for more information about severn trent plc 
and its businesses see our website
wwwseverntrentcom
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 and 50 tcf pulps from plantations
and sustainable forests in addition the printing process is taken into
account – this report is printed by pillans and waddies who operate
an environmental management system certified to iso 14001
designed and produced by tayburn
severn trent plc
2297 coventry road
birmingham b26 3pu
united kingdom
telephone 44 0121 722 4000
severn trent plc annual report and accounts 2004
severn trent plc
annual report and accounts 2004 this is severn trent
severn trent plc is a leading
environmental services group
providing water waste and utility
services we aim to increase
shareholder value by providing
integrated solutions to
environmental problems and by
grasping the growth opportunities
created by new legislation and new
requirements in the private and
public sectors
firmly embedded in our corporate
strategy is a commitment to
corporate responsibility and sound
financial management
you can find out more about severn
trent plc and the businesses within
our group by visiting our website
wwwseverntrentcom
contents
01 financial highlights
02 chairman’s statement
04 group chief executive’s review
06 core businesses at a glance
08 review of operations
15 corporate responsibility
16 financial review
18 board of directors
20 directors’ report
25 remuneration report
32 directors’ responsibilities in relation to the financial statements
33 independent auditors’ report to the members of severn trent plc
34 group profit and loss account
35 balance sheets
36 group cash flow statement
36 reconciliation of net cash flow to movement in net debt
37 statement of total recognised gains and losses
37 reconciliation of movements in shareholders’ funds
38 notes to the financial statements
67 five year summary
68 shareholder information
annual review 2004
you can view and download a copy of the group’s
annual review and summary financial statement 
on our website at wwwseverntrentcomreports2004 
or request a copy free of charge by contacting us using
the details on the back cover of this report
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 november
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 2004
interim dividend paid 6 april 2004 
proposed final dividend payable 1 october 2004 
you can find out more about severn trent and the businesses within
our group by visiting our websites
wwwseverntrentcom provides information about the group including
our corporate responsibility activity and shareholder information
you can find out about the products and services we offer by visiting
our business sites
wwwstwatercouk
wwwbiffacouk
wwwstlinccom
wwwstlanalyticalcouk
wwwseverntrentservicescom
wwwstwaterinternationalcom
wwwaseriticom
wwwworksuitecom
wwwstretailservicescouk
wwwstutilityservicescouk
wwwseverntrentpropertycom
wwwhaswellcouk
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 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
wwwseverntrentcomreports2004 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 1 severn trent plc annual report and accounts 2004
financial highlights
00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04
15666 
16816
17943
18520
20151
3387 
2217
2333
2252
2428
928 
610
632
581
614
4500 
4500
4590
4590
4704
2004 2003  change
turnover £m 2015 1852 88
profit before interest pre goodwill and exceptionals £m 441 410 75
profit before interest pre exceptionals £m 411 385 68
profit before interest post exceptionals £m 422 344 229
profit before tax pre goodwill and exceptionals £m 273 250 89
profit before tax pre exceptionals £m 243 225 78
profit before tax post exceptionals £m 254 184 380
earnings per share pre exceptionals and deferred tax p 614 581 57
earnings per share post exceptionals and deferred tax p 535 289 851
gearing  1239 1129 97
final dividend p 2927 2856 25
interim dividend p 1777 1734 25
total dividend for the year p 4704 4590 25
exceptional items in 2004 of a £116 million credit comprised of 
a £198 million profit on the sale of land and buildings a £27
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 us and a £109 million
charge in respect of hales waste integration costs
exceptional items in 2003 of a £408 million charge 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 us
group profit before tax 
before exceptional items 
£m
group turnover
£m
earnings per share
before exceptional items 
and deferred tax 
pence
dividends per share
pence 2 severn trent plc annual report and accounts 2004
chairman’s statement
• good full year results
• increased overall profits from nonregulated businesses
• severn trent water continues to outperform
group profit before interest tax goodwill 
amortisation and exceptional items

up 75 at
£4406 million
we have enhanced our dividend policy such 
that barring unforeseen circumstances fullyear
dividends per share would be a minimum of
4704p up to the end of the current review 
period in march 2005
business performance
severn trent produced a good performance in 20032004
excluding the impact of exchange rates turnover rose in all the core
businesses of water waste and laboratories we have worked hard to
balance the expectations and needs of different parties – employees
customers investors regulators and communities sound daytoday
management is combined with a longterm commitment to
sustainability
much of our management focus over the year has concerned the
preparation of our draft and final amp4 business plan for ofwat
setting out our proposed investment plans for 20052010 we are
confident in our ability to meet new targets for this period just as 
we are confident that we will continue to outperform our amp3
regulatory contract in respect of 20022003 severn trent water 
has the leading position in ofwat’s overall performance assessment
opa of water and sewerage companies our charges are also
among the lowest in the uk and under current plans will be the
lowest by 2010
whilst developing the future strategy of our regulated business we
have pressed ahead with developing biffa as one of the leading
waste management companies in the uk  the biggest event during
the year being the acquisition of the former hales business
severn trent water and biffa are sharing expertise and technology 
in wastewater disposal and energy generation and biffa is using
severn trent facilities in its important integrated management
contract for leicester city council we expect such synergies to
create further opportunities in the future
services delivered good profits in 20032004 severn trent
laboratories developed its capabilities in several new fields including
mould severn trent services benefited from the management
actions taken in 2002 in the water purification business
reflecting our commitment to environmental leadership severn
trent was named as the leading utility in the dow jones
sustainability index for the third consecutive year this is the first
time that any utility has won this category three times in a row
group results
group turnover was £2015 million an increase of 88 over last
year the turnover of the nonregulated businesses increased by
127 to £1161 million representing 548 of the group total
turnover from water and sewerage increased by 42 to £957
million group profit before interest tax goodwill amortisation and
exceptional items was up 75 to £441 million the water and
sewerage business was up by 38 to £338 million the group’s
nonregulated businesses in total were up 181 to £123 million
representing some 27 of the group total
group profit before interest tax and exceptional items was £411
million £385 million group profit before interest and tax was 
£422 million £344 million
the board is proposing a final dividend of 2927 pence 2856 pence
to be paid on 1 october 2004 this would give a total dividend for
the year of 4704 pence an increase of 25 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 4704 pence
for the period of amp4 from 1 april 2005 the outcome of the
amp4 price review will be a critical input in the determination of the
group’s dividend policy accordingly the board intends to consider
its dividend policy for the period from 1 april 2005 to 31 march
2010 following the finalisation of the amp4 price review
based on ssap24 the group expects a significant additional pension
charge in 20042005 that is provisionally estimated to be of the
order of around £30 million to £35 million net of amounts allocated
to own work capitalised with broadly around two thirds to three
quarters of this amount expected to be attributable to severn trent
water however given the preliminary nature of these estimates it is
goodwill amortisation £298 million and exceptional profits of £116 million 3 severn trent plc annual report and accounts 2004
marisa cassoni stepped down as a pension trustee and we are
grateful for her valuable contribution during a time of change in 
the pensions arena i would also like to thank martin flower for 
his continuing work as chairman of the remuneration committee
and as senior independent director
i am sad to say that i shall be standing down as chairman as of 
31 december 2004 after nearly nine years on the board i expect
my successor to be appointed well before then
naturally my thanks must also go to the staff of severn trent
businesses all over the world our continuing ability to meet our
objectives and serve our stakeholders is due to their hard work
commitment and levels of expertise 
outlook
although the group expects significant additional pension charges 
in 20042005 we consider that overall our core businesses –
severn trent water biffa and laboratories – in terms of experience
market position financial strength and reputation provide a good
platform for the future with the group well positioned to capitalise
on opportunities clearly the future will also bring challenges sound
management and cost control will therefore remain a key element in
our strategy for consolidating our position as the uk’s leading
integrated environmental services business and increasing
shareholder value
david arculus
chairman
quite possible that the actual additional pension charge as a result of
these valuations could be materially different from these estimates
see financial review – pensions
management and staff
robert walker will reach retirement in february 2005 having
completed nearly six years as group chief executive his
contribution and legacy are considerable 
we are delighted that robert’s successor will be colin matthews 
who joined the board as a nonexecutive director in october 2003
colin has already had a distinguished career at transco british
airways and hays where he has been chief executive for the last 
two years we are very fortunate to have secured a man of his
talents as our leader for the next few years
alan perelman will be retiring as group finance director as of 31
august 2004 and will be replaced by mark wilson currently director
of finance and regulation in severn trent water i would like to thank
alan for his dedicated service and wish him well in his retirement
brian duckworth has decided to stand down as managing director 
of severn trent water and from the severn trent plc board at the end
of august but he will continue as an employee of the group until he
leaves in march 2005 thus ensuring his expertise is available to help
complete the regulatory process for the amp4 review brian has
served severn trent for 30 years with distinction and we thank him
for his outstanding contributions to the group and the water industry
not just in the midlands but nationally and internationally as well
three new non executive directors martin houston colin matthews
and john smith are already making a positive impact on the board’s
work we were sorry to lose eric anstee following his appointment as
chief executive of the institute of chartered accountants we thank
him for his contribution to the board’s work not least as outgoing
chairman of the audit committee
john smith took over chairmanship of the audit committee from
eric anstee the environment committee has been renamed the
corporate responsibility committee to give a truer reflection of its
work and from now on it will always be chaired by the group chief
executive the former chair derek osborn is still playing a leading
role on that committee 4 severn trent plc annual report and accounts 2004
group chief executive’s review
group results are ahead of a year ago and our core businesses 
– water waste and laboratories – are in good shape these three 
businesses accounted for 83 of group revenues and over 90 
of group operating profit
our aim is to establish severn trent as the 
uk’s leading supplier of environmental goods 
and services and as a major provider of
environmental solutions to the large and 
growing us market
i am pleased to report a good allround set of results for my last full
year as group chief executive our success has been achieved by
concentrating on our five strategic fundamentals
• giving priority resources and management attention to the core
businesses of water waste and laboratories
• in terms of acquisitions focusing significant attention on uk waste
with smaller or bolt on acquisitions in laboratories
• improving or disposing of underperforming assets
• driving for cost reduction and operating efficiencies in all
businesses
• exploiting group synergies in areas like businesswide cross 
selling initiatives and better integrating the group’s purchasing
human resources and operating assets
water
severn trent has benefited from the price increase from december
2002’s successful interim price determination idok and also from
continuing efforts and initiatives to manage costs and control upward
pressures in the business
water remains firmly on track to outperform against its regulatory
contract for the current five year period and meet its own stretching
targets on the operating expenditure front we’re confident of
achieving £75 million of gross operating cost efficiencies by the final
year 20042005 ofwat’s target was £62 million
the business continues to deliver efficiencies against its £2 billion
investment programme and we’re confident we will deliver average
capital expenditure efficiencies of around 5 over the amp3 period
measured against the rpi index we are on track to deliver all our
capital investment obligations
our final business plan as submitted to ofwat for the next five year
period aims to achieve the right balance between customer and
investor expectations our ambition is to deliver noticeable service
improvements to our customers whilst maintaining household bills
that deliver value for money at the same time we aim to achieve
appropriate financial returns to our investors – all of this of course
against a background of financial prudence and careful balance
sheet management
for the average bill our final business plan would mean an increase
of £57 per household by 20092010 in real terms on the basis 
of all the plans submitted to the regulator this would leave severn
trent with the lowest average household bill for any water and
sewerage company by 20092010
waste
we are now starting to see legislative and regulatory change
impacting on the way we handle and treat our waste
in the industrialcommercial sector where the waste generated
represents 79 of the uk’s total waste tonnage tighter packaging
regulations are being implemented to help customers biffa has a
well established compliance scheme called biffpack that has seen
membership grow by 10 in the past year
the landfill directive requires 65 of biodegradable municipal
waste to be diverted from landfill by 2020 responsibility to ensure
this happens has been assigned to each waste disposal authority
and 25 year pfi treatment and disposal contracts are now being let
with biffa well placed to compete for them 
biffa is well positioned to take advantage of these future
opportunities particularly now that the acquisition of hales has
firmly established biffa as one of the largest integrated waste
management companies in the uk
against this industry framework biffa has achieved a solid overall
result particularly in light of the uncertain economic background
this reflects the strength of biffa’s management and its integrated –
collection landfill and special waste – business model
1 water 45 £9567m
2 waste 30 £6331m
3services 18 £3812m
4others 7 £1471m
2
1 4
turnover by business
 of group total in 20032004
3 5 severn trent plc annual report and accounts 2004
outlook
the past year’s results have clearly benefited from a focused
strategy disciplined management and tight cost controls throughout
the business and we are confident that we have the right platform
for the future
as this is my last report as group chief executive i must stress that
everything severn trent has achieved has been made possible by
the enthusiasm and skill of all my colleagues i shall miss them
greatly but i know they will give my successor the same excellence
and dedication which will serve the group well in the future
robert walker
group chief executive
services
excluding the impact of exchange rates turnover and profit before
interest tax and goodwill amortisation improved this satisfactory
result principally reflects the pk mould testing acquisition in april
last year which has enhanced our core laboratories business and
also the significant management actions taken in 20022003 in our
water purification division to rationalise and improve the cost base
and refocus the business in growth segments
severn trent laboratories continued to drive forward with its core
strategies of firstly maximising the base business share in the
traditional routine environmental testing areas by low cost high
quality service turnround and secondly expanding into higher
growth more attractive new areas of testing such as mould and
specialist microbiology
our remaining us businesses water purification and operating
services made significant strides over the year probably the most
progress of any of our businesses
water purification particularly has made significant improvements
this partly reflects the downsizing in 2002 and more effective it
systems and manufacturing processes but most recently it reflects
more aggressive and targeted sales efforts behind new and higher
margin products and technologies
the operating services business continues to strengthen contract
operations has delivered organic growth in revenue and we believe
this is now the third largest business of its type in the us the
division is currently bidding on 200 million of new business
potential in the next six months in addition to the recently signed
65 million fresh kills landfill contract in new york
core businesses
we are confident that our core businesses of water waste and
laboratories are in fine shape to take the group forward they each
share common characteristics of leadership scale and low cost
advantage among the best management teams in each sector
consistent strong past performance and longterm opportunities 
for profitable growth 6 severn trent plc annual report and accounts 2004
core businesses at a glance
severn trent generates revenues of £20 billion and employs over 15000
people across the uk us and europe we are increasingly focused on the
industrial and commercial sectors to help business customers meet
environmental objectives
key strengths business

track record of outperforming
regulatory contract

strong management structures and
cost controls

good account management for
business customers

excellent customer service quality 
and biodiversity record
severn trent water provides essential water and
sewerage services to around 3 million households
in england and wales it also provides products 
and services to business customers in its region 
it has a good track record on service levels gross
operating cost efficiencies and quality and
environmental compliance
for further information please visit
wwwstwatercouk

specialist fleet achieving high levels 
of fuel and operational efficiency

over 30 landfill sites with good
geographic coverage and high
environmental standards 

special waste solutions based on
innovation and new technologies

strong it infrastructure delivering
synergies and efficiencies 

good strategic partnerships in recycling
biffa is one of the uk’s largest integrated waste
management businesses providing collection
landfill and special waste services to local
authorities and industrialcommercial clients 
it has around 90000 customers and an
infrastructure that includes 34 operational landfill
sites and 13 special waste treatment facilities 
it also has 11 operational facilities in belgium
for further information please visit wwwbiffacouk

record of innovation and being at the
forefront of new markets

history of successful acquisitions and
organic growth

reputation for good customer service

client list of leading us and uk
companies
severn trent laboratories stl is the largest
environmental testing company in the world
providing environmental analysis services in 
the us and the uk it has 31 laboratories and 
21 service centres in the us and 4 laboratories 
and 1 service centre in the uk 
for further information please visit 
wwwstlinccom wwwstlanalyticalcouk
water
waste
laboratories 7 severn trent plc annual report and accounts 2004
performance highlights

turnover up 42 at £9567 million

topperforming water and sewerage company in ofwat’s 
latest overall performance assessment

total amp3 gross operating efficiencies of some £69 million 
£17 million more than ofwat targets

started £16 million programme to generate 13 
of annual energy needs from renewable resources
outlook
in december 2004 ofwat will announce the final determination
of its amp4 price review for the years 20052010 until this is
finalised there is some uncertainty about the outlook for all water
companies however severn trent water is well on track to
outperform ofwat’s amp3 targets for the five year period to
20042005 it is also well positioned to benefit from the new
competition framework for large customers which comes into
operation for 2005

turnover up 239 at £6331 million

acquisition of hales strengthens position as one of the uk’s
largest waste management companies

extended contracts with local authorities working towards
achieving new recycling targets

boosted capacity to generate power from landfill gas 
to around 90mw in the uk
legislation and taxation will drive demand in the uk for
alternative methods of waste disposal in the uk aided by its
experience in belgium biffa is in a strong position to capitalise
on this its expertise in special waste will also help it use the
openings created by the landfill directive in the uk

in local currency turnover in the us up some 8 and in the
uk up 2 

acquisition of pk a microbiology business with a high profile
in the growing market for indoor air quality testing in the us

acquisition of aerotech strengthens presence in southwestern
us and puts stl at forefront of markets for indoor air quality
food microbiology and industrial hygiene

opening of new service centres in us extends 
geographical strength
the stl strategy to be a leader in highend markets continues 
to present new opportunities in emerging markets such as indoor
air quality and mould food microbiology endocrine disrupters
and perchlorate testing in the us legislation concerning harbour
infrastructure and dredging cleanup also positions stl favourably
for the high growth market of sediments analysis in the uk eu
legislation like the water framework directive the groundwater
directive and the landfill directive will create new openings 
for growth
for information on our other businesses visit the 
following websites
severn trent services wwwseverntrentservicescom
severn trent water international wwwstwaterinternationalcom
severn trent systems wwwaseriticom  wwwworksuitecom
severn trent retail services wwwstretailservicescouk
severn trent utility services wwwstutilityservicescouk
severn trent property wwwseverntrentpropertycom
charles haswell and partners wwwhaswellcouk 8 severn trent plc annual report and accounts 2004
review of operations
water and sewerage
severn trent water achieved another good performance in 20032004
building on the strong foundations we have put down in previous years
we remain well positioned to outperform our regulatory contract for the
period 2000 to 2005
turnover
£9567 million
profit before interest tax goodwill amortisation
and exceptional items

up 38 at
£3379 million
performance
in 20032004 turnover from water and sewerage services increased
by 42 to £9567 million contributing to this rise in turnover were
the price increases resulting from the idok of december 2002 
in which ofwat allowed our request to raise prices by 21 above
inflation from april 2003 the idok increase benefited turnover by
some £19 million in addition increased consumption by metered
customers during the dry hot summer is estimated to have added
some £25 million to turnover in the year
profit before interest tax goodwill amortisation and exceptional
items was up 38 to £3379 million goodwill amortisation was
£13 million £01 million and profit before interest and tax
excluding exceptional items was £3366 million £3254 million
including an exceptional profit of £198 million from the sales of
land and property profit before interest and tax was £3564 million
£3254 million given its magnitude the profit from the sale of
fixed assets of £67 million was not treated as exceptional in
20022003 there was an additional pension charge net of
amounts allocated to own work capitalised of £18 million for water
and sewerage to reflect the valuation of pension schemes see
financial review – pensions
outperforming the regulatory contract
our programme for delivering gross operating cost efficiencies 
in line with ofwat’s amp3 targets for 20002005 continued to 
make good progress in 20032004 direct operating costs in
20032004 excluding corporate management charges of severn
trent water were £3783 million a reduction in real terms of £03
million or 01 excluding the impact of inflation gross operating
cost efficiencies in 20032004 amounted to £81 million although
these efficiencies were offset by cost pressures of £78 million at 31
march 2004 total amp3 gross operating cost efficiencies amounted
to approximately £69 million some £17 million more than our
ofwat target however these cost efficiencies have been offset by
new cost pressures amounting to around £60 million total amp3
gross operating efficiencies for amp3 are expected to reach £75
million in 20042005 though again they will be offset by cost
pressures that excluding the expected additional pension charge in
20042005 see financial review – pensions are expected to be of 
a broadly similar amount
in 20032004 we invested approximately £442 million in
programmes to improve drinking water quality the effluent from 
our sewage treatment works and a range of customer service
improvements such as sewer flooding we continued to deliver
efficiencies against our investment programme of approximately 
£2 billion for the 5 year period the programme is on track to deliver
average capex efficiencies of around 5 as measured against the
retail prices index or 12 against the construction output 
price index
profit from the sale of fixed assets was £198 million £67 million
arising from the sale of land and property in previous years the
profit from the sale of fixed assets has been included within and
has therefore reduced the operating costs of severn trent water in
this year as the profit from the sale of fixed assets is significantly
larger than last year the continuance of this treatment would unduly
flatter the yearonyear trends for operating costs accordingly
operating costs as set out above have been stated after excluding
any benefit from fixed asset disposals for all years
the 20052010 price review
a critical activity in 20032004 was the preparation of our strategic
business plan for amp4 ofwat’s fourth asset management plan
since privatisation which covers investment and prices for the
period 20052010 
in drawing up our business plan we have had to balance often
conflicting pressures and expectations on price levels and investor
returns environmental and customer service improvements
efficiency and operational risk with this in mind our main strategic
objectives for 20052010 relate to securing services advances
already achieved further ensuring the reliability of water supply
meeting new obligations on drinking water quality and the
environment satisfying key customer service concerns and
providing an attractive investment opportunity ofwat will make an
interim determination on amp4 in august 2004 and a final
determination in december any new price limits will come into
effect from april 2005
water supply
low autumn rainfall in 2003 meant that the year was one of the
driest on record as a result some of our reservoirs were less than
60 full at the start of winter at least a third behind normal levels
however by using measures like taking water from the river 
severn to supply birmingham we maintained water supply to 
all our customers
goodwill amortisation £13 million and exceptional profits of £198 million 9 severn trent plc annual report and accounts 2004
each year ofwat publishes a report
on the levels of service provided by
water companies to their customers
the report includes an overall
performance assessment opa
which compares companies’
performance on measures like water
supply sewerage services customer
service and environmental impact 
it is thus an extremely important
gauge of the quality of service that
companies are delivering
the most recent opa was published
in march 2004 and evaluated
companies’ performance in
20022003 we were delighted that
the assessment showed severn
trent water to be the uk’s top
performing water and sewerage
company once our revised leakage
targets had been taken into account
although the assessment covers 
the previous year we are confident
that we maintained the quality and
efficiency of the service we deliver
indeed we improved on it in
20032004
two it projects implemented in
20032004 contributed to improved
efficiency and customer service 
the first uses mobile technology 
to improve the efficiency of severn
trent’s mobile workforce by
delivering information such as job
details location maps biodiversity
plans and health and safety
information direct to their laptop
computer
the second – integrated customer
experience or ice – improves
customers’ experience when they
phone our operations call centre
information from different systems
is presented to customer service
agents in a single intuitive format
enabling them to complete customer
requests more quickly and efficiently
case study
outperforming our sector on service
and quality
ofwat’s 20022003 overall performance
assessment showed severn trent water was 
the uk’s topperforming water and sewerage
company in 20032004 we have maintained and
improved the quality of our service to customers
the longerterm impact of climate change means that dry years 
such as 2003 are likely to become more frequent and our strategic
planning for the future takes account of this
in july 2003 we changed the way we collected data on water
consumption by our customers based on this and other new
information we recalibrated our total leakage on the company’s 
and customers’ pipes to 549 mld for 20022003 we worked with
ofwat to establish new leakage targets for march 2005 and we have
started to put in place improved monitoring systems to measure
losses from trunk mains and service reservoirs
competition and commercial customers
the water act 2003 which came into force in november set a
framework for introducing competition in the water industry ofwat 
is currently working with the water industry to determine the
detailed rules for the new competition regime which will apply to
business customers using more than 50 mega litres of water a year
– just under 300 businesses in our region 
we look forward to the arrival of competition in 2005 and we are
confident that we can offer an excellent product range and account
management to business customers inside or outside our region 
at the same time we remain equally focused on serving these
customers – whether domestic or commercial – that are not affected
by the new competition rules in advance of the new competition
framework severn trent water already supplies valueadded
services and products to a number of household names for
example confectioner thorntons installed our data monitor product
to track water supply used and effluent produced in an effort to
minimise resource use and maximise efficiency experts on our
waste guardian team helped brewer carlsberg to use carbon
dioxide a natural byproduct of brewing to correct ph levels in
caustic wash water keeping its effluent discharges within
environmental consent limits
severn trent utility services continues to provide asset and 
customer management solutions to companies in the utility rail and
transportation retail and financial services sectors in 20032004 
it won the business innovation award at the annual utility industry
achievement awards our severn trent retail services business was
created to offer products such as gas electricity insurance and
telecommunications services
environment and community
corporate responsibility is firmly embedded in severn trent’s
business and we recognise that our work has a significant impact 
on the environment and communities of the midlands we support
hundreds of projects across the region all with a sustainability 
agenda and following the launch of our biodiversity action plan 
in 1999 we have conducted rigorous ecological assessments of
around 1800 sites
in 20032004 our work on two projects – aston hall and the meriden
to highters heath trunk main – was recognised when we won first and
second place at the green apple environment awards which promote
environmental best practice amongst companies councils and
communities the aston hall project was also recognised at the
chartered institute of water and environmental management awards
energy management is an important aspect of our commitment to
environmental leadership severn trent water already has combined
heat and power chp units on sewage digesters at seven sites and 
in 20032004 we embarked on a £16 million programme that will
enable us to generate 27 megawatts of power more than 13 of 
our energy needs through new chp units in terms of our 
community involvement much work is targeted at education in 2003
we introduced our ‘wet water wizard’ to midlands schoolchildren 
this cartoon character is designed to teach children about the water
cycle and the importance of valuing water the initiative includes
dvds videos and comics for schoolchildren and links to the 
national curriculum in science and geography
outlook
the amp4 pricing review is enormously important to the outlook for
severn trent water as we await its outcome we are confident that 
the regulators understand that severn trent has achieved significant
efficiencies in its work but that further investment is nevertheless still
needed it is widely understood that prices for customers will have to
rise but the average household water bill in the midlands will still be
among the best value in the country in addition the price increases
we have asked for will enable us to deliver clear benefits to our
customers as well as further environmental improvements our
record against the current amp3 regulatory contract and on ofwat’s
overall performance assessment combined with the opportunities
that competition will create gives us a good platform 
for the future 10 severn trent plc annual report and accounts 2004
review of operations
waste
the two main stories in our waste business in 20032004 were the
acquisition of hales and the way that legislation has continued to create
new opportunities in all areas of the business – collection landfill and
special waste the hales’ acquisition means that biffa is now even better
placed than previously to capitalise on these new opportunities
turnover up 239 at 
£6331 million
profit before interest tax goodwill 
amortisation and exceptional items
 
up 166 at
£792 million
at the core of biffa’s performance and results in 20032004 were the
acquisition of hales waste control and the changes that legislation is
bringing to the uk waste industry the acquisition of hales firmly
establishes biffa as one of the largest integrated waste management
companies in the uk the implementation of legislation is creating
new business opportunities for extending local authority contracts 
and the development of integrated waste management contracts
performance
waste management’s turnover increased by 239 to £6331 
million benefiting from the contribution of hales’ turnover turnover
in the uk rose to £5739 million an increase of 255 belgian
turnover rose by 104 to £592 million biffa’s profit before interest
tax goodwill amortisation and exceptional items was £792 million
up 166 on the previous year goodwill amortisation was £213
million there was an exceptional charge for hales integration costs 
of £109 million waste management’s profit before interest and tax
was £470 million £513 million there was also an additional
pension charge of £18 million for waste management to reflect the
valuation of pension schemes see financial review – pensions
on 19 june 2003 biffa acquired hales from rmc uk limited for
approximately £126 million and paid approximately £15 million
exclusive of vat to ing to purchase vehicles and equipment used 
in the hales’ business being a total consideration of approximately
£141 million excluding transaction costs biffa targeted synergies 
of around £75 million per annum in terms of run rate from the
integration of hales the integration process has gone well and is
now close to completion in 20032004 hales contributed including 
synergies an estimated £104m to waste management’s profit
before interest goodwill amortisation and exceptional items
excluding the impact of acquisitions hales £104 million other
acquisitions of £02 million and of increased pension charges 
waste management’s profit before interest tax goodwill amortisation
and exceptional items was up by 37 compared to last year the
results for the year include the costs of settling legal disputes and
insurance credits of a broadly similar scale these items have been
allocated to uk central costs so as to provide more comparable
figures yearonyear for the three uk business units of collection
landfill and special waste
collection
biffa’s collection division works with around 90000
industrialcommercial customers across the uk and operates 
almost 50 local authority contracts the biffpack packaging
compliance scheme is the third largest in the uk with over 430
members
the speedy integration of hales made it particularly difficult to
discern the underlying volume trend despite the softness in the
industrialcommercial market collection turnover in the uk
increased to £3606 million £2707 million in 20032004
including the contribution of hales profit before interest tax
goodwill amortisation and exceptional items was £516 million up
183 excluding the estimated contribution from hales collection’s
profit before interest tax and goodwill amortisation was down by
around 2
in 20032004 with local authorities striving to meet statutory
recycling targets biffa was able to extend several contracts with
additional services for example stratforduponavon district council
extended its contract with biffa to cover its fiveyear organic waste
recycling scheme other new or extended local authority contracts
included west berkshire district council tandridge woking and
forest of dean 
success in gaining important new contracts on the
industrialcommercial side continued capitalising on biffa’s national
coverage of depots and supporting it infrastructure following the
creation of a new pretreatment division in 20022003 biffa now
has 23 pretreatment facilities nationwide strategic partnerships are
extremely important in this area of the business and in july 2003
biffa and kappa paper recycling entered into an arrangement under
which more than 20000 tonnes of waste paper a year is expected 
to be collected and processed biffa is also continuing to work with
sca on recycling and with emr on the disposal of electrical
appliances under the weee waste electrical and electronic
equipment directive 
landfill
although legislation and increases in landfill tax are likely to drive
demand for alternative methods of disposal in the future landfill
remains the primary waste disposal route in the uk biffa currently
operates 34 landfill sites and it has been recommended for the
iso14001 environmental management accreditation for its landfill
division landfill turnover in the uk was up 152 to £1631 million
in 20032004 excluding the estimated impact of hales landfill
volumes were up by around 3 and unit revenues were up 1 
goodwill amortisation £213 million and exceptional costs of £109 million 11 severn trent plc annual report and accounts 2004
june 2003 saw biffa acquire 
hales waste control and rmc
environmental services in a £141
million deal that established biffa as
one of the largest integrated waste
management companies in the uk
hales was one of the top 10 waste
companies in the uk with some
27000 industrialcommercial
customers 38 operating depots 
8 operational landfill sites and 
5 transfer stations its wastesafe
service for small amounts of 
special waste is well known in the
marketplace and complements
biffa’s existing services for bulk
liquid waste
with around 1000 employees and
450 industrialcommercial collection
vehicles the hales integration was 
a substantial project employee 
and union consultations had to be
undertaken collection depots and
landfill sites had to integrated into
the biffa system sales forces had 
to be integrated and crucially 
a common it system had to be 
set up 
the acquisition of hales gives 
biffa greatly increased coverage in
london and east anglia enabling it
to offer better geographical coverage
to customers with multiple sites 
it also greatly increases biffa’s
operational landfill void in the 
south of england in addition the
acquisition is delivering important
cost efficiencies through improved
fleet utilisation it also enhances the
combined company’s ability to
capitalise on new market
opportunities
case study
hales acquisition strengthens biffa’s
market leadership
in buying hales in june 2003 biffa has
strengthened its geographical coverage 
its product range and its customer base
landfill’s profit before interest tax and goodwill amortisation was 
up 176 to £340 million including the hales’ contribution and up
by around 7 if that contribution is excluded 
one important component of the division’s work in the year was
further preparation for provisions of the landfill directive – from july
2004 codisposal of hazardous and nonhazardous waste will be
banned however the acceptance criteria for hazardous waste landfill
sites will not be determined until next year and the identification
processes for the pretreatment of wastestreams that will no longer
be able to go directly to landfill is underway we also continued the
process of obtaining new permits for our sites under the integrated
pollution prevention and control regime
two of biffa’s composting sites – etwall in derbyshire and poplars in
staffordshire – received certification to the bsi pas 100 standard
during the year – making biffa the only compost producer in the uk
to have gained this certification at two separate sites 
special waste 
the special waste division’s turnover increased by 116 to 
£502 million in 20032004 profit before interest tax and goodwill
amortisation for the division was £70 million excluding the estimated
impact of hales this figure was up by around 7 on the previous year
with its range of products and technologies for handling special waste
the division is well placed to exploit the opportunities offered by the
landfill directive and hazardous waste regulations hales’ wastesafe
service – sealed lockable containers for relatively small quantities of
hazardous wastes – is an important addition to the packaged waste
range of services which also includes hazpak and backtrack another
important addition to our special waste facilities is swarf secure
waste and recycling facility a dedicated secure facility for sensitive
wastes such as confidential materials or product recalls
biffa’s power generation activity is a key component of the special
waste division in 20032004 we boosted our capacity to generate
power from landfill gas to around 90 mw in the uk
integrated municipal contracts
in the previous financial year biffa won a £300 million integrated
waste contract with leicester city council to manage all its waste
collection and disposal facilities development and implementation 
of the contract progressed well in 20032004 – new facilities
including a recycling centre at bursom and an anaerobic digester
plant for organic waste at wanlip are almost complete in
september biffa took over the management of leicester’s
community recycling centres and in february 2004 it began 
weekly waste and recycling collections from 117000 households
community and environment
biffa donates its landfill tax credits to community and environment
projects through the biffaward fund changes to the landfill tax
credit scheme by the government in 2003 have reduced the scope
of biffaward’s contributions to projects and the type of projects it
can fund however almost £75 million was given to community and
environment projects in 20032004 
in terms of the environment biodiversity is at the heart of biffa’s
work on the 160 sites for which it has stewardship following the
publication of a biodiversity action plan in 20022003 a rigorous
audit of all biffa’s landholdings is underway and scheduled for
completion by summer 2005 
belgium
biffa has 11 operational facilities in belgium comprising depots for
industrial commercial and municipal services a special waste
treatment centre and two landfill sites belgium’s waste disposal
legislation and recycling culture is well in advance of that in the uk
our experience in this market means we are well equipped to take
the opportunities offered by the uk’s regulatory changes
biffa’s turnover in belgium was up 104 to £592 million a change
in belgian legislation means that turnover there is now reported gross
of the recovery for environmental taxes making it consistent with the
uk so this has boosted turnover figures for the year without the
effect of that change turnover would have been up by about 6
profit before interest tax and goodwill amortisation in belgium was
£32 million
outlook
biffa’s market position comprising strengths in collection landfill
and special waste continues to provide a sound platform 
for biffa’s future development and performance legislation and
increases in landfill tax will continue to drive demand for alternative
methods of waste disposal in the uk biffa’s experience in belgium
means we are well placed to capitalise on these opportunities as do
our recognised high standards in pretreatment and recycling 12 severn trent plc annual report and accounts 2004
review of operations
the services group
our us and other international businesses delivered good results 
in 20032004 often in difficult market conditions strong management
had a positive impact on margins and profits and the high levels of
innovation and service achieved in different parts of this group were
recognised through prestigious industry awards and accolades
turnover down 11 at 
£3812 million
profit before interest tax and 
goodwill amortisation
 
up 132 at
£387 million
performance
severn trent services’ turnover decreased by 11 to £3812 million
in 20032004 with a little under 80 arising in the us excluding
the impact of the exchange rates turnover increased by around 6
profit before interest tax goodwill amortisation and exceptional
items was £387 million up 132 excluding the effect of exchange
rates this figure increased by around 16 on the previous year
goodwill amortisation for the services group was £72 million 
£85 million profit before interest and tax was £315 million 
loss of £211 million
severn trent laboratories
turnover in laboratories the largest business within services was
down 10 to £1701 million but excluding the impact of exchange
rates turnover increased by around 7 turnover in the us in us
was up by around 8 and turnover in the uk £ was up by around
2 a little over 80 of laboratories’ turnover arose in the us
the us performance took place against a background of difficult
markets – for example federal budget deficits have led to cutbacks
in the united states environmental protection agency funding
nevertheless excluding the impact of exchange rates the
laboratories business has continued to grow turnover
leading the market
severn trent laboratories expanded its geographical reach in
20032004 opening new service centres in five us states – florida
indiana new jersey kansas and arizona its operations now comprise
31 laboratories and 21 service centres in the us 4 laboratories and 
1 service centre in the uk and a large fleet of mobile laboratories
underlining stl’s leading service shell oil products recognized stl
as the “outstanding contracting firm of 2003” karen petryna pe
and senior environmental engineer of shell oil products us said 
“in the last year stl has done a fantastic job providing great
customer service for us while getting up to speed with our internal
procedures and requirements taking over a large volume of work in
northern california and offering project and agency specific
support expertise documentation and protocol stl is a very
valuable partner for us”
stl’s market leadership is not just sizerelated it also takes the form
of being at the forefront of emerging areas in contaminant testing
for example in 20032004 it became one of the first commercial
laboratories to offer analytical techniques to test for pbdes these
chemicals are used as flame retardants in for example furniture
and textiles but have recently been recognised as being
environmental contaminants of worldwide concern 
in addition through the acquisitions of two us companies – pk
microbiology services inc pk and aerotech laboratories inc – stl
is now in a leadership position in the expanding indoor air quality
and mouldtesting market see case study
acquisitions
two important acquisitions in 2003 and 2004 framed the 
financial year in april 2003 stl acquired pk microbiology
services a microbiology and mycology testing business recognised
as a pioneer in mould testing in march 2004 stl acquired
aerotech laboratories inc aerotech another leader in this field
with additional expertise in food testing and industrial hygiene
targeted acquisitions have been a key part of stl’s strategy for
growing its business and will continue to be so as with pk and
aerotech stl’s acquisition strategy is focused on successful
profitable businesses that can add new testing capabilities or
geographical coverage
outlook
whilst economic conditions in the us are likely to remain difficult
there are a number of positive market opportunities emerging
market areas such as indoor air quality and mould food hygiene
testing for perchlorates sediments and vapour intrusion all provide
good opportunities for profitable growth on the uk side of the
business eu legislation such as the water framework directive 
the groundwater directive and the landfill directive is also 
creating opportunities
in addition stl’s wide spectrum of technical expertise and
reputation for excellent customer service means we are well
positioned to win both public and privatesector contracts – whether
in emerging markets or existing ones
goodwill amortisation of £72 million 13 severn trent plc annual report and accounts 2004
indoor air quality “iaq” is a major
market opportunity in the us and
elsewhere there is widespread
concern that mould and toxic mould
could be linked to ‘sick building
syndrome’ and this is creating
major legal and financial problems
for property owners and insurers 
in april 2003 severn trent
laboratories put itself at the
vanguard of this market when it
acquired pk microbiology services
inc a business whose staff have
worked on many highprofile mould
testing cases in the us
eleven months later severn 
trent also acquired aerotech
laboratories in arizona the us’s
largest commercial indoor air
quality laboratory aerotech’s
analytical services include mould
testing food microbiology industrial
hygiene and bioterrorism response
analysis as well as giving stl a
huge presence in the valuable and
growing iaq market the acquisition
also accomplishes other important
goals
first food microbiology is another
emerging market and represents 
an area of synergy to stl’s existing
testing range second it closes a
gap in stl’s western us coverage
phoenix arizona is one of the
fastestgrowing cities in the us 
and this growth is promoting
environmental work relating to
infrastructure development the
opportunities for stl thus go far
beyond the market potential of iaq
case study
new markets in the us
targeted acquisitions have extended stl’s
capabilities in key emerging markets
severn trent services
severn trent services improved its performance before the impact 
of exchange rates in previous years work was done to build the
severn trent brand in the us and worldwide and these efforts are
now starting to deliver results 
in addition the restructuring programme initiated in 20022003 has
led to a more focused management approach and tighter controls
on costs this in turn has helped to increase margins
water purification
the water purification division was one of the main objects of last
year’s restructuring programme and the benefits are visible cost
reductions have brought an improvement in margins and a new
integrated it system has led to opportunities for greater operational
efficiency purchasing synergies and better inventory management
control
turnover decreased by 53 to £829 million but excluding the
impact of exchange rates turnover was up by around 2
despite difficult markets water purification continued to launch 
new products and services and these had a positive impact on
results among the new technologies were two new introductions 
to the clortec product line and upgrades of the instrumentation
product range
of continuing importance was the partnership with bayer ag on
severn trent’s sorb33 system for removing arsenic from drinking
water this is now being piloted at 25 sites in the us
severn trent services’ eclox water test kit has been chosen to
receive the prestigious queens award for innovation a special version
of the test kit has been developed for the british ministry of defence
and there are now over five hundred units in service around the world
operating services 
the operating services division handles operating and maintenance
contracts for customers in the us unlike most of severn trent
services’ businesses in the us contract operations saw positive
effects from the weak us economy since state and local
municipalities faced with budget deficits are increasingly looking 
to publicprivate partnerships to improve the operating efficiency 
of water and waste treatment sites 
turnover in 20032004 grew 17 but excluding the impact of
exchange rates turnover was up by around 7
contract operations delivered organic revenue growth of around 
7 contract operations won 32 new contracts notable among 
them was significant new business with the florida government
utilities authority
in contrast budget deficits are a negative backdrop for the pipeline
services business providing minimal support for infrastructure
projects however last year’s restructuring programme and a 
strategy of cutting costs and focusing on the core business of repair
rehabilitation and flow metering work has borne fruit
another positive note was a new contract with the city of st louis
missouri which will continue into 2005 this is the second large
contract won with this city exhibiting the strength of our relationship
our metering services business achieved good growth in 20032004
the business landed a large meter contract in qatar and its new 
global meter is being introduced in the middle east and europe
which will begin to provide additional benefits in the coming year 
severn trent water international stwi provides a range of
management and consultancy services in europe and the developing
world contracts include a publicprivate partnership to operate
water and wastewater services in umbria begun in 20022003
and longstanding publicprivate partnerships with the flemish
government in belgium aquafin and in portugal with the joint
venture company indaqua the worldwide management services
and consultancy business had key contracts in russia the ukraine
and guyana management support and training was provided in
many developing countries particularly in africa in collaboration
with a british government initiative and through swedish
governmentfunded projects
in the uk stwi achieved “preferred bidder status” for a major 
longterm contract with the ministry of defence to manage water
and wastewater services for sites in northern eastern and south
eastern england negotiations of the final contract are in progress
associated undertakings contributed £107 million £100 million 
of profit before interest tax and goodwill amortisation to the results
of operating services 14 severn trent plc annual report and accounts 2004
review of operations
other businesses
sales in the uk north america and australia led to an improved
performance from severn trent’s systems group in property there 
was good progress on current projects
turnover up 95 at 
£1471 million
profit before interest tax and exceptional items

£55 million
systems
total turnover for the severn trent systems group in 20032004
was £636 million up 38 on the previous year profit before
interest and tax was £50 million 
aseriti supplies it solutions and services for the private public and
utility sectors in the uk usa and australia 
in the uk it won a substantial contract to supply software and
expertise to utility infrastructure provider core utility solutions ltd 
it has managed and implemented substantial projects for severn
trent water and severn trent plc these included an it solution to
transfer information on the region’s 62000 mile pipe network from
paper maps onto mobile computers its latest cis solution was 
also delivered and installed to severn trent water in preparation 
for competition
in the us south maryland electric cooperative – one of the ten
largest electric cooperatives in the us – went live with cisopen
vision in november 2003 cisopen vision is also being used
successfully by snohomish public utilities department following its
implementation in january 2003 in australia the energy utility
citipower based in victoria went live with cisopen vision for
269000 customers in september 2003 energy supplier etsa
based in south australia went live with 765000 customers in
november 2003 and energy utility alinta went live with the new
upgrade of cisopen vision in february 2004 with 480000
customers alinta now has 99 of its retail customers on cisopen
vision and uses the system to generate 8000 bills per day
worksuite the work management business of the systems group
was restructured into a stand–alone wholly owned subsidiary based
in houston its market is the uk and primarily north america where
it enjoys a leadership position the company completed major new
sales to fpl enbridge and northeast utilities it also advanced its
largescale deployments of its integrated office web and wireless
technology at fpl national grid and a scottish power affiliate in 
the uk
property engineering consultancy and insurance
total turnover from these businesses in 20032004 was £835
million £730 million profit before interest and tax was £32
million £55 million the reduction in profits reflects the result from
haswells the group’s engineering consultancy business
property
severn trent property was originally set up to exploit the
development potential of land surplus to severn trent water’s
requirements it also undertakes projects on sites acquired from 
third parties
in 20032004 good progress was made on virtually all current
projects at thorpe park leeds – the largest outoftown office park in
the north of england – further buildings were completed for ws atkins
plc boxwood plc and the university of leeds major infrastructure
which will give direct access onto the m1 motorway is now completed 
at daventry international rail freight terminal planning permission
to extend the project by up to 2 million sq ft was granted during
autumn 2003 during the year a major regional sorting hub was
completed for royal mail remaining undeveloped land within the
first phase of the project was sold to another developer
at warwick work has commenced at tournament fields adjacent 
to junction 15 of the m40 the site has planning permission for
office and business use infrastructure including roads and drainage
is under construction 
engineering 
charles haswell  partners offers consultancy services in a wide range
of engineering and environmental disciplines in 2003 two awards
paid tribute to the company’s expertise new civil engineer and the
association of consulting engineers recognised it as the top medium
sized consulting engineer in 2003 secondly it was joint winner of the
british geotechnical society’s fleming award for its work on design
and construction of a section of the dublin port tunnel project
other activity in 20032004 included working with yorkshire water
services as a key member of its eastern area wastewater capital
solution team it also made a major contribution to the successful
delivery of severn trent water’s capital programme
charles haswell  partners introduced its environmental
management system in 20032004 which is accredited to the iso
140012001 standard
insurance
derwent insurance based in guernsey severn trent’s captive insurer
provides insurance cover to severn trent group companies
exceptional provision release of £27 million 15 severn trent plc annual report and accounts 2004
corporate responsibility
severn trent’s corporate vision is to be at the forefront of the
environmental services industry our corporate values of environmental
leadership service and quality are enshrined in our code of business
principles and conduct they define our business culture and guide 
our strategies
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 at 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 it covers issues
ranging from obeying the law to displaying integrity
environment
the goal of environmental leadership influenced work at every level
in 20032004 projects ranged from auditing biffa’s landfill sites
against its biodiversity action plan to detailed planning on how our
businesses will adapt to the existing effects of climate change – for
example designing sewerage systems to cope with shorter more
intense bursts of rainfall
mitigation of our own environmental impact is also central and a
major achievement in this area is our electricity generation from
renewable resources where in 20032004 we increased our installed
generating capacity to more than 100mw
workplace
we are committed to providing a safe working environment for our
employees and all other people that come into contact with the
company and in 20032004 the number of reportable health and
safety incidents declined we also seek to ensure equality of
opportunity through a diverse workforce as we believe in the best
use of available talent will benefit the business as well as the
communities that we serve
community
severn trent’s community affairs programme focuses on
environmental education the built environment and the natural
environment investment takes cash and noncash forms and we are
a member of the percent club of businesses which donate at least
1 of pretax profits to the community employee volunteering is an
important part of this and the benefits of this work are seen in our
business as well as in the community
marketplace
in all areas of severn trent’s business in 20032004 our
commitment to corporate responsibility also led to success in the
marketplace for example severn trent’s levels of service were
recognised in its leading position among water and sewerage
companies in ofwat’s overall performance assessment in 2003 
the laboratories business’s work on emerging new environmental
and health risks such as toxic mould is being rewarded with
continuing growth
biffa’s experience in the isle of wight where it diverted over 45 
of the island’s waste from landfill is a good platform for offering
integrated waste management services to local authorities a £300
million 25 year contract with leicester city council is now
underway and there will be other opportunities in this field as local
authorities attempt to reach stringent recycling targets
further commentary on severn trent’s commitment to corporate
responsibility in 20032004 is available in the company’s annual
stewardship report 16 severn trent plc annual report and accounts 2004
group results
group turnover was £20151 million £18520 million an increase
of 88 over last year the growth in turnover was mainly due to the
contribution of the nonregulated businesses which benefited from
the acquisitions made in the year the turnover of the nonregulated
businesses increased by 127 to £11614 million £10306
million representing 548 529 of the group total before the
elimination of inter segment trading turnover from water and
sewerage increased by 42 to £9567 million £9179 million 
goodwill amortisation was £298 million £252 million there was a
net exceptional profit of £116 million loss of £408 million – see
below 
group profit before interest tax goodwill amortisation and
exceptional items was up 75 to £4406 million £4098 million
the water and sewerage business was up by 38 to £3379 million
£3255 millionthe group’s nonregulated businesses in total were
up 181 to £1234 million £1045 million representing 268
243 of the group total before unrealised profit on inter segment
trading and corporate overheads
group profit before interest tax and exceptional items was £4108
million £3846 million group profit before interest and tax was
£4224 million £3438 million
after interest charges of £1680 million £1594 million group
profit before tax goodwill amortisation and exceptional items was up
89 at £2726 million £2504 million group profit before tax and
exceptional items was £2428 million £2252 million an increase of
78 group profit before tax was £2544 million £1844 million
the total tax charge for the year was £696 million £843 million 
of which current tax represented £333 million £248 million and
deferred tax was £363 million £595 million minority interests
were £07 million £09 million profit after tax and minority
interests was £1841 million £992 million
basic earnings per share were 535 pence 289 pence adjusted
basic earnings per share before exceptional items and deferred tax
were 614 pence 581 pence an increase of 57
operating activities generated a net cash inflow of £7331 million
the main cash outflows were capital expenditure and financial
investment of £4875 million equity dividends of £1577 million
acquisitions of £1706 million and net financing costs of £1483
million the increase in net debt was £2435 million
net debt at 31 march 2004 was £27491 million £25056 million
gearing reflecting the provision for deferred tax was 124 113
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 net exceptional profit in the year of £116 million
comprising the net of 
•a £198 million profit from the sale of fixed assets arising from
the sale of land and property by severn trent water given its
magnitude the profit from the sale of fixed assets was not treated
as exceptional in 20022003 £67 million
•a £27 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
•a charge of £109 million in waste management for hales’
integration costs
in 20022003 there was an exceptional charge of £408 million
comprising the net cost of a £468 million write down for
impairment in the net book value of some businesses within
services and 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
taxation
the charge for current tax was £333 million £248 million of
which £24 million was attributable to exceptional items the current
tax charge of £309 million attributable to profit after interest and
goodwill amortisation but before tax and exceptional items is an
effective rate of 127 110 the current tax rate has benefited
from an adjustment in respect of prior periods
pensions
ssap24 the applicable standard for severn trent uses 
the results of the last formal actuarial valuations to determine the
pension charge in the group’s accounts this principle has been
followed in determining the group’s pension charge for 20032004
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
formal actuarial valuations have been undertaken for the stmips 
as at 31 march 2003 and for the ukwps as at 6 april 2003 given
the deterioration in the funding position of these two schemes since
their previous formal actuarial valuations there is an additional
pension charge net of amounts allocated to own work capitalised
of £41 million for the group in 20032004 reflecting the results of 
these valuations
the group’s pension charge in 20032004 in respect of the stwps
and the stssps is based on their formal actuarial valuations as at
31 march 2001 when these funds had a combined surplus of
around £46 million formal actuarial valuations of the stwps and
the stssps are currently being undertaken as at 31 march 2004 in
accordance with the normal triennial pattern of valuations given the
deterioration in the funding position of these two schemes since
their last formal actuarial valuations these valuations and the
analogous assessment of the group’s unfunded pension liabilities
for senior staff are expected to result in a significant additional
pension charge for the group in 20042005 based on ssap 24
this additional pension charge net of amounts allocated to own
work capitalised is provisionally estimated to be of the order of
around £30 million to £35 million with broadly around two thirds to
three quarters of this amount expected to be attributable to severn 
financial review 17 severn trent plc annual report and accounts 2004
trent water given the preliminary nature of these estimates it is
quite possible that the actual additional pension charge as a result of
these valuations could be materially different from these estimates
on an frs17 basis the estimated net position before deferred tax
of the group’s defined benefit pension schemes and the group’s
unfunded pension liabilities for senior staff was a deficit of
approximately £368 million as at 31 march 2004 as compared to a
deficit of approximately £325 million as at 31 march 2003 although
the value of assets has increased over the last year liabilities have
increased by a greater amount reflecting inter alia the updating of
mortality assumptions to be in line with current experience and to
include an allowance for expected further improvements and a
reduction in the real discount rate net of deferred tax the estimated
net deficit on an frs17 basis as at 31 march 2004 was
approximately £257 million on an frs17 basis the funding level
has improved from around 70 at 31 march 2003 to 72 at 
31 march 2004 
as at 31 march 2004 the group’s defined benefit pension schemes
had total assets of approximately £937 million of which around
73 was invested in equities
further details of the group’s pensions position are contained in
note 23 to the accounts
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
on 5 april 2004 severn trent put in place a new £700 million
revolving credit facility rcf this facility replaced two existing
facilities – a £600 million rcf and a £160 million bilateral facility
the new rcf comprises two elements a £200 million tranche
maturing in 364 days with a one year termout option and a £500
million tranche having a five year maturity
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 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 2004 interest rates for some
70 of the group’s net debt of £2749 million were so fixed at 
a weighted average interest rate of 61 for a weighted average
period of 179 years in addition the group has a £50 million
forward start interest rate swap floating to fixed that commences
during 20042005
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
in august 2003 moody’s investor services and standard  poors
lowered the long term credit rating of severn trent plc and severn
trent water limited
long term ratings severn trent severn trent
water limited plc
moody’s a2a3
standard  poor’s a a–
further details of the group’s borrowings investments and financial
instruments are contained in note 17 to the accounts
international accounting standards
the group will be required to prepare its financial statements 
under international accounting standards ias for the year ending
31 march 2006 with the group’s first published results under ias
being the 20052006 interim results
the group has commenced a programme of work to prepare for 
the adoption of ias an initial review has been undertaken to identify
the differences between ias and existing uk standards 
and group accounting policies a central project management team
has been formed to coordinate the transition process with working
groups from individual subsidiaries involved in the work with a 
view also to determining any additional data that may be required 
to be collected
some of the prospective standards are still under review by the
international accounting standards board and in addition the
group’s work in reviewing the impact of existing ias is still ongoing
hence at this time no definitive information on the impact on the
group of the adoption of ias is being provided however it seems
likely that the adoption of ias will increase the volatility of the
group’s reported results and impact its balance sheet
potentially significant changes arising from the adoption of ias are
currently thought to include accounting for financial instruments
retirement benefits fixed assets and renewals accounting deferred
tax and business combinations
supplementary information
for supplementary information including the group’s preliminary
results presentation see the severn trent website
wwwseverntrentcom
alan perelman
group finance director 18 severn trent plc annual report and accounts 2004
board of directors
david arculus ma msc chairman
58
mr arculus joined the board in may
1996 as a nonexecutive director and
was appointed chairman on 29 july
1998 he is a nonexecutive director
of barclays plc and was recently
appointed as a nonexecutive
director of mmo
2
 from 2002 to may
2004 he was chairman of earls court
 olympia group ltd and 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
john banyard bsceng freng fice
fciwem 59
mr banyard joined the board in
january 1998 he is an executive
director of severn trent water ltd
with responsibility for asset
management he is also a director of
uk water industry research ltd 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 51
mr bettington joined the board in
november 1994 he is the managing
director of severn trent’s waste
management business biffa waste
services ltd 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 52
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 55
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 ltd 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
board committees
membership of board committees is as
detailed below
audit committee
j b smith chairman
m l cassoni
f a osborn
secretary – p p davies
charitable contributions committee
b duckworth chairman
r m walker
secretary – p p davies
corporate responsibility committee
r m walker chairman
t d g arculus
m j bettington
r s brydon jannetta 
b duckworth
l f graziano 
j w oatridge
f a osborn 
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
p j gavan
j w oatridge
a s perelman
p k tandon
remuneration committee
m c flower chairman
m l cassoni
j d g mcadam
secretary – p p davies
nominations committee
t d g arculus chairman
m c flower 
j d g mcadam
f a osborn
secretary – p p davies
treasury committee
m l cassoni chairman
t d g arculus
t e jack
a s perelman
j b smith
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 2004
derek osborn cb 63
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 56
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
john smith fcca hon friba 46
mr smith joined the board on 3
november 2003 he is a member of
the h m treasury’s public services
productivity panel the accounting
standards board and the 100 group
of finance directors he is a fellow of
the chartered association of certified
accountants after training with a
firm of accountants mr smith joined
the british railways board moving
up over a period of 14 years to head
up their corporate demerger team 
in 1989 he moved to the bbc
becoming director of finance
property and business affairs in
1997 mr smith has held a non
executive directorship with vickers
plc was a member of the advisory
board of zurich financial services 
uk and was a director of the royal
television society 
robert walker ma 59
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 and baa plc
nonexecutive director
martin flower ba 57 
mr flower joined the board in june
1996 and is the senior independent
nonexecutive director at the end of
may 2004 he retired as chairman of
coats ltd where he had previously
been group chief executive
martin houston bsc msc dic 46
mr houston joined the board on 
1 september 2003 he is currently
executive vice president and
managing director of bg group’s
north american caribbean and
global liquefied natural gas
business and a member of the group
executive committee he joined bg
group in 1983 and has held a
number of technical and commercial
roles with a predominantly
international focus he has a bsc in
geology from newcastle university
and an msc in petroleum geology
from imperial college london he is
a fellow of the geological society of
london and sits on the board of
sigtto society of international gas
tanker  terminal operators ltd
colin matthews ma ceng 48 
mr matthews joined the board on 17
october 2003 he is a chartered
engineer who has worked in japan
france canada and the uk he
worked for the american general
electric company for nine years and
subsequently spent five years at
british airways first as director of
engineering then as director of
technical operations responsible for
all aircraft maintenance it and
procurement he then joined the
board of lattice group plc as group
managing director of transco until its
merger with the national grid he
has held his current position as ceo
of hays plc since november 2002
mr matthews holds a first class
degree in engineering from
cambridge university
john mcadam bsc phd 56
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
top row 
david arculus
robert walker 
alan perelman
brian duckworth
martin bettington 
colin matthews
john mcadam 
bottom row 
martin flower
marisa cassoni 
derek osborn
john smith 
john banyard
martin houston 20 severn trent plc annual report and accounts 2004
directors’ report
the directors present their report together with the audited financial
statements of the group for the year ended 31 march 2004
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
2004 appear in notes 12 and 25 to the financial statements on
pages 48 49 65 and 66
dividend and reserves
details of dividends paid payable and proposed are set out in note 
8 to the financial statements on page 46 subject to approval at the
annual general meeting the recommended final dividend of 2927p
2003 2856p net for each ordinary share will be paid on 
1 october 2004 to shareholders on the register at the close of
business on 18 june 2004 this together with the interim dividend
of 1777p 2003 1734p per share which was paid on 6 april
2004 brings the total for the year to 4704p 2003 4590p
proposed transfers tofrom reserves are set out in note 20 to the
financial statements on page 56
share capital
details of movements in share capital are shown in note 19 to the
financial statements on page 55
resolutions will be proposed at this year’s annual general meeting
“agm” to renew the directors’ authority to
• allot relevant securities within the meaning of section 80 of the
companies act 1985
• issue equity securities for cash without first having to offer these
securities to existing shareholders and
• make market purchases of the company’s own ordinary shares
full details of these resolutions are included in the notice of the
agm which is circulated to all shareholders
substantial shareholdings
as at 7 june 2004 the company had been notified of the following
substantial shareholding
number of ordinary 
shares of 65
5
⁄19p each 
legal  general investment 
management limited 11259833 326
directors
a list of directors and their background details appear on pages 
18 and 19 full details of their service contracts emoluments 
and share interests can be found in the remuneration report on
pages 25 to 31 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
mr m j houston mr c s matthews and mr j b smith joined the
board as nonexecutive directors on 1 september 2003 17 october
2003 and 3 november 2003 respectively 
mrs c tritton and mr e e anstee retired from the board on 30 july
2003 and 15 december 2003 respectively
in accordance with the company’s articles of association messrs 
j k banyard b duckworth m j houston c s matthews f a osborn 
j b smith and dr j d g mcadam retire at the agm and being
eligible offer themselves for reappointment the nominations
committee supports and recommends the proposed
reappointments 
the company has recently announced a number of changes
regarding its directors it has been agreed that mr t d g arculus will
step down as chairman of the board as he will soon be appointed
chairman of mmo
2
 however in order to provide continuity to the
board during a time of change and also assist in the finalisation of
severn trent water’s amp4 determination it was considered to be in
the best interests of the company for him to remain in post until 31
december 2004 mr r m walker will retire as group chief executive
on 2 february 2005 and will be succeeded by mr c s matthews 
mr a s perelman will retire as group finance director on 31 august
2004 and will be replaced by mr m r wilson mr b duckworth will
step down from the board at the end of august 2004 mrs r s
brydon jannetta will join the board as an executive director in
september 2004
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 
following the issue of a revised combined code on corporate
governance the “revised code” in july 2003 which incorporated
recommendations from the reports on the role and effectiveness of
nonexecutive directors the higgs report and audit committees
the smith report the company has carried out a review of its
corporate governance arrangements and made changes as
necessary and appropriate
as the revised code became effective for accounting periods
starting on or after 1 november 2003 this report has been 
prepared on the basis of the previous combined code on 
corporate governance the “code” however it is anticipated that
the company will be compliant with virtually all provisions of the
revised code for the new financial year
throughout the year ended 31 march 2004 the company has been
in compliance with the provisions set out in section 1 of the code
and applied its principles as follows
the board
the board currently consists of five executive directors and eight
nonexecutive directors the board has reviewed the status of the
nonexecutive directors and has confirmed that with the exception 
of mr c s matthews as group chief executive designate it regards
them as being independent at the time of his appointment as
chairman of the company mr t d g arculus was considered to 
be independent however in accordance with the revised code 
he is now deemed not to be independent
the board meets ten times each year and convenes additional
meetings as and when required 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 21 severn trent plc annual report and accounts 2004
attendance at the regular meetings of the board during the year 
by the currentserving directors was 97
in addition to the board meetings the nonexecutive directors
including the chairman meet separately on a regular basis and also
have an annual meeting at which time there is an opportunity for
the nonexecutive directors to meet without the chairman
a rigorous and formal review of the effectiveness of the board was
undertaken by the chairman and the company secretary the
results of the review were reported to the board and a number of
resultant changes have been introduced to improve the board’s
effectiveness
all nonexecutive directors who joined the board during the year
have undertaken a course of induction furthermore the training
needs of all directors have been reviewed and appropriate training
identified as part of a continuing process
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 
all the committees meet regularly throughout the year except for 
the nominations committee which meets when required but in 
any event at least twice a year the membership of the committees
is set out on page 18
the terms of reference and membership of the audit remuneration
and nominations committees the “principal committees” have
been reviewed in line with the revised code and smith report 
as appropriate the terms of reference for each of the principal
committees are available on the company’s website
wwwseverntrentcom or on written request to the company
secretary at the address given on the back cover 
each of the principal committees has reviewed its effectiveness 
and any necessary actions have been identified and reported to 
the board in the case of the remuneration committee the review
process is continuing
audit committee
membership of the audit committee now consists entirely of
independent nonexecutive directors appointments to the audit
committee are made by the board by invitation of the audit
committee other individuals such as the chairman group chief
executive group finance director head of internal audit and
representatives of the external auditors pricewaterhousecoopers
llp will normally be in attendance for all or part of the audit
committee’s meetings the audit committee also meets privately
with both the external and internal auditors during the year the
audit committee met five times and attendance by the current
serving directors was 93
remuneration committee
the remuneration committee also consists entirely of independent
nonexecutive directors it determines on behalf of the board the
company’s policy on the remuneration of executive directors the
chairman of the board and a number of the company’s senior
executives further details on remuneration issues are given in the
remuneration report on pages 25 to 31 during the year the
remuneration committee had seven meetings attendance by the
currentserving directors was 95
nominations committee
the nominations committee comprises all nonexecutive directors
the majority of whom are independent it makes recommendations
to the board on the appointment and where applicable 
reappointment to the board of both executive and nonexecutive
directors considers succession planning and related issues during
the year the nominations committee met on four occasions
attendance at those meetings by the currentserving directors 
was 100
treasury committee
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
board approved terms of reference its policy statement and the
treasury procedures manual 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
corporate responsibility committee
the corporate responsibility committee’s principal terms of
reference are to help further develop both the company’s
environmental leadership strategy and objectives and address
matters relating to corporate social responsibility
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 its
activities in relation to the environment corporate social
responsibility and sustainable development
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 the most recent
annual stewardship report may be obtained from the company’s
website wwwseverntrentcom or by sending a request for a free
copy to the address given on the back cover
charitable contributions committee
the charitable contributions committee meets as required
throughout the year to award donations to charities from a budget
approved each year by the board
executive committee
the severn trent executive committee has delegated authority 
to approve capital and other expenditure within defined limits 
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
a statement by the directors covering their responsibilities in
relation to the group’s system of internal control is set out on pages
22 and 23 a statement regarding the adoption of the going concern
basis for the preparation of the financial statements is set out on
page 24
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 2004
in their assessment of the independence of the group’s 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
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
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 
in addition to the annual appointment of auditors by the
shareholders the audit committee reviews the auditors’
performance on an ongoing basis due to the longevity of the
incumbent auditors’ appointment the audit committee has decided
to commence a formal selection process it is intended that the
auditors selected using a competitive process should be in place 
in time for the audit review of the group’s 20052006 interim
results pricewaterhousecoopers llp the group’s current auditors
have been asked to participate in this process 
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 and other regulatory matters covenants and other
borrowing related matters and stock exchange circulars
subject to conflict of interest or other pertinent issues impacting
delivery of services the auditors are used to perform such work 
on behalf of the group
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 “internal audit” 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 
a competitive selection process has been undertaken to decide who
should undertake transaction related services for the group which
concluded that the auditors would generally be used to supply 
these services
other advisory services excludes services for 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’ where fees payable to the auditors exceed
£100000 would be the subject of a competitive selection process
further any projects for ‘other advisory services’ where fees payable
to the auditors would exceed £500000 must be approved by the
audit committee
the level of nonaudit services provided by the auditors and the
associated fees are 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 nonaudit services is provided on page 44
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
the adequacy of both the auditors and internal audit has recently
been reviewed by the audit committee
reappointment of auditors
a resolution proposing the reappointment of
pricewaterhousecoopers llp as auditors will be put to the agm
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 sixmonthly reports
the board reviews risk management and the effectiveness of the
system of internal control through the audit committee the audit
committee meets at least three times a year and both the head of
internal audit and the auditors have direct access to the chairman
of the audit 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
auditors present their audit strategy to the audit committee and
directors’ report
continued 23 severn trent plc annual report and accounts 2004
these activities are all complemented at senior manager level by 
the leadership development programme which covers the top 120
managers the aim of the programme is to produce a stream of
technically and managerially competent managers who are able 
to put into action the group’s future business plans
several group companies participate in external accreditation
schemes such as investors in people and it is particularly pleasing
when these accreditations are retained following periodic
reassessment such as in metering services
group companies continue to meet legislative requirements of the
countries in which they operate in addition they further operate 
in compliance with the group’s code of business principles and
conduct disclosure whistleblowing procedures are in place in all
group companies to deal with allegations of breaches of that code
and supporting values including bullying harassment and fraud
these procedures have recently been reviewed by the audit
committee along with the group’s code of business principles and
conduct and the formalising of the fraud policy
diversity
diversity policies are in place in each company in the group that
reflect the requirements of the locations in which they operate and
that also meet the aims of the company’s code of business
principles and conduct
the company continues to monitor the data on the diversity of 
the current and potential workforce the us businesses continue 
to demonstrate their lead in the group with the gender and ethnic
diversity of their workforces a number of training initiatives have
been undertaken to communicate and reinforce the group’s diversity
policy including workshops using the forum theatre concept
on an ongoing basis the company benchmarks its policies and
practices in this area by taking guidance from best practice 
advisors such as the employers forum on disability and race 
for opportunity progress is regularly monitored by the corporate
responsibility committee
health and safety
this year the company has continued to develop a safety culture
fully integrated into all aspects of the way the business is managed
to help ensure that the actions taken are consistent with best
practice the main companies in the group have partnered with
external experts to develop behavioural safety initiatives involving
employees at all levels
work also continued on overarching group standards which apply to
all group companies wherever they operate and these standards will
address all key risk areas
the group health and safety committee chaired by the group 
chief executive has continued with its work of monitoring the
performance and progress of safety programmes within group
companies throughout the year the committee receives quarterly
reports on the five key action plans on which companies have
agreed to focus as well as summaries of new legislation in this area
the managing directors of the operating companies also take the
opportunity to share learning points and new initiatives with each
other at these meetings
the company is keen to map its actions against external standards
and as part of this work a number of sites have been awarded five
stars following british safety council audits this is the fourth
report on significant control issues upon completion of their audit
the chairman of the audit committee reports to the board
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 2004 and up to the date of approval of the
annual report and accounts it accords with the guidance in the
report on guidance on internal control the turnbull guidance 
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
employees
the group employed 15973 people as at 31 march 2004 2003
14890 of these 5099 32 were employed in the water business
5241 33 in the biffa waste business and 4781 30 in the
severn trent services businesses the numbers in biffa have
increased as a result of the acquisition of hales waste in 2003
approximately 29 of employees continue to be 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 
the larger group companies now each have their own intranets
which form a major communication channel with their employees 
in addition to inhouse magazines and toolbox talks
group companies continue to maintain positive relationships with 
the recognised trade unions and with other elected representatives
the group’s annual meetings of the european consultative council
are a further opportunity to develop a dialogue with employee
representatives and promote their better understanding of the 
future issues facing our businesses in europe
the group has undertaken a major review of its pension strategy
with the objectives of reducing risk maintaining affordability and
demonstrating equity as a result of this review three new pension
options were made available to new employees from 1 april 2004
namely a defined contribution scheme an average salary scheme
and a revised final salary scheme details of these revised options
have been circulated to employees
the group’s “lifestyle” flexible benefits scheme continues to expand
amongst uk based employees and with its introduction to biffa staff
in october 2004 will cover over 8000 employees 
the group continues to focus on the development of employees 
at all levels in biffa there has been a significant effort in
harmonising the driver training programme to incorporate the best
from the biffa and the hales driver training schemes this has been
further extended by the launch of an nvq scheme which underpins
the inhouse scheme by linking it to a national standard
three of the training programmes in severn trent water received
awards the institute of leadership and management award for
excellence in supervisory management and the sector skills
council award for both the bsc in water and environmental
management and the partnership with warwick business school
all companies have the goal of making learning opportunities
available and accessible to all employees to this end many
companies are making learning resource centres available in 
elearning by intranet and internet providers 24 severn trent plc annual report and accounts 2004
consecutive year that this has been achieved and it provides
assurance that the company’s management system is aligned with
best practice in health and safety health and safety is discussed at
every board meeting in addition the board receives sixmonthly
reviews and other periodic reports from the managing directors of
the operating companies 
research and development
research and development expenditure including the amounts that
have been capitalised amounted to £42 million 2003 £49 million 
severn trent water has continued to develop the sorb 33 process
the process has been extensively developed in the uk to meet the
new standards for arsenic in drinking water and has also been
adopted for 50 of the environmental protection agency
demonstration sites in the usa a service reservoir management
system has also been developed which stabilises the disinfection
process used in drinking water treatment to improve the taste and
quality of stored water in addition research has continued into the
removal of endocrine disrupting chemicals pharmaceuticals and
persistent organic pollutants and nutrients from wastewater
through biffaward its landfill tax credit scheme biffa has
supported the publication of a series of studies in resource flow
mass balance these studies are themed around the concept that
matter can neither be created nor destroyed and that the
measurement of inputoutput streams provides indicators of
pollution other funding through the scheme has been directed at
scientific evaluation of recovered materials – particularly rubber
plastic and glass – and their performance in reuse applications 
most notably these have applied in the construction and civil
engineering sectors working with cross sectoral partners
severn trent laboratories in the usa has been developing new
analytical methods for detecting low levels of emerging toxic
contaminants such as flame retardants fire fighting foam and
perchlorate which is used in rocket fuel fireworks and air bags 
the main focus in the uk has been to improve the efficiency of
legionella testing detection and ways to inactivate legionella other
work includes projects to evaluate microorganisms indicative of
sewage contamination
key developments by severn trent services include a global water
meter incorporating fluidic oscillation meter technology in a low cost
design a series of microchem 4000 analysers for measuring ph
chlorine and orp oxidation reduction potential a fluoride monitor
developed for the us market and a lightweight portable electro
chlorination unit for the marine market
communications with shareholders and the agm
the company attaches considerable importance to the effectiveness
of its communications with shareholders prior to the agm private
investors are given the opportunity to meet the board and also to
question them during the agm itself they are encouraged to
participate in the agm photographic displays and literature are
available to shareholders at the agm to demonstrate the nature 
and extent of the group’s environmental services the company 
will on request provide a summary of the proceedings of the agm
the company also responds to enquiries from shareholders as 
they arise throughout the year further information relevant to
shareholders is provided on the company’s website
wwwseverntrentcom 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 in breach of any
regulatory regime
contributions for political and charitable purposes
donations to charitable organisations during the year amounted 
to £276121 2003 £275868 the charitable contributions
committee is responsible for ensuring that the money donated by
the company is used in the most effective way it focuses on the
development of long term partnerships with charities close to the
company’s major sites and which reflect the company’s value of
environmental leadership their work focuses on environmental
education the preservation and enhancement of the natural
environment or addressing social exclusion issues in the built
environment the company is also committed to supporting
wateraid the uk’s only major charity dedicated to providing safe
domestic water and sanitation to the world’s poorest people 
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 however as in
previous years and on a precautionary basis resolutions will be
proposed at this year’s agm in relation to political expenditure as
defined by the political parties elections and referendums act
2000 full details of those resolutions are given in the notice of the
agm which is circulated to all shareholders
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 details of supplier payment policies can be obtained from
the individual companies at the addresses shown in note 25
trade creditors for the group and company at the yearend are
estimated as representing no greater than 30 days’ purchases
2003 no greater than 30 days
economic and monetary union
the group maintains its preparedness for conversion to the euro
should the uk enter the emu 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
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 will be 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
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 34 to 66 have been prepared on the
going concern basis
by order of the board
p p davies llb solicitor
group general counsel and company secretary
7 june 2004
directors’ report
continued 25 severn trent plc annual report and accounts 2004
remuneration committee
the remuneration committee determines on behalf of the board
the company’s policy on the remuneration of executive directors
and the chairman of the board the committee determines the total
remuneration packages and contractual terms and conditions for
these individuals the committee also determines the remuneration
policy for the next band of approximately 10 senior executives 
it is intended that further information on the remuneration of this
latter group of employees will be disclosed in next year’s report 
and accounts the policy framework for remunerating all senior
executives is consistent with the approach taken for executive
directors
the committee is comprised exclusively of independent non
executive directors of the company the members of the committee
during the year were 
m c flower chairman
t d g arculus resigned 31 march 2004
j d g mcadam
m l cassoni appointed 27 february 2004
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 comply with the
combined code on corporate governance of the financial services
authority the ‘code’ in setting performance related remuneration
the committee has regard to the provisions set out in schedule a to
the code
advisers
to ensure that the company’s remuneration practices are market
competitive the committee has access to detailed external research
on market data and trends from experienced specialist consultants
the committee has received material advice from deloitte  touche
new bridge street consultants llp who were appointed by the
committee to replace deloitte  touche as principal adviser in
december 2003 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 four consultants provide employee benefits services andor
remuneration advice to the group below board level
the group chief executive and mr j w oatridge group services
director and the chairman of the board with effect from 
1 april 2004 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 company secretary acts as secretary to the committee 
the committee’s terms of appointment for new bridge street
consultants llp are available on request from the company
secretary
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
remuneration report
• incentives are aligned with the interests of shareholders and seek
to 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 for 20042005 vary between 135 and 160
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 has with effect from 26 april 2004 adopted
guidelines which expect executive directors to have a minimum
holding of ordinary shares in the company the group chief
executive is expected to hold shares to the value of 15 x salary 
and other executive directors 1 x salary to be acquired over a
transitional period through a variety of share schemes all
employees are encouraged to hold shares in the company
external directorships
executive directors are encouraged to take on external nonexecutive
directorships though normally only one other ftse 100
appointment in order to avoid any conflicts of interest all such
appointments are subject to the approval of the nominations
committee in view of mr r m walker’s imminent retirement and the
appointment of his successor the board has agreed he can take a
second ftse 100 nonexecutive directorship from 1 april 2004
however directors are normally only able to retain the fees arising
from one such appointment mr b duckworth has two external 
nonexecutive directorships neither is a ftse 100 company and 
he retains the fees from only one appointment
chairman and other nonexecutive directors
mr t d g arculus is paid fees of £156280 £175000 from 1 august
2003 per annum which include a company contribution of
£34650 per annum to mr arculus’s private pension arrangements
and £10000 per annum paid in the form of shares in the company
the company also provides private health scheme insurance and car
provision and allowance 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 other than the
chairman 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 26 severn trent plc annual report and accounts 2004
nonexecutive directors receive payment of part of their fees in 
the form of ordinary shares in the company which from may 2004
have to be retained for the period of their appointment
the nonexecutive directors do not have service contracts or
consultancy agreements with any group company
remuneration arrangements for executive directors
the remuneration arrangements for executive directors comprise
the following elements
• base salary and benefits
• annual bonus plan
• long term incentive plan
• 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
individual performance and contribution and developments in the
relevant employment market
the nonsalary benefits for executive directors comprise the use of 
a motor car fuel private medical insurance life assurance and an
incapacity benefits scheme the executive directors are 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 29
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
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 20032004 was 50 of base salary
which is paid only for superior financial performance financial
performance accounts for 30 of the total bonus potential of 50
and the balance of 20 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 committee for the year ended 31 march 2004 are
shown in the table of directors’ emoluments on page 29 for the
20042005 financial year the bonus potential for the group chief
executive will be 60 and for the managing director of biffa 
mr m j bettington will be 75 the bonus potential for other
executive directors remains at 50 these changes reflect
developments in market practice and the decision to consider pay
practices across a broader section of industry when benchmarking
pay at biffa the committee is satisfied that the additional bonuses
will only be payable for superior performance 
remuneration report
continued
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 2002 and 2003 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 1 april 2002
and 1 april 2003 mr r m 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 2004 award this will remain unchanged other than for
messrs j k banyard and b duckworth who will both receive an
allocation of 85 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 2003 award the
comparator group additionally contains northumbrian water plc 
for the executive directors the 2001 2002 and 2003 ltip awards
will be triggered if the company’s tsr performance is at the median
or above and the ep meets the scaled targets set ep is calculated
by reference to a post tax rate of return of 75 it is envisaged that
an ltip award will be made in 2004 and this will be subject to
similar performance targets
the committee considers that the performance conditions are
appropriate since the company compares its 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 and verified using an external
data source such as thomson financial 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 2001
ended on 31 march 2004 the remuneration committee has
determined based on the company’s tsr and ep performance over
the three year performance period that the executive directors are
entitled to 100 of the shares allocated 27 severn trent plc annual report and accounts 2004
total shareholder return
year ended march –––––– severn trent plc – – – – ftse 100 index
source thomson financial
this graph looks at the value by 31 march 2004 of £100 invested
in the company on 31 march 1999 compared with the value of 
£100 invested in the ftse 100 index the ftse 100 was chosen 
as the comparator because the company is a constituent of 
that index
the other points plotted are the values at intervening financial 
yearends
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 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
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
the “cap” 20032004 £99000 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 £400662
for mr walker and £190010 for mr perelman the committee
decided that in cases of executive directors who are subject to the
cap where their pension contribution based on their actual annual
salary exceeds the inland revenue limit 15 of the 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 ukla listing rules the ‘rules’ these
rules are still in place but it is now also necessary to make
disclosures 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 29
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 and
the committee also intends to review the ongoing operation of the
ltip in the course of the forthcoming financial year
directors’ service agreements and letters of engagement
the current policy of the 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 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
the current executive directors other than mr m j bettington are all
scheduled to leave on or before 31 march 2005 therefore by that
date the above contractual arrangements will cease going forward
it is intended that the appointments for all new executive directors
and also in the case of mr bettington will be on the basis of 12
months’ notice by either party 
the new service agreements will also provide for a maximum
damages payment in the case of redundancy or termination in
breach of the agreement by the company of up to 175 of base
salary which was calculated as a conservative preestimate of the
value of salary fixed benefits and on target bonus any damages
payments will not be made automatically and will be subject to
0
99 00 01 02 03 04
20
40
60
80
100
120
140
value £ 28 severn trent plc annual report and accounts 2004
remuneration report
continued
phasing and mitigation it will also take into account a view of the
extent of poor performance on the part of the executive director 
the liquidated damages payment will not include awards which have
been made under the company’s ltip over which the committee
retains absolute discretion there are no specific contractual
payments or benefits which would be triggered in the event of a
change in control of the company
pages 29 to 31 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 
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
as announced on 5 may 2004 mr a s perelman will step down as group finance director on 31 august 2004 and will leave the company 
on 30 september 2004
messrs j k banyard and b duckworth are the subject of reappointment as executive directors at the annual general meeting
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 initial appointment current appointment current expiry date
t d g arculus 20 may 1996 29 july 2001 28 july 2004
m l cassoni 1 september 2001 1 september 2001 31 august 2004
m c flower 11 june 1996 11 june 2002 10 june 2005
m j houston 1 september 2003 1 september 2003 31 august 2006
c s matthews 17 october 2003 17 october 2003 16 october 2006
j d g mcadam 18 september 2000 18 september 2003 17 september 2006
f a osborn 21 september 1998 21 september 2001 20 september 2004
j b smith 3 november 2003 3 november 2003 2 november 2006
details for the nonexecutive directors who retired from the board during the year are as follows
e e anstee 30 july 1999 15 december 2003
c tritton 1 november 1991 30 july 2003
subject to the requirements of the company’s articles of association for the reappointment of directors at annual general meetings
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 29 severn trent plc annual report and accounts 2004
directors’ emoluments
the emoluments of the chairman the executive directors and fees payable to the nonexecutive directors are as follows
basic salary and fees
benefits in annual total total
cash shares
2
total kind
3
bonus other
4
200304 200203
£000 £000 £000 £000 £000 £000 £000 £000
chairman and other
nonexecutive directors
t d g arculus chairman 1242 100 1342 232 – 60 1634 1548
e e anstee resigned 151203 236 13 249 – – 17 266 329
m l cassoni 379 28 407 – – 16 423 294
m c flower 488 28 516 – – 08 524 444
m j houston 157 18 175 – – – 175 –
c s matthews
1
136 – 136 – – – 136 –
j d g mcadam 264 28 292 – – 09 301 279
f a osborn 430 28 458 – – 10 468 502
a h simon resigned 260702 – – – – – – – 115
j b smith
1
144 – 144 – – – 144 –
c tritton resigned 300703 100 08 108 – – 01 109 329
executive directors
j k banyard 1900 – 1900 222 912 03 3037 2798
m j bettington 2925 – 2925 212 1320 – 4457 3338
b duckworth 2550 – 2550 240 1224 01 4015 3620
a s perelman 3500 – 3500 288 1645 01 5434 5122
r m walker 4800 – 4800 356 2304 01 7461 6115
total emoluments 19251 251 19502 1550 7405 127 28584 24833
1 mr c s matthews’ total fees are paid directly to his employer total fees for mr j b smith represent fees due but not yet paid
2 with the exception of messrs c s matthews and j b smith all nonexecutive directors received a proportion of their total fees by way of
shares in the company the gross value of those awards is included in the table above nonexecutive directors who were either appointed
or resigned during the year received time apportioned awards where applicable the number of shares received by each nonexecutive
director during the year was mr t d g arculus – 824 ms m l cassoni – 228 mr m c flower – 228 dr j d g mcadam – 228 
mr f a osborn – 228 mr m j houston – 133 mr e e anstee – 114 and mrs c tritton – 70
3 benefits in kind for executive directors comprise the use of a motor car fuel private medical insurance life assurance and an incapacity
benefits scheme
4 other emoluments represent expenses chargeable to uk income tax paid to directors
directors’ pension provisions
3
increase
increase in transfer decrease
increase in accrued value of transfer transfer in transfer 
accrued pension increase in value of value of value over 
accrued pension during the accrued accrued accrued the year net
pension at during year net pension at pension at pension at of director’s
310304 the year of inflation
1
310304 310304
2
310303
2
contributions
£ pa £ pa £ pa £000 £000 £000 £000
j k banyard 127074 8217 5112 885 24828 20653 4061
m j bettington 135949 25752 22873 2500 15905 9883 5846
b duckworth 146848 15734 12309 1647 21471 15788 5530
a s perelman 29147 12418 11981 1724 4556 2195 2212
r m walker 75522 25177 23862 4487 14672 8687 5836
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 2003 and march 2004
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 £34650 per annum to mr arculus’s private pension arrangements 30 severn trent plc annual report and accounts 2004
remuneration report
continued
the directors of the company at 31 march 2004 and their beneficial interests in the shares of the company were as follows
i beneficial holdings
at 1 april 2003
or subsequent
date of
appointment at 31 at 7
number of march 2004 june 2004
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 11046 13683 13683
m l cassoni 238 568 568
m c flower 1255 1585 1585
m j houston – 1133 1133
c s matthews – 1000 1000
j d g mcadam 255 585 585
f a osborn 765 1095 1095
j b smith –––
executive directors
j k banyard 17058 23210 23301
m j bettington 9144 12541 12541
b duckworth 19739 25101 13214
a s perelman 40 76 76
r m walker 638 7180 7180
messrs banyard bettington duckworth perelman and walker have further interests in the company’s ordinary shares of 65
5
 19p each by 
virtue of having received contingent awards of shares under the severn trent plc long term incentive plan the ‘ltip’ on 30 august 2001 
for alan perelman 6 february 2002 24 september 2002 and 13 august 2003 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 on pages 26 and 27 of the
remuneration report the individual interests which represent the maximum aggregate number of shares to which each individual could
become entitled are as follows
at 1 at 31
april 2003 market market march 2004
number of awards price awards price at number of
ordinary vested at time gain on lapsed awarded time ordinary
shares of during of vesting vesting during during of 2003 shares of
65
5
 19p each year p £000 year year award p 65
5
 19p each
j k banyard 44608 4818 69925 337 4819 19178 66050 54149
m j bettington 59515 5759 69925 403 5759 28767 66050 76764
b duckworth 59820 6502 69925 455 6503 25739 66050 72554
a s perelman 68240 – – – – 35328 66050 103568
r m walker 126148 6506 69925 455 6506 69214 66050 182350
the awards that vested during the year were awarded on 10 august 2000 at a market price of 735p
no further awards have been made under the ltip as at 7 june 2004 31 severn trent plc annual report and accounts 2004
the performance period for allocations of shares made in 2001 ended on 31 march 2004 the remuneration committee has subsequently
determined based on the company’s total shareholder return and economic profit targets over the three year performance period that
executive directors were entitled to 100 of the award the 2001 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 2001 award is as follows
number of 
ordinary shares
of 65
5
 19p
market price each vested
at time of from the 
date of award award p 2001 award
j k banyard 30 august 2001 750 15450
m j bettington 30 august 2001 750 20109
b duckworth 30 august 2001 750 20600
a s perelman 6 february 2002 7325 31428
r m walker 30 august 2001 750 48435
as at 7 june 2004 the shares from the 2001 contingent award had not vested but in line with usual practice would do so as soon as
practicable after the end of the performance period
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 of date 
year no year no year no year no year no grant of exercise from which 
of shares of shares of shares of shares of shares option price p exercisable expiry date
executive share options
j k banyard 7800 7800
5
–– – 1993 625 dec 1996 dec 2003
b duckworth 8528 8528
8
–– – 1993 625 dec 1996 dec 2003
sharesave options
1
j k banyard 1024 1024
4
–– – 2000 473 may 2003 oct 2003
866 – – – 866 2002 548 may 2005 oct 2005
m j bettington 2158 – 2158
6
–– 1998 799 apr 2003 sep 2003
b duckworth 1228 1228
7
–– – 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 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 
to comply with inland revenue requirements options are not subject to prevesting conditions
2 the total gain on exercise of share options during the year amounted to £16240 2003 £6083
3 no executive share options in respect of executive directors were granted or lapsed during the year at 31 march 2004 there were 205
other executives participating in the group’s share option scheme 2003 194
4 mr banyard exercised 1024 sharesave options during the year at 473p the market price at exercise date was 7195p and the gain on
exercise amounted to £2524
5 mr banyard exercised 7800 executive share options during the year at 625p the market price at exercise date was 703p and the gain
on exercise amounted to £6084
6 mr bettington cancelled 2158 sharesave options during the year
7 mr duckworth exercised 1228 sharesave options during the year at 473p the market price at exercise date was 7195p and the gain 
on exercise amounted to £3027
8 mr duckworth exercised 8528 executive share options during the year at 625p the market price at exercise date was 679p and the
gain on exercise amounted to £4605
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 at the close of business on 31 march 2004 the midmarket price of the company’s shares was 761p 31 march 2003 716p and the
range during the year was 640p to 7625p
signed on behalf of the board who approved the remuneration report on 7 june 2004
m c flower
chairman of the remuneration committee 32 severn trent plc annual report and accounts 2004
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 and the group have 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 and
the group keep 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
directors’ responsibilities in relation to the financial statements
the directors have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the company
and 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 33 severn trent plc annual report and accounts 2004
independent auditors’ report to the members of severn trent plc
we have audited the financial statements which comprise the group
profit and loss account the balance sheet the cash flow statement
the statement of total recognised gains and losses movements in
shareholders funds reconciliation of net cashflow to movement in
net debt 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 and
the financial statements in accordance with applicable united
kingdom law and accounting standards are set out in the statement
of directors’ responsibilities the directors are also responsible for
preparing the directors’ remuneration report
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 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 review of operations corporate responsibility
financial review directors’ responsibility in relation to financial
statements and the five year summary 
we review whether the corporate governance statement reflects the
company’s compliance with the seven provisions of the combined
code issued in june 1998 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 the group’s corporate
governance procedures or its risk and control procedures 
basis of audit opinion
we conducted our audit in accordance with auditing standards
issued by the auditing practices board an audit includes
examination on a test basis of evidence relevant to the amounts
and disclosures in the financial statements 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 2004 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
7 june 2004 34 severn trent plc annual report and accounts 2004
continuing operations
total
acquisitions 2004 2003
notes £m £m £m £m
turnover group and share of joint ventures 19233 952 20185 18558
less share of joint ventures’ turnover 34 – 34 38
turnover 2 19199 952 20151 18520
operating costs before goodwill amortisation and exceptional items 15051 813 15864 14530
goodwill amortisation 2 248 50 298 252
exceptional integration costs 23 – 109 109 –
exceptional provision release 23 27 – 27 60
exceptional impairment of goodwill and tangible fixed assets 23 ––– 468
total operating costs 3 15272 972 16244 15190
group operating profitloss 3927 20 3907 3330
share of operating profit of joint ventures and associates 2 119 – 119 108
exceptional profit on disposal of fixed assets 24 198 – 198 –
profit before interest goodwill amortisation and exceptional items 2 4267 139 4406 4098
goodwill amortisation 2 248 50 298 252
profit before interest and exceptional items 2 4019 89 4108 3846
exceptional costs 23 – 109 109 468
exceptional profits 23 225 – 225 60
profitloss before interest 2 4244 20 4224 3438
net interest payable 6 1680 1594
profit after interest before goodwill amortisation and exceptional items 2726 2504
goodwill amortisation 2 298 252 
profit after interest before exceptional items 2428 2252 
exceptional items 23 116 408 
profit on ordinary activities before taxation 2544 1844
taxation on profit on ordinary activities – current tax 7 333 248 
– deferred tax 7 363 595 
total taxation 7 696 843
profit on ordinary activities after taxation 1848 1001 
equity minority interests 07 09 
profit for the financial year 1841 992 
dividends 8 1620 1576 
retained profitloss for the financial year 20 221 584 
earnings per share pence
basic 9 535 289 
diluted 9 533 288 
adjusted basic before exceptional items and deferred tax 9 614 581 
adjusted diluted before exceptional items and deferred tax 9 612 579 
there is no difference between the profit on ordinary activities before taxation and the retained profitloss for the financial years stated
above and their historical cost equivalents
group profit and loss account
year ended 31 march 2004 35 severn trent plc annual report and accounts 2004
balance sheets
at 31 march 2004
group company
2004 2003 2004 2003
notes £m £m £m £m
fixed assets
intangible assets – goodwill 10 4976 4015 – –
tangible assets 11 52780 50486 71 74
investments in joint ventures
share of gross assets 72 31 – –
share of gross liabilities 65 26 – –
loans to joint ventures 89 47 – –
96 52 – –
investments in associates 177 176 – –
investments in subsidiaries – – 35908 34651
other investments 42 77 32 65
total investments 12 315 305 35940 34716
58071 54806 36011 34790
current assets
stocks 13 804 910 – –
debtors 14 4528 4232 529 481
shortterm deposits 17b 708 257 317 –
cash at bank and in hand 445 432 1677 1916
6485 5831 2523 2397
creditors amounts falling due within one year 15 12237 12192 6531 6136
net current liabilities 5752 6361 4008 3739
total assets less current liabilities 52319 48445 32003 31051
creditors amounts falling due after more than one year 16 24406 21016 3007 1720
provisions for liabilities and charges 18
deferred tax provisions 4629 4258 06 14
other provisions 1091 973 – –
5720 5231 06 14
net assets 22193 22198 28990 29317
capital and reserves
called up share capital 19 2252 2244 2252 2244
share premium account 20 335 287 335 287
capital redemption reserve 20 1561 1561 1561 1561
profit and loss account 20 18021 18084 24842 25225
total equity shareholders’ funds 22169 22176 28990 29317
minority shareholders’ interest equity 24 22 – –
22193 22198 28990 29317
signed on behalf of the board who approved the accounts on 7 june 2004
david arculus alan perelman
chairman group finance director 36 severn trent plc annual report and accounts 2004
group cash flow statement
year ended 31 march 2004
reconciliation of net cash flow to movement in net debt
2004 2003
notes £m £m £m £m
net cash inflow from operating activities 24a 7331 6827
dividends received from associates and joint ventures 19 16
returns on investments and servicing of finance 24b 1483 1467
taxation 195 143
capital expenditure and financial investment 24c 4875 4540
acquisitions 24d 1706 115
equity dividends paid 1577 1575
net cash outflow before use of liquid resources and financing 2486 997
management of liquid resources 24e 452 65
financing
increase in debt 2831 1141
issue of shares 56 33
24f 2887 1174
decreaseincrease in cash 51 112
2004 2003
notes £m £m £m £m
decreaseincrease in cash as above 51 112
cash flow from movement in net debt and financing 2831 1141
cash flow from movement in liquid resources 452 65
change in net debt resulting from cash flows 2430 964
net cashdebt assumed with acquisitions 24g 03 04
movement in rolled up interest on finance leases 22 13
currency translation differences 60 26
other non cash items 90 10
increase in net debt 2435 939
opening net debt 25056 24117
closing net debt 24g 27491 25056 37 severn trent plc annual report and accounts 2004
statement of total recognised gains and losses
year ended 31 march 2004
reconciliation of movements in shareholders’ funds
group company
2004 2003 2004 2003
£m £m £m £m
opening equity shareholders’ funds 22176 22940 29317 29472
profit for the financial year 1841 992 1237 1388
dividends 1620 1576 1620 1576
retained profitloss for the financial year 221 584 383 188
other recognised gains and losses relating to the year 284 213 – –
shares issued 56 33 56 33
net reduction in equity shareholders’ funds 07 764 327 155
closing equity shareholders’ funds 22169 22176 28990 29317
group
2004 2003
£m £m
profit for the financial year – group 1821 973
– joint ventures 06 05
– associates 14 14
total profit for the financial year 1841 992
exchange movement on translation of overseas results and net assets 356 251
translation differences on foreign currency hedging 103 38
tax on translation differences on foreign currency hedging 31 –
total recognised gains and losses for the year 1557 779
the company had no recognised gains or losses other than the loss for the year
in 20032004 in accordance with uitf19 a tax charge of £31 million related to gains of £103 million arising on foreign currency
borrowings hedging investments in foreign businesses has been reflected in the statement of total recognised gains and losses above in
20022003 a tax charge of £11 million related to such gains of £38 million was instead charged to the profit and loss account had the
£11 million charge been properly treated as in the current year adjusted earnings per share in 20022003 would have improved by 04
pence from 581 pence to 585 pence given the magnitude of the numbers no restatement has been applied to the 20022003 figures 38 severn trent plc annual report and accounts 2004
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 trade discounts and intercompany sales in the ordinary course of
business for goods and services provided
revenue is not recognised until the service has been provided to the customer or the goods which the sale relates to have either been
despatched to the customer or where they are held on the customer’s behalf title has passed to the customer
in respect of long term contracts revenue is recognised based on the value of work carried out during the year with reference to the total
sales value and the stage of completion of these contracts
income includes an estimation of the amount of mains water and wastewater charges unbilled at the year end 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
revenue is recognised for software licence agreements for general release software at the time of client acceptance of the software 
where software modifications are integral to the overall contract software licence revenue is recognised over the life of the modifications
software support and maintenance revenue is recognised over the period it relates to
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
notes to the financial statements 39 severn trent plc annual report and accounts 2004
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 £3626 million lower than it would otherwise have been 2003 £3270 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 impairment of goodwill and fixed assets
impairments of goodwill and fixed assets are calculated as the difference between the carrying value of net assets of income generating
units including where appropriate investments and goodwill and their recoverable amounts recoverable amount is defined as the higher of
net realisable value or estimated value in use at the date the impairment review is undertaken net realisable value represents the net
amount that can be generated through sale of assets value in use represents the present value of expected future cash flows discounted on
a pretax basis using the estimated cost of capital of the income generating unit
impairment reviews are carried out if there is some indication that an impairment may have occurred or where otherwise required to
ensure that goodwill and fixed assets are not carried above their estimated recoverable amounts
impairments are recognised in the profit and loss account and where material are disclosed as exceptional
h investments
investments held as fixed assets are stated at cost less amounts written off
i 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
j 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 material restoration balances arising are discounted by applying an appropriate discount rate
k 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 material environmental control and aftercare costs are discounted by applying an appropriate discount rate
l 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
m 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 40 severn trent plc annual report and accounts 2004
1 accounting policies continued
n 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
o 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 capitalised and written off over the expected useful life of those assets
p 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
q goodwill
goodwill represents the excess of the fair value of the 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 15 and 20 years
dependent upon the nature of the business and assets purchased
r 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
s 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
t long term incentive plan
shares in the company purchased for the long term incentive plan are held under trust and are initially recorded within investments in the
balance sheet at cost the cost of the awards is taken to the profit and loss account over the period in which performance is measured
u precontract costs
precontract costs incurred are written off as an expense until such time as award of the contract becomes virtually certain
notes to the financial statements
continued 41 severn trent plc annual report and accounts 2004
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
2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
group turnover
water and sewerage 9567 9179 – – 9567 9179
waste management 5739 4573 592 536 6331 5109
services 636 558 3176 3296 3812 3854
systems 520 509 116 104 636 613
property engineering consultancy and insurance 800 664 35 66 835 730
inter segment trading 1021 958 09 07 1030 965
16241 14525 3910 3995 20151 18520
group profit before interest goodwill amortisation 
and exceptional items
water and sewerage 3379 3255 – – 3379 3255
waste management 760 648 32 31 792 679
services 46 42 341 300 387 342
systems 34 07 11 24 23 31
property engineering consultancy and insurance 32 55 – – 32 55
unrealised profit on inter segment trading 24 26 – – 24 26
corporate overheads 183 176 – – 183 176
4044 3791 362 307 4406 4098
goodwill amortisation 232 174 66 78 298 252
group profit before interest and exceptional items
water and sewerage 3366 3254 – – 3366 3254
waste management 549 483 30 30 579 513
services 38 34 277 223 315 257
systems 34 07 11 24 23 31
property engineering consultancy and insurance 32 55 – – 32 55
unrealised profit on inter segment trading 24 26 – – 24 26
corporate overheads 183 176 – – 183 176
3812 3617 296 229 4108 3846
exceptional items
exceptional profit on disposal of fixed assets – water and sewerage 198 – – – 198 –
exceptional integration costs – waste management 109 – – – 109 –
exceptional impairment of goodwill and tangible fixed assets
– services – 35 – 433 – 468
exceptional contract provision release – systems – – 27 60 27 60
89 35 27 373 116 408
group profit before interest
water and sewerage 3564 3254 – – 3564 3254
waste management 440 483 30 30 470 513
services 38 01 277 210 315 211
systems 34 07 16 36 50 29
property engineering consultancy and insurance 32 55 – – 32 55
unrealised profit on inter segment trading 24 26 – – 24 26
corporate overheads 183 176 – – 183 176
3901 3582 323 144 4224 3438
turnover by origin and destination do not differ materially 42 severn trent plc annual report and accounts 2004
2 segmental analysis continued
b joint ventures and associates
other – principally
united kingdom usa and europe group
2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
share of joint ventures’ turnover 32 34 02 04 34 38
share of operating profit of joint ventures and associates
joint ventures 12 08 – – 12 08
associates – – 107 100 107 100
12 08 107 100 119 108
c acquisitions
the profit and loss account and segmental analysis include the following amounts in respect of businesses acquired during the year
turnover operating profitloss
other – other –
principally principally
united usa and united usa and
kingdom europe total kingdom europe total
£m £m £m £m £m £m
waste management 890 – 890 50 – 50
services – 62 62 – 30 30
total 890 62 952 50 30 20
waste management’s and services’ operating profit in the table above is after charging goodwill amortisation of £47 million and £03 million
respectively
waste management’s operating profit is also stated after charging exceptional integration costs of £109 million profit before interest tax
goodwill amortisation and exceptional items of acquisitions in this period therefore amounts to £139 million waste management £106
million including estimated synergies and services £33 million
d analysis of net operating assets by geographical location and type of business
other – principally
united kingdom usa and europe group
2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
water and sewerage 47261 45422 – – 47261 45422
waste management 2578 2084 214 237 2792 2321
services 155 173 1245 1360 1400 1533
systems 54 83 20 26 34 57
property engineering consultancy insurance and corporate 128 243 – – 128 243
net operating assets 50176 48005 1439 1571 51615 49576
goodwill
water and sewerage – 13
waste management 3907 2892
services 1069 1110
shortterm deposits cash borrowings taxation and dividends payable 34398 31393
22193 22198
notes to the financial statements
continued 43 severn trent plc annual report and accounts 2004
3 operating costs continuing operations
total
acquisitions 2004 2003
£m £m £m £m
wages and salaries 4015 223 4238 3964
social security costs 344 16 360 313
pension costs note 23 290 12 302 243
total employee costs 4649 251 4900 4520
power 346 03 349 370
raw materials and consumables 1416 50 1466 1429
rates 593 11 604 580
service charges 248 – 248 233
waste disposal costs 915 137 1052 806
other operating costs 3271 332 3603 3112
depreciation – on owned assets 2271 77 2348 2261
– on assets held under finance leases 85 – 85 94
– on infrastructure assets 566 – 566 556
amortisation and impairment – goodwill 248 50 298 677
hired and contracted services 1259 10 1269 1197
environmental and landfill restoration costs 63 12 75 43
operating lease rental – land and buildings 117 07 124 119
– other 91 10 101 53
hire of plant and machinery 172 22 194 200
research and development expenditure 32 – 32 39
profit on disposal of fixed assets see note 4 below ––– 67
foreign exchange losses 07 – 07 05
16349 972 17321 16227
own work capitalised 1077 – 1077 1037
total operating costs 15272 972 16244 15190
a net exceptional credit arose during 20032004 of £116 million as opposed to a net £408 million charge arising in the prior year this is
further analysed below
exceptional items in 20032004 comprise a £198 million profit from the disposal of fixed assets and a £27 million credit from the release of
part of an exceptional charge made in 20012002 offset by a £109 million charge for hales’ integration costs
the exceptional profit on disposal of fixed assets during 20032004 of £198 million relates to the disposal of land and property by severn
trent water which is disclosed on the face of the profit and loss account see note 4 below
operating costs for 20032004 include a £109 million charge in respect of integration costs associated with the acquisition of hales waste
£48 million in wages and salaries and £61 million in other operating costs this is offset by a £27 million release of part of the £25 million
charge made in 20012002 in respect of certain systems’ cis open vision contracts in the usa included in other operating costs
exceptional items in 20022003 comprise a charge of £468 million for the impairment of goodwill and tangible fixed assets in services
offset by a £60 million credit from the release of an exceptional charge made in 20012002
the £468 million impairment was determined in accordance with frs 11 “impairment of fixed assets and goodwill” the impairment
restated 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 included in depreciation of owned assets
the exceptional contract provision release of £60 million in 20022003 related to the release of part of a £250 million exceptional charge
made in 20012002 in respect of certain systems cisov contracts in the usa included in other operating costs 44 severn trent plc annual report and accounts 2004
3 operating costs continued
during the year pricewaterhousecoopers llp earned the following fees
2004 2003
£m £m
audit related
group statutory 07 07
regulatory 02 01
09 08
further assurance services – due diligence capitalised as part of acquisition costs 05 01
taxation services
compliance 01 –
advisory 01 06
02 06
other services 02 01
total fees 18 16
taxation services include compliance services such as tax return preparation and advisory services
other services primarily include training programmes
included in auditors’ remuneration above is £100000 2003 £75000 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 31
4profits on disposal of fixed assets
profits on disposal of fixed assets expressed on a like for like basis comprising only sales of land and property have arisen as follows in the
reported periods
2004 2003
£m £m
profits on disposal of fixed assets 198 67
in the current period profits on disposal of fixed assets amounting to £198 million have been shown separately as exceptional on the face
of the profit and loss account after operating profit due to the materiality of the amounts involved in previous periods such profits on
disposal shown above were not treated as exceptional and were reported within operating costs given their relative magnitude
changes in analysis
in prior periods profits on disposal of fixed assets other than land and property were also reported within operating costs as part of a total
figure for profits on disposals of fixed assets they are now regarded more appropriately as minor adjustments to depreciation a £12
million profit arising from such adjustments in the current year has been deducted from the depreciation charge a £02 million depreciation
charge arose in 20022003
5 employee numbers
average number of employees including executive directors during the year full time equivalent
2004 2003
number number
by type of business
water and sewerage 4998 4780
waste management 5061 4043
services 4835 4796
systems 533 656
property engineering consultancy insurance and corporate 366 372
15793 14647
by geographical location
united kingdom 11185 10119
other – principally usa and europe 4608 4528
15793 14647
notes to the financial statements
continued 45 severn trent plc annual report and accounts 2004
6 net interest payable
2004 2003
£m £m
interest receivable and similar income 35 20
interest payable and similar charges
bank loans and overdrafts 343 371
other loans 1069 928
interest on discounted provisions 21 19
finance leases 196 221
1594 1519
share of joint ventures 02 02
share of associates 84 73
1680 1594
7taxation
a analysis of charge in the year
2004 2003
£m £m
current tax
uk corporation tax – current year at 30 390 279
– prior year 83 64
double taxation relief 06 08
total uk tax – group 301 207
overseas tax – current year 19 23
– prior year – 04
total overseas tax 19 27
total current tax – group 320 234
share of tax charges of – joint ventures 04 02
– associates 09 12
total current tax 333 248
deferred tax
origination and reversal of timing differences – current year 363 404
– prior year 46 131
increasedecrease in discount 46 60
total deferred tax 363 595
total tax charge 696 843
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
2004 2003
£m £m
profit on ordinary activities before tax 2544 1844
profit on ordinary activities multiplied by the standard rate of corporation tax in the uk 30 763 553
effects of
permanent differences 07 144
capital allowances for year in excess of depreciation 343 394
utilisation ofmovement in shortterm timing differences 11 07
utilisation ofmovement in tax losses 30 03
overseas tax rate differences 08 15
adjustment in respect of prior years 83 60
total current tax 333 248
of the current year tax charge £24 million relates to tax charges arising on exceptional items the exceptional items in 20022003 had no
effect on the current tax charge in that period 46 severn trent plc annual report and accounts 2004
7taxation continued
b factors affecting the current tax charge in the year continued
the group’s current tax charge excluding tax arising from exceptional items of £309 million 2003 £248 million represents 127 
2003 110 of the group’s profit after interest but before exceptional items
c factors affecting future tax charge
the group’s future current tax charge will be affected by the requirements of amp4 which will impact both depreciation and capital
allowances in addition the mix of profits from the different jurisdictions in which the group operates will have an impact on the effective rate
of tax no deferred tax asset has been recognised on the us subgroup although these should be available to reduce the current tax charge in
future years the estimated value of the deferred tax asset not recognised measured at the uk standard rate of 30 is £62 million the
group’s future deferred tax charge will be impacted by changes in interest rates
8 dividends
2004 2003
pence pence
per share £m per share £m
interim dividend declared 1777 611 1734 595
final dividend proposed 2927 1009 2856 981
4704 1620 4590 1576
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 as the trust waives the dividends due on the shares 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 2004 and 2003 the
directors consider that the supplementary figures provide a useful additional indication of performance
2004 2003
weighted weighted
average average
number of per share number of per share
earnings shares amount earnings shares amount
£m m pence £m m pence
basic earnings per share 1841 3438 535 992 3431 289
effect of dilutive options – 15 02 – 14 01
diluted earnings per share 1841 3453 533 992 3445 288
supplementary earnings per share
basic earnings per share 1841 3438 535 992 3431 289
effect of
exceptional profit on disposal of fixed assets 198 – 58 –––
exceptional integration costs 109 – 32 –––
exceptional impairment of goodwill and tangible fixed assets ––– 468 – 136
exceptional contract provision release 27 – 08 60 – 17
tax relating to exceptional items 24 – 07 –––
deferred tax 363 – 106 595 – 173
adjusted basic earnings per share before exceptional 
items and deferred tax 2112 3438 614 1995 3431 581
diluted earnings per share 1841 3453 533 992 3445 288
effect of
exceptional profit on disposal of fixed assets 198 – 57 –––
exceptional integration costs 109 – 32 –––
exceptional impairment of goodwill and tangible fixed assets ––– 468 – 135
exceptional contract provision release 27 – 08 60 – 17
tax relating to exceptional items 24 – 07 –––
deferred tax 363 – 105 595 – 173
diluted earnings per share before exceptional items 
and deferred tax 2112 3453 612 1995 3445 579
notes to the financial statements
continued 47 severn trent plc annual report and accounts 2004
10 goodwill
group
2004
£m
cost
at 1 april 2003 5180
arising on acquisitions in the year note 21a 1379
arising on prior year acquisitions note 21b 02
exchange adjustments 218
at 31 march 2004 6343
amortisation
at 1 april 2003 1165
charge for year 298
exchange adjustments 96
at 31 march 2004 1367
net book value
at 31 march 2004 4976
at 31 march 2003 4015
11 tangible assets
group company
land and infrastructure plant and land and plant and
buildings assets equipment total buildings equipment total
£m £m £m £m £m £m £m
cost
at 1 april 2003 20252 30472 26797 77521 73 50 123
acquisition of businesses 154 – 311 465 – – –
additions 1094 1935 2290 5319 – 05 05
grants and contributions – 356 – 356 – – –
disposals 71 06 763 840 – – –
reclassifications and transfers 02 – 24 22 – – –
exchange adjustments 47 – 134 181 – – –
at 31 march 2004 21384 32045 28477 81906 73 55 128
depreciation
at 1 april 2003 6260 8833 11942 27035 05 44 49
charge for year 549 566 1884 2999 – 08 08
disposals 56 06 715 777 – – –
reclassifications and transfers 14 – 27 41 – – –
exchange adjustments 14 – 76 90 – – –
at 31 march 2004 6725 9393 13008 29126 05 52 57
net book value
at 31 march 2004 14659 22652 15469 52780 68 03 71
at 31 march 2003 13992 21639 14855 50486 68 06 74
i included in tangible fixed assets are assets held under finance leases as follows
2004 2003
£m £m
cost 3979 3014
accumulated depreciation 1154 689
net book value 2825 2325
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 48 severn trent plc annual report and accounts 2004
11 tangible assets continued
iii the net book value of land and buildings is analysed as follows
2004 2003
£m £m
freehold 13914 13340
long leasehold 422 419
short leasehold 323 233
14659 13992
iv the net book value of land and buildings includes £1271 million 2003 £1181 million in respect of landfill sites
v included in the above are the following tangible fixed assets not subject to depreciation
2004 2003
£m £m
land 467 301
assets in the course of construction 2349 3014
2816 3315
12 investments
group
2004 2003
£m £m
investments in joint ventures
share of gross assets 72 31
share of gross liabilities 65 26
loans 89 47
96 52
investments in associates
share of net assets 145 147
loans 32 29
177 176
other investments 10 12
own shares 32 65
315 305
interests in interests in other own
joint ventures associates investments shares total
£m £m £m £m £m
group
at 1 april 2003 52 176 12 65 305
loans advanced 50 03 – – 53
additions – 04 – 32 36
disposals –– 02 – 02
loans repaid 08 – – – 08
share of profits 06 14 – – 20
dividends receivable 04 15 – – 19
cumulative amortisation of own shares – – – 65 65
other movements – 05 – – 05
at 31 march 2004 96 177 10 32 315
notes to the financial statements
continued 49 severn trent plc annual report and accounts 2004
interests in joint ventures and associates at 31 march 2004 comprised the group’s share of net assets less provisions of £152 million
2003 £152 million and loans of £121 million 2003 £76 million the group’s share of the post acquisition accumulated profits of joint
ventures at 31 march 2004 was £27 million 2003 £21 million the group’s share of the post acquisition accumulated profits of
associates at 31 march 2004 was £31 million 2003 £17 million particulars of the group’s principal joint venture and associated
undertakings at 31 march 2004 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 – – 375000 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
umbria due servizi idrici scarl water and waste water 64 – – 64000 shares at €1share 
cognica limited asset management 50 100000 100000 –
east leeds development 
company limited property development 50 500 500 –
east leeds holdings limited property development 50 500 500 –
eldc triangle limited property development 38 240 760

–
held by the group

held by east leeds holdings limited
the country of incorporation registration and main operation is great britain with the exceptions of capital controls india india aquafin
belgium indaqua portugal and umbria italy
the group financial statements incorporate a trading period for aquafin and indaqua of twelve months to their accounting reference date of
31 december 2003
interests in own shares represent ordinary shares of 65
5
⁄19p each held in trust for certain senior employees under the long term incentive plan
the “ltip”
the main features of the ltip are set out in the remuneration report on pages 26 27 30 and 31 at 31 march 2004 the trust held
1335947 shares 2003 982492 shares the market value of these shares was £102 million 2003 £70 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
in prior years the cumulative amortisation for the ltip was held within working capital during the current year this has been reanalysed to
show it within investments in order to provide better analysis of the charge associated with the ltip
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
subsidiary undertakings own shares total
shares loans
£m £m £m £m
company
at 1 april 2003 9868 24783 65 34716
additionsloans advanced 185 1609 32 1826
loans repaid – 397 – 397
disposalsprovisions 140 – – 140
reallocation of charge on own shares – – 65 65
at 31 march 2004 9913 25995 32 35940
13 stocks
group
2004 2003
£m £m
stocks and work in progress 318 396
development land and properties 486 514
804 910
the replacement value of stocks and work in progress is not materially different from their book value 50 severn trent plc annual report and accounts 2004
14 debtors
group company
2004 2003 2004 2003
£m £m £m £m
trade debtors 2776 2514 – –
amounts owed by group undertakings – – 509 446
amounts owed by associated undertakings 03 03 – –
corporation tax recoverable 03 07 – –
other debtors 379 508 07 22
prepayments and accrued income 1367 1200 13 13
4528 4232 529 481
included within group debtors of £4528 million is £71 million of prepayments and accrued income £07 million of other debtors and £01
million of amounts owed by associated undertakings that falls due after one year
in 2003 included in group debtors of £4232 million were £81 million of prepayments and accrued income and £32 million of other 
debtors that fell due after one year
15 creditors amounts falling due within one year
group company
2004 2003 2004 2003
£m £m £m £m
bank overdrafts 321 318 321 318
bank loans 640 973 – –
other loans 3784 4031 3544 3384
obligations under finance leases 124 54 – –
borrowings note 17 4869 5376 3865 3702
trade creditors 712 598 03 02
amounts owed to group undertakings – – 590 393
other creditors 315 355 149 217
taxation and social security 327 265 03 –
corporation tax payable 658 505 259 215
dividends payable 1622 1579 1622 1579
accruals and deferred income 3734 3514 40 28
12237 12192 6531 6136
16 creditors amounts falling due after more than one year
group company
2004 2003 2004 2003
£m £m £m £m
bank loans 4282 4889 – –
other loans 14605 10922 2903 1624
obligations under finance leases 4888 4558 – –
borrowings note 17 23775 20369 2903 1624
deferred income 457 475 – –
other creditors 174 172 104 96
24406 21016 3007 1720
notes to the financial statements
continued 51 severn trent plc annual report and accounts 2004
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 short term debtors and creditors have been excluded from
disclosures other than the currency risk disclosures
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
currency weighted
average
weighted period for
floating fixed average which
2004 interest interest interest interest
total rate rate rate is fixed
£m £m £m  years
sterling 27752 8610 19142 61 179
euro 321 321 –
dollar 571 571 –
total borrowings at 31 march 2004 28644 9502 19142
total borrowings at 31 march 2003 25745 6787 18958
in addition to the fixed debt above the group has a £50 million of forward start interest rate swap floating to fixed that commences during
the financial year ending 31 march 2005 this forward start interest rate swap has an interest rate of 50 and a duration of 30 years
floating rate borrowings bear interest based on libor
b investments in interest earning assets analysed by currency after taking account of various
currency swaps entered into by the group
2004 2003
currency £m £m
sterling deposits 683 237
euro deposits 03 03
us dollar deposits 22 17
total 708 257
investments in interest earning assets comprise shortterm deposits placed on money markets with a maturity date not exceeding one year
and certificates of deposit
of the total £708 million interest earning assets there is £312 million £290 million of sterling deposits and £22 million of us dollar
deposits of cash held on short term deposit as security for external insurance as part of derwent’s reinsurance obligations
the company has £317 million of sterling held on short term 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 – 14 318 01 303
dollar –––––
total – 14 318 01 303
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 52 severn trent plc annual report and accounts 2004
17 financial instruments continued
d borrowings analysed by maturity date
loans
repayable by
instalments
any of which
are payable other
after five repayment finance 2004 2003
overdrafts years terms leases total total
£m £m £m £m £m £m
group
borrowings due within one year note 15 321 – 4424 124 4869 5376
borrowings due after one year
between one and two years –– 1370 137 1507 939
between two and five years –– 4623 615 5238 3912
after more than five years –– 12894 4136 17030 15518
total borrowings due after one year note 16 –– 18887 4888 23775 20369
321 – 23311 5012 28644 25745
loans repayable partly or wholly after five years comprise
rate of interest 2004 2003
 £m £m
european investment bank loans – 20092013 3061 2239 2206
sterling bond stwuf – 2024 61 2983 2982
sterling bond stwuf – 2029 63 4131 4126
euro medium term notes 4153 3541 1976
other loans – 03
12894 11293
severn trent water utilities finance plc
company
the company has loans and overdrafts totalling £6531 million 2003 £4802 million which are repayable within five years and £237
million 2003 £524 million repayable after more than five years
e borrowings facilities
the group has the following undrawn committed borrowing facilities available at 31 march 2004
2004 2003
£m £m
expiring within one year 1600 –
expiring after two years 6000 6000
7600 6000
on 5 april 2004 the group put in place a new £700 million revolving credit facility rcf this facility replaced two existing facilities – a
£600 million rcf and a £160 million bilateral facility the new rcf comprises two elements a £200 million tranche maturing in 364 day
with a one year termout option and a £500 million tranche having a five year maturity
in addition the group also has an overdraft facility of £800 million 2003 £750 million of which £479 million 2003 £432 million
remains undrawn at the yearend
notes to the financial statements
continued 53 severn trent plc annual report and accounts 2004
f fair values of financial instruments
financial instruments by category
assetliability 2004 2003
book value fair value book value fair value
£m £m £m £m
primary financial instruments held or issued to finance the group’s operations
shortterm deposits 708 708 257 257
cash at bank and in hand 292 292 372 377
borrowings falling due within one year 4772 4778 5350 5349
borrowings falling due after more than one year 23564 24610 20202 21555
derivative financial instruments held to manage the currency and interest rate profile
interest rate swaps and similar instruments – 650 – 938
currency instrument – cross currency swaps 308 308 193 153
currency instrument – investment hedge 153 153 60 55
total net debt 27491 29193 25056 27306
other longterm assetsliabilities
interest in own shares 32 102 65 70
other fixed asset investments 10 10 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
g unrecognised gains and losses on hedges at 31 march 2004
total net
gains
gains losses losses
£m £m £m
unrecognised gains and losses on hedges at 1 april 2003 113 1016 903
arising in previous years that were recognised in the year 11 10 01
arising before 1 april 2003 that were not recognised in the financial year 124 1026 902
unrecognised gains and losses arising during the financial year 63 315 252
unrecognised gains and losses on hedges at 31 march 2004 61 711 650
expected to be recognised
in one year or less 03 70 67
in later years 58 641 583
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 54 severn trent plc annual report and accounts 2004
18 provisions for liabilities and charges
a group provisions comprise the following
2004 2003
£m £m
deferred tax 4629 4258
other provisions 1091 973
5720 5231
deferred tax
the group’s full deferred tax liability calculated at a tax rate of 30 2003 30 is
2004 2003
£m £m
capital allowances 8783 8459
tax lossesother timing differences 196 289
undiscounted provision for deferred tax 8587 8170
discount 3958 3912
discounted provision for deferred tax 4629 4258
provision at start of year 4258 3663
deferred tax charge for year 363 595
exchange translation differences 08 –
provision at end of year 4629 4258
other provisions
other provisions comprise
charged
balance at acquired credited to transferred balance at
1 april with profit and exchange to other 31 march
2003 subsidiaries loss account adjustments utilised categories 2004
£m £m £m £m £m £m £m
environmental and landfill restoration 621 145 115 03 106 01 771
restructuring 24 – 54 – 57 – 21
insurance 211 – 106 – 94 – 223
onerousloss making contracts 108 12 26 – 27 01 68
other 09 – 02 01 02 – 08
973 157 251 04 286 – 1091
as more fully explained in notes 1 j and k 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 up to 30 years thereafter discounting is applied included in the £115
million charge against profit in the current year is £21 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 1l 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 £26 million credit in relation to onerous contract provisions includes an exceptional £27 million release of excess cisopen vision
contract provisions see note 3
b company provisions are as follows
2004 2003
£m £m
deferred tax 06 14
notes to the financial statements
continued 55 severn trent plc annual report and accounts 2004
19 called up share capital
2004 2003
£m £m
total authorised share capital
520175751 ordinary shares of 65
5
⁄19p 3395 3395
total issued and fully paid share capital
345115866 2003 343976362 ordinary shares of 65
5
⁄19p 2252 2244
a shares issued during the year
1076938 ordinary shares of 65
5
⁄19p were issued at 535p 799p 528p 473p 568p 548p or 536p under the group’s employee sharesave
scheme and 62566 ordinary shares of 65
5
⁄19p were issued at 625p or 688p under the group’s share option scheme formerly executive
share option scheme the aggregate consideration in respect of these allotments was £56 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 177294 ordinary shares of 65
5
⁄19p 2003 451063 ordinary shares of 65
5
⁄19p
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 358044 ordinary shares of 65
5
⁄19p 2003 192840 issued under the share
incentive plan these shares are held in trust on behalf of employees who are beneficially entitled to the shares
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 2004 were as follows
number of shares
date of grant normal date of exercise option price 2004 2003
january 1996 2003 535p – 103595
january 1997 2002 or 2004 528p 130429 136623
january 1998 2003 or 2005 799p 48004 215181
january 1999 2004 or 2006 831p 130371 139437
january 2000 2003 2005 or 2007 473p 1470399 2479683
january 2001 2004 2006 or 2008 568p 940485 1005844
january 2002 2005 2007 or 2009 548p 995143 1084157
january 2003 2006 2008 or 2010 536p 1509927 1628944
january 2004 2007 2009 or 2011 592p 1268299 –
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 2004 were as follows
number of shares
date of grant number normal date of exercise option price 2004 2003
december 1993 0 19962003 625p – 61716
june 1998 31 20012008 1005p 58633 80568
june 1999 38 20022009 934p 57009 59379
june 2000 33 20032010 688p 67011 67955
july 2001 39 20042011 738p 106796 110861
june 2002 58 20052012 720p 125965 125965
july 2003 55 20062013 6805p 134219 –
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 2004 were as follows
number of shares
date of grant number normal date of exercise option price 2004 2003
june 1998 17 20012008 1005p 36689 36905
june 1999 41 20022009 934p 90266 116312
june 2000 64 20032010 688p 236238 257351
july 2001 71 20042011 738p 300822 313187
june 2002 86 20052012 720p 338873 355098
july 2003 85 20062013 6805p 306532 – 56 severn trent plc annual report and accounts 2004
20 reserves
share capital profit
premium redemption and loss
account reserve account
£m £m £m
group
at 1 april 2003 287 1561 18084
retained profit for the year –– 221
shares issued 48––
exchange movement on translation of overseas results and net assets – – 356
translation differences on foreign currency hedging – – 103
tax on translation differences on foreign currency hedging – – 31
at 31 march 2004 335 1561 18021
share capital profit
premium redemption and loss
account reserve account
£m £m £m
company
at 1 april 2003 287 1561 25225
retained loss for the year –– 383
shares issued 48––
at 31 march 2004 335 1561 24842
the profit attributable to shareholders dealt with in the accounts of the company was £1237 million 2003 £1388 million in the previous
three 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 2004 cumulative goodwill written off directly against group reserves amounted to £2877 million 2003 £2877 million
21 acquisitions and disposals
a acquisitions in 20032004
during the year the group acquired interests in the following businesses
name of business date of acquisition
services
pk microbiology services inc 4 april 2003
townley 4 august 2003
aerotech laboratories inc 16 march 2004
waste management all asset acquisitions
tony bacon refuse 10 april 2003
hales waste control 19 june 2003
sws 7 july 2003
bridington 1 august 2003
enviro waste 21 november 2003
all acquisitions were accounted for using the acquisition method
from the dates of acquisition to 31 march 2004 the acquisitions added £952 million to turnover hales waste £866 million and a loss
before interest of £20 million hales waste loss before interest £51 million including estimated synergies after charging exceptional
restructuring costs of £109 million all of which relate to hales waste and goodwill amortisation of £50 million hales waste £46 million
as a result of the integration of the acquisitions with the group’s existing businesses it has not been possible to separately identify 
their cashflows
hales waste was a division of rmc uk limited and as such did not prepare separate statutory accounts as a result the figures quoted
below have been extracted from management accounts with adjustments made for the elements of the hales waste business that were not
purchased by biffa and for tax assumed to be 30
in its financial year to 31 december 2002 it is estimated hales waste made a profit after tax and minority interests of £64 million
notes to the financial statements
continued 57 severn trent plc annual report and accounts 2004
for the period since that date to the date of acquisition the may management accounts of hales waste rolled forward to the date of
acquisition indicate 
£m
turnover 545 
operating profit 46 
profit before taxation 46 
taxation and minority interests 14
profit for the financial period 32
the book value of net assets acquired and their provisional fair value were as follows
hales waste acquisition
accounting book value
policy other and provisional
book value revaluations harmonisation adjustments fair value total
£m £m £m £m £m
tangible fixed assets 501 – 84 08 409
stocks 10 – – 03 07
debtors due within one year 05––– 05
cash at bank and in hand 02––– 02
creditors due within one year 15 – – 03 12
provisions for liabilities and charges 36 – 109 12 157
467 – 193 20 254
consideration – paid 1411
– expenses paid 46
total consideration 1457
goodwill 1203
all fair value adjustments above will be reviewed during 20042005 any revision will be accounted for as adjustments to goodwill in that year
significant other adjustments of £08 million to fixed assets relate to the write down of specialised vehicles associated with onerous
contracts the £12 million other adjustment in provisions relates to provisions for onerous contracts
there is no material impact on deferred tax from this acquisition
other acquisitions
accounting book value
policy other and provisional
book value revaluations harmonisation adjustments fair value total
£m £m £m £m £m
tangible fixed assets 56 – – 56
stocks 04––– 04
debtors due within one year 27 – – 11 16
cash at bank and in hand 01––– 01
creditors due within one year 09 – – 01 10
79 – – 12 67
consideration – paid 239
– expenses paid 04
total consideration 243
goodwill 176
none of the other 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 20042005 any revision will be accounted for as adjustments to goodwill in that year
b acquisitions in 20022003
a further £02 million of goodwill on prior year acquisitions has resulted from additional consideration which had not been accrued 58 severn trent plc annual report and accounts 2004
22 commitments and contingent liabilities
a investment expenditure commitments
2004 2003
£m £m
contracted for but not provided in the financial statements 2120 2002
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
2004 2003
land and land and
buildings other buildings other
£m £m £m £m
within one year 37 12 11 11
between one and five years 88 53 40 41
after five years 38 – 38 –
163 65 89 52
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 ssap 24 uses the results of the last formal actuarial valuation to determine the group’s
pension charge thus the group’s pension charge in 20032004 is based on formal actuarial valuations as at the dates set out 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
as the uk waste pension scheme and the severn trent mirror image pension scheme are closed to new entrants the age profile of scheme
participants is expected to rise and hence service costs are also expected to rise in the future a formal 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 2003
severn trent mirror image pension scheme 31 march 2003
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 £18 million 2003 £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
as from 1 april 2004 the stwps has been amended with new defined benefit and defined contribution sections introduced as a result the
scheme’s name has been changed to the severn trent pension scheme
notes to the financial statements
continued 59 severn trent plc annual report and accounts 2004
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
as the uk waste pension scheme and the severn trent mirror image pension scheme are closed to new entrants the age profile of scheme
participants is expected to rise and hence service costs are also expected to rise in the future
the results of these valuations at the above dates including the unfunded arrangement for senior staff as at 31 march 2004 were 
as follows
stwps others total
£m £m £m
market value of assets 7937 1333 9270
present value of scheme liabilities 7448 1721 9169
surpluses 489 – 489
deficits – 388 388
net surplusdeficit 489 388 101
ignoring amounts which may or may not be recoverable and deferred tax
the unfunded supplemental scheme is revalued each year using the assumptions used in the most recent formal actuarial valuation of the
severn trent senior staff pension scheme
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 in payment and deferment 25
discount rate 57
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 the contributions continued at this level in 20032004 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 2004 amounted on average to 139 of pensionable payroll the regular cost of
stwps to the group in the year to 31 march 2004 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 £302 million 2003 £243 million £282 million 2003 £230 million of this charge
relates to the group’s defined benefit schemes including unfunded charge and £20 million 2003 £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
formal actuarial valuations of the stwps and the stssps are currently being undertaken as at 31 march 2004 see financial review –
pensions on page 16 for further information
b frs 17 ‘retirement benefits’ – additional disclosures
the actuarial liabilities and the market values of the assets at 31 march 2004 of the group’s defined benefit schemes and the unfunded
arrangement for senior staff details of which are provided above have been assessed by the group’s actuaries in accordance with the
requirements of frs 17
the approximate weighted average of the major assumptions used by the actuary to calculate scheme liabilities under frs 17 are
31 march 2004 31 march 2003 31 march 2002
valuation method projected unit projected unit projected unit
price inflation 275 225 250
salary increases 425 375 400
pension increases 275 225 250
discount rate 550 525 600 60 severn trent plc annual report and accounts 2004
23 pensions and retirement benefits continued
the assets and liabilities in the schemes and expected rates of return were
at 31 march 2004
total fair
longterm rate value at
of return 31 march
expected at stwps others 2004
31 march 2004 £m £m £m
equities 850 5958 903 6861
gilts 466 924 470 1394
corporate bonds 550 131 15 146
property 658 463 66 529
cash 375 383 55 438
total market value of assets 7859 1509 9368
present value of scheme liabilities 10989 2054 13043
net deficit in schemes before deferred tax 3130 545 3675
net group
total after
total deferred deferred
deficit tax asset tax
£m £m £m
total schemes at 31 march 2004 3675 1103 2572
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 deferred total after
deficit tax asset deferred tax
£m £m £m
total schemes at 31 march 2003 3251 975 2276
at 31 march 2002
longterm rate total fair 
rate of return value at 31
expected at 31 stwps others march 2002
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 
notes to the financial statements
continued 61 severn trent plc annual report and accounts 2004
total deferred net group
recoverable tax total after
surplus liability deferred
deficit asset tax
£m £m £m
schemes in surplus 341 102 239 
schemes in deficit 160 48 112
total schemes at 31 march 2002 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 2004 and
31 march 2003 would be as follows
2004 2004 2003 2003
reserves net assets reserves net assets
£m £m £m £m
excluding net pension surplus 18021 22193 18084 22198
net pension liabilitysurplus under frs 17 2572 2572 2276 2276
net liabilities already recognised in accounts under 
ssap 24 net of deferred tax 24 24 22 22
including net pension surplus 15473 19645 15830 19944
the weighted average employer contributions rates to all group defined benefit schemes expressed as a percentage of pensionable payroll
were 149 in the year ended 31 march 2004 2003 145
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 under frs 17 would have been as follows
analysis of amounts that would have been charged to operating profit
for the year ended 31 march 2004
stwps others total
£m £m £m
loss on settlements and curtailments 08 – 08
current service cost 309 42 351
total operating charge 317 42 359
loss on settlement and curtailment relates to the hales acquisition 
for the year ended 31 march 2003
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
for the year ended 31 march 2004
stwps others total
£m £m £m
expected return on scheme assets 447 83 530 
interest on scheme liabilities 463 90 553
net return 16 07 23
for the year ended 31 march 2003
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  62 severn trent plc annual report and accounts 2004
23 pensions and retirement benefits continued
history of experience gains and losses and analysis of amounts that would have been recognised in the statement of total recognised
gains and losses
for the year ended 31 march 2004
stwps others total
actual return less expected return on scheme assets
amount £m 1163 161 1324 
percentage of scheme assets 148 107 141
experience gains and losses arising on the scheme liabilities
amount £m 113 60 173
percentage of scheme liabilties 10 29 13
changes in assumptions underlying the present value of scheme liabilities
amount £m 1278 189 1467
actuarial loss recognised in the statement of total recognised gains and losses
amount £m 228 88 316
percentage of scheme liabilties 21 43 24
for the year ended 31 march 2003
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 liabilties 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 liabilties 354 209 331
the following table reconciles the movements in pension scheme deficits during the period
for the year ended 31 march 2004
stwps others total
£m £m £m
deficits in the scheme at the beginning of the year 2803 448 3251
contributions 234 40 274 
current service cost 309 42 351
acquisition loss 08 – 08
other financial costs 16 07 23
actuarial loss 228 88 316
deficit in scheme at end of year 3130 545 3675
notes to the financial statements
continued 63 severn trent plc annual report and accounts 2004
for the year ended 31 march 2003
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 income 120 14 134 
actuarial loss 3184 361 3545
deficit in scheme at end of year 2803 448 3251
24 cash flow statement
a reconciliation of profit before interest to operating cash flows
2004 2003
£m £m
operating profit 3907 3330
depreciation charge 2999 2911
amortisation of goodwill 298 677
profit on sale of tangible fixed assets – 67
deferred income movement 21 40
provisions for liabilities and charges 231 127
utilisation of provisions for liabilities and charges 286 304
decrease in stocks 92 51
increase in debtors 372 298
increase in creditors 483 440
net cash inflow from operating activities 7331 6827
see reference in note 4 to the profit on disposal of tangible fixed assets in 20022003
the depreciation charge includes a £43 million exceptional charge in 20022003
the goodwill amortisation charge includes a £425 million exceptional charge in 20022003
provisions for liabilities and charges includes a £27 million credit in 20032004 and £60 million credit in 20022003 in respect of
exceptional onerous contract provisions charged to the profit and loss account in 20012002
b returns on investments and servicing of finance
2004 2003
£m £m
interest received 35 22
interest paid 1303 1255
interest element of finance lease rental payments 215 234
net cash outflow for returns on investments and servicing of finance 1483 1467
c capital expenditure and financial investment
2004 2003
£m £m
purchase of tangible fixed assets 5406 4981
grants received 356 325
sale of tangible fixed assets 256 138
loans advanced to associates and joint ventures 53 10
loans repaid by associates and joint ventures 08 09
movements in other fixed asset investments 04 01
investment in own shares 32 20
net cash outflow for capital expenditure and financial investment 4875 4540 64 severn trent plc annual report and accounts 2004
24 cash flow statement continued
d acquisitions and disposals
book and provisional
fair value of assets acquired
2004 2003
£m £m
acquisitions
tangible fixed assets 465 11
current assets 32 16
liabilities 179 11
provisional fair value of net assets acquired excluding net borrowings 318 16
goodwill – capitalised 1379 65
consideration for businesses acquired 1697 81
cashdebt of businesses acquired 03 04
net consideration 1700 77
satisfied by
cash consideration relating to current year acquisitions 1700 66
deferred consideration relating to current year acquisitions – 11
1700 77
cash consideration – as above 1700 66
cash consideration relating to previous years’ acquisitions not accrued 02 06
cash settlement of opening accrued consideration 04 43
1706 115
e liquid resources comprise amounts held via shortterm deposits with a maturity date of less than one year
f financing
2004 2003
£m £m
loans advanced 7373 5569
repayments of amounts borrowed 4965 4417
new finance lease funding 423 –
finance lease capital repaid – 11
increase in debt 2831 1141
receipts from shares issued net of expenses 56 33
net cash inflow from financing 2887 1174
g analysis of changes in net debt
at 31 march cash acquisitions other non exchange at 31 march
2003 flow disposals cash changes movement 2004
£m £m £m £m £m £m
cash at bank and in hand 432 37 03 – 47 445
overdrafts note 15 318 14 – – 11 321
114 51 03 – 58 124
debt due within one year note 15 5004 580 – – – 4424
debt due after one year note 16 15811 2988 – 90 02 18887
finance leases notes 15 and 16 4612 423 – 22 01 5012
25427 2831 – 68 03 28323
shortterm deposits 257 452 – – 01 708
total 25056 2430 03 68 60 27491
notes to the financial statements
continued 65 severn trent plc annual report and accounts 2004
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 t w j lowth
m j bettington n h manning
w r a de jonghe f a osborn
m c flower r b tate
d r knott
biffa waste services limited
coronation road cressex high wycombe
hp12 3tz
telephone 01494 521221
directors
m j bettington t w j lowth
b j griffiths n h manning
p t jones m l saville
d r knott r b tate
uk waste management limited
coronation road cressex high wycombe
hp12 3tz
telephone 01494 521221
directors
m j bettington t w j lowth
d r knott
biffa waste management limited
coronation road cressex high wycombe
hp12 3tz
telephone 01494 521221
directors
m j bettington t w j lowth
d r knott
biffa treatment nv
robert schumanplein 6 bus 5 
1040 brussels belgium
telephone 0032 2 257 92 00
incorporated and operational in belgium
directors
m j bettington k smits
p canivet w tytgat
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 s 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
l f 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
l f 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
25 principal subsidiary undertakings and their directors
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 services limited
formerly severn trent water purification
limited
park lane minworth sutton coldfield 
west midlands b76 9bl
telephone 0121 313 2300
directors
m j ashley r g piper
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
l f 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
l f 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 g piper
severn trent laboratories limited
stl business centre torrington avenue
coventry cv4 9gu
telephone 024 764 21213
directors
r s brydon jannetta r a henton
a w gibson i d stanford 66 severn trent plc annual report and accounts 2004
property
severn trent property limited
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
property development
directors
g p f inge v j o’connell
p a ludlow a s perelman
j s r haynes
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
m c inns 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 j c mann
pp davies p k tandon
j e langlois 
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
p p davies m r wilson
b duckworth
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 s brydon jannetta k j kelly
h collins villemaire
en novative technologies 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 s brydon jannetta k j kelly
h collins villemaire
aerotech holdings 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
h collins villemaire k c wheatstone
j miller
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 r picken
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 k j kelly
l f graziano g mollere
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 j w bostock
rt bell d j jordan
pj blantern p c wood
severn trent retail services limited
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
retail services company
directors
b duckworth n j budden
jh bailey d j jordan
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
as at 7 june 2004 67 severn trent plc annual report and accounts 2004
five year summary
2004 2003 2002 2001 2000
restated
£m £m £m £m £m
profit and loss account
turnover group and share of joint ventures 20185 18558 17991 16859 15802
less share of joint ventures’ turnover 34 38 48 43 136
turnover 20151 18520 17943 16816 15666
profit before interest goodwill amortisation and exceptional items 4406 4098 4188 4002 4658
goodwill amortisation 298 252 265 174 64
profit before interest and exceptional items 4108 3846 3923 3828 4594
exceptional items 116 408 170 155 647
net interest payable 1680 1594 1590 1611 1207
profit on ordinary activities before taxation 2544 1844 2163 2062 2740
current taxation on profit on ordinary activities 333 248 161 124 221
deferred taxation 363 595 423 524 –
profit on ordinary activities after taxation 1848 1001 1579 1414 2519
equity minority interests 07 09 06 04 –
dividends 1620 1576 1576 1545 1540
retained profitloss for the financial year 221 584 03 135 979
net assets employed
fixed assets 58071 54806 53957 53098 47946
net liabilities excluding net debt 2667 2321 2082 1902 2122
provisions for liabilities and charges 5720 5231 4804 4180 960
49684 47254 47071 47016 44864
financed by
called up share capital 2252 2244 2240 2236 2317
reserves 19917 19932 20700 20663 23150
total shareholders’ funds 22169 22176 22940 22899 25467
minority shareholders’ interest 24 22 14 12 03
net debt 27491 25056 24117 24105 19394
49684 47254 47071 47016 44864
statistics
earnings per share 535p 289p 459p 412p 738p
earnings per share before exceptional items and deferred tax 614p 581p 632p 610p 928p
dividends per share 4704p 459p 459p 450p 450p
dividend cover before exceptional items in all years and before
deferred tax in 2004 2003 2002 and 2001 13 13 14 14 20
gearing 1239 1129 1051 1052 761
ordinary share price at 31 march 761p 716p 738p 6945p 565p
average number of employees – water and sewerage 4998 4780 4662 4837 5144
– other 10795 9867 9710 9220 7724
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 68 severn trent plc annual report and accounts 2004
shareholder information
shares held by category 
of shareholder
 of total shareholders
1 individual and 
joint accounts 915
2 others 85
shares held by category 
of shareholder
 of total ordinary shares
1 individual and 
joint accounts 134
2 others 866
annual general meeting
27 july 2004 at 230pm at the national exhibition centre
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
crest members may appoint a proxy electronically via lloyds tsb
registrars id 7ra01
shareholdings
analysis of shareholdings at 31 march 2004
percentage number of percentage
of total ordinary of ordinary
number of shareholders shares shares
shareholdings shareholders  million 
1499 57871 590 113 33
500999 22882 233 157 46
10004999 15714 160 247 72
50009999 630 06 42 12
1000049999 496 05 103 29
5000099999 151 02 104 30
over 100000 345 04 2685 778
98089 1000 3451 1000
others eg insurance companies nominee companies banks pension funds other
corporate bodies limited and public limited companies
forwardlooking statements
this document contains certain ‘forwardlooking statements’ with
respect to severntrent’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 economies and markets in which the
group operates changes in the regulatory and competition
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 written or verbal forwardlooking statements made in this
document or made subsequently which are 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 forward
looking statements
not an offer
this document is not an offer to sell exchange or transfer any
securities of severn trent plc or any of its subsidiaries and is not
soliciting an offer to purchase exchange or transfer such securities
in any jurisdiction securities may not be offered sold or transferred
in the united states absent registration or an applicable exemption
from the registration requirements of the us securities act of 1933
as amended
21 1
2 this is severn trent
severn trent plc is a leading
environmental services group
providing water waste and utility
services we aim to increase
shareholder value by providing
integrated solutions to
environmental problems and by
grasping the growth opportunities
created by new legislation and new
requirements in the private and
public sectors
firmly embedded in our corporate
strategy is a commitment to
corporate responsibility and sound
financial management
you can find out more about severn
trent plc and the businesses within
our group by visiting our website
wwwseverntrentcom
contents
01 financial highlights
02 chairman’s statement
04 group chief executive’s review
06 core businesses at a glance
08 review of operations
15 corporate responsibility
16 financial review
18 board of directors
20 directors’ report
25 remuneration report
32 directors’ responsibilities in relation to the financial statements
33 independent auditors’ report to the members of severn trent plc
34 group profit and loss account
35 balance sheets
36 group cash flow statement
36 reconciliation of net cash flow to movement in net debt
37 statement of total recognised gains and losses
37 reconciliation of movements in shareholders’ funds
38 notes to the financial statements
67 five year summary
68 shareholder information
annual review 2004
you can view and download a copy of the group’s
annual review and summary financial statement 
on our website at wwwseverntrentcomreports2004 
or request a copy free of charge by contacting us using
the details on the back cover of this report
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 november
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 2004
interim dividend paid 6 april 2004 
proposed final dividend payable 1 october 2004 
you can find out more about severn trent and the businesses within
our group by visiting our websites
wwwseverntrentcom provides information about the group including
our corporate responsibility activity and shareholder information
you can find out about the products and services we offer by visiting
our business sites
wwwstwatercouk
wwwbiffacouk
wwwstlinccom
wwwstlanalyticalcouk
wwwseverntrentservicescom
wwwstwaterinternationalcom
wwwaseriticom
wwwworksuitecom
wwwstretailservicescouk
wwwstutilityservicescouk
wwwseverntrentpropertycom
wwwhaswellcouk
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 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
wwwseverntrentcomreports2004 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
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 and 50 tcf pulps from plantations
and sustainable forests in addition the printing process is taken into
account – this report is printed by pillans and waddies who operate
an environmental management system certified to iso 14001
designed and produced by tayburn
severn trent plc
2297 coventry road
birmingham b26 3pu
united kingdom
telephone 44 0121 722 4000
severn trent plc annual report and accounts 2004
severn trent plc
annual report and accounts 2004 severn trent plc
annual review 2004 this is severn trent
severn trent plc is a leading
environmental services group
providing water waste and utility
services we aim to increase
shareholder value by providing
integrated solutions to
environmental problems and by
grasping the growth opportunities
created by new legislation and new
requirements in the private and
public sectors
firmly embedded in our corporate
strategy is a commitment to
corporate responsibility and sound
financial management
you can find out more about severn
trent plc and the businesses within
our group by visiting our website
wwwseverntrentcom
contents
01 highlights
02 chairman’s statement
04 group chief executive’s review
06 core businesses at a glance
08 summary review of operations
15 corporate responsibility
16 financial review
18 board of directors
20 independent auditors’ statement
20 summary directors’ report
22 summary profit and loss account
23 summary group balance sheet
23 summary group cash flow statement
24 summary renumeration report
27 shareholder information
annual report and accounts 2004
you can view and download a copy of the group’s
annual report and accounts on our website at
wwwseverntrentcomreports2004 or request a copy
free of charge by contacting us using the details on 
the back cover of this report 1 severn trent plc annual review 2004
dividend
final dividend of 2927p bringing 
the total for the year to 4704p
group turnover
up 88 to £20151m £18520m
group profit before interest 
tax goodwill amortisation and
exceptional items

up 75 at £4406m
goodwill amortisation £298 million and exceptional items of £116 million
earnings per share
535p 289p before exceptional
items and deferred tax 614p 581p
customer service and quality
uk’s top performing water 
and sewerage company in 
ofwat’s 20022003 overall
performance assessment
leadership
we hold market leadership 
positions in the uk waste market 
and in environmental testing
in the us and the uk
highlights
group profit before tax 
before exceptional items 
£m
group turnover
£m
00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04
earnings per share
before exceptional items 
and deferred tax 
pence
dividends per share
pence
15666 
16816
17943
18520
20151
3387 
2217
2333
2252
2428
928 
610
632
581
614
4500 
4500
4590
4590
4704 2 severn trent plc annual review 2004
chairman’s statement
• good full year results
• increased overall profits from nonregulated businesses
• severn trent water continues to outperform
group profit before interest tax goodwill 
amortisation and exceptional items

up 75 at
£4406 million
we have enhanced our dividend policy such 
that barring unforeseen circumstances fullyear
dividends per share would be a minimum of
4704p up to the end of the current review 
period in march 2005
business performance
severn trent produced a good performance in 20032004
excluding the impact of exchange rates turnover rose in all the core
businesses of water waste and laboratories we have worked hard to
balance the expectations and needs of different parties – employees
customers investors regulators and communities sound daytoday
management is combined with a longterm commitment to
sustainability
much of our management focus over the year has concerned the
preparation of our draft and final amp4 business plan for ofwat
setting out our proposed investment plans for 20052010 we are
confident in our ability to meet new targets for this period just as 
we are confident that we will continue to outperform our amp3
regulatory contract in respect of 20022003 severn trent water 
has the leading position in ofwat’s overall performance assessment
opa of water and sewerage companies our charges are also
among the lowest in the uk and under current plans will be the
lowest by 2010
whilst developing the future strategy of our regulated business we
have pressed ahead with developing biffa as one of the leading
waste management companies in the uk  the biggest event during
the year being the acquisition of the former hales business
severn trent water and biffa are sharing expertise and technology 
in wastewater disposal and energy generation and biffa is using
severn trent facilities in its important integrated management
contract for leicester city council we expect such synergies to
create further opportunities in the future
services delivered good profits in 20032004 severn trent
laboratories developed its capabilities in several new fields including
mould severn trent services benefited from the management
actions taken in 2002 in the water purification business
reflecting our commitment to environmental leadership severn
trent was named as the leading utility in the dow jones
sustainability index for the third consecutive year this is the first
time that any utility has won this category three times in a row
group results
group turnover was £2015 million an increase of 88 over last
year the turnover of the nonregulated businesses increased by
127 to £1161 million representing 548 of the group total
turnover from water and sewerage increased by 42 to £957
million group profit before interest tax goodwill amortisation and
exceptional items was up 75 to £441 million the water and
sewerage business was up by 38 to £338 million the group’s
nonregulated businesses in total were up 181 to £123 million
representing some 27 of the group total
group profit before interest tax and exceptional items was £411
million £385 million group profit before interest and tax was 
£422 million £344 million
the board is proposing a final dividend of 2927 pence 2856 pence
to be paid on 1 october 2004 this would give a total dividend for
the year of 4704 pence an increase of 25 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 4704 pence
for the period of amp4 from 1 april 2005 the outcome of the
amp4 price review will be a critical input in the determination of the
group’s dividend policy accordingly the board intends to consider
its dividend policy for the period from 1 april 2005 to 31 march
2010 following the finalisation of the amp4 price review
based on ssap24 the group expects a significant additional pension
charge in 20042005 that is provisionally estimated to be of the
order of around £30 million to £35 million net of amounts allocated
to own work capitalised with broadly around two thirds to three
quarters of this amount expected to be attributable to severn trent
water however given the preliminary nature of these estimates it is
goodwill amortisation £298 million and exceptional profits of £116 million 3 severn trent plc annual review 2004
marisa cassoni stepped down as a pension trustee and we are
grateful for her valuable contribution during a time of change in 
the pensions arena i would also like to thank martin flower for 
his continuing work as chairman of the remuneration committee
and as senior independent director
i am sad to say that i shall be standing down as chairman as of 
31 december 2004 after nearly nine years on the board i expect
my successor to be appointed well before then
naturally my thanks must also go to the staff of severn trent
businesses all over the world our continuing ability to meet our
objectives and serve our stakeholders is due to their hard work
commitment and levels of expertise 
outlook
although the group expects significant additional pension charges 
in 20042005 we consider that overall our core businesses –
severn trent water biffa and laboratories – in terms of experience
market position financial strength and reputation provide a good
platform for the future with the group well positioned to capitalise
on opportunities clearly the future will also bring challenges sound
management and cost control will therefore remain a key element in
our strategy for consolidating our position as the uk’s leading
integrated environmental services business and increasing
shareholder value
david arculus
chairman
quite possible that the actual additional pension charge as a result of
these valuations could be materially different from these estimates
see financial review – pensions
management and staff
robert walker will reach retirement in february 2005 having
completed nearly six years as group chief executive his
contribution and legacy are considerable 
we are delighted that robert’s successor will be colin matthews 
who joined the board as a nonexecutive director in october 2003
colin has already had a distinguished career at transco british
airways and hays where he has been chief executive for the last 
two years we are very fortunate to have secured a man of his
talents as our leader for the next few years
alan perelman will be retiring as group finance director as of 31
august 2004 and will be replaced by mark wilson currently director
of finance and regulation in severn trent water i would like to thank
alan for his dedicated service and wish him well in his retirement
brian duckworth has decided to stand down as managing director 
of severn trent water and from the severn trent plc board at the end
of august but he will continue as an employee of the group until he
leaves in march 2005 thus ensuring his expertise is available to help
complete the regulatory process for the amp4 review brian has
served severn trent for 30 years with distinction and we thank him
for his outstanding contributions to the group and the water industry
not just in the midlands but nationally and internationally as well
three new non executive directors martin houston colin matthews
and john smith are already making a positive impact on the board’s
work we were sorry to lose eric anstee following his appointment as
chief executive of the institute of chartered accountants we thank
him for his contribution to the board’s work not least as outgoing
chairman of the audit committee
john smith took over chairmanship of the audit committee from
eric anstee the environment committee has been renamed the
corporate responsibility committee to give a truer reflection of its
work and from now on it will always be chaired by the group chief
executive the former chair derek osborn is still playing a leading
role on that committee 4 severn trent plc annual review 2004
1 water 45 £9567m
2 waste 30 £6331m
3services 18 £3812m
4others 7 £1471m
2
1 4
turnover by business
 of group total in 20032004
3
group chief executive’s review
group results are ahead of a year ago and our core businesses 
– water waste and laboratories – are in good shape these three 
businesses accounted for 83 of group revenues and over 90 
of group operating profit
our aim is to establish severn trent as the 
uk’s leading supplier of environmental goods 
and services and as a major provider of
environmental solutions to the large and 
growing us market
i am pleased to report a good allround set of results for my last full
year as group chief executive our success has been achieved by
concentrating on our five strategic fundamentals
• giving priority resources and management attention to the core
businesses of water waste and laboratories
• in terms of acquisitions focusing significant attention on uk waste
with smaller or bolt on acquisitions in laboratories
• improving or disposing of underperforming assets
• driving for cost reduction and operating efficiencies in all
businesses
• exploiting group synergies in areas like businesswide cross 
selling initiatives and better integrating the group’s purchasing
human resources and operating assets
water
severn trent has benefited from the price increase from december
2002’s successful interim price determination idok and also from
continuing efforts and initiatives to manage costs and control upward
pressures in the business
water remains firmly on track to outperform against its regulatory
contract for the current five year period and meet its own stretching
targets on the operating expenditure front we’re confident of
achieving £75 million of gross operating cost efficiencies by the final
year 20042005 ofwat’s target was £62 million
the business continues to deliver efficiencies against its £2 billion
investment programme and we’re confident we will deliver average
capital expenditure efficiencies of around 5 over the amp3 period
measured against the rpi index we are on track to deliver all our
capital investment obligations
our final business plan as submitted to ofwat for the next five year
period aims to achieve the right balance between customer and
investor expectations our ambition is to deliver noticeable service
improvements to our customers whilst maintaining household bills
that deliver value for money at the same time we aim to achieve
appropriate financial returns to our investors – all of this of course
against a background of financial prudence and careful balance
sheet management
for the average bill our final business plan would mean an increase
of £57 per household by 20092010 in real terms on the basis 
of all the plans submitted to the regulator this would leave severn
trent with the lowest average household bill for any water and
sewerage company by 20092010
waste
we are now starting to see legislative and regulatory change
impacting on the way we handle and treat our waste
in the industrialcommercial sector where the waste generated
represents 79 of the uk’s total waste tonnage tighter packaging
regulations are being implemented to help customers biffa has a
well established compliance scheme called biffpack that has seen
membership grow by 10 in the past year
the landfill directive requires 65 of biodegradable municipal
waste to be diverted from landfill by 2020 responsibility to ensure
this happens has been assigned to each waste disposal authority
and 25 year pfi treatment and disposal contracts are now being let
with biffa well placed to compete for them 
biffa is well positioned to take advantage of these future
opportunities particularly now that the acquisition of hales has
firmly established biffa as one of the largest integrated waste
management companies in the uk
against this industry framework biffa has achieved a solid overall
result particularly in light of the uncertain economic background
this reflects the strength of biffa’s management and its integrated –
collection landfill and special waste – business model 5 severn trent plc annual review 2004
outlook
the past year’s results have clearly benefited from a focused
strategy disciplined management and tight cost controls throughout
the business and we are confident that we have the right platform
for the future
as this is my last report as group chief executive i must stress that
everything severn trent has achieved has been made possible by
the enthusiasm and skill of all my colleagues i shall miss them
greatly but i know they will give my successor the same excellence
and dedication which will serve the group well in the future
robert walker
group chief executive
services
excluding the impact of exchange rates turnover and profit before
interest tax and goodwill amortisation improved this satisfactory
result principally reflects the pk mould testing acquisition in april
last year which has enhanced our core laboratories business and
also the significant management actions taken in 20022003 in our
water purification division to rationalise and improve the cost base
and refocus the business in growth segments
severn trent laboratories continued to drive forward with its core
strategies of firstly maximising the base business share in the
traditional routine environmental testing areas by low cost high
quality service turnround and secondly expanding into higher
growth more attractive new areas of testing such as mould and
specialist microbiology
our remaining us businesses water purification and operating
services made significant strides over the year probably the most
progress of any of our businesses
water purification particularly has made significant improvements
this partly reflects the downsizing in 2002 and more effective it
systems and manufacturing processes but most recently it reflects
more aggressive and targeted sales efforts behind new and higher
margin products and technologies
the operating services business continues to strengthen contract
operations has delivered organic growth in revenue and we believe
this is now the third largest business of its type in the us the
division is currently bidding on 200 million of new business
potential in the next six months in addition to the recently signed
65 million fresh kills landfill contract in new york
core businesses
we are confident that our core businesses of water waste and
laboratories are in fine shape to take the group forward they each
share common characteristics of leadership scale and low cost
advantage among the best management teams in each sector
consistent strong past performance and longterm opportunities 
for profitable growth 6 severn trent plc annual review 2004
key strengths business
water
waste
laboratories
core businesses at a glance
severn trent generates revenues of £20 billion and employs over 15000
people across the uk us and europe we are increasingly focused on the
industrial and commercial sectors to help business customers meet
environmental objectives

track record of outperforming
regulatory contract

strong management structures and
cost controls

good account management for
business customers

excellent customer service quality 
and biodiversity record
severn trent water provides essential water and
sewerage services to around 3 million households
in england and wales it also provides products 
and services to business customers in its region 
it has a good track record on service levels gross
operating cost efficiencies and quality and
environmental compliance
for further information please visit
wwwstwatercouk

specialist fleet achieving high levels 
of fuel and operational efficiency

over 30 landfill sites with good
geographic coverage and high
environmental standards 

special waste solutions based on
innovation and new technologies

strong it infrastructure delivering
synergies and efficiencies 

good strategic partnerships in recycling
biffa is one of the uk’s largest integrated waste
management businesses providing collection
landfill and special waste services to local
authorities and industrialcommercial clients 
it has around 90000 customers and an
infrastructure that includes 34 operational landfill
sites and 13 special waste treatment facilities 
it also has 11 operational facilities in belgium
for further information please visit wwwbiffacouk

record of innovation and being at the
forefront of new markets

history of successful acquisitions and
organic growth

reputation for good customer service

client list of leading us and uk
companies
severn trent laboratories stl is the largest
environmental testing company in the world
providing environmental analysis services in 
the us and the uk it has 31 laboratories and 
21 service centres in the us and 4 laboratories 
and 1 service centre in the uk 
for further information please visit 
wwwstlinccom wwwstlanalyticalcouk 7 severn trent plc annual review 2004
performance highlights outlook

turnover up 42 at £9567 million

topperforming water and sewerage company in ofwat’s 
latest overall performance assessment

total amp3 gross operating efficiencies of some £69 million 
£17 million more than ofwat targets

started £16 million programme to generate 13 
of annual energy needs from renewable resources
in december 2004 ofwat will announce the final determination
of its amp4 price review for the years 20052010 until this is
finalised there is some uncertainty about the outlook for all water
companies however severn trent water is well on track to
outperform ofwat’s amp3 targets for the five year period to
20042005 it is also well positioned to benefit from the new
competition framework for large customers which comes into
operation for 2005

turnover up 239 at £6331 million

acquisition of hales strengthens position as one of the uk’s
largest waste management companies

extended contracts with local authorities working towards
achieving new recycling targets

boosted capacity to generate power from landfill gas 
to around 90mw in the uk
legislation and taxation will drive demand in the uk for
alternative methods of waste disposal in the uk aided by its
experience in belgium biffa is in a strong position to capitalise
on this its expertise in special waste will also help it use the
openings created by the landfill directive in the uk

in local currency turnover in the us up some 8 and in the
uk up 2 

acquisition of pk a microbiology business with a high profile
in the growing market for indoor air quality testing in the us

acquisition of aerotech strengthens presence in southwestern
us and puts stl at forefront of markets for indoor air quality
food microbiology and industrial hygiene

opening of new service centres in us extends 
geographical strength
the stl strategy to be a leader in highend markets continues 
to present new opportunities in emerging markets such as indoor
air quality and mould food microbiology endocrine disrupters
and perchlorate testing in the us legislation concerning harbour
infrastructure and dredging cleanup also positions stl favourably
for the high growth market of sediments analysis in the uk eu
legislation like the water framework directive the groundwater
directive and the landfill directive will create new openings 
for growth
for information on our other businesses visit the 
following websites
severn trent services wwwseverntrentservicescom
severn trent water international wwwstwaterinternationalcom
severn trent systems wwwaseriticom  wwwworksuitecom
severn trent retail services wwwstretailservicescouk
severn trent utility services wwwstutilityservicescouk
severn trent property wwwseverntrentpropertycom
charles haswell and partners wwwhaswellcouk 8 severn trent plc annual review 2004
performance
in 20032004 turnover from water and sewerage services increased
by 42 to £9567 million contributing to this rise in turnover were
the price increases resulting from the idok of december 2002 in
which ofwat allowed our request to raise prices by 21 above
inflation from april 2003 the idok increase benefited turnover by
some £19 million in addition increased consumption by metered
customers during the dry hot summer is estimated to have added
some £25 million to turnover in the year
profit before interest tax goodwill amortisation and exceptional
items was up 38 to £3379 million goodwill amortisation was
£13 million £01 million and profit before interest tax and
exceptional items was £3366 million £3254 million including an
exceptional profit of £198 million from the sales of land and
property profit before tax and interest was £3564 million £3254
million given its magnitude the profit from the sale of fixed assets
of £67 million was not treated as exceptional in 20022003 there
was an additional pension charge net of amounts allocated to own
work capitalised of £18 million for water and sewerage to reflect
the valuation of pension schemes see financial review – pensions
outperforming the regulatory contract
our programme for delivering gross operating cost efficiencies 
in line with ofwat’s amp3 targets for 20002005 continued to 
make good progress at 31 march 2004 total amp3 gross operating
cost efficiencies amounted to approximately £69 million some £17
million more than our ofwat target 
in 20032004 we invested approximately £442 million in
programmes to improve drinking water quality the effluent from 
our sewage treatment works and a range of customer service
improvements we continued to deliver efficiencies against our
investment programme of approximately £2 billion for the 5 
year period 
the 20052010 price review
a critical activity in 20032004 was the preparation of our strategic
business plan for amp4 ofwat’s fourth asset management plan
since privatisation which covers investment and prices for the
period 20052010 in drawing up our business plan we have had 
summary review of operations
water
severn trent water achieved another
good performance in 20032004
building on the strong foundations
we have put down in previous years
we remain well positioned to
outperform our ofwat targets for 
the period 2000 to 2005
turnover up 42 at
£9567m
profit before interest tax goodwill 
amortisation and exceptional items

up 38 at
£3379m
goodwill amortisation £13 million and exceptional profits of £198 million 9 severn trent plc annual review 2004
impact on the environment and communities of the midlands 
we support hundreds of projects across the region all with a
sustainability agenda
energy management is an important aspect of our commitment to
environmental leadership in 20032004 we embarked on a £16
million programme that will enable us to generate 27 megawatts of
power more than 13 of our energy needs through new chp units
outlook
the amp4 pricing review is enormously important to the outlook 
for severn trent water we are confident that the regulators
understand that severn trent has achieved significant efficiencies 
in its work but that further investment is still needed it is widely
understood that prices for customers will have to rise but the
average household water bill in the midlands will still be among 
the best value in the country 
our record against all the current amp3 regulatory contract and 
on ofwat’s overall performance assessment combined with the
opportunities that competition will create gives us a good platform
for the future
to balance often conflicting pressures and expectations on price
levels and investor returns environmental and customer service
improvements efficiency and operational risk ofwat will make an
interim determination on amp4 in august 2004 and a final
determination in december
water supply
low autumn rainfall in 2003 meant that the year was one of the
driest on record as a result some of our reservoirs were less than
60 full at the start of winter however we maintained water supply
to all our customers 
in july 2003 we changed the way we collected data on water
consumption by our customers based on this and other new
information we recalibrated our total leakage on the company’s and
customers’ pipes we worked with ofwat to establish new leakage
targets for march 2005 and we have started to put in place
improved monitoring systems to measure losses
competition and commercial customers
the water act 2003 which came into force in november set a
framework for introducing competition in the water industry for
business customers using more than 50 mega litres of water a year
we look forward to the arrival of competition in 2005 and we are
confident that we can offer an excellent product range and account
management to business customers inside or outside our region
environment and community
corporate responsibility is firmly embedded in severn trent’s
business and we recognise that our work has a significant 
levels of service
severn trent water is the uk’s top
performing water and sewerage
company in ofwat’s overall
performance assessment
case study
outperforming our sector on service
and quality
ofwat’s most recent overall performance
assessment for 20022003 showed severn trent
water was the uk’s topperforming water and
sewerage company in 20032004 we have
maintained and improved the quality of our
service to customers
each year ofwat publishes a report
on the levels of service provided by
water companies to their customers
the report includes an overall
performance assessment opa
which compares companies’
performance on measures like water
supply sewerage services customer
service and environmental impact 
it is thus an extremely important
gauge of the quality of service that
companies are delivering
the most recent opa was published
in march 2004 and evaluated
companies’ performance in
20022003 we were delighted that
the assessment showed severn trent
water to be the uk’s topperforming
water and sewerage company once
our revised leakage targets had been
taken into account
although the assessment covers 
the previous year we are confident
that we maintained the quality and
efficiency of the service we deliver 
indeed we improved on it in
20032004
two it projects implemented in
20032004 contributed to improved
efficiency and customer service 
the first uses mobile technology 
to improve the efficiency of severn
trent’s mobile workforce by
delivering information such as job
details location maps biodiversity
plans and health and safety
information direct to their laptop
computer
the second – integrated customer
experience or ice – improves
customers’ experience when they
phone our operations call centre
information from different systems is
presented to customer service agents
in a single intuitive format enabling
them to complete customer requests
more quickly and efficiently
new technology
improving customer service and
efficiency by delivering information
direct to employees wherever they 
are working 10 severn trent plc annual review 2004
performance
waste management’s turnover increased by 239 to £6331 million
benefiting from the contribution of hales’ turnover turnover in the
uk rose to £5739 million an increase of 255 belgian turnover
rose by 104 to £592 million biffa’s profit before interest tax
goodwill amortisation and exceptional items was £792 million up
166 on the previous year goodwill amortisation was £213 million
there was an exceptional charge for hales integration costs of £109
million there was also an additional pension charge of £18 million
for waste management to reflect the valuation of pension schemes
see financial review – pensions profit before interest and tax was
£470 million
on 19 june 2003 biffa acquired hales from rmc uk limited for
approximately £126 million and paid approximately £15 million
exclusive of vat to ing to purchase vehicles and equipment used in
the hales’ business being a total consideration of approximately £141
million excluding transaction costs biffa targeted synergies of around
£75 million per annum in terms of run rate from the integration of
hales the integration process has gone well and is now close to
completion in 20032004 hales contributed including synergies an
estimated £104 million to waste management’s profit before interest
tax goodwill amortisation and exceptional items excluding the impact
of acquisitions hales £104 million other acquisitions £02 million
and of increased pension charges waste management’s profit before
interest tax goodwill amortisation and exceptional items was up by
37 compared to last year the results for the year include the cost 
of settling legal disputes and insurance credits of a broadly similar
scale these items have been allocated to uk central costs so as to
provide more comparable figures yearonyear for the three uk
business units of collection landfill and special waste
collection
biffa’s collection division works with around 90000
industrialcommercial customers across the uk and operates almost
50 local authority contracts despite softness in the
industrialcommercial market collection turnover in the uk
increased to £3606 million £2707 million in 20032004
including the contribution of hales profit before interest tax goodwill
amortisation and exceptional items was £516 million up 183
excluding the estimated contribution from hales collection’s profit
before interest tax and goodwill amortisation was down by around
summary review of operations
waste
the two main stories in our waste
business in 20032004 were the
acquisition of hales and the way that
legislation has continued to create
new opportunities in all areas of the
business – collection landfill and
special waste the hales’ acquisition
means that biffa is now even better
placed than previously to capitalise
on these new opportunities
turnover up 239 at 
£6331m
profit before interest tax goodwill amortisation
and exceptional items

up 166 at
£792m
goodwill amortisation £213 million and exceptional costs of £109 million 11 severn trent plc annual review 2004
2 in 20032004 with local authorities striving to meet statutory
recycling targets biffa was able to extend several contracts with
additional services success in gaining important new contracts on
the industrialcommercial side continued capitalising on biffa’s
national coverage of depots and supporting it infrastructure 
landfill
although legislation and increases in landfill tax are likely to 
drive demand for alternative methods of disposal in the future
landfill remains the primary waste disposal route in the uk biffa
currently operates 34 landfill sites and it has been recommended
for the iso14001 environmental management accreditation for its
landfill division
landfill turnover in the uk was up 152 to £1631 million in
20032004 landfill volumes excluding the estimated impact of
hales were up by around 3 and unit revenues were up 1
landfill’s profit before interest tax and goodwill amortisation was 
up 176 to £340 million including the hales’ contribution and 
up by around 7 if that contribution is excluded
special waste
the special waste division’s turnover increased by 116 to £502
million in 20032004 profit before interest tax and goodwill
amortisation for the division was £70 million excluding the
contribution from hales this figure was up by around 7 on 
the previous year with its range of products and technologies for
handling special waste the division is well placed to exploit the
opportunities offered by the landfill directive and hazardous waste
regulations biffa’s power generation activity is a key component of
the special waste division in 20032004 we boosted our capacity 
to generate power from landfill gas to around 90 mw in the uk 
successful integration
the hales acquisition is already
delivering cost efficiencies 
by improving vehicle utilisation
throughout the enlarged 
collection infrastructure
unique market position
biffa is well placed to capitalise on
opportunities created by legislation
driving the need for alternative
methods of waste disposal
case study
hales acquisition strengthens biffa’s
market leadership
in buying hales in june 2003 biffa has
strengthened its geographical coverage 
its product range and its customer base
june 2003 saw biffa acquire 
hales waste control and rmc
environmental services in a £141
million deal that established biffa as
one of the largest integrated waste
management companies in the uk
hales was one of the top 10 waste
companies in the uk with some
27000 industrialcommercial
customers 38 operating depots 
8 operational landfill sites and 
5 transfer stations its wastesafe
service for small amounts of 
special waste is well known in the
marketplace and complements
biffa’s existing services for bulk 
liquid waste
with around 1000 employees and
450 industrialcommercial collection
vehicles the hales’ integration was 
a substantial project employee 
and union consultations had to be
undertaken collection depots and
landfill sites had to integrated into
the biffa system sales forces had 
to be integrated and crucially 
a common it system had to be 
set up 
the acquisition of hales gives 
biffa greatly increased coverage in
london and east anglia enabling it
to offer better geographical coverage
to customers with multiple sites 
it also greatly increases biffa’s
operational landfill void in the 
south of england in addition the
acquisition is delivering important
cost efficiencies through improved
fleet utilisation it also enhances the
combined company’s ability to
capitalise on new market
opportunities
integrated municipal contracts
in the previous financial year biffa won a £300 million integrated
waste contract with leicester city council to manage all its waste
collection and disposal facilities development and implementation
of the contract progressed well in 20032004
community and environment
biffa donates its landfill tax credits to community and environment
projects through the biffaward fund changes to the landfill tax
credit scheme by the government in 2003 have reduced the scope
of biffaward’s contributions to projects and the type of projects it
can fund however almost £75 million was given to community and
environment projects in 20032004
belgium
biffa’s turnover in belgium was up 104 to £592 million a change
in belgian legislation means that turnover there is now reported
gross of the recovery for environmental taxes making it consistent
with the uk so this has boosted turnover figures for the year
without the effect of that change turnover would have been up 
by about 6 profit before interest tax and goodwill amortisation 
in belgium was £32 million
outlook
biffa’s market position comprising strengths in collection landfill
and special waste continues to provide a positive outlook for biffa’s
future development and performance legislation and increases in
landfill tax will continue to drive demand for alternative methods 
of waste disposal in the uk biffa’s experience in belgium means 
we are well placed to capitalise on these opportunities as do our
recognised high standards in pretreatment and recycling 12 severn trent plc annual review 2004
performance
severn trent services’ turnover decreased by 11 to £3812 million
in 20032004 with a little under 80 of turnover arising in the us
excluding the impact of the exchange rates turnover increased by
around 6
profits before the impact of exchange rates were also affected by the
weak dollar profit before interest tax goodwill amortisation and
exceptional items was £387 million up 132 excluding the effect
of exchange rates this figure increased by around 16 on the
previous year
goodwill amortisation for the services group was £72 million £85
million profit before interest and tax was £315 million loss of
£211 million
severn trent laboratories
turnover in laboratories the largest business within services 
was down 10 to £1701 million but excluding the impact of
exchange rates turnover increased by around 7 turnover in 
the us in us was up by around 8 and turnover in the uk £
was up by around 2 a little over 80 of laboratories’ turnover
arose in the us
the us performance took place against a background of difficult
markets – for example federal budget deficits have led to cutbacks
in the united states environmental protection agency funding
nevertheless excluding the impact of exchange rates the
laboratories business has continued to grow turnover
leading the market
severn trent laboratories expanded its geographical reach in
20032004 opening new service centres in five us states its
operations now comprise 31 laboratories and 21 service centres in
the us 4 laboratories and 1 service centre in the uk and a large
fleet of mobile laboratories
stl’s market leadership is not just sizerelated it also takes the form
of being at the forefront of emerging areas in contaminant testing 
summary review of operations
the services group
our us and other international
businesses delivered good results in
20032004 often in difficult market
conditions strong management had
a positive impact on margins and
profits and the high levels of
innovation and service achieved in
different parts of this group were
recognised through prestigious
industry awards and accolades
turnover down 11 at
£3812m
profit before interest tax and goodwill
amortisation

up 132 at
£387m
goodwill amortisation of £72 million 13 severn trent plc annual review 2004
operating services
the operating services division handles operating and maintenance
contracts for customers in the us contract operations saw positive
effects from the weak us economy since state and local
municipalities faced with budget deficits are increasingly looking to
publicprivate partnerships to improve the operating efficiency of
water and waste treatment sites
turnover in 20032004 grew 17 but excluding the impact of
exchange rates turnover was up by around 7 
in contrast budget deficits are a negative backdrop for the pipeline
services business providing minimal support for infrastructure
projects however last year’s restructuring programme and a
strategy of cutting costs and focusing on the core business of repair
rehabilitation and flow metering work has borne fruit
our metering services business achieved good growth in
20032004
severn trent water international stwi provides a range of
management and consultancy services in europe and the developing
world contracts include a publicprivate partnership to operate
water and wastewater services in umbria begun in 20022003
and longstanding publicprivate partnerships with the flemish
government in belgium aquafin and in portugal with the joint
venture company indaqua
acquisitions
in april 2003 stl acquired pk microbiology services a
microbiology and mycology testing business recognised as a pioneer
in mould testing in march 2004 stl acquired aerotech
laboratories inc aerotech another leader in this field targeted
acquisitions have been a key part of stl’s strategy for growing its
business and will continue to be so 
outlook
whilst economic conditions in the us are likely to remain difficult
there are a number of positive market opportunities emerging
market areas such as indoor air quality and mould food hygiene
and testing for perchlorate all provide good opportunities for
profitable growth on the uk side of the business eu legislation 
is also creating opportunities
severn trent services
severn trent services improved its performance before the impact
of exchange rates the restructuring programme initiated in
20022003 has led to a more focused management approach 
and tighter controls on costs this in turn has helped to increase
margins
water purification
the water purification division was one of the main objects of last
year’s restructuring programme and the benefits are visible cost
reductions have brought a substantial improvement in margins
turnover decreased by 53 to £829 million but excluding the
impact of exchange rates turnover was up by around 2
scale and breadth
severn trent laboratories leadership
position and wide spectrum of services
remains key to its success
improved performance
the services group has made
significant progress
case study
new markets in the us
targeted acquisitions have extended stl’s
capabilities in key emerging markets
indoor air quality “iaq” is a major
market opportunity in the us and
elsewhere there is widespread
concern that mould and toxic mould
could be linked to ‘sick building
syndrome’ and this is creating major
legal and financial problems for
property owners and insurers 
in april 2003 severn trent
laboratories put itself at the
vanguard of this market when it
acquired pk microbiology services
a microbiology business whose staff
have worked on many highprofile
mouldtesting cases in the us
eleven months later severn 
trent also acquired aerotech
laboratories in arizona the us’s
largest commercial indoor air quality
laboratory aerotech’s analytical
services include mould testing food
microbiology industrial hygiene and
bioterrorism response analysis as
well as giving stl a huge presence in
the valuable and growing iaq market 
the acquisition also accomplishes
other important goals
first food microbiology is another
emerging market and represents 
an area of synergy to stl’s existing
testing range second it closes a 
gap in stl’s western us coverage
phoenix arizona is one of the fastest
growing cities in the us and this
growth is promoting environmental
work relating to infrastructure
development the opportunities for
stl thus go far beyond the market
potential of iaq 14 severn trent plc annual review 2004
summary review of operations
other businesses
sales in the uk north america 
and australia led to an improved
performance from severn trent’s
systems group in property 
there was good progress on 
current projects
systems
total turnover for the severn trent systems group in 20032004
was £636 million up 38 on the previous year profit before
interest and tax was £50 million 
aseriti supplies it solutions and services for the private public and
utility sectors in the uk usa and australia 
in the uk it won a substantial contract to supply software and
expertise to utility infrastructure provider core utility solutions ltd 
it has managed and implemented substantial projects for severn
trent water and severn trent plc these included an it solution to
transfer information on the region’s 62000 mile pipe network from
paper maps onto mobile computers its latest cis solution was 
also delivered and installed to severn trent water in preparation 
for competition
in the us south maryland electric cooperative – one of the ten
largest electric cooperatives in the us – went live with cisopen
vision in november 2003 cisopen vision is also being used
successfully by snohomish public utilities department following its
implementation in january 2003 in australia the energy utility
citipower based in victoria went live with cisopen vision for
269000 customers in september 2003 energy supplier etsa
based in south australia went live with 765000 customers in
november 2003 and energy utility alinta went live with the new
upgrade of cisopen vision in february 2004 with 480000
customers alinta now has 99 of its retail customers on cisopen
vision and uses the system to generate 8000 bills per day
worksuite the work management business of the systems group
was restructured into a stand–alone wholly owned subsidiary based
in houston its market is the uk and primarily north america where
it enjoys a leadership position the company completed major new
sales to fpl enbridge and northeast utilities it also advanced its
largescale deployments of its integrated office web and wireless
technology at fpl national grid and a scottish power affiliate in 
the uk
property engineering consultancy and insurance
total turnover from these businesses in 20032004 was £835
million £730 million profit before interest and tax was £32
million £55 million the reduction in profits reflects the result from
haswells the group’s engineering consultancy business
property
severn trent property was originally set up to exploit the
development potential of land surplus to severn trent water’s
requirements it also undertakes projects on sites acquired from 
third parties
in 20032004 good progress was made on virtually all current
projects at thorpe park leeds – the largest outoftown office park in
the north of england – further buildings were completed for ws
atkins plc boxwood plc and the university of leeds major
infrastructure which will give direct access onto the m1 motorway is
now completed 
at daventry international rail freight terminal planning permission
to extend the project by up to 2 million sq ft was granted during
autumn 2003 during the year a major regional sorting hub was
completed for royal mail remaining undeveloped land within the
first phase of the project was sold to another developer
at warwick work has commenced at tournament fields adjacent 
to junction 15 of the m40 the site has planning permission for
office and business use infrastructure including roads and
drainage is under construction 
engineering 
charles haswell  partners offers consultancy services in a wide
range of engineering and environmental disciplines in 2003 two
awards paid tribute to the company’s expertise new civil engineer
and the association of consulting engineers recognised it as the top
mediumsized consulting engineer in 2003 secondly it was joint
winner of the british geotechnical society’s fleming award for its
work on design and construction of a section of the dublin port
tunnel project
other activity in 20032004 included working with yorkshire water
services as a key member of its eastern area wastewater capital
solution team it also made a major contribution to the successful
delivery of severn trent water’s capital programme
charles haswell  partners introduced its environmental
management system in 20032004 which is accredited to the iso
140012001 standard
insurance
derwent insurance based in guernsey severn trent’s captive
insurer provides insurance cover to severn trent group companies
turnover up 95 at 
£1471 million
profit before interest tax and exceptional items

£55 million
exceptional provision release of £27 million 15 severn trent plc annual review 2004
corporate responsibility
severn trent’s corporate vision is 
to be at the forefront of the
environmental services industry our
corporate values of environmental
leadership service and quality are
enshrined in our code of business
principles and conduct they define
our business culture and guide 
our strategies
environmental solutions
our objective is to provide services
that solve environmental problems
respond to new environmental
expectations and deliver sustainable
development
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 at wwwseverntrentcom
environment
the goal of environmental leadership influenced work at every level
in 20032004 projects ranged from auditing biffa’s landfill sites
against its biodiversity action plan to detailed planning on how 
our businesses will adapt to the existing effects of climate change
mitigation of our own environmental impact is also central and a
major achievement in this area is our electricity generation from
renewable resources
workplace
we are committed to providing a safe working environment for our
employees and all other people that come into contact with the
company and in 20032004 the number of reportable health and
safety incidents declined we also seek to ensure equality of
opportunity through a diverse workforce 
recognised leadership
severn trent has been named as 
the leading utility in the dow jones
sustainability index for the third
consecutive year
community
severn trent’s community affairs programme focuses on
environmental education the built environment and the natural
environment investment takes cash and noncash forms and we 
are a member of the percent club of businesses which donate at
least 1 of pretax profits to the community employee volunteering
is an important part of this
marketplace
in all areas of severn trent’s business in 20032004 our
commitment to corporate responsibility also led to success in 
the marketplace for example severn trent’s levels of service 
were recognised in its leading position among water and sewerage
companies in ofwat’s overall performance assessment in 2003 
the laboratories business’s work on emerging new environmental
and health risks such as toxic mould is being rewarded with
continuing growth biffa’s experience in the isle of wight where it
diverted over 45 of the island’s waste from landfill is a good
platform for offering integrated waste management services to 
local authorities 
further commentary on severn trent’s commitment to corporate
responsibility in 20032004 is available in the company’s annual
stewardship report 16 severn trent plc annual review 2004
group results
group turnover was £20151 million £18520 million an increase
of 88 over last year the growth in turnover was mainly due to the
contribution of the nonregulated businesses which benefited from
the acquisitions made in the year the turnover of the nonregulated
businesses increased by 127 to £11614 million £10306
million representing 548 529 of the group total before the
elimination of inter segment trading turnover from water and
sewerage increased by 42 to £9567 million £9179 million 
goodwill amortisation was £298 million £252 million there 
was a net exceptional profit of £116 million loss of £408 million 
– see below 
group profit before interest tax goodwill amortisation and
exceptional items was up 75 to £4406 million £4098 million
the water and sewerage business was up by 38 to £3379 million
£3255 millionthe group’s nonregulated businesses in total were
up 181 to £1234 million £1045 million representing 268
243 of the group total before unrealised profit on inter segment
trading and corporate overheads
group profit before interest tax and exceptional items was £4108
million £3846 million group profit before interest and tax was
£4224 million £3438 million
after interest charges of £1680 million £1594 million group
profit before tax goodwill amortisation and exceptional items was up
89 at £2726 million £2504 million group profit before tax and
exceptional items was £2428 million £2252 million an increase of
78 group profit before tax was £2544 million £1844 million
the total tax charge for the year was £696 million £843 million 
of which current tax represented £333 million £248 million and
deferred tax was £363 million £595 million minority interests
were £07 million £09 million profit after tax and minority
interests was £1841 million £992 million
basic earnings per share were 535 pence 289 pence adjusted
basic earnings per share before exceptional items and deferred tax
were 614 pence 581 pence an increase of 57
operating activities generated a net cash inflow of £7331 million
the main cash outflows were capital expenditure and financial
investment of £4875 million equity dividends of £1577 million
acquisitions of £1706 million and net financing costs of £1483
million the increase in net debt was £2435 million
net debt at 31 march 2004 was £27491 million £25056 million
gearing reflecting the provision for deferred tax was 124 113
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 net exceptional profit in the year of £116 million
comprising the net of 
•a £198 million profit from the sale of fixed assets arising from
the sale of land and property by severn trent water given its
magnitude the profit from the sale of fixed assets was not treated
as exceptional in 20022003 £67 million
•a £27 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
•a charge of £109 million in waste management for hales’
integration costs
in 20022003 there was an exceptional charge of £408 million
comprising the net cost of a £468 million write down for
impairment in the net book value of some businesses within
services and 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
taxation
the charge for current tax was £333 million £248 million of
which £24 million was attributable to exceptional items the current
tax charge of £309 million attributable to profit after interest and
goodwill amortisation but before tax and exceptional items is an
effective rate of 127 110 the current tax rate has benefited
from an adjustment in respect of prior periods
pensions
ssap24 the applicable standard for severn trent uses the results 
of the last formal actuarial valuations to determine the pension
charge in the group’s accounts this principle has been followed 
in determining the group’s pension charge for 20032004
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
formal actuarial valuations have been undertaken for the stmips 
as at 31 march 2003 and for the ukwps as at 6 april 2003 given
the deterioration in the funding position of these two schemes since
their previous formal actuarial valuations there is an additional
pension charge net of amounts allocated to own work capitalised
of £41 million for the group in 20032004 reflecting the results of 
these valuations
the group’s pension charge in 20032004 in respect of the stwps
and the stssps is based on their formal actuarial valuations as at
31 march 2001 when these funds had a combined surplus of
around £46 million formal actuarial valuations of the stwps and
the stssps are currently being undertaken as at 31 march 2004 in
accordance with the normal triennial pattern of valuations given the
deterioration in the funding position of these two schemes since
their last formal actuarial valuations these valuations and the
analogous assessment of the group’s unfunded pension liabilities
for senior staff are expected to result in a significant additional
pension charge for the group in 20042005 based on ssap 24
this additional pension charge net of amounts allocated to own
work capitalised is provisionally estimated to be of the order of
around £30 million to £35 million with broadly around two thirds to
three quarters of this amount expected to be attributable to severn 
financial review 17 severn trent plc annual review 2004
trent water given the preliminary nature of these estimates it is
quite possible that the actual additional pension charge as a result of
these valuations could be materially different from these estimates
on an frs17 basis the estimated net position before deferred tax
of the group’s defined benefit pension schemes and the group’s
unfunded pension liabilities for senior staff was a deficit of
approximately £368 million as at 31 march 2004 as compared to a
deficit of approximately £325 million as at 31 march 2003 although
the value of assets has increased over the last year liabilities have
increased by a greater amount reflecting inter alia the updating of
mortality assumptions to be in line with current experience and to
include an allowance for expected further improvements and a
reduction in the real discount rate net of deferred tax the estimated
net deficit on an frs17 basis as at 31 march 2004 was
approximately £257 million on an frs17 basis the funding level
has improved from around 70 at 31 march 2003 to 72 at 
31 march 2004 
as at 31 march 2004 the group’s defined benefit pension schemes
had total assets of approximately £937 million of which around
73 was invested in equities
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
on 5 april 2004 severn trent put in place a new £700 million
revolving credit facility rcf this facility replaced two existing
facilities – a £600 million rcf and a £160 million bilateral facility
the new rcf comprises two elements a £200 million tranche
maturing in 364 days with a one year termout option and a £500
million tranche having a five year maturity
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 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 2004 interest rates for some
70 of the group’s net debt of £2749 million were so fixed at 
a weighted average interest rate of 61 for a weighted average
period of 179 years in addition the group has a £50 million
forward start interest rate swap floating to fixed that commences
during 20042005
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
in august 2003 moody’s investor services and standard  poor’s
lowered the long term credit rating of severn trent plc and severn
trent water limited
long term ratings severn trent severn trent
water limited plc
moody’s a2a3
standard  poor’s a a–
international accounting standards
the group will be required to prepare its financial statements 
under international accounting standards ias for the year ending
31 march 2006 with the group’s first published results under ias
being the 20052006 interim results
the group has commenced a programme of work to prepare for 
the adoption of ias an initial review has been undertaken to identify
the differences between ias and existing uk standards 
and group accounting policies a central project management team
has been formed to coordinate the transition process with working
groups from individual subsidiaries involved in the work with a 
view also to determining any additional data that may be required 
to be collected
some of the prospective standards are still under review by the
international accounting standards board and in addition the
group’s work in reviewing the impact of existing ias is still ongoing
hence at this time no definitive information on the impact on the
group of the adoption of ias is being provided however it seems
likely that the adoption of ias will increase the volatility of the
group’s reported results and impact its balance sheet
potentially significant changes arising from the adoption of ias are
currently thought to include accounting for financial instruments
retirement benefits fixed assets and renewals accounting deferred
tax and business combinations
supplementary information
for supplementary information including the group’s preliminary
results presentation see the severn trent website
wwwseverntrentcom
alan perelman
group finance director board of directors
david arculus ma msc chairman
58
mr arculus joined the board in may
1996 as a nonexecutive director and
was appointed chairman on 29 july
1998 he is a nonexecutive director
of barclays plc and was recently
appointed as a nonexecutive
director of mmo
2
 from 2002 to may
2004 he was chairman of earls court
 olympia group ltd and 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
john banyard bsceng freng fice
fciwem 59
mr banyard joined the board in
january 1998 he is an executive
director of severn trent water ltd
with responsibility for asset
management he is also a director of
uk water industry research ltd 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 51
mr bettington joined the board in
november 1994 he is the managing
director of severn trent’s waste
management business biffa waste
services ltd 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 52
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 55
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 ltd 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
board committees
membership of board committees is as
detailed below
audit committee
j b smith chairman
m l cassoni
f a osborn
secretary – p p davies
charitable contributions committee
b duckworth chairman
r m walker
secretary – p p davies
corporate responsibility committee
r m walker chairman
t d g arculus
m j bettington
r s brydon jannetta 
b duckworth
l f graziano 
j w oatridge
f a osborn 
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
p j gavan
j w oatridge
a s perelman
p k tandon
remuneration committee
m c flower chairman
m l cassoni
j d g mcadam
secretary – p p davies
nominations committee
t d g arculus chairman
m c flower 
j d g mcadam
f a osborn
secretary – p p davies
treasury committee
m l cassoni chairman
t d g arculus
t e jack
a s perelman
j b smith
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
18 severn trent plc annual review 2004 derek osborn cb 63
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 56
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
john smith fcca hon friba 46
mr smith joined the board on 3
november 2003 he is a member of
the h m treasury’s public services
productivity panel the accounting
standards board and the 100 group
of finance directors he is a fellow of
the chartered association of certified
accountants after training with a
firm of accountants mr smith joined
the british railways board moving
up over a period of 14 years to head
up their corporate demerger team 
in 1989 he moved to the bbc
becoming director of finance
property and business affairs in
1997 mr smith has held a non
executive directorship with vickers
plc was a member of the advisory
board of zurich financial services 
uk and was a director of the royal
television society 
robert walker ma 59
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 and baa plc
nonexecutive director
martin flower ba 57 
mr flower joined the board in june
1996 and is the senior independent
nonexecutive director at the end of
may 2004 he retired as chairman of
coats ltd where he had previously
been group chief executive
martin houston bsc msc dic 46
mr houston joined the board on 
1 september 2003 he is currently
executive vice president and
managing director of bg group’s
north american caribbean and
global liquefied natural gas
business and a member of the group
executive committee he joined bg
group in 1983 and has held a
number of technical and commercial
roles with a predominantly
international focus he has a bsc in
geology from newcastle university
and an msc in petroleum geology
from imperial college london he is
a fellow of the geological society of
london and sits on the board of
sigtto society of international gas
tanker  terminal operators ltd
colin matthews ma ceng 48 
mr matthews joined the board on 17
october 2003 he is a chartered
engineer who has worked in japan
france canada and the uk he
worked for the american general
electric company for nine years and
subsequently spent five years at
british airways first as director of
engineering then as director of
technical operations responsible for
all aircraft maintenance it and
procurement he then joined the
board of lattice group plc as group
managing director of transco until its
merger with the national grid he
has held his current position as ceo
of hays plc since november 2002
mr matthews holds a first class
degree in engineering from
cambridge university
john mcadam bsc phd 56
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
top row 
david arculus
robert walker 
alan perelman
brian duckworth
martin bettington 
colin matthews
john mcadam 
bottom row 
martin flower
marisa cassoni 
derek osborn
john smith 
john banyard
martin houston
19 severn trent plc annual review 2004 20 severn trent plc annual review 2004
independent auditors’ statement 
to the members of severn trent plc
we have examined the summary financial statement of severn trent plc
respective responsibilities of directors and auditors
the directors are responsible for preparing the summarised annual
review 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 2004 with the annual
financial statements the directors’ report and the 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 2004 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
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
remuneration report of severn trent plc for the year ended 31 march
2004 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
7 june 2004
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 these are described in more detail
together with a review of the group’s business and future
developments on pages 8 to 14
final dividend
subject to approval at the annual general meeting the
recommended final dividend of 2927p 2003 2856p net for each
ordinary share will be paid on 1 october 2004 to shareholders on 
the register at the close of business on 18 june 2004 this together
with the interim dividend of 1777p 2003 1734p per share which
was paid on 6 april 2004 brings the total for the year to 4704p
2003 4590p
share capital
resolutions will be proposed at this year’s annual general meeting
“agm” to renew the directors’ authority to
• allot relevant securities within the meaning of section 80 of the
companies act 1985
• issue equity securities for cash without first having to offer these
securities to existing shareholders and
• make market purchases of the company’s own ordinary shares
full details of these resolutions are included in the notice of the
agm which is circulated to all shareholders
substantial shareholdings
as at 7 june 2004 the company had been notified of the following
substantial shareholding
number of ordinary 
shares of 65
5
⁄19p each 
legal  general investment 
management limited 11259833 326
directors
a list of directors and their background details appear on pages 
18 and 19 details of their service contracts and emoluments can 
be found in the summary remuneration report on page 24 to 26
mr m j houston mr c s matthews and mr j b smith joined the
board as nonexecutive directors on 1 september 2003 17 october
2003 and 3 november 2003 respectively
mrs c tritton and mr e e anstee retired from the board on 30 july
2003 and 15 december 2003 respectively
in accordance with the company’s articles of association messrs 
j k banyard b duckworth m j houston c s matthews f a osborn 
j b smith and dr j d g mcadam retire at the agm and being
eligible offer themselves for reappointment the nominations
committee supports and recommends the proposed
reappointments 
the company has recently announced a number of changes
regarding its directors it has been agreed that mr t d g arculus will
step down as chairman of the board as he will soon be appointed
chairman of mmo
2
 however in order to provide continuity to the
board during a time of change and also assist in the finalisation of
severn trent water’s amp4 determination it was considered to be in
the best interests of the company for him to remain in post until 31
december 2004 mr r m walker will retire as group chief executive
on 2 february 2005 and will be succeeded by mr c s matthews 
mr a s perelman will retire as group finance director on 31 august
2004 and will be replaced by mr m r wilson mr b duckworth will
step down from the board at the end of august 2004 mrs r s
brydon jannetta will join the board as an executive director in
september 2004
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 
following the issue of a revised combined code on corporate
governance the “revised code” in july 2003 the company has
carried out a review of its corporate governance arrangements and
made changes as necessary and appropriate
as the revised code became effective for accounting periods
starting on or after 1 november 2003 this report has been 
prepared on the basis of the previous combined code on 
corporate governance the “code” however it is anticipated that
the company will be compliant with virtually all provisions of the
revised code for the new financial year 21 severn trent plc annual review 2004
throughout the year ended 31 march 2004 the company has been
in compliance with the provisions set out in section 1 of the code
the board
the board currently consists of five executive directors and eight
nonexecutive directors the board has reviewed the status of the
nonexecutive directors and has confirmed that with the exception 
of mr c s matthews as group chief executive designate it regards
them as being independent at the time of his appointment as
chairman of the company mr t d g arculus was considered to 
be independent however in accordance with the revised code 
he is now deemed not to be independent
employees
the group employed 15973 people as at 31 march 2004 2003
14890 of these 5099 32 were employed in the water business
5241 33 in the biffa waste business and 4781 30 in the
severn trent services businesses the numbers in biffa have
increased as a result of the acquisition of hales waste in 2003
approximately 29 of employees continue to be based outside the
uk mainly in the usa belgium and italy
the larger group companies now each have their own intranets
which form a major communication channel with their employees 
in addition to inhouse magazines and toolbox talks
group companies continue to maintain positive relationships with 
the recognised trade unions and with other elected representatives
the group’s annual meetings of the european consultative council
are a further opportunity to develop a dialogue with employee
representatives and promote their better understanding of the 
future issues facing our businesses in europe
the group has undertaken a major review of its pension strategy
with the objectives of reducing risk maintaining affordability and
demonstrating equity as a result of this review three new pension
options were made available to new employees from 1 april 2004
the group’s “lifestyle” flexible benefits scheme continues to expand
amongst uk based employees and with its introduction to biffa staff
in october 2004 will cover over 8000 employees 
the group continues to focus on the development of employees 
at all levels in biffa there has been a significant effort in
harmonising the driver training programme to incorporate the best
from the biffa and the hales driver training schemes
three of the training programmes in severn trent water received
awards the institute of leadership and management award for
excellence in supervisory management and the sector skills
council award for both the bsc in water and environmental
management and the partnership with warwick business school
all companies have the goal of making learning opportunities
available and accessible to all employees to this end many
companies are making learning resource centres available in 
elearning by intranet and internet providers these activities are all
complemented at senior manager level by the leadership
development programme which covers the top 120 managers 
group companies continue to meet legislative requirements of the
countries in which they operate in addition they further operate 
in compliance with the group’s code of business principles and
conduct and disclosure whistleblowing procedures
diversity
diversity policies are in place in each company in the group that
reflect the requirements of the locations in which they operate and
that also meet the aims of the company’s code of business
principles and conduct
the company continues to monitor the data on the diversity of 
the current and potential workforce the us businesses continue 
to demonstrate their lead in the group with the gender and ethnic
diversity of their workforces
on an ongoing basis the company benchmarks its policies and
practices in this area by taking guidance from best practice 
advisors such as the employers forum on disability and race 
for opportunity progress is regularly monitored by the corporate
responsibility committee
health and safety
this year the company has continued to develop a safety culture
fully integrated into all aspects of the way the business is managed
to help ensure that the actions taken are consistent with best
practice the main companies in the group have partnered with
external experts to develop behavioural safety initiatives involving
employees at all levels
work also continued on overarching group standards which apply to
all group companies wherever they operate and these standards will
address all key risk areas
health and safety is discussed at every board meeting in addition
the board receives sixmonthly reviews and other periodic reports
from the managing directors of the operating companies 
auditors
the auditors’ report on the full annual accounts of the group for the
year ended 31 march 2004 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
a resolution proposing the reappointment of
pricewaterhousecoopers llp as auditors will be put to the agm
by order of the board
p p davies llb solicitor 
group general counsel and company secretary 
7 june 2004 22 severn trent plc annual review 2004
continuing operations
total
acquisitions 2004 2003
£m £m £m £m
turnover 19199 952 20151 18520
operating costs before goodwill amortisation and exceptional items 15051 813 15864 14530
goodwill amortisation 248 50 298 252
exceptional integration costs – 109 109 –
exceptional provision release 27 – 27 60
exceptional impairment of goodwill and tangible fixed assets ––– 468
total operating costs 15272 972 16244 15190
group operating profitloss 3927 20 3907 3330
share of operating profit of joint ventures and associates 119 – 119 108
exceptional profit on disposal of fixed assets 198 – 198 –
profit before interest goodwill amortisation and exceptional items 4267 139 4406 4098
goodwill amortisation 248 50 298 252
profit before interest and exceptional items 4019 89 4108 3846
exceptional costs – 109 109 468
exceptional profits 225 – 225 60
profitloss before interest 4244 20 4224 3438
net interest payable 1680 1594
profit after interest before goodwill amortisation and exceptional items 2726 2504
goodwill amortisation 298 252 
profit after interest before exceptional items 2428 2252 
exceptional items 116 408 
profit on ordinary activities before taxation 2544 1844
taxation on profit on ordinary activities – current tax 333 248 
– deferred tax 363 595 
total taxation 696 843
profit on ordinary activities after taxation 1848 1001 
equity minority interests 07 09 
profit for the financial year 1841 992 
dividends 1620 1576 
retained profitloss for the financial year 221 584 
earnings per share pence
basic 535 289 
adjusted basic before exceptional items and deferred tax 614 581  
summary group profit and loss account
year ended 31 march 2004
important note the annual review and 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 2004 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
wwwseverntrentcomreports2004 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 27 23 severn trent plc annual review 2004
summary group balance sheet
at 31 march 2004
2004 2003
£m £m
fixed assets 58071 54806
current assets 6485 5831
creditors amounts falling due within one year 12237 12192
net current liabilities 5752 6361
total assets less current liabilities 52319 48445
creditors amounts falling due after more than one year 24406 21016
provisions for liabilities and charges 5720 5231
net assets 22193 22198
capital and reserves 22169 22176
minority shareholders’ interest equity 24 22
22193 22198
signed on behalf of the board who approved the accounts on 7 june 2004
david arculus alan perelman
chairman group finance director
summary group cash flow statement
year ended 31 march 2004
2004 2003
£m £m £m £m
net cash inflow from operating activities 7331 6827
dividends received from associates and joint ventures 19 16
returns on investments and servicing of finance 1483 1467
taxation 195 143
capital expenditure and financial investment 4875 4540
acquisitions 1706 115
equity dividends paid 1577 1575
net cash outflow before use of liquid resources and financing 2486 997
management of liquid resources 452 65
financing
increase in debt 2831 1141
issue of shares 56 33
2887 1174
decreaseincrease in cash 51 112 24 severn trent plc annual review 2004
remuneration committee
the remuneration committee determines on behalf of the board
the company’s policy on the remuneration of executive directors
and the chairman of the board the committee also determines the
remuneration policy for the next band of approximately 10 senior
executives
the policy framework for remunerating all senior executives is
consistent with the approach taken for executive directors
the committee is comprised exclusively of independent non
executive directors of the company the members of the committee
during the year were 
m c flower chairman
t d g arculus resigned 31 march 2004
j d g mcadam
m l cassoni appointed 27 february 2004
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 comply with the
combined code on corporate governance of the financial services
authority the ‘code’ in setting performance related remuneration
the committee has regard to the provisions set out in schedule a to
the code
advisers
to ensure that the company’s remuneration practices are market
competitive the committee has access to detailed external research
on market data and trends from experienced specialist consultants
the group chief executive and mr j w oatridge group services
director and the chairman of the board with effect from 
1 april 2004 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 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 seek
to 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 for 20042005 vary between 135 and 160
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 has with effect from 26 april 2004 adopted
guidelines which expect executive directors to have a minimum
holding of ordinary shares in the company the group chief
executive is expected to hold shares to the value of 15 x salary 
and other executive directors 1 x salary to be acquired over a
transitional period through a variety of share schemes all
employees are encouraged to hold shares in the company
external directorships
executive directors are encouraged to take on external nonexecutive
directorships though normally only one other ftse 100
appointment in order to avoid any conflicts of interest all such
appointments are subject to the approval of the nominations
committee 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 other than the
chairman 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 ordinary shares in the company which from may 2004
have to be retained for the period of their appointment
the nonexecutive directors do not have service contracts or
consultancy agreements with any group company
remuneration arrangements for executive directors
the remuneration arrangements for executive directors comprise
the following elements
• base salary and benefits
• annual bonus plan
• long term incentive plan
•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
individual performance and contribution and developments in the
relevant employment market
the nonsalary benefits for executive directors comprise the use of 
a motor car fuel private medical insurance life assurance and an
incapacity benefits scheme
summary remuneration report 25 severn trent plc annual review 2004
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
committee the maximum amount payable under the bonus
scheme in 20032004 was 50 of base salary 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 committee for the year ended 31
march 2004 are shown in the table of directors’ emoluments on
page 29 for the 20042005 financial year the bonus potential for
the group chief executive will be 60 and for the managing
director of biffa mr m j bettington will be 75 the bonus
potential for other executive directors remains at 50
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 2002 and 2003 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 1 april 2002
and 1 april 2003 mr r m 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 2004 award this will remain unchanged other than for
messrs j k banyard and b duckworth who will both receive an
allocation of 85 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 2003 award the
comparator group additionally contains northumbrian water plc 
for the executive directors the 2001 2002 and 2003 ltip awards
will be triggered if the company’s tsr performance is at the median
or above and the ep meets the scaled targets set ep is calculated
by reference to a post tax rate of return of 75 it is envisaged that
an ltip award will be made in 2004 and this will be subject to
similar performance targets
the performance period for allocations of shares made in 2001
ended on 31 march 2004 the remuneration committee has
determined based on the company’s tsr and ep performance over
the three year performance period that the executive directors are
entitled to 100 of the shares allocated
total shareholder return
year ended march –––––– severn trent plc – – – – ftse 100 index
source thomson financial
this graph looks at the value by 31 march 2004 of £100 invested
in the company on 31 march 1999 compared with the value of 
£100 invested in the ftse 100 index the ftse 100 was chosen 
as the comparator because the company is a constituent of 
that index
the other points plotted are the values at intervening financial 
yearends
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 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
20032004 £99000 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
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 and
the committee also intends to review the ongoing operation of the
ltip in the course of the forthcoming financial year
0
99 00 01 02 03 04
20
40
60
80
100
120
140
value £ 26 severn trent plc annual review 2004
directors’ service agreements and letters of engagement
the current policy of the 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
the current executive directors other than mr m j bettington are all
scheduled to leave on or before 31 march 2005 therefore by that
date the above contractual arrangements will cease going forward
it is intended that the appointments for all new executive directors
and also in the case of mr bettington will be on the basis of 12
months’ notice by either party
the new service agreements will also provide for a maximum
damages payment in the case of redundancy or termination in
breach of the agreement by the company of up to 175 of base
salary which was calculated as a conservative preestimate of the
value of salary fixed benefits and on target bonus any damages
payments will not be made automatically and will be subject to
phasing and mitigation it will also take into account a view of the
extent of poor performance on the part of the executive director 
the liquidated damages payment will not include awards which have
been made under the company’s ltip over which the committee
retains absolute discretion there are no specific contractual
payments or benefits which would be triggered in the event of a
change in control of the company
summary remuneration report
continued
directors’ emoluments
the emoluments of the chairman the executive directors and fees payable to the nonexecutive directors are as follows
basic salary and fees
benefits in annual total total
cash shares
2
total kind
3
bonus other
4
200304 200203
£000 £000 £000 £000 £000 £000 £000 £000
chairman and other
nonexecutive directors
t d g arculus chairman 1242 100 1342 232 – 60 1634 1548
e e anstee resigned 151203 236 13 249 – – 17 266 329
m l cassoni 379 28 407 – – 16 423 294
m c flower 488 28 516 – – 08 524 444
m j houston 157 18 175 – – – 175 –
c s matthews
1
136 – 136 – – – 136 –
j d g mcadam 264 28 292 – – 09 301 279
f a osborn 430 28 458 – – 10 468 502
a h simon resigned 260702 – – – – – – – 115
j b smith
1
144 – 144 – – – 144 –
c tritton resigned 300703 100 08 108 – – 01 109 329
executive directors
j k banyard 1900 – 1900 222 912 03 3037 2798
m j bettington 2925 – 2925 212 1320 – 4457 3338
b duckworth 2550 – 2550 240 1224 01 4015 3620
a s perelman 3500 – 3500 288 1645 01 5434 5122
r m walker 4800 – 4800 356 2304 01 7461 6115
total emoluments 19251 251 19502 1550 7405 127 28584 24833
1 mr c s matthews’ total fees are paid directly to his employer total fees for mr j b smith represent fees due but not yet paid
2 with the exception of messrs c s matthews and j b smith all nonexecutive directors received a proportion of their total fees by way of
shares in the company the gross value of those awards is included in the table above nonexecutive directors who were either appointed
or resigned during the year received time apportioned awards where applicable the number of shares received by each nonexecutive
director during the year was mr t d g arculus – 824 ms m l cassoni – 228 mr m c flower – 228 dr j d g mcadam – 228 
mr f a osborn – 228 mr m j houston – 133 mr e e anstee – 114 and mrs c tritton – 70
3 benefits in kind for executive directors comprise the use of a motor car fuel private medical insurance life assurance and an incapacity
benefits scheme
4 other emoluments represent expenses chargeable to uk income tax paid to directors
signed on behalf of the board who approved the remuneration report on 7 june 2004
m c flower
chairman of the remuneration committee 27 severn trent plc annual review 2004
shareholder information
key dates in 2004
dividends – ordinary shares
16 june 2004 exdividend date for final dividend
18 june 2004 record date for final dividend
1 october 2004 payment of final dividend
shareholder communications 
27 july 2004 annual general meeting at the national
exhibition centre birmingham
november 2004 announcement of half year results
annual general meeting
the annual general meeting will be held at 230pm on tuesday 27
july 2004 at the national exhibition centre birmingham 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
crest members may appoint a proxy electronically via lloyds tsb
registrars id 7ra01
low cost dealing service
lloyds tsb registrars also offer a low cost dealing service for
anyone who wishes to buy or sell severn trent plc shares by
telephone internet or post to obtain further information see 
contact details in the lefthand column
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 ‘forwardlooking 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 economies and markets in which the
group operates changes in the regulatory and competition
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 written or verbal forwardlooking statements made in this
document or made subsequently which are 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
not an offer
this document is not an offer to sell exchange or transfer any
securities of severn trent plc or any of its subsidiaries and is not
soliciting an offer to purchase exchange or transfer such securities
in any jurisdiction securities may not be offered sold or transferred
in the united states absent registration or an applicable exemption
from the registration requirements of the us securities act of 1933
as amended
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
wwwseverntrentcomreports2004 28 severn trent plc annual review 2004
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 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
wwwseverntrentcomreports2004 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
you can find out more about severn trent and the businesses within
our group by visiting our websites
wwwseverntrentcom provides information about the group including
our corporate responsibility activity and shareholder information
you can find out about the products and services we offer by visiting
our business sites
wwwstwatercouk
wwwbiffacouk
wwwstlinccom
wwwstlanalyticalcouk
wwwseverntrentservicescom
wwwstwaterinternationalcom
wwwaseriticom
wwwworksuitecom
wwwstretailservicescouk
wwwstutilityservicescouk
wwwseverntrentpropertycom
wwwhaswellcouk  for more information about severn trent plc 
and its businesses see our website 
wwwseverntrentcom
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 and 50 tcf pulps from plantations
and sustainable forests in addition the printing process is taken into
account – this report is printed by pillans and waddies who operate
an environmental management system certified to iso 14001
designed and produced by tayburn
severn trent plc
2297 coventry road
birmingham b26 3pu
united kingdom
telephone 44 0121 722 4000


Summary:
 2 severn trent plc annual report and accounts 2004
chairman’s statement
• good full year results
• increased overall profits from nonregulated businesses
• severn trent water continues to outperform
group profit before interest tax goodwill 
amortisation and exceptional items

up 75 at
£4406 million
we have enhanced our dividend policy such 
that barring unforeseen circumstances fullyear
dividends per share would be a minimum of
4704p up to the end of the current review 
period in march 2005
business performance
severn trent produced a good performance in 20032004
excluding the impact of exchange rates turnover rose in all the core
businesses of water waste and laboratories we have worked hard to
balance the expectations and needs of different parties – employees
customers investors regulators and communities sound daytoday
management is combined with a longterm commitment to
sustainability
much of our management focus over the year has concerned the
preparation of our draft and final amp4 business plan for ofwat
setting out our proposed investment plans for 20052010 we are
confident in our ability to meet new targets for this period just as 
we are confident that we will continue to outperform our amp3
regulatory contract in respect of 20022003 severn trent water 
has the leading position in ofwat’s overall performance assessment
opa of water and sewerage companies our charges are also
among the lowest in the uk and under current plans will be the
lowest by 2010
whilst developing the future strategy of our regulated business we
have pressed ahead with developing biffa as one of the leading
waste management companies in the uk  the biggest event during
the year being the acquisition of the former hales business
severn trent water and biffa are sharing expertise and technology 
in wastewater disposal and energy generation and biffa is using
severn trent facilities in its important integrated management
contract for leicester city council we expect such synergies to
create further opportunities in the future
services delivered good profits in 20032004 severn trent
laboratories developed its capabilities in several new fields including
mould severn trent services benefited from the management
actions taken in 2002 in the water purification business
reflecting our commitment to environmental leadership severn
trent was named as the leading utility in the dow jones
sustainability index for the third consecutive year this is the first
time that any utility has won this category three times in a row
group results
group turnover was £2015 million an increase of 88 over last
year the turnover of the nonregulated businesses increased by
127 to £1161 million representing 548 of the group total
turnover from water and sewerage increased by 42 to £957
million group profit before interest tax goodwill amortisation and
exceptional items was up 75 to £441 million the water and
sewerage business was up by 38 to £338 million the group’s
nonregulated businesses in total were up 181 to £123 million
representing some 27 of the group total
group profit before interest tax and exceptional items was £411
million £385 million group profit before interest and tax was 
£422 million £344 million
the board is proposing a final dividend of 2927 pence 2856 pence
to be paid on 1 october 2004 this would give a total dividend for
the year of 4704 pence an increase of 25 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 4704 pence
for the period of amp4 from 1 april 2005 the outcome of the
amp4 price review will be a critical input in the determination of the
group’s dividend policy accordingly the board intends to consider
its dividend policy for the period from 1 april 2005 to 31 march
2010 following the finalisation of the amp4 price review
based on ssap24 the group expects a significant additional pension
charge in 20042005 that is provisionally estimated to be of the
order of around £30 million to £35 million net of amounts allocated
to own work capitalised with broadly around two thirds to three
quarters of this amount expected to be attributable to severn trent
water however given the preliminary nature of these estimates it is
goodwill amortisation £298 million and exceptional profits of £116 million 3 severn trent plc annual report and accounts 2004
marisa cassoni stepped down as a pension trustee and we are
grateful for her valuable contribution during a time of change in 
the pensions arena i would also like to thank martin flower for 
his continuing work as chairman of the remuneration committee
and as senior independent director
i am sad to say that i shall be standing down as chairman as of 
31 december 2004 after nearly nine years on the board i expect
my successor to be appointed well before then
naturally my thanks must also go to the staff of severn trent
businesses all over the world our continuing ability to meet our
objectives and serve our stakeholders is due to their hard work
commitment and levels of expertise 
outlook
although the group expects significant additional pension charges 
in 20042005 we consider that overall our core businesses –
severn trent water biffa and laboratories – in terms of experience
market position financial strength and reputation provide a good
platform for the future with the group well positioned to capitalise
on opportunities clearly the future will also bring challenges sound
management and cost control will therefore remain a key element in
our strategy for consolidating our position as the uk’s leading
integrated environmental services business and increasing
shareholder value
david arculus
chairman
quite possible that the actual additional pension charge as a result of
these valuations could be materially different from these estimates
see financial review – pensions
management and staff
robert walker will reach retirement in february 2005 having
completed nearly six years as group chief executive his
contribution and legacy are considerable 
we are delighted that robert’s successor will be colin matthews 
who joined the board as a nonexecutive director in october 2003
colin has already had a distinguished career at transco british
airways and hays where he has been chief executive for the last 
two years we are very fortunate to have secured a man of his
talents as our leader for the next few years
alan perelman will be retiring as group finance director as of 31
august 2004 and will be replaced by mark wilson currently director
of finance and regulation in severn trent water i would like to thank
alan for his dedicated service and wish him well in his retirement
brian duckworth has decided to stand down as managing director 
of severn trent water and from the severn trent plc board at the end
of august but he will continue as an employee of the group until he
leaves in march 2005 thus ensuring his expertise is available to help
complete the regulatory process for the amp4 review brian has
served severn trent for 30 years with distinction and we thank him
for his outstanding contributions to the group and the water industry
not just in the midlands but nationally and internationally as well
three new non executive directors martin houston colin matthews
and john smith are already making a positive impact on the board’s
work we were sorry to lose eric anstee following his appointment as
chief executive of the institute of chartered accountants we thank
him for his contribution to the board’s work not least as outgoing
chairman of the audit committee
john smith took over chairmanship of the audit committee from
eric anstee the environment committee has been renamed the
corporate responsibility committee to give a truer reflection of its
work and from now on it will always be chaired by the group chief
executive the former chair derek osborn is still playing a leading
role on that committee