(168.3)
–
(1.8)
439.9
65.8
(562.5)
(496.7)
(56.8)
30.0p
30.0p
(8.3)p
(8.3)p
45.51p
43.50p
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Consolidated income statement
for the year ended 31 March
Consolidated statement of comprehensive income
for the year ended 31 March
Profit/(loss) 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 that may be reclassified to profit or loss
Reclassification of items taken directly to equity
Tax reclassified to income statement
(1,383.6)
(1,252.7)
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 (losses)/gains 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
Tax on items taken directly to equity
Other comprehensive income that will not be reclassified to profit or loss
Total comprehensive income
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n
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a
a
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n
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c
i
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a
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l
s
s
2023
£m
204.9
(50.6)
12.7
(36.6)
7.0
(67.5)
(445.3)
4.8
6.3
151.5
(282.7)
(145.3)
2022
£m
(56.8)
107.6
(27.0)
(0.9)
0.2
79.9
313.6
(4.1)
–
(109.4)
200.1
223.2
Note
1,824.4
1,862.7
2023
£m
(192.2)
(556.4)
(22.7)
4.8
(423.6)
(193.5)
440.8
47.0
(262.7)
–
(215.7)
31.2
–
256.3
25.2
(76.6)
(51.4)
204.9
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)
30.0p
30.0p
(8.3)p
(8.3)p
45.51p
43.50p
2
3
4
4
4
4
5
6
A6
7
13
8
8
8
9
9
10
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
Profit on disposal of subsidiary
Share of losses of joint venture
Profit before tax
Current tax credit
Deferred tax charge
Tax
Profit/(loss) after tax
Earnings per share
Basic
Diluted
Dividend per ordinary share
All of the results shown above relate to continuing operations.
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Stock code: UU.
233
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
2023
£m
Group
2022
£m
2023
£m
Company
2022
£m
11
12
13
14
15
18
A4
14
15
16
A4
20
17
8
A4
20
17
19
A4
22
21
12,570.7
142.3
16.5
1.2
75.7
600.8
428.6
13,835.8
13.1
190.5
98.9
340.4
48.5
691.4
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
14,527.2
14,437.0
–
–
–
–
6,326.8
6,326.8
–
75.0
–
–
–
75.0
–
–
6,401.8
6,401.8
–
30.1
–
–
–
–
20.2
–
–
–
30.1
6,431.9
20.2
6,422.0
(892.4)
(8,259.0)
(2,048.1)
(243.1)
(835.2)
(7,671.0)
(2,148.1)
(136.7)
–
–
(1,864.8)
(1,799.9)
–
–
–
–
(11,442.6)
(10,791.0)
(1,864.8)
(1,799.9)
(376.7)
(176.4)
(13.1)
(9.7)
(575.9)
(12,018.5)
2,508.7
499.8
2.9
353.4
1,652.6
2,508.7
(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
(5.6)
(13.1)
–
–
–
(5.6)
(1,870.4)
4,561.5
499.8
2.9
1,033.3
3,025.5
4,561.5
–
–
–
(13.1)
(1,813.0)
4,609.0
499.8
2.9
1,033.3
3,073.0
4,609.0
These financial statements for the group and United Utilities Group PLC (company number: 6559020) were approved by the board of
directors on 24 May 2023 and signed on its behalf by:
Louise Beardmore
Chief Executive Officer
Phil Aspin
Chief Financial Officer
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Consolidated and company statements of
financial position at 31 March
Consolidated statement of changes in equity
for the year ended 31 March
Total
£m
2,957.4
204.9
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204.9
Share
capital
£m
499.8
Share
premium
account
£m
Other
reserves*
£m
Retained
earnings
£m
2.9
416.2
2,038.5
(445.3)
(445.3)
4.8
–
–
153.1
–
–
(82.5)
(301.2)
4.6
(6.8)
4.8
(50.6)
6.3
164.2
(36.6)
7.0
(145.3)
(301.2)
4.6
(6.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(50.6)
6.3
11.1
(36.6)
7.0
(62.8)
–
–
–
At 1 April 2022
Profit after tax
Other comprehensive income
Remeasurement losses 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 8)
Reclassification of items taken directly to equity
Tax reclassified to income statement (see note 8)
Total comprehensive income
Dividends (see note 10)
Equity-settled share-based payments (see note 3)
Purchase of shares to satisfy exercise of share options
Interests in joint ventures and other investments
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
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Note
2023
£m
Group
2022
£m
2023
£m
Company
2022
£m
14,527.2
14,437.0
30.1
6,431.9
20.2
6,422.0
11
12
13
14
15
18
A4
14
15
16
A4
20
17
8
A4
20
17
19
A4
22
21
12,570.7
142.3
16.5
1.2
75.7
600.8
428.6
13,835.8
13.1
190.5
98.9
340.4
48.5
691.4
(892.4)
(8,259.0)
(2,048.1)
(243.1)
(376.7)
(176.4)
(13.1)
(9.7)
(575.9)
(12,018.5)
2,508.7
499.8
2.9
353.4
1,652.6
2,508.7
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
(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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,326.8
6,326.8
75.0
75.0
6,401.8
6,401.8
30.1
20.2
(1,864.8)
(1,799.9)
(5.6)
(13.1)
(5.6)
(1,870.4)
4,561.5
499.8
2.9
1,033.3
3,025.5
4,561.5
(13.1)
(1,813.0)
4,609.0
499.8
2.9
1,033.3
3,073.0
4,609.0
(11,442.6)
(10,791.0)
(1,864.8)
(1,799.9)
These financial statements for the group and United Utilities Group PLC (company number: 6559020) were approved by the board of
directors on 24 May 2023 and signed on its behalf by:
Louise Beardmore
Chief Executive Officer
Phil Aspin
Chief Financial Officer
At 31 March 2023
499.8
2.9
353.4
1,652.6
2,508.7
At 1 April 2021
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 effectiveness
Cost of hedging – cross-currency basis spread adjustment
Tax on items taken directly to equity
Reclassification of items taken directly to equity
Tax reclassified to income statement (see note 8)
Total comprehensive income
Dividends (see note 10)
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
107.6
(27.0)
(0.9)
0.2
79.9
–
–
–
(56.8)
(56.8)
313.6
313.6
(4.1)
–
(4.1)
107.6
(109.4)
(136.4)
–
–
143.3
(295.5)
4.8
(6.1)
(0.9)
0.2
223.2
(295.5)
4.8
(6.1)
At 31 March 2022
499.8
2.9
416.2
2,038.5
2,957.4
* 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 21.
234
unitedutilities.com/corporate
Stock code: UU.
235
Company statement of changes in equity
for the year ended 31 March
At 1 April 2022
Profit after tax
Total comprehensive income
Dividends (see note 10)
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
3,073.0
4,609.0
–
–
–
–
–
–
–
–
–
–
255.9
255.9
(301.2)
4.6
(6.8)
255.9
255.9
(301.2)
4.6
(6.8)
At 31 March 2023
499.8
2.9
1,033.3
3,025.5
4,561.5
At 1 April 2021
Profit after tax
Total comprehensive income
Dividends (see note 10)
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
–
–
–
–
–
–
–
–
–
–
3,091.3
278.5
278.5
(295.5)
4.8
(6.1)
Total
£m
4,627.3
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 31 March 2023, 31 March 2022 and 31 March 2021, 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 £255.9 million (2022: £278.5 million).
U
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3
1
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2
3
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unitedutilities.com/corporate
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 2023
499.8
2.9
1,033.3
3,025.5
4,561.5
At 1 April 2022
Profit after tax
Total comprehensive income
Dividends (see note 10)
Equity-settled share-based payments (see note 3)
Purchase of shares to satisfy exercise of share options
At 1 April 2021
Profit after tax
Total comprehensive income
Dividends (see note 10)
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
3,073.0
4,609.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Share
capital
£m
499.8
Share
premium
account
£m
2.9
Other
reserves
£m
1,033.3
Total
£m
255.9
255.9
(301.2)
4.6
(6.8)
Total
£m
4,627.3
278.5
278.5
(295.5)
4.8
(6.1)
–
–
–
–
–
–
–
–
–
–
255.9
255.9
(301.2)
4.6
(6.8)
Retained
earnings
£m
3,091.3
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 31 March 2023, 31 March 2022 and 31 March 2021, 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 £255.9 million (2022: £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
Proceeds from disposal of subsidiary
Net cash used in investing activities
Financing activities
Proceeds from borrowings net of issuance costs
Repayment of borrowings
Note
A1
A1
A1
20
A6
7
Dividends paid to equity holders of the company
10
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
16
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F
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a
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c
i
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a
l
l
s
s
2023
£m
883.1
(118.2)
15.8
(10.8)
17.6
787.5
(675.9)
(18.1)
5.1
5.0
90.5
Group
2022
£m
1,061.6
(121.9)
3.6
(8.9)
–
934.4
(609.0)
(19.5)
1.8
(13.0)
–
(593.4)
(639.7)
501.1
(278.1)
(301.2)
(6.8)
(85.0)
(1.3)
107.8
220.1
327.9
173.7
(681.8)
(295.5)
(6.1)
(809.7)
1.5
(513.5)
733.6
220.1
2023
£m
306.5
(63.0)
–
–
8.6
252.1
–
–
–
–
–
–
55.9
–
(301.2)
(6.8)
(252.1)
–
–
–
–
Company
2022
£m
301.2
(19.7)
–
–
–
281.5
–
–
–
–
–
–
20.1
–
(295.5)
(6.1)
(281.5)
–
–
–
–
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2
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2
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unitedutilities.com/corporate
Stock code: UU.
237
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
242
242
242
4
A1
Operating profit
Consolidated statement of cash flows – further
analysis
244
259
Financing – information relating to how we finance our business
5
6
9
10
16
Investment income
Finance expense
Earnings per share
Dividends
Cash and cash equivalents
245
245
249
249
254
17
22
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
14
15
16
Inventories
Trade and other receivables
Cash and cash equivalents
253
253
254
20
A6
Trade and other payables
Related party transactions
Tax – information relating to our current and deferred taxation
8
Tax
246
Employees – information relating to the costs associated with employing our people
3
18
Directors and employees
Retirement benefits
242
255
A5 Retirement benefits
Long-term assets – information relating to our long-term operational and investment assets
7
11
12
Profit on disposal of subsidiary
Property, plant and equipment
Intangible assets
Other – other useful information
19
21
23
Provisions
Other reserves
Contingent liabilities
246
250
252
256
257
258
13
18
A5
Joint ventures and other investments
Retirement benefits
Retirement benefits
24
A7
A8
Events after the reporting period
Accounting policies
Subsidiaries and other group undertakings
255
258
260
262
265
257
279
273
252
255
273
258
280
286
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Guide to detailed financial statements disclosures
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
Operating profit
analysis
Consolidated statement of cash flows – further
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
Working capital – information relating to the day-to-day working capital of our business
Borrowings
Share capital
Net debt
Borrowings
Financial risk management
20
A6
Trade and other payables
Related party transactions
Tax – information relating to our current and deferred taxation
8
Tax
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
Profit on disposal of subsidiary
Property, plant and equipment
Intangible assets
Other – other useful information
Provisions
Other reserves
Contingent liabilities
Joint ventures and other investments
Retirement benefits
Retirement benefits
Events after the reporting period
Accounting policies
Subsidiaries and other group undertakings
242
242
242
245
245
249
249
254
253
253
254
246
242
255
246
250
252
256
257
258
4
A1
17
22
A2
A3
A4
13
18
A5
24
A7
A8
Page
244
259
255
258
260
262
265
257
279
273
252
255
273
258
280
286
1
2
3
5
6
9
10
16
14
15
16
3
18
7
11
12
19
21
23
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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
UK-adopted international accounting standards and in conformity
with the requirements of the Companies Act 2006. 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. 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
plausible, 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 of £500 million arising in the assessment
period; elevated levels of bad debt of £15 million per annum;
outcome delivery incentive penalties equivalent to 1.0 per cent of
RoRE per annum; 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 plausible, 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 2023, 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.
Future accounting developments
Certain new accounting standards, amendments to accounting
standards and interpretations have been published that are not
mandatory for 31 March 2023 reporting periods and have not
been early adopted by the group. These standards, amendments
or interpretations are not expected to have a material impact
on the entity in the current or future reporting periods and on
foreseeable future transactions.
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 critical accounting
judgements and key sources of estimation uncertainty. In
determining which of these are significant, the group has
considered the extent to which the estimation gives rise to a
significant risk of resulting in a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
Considered in this context, the group considers the accounting
estimates for retirement benefits to be significant areas of
estimation uncertainty in preparing the financial statements.
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 £216.3 million (2022: £271.1 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 2023. 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.
238
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239
Accounting policies
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 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 £29.5 million (2022:
£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)
and the required adjustment to revenue would have been
£18.6 million (2022: £12.4 million) lower.
Accounting estimate** – In accordance with IFRS 15 ‘Revenue
from contracts with customers’, revenue is only recognised
where it is deemed probable of recovery. Any gross debt that
is not expected to be recovered through future cash collection
must be provided against through either an allowance for
expected credit losses (non-collection) or credit note provision
(incorrectly billed).
For any period, the credit note provision in respect of non-
household customers is built up across two types of loss, which
can be incurred against non-household revenue: allowances
pending payment and future allowances that we could expect
to receive in relation to periods from April 2017 to March 2023.
The allowances relate to data changes following the final bill
issued for a period (received approximately 16 months after the
initial estimate for the period).
At 31 March 2023, the credit note provision in respect of
non-household revenue was £24.0 million, compared with
£23.8 million at 31 March 2022.
To forecast future allowances, historic information has been
used. Determining the ageing analysis of allowances raised since
the opening of the non-household market is not straightforward,
and work is ongoing between wholesalers and retailers to
improve the quality of market data. It is therefore reasonable
to expect that the value of allowances relating to final bills for
a period (referred to as ‘RF’ within the market mechanisms and
received around 16 months after the initial estimate) to reduce
over time, as data for more recent periods since the opening
of the water retail market should not be subject to the same
legacy issues as earlier periods. Had it been assumed that future
average daily allowances continue at the current daily average,
the credit note provision recorded at 31 March 2023 would have
been £2.0 million higher than that recorded.
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 (‘ECL’) 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 2023, an allowance for expected credit
losses relating to household customer debt of £81.5 million
(2022: £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 £2.2 million (2022: £1.1 million) or reduced by
£0.2 million (2022: £0.5 million), respectively.
In determining the allowance for expected credit losses, we have
applied the group’s provisioning percentages, which are derived
from historic experience, to the aged debt bandings to calculate
the bad debt charge and the expected credit loss position. The
adequacy of the ECL allowance is then evaluated using analysis
against the average collection over the last three years, which is
considered to give a reasonable forecast of cash collection for
use in the forward-looking ECL assessment.
We have also considered the higher level of uncertainty around
how economic conditions may impact the recoverability of
household receivables for a significant proportion of the group’s
customer base. A range of scenarios have been used to inform a
probability-based assessment of the allowance for expected credit
losses. These take account of cash collection rates in the current
year, as well as in recent years, incorporating the current levels of
economic uncertainty in order to provide a range of views as to
how recoverability of household receivables may be impacted by
different conditions.
This supports a charge equivalent to around 1.8 per cent of
household revenue recorded during the period, which is broadly
consistent with the position at 31 March 2022.
Had future cash collection been assessed based on the average
cash collection rates for the current year only, the allowance
for expected credit losses charged to the income statement
would have been 1.8 per cent of household revenue resulting
in an increase in the charge of £0.1 million, with similar results
based on using average cash collection from the last two or
the last four years. At 31 March 2023, a charge of 1.8 per cent
is considered to be appropriate given prevailing levels of
uncertainty and recognising the level of estimation uncertainty
associated with the assumptions made in forecasting the year
end debt position upon which the allowance for expected credit
losses is based.
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 2023 was £141.0 million (2022: £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 £4.7million
(2022: £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.
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Accounting policies
Revenue recognition and allowance for doubtful receivables
negatively. At 31 March 2023, an allowance for expected credit
Accounting estimate** – The group recognises revenue generally
losses relating to household customer debt of £81.5 million
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,
(2022: £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 £2.2 million (2022: £1.1 million) or reduced by
revenue recognition is delayed until such time as collectability is
£0.2 million (2022: £0.5 million), respectively.
deemed probable. There are two 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 £29.5 million (2022:
£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)
and the required adjustment to revenue would have been
£18.6 million (2022: £12.4 million) lower.
Accounting estimate** – In accordance with IFRS 15 ‘Revenue
from contracts with customers’, revenue is only recognised
where it is deemed probable of recovery. Any gross debt that
is not expected to be recovered through future cash collection
must be provided against through either an allowance for
expected credit losses (non-collection) or credit note provision
(incorrectly billed).
For any period, the credit note provision in respect of non-
household customers is built up across two types of loss, which
can be incurred against non-household revenue: allowances
pending payment and future allowances that we could expect
to receive in relation to periods from April 2017 to March 2023.
The allowances relate to data changes following the final bill
issued for a period (received approximately 16 months after the
initial estimate for the period).
At 31 March 2023, the credit note provision in respect of
non-household revenue was £24.0 million, compared with
£23.8 million at 31 March 2022.
In determining the allowance for expected credit losses, we have
applied the group’s provisioning percentages, which are derived
from historic experience, to the aged debt bandings to calculate
the bad debt charge and the expected credit loss position. The
adequacy of the ECL allowance is then evaluated using analysis
against the average collection over the last three years, which is
considered to give a reasonable forecast of cash collection for
use in the forward-looking ECL assessment.
We have also considered the higher level of uncertainty around
how economic conditions may impact the recoverability of
household receivables for a significant proportion of the group’s
customer base. A range of scenarios have been used to inform a
probability-based assessment of the allowance for expected credit
losses. These take account of cash collection rates in the current
year, as well as in recent years, incorporating the current levels of
economic uncertainty in order to provide a range of views as to
how recoverability of household receivables may be impacted by
different conditions.
This supports a charge equivalent to around 1.8 per cent of
household revenue recorded during the period, which is broadly
consistent with the position at 31 March 2022.
Had future cash collection been assessed based on the average
cash collection rates for the current year only, the allowance
for expected credit losses charged to the income statement
would have been 1.8 per cent of household revenue resulting
in an increase in the charge of £0.1 million, with similar results
based on using average cash collection from the last two or
the last four years. At 31 March 2023, a charge of 1.8 per cent
is considered to be appropriate given prevailing levels of
uncertainty and recognising the level of estimation uncertainty
associated with the assumptions made in forecasting the year
end debt position upon which the allowance for expected credit
losses is based.
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
To forecast future allowances, historic information has been
supplied, including the sales value of an estimate of the units
used. Determining the ageing analysis of allowances raised since
supplied between the dates of the last water meter reading and
the opening of the non-household market is not straightforward,
the billing date. Meters are read on a cyclical basis and the group
and work is ongoing between wholesalers and retailers to
improve the quality of market data. It is therefore reasonable
to expect that the value of allowances relating to final bills for
a period (referred to as ‘RF’ within the market mechanisms and
received around 16 months after the initial estimate) to reduce
over time, as data for more recent periods since the opening
of the water retail market should not be subject to the same
legacy issues as earlier periods. Had it been assumed that future
average daily allowances continue at the current daily average,
the credit note provision recorded at 31 March 2023 would have
been £2.0 million higher than that recorded.
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 2023 was £141.0 million (2022: £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 £4.7million
Accounting estimate** – At each reporting date, the company
(2022: £5.0 million) higher or lower respectively. For customers
and each of its subsidiaries evaluate the estimated recoverability
who do not have a meter, the receivable billed and revenue
of trade receivables and record allowances for expected credit
recognised is dependent on the rateable value of the property
as assessed by an independent rating officer.
losses (‘ECL’) 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
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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
of depreciation or be an indication of potential impairment
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. The group further mitigates the financial
exposure arising from climate-related risks through the use of
insurance policies which insure against costs incurred as a result
of major environmental incidents.
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 52 per cent of total spend in relation to
infrastructure assets during the year. A change of +/- 1 per cent
would have resulted in £4.0 million (2022: £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 £2.5 million
(2022: £2.3 million) less/more expenditure being charged to the
income statement during the period.
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 £423.6 million (2022: £418.2 million). A 10 per cent
increase in average asset lives would have resulted in a
£41.4 million (2022: £38.2 million) reduction in this figure and a
10 per cent decrease in average asset lives would have resulted
in a £39.0 million (2022: £41.6 million) increase in this figure.
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 the impact of financial risks on profit before tax and equity,
driven in part by derivative financial instruments, are included in
note A4.
* Judgements/estimates that could reasonably give rise to a material
adjustment to the carrying value of assets or liabilities in the short term.
** Other judgements/estimates considered less likely to give rise to a
material adjustment to the carrying value of assets or liabilities in the
short term.
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 and the measurement
bases of the assets and liabilities across a number of areas,
predominantly in respect of the valuation of the property, plant
and equipment held by the group.
240
unitedutilities.com/corporate
Stock code: UU.
241
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 a range of financial and
operational key performance indicators (KPIs), with operational KPIs aligned to the group’s purpose and financial KPIs focused on
profitability and financial sustainability. The board reviews revenue, operating profit and gearing, along with operational drivers at a
consolidated level. 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
2023
£m
758.1
914.7
83.0
68.6
2022
£m
776.5
946.3
68.9
71.0
1,824.4
1,862.7
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 diversion 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
2023
£m
0.8
1.6
0.4
0.6
1.8
5.2
2022
£m
0.8
1.2
0.3
0.7
1.8
4.8
Further information about the remuneration of individual directors and details of their pension arrangements are provided in the
Directors’ remuneration report on pages 170 to 203.
Remuneration of key management personnel
Salaries and short-term employee benefits
Share-based payment charge
2023
£m
6.4
3.4
9.8
2022
£m
6.2
2.6
8.8
Key management personnel comprises all directors and certain senior managers who are members of the executive team.
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242
unitedutilities.com/corporate
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 a range of financial and
operational key performance indicators (KPIs), with operational KPIs aligned to the group’s purpose and financial KPIs focused on
profitability and financial sustainability. The board reviews revenue, operating profit and gearing, along with operational drivers at a
consolidated level. 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 diversion 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.
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3 Directors and employees
Directors’ remuneration
Fees to non-executive directors
Salaries
Benefits
Bonus
Share-based payment charge
Directors’ remuneration report on pages 170 to 203.
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.
2023
£m
758.1
914.7
83.0
68.6
2022
£m
776.5
946.3
68.9
71.0
1,824.4
1,862.7
2023
£m
0.8
1.6
0.4
0.6
1.8
5.2
2023
£m
6.4
3.4
9.8
2022
£m
0.8
1.2
0.3
0.7
1.8
4.8
2022
£m
6.2
2.6
8.8
3 Directors and employees continued
Staff costs (including directors)
Group
Wages and salaries(1)
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
Staff costs
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2023
£m
317.4
30.7
(0.2)
8.5
29.2
385.6
(193.4)
192.2
2022
£m
302.9
28.2
0.4
9.6
26.1
367.2
(182.9)
184.3
Note:
(1) Wages and salaries excluding non-permanent staff was £274.7 million (2022: £260.3 million).
Included within staff costs were £(0.2) million (2022: £0.4 million) of restructuring costs.
The total expense included within staff costs in respect of equity-settled share-based payments was £4.6 million (2022: £4.8 million).
The company operates several share option schemes, details of which are given on pages 182 to 192 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.
2023
number
2022
number
5,975
5,728
242
unitedutilities.com/corporate
Stock code: UU.
243
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
Materials
Power
Hired and contracted services
Property rates
Regulatory fees
Insurance
Accrued innovation costs
Loss on disposal of property, plant and equipment
Cost of properties disposed
Other expenses
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Allowance for expected credit losses – trade and other receivables
Allowance for expected credit losses – trade and other receivables (see note 15)
Other income
Other income
Depreciation and amortisation expense
Depreciation of property, plant and equipment (see note 11)
Amortisation of other intangible assets (see note 12)
2023
£m
132.7
130.8
103.7
87.1
36.7
19.7
6.1
4.2
1.4
34.0
556.4
22.7
22.7
(4.8)
(4.8)
385.5
38.1
423.6
2022
£m
90.8
99.6
95.4
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
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1
M
a
r
c
h
2
0
2
3
Included within operating costs for the year are £8.4 million relating to operational incidents over the dry summer period in 2022,
and £11.1 million relating to the group’s response to periods of extreme cold weather over the winter of 2022/23, including a rapid
freeze-thaw in December 2022 leading to burst pipes. The costs associated with this response include the cost of emergency network
repairs, customer compensation where short-term supply interruptions were experienced, and the provision of bottled water.
Research and development expenditure for the year ended 31 March 2023, was £1.2 million (2022: £1.2 million). In addition, £6.1 million
(2022: £5.9 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 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
2023
£’000
2022
£’000
215
642
857
75
159
1,091
169
506
675
64
116
855
244
unitedutilities.com/corporate
Notes to the financial statements
Other operating costs
Materials
Power
Hired and contracted services
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 15)
Other income
Other income
Depreciation and amortisation expense
Depreciation of property, plant and equipment (see note 11)
Amortisation of other intangible assets (see note 12)
U
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a
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t
a
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m
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s
f
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h
e
y
e
a
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e
n
d
e
d
3
1
M
a
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c
h
2
0
2
3
Included within operating costs for the year are £8.4 million relating to operational incidents over the dry summer period in 2022,
and £11.1 million relating to the group’s response to periods of extreme cold weather over the winter of 2022/23, including a rapid
freeze-thaw in December 2022 leading to burst pipes. The costs associated with this response include the cost of emergency network
repairs, customer compensation where short-term supply interruptions were experienced, and the provision of bottled water.
Research and development expenditure for the year ended 31 March 2023, was £1.2 million (2022: £1.2 million). In addition, £6.1 million
(2022: £5.9 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 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
2023
£m
132.7
130.8
103.7
87.1
36.7
19.7
6.1
4.2
1.4
34.0
556.4
22.7
22.7
(4.8)
(4.8)
385.5
38.1
423.6
2022
£m
90.8
99.6
95.4
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
2023
£’000
2022
£’000
215
642
857
75
159
1,091
169
506
675
64
116
855
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)
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a
l
l
s
s
2023
£m
11.5
4.7
28.7
2.1
47.0
2023
£m
497.7
497.7
(213.1)
224.7
11.6
(4.2)
0.4
(3.8)
(146.0)
(32.8)
(62.2)
(1.8)
(242.8)
(235.0)
262.7
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
Notes:
(1)
Includes a £463.5 million (2022: £227.9 million) non-cash inflation uplift expense repayable on maturity in relation to the group’s index-linked debt and
£1.5 million (2022: £1.6 million) interest expense on lease liabilities, representing the unwinding of the discounting applied to future lease payments.
(2) Includes foreign exchange losses of £20.6 million (2022: £4.3 million losses). These gains/losses are largely offset by fair value losses/gains on
derivatives.
(3) Under the provisions of IFRS 9 ‘Financial Instruments’, a £6.3 million gain (2022: nil) 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.
(4) Under the provisions of IFRS 9 ‘Financial Instruments’, a £4.8 million gain (2022: £4.1 million loss) due to changes in the group’s own credit risk is
recognised in other comprehensive income rather than within profit or loss.
(5) 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.
(6) Includes £31.8 million income (2022: £33.2 million) due to net interest on derivatives and debt under fair value option and £56.2 million expense
(2022: £28.3 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 118 to 119.
Interest payable is stated net of £127.5 million (2022: £52.7 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 7.9 per cent (2022: 4.2 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 118 to 119, is calculated by adjusting net finance
expense and investment income of £215.7million (2022: £168.3 million) reported in the income statement to exclude the £235.0 million
of fair value gains in the above table, but include £31.8 million income due to net interest on derivatives and debt under fair value
option, and £56.2 million expense due to non-cash inflation uplift on index-linked derivatives.
244
unitedutilities.com/corporate
Stock code: UU.
245
Notes to the financial statements
7 Profit on disposal of subsidiary
On 29 September 2022, the group sold the entire issued share capital of its wholly owned subsidiary United Utilities Renewable
Energy Limited (UURE) to SEEIT Holdco Limited.
Profit on disposal is shown below and included within the group’s consolidated income statement:
Total consideration received
Total net assets disposed
Fees and transaction costs
Profit on disposal of subsidiary
2023
£m
98.5
(63.8)
(3.5)
31.2
Management does not consider UURE to meet the definition of a discontinued operation as set out in IFRS 5 ‘Non-current assets held
for sale and discontinued operations’ as it was not considered a separate major line of business for the group, UURE accounted for
around £3.5 million of external revenue included in the group’s consolidated financial statements for the period from 1 April 2022 to
29 September 2022 when the disposal occurred (year ended 31 March 2022: £3.5 million), with the majority of UURE’s revenue relating
to a long-term power purchase agreement with UUW that continues in place following the disposal. As such, no separate disclosures
relating to discontinued operations have been included in the group’s income statement or the notes to the financial statements.
The total consideration received in relation to the disposal of UURE is reconciled to the net cash income on disposal of the subsidiary
per the consolidated statement of cash flows as follows:
Total consideration received
Cash and cash equivalents held by UURE disposed of
Fees and transaction costs
Net cash income on disposal of subsidiary
8 Tax
Current tax
UK corporation tax
Adjustments in respect of prior years
Total current tax (credit) 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
2023
£m
98.5
(4.5)
(3.5)
90.5
2022
£m
6.7
(72.5)
(65.8)
92.9
66.9
159.8
402.7
562.5
496.7
2023
£m
–
(25.2)
(25.2)
44.1
32.5
76.6
–
76.6
51.4
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a
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3
1
M
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2
0
2
3
The deferred tax charge of £402.7 million in the prior year reflects the increase in the rate of corporation tax from 19 per cent to
25 per cent from 1 April 2023.
The current tax ‘adjustments in respect of prior years’ of £25.2 million is mainly due to the utilisation of losses, which were previously
being carried forward.
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
2023
£m
256.3
48.7
10.6
7.3
–
(15.2)
51.4
2023
%
19.0
4.1
2.8
–
(5.9)
20.0
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
246
unitedutilities.com/corporate
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Notes to the financial statements
7 Profit on disposal of subsidiary
Energy Limited (UURE) to SEEIT Holdco Limited.
On 29 September 2022, the group sold the entire issued share capital of its wholly owned subsidiary United Utilities Renewable
8 Tax continued
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.
Profit on disposal is shown below and included within the group’s consolidated income statement:
The table below reconciles the notional tax charge at the UK corporation tax rate to the total current tax charge for the year:
Total consideration received
Total net assets disposed
Fees and transaction costs
Profit on disposal of subsidiary
Management does not consider UURE to meet the definition of a discontinued operation as set out in IFRS 5 ‘Non-current assets held
for sale and discontinued operations’ as it was not considered a separate major line of business for the group, UURE accounted for
around £3.5 million of external revenue included in the group’s consolidated financial statements for the period from 1 April 2022 to
29 September 2022 when the disposal occurred (year ended 31 March 2022: £3.5 million), with the majority of UURE’s revenue relating
to a long-term power purchase agreement with UUW that continues in place following the disposal. As such, no separate disclosures
relating to discontinued operations have been included in the group’s income statement or the notes to the financial statements.
The total consideration received in relation to the disposal of UURE is reconciled to the net cash income on disposal of the subsidiary
per the consolidated statement of cash flows as follows:
U
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g
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A
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u
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R
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p
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a
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F
i
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a
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c
i
a
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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
d
3
1
M
a
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c
h
2
0
2
3
Total consideration received
Cash and cash equivalents held by UURE disposed of
Fees and transaction costs
Net cash income on disposal of subsidiary
8 Tax
Current tax
UK corporation tax
Adjustments in respect of prior years
Total current tax (credit) 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
25 per cent from 1 April 2023.
being carried forward.
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
The deferred tax charge of £402.7 million in the prior year reflects the increase in the rate of corporation tax from 19 per cent to
The current tax ‘adjustments in respect of prior years’ of £25.2 million is mainly due to the utilisation of losses, which were previously
The table below reconciles the notional tax charge at the UK corporation tax rate to the total tax charge and total effective tax rate
2023
£m
256.3
48.7
10.6
7.3
–
(15.2)
51.4
2023
%
19.0
4.1
2.8
–
(5.9)
20.0
2023
£m
98.5
(63.8)
(3.5)
31.2
2023
£m
98.5
(4.5)
(3.5)
90.5
2022
£m
6.7
(72.5)
(65.8)
92.9
66.9
159.8
402.7
562.5
496.7
2022
%
19.0
5.1
(1.3)
91.5
(1.4)
112.9
2023
£m
–
(25.2)
(25.2)
44.1
32.5
76.6
–
76.6
51.4
2022
£m
439.9
83.6
22.3
(5.6)
402.7
(6.3)
496.7
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 subsidiary
Income not taxable
Depreciation charged on non-qualifying assets
Current year tax losses carry forward
Current tax (credit) for the year
2023
£m
256.3
48.7
(107.5)
69.8
(25.2)
(48.9)
(6.0)
(24.2)
2.6
–
(5.9)
(12.0)
2.6
80.8
(25.2)
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)
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.
The current year net timing differences in relation to capital spend, i.e. capital allowances less depreciation, was higher in the current
and prior year mainly due to the temporary super-deductions introduced in 2021.
The adjustments to tax charge in respect of prior years of £25.2 million mainly relates to the utilisation of tax losses, which were
previously being carried forward. The £72.5 million in the prior year 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 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 income not taxable is mainly due to the additional 30 per cent element of the temporary capital allowances super-deductions
introduced in 2021.
Depreciation charged on non-qualifying assets relates to accounting depreciation where there is no corresponding tax deduction.
Tax on items recorded within other comprehensive income
Deferred tax
On remeasurement (losses)/gains on defined benefit pension schemes
On net fair value (losses)/gains 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
2023
£m
(152.8)
(19.1)
0.7
(171.2)
2022
£m
111.1
26.1
(1.0)
136.2
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).
246
unitedutilities.com/corporate
Stock code: UU.
247
Notes to the financial statements
8 Tax continued
Current tax asset/(liability)
Group
At 1 April 2021
Charged to the income statement
Adjustments in respect of prior years
Transfer to amounts owed by related parties
Payments/(receipts)
At 31 March 2022
Charged to the income statement
Adjustments in respect of prior years
Transfer from amounts owed by related parties
Payments/(receipts)
At 31 March 2023
Total
£m
6.9
(6.7)
72.5
(6.1)
7.8
74.4
–
25.2
6.1
(6.8)
98.9
The amount owed by Water Plus relating to the surrender of consortium relief tax losses was nil (March 2022: £6.1 million).
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 2021
Charged to the income statement
Change in tax rate
Charged to other comprehensive income
At 31 March 2022
Charged to the income statement
Credited to other comprehensive income
Disposal of deferred tax liability
At 31 March 2023
Accelerated
tax
depreciation
£m
Retirement
benefit
obligations
£m
1,226.6
149.3
414.7
–
1,790.6
78.7
–
(5.4)
1,863.9
241.2
3.5
–
111.1
355.8
7.3
(152.8)
–
210.3
Other
£m
(18.3)
6.9
(12.0)
25.1
1.7
(9.4)
(18.4)
–
(26.1)
Total
£m
1,449.5
159.7
402.7
136.2
2,148.1
76.6
(171.2)
(5.4)
2,048.1
Certain deferred tax assets and liabilities have been offset in accordance with IAS 12 ‘Income Taxes’.
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 relates to
deferred taxation on the pension 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, is not expected to be
significant for the medium term.
The other short-term temporary differences of £26.1 million includes £108.9 million relating to tax losses which have been carried
forward, where permitted under HMRC rules, to be utilised in future periods. 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 2023 or 31 March 2022.
U
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S
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a
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f
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a
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3
1
M
a
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2
0
2
3
248
unitedutilities.com/corporate
The amount owed by Water Plus relating to the surrender of consortium relief tax losses was nil (March 2022: £6.1 million).
The following are the major deferred tax liabilities and assets recognised by the group, and the movements thereon, during the current
Notes to the financial statements
8 Tax continued
Current tax asset/(liability)
Group
At 1 April 2021
Charged to the income statement
Adjustments in respect of prior years
Transfer to amounts owed by related parties
Payments/(receipts)
At 31 March 2022
Charged to the income statement
Adjustments in respect of prior years
Transfer from amounts owed by related parties
Payments/(receipts)
At 31 March 2023
Deferred tax liabilities
and prior year:
Group
At 1 April 2021
Charged to the income statement
Change in tax rate
Charged to other comprehensive income
At 31 March 2022
Charged to the income statement
Credited to other comprehensive income
Disposal of deferred tax liability
At 31 March 2023
U
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U
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i
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i
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s
G
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P
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C
I
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t
e
g
r
a
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d
A
n
n
u
a
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R
e
p
o
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t
a
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d
F
i
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a
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c
i
a
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S
t
a
t
e
m
e
n
t
s
f
o
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e
y
e
a
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e
n
d
e
d
3
1
M
a
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c
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2
0
2
3
Total
£m
6.9
(6.7)
72.5
(6.1)
7.8
74.4
–
25.2
6.1
(6.8)
98.9
Total
£m
1,449.5
159.7
402.7
136.2
2,148.1
76.6
(171.2)
(5.4)
2,048.1
Accelerated
Retirement
benefit
depreciation
obligations
tax
£m
1,226.6
149.3
414.7
–
1,790.6
78.7
–
(5.4)
1,863.9
£m
241.2
3.5
–
111.1
355.8
7.3
(152.8)
–
210.3
Other
£m
(18.3)
6.9
(12.0)
25.1
1.7
(9.4)
(18.4)
–
(26.1)
Certain deferred tax assets and liabilities have been offset in accordance with IAS 12 ‘Income Taxes’.
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 relates to
deferred taxation on the pension 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, is not expected to be
significant for the medium term.
The other short-term temporary differences of £26.1 million includes £108.9 million relating to tax losses which have been carried
forward, where permitted under HMRC rules, to be utilised in future periods. 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 2023 or 31 March 2022.
9 Earnings per share
Profit/(loss) after tax attributable to equity holders of the company – continuing operations
Earnings per share
Basic
Diluted
2023
£m
204.9
2023
pence
30.0
30.0
2022
£m
(56.8)
2022
pence
(8.3)
(8.3)
i
i
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F
n
n
a
a
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c
c
i
i
a
a
l
l
s
s
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 (2022: 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 684.1 million, being the
weighted average number of shares in issue during the year, including dilutive shares (2022: 683.8 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).
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
10 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 2022 at 29.00 pence per share (2021: 28.83 pence)
Interim dividend for the year ended 31 March 2023 at 15.17 pence per share (2022: 14.50 pence)
Proposed final dividend for the year ended 31 March 2023 at 30.34 pence per share (2022: 29.00 pence)
2023
million
681.9
2.2
684.1
2023
£m
197.8
103.4
301.2
206.9
2022
million
681.9
1.9
683.8
2022
£m
196.6
98.9
295.5
197.8
The proposed final dividends for the years ended 31 March 2023 and 31 March 2022, 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 2023 and 31 March 2022.
248
unitedutilities.com/corporate
Stock code: UU.
249
Notes to the financial statements
11 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
2023
£m
12,513.8
56.9
12,570.7
2022
£m
12,087.7
59.8
12,147.5
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 2021
Additions
Transfers
Disposals
At 31 March 2022
Additions
Transfers
Disposals
At 31 March 2023
Accumulated depreciation
At 1 April 2021
Charge for the year
Transfers
Disposals
At 31 March 2022
Charge for the year
Transfers
Disposals
At 31 March 2023
Net book value at 31 March 2022
Net book value at 31 March 2023
363.7
2.5
6.4
(0.3)
372.3
1.1
1.3
(7.2)
367.5
128.9
8.4
–
(0.2)
137.1
8.5
–
(6.8)
138.8
235.2
228.7
5,897.8
8,074.7
84.8
48.8
(0.1)
181.2
241.9
(136.1)
6,031.3
8,361.7
88.7
129.1
(10.7)
243.5
99.0
(199.7)
6,238.4
8,504.5
477.1
45.0
0.2
–
522.3
47.9
0.4
(10.6)
560.0
5,509.0
5,678.4
3,593.6
294.7
(0.1)
(130.1)
3,758.1
305.5
2.9
(132.8)
3,933.7
4,603.6
4,570.8
515.9
7.6
4.7
(14.5)
513.7
2.9
7.1
(19.1)
504.6
401.3
26.5
–
(14.1)
413.7
21.6
–
(18.6)
416.7
100.0
87.9
Total
£m
16,340.6
728.5
0.9
(151.1)
16,918.9
866.9
13.9
(236.7)
1,488.5
452.4
(300.9)
(0.1)
1,639.9
530.7
(222.6)
–
1,948.0
17,563.0
–
–
–
–
–
–
–
–
–
4,600.9
374.6
0.1
(144.4)
4,831.2
383.5
3.3
(168.8)
5,049.2
1,639.9
1,948.0
12,087.7
12,513.8
At 31 March 2023, the group had entered into contractual commitments for the acquisition of property, plant and equipment
amounting to £322.6 million (2022: £280.8 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.
Following a review of inventories carried out during the year, the group has opted to reclassify spare parts previously recognised
within inventories to property, plant and equipment in order to better reflect the expected consumption pattern of these items.
This has resulted in £14.6 million being transferred to property, plant and equipment (cost) and £3.3 million being transferred to
accumulated depreciation, giving a net transfer of £11.3 million. Depreciation of these spare parts is expected to commence at the
point where they are ready to be installed, with the annual depreciation charge of the assets transferred expected to be around
£0.6 million.
U
n
i
t
e
d
U
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i
l
i
t
i
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s
G
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o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
a
i
i
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
3
250
unitedutilities.com/corporate
11 Property, plant and equipment
Property, plant and equipment comprises owned and leased assets.
11 Property, plant and equipment continued
Right-of-use assets – leased
Group
Cost
At 1 April 2021
Additions
Disposals
At 31 March 2022
Additions
Disposals
At 31 March 2023
Accumulated depreciation
At 1 April 2021
Charge for the year
Disposals
At 31 March 2022
Charge for the year
Disposals
At 31 March 2023
Net book value at 31 March 2022
Net book value at 31 March 2023
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
Land and
buildings
£m
Operational
assets
£m
Fixtures,
fittings
tools and
equipment
£m
55.1
2.1
(0.3)
56.9
0.3
(1.4)
55.8
2.1
1.5
(0.4)
3.2
1.4
–
4.6
53.7
51.2
7.8
0.7
(1.4)
7.1
0.7
(1.1)
6.7
1.7
0.9
(1.4)
1.2
0.6
(0.6)
1.2
5.9
5.5
0.2
–
–
0.2
–
–
0.2
–
–
–
–
–
–
–
0.2
0.2
Total
£m
63.1
2.8
(1.7)
64.2
1.0
(2.5)
62.7
3.8
2.4
(1.8)
4.4
2.0
(0.6)
5.8
59.8
56.9
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.
Company
The company had no property, plant and equipment or contractual commitments for the acquisition of property, plant and equipment
at 31 March 2023 or 31 March 2022.
Fixtures,
fittings, tools
Land and
buildings
£m
structure
Operational
assets
equipment
construction
5,897.8
8,074.7
Notes to the financial statements
Property, plant and equipment – owned
Right-of-use assets – leased
Net book value
Property, plant and equipment – owned
Group
Cost
At 1 April 2021
Additions
Transfers
Disposals
Additions
Transfers
Disposals
Accumulated depreciation
At 1 April 2021
Charge for the year
Transfers
Disposals
At 31 March 2022
Charge for the year
Transfers
Disposals
At 31 March 2023
Net book value at 31 March 2022
Net book value at 31 March 2023
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
Infra-
assets
£m
84.8
48.8
(0.1)
88.7
129.1
(10.7)
477.1
45.0
0.2
–
522.3
47.9
0.4
(10.6)
560.0
5,509.0
5,678.4
£m
181.2
241.9
(136.1)
243.5
99.0
(199.7)
3,593.6
294.7
(0.1)
(130.1)
3,758.1
305.5
2.9
(132.8)
3,933.7
4,603.6
4,570.8
363.7
2.5
6.4
(0.3)
372.3
1.1
1.3
(7.2)
367.5
128.9
8.4
–
(0.2)
137.1
8.5
–
(6.8)
138.8
235.2
228.7
2023
£m
12,513.8
56.9
12,570.7
2022
£m
12,087.7
59.8
12,147.5
Assets in
course of
£m
1,488.5
452.4
(300.9)
(0.1)
1,639.9
530.7
(222.6)
–
–
–
–
–
–
–
–
–
–
and
£m
515.9
7.6
4.7
(14.5)
513.7
2.9
7.1
(19.1)
504.6
401.3
26.5
–
(14.1)
413.7
21.6
–
(18.6)
416.7
100.0
87.9
Total
£m
16,340.6
728.5
0.9
(151.1)
16,918.9
866.9
13.9
(236.7)
4,600.9
374.6
0.1
(144.4)
4,831.2
383.5
3.3
(168.8)
5,049.2
1,639.9
1,948.0
12,087.7
12,513.8
At 31 March 2022
6,031.3
8,361.7
At 31 March 2023
6,238.4
8,504.5
1,948.0
17,563.0
At 31 March 2023, the group had entered into contractual commitments for the acquisition of property, plant and equipment
amounting to £322.6 million (2022: £280.8 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.
Following a review of inventories carried out during the year, the group has opted to reclassify spare parts previously recognised
within inventories to property, plant and equipment in order to better reflect the expected consumption pattern of these items.
This has resulted in £14.6 million being transferred to property, plant and equipment (cost) and £3.3 million being transferred to
accumulated depreciation, giving a net transfer of £11.3 million. Depreciation of these spare parts is expected to commence at the
point where they are ready to be installed, with the annual depreciation charge of the assets transferred expected to be around
£0.6 million.
250
unitedutilities.com/corporate
Stock code: UU.
251
Notes to the financial statements
12
Intangible assets
Group
Cost
At 1 April 2021
Additions
Transfers
Disposals
At 31 March 2022
Additions
Transfers
Disposals
At 31 March 2023
Accumulated amortisation
At 1 April 2021
Charge for the year
Transfers
Disposals
At 31 March 2022
Charge for the year
Transfers
Disposals
At 31 March 2023
Net book value at 31 March 2022
Net book value at 31 March 2023
U
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U
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i
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i
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i
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s
G
r
o
u
p
P
L
C
I
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t
e
g
r
a
t
e
d
A
n
n
u
a
l
Total
£m
425.1
20.1
0.9
(13.2)
432.9
19.0
0.6
–
452.5
244.0
41.2
–
(13.1)
272.1
38.1
–
–
310.2
160.8
142.3
R
e
p
o
r
t
a
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d
F
n
a
n
c
a
i
i
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
3
The group’s intangible assets relate mainly to computer software.
At 31 March 2023, the group had entered into contractual commitments for the acquisition of intangible assets amounting to
£2.8 million (2022: £1.8 million).
Company
The company had no intangible assets or contractual commitments for the acquisition of intangible assets at 31 March 2023 or
31 March 2022.
13 Joint ventures and other investments
Joint ventures at the start of the period
Additions
Share of losses of joint ventures
Joint ventures at the end of the period
Other investments
Interests in joint ventures and other investments
2023
£m
16.5
–
–
16.5
–
16.5
2022
£m
–
18.3
(1.8)
16.5
0.1
16.6
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. The group also has a 50 per cent interest in
Lingley Mere Business Park Development Company Limited, which is jointly owned and controlled by the group and Muse Developments
Limited under a joint venture agreement.
The group’s total share of Water Plus losses for the year was nil (2022: £1.8 million share of losses), all of which is recognised in the
income statement. The group incurred a share of the losses of Lingley Mere Business Park Development Company Limited for the year
of £0.4 million (2022: nil), which have not been recognised as at 31 March 2023. This is unrecognised as the brought forward carrying
amount of the group’s interest in the joint venture is nil.
Additions in the prior year relate to an equity investment in Water Plus following the conversion of the existing fully drawn facility to
equity share capital as executed on 23 April 2021.
The group recognised a disposal in the year of £0.1 million (2022: nil) in its other investments.
Details of transactions between the group and its joint ventures and other investments are disclosed in note A6.
Company
At 31 March 2023, the company’s investments related solely to its investments in United Utilities PLC, which was recorded at a cost of
£6,326.8 million (2022: £6,326.8 million).
252
unitedutilities.com/corporate
Notes to the financial statements
12
Intangible assets
Group
Cost
At 1 April 2021
Additions
Transfers
Disposals
Additions
Transfers
Disposals
At 31 March 2022
At 31 March 2023
Accumulated amortisation
At 1 April 2021
Charge for the year
Transfers
Disposals
At 31 March 2022
Charge for the year
Transfers
Disposals
At 31 March 2023
Net book value at 31 March 2022
Net book value at 31 March 2023
£2.8 million (2022: £1.8 million).
Company
31 March 2022.
13 Joint ventures and other investments
Joint ventures at the start of the period
Additions
Share of losses of joint ventures
Joint ventures at the end of the period
Other investments
Interests in joint ventures and other investments
U
n
i
t
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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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C
I
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t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
The group’s intangible assets relate mainly to computer software.
At 31 March 2023, the group had entered into contractual commitments for the acquisition of intangible assets amounting to
The company had no intangible assets or contractual commitments for the acquisition of intangible assets at 31 March 2023 or
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. The group also has a 50 per cent interest in
Lingley Mere Business Park Development Company Limited, which is jointly owned and controlled by the group and Muse Developments
Limited under a joint venture agreement.
The group’s total share of Water Plus losses for the year was nil (2022: £1.8 million share of losses), all of which is recognised in the
income statement. The group incurred a share of the losses of Lingley Mere Business Park Development Company Limited for the year
of £0.4 million (2022: nil), which have not been recognised as at 31 March 2023. This is unrecognised as the brought forward carrying
amount of the group’s interest in the joint venture is nil.
Additions in the prior year relate to an equity investment in Water Plus following the conversion of the existing fully drawn facility to
equity share capital as executed on 23 April 2021.
The group recognised a disposal in the year of £0.1 million (2022: nil) in its other investments.
Details of transactions between the group and its joint ventures and other investments are disclosed in note A6.
At 31 March 2023, the company’s investments related solely to its investments in United Utilities PLC, which was recorded at a cost of
Company
£6,326.8 million (2022: £6,326.8 million).
Total
£m
425.1
20.1
0.9
(13.2)
432.9
19.0
0.6
–
452.5
244.0
41.2
–
(13.1)
272.1
38.1
–
–
310.2
160.8
142.3
2022
£m
–
18.3
(1.8)
16.5
0.1
16.6
2023
£m
16.5
–
–
–
16.5
16.5
14
Inventories
Group
Properties held for resale
Other inventories
2023
£m
4.2
10.1
14.3
2022
£m
1.6
16.6
18.2
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
Included within other inventories are £1.2 million (2022: £0.4 million) 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.
Company
The company had no inventories at 31 March 2023 or 31 March 2022.
15 Trade and other receivables
Trade receivables
Amounts owed by subsidiary undertakings
Amounts owed by related parties (see note A6)
Other debtors and prepayments
Accrued income
Group
Company
2023
£m
47.8
–
102.2
43.1
73.1
266.2
2022
£m
61.7
–
116.4
37.7
88.6
304.4
2023
£m
–
105.1
–
–
–
2022
£m
–
95.2
–
–
–
105.1
95.2
At 31 March 2023, the group had £75.7 million (2022: £81.7 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 2023 and 31 March 2022.
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
2023
£m
84.6
22.7
(21.0)
(0.6)
85.7
2022
£m
80.4
23.4
(19.2)
–
84.6
Amounts charged to deferred income relate to amounts invoiced for which revenue has not yet been recognised in the income statement.
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 2023 and 31 March 2022, the group had no trade receivables that were past due and not individually impaired.
252
unitedutilities.com/corporate
Stock code: UU.
253
Notes to the financial statements
15 Trade and other receivables continued
The following table provides information regarding the ageing of net trade receivables that were past due and individually impaired:
At 31 March 2023
Gross trade receivables
Allowance for expected credit losses
Net trade receivables
At 31 March 2022
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
51.6
(20.2)
31.4
31.8
(16.7)
15.1
50.1
(48.8)
1.3
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
51.5
(51.2)
0.3
Carrying
value
£m
133.5
(85.7)
47.8
Carrying
value
£m
146.3
(84.6)
61.7
At 31 March 2023, the group had £0.3 million (2022: £0.1 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 2023 and 31 March 2022, 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 2023 and 31 March 2022, the company had no trade receivables that were past due. Of the £105.1 million (2022:
£95.2 million) owed by subsidiaries, £75.0 million (2022: £75.0 million) was classified as non-current at the reporting date.
The carrying amount of trade and other receivables approximates to their fair value at 31 March 2023 and 31 March 2022.
16 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 17)
Cash and cash equivalents in the statement of cash flows
2023
£m
2.6
337.8
340.4
(12.5)
327.9
Group
2022
£m
9.9
231.0
240.9
(20.8)
220.1
2023
£m
Company
2022
£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.
U
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G
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P
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I
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t
e
g
r
a
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e
d
A
n
n
u
a
l
R
e
p
o
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t
a
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d
F
n
a
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c
a
i
i
l
S
t
a
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e
m
e
n
t
s
f
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t
h
e
y
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a
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e
n
d
e
d
3
1
M
a
r
c
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2
0
2
3
254
unitedutilities.com/corporate
Notes to the financial statements
15 Trade and other receivables continued
The following table provides information regarding the ageing of net trade receivables that were past due and individually impaired:
At 31 March 2023
Gross trade receivables
Allowance for expected credit losses
Net trade receivables
At 31 March 2022
Gross trade receivables
Allowance for expected credit losses
Net trade receivables
Aged
between one
Aged
less than one
year and two
greater than
Carrying
years
two years
Aged
£m
31.8
(16.7)
15.1
Aged
£m
26.1
(13.1)
13.0
year
£m
51.6
(20.2)
31.4
year
£m
68.7
(20.3)
48.4
£m
50.1
(48.8)
1.3
£m
51.5
(51.2)
0.3
value
£m
133.5
(85.7)
47.8
value
£m
146.3
(84.6)
61.7
Aged
between one
Aged
less than one
year and two
greater than
Carrying
years
two years
At 31 March 2023, the group had £0.3 million (2022: £0.1 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 2023 and 31 March 2022, 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 2023 and 31 March 2022, the company had no trade receivables that were past due. Of the £105.1 million (2022:
£95.2 million) owed by subsidiaries, £75.0 million (2022: £75.0 million) was classified as non-current at the reporting date.
The carrying amount of trade and other receivables approximates to their fair value at 31 March 2023 and 31 March 2022.
16 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 17)
Cash and cash equivalents in the statement of cash flows
2023
£m
2.6
337.8
340.4
(12.5)
327.9
Group
2022
£m
9.9
231.0
240.9
(20.8)
220.1
2023
£m
Company
2022
£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
U
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U
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i
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G
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P
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C
I
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t
e
g
r
a
t
e
d
A
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n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
d
3
1
M
a
r
c
h
2
0
2
3
17 Borrowings
Group
Non-current liabilities
Bonds
Bank and other term borrowings
Lease obligations
Current liabilities
Bank and other term borrowings
Book overdrafts (see note 16)
Lease obligations
Company
Non-current liabilities
Amounts owed to subsidiary undertakings
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
2023
£m
6,378.8
1,825.0
55.2
8,259.0
160.8
12.5
3.1
176.4
8,435.4
2023
£m
1,864.8
1,864.8
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
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 and the maturity profile of lease
liabilities recognised at the balance sheet date, see note A3.
Borrowings are unsecured and are measured at amortised cost. The carrying amounts of borrowings approximate their fair value.
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
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
2023
£m
6.0
2.5
8.5
(28.7)
(20.2)
2022
£m
7.5
2.1
9.6
(14.3)
(4.7)
Defined benefit pension costs excluding curtailments/settlements included within employee benefit expense were £8.5 million (2022:
£9.6 million) comprising current service costs and administrative expenses. Total post-employment benefits expense excluding
curtailments/settlements charged to operating profit of £37.7 million (2022: £35.7 million) comprise the defined benefit costs
described above of £8.5 million (2022: £9.6 million) and defined contribution costs of £29.2 million (2022: £26.1 million) (see note 3).
254
unitedutilities.com/corporate
Stock code: UU.
255
Notes to the financial statements
18 Retirement benefits continued
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 (losses)/gains gross of tax
At the end of the year
2023
£m
1,016.8
20.2
9.1
(445.3)
600.8
2022
£m
689.0
4.7
9.5
313.6
1,016.8
Included in the contributions paid of £9.1 million (2022: £9.5 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
nil (2022: £0.5 million), payments in relation to historic unfunded, unregistered retirement benefit schemes of £0.6 million
(2022: £2.5 million), and administration expenses of £2.5 million (2022: £2.1 million). Contributions in relation to current service
cost remained broadly stable at £6.0 million (2022: £6.1 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 arising from changes in financial assumptions
Actuarial (losses)/gains arising from changes in demographic assumptions
Actuarial (losses) arising from experience
Remeasurement (losses)/gains on defined benefit pension schemes
2023
£m
(1,087.8)
950.0
(60.7)
(246.8)
(445.3)
2022
£m
102.2
164.0
52.4
(5.0)
313.6
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 note 8).
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 £29.2 million (2022: £26.1 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 2023 and 31 March 2022.
19 Provisions
Group
At 1 April 2021
Charged to the income statement
Utilised in the year
At 31 March 2022
Charged to the income statement
Utilised in the year
At 31 March 2023
Severance
£m
Other
£m
1.6
0.3
(0.7)
1.2
(0.3)
(0.5)
0.4
9.5
4.7
(1.9)
12.3
0.8
(0.4)
12.7
Total
£m
11.1
5.0
(2.6)
13.5
0.5
(0.9)
13.1
The group had no provisions classed as non-current at 31 March 2023 or 31 March 2022.
The severance provision as at 31 March 2023 and 31 March 2022 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 claims.
Company
The company had no provisions at 31 March 2023 or 31 March 2022.
U
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U
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i
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G
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o
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P
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I
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t
e
g
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a
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d
A
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n
u
a
l
R
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p
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t
a
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d
F
n
a
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c
a
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i
l
S
t
a
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e
m
e
n
t
s
f
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t
h
e
y
e
a
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e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
3
256
unitedutilities.com/corporate
Notes to the financial statements
18 Retirement benefits continued
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 (losses)/gains gross of tax
At the end of the year
2023
£m
1,016.8
20.2
9.1
(445.3)
600.8
2022
£m
689.0
4.7
9.5
313.6
1,016.8
2023
£m
(1,087.8)
950.0
(60.7)
(246.8)
(445.3)
2022
£m
102.2
164.0
52.4
(5.0)
313.6
Included in the contributions paid of £9.1 million (2022: £9.5 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
nil (2022: £0.5 million), payments in relation to historic unfunded, unregistered retirement benefit schemes of £0.6 million
(2022: £2.5 million), and administration expenses of £2.5 million (2022: £2.1 million). Contributions in relation to current service
cost remained broadly stable at £6.0 million (2022: £6.1 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 arising from changes in financial assumptions
Actuarial (losses)/gains arising from changes in demographic assumptions
Actuarial (losses) arising from experience
Remeasurement (losses)/gains on defined benefit pension schemes
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
For more information in relation to the group’s defined benefit pension schemes, including changes in financial and demographic
During the year, the group made £29.2 million (2022: £26.1 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.
The company did not participate in any of the group’s pension schemes during the years ended 31 March 2023 and 31 March 2022.
U
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U
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i
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G
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P
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C
I
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t
e
g
r
a
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e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
(see note 8).
assumptions, see note A5.
Defined contribution schemes
Company
19 Provisions
Group
At 1 April 2021
Utilised in the year
At 31 March 2022
Utilised in the year
At 31 March 2023
Charged to the income statement
Charged to the income statement
Severance
Other
Total
£m
1.6
0.3
(0.7)
1.2
(0.3)
(0.5)
0.4
£m
9.5
4.7
(1.9)
12.3
0.8
(0.4)
12.7
£m
11.1
5.0
(2.6)
13.5
0.5
(0.9)
13.1
The group had no provisions classed as non-current at 31 March 2023 or 31 March 2022.
The severance provision as at 31 March 2023 and 31 March 2022 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 claims.
Company
The company had no provisions at 31 March 2023 or 31 March 2022.
20 Trade and other payables
Non-current
Deferred grants and contributions
Other creditors
Current
Trade payables
Amounts owed to subsidiary undertakings
Other tax and social security
Deferred grants and contributions
Accruals and other creditors
Deferred income
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
2023
£m
873.3
19.1
892.4
2023
£m
26.4
–
6.9
16.6
272.8
54.0
376.7
Group
2022
£m
818.2
17.0
835.2
Group
2022
£m
28.3
–
6.6
16.0
266.8
48.1
365.8
2023
£m
–
–
–
2023
£m
–
2.0
–
–
3.6
–
5.6
Company
2022
£m
–
–
–
Company
2022
£m
–
9.5
–
–
3.6
–
13.1
The average credit period taken for trade purchases is 11 days (2022: 13 days).
The carrying amounts of trade and other payables approximates to their fair value at 31 March 2023 and 31 March 2022.
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
21 Other reserves
Group
At 1 April 2021
Capital
redemption
reserve
£m
Merger
reserve
£m
Cost of
hedging
reserve
£m
Cash flow
hedging
reserve
£m
1,033.3
(703.6)
0.4
Changes in fair value recognised in other
comprehensive income
Amounts reclassified from other comprehensive
income to profit or loss
Tax on hedge effectiveness taken directly to equity
Tax on reclassification to consolidated income statement
At 31 March 2022
At 1 April 2022
Changes in fair value recognised in other
comprehensive income
Amounts reclassified from other comprehensive
income to profit or loss
Tax on hedge effectiveness taken directly to equity
Tax on reclassification to consolidated income statement
–
–
–
–
–
–
–
–
1,033.3
(703.6)
1,033.3
(703.6)
–
–
–
–
–
–
–
–
At 31 March 2023
1,033.3
(703.6)
–
–
–
–
0.4
0.4
6.3
–
(1.6)
–
5.1
2023
£m
834.2
5.4
66.2
(16.2)
(0.3)
0.6
889.9
6.2
107.6
(0.9)
(27.0)
0.2
86.1
86.1
(50.6)
(36.6)
12.7
7.0
18.6
2022
£m
795.8
1.8
52.4
(15.4)
(0.4)
–
834.2
Total
£m
336.3
107.6
(0.9)
(27.0)
0.2
416.2
416.2
(44.3)
(36.6)
11.1
7.0
353.4
256
unitedutilities.com/corporate
Stock code: UU.
257
Notes to the financial statements
21 Other reserves continued
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 2023, 31 March 2022 and 1 April 2021, 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.
22 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
2023
million
681.9
274.0
955.9
2023
£m
34.1
465.7
499.8
2022
million
681.9
274.0
955.9
2022
£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 210 to 211.
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 236), 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.
23 Contingent liabilities
At 31 March 2023, there were commitments for future capital expenditure and infrastructure renewals expenditure contracted, but not
provided for, of £339.0 million (2022: £293.3 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 (2022: none).
The company has not entered into performance guarantees as at 31 March 2023 and 31 March 2022.
24 Events after the reporting period
With the exception of the new borrowings and entering into of a new undrawn committed borrowing facility, as described in note A3,
there were no significant events after the reporting period requiring disclosure or any adjustments to the financial position, financial
performance, or cash flows reported as at 31 March 2023.
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
a
i
i
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
3
258
unitedutilities.com/corporate
Notes to the financial statements
Notes to the financial statements – appendices
21 Other reserves continued
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.
The company’s other reserves at 31 March 2023, 31 March 2022 and 1 April 2021, 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
company in the year ended 31 March 2009.
22 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
2023
million
681.9
274.0
955.9
2023
£m
34.1
465.7
499.8
2022
million
681.9
274.0
955.9
2022
£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 210 to 211.
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 236), 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.
23 Contingent liabilities
provided for, of £339.0 million (2022: £293.3 million).
At 31 March 2023, 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 (2022: none).
The company has not entered into performance guarantees as at 31 March 2023 and 31 March 2022.
24 Events after the reporting period
With the exception of the new borrowings and entering into of a new undrawn committed borrowing facility, as described in note A3,
there were no significant events after the reporting period requiring disclosure or any adjustments to the financial position, financial
performance, or cash flows reported as at 31 March 2023.
U
n
i
t
e
d
U
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i
l
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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I
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g
r
a
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d
A
n
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u
a
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p
o
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a
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d
F
i
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a
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a
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S
t
a
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e
m
e
n
t
s
f
o
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t
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e
y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
3
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 losses of joint ventures (see note 13)
Profit on disposal of subsidiary
Operating profit
Adjustments for:
Depreciation of property, plant and equipment (see note 11)
Amortisation of intangible assets (see note 12)
Loss on disposal of property, plant and equipment (see note 4)
Amortisation of deferred grants and contributions (see note 20)
Equity-settled share-based payments charge (see note 3)
Changes in working capital:
Decrease in inventories (see note 14)
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions (see note 21)
Pension contributions paid less pension expense charged
to operating profit
Cash generated from operations
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
2023
£m
256.3
215.7
–
(31.2)
440.8
385.5
38.1
4.2
(16.2)
5.1
3.9
27.2
(5.5)
(0.4)
0.4
883.1
Group
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
0.1
1,061.6
2023
£m
245.4
55.9
–
–
301.3
–
–
–
–
–
–
5.0
0.2
–
–
Company
2022
£m
274.5
21.0
–
–
295.5
–
–
–
–
–
–
5.5
0.2
–
–
306.5
301.2
The group has received property, plant and equipment of £66.2 million (2022: £52.4 million) in exchange for the provision of future
goods and services (see notes 20 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 20)
IAS 23 capitalised borrowing costs (see note 6)
Transfer of spare parts from inventories (see note 11)
Net book value transfers to intangible assets
Timing differences on cash paid(2)
Property, plant and equipment additions
2023
£m
675.9
66.2
126.0
(11.3)
0.6
9.5
866.9
2022
£m
609.0
52.4
52.1
–
–
15.0
728.5
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 (see note 20).
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
2023
£m
18.1
1.5
(0.6)
19.0
2022
£m
19.5
0.6
–
20.1
258
unitedutilities.com/corporate
Stock code: UU.
259
Notes to the financial statements – appendices
A2 Net debt
Net debt comprises borrowings, net of cash and short-term deposits and derivatives hedging the financial risk associated with the
group’s borrowings(1). 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(3)
£m
Net
debt
£m
At 31 March 2022
(6,168.4)
(1,729.9)
(60.9)
68.9
140.3
(7,750.0)
220.1
(40.1)
(7,570.0)
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(2)
Payments in respect
of borrowings and
derivatives(2)
Dividends paid
Exercise of share options
– purchase of shares
Changes arising from
financing activities
Cash flows used in
investing activities
Cash flows generated from
operating activities
Effects of exchange rate
changes
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
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t
a
n
d
F
n
a
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c
a
i
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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
3
–
–
(463.4)
231.9
(20.6)
(0.8)
–
–
–
–
(325.4)
239.2
(22.3)
1.1
(138.0)
3.3
1.7
0.3
–
–
–
(2.2)
(103.1)
(398.0)
–
–
–
–
274.7
3.3
–
–
–
–
(220.1)
209.5
–
–
–
0.1
–
–
–
–
–
–
–
–
(501.1)
501.1
278.1
–
–
(278.1)
(301.2)
(6.8)
–
(463.4)
(264.2)
–
–
–
–
–
–
(32.3)
(20.6)
(0.8)
–
–
(301.2)
(6.8)
(210.5)
(256.0)
1.1
(220.0)
209.5
(475.9)
(85.0)
(264.2)
(825.1)
–
–
–
–
–
–
–
1.5
–
–
–
–
–
–
–
–
1.5
–
(593.4)
787.5
(1.3)
327.9
–
–
–
(593.4)
789.0
(1.3)
(304.3) (8,200.8)
At 31 March 2023
(6,378.9)
(1,985.9)
(58.3)
(151.1)
349.8
(8,224.4)
Notes:
(1) Derivatives held for the purpose of hedging commodity prices are excluded from net debt. At 31 March 2023 the group had net derivative assets of
£25.5 million (2022: £111.0 million) to hedge electricity prices. See note A4 for further details.
(2) 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.
(3) 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 £85.3 million (2022:
£29.9 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.
260
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 hedging the financial risk associated with the
group’s borrowings(1). 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(3)
£m
£m
£m
£m
£m
£m
loss
£m
Net
debt
£m
Adjust-
ments in
At 31 March 2022
(6,168.4)
(1,729.9)
(60.9)
68.9
140.3
(7,750.0)
(40.1)
(7,570.0)
(220.1)
209.5
(264.2)
(103.1)
(398.0)
(501.1)
501.1
274.7
3.3
0.1
278.1
(325.4)
239.2
(22.3)
1.1
(138.0)
3.3
1.7
0.3
–
–
–
–
–
–
–
–
–
–
–
(2.2)
–
–
–
–
–
–
–
1.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(463.4)
231.9
(20.6)
(0.8)
–
–
–
1.5
–
£m
220.1
–
–
–
–
(278.1)
(301.2)
(6.8)
(593.4)
787.5
(1.3)
327.9
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(2)
Payments in respect
of borrowings and
derivatives(2)
Dividends paid
Exercise of share options
– purchase of shares
Changes arising from
financing activities
Cash flows used in
investing activities
Cash flows generated from
operating activities
Effects of exchange rate
changes
Notes:
At 31 March 2023
(6,378.9)
(1,985.9)
(58.3)
(151.1)
349.8
(8,224.4)
(304.3) (8,200.8)
(1) Derivatives held for the purpose of hedging commodity prices are excluded from net debt. At 31 March 2023 the group had net derivative assets of
£25.5 million (2022: £111.0 million) to hedge electricity prices. See note A4 for further details.
(2) 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.
(3) 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 £85.3 million (2022:
£29.9 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.
–
–
–
–
–
–
–
–
–
–
(463.4)
(32.3)
(20.6)
(0.8)
–
–
(301.2)
(6.8)
(593.4)
789.0
(1.3)
(210.5)
(256.0)
1.1
(220.0)
209.5
(475.9)
(85.0)
(264.2)
(825.1)
U
n
i
t
e
d
U
t
i
l
i
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s
G
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o
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P
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I
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g
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a
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d
A
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a
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p
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a
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d
F
i
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a
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c
i
a
l
S
t
a
t
e
m
e
n
t
s
f
o
r
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h
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y
e
a
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n
d
e
d
3
1
M
a
r
c
h
2
0
2
3
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
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
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.
260
unitedutilities.com/corporate
Stock code: UU.
261
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
Borrowings in fair value hedge relationships
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
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
1.45% 8.5bn bond
GBP
EUR
JPY
GBP
EUR
HKD
USD
EUR
EUR
EUR
GBP
GBP
JPY
Borrowings designated at fair value through profit or loss
6.875% 400m bond
USD
Borrowings measured at amortised cost
Short-term bank borrowings – fixed
0.47%+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
0.780%+SONIA 100m loan
0.178%+RPI 35m IL bond
0.970%+SONIA 135m loan
0.245%+CPI 20m IL bond
0.01%+RPI 38m bond
3.375%+RPI 50m IL bond
0.9856%+SONIA 100m EIB (amortising) loan
0.940%SONIA 150m loan
0.9676%SONIA 150m EIB (amortising) loan
0.8496%+SONIA 100m EIB (amortising) loan
0.7876%+SONIA 150m EIB (amortising) 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
2025
2026
2026
2027
2027
2027
2028
2029
2029
2030
2030
2031
2031
2031
2031
2032
2032
2033
2033
2035
2037
2028
2023
2023
2025
2025
2026
2028
2029
2029
2029
2029
2029
2029
2030
2030
2030
2030
2030
2030
2031
2031
2032
2032
2032
2032
2033
2033
Fair
value
2023
£m
2,310.1
427.8
Carrying
value
2023
£m
2,332.3
427.8
31.5
72.6
42.1
80.2
315.5
84.6
74.3
234.7
23.4
63.5
365.7
23.6
57.4
22.5
20.3
18.6
21.4
78.1
199.8
52.5
361.0
361.0
5,400.0
45.8
-
138.9
34.6
135.3
26.3
33.6
108.0
36.4
35.9
35.9
37.4
37.2
37.4
37.5
97.2
46.1
132.1
21.8
50.5
120.8
55.3
147.0
87.3
60.2
97.2
32.6
75.4
41.5
82.2
308.2
85.8
79.0
246.5
23.2
64.6
358.4
22.0
55.4
22.5
21.2
19.3
22.7
78.6
213.4
52.0
361.0
361.0
5,742.1
45.8
-
140.8
35.1
138.9
28.5
33.7
118.4
36.3
36.0
36.0
37.9
37.8
37.6
37.8
99.8
49.2
134.7
25.0
53.5
97.1
56.3
149.7
89.1
62.5
98.4
Fair
value
2022
£m
2,511.5
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
6,283.7
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
Carrying
value
2022
£m
2,494.0
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
5,115.9
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
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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:
A3 Borrowings continued
Year of final
Fair
Carrying
Carrying
Currency
repayment
Currency
Year of final
repayment
Borrowings measured at amortised cost (continued)
2.0% 250m bond
0.01%+RPI 100m EIB (amortising) IL loan
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
1.1496%+SONIA 100m EIB (amortising) loan
1.1166%0+SONIA 75m EIB (amortising) loan
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% 325m bond(1)
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 16)
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
GBP
GBP
2033
2033
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
2023
various
Fair
value
2023
£m
195.3
89.7
67.1
69.7
69.7
202.7
77.4
61.0
31.3
20.8
33.7
59.9
62.5
215.4
127.3
192.8
106.9
87.8
184.9
187.3
36.8
87.9
26.9
94.1
37.3
187.9
185.3
181.3
88.8
44.0
88.5
86.5
60.0
171.0
25.4
88.6
12.5
58.3
Carrying
value
2023
£m
245.6
95.4
71.5
74.3
74.3
181.0
78.1
60.9
39.1
25.0
41.1
74.4
60.7
300.4
118.5
179.1
163.5
89.4
178.6
295.6
35.6
89.3
39.2
88.9
24.7
183.1
182.4
182.0
90.9
45.4
90.5
90.2
63.1
175.2
40.1
88.3
12.5
58.3
i
i
F
F
n
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a
a
n
n
c
c
i
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a
a
l
l
s
s
Fair
value
2022
£m
Carrying
value
2022
£m
236.9
245.6
97.6
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
91.8
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
262
unitedutilities.com/corporate
Stock code: UU.
263
8,071.1
8,435.4
9,165.1
7,979.8
Note:
(1)
During the year, the group issued £75 million fixed rate notes as a fungible increase to £250 million fixed rate notes issued in prior years. These notes
were issued under the same terms with the year of final repayment being 2031 and the coupon rate of 1.75 per cent.
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.
After the reporting period, the group raised new borrowings of £300 million fixed rate notes, due October 2038, and a £100 million
loan facility, due April 2032.
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Borrowings in fair value hedge relationships
5.02% JPY 10bn dual currency loan
JPY/USD
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
1.45% 8.5bn bond
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
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
0.780%+SONIA 100m loan
0.178%+RPI 35m IL bond
0.970%+SONIA 135m loan
0.245%+CPI 20m IL bond
0.01%+RPI 38m bond
3.375%+RPI 50m IL bond
0.9856%+SONIA 100m EIB (amortising) loan
0.940%SONIA 150m loan
0.9676%SONIA 150m EIB (amortising) loan
0.8496%+SONIA 100m EIB (amortising) loan
0.7876%+SONIA 150m EIB (amortising) loan
value
2023
£m
2,310.1
427.8
31.5
72.6
42.1
80.2
315.5
84.6
74.3
234.7
23.4
63.5
365.7
23.6
57.4
22.5
20.3
18.6
21.4
78.1
199.8
52.5
361.0
361.0
45.8
-
138.9
34.6
135.3
26.3
33.6
108.0
36.4
35.9
35.9
37.4
37.2
37.4
37.5
97.2
46.1
132.1
21.8
50.5
120.8
55.3
147.0
87.3
60.2
97.2
5,400.0
value
2023
£m
2,332.3
427.8
32.6
75.4
41.5
82.2
308.2
85.8
79.0
246.5
23.2
64.6
358.4
22.0
55.4
22.5
21.2
19.3
22.7
78.6
213.4
52.0
361.0
361.0
5,742.1
45.8
-
140.8
35.1
138.9
28.5
33.7
118.4
36.3
36.0
36.0
37.9
37.8
37.6
37.8
99.8
49.2
134.7
25.0
53.5
97.1
56.3
149.7
89.1
62.5
98.4
2025
2026
2026
2027
2027
2027
2028
2029
2029
2030
2030
2031
2031
2031
2031
2032
2032
2033
2033
2035
2037
2023
2023
2025
2025
2026
2028
2029
2029
2029
2029
2029
2029
2030
2030
2030
2030
2030
2030
2031
2031
2032
2032
2032
2032
2033
2033
Fair
value
2022
£m
2,511.5
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
6,283.7
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
value
2022
£m
2,494.0
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
5,115.9
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
GBP
HKD
HKD
EUR
HKD
GBP
GBP
GBP
EUR
JPY
GBP
EUR
HKD
USD
EUR
EUR
EUR
GBP
GBP
JPY
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
Notes to the financial statements – appendices
A3 Borrowings continued
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
2023
£m
3.2
9.0
7.8
25.0
41.3
81.5
105.3
3.2
276.3
(218.0)
58.3
2022
£m
3.3
10.4
8.1
25.5
42.0
81.5
106.9
3.2
280.9
(220.0)
60.9
During the year ended 31 March 2023, £1.5 million (2022: £1.6 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 2023 was £3.3 million (2022: £3.7 million); of this, £1.5 million was
payment of interest (2022: £1.6 million) and £1.8 million payment of principal (2022: £2.1 million).
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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Notes to the financial statements – appendices
A3 Borrowings continued
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
2023
£m
3.2
9.0
7.8
25.0
41.3
81.5
105.3
3.2
276.3
(218.0)
58.3
2022
£m
3.3
10.4
8.1
25.5
42.0
81.5
106.9
3.2
280.9
(220.0)
60.9
During the year ended 31 March 2023, £1.5 million (2022: £1.6 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 2023 was £3.3 million (2022: £3.7 million); of this, £1.5 million was
payment of interest (2022: £1.6 million) and £1.8 million payment of principal (2022: £2.1 million).
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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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 2023, the group had £1,190.4 million (2022: £1,040.9 million) of available liquidity, which comprised £340.4 million (2022:
£240.9 million) of cash and short-term deposits and £850.0 million (2022: £800.0 million) of undrawn committed borrowing facilities.
The group had available committed borrowing facilities as follows:
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
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
2023
£m
150.0
50.0
650.0
850.0
–
850.0
2022
£m
100.0
150.0
550.0
800.0
–
800.0
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 2023 or 31 March 2022.
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 18.
Group
At 31 March 2023
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
12,650.3
1,923.1
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
166.7
208.0
617.9
298.1
306.7
297.7
155.8
144.8
591.3
144.3
10,811.9
830.2
(6,196.4)
(6,196.4)
8,377.0
(6,196.4)
374.7
916.0
604.4
300.6
735.6
11,642.1
2,404.4
(2,120.5)
(508.2)
(224.3)
(508.2)
(508.2)
111.2
(182.4)
112.9
(170.0)
205.0
(249.2)
92.1
198.3
1,684.9
(126.3)
(249.5)
(1,143.1)
(71.2)
(57.1)
(44.2)
(34.2)
(51.2)
541.8
264
unitedutilities.com/corporate
Stock code: UU.
265
Notes to the financial statements – appendices
A4 Financial risk management continued
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)
* Re-presented (see footnote 3).
Total(1)
£m
Adjust-
ment(2)
£m
11,289.3
2,041.2
(5,411.6)
7,918.9
1,209.5
(1,756.0)
226.3
(320.2)
(5,411.6)
(5,411.6)
226.3
226.3
1 year
or less
£m
137.6
332.3
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
More than
5 years
£m
138.6
133.4
589.7
268.9
267.2
269.5
130.0
131.4
10,026.2
905.7
469.9
272.0
858.6
536.7
261.4
10,931.9
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)
(80.5)
(82.2)
(63.3)
(47.2)
(45.4)
(227.9)
Notes:
(1)
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.
(2) 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 £58.3 million
(2022: £60.9 million) of lease liabilities.
(3) The derivative balance includes swaps with a carrying value of £4.3 million (2022: £32.5 million) subject to optional break clauses that could be
exercised within one year of the reporting date, and £39.6 million (2022: £107.6 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.
Company
The company has total borrowings of nil (2022: nil), which are payable within one year, and £1,864.8 million (2022: £1,799.9 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 2023, Water Plus was the group’s single largest debtor, with amounts outstanding in relation to
wholesale services of £26.7 million (2022: £28.6 million). During the year, sales to Water Plus in relation to wholesale services were
£335.1 million (2022: £363.1 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 15).
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.
U
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g
r
a
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d
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
a
i
i
l
S
t
a
t
e
m
e
n
t
s
f
o
r
t
h
e
y
e
a
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e
n
d
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3
1
M
a
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2
0
2
3
266
unitedutilities.com/corporate
Notes to the financial statements – appendices
Adjust-
1 year
Total(1)
£m
£m
ment(2)
or less
1–2 years
2–3 years
3–4 years
4–5 years
5 years
£m
137.6
332.3
£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
469.9
272.0
858.6
536.7
261.4
10,931.9
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
(5,411.6)
7,918.9
1,209.5
(1,756.0)
226.3
(320.2)
(5,411.6)
(5,411.6)
226.3
226.3
A4 Financial risk management continued
At 31 March 2022
Group
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).
Notes:
over the life of each instrument.
(1)
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
(2) 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 £58.3 million
(2022: £60.9 million) of lease liabilities.
(3) The derivative balance includes swaps with a carrying value of £4.3 million (2022: £32.5 million) subject to optional break clauses that could be
exercised within one year of the reporting date, and £39.6 million (2022: £107.6 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.
The company has total borrowings of nil (2022: nil), which are payable within one year, and £1,864.8 million (2022: £1,799.9 million),
which are payable within one to two years.
Company
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 2023, Water Plus was the group’s single largest debtor, with amounts outstanding in relation to
wholesale services of £26.7 million (2022: £28.6 million). During the year, sales to Water Plus in relation to wholesale services were
£335.1 million (2022: £363.1 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 15).
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.
U
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a
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F
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S
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a
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f
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3
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2
3
A4 Financial risk management continued
At 31 March 2023 and 31 March 2022, 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 16)
Trade and other receivables (see note 15)
Investments (see note 13)*
Derivative financial instruments
2023
£m
340.4
266.2
–
477.1
Group
2022
£m
240.9
304.4
0.1
457.4
2023
£m
–
105.1
–
–
1,083.8
1,002.8
105.1
Company
2022
£m
–
95.2
–
–
95.2
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
(80.5)
(82.2)
(63.3)
(47.2)
(45.4)
(227.9)
* 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 2023, the group held £45.8 million (2022:
£49.2 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
£4,407.1 million at 31 March 2023 (2022: £4,220.4 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.
Group
Impact on profit before taxation and equity
1% increase in RPI/CPI
1% decrease in RPI/CPI
2023
£m
(40.1)
40.1
2022
£m
(37.0)
37.0
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 2023 or 31 March 2022.
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).
266
unitedutilities.com/corporate
Stock code: UU.
267
Notes to the financial statements – appendices
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
2023
£m
91.0
(120.1)
Group
2022
£m
89.5
(94.3)
2023
£m
(18.6)
18.6
Company
2022
£m
(18.0)
18.0
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
1.0
300.0
4.7
1,125.0
1.5
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 2023(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
(164.2)
(156.2)
(197.1)
198.6
1.5
1,300.0
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.
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268
unitedutilities.com/corporate
Notes to the financial statements – appendices
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
not indicative of the years then ended.
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
Increase/(decrease) in profit before tax and equity
1% increase in interest rate
1% decrease in interest rate
2023
£m
91.0
(120.1)
Group
2022
£m
89.5
(94.3)
2023
£m
(18.6)
18.6
Company
2022
£m
(18.0)
18.0
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
1.0
300.0
4.7
1,125.0
1.5
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:
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 2023(1)
ness
instruments
amount of
amount of
(gains)/losses
recognised
directly
the hedging
the hedging
on hedged
Hedged
Hedging
in the income
impacted by
instruments
instruments
£m
£m
items
£m
1,875.0
(164.2)
(156.2)
items
instruments
statement
IBOR reform
£m
(197.1)
£m
198.6
£m
1.5
£m
1,300.0
(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 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.
Risk exposure
Interest rate risk
on borrowings
Note:
Currency risk
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
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
–
–
–
–
216.2
1.4
377.7
1.0
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:
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
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 2023(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
593.9
3.3
15.7
(16.0)
16.0
–
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
268
unitedutilities.com/corporate
Stock code: UU.
269
Notes to the financial statements – appendices
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.
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
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
n
a
n
c
a
i
i
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
3
Group
At 31 March 2023
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 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
2,332.3
–
2,332.3
361.0
–
361.0
970.4
842.0
3,929.7
5,742.1
–
–
–
–
361.0
361.0
46.8
842.0
3,929.7
4,818.5
–
(2,027.8)
8,435.4
(340.4)
8,095.0
Total
£m
3,151.7
(340.4)
2,811.3
1 year
or less
£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
427.8
–
427.8
108.0
–
108.0
–
–
–
1.2
–
–
1.2
–
–
–
1.5
–
–
1.5
200.0
629.0
–
200.0
309.5
–
–
–
–
–
–
–
2.7
–
–
2.7
389.8
392.5
–
431.9
1,364.6
–
–
431.9
1,364.6
–
–
–
1.7
–
–
1.7
361.0
(361.0)
–
916.5
–
–
916.5
99.5
533.1
–
1,138.5
3,419.6
–
629.0
309.5
392.5
533.1
3,419.6
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
More than
5 years
£m
–
–
–
–
–
–
1.1
–
–
1.1
441.2
(441.2)
103.7
(103.7)
–
–
–
–
1.9
–
–
1.9
–
–
–
–
3.2
–
–
3.2
–
–
–
–
–
–
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
–
(2,267.8)
7,979.8
(240.9)
4,837.2
(240.9)
7,738.9
4,596.3
575.0
576.1
–
576.1
350.0
351.9
–
351.9
200.0
203.2
–
203.2
270
unitedutilities.com/corporate
Notes to the financial statements – appendices
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.
A4 Financial risk management continued
Company
Borrowings measured at amortised cost
Floating rate instruments
1 year
More than
Total borrowings
2023
1 year or less
£m
Total
£m
2022
1 year or less
£m
Total
£m
1,864.8
1,864.8
1,864.8
1,864.8
1,799.9
1,799.9
1,799.9
1,799.9
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
U
n
i
t
e
d
U
t
i
l
i
t
i
e
s
G
r
o
u
p
P
L
C
I
n
t
e
g
r
a
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
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
3
Group
At 31 March 2023
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 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
Total
£m
or less
1–2 years
2–3 years
3–4 years
4–5 years
5 years
£m
£m
£m
£m
£m
£m
427.8
108.0
431.9
1,364.6
427.8
108.0
431.9
1,364.6
1.5
2.7
916.5
1.5
2.7
–
(2,027.8)
200.0
629.0
–
200.0
309.5
–
389.8
392.5
–
99.5
533.1
–
629.0
309.5
392.5
533.1
3,419.6
Total
£m
or less
1–2 years
2–3 years
3–4 years
4–5 years
5 years
£m
£m
£m
£m
£m
£m
More than
441.2
(441.2)
103.7
(103.7)
2,332.3
–
2,332.3
361.0
–
361.0
970.4
842.0
3,929.7
5,742.1
8,435.4
(340.4)
8,095.0
–
–
–
–
361.0
361.0
46.8
842.0
3,929.7
4,818.5
3,151.7
(340.4)
2,811.3
1 year
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
–
–
–
–
1.2
–
–
1.2
–
–
–
–
–
–
1.1
–
–
1.1
–
–
–
–
–
–
–
–
–
–
1.9
–
–
1.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.2
3.2
–
–
–
–
1.7
–
–
1.7
–
–
–
–
–
–
1.4
–
–
1.4
–
1.4
–
1.4
–
–
–
–
–
–
–
–
–
–
361.0
(361.0)
916.5
1,138.5
3,419.6
1,949.1
(1,949.1)
369.9
(369.9)
867.2
867.2
1,142.8
2,010.0
2,010.0
–
(2,267.8)
7,979.8
(240.9)
4,837.2
(240.9)
7,738.9
4,596.3
575.0
576.1
–
576.1
350.0
351.9
–
351.9
200.0
203.2
–
203.2
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 on a rolling four-year basis,
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
373,320
83.19
394,080
80.80
65,760
359.50
–
–
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
2023(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
105.0
25.5
87.3
–
17.5
(36.6)
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
certain derivatives) to regulatory capital value (RCV) of UUW, within a target range of 55 per cent to 65 per cent. As at 31 March 2023,
RCV gearing was within the range at 58 per cent (2022: 59 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.
270
unitedutilities.com/corporate
Stock code: UU.
271
Notes to the financial statements – appendices
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
2023
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
Financial liabilities at fair value through profit or loss
Derivative financial liabilities – fair value hedge
Derivative financial liabilities –held for trading(1)
Derivative financial assets – 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
Group
2022
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
–
–
–
–
–
–
–
(1,936.1)
(2,541.3)
(4,477.4)
Level 1
£m
–
–
–
–
–
–
–
–
65.4
352.0
59.7
(215.3)
(3.4)
(34.1)
(361.0)
(374.0)
(2,858.7)
(3,369.2)
Level 2
£m
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)
–
–
–
–
–
–
–
–
–
–
Level 3
£m
–
–
–
–
–
–
–
–
–
–
–
Total
£m
65.4
352.0
59.7
(215.3)
(3.4)
(34.1)
(361.0)
(2,310.1)
(5,400.0)
(7,846.6)
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)
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 £133.9 million (2022: £130.1 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 £4,477.4 million (2022:
£4,590.4 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 £113.0 million decrease (2022: £497.2 million
decrease) in level 1 fair value measurements primarily reflects the rise in interest rates during the year.
During the year, changes in the fair value of financial liabilities designated at fair value through profit or loss resulted in a £20.6 million
loss (2022: £0.4 million loss). Included within this was a £4.7 million gain (2022: £4.2 million gain) attributable to changes in own credit
risk, recognised in other comprehensive income. The cumulative amount due to changes in credit spread was £35.2 million profit (2022:
£39.9 million profit). The carrying amount is £134.9 million (2022: £143.8 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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272
unitedutilities.com/corporate
Notes to the financial statements – appendices
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.
A4 Financial risk management continued
Fair values
Group
2023
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
Financial liabilities at fair value through profit or loss
Derivative financial liabilities – fair value hedge
Derivative financial liabilities –held for trading(1)
Derivative financial assets – 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
Group
2022
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
Level 1
£m
Level 2
£m
Level 3
£m
(1,936.1)
(2,541.3)
(4,477.4)
Level 1
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
65.4
352.0
59.7
(215.3)
(3.4)
(34.1)
(361.0)
(374.0)
(2,858.7)
(3,369.2)
Level 2
£m
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)
Level 3
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£m
65.4
352.0
59.7
(215.3)
(3.4)
(34.1)
(361.0)
(2,310.1)
(5,400.0)
(7,846.6)
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)
(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 £133.9 million (2022: £130.1 million).
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
Note:
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
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 £4,477.4 million (2022:
£4,590.4 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 £113.0 million decrease (2022: £497.2 million
decrease) in level 1 fair value measurements primarily reflects the rise in interest rates during the year.
During the year, changes in the fair value of financial liabilities designated at fair value through profit or loss resulted in a £20.6 million
loss (2022: £0.4 million loss). Included within this was a £4.7 million gain (2022: £4.2 million gain) attributable to changes in own credit
risk, recognised in other comprehensive income. The cumulative amount due to changes in credit spread was £35.2 million profit (2022:
£39.9 million profit). The carrying amount is £134.9 million (2022: £143.8 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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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) – members 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 members.
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:
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Total fair value of schemes’ assets
Present value of defined benefit obligations
Net retirement benefit surplus
2023
£m
2,931.3
(2,330.5)
600.8
2022
£m
4,035.7
(3,018.9)
1,016.8
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 arising from changes in financial assumptions
Actuarial (losses)/gains arising from changes in demographic assumptions
Actuarial (losses) arising from experience
Member contributions
Benefits paid
Current service cost
At the end of the year
2023
£m
362.7
436.4
1,531.4
2,330.5
2022
£m
504.7
602.1
1,912.1
3,018.9
2023
£m
2022
£m
(3,018.9)
(3,295.7)
(82.7)
950.0
(60.7)
(246.8)
(2.3)
136.9
(6.0)
(66.5)
164.0
52.4
(5.0)
(2.3)
141.7
(7.5)
(2,330.5)
(3,018.9)
The duration of the combined schemes is around 14 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:
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
UUPS
)
m
£
(
150
125
100
75
50
25
0
ESPS
30
25
20
15
10
5
0
)
m
£
(
2023
2039
2055
2071
2087
2103
2023
2039
2055
2071
2087
2103
Pensioners
Deferreds
Actives
Future service
Pensioners
Deferreds
Actives
Future service
272
unitedutilities.com/corporate
Stock code: UU.
273
Notes to the financial statements – appendices
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 £8.9 million in the year ending 31 March 2024, £7.8 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 actively engaged in 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, 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 2023, the discount rate increased by 1.9 per cent (2022: 0.75 per cent increase), which includes a 2.05
per cent increase in gilt yields over the year and a 0.15 per cent reduction in credit spreads. The IAS 19 remeasurement loss of £445.3
million (2022: £313.6 million gain) reported in note 19 has largely resulted from the schemes being more than 100 per cent hedged
on an IAS 19 basis, which has resulted in a greater reduction of the schemes’ assets than the defined benefit obligations as a result of
yield rises.
The fall in value of the schemes’ assets is largely a result of the changes in financial conditions seen over the period. The schemes’
investment strategies have been designed such that the assets are fully hedged against the schemes’ technical provisions funding
positions, and are therefore more than 100 per cent hedged on an IAS 19 basis. As a result, increases in net yields are expected to
reduce the schemes’ assets by a greater amount than the IAS 19 liabilities.
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unitedutilities.com/corporate
Notes to the financial statements – appendices
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 £8.9 million in the year ending 31 March 2024, £7.8 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 actively engaged in 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.
outlined above.
Changes in mortality have not been hedged due to this exposure being subject to lower volatility in the short term, though the group
and scheme trustees are committed to exploring options to de-risk changes in mortality, or pension longevity, in future periods, as
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 2023, the discount rate increased by 1.9 per cent (2022: 0.75 per cent increase), which includes a 2.05
per cent increase in gilt yields over the year and a 0.15 per cent reduction in credit spreads. The IAS 19 remeasurement loss of £445.3
million (2022: £313.6 million gain) reported in note 19 has largely resulted from the schemes being more than 100 per cent hedged
on an IAS 19 basis, which has resulted in a greater reduction of the schemes’ assets than the defined benefit obligations as a result of
yield rises.
The fall in value of the schemes’ assets is largely a result of the changes in financial conditions seen over the period. The schemes’
investment strategies have been designed such that the assets are fully hedged against the schemes’ technical provisions funding
positions, and are therefore more than 100 per cent hedged on an IAS 19 basis. As a result, increases in net yields are expected to
reduce the schemes’ assets by a greater amount than the IAS 19 liabilities.
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A5 Retirement benefits continued
The increase in credit spreads during the year is partially offset by an RPI inflation assumption reduction of 0.35 per cent (2022:
0.40 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.
While longer term expectations for inflation have started to fall, in the shorter term high inflation has resulted in greater than expected
pension increases.
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 2023. 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. As part of each actuarial valuation and, more frequently, as required by the
trustees, member data is reassessed for completeness and accuracy and to ensure it reflects any relevant changes to benefits entitled
by each member.
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:
i
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a
a
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i
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s
s
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)
2023
% p.a.
2022
% p.a.
4.70
3.40
3.40
3.40
3.40
2.85
3.40
2.85
2.80
3.75
3.75
3.75
3.75
3.20
3.75
3.20
Note:
(1)
The CPI price inflation assumption represents a single weighted average rate derived from an assumption of 2.50 per cent pre-2030 and 3.30 per cent
post-2030 (31 March 2022: 2.85 per cent pre-2030 and 3.65 per cent post-2030).
The discount rate is consistent with a high-quality corporate bond rate, with 4.70 per cent being equivalent to gilts plus 0.95 basis
points (31 March 2022: 2.80 per cent being equivalent to gilts plus 1.10 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
The Continuous Mortality Investigation’s (CMI) 2022 tables are not expected to be released until June 2023 and therefore not available
in time for the 31 March 2023 year-end accounting figures. There remains considerable uncertainty around the long-term impact and
the choice of appropriate adjustment remains subjective and is limited to the available parameters within the CMI model. As such,
in arriving at mortality assumptions for 31 March 2023, the group has retained the same assumptions as used for 31 March 2022. The
base tables used for the mortality in retirement assumption are the CMI S3PA (2022: S3PA) year of birth tables, with a scaling factor
of 109 per cent (2022: 109 per cent) and 115 per cent (2022: 115 per cent) for male pensioners and non-pensioners respectively and
110 per cent (2022: 110 per cent) and 111 per cent (2022: 111 per cent) for female pensioners and non-pensioners respectively, reflecting
the profile of the membership. At 31 March 2023, future improvements in mortality are based on the extended CMI 2021 (2022: CMI
2021) projection model, with a long-term annual rate of improvement of 1.25 per cent (2022: 1.25 per cent).
Although the long-term impacts of the COVID-19 pandemic are not yet fully known, mortality over 2022 and the early part of 2023
has remained above pre-pandemic levels. This suggests that the general level of mortality in the population will be higher than had
previously been projected pre-pandemic. Accordingly, the group has retained its COVID-19 adjustment of a 2021 parameter of
10 per cent within the CMI 2021 projections.
274
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Stock code: UU.
275
Notes to the financial statements – appendices
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
2023
years
25.9
26.6
28.0
29.1
2022
years
25.9
26.5
27.9
29.0
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. The schemes’ hedging strategies are designed primarily to reduce the volatility on a technical provisions basis.
• 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 £78.2/£82.7 million (2022:
£119.7/£127.7 million) decrease/increase in the schemes’ liabilities at 31 March 2023, 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 £73.3/69.5 million
(2022: £111.5/105.2 million) increase/decrease in the schemes’ liabilities at 31 March 2023, 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 2023, 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
2023, 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 (2022: 0.2 per cent) has been
deducted from the breakeven inflation rate for the year ended 31 March 2023. The impact of this is a decrease in the defined
benefit obligation of around £61.0 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 £7.0 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 £16.5 million increase in the schemes’ liabilities at 31 March 2023 (2022: £29.1 million
increase in the schemes’ liabilities).
• Life expectancy – An increase/decrease in life expectancy of one year would have resulted in a £83.9 million (2022: £135.0 million)
increase/decrease in the schemes’ liabilities at 31 March 2023. 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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276
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Notes to the financial statements – appendices
Group
Retired member – male
Non-retired member – male
Retired member – female
Non-retired member – female
2023
years
25.9
26.6
28.0
29.1
2022
years
25.9
26.5
27.9
29.0
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3
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. The schemes’ hedging strategies are designed primarily to reduce the volatility on a technical provisions basis.
• 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 £78.2/£82.7 million (2022:
£119.7/£127.7 million) decrease/increase in the schemes’ liabilities at 31 March 2023, 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 £73.3/69.5 million
(2022: £111.5/105.2 million) increase/decrease in the schemes’ liabilities at 31 March 2023, 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 2023, 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
2023, 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 (2022: 0.2 per cent) has been
deducted from the breakeven inflation rate for the year ended 31 March 2023. The impact of this is a decrease in the defined
benefit obligation of around £61.0 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 £7.0 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 £16.5 million increase in the schemes’ liabilities at 31 March 2023 (2022: £29.1 million
increase in the schemes’ liabilities).
• Life expectancy – An increase/decrease in life expectancy of one year would have resulted in a £83.9 million (2022: £135.0 million)
increase/decrease in the schemes’ liabilities at 31 March 2023. 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.
A5 Retirement benefits continued
The current life expectancies at age 60 underlying the value of the accrued liabilities for the schemes are:
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 2023
Non-equity growth assets
Gilts
Bonds
Other
Total fair value of schemes’ assets
At 31 March 2022
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
%
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s
s
278.2
1,822.3
1,211.2
422.8
3,734.5
606.6
2,839.1
1,708.0
423.0
5,576.7
–
(886.9)
(2.5)
86.2
(803.2)
–
(1,657.6)
(3.7)
120.3
(1,541.0)
278.2
935.4
1,208.7
509.0
2,931.3
606.6
1,181.5
1,704.3
543.3
4,035.7
9.5
31.9
41.2
17.4
100.0
15.0
29.3
42.2
13.5
100.0
Included within the group’s defined benefit pension scheme assets are assets with a fair value estimated to be £216.3 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 2023. 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). During
the year ended 31 March 2023 no liquidity support or facilities were required by the company as a result of collateral calls.
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
2023
£m
2022
£m
(886.9)
(886.9)
(1,657.6)
(1,657.6)
13.8
(16.3)
(2.5)
(17.2)
(13.2)
116.6
86.2
(1.4)
(2.3)
(3.7)
(32.5)
18.0
134.2
0.6
120.3
Total fair value of derivatives
(803.2)
(1,541.0)
The derivatives shown in the tables only cover those expressly held for the purpose of reducing certain undesirable asset and liability
risks as part of the liability driven investment strategies. 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 £371.2 million
(2022: £681.5 million).
276
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Stock code: UU.
277
Notes to the financial statements – appendices
A5 Retirement benefits continued
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.
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
2023
£m
4,035.7
111.4
(1,087.8)
2.3
(136.9)
(2.5)
9.1
2022
£m
3,984.7
80.8
102.2
2.3
(141.7)
(2.1)
9.5
2,931.3
4,035.7
The group’s actual return on the schemes’ assets was a loss of £976.4 million (2022: £183.0 million gain), largely as a result of the
schemes’ investment strategies hedging increases in the technical provisions due to change in financial conditions.
The trustees of both the ESPS and UUPS schemes publish a statement of investment principles, available via the United Utilities
corporate website. The statements set out the ESG principles, in particular climate risk, behind the choice of investments.
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
2023
£m
335.1
0.2
(1.3)
–
4.7
102.2
–
2022
£m
363.1
0.1
–
–
2.8
116.4
–
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 2023, amounts owed by joint ventures, as recorded within trade and other receivables in the statement of financial
position, were £102.2 million (March 2022: £116.4 million), comprising £26.7 million (March 2022: £28.5 million) of trade balances,
which are unsecured and will be settled in accordance with normal credit terms, and £75.5 million (March 2022: £80.4 million) relating
to loans.
Included within these loans receivable were the following amounts owed by Water Plus:
• £74.4 million (2022: £79.4 million) outstanding on a £95.0 million revolving credit facility provided by United Utilities PLC, with a
maturity date of December 2026, bearing a floating rate interest rate of the Bank of England base rate plus a credit margin. This
balance comprises £75.5 million outstanding, net of a £1.1 million allowance for expected credit losses (2022: £80.5 million net of a
£1.1 million allowance for expected credit losses); and
• £1.4 million (2022: £1.0 million) receivable being the £11.0 million (2022: £10.6 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 (2022:
£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 2023 and 31 March 2022 of £12.5 million, comprising a £11.0 million (2022:
£10.6 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 £1.5 million (2022: £1.9 million) recorded as an equity contribution to Water
Plus recognised within interests in joint ventures.
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278
unitedutilities.com/corporate
A6 Related party transactions continued
A further £0.1 million (2022: £1.4 million) of non-current receivables was owed by other related parties at 31 March 2023.
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 £48.9 million, of which £26.0 million related to guarantees to United Utilities Water Limited.
At 31 March 2023, amounts owed to related parties were nil (March 2022: nil).
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 £301.2 million (2022: £295.5 million) and total net
interest payable during the year was £55.8 million (2022: £21.0 million). Amounts outstanding at 31 March 2023 and 31 March 2022
between the parent company and subsidiary undertakings are disclosed in notes 15, 17 and 21.
At 31 March 2023 and 31 March 2022, 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 2023 and 31 March 2022.
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Notes to the financial statements – appendices
A5 Retirement benefits continued
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.
Movements in the fair value of the schemes’ assets were as follows:
The return on plan assets, excluding amounts included in interest
Group
At the start of the year
Interest income on schemes’ assets
Member contributions
Benefits paid
Administrative expenses
Company contributions
At the end of the year
2023
£m
4,035.7
111.4
(1,087.8)
2.3
(136.9)
(2.5)
9.1
2022
£m
3,984.7
80.8
102.2
2.3
(141.7)
(2.1)
9.5
2,931.3
4,035.7
2023
£m
335.1
0.2
(1.3)
–
4.7
102.2
–
2022
£m
363.1
0.1
–
–
2.8
116.4
–
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2
3
The group’s actual return on the schemes’ assets was a loss of £976.4 million (2022: £183.0 million gain), largely as a result of the
schemes’ investment strategies hedging increases in the technical provisions due to change in financial conditions.
The trustees of both the ESPS and UUPS schemes publish a statement of investment principles, available via the United Utilities
corporate website. The statements set out the ESG principles, in particular climate risk, behind the choice of investments.
A6 Related party transactions
Group
disclosed in this note.
the period end date, were as follows:
Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
The related party transactions with the group’s joint ventures and other related parties during the period, and amounts outstanding at
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
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 2023, amounts owed by joint ventures, as recorded within trade and other receivables in the statement of financial
position, were £102.2 million (March 2022: £116.4 million), comprising £26.7 million (March 2022: £28.5 million) of trade balances,
which are unsecured and will be settled in accordance with normal credit terms, and £75.5 million (March 2022: £80.4 million) relating
to loans.
Included within these loans receivable were the following amounts owed by Water Plus:
• £74.4 million (2022: £79.4 million) outstanding on a £95.0 million revolving credit facility provided by United Utilities PLC, with a
maturity date of December 2026, bearing a floating rate interest rate of the Bank of England base rate plus a credit margin. This
balance comprises £75.5 million outstanding, net of a £1.1 million allowance for expected credit losses (2022: £80.5 million net of a
£1.1 million allowance for expected credit losses); and
• £1.4 million (2022: £1.0 million) receivable being the £11.0 million (2022: £10.6 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 (2022:
£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 2023 and 31 March 2022 of £12.5 million, comprising a £11.0 million (2022:
£10.6 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 £1.5 million (2022: £1.9 million) recorded as an equity contribution to Water
Plus recognised within interests in joint ventures.
278
unitedutilities.com/corporate
Stock code: UU.
279
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Notes to the financial statements – appendices
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 239 to 241.
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.
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 96 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 distinct 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, and also includes any adjustment
to tax payable in respect of previous years.
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.
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.
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Notes to the financial statements – appendices
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 239 to 241.
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.
Payments received in advance of revenue recognition are
recorded as deferred income. This includes the revenue in
respect of connection activities, itself a distinct 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
Where necessary, adjustments are made to the financial
issue of a financial asset or financial liability are included in the initial
statements of subsidiaries to bring the accounting policies used
fair value of that instrument. Where borrowing costs are attributable
under the relevant local GAAP into line with those used by the
to the acquisition, construction or production of a qualifying asset,
group. Amounts attributable to non-controlling interests are
such costs are capitalised as part of the specific asset.
presented separately in equity and total comprehensive income
Tax
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.
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 96 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.
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, and also includes any adjustment
to tax payable in respect of previous years.
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.
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.
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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.
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.
Deferred tax assets have been recognised in respect of all tax
losses and other temporary differences giving rise to deferred tax
assets because it is probable that these assets will be recovered.
These deferred tax assets will be recovered against the deferred
tax liabilities in relation to fixed assets which will reverse in the
same periods.
Deferred tax assets and deferred tax liabilities are offset when
there is a legally enforceable right to set off tax assets against
tax liabilities and when they relate to income taxes levied by
the same taxation authority and the group intends to settle its
current assets and liabilities on a net basis.
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.
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.
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
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Stock code: UU.
281
Notes to the financial statements – appendices
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 are subsequently amortised over a
period of generally 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 and other receivables
Trade and other receivables are initially measured at fair value on
initial recognition. Trade and other receivables are held within a
business model to collect contractual cash flows which comprise
solely payments of principal and interest on the principal
amount outstanding. After initial recognition, trade and other
receivables are subsequently measured at amortised cost using
the effective interest method. The amortised cost is reduced by
impairment losses. At each reporting date, the group evaluates
the estimated recoverability of trade and other receivables and
records allowances for expected credit losses. An allowance
is recognised where there is objective evidence the group
will be unable to collect all of the amount due. The receivable
is recognised at the recoverable amount and the difference
between the amortised cost and the recoverable amount is
recorded as an expense within the profit and loss account.
The group estimates the expected credit loss on trade and other
receivables applying the simplified approach as permitted under
IFRS 9. For trade and other receivables that are assessed as not
impaired individually, the expected credit loss is estimated based
on the group’s historical experience of cash collection and the
incorporation of forward-looking information.
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
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Notes to the financial statements – appendices
customisation of a SaaS system may enhance the group’s existing
Cash and short-term deposits
digital infrastructure and would be expected to generate broader
Cash and short-term deposits include cash at bank and in hand,
future economic benefit. Where this results in an identifiable
deposits and other short-term highly liquid investments which
intangible asset that the group controls, the costs are capitalised
are readily convertible into known amounts of cash, have a
in accordance with IAS 38 and are subsequently amortised over a
maturity of three months or less from the date of acquisition and
period of generally three to 10 years.
Impairment of assets
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
Where appropriate, assets are reviewed for impairment at each
reporting date to determine whether there is any indication that
of book overdrafts.
those assets may have suffered an impairment loss. Where the
Financial investments
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
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
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 and other receivables
Trade and other receivables are initially measured at fair value on
initial recognition. Trade and other receivables are held within a
business model to collect contractual cash flows which comprise
solely payments of principal and interest on the principal
amount outstanding. After initial recognition, trade and other
receivables are subsequently measured at amortised cost using
the effective interest method. The amortised cost is reduced by
impairment losses. At each reporting date, the group evaluates
the estimated recoverability of trade and other receivables and
records allowances for expected credit losses. An allowance
is recognised where there is objective evidence the group
will be unable to collect all of the amount due. The receivable
is recognised at the recoverable amount and the difference
between the amortised cost and the recoverable amount is
The group estimates the expected credit loss on trade and other
receivables applying the simplified approach as permitted under
IFRS 9. For trade and other receivables that are assessed as not
impaired individually, the expected credit loss is estimated based
on the group’s historical experience of cash collection and the
incorporation of forward-looking information.
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
As a regulated business the group’s principal subsidiary, United
recorded as an expense within the profit and loss account.
Non-current assets classified as held for sale are measured
its liabilities.
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
Equity instruments
Equity instruments issued by the group are recorded at the
proceeds received, net of direct issue costs.
having been met only when the sale is highly probable and the
Borrowings
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.
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
Financial instruments
Financial assets and financial liabilities are recognised and
derecognised in the group’s statement of financial position on
term of the borrowing.
the trade date when the group becomes/ceases to be a party to
The default treatment of measuring at amortised cost, while
the contractual provisions of the instrument.
associated hedging derivatives are recognised at fair value,
presents an accounting measurement mismatch that has
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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.
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.
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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.
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.
Under the provisions of IFRS 9 ‘Financial Instruments’,
changes in the group’s own credit risk are recognised in other
comprehensive income.
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
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.
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Stock code: UU.
283
Notes to the financial statements – appendices
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).
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.
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.
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Interest payments and receipts
IIFRS 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 237) 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.
Notes to the financial statements – appendices
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
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
further payment obligations once the contributions have been paid.
asset and lease liability is recognised at the commencement
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
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,
exercisable with the impact of any revision being recognised in the
and the group deems that separation of such contracts into
income statement, and a corresponding adjustment to equity over
their constituent parts for this asset class would generally
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).
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.
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.
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.
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Stock code: UU.
285
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, see note 13.
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 PLC
United Utilities Property Services 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
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
99.9 Dormant
90.9
Property management
100.0 Dormant
100.0 Dormant
100.0 Dormant
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 Holding company
100.0
Property management
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
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(1)
Water Plus Limited(1)
Water Plus Select Limited(1)
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50.0 Development company
16.7 Dormant
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
Note:
(1)
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.
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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, see note 13.
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 2023. The calculation of RCV gearing and net debt have been re-presented for
the years ended 31 March 2019 to 31 March 2022 so that they are presented on a consistent basis to the measures presented for the
year ended 31 March 2023. Further detail of the changes to how these measures are presented can be found on page 115.
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 PLC
United Utilities Property Services 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
Joint ventures
Great Britain
Limited
Selectusonline Limited
Water Plus Group Limited(1)
Water Plus Limited(1)
Water Plus Select Limited(1)
Note:
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
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2
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100.0 Consulting services and project management
99.9 Dormant
90.9
Property management
100.0 Dormant
100.0 Dormant
100.0 Dormant
100.0
Energy generation
100.0 Corporate trustee
100.0 Holding company
100.0 Corporate trustee
100.0 Holding company
100.0
Property management
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
50.0 Development company
16.7 Dormant
50.0 Holding company
50.0 Water and wastewater retail services
50.0 Water and wastewater retail services
United Utilities Bioresources Limited
100.0 Wastewater services
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
(1)
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.
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
2023
£m
2022
£m
2021
£m
2020
£m
2019
£m
1,824.4
1,862.7
1,808.0
1,859.3
1,818.5
440.8
440.8
256.3
(34.3)
204.9
(8.7)
30.0p
(1.3)p
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
Dividend per ordinary share
45.51p
43.50p
43.24p
42.60p
41.28p
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
13,835.8
691.4
14,527.2
(11,442.6)
(575.9)
(12,018.5)
2,508.7
787.5
(593.4)
(85.0)
(1.3)
107.8
13,823.2
613.8
14,437.0
(10,791.0)
(688.6)
(11,479.6)
2,957.4
934.4
(639.7)
(809.7)
1.5
(513.5)
13,166.2
1,012.9
14,179.1
(10,152.6)
(995.5)
(11,148.1)
3,031.0
859.4
(549.3)
(89.7)
–
220.4
Net debt
RCV gearing(1) (%)
8,200.8
58%
7,570.0
59%
7,305.8
63%
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)
6,990.4
60%
Note:
(1)
Regulatory Capital Value (RCV) gearing is calculated as group net debt (see Note A2) adjusted for loan receivables from joint ventures, divided by the
RCV (as adjusted for actual spend and timing difference) of United Utilities Water Limited, including the expected value of AMP7 ex-post adjustment
mechanisms. Prior year figures have been re-presented for comparative purposes.
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unitedutilities.com/corporate
Stock code: UU.
287
Shareholder information
Key dates
− 22 June 2023
Ex-dividend date for the 2022/23 final dividend
− 23 June 2023
Record date for 2022/23 final dividend
− 11 July 2023
DRIP election date for 2022/23 final dividend
− 21 July 2023
Annual general meeting
− 1 August 2023
Payment of 2022/23 final dividend to shareholders
− 16 November 2023
Announcement of half-year results for the six months ending
30 September 2023
− 21 December 2023
Ex-dividend date for 2023/24 interim dividend
− 22 December 2023
Record date for 2023/24 interim dividend
− 11 January 2024
DRIP election date for 2023/24 interim dividend
− 1 February 2024
Payment of 2023/24 interim dividend to shareholders
− May 2024
Announce the final results for the 2023/24 financial year
− June 2024
Publish the integrated annual report and financial statements
for the 2023/24 financial year
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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
integrated annual report or in any related document to
communicate with the company for any purposes other than
those expressly stated.
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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 integrated annual report is available online. View or
download the full integrated annual report and financial
statements from: unitedutilities.annualreport2023.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.
288
unitedutilities.com/corporate
Shareholder information
Key dates
− 22 June 2023
− 23 June 2023
− 11 July 2023
Ex-dividend date for the 2022/23 final dividend
Record date for 2022/23 final dividend
DRIP election date for 2022/23 final dividend
− 21 July 2023
Annual general meeting
− 1 August 2023
− 16 November 2023
30 September 2023
− 21 December 2023
Payment of 2022/23 final dividend to shareholders
Announcement of half-year results for the six months ending
Ex-dividend date for 2023/24 interim dividend
− 22 December 2023
Record date for 2023/24 interim dividend
− 11 January 2024
− 1 February 2024
− May 2024
− June 2024
DRIP election date for 2023/24 interim dividend
Payment of 2023/24 interim dividend to shareholders
Announce the final results for the 2023/24 financial year
Publish the integrated annual report and financial statements
for the 2023/24 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.
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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 integrated annual report is available online. View or
download the full integrated annual report and financial
statements from: unitedutilities.annualreport2023.com
288
unitedutilities.com/corporate
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
integrated 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 integrated annual 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:
+44 (0)371 384 2041 (please use the code when calling from
outside the UK) or for deaf and speech impaired customers, we
welcome calls via Relay UK. Please see www.relayuk.bt.com for
more information. Lines are open 8.30am to 5.30pm, 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 2023
7
7
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1
6
9
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% of shares
Number of
holdings
Geographic location of major shareholdings %
Equiniti also offers a stocks and shares ISA for United Utilities
shares: call 0345 300 0430 or go to: shareview.co.uk/dealing
11
20
39
30
United Kingdom
North America
Europe
Rest of the World
Dividend history – pence per share
2019
2020
2021
2022
2023
Interim
Final
Total ordinary
13.76
27.52
41.28
14.20
28.40
42.60
14.41
28.83
43.24
14.50
29.00
43.50
15.17
30.34
45.51
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
Important information
Cautionary statement:
The integrated 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.
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.
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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