Key performance indicators and other stakeholder metrics

We have a range of key performance indicators (KPIs) encompassing the important areas of customer service and environmental performance, as well as financial indicators. Our operational KPIs are aligned with our strategic themes, and our financial KPIs assess both the profitability and sustainability of our business.

Further detail on our performance against our regulatory commitments is published in July of each year in our Annual Performance Report.

In addition to our KPIs and regulatory commitments, we monitor our performance against an assortment of metrics that are of interest to our many stakeholders, and report against these within this report and on our corporate website.

Our key performance indicators (KPIs)

To help measure progress on how well we are delivering the outcomes described in our business model and adding value for all our stakeholders, we focus on a range of financial and operational KPIs. Our executive bonuses and long-term incentives are closely aligned to our financial and operational performance KPIs, as highlighted in the At a glance summary: executive directors' remuneration.

We set operational KPIs for the five-year regulatory period. These align with our three 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 the following pages. These operational KPIs remain consistent with last year.

We set financial KPIs that assess both the profitability and sustainability of our business from a financial perspective. A description of these financial KPIs and our performance against these targets can be seen in the Financial KPIs section. We set internal budgets for financial KPIs but we do not have externally declared targets for these.

This year we have changed one of our financial KPIs. We have removed revenue from the list, recognising that the movements in revenue are dependent on the regulatory mechanism rather than management control, and replaced this with total shareholder return, a measure of movements in the share price plus dividends over the year, which is more important for shareholders. This measure is used for our executive remuneration through the long-term plan, although the time frame of calculation and comparators are different for the one-year KPI and the three-year incentive plan.

Annual Performance Report (APR)

Performance against our regulatory contract is monitored and assessed each year, and reported within an Annual Performance Report (APR). This has been a requirement from Ofwat for all water companies since the start of the current regulatory period in financial year 2015/16, when this replaced the previous 'regulatory accounts'.

The majority 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 also 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, which differs from IFRS reporting; however, 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 2018/19 will be published in July 2019.

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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 in How we create value for stakeholders, 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 in the Stakeholder metrics section 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 our stakeholder metrics table also reports 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, but our stakeholder metrics table also reports 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 also regularly report on numerous corporate responsibility performance measures on our external website.

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