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Key performance indicators

We measure the achievement of our objectives through the use of qualitative assessments and through the monitoring of quantitative indicators, termed key performance indicators (KPIs).

In line with our operating objectives, we use both financial and non-financial KPIs. Where relevant, KPIs are used as our primary measures of whether we are achieving our objectives; however, the scale and size of our operations means we use many other detailed performance measures in addition to KPIs. We also use KPIs to measure performance against our primary objective of growing our businesses to create value for our shareholders. We use qualitative assessments to judge progress against our objectives in areas where numerical measures are less relevant.

The majority of our KPIs are unchanged from last year; however, we have increased the number of KPIs presented in the table below by including business-specific reliability KPIs.

Value	KPI	Description	Target	Results

Shareholder value	Total shareholder return	Change in share price, assuming reinvestment of dividends and returns of capital	To increase	2006/07: 44.9% 2005/06: 22.9% 2004/05: 19.0%
Performance – safety	Injuries to the public	Members of the public injured as a direct result of our operations¹	Zero	2006/07: 28 2005/06: 20 2004/05: 52
	Employee lost time injury frequency rate	Injuries resulting in employees taking time off work (per 100,000 hours worked)	Zero	2006/07: 0.34 2005/06: 0.28 2004/05: 0.37
	Gas safety-related service standards	Proportion of uncontrolled gas escapes attended within one hour in the UK	More than 97%	2006/07: 98.51% 2005/06: 97.97% 2004/05: 98.46%
	Gas Distribution – UK mains replacement	Kilometres of gas main decommissioned	2006/07: 1,824 km 2005/06: 1,724 km 2004/05: 1,492 km	2006/07: 1,850 km 2005/06: 1,724 km 2004/05: 1,458 km
	Sickness absence rate	Proportion of available work days which are lost due to sickness	Zero work-related sickness²	2006/07: 2.48% 2005/06: 2.38% 2004/05: 2.69%
Performance – reliability	Transmission – UK electricity system reliability	Electricity delivered by the electricity transmission system as a proportion of electricity demanded	99.9999%	2006/07: 99.9999% 2005/06: 99.9999% 2004/05: 99.99998%
	Transmission – UK gas system reliability	Gas delivered by the gas transmission system as a proportion of gas demanded	100%	2006/07: 100% 2005/06: 100% 2004/05: 100%
	Transmission – US electricity system reliability	The number of customer interruptions and associated MWh lost	Less than 75 and less than 408 MWh	2006/07: 75 and 264 MWh 2005/06: 97 and 348 MWh 2004/05: 73 and 386 MWh
	Gas Distribution – UK network reliability	Proportion of total customer days without unplanned customer interruptions	99.999%	2006/07: 99.999% 2005/06: 99.999% 2004/05: 99.999%
	Electricity Distribution – US network reliability	Average time the average customer is without power over the year	Less than 115 minutes	2006/07: 121 minutes 2005/06: 141 minutes 2004/05: 120 minutes
	Other business-specific reliability measures are discussed under Performance during the year in each of the business sections.
Performance – efficiency and financial performance³	Adjusted operating profit excluding stranded⁴	Operating profit from continuing operations excluding US stranded cost recoveries, exceptional items and remeasurements	To increase sufficiently to support 7% dividend growth through to March 2008	2006/07: £2,031 million 2005/06: £1,968 million 2004/05: £1,936 million
	Adjusted earnings per share⁵	Earnings per share from continuing operations before exceptional items and remeasurements		2006/07: 47.7p 2005/06: 45.5p 2004/05: 41.4p
	Operating cash flows	Cash flows generated from continuing operations		2006/07: £3,090 million 2005/06: £2,973 million 2004/05: £2,820 million
Growth – investment	Capital investment	Additions to plant and equipment and to intangible assets	There is no numerical target for capital expenditure, or for acquisitions, as each investment is different and is considered on its meritsTo increase	2006/07: £2,375 million 2005/06: £2,108 million 2004/05: £1,905 million
	Investments in acquisitions	Consideration in respect of acquired businesses		2006/07: £354 million 2005/06: No acquisitions 2004/05: £1,122 million
Growth – value from our investments	Return on equity	Adjusted earnings excluding stranded and converted on to a regulatory basis over equity on a regulatory basis	This is a new measure and a target is not yet established	2006/07: 12.4% (3 year average)
	Synergy savings	Annualised cost savings achieved from the integration of an acquired business	Rhode Island: $18 million	Rhode Island: Target to be achieved in future periods
Talent – inclusion and diversity	Percentage of female employees	Proportion of employees who are female	Our ambition is for our employees to reflect the communities we serve while ensuring that we recruit and retain talented people regardless of their gender, race, disability, sexual orientation, age, religion or belief	2006/07: 23.7% 2005/06: 23.4% 2004/05: 21.0%
	Percentage of black and minority ethnic employees	Proportion of employees who are black and minority ethnic		2006/07: 7.3% 2005/06: 6.7% 2004/05: 6.0%
Responsibility – climate change	Percentage reduction in greenhouse gas emissions against verified baseline⁶	CO₂ equivalent emissions estimated to be caused by our operations	60% reduction by 2050	2006/07: 35% 2005/06: 26% 2004/05: 28%
Responsibility – protect the environment	Significant direct environmental incidents	Own fault and contractor-related environmental incidents	Zero in each case	2006/07: 20, 20 2005/06: 22, 1 2004/05: 20, 3
	Total value of fines from environmental prosecutions and citations	Financial quantity of fines imposed	Zero	2006/07: $4,885 2005/06: Zero 2004/05: $3,000

Injuries comprise fatalities, injuries that require the person to receive hospital treatment and other injuries reported in the UK under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR).
The sickness absence rate includes absences resulting from both work-related and non work-related illnesses. Our target relates to work-related illnesses, however, we do not have a measure that excludes non work-related illnesses sufficiently accurately.
The KPI for a 30% reduction in controllable costs by 31 March 2007 in our Gas Distribution business in the UK is no longer included as it was achieved by 31 March 2006.
This measure has been amended from that presented last year to exclude the impact of US stranded cost recoveries in line with our strategic announcement to return these cash flows to shareholders, and also to reflect the reclassification of wireless infrastructure and Basslink in Australia as discontinued operations. Operating profit from continuing operations
including US stranded cost recoveries and exceptional items and remeasurements increased to £2,513 million in 2006/07 from £2,374 million in 2005/06 and from £2,113 million in 2004/05.
Basic earnings per share from continuing operations including exceptional items and remeasurements increased from35.9p in 2004/05 to 41.6p in 2005/06 to 48.1p in 2006/07.
The KPI we use for measuring reduction in greenhouse gas emissions has been changed from last year’s measure of greenhouse gas emissions per £m revenue to a measure that aligns with our target of a 60% reduction in emissions. The verified baseline is based on available historic data for our various emission sources, for example, methane leakage and venting. The period this data covers varies by source, therefore our baseline cannot be attributed to a specific year. The baseline will be adjusted on an annual basis to include businesses we acquire. The derivation of our baseline is included in the responsibility section of our corporate website.

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