CEO's review

A year of progress

We are pleased to report a good set of results for both our regulated and our non-regulated activities. Along with our achievement in meeting Ofwat’s revised target for our capital investment programme and in outperforming our leakage target, the figures mark a year of excellent progress for the group.

I wrote last year that we had started on a journey towards our vision of becoming a world class operator of utility infrastructure and I defined this in the context of three topics.

The first has been to reshape our portfolio to allow us to focus on our core skills – the operation of water, wastewater, gas and electricity infrastructure and the design and build of that infrastructure.

The second has been to set a capital structure and dividend policy appropriate for the future of the group. Following the sale of United Utilities Electricity, principally comprising our electricity distribution assets, and the review of our capital structure, we intend to return £1.5 billion to our shareholders, adjust our gearing to a level more appropriate to the business and implement a new dividend policy. Once the value has been returned, our review of capital structure and dividend policy will have been completed.

The third is to raise our operational performance. Here we’ve made good progress, particularly in outperforming Ofwat’s leakage target and in raising our customer satisfaction scores to levels dramatically higher than any we achieved before 2006. There are, however, areas where there is more to be done. We need to improve compliance with environmental standards at our wastewater treatment works, manage better any unplanned supply interruptions to our customers and reduce incidents of sewer flooding. We are working hard to address these areas.

In respect of our non-regulated business activities, we secured the £1.5 billion contract to manage the electricity distribution assets of Electricity North West. This was in addition to extending our contracts for Southern Water and British Gas Trading.

To continue our momentum towards world class performance, we need to go further in instilling our company values. Our values of team, trust, passion and commitment are crucial in reinforcing the sense of public duty that has always been part of our ethos at United Utilities, while also helping to sharpen our focus on operational and financial performance.

The key to this cultural change lies in our leadership and here we’ve made decisive changes. We have placed greater emphasis on leadership at every level and of the ten members of our top executive team, half have been recruited in the last two years. We’ve also established a wider group of senior leaders, responsible for bringing new thinking into United Utilities and for helping us to achieve the changes we need to make and to inspire our people to deliver it.

We’re also working on the motivation of our people. This year we’ve taken further steps to measure our employees’ sense of engagement and improve the areas where we’re weak. As people become more committed and involved, they’re more likely to demonstrate our values which in turn will propel us towards better operational performance and the fulfilment of our vision. View our human resources pages.

As we change and improve, we also seek to operate more sustainably. We know that sustainability makes good business sense and helps to attract and retain good people. We’ve committed ourselves to reducing our carbon emissions by 26 per cent by 2012*. I’m proud that our record on sustainability is one of the best in the industry and pleased that Ofwat is increasingly minded to factor climate change into the requirements of the next regulatory review. With this due in 2009, we continue to work with our regulator to ensure the best outcome for the business, our customers, the environment and our shareholders. View our climate change pages.

There is a long journey ahead, particularly in terms of the mindset and ethos of the organisation. I’m heartened by the progress of the last 12 months and confident of further gains in the year ahead.

Philip Green
Chief executive

* Target consists of at least 8.0% carbon reduction from our own activities and the remainder from certified renewable energy contracts. View our performance pages.