To help measure progress on how well we are delivering our purpose and adding value for all our stakeholders, we monitor and measure our performance against a range of operational and financial key performance indicators (KPIs), as well as other performance indicators for each stakeholder group.
Our KPIs for the 2015–20 period
We have a range of metrics for our KPIs for the current regulatory period, covering important areas such as customer service and environmental performance, as well as financial indicators.
Our operational KPIs are aligned with our strategic themes, and reflect the outcomes we have committed to deliver for customers and other stakeholders, including the environment. A description of these operational KPIs, our targets for each, and our performance against these targets can be seen on pages 56 and 57.
Our financial KPIs assess both the profitability and sustainability of our business from a financial perspective. A description of these financial KPIs and our performance against our targets can be seen on pages 58 and 59. We set internal budgets for financial KPIs but we do not have externally declared targets for these.
Our operational and financial KPIs remain consistent with last year, being the final year of the current regulatory period, albeit we have updated the definition of underlying earnings per share, as we now report this measure excluding the impact of deferred tax, in line with the approach taken by our listed peers. We have set new KPIs for the 2020–25 period, as set out on the next page.
Our executive bonuses and long-term incentives are closely aligned to our financial and operational performance KPIs, as highlighted in the remuneration report on page 162.
Annual Performance Report (APR)
Performance against our regulatory contract is monitored and assessed each year, and reported within an Annual Performance Report (APR), as required by Ofwat for all water companies since the start of the current regulatory period in 2015/16, replacing the previous ‘regulatory accounts’.
Most of our operational KPIs relate to this regulatory performance on a high level, and it is within the APR that more detail can be found on the components within these measures, as well as narrative detail about our performance during the year.
There is financial information contained within the APR. This relates only to the regulated company and its appointed activities, and is calculated and prepared in accordance with the regulatory accounting framework. This differs from IFRS reporting, and a reconciliation to IFRS reporting is provided in our APR. For the purposes of clarification, our financial KPIs relate to our performance at the group level, and are calculated
in line with the definitions given in this report.
Our APRs for previous years are available on our external website, and the APR for 2019/20 will be published in July 2020.
Other performance indicators
Our KPIs provide a snapshot of our performance across a variety of areas, but these are by no means the only metrics by which we monitor and assess our performance on a regular basis, and we report against other metrics both internally and externally.
As discussed on pages 22 to 27, we engage with a variety of stakeholders and this gives us a view of what matters most to them. We report on a selection of other stakeholder metrics on pages 60 and 61 of this report, based on the measures shown to be of highest interest to our stakeholders.
For example, on customer service our KPIs are Ofwat’s measures, the qualitative and quantitative Service Incentive Mechanism (SIM), but on page 60 we report on the level of customer complaints, use of digital communication channels, customers helped through assistance schemes, and the impact of water efficiency measures.
On environmental performance, our KPIs include performance against our leakage target and the overall assessments by the Environment Agency and Dow Jones Sustainability Index, and on page 61 we report on more specific environmental performance indicators, such as carbon footprint, proportion of waste going to beneficial use rather than landfill, and measures of natural capital.
We regularly report on numerous corporate responsibility performance measures on our external website.
Planned changes for the 2020–25 period (AMP7)
Aligning closer to our stakeholders
In line with our purpose, we measure our performance by reference to the value we create for each of our stakeholder groups. We have increased this alignment for the 2020–25 period (AMP7), in which we have selected one operational key performance indicator (KPI) for each of our stakeholder groups. We will retain the linkage with our strategic themes, recognising that there is some overlap and therefore not restrict measures to just one of these themes.
Our KPIs for the 2020–25 period
Our financial KPIs will be largely the same as the 2015–20 period, with the addition of having low-dependency defined benefit pension schemes with nil deficit. This recognises the increasing importance of this strong and secure position for our people, which represents a significant driver of relative value.
For our operational KPIs we have selected one main metric for each stakeholder group, based on the top material issues identified through our stakeholder engagement as set out on pages 22 to 27.
We will report our community investment over the 2020–25 period as the key measure for communities. We will target increasing this investment by at least 10 per cent over the period compared to the average between 2010 and 2020. This measure links to “In a responsible manner”.
We will report our ranking on Ofwat’s customer measure of experience (C-MeX), as customer sentiment is likely to be influenced by a broad range of service components and so best satisfies the spectrum of what matters to customers. We will target being upper quartile within the industry each year. This measure links to “The best service to customers”.
We will report employee satisfaction as the key measure for employees, with a target to be at least as good as the UK high performance norm. This measure links to “In a responsible manner”.
We are retaining the Environment Agency’s Environmental Performance Assessment as a key metric for our performance to create value for the environment in AMP7, and will target upper quartile performance within the industry each year. This measure links to “In a responsible manner”.
We will report Return on Regulated Equity (RoRE) as the key measure for shareholders, encompassing regulatory out/under-performance across financial and operational efficiency, customer satisfaction, and regulatory performance targets. Our targets will be updated throughout the period in line with guidance on the individual components of RoRE. This measure links to both “The best service to customers” and “At the lowest sustainable cost”.
We will report the percentage of invoices paid within 60 days as our main metric for suppliers, targeting at least 95 per cent in line with the requirements of the Prompt Payment Code. This measure links to “In a responsible manner”.
Other performance indicators in AMP7
We have selected one main metric as the key performance indicator for each stakeholder group. We will, however, continue to report our performance against the many other metrics for our stakeholders, as we have done this year, within our annual reports, our APRs, and on our corporate website.
Find more information on our performance