Registered No: 2366616 United Utilities PLC Annual Report and Financial Statements 31 March 2021 United Utilities PLC Contents Directors, advisers and other information 2 Strategic report 3 Directors’ report 93 Statement of directors’ responsibilities in respect of the annual report and the financial statements 97 Independent auditor’s report 98 Consolidated income statement 107 Consolidated statement of comprehensive income 108 Consolidated and company statements of financial position 109 Consolidated statement of changes in equity 110 Company statement of changes in equity 111 Consolidated and company statements of cash flows 112 Accounting policies 113 Notes to the financial statements 119 1 United Utilities PLC Directors, advisers and other information Directors PA Aspin GL Baron RJ Lee SL Mogford BF Murphy Secretary SR Gardiner Auditor KPMG LLP St Peter’s Square Manchester M2 3AE Registered office Haweswater House Lingley Mere Business Park Lingley Green Avenue Great Sankey Warrington WA5 3LP Terms used in this report: United Utilities PLC’s ultimate parent company is United Utilities Group PLC. ‘UUG’ means United Utilities Group PLC and ‘United Utilities’ or ‘the UUG group’ means United Utilities Group PLC and its subsidiary undertakings. ‘UU’ or ‘the group’ means United Utilities PLC and its subsidiary undertakings. Cautionary statement: This financial report contains certain forward-looking statements with respect to the operations, performance and financial condition of the group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this financial report and the company undertakes no obligation to update these forward-looking statements. Nothing in this financial report should be construed as a profit forecast. Certain regulatory performance data contained in this financial report is subject to regulatory audit. 2 United Utilities PLC Strategic report Our approach as a responsible business The way we act as a business has a profound influence on the social, economic and environmental wellbeing of the region. Responsible business is in our DNA We have a strong track record leading on environmental, social and governance (ESG) matters. Over the past 20 years we have measured ourselves against national and international benchmarks of responsible business practice, often breaking new ground in the way the water sector approaches challenges such as catchment management schemes and support for vulnerable customers. This long-standing commitment to responsible business has provided a solid foundation upon which to evolve existing programmes, develop new initiatives, and respond to the changing world in which we operate. What is our approach? We will only deliver our purpose of providing great water and more for the North West, and create and maintain value for our stakeholders, if we act in a responsible manner. This comes from understanding what matters most to our stakeholders and balancing these different perspectives in our decision-making. Our approach isn’t just about what we do, but how we do it. A key strength is our commitment to open, honest and transparent reporting about the continuity of our approach, underpinned by a clear purpose and strategic objectives. Increasingly, stakeholders assess how companies approach responsible business through the lens of ESG. We believe there is a close relationship between ESG performance and investor value. Demonstrating how we act responsibly and create value Being a purpose-led business it is up to us to provide the evidence that we are providing great water and more for the North West. Our stakeholders are ultimately the ones who will judge whether we are delivering on our purpose. Having tangible, externally recognised measures of our behaviour and performance helps retain the trust of those who take an interest in the way we do business. It enables us to demonstrate that we are operating in our stakeholders' interests. We collate, monitor and report on a wide range of performance measures, linked to what stakeholders tell us matter most, and align ourselves to recognised management standards and accreditations to give confidence in the way we are operating. We report these publicly so stakeholders can assess our progress. Alongside this we actively participate in a range of global ESG ratings, indices and frameworks to benchmark our approach against best practice and emerging sustainability challenges. As responsible business practice evolves we look constantly at how we can improve. For instance, we are currently exploring whether embedding multi-capital thinking (manufactured, financial, natural, social, human and intellectual capital) into business processes will add value and better inform our decision- making processes. This includes how we might report publicly against these capitals. Reporting responsible business performance Evolving market expectations The way we report on environmental, social and governance (ESG) issues is evolving as stakeholder interest grows. There is increasing interest in how companies respond to sustainability challenges and growing expectations on how they disclose relevant information and data on their responsible business activities. 3 United Utilities PLC Strategic report For example, there is more interest in the disclosure of the ESG performance of companies and, last year, we published an investor guide to ESG at United Utilities in response to that trend. unitedutilities.com/globalassets/documents/pdf/united-utilities-esg-booklet-2020.pdf The way in which we report has evolved over the past ten years to incorporate more ESG information and data through such action as moving to integrated reporting. We have looked to do this without making this report unnecessarily lengthy or difficult to read. Rather than adopt one specific framework, our approach is to use the framework of our purpose-led approach to disclose performance and data for each of the stakeholders we create value for. Many of the ESG indices in which we participate (see pages 58 to 59) draw their data from this report. However, we do recognise that some stakeholders prefer to have specific data provided in one place. The following indicates where further information on certain frameworks can be found: World Economic Forum (WEF) International Business Council (IBC) The WEF IBC has proposed a set of common metrics for the consistent reporting of sustainable value creation in mainstream annual reports. We already integrate many of these metrics in our annual report and to make this easier for those searching for the information we have collated them into one place on our website. unitedutilities.com/wef Sustainability Accounting Standards Board (SASB) SASB standards aim to standardise disclosure of material sustainability information mainly for companies based in the United States. As many of UUG’s shareholders are located in North America we are publishing comparable SASB data on our corporate website. This covers the main SASB data points for the water utilities industry of which we are part. unitedutilities.com/sasb Taskforce for climate-related financial disclosures (TCFD) TCFD sets out a framework for companies to provide stakeholders with an assessment of the financial implications of climate change and what this means for governance, strategy, risk and metrics. For the second year, we have included a TCFD section in our annual report. Read more on pages 60 to 79. Sustainable Development Goals (SDGs) We have identified six SDGs that are material to our business. More details can be found on pages 59 to 60. We also complete a variety of issue and stakeholder-specific rankings and benchmarks such as the Workforce Disclosure Initiative (WDI). Disclosure of these performance scores can be found on our website. unitedutilities.com/corporate/responsibility/our-approach/cr-performance 4 United Utilities PLC Strategic report Our purpose, vision, strategy and values Our strategic themes define the way we operate so we can deliver our purpose and work towards our vision, and our core values provide the cultural framework within which we operate. Our purpose – why we exist To provide great water and more for the North West. We are a purpose-led organisation and this drives us to deliver our services in an environmentally sustainable, economically beneficial and socially responsible manner, looking after the interests of the stakeholders with whom we interact. Our vision To be the best UK water and wastewater company. This is what motivates us to improve our services and deliver more. To achieve this vision, our strategy has three themes – the best service to customers, at the lowest sustainable cost, in a responsible manner. How we deliver our purpose and vision The best service to customers We put customers at the heart of everything we do. As well as delivering a reliable service of great-tasting water and removing wastewater, we proactively keep customers informed about any work we are doing in their area and communicate with them in ways that meet their individual needs; for example, we now use ‘push texts’ to send updates and alerts to customers within a specified location. The best service to customers means being available when they need to contact us, always interacting in a friendly and helpful manner, and offering tailored support and assistance