severn trent plc annual report and accounts 2003
delivering
environmental sense this is severn trent
severn trent plc is a leading environmental services group
providing water waste and utility services our objective 
is to grow by providing services that solve environmental
problems that respond to new environmental expectations
and that help to deliver sustainable development
you can ﬁnd out more about severn trent plc and the
businesses within our group by visiting our website
wwwseverntrentcom or the sites listed below
our businesses activities
severn trent water is the group’s
regulated water business it supplies
water and wastewater collection 
and treatment services for around 
8 million people across the midlands 
and midwales
biffa is one of the largest single suppliers
of waste management services in the uk
it collects treats recovers and disposes
of municipal commercial and industrial
waste nationwide and in belgium
severn trent laboratories is a leading
environmental testing laboratory
company in the us and the uk
severn trent services supplies products
and services associated with water
wastewater and contaminated land 
severn trent water international
provides a range of private sector
management and consultancy services 
in europe and the developing world
severn trent systems – ‘aseriti’ supplies
it services and solutions focusing upon
managed services ebusiness and
consultancy ‘worksuite’ supplies a range
of work management software products
and related services
severn trent retail services provides 
a series of products to domestic and
commercial markets including energy
insurance telecoms and conveyancing
services
severn trent utility services provides
asset management and customer 
service solutions to other utilities and
local authorities
severn trent property develops facilities
in the uk primarily for the distribution
retail and industrial sectors
charles haswell and partners is an
international consultancy with experience
in a wide range of engineering and
environmental disciplines
severn trent water wwwstwatercouk
biffa wwwbiffacouk
severn trent laboratories us wwwstlinccom
severn trent laboratories uk wwwstlanalyticalcouk
severn trent services wwwseverntrentservicescom
severn trent water international wwwstwaterinternationalcom
severn trent systems wwwaseriticom
wwwworksuitecom
severn trent energy wwwstenergycouk
severn trent utility services wwwstutilityservicescouk
severn trent property wwwseverntrentpropertycom
charles haswell and partners wwwhaswellcouk contents
01 financial highlights
02 chairman’s statement
04 group chief executive’s review
06 the environment is our business
08 review of operations
15 corporate social responsibility
16 financial review
18 board of directors
20 directors’ report
25 remuneration report
31 directors’ responsibilities in relation 
to the ﬁnancial statements
31 independent auditors’ report to the
members of severn trent plc
32 group proﬁt and loss account
33 balance sheets
34 group cash ﬂow statement
34 reconciliation of net cash ﬂow 
to movement in net debt
35 statement of total recognised gains 
and losses
35 reconciliation of movement
in shareholders’ funds
36 notes to the ﬁnancial statements
63 five year summary
64 shareholder information
financial highlights
group turnover £m
03
02
01
00
99
18520
17943
16816
15666
13643
group profit before tax £m
before exceptional items
03
02
01
00
99
2252
2333
2217
3387
3614
earnings per share pence
before exceptional items and
deferred tax
03
02
01
00
99
581
632
610
928
924
dividends per share pence
03
02
01
00
99
4590
4590
4500
4500
4300
2003 2002  change
turnover £m 1852 1794 32
proﬁt before interest pre goodwill and exceptionals £m 410 419 21
proﬁt before interest pre exceptionals £m 385 392 20
proﬁt before interest post exceptionals £m 344 375 84
proﬁt before tax pre goodwill and exceptionals £m 250 260 36
proﬁt before tax pre exceptionals £m 225 233 35
proﬁt before tax post exceptionals £m 184 216 147
earnings per share pre exceptionals and deferred tax p 581 632 81
earnings per share post exceptionals and deferred tax p 289 459 370
gearing  1129 1051 78
final dividend p 2856 2856 –
interim dividend p 1734 1734 –
total equity dividends for the year p 4590 4590 –
exceptional items in 2003 of £408 million comprised the net cost of a £468 million charge 
in services for the impairment of goodwill and tangible ﬁxed assets and a £60 million credit
from the release of part of the £250 million exceptional charge made in 20012002 in
respect of certain of systems’ cisopen vision contracts in the usa
exceptional items in 2002 all arising in severn trent systems comprised the net cost of a 
£250 million charge to cover the anticipated total costs of completing loss making cisopen 
vision contracts in the usa and an £80 million proﬁt on disposal of stoner associates
01 severn trent plc annual report and accounts 2003
annual review 2003
you can view and download 
a copy of the group’s 
annual review and 
summary financial 
statement on our website 
at wwwseverntrentcom
reports2003 or request 
a copy free of charge 
by contacting us using 
the details on the inside 
back cover of this report introduction
during a turbulent economic and political
year severn trent was a haven of stability 
for investors against a background of a fall
of around 30 in the ftse allshare index
our share price remained relatively stable 
in addition our shares delivered one of 
the higher dividend yields in the index
we made a clear statement that it is the
board’s intention that for the period up 
to 31 march 2005 barring unforeseen
circumstances full year dividends per share
would be a minimum of 459p this being
the full year dividend for 20012002 in 
line with our longerterm goals of delivering
attractive yields and sustainable dividends
we also worked to grow the business
business performance
to achieve continued stability severn trent
concentrated on further reducing the risks
facing the company and our investors 
in 20022003 we strengthened our focus 
on our core business areas of water waste
and laboratories 
our organisational and ﬁnancial management
systems are designed to help protect us from
risk in particular severn trent’s mixed equity
and debt model is we believe the best way to
provide continued investment for the water
industry however the regulatory regime
must allow an adequate rate of return and
encourage management incentives severn
trent water’s debt was 495 of regulatory
capital value at 31 march 2003
the severn trent water team convinced 
the regulator ofwat to allow us to recover
some of the growing cost pressures on the
company by increasing charges as a result
water bills will rise slightly above the rate 
of inﬂation for the next two years this will
mean that prices to customers are still below
those in 2000 the beginning of the last
regulatory review
contributing to severn trent’s drive for growth
is a move towards public sector contracts
we were named as preferred bidder for a
group turnover was up 32 at 
£18520 million
‘‘
chairman’s statement
02 severn trent plc annual report and accounts 2003
we made a clear statement that for
the period up to 31 march 2005
barring unforeseen circumstances
full year dividends per share would
be a minimum of 459p in line with
our longerterm goals of delivering
attractive yields and sustainable
dividends we also worked to grow
the business
david arculus
chairman
’’ substantial longterm strategic partnership
with solihull metropolitan borough council
in our nonregulated businesses biffa won a
signiﬁcant contract to manage the collection
recycling and disposal of waste for leicester
city council 
in severn trent services our successful
laboratories operation stl strengthened
their suite of water ground and air testing
products growing their proﬁts organically by
over 10 severn trent water international
led by tony hill recently awarded an mbe
continued to pursue opportunities in the 
uk belgium italy and further aﬁeld
group results
group turnover was £18520 million up 32
the nonregulated businesses increased
turnover by 50 to £10306 million
turnover from water and sewerage increased
by 20 to £9179 million
goodwill amortisation was £252 million
£265 million there was a net exceptional
charge in the year of £408 million 
£170 million
group proﬁt before interest tax goodwill
amortisation and exceptional items was 
21 lower at £4098 million the water 
and sewerage business was down by 
26 to £3255 million reﬂecting the tight
regulatory determination whilst the group’s
nonregulated businesses were up 37 to
£1045 million representing 243 of the
group total
group proﬁt before interest tax and
exceptional items was £3846 million
£3923 million group proﬁt before interest
and tax was £3438 million £3753 million
after interest charges of £1594 million
group proﬁt before tax goodwill amortisation
and exceptional items was 36 lower 
at £2504 million group proﬁt before tax
and exceptional items was £2252 million
£2333 million a reduction of 35 
group proﬁt before tax was £1844 million
£2163 million
corporate social responsibility
severn trent is committed to high standards
of corporate governance we are actively
involved in the debate surrounding the 
higgs report into the role of nonexecutive
directors which was published following
recent highproﬁle corporate failures 
while many of the higgs recommendations
are sound we feel that the report is too
prescriptive and we are articulating our
concerns in the hope of achieving a sensible
conclusion to the debate 
severn trent aims to achieve high
environmental and social standards 
we were ranked top of our sector in the 
dow jones sustainability index for the
second consecutive year 
biffa is recognised as making a substantial
and positive contribution to the national
environmental debate as well as boosting
sustainability through its landﬁll gas 
to energy projects during 20022003 
our landﬁll tax credit scheme biffaward
which recycles landﬁll tax credits provided
£17 million for environmental and
community projects
through our group community affairs
programme we have 11 longterm
partnerships with midlands’ charities 
many of our employees have given their 
own time to help community projects
employee volunteering is now being used 
by many businesses within the group as a
way of enhancing and introducing new skills
to employees we are a founding member
of ‘birmingham cares’ which delivers
volunteering opportunities in birmingham
we are also members of business in the
community’s percent club by virtue of
investing more than 1 of our pretax 
proﬁts in the community
management and staff
our board and top management team
remained unchanged during the year
bringing stability and consistency of vision
and strategy 
however clare tritton has now decided to
stand down as a nonexecutive director after
almost 12 years and i would like to thank 
her for her outstanding contribution to the
board eric anstee took over the chairmanship
of the audit committee and marisa cassoni
succeeded him as chairman of the treasury
committee
my greatest thanks however must go to 
our hard working staff in the uk us europe
and other parts of the world who once again
worked tirelessly to achieve our business
goals and uphold our reputation for both
service delivery and environmental concern
our continuing success will be due to their
skill and dedication
outlook
there are signiﬁcant opportunities for the
group particularly from the increasing pace
of legislation in the waste sector with biffa
well positioned to take advantage of growing
demand for predisposal treatment and sorting 
growing synergies between our water and waste
companies will lead to future opportunities 
a signiﬁcant proportion of severn trent
water’s income comes from processing
waste products and we see considerable
scope for sharing expertise and technology
in the current ﬁnancial year our key virtues of
integrity consistent performance and sound
management will be more important than ever
given the continuing economic challenges
looking further ahead the dual drivers of
increasing environmental legislation and
greater understanding of the water industry’s
investment needs offer further growth
opportunities
the group’s strategy continues to be to
increase shareholder value by establishing
severn trent as the uk’s leading integrated
environmental services business management
aims to build on the group’s leadership
positions in the uk waste market and in
environmental testing in the usa and the 
uk with severn trent water continuing 
to outperform its regulatory targets
there are signiﬁcant opportunities for the group
particularly from the increasing pace of legislation 
in the waste sector with biffa well positioned to 
take advantage of growing demand for predisposal
treatment and sorting 
turnover by business
 of group total in 20022003
1 water
2 waste
3 services
4 others
47 £9179m
26 £5109m
20 £3854m
  7 £1343m
1
2
3
4
03 severn trent plc annual report and accounts 2003 the group’s core businesses – water
waste and laboratories – all ﬁnished 
the year in robust shape with waste
and laboratories particularly well
positioned to take advantage of the
economic upturn whenever it comes
robert walker
group chief executive
’’
‘‘
group chief executive’s review
£2 billion
severn trent water continued to deliver
efﬁciencies against its £2 billion investment
programme for the ﬁveyear period 
20002001 to 20042005
i am pleased to report a satisfactory set of
results achieved in what can be described 
as a difﬁcult year with broadly unchanged
pricing in the water business and challenging
economic conditions in our main uk and 
us markets
the group’s core businesses – water waste
and laboratories – all ﬁnished the year in
robust shape with waste and laboratories 
particularly well positioned to take advantage
of the economic upturn whenever it comes
management confronted problem areas and
has largely dealt with them agreement has
been reached with those customers in the
us over the systems’ contracts that were 
in dispute the water puriﬁcation division 
of services showed a strong improvement 
in the second half and biffa belgium had 
a signiﬁcantly better year
and we have successfully targeted major
multiyear contracts in highly competitive
areas of our business
water
the water and sewerage business produced
another creditable performance given broadly
unchanged pricing and continuing cost
pressures which mostly offset the company’s
outperformance against regulatory targets
for gross operating cost efﬁciencies
the business continues on track to outperform
its regulated targets and indeed to meet 
its own stretched targets gross operating
cost efﬁciencies amounted to £61 million 
per annum in 20022003 however these
savings are being offset by cost pressures 
that is why it is important to continue to 
look for new opportunities to make operating
cost savings
severn trent water continued to deliver
efﬁciencies against its £2 billion investment
programme for the ﬁveyear period 20002001
to 20042005 and is on track to deliver
average capex efﬁciencies of around 7 over
that period i am pleased that the company
has achieved its best ever customer service
04 severn trent plc annual report and accounts 2003 the water and sewerage business produced another
creditable performance given broadly unchanged
pricing and continuing cost pressures the markets
for biffa and services are expected to remain difﬁcult
into 20032004 though their leadership positions in
waste in the uk and in environmental testing in the
us and the uk should provide platforms for future
growth when the economic climate improves
performance as measured against the ofwat
customer service standards
in addition of course there are increased
costs that are speciﬁc to the water sector
these formed the basis of our successful
idok application last autumn and most 
of these costs were allowed
the amp4 pricing review process is now 
well under way
while we are pleased with the regulator’s
commitment to greater transparency in the
process and the considerable efforts he is
making with city and investor audiences we
remain concerned about three central issues
• the need to retain equity in the sector both
as a source of capital and as an incentive
towards greater efﬁciency is as critical 
as ever – it is the best way of ensuring
sustained investment and performance
• there is still uncertainty about the 
varying demands of the quality regulators
particularly the ea around the capital
programme we must have clear guidance
and coordination between the various
regulators
• we need to improve the mechanics and
effectiveness of interim price determinates
between reviews the objective should be 
to deal with material charges to company
obligations as and when they occur leaving
companies in the same ﬁnancial position 
as if the charges had been foreseen during
the review
waste
the key theme for the whole year has been
lower industrial and commercial volumes
resulting from the slowing down in the uk’s
manufacturing and commercial sectors this
has impacted all three of biffa’s uk divisions
– collection landﬁll and special waste
however biffa has delivered a solid
performance in difﬁcult market conditions
particularly in the uk excluding the
contribution from footandmouth in
20012002 biffa has produced a broadly 
ﬂat performance year on year
we remain convinced of our analysis of
the attractiveness of the waste sector
• the uk waste sector has the most 
potential for growth in europe
• our integrated business model of
collection landﬁll disposal and special
waste treatment is right for the future
• our focus on industrial and commercial
waste remains the right one
• new municipal contracts combining
collection recycling treatment and 
disposal open up a signiﬁcant market
opportunity for biffa
i am conﬁdent biffa will continue to be 
the benchmark waste operator in the uk
services
severn trent laboratories stl performed
strongly throughout the year delivering
organic growth in proﬁt before interest tax
and goodwill amortisation of over 10 and
is now well positioned to take advantage of
growth opportunities in new areas of testing
operating services continued to add
proﬁtable new municipal outsourcing
businesses although weaknesses remain 
in the smaller pipeline services businesses
reﬂecting management actions water
puriﬁcation’s performance improved in 
the second half
severn trent water international stwi
improved proﬁtability in its aquaﬁn
investment in belgium and commenced 
work at terni the only privatised contract 
in italy to start operations so far 
major longterm contracts
we have successfully bid for longterm
contracts amounting to more than £1 billion
in revenues
• a contract to operate a strategic
partnership with solihull metropolitan
borough council this is worth £750 million
in revenues over the next 15 years and is
due to be signed in the autumn of 2003
• the integrated city of leicester waste
contract producing revenues of £300 million
over 25 years
in addition we have been shortlisted to the
ﬁnal two on longterm contracts with the
ministry of defence £1 billion revenues 
and another integrated waste contract
these all demonstrate the group’s abilities 
to bring resources together from all our
companies to compete for valuable long
term business
core businesses
our core businesses of water waste and 
laboratories have four basic advantages
• leadership scale and low cost advantage
• among the best management teams in
each sector
• consistent strong past performance
• longterm opportunities for proﬁtable growth
these will stand us in good stead as we face
up to another testing year in 20032004
with conﬁdence and commitment
people
none of what i have reported would 
have been possible without the excellent
performance of our staff throughout this
year i am grateful for the resourcefulness
and enthusiasm shown by employees in 
the face of continual challenge
outlook
overall the group is likely to experience
another challenging year in 20032004
severn trent water will beneﬁt from the
outcome of the idok and is expected to
continue to outperform its regulatory 
targets for gross operating cost efﬁciencies
however offsetting cost pressures are
expected to grow in addition increases in
depreciation are also expected reﬂecting 
the growing capital expenditure programme
the markets for biffa and services are
expected to remain difﬁcult into 20032004
though their leadership positions in waste 
in the uk and in environmental testing in 
the us and the uk should provide platforms
for future growth when the economic climate
improves
05 severn trent plc annual report and accounts 2003 the environment is our business
06 severn trent plc annual report and accounts 2003
severn trent has been a component of the djsi for 
four years in a row and has consistently outperformed
the rest of the industry over the years the company
has displayed superior strategy management tools 
and improvement programs in all three dimensions 
of corporate sustainability 
dow jones sustainability index
commenting on severn trent’s performance in the 2003 index
‘‘
‘‘
’’
as part of a continuing process aimed at
gaining permits for all our sites that fall 
under the ippc legislation our partnership
with severn trent water has been key as 
we prepare for the implementation of our
environmental management system
brian how
operations manager 
rank hovis ltd
’’
i am consistently impressed 
by the management’s in
depth understanding of the
commercial and regulatory
framework in which its three
core businesses operate
verity mitchell
utilities analyst 
hsbc corporate banking
‘‘
’’ 07 severn trent plc annual report and accounts 2003
‘‘
’’
to ensure compliance with our environmental
health and safety standards we have created 
a database management system that allows
managers to constantly track their performance
and measure exposure to risks at every biffa 
site across the uk
amanda richards
business systems improvement manager biffa
in the long run we recognise that
exemplary environmental and
social performance contributes to
raising our ﬁnancial performance
and increasing shareholder value
roger peace
director of sustainable development
and risk assurance severn trent plc
‘‘
’’
’’
it’s fundamental that we continue to deliver 
a highquality service to our customers in
ensuring this happens it’s really our people
who make the difference constantly striving
to improve efﬁciency and environmental
health and safety performance
pervinder johal
head of microbiology 
severn trent laboratories
‘‘ work continued on our £70 million investment
programme at derby sewage works in another
project we invested £12 million to lay a water
main between redditch and henley to reinforce
supplies in these areas
we also began an £8 million upgrade 
to the bamford water treatment works in
north derbyshire this project will improve
the quality of drinking water across the 
east midlands as bamford is one of the
company’s key water treatment works
supplying up to 30 million gallons of water 
each day to customers across the region 
service and quality
in the year we delivered our best ever levels of
service as measured by the ofwat customer
service standards we continued to maintain
the highest levels of drinking water quality
and protection for our rivers
we replaced 15km of ageing cast iron pipes
in and around tenbury wells worcestershire
we also upgraded the bromsgrove sewage
treatment works to improve the quality 
of efﬂuent being discharged to the local
watercourse the environment agency has
reported that in the last 10 years midlands
rivers have become considerably cleaner 
as a result of our investments at sewage
treatment works
our efforts to provide a top quality service 
to our customers were recognised when we
won a customer care award at the utility
industry achievement awards for the success
of measures to tackle sewer ﬂooding
industry competition
at the end of the year parliament was debating
aspects of a new water bill part of which 
set a framework for greater competition
within the industry we began to prepare 
for this new environment which will initially
impact only business customers using 
more than 50 megalitres of water a year 
by strengthening account management with
existing customers and working with major
users outside of our region we believe that
the quality of our services positions us well
to beneﬁt from greater competition
the increases now mean that we can
continue to improve customer service and
properly maintain our assets in the face 
of rising costs we will also be able to meet
other new challenges such as the protection
of some householders from sewer ﬂooding
while we were largely pleased with 
ofwat’s interim price determination 
we were disappointed that it did not take 
into account the impact on our operating
costs of new regulations relating to nitrate
vulnerable zones
beating the regulatory contract
during the year we achieved further
operating cost efﬁciencies through a wide
range of measures including the better use
of new technology and by generating more 
of our own power relative to the beginning
of amp3 in 20022003 gross operating 
cost efﬁciencies amounted to approximately
£61 million some £16 million ahead of 
the ofwat target but were offset by cost
pressures amounting to approximately 
£49 million by the end of amp3 gross
operating efﬁciencies are expected to amount
to around £75 million although there will 
be offsetting cost pressures reﬂecting the
capital expenditure programme increases 
in depreciation are also expected
in the year we invested approximately 
£425 million to deliver improvements in
customer service and higher standards in
drinking water and sewage efﬂuent quality
severn trent water continued to deliver
efﬁciencies against its approximate £2 billion
investment programme for the ﬁveyear
period 20002001 to 20042005 and is 
on track to deliver average capex efﬁciencies
of around 7 over the amp3 period 
20022003 performance
in 20022003 turnover from water and
sewerage increased by 20 to £9179 million
£8999 million proﬁt before interest tax
and goodwill amortisation was down 26 to
£3255 million £3341 million after goodwill
amortisation of £01 million £nil proﬁt
before interest and tax was £3254 million
£3341 million
direct operating costs of the regulated 
water business were £3625 million a
reduction in real terms of £14 million 
or 04 excluding the impact of inﬂation 
gross operating cost efﬁciencies in
20022003 amounted to £144 million a
reduction of 41 compared to the previous
year however these efﬁciencies were offset
by cost pressures of £130 million
the programme for reducing costs in 
severn trent water has continued to 
make good progress since the beginning 
of the third asset management plan post
privatisation amp3 gross operating cost
efﬁciencies have now reached £61 million
per annum offset by cost pressures
amounting to £49 million the £61 million 
of gross operating cost efﬁciencies is 
£16 million ahead of the ofwat target 
for year 3 of the 5 year plan period 
the interim determination
last autumn ofwat allowed our appeal 
to increase prices to ﬁnance several new
challenges faced by the company since 
the last price review in 1999 when customer
charges were reduced by almost 12 
the new price limits – bills will rise by 
21 above inﬂation in 2003 and 22
above inﬂation in 2004 – will mean that
average household bills will rise by around
£10 in 20032004
during the year we achieved further operating 
cost efﬁciencies through a wide range of measures
including the better use of new technology and 
by generating more of our own power
review of operations
water and sewerage
turnover
£9179
million
proﬁt before interest
£3254
million
08 severn trent plc annual report and accounts 2003 outlook
to ensure that we can deliver what
customers want and meet rising costs 
it seems likely that water bills will need 
to rise after the next pricing review
severn trent is working closely with ofwat
and the other regulatory bodies to improve
the regulatory framework to ensure that the
needs of both customers and shareholders
are met we perceive a growing understanding
at government level that signiﬁcant efﬁciencies
have now been achieved within the industry
and that further investment is still needed to
protect the achievements made to date and
secure further improvements for customers
while there are challenges ahead we believe
that the strengthening of dialogue with
government coupled with our ability to take
advantage of a more competitive environment
positions us well for future growth
environment agency and the department 
of environment food and rural affairs 
other local research involved focus group
discussions across the region to gain a clear
understanding of our customers’ aspirations
and their willingness to pay for any new
investment needed to meet these
expectations
our draft strategic business plan which is
due to be submitted to ofwat in august 
will also take into account further increases
in our costs as well as the impact of climate
change we are facing rising costs in such
areas as insurance bad debts pensions
sludge disposal and discharges to canals
community and environment
we strive to be a responsible company and
support many hundreds of projects – all with
a sustainability agenda – across the severn
trent region our achievements in this area
are measured externally and ranked against
our peers in the business in the community
corporate responsibility index
we are particularly proud of our support to
young people in our region in 20022003
for example we supplied free water bottles
to thousands of ﬁveyearolds this scheme
followed studies suggesting that children
who do not drink enough water are prone to
tiredness poor concentration and dehydration
the bottles emblazoned with the ‘h2go’ logo
are designed to be reﬁlled with tap water
in 2002 we joined forces with bbc wildlife
magazine and the wildlife trusts to search
for the young environment champion of the
year the scheme sought the most creative
environmental projects in the uk created 
by children aged between 7 and 17
we have surveyed over 1700 of our
operational sites for ecological signiﬁcance
over 650 of these sites contain at least 
one target habitat from the uk biodiversity
action plan management plans and revised
maintenance regimes have been devised 
and are being progressively implemented 
to maximise our contribution to biodiversity
targets
we already have experience of working
outside the severn trent region through
agreements with such companies as northern
foods during 20022003 we continued to
cultivate opportunities across the uk and 
won further contracts with such organisations
as rank hovis mcdougalls dairy crest and
northampton general hospital
we further strengthened our portfolio of
valueadded products with waste guardian
this service helps companies to comply 
with the new ippc integrated pollution
prevention and control legislation and 
to improve waste management
growing the business
in 20022003 severn trent utility services
which provides asset management and
customer service solutions became the
preferred bidder for a 15year contract 
with solihull metropolitan borough council
this contract due to start later this year with
revenues of around £750 million will involve
us working as the council’s strategic partner 
as it seeks to improve services and value 
for money and introduce new technology
severn trent utility services also continued to
strengthen its relationship with existing clients
such as scottish water and network rail
our severn trent retail services business
which was created to offer products 
such as gas electricity insurance and
telecommunications services continued 
to perform strongly in the year over
200000 products were sold to more than
75000 customers
the 2005 pricing review
during the year we began to prepare our
submission to ofwat for the next pricing
review this submission will include our
proposed spending plans for the period
2005 to 2010 these plans will take into
account the state of our existing assets 
and new legislation which we have to meet
our plans will also reﬂect customer research
carried out in conjunction with ofwat the
drinking water inspectorate water uk the
market opportunities
the strengthening of our account
management and the quality of our 
service means we are wellpositioned to
beneﬁt from greater competition amongst
business customers also our business
has opportunities to grow in the areas of
debt management local authority contracts
conveyancing searches and telecoms
we are working closely 
with ofwat and the other
regulatory bodies to improve
the regulatory framework to
ensure that the needs of both
customers and shareholders
are met
brian duckworth 
managing director 
severn trent water
’’
09 severn trent plc annual report and accounts 2003
highlights
• continued to deliver capital expenditure
efﬁciencies against our £2 billion
investment programme for the period
20002001 to 20042005 on track to
deliver around 7 efﬁciencies over amp3
• won a customer care award at the utility
industry achievement awards
• awarded further contracts across 
the uk with such organisations as 
rank hovis mcdougalls dairy crest 
and northampton general hospital 
• named as the preferred bidder for 
a 15year contract with revenues of 
£750 million with solihull metropolitan
borough council
‘‘ review of operations
waste
was awarded european ecomanagement
and audit scheme emas accreditation
to improve efﬁciency and customer 
service within our commercial and industrial
collection business we successfully completed
the roll out of direct online communication
between our trucks and depots eventually
the system will enable our depots to monitor
the progress of all of our 1200 trucks and
for customers to directly access their accounts
online via the website
we took steps to reduce the environmental
impact of our trucks by switching the entire
ﬂeet to ultra low sulphur diesel the cleanest
massmarket fuel available we have also
piloted the use of cleaner engines oils and
paints and have taken measures to reduce
fuel use our biffpack packaging compliance
scheme which is the third largest in the 
uk continued to expand and now has 
422 members
landﬁll
despite the growing demand for recycling
landﬁll remains the uk’s major waste
disposal route in 20022003 our landﬁll
turnover in the uk was £1416 million
£1474 million landﬁll volumes decreased
by around 7 3 for sites open in both 
20012002 and 20022003 and average
unit revenues were up by around 2
excluding the impact of footandmouth
proﬁt from the landﬁll division before
interest tax and goodwill amortisation was
down 152 at £289 million £341 million 
the eu landﬁll directive started to 
take effect during 2002 to meet the
requirements of the directive we submitted
46 conditioning plans to the environment
agency commencing the new permitting
process under the integrated pollution
prevention and control ippc regime
biffa continues to operate some 30 landﬁll
locations including a new site at skelton
grange near leeds this facility was built 
to replace an existing site which is now 
full this includes the provision of a light
waste building for the handling of wind
blown wastes such as paper and cardboard
volumes down 3 before interest tax 
and goodwill amortisation the collection
division contributed a proﬁt of £436 million
£453 million 
biffa services a total of 53 municipal
collection contracts which include waste 
and recyclables collection street cleaning
civic amenity and transfer station sites biffa
also works with more than 60000 industrial
and commercial clients in the uk to help
these customers develop waste management
strategies that meet their obligation to ﬁnd
alternative disposal methods we created 
a new pretreatment division this manages 
all of our paper recycling branches sorting
facilities and transfer stations
an expansion programme is in place to further
enhance our capabilities in this area through
expanding our existing material recycling
facilities and transfer stations this has
commenced with a new recycling centre at
irlam in lancashire capable of handling
around 100000 tonnes of paper a year and
the redevelopment of our existing depot and
recycling facility in nottingham
in response to environmental restrictions
imposed by the eu’s electrical and electronic
equipment directive we also collaborated
with partners endeva and emr to create
transform this new business seeks to make
recycling easier by pooling resources for
disposal of redundant electrical appliances
bridgend council awarded biffa a sixyear
contract to provide household trade bulk
and clinical waste collection services despite
strong competition we also won a sevenyear
contract with mole valley district council 
to manage its household commercial and
recycling waste collections in addition to
these new customers we have extended
existing agreements to include kerbside
recycling collections in south shropshire
burnley forest of dean and north somerset
our longrunning contract on the isle of
wight provides essential experience for such
integrated municipal contracts during the
year 49 of the island’s waste was diverted
from landﬁll and island waste services 
biffa
in 20022003 conditions in the uk waste
market were difﬁcult as the economic slowdown
impacted industrial and commercial volumes
in biffa’s three business sectors of collection
landﬁll and special waste
however in the uk we saw signiﬁcant growth
in the municipal sector pre treatment activities
and electricity generation biffa belgium also
performed well
in 20022003 waste management’s turnover
increased by 33 to £5109 million turnover
in the uk increased by 17 to £4573 million
while belgian turnover increased by 183
to £536 million biffa’s proﬁt before interest
tax and goodwill amortisation including biffa
belgium was down by 70 to £679 million
but broadly ﬂat yearonyear if the contribution
from footandmouth in 20012002 is excluded
after goodwill amortisation of £166 million
£168 million proﬁt before interest and tax
was £513 million £562 million
legislation continued to drive the move away
from landﬁll towards alternative methods of
disposal such as recycling and composting
in particular our reputation in assisting 
local authorities to meet challenging 
targets for diverting waste from landﬁll 
is being recognised
this increased focus on alternatives to landﬁll
enabled us to extend and win signiﬁcant
contracts with local authorities for example
we were awarded a contract to manage all
waste collection recycling and disposal facilities
for leicester city council with revenues of
£300 million as part of this 25year contract
we will invest in a waste recycling facility 
the contract already started includes weekly
collections of wheeledbins glass plastics
and paper for recycling in conjunction with
severn trent water we will also build an
anaerobic digester for treating the city’s
organic waste
collection
our collection turnover in the uk was 
£2707 million £2608 million the economic
slowdown affected industrialcommercial
collection volumes resulting in a decline
turnover
£5109
million
10 severn trent plc annual report and accounts 2003
£679
million
goodwill amortisation £166 million
proﬁt before interest
and goodwill amortisation lancashire and london which has resulted
in more than 70 hectares of new planting
with access improvements to a further 
80 hectares of woodland
we also launched our third biannual
environmental report – biffaecology
outlook
a raft of legislation and increases in landﬁll
tax are likely to drive further demand for
recycling composting and other alternatives
to landﬁll our experience in the european
waste disposal sector leaves us well placed to
seize these growing opportunities however
we believe a great deal of investment is
needed in the uk’s waste infrastructure to
deal with rapidly changing demands and that
investment has been hindered by conﬂicting
policies and confusing ﬁnancial signals
in our recent publication future perfect we
recommend a course of action for a more
sustainable future this demands a sea change
in attitudes and an industrial revolution for
the waste industry critically government
ngos and industry must work more closely
together to ﬁnd effective solutions
capacity to 83mw in the uk we are seeking
to increase our generating capacity to around
100mw by 2006
belgium
in belgium turnover increased by 183 
to £536 million and proﬁt before interest
tax and goodwill amortisation increased to
£31 million £13 million
in europe waste legislation and recycling
techniques are ahead of the uk we believe
our experiences in belgium position us well
to seize new opportunities presented by
increasing legislation in the uk
it was a turnaround year for our business 
in belgium where we operate collection
centres and a landﬁll site at cour au bois
with the capacity to generate 3mw of power
we also continued to operate depots for
industrial and commercial customers and
local authority contracts as well as providing
a special waste treatment facility in antwerp
environment and community
during the year we provided signiﬁcant support
to environment and community initiatives
our landﬁll tax credit scheme biffaward
provided £17 million to community and
environment projects since biffaward 
began in 1997 we have donated £57 million
to more than 600 schemes among those 
to beneﬁt this year was a young people’s
skate park in bexhill east sussex a project
that involved young people the local authority
bexhill high school and the police to provide
much needed additional recreation space
biffaward also funded a series of mass
balance research projects continuing 
the national programme on sustainable
resource use projects included the city
limits report a resource ﬂow and ecological
footprint analysis of greater london launched
by the deputy lord mayor in september 2002
we were very pleased to have the environment
minister michael meacher present the annual
biffaward awards for the fourth consecutive
year the overall winner was the national
urban forest unit which established three
new urban forestry initiatives in yorkshire
ensuring the new skelton grange site can
provide continuous service in wet and windy
weather when other landﬁlls may close it 
is also one of the ﬁrst in the country to be
licensed under the new ippc legislation which
is a requirement of the landﬁll directive
we have been successful in gaining extensions
to our sites increasing our void bank by 
8 million cubic metres which now stands at
107 million cubic metres of operational void
or void under development including arpley
special waste
the special waste division in the uk which
includes the important power generation
activity achieved a 90 increase in turnover
to £450 million and contributed proﬁt before
interest tax and goodwill amortisation of
£59 million £61 million
as one of the uk’s largest suppliers of
integrated waste management services we
are well placed to help companies deal with
multiple waste streams and meet their legal
obligations in 20022003 we were awarded
a three year contract by shell to service 
630 retail forecourts collect ofﬁce waste from
distribution terminals and manage waste 
at the stanlow and eastham oil reﬁneries
previously shell employed several regional
waste management companies for this work
we also won a major contract to deal with 
a variety of waste streams for peugeot in
coventry and another contract with chemical
company rhodia to handle waste at seven
uk chemical plants the latter commits biffa
to reducing rhodia’s waste management
costs through recycling and other landﬁll
diversion techniques
our waste treatment plants are well placed to
exploit opportunities offered by the landﬁll
directive they have successfully developed a
range of treatment technologies for customer
speciﬁc waste treatment need as customers
seek to comply with new regulations such
advanced technologies play an increasingly
important role
we continued to generate electricity from
landﬁll gas having increased our interests in
11 severn trent plc annual report and accounts 2003
market opportunities
biffa’s integrated business model of
collection landﬁll disposal and special
waste treatment positions the company as
the ‘benchmark’ waste company in the uk
the landﬁll directive opens up signiﬁcant
opportunities for longterm municipal
contracts and this combined with a focus
on industrial and commercial waste
accounts creates signiﬁcant opportunities
highlights
• awarded a contract to manage all 
waste collection and disposal facilities 
for leicester city council with revenues 
of £300 million over 25 years
• reduced the environmental impact of 
our trucks by switching the entire ﬂeet 
to ultra low sulphur diesel the cleanest
massmarket fuel available
• awarded a three year contract by shell 
to service 630 retail forecourts collect
ofﬁce waste from distribution terminals
and manage waste at the stanlow and
eastham oil reﬁneries
• signiﬁcant growth in the municipal 
predisposal treatment and electricity
generation sectors
a raft of legislation and
increases in landﬁll tax are
likely to drive further demand
for recycling composting and
other alternatives to landﬁll
our experience in the
european waste disposal
sector leaves us well placed 
to seize these growing
opportunities
martin bettington 
managing director 
biffa
’’
‘‘ review of operations
the services group
with commercial clients and capitalising on
opportunities presented by new european
legislation such as the landﬁll directive and
integrated pollution prevention and control
ippc regulations
we continued to win signiﬁcant contracts
including a major agreement with cardiff
harbour authority for example that will
involve analysing samples to help their
ongoing monitoring and assessment of water
quality within the 200 hectare freshwater
lake created by closure of the barrage
another example just a few miles down the
coast is llandarcy the site of the uk’s oldest
crude oil reﬁnery the site owners bp in
conjunction with the welsh development
agency are developing it for commercial and
residential use urs a leading environmental
consultancy are advising on environmental
issues using data generated from analysis
completed by stl
integration
stl is a relatively young business that has
grown signiﬁcantly in the last ﬁve years with
the acquisition of laboratories across the us
and uk during the year signiﬁcant progress
was made towards full integration of all 
our sites and the creation of a common
culture within a uniﬁed company extensive
efforts were made to create an employee
communications program that will help staff
by many large ﬁrms and general economic
pressures affecting much of the client base
scale and breadth
the scale and breadth of stl’s offering remains
key to our success the laboratories business
works for 200 of the fortune 500 companies
and during 20022003 continued to win
new work with large blue chip clients 
stl was also selected by atofina
petrochemicals part of totalfinaelf 
total sa to provide environmental
laboratory services to all of its us facilities
in 20022003 the business responded to
emerging concerns about the prevalence of a
rocket fuel additive identiﬁed as perchlorate
in us water sources by creating ﬁve
specialist analysis centres within existing
laboratories to respond to the demand for
perchlorate testing to further strengthen our
portfolio a dedicated drinking water analysis
facility was equipped and certiﬁed in stl’s
existing laboratory in savannah georgia
during the year the need to build a mycology
and microbiology capability in the us became
clear as key clients regularly requested this
service and research revealed a growing
demand in this area this led to the acquisition
of new jerseybased pk microbiology
services shortly after the close of the ﬁnancial
year net assets on acquisition are provisionally
estimated at around £1 million this puts stl
in a particularly good position to capitalise on
growing concerns about toxic mould which
is linked to ‘sick building syndrome’ this
can lead to ill health among the occupants 
of affected buildings and is the subject of
numerous litigation claims in the us
uk highlights
in the uk stl has two centres of excellence
in coventry which specialise in waste water
and soil analysis one in south wales that
focuses on drinking water and another in
cheshire with expertise in ecotoxicity
microbiology and biology
in 20022003 the uk operation sought 
to offset potential reduced demand from 
the water sector by increasing its business
20022003 performance
services’ turnover increased by 10 to
£3854 million proﬁt before interest tax
goodwill amortisation and exceptional 
items increased by 69 to £342 million
after goodwill amortisation of £85 million 
£96 million proﬁt before interest tax 
and exceptional items was £257 million
£224 million after an exceptional charge
of £468 million services’ proﬁt before
interest and tax was a loss of £211 million
proﬁt of £224 million
the exceptional charge of £468 million
represents a write down for impairment in
the carrying value of water puriﬁcation and
operating services principally in pipeline
services the charge for impairment has 
no impact on cash ﬂows
some 81 of services’ turnover arose in the
usa excluding the impact of exchange rates
services’ turnover increased by approximately
7 and proﬁt before interest tax goodwill
amortisation and exceptional items increased
by approximately 10 after eliminating 
the share of associated undertakings’ proﬁt
where the corresponding turnover is not
consolidated into services’ results services’
sales margin increased to 63 60
severn trent laboratories
leadership
in 20022003 severn trent laboratories
stl strengthened its leadership position in
the us and uk environmental testing markets
despite the difﬁcult economic conditions
turnover increased by 01 to £1718 million
but turnover in the us in us grew by 44
and turnover in the uk in £ grew by 240
stl serves these markets with 29 laboratories
in the us and 4 in the uk during the year we
continued to expand our geographic presence
with new service centres in key locations in
the us bringing the total number of satellite
locations to 16 this expansion extends stl’s
reach across the us by providing local sales
and sample collection services for key clients
this increased turnover in the us and uk
markets despite reduced corporate spending
12 severn trent plc annual report and accounts 2003
turnover
£3854
million
stl’s leadership position and
wide spectrum of services
places us in pole position 
to win major contracts and
continue to improve our
business model
rachel brydon jannetta 
president and 
chief executive ofﬁcer 
severn trent laboratories
’’
‘‘
£342
million
goodwill amortisation £85 million and 
exceptional charges £468 million
proﬁt before interest
goodwill amortisation and exceptional items during the year we combined the us and
european operations of our water metering
business and introduced new software that
will enable us to read a wider range of water
meters in use across the us
our international arm severn trent water
international focused on providing private
sector management in western europe where
stateowned water authorities are being
restructured in 20022003 it increased
turnover by 43 we began our 30year italian
contract to operate water and wastewater
services in terni umbria this positions us well
to take advantage of emerging opportunities
in italy we also continued to operate in
belgium germany ireland and portugal
severn trent water international’s
management consultancy business works
with funding agencies and governments to
support sustainable development and capacity
building in the developing world and eastern
and central europe during the year we were
awarded a management contract for guyana
water incorporated which covers the whole
of guyana in russia we led two consultancy
projects to improve water management in 
14 cities
outlook
the restructuring of the business has laid 
a strong foundation for growth when the
economy recovers we also believe that our
increased focus on international markets 
will help to insulate the business from future
economic difﬁculties in particular regions
and california manufacturing operations 
into the torrance california facility
we continued to invest in developing and
marketing new technologies for example
through our marketing alliance with bayer
ag we developed and began to market our
sorb 33™ system for removing naturally
occurring arsenic from drinking water
in line with our focus on global markets our
joint venture with de nora won a contract to
supply seaclor® on site sodium hypochlorite
generation systems for use at the ras laffan
industrial city in qatar we also won a contract
to supply our clortec™ reservoir management
systems at 28 reservoirs for the moulton
niguel water district in california
operating services including severn trent
water international
the operating services division operates
water and wastewater facilities plus other
related services for customers who are
largely based in the us its experience in
realising operating efﬁciencies and delivering
new technology enables the division to achieve
signiﬁcant cost savings for many clients
turnover in operating services increased 
by 46 to £1261 million
contract operations delivered organic
turnover growth of around 7 it was buoyed
by demand from us municipalities seeking
ways to reduce costs in order to ease budget
deﬁcits the city of jackson mississippi
renewed and expanded our operations 
and maintenance contract which includes
three wastewater treatment plants and 
92 pumping stations in a separate contract
the city of alamogordo in new mexico
awarded us an eightyear contract to operate
its water and wastewater treatment facilities
by contrast pipelines services performed
poorly in a difﬁcult market as municipalities
sought to rein in spending on their water and
sewerage infrastructure in response to the
fall in demand for pipeline assessment work
we closed sites in texas tennessee north
carolina and connecticut
identify with sister laboratories and work
together to share customer projects and to
benchmark best practice to create efﬁciency
beneﬁts and technology sharing across all sites
outlook
stl’s leadership and wide spectrum of
services places us in pole position to win
major contracts and continue to improve 
our business model
severn trent services
improving efﬁciency
in 20022003 severn trent services took
action to both improve efﬁciency and reduce
its exposure to the troubled us economy
we appointed a new chief executive who
launched a major restructuring programme
that integrated some us and european
businesses reduced layers of management
consolidated manufacturing operations and
closed four us sites which reduced headcount
by approximately 140 people as part of 
the process ﬁnance human resources 
and marketing functions were centralised
this allowed us to spread best practice and
technologies more rapidly around the world
generate necessary cost savings and place
greater focus on markets with signiﬁcant
growth potential
water puriﬁcation solutions
our water puriﬁcation division delivers 
water disinfection and ﬁltration products 
to municipal and industrial customers its
turnover decreased by 21 to £875 million
its performance was impacted by its difﬁcult
market place there was a fall in demand for
ﬁltration systems as industrial clients reined
in spending and municipal clients reallocated
already tight budgets to security areas
however following management action
performance improved in the second half
we increased the proportion of our sales
outside the us to 45 as we renewed 
our focus on global markets we also 
brought together the previously separate 
us and european operations under a single
management to further reduce our cost
base we consolidated our new hampshire
13 severn trent plc annual report and accounts 2003
highlights
• launched a major restructuring
programme that integrated some us and
european businesses
• severn trent water international begun 
a 30year contract to supply water and
wastewater services in terni italy
• in stl we continued to expand our
geographic presence with new service
centres in key locations in the us
• in water puriﬁcation solutions we
increased the proportion of our sales
outside the us to 45 as we renewed 
our focus on global markets
the restructuring of the
business has laid a strong
foundation for growth when
the economy recovers
len graziano 
president and 
chief executive ofﬁcer
severn trent services
’’
‘‘
market opportunities
for laboratories the scale and breadth 
of our offering remains key to its success
in the uk to offset potential reduced
demand from the water sector stl are
seeking to capitalise on new legislation
such as the landﬁll directive and ippc
regulations for our services businesses
we will continue to increase our focus 
on international markets review of operations
other businesses
it has global reach through its partner network
through restructuring it lowered its cost base
while retaining its leadership position in north
america its customer reception continues to
be strong national grid became a worksuite
customer in the past year industry leaders
such as aep lge ppl and we energies 
put worksuite products into production both
fpl and in the uk severn trent water also
implemented the new worksuite wireless
ﬁeld products the reception for its most
recent products in the areas of the internet
scheduling and wireless continues to grow
with the wireless segment enhanced by a
reseller agreement with panasonic
property engineering consultancy
and insurance
20022003 performance 
total turnover from these businesses in 
the year was £730 million £430 million
generating proﬁt before interest and tax 
of £55 million £15 million
property
development activity during 20022003
continued at an encouraging level with
signiﬁcant progress being made 
at thorpe park leeds which has an 
ultimate capacity of 18 million sq ft of 
ofﬁce development pre let buildings are 
in course of construction for ws atkins plc
and boxwood plc whilst a regional ofﬁce 
for bryant homes limited was handed over
in march
daventry international rail freight terminal
remains the largest scheme to be undertaken
by the company and during the year terms
were concluded with royal mail for the
construction of a new regional sorting hub 
of almost 300000 sq ft on a site of 30 acres
this building due for completion in august has
now been forward sold to a private investor
systems
20022003 performance
total turnover for systems reduced to 
£613 million £620 million systems
produced a loss before interest tax and
exceptional items of £31 million loss of
£58 million after an exceptional credit 
of £60 million net exceptional charge 
£170 million proﬁt before interest and 
tax was £29 million loss of £228 million
agreement has been reached with those
customers in the us over the cisopen vision
contracts that were in dispute with the
associated costs of these problem contracts
expected to be covered by the £250 million
exceptional charge in 20012002 an
exceptional credit of £60 million has been
taken in the year representing the release of
part of the £250 million exceptional charge
systems continues to provide some support
and maintenance for these customers
aseriti the new brand for severn trent
systems in the uk was created to help 
move the business forward with a new and
exciting strategy of development and growth
aseriti takes a strong interest and pride in
the culture that it creates in its business
through an extensive culture change
programme employees are being involved 
in creating an adaptive and constructive
culture for now and the future 
in severn trent water aseriti delivered a
number of very large projects including a
ﬁeld asset management system and 5000
seat technology refresh we also put in 
place a benchmarked development services
contract to ensure best value for our work
with severn trent water 
aseriti has also had its ﬁrst successes in
winning business outside the utility market
working on a variety of consultancy and
technology projects for public and private
sector clients
systems’ work management business under
the worksuite brand is being transformed
into a standalone business based in houston
at hinckley where the company had
originally intended undertaking a distribution
scheme the site has been sold to another
developer planning permission has recently
been obtained for a 770000 sq ft mixed 
use scheme at tournament fields warwick
engineering consultancy
during the year charles haswell and partners
has been recognised as one of the top three
mediumsized consulting engineers by a
leading industry journal
the company has continued to make a
major contribution to the successful delivery
of severn trent water’s capital programme
for 20022003 and has been recognised by
yorkshire water services as a key member of
its very successful eastern area wastewater
capital solution team it is also a member 
of a consortium that is delivering capital
solutions to scottish water
charles haswell and partners is a key member
of the team delivering the dublin port tunnel
project which is the largest civil engineering
project in ireland and is a major contributor
to the channel tunnel rail link project
through the introduction of its business
management system the company has
enabled the successful transition of its
quality assurance processes to the iso
90002000 standard
insurance
derwent insurance based in guernsey
provides insurance cover to severn trent
group companies
14 severn trent plc annual report and accounts 2003
highlights
• aseriti the new brand for severn trent
systems in the uk was created to help
move the business forward with a new 
and exciting strategy of development 
and growth
• systems’ work management business
under the worksuite brand is being
transformed into a standalone business
based in houston it has global reach
through its partner network through
restructuring it lowered its cost base
while retaining its leadership position 
in north america corporate social responsibility
our policy
we strive to be a responsible corporate
citizen and recognise that severn trent 
has an important role to play in achieving
sustainable development for society as a
whole as part of this commitment we seek
to conserve natural resources and to support
the communities in which we operate
our role as an environmental services
company means that our activities are 
of intrinsic beneﬁt to society however 
our ability to achieve business success also
makes a signiﬁcant contribution to building 
a sustainable future as well as delivering
shareholder value we support the wider
community in ways that range from the
employment opportunities we offer to our
charitable donations
vision values and principles
we aspire to high standards of corporate
behaviour as we pursue our vision of leadership
in the environmental services industry to 
set an ethical framework for our activities 
we have published our values and a code 
of business principles which are available on
our website wwwseverntrentcom
our values articulate the company’s
commitment to disposing of waste safely
providing value for money conserving natural
resources maintaining infrastructure and
complying with all appropriate standards
the code of business principles guides our
people as they face daytoday challenges
and covers issues ranging from obeying 
the law to displaying integrity
community support
our community affairs programme focuses
on the key themes of environmental
education the built environment and the
natural environment
in 20022003 we donated more than 
£02 million to community projects among
the charities to beneﬁt were bridle gate in
staffordshire which provides educational
opportunities for children with special 
needs and the cromford venture centre 
in derbyshire which helps young people
build conﬁdence and selfesteem
through our employee volunteering
programme we encourage our people 
to share their expertise with the charities 
we support in 20022003 we supported
employees in holding workshops with the
fairbridge charity in the west midlands 
to provide disadvantaged young people 
with guidance about setting up their 
own businesses
in addition to the community affairs
programme our biffaward landﬁll tax 
credit scheme which is administered by 
the royal society for nature conservation
provided £17 million for environment and
community projects
around the world
severn trent water international shares 
its skills to improve water management in
the developing world and in eastern and
central europe
for example we are an active participant in
the uk government’s partners for water and
sanitation initiative under this scheme we
are working to improve water and sanitation
services in nigeria south africa and uganda
environmental management
we have a robust environmental management
system which has achieved the international
iso 14001 accreditation to ensure that
environmental management is pursued 
at a strategic level it is overseen by our
environmental advisory committee which
reports directly to the board
our progress
we are committed to being open about our
corporate social responsibility performance
during the year we were again ranked top 
of our sector in the dow jones sustainability
index and featured in the ftse4good index
we publish full details of our progress in our
stewardship report and on our website
our corporate vision is to be at the forefront of 
the environmental services industry our corporate
values of environmental leadership service and
quality enshrined in our code of business principles
and conduct deﬁne our business culture and guide
our strategies
to set an ethical framework for our
activities we have published our values
and a code of business principles which
are available on our website
wwwseverntrentcom
the code of business principles guides our
people as they face daytoday challenges
and covers issues ranging from obeying
the law to displaying integrity
15 severn trent plc annual report and accounts 2003 financial review
16 severn trent plc annual report and accounts 2003
group results
group turnover was £18520 million 
£17943 million an increase of 32 over
last year the growth in turnover was mainly
due to the contribution of the nonregulated
businesses which increased turnover by
50 to £10306 million £9814 million
representing 529 522 of the group
total before the elimination of inter segment
trading turnover from water and sewerage
increased by 20 to £9179 million 
£8999 million
goodwill amortisation was £252 million
£265 million there was a net exceptional
charge of £408 million £170 million – 
see below
group proﬁt before interest tax goodwill
amortisation and exceptional items was 
21 lower at £4098 million £4188 million
the water and sewerage business was down
by 26 to £3255 million £3341 million
the group’s nonregulated businesses in
total were up by 37 to £1045 million
£1008 million representing 243 232
of the group total before unrealised proﬁt 
on inter segment trading and corporate
overheads
group proﬁt before interest tax and
exceptional items was £3846 million
£3923 million group proﬁt before interest
and tax was £3438 million £3753 million
after interest charges of £1594 million
£1590 million group proﬁt before tax
goodwill amortisation and exceptional 
items was 36 lower at £2504 million
£2598 million group proﬁt before tax 
and exceptional items was £2252 million
£2333 million a reduction of 35 
group proﬁt before tax was £1844 million
£2163 million
the total tax charge for the year was 
£843 million £584 million of which
current tax represented £248 million 
£161 million and deferred tax was 
£595 million £423 million minority
interests were £09 million £06 million
proﬁt after tax and minority interests 
was £992 million £1573 million
basic earnings per share were 289 pence
459 pence adjusted basic earnings 
per share before exceptional items and
deferred tax were 581 pence 632 pence
a decrease of 81
operating activities generated a net cash
inﬂow of £6827 million the main cash
outﬂows were capital expenditure and
ﬁnancial investment of £4540 million 
equity dividends of £1575 million and 
net ﬁnancing costs of £1467 million the
increase in net debt was £939 million
net debt at 31 march 2003 was £25056
million £24117 million gearing reﬂecting
the provision for deferred tax was 113 
105 the group’s net interest charge 
was covered 44 times 44 times by proﬁt
before interest tax depreciation goodwill
amortisation and exceptional items
exceptional items
there was a charge for exceptional items 
in the year of £408 million comprising the
net cost of
• a charge of £468 million in services 
for impairment in the carrying value of
water puriﬁcation and operating services
principally in pipeline services this 
is an increase of £54 million from the 
£414 million charge reported at the 
halfyear the charge for impairment 
has no impact on cash ﬂows
• a £60 million credit from the release of
part of the exceptional charge made in
20012002 in respect of certain of systems’
cisopen vision contracts in the usa
in the previous year there was a net charge
for exceptional items of £170 million all
arising in systems comprising a proﬁt 
of £80 million from the sale of stoner
associates and a charge of £250 million 
in respect of certain of systems’ cisopen
vision contracts in the usa
over recent years the group has generated 
a proﬁt from the sale of ﬁxed assets
principally arising from the sale of land 
by severn trent water which in 20022003
amounted to £65 million the group’s proﬁt
from the sale of ﬁxed assets in 20032004 
is currently expected to be signiﬁcantly
larger than in previous years with an
anticipated outcome of around £10 million
to £20 million given the magnitude of this
anticipated outcome the group currently
expects to treat the proﬁt from the sale of
ﬁxed assets in 20032004 as exceptional
taxation
the charge for current tax was £248 million
£161 million an effective rate of 110
69 attributable to proﬁt after interest 
and goodwill amortisation but before tax 
and exceptional items the current tax rate
has beneﬁted from the utilisation of taxation
allowances disclaimed in earlier years due
to the changing shape and maturity of the
group the effective rate for the current tax
charge as a percentage of proﬁt after interest
and goodwill amortisation but before tax and
exceptional items is expected to increase
the group has chosen to apply discounting
in computing deferred tax the deferred tax
charge in future years is more difﬁcult to
predict as in particular it is impacted by
changes in interest rates from one balance
sheet date to the next deferred tax has no
impact on tax paid or cash ﬂows
pensions
ssap24 the applicable standard for severn
trent uses the results of the last formal
actuarial valuations which in total had a 
net surplus of approximately £57 million to
determine the pension charge in the group’s
accounts the ssap24 charge continues to
be derived on this basis until the next formal
actuarial valuation thus notwithstanding the
fall in equity values this principle has been
followed in determining the group’s pension
charge for 20022003 and is currently
expected to be applied in 20032004
on an frs 17 basis the estimated 
net position before amounts deemed
irrecoverable and deferred tax of the 
group’s deﬁned beneﬁt pension schemes
was a deﬁcit of approximately £325 million
as at 31 march 2003 as compared to a
surplus of approximately £30 million as 
at 31 march 2002 net of deferred tax the
estimated net deﬁcit on an frs 17 basis  17 severn trent plc annual report and accounts 2003
as at 31 march 2003 was approximately
£228 million as at 31 march 2003 the
group’s deﬁned beneﬁt pension schemes had
total assets of approximately £746 million of
which around 67 was invested in equities
the group has four deﬁned beneﬁt pension
schemes viz the severn trent water 
pension scheme stwps which is by 
far the largest of the group’s deﬁned 
beneﬁt pension schemes the severn trent
mirror image pension scheme stmips 
the uk waste pension scheme ukwps 
and the severn trent senior staff pension
scheme stssps
the stmips is due its formal actuarial
valuation as at 31 march 2003 it has been
decided to bring forward the formal actuarial
valuation of the ukwps by one year to 
6 april 2003 given the deterioration in 
the funding position of these two schemes
since their last formal actuarial valuations
these valuations are expected to result in 
an increased pension charge for the group 
in 20032004 that is provisionally estimated 
to be of the order of around £2 million to 
£5 million
if the value of investments does not recover
relative to liabilities the next formal actuarial
valuations of the stwps and the stssps are
expected to result in a signiﬁcant additional
increase in the group’s pension charge the
next formal actuarial valuations for these two
schemes must be undertaken as at a date
that is no later than 31 march 2004
for further information on the group’s pension
and retirement beneﬁts see note 23
treasury management
the group’s treasury affairs are managed
centrally and in accordance with its treasury
procedures manual and policy statement
the treasury operation’s primary role is to
manage liquidity funding investment and
the group’s ﬁnancial risk including risk 
from volatility in interest and to a lesser
extent currency rates and counterparty
credit risk its activities are subject to a 
set of controls commensurate with the
magnitude of the borrowings and investments
under its management a treasury committee
appointed by the board determines
matters of treasury policy and its approval 
is required for certain treasury transactions
it is the group’s strategy to access a broad
range of sources of ﬁnance to obtain both
the quantum required and the lowest cost
compatible with the need for continued
availability
the group uses ﬁnancial derivatives solely 
for the purposes of managing risk associated
with ﬁnancing its normal business activities
the group does not hold or issue derivative
ﬁnancial instruments for ﬁnancial trading
purposes the group uses a limited number
of currency swaps and interest rate swaps 
to redenominate external borrowings into the
currencies and interest rate coupon required
for group purposes the duration of these
swaps matches the duration of the principal
instruments
the group’s policy for the management of
interest rate risk requires that no less than
50 of the group’s borrowings should be 
at ﬁxed interest rates or hedged through 
the use of interest rate swaps or forward 
rate agreements at 31 march 2003 
interest rates for some 76 of the group’s
net debt of £25056 million were so ﬁxed 
at a weighted average interest rate of 62 
for a weighted average period of 177 years
in addition the group has £125 million of
forward start interest rate swaps ﬂoating 
to ﬁxed that commence during 20032004
these forward start interest rate swaps 
have a weighted average interest rate of
51 and a weighted average duration 
of 30 years
the group’s business does not involve
signiﬁcant exposure to foreign exchange
transactions cross currency swaps are
employed to exchange foreign currency
borrowings for sterling the group also has
investments in various assets denominated
in foreign currencies principally the us
dollar and the euro the group’s current
policy is to hedge an element of the currency
translation risk associated with certain
foreign currency denominated assets
further details of the group’s borrowings
investments and ﬁnancial instruments are
contained in note 17 to the accounts
alan perelman
group finance director
proﬁt before interest tax goodwill amortisation 
and exceptional items for the group’s nonregulated
businesses in total was up by 37 to £1045 million
£1008 million representing 243 232 of the
group total before unrealised proﬁt on inter segment
trading and corporate overheads
supplementary information
for supplementary information including 
the group’s presentation to analysts see the
severn trent website wwwseverntrentcom board of directors
18 severn trent plc annual report and accounts 2003
alan perelman
derek osborn
brian duckworth
david arculus
eric anstee
clare tritton
martin bettington
john banyard
robert walker
marisa cassoni
john mcadam
martin flower
board committees
membership of board committees 
is as detailed below
audit committee
e e anstee chairman
t d g arculus
m l cassoni
f a osborn
secretary – p p davies
charitable contributions committee
b duckworth chairman
rmwalker
secretary – p p davies
environmental and corporate social
responsibility advisory committee
f a osborn chairman 
t d g arculus
m j bettington 
r brydon jannetta
b duckworth
lf graziano
j w oatridge
r m walker
secretary – p p davies
executive committee
r m walker chairman
t d g arculus
j k banyard 
m j bettington
p p davies and secretary
b duckworth
pj gavan
jw oatridge
a s perelman
pktandon
remuneration committee
m c flower chairman
t d g arculus
j d g mcadam
secretary – p p davies
nominations committee
t d g arculus chairman
m c flower 
j d g mcadam
secretary – p p davies
treasury committee
ml cassoni chairman
e e anstee
t d g arculus 
t e jack
a s perelman
r m walker
m r wilson
secretary – p p davies
senior independent nonexecutive
director
m c flower
group general counsel and company
secretary
p p davies llb solicitor 19 severn trent plc annual report and accounts 2003
david arculus ma msc chairman 57
mr arculus joined the board in may 1996 as
a nonexecutive director and was appointed
chairman on 29 july 1998 he is chairman
of earls court  olympia group ltd and is 
a nonexecutive director of barclays plc 
he was recently appointed as a nonexecutive
director of mm0
2
 from 1998 to october
2001 he was chairman of ipc group ltd
until 1997 he was group managing director
of emap plc the international media
company where he played a signiﬁcant role
in the growth of that company mr arculus
was formerly a journalist and a producer at
the bbc in april 2002 he was appointed by
the government to chair its better regulation
task force
robert walker ma 58
mr walker joined the board in may 1996 as
a nonexecutive director he was appointed
deputy chief executive in july 1999 and
became group chief executive in august
2000 he has previously worked for procter
 gamble mckinsey  company and
pepsico inc where he was a division
president mr walker is also a nonexecutive
director of wolseley plc
eric anstee fca 52
mr anstee joined the board in july 1999 he is
chairman of mansell plc and a nonexecutive
director of ssl international plc he was
appointed chairman of d p communications
uk plc in may 2002 until august 2001 
he was chief executive – financial services 
of old mutual group having been group
finance director from november 1998 to
december 1999 prior to that he was group
finance director of the energy group plc
which was acquired by texas utilities in
1998 and group finance director of eastern
group plc between 1993 and 1995 prior to
its acquisition by hanson plc before joining
eastern he was a senior partner with ernst 
 young and a member of the management
board of the management consultancy arm
he is a member of the accounting standards
board’s urgent issues task force and a
member of the senate of the institute of
chartered accountants in england  wales
john banyard bsceng freng fice 
fciwem 58
mr banyard joined the board in january
1998 he is an executive director of severn
trent water limited with responsibility for
asset management he is also a director 
of uk water industry research limited a
member of the court of cranﬁeld university
and the royal academy of engineering
visiting professor of water engineering at
loughborough university mr banyard is 
a chartered civil engineer and has worked 
in a number of engineering roles within the
group since joining severn trent in 1974 
he was elected a fellow of the royal academy
of engineering in 1997 he is currently
president of the pipeline industries guild
martin bettington bsc mecheng mba 50
mr bettington joined the board in november
1994 he is the managing director of severn
trent’s waste management business biffa
waste services mr bettington was previously
employed by bet plc biffa’s former holding
company he holds an mba from manchester
business school
marisa cassoni bsc aca 51
ms cassoni joined the board on
1 september 2001 she is currently group
finance director of royal mail plc having
previously been group finance director at
britannic assurance plc from 1998 to 2001
ms cassoni qualiﬁed as an accountant with
deloittes where she rose to be corporate
finance manager she later moved to the
prudential corporation becoming group
finance director of the prudential’s uk
division in 1994
brian duckworth ba fcca fciwem 
fiwo 54
mr duckworth joined the board in 
november 1994 he has worked in various
roles since joining severn trent in 1974 
and was appointed managing director of
severn trent water limited on 1 april 1995 
mr duckworth was appointed as a non
executive director of avon rubber plc 
and redrow plc in 2002 he has served 
as the president of the institution of water
ofﬁcers and chairman of water uk the
water industry’s trade association
martin flower ba 56 
mr flower joined the board in june 1996
and is the senior independent nonexecutive
director he is group chief executive of coats
plc and during his career at coats has been
based in different parts of europe asia paciﬁc
and south america he has a particular
interest in and knowledge of european and
eu affairs
john mcadam bsc phd 55
dr mcadam joined the board on
18 september 2000 he is chief executive
and a member of the board of ici plc he
joined ici in 1997 following the acquisition 
of the specialty chemical businesses from
unilever where he held a number of senior
positions in birds eye walls ltd unichema
international and quest international 
he was appointed executive vice president
coatings and chief executive of ici paints in
1998 and joined the board of ici plc soon
after when he also became responsible for
corporate research  technology he took
over as chief executive of ici plc in april
2003 he is a member of the university of
surrey business advisory group
derek osborn cb 62
mr osborn joined the board on
21 september 1998 and is a leading 
ﬁgure in the environmental world he 
was chairman of the uk round table on
sustainable development from 1999 to
2000 and is now a member of the uk
commission on sustainable development
he has been chairman of uned uk since
1996 and was chairman of the international
institute for environment and development
from 1998 to 2002 he is chairman of
jupiter global green investment trust 
and of the international advisory board of
erm cvs mr osborn was director general 
of environment protection in the department 
of the environment from 1990 to 1995 and
chairman of the management board of the
european environment agency from 1995 
to 1999 
alan perelman ma msc 55
mr perelman joined the board in october
2001 and was appointed group finance
director in december 2001 prior to this 
he was group finance director at whitbread
from 1990 to 2001 previous positions held
were group finance director at the gateway
corporation and various positions at rio
tinto both in the uk and overseas
clare tritton ba qc 67
mrs tritton joined the board in november
1991 she is also a trustee director of
certain of the severn trent pension schemes
mrs tritton has wide legal experience with
emphasis on european community law and
particularly on competition law she served
on the monopolies and mergers commission
and on fimbra until may 1998 mrs tritton
is chief executive of throckmorton estates
and was until recently a nonexecutive
director of the birmingham royal ballet
trust company she is also chair of the
primary immunodeﬁciency association and
serves on the country land and business
association
nonexecutive director directors’ report
the directors present their report together
with the audited ﬁnancial statements of the
group for the year ended 31 march 2003
principal activities
the principal activities of the group
continued to be the supply of water and
sewerage services waste management 
and the provision of environmental services
these are described in more detail together
with a review of the group’s business and
future developments on pages 8 to 14 which
should be read in conjunction with this
report details of the principal joint venture
associated and subsidiary undertakings of
the group at 31 march 2003 appear in notes
12 and 25 to the ﬁnancial statements on
pages 46 47 61 and 62
dividend and reserves
details of dividends paid payable and
proposed are set out in note 8 to the ﬁnancial
statements on page 43 subject to approval at
the annual general meeting the recommended
final dividend of 2856p 2002 2856p 
net for each ordinary share will be paid on 
1 october 2003 to shareholders on the register
at the close of business on 20 june 2003
bringing the total for the year to 4590p
2002 4590p proposed transfers tofrom
reserves are set out in note 20 to the ﬁnancial
statements on page 53
share capital
details of movements in share capital are
shown in note 19 to the ﬁnancial statements
on pages 51 and 52 a special resolution
resolution 13 will be put to shareholders 
at the annual general meeting which if
passed will renew the directors’ authority 
to issue equity securities for cash without
ﬁrst having to offer these securities to
existing shareholders as is required by
section 89 of the companies act 1985 
the authority allows the directors to allot
equity securities in connection with a rights
issue it also permits the directors to allot
equity securities up to a maximum amount
equal to 5 of the issued ordinary shares 
of the company for these purposes equity
securities are ordinary shares in the company
but they do not include shares which are
allotted under employee share schemes by
exempting the company from the requirements
of section 89 of the companies act 1985
the directors will have greater ﬂexibility 
to raise ﬁnance the authority will be valid
until the earlier of the conclusion of the next
annual general meeting or 29 october 2004
a rights issue would involve the company
offering existing shareholders the opportunity
to buy new ordinary shares the number of
ordinary shares that a shareholder can buy in
a rights issue depends on the number heshe
already owns regulations in some countries
prevent shareholders from participating in a
rights issue and the resolution will allow the
directors to make alternative arrangements
for those shareholders
renewal of authority to purchase own shares
last year’s annual general meeting authorised
the directors to purchase in the market the
company’s own ordinary shares and a special
resolution will be proposed at this year’s
annual general meeting to renew the authority
on the same terms as outlined below the
directors have no present intention that the
company should purchase its own ordinary
shares but they would nevertheless wish to
be able to act quickly if circumstances arise
in which they consider such purchases to be
in the interests of shareholders generally the
proposed authority is set out in resolution 14
the authority will be limited to approximately
10 of the company’s issued ordinary share
capital as at 31 march 2003 the minimum
price per ordinary share payable by the
company exclusive of expenses will be
65
5
⁄
19
p the nominal value of each ordinary
share the maximum to be paid per ordinary
share on any exercise of such authority
exclusive of expenses will be an amount 
not more than 5 above the average of the
middle market quotations for ordinary shares
of the company as derived from the london
stock exchange daily ofﬁcial list for the ﬁve
business days immediately preceding the
date of each purchase purchases will only
be made on the london stock exchange 
and only in circumstances where the board
believes that they are in the interests of
shareholders generally furthermore
purchases of ordinary shares will only be
made if the board believes that they would
result in an increase in earnings per share
any purchases will be ﬁnanced out of proﬁts
available for distribution this authority will
be valid until the earlier of the conclusion 
of the next annual general meeting or
29 october 2004
supplier payment policy
individual operating companies within 
the group are responsible for establishing
appropriate policies with regard to the payment
of their suppliers the companies agree
terms and conditions under which business
transactions with suppliers are conducted 
it is group policy that provided a supplier 
is complying with the relevant terms and
conditions including the prompt and complete
submission of all speciﬁed documentation
payment will be made in accordance with
agreed terms it is also group policy to ensure
that suppliers know the terms on which
payment will take place when business is
agreed trade creditors at the yearend are
estimated as representing no greater than 
30 days’ purchases 2002 no greater than
30 days
contributions for political and charitable
purposes
donations to charitable organisations 
during the year amounted to £275868 
2002 £311627 no political donations
were made during the year 
it is the company’s policy not to make any
donations to political parties and the board
does not intend to change that policy the
political parties elections and referendums
act 2000 however deﬁnes political donations
and expenditure very broadly which in 
the continued absence of guidelines from 
the government may cover some business
activities not normally thought of as political
donations for example involvement in
seminars or functions that may be attended
by politicians or job exchanges between
industry and government
without such guidelines the board considers
it prudent to obtain approval to incur
expenditure on such activities and special
resolutions to that effect resolutions 7 to 11
covering the company and certain of its
subsidiaries will be proposed at the annual
general meeting the board will not use this
authority to make any political donations 
in the generally accepted sense
employees
the group employed 14890 people as at
31 march 2003 2002 14571 of these
4904 33 were employed in the water
business 4232 28 in the biffa waste
business and 4761 32 in the severn
trent services businesses approximately
30 of employees are based outside the 
uk mainly in the usa belgium and italy
the proportions of employees in each of 
the major business units continue to reﬂect
the diversity of the group’s activities
group companies continue to encourage
communication with and between employees
each of the major business units has its own
inhouse magazine uses employee surveys
team brieﬁngs and ‘tool box’ talks and has an
intranet facility covering all main locations
intranets are increasingly used as the 
basis for open forum discussions and for
‘suggestion’ schemes
the groupwide intranet is now established
as the principal communication mechanism
for senior managers across the group in the
uk europe and the usa the focus over the
past year has been to develop intrabusiness
collaboration and consultation for example
between sales and marketing teams and
technology experts in addition the extranet
capability has been developed so that
external contractors and suppliers working
with an internal project team are able to
20 severn trent plc annual report and accounts 2003 access the online ‘team room’ for example
the consultants and contractors supporting
the biffa project team on the leicester city
council integrated waste contract
group companies continue to maintain 
good relationships with the recognised 
trade unions and their directly elected
representatives
after a series of discussions with the
recognised trade unions a revised collective
agreement has been negotiated which
harmonises terms and conditions of
employment between the former uk waste
and biffa waste services commercial landﬁll
and special waste divisions and settled a pay
award for two years around 1600 employees
are covered by this collective agreement
severn trent water have successfully
implemented a new partnership agreement
with its recognised trade unions and this 
has received recognition from the tuc 
and government ministers
the annual meeting of the group’s european
consultative council took place in october
2002 these meetings are developing a
dialogue and a better understanding of the
issues facing our european businesses
the board endorsed code of business
principles and conduct deﬁnes the values
and vision of the group and underpins the
strategies that guide business activities the
group’s business goals are long term and 
the code has been developed to provide
appropriate ethical direction to sustain their
achievement the code is available at the
group website wwwseverntrentcom
further details of the company’s achievements
visàvis our stated sustainable development
targets are detailed in the company’s
stewardship report
‘whistle blowing’ procedures are in place in
every group company to deal with allegations
of harassment bullying etc and any other
breaches of the company’s codes and values
each business unit has ongoing training 
and development and succession planning
mechanisms to ensure that there are sufﬁcient
technically and managerially competent
employees available to meet current and
future business needs and customer
expectations at the highest level this is
managed across the group by a leadership
development programme based on agreed
competencies covering the top 120 managers
all group companies continue to invest in 
the development of their employees at all
levels much of this development is externally
veriﬁed either by processes such as investors
in people or by the achievement of a wide
range of accredited qualiﬁcations
the group’s ‘lifestyle’ ﬂexible beneﬁts
scheme is now available to around 5000 uk
employees with further increases envisaged
group companies continue to meet the
minimum requirements of the employment
legislation in each of the countries in which
we operate and we also seek to operate at
local best practice levels
diversity
group companies continue to review their
diversity policies and practices to ensure that
they comply with the legislative requirements
of each location in which we operate and
also meet the company’s code of business
principles and conduct
we have reviewed processes to ensure the
accuracy of the data on the composition of
our current workforce and during the last
year many business units including severn
trent services in the usa have undertaken
training programmes to emphasise the
importance of diversity and equality 
this and similar initiatives will ensure 
that we continue to attract and retain the 
best possible workforce that reﬂects the
diversity of manpower resources available
the company continues to actively
participate in the employer’s forum on
disability embracing its approaches for 
both employees and customers
further information on the group’s diversity
position is detailed in the company’s
stewardship report
health and safety
once again the effort to improve health and
safety management has been undertaken
during a period of further growth both in 
the uk and abroad and in an atmosphere 
of increased regulation
the group has responded to these
challenges and has reﬁned its already
maturing health and safety management
system by introducing a comprehensive set
of performance standards and technical
guidelines designed to produce quantiﬁable
beneﬁts in the coming years
the group health and safety committee
chaired by the chief executive continued 
to monitor the performance and progress of
safety programmes within group companies
throughout the year including initiatives
covering occupational road risk and
behavioural safety group companies have
continued to develop their own internal
auditing systems in addition to existing
group protocols
regrettably however we have to report 
an employee fatality in april 2002 such
accidents are investigated rigorously and 
the results used as lessons to promote
improvement
we will continue with our efforts to create 
a culture where proactive health and safety
management is an integral part of the way 
in which we manage our business and a
number of programmes are currently being
introduced that will assist us towards this goal
substantial shareholdings
as at 10 june 2003 the company had 
been notiﬁed of the following substantial
shareholding
number of ordinary
shares of 65
5
⁄19p each 
legal  general 
investment management 
limited 10376057 302
accounts of severn trent water limited
separate accounts for severn trent water
limited are prepared and sent to the
director general of water services a copy 
of these accounts is available from the
website of severn trent water limited
wwwstwatercouk or on written request 
to the company secretary at the address
given on the back cover there is no charge
for this publication
research and development
research and development expenditure
including the amounts that have been
capitalised amounted to £49 million 
2002 £52 million
severn trent water has aligned its research
and development activities to the likely
requirements of amp4 and in particular 
to the forthcoming standards for nutrient
removal from sewage efﬂuents the control 
of odour at sewage treatment works and the
efﬁciency of the anaerobic digestion process
sustainability remains a key theme not 
least through participation in the dti’s
sustainable water management programme
participation also continues in grantaided
consortia projects and with academic and
research organisations
biffa has continued with its support into
research to improve the understanding of
sectoral resource ﬂows in the economy this
mass balance resource ﬂow programme is
supported by both the environmental agency
and by defra in their efforts to develop
better information reporting systems relating
21 severn trent plc annual report and accounts 2003 directors’ report
continued
to the ﬂow of municipal solid waste in addition
biffa are chairing a dti programme targeted
at innovative waste treatment processes
severn trent laboratories have continued 
to develop new and improved analytical
methods that improve efﬁciency or meet
emerging client needs new methods have
been introduced to analyse volatile organic
compounds in wastewater and improve the
levels of detection of mercury analysis as
well as improvements to the level of arsenic
detection that can be achieved in water
sediment and soil samples
severn trent services research and
development expenditure has focused 
on expanding the scope of its existing
product range this has included technical
developments to the clortec hypochlorite
dosing system which has led to a 20
reduction in the amount of raw material 
used per pound of hypochlorite produced in
the uk instrumentation development has led
to the introduction of a bufferless chlorine
analyser which is now on trial with a number
of customers and a lower cost water meter
designed for the global market
corporate governance
the company attaches great signiﬁcance 
to the maintenance of good corporate
governance procedures and adherence 
to best practice recognising that they play
their part in creating a framework which can
provide increased beneﬁts for shareholders
the company regards the combined code
on corporate governance the ‘code’ 
as a valuable development of previous
corporate governance arrangements and
recommendations which it has embraced in
recent years following the recommendations
in the reports on the role and effectiveness
of nonexecutive directors the higgs report
and audit committees the smith report the
company is reviewing its corporate governance
arrangements and will consider making
changes as necessary and appropriate once
the financial services authority has ﬁnalised
the amendments to the code later in the
year throughout the year ended 31 march
2003 the company has been in compliance
with the provisions set out in section 1 of 
the code 
statements by the directors covering 
their responsibilities in relation to the 
group’s system of internal control and the
adoption of the going concern basis for the
preparation of the ﬁnancial statements are
set out on pages 23 and 24 respectively
the board
a list of directors and their background
details appear on pages 18 and 19 the
board currently consists of ﬁve executive
directors and seven nonexecutive directors
the board has reviewed the status of the
nonexecutive directors and has conﬁrmed
that it regards them as being independent
however mrs tritton’s appointment has 
been reviewed during the year in light of her
length of service and she will retire from the
board on 30 july 2003
the board meets ten times each year and
convenes additional meetings to deal with
major matters as and when these arise the
board has established a formal schedule 
of matters which are speciﬁcally reserved 
to it for decision thereby ensuring that it
maintains control over strategies and ﬁnancial
and key operational issues it has also put 
in place an organisational structure with
clearly deﬁned lines of responsibility and
delegations of authority which are reviewed
from time to time
board committees
the board has delegated certain powers 
and duties to the board committees all of
which operate within clearly deﬁned terms 
of reference and in accordance with the code
where applicable the terms of reference are
currently undergoing a periodic review all
the committees meet regularly throughout
the year except for the nominations
committee which meets when required 
the membership of the committees is set
out on page 18
the nominations committee makes
recommendations to the board on the
appointment to the board of both executive
and nonexecutive directors considers
succession planning and related issues 
the remuneration committee’s principal
terms of reference are set out in the
remuneration report on pages 25 to 30
the main responsibilities of the audit
committee are referred to later under
‘internal control’
the treasury committee determines matters
of treasury policy and its approval is required
for certain treasury transactions the group’s
treasury affairs are managed centrally and 
in accordance with its treasury procedures
manual and policy statement compliance
with these policies and procedures is
monitored by management by the group’s
internal auditors and to the extent necessary
to support their audit report by the external
auditors
the environmental and corporate social
responsibility advisory committee’s
principal terms of reference are to help 
to develop further both the company’s
environmental leadership strategy and
objectives and address matters relating to
corporate social responsibility additional
details of the company’s environmental
objectives may be found on page 24
the charitable contributions committee
meets regularly throughout the year to 
award donations to charities
finally the severn trent executive committee
has delegated authority to approve capital
and other expenditure within deﬁned limits
which have been reviewed during the year 
by the board proposals involving major
undertakings or matters of strategic
signiﬁcance are subject to the detailed 
review and approval of the board the
executive committee is responsible for
reviewing the ﬁnancial and operational
performance of all companies within the
group and in establishing or supporting 
the board in establishing policies covering
organisational and employment matters
directors
details of current directors are shown on
pages 18 and 19
mr e e anstee mr t d g arculus and 
mr r m walker retire from the board by
rotation in accordance with the articles 
of association of the company and being
eligible offer themselves for reappointment
at this year’s annual general meeting
mrs c tritton will retire from the board at 
the conclusion of this year’s annual general
meeting but will not be seeking reappointment
mr walker has a service contract which
provides for not less than 12 months’ written
notice of termination by the company and
not less than 12 months’ written notice by
him expiring at any time
mr anstee and mr arculus being non
executive directors do not have service
contracts with the company 
the directors of the company at 31 march
2003 and their interests in the shares of the
company can be found on pages 29 and 30
no director had an interest in the shares 
of any subsidiary undertaking no contract
signiﬁcant to the company’s business in
which a director had a material interest 
was entered into during the year
auditors
as of 1 april 2003 the board has instituted
formal policies and procedures so as to
minimise the risk of the independence and
objectivity of the group’s external auditors
the ‘auditors’ being compromised the
primary policies in place include the
following safeguards
22 severn trent plc annual report and accounts 2003 1 in their assessment of the independence
of the auditors the audit committee
receives annually in writing details of
relationships between the auditors 
and the group which may bear on the
auditors’ independence and receives
conﬁrmation that they are independent 
of the group as required by auditing
standard sas 610 
2 the audit committee meets with the
auditors three times a year with executive
management in attendance by invitation
the audit committee and the auditors
also hold separate meetings on these
occasions without the attendance of
executive management and at any other
time at the sole discretion of either the
audit committee or the auditors
3 the audit committee annually reviews 
the level of the auditors’ fees in respect 
of the audit of the ﬁnancial statements of
the group and its subsidiaries at the same
time as considering the adequacy of the
auditors’ proposed audit plan
4 in addition to the annual appointment 
of auditors by the shareholders the 
audit committee reviews the auditors’
performance on an ongoing basis 
5 the board has instituted the following
policies in relation to the performance 
by the auditors of services for the group
auditrelated services including reporting
on regulatory accounts covenant and 
other borrowing related matters and 
stock exchange circulars 
subject to conﬂict of interest or other
pertinent issues impacting delivery 
of the services the auditors are used 
to perform such work on behalf of the
group the audit committee has recently
speciﬁcally addressed the longevity of
appointment of the auditors but has
decided not to take any action for the 
time being
tax compliance and tax advisory services
given their knowledge of the group
subject to conﬂict of interest or other
pertinent issues impacting delivery of 
the services the auditors are used to
undertake tax compliance and general 
tax advisory services speciﬁc projects 
are assessed on a case by case basis
depending on who is best suited to
perform the work
internal audit services
the group has its own internally resourced
internal audit department with a direct
and independent reporting line to the
audit committee it is the intention that
no such services should be provided by
the auditors except on rare occasions 
in relation to standalone projects where
specialist skills are required and then 
only with the express prior authorisation
of the audit committee chairman
transaction related services
historically the auditors have generally
been used for such work however 
it has been decided to commence a
competitive process to decide who 
should undertake transaction related
services for the group the auditors have
been invited to participate in this process
and will continue to undertake such work
pending the outcome of this process
other advisory services excludes services 
in the above four categories
each project is assessed on a case by case
basis depending on who is best suited to
perform the work any material project for
‘other advisory services’ fees in excess of
£100000 where the auditors were being
considered for the provision of the service
would be the subject of a competitive
process further any projects for ‘other
advisory services’ where the fees payable
to the auditors exceed £500000 must be
approved by the audit committee
the level of non auditrelated services
provided by the auditors and the associated
fees will be considered annually by the
audit committee in the context of the
auditors’ independence as part of the
audit committee’s review of the adequacy
and objectivity of the audit process an
analysis of fees payable to the auditors 
in respect of audit and non auditrelated
services is provided on page 41
6 it is the group’s policy to seek rotation 
of the auditors’ principal engagement
partner as a matter of course every ﬁve
years and where deemed appropriate 
by the audit committee of other key
members of the audit team 
internal control
the board has overall responsibility for 
the group’s system of internal control and 
for reviewing its effectiveness the board 
has formally established policies and
processes for identifying and evaluating the
signiﬁcant risks faced by the group there
are established procedures for managing
these risks of which the key elements are 
an organisation structure with clear lines 
of accountability regular structured reviews
of business risk by senior management a
scheme of delegated authority preapproval
of plans budgets and signiﬁcant investments
and monthly reporting of ﬁnancial results
and other key business monitors
the executive directors and senior
management teams of each of the principal
subsidiary companies have identiﬁed the
risks facing their businesses and have 
made an assessment of the impact of 
those risks the controls that are in place 
to manage each of the more signiﬁcant 
risks in each unit have been identiﬁed 
within a comprehensive control framework
and an assessment has been made of the
effectiveness of these controls
the directors of each of the principal
subsidiary companies regularly consider new
risks and threats and control weaknesses
that may have become apparent and report
at sixmonthly intervals to the group chief
executive they also conduct an annual
review of the risks facing their businesses
and report on this review in one of the six
monthly reports
the board reviews risk management and the
effectiveness of the system of internal control
through the audit committee the audit
committee meets three times a year and
both the internal and external auditors 
have direct access to the chairman of the
committee the audit committee receives
reports on a sixmonthly frequency from the
group chief executive on the signiﬁcant risks
faced by the group an assessment of the
effectiveness of controls over each of those
risks and an action plan to improve controls
where this has been assessed as necessary
any signiﬁcant control weaknesses that 
have been identiﬁed are also reported to 
the audit committee the audit committee
also receives reports from internal audit and
from management on speciﬁc control issues
agrees audit strategies and reviews reports
from management on the ﬁnancial results of
the group in addition the external auditors
present their audit strategy to the audit
committee and report on signiﬁcant control
issues upon completion of their audit the
chairman of the audit committee reports 
to the board as do the external auditors
the directors conﬁrm that there is an
ongoing process for the identiﬁcation
evaluation and management of the
signiﬁcant risks faced by the group this
process has been in place throughout the
year ended 31 march 2003 and up to the
date of approval of the annual report and
accounts it accords with the guidance in 
the report on ‘internal control guidance for
directors on the combined code’ a sound
system of internal control is designed to
manage risks but cannot eliminate them 
and therefore provides reasonable but not
absolute assurance against a company
failing to meet its business objectives or
against material errors losses or fraud or
breaches of laws or regulations
23 severn trent plc annual report and accounts 2003 directors’ report
continued
on 20 january 2003 the group established
by the financial reporting council ‘frc’
and chaired by sir robert smith published
its report on the roles and responsibilities of
audit committees and recommendations on
the development of the existing combined
code guidance the audit committee has
given preliminary consideration to and will
continue to assess its compliance with the
provisions of the report the audit committee’s
terms of reference have been periodically
reviewed in recent years in order to ensure
that they comply with good practice
environment corporate social responsibility
and sustainable development
the company’s corporate vision is to 
be at the forefront of the environmental 
services industry the company has a policy
statement that deﬁnes how the vision is
incorporated into the company’s activities in
relation to the environment corporate social
responsibility and sustainable development
the board has established an environmental
and corporate social responsibility advisory
committee to provide advice on the company’s
activities and programmes in relation to the
environment and aspects of corporate social
responsibility and a charitable contributions
committee which is responsible for allocating
the charitable contributions budget as
approved by the board each year
the company reports on its environmental
and corporate social responsibility performance
and its contribution to sustainable
development in the annual ‘stewardship’
report the most recent edition of the 
report may be obtained from our website
wwwseverntrentcom or by sending a
request for a free copy to the address 
given on the back cover
the company complies with the guidelines
issued by the association of british insurers on
socially responsible investment and reporting
on social ethical and environmental matters 
economic and monetary union
the group started preparations for the
introduction of the euro in mid1997 the
experience gained from the conversion of our
subsidiary and associated companies located
in the euro area countries has been a useful
input into the conversion planning the
group has developed an internal changeover
plan that seeks to prepare for the signiﬁcant
system changes that would be necessary if
the uk enters the emu 
communications with shareholders and 
the annual general meeting
the company attaches considerable
importance to the effectiveness of its
communications with shareholders prior 
to the annual general meeting private
investors are given the opportunity to meet
the board and also to question them during
the meeting itself they are encouraged to
participate in the meeting photographic
displays and literature are available to
shareholders at the annual general meeting
to demonstrate the nature and extent of 
the group’s environmental services the
company also responds to enquiries from
shareholders as they arise throughout the
year the company will on request provide 
a summary of the proceedings of the annual
general meeting
regular communication is maintained 
with institutional shareholders and 
fund managers through meetings and
presentations such communications 
are sensitive to the need not to disclose
potentially pricesensitive information
going concern
the board has a reasonable expectation that
the group and the company have adequate
resources to continue in operational existence
for the foreseeable future accordingly the
ﬁnancial statements set out on pages 32 
to 62 have been prepared on the going
concern basis
auditors
following pricewaterhousecoopers’ conversion
to a limited liability partnership on 1 january
2003 pricewaterhousecoopers resigned as
auditors and pricewaterhousecoopers llp
was appointed by the board to ﬁll the casual
vacancy the companies act 1985 requires
that special notice be given of the resolution
to reappoint pricewaterhousecoopers llp as
auditors at the forthcoming annual general
meeting the appropriate special notice has
been served on the company and accordingly
a resolution proposing the reappointment of
pricewaterhousecoopers llp will be put to
the annual general meeting
by order of the board
p p davies llb solicitor
group general counsel and company
secretary
10 june 2003
24 severn trent plc annual report and accounts 2003 remuneration report
remuneration committee
the remuneration committee determines on
behalf of the board the company’s policy on
the remuneration of executive directors
the committee determines the total
remuneration packages and contractual
terms and conditions for these individuals
the policy framework for remunerating 
all senior executives is consistent with the
approaches taken for executive directors
the remuneration committee is comprised
exclusively of independent nonexecutive
directors of the company the members 
of the remuneration committee during 
the year were
m c flower chairman
t d g arculus
j d g mcadam
the committee members have no personal
financial interest other than as shareholders
in the matters to be decided
the constitution and operation of the
committee complies with the combined code
for corporate governance of the financial
services authority in setting performance
related remuneration the committee has
regard to the provisions set out in schedule a
to the code
advisers
to ensure that severn trent’s remuneration
practices are market competitive the
remuneration committee has access to
detailed external research on market data
and trends from experienced international
consultants
the committee has received material 
advice from deloitte  touche who 
replaced andersen on 1 august 2002 hay
management consultants and watson wyatt
who have been appointed by the committee
for the purpose of providing this advice
in relation to other services provided to the
group deloitte  touche provide overseas tax
advice and watson wyatt are the actuaries
to the group’s main uk pension schemes
all three consultants provide employee
benefits services andor remuneration 
advice to the group below board level
the appointment of the principal adviser
currently deloitte  touche will be 
formally reviewed by the committee 
during the financial year 20032004
the group chief executive and the group
services director also provide advice and 
are invited to attend meetings to respond to
specific questions raised by the committee
this specifically excludes any matter
concerning their own remuneration the
group company secretary acts as secretary
to the committee
remuneration policy
the company’s ongoing remuneration policy
for executive directors is to review regularly
and update as appropriate the framework to
provide remuneration in a form and amount
which will attract retain motivate and
reward high calibre individuals to achieve
this the remuneration package is based on
the following principles
• incentives are aligned with the interests 
of shareholders and reward the creation 
of longterm value
• reward elements are designed to reinforce
the link between performance and reward
performance related elements should 
form a significant proportion of the total
remuneration package and at maximum
vary between 120 and 150 of basic pay
• the total compensation package for 
ontarget performance should be fully
competitive in the relevant market
• packages are structured flexibly to 
meet critical resource needs and retain 
key executives
the committee seeks to take a prudent and
responsible approach taking into account 
the interests of shareholders customers
employees and the local community
personal shareholdings
the company does not have a policy 
which requires executive directors to have 
a minimum holding of ordinary shares in
severn trent but through a variety of share
schemes encourages all employees to hold
shares in the company
external directorships
executive directors are encouraged to take
on external nonexecutive directorships in
order to avoid a conflict of interest all such
appointments are subject to the approval of
the remuneration committee and the board
directors are normally only able to retain the
fees arising from one such appointment
chairman and other nonexecutive directors
mr t d g arculus is paid fees of £117600 per
annum in addition the company contributes
£28680 per annum to mr arculus’s private
pension arrangements as well as providing
private health scheme insurance and car
provision and allowance in addition a
further fee of £10000 per annum is paid 
in the form of shares in the company
mr arculus does not participate in any of the
company’s pension arrangements share or
bonus schemes or have the benefit of the
provision of fuel for the car
the remuneration policy for nonexecutive
directors is determined by the board within
the limits set out in the articles of
association
remuneration comprises an annual fee for
acting as a nonexecutive director of the
company and additional fees for acting as
• chairman of a board committee
• senior nonexecutive director
• trustee of a company pension scheme
• nonexecutive director of a subsidiary
company
nonexecutive directors are not eligible 
to participate in incentive plans nor is any
pension provision made except as detailed 
in relation to mr arculus
nonexecutive directors receive payment of
part of their fees in the form of severn trent
ordinary shares
the nonexecutive directors do not have
service contracts or consultancy agreements
with any group company
remuneration package for executive
directors
the remuneration package for executive
directors comprises the following elements
• base salary and benefits
• annual bonus plan
• long term incentive plan
• postretirement benefits
the performance related elements when
valued at ontarget performance comprise
more than 60 of the total potential package
excluding postretirement benefits
details of each of the above elements are 
as follows
base salaries and benefits
base salaries are a fixed cash sum payable
monthly the company’s policy is to set the
salary for each executive director within a 
range having regard to the market median for
similar roles in large publicly quoted companies
salaries for individual directors are reviewed
annually by the remuneration committee
recognising the individuals’ performance 
and contribution and developments in the
relevant employment market
the principal nonsalary benefits for
executive directors include the use of a 
motor car fuel private medical insurance
life assurance and an incapacity benefits
scheme since january 2002 the executive
directors have been allowed to ‘flex’ these
benefits under the company’s lifestyle
scheme as they are flexing within the same
value of overall package their individual
choices are not reflected in the table of
directors’ emoluments on page 28
25 severn trent plc annual report and accounts 2003 remuneration report
continued
26 severn trent plc annual report and accounts 2003
annual bonus plan
executive directors are eligible for annual
bonuses to encourage improved performance
measured by reference to both financial and
nonfinancial factors performance targets are
established by the remuneration committee
to align executive directors’ interests with
shareholders and are measured by reference to
profitability together with specific targets for
quality service environmental performance
and the achievement of personal objectives 
the maximum amount payable under the 
bonus scheme in 20022003 was 50 of base
salary which is paid only for superior financial
performance financial performance accounts
for 60 of the total bonus potential and 
40 is dependent on performance in respect
of the remaining factors the performance
requirements are stretching and involve an
assessment of up to ten parameters for each
executive director annual bonus payments are
not taken into account in calculating pension
entitlements the actual bonuses awarded 
by the remuneration committee for the year
ended 31 march 2003 are shown in the table
of directors’ emoluments on page 28
longterm incentives
a long term incentive plan ‘ltip’ for
executive directors was approved by
shareholders at the 1997 annual general
meeting and amended with shareholder
approval at the 2001 annual general meeting
the performance for the 2001 and 2002
ltips is measured by reference to a
combination of total shareholder return
‘tsr’ and economic profit ‘ep’ targets
the maximum allocation that may be made
to an individual executive director in any year
is such number of shares as have a market
value equal to 100 of base salary shares
are allocated annually by the committee but 
are not released to executive directors for a
period of three years thereafter provided that
the tsr has achieved a prescribed ranking
in comparison with a number of selected
comparator companies and that the ep
targets have also been met the performance
criteria are specific to each award for 
the performance periods effective from
1 april 2001 and 1 april 2002 mr walker
received an allocation of shares equivalent 
to 100 of his salary and the remaining
executive directors received allocations
equivalent to 70 of their salaries 
for the 2001 and 2002 awards the
comparator group consists of
awg plc kelda plc pennon group plc
shanks plc united utilities plc and waste
recycling group plc
for the executive directors an award under
the 2001 and 2002 ltip schemes will be
triggered if the comparator tsr performance
is at the median or above and the ep meets 
the scaled targets set ep is calculated 
by reference to a rate of return of 75
it is considered that the performance 
conditions are appropriate since we compare
our performance against companies in a 
similar sector whilst at the same time
strengthening the alignment with
shareholders by placing emphasis on ep
and sustained longterm value creation
tsr performance will be assessed using 
an external data source such as datastream
for share price and dividends in the period
the calculations of ep will be based on
information from the company’s financial
statements and will be verified by external
advisers
the performance period for allocations of
shares made in 2000 ended on 31 march
2003 the remuneration committee has
determined based on the company’s tsr
performance over the three year performance
period that participants are entitled to 
50 of the shares allocated in respect 
of the 2000 ltip the qualifying condition 
for vesting was that the company’s tsr
performance was ranked median against the
following comparators awg bg national
power kelda pennon scottishpower scottish
and southern energy and united utilities
hyder powergen and thames water were
constituents of the original comparator group
but were acquired during the performance
period and it was determined that they
should be excluded from the comparator
group the measurement of the performance
of bg and national power incorporated 
the performance of innogy and lattice
subsequent to the demerger the shares 
in respect of the 2000 award will be
released to executive directors as soon as
practicable following the announcement on
10 june 2003 of the company’s results for
the year ended 31 march 2003
postretirement benefits
the company’s policy is to offer all executive
directors membership of the senior staff
pension scheme ‘the scheme’ all current
executive directors participate in the scheme
the scheme is a funded inland revenue
approved final salary occupational pension
scheme which provides
• a normal retirement age of 60 years
• an overall pension at normal retirement 
age of twothirds of final pensionable
salary subject to the completion of 
20 years’ pensionable service
• life cover of 4 x pensionable earnings
• a pension payable in the event of
retirement on grounds of ill health
• a spouse’s pension on death
early retirement is available after the age 
of 50 with the consent of the company any
pension would be subject to a reduction that
the trustee considers appropriate acting 
on actuarial advice to reflect the expected
longer payment of the pension in certain
circumstances and subject to payment 
of suitable additional contributions by the
company and the individual consent may
not be required for early retirement above
the age of 55 and the reduction may be
reduced or eliminated in the event of
incapacity early retirement is available on 
an unreduced basis allowing for pensionable
service to age 60
under the trust deed and rules pensions 
in payment in excess of any guaranteed
minimum pension are guaranteed to increase
at a rate of price inflation subject to a
maximum of 5 each year in the calculation
of individual cash equivalent transfer values
allowance is made for increases to pensions
in payment in excess of any guaranteed
minimum pension in line with price inflation
severn trent year ended march ftse 100 index
our reward programmes are designed to support the generation of total shareholder return the graph
below shows the total shareholder return for the ftse 100 and the company since 1 april 1998 the 
ftse 100 has been chosen because it is considered to be the most appropriate basis for comparison 
as it is a broad equity index in which the company is a constituent
tsr index at 1498  100
120
110
100
90
80
70
60
50
98 99 00 01 02 03
performance graph the company has a future obligation 
in respect of mr r m walker and mr a s
perelman both of whom joined this scheme
after 1 june 1989 and are therefore subject
to the inland revenue earnings cap
20022003 £97200 to pay the difference
between their pension entitlement based
upon the relevant portion of their salary 
and the maximum amount payable had 
the cap not been in place the obligation is
unfunded the amount charged to the profit
and loss account in the year for this future
obligation was £269117 for mr walker and
£167202 for mr perelman
the committee decided that in cases of
executive directors where the employees’
pension contribution based on their actual
annual salary exceeds the inland revenue
limit 15 of pension cap the executive
director would only be required to
contribute up to the inland revenue limit
although their pension would still be based
on their actual earnings
as explained above the executive directors
are members of defined benefit pension
arrangements in previous years’ accounts
disclosures of these benefits have been
made under the requirements of the stock
exchange listing rules these rules are
still in place but it is now also necessary 
to make disclosure in accordance with 
the directors’ remuneration report
regulations 2002
a table detailing the executive directors’
pension provisions under the two sets of
requirements is shown on page 28
forwardlooking statement
the committee will keep the existing
remuneration arrangements as detailed 
in this report under review during the next
year to ensure that the company’s reward
programmes remain competitive and
provide appropriate incentives no significant
changes to the reward arrangements for
executive directors are anticipated however
as usual there will be individual reviews of
base salary annual bonus and ltip awards
the performance targets for incentive
arrangements will also be reviewed to 
ensure alignment with the group strategy
directors’ service agreements and letters 
of engagement
the current policy of the remuneration
committee is that executive directors are
employed on contracts subject to no more
than 12 months’ notice in accordance with
current corporate governance best practice
the executive directors are required to 
give not less than six months’ notice of
termination 12 months in the case of the
group chief executive in the case of new
appointments from outside the group 
in order to attract and retain high calibre
individuals there may be an entitlement 
to a 24 months’ notice period reducing to 
12 months at the end of the first year of
employment
in the case of executive directors who were
appointed prior to 1999 and who previously
had written notice periods in excess of 
12 months contractual terms were put 
in place in march 2000 which define levels
of compensation payments that might 
be payable in the event of redundancy 
or breach of contract such payment not
being triggered in the event of dismissal 
for misconduct or poor performance
the obligations under the arrangements are
service related with four weeks pay for each
year of service to a maximum of 25 years
one year’s bonus and £20000 for loss of
benefits car health insurance etc
there are no specific contractual payments
or benefits which would be triggered in the
event of a change in control of the company
pages 28 to 30 and the tables thereon
comprise the ‘auditable part’ of the
remuneration report being the information
required by part 3 of schedule 7a to the
companies act 1985
27 severn trent plc annual report and accounts 2003
the dates of the current executive directors’ agreements the dates on which their appointments became effective and the current expiry dates
of their agreements are as follows
executive director date of agreement effective date expiry date
j k banyard 20 april 1998 23 january 1998 terminable on 12 months’ notice
m j bettington 28 december 1994 8 november 1994 terminable on 12 months’ notice
b duckworth 11 january 1995 8 november 1994 terminable on 12 months’ notice
a s perelman 11 september 2001 1 october 2001 terminable on 12 months’ notice
r m walker 7 july 1999 12 july 1999 terminable on 12 months’ notice
mr r m walker is the subject of reappointment as an executive director at the annual general meeting and the committee believes that his
extensive knowledge and experience fully justifies the continuation of the contractual arrangement outlined above
in respect of the chairman and current nonexecutive directors the dates on which their appointments took effect and the current expiry dates
are as follows
chairman and nonexecutive directors effective date current expiry date
t d g arculus 20 may 1996 28 july 2004
e e anstee 30 july 1999 29 july 2005
m l cassoni 1 september 2001 31 august 2004
m c flower 11 june 1996 10 june 2005
j d g mcadam 18 september 2000 17 september 2003
d a osborn 21 september 1998 20 september 2004
c tritton 1 november 1991 30 july 2003
it is the normal practice of the company for nonexecutive directors to serve three threeyear terms nonexecutive directors have no right to
compensation on the early termination of their appointment remuneration report
continued
28 severn trent plc annual report and accounts 2003
directors’ emoluments
the emoluments of the chairman the executive directors and fees payable to the nonexecutive directors are as follows
basic salary benefits
5
annual total total
and fees
3
in kind bonus other
1
20022003 20012002
£000 £000 £000 £000 £000 £000
chairman and other nonexecutive directors
t d g arculus chairman 1276 212 – 60 1548 1409
e e anstee 325 – – 04 329 315
m l cassoni 289 – – 05 294 160
m c flower 440 – – 04 444 409
j d g mcadam 275 – – 04 279 267
f a osborn 500 – – 02 502 509
a h simon resigned 260702 114 – – 01 115 338
c tritton 329––– 329 311
executive directors 
j k banyard 1750 213 831 04 2798 2403
m j bettington 2500 201 637 – 3338 2820
r a s costin retired 211201
4
––––– 2146
b duckworth 2350 211 1058 01 3620 3143
a s perelman 3350 253 1514 05 5122 3368
r m walker
2
4060 349 1705 01 6115 4927
total emoluments 17558 1439 5745 91 24833 22525
1 other emoluments represent expenses chargeable to uk income tax paid to directors
2 aggregate emoluments for mr walker as highest paid director amounted to £611500 2002 £492700
3 included within fees for the nonexecutive directors are amounts elected to be received by way of shares rather than as emoluments 
to encourage participation in line with corporate governance best practice 224 shares with a gross value of £2500 were received by 
all of the nonexecutive directors for the period with the exception of mr arculus who received 908 shares with a gross value of £10000 
mr simon who resigned in the year received his time apportioned award of £801 in cash
4 mr costin’s salary and benefits in kind in the previous financial year are those amounts earned up to the date he retired as a member 
of the board 21 december 2001 in the remainder of the previous financial year he received a further £52700 in salary and £6100 of
benefits in kind in relation to the period following his retirement from the board to 31 march 2002 mr costin retired from the company 
on 12 may 2002 aged 59 he received a further £214925 of salary bonus of £58963 and £25732 of benefits in kind in the current
financial year being the balance of his contract which terminated at the age of 60
5 benefits in kind include the use of a motor car fuel private medical insurance life assurance and an incapacity benefits scheme
directors’ pension provisions
3
increase
decrease in
increase in transfer value transfer value
increase in accrued pension of increase in transfer value of transfer value of over the year
accrued pension accrued pension during the year accrued benefits accrued pension accrued pension net of director’s
at 310303 during the year net of inflation
1
at 310303 at 310303
2
at 310302
2
contributions
£ pa £ pa £ pa £000 £000 £000 £000
j k banyard 118855 7264 3811 557 20653 17909 2639
m j bettington 110197 22191 19468 1596 9883 9712 21
b duckworth 131114 14313 10698 1147 15788 15125 522
a s perelman 16729 11247 11077 1308 2195 745 1304
r m walker 50345 18067 17068 2799 8687 5158 3383
the pensions shown above will be provided through both the severn trent senior staff pension scheme and the severn trent supplemental
pension scheme
1 inflation over the year is measured by reference to the increase in the retail price index between march 2002 and march 2003
2 the transfer values have been calculated in accordance with actuarial guidance note gn11 published by the institute of actuaries and
faculty of actuaries
3 in addition the company contributes £28680 per annum to mr arculus’s private pension arrangements the directors of the company at 31 march 2003 and their beneficial interests in the shares of the company were as follows
i beneficial holdings
at 1 april 
2002 or 
subsequent
date of at 31 march at 10 june 
appointment 2003 2003
number of number of number of
ordinary ordinary ordinary
shares of shares of shares of
65
5
 19p each 65
5
 19p each 65
5
 19p each
chairman and other nonexecutive directors
t d g arculus chairman 10551 11046 11459
e e anstee 2133 2255 2357
m l cassoni 116 238 340
m c flower 1133 1255 1357
j d g mcadam 133 255 357
f a osborn 643 765 867
c tritton 2860 2982 3084
executive directors
j k banyard 15183 17058 18140
m j bettington 9144 9144 9144
b duckworth 18217 19739 21046
a s perelman –4040
r m walker 598 638 638
messrs banyard bettington duckworth perelman and walker have further interests in the company’s ordinary shares of 65
5
⁄
19
p each by 
virtue of having received contingent awards of shares under the severn trent plc long term incentive plan the ‘ltip’ on 10 august 2000 
30 august 2001 and 24 september 2002 the ltip operates on a threeyear rolling basis the severn trent employee share ownership trust
is operated in conjunction with the ltip awards do not vest until they have been held in trust for three years and specific performance criteria
have been satisfied the details of the performance criteria are explained in the remuneration report on page 26 the individual interests
which represent the maximum aggregate number of shares to which each individual could become entitled are as follows
at 1 april at 31 march 
2002 2003
number of number of
ordinary awards awarded market price ordinary
shares of lapsed during at time of shares of
65
5
 19p each during year year award p 65
5
 19p each
j k banyard 31456 6369 19521 695 44608
m j bettington 39522 7895 27888 695 59515
b duckworth 42893 9288 26215 695 59820
a s perelman 31428 – 36812 695 68240
r m walker 61447 – 64701 695 126148
no awards vested during the year consequently there has been no gain on vesting 2002 £ nil
no further awards have been made under the ltip as at 10 june 2003
the performance period for allocations of shares made in 2000 ended on 31 march 2003 the remuneration committee has subsequently
determined based on the company’s total shareholder return over the three year performance period that participants are entitled to 50 
of the award the details of the performance criterion are explained in the remuneration report on page 26 the 2000 contingent awards of
shares are included in the table above and the actual number of shares to which each individual has become entitled from the 2000 award 
is as follows
number of ordinary shares
market price at of 65
5
 19p each vested
date of award time of award p from the 2000 award
j k banyard 10 aug 2000 735 4818
m j bettington 10 aug 2000 735 5759
b duckworth 10 aug 2000 735 6502
r m walker 10 aug 2000 735 6506
as at 10 june 2003 the shares from the 2000 contingent award had not vested but would do so as soon as practicable
29 severn trent plc annual report and accounts 2003 remuneration report
continued
30 severn trent plc annual report and accounts 2003
ii options over ordinary shares
at the exercised cancelled granted at the
start of the during the during the during the end of the year date from
year no year no year no year no year no of grant exercise which
of shares of shares of shares of shares of shares of option price p exercisable expiry date
executive share options
j k banyard 7800––– 7800 1993 625 dec 1996 dec 2003
b duckworth 8528––– 8528 1993 625 dec 1996 dec 2003
sharesave options
1
j k banyard 1633 1633
4
–– 0 1997 528 apr 2002 sep 2002
1024
5
––– 1024 2000 473 may 2003 oct 2003
866––– 866 2002 548 may 2005 oct 2005
m j bettington 2158
6
––– 2158 1998 799 apr 2003 sep 2003
b duckworth 1306 1306
7
–– 0 1997 528 apr 2002 sep 2002
1228
8
––– 1228 2000 473 may 2003 oct 2003
693––– 693 2002 548 may 2005 oct 2005
––– 1057 1057 2003 536 may 2006 oct 2006
a s perelman – – – 3064 3064 2003 536 may 2008 oct 2008
r m walker
10
3235 – 3235 – 0 2001 568 may 2008 oct 2008
––– 1763 1763 2003 536 may 2006 oct 2006
1 the executive directors in common with all eligible uk employees of the group are entitled to participate in the company’s inland 
revenue approved sharesave scheme the terms and conditions applicable to these options are those provided in that scheme
2 the total gain on exercise of share options during the year amounted to £6083 2002 £ nil
3 no executive share options in respect of executive directors were granted or lapsed during the year at 31 march 2003 there were 
194 other executives participating in the group’s share option scheme 2002 188
4 mr banyard exercised 1633 options during the year at £528 the market price at exercise date was £735 and the gain on exercise
amounted to £3380
5 since the yearend mr banyard exercised 1024 options at £473 the market price at exercise date was £719
1
⁄
2
and the gain on exercise
amounted to £2524
6 since the yearend mr bettington cancelled 2158 options
7 mr duckworth exercised 1306 options during the year at £528 the market price at exercise date was £735 and the gain on exercise
amounted to £2703
8 since the yearend mr duckworth exercised 1228 options at £473 the market price at exercise date was £719
1
⁄
2
and the gain on
exercise amounted to £3027
9 the gains on share options referred to above are the notional gain before taxation based on the difference between the exercise price and
the midmarket price at the close of business on the date of exercise it does not indicate that this was the actual gain realised on the sale 
of shares or that the shares in question have necessarily been sold
10 mr walker was granted options over 1763 ordinary shares in the company’s three year sharesave scheme on 8 january 2003 
on 28 january 2003 he ceased participation in the company’s 2001 seven year sharesave scheme to comply with inland revenue
contribution limits and his options over 3235 ordinary shares were cancelled
11 at the close of business on 31 march 2003 the midmarket price of the company’s shares was 716p 28 march 2002 last trading day
738p and the range during the year was 5895p to 787p 31 severn trent plc annual report and accounts 2003
directors’ responsibilities in relation to the 
ﬁnancial statements
the directors are required by the united
kingdom companies act 1985 to prepare
ﬁnancial statements 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 of the proﬁt
or loss of the group for the ﬁnancial year
the directors consider that in preparing the
ﬁnancial statements the company has used
appropriate accounting policies consistently
applied and supported by reasonable and
prudent judgements and estimates and that
all united kingdom accounting standards
which they consider applicable have been
followed any material departures being 
disclosed and explained in the ﬁnancial
statements
the directors have responsibility for ensuring
that the company keeps accounting records
which disclose with reasonable accuracy 
at any time the ﬁnancial position of the
company and which enable them to ensure
that the ﬁnancial statements comply with 
the united kingdom companies act 1985
the directors have general responsibility 
for taking such steps as are reasonably 
open to them to safeguard the assets of 
the group and to prevent and detect fraud
and other irregularities
the maintenance and integrity of the severn
trent plc website is the responsibility of the
directors the work carried out by the auditors
does not involve consideration of these matters
and accordingly the auditors accept no
responsibility for any changes that may have
occurred to the ﬁnancial statements since
they were initially presented on the website
legislation in the united kingdom governing
the preparation and dissemination of ﬁnancial
statements may differ from legislation in
other jurisdictions
independent auditors’ report to the members 
of severn trent plc
we have audited the ﬁnancial statements
which comprise the proﬁt and loss account
the balance sheet the cash ﬂow statement
the statement of total recognised gains and
losses and the related notes we have also
audited the disclosures required by part 3 
of schedule 7a to the companies act 1985
contained in the directors’ remuneration
report ‘the auditable part’
respective responsibilities of directors 
and auditors
the directors’ responsibilities for preparing
the annual report the directors’ remuneration
report and the ﬁnancial statements in
accordance with applicable united kingdom
law and accounting standards are set out in
the statement of directors’ responsibilities 
our responsibility is to audit the ﬁnancial
statements and the auditable part of the
directors’ remuneration report in accordance
with relevant legal and regulatory
requirements and united kingdom auditing
standards issued by the auditing practices
board this report including the opinion has
been prepared for and only for the company’s
members as a body in accordance with
section 235 of the companies act 1985 and
for no other purpose we do not in giving
this opinion accept or assume responsibility
for any other purpose or to any other person
to whom this report is shown or into whose
hands it may come save where expressly
agreed by our prior consent in writing
we report to you our opinion as to whether
the ﬁnancial statements give a true and fair
view and whether the ﬁnancial statements
and the auditable part of the directors’
remuneration report have been properly
prepared in accordance with the companies
act 1985 we also report to you if in our
opinion the directors’ report is not consistent
with the ﬁnancial statements if the company
has not kept proper accounting records 
if we have not received all the information 
and explanations we require for our audit 
or if information speciﬁed by law regarding
directors’ remuneration and transactions is
not disclosed
we read the other information contained 
in the annual report and consider the
implications for our report if we become
aware of any apparent misstatements or
material inconsistencies with the ﬁnancial
statements the other information comprises
only the directors’ report the unaudited 
part of the directors’ remuneration report
the chairman’s statement the group chief
executive’s review the operating and
ﬁnancial review and the corporate
governance statement 
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 to form an opinion on the
effectiveness of the company’s or group’s
corporate governance procedures or its risk
and control procedures 
basis of audit opinion
we conducted our audit in accordance 
with auditing standards issued by the
auditing practices board an audit includes
examination on a test basis of evidence
relevant to the amounts and disclosures in
the ﬁnancial statements and the auditable
part of the directors’ remuneration report 
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
company’s circumstances consistently
applied and adequately disclosed
we planned and performed our audit so as to
obtain all the information and explanations
which we considered necessary in order to
provide us with sufﬁcient evidence to give
reasonable assurance that the ﬁnancial
statements and the auditable part of the
directors’ remuneration report are free from
material misstatement whether caused by
fraud or other irregularity or error in forming
our opinion we also evaluated the overall
adequacy of the presentation of information
in the ﬁnancial statements
opinion
in our opinion
• the ﬁnancial statements give a true and fair
view of the state of affairs of the company
and the group at 31 march 2003 and of 
the proﬁt and cash ﬂows of the group for
the year then ended
• the ﬁnancial statements have been
properly prepared in accordance with the
companies act 1985 and
• those parts of the directors’ remuneration
report required by part 3 of schedule 7a 
to the companies act 1985 have been
properly prepared in accordance with the
companies act 1985
pricewaterhousecoopers llp
chartered accountants and registered auditors
birmingham 10 june 2003 group proﬁt and loss account
year ended 31 march 2003
2003 2002
notes £m £m
turnover group and share of joint ventures 18558 17991
less share of joint ventures’ turnover 38 48
turnover 2 18520 17943
operating costs before goodwill amortisation and exceptional items 14530 13854
goodwill amortisation 3 252 265
exceptional impairment of goodwill and tangible ﬁxed assets 3 468 –
exceptional contract provision releasecosts 3 60 250
total operating costs 3 15190 14369
group operating proﬁt 3330 3574
share of operating proﬁt of joint ventures and associates 2 108 99
exceptional proﬁt on disposal of business 7 – 80
proﬁt before interest goodwill amortisation and exceptional items 2 4098 4188
goodwill amortisation 2 252 265
proﬁt before interest and exceptional items 2 3846 3923
exceptional costs 2 468 250
exceptional provision releaseproﬁts 2 60 80
proﬁt before interest 2 3438 3753
net interest payable 5 1594 1590
proﬁt after interest before goodwill amortisation and exceptional items 2504 2598
goodwill amortisation 252 265
proﬁt after interest before exceptional items 2252 2333
exceptional items 408 170
proﬁt on ordinary activities before taxation 1844 2163
taxation on proﬁt on ordinary activities – current tax 6 248 161
– deferred tax 6 595 423
total taxation 6 843 584
proﬁt on ordinary activities after taxation 1001 1579
equity minority interests 09 06
proﬁt for the ﬁnancial year 992 1573
dividends 8 1576 1576
retained loss for the ﬁnancial year 20 584 03
earnings per share pence
basic 9 289 459
diluted 9 288 457
adjusted basic before exceptional items and deferred tax 9 581 632
adjusted diluted before exceptional items and deferred tax 9 579 629
there is no difference between the proﬁt on ordinary activities before taxation and the retained loss for the ﬁnancial year stated above and
their historical cost equivalents
all items dealt with in arriving at operating proﬁt relate to continuing activities
32 severn trent plc annual report and accounts 2003 balance sheets
at 31 march 2003
group company
2003 2002 2003 2002
notes £m £m £m £m
fixed assets
intangible assets – goodwill 10 4015 4748 – –
tangible assets 11 50486 48918 74 80
investments in joint ventures
share of gross assets 31 60 – –
share of gross liabilities 26 46 – –
loans to joint ventures 47 47 – –
52 61 – –
investments in associates 176 173 – –
investments in subsidiaries – – 34651 34219
other investments 77 57 65 45
total investments 12 305 291 34716 34264
54806 53957 34790 34344
current assets
stocks 13 910 972 – –
debtors 14 4232 3905 481 449
shortterm deposits 257 191 – –
cash at bank and in hand 432 289 1916 1378
5831 5357 2397 1827
creditors amounts falling due within one year 15 12192 11128 6136 5328
net current liabilities 6361 5771 3739 3501
total assets less current liabilities 48445 48186 31051 30843
creditors amounts falling due after more than one year 16 21016 20428 1720 1348
provisions for liabilities and charges 18 5231 4804 14 23
net assets 22198 22954 29317 29472
capital and reserves
called up share capital 19 2244 2240 2244 2240
share premium account 20 287 244 287 244
capital redemption reserve 20 1561 1561 1561 1561
proﬁt and loss account 20 18084 18895 25225 25427
total equity shareholders’ funds 22176 22940 29317 29472
minority shareholders’ interest equity 22 14 – –
22198 22954 29317 29472
signed on behalf of the board who approved the accounts on 10 june 2003
david arculus alan perelman
chairman group finance director
33 severn trent plc annual report and accounts 2003 group cash ﬂow statement
year ended 31 march 2003
2003 2002
notes £m £m £m £m
net cash inﬂow from operating activities 24a 6827 6655
dividends received from associates and joint ventures 16 12
returns on investments and servicing of ﬁnance 24b 1467 1449
taxation 143 67
capital expenditure and ﬁnancial investment 24c 4540 3521
acquisitions and disposals 24d 115 –
equity dividends paid 1575 1541
net cash outﬂowinﬂow before use of liquid resources and ﬁnancing 997 89
management of liquid resources 24e 65 620
financing
increasedecrease in debt 1141 815
issue of shares 33 34
24f 1174 781
increasedecrease in cash 112 72
34 severn trent plc annual report and accounts 2003
reconciliation of net cash ﬂow to movement in net debt
2003 2002
notes £m £m £m £m
increasedecrease in cash as above 112 72
cash ﬂow from movement in net debt and ﬁnancing 1141 815
cash ﬂow from movement in liquid resources 65 620
change in net debt resulting from cash ﬂows 964 123
net debt assumedrelinquished with acquisitions and disposals 24g 04 87
movement in rolled up interest on ﬁnance leases 13 22
currency translation differences 26 07
other non cash items 10 19
increase in net debt 939 12
opening net debt 24117 24105
closing net debt 24g 25056 24117 35 severn trent annual report and accounts 2003
statement of total recognised gains and losses
year ended 31 march 2003
group
2003 2002
£m £m
proﬁt for the ﬁnancial year – group 973 1557
– joint ventures 05 06
– associates 14 10
total proﬁt for the ﬁnancial year 992 1573
currency translation differences 213 14
goodwill written off to reserves on pre april 1998 acquisition earnout consideration – 07
goodwill charged to proﬁt on disposal previously written off to reserves pre april 1998 – 31
total recognised gains and losses for the year 779 1583
the company had no recognised gains or losses other than the proﬁt for the year
35 severn trent plc annual report and accounts 2003
reconciliation of movements in shareholders’ funds
group company
2003 2002 2003 2002
£m £m £m £m
opening shareholders’ funds 22940 22899 29472 26427
proﬁt for the ﬁnancial year 992 1573 1388 4587
dividends 1576 1576 1576 1576
retained lossproﬁt for the ﬁnancial year 584 03 188 3011
other recognised gains and losses relating to the year 213 10 – –
shares issued 33 34 33 34
net reduction inaddition to shareholders’ funds 764 41 155 3045
closing shareholders’ funds 22176 22940 29317 29472 notes to the ﬁnancial statements
36 severn trent plc annual report and accounts 2003
1 accounting policies
a basis of accounting
the ﬁnancial statements have been prepared under the historical cost convention in accordance with applicable accounting standards 
and except for the treatment of certain grants and contributions comply with the requirements of the united kingdom companies act 1985 
‘the act’ an explanation of this departure from the requirements of the act is given in the policy on grants and contributions below
there have been no new accounting standards adopted in the year
the group continues to adopt the transitional provisions of frs 17 requiring certain additional disclosures which are set out in note 23 
b basis of consolidation
the ﬁnancial statements include the results of severn trent plc and its subsidiary joint venture and associated undertakings
the results of subsidiaries joint ventures and associated undertakings are included from the date of acquisition or incorporation and excluded
from the date of disposal the results of joint venture undertakings are accounted for on a gross equity basis where the company’s holding is
50 and the company exercises joint control under a contractual arrangement the results of associates are accounted for on an equity basis
where the company’s holding is 20 or more and the company exercises signiﬁcant inﬂuence
c turnover
turnover represents the income receivable excluding value added tax in the ordinary course of business for goods and services provided and
in respect of contract work in progress the value of work carried out
income includes an estimation of the amount of main water and wastewater charges unbilled at the yearend the accrual is estimated using 
a deﬁned methodology based upon a measure of unbilled water consumed by tariff which is calculated from historical billing information
d tangible ﬁxed assets and depreciation
tangible ﬁxed assets comprise
i infrastructure assets
infrastructure assets comprise a network of systems being mains and sewers impounding and pumped raw water storage reservoirs dams 
and sludge pipelines
expenditure on infrastructure assets relating to increases in capacity or enhancements of the network and on maintaining the operating
capability of the network in accordance with the deﬁned standards of service is treated as an addition and included at cost after deducting
grants and contributions
the depreciation charged for infrastructure assets is the estimated anticipated level of annual expenditure required to maintain the operating
capability of the network less the estimated anticipated level of relevant annual grants and contributions based on the company’s independently
certiﬁed asset management plan
ii landﬁll sites
landﬁll sites are included within land and buildings at cost less accumulated depreciation
the cost of landﬁll sites includes the cost of acquiring developing and engineering sites but does not include interest the cost of the asset 
is depreciated over the estimated life of the site on the basis of the usage of void space
iii other assets
other assets are included at cost less accumulated depreciation freehold land is not depreciated other assets are depreciated over their
estimated economic lives which are principally as follows
years
buildings 3060
operational structures 4080
fixed plant 2040
vehicles mobile plant and computers 215
assets in the course of construction are not depreciated until commissioned 37 severn trent plc annual report and accounts 2003
e leased assets
where assets are ﬁnanced by leasing arrangements which transfer substantially all the risks and rewards of ownership of an asset to the lessee
ﬁnance leases the assets are accounted for as if they had been purchased and the corresponding capital cost is shown as an obligation to the
lessor lease payments are treated as consisting of a capital element and a ﬁnance charge the capital element reducing the obligation to the
lessor and the ﬁnance charge being written off to the proﬁt and loss account over the period of the lease in proportion to the capital amount
outstanding depreciation is charged over the shorter of the estimated useful life and the lease period
all other leases are accounted for as operating leases rental costs arising under operating leases are expensed in the year in which they 
are incurred
f grants and contributions
grants and contributions received in respect of non infrastructure assets are treated as deferred income and are recognised in the proﬁt and
loss account over the useful economic life of those assets 
in accordance with industry practice grants and contributions relating to infrastructure assets have been deducted from the cost of ﬁxed assets
this is not in accordance with schedule 4 to the act which requires assets to be shown at their purchase price or production cost and hence
grants and contributions to be presented as deferred income this departure from the requirements of the act is in the opinion of the directors
necessary to give a true and fair view as while a provision is made for depreciation of infrastructure assets these assets do not have determinable
finite lives and therefore no basis exists on which to recognise grants and contributions as deferred income the effect of this departure is that
the cost of ﬁxed assets is £3270 million lower than it would otherwise have been 2002 £2945 million
those grants and contributions relating to the maintenance of the operating capability of the infrastructure network are taken into account in
determining the depreciation charged for infrastructure assets
g investments
investments held as ﬁxed assets are stated at cost less amounts written off
h stocks
stocks are stated at cost less provisions necessary to account for any damage and obsolescence work in progress is valued at the lower of 
cost and net realisable value cost includes labour materials transport and an element of overheads
development land and properties are included at the lower of cost and net realisable value cost includes the cost of acquiring and developing
the sites the net realisable value of development land is based upon its value as a serviced site after taking account of the cost of providing
infrastructure services turnover and attributable proﬁts on properties under development are determined by reference to valuation of work
carried out to date
i landﬁll restoration costs
provision for the cost of restoring landﬁll sites is made over the operational life of each landﬁll site and charged to the proﬁt and loss account
on the basis of the usage of void space
j environmental control and aftercare costs
environmental control and aftercare costs are incurred over the operational life of each landﬁll site and may be incurred for a considerable
period thereafter provision for all such costs is made over the operational life of the site and charged to the proﬁt and loss account on the 
basis of the usage of void space
k insurance
provision is made for claims notiﬁed and for claims incurred but which have not yet been notiﬁed based on advice from the group’s external
insurance advisers
l pension costs
costs of deﬁned beneﬁt pension schemes are determined by an independent actuary so as to spread the cost of providing pension beneﬁts
over the estimated period of employees’ average service lives with the group costs of deﬁned contribution pension schemes are charged to 
the proﬁt and loss account in the period in which they fall due notes to the ﬁnancial statements
continued
38 severn trent plc annual report and accounts 2003
1 accounting policies continued
m foreign currency
the trading results of overseas subsidiary and associated undertakings are translated into sterling using average rates of exchange ruling 
during the year
the net equity interests in overseas subsidiary and associated undertakings are translated into sterling at the rates of exchange ruling at the
yearend exchange differences thus arising are treated as movements in reserves together with exchange differences on loans between group
companies exchange differences arising in respect of foreign exchange instruments taken out as hedges of overseas investments are also
treated as movements in reserves 
all other foreign currency denominated assets and liabilities of the company and its united kingdom subsidiary undertakings are translated
into sterling at the rates of exchange ruling at the yearend in those instances where forward cover has been arranged the forward rate is used
any exchange differences so arising are dealt with through the proﬁt and loss account
foreign currency transactions arising during the year are translated into sterling at the rate of exchange ruling on the date of the transaction 
all proﬁts and losses on exchange arising during the year are dealt with through the proﬁt and loss account
n research and development
research and development expenditure is charged to the proﬁt and loss account in the year in which it is incurred expenditure on tangible
ﬁxed assets relating to research and development projects is written off over the expected useful life of those assets
o deferred taxation
deferred taxation is fully provided in respect of timing differences between the treatment of certain items for taxation and accounting purposes
only to the extent that an entity has an obligation to pay more tax in the future or a right to pay less tax in the future material deferred taxation
balances arising are discounted by applying an appropriate risk free discount rate for the purposes of discounting the period over which
accelerated capital allowances in respect of infrastructure assets reverse is determined by the estimated annual cost of maintaining the operating
capability of the network
p goodwill
goodwill represents the excess of purchase consideration over the fair value of the net assets acquired
goodwill arising on all acquisitions prior to 1 april 1998 remains eliminated against reserves purchased goodwill arising on acquisitions after
31 march 1998 is treated as an intangible ﬁxed asset in the balance sheet and stated at cost less accumulated amortisation capitalised goodwill
is amortised on a straight line basis over its useful economic life useful economic lives are currently estimated at between 5 and 20 years
q euro costs
costs of preparing systems and other applications for the introduction of the euro are written off to the proﬁt and loss account as incurred
unless there is a signiﬁcant enhancement to the system or application in which case the costs are capitalised and depreciated in line with 
the policy stated in d
r derivatives and other ﬁnancial instruments
debt instruments
the ﬁnancial costs of debt instruments are charged to the proﬁt and loss account over the term of the debt at a constant rate on the carrying
amount such costs include the cost of issue and any discount to face value arising on issue or any premium arising on maturity
differences arising from the movement in exchange rates during the year on translation into sterling of the foreign currency borrowings and
similar instruments used to ﬁnance longterm equity investments are taken directly to reserves and reported in the statement of total recognised
gains and losses
derivative ﬁnancial instruments
financial instruments in particular interest rate swaps and to a lesser extent currency swaps are used to manage the ﬁnancial risks arising
from the business activities of the group and the ﬁnancing of those activities there is no trading activity in ﬁnancial instruments a review of
how the ﬁnancial risks are managed is included in the financial review financial instruments are accounted for as follows 
• interest rate swaps are used to hedge the group’s exposure to movements in interest rates the interest payable or receivable on such swaps
is accrued in the same way as interest arising on deposits or borrowings interest rate swaps are not revalued to fair value prior to maturity
• currency swaps are used to hedge foreign currency investments the future currency exchange within such contracts is revalued to the rate 
of exchange at the balance sheet date and any unrealised gain or loss is matched with that on the underlying asset or liability in reserves 
the interest coupon on such swaps is accrued in the same way as that on borrowings and deposits
the aggregate fair values at the balance sheet date of the hedging instruments described above are disclosed in note 17 to the accounts 39 severn trent plc annual report and accounts 2003
2 segmental analysis
a analysis of turnover and proﬁt before interest by geographical origin and type of business
other – principally
united kingdom usa and europe group
2003 2002 2003 2002 2003 2002
£m £m £m £m £m £m
group turnover
water and sewerage 9179 8999 – – 9179 8999
waste management 4573 4495 536 453 5109 4948
services 558 460 3296 3356 3854 3816
systems 509 521 104 99 613 620
property engineering consultancy and insurance 664 410 66 20 730 430
inter segment trading 958 842 07 28 965 870
14525 14043 3995 3900 18520 17943
group proﬁt before interest goodwill amortisation and exceptional items
water and sewerage 3255 3341 – – 3255 3341
waste management 648 717 31 13 679 730
services 42 16 300 304 342 320
systems 07 02 24 55 31 57
property engineering consultancy and insurance 55 15 – – 55 15
unrealised proﬁt on inter segment trading 26 11 – – 26 11
corporate overheads 176 150 – – 176 150
3791 3926 307 262 4098 4188
goodwill amortisation 174 173 78 92 252 265
group proﬁt before interest and exceptional items
water and sewerage 3254 3341 – – 3254 3341
waste management 483 550 30 12 513 562
services 34 10 223 214 257 224
systems 07 02 24 56 31 58
property engineering consultancy and insurance 55 15 – – 55 15
unrealised proﬁt on inter segment trading 26 11 – – 26 11
corporate overheads 176 150 – – 176 150
3617 3753 229 170 3846 3923
exceptional items
exceptional impairment of ﬁxed assets – services 35 – 433 – 468 –
exceptional contract provision releasecosts – systems – – 60 250 60 250
proﬁt on disposal of business – systems – – – 80 – 80
35 – 373 170 408 170
group proﬁt before interest
water and sewerage 3254 3341 – – 3254 3341
waste management 483 550 30 12 513 562
services 01 10 210 214 211 224
systems 07 02 36 226 29 228
property engineering consultancy and insurance 55 15 – – 55 15
unrealised proﬁt on inter segment trading 26 11 – – 26 11
corporate overheads 176 150 – – 176 150
3582 3753 144 – 3438 3753
turnover by origin and destination do not differ materially notes to the ﬁnancial statements
continued
40 severn trent plc annual report and accounts 2003
2 segmental analysis continued
b joint ventures and associates
other – principally
united kingdom usa and europe group
2003 2002 2003 2002 2003 2002
£m £m £m £m £m £m
share of joint venture’s turnover 34 36 04 12 38 48
share of operating proﬁt of joint ventures and associates
joint ventures 08 09 – – 08 09
associates – – 100 90 100 90
08 09 100 90 108 99
c acquisitions
the proﬁt and loss account and segmental analysis include the following amounts in respect of businesses acquired during the year
turnover operating proﬁt
other – other –
principally principally
united usa and united usa and
kingdom europe total kingdom europe total
£m £m £m £m £m £m
water and sewerage 11 – 11 08 – 08
waste management 08 – 08 01 – 01
services – 58 58 – 09 09
total 19 58 77 07 09 02
water and sewerage and services’ operating proﬁt in the table above is after charging goodwill amortisation of £01 million and £02 million
respectively
d analysis of net operating assets by geographical location and type of business
other – principally
united kingdom usa and europe group
2003 2002 2003 2002 2003 2002
£m £m £m £m £m £m
water and sewerage 45422 43685 – – 45422 43685
waste management 2084 2089 237 241 2321 2330
services 173 187 1360 1603 1533 1790
systems 83 57 26 165 57 108
property engineering consultancy insurance and corporate 243 274 – – 243 274
net operating assets 48005 46292 1571 1679 49576 47971
goodwill
water and sewerage 13 –
waste management 2892 3052
services 1110 1696
shortterm deposits cash borrowings taxation and dividends payable 31393 29765
22198 22954 41 severn trent plc annual report and accounts 2003
3 operating costs
2003 2002
£m £m
wages and salaries 3964 3763
social security costs 313 299
pension costs note 23 243 263
total employee costs 4520 4325
power 370 400
raw materials and consumables 1429 1458
rates 580 568
service charges 233 228
waste disposal costs 806 713
other operating costs including exceptional items see below 3102 2838
depreciation – on owned assets including £43 million exceptional charge in 2003 see below 2259 2198
– on assets held under ﬁnance leases 94 75
– on infrastructure assets 556 541
amortisation and impairment – goodwill including £425 million exceptional impairment charge in 2003 see below 677 265
hired and contracted services 1197 1240
environmental and landﬁll restoration costs 43 100
operating lease rental – land and buildings 119 108
– other 53 59
hire of plant and machinery 200 174
research and development expenditure 39 35
auditors’ remuneration – audit work 08 06
– non audit work 07 08
proﬁt on disposal of ﬁxed assets 65 20
16227 15319
own work capitalised 1037 950
total operating costs 15190 14369
if expressed on an equivalent basis to the current year ﬁgure of £65 million proﬁt on sale of tangible ﬁxed assets in 20012002 would be
£49 million and not the ﬁgure of £20 million reported last year and shown as a comparative above if amended there would be changes in
20012002 to the analysis of operating costs and to the analysis of cash ﬂows as such changes are not material for the group and would 
have no impact on the overall proﬁt or cash ﬂow of the group in 20012002 no changes have been effected
exceptional items in 20022003 included in the above analysis comprise
a charge of £468 million for impairment of goodwill and tangible ﬁxed assets in services this was offset by a £60 million release of part of
the £250 million exceptional charge made in 20012002 in respect of certain of systems’ cisopen vision contracts in the usa included
within ‘other operating costs’ above
the impairment was determined in accordance with frs 11 ‘impairment of ﬁxed assets and goodwill’ the impairment restates the relevant
assets to value in use using a pretax discount rate of 10 £425 million of this impairment charge was a write down of goodwill the remaining
£43 million was a write down of tangible ﬁxed assets the impairment has resulted in the year in a £12 million reduction in goodwill
amortisation and a £06 million reduction in depreciation
exceptional contract costs in the year ended 31 march 2002 of £250 million arising in systems related to the costs of completing onerous
contracts in the usa
during the year pricewaterhousecoopers earned the following fees
2003 2002
£m £m
included in operating costs above
statutory audit fees 08 06
nonaudit fees – taxation services 06 05
– other fees 01 03
15 14
due diligence fees capitalised as part of acquisition costs 01 06
total fees 16 20
included in auditors’ remuneration above is £75000 2002 £55000 in respect of the audit of the company
details of directors’ remuneration are set out in the report of the remuneration committee on pages 25 to 30 notes to the ﬁnancial statements
continued
42 severn trent plc annual report and accounts 2003
4 employee numbers
average number of employees during the year full time equivalent
2003 2002
number number
by type of business
water and sewerage 4780 4662
waste management 4043 3904
services 4796 4825
systems 656 641
property engineering consultancy insurance and corporate 372 340
14647 14372
by geographical location
united kingdom 10119 9759
other – principally usa and europe 4528 4613
14647 14372
5 net interest payable
2003 2002
£m £m
interest receivable and similar income 20 42
interest payable and similar charges
bank loans and overdrafts 371 432
other loans 928 858
interest on discounted provisions 19 30
finance leases 221 242
1519 1520
share of joint ventures 02 02
share of associates 73 68
1594 1590
6 taxation
a analysis of charge in the year
2003 2002
£m £m
current tax
uk corporation tax – current year at 30 279 175
– prior year 64 51
double taxation relief 08 06
total uk tax – group 207 118
overseas tax – current year 23 30
– prior year 04 –
total overseas tax 27 30
total current tax – group 234 148
share of tax charges of – joint ventures 02 01
– associates 12 12
total current tax 248 161
deferred tax 
origination and reversal of timing differences – current year 404 593
– prior year 131 50
decreaseincrease in discount 60 220
total deferred tax 595 423
total tax charge 843 584 43 severn trent plc annual report and accounts 2003
b factors affecting the current tax charge in the year
the current tax assessed for the year is lower than the standard rate of corporation tax in the uk 30 the differences are explained below
2003 2002
£m £m
proﬁt on ordinary activities before tax 1844 2163
proﬁt on ordinary activities multiplied by the standard rate of corporation tax in the uk 30 553 649
effects of
expenses not deductible for tax purposes 144 136
capital allowances for year in excess of depreciation 394 500
utilisation ofmovement in shortterm timing differences 07 89
utilisation ofmovement in tax losses 03 01
overseas tax rate differences 15 17
adjustment in respect of prior years 60 51
total current tax 248 161
c factors affecting future tax rates
the group’s current tax charge of £248 million 2002 £161 million represents 110 2002 69 of the group’s proﬁt after interest but
before exceptional items due to the changing shape and maturity of the group the current tax charge as a percentage of proﬁt after interest
but before exceptional items is expected to increase
the group’s deferred tax charge in future years is more difﬁcult to predict as in particular it is impacted by changes in interest rates from 
one balance sheet date to the next
no deferred tax asset has been recognised on net operating losses relating to the us subgroup the estimated amount of the deferred tax
asset not recognised measured at the uk standard rate of 30 is £121 million
7 exceptional proﬁt on disposal of business in prior year
2003 2002
£m £m
gain on disposal of subsidiary net assets – 111
goodwill previously eliminated against reserves – 31
proﬁt on sale of subsidiary – 80
in may 2001 the group sold stoner associates a wholly owned subsidiary and part of the systems business for 260 million £172 million
realising a gain of £80 million on disposal no current tax arose on the gain as a result of available tax losses
8 dividends
2003 2002
pence pence
per share £m per share £m
interim dividend declared 1734 595 1734 595
final dividend proposed 2856 981 2856 981
4590 1576 4590 1576 notes to the ﬁnancial statements
continued
44 severn trent plc annual report and accounts 2003
9 earnings per share
basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number 
of ordinary shares in issue during the year excluding those held in the severn trent employee share ownership trust which are treated 
as cancelled
for diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially
dilutive ordinary shares these represent share options granted to employees where the exercise price is less than the average market price 
of the company’s shares during the year
supplementary adjusted earnings per share ﬁgures are presented these exclude the effects of exceptional items and deferred tax in both 2003
and 2002 the directors consider that the supplementary ﬁgures provide a useful additional indication of performance
2003 2002
weighted weighted
average average
number per share number per share
earnings of shares amount earnings of shares amount
£m m pence £m m pence
basic earnings per share 992 3431 289 1573 3428 459
effect of dilutive options – 14 01 – 15 02
diluted earnings per share 992 3445 288 1573 3443 457
supplementary earnings per share
basic earnings per share 992 3431 289 1573 3428 459
effect of
exceptional impairment of goodwill and tangible ﬁxed assets 468 – 136 – – – 
exceptional proﬁt on disposal of business ––– 80 – 23 
exceptional contract provision releasecosts 60 – 17 250 – 73 
deferred tax 595 – 173 423 – 123
adjusted basic earnings per share before exceptional items and deferred tax 1995 3431 581 2166 3428 632
diluted earnings per share 992 3445 288 1573 3443 457
effect of
exceptional impairment of goodwill and tangible ﬁxed assets 468 – 135 – – – 
exceptional proﬁt on disposal of business ––– 80 – 23 
exceptional contract provision releasecosts 60 – 17 250 – 72 
deferred tax 595 – 173 423 – 123
diluted earnings per share before exceptional items and deferred tax 1995 3445 579 2166 3443 629
10 goodwill
group
2003
£m
cost
at 1 april 2002 5270
arising on acquisitions in the year note 21a 65
arising on prior year acquisitions note 21b 09
exchange adjustments 164
at 31 march 2003 5180
amortisation
at 1 april 2002 522
charge for year 252
exceptional goodwill impairment note 3 425
exchange adjustments 34
at 31 march 2003 1165
net book value
at 31 march 2003 4015
at 31 march 2002 4748
the cumulative goodwill impairment charge recognised at the yearend is £425 million 2002 £ nil 45 severn trent plc annual report and accounts 2003
11 tangible assets
group company
land and infrastructure plant and
buildings assets equipment total total
£m £m £m £m £m
cost
at 1 april 2002 19404 28943 24956 73303 120
acquisition of businesses –– 11 11 –
additions 913 1861 2142 4916 03
grants and contributions – 325 – 325 –
disposals 49 07 299 355 –
reclassiﬁcations and transfers 06 – 04 10 –
exchange adjustments 10 – 09 19 –
at 31 march 2003 20252 30472 26797 77521 123
depreciation
at 1 april 2002 5717 8284 10384 24385 40
charge for year 545 556 1765 2866 09
exceptional tangible ﬁxed asset impairment note 3 04 – 39 43 –
disposals 33 07 244 284 –
reclassiﬁcations and transfers 18 – 04 14 –
exchange adjustments 09 – 02 11 –
at 31 march 2003 6260 8833 11942 27035 49
net book value
at 31 march 2003 13992 21639 14855 50486 74
at 31 march 2002 13687 20659 14572 48918 80 
i included in tangible ﬁxed assets are assets held under ﬁnance leases as follows
2003 2002
£m £m
cost 3014 3030
accumulated depreciation 689 613
net book value 2325 2417
ii grants and contributions received relating to infrastructure assets have been deducted from the cost of ﬁxed assets in order to show a true
and fair view as set out in note 1f
iii the net book value of land and buildings is analysed as follows
2003 2002
£m £m
freehold 13340 12967
long leasehold 419 446
short leasehold 233 274
13992 13687
iv the net book value of land and buildings includes £1181 million 2002 £1182 million in respect of landﬁll sites
v included in the above are the following tangible ﬁxed assets not subject to depreciation
2003 2002
£m £m
land 301 312
assets in the course of construction 3014 2253
3315 2565
vi at 31 march 2003 the company’s tangible ﬁxed assets comprised freehold land and buildings with a net book value of £68 million 
2002 £68 million and plant and equipment with a net book value of £06 million 2002 £12 million notes to the ﬁnancial statements
continued
46 severn trent plc annual report and accounts 2003
12 investments
group
2003 2002
£m £m
investments in joint ventures
share of gross assets 31 60
share of gross liabilities 26 46
loans 47 47
52 61
investments in associates
share of net assets 147 147
loans 29 26
176 173
other investments 12 12
own shares 65 45
305 291
interests in interests in other own
joint ventures associates investments shares total
£m £m £m £m £m
group
at 1 april 2002 61 173 12 45 291
loans advanced 07 03 – – 10
additions –– 01 20 21
disposals 11 – – – 11
loans repaid 07 – – – 07
share of proﬁts 05 14 – – 19
dividends receivable 01 15 – – 16
other movements 02 01 01 – 02
at 31 march 2003 52 176 12 65 305
interests in joint ventures and associates at 31 march 2003 comprised the group’s share of net assets less provisions of £152 million 
2002 £161 million and loans of £76 million 2002 £73 million the group’s share of the post acquisition accumulated proﬁts of joint
ventures at 31 march 2003 was £21 million 2002 £16 million the group’s share of the post acquisition accumulated proﬁts of associates 
at 31 march 2003 was £17 million 2002 £02 million particulars of the group’s principal joint venture and associated undertakings at
31 march 2003 are
issued share capital
percentage
nature of of share a ordinary b ordinary other classes
business capital held shares of £1 shares of £1 of shares
biogeneration limited power generation 50 500 500 –
gmi rovinian limited property development 50 25000 25000 –
capital controls india private limited chlorination equipment 50 – – 750000 equity shares at rs10share
aquaﬁn nv sewerage undertaking 20 – – 160000 shares at €124share
indaqua industria e gestao de aguas water undertaking 30 – – 300000 shares at €5share
cognica limited asset management 50 100000 100000 –
held by the group
the country of incorporation registration and main operation is great britain with the exceptions of capital controls india india aquaﬁn
belgium and indaqua portugal
the group ﬁnancial statements incorporate a trading period for aquaﬁn and indaqua of twelve months to their accounting reference date of 
31 december 2002
interests in own shares represent ordinary shares of 65
5
⁄
19
p each held in trust for certain senior employees under the long term incentive plan
the main features of the plan are set out in the remuneration committee report on pages 26 and 29 at 31 march 2003 the trust held 
982492 shares 2002 669320 shares the market value of these shares was £70 million 2002 £49 million the costs of acquiring the
shares are charged to the proﬁt and loss account over the three year period for which the performance criteria are measured
details of the principal operating subsidiaries by type of business are set out in note 25 a complete list of subsidiary undertakings is available
on request to the company and will be ﬁled with the next annual return 47 severn trent plc annual report and accounts 2003
subsidiary undertakings own shares total
shares loans
£m £m £m £m
company
at 1 april 2002 5431 28788 45 34264
additionsloans advanced 4571 455 20 5046
loans repaid – 4460 – 4460
disposalsprovisions 134 – – 134
at 31 march 2003 9868 24783 65 34716
13 stocks
group
2003 2002
£m £m
stocks and work in progress 396 359
development land and properties 514 613
910 972
the replacement value of stocks and work in progress is not materially different from their book value
14 debtors
group company
2003 2002 2003 2002
£m £m £m £m
trade debtors 2514 2539 – –
amounts owed by group undertakings – – 446 438
amounts owed by associated undertakings 03 02 – –
corporation tax recoverable 07 07 – –
other debtors 508 311 22 03
prepayments and accrued income 1200 1046 13 08
4232 3905 481 449
included within group debtors of £4232 million is £113 million 2002 £106 million which falls due after more than one year
15 creditors amounts falling due within one year
group company
2003 2002 2003 2002
£m £m £m £m
bank overdrafts 318 312 318 508
bank loans 973 1044 – –
other loans 4031 3392 3384 2657
obligations under ﬁnance leases 54 47 – –
borrowings note 17 5376 4795 3702 3165
trade creditors 598 462 02 04
amounts owed to group undertakings – – 393 261
other creditors 355 293 217 144
taxation and social security 265 221 – –
corporation tax payable 505 414 215 85
dividends payable 1579 1578 1579 1578
accruals and deferred income 3514 3365 28 91
12192 11128 6136 5328 notes to the ﬁnancial statements
continued
48 severn trent plc annual report and accounts 2003
16 creditors amounts falling due after more than one year
group company
2003 2002 2003 2002
£m £m £m £m
bank loans 4889 4656 – –
other loans 10922 10557 1624 1294
obligations under ﬁnance leases 4558 4589 – –
borrowings note 17 20369 19802 1624 1294
deferred income 475 495 – –
other creditors 172 131 96 54
21016 20428 1720 1348
17 financial instruments
the group’s policies in respect of foreign currency and interest rate risk management and the related use of ﬁnancial instruments are set 
out in the treasury management section of the financial review on page 17
a borrowings analysed by currency and interest rate after taking account of various currency and interest rate swaps entered into 
by the group
fixed borrowings
weighted 
average
weighted period for 
floating fixed average which 
2003 interest interest interest interest 
total rate rate rate is ﬁxed
currency £m £m £m  years
sterling 24763 5805 18958 62 177
euro 318 318 –
dollar 664 664 –
total borrowings at 31 march 2003 25745 6787 18958
total borrowings at 31 march 2002 24597 5853 18744
in addition to the ﬁxed debt above the group has £125 million of forward start interest rate swaps ﬂoating to ﬁxed that commence during the
financial year ending march 2004 these forward start interest rate swaps have a weighted average interest rate of 51 and a weighted average
duration of 30 years
floating rate borrowings bear interest based on libor
b investments in interest bearing assets
2003 2002
currency £m £m
sterling deposits 237 179
euro deposits 03 12
us dollar deposits 17 –
total 257 191
investments in interest bearing assets comprise shortterm deposits placed on money markets with a maturity date not exceeding one year
and certiﬁcates of deposit
c monetary assets and liabilities by currency excluding the functional currency 
net foreign currency monetary assetsliabilities
sterling us dollar euro other total
£m £m £m £m £m
functional currency of operation
sterling – 27 240 01 212
dollar 02 – – – 02
total 02 27 240 01 214
net currency gainslosses arising from monetary assetsliabilities not in the functional currency of an operation are recognised in its proﬁt
and loss account those arising from the translation of us dollar and euro functional currency ﬁnancial statements into sterling are recognised
in the statement of total recognised gains and losses 49 severn trent plc annual report and accounts 2003
d borrowings analysed by maturity date
loans 
repayable by
instalments
any of which other 
are payable repayment finance 2003 2002
overdrafts after ﬁve years terms leases total total
£m £m £m £m £m £m
group
borrowings due within one year note 15 318 – 5004 54 5376 4795
borrowings due after one year
between one and two years –– 880 59 939 1230
between two and ﬁve years –– 3638 274 3912 3511
after more than ﬁve years –– 11293 4225 15518 15061
total borrowings due after one year note 16 –– 15811 4558 20369 19802
318 – 20815 4612 25745 24597
loans repayable partly or wholly after ﬁve years comprise rate of interest 2003 2002
 £m £m
european investment bank loans – 20082013 2861 2206 1750
sterling bond stwuf – 2024 61 2982 2979
sterling bond stwuf – 2029 63 4126 4133
euro medium term notes 3745 1976 1836
other loans 39 03 17
11293 10715
severn trent water utilities finance plc
company
the company has loans and overdrafts totalling £4802 million 2002 £4061 million which are repayable within ﬁve years and £524 million
2002 £398 million repayable after more than ﬁve years
e borrowings facilities
the group has the following undrawn committed borrowing facilities available at 31 march 2003 2003 2002
£m £m
expiring within one year – 2000
expiring after two years 6000 6000
6000 8000
in addition the group also has an overdraft facility of £750 million 2002 £750 million of which £432 million 2002 £438 million remains
undrawn at the yearend
f fair values of ﬁnancial instruments
financial instruments by category 2003 2002
book value fair value book value fair value
assetliability £m £m £m £m
primary ﬁnancial instruments held or issued to ﬁnance the group’s operations
shortterm deposits 257 257 191 191
cash at bank and in hand 372 377 289 289
borrowings falling due within one year 5350 5349 4688 4700
borrowings falling due after more than one year 20202 21555 19633 19623
derivative ﬁnancial instruments held to manage the currency and interest rate proﬁle
interest rate swaps and similar instruments – 938 – 215
currency instrument – cross currency swaps 193 153 263 196
currency instrument – investment hedge 60 55 13 11
total net debt 25056 27306 24117 24265
other longterm assetsliabilities
interest in own shares 65 70 45 49
other ﬁxed asset investments 12 12 12 12
where available market rates have been used to determine fair values when market prices are not available fair values have been calculated
by discounting cash ﬂows at prevailing interest rates
shortterm debtors and creditors have been excluded from the above analysis notes to the ﬁnancial statements
continued
50 severn trent plc annual report and accounts 2003
17 financial instruments continued
g unrecognised gains and losses on hedges at 31 march 2003
total net
gains
gains losses losses
£m £m £m
unrecognised gains and losses on hedges at 1 april 2002 146 292 146
arising in previous years that were recognised in the year 37 07 30
arising before 1 april 2002 that were not recognised in the ﬁnancial year 183 299 116
unrecognised gains and losses arising during the ﬁnancial year 70 717 787
unrecognised gains and losses on hedges at 31 march 2003 113 1016 903
expected to be recognised
in one year or less 11 10 01
in later years 102 1006 904
the instruments used for hedging group exposures to movements in interest rates and exchanges rates are explained in the financial review on
page 17 changes in the fair value of instruments used as hedges are not recognised in the ﬁnancial statements until the hedged position matures
18 provisions for liabilities and charges
a group provisions comprise the following
2003 2002
£m £m
deferred tax 4258 3663
other provisions 973 1141
5231 4804
deferred tax
the group’s full deferred tax liability calculated at a tax rate of 30 2002 30 is
2003 2002
£m £m
capital allowances 8459 8051
tax lossesother timing differences 289 416
undiscounted provision for deferred tax 8170 7635
discount 3912 3972
discounted provision for deferred tax 4258 3663
provision at start of year 3663 3243
deferred tax charge for year 595 423
movements arising on acquisitiondisposal of businesses – 03
provision at end of year 4258 3663 51 severn trent plc annual report and accounts 2003
other provisions 
other provisions comprise
balance at charged to transferred balance at
1 april proﬁt and to other exchange 31 march
2002 loss account categories adjustments utilised 2003
£m £m £m £m £m £m
environmental and landﬁll restoration 652 68 20 07 86 621
restructuring 25 13 03 – 17 24
insurance 176 109 – – 74 211
onerousloss making contracts 279 51 – – 120 108
other 09 07 – – 07 09
1141 146 17 07 304 973
as more fully explained in notes 1 i and j environmental and landﬁll restoration provisions reﬂect costs to be incurred over the operational 
life of individual landﬁll sites and in the case of aftercare costs for a considerable period thereafter discounting is applied included in the 
£68 million charge against proﬁt in the current year is £19 million interest resulting from the use of discounting
the restructuring provision reﬂects costs to be incurred in respect of committed programmes all of the associated outﬂows are estimated 
to occur within one year of the balance sheet date
derwent insurance limited a captive insurance company is a wholly owned subsidiary of the group provisions for claims are made as set 
out in note 1k the associated outﬂows are estimated to arise over a period of up to ﬁve years from the balance sheet date
the onerousloss making contract provision relates to speciﬁc contractual liabilities either assumed with businesses acquired or arising in
existing group businesses where estimated future costs are not expected to be recovered in revenues the associated outﬂows are estimated 
to crystallise over the relevant contract periods of up to ﬁve years from the balance sheet date
the £51 million credit in relation to onerous contract provisions includes an exceptional £60 million release of excess cisopen vision contract
provisions see note 3
b company provisions are as follows
2003 2002
£m £m
deferred tax 14 23
19 called up share capital
2003 2002
£m £m
total authorised share capital
520175751 ordinary shares of 65
5
⁄
19
p 3395 3395 
total issued and fully paid share capital
343976362 2002 343314703 ordinary shares of 65
5
⁄
19
p 2244 2240 
a shares issued during the year
569961 ordinary shares of 65
5
⁄
19
p were issued at 735p 7435p 7585p 757p 7555p 718p 667p 650p 580p 612p 6325p 628p 673p
6825p 700p or 715p under the group’s employee sharesave scheme and 91698 ordinary shares of 65
5
⁄
19
p were issued at 625p 497p 
or 688p under the group’s share option scheme formerly executive share option scheme the aggregate consideration in respect of these
allotments was £47 million
b employee share schemes
i the severn trent share schemes proﬁt sharing scheme
the issued and paid up share capital of the company includes 451063 ordinary shares of 65
5
⁄
19
p 2002 679766 ordinary shares of 65
5
⁄
19
p
issued under the proﬁt sharing scheme these shares are held in trust on behalf of employees who are beneﬁcially entitled to the shares
ii the severn trent share schemes share incentive plan
the issued and paid up share capital of the company includes 192840 ordinary shares of 65
5
⁄
19
p 2002 nil issued under the share incentive
plan these shares are held in trust on behalf of employees who are beneﬁcially entitled to the shares notes to the ﬁnancial statements
continued
52 severn trent plc annual report and accounts 2003
19 called up share capital continued
iii employee sharesave scheme
under the terms of the sharesave scheme the board may grant those employees who have entered into an inland revenue approved save 
as you earn saye contract for a period of 3 5 or 7 years the right to purchase ordinary shares in the company options outstanding at
31 march 2003 were as follows
number of shares
date of grant normal date of exercise option price 2003 2002
january 1995 2002 415p – 173618
january 1996 2001 or 2003 535p 103595 105705
january 1997 2002 or 2004 528p 136623 503527
january 1998 2001 2003 or 2005 799p 215181 227424
january 1999 2002 2004 or 2006 831p 139437 241791
january 2000 2003 2005 or 2007 473p 2479683 2621630
january 2001 2004 2006 or 2008 568p 1005844 1098940
january 2002 2005 2007 or 2009 548p 1084157 1169951
january 2003 2006 2008 or 2010 536p 1628944 –
iv approved share option scheme 
under the terms of the share option scheme formerly executive share option scheme the board has granted directors and other executives
options to purchase ordinary shares in the company options outstanding under this scheme at 31 march 2003 were as follows
number of shares
date of grant number normal date of exercise option price 2003 2002
march 1993 0 19962003 497p – 21725
december 1993 15 19962003 625p 61716 139071
june 1998 42 20012008 1005p 80568 88444
june 1999 42 20022009 934p 59379 75174
june 2000 34 20032010 688p 67955 76784
july 2001 40 20042011 738p 110861 116040
june 2002 58 20052012 720p 125965 –
v unapproved share option scheme
the board has granted executives options to purchase ordinary shares in the company under an unapproved share option scheme options
outstanding under this scheme at 31 march 2003 were as follows 
number of shares
date of grant number normal date of exercise option price 2003 2002
june 1998 19 20012008 1005p 36905 40753
june 1999 51 20022009 934p 116312 164652
june 2000 69 20032010 688p 257351 277506
july 2001 74 20042011 738p 313187 326235
june 2002 89 20052012 720p 355098 – 53 severn trent plc annual report and accounts 2003
20 reserves
share capital proﬁt 
premium redemption and loss
account reserve account
£m £m £m
group
at 1 april 2002 244 1561 18895
retained loss for the year –– 584
shares issued 29––
adjustment for shares issued under quest scheme 14 – 14
currency translation differences –– 213
at 31 march 2003 287 1561 18084
currency translation differences of £213 million in reserves are the net of a £253 million loss on retranslation of the opening balance sheet 
at yearend exchange rates and a £40 million net gain on foreign currency borrowings acting as a partial hedge
share capital proﬁt 
premium redemption and loss
account reserve account
£m £m £m
company
at 1 april 2002 244 1561 25427
retained loss for the year –– 188
shares issued 29––
adjustment for shares issued under quest scheme 14 – 14
at 31 march 2003 287 1561 25225
the proﬁt attributable to shareholders dealt with in the accounts of the company was £1388 million 2002 £4587 million in the previous
two years £12212 million of the company’s retained proﬁt arose as a result of group restructuring exercises and are not considered likely 
to be distributable as permitted by section 230 of the companies act 1985 no proﬁt or loss account is presented for the company
at 31 march 2003 cumulative goodwill written off directly against group reserves amounted to £2877 million 2002 £2877 million
21 acquisitions and disposals
a acquisitions in 20022003
during the year the group acquired interests in the following businesses
name of business date of acquisition
water and sewerage
uk talks ltd 20 june 2002
services
en novative technologies inc 19 april 2002
planned community management inc 1 april 2002
infratech ads corporation 5 june 2002
waste management all asset acquisitions
hart dc 10 may 2002
onyx torbay 5 july 2002
sbs waste 31 july 2002
onyx carlisle 30 august 2002
property
abbcott developments ltd 5 december 2002
uk talks was a previous joint venture of the group the acquisition date above is the date at which the investment ceased being a joint venture
and became a subsidiary of the group
all acquisitions were accounted for using the acquisition method 
from the dates of acquisition to 31 march 2003 the acquisitions contributed £77 million to turnover and a proﬁt before interest of £02 million notes to the ﬁnancial statements
continued
54 severn trent plc annual report and accounts 2003
21 acquisitions and disposals continued
the book value of net assets acquired and their provisional fair value were as follows
book value
and provisional
fair value total
£m
tangible ﬁxed assets 11
stocks 04
debtors due within one year 12
cash at bank and in hand –
bank loans 04
creditors due within one year 11
12
consideration – paid 59
– deferred 04
– expenses paid 07
– expenses deferred 07
total consideration 77
goodwill 65
there have been no accounting policy harmonisations to reﬂect adjustments in accordance with group policy in the current period
none of the businesses acquired during the year had preacquisition trading results which were individually signiﬁcant in the context of the group
all fair value adjustments above will be reviewed during 20032004 any revision will be accounted for as adjustments to goodwill in that year
b acquisitions in 20012002
the ﬁnalisation of provisional fair values on acquisitions made in the ﬁnancial year to 31 march 2002 has resulted in additional goodwill 
of £03 million relating to an increase in deferred acquisition creditors reﬂecting further future consideration now expected to become due
a further £06 million of goodwill on prior year acquisitions has resulted from additional consideration which had not been accrued
c disposals in 20012002
in may 2001 the group sold stoner associates a wholly owned subsidiary and part of the severn trent systems business for 260 million
£181 million realising a gain of £80 million on disposal
£m
tangible ﬁxed assets 54
goodwill 07
debtors due within one year 44
cash at bank and in hand 05
creditors due within one year 49
61
goodwill written off directly to reserves on acquisition of business pre april 1998 31
proﬁt on disposal 80
proceeds from disposal net of £09 million expenses of sale 172
stoner contributed £15 million to group turnover £01 million to operating proﬁt and an operating cash outﬂow of £01 million in the period
prior to its disposal 55 severn trent plc annual report and accounts 2003
22 commitments and contingent liabilities
a investment expenditure commitments
2003 2002
£m £m
contracted for but not provided in the ﬁnancial statements 2002 1523
in addition to these commitments severn trent water limited has longerterm expenditure plans which include investments to achieve improvements
in performance mandated by the director general of water services and to provide for growth in demand for water and sewerage services
b operating lease commitments
the group is committed to making the following payments during the next year in respect of operating leases which expire as follows
2003 2002
land and land and
buildings other buildings other
£m £m £m £m
within one year 11 11 15 09
between one and ﬁve years 40 41 43 06
after ﬁve years 38 – 15 –
89 52 73 15
c bonds and guarantees
group undertakings have entered into bonds in the normal course of business the company has entered into guarantees in the normal course
of business no liability is expected to arise in respect of either bonds or guarantees
d bank offset arrangements
the banking arrangements of the company operate on a pooled basis with certain of its subsidiary undertakings under these arrangements
participating companies guarantee each other’s overdrawn balances to the extent of their credit balances credit balances can be offset against
overdrawn balances of participating companies
23 pensions and retirement beneﬁts
the group continues to account for pension arrangements in accordance with ssap 24 ‘accounting for pension costs’ disclosures required
under ssap 24 are set out in note 23 a below 
in november 2000 the accounting standards board issued frs 17 ‘retirement beneﬁts’ which will replace ssap 24 full adoption of frs 17 
is not required in the case of the severn trent group until at the earliest the year ending 31 march 2006 in the interim certain additional
disclosures are required under the transitional provisions of frs 17 details of which are provided in note 23 b below 
a ssap 24 ‘accounting for pension costs’ – disclosures
the group operates a number of deﬁned beneﬁt pension schemes in the uk covering the majority of uk employees the deﬁned beneﬁt
schemes are fully funded to cover future salary and pension increases and their assets are held in separate funds administered by the trustees
an actuarial valuation of each scheme is carried out at regular intervals by an independent professionally qualiﬁed actuary
the uk deﬁned beneﬁt schemes and the date of their last formal actuarial valuation are as follows
uk deﬁned beneﬁt scheme date of last formal actuarial valuation
severn trent water pension scheme ‘stwps’ 31 march 2001
severn trent senior staff pension scheme 31 march 2001
uk waste pension scheme 6 april 2001
severn trent mirror image pension scheme 31 march 2000
the stwps is by far the largest of the group’s uk deﬁned beneﬁt schemes
beneﬁts are also provided by the group on an unfunded unapproved basis to a number of senior staff recruited since june 1989 whose
beneﬁts would otherwise be restricted by the finance act 1989 earnings cap provision is made for such beneﬁts by annual charge against 
the group’s earnings totalling in the current year £12 million 2002 £12 million
the group also operates deﬁned contribution arrangements for certain of its uk and overseas employees in september 2001 the severn trent
group pension scheme an occupational deﬁned contribution scheme was established to ensure compliance with stakeholder legislation and
to provide the group with an alternative pension arrangement
the most recent formal actuarial valuations of the group’s uk deﬁned beneﬁt schemes were carried out using the projected unit method 
except for the uk waste pension scheme and the severn trent mirror image pension scheme where the attained age method was applied 
as both of these schemes are closed to new entrants notes to the ﬁnancial statements
continued
56 severn trent plc annual report and accounts 2003
23 pensions and retirement beneﬁts continued
the cumulative results of these valuations at the above dates including the unfunded arrangement for senior staff were as follows
stwps others total
£m £m £m
market value of assets 7937 1615 9552
present value of scheme liabilities 7448 1533 8981
surpluses 489 185 674
deﬁcits – 103 103
net surplus 489 82 571
ignoring amounts which may or may not be recoverable and deferred tax
the major assumptions used by the scheme actuary in the most recent valuation of the stwps also the approximate weighted average 
of assumptions used for the most recent formal valuations of all group schemes were as follows
price inﬂation 25
salary increases 40
pension increases 25
discount rate 60
employer’s contributions to stwps were increased from 1 april 2002 to 1464 122 or 732 of pensionable pay previously 1236
103 or 618 of stwps members employees’ contributions continue at the rate of 6 5 or 3 of pensionable pay
employer’s contributions to stwps in the year to 31 march 2003 amounted on average to 139 of pensionable payroll the regular cost 
of stwps to the group in the year to 31 march 2003 amounted to 139 of pensionable payroll or 109 after allowing for amortisation of
surplus which has been recognised in arriving at the pension charge for the year
the total pension charge for all pension arrangements in the severn trent group accounts for the year ended 31 march 2003 after amortisation
of surpluses and deﬁcits amounted to £243 million 2002 £263 million £230 million 2002 £250 million of this charge relates to the
group’s deﬁned beneﬁt schemes including unfunded charge and £13 million 2002 £13 million relates to the group’s deﬁned contribution
arrangements amounts carried in the balance sheet in respect of pension costs are not signiﬁcant in the context of the group
b frs 17 ‘retirement beneﬁts’ – additional disclosures
the most recent valuations of the group’s deﬁned beneﬁt schemes details of which are provided above have been updated by the group’s
actuaries so as to reassess the actuarial liabilities and the market values of the assets at 31 march 2003 in accordance with the requirements 
of frs 17 
the weighted average of the major assumptions used by the actuary to calculate scheme liabilities under frs 17 are
31 march 2003 31 march 2002
valuation method projected unit projected unit
price inﬂation 225 25
salary increases 375 40
pension increases 225 25
discount rate 525 60 57 severn trent plc annual report and accounts 2003
the assets and liabilities in the schemes and expected rates of return were
at 31 march 2003
total fair
longterm rate value at
of return 31 march 
expected at stwps others 2003
31 march 2003 £m £m £m
equities 825 4300 671 4971
gilts 453 1329 511 1840
property 639 425 62 487
cash 375 125 37 162
total market value of assets 6179 1281 7460
present value of scheme liabilities 8982 1729 10711
net deﬁcit in schemes before deferred tax 2803 448 3251
net group
total total after
recoverable deferred deferred
deﬁcit tax asset tax
£m £m £m
total schemes in deﬁcit at 31 march 2003 3251 975 2276
at 31 march 2002
total fair
longterm rate value at
of return 31 march 
expected at stwps others 2002
31 march 2002 £m £m £m
equities 775 6070 921 6991
gilts 515 1473 500 1973
property 645 214 34 248
cash 450 104 29 133
total market value of assets 7861 1484 9345
present value of scheme liabilities 7580 1460 9040
net surplus in schemes before amounts deemed irrecoverable and deferred tax 281 24 305
less surplus deemed irrecoverable – 124 124
total recoverable surplusdeﬁcit in schemes before deferred tax 281 100 181
total net group
recoverable deferred tax total after
surplus liability deferred tax
deﬁcit asset £m
schemes in surplus 341 102 239
schemes in deﬁcit 160 48 112
total 181 54 127
if the above amounts were recognised in the ﬁnancial statements the group’s net assets and proﬁt and loss reserve at 31 march 2003 and
31 march 2002 would be as follows
2003 2003 2002 2002
reserves net assets reserves net assets
£m £m £m £m
excluding net pension surplus 18084 22198 18895 22954
net pension liabilitysurplus under frs 17 2276 2276 127 127
net liabilities already recognised in accounts under ssap 24 net of deferred tax 22 22 19 19
including net pension surplus 15830 19944 19041 23100
the weighted average employer contributions rates to all group deﬁned beneﬁt schemes expressed as a percentage of pensionable payroll
were 145 in the year ended 31 march 2003 2002 12 notes to the ﬁnancial statements
continued
58 severn trent plc annual report and accounts 2003
23 pensions and retirement beneﬁts continued
the amounts that would have been recognised in the proﬁt and loss account and statement of total recognised gains and losses in respect of
the pension schemes in the year to 31 march 2003 under frs 17 would have been as follows
analysis of amounts that would have been charged to operating proﬁt
stwps others total
£m £m £m
current service cost and total operating charge 247 36 283
analysis of amounts that would have been included as other ﬁnance income
stwps others total
£m £m £m
expected return on scheme assets 568 100 668
interest on scheme liabilities 448 86 534
net return 120 14 134
analysis of amounts that would have been recognised in the statement of total recognised gains and losses
stwps others total
actual return less expected return on scheme assets
amount £m 2354 285 2639
percentage of scheme assets 381 222 354
experience gains and losses arising on the scheme liabilities
amount £m 214 86 300
percentage of scheme assets 24 50 28
changes in assumptions underlying the present value of scheme liabilities
amount £m 616 114 730
reversal of irrecoverable surplus
amount £m – 124 124
actuarial loss recognised in the statement of total recognised gains and losses
amount £m 3184 361 3545
percentage of scheme liabilities 354 209 331
the following table reconciles the movements in pension scheme surplusesdeﬁcits during the period
stwps others total
£m £m £m
surplusdeﬁcit in the scheme at the beginning of the year 281 100 181
contributions 227 35 262
current service cost 247 36 283
other ﬁnancial incomecosts 120 14 134
actuarial loss 3184 361 3545
deﬁcit in scheme at end of year 2803 448 3251 59 severn trent plc annual report and accounts 2003
24 cash ﬂow statement
a reconciliation of proﬁt before interest to operating cash ﬂows
2003 2002
£m £m
operating proﬁt 3330 3574
depreciation charge including £43 million exceptional charge 2909 2814
amortisation of goodwill including £425 million exceptional charge 677 265
proﬁt on sale of tangible ﬁxed assets 65 20
deferred income movement 40 02
provisions for liabilities and charges 127 402
utilisation of provisions for liabilities and charges 304 314
decreaseincrease in stocks 51 188
increasedecrease in debtors 298 224
increasedecrease in creditors 440 100
net cash inﬂow from operating activities 6827 6655
see reference in note 3 to the proﬁt on sale of tangible ﬁxed assets in the year ended 31 march 2002
provisions for liabilities and charges includes a £60 million credit in respect of exceptional onerous contract provisions charged to the proﬁt
and loss account in the year ended 31 march 2002
b returns on investments and servicing of ﬁnance
2003 2002
£m £m
interest received 22 101
interest paid 1255 1330
interest element of ﬁnance lease rental payments 234 220
net cash outﬂow for returns on investments and servicing of ﬁnance 1467 1449
c capital expenditure and ﬁnancial investment
2003 2002
£m £m
purchase of tangible ﬁxed assets 4981 4019
grants received 325 273
sale of tangible ﬁxed assets 138 246
loans advanced to associates and joint ventures 10 19
loans repaid by associates and joint ventures 09 07
movements in other ﬁxed asset investments 01 10
investment in own shares 20 19
net cash outﬂow for capital expenditure and ﬁnancial investment 4540 3521 notes to the ﬁnancial statements
continued
60 severn trent plc annual report and accounts 2003
24 cash ﬂow statement continued
d acquisitions and disposals
book and provisional
fair value of assets acquired
2003 2002
acquisitions £m £m
tangible ﬁxed assets 11 14
current assets 16 51
liabilities 11 31
provisional fair value of net assets acquired excluding net borrowings 16 34
goodwill – capitalised 65 143
consideration for businesses acquired 81 177
net debtcash of businesses acquired 04 01
net consideration 77 178
satisﬁed by
cash consideration relating to current year acquisitions 66 88
deferred consideration relating to current year acquisitions 11 90
77 178
cash consideration – as above 66 88
cash consideration relating to previous years’ acquisitions not accrued 06 40
cash settlement of opening accrued consideration 43 44
115 172
acquisitions have not materially impacted on the group’s operating cash ﬂow for the year
disposals
proceeds on disposal of businesses note 21c – 172
total cash ﬂow from acquisitions and disposals 115 –
e liquid resources comprise amounts held via shortterm deposits with a maturity date of less than one year
f financing
2003 2002
£m £m
loans advanced 5569 7255
repayments of amounts borrowed 4417 8063
new ﬁnance lease funding – 03
finance lease capital repaid 11 10
increasedecrease in debt 1141 815
receipts from shares issued net of expenses 33 34
net cash inﬂow from ﬁnancing 1174 781
g analysis of changes in net debt
at 31 march cash acquisitions other non exchange at 31 march
2002 ﬂow disposalscash changesmovement 2003 
£m £m £m £m £m £m
cash at bank and in hand 289 123 – – 20 432
overdrafts note 15 312 11 – – 05 318
23 112 – – 25 114
debt due within one year note 15 4436 602 04 38 – 5004
debt due after one year note 16 15213 550 – 48 – 15811
finance leases notes 15 and 16 4636 11 – 13 – 4612
24285 1141 04 03 – 25427
shortterm deposits 191 65 – – 01 257
total 24117 964 04 03 26 25056 61 severn trent plc annual report and accounts 2003
water and sewerage
severn trent water limited
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
directors
r m walker j a hill
b duckworth g p noone
t d g arculus p f stephenson
j h bailey s stubbs
j k banyard m r wilson
i elliott
waste management
biffa plc
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
holding company
directors
r m walker n h manning
m j bettington f a osborn
w r a de jonghe r b tate
m c flower r e tweedale
t w j lowth
biffa waste services limited
coronation road cressex
high wycombe hp12 3tz
telephone 01494 521221
directors
m j bettington n h manning
b j grifﬁths m l saville
p t jones r b tate
t w j lowth r e tweedale
uk waste management limited
coronation road cressex
high wycombe hp12 3tz
telephone 01494 521221
directors
m j bettington r e tweedale
t w j lowth
biffa waste management limited
coronation road cressex
high wycombe hp12 3tz
telephone 01494 521221
directors
m j bettington r e tweedale
t w j lowth
biffa treatment nv
robert schumanplein 6 bus 5
1040 brussels belgium
telephone 0032 2 257 92 70
incorporated and operational in belgium
directors
m j bettington k smits
p canivet w tytgat
t w j lowth n v retema
represented by 
w r a de jonghe
services
severn trent services inc
suite 300 580 virginia drive ft washington
pennsylvania 19034 2707 usa
telephone 001 215 646 9201
incorporated and operational in the 
united states of america
directors
r m walker d l chester
j k banyard l f graziano
r brydon jannetta p k tandon
severn trent del inc
300 delaware avenue suite 1704
wilmington delaware 19801 usa
telephone 001 302 427 5990
holding company – incorporated and
operational in the united states of america
directors
p p davies k j kelly
lf graziano j w whalen jr
severn trent services del inc
300 delaware avenue suite 1704
wilmington delaware 19801 usa
telephone 001 302 427 5990
holding company – incorporated and
operational in the united states of america
directors
lf graziano j w whalen jr
k j kelly p winnington
severn trent water international limited
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
directors
b duckworth a e roe
j a hill r m walker
b m horner w g weatherdon
a norman
severn trent water international
overseas holdings limited
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
directors
b duckworth j a hill
severn trent environmental services inc
park 10 16337 park row
houston texas 77084 usa
telephone 001 281 578 4200
incorporated and operational in the 
united states of america
directors
i s burrowes j a graziose jr
d l chester k j kelly
l f graziano
severn trent water puriﬁcation limited
park lane minworth sutton coldﬁeld
west midlands b76 9bl
telephone 0121 313 2300
directors
m j ashley r picken
severn trent water puriﬁcation inc
3000 advance lane colmar
pennsylvania 18915 usa
telephone 001 215 997 4000
incorporated and operational in the 
united states of america
directors
d l chester k j kelly
lf graziano
excel technologies international corp
1110 industrial blvd sugarland
texas 77478 usa
telephone 001 281 240 6770
incorporated and operational in the 
united states of america
directors
d l chester k j kelly
lf graziano
severn trent metering services limited
smeckley wood close
chesterﬁeld trading estate
chesterﬁeld s41 9pz
telephone 01246 456658
directors
g g archibald l f graziano
a elder r picken
severn trent laboratories limited
stl business centre torrington avenue
coventry cv4 9gu
telephone 024 764 21213
directors
r brydon jannetta r a henton
a w gibson i d stanford
severn trent laboratories inc
suite 300 580 virginia drive ft washington
pennsylvania 19034 2707 usa
telephone 001 215 646 9201
incorporated and operational in the 
united states of america
directors
r brydon jannetta k j kelly
dl chester
25 principal subsidiary undertakings and their directors 62 severn trent plc annual report and accounts 2003
notes to the ﬁnancial statements
continued
en novative technologies inc
formerly environmental sampling supply inc
9610 san leandro street oakland
california 946032322 usa
telephone 001 510 562 4988
incorporated and operational in the 
united states of america
directors
r brydon jannetta k j kelly
dl chester
qed environmental systems inc
6095 jackson road ann arbor
michigan 48103 usa
telephone 001 734 995 2547
incorporated and operational in the 
united states of america
directors
r brydon jannetta k j kelly
dl chester
systems
severn trent systems limited
trading as aseriti
2800 the crescent
birmingham business park
birmingham b37 7yl
telephone 0121 717 7755
directors
r m walker i p clark
j m bassford
computer systems and applications inc
trading as severn trent systems inc
two chasewood park
20405 state highway 249 suite 600
houston texas 77070 usa
telephone 001 281 320 7100
incorporated and operational in the 
united states of america
directors
j m bassford g mollere
lf graziano s h reilly
k j kelly
property
severn trent property limited
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
property development
directors
g p f inge j s r haynes
p a ludlow v j o’connell
p p davies a s perelman
daventry international rail freight 
terminal limited
925 owned
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
property development
directors
p a ludlow j jones
j s r haynes
engineering consultancy and insurance
charles haswell and partners limited
3900 parkside birmingham business park 
birmingham b37 7yg
telephone 0121 717 7744
engineering design consultants
directors
i elliott a c smith
d r gutteridge m r wilson
derwent insurance limited
po box 34 st martin’s house le bordage
st peter port guernsey gy1 4au
telephone 01481 715300
insurance company – incorporated and
operational in guernsey
directors
g m de cruz m r miles
j e langlois p k tandon
j c mann
others
severn trent water services plc
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
holding company
directors
r m walker j a hill
b duckworth m r wilson
p p davies
severn trent services holdings plc
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
holding company
directors
r m walker a s perelman
p p davies
severn trent corporate holdings plc
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
holding company
directors
r m walker a s perelman
p p davies
severn trent overseas holdings limited
2297 coventry road birmingham b26 3pu
telephone 0121 722 6000
holding company
directors
p p davies a s perelman
severn trent utility services limited
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
utility services company
directors
b duckworth d j jordan
r t bell j n myers
j w bostock p c wood
severn trent retail services limited
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
retail services company
directors
b duckworth a edees
j h bailey d j jordan
n budden
held directly by the company
country of incorporation registration and
main operation is great britain unless
otherwise stated
all subsidiary undertakings are wholly owned
unless otherwise indicated all shareholdings
are in ordinary shares with the exception 
of a preference shareholding in biffa plc 
and severn trent water services plc
all subsidiary undertakings have been
included in the consolidation
25 principal subsidiary undertakings and their directors continued five year summary
2003 2002 2001 2000 1999 
restated
£m £m £m £m £m
proﬁt and loss account
turnover group and share of joint ventures 18558 17991 16859 15802 13786
less share of joint ventures’ turnover 38 48 43 136 143
turnover 18520 17943 16816 15666 13643
proﬁt before interest goodwill amortisation and exceptional items 4098 4188 4002 4658 4630
goodwill amortisation 252 265 174 64 13
proﬁt before interest and exceptional items 3846 3923 3828 4594 4617
exceptional items 408 170 155 647 110
net interest payable 1594 1590 1611 1207 1003
proﬁt on ordinary activities before taxation 1844 2163 2062 2740 3504
current taxation on proﬁt on ordinary activities 248 161 124 221 466
deferred taxation 595 423 524 – –
proﬁt on ordinary activities after taxation 1001 1579 1414 2519 3038
equity minority interests 09 06 04 – –
dividends 1576 1576 1545 1540 1470
retained lossproﬁt for the ﬁnancial year 584 03 135 979 1568
net assets employed
fixed assets 54806 53957 53098 47946 43192
net liabilities excluding net debt 2321 2082 1902 2122 3518
provisions for liabilities and charges 5231 4804 4180 960 427
47254 47071 47016 44864 39247
financed by
called up share capital 2244 2240 2236 2317 2311
reserves 19932 20700 20663 23150 22148
total shareholders’ funds 22176 22940 22899 25467 24459
minority shareholders’ interest 22 14 12 03 03
net debt 25056 24117 24105 19394 14785
47254 47071 47016 44864 39247
statistics
earnings per share 289p 459p 412p 738p 892p
earnings per share before exceptional items and deferred tax 581p 632p 610p 928p 924p
dividends per share 459p 459p 450p 450p 430p
dividend cover before exceptional items in all years and before 
deferred tax in 2003 2002 and 2001 13 14 14 20 21
gearing 1129 1051 1052 761 604
ordinary share price at 31 march 716p 738p 6945p 565p 840p
average number of employees – water and sewerage 4780 4662 4837 5144 5276
– other 9867 9710 9220 7724 5819
following the implementation of frs 19 ‘deferred tax’ the 2001 results were restated to reﬂect a deferred tax charge under the new
accounting standard other prior year comparatives have not been restated in the above table
63 severn trent plc annual report and accounts 2003 64 severn trent plc annual report and accounts 2003
shareholder information
annual general meeting
30 july 2003 230pm at the national
motorcycle museum birmingham
registrars
lloyds tsb registrars
the causeway
worthing
west sussex bn99 6da
telephone 0870 600 3967
severn trent plc
registered number 2366619
registered ofﬁce
2297 coventry road
birmingham b26 3pu
telephone 0121 722 4000
shareview
wwwshareviewcouk is a service offered by
lloyds tsb registrars that enables you to
check your holdings in many uk companies
and helps you to organise your investments
electronically you can register for this 
free portfolio service by logging onto
wwwshareviewcouk and following 
a simple registration process
electronic proxy appointments
for this year’s annual general meeting you
may if you wish register the appointment 
of a proxy electronically by logging onto the
website wwwsharevotecouk you will need
your voting reference numbers the three 8
digit numbers shown on your form of proxy 
alternatively if you have registered for a
shareview portfolio log onto your portfolio at
wwwshareviewcouk and click on company
meetings 
please note that any electronic
communication that is found to contain 
a computer virus will not be accepted
forwardlooking statements
this document contains certain ‘forward
looking statements’ with respect to severn
trent’s ﬁnancial condition results of
operations and business and certain 
of severn trent’s plans and objectives 
with respect to these items
forwardlooking statements are sometimes
but not always identiﬁed by their use of 
a date in the future or such words as
‘anticipates’ ‘aims’ ‘due’ ‘could’ ‘may’
‘should’ ‘expects’ ‘believes’ ‘intends’ 
‘plans’ ‘targets’ ‘goal’ or ‘estimates’ 
by their very nature forwardlooking
statements are inherently unpredictable
speculative and involve risk and uncertainty
because they relate to events and depend on
circumstances that will occur in the future
there are a number of factors that could
cause actual results and developments to
differ materially from those expressed or
implied by these forwardlooking statements
these factors include but are not limited 
to changes in the markets in which the
group operates changes in the regulatory
frameworks in which the group operates the
impact of legal or other proceedings against
or which affect the group and changes in
interest and exchange rates
all subsequent written or verbal forward
looking statements attributable to severn
trent or any other member of the group or
persons acting on their behalf are expressly
qualiﬁed in their entirety by the factors
referred to above severn trent does not
intend to update these forwardlooking
statements
others eg insurance companies nominee
companies banks pension funds other corporate
bodies limited and public limited companies
shareholdings
analysis of shareholdings at 31 march 2003
percentage number of percentage
of total ordinary of ordinary
number of shareholders shares shares
shareholders  million 
1499 58456 597114 33
500999 22621 231155 45
10004999 15069 154234 68
50009999 578 06 39 11
1000049999 601 06 129 38
5000099999 155 02 109 32
over 100000 375 04 2660 773
97855 1000 3440 1000
financial calendar
announcement of results
the results of the group will normally be published 
at the following times
interim results for the six months to 30 september december
preliminary results for the year to 31 march june
report and accounts for the year to 31 march june
dividend payments
dividend payments in respect 
of the year ended 31 march 2003
interim dividend paid 7 april 2003
proposed ﬁnal dividend payable 1 october 2003
shares held by category of shareholder
 of total ordinary shares
shares held by category of shareholder
 of total shareholders
1 individual and 
   joint accounts
2 others
9221
779
1 2
1 individual and 
   joint accounts
2 others
1323
8677
1
2 the following publications are also available
severn trent plc 
• annual review and summary financial 
statements
• stewardship – sustainable development report
severn trent water
• annual report and accounts
including regulatory accounts
• delivering sustainability
• biodiversity action plan
• conservation access recreation
and education report
biffa
• biffaecology – environment report
• future perfect – biffa book v
• biffa and biodiversity
• biffaward annual report and accounts
contact us at the address below 
for copies of publications
severn trent plc
2297 coventry road
birmingham b26 3pu
united kingdom
telephone 44 0121 722 4000
we are constantly looking at how best to provide the information our
stakeholders need quickly and cost effectively we also seek to minimise
the resources used wherever possible 
if you are a shareholder you too can ‘do your bit’ if you currently receive
the full annual report and accounts why not consider switching to the
annual review only you can still view or download a copy of the full
annual report and accounts online at wwwseverntrentcomreports2003
you can also elect not to receive paper copies of the annual report and
other shareholder documents instead you will receive an email containing
a link to a website where electronic copies of the documents can be viewed
or downloaded
please call lloyds tsb registrars on 0870 600 3967 to request the 
annual review only or to register for edelivery 
for more information about severn trent plc and its businesses see 
our website 
wwwseverntrentcom  front cover
lisa roberts severn trent laboratories
neville moore biffa ﬂeet maintenance team
ben young severn trent water ranger services
back cover
alex mirkovic biffa business development team
designed and produced by cgi brandsense
severn trent plc
2297 coventry road
birmingham b26 3pu
united kingdom
telephone 44 0121 722 4000
the paper used in the production of this
report zanders megamatt is produced using
chlorine free processes from 50 recycled
pre and post consumer waste it is certiﬁed
to the nordic swan standard which requires
products to meet a strict range of standards
in addition the printing process is taken into
account – this report is printed by wace 
who operate an environmental management
system certiﬁed to iso 14001
for more information about severn trent plc
and its businesses see our website 
wwwseverntrentcom  delivering
environmental sense
severn trent plc annual review 2003 this is severn trent
severn trent plc is a leading environmental services group
providing water waste and utility services our objective 
is to grow by providing services that solve environmental
problems that respond to new environmental expectations
and that help to deliver sustainable development
you can ﬁnd out more about severn trent plc and the
businesses within our group by visiting our website
wwwseverntrentcom or the sites listed below
our businesses activities
severn trent water is the group’s
regulated water business it supplies
water and wastewater collection 
and treatment services for around 
8 million people across the midlands 
and midwales
biffa is one of the largest single suppliers
of waste management services in the uk
it collects treats recovers and disposes
of municipal commercial and industrial
waste nationwide and in belgium
severn trent laboratories is a leading
environmental testing laboratory
company in the us and the uk
severn trent services supplies products
and services associated with water
wastewater and contaminated land 
severn trent water international
provides a range of private sector
management and consultancy services 
in europe and the developing world
severn trent systems – ‘aseriti’ supplies
it services and solutions focusing upon
managed services ebusiness and
consultancy ‘worksuite’ supplies a range
of work management software products
and related services
severn trent retail services provides 
a series of products to domestic and
commercial markets including energy
insurance telecoms and conveyancing
services
severn trent utility services provides
asset management and customer 
service solutions to other utilities and
local authorities
severn trent property develops facilities
in the uk primarily for the distribution
retail and industrial sectors
charles haswell and partners is an
international consultancy with experience
in a wide range of engineering and
environmental disciplines
severn trent water wwwstwatercouk
biffa wwwbiffacouk
severn trent laboratories us wwwstlinccom
severn trent laboratories uk wwwstlanalyticalcouk
severn trent services wwwseverntrentservicescom
severn trent water international wwwstwaterinternationalcom
severn trent systems wwwaseriticom
wwwworksuitecom
severn trent energy wwwstenergycouk
severn trent utility services wwwstutilityservicescouk
severn trent property wwwseverntrentpropertycom
charles haswell and partners wwwhaswellcouk contents
01 financial and other highlights
02 chairman’s statement
04 group chief executive’s review
06 the environment is our business
08 summary review of operations
15 corporate social responsibility
16 board of directors
18 independent auditors’ statement
18 summary directors’ report
19 summary group proﬁt and 
loss account
20 summary group balance sheet
20 summary group cash ﬂow statement
21 summary remuneration report
24 shareholder information
financial and other highlights
• final dividend of 2856p bringing the total for the year 
to 459p
• group turnover of £18520 million £17943 million
• group proﬁt before tax of £1844 million £2163 million
before exceptional items £2252 million £2333 million
• earnings per share of 289p 459p before exceptional 
items and deferred tax 581p 632p
• severn trent water achieves its best ever customer service
performance £425 million invested in capital schemes
• leadership positions in the uk waste market and in
environmental testing in the usa and the uk
annual report and
accounts 2003
you can view and download 
a copy of the group’s 
annual report and 
accounts on our website 
at wwwseverntrentcom
reports2003 or request a
copy free of charge 
by contacting us using the
details on the back cover of
this report
01 severn trent plc annual review 2003
severn trent plc annual report and accounts 2003
delivering
environmental sense
group turnover £m
03
02
01
00
99
18520
17943
16816
15666
13643
group profit before tax £m
before exceptional items
03
02
01
00
99
2252
2333
2217
3387
3614
earnings per share pence
before exceptional items and
deferred tax
03
02
01
00
99
581
632
610
928
924
dividends per share pence
03
02
01
00
99
4590
4590
4500
4500
4300 introduction
during a turbulent economic and political
year severn trent was a haven of stability 
for investors against a background of a fall
of around 30 in the ftse allshare index
our share price remained relatively stable 
in addition our shares delivered one of 
the higher dividend yields in the index
we made a clear statement that it is the
board’s intention that for the period up 
to 31 march 2005 barring unforeseen
circumstances full year dividends per share
would be a minimum of 459p this being
the full year dividend for 20012002 in 
line with our longerterm goals of delivering
attractive yields and sustainable dividends
we also worked to grow the business
business performance
to achieve continued stability severn trent
concentrated on further reducing the risks
facing the company and our investors 
in 20022003 we strengthened our focus 
on our core business areas of water waste
and laboratories 
our organisational and ﬁnancial management
systems are designed to help protect us from
risk in particular severn trent’s mixed equity
and debt model is we believe the best way to
provide continued investment for the water
industry however the regulatory regime
must allow an adequate rate of return and
encourage management incentives severn
trent water’s debt was 495 of regulatory
capital value at 31 march 2003
the severn trent water team convinced 
the regulator ofwat to allow us to recover
some of the growing cost pressures on the
company by increasing charges as a result
water bills will rise slightly above the rate 
of inﬂation for the next two years this will
mean that prices to customers are still below
those in 2000 the beginning of the last
regulatory review
contributing to severn trent’s drive for growth
is a move towards public sector contracts
we were named as preferred bidder for a
chairman’s statement
02 severn trent plc annual review 2003
group turnover was up 32 at 
£18520 million
‘‘
we made a clear statement that for
the period up to 31 march 2005
barring unforeseen circumstances
full year dividends per share would
be a minimum of 459p in line with
our longerterm goals of delivering
attractive yields and sustainable
dividends we also worked to grow
the business
david arculus
chairman
’’ substantial longterm strategic partnership
with solihull metropolitan borough council
in our nonregulated businesses biffa won a
signiﬁcant contract to manage the collection
recycling and disposal of waste for leicester
city council 
in severn trent services our successful
laboratories operation stl strengthened
their suite of water ground and air testing
products growing their proﬁts organically by
over 10 severn trent water international
led by tony hill recently awarded an mbe
continued to pursue opportunities in the 
uk belgium italy and further aﬁeld
group results
group turnover was £18520 million up 32
the nonregulated businesses increased
turnover by 50 to £10306 million
turnover from water and sewerage increased
by 20 to £9179 million
goodwill amortisation was £252 million
£265 million there was a net exceptional
charge in the year of £408 million 
£170 million
group proﬁt before interest tax goodwill
amortisation and exceptional items was 
21 lower at £4098 million the water 
and sewerage business was down by 
26 to £3255 million reﬂecting the tight
regulatory determination whilst the group’s
nonregulated businesses were up 37 to
£1045 million representing 243 of the
group total
group proﬁt before interest tax and
exceptional items was £3846 million
£3923 million group proﬁt before interest
and tax was £3438 million £3753 million
after interest charges of £1594 million
group proﬁt before tax goodwill amortisation
and exceptional items was 36 lower 
at £2504 million group proﬁt before tax
and exceptional items was £2252 million
£2333 million a reduction of 35 
group proﬁt before tax was £1844 million
£2163 million
corporate social responsibility
severn trent is committed to high standards
of corporate governance we are actively
involved in the debate surrounding the 
higgs report into the role of nonexecutive
directors which was published following
recent highproﬁle corporate failures 
while many of the higgs recommendations
are sound we feel that the report is too
prescriptive and we are articulating our
concerns in the hope of achieving a sensible
conclusion to the debate 
severn trent aims to achieve high
environmental and social standards 
we were ranked top of our sector in the 
dow jones sustainability index for the
second consecutive year 
biffa is recognised as making a substantial
and positive contribution to the national
environmental debate as well as boosting
sustainability through its landﬁll gas 
to energy projects during 20022003 
our landﬁll tax credit scheme biffaward
which recycles landﬁll tax credits provided
£17 million for environmental and
community projects
through our group community affairs
programme we have 11 longterm
partnerships with midlands’ charities 
many of our employees have given their 
own time to help community projects
employee volunteering is now being used 
by many businesses within the group as a
way of enhancing and introducing new skills
to employees we are a founding member
of ‘birmingham cares’ which delivers
volunteering opportunities in birmingham
we are also members of business in the
community’s percent club by virtue of
investing more than 1 of our pretax 
proﬁts in the community
management and staff
our board and top management team
remained unchanged during the year
bringing stability and consistency of vision
and strategy 
however clare tritton has now decided to
stand down as a nonexecutive director after
almost 12 years and i would like to thank 
her for her outstanding contribution to the
board eric anstee took over the chairmanship
of the audit committee and marisa cassoni
succeeded him as chairman of the treasury
committee
my greatest thanks however must go to 
our hard working staff in the uk us europe
and other parts of the world who once again
worked tirelessly to achieve our business
goals and uphold our reputation for both
service delivery and environmental concern
our continuing success will be due to their
skill and dedication
outlook
there are signiﬁcant opportunities for the
group particularly from the increasing pace
of legislation in the waste sector with biffa
well positioned to take advantage of growing
demand for predisposal treatment and sorting 
growing synergies between our water and waste
companies will lead to future opportunities 
a signiﬁcant proportion of severn trent
water’s income comes from processing
waste products and we see considerable
scope for sharing expertise and technology
in the current ﬁnancial year our key virtues of
integrity consistent performance and sound
management will be more important than ever
given the continuing economic challenges
looking further ahead the dual drivers of
increasing environmental legislation and
greater understanding of the water industry’s
investment needs offer further growth
opportunities
the group’s strategy continues to be to
increase shareholder value by establishing
severn trent as the uk’s leading integrated
environmental services business management
aims to build on the group’s leadership
positions in the uk waste market and in
environmental testing in the usa and the 
uk with severn trent water continuing 
to outperform its regulatory targets
turnover by business
 of group total in 20022003
1 water
2 waste
3 services
4 others
47 £9179m
26 £5109m
20 £3854m
  7 £1343m
1
2
3
4
03 severn trent plc annual review 2003
there are signiﬁcant opportunities for the group
particularly from the increasing pace of legislation 
in the waste sector with biffa well positioned to 
take advantage of growing demand for predisposal
treatment and sorting  group chief executive’s review
i am pleased to report a satisfactory set of
results achieved in what can be described 
as a difﬁcult year with broadly unchanged
pricing in the water business and challenging
economic conditions in our main uk and 
us markets
the group’s core businesses – water waste
and laboratories – all ﬁnished the year in
robust shape with waste and laboratories 
particularly well positioned to take advantage
of the economic upturn whenever it comes
management confronted problem areas and
has largely dealt with them agreement has
been reached with those customers in the
us over the systems’ contracts that were 
in dispute the water puriﬁcation division 
of services showed a strong improvement 
in the second half and biffa belgium had 
a signiﬁcantly better year
and we have successfully targeted major
multiyear contracts in highly competitive
areas of our business
water
the water and sewerage business produced
another creditable performance given broadly
unchanged pricing and continuing cost
pressures which mostly offset the company’s
outperformance against regulatory targets
for gross operating cost efﬁciencies
the business continues on track to outperform
its regulated targets and indeed to meet 
its own stretched targets gross operating
cost efﬁciencies amounted to £61 million 
per annum in 20022003 however these
savings are being offset by cost pressures 
that is why it is important to continue to 
look for new opportunities to make operating
cost savings
severn trent water continued to deliver
efﬁciencies against its £2 billion investment
programme for the ﬁveyear period 20002001
to 20042005 and is on track to deliver
average capex efﬁciencies of around 7 over
that period i am pleased that the company
has achieved its best ever customer service
04 severn trent plc annual review 2003
the group’s core businesses – water
waste and laboratories – all ﬁnished 
the year in robust shape with waste
and laboratories particularly well
positioned to take advantage of the
economic upturn whenever it comes
robert walker
group chief executive
’’
‘‘
£2 billion
severn trent water continued to deliver
efﬁciencies against its £2 billion investment
programme for the ﬁveyear period 
20002001 to 20042005 performance as measured against the ofwat
customer service standards
in addition of course there are increased
costs that are speciﬁc to the water sector
these formed the basis of our successful
idok application last autumn and most 
of these costs were allowed
the amp4 pricing review process is now 
well under way
while we are pleased with the regulator’s
commitment to greater transparency in the
process and the considerable efforts he is
making with city and investor audiences we
remain concerned about three central issues
• the need to retain equity in the sector both
as a source of capital and as an incentive
towards greater efﬁciency is as critical 
as ever – it is the best way of ensuring
sustained investment and performance
• there is still uncertainty about the 
varying demands of the quality regulators
particularly the ea around the capital
programme we must have clear guidance
and coordination between the various
regulators
• we need to improve the mechanics and
effectiveness of interim price determinates
between reviews the objective should be 
to deal with material charges to company
obligations as and when they occur leaving
companies in the same ﬁnancial position 
as if the charges had been foreseen during
the review
waste
the key theme for the whole year has been
lower industrial and commercial volumes
resulting from the slowing down in the uk’s
manufacturing and commercial sectors this
has impacted all three of biffa’s uk divisions
– collection landﬁll and special waste
however biffa has delivered a solid
performance in difﬁcult market conditions
particularly in the uk excluding the
contribution from footandmouth in
20012002 biffa has produced a broadly 
ﬂat performance year on year
we remain convinced of our analysis of
the attractiveness of the waste sector
• the uk waste sector has the most 
potential for growth in europe
• our integrated business model of
collection landﬁll disposal and special
waste treatment is right for the future
• our focus on industrial and commercial
waste remains the right one
• new municipal contracts combining
collection recycling treatment and 
disposal open up a signiﬁcant market
opportunity for biffa
i am conﬁdent biffa will continue to be 
the benchmark waste operator in the uk
services
severn trent laboratories stl performed
strongly throughout the year delivering
organic growth in proﬁt before interest tax
and goodwill amortisation of over 10 and
is now well positioned to take advantage of
growth opportunities in new areas of testing
operating services continued to add
proﬁtable new municipal outsourcing
businesses although weaknesses remain 
in the smaller pipeline services businesses
reﬂecting management actions water
puriﬁcation’s performance improved in 
the second half
severn trent water international stwi
improved proﬁtability in its aquaﬁn
investment in belgium and commenced 
work at terni the only privatised contract 
in italy to start operations so far 
major longterm contracts
we have successfully bid for longterm
contracts amounting to more than £1 billion
in revenues
• a contract to operate a strategic
partnership with solihull metropolitan
borough council this is worth £750 million
in revenues over the next 15 years and is
due to be signed in the autumn of 2003
• the integrated city of leicester waste
contract producing revenues of £300 million
over 25 years
in addition we have been shortlisted to the
ﬁnal two on longterm contracts with the
ministry of defence £1 billion revenues 
and another integrated waste contract
these all demonstrate the group’s abilities 
to bring resources together from all our
companies to compete for valuable long
term business
core businesses
our core businesses of water waste and 
laboratories have four basic advantages
• leadership scale and low cost advantage
• among the best management teams in
each sector
• consistent strong past performance
• longterm opportunities for proﬁtable growth
these will stand us in good stead as we face
up to another testing year in 20032004
with conﬁdence and commitment
people
none of what i have reported would 
have been possible without the excellent
performance of our staff throughout this
year i am grateful for the resourcefulness
and enthusiasm shown by employees in 
the face of continual challenge
outlook
overall the group is likely to experience
another challenging year in 20032004
severn trent water will beneﬁt from the
outcome of the idok and is expected to
continue to outperform its regulatory 
targets for gross operating cost efﬁciencies
however offsetting cost pressures are
expected to grow in addition increases in
depreciation are also expected reﬂecting 
the growing capital expenditure programme
the markets for biffa and services are
expected to remain difﬁcult into 20032004
though their leadership positions in waste 
in the uk and in environmental testing in 
the us and the uk should provide platforms
for future growth when the economic climate
improves
05 severn trent plc annual review 2003
the water and sewerage business produced another
creditable performance given broadly unchanged
pricing and continuing cost pressures the markets
for biffa and services are expected to remain difﬁcult
into 20032004 though their leadership positions in
waste in the uk and in environmental testing in the
us and the uk should provide platforms for future
growth when the economic climate improves the environment is our business
06 severn trent plc annual review 2003
‘‘
‘‘
severn trent has been a component of the djsi for 
four years in a row and has consistently outperformed
the rest of the industry over the years the company 
has displayed superior strategy management tools 
and improvement programs in all three dimensions 
of corporate sustainability 
dow jones sustainability index
commenting on severn trent’s performance 
in the 2003 index
’’
as part of a continuing process aimed at gaining
permits for all our sites that fall under the ippc
legislation our partnership with severn trent water
has been key as we prepare for the implementation
of our environmental management system
brian how
operations manager rank hovis ltd
‘‘
’’
i am consistently impressed by the
management’s indepth understanding of
the commercial and regulatory framework
in which its three core businesses operate
verity mitchell
utilities analyst 
hsbc corporate banking
’’ ‘‘
‘‘
in the long run we recognise
that exemplary environmental
and social performance
contributes to raising our
ﬁnancial performance and
increasing shareholder value
roger peace
director of sustainable development 
and risk assurance severn trent plc
’’
it’s fundamental that we continue to
deliver a highquality service to our
customers in ensuring this happens 
it’s really our people who make the
difference constantly striving to 
improve efﬁciency and environmental
health and safety performance
pervinder johal
head of microbiology severn trent laboratories
‘‘
to ensure compliance with 
our environmental health 
and safety standards we 
have created a database
management system that
allows managers to constantly
track their performance and
measure exposure to risks at
every biffa site across the uk
amanda richards
business systems improvement manager biffa
’’
’ ’ 20022003 performance
in 20022003 turnover from water and
sewerage increased by 20 to £9179 million
£8999 million proﬁt before interest tax
and goodwill amortisation was down 26 to
£3255 million £3341 million after goodwill
amortisation of £01 million £nil proﬁt
before interest and tax was £3254 million
£3341 million
direct operating costs of the regulated 
water business were £3625 million a
reduction in real terms of £14 million 
or 04 excluding the impact of inﬂation 
gross operating cost efﬁciencies in
20022003 amounted to £144 million a
reduction of 41 compared to the previous
year however these efﬁciencies were offset
by cost pressures of £130 million
the programme for reducing costs in 
severn trent water has continued to 
make good progress since the beginning 
of the third asset management plan post
privatisation amp3 gross operating cost
efﬁciencies have now reached £61 million
per annum offset by cost pressures
amounting to £49 million the £61 million 
of gross operating cost efﬁciencies is 
£16 million ahead of the ofwat target 
for year 3 of the 5 year plan period 
the interim determination
last autumn ofwat allowed our appeal 
to increase prices to ﬁnance several new
challenges faced by the company since 
the last price review in 1999 when customer
charges were reduced by almost 12 
the new price limits – bills will rise by 
21 above inﬂation in 2003 and 22
above inﬂation in 2004 – will mean that
average household bills will rise by around
£10 in 20032004
beating the regulatory contract
during the year we achieved further
operating cost efﬁciencies through a wide
range of measures including the better use
of new technology and by generating more 
of our own power
in the year we invested approximately 
£425 million to deliver improvements in
during the year we achieved further operating 
cost efﬁciencies through a wide range of measures
including the better use of new technology and 
by generating more of our own power
summary review of operations
water and sewerage
08 severn trent plc annual review 2003
turnover
£9179
million
proﬁt before interest
£3254
million community and environment
we strive to be a responsible company and
support many hundreds of projects – all with
a sustainability agenda – across the severn
trent region our achievements in this area
are measured externally and ranked against
our peers in the business in the community
corporate responsibility index
outlook
to ensure that we can deliver what
customers want and meet rising costs 
it seems likely that water bills will need 
to rise after the next pricing review
severn trent is working closely with ofwat
and the other regulatory bodies to improve
the regulatory framework to ensure that the
needs of both customers and shareholders
are met
while there are challenges ahead we believe
that the strengthening of dialogue with
government coupled with our ability to take
advantage of a more competitive environment
positions us well for future growth
customer service and higher standards in
drinking water and sewage efﬂuent quality
severn trent water continued to deliver
efﬁciencies against its approximate £2 billion
investment programme for the ﬁveyear
period 20002001 to 20042005 and is 
on track to deliver average capex efﬁciencies
of around 7 over the amp3 period 
service and quality
in the year we delivered our best ever levels of
service as measured by the ofwat customer
service standards we continued to maintain
the highest levels of drinking water quality
and protection for our rivers
our efforts to provide a top quality service 
to our customers were recognised when we
won a customer care award at the utility
industry achievement awards for the success
of measures to tackle sewer ﬂooding
industry competition
we believe that the quality of our services
positions us well to beneﬁt from greater
competition
during 20022003 we continued to cultivate
opportunities across the uk and won further
contracts with such organisations as rank hovis
mcdougalls dairy crest and northampton
general hospital
growing the business
in 20022003 severn trent utility services
which provides asset management and
customer service solutions became the
preferred bidder for a 15year contract 
with solihull metropolitan borough council
our severn trent retail services business
which was created to offer products 
such as gas electricity insurance and
telecommunications services continued 
to perform strongly
the 2005 pricing review
during the year we began to prepare our
submission to ofwat for the next pricing
review these plans will take into account 
the state of our existing assets and new
legislation which we have to meet
previous page
upgrading the sewerage
infrastructure in redditch
investment to alleviate and 
avoid sewerﬂooding incidents 
is a high priority
above right
derby sewage treatment 
works where a £70 million
investment programme 
is delivering signiﬁcant
improvements to the 
river derwent
below
working closely with pz cussons
nottingham on initiatives
covering waste minimisation
leakage detection and repair
09 severn trent plc annual review 2003
market opportunities
the strengthening of our account
management and the quality of our 
service means we are wellpositioned to
beneﬁt from greater competition amongst
business customers also our business
has opportunities to grow in the areas of
debt management local authority contracts
conveyancing searches and telecoms
highlights
• continued to deliver capital expenditure
efﬁciencies against our £2 billion
investment programme for the period
20002001 to 20042005 on track to
deliver around 7 efﬁciencies over amp3
• won a customer care award at the utility
industry achievement awards
• awarded further contracts across 
the uk with such organisations as 
rank hovis mcdougalls dairy crest 
and northampton general hospital 
• named as the preferred bidder for 
a 15year contract with revenues of 
£750 million with solihull metropolitan
borough council
we are working closely 
with ofwat and the other
regulatory bodies to improve
the regulatory framework to
ensure that the needs of both
customers and shareholders
are met
brian duckworth 
managing director 
severn trent water
’’
‘‘ this increased focus on alternatives to landﬁll
enabled us to extend and win signiﬁcant
contracts with local authorities for example
we were awarded a 25year contract to
manage all waste collection recycling and
disposal facilities for leicester city council
with revenues of £300 million
collection
our collection turnover in the uk was 
£2707 million £2608 million the economic
slowdown affected industrialcommercial
collection volumes resulting in a decline
volumes down 3 before interest tax 
and goodwill amortisation the collection
division contributed a proﬁt of £436 million
£453 million 
biffa services a total of 53 municipal
collection contracts which include waste 
and recyclables collection street cleaning
civic amenity and transfer station sites biffa
also works with more than 60000 industrial
and commercial clients in the uk
our longrunning contract on the isle of
wight provides essential experience for such
integrated municipal contracts during the
year 49 of the island’s waste was diverted
from landﬁll and island waste services 
was awarded european ecomanagement
and audit scheme emas accreditation
we took steps to reduce the environmental
impact of our trucks by switching the entire
ﬂeet to ultra low sulphur diesel the cleanest
massmarket fuel available
landﬁll
despite the growing demand for 
recycling landﬁll remains the uk’s 
major waste disposal route in 20022003
our landﬁll turnover in the uk was £1416
million £1474 million landﬁll volumes
decreased by around 7 3 for sites 
open in both 20012002 and 20022003
and average unit revenues were up by
around 2 excluding the impact of 
footandmouth proﬁt from the landﬁll
division before interest tax and goodwill
amortisation was down 152 at £289
million £341 million 
biffa
in 20022003 conditions in the uk waste
market were difﬁcult as the economic slowdown
impacted industrial and commercial volumes
in biffa’s three business sectors of collection
landﬁll and special waste
however in the uk we saw signiﬁcant growth
in the municipal sector pre treatment activities
and electricity generation biffa belgium also
performed well
in 20022003 waste management’s turnover
increased by 33 to £5109 million turnover
in the uk increased by 17 to £4573 million
while belgian turnover increased by 183
to £536 million biffa’s proﬁt before interest
tax and goodwill amortisation including biffa
belgium was down by 70 to £679 million
but broadly ﬂat yearonyear if the contribution
from footandmouth in 20012002 is excluded
after goodwill amortisation of £166 million
£168 million proﬁt before interest and tax
was £513 million £562 million
legislation continued to drive the move away
from landﬁll towards alternative methods of
disposal such as recycling and composting
a raft of legislation and
increases in landﬁll tax are
likely to drive further demand
for recycling composting and
other alternatives to landﬁll
our experience in the
european waste disposal
sector leaves us well placed 
to seize these growing
opportunities
martin bettington 
managing director 
biffa
‘‘
summary review of operations
waste
in the uk we saw signiﬁcant growth in the municipal
sector pre treatment activities and electricity generation
biffa belgium also performed well
’’
10 severn trent plc annual review 2003
turnover
£5109
million
£679
million
goodwill amortisation £166 million
proﬁt before interest
and goodwill amortisation the eu landﬁll directive started to take
effect during 2002
special waste
the special waste division in the uk which
includes the important power generation
activity achieved a 90 increase in turnover
to £450 million and contributed proﬁt before
interest tax and goodwill amortisation of
£59 million £61 million
in 20022003 we were awarded a three
year contract by shell to service 630 retail
forecourts collect ofﬁce waste from distribution
terminals and manage waste at the stanlow
and eastham oil reﬁneries previously shell
employed several regional waste management
companies for this work
we continued to generate electricity from
landﬁll gas having increased our interests in
capacity to 83mw in the uk we are seeking
to increase our generating capacity to around
100mw by 2006
belgium
in belgium turnover increased by 183 
to £536 million and proﬁt before interest
tax and goodwill amortisation increased to
£31 million £13 million 
environment and community
during the year we provided signiﬁcant support
to environment and community initiatives
our landﬁll tax credit scheme biffaward
provided £17 million to community and
environment projects since biffaward 
began in 1997 we have donated £57 million
to more than 600 schemes
we also launched our third biannual
environmental report – biffaecology
outlook
a raft of legislation and increases in landﬁll
tax are likely to drive further demand for
recycling composting and other alternatives
to landﬁll our experience in the european
waste disposal sector leaves us well placed to
seize these growing opportunities
previous page
skelton grange waste
management centre
near leeds one of
around 30 landﬁll 
sites operated
nationally by biffa
above
the new leicester city
council integrated waste
management contract will
aim to reach a recycling
target of 40 by 2005
below
biffa’s largest landﬁll 
gas generation location 
at risley the plant is
capable of generating
more than 10mw of
electricity
11 severn trent plc annual review 2003
market opportunities
biffa’s integrated business model of
collection landﬁll disposal and special
waste treatment positions the company as
the ‘benchmark’ waste company in the uk
the landﬁll directive opens up signiﬁcant
opportunities for longterm municipal
contracts and this combined with a focus
on industrial and commercial waste
accounts creates signiﬁcant opportunities
highlights
• awarded a contract to manage all 
waste collection and disposal facilities 
for leicester city council with revenues 
of £300 million over 25 years
• reduced the environmental impact of 
our trucks by switching the entire ﬂeet 
to ultra low sulphur diesel the cleanest
massmarket fuel available
• awarded a three year contract by shell 
to service 630 retail forecourts collect
ofﬁce waste from distribution terminals
and manage waste at the stanlow and
eastham oil reﬁneries
• signiﬁcant growth in the municipal 
predisposal treatment and electricity
generation sectors 20022003 performance
services’ turnover increased by 10 to
£3854 million proﬁt before interest tax
goodwill amortisation and exceptional 
items increased by 69 to £342 million
after goodwill amortisation of £85 million 
£96 million proﬁt before interest tax 
and exceptional items was £257 million
£224 million after an exceptional charge
of £468 million services’ proﬁt before
interest and tax was a loss of £211 million
proﬁt of £224 million
the exceptional charge of £468 million
represents a write down for impairment in
the carrying value of water puriﬁcation and
operating services principally in pipeline
services the charge for impairment has 
no impact on cash ﬂows
some 81 of services’ turnover arose in the
usa excluding the impact of exchange rates
services’ turnover increased by approximately
7 and proﬁt before interest tax goodwill
amortisation and exceptional items increased
by approximately 10 after eliminating 
the share of associated undertakings’ proﬁt
where the corresponding turnover is not
consolidated into services’ results services’
sales margin increased to 63 60
above
at the stl business centre
coventry the laboratory
processes around 2 million
test results a year for more
than 1000 uk customers
right
bp taking water samples 
at their llandarcy site 
south wales that will 
then be analysed at the 
stl bridgend facilities
summary review of operations
the services group
12 severn trent plc annual review 2003
the scale and breadth of severn trent laboratories
offering remains key to our success the laboratories
business works for 200 of the fortune 500 companies
and during 20022003 continued to win new work
with large blue chip clients 
stl’s leadership position and
wide spectrum of services
places us in pole position 
to win major contracts and
continue to improve our
business model
rachel brydon jannetta 
president and 
chief executive ofﬁcer 
severn trent laboratories
‘‘
’’
turnover
£3854
million
£342
million
goodwill amortisation £85 million and 
exceptional charges £468 million
proﬁt before interest
goodwill amortisation and exceptional items severn trent laboratories
leadership
in 20022003 severn trent laboratories
stl strengthened its leadership position in
the us and uk environmental testing markets
despite the difﬁcult economic conditions
turnover increased by 01 to £1718 million
but turnover in the us in us grew by 44
and turnover in the uk in £ grew by 240
stl serves these markets with 29 laboratories
in the us and 4 in the uk 
scale and breadth
the scale and breadth of stl’s offering remains
key to our success the laboratories business
works for 200 of the fortune 500 companies
and during 20022003 continued to win
new work with large blue chip clients 
uk
in the uk stl has two centres of excellence
in coventry which specialise in waste water
and soil analysis one in south wales that
focuses on drinking water and another in
cheshire with expertise in ecotoxicity
microbiology and biology
outlook
stl’s leadership and wide spectrum of services
places us in pole position to win major contracts
and continue to improve our business model
severn trent services
improving efﬁciency
in 20022003 severn trent services took
action to both improve efﬁciency and reduce
its exposure to the troubled us economy
we appointed a new chief executive who
launched a major restructuring programme
that integrated some us and european
businesses reduced layers of management
consolidated manufacturing operations and
closed four us sites which reduced headcount
by approximately 140 people
water puriﬁcation solutions
our water puriﬁcation division delivers 
water disinfection and ﬁltration products 
to municipal and industrial customers its
turnover decreased by 21 to £875 million
its performance was impacted by its difﬁcult
market place there was a fall in demand for
ﬁltration systems as industrial clients reined
in spending and municipal clients reallocated
already tight budgets to security areas
however following management action
performance improved in the second half
operating services including severn trent
water international
the operating services division operates
water and wastewater facilities plus other
related services for customers who are
largely based in the us its experience in
realising operating efﬁciencies and delivering
new technology enables the division to achieve
signiﬁcant cost savings for many clients
turnover in operating services increased 
by 46 to £1261 million
contract operations delivered organic
turnover growth of around 7 it was 
buoyed by demand from us municipalities
seeking ways to reduce costs in order to 
ease budget deﬁcits
pipelines services performed poorly in a
difﬁcult market as municipalities sought 
to rein in spending on their water and
sewerage infrastructure in response to 
the fall in demand for pipeline assessment
work we closed sites in texas tennessee
north carolina and connecticut
during the year we combined the us and
european operations of our water metering
business and introduced new software that
will enable us to read a wider range of water
meters in use across the us
our international arm severn trent water
international focused on providing private
sector management in western europe where
stateowned water authorities are being
restructured in 20022003 it increased
turnover by 43 we began our 30year italian
contract to operate water and wastewater
services in terni umbria
outlook
the restructuring of the business has laid 
a strong foundation for growth when the
economy recovers we also believe that our
increased focus on international markets 
will help to insulate the business from future
economic difﬁculties in particular regions
the restructuring of the
business has laid a strong
foundation for growth when
the economy recovers
len graziano 
president and 
chief executive ofﬁcer
severn trent services
’’
13 severn trent plc annual review 2003
below
in italy severn trent water
international remains in a
strong position as the market
for regional water service
managers continues to grow
‘‘
highlights
• launched a major restructuring
programme that integrated some us and
european businesses
• severn trent water international begun 
a 30year contract to supply water and
wastewater services in terni italy
• in stl we continued to expand our
geographic presence with new service
centres in key locations in the us
• in water puriﬁcation solutions we
increased the proportion of our sales
outside the us to 45 as we renewed 
our focus on global markets
market opportunities
for laboratories the scale and breadth 
of our offering remains key to its success
in the uk to offset potential reduced
demand from the water sector stl are
seeking to capitalise on new legislation
such as the landﬁll directive and ippc
regulations for our services businesses
we will continue to increase our focus 
on international markets summary review of operations
other businesses
systems
20022003 performance
total turnover for systems reduced to 
£613 million £620 million systems
produced a loss before interest tax and
exceptional items of £31 million loss of
£58 million after an exceptional credit 
of £60 million net exceptional charge 
£170 million proﬁt before interest and 
tax was £29 million loss of £228 million
agreement has been reached with those
customers in the us over the cisopen vision
contracts that were in dispute with the
associated costs of these problem contracts
expected to be covered by the £250 million
exceptional charge in 20012002 an
exceptional credit of £60 million has been
taken in the year representing the release of
part of the £250 million exceptional charge
systems continues to provide some support
and maintenance for these customers
aseriti the new brand for severn trent
systems in the uk was created to help 
move the business forward with a new and
exciting strategy of development and growth
in severn trent water aseriti delivered a
number of very large projects including a
ﬁeld asset management system and 5000
seat technology refresh
systems’ work management business under
the worksuite brand is being transformed
into a standalone business based in houston
it has global reach through its partner network
through restructuring it lowered its cost base
while retaining its leadership position in north
america its customer reception continues to
be strong national grid became a worksuite
customer in the past year industry leaders
such as aep lge ppl and we energies 
put worksuite products into production
property engineering consultancy
and insurance
20022003 performance 
total turnover from these businesses in 
the year was £730 million £430 million
generating proﬁt before interest and tax 
of £55 million £15 million
property
development activity during 20022003
continued at an encouraging level with
signiﬁcant progress being made 
at thorpe park leeds which has an 
ultimate capacity of 18 million sq ft of 
ofﬁce development pre let buildings are 
in course of construction for ws atkins plc
and boxwood plc whilst a regional ofﬁce 
for bryant homes limited was handed over
in march
daventry international rail freight terminal
remains the largest scheme to be undertaken
by the company
engineering consultancy
during the year charles haswell and partners
has been recognised as one of the top three
mediumsized consulting engineers by a
leading industry journal
the company has continued to make a
major contribution to the successful delivery
of severn trent water’s capital programme
for 20022003
charles haswell and partners is a key member
of the team delivering the dublin port tunnel
project which is the largest civil engineering
project in ireland and is a major contributor
to the channel tunnel rail link project
insurance
derwent insurance based in guernsey
provides insurance cover to severn trent
group companies
above
aseriti the new brand name
for severn trent systems in
the uk
14 severn trent plc annual review 2003
highlights
• aseriti the new brand for severn trent
systems in the uk was created to help
move the business forward with a new 
and exciting strategy of development 
and growth
• systems’ work management business
under the worksuite brand is being
transformed into a standalone business
based in houston it has global reach
through its partner network through
restructuring it lowered its cost base
while retaining its leadership position 
in north america corporate social responsibility
our policy
we strive to be a responsible corporate
citizen and recognise that severn trent 
has an important role to play in achieving
sustainable development for society as a
whole as part of this commitment we seek
to conserve natural resources and to support
the communities in which we operate
our role as an environmental services
company means that our activities are 
of intrinsic beneﬁt to society however 
our ability to achieve business success also
makes a signiﬁcant contribution to building 
a sustainable future as well as delivering
shareholder value we support the wider
community in ways that range from the
employment opportunities we offer to our
charitable donations
vision values and principles
we aspire to high standards of corporate
behaviour as we pursue our vision of leadership
in the environmental services industry to 
set an ethical framework for our activities 
we have published our values and a code 
of business principles which are available
on our website wwwseverntrentcom
our values articulate the company’s
commitment to disposing of waste safely
providing value for money conserving natural
resources maintaining infrastructure and
complying with all appropriate standards
the code of business principles guides our
people as they face daytoday challenges
and covers issues ranging from obeying 
the law to displaying integrity
community support
our community affairs programme focuses
on the key themes of environmental
education the built environment and the
natural environment
in 20022003 we donated more than 
£02 million to community projects among
the charities to beneﬁt were bridle gate in
staffordshire which provides educational
opportunities for children with special 
needs and the cromford venture centre 
in derbyshire which helps young people
build conﬁdence and selfesteem
through our employee volunteering
programme we encourage our people 
to share their expertise with the charities 
we support in 20022003 we supported
employees in holding workshops with the
fairbridge charity in the west midlands 
to provide disadvantaged young people 
with guidance about setting up their 
own businesses
in addition to the community affairs
programme our biffaward landﬁll tax 
credit scheme which is administered by 
the royal society for nature conservation
provided £17 million for environment and
community projects
our corporate vision is to be at the forefront of 
the environmental services industry our corporate
values of environmental leadership service and
quality enshrined in our code of business principles
and conduct deﬁne our business culture and guide
our strategies
15 severn trent plc annual review 2003
above
we continue to support the fairbridge charity 
in the west midlands offering disadvantaged 
young people longterm personal development
programmes
left
a restored area of the risley landﬁll site biffa 
are now undertaking ecological assessments 
to establish the biodiversity signiﬁcance of land
under their stewardship
to set an ethical framework for our
activities we have published our values
and a code of business principles
which are available on our website
wwwseverntrentcom
the code of business principles guides our
people as they face daytoday challenges
and covers issues ranging from obeying
the law to displaying integrity
around the world
severn trent water international shares 
its skills to improve water management in
the developing world and in eastern and
central europe
for example we are an active participant in
the uk government’s partners for water and
sanitation initiative under this scheme we
are working to improve water and sanitation
services in nigeria south africa and uganda
environmental management
we have a robust environmental management
system which has achieved the international
iso 14001 accreditation to ensure that
environmental management is pursued 
at a strategic level it is overseen by our
environmental advisory committee which
reports directly to the board
our progress
we are committed to being open about our
corporate social responsibility performance
during the year we were again ranked top 
of our sector in the dow jones sustainability
index and featured in the ftse4good index
we publish full details of our progress in our
stewardship report and on our website board of directors
16 severn trent plc annual review 2003
alan perelman
derek osborn
brian duckworth
david arculus
eric anstee
clare tritton
martin bettington
john banyard
robert walker
marisa cassoni
john mcadam
martin flower
board committees
membership of board committees 
is as detailed below
audit committee
e e anstee chairman
t d g arculus
m l cassoni
f a osborn
secretary – p p davies
charitable contributions committee
b duckworth chairman
rmwalker
secretary – p p davies
environmental and corporate social
responsibility advisory committee
f a osborn chairman 
t d g arculus
m j bettington 
r brydon jannetta
b duckworth
lf graziano
j w oatridge
r m walker
secretary – p p davies
executive committee
r m walker chairman
t d g arculus
j k banyard 
m j bettington
p p davies and secretary
b duckworth
pj gavan
jw oatridge
a s perelman
pktandon
remuneration committee
m c flower chairman
t d g arculus
j d g mcadam
secretary – p p davies
nominations committee
t d g arculus chairman
m c flower 
j d g mcadam
secretary – p p davies
treasury committee
ml cassoni chairman
e e anstee
t d g arculus 
t e jack
a s perelman
r m walker
m r wilson
secretary – p p davies
senior independent nonexecutive
director
m c flower
group general counsel and company
secretary
p p davies llb solicitor 17 severn trent plc annual review 2003
david arculus ma msc chairman 57
mr arculus joined the board in may 1996 as
a nonexecutive director and was appointed
chairman on 29 july 1998 he is chairman
of earls court  olympia group ltd and is 
a nonexecutive director of barclays plc 
he was recently appointed as a nonexecutive
director of mm0
2
 from 1998 to october
2001 he was chairman of ipc group ltd
until 1997 he was group managing director
of emap plc the international media
company where he played a signiﬁcant role
in the growth of that company mr arculus
was formerly a journalist and a producer at
the bbc in april 2002 he was appointed by
the government to chair its better regulation
task force
robert walker ma 58
mr walker joined the board in may 1996 as
a nonexecutive director he was appointed
deputy chief executive in july 1999 and
became group chief executive in august
2000 he has previously worked for procter
 gamble mckinsey  company and
pepsico inc where he was a division
president mr walker is also a nonexecutive
director of wolseley plc
eric anstee fca 52
mr anstee joined the board in july 1999 he is
chairman of mansell plc and a nonexecutive
director of ssl international plc he was
appointed chairman of d p communications
uk plc in may 2002 until august 2001 
he was chief executive – financial services 
of old mutual group having been group
finance director from november 1998 to
december 1999 prior to that he was group
finance director of the energy group plc
which was acquired by texas utilities in
1998 and group finance director of eastern
group plc between 1993 and 1995 prior to
its acquisition by hanson plc before joining
eastern he was a senior partner with ernst 
 young and a member of the management
board of the management consultancy arm
he is a member of the accounting standards
board’s urgent issues task force and a
member of the senate of the institute of
chartered accountants in england  wales
john banyard bsceng freng fice 
fciwem 58
mr banyard joined the board in january
1998 he is an executive director of severn
trent water limited with responsibility for
asset management he is also a director 
of uk water industry research limited a
member of the court of cranﬁeld university
and the royal academy of engineering
visiting professor of water engineering at
loughborough university mr banyard is 
a chartered civil engineer and has worked 
in a number of engineering roles within the
group since joining severn trent in 1974 
he was elected a fellow of the royal academy
of engineering in 1997 he is currently
president of the pipeline industries guild
martin bettington bsc mecheng mba 50
mr bettington joined the board in november
1994 he is the managing director of severn
trent’s waste management business biffa
waste services mr bettington was previously
employed by bet plc biffa’s former holding
company he holds an mba from manchester
business school
marisa cassoni bsc aca 51
ms cassoni joined the board on
1 september 2001 she is currently group
finance director of royal mail plc having
previously been group finance director at
britannic assurance plc from 1998 to 2001
ms cassoni qualiﬁed as an accountant with
deloittes where she rose to be corporate
finance manager she later moved to the
prudential corporation becoming group
finance director of the prudential’s uk
division in 1994
brian duckworth ba fcca fciwem 
fiwo 54
mr duckworth joined the board in 
november 1994 he has worked in various
roles since joining severn trent in 1974 
and was appointed managing director of
severn trent water limited on 1 april 1995 
mr duckworth was appointed as a non
executive director of avon rubber plc 
and redrow plc in 2002 he has served 
as the president of the institution of water
ofﬁcers and chairman of water uk the
water industry’s trade association
martin flower ba 56 
mr flower joined the board in june 1996
and is the senior independent nonexecutive
director he is group chief executive of coats
plc and during his career at coats has been
based in different parts of europe asia paciﬁc
and south america he has a particular
interest in and knowledge of european and
eu affairs
john mcadam bsc phd 55
dr mcadam joined the board on
18 september 2000 he is chief executive
and a member of the board of ici plc he
joined ici in 1997 following the acquisition 
of the specialty chemical businesses from
unilever where he held a number of senior
positions in birds eye walls ltd unichema
international and quest international 
he was appointed executive vice president
coatings and chief executive of ici paints in
1998 and joined the board of ici plc soon
after when he also became responsible for
corporate research  technology he took
over as chief executive of ici plc in april
2003 he is a member of the university of
surrey business advisory group
derek osborn cb 62
mr osborn joined the board on
21 september 1998 and is a leading 
ﬁgure in the environmental world he 
was chairman of the uk round table on
sustainable development from 1999 to
2000 and is now a member of the uk
commission on sustainable development
he has been chairman of uned uk since
1996 and was chairman of the international
institute for environment and development
from 1998 to 2002 he is chairman of
jupiter global green investment trust 
and of the international advisory board of
erm cvs mr osborn was director general 
of environment protection in the department 
of the environment from 1990 to 1995 and
chairman of the management board of the
european environment agency from 1995 
to 1999 
alan perelman ma msc 55
mr perelman joined the board in october
2001 and was appointed group finance
director in december 2001 prior to this 
he was group finance director at whitbread
from 1990 to 2001 previous positions held
were group finance director at the gateway
corporation and various positions at rio
tinto both in the uk and overseas
clare tritton ba qc 67
mrs tritton joined the board in november
1991 she is also a trustee director of
certain of the severn trent pension schemes
mrs tritton has wide legal experience with
emphasis on european community law and
particularly on competition law she served
on the monopolies and mergers commission
and on fimbra until may 1998 mrs tritton
is chief executive of throckmorton estates
and was until recently a nonexecutive
director of the birmingham royal ballet
trust company she is also chair of the
primary immunodeﬁciency association and
serves on the country land and business
association
nonexecutive director summary ﬁnancial statement
independent auditors’ statement to the members of severn trent plc
18 severn trent plc annual review 2003
the auditing practices board for use in the
united kingdom
opinion
in our opinion the summary ﬁnancial
statement is consistent with the annual
ﬁnancial statements the directors’ report
and the directors’ remuneration report of
severn trent plc for the year ended 31
march 2003 and complies with the
applicable requirements of section 251 
of the companies act 1985 and the
regulations made thereunder
pricewaterhousecoopers llp
chartered accountants and registered
auditors birmingham 10 june 2003
we have examined the summary ﬁnancial
statement of severn trent plc
respective responsibilities of directors 
and auditors
the directors are responsible for preparing
the annual review 2003 in accordance with
applicable law our responsibility is to report
to you our opinion on the consistency of 
the summary ﬁnancial statement within the
annual review 2003 with the annual ﬁnancial
statements the directors’ report and the
directors’ remuneration report and its
compliance with the relevant requirements 
of section 251 of the united kingdom
companies act 1985 and the regulations
made thereunder we also read the other
information contained in the annual review
2003 and consider the implications for our
report if we become aware of any apparent
misstatements or material inconsistencies
with the summary ﬁnancial statement
this statement including the opinion has
been prepared for and only for the company’s
members as a body in accordance with
section 251 of the companies act 1985 and
for no other purpose we do not in giving
this opinion accept or assume responsibility
for any other purpose or to any other person
to whom this statement is shown or into whose
hands it may come save where expressly
agreed by our prior consent in writing
basis of opinion 
we conducted our work in accordance with
bulletin 19996 ‘the auditors’ statement on
the summary ﬁnancial statement’ issued by
summary directors’ report
principal activities
the principal activities of the group
continued to be the supply of water and
sewerage services waste management and
the provision of environmental services 
a review of the group’s business activities
their performance and future developments
can be found on pages 8 to 14
final dividend
subject to approval at the annual general
meeting the recommended ﬁnal dividend 
of 2856p 2002 2856p net for each
ordinary share will be paid on 1 october
2003 to shareholders on the register at the
close of business on 20 june 2003
directors
details of the current members of the 
board are shown on pages 16 and 17
mr e e anstee mr t d g arculus and 
mr r m walker retire from the board by
rotation in accordance with the articles 
of association of the company and being
eligible offer themselves for reappointment
mrs c tritton will retire from the board 
at the conclusion of this year’s annual
general meeting but will not be seeking
reappointment
mr walker has a service contract which
provides for not less than 12 months’ written
notice of termination by the company and
not less than 12 months’ written notice by
him expiring at any time mr anstee and 
mr arculus being nonexecutive directors do
not have service contracts with the company
corporate governance
the board is committed to business integrity
and professionalism in all its activities 
as part of this commitment the board supports
the highest standards of corporate governance
and the development of best practice the
annual report and accounts 2003 contains
the full corporate governance statement
health and safety
the company continues to proactively 
address the management of health and 
safety issues across the group
employees
group companies continue to encourage
communication with and between employees
each of the major business units has its own
inhouse magazine uses employee surveys
team brieﬁngs and ‘tool box’ talks and 
has an intranet facility covering all of their
main locations
intranets are increasingly used as the 
basis for open forum discussions and 
for ‘suggestion’ schemes
group companies continue to maintain good
relationships with the recognised trade unions
and their directly elected representatives
severn trent water have successfully
implemented a new partnership agreement
with its recognised trade unions and this 
has received recognition from the tuc and
government ministers
the board endorsed code of business
principles and conduct deﬁnes the values
and vision of the group and underpins the
strategies that guide business activities the
group’s business goals are long term and 
the code has been developed to provide
appropriate ethical direction to sustain their
achievement the code is available at the
group website wwwseverntrentcom
further details of the company’s
achievements visàvis our stated sustainable
development targets are detailed in the
company’s stewardship report
‘whistle blowing’ procedures are in place in
every group company to deal with allegations
of harassment bullying etc and any other
breaches of the company’s codes and values
diversity
group companies continue to review their
diversity policies and practices to ensure that
they comply with the legislative requirements
of each location in which we operate and
also meet the company’s code of business
principles and conduct 
further information on the group’s diversity
position is detailed in the company’s
stewardship report
auditors’ report
the auditors’ report on the full annual
accounts of the group for the year ended
31 march 2003 was unqualiﬁed and did 
not contain a statement under either section
2372 accounting records or returns
inadequate or accounts not agreeing with
records and returns or 2373 failure to
obtain necessary information and explanations
of the companies act 1985
by order of the board
p p davies llb solicitor
group general counsel 
and company secretary
10 june 2003 summary group proﬁt and loss account
year ended 31 march 2003
19 severn trent plc annual review 2003
2003 2002
£m £m
turnover 18520 17943
operating costs before goodwill amortisation and exceptional items 14530 13854
goodwill amortisation 252 265
exceptional impairment of goodwill and tangible ﬁxed assets 468 –
exceptional contract provision releasecosts 60 250
total operating costs 15190 14369
group operating proﬁt 3330 3574
share of operating proﬁt of joint ventures and associates 108 99
exceptional proﬁt on disposal of business – 80
proﬁt before interest goodwill amortisation and exceptional items 4098 4188
goodwill amortisation 252 265
proﬁt before interest and exceptional items 3846 3923
exceptional costs 468 250
exceptional provision releaseproﬁts 60 80
proﬁt before interest 3438 3753
net interest payable 1594 1590
proﬁt after interest before goodwill amortisation and exceptional items 2504 2598
goodwill amortisation 252 265
proﬁt after interest before exceptional items 2252 2333
exceptional items 408 170
proﬁt on ordinary activities before taxation 1844 2163
taxation on proﬁt on ordinary activities – current tax 248 161
– deferred tax 595 423
total taxation 843 584
proﬁt on ordinary activities after taxation 1001 1579
equity minority interests 09 06
proﬁt for the ﬁnancial year 992 1573
dividends 1576 1576
retained loss for the ﬁnancial year 584 03
earnings per share pence
basic 289 459
adjusted basic before exceptional items and deferred tax 581 632
important note the summary ﬁnancial
statement does not contain sufﬁcient
information to allow a full understanding 
of the results of the group and of the state 
of affairs of the company or of the group nor
of the policies and arrangements concerning
directors’ remuneration for further details
the annual report and accounts 2003 
which includes the directors’ report and the
auditors’ report on the ﬁnancial statements
should be consulted 
a copy can be obtained free of charge 
by writing to the company secretary at 
2297 coventry road birmingham b26 3pu
alternatively it can be accessed on the
website at www severntrentcom
reports2003 shareholders can elect to
obtain the full annual report and accounts
for all future ﬁnancial years by contacting 
the company’s registrars lloyds tsb
registrars whose details appear on page 24 2003 2002
£m £m
fixed assets 54806 53957
current assets 5831 5357
creditors amounts falling due within one year 12192 11128
net current liabilities 6361 5771
total assets less current liabilities 48445 48186
creditors amounts falling due after more than one year 21016 20428
provisions for liabilities and charges 5231 4804
net assets 22198 22954
capital and reserves 22176 22940
minority shareholders’ interest equity 22 14
22198 22954
signed on behalf of the board who approved the accounts on 10 june 2003
david arculus alan perelman
chairman group finance director
2003 2002
£m £m £m £m
net cash inﬂow from operating activities 6827 6655
dividends received from associates and joint ventures 16 12
returns on investments and servicing of ﬁnance 1467 1449
taxation 143 67
capital expenditure and ﬁnancial investment 4540 3521
acquisitions and disposals 115 –
equity dividends paid 1575 1541
net cash outﬂowinﬂow before use of liquid resources and ﬁnancing 997 89
management of liquid resources 65 620
financing
increasedecrease in debt 1141 815
issue of shares 33 34
1174 781
increasedecrease in cash 112 72
summary group balance sheet 
at 31 march 2003
summary group cash ﬂow statement
year ended 31 march 2003
summary ﬁnancial statement
continued
20 severn trent plc annual review 2003 summary remuneration report
21 severn trent plc annual review 2003
remuneration committee
the remuneration committee determines on
behalf of the board the company’s policy on
the remuneration of executive directors
the committee determines the total
remuneration packages and contractual
terms and conditions for these individuals
the policy framework for remunerating 
all senior executives is consistent with the
approaches taken for executive directors
the remuneration committee is comprised
exclusively of independent nonexecutive
directors of the company the members 
of the remuneration committee during 
the year were
m c flower chairman
t d g arculus
j d g mcadam
the committee members have no personal
ﬁnancial interest other than as shareholders
in the matters to be decided
the constitution and operation of the
committee complies with the combined code
for corporate governance of the financial
services authority in setting performance
related remuneration the committee has
regard to the provisions set out in schedule a
to the code
advisers
to ensure that severn trent’s remuneration
practices are market competitive the
remuneration committee has access to
detailed external research on market data
and trends from experienced international
consultants
the committee has received material 
advice from deloitte  touche who 
replaced andersen on 1 august 2002 hay
management consultants and watson wyatt
who have been appointed by the committee
for the purpose of providing this advice
in relation to other services provided to the
group deloitte  touche provide overseas tax
advice and watson wyatt are the actuaries
to the group’s main uk pension schemes
all three consultants provide employee
beneﬁts services andor remuneration 
advice to the group below board level
the appointment of the principal adviser
currently deloitte  touche will be 
formally reviewed by the committee 
during the ﬁnancial year 20032004
the group chief executive and the group
services director also provide advice and 
are invited to attend meetings to respond to
speciﬁc questions raised by the committee
this speciﬁcally excludes any matter
concerning their own remuneration the
group company secretary acts as secretary
to the committee
remuneration policy
the company’s ongoing remuneration policy
for executive directors is to review regularly
and update as appropriate the framework to
provide remuneration in a form and amount
which will attract retain motivate and reward
high calibre individuals to achieve this the
remuneration package is based on the
following principles
• incentives are aligned with the interests 
of shareholders and reward the creation 
of longterm value
• reward elements are designed to reinforce
the link between performance and reward
performance related elements should 
form a signiﬁcant proportion of the total
remuneration package and at maximum
vary between 120 and 150 of basic pay
• the total compensation package for 
ontarget performance should be fully
competitive in the relevant market
• packages are structured ﬂexibly to meet critical
resource needs and retain key executives
the committee seeks to take a prudent and
responsible approach taking into account 
the interests of shareholders customers
employees and the local community
personal shareholdings
the company does not have a policy 
which requires executive directors to have 
a minimum holding of ordinary shares in
severn trent but through a variety of share
schemes encourages all employees to hold
shares in the company
external directorships
executive directors are encouraged to take
on external nonexecutive directorships in
order to avoid a conﬂict of interest all such
appointments are subject to the approval of
the remuneration committee and the board
directors are normally only able to retain the
fees arising from one such appointment
chairman and other nonexecutive directors
the remuneration policy for nonexecutive
directors is determined by the board within
the limits set out in the articles of association
remuneration comprises an annual fee for
acting as a nonexecutive director of the
company and additional fees for acting as
• chairman of a board committee
• senior nonexecutive director
• trustee of a company pension scheme
• nonexecutive director of a subsidiary company
• chairman of the company
nonexecutive directors are not eligible 
to participate in incentive plans nor is any
pension provision made except as detailed 
in relation to mr arculus
nonexecutive directors receive payment of
part of their fees in the form of severn trent
ordinary shares
the nonexecutive directors do not have
service contracts or consultancy agreements
with any group company
remuneration package for executive directors
the remuneration package for executive
directors comprises the following elements
• base salary and beneﬁts
• annual bonus plan
• long term incentive plan
• postretirement beneﬁts
the performance related elements when
valued at ontarget performance comprise
more than 60 of the total potential package
excluding postretirement beneﬁts
details of each of the above elements are 
as follows
base salaries and beneﬁts
base salaries are a ﬁxed cash sum payable
monthly the company’s policy is to set the
salary for each executive director within a 
range having regard to the market median for
similar roles in large publicly quoted companies
salaries for individual directors are reviewed
annually by the remuneration committee
recognising the individuals’ performance 
and contribution and developments in the
relevant employment market
the principal nonsalary beneﬁts for executive
directors include the use of a motor car fuel
private medical insurance life assurance and 
an incapacity beneﬁts scheme since january 
2002 the executive directors have been allowed 
to ‘ﬂex’ these beneﬁts under the company’s
lifestyle scheme as they are ﬂexing within the
same value of overall package their individual
choices are not reﬂected in the table of
directors’ emoluments on page 23
annual bonus plan
executive directors are eligible for annual
bonuses to encourage improved performance
measured by reference to both ﬁnancial and
nonﬁnancial factors performance targets are
established by the remuneration committee
to align executive directors’ interests with
shareholders and are measured by reference to
proﬁtability together with speciﬁc targets for
quality service environmental performance
and the achievement of personal objectives 
the maximum amount payable under the 
bonus scheme in 20022003 was 50 of base
salary which is paid only for superior ﬁnancial
performance financial performance accounts
for 60 of the total bonus potential and 
40 is dependent on performance in respect
of the remaining factors the performance
requirements are stretching and involve an
assessment of up to ten parameters for each
executive director annual bonus payments are
not taken into account in calculating pension
entitlements the actual bonuses awarded 
by the remuneration committee for the year
ended 31 march 2003 are shown in the table
of directors’ emoluments on page 23
longterm incentives
a long term incentive plan ‘ltip’ for
executive directors was approved by
shareholders at the 1997 annual general
meeting and amended with shareholder
approval at the 2001 annual general meeting summary remuneration report
continued
22 severn trent plc annual review 2003
the performance for the 2001 and 2002
ltips is measured by reference to a
combination of total shareholder return
‘tsr’ and economic proﬁt ‘ep’ targets
the maximum allocation that may be made
to an individual executive director in any year
is such number of shares as have a market
value equal to 100 of base salary shares
are allocated annually by the committee but 
are not released to executive directors for a
period of three years thereafter provided that
the tsr has achieved a prescribed ranking in
comparison with a number of selected
comparator companies and that the ep
targets have also been met the performance
criteria are speciﬁc to each award for 
the performance periods effective from
1 april 2001 and 1 april 2002 mr walker
received an allocation of shares equivalent 
to 100 of his salary and the remaining
executive directors received allocations
equivalent to 70 of their salaries 
for the 2001 and 2002 awards the
comparator group consists of
awg plc kelda plc pennon group plc
shanks plc united utilities plc and waste
recycling group plc
for the executive directors an award under
the 2001 and 2002 ltip schemes will be
triggered if the comparator tsr performance
is at the median or above and the ep meets 
the scaled targets set ep is calculated 
by reference to a rate of return of 75
it is considered that the performance 
conditions are appropriate since we 
compare our performance against
companies in a similar sector whilst at 
the same time strengthening the alignment
with shareholders by placing emphasis on
ep and sustained longterm value creation
tsr performance will be assessed using an
external data source such as datastream for
share price and dividends in the period the
calculations of ep will be based on information
from the company’s ﬁnancial statements and
will be veriﬁed by external advisers
the performance period for allocations of
shares made in 2000 ended on 31 march
2003 the remuneration committee has
determined based on the company’s tsr
performance over the three year performance
period that participants are entitled to 
50 of the shares allocated in respect 
of the 2000 ltip the qualifying condition 
for vesting was that the company’s tsr
performance was ranked median against the
following comparators awg bg national
power kelda pennon scottishpower scottish
and southern energy and united utilities
hyder powergen and thames water were
constituents of the original comparator group
but were acquired during the performance
period and it was determined that they
should be excluded from the comparator
group the measurement of the performance
of bg and national power incorporated 
the performance of innogy and lattice
subsequent to the demerger the shares 
in respect of the 2000 award will be released
to executive directors as soon as practicable
following the announcement on 10 june
2003 of the company’s results for the year
ended 31 march 2003
postretirement beneﬁts
the company’s policy is to offer all executive
directors membership of the senior staff
pension scheme ‘the scheme’ all current
executive directors participate in the scheme
the scheme is a funded inland revenue
approved ﬁnal salary occupational pension
scheme which provides
• a normal retirement age of 60 years
• an overall pension at normal retirement 
age of twothirds of ﬁnal pensionable
salary subject to the completion of 
20 years’ pensionable service
• life cover of 4 x pensionable earnings
• a pension payable in the event of
retirement on grounds of ill health
• a spouse’s pension on death
the ﬁve executive directors are members of
deﬁned beneﬁt pension arrangements and in
the year to 31 march 2003 the company
contributed £501355 on their behalf into these
arrangements in addition £436319 was
charged to the proﬁt and loss account in the
year in respect of an unfunded obligation to
provide pension beneﬁts based on salaries in
excess of the inland revenue earnings cap the
company also contributes £28680 per annum
to mr arculus’s private pension arrangement
forwardlooking statement
the committee will keep the existing
remuneration arrangements as detailed 
in this report under review during the next
year to ensure that the company’s reward
programmes remain competitive and provide
appropriate incentives no signiﬁcant
changes to the reward arrangements for
executive directors are anticipated however
as usual there will be individual reviews of
base salary annual bonus and ltip awards
the performance targets for incentive
arrangements will also be reviewed to 
ensure alignment with the group strategy
directors’ service agreements and letters 
of engagement
the current policy of the remuneration
committee is that executive directors are
employed on contracts subject to no more
than 12 months’ notice in accordance with
current corporate governance best practice
the executive directors are required to 
give not less than six months’ notice of
termination 12 months in the case of the
group chief executive in the case of new
appointments from outside the group 
in order to attract and retain high calibre
individuals there may be an entitlement 
to a 24 months’ notice period reducing to 
12 months at the end of the ﬁrst year of
employment
in the case of executive directors who were
appointed prior to 1999 and who previously
had written notice periods in excess of 
12 months contractual terms were put 
in place in march 2000 which deﬁne levels of
compensation payments that might 
be payable in the event of redundancy 
or breach of contract such payment not
being triggered in the event of dismissal 
for misconduct or poor performance
the obligations under the arrangements are
service related with four weeks pay for each
year of service to a maximum of 25 years
one year’s bonus and £20000 for loss of
beneﬁts car health insurance etc
there are no speciﬁc contractual payments
or beneﬁts which would be triggered in the
event of a change in control of the company
page 23 and the table thereon comprise 
the ‘auditable part’ of the summary
remuneration report being the information
required by part 3 of schedule 7a to the
companies act 1985
severn trent year ended march ftse 100 index
our reward programmes are designed to support the generation of total shareholder return the graph
below shows the total shareholder return for the ftse 100 and the company since 1 april 1998 the 
ftse 100 has been chosen because it is considered to be the most appropriate basis for comparison 
as it is a broad equity index in which the company is a constituent
tsr index at 1498  100
120
110
100
90
80
70
60
50
98 99 00 01 02 03
performance graph 23 severn trent plc annual review 2003
the dates of the current executive directors’ agreements the dates on which their appointments became effective and the current expiry dates of
their agreements are as follows
executive director date of agreement effective date expiry date
j k banyard 20 april 1998 23 january 1998 terminable on 12 months’ notice
m j bettington 28 december 1994 8 november 1994 terminable on 12 months’ notice
b duckworth 11 january 1995 8 november 1994 terminable on 12 months’ notice
a s perelman 11 september 2001 1 october 2001 terminable on 12 months’ notice
r m walker 7 july 1999 12 july 1999 terminable on 12 months’ notice
mr r m walker is the subject of reappointment as an executive director at the annual general meeting and the committee believes that his
extensive knowledge and experience fully justiﬁes the continuation of the contractual arrangement outlined above
in respect of the chairman and current nonexecutive directors the dates on which their appointments took effect and the current expiry dates
are as follows
chairman and nonexecutive directors effective date current expiry date
t d g arculus 20 may 1996 28 july 2004
e e anstee 30 july 1999 29 july 2005
m l cassoni 1 september 2001 31 august 2004
m c flower 11 june 1996 10 june 2005
j d g mcadam 18 september 2000 17 september 2003
d a osborn 21 september 1998 20 september 2004
c tritton 1 november 1991 30 july 2003
it is the normal practice of the company for nonexecutive directors to serve three threeyear terms nonexecutive directors have no right to
compensation on the early termination of their appointment
directors’ emoluments
the emoluments of the chairman the executive directors and fees payable to the nonexecutive directors are as follows
basic salary beneﬁts
5
annual total total
and fees
3
in kind bonus other
1
20022003 20012002
£000 £000 £000 £000 £000 £000
chairman and other nonexecutive directors
t d g arculus chairman 1276 212 – 60 1548 1409
e e anstee 325 – – 04 329 315
m l cassoni 289 – – 05 294 160
m c flower 440 – – 04 444 409
j d g mcadam 275 – – 04 279 267
f a osborn 500 – – 02 502 509
a h simon resigned 260702 114 – – 01 115 338
c tritton 329––– 329 311
executive directors 
j k banyard 1750 213 831 04 2798 2403
m j bettington 2500 201 637 – 3338 2820
r a s costin retired 211201
4
––––– 2146
b duckworth 2350 211 1058 01 3620 3143
a s perelman 3350 253 1514 05 5122 3368
r m walker
2
4060 349 1705 01 6115 4927
total emoluments 17558 1439 5745 91 24833 22525
1 other emoluments represent expenses chargeable to uk income tax paid to directors
2 aggregate emoluments for mr walker as highest paid director amounted to £611500 2002 £492700
3 included within fees for the nonexecutive directors are amounts elected to be received by way of shares rather than as emoluments 
to encourage participation in line with corporate governance best practice 224 shares with a gross value of £2500 were received by 
all of the nonexecutive directors for the period with the exception of mr arculus who received 908 shares with a gross value of £10000 
mr simon who resigned in the year received his time apportioned award of £801 in cash
4 mr costin’s salary and beneﬁts in kind in the previous ﬁnancial year are those amounts earned up to the date he retired as a member 
of the board 21 december 2001 in the remainder of the previous ﬁnancial year he received a further £52700 in salary and £6100 of
beneﬁts in kind in relation to the period following his retirement from the board to 31 march 2002 mr costin retired from the company 
on 12 may 2002 aged 59 he received a further £214925 of salary bonus of £58963 and £25732 of beneﬁts in kind in the current
ﬁnancial year being the balance of his contract which terminated at the age of 60
5 beneﬁts in kind include the use of a motor car fuel private medical insurance life assurance and an incapacity beneﬁts scheme
6 during the year two executive directors exercised share options with an aggregate gain on exercise of £6083 since the yearend they have
exercised further share options with an aggregate gain on exercise of £5551 no awards vested during the year under the severn trent plc
long term incentive plan ‘ltip’ and consequently there has been no gain on vesting 2002 nil since the yearend the remuneration
committee has determined that 50 of the 2000 ltip award should vest but as at 10 june 2003 this has not taken place shareholder information
24 severn trent plc annual review 2003
key dates in 2003
dividends – ordinary shares
18 june 2003
exdividend date for ﬁnal dividend
20 june 2003
record date for ﬁnal dividend
1 october 2003
payment of ﬁnal dividend
shareholder communications
30 july 2003
annual general meeting at the
national motorcycle museum birmingham
december 2003
announcement of half year results
annual general meeting
the annual general meeting will be held 
at 230pm on wednesday 30 july 2003 
at the national motorcycle museum
birmingham b92 0ej the notice of the
meeting and a form of proxy are enclosed
with this review
registrars
lloyds tsb registrars are the company’s
share registrars and they will deal with 
any queries you may have regarding
• shareholdings
• dividends
• lost share certiﬁcates
• change of name or address
• death of a shareholder
• request for the full report and accounts
if you wish to have your dividends paid
directly into your bank or building society
account you should contact the registrars
and they will send you a dividend mandate
form alternatively you will ﬁnd a form of
mandate attached to your last dividend
mailing which you may complete and return
to the registrars please note you will still
receive tax vouchers at your usual address 
their contact details are
lloyds tsb registrars
the causeway
worthing
west sussex bn99 6da
you can also ring them on the severn trent
dedicated telephone line 0870 600 3967
alternatively if you have access to the
internet you can look directly at details 
of your shareholder account by visiting
wwwshareviewcouk this is a service offered
by lloyds tsb registrars that enables you to
check your holdings in many uk companies
and helps you to organise your investments
electronically you can register for this 
free portfolio service by logging onto
wwwshareviewcouk and following 
a simple registration process
electronic proxy appointments
for this year’s annual general meeting you
may if you wish register the appointment 
of a proxy electronically by logging onto the
website wwwsharevotecouk you will need
your voting reference numbers the three 8
digit numbers shown on your form of proxy 
alternatively if you have registered for a
shareview portfolio log onto your portfolio 
at wwwshareviewcouk and click on
company meetings 
please note that any electronic
communication that is found to contain 
a computer virus will not be accepted
low cost postal dealing service
lloyds tsb registrars also offer a low cost
postal dealing service for anyone who wishes
to buy or sell severn trent plc shares
the charge for this service is 05 of the
transaction value minimum charge – £750
and deals are completed once a week on
fridays stamp duty of 05 is payable in
addition to the above charge on the value 
of purchases
see left for contact details
unsolicited mail
we are obliged whenever requested to
provide copies of our shareholder register 
to any third parties so it is quite likely that
you may receive unsolicited mail from time 
to time
you can limit the amount of unsolicited 
mail you receive by contacting
the mailing preference service
freepost 22
london w1e 7ez
forwardlooking statements
this document contains certain ‘forward
looking statements’ with respect to 
severn trent’s ﬁnancial condition results 
of operations and business and certain 
of severn trent’s plans and objectives with
respect to these items
forwardlooking statements are sometimes
but not always identiﬁed by their use of 
a date in the future or such words as
‘anticipates’ ‘aims’ ‘due’ ‘could’ ‘may’
‘should’ ‘expects’ ‘believes’ ‘intends’ 
‘plans’ ‘targets’ ‘goal’ or ‘estimates’ by 
their very nature forwardlooking statements
are inherently unpredictable speculative 
and involve risk and uncertainty because
they relate to events and depend on
circumstances that will occur in the future
there are a number of factors that could
cause actual results and developments to
differ materially from those expressed or
implied by these forwardlooking statements
these factors include but are not limited 
to changes in the regulatory framework 
in which the group operates the impact 
of legal or other proceedings against or
which affect the group and changes in
interest and exchange rates
all subsequent written or verbal forward
looking statements attributable to severn
trent or any other member of the group or
persons acting on their behalf are expressly
qualiﬁed in their entirety by the factors
referred to above severn trent does not
intend to update these forwardlooking
statements
wwwseverntrentcom
shareholders are likely to ﬁnd the 
financial performance section of particular
interest containing a range of shareholder
information such as detailed coverage of our
share price dividend payments key dates
our registrars as well as corporate ﬁnancial 
and environmental news releases and city
presentations
our annual review and annual report 
and accounts are available on the 
website accessed directly via 
wwwseverntrentcomreports2003 the following publications are also available
severn trent plc 
• annual report and accounts
• stewardship – sustainable development report
severn trent water
• annual report and accounts
including regulatory accounts
• delivering sustainability
• biodiversity action plan
• conservation access recreation
and education report
biffa
• biffaecology – environment report
• future perfect – biffa book v
• biffa and biodiversity
• biffaward annual report and accounts
contact us at the address below 
for copies of publications
severn trent plc
2297 coventry road
birmingham b26 3pu
united kingdom
telephone 44 0121 722 4000
we are constantly looking at how best to provide the information our
stakeholders need quickly and cost effectively we also seek to minimise
the resources used wherever possible 
if you are a shareholder you too can ‘do your bit’ if you currently receive
the full annual report and accounts why not consider switching to the
annual review only you can still view or download a copy of the full
annual report and accounts online at wwwseverntrentcomreports2003
you can also elect not to receive paper copies of the annual report and
other shareholder documents instead you will receive an email containing
a link to a website where electronic copies of the documents can be viewed
or downloaded
please call lloyds tsb registrars on 0870 600 3967 to request the 
annual review only or to register for edelivery 
for more information about severn trent plc and its businesses see 
our website 
wwwseverntrentcom  for more information about severn trent plc
and its businesses see our website 
wwwseverntrentcom 
front cover
lisa roberts severn trent laboratories
neville moore biffa ﬂeet maintenance team
ben young severn trent water ranger services
back cover
alex mirkovic biffa business development team
designed and produced by cgi brandsense
the paper used in the production of this
report zanders megamatt is produced using
chlorine free processes from 50 recycled
pre and post consumer waste it is certiﬁed
to the nordic swan standard which requires
products to meet a strict range of standards
in addition the printing process is taken into
account – this report is printed by wace 
who operate an environmental management
system certiﬁed to iso 14001
severn trent plc
2297 coventry road
birmingham b26 3pu
united kingdom
telephone 44 0121 722 4000


Summary:
 contents
01 financial highlights
02 chairman’s statement
04 group chief executive’s review
06 the environment is our business
08 review of operations
15 corporate social responsibility
16 financial review
18 board of directors
20 directors’ report
25 remuneration report
31 directors’ responsibilities in relation 
to the ﬁnancial statements
31 independent auditors’ report to the
members of severn trent plc
32 group proﬁt and loss account
33 balance sheets
34 group cash ﬂow statement
34 reconciliation of net cash ﬂow 
to movement in net debt
35 statement of total recognised gains 
and losses
35 reconciliation of movement
in shareholders’ funds
36 notes to the ﬁnancial statements
63 five year summary
64 shareholder information
financial highlights
group turnover £m
03
02
01
00
99
18520
17943
16816
15666
13643
group profit before tax £m
before exceptional items
03
02
01
00
99
2252
2333
2217
3387
3614
earnings per share pence
before exceptional items and
deferred tax
03
02
01
00
99
581
632
610
928
924
dividends per share pence
03
02
01
00
99
4590
4590
4500
4500
4300
2003 2002  change
turnover £m 1852 1794 32
proﬁt before interest pre goodwill and exceptionals £m 410 419 21
proﬁt before interest pre exceptionals £m 385 392 20
proﬁt before interest post exceptionals £m 344 375 84
proﬁt before tax pre goodwill and exceptionals £m 250 260 36
proﬁt before tax pre exceptionals £m 225 233 35
proﬁt before tax post exceptionals £m 184 216 147
earnings per share pre exceptionals and deferred tax p 581 632 81
earnings per share post exceptionals and deferred tax p 289 459 370
gearing  1129 1051 78
final dividend p 2856 2856 –
interim dividend p 1734 1734 –
total equity dividends for the year p 4590 4590 –
exceptional items in 2003 of £408 million comprised the net cost of a £468 million charge 
in services for the impairment of goodwill and tangible ﬁxed assets and a £60 million credit
from the release of part of the £250 million exceptional charge made in 20012002 in
respect of certain of systems’ cisopen vision contracts in the usa
exceptional items in 2002 all arising in severn trent systems comprised the net cost of a 
£250 million charge to cover the anticipated total costs of completing loss making cisopen 
vision contracts in the usa and an £80 million proﬁt on disposal of stoner associates
01 severn trent plc annual report and accounts 2003
annual review 2003
you can view and download 
a copy of the group’s 
annual review and 
summary financial 
statement on our website 
at wwwseverntrentcom
reports2003 or request 
a copy free of charge 
by contacting us using 
the details on the inside 
back cover of this report