report and accounts 2003 contents
1 highlights of the year
2 chairman’s statement
4 chief executive’s review
14 financial review
18 directors’ biographical details
20 directors’ report
22 corporate and social responsibility
24 corporate governance
26 remuneration report
32 directors and advisers
33 statement of directors’ responsibilities
34 independent auditors’ report
36 consolidated profit and loss account
37 consolidated balance sheet
38 company balance sheet
39 supplementary statements
40 consolidated cash flow statement
41 notes to the cash flow statement
42 notes to the accounts
62 five year summary
63 shareholder analysis
64 financial calendar south staffordshire group plc report  accounts 2003
highlights of the year – 1
• 54 increase in support services operating profit
†
which now represents
twothirds of the group
• home service shows outstanding growth with a 37 increase in
operating profit
†
and a 30 increase in policies to 24 million
• commercial outsourcing continues to benefit from its investment in its
longer term customer relationships
• the three significant acquisitions in the year regency highway and
middleton contributed £62m to operating profits
†

• south staffordshire water continues to provide a steady profit stream
from a reduced equity base
• £12m cash generated after capital expenditure tax and dividends with
£85m bond issue financing £84m spent on acquisitions
2003 2002 increase 
turnover £2658m£1771m 50 
profit before tax excluding goodwill 
and exceptional item £445m £364m  22 
profit before tax £386m £345m 12
earnings per share 459p 396p  16 
dividend per share 180p 161p 12
highlights of the year
profit before tax £m
45
40
35
30
25
20
1999 2000 2001 2002 2003
16 compound growth in profit
before tax over past five years

excluding goodwill and exceptional item as shown on page 36
†  excluding goodwill as shown on page 44 south staffordshire group plc report  accounts 2003
2 – chairman’s statement
lindsay bury – chairman
the group had a particularly successful year
achieving 26 organic growth in operating profits
†
from its support services businesses combined
with a contribution of £62m from the acquisitions
in the year 
during the year we saw a substantial increase in the
liquidity of the group’s shares following the
successful placing of 40 of our stock owned for
many years by vivendi and axa with a range of
institutional investors 
group results
in the year ended 31 march 2003 the group’s
turnover including share of joint ventures increased
by 50 to £2658m 2002 £1771m profit before
tax goodwill and exceptional item has increased
by 22 to £445m 2002 £364m this comprises
a 54 increase in operating profit
†
from support
services and a 2 increase in regulated water
supply profits earnings per share excluding
goodwill and exceptional item for the year have
increased by 159 to 459p 2002 396p the
board is proposing a final dividend per share of
124p making a total for the year of 180p 2002
161p an increase of 118 following the
acquisitions which increased debt by £84m the
balance sheet remains strong with net debt at 31
march 2003 of £1031m 2002 £286m and
interest cover of 85 times
homeserve
the homeserve businesses have more than
doubled turnover to £121m 2002 £60m with
operating profits
†
increasing by 70 to £240m
2002 £141m this represents 37 organic profit
growth in the existing homeserve businesses
together with a profit contribution of £47m from
regency and highway which were acquired during
the year
home service has increased the number of policies
in force by 30 to 24 million which represents the
largest annual increase since the business started
this reflects a combination of growth in the core
plumbing product new products introduced during
the year together with greater use of outbound
telesales for customer acquisition and renewal rates
being maintained at 86
regency which was acquired in may 2002 and
provides underwritten furniture warranties and
repairs to retailers and manufacturers has achieved
strong sales growth in the year it has significantly
expanded its employed repair network and
successfully implemented a new warranty
programme for harveys one of its major retail
customers
chairman’s statement
 excluding goodwill and exceptional item as shown on page 36
† excluding goodwill as shown on page 44 south staffordshire group plc report  accounts 2003
chairman’s statement – 3
highway which was acquired in july 2002 and
provides emergency repair services to insurers has
achieved a reduced profit compared to last year
highway had increased its cost base and
operational capacity in anticipation of continuing to
win new customers new customers have been
added but not as quickly as anticipated this has
been combined with a reduction in average job
values this has reduced profits in the short term
and has led to us putting measures in place to
create a more flexible cost base
commercial outsourcing
the commercial outsourcing businesses have
grown turnover by 34 to £104m operating profit
†
has increased by 25 to £100m which includes a
contribution of £15m from the acquisition of
middleton doorman
onsite has achieved significant growth in its long
term business with thames water and london
underground additionally middleton doorman has
performed well since acquisition and has broadened
the division’s customer base and service offering
the echo joint venture with south west water is
now well established and our rapid software has
been implemented in addition our mailing services
business has achieved improved margins during the
year
regulated water supply
operating profits from regulated water supply have
increased by 2 to £165m 2002 £162m on
turnover of £59m this compares to an rpi of
09 which was used as the basis for increasing
charges for 200203 the business continues to
achieve efficiency gains and deliver the highest
levels of service the business remains on course to
meet all of its regulatory targets including
demanding efficiency savings which apply until the
next price review in 2005 the water company
issued an unsecured 23 year indexlinked bond of
£85m which increased debt to approximately 65
of the regulated asset value thereby reducing its
cost of capital
prospects
the group’s strategy for growth remains to develop
as a support services business through both its
homeserve and commercial outsourcing activities
it will continue to benefit from the increasing
demand for a broad range of assistance services
into the home and the trend to outsourcing in both
industry and the utilities market
significant opportunities for growth exist in all areas
of our support services businesses home service
will continue to develop new products and improve
market penetration regency’s priorities will include
growing its repair business and developing new
retail warranty products within highway our focus
will be on improving operational efficiency and
developing a plumbing service for its insurance
customer base commercial outsourcing is well
positioned to build on its established long term
customer relationships the regulated water
supply business will continue to provide high levels
of service at low charges 
overall the group should benefit from continued
strong demand for its support services activities
together with stable returns from regulated water
supply
lindsay bury
chairman
3 june 2003 south staffordshire group plc report  accounts 2003
4 – chief executive’s review
our partners include the majority of the uk water
and power utilities leading furniture retailers
appliance manufacturers and household insurers
homeserve has combined significant organic profit
growth with two major acquisitions regency and
highway in addition we made a smaller acquisition
in march 2003 servowarm enhancing the delivery
of our gas boiler warranty and emergency repair
business in total this year we have invested £70m
in cash with estimated deferred consideration of
£26m based on future profitability
home service is the market leader in the provision
of plumbing and drainage and electrical wiring cover
to the domestic market our customers include the
majority of uk water gas and electricity companies
home service had a record year for policy growth
with the number of policies increasing by 30 to
24 million 173 million plumbing policies 055
million electrical and 012 million other policies
including domestic heating this is the largest
increase in the number of policies since the
business started and policy growth rates in excess
of 25 have now been maintained for the ninth
successive year further growth will come from
increasing our market penetration with the existing
plumbing product together with cross selling other
domestic products
home service has increased its outbound telesales
capability to over 140 full time staff this has been a
significant contributor to our record policy growth at
acquisition costs lower than those for direct mail
marketing home service launched a new product
in the year ‘water supply pipe cover’ and sold
157000 policies highlighting the success of cross
selling to existing members
home service is successfully developing its
manufacturer warranty operation increasing
warranty card return rates and take up of extended
warranties in addition to ideal boilers home
service is now also working for mira one of the
largest uk shower manufacturers
home hotline continues to operate claims handling
and job deployment on behalf of direct line for its
‘home response 24’ product and this year was
appointed to run the helpline for 16 million direct
line household insurance policyholders
growth in our joint venture business with generale
des eaux based in france is encouraging with
over 60000 plumbing policies we have achieved
good take up rates particularly for the supply pipe
product at acquisition costs which are now
comparable with the uk
homeserve plc the new name for our home
service businesses is one of the uk’s largest
providers of home warranties and assistance
services to major business partners with a total of
over 95 million policies
chief executive’s review south staffordshire group plc report  accounts 2003
section title – 5
far left brian whitty  chief executive south staffordshire group plc
left home service head office in walsall
above highway plumber unblocking a drain for a home service customer above regency deploying work to their national employed cleaning network
right servowarm engineer repairing a policyholder’s boiler
far right highway the uk’s leading provider of emergency repair services to household insurers south staffordshire group plc report  accounts 2003
chief executive’s review – 7
regency is the market leader in the provision of
underwritten furniture warranty and repair services
on behalf of retailers and manufacturers and now
has over 7 million policies in issue since acquisition
in may 2002 regency has performed well
achieving an operating profit of £40m in january
2003 harveys announced that they were
discontinuing their structural warranty product
which regency have now replaced with an
alternative extended warranty product regency has
also increased its base of directly employed
upholstery repair and cleaning operatives to over
100 enabling it to deliver the high quality service
that warranty buyers expect
in july 2002 we completed the acquisition of
highway the uk’s leading provider of emergency
glass frame lock and garage door repair and
replacement services to household insurers the
acquisition of highway provides homeserve with a
market leading position with household insurers and
widens the range of domestic emergency services
we provide 
highway achieved a profit of £07m in the nine
months to 31 march 2003 compared to £24m
over the equivalent period last year the reduced
profit reflects an increase in costs and a reduction in
average job values the cost base has increased by
£07m which increased our operational capacity in
anticipation of new insurance customers whilst
slow to develop we have now won important new
customers including prudential mcdonalds and
marks and spencer prudential is now one of
highway’s ten largest customers there has also
been a 5 fall in average job values with an impact
of £06m highway has seen a reduction in higher
value storm damage related work following the
milder weather this year compared to normal
in order to ensure that we can better meet these
peaks and troughs in demand we are reorganising
elements of the business and taking steps to
reduce the operating cost base we are
reorganising the national branch network to reduce
cost and improve efficiency in addition we have
strengthened the existing management team
appointing a chief executive with a proven track
record in this industry who will join in june 2003
highway has continued to develop its employed
plumbing and drainage network and a number of
insurance customers are currently trialling this
service if successful this service will represent a
significant new market for highway
in march 2003 we acquired servowarm which
provides home assistance policies for domestic
boiler breakdowns supported by a service and
repair operation servowarm complements home
service’s existing gas heating policy business and
provides a high quality network of 115 employed
domestic gas engineers servowarm’s engineers are
trained to repair a wide range of manufacturers’
boilers and will work alongside our existing
subcontract network 
we are confident that our homeserve businesses
are well positioned to achieve further significant
growth we will continue to add new customers and
affinity partners and develop new products and
services our uk markets still have significant
potential and we will continue to develop our
international presence in a low risk and cost
effective manner south staffordshire group plc report  accounts 2003
8 – chief executive’s review
onsite has again seen a doubling in business with
thames water from £36m to £8m for whom we
provide a range of planned and reactive drainage
services on the sewerage networks that serve
london and the home counties this growth follows
a substantial investment last year by onsite in a
dedicated call centre operating equipment and
employee training to support the thames contract 
the division has also seen a significant increase in
the provision of planned and reactive drainage
services for the london underground rail network
with turnover increasing from £46m to £64m
following the restructuring of the london
underground we are now working closely with both
tubelines and metronet the new ppp consortia 
we added specialist water treatment to the
division’s offering following the transfer of the water
testing and dosing operations from south
staffordshire water into onsite this business has
performed well during the year winning work from
other water companies the coal authority and the
environment agency
in order to broaden our already established
industrial and commercial client base and to
increase our service offering we acquired middleton
doorman in august 2002 the company provides
specialist maintenance mechanical and electrical
services and automatic door and access
maintenance to commercial and public sector
clients
middleton is contracted to provide specialist
maintenance services to the london underground
rail network thereby increasing the range of
services we provide to this client middleton also
has an established and strong relationship with the
city of birmingham where we provide significant
me services for their public buildings since
acquisition middleton has successfully won a
number of important new clients including argos
nationwide building society and the big food
group whilst continuing to provide a
comprehensive service to tesco stores
we continue to see growth opportunities for onsite
we have strengthened our senior management
team and we are confident that we have the skills
and resources which will enable us to continue to
build upon our success in the utility and commercial
outsourcing market
onsite provides a comprehensive range of
infrastructure maintenance services to major utilities
public authorities and a wide commercial and
industrial client base through long term partnerships
and contractual relationships with its customers  south staffordshire group plc report  accounts 2003
section title – 9
far left onsite provide specialist services including cctv surveys of drains
left and above middleton provide specialist maintenance services to commercial
and public sector clients south staffordshire group plc report  accounts 2003
10 – chief executive’s review
the customer solutions division provides a range of
services to companies to assist them in managing
their customer contact
echo
echo managed services specialises in the provision
of customer management services such as billing
debt collection and contact management echo was
established in 2001 to provide services to its initial
customers south staffordshire water and severn
trent echo south west our joint venture with
south west water to provide customer contact and
billing has performed well during the year during
this first full year of trading the joint venture has
delivered efficiency savings and maintained high
levels of customer service
last year we added green flag and britannic
assurance as customers and we have continued to
develop these relationships new clients won during
the year include spring recruitment and east
devon district council in addition to a number of
short term contracts 
echo has focused on developing niche offerings
including recruitment screening customer
satisfaction surveys and outbound telemarketing
where we can add specialist skills and value we
have consistently demonstrated to our customers
that we can achieve high service levels as well as
cost reductions for these outsourced services 
rapid
during the year south west water completed the
implementation of our rapid software product the
software was used successfully in the annual billing
of south west water’s unmeasured customer base
during the year
our support to bristol and wessex billing services
continued with the completion of the second phase
of software implementation now extended to
include the measured customer base the system is
now used by the joint billing venture to bill the full
customer base of bristol water and wessex water
rapid software is now used to bill over 3 million uk
utility customers we will continue to develop the
product during the coming year to meet the
requirements of our existing clients the sales and
implementation cycle for rapid’s products is
typically over 12 months and we do not expect any
significant licence fee revenue in the coming year 
mail solutions
our mailing services business has improved its
margins despite operating in a highly competitive
market we have achieved this through our
continued focus on efficiency and quality
we provide services to high profile customers
including hsbc barclaycard lloyds bank and
npower and we have supplied tickets for major
sporting events such as the champions league
final and the fa cup final 
this market will continue to be highly competitive
however we are confident that we are well
positioned to continue to improve our overall trading
performance far left mail solutions specialises in an efficient and quality service
left echo providing customer management services from its walsall call centre
above rapid software is now used to bill over 3 million uk utility customers above using remote meter reading technology to improve service standards and achieve efficiency savings
right and far right detecting leaks to ensure demanding leakage targets are met south staffordshire group plc report  accounts 2003
chief executive’s review – 13
south staffordshire water continues to be at the
forefront of the water industry delivering exceptional
value for money through a combination of low bills
and high levels of service
the last few years have seen significant change
including outsourcing of customer services to echo
and laboratory analysis to severn trent together
with the consolidation of our divisional offices each
of these initiatives has been successful both in
improving service standards to customers and
achieving cost reductions we are continuing to
make excellent progress towards ofwat’s efficiency
targets to reduce operating costs in the year and
are on track to meet ofwat’s target reduction in
operating expenditure for the period 2000 to 2005
our domestic customers continue to pay the
second lowest charge in england and wales with
annual bills of £86 which when combined with
severn trent’s sewerage charge which we collect
on their behalf through our contract with echo
means that our domestic customers benefit from
the lowest overall charge in england and wales in
addition our large industrial clients enjoy the lowest
volumetric rates in the country we achieved water
quality compliance levels of 999 amongst the
very highest in the industry our demanding leakage
targets were also achieved 
ofwat’s latest annual review of customer service
again reported that all of the company’s service
levels were in the highest category and the water
company was ranked second highest in overall
performance assessment for the industry for
200102 levels of service for 200203 have seen
further improvement
the water company raised £85m through the issue
of an unsecured index linked bond this has
enabled the business to improve its capital structure
by funding the repurchase of water company
shares from the group gearing within the water
company has now increased to 65 of regulated
asset value
the company has seen another substantial year of
capital investment primarily on the extensive
programme of water treatment upgrades agreed
with the drinking water inspectorate together with
increasing capacity at its second largest treatment
works
2003 will be an important year as we move towards
the setting of prices for the period 2005 to 2010
we will submit the company’s draft business plan
to the regulator in august 2003 in anticipation of a
final determination in november 2004
brian whitty
group chief executive
3 june 2003 south staffordshire group plc report  accounts 2003
14 – financial review
financial review
andrew belk  group finance director
group results
turnover for the year including share of joint
ventures increased by 50 to £2658m 2002
£1771m including organic growth of 14 this
reflects strong growth in homeserve with turnover
doubling to £1213m 2002 £603m including
£446m from the acquisitions in the year the
existing homeserve business achieved organic
growth in turnover of 27 to £767m 2002
£603m with a 30 increase in policies to 24m
2002 185m
commercial outsourcing increased turnover by
£262m to £1040m a 34 increase including
£192m from middleton doorman onsite achieved
13 organic growth benefitting from increased
activity with thames water and london
underground with an increase of 4 in customer
solutions
regulated water supply turnover was marginally
lower at £588m 2002 £591m reflecting the
increase in rpi of 09 which was used as the
basis for increasing charges for the year and the
company’s k factor of –1
group operating profit before goodwill
†
increased by
32 to £505m 2002 £383m including 16
organic growth homeserve profits
†
increased 70
to £240m 2002 £141m with a £40m
contribution from regency £07m from highway
and 37 organic growth from home service which
increased its margin to 25 2002 23 the
growth in home service is after increasing the
investment in overseas operations to £07m 2002
£02m
profits
†
from commercial outsourcing increased by
25 to £100m 2002 £80m including £15m
from middleton doorman organic profit growth of
6 reflects the continued investment in long term
relationships within onsite and echo with margins
being maintained at 10
regulated water supply achieved a 2 increase in
operating profit despite lower turnover and a higher
depreciation charge with the continuing focus on
cost control resulting in further efficiency savings in
the year 
profit before tax excluding goodwill and exceptional
costs was £445m an increase of 22 2002
£364m this was after an increase in the net
interest charge to £60m 2002 £19m reflecting
the acquisitions in the year
the increased goodwill charge of £60m 2002
£13m is due to the acquisitions there were no
exceptional costs in the year 2002 £06m loss on
sale of subsidiary
taxation
the effective rate of tax for the year based on
profits excluding goodwill and exceptional costs
was 287 compared to 270 for the previous
year the increased rate was largely attributable to
the impact of the acquisitions in the year with the
group’s future tax rate likely to be closer to the
standard rate of 30
turnover for the year increased by 50 to £2658m
profit before tax was £445m an increase of 22 south staffordshire group plc report  accounts 2003
financial review – 15
earnings per share 
earnings per share excluding goodwill and
exceptional item was 459p 159 ahead of last
year 2002 396p the increase in earnings is lower
than the growth in profit before tax due to the
higher minority interest charge reflecting the growth
in homeserve and the increase in the tax rate
compound annual earnings growth excluding
goodwill and exceptional item over the last five
years is 128 with annual operating profit growth
of 35 in support services and 25 in regulated
water supply over the same period 
dividends
the board is proposing a full year dividend of 180p
2002 161p an increase of 118 with dividend
cover of 25 times the regulated water business
has declared a reduced dividend for the year of
£48m 2002 £61m as a result of an increased
interest charge following the bond issue 
acquisitions
the group has completed a number of significant
acquisitions in the year investing £841m in cash
and assumed debt together with estimated
deferred consideration of £264m based on future
profitability
47 homeserve £240m
20 commercial outsourcing £100m
33 regulated water £165m
divisional contribution 
to operating profit
†

46 homeserve £1213m
32 commercial outsourcing £857m
22 regulated water £588m
divisional contribution 
to turnover
excluding interdivision 
 excluding goodwill and exceptional item as shown on page 36
† excluding goodwill as shown on page 44 south staffordshire group plc report  accounts 2003
16 – financial review
homeserve acquired regency financial holdings
plc on 14 may 2002 for a consideration of £453m
including costs of which £67m is deferred
highway emergency services limited was acquired
on 5 july 2002 for a consideration of £485m
including costs including £195m payable on
deferred terms dependent on future profitability of
which £135m is payable after 31 march 2006
homeserve also purchased servotomic limited for
£24m on 3 march 2003 and the 40 minority
holding in home hotline limited for £19m on 1
april 2002
on 1 august 2002 onsite acquired middleton
maintenance services limited for a consideration of
£158m including costs
goodwill on these acquisitions totalled £112m and
is being amortised over its estimated useful life of
20 years
financing
during the year south staffordshire water plc
successfully issued an unsecured 23 year index
linked bond of £85m at a coupon of 375 based
upon a rating by standard and poor’s of a £65m
of the funds raised were used to repurchase shares
in the water company from the group thereby
increasing net debt in the business to £96m being
65 of the regulated asset value the level of debt
is expected to increase to approximately 70 of
rav next year before declining thereafter reflecting
the timing of capital expenditure
the support services businesses continue to be
cash generative with net debt at 31 march 2003 of
£7m and interest cover of over 25 times the
homeserve acquisitions in the year were financed
by loans from the group on commercial terms
resulting in net debt in homeserve including these
group loans of £51m
the group now has in place total bank facilities and
bond financing of £147m a significant proportion of
this is long term to reflect the nature of the assets in
the water business and to support the ongoing
development of the group
the bond issue has reduced the group’s exposure
to potential increases in short term interest rates
with inflation risk on the cost of the bond being
effectively hedged against regulated water revenues
which are also linked to rpi 
capital expenditure
capital investment in the year net of capital
contributions totalled £277m 2002 £332m this
included further significant investment in the
regulated water business of £213m 2002
£224m together with £30m in homeserve on it
telephony systems and equipment to support future
growth and £34m in commercial outsourcing
principally to support growth in onsite capital
expenditure in the water business is expected to
increase in 20034 before reducing significantly in
20045
cash flow and borrowings
the group generated cash of £666m in the year
from operating activities after capital expenditure of
£260m net of capital contributions and sale
proceeds and interest tax and dividends totalling
£295m this resulted in a net cash inflow of
£122m compared to a cash outflow of £44m in
the previous year the cash outflow in respect of
acquisitions was £789m and with £800m raised
from financing resulted in an increase in net debt in
the year of £745m to £1031m at 31 march 2003
2002 £286m
working capital in the year increased by £10m
reflecting strong working capital management south staffordshire group plc report  accounts 2003
financial review – 17
pensions
pension costs relating to the group’s defined
benefit pension scheme continue to be accounted
for in accordance with ssap 24 the actuarial
valuation of the scheme at 1 april 2002 showed a
surplus of £49m the additional disclosures
presented under the second year of transitional
arrangements for frs 17 retirement benefits
show a pension deficit net of deferred tax of
£78m 2002 £108m surplus this arises from the
recent stock market falls and its calculation is not
considered reflective of the long term funding of the
scheme
there have been no other new accounting
standards which have had an impact on the
financial statements for the year
andrew belk
group finance director
3 june 2003
earnings per share p
excluding goodwill and exceptional item
500
450
400
350
300
250
1999 2000 2001 2002 2003
dividend per share p
180
170
160
150
140
130
120
110
100
1999 2000 2001 2002 2003 south staffordshire group plc report  accounts 2003
18 – directors’ biographical details
directors’ biographical details
back row left to right robert harley john harris david sankey andrew belk
richard harpin adrian page david penna panton corbett
front row left to right brian whitty lindsay bury south staffordshire group plc report  accounts 2003
directors’ biographical details – 19
lindsay claude neils bury ba  ∆ 

Summary:
 south staffordshire group plc report  accounts 2003
highlights of the year – 1
• 54 increase in support services operating profit
†
which now represents
twothirds of the group
• home service shows outstanding growth with a 37 increase in
operating profit
†
and a 30 increase in policies to 24 million
• commercial outsourcing continues to benefit from its investment in its
longer term customer relationships
• the three significant acquisitions in the year regency highway and
middleton contributed £62m to operating profits
†

• south staffordshire water continues to provide a steady profit stream
from a reduced equity base
• £12m cash generated after capital expenditure tax and dividends with
£85m bond issue financing £84m spent on acquisitions
2003 2002 increase 
turnover £2658m£1771m 50 
profit before tax excluding goodwill 
and exceptional item £445m £364m  22 
profit before tax £386m £345m 12
earnings per share 459p 396p  16 
dividend per share 180p 161p 12
highlights of the year
profit before tax £m
45
40
35
30
25
20
1999 2000 2001 2002 2003
16 compound growth in profit
before tax over past five years

excluding goodwill and exceptional item as shown on page 36
†  excluding goodwill as shown on page 44