annual report and accounts 2005
for more information about severn trent plc and its businesses
see our website wwwseverntrentcom
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severn trent plc registered office 2297 coventry road birmingham b26 3pu
telephone 44 0121 722 4000 registered number 2366619
severn trent plc annual report and accounts 2005 this is severn trent 
severn trent plc is a leading
provider of water waste and
environmental services
we are determined to ensure that customers get the benefit
of high quality and cost effective services while investors
receive an appropriate return
firmly embedded in our corporate strategy is a commitment to
corporate responsibility particularly health and safety and
environmental performance 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 review of operations – water and
sewerage
10 review of operations – waste management
14 review of operations – laboratories
16 review of operations – water purification
and operating services
18 review of operations – other businesses
19 review of operations – corporate
responsibility
22 financial review
24 board of directors
26 directors’ report
32 remuneration report
40 directors’ responsibilities in relation 
to the financial statements
41 independent auditors’ report to 
the members of severn trent plc
42 group profit and loss account
43 balance sheets
44 group cash flow statement
44 reconciliation of net cash flow 
to movement in net debt
45 statement of total recognised 
gains and losses
45 reconciliation of movements 
in shareholders’ funds
46 notes to the financial statements
75 five year summary
76 information for shareholders 20812
20151
18520
17943
16816 01
02
03
04
05
group turnover 
£m
2321
2428
2333
2217 01
02
03
04
05
group profit before tax 
and exceptional items 
£m
2252
556
614
632
610 01
02
03
04
05
earnings per share 
before exceptional items 
and deferred tax 
pence
581
4851
4704
4590
4500 01
02
03
04
05
dividends per share 
pence
4590
group turnover
up 33 to 
£2081m
group profit 
before interest tax goodwill 
amortisation and exceptional items

down 05 at 
£4386m
goodwill amortisation £301 million 
and net exceptional charge of £148 million
earnings per share
before exceptional 
items and deferred tax 
556p
dividend
final dividend 
of 3030p bringing 
the total for the 
year to 4851p
an exceptional charge of £148 million in 20042005 comprises a profit of £76 million on disposal of fixed assets a net loss on sale and termination of operations of £94 million and 
a charge of £130 million relating to restructuring
an exceptional credit of £116 million in 20032004 comprised 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
financial highlights
severn trent plc 
annual report and accounts 2005 01
2005 2004  change
turnover £m 2081 2015 33
profit before interest pre goodwill and exceptionals £m 439 441 05
profit before interest pre exceptionals £m 409 411 06
profit before interest post exceptionals £m 394 422 68
profit before tax pre goodwill and exceptionals £m 262 273 38
profit before tax pre exceptionals £m 232 243 44
profit before tax post exceptionals £m 217 254 146
earnings per share pre exceptionals and deferred tax p 556 614 94
earnings per share post exceptionals and deferred tax p 403 535 247
gearing  568 554 25
final dividend p 3030 2927 35
interim dividend p 1821 1777 25
total dividend for the year p 4851 4704 31 chairman’s statement 02
severn trent plc 
annual report and accounts 2005
business performance
we announced in january 2005 that severn
trent water would accept ofwat’s final price
determination for 20052010 this is the
single most important event for the group 
in 20042005
ofwat’s final amp4 determination allows
severn trent water to raise prices by 24
before inflation equivalent to around £53 
per property over the five year period even
after this rise severn trent water’s average
household bills will remain among the lowest
in its sector
the efficiency targets set by ofwat are
extremely challenging the determination
includes a reduction in the allowance for
capital maintenance costs particularly in
respect of mains renewal and a reduction 
in the costs allowed for alternative sludge
disposal methods the determination includes
sufficient costs to fund only half of severn
trent water’s pension deficit
in addition there remain other areas 
such as electricity costs business rates and
operational areas where the determination
allows for smaller cost increases than are
forecast in the company plan
severn trent water is already performing 
at or close to ofwat’s operating and capital
efficiency frontiers we want to continue this
so plans are being put in place to maintain
severn trent water as one of the most efficient
companies in the water sector in terms of
both operating costs and capital investment
we are determined to improve our
performance to meet all these challenges
while much of our management focus has
been concerned with the ofwat determination
we have continued to develop our waste
management company biffa into a leading
integrated waste management company
we have achieved scale in the important
industrialcommercial collection area where
we are the largest uk operator we have
control over disposal through having a large
landfill operation probably joint second in
terms of void space together with a number
of strategic alliances to take recovered
materials we have excellent special waste
capabilities through our treatment centres
no other company has these combined
strengths in the uk
new legislation and increased landfill tax will
impact on all aspects of biffa’s business but
changes in legislation also create new
business opportunities in pretreatment
special waste and integrated waste
management with the hales integration now
complete biffa is in a good position to
maximise these opportunities and to develop
good organic growth going forward
severn trent laboratories the world’s
leading environmental testing company has
experienced extremely challenging market
conditions in the us
legislation and public concern will drive the
growth of markets like indoor air quality food
microbiology endocrine disrupters and
perchlorate testing stl has put in place the
expertise and facilities to keep it at the
forefront of these and other emerging
markets
the water purification and operating services
business continues to perform well head
quartered in the us it supplies technology and
expertise to private and public sector clients
all over the world the water purification
market will continue to grow and our strong
market position and brand recognition will
enable us to compete vigorously
this business exploits technology and
capability from our uk water expertise so is
attractive to severn trent going forward
corporate responsibility
severn trent was named as the leading utility
in the dow jones sustainability index for the
fourth consecutive year this is the first time
severn trent produced satisfactory results overall in
20042005 excluding the impact of exchange rates
turnover rose in all the main businesses of water and
sewerage waste management laboratories and water
purification and operating services that any utility has won this category four
times in a row
severn trent’s award was made after 
an assessment of the quality of our
management and performance in terms of
integrating economic environmental and
social considerations into business strategies
while continuing to enhance competitiveness
and brand reputation
our businesses are one of the uk’s largest
managers of ‘renewable carbon’ which is
biodegradable waste and sewage sludge 
that can be utilised to generate renewable
electricity we handle approximately 12 
of the uk’s waste renewable carbon
excluding agriculture
in 20042005 we generated around 690
gwh of renewable electricity which equates
to 5 of the uk’s renewable electricity
group results 
overall the severn trent group has delivered
a satisfactory performance in 20042005
with group profit before tax goodwill
amortisation and exceptional items at £2622
million a decrease of 38 after incremental
pension charges of £313 million group
profit before tax and exceptional items was
£2321 million £2428 million and group
profit before tax was £2173 million 
£2544 million
the board is proposing a final dividend of
3030p 2927p to be paid on 31 august
2005 this would give a total dividend for 
the year of 4851p an increase of 31
management and staff
as you know i succeeded david arculus as
chairman of severn trent plc on 1 january
2005 i am delighted to take up my role as
chairman as i regard severn trent as one of
the best managed companies in the utility
sector
john banyard executive director of severn
trent water with responsibility for asset
management also retired at the end of
december 2004 we thank him for 
38 years of service and wish him well 
he certainly deserves his obe for services 
to the water industry and to engineering
i am extremely grateful to martin flower senior
independent nonexecutive director who
agreed to become deputy chairman from 6
july 2004 to ensure continuity on the board
and support for our new management team
colin matthews arrived in september 2004
as acting managing director of severn trent
water and took over as group chief executive
on 1 february 2005 on the retirement of
robert walker
colin’s wide experience with america’s
general electric company british airways
transco and hays means we have appointed
a first class individual with an engineering
and operational background who can build
on the success of our businesses we are
fortunate to have him lead our group
as indeed we are with tony wray who joined
the board as managing director of severn
trent water on 7 march 2005 from eircom
having been previously director asset
management and then national operations
director transco
we also welcomed rachel brydon jannetta
and mark wilson to the board in september
2004 rachel is president and ceo of severn
trent laboratories based in the us mark is
group finance director having been finance
and regulation director in severn trent
water
since my appointment as chairman we have
carried out a rigorous board effectiveness
review with the help of independent
consultants which has generated a number
of actions to secure improvements to board
performance
although i am relatively new to severn trent 
i have discovered already that there is a
dedicated and highly trained staff whose
hard work and commitment ensures we 
have the ability to achieve our objectives
outlook
the finalisation of the amp4 determination
provides greater certainty for severn trent
water going forward and sets challenging 
but clear financial and service targets which
the company is well positioned to deliver
biffa anticipates organic growth within 
the competitive waste sector in the uk 
as a result of its technology its scale and
through new opportunities driven by waste
legislation reduced federal spending on 
the environment is expected to continue the
difficult market conditions for laboratories 
in the us in 20052006 the uk market 
for laboratories is expected to remain 
strong the services business is expected 
to continue to grow in line with favourable
market conditions
the objective over the next five years is to
ensure customers in the group’s regulated
and nonregulated businesses get the
benefits of high quality and cost effective
services while ensuring that investors receive
an appropriate return
the board of severn trent plc intends to
maintain as a minimum group dividends 
in real terms at least up to 20092010 
our shareholders can be confident in this 
as a dividend ‘floor’ for the next five years 
our objective is of course to do better 
with real growth over the amp4 period
sir john egan
chairman
severn trent plc 
annual report and accounts 2005 03 group chief executive’s review 04
my team and i are highly focused on improving
operational performance indeed we are already
analysing and scrutinising all our businesses in
greater detail both to ensure continual improvement
but also to be certain we can demonstrate their value
to the group as a whole going forward
severn trent plc 
annual report and accounts 2005
severn trent is a successful group 
with tremendous strengths and great
opportunities – that is my clear conclusion
after four months as group chief executive
and nine months as an executive director
for five months from september 2004 
i focused exclusively on severn trent water
which after all accounts for around 77 
of our profits since becoming group ceo 
i have been immersed in all the businesses
in the group
as a result i am able now to lay out the two
top priorities for our company both of which
are operational
the first is to deliver and hopefully beat the
operational performance required by the
regulatory settlement for severn trent water
from 20052010
the second is to build on our waste company’s
operational success story by refocusing on
organic growth and return on investment
improving operational performance goes
hand in hand with improving financial
performance there is a false argument
which implies that the way to achieve cost
reduction is to cut corners and reduce
standards i believe the opposite the way to
secure cost reduction is to raise professional
standards across the whole organisation
however good we become in health and
safety quality or environmental performance
we must always have an ambition to get
better as we get the processes in place to
raise these professional standards then our
financial performance will also improve
health and safety
we have established three key health and
safety principles for all employees
 if a job cannot be done safely don’t do it
 always look for safety hazards
 never ignore a safety hazard fix it or
report it
i deeply regret to report one employee
fatality this year where a biffa refuse collector
was hit by a reversing vehicle as with any
serious accident we have undertaken a
rigorous investigation and audit to reduce
the possibility of this or any similar incident
happening in future
overall the group recorded a riddor
reportable incident rate of 2293 per 
1000 employees this represents a 4
improvement rate on last year’s figure 
we are looking to accelerate the rate of
improvement in this and future years
water and sewerage
in 20042005 we completed the amp3
programme reaching the ofwat targets and
outperforming them in many cases we were
among the leading water and sewerage
companies in ofwat’s overall performance
and relative efficiency assessments
the challenge now is to at least deliver 
the performance required by the price
determination agreed in january 2005 
we have already streamlined the top
management structure to achieve a
shortening of the lines of communication
from the top to the bottom to continue to
drive efficiencies through the organisation
operational efficiencies will be achieved in
the following ways 
headcount reduction we cannot deliver
operational efficiencies without reducing
employee numbers within the group largely
through improved technology there are
three particular areas in which we continue to
invest replacing back office systems around
financing and purchasing continuing to
upgrade our customer interface systems and
maintaining but also improving our capability
to manage our remote sites automatically
overheads we can reduce our property
costs by consolidating office accommodation
and depots procurement we are reducing the number
of suppliers and working with them in a
more intense and collaborative way taking
cost out of the total system and sharing the
benefits with them this is in contrast to
expending more energy in determining who
pays than in reducing cost 
our capital expenditure amounts to a total of
£26 billion over the five year period there
are some 900 significant projects a huge
programme for us to manage we are looking
to work with 20 named key contractors
reduced from 50 in the past
we shall
 standardise designs as far as we can 
not just whole plants but also elements
within the plants
 invest in preparation work in order to
reduce the cost of the delivery
 ensure good discipline around ‘design
freeze’ and establish target pricing
we are also looking to make sure that our
suppliers are incentivised financially to drive
for continuous improvement and that they
like us are motivated on an “rpi minus”
type incentive arrangement 
other industries have already demonstrated
the value of implementing these procurement
principles
waste management
biffa’s growth represents a real success story
in terms of acquiring uk waste then hales
and successfully integrating them equally
the marketplace in which biffa has been
operating has been flat overall and the bulk
of biffa’s recent growth has been from the
acquisition of hales therefore the question
of organic growth is important
we believe that the myriad of regulatory
developments which are scheduled year in
year out for the next five years are going to
drive opportunities for revenue growth this
is a marketplace which is going to favour the
bigger players in this industry and we are
determined to benefit
biffa’s management achieved healthy organic
turnover growth throughout the 1990s more
recently the uk waste and hales acquisitions
have accounted for a more substantial part
of biffa’s turnover growth that is why the
two key challenges for us within biffa are to
reestablish a focus on organic growth and 
to improve the return on investment
laboratories
the business in the us operated in a difficult
market last year there has been a significant
reduction in return on total investment in the
course of the year which we must confront
one particularly key initiative is to replace 
a number of laboratory information
management systems with a single standard
system that covers the whole network
customers buy not simply tests but also 
data customers want that data with faster
turn round times and standardised reporting 
and they want to be able to transfer and 
use data in their own systems having
different it systems in our laboratories 
is an impediment to exploiting our scale 
the first five laboratories already have 
the new system up and running and it is
currently being debugged it will be rolled 
out to the others in the course of the next 
12 months in 20062007 we expect to 
see significant operational improvements 
from this new system
water purification and operating services
this business includes the water purification
business the contract operations business
severn trent water international and the
smaller metering services and pipeline
services businesses
the simplification of these activities in recent
years has stabilised the business and in the
last couple of years we have seen a gradual
improvement in returns although this is of 
a modest scale this is a business which is
closely related to water in the uk it exploits
our  technology and capability and from a
stable base is now back on a growing and
improving trend
severn trent water international which
provides management and consultancy
services in europe and the developing world
was awarded an exciting 25 year pfi contract
worth approximately £1 billion with costain
this groundbreaking deal for the provision of
water and wastewater services to mod sites
in england is now up and running
other businesses
we will take the opportunities that we can to
restructure some of our smaller businesses
to make sure that we are focused on doing
the right thing for our main business activities
we are scaling down our engineering
consultancy charles haswell and merging 
it into the water business all of their skill 
is now devoted to severn trent water and 
we are no longer pursuing external contracts
our severn trent water international interest
in portugal has been sold and we are
restructuring severn trent systems so 
we can focus on our inhouse it needs 
whilst satisfying our existing obligations 
to our client base
outlook
my team and i are highly focused on
improving operational performance indeed
we are already analysing and scrutinising 
all our businesses in greater detail both to
ensure continual improvement but also to 
be certain we can demonstrate their value 
to the group as a whole going forward
colin matthews
group chief executive
turnover by business
 of group total in 20042005
5
4
3
2
1
1water 47£10151m
2waste 32£6963m
3laboratories 7£1626m
4 water purification and 
operating services 10 £2081m
5 other 4 £868m
severn trent plc 
annual report and accounts 2005 05 severn trent water
severn trent water provides water and sewerage services to around 37 million
household and business properties in england and wales it employs over 5000
people in the midlands region industry regulators have recognised it as one of
the leading companies in its sector in terms of water quality efficiency and
overall performance it also has a strong track record on customer service 
key strengths
 track record of outperforming regulatory
contract
 good performance in ofwat efficiency 
and performance assessments
 drinking and wastewater quality
consistently above average
 excellent record in biodiversity community
relations and employment practices
outlook
the efficiency targets ofwat set severn 
trent water for amp4 are extremely testing
however our overall efficiency has been
assessed by ofwat as above average and we
are confident about our ability to meet the
regulatory targets and amp4 obligations 
we will continue to supply high quality 
water and sewerage services to domestic 
and business customers while delivering
appropriate returns to investors
review of operations water and sewerage 06
severn trent plc 
annual report and accounts 2005 
find out more
more information on severn trent water is available on our
website wwwstwatercouk
the site includes more detailed information about severn trent
water’s plans for the 20052010 amp4 programme
details of severn trent’s amp3 performance and amp4 obligations
and targets can also be found on wwwofwatgovuk and
wwwdwigovuk
 turnover up 61 to £10151m £9567m
 amp3 regulatory outputs delivered
 high levels of performance for customer service
water and wastewater quality
amp4 sets the scene for 20052010
december 2004 brought the final determination of
ofwat’s amp4 price review for 20052010 it was the
culmination of a long process that involved almost
every department in the company
ofwat’s final amp4 determination allowed
severn trent water to raise prices by 24
before inflation equivalent to around £53 per
property over the period even after this rise
severn trent water’s average household bills
will remain among the lowest in its sector
although the determination was lower than
the amount asked for it will enable severn
trent water to maintain the high levels of
customer service water quality and
environmental compliance achieved over the
last five years in recognition of our previous
performance we were given an incentive
reward of 01 we are also one of only two
water and sewerage companies to have
qualified for an enhanced incentive at the
2009 price review in all of ofwat’s efficiency 
assessments this is intended to encourage
top performing companies to continue
improving in future it will allow us to meet
new environmental standards and to make
improvements such as reducing sewer
flooding and improving the taste and odour
of drinking water in specific areas the
investment programme will cost some 
£26 billion and equates to around £720 
for every household
the efficiency targets set by ofwat were
stringent despite the fact severn trent is
performing at or close to ofwat’s operating
and capital efficiency frontiers as part of the
organisational changes necessary to meet
these targets the company will have to cut
300350 jobs over two years 
regulatory review
above
upgrading sewerage infrastructure
main image
terry welch severn trent water
severn trent plc 
annual report and accounts 2005 07 review of operations water and sewerage 08
severn trent plc 
annual report and accounts 2005
severn trent invested more than £2 billion in 
20002005 our programme of work included 
some 9000 individual projects and jobs all 
with the aim of ensuring high quality water 
and wastewater throughout our region 
performance
severn trent water performed strongly 
in 20042005 and exceeded its financial
targets for the year turnover from water 
and sewerage increased by 61 to £10151
million the allowed increase in charges for
20042005 was 47 including inflation
profit before interest tax goodwill
amortisation and exceptional items rose by
06 to £3399 million after incremental
pension charges of £217 million profit
before interest and tax was £3345 million
£3564 million
completing the 20002005 contract
in 20042005 we completed the amp3
programme reaching the ofwat targets 
and outperforming them in many cases we
were among the leading water and sewerage
companies in ofwat’s overall performance
and relative efficiency assessments
direct operating costs in 20042005 rose by
£418 million to £4201 million this increase
arose from the completion of the amp3
programme and from incremental pension
charges the rise was partially offset by
operating cost efficiencies in real terms 
the increase was £297 million after the
pension charges or £80 million before
pension charges 
in 20042005 we invested some £452 million
we continued to deliver efficiencies against
the £2 billion investment programme for
20002005 over the amp3 period we
achieved average capex efficiencies of
around 5 measured against the retail
prices index or around 13 measured
against the construction output price index 
in 2003 ofwat and severn trent agreed new
leakage targets of 505mld for march 2005
and we put in place a programme on leakage
control and monitoring to realise this we 
will continue with our programme of mains
replacement and active leakage detection 
in amp4 to improve our leakage figures
serving our customers
research undertaken by severn trent water
in association with several industry bodies
shows that customers’ main priorities are 
a consistent supply of clean safe water 
and safe reliable drainage among the
headline projects we embarked on or
completed in 20042005 in order to 
achieve that were schemes to protect the
quality of drinking water from boreholes
schemes to prevent sewer flooding projects
to improve cryptosporidium removal at water
treatment works and phosphorus removal
schemes at a number of sewage works
our enhanced water treatment process 
won a prestigious industry award in 2004
which recognised both the technical
achievement of the project and the 
way it was implemented
severn trent water believes that the way 
we work with customers and not just the
quality of services we provide is important
we continued work on two major it projects
in 20042005 the first target is a more
effective billing system that makes processes
such as changing details when moving
house for example much easier for
customers more than two million customers
were switched to this system in 20042005
the second ice or improved customer
experience is a process management
application designed to improve customers’
experience when they deal with our call
centres we made good progress on rolling
out ice in 20042005 and will continue 
the process in 20052006
above
filter maintenance wanlip sewage treatment works below
combined heat and power units 
minworth sewage treatment works
corporate responsibility
severn trent water contributes positively to
the communities in our region we support
hundreds of projects all with a sustainability
agenda and many with an educational focus
as well as teaching children about the water
cycle our educational work in 20042005
promoted the benefits of drinking water
we launched a five year biodiversity plan in
1999 and achieved virtually all the targets 
by 2004 we have now launched a revised
action plan for 20042010 we are one of
seven organisations taking part in the pilot 
of a new biodiversity benchmarking scheme
created by the wildlife trusts
energy management is another important
aspect of our environmental agenda severn
trent water has installed combined heat and
power chp units at around 30 sewage works
which increased our total generation capacity
to 27mw in 20042005
we actively promote equality and welcome
diversity in all aspects of our business and
encourage employees to seek a good work
life balance in march 2005 severn trent
water was named as one of the top ten big
companies to work for in the uk in a
nationwide survey by the sunday times
newspaper 
health and safety is the core of our
obligations to our employees customers and
the communities where we work over the
past two years we have instilled a strong
management focus on improving our health
and safety record in 20042005 there was 
a 24 reduction in reportable incidents 
a number of severn trent water’s facilities
won british safety council fivestar awards 
in 20042005 
we support the charity wateraid in order to
help people worldwide gain access to safe
water and sanitation severn trent water 
worked with wateraid and central tv on a
project to take three young reporters to
ethiopia their experiences were screened 
on nightly news bulletins to give viewers an
insight into life without the clean water and
sanitation that the uk takes for granted
outlook
with the amp3 process concluded severn
trent water can focus on ensuring that we
deliver the new contract although the targets
set in amp4 are challenging we have a
strong track record on efficiency cost control
productivity and customer service we 
are confident that we can maintain and 
in some cases improve on this record 
while continuing to deliver good returns 
to investors
autumn 2005 sees the introduction of 
the new competition regime for business
customers using more than 50 megalitres 
of water a year we have good relationships
with business customers in our region 
and are well placed to retain our business
accounts we also believe we have the
potential to win new national accounts and
customers outside our region there are
good opportunities in this field and we 
have put in place the necessary systems 
for operating in the new regime
profit 
before interest tax goodwill 
amortisation and exceptional items

up 06 at
£3399m
goodwill amortisation nil and 
exceptional charges of £54 million
severn trent plc 
annual report and accounts 2005 09 biffa 
biffa is one of the largest integrated waste management companies in 
the uk it provides collection landfill and special waste services to over 
90000 commercialindustrial customers and almost one million households 
through its local authority contracts biffa’s infrastructure includes the 
operation of over 30 landfill sites 13 special waste treatment facilities 
and a collection fleet of over 1650 specialist vehicles the company 
employs over 5000 people in the uk and belgium
outlook
new legislation and increased landfill tax 
will impact on all aspects of our business
but changes in legislation also create new
business opportunities in pretreatment
special waste and integrated waste
management with the hales integration 
now complete biffa is in a good position 
to maximise those opportunities and to
achieve good organic growth in 20052006
key strengths
 high quality it infrastructure delivers
efficiencies and customer service
 modern specialist fleet with high levels 
of fuel and operational efficiency
 over 30 landfill sites throughout the uk 
all with iso14001 certification
 over one million tonnes of waste recycled
and composted in 20042005 one year
ahead of target
 special waste expertise based on
innovation new technologies and
understanding of new legislation
review of operations waste management 10
severn trent plc 
annual report and accounts 2005  turnover up 100 to £6963m £6331m
 turnover from collection up 93 
landfill up 99 special waste up 116 
and belgium up 128
 strong it infrastructure delivering synergies 
and efficiencies
raising the bar in health and safety performance
biffa’s goal is to be a leader in health and safety in
the waste industry and a benchmark for others our
aim is to ensure the safety of everyone who comes
into contact with our operations – whether they are
employees customers contractors or members of
the public
culture change

find out more
more information on biffa is available at wwwbiffacouk
details of biffaward the landfill tax credit scheme 
can be found at wwwbiffawardorg
the waste industry has traditionally had a
poor record on health and safety compared
with many other industries biffa is
determined to improve on this record
in 2002 we launched a companywide
culture change programme to promote and
improve health and safety across all our
divisions regular workshops which include
employees from all our different business
functions are held to discuss the importance
of health and safety these have proved
highly effective in identifying potentially
dangerous practices and in spreading the
key messages of the programme ‘if we can’t
manage the risk we don’t do it’ and ‘think
what if not if only’ employees are continually
encouraged to question their behaviour and
attitudes towards health and safety issues 
other initiatives in 20042005 include
introducing new personal protective
equipment and uniforms installing new
hardware such as reversingaid cameras 
to our fleet providing manual handling
training across the whole organisation 
and holding a health and safety 
awareness week
one of the real benefits of the culture change
programme is that our employees across all
operational and support functions are given
the opportunity to make suggestions to
improve health and safety the results of our
various culture change programme initiatives
are evident
following the british safety councils audit of
the companys locations biffas performance
was very highly rated with six uk locations
achieving four star ratings 
recognition has also been achieved with the
recent award of ohsas 18001 certification
occupational health and safety audit
covering health and safety performance 
in the fleet workshops
above
manual handling training provided for all
employees 
main image
gavin george biffa 
severn trent plc 
annual report and accounts 2005 11 review of operations waste management 12
severn trent plc 
annual report and accounts 2005
biffa achieved a good performance in
20042005 following the acquisition of
hales waste control in 20032004 we
completed the integration of that business
ahead of schedule and realised the planned
synergies from the deal
in addition to the hales integration three
other themes ran through the business a
drive to make biffa the health and safety
leader in its industry legislation and the
upgrading of our it capabilities
in terms of legislation european directives
such as the landfill directive road transport
directive and hazardous waste regulations
directive are having a fundamental effect on
the way we run our business we are on track
in our preparations for these directives and
ready for the opportunities they create
the it programme had two aspects in our
collection fleet we installed incab technology
linked directly to our it network as well as
improving our operational efficiency and
customer service this technology helped us
win important new municipal contracts we
also upgraded our mainframe capabilities
ensuring greater it security and business
continuity
performance
turnover for waste management increased
by 100 in 20042005 to £6963 million
turnover in the uk was £6295 million up
97 on the previous financial year turnover
in belgium was £668 million up 128
biffa’s profit before interest tax goodwill
amortisation and exceptional items increased
by 53 to £834 million or 105 before
incremental pension charges of £41 million
goodwill amortisation was £229 million
£213 million profit before interest and 
tax was £605 million £470 million
there were no further costs for the
integration of hales in 20042005 and the
planned annualised synergies of £75 million
are being delivered 
collection
biffa’s collection division works with
industrialcommercial customers and 
local authorities across the uk 
the division won a number of large new
commercialindustrial accounts in the
municipal sector the securing of new
contracts and the extension of existing
contracts brought the total of municipal
contracts now managed to 50 they included
important new sevenyear contracts in the
london boroughs of wandsworth and
havering the division also rewon contracts
in swale kent tandridge and west
berkshire evidence of previous good
performance 
biffa continued to invest in new facilities and
depot upgrades in 20042005 new facilities
were set up in south shields middlesbrough
st albans southampton and bridlington
unfortunately in june 2004 a fire caused
serious damage to the new bursom recycling
plant built as part of the £300 million
integrated waste management contract with
leicester city council the plant is now back
in operation and the technology is the only
one of its kind in the uk
overall in the collection division turnover
increased to £3942 million £3606 million
profit before interest tax goodwill amortisation
and exceptional charges was £540 million
up 47 on the previous year 
landfill
biffa operates more than 30 landfill sites 
in the uk the landfill division as a whole
received the iso 14001 environmental
management certification in 20042005 
the division made good progress on
compliance with the implementation 
of the landfill directive for example biffa
continued the process of obtaining pollution
prevention and control ppc permits and
11 of the 38 permits applied for had been
obtained by the end of the year
top
cell preparation redhill landfill site
above
specialist collection vehicle
profit 
before interest tax goodwill 
amortisation and exceptional items

up 53 at
£834m
goodwill amortisation £229 million 
and exceptional items of nil in august 2004 biffa completed its integration 
of the hales waste control business well ahead 
of schedule all planned synergies from bringing
together the biffa and hales businesses were
delivered and there were no further integration 
costs in 20042005
outlook
legislation will continue to provide both
challenges and opportunities the landfill
directive and increases in landfill tax from
april 2005 will stimulate demand for
alternatives to landfill but our pretreatment
recycling and special waste activities will
benefit from that we believe that the market
already recognises our strengths in those
areas and we are positive about prospects
for the year ahead
below
wastesafe secure transportation 
of hazardous waste materials
the landfill directive also created new
business openings biffa implemented 
four stable nonreactive cells for asbestos
disposal in key strategic areas it also formed
a strategic partnership with a canadian
company biogenie to remove and treat
contaminated soil from brownfield
construction sites 
in 20042005 the effect of the landfill
directive on business volumes was limited
indeed in the first months of the year 
the division benefited from an increase of
higher margin contaminated waste work 
in the run up to implementation of the
landfill england and wales regulations 
in july 2004 
turnover for the division was up 99 
to £1793 million profit before interest tax
goodwill amortisation and exceptional items
rose by 138 to £387 million £340 million
landfill volumes were up 5 overall unit
revenues excluding landfill tax were up by 5
special waste
the special waste division works with
customers in many sectors to manage
hazardous waste materials services include
packaged waste services like hazpak waste
safe and backtrack which all performed 
well in 20042005 the division also 
leads the company’s integrated waste
management contracts which encompass 
all aspects of biffa’s business – collection
pretreatment recycling and landfill
capabilities as well as its special waste
expertise during 20042005 the integrated
waste management team helped to recycle
over 23000 tonnes of waste for clients
the special waste division also manages
biffa’s power generation activity with new
capacity added at a number of uk sites in
20042005 biffa’s power generation interests
in the uk exceeded 100mw by year end
turnover in special waste was £560 million
in 20042005 up 116 profit before 
interest tax goodwill amortisation 
and exceptional items was £82 million 
£70 million 
belgium
biffa has 11 operational facilities in belgium
as well as contributing to the balance sheet
the business adds value to biffa by providing
experience of operating in a recycling and
recovery culture well in advance of the uk
for example since belgian householders
have greater responsibility for separation 
of wastes lessons can be learned when
developing pretreatment and automatic
sorting facilities in the uk
despite difficult market conditions biffa’s
turnover in belgium was £668 million up
128 profit before interest tax goodwill
amortisation and exceptional items was 
£33 million £32 million 
corporate responsibility
biffa recognises its responsibility to
contribute positively to communities and 
the environment biffaward the company’s
landfill tax credit scheme has distributed
over £70 million to over 800 community 
and environment projects since it was set 
up in 1998 in 20042005 it distributed
approximately £7 million ranging from a
grant to an unemployed workers’ centre to a
project to restore wildlife habitats in the fens
towards the end of the year biffa produced
an awardwinning interactive educational cd
to help primary and secondary schoolchildren
learn about waste and recycling and how
they can ‘do their bit’ to protect the
environment 
biffa continued in its commitment to report
biennially on its environmental performance
but this year extended the report to include
more social issues making this year’s report
its first corporate responsibility report
severn trent plc 
annual report and accounts 2005 13 stl 
severn trent laboratories opened eight new service
centres in the us and two in the british isles in
20042005 responding to local market requirements
demand from customers and opportunities for
business growth
key strengths
 market leaders in the us and uk 
 reputation for technical excellence and responsive
customer service 
 record of innovation and being at the forefront 
of new markets 
 client portfolio of leading us and uk companies 
 new service centres extend geographical strength
serving the customer

find out more
more information on severn trent laboratories is available at
wwwstlltdcouk wwwstlinccom wwwqedenvcom and
wwwaerotechpkcom
above
expert analysis in accredited laboratories
review of operations laboratories 14
severn trent plc 
annual report and accounts 2005 new indoor air quality iaq testing facilities
were set up within existing laboratories in
florida texas and california to serve the
growing market for iaq and mould testing
the new facilities combined with the
expertise and reputation of our subsidiaries
pk microbiology services and aerotech
create a very strong position in this market
one particularly key initiative is to replace a
number of individual laboratory information
management systems with a single standard
system that covers the whole network 
qed environmental systems
stl’s groundwater sampling equipment
division qed won a 3 million contract 
to supply a major mining and chemicals
company in australia with air stripper 
units which remove vocs volatile organic
compounds this is the largest contract in
qed’s history the air strippers are being
used in a high profile project to remove 
legacy contamination from groundwater
the uk business
market conditions in the uk were much
better than in the us the landfill directive
created new opportunities and we enjoyed
growing demand for contaminated land
testing driven by the development of
brownfield construction sites the service
centres in ireland and scotland performed
strongly winning new analytical contracts
outlook
although we do not expect market conditions
in the us to ease in 20052006 there are
opportunities for growth stl expects to 
carry out increased sediment testing work 
in connection with the initiative to clean up
the great lakes and increased opportunities
in the iaq market and food hygiene markets
are also expected to provide growth stl has
the expertise in place to compete strongly 
in newly emerging market areas such as
testing for endocrine disrupters perchlorate
contamination fragrance allergens and flame
retardants in the uk legislation like the
landfill directive and the water framework
directive will continue to create growth
opportunities 
in the us market conditions were very
challenging in 20042005 as federal funding
for environmental clean up projects was
severely impacted by diversion of funds 
to the military’s activities in iraq and other
overseas locations budget deficits at local
state and national levels also reduced
demand while general enforcement levels 
continue to slow in addition the us
encountered the worst hurricane season 
in over 100 years – stl has six laboratories
in the hurricane belt one in florida was badly
damaged and all six experienced power
outages service disruption and downtime
against this difficult background turnover
was down 44 to £1626 million while profit
before interest tax goodwill amortisation 
and exceptional items was down 309 to
£150 million part of the shrinkage can be
attributed to the effect of the dollar exchange
rate movements but us margins were
severely impacted by pricing pressures
driven by the reduction in demand turnover
was up 19 in the us excluding the impact
of exchange rates and by 64 in the uk
profit before interest and tax was £109
million £177 million
serving the customer
stl’s strategy to combat the current market
challenges in the us and return to growth 
is to focus on service standards and further
develop strengths in high growth and newly
emerging market segments in order to
increase penetration in specific locations 
stl opened eight new service centres in the
us and two in the british isles these service
centres provide convenient local services
such as delivery of sample containers and
related supplies as well as sample collection
and shipping some service centres also offer
project management and limited analytical
capabilities and are complemented by other
value added products such as the webbased
mystl electronic project management system
as well as offering greater convenience to
existing customers these new service centres
brought us closer to new clients in the us
scotland and ireland
profit 
before interest tax goodwill 
amortisation and exceptional items

down 309 at
£150m
goodwill amortisation £41 million 
and exceptional items of nil
top
service centres provide convenient local services
above
soil sampling and confirmation testing of 
stockpiled materials
severn trent plc 
annual report and accounts 2005 15 severn trent 
services 
severn trent services continued to invest in technology
and product development in 20042005 that put
them at the forefront of emerging markets ranging
from water purification and contract operations to
water metering and infrastructure projects
key strengths
 strong market position and brand recognition
 strategy focusing on high margin business
opportunities
 continually expanding product and technology base
 emphasis on cost control and operational efficiency
technology and product development

find out more
more information on severn trent services is available at
wwwseverntrentservicescom and wwwstwaterinternationalcom
above
tetra® nitrifying submerged aerated filter nsaf
and deep bed filter dbf crankley point 
review of operations water purification and operating services 16
severn trent plc 
annual report and accounts 2005 outlook
the water purification market will continue 
to grow and severn trent services’ strong
market position and brand recognition will
enable us to compete vigorously there are
good growth opportunities in arsenic 
removal and ultrafiltration and ro membrane
products forthcoming legislation like us
regulations on ballast water which come into
effect in 20062007 will create new openings
for our electro chlorination technology
in the us budget deficits have worked 
to the advantage of the contract operations
business with states and municipalities
relying more heavily on publicprivate
partnerships to supply water and waste
treatment services
the outlook for water metering and contract
operations also looks positive the strong
reputation of both businesses will stand us 
in good stead as we pursue new contracts
and market opportunities
severn trent services comprises two
divisions water purification and operating
services the latter includes the contract
operations business seven trent water
international and the smaller metering
services and pipeline services businesses
before the impact of exchange rate
movements there was overall organic 
growth across these businesses profitability
and margins benefited greatly from the
restructuring programme and cost controls
implemented in 20022003 and our strategy
of focusing on higher margin business
turnover decreased by 14 to £2081
million but excluding the impact of exchange
rates turnover increased by 52 profit
before interest tax goodwill amortisation 
and exceptional items was up 165 at
£198 million profit before interest and 
tax was £210 million £138 million
water purification
turnover in the water purification division
decreased by 75 to £767 million this 
was a result of two main factors exchange
movements and lower revenues in the uk
where customers were waiting for the
resolution of the amp4 process before
commissioning new projects excluding 
the impact of exchange rates turnover 
was down by 08 the us side of the
business performed well with turnover 
in us up 41
we continued our work to expand our
product and technology base we extended
our partnership with lanxess formerly part
of bayer ag on our sorb33 system for
removing arsenic from drinking water to
cover the industrial and municipal
wastewater sector as well we were delighted
with this agreement which creates significant
business opportunities
we also entered into a new alliance
collaboration with inge ag to incorporate
their ultrafiltration uf membrane products 
into our ultrafiltration systems throughout
the world inge is known for its leadership
and innovation in this rapidly growing market
so this is an important new relationship
operating services
turnover in the operating services division
was £1314 million up by 25 excluding
the impact of exchange rates turnover was
up by 91
there was good performance across the
business contract operations which carries
out operating and maintenance contracts for
customers in the us decreased its turnover
by 03 to £750 million turnover in us
was up by 88 among the contracts
announced during 20042005 was an eight
year leachate control contract worth 65
million at fresh kills landfill in new york
severn trent water international stwi
which provides management and consultancy
services in europe and the developing world
had an excellent year the uk ministry of
defence awarded a 25 year pfi contract
worth approximately £1 billion to a subsidiary
of stwi called coast to coast water c2c
this groundbreaking deal called project
aquatrine package c is for the provision 
of water and wastewater services to
approximately 1500 mod sites in england
and commenced on 30 march 2005
turnover at stwi was up by 131
the metering services business increased
turnover by 226 it won a 4 million
contract to replace domestic water meters 
in qatar with its smartmeter™ line of meters
this new global water metering product
launched in 20032004 is well suited to the
difficult water conditions in the middle east
so there are good prospects in that market
pipeline services turnover was down by
162 state and federal budget deficits 
in the us mean there is limited investment 
in infrastructure projects 
profit 
before interest tax goodwill 
amortisation and exceptional items

up 165 at
£198m
goodwill amortisation £31 million 
and exceptional credit of £43 million
below
smartmeter™ advanced water metering technology
severn trent plc 
annual report and accounts 2005 17 review of operations other businesses 18
severn trent plc 
annual report and accounts 2005
total turnover for other businesses
comprising systems property engineering
consultancy and insurance in 20042005 
was £868 million down 410 profit 
before interest tax goodwill amortisation 
and exceptional items was £48 million 
down 127 on the previous year loss
before interest and tax was £89 million
profit £82 million
systems 
the systems group comprises two main
entities aseriti and worksuite aseriti
provides it services and solutions for water
gas and electricity utilities worldwide its
principal product is the cisopen vision cis
customer information and billing system
in australia aseriti’s cis continues to be the
cornerstone application for five major energy
utilities operating in a highly competitive
deregulated market 
in 20042005 aseriti implemented cis 
at severn trent water successfully migrating
the water company’s unmetered customers
the system was used to produce annual 
bills for over 3 million accounts in february
march 2005
during the year aseriti commenced a plan 
to refocus its activities it has curtailed its
operations in the us and in the uk it has
ceased providing it services to external
customers and will limit this work to severn
trent water and other group companies 
it will continue to market cis from the uk
worksuite is the work management business
of the systems group and does much of 
its business in north america the business
made a number of sales to bluechip utilities
in 20042005 and is a market leader in 
its field despite this 20042005 was a
difficult trading year and profits were below
expectations certain licence sales made 
in 20042005 are contingent upon worksuite
client activities and therefore revenue
recognition for these sales will not occur 
until 20052006
property
severn trent property undertook a strategic
review of its activities in 20042005 and
decided to focus on whollyowned sites
rather than expand its joint venture
operations as a result of this decision the
company sold its 51 interest in thorpe
park leeds to its joint venture partners
realising a satisfactory profit the company
has now relinquished all interest in the
thorpe park office park although it retains
interests in peripheral sites
at daventry international rail freight
terminal planning permission has now been
granted for a further 2 million square feet
and work continues on infrastructure design
and costings marketing of the site will begin
in 20052006 with the aim of securing
substantial prelettings before building work
starts in 2006
the tournament fields office scheme at
warwick progressed well during the year the
principal infrastructure has been completed
and marketing of the site is underway
discussions are in hand with a number of
potential occupiers which could lead to
building work starting in 20052006
in birmingham a site of 90 acres owned by
severn trent water has been allocated for
employment use and an outline planning
application has been submitted severn 
trent property is hopeful that consent for
development will be granted shortly which
will lead to the project being taken over by
severn trent property
engineering
charles haswell  partners is severn trent’s
engineering consultancy business providing
expertise in a variety of engineering and
environmental disciplines
haswell made a major contribution to the
successful delivery of severn trent water’s
capital programme for 20042005 it was
also appointed as one of the three consulting
engineers that will work on severn trent
water’s amp4 programme it worked with
yorkshire water as a key member of its
eastern area wastewater capital solution
team and it contributed to the dublin port
tunnel project in ireland its health and
safety management system was certified 
to the ohsas 18001 standard
after a review of the business towards the
end of 20042005 the decision was taken
that the best way forward for haswell was to
limit its work to severn trent water projects
these already accounted for approximately
70 of turnover in 20042005 therefore
once existing projects have been completed
haswell will cease trading with external
clients and it will eventually be absorbed
into severn trent water
insurance
derwent insurance severn trent’s captive
insurer provides insurance cover to severn
trent group companies

find out more
wwwaseriticom
wwwworksuitecom
wwwseverntrentpropertycom
wwwhaswellcouk severn trent is one of the uks leading suppliers of environmental goods and
services we believe this is consistent with sustainable development and with
being a good corporate citizen we also believe that demonstrating corporate
responsibility enhances both the nonfinancial and financial assets of the
company and therefore increases shareholder value
corporate
responsibility 
key strengths
 leading utility in dow jones world
sustainability index for the fourth
consecutive year
 renewable energy generating capacity 
of 131mw
 placed 13th in the guardian’s giving list 
in 2004 the highestranking utility
 strong culture of worklife balance 
training and diversity
 one of first companies in sector to support
the united nations’ global compact
outlook
in 20052006 and beyond severn trent will
continue to promote responsible corporate
behaviour across our businesses we will
work to identify emerging cr issues and
opportunities and we will continue to
anticipate issues that might be raised by 
the socially responsible investment sri
community and other stakeholders 
main image
amanda richards biffa 
review of operations corporate responsibility
severn trent plc 
annual report and accounts 2005 19 review of operations corporate responsibility 20
severn trent plc 
annual report and accounts 2005
in the face of strong competition severn trent has
been named as the utilities sector leader in the
global dow jones sustainability world index for 
the fourth consecutive year no other utility has
achieved this distinction
embedding cr in our business
severn trent’s policies on corporate
responsibility are steered by our corporate
responsibility committee to reflect the
importance we place on this area the
committee is chaired by the group chief
executive it consists of nonexecutive and
executive directors and includes the managing
directors of the four main businesses
in june 2004 the corporate responsibility
committee absorbed severn trent’s
charitable contributions committee this
enables us to consider charitable giving in
the overall context of our corporate
citizenship and our work with communities
severn trent has a detailed corporate
responsibility policy that defines how our
vision and values on corporate responsibility
are incorporated in our daily activities this
includes a code of conduct which was
revised in 20042005 following extensive
consultations with employees and external
stakeholders
our vision and values
as an environmental services company our
activities are of intrinsic benefit to society
our ability to deliver business success  
and the way in which we deliver it makes 
a significant contribution to building a
sustainable future in the uk and beyond 
as part of our commitment to achieving 
a sustainable future we seek to
 conserve the natural resources that we
manage
 safely dispose of the waste we handle
 maintain the infrastructure necessary 
to sustain our business in the future
 comply with the highest environmental
standards
 provide a safe working environment where
our people are valued and respected
 support the communities in which we live
and work
translating values into practice
in june 2004 we formally expressed our
support for the un global compact and 
were one of the first utility companies in the
uk to do so the compact consists of ten
principles concerning businesses’
responsibilities on human rights labour
policies the environment and anticorruption
our support for the compact reflects our
existing commitment to responsible
environmental and employment practices
but it also represents a broadening of our cr
values to cover human rights issues as part
of this broader commitment we have begun
working in partnership with other utilities to
incorporate human rights criteria into our
supply chain assessments
our support for the principles of the global
compact and for corporate responsibility in
general took many forms in 20042005 and
is evident across our business below we
summarise some of the tangible ways in
which we put our values into practice in
20042005
environment
in 20042005 our work included mitigating
our impact on climate change increasing the
volume of waste handled for recycling by biffa
promoting biodiversity and improving our
supply chain assessments
our work to mitigate our impact on climate
change focuses on both short term and
longer term measures the case study
opposite describes how we generate energy
from our ‘renewable carbon’ resources 
at the same time we continually monitor 
our fuel related transport emissions biffa’s
programme to improve fuel efficiency
includes using ultra low sulphur diesel 
and installing smoke emission meters at
workshops to check that each truck’s engine
is running at optimum efficiency biffa also
have a target to use biodiesel in 50 of fleet
vehicles by april 2006
we continued to work with the carbon 
trust on our carbon management model
this projects a potential greenhouse gas
emissions scenario for 2020 for the group
helping us to target where and how we can
reduce emissions 
both severn trent water and biffa have
biodiversity action plans in place severn
trent water launched its first five year plan 
in 1999 and achieved virtually all the targets
by 2004 it has now launched a revised
action plan for 20042010
workplace
we actively promote equality diversity and
health and safety and encourage employees
to seek a good worklife balance 
the group has a ‘lifestyle’ flexible benefits
scheme for its uk based employees and we
are expanding this year by year
in march 2005 severn trent water was
named as one of the top ten big companies
to work for in the uk in a nationwide survey
by the sunday times newspaper the survey
acknowledged the company’s strengths in
leadership treatment of staff and
contribution to society
we actively promote diversity and business
units have developed their own diversity
strategies and action plans at biffa for
example 400 managers and supervisors 
took part in diversity and equality awareness
training in 20042005 severn trent water
took part in a benchmarking exercise for
race for opportunity a campaign organised
by business in the community it came
runner up in the best newcomer in the
privatepublic sector category
there has also been a strong management
focus on improving health and safety
performance across the group
this year health and safety targets were set
that included the need to undergo a number
of british safety council audits the overall
group target was to achieve an average score
of 35 stars per site the best performers
were severn trent water who were awarded
‘5 stars’ at seven sites and laboratories 
who received a ‘5 star’ award for a site in
the us ‘4 stars’ were awarded to seven sites
operated by biffa and one laboratories site
in the uk these criteria and supported hundreds of
local projects
severn trent is also a leading corporate
supporter of wateraid its support in
20042005 ranged from our annual
corporate donation to sending volunteers 
to wateraid projects in africa to employee
fundraising and awareness initiatives 
education is a strong theme of our
community activities severn trent water
works with children and schools teaching
them about the water cycle and promoting
the benefits of drinking water biffa produced 
an interactive educational cd to teach
schoolchildren how they can do their 
own bit to protect the environment
mitigating our impact on the climate
greenhouse gas emissions are an inevitable result 
of severn trent’s operations but we have rigorous
programmes to measure monitor and mitigate
those emissions 
energy management is an important part of
severn trent’s work to mitigate the impact 
of our operations on the climate as well as
trying to maximise energy efficiency we also
significantly reduce our net greenhouse gas
emissions through renewable electricity
generation 
biffa and severn trent water between them
manage 12 of the uk’s ‘renewable carbon’
excluding agriculture we call it ‘renewable
carbon’ because of the important link
between the responsible disposal of these
biodegradable materials waste and sewage
sludge and the opportunity to generate
valuable renewable energy from their disposal 
during 20042005 both severn trent water
and biffa steadily increased their renewable
energy generation capacity 
biffa captures landfill gas and uses it to
produce electricity during 20042005 it
expanded its generation facilities to include
smaller landfill sites and it invested in more 
mobile facilities to ensure it can respond 
to changing emissions patterns 
severn trent water uses combined heat and
power chp units to convert the methane
from digested sewage sludge into electricity 
by the end of the year their combined
generation capacity had reached 131mw 
up from some 110mw in 20032004 
during 20042005 severn trent generated
around 690gwh of electricity which equates
to 5 of the uk’s total renewable electricity
production
renewable energy
community
all parts of the group aim to contribute
positively to the communities in which 
they operate this includes involving
communities in our plans wherever 
possible and establishing longterm
community liaison groups at some sites 
our community investment guidelines 
focus on three main areas environmental
education the built environment and the
natural environment in 20042005 our staff
worked with ten partner charities that met

find out more
more information is available at
wwwseverntrentcomcorporateresponsibility
the site includes more detailed information about our code 
of conduct you can also view or download a copy of the code
above
renewable energy generation 
risley landfill site 
severn trent plc 
annual report and accounts 2005 21 financial review 22
severn trent plc 
annual report and accounts 2005
group results 
group turnover was £20812 million
£20151 million an increase of 33 over
last year the growth in turnover was mainly
due to the contributions of severn trent
water and biffa which were partially offset 
by exchange rate impacts in laboratories
and services and lower activity in property
group profit before interest tax goodwill
amortisation and exceptional items was down
05 to £4386 million £4406 million
goodwill amortisation was £301 million
£298 million there was a net exceptional
charge of £148 million profit of £116
million
group profit before interest tax and
exceptional items was £4085 million
£4108 million group profit before interest
and tax was £3937 million £4224 million
after net interest charges of £1764 million
£1680 million group profit before tax
goodwill amortisation and exceptional items
was down 38 to £2622 million £2726
million group profit before tax and
exceptional items was £2321 million
£2428 million a decrease of 44 
group profit before tax was £2173 million
£2544 million
the total tax charge for the year was £778
million £696 million of which current tax
represented £409 million £333 million
and deferred tax was £369 million £363
million minority interests were £07 million
£07 million profit after tax and minority
interests was £1388 million £1841 million
earnings per share adjusted to exclude
exceptional items and deferred tax
decreased by 94 to 556 pence 614
pence as a result of increased pensions
interest and tax charges basic earnings per
share are 403 pence 535 pence
operating activities generated a net cash
inflow of £6992 million £7331 million 
the main cash outflows were capital
expenditure and financial investment of
£4831 million £4843 million equity
dividends of £1620 million £1577 million
and net financing costs of £1513 million
£1483 million the increase in net debt
was £1409 million £2435 million
net debt at 31 march 2005 was £28900
million £27491 million gearing reflecting
the provision for deferred tax was 57
55 the group’s net interest charge 
was covered 43 times 44 times by profit
before interest tax depreciation goodwill
amortisation and exceptional items
exceptional items
there was a net exceptional charge in the
year of £148 million comprising the net of
 an operating charge of £130 million for
redundancy costs in severn trent water
in relation to planned manpower
reductions arising from the amp4 price
review
 a charge of £137 million of which £99
million relates to goodwill previously
written off to reserves resulting from the
closure of systems us cis business and
the termination of external sales from
systems uk it services business and
from engineering consultancy 
 a £43 million credit from the disposal of
the groups investment in an associated
undertakings in portugal and 
 a £76 million credit from the profit on
sale of fixed assets in severn trent water
in 20032004 there was a net exceptional
credit of £116 million comprising the net 
of a £198 million profit on the sale of fixed
assets arising from the sale of land and
property by severn trent water 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 us and a charge 
of £109 million in waste management 
for hales integration costs
taxation
the charge for current tax was £409 million
£333 million of which £10 million £24
million was attributable to exceptional items
the current tax charge of £399 million
attributable to profit after interest and
goodwill amortisation but before exceptional
items is an effective rate of 172 127
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 groups accounts this principle
has been followed in determining the groups
pension charge for 20042005
the group has four defined benefit pension
schemes of which the severn trent pension
scheme stps is by far the largest formal
actuarial valuations have been undertaken
for the stps and another scheme the severn
trent senior staff pension scheme as at 31
march 2004 as a result of these valuations
there are incremental pension charges of
£313 million for the group in 20042005
on an frs17 basis the estimated net
position before deferred tax of the groups
defined benefit pension schemes and the
groups unfunded pension liabilities for
senior staff was a deficit of approximately
£309 million as at 31 march 2005 this
compares to a deficit of approximately £368
million as at 31 march 2004 with the value
of assets increasing over the last year by a
greater amount than the value of liabilities
net of deferred tax the estimated net deficit
on an frs17 basis as at 31 march 2005 was
approximately £217 million on an frs17
basis the funding level has improved from
around 72 at 31 march 2004 to around
78 at 31 march 2005
as at 31 march 2005 the groups defined
benefit pension schemes had total assets 
of approximately £1079 million of which
around 69 was invested in equities
group turnover was £20812 million £20151 million
an increase of 33 over last year the growth in
turnover was mainly due to the contributions of severn
trent water and biffa which were partially offset by
exchange rate impacts in laboratories and services
and lower activity in property further details of the group’s pension
position are contained in note 23 to the
accounts on pages 6671
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 the board determines matters
of treasury policy and its approval is required
for certain treasury transactions
it is the group’s strategy to access a broad
range of sources of finance to obtain both
the quantum required and the lowest cost
compatible with the need for continued
availability
the group uses financial derivatives solely 
for the purpose 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 2005 interest rates
for some 66 of the group’s net debt of
£2890 million were so fixed at a weighted
average interest rate of 6 for a weighted
average period of 174 years 
the group’s business does not involve
significant exposure to foreign exchange
transactions cross currency swaps are
employed to exchange foreign currency
borrowings for sterling the group also has
investments in various assets denominated in
foreign currencies principally the us dollar
and the euro the group’s current policy is to
hedge an element of the currency translation
risk associated with certain foreign currency
denominated assets
the long term credit ratings of severn trent
plc and severn trent water limited are
long term severn trent severn trent
ratings water limited plc 
moody’s a2 a3 
standard  poor’s a a– 
exchange rates
approximately 31 of the group’s profit
before interest tax goodwill amortisation 
and exceptional items and 19 of its net
operating assets are denominated in us
dollars and approximately 36 of its profit
before interest tax goodwill amortisation 
and exceptional items and 07 of its net
operating assets are denominated in euros
the trading results of overseas subsidiaries
are translated to sterling at the average rate
of exchange ruling during the year and their
net assets are translated at the closing rate
on the balance sheet date 
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’s programme of work to prepare
for the adoption of ias has continued
throughout the year key finance employees
have been trained in ias and the differences
from uk gaap that are likely to impact the
group the group’s systems have been
modified to enable reporting under ias 
work is now underway to determine the
adjustments required to construct the opening
balance sheet for ias as at 1 april 2004 and
to prepare the balance sheet as at 31 march
2005 and the profit and loss account for the
year then ended these statements will form
the comparative figures in our first full year
ias financial statements 
significant changes will arise for the
accounting treatment of retirement benefits
fixed assets and renewals accounting
deferred tax dividends goodwill and
financial instruments it is expected that 
the overall net impact will be to reduce 
net assets and increase earnings volatility
further details will be made available on 
19 september 2005
supplementary information 
for supplementary information including 
the group’s preliminary results presentation
see the severn trent website
wwwseverntrentcom
mark wilson 
group finance director
severn trent plc 
annual report and accounts 2005 23 board of directors 24
severn trent plc 
annual report and accounts 2005
derek osborn cb 64
mr osborn joined the board in september 1998
he is chairman of stakeholder forum jupiter
global green investment trust and the international
advisory board of erm cvs and is a member of the
uk commission on sustainable development he
was director general of environment protection in
the department of the environment from 1990 to
1995 chairman of the management board of the
european environment agency from 1995 to 1999
chairman of the uk round table on sustainable
development from 1999 to 2000 and chairman 
of the international institute for environment and
development from 1998 to 2002
martin houston bsc msc dic 47
mr houston joined the board in september 2003
he is executive vice president and managing
director of bg group’s north american caribbean
and global liquified 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 is a fellow of the geological
society of london
marisa cassoni bsc aca 53
ms cassoni joined the board in 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 she is a
nonexecutive director of gfi a company listed 
on the new york stock exchange a member of the
cbi economic affairs committee and a member 
of the financial reporting council’s accounting
standards board
colin matthews ma ceng mba 49
mr matthews joined the board as a nonexecutive
director in october 2003 he was appointed group
chief executive designate in september 2004 and
became group chief executive on 1 february 2005
he is a chartered engineer who has worked for the
american general electric company and then at
british airways first as director of engineering then
as director of technical operations responsible for
all aircraft maintenance it and procurement he
was group managing director of transco from 2001
to 2002 and ceo of hays plc from november 2002
to june 2004
mark wilson ba aca 47
mr wilson joined the board as group finance
director on 1 september 2004 prior to this he was
finance and regulation director for severn trent
water ltd from 1995 and was also a nonexecutive
director of paypoint until august 2004 previously
mr wilson worked for arthur andersen both in
london and hong kong and for international
leisure group 
sir john egan kbe msc beng 65
sir john egan joined the board on 1 october 2004
becoming chairman on 1 january 2005 he is also
chairman of inchcape plc and harrison lovegrove
 co ltd sir john worked in the motor industry
until 1990 at general motors massey ferguson 
and british leyland rising to become chairman
and chief executive of jaguar plc he was chief
executive of baa plc from 1990 to 1999 and
chairman of mepc from 1998 to 2000 he was
also president of the confederation of british
industry from 2002 to 2004 sir john was knighted
in the queen’s birthday honours list in 1986 
and is a deputy lieutenant of the county of
warwickshire
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
corporate responsibility
committee
c s matthews chairman
m j bettington
r s brydon jannetta
p j gavan 
l f graziano 
f a osborn
a p smith
a p wray
secretary – p p davies
executive committee
c s matthews chairman
m j bettington
r s brydon jannetta 
p p davies and secretary
p j gavan
l f graziano 
a p smith
p k tandon
j van den arend schmidt
m r wilson
a p wray
remuneration committee
m c flower chairman
m l cassoni
j d g mcadam
secretary – p p davies
nominations committee
sir john egan chairman
m c flower 
j d g mcadam
f a osborn
secretary – p p davies
senior independent 
nonexecutive director
m c flower
group general counsel 
and company secretary
p p davies llb solicitor tony wray bsc hons 43
mr wray joined the board on 7 march 2005 he 
is managing director of severn trent water ltd
prior to this he was director networks at eircom
the republic of ireland’s telephone operator 
he joined british gas in 1983 and held various
managerial positions before becoming head 
of asset management in 2000 he was director 
of asset management transco then national
operations director transco before being appointed
to implement the merger integration of lattice
transco and national grid group into national
grid transco
rachel brydon jannetta fcca 45
mrs brydon jannetta joined the board on 1
september 2004 she is president and ceo of
severn trent’s us and uk laboratories businesses
a fellow of the chartered association of certified
accountants mrs brydon jannetta qualified as an
accountant in 1984 with gerber landa and gee 
an accounting firm based in glasgow she then
spent eight years in retail management latterly 
with an asda plc group company before joining
severn trent in 1993 as managing director of 
its uk laboratories operation
martin bettington bsc mecheng mba 52 
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
john mcadam bsc phd 57
dr mcadam joined the board in september 2000
he is chief executive of ici plc he joined ici in
1997 following the acquisition of the specialty
chemical businesses from unilever and was
appointed executive vice president coatings and
chief executive of ici paints in 1998 he joined the
board of ici plc soon after when he also became
responsible for corporate research  technology
and he was appointed chief executive in 2003 
dr mcadam is a member of the university of 
surrey business advisory board and the university
of cambridge chemistry advisory board
john smith fcca hon friba 47
mr smith joined the board in november 2003 
he is a member of h m treasury’s public services
productivity panel and the 100 group of finance
directors after training as an accountant mr smith
joined the british railways board rising to head their
corporate demerger team in 1989 he moved to the
bbc where he was finance director for eight years
and became chief operating officer in june 2004
he is also chief executive of the bbc’s trading arm
bbc worldwide mr smith has held a nonexecutive
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 he
also served for three years on the accounting
standards board until november 2004 
martin flower ba 58 
mr flower joined the board in june 1996 and was
appointed deputy chairman on 6 july 2004 he 
is the senior independent nonexecutive director
he was also appointed as a director of the morgan
crucible company plc in december 2004 and as 
a nonexecutive director and chairmanelect of
croda international plc in may 2005 in may 2004
he retired as chairman of coats ltd where he had
previously been group chief executive
left to right
derek osborn
martin houston 
marisa cassoni 
colin matthews 
mark wilson 
sir john egan 
tony wray 
rachel brydon jannetta 
martin bettington
john mcadam 
john smith 
martin flower
nonexecutive director
severn trent plc 
annual report and accounts 2005 25 the directors present their report together
with the audited financial statements of the
group for the year ended 31 march 2005
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 6 to 21 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 2005 appear in notes
12 and 25 to the financial statements on
pages 56 57 73 and 74
dividend and reserves 
details of dividends paid payable and
proposed are set out in note 8 to the
financial statements on page 54 subject to
approval at the annual general meeting
“agm” the recommended final dividend of
3030p 2004 2927p for each ordinary
share will be paid on 31 august 2005 to
shareholders on the register at the close of
business on 24 june 2005 this together
with the interim dividend of 1821p 2004
1777p per share which was paid on 6 april
2005 brings the total for the year to 4851p
2004 4704p proposed transfers tofrom
reserves are set out in note 20 to the
financial statements on page 64
share capital 
details of movements in share capital are
shown in note 19 to the financial statements
on page 63
resolutions will be proposed at this year’s
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
directors’ report 2005 26
severn trent plc 
annual report and accounts 2005
substantial shareholdings 
as at 6 june 2005 the company had 
been notified of the following substantial
shareholdings 
number of ordinary 
shares of 65 
5
⁄ 19p each  
fidelity 20709407599
international limited
legal  general 11259833 326
investment management 
limited
directors 
a list of directors and their background
details appear on pages 24 and 25 full
details of their service contracts emoluments
and share interests can be found in the
remuneration report on pages 32 to 39 
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
sir john egan was appointed as a non
executive director on 1 october 2004 
mrs r s brydon jannetta and mr m r wilson
were appointed as executive directors on 
1 september 2004 mr a p wray joined 
the board as an executive director on 
7 march 2005
mr a s perelman and mr b duckworth
retired from the board on 31 august 2004
mr j k banyard mr t d g arculus and mr r
m walker retired from the board on 30
december 2004 31 december 2004 and 
2 february 2005 respectively 
sir john egan became chairman of the
company on 1 january 2005 mr m c flower
was appointed deputy chairman of the
company on 6 july 2004 and mr c s
matthews took over as group chief executive
on 1 february 2005
in accordance with the company’s articles 
of association mr m j bettington mrs r s
brydon jannetta ms m l cassoni sir john
egan mr m c flower mr m r wilson and 
mr a p wray retire at the agm and being
eligible offer themselves for reappointment
the board and the nominations committee
support and recommend the proposed
reappointments
corporate governance 
the company attaches great significance 
to the maintenance of good corporate
governance procedures and adherence 
to best practice recognising that they play
their part in creating a framework which can
provide increased benefits for shareholders
the board is pleased to report that in 
an index of the ftse 100 uk companies
compiled by ftse and institutional
shareholder services the company was
ranked in the top 10 for good corporate
governance practice
during the year to 31 march 2005 the
company complied with the principles set
out in section 1 of the combined code on
corporate governance issued in july 2003
the “combined code” as detailed below
and in the remuneration report on pages 
32 to 39 save and except as follows
 the former chairman mr t d g arculus
was appointed as chairman of mmo2
in july 2004 but was requested by 
the board to remain in office until 
31 december 2004 to provide some
continuity while a number of board
changes took place and also while 
the amp4 final determination was
awaited by severn trent water
 mr r m walker former group chief
executive was granted permission by 
the nominations committee to phase 
an increase in the number of ftse 100
nonexecutive directorships he could 
hold above the current policy of one such
appointment during the period up to his
retirement further reference to this can
be found in the remuneration report on
page 32
 during the current year mr flower will
have served on the board for nine years
and will at that stage be deemed by the
combined code not to be independent
however subject to the above the board
considers that mr flower is independent
and wishes him to remain on the board
for another year to 10 june 2006 
mr flower is deputy chairman as well 
as senior independent nonexecutive
director and chairman of the
remuneration committee and the 
board wishes him to continue to hold
those positions at least until the above
date he has made a very valuable
contribution and the board considers 
it important that he should continue to
have the opportunity to do so particularly
to help provide continuity in light of the
significant changes to the board that
have recently taken place the board
the board currently consists of five executive
directors and seven nonexecutive directors
the board has reviewed the status of the
nonexecutive directors and has confirmed
that it regards them as being independent 
at the time of his appointment sir john 
egan was considered by the board to be
independent in addition the board is
satisfied that he is able to devote sufficient
time to his duties as chairman of the
company
the board meets at least ten times each 
year and also 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 
a revised organisational structure across 
the group with clearly defined lines of
responsibility the delegations of authority
have also been modified during the year 
and are to be the subject of a major review
in the current year
in addition to the board meetings the non
executive directors including the chairman
meet separately on a regular basis and also
have an annual meeting where there is an
opportunity for the nonexecutive directors to
meet without the chairman
the division of responsibilities between the
chairman and the group chief executive is
clearly defined the chairman ensures the
effective operation of the board whilst the
group chief executive has responsibility for
the efficient running of all of the group’s
businesses
all directors who joined the board during 
the year have undertaken induction training
furthermore the training needs of all directors
have been reviewed and appropriate training
identified as part of a continuing process
the board is satisfied that it has a sufficient
number of nonexecutive directors with
recent and relevant financial experience as
can be seen from the directors’ biographies
on pages 24 and 25
during the year the board with the help of
an outside facilitator carried out a formal
evaluation of its performance and that of 
its committees individual directors and
company secretary since the board has
undergone a number of changes in the last
year it was recognised that the review had
taken place at a time of transition each
director and the company secretary
completed a detailed questionnaire on
hisher perception of the composition 
operation and effectiveness of the board 
and its committees and on the performance 
of the chairman each of the directors and
the company secretary they were then
interviewed by the facilitator to explore
certain issues in greater depth and to identify
areas requiring improvement additionally
the board reviewed progress against actions
identified in last year’s review finally the
directors and the company secretary were
interviewed by the chairman and the
chairman was interviewed by the deputy
chairman
the evaluation drew particular attention to
the fact that although the company had
performed well in recent years and the board
had a clear understanding of its remit there
were opportunities to improve its functioning
the board has realigned its time allocations
at board meetings in accordance with its 
key priorities and has also determined that
any business previously submitted to the
treasury committee should in future 
be referred to the board accordingly 
that committee has not operated since 
31 march 2005 as mentioned earlier 
the board has already embarked on a 
review of its subsidiary board arrangements
and processes line management and
delegation levels 
in may 2004 an employee of severn 
trent water raised a number of allegations
relating in particular to alleged accounting
inaccuracies and regulatory returns in respect
of which an announcement was made on 22
november 2004 this can be viewed on the
company’s website wwwseverntrentcom 
pricewaterhousecoopers llp forensic
services was appointed by the company 
to carry out a thorough and independent
investigation and in the light of their findings
the board was and remains of the view that 
the matters raised have no effect upon the
integrity of the accounts and that severn
trent water’s customers have not been
overcharged however as such findings
revealed evidence of some behaviour which
the board believed fell short of the high
standards it expects from employees a
disciplinary investigation was instigated
which though substantially complete is likely
to continue at least until ofwat’s review of
these matters is completed 
the board with the support of the audit
committee has taken and intends to take
such actions as it thinks appropriate to
ensure the maintenance of both high ethical
and professional standards and resilient 
and effective controls throughout all group
companies the company is supporting 
ofwat in its review of these allegations 
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
combined code where applicable all of the
committees meet regularly throughout the
year the membership of the committees is
set out on page 24
the terms of reference and membership of
the audit remuneration and nominations
committees 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 terms of
reference during the year and any necessary
actions have been identified and reported to
the board
audit committee 
membership of the audit committee 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 will normally be in
attendance for all or part of the audit
committee’s meetings
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 and the
chairman of the board and is consulted 
by the group chief executive regarding
remuneration for a number of the company’s
senior executives further details on
remuneration issues are given in the
remuneration report on pages 32 to 39 
nominations committee 
the nominations committee comprises 
the chairman and three independent non
executive directors 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
severn trent plc 
annual report and accounts 2005 27 corporate responsibility committee
the corporate responsibility committee’s
principal terms of reference are to help
further develop the company’s environmental
leadership strategy and objectives and
address matters relating to corporate
responsibility
the company’s corporate vision is to be at
the forefront of the environmental services
industry and has a policy statement that
defines how the vision is incorporated into 
its activities in relation to the environment
corporate responsibility and sustainable
development it has expressed support for
the united nations global compact and
reports against the 10 principles in the
company’s online corporate responsibility
report which can be viewed at
wwwseverntrentcom
the company seeks to comply with the
guidelines issued by the association of
british insurers on socially responsible
investment and reporting on social ethical
and environmental matters
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 and where appropriate remuneration
committee in establishing policies covering
organisational and employment matters
attendance at meetings 
details of the board and principal
committees meetings attended by each
director during the year are as follows
remun nomi
board audit eration nations
no of meetings 15 6 11 2
t d g  arculus
1
11 – – 1
j k banyard
2
10 –––
m j bettington 13 – – –
r s brydon 
jannetta
3
7–––
m l cassoni 10 5 8 –
b duckworth
4
4–––
sir john egan
5
6–– 1
m c flower 14 – 11 2
m j houston 13 – – –
c s matthews 15 – – –
j d g mcadam 12 – 9 2
f a osborn 13 6 – 1
a s perelman
4
5–––
j b smith 12 6 – –
r m walker
6
12 –––
m r wilson
3
7–––
a p wray
7
1–––
1
resigned 311204
2
resigned 301204
3
appointed 010904
4
resigned 310804
5
appointed 011004
6
resigned 020205
7
appointed 070305
directors’ report 2005 continued 28
severn trent plc 
annual report and accounts 2005
the nominations committee has reviewed
and is satisfied with the attendance by the
directors at the meetings of the board and
principal committees during the year
directors’ indemnities
article 154 of the company’s articles of
association provides that every director of
the company shall be indemnified out of the
assets of the company against all costs
charges losses damages and liabilities
incurred by himher in defending any
proceedings in which judgment is given in
hisher favour or in which heshe is
acquitted or in connection with any
application in which relief is granted to
himher by the court in each case arising
out of hisher position as a director of the
company on 8 october 2002 the
shareholders and directors of severn trent
italia spa gave an indemnity to its directors
other than snr alberto rittatore vonwiller
in respect of all costs charges expenses
losses damages and liabilities arising in their
capacity as directors of that company in
respect of defending any actual or
threatened proceedings and which do not
arise directly or indirectly from any crime
fraud or gross negligence and which are not
covered by insurance the maximum amount
of the indemnity given was £535 million per
director
internal controls
a statement by the directors covering their
responsibilities in relation to the group’s
system of internal control is set out on page
29 a statement regarding the adoption of
the going concern basis for the preparation
of the financial statements is set out on 
page 31
auditors 
the board has formal policies and
procedures designed 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
 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 at least 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 effectiveness of
the audit due to the longevity of the
incumbent auditors’ appointment the
audit committee carried out a formal
selection process during 20042005 
as a result a resolution proposing the
appointment of deloitte  touche llp as
auditors will be put to the agm providing
the appointment is approved the new
auditors will perform the audit of the
group’s results for 20052006
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 
it is the intention that no internal audit
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 the group has its own internally
resourced internal audit department
“internal audit” with a direct and
independent reporting line to the audit
committee the effectiveness of internal
audit has been reviewed periodically during
the year by the audit committee
transaction related services 
a competitive selection process was
undertaken in 20032004 to decide who
should undertake transaction related services
for the group which concluded that
pricewaterhousecoopers llp would generally
be used to supply these services when due
diligence fees were £100000 or less per
service in other cases audit committee
approval would be necessary for the
appointment of a firm 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
generally be the subject of a competitive
selection process furthermore 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 52
it is the group’s policy to seek rotation of 
the auditors’ principal engagement partner
as a matter of course every five years and of
other key members of the audit team where
deemed appropriate by the audit committee
appointment of auditors 
following the audit committee’s review of
the auditors the board wishes to change 
the auditors from pricewaterhousecoopers
llp “pwc” to deloitte  touche llp
“deloittes” pwc having completed the
audit for the year ended 31 march 2005
have agreed that they will not seek
reappointment at the agm accordingly a
resolution proposing the appointment of
deloittes as auditors will be put to the agm
special notice of the intention to propose
such a resolution having been received in
accordance with sections 379 and 388 of the
companies act 1985
internal control 
the board has overall responsibility for the
group’s system of internal control and for
reviewing its effectiveness the board has
formally established policies and processes
for identifying and evaluating the significant
risks faced by the group there are
established procedures for managing these
risks of which the key elements are an
organisation structure with clear lines of
accountability regular structured reviews of
business risk by senior management a
scheme of delegated authority preapproval
of plans budgets and significant investments
and monthly reporting of financial results
and other key business monitors
the executive directors and senior
management teams of each of the principal
subsidiary companies have identified the
risks facing their businesses and have made
an assessment of the impact of those risks
the controls that are in place to manage
each of the more significant risks in each
unit have been identified within a
comprehensive control framework and an
assessment has been made of the
effectiveness of these controls
the directors of each of the principal
subsidiary companies regularly consider new
risks and threats and control weaknesses
that may have become apparent and report
at sixmonthly intervals to the group chief
executive they also conduct an annual
review of the risks facing their businesses
and report on this review in one of the six
monthly reports
the board reviews risk management and the
effectiveness of the system of internal control
through the audit committee the audit
committee meets 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 in addition the 
audit committee periodically holds separate
meetings with internal audit without the
attendance of executive management the
audit committee receives reports on a six
monthly 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 report on significant control issues
identified as part of their audit the
chairman of the audit committee reports to
the board the audit committee has
reviewed risk management and the
effectiveness of the system of internal control
during the year ended 31 march 2005
during the year a number of initiatives were
launched to further strengthen the controls
and identify any other improvements that
can be made and have regard to the
allegations referred to on page 27 these
include simplifying management structures
reporting lines and group delegated
authorisations enhancing the group’s
business education programme an
evaluation of internal controls in severn trent
water and the implementation of new ias
reporting disciplines
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 2005
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 16583 people as at 
31 march 2005 2004 15973 of these
5053 30 were employed in water and
sewerage business 5510 33 in the waste
management business 2891 17 in the
laboratories business and 2387 14 in
the water purification and operating services
business approximately 30 of employees
are based outside the uk mainly in the us
belgium and italy 
most group companies have their own
intranets which form a major communication
channel with their employees in addition to
inhouse magazines toolbox talks and team
briefings employee opinion surveys are used
to provide feedback on a range of issues
group companies continue to maintain
positive relationships with the recognised
trade unions and with other elected
representatives the group’s meeting of the
european consultative council is an annual
opportunity to promote dialogue with
employee representatives and further
enhance their understanding of the future
issues facing our businesses in europe
following the introduction of new pension
options for new uk based employees in april
2004 the company continues to monitor 
its pension provision with the objectives of
reducing risk and maintaining affordability
the group’s “lifestyle” flexible benefits
scheme was further extended amongst uk
based employees and from october 2004
over 8000 employees were eligible to
participate 
employee share ownership is encouraged
through the operation of a number of
employee share plans including a save as
you earn scheme and a share incentive plan
the group continues to focus on the
development of employees at all levels with
annual performance appraisals used to drive
the direction of and demand for training
activities
management development and training has
been a core activity in all group companies
operating via a range of providers including
leading business schools such as insead
warwick and aston as well as tailored in
house programmes
severn trent plc 
annual report and accounts 2005 29 in biffa there was a marked increase in the
number of training days delivered during the
year with major programmes in driver
training manual handling and diversity
awareness biffa also takes an active part in
the utilities and energy skills council
meetings to develop a ‘career map’ of the
waste industry and its training requirements
all companies have the goal of making
learning opportunities available and
accessible to all employees to this end
many group companies are making learning
resource centres available via intranets 
and the internet 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 
we were delighted that severn trent water
gained recognition as one of the sunday
times ‘top 10 best big companies to work
for’ and were also listed in the guardian’s
publication ‘britain’s top employers 2005’
severn trent laboratories also received
external commendations being a finalist 
in two categories of the coventry and
warwickshire investors in people good
practice awards 
ethics and diversity
following a review of the group’s code of
business principles and conduct involving
consultation with employees and external
stakeholders a revised code of conduct has
been produced compliance with the code
and statutory obligations is monitored
through a series of performance indicators
group companies continue to meet as a
minimum legislative requirements of the
countries in which they operate
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 the effectiveness of
our disclosure whistleblowing policy and
procedures has been subject to review and
the revised policy will be rolled out through
employee communication and management
training programmes during the coming year
we remain committed to creating an
environment which values diversity and
enhances the contribution made by each 
of our employees we regularly review 
our working practices to ensure equality 
directors’ report 2005 continued 30
severn trent plc 
annual report and accounts 2005
of opportunity for all of our employees
regardless of race gender religious belief
sexual orientation disability age or any other
status unrelated to an individual’s ability to
perform their job reasonable adjustments
are made to ensure the workplace is
accessible to both current employees and
potential recruits
diversity profiles across the group continue
to be monitored and reported regularly this
information is used on an individual business
unit basis to track against local and national
population profiles the collection of data on
diversity has been extended to job applicants
to assess the effectiveness of our recruitment
processes we positively encourage
applications from suitably qualified and
eligible candidates including those with
disabilities and regularly review our approach
to recruitment to enhance our access to the
widest possible pool of skills and talent
targeted recruitment initiatives including our
graduate recruitment campaign and our
presence at a diversity fair have increased
the diversity of applicants other activities
over the last twelve months include diversity
awareness programmes in biffa and a fair
treatment program attended by almost 2000
employees in severn trent services in the us 
the company benchmarks its policies and
practices in this area against best practice
organisations such as ‘race for opportunity
and employers’ forum on disability
participation in race for opportunity’s 2004
benchmarking exercise resulted in severn
trent water achieving runner up position
amongst best newcomers in the
privatepublic sector category 
health and safety 
at severn trent we see the effective
management of health and safety as a key
priority that makes good business sense to
support this core value we have established
three health and safety principles for all
employees 
 if a job cannot be done safely don’t do it
 always look out for safety hazards
 never ignore a safety hazard fix it or
report it
regrettably we have to report one employee
fatality this year when a refuse collector from
biffa was hit by a reversing vehicle as with
any serious accident we have undertaken a
rigorous investigation and acted to reduce
the possibility of this or any similar incident
happening in future 
historically we have worked hard to improve
our health and safety performance however
in recent years this has proved difficult to
sustain and over the last year performance
has not improved significantly this is
unsatisfactory and we are committed to
improving our performance so that noone is
hurt or injured by our activities
to add pace and focus to the process the
group health and safety executive committee
now meets on a monthly basis and includes
health and safety professionals the meetings
are chaired by the group chief executive
who reports on health and safety
performance to the board each month 
we have continued to use the british safety
council to verify our health and safety
management systems achieving a number 
of 5 star awards and have undertaken
‘climate surveys’ to determine employees’
attitudes to health and safety 
through ongoing culture change
programmes we continue to embed the
principles of health and safety into the 
day to day management of the businesses 
whilst ensuring that current systems and
procedures meet severn trent’s health 
and safety standards 
going forward the target is to reduce to
minimal levels the number of accidents 
to support this managing directors’ bonus
arrangements will this year be linked to
improvements in their companies’ accident
records coupled with the continued external
verification of their health and safety
management systems 
research and development
research and development expenditure
including amounts capitalised as tangible
fixed assets related to research and
development amounted to £53 million
2004 £42 million
this year severn trent water has
concentrated on developing technologies to
meet the standards required for drinking
water and sewage works effluents over the
next five years this work has identified
novel cost effective processes capable of
removing metals from drinking water to
levels required by future standards on waste
water treatment a more sustainable process
has been developed for removing
phosphorus from sewage without using
chemicals and this work is beginning to find
its way into full scale plants where it is
expected to reduce costs and simplify
operations work has also started to identify
the best methods for removing endocrine
disrupting compounds and metals from
sewage treatment works effluents
severn trent services has continued to
develop new products during the year in
support of organic growth targets a cost
effective onsite hypochlorite generation
system has been introduced which enables
ships to comply with new regulations on the
treatment of ballast water when entering us
ports a new lower cost system has also been
designed to control chlorinerelated water
quality and temperature uniformity in large
reservoirs patent applications have been filed for both of these systems a third
notable development relates to a new
intelligent water meter based on fluidic
oscillator technology production is targeted
to start in spring 2006
severn trent laboratories in the us has
developed a method of identifying 24
potentially allergenic compounds present 
at very low concentrations in fragrances 
and essential oils this complex analysis 
is of interest to major fragranceflavours
companies due to eu labelling regulations
further development of this process will
continue this year new methods have 
been developed for analysing emerging
contaminants including perchlorate and 
nnitrosodimethylamine the perchlorate
method will shortly be undergoing nationwide
validation a method has also been developed
of identifying polybrominated diphenyl ethers
pbde’s which are widely used as flame
retardants in the us
in previous years the principal areas of
biffa’s rd work were in technology
efficiencies and the analysis of material flows
in the economy similar important studies
continue to be produced the most recent
being an input and output analysis of
resource flows in the south west region
research associated with the dynamics of
resource flows in the uk economy are
increasingly recognised as a vital
contribution to the development of an
effective and focused policy framework in the
context of the emergent eu thematic
strategy on improved resource efficiency
biffa also continues to participate on a
number of industry sector and government
study groups most notably the miniwaste
faraday committee and the defra
committee considering the development of
an electronic data capture network for
industrial commercial and domestic waste
flows in the uk
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 
in addition the board considers it important
to canvass the views of institutional
shareholders and a report was submitted 
to the board during the year in connection
with a comprehensive survey of institutional
shareholders
contributions for political and 
charitable purposes 
donations to charitable organisations 
during the year amounted to £378825
2004 £375461 the company focuses on
the development of long term partnerships
with charities close to its major sites and
which reflect the company’s value of
environmental leadership the 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 for additional
information regarding charitable donations
see page 21
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 under the political parties elections
and referendums act 2000 the definition of
political expenditure and donations is
extremely wide and extends to activities not
normally thought of as political the following
normal industry activities undertaken during
the year fall within the ambit of such act
 biffa waste services limited paid a £500
subscription fee to the socialist
environment and resources association
sera an organisation which aims to
promote sustainable environmental
policies within the labour movement and
labour party to ensure sustainable
development is central to the work of the
government
 in addition biffa waste services limited
paid £2000 in sponsorship fees towards 
a waste seminar arranged by sera
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 to the financial statements on
pages 73 and 74 trade creditors for the
group at the year end are estimated as
representing no greater than 30 days’
purchases 2004 no greater than 30 days
trade creditors for the company at the year
end are estimated as representing 34 days’
purchases 2004 no greater that 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 euro area countries has
been a useful input into the conversion
planning 
accounts of severn trent water limited 
regulatory 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 42 to 74 have been
prepared on the going concern basis
by order of the board 
p p davies llb solicitor 
group general counsel and company
secretary
6 june 2005
severn trent plc 
annual report and accounts 2005 31 this report provides the information required
by the directors’ remuneration report
regulations 2002 it also describes how 
the principles of the financial services
authority’s combined code on corporate
governance the ‘combined code’ are
applied by the company in relation to
directors’ remuneration and sets out the
remuneration policy for the current and
forthcoming financial years 
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 
11 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 nonexecutive directors of the
company the members of the committee
during the year were 
 m c flower chairman 
 j d g mcadam 
 m l cassoni 
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 
in setting performance related remuneration
the committee has regard to the provisions
set out in schedule a to the combined 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 new bridge street consultants llp 
hay management consultants and watson
wyatt which have been appointed by the
committee for the purpose of providing this
advice in relation to other services provided
to the group watson wyatt are the actuaries
to the group’s main uk pension schemes
both watson wyatt and hay management
consultants provide employee benefits
services andor remuneration advice to the
group below board level new bridge street
consultants llp has not provided any such
services to the company 
remuneration report 32
severn trent plc 
annual report and accounts 2005
the chairman of the board sir john egan
previously mr t d g arculus the group
chief executive mr c s matthews previously
mr r m walker the group human
resources director mr a p smith previously
mr j w oatridge and the director of
corporate development mr p k tandon also
provide advice and are invited to attend
some meetings as requested to respond to
specific questions raised by the committee
such attendances specifically exclude any
matter concerning their own remuneration
the company secretary acts as secretary to
the committee 
the committee’s terms of reference can 
be viewed on the company’s website at
wwwseverntrentcom or requested from 
the company secretary the terms 
of appointment for new bridge street
consultants llp are available on request
from the company secretary
remuneration policy 
the company’s continuing 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
typically comprise at least 50 of total
remuneration if paid at the maximum 
 the total remuneration package for on
target 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 and
considers the mix between fixed and
performance pay is significant and
appropriate 
personal shareholdings 
the company with effect from april 2004
adopted guidelines which expect executive
directors to have a minimum holding of
shares in the company the group chief
executive is expected to hold shares to the
value of 15 x base salary and other executive
directors 1 x base salary directors are
expected to retain shares they receive 
through the long term incentive plan or
other share based company bonus schemes
to enable them to meet the guideline
holdings within five years if insufficient
shares are awarded within five years then
this timescale will be extended
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 executive directors are normally
only able to retain the fees arising from one
such appointment however in view of his
imminent retirement mr r m walker was
allowed to retain fees from his additional
external appointments see page 26
although the company still retained the 
fees received from baa plc
chairman and other nonexecutive directors 
mr t d g arculus was paid fees of £200000
per annum effective from 1 august 2004
until his retirement on 31 december 2004
inclusive of £10000 per annum in the form
of shares in the company and £26775
which at his request was paid into his
personal pension arrangements benefits in
kind comprised private medical insurance 
a company car fuel card plus a retirement
dinner and gift mr arculus did not
participate in any of the company’s pension
arrangements share or bonus schemes 
he did not receive payment for loss of 
office upon termination
sir john egan is paid fees of £215000 per
annum effective from 1 january 2005 for
his role as chairman this includes £32250
per annum paid in the form of shares in the
company sir john does not participate in
any of the company’s pension arrangements
share or bonus schemes nor does he receive
benefits in kind other than attendance at
retirement functions however under the
terms of his letter of appointment he has the
option of being provided with a company car
mr m c flower is paid fees of £100000 per
annum effective from 6 july 2004 for his
role as deputy chairman this includes
£10000 per annum paid in the form of
shares in the company mr flower does not
participate in any of the company’s pension
arrangements share or bonus schemes or
receive benefits in kind other than
attendance at retirement functions 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 
 member 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
save for mr j b smith and for mr c s
matthews to 30 june 2004 nonexecutive
directors receive payment of part of their
fees in the form of 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 but they do have
letters of appointment with the 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 publicly quoted
companies of a comparable size and so far
as practical undertaking similar activities
salaries for individual directors are reviewed
annually by the committee and generally
take effect on 1 april salaries are set with
reference to individual performance
experience and contribution together with
developments in the relevant employment
market and internal relativities
executive directors’ salaries have recently
been reviewed for the financial year
20052006 and will be as follows
director salary wef increase 
1 april 05
m j bettington 325000 48
r s brydon
jannetta 385000 us 4
c s matthews 520000 4
m r wilson 275000 22
– in line with 
comparative 
market data 
a p wray 250000 na – new
appointment
there are 11 executives immediately below
board level who are paid between £100000
and £200000 per annum 
salary £000 number of executives
100 – 125 1
126 – 150 4
151 – 175 2
176 – 200 4
the nonsalary benefits for executive
directors comprise the use of a company car
or allowance fuel private medical insurance
life assurance retirement gifts attendance at
retirement functions and an incapacity
benefits scheme these and other benefits
may be flexed under the company’s lifestyle
flexible benefits 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 37 
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 health 
and safety quality service environmental
performance and the achievement of
personal objectives 
annual bonus 20042005 – maximum value
of bonus elements as  of base salary
non maximum
financial financial bonus
director total total value
j k banyard 30 20 50
m j bettington 55 20 75
r s brydon jannetta 60 15 75
b duckworth 25 25 50
c s matthews 40 20 60
a s perelman 30 20 50
r m walker 30 30 60
m r wilson 30 20 50
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 their pension
entitlements the actual bonuses awarded by
the committee for the year ended 31 march
2005 are shown in the table of directors’
emoluments on page 37 as reported in last
year’s remuneration report since the last
financial year the bonus potential for the
group chief executive has been 60 for the
managing directors of biffa and severn trent
laboratories mr m j bettington and mrs r s
brydon jannetta it has been 75 and the
bonus potential for other executive directors
is 50 these remain unchanged for the
20052006 financial year 
the maximum bonus payable to other
executives below board level also ranges
from 5075 and their plan is structured in
a similar way as that for executive directors
longterm incentives 
a long term incentive plan ‘ltip’ for
executive directors was approved by
shareholders at the 1997 agm and amended
with shareholder approval at the 2001 agm 
the performance for the 2002 2003 and
2004 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 2002 1 april
2003 and 1 april 2004 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 2002 award 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
and 2004 awards the comparator group
additionally contains northumbrian water plc 
severn trent plc 
annual report and accounts 2005 33 for the executive directors the 2002 2003
and 2004 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 
in 2004 the committee carried out a
detailed review of the longterm incentive
arrangements for executive directors and
other key senior executives the main
outcome of that review was that shareholders
should be asked to approve the introduction
of a new long term incentive plan – the
severn trent long term incentive plan 2005
‘ltip 2005’ 
subject to shareholder approval participants
in the ltip 2005 will at the discretion of 
the committee receive an annual award of
performance shares which will vest three
years from the date of the award to the
extent that certain performance conditions
have been met details of the ltip 2005 are
set out in the appendix to the notice of the
agm in summary the ltip 2005 will be
structured as follows
 annual conditional awards of
performance shares may be made to
executive directors and senior staff
 no participant will be granted awards over
shares worth more than 125 of base
salary in any financial year however
initially it is proposed that the group
chief executive will receive awards over
shares worth 100 of salary with other
executive directors and senior staff
receiving lower awards
 the number of shares subject to an award
will increase to reflect dividends paid
through the performance period on 
the basis of such notional dividends 
being reinvested at the then prevailing
share price
 awards will normally vest as soon 
as the committee determines that the
performance conditions have been met
following 1 april in the financial year in
which the third anniversary of the date of
grant falls provided that the participant
remains in employment on that 1 april
 for grants made to executives other than
to those executives below board level in
the nonwater core subsidiaries the
vesting of half of an award will be
determined by reference to challenging
ep targets measured by reference to
either group or subsidiary performance
and the other half will be determined by
reference to tsr compared to a bespoke
group of comparator companies there
will be no retesting of the performance
conditions
as summarised above for grants made to
executives other than those executives below
board level in the nonwater core subsidiaries
the performance measure for half of the
award will be ep ep is the key measure used
by the company to measure its long term
financial performance and is therefore felt
to be appropriate
ep will be measured by reference to either
group or subsidiary performance depending
upon the participant’s main focus of
responsibility although the committee 
has concluded that it would not be in
shareholders’ interests to disclose the 
actual financial targets given competitive
sensitivities it has confirmed that it will
ensure that the minimum threshold level of
vesting in respect of the water business over
the five year cycle will not be lower than that
implied in the recently published ofwat
determination the maximum threshold level
of vesting will be set at a level which is in
the view of the committee comparably
stretching to the upper quartile tsr
condition see below
this approach for setting the ep
performance conditions has been discussed
with key institutional investors which have
acknowledged that due to the commercially
sensitive nature of the ep performance
conditions it is not appropriate for them to
be publicly disseminated
the performance measure for the other half of
the award will be the company’s tsr relative
to a comparator group of approximately 
20 companies the comparator group will
comprise water and waste companies and
ftse 100 high yield companies excluding
financial and retail companies or other
sectors which might result in an undue bias
in the sample ‘high yield’ has been defined
as companies which have an average gross
yield of 05 below base rate in a calendar 
month preceding the start of the performance
period and their inclusion recognises the fact
that at least in part shareholders choose 
to invest in the company for the dividend
income it produces the committee will
review the proposed constituents before
making any award to ensure that overall 
it remains appropriate
for median tsrthreshold ep levels of
performance 25 of that part of the award
will vest and for upper quartile tsrstretch
ep levels of performance 100 of that part
of the award will vest vesting between 25
and 100 will be on a straight line basis for
both parts of the award
for those executives below board level in 
the nonwater core subsidiaries a greater
proportion of their awards may be determined
by reference to ep targets but not less than
25 of an award will be determined by tsr
after the end of the performance period 
the tsr performance condition will be
measured and independently verified by 
new bridge street consultants llp on 
behalf of the committee the extent to 
which the ep performance condition has
been satisfied will be calculated internally
but as with the previous ltip independently
checked
the committee feels that the proposed 
new arrangements are both challenging 
and appropriate to meet the particular 
needs of the company
the committee is conscious that the bases
for measuring the profits that underlie the ep
calculation are changing in light of the move
from uk gaap to international accounting
standards and will ensure that any ep
performance conditions are measured on a
consistent basis and as originally intended
remuneration report continued 34
severn trent plc 
annual report and accounts 2005
this graph shows the value by 31 march 2005 of £100 invested in severn trent on 31 march 2000
compared with the value of £100 invested in the ftse 100 index the other points plotted are the values
at intervening financial yearends the ftse 100 was chosen as the comparator because the company is a
constituent of that index
severn trent plc
value £
31 march ‘00
220
200
180
160
140
120
100
80
60
40
20
0
31 march ‘01 31 march ‘02 31 march ‘03 31 march ‘04 31 march ‘05
total shareholder return
source thomson financial
ftse 100 index details of the company’s shares that are held
in trust on behalf of participants of certain of
the employee share schemes are given on
pages 63 and 64 in respect of the ltip the
company’s hedging policy is to purchase
and hold in trust 50 of the total number of
shares that could potentially vest from all
outstanding ltip awards the requirement to
purchase shares to maintain the 50 hedge
is calculated and carried out shortly after
each annual award only “free shares” are
offered under the company’s share incentive
plan and all of the shares taken up by
employees at each invitation are purchased
and placed in trust immediately
the committee is satisfied that the overall
dilution limits provide sufficient headroom
for all the company’s share schemes
postretirement benefits 
all current executive directors participate 
in the senior staff pension scheme the
‘scheme’ with the exception of mrs r s
brydon jannetta who continues to be a
member of the severn trent pension 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 dependent’s pension on death of two
thirds of the member’s pension
members’ contributions are payable at the
rate of 6 of pensionable earnings 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 messrs a s perelman r m walker
and m r wilson who joined the scheme 
after 1 june 1989 and are therefore subject
to the inland revenue earnings cap the
‘cap’ 20042005 £102000 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 £70935 for mr perelman
£556962 for mr walker and £217657 for
mr wilson 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 38
from april 2004 all new uk based executive
director appointments are provided with 
a cash supplement in lieu of the unfunded
arrangement this was applied in the case 
of messrs c s matthews and a p wray 
at 40 of their respective salaries above 
the cap
during the current year the company will be
reviewing its pension policy for directors and
employees as a result of the pensions act
2004 finance act 2004 and the results of
the triennial valuation of two of its main
schemes during 2004 the committee will
report on the outcome of this review in the
next remuneration report and it is envisaged
that there will be no increase in the cost to
the company as a result of the review
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 award levels the performance targets
for incentive arrangements will continue to
be reviewed to ensure alignment with the
group strategy and will for the next year 
as indicated in the directors report place 
an increased emphasis on the achievement
of health and safety performance targets
directors’ service agreements and letters 
of engagement 
a new model service contract was approved
by the committee in 2004 all current
executive directors have signed the model
contract and accordingly service agreements
for all executive directors have notice periods
of 12 months they 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 both
phasing and mitigation contracts also
permit the committee to take into account 
a view of the extent of poor performance 
on the part of the executive director any
payment will not include amounts in respect
of 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 the
committee believes that the contracts
provide as much scope as is feasible to
protect the interests of shareholders when
negotiating a termination at which time it
would address the duty of mitigation 
the previous policy of the committee was
that executive directors were employed 
on contracts subject to no more than 
12 months’ notice in accordance with 
the then prevailing corporate governance
best practice the executive directors were
required to give not less than six months’
notice of termination 12 months in the case
of the group chief executive the retiring
executive directors who all left on or before
31 march 2005 therefore retained the above
contractual arrangements to that date
the service contract for mrs r s brydon
jannetta who is based in the us and
employed by a us subsidiary is in the same
format as for other executive directors but
modified to reflect prevailing us employment
legislation
severn trent plc 
annual report and accounts 2005 35 remuneration report continued 36
severn trent plc 
annual report and accounts 2005
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 directors date of agreement effective date expiry date 
m j bettington 10 june 2004 10 june 2004 terminable on 12 months’ notice 
r s brydon jannetta 30 june 2004 1 september 2004 terminable on 12 months’ notice 
c s matthews 3 june 2004 6 september 2004 terminable on 12 months’ notice 
m r wilson 5 may 2004 1 september 2004 terminable on 12 months’ notice 
a p wray 19 january 2005 7 march 2005 terminable on 12 months’ notice 
mrs r s brydon jannetta and messrs m j bettington m r wilson and a p wray are the subject of reappointment as executive directors at the
forthcoming agm
details for the executive directors’ agreements who retired from the board during the year are as follows
executive directors date of agreement effective date expiry date 
j k banyard 20 april 1998 23 january 1998 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
payments to the above executive directors who retired from the board during the year are detailed in the table of directors’ emoluments on
page 37 no further payments in terms of salary pay in lieu of notice bonus or benefits in kind were or will be made no cash contributions 
to their pension schemes were required they were allowed to retain their ltip awards but these will be prorated back to reflect their period of
employment during the relevant performance period they have no further contractual or consultancy arrangements with the company and
have no personal interest in the company other than as pensioners andor as shareholders
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
sir john egan 1 october 2004 1 october 2004 30 september 2007
m l cassoni 1 september 2001 1 september 2004 31 august 2007
m c flower 11 june 1996 6 july 2004 10 june 2005
m j houston 1 september 2003 1 september 2003 31 august 2006
j d g mcadam 18 september 2000 18 september 2003 17 september 2006
f a osborn 21 september 1998 21 september 2004 20 september 2005
j b smith 3 november 2003 3 november 2003 2 november 2006
details for the nonexecutive director who retired from the board during the year are as follows
t d g arculus 20 may 1996 29 july 2004 31 december 2004
subject to the requirements of the company’s articles of association for the reappointment of directors at agms
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
the text and tables that follow comprise the auditable part of the remuneration report being the information required by part 3 of schedule
7a to the companies act 1985 severn trent plc 
annual report and accounts 2005 37
directors’ emoluments
the emoluments of the chairman the executive directors and fees payable to the nonexecutive directors are as follows 
base salary and fees
2
benefits in annual total total
cash shares total kind
3
bonus
9
other
1
200405 200304
£000 £000 £000 £000 £000 £000 £000 £000
chairmen and other nonexecutive directors
t d g arculus chairman resigned 311204 1074 75 1149 253 – 20 1422 1634 
sir john egan chairman appointed 011004
4
525 88 613 08 – – 621 – 
e e anstee resigned 151203 – – – – – – – 266 
m l cassoni 376 39 415 – – 09 424 423 
m c flower 798 77 875 08 – 19 902 524 
m j houston 271 29 300 08 – – 308 175 
c s matthews until 050904
8
122 06 128 – – 06 134 136 
j d g mcadam 306 34 340 08 – 07 355 301 
f a osborn 465 50 515 08 – 05 528 468 
j b smith
7
430 – 430 08 – – 438 144 
c tritton resigned 300703 – – – – – – – 109 
executive directors
j k banyard resigned 301204 1535 – 1535 223 750 02 2510 3037 
m j bettington 3100 – 3100 205 1891 – 5196 4457 
r s brydon jannetta appointed 010904 1159 – 1159 48 169 – 1376 – 
b duckworth resigned 310804
6
1167 – 1167 102 554 – 1823 4015 
c s matthews from 060904 2700 – 2700 69 1604 968 5341 – 
a s perelman resigned 310804
5
1735 – 1735 151 600 – 2486 5434 
r m walker resigned 020205 4527 – 4527 517 2037 01 7082 7461 
m r wilson appointed 010904 1313 – 1313 129 591 – 2033 – 
a p wray appointed 070305 172 – 172 18 – 41 231 – 
total emoluments 21775 398 22173 1763 8196 1078 33210 28584 
1 other emoluments represent expenses chargeable to uk income tax car allowances and amounts in lieu of entry into the supplementary pension scheme for 
those earning above the pension cap limit paid to directors
2 included within fees for the nonexecutive directors are amounts received by way of shares rather than as emoluments to encourage participation in 
line with corporate governance best practice the gross value of shares is included in the table above nonexecutive directors who were either appointed 
or resigned during the year received a time apportioned award the number of shares received by each nonexecutive director during the year was 
mr t d g arculus – 527 sir john egan – 735 ms m l cassoni – 246 mr m c flower – 488 mr m j houston – 180 mr c s matthews – 34 
dr j d g mcadam – 215 mr f a osborn – 377
3 benefits in kind for executive directors comprise the use of a company car fuel retirement gifts attendance at retirement functions private medical insurance 
life assurance and an incapacity benefits scheme benefits in kind for nonexecutive directors other than mr t d g arculus comprise attendance at retirement
functions mr t d g arculus’ benefits in kind comprise the use of a company car fuel private medical insurance retirement gifts and attendance 
at retirement functions
4 sir john egan was appointed chairman from 1 january 2005 and received fees as a nonexecutive director prior to that date
5 mr a s perelman was employed by the company until 30 september 2004 in this month his total emoluments were £31870 and his bonus relating to this
period was £12000
6 mr b duckworth remained employed in a consultancy capacity until 31 march 2005 his total emoluments from the date of his resignation from the board to 
31 march 2005 were £189092 and his bonus relating to this period was £77583
7 mr j b smith’s fees represent fees due but not yet paid
8 mr c s matthews’ fees and share entitlements were paid as cash directly to his employer up to 30 june 2004 
9 the bonus percentages paid to executive directors were in the range of 145 to 61 of base salary remuneration report continued 38
severn trent plc 
annual report and accounts 2005
directors’ pension provisions
3
the disclosure of pension benefits is made under the requirements of the listing rules of the uk listing authority ‘the rules’ and also the
requirements of the directors’ remuneration report regulations 2002 ‘the regulations’ these are shown in separate tables below
the rules require information to cover the period during which a director was a board member whilst the regulations require information to
cover the financial year the information below sets out the disclosures required by the regulations
increase
increase in decrease
increase in accrued transfer transfer in transfer
service accrued pension value of value of value over
completed in accrued pension during the accrued accrued the year net
years including pension at during year net pension at pension at of directors’
transferred in 310305 the year of inflation
1
310305
2
310304
2
contributions
name service credits £ pa £ pa £ pa £000 £000 £000 
j k banyard 38 131667 4593 945 30040 24828 5122
m j bettington 23 151522 15573 12260 19173 15905 3082
r s brydon jannetta 13 22952 2325 1666 1844 1553 243
b duckworth 34 161032 14184 9491 36080 21471 14441
c s matthews – 1928 1928 1928 194 – 159
a s perelman 3 35500 6353 5800 7568 4556 2935
m r wilson 9 68371 22659 21198 6412 4015 2255
r m walker 5 95291 19769 18010 21791 14672 6991
a p wray – 224 224 224 17 – 12
the information below sets out the disclosures required by the rules
increase in increase in accrued transfer value of increase
accrued pension accrued pension pension during the in accrued benefits net of
at 310305 during the year year net of inflation
1
directors’ contributions
2
name £ pa £ pa £ pa £000
j k banyard 131667 4593 945 129
m j bettington 151522 15573 12260 1365
r s brydon jannetta 22952 986 623 21
b duckworth 150064 3216 989 10377
c s matthews 1928 1928 1928 159
a s perelman 34433 5286 4844 2569
m r wilson 68371 17106 16258 1382
r m walker 95291 19769 18010 4016
a p wray 224 224 224 12
the pensions shown above will be provided through the severn trent senior staff pension scheme the severn trent supplemental pension
scheme and the severn trent pension scheme
1 inflation over the year is measured by reference to the increase in the retail price index between march 2004 or the month prior to appointment and 
march 2005 or earlier date of leaving
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 contributed £26775 to mr arculus’ personal pension arrangements
the directors of the company at 31 march 2005 and their beneficial interests in the shares of the company were as follows
i beneficial holdings
at 1 april 2004
or subsequent
date of appointment at 31 march 2005 at 6 june 2005 
number of ordinary number of ordinary number of ordinary 
shares of 65
5
19p each shares of 65
5
19p each shares of 65
5
19p each 
chairman and other nonexecutive directors
sir john egan chairman – 6035 6035
m l cassoni 568 814 814
m c flower 1585 2073 2073
m j houston 1133 1313 1313
j d g mcadam 585 800 800
f a osborn 1095 1472 1472
j b smith –––
executive directors
m j bettington 12541 24405 24405
r s brydon jannetta 5955 20032 20032
c s matthews 1000 1034 1034
m r wilson 7981 10640 10662
a p wray ––– severn trent plc 
annual report and accounts 2005 39
mrs brydon jannetta and messrs bettington matthews and wilson 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 24 september
2002 13 august 2003 and 15 december 2004 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 33 and 34 of the remuneration report the
individual interests for the above named directors and for the executive directors who left during the year which represent the maximum
aggregate number of shares to which each individual could become entitled are as follows
at 1 april at 31 march
2004 or 2005 or earlier 
subsequent date market date of leaving
of appointment awards price at awards market price number
number of vested time of gain lapsed at time of of ordinary
ordinary shares during vesting on vesting during awarded 2004 award shares of
of 65
5
⁄ 19p each year p £000 year during year p 65
5
⁄ 19p each
j k banyard 54149 15450 82075 1268 – 16364 946 55063
m j bettington 76764 20109 82075 1650 – 25365 946 82020
r s brydon jannetta 37518 – – – – 16851 946 54369
b duckworth 72554 20600 82075 1691 – – – 51954
c s matthews – – – – – 52600 946 52600
a s perelman 103568 31428 82075 2579 – – – 72140
r m walker 182350 48435 82075 3975 – 60783 946 194698
m r wilson 24929 – – – – 18410 946 43339
the awards that vested during the year were awarded on 30 august 2001 at a market price of 750p
no further awards have been made under the ltip as at 6 june 2005
the performance period for allocations of shares made in 2002 ended on 31 march 2005 the remuneration committee has subsequently
determined based on the company’s total shareholder return and the relevant group or subsidiary economic profit targets over the three 
year performance period that participating executive directors are entitled to 100 of the award the 2002 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 2002 award is as follows
market price number of ordinary shares of 
date of award at time of award p 65
5
19p each vested from the 2002 award
j k banyard 24 september 2002 5985 19521
m j bettington 24 september 2002 5985 27888
r s brydon jannetta 24 september 2002 5985 16282
b duckworth 24 september 2002 5985 26215
a s perelman 24 september 2002 5985 36812
r m walker 24 september 2002 5985 64701
m r wilson 24 september 2002 5985 11952
as at 6 june 2005 the shares from the 2002 contingent award had not vested but would do so as soon as practicable
ii options over ordinary shares
at the start at the end of
of the year or exercised cancelled granted the year or 
subsequent date of during the during the during the earlier date of year of date
appointment no year no year no year no leaving no grant of exercise from which expiry
of shares of shares of shares of shares of shares option price p exercisable date
sharesave options
1
j k banyard 866 – – – 866 2002 548 dec 2004 jun 2005
m j bettington – – – 1248 1248 2005 759 may 2008 oct 2008
b duckworth 693 – – – 693 2002 548 april 2005 sept 2005
1057 – – – 1057 2003 536 – –
a s perelman 3064 – – – 3064 2003 536 – –
r m walker 1763 – – – 1763 2003 536 feb 2005 aug 2005
m r wilson 3020 – – – 3020 2002 548 may 2007 oct 2007
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 the options have no performance conditions 
as such conditions are not permitted by legislation
2 the total gain on exercise of share options during the year amounted to £nil 2004 £16240
3 no executive share options in respect of executive directors were granted or lapsed during the year at 31 march 2005 there were 181 other executives
participating in the group’s share option scheme 2004 205
4 the gain on share options referred to above is 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
5 at the close of business on 31 march 2005 the midmarket price of the company’s shares was 915p 31 march 2004 761p and the range during the year 
was 762p to 978
1
⁄ 2p
signed on behalf of the board who approved the remuneration report on 6 june 2005
m c flower
chairman of the remuneration committee 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 the group and which enable them to ensure that the financial statements
comply with the united kingdom companies act 1985
the directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the 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
directors’ responsibilities in relation to the financial statements 40
severn trent plc 
annual report and accounts 2005 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 the reconciliation of movements in shareholders’ funds the reconciliation of net cash flow 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 directors’ remuneration report have been properly prepared in accordance with the companies act 1985 we also report
to you if in our opinion the directors’ report is not consistent with the financial statements if the company has not kept proper accounting
records if we have not received all the information and explanations we require for our audit or if information specified by law regarding
directors’ remuneration and transactions is not disclosed
we read the other information contained in the annual report and consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the financial statements the other information comprises only the directors’ report
the unaudited part of the directors’ remuneration report the financial highlights the chairman’s statement the group chief executive’s review 
the review of operations the financial review the board of directors the directors’ responsibilities in relation to the financial statements the
five year summary and the information for shareholders
we review whether the corporate governance statement reflects the company’s compliance with the nine provisions of the 2003 frc
combined code specified for our review by the listing rules of the financial services authority and we report if it does not we are not
required to consider whether the board’s statements on internal control cover all risks and controls or to form an opinion on the effectiveness
of the 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 2005 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
6 june 2005
independent auditors’ report to the members of severn trent plc
severn trent plc 
annual report and accounts 2005 41 2005 2004
notes £m £m
turnover group and share of joint ventures 20842 20185
less share of joint ventures’ turnover 30 34
group turnover 2 20812 20151
operating costs before goodwill amortisation and exceptional items 16543 15864
goodwill amortisation 2 301 298
exceptional restructuring costs 23 130 –
exceptional integration costs 23 – 109
exceptional provision release 23 – 27
total operating costs 3 16974 16244
group operating profit 3838 3907
share of operating profit of joint ventures and associates 2 117 119
exceptional net loss on sale and termination of operations 24 94 –
exceptional profit on disposal of fixed assets 23 76 198
profit before interest goodwill amortisation and exceptional items 2 4386 4406
goodwill amortisation 2 301 298
profit before interest and exceptional items 2 4085 4108
exceptional items 234 148 116
profit before interest 2 3937 4224
net interest payable 6 1764 1680
profit after interest before goodwill amortisation and exceptional items 2622 2726
goodwill amortisation 2 301 298
profit after interest before exceptional items 2321 2428
exceptional items 234 148 116
profit on ordinary activities before taxation 2173 2544
taxation on profit on ordinary activities – current tax 7 409 333
– deferred tax 7 369 363
total taxation 7 778 696
profit on ordinary activities after taxation 1395 1848
equity minority interests 07 07
profit for the financial year 1388 1841
dividends 8 1674 1620
retained lossprofit for the financial year 20 286 221
earnings per share pence
basic 9 403 535
diluted 9 400 533
adjusted basic before exceptional items and deferred tax 9 556 614
adjusted diluted before exceptional items and deferred tax 9 552 612
there is no difference between the profit on ordinary activities before taxation and the retained lossprofit for the financial years stated
above and their historical cost equivalents
group profit and loss account year ended 31 march 2005 42
severn trent plc 
annual report and accounts 2005 group company
2005 2004 2005 2004
restated restated 
notes £m £m £m £m
fixed assets
intangible assets
goodwill 10 4695 4976 – –
other intangible assets 10 142 – – –
tangible assets 11 54406 52780 63 71
investments in joint ventures
share of gross assets 58 72 – –
share of gross liabilities 70 65 – –
loans to joint ventures 107 89 – –
95 96 – –
investments in associates 163 177 – –
investments in subsidiaries – – 36123 35908
other investments 07 10 – –
total investments 12 265 283 36123 35908
59508 58039 36186 35979
current assets
stocks 13 660 804 – –
debtors 14 4994 4528 843 529
shortterm deposits 17b 404 708 – 317
cash at bank and in hand 504 445 1723 1677
6562 6485 2566 2523
creditors amounts falling due within one year 15 12255 12237 6663 6531
net current liabilities 5693 5752 4097 4008
total assets less current liabilities 53815 52287 32089 31971
creditors amounts falling due after more than one year 16 25573 24406 3291 3007
provisions for liabilities and charges 18
deferred tax provisions 4998 4629 – 06
other provisions 1244 1091 – –
6242 5720 – 06
net assets 22000 22161 28798 28958
capital and reserves
called up share capital 19 2258 2252 2258 2252
share premium account 20 384 335 384 335
capital redemption reserve 20 1561 1561 1561 1561
profit and loss account 20 17778 17989 24595 24810
total equity shareholders’ funds 21981 22137 28798 28958
minority shareholders’ interests equity 19 24 – –
22000 22161 28798 28958
signed on behalf of the board who approved the accounts on 6 june 2005
sir john egan mark wilson
chairman group finance director
balance sheets at 31 march 2005
severn trent plc 
annual report and accounts 2005 43 2005 2004
restated restated 
notes £m £m £m £m
net cash inflow from operating activities 24a 6992 7331
dividends received from associates and joint ventures 35 19
returns on investments and servicing of finance 24b 1513 1483
taxation 365 195
capital expenditure and financial investment 24c 4831 4843
acquisitions and disposals 24d 34 1706
equity dividends paid 1620 1577
net cash outflow before use of liquid resources and financing 1268 2454
management of liquid resources 24e 304 452
financing
increase in debt 1061 2831
issue of shares 55 56
share purchase by employee share trust 41 32
24f 1075 2855
increasedecrease in cash 111 51
reconciliation of net cash flow to movement in net debt
2005 2004
notes £m £m £m £m
increasedecrease in cash as above 111 51
cash flow from movement in net debt and financing 1061 2831
cash flow from movement in liquid resources 304 452
change in net debt resulting from cash flows 1254 2430
net cash assumed with acquisitions – 03
movement in rolled up interest on finance leases 75 22
currency translation differences 07 60
other non cash items 87 90
increase in net debt 1409 2435
opening net debt 27491 25056
closing net debt 24g 28900 27491
group cash flow statement year ended 31 march 2005 44
severn trent plc 
annual report and accounts 2005 group
2005 2004
£m £m
profit for the financial year – group 1370 1821
– joint ventures 01 06
– associates 17 14
total profit for the financial year 1388 1841
exchange movement on translation of overseas results and net assets 40 356
translation differences on foreign currency hedging 08 103
tax on translation differences on foreign currency hedging 02 31
total recognised gains and losses for the year 1354 1557
the company had no recognised gains or losses other than the profit for the year
reconciliation of movements in shareholders’ funds
group company
2005 2004 2005 2004
restated restated 
£m £m £m £m
opening equity shareholders’ funds as previously reported 22169 22176 28990 29317
prior year adjustment see note 1 32 12 32 12
opening equity shareholders’ funds as restated 22137 22164 28958 29305
profit for the financial year 1388 1841 1457 1237
dividends 1674 1620 1674 1620
retained lossprofit for the financial year 286 221 217 383
other recognised gains and losses relating to the year 34 284 – –
goodwill previously written off to reserves taken to the profit
and loss account on termination of operations see note 4 107 – – –
shares issued 55 56 55 56
own shares purchased 41 32 41 32
credit arising from own shares charge 43 12 43 12
net reduction in equity shareholders’ funds 156 27 160 347
closing equity shareholders’ funds 21981 22137 28798 28958
statement of total recognised gains and losses year ended 31 march 2005
severn trent plc 
annual report and accounts 2005 45 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
in preparing these financial statements the group has adopted uitf38 – ‘accounting for esop trusts’ and uitf17 – ‘employee share
schemes’ revised 2003
the company and group balance sheets incorporate the shares held by severn trent employee share ownership trust ‘the trust’ which have
not vested unconditionally at the balance sheet date in line with uitf38 the consideration paid for these shares is shown as a deduction 
in arriving at shareholders’ funds and the prior year figures have been restated accordingly a deduction of £12 million has been made 
to opening reserves at 31 march 2003 at 31 march 2004 this has led to a £32 million reduction in the value of the investments in the
company and group balance sheets with a corresponding reduction in shareholders’ funds in addition £32 million spent purchasing shares
in the year to 31 march 2004 has been reclassified in the group cash flow statement from capital expenditure and financial investment to
financing
the group has taken the exemption under uitf17 and not applied this to inland revenue approved save as you earn schemes
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 contract activity and stage of completion with reference to the total sales
value 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
notes to the financial statements 46
severn trent plc 
annual report and accounts 2005 iii other assets
other assets are included at cost less accumulated depreciation freehold land is not depreciated other assets are depreciated on a straight
line basis over their estimated economic lives which are principally as follows
years
buildings 3060
operational structures 4080
fixed plant 2040
vehicles mobile plant computers and software 215
assets in the course of construction are not depreciated until commissioned
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 fair values of minimum lease payments are 
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 charged to the profit and loss account
on a straight line basis over the life of the lease
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 finite lives have 
not been determined for these assets 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 £3985 million lower than it would otherwise have been 2004 £3626 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
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
severn trent plc 
annual report and accounts 2005 47 1 accounting policies continued
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
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 the group has an obligation to pay more tax in the future or a right to pay less tax in the future deferred tax assets are
only recognised to the extent that taxable profits are expected to arise 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 goodwill previously written off to reserves is taken to the profit
and loss account upon the termination or sale of operations purchased goodwill arising on acquisitions after 31 march 1998 is treated as an
intangible fixed asset in the balance sheet and stated at cost less accumulated amortisation capitalised goodwill is amortised on a straight
line basis over its useful economic life useful economic lives are currently estimated at between 5 and 20 years 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 as a deduction from equity
shareholders funds the intrinsic value of the awards is charged 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 these costs are
amortised over the life of the contract
notes to the financial statements continued 48
severn trent plc 
annual report and accounts 2005 2 segmental analysis
a analysis of turnover and profit before interest by geographical origin and type of business
in previous years laboratories and water purification and operating services were combined under the heading ‘services’ and systems was
disclosed as a separate segment the directors consider that the segmental disclosure adopted in the current year provides a more useful
analysis of the group’s operations
other – principally
united kingdom us and europe group
2005 2004 2005 2004 2005 2004
restated restated restated
£m £m £m £m £m £m
group turnover
water and sewerage 10151 9567 – – 10151 9567 
waste management 6295 5739 668 592 6963 6331 
laboratories 300 282 1326 1419 1626 1701 
water purification and operating services 326 354 1755 1757 2081 2111 
other businesses 761 1320 107 151 868 1471 
inter segment trading 869 1021 08 09 877 1030 
16964 16241 3848 3910 20812 20151 
group profit before interest goodwill amortisation 
and exceptional items
water and sewerage 3399 3379 – – 3399 3379 
waste management 801 760 33 32 834 792 
laboratories 47 46 103 171 150 217 
water purification and operating services 08 – 190 170 198 170 
other businesses 82 66 34 11 48 55 
unrealised profit on intersegment trading 09 24 – – 09 24 
corporate overheads 234 183 – – 234 183 
4094 4044 292 362 4386 4406 
goodwill amortisation 235 232 66 66 301 298 
group profit before interest and exceptional items
water and sewerage 3399 3366 – – 3399 3366 
waste management 573 549 32 30 605 579 
laboratories 40 38 69 139 109 177 
water purification and operating services 08 – 159 138 167 138 
other businesses 82 66 34 11 48 55 
unrealised profit on intersegment trading 09 24 – – 09 24 
corporate overheads 234 183 – – 234 183 
3859 3812 226 296 4085 4108 
exceptional items
exceptional restructuring costs – water and sewerage 130 – – – 130 – 
exceptional profit on disposal of fixed assets – water and sewerage 76 198 – – 76 198 
exceptional integration costs – waste management – 109 – – – 109 
exceptional profit on disposal of associate – 
water purification and operating services – – 43 – 43 – 
exceptional contract provision release – other businesses – – – 27 – 27 
exceptional loss on termination of operations – other businesses 66 – 71 – 137 – 
120 89 28 27 148 116 
group profit before interest
water and sewerage 3345 3564 – – 3345 3564 
waste management 573 440 32 30 605 470 
laboratories 40 38 69 139 109 177 
water purification and operating services 08 – 202 138 210 138 
other businesses 16 66 105 16 89 82 
unrealised profit on intersegment trading 09 24 – – 09 24 
corporate overheads 234 183 – – 234 183 
3739 3901 198 323 3937 4224 
turnover by origin and destination do not differ materially
other businesses comprise systems property engineering consultancy and insurance
severn trent plc 
annual report and accounts 2005 49 2 segmental analysis continued
b joint ventures and associates
other – principally
united kingdom us and europe group
2005 2004 2005 2004 2005 2004
£m £m £m £m £m £m
share of joint ventures’ turnover 28 32 02 02 30 34
share of operating profit of joint ventures and associates
joint ventures 06 12 – – 06 12
associates – – 111 107 111 107
06 12 111 107 117 119
c acquisitions
the profit and loss account and segmental analysis include the following amounts in respect of businesses acquired during the year
turnover operating profit
other – other –
principally principally
united us and united us and
kingdom europe total kingdom europe total
£m £m £m £m £m £m
waste management 12 – 12 02 –02
d analysis of net operating assets by geographical location and type of business
other – principally
united kingdom us and europe group
2005 2004 2005 2004 2005 2004
restated restated restated
£m £m £m £m £m £m
water and sewerage 48665 47261 – – 48665 47261 
waste management 2702 2578 182 214 2884 2792 
laboratories 83 – 576 599 659 599 
water purification and operating services 255 155 666 646 921 801 
other businesses and corporate 488 150 47 20 441 130 
net operating assets 52193 50144 1377 1439 53570 51583 
goodwill
waste management 3702 3907
laboratories 640 678
water purification and operating services 353 391
short term deposits cash borrowings taxation and dividends payable 36265 34398
22000 22161 
notes to the financial statements continued 50
severn trent plc 
annual report and accounts 2005 3 operating costs
2005 2004
£m £m £m £m
own work capitalised 1002 1077
raw materials and consumables 1548 1466
wages and salaries 4496 4238 
social security costs 369 360 
pension costs note 23 677 302 
total staff costs 5542 4900 
depreciation and other amounts written off tangible and intangible assets 3502 3297 
other operating charges 7384 7658 
total operating costs 16974 16244 
depreciation and other amounts written off tangible and intangible assets comprises
2005 2004
£m £m
depreciation – on owned assets 2421 2348 
– on assets held under finance leases 197 85
– on infrastructure assets 581 566 
amortisation and impairment – goodwill 301 298 
– other intangible assets 02 –
3502 3297 
other operating charges comprises
2005 2004
£m £m
power 416 349 
rates 585 604 
service charges   257 248 
waste disposal costs 1093 1052 
other operating costs 3241 3603 
hired and contracted services 1224 1269 
environmental and landfill restoration costs 96 75 
operating lease rentals – land and buildings 126 124 
– other 109 101 
hire of plant and machinery 196 194 
research and development expenditure 37 32 
foreign exchange losses 04 07 
7384 7658 
a net exceptional charge of £148 million arose in 20042005 this comprises
a £130 million charge relating to restructuring an exceptional profit of £76 million on disposal of fixed assets and a net loss on disposal and
closure of businesses of £94 million this is further analysed below
the exceptional charge of £130 million related to restructuring of severn trent water this is included in operating costs above £104 million
in wages and salaries and £26 million in pension costs
the exceptional profit of £76 million from disposal of fixed assets consisted of a £61 million profit on the sale of land and buildings by
severn trent water and a £15 million profit on disposal of a fixed asset investment in addition to this a net loss on disposal and closure of
businesses arose of £94 million see note 4
a net exceptional credit arose during 20032004 of £116 million this comprised
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
operating costs for 20032004 included 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 £250
million charge made in 20012002 in respect of certain systems’ cisopen vision contracts in the us included in other operating costs
severn trent plc 
annual report and accounts 2005 51 3 operating costs continued
during the year pricewaterhousecoopers llp earned the following fees
2005 2004
£m £m
audit related
group statutory 09 07
regulatory 01 02
10 09
further assurance services – due diligence capitalised as part of acquisition costs – 05
taxation services
compliance 01 01
advisory 01 01
02 02
other services 20 02
total fees 32 18
taxation services include compliance services such as tax return preparation and advisory services
other services primarily include an independent forensic investigation advice regarding the adoption of international financial reporting
standards and training programmes
included in auditors’ remuneration above is £105000 2004 £100000 in respect of the audit of the company
details of directors’ remuneration are set out in the report of the remuneration committee on pages 32 to 39 which form part of these
financial statements
4 net loss on sale and termination of operations
2005 2004
£m £m
profit on sale of operations 43 –
loss on termination of operations 137 –
94 –
the profit on sale of operations arose from the disposal of the group’s interest in its associated undertaking indaqua industria e gestao de aguas
the loss on termination of operations arose from the decision to close one of the group’s us systems businesses and to cease trading 
with external customers for the group’s uk it services business and its engineering consultancy business it includes costs of closure 
of £38 million and goodwill previously written off directly to reserves of £99 million
5 employee numbers
average number of employees including executive directors during the year full time equivalent
2005 2004
restated
number number
by type of business
water and sewerage 5106 4998
waste management 5353 5061
laboratories 2756 2582
water purification and operating services 2343 2253
other businesses and corporate 816 899
16374 15793
by geographical location
united kingdom 11569 11185
other – principally us and europe 4805 4608
16374 15793
notes to the financial statements continued 52
severn trent plc 
annual report and accounts 2005 6 net interest payable
2005 2004
£m £m
interest receivable and similar income 37 35
interest payable and similar charges
bank loans and overdrafts 320 343
other loans 1134 1069
interest on discounted provisions 22 21
finance leases 238 196
1677 1594
share of joint ventures 03 02
share of associates 84 84
1764 1680
7 taxation
a analysis of charge in the year
2005 2004
£m £m
current tax
uk corporation tax – current year at 30 484 390
– prior year 127 83
double taxation relief 04 06
total uk tax – group 353 301
overseas tax – current year 32 19
– prior year 12 –
total overseas tax 44 19
total current tax – group 397 320
share of tax charges of – joint ventures 02 04
– associates 10 09
total current tax 409 333
deferred tax
origination and reversal of timing differences – current year 235 363
– prior year 142 46
increase in discount 08 46
total deferred tax 369 363
total tax charge 778 696
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
2005 2004
£m £m
profit on ordinary activities before tax 2173 2544
profit on ordinary activities multiplied by the standard rate of corporation tax in the uk 30 652 763
effects of
permanent differences 96 07
capital allowances for year in excess of depreciation 288 343
utilisation ofmovement in shortterm timing differences 63 11
utilisation ofmovement in tax losses 10 30
overseas tax rate differences 11 08
adjustment in respect of prior years 115 83
total current tax 409 333
of the current year tax charge £10 million relates to tax charges arising on exceptional items
of the prior year tax charge £24 million relates to tax charges arising on exceptional items
severn trent plc 
annual report and accounts 2005 53 7 taxation 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 £399 million 2004 £309 million represents 172 
2004 127 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
hm revenue and customs’ revised views concerning tax deductions for deferred revenue expenditure as published in tax bulletin 53 will
increase the effective rate of tax in 20052006 et seq 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 in 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 £91 million 2004 £62 million the group’s future deferred tax charge will be impacted by changes to interest rates
8 dividends
2005 2004
pence pence
per share £m per share £m
interim dividend declared 1821 628 1777 611
final dividend proposed 3030 1046 2927 1009
4851 1674 4704 1620
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 2005 and 2004 the directors
consider that the supplementary figures provide a useful additional indication of performance
2005 2004
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 1388 3447 403 1841 3438 535 
effect of dilutive options –25 03 – 15 02 
diluted earnings per share 1388 3472 400 1841 3453 533 
supplementary earnings per share
basic earnings per share 1388 3447 403 1841 3438 535 
effect of
exceptional profit on disposal of fixed assets 76 – 22 198 – 58 
exceptional restructuring costs 130 – 38 ––– 
exceptional integration costs ––– 109 – 32 
exceptional net loss on sale and termination of operations 94 – 27 ––– 
exceptional contract provision release ––– 27 – 08 
tax related to exceptional items 10 – 03 24 – 07 
deferred tax 369 – 107 363 – 106 
adjusted earnings per share before 
exceptional items and deferred tax 1915 3447 556 2112 3438 614 
diluted earnings per share 1388 3472 400 1841 3453 533 
effect of
exceptional profit on disposal of fixed assets 76 – 22 198 – 57 
exceptional restructuring costs 130 – 38 ––– 
exceptional integration costs ––– 109 – 32 
exceptional net loss on sale and termination of operations 94 – 27 ––– 
exceptional contract provision release ––– 27 – 08 
tax related to exceptional items 10 – 03 24 – 07 
deferred tax 369 – 106 363 – 105 
diluted earnings per share before exceptional items 
and deferred tax 1915 3472 552 2112 3453 612 
notes to the financial statements continued 54
severn trent plc 
annual report and accounts 2005 10 intangible assets 
goodwill
group
2005
£m
cost
at 1 april 2004 6343
arising on acquisitions in the year note 21a 12
arising on prior year acquisitions note 21b 29
exchange adjustments 38
at 31 march 2005 6346
amortisation
at 1 april 2004 1367
charge for year 301
exchange adjustments 17
at 31 march 2005 1651
net book value
at 31 march 2005 4695
at 31 march 2004 4976
group
2005
£m
other intangible assets
cost
at 1 april 2004 –
additions 144
at 31 march 2005 144
amortisation
at 1 april 2004 –
charge for year 02
at 31 march 2005 02
net book value
at 31 march 2005 142
at 31 march 2004 –
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 2004 21384 32045 28477 81906 73 55 128
acquisition of businesses in current year note 21a – – 07 07 – – – 
acquisition of businesses in prior years note 21b 08 – – 08 – – – 
additions 1183 1733 2394 5310 – 01 01 
grants and contributions – 359 – 359 – – – 
disposals 97 06 1334 1437 – – – 
reclassifications and transfers 41 – 25 16 06 06 – 
exchange adjustments 03 – 04 07 – – – 
at 31 march 2005 22418 33413 29565 85396 67 62 129 
depreciation
at 1 april 2004 6725 9393 13008 29126 05 52 57 
charge for year 626 581 1992 3199 – 09 09 
disposals 70 06 1266 1342 – – – 
reclassifications and transfers 23 – 16 07 16 16 – 
exchange adjustments 01 – 01 – – – – 
at 31 march 2005 7305 9968 13717 30990 21 45 66 
net book value
at 31 march 2005 15113 23445 15848 54406 46 17 63 
at 31 march 2004 14659 22652 15469 52780 68 03 71
severn trent plc 
annual report and accounts 2005 55 11 tangible assets continued
i included in tangible fixed assets are assets held under finance leases as follows
2005 2004
£m £m
cost 3798 3979
accumulated depreciation 1330 1154
net book value 2468 2825
ii grants and contributions received relating to infrastructure assets have been deducted from the cost of fixed assets in order to show a true
and fair view as set out in note 1f
iii the net book value of land and buildings is analysed as follows
2005 2004
£m £m
freehold 14371 13914
long leasehold 410 422
short leasehold 332 323
15113 14659
iv the net book value of land and buildings includes £1170 million 2004 £1271 million in respect of landfill sites
v included in the above are the following tangible fixed assets not subject to depreciation
2005 2004
£m £m
land 363 467
assets in the course of construction 2488 2349
2851 2816
12 investments
group
2005 2004
restated
£m £m £m £m
investments in joint ventures
share of gross assets 58 72
share of gross liabilities 70 65
loans 107 89
95 96
investments in associates
share of net assets 163 145
loans – 32
163 177
other investments 07 10
265 283
interests in interests in other own
joint ventures associates investments shares total 
£m £m £m £m £m
group
at 1 april 2004 as previously reported 96 177 10 32 315
prior year adjustment note 1 – – – 32 32
at 1 april 2004 restated 96 177 10 – 283
loans advanced 21 – – – 21
additions – – 02 – 02
disposals – 10 05 – 05
loans repaid 03 32 – – 35
share of profits 01 17 – – 18
dividends receivable 20 15 – – 35
other movements –06 – – 06
at 31 march 2005 95 163 07 – 265
notes to the financial statements continued 56
severn trent plc 
annual report and accounts 2005 interests in joint ventures and associates at 31 march 2005 comprised the group’s share of net assets less provisions of £151 million 
2004 £152 million and loans of £107 million 2004 £121 million the group’s share of the post acquisition accumulated profits 
of joint ventures at 31 march 2005 was £08 million 2004 £27 million the group’s share of the post acquisition accumulated profits 
of associates at 31 march 2005 was £33 million 2004 £31 million particulars of the group’s principal joint venture and associated
undertakings at 31 march 2005 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
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 –
aquafin nv sewerage undertaking 20 – – 160000 shares at €124share
held by the group
held by east leeds holdings limited
the country of incorporation and main operation is great britain with the exceptions of capital controls india india and aquafin belgium
the group financial statements incorporate a trading period for aquafin of 12 months to its accounting reference date of 31 december 2004
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 loans shares total
£m £m £m £m
company
at 1 april 2004 as previously reported 9913 25995 32 35940
prior year adjustment note 1 – – 32 32
at 1 april 2004 restated 9913 25995 – 35908
additionsloans advanced 365 637 – 1002
loans repaid – 705 – 705
disposalsprovisions 82 – – 82
at 31 march 2005 10196 25927 – 36123
13 stocks
group
2005 2004
£m £m
raw materials and consumables 189 186
work in progress 91 92 
finished goods 52 40 
development land and properties 328 486 
660 804 
the replacement value of stocks and work in progress is not materially different from their book value
severn trent plc 
annual report and accounts 2005 57 14 debtors
group company
2005 2004 2005 2004
£m £m £m £m
trade debtors 2761 2776 – –
amounts owed by group undertakings – – 798 509
amounts owed by associated undertakings 03 03 – –
corporation tax recoverable 05 03 – –
deferred tax – – 02 –
other debtors 325 379 35 07
prepayments and accrued income 1900 1367 08 13
4994 4528 843 529
within group debtors of £4994 million is £66 million of prepayments and accrued income £06 million of other debtors and £01 million of
amounts owed by associated undertakings that falls due after one year
included within group debtors in 2004 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
15 creditors amounts falling due within one year
group company
2005 2004 2005 2004
£m £m £m £m
bank overdrafts 264 321 260 321
bank loans 807 640 – –
other loans 3559 3784 3409 3544
obligations under finance leases 235 124 – –
borrowings note 17 4865 4869 3669 3865
trade creditors 608 712 06 03
amounts owed to group undertakings – – 720 590
other creditors 353 315 78 149
taxation and social security 276 327 02 03
corporation tax payable 696 658 416 259
dividends payable 1676 1622 1676 1622
accruals and deferred income 3781 3734 96 40
12255 12237 6663 6531
16 creditors amounts falling due after more than one year
group company
2005 2004 2005 2004
£m £m £m £m
bank loans 3678 4282 – –
other loans 16494 14605 3169 2903
obligations under finance leases 4771 4888 – –
borrowings note 17 24943 23775 3169 2903
deferred income 451 457 – –
other creditors 179 174 122 104
25573 24406 3291 3007
notes to the financial statements continued 58
severn trent plc 
annual report and accounts 2005 17 financial instruments
the group’s policies in respect of foreign currency and interest rate risk management and the related use of financial instruments which form
part of these financial statements are set out in the treasury management section of the financial review on page 23 shortterm debtors and
creditors have been excluded from disclosures other than the currency risk disclosures
a financial liabilities analysed by currency and interest rate after taking account of various currency 
and interest rate swaps entered into by the group
at 31 march 2005
fixed borrowings
currency weighted
average
weighted period for
noninterest floating fixed average which
2005 bearing interest interest interest interest
total liabilities rate rate rate is fixed
£m £m £m £m  years
sterling 29025 37 10007 18981 60 174
euro 264 – 264 –
us dollar 556 – 556 –
total financial liabilities at 31 march 2005 29845 37 10827 18981
at 31 march 2004
fixed borrowings
currency weighted
average
weighted period for
noninterest floating fixed average which
2004 bearing interest interest interest interest
total liabilities rate rate rate is fixed
£m £m £m £m  year 1
sterling 27820 68 8610 19142 61 179
euro 321 – 321 –
us dollar 571 – 571 –
total financial liabilities at 31 march 2004 28712 68 9502 19142
non interest bearing liabilities relate to onerous contracts see note 18 the weighted average period to maturity is 20 years 24 years
in addition to the fixed debt above the group entered into a number of forward start accruing interest rate swaps these have an initial
notional value of £170 million and commence accreting notional value between march 2005 and december 2032 the maximum notional
value of these swaps is £1350 million these swaps are float to fixed and bear fixed interest at between 526 and 552
following the year end the group has entered into £2270 million of forward start interest rate swaps floating to fixed that commence between
may 2005 and september 2009 these swaps all terminate in may 2010 these interest rate swaps bear interest between 482 and 484
floating rate borrowings bear interest based on libor whilst euro denominated borrowings bear interest based on euribor and dollar
borrowings bear interest based on dollar libor
b investments in interest earning assets analysed by currency after taking account of various
currency swaps entered into by the group
2005 2004
currency £m £m
sterling deposits 404 683
euro deposits – 03
us dollar deposits – 22
404 708
investments in interest earning assets comprise shortterm deposits placed on money markets and certificates of deposit with a maturity date
not exceeding one year
financial assets comprise £504 million of cash and £404 million of cash held on short term deposit sterling assets receive interest based on
libid
of the total £404 million interest earning assets there is £370 million of cash held on short term deposit as security for external insurance
as part of derwent’s reinsurance obligations in addition severn trent water and biffa have a total of £34 million on short term deposit 
£23 million for severn trent water and £11 million for biffa as security for self insurance obligations
severn trent plc 
annual report and accounts 2005 59 17 financial instruments continued
c monetary assets and liabilities by currency excluding the functional currency
at 31 march 2005
net foreign currency monetary assets
sterling us dollar euro other total
£m £m £m £m £m
functional currency of operation
sterling – 16 07 02 25
at 31 march 2004
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
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
d financial liabilities analysed by maturity date
loans
repayable by
instalments
any of which
are payable other other
after five repayment finance financial 2005 2004
overdrafts years terms leases liabilities total total
£m £m £m £m £m £m £m
group
financial liabilities due within one year 264 – 4366 235 08 4873 4877
borrowings due after one year
between one and two years – – 1266 124 10 1400 1528
between two and five years – – 5797 586 19 6402 5277
after more than five years – 153 12956 4061 – 17170 17030
total financial liabilities due after one year – 153 20019 4771 29 24972 23835
264 153 24385 5006 37 29845 28712
loans repayable partly or wholly after five years comprise
rate of interest 2005 2004
 £m £m
european investment bank loans – 2013 31 1277 2239
sterling bond stwuf – 2024 61 2984 2983
sterling bond stwuf – 2029 63 4136 4131
euro medium term notes 4256 4559 3541
other loans 52 153 –
13109 12894
severn trent water utilities finance plc
company
the company has loans and overdrafts totalling £6371 million 2004 £6531 million which are repayable within five years and £467 million
2004 £237 million repayable after more than five years
notes to the financial statements continued 60
severn trent plc 
annual report and accounts 2005 e borrowing facilities
the group has the following undrawn committed borrowing facilities available at 31 march 2005
2005 2004
£m £m
expiring within one year – 1600
expiring in more than one but not more than two years 2000 6000
expiring in more than two but not more than five years 5000 –
7000 7600
in addition the group also has overdraft facilities of £870 million 2004 £800 million of which £568 million 2004 £479 million remains
undrawn at the year end
f fair values of financial instruments
financial instruments by category
assetliability
2005 2004
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 404 404 708 708
cash at bank and in hand 504 504 292 292
borrowings falling due within one year 4801 4813 4772 4778
borrowings falling due after more than one year 24679 26165 23564 24610
provisions for onerous contracts 37 37 68 68
derivative financial instruments held to manage the currency and interest rate profile
interest rate swaps and similar instruments – 637 – 650
currency instrument – cross currency swaps 325 374 308 308
currency instrument – investment hedge 03 02 153 153
total net financial liabilities 28937 31120 27559 29261
other longterm assets restated
other fixed asset investments 07 07 10 10
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 2005
total net
gains
gains losses losses
£m £m £m
unrecognised gains and losses on hedges at 1 april 2004 61 711 650
arising in previous years that were recognised in the year 21 52 31
arising before 1 april 2004 that were not recognised in the financial year 82 763 681
unrecognised gains and losses arising during the financial year 64 60 04
unrecognised gains and losses on hedges at 31 march 2005 18 703 685
expected to be recognised
in one year or less – 04 04
in later years 18 699 681
the instruments used for hedging group exposures to movements in interest rates and exchanges rates are explained in the financial review
on page 23 changes in the fair value of instruments used as hedges are not recognised in the financial statements until the hedged position
matures
severn trent plc 
annual report and accounts 2005 61 18 provisions for liabilities and charges
a group provisions comprise the following
2005 2004
£m £m
deferred tax 4998 4629
other provisions 1244 1091
6242 5720
deferred tax
the group’s full deferred tax liability calculated at a tax rate of 30 2004 30 is
2005 2004
£m £m
capital allowances 9212 8783
tax lossesother timing differences 248 196
undiscounted provision for deferred tax 8964 8587
discount 3966 3958
discounted provision for deferred tax 4998 4629
provision at start of year 4629 4258
deferred tax charge for year 369 363
exchange translation differences – 08
provision at end of year 4998 4629
other provisions
other provisions comprise
balance at prior year transferred balance at
31 march fair value profit and exchange between 31 march
2004 adjustments loss account adjustments utilised categories 2005
£m £m £m £m £m £m £m
environmental and landfill restoration 771 05 118 03 96 27 774
restructuring 21 – 164 – 34 – 151
insurance 223 – 125 – 86 13 275
onerousloss making contracts 68 01 04 – 34 – 37
other 08 – 04 – 05 – 07
1091 04 415 03 255 14 1244
as more fully explained in notes 1j and 1k 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 to landfill aftercare costs
included in the £415 million charge against profit in the current year is £22 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 expected to
occur within two years 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
b company provisions are as follows
2005 2004
£m £m
deferred tax – 06
notes to the financial statements continued 62
severn trent plc 
annual report and accounts 2005 19 called up share capital
2005 2004
£m £m
total authorised share capital
520175751 ordinary shares of 65 
5
⁄ 19p 3395 3395
total issued and fully paid share capital
346002393 2004 345115866 ordinary shares of 65 
5
⁄ 19p 2258 2252
a shares issued during the year
593656 ordinary shares of 65 
5
⁄ 19p were issued at 473p 528p 536p 548p 568p 592p 799p or 831p under the group’s employee
sharesave scheme and 292871 ordinary shares of 65 
5
⁄ 19p were issued at 6805p 688p 720p or 738p under the group’s share option
scheme formerly executive share option scheme the aggregate consideration in respect of these allotments was £55 million
b employee share schemes
i the severn trent share schemes profit sharing scheme
these shares were held in trust on behalf of employees who were beneficially entitled to them however all of these shares have now 
been released from trust and the issued and paid up share capital of the company no longer includes any ordinary shares of 65 
5
⁄ 19p 
issued under the profit sharing scheme 2004 177294 ordinary shares of 65 
5
⁄ 19p
ii the severn trent share schemes share incentive plan
the issued and paid up share capital of the company includes 493115 ordinary shares of 65 
5
⁄ 19p 2004 358044 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 contract for a period of three five or seven years the right to subscribe for ordinary shares in the company options outstanding
at 31 march 2005 were as follows
number of shares
date of grant normal date of exercise option price 2005 2004
january 1997 2004 528p – 130429
january 1998 2003 or 2005 799p 43755 48004
january 1999 2004 or 2006 831p 29169 130371
january 2000 2003 2005 or 2007 473p 1428973 1470399
january 2001 2004 2006 or 2008 568p 481508 940485
january 2002 2005 2007 or 2009 548p 926533 995143
january 2003 2006 2008 or 2010 536p 1402330 1509927
january 2004 2007 2009 or 2011 592p 1174622 1268299
january 2005 2008 2010 or 2012 759p 1191383 –
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 subscribe for ordinary shares in the company options outstanding under this scheme at 31 march 2005 were as follows
number of shares
date of grant number normal date of exercise option price 2005 2004
june 1998 26 20012008 1005p 49052 58633
june 1999 34 20022009 934p 53720 57009
june 2000 29 20032010 688p 58725 67011
july 2001 12 20042011 738p 27555 106796
june 2002 55 20052012 720p 119431 125965
july 2003 49 20062013 6805p 116099 134219
v unapproved share option scheme
the board has granted executives options to subscribe for ordinary shares in the company under an unapproved share option scheme 
options outstanding under this scheme at 31 march 2005 were as follows
number of shares
date of grant number normal date of exercise option price 2005 2004
june 1998 16 20012008 1005p 34655 36689
june 1999 35 20022009 934p 76255 90266
june 2000 54 20032010 688p 200125 236238
july 2001 36 20042011 738p 158077 300822
june 2002 80 20052012 720p 313803 338873
july 2003 76 20062013 6805p 281405 306532
severn trent plc 
annual report and accounts 2005 63 20 reserves
share capital profit
premium redemption and loss
account reserve account
£m £m £m
group
at 1 april 2004 as previously reported 335 1561 18021
prior year adjustment note 1 –– 32
at 1 april 2004 restated 335 1561 17989
retained loss for the year – – 286
shares issued 49 – –
own shares purchased –– 41
credit arising from own shares charge –– 43
exchange movement on translation of overseas results and net assets – – 40
goodwill previously written off to reserves taken to the profit and loss account 
on termination of operations see note 4 – – 107
translation differences on foreign currency hedging – – 08
tax on translation differences on foreign currency hedging – – 02
at 31 march 2005 384 1561 17778
purchase of own shares represents ordinary shares of 65 
5
⁄19p each purchased by the trust for certain senior employees under the long term
incentive plan ‘ltip’ the main features of the ltip are set out in the remuneration report on pages 33 34 35 and 39 at 31 march 2005
the trust held 1369984 shares 2004 1335947 shares 
the market value of these shares was £125 million 2004 £102 million the intrinsic value of these shares is charged to the profit and loss
account over the three year period for which the performance criteria are measured
the fair values of each share granted under the ltip outstanding at 31 march 2005 are as follows
20022003 scheme – £3365
20032004 scheme – £3645
20042005 scheme – £4835
share capital profit
premium redemption and loss
account reserve account
£m £m £m
company
at 1 april 2004 as previously reported 335 1561 24842
prior year adjustment note 1 –– 32
at 1 april 2004 restated 335 1561 24810
retained loss for the year – – 217
shares issued 49 – –
own shares purchased –– 41
credit arising from own shares charge –– 43
at 31 march 2005 384 1561 24595
the profit attributable to shareholders dealt with in the accounts of the company was £1457 million 2004 £1237 million in previous
years £12212 million of the company’s retained profit arose as a result of group restructuring exercises and is 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 2005 cumulative goodwill written off directly against group reserves amounted to £2770 million 2004 £2877 million
notes to the financial statements continued 64
severn trent plc 
annual report and accounts 2005 21 acquisitions and disposals
a acquisitions in 20042005
during the year the group acquired interests in the following businesses all asset and trade acquisitions
name of business date of acquisition
waste management
gateshead 26 april 2004
southwood skip hire 31 august 2004
laboratories
wrcnfs limited 2 march 2005
all acquisitions were accounted for using the acquisition method 
none of the businesses acquired during the year had preacquisition trading results which were individually significant in the context of the
group
from the date of acquisition to 31 march 2005 the acquisitions contributed £12 million to turnover and have a profit before interest and tax
of £02 million
the book value and provisional fair value of net assets acquired were as follows
book value and
provisional
fair value
£ m
tangible fixed assets 07
consideration – paid 14
– accrued 05
total consideration 19 
goodwill 12 
goodwill arising on these acquisitons is being amortised over periods between 5 and 20 years
b acquisitions in prior years
the provisional fair value of hales’ net assets acquired in the prior year has been reduced by £12 million from £254 million to £242 million
and the costs of acquisition have increased by £04 million causing goodwill to increase by £16 million
final fair 
provisional prior year value to
fair value fair value the group
2004 adjustments 2005
£m £m £m
tangible fixed assets 409 08 401 
stocks 07 – 07 
debtors due within one year 05 – 05 
cash at bank and in hand 02 – 02 
creditors due within one year 12 – 12 
provisions 157 04 161 
254 12 242 
consideration – paid 1457 04 1461 
goodwill 1203 16 1219 
the adjustment to fixed assets reflects write downs following the completion of the valuation review 
the adjustment to provisions reflects completion of the detailed assessments of environmental and landfill restoration costs associated 
with the landfill sites acquired
a further £13 million of goodwill on other prior year acquisitions has resulted from additional consideration which had not been accrued
severn trent plc 
annual report and accounts 2005 65 21 acquisitions and disposals continued
c disposals in 20042005
in december 2004 the group sold its interest in indaqua industria e gestao de aguas an associated undertaking and part of the water
purification and operating services segment for €92 million £65 million realising a gain of £43 million on disposal
£m
interest in net liabilities 10
loan repaid 32
profit on disposal 43
proceeds on disposal 65
indaqua contributed £04 million to operating profit
22 commitments and contingent liabilities
2005 2004
£m £m
a investment expenditure commitments
contracted for but not provided in the financial statements 1742 2120
in addition to these commitments severn trent water limited has longer term 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
2005 2004
land and land and
buildings other buildings other
£m £m £m £m
within one year 40 39 37 12
between one and five years 117 58 88 53
after five years 73 11 38 –
230 108 163 65 
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 23a 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 20042005 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 by which time the group will have
adopted international financial reporting standards in the interim certain additional disclosures are required under the transitional
provisions of frs 17 details of which are provided in note 23b opposite
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 funded to cover future salary and pension increases and their assets are held in separate funds administered by the trustees
as from april 2004 the severn trent pension scheme was amended with new defined benefit and contribution sections introduced
the uk defined benefit schemes and the dates of their last formal actuarial valuation are as follows
uk defined benefit scheme date of last formal actuarial valuation
severn trent pension scheme stps 31 march 2004
severn trent senior staff pension scheme 31 march 2004
uk waste pension scheme 6 april 2003
severn trent mirror image pension scheme 31 march 2003
the stps is by far the largest of the group’s uk defined benefit schemes
notes to the financial statements continued 66
severn trent plc 
annual report and accounts 2005 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 an annual charge against
the group’s earnings totalling in the current year £26 million 2004 £18 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 this was closed to new entrants on 1 april 2005 and replaced
by the severn trent stakeholder pension scheme
the most recent formal actuarial valuation of the stps was carried out using the projected unit method whilst for the severn trent senior
staff pension scheme uk waste pension scheme and the severn trent mirror image pension scheme the attained age method was applied
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 results of these valuations at the above dates including the unfunded arrangement for senior staff as at 31 march 2005 were as follows
stps others total
£m £m £m
market value of assets 7986 1371 9357
present value of scheme liabilities 10181 1914 12095
net deficits 2195 543 2738
the major assumptions used by the scheme actuary in the most recent valuation of the stps also the approximate weighted average of
assumptions used for the most recent formal valuations of all group schemes were as follows
price inflation 275
salary increases 425
pension increases in payment and deferment 275
weighted average discount rate 570
following the valuation of the stps scheme the employers’ contribution rates have been increased this increase has varied for different
companies in the group the majority of the pension contributions are paid by severn trent water and biffa the new employer contribution
rates for these are
employee contribution rates employer contribution rates
severn trent water biffa
6 3324 2304
5 2770 1920
3 1662 1152
employers’ contributions to stps in 20032004 were 1464 122 or 732 of pensionable pay which applied to all group companies
employees’ contributions continued at the rate of 6 5 or 3 of pensionable pay
employers’ contributions to stps in the year to 31 march 2005 amounted on average to 277 of pensionable payroll which was broadly
equivalent to the pension charge for the year
the total pension charge for all pension arrangements for the year ended 31 march 2005 after amortisation of surpluses and deficits
amounted to £677 million 2004 £302 million £655 million 2004 £282 million of this charge relates to the group’s defined benefit
schemes including unfunded charge and £22 million 2004 £20 million relates to the group’s defined contribution arrangements amounts
carried in the balance sheet in respect of pension costs are not significant in the context of the group
b frs 17 ‘retirement benefits’ – additional disclosures
the actuarial liabilities and the market values of the assets at 31 march 2005 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
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 approximate weighted average of the major assumptions used by the actuary to calculate scheme liabilities under frs 17 are
31 march 2005 31 march 2004 31 march 2003
valuation method projected unit projected unit projected unit
price inflation 275 275 225
salary increases 425 425 375
pension increases 275 275 225
discount rate 550 550 525
severn trent plc 
annual report and accounts 2005 67 23 pensions and retirement benefits continued
the assets and liabilities in the schemes and expected rates of return were
at 31 march 2005
longterm rate total fair 
rate of return value at 31
expected at 31 stps others march 2005
march 2005 £m £m £m
equities 825 6460 968 7428
gilts 460 1314 545 1859
corporate bonds 550 494 56 550
property 646 557 85 642
cash 375 263 43 306
total market value of assets 9088 1697 10785
present value of scheme liabilities 11722 2156 13878
net deficit in schemes before deferred tax 2634 459 3093
net group
total deferred total after
deficit tax asset deferred tax
£m £m £m
total schemes at 31 march 2005 3093 928 2165
at 31 march 2004
total fair
longterm rate value at
of return 31 march
expected at stps 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
longterm total fair value 
of return at 31 march
expected at stps 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
notes to the financial statements continued 68
severn trent plc 
annual report and accounts 2005 if the above amounts were recognised in the financial statements the group’s net assets and profit and loss reserve at 31 march 2005 and 
31 march 2004 would be as follows
2004 2004
2005 2005 profit and 
profit and loss reserve net assets
loss reserve net assets restated restated 
£m £m £m £m
excluding net pension liability 17778 22000 17989 22161
net pension liability under frs 17 2165 2165 2572 2572
net liabilities already recognised in accounts under 
ssap 24 net of deferred tax 91 91 24 24
including net pension liability 15704 19926 15441 19613
the weighted average employer contributions’ rates to all group defined benefit schemes expressed as a percentage of pensionable payroll
were 314 in the year ended 31 march 2005 2004 149
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 2005
stps others total
£m £m £m
loss on settlements and curtailments 28 12 40
current service 388 49 437
total operating charge 416 61 477
the loss on settlements and curtailments relates to charges in respect of restructuring severn trent water
for the year ended 31 march 2004
stps others total
£m £m £m
loss on settlements and curtailments 08 – 08
current service cost 309 42 351
total operating charge 317 42 359
the loss on settlement and curtailment relates to the hales acquisition 
analysis of amounts that would have been included as other finance income
for the year ended 31 march 2005
stps others total
£m £m £m
expected return on scheme assets 603 106 709
interest on scheme liabilities 596 111 707
net return 07 05 02 
for the year ended 31 march 2004
stps 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
severn trent plc 
annual report and accounts 2005 69 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 2005
stps others total
actual return less expected return on scheme assets
amount £m 325 45 370
percentage of scheme assets 36 27 34
experience gains and losses arising on the scheme liabilities
amount £m 77 07 70
percentage of scheme liabilities 07 03 05
changes in assumptions underlying the present value of scheme liabilities
amount £m –––
actuarial gain recognised in the statement of total recognised gains and losses
amount £m 402 38 440
percentage of scheme liabilities 34 18 32
for the year ended 31 march 2004
stps 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 liabilities 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 liabilities 21 43 24
for the year ended 31 march 2003
stps 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 liabilities 24 50 28
changes in assumptions underlying the present value of scheme liabilities
amount £m 616 114 730
reversal of irrecoverable surplus
amount £m – 124 124 
actuarial loss recognised in the statement of total recognised gains and losses
amount £m 3184 361 3545
percentage of scheme liabilities 354 209 331
the following table reconciles the movements in pension scheme deficits during the period
for the year ended 31 march 2005
stps others total
£m £m £m
deficit in the scheme at the beginning of the year 3130 545 3675
contributions 503 114 617
current service cost 388 49 437
loss on settlements and curtailments 28 12 40
other financial incomecosts 07 05 02 
actuarial gain 402 38 440
deficit in scheme at end of year 2634 459 3093
notes to the financial statements continued 70
severn trent plc 
annual report and accounts 2005 for the year ended 31 march 2004
stps others total
£m £m £m
deficit 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
24 cash flow statement
a reconciliation of profit before interest to operating cash flows
2005 2004
£m £m
operating profit 3838 3907
depreciation charge 3199 2999
amortisation of other intangible assets 02 –
amortisation of goodwill 301 298
deferred income movement 14 21
provisions for liabilities and charges 335 231
utilisation of provisions for liabilities and charges 255 286
decrease in stocks 140 92
increase in debtors 369 372
decreaseincrease in creditors 185 483
net cash inflow from operating activities 6992 7331
within cash inflow from operating activities in 20042005 is a £15 million cash outflow relating to costs incurred as part of the exceptional
restructuring within severn trent water a £04 million cash outflow relating to the exceptional loss on termination of operations and a 
£13 million cash outflow relating to the hales integration costs
within cash inflow from operating activities in 20032004 is a £96 million cash outflow relating to the hales integration costs
b returns on investments and servicing of finance
2005 2004
£m £m
interest received 20 35
interest paid 1363 1303
dividend to minority interest 06 –
interest element of finance lease rental payments 164 215
net cash outflow for returns on investments and servicing of finance 1513 1483
c capital expenditure and financial investment
2004
2005 restated 
£m £m
purchase of tangible and intangible fixed assets 5351 5406
grants received 368 356
sale of tangible fixed assets 156 256
loans advanced to associates and joint ventures 21 53
loans repaid by associates and joint ventures 03 08
movements in other fixed asset investments 14 04
net cash outflow for capital expenditure and financial investment 4831 4843
movements in other fixed asset investments includes £19 million of cash relating to the exceptional profit on disposal of fixed asset investment
proceeds from the sale of tangible fixed assets include £71 million 2004 £211 million relating to the exceptional profit on sale of land and
buildings by severn trent water
severn trent plc 
annual report and accounts 2005 71 d acquisitions and disposals
book and provisional
fair value of assets acquired
2005 2004
£m £m
acquisitions
tangible fixed assets 07 465
current assets – 32
liabilities – 179
provisional fair value of net assets acquired excluding net borrowings 07 318
goodwill – capitalised 12 1379
consideration for businesses acquired 19 1697
cash of businesses acquired – 03
net consideration 19 1700
satisfied by
cash consideration relating to current year acquisitions 14 1700
deferred consideration relating to current year acquisitions 05 –
19 1700
cash consideration – as above 14 1700
cash consideration relating to previous years acquisitions not accrued 17 02
cash settlement of opening accrued consideration – 04
31 1706
disposals
proceeds on disposal of businesses note 21c 65 –
total cash flow from acquisitions and disposals 34 1706
acquisitions have not materially impacted on the group’s operating cashflow for the year
the proceeds on disposal of businesses relate to the exceptional profit on sale of the group’s interest in indaqua
e liquid resources
liquid resources comprise amounts held via shortterm deposits with a maturity date of less than one year
f financing
2004
2005 restated 
£m £m
loans advanced 5566 7373
repayments of amounts borrowed 4424 4965
new finance lease funding – 423
finance lease capital repaid 81 –
increase in debt 1061 2831
receipts from shares issued net of expenses 55 56
share purchase by employee share trust 41 32
net cash inflow from financing 1075 2855
g analysis of changes in net debt
at 31 march cash other non exchange at 31 march
2004 flow cash changes movement 2005
£m £m £m £m £m
cash at bank and in hand 445 48 – 11 504
overdrafts note 15 321 63 – 06 264
124 111 – 05 240
debt due within one year note 15 4424 58 – – 4366
debt due after one year note 16 18887 1200 87 02 20172
finance leases notes 15 and 16 5012 81 75 – 5006
28323 1061 162 02 29544
shortterm deposits 708 304 – – 404
total 27491 1254 162 07 28900
notes to the financial statements continued 72
severn trent plc 
annual report and accounts 2005 25 principal subsidiary undertakings and
their directors
water and sewerage
severn trent water limited
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
directors
c s matthews j h bailey 
i elliott r s s martin
g c messham s h reilly
p f stephenson s stubbs
m r wilson a p wray
waste management
biffa plc
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
holding company
directors
c s matthews m j bettington
w r a de jonghe d r knott
t w j lowth n h manning
r b tate
biffa waste services limited
coronation road cressex
high wycombe hp12 3tz
telephone 01494 521221
directors
m j bettington r chivers
b j griffiths p t jones 
d r knott t w j lowth
n h manning m d prosser
m sadique m l saville
d savory r b tate
uk waste management limited
coronation road cressex
high wycombe hp12 3tz
telephone 01494 521221
directors
m j bettington d r knott
t w j lowth
biffa waste management limited
coronation road cressex
high wycombe hp12 3tz
telephone 01494 521221
directors
m j bettington d r knott
t w j lowth
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 p canivet
t w j lowth n v retema
represented by 
w r a de jonghe
k smits w tytgat
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
c s matthews r s brydon jannetta
d l chester l f graziano
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 l f graziano
k j kelly 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 k j kelly
j w whalen jr p winnington
severn trent water international limited
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
directors
l f graziano b m horner 
a norman w g weatherdon
coast to coast water limited
80 owned
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
directors
a j handford b m horner 
a norman
c2c services limited
80 owned
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
directors
w f earp a j handford
b m horner r j phillips
w g weatherdon e a wilson
severn trent water international 
overseas holdings limited
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
directors
a norman m r wilson
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 d l chester 
l f graziano j a graziose jr
k j kelly
severn trent services limited
park lane minworth sutton coldfield 
west midlands b76 9bl
telephone 0121 313 2300
directors
r a lloyd 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 l f graziano
k j kelly
severn trent plc 
annual report and accounts 2005 73 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 l f graziano
k j kelly
severn trent metering services limited
smeckley wood close
chesterfield trading estate
chesterfield s41 9pz
telephone 01246 456658
directors
g g archibald a r elder
l f graziano r g piper
severn trent laboratories limited
stl business centre torrington avenue
coventry cv4 9gu
telephone 024 764 21213
directors
r s brydon jannetta a w gibson
r a henton
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 h collins villemaire
k j kelly k c wheatstone
qed environmental systems inc
6095 jackson road ann arbor
michigan 48103 usa
telephone 001 734 995 2547
incorporated and operational in the
united states of america
directors
r s brydon jannetta h collins villemaire
k j kelly k c wheatstone
systems
severn trent systems limited
trading as aseriti
2800 the crescent
birmingham business park
birmingham b37 7yl
telephone 0121 717 7755
directors
j m bassford r picken
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 l f graziano 
k j kelly g mollere
property
severn trent property limited
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
property development
directors
g p f inge j s r haynes
p a ludlow v j o’connell
daventry international rail freight 
terminal limited
925 owned
2308 coventry road birmingham b26 3jz
telephone 0121 722 6000
property development
directors
j s r haynes j jones
p a ludlow 
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 m c inns
a c smith m r wilson
derwent insurance limited
5763 line wall road gibraltar
telephone 0035 31 604 8100
insurance company – incorporated and
operational in gibraltar
directors
p p davies n feetham
p k tandon f white
others
severn trent water services plc
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
holding company
directors
p p davies m r wilson
severn trent services holdings plc
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
holding company
directors
p p davies m r wilson
severn trent corporate holdings plc
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
holding company
directors
p p davies m r wilson
severn trent overseas holdings limited
2297 coventry road birmingham b26 3pu
telephone 0121 722 4000
holding company
directors
p p davies m r wilson
held directly by the company
country of incorporation 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 6 june 2005
notes to the financial statements continued 74
severn trent plc 
annual report and accounts 2005 2005 2004 2003 2002 2001
restated restated
£m £m £m £m £m
profit and loss account
turnover group and share of joint ventures 20842 20185 18558 17991 16859
less share of joint ventures’ turnover 30 34 38 48 43
turnover 20812 20151 18520 17943 16816
profit before interest goodwill amortisation and exceptional items 4386 4406 4098 4188 4002
goodwill amortisation 301 298 252 265 174
profit before interest and exceptional items 4085 4108 3846 3923 3828
net exceptional items 148 116 408 170 155
net interest payable 1764 1680 1594 1590 1611
profit on ordinary activities before taxation 2173 2544 1844 2163 2062
current taxation on profit on ordinary activities 409 333 248 161 124
deferred taxation 369 363 595 423 524
profit on ordinary activities after taxation 1395 1848 1001 1579 1414
equity minority interests 07 07 09 06 04
dividends 1674 1620 1576 1576 1545
retained lossprofit for the financial year 286 221 584 03 135
net assets employed
fixed assets 59508 58039 54806 53957 53098
other net liabilities excluding net debt and provisions 2366 2667 2321 2082 1902
provisions for liabilities and charges 6242 5720 5231 4804 4180
50900 49652 47254 47071 47016
financed by
called up share capital 2258 2252 2244 2240 2236
reserves 19723 19885 19932 20700 20663
total shareholders’ funds 21981 22137 22176 22940 22899
minority shareholders’ interests 19 24 22 14 12
net debt 28900 27491 25056 24117 24105
50900 49652 47254 47071 47016
statistics
earnings per share 403p 535p 289p 459p 412p
earnings per share before exceptional items and deferred tax 556p 614p 581p 632p 610p
dividends per share 4851p 4704p 459p 459p 450p
dividend cover before exceptional items in all years and before
deferred tax 11 13 13 14 14
gearing 568 554 530 513 513
ordinary share price at 31 march 915p 761p 716p 738p 6945p
average number of employees – water and sewerage 5106 4998 4780 4662 4837
– other 11268 10795 9867 9710 9220
following the implementation of uitf38 – ‘accounting for esop trusts’ the 2004 balance sheet was restated to reflect shares held by the
severn trent employee share ownership trust which have not vested unconditionally at the balance sheet date other prior year comparatives
have not been restated in the above table
following the implementation of frs 19 ‘deferred tax’ the 2001 results were restated to reflect a deferred tax charge under the new
accounting standard
gearing has been calculated as net debt divided by the sum of net equity and net debt
five year summary
severn trent plc 
annual report and accounts 2005 75 information for shareholders 76
severn trent plc 
annual report and accounts 2005
shareholder enquiries
if you have a question about your
shareholding in the company you should
contact our registrars lloyds tsb registrars
who are responsible for making dividend
payments and updating the register of
shareholders including details of changes 
to names and addresses you should also
contact the registrars if you would like 
to have your dividends paid directly into 
your bank or building society account
the registrars contact details are
telephone helpline 0870 600 3967
lloyds tsb registrars the causeway
worthing west sussex bn99 6da
online communication
shareview is operated by lloyds tsb
registrars and gives you access to services
over the internet that enable you to check
details of your shareholding at any time 
to register for the service please go to
wwwshareviewcouk
shareholders can also elect to receive
communications from the company
electronically if you do you will receive an
email notification when the annual report
and notice of annual general meeting
become available on our website to register
for this service please contact lloyds tsb
registrars
company information
the company’s website at
wwwseverntrentcom provides news and
details of the company’s activities latest
results information on the share price 
and links to our businesses’ websites 
financial calendar and results announcements
annual general meeting
at the international convention centre 26 july 2005 
broad street birmingham b1 2ea at 1100am 
dividend payments in respect of the year 
ended 31 march 2005
interim dividend paid 6 april 2005 
proposed final dividend payable 31 august 2005
the results of the group will normally 
be published at the following times
interim results for the six months to 30 september december
preliminary results for the year to 31 march june
report and accounts for the year to 31 march june
analysis of shareholdings at 31 march 2005
number
number of  of of shares 
category shareholders shareholders million of shares
individual and joint accounts 85568 9229 441 1275
other 7147 771 3019 8725
total 92715 10000 3460 10000
number
number of  of of shares 
size of holding shareholders shareholders million of shares
1499 55365 597 108 31
500999 21487 232 147 43
10004999 14398 155 225 65
50009999 491 05 32 09
1000049999 467 05 101 29
5000099999 151 02 103 30
over 100000 356 04 2744 793
total 92715 1000 3460 1000
 includes insurance companies nominee companies banks pension funds other corporate bodies 
limited and public limited companies
cautionary statement 
this document contains certain ‘forward
looking statements’ with respect to severn
trent’s financial condition results of
operations and business and certain of
severn trent’s plans and objectives with
respect to these items 
forwardlooking statements are sometimes
but not always identified by their use of a
date in the future or such words as
‘anticipates’ ‘aims’ ‘due’ ‘could’ ‘may’
‘should’ ‘expects’ ‘believes’ ‘intends’
‘plans’ ‘targets’ ‘goal’ or ‘estimates’ by their
very nature forwardlooking statements are
inherently unpredictable speculative and
involve risk and uncertainty because they
relate to events and depend on
circumstances that will occur in the future
there are a number of factors that could
cause actual results and developments to
differ materially from those expressed or
implied by these forwardlooking statements
these factors include but are not limited to
changes in the 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
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 this is severn trent 
severn trent plc is a leading
provider of water waste and
environmental services
we are determined to ensure that customers get the benefit
of high quality and cost effective services while investors
receive an appropriate return
firmly embedded in our corporate strategy is a commitment to
corporate responsibility particularly health and safety and
environmental performance 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 review of operations – water and
sewerage
10 review of operations – waste management
14 review of operations – laboratories
16 review of operations – water purification
and operating services
18 review of operations – other businesses
19 review of operations – corporate
responsibility
22 financial review
24 board of directors
26 directors’ report
32 remuneration report
40 directors’ responsibilities in relation 
to the financial statements
41 independent auditors’ report to 
the members of severn trent plc
42 group profit and loss account
43 balance sheets
44 group cash flow statement
44 reconciliation of net cash flow 
to movement in net debt
45 statement of total recognised 
gains and losses
45 reconciliation of movements 
in shareholders’ funds
46 notes to the financial statements
75 five year summary
76 information for shareholders annual report and accounts 2005
for more information about severn trent plc and its businesses
see our website wwwseverntrentcom
this document is printed by st ives westerham press on mohawk options 100 pc supplied
by paper resources ltd the paper is manufactured in accordance with fsc standards from
100 postconsumer recycled waste and only wind energy is used during the papermaking
designed and produced by tayburn
severn trent plc registered office 2297 coventry road birmingham b26 3pu
telephone 44 0121 722 4000 registered number 2366619
severn trent plc annual report and accounts 2005 annual review 2005
for more information about severn trent plc and its businesses
see our website wwwseverntrentcom
this document is printed by st ives westerham press on mohawk options 100 pc supplied
by paper resources ltd the paper is manufactured in accordance with fsc standards from
100 postconsumer recycled waste and only wind energy is used during the papermaking
designed and produced by tayburn
severn trent plc registered office 2297 coventry road birmingham b26 3pu
telephone 44 0121 722 4000 registered number 2366619 this is severn trent 
severn trent plc is a leading
provider of water waste and
environmental services
we are determined to ensure that customers get the benefit
of high quality and cost effective services while investors
receive an appropriate return
firmly embedded in our corporate strategy is a commitment to
corporate responsibility particularly health and safety and
environmental performance 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 review of operations – water and
sewerage
10 review of operations – waste management
14 review of operations – laboratories
16 review of operations – water purification
and operating services
18 review of operations – other businesses
19 review of operations – corporate
responsibility
22 financial review
24 board of directors
26 independent auditors’ statement
26 summary directors’ report
28 summary group profit and loss account
29 summary group balance sheet
29 summary group cash flow statement
30 summary remuneration report
33 information for shareholders
information for shareholders
severn trent plc 
annual review 2005 33
financial calendar and results announcements
annual general meeting
at the international convention centre 26 july 2005 
broad street birmingham b1 2ea at 1100am 
dividend payments in respect of the year 
ended 31 march 2005
interim dividend paid 6 april 2005 
proposed final dividend payable 31 august 2005
the results of the group will normally 
be published at the following times
interim results for the six months to 30 september december
preliminary results for the year to 31 march june
report and accounts for the year to 31 march june
analysis of shareholdings at 31 march 2005
number
number of  of of shares 
category shareholders shareholders million of shares
individual and joint accounts 85568 9229 441 1275
other 7147 771 3019 8725
total 92715 10000 3460 10000
number
number of  of of shares 
size of holding shareholders shareholders million of shares
1499 55365 597 108 31
500999 21487 232 147 43
10004999 14398 155 225 65
50009999 491 05 32 09
1000049999 467 05 101 29
5000099999 151 02 103 30
over 100000 356 04 2744 793
total 92715 1000 3460 1000
 includes insurance companies nominee companies banks pension funds other corporate bodies 
limited and public limited companies
cautionary statement 
this document contains certain ‘forward
looking statements’ with respect to severn
trent’s financial condition results of
operations and business and certain 
of severn trent’s plans and objectives 
with respect to these items 
forwardlooking statements are sometimes
but not always identified by their use of 
a date in the future or such words as
‘anticipates’ ‘aims’ ‘due’ ‘could’ ‘may’
‘should’ ‘expects’ ‘believes’ ‘intends’
‘plans’ ‘targets’ ‘goal’ or ‘estimates’ by 
their very nature forwardlooking statements
are inherently unpredictable speculative 
and involve risk and uncertainty because
they relate to events and depend on
circumstances that will occur in the future
there are a number of factors that could
cause actual results and developments to
differ materially from those expressed or
implied by these forwardlooking statements
these factors include but are not limited to
changes in the 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
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
shareholder enquiries
if you have a question about your
shareholding in the company you should
contact our registrars lloyds tsb registrars
who are responsible for making dividend
payments and updating the register of
shareholders including details of changes 
to addresses and names you should also
contact the registrars if you would like 
to have your dividends paid directly into 
your bank or building society account
the registrars contact details are
telephone helpline 0870 600 3967
lloyds tsb registrars the causeway
worthing west sussex bn99 6da
online communication
shareview is operated by lloyds tsb
registrars and gives you access to services
over the internet that enable you to check
details of your shareholding at any time 
to register for the service please go to
wwwshareviewcouk
shareholders can also elect to receive
communications from the company
electronically if you do you will receive an
email notification when the annual report
and notice of annual general meeting
become available on our website to register
for this service please contact lloyds tsb
registrars
company information
the company’s website at
wwwseverntrentcom provides news and
details of the company’s activities latest
results information on the share price 
and links to our businesses’ websites  20812
20151
18520
17943
16816 01
02
03
04
05
group turnover 
£m
2321
2428
2333
2217 01
02
03
04
05
group profit before tax 
and exceptional items 
£m
2252
556
614
632
610 01
02
03
04
05
earnings per share 
before exceptional items 
and deferred tax 
pence
581
4851
4704
4590
4500 01
02
03
04
05
dividends per share 
pence
4590
group turnover
up 33 to 
£2081m
group profit 
before interest tax goodwill 
amortisation and exceptional items

down 05 at 
£4386m
goodwill amortisation £301 million 
and net exceptional charge of £148 million
earnings per share
before exceptional 
items and deferred tax 
556p
dividend
final dividend 
of 3030p bringing 
the total for the 
year to 4851p
an exceptional charge of £148 million in 20042005 comprises a profit of £76 million on disposal of fixed assets a net loss on sale and termination of operations of £94 million and 
a charge of £130 million relating to restructuring
an exceptional credit of £116 million in 20032004 comprised 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
financial highlights
severn trent plc 
annual review 2005 01
2005 2004  change
turnover £m 2081 2015 33
profit before interest pre goodwill and exceptionals £m 439 441 05
profit before interest pre exceptionals £m 409 411 06
profit before interest post exceptionals £m 394 422 68
profit before tax pre goodwill and exceptionals £m 262 273 38
profit before tax pre exceptionals £m 232 243 44
profit before tax post exceptionals £m 217 254 146
earnings per share pre exceptionals and deferred tax p 556 614 94
earnings per share post exceptionals and deferred tax p 403 535 247
gearing  568 554 25
final dividend p 3030 2927 35
interim dividend p 1821 1777 25
total dividend for the year p 4851 4704 31 chairman’s statement 02
severn trent plc 
annual review 2005
business performance
we announced in january 2005 that severn
trent water would accept ofwat’s final price
determination for 20052010 this is the
single most important event for the group 
in 20042005
ofwat’s final amp4 determination allows
severn trent water to raise prices by 24
before inflation equivalent to around £53 
per property over the five year period even
after this rise severn trent water’s average
household bills will remain among the lowest
in its sector
the efficiency targets set by ofwat are
extremely challenging the determination
includes a reduction in the allowance for
capital maintenance costs particularly in
respect of mains renewal and a reduction 
in the costs allowed for alternative sludge
disposal methods the determination includes
sufficient costs to fund only half of severn
trent water’s pension deficit
in addition there remain other areas 
such as electricity costs business rates and
operational areas where the determination
allows for smaller cost increases than are
forecast in the company plan
severn trent water is already performing 
at or close to ofwat’s operating and capital
efficiency frontiers we want to continue this
so plans are being put in place to maintain
severn trent water as one of the most efficient
companies in the water sector in terms of
both operating costs and capital investment
we are determined to improve our
performance to meet all these challenges
while much of our management focus has
been concerned with the ofwat determination
we have continued to develop our waste
management company biffa into a leading
integrated waste management company
we have achieved scale in the important
industrialcommercial collection area where
we are the largest uk operator we have
control over disposal through having a large
landfill operation probably joint second in
terms of void space together with a number
of strategic alliances to take recovered
materials we have excellent special waste
capabilities through our treatment centres
no other company has these combined
strengths in the uk
new legislation and increased landfill tax will
impact on all aspects of biffa’s business but
changes in legislation also create new
business opportunities in pretreatment
special waste and integrated waste
management with the hales integration now
complete biffa is in a good position to
maximise these opportunities and to develop
good organic growth going forward
severn trent laboratories the world’s
leading environmental testing company has
experienced extremely challenging market
conditions in the us
legislation and public concern will drive the
growth of markets like indoor air quality food
microbiology endocrine disrupters and
perchlorate testing stl has put in place the
expertise and facilities to keep it at the
forefront of these and other emerging
markets
the water purification and operating services
business continues to perform well head
quartered in the us it supplies technology and
expertise to private and public sector clients
all over the world the water purification
market will continue to grow and our strong
market position and brand recognition will
enable us to compete vigorously
this business exploits technology and
capability from our uk water expertise so is
attractive to severn trent going forward
corporate responsibility
severn trent was named as the leading utility
in the dow jones sustainability index for the
fourth consecutive year this is the first time
severn trent produced satisfactory results overall in
20042005 excluding the impact of exchange rates
turnover rose in all the main businesses of water and
sewerage waste management laboratories and water
purification and operating services that any utility has won this category four
times in a row
severn trent’s award was made after 
an assessment of the quality of our
management and performance in terms of
integrating economic environmental and
social considerations into business strategies
while continuing to enhance competitiveness
and brand reputation
our businesses are one of the uk’s largest
managers of ‘renewable carbon’ which is
biodegradable waste and sewage sludge 
that can be utilised to generate renewable
electricity we handle approximately 12 
of the uk’s waste renewable carbon
excluding agriculture
in 20042005 we generated around 690
gwh of renewable electricity which equates
to 5 of the uk’s renewable electricity
group results 
overall the severn trent group has delivered
a satisfactory performance in 20042005
with group profit before tax goodwill
amortisation and exceptional items at £2622
million a decrease of 38 after incremental
pension charges of £313 million group
profit before tax and exceptional items was
£2321 million £2428 million and group
profit before tax was £2173 million 
£2544 million
the board is proposing a final dividend of
3030p 2927p to be paid on 31 august
2005 this would give a total dividend for 
the year of 4851p an increase of 31
management and staff
as you know i succeeded david arculus as
chairman of severn trent plc on 1 january
2005 i am delighted to take up my role as
chairman as i regard severn trent as one of
the best managed companies in the utility
sector
john banyard executive director of severn
trent water with responsibility for asset
management also retired at the end of
december 2004 we thank him for 
38 years of service and wish him well 
he certainly deserves his obe for services 
to the water industry and to engineering
i am extremely grateful to martin flower senior
independent nonexecutive director who
agreed to become deputy chairman from 6
july 2004 to ensure continuity on the board
and support for our new management team
colin matthews arrived in september 2004
as acting managing director of severn trent
water and took over as group chief executive
on 1 february 2005 on the retirement of
robert walker
colin’s wide experience with america’s
general electric company british airways
transco and hays means we have appointed
a first class individual with an engineering
and operational background who can build
on the success of our businesses we are
fortunate to have him lead our group
as indeed we are with tony wray who joined
the board as managing director of severn
trent water on 7 march 2005 from eircom
having been previously director asset
management and then national operations
director transco
we also welcomed rachel brydon jannetta
and mark wilson to the board in september
2004 rachel is president and ceo of severn
trent laboratories based in the us mark is
group finance director having been finance
and regulation director in severn trent
water
since my appointment as chairman we have
carried out a rigorous board effectiveness
review with the help of independent
consultants which has generated a number
of actions to secure improvements to board
performance
although i am relatively new to severn trent 
i have discovered already that there is a
dedicated and highly trained staff whose
hard work and commitment ensures we 
have the ability to achieve our objectives
outlook
the finalisation of the amp4 determination
provides greater certainty for severn trent
water going forward and sets challenging 
but clear financial and service targets which
the company is well positioned to deliver
biffa anticipates organic growth within 
the competitive waste sector in the uk 
as a result of its technology its scale and
through new opportunities driven by waste
legislation reduced federal spending on 
the environment is expected to continue the
difficult market conditions for laboratories 
in the us in 20052006 the uk market 
for laboratories is expected to remain 
strong the services business is expected 
to continue to grow in line with favourable
market conditions
the objective over the next five years is to
ensure customers in the group’s regulated
and nonregulated businesses get the
benefits of high quality and cost effective
services while ensuring that investors receive
an appropriate return
the board of severn trent plc intends to
maintain as a minimum group dividends 
in real terms at least up to 20092010 
our shareholders can be confident in this 
as a dividend ‘floor’ for the next five years 
our objective is of course to do better 
with real growth over the amp4 period
sir john egan
chairman
severn trent plc 
annual review 2005 03 group chief executive’s review 04
my team and i are highly focused on improving
operational performance indeed we are already
analysing and scrutinising all our businesses in
greater detail both to ensure continual improvement
but also to be certain we can demonstrate their value
to the group as a whole going forward
severn trent plc 
annual review 2005
severn trent is a successful group 
with tremendous strengths and great
opportunities – that is my clear conclusion
after four months as group chief executive
and nine months as an executive director
for five months from september 2004 
i focused exclusively on severn trent water
which after all accounts for around 77 
of our profits since becoming group ceo 
i have been immersed in all the businesses
in the group
as a result i am able now to lay out the two
top priorities for our company both of which
are operational
the first is to deliver and hopefully beat the
operational performance required by the
regulatory settlement for severn trent water
from 20052010
the second is to build on our waste company’s
operational success story by refocusing on
organic growth and return on investment
improving operational performance goes
hand in hand with improving financial
performance there is a false argument
which implies that the way to achieve cost
reduction is to cut corners and reduce
standards i believe the opposite the way to
secure cost reduction is to raise professional
standards across the whole organisation
however good we become in health and
safety quality or environmental performance
we must always have an ambition to get
better as we get the processes in place to
raise these professional standards then our
financial performance will also improve
health and safety
we have established three key health and
safety principles for all employees
 if a job cannot be done safely don’t do it
 always look for safety hazards
 never ignore a safety hazard fix it or
report it
i deeply regret to report one employee
fatality this year where a biffa refuse collector
was hit by a reversing vehicle as with any
serious accident we have undertaken a
rigorous investigation and audit to reduce
the possibility of this or any similar incident
happening in future
overall the group recorded a riddor
reportable incident rate of 2293 per 
1000 employees this represents a 4
improvement rate on last year’s figure 
we are looking to accelerate the rate of
improvement in this and future years
water and sewerage
in 20042005 we completed the amp3
programme reaching the ofwat targets and
outperforming them in many cases we were
among the leading water and sewerage
companies in ofwat’s overall performance
and relative efficiency assessments
the challenge now is to at least deliver 
the performance required by the price
determination agreed in january 2005 
we have already streamlined the top
management structure to achieve a
shortening of the lines of communication
from the top to the bottom to continue to
drive efficiencies through the organisation
operational efficiencies will be achieved in
the following ways 
headcount reduction we cannot deliver
operational efficiencies without reducing
employee numbers within the group largely
through improved technology there are
three particular areas in which we continue to
invest replacing back office systems around
financing and purchasing continuing to
upgrade our customer interface systems and
maintaining but also improving our capability
to manage our remote sites automatically
overheads we can reduce our property
costs by consolidating office accommodation
and depots procurement we are reducing the number
of suppliers and working with them in a
more intense and collaborative way taking
cost out of the total system and sharing the
benefits with them this is in contrast to
expending more energy in determining who
pays than in reducing cost 
our capital expenditure amounts to a total of
£26 billion over the five year period there
are some 900 significant projects a huge
programme for us to manage we are looking
to work with 20 named key contractors
reduced from 50 in the past
we shall
 standardise designs as far as we can 
not just whole plants but also elements
within the plants
 invest in preparation work in order to
reduce the cost of the delivery
 ensure good discipline around ‘design
freeze’ and establish target pricing
we are also looking to make sure that our
suppliers are incentivised financially to drive
for continuous improvement and that they
like us are motivated on an “rpi minus”
type incentive arrangement 
other industries have already demonstrated
the value of implementing these procurement
principles
waste management
biffa’s growth represents a real success story
in terms of acquiring uk waste then hales
and successfully integrating them equally
the marketplace in which biffa has been
operating has been flat overall and the bulk
of biffa’s recent growth has been from the
acquisition of hales therefore the question
of organic growth is important
we believe that the myriad of regulatory
developments which are scheduled year in
year out for the next five years are going to
drive opportunities for revenue growth this
is a marketplace which is going to favour the
bigger players in this industry and we are
determined to benefit
biffa’s management achieved healthy organic
turnover growth throughout the 1990s more
recently the uk waste and hales acquisitions
have accounted for a more substantial part
of biffa’s turnover growth that is why the
two key challenges for us within biffa are to
reestablish a focus on organic growth and 
to improve the return on investment
laboratories
the business in the us operated in a difficult
market last year there has been a significant
reduction in return on total investment in the
course of the year which we must confront
one particularly key initiative is to replace 
a number of laboratory information
management systems with a single standard
system that covers the whole network
customers buy not simply tests but also 
data customers want that data with faster
turn round times and standardised reporting 
and they want to be able to transfer and 
use data in their own systems having
different it systems in our laboratories 
is an impediment to exploiting our scale 
the first five laboratories already have 
the new system up and running and it is
currently being debugged it will be rolled 
out to the others in the course of the next 
12 months in 20062007 we expect to 
see significant operational improvements 
from this new system
water purification and operating services
this business includes the water purification
business the contract operations business
severn trent water international and the
smaller metering services and pipeline
services businesses
the simplification of these activities in recent
years has stabilised the business and in the
last couple of years we have seen a gradual
improvement in returns although this is of 
a modest scale this is a business which is
closely related to water in the uk it exploits
our  technology and capability and from a
stable base is now back on a growing and
improving trend
severn trent water international which
provides management and consultancy
services in europe and the developing world
was awarded an exciting 25 year pfi contract
worth approximately £1 billion with costain
this groundbreaking deal for the provision of
water and wastewater services to mod sites
in england is now up and running
other businesses
we will take the opportunities that we can to
restructure some of our smaller businesses
to make sure that we are focused on doing
the right thing for our main business activities
we are scaling down our engineering
consultancy charles haswell and merging 
it into the water business all of their skill 
is now devoted to severn trent water and 
we are no longer pursuing external contracts
our severn trent water international interest
in portugal has been sold and we are
restructuring severn trent systems so 
we can focus on our inhouse it needs 
whilst satisfying our existing obligations 
to our client base
outlook
my team and i are highly focused on
improving operational performance indeed
we are already analysing and scrutinising 
all our businesses in greater detail both to
ensure continual improvement but also to 
be certain we can demonstrate their value 
to the group as a whole going forward
colin matthews
group chief executive
turnover by business
 of group total in 20042005
5
4
3
2
1
1water 47£10151m
2waste 32£6963m
3laboratories 7£1626m
4 water purification and 
operating services 10 £2081m
5 other 4 £868m
severn trent plc 
annual review 2005 05 severn trent water
severn trent water provides water and sewerage services to around 37 million
household and business properties in england and wales it employs over 5000
people in the midlands region industry regulators have recognised it as one of
the leading companies in its sector in terms of water quality efficiency and
overall performance it also has a strong track record on customer service 
key strengths
 track record of outperforming regulatory
contract
 good performance in ofwat efficiency 
and performance assessments
 drinking and wastewater quality
consistently above average
 excellent record in biodiversity community
relations and employment practices
outlook
the efficiency targets ofwat set severn 
trent water for amp4 are extremely testing
however our overall efficiency has been
assessed by ofwat as above average and we
are confident about our ability to meet the
regulatory targets and amp4 obligations 
we will continue to supply high quality 
water and sewerage services to domestic 
and business customers while delivering
appropriate returns to investors
review of operations water and sewerage 06
severn trent plc 
annual review 2005 
find out more
more information on severn trent water is available on our
website wwwstwatercouk
the site includes more detailed information about severn trent
water’s plans for the 20052010 amp4 programme
details of severn trent’s amp3 performance and amp4 obligations
and targets can also be found on wwwofwatgovuk and
wwwdwigovuk
 turnover up 61 to £10151m £9567m
 amp3 regulatory outputs delivered
 high levels of performance for customer service
water and wastewater quality
amp4 sets the scene for 20052010
december 2004 brought the final determination of
ofwat’s amp4 price review for 20052010 it was the
culmination of a long process that involved almost
every department in the company
ofwat’s final amp4 determination allowed
severn trent water to raise prices by 24
before inflation equivalent to around £53 per
property over the period even after this rise
severn trent water’s average household bills
will remain among the lowest in its sector
although the determination was lower than
the amount asked for it will enable severn
trent water to maintain the high levels of
customer service water quality and
environmental compliance achieved over the
last five years in recognition of our previous
performance we were given an incentive
reward of 01 we are also one of only two
water and sewerage companies to have
qualified for an enhanced incentive at the
2009 price review in all of ofwat’s efficiency 
assessments this is intended to encourage
top performing companies to continue
improving in future it will allow us to meet
new environmental standards and to make
improvements such as reducing sewer
flooding and improving the taste and odour
of drinking water in specific areas the
investment programme will cost some 
£26 billion and equates to around £720 
for every household
the efficiency targets set by ofwat were
stringent despite the fact severn trent is
performing at or close to ofwat’s operating
and capital efficiency frontiers as part of the
organisational changes necessary to meet
these targets the company will have to cut
300350 jobs over two years 
regulatory review
above
upgrading sewerage infrastructure
main image
terry welch severn trent water
severn trent plc 
annual review 2005 07 review of operations water and sewerage 08
severn trent plc 
annual review 2005
severn trent invested more than £2 billion in 
20002005 our programme of work included 
some 9000 individual projects and jobs all 
with the aim of ensuring high quality water 
and wastewater throughout our region 
performance
severn trent water performed strongly 
in 20042005 and exceeded its financial
targets for the year turnover from water 
and sewerage increased by 61 to £10151
million the allowed increase in charges for
20042005 was 47 including inflation
profit before interest tax goodwill
amortisation and exceptional items rose by
06 to £3399 million after incremental
pension charges of £217 million profit
before interest and tax was £3345 million
£3564 million
completing the 20002005 contract
in 20042005 we completed the amp3
programme reaching the ofwat targets 
and outperforming them in many cases we
were among the leading water and sewerage
companies in ofwat’s overall performance
and relative efficiency assessments
direct operating costs in 20042005 rose by
£418 million to £4201 million this increase
arose from the completion of the amp3
programme and from incremental pension
charges the rise was partially offset by
operating cost efficiencies in real terms 
the increase was £297 million after the
pension charges or £80 million before
pension charges 
in 20042005 we invested some £452 million
we continued to deliver efficiencies against
the £2 billion investment programme for
20002005 over the amp3 period we
achieved average capex efficiencies of
around 5 measured against the retail
prices index or around 13 measured
against the construction output price index 
in 2003 ofwat and severn trent agreed new
leakage targets of 505mld for march 2005
and we put in place a programme on leakage
control and monitoring to realise this we 
will continue with our programme of mains
replacement and active leakage detection 
in amp4 to improve our leakage figures
serving our customers
research undertaken by severn trent water
in association with several industry bodies
shows that customers’ main priorities are 
a consistent supply of clean safe water 
and safe reliable drainage among the
headline projects we embarked on or
completed in 20042005 in order to 
achieve that were schemes to protect the
quality of drinking water from boreholes
schemes to prevent sewer flooding projects
to improve cryptosporidium removal at water
treatment works and phosphorus removal
schemes at a number of sewage works
our enhanced water treatment process 
won a prestigious industry award in 2004
which recognised both the technical
achievement of the project and the 
way it was implemented
severn trent water believes that the way 
we work with customers and not just the
quality of services we provide is important
we continued work on two major it projects
in 20042005 the first target is a more
effective billing system that makes processes
such as changing details when moving
house for example much easier for
customers more than two million customers
were switched to this system in 20042005
the second ice or improved customer
experience is a process management
application designed to improve customers’
experience when they deal with our call
centres we made good progress on rolling
out ice in 20042005 and will continue 
the process in 20052006
above
filter maintenance wanlip sewage treatment works below
combined heat and power units 
minworth sewage treatment works
corporate responsibility
severn trent water contributes positively to
the communities in our region we support
hundreds of projects all with a sustainability
agenda and many with an educational focus
as well as teaching children about the water
cycle our educational work in 20042005
promoted the benefits of drinking water
we launched a five year biodiversity plan in
1999 and achieved virtually all the targets 
by 2004 we have now launched a revised
action plan for 20042010 we are one of
seven organisations taking part in the pilot 
of a new biodiversity benchmarking scheme
created by the wildlife trusts
energy management is another important
aspect of our environmental agenda severn
trent water has installed combined heat and
power chp units at around 30 sewage works
which increased our total generation capacity
to 27mw in 20042005
we actively promote equality and welcome
diversity in all aspects of our business and
encourage employees to seek a good work
life balance in march 2005 severn trent
water was named as one of the top ten big
companies to work for in the uk in a
nationwide survey by the sunday times
newspaper 
health and safety is the core of our
obligations to our employees customers and
the communities where we work over the
past two years we have instilled a strong
management focus on improving our health
and safety record in 20042005 there was 
a 24 reduction in reportable incidents 
a number of severn trent water’s facilities
won british safety council fivestar awards 
in 20042005 
we support the charity wateraid in order to
help people worldwide gain access to safe
water and sanitation severn trent water 
worked with wateraid and central tv on a
project to take three young reporters to
ethiopia their experiences were screened 
on nightly news bulletins to give viewers an
insight into life without the clean water and
sanitation that the uk takes for granted
outlook
with the amp3 process concluded severn
trent water can focus on ensuring that we
deliver the new contract although the targets
set in amp4 are challenging we have a
strong track record on efficiency cost control
productivity and customer service we 
are confident that we can maintain and 
in some cases improve on this record 
while continuing to deliver good returns 
to investors
autumn 2005 sees the introduction of 
the new competition regime for business
customers using more than 50 megalitres 
of water a year we have good relationships
with business customers in our region 
and are well placed to retain our business
accounts we also believe we have the
potential to win new national accounts and
customers outside our region there are
good opportunities in this field and we 
have put in place the necessary systems 
for operating in the new regime
profit 
before interest tax goodwill 
amortisation and exceptional items

up 06 at
£3399m
goodwill amortisation nil and 
exceptional charges of £54 million
severn trent plc 
annual review 2005 09 biffa 
biffa is one of the largest integrated waste management companies in 
the uk it provides collection landfill and special waste services to over 
90000 commercialindustrial customers and almost one million households 
through its local authority contracts biffa’s infrastructure includes the 
operation of over 30 landfill sites 13 special waste treatment facilities 
and a collection fleet of over 1650 specialist vehicles the company 
employs over 5000 people in the uk and belgium
outlook
new legislation and increased landfill tax 
will impact on all aspects of our business
but changes in legislation also create new
business opportunities in pretreatment
special waste and integrated waste
management with the hales integration 
now complete biffa is in a good position 
to maximise those opportunities and to
achieve good organic growth in 20052006
key strengths
 high quality it infrastructure delivers
efficiencies and customer service
 modern specialist fleet with high levels 
of fuel and operational efficiency
 over 30 landfill sites throughout the uk 
all with iso14001 certification
 over one million tonnes of waste recycled
and composted in 20042005 one year
ahead of target
 special waste expertise based on
innovation new technologies and
understanding of new legislation
review of operations waste management 10
severn trent plc 
annual review 2005  turnover up 100 to £6963m £6331m
 turnover from collection up 93 
landfill up 99 special waste up 116 
and belgium up 128
 strong it infrastructure delivering synergies 
and efficiencies
raising the bar in health and safety performance
biffa’s goal is to be a leader in health and safety in
the waste industry and a benchmark for others our
aim is to ensure the safety of everyone who comes
into contact with our operations – whether they are
employees customers contractors or members of
the public
culture change

find out more
more information on biffa is available at wwwbiffacouk
details of biffaward the landfill tax credit scheme 
can be found at wwwbiffawardorg
the waste industry has traditionally had a
poor record on health and safety compared
with many other industries biffa is
determined to improve on this record
in 2002 we launched a companywide
culture change programme to promote and
improve health and safety across all our
divisions regular workshops which include
employees from all our different business
functions are held to discuss the importance
of health and safety these have proved
highly effective in identifying potentially
dangerous practices and in spreading the
key messages of the programme ‘if we can’t
manage the risk we don’t do it’ and ‘think
what if not if only’ employees are continually
encouraged to question their behaviour and
attitudes towards health and safety issues 
other initiatives in 20042005 include
introducing new personal protective
equipment and uniforms installing new
hardware such as reversingaid cameras 
to our fleet providing manual handling
training across the whole organisation 
and holding a health and safety 
awareness week
one of the real benefits of the culture change
programme is that our employees across all
operational and support functions are given
the opportunity to make suggestions to
improve health and safety the results of our
various culture change programme initiatives
are evident
following the british safety councils audit of
the companys locations biffas performance
was very highly rated with six uk locations
achieving four star ratings 
recognition has also been achieved with the
recent award of ohsas 18001 certification
occupational health and safety audit
covering health and safety performance 
in the fleet workshops
above
manual handling training provided for all
employees 
main image
gavin george biffa 
severn trent plc 
annual review 2005 11 review of operations waste management 12
severn trent plc 
annual review 2005
biffa achieved a good performance in
20042005 following the acquisition of
hales waste control in 20032004 we
completed the integration of that business
ahead of schedule and realised the planned
synergies from the deal
in addition to the hales integration three
other themes ran through the business a
drive to make biffa the health and safety
leader in its industry legislation and the
upgrading of our it capabilities
in terms of legislation european directives
such as the landfill directive road transport
directive and hazardous waste regulations
directive are having a fundamental effect on
the way we run our business we are on track
in our preparations for these directives and
ready for the opportunities they create
the it programme had two aspects in our
collection fleet we installed incab technology
linked directly to our it network as well as
improving our operational efficiency and
customer service this technology helped us
win important new municipal contracts we
also upgraded our mainframe capabilities
ensuring greater it security and business
continuity
performance
turnover for waste management increased
by 100 in 20042005 to £6963 million
turnover in the uk was £6295 million up
97 on the previous financial year turnover
in belgium was £668 million up 128
biffa’s profit before interest tax goodwill
amortisation and exceptional items increased
by 53 to £834 million or 105 before
incremental pension charges of £41 million
goodwill amortisation was £229 million
£213 million profit before interest and 
tax was £605 million £470 million
there were no further costs for the
integration of hales in 20042005 and the
planned annualised synergies of £75 million
are being delivered 
collection
biffa’s collection division works with
industrialcommercial customers and 
local authorities across the uk 
the division won a number of large new
commercialindustrial accounts in the
municipal sector the securing of new
contracts and the extension of existing
contracts brought the total of municipal
contracts now managed to 50 they included
important new sevenyear contracts in the
london boroughs of wandsworth and
havering the division also rewon contracts
in swale kent tandridge and west
berkshire evidence of previous good
performance 
biffa continued to invest in new facilities and
depot upgrades in 20042005 new facilities
were set up in south shields middlesbrough
st albans southampton and bridlington
unfortunately in june 2004 a fire caused
serious damage to the new bursom recycling
plant built as part of the £300 million
integrated waste management contract with
leicester city council the plant is now back
in operation and the technology is the only
one of its kind in the uk
overall in the collection division turnover
increased to £3942 million £3606 million
profit before interest tax goodwill amortisation
and exceptional charges was £540 million
up 47 on the previous year 
landfill
biffa operates more than 30 landfill sites 
in the uk the landfill division as a whole
received the iso 14001 environmental
management certification in 20042005 
the division made good progress on
compliance with the implementation 
of the landfill directive for example biffa
continued the process of obtaining pollution
prevention and control ppc permits and
11 of the 38 permits applied for had been
obtained by the end of the year
top
cell preparation redhill landfill site
above
specialist collection vehicle
profit 
before interest tax goodwill 
amortisation and exceptional items

up 53 at
£834m
goodwill amortisation £229 million 
and exceptional items of nil in august 2004 biffa completed its integration 
of the hales waste control business well ahead 
of schedule all planned synergies from bringing
together the biffa and hales businesses were
delivered and there were no further integration 
costs in 20042005
outlook
legislation will continue to provide both
challenges and opportunities the landfill
directive and increases in landfill tax from
april 2005 will stimulate demand for
alternatives to landfill but our pretreatment
recycling and special waste activities will
benefit from that we believe that the market
already recognises our strengths in those
areas and we are positive about prospects
for the year ahead
below
wastesafe secure transportation 
of hazardous waste materials
the landfill directive also created new
business openings biffa implemented 
four stable nonreactive cells for asbestos
disposal in key strategic areas it also formed
a strategic partnership with a canadian
company biogenie to remove and treat
contaminated soil from brownfield
construction sites 
in 20042005 the effect of the landfill
directive on business volumes was limited
indeed in the first months of the year 
the division benefited from an increase of
higher margin contaminated waste work 
in the run up to implementation of the
landfill england and wales regulations 
in july 2004 
turnover for the division was up 99 
to £1793 million profit before interest tax
goodwill amortisation and exceptional items
rose by 138 to £387 million £340 million
landfill volumes were up 5 overall unit
revenues excluding landfill tax were up by 5
special waste
the special waste division works with
customers in many sectors to manage
hazardous waste materials services include
packaged waste services like hazpak waste
safe and backtrack which all performed 
well in 20042005 the division also 
leads the company’s integrated waste
management contracts which encompass 
all aspects of biffa’s business – collection
pretreatment recycling and landfill
capabilities as well as its special waste
expertise during 20042005 the integrated
waste management team helped to recycle
over 23000 tonnes of waste for clients
the special waste division also manages
biffa’s power generation activity with new
capacity added at a number of uk sites in
20042005 biffa’s power generation interests
in the uk exceeded 100mw by year end
turnover in special waste was £560 million
in 20042005 up 116 profit before 
interest tax goodwill amortisation 
and exceptional items was £82 million 
£70 million 
belgium
biffa has 11 operational facilities in belgium
as well as contributing to the balance sheet
the business adds value to biffa by providing
experience of operating in a recycling and
recovery culture well in advance of the uk
for example since belgian householders
have greater responsibility for separation 
of wastes lessons can be learned when
developing pretreatment and automatic
sorting facilities in the uk
despite difficult market conditions biffa’s
turnover in belgium was £668 million up
128 profit before interest tax goodwill
amortisation and exceptional items was 
£33 million £32 million 
corporate responsibility
biffa recognises its responsibility to
contribute positively to communities and 
the environment biffaward the company’s
landfill tax credit scheme has distributed
over £70 million to over 800 community 
and environment projects since it was set 
up in 1998 in 20042005 it distributed
approximately £7 million ranging from a
grant to an unemployed workers’ centre to a
project to restore wildlife habitats in the fens
towards the end of the year biffa produced
an awardwinning interactive educational cd
to help primary and secondary schoolchildren
learn about waste and recycling and how
they can ‘do their bit’ to protect the
environment 
biffa continued in its commitment to report
biennially on its environmental performance
but this year extended the report to include
more social issues making this year’s report
its first corporate responsibility report
severn trent plc 
annual review 2005 13 stl 
severn trent laboratories opened eight new service
centres in the us and two in the british isles in
20042005 responding to local market requirements
demand from customers and opportunities for
business growth
key strengths
 market leaders in the us and uk 
 reputation for technical excellence and responsive
customer service 
 record of innovation and being at the forefront 
of new markets 
 client portfolio of leading us and uk companies 
 new service centres extend geographical strength
serving the customer

find out more
more information on severn trent laboratories is available at
wwwstlltdcouk wwwstlinccom wwwqedenvcom and
wwwaerotechpkcom
above
expert analysis in accredited laboratories
review of operations laboratories 14
severn trent plc 
annual review 2005 new indoor air quality iaq testing facilities
were set up within existing laboratories in
florida texas and california to serve the
growing market for iaq and mould testing
the new facilities combined with the
expertise and reputation of our subsidiaries
pk microbiology services and aerotech
create a very strong position in this market
one particularly key initiative is to replace a
number of individual laboratory information
management systems with a single standard
system that covers the whole network 
qed environmental systems
stl’s groundwater sampling equipment
division qed won a 3 million contract 
to supply a major mining and chemicals
company in australia with air stripper 
units which remove vocs volatile organic
compounds this is the largest contract in
qed’s history the air strippers are being
used in a high profile project to remove 
legacy contamination from groundwater
the uk business
market conditions in the uk were much
better than in the us the landfill directive
created new opportunities and we enjoyed
growing demand for contaminated land
testing driven by the development of
brownfield construction sites the service
centres in ireland and scotland performed
strongly winning new analytical contracts
outlook
although we do not expect market conditions
in the us to ease in 20052006 there are
opportunities for growth stl expects to 
carry out increased sediment testing work 
in connection with the initiative to clean up
the great lakes and increased opportunities
in the iaq market and food hygiene markets
are also expected to provide growth stl has
the expertise in place to compete strongly 
in newly emerging market areas such as
testing for endocrine disrupters perchlorate
contamination fragrance allergens and flame
retardants in the uk legislation like the
landfill directive and the water framework
directive will continue to create growth
opportunities 
in the us market conditions were very
challenging in 20042005 as federal funding
for environmental clean up projects was
severely impacted by diversion of funds 
to the military’s activities in iraq and other
overseas locations budget deficits at local
state and national levels also reduced
demand while general enforcement levels 
continue to slow in addition the us
encountered the worst hurricane season 
in over 100 years – stl has six laboratories
in the hurricane belt one in florida was badly
damaged and all six experienced power
outages service disruption and downtime
against this difficult background turnover
was down 44 to £1626 million while profit
before interest tax goodwill amortisation 
and exceptional items was down 309 to
£150 million part of the shrinkage can be
attributed to the effect of the dollar exchange
rate movements but us margins were
severely impacted by pricing pressures
driven by the reduction in demand turnover
was up 19 in the us excluding the impact
of exchange rates and by 64 in the uk
profit before interest and tax was £109
million £177 million
serving the customer
stl’s strategy to combat the current market
challenges in the us and return to growth 
is to focus on service standards and further
develop strengths in high growth and newly
emerging market segments in order to
increase penetration in specific locations 
stl opened eight new service centres in the
us and two in the british isles these service
centres provide convenient local services
such as delivery of sample containers and
related supplies as well as sample collection
and shipping some service centres also offer
project management and limited analytical
capabilities and are complemented by other
value added products such as the webbased
mystl electronic project management system
as well as offering greater convenience to
existing customers these new service centres
brought us closer to new clients in the us
scotland and ireland
profit 
before interest tax goodwill 
amortisation and exceptional items

down 309 at
£150m
goodwill amortisation £41 million 
and exceptional items of nil
top
service centres provide convenient local services
above
soil sampling and confirmation testing of 
stockpiled materials
severn trent plc 
annual review 2005 15 severn trent 
services 
severn trent services continued to invest in technology
and product development in 20042005 that put
them at the forefront of emerging markets ranging
from water purification and contract operations to
water metering and infrastructure projects
key strengths
 strong market position and brand recognition
 strategy focusing on high margin business
opportunities
 continually expanding product and technology base
 emphasis on cost control and operational efficiency
technology and product development

find out more
more information on severn trent services is available at
wwwseverntrentservicescom and wwwstwaterinternationalcom
above
tetra® nitrifying submerged aerated filter nsaf
and deep bed filter dbf crankley point 
review of operations water purification and operating services 16
severn trent plc 
annual review 2005 outlook
the water purification market will continue 
to grow and severn trent services’ strong
market position and brand recognition will
enable us to compete vigorously there are
good growth opportunities in arsenic 
removal and ultrafiltration and ro membrane
products forthcoming legislation like us
regulations on ballast water which come into
effect in 20062007 will create new openings
for our electro chlorination technology
in the us budget deficits have worked 
to the advantage of the contract operations
business with states and municipalities
relying more heavily on publicprivate
partnerships to supply water and waste
treatment services
the outlook for water metering and contract
operations also looks positive the strong
reputation of both businesses will stand us 
in good stead as we pursue new contracts
and market opportunities
severn trent services comprises two
divisions water purification and operating
services the latter includes the contract
operations business seven trent water
international and the smaller metering
services and pipeline services businesses
before the impact of exchange rate
movements there was overall organic 
growth across these businesses profitability
and margins benefited greatly from the
restructuring programme and cost controls
implemented in 20022003 and our strategy
of focusing on higher margin business
turnover decreased by 14 to £2081
million but excluding the impact of exchange
rates turnover increased by 52 profit
before interest tax goodwill amortisation 
and exceptional items was up 165 at
£198 million profit before interest and 
tax was £210 million £138 million
water purification
turnover in the water purification division
decreased by 75 to £767 million this 
was a result of two main factors exchange
movements and lower revenues in the uk
where customers were waiting for the
resolution of the amp4 process before
commissioning new projects excluding 
the impact of exchange rates turnover 
was down by 08 the us side of the
business performed well with turnover 
in us up 41
we continued our work to expand our
product and technology base we extended
our partnership with lanxess formerly part
of bayer ag on our sorb33 system for
removing arsenic from drinking water to
cover the industrial and municipal
wastewater sector as well we were delighted
with this agreement which creates significant
business opportunities
we also entered into a new alliance
collaboration with inge ag to incorporate
their ultrafiltration uf membrane products 
into our ultrafiltration systems throughout
the world inge is known for its leadership
and innovation in this rapidly growing market
so this is an important new relationship
operating services
turnover in the operating services division
was £1314 million up by 25 excluding
the impact of exchange rates turnover was
up by 91
there was good performance across the
business contract operations which carries
out operating and maintenance contracts for
customers in the us decreased its turnover
by 03 to £750 million turnover in us
was up by 88 among the contracts
announced during 20042005 was an eight
year leachate control contract worth 65
million at fresh kills landfill in new york
severn trent water international stwi
which provides management and consultancy
services in europe and the developing world
had an excellent year the uk ministry of
defence awarded a 25 year pfi contract
worth approximately £1 billion to a subsidiary
of stwi called coast to coast water c2c
this groundbreaking deal called project
aquatrine package c is for the provision 
of water and wastewater services to
approximately 1500 mod sites in england
and commenced on 30 march 2005
turnover at stwi was up by 131
the metering services business increased
turnover by 226 it won a 4 million
contract to replace domestic water meters 
in qatar with its smartmeter™ line of meters
this new global water metering product
launched in 20032004 is well suited to the
difficult water conditions in the middle east
so there are good prospects in that market
pipeline services turnover was down by
162 state and federal budget deficits 
in the us mean there is limited investment 
in infrastructure projects 
profit 
before interest tax goodwill 
amortisation and exceptional items

up 165 at
£198m
goodwill amortisation £31 million 
and exceptional credit of £43 million
below
smartmeter™ advanced water metering technology
severn trent plc 
annual review 2005 17 review of operations other businesses 18
severn trent plc 
annual review 2005
total turnover for other businesses
comprising systems property engineering
consultancy and insurance in 20042005 
was £868 million down 410 profit 
before interest tax goodwill amortisation 
and exceptional items was £48 million 
down 127 on the previous year loss
before interest and tax was £89 million
profit £82 million
systems 
the systems group comprises two main
entities aseriti and worksuite aseriti
provides it services and solutions for water
gas and electricity utilities worldwide its
principal product is the cisopen vision cis
customer information and billing system
in australia aseriti’s cis continues to be the
cornerstone application for five major energy
utilities operating in a highly competitive
deregulated market 
in 20042005 aseriti implemented cis 
at severn trent water successfully migrating
the water company’s unmetered customers
the system was used to produce annual 
bills for over 3 million accounts in february
march 2005
during the year aseriti commenced a plan 
to refocus its activities it has curtailed its
operations in the us and in the uk it has
ceased providing it services to external
customers and will limit this work to severn
trent water and other group companies 
it will continue to market cis from the uk
worksuite is the work management business
of the systems group and does much of 
its business in north america the business
made a number of sales to bluechip utilities
in 20042005 and is a market leader in 
its field despite this 20042005 was a
difficult trading year and profits were below
expectations certain licence sales made 
in 20042005 are contingent upon worksuite
client activities and therefore revenue
recognition for these sales will not occur 
until 20052006
property
severn trent property undertook a strategic
review of its activities in 20042005 and
decided to focus on whollyowned sites
rather than expand its joint venture
operations as a result of this decision the
company sold its 51 interest in thorpe
park leeds to its joint venture partners
realising a satisfactory profit the company
has now relinquished all interest in the
thorpe park office park although it retains
interests in peripheral sites
at daventry international rail freight
terminal planning permission has now been
granted for a further 2 million square feet
and work continues on infrastructure design
and costings marketing of the site will begin
in 20052006 with the aim of securing
substantial prelettings before building work
starts in 2006
the tournament fields office scheme at
warwick progressed well during the year the
principal infrastructure has been completed
and marketing of the site is underway
discussions are in hand with a number of
potential occupiers which could lead to
building work starting in 20052006
in birmingham a site of 90 acres owned by
severn trent water has been allocated for
employment use and an outline planning
application has been submitted severn 
trent property is hopeful that consent for
development will be granted shortly which
will lead to the project being taken over by
severn trent property
engineering
charles haswell  partners is severn trent’s
engineering consultancy business providing
expertise in a variety of engineering and
environmental disciplines
haswell made a major contribution to the
successful delivery of severn trent water’s
capital programme for 20042005 it was
also appointed as one of the three consulting
engineers that will work on severn trent
water’s amp4 programme it worked with
yorkshire water as a key member of its
eastern area wastewater capital solution
team and it contributed to the dublin port
tunnel project in ireland its health and
safety management system was certified 
to the ohsas 18001 standard
after a review of the business towards the
end of 20042005 the decision was taken
that the best way forward for haswell was to
limit its work to severn trent water projects
these already accounted for approximately
70 of turnover in 20042005 therefore
once existing projects have been completed
haswell will cease trading with external
clients and it will eventually be absorbed
into severn trent water
insurance
derwent insurance severn trent’s captive
insurer provides insurance cover to severn
trent group companies

find out more
wwwaseriticom
wwwworksuitecom
wwwseverntrentpropertycom
wwwhaswellcouk severn trent is one of the uks leading suppliers of environmental goods and
services we believe this is consistent with sustainable development and with
being a good corporate citizen we also believe that demonstrating corporate
responsibility enhances both the nonfinancial and financial assets of the
company and therefore increases shareholder value
corporate
responsibility 
key strengths
 leading utility in dow jones world
sustainability index for the fourth
consecutive year
 renewable energy generating capacity 
of 131mw
 placed 13th in the guardian’s giving list 
in 2004 the highestranking utility
 strong culture of worklife balance 
training and diversity
 one of first companies in sector to support
the united nations’ global compact
outlook
in 20052006 and beyond severn trent will
continue to promote responsible corporate
behaviour across our businesses we will
work to identify emerging cr issues and
opportunities and we will continue to
anticipate issues that might be raised by 
the socially responsible investment sri
community and other stakeholders 
main image
amanda richards biffa 
review of operations corporate responsibility
severn trent plc 
annual review 2005 19 review of operations corporate responsibility 20
severn trent plc 
annual review 2005
in the face of strong competition severn trent has
been named as the utilities sector leader in the
global dow jones sustainability world index for 
the fourth consecutive year no other utility has
achieved this distinction
embedding cr in our business
severn trent’s policies on corporate
responsibility are steered by our corporate
responsibility committee to reflect the
importance we place on this area the
committee is chaired by the group chief
executive it consists of nonexecutive and
executive directors and includes the managing
directors of the four main businesses
in june 2004 the corporate responsibility
committee absorbed severn trent’s
charitable contributions committee this
enables us to consider charitable giving in
the overall context of our corporate
citizenship and our work with communities
severn trent has a detailed corporate
responsibility policy that defines how our
vision and values on corporate responsibility
are incorporated in our daily activities this
includes a code of conduct which was
revised in 20042005 following extensive
consultations with employees and external
stakeholders
our vision and values
as an environmental services company our
activities are of intrinsic benefit to society
our ability to deliver business success  
and the way in which we deliver it makes 
a significant contribution to building a
sustainable future in the uk and beyond 
as part of our commitment to achieving 
a sustainable future we seek to
 conserve the natural resources that we
manage
 safely dispose of the waste we handle
 maintain the infrastructure necessary 
to sustain our business in the future
 comply with the highest environmental
standards
 provide a safe working environment where
our people are valued and respected
 support the communities in which we live
and work
translating values into practice
in june 2004 we formally expressed our
support for the un global compact and 
were one of the first utility companies in the
uk to do so the compact consists of ten
principles concerning businesses’
responsibilities on human rights labour
policies the environment and anticorruption
our support for the compact reflects our
existing commitment to responsible
environmental and employment practices
but it also represents a broadening of our cr
values to cover human rights issues as part
of this broader commitment we have begun
working in partnership with other utilities to
incorporate human rights criteria into our
supply chain assessments
our support for the principles of the global
compact and for corporate responsibility in
general took many forms in 20042005 and
is evident across our business below we
summarise some of the tangible ways in
which we put our values into practice in
20042005
environment
in 20042005 our work included mitigating
our impact on climate change increasing the
volume of waste handled for recycling by biffa
promoting biodiversity and improving our
supply chain assessments
our work to mitigate our impact on climate
change focuses on both short term and
longer term measures the case study
opposite describes how we generate energy
from our ‘renewable carbon’ resources 
at the same time we continually monitor 
our fuel related transport emissions biffa’s
programme to improve fuel efficiency
includes using ultra low sulphur diesel 
and installing smoke emission meters at
workshops to check that each truck’s engine
is running at optimum efficiency biffa also
have a target to use biodiesel in 50 of fleet
vehicles by april 2006
we continued to work with the carbon 
trust on our carbon management model
this projects a potential greenhouse gas
emissions scenario for 2020 for the group
helping us to target where and how we can
reduce emissions 
both severn trent water and biffa have
biodiversity action plans in place severn
trent water launched its first five year plan 
in 1999 and achieved virtually all the targets
by 2004 it has now launched a revised
action plan for 20042010
workplace
we actively promote equality diversity and
health and safety and encourage employees
to seek a good worklife balance 
the group has a ‘lifestyle’ flexible benefits
scheme for its uk based employees and we
are expanding this year by year
in march 2005 severn trent water was
named as one of the top ten big companies
to work for in the uk in a nationwide survey
by the sunday times newspaper the survey
acknowledged the company’s strengths in
leadership treatment of staff and
contribution to society
we actively promote diversity and business
units have developed their own diversity
strategies and action plans at biffa for
example 400 managers and supervisors 
took part in diversity and equality awareness
training in 20042005 severn trent water
took part in a benchmarking exercise for
race for opportunity a campaign organised
by business in the community it came
runner up in the best newcomer in the
privatepublic sector category
there has also been a strong management
focus on improving health and safety
performance across the group
this year health and safety targets were set
that included the need to undergo a number
of british safety council audits the overall
group target was to achieve an average score
of 35 stars per site the best performers
were severn trent water who were awarded
‘5 stars’ at seven sites and laboratories 
who received a ‘5 star’ award for a site in
the us ‘4 stars’ were awarded to seven sites
operated by biffa and one laboratories site
in the uk these criteria and supported hundreds of
local projects
severn trent is also a leading corporate
supporter of wateraid its support in
20042005 ranged from our annual
corporate donation to sending volunteers 
to wateraid projects in africa to employee
fundraising and awareness initiatives 
education is a strong theme of our
community activities severn trent water
works with children and schools teaching
them about the water cycle and promoting
the benefits of drinking water biffa produced 
an interactive educational cd to teach
schoolchildren how they can do their 
own bit to protect the environment
mitigating our impact on the climate
greenhouse gas emissions are an inevitable result 
of severn trent’s operations but we have rigorous
programmes to measure monitor and mitigate
those emissions 
energy management is an important part of
severn trent’s work to mitigate the impact 
of our operations on the climate as well as
trying to maximise energy efficiency we also
significantly reduce our net greenhouse gas
emissions through renewable electricity
generation 
biffa and severn trent water between them
manage 12 of the uk’s ‘renewable carbon’
excluding agriculture we call it ‘renewable
carbon’ because of the important link
between the responsible disposal of these
biodegradable materials waste and sewage
sludge and the opportunity to generate
valuable renewable energy from their disposal 
during 20042005 both severn trent water
and biffa steadily increased their renewable
energy generation capacity 
biffa captures landfill gas and uses it to
produce electricity during 20042005 it
expanded its generation facilities to include
smaller landfill sites and it invested in more 
mobile facilities to ensure it can respond 
to changing emissions patterns 
severn trent water uses combined heat and
power chp units to convert the methane
from digested sewage sludge into electricity 
by the end of the year their combined
generation capacity had reached 131mw 
up from some 110mw in 20032004 
during 20042005 severn trent generated
around 690gwh of electricity which equates
to 5 of the uk’s total renewable electricity
production
renewable energy
community
all parts of the group aim to contribute
positively to the communities in which 
they operate this includes involving
communities in our plans wherever 
possible and establishing longterm
community liaison groups at some sites 
our community investment guidelines 
focus on three main areas environmental
education the built environment and the
natural environment in 20042005 our staff
worked with ten partner charities that met

find out more
more information is available at
wwwseverntrentcomcorporateresponsibility
the site includes more detailed information about our code 
of conduct you can also view or download a copy of the code
above
renewable energy generation 
risley landfill site 
severn trent plc 
annual review 2005 21 financial review 22
severn trent plc 
annual review 2005
group results 
group turnover was £20812 million
£20151 million an increase of 33 over
last year the growth in turnover was mainly
due to the contributions of severn trent
water and biffa which were partially offset 
by exchange rate impacts in laboratories
and services and lower activity in property
group profit before interest tax goodwill
amortisation and exceptional items was down
05 to £4386 million £4406 million
goodwill amortisation was £301 million
£298 million there was a net exceptional
charge of £148 million profit of £116
million
group profit before interest tax and
exceptional items was £4085 million
£4108 million group profit before interest
and tax was £3937 million £4224 million
after net interest charges of £1764 million
£1680 million group profit before tax
goodwill amortisation and exceptional items
was down 38 to £2622 million £2726
million group profit before tax and
exceptional items was £2321 million
£2428 million a decrease of 44 
group profit before tax was £2173 million
£2544 million
the total tax charge for the year was £778
million £696 million of which current tax
represented £409 million £333 million
and deferred tax was £369 million £363
million minority interests were £07 million
£07 million profit after tax and minority
interests was £1388 million £1841 million
earnings per share adjusted to exclude
exceptional items and deferred tax
decreased by 94 to 556 pence 614
pence as a result of increased pensions
interest and tax charges basic earnings per
share are 403 pence 535 pence
operating activities generated a net cash
inflow of £6992 million £7331 million 
the main cash outflows were capital
expenditure and financial investment of
£4831 million £4843 million equity
dividends of £1620 million £1577 million
and net financing costs of £1513 million
£1483 million the increase in net debt
was £1409 million £2435 million
net debt at 31 march 2005 was £28900
million £27491 million gearing reflecting
the provision for deferred tax was 57
55 the group’s net interest charge 
was covered 43 times 44 times by profit
before interest tax depreciation goodwill
amortisation and exceptional items
exceptional items
there was a net exceptional charge in the
year of £148 million comprising the net of
 an operating charge of £130 million for
redundancy costs in severn trent water
in relation to planned manpower
reductions arising from the amp4 price
review
 a charge of £137 million of which £99
million relates to goodwill previously
written off to reserves resulting from the
closure of systems us cis business and
the termination of external sales from
systems uk it services business and
from engineering consultancy 
 a £43 million credit from the disposal of
the groups investment in an associated
undertakings in portugal and 
 a £76 million credit from the profit on
sale of fixed assets in severn trent water
in 20032004 there was a net exceptional
credit of £116 million comprising the net 
of a £198 million profit on the sale of fixed
assets arising from the sale of land and
property by severn trent water 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 us and a charge 
of £109 million in waste management 
for hales integration costs
taxation
the charge for current tax was £409 million
£333 million of which £10 million £24
million was attributable to exceptional items
the current tax charge of £399 million
attributable to profit after interest and
goodwill amortisation but before exceptional
items is an effective rate of 172 127
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 groups accounts this principle
has been followed in determining the groups
pension charge for 20042005
the group has four defined benefit pension
schemes of which the severn trent pension
scheme stps is by far the largest formal
actuarial valuations have been undertaken
for the stps and another scheme the severn
trent senior staff pension scheme as at 31
march 2004 as a result of these valuations
there are incremental pension charges of
£313 million for the group in 20042005
on an frs17 basis the estimated net
position before deferred tax of the groups
defined benefit pension schemes and the
groups unfunded pension liabilities for
senior staff was a deficit of approximately
£309 million as at 31 march 2005 this
compares to a deficit of approximately £368
million as at 31 march 2004 with the value
of assets increasing over the last year by a
greater amount than the value of liabilities
net of deferred tax the estimated net deficit
on an frs17 basis as at 31 march 2005 was
approximately £217 million on an frs17
basis the funding level has improved from
around 72 at 31 march 2004 to around
78 at 31 march 2005
as at 31 march 2005 the groups defined
benefit pension schemes had total assets 
of approximately £1079 million of which
around 69 was invested in equities
group turnover was £20812 million £20151 million
an increase of 33 over last year the growth in
turnover was mainly due to the contributions of severn
trent water and biffa which were partially offset by
exchange rate impacts in laboratories and services
and lower activity in property 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 the board determines matters
of treasury policy and its approval is required
for certain treasury transactions
it is the group’s strategy to access a broad
range of sources of finance to obtain both
the quantum required and the lowest cost
compatible with the need for continued
availability
the group uses financial derivatives solely 
for the purpose 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 2005 interest rates
for some 66 of the group’s net debt of
£2890 million were so fixed at a weighted
average interest rate of 6 for a weighted
average period of 174 years 
the group’s business does not involve
significant exposure to foreign exchange
transactions cross currency swaps are
employed to exchange foreign currency
borrowings for sterling the group also has
investments in various assets denominated in
foreign currencies principally the us dollar
and the euro the group’s current policy is to
hedge an element of the currency translation
risk associated with certain foreign currency
denominated assets
the long term credit ratings of severn trent
plc and severn trent water limited are
long term severn trent severn trent
ratings water limited plc 
moody’s a2 a3 
standard  poor’s a a–
exchange rates
approximately 31 of the group’s profit
before interest tax goodwill amortisation 
and exceptional items and 19 of its net
operating assets are denominated in us
dollars and approximately 36 of its profit
before interest tax goodwill amortisation 
and exceptional items and 07 of its net
operating assets are denominated in euros
the trading results of overseas subsidiaries
are translated to sterling at the average rate
of exchange ruling during the year and their
net assets are translated at the closing rate
on the balance sheet date 
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’s programme of work to prepare
for the adoption of ias has continued
throughout the year key finance employees
have been trained in ias and the differences
from uk gaap that are likely to impact the
group the group’s systems have been
modified to enable reporting under ias 
work is now underway to determine the
adjustments required to construct the opening
balance sheet for ias as at 1 april 2004 and
to prepare the balance sheet as at 31 march
2005 and the profit and loss account for the
year then ended these statements will form
the comparative figures in our first full year
ias financial statements 
significant changes will arise for the
accounting treatment of retirement benefits
fixed assets and renewals accounting
deferred tax dividends goodwill and
financial instruments it is expected that 
the overall net impact will be to reduce 
net assets and increase earnings volatility
further details will be made available on 
19 september 2005
supplementary information 
for supplementary information including 
the group’s preliminary results presentation
see the severn trent website
wwwseverntrentcom
mark wilson 
group finance director
severn trent plc 
annual review 2005 23 board of directors 24
severn trent plc 
annual review 2005
derek osborn cb 64
mr osborn joined the board in september 1998
he is chairman of stakeholder forum jupiter
global green investment trust and the international
advisory board of erm cvs and is a member of the
uk commission on sustainable development he
was director general of environment protection in
the department of the environment from 1990 to
1995 chairman of the management board of the
european environment agency from 1995 to 1999
chairman of the uk round table on sustainable
development from 1999 to 2000 and chairman 
of the international institute for environment and
development from 1998 to 2002
martin houston bsc msc dic 47
mr houston joined the board in september 2003
he is executive vice president and managing
director of bg group’s north american caribbean
and global liquified 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 is a fellow of the geological
society of london
marisa cassoni bsc aca 53
ms cassoni joined the board in 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 she is a
nonexecutive director of gfi a company listed 
on the new york stock exchange a member of the
cbi economic affairs committee and a member 
of the financial reporting council’s accounting
standards board
colin matthews ma ceng mba 49
mr matthews joined the board as a nonexecutive
director in october 2003 he was appointed group
chief executive designate in september 2004 and
became group chief executive on 1 february 2005
he is a chartered engineer who has worked for the
american general electric company and then at
british airways first as director of engineering then
as director of technical operations responsible for
all aircraft maintenance it and procurement he
was group managing director of transco from 2001
to 2002 and ceo of hays plc from november 2002
to june 2004
mark wilson ba aca 47
mr wilson joined the board as group finance
director on 1 september 2004 prior to this he was
finance and regulation director for severn trent
water ltd from 1995 and was also a nonexecutive
director of paypoint until august 2004 previously
mr wilson worked for arthur andersen both in
london and hong kong and for international
leisure group 
sir john egan kbe msc beng 65
sir john egan joined the board on 1 october 2004
becoming chairman on 1 january 2005 he is also
chairman of inchcape plc and harrison lovegrove
 co ltd sir john worked in the motor industry
until 1990 at general motors massey ferguson 
and british leyland rising to become chairman
and chief executive of jaguar plc he was chief
executive of baa plc from 1990 to 1999 and
chairman of mepc from 1998 to 2000 he was
also president of the confederation of british
industry from 2002 to 2004 sir john was knighted
in the queen’s birthday honours list in 1986 
and is a deputy lieutenant of the county of
warwickshire
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
corporate responsibility
committee
c s matthews chairman
m j bettington
r s brydon jannetta
p j gavan 
l f graziano 
f a osborn
a p smith
a p wray
secretary – p p davies
executive committee
c s matthews chairman
m j bettington
r s brydon jannetta 
p p davies and secretary
p j gavan
l f graziano 
a p smith
p k tandon
j van den arend schmidt
m r wilson
a p wray
remuneration committee
m c flower chairman
m l cassoni
j d g mcadam
secretary – p p davies
nominations committee
sir john egan chairman
m c flower 
j d g mcadam
f a osborn
secretary – p p davies
senior independent 
nonexecutive director
m c flower
group general counsel 
and company secretary
p p davies llb solicitor tony wray bsc hons 43
mr wray joined the board on 7 march 2005 he 
is managing director of severn trent water ltd
prior to this he was director networks at eircom
the republic of ireland’s telephone operator 
he joined british gas in 1983 and held various
managerial positions before becoming head 
of asset management in 2000 he was director 
of asset management transco then national
operations director transco before being appointed
to implement the merger integration of lattice
transco and national grid group into national
grid transco
rachel brydon jannetta fcca 45
mrs brydon jannetta joined the board on 1
september 2004 she is president and ceo of
severn trent’s us and uk laboratories businesses
a fellow of the chartered association of certified
accountants mrs brydon jannetta qualified as an
accountant in 1984 with gerber landa and gee 
an accounting firm based in glasgow she then
spent eight years in retail management latterly 
with an asda plc group company before joining
severn trent in 1993 as managing director of 
its uk laboratories operation
martin bettington bsc mecheng mba 52 
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
john mcadam bsc phd 57
dr mcadam joined the board in september 2000
he is chief executive of ici plc he joined ici in
1997 following the acquisition of the specialty
chemical businesses from unilever and was
appointed executive vice president coatings and
chief executive of ici paints in 1998 he joined the
board of ici plc soon after when he also became
responsible for corporate research  technology
and he was appointed chief executive in 2003 
dr mcadam is a member of the university of 
surrey business advisory board and the university
of cambridge chemistry advisory board
john smith fcca hon friba 47
mr smith joined the board in november 2003 
he is a member of h m treasury’s public services
productivity panel and the 100 group of finance
directors after training as an accountant mr smith
joined the british railways board rising to head their
corporate demerger team in 1989 he moved to the
bbc where he was finance director for eight years
and became chief operating officer in june 2004
he is also chief executive of the bbc’s trading arm
bbc worldwide mr smith has held a nonexecutive
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 he
also served for three years on the accounting
standards board until november 2004 
martin flower ba 58 
mr flower joined the board in june 1996 and was
appointed deputy chairman on 6 july 2004 he 
is the senior independent nonexecutive director
he was also appointed as a director of the morgan
crucible company plc in december 2004 and as 
a nonexecutive director and chairmanelect of
croda international plc in may 2005 in may 2004
he retired as chairman of coats ltd where he had
previously been group chief executive
left to right
derek osborn
martin houston 
marisa cassoni 
colin matthews 
mark wilson 
sir john egan 
tony wray 
rachel brydon jannetta 
martin bettington
john mcadam 
john smith 
martin flower
nonexecutive director
severn trent plc 
annual review 2005 25 independent auditors’ statement to the members of severn trent plc 26
severn trent plc 
annual review 2005
summary directors’ report
we have examined the summary financial
statement of severn trent plc
respective responsibilities of directors 
and auditors
the directors are responsible for preparing
the annual review 2005 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 2005 with the annual
financial statements the directors report and
the directors remuneration report and its
compliance with the relevant requirements of
section 251 of the companies act 1985 and
the regulations made thereunder we also
read the other information contained in the
annual review 2005 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 companys
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 directors remuneration report 
of severn trent plc for the year ended 
31 march 2005 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
6 june 2005
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 6 to 21
final dividend
subject to approval at the annual general
meeting “agm” the recommended final
dividend of 3030p 2004 2927p for each
ordinary share will be paid on 31 august
2005 to shareholders on the register at the
close of business on 24 june 2005 this
together with the interim dividend of 1821p
2004 1777p per share which was paid on
6 april 2005 brings the total for the year to
4851p 2004 4704p 
share capital 
resolutions will be proposed at this year’s
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 
 ake 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 6 june 2005 the company had 
been notified of the following substantial
shareholdings 
number of ordinary 
shares of 65 
5
⁄ 19p each  
fidelity 20709407599
international limited
legal  general 11259833 326
investment management 
limited
directors 
a list of directors and their background
details appear on pages 24 and 25 full
details of their service contracts and
emoluments  can be found in the summary
remuneration report on pages 30 to 32 
sir john egan was appointed as a non
executive director on 1 october 2004 
mrs r s brydon jannetta and mr m r wilson
were appointed as executive directors on 
1 september 2004 mr a p wray joined 
the board as an executive director on 
7 march 2005
mr a s perelman and mr b duckworth
retired from the board on 31 august 2004
mr j k banyard mr t d g arculus and mr r
m walker retired from the board on 30
december 2004 31 december 2004 and 
2 february 2005 respectively 
sir john egan became chairman of the
company on 1 january 2005 mr m c flower
was appointed deputy chairman of the
company on 6 july 2004 and mr c s
matthews took over as group chief executive
on 1 february 2005
in accordance with the company’s articles 
of association mr m j bettington mrs r s
brydon jannetta ms m l cassoni sir john
egan mr m c flower mr m r wilson and 
mr a p wray retire at the agm and being
eligible offer themselves for reappointment
the board and the nominations committee
support and recommend the proposed
reappointments
corporate governance 
the company attaches great significance 
to the maintenance of good corporate
governance procedures and adherence 
to best practice recognising that they play
their part in creating a framework which can
provide increased benefits for shareholders
the board is pleased to report that in 
an index of the ftse 100 uk companies
compiled by ftse and institutional
shareholder services the company was
ranked in the top 10 for good corporate
governance practice
during the year to 31 march 2005 the
company complied with the principles set
out in section 1 of the combined code on
corporate governance issued in july 2003
the “combined code” save and except as
follows
 the former chairman mr t d g arculus
was appointed as chairman of mmo2
in july 2004 but was requested by 
the board to remain in office until 
31 december 2004 to provide some
continuity while a number of board
changes took place and also while 
the amp4 final determination was
awaited by severn trent water
 mr r m walker former group chief
executive was granted permission by 
the nominations committee to phase 
an increase in the number of ftse 100
nonexecutive directorships he could 
hold above the current policy of one such
appointment during the period up to his
retirement  the board
the board currently consists of five executive
directors and seven nonexecutive directors
the board has reviewed the status of the
nonexecutive directors and has confirmed
that it regards them as being independent 
at the time of his appointment sir john
egan was considered by the board to be
independent in addition the board is
satisfied that he is able to devote sufficient
time to his duties as chairman of the
company
all directors who joined the board during 
the year have undertaken induction training
furthermore the training needs of all directors
have been reviewed and appropriate training
identified as part of a continuing process
the board is satisfied that it has a sufficient
number of nonexecutive directors with
recent and relevant financial experience as
can be seen from the directors’ biographies
on pages 24 and 25
during the year the board with the help of
an outside facilitator carried out a formal
evaluation of its performance and that of 
its committees individual directors and
company secretary the evaluation drew
particular attention to the fact that although
the company had performed well in recent
years and the board had a clear
understanding of its remit there were
opportunities to improve its functioning
in may 2004 an employee of severn 
trent water raised a number of allegations
relating in particular to alleged accounting
inaccuracies and regulatory returns in respect
of which an announcement was made on 22
november 2004 this can be viewed on the
company’s website wwwseverntrentcom 
pricewaterhousecoopers llp forensic
services was appointed by the company 
to carry out a thorough and independent
investigation and in the light of their findings
the board was and remains of the view that 
the matters raised have no effect upon the
integrity of the accounts and that severn
trent water’s customers have not been
overcharged however as such findings
revealed evidence of some behaviour which
the board believed fell short of the high
standards it expects from employees a
disciplinary investigation was instigated
which though substantially complete 
is likely to continue at least until ofwat’s
review of these matters is completed 
the board with the support of the audit
committee has taken and intends to take
such actions as it thinks appropriate to
ensure the maintenance of both high ethical
and professional standards and resilient 
and effective controls throughout all group
companies the company is supporting 
ofwat in its review of these allegations 
employees
the group employed 16583 people as at 
31 march 2005 2004 15973 of these
5053 30 were employed in the water and
sewerage business 5510 33 in the waste
management business 2891 17 in the
laboratories business and 2387 14 in
the water purification and operating services
business approximately 30 of employees
are based outside the uk mainly in the us
belgium and italy 
most group companies have their own
intranets which form a major communication
channel with their employees in addition to
inhouse magazines toolbox talks and team
briefings employee opinion surveys are used
to provide feedback on a range of issues
group companies continue to maintain
positive relationships with the recognised
trade unions and with other elected
representatives the group’s meeting of the
european consultative council is an annual
opportunity to promote dialogue with
employee representatives and further
enhance their understanding of the future
issues facing our businesses in europe
following the introduction of new pension
options for new uk based employees in april
2004 the company continues to monitor 
its pension provision with the objectives of
reducing risk and maintaining affordability
the group’s “lifestyle” flexible benefits scheme
was further extended amongst uk based
employees and from october 2004 over
8000 employees were eligible to participate 
employee share ownership is encouraged
through the operation of a number of
employee share plans including a save as
you earn scheme and a share incentive plan
the group continues to focus on the
development of employees at all levels with
annual performance appraisals used to drive
the direction of and demand for training
activities management development and
training has been a core activity in all group
companies operating via a range of
providers including leading business schools
such as insead warwick and aston as well
as tailored inhouse programmes
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 we were
delighted that severn trent water gained
recognition as one of the sunday times
‘top 10 best big companies to work for’
and were also listed in the guardian’s
publication ‘britain’s top employers 2005’
severn trent laboratories also received
external commendations being a finalist 
in two categories of the coventry and
warwickshire investors in people good
practice awards 
ethics and diversity
following a review of the group’s code of
business principles and conduct a revised
code of conduct has been produced group
companies continue to meet as a minimum
legislative requirements of the countries in
which they operate
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
diversity profiles across the group continue
to be monitored and reported regularly 
the company benchmarks its policies and
practices in this area against best practice
organisations such as ‘race for opportunity
and employers’ forum on disability 
health and safety 
at severn trent we see the effective
management of health and safety as a key
priority that makes good business sense to
support this core value we have established
three health and safety principles for all
employees 
 if a job cannot be done safely don’t do it
 always look out for safety hazards
 never ignore a safety hazard fix it or
report it
the group health and safety executive
committee now meets on a monthly basis
and includes health and safety professionals
the meetings are chaired by the group chief
executive who reports on health and safety
performance to the board each month 
auditors 
the auditors’ report on the full annual
accounts of the group for the year ended 
31 march 2005 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
following the audit committee’s review of
the auditors the board wishes to change 
the auditors from pricewaterhousecoopers
llp “pwc” to deloitte  touche llp
“deloittes” pwc having completed the
audit for the year ended 31 march 2005
have agreed that they will not seek
reappointment at the agm accordingly a
resolution proposing the appointment of
deloittes as auditors will be put to the agm
by order of the board 
p p davies llb solicitor 
group general counsel and company
secretary
6 june 2005
severn trent plc 
annual review 2005 27 summary group profit and loss year ended 31 march 2004 28
severn trent plc 
annual review 2005
2005 2004
£m £m
turnover group and share of joint ventures 20842 20185 
less share of joint ventures turnover 30 34 
group turnover 20812 20151 
operating costs before goodwill amortisation and exceptional items 16543 15864 
goodwill amortisation 301 298 
exceptional restructuring costs 130 – 
exceptional integration costs – 109 
exceptional provision release – 27 
total operating costs 16974 16244
group operating profit 3838 3907 
share of operating profit of joint ventures and associates 117 119 
exceptional net loss on sale and termination of operations 94 –
exceptional profit on disposal of fixed assets 76 198 
profit before interest goodwill amortisation and exceptional items 4386 4406 
goodwill amortisation 301 298 
profit before interest and exceptional items 4085 4108 
exceptional items 148 116
profit before interest 3937 4224 
net interest payable 1764 1680 
profit after interest before goodwill amortisation and exceptional items 2622 2726 
goodwill amortisation 301 298 
profit after interest before exceptional items 2321 2428 
exceptional items 148 116 
profit on ordinary activities before taxation 2173 2544 
taxation on profit on ordinary activities – current tax 409 333 
– deferred tax 369 363 
total taxation 778 696 
profit on ordinary activities after taxation 1395 1848 
equity minority interests 07 07 
profit for the financial year 1388 1841 
dividends 1674 1620 
retained lossprofit for the financial year 286 221 
earnings per share pence
basic 403 535 
adjusted basic before exceptional items and deferred tax 556 614 
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 2005 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 wwwseverntrentcomreports2005 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 33 summary group balance sheet at 31 march 2005
severn trent plc 
annual review 2005 29
summary group cash flow statement year ended 31 march 2004
2005 2004
restated restated
£m £m £m £m
net cash inflow from operating activities 6992 7331 
dividends received from associates and joint ventures 35 19 
returns on investments and servicing of finance 1513 1483
taxation 365 195
capital expenditure and financial investment 4831 4843
acquisitions 34 1706
equity dividends paid 1620 1577
net cash outflow before use of liquid resources and financing 1268 2454
management of liquid resources 304 452
financing
increase in debt 1061 2831 
issue of shares 55 56 
share purchase by employee share trust 41 32
1075 2855 
increasedecrease in cash 111 51
2005 2004
restated
£m £m
fixed assets 59508 58039
current assets 6562 6485 
creditors amounts falling due within one year 12255 12237
net current liabilities 5693 5752
total assets less current liabilities 53815 52287 
creditors amounts falling due after more than one year 25573 24406
provisions for liabilities and charges 6242 5720
net assets 22000 22161 
capital and reserves 21981 22137 
minority shareholders interest equity 19 24 
22000 22161 
signed on behalf of the board who approved the accounts on 6 june 2005
sir john egan mark wilson
chairman group finance director summary remuneration report 30
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 
11 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 nonexecutive directors of the
company the members of the committee
during the year were 
 m c flower chairman 
 j d g mcadam 
 m l cassoni 
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 ‘combined code’ 
in setting performance related remuneration
the committee has regard to the provisions
set out in schedule a to the combined 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 chairman of the board sir john egan
previously mr t d g arculus the group
chief executive mr c s matthews previously
mr r m walker the group human
resources director mr a p smith previously
mr j w oatridge and the director of
corporate development mr p k tandon also
provide advice and are invited to attend
some meetings as required 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 continuing 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
typically comprise at least 50 of total
remuneration if paid at the maximum 
 the total remuneration package for on
target 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 with effect from april 2004
adopted guidelines which expect executive
directors to have a minimum holding of
shares in the company the group chief
executive is expected to hold shares to 
the value of 15 x base salary and other
executive directors 1 x base salary 
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 executive 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 
 member 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 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 but they do have
letters of appointment with the 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 publicly quoted
companies of a comparable size
salaries for individual directors are reviewed
annually by the committee and generally
take effect on 1 april salaries are set with
reference to individual performance
experience and contribution together with
developments in the relevant employment
market and internal relativities
the nonsalary benefits for executive
directors comprise the use of a company car
or allowance fuel private medical insurance
life assurance retirement gifts attendance 
at retirement functions and an incapacity
benefits scheme
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 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 their pension entitlements the
bonus potential for the group chief executive
is 60 for the managing directors of biffa
and severn trent laboratories it is 75 
and the bonus potential for other executive
directors is 50 
the maximum bonus payable to other
executives below board level also ranges
from 5075 and their plan is structured in
a similar way as that for executive directors
longterm incentives 
a long term incentive plan ‘ltip’ for
executive directors was approved by
shareholders at the 1997 agm and amended
with shareholder approval at the 2001 agm 
the performance for the 2002 2003 and
2004 ltips is measured by reference to a
combination of total shareholder return
‘tsr’ and economic profit ‘ep’ targets
severn trent plc 
annual review 2005 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 2002 1 april
2003 and 1 april 2004 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 2002 award 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
and 2004 awards the comparator group
additionally contains northumbrian water plc 
for the executive directors the 2002 2003
and 2004 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 
in 2004 the committee carried out a
detailed review of the longterm incentive
arrangements for executive directors and
other key senior executives the main
outcome of that review was that shareholders
should be asked to approve the introduction
of a new long term incentive plan – the
severn trent long term incentive plan 2005
‘ltip 2005’ further details are contained 
in the notice of the agm and the full
remuneration report
postretirement benefits 
all current executive directors participate 
in the senior staff pension scheme the
‘scheme’ with the exception of mrs r s
brydon jannetta who continues to be a
member of the severn trent pension 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 dependent’s pension on death of two
thirds of the member’s pension
the company has a future obligation in
respect of messrs a s perelman r m walker
and m r wilson who joined the scheme 
after 1 june 1989 and are therefore subject
to the inland revenue earnings cap the
‘cap’ 20042005 £102000 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 
from april 2004 all new uk based executive
director appointments are provided with a
cash supplement in lieu of the unfunded
arrangement 
forwardlooking statement 
the committee will keep the existing
remuneration arrangements as detailed 
in this report under review during the next
year to ensure that the company’s reward
programmes remain competitive and provide
appropriate incentives no significant
changes to the reward arrangements 
for executive directors are anticipated
however as usual there will be individual
reviews of base salary annual bonus and
ltip award levels the performance targets
for incentive arrangements will continue to
be reviewed to ensure alignment with the
group strategy and will for the next year 
as indicated in the directors report place 
an increased emphasis on the achievement
of health and safety performance targets
directors’ service agreements and letters 
of engagement 
a new model service contract was approved
by the committee in 2004 all current
executive directors have signed the model
contract and accordingly service agreements
for all executive directors have notice periods
of 12 months they 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 both
phasing and mitigation contracts also
permit the committee to take into account 
a view of the extent of poor performance 
on the part of the executive director any
payment will not include amounts in respect
of 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 
severn trent plc 
annual review 2005 31
this graph shows the value by 31 march 2005 of £100 invested in severn trent on 31 march 2000
compared with the value of £100 invested in the ftse 100 index the other points plotted are the 
values at intervening financial yearends the ftse 100 was chosen as the comparator because the
company is a constituent of that index
severn trent plc
value £
31 march ‘00
220
200
180
160
140
120
100
80
60
40
20
0
31 march ‘01 31 march ‘02 31 march ‘03 31 march ‘04 31 march ‘05
total shareholder return
source thomson financial
ftse 100 index summary remuneration report continued 32
severn trent plc 
annual review 2005
directors’ emoluments
the emoluments of the chairman the executive directors and fees payable to the nonexecutive directors are as follows 
base salary and fees
2
benefits in annual total total
cash shares total kind
3
bonus
9
other
1
200405 200304
£000 £000 £000 £000 £000 £000 £000 £000
chairmen and other nonexecutive directors
t d g arculus chairman resigned 311204
10
1074 75 1149 253 – 20 1422 1634 
sir john egan chairman appointed 011004
4
525 88 613 08 – – 621 – 
e e anstee resigned 151203 – – – – – – – 266 
m l cassoni 376 39 415 – – 09 424 423 
m c flower 798 77 875 08 – 19 902 524 
m j houston 271 29 300 08 – – 308 175 
c s matthews until 050904
8
122 06 128 – – 06 134 136 
j d g mcadam 306 34 340 08 – 07 355 301 
f a osborn 465 50 515 08 – 05 528 468 
j b smith
7
430 – 430 08 – – 438 144 
c tritton resigned 300703 – – – – – – – 109 
executive directors
j k banyard resigned 301204 1535 – 1535 223 750 02 2510 3037 
m j bettington 3100 – 3100 205 1891 – 5196 4457 
r s brydon jannetta appointed 010904 1159 – 1159 48 169 – 1376 – 
b duckworth resigned 310804
6
1167 – 1167 102 554 – 1823 4015 
c s matthews from 060904 2700 – 2700 69 1604 968 5341 – 
a s perelman resigned 310804
5
1735 – 1735 151 600 – 2486 5434 
r m walker resigned 030205 4527 – 4527 517 2037 01 7082 7461 
m r wilson appointed 010904 1313 – 1313 129 591 – 2033 – 
a p wray appointed 070305 172 – 172 18 – 41 231 – 
total emoluments 21775 398 22173 1763 8196 1078 33210 28584 
1 other emoluments represent expenses chargeable to uk income tax car allowances and amounts in lieu of entry into the supplementary pension scheme for 
those earning above the pension cap limit paid to directors
2 included within fees for the nonexecutive directors are amounts received by way of shares rather than as emoluments to encourage participation in 
line with corporate governance best practice the gross value of shares is included in the table above nonexecutive directors who were either appointed 
or resigned during the year received a time apportioned award the number of shares received by each nonexecutive director during the year was 
mr t d g arculus – 527 sir john egan – 735 ms m l cassoni – 246 mr m c flower – 488 mr m j houston – 180 mr c s matthews – 34 
dr j d g mcadam – 215 mr f a osborn – 377
3 benefits in kind for executive directors comprise the use of a company car fuel retirement gifts attendance at retirement functions private medical 
insurance life assurance and an incapacity benefits scheme benefits in kind for nonexecutive directors other than mr t d g arculus comprise attendance 
at retirement functions mr t d g arculus benefits in kind comprise the use of a company car fuel private medical insurance retirement gifts and attendance 
at retirement functions
4 sir john egan was appointed chairman from 1 january 2005 and received fees as a nonexecutive director prior to that date
5 mr a s perelman was employed by the company until 30 september 2004 in this month his total emoluments were £31870 and his bonus relating to this
period was £12000
6 mr b duckworth remained employed in a consultancy capacity until 31 march 2005 his total emoluments from the date of his resignation from the board to 
31 march 2005 were £189092 and his bonus relating to this period was £77583
7 mr j b smith’s fees represent fees due but not yet paid
8 mr c s matthews’ fees and share entitlements were paid as cash directly to his employer up to 30 june 2004 
9 the bonus percentages paid to executive directors were in the range of 145 to 61 of base salary
10 in addition the company contributed £26775 to mr arculus’s personal pension arrangements
signed on behalf of the board who approved the remuneration report on 6 june 2005
m c flower
chairman of the remuneration committee this is severn trent 
severn trent plc is a leading
provider of water waste and
environmental services
we are determined to ensure that customers get the benefit
of high quality and cost effective services while investors
receive an appropriate return
firmly embedded in our corporate strategy is a commitment to
corporate responsibility particularly health and safety and
environmental performance 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 review of operations – water and
sewerage
10 review of operations – waste management
14 review of operations – laboratories
16 review of operations – water purification
and operating services
18 review of operations – other businesses
19 review of operations – corporate
responsibility
22 financial review
24 board of directors
26 independent auditors’ statement
26 summary directors’ report
28 summary group profit and loss account
29 summary group balance sheet
29 summary group cash flow statement
30 summary remuneration report
33 information for shareholders
information for shareholders
severn trent plc 
annual review 2005 33
financial calendar and results announcements
annual general meeting
at the international convention centre 26 july 2005 
broad street birmingham b1 2ea at 1100am 
dividend payments in respect of the year 
ended 31 march 2005
interim dividend paid 6 april 2005 
proposed final dividend payable 31 august 2005
the results of the group will normally 
be published at the following times
interim results for the six months to 30 september december
preliminary results for the year to 31 march june
report and accounts for the year to 31 march june
analysis of shareholdings at 31 march 2005
number
number of  of of shares 
category shareholders shareholders million of shares
individual and joint accounts 85568 9229 441 1275
other 7147 771 3019 8725
total 92715 10000 3460 10000
number
number of  of of shares 
size of holding shareholders shareholders million of shares
1499 55365 597 108 31
500999 21487 232 147 43
10004999 14398 155 225 65
50009999 491 05 32 09
1000049999 467 05 101 29
5000099999 151 02 103 30
over 100000 356 04 2744 793
total 92715 1000 3460 1000
 includes insurance companies nominee companies banks pension funds other corporate bodies 
limited and public limited companies
cautionary statement 
this document contains certain ‘forward
looking statements’ with respect to severn
trent’s financial condition results of
operations and business and certain 
of severn trent’s plans and objectives 
with respect to these items 
forwardlooking statements are sometimes
but not always identified by their use of 
a date in the future or such words as
‘anticipates’ ‘aims’ ‘due’ ‘could’ ‘may’
‘should’ ‘expects’ ‘believes’ ‘intends’
‘plans’ ‘targets’ ‘goal’ or ‘estimates’ by 
their very nature forwardlooking statements
are inherently unpredictable speculative 
and involve risk and uncertainty because
they relate to events and depend on
circumstances that will occur in the future
there are a number of factors that could
cause actual results and developments to
differ materially from those expressed or
implied by these forwardlooking statements
these factors include but are not limited to
changes in the 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 
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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
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trent plc or any of its subsidiaries and is not
soliciting an offer to purchase exchange or
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from the registration requirements of the 
us securities act of 1933 as amended
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Summary:
 chairman’s statement 02
severn trent plc 
annual report and accounts 2005
business performance
we announced in january 2005 that severn
trent water would accept ofwat’s final price
determination for 20052010 this is the
single most important event for the group 
in 20042005
ofwat’s final amp4 determination allows
severn trent water to raise prices by 24
before inflation equivalent to around £53 
per property over the five year period even
after this rise severn trent water’s average
household bills will remain among the lowest
in its sector
the efficiency targets set by ofwat are
extremely challenging the determination
includes a reduction in the allowance for
capital maintenance costs particularly in
respect of mains renewal and a reduction 
in the costs allowed for alternative sludge
disposal methods the determination includes
sufficient costs to fund only half of severn
trent water’s pension deficit
in addition there remain other areas 
such as electricity costs business rates and
operational areas where the determination
allows for smaller cost increases than are
forecast in the company plan
severn trent water is already performing 
at or close to ofwat’s operating and capital
efficiency frontiers we want to continue this
so plans are being put in place to maintain
severn trent water as one of the most efficient
companies in the water sector in terms of
both operating costs and capital investment
we are determined to improve our
performance to meet all these challenges
while much of our management focus has
been concerned with the ofwat determination
we have continued to develop our waste
management company biffa into a leading
integrated waste management company
we have achieved scale in the important
industrialcommercial collection area where
we are the largest uk operator we have
control over disposal through having a large
landfill operation probably joint second in
terms of void space together with a number
of strategic alliances to take recovered
materials we have excellent special waste
capabilities through our treatment centres
no other company has these combined
strengths in the uk
new legislation and increased landfill tax will
impact on all aspects of biffa’s business but
changes in legislation also create new
business opportunities in pretreatment
special waste and integrated waste
management with the hales integration now
complete biffa is in a good position to
maximise these opportunities and to develop
good organic growth going forward
severn trent laboratories the world’s
leading environmental testing company has
experienced extremely challenging market
conditions in the us
legislation and public concern will drive the
growth of markets like indoor air quality food
microbiology endocrine disrupters and
perchlorate testing stl has put in place the
expertise and facilities to keep it at the
forefront of these and other emerging
markets
the water purification and operating services
business continues to perform well head
quartered in the us it supplies technology and
expertise to private and public sector clients
all over the world the water purification
market will continue to grow and our strong
market position and brand recognition will
enable us to compete vigorously
this business exploits technology and
capability from our uk water expertise so is
attractive to severn trent going forward
corporate responsibility
severn trent was named as the leading utility
in the dow jones sustainability index for the
fourth consecutive year this is the first time
severn trent produced satisfactory results overall in
20042005 excluding the impact of exchange rates
turnover rose in all the main businesses of water and
sewerage waste management laboratories and water
purification and operating services that any utility has won this category four
times in a row
severn trent’s award was made after 
an assessment of the quality of our
management and performance in terms of
integrating economic environmental and
social considerations into business strategies
while continuing to enhance competitiveness
and brand reputation
our businesses are one of the uk’s largest
managers of ‘renewable carbon’ which is
biodegradable waste and sewage sludge 
that can be utilised to generate renewable
electricity we handle approximately 12 
of the uk’s waste renewable carbon
excluding agriculture
in 20042005 we generated around 690
gwh of renewable electricity which equates
to 5 of the uk’s renewable electricity
group results 
overall the severn trent group has delivered
a satisfactory performance in 20042005
with group profit before tax goodwill
amortisation and exceptional items at £2622
million a decrease of 38 after incremental
pension charges of £313 million group
profit before tax and exceptional items was
£2321 million £2428 million and group
profit before tax was £2173 million 
£2544 million
the board is proposing a final dividend of
3030p 2927p to be paid on 31 august
2005 this would give a total dividend for 
the year of 4851p an increase of 31
management and staff
as you know i succeeded david arculus as
chairman of severn trent plc on 1 january
2005 i am delighted to take up my role as
chairman as i regard severn trent as one of
the best managed companies in the utility
sector
john banyard executive director of severn
trent water with responsibility for asset
management also retired at the end of
december 2004 we thank him for 
38 years of service and wish him well 
he certainly deserves his obe for services 
to the water industry and to engineering
i am extremely grateful to martin flower senior
independent nonexecutive director who
agreed to become deputy chairman from 6
july 2004 to ensure continuity on the board
and support for our new management team
colin matthews arrived in september 2004
as acting managing director of severn trent
water and took over as group chief executive
on 1 february 2005 on the retirement of
robert walker
colin’s wide experience with america’s
general electric company british airways
transco and hays means we have appointed
a first class individual with an engineering
and operational background who can build
on the success of our businesses we are
fortunate to have him lead our group
as indeed we are with tony wray who joined
the board as managing director of severn
trent water on 7 march 2005 from eircom
having been previously director asset
management and then national operations
director transco
we also welcomed rachel brydon jannetta
and mark wilson to the board in september
2004 rachel is president and ceo of severn
trent laboratories based in the us mark is
group finance director having been finance
and regulation director in severn trent
water
since my appointment as chairman we have
carried out a rigorous board effectiveness
review with the help of independent
consultants which has generated a number
of actions to secure improvements to board
performance
although i am relatively new to severn trent 
i have discovered already that there is a
dedicated and highly trained staff whose
hard work and commitment ensures we 
have the ability to achieve our objectives
outlook
the finalisation of the amp4 determination
provides greater certainty for severn trent
water going forward and sets challenging 
but clear financial and service targets which
the company is well positioned to deliver
biffa anticipates organic growth within 
the competitive waste sector in the uk 
as a result of its technology its scale and
through new opportunities driven by waste
legislation reduced federal spending on 
the environment is expected to continue the
difficult market conditions for laboratories 
in the us in 20052006 the uk market 
for laboratories is expected to remain 
strong the services business is expected 
to continue to grow in line with favourable
market conditions
the objective over the next five years is to
ensure customers in the group’s regulated
and nonregulated businesses get the
benefits of high quality and cost effective
services while ensuring that investors receive
an appropriate return
the board of severn trent plc intends to
maintain as a minimum group dividends 
in real terms at least up to 20092010 
our shareholders can be confident in this 
as a dividend ‘floor’ for the next five years 
our objective is of course to do better 
with real growth over the amp4 period
sir john egan
chairman
severn trent plc 
annual report and accounts 2005 03