Report and Accounts 2003 Contents
1 Highlights of the Year
2 Chairman’s Statement
4 Chief Executive’s Review
14 Financial Review
18 Directors’ Biographical Details
20 Directors’ Report
22 Corporate and Social Responsibility
24 Corporate Governance
26 Remuneration Report
32 Directors and Advisers
33 Statement of Directors’ Responsibilities
34 Independent Auditors’ Report
36 Consolidated Profit and Loss Account
37 Consolidated Balance Sheet
38 Company Balance Sheet
39 Supplementary Statements
40 Consolidated Cash Flow Statement
41 Notes to the Cash Flow Statement
42 Notes to the Accounts
62 Five Year Summary
63 Shareholder Analysis
64 Financial Calendar South Staffordshire Group Plc Report & Accounts 2003
Highlights of the Year – 1
• 54% increase in Support Services operating profit
†
which now represents
two-thirds of the Group.
• Home Service shows outstanding growth with a 37% increase in
operating profit
†
and a 30% increase in policies to 2.4 million.
• Commercial outsourcing continues to benefit from its investment in its
longer term customer relationships.
• The three significant acquisitions in the year, Regency, Highway and
Middleton contributed £6.2m to operating profits
†
.
• South Staffordshire Water continues to provide a steady profit stream
from a reduced equity base.
• £12m cash generated after capital expenditure, tax and dividends, with
£85m bond issue financing £84m spent on acquisitions.
2003 2002 Increase 
Turnover £265.8m£177.1m 50% 
Profit before tax excluding goodwill 
and exceptional item* £44.5m £36.4m  22% 
Profit before tax £38.6m £34.5m 12%
Earnings per share* 45.9p 39.6p  16% 
Dividend per share 18.0p 16.1p 12%
Highlights of the Year
Profit Before Tax* (£m)
45
40
35
30
25
20
1999 2000 2001 2002 2003
16% compound growth in profit
before tax* over past five years
*
Excluding goodwill and exceptional item as shown on page 36
†  Excluding goodwill as shown on page 44 South Staffordshire Group Plc Report & Accounts 2003
2 – Chairman’s Statement
Lindsay Bury – Chairman
The Group had a particularly successful year
achieving 26% organic growth in operating profits
†
from its Support Services businesses combined
with a contribution of £6.2m from the acquisitions
in the year. 
During the year we saw a substantial increase in the
liquidity of the Group’s shares following the
successful placing of 40% of our stock, owned for
many years by Vivendi and Axa, with a range of
institutional investors. 
Group Results
In the year ended 31 March 2003 the Group’s
turnover (including share of joint ventures) increased
by 50% to £265.8m (2002: £177.1m). Profit before
tax, goodwill and exceptional item* has increased
by 22% to £44.5m (2002: £36.4m). This comprises
a 54% increase in operating profit
†
from Support
Services and a 2% increase in Regulated Water
Supply profits. Earnings per share (excluding
goodwill and exceptional item)* for the year have
increased by 15.9% to 45.9p (2002: 39.6p). The
Board is proposing a final dividend per share of
12.4p making a total for the year of 18.0p (2002:
16.1p), an increase of 11.8%. Following the
acquisitions, which increased debt by £84m, the
balance sheet remains strong with net debt at 31
March 2003 of £103.1m (2002: £28.6m) and
interest cover* of 8.5 times.
HomeServe
The HomeServe businesses have more than
doubled turnover to £121m (2002: £60m), with
operating profits
†
increasing by 70% to £24.0m
(2002: £14.1m). This represents 37% organic profit
growth in the existing HomeServe businesses
together with a profit contribution of £4.7m from
Regency and Highway, which were acquired during
the year.
Home Service has increased the number of policies
in force by 30% to 2.4 million, which represents the
largest annual increase since the business started.
This reflects a combination of growth in the core
plumbing product, new products introduced during
the year, together with greater use of outbound
telesales for customer acquisition and renewal rates
being maintained at 86%.
Regency, which was acquired in May 2002 and
provides underwritten furniture warranties and
repairs to retailers and manufacturers, has achieved
strong sales growth in the year. It has significantly
expanded its employed repair network and
successfully implemented a new warranty
programme for Harveys, one of its major retail
customers.
Chairman’s Statement
* Excluding goodwill and exceptional item as shown on page 36
† Excluding goodwill as shown on page 44 South Staffordshire Group Plc Report & Accounts 2003
Chairman’s Statement – 3
Highway, which was acquired in July 2002 and
provides emergency repair services to insurers, has
achieved a reduced profit compared to last year.
Highway had increased its cost base and
operational capacity in anticipation of continuing to
win new customers. New customers have been
added but not as quickly as anticipated. This has
been combined with a reduction in average job
values. This has reduced profits in the short term
and has led to us putting measures in place to
create a more flexible cost base.
Commercial Outsourcing
The Commercial Outsourcing businesses have
grown turnover by 34% to £104m. Operating profit
†
has increased by 25% to £10.0m, which includes a
contribution of £1.5m from the acquisition of
Middleton Doorman.
OnSite has achieved significant growth in its long
term business with Thames Water and London
Underground. Additionally, Middleton Doorman has
performed well since acquisition and has broadened
the division’s customer base and service offering.
The Echo joint venture with South West Water is
now well established and our Rapid software has
been implemented. In addition, our mailing services
business has achieved improved margins during the
year.
Regulated Water Supply
Operating profits from Regulated Water Supply have
increased by 2% to £16.5m (2002: £16.2m) on
turnover of £59m. This compares to an RPI of
0.9%, which was used as the basis for increasing
charges for 2002/03. The business continues to
achieve efficiency gains and deliver the highest
levels of service. The business remains on course to
meet all of its regulatory targets, including
demanding efficiency savings, which apply until the
next price review in 2005. The Water Company
issued an unsecured 23 year index-linked bond of
£85m which increased debt to approximately 65%
of the Regulated Asset Value, thereby reducing its
cost of capital.
Prospects
The Group’s strategy for growth remains to develop
as a Support Services business through both its
HomeServe and Commercial Outsourcing activities.
It will continue to benefit from the increasing
demand for a broad range of assistance services
into the home and the trend to outsourcing in both
industry and the utilities market.
Significant opportunities for growth exist in all areas
of our Support Services businesses. Home Service
will continue to develop new products and improve
market penetration. Regency’s priorities will include
growing its repair business and developing new
retail warranty products. Within Highway our focus
will be on improving operational efficiency and
developing a plumbing service for its insurance
customer base. Commercial Outsourcing is well
positioned to build on its established long term
customer relationships. The Regulated Water
Supply business will continue to provide high levels
of service at low charges. 
Overall the Group should benefit from continued
strong demand for its Support Services activities,
together with stable returns from Regulated Water
Supply.
Lindsay Bury
Chairman
3 June 2003 South Staffordshire Group Plc Report & Accounts 2003
4 – Chief Executive’s Review
Our partners include the majority of the UK water
and power utilities, leading furniture retailers,
appliance manufacturers and household insurers.
HomeServe has combined significant organic profit
growth with two major acquisitions, Regency and
Highway. In addition, we made a smaller acquisition
in March 2003, Servowarm, enhancing the delivery
of our gas boiler warranty and emergency repair
business. In total this year we have invested £70m
in cash with estimated deferred consideration of
£26m based on future profitability.
Home Service is the market leader in the provision
of plumbing and drainage and electrical wiring cover
to the domestic market. Our customers include the
majority of UK water, gas and electricity companies.
Home Service had a record year for policy growth,
with the number of policies increasing by 30% to
2.4 million; 1.73 million plumbing policies, 0.55
million electrical and 0.12 million other policies
including domestic heating. This is the largest
increase in the number of policies since the
business started and policy growth rates in excess
of 25% have now been maintained for the ninth
successive year. Further growth will come from
increasing our market penetration with the existing
plumbing product together with cross selling other
domestic products.
Home Service has increased its outbound telesales
capability to over 140 full time staff. This has been a
significant contributor to our record policy growth at
acquisition costs lower than those for direct mail
marketing. Home Service launched a new product
in the year ‘Water Supply Pipe Cover’, and sold
157,000 policies, highlighting the success of cross
selling to existing members.
Home Service is successfully developing its
manufacturer warranty operation, increasing
warranty card return rates and take up of extended
warranties. In addition to Ideal Boilers, Home
Service is now also working for Mira, one of the
largest UK shower manufacturers.
Home Hotline continues to operate claims handling
and job deployment on behalf of Direct Line for its
‘Home Response 24’ product and this year was
appointed to run the helpline for 1.6 million Direct
Line household insurance policyholders.
Growth in our joint venture business with Generale
des Eaux, based in France, is encouraging, with
over 60,000 plumbing policies. We have achieved
good take up rates, particularly for the supply pipe
product, at acquisition costs which are now
comparable with the UK.
HomeServe plc, the new name for our Home
Service businesses, is one of the UK’s largest
providers of home warranties and assistance
services to major business partners, with a total of
over 9.5 million policies.
Chief Executive’s Review South Staffordshire Group Plc Report & Accounts 2003
<Section Title> – 5
Far Left: Brian Whitty - Chief Executive, South Staffordshire Group Plc
Left: Home Service head office in Walsall
Above: Highway plumber unblocking a drain for a Home Service customer Above: Regency, deploying work to their national employed cleaning network
Right: Servowarm engineer repairing a policyholder’s boiler
Far right: Highway, the UK’s leading provider of emergency repair services to household insurers South Staffordshire Group Plc Report & Accounts 2003
Chief Executive’s Review – 7
Regency is the market leader in the provision of
underwritten furniture warranty and repair services
on behalf of retailers and manufacturers, and now
has over 7 million policies in issue. Since acquisition
in May 2002, Regency has performed well,
achieving an operating profit of £4.0m. In January
2003, Harveys announced that they were
discontinuing their structural warranty product,
which Regency have now replaced with an
alternative extended warranty product. Regency has
also increased its base of directly employed
upholstery repair and cleaning operatives to over
100 enabling it to deliver the high quality service
that warranty buyers expect.
In July 2002, we completed the acquisition of
Highway, the UK’s leading provider of emergency
glass, frame, lock and garage door repair and
replacement services to household insurers. The
acquisition of Highway provides HomeServe with a
market leading position with household insurers and
widens the range of domestic emergency services
we provide. 
Highway achieved a profit of £0.7m in the nine
months to 31 March 2003, compared to £2.4m
over the equivalent period last year. The reduced
profit reflects an increase in costs and a reduction in
average job values. The cost base has increased by
£0.7m which increased our operational capacity in
anticipation of new insurance customers. Whilst
slow to develop, we have now won important new
customers, including Prudential, McDonalds and
Marks and Spencer. Prudential is now one of
Highway’s ten largest customers. There has also
been a 5% fall in average job values, with an impact
of £0.6m. Highway has seen a reduction in higher
value storm damage related work following the
milder weather this year compared to normal.
In order to ensure that we can better meet these
peaks and troughs in demand, we are reorganising
elements of the business and taking steps to
reduce the operating cost base. We are
reorganising the national branch network to reduce
cost and improve efficiency. In addition, we have
strengthened the existing management team,
appointing a Chief Executive, with a proven track
record in this industry, who will join in June 2003.
Highway has continued to develop its employed
plumbing and drainage network and a number of
insurance customers are currently trialling this
service. If successful, this service will represent a
significant new market for Highway.
In March 2003, we acquired Servowarm, which
provides home assistance policies for domestic
boiler breakdowns, supported by a service and
repair operation. Servowarm complements Home
Service’s existing gas heating policy business and
provides a high quality network of 115 employed
domestic gas engineers. Servowarm’s engineers are
trained to repair a wide range of manufacturers’
boilers and will work alongside our existing
subcontract network. 
We are confident that our HomeServe businesses
are well positioned to achieve further significant
growth. We will continue to add new customers and
affinity partners and develop new products and
services. Our UK markets still have significant
potential and we will continue to develop our
international presence in a low risk and cost
effective manner. South Staffordshire Group Plc Report & Accounts 2003
8 – Chief Executive’s Review
OnSite has again seen a doubling in business with
Thames Water from £3.6m to £8m, for whom we
provide a range of planned and reactive drainage
services on the sewerage networks that serve
London and the home counties. This growth follows
a substantial investment last year by OnSite in a
dedicated call centre, operating equipment and
employee training to support the Thames contract. 
The division has also seen a significant increase in
the provision of planned and reactive drainage
services for the London Underground rail network
with turnover increasing from £4.6m to £6.4m.
Following the restructuring of the London
Underground, we are now working closely with both
Tubelines and Metronet, the new PPP consortia. 
We added specialist water treatment to the
division’s offering following the transfer of the water
testing and dosing operations from South
Staffordshire Water into OnSite. This business has
performed well during the year, winning work from
other Water Companies, the Coal Authority and the
Environment Agency.
In order to broaden our already established
industrial and commercial client base and to
increase our service offering, we acquired Middleton
Doorman in August 2002. The Company provides
specialist maintenance, mechanical and electrical
services and automatic door and access
maintenance to commercial and public sector
clients.
Middleton is contracted to provide specialist
maintenance services to the London Underground
rail network, thereby increasing the range of
services we provide to this client. Middleton also
has an established and strong relationship with the
City of Birmingham, where we provide significant
M&E services for their public buildings. Since
acquisition, Middleton has successfully won a
number of important new clients, including Argos,
Nationwide Building Society and The Big Food
Group, whilst continuing to provide a
comprehensive service to Tesco Stores.
We continue to see growth opportunities for OnSite.
We have strengthened our senior management
team and we are confident that we have the skills
and resources which will enable us to continue to
build upon our success in the utility and commercial
outsourcing market.
OnSite provides a comprehensive range of
infrastructure maintenance services to major utilities,
public authorities and a wide commercial and
industrial client base, through long term partnerships
and contractual relationships with its customers.  South Staffordshire Group Plc Report & Accounts 2003
<Section Title> – 9
Far left: OnSite provide specialist services including CCTV surveys of drains
Left and above: Middleton provide specialist maintenance services to commercial
and public sector clients South Staffordshire Group Plc Report & Accounts 2003
10 – Chief Executive’s Review
The Customer Solutions division provides a range of
services to companies to assist them in managing
their customer contact.
Echo
Echo Managed Services specialises in the provision
of customer management services such as billing,
debt collection and contact management. Echo was
established in 2001 to provide services to its initial
customers, South Staffordshire Water and Severn
Trent. Echo South West, our joint venture with
South West Water to provide customer contact and
billing, has performed well during the year. During
this first full year of trading the joint venture has
delivered efficiency savings and maintained high
levels of customer service.
Last year we added Green Flag and Britannic
Assurance as customers and we have continued to
develop these relationships. New clients won during
the year include Spring Recruitment and East
Devon District Council in addition to a number of
short term contracts. 
Echo has focused on developing niche offerings,
including recruitment screening, customer
satisfaction surveys and outbound telemarketing,
where we can add specialist skills and value. We
have consistently demonstrated to our customers
that we can achieve high service levels as well as
cost reductions for these outsourced services. 
Rapid
During the year South West Water completed the
implementation of our Rapid software product. The
software was used successfully in the annual billing
of South West Water’s unmeasured customer base
during the year.
Our support to Bristol and Wessex Billing Services
continued with the completion of the second phase
of software implementation, now extended to
include the measured customer base. The system is
now used by the joint billing venture to bill the full
customer base of Bristol Water and Wessex Water.
Rapid software is now used to bill over 3 million UK
utility customers. We will continue to develop the
product during the coming year to meet the
requirements of our existing clients. The sales and
implementation cycle for Rapid’s products is
typically over 12 months and we do not expect any
significant licence fee revenue in the coming year. 
Mail Solutions
Our mailing services business has improved its
margins despite operating in a highly competitive
market. We have achieved this through our
continued focus on efficiency and quality.
We provide services to high profile customers
including HSBC, Barclaycard, Lloyds Bank and
Npower and we have supplied tickets for major
sporting events such as the Champions League
final and the FA Cup final. 
This market will continue to be highly competitive.
However, we are confident that we are well
positioned to continue to improve our overall trading
performance. Far left: Mail Solutions specialises in an efficient and quality service
Left: Echo, providing customer management services from its Walsall call centre
Above: Rapid software is now used to bill over 3 million UK utility customers Above: Using remote meter reading technology to improve service standards and achieve efficiency savings
Right and far right: Detecting leaks to ensure demanding leakage targets are met South Staffordshire Group Plc Report & Accounts 2003
Chief Executive’s Review – 13
South Staffordshire Water continues to be at the
forefront of the Water Industry, delivering exceptional
value for money through a combination of low bills
and high levels of service.
The last few years have seen significant change,
including outsourcing of customer services to Echo
and laboratory analysis to Severn Trent, together
with the consolidation of our divisional offices. Each
of these initiatives has been successful, both in
improving service standards to customers and
achieving cost reductions. We are continuing to
make excellent progress towards Ofwat’s efficiency
targets to reduce operating costs in the year and
are on track to meet Ofwat’s target reduction in
operating expenditure for the period 2000 to 2005.
Our domestic customers continue to pay the
second lowest charge in England and Wales with
annual bills of £86, which when combined with
Severn Trent’s sewerage charge, which we collect
on their behalf through our contract with Echo,
means that our domestic customers benefit from
the lowest overall charge in England and Wales. In
addition, our large industrial clients enjoy the lowest
volumetric rates in the country. We achieved water
quality compliance levels of 99.9%, amongst the
very highest in the Industry. Our demanding leakage
targets were also achieved. 
Ofwat’s latest annual review of customer service
again reported that all of the company’s service
levels were in the highest category and the Water
Company was ranked second highest in overall
performance assessment for the industry for
2001/02. Levels of service for 2002/03 have seen
further improvement.
The Water Company raised £85m through the issue
of an unsecured index linked bond. This has
enabled the business to improve its capital structure
by funding the repurchase of Water Company
shares from the Group. Gearing within the Water
Company has now increased to 65% of Regulated
Asset Value.
The Company has seen another substantial year of
capital investment, primarily on the extensive
programme of water treatment upgrades agreed
with the Drinking Water Inspectorate together with
increasing capacity at its second largest treatment
works.
2003 will be an important year as we move towards
the setting of prices for the period 2005 to 2010.
We will submit the Company’s draft Business Plan
to the Regulator in August 2003 in anticipation of a
final determination in November 2004.
Brian Whitty
Group Chief Executive
3 June 2003 South Staffordshire Group Plc Report & Accounts 2003
14 – Financial Review
Financial Review
Andrew Belk - Group Finance Director
Group Results
Turnover for the year (including share of joint
ventures) increased by 50% to £265.8m (2002:
£177.1m), including organic growth of 14%. This
reflects strong growth in HomeServe with turnover
doubling to £121.3m (2002: £60.3m), including
£44.6m from the acquisitions in the year. The
existing HomeServe business achieved organic
growth in turnover of 27% to £76.7m (2002:
£60.3m), with a 30% increase in policies to 2.4m
(2002: 1.85m).
Commercial Outsourcing increased turnover by
£26.2m to £104.0m, a 34% increase, including
£19.2m from Middleton Doorman. OnSite achieved
13% organic growth, benefitting from increased
activity with Thames Water and London
Underground, with an increase of 4% in Customer
Solutions.
Regulated Water Supply turnover was marginally
lower at £58.8m (2002: £59.1m) reflecting the
increase in RPI of 0.9% which was used as the
basis for increasing charges for the year and the
Company’s K factor of –1%.
Group operating profit before goodwill
†
increased by
32% to £50.5m (2002: £38.3m), including 16%
organic growth. HomeServe profits
†
increased 70%
to £24.0m (2002: £14.1m), with a £4.0m
contribution from Regency, £0.7m from Highway
and 37% organic growth from Home Service, which
increased its margin to 25% (2002: 23%). The
growth in Home Service is after increasing the
investment in overseas operations to £0.7m (2002:
£0.2m).
Profits
†
from Commercial Outsourcing increased by
25% to £10.0m (2002: £8.0m), including £1.5m
from Middleton Doorman. Organic profit growth of
6% reflects the continued investment in long term
relationships within OnSite and Echo, with margins
being maintained at 10%.
Regulated Water Supply achieved a 2% increase in
operating profit despite lower turnover and a higher
depreciation charge, with the continuing focus on
cost control resulting in further efficiency savings in
the year. 
Profit before tax excluding goodwill and exceptional
costs* was £44.5m, an increase of 22% (2002:
£36.4m). This was after an increase in the net
interest charge to £6.0m (2002: £1.9m), reflecting
the acquisitions in the year.
The increased goodwill charge of £6.0m (2002:
£1.3m) is due to the acquisitions. There were no
exceptional costs in the year (2002: £0.6m loss on
sale of subsidiary).
Taxation
The effective rate of tax for the year, based on
profits excluding goodwill and exceptional costs,
was 28.7% compared to 27.0% for the previous
year. The increased rate was largely attributable to
the impact of the acquisitions in the year with the
Group’s future tax rate likely to be closer to the
standard rate of 30%.
Turnover for the year increased by 50% to £265.8m.
Profit before tax* was £44.5m, an increase of 22%. South Staffordshire Group Plc Report & Accounts 2003
Financial Review – 15
Earnings per Share 
Earnings per share, excluding goodwill and
exceptional item*, was 45.9p, 15.9% ahead of last
year (2002: 39.6p). The increase in earnings is lower
than the growth in profit before tax due to the
higher minority interest charge reflecting the growth
in HomeServe and the increase in the tax rate.
Compound annual earnings growth, excluding
goodwill and exceptional item, over the last five
years is 12.8% with annual operating profit growth
of 35% in Support Services and 2.5% in Regulated
Water Supply over the same period. 
Dividends
The Board is proposing a full year dividend of 18.0p
(2002: 16.1p), an increase of 11.8%, with dividend
cover* of 2.5 times. The Regulated Water business
has declared a reduced dividend for the year of
£4.8m (2002: £6.1m) as a result of an increased
interest charge following the bond issue. 
Acquisitions
The Group has completed a number of significant
acquisitions in the year, investing £84.1m in cash
and assumed debt, together with estimated
deferred consideration of £26.4m based on future
profitability.
47% HomeServe (£24.0m)
20% Commercial Outsourcing (£10.0m)
33% Regulated Water (£16.5m)
Divisional Contribution 
to Operating Profit
†
(%)
46% HomeServe (£121.3m)
32% Commercial Outsourcing (£85.7m)
22% Regulated Water (£58.8m)
Divisional Contribution 
to Turnover
(excluding inter-division) (%)
* Excluding goodwill and exceptional item as shown on page 36
† Excluding goodwill as shown on page 44 South Staffordshire Group Plc Report & Accounts 2003
16 – Financial Review
HomeServe acquired Regency Financial Holdings
Plc on 14 May 2002 for a consideration of £45.3m
(including costs) of which £6.7m is deferred.
Highway Emergency Services Limited was acquired
on 5 July 2002 for a consideration of £48.5m
(including costs) including £19.5m payable on
deferred terms dependent on future profitability, of
which £13.5m is payable after 31 March 2006.
HomeServe also purchased Servotomic Limited for
£2.4m on 3 March 2003 and the 40% minority
holding in Home Hotline Limited for £1.9m on 1
April 2002.
On 1 August 2002, OnSite acquired Middleton
Maintenance Services Limited for a consideration of
£15.8m (including costs).
Goodwill on these acquisitions totalled £112m and
is being amortised over its estimated useful life of
20 years.
Financing
During the year South Staffordshire Water PLC
successfully issued an unsecured 23 year index-
linked bond of £85m at a coupon of 3.75% based
upon a rating by Standard and Poor’s of A-. £65m
of the funds raised were used to repurchase shares
in the Water Company from the Group, thereby
increasing net debt in the business to £96m, being
65% of the Regulated Asset Value. The level of debt
is expected to increase to approximately 70% of
RAV next year, before declining thereafter, reflecting
the timing of capital expenditure.
The Support Services businesses continue to be
cash generative with net debt at 31 March 2003 of
£7m and interest cover* of over 25 times. The
HomeServe acquisitions in the year were financed
by loans from the Group on commercial terms,
resulting in net debt in HomeServe (including these
Group loans) of £51m.
The Group now has in place total bank facilities and
bond financing of £147m. A significant proportion of
this is long term to reflect the nature of the assets in
the Water business and to support the ongoing
development of the Group.
The bond issue has reduced the Group’s exposure
to potential increases in short term interest rates
with inflation risk on the cost of the bond being
effectively hedged against regulated water revenues,
which are also linked to RPI. 
Capital expenditure
Capital investment in the year, net of capital
contributions, totalled £27.7m (2002: £33.2m). This
included further significant investment in the
regulated water business of £21.3m (2002:
£22.4m), together with £3.0m in HomeServe on IT,
telephony systems and equipment to support future
growth and £3.4m in Commercial Outsourcing,
principally to support growth in OnSite. Capital
expenditure in the Water business is expected to
increase in 2003/4 before reducing significantly in
2004/5.
Cash Flow and Borrowings
The Group generated cash of £66.6m in the year
from operating activities. After capital expenditure of
£26.0m (net of capital contributions and sale
proceeds) and interest, tax and dividends totalling
£29.5m, this resulted in a net cash inflow of
£12.2m, compared to a cash outflow of £4.4m in
the previous year. The cash outflow in respect of
acquisitions was £78.9m and with £80.0m raised
from financing resulted in an increase in net debt in
the year of £74.5m to £103.1m at 31 March 2003
(2002: £28.6m).
Working capital in the year increased by £1.0m
reflecting strong working capital management. South Staffordshire Group Plc Report & Accounts 2003
Financial Review – 17
Pensions
Pension costs relating to the Group’s defined
benefit pension scheme continue to be accounted
for in accordance with SSAP 24. The actuarial
valuation of the scheme at 1 April 2002 showed a
surplus of £4.9m. The additional disclosures
presented under the second year of transitional
arrangements for FRS 17, Retirement Benefits,
show a pension deficit, net of deferred tax, of
£7.8m (2002: £10.8m surplus). This arises from the
recent stock market falls and its calculation is not
considered reflective of the long term funding of the
scheme.
There have been no other new accounting
standards which have had an impact on the
financial statements for the year.
Andrew Belk
Group Finance Director
3 June 2003
Earnings per Share (p)
(excluding goodwill and exceptional item)
50.0
45.0
40.0
35.0
30.0
25.0
1999 2000 2001 2002 2003
Dividend per Share (p)
18.0
17.0
16.0
15.0
14.0
13.0
12.0
11.0
10.0
1999 2000 2001 2002 2003 South Staffordshire Group Plc Report & Accounts 2003
18 – Directors’ Biographical Details
Directors’ Biographical Details
Back Row (left to right); Robert Harley, John Harris, David Sankey, Andrew Belk,
Richard Harpin, Adrian Page, David Penna, Panton Corbett.
Front Row (left to right); Brian Whitty, Lindsay Bury. South Staffordshire Group Plc Report & Accounts 2003
Directors’ Biographical Details – 19
Lindsay Claude Neils Bury, BA * ∆  Age 64. Appointed Chairman in 1992 having been a
Director since 1978. A Director of Sage Group PLC,
Henderson Electric and General Investment
Company PLC and Servicepower Technologies
PLC. He is also Chairman of Fauna & Flora
International.
Brian Howard Whitty, FCA  Age 49. Appointed Group Chief Executive and
Chairman of the principal operating subsidiaries in
July 1998 following 3 years as Group Finance
Director. Previously Finance Director of ACT Group
PLC.
Andrew John Belk, BSc (Hons), ACA
Age 39. Appointed Group Finance Director in 2002
following a period as Commercial Director of
HomeServe. Previously Chief Executive of a small
UK IT and telecommunications business and a
Corporate Finance Director with Andersen.
Richard Panton Corbett * • ∆  Age 65. Appointed to the Board in 1993. He is a
Director of Haynes Publishing Group PLC, Tex
Holdings PLC and Sterling Publishing Group PLC.
He was Chairman of the Alternative Investment
market until April 1998.
Robert Ian Harley
Age 49. Appointed to the Board in May 2001, also
Managing Director of OnSite. Formerly co-owner of
Insight Surveys which was acquired by the Group in
1997.
Richard David Harpin, BA (Hons), CDipAF
Age 38. Appointed to the Board in May 2001. Chief
Executive of HomeServe having founded the
business in conjunction with South Staffordshire
Group in 1993.
John Richard Harris, MBA, LLB, ACIS * ∆ Age 62. Appointed as a Non-Executive Director in
July 1998 following 8 years as Managing Director.
Also a Director of Brintons Ltd and Wallis Group
Ltd.
David Malcolm Penna,
BSc (Hons), CEng, FCMA, MICE
Age 54. Appointed to the Board in October 1996,
also Managing Director of South Staffordshire
Water. Has 33 years experience in the water
industry including 7 years previously with South
Staffordshire Water.
David Baldwin Sankey, MA * • ∆ Age 59. Appointed to the Board in 1982, following
10 years involvement with the G.K.N. Group both in
the UK and overseas. A Director of Eliza Tinsley
PLC and James Beattie PLC.
* Non-Executive
• Member of Audit Committee
(Chairman: R P Corbett)
∆ Member of Remuneration Committee
(Chairman: L C N Bury)
 Member of Nomination Committee 
(Chairman: L C N Bury)
Company Secretary:
Adrian Peter Page, BSc (Hons), ACA South Staffordshire Group Plc Report & Accounts 2003
20
The Directors have pleasure in presenting their Report
and Accounts for the year ended 31 March 2003.
Principal Activities and Review of Business
The Group is engaged in business support services and
water supply to domestic, industrial and commercial
customers. Details of Group activities are set out in the
Chairman’s Statement and Chief Executive’s Review on
pages 2 to 13.
Financial Results and Dividends
The Group’s results are shown in the consolidated profit
and loss account on page 36. The Directors are
recommending the payment on 1 July 2003 of a final
dividend of 12.4 pence per ordinary share to shareholders
on the register at the close of business on 13 June 2003,
making a total dividend for the year of 18.0 pence per
ordinary share (2002: 16.1 pence).
Fixed Assets
Capital expenditure on tangible fixed assets, including
infrastructure renewals, amounted to £32.5m during the
year.
Directors
Details of the Directors who held office at 3 June 2003 are
given on page 19. Mr Andrew Belk was appointed to the
Board on 2 September 2002. Mr Simon Kenyon-Slaney
retired on 28 June 2002. Mr Adrian Page resigned as a
Director on 2 September 2002. All of the other Directors
served throughout the financial year.
Mr Belk, having been appointed since the last Annual
General Meeting, will retire from the Board in accordance
with the Articles of Association and, being eligible, will
offer himself for election. Mr Penna, Mr Corbett and Mr
Sankey retire by rotation and, being eligible, offer
themselves for re-election. Both Mr Belk and Mr Penna
have one year rolling service contracts. Mr Corbett and
Mr Sankey were both appointed for a three year
renewable term in June 2000.
Directors’ Report
The beneficial interests of the Directors in the shares of
the Company and the options held as at 31 March 2003
are set out in the Remuneration Report. None of the
Directors serving at the year end had a beneficial interest
in the share capital of any subsidiary company save for Mr
Harpin who held 21,300 ordinary shares of £1 each in
HomeServe plc which represents 19
1
/2% of the share
capital (2002: 21,300 shares in Home Service (GB) Ltd
which were exchanged for shares in HomeServe plc
during the year).
Annual General Meeting 
Allotment of Shares and Pre-emption Rights
There will be proposed at the Annual General Meeting a
renewal of the Directors’ general authority to allot shares
up to a maximum nominal amount (“the Section 80
Amount”) and the Directors’ authority to issue shares for
cash without applying the statutory pre-emption rights up
to a maximum nominal amount (“the Section 89
Amount”).
Authority to Purchase Own Shares
Approval is being sought for the Company to renew the
authority contained in the Articles of Association to
purchase its own ordinary shares. The Board has no firm
intention that the Company should make purchases of its
own shares if the proposed authority becomes effective,
but would like to be able to act quickly if circumstances
arise in which such a purchase would be desirable.
Purchases will only be made on the London Stock
Exchange and only in circumstances where the Board
believes that they are in the best interests of the
shareholders generally.
Further details on the resolutions to be proposed at the
Annual General Meeting can be found in the Shareholder
Circular.
Donations
Charitable donations of £88,799 (2002: £95,176) were
made during the year, including amounts contributed to
the South Staffordshire Water Charitable Trust. There were
no political contributions in either year. South Staffordshire Group Plc Report & Accounts 2003
21
Auditors
On 31 July 2002 Arthur Andersen resigned as auditors
and Deloitte & Touche were appointed to fill the resulting
vacancy. A resolution proposing the reappointment of
Deloitte & Touche as auditors will be put to the Annual
General Meeting.
Payment of Creditors
The Group’s policy is to pay suppliers in line with the
terms of payment agreed with each of them when
contracting for their products or services. Trade creditors
at 31 March 2003 represent 88 days of purchases during
the year (2002: 84 days) for the Group and nil for the
Company. This calculation is distorted by the higher than
average level of capital and certain other expenditure
incurred during February and March 2003 and reflected in
year end trade creditors.
Substantial Shareholdings
As far as the Directors are aware, no person had a
beneficial interest in 3% or more of the voting share
capital at 9 May 2003, except for the following:
Ordinary Percentage
Shares Holding
AMVESCAP PLC 7,584,660 12.00%
HBOS PLC 6,379,272 10.10%
Barclays PLC 2,925,122 4.63%
Wesleyan Assurance Society 2,846,070 4.51%
Invesco Perpetual 
High Income Fund* 2,674,003 4.23%
Legal & General Group Plc 2,012,549 3.19%
*Included in AMVESCAP PLC holding
By Order of the Board
A P Page
Company Secretary
3 June 2003 South Staffordshire Group Plc Report & Accounts 2003
22
Corporate and Social Responsibility
It is recognised that the Group's future success will
depend in part on taking into account the interests of all
of the stakeholders in our business including employees,
customers, shareholders and the wider community. The
Group is committed to improving its corporate
responsibility activities and will continue to report on them. 
Employees
Our employees are key to our success. The Water
Company has maintained its 'Investors in People'
accreditation and Home Service has been voted one of
the top 100 companies to work for by the Sunday Times
for the second year running.
The Group has a policy of equal opportunities and non-
discrimination. Every reasonable effort is made to provide
disabled people with equal opportunities for employment,
training and promotion, taking into account their particular
aptitudes and abilities. The Water Company has been
awarded a certificate in recognition of it being 'Positive
about Disabled People'. 
Communication is extremely important, particularly as the
Group grows. Team briefings are held monthly in the
majority of the Group's businesses to keep employees
informed about new developments and this initiative will
continue to be rolled out to newly acquired companies.
Newsletters and special publications are also used to
communicate within the Divisions and across the Group.
A Savings Related Share Option Scheme is operated
across the Group and is highly successful in involving
employees in the performance of the Group. All Group
employees have access to a pension scheme, including
those employed by newly acquired businesses.
The majority of employees have regular performance and
development reviews. Training continues to be of great
importance to ensure that all employees have the right
skills to perform to their maximum ability.
Health & Safety
The Group is committed to maintaining high standards of
health and safety across all its business activities. A full-
time Group Safety Adviser is employed to develop and
implement a strategy that effectively protects the health
and safety of employees and ensures consistency with
statutory requirements. The Adviser provides support in
setting corporate objectives and formulating Group policy
and minimum standards in conjunction with David Penna,
who is the nominated main Board Director for reporting on
health and safety.
Each Division has appointed a board member to act as
champion for health and safety and has in place
arrangements for the effective co-ordination and
implementation of consistent practices that meet or
exceed minimum statutory requirements. The involvement
of employees is critical to the success of any health and
safety programme and employee forums have been
established at local and Divisional level throughout the
Group.
Total RIDDOR-reportable incidents per 1,000
employees over the past ten years
Reportable Incident Rate
Financial Year
94 95 96 97 98 99 00 01 02 03
30
25
20
15
10
5
0 South Staffordshire Group Plc Report & Accounts 2003
23
The Group continues to demonstrate a commendable
health and safety record, with a steady decline in the
reportable incident rate as illustrated in the chart opposite.
This is despite the fact that the expansion of the Group
over recent years has increased its exposure to safety
critical activities such as the confined space work
undertaken by OnSite.
Health and safety is fundamental to the success of the
Group's business activities and the development of good
working practices will continue to be promoted at all
levels within the Group. 
Customers
All of the Divisions are committed to providing excellent
service to both commercial and domestic customers.
Within commercial outsourcing, building long term
relationships with customers is key to the future success
and stability of the business. Without high levels of
service, customers would not be retained. 
The Water Company was rated second overall in the
water industry for service last year and is constantly
reviewing its activities to ensure that it maintains its high
standards. There is a Special Services Scheme for
customers who require additional assistance and bills are
available in braille, large print and on audio cassette if
required. Home Service attempts to call customers within
48 hours of the use of their service to ensure they were
fully satisfied. They also provide documentation in
alternative formats.
Environment
The Group has a clear strategy to make a significant
contribution to environmental sustainability. The
operational activities of Group companies have varying
environmental demands and we therefore prioritise
attention to those activities with the largest impact.
The Water Company now publishes a comprehensive
Environment Report detailing a wide range of the
Company’s environmental activities. Work is underway on
reviewing and updating the Water Efficiency Plan and the
Bio-Diversity Action Plan. 
The Water Company has continued to improve its energy
efficiency. The effectiveness of the Company’s strategies
for the management and use of energy have been
recognised by the Institute of Energy who awarded the
Company with the Energy Efficiency Accreditation
Scheme, which is managed by the National Energy
Foundation. 
The comprehensive five-year woodland management plan
for the 205 acres of mixed woodland at Blithfield
Reservoir is now being implemented. This affords
opportunities for expanding the area of native broadleaf
woodland at the site through active bracken control and
weeding. It also allows the Company to demonstrate its
commitment to nature conservation and education, as
areas are developed and maintained with clear objectives
in mind.
OnSite is committed to the continual improvement of
environmental performance and is currently implementing
an integrated Quality, Environment, Safety and Health
(QUENSH) management system and will be seeking
certification to ISO9001:2000 in 2003 and
ISO14001:1996 and OHSAS18001:1999 in 2004. They
have a dedicated manager appointed to this project who
also provides environmental consultancy to external
clients and other Divisions within the Group.
OnSite's water treatment business has been entered for
nomination for an Environmental Engineering Award for its
work on the Six Bells Minewater Treatment Plant on
behalf of the Coal Authority.
Community & Charitable Giving
The Group is committed to assisting charities that have a
direct impact on the communities in which its businesses
operate. It supports the Air Ambulance both financially, by
charitable donation and practically, by providing office
space. Other organisations supported by the Group
include the Princes Trust, Lichfield Cathedral and British
Blind Sport.
We also encourage employees to support charities of
their choice and they can contribute to those charities in a
tax efficient manner through the Give As You Earn
Scheme. In addition, employees of the Water Company
are particularly active in their fundraising efforts for
WaterAid, the official charity for the water industry that is
dedicated exclusively to the provision of safe domestic
water to the world's poorest people. South Staffordshire Group Plc Report & Accounts 2003
24
Corporate Governance
The Board has continued to apply the Combined Code
with flexibility and common sense. The publication of the
Higgs Report has been noted and will be reported on in
due course.
Directors
At the year end the Board comprised nine Directors, five
executive and four non-executive. As Mr Harris was
previously Managing Director of the Company he is not
considered to be independent but the Board feel that the
other three non-executive directors are independent. Full
details of the Directors are shown on page 19. Ten board
meetings are held each year with additional meetings held
as necessary. A pack of information is provided to each
Director in advance of any board meeting to allow
sufficient time for preparation.
Committee members are shown on page 19. Following
the retirement of Mr Kenyon-Slaney there are only two
members of the Audit Committee instead of the three
required. This is considered appropriate given the
experience of the members but will be kept under review.
The Combined Code requires that members of the
Remuneration Committee are independent. Mr Harris is
not considered independent but he is a member of the
Remuneration Committee. This will also be kept under
review. The Audit Committee has met four times in the
year and the Remuneration Committee meets annually (or
more often if required). The Nomination Committee met
during the year to consider the appointment of Mr Belk.
A schedule of matters reserved for the Board was
adopted in 1996 based on ICSA Best Practice. However,
the Board maintains a flexible approach to Board matters
with the delegation of power to a committee being used
for specific routine purposes.
The Board has an established formal procedure for
Directors wishing to seek independent legal and other
professional advice. No such advice was sought during
the year. The Board also has access to the advice and
services of the Company Secretary.
No formal training has been provided for the Board due to
the knowledge and experience of its members. However,
the Board is conscious of the need to ensure that all
Directors are kept up to date with legislation, good
practice and other issues. Therefore, its professional
advisers now hold informal training sessions for the Board
as necessary. 
The Board has elected not to nominate a senior
independent Director as it is felt that where there is
already an experienced independent non-executive
Chairman this could prove unnecessarily divisive.
The Board’s approach to non-executive appointments
was revised in 1996 such that future appointments, whilst
still for a fixed term of three years (subject to retirement by
rotation), would not normally, as a matter of policy, be
renewable more than twice.
All the Directors are subject to retirement by rotation and
will submit themselves for re-election at least once every
three years.
Directors’ Remuneration
This area of policy and practice is dealt with in full in the
remuneration report on pages 26 to 31. The remuneration
report will be put to a shareholder vote at the AGM.
Relations with Shareholders
Meetings take place regularly with the Company’s largest
institutional investors.
The Board is available at the AGM to answer questions
on all aspects of the Company. Proxy votes will be
announced at the AGM following the show of hands.
The Board has considered the recommendation within the
Code that the AGM notice be sent to shareholders at
least twenty working days before the meeting but has
decided, as last year, to remain compliant with the
Companies Act requirements. Currently, the Company is
able to announce its Preliminary Results, send the Annual
Report and AGM notice to shareholders, hold the AGM
and pay the final dividend all within three months of the
year end. To allow additional time for the notice period
could extend this period and delay payment of the final
dividend and the Board does not believe this would be
advantageous either to the Company or the shareholders. South Staffordshire Group Plc Report & Accounts 2003
25
Accountability and Audit
A review of the Group’s position and prospects is set out
in the Chairman’s Statement, Chief Executive’s Review
and Financial Review on pages 2 to 17. 
The Directors acknowledge their responsibility for the
Group’s system of internal control and for reviewing its
effectiveness, including their responsibility for taking
reasonable steps for the safeguarding of the assets of the
Group and for preventing and detecting fraud and other
irregularities. Such a system can nonetheless provide only
reasonable and not absolute assurance against
misstatement or loss.
There is an established internal control framework which
is continually reviewed and updated taking into account
the changing nature of the Group’s operations. This
process includes the identification, evaluation and
management of the significant risks faced by the Group.
The Directors confirm that procedures to comply with the
Turnbull guidance are in place and that there has been full
compliance with the guidance for the period ended 31
March 2003 and up to the date of this Report.
A defined organisation structure for the Group exists with
clear lines of accountability and appropriate division of
duties. The Group’s financial regulations specify
authorisation limits for individual managers, with all
material transactions being approved by the Board. In
addition, formal treasury policies are in place. Three year
business plans, annual budgets and investment proposals
for each business and for the Group are formally
prepared, reviewed and approved by the Board. Financial
results and cash flows, including a comparison with
budgets and forecasts, are reported to the Board monthly
with variances being identified and used to initiate action.
Risk management is discussed at Board level both in
terms of the Group and the Divisions on a regular basis.
The key risks for each Division and the Group have been
identified together with the controls to monitor, reduce
and mitigate against their potential impact. The Board has
reviewed the effectiveness of the internal control
framework for the period covered by these financial
statements.
The responsibilities of the Directors and auditors in the
area of financial reporting are set out on pages 33 to 35.
Members of the Audit Committee are set out on page 19.
The Committee normally meets to review the interim and
annual accounts, to monitor the adequacy and
effectiveness of internal controls and to agree audit
strategy. The external auditors and the Group Finance
Director are invited to attend all meetings. 
During the year the Group enhanced its internal audit
function and recruited an experienced Head of Internal
Audit. The need for this has arisen due to the increased
size and complexity of the Group following the significant
acquisitions in the year.
Internal Audit reports directly to the Audit Committee and
a formal audit plan is in place to address the key risks
across the Group.
The external auditors are subject to an annual vote by
shareholders and the Audit Committee monitors both
their performance and independence on an annual basis.
In general, the non-audit services undertaken by the
external auditors are regulatory in nature or related to
corporate tax advice. This work is so closely related to
the core audit services that the external auditors are best
placed to undertake it. The external auditors have not
been involved in due diligence work or general
consultancy.
The Board is of the opinion that having reviewed the
external auditors’ performance and fees during the
period, both are satisfactory. The Board does not believe
that the value of non-audit services provided to the
Company by the external auditors is substantial.
Going Concern
The Directors consider that it is appropriate to prepare
the accounts on a going concern basis. This is based
upon a review of the Group’s budget for 2003/4, the
three year operating plan and investment programme,
together with the committed borrowing facilities available
to the Group. 
Compliance Statement
The Company has complied with the provisions of the
Code except with regard to the appointment of a senior
independent non-executive Director, the period of notice
of the AGM and committee membership as detailed
above. South Staffordshire Group Plc Report & Accounts 2003
26
Remuneration Report
This report has been prepared in accordance with the
Directors’ Remuneration Report Regulations 2002 which
introduced new statutory requirements for the disclosure
of directors’ remuneration in respect of periods ending on
or after 31 December 2002. The report also meets the
relevant requirements of the Listing Rules of the Financial
Services Authority and describes how the Board has
applied the Principles of Good Governance relating to
directors’ remuneration. A resolution to approve the report
will be proposed at the Annual General Meeting.
The Regulations require the auditors to report to the
Company’s members on the “auditable part” of the
Directors’ remuneration report and to state whether in
their opinion that part of the report has been properly
prepared in accordance with the Companies Act 1985 (as
amended by the Regulations). The report has therefore
been divided into separate sections for audited and
unaudited information.
Unaudited Information 
Remuneration Committee
The Committee comprises each of the Board’s non-
executive Directors (shown on page 19) and meets
annually, or more frequently as required. No executive
Director sits on the Committee, although the Group Chief
Executive attends and advises on executive Director
remuneration (but takes no part in the discussion on his
own remuneration).
The Committee also determines the remuneration of the
Chairman (with him taking no part in the discussion on his
fee). The remuneration of other non-executive Directors is
determined by the Board as a whole, based on outside
advice and a review of current practices in other
companies.
Policy on Remuneration of Executive Directors
i. Total Level of Remuneration
The Remuneration Committee aims to ensure that
the remuneration packages offered are competitive
and designed to attract, retain and motivate
executive Directors of the right calibre. A review of
remuneration policy and salary levels is currently
being undertaken by PricewaterhouseCoopers and
their recommendations will be considered in
developing future remuneration policy.
ii. The Main Components 
The main components of the remuneration package
for executive Directors are basic salary, benefits,
annual bonus and long-term incentives as follows:
a. Basic Salary
Basic salary for each Director is determined by the
Remuneration Committee taking into account
performance of the individual and the Group,
together with experience, responsibilities and
marketability. The basic salary is set within the
parameters recommended as appropriate by the
consultant reviews and takes into account levels of
pay across the Group.
b. Benefits
Pensions, company car, medical insurance, holidays
and other benefits are in line with those provided at
executive Director level in similar businesses. It is
Company policy that benefits in kind are included in
pensionable earnings where they are of a
contractual nature on the basis that the benefits are
taxable income in the hands of the employee.
c. Annual Bonus
The annual bonus is designed to drive the short-
term performance of the Group and encourage real
year on year growth in profitability. No annual bonus
is paid unless there is superior performance as a
result of the achievement of challenging criteria
based on:
— compound growth in earnings per share;
— measurable personal targets which relate to 
the part of the business that the Director has 
direct responsibility for.
The maximum bonus payable is 50% of salary.
Given the performance-related nature of bonus
arrangements, it is Company policy to include the
bonus element of remuneration within pensionable
earnings. South Staffordshire Group Plc Report & Accounts 2003
27
d. Long-Term Incentives
Long-term incentives are provided through the
Restricted Share Plan and Executive Share Options.
Both are designed to encourage and reward
continuing improvement in the Group’s performance
over the longer term and its participants are the
executive Directors and other senior executives who
are best placed to influence such performance.
A new Executive Share Option Plan was approved
by shareholders in 2001 to replace both the existing
Executive Share Option Scheme which had reached
the end of its ten year life and the Restricted Share
Plan. Options become exercisable between three
and ten years from grant subject to the achievement
of stretching performance criteria. Options under the
new Plan were granted in July 2001 and 2002 and
are subject to performance criteria based on annual
average EPS growth. This performance measure
has been chosen to emphasise the alignment of
interest between the participants and shareholders.
Options become exercisable based on a sliding
scale and can only be fully exercised if annual
average EPS growth of RPI + 10% is achieved over
a three year period. No options are exercisable if
average EPS growth is less than RPI + 4%. If this
happens, retesting of conditions will be possible in
years 4 and 5, but performance will continue to be
measured from a fixed date. Directors must also fulfil
a shareholding requirement equal to 50% of options
granted before they can exercise an option. The
option price is the market price on the last dealing
day prior to the date of grant. Messrs Belk, Harley,
Harpin, Penna and Whitty were granted options
during the year. Details of options granted are
shown on page 31.
The Restricted Share Plan is operated under the
existing Employee Share Ownership Plan (ESOP)
— The South Staffordshire Water Employee Trust.
This Trust purchases shares on the market and the
Remuneration Committee makes recommendations
to the Trustees concerning allocations of awards
under the Plan.
The shares so purchased will be held in trust,
normally for a period of three to ten years. After this
period they may become transferable in part or in
whole, at the discretion of the Trustees and provided
the performance targets set by the Remuneration
Committee have been met. The targets set are
based upon the Group achieving superior growth in
EPS and share price against a group of comparator
companies taken from the utilities sector. The last
award was in 2000 and no further awards will be
made under the Plan.
Earnings related performance targets in respect of
the Company’s share based incentive schemes
would be adjusted to exclude the benefit of share
repurchases.
Company Policy on Contracts of Service
All executive Directors’ contracts of service require one
year’s notice of termination by the Company. Liquidated
damage provisions in contracts are limited to the payment
of one year’s remuneration. Notice periods and payments
are not extendable in takeover situations.
Company Pensions Policy regarding Executive
Directors
The Company’s policy is to offer Directors membership of
the Water Companies Pension Scheme or the South
Staffordshire Money Plan.
The Water Companies Pension Scheme is a funded,
Inland Revenue approved, final salary, occupational
pension scheme. Its main features are:
i. a normal pension age of 60;
ii. pension at normal pension age of one-half of final
pensionable salary and a tax-free lump sum of one
and a half times final pensionable salary, subject to
completion of 40 years service;
iii. life assurance of five times pensionable salary or basic
salary as applicable;
iv. pension payable in the event of ill health; and
v. spouse’s pension on death.
The South Staffordshire Money Plan is a funded, Inland
Revenue approved, defined contribution, occupational
pension scheme. Its main features are:
i. a normal pension age of 65;
ii. a contribution rate of up to 10%, matched by the
Company;
iii. life assurance of five times basic salary;
iv. permanent health insurance; and
v. spouse’s pension on death.
If the benefits provided under these Schemes are
restricted as a result of the earnings cap further provision
is made via a funded unapproved retirement benefit
scheme. For Directors appointed prior to 1999 the
Company compensates them for the tax impact of the
contributions to this scheme. South Staffordshire Group Plc Report & Accounts 2003
28
Remuneration Report
Audited Information
Directors’ Emoluments
Basic Total
Salary Benefits Bonus Emoluments
2003 2002
£’000 £’000 £’000 £’000 £’000
Executive
B. H. Whitty 203 22 75 300 287
A. J. Belk* 73 10 25 108 —
R. I. Harley 111 17 39 167 132
R. D. Harpin 146 20 53 219 181
D. M. Penna 137 21 50 208 203
A. P . Page
∆ 46 8 16 70 152
Non-Executive
L. C. N. Bury 55 —— 55 42
R. P . Corbett 20 —— 20 19
J. R. Harris 20 —— 20 19
D. B. Sankey 20 —— 20 19
W. S. R. Kenyon-Slaney† 5 —— 519
H. B. Meynellº ———— 4
Total 836 98 258 1,192
Total 2002 752 81 244 1,077
* Appointed 2 September 2002
∆ Resigned 2 September 2002
† Retired 28 June 2002
º Retired 22 June 2001
R. D. Harpin and R. I. Harley were appointed on 18 May 2001
Performance Graph
The graph opposite shows the Company’s performance,
measured by total shareholder return, compared with the
performance of the FTSE 250 (also measured by total
shareholder return) for the five years ended 31 March
2003. This comparator has been chosen to provide a
meaningful comparison of relative performance against
similar sized UK listed companies. South Staffordshire Group Plc Report & Accounts 2003
29
Directors’ Pensions
Seven Directors were members of the Company’s defined benefit pension scheme. The following Directors had accrued
entitlements under the scheme as follows:
Accrued pension Accrued pension Transfer
31 March Increase in accrued 31 March value of
2003 pension in the year 2002 increase
£’000 £’000 £’000 £’000
B. H. Whitty 9 1 8 14
R. D. Harpin 5149
D. M. Penna 35 2 33 36
R. P . Corbett 10 1 9 12
D. B. Sankey 10 — 10 2
A. P . Page* 17 1 16 4
W. S. R. Kenyon Slaney* 10 — 10 3
The following table sets out the transfer value of the Directors’ accrued benefits under the scheme calculated in a manner
consistent with “Retirement Benefit Scheme - Transfer Values (GN 11)” published by the Institute of Actuaries and the
Faculty of Actuaries.
Transfer value Increase in transfer Transfer value 
31 March Contributions made value in the year 31 March 
2003 by the Director net of contributions 2002
£’000 £’000 £’000 £’000
B. H. Whitty 107 — 4 103
R. D. Harpin 36 — 531
D. M. Penna 546 — 30 516
R. P . Corbett 97 — 14 83
D. B. Sankey 63 — (4) 67
A. P . Page* 115 — (5) 120
W. S. R. Kenyon Slaney* 135 —— 135
The transfer values disclosed above do not represent a sum paid or payable to the individual Director. Instead they
represent a potential liability of the pension scheme.
Six Directors were members of money purchase schemes. Contributions paid by the Company in respect of such Directors
were as follows:
2003 2002
£’000 £’000
B. H. Whitty 80 75
A. J. Belk 15 —
R. I. Harley 84
R. D. Harpin 10 8
D. M. Penna 87 87
L. C. N. Bury — 10
A. P . Page* 13 29
* To date of resignation/retirement South Staffordshire Group Plc Report & Accounts 2003
30
Remuneration Report
Directors’ Shareholdings
The beneficial interests of Directors who served at the end of the year, together with those of their families, in the shares of
the Company are as follows:
Ordinary Shares
2003 2002
L. C. N. Bury 600,000 600,000
A. J. Belk
——
*
R. I. Harley 10,000 10,000
R. D. Harpin 1,101,522 1,101,522
B. H. Whitty 55,025 30,744
D. M. Penna 38,427 22,770
R. P . Corbett
——
J. R. Harris 26,330 26,330
D. B. Sankey 5,770 5,770
In addition, Mr Sankey holds a non-beneficial interest in 20,000 ordinary shares.
* At date of appointment
There were no changes in the Directors’ interests in the share capital of the Company between 31 March and 3 June 2003.
Directors’ Options and Long-Term Incentives
Details of the share options held by Directors under SAYE Schemes are as follows:
Granted Exercised Date
31 March during during 31 March Option Date exercisable
2003 year year 2002 price granted from
B. H. Whitty —— 6,570 6,570 262.2p 9.1.98 1.2.03
B. H. Whitty 3,524 3,524 —— 466.0p 10.12.02 1.2.08
A. J. Belk 2,027 2,027 ——* 466.0p 10.12.02 1.2.06
R. I. Harley 5,430 —— 5,430 310.4p 18.12.98 1.2.04
R. D. Harpin 5,144 —— 5,144 328.0p 21.12.00 1.2.05
D. M. Penna —— 6,570 6,570 262.2p 9.1.98 1.2.03
D. M. Penna 2,027 2,027 —— 466.0p 10.12.02 1.2.06
A. P . Page 6,570†— — 6,570 262.2p 9.1.98 1.2.03
SAYE Scheme options are exercisable for a 6 month period from the date shown. The market price of the Company’s
shares on the day the options were exercised was £4.16
1
/2.
* At date of appointment
† At date of resignation South Staffordshire Group Plc Report & Accounts 2003
31
Details of the share options held by Directors under Executive Share Option Schemes are as follows:
Granted Exercised
31 March during during 31 March Option Date
2003 year year 2002 price granted
B. H. Whitty 150,000 —— 150,000 366.5p 3.6.98
B. H. Whitty 30,000 —— 30,000 377.5p 23.6.00
B. H. Whitty 72,500 —— 72,500 550.0p 17.7.01
B. H. Whitty 65,000 65,000 —— 589.0p 8.7.02
A. J. Belk 12,500 —— 12,500* 550.0p 17.7.01
A. J. Belk 17,500 —— 17,500* 589.0p 8.7.02
A. J. Belk 36,000 36,000 ——* 466.0p 13.11.02
R. I. Harley 12,500 —— 12,500 366.5p 3.6.98
R. I. Harley 50,000 —— 50,000 407.5p 30.7.99
R. I. Harley 36,000 —— 36,000 550.0p 17.7.01
R. I. Harley 33,000 33,000 —— 589.0p 8.7.02
R. D. Harpin 49,000 —— 49,000 550.0p 17.7.01
R. D. Harpin 44,000 44,000 —— 589.0p 8.7.02
D. M. Penna 125,000 —— 125,000 366.5p 3.6.98
D. M. Penna 25,000 —— 25,000 377.5p 23.6.00
D. M. Penna 49,000 —— 49,000 550.0p 17.7.01
D. M. Penna 44,000 44,000 —— 589.0p 8.7.02
A. P . Page 12,500†— — 12,500 366.5p 3.6.98
A. P . Page 50,000†— — 50,000 407.5p 30.7.99
A. P . Page 20,000†— — 20,000 377.5p 23.6.00
A. P . Page 40,000†— — 40,000 550.0p 17.7.01
A. P . Page 17,500† 17,500 —— 589.0p 8.7.02
Executive Share Options are exercisable between 3 and 10 years from the date of grant.
Details of the maximum number of shares receivable from conditional awards made under the Restricted Share Plan are as
follows:
Awarded Lapsed Vested
31 March during during during 31 March
2003 year year year 2002
B. H. Whitty 21,260 —— 17,711 38,971
D. M. Penna 18,180 —— 15,145 33,325
A. P . Page 11,785† ——— 11,785
The shares that vested in the year were provisionally awarded on 30 July 1999. The market price on award was £4.07
1
/2
and on vesting was £5.32
1
/2.
* At date of appointment        
† At date of resignation
The market price of the Company’s shares at 31 March 2003 was £3.89
1
/2 (2002: £5.75). During the year the price ranged
from £3.71
1
/2 to £6.11
1
/2.
The Company’s Register of Directors’ Interests, which is open to inspection at the Registered Office, contains full details of
Directors’ shareholdings and share options.
By Order of the Board
A P Page
Company Secretary
3 June 2003 South Staffordshire Group Plc Report & Accounts 2003
32
Directors and Advisers
Directors Lindsay Claude Neils Bury, BA, Chairman
Brian Howard Whitty, FCA, Group Chief Executive
Andrew John Belk, BSc (Hons), ACA
Richard Panton Corbett 
Robert Ian Harley
Richard David Harpin, BA (Hons), CDipAF
John Richard Harris, MBA, LLB, ACIS
David Malcolm Penna, BSc (Hons), CEng, FCMA, MICE
David Baldwin Sankey, MA
Secretary Adrian Peter Page, BSc (Hons), ACA
Registered Office Green Lane, Walsall, West Midlands WS2 7PD.
Telephone: 01922 638282.
Registered in England, Number 2648297.
Stockbrokers Cazenove 
20 Moorgate, London EC2R 6DA.
Financial Advisers N.M. Rothschild & Sons Limited
New Court, St Swithins Lane, London EC4P 4DU.
Financial PR College Hill
Advisers 78 Cannon Street, London EC4N 6HH.
Auditors Deloitte & Touche 
Four Brindleyplace, Birmingham B1 2HZ.
Legal Advisers Martineau Johnson
St Philips House, St Philips Place, Birmingham B3 2PP .
Wragge & Co
55 Colmore Row, Birmingham B3 2AS.
Bankers HSBC Bank plc
130 New Street, PO Box 68, Birmingham B2 4JU.
Registrars Computershare Investor Services PLC
PO Box 82, The Pavilions,
Bridgwater Road, Bristol BS99 7NH. South Staffordshire Group Plc Report & Accounts 2003
33
Statement of Directors’ Responsibilities
The following statement, which should be read in
conjunction with the auditors’ statement of their
responsibilities set out on the following pages, is made
with a view to distinguishing for shareholders the
respective responsibilities of the Directors and of the
auditors in relation to the accounts.
The Directors are required by the Companies Act 1985 to
prepare accounts for each financial year which 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 the profit
or loss of the Group for the financial year.
In preparing these accounts, the Directors are required to:
 select suitable accounting policies and then apply
them consistently;
 make judgements and estimates that are
reasonable and prudent;
 state whether applicable accounting standards have
been followed, subject to any material departures
disclosed and explained in the accounts; and
 prepare the accounts on the going concern basis
unless it is inappropriate to presume that the
Company will continue in business.
The Directors have responsibility for keeping accounting
records which disclose with reasonable accuracy at any
time the financial position of the Company and the Group
and which enable them to ensure that the accounts
comply with the Companies Act 1985.
The Directors have responsibility for taking such steps as
are reasonably open to them to safeguard the assets of
the Company and the Group and to prevent and detect
fraud and other irregularities.
The Directors, having prepared the accounts, are required
to provide the auditors with such information and
explanation as the auditors think necessary for the
performance of their duty. South Staffordshire Group Plc Report & Accounts 2003
34
Independent Auditors’ Report
Independent Auditors’ Report to the Members
of South Staffordshire Group Plc
We have audited the financial statements of South
Staffordshire Group Plc for the year ended 31 March
2003 which comprise the profit and loss account, the
balance sheets, the cash flow statement and notes, the
consolidated statement of total recognised gains and
losses, the reconciliation of movements in shareholders’
funds and the related notes 1 to 29. These financial
statements have been prepared under the accounting
policies set out therein. We have also audited the
information in the part of the Directors’ remuneration
report that is described as having been audited.
This report is made solely to the Company’s members, as
a body, in accordance with section 235 of the Companies
Act 1985. Our audit work has been undertaken so that
we might state to the Company’s members those matters
we are required to state to them in an auditors’ report and
for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as
a body, for our audit work, for this report, or for the
opinions we have formed.
Respective Responsibilities of Directors and
Auditors
As described in the statement of Directors’
responsibilities, the Company’s Directors are responsible
for the preparation of the financial statements in
accordance with applicable United Kingdom law and
accounting standards. They are also responsible for the
preparation of the other information contained in the
annual report including the Directors’ remuneration report.
Our responsibility is to audit the financial statements and
the part of the Directors’ remuneration report described
as having been audited in accordance with relevant
United Kingdom legal and regulatory requirements and
auditing standards.
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 part of the Directors’
remuneration report described as having been audited
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 with the Company and
other members of the Group is not disclosed.
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.
We read the Directors’ report and the other information
contained in the annual report for the above year as
described in the contents section including the unaudited
part of the Directors’ remuneration report and consider
the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with
the financial statements. South Staffordshire Group Plc Report & Accounts 2003
35
Basis of Audit Opinion
We conducted our audit in accordance with United
Kingdom 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 and the part of the
Directors’ remuneration report described as having been
audited. It also includes an assessment of the significant
estimates and judgements made by the Directors in the
preparation of the financial statements and of whether the
accounting policies are appropriate to the circumstances
of the Company and the Group, 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
and the part of the Directors’ remuneration report
described as having been audited 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 and the part of the
Directors’ remuneration report described as having been
audited.
Opinion
In our opinion: 
— the financial statements give a true and fair view of
the state of affairs of the Company and the Group
as at 31 March 2003 and of the profit of the Group
for the year then ended; and
— the financial statements and the part of the
Directors’ remuneration report described as having
been audited have been properly prepared in
accordance with the Companies Act 1985.
Deloitte & Touche
Chartered Accountants
and Registered Auditors
Birmingham
3 June 2003 South Staffordshire Group Plc Report & Accounts 2003
36
Continuing 2003 2002
Operations Acquisitions
Note £’000 £’000 £’000 £’000
Turnover 2 201,980 63,814 265,794 177,090
Less share of joint ventures’ turnover (4,456) — (4,456) (676)
Group turnover 197,524 63,814 261,338 176,414
Operating costs including goodwill amortisation 3 (154,647) (62,354) (217,001) (139,926)
Other operating income 6 634 (45) 589 834
Operating profit
Group operating profit 43,511 1,415 44,926 37,322
Share of joint ventures’ operating loss (408) — (408) (259)
Total operating profit before goodwill 2 44,331 6,160 50,491 38,319
Goodwill amortisation (1,228) (4,745) (5,973) (1,256)
Total operating profit: Group and share 
of joint ventures 2 43,103 1,415 44,518 37,063
Exceptional costs - loss on disposal of subsidiary — (611)
Net interest payable 7 (5,962) (1,912)
Profit before tax, goodwill and exceptional costs 44,529 36,407
Goodwill amortisation (5,973) (1,256)
Exceptional costs - loss on disposal of subsidiary — (611)
Profit on ordinary activities before taxation 38,556 34,540
Taxation on profit on ordinary activities 8 (12,789) (9,844)
Profit on ordinary activities after taxation 25,767 24,696
Minority shareholders’ equity interests (1,780) (1,886)
Profit for the financial year 23,987 22,810
Dividends paid and proposed 9 (11,340) (10,097)
Retained profit for the year 25 12,647 12,713
Earnings per share
Basic 10 38.2p 36.6p
Basic excluding goodwill and 
exceptional costs 10 45.9p 39.6p
Diluted 10 37.9p 36.1p
Diluted excluding goodwill and
exceptional costs 10 45.5p 39.0p
A statement of movements in reserves is given in note 25 to the accounts.
The results above are derived from continuing operations.
The accompanying notes are an integral part of these accounts.
Consolidated Profit and Loss Account
For the year ended 31 March 2003 South Staffordshire Group Plc Report & Accounts 2003
37
Consolidated Balance Sheet
As at 31 March 2003
2003 2002
(Restated)
Note £’000 £’000
Fixed assets
Goodwill 11 127,363 21,579
Tangible assets 12 171,122 153,379
Investments 15 — 20
298,485 174,978
Current assets
Stocks 16 6,103 3,062
Debtors 17 76,527 54,440
Cash at bank and in hand 10,792 6,967
93,422 64,469
Creditors – amounts falling due within one year
Borrowings 18 (22,892) (30,313)
Other creditors 19 (99,050) (73,360)
(121,942) (103,673)
Net current liabilities (28,520) (39,204)
Total assets less current liabilities 269,965 135,774
Creditors – amounts falling due after more than one year
Borrowings 18 (91,021) (5,233)
Other creditors 19 (21,473) —
(112,494) (5,233)
Provisions for liabilities and charges 21 (9,218) (7,043)
Accruals and deferred income 23 (18,454) (8,354)
Net assets 129,799 115,144
Capital and reserves
Share capital 24 6,315 6,280
Share premium 24 16,520 15,046
Capital redemption reserve 1,200 1,200
Profit and loss account 25 101,606 89,477
Equity shareholders’ funds 125,641 112,003
Minority shareholders’ equity interests 4,158 3,141
129,799 115,144
The accompanying notes are an integral part of these accounts.
The accounts were approved by the Board of Directors on 3 June 2003.
L C N Bury
A J Belk South Staffordshire Group Plc Report & Accounts 2003
38
Company Balance Sheet
As at 31 March 2003
2003 2002
Note £’000 £’000
Fixed assets
Investments 15 21,735 21,755
Current assets
Debtors 17 121,477 33,907
Creditors – amounts falling due within one year
Borrowings 18 (25,799) (15,320)
Other creditors 19 (18,535) (9,613)
(44,334) (24,933)
Net current assets 77,143 8,974
Total assets less current liabilities 98,878 30,729
Net assets 98,878 30,729
Capital and reserves
Ordinary share capital 24 6,315 6,280
Share premium 24 16,520 15,046
Capital redemption reserve 1,200 1,200
Profit and loss account 25 74,843 8,203
Equity shareholders’ funds 98,878 30,729
The accompanying notes are an integral part of these accounts.
The accounts were approved by the Board of Directors on 3 June 2003.
L C N Bury
A J Belk South Staffordshire Group Plc Report & Accounts 2003
39
Supplementary Statements
For the year ended 31 March 2003
Consolidated Statement of Total Recognised Gains and Losses
2003 2002
Note £’000 £’000
Profit for the financial year 23,987 22,810
Total recognised gains and losses relating to the year 23,987 22,810
Reconciliation of Movements in Consolidated Shareholders’ Funds
Profit for the financial year 23,987 22,810
Dividends (11,340) (10,097)
12,647 12,713
New share capital subscribed 24 991 1,378
Net additions to shareholders’ funds 13,638 14,091
Opening shareholders’ funds 112,003 97,912
Closing shareholders’ funds 125,641 112,003
The accompanying notes are an integral part of these accounts. South Staffordshire Group Plc Report & Accounts 2003
40
Consolidated Cash Flow Statement
For the year ended 31 March 2003 
2003 2002
Note £’000 £’000 £’000 £’000
Net cash inflow from operating activities (a) 66,584 49,471
Returns on investments and servicing of finance:
Interest received 235 194
Interest paid (3,532) (1,661)
Interest element of finance lease and hire-purchase
rental payments (428) (445)
Dividends paid to minority interests (2,293) (1,293)
Net cash outflow from returns on investments
and servicing of finance (6,018) (3,205)
Taxation:
Corporation tax paid (12,958) (9,403)
Capital expenditure and financial investment:
Purchase of tangible fixed assets (31,755) (38,912)
Investment in joint ventures (100) (314)
(Purchase)/sale of own shares (32) 19
Sale of tangible fixed assets 1,070 1,191
Capital contributions received 4,795 6,001
Net cash outflow from capital expenditure 
and financial investment (26,022) (32,015)
Acquisitions and disposals:
Investment in subsidiary undertakings (78,929) —
Net cash outflow from acquisitions and disposals (78,929) —
Equity dividends paid (10,481) (9,344)
Financing:
Issue of ordinary share capital 991 1,378
Proceeds from bond issue 83,712 —
Repayment of loan notes (3,364) (219)
Capital element of finance lease and hire-purchase 
rental payments (1,285) (1,053)
Net cash inflow from financing 80,054 106
Increase/(decrease) in cash 12,230 (4,390)
The accompanying notes are an integral part of these accounts. South Staffordshire Group Plc Report & Accounts 2003
41
Notes to the Cash Flow Statement
For the year ended 31 March 2003
(a) Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities
2003 2002
£’000 £’000 £’000 £’000
Total operating profit: Group and share of joint ventures 44,518 37,063
Amortisation of goodwill 5,973 1,256
50,491 38,319
Depreciation and amortisation (non-infrastructure assets) 11,718 8,880
Depreciation and amortisation (infrastructure assets) 5,016 4,599
Profit on disposal of assets (84) (379)
Provision against investments 52 89
16,702 13,189
Share of operating loss in joint ventures 408 259
Decrease in stocks 112 334
Decrease/(increase) in debtors 1,784 (12,082)
(Decrease)/increase in creditors (2,913) 9,452
(1,017) (2,296)
Net cash inflow from operating activities 66,584 49,471
(b) Reconciliation of Movement in Net Debt
2003 2002
£’000 £’000
Increase in cash 3,825 1,380
Decrease/(increase) in bank overdraft 8,405 (5,770)
12,230 (4,390)
Debt repayments 4,649 1,272
Debt issued in respect of acquisitions (3,761) —
Assets purchased under finance leases (788) (275)
Debt in companies acquired (1,455) —
Index-linked bond
- proceeds from issue (83,712) —
- indexation (1,705) —
Increase in net debt in year (74,542) (3,393)
Net debt brought forward (28,579) (25,186)
Net debt carried forward (103,121) (28,579)
(c) Analysis of Net Debt
Balance at Other Balance at 
1 April non cash 31 March
2002 Cash flow Acquisitions changes  2003
£’000 £’000 £’000 £’000 £’000
Cash at bank and in hand and bank overdraft (20,327) 12,230 —— (8,097)
Irredeemable debenture stock (1,633) —— — (1,633)
Index-linked bond — (83,712) — (1,705) (85,417)
Obligations under finance leases and
hire-purchase contracts (4,595) 1,285 (1,455) (788) (5,553)
Loan notes (2,024) 3,364 (3,761) — (2,421)
Net debt (28,579) (66,833) (5,216) (2,493) (103,121) South Staffordshire Group Plc Report & Accounts 2003
42
1 Statement of Accounting Policies
The principal accounting policies are summarised
below. They have all been applied consistently
throughout the year and the preceding year.
(a) Basis of Accounting
The accounts have been prepared under the historical
cost convention and in accordance with the
requirements of the London Stock Exchange and
applicable accounting standards.
(b) Basis of Consolidation
The Group accounts consolidate the accounts of
South Staffordshire Group Plc and its subsidiary
undertakings made up to 31 March each year. The
results of subsidiaries acquired or sold are
consolidated for the periods from or to the date on
which control passed. The Group makes full provision
for the minority interests’ share of net liabilities in
subsidiary undertakings. Acquisitions are accounted
for under the acquisition method.
(c) Joint Ventures
The Group’s share of turnover and profit or loss of
joint ventures is included in the consolidated profit and
loss account. The Group’s share of their net assets or
liabilities is included in the consolidated balance sheet.
(d) Turnover and profit recognition
HomeServe turnover includes amounts receivable
from the sale of policies, stated net of underwriting,
commissions payable and Insurance Premium Tax.
Turnover is recognised on sale of the policy except
where an obligation exists to provide future services
where an appropriate proportion of monies received in
advance are treated as deferred income and
recognised over the relevant period. Member
acquisition costs are recognised in full on sale of the
policy.
Turnover in commercial outsourcing represents
amounts receivable, excluding VAT, from the sale of
goods and services.
Regulated Water turnover includes amounts billed
together with an estimation of amounts unbilled at the
year end.
Notes to the Accounts 
(e) Goodwill
Goodwill arising on acquisitions, represents the
excess of the fair value of the consideration given
over the fair value of the identifiable assets and
liabilities acquired. From the year ended 31 March
1999 goodwill has been capitalised on the balance
sheet and amortised over its estimated useful life of
up to 20 years. Prior to this period goodwill was
written off to reserves in accordance with the
accounting standard then in force. This would be
charged to the profit and loss account in the event of
the disposal of the relevant business.
(f) Tangible Fixed Assets and Depreciation
Tangible fixed assets comprise infrastructure assets
(consisting of water mains, impounding and pumped
raw water storage reservoirs and dams), operational
structures (being pumping stations, treatment
stations, boreholes and service reservoirs) and other
assets.
Infrastructure Assets
Infrastructure assets comprise a network of systems
that, as a whole, is intended to be maintained in
perpetuity at a specified level of service by the
continuing replacement and refurbishment of its
components. Expenditure on infrastructure assets
relating to increases in capacity or enhancements of
the networks and on maintaining the operating
capability of the network in accordance with defined
standards of service are treated as additions which
are included at cost. 
The depreciation charge for infrastructure assets is
the level of annual expenditure required to maintain
the operating capability of the network which is based
on the Company’s independently certified asset
management plan. South Staffordshire Group Plc Report & Accounts 2003
43
Operational Structures and Other Assets
Operational structures and other assets are stated at
cost less accumulated depreciation and any provision
for impairment. Depreciation is provided on a straight
line basis to write off the cost less estimated residual
value over the estimated useful lives of the assets,
with the exception of land which is not depreciated.
The estimated useful lives of assets are as follows:
Buildings and Service Reservoirs 50-80 years
Boreholes 100 years
Fixed Plant 20–30 years
Meters 15 years
Mobile Plant 5 years
Motor Vehicles 3–7 years
Office Equipment 5–7 years
Envelope and Mailing Equipment 7–10 years
(g) Capital Contributions
Capital contributions, which arise in the regulated
water business, are treated as deferred income and
amortised over the estimated useful lives of the assets
concerned, except in the case of contributions
towards the cost of infrastructure assets. This
departure from the requirements of the Companies
Act 1985 is, in the opinion of the Directors, necessary
for the financial statements to show a true and fair
view as it is not possible to amortise contributions to
the profit and loss account over the lives of the fixed
assets concerned, as infrastructure assets do not
have determinable finite lives.
(h) Leased Assets
Assets financed by leasing and hire-purchase
arrangements which transfer substantially all the risks
and rewards of ownership to the Group are included
in tangible fixed assets, and the net obligation to pay
future rentals is included in creditors. Rentals are
apportioned between finance charges and a reduction
of the outstanding liability for future rentals so as to
produce a constant charge to the profit and loss
account based upon the capital outstanding.
Operating lease rentals are charged to the profit and
loss account on a straight line basis.
(i) Investments
Investments held as fixed assets are stated at cost
less amounts written off and any provision for
impairment. 
(j) Stocks
Stocks are valued at the lower of cost and net
realisable value. Cost includes an appropriate element
of overheads. Provision is made for obsolete, slow
moving or defective items where appropriate.
(k) Pensions
For the defined benefit scheme the cost of pension
contributions is charged to the profit and loss account
on a systematic basis over the average service lives of
the employees, in accordance with the advice of an
independent actuary. For defined contribution
schemes the amount charged to the profit and loss
account is the contributions payable in the year.
(l) Research and Development
Research and development expenditure is charged to
the profit and loss account in the year in which it is
incurred.
(m) Taxation
Corporation tax payable is provided on taxable profits
at the current rate. Deferred tax is provided in respect
of capital allowances in excess of depreciation and all
other timing differences that have originated but not
reversed at the balance sheet date using the current
rate of tax. The liability is discounted, using the yield
to maturity on government gilts, to reflect the time
value of money over the period between the balance
sheet date and the date on which the timing
differences are expected to reverse.
(n) Index-linked bond
The index-linked bond is carried in the balance sheet
at an amount equal to the sum of the proceeds
received on issue and indexation to date, less issue
costs. The premium/discount and costs of issue are
amortised over the life of the bond and included in net
interest payable in the profit and loss account,
together with interest paid for the period and
indexation.
Following the acquisitions in the year, the presentation
of the prior year balance sheet has been restated to
show amounts of £4,628,000 previously included
within creditors - amounts falling due within one year,
under the heading accruals and deferred income
which is now presented after provisions for liabilities
and charges in accordance with Schedule 4 of the
Companies Act 1985. South Staffordshire Group Plc Report & Accounts 2003
44
2 Segmental Information
Turnover
2003 2002
Continuing
Operations Acquisitions Total Total
£’000 £’000 £’000 £’000
HomeServe 76,668 44,599 121,267 60,281
Commercial outsourcing 84,811 19,215 104,026 77,852
Inter-division (18,335) — (18,335) (20,168)
Support services 143,144 63,814 206,958 117,965
Regulated water supply 58,836 — 58,836 59,125
201,980 63,814 265,794 177,090
Inter-division turnover relates wholly to commercial outsourcing.
Operating Profit
2003 2002
Continuing
Operations Acquisitions Total Total
£’000 £’000 £’000 £’000
HomeServe 19,301 4,696 23,997 14,117
Commercial outsourcing 8,516 1,464 9,980 8,015
Support services 27,817 6,160 33,977 22,132
Regulated water supply 16,514 — 16,514 16,187
44,331 6,160 50,491 38,319
Amortisation of goodwill (1,228) (4,745) (5,973) (1,256)
43,103 1,415 44,518 37,063
Within HomeServe, acquisitions include the results of Regency Financial Holdings Limited (turnover £13,040,000 and
operating profit £4,017,000) and Highway Emergency Services Limited (turnover £30,899,000 and operating profit
£679,000).
Net Operating Assets
2003 2002
£’000 £’000
HomeServe 8,296 8,973
Commercial outsourcing 27,641 24,987
Support services 35,937 33,960
Regulated water supply 121,365 110,858
157,302 144,818
Net debt (103,121) (28,579)
Deferred consideration (26,367) —
Goodwill 127,363 21,579
Own shares held — 20
Proposed dividend (9,239) (8,960)
Corporation tax (6,921) (6,691)
Provisions for liabilities and charges (9,218) (7,043)
Net assets 129,799 115,144
Substantially all turnover, operating profit and net operating assets arise in the United Kingdom.
Notes to the Accounts  South Staffordshire Group Plc Report & Accounts 2003
45
3 Operating Costs
2003 2002
Continuing
Operations Acquisitions
£’000 £’000 £’000 £’000
Raw materials and consumables 20,501 19,843 40,344 20,791
Manpower costs (note 4) 53,256 25,635 78,891 47,255
Depreciation (infrastructure assets) 5,016 — 5,016 4,599
Depreciation (non-infrastructure assets) 10,516 1,410 11,926 9,029
Amortisation of goodwill 1,228 4,745 5,973 1,256
Other operating costs 64,130 10,721 74,851 56,996
154,647 62,354 217,001 139,926
Other operating costs include £4,357,000 (2002: £1,457,000) in respect of operating lease rentals which relate
principally to land and buildings and motor vehicles.
Other operating costs in respect of the major acquisitions include: 
Regency Highway Middleton
Financial Emergency Maintenance
Holdings Plc Services Ltd Services Ltd
£’000 £’000 £’000
Raw materials and consumables 1,607 8,745 9,374
Manpower costs 4,843 13,759 6,707
Depreciation (non-infrastructure assets) 519 431 458
Other operating costs 2,039 7,273 1,193
Auditors’ remuneration, included within other operating costs, comprised £159,000 for statutory audit (2002: £80,000)
and £117,000 for other services (2002: £134,000). Remuneration for 2003 was paid to Deloitte & Touche and for
2002 to Arthur Andersen.
4 Staff Costs
2003 2002
£’000 £’000
Wages and salaries 70,575 42,016
Social security costs 6,334 3,765
Pension costs 1,982 1,474
78,891 47,255
2003 2002
Number Number
Average number of employees
HomeServe 1,579 488
Commercial outsourcing 1,227 979
Regulated water supply 318 374
3,124 1,841
5 Directors’ Emoluments
2003 2002
£’000 £’000
Emoluments 1,192 1,077
Contributions to money purchase pension schemes 213 213
Value of shares vested under restricted share plan 175 54
Gain on exercise of SAYE options 20 —
The emoluments of the Directors are analysed in the Remuneration Report. South Staffordshire Group Plc Report & Accounts 2003
46
There were 7 Directors accruing benefits under defined benefit schemes and 6 Directors accruing benefits under
money purchase schemes (2002: 7 and 6 respectively).
The highest paid Director received emoluments of £300,000 (2002: £287,000). He is a member of a defined benefit
pension scheme which provided for accrued pension of £9,400 (2002: £7,998) and accrued lump sum of £28,200
(2002: £23,994) at 31 March 2003. In addition, the cost of providing benefits under the South Staffordshire Group
Funded Unapproved Retirement Benefit Scheme on his behalf was £80,000 (2002: £75,000).
6 Other Operating Income
2003 2002
£’000 £’000
Profit on disposal of tangible fixed assets 84 379
Rental income 505 455
589 834
7 Net Interest Payable
2003 2002
£’000 £’000
Interest payable and similar charges
Index-linked bond 3,614 —
Bank overdraft and other interest 2,075 1,594
Finance charges in respect of finance leases
and hire-purchase contracts 428 445
Debentures 67 67
Share of joint venture interest payable 13 —
6,197 2,106
Interest receivable on short-term deposits (235) (194)
5,962 1,912
Net interest payable includes £2,953,000 in HomeServe and £4,728,000 in the regulated water business.
8 Taxation
2003 2002
The tax charge for the year comprises:
£’000 £’000
Current tax 
Corporation tax 12,016 9,184
Adjustment in respect of prior years (1,030) (391)
10,986 8,793
Deferred tax 
Origination and reversal of timing differences 1,890 1,651
Increase in discount (242) (600)
Adjustment in respect of prior years 155 —
1,803 1,051
12,789 9,844
Notes to the Accounts  South Staffordshire Group Plc Report & Accounts 2003
47
The overall rate of tax for the Group, including deferred tax, based on profit before tax excluding goodwill and
exceptional costs was 28.7% (2002: 27.0%).
The principal differences between the current corporation tax rate for the Group, based on profit before tax (after
goodwill and exceptional costs), and the standard rate of corporation tax are as follows:
2003 2002
Standard rate of corporation tax 30.0% 30.0%
Goodwill not deductible for tax purposes 4.5% 1.1%
Other expenses not deductible for tax purposes 1.4% 0.5%
Capital allowances in excess of depreciation (4.7%) (5.0%)
Adjustments in respect of prior years (2.7%) (1.1%)
Current corporation tax rate for the year 28.5% 25.5%
9 Dividends Paid and Proposed
2003 2002
£’000 £’000
Equity interests
Interim dividend paid of 5.6p (2002: 5.0p) per share 3,516 3,132
Proposed dividend of 12.4p (2002: 11.1p) per share 7,824 6,965
11,340 10,097
A nominal dividend of 0.01 pence per share is proposed in respect of 48,963 shares held by the South Staffordshire
Water Employee Trust in accordance with a Deed of Waiver dated 31 December 1992.
10 Earnings per Share
The calculation of earnings per share is based on profit after tax and minority interests divided by the weighted
average number of shares in issue during the financial period. Diluted earnings per share takes into account the
dilution effect of the full exercise of all share options granted by the Company by comparing the difference between
the weighted average exercise price of exercisable share options with the average share price over the period.
Adjusted earnings per share has been calculated by excluding the amortisation of goodwill and exceptional costs.
This is considered to be a better indicator of performance by the Company.
The calculations of earnings per share are based on the following profits and numbers of shares:
2003 2002
£’000 £’000
Profit for the financial year 23,987 22,810
Amortisation of goodwill 
- total 5,973 1,256
- relating to minority shareholders (1,145) —
Exceptional costs — 611
Profit for adjusted earnings per share 28,815 24,677
2003 2002
Number of Number of 
shares shares
Weighted average number of shares
For basic and adjusted earnings per share 62,772,234 62,346,645
Exercise of share options 546,703 924,894
For diluted earnings per share 63,318,937 63,271,539 South Staffordshire Group Plc Report & Accounts 2003
48
11 Goodwill
Group
£’000
Cost
At 1 April 2002 24,545
Acquisitions 111,757
At 31 March 2003 136,302
Amortisation
At 1 April 2002 2,966
Charge for the year 5,973
At 31 March 2003 8,939
Net Book Value
At 31 March 2003 127,363
At 31 March 2002 21,579
At 31 March 2003 the cumulative amount of goodwill written off directly to reserves amounted to £11,826,000 
(2002: £11,826,000).
12 Tangible Fixed Assets
Group Infra- Mobile 
Land and structure Operational Fixed Plant &
Buildings Assets Structures Plant Equipment Total
£’000 £’000 £’000 £’000 £’000 £’000
Cost
At 1 April 2002 (restated) 24,857 96,081 21,029 57,007 67,596 266,570
Acquisitions 2,976 ——— 9,114 12,090
Additions 1,002 13,475 2,062 6,947 9,057 32,543
Capital contributions received — (3,961) ——— (3,961)
Disposals (26) (492) — (482) (3,375) (4,375)
At 31 March 2003 28,809 105,103 23,091 63,472 82,392 302,867
Depreciation
At 1 April 2002 2,684 55,567 4,159 20,102 30,679 113,191
Acquisitions 180 ——— 4,821 5,001
Charge for the year 641 5,016 341 2,789 8,155 16,942
Disposals (12) (492) — (342) (2,543) (3,389)
At 31 March 2003 3,493 60,091 4,500 22,549 41,112 131,745
Net Book Value
At 31 March 2003
Owned 25,316 40,785 18,174 37,852 38,671 160,798
Leased — 4,227 417 3,071 2,609 10,324
25,316 45,012 18,591 40,923 41,280 171,122
At 31 March 2002
Owned (restated) 22,173 36,287 16,448 33,364 35,746 144,018
Leased — 4,227 422 3,541 1,171 9,361
22,173 40,514 16,870 36,905 36,917 153,379
Notes to the Accounts  South Staffordshire Group Plc Report & Accounts 2003
49
Infrastructure renewals expenditure and the charge to the profit and loss account have been included within
infrastructure assets cost and accumulated depreciation. The net book value of infrastructure assets is stated net of
capital contributions. Previously, capital contributions were shown as a deduction from the cost of the assets on the
face of the balance sheet. The brought forward cost and net book value of infrastructure assets have been restated
accordingly. The balance of capital contributions at 31 March and movements in the year are set out in note 14
below. 
Tangible fixed assets financed by leasing and hire-purchase amounted to £14,338,000 (2002: £12,513,000) less
accumulated depreciation of £4,014,000 (2002: £3,152,000). Depreciation charged to the profit and loss account
for the year in respect of leased assets amounted to £881,000 (2002: £618,000). Tangible fixed assets include
freehold land of £2,085,000 (2002: £1,883,000) which is not subject to depreciation.
13 Capital Commitments
Capital commitments outstanding at 31 March 2003 were £9,431,000 (2002: £11,487,000). 
14 Capital Contributions
Infrastructure Other
Assets Assets
£’000 £’000
Balance at 1 April 2002 48,531 3,726
Capital contributions received 3,961 834
Disposals (248) —
Amortised in year — (208)
Balance at 31 March 2003 52,244 4,352
Capital contributions in respect of other assets are included in accruals and deferred income (note 23).
15 Investments
Group Company
Shares in Loans to
Own Own subsidiary subsidiary Total 
shares shares undertakings undertakings Company
£’000 £’000 £’000 £’000 £’000
Cost
At 1 April 2002 229 229 11,735 10,000 21,964
Additions 32 32
——
32
Disposals (80) (80) —— (80)
At 31 March 2003 181 181 11,735 10,000 21,916
Provision
At 1 April 2002 209 209 —— 209
Charge for the year 52 52 —— 52
Disposals (80) (80) —— (80)
At 31 March 2003 181 181 —— 181
Net Book Value
At 31 March 2003 —— 11,735 10,000 21,735
At 31 March 2002 20 20 11,735 10,000 21,755 South Staffordshire Group Plc Report & Accounts 2003
50
Notes to the Accounts 
In accordance with UITF Abstract 13, shares in the Company held by the South Staffordshire Water Employee Trust
are shown as investments.
At 31 March 2003 the Trust held 48,963 shares in the Company (2002: 75,911). There are no unallocated shares. The
market value of the shares at 31 March 2003 was £190,711 (2002: £436,488). The cost of shares conditionally
allocated to employees is written off over the period to which the performance criteria relate. As stated in note 9,
dividends have been waived by the Trust. Any costs of administration are included in the profit and loss account as
they accrue.
The Company’s principal subsidiary undertakings and joint ventures, all of which have only ordinary shares in issue,
except Highway which also has preference shares in issue, are as follows:
Proportion of Shares Held Nature of Business
Direct Indirect
South Staffordshire Water PLC 100% Water supply
HomeServe
HomeServe plc 75% Intermediate holding company
Home Service (GB) Ltd 75% Plumbing, heating and electrical 
home assistance
Home Hotline Ltd 75% Claims handling
Highway Emergency Services Ltd 75% Emergency glazing & door repair
Regency Financial Holdings Ltd 75% Intermediate holding company
Regency Warranties Ltd 75% Furniture warranties & repairs 
Servotomic Ltd 75% Warranties service and repair
for domestic boilers
Domeo S.A. 40% Plumbing home assistance 
joint venture registered in France
Customer Solutions
Echo Managed Services Ltd 100% Customer management
Echo South West Ltd 50% Customer management 
joint venture
Mail Solutions Ltd 100% Mailing services
Rapid Systems Ltd 100% Development and sale of software
OnSite Resources
OnSite Resources Ltd 100% Water & wastewater services
OnSite Central Ltd 100% Water treatment, distribution and 
sewerage network services
OnSite South Ltd 100% Wastewater services
Middleton Maintenance Services Ltd 100% Building infrastructure 
maintenance
South Staffordshire Enterprises Ltd 100% Intermediate holding company
South Staffordshire Water Holdings Ltd 100% Intermediate holding company
Affinity Partners Ltd 75% Insurance captive registered in
Guernsey South Staffordshire Group Plc Report & Accounts 2003
51
16 Stocks
Group
2003 2002
£’000 £’000
Stores and raw materials 4,133 2,460
Work in progress 1,851 545
Finished goods 119 57
6,103 3,062
17 Debtors
Group Company
2003 2002 2003 2002
£’000 £’000 £’000 £’000
Amounts recoverable within one year
Trade debtors 54,546 37,487 — —
Other debtors 16,342 12,322 80 7
Amounts owed by joint ventures 784 304 — —
Amounts owed by Group undertakings — — 121,269 33,812
Prepayments and accrued income 4,782 4,230 128 88
76,454 54,343 121,477 33,907
Amounts recoverable after more than one year
Other debtors 73 97 — —
76,527 54,440 121,477 33,907
18 Borrowings
Group Company
2003 2002 2003 2002
£’000 £’000 £’000 £’000
Amounts falling due within one year
Bank loans and overdrafts 18,889 27,294 25,799 15,320
Obligations under finance leases and 
hire purchase contracts 1,582 995 — —
Loan notes 2,421 2,024 — —
22,892 30,313 25,799 15,320
Amounts falling due after more than one year
Index-linked bonds 85,417 — — —
Irredeemable debenture stock (note 20) 1,633 1,633 — —
Obligations under finance leases and hire-purchase contracts:
Payable between one and two years 1,446 886 — —
Payable between two and five years 2,323 1,931 — —
Payable after five years 202 783 — —
91,021 5,233 — —
South Staffordshire Water PLC issued £85,000,000 3.75% Retail Price Index-linked unsecured bonds, £75,000,000
on 22 August 2002 and £10,000,000 on 26 September 2002. The bonds are repayable in 2025.
The bonds are included in the balance sheet at an amount equal to the sum of the proceeds received on issue and
indexation to date, less issue costs.
The obligations under finance leases and hire purchase contracts are secured on the assets to which they relate. South Staffordshire Group Plc Report & Accounts 2003
52
Notes to the Accounts 
19 Other Creditors
Group Company
2003 2002 2003 2002
£’000 £’000 £’000 £’000
Amounts falling due within one year
Trade creditors 46,195 30,782 — —
Payments received in advance 6,868 5,647 — —
Amounts owed to group undertakings — — 6,125 47
Other creditors 22,573 20,015 1,935 1,540
Deferred consideration in respect of acquisitions 4,894 — — —
Proposed dividends 7,824 6,965 7,824 6,965
Proposed dividends payable to minority interests 1,415 1,995 — —
Corporation tax payable 6,921 6,691 2,558 976
Other taxation and social security 2,360 1,265 93 85
99,050 73,360 18,535 9,613
Amounts falling due after more than one year
Deferred consideration in respect of acquisitions 21,473 — — —
Deferred consideration includes £13,500,000 payable after 31 March 2006.
20 Irredeemable Debenture Stock
Group
2003 2002
£’000 £’000
3
1
⁄2% 476 476
4% 627 627
5% 500 500
1,603 1,603
Net premium on irredeemable debenture stock 30 30
1,633 1,633
21 Provisions for Liabilities and Charges
Share of
Deferred joint venture
tax net liabilities Total
£’000 £’000 £’000
At 1 April 2002 6,794 249 7,043
Acquisitions 51 — 51
Profit and loss account charge 1,803 421 2,224
Investment in the period — (100) (100)
At 31 March 2003 8,648 570 9,218
The Group’s share of gross assets and gross liabilities in joint ventures was £1,010,000 (2002: £406,000) and
£1,580,000 (2002: £655,000) respectively. 
An analysis of deferred tax is set out in note 22. South Staffordshire Group Plc Report & Accounts 2003
53
22 Deferred Tax
2003 2002
£’000 £’000
Deferred tax is provided as follows:
Accelerated capital allowances 16,576 14,566
Other timing differences (132) (218)
Undiscounted provision for deferred tax 16,444 14,348
Discount (7,796) (7,554)
Discounted provision for deferred tax 8,648 6,794
There is no deferred tax liability in the Company.
23 Accruals and Deferred Income
2003 2002
£’000 £’000
Capital contributions (note 14) 4,352 3,726
Other deferred income 14,102 4,628
18,454 8,354
Other deferred income relates to policy receipts from members in respect of which the Group has an obligation to
provide future services.
24 Called up Share Capital 
2003 2002
£’000 £’000
Authorised
88,000,000 Ordinary shares of 10p each 8,800 8,800
Issued and fully paid
63,151,756 (2002: 62,804,758) Ordinary shares of 10p each 6,315 6,280
Ordinary Share
Share Capital Premium
£’000 £’000
Balance at 1 April 2002 6,280 15,046
Shares issued in the year 35 956
Transfer from profit and loss reserve — 518
Balance at 31 March 2003 6,315 16,520
During the year 321,998 Save As You Earn (SAYE) scheme options were exercised for which external consideration
of £894,000 was received, including a share premium of £862,000. 25,000 Executive Share Option Scheme (ESOS)
options were also exercised for which external consideration of £97,000 was received, including a share premium of
£94,000. South Staffordshire Group Plc Report & Accounts 2003
54
Notes to the Accounts 
Options 
Details of outstanding share options are shown below:
Date of Grant Date Exercisable Number of Shares Exercise Price
SAYE Scheme 9.1.98 1.2.03 5,320 £2.622
Executive Scheme 3.6.98 3.6.01 372,500 £3.665
SAYE Scheme 18.12.98 1.2.04 170,020 £3.104
Executive Scheme 30.7.99 30.7.02 127,500 £4.075
SAYE Scheme 22.12.99 1.2.03 8,777 £3.000
SAYE Scheme 22.12.99 1.2.05 85,289 £3.000
Executive Scheme 23.6.00 23.6.03 280,000 £3.775
Executive Scheme 29.9.00 29.9.03 12,500 £3.425
Executive Scheme 30.11.00 30.11.03 62,500 £4.100
SAYE Scheme 21.12.00 1.2.04 155,864 £3.280
SAYE Scheme 21.12.00 1.2.06 144,069 £3.280
Executive Scheme 17.7.01 17.7.04 579,000 £5.500
Executive Scheme 9.1.02 9.1.05 20,000 £5.915
SAYE Scheme 16.1.02 1.2.05 168,187 £4.760
SAYE Scheme 16.1.02 1.2.07 149,834 £4.760
Executive Scheme 8.7.02 8.7.05 658,500 £5.890
Executive Scheme 13.11.02 13.11.05 36,000 £4.660
SAYE Scheme 10.12.02 1.2.06 151,306 £4.660
SAYE Scheme 10.12.02 1.2.08 172,159 £4.660
Options granted under the SAYE Scheme are exercisable for a six month period from the date indicated which is at
the end of either a 3 year or 5 year savings period. Executive Scheme options are exercisable between 3 and 10
years from the date of grant.
Details of options granted to Directors are included in the Remuneration Report.
Restricted Share Plan
The Remuneration Committee of the Board has conditionally allocated 51,225 shares under this Plan.
25 Profit and Loss Account
Group Company
£’000 £’000
Balance at 1 April 2002 89,477 8,203
Transfer to share premium reserve (518) —
Retained profit for the year 12,647 66,640
Balance at 31 March 2003 101,606 74,843
As provided by s230 of the Companies Act 1985, the Company has not presented its own profit and loss account.
The Company’s profit for the financial year was £77,980,000 (2002: £10,140,000). South Staffordshire Group Plc Report & Accounts 2003
55
26 Acquisitions
During the year the group acquired the entire issued share capital of Regency Financial Holdings Plc, Highway
Emergency Services Limited, Middleton Maintenance Services Limited and Servotomic Limited. Servotomic Limited
was acquired on 3 March 2003. On 1 April 2002, the Group also acquired the 40% of Home Hotline Limited
previously held by other shareholders.
The acquisition method of accounting has been adopted in all cases.
Details of the consideration, the fair value of the assets and liabilities acquired and any adjustments thereto and the
goodwill on these acquisitions are set out below.
Regency Highway Middleton
Financial Emergency Maintenance
Holdings Services Services
Plc Limited Limited Others Total
Date acquired: 14 May 2002 5 July 2002 1 August 2002
Acquired by: HomeServe HomeServe OnSite HomeServe
£’000 £’000 £’000 £’000 £’000
Consideration:
Cash including acquisition
expenses 38,589 29,048 12,053 4,944 84,634
Loan notes —— 3,761 — 3,761
Deferred consideration payable in cash 6,700 19,473 — 194 26,367
45,289 48,521 15,814 5,138 114,762
Fair value of net assets acquired:
Tangible fixed assets 3,954 1,252 1,625 258 7,089
Cash at bank and in hand 2,514 229 2,767 195 5,705
Debt (41) (26) (1,388) — (1,455)
Deferred income (6,577) —— (934) (7,511)
Other net current assets/(liabilities) (2,592) 2,593 (848) (226) (1,073)
Minority interests —— — 250 250
(2,742) 4,048 2,156 (457) 3,005
Goodwill on acquisition 48,031 44,473 13,658 5,595 111,757
Fair value adjustments:
Deferred tax 125 94 —— 219
Other 25 73 — 149 247
150 167 — 149 466
Goodwill on other acquisitions of £5,595,000 includes £1,645,000 in respect of Home Hotline Limited and
£3,400,000 in respect of Servotomic Limited.
Other fair value adjustments principally comprised the write-down of fixed assets and additional supplier invoice
accruals.
Goodwill is being amortised over its estimated useful life of up to 20 years. South Staffordshire Group Plc Report & Accounts 2003
56
Summarised profit and loss accounts in respect of the major acquisitions are set out below:
Regency Highway Middleton
Financial Emergency Maintenance
Holdings Services Services
Plc Limited Limited
Period: 1 April 2002 1 April 2002 1 February 2002
to to to 
14 May 2002 5 July 2002 1 August 2002
£’000 £’000 £’000
Turnover 1,094 12,382 12,825
Operating profit 365 448 1,063
Goodwill amortisation — (122) —
Net interest receivable/(payable) 10 (181) (1)
Profit before taxation 375 145 1,062
Taxation (113) (102) (328)
Profit after taxation 262 43 734
Period: Year Nine months Year 
ended ended ended
31 March 31 March 31 January
2002 2002 2002
£’000 £’000 £’000
Profit before taxation 2,672 1,079 1,730
Taxation (794) (384) (511)
Profit after taxation 1,878 695 1,219
There were no material recognised gains and losses in the periods above other than the profit on ordinary activities
after taxation except in respect of Highway Emergency Services in which there was a prior period adjustment of
£239,000 in respect of the adoption of FRS 19 (deferred tax).
The net cash outflow in respect of the acquisitions comprised:
£’000
Cash consideration 84,634
Less cash balances acquired (5,705)
78,929
The increase in debt resulting from the acquisitions comprised:
Cash consideration less cash balances acquired 78,929
Loan notes issued 3,761
Debt acquired 1,455
84,145
Notes to the Accounts  South Staffordshire Group Plc Report & Accounts 2003
57
The consolidated cash flow statement for the year ended 31 March 2003 includes the following amounts in respect
of the subsidiary undertakings acquired during the year from the respective dates of acquisition.
£’000
Operating cash flow 4,082
Returns on investments and servicing of finance (56)
Taxation (2,904)
Capital expenditure and financial investment (2,395)
Financing (244)
Net cash outflow (1,517)
The cash flows of the acquisitions are individually not material.
27 Operating Lease Commitments
Annual commitments under non-cancellable operating leases at 31 March were as follows:
2003 2002
Land and Land and
buildings Other buildings Other
£’000 £’000 £’000 £’000
Leases which expire:
Within one year 586 613 449 232
Between two and five years 1,029 2,550 108 229
After five years 238 104 345 96
1,853 3,267 902 557
28 Financial Liabilities
The Group’s financial liabilities included below comprise borrowings and creditors falling due after more than one
year. These do not include short term debtors and creditors. The main purpose of these financial instruments is to
raise finance for the Group’s operations. It is, and has been throughout the period under review, the Group’s policy
that no trading in financial instruments shall be undertaken. The Group’s policy in respect of cash and borrowings, is
to maintain flexibility with a balance between fixed and floating rates and long and short term debt.
Interest Rate Risk Profile
2003 2002
(Restated)
£’000 £’000
Retail Price Index-linked bonds 85,417 —
Fixed rate financial liabilities 7,186 6,228
Floating rate financial liabilities 21,310 29,318
113,913 35,546
Financial liabilities on which no interest is paid 21,473 —
135,386 35,546
During the year South Staffordshire Water PLC issued £85,000,000 Retail Price Index-linked bonds, repayable in
2025. The bonds provide a source of long-term funding for that company. £65,000,000 of the proceeds were used
by South Staffordshire Water PLC to improve the capital structure of the water business by buying back its shares
from the Group. The Group used the proceeds received to finance in part the acquisitions in the year. The revenues
of the regulated water business are linked to the Retail Price Index and provide an effective hedge against the index-
linked element of the interest charge on the bonds. Interest rates in respect of the Group’s remaining debt were
weighted towards floating rates and short-term debt. South Staffordshire Group Plc Report & Accounts 2003
58
Notes to the Accounts 
For all debt, assets and liabilities, the book values and fair values are not materially different, except for the
£85,000,000 index-linked bonds, the fair value of which based on market value at 31 March 2003 was £89,939,000.
Financial Liabilities
on which no
Fixed rate financial liabilities interest is paid
Weighted Weighted average Weighted
average period for which average period
interest rate rate is fixed until maturity
% years years
2003
Sterling 7.9 2.9 2.8
2002 (Restated)
Sterling 8.0 4.1 —
The floating rate financial liabilities comprise sterling denominated loan notes, bank loans and overdrafts that bear
interest at rates based on LIBOR and base rate. The Group’s cash balances earn interest at floating rates linked to
LIBOR. 
Maturity of Financial Liabilities
The maturity profile of the Group’s financial liabilities at 31 March was as follows:
2003 2002
(Restated) 
£’000 £’000
In one year or less, on demand 22,892 30,313
In more than one year, but not more than two 9,397 886
In more than two years, but not more than five 15,845 1,931
In more than five years 202 783
In more than twenty years 87,050 1,633
135,386 35,546
Borrowing Facilities
The Group has various borrowing facilities available to it. The undrawn committed facilities available at 31 March in
respect of which all conditions precedent had been made at that date were as follows:
2003 2002
£’000 £’000
Expiring in one year or less 18,650 12,500
Expiring in more than one year but not more than two years 8,720 —
Expiring in more than two years 11,000 1,000
38,370 13,500 South Staffordshire Group Plc Report & Accounts 2003
59
29 Pension Retirement Benefits
The Group operates a number of funded pension schemes for the benefit of its employees. The Group participates
in the Water Companies Pension Scheme, by way of a separate sub-fund, which provides benefits based on final
pensionable pay. The Group also operates a number of defined contribution Money Plan Pension Schemes. The
assets of these schemes are held separately from those of the Group, being invested by discretionary fund
managers.
The contributions to the defined contribution schemes are charged against profits as incurred. The amount charged
to the profit and loss account for the defined benefit scheme is the estimated regular cost of providing the benefits
accrued in the year, adjusted to reflect variations from that cost.
The regular cost of the defined benefit scheme is calculated so that it represents a substantially level percentage of
current and future pensionable payroll. Variations from regular cost are charged or credited to the profit and loss
account over 13 years, being the estimated average remaining working life of Scheme members. The regular cost
and the variations are determined by a qualified actuary on the basis of triennial valuations, using the current unit
method for death in service benefits and the projected unit method for other benefits.
The most recent actuarial valuation at 1 April 2002 showed the market value of the Group’s sub-fund as 
£121.3 million, and that the actuarial value of those assets represented 113% of the benefits that had accrued to
members after allowing for expected future increases in earnings.
As required by SSAP 24, the figures included in the accounts in respect of the defined benefit pension scheme are
based on the 1 April 2002 actuarial valuation. This does not take into account any impact of the fall in general stock
market values since that date. Any such impact will be reflected in the next SSAP 24 triennial valuation as at 1 April
2005 based upon which subsequent pension costs will be determined until the adoption of FRS 17.
The assumptions which have the most significant effect on the results of the valuation are those relating to the rate
of return on investments and the rates of increase in salaries, wages and pensions. The valuation at 
1 April 2002 assumed that equity returns would be 7.2% per annum, that salary and wage increases would average
4.8% per annum and that present and future pensions would increase at the rate of 2.8% per annum.
In accordance with the recommendations of the actuary, the amount charged to the profit and loss account for the
defined benefit scheme in 2003 was £1,189,000 (2002: £1,106,000) representing an employer’s contribution rate of
9.6%. The amount charged to the profit and loss account for the various defined contribution schemes in 2003 was
£793,000 (2002: £368,000). South Staffordshire Group Plc Report & Accounts 2003
60
Financial Reporting Standard 17
Additional disclosures regarding the Group’s defined benefit pension scheme are required under the transitional
provisions of FRS 17 “Retirement benefits” and these are set out below. The disclosures relate to the second year
of the transitional provisions. They provide information which will be necessary for full implementation of FRS 17 in
due course. The Accounting Standards Board has delayed the mandatory full implementation of the Standard,
which will not now be required before 2005.
The actuarial valuation described above has been updated at 31 March 2003 by a qualified actuary using revised
assumptions that are consistent with the requirements of FRS 17. Investments have been valued for this purpose at
market value.
The major assumptions used were as follows:
31 March 31 March
2003 2002
Rate of increase in salaries 4.5% 4.8%
Rate of increase in pensions 2.5% 2.8%
Discount rate 5.6% 6.1%
Inflation 2.5% 2.8%
The market value of the assets in the scheme, the present value of the liabilities in the scheme and the expected
rate of return at the balance sheet date were:
2003 2002
Expected Expected
rate of rate of 
return return
per annum Valuation per annum Valuation
%£’000 %£’000
Equities 7.5 38,702 8.3 40,047
Bonds/gilts 4.5 61,050 5.2 76,847
Corporate bonds 5.6 5,046 6.1 2,309
Property 6.0 1,172 6.7 1,506
Cash 3.8 4,116 5.2 830
Market value of assets 110,086 121,539
Present value of scheme liabilities (121,186) (106,179)
(Deficit)/surplus in the scheme (11,100) 15,360
Related deferred tax asset/(liability) 3,330 (4,608)
(Deficit)/surplus after deferred tax (7,770) 10,752
Notes to the Accounts  South Staffordshire Group Plc Report & Accounts 2003
61
Had FRS 17 been implemented in full throughout the financial year the following amounts would have been charged
to the profit and loss account:
2003
£’000
Amounts included within operating profit:
Current service cost 2,500
Past service cost 1,400
3,900
Amounts included as other finance income:
Expected return on scheme assets 7,500
Interest on scheme liabilities (6,400)
1,100
In addition the following amounts would have been recognised in the statement of total recognised gains and losses:
2003
£’000
Actual return less expected return on scheme assets (15,200)
Experience gain on scheme liabilities 1,000
Effect of changes in assumptions relating to
the present value of scheme liabilities (10,500)
Actuarial loss (24,700)
The movement in the scheme surplus/deficit during the year was as follows:
2003
£’000
Surplus in the scheme brought forward 15,360
Current service cost (3,100)
Contributions 1,640
Past service cost (1,400)
Finance income 1,100
Actuarial loss (24,700)
Deficit in the scheme carried forward (11,100)
The impact of FRS 17, if implemented in full throughout the financial year, would have been to increase the amount
charged to the profit and loss account by £1,611,000 and to reduce the reserves of the Group at 31 March 2003 by
£7,770,000.
The following disclosures, relating to amounts charged in the statement of total recognised gains and losses, will be
built up over time as a five year history:
% of scheme
assets/(liabilities) £’000
Actual return less expected return on scheme assets (14%) (15,200)
Experience gains on scheme liabilities 1% 1,000
Actuarial loss (20%) (24,700)
2003 South Staffordshire Group Plc Report & Accounts 2003
62
Five Year Summary
2003 2002 2001 2000 1999
£’000 £’000 £’000 £’000 £’000
Turnover 
HomeServe 121,267 60,281 45,516 34,767 23,463
Commercial outsourcing 104,026 77,852 60,023 39,342 29,881
Inter-division (18,335) (20,168) (13,388) (8,914) (10,299)
Support services 206,958 117,965 92,151 65,195 43,045
Regulated water supply 58,836 59,125 58,348 59,451 58,103
265,794 177,090 150,499 124,646 101,148
Operating profit 
HomeServe 23,997 14,117 10,799
Commercial outsourcing 9,980 8,015 7,224
Support services 33,977 22,132 18,023 13,915 10,135
Regulated water supply 16,514 16,187 15,507 16,631 15,774
50,491 38,319 33,530 30,546 25,909
Net interest payable (5,962) (1,912) (1,967) (1,193) (1,281)
Profit before tax (excluding goodwill 
and exceptional costs) 44,529 36,407 31,563 29,353 24,628
Goodwill (5,973) (1,256) (1,243) (449) (68)
Exceptional costs — (611) ———
Profit before tax 38,556 34,540 30,320 28,904 24,560
Retained profit 12,647 12,713 11,048 10,839 9,713
Adjusted earnings per share 45.9p 39.6p 34.4p 32.4p 28.3p
Dividend per share 18.0p 16.1p 14.5p 13.3p 11.8p
Average number of employees 3,124 1,841 1,560 1,266 1,060
Capital investment (note 1) 32,543 39,187 29,161 23,871 23,008
Net assets 129,799 115,144 99,452 89,073 71,512
Net debt (note 2) 103,121 28,579 25,186 22,875 15,476
Share price (year end) 389
1
/2p 575p 512
1
/2p 342
1
/2p 379p
Market capitalisation £246.0m £361.1m £318.8m £212.7m £228.0m
Notes
1 Capital investment represents fixed asset additions together with infrastructure renewals expenditure.
2 Net debt includes irredeemable debentures and prior to 2001, preference shares.
3 Support services operating profit was not separately analysed prior to 2001. South Staffordshire Group Plc Report & Accounts 2003
63
Number of Number of % of Total % of 
Shares Shareholders Shareholders Shares
1–1,000 839 43.5% 0.7%
1,001–10,000 808 42.0% 4.4%
10,001–500,000 250 13.0% 34.4%
500,001–1,000,000 18 0.9% 20.5%
over 1,000,000 12 0.6% 40.0%
1,927 100.0% 100.0%
Unit Trusts 38.2%
Pension Funds 18.0%
Individuals 16.1%
Insurance Companies 12.5%
Other 12.2%
Investment Trusts 1.6%
Overseas Banks 1.4%
100.0%
Shareholder Analysis as at 31 March 2003 South Staffordshire Group Plc Report & Accounts 2003
64
Financial Calendar
2003
27 June Annual General Meeting
1 July Final dividend for the year ending 31 March 2003 to be paid
November Interim results for the six months ending 30 September 2003 to be announced
2004
2 January Interim dividend for the year ending 31 March 2004 to be paid
May Preliminary announcement of results for the year ending 31 March 2004
June 2004 Report and Accounts circulated
Regulatory Accounts
South Staffordshire Water PLC is required to publish additional financial information relating to the “Appointed Business” as
a water supply company in accordance with its Instrument of Appointment from the Secretary of State for the Environment.
A copy of this information is available by application to the Company Secretary at Green Lane, Walsall, WS2 7PD. South Staffordshire Group Plc 
Green Lane, Walsall, West Midlands  WS2 7PD
Tel: 01922 638282
Fax: 01922 723631
www.south-staffordshire.com