The directors present their 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 2010.
Sections within this page:
Principal activities and business review
Dividends
Directors
Corporate governance statement
The annual general meeting
Share capital, transfers of shares and voting rights
Major interests in shares
Purchase of own shares
Change of control
Directors’ indemnities and insurance
Political and charitable donations
Employees
Environmental, social and community matters
Essential contractual relationships
Policy on payment of creditors
Approach to technology development
Financial instruments
Fixed assets
Events occurring after the reporting period
Information given to the auditors
Reappointment of auditors
Principal activities and business review
The company is a public limited company registered in England and Wales. Its registered office address is at Haweswater House, Lingley Mere Business Park, Lingley Green Avenue, Great Sankey, Warrington, WA5 3LP.
The company is the holding company of a group which owns and operates water and wastewater assets and also manages infrastructure for other businesses, predominantly within the United Kingdom.
The business review, which includes the chairman’s and chief executive officer’s statements and the financial performance section , provides a balanced analysis of the development and performance of the group’s business during the financial year, and the position of the group’s business at the year end, and forms part of this directors’ report. A summary of performance can be found on the inside front cover. A summary of the principal risks and uncertainties can be found in the principal risks section. An indication of likely future developments of the group can be found in the chief executive officer's statement. The company’s principal subsidiary undertakings, and the associated companies and joint ventures in which the group participates, are listed in note 14 to the consolidated financial statements.
Dividends
The directors are recommending a final dividend of 23.13 pence per ordinary share for the year ended 31 March 2010, which, together with the interim dividend of 11.17 pence, gives a total dividend for the year of 34.30 pence per ordinary share (the interim and final dividends paid in respect of the 2008/09 financial year were 10.64 pence and 22.03 pence per ordinary share respectively).
Subject to approval by shareholders at the annual general meeting, the final dividend will be paid on 2 August 2010 to shareholders on the register at the close of business on 18 June 2010. United Utilities Employee Share Trust Limited has waived its rights to dividends, including dividends paid in respect of the year ended 31 March 2010 and future dividends, in respect of the 41,418 ordinary shares held by it as at 20 May 2010.
Directors
The names of the current directors and summary biographical details of those who served during the financial year ended 31 March 2010 are given in the governance section.
During the year, there were no changes to the membership of the board although, as announced on 10 December 2009, Tim Weller, chief financial officer, will step down from the board and leave the company on 21 May 2010 and Andrew Pinder, non-executive director, will retire from the board at the annual general meeting on 23 July 2010.
The articles of association provide that a director must retire at the third annual general meeting following his or her last appointment or reappointment by shareholders. For the annual general meetings held in 2009 and 2010, the articles included transitional provisions in relation to the retirement of directors by rotation. Charlie Cornish, Catherine Bell and Nick Salmon are retiring and offering themselves for reappointment at the 2010 annual general meeting.
Details of the board’s policies and procedures regarding the appointment of directors are included in the corporate governance report . Details of the interests in the company’s shares held by the directors and persons connected with them are set out in the directors’ remuneration report.
Corporate governance statement
Further details of the company’s compliance with the Combined Code on Corporate Governance as published by the Financial Reporting Council in June 2008 (the code) are given on pages 32 to 41. The statement includes a description of the main features of the group’s 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, published in June 2008 as applicable to the company for the year ended 31 March 2010, can be found at the Financial Reporting Council’s website frc.org.uk. Copies of the matters reserved to the board and the terms of reference for each of the main board committees can be found on the company’s website at unitedutilities.com. The corporate governance statement also includes the consideration given by the directors to the factors relevant to the adoption of the going concern basis.
The annual general meeting
The annual general meeting of the company will be held on 23 July 2010 at The Midland Hotel, Peter Street, Manchester, M2 3NQ.
Full details of the resolutions to be proposed to shareholders, and explanatory notes in respect of these resolutions, can be found in the notice of annual general meeting. A copy can be found on the company’s website.
At the annual general meeting, 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 Deloitte LLP as auditors.
In addition, resolutions will be proposed: 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; to update the company’s articles of association to reflect requirements of the Companies Act 2006; and to enable the company to continue to hold general meetings on not less than 14 clear days’ notice.
Share capital, transfers of shares and voting rights
At 31 March 2010, the authorised share capital of the company was £1,580,050,000 divided into 1,000,000,000 ordinary shares of five pence each, 626,043,820 B shares of 170 pence each, 273,956,180 deferred shares of 170 pence each and 50,000 non-voting redeemable preference shares of £1 each, and the issued share capital of the company was £499,802,308 divided into 681,536,032 ordinary shares of five pence each and 273,956,180 deferred shares of 170 pence each. Details of the share capital and movements in the issued share capital are shown in note 25 to the financial statements. The ordinary shares represented 71.3 per cent and the deferred shares represented 28.7 per cent respectively of the total issued share capital as at 31 March 2010.
All ordinary shares have the same rights, including the rights to one vote at a general meeting, to an equal proportion of any dividend declared and payable, and to an equal amount of any surplus assets which are distributed in the event of a winding-up.
The 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 shares in the company are provided by the 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 its annual general meeting and such resolutions will be proposed at the 2010 annual general meeting. The directors’ powers are conferred on them by UK legislation and by the company’s articles. At the annual general meeting of the company on 24 July 2009, the directors were authorised to issue relevant securities up to an aggregate nominal amount of £11,358,093 and were empowered to allot equity securities for cash on a non pre-emptive basis to an aggregate nominal amount of £1,703,714.
Electronic and paper proxy appointment and voting instructions must be received by the company’s registrars 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.
There are no restrictions on the transfer of ordinary shares in the company, nor any limitations on the holding of 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 Services Authority’s Listing Rules or the City Code on Takeovers and Mergers.
There are no arrangements known to the company by which financial rights carried by any shares in the company are held by a person other than the holder of the shares, nor are there known to the company any arrangements between holders of securities that may result in restrictions on the transfer of securities or on voting rights. All issued shares are fully paid.
Major interests in shares
At 20 May 2010, the 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 Services Authority:
| Shareholder |
% of issued share capital |
Direct or indirect nature of holding |
| BlackRock Inc |
5.13 |
indirect |
| Pictet Asset Management S.A. |
4.995 |
indirect |
| AXA S.A. |
4.933 |
direct and indirect |
| Tradewinds Global Investors, LLC |
4.12 |
indirect |
| Legal & General Group PLC |
3.97 |
indirect |
Purchase of own shares
At the annual general meeting of the company held on 24 July 2009, shareholders authorised the company to purchase, in the market, up to 68,148,563 of its own ordinary shares of five pence each. No shares were purchased pursuant to that authority during the year. Such authority from shareholders is normally sought annually. Authorisation will be sought from shareholders of the company at the 2010 annual general meeting to grant authority to purchase up to 68,153,603 of its own ordinary shares of five pence each, such authority to expire at the conclusion of the company’s annual general meeting in 2011 or, if earlier, on 22 October 2011.
Change of control
The trustee of the United Utilities Employee Share Trust, which administers the performance share plans, matching share plans and deferred share award scheme, has the ability to exercise voting rights at its discretion which relate to shares which it holds 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 the share incentive plan would be able to direct the trustees how to act on their behalf.
Directors’ indemnities and insurance
The company has in place contractual entitlements for 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. 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 and charitable donations
United Utilities does not support any political party and does 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 political stakeholders. This includes promoting United Utilities’ activities at any of the main political parties’ annual conferences when they are held in the North West region. In 2009/10, the Conservative Party held its annual conference in Manchester, as did the Labour Party the previous year. The group incurred expenditure of £19,155 (2009: £27,702) as part of this process. At the 2009 annual general meeting, an authority was taken to cover such expenditure. A similar resolution will be put to the shareholders at the 2010 annual general meeting to authorise the company and its subsidiaries to make such expenditure.
Charitable donations by the group in the year amounted to £5,247,202 (2009: £4,262,520) in support of charitable causes in the local communities in which it operates and those of interest to its employees.
Employees
The company’s policies on employee consultation and on equal opportunities for disabled employees are contained within the employees section of the business review. The board encourages employees to own shares in the company. Details of employee share schemes can be found in the remuneration report.
Environmental, social and community matters
Details of the company’s approach to corporate responsibility, relating to the environment and social and community issues, can be found in the corporate responsibility section.
Essential contractual relationships
Certain suppliers to the group contribute key goods or services, the loss of which could cause disruption to the group’s services. However, none are so vital that their loss would affect the viability of the group as a whole; nor is the business of the group overly dependent upon any one individual customer.
Policy on payment of creditors
The group’s policy is in line with the CBI Code of Prompt Payment (copies are available from the CBI, Centre Point, 103 New Oxford Street, London, WC1A 1DU). Payment terms are specific to the type of contract and the relevant commercial arrangements, and are agreed with suppliers in advance. The group makes every effort to comply with the payment terms as agreed with its suppliers subject to there being no dispute with the invoices received. As at 31 March 2010, the average credit period taken for trade purchases was 34 days for the group (2009: 34 days). The company has no trade and other payables due to external creditors.
Approach to technology development
The company is committed to using innovative, cost-effective and practical solutions for providing high quality services. It recognises the importance of ensuring that it focuses properly its investment in the development of technology, that it has the right skills to apply technology to achieve sustainable competitive advantage and that it continues to be alert to emerging technological opportunities.
Financial instruments
The risk management objectives and policies of the company in relation to the use of financial instruments can be found in note 19 to the financial statements.
Fixed assets
The group holds significant land assets; however, the vast majority of these are water catchment assets which are an integral and essential part of the operation of the group’s regulated business. The nature of these assets, which are primarily moorland areas and which could not be sold by the group, means that it is impractical to obtain meaningful market values for the land. Other land owned by the group, the majority of which relates to operational sites, does not have a market value materially different from historic cost.
Events occurring after the reporting period
Details of events after the reporting period are included in note 31 to the consolidated financial statements.
Information given to the auditors
Each of the persons who is a director at the date of approval of this report confirms that:
(1) so far as he or she is aware, there is no relevant audit information of which the company’s auditors are unaware; and
(2) 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 auditors are 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 auditors
The board is proposing that shareholders reappoint Deloitte LLP as auditors at the forthcoming annual general meeting and authorise the directors to fix the auditors’ remuneration.
Approved by the board on 20 May 2010 and signed on its behalf by:
Tom Keevil
Company secretary