Directors' report statutory and other information

Gross carbon emissions for 2015/16

454,857

tonnes CO2 equivalent

22.4 per cent below our 2005/06 baseline

138 GWh

of renewable generation in 2015/16 – equivalent to 17 per cent of our electricity consumption

Our directors present their management report including the Strategic report 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 2016.

Business model

A description of the company's business model can be found within the Strategic report.

Carbon

We measure our emissions over the financial reporting year against a footprint covering the operational activities of the water, wastewater and property services businesses in the UK. All figures stated are in line with the latest UK Government carbon reporting guidance. Our reporting is compliant with the international carbon reporting standard (ISO 14064, Part 1) and assured by the Certified Emissions Measurement and Reduction Scheme (CEMARS).

Our performance in 2015/16 was 454,857 tCO2e which is 22.4 per cent below the 2005/06 baseline. The trend in our overall emissions continues to be downwards even though it has fluctuated over the past few years – as it can be affected by weather, operational conditions and the carbon content of the UK's electricity supply.

Our carbon footprint over the last 11 years

Carbon Footprint

We expect the overall trend in our emissions to remain downwards reflecting our efforts to use less energy and increase renewable energy generation, alongside projected decreases in the carbon content of the UK's energy supply. In 2015/16, the reduction in the carbon intensity of UK grid electricity offset the small increase in our consumption of grid electricity, whilst natural gas consumption saw a small decrease. An improvement in sludge and process emissions was offset by Defra's change to the Global Warming Potential (GWP) factor for methane, which increased by nearly 20 per cent this year. Exceptional weather and operational conditions reduced renewable electricity generation from our CHP fleet by 12 per cent below target, whilst our investment in wind and solar photovoltaics saw an additional 4.36 GWh of electricity generation.

CO2

CH4

N20

SF6

HFCs

PFCs

SCOPE 1

(Direct)

  • Process emissions including refrigerants
  • Fossil fuel use
  • Company vehicles

SCOPE 2

(Indirect)

  • Purchased electricity (generation)

SCOPE 3

(Indirect)

  • Purchased electricity (transmission and distribution)
  • Sludge and process waste disposal
  • Public transport and mileage

Outside of boundary:

contractor emissions, supplier emissions, customer emissions

Emissions

Emissions 2016

Direct emissions from burning off fossil fuels

Process and emissions from our treatment plants – including refrigerants

Transport company owned or leased vehicles

Total grid electricity used by company: generation

Total grid electricity used by company: transmission and distribution

Business travel on public transport and private vehicles used for company business

Emissions from sludge/process waste disposal

The boundary of our carbon footprint includes both direct and indirect emissions as a result of our operations.

  • Direct emissions include those from our treatment processes, company vehicles and burning of fossil fuels for heating or incineration of sewage sludge.
  • Indirect emissions include those from the electricity we use to power our treatment plants, emissions from travel on company business and sludge and treatment waste disposal emissions. Our emissions account for all of the Kyoto Protocol gases – converted to carbon dioxide equivalents. There are no material omissions.

The following table gives a breakdown of our carbon emissions by scope and source:

CHG ScopeSource2013/14
(tCO2e)
2014/15
(tCO2e)
2015/16
(tCO2e)
Scope 1 emissionsDirect emissions from burning of fossil fuels9,5259,57512,283
Process emissions from our treatment plants – including refrigerants82,42183,76287,004
Transport: company owned or leased vehicles10,04610,70411,246
Scope 2 emissionsTotal grid electricity purchased by the company: generation298,768321,185302,791
Scope 3 emissionsTotal grid electricity purchased by the company: transmission and distribution25,54628,08625,006
Business travel on public transport and private vehicles used for company business2,8602,9712,783
Emissions from sludge and process waste disposal19,87517,42513,744
Gross carbon footprint total449,041473,708454,857
Emission reductions from exported renewable electricity(6,676)(6,155)(4,209)
Net carbon footprint total442,365467,553450,648
Emissions per £million turnover263.44275.44262.92
DividendsOur directors are recommending a final dividend of 25.64 pence per ordinary share for the year ended 31 March 2016, which, together with the interim dividend of 12.81 pence, gives a total dividend for the year of 38.45 pence per ordinary share (the interim and final dividends we paid in respect of the 2014/15 financial year were 12.56 pence and 25.14 pence per ordinary share respectively). Subject to approval by our shareholders at our AGM, our final dividend will be paid on 1 August 2016 to shareholders on the register at the close of business on 24 June 2016.
DirectorsThe biographical details, together with the skills and experience, of our directors who served during the financial year ended 31 March 2016.
ReappointmentOur articles of association provide that our directors must retire at the third annual general meeting following their last election or reappointment by our shareholders. However, our board, being mindful of the recommendation contained within the UK Corporate Governance Code published in 2014 ('the Code') that all directors should be subject to annual election by shareholders, has decided that all of our directors will retire at AGMs and offer themselves for election/reappointment, as has happened at all the AGMs since 2011. Information regarding the appointment of our directors is included in our corporate governance report. Dr Catherine Bell is not seeking reappointment at the 2016 AGM.
InterestsDetails 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 which is hereby incorporated by reference into this directors' report.
Corporate governance statementThe corporate governance report is hereby incorporated by reference into this directors' report and includes details of our compliance with 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 Code, as applicable to the company for the year ended 31 March 2016, 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.
Our corporate governance statement also includes the consideration given by our directors to the factors relevant to the provision of a long-term viability statement. We can confirm that during the financial year 2015/2016 there have been no breaches of our anti-bribery and competition policies and no investigations or enforcement activity against us in respect of these matters.
Share capitalAt 31 March 2016, 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. 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 2016.
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 2016 AGM. Our directors' powers are conferred on them by UK legislation and by the company's articles. At the AGM of the company on 24 July 2015, 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.
VotingElectronic and paper proxy appointment and voting instructions must be received by our registrars (Equiniti) not 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.
TransfersThere are no restrictions on the transfer of our ordinary shares in the company, nor any limitations on the holding of our shares in the company, save (i) where the company has exercised its right to suspend their voting rights or to prohibit their transfer following the omission of their holder or any person interested in them to provide the company with information requested by it in accordance with Part 22 of the Companies Act 2006; or (ii) where their holder is precluded from exercising voting rights by the Financial Conduct Authority's Listing Rules or the City Code on Takeovers and Mergers.
There are no agreements known to us between holders of securities that may result in restrictions on the transfer of securities or on voting rights. All our issued shares are fully paid.
Major shareholdings

At 25 May 2016, 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:

Per cent of
issued share
capital
Direct or
indirect nature
of holding
Legal & General Group Plc3.02direct
BlackRock Inc5.13indirect
Purchase of own sharesAt our last AGM held on 24 July 2015, 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 2016 AGM, we will 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 2017.
Change of controlAs at 31 March 2016, Equiniti Trust (Jersey) 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 share incentive plan (ShareBuy) would be able to direct the trustee of the share incentive plan, Equiniti Share Plan Trustees Limited, how to act on their behalf.
Information required by UK listing rule 9.8.4Details of the amount of interest capitalised by the group during the financial year can be found in note 5 to the financial statements. In line with current UK tax legislation, the amount is fully deductible against the group's corporation tax liability resulting in tax relief of £4.3 million.
There are no other disclosures to be made under listing rule 9.8.4.
Directors' indemnitiesand insuranceWe 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 also maintains an appropriate level of directors' and officers' liability insurance.
Political donationsWe do not support any political party and do not make what are commonly regarded as donations to any political party or other political organisations. However, the wide definition of donations in the Political Parties, Elections and Referendums Act 2000 covers activities which form part of the necessary relationship between the group and our political stakeholders. This includes promoting United Utilities' activities at the main political parties' annual conferences, and occasional stakeholder engagement in Westminster.
The group incurred expenditure of £5,360 (2015: £21,600) as part of this process. At the 2015 AGM, an authority was taken to cover such expenditure. A similar resolution will be put to our shareholders at the 2016 AGM to authorise the company and its subsidiaries to make such expenditure.
EmployeesOur policies on employee consultation and on equal opportunities for our disabled employees can be found in the 'People' section. The company's business principles make clear how it and all our employees must seek to act with integrity and fairness and observe legal requirements. Anyone with serious concerns that the company may not be adhering to these principles is encouraged to speak up via their line manager or through a confidential telephone line.
Importance is placed on strengthening employees' engagement, measuring their views annually, then taking action to improve how they feel about the company and understand its direction. Employees are provided with regular information to enable them to understand the financial and economic factors affecting the company's performance. The board encourages employees to own shares in the company through the all employee share incentive plan (ShareBuy). For further information on our average number of employees during the year, go to note 2.
Environmental, socialand community mattersDetails of our approach to corporate responsibility, relating to the environment and social and community issues.
Essential contractual relationshipsCertain suppliers we use contribute key goods or services, the loss of which could cause disruption to our services. However, none are so vital that their loss would affect our viability as a group as a whole nor are we overly dependent on any one individual customer.
Approach to technology developmentWe 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 also that we continue to be alert to emerging technological opportunities.
Financial instrumentsOur risk management objectives and policies in relation to the use of financial instruments can be found in note A4 to the financial statements.
Events occurring after the reporting periodDetails of events after the reporting period are included in note 25 to the consolidated financial statements.
Slavery and Human Trafficking Statement 2016Our 2016 statement can be found on our website at corporate.unitedutilities.com/slavery-human-trafficking

Total dividend per share

38.45p

for 2015/16

(2014/15: 37.70p per share)

Annual general meeting

Our 2016 annual general meeting (AGM) will be held on 22 July.

  • Full details of the resolutions to be proposed to our shareholders, and explanatory notes in respect of these resolutions, can be found in our notice of AGM. A copy can be found on our website

At our 2016 AGM, resolutions will be proposed, amongst other matters:

  • to receive the annual report and financial statements; to approve the directors' remuneration report; to declare a final dividend; and to reappoint KPMG LLP as auditor.
  • 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 working 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 he or she is aware, there is no relevant audit information of which the company's auditor is unaware; and
  • he or she has taken all the steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the company's auditor is aware of that information. This confirmation is given, and should be interpreted, in accordance with the provisions of s418 of the Companies Act 2006.

Reappointment of the auditor

Our board is proposing that our shareholders reappoint KPMG LLP as our auditor at the forthcoming AGM and authorises the audit committee of the board to set the auditor's remuneration.

Approved by the board on 25 May 2016 and signed on its behalf by:

Simon Gardiner

Company Secretary