Underlying operating profit


£744m

Definition

The underlying operating profit measure excludes from the reported operating profit any restructuring costs and significant non-recurring items. The group determines adjusted items consistently in the calculation of its underlying operating profit measure against a framework that considers significance by reference to profit before tax, in addition to other qualitative factors such as whether the item is deemed to be within the normal course of business, its assessed frequency of 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 on Our performance in 2019/20.

Link to bonus/LTP

Bonus – direct LTP – indirect

Status

Close to achieving target but more work to be done

Performance

Underlying operating profit of £744 million was up £59 million, largely reflecting the inflationary increase in our allowed revenue and lower infrastructure renewals expenditure (IRE), which was mainly due to the phasing of our five-year capital projects that had a significant element of IRE spend.


Underlying earnings per share


63.0p

Definition

This measure deducts underlying net finance expense 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 consistent adjustments to the reported net finance expense, including the stripping out of fair value movements. Underlying taxation strips out deferred tax (including any tax credits or debits arising from changes in the tax rate from reported taxation), any prior year adjustments or exceptional tax. Reconciliations to the underlying measures above are shown on Our performance in 2019/20.

Link to bonus/LTP

LTP – indirect

Status

Close to achieving target but more work to be done

Performance

Underlying earnings per share was up 3.2 pence at 63 pence due to the increase in underlying operating profit partly offset by a higher underlying net finance expense due to higher RPI inflation on our index-linked debt, and a share of small underlying losses of joint ventures.


Dividend per share


42.60p

Definition

This measure divides total dividends declared by the average number of shares in issue during the year.

Link to bonus/LTP

LTP – direct

Status

Achieved/confident of achieving target

Performance

Recognising the strong performance we have delivered in the year, and finishing the 2015–20 period as a leading company, the board has proposed an increase in the dividend of 3.2 per cent to 42.6 pence per share, in line with our AMP6 policy of targeting growth in line with RPI inflation.


Gearing: net debt to RCV


62%

Definition

Group net debt (including derivatives) divided by UUW's regulatory capital value (RCV). From 2016/17 onwards this uses shadow RCV, adjusted for actual spend, while prior years used Ofwat's published RCV in out-turn prices in line with previous methodology.

Target

Maintain gearing within a range of 55 per cent to 65 per cent.

Status

Achieved/confident of achieving target

Performance

Our gearing has increased slightly this year but remains within our target range of 55 per cent to 65 per cent, supporting a solid investment grade credit rating.


Total shareholder return


+17%

Definition

This measure calculates the return to shareholders based on the movement in the share price plus dividends over each financial year.

Link to bonus/LTP

LTP – direct

Status

Close to achieving target but more work to be done

Performance

Our total shareholder return was 17 per cent positive over the year to 31 March 2020.

Note 1: For both our operational and financial KPIs, where we have declared external targets we assess our performance against the most recent public targets. Where there are no externally declared targets we assess our performance against our internal budget; however, our internal budget is not disclosed. Green status indicates that we have achieved or are confident of achieving our target. Amber status indicates that we are close to achieving our target but there remains some work to be done. Red status indicates that we are missing our target.

Note 2: In some instances the remuneration committee has used metrics with similar names but calculation methodologies which they consider more appropriate for executive remuneration, as set out in the remuneration report in the Corporate governance report.