To help measure our progress on how well we are adding value for our stakeholders and delivering the outcomes described above, we focus on a range of financial and operational KPIs, as defined on the next page. These KPIs are set for the five-year planning period and encompass the important areas of customer service and environmental performance, as well as financial indicators, taking into consideration the interests of all our stakeholders. Strong performance across these KPIs would indicate that our strategy is delivering on our targeted outcomes, helping us on our path to reaching our long-term strategic goals.

Our financial KPIs are the same as for the previous year, and our operational KPIs are the same as for the previous year, with the exception of the KPI relating to the non-household retail part of the business. As this is now under our joint venture, the non-household price control is no longer within our consolidated group and we no longer include this as one of our KPIs.

Our executive bonuses and long-term incentives are closely aligned to our financial and operational performance KPIs, as highlighted in the remuneration report.

Operational KPIs

These operational KPIs feed through from our three strategic themes to deliver the best service to customers, at the lowest sustainable cost, in a responsible manner.

KPI

Wholesale outcome delivery incentive (ODI) composite
Net reward/(penalty) accrued across United Utilities' 19 wholesale financial ODIs

Target

Range of +£30 million to -£50 million over 2015-20

Performance

2016/17: £6.7 million net reward
2015/16: £2.5 million net reward

Status

 

Linked to bonus/LTP

Bonus – direct
LTP – indirect

KPI

Service incentive mechanism – qualitative
Ofwat-derived index based on quarterly customer satisfaction surveys, measuring the absolute and relative performance of the 18 water companies. Each company receives a score in the range of zero to five, with five being the highest attainable score

Target

To move towards the upper quartile in the medium-term

Performance

Service incentive mechanism qualitative

Status

 

Linked to bonus/LTP

Bonus – direct
LTP – direct

KPI

Service incentive mechanism – quantitative
Ofwat-derived composite index based on the number of customer contacts, assessed by type, measuring the absolute and relative performance of the 18 water companies. Each company receives a SIM point total, where the lowest score represents the best performance

Target

To move towards the upper quartile in the medium-term

Performance

Service incentive mechanism quantitative

Status

 

Linked to bonus/LTP

Bonus – direct
LTP – direct

KPI

Totex outperformance
Progress to date on delivering our promises to customers within the cumulative 2015-20 wholesale totex final determination allowance

Target

To meet Ofwat's final determination totex allowance

Performance

2015-20: On track to meet the final determination allowance
Totex new measure for 2015-20 period, hence no prior years' comparators

Status

 

Linked to bonus/LTP

Bonus – indirect
LTP – indirect

KPI

Financing outperformance
Progress to date on financing expenditure outperformance secured versus Ofwat's industry allowed cost of debt of 2.59 per cent real over the 2015-20 period

Target

To beat Ofwat's industry allowed cost of debt

Performance

2015-20: On track to beat Ofwat allowance
2010-15: Exceeded £300 million target

Status

 

Linked to bonus/LTP

LTP – indirect

KPI

Household retail cost to serve
Cost to serve in our household retail business compared with Ofwat's revenue allowance

Target

To minimise costs compared with Ofwat's revenue allowance

Performance

2016/17: £14 million outperformance
2015/16: £10 million outperformance

Status

 

Linked to bonus/LTP

Bonus – indirect
LTP – indirect

KPI

Leakage – average annual leakage
Average annual water leakage from our network quantified in megalitres per day

Target

To meet our regulatory leakage target, as set by Ofwat

Performance

2016/17: 441Ml/d – Met target
2015/16: 463Ml/d – Met target
2014/15: 454Ml/d – Met target
2013/14: 452Ml/d – Met target
2012/13: 457Ml/d – Met target

Status

 

Linked to bonus/LTP

Bonus – indirect

KPI

Environment Agency performance assessment
Composite assessment produced by the Environment Agency, measuring the absolute and relative performance of the 10 water and wastewater companies across a broad range of areas, including pollution

Target

To be a first quartile performer on a consistent basis

Performance

*2015/16 latest available assessment

Status

 

Linked to bonus/LTP

Bonus – indirect

KPI

Dow Jones Sustainability Index rating
Independent rating awarded using sustainability metrics covering economic, environmental, social and governance performance

Target

To retain 'World Class' rating each year

Performance

2016/17: 'World Class'
2015/16: 'World Class'
2014/15: 'World Class'
2014/15: 'World Class'
2013/14: 'World Class'
2012/13: 'World Class'

Status

 

Linked to bonus/LTP

Bonus – direct

Note 1: Sector best and worst on quantitative SIM based on datashare of 13/18 water companies (using 12 month actuals).

Financial KPIs

In respect of our financial KPIs, we use underlying profit measures as these enable more meaningful comparisons of the year-on-year performance of our business.

£1,704 million -1.5 per cent
A definition of revenue is included within the 'Accounting policies' note

Performance

KPI Revenue

Status

 

Feeds into bonus / LTP

Bonus – indirect
LTP – indirect

£623 million +3.1 per cent
The underlying operating profit measure excludes from the reported operating profit any restructuring costs and other significant non-recurring items. The group determines adjusted items in the calculation of its underlying operating profit measure 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 the current year performance. A reconciliation is shown here

Performance

KPI Underlying Operating Profit

Status

 

Feeds into bonus / LTP

Bonus – direct
LTP – indirect

46.0 pence -3.6 per cent
This measure deducts underlying net finance expense and underlying taxation from underlying operating profit to calculate underlying profit after tax and then divides this by the average number of shares in issuance during the year. Underlying net finance expense makes adjustments to the reported net finance expense, including the stripping out of fair value movements. Underlying taxation strips out any prior year adjustments, exceptional tax or any deferred tax credits or debits arising from changes in the tax rate from reported taxation. Read our Reconciliations to the underlying measures above here

Performance

KPI Underlying Earnings per Share

Status

 

Feeds into bonus / LTP

LTP – indirect

38.87 pence +1.1 per cent
This measure divides total dividends declared by the average number of shares in issuance during the year

Performance

KPI Dividend

Status

 

Feeds into bonus / LTP

LTP – direct

61 per cent +1.0 per cent
Group net debt (including derivatives) divided by UUW's regulatory capital value (for 2016/17 this uses shadow RCV, adjusted for actual spend, whilst prior years used Ofwat's published RCV in outturn prices as per previous methodology). Our target range is 55 per cent to 65 per cent

Performance

KPI Gearing

Status

 

Note 2: For both our Operational and Financial KPIs, where we have declared external targets we assess our performance against these targets. Where there are no externally declared targets we assess our performance against our internal budget, however our internal budget is not disclosed.

Note 3: In some instances the remuneration committee has used metrics with similar names but calculation methodologies which they consider more appropriate for executive remuneration, as set out in the remuneration report.