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Yorkshire Water Services Limited YORKSHIRE WATER SERVICES LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS – AN INTEGRATED REPORT FOR THE YEAR ENDED 31 MARCH 2020 Contents ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 CONTENTS ABOUT THIS INTEGRATED REPORT 03 PERFORMANCE HIGHLIGHTS 05 YORKSHIRE WATER AT A GLANCE 06 CHAIRMAN’S STATEMENT 07 CHIEF EXECUTIVE’S REPORT 08 STRATEGIC REPORT 12 OUR BUSINESS STRATEGY 12 KEY PERFORMANCE INDICATORS 18 CUSTOMER OUTCOME: 20 WE PROVIDE THE LEVEL OF CUSTOMER SERVICE YOU EXPECT AND VALUE CUSTOMER OUTCOME: 23 WE PROVIDE YOU WITH WATER THAT IS CLEAN AND SAFE TO DRINK CUSTOMER OUTCOME: 25 WE MAKE SURE THAT YOU ALWAYS HAVE ENOUGH WATER CUSTOMER OUTCOME: 29 WE TAKE CARE OF YOUR WASTEWATER AND PROTECT YOU AND THE ENVIRONMENT FROM SEWER FLOODING CUSTOMER OUTCOME: 31 WE PROTECT AND IMPROVE THE WATER ENVIRONMENT CUSTOMER OUTCOME: 34 WE UNDERSTAND OUR IMPACT ON THE WIDER ENVIRONMENT AND ACT RESPONSIBLY CUSTOMER OUTCOME: 43 WE KEEP YOUR BILLS AS LOW AS POSSIBLE SECTION 172(1) STATEMENT 45 OUR FINANCIAL PERFORMANCE AND GOVERNANCE 48 OUR CORPORATE STRUCTURE 54 IDENTIFYING AND MANAGING OUR RISKS 56 OUR PRINCIPAL RISKS 60 LONG TERM VIABILITY STATEMENT 68 DISCLOSING OUR CLIMATE CHANGE RISKS AND STRATEGY 74 ASSURING THE QUALITY OF THIS STRATEGIC REPORT 78 DIRECTORS' REPORT 79 CORPORATE GOVERNANCE STATEMENT 79 BOARD OF DIRECTORS 80 LEADERSHIP TEAM 84 NOMINATION COMMITTEE REPORT 96 SOCIAL VALUE COMMITTEE REPORT 98 SAFETY, HEALTH AND ENVIRONMENT COMMITTEE REPORT 101 AUDIT COMMITTEE REPORT 104 OTHER DISCLOSURES 109 DIRECTORS’ REMUNERATION REPORT 112 REMUNERATION POLICY REPORT 116 INDEPENDENT AUDITOR’S REPORT TO THE 137 MEMBERS OF YORKSHIRE WATER SERVICES LIMITED STATUTORY FINANCIAL STATEMENTS 146 PROFIT AND LOSS ACCOUNT 146 STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE 146 BALANCE SHEET 147 STATEMENT OF CHANGES IN EQUITY 148 NOTES 149 Contents ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 ABOUT THIS INTEGRATED REPORT INTEGRATED REPORTING WE HAVE RECOGNISED FOR MANY YEARS THAT In practical terms, this means that throughout this OUR STRATEGY, RISK, PERFORMANCE AND report we openly disclose performance information SUSTAINABILITY ARE INSEPARABLE AND ARE that goes beyond our legal duties to include activities INTEGRAL TO OUR SUCCESS. WE HAVE TAKEN THE covering a broad range of environmental, financial and ‘INTEGRATED’ APPROACH TO OUR ANNUAL REPORT social considerations. To further support the integrated approach we also provide a new form of sustainability AND FINANCIAL STATEMENTS SINCE 2014. THE report alongside our traditional annual reports to INTERNATIONAL INTEGRATED REPORTING COUNCIL share more information on the latest and developing DEFINE AN INTEGRATED REPORT AS ONE WHICH understanding of the total value and impact we manage PROVIDES “A CONCISE COMMUNICATION ABOUT and influence. This replaces the Global Reporting Initiative HOW AN ORGANISATION’S STRATEGY, GOVERNANCE, (GRI) report we provided last year. The sustainability PERFORMANCE AND PROSPECTS, IN THE CONTEXT OF report will be published later in 2020 at ITS EXTERNAL ENVIRONMENT, LEAD TO THE CREATION yorkshirewater.com/capitals OF VALUE IN THE SHORT, MEDIUM AND LONG TERM”. FIND OUT MORE ABOUT INTEGRATED REPORTING AT: Changes to this year’s Annual Report and THEIIRC.ORG. Financial Statements (ARFS) We continue to evolve our ARFS to meet latest business, stakeholder and legislative requirements, to follow best practice, and to embed the principles of the integrated approach. This year we have: • Added carbon in the section on our most important Key Performance Indicators. This reflects the escalated priority we are giving to carbon reduction, including the world-leading commitment we and the English water sector have made to net zero emissions by 2030. • Ensured compliance with the new Streamlined Energy and Carbon Reporting (SECR) requirements, adding a new table of energy use measures (page 35) to our existing carbon measures in the section: We understand our impact on the wider environment and act responsibly. • Updated the section on our climate-related risks and strategy. This shares our latest and cutting-edge work to further improve our ability to quantify the risks we face from climate change, in which we are applying our Six Capitals approach to enable sophisticated economic valuation of the risks. 03 Contents ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 Statement on non financial information Alignment with our other publications Yorkshire Water Services Limited has complied with the In parallel to this document and the new sustainability requirements of S414CB of the Companies Act 2006 report we mention above, we also publish our Annual by including certain non financial information within Performance Report (APR). In the APR we describe the strategic report. This can be found as follows: how we are delivering our regulated investment plan and service commitments. The APR is designed for • Our business model is on pages 16 to 17. customers, and to meet regulatory requirements set by Information regarding the following matters, including a our regulator, Ofwat. You can find our APR on our website description of relevant policies, the due diligence process at yorkshirewater.com/reports implemented in pursuance of the policies and outcomes We also publish a wide range of other reports and of those policies, can be found on the following pages: information on our website, yorkshirewater.com. • Environmental matters on page 37. Throughout this report we provide links to specific webpages or other publications where more detailed • Employees on pages 38 to 42. information is available. • Social matters on pages 98 to 100. Trusting the information we publish • Respect for human rights on page 38; and We always want to provide you with information you can • Anti-corruption and anti-bribery matters on page 38. trust. If we don’t get it right, we risk losing your trust and Where principal risks have been identified in relation to confidence. Our Assurance Plan explains the process we any of the matters listed above, these can be found on have in place to give confidence that the information we pages 60 to 67, including a description of the business publish is accurate, accessible and easy to understand. relationships, products and services which are likely You can find our Assurance Plan on our website at this link: to cause adverse impacts in those areas of risk, and a yorkshirewater.com/attachments/assurance-plan description of how the principal risks are managed. We operate a best practice risk-based approach known All our key performance indicators, including those non- as ‘three levels of assurance’. We apply this approach financial indicators, are reported and discussed within the to all the reporting covered by the Assurance Plan. In strategic report on pages 12 to 78. Further detail on how applying our approach to this Annual Report and Financial these are presented can be found on page 15. Statements we ensure a range of internal and independent assurance measures, including the following third level The Financial Performance and Governance section on assurance parties: pages 48 to 53 includes, where appropriate, references to, and additional explanations of, amounts included in the • Deloitte LLP is our external independent financial entity’s annual accounts. auditor. Deloitte reviews the information presented within our statutory accounts to ensure they present a true and fair view of the state of affairs of the company and that they have been prepared in accordance with relevant accounting standards and legislation. Deloitte provide an opinion on our statutory accounts as detailed on page pages 137 to 146. • Jacobs is our external independent technical assurance provider. Jacobs reviews the information we report on our Performance Commitments to confirm accuracy and completeness. • Our Internal Audit function has reviewed the reported position on our Performance Commitments and other priority activities. 04 Contents ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 PERFORMANCE HIGHLIGHTS AVERAGE BILLS OPERATING £392 SECOND LOWEST IN THE COUNTRY, INCREASED BY LESS PROFIT THAN INFLATION £212.4m* (2018/19: £387) see pages 43 to 44 for more (2018/19: £229.5m) *Including exceptional items, see page 48 for more UK CUSTOMER TAX TOTAL TAX SATISFACTION SURVEY. CONTRIBUTION 73.7 POINTS £145.2m OUT OF 100 (2018/19: £131.5m), see page 53 for more (2018/19: 76) CONTINUING TO MEET AND EXCEED REDUCED OUR PERFORMANCE EMISSIONS COMMITMENTS BY 80% SINCE 2004/05. 22 OF 26 83 KT CO2E (2018/19: 21 out of 26) (2018/19: 89 Kilotonnes of Carbon Dioxide Equivalent, KT CO2e) FIVE NATIONAL MADE FURTHER AWARDS IMPROVEMENTS IN OUR FOR INNOVATIVE CUSTOMER ENGAGEMENT DIVERSITY CAMPAIGNS PAY GAP REPORT 05 Contents ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 YORKSHIRE WATER AT A GLANCE Northallerton Leyburn Scarborough Filey Malton Bridlington Harrogate Skipton York Bradford Leeds Selby Hull Goole Withernsea Wakefield Doncaster Sheffield Key Operational boundary Water service Chesterfield Operational boundary Sewerage service WE’RE PROUD TO PLAY WATER’S ROLE IN MAKING YORKSHIRE A BRILLIANT PLACE TO BE – NOW AND ALWAYS. We provide some of life’s most essential services to the people and businesses of the Yorkshire and Humberside region, playing a key role in the region’s health, wellbeing and prosperity. We do this by supplying water and wastewater services, and being custodians of essential infrastructure and the natural environment. 5 MILLION 140,000 3,525 31,891km DOMESTIC CUSTOMERS BUSINESS PREMISES EMPLOYEES OF WATER
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