Bristol Water Holdings plc
Annual Report and accounts
2003 Contents
Page
Financial highlights 1
Chairman's statement 2
Chief Executive’s report 5
Operating and financial review 8
Directors and advisers 14
Directors' report 15
Corporate governance 17
Corporate social responsibility 19
Remuneration committee report 20
Accounting policies 23
Group profit and loss account 26
Statement of total recognised gains and losses 26
Balance sheets 27
Group cash flow statement 28
Notes to the accounts 29
Independent auditors' report 47
Financial history 48
Analysis of shareholders Inside back cover
The Group contains one of the largest independent water supply companies in the country, providing an average of
300 million litres of water each day through 6,500 kilometres of mains. Bristol Water plc is responsible for supplying
over one million people and businesses in an area of almost 2,400 square kilometres centred on Bristol.The area
served covers Bristol and surrounding parts of Somerset, Gloucestershire and Wiltshire.
In addition, the Group carries out a range of contracting and consulting services primarily through its subsidiaries,
Walter Lawrence Civil & Mechanical Limited and Bristol Water Services Limited. Financial highlights
Year ended 31 March 2003 2002 % change
£m £m %
Group turnover - 
Regulated water business 70.0 68.0 3
Other businesses 42.3 61.1 (31)
T otal 112.3 129.1 (13)
Profit before tax -
Regulated water business 14.6 13.9 5
Other businesses 1.5 1.7 (8)
T otal 16.1 15.6 3
Profit after tax - 9.6 12.1 (20)
Earnings per ordinary share
- Shares in issue 115.5p 148.7p (22)
- Fully diluted 114.5p 147.5p (22)
Dividend per ordinary share 70.6p 67.2p 5
Results stated before application of FRS19 Deferred Tax
Profit after tax 13.4 13.3 0
Earnings per ordinary share
- Shares in issue 166.3p 166.3p 0
- Fully diluted 164.9p 164.9p 0
Financial calendar
Annual General Meeting 21 July 2003
Record date for 2003 final dividend 18 July 2003
Payment date for 2003 final dividend 1 October 2003
Interim announcement of unaudited results for the six months to 
30 September 2003 (provisional) 27 November 2003
Payment date for 2004 interim dividend (provisional) 4 February 2004
Announcement of 2004 results (provisional) 27 May 2004
Bristol Water Holdings plc Report & Accounts 2003 1 Chairman’s statement
‘
Another strong 
performance
’
Moger W oolley
The group has delivered another strong performance and has
achieved excellent financial results from the regulated water
company and a positive contribution from other businesses.
Regulated water business
In last year’s Annual Report, we signalled that the progressive
build up of the regulated business’s capital programme, with its
consequent additional financing, depreciation and operating
costs, together with the relatively low level of increase in
charges under the RPI+K price limits of 1.9% would have a 
significant impact on profits. Given this background, the result
achieved of a profit before tax of £14.6m compared to
£13.9m in the previous year represents an excellent outcome.
This is due to a combination of factors including a real terms
reduction in operating costs and the effects of a lower than
expected level of capital expenditure.
During the year, we commenced a £12m project for a major
upgrade of Barrow, our second largest water treatment plant,
with completion planned for Spring 2004.
We continued to deliver high levels of service to customers.
This is reflected by our position in the latest Ofwat report on
service levels for 2001/02, which ranked us third of all water
companies in England and Wales.
We have developed a new financing package for the regulated
water business.This was completed shortly after the year end.
Prior to completion, the business had a relatively short debt
maturity profile.The new structure will provide a better mix
of financing and a considerably longer maturity profile, more
appropriate to the long-term nature of its asset base.The new
facilities offer flexibility for the future including the ability to
substantially increase the financial gearing of the company.
However, it is not the Board’s current intention to do so.
The key issue for the water sector is the Periodic Review process
through which Ofwat will set price limits for the 5 years 2005-10.
It is much too early to forecast the outcome, but we are encour-
aged that the approach Ofwat is taking in the early stages of the
process is intended to lead to an appropriate balance between
the interests of customers and shareholders.
Other businesses
Our other businesses made a good contribution to profits
with profit before tax of £1.5m compared to £1.7m in 
the previous year. The small reduction reflects improved
performance offset by start up costs associated with three
new developments; Gas Design Consultancy (GDC), a
design business linked very closely to Lawrence; establishing
our new leakage consultancy company in the USA; and the
Watergrid project start-up costs.
Lawrence, the contracting division, has built on last year’s
result and recorded an increase in profit before tax to £1.4m
(2002 - £1.1m). During the year we reviewed the strategic 
fit of Lawrence within the group and concluded that its 
contracting base was inconsistent with our business focus on
core water skills. Accordingly, we are considering the potential
sale of Lawrence, together with its sister company GDC.
Our international division (BWS) continues to make
progress. We are now three years into the nine-year
Selangor project in Malaysia.This project for the reduction of
water losses, which is being carried out by our joint venture
company PABW, has met all its performance targets.
2 Bristol Water Holdings plc Report & Accounts 2003 During 2002, we established a new BWS company in the
USA, which we see as an attractive future market for our
water loss reduction skill base. The company has already
secured a number of small contracts.
We are pleased that the Bristol Water Holdings/AWG 
consortium has been selected as British Waterways’ partner
for the Watergrid project. With our long experience as the
largest user of canal water for the purpose of water supply in
the UK, this fits well with our core water skills based strategy.
Watergrid offers an opportunity for us to work with our
partners to use our expertise in a wider market, outside the
Bristol area.
Financial result and dividends
Profit before tax for the year increased to £16.1m com-
pared to £15.6m in the previous year.The high deferred tax
charge means that earnings per share have fallen.
We have declared a 6% increase in the final dividend, bringing
the total dividend for the year to 70.6p, a 5% increase over
2001/02. The final dividend of 49.8p will be paid on 
1 October 2003.
Higgs Report
The Board already follows many of the proposals contained
within the Higgs Report and will review this matter further
once the recommendations are finalised.
Corporate changes
We are proposing, subject to shareholder approval at the
Annual General Meeting, to make some changes to the
share capital structure of the company and the Articles of
Association.
We currently have 2% of the ordinary shares in a separate
non-voting class. We propose to convert these to voting
shares thus removing an historical anomaly.
At the same time, given the current share price, we propose
a share split on the basis of five new ordinary shares for each
existing share.We believe that this will be a benefit to share-
holders by increasing the marketability and liquidity of the
company’s shares.The share split, if approved, is expected to
take effect from 28 July 2003.
Bristol Water Holdings plc Report & Accounts 2003 3
‘
Delivered high levels of 
service to customers
’ 4 Bristol Water Holdings plc Report & Accounts 2003
We are proposing a general power for the Board to make
market purchases for up to 10% of the issued share capital.
The Board has no current intention to utilise this authority but
believes it appropriate to obtain this flexibility.
The Board proposes to redesignate the 5,839,250 autho-
rised but unissued 6.75% cumulative convertible redeemable
preference shares as Ordinary Shares.
We also propose some further amendments to the Articles
of Association of the company to update them in line with
current practice.
Full details of the proposed changes, which will require
approval at an extraordinary class meeting of the non-voting
shareholders, in respect of the proposed conversion to voting
status, and as special business at the Annual General Meeting
of the company will be set out in the formal notices for
those meetings.
Outlook
The continued progressive build up of the regulated business’s
capital programme, with its consequent additional financing,
depreciation and operating cost implications, together with the
relatively low level of increase in charges under the RPI+K price
limits to customers for 2003/04 of 2.7%, including a K factor of
0%, and a negative K factor of 1.9% in 2004/05 will constrain
profits over the next two years.
The progress that the group made during the year together
with the two key initiatives of refinancing the regulated water
business and the potential sale of Lawrence will place the
group in a strong position.
My thanks go to all our employees who have contributed to
the success of the group.
Moger Woolley
Chairman
29 May 2003
‘
Group will be placed in 
a strong position
’ Bristol Water plc – 
the regulated business
During the year, we have continued to consolidate the 
considerable operating cost reductions made in recent years.
A major focus has been the continued development of the joint
venture with Wessex Water to enable the two companies to
issue combined bills to customers.The first joint bills for unmea-
sured customers were issued at the beginning of the year with
the first metered bills being issued in November.With the billing
system now fully operational, this will allow us to progressively
realise the planned efficiency gains from the new arrangement
together with the provision of a simplified and improved serv-
ice to customers. High levels of service to customers have been
maintained throughout this complex process.
During the year, we achieved certification to the new 
ISO 9001:2000 quality standard, upgrading from our previous
ISO 9001:1994 assessment.The scope of our quality manage-
ment system covers all aspects of the production and distribu-
tion of water, technical design and the procurement of related
products and services.
We have initiated a major review of the processes and cost
structure in the business. Our objective is to identify the
potential scope for further efficiency gains.The exercise will
take a further few months to complete. Throughout the
process we are evaluating carefully the trade-offs between
cost reductions and the associated risks.
We were pleased by our ranking in the latest Ofwat report
on service levels by water companies in 2001/02.We were
ranked third of all water companies in England and Wales
and have been the most consistently highly-rated company
over the past few years.This recognises our commitment to
the delivery of high levels of service to customers.
Our capital programme for the five years to 2005, as set out
in the Final Determination, amounts to £125m (May 1999
prices). In accordance with the Drinking Water
Inspectorate’s protocol we have not yet commenced the
lead pipe replacement programme that was incorporated in
Ofwat’s price determination, pending the results of
orthophosphate dosing trials currently in progress. These
are currently demonstrating substantial compliance with the
lead standard that comes into force in 2013 and it is
increasingly likely that the actual spend on lead pipe
replacement during the five year period will be at a 
relatively low level.
Bristol Water Holdings plc Report & Accounts 2003 5
Chief Executive’s report
‘
Commitment to 
delivery of high service
standards
’
Alan Parsons Capital investment, including infrastructure renewals, net of
grants and contributions, for the year totalled £20.0m. Key projects
included the completion of our 30 month, £12m mains 
renovation programme, which has involved the renovation of
some 250km of mains throughout our area.We also completed
the installation of a barrier to remove cryptosporidium oocysts
at the Chelvey water treatment works, bringing the total of
treatment works with such barriers to eight.
We have recently commenced a £12m project for a major
upgrade of our Barrow treatment plant, with completion planned
for Spring 2004. Expenditure on the project at some £1.7m 
during the year was lower than originally expected reflecting a
revised project plan and delays in obtaining relevant planning
approvals.This is a complex project and is progressing well.
Ofwat has set out details of the planned Periodic Review
process that will set price limits for the 5 years from 2005
to 2010. Ofwat’s process will take almost two years to com-
plete and the outcome will be extremely important to the
business.The first major milestone is the submission of our
draft business plan to Ofwat during August 2003.
The refinancing arrangements explained in the Chairman’s
statement effectively apply a financial ringfencing to the reg-
ulated water business and provide flexibility to increase its
debt levels significantly in the future. We have no current
plans to substantially increase gearing levels, but believe that
in arranging long term financing it was appropriate to create
this type of flexibility.
As noted in the Chairman’s statement, profits for the next
two years will be influenced by a range of additional costs,
in particular the financing, depreciation and operating cost impli-
cations of the continuing capital programme.We will continue
to seek further operational efficiency gains whilst ensuring that
we do not compromise our high standards of service.
Other businesses
Lawrence
Despite the anticipated reduction in turnover from its
pipeline division, Lawrence consolidated the turnaround
achieved over the last three years with an increase in profit
before tax to £1.4m (2002 - £1.1m).
During the year we established a sister company to
Lawrence, Gas Design Consultancy (GDC). GDC is a design
house for gas pipeline projects.Trading losses during its start up
year amounted to £0.3m. GDC has considerable synergies with
Lawrence and we believe that it will add value either within
the group or in the event of a sale of Lawrence.
6 Bristol Water Holdings plc Report & Accounts 2003
‘
Seeking further 
operational efficiency 
gains
’ Bristol Water Holdings plc Report & Accounts 2003 7
Lawrence does not fit well with our core water skill based
strategy. During the year we concluded that the turnaround
process, as demonstrated by Lawrence’s financial perform-
ance, had progressed sufficiently that it was appropriate to
consider a sale of both Lawrence and GDC.
Bristol W ater Services(BWS) 
BWS is our international division providing network manage-
ment services, specialising in leakage reduction.
Together with our joint venture partner, Premier Ayer Sdn
Bhd, we are now three years into the nine-year phase 2
Selangor project in Malaysia. This project for non-revenue
water reduction is being carried out by our joint venture
company PABW and continues to meet all performance 
targets, making a useful contribution to satisfying the increasing
demands for water in Kuala Lumpur and surrounding areas.
The consultancy project that BWS and its consortium 
partners was awarded earlier this year, to identify performance
indicators and best practice methodologies for leakage reduction
across North America, is now well under way. Given our 
success in securing both this contract and further contracts in 
the region we have now established a new subsidiary company
in the USA.
BWS is taking the lead role in a £1m, eighteen-month project
for the European Agency for Reconstruction to assist in the
restructuring and development of the water industry within
Kosovo.
Overall, the division achieved a break-even position (2002 -
£0.1m profit before tax), after continued investment in 
marketing and business development, including the establish-
ment of a presence in the USA.
Watergrid
The Watergrid project is a unique opportunity to apply our
experience of using canal water to supply customers in a
wider market. A new company, Watergrid Ltd, has been
established as a national joint venture between the public
and private sectors. Using the extensive canal and river 
network for the movement of water,Watergrid Ltd is seeking
to serve multiple customer bases with bespoke water services
and wastewater treatment facilities.
Watergrid Ltd has been formed between the Bristol Water
Holdings/AWG consortium, British Waterways and the
Government’s PPP facilitator, Partnerships UK. Both Bristol
Water and AWG have effective 22.5% equity interests in the
new venture.
Alan Parsons
Chief Executive
29 May 2003
‘
Periodic Review process -
outcome will be 
extremely important
’ 8 Bristol Water Holdings plc Report & Accounts 2003
Results Overview
Group turnover reduced from £129.1m to £112.3m.As antic-
ipated, this reflects a reduction in turnover for Lawrence from
the high levels reported in the previous year.
The results represent a strong underlying performance with
profit before tax increasing by £0.5m to £16.1m 
compared to £15.6m in 2002, despite a reduction in net gains
from asset disposals of £0.4m.
The group results include a total tax charge of some 40%
compared to 23% in the previous year, which accounts for the
reduction in Earnings per Share.This includes a deferred tax
charge of £3.8m (2002 - £1.3m) in addition to the underlying
current tax charge of £2.7m. The deferred tax element is
unusually high because of a reduction in the discount rates
used to calculate the deferred tax liability. As required by
FRS19, the discount rates applied are based on government
gilts for relevant periods. The effect of the change in rates
essentially reverses a corresponding gain made in the second
half of 2001/02 when discount rates increased.
The Board proposes a total dividend for the year of 70.6p, a
5% increase over 2002. As a result, a final dividend of 49.8p is
being recommended. It will be paid on 1 October 2003 to
shareholders on the register on 18 July 2003. Our shares will
go ex-dividend on 16 July 2003. Ordinary dividend cover is 1.6
times compared to 2.2 times last year.
In these accounts the appropriate transitional disclosures
required under FRS17, the new accounting standard on pensions,
are made.These show that the group’s sections within the Water
Companies’ Pension Scheme would be represented on the 
balance sheet as a deficit net of tax of £14.8m, this compares to
an asset net of tax of £10.1m in 2002 under FRS17.The change
reflects the adverse movements of the equity markets.
An actuarial review of the pension sections as at 1 April 2002
has recently been completed and shows combined net 
surpluses on an actuarial basis of £5.6m. The sections are 
currently invested primarily in equities. In consultation with both
the trustees and the actuary, we have carefully examined the
investment strategy and concluded that the appropriate long-
term strategy is to reduce the proportion of equities with a
corresponding increase in investments in bonds and other fixed
Operating and financial review
‘
Results represent a strong 
underlying performance
’
Andy Nield
2003 2002
£m £m
Group turnover
Regulated water business 70.0 68.0
Other businesses 42.3 61.1
T otal 112.3 129.1
Profit before tax
Regulated water business 14.6 13.9
Other businesses 1.5 1.7
T otal 16.1 15.6
Taxation
Current tax 2.7 2.2
Deferred tax 3.8 1.3
T otal 6.5 3.5
Profit after tax 9.6 12.1 income securities. Given the current equity market position
we have delayed the implementation of this change until we
see some further recovery in equity market values.
We have agreed a significant increase in cash contributions to
the pension funds effective from 1 April 2003.The total cash
contributions will be broadly in line with the SSAP24 charge
of £1.6m reflected in these accounts for 2002/03.The appro-
priate disclosures are set out in note 23.
Regulated activities – 
Bristol Water plc
In November 1999, Ofwat issued the Periodic Review Final
Determination.This set maximum price limits for charges to
customers for the five years 2000-05.The limits, known as K
factors, plus movements in the RPI index, determine the
allowed increase or decrease in overall charges each year. For
2002/03 the K factor was 1%, which together with an RPI
movement of 0.9% meant an average increase in charges to
customers of some 1.9%.
Overall turnover increased by some £2.0m, mainly due to the
RPI+K increase.
Operating costs before depreciation were £36.6m, slightly
above the £36.5m recorded in 2002.After taking the effect of
inflation into account, this represents a reduction in real terms.
Net depreciation increased by £0.3m to £14.0m reflecting the
commissioning of new assets offset by the non-recurrence of
an accelerated depreciation charge of £0.4m for other assets
in the previous year.
Overall profit before tax of £14.6m represents a £0.7m
improvement from 2002.
Net capital investment in the year after grants and contributions
from developers was £20.0m, compared to £23.5m in 2002.
Other businesses
Our other businesses made a good contribution to profits
with profit before tax of £1.5m compared to £1.7m in the
previous year. The small reduction largely reflects start-up 
costs associated with Gas Design Consultancy (GDC), a
design business linked very closely to Lawrence; establishing
our new company in the USA; and the Watergrid project
start-up costs.
Bristol Water Holdings plc Report & Accounts 2003 9
‘
Reduction in real terms 
of operating costs in 
Bristol Water plc
’ 10 Bristol Water Holdings plc Report & Accounts 2003
Lawrence: Turnover reduced to £47.8m compared to the
very high level of £63.5m in 2002.As anticipated, this reflects
a reduction in the value of major gas pipeline projects 
carried out for Transco, both on a sole basis and through a
joint arrangement with a Dutch contractor, NACAP. Profit
before tax was £1.4m compared to £1.1m in 2002.
Gas Design Consultancy: GDC is a design house for gas
pipeline projects with considerable synergies with Lawrence.
Start-up losses during the year amounted to £0.3m.
Bristol Water Services: After further investment in business
development activities, the division recorded a breakeven
result, compared to a profit of £0.1m in 2002.
Watergrid: Our contribution to initial development costs,
via our 50% interest in Waternet Ltd, amounted to £0.1m in
the year.
Purton Carbons: We provided against the cost of our
investment in this joint venture in 2000 due to the difficult
market conditions it faced. These conditions continue to 
prevail.This year our share of profits amounted to £0.1m.
Treasury
Group net cash inflow from operating activities was £28.5m
(2002 - £29.7m), net cash outflows from investments and
servicing of finance totalled £6.4m (2002 - £5.3m) and net
capital expenditure amounted to £16.1m (2002 - £22.9m).
Total cash outflows before management of liquid resources
and financing were £1.8m (2002 - £5.4m).
Net borrowings increased from £61.5m to £64.9m during
the year. Net debt in Bristol Water plc, the regulated water
business, at 31 March 2003 was £74.8m and represented
approximately 41% of Regulatory Capital Value.
At the year end, net gearing (net debt/equity) was 73% 
compared to 72% in 2002. Net debt and gearing levels are
expected to increase during 2003/04 as the level of capital
investment in the regulated business increases.
A major post balance sheet event is the finalisation of a 
new financing arrangement for Bristol Water plc. Prior to the
refinancing, we had a relatively short debt maturity profile
and the new structure provides a better mix and 
considerably longer maturity profile appropriate to the 
long-term nature of the assets being financed.The new facilities
provide for the repayment of £20m of existing bank debt
and to finance the ongoing capital expenditure programme.
£15m of index-linked debt was drawn through the existing
Artesian Finance plc monoline wrapped bond programme
arranged by the Royal Bank of Scotland, previously used by
three other water companies. An equivalent £30m financing
was also drawn on a fixed interest basis through a new bond
programme issued by Artesian Finance II plc. The facilities
extend to 2032 and 2033 respectively.
The new financing is based on a ringfenced structure and
some existing lenders have entered into an intercreditor
arrangement to share the ringfencing security package. It is
expected that all new senior debt will also become part of
the intercreditor arrangement.
‘
New financing 
arrangement finalised -
creates flexibility
’ The intercreditor structure is governed by two key financial ratio
covenants: debt to regulated asset value and a cash interest
cover ratio.The structure would enable a substantial increase in
gearing of the ringfenced business should it be concluded that
this is appropriate, in which case it is expected that Ofwat
would seek changes, in line with those recently adopted by
more highly geared water companies, to Bristol Water plc’s
licence of appointment as a water undertaker.
The group uses interest rate derivatives to manage exposures to
fluctuations in interest rates. Positions on hedges are deferred and
matched to appropriate underlying transactions. As part of the
refinancing arrangement for Bristol Water plc, the group has
redesignated a £20m interest rate swap, which swaps variable rate
LIBOR to fixed rate.This was previously matched to the £20m
bank loan now repaid.The redesignation matches it to a £10m
variable rate bank loan and to £10m of variable rate leases.
Net interest charges in the year totalled £4.9m (2002 - £4.2m)
and were covered 4.2 times (2002 - 4.5 times).
The net interest charge is expected to increase during 2003/04.
This reflects the additional net debt resulting from planned capital
expenditure for the regulated business together with an increase
in the effective average interest rate following the refinancing.
The average interest rate is expected to increase as the Artesian
borrowing is subject to long-term interest rate margins and the
investment returns on temporary cash surpluses will be lower
than borrowing costs.We maintain temporary cash surpluses to
provide pre-funding for future capital expenditure and working
capital requirements and to provide financial flexibility.
Strategy/Objectives
The group’s strategy is focussed around the regulated water
business of Bristol Water plc, and the development of comple-
mentary businesses/activities that build on this core skill base.
As explained in the Chairman’s Statement, during the year we
reviewed the strategic fit of Lawrence within the group and
concluded that its contracting base was inconsistent with this
focus. Accordingly we are considering the potential sale of
Lawrence, together with its sister company GDC.
Monitoring the business
A number of systems are used to monitor the financial and
operational performance of the group including
 Monthly management accounts and budgetary control
 Monthly key performance indicators
 Ad hoc internal audits of business processes
 Detailed Quality Assurance systems
Outlook
The continued progressive build up of the regulated business’s
capital programme, with its consequent additional financing,
depreciation and operating cost implications, together with
the relatively low level of increase in charges under the RPI+K
price limits to customers for 2003/04 of 2.7%, including a K
factor of 0%, and a negative K factor of 1.9% in 2004/05, will
constrain profits over the next two years.
Andy Nield
Group Finance Director
29 May 2003
Bristol Water Holdings plc Report & Accounts 2003 11
‘
Group's strategy 
focussed around 
water business
’ The board of directors
This page from left to right
Moger Woolley, Alan Parsons 
Sir Richard Gaskell, Roger Wyatt 
Opposite page from left to right
Trevor Smallwood, Andy Nield 
Professor David Blockley 
Peter McIlwraith,Thomas Lachelin  Above:The £12m project for a major
upgrade of the Barrow Treatment
Works is progressing well. 14 Bristol Water Holdings plc Report & Accounts 2003
John Moger Woolley DL
Age 68
Non-executive Chairman,
Member of Audit Committee,
Member of Remuneration Committee
Appointed to the board of The Bristol Waterworks Company 
in 1990, which subsequently became Bristol Water Holdings plc
in 1991, and became Chairman of the public limited company in
1998. Director of Brunel Holdings plc and Chairman of The
Council of the University of Bristol. Until recently, High Sheriff of
Gloucestershire. Former Chief Executive of DRG plc.
Sir Richard Kennedy Harvey Gaskell 
Age 66
Deputy Chairman and Non-executive Director, Chairman of
Remuneration Committee
Appointed to the board of The Bristol Waterworks Company
in 1989, which subsequently became Bristol Water Holdings
plc in 1991, and became Deputy Chairman of Bristol Water
Holdings plc in 1998. Former President of the Law Society.
Former Senior Partner in Lawrence Tucketts, Solicitors, and
former Trustee of the Laura Ashley Foundation.
Professor David Ian Blockley 
Age 61
Non-executive,
Member of Audit Committee
Appointed to the board in 1998. Head of Department of
Civil Engineering and formerly Dean of the Faculty of
Engineering at the University of Bristol. Previously President
of the Institution of Structural Engineers (2001/02).
Thomas Pierre Hilbery Lachelin 
Age 66
Non-executive,
Chairman of Audit Committee and member of
Remuneration Committee
Appointed to the board of The Bristol Waterworks
Company in 1988, which subsequently became Bristol Water
Holdings plc in 1991. Former Director of Imperial Tobacco
Ltd and former Chairman of Imperial Tobacco International
Limited.
Peter McIlwraith 
Age 55
Non-executive, Member of Audit Committee Appointed 
to the board in 2001. Chairman of @Bristol Limited,
and Director of Brandon Hire plc. Former partner with
PricewaterhouseCoopers.
Trevor Smallwood OBE
Age 55
Non-executive, Member of Remuneration Committee
Appointed to the board in 1999. Director of Bristol Chamber
of Commerce, Industry and Shipping, Chairman of Greater
Bristol Foundation, former Chairman of FirstGroup plc and
former Chairman of Bristol International Airport.
Alan Parsons 
Age 54
Group Chief Executive
Joined the company as Finance Director and was appointed
to the board in 1991 and appointed as Group Chief Executive
in 2000. Chairman of principal subsidiary companies. and
director of certain associated companies. Chairman of WTI.
Andrew Simon Nield 
Age 47
Group Finance Director
Appointed to the board in 2000. Previously held a range of
senior roles with Anglian Water plc. Also a Director of Bristol
Water plc and other principal subsidiaries. Director of certain
associated companies. Director of the Water Companies
(Pension Fund) Trustee Company.
Roger William Wyatt 
Age 57
Managing Director - Bristol Water plc.
Joined the company in 1969 and held a range of technical and
managerial posts with the group before becoming Managing
Director of Bristol Water plc in 2000.Appointed to the board
in 1995. Also a director of certain other subsidiaries.
Directors and advisers
SECRETARY AND REGISTERED OFFICE
S C Robson, Solicitor,
PO Box 218, Bridgwater Road, Bristol BS99 7AU
FINANCIAL ADVISERS
Dresdner Kleinwort Wasserstein,
20 Fenchurch Street, London EC3P 3DB
Hoare Govett Corporate Finance Limited,
4 Broadgate, London EC2M 7LE
PRINCIPAL BANKERS
The Royal Bank of Scotland plc,
135 Bishopsgate, London EC2M 3UR
AUDITORS
PricewaterhouseCoopers LLP ,
31 Great George Street, Bristol BS1 5QD
REGISTRARS AND TRANSFER AGENTS
Computershare Services plc,
PO Box 82,The Pavilions,
Bridgwater Road, Bristol BS99 7NH
STOCKBROKERS
Hoare Govett Corporate Finance Limited,
4 Broadgate, London EC2M 7LE
Rowan Dartington & Co Limited,
7th Floor,The Colston Centre,
Colston Street, Bristol BS1 4XE The directors have pleasure in submitting their report and the accounts for the year ended 31 March 2003.
PRINCIPAL ACTIVITIES
The group's principal activities are, through Bristol Water plc, the provision of water supply and related services to a population
of more than one million people and businesses in an area of 2,391 square kilometres centred on Bristol, together with a range
of contracting and consulting services through its subsidiaries Walter Lawrence Civil & Mechanical Limited and Bristol Water
Services Limited.
RESULTS FOR THE YEAR
The results for the year are shown in the profit and loss account and are discussed in the Chairman's statement , Chief Executive’s
report and Operating and Financial Review.
For the year ended 31 March 2003 shareholders received an interim dividend of 20.8p on 6 February 2003. A final dividend 
of 49.8p per ordinary share is proposed for holders of ordinary shares on the register at 18 July 2003, equating to a total 
dividend for the year of 70.6p.The final dividend will be paid on 1 October 2003.
DIRECTORS AND THEIR INTERESTS
The directors during the year, and their beneficial interests in the ordinary shares of the company, were:
1 April 2002 31 March 2003
J M Woolley, Chairman 2,830 2,830
Sir Richard Gaskell, Deputy Chairman 146 146
T Smallwood - -
Professor D I Blockley 175 175
T P H Lachelin 2,350 2,350
P McIlwraith - -
A Parsons, Chief Executive 9,276 9,282
A S Nield, Finance Director 500 500
R W Wyatt 5,103 5,103
T P H Lachelin,T Smallwood and R W Wyatt will offer themselves for re-election at the Annual General Meeting.
Details of options over ordinary shares granted and exercised under both the Executive Share Option Scheme and the Employee
Savings Related Share Option Scheme are shown in the Remuneration Committee report.
No director's interest has changed in the period from 31 March 2003 to the date of this report.
At no time during the year has any director had a material interest in any contract of significance with any company in the group,
other than his service contract, nor held any shares in any group company except the shareholdings set out above.
FIXED ASSETS
In the opinion of the directors there is no material difference between the book value and market value of land expected to be
disposed of within the next twelve months.
EMPLOYEE MATTERS
The group is committed to extensive policies of employee involvement, communication, training and sound relationships with
trade unions.The group operates a Savings Related Share Option Scheme for all eligible employees.The group is an equal oppor-
tunity employer providing employment and appropriate facilities for disabled people. High standards for Health and Safety poli-
cies have been set together with targets for quality and customer service.
RESEARCH AND DEVELOPMENT
The group undertakes research and development projects in relation to its core business. Expenditure during the year amounted
to £59,000 (2002 - £72,000).
CHARITABLE DONATIONS
Donations by the group to charitable causes during the year amounted to £33,000 (2002 - £26,000).
PAYMENT PRACTICES
It is group policy to comply with the terms of payment agreed with a supplier.Where payment terms are not negotiated, the
group endeavours to adhere to the supplier's standard terms.The group pays creditors in accordance with payment terms on
receipt of valid invoices. At the end of the year the group’s trade creditors represented the equivalent of 43 days purchases
(2002 - 48).
Bristol Water Holdings plc Report & Accounts 2003 15
Directors’ report
for the year ended 31 March 2003 16 Bristol Water Holdings plc Report & Accounts 2003
SUBSTANTIAL SHAREHOLDINGS
According to notifications received, the following were interested in 3% or more of the company's voting capital on 19 May 2003:
Shares held % 
Ecofin Water and Power Opportunities plc 1,776,718 24.5
Axa Sun Life Investment Management Limited 1,198,671 16.5
Royal London Asset Management 290,450 4.0
Royal Insurance Group 258,181 3.6
Dartington Portfolio Nominees 249,677 3.4
CORPORATE GOVERNANCE
The company's and group’s compliance with the Combined Code - Principles of Good Governance and Code of Best Practice
is reported on page 17.
POST BALANCE SHEET EVENTS
During April 2003, all the ordinary issued shares of Bristol Water plc were transferred to Bristol Water Core Holdings Limited,
a wholly-owned subsidiary of Bristol Water Holdings plc.
During May 2003, Bristol Water plc entered into a new financing structure. Details are set out in the Operating and Financial
Review and in Note 17 to the Accounts.
AUDITORS
Following the conversion of our auditors PricewaterhouseCoopers to a Limited Liability Partnership (LLP) on 1 January 2003,
PricewaterhouseCoopers resigned on 27 January 2003 and the directors appointed its successors PricewaterhouseCoopers LLP
as its auditors. A resolution to reappoint PricewaterhouseCoopers LLP as auditors of the company will be proposed at the
Annual General Meeting.
DIRECTORS' RESPONSIBILITIES FOR THE PREPARATION OF FINANCIAL STATEMENTS
The following statement, which should be read in conjunction with the statement of responsibilities set out in the independent
auditors' report, is made with a view to distinguishing for shareholders the respective responsibilities of the directors and of the
auditors in relation to the financial statements.
The directors are required by UK company law to prepare financial statements for each financial year that give a true and fair
view of the state of affairs of the company and the group as at the end of the financial year and of the profit or loss of the group
for that period.
In preparing the financial statements the directors are required to select and apply consistently suitable accounting policies framed
by reference to reasonable and prudent judgements and estimates. Applicable accounting standards also have to be followed 
and a statement made to that effect in the financial statements, subject to any material departures being disclosed and explained
in the notes to the financial statements.The directors are required to prepare the financial statements on a going concern basis
unless it is inappropriate to presume the group will continue in business. Directors are responsible for ensuring proper accounting
records are kept which disclose with reasonable accuracy at any time the financial position of the company and the group and
enable them to ensure that the financial statements comply with the Companies Act 1985.They are also responsible for taking
reasonable steps to safeguard the assets of the group and for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
By order of the Board
S C Robson, Secretary
29 May 2003
Directors’ reportcontinued
for the year ended 31 March 2003 DIRECTORS' STATEMENT 
The Board fully supports the recommendations of "The Combined Code - Principles of Good Governance and Code of Best
Practice" (the Combined Code) which was appended to the London Stock Exchange Listing Rules in 1999. It has reviewed the
Combined Code and considers that the company complies with the provisions set out in Section 1 of the Combined Code.
The directors report that, after making enquiries, they have a reasonable expectation that the company and group have adequate
resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in
preparing the accounts.
Board and Board Committees
The Board of Bristol Water Holdings plc comprises three executive directors and six non-executive directors. All of the non-
executive directors are, in the opinion of the Board, independent of management.The Board, which met nine times in the year,
executes overall control of the group’s affairs by the schedule of matters reserved for their decision.These include the approval
of group strategy, financial statements, major acquisitions and disposals, authority levels for expenditure, treasury and risk man-
agement policies. In furtherance of their duties, there are agreed procedures for the directors to take independent professional
advice, if necessary, at the company’s expense. All directors have access to the advice and services of the Company Secretary.
The Board delegates day-to-day and business management control to the Boards of the operating subsidiary companies within
the group which comprise the executive directors and certain other of the group’s senior management. In the two principal 
subsidiaries, the Board of Bristol Water plc met 20 times during the year and the Board of Lawrence met formally nine times
during the year, and their decisions are communicated throughout the relevant companies on a regular basis.The Board of each
of the operating subsidiary companies is responsible for implementing group policy, the monitoring and performance of the 
business and reporting to the full Board of Bristol Water Holdings plc thereon.
The company has an Audit Committee, which met four times during the year, whose terms of reference include the points 
recommended by the Combined Code. Its duties include monitoring internal controls throughout the group, approving the group’s
accounting policies and reviewing the interim and annual financial statements before submission to the Board.The Committee is
chaired by Mr T P H Lachelin and comprises three other non-executive directors.The auditors attended all meetings in the year.
The composition of the Remuneration Committee is described in the report of that committee on page 20.
The entire Board constitutes the Nominations Committee. It is responsible for selecting and appointing the company’s executive
and non-executive directors and considers such matters as required.
The Board considers the Chairman to be the principal point of reference to whom concerns of whatever nature may be 
conveyed. In the event that an individual does not wish to raise a concern with him, the Board has identified Sir Richard Gaskell
as the senior independent member of the Board to whom such concerns may be addressed.
The Board already follows many of the proposals contained within the Higgs Report and will review this matter further once
the recommendations are finalised.
Shareholder Communications
The company maintains open communication with its shareholders outside "closed periods" as defined by the Stock Exchange.
Financial and other information is provided on Bristol Water’s website.
Internal Controls - Risk Management
The company, as required by the Financial Services Authority, has complied with the Combined Code provisions on internal 
control having established the procedures necessary to implement the guidance issued in September 1999 (the Turnbull
Committee report) and by reporting in accordance with that guidance.
The Board has overall responsibility for the system of internal control for the group and for reviewing its effectiveness whilst the
role of management is to implement Board policies on risk and control.The system of internal control is designed to manage
risks to appropriate minima rather than eliminate any risk of failure in achieving business objectives. In pursuing these objectives,
internal controls can only provide reasonable and not absolute assurance against material misstatement or loss.
Bristol Water Holdings plc Report & Accounts 2003 17
Corporate governance 18 Bristol Water Holdings plc Report & Accounts 2003
The Board encourages a culture of risk identification and management across all aspects of the business, and uses the following
main processes to review the effectiveness of the system of internal control:
The Executive Directors:
 have delegated authority to manage the business and to implement internal control and risk management processes
 have established a system of Key Performance Indicators and risk identification matrices
Subsidiaries are operated through a formal Board structure.These Boards, subject to ratification by the Board of Bristol Water
Holdings plc:
 consider material financing and investment decisions
 review the role of insurance in managing risks
 review on a regular basis detailed Key Performance Indicators reports which include the identification of material risks and
the actions taken to manage such risks
 review and approve financial budgets 
The Audit Committee:
 reviews external audit work plans and commissions, where appropriate, reviews of specific issues
 considers reports from management and external auditors on the system of internal control and any material control 
weaknesses identified
 discusses with management the actions taken on any problem areas identified by Board members and management or in the 
external audit reports 
 the Chairman of the Committee reports the outcome of the Audit Committee meetings to the Board and the Board 
receives the minutes of all Audit Committee meetings
The Board:
 considers material financing and investment decisions across the group including the giving of guarantees and indemnities,
and monitors policy and control mechanisms for managing treasury risk
 reviews the role of insurance in managing risks across the group
 reviews on a regular basis a summary Key Performance Indicators report which includes the identification of material risks 
and the actions taken to manage such risks 
 reviews the effectiveness of the risk management process and significant risk issues
 reviews and approves financial budgets across the group
 receives the minutes of all subsidiary company Board meetings
The Board undertook a formal assessment of risk management and control arrangements on 19 May 2003 in order to form a
view on the overall effectiveness of the system of internal control.This review included an assessment of the effectiveness of
internal controls within material joint arrangements and joint ventures, namely Lawrence/NACAP and PABW in Malaysia.
The Board concluded that the overall internal control framework was working effectively.
The Audit Committee formally considered the need for an internal audit function and recommended to the Board that the cur-
rent arrangements of reports from management, external auditors and other external advisers on the system of internal control
are appropriate.The Board formally endorsed this recommendation on 19 May 2003.The Board will continue to review the need
for an internal audit function on an annual basis.
By order of the Board
S C Robson, Secretary
29 May 2003
Corporate governancecontinued The group continues to take its environmental, social and ethical responsibilities seriously.
The regulated water business
Bristol Water plc is focused on delivering an essential service to over a million people every day.We recognise the impacts of
our activities on the wider society and seek to make these as sustainable and positive as possible. Our vision is to be a water
company balancing all stakeholders’ interests, delivering world-class performance at best value, both now and in the future.
Among the ways we deliver this are by:
 taking account of the needs and priorities of all stakeholders
 understanding risks and managing them effectively
 having open, honest and full communication throughout the business
 motivating and developing staff, recognising their key role in the success of the company
 keeping health and safety issues a high priority
 maintaining ISO 9001 certification
 maintaining programmes of community involvement and encouraging the public to visit our facilities and understand our
business
 providing open and honest channels of communication with the media, local government and others
 minimising water abstraction if there is a risk of environmental damage and  encouraging others to use water resources in a 
sustainable way
 reviewing other impacts on the environment to minimise adverse effects
 dealing with suppliers in an ethical way but demanding high standards and full contractual compliance from them
Corporate responsibility activities fall into two main categories:
 Environment: We fulfil - and in many areas exceed - all the requirements of conservation and environmental duties placed 
upon us by the Water Act 1999 and the Code of Practice on Conservation,Access and Recreation.We have a well-established
environment policy and demonstrate a strong commitment to the sustainable management of water resources.We carefully
assess the risks associated with any potential environmental impact of our work and ensure that these risks are mitigated and 
managed through appropriate management and contingency planning.
 Community: We provide the best possible access, consistent with water quality and security needs, for people at our major 
reservoirs, such as Chew and Blagdon Lakes, and other suitable sites.
We have active programmes to support and engage with local communities, reflecting our role as an essential part of those 
communities.We regularly sponsor a wide range of community and charitable events, especially those related to water use.
A structured programme of educational support for all age groups is provided, with the main thrust being to encourage all
customers to use water wisely.This programme features open days, visitor centres, public information advertising and web sites.
We continually seek to find out what our customers think of our services and what they want, through regular market research
and face-to-face contact.
Other businesses
Our other businesses share the overall group vision of success through sustainability.They are committed to good practice in all
fields of corporate social responsibility, including meeting the highest standards on health and safety.
All the group subsidiaries operate policies aimed at protecting the environment in which they work.
Lawrence operates successfully to the demanding standards of ISO 14001 environmental management certification. In addition,
Lawrence also has an on-going programme of community sponsorship and support.
BWS, using skills developed by the regulated water business, is committed to protecting the environment by reducing water leak-
age and wastage. It also carefully respects the diversity and sensitivities of the many and varied cultures within which it operates
worldwide.
Bristol Water Holdings plc Report & Accounts 2003 19
Corporate social responsibility 20 Bristol Water Holdings plc Report & Accounts 2003
Role and composition of the Remuneration Committee
The Remuneration Committee determines the remuneration and other employment conditions of the executive directors and
senior executives of Bristol Water Holdings plc and its subsidiary companies.The membership of the committee during the year
comprised Sir Richard Gaskell (Chairman), Mr T P H Lachelin, Mr T Smallwood and Mr J M Woolley. It consists solely of non-
executive directors.The Committee met four times during the year and all members were in attendance on each occasion.
In deciding appropriate levels of executive remuneration, the Committee relies on external research from independent
remuneration consultants which gives up-to-date information on a comparator group of companies. During the year the Hay
Group and Towers Perrin assisted the Committee on matters relating to directors’ and senior executives’ remuneration. Both
organisations had previously been appointed by the Committee for this purpose and neither provided any other services to
the company during the year, although during the year the Hay Group also worked on a job evaluation project for Bristol
Water plc.
During the year Alan Parsons, Group Chief Executive; Andrew Nield, Group Finance Director; and Peter Knowlson, HR Director
of Bristol Water plc also provided material advice and services to the Committee in connection with its consideration of matters
relating to directors’ remuneration.
Remuneration policy
The key principles underpinning remuneration policy are the need to offer remuneration packages which can attract, motivate
and retain directors of the calibre needed, and to reward those directors both for enhancing value to shareholders and for 
delivering quality service to customers.
The current policy on executive remuneration is to fix salaries and other elements of the remuneration package primarily having
regard to median salary levels disclosed by the independent research.
There are three main elements of the remuneration package for executive directors.
1. Basic annual salary - based on independent salary surveys and reviewed annually, with changes based on assessed individual 
performance.
2. Annual bonus - based on the achievement of water quality, customer service and leakage targets and group financial targets 
in the previous year, and restricted to a maximum of 30% of basic salary.
3. Taxable benefits in kind - reflecting market practice and comprising the provision of a company car, private medical insurance 
and payment of home telephone rental.
The above remuneration policy will continue to apply for the financial year 2003/04 and there are no plans to change it for any
subsequent financial year.
Share options and long-term incentive schemes
No options were granted during the year under the terms of the Executive Share Option Scheme approved by shareholders
in 1991, and renewed shareholder approval for that scheme was not sought at the 2001 Annual General Meeting. Under the
terms of the scheme, options were issued at mid-market price and must be exercised between three and ten years after grant,
subject to the achievement of real growth in earnings per share, ie after inflation (RPI), and to the approval of the Board.These
performance conditions are considered both reasonable and in line with market practice when the scheme was introduced.
Details of outstanding options are shown overleaf.
There is no long-term incentive scheme in place at present and there are no plans to introduce one.
Service contracts
In November 2000 the Remuneration Committee decided that newly appointed executive directors would receive 12 month
rolling contracts and transitional arrangements were put in place to reduce existing executive directors’ contracts from 24
months to 12 months.
During the year Mr Parsons’ and Mr Wyatt’s service contracts (dated 1 September 2000) had notice periods of 24 months.With
effect from 1 April 2003 their notice periods have reduced to 12 months.
Mr Parsons and Mr Wyatt have a provision in their service contracts for the enhancement of their Water Companies’ Pension
Scheme pensionable service by a maximum of 6
2
/3 years in the event of redundancy. Executive Directors appointed since 1995
do not have this benefit.
Remuneration committee report Service contracts (continued)
Mr Nield’s current contract is dated 18 January 2002. He joined the company on 1 April 2000, and so has always had a service
contract with a notice period of 12 months. Mr Nield’s contract contains provision for the payment of liquidated damages
equivalent to 12 months’ basic salary in the event of a takeover of the company taking place before 31 March 2005.This
arrangement was entered into at the recruitment stage as part of the contract negotiations.
There are no other provisions in any of the executive directors’ contracts for compensation payable upon early termination and
the normal principles of mitigation will apply.
Directors’ pension arrangements
Until 5 December 2001, newly-appointed executive directors were eligible to become contributory members of the Water
Companies’ Pension Scheme, a defined benefits, final salary scheme. Under the terms of that scheme the only elements of remu-
neration other than basic salary which are pensionable relate to the taxable benefits associated with company car provision for
directors who first became company car holders before 4 July 1994, so retaining on a personal basis the contractual entitlements
of such individuals at the date this change in remuneration policy was introduced. Since April 2001 a notional figure, indexed
annually, has been used for this purpose based on the value of the taxable benefit as at 6 April 2001.
Any newly-appointed executive directors recruited externally will be offered membership of a Bristol Water group designated
stakeholder pension scheme or the option of a company contribution to a personal pension plan.
Non-executive directors
The remuneration of the non-executive directors is determined by the Board within the limits set by shareholders in 2002 and
is based upon independent surveys of fees paid to non-executive directors. Fee levels are set having regard to the fees payable
for similar roles in companies of comparable size and on the basis of time commitments.Additional responsibilities are also taken
into account.
This policy is expected to continue to apply unchanged in the future.
Non-executive directors do not have contracts of service, do not participate in company pension, share or bonus schemes and
do not receive any taxable benefits in kind.
Performance Graph
The graph below indicates the company’s total shareholder returns in comparison with the FTSE Small Cap index.
SOURCE: Datastream
Details of directors’ remuneration, pensions benefits and share options
This report includes the statutory disclosures required by The Companies Act 1985, as amended by the Company Accounts
(Disclosure of Directors’ Emoluments) Regulations 1997 and the Directors’ Remuneration Report Regulations 2002. Full details
of all elements in the remuneration package of each director and share options are set out overleaf. Details of directors’ share
interests are given in the Directors’ Report.
Bristol Water Holdings plc Report & Accounts 2003 21
£140
£120
£100
£80
£60
£40
31Mar 98 31Mar 99 31Mar 00 31Mar 01 31Mar 02 31Mar 03
Change in value of a £100 holding in
Bristol Water Holdings plc vs 
the FTSE Small Cap index
after reinvestment of dividends
Bristol Water FTSE Small Cap 22 Bristol Water Holdings plc Report & Accounts 2003
(a) Salary/fees Benefits Bonus T otal 2002
£000 £000 £000 £000 £000
J M Woolley Non-executive 39 - - 39 34
Sir Richard Gaskell Non-executive 26 - - 26 23
Professor D I Blockley Non-executive 20 - - 20 18
T P H Lachelin Non-executive 24 - - 24 20
P McIlwraith Non-executive 20 - - 20 7
A S Nield Executive 123 9 29 161 152
A Parsons Executive 151 10 32 193 193
T Smallwood Non-executive 20 - - 20 18
R W Wyatt Executive 114 8 24 146 147
Charge to Profit and Loss Account 537 27 85 649 612
Bonus represents amounts accrued and approved, but not paid, as at 31 March 2003.
(b) Accrued pension scheme benefits earned by directors -
A S Nield A Parsons R W Wyatt
£000 £000 £000
Listing Rules disclosure
Increase in accrued pension during 2002/03 in excess of inflation 4 2 2
Increase in accrued lump sum during 2002/03 in excess of inflation 13 7 7
Accumulated pension at 31.3.2003 per annum 37 32 56
Accumulated lump sum at 31.3.2003 110 95 168
Transfer value of increase 43 35 39
Transfer value of increase less director’s contribution 37 27 33
A S Nield A Parsons R W Wyatt
£000 £000 £000
Schedule 7A disclosure
Increase in accrued pension during 2002/03 5 3 3
Increase in accrued lump sum during 2002/03 15 8 9
Accumulated pension at 31.3.2003 per annum 37 32 56
Accumulated lump sum at 31.3.2003 110 95 168
Transfer value
as at 31.3.2002 354 441 914
as at 31.3.2003 362 471 1,001
Increase in transfer value 8 30 87
Increase in transfer value less director’s contributions 2 22 81
Only the three executive directors accrued retirement benefits under a defined benefits scheme during the year. No other 
director receives any pension benefits from the company.
(c) The following unexercised options over ordinary shares in the company have been granted to directors under the terms of 
the Executive Share Option Scheme and Savings Related Share Option Scheme -
Options
Date of Unexercised Unexercised Exercise Exercisable
Grant at 31. 3. 02 at 31. 3. 03 price £ from to
A Parsons 20.12.95 2,434 2,434 11.80 Dec 1998 Dec 2005
16.07.02* - 1,628 10.16 Sept 2007 March 2008
A S Nield 13.07.01* 2,062 2,062 8.18 Sept 2006 March 2007
R W Wyatt 20.12.95 2,136 2,136 11.80 Dec 1998 Dec 2005
16.07.02* - 935 10.16 Sept 2005 March 2006
*Savings Related Share Option Scheme
The market price of the relevant shares at 31 March 2003 was £11.63 and ranged from £10.50 to £12.80 during the year.
Sir Richard Gaskell 
Chairman of Remuneration Committee
29 May 2003
Remuneration committee report continued The significant accounting policies adopted in the preparation of the accounts, which have been applied consistently, are set out
below.
a. Accounting convention
The accounts are prepared under the historical cost convention and in accordance with applicable accounting standards in
the United Kingdom and with the provisions of the Companies Act 1985, except for the treatment of certain capital contri-
butions as explained in (f) overleaf.
b. Basis of consolidation
The group accounts comprise the consolidation of the accounts of the company and all its subsidiary undertakings after elimi-
nating inter-company transactions.As provided by the Companies Act 1985, a separate profit and loss account for the company
is not disclosed.
On acquisition of a subsidiary, all of the subsidiary’s assets and liabilities that exist at the date of acquisition are recorded at
their fair values reflecting their condition at that date and alignment with group accounting policies.All changes to those assets
and liabilities, and the resulting gains and losses, that arise after the group has gained control of the subsidiary are reflected
in the post acquisition profit and loss account.
The group’s share of profits less losses of joint ventures is included in the consolidated profit and loss account, and the group’s
share of their net assets is included in the consolidated balance sheet under the gross equity method.
The group accounts for its own share of assets, liabilities and cash flows arising within joint arrangements, measured according
to the terms of the agreement governing each arrangement.
c. Goodwill
Goodwill arising on consolidation represents the excess of fair value of the consideration given over the fair value of 
the identifiable net assets acquired. Goodwill arising on the acquisition of subsidiaries and joint ventures is capitalised and
amortised over the shorter of its estimated useful life and 20 years. If an impairment event occurs the carrying value of good-
will is reviewed, and if necessary written down to appropriate levels. Goodwill which arose prior to 1 April 1998 remains
eliminated against reserves and will be charged in the profit and loss account on disposal of the business to which it relates.
d. T urnover
Turnover comprises charges to and accrued income from customers, exclusive of VAT, and after eliminating inter-company
transactions.
Income from metered supplies is based upon volumes of water invoiced plus estimated volumes of uninvoiced water deliv-
ered to customers during the year.
e. Tangible fixed assets and depreciation 
Tangible fixed assets comprise infrastructure assets and other assets.
(i) Infrastructure assets 
Infrastructure assets comprise the integrated network of impounding and pumped raw water storage reservoirs and
water mains and associated underground pipework. Expenditure on such assets relating to increases in capacity,
enhancements or planned maintenance of the network is treated as an addition to fixed assets and is included at cost.
The cost of infrastructure assets is their purchase cost together with incidental expenses of acquisition and directly
attributable labour costs which are incremental to the group.
(ii) Other assets 
Other assets include land and buildings, operational structures, fixed and mobile plant, equipment and motor vehicles.
All are included at cost.The cost of other assets is their purchase cost together with incidental expenses of acquisition
and any directly attributable labour costs which are incremental to the group.
(iii) Depreciation 
Depreciation is charged, where appropriate, on a straight-line basis on the original cost of assets, less their estimated
residual values, over their expected economic lives. Freehold land is not depreciated.
Depreciation of infrastructure assets takes account of planned expenditure levels to maintain the operating capability
of the group’s infrastructure assets in perpetuity. Regard is primarily taken of the five year plans submitted to the Office
of Water Services for use in setting price limits under the RPI+K formula.
Bristol Water Holdings plc Report & Accounts 2003 23
Accounting policies 24 Bristol Water Holdings plc Report & Accounts 2003
Accounting policies continued
Other assets are depreciated after commissioning over the following estimated economic lives -
Operational properties and structures 40 to 100 years
Treatment, pumping and general plant 20 to 24 years
Computing and communications equipment 3 to 15 years
Vehicles and mobile plant 5 to 7 years
f. Grants and contributions 
Contributions received in respect of tangible assets other than infrastructure assets are treated as deferred income and
amortised in the profit and loss account over the expected useful lives of the related assets. Contributions received in respect
of enhancing the infrastructure network are not shown as deferred income but are deducted from the cost of the related
fixed assets.This treatment is permitted by SSAP4 but is a departure from the Companies Act 1985 which requires such
contributions to be shown as deferred income. It is the directors' opinion that this treatment is necessary to show a true
and fair view as the related assets do not have determinable finite lives and therefore no basis exists for the amortisation of
the contributions.The effect on tangible fixed assets is shown in Note 9(d) to the accounts.
g. Leased assets 
Assets financed by leasing agreements that transfer substantially all the risks and rewards of ownership of an asset to the
group are capitalised and depreciated over the shorter of their estimated useful lives and the lease term.The capital portion
of the lease commitment is included in current or non-current creditors as appropriate.The capital element of the lease
rental is deducted from the obligation to the lessor as paid.The interest element of lease rentals and the depreciation of the
relevant assets are charged to the profit and loss account.
Operating lease rental payments are charged to the profit and loss account as incurred over the term of the lease.
h. Pension costs 
The cost of providing pension benefits is charged to the profit and loss account to spread the cost over the expected aver-
age service lives of employees. Differences between the amounts funded and amounts charged to the profit and loss account
are recorded as prepayments or provisions, as appropriate, in the balance sheet.
The appropriate transitional disclosures under FRS17, "Retirement Benefits", the new accounting standard on pensions, are
included in Note 23 to the accounts.
i. Research and development
Research and development expenditure is charged to the profit and loss account as incurred.
j. Taxation 
The charge for taxation is computed based on the profit for the period adjusted according to tax legislation.
Advance corporation tax in respect of dividends in previous years was written off to the profit and loss account unless it
could be recovered against mainstream corporation tax in the current year or with reasonable assurance in the future. Credit
is taken for advance corporation tax previously written off when it is recovered against mainstream corporation tax liabili-
ties.
Deferred tax has been recognised as a liability or asset if transactions have occurred at the balance sheet date that give rise
to an obligation to pay more taxation in future, or a right to pay less taxation in future. An asset is not recognised to the
extent that the transfer of economic benefits in future years is not probable. Deferred tax assets and liabilities recognised
have been discounted at rates equivalent to the post-tax yields to maturity that could be obtained at the balance sheet date
on government bonds with maturity dates similar to those of the deferred tax assets and liabilities.
k. Stocks 
Stocks are valued at the lower of cost and net realisable value. In accordance with established practice in the water industry
no value is included in the accounts in respect of water held in store.
l. Long-term contracts
Profit attributable to the stage of completion of a contract is recognised when the outcome of the contract can be foreseen
with reasonable certainty.Turnover for such contracts represents the value of work done in the period. Full provision is made
for any losses that are foreseen. Amounts recoverable on contracts are included in debtors and represent turnover recog-
nised in excess of payments on account. m. Financial instruments
The group uses interest rate derivatives to manage exposures to fluctuations in interest rates. Positions on hedges are
deferred and matched to the underlying transaction.
n. Foreign exchange transactions
Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction, or where 
forward exchange contracts have been arranged, at the contracted rate. Monetary assets and liabilities denominated in 
foreign currencies are translated at the exchange rate ruling at the balance sheet date, and any exchange differences are taken
to the profit and loss account.
Profits and losses of overseas subsidiaries, which have currencies of operation other than sterling, are translated into sterling
at average rates of exchange ruling during the period. Differences between the profit and loss accounts translated at 
average rates and at the balance sheet rates are shown as a movement on reserves and in the statement of total recognised
gains and losses.
Exchange differences arising from the retranslation of overseas net investments are shown as a movement on reserves and
in the statement of total recognised gains and losses, as permitted under SSAP 20.
Bristol Water Holdings plc Report & Accounts 2003 25 Group profit and loss account
for the year ended 31 March 2003
2003 2002
Note £000 £000
Turnover including share of joint ventures 1 120,836 136,015
Less: share of turnover of joint ventures (8,504) (6,897)
Group turnover 112,332 129,118
Operating costs 2 (92,087) (110,252)
Group operating profit 20,245 18,866
Share of operating profit of joint ventures 164 157
Total operating profit: group and share of joint ventures 1 20,409 19,023
Profit on disposal of tangible fixed assets 3 402 753
Profit on disposal of businesses 3 143 23
Net interest payable and similar charges 4 (4,861) (4,224)
Profit on ordinary activities before taxation 1 16,093 15,575
Taxation on profit on ordinary activities 5 (6,448) (3,525)
Profit on ordinary activities after taxation 9,645 12,050
Minority shareholders' non-equity interest 21 (1,094) (1,094)
Profit attributable to Bristol Water Holdings plc shareholders 8,551 10,956
Dividends 6 (5,230) (4,965)
Profit retained for the year 20 3,321 5,991
Earnings per share -
On average number of ordinary shares in issue 7 115.5p 148.7p
On fully diluted basis 114.5p 147.5p
All of the turnover and operating costs above relate to continuing operations.
There is no difference between the profit on ordinary activities before taxation and the retained profit for the year stated above
and their historical cost equivalents.
The accompanying notes to the accounts form an integral part of this statement.
Statement of total 
recognised gains and losses
for the year ended 31 March 2003
2003 2002
£000 £000
Profit attributable to Bristol Water Holdings plc shareholders 8,551 10,956
Foreign currency translation differences (17) -
Total recognised gains and losses for the financial year 8,534 10,956
Prior year adjustments - (11,202)
Total gain/(loss) recognised since last annual report 8,534 (246)
The prior year adjustments first incorporated in 2002 relate to:
•
the recognition of income from metered supplies on the basis of volumes of water delivered, rather than volumes invoiced - £1,768,000
•
the application of FRS19 ‘Accounting for deferred tax’ - £(12,970,000)
The accompanying notes to the accounts form an integral part of this statement.
26 Bristol Water Holdings plc Report & Accounts 2003 Balance sheets
at 31 March 2003
Group Group Company Company
2003 2002 2003 2002
Note £000 £000 £000 £000
Fixed assets
Intangible fixed assets 8 6 23 - -
Tangible fixed assets 9 185,769 180,770 - -
Investments 10 - - 12,914 14,211
Investments in joint ventures - 11
Share of gross assets 6,878 6,289 - -
Share of gross liabilities (6,477) (5,957) - -
T otal 401 332 - -
Total fixed assets 186,176 181,125 12,914 14,211
Current assets
Stocks 12 683 512--
Debtors 13 26,199 21,447 15,417 5,076
Cash at bank and on deposit 14 19,658 24,513 8,635 6,053
46,540 46,472 24,052 11,129
Creditors: amounts falling due within one year
Short term borrowings 14 6,760 3,138 - 81
Other creditors 15 32,136 33,249 3,982 3,696
38,896 36,387 3,982 3,777
Net current assets 7,644 10,085 20,070 7,352
Total assets less current liabilities 193,820 191,210 32,984 21,563
Creditors: amounts falling due after more than one year 14 (77,771) (82,825) - -
Deferred income 16 (8,429) (8,396) - -
Provisions for liabilities and charges 18 (19,189) (14,926) - -
Net assets 1 88,431 85,063 32,984 21,563
Capital and reserves
Called up share capital 19 7,404 7,397 7,404 7,397
Share premium 20 6,080 6,023 6,080 6,023
Other non-distributable reserves 20 4,024 4,024 - -
Profit and loss account 20 58,423 55,119 19,500 8,143
Total equity shareholders' funds 20 75,931 72,563 32,984 21,563
Minority shareholders' non-equity interest 21 12,500 12,500 - -
88,431 85,063 32,984 21,563
The accounts were approved by the Board on 29 May 2003 and signed on its behalf by -
J M Woolley Chairman
Sir Richard Gaskell Deputy Chairman
The accompanying notes to the accounts form an integral part of this statement.
Bristol Water Holdings plc Report & Accounts 2003 27 Group cash flow statement
for the year ended 31 March 2003
Note 2003 2002
£000 £000
Net cash inflow from operating activities 24(a) 28,537 29,671
Dividends received from joint ventures 129 -
Returns on investments and servicing of finance
Interest received 903 1,282
Interest paid (4,830) (4,233)
Interest paid on finance leases (1,354) (1,287)
Dividends paid to minorities (1,094) (1,094)
(6,375) (5,332)
Taxation
Corporation tax paid (2,978) (2,183)
Capital expenditure
Purchase of tangible fixed assets (20,748) (26,444)
less contributions received 3,409 2,588
Proceeds from disposal of tangible fixed assets 1,215 957
(16,124) (22,899)
Acquisitions and disposals
Proceeds on disposal of subsidiary 93 173
Cash eliminated on disposal of subsidiary - (60)
Investment in joint venture (80) -
13 113
Dividends paid on equity shares (5,020) (4,786)
Cash outflow before management of liquid resources and financing (1,818) (5,416)
Management of liquid resources
being decrease/(increase) in short term deposits 5,500 (295)
Financing 
Issue of shares 64 345
New term loans 47 5,000
Cash inflow from refinancing assets under new finance leases - 8,159
Capital element of lease repayments (1,585) (1,430)
Capital element of loan repayments (1,563) (3,223)
(3,037) 8,851
Increase in cash 24(c) 645 3,140
Cash, beginning of year 5,513 2,373
Cash, end of year 6,158 5,513
The accompanying notes to the accounts form an integral part of this statement.
28 Bristol Water Holdings plc Report & Accounts 2003 Notes to the accounts
1. SEGMENTAL ANAL YSIS
2003 2002
£000 £000
Turnover -
Water supply and related activities 69,974 68,013
Contracting and other services
Group 53,146 70,005
Joint ventures 8,504 6,897
Intra-group sales (10,788) (8,900)
Turnover including share of joint ventures 120,836 136,015
Turnover of £7,186,000 (2002 - £6,023,000) was derived from services provided outside the United Kingdom, primarily South East
Asia.The maximum level of prices the principal subsidiary, Bristol Water plc, may levy for the majority of water charges is controlled
by the Director General of the Office of Water Services.
2003 2002
£000 £000
Operating profit of group and share of joint ventures -
Water supply and related activities 19,361 17,741
Contracting and other services 1,048 1,282
Group total 20,409 19,023
Profit on ordinary activities before taxation -
Water supply and related activities 14,563 13,903
Contracting and other services 1,530 1,672
Group total 16,093 15,575
Net assets employed -
Water supply and related activities 65,534 73,946
Contracting and other services 22,897 11,117
Group total 88,431 85,063
2003 2002
Number of employees (average full time equivalents) -
Water supply and related activities 422 430
Contracting and other services 396 510
Group total 818 940
The number of employees for water supply and related activities in 2002 excluded approximately 50 full time equivalent former
employees of Bristol Water plc, transferred during 2002 to Bristol Wessex Billing Services Limited, whose costs were recorded within
the payroll costs set out in note 2, during transitional financial arrangements and are now included in other operating costs for 2003.
Bristol Water Holdings plc Report & Accounts 2003 29 Notes to the accounts
2. OPERATING COSTS
The directors believe that the nature of the group's business is such that the analysis of operating costs required by the Companies
Act 1985 is not appropriate. As required by the Act the directors have therefore adapted the prescribed format so that disclosure
of operating costs is appropriate to the group's principal business.
(a) Operating costs comprise -
2003 2002
£000 £000
Wages and salaries 23,160 26,281
Social security costs 1,902 2,212
Pension costs 1,632 1,024
Total payroll cost 26,694 29,517
Less charged to fixed assets (3,003) (2,721)
Net payroll cost 23,691 26,796
Other operating costs
Operating lease rentals
- Plant and machinery 482 530
- Other 236 19
Research and development expenditure 59 72
Auditors' remuneration -
For statutory audit services
- Company 9 9
- Subsidiaries 99 82
For other audit services including review of interim statements 
and audit of regulatory returns submitted by Bristol Water plc 36 32
For non-audit services mainly tax advice and compliance work 40 29
Raw materials, consumables, bad debts and other charges less
recoveries 53,148 68,690
Total other operating costs 54,109 69,463
Depreciation of tangible fixed assets -
On owned assets 11,991 11,489
On leased assets 2,571 2,770
Amortisation of related deferred income (292) (283)
Net depreciation 14,270 13,976
Amortisation of intangible fixed assets 17 17
Total operating costs 92,087 110,252
(b) Directors' emoluments -
2003 2002
£000 £000
Fees, management remuneration and benefits in kind 564 520
Performance bonuses 85 92
649 612
Fees, remuneration, benefits in kind and performance bonuses included -
Highest paid director in year, including accrued performance
bonuses of £32,000 (2002 - £37,000) 193 193
Further details regarding directors are set out in the Remuneration Committee Report on pages 20 to 22.
30 Bristol Water Holdings plc Report & Accounts 2003 Notes to the accounts
3. PROFITS ON DISPOSALS
Profits on disposals comprise:
2003 2002
£000 £000
Profit on disposal of tangible fixed assets 402 753
Profit on disposal of trading division of a subsidiary - Lazer Engineering 20 20
The division was sold in 2002.The £20,000 profit in 2003 is the 
second and final instalment under the sale contract
Profit on disposal of Operational (UK) Limited 123 3
The company was sold in 2002.The £123,000 profit in 2003 reflects release of warranty 
reserve of £50,000 and receipt of additional monies under the sale agreement
143 23
The profit on disposal of tangible fixed assets is mainly from vehicles and property sold by Bristol Water plc amounting to £386,000
(2002 - £760,000).
4. NET INTEREST PAYABLE AND SIMILAR CHARGES
The net interest payable and similar charges for the year comprise -
2003 2002
£000 £000
On bank borrowings 3,200 3,052
On other borrowings 1,166 1,140
Finance leases 1,375 1,339
Less bank interest receivable (880) (1,307)
Net interest expense 4,861 4,224
Bristol Water Holdings plc Report & Accounts 2003 31 Notes to the accounts
5. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
(a) Analysis of charge for the year
2003 2002
£000 £000
Current tax:
UK Corporation tax at 30% (2002 – 30%) 3,005 4,984
Advance Corporation Tax written off/(back) 1,699 (1,027)
Adjustment to prior periods (2,068) (1,813)
UK Corporation tax liability 2,636 2,144
Foreign taxation 53 89
Total current tax 2,689 2,233
Deferred tax:
Current year movement 1,360 (176)
Adjustment to prior periods 1,204 2,851
Effect of discounting 1,195 (1,383)
Total deferred tax 3,759 1,292
Total tax on profit on ordinary activities 6,448 3,525
The adjustment to prior periods mainly relates to the effects of an agreement with the Inland Revenue to accelerate certain capital
allowances.This has reduced the mainstream Corporation T ax charge, but reduced the recovery of Advance Corporation T ax.
Factors that may affect future tax charges
Based on current capital investment plans, the company expects to continue to be able to claim capital allowances in excess of
depreciation in future years.
Advance Corporation Tax (ACT) has only been recognised as an asset to the extent that it is foreseen to be recoverable in the
next 12 months.There is a further £6.1m not recognised including ACT previously assumed to be recoverable in prior years,
now not recovered following increases in capital allowances claimed for the relevant years.
Changes in the discount rate year on year may cause large fluctuations in the effective tax rate.
(b) Factors affecting the tax charge:
The current tax for the period is lower (2002 – lower) than the standard rate of corporation tax in the United Kingdom (30%).
The differences are explained below:
2003 2002
£000 £000
Profit on ordinary activities before taxation 16,093 15,575
Profit on ordinary activities multiplied by standard rate of
Corporation tax in the United Kingdom at 30% (2002 - 30%) 4,828 4,673
Effects of:
ACT set off for the current year 44 (1,027)
Expenses not deductible for tax purposes (8) 199
Capital allowances in excess of depreciation (1,979) (73)
Other net changes 217 274
Current tax on profits for the year 3,102 4,046
Adjustments to tax in respect of prior period (2,068) (1,813)
Adjustments in respect of ACT for prior years 1,655 -
Total current tax charge 2,689 2,233
6. DIVIDENDS
Dividends paid and proposed comprise -
2003 2002
£000 £000
On ordinary (equity) shares -
Interim dividend paid of 20.8p (2002 - 20.2p) 1,543 1,488
Proposed final dividend of 49.8p (2002 - 47.0p) 3,687 3,477
Total dividends paid and proposed 5,230 4,965
32 Bristol Water Holdings plc Report & Accounts 2003 Notes to the accounts
7. EARNINGS PER SHARE
Earnings per share have been calculated as follows -
2003 2002
000 000
On average number of ordinary shares in issue during the year -
Earnings attributable to ordinary shares £8,551 £10,956
Weighted average number of ordinary shares 7,402 7,365
On fully diluted basis -
Earnings attributable to ordinary shares £8,551 £10,956
Weighted average number of fully diluted ordinary shares 7,465 7,426
The weighted average number of fully diluted ordinary shares includes options over shares where the option price is less than or 
equal to the average share price during the year.
8. INTANGIBLE FIXED ASSETS
The movement for the year, all relating to subsidiaries, comprises -
Intellectual
Goodwill property rights T otal
£000 £000 £000
Cost -
At 1 April 2002 and at 31 March 2003 30 87 117
Amortisation -
At 1 April 2002 30 64 94
Charge for year - 17 17
At 31 March 2003 30 81 111
Net book value -
At 31 March 2003 - 6 6
At 31 March 2002 - 23 23
Intellectual property rights are being amortised on a straight-line basis over five years.
The amortisation periods are the periods over which the directors, having considered the nature of the trades, estimate that the
value of the underlying businesses acquired are expected to exceed the value of the underlying assets.
9. TANGIBLE FIXED ASSETS
(a) The movements for the year, all relating to subsidiaries, comprise -
Freehold land Infra-
and operational Plant and structure
structures equipment assets T otal
£000 £000 £000 £000 
Cost
At 1 April 2002 133,999 25,846 147,329 307,174
Additions 7,552 3,862 12,369 23,783
Disposals (1,050) (1,781) (1,695) (4,526)
Grants and contributions (168) - (3,241) (3,409)
At 31 March 2003 140,333 27,927 154,762 323,022
Depreciation
At 1 April 2002 44,766 15,423 66,215 126,404
Charge for year 4,694 2,921 6,947 14,562
Disposals (278) (1,740) (1,695) (3,713)
At 31 March 2003 49,182 16,604 71,467 137,253
Net book value
At 31 March 2003 91,151 11,323 83,295 185,769
At 31 March 2002 89,233 10,423 81,114 180,770
Bristol Water Holdings plc Report & Accounts 2003 33 Notes to the accounts
9. TANGIBLE FIXED ASSETS continued
(b) Included at 31 March 2003 is freehold land not subjected to depreciation in the year of £1,316,000 (2002 - £1,317,000).
(c) Included at 31 March 2003 are fixed assets held under finance leases with a cost of £49,414,000 (2002 - £50,788,000) 
and cumulative depreciation of £21,771,000 (2002 - £19,800,000). Comparative figures have been reanalysed following a review
with the relevant leasing company of the allocation of expenditure on partly completed assets. The previously published 
values were cost £48,001,000 and cumulative depreciation of £16,874,000.There is no Profit and Loss account impact of the 
reanalysis.
This is analysed by asset type as follows -
Freehold land Infra-
and operational Plant and structure
structures equipment assets T otal
£000 £000 £000 £000 
At 31 March 2003
Cost 38,568 9,694 1,152 49,414
Depreciation (13,421) (8,350) - (21,771)
Net book value 25,147 1,344 1,152 27,643
At 31 March 2002
Cost 38,569 11,067 1,152 50,788
Depreciation (11,439) (8,361) - (19,800)
Net book value 27,130 2,706 1,152 30,988
(d)The net book value of infrastructure assets is stated after the deduction of cumulative contributions of £33,887,000 (2002 - 
£30,646,000) as explained in Accounting Policy (f).
(e) The charge for depreciation includes £Nil (2002 - £422,000) accelerated depreciation in respect of certain assets that are to
be replaced significantly earlier than previously planned.
10. INVESTMENTS
The movement in investments shown in the company balance sheet comprises -
Shares in Shares in Loans to Total
subsidiaries joint ventures subsidiaries
£000 £000 £000 £000
At 1 April 2002 7,498 - 6,713 14,211
New investment - 80 - 80
Loan repayments - - (1,377) (1,377)
At 31 March 2003 7,498 80 5,336 12,914
Details of the investment in joint ventures are given in note 11 to these accounts.
The principal subsidiary companies, both of which are wholly owned and incorporated in England and Wales, comprise -
Bristol Water plc:
a licensed water undertaker under the terms of the Water Industry Act 1991.The company owns all issued ordinary shares but
none of its irredeemable preference shares (Note 21). After the year end, in connection with the refinancing described in the
Operating and Financial Review, ownership of all issued ordinary shares of Bristol Water plc was transferred to Bristol Water Core
Holdings Limited, a wholly-owned subsidiary of the company.
Verdan Group Limited:
a wholly owned subsidiary whose principal wholly owned subsidiaries, Walter Lawrence Civil & Mechanical Limited and Bristol
Water Services Limited provide contracting, consultancy and other environmental services.
The directors are of the opinion that the carrying value of the investments does not exceed their market value.
34 Bristol Water Holdings plc Report & Accounts 2003 Notes to the accounts
11. INVESTMENT IN JOINT VENTURES
The movement in investment in joint ventures in the group balance sheet comprises –
Purton
BWBSL Carbons PABW Waternet Watergrid* T otal
£000 £000 £000 £000 £000 £000
At 1 April 2002 - 221 111 - - 332
Share of profit of joint venture 3 74 138 - (51) 164
Tax charge (1) (1) (44) - - (46)
Dividends received - - (129) - - (129)
New investment - - - 80 68 148
Investment made by JV - - - (68) - (68)
At 31 March 2003 2 294 76 12 17 401
*Indirect holding (see below)
Joint ventures, for which the group’s share of total assets and total liabilities is shown in the group balance sheet, comprise -
Bristol Wessex Billing Services Limited (BWBSL), registered in England and Wales, whose year end is 31 March. Bristol Water Holdings
plc owns 100 class ‘B’ shares in the company, representing a holding of 50% of the voting and equity rights of the company. BWBSL
has contracted to provide billing and customer services to both Bristol Water plc and Wessex Water Services Limited.
Purton Carbons Limited, registered in Scotland, whose year end is 31 December.Verdan Group Limited owns 50% of each class 
of the issued shares. Purton Carbons is involved in the regeneration of granular activated carbon, a highly competitive market.
At 31 March 2000 the group reviewed the carrying value of the investment, in light of market conditions, and decided to make 
a substantial impairment provision of £1,563,000 at that date.The directors consider that these conditions still apply and the 
impairment provision has been retained.The group has recognised its share of the profit of the joint venture after adjustment for
the depreciation charge recorded in the Purton Carbons’ accounts in respect of the impaired assets.
PABW Sdn Bhd, registered in Malaysia, whose year end is 30 June. Bristol Water Services Limited has a beneficial interest in 49%
of the issued shares but has a 50% share of the risks and rewards within the individual joint venture contract and exercises joint
voting control of the company.
Waternet Limited, registered in England and Wales, whose year end is 31 March, was incorporated on 27 September 2000 under
the name of JacLordan (8) Limited and subsequently changed its name. On 8 November 2002, Bristol Water Holdings plc acquired
80,000 Class ‘B’ ordinary shares in the company for £80,000, representing 50% of the voting and equity rights of the company.
Waternet Limited represents the interests of Bristol Water Holdings plc in the Watergrid project. During the year, the company did
not trade.
Watergrid Limited, registered in England and Wales, whose year end is 31 December, was incorporated on 12 March 2002 under
the name of Precis (2001) Limited and subsequently changed its name. On 15 November 2002, Waternet Limited acquired
£135,000 Class ‘B’ ordinary shares for £135,000, representing 45% of the voting rights (subject to certain special conditions), 35%
of the dividend rights and 35% of the capital rights on liquidation (after repayment of nominal value of equity).Watergrid Limited
entered into a concession contract with British Waterways in November 2002 and is actively seeking opportunities to use the canal
and river network to serve multiple customer bases with bespoke water services and waste water treatment facilities.
The financial position of the joint ventures is as follows, as disclosed by accounts for the year ended 31 March 2003 unless other-
wise stated.
Bristol Water Holdings plc Report & Accounts 2003 35 Notes to the accounts
11. INVESTMENT IN JOINT VENTURES continued
BWBSL Purton PABW Waternet Watergrid*
Carbons
Note (1) Note (2) Note (3) Note (4)
£000 £000 £000 £000 £000
Profit and Loss accounts
Turnover 10,823 1,035 5,251 - -
Profit/(loss) before taxation 5 4 376 - (227)
Profit/(loss) after taxation 4 3 260 - (227)
Balance sheets
Fixed assets 152 1,973 730 - 16
Investment in Watergrid - - - 135 -
Current assets 3,269 1,628 6,993 25 183
Current liabilities (3,417) (465) (6,958) - (126)
Net current (liabilities)/assets (148) 1,163 35 25 57
Total assets less current liabilities 4 3,136 765 160 73
Long term liabilities - - (70) - -
Shareholders’ funds 4 3,136 695 160 73
Notes: (1) Results are for the year ended 31 December 2002 and are stated before adjustments for group accounting policies.
(2) Results are stated before application of the group long-term accounting profit recognition policy.The group share 
of PABW’s turnover, profit before tax and profit after tax are included in these accounts as £2,575,000, £138,000 and 
£94,000 respectively.
(3) In these accounts, the consolidation of Watergrid means that the investment in Watergrid is not shown in the value 
of the Waternet joint venture, resulting in a net investment carried forward of £12,000.
(4) The company commenced trading in November 2002.
The directors are of the opinion that the carrying value of the investments does not exceed their market value.
12. STOCKS
Stocks, all relating to subsidiaries, comprise consumable stores.The replacement cost of stocks is not considered to be materially
different from their carrying value in the balance sheet.
13. DEBTORS
Debtors comprise -
Group Company
2003 2002 2003 2002
£000 £000 £000 £000
Trade debtors 7,120 7,211 - -
Amounts recoverable under long term contracts 8,665 8,425 - -
Other debtors 1,160 1,179 259 2
Due from group and joint venture companies 2,653 1,567 15,142 5,023
Prepayments and accrued income 6,601 3,065 16 51
26,199 21,447 15,417 5,076
Included within other debtors due to the group is £183,000 relating to amounts receivable after one year (2002 - £515,000).
36 Bristol Water Holdings plc Report & Accounts 2003 Notes to the accounts
14. NET BORROWINGS
(a) At 31 March 2003 group net borrowings were -
Term loans Finance Debentures T otal T otal
less cash leases 2003 2002
£000 £000 £000 £000 £000
Repayment due -
Between one and two years - 1,682 3,455 5,137 1,544
Between two and five years 18,000 6,704 - 24,704 22,854
After five years -
Other than by instalments 15,000 - 1,776 16,776 16,776
By instalments 12,000 17,584 - 29,584 40,081
Irredeemable debentures - - 1,570 1,570 1,570
Total borrowings due after one year 45,000 25,970 6,801 77,771 82,825
Current portion of debt 3,400 1,532 1,828 6,760 3,138
Less cash balances and
short term deposits (19,658) - - (19,658) (24,513)
Net borrowings 28,742 27,502 8,629 64,873 61,450
(b) Details of borrowings not wholly repayable within five years -
2003 2002
£000 £000
Debentures (listed on the London Stock Exchange) -
11.20% Redeemable 2005 to 2009 at the group’s option 1,776 1,776
4.00% Consolidated irredeemable 1,405 1,405
4.00% Perpetual irredeemable 55 55
4.25% Perpetual irredeemable 37 37
3.50% Perpetual irredeemable 73 73
3,346 3,346
Bank loans -
Unsecured, repayable in instalments between 2006 and 2010,
fixed interest at 7.75% pa to 2002 then LIBOR related 20,000 20,000
Unsecured, repayable 2008, fixed interest at 6.1% pa 5,000 5,000
Unsecured, repayable 2008, fixed interest at 6.5% pa 10,000 10,000
Finance leases 17,584 20,081
55,930 58,427
The unsecured £20m bank loan, of which £12m was repayable after 5 years as at 31 March 2003, was repaid in May 2003 as
part of the refinancing arrangements.
(c) At 31 March 2003 the company had £Nil of short term borrowings (2002 - £81,000).
15. OTHER CREDITORS DUE WITHIN ONE YEAR
Other creditors due within one year comprise -
Group Company
2003 2002 2003 2002
£000 £000 £000 £000
Receipts in advance 4,546 2,655 - -
Trade creditors 10,403 13,051 - -
Due to joint ventures 1,417 409 - -
Due to group companies - - 79 -
Dividends payable 4,234 4,024 3, 687 3,477
Corporation tax 809 1,648 - -
Other taxation and social security 1,573 1,502 - -
Accruals and deposits received 9,154 9,960 216 219
32,136 33,249 3,982 3,696
Bristol Water Holdings plc Report & Accounts 2003 37 Notes to the accounts
16. DEFERRED INCOME
Deferred income represents grants and contributions received by Bristol Water plc in respect of non-infrastructure assets less
amounts amortised to the profit and loss account.
2003 2002
£000 £000
Beginning of year 8,396 8,467
Contributions received 325 212
Less amortised (292) (283)
End of year 8,429 8,396
17. FINANCIAL INSTRUMENTS
The group’s financial instruments, other than derivatives, comprise irredeemable preference shares, borrowings, cash and various
items, such as trade debtors and trade creditors, that arise directly from its operations.The sole purpose of these financial instru-
ments is to finance the group’s operations.The group also enters into interest rate swaps to manage the interest rate risk arising
from its operations and sources of finance. It is the group’s policy not to trade in financial instruments.
Interest rate risk management
The group borrows at both fixed and floating rates of interest, it then uses interest rate swaps to generate the desired interest rate
profile and manage its exposure to interest rate fluctuations.The group’s policy is to maintain the majority of its net debt on a fixed
interest basis, using swaps where appropriate to manage this position. At the year end 61% (2002 - 72%) of the group’s financial
instruments, including irredeemable preference shares, were at fixed rates after taking into account interest rate swaps.
Liquidity risk management
It is group policy to ensure continuity of funding. At the year end 62% (2002 - 60%) of its financial instruments, including 
irredeemable preference shares, mature after five years.This percentage will increase following the refinancing completed in May
2003. Short-term flexibility is achieved using committed bank facilities and short-term deposits.
Interest rate risk profile of financial liabilities
The interest rate risk profile of the group’s financial liabilities at 31 March, after taking account of the interest rate swaps used to
manage the interest profile, was -
Floating rate Fixed rate
financial financial
liabilities liabilities T otal
£000 £000 £000
Financial liabilities 37,405 45,556 82,961
Irredeemable debentures - 1,570 1,570
Irredeemable preference shares - 12,500 12,500
At 31 March 2003* 37,405 59,626 97,031
Financial liabilities 38,587 45,806 84,393
Irredeemable debentures - 1,570 1,570
Irredeemable preference shares - 12,500 12,500
At 31 March 2002* 38,587 59,876 98,463
*Short-term debtors, creditors, cash and deposits have been excluded from the above disclosures.All the group’s creditors falling due
within one year (other than borrowings) are excluded from the above table either due to the exclusion of short-term balances or
because they do not meet the definition of a financial liability within FRS 13, such as tax balances.
At 31 March 2003, the group was party to one interest rate swap.This commenced in September 2001 and originally hedged for a
five year period £20m of borrowings that became floating rate at that time. In preparation for the refinancing completed in May 2003,
during the year, the Board redesignated the swap against a £10m variable rate bank loan and £10m of variable rate leases. At 31 March
2003, the variable rate bank loan had a maturity date approximately seven months less than the swap.As part of the refinancing the bank
loan was replaced in May 2003 by a similar loan with a 5 year maturity with a 0.075% increase in margin.The swap exchanges LIBOR
rates on a 3 monthly basis for a fixed rate of 7.72%.The Board’s current intention is to maintain a future interest rate management
profile consisting of financial liabilities at either fixed or index-linked rates amounting to 70% or more of such liabilities.
38 Bristol Water Holdings plc Report & Accounts 2003 Notes to the accounts
Weighted Weighted average
average period for which
interest rate rate is fixed
% Years
Financial liabilities* 7.6 3.8
Irredeemable debentures 4.0 -
Irredeemable preference shares 8.8 -
At 31 March 2003 7.7
Financial liabilities 8.0 4.6
Irredeemable debentures 4.0 -
Irredeemable preference shares 8.8 -
At 31 March 2002 8.0
*including £10m variable rate bank loan, hedged by the swap, for its remaining term as at 31 March 2003.
Floating rate liabilities bear interest at rates based on relevant LIBOR equivalents, which are fixed in advance for periods of up to
one year.
Interest rate risk of financial assets
The financial assets comprise only cash at bank and short-term deposits. Cash and short-term deposits are placed with banks and
building societies on a rolling basis of up to one year earning interest based on LIBID equivalents.
Borrowing facilities
At 31 March 2003, Bristol Water plc had a £5m undrawn, committed 364-day borrowing facility available in respect of which all
conditions precedent have been met. During May 2003, Bristol Water plc agreed a 5-year term £10m committed borrowing
facility in which all conditions precedent have been met.The facility is floating rate and incurs non-utilisation fees at market rates.
At the same time, Bristol Water plc cancelled the £5m 364-day facility referred to above.
Fair values of financial assets and financial liabilities
Although the group does not intend to trade in any financial instruments, the following table provides a comparison, by category,
of the carrying amounts and the fair value of the group’s financial assets and financial liabilities. Fair value is the amount at which a
financial instrument could be exchanged in an arm’s length transaction between informed and willing parties, other than a forced
or liquidation sale and excludes accrued interest. Where available, market values have been used to determine fair values.
Where market values are not available, fair values have been calculated by discounting expected cash flows at prevailing interest
rates.The table below summarises the methods and assumptions used for each category of financial instrument.
31 March 2003 31 March 2002
Book value Fair value Book value Fair value
£000 £000 £000 £000
Primary financial instruments held or
issued to finance the group’s operations:
Cash at bank 19,658 19,658 24,513 24, 513
Short-term borrowings (6,760) (6,760) (3,138) (3,138)
Long-term borrowings (77,771) (79,401) (82,825) (84,130)
Preference shares (12,500) (16,625) (12,500) (17,188)
Derivative financial instruments held
to manage the interest rate profile:
Interest rate swaps - (2,145) - (2,579)
(77,373) (85,273) (73,950) (82,522)
Bristol Water Holdings plc Report & Accounts 2003 39 Notes to the accounts
17. FINANCIAL INSTRUMENTS continued
Summary of methods and assumptions
Short-term borrowings The fair value of short-term borrowings approximates to the carrying amount because of the short 
maturity of these instruments.
Long-term borrowings The fair value of the group’s debentures has been calculated by discounting the expected cash flows at 
prevailing market rates including an estimated margin over gilts. Fixed rate bank loans and leases have 
been discounted on a similar basis but to LIBOR futures. In the case of floating rate facilities the fair 
values approximate to the carrying values as payments are reset to market rates at intervals of one year 
or less.
Preference shares The group’s preference shares are listed on the London Stock Exchange and their fair value is based on 
their quoted market price.
Interest rate swaps Fair value is based on the market price of comparable instruments at the balance sheet date.
Interest rate hedges
The group hedges interest rate risk using interest rate swaps.The table below shows the extent to which the group has unrecog-
nised off-balance sheet positions in respect of financial instruments used as hedges at the beginning and end of the year. It also
shows how they are expected to be included in the profit and loss account by year. Relative to interest rates at the year end, the
hedges will increase future interest costs as follows -
£000
Unrecognised positions on hedges at 31 March 2002 2,579
Arising in previous years included in 2003 income (645)
Positions not included in 2003 income
Arising before 1 April 2002 1,934
Arising in 2003 211
Positions on hedges at 31 March 2003 2,145
of which:
Expected to be included in 2004 income 804
Expected to be included in 2005 income or later 1,341
Currency exposures
The group has no material unhedged monetary assets and liabilities denominated in a currency different from the currency of
the particular operations.
18. PROVISIONS FOR LIABILITIES AND CHARGES
The total provisions for liabilities and charges are as follows:
2003 2002
£000 £000
Deferred taxation 19,189 14,926
Analysis of deferred taxation liability:
Accelerated capital allowances and capital element
of finance leases 35,173 32,840
Deferred income (2,529) (2,519)
Short-term timing differences (456) (698)
Unrelieved Advance Corporation T ax - (504)
32,188 29,119
Effect of discounting (12,999) (14,193)
Net provision 19,189 14,926
Analysis of deferred tax movement
2003 2002
£000 £000
Provision brought forward at 1 April 14,926 12,970
Charge to Profit and Loss Account 3,759 1,292
Advance Corporation Tax utilisation 504 664
Provision carried forward at 31 March 19,189 14,926
40 Bristol Water Holdings plc Report & Accounts 2003 Notes to the accounts
19. CALLED UP SHARE CAPITAL
The authorised and issued share capital of the company comprises shares of £1 par value -
Authorised Issued and fully paid
2003 2002 2003 2002
£000 £000 £000 £000
Ordinary shares 19,020 19,020 7,263 7,256
Non-voting ordinary shares 141 141 141 141
6.75% redeemable preference shares 5,839 5,839 - -
25,000 25,000 7,404 7,397
6,900 ordinary shares were issued fully paid during the year for a consideration of £63,967 under the Employee Savings Related 
Share Option Scheme.
The ordinary and non-voting ordinary shares rank pari passu in all respects except voting rights.
Options over 5,932 ordinary shares have previously been granted, exercisable by 2006, to executive directors of group companies.
Current options have been granted under the group’s Employee Savings Related Share Option Scheme as follows:-
Exercisable in At £10.48 At £6.40 At £8.18 At £10.16
2003 10,906 - - -
2003-04 - 76,269 - -
2004-05 - - 24,197 -
2005-06 - 23,607 - 22,923
2006-07 - - 13,851 -
2007-08 - - - 21,402
The directors are empowered to issue further shares in respect of employee benefit schemes.
20. MOVEMENT IN SHAREHOLDERS' FUNDS
Share Share Other Profit and Total T otal
capital premium reserves loss account 2003 2002
£000 £000 £000 £000 £000 £000
Group
Beginning of the year 7,397 6,023 4,024 55,119 72,563 66,227
Issue of new shares 7 57 - - 64 345
Profit for the year - - - 8,551 8,551 10,956
Dividends - - - (5,230) (5,230) (4,965)
Foreign currency
translation difference - - - (17) (17) -
End of year 7,404 6,080 4,024 58,423 75,931 72,563
Share Share Other Profit and Total T otal
capital premium reserves loss account 2003 2002
£000 £000 £000 £000 £000 £000
Company
Beginning of the year 7,397 6,023 - 8,143 21,563 19,649
Issue of new shares 7 57 - - 64 345
Profit for the year - - - 16,587 16,587 6,534
Dividends - - - (5,230) (5,230) (4,965)
End of year 7,404 6,080 - 19,500 32,984 21,563
21. MINORITY SHAREHOLDERS' NON-EQUITY INTEREST
The minority shareholders' non-equity interest in the group balance sheet represents £12,500,000 8.75% cumulative irredeemable
preference shares issued by Bristol Water plc.The minority interest in the profit and loss account is limited to the net dividend on
such preference shares.
Bristol Water Holdings plc Report & Accounts 2003 41 Notes to the accounts
22. COMMITMENTS AND CONTINGENCIES 
(a) Capital commitments, all relating to subsidiaries, at 31 March 2003 contracted for but not provided were £10,890,000 (2002 - 
£7,493,000).
(b) Subsidiaries have the following non-cancellable operating lease commitments payable during the next financial year -
2003 2002
£000 £000
Operating leases expiring -
Within one year, in respect of buildings - 5
Within one year, in respect of other plant and machinery 97 23
Within two to five years, in respect of buildings 55 27
Within two to five years, in respect of other plant and machinery 324 382
After five years, in respect of buildings 161 161
637 598
(c) Contingencies 
The company is a member of a VAT group and is jointly liable for the VAT liabilities of its principal subsidiary.The group has 
contingent liabilities in respect of contracts in the normal course of business. Other than as shown in these accounts the 
directors are not aware of any other contingent liabilities that require disclosure.
(d)The group and company have entered into performance bonding and guarantee arrangements in the normal course of 
business. The company continues to support the performance bond for 15mRM (Malaysian Ringitt, approximately £2.5m) 
provided by a bank and guaranteed by the company that was given in respect of the group’s obligations in relation to the 
Selangor, Malaysia project.The company also provides guarantees of subsidiary companies’ obligations under specific contracts.
23. PENSIONS
(a) Pension arrangements
Pension arrangements for the majority of the group’s employees are provided through the group’s membership of the Water
Companies' Pension Scheme (WCPS) which provides defined benefits based on final pensionable pay.The group’s membership
of WCPS is through separate sections.The principal section is the Bristol Water plc section.The assets of each section are held
separately from those of the group and are invested by discretionary fund managers appointed by the trustees of the Scheme.
All sections have been closed to new entrants and all new eligible employees are offered stakeholder pensions.
The financial position of the sections are determined by an independent actuary based on triennial valuations using the 
projected unit method.The assumptions that have the most significant effect on the results of the valuation are those relating
to the rate of return on section investments and the rate of increase in salaries, wages, pensions and dividends.The most recent
triennial actuarial valuation at 1 April 2002 assumed that investment returns would be 7.2% per annum pre-retirement and 5.2%
post retirement, salaries and wages would increase on average by 4.8% and pensions by 2.8%.
The actuarial valuation at 1 April 2002 showed the market value of section assets relating to the group as £103 million and that
the actuarial value of these assets represented 106% of accrued benefits allowing for future earnings increases.
The sections are currently invested primarily in equities.The investment strategy has been carefully examined and it has been
concluded that the appropriate long term strategy is to reduce the proportion of equities with a corresponding increase in
investments in bonds and other fixed income securities.The implementation of this change has been delayed until there is 
further recovery in equity market values.This policy has been agreed with the Trustees.
A significant increase in cash contributions, to approximately £1.6m per annum, to the WCPS sections effective from 1 April
2003 has been agreed with the Trustees.
(b) Accounting under SSAP24
Pension costs charged to the profit and loss account are computed in accordance with SSAP24 to spread the cost of pensions
over the employees' expected working lives with the company.
For the purpose of the SSAP24 charge the same assumptions have been made as for the triennial actuarial review, with the
exception of a more prudent assumption for future salaries and wages increases of 5.3% per annum for the Bristol Water plc
section.
The SSAP24 charge is broadly in line with the anticipated contribution rates effective from 1 April 2003.
The total pension charge for the year was £1,632,000 (2002 - £1,024,000) including £818,000 (2002 - £200,000) accrued in
accordance with SSAP24, bringing the total accrued at 31 March 2003 to £1,018,000 (2002 - £200,000). Past service surpluses are
amortised over the expected remaining service lives of members.There were no outstanding or prepaid contributions at the
balance sheet date.
42 Bristol Water Holdings plc Report & Accounts 2003 Notes to the accounts
(c) Accounting under FRS17 "Retirement Benefits"
Full implementation of FRS17 "Retirement Benefits" in the primary financial statements will not be mandatory for the group until
the year ending 31 March 2007.The following transitional disclosures are required.
Basis of valuation
The actuarial valuations of both the Bristol Water plc and Verdan Group Limited sections of WCPS were updated to 31 March
2003, by an independent qualified actuary, using the following major assumptions in accordance with the transitional arrangements
of FRS17.
Contributions
Contributions paid in the year ended 31 March 2003 were £814,000 (2002 - £824,000). In accordance with the terms of the
scheme, the contribution rates to the sub-sections during the year, and the increased rates effective from 1 April 2003 following
the 1 April 2002 actuarial valuation, expressed as a percentage of pensionable earnings, were:
2003 from 1.4.03
Bristol Water plc - main sub-section 9.8% 18.1%
- alternative sub-section Nil% 8.1%
Verdan Group Ltd and its subsidiaries - main sub-section 12.7% 18.4%
- alternative sub-section 4.4% 12.8%
Valuation base 2003 2002
RPI Inflation 2.5% 2.8%
Pension increases (RPI) 2.5% 2.8%
Pension increases (LPI) 2.4% 2.8%
Salary increases 4.5% 4.8%
Discount rate 5.6% 6.1%
Analysis of group WCPS pension section assets and liabilities 2003 2002
Expected long-term rate of return for:
Equities 7.5% 8.3%
Bonds 4.5% 5.2%
Corporate bonds 5.6% 6.1%
Property 6.0% 6.7%
Cash 3.8% 5.2%
Values at 31 March 2003 Values at 31 March 2002
Bristol Verdan Total Bristol Verdan Total
Water plc Group Ltd Water plc Group Ltd Total
£000 £000 £000 £000 £000 £000
Market value of fund assets
Equities 53,900 3,391 57,291 77,092 4,739 81,831
Bonds 5,400 342 5,742 11,198 688 11,886
Corporate bonds 7,000 442 7,442 4,445 273 4,718
Property 1,600 103 1,703 2,900 178 3,078
Cash 5,700 361 6,061 1,597 98 1,695
Total market value of assets 73,600 4,639 78,239 97,232 5,976 103,208
Present value of the 
sections’ liabilities (92,100) (7,150) (99,250) (82,882) (5,949) (88,831)
(Deficit)/surplus in the sections (18,500) (2,511) (21,011) 14,350 27 14,377
Deferred taxation 5,500 753 6,253 (4,305) (8) (4,313)
Net pension (liability)/asset (13,000) (1,758) (14,758) 10,045 19 10,064
Bristol Water Holdings plc Report & Accounts 2003 43 Notes to the accounts
23. PENSIONS continued
If the amounts shown on the previous page had been recognised in the financial statements, the group’s net assets and reserves at 
31 March 2003 would have been:
2003 2002
£000 £000
Net assets:
Net assets excluding pension (liability)/asset 88,431 85,063
Adjustment in respect of SSAP24 accrual 1,018 200
Deferred tax related to SSAP24 accrual (305) (60)
Pension (liability)/asset (14,758) 10,064
Net assets including pension (liability)/asset 74,386 95,267
Reserves:
Profit and Loss Account excluding pension (liability)/asset 58,423 55,119
Adjustment in respect of SSAP24 accrual 1,018 200
Deferred tax related to SSAP24 accrual (305) (60)
Pension (liability)/asset (14,758) 10,064
Profit and Loss Account including pension (liability)/asset 44,378 65,323
Analysis of charges to Profit and Loss Account had FRS17 been fully implemented:
Bristol Verdan T otal
Water plc Group Ltd
£000 £000 £000
Employer’s part of current service cost 1,700 262 1,962
Total operating charge 1,700 262 1,962
Analysis of amount credited/(charged) to other finance income
Bristol Verdan T otal
Water plc Group Ltd
£000 £000 £000
Expected return on pension sections’ assets 7,400 464 7,864
Interest on pension sections’ liabilities (5,100) (368) (5,468)
Net return 2,300 96 2,396
Analysis of amount recognised in the Statement of Recognised Gains and Losses (STRGL)
Bristol Verdan T otal
Water plc Group Ltd
£000 £000 £000
Actual return less expected return on pension sections’ assets (28,450) (1,823) (30,273)
Experience gains/(losses) arising on sections’ liabilities 2,100 (59) 2,041
Changes in assumptions underlying the present value of sections’ liabilities (7,800) (630) (8,430)
Actual (loss) recognised in STRGL (34,150) (2,512) (36,662)
Movement in sections’ pre-tax surplus/(deficit) during the year
Bristol Verdan T otal
Water plc Group Ltd
£000 £000 £000
Surplus in sections’ at beginning of the year 14,350 27 14,377
Movement in year:
Current service cost (2,100) (329) (2,429)
Aggregate contributions 1,100 207 1,307
Other financial income 2,300 96 2,396
Actuarial loss recognised in STRGL (34,150) (2,512) (36,662)
(Deficit) in sections’ at end of the year (18,500) (2,511) (21,011)
44 Bristol Water Holdings plc Report & Accounts 2003 Notes to the accounts
Bristol Verdan T otal
Water plc Group Ltd
£000 £000 £000
History of experience gain and losses
Difference between expected and actual return on sections’ assets:
Amount – (loss) (28,450) (1,823) (30,273)
Percentage of sections’ assets 39% 39% 39%
Experience gains and losses on sections’ liabilities
Amount – gain 2,100 (59) 2,041
Percentage of the present value of the sections’ liabilities 2% 1% 2%
Total amount recognised in STRGL
Amount – (loss) (34,150) (2,512) (36,612)
Percentage of the present value of the sections’ liabilities 37% 35% 37%
24. ADDITIONAL INFORMATION TO THE GROUP CASH FLOW STATEMENT
(a) Reconciliation of operating profit to net cash inflow from operating activities -
2003 2002
£000 £000
Operating profit 20,245 18,866
Depreciation and amortisation 14,287 13,993
Cash flow from operations 34,532 32,859
Working capital movements -
Stocks (171) 146
Debtors (4,775) (6,660)
Creditors (1,049) 3,639
Provisions - (313)
Net cash inflow from operating activities 28,537 29,671
(b) Reconciliation of net cash flow to movement in net borrowings -
2003 2002
£000 £000
Increase in cash in year 645 3,140
Cash used to repay leases 1,585 1,430
Cash used to repay loans 1,563 3,223
Cash from new borrowings (47) (13,159)
Cash from (decrease)/increase in liquid resources (5,500) 295
Increase in net borrowings resulting from cash flows (1,754) (5,071)
New loans not affecting cash flow (1,669) (1,731)
Net borrowings, beginning of year (61,450) (54,648)
Net borrowings, end of year (64,873) (61,450)
(c) Analysis of changes in net borrowings during the year -
Opening Cash flows Debt New debt Closing net
net in year maturities not affecting borrowings
borrowings cashflow*
£000 £000 £000 £000 £000
Cash 5,513 645 - - 6,158
Short-term deposits 19,000 (5,500) - - 13,500
Cash at bank and on deposit 24,513 (4,855) - - 19,658
Borrowings due within one year (3,138) 3,148 (5,101) (1,669) (6,760)
Borrowings due after one year (82,825) (47) 5,101 - (77,771)
Net borrowings (61,450) (1,754) - (1,669) (64,873)
*Represents deferred payment terms for capital expenditure relating to the joint billing arrangements established with Wessex Water.
Bristol Water Holdings plc Report & Accounts 2003 45 Notes to the accounts
25. RELATED PARTY TRANSACTIONS
In the ordinary course of business, group companies have contracted on an arm’s length basis with joint ventures.Transactions with
joint ventures during the year comprised -
BWBSL PABW Purton Watergrid
Carbons Ltd Ltd
£000 £000 £000 £000
Purchases from 2,859 - 180 -
Services rendered to 421 1,443 50 33
Balance at year end due from 2,004 616 - 33
Balance at year end due to 1,152 - 265 -
26. POST BALANCE SHEET EVENTS
During April 2003, all the ordinary issued shares of Bristol Water plc were transferred to Bristol Water Core Holdings Limited, a
wholly-owned subsidiary of the ultimate parent company, Bristol Water Holdings plc.
During May 2003, Bristol Water plc entered into a new financing structure. Details are set out in the Operating and Financial Review
and in Note 17 to the Accounts.
46 Bristol Water Holdings plc Report & Accounts 2003 Independent auditors’ report to
the shareholders of Bristol Water
Holdings plc
We have audited the financial statements which comprise the accounting policies, the profit and loss account, the balance sheet, the cash
flow statement, the statement of total recognised gains and losses and the related notes.We have also audited the disclosures required
by Part 3 of Schedule 7A to the Companies Act 1985 contained in the Remuneration Committee Report ("the auditable part").
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the annual report, the Remuneration Committee Report and the financial statements in 
accordance with applicable United Kingdom law and accounting standards are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements and the auditable part of the Remuneration Committee Report in accordance with
relevant legal and regulatory requirements and United Kingdom auditing standards issued by the Auditing Practices Board.This report,
including the opinion, has been prepared for and only for the company’s members as a body in accordance with Section 235 of the
Companies Act 1985 and for no other purpose.We do not, in giving this opinion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior 
consent in writing.
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and
the auditable part of the Remuneration Committee Report have been properly prepared in accordance with the Companies Act 1985.
We also report to you if, in our opinion, the Directors' Report is not consistent with the financial statements, if the company has not kept
proper accounting records, if we have not received all the information and explanations we require for our audit, or if information 
specified by law regarding directors' remuneration and transactions is not disclosed.
We read the other information contained in the annual report and consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the financial statements.This other information comprises the Directors' Report,
the Chairman's Statement, the Chief Executive’s Report, the Operating and Financial Review, the Corporate Governance Statement, the
Corporate Social Responsibility statement and the Remuneration Committee Report.
We review whether the Corporate Governance Statement reflects the company's compliance with the seven provisions of the Combined
Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not.We are not required
to consider whether the board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the
group's corporate governance procedures or its risk and control procedures.
Basis of audit opinion
We conducted our audit in accordance with auditing standards issued by the Auditing Practices Board. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the 
significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting
policies are appropriate to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order 
to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation
of information in the financial statements.
Opinion
In our opinion :
•
the financial statements give a true and fair view of the state of affairs of the company and the group at 31 March 2003 and of the 
profit and cash flows of the group for the year then ended;
•
the financial statements have been properly prepared in accordance with the Companies Act 1985; and
•
those parts of the Remuneration Committee Report required by Part 3 of Schedule 7A to the Companies Act 1985 have been properly 
prepared in accordance with the Companies Act 1985.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Bristol
29 May 2003
Note: The maintenance and integrity of the Bristol Water website is the responsibility of the directors; the work carried out by the auditors 
does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have 
occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing 
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Bristol Water Holdings plc Report & Accounts 2003 47 Financial history
PROFIT AND LOSS ACCOUNTS
Years ended 31 March 2003 2002 2001 2000 1999
£000 £000 £000 £000 £000
Group turnover 112,332 129,118 101,488 85,976 79,891
Operating profit 20,409 19,023 14,095 15,228 20,437
Profit/(loss) on disposals 545 776 380 (157) 143
Net interest (4,861) (4,224) (4,036) (4,351) (3,876)
Profit before taxation 16,093 15,575 10,439 10,720 16,704
Taxation (6,448) (3,525) (3,582) (4,721) (4,509)
Profit after taxation 9,645 12,050 6,857 5,999 12,195
Minority interests (1,094) (1,094) (1,094) (1,094) (1,094)
Dividends paid and proposed (5,230) (4,965) (4,711) (4,528) (4,528)
Profit retained 3,321 5,991 1,052 377 6,573
BALANCE SHEETS 2003 2002 2001 2000 1999
At 31 March £000 £000 £000 £000 £000
Fixed assets 186,176 181,125 171,799 170,272 164,182
Net current assets/(liabilities) 7,644 10,085 (224) 77 324
Total assets less current liabilities 193,820 191,210 171,575 170,349 164,506
Debt due after one year (77,771) (82,825) (71,098) (71,342) (69,153)
Other liabilities (8,429) (8,396) (8,780) (9,372) (8,254)
Provision for deferred tax (19,189) (14,926) (12,970) (11,960) (10,080)
Net assets 88,431 85,063 78,727 77,675 77,019
CASH FLOW 2003 2002 2001 2000 1999
Years ended 31 March £000 £000 £000 £000 £000
Cash flow from operations 28,537 29,671 32,062 28,273 32,712
Dividends received from joint ventures 129 ----
Interest and non-equity dividends paid (6,375) (5,332) (4,827) (5,242) (5,211)
Tax and ACT paid (2,978) (2,183) (3,192) (2,126) (1,783)
Capital expenditure (16,124) (22,899) (15,189) (18,033) (30,751)
Acquisitions and disposals 13 113 (68) 1,141 (355)
Dividends paid on equity shares (5,020) (4,786) (4,579) (5,890) (2,927)
Cash flow before management of liquid
resources and financing (1,818) (5,416) 4,207 (1,877) (8,315)
Management of liquid resources 5,500 (295) (15,901) (489) (377)
Net (decrease)/increase in financing (3,037) 8,851 2,821 (1,385) 14,436
Increase/(decrease) in cash 645 3,140 (8,873) (3,751) 5,744
RATIOS AND STATISTICS 2003 2002 2001 2000 1999
Operating profit margin 18% 15% 14% 18% 26%
Interest cover (times) 4.2 4.5 3.5 3.5 5.3 
Earnings per ordinary share 115.5p 148.7p 78.3p 66.6p 150.9p
Fully diluted earnings per share 114.5p 147.5p 78.0p 66.3p 149.5p
Ordinary dividend per share 70.6p 67.2p 64.0p 61.5p 61.5p
Ordinary dividend cover (times) 1.6 2.2 1.2 1.1 2.5 
Net gearing ratio 73% 72% 70% 76% 70%
Notes - All comparative data have been restated where necessary to conform with accounting practices adopted for the first time in the 
2002 financial statements.
All data include exceptional items where relevant.
48 Bristol Water Holdings plc Report & Accounts 2003 Number of Holding %
shareholders
ORDINAR Y VOTING SHARES
By size of holding -
Up to 100 shares 993 44,202 0.6
101 to 1,000 shares 1,542 525,609 7.2
1,001 to 10,000 shares 259 730,862 10.1
Over 10,000 shares 61 5,962,314 82.1
T otal 2,855 7,262,987 100.0
By type of shareholder 
Private individuals 2,351 636,161 8.8
Institutions, nominees and banks 464 6,288,766 86.6
Other companies 40 338,060 4.6
T otal 2,855 7,262,987 100.0
Analysis of shareholders
at 31 March 2003