sustainable growth
annual report and accounts 2011 contents introduction
wwwseverntrentcom

1 201 1 severn trent group highlights
2 group at a glance
4 chairman’s statement
6 chief executive’s review 
8 our strategy 

10 severn trent water – performance
16 severn trent services – performance
20 looking forward
22 financial review

26 directors’ report
29 directors’ responsibility statement
30 board of directors
32 executive committee
33 chairman’s letter
39 nominations committee
40 audit committee
42 corporate responsibility committee
43 remuneration committee
56 risk and assurance

59 independent auditor’s report
60 consolidated income statement
61 consolidated statement of comprehensive income
62 consolidated statement of changes in equity
63 consolidated balance sheet
64 consolidated cash ﬂow statement
65 notes to the group ﬁnancial statements

1 12 independent auditor’s report 
1 13 company balance sheet
1 13 company statement of total recognised gains and losses
1 14 notes to the company ﬁnancial statements

122 five year summary
123 severn trent water – delivering against our kpis
124 information for shareholders
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
forward looking statements are sometimes but not always identiﬁed by their use of a date in  
the future or such words as ‘anticipates’ ‘aims’ ‘due’ ‘will’ ‘could’ ‘may’ ‘should’ ‘expects’ 
‘believes’ ‘intends’ ‘plans’ ‘potential’ ‘reasonably possible’ ‘targets’ ‘goal’ or ‘estimates’ by their 
very nature forward looking 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 forward looking 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 forward looking statements made in this document or made subsequently 
which are attributable to severn trent or any other member of the group or persons acting on 
their behalf are expressly qualiﬁed in their entirety by the factors referred to above severn trent 
does not intend to update these forward looking statements
nothing in this document should be regarded as a proﬁts forecast
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
severn trent plc
severn trent plc is a public limited company listed on the  
london stock exchange and registered in england and wales 
with company number 2366619 this is the annual report  
and accounts for the year ended 31 march 2011
more information on severn trent plc can be found on our 
website at wwwseverntrentcom
severn trent is a ftse 100 
company our core business is 
water we provide and treat water 
and waste water in the uk and 
internationally through our two 
complementary businesses – 
severn trent water and severn 
trent services
 find out more at our corporate website 
 wwwseverntrentcom
 severn trent water website 
 wwwstwatercouk
 severn trent services website 
 wwwseverntrentservicescom
overview business review governance other information financial statements severn trent plc annual report and accounts 2011 1
overview
2006
value £
2007 2008 2009 2010 2011
total shareholder return
0
25
50
75
100
125
150
175
200
2011 severn trent group highlights
2010 £3344m 2010 £3384m 2010 £17039m
2011 2011 2011
2010 1228p
2011 2011
2010 7232p
• good start to amp5 regulatory period – realising beneﬁts of efﬁciency 
improvement programmes and planned outputs delivered
• severn trent water opex below level allowed in final determination
• selfgenerated renewables now supplying 22 of severn trent water’s power 
requirements
• real price reduction in ﬁrst year of new amp has rebased underlying proﬁtability
• full year dividend 6509 pence per share dividend for 201112 to grow by 
77 to 7010p
• on track to deliver further efﬁciencies – ambition remains to outperform  
over amp5
 november 2010 rpi of 47  3
group turnover £m
£17113m
group proﬁt £m
£2886m
 before tax gainslosses on ﬁnancial instruments  
and exceptional items
 before exceptional items gainslosses  
on ﬁnancial instruments and deferred tax
group proﬁt before tax £m
£2530m
dividend pence per share
6509p
earnings per share pence
1056p
severn trent plc
ftse 100 index
this graph illustrates the value at 31 march 201 1 
of £100 invested in severn trent on 31 march 
2006 compared with the value of £100 invested  
in the ftse 100 index the intermediate points 
show the value at intervening ﬁnancial year ends  
source datastream  severn trent plc annual report and accounts 2011 2
group at a glance
severn trent water 
find out more on page 10 
our industry
the water industry in england and wales 
invests more than £3 billion a year and 
employs over 27 000 people there are 
currently 10 water and sewerage companies 
in england and wales
our sector is facing signiﬁcant long term 
challenges the privatisation of the industry 
just over 20 years ago led to improvements 
in services to customers better quality 
drinking water and higher environmental 
standards it also attracted new investment 
those successes however have also had 
consequences such as high levels of debt 
rising prices for customers and increased 
carbon emissions our proposals for 
changes in our industry are helping us to 
play a role in shaping the debate we talk 
more about our position and how other 
bodies with a stake in our industry are 
responding on pages 20 and 21
our business
severn t rent water is a regulated business 
we work within ﬁve year price cycles with the 
prices we charge our customers set at the 
beginning of each cycle by our economic 
regulator ofwat these ﬁve year cycles are 
known as asset management plan amp 
periods we have just reached the end of the 
ﬁrst year of amp5 
our performance
every june all water companies submit 
a detailed annual breakdown of their 
performance known as the june return  
to ofwat ofwat uses this information to 
monitor and compare companies’ 
performance 
as well as being regulated by ofwat our 
performance is monitored by
• the drinking water inspectorate dwi 
which is responsible for making sure we 
comply with drinking water quality 
regulations 
• the environment agency which controls 
water abstraction river pollution and 
ﬂooding
we also work with the government 
including the department for environment 
food and rural affairs defra and the 
welsh assembly government and other 
agencies such as the consumer council for 
water ccwater and natural england to 
make sure we meet the highest customer 
service and environmental standards while 
offering our customers the lowest prices
our vision for the future
our 25 year strategic direction statement 
sets out the long term direction and 
development of our group for the years 
2010–35 see ‘our strategy’ page 8  
you can also ﬁnd the full report on our 
website wwwstwatercouksds
severn trent water provides 
high quality water and 
sewerage services to over  
32 million households and 
businesses in the midlands  
and midwales
key strengths
• we are committed to the long term 
sustainable stewardship of the 
business the environment customers 
and the communities in which we live 
and work
• our efﬁciencies and high standards 
help us keep our costs low and 
generate progressive sustainable 
returns for our shareholders
• we continually work to improve our 
performance and deliver cost and 
operational efﬁciencies against 18 key 
performance indicators kpis each  
of which is aligned to our long term 
strategy
• our bills for water and sewerage 
combined are the lowest on average in 
england and wales
• we have one of the lowest reported per 
capita consumption rates in the uk
• we have a strong management team  
a clear business plan and we launched 
our long term plans in our 25 year 
strategic direction statement in 2007 
where we operate in the uk
our region stretches 
across the heart of  
the uk from the 
bristol channel to  
the humber and  
from midwales to  
the east midlands
our physical assets include
– 46000 km of water mains
– 126 water treatment works
– 54000 km of sewers
–  1026 sewage 
treatment works
5128
as at 31 march 201 1
14bn litres
18bn litres
employees
waste water collected per day
drinking water supplied per day
turnover £m
20101 1 up 03
2011
2010 13853
13898
severn trent water 
proﬁt 20101 1
 
 
down 69
 before exceptional items interest and tax
split of business
£5037m severn trent plc annual report and accounts 2011 3
overview
group at a glance
severn trent services 
find out more on page 16 
key strengths
• our business has a clear strategy for 
growth which focuses on the growing 
global demand for clean water and 
safe efﬁcient waste water treatment
• we are known for our quality reliability 
and stability
• we provide operating services to  
an increasing number of utilities 
municipalities and commercial 
customers in targeted countries
• we are a leader in high growth 
technology markets such as 
disinfection ﬁltration adsorption and 
marineoffshore waste water treatments
• we have a track record of growth and 
efﬁcient operations
11
number of countries with 
operating entity
our industry
the market for water and waste water 
products and services is large with 
substantial prospects for growth in the areas 
we serve that is because the drivers of the 
water and waste water business – water 
scarcity population growth climate change 
and more stringent regulatory requirements 
– remain strong 
our business
severn trent services provides water and 
waste water treatment and operating 
services to utilities municipalities and 
commercial customers around the world 
we focus on the high growth markets and 
geographies where our broad line of 
products and services meet the signiﬁcant 
needs of our customers
we have three principal business streams
• operating services provides contract 
operating services to manage and 
maintain water and waste water plants 
and networks in selected countries 
worldwide we are a leading provider in 
the united states and united kingdom 
one of the few integrated water operators 
in italy and are building a strong presence 
in ireland
• water puriﬁcation products is one of 
the leading global providers of advanced 
technologies and integrated solutions for 
water and waste water disinfection 
ﬁltration adsorption and marineoffshore 
waste water treatment
• analytical services is a leader in uk 
environmental water testing services
our performance
we measure our performance against our 
key strategic initiatives we discuss how 
these shape our businesses on page 9
where we operate
our activities are focused in four regions 
– the americas europe middle east and 
north africa mena and asia paciﬁc 
operating services operates in the us uk 
ireland and italy water puriﬁcation operates 
in all four regions and analytical services 
operates in the uk
severn trent services is one  
of the world’s leading suppliers 
of water and waste water 
treatment solutions  
we are known for continual 
innovation reliability  quality 
services and leadership in  
our chosen markets 
turnover £m
20101 1 down 01
2011
3365
3361
2010
severn trent services 
proﬁt 20101 1 
 
 
down 105
 before exceptional items interest and tax
3056
as at 31 march 201 1
employees
£257m severn trent plc annual report and accounts 2011 4
chairman’s statement
at the end of my ﬁrst ﬁnancial year as 
chairman i’m pleased to report that we 
have made a good start to delivering  
our targets for the new amp5 regulatory 
period and are realising the beneﬁts of  
our efﬁciency improvement programmes 
as expected the price reductions at the 
start of the ﬁve year determination have 
reduced proﬁtability below prior years’ 
levels but from this base severn trent 
water has continued to outperform
for the year total group turnover was up 
04 to £17 billion the real price reduction 
in the ﬁrst year of the new amp has 
rebased underlying proﬁtability with group 
proﬁt before tax gainslosses on ﬁnancial 
instruments and exceptional items down 
147 to £2886 million giving adjusted 
earnings per share excluding deferred tax 
of 1056p a 14 decrease on the prior year
this is a good solid business on track  
to perform well and deliver total overall 
beneﬁts for shareholders customers and 
the environment
there remains signiﬁcant opportunity for 
growth in both our services business and 
in delivering further outperformance in 
severn trent water
andrew duff chairman severn trent plc annual report and accounts 2011 5
overview
i am delighted to ﬁnd at severn trent a 
strong board of executives very capably  
led by tony wray that is committed to 
operational excellence and continuous 
improvement momentum within the 
company is strong and we have the 
ambition to be recognised as a top 
performer in our sector i am also grateful to 
the management team for the wholehearted 
support that they have given to me in my 
ﬁrst year as chairman
we have a solid track record of ﬁnancial 
performance and the board is proposing a 
ﬁnal dividend of 3905p to be paid on 29 
july 2011 this will give a total dividend of 
6509 pence per ordinary share from this 
new base we will look to grow the dividend 
by 3 above rpi each year up to 201415 
the single largest proﬁt driver was the 
performance of severn trent water which 
continued to outperform with planned 
operational expenditure below the level of 
the final determination 
this improvement in efﬁciency is a 
consequence of the group’s ongoing change 
programme which is resulting in signiﬁcant 
business improvement one of the most 
momentous changes during the year was 
the move to our new operating centre in 
coventry resulting in not only a change  
of environment for our people but a  
change to new more efﬁcient and 
innovative working practices i’ve yet to 
meet a visitor who isn’t impressed by this 
truly modern working environment and the 
building has created a level of energy and 
enthusiasm that is infectious
the change programme extends beyond 
the ofﬁce to the group’s operations and 
processes and includes signiﬁcant systems 
investment naturally as with many 
programmes of this size and scale it comes 
with its challenges but we’re conﬁdent we 
have embarked upon a course that will allow 
us to continue to deliver further efﬁciencies 
throughout the amp period
operational performance during the year 
was impacted by the severe winter weather 
placing pressure on our leakage 
performance during the year the number of 
unplanned interruptions to customers’ water 
supply increased we have decided to 
increase the level of investment in our water 
distribution system in order to build even 
greater resilience in our infrastructure to 
cope with severe weather in future years 
severe weather notwithstanding however 
we continue to provide some of the highest 
standards of customer service in the 
industry with excellent drinking water quality 
and a year on year reduction in the number 
of properties suffering from sewer ﬂooding 
i am particularly pleased to see the focus  
on health and safety within the business 
the personal safety of employees has 
always been one of my priorities so i was 
pleased to ﬁnd a strong culture and focus on 
safety in the company our recent employee 
engagement survey shows that 95 of our 
people say that health and safety is taken 
seriously at severn trent water and this is 
reﬂected in the severn trent water lost 
time incident lti performance which 
remains the best in the sector safety is one 
issue but the commitment of our employees 
is vital to our group’s success and so we are 
continuing to invest in the development and 
training of our employees and future leaders
during the year we made good progress in 
protecting our environment and dealing with 
waste water whilst continuing to lead the 
industry in the production of renewable 
energy selfgenerated renewables now 
supply 22 of severn trent water’s power 
requirements helping to mitigate our  
carbon impact 
severn trent services had a mixed year 
with performance falling below expectations 
although the business made good progress 
in reducing its costs and maintains a strong 
order book results were affected by project 
delays in our middle east and north africa 
region and the slowdown in the global 
economic environment impacting public 
funded initiatives growth and proﬁtability  
in our services business remains a priority 
and we are well placed to make progress  
on this aim 
as i write this statement it seems likely that 
there will be some regulatory change 
following the publication of the government’s 
white paper later this year we intend to 
continue to play an active role in regulatory 
reform and play an inﬂuential role in the 
debate about how our industry addresses 
the challenges ahead of us in order to 
promote sustainable growth we also want 
to make sure that any change strikes the 
right balance between delivering value and 
security to our customers and reliable 
returns to our shareholders we must get 
this right because the investment challenge 
over future years means that we must be 
able to compete for capital internationally as 
the need for infrastructure funding globally 
becomes more pressing you can read 
more about our position on page 20 of  
this report
all of this will undoubtedly bring more 
challenges but i ﬁrmly believe that we have 
the talent the innovation the systems and 
the resources to continue to achieve 
proﬁtable and sustainable growth for our 
group whilst also meeting the needs of our 
customers and the environment
‘ we have the talent the innovation the 
systems and the resources to continue  
to achieve proﬁtable and sustainable 
growth for our group whilst also  
meeting the needs of our customers  
and the environment’
andrew duff  
chairman severn trent plc annual report and accounts 2011 6
chief executive’s review
our strategy of sustainable growth 
through a focus on water and waste  
water operations in the uk and 
internationally continues to deliver 
signiﬁcant overall value
in the uk severn trent water made  
a good start to the new ﬁve year  
regulatory period performing broadly  
in line with expectations 
in a challenging year i would like to  
pay tribute to our people who 
professionally handled both difﬁcult 
operational circumstances and  
signiﬁcant internal change
our severn trent services business 
started the year strongly but was  
affected by the economic slowdown  
and political and regulatory uncertainty  
in the second half 
fundamentally we remain well placed  
to deliver our business plan and to 
continue to play an active role in shaping 
the future of the uk water industry
t ony wray  chief executive severn trent plc annual report and accounts 2011 7
overview
business performance review
group proﬁt before interest tax and 
exceptional items is down 7 due to 
expected price reductions in the ﬁrst year  
of the amp period for severn trent water 
and a disappointing second half 
performance in severn trent services  
in challenging market conditions
from the new dividend base of 6509p we 
will grow the dividend by 3 above rpi up 
to 201415 
underlying ﬁnancial performance remains 
strong and we continued to outperform our 
regulatory targets
severn trent water
with our focus on operational excellence 
and continuous improvement our goal is  
to keep prices low and deliver the highest 
customer service and environmental 
standards
overall we achieved these goals in the past 
year we delivered industryleading drinking 
water quality and reduced the number of 
incidents of sewer ﬂooding one of the 
biggest causes of distress to our customers 
our customers also beneﬁted from the 
lowest combined average water and 
sewerage bills in england and wales
in these straitened times we’ve carried  
on helping customers who have difﬁculties 
paying their bills and as a result we have 
also been able to reduce bad debt
environmental performance continues to  
be strong and we are reinforcing our leading 
position in renewable energy generation 
with 22 of severn trent water’s electricity 
requirements being met by selfgenerated 
renewables some of that was generated  
by the uk’s ﬁrst commercial scale crops to 
energy plant which was opened this year 
leakage was above target as a result of the 
severe winter weather however despite 
signiﬁcant operational challenges we 
maintained our leakage at the same level as 
last year unplanned interruptions to supply 
also increased during the year 
steps are in place to improve the resilience 
of our water distribution network but i would 
like to pay tribute to our people who faced 
with unprecedented operational challenges 
kept customer supplies running over this 
difﬁcult period 
that we are able to work in such a ﬂexible 
and responsive way is thanks in part to the 
changes we have made to our internal 
operations this year we moved to our new 
operating centre severn trent centre in 
coventry bringing together under one roof 
many teams previously dispersed over 
seven older buildings we have transformed 
our technology infrastructure and 
implemented the second phase of sap 
which will help us to run our business more 
effectively
once again i would like to use this 
opportunity to thank our people for the way 
they have responded to such a signiﬁcant 
change in technology and ways of working
severn trent services
the economic environment remained 
especially challenging for our severn trent 
services business which started the year 
well only to experience a market downturn  
in the second half
while the underlying market is growing and 
demand remains strong projects are being 
delayed as project ﬁnancing has been less 
available and slower to obtain in addition 
political uncertainty in the middle east a key 
market for our water puriﬁcation products 
and the moratorium on deep well drilling  
in the us led to lower sales of our highly 
successful electrochlorination product line 
in the us in particular municipal budget 
shortfalls have limited infrastructure 
spending on products while driving more 
project opportunities for outsourcing in our 
operating services units
looking ahead
at severn trent water with strong 
underlying performance and the right 
people technology and amp5 contracts  
in place we are well placed to achieve  
our business plan and outperform our 
regulatory targets 
in severn trent services the prospects for 
long term growth remain good but the ﬁrst 
half of the coming year is likely to see the 
same market conditions that prevailed at the 
end of last year with a good portfolio of 
business and products we are conﬁdent  
of returning to proﬁtable and sustainable 
growth once the public ﬁnances start to 
recover and the political and regulatory 
uncertainty in key markets subside
in terms of prospects for regulatory and 
industry change severn trent remains at 
the forefront of industry thinking and our 
ideas for a sustainable future for our  
industry have been widely published  
and well received 
throughout our operations our goal 
continues to be to deliver long term 
sustainable growth this strategy 
underpinned by a clear focus on customers 
environmental performance people and 
shareholder value will continue
2010 £125
2011 £161
2006 £100
2007 £128
2008 £132
2009 £97
total shareholder return 
2006–2011 severn trent plc annual report and accounts 2011 8
our strategy
sustainable growth
customers
our customers have the lowest on average 
bills in england and wales but keeping 
customers satisﬁed is not just about low 
charges and value for money we also need 
to reﬂect their needs and priorities in our 
plans communicate clearly keep our 
promises and apologise if things go wrong 
environment
our operations depend on the environment 
in which we operate our activities can have 
a signiﬁcant impact and we take our 
stewardship of the environment very 
seriously looking for innovative ways to 
manage our river catchments and minimise 
pollution and our carbon footprint
sustainable
we need to strike the right 
balance to maintain a healthy 
business we do this by
severn t rent water 
our vision is to be the best water and waste water company in the 
uk we aim to achieve this by providing the highest standards 
and lowest charges and through great people we focus on four 
key areas – customers environment people and value 
key strategic intentions
 
our strategy is based on 
eight key strategic intentions 
ksis which reﬂect what 
matters to our customers and 
wider stakeholder groups 
we measure our performance 
within each ksi against our 
18 key performance 
indicators kpis  
1  providing a continuous 
supply of quality water
2  dealing effectively with 
waste water
3  responding to customers’ 
needs
4  minimising our carbon 
footprint
5  having the lowest possible 
charges
6  having the right skills to 
deliver
7  maintaining investor 
conﬁdence
8  promoting an effective 
regulatory regime
people
our drive to work safer better and faster  
is the cornerstone of our business 
transformation initiatives making sure  
we have the right processes and systems  
in place underpinned by a strong safety 
culture is a fundamental part of our drive  
for operational excellence and continuous 
improvement
value
the more efﬁciently we work the higher  
our standards in turn this improves our 
ability to keep our costs low and generate 
progressive sustainable returns which 
earns the trust of our shareholders
providing high standards of service to 
our customers strong environmental 
performance a fair return for investors 
and a great place to work for our people
running a sustainable business balancing 
the needs of all our stakeholders along with 
the needs of the environment in which our 
businesses operate
making sure our business is efﬁciently 
ﬁnanced with a ﬂexible and sustainable 
balance sheet 
as well as ensuring we are securely funded 
we work to manage our balance sheet 
sensibly and keep our credit ratings stable 
we keep our reﬁnancing needs under 
constant review to take advantage of 
favourable market conditions
acting responsibly operating safely 
and doing the right things
the very nature of our business makes 
corporate responsibility part and parcel of 
our everyday business activities what we 
do affects the environment local and 
regional communities our people and 
society at large acting responsibly 
operating safely and doing the right thing 
also play important roles in enhancing our 
reputation with our stakeholders it therefore 
makes sense to make ethical and 
responsible business practices an integral 
part of our strategy incorporated into our 
business planning and risk management
our key focus
customers
delivering quality 
services at 
prices customers 
can afford
environment
reducing 
pollution and our 
carbon footprint 
people
investing in the 
right people with 
the right skills
value
making our 
business 
attractive to 
investors severn trent plc annual report and accounts 2011 9
overview
severn trent services is one of the leading 
water and waste water businesses in the 
world to achieve our strategy we focus on
• expanding the scope of our operating 
services to existing clients around the 
world
• continuing the geographic expansion  
of our products
• enhancing products and operations to 
improve our effectiveness and efﬁciency
• developing new technologies at the 
forefront of water and waste water 
solutions
growth 
we create and release value by 
focusing on water and waste 
water we achieve this by
severn t rent services 
 we aim to maintain strong operational performance through  
cost control and revenue growth and by capitalising on the  
right opportunities for growth in the higher return unregulated 
market sectors
key strategic initiatives
 
eight key strategic initiatives 
deﬁne our strategy and set 
out how we intend to achieve 
our objectives  
1  deliver what customers 
value
2  establish long term 
contracts and strong sales 
channel relationships
3  expand our global 
technology programme
4  continuously improve 
quality health safety  
and environmental 
performance
5  invest in strategic 
partnerships to 
supplement organic 
growth
6  optimise processes and 
organisational capabilities
7  continue to build a strong 
coherent and respected 
brand
8  increase employee 
engagement
operational performance
as a competitive business it is crucial that 
we build on our strengths in order to secure 
new business and maintain high levels of 
contract renewals in operating services 
for our water puriﬁcation products 
business this means continuing innovation 
to develop highend products taking 
advantage of market opportunities while 
staying focused on water we also aim to 
preserve our operational margins through 
efﬁciency gains
we are always looking for ways to improve 
our standards and operate more efﬁciently 
we achieve this through supply chain cost 
reduction in component sourcing and lower 
cost locations for engineering and 
assembly and by improving our 
environmental and health and safety 
performance
growing severn trent water in the  
uk through investment in our networks 
and services
we are committed to reaching the highest 
standards in the industry and to continually 
improving our performance in every area of 
our business from the resilience of our 
networks to the energy we consume and the 
way we interact with our customers for that 
reason the improvement targets we set 
ourselves are ambitious and often more 
challenging than our regulatory requirements
winning in a changing world – 
positioning severn trent to capitalise 
on opportunities in a new regulatory 
framework
our industry has delivered signiﬁcant 
beneﬁts in the two decades since 
privatisation however we believe that 
changes to the regulatory and policy 
framework are now needed in order to make 
the industry sustainable our strategy of 
continually improving our operational and 
ﬁnancial performance backed by a 
signiﬁcant programme of change puts us  
in a strong position to prosper from future 
changes to the way we are regulated
deploying our severn trent services 
business into new markets
this business operates at the forefront  
of the demand for water and waste water 
services we achieve growth in this 
business by expanding the scope of our 
existing markets entering new high growth 
markets and investing in innovative 
technologies 
developing new treatment technologies
our research and development teams 
investigate treatment technologies to 
improve our efﬁciency and continually 
reduce our environmental impacts by 
challenging traditional approaches we are 
able to introduce groundbreaking solutions 
that require less capital investment and 
lower operational costs severn trent plc annual report and accounts 2011 10
business review
severn trent water
performance
our aim is to deliver the highest standards 
and lowest prices for customers and one of 
the best standards of drinking water in the 
uk at an average of £298 severn trent 
water customers also paid the lowest 
average combined water and sewerage bill 
in england and wales over the last year 
for those customers struggling to pay we 
helped to manage their payments whilst 
reducing our own bad debt risk
the harsh december had a signiﬁcant 
impact on our operations particularly on 
our leakage performance with a sharp 
peak in leakages at the height of the 
freezethaw events the severe weather 
also meant that our capital programme got 
off to a slower start than we had aimed for
we are particularly pleased with progress 
in our work to tackle sewer ﬂooding one  
of the biggest causes of disruption and 
distress to our customers we also halved 
the total number of pollution incidents in the 
category 1 and 2 bands with none in the 
most serious category 1 classiﬁcation
our business also underwent change 
during the year as we set up to deliver  
our ambitious amp5 programme our 
streamlined new supply chain is now  
in place and major improvements in 
technology and ways of working have been 
implemented including the move to a state 
of the art operational centre in coventry
customers
our customers’ combined average water 
and sewerage bills are the lowest in 
england and wales and the quality of the 
water we provide is amongst the best in the 
industry we also score well on the process 
side of dealing with our customers – we 
aim to deal with customer issues at ﬁrst 
point of contact although we solve 
problems efﬁciently we need to improve 
the way we engage with our customers 
our challenge is to maintain our  
efﬁciency whilst making our customers  
feel more valued
underlying improvements in 
operational performance were 
affected by a challenging 
business and economic 
environment together with  
the coldest december in  
100 years however overall 
progress remains strong with 
signiﬁcant business change 
resulting in the delivery of 
planned efﬁciencies
we worked with customer 
focus groups to redesign our 
customer bills so they ﬁt our 
customers’ needs
82m
we serve 82 million people
£298
lowest combined average water  
and sewerage bill in england and  
wales at £298
82p
average customer pays just  
82 pence per day
our challenge is to keep 
continually improving how we 
engage with our customers 
we need to maintain our 
efﬁciency while making our 
customers feel more valued severn trent plc annual report and accounts 2011 11
business review
case study 
transferring sewer 
ownership
we anticipate the transfer of 
private drains and sewers 
pdas will take place in 
october 2011 at the moment 
home owners are responsible 
for everything up to the main 
sewer including the 
connection after the transfer 
we will own around 37 000km 
of sewers which are currently 
privately owned and be 
responsible for their repair 
and maintenance we also 
expect roughly 4000 
pumping stations to be 
transferred in stages over the 
following ﬁve years we 
believe this will beneﬁt some 
customers in a number of 
ways such as reducing their 
liability and repair costs  
but will lead to higher bills  
in general to fund the 
necessary continued 
investment our plans for the 
transition are well advanced 
and we have been engaging 
with regulators and 
government to make sure  
we provide customers with 
an efﬁcient service after  
the transfer
customer experience
we are committed to providing the best 
customer experience possible ofwat’s 
service incentive mechanism sim a new 
way of measuring the customer experience 
will help us keep track of our performance  
it measures whether our customers feel 
valued when we interact with them as well 
as how well we respond to their telephone 
and written communications the 201011 
ﬁnancial year is our ﬁrst full year of data  
we are using the information we gather to 
put together a customer experience 
programme that covers recruitment training 
our telephone performance and improving 
every single touch point customers have 
with severn trent 
at times and especially during the harsh 
winter our customers found it difﬁcult to 
contact us as we were inundated with calls 
from people with frozen domestic pipes 
this has increased complaints which we  
are working hard to resolve 
a continuous supply of quality water
in 2010 we delivered 9998 overall mean 
zonal compliance with dwi drinking water 
quality regulatory standards however  
our unplanned interruptions to supply 
performance over the year was not at the 
level we expect three major events caused 
signiﬁcant disruption and regrettably a 
number of our customers were without 
water for some time we have a dedicated 
programme in place to improve performance 
flooding and pollution 
we are ahead of our target for reducing the 
number of properties on the sewer ﬂooding 
risk register thanks to investments in our 
network and our proactive monitoring which 
allows us to identify and ﬁx problems before 
they result in failure we have reduced the 
number of network failurerelated repairs by 
15 resulting in less disruption to customers 
and reduced ﬂooding and pollution 
managing debt
our challenge is to reduce bad debt while 
helping people who genuinely want to pay 
but are ﬁnding it difﬁcult to meet their 
payments in 2010 we introduced a new 
credit management system that helps us 
target our efforts more efﬁciently along with 
our relationships team which works with 
social housing landlords to track tenants 
moving in and out of rented accommodation 
and stay on top of debt in this sector we 
reduced bad debt to 23 of sales our 
region is still feeling the effects of the 
economic change the country is currently 
experiencing and for this reason our outlook 
on debt reduction is cautious
to help people on lower incomes who want 
to be good payers but have fallen into debt 
we are piloting the new together tariff 
where we match payments made by 
customers we have contributed £45 million 
to the severn trent trust fund helped over 
4800 customers through our watersure 
tariff and signed up 43549 people to  
water direct
customer written complaints per 1000 
properties
573 2011 495 2010
first time call resolution for billing 
90 2011 89 2010
properties at risk of low pressure per 
1000 properties
007 2011 012 2010
for more information on kpis  
see page 123 severn trent plc annual report and accounts 2011 12
jobs resolved ﬁrst time 
975 2011 965 2010
net energy use – gigawatt hours gwh 
706 2011 714 2010
leakage – megalitres per day mld 
497 2011 497 2010
pollution incidents cat 1 2 and 3  
378 2011 322 2010
business review
severn trent water
performance continued
case study 
improving river water 
quality 
a £9 million project to 
upgrade our sewerage 
network and improve the 
water quality of the river 
tame unearthed several 
hurdles at the feasibility study 
stage these included 
contaminated ground buried 
concrete structures the 
presence of great crested 
newts and a complex 
geology with a past history of 
deep coal mining and high 
groundwater levels we 
worked with the environment 
agency and the local 
authority to secure an 
agreement to reuse all 
excavated material on site 
delivering a huge reduction in 
the project’s carbon footprint 
collaborating with our 
contractor also enabled us  
to introduce several 
innovations such as 
specialist covers to the tank 
and control of groundwater 
environment 
our customers should have conﬁdence that 
we will take away waste water and treat it to 
the highest environmental standards before 
returning it to our region’s rivers we also 
strive to run our operations in a sustainable 
way and reduce our carbon footprint 
during the year we made good progress  
in protecting our environment and dealing 
with waste water whilst continuing to lead 
the industry in the production of renewable 
energy however severe winter weather 
impacted our leakage performance in  
what was otherwise a year of improved 
environmental performance
dealing with waste water
during the past 12 months we have had a 
strong focus on continuous improvement 
which has resulted in us halving the  
number of serious pollution incidents from 
eight to four in the year with no category  
1 pollutions we have been working on 
improved processes for identifying 
monitoring and reporting pollution and our 
self reporting has increased by 11 we are 
conﬁdent that this is helping us to focus on 
the right things and whilst this has led to an 
overall increase from 322 to 378 reported 
pollution incidents we are conﬁdent that this 
is due to raising our standards of working 
and improving our understanding such  
that in the longer term we will deliver  
better overall performance
an £82 million investment to resolve 
pollution from our sewers overﬂowing in 
rivers and streams will lead to a further 
signiﬁcant improvement in river quality  
in the region
our sewage treatment works failing consent 
limit was 169 2010 180 we are 
working to improve this as part of our 
environmental improvement plan which we 
put in place this year our plan developed 
alongside ofwat supports our aim of raising 
the standards of our watercourses to beneﬁt 
local communities and those who use our 
rivers for recreation
one of our challenges is striking a balance 
between river water quality and carbon 
production we invest in plant to eliminate 
nitrates and pesticides in order to improve 
water quality in our rivers and comply with 
the water framework directive wfd to 
reduce the number of new treatment works 
we need to build we work in partnership 
with farmers and industries to encourage 
them to discharge less efﬂuent and waste 
into watercourses through the use of 
catchment management investigations 
cmi severn trent is currently engaged  
in 47 cmis more than any other water 
company we have also developed a  
joint initiative with the environment  
agency to balance carbon emissions  
and river ecology
for more information on kpis  
see page 123 megalitres per day mld
2007 2011 2010 2008 2009
350
450
550
750
650
800
winter peaks 200708 to 201011 
weekly leakage april 2007 to march 2011
severn trent plc annual report and accounts 2011 13
business review
case study 
saving water and energy
thanks to the efforts of our 
customers we continue to 
lead the industry in water 
efﬁciency nottingham couple 
gary and clare blissett are a 
good example by making a 
few practical changes they 
virtually halved their water 
consumption – and energy 
bills – in a year as gary 
explains “it’s about small 
behavioural changes such  
as turning off the tap when 
brushing our teeth only 
putting a full load into the 
washing machine and 
dishwasher and taking 
showers instead of baths” 
they also ordered free water 
saving devices such as a 
showersave device from 
severn trent our work  
with customers energy 
companies and schools 
helps us have the lowest per 
capita consumption of water 
in the uk
15 gwh
of electricity from 37 000 tonnes  
of converted maize sludge
126 litres
customers used on average just  
126 litres of water per day
9
increase in our production of renewable 
energy 
protecting the biodiversity of our region
the scale and scope of our operations puts 
us in a unique position to protect and often 
enhance the biodiversity of our region 
particularly its aquatic ecosystem there are 
over 800 sites of special scientiﬁc interest 
sssi in our region a number of which are 
nominated as sites of european importance 
for the conservation and protection of 
endangered species we own or partly 
manage 37 sssis and work in partnership 
with natural england countryside council 
for wales our tenants and other partners to 
safeguard the special interest of these sites 
reducing leakage
we experienced the coldest december  
in 100 years with signiﬁcant snowfall and a 
prolonged freeze across our region the 
graph below shows how leakage increased 
sharply compared to previous years this 
caused severe operational difﬁculties but we 
kept customers on supply throughout the 
winter however two freezes followed by 
two thaws caused leakage to rise to 
unprecedented levels we were able to 
maintain leakage at last year’s levels of  
497 megalitres per day mld however 
despite deploying additional resources we 
were unable to achieve our leakage target  
of 483 mld as a direct result of the weather 
we have reduced leakage signiﬁcantly  
since the winter and we have plans in  
place to achieve our targets in 201112  
our long term trend on leakage is good  
and we are conﬁdent of hitting our targets  
in future years
customers also have a part to play and  
our water conservation and efﬁciency 
programme has resulted in one of the  
lowest per capita water usages in the uk 
severn trent water customers use an 
average of 126 litres per day compared  
to the national average of 146 litres
reducing our carbon footprint
in 201011 we met our target of producing 
22 of severn trent water’s energy 
requirements from renewables reinforcing 
our leading position in the production of 
renewable electricity from sewage  
the group also delivered the uk’s ﬁrst 
commercial scale ‘energy crop’ power  
plant using maize and wheat to generate  
15 gigawatt hours gwh of electricity  
per annum enough to power 4500 homes  
the group has recently received permission 
to build its ﬁrst wind turbine which will  
help us achieve the goal of 30 of severn 
trent water’s power requirements being 
generated from our own renewables  
by 201415
as well as reducing our carbon impact 
renewables will also offer protection against 
rising energy prices reducing our exposure 
in volatile energy markets and saving 
around £28 million over the next ﬁve years 
in addition to generating our own energy  
we also set targets and monitor energy use 
across every area of our business our 
people take every opportunity to reduce 
energy from turning off lights to reducing 
unnecessary journeys we continue to 
invest in trackers and software that routes 
vehicles to make job scheduling more 
efﬁcient leading to reduced mileage and  
an improvement in productivity severn trent plc annual report and accounts 2011 14
business review
severn trent water
performance continued
lost time incidents per 100000 hours 
worked
037 2011 036 2010
for more information on kpis  
see page 123
people
over the past 12 months we have taken 
signiﬁcant steps to transform the way we 
work from the environment our people work 
in to the processes and technologies we 
use this is a vital part of our strategy to 
improve our performance and operational 
efﬁciency and the service we provide to our 
customers any change on this scale is 
bound to be challenging but overall our 
people are embracing the new working 
arrangements and once again showed 
exceptional commitment over a difﬁcult 
winter period 
a new way of working
in october we moved to the severn trent 
centre in coventry one of the most energy 
efﬁcient buildings in europe it reﬂects our 
ethos of openness team working high 
standards and low charges we also 
transformed our technology infrastructure 
virtual desktops allow our employees to 
access their pcs and business systems 
from any desk at a large proportion of our 
sites it also allows us to form teams 
dynamically to resolve speciﬁc problems 
for example during the extreme cold 
weather the technology allowed our people 
to rapidly form work groups and share 
information we are now using these 
working arrangements as a template to 
modernise the rest of our sites through our 
ongoing workplace improvement plan
improving our technology and  
business processes
throughout the year we continued to invest 
strategically in new technology completing 
the implementation of our new sap 
workforce management systems refreshing 
our desktop technology providing high 
bandwidth telecoms infrastructure and new 
data centres the adoption of new lower 
running cost technology has increased 
reliability and performance at a lower 
operating cost
the new sap workforce scheduling 
technology and processes are starting to 
make our operational teams more 
productive and our investment in sap’s 
asset management systems is contributing 
to improved capital programme efﬁciencies
our new systems and technology are 
fundamentally changing the way we work 
and so we have invested heavily in training 
our people to equip them with the right skills 
to exploit the new technology and systems
throughout our business our teams are 
improving their performance by changing 
the way they work using our ‘safer better 
faster’ approach to continuous 
improvement with more than two thirds of 
the organisation now upskilled in the tools 
and techniques managers and their teams 
are equipped to improve their processes to 
deliver higher standards of performance to 
our customers in the most cost effective 
ways they can the approach is now being 
introduced into our business support areas 
the success of this programme is due to the 
involvement and engagement of our people 
in making the improvements for themselves 
– taking ownership of their performance 
learning new tools and techniques  
and working more collaboratively with 
colleagues in different functions to  
solve problems
severn trent centre in coventry severn trent plc annual report and accounts 2011 15
business review
a concept known as safety 
improvement teams set up  
by our waste water services 
team to increase employee 
engagement around health 
and safety won a rospa 
silver award in 2010
employee motivation 
74 2011 74 2010
engaging our people
although our people went through 
considerable changes during the year  
those changes led to upskilling simpliﬁed 
processes and a better workplace and 
technologies our employee engagement 
survey revealed that 74 of employees 
across the organisation remain positively 
engaged positively engaged means 
employees are committed to the 
organisation and have the desire to go 
above and beyond the call of duty to achieve 
success people support the need for the 
improvements and changes we are making 
86 and think their colleagues give them 
the support they need to do their job 87 
a high percentage 88 are also happy to 
go the extra mile when required 
however only 33 of employees felt that 
changes which affected their job had been 
well implemented in response to this we 
introduced a module on change 
management to our line manager 
development programme 
we share the results of the employee 
engagement survey with our teams and 
trades union partners in order to ﬁnd more 
productive and cooperative ways to work 
together in the future 
a safe and healthy workforce
during the year our health and safety 
performance despite remaining at upper 
quartile and leading the sector did not 
improve this is the ﬁrst time in a number  
of years that we have not seen a year on 
year improvement and we are seeking to 
address the identifying causes to enable  
the business to attain further progress in  
this important performance measure 
importantly we have a strong culture of 
people taking personal responsibility for 
their own health and safety and that of 
others this year 95 of our workforce 
agreed that health and safety is taken 
seriously and 87 said we give them  
the right support to do their job safely  
we have introduced better health 
surveillance processes as part of improving 
our employees’ wellbeing but recognise that 
while we have made positive progress we 
have more to do in this area
recruitment and training
having the right people with the right skills is 
more important than ever we are working 
to make sure we have a more diverse 
workforce with a particular focus on 
attracting more female candidates for 
operational and senior roles in 2010 we 
continued to provide regular diversityrelated 
training and communications to managers 
employees and new joiners and worked to 
embed the importance of diversity within our 
business with the help of acas we have 
designed and are implementing diversity 
training events that will eventually train 500 
water distribution employees
to develop succession plans we identify 
and mentor future leaders through our  
talent review process which assessed  
893 managers and potential leaders this 
year current managers have access to  
our line manager journey which includes  
a suite of training modules such as  
change management and coaching for 
performance we continue to develop  
the training programme package and add 
new modules when a need is identiﬁed
for more information on kpis  
see page 123 severn trent plc annual report and accounts 2011 16
business review 
severn trent services
performance
case study 
growing business in spain
our acquisition of ps 
apliclor sa near barcelona 
in 2009 has resulted in 
several new orders in the 
country such as a contract 
to supply spain’s largest 
electrochlorination plant in 
tarragona the plant will 
improve water management 
in the region which supplies 
140000 residents with 
drinking water this is a 
good working example of 
our acquisition strategy to 
create a european hub from 
which we can bring new 
water puriﬁcation business 
to the rest of the region
the wider social and economic environment 
remained challenging particularly in the 
second half of the year with delays to 
ﬁnancing of capital projects the gulf coast 
deep well drilling moratorium in the us and 
political unrest in the middle east there 
were a few visible signs of recovery in the 
majority of our markets post the ﬁnancial 
crisis although a few markets china for 
example were more robust the impact was 
felt most acutely in our products business 
particularly disinfection products in the us 
and in operating services the impact was 
mainly in europe particularly italy
water puriﬁcation products
industry publications and trade associations 
reported market contractions in the range of 
4 for water equipment despite the slower 
than anticipated market recovery we were 
able to grow some product lines mainly in 
ﬁltration while disinfection particularly 
electrochlorination was impacted by the 
moratorium on the gulf of mexico deep well 
drilling the us water business was 
particularly impacted with the budget crises 
experienced by municipal establishments 
rippling out to the market in the future we 
expect recovery in this market to be slow 
and gradual
‘ despite the slower than 
anticipated market recovery   
we were able to grow some 
product lines’
a challenging economic 
environment and social and 
political uncertainty impacted 
negatively on performance 
especially in the second half 
however we made good 
progress in reducing our  
costs and improving our 
environment and health and 
safety performance we are 
also investing in speciﬁc 
segments both in our products 
business and operating 
services to capture growth 
opportunities and deliver 
longer term proﬁtability 
in europe after a slow start activity picked 
up towards the end of the year in the uk 
more projects were commissioned as water 
companies settled into the new regulatory 
period delays in ﬁnancing in our other 
european markets led to a slowdown in 
product shipments however while projects 
were delayed none were cancelled 
with the exception of china which 
remained healthy for most of the year 
uncertainties around the economy and 
funding also affected our business in asia 
paciﬁc although in the ﬁnal quarter of the 
year there were some signs of improvement
denitriﬁcation plant in china 
 
£1m
electrochlorination in india 
 
£13m
electrochlorination in egypt  
 
£28m
filtration blocks in mexico 
 
£28m
new project orders turnover severn trent plc annual report and accounts 2011 17
business review
  
operating services  
adds £21 million through  
hub and spoke
we operate on a hub and 
spoke approach looking for 
new business in the areas 
surrounding existing 
contracts this proved 
particularly successful in 
oklahoma where we 
expanded our presence  
in the area by signing three 
new multi year operating 
services contracts during  
the year bringing in over 
£21 million revenue annually
south america remains relatively strong 
with 36 year on year growth and a number 
of attractive orders including two orders  
for ﬁltration blocks in mexico worth over 
£28 million
in the middle east and north africa mena 
region the global economic slowdown 
continued to adversely impact our business 
and several large projects were postponed 
due to delays in ﬁnancing during the last 
quarter the region was also impacted by 
social and political unrest
operating services
forced to ﬁnd cost efﬁciencies municipal 
utilities will sometimes look to public private 
partnerships they need to make real 
savings from any outsourcing strategy  
so our focus is on cost efﬁciency and 
continually improving our processes in the 
us we increased our market position and 
were one of just two companies to report 
year on year revenue growth
to support new business we have continued 
to selectively add people to our business 
development new project proposals and 
technical support service teams we expect 
to accelerate the investment in these same 
departments in the coming year to take 
advantage of the medium term growth 
potential in the us market 
we also developed our presence in ireland 
this year – an operate and maintain project 
in limerick has been running for almost a 
year and we have won and started work  
on a new contract for a waste water 
treatment plant in letterkenny in the rest  
of europe ﬁnancing delayed some larger 
designbuildoperate projects in the uk  
and italy which negatively impacted 
performance in the second half although 
we continue to develop the project pipeline 
in both countries
analytical services
our business continued to feel the effects  
of the uk slowdown particularly in the 
commercial sector we have just reached 
the end of the ﬁrst full year of our 10 year 
contract with yorkshire water using our new 
laboratory in wakeﬁeld during the year our 
wakeﬁeld laboratory also took on some 
work from our bridgend facility where some 
testing was temporarily suspended following 
a dwi audit the facility at bridgend is fully 
operational and with new accreditation 
following corrective action
continuous improvement
operational efﬁciency
in a more challenging market environment 
our focus is on being more efﬁcient our 
products division has been moving our 
production to lower cost regions closer to 
our markets rather than shipping them from 
the uk and us this year we exceeded our 
target and made supply chain savings of 
£24 million on the previous year
one of the ways we deal with price 
pressures in our operating services 
business is by offering energy management 
plans to our us customers at no extra cost 
we review their energy use this enables 
our customers to alter their processes and 
operating procedures and improve 
efﬁciency beneﬁting both our customers 
and severn trent services
£336 1m
turnover in 20101 1 
£04m 
down on 200910
£257m
 
down 105 proﬁt before interest  
tax and exceptional items  severn trent plc annual report and accounts 2011 18
business review 
severn trent services
performance continued
environment
as part of a global water company we 
understand the need to ﬁnd innovative ways 
to reduce our impact on the environment 
and in turn those of our clients and 
customers we achieve this through careful 
management of our resources and waste 
water discharges the way we operate our 
treatment sites and development of 
technologies for the third consecutive year 
we completed site energy management 
plans semps for ﬁve major plants in our 
us operating services business our 
semps evaluate several operating 
conditions to determine the most energy 
efﬁcient treatment process several of our 
businesses are certiﬁed under iso 
140012004 the international standard  
for environmental management systems 
which we use to manage and minimise  
our impacts
many of our products and services help  
our customers improve their environmental 
performance and operate more efﬁciently 
in the ﬁrst year of our public private 
partnership to operate sewerage and waste 
water treatment plants for the city of 
clinton oklahoma we saved the city 
approximately £100000 in operating 
expenses improved compliance got the 
plants operating more efﬁciently and made 
signiﬁcant reductions in energy usage in 
italy we completed a green energy plant to 
generate electricity from biogas produced 
by sewage sludge we use the energy to 
run the treatment plant and sell any excess 
to the national energy grid
people health and safety
to meet the aims of our growth strategy 
we need to recruit and develop a talented 
and motivated workforce and provide them 
with a safe and rewarding place to work 
we were therefore delighted that in our 
employee engagement survey severn 
trent services outperformed many other 
industry and country benchmarks results 
of the independently run survey show that 
the majority of our employees are proud to 
work for us and 90 feel we meet the 
needs of our customers
given our strategy to embed health and 
safety in all areas of our business we were 
particularly pleased that 95 of our 
employees take personal responsibility for 
working safely and 90 are aware of their 
responsibility to protect the environment  
in january we set up a multi level task 
team to suggest ways we could continue  
to improve our health and safety 
performance incorporating their 
recommendations into our health and 
safety plans for 201112 
‘ our organisation serves more than 38000 
families in haiti through our household 
water treatment programmes severn t rent 
services’ donation of water disinfection 
equipment will improve our capacity to 
serve each of these families in an ongoing 
sustainable way’
michael ritter  
co founder and ceo of deep springs international 
90
of employees feel we meet the needs  
of our customers
case study 
assisting in the effort to 
provide safe drinking water 
to the residents of haiti
as part of a humanitarian 
campaign to enable ordinary 
citizens to treat their drinking 
water at the point of 
consumption we donated  
11 portable electrolytic water 
disinfection systems to 
agencies working in haiti 
the units which convert 
saltwater and energy into 
liquid sodium hypochlorite 
are being used to disinfect 
drinking water
ten portable sanilec
®
 
systems and one clortec
®
 
unit were donated to three 
humanitarian agencies 
working in haiti operation 
blessing international deep 
springs international dsi 
and st damien hospital 
dsi seeks to alleviate 
poverty illness and 
unemployment through an 
integrated and sustainable 
safe water programme 
operation blessing 
international provides 
strategic disaster relief 
medical aid hunger relief 
clean water and community 
development around the 
world and st damien 
hospital is a free paediatric 
hospital in haiti
the equipment allowed  
dsi to quickly set up bulk 
distribution of sodium 
hypochlorite solution in 
response to the cholera 
outbreak in addition to the 
equipment we provided 
technical support to optimise 
production this support 
allowed dsi to treat over  
86 million litres of water severn trent plc annual report and accounts 2011 19
business review
in the uk operating services won two 
gold awards from the royal society for the 
prevention of accidents rospa 
sustainability and growth
as a global leader in advanced water and 
waste water technology it is vital we 
develop a strong pipeline of new 
technologies that meet a speciﬁc need in 
the market it is equally important that our 
product portfolio meets and anticipates 
future regulatory standards to that end we 
have been centralising product development 
across severn trent services ensuring 
that we focus our efforts on developing the 
right products in the right areas around the 
world our recent developments include 
two groundbreaking new products
• balpure
®
 is a ballast water treatment 
system that received approval from  
the marine environment protection 
committee mepc in october see case 
study right
• microdynamics
®
 microwave ultraviolet 
technology uses microwave technology in 
the disinfection of waste water we are the 
only company selling this kind of patented 
microwave technology which is more 
efﬁcient and leads to longer bulb life 
we plan to continue to invest in the 
development of new products to meet 
changing market demands and improve 
performance 
outlook
the second half of the year saw signiﬁcant 
impacts from project delays in europe 
unrest in the middle east and the impact 
from the gulf of mexico drilling moratorium 
although some countries in the middle 
east are now moving forward and the 
moratorium has lifted shipments are only 
slowly returning to normal financing will 
continue to be an issue in the coming year 
the opportunity for sustained future growth 
in severn trent services remains around 
60 atos in italy are expected to move from 
the public to private sector in the medium 
term and the market for municipality 
outsourcing in the us is expected to double 
to c3 billion in the products arena 
microdynamics
®
 and balpure
®
 offer 
attractive medium and longer term growth 
as a result in 201112 we will be investing 
around £5 million in total in our business 
development resources in the usa and 
italy and building our market and 
technology resources to support the launch 
of our balpure
®
 and microdynamics
®
 
product lines our base business of 
operating services and water puriﬁcation 
is expected to deliver increased top line 
growth year on year in 201112 despite 
current difﬁcult market conditions although 
the ﬁrst six months may still be challenging 
at the pbit level growth in the base 
business is expected to be offset by the 
investment in new opportunities leaving 
severn trent services pbit in 201112 
lower year on year investment in these 
growth areas will in the medium term 
enable severn trent services to deliver 
higher levels of sustainable growth
‘ with a three year 
lamp life guarantee 
the microdynamics
®
 
system offered the 
lowest overall 
operational costs 
and maintenance 
requirements of any 
uv technology we 
evaluated’
jim newton  
environmental programme manager  
regional waste water treatment plant  
kent county delaware
legislation in italy will drive 
market activity for private 
partners investing in the 
country’s integrated water 
services a to segment we 
believe that our strong market 
presence gives us a great 
foundation to work from and 
expect to see an increase in our 
business here over the next 
several years
case study 
t apping into a new  
market opportunity
international maritime 
organisation imo 
regulations will soon require 
the treatment of ballast water 
before it is brought into ports 
worldwide we have 
developed the patented 
balpure
®
 system for the 
treatment of ballast water 
the result is highly desirable 
technology that puts us at the 
forefront of ballast treatment 
solutions for larger vessels in 
an addressable market that is 
expected to be worth around 
£7 billion up to 2020 and 
around £450 million annually 
beyond that severn trent plc annual report and accounts 2011 20
business review 
looking forward
climate change
whether it’s the energy we use the water 
we supply to our customers or the quality  
of the diverse environment under our 
stewardship our business both contributes 
to and is affected by climate change on 
the question of water scarcity our strategy is 
to reduce demand and improve the ﬂexibility 
of our network before developing new 
sources for instance by encouraging our 
customers to use water sensibly we have 
one of the lowest per capita consumptions 
of water in the uk 
however valuable these measures they are 
not enough on their own water companies 
need to think differently in order to tackle 
climate change and arrive at more 
sustainable solutions
water trading
changing weather patterns are predicted  
to lead to hotter drier summers and wetter 
winters this will mean less water being 
available at different times of the year our 
last water resources management plan 
showed that over the next 25 years severn 
since privatisation our industry 
has experienced two decades 
of improvement but the world 
today is a very different place 
and if we are to meet our vision 
of creating a sustainable water 
industry  we need some 
changes we are playing an 
active role in shaping the future 
of the water industry in the uk
trent will face a shortfall of 232 million  
litres a day because of climate change  
and population growth if we do not do  
things differently 
but this is not just a problem for severn 
trent it is one for the nation as a whole 
one change we would like to see is more 
water trading water companies could trade 
resources nationally using water from areas 
of lower cost to higher cost with the right 
regulatory regime we believe it would be 
possible to use existing networks to move 
water from one region to another 
intelligent funding
there is no doubt that over the next 20 
years the water industry will need to 
maintain signiﬁcant investment in 
infrastructure in order to improve network 
resilience and reach higher environmental 
standards
initiatives like water trading and more ﬂexible 
outcomebased regulation will help avoid 
unnecessary capital investment but the 
sector’s continuing ability to deliver its 
investment programmes relies on its being 
able to fund them we believe that 
continuing to ﬁnance the programme 
entirely from borrowing is unsustainable 
putting pressure on credit ratings and 
passing on risk to customers equity 
participation remains as important as ever 
long term sustainable returns need to 
reﬂect this reality
severn trent continues to address the 
medium and longer term challenges facing 
the industry and published its views in its 
publication ‘changing course’ this 
document is available for shareholders to 
read and copies may be obtained from the 
company secretary or electronically at 
wwwseverntrentcom some of the  
key highlights from that document are 
presented below
over the past 20 years our industry has 
seen improved customer standards 
environmental performance and service 
quality and become more efﬁcient water 
companies have also successfully funded 
an investment programme valued at around 
£85 billion however these improvements 
have come at a cost 
customer bills have risen energy use  
has increased by 113 and the industry  
as a whole is managing debts of some  
£33 billion on top of that the reality of 
climate change is already having an impact 
on our business to carry on in the same 
way would not be sustainable that is why 
we published our document changing 
course in 2010 setting out our position and 
outlining the six key changes we believe are 
needed to address the challenges we face
later this year the uk government is due to 
publish its white paper while we do not 
know what recommendations it will contain 
we are pleased with the response to 
changing course and encouraged by the 
development of the debate over water 
trading and policy making 
‘ the debate over  
the next 20 years 
will be about 
security of supply’
michael mckeon  
finance director
‘ we’re beyond the 
point of whether you 
believe in climate 
change or not  
the reality is we  
are experiencing 
more extremes and 
we have to ﬁnd 
ways to cope’
tony wray  
chief executive severn trent plc annual report and accounts 2011 21
business review
competition and consolidation
bringing about the kind of changes we 
believe our industry needs would require a 
change in the structure and regulation of the 
water sector the framework of incentives 
and output setting under the existing regime 
can mean that more sustainable solutions 
are overlooked in favour of capital intensive 
solutions faced with the choice of sourcing 
lowcost water elsewhere or building a 
reservoir companies often opt to build a 
reservoir this then becomes part of the 
regulated asset base allowing water 
companies to increase pricing 
we believe it would be better to encourage 
sustainable solutions that beneﬁt customers 
and the environment a gradual move 
towards a marketbased framework and 
competition within the sector would enable 
water companies to make best use of 
resources nationally rather than regionally 
such a move would help maintain investors’ 
conﬁdence in our industry and avoid an 
increase in the cost of capital 
as a water company we are unusual in that 
we are already able to supply water to large 
commercial and industrial companies 
across england and wales through severn 
trent services our expertise in commercial 
markets together with our conﬁdence about 
embracing the future and our operational 
ﬁnancial and strategic strength mean we are 
well placed to adapt to any structural or 
regulatory changes in our industry indeed 
we are looking forward to the opportunities 
the future will bring both in the regulated 
and commercial spheres
‘ the companies will 
need to plan 
innovate and deliver 
services in new and 
more sustainable 
ways and that 
means the regulatory 
environment we 
provide needs to 
change as well’
phillip fletcher chairman ofwat  
ofwat annual report 200910
changing course – six key 
changes required to meet 
future challenges
policy changes
• more ﬂexible 
implementation of eu 
directives to ensure a 
better trade off between 
costs and carbon 
emissions
• developing competition 
through water trading  
this would also optimise 
resources nationally rather 
than just regionally
regulatory changes
• a more ﬂexible approach 
to environmental consents 
to allow for more cost 
effective approaches
•  an improved price setting 
process to provide the right 
incentives for sustainable 
ﬁnancing more 
sustainable solutions and 
increased innovation
industry changes
• companies must take the 
lead in driving innovation 
both in terms of the 
strategic and technical 
solutions they pursue and 
in shaping the wider 
direction the sector takes
changes to the institutional 
framework
• government should 
prioritise national policy 
outcomes and ensure the 
regulatory framework is  
set up to deliver them
a digital version  
of the changing 
course report is 
available at  
wwwstwatercouk
‘ …we are looking at how we can better 
reveal the true value of water to enable the 
sectors to make better more sustainable 
decisions for example we are exploring 
how abstraction and water trading can 
contribute to this’
regina finn chief executive ofwat 
ofwat annual report 200910 severn trent plc annual report and accounts 2011 22
business review 
financial review
group ﬁnancial performance
we are now some two years on from the full effect of the ﬁnancial 
crisis and many but not all ﬁnancial activities and markets have 
returned to what may be considered normal levels however we are 
yet to see the return of a fully functioning commercial paper market 
and have continued to support our liquidity position by holding cash 
reserves from earlier bond market issuances in other areas we are 
yet to see any material effect on the ﬁnances of our customer base 
from the package of measures the uk government has announced 
on public spending indeed we have improved our customer 
collections performance year on year the ability of domestic and 
commercial customers alike to support their water bills in this new 
environment has yet to be seen though we remain conﬁdent that 
our debt recovery processes are in good shape to address any 
challenge that may arise
pbit is proﬁt before interest and tax underlying pbit is pbit 
excluding exceptional items as set out in note 8
group turnover was £17113 million £17039 million an increase 
of 04 over last year severn trent water’s prices were reduced by 
an average of 07 but measured consumption increased so that 
turnover was broadly similar to the prior year
underlying group pbit decreased by 68 to £5191 million £557 1 
million the primary factors affecting underlying pbit are described 
in the commentary on severn trent water and severn trent 
services below there were net exceptional charges of £214 million 
£497 million group pbit decreased 19 to £497 7 million 
£507 4 million
severn trent water
turnover in severn trent water increased by 03 in 201011  
to £13898 million sales prices decreased by 07 including 
inﬂation from 1 april 2010 in the ﬁrst half of the year consumption 
was higher period on period as a result of strong household and 
robust commercial consumption the second half of the year 
showed a more normal period on period declining trend leading to 
the 03 increase in turnover over the full year
underlying pbit decreased by 69 on the previous year to £5037 
million beyond the increase in turnover of £45 million a number of 
factors impacted underlying pbit employee costs decreased by 
£81 million as lower headcount offset higher pension costs but hired 
and contracted services were £98 million higher depreciation 
increased by £164 million due to the growing asset base and write 
down of £64 million on one experimental sludge dryer there was a 
reduction in infrastructure renewals expenditure of £7 6 million own 
work capitalised was £212 million lower in line with the lower levels 
of capital expenditure in the year bad debts were £14 million lower 
and other costs increased by £118 million
during the ﬁnancial year severn trent water invested £4053 million 
uk gaap net of grants and contributions in ﬁxed assets and 
maintaining and improving its infrastructure network included in this 
total was net infrastructure renewals expenditure of £969 million 
charged to the income statement under ifrs
severn trent services
2011 
£m
2010 
£m
increase 
decrease 

turnover   
services as reported 3361 3365 01
impact of exchange rate ﬂuctuations – 44 
like for like businesses in constant 
currency
3361 3321 12
    
 
2011 
£m
2010 
£m
increase 
decrease 

underlying pbit  
services as reported 257 287 105
impact of exchange rate ﬂuctuations – 03 
like for like businesses in constant 
currency
257 284 95
reported turnover in severn trent services was £3361 million  
in 201011 a decrease of 01 vs the prior year and reported 
underlying pbit decreased by 105 to £257 million
after adjusting for the impact of exchange rate ﬂuctuations turnover 
on a constant currency basis increased 12 but underlying pbit 
measured on the same basis was down 95 the ﬁrst half year 
saw proﬁts rise period on period but the second half was impacted 
by the factors mentioned in the operating review
operating services
turnover for the year was £2013 million a decrease of 32 
compared to the prior year on a constant currency basis in the us 
and uk the operating services businesses broadly maintained their 
levels of activity from the previous year however the business was 
impacted by project delays in italy and reduced activity in our 
metering services and searches businesses in the uk both of 
which are driven to some extent by the housing market
water puriﬁcation
turnover for the year was £1056 million an increase of 92 
compared to the prior year on a constant currency basis however 
the strong growth experienced in the ﬁrst half of the year did not 
continue into the second half of the year and turnover in the second 
half of 201011 was at broadly the same level as the same period in 
the previous year
analytical services
turnover for the year was £292 million an increase of 62  
this represented an improvement due to growth in revenue  
from new contracts severn trent plc annual report and accounts 2011 23
business review
corporate and other
corporate overheads amounted to £92 million £127 million our 
captive insurance company and other businesses generated a loss 
of £06 million loss of £23 million the group’s captive insurance 
company insures severn trent group risks only and does not write 
any external business
exceptional items
there were net exceptional charges in the year to 31 march 2011  
of £214 million £497 million comprising
restructuring costs
• a charge of £130 million in severn trent water arising from 
programmes to restructure and realign the business and
• a charge of £07 million in severn trent services from the 
programmes to restructure the water puriﬁcation and analytical 
services businesses
regulatory matters
• a charge of £38 million in severn trent services arising from  
the group’s response to an audit in september 2010 by the 
drinking water inspectorate dwi of aspects of the services 
provided by severn trent laboratories limited from its bridgend 
laboratory and
• a charge of £39 million in corporate overheads arising from the 
group’s response to a request from ofwat to provide certain 
information under the competition act in connection with severn 
trent laboratories limited’s contracts with severn trent water 
limited and certain other water companies
net ﬁnance costs
the group’s net ﬁnance costs were £2306 million compared to 
£2188 million in the prior year the group has ﬁxed the interest rate 
of its non indexlinked debt for the ﬁve year period to march 2015 
the group’s cost of indexlinked debt is however linked to the 
movement in the retail prices index rpi this debt provides an 
economic hedge for severn trent water’s revenues and regulatory 
asset values that are also rpi linked under its regulatory regime 
the increase in the full interest charge is therefore largely due to 
higher interest charges on indexlinked debt as inﬂation was higher 
than the prior year and in addition average group net debt 
increased during the year the effective interest rate for 201011  
was 64 58 of which cash interest cost is 50 vs 54 in  
the prior year
proﬁt before tax
underlying group proﬁt before tax decreased by 147 to £2886 
million £3384 million group proﬁt before tax was £2530 million 
£3344 million
taxation 
the total tax credit for the full year was £215 million charge of 
£829 million of which current tax represented a charge of £321 
million £407 million and deferred tax was a credit of £536 million 
£422 million
a prior year tax credit amounting to £344 million arose during the 
year mainly as a result of the agreement of open tax positions 
covering a number of years
the effective rate of current tax excluding prior year items and 
exceptional items calculated on proﬁt before tax exceptional items 
and gainslosses on ﬁnancial instruments was 244 226 the 
change in effective rate is as a result of lower capital allowances in 
severn trent water
going forward we expect the effective current tax rate for 201112  
to be in the range of 26 to 27
proﬁt for the period and earnings per share
proﬁt for the period was £2745 million £2515 million
basic earnings per share were 1152 pence 1056 pence  
adjusted basic earnings per share before exceptional items  
gainslosses on ﬁnancial instruments and deferred tax were  
1056 pence 1228 pence
cash ﬂow
 
2011 
£m
2010 
£m
cash generated from operations 7530 7080 
net capital expenditure 3995 4878
net interest paid 1803 1942
tax paidreceived 324 538
other cash flows 15 16
free cash flow 1393 294
acquisitions and disposals – 110
dividends 1694 1597
net issue of shares 27 24 
change in net debt from cash flows 274 1977
non cash movements 800 38
change in net debt 1074 2015
net debt 1 april 37614 35599
net debt at 31 march 38688 37614
net debt comprises  
cash and cash equivalents 3152 2278 
cross currency swaps hedging debt 1604 187 3 
bank loans 8468 6898
other loans 32309 3 1859
finance leases 2667 3008
 38688 37614 severn trent plc annual report and accounts 2011 24
maturity proﬁle of gross debt £ millions
0
100
200
300
400
500
600
700
2011 2016 2021 2026 2031 2036 2041 2046 2051 2056 2061 2066
business review 
financial review continued
cash generated from operations was £753 million £708 million 
capital expenditure net of grants and proceeds of sales of ﬁxed 
assets was £3995 million £487 8 million net interest paid 
decreased to £1803 million £1942 million
net debt at 31 march 2011 was £38688 million £37614 million 
balance sheet gearing net debtnet debt plus equity at the year 
end was 77 8 799 net debt expressed as a percentage of 
regulatory capital value at 31 march 2011 was 57 58 the 
group’s net interest charge excluding gainslosses on ﬁnancial 
instruments and net ﬁnance costs from pensions was covered 35 
times 39 times by proﬁt before interest tax depreciation and 
exceptional items and 23 times 27 times by underlying pbit
the fair value of the group’s borrowings at 31 march 2011 is 
estimated to be £46718 million £4267 9 million compared to the 
book value of £43444 million £41765 million the group’s debt 
instruments are not traded in an active market and hence the fair 
value disclosed above is based on a theoretical discounted cash 
ﬂow calculation and does not represent an estimate of the amount 
for which the debt could be settled
treasury management and liquidity
the group continues to monitor liquidity carefully at 31 march 2011 
the group had £3152 million in cash and cash equivalents the 
group also has an undrawn £500 million committed bank facility of 
which £417 million expires in 2012 with the balance maturing in 
2013 average debt maturity is around 16 years the group is 
funded for its investment and cash ﬂow needs up to march 2013
cash is invested in deposits with highly rated a banks and 
liquidity funds and the list of counterparties is regularly reviewed and 
reported to the board
treasury policy and operations
our treasury affairs are managed centrally and in accordance  
with our treasury procedures manual and policy statement the 
treasury operation’s role is to manage liquidity funding investment 
and our ﬁnancial risk including risk from volatility in interest and to a 
lesser extent currency rates and counterparty credit risk the board 
determines matters of treasury policy and its approval is required for 
certain treasury transactions
our strategy is to access a broad range of sources of ﬁnance  
to obtain both the quantum required and lowest cost compatible  
with the need for continued availability our principal operating 
subsidiary severn trent water is a long term business 
characterised by multi year investment programmes our strategic 
funding objectives reﬂect this and the liquidity position and the 
availability of committed funding are essential to meeting our 
objectives and obligations we therefore aim for a balance of long 
term funding or commitment of funds across a range of funding 
sources at the best possible economic cost
the group’s current policy for the management of interest rate risk 
requires that no less than 45 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 2011 interest rates 
for some 76 of the group’s net debt of £38688 million were ﬁxed 
in this way
we use ﬁnancial derivatives solely to manage risks associated with 
our normal business activities we do not hold or issue derivative 
ﬁnancial instruments for ﬁnancial trading
except for debt raised in foreign currency which is fully hedged our 
business does not involve signiﬁcant exposure to foreign exchange 
transactions we have investments in various assets denominated 
in foreign currencies principally the us dollar and the euro our 
current policy is to hedge an element of the currency translation risk 
associated with certain foreign currency denominated assets
we have entered into energy swaps that ﬁx the cost of substantially 
all of severn trent water’s expected net electricity consumption for 
the next three years and part of its anticipated consumption for the 
following year the price ﬁxed in these swaps is lower than the 
amount assumed in the final determination for amp5 
the group issues notes in foreign currency under its emtn 
programme and uses cross currency swaps to convert the proceeds 
to sterling the effect of these swaps is that interest and principal 
payments on the borrowings are denominated in sterling and hence 
the currency risk is eliminated the foreign currency notes and the 
cross currency swaps are recorded in the balance sheet at their fair 
values and the changes in fair values are taken to gainslosses on  severn trent plc annual report and accounts 2011 25
business review
ﬁnancial instruments in the proﬁt and loss account since the terms 
of the swaps closely match those of the underlying notes such 
changes tend to be broadly equal and opposite
the group holds interest rate swaps with a net notional principal 
amount of £4623 million and cross currency swaps with a net 
notional principal amount of £5366 million which economically act 
to hedge the interest rate risk on ﬂoating rate debt or the exchange 
rate risk on certain foreign currency borrowings however the 
swaps do not meet the hedge accounting rules of ias 39 and 
therefore these swaps are carried in the balance sheet at fair value 
the changes in fair value are taken to gainslosses on ﬁnancial 
instruments in the proﬁt and loss account during the period there 
has been a decrease of £157 million in the fair value of these 
instruments 
it is important to note that we intend to and typically do hold these 
swaps to maturity further this is not a cash movement and over 
the life of the swaps these changes in fair value will net out
credit ratings
our long term credit ratings are
long term ratings
severn  
trent plc
severn  
trent water
moody’s baa1 a3
standard and poor’s bbb bbb
further details of our borrowings investments and ﬁnancial 
instruments are contained in note 32 to the ﬁnancial statements
pensions
the group operates two deﬁned beneﬁt pension schemes of which 
the severn trent pension scheme stps is by far the largest 
formal triennial actuarial valuations and funding agreements for the 
stps are in the course of being renewed as at 31 march 2010 the 
key actuarial assumptions from these valuations have been updated 
for the accounts as at 31 march 2011 with overall contribution levels 
remaining unchanged including deﬁcit reduction payments of £10 
million per annum until new agreements are agreed
on an ias 19 basis the estimated net position before deferred tax 
of the group’s deﬁned beneﬁt pension schemes was a deﬁcit of 
£2921 million as at 31 march 2011 this compares to a deﬁcit of 
£3549 million as at 31 march 2010
on an ias 19 basis the funding level has increased from around 
797 at 31 march 2010 to around 835 at 31 march 2011
 
2011 

2010 

price inflation 350 360 
salary increases 400 410 
pension increases in payment 350 360 
pension increases in deferment 350 360 
discount rate 560 570 
long term rate of return on equities 785 800 
age to which current pensioners aged 65 are 
expected to live
  
– men 874 853
– women 910 886
age to which future pensioners aged 45 at the 
balance sheet date are expected to live
  
– men 880 865 
– women 918 896 
the following table summarises the estimated impact on scheme 
liabilities resulting from changes to key actuarial assumptions whilst 
holding all other assumptions constant
assumption change in assumption
impact on  
scheme liabilities
discount rate increasedecrease  
by 01
decreaseincrease 
by £30 million
price inflation increasedecrease  
by 01
increasedecrease  
by £25 million
mortality increase in life 
expectancy by 1 year
increase  
by £45 million
on 11 may 2011 severn trent announced it is consulting with its 
6000 plus uk employees on proposed changes to its pension 
arrangements which would see all existing pensions replaced by 
one new deﬁned contribution scheme under the new proposals 
the deﬁned beneﬁt schemes would close to future accrual whilst 
protecting the beneﬁts already built up by members the existing 
deﬁned contribution scheme would also be replaced by the new 
pension arrangements the proposal is to automatically enrol new 
employees into the new pension from 2012 and automatically enrol 
those employees who are not currently members of a severn trent 
scheme from 2013 severn trent is consulting with its employees 
from june for three months with changes introduced no earlier  
than april 2012
accounting policies and presentation of the ﬁnancial statements
our consolidated ﬁnancial statements are prepared in accordance 
with international financial reporting standards that have been 
endorsed by the european union  severn trent plc annual report and accounts 2011 26
governance
directors’ report
the directors present their report together with the audited ﬁnancial 
statements of the group for the year ended 31 march 2011
principal activity
the principal activity of the group is to provide and treat water and 
remove waste water in the uk and internationally
details of the principal joint ventures associated and subsidiary 
undertakings of the group at 31 march 2011 appear in notes 19  
20 and 40 to the ﬁnancial statements on pages 83 and 111
business review
the chairman’s statement the chief executive’s review  
the report and performance reviews for the group’s main 
businesses and the ﬁnancial review on pages 10 to 25 provide 
detailed information relating to the group and its strategy the 
operation of its businesses and the results and ﬁnancial position 
for the year ended 31 march 2011
details of the principal risks and uncertainties facing the group are 
set out in the risk and assurance section on pages 56 to 58
all of the above are incorporated by reference in and are deemed  
to form part of this report
directors and their interests
biographies of the directors currently serving on the board are set 
out on pages 30 and 31
details of changes to the board during the year and of the directors 
offering themselves for reappointment at the annual general meeting 
agm are set out in the chairman’s letter on pages 33 to 38
details of directors’ service agreements are set out in the directors’ 
remuneration report on page 50 the interests of the directors in the 
shares of the company are shown on pages 52 to 55 of that report
directors’ indemnities
the company’s articles of association provide that directors of the 
company shall be indemniﬁed by the company against any costs 
incurred by them in carrying out their duties including defending any 
proceedings brought against them arising out of their positions as 
directors in which they are acquitted or judgment is given in their 
favour or relief from any liability is granted to them by the court
employees
the average number of employees within the group is shown in 
note 9 to the ﬁnancial statements on page 76
severn trent believes that a diverse and inclusive culture is a key 
factor in being a successful business apart from ensuring an 
individual has the ability to do the job we do not discriminate in any 
way and make every effort to ensure that those with disabilities are 
able to be employed by us we ensure that training career 
development and promotion opportunities are available for all our 
employees irrespective of their gender race age or disability
the group actively encourages employee involvement and 
consultation and places emphasis on keeping its employees 
informed of its activity and ﬁnancial performance by way of brieﬁngs 
and publication to staff of all relevant information and corporate 
announcements to help develop employees’ interest in the 
company’s performance severn trent offers two employee share 
plans the severn trent sharesave scheme an hm revenue and 
customs approved saye plan is offered to uk employees on an 
annual basis the severn trent share incentive plan approved by 
hm revenue and customs makes an annual award of shares to 
severn trent plc and severn trent water limited employees based 
on performance against the kpis
research and development
expenditure on research and development is set out in note 7 to the 
accounts on page 75
treasury management
the disclosures required under the eu fair value directive in 
relation to the use of ﬁnancial instruments by the company are set 
out in note 32 to the accounts on pages 92 to 103 further details  
on our treasury policy and management are set out in the ﬁnancial 
review on page 24
post balance sheet events
details of post balance sheet events are set out in note 38 to the 
group ﬁnancial statements on page 110
dividends
an interim dividend of 2604 pence per ordinary share was paid on 
14 january 2011 the directors recommend a ﬁnal dividend of 3905 
pence per ordinary share to be paid on 29 july 2011 to shareholders 
on the register on 24 june 2011 this would bring the total dividend 
for 201011 to 6509 pence per ordinary share 2010 7232 pence 
the payment of the ﬁnal dividend is subject to shareholder approval 
at the agm
capital structure
details of the company’s issued share capital and of the movements 
during the year are shown in note 29 to the ﬁnancial statements on 
page 91 the company has one class of ordinary shares which 
carries no right to ﬁxed income each share carries the right to one 
vote at general meetings of the company the issued nominal value 
of the ordinary shares is 100 of the total issued nominal value of 
all share capital
there are no speciﬁc restrictions on the size of a holding nor on  
the transfer of shares which are both governed by the general 
provisions of the articles of association and prevailing legislation 
the directors are not aware of any agreements between holders of 
the company’s shares that may result in restrictions on the transfer 
of securities or on voting rights
details of employee share schemes are set out in note 33 to the 
ﬁnancial statements on pages 103 to 107  for shares held by the 
severn trent employee share ownership trust the trustee abstains 
from voting
no person has any special rights of control over the company’s 
share capital and all issued shares are fully paid
with regard to the appointment and replacement of directors the 
company is governed by its articles of association the combined 
code on corporate governance the companies act 2006 and 
related legislation the articles may be amended by special 
resolution of the shareholders the powers of directors are 
described in the board governance document the articles and the 
chairman’s letter on pages 33 to 38
under its articles of association the directors have authority to allot 
ordinary shares subject to the aggregate nominal amount limit set 
at the 2010 agm
there are a number of agreements that take effect after or 
terminate upon a change of control of the company such as  severn trent plc annual report and accounts 2011 27
governance
commercial contracts bank loan agreements property lease 
arrangements and employee share plans none of these is 
considered to be signiﬁcant in terms of their likely impact on the 
business of the group as a whole there are no agreements 
between the company and its directors or employees that provide 
for compensation for loss of ofﬁce or employment that occurs 
because of a takeover bid
substantial shareholdings
as at 23 may 2011 the company had been notiﬁed in accordance 
with chapter 5 of the disclosure and transparency rules of the 
following major shareholdings
name of holder
percentage of 
voting rights and 
issued share 
capital
no of ordinary 
shares of  
97
17
 19p each
norges bank 398 9438492
legal  general group plc 397 9403273
aegon asset management 304 7214266
percentages rounded to two decimal places
authority to purchase shares
the company was given authority at its agm in 2010 to make 
market purchases of ordinary shares up to a maximum number  
of 23697 346 shares similar authority will again be sought from 
shareholders at this year’s agm no market purchases were made 
by the company during the year ended 31 march 2011
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 40 to the 
ﬁnancial statements on page 111 trade creditors for the group at 
the year end are estimated as representing 244 days’ purchases 
2010 441 days’ purchases
contributions for political and charitable purposes
donations to charitable organisations during the year amounted to 
£181843 2010 £326382 donations are given to charities whose 
projects align closely with our aim to promote the responsible use  
of water resources and waste water services which provide the 
opportunity for longer term partnerships in addition we provide 
donations to employee nominated charities through a matched 
funding scheme and health and safety reward schemes we are 
also committed to supporting wateraid the uk’s only major charity 
dedicated to improving access to safe water hygiene and sanitation 
in the world’s poorest countries
in 200809 a provision of £5 million was established for additional 
contributions to the severn trent charitable trust as agreed with 
ofwat severn trent water paid £2 million additional contributions in 
that year and a further £2 million in 200910 the remaining £1 million 
was paid in 20101 1 provided for in previous years to the severn 
trent trust fund which helps people out of poverty and debt
severn trent’s policy is not to make any donations for political 
purposes in the uk or to donate to eu political parties or incur eu 
political expenditure accordingly neither severn trent plc nor its 
subsidiaries made any political donations or incurred political 
expenditure in the ﬁnancial year under review
under the provisions of the political parties elections and 
referendums act 2000 the relevant provisions of which are now 
contained in part 14 of the companies act 2006 shareholder 
authority is required for political donations to be made or political 
expenditure to be incurred by the company or any of its subsidiaries 
in the eu and disclose any such payments in the annual report  
the legislation gives a wide deﬁnition of what constitutes political 
donations and political expenditure including sponsorship 
subscriptions payment of expenses paid leave for employees 
fulﬁlling public duties and support for bodies representing the 
business community in policy review or reform the company  
has therefore obtained limited authority from shareholders as a 
precautionary measure to allow the company to continue supporting 
the community and such organisations without inadvertently 
breaching the legislation
at the 2010 agm shareholders gave the company authorities to 
make political donations or to incur political expenditure in the eu 
which would not ordinarily be regarded as political donations up  
to an aggregate annual limit of £50000 for the company and its 
subsidiaries pursuant to those authorities during the year ended  
31 march 2011 the group incurred costs of £nil 2010 £nil those 
authorities will expire at the 2011 agm and in line with market 
practice to renew the authorities on an annual basis the board has 
decided to put forward a resolution to this year’s agm to renew the 
authorities to make donations to political organisations and to incur 
political expenditure up to a maximum of £50000 per annum  
as permitted under the companies act 2006 this resolution also 
covers any political donations made or political expenditure 
incurred by any subsidiaries of the company
analysis of shareholdings at 31 march 2011
 
category
number of 
shareholders
 of 
shareholders
number of  
shares
  
of shares
individual and 
joint accounts 67072 9083 26250821 1107
other 6774 917 210891713 8893
total 73846 10000 237142534 10000
 includes insurance companies nominee companies banks pension funds other 
corporate bodies limited and public limited companies
size of holding
number of 
shareholders
 of 
shareholders
number of  
shares
  
of shares
1–500 54416 7369 10730367 452
501–1000 12947 17539353906 394
1001–5000 5452 738 9932847 419
5001–10000 311 0422162766 091
10001–25000 196 027 3214558 136
25001–50000 138 019 5157229 217
over 50000 386 052 196590861 8291
total 73846 10000 237142534 10000 severn trent plc annual report and accounts 2011 28
governance
directors’ report continued
internal controls
the board is responsible for the group’s system of internal control 
and for reviewing its effectiveness the board reviews the 
effectiveness of the system of internal control including ﬁnancial 
operational and compliance and risk management at least annually 
in accordance with the requirements of the combined code for 
effectiveness and adequacy the internal control system can only 
provide reasonable and not absolute assurance against material 
misstatement or loss as it is designed to manage rather than 
eliminate the risk of failure to achieve business objectives
the audit committee reviews the group’s risk management process 
and the effectiveness of the system of internal control on behalf of 
the board and keeps under review ways in which to enhance the 
control and audit arrangements the audit committee receives 
reports every six months from the chief executive detailing the 
signiﬁcant risks and uncertainties 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 during the course of its review of the 
system of internal control in 201011 the audit committee has not 
identiﬁed nor been advised of any failings or weaknesses which it 
has determined to be signiﬁcant therefore a conﬁrmation in respect 
of necessary actions has not been considered appropriate
the internal audit department provides objective assurance and 
advice on risk management and control the external auditor also 
reports on signiﬁcant ﬁnancial control issues to this committee
the board conﬁrms that procedures providing an ongoing process 
for identifying evaluating and managing the principal risks and 
uncertainties faced by the group have been in place for the year to 
31 march 2011 and up to the date of approval of the annual report 
which is in accordance with the revised guidance on internal control 
published in october 2005 the turnbull guidance
external auditor
in the case of each of the persons who were directors of the 
company at the date when this report was approved
• so far as each of the directors is aware there is no relevant audit 
information of which the company’s auditor is unaware and
• each of the directors has taken all the steps that heshe ought to 
have taken as a director to make himselfherself aware of any 
relevant audit information and to establish that the company’s 
auditor is aware of that information
relevant audit information means information needed by the 
company’s auditor in connection with preparing its report
this conﬁrmation is given and should be interpreted in accordance 
with the provisions of section 418 of the companies act 2006
deloitte llp have indicated their willingness to continue as auditor 
a resolution to reappoint deloitte llp will be proposed at this  
year’s agm
the audit committee has recommended to the board the 
reappointment of deloitte llp and a resolution to that effect will  
be on the agenda at the agm the audit committee will also be 
responsible for determining the audit fee on behalf of the board
accounts of severn trent water limited
regulatory accounts for severn trent water limited are prepared 
and sent to ofwat 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 group’s business activities together with the factors likely to 
affect its future development performance and position are set out 
in the chief executive’s review on pages 6 and 7 and the business 
reviews of severn trent water and severn trent services on  
pages 8 to 19 the ﬁnancial position of the group its cash ﬂows 
liquidity position and borrowing facilities are described in the 
financial review on pages 22 to 25 the group’s objectives  
policies and processes for managing its capital and its ﬁnancial  
risk management objectives are described in the financial review 
and in the governance report on pages 26 to 58 details of the 
group’s ﬁnancial instruments hedging activities and exposure to 
credit risk and liquidity risk are described in note 32 to the group 
ﬁnancial statements
the group’s principal operating subsidiary severn trent water is a 
regulated long term business characterised by multi year investment 
programmes the group’s strategic funding objectives reﬂect this 
the group therefore seeks to attain a balance of long term funding 
or commitment of funds across a range of funding at the best 
possible economic cost average debt maturity is 16 years and the 
effective average interest cost during the year was 64 the group 
is in a strong liquidity position with £3152 million in cash and liquid 
reserves and £500 million of undrawn committed bank facilities 
which are expected to be sufﬁcient to fund its investment and cash 
ﬂow needs until march 2013 in the normal course of business 
severn trent water operates in an industry that is currently subject 
to economic regulation rather than market competition ofwat the 
economic regulator has a statutory obligation to set price limits that 
it believes will enable the water companies to ﬁnance their activities 
as a consequence the directors believe that the group is well placed 
to manage its business risks successfully despite the current 
uncertain economic outlook
after making enquiries the directors have a reasonable expectation 
that the company and the group have adequate resources to 
continue in operational existence for the foreseeable future 
accordingly they continue to adopt the going concern basis in 
preparing the annual report and accounts
annual general meeting
the agm of the company will be held at the international convention 
centre broad street birmingham b1 2ea at 11am on wednesday 
20 july 2011 the notice convening the meeting together with details 
of the business to be considered and explanatory notes for each 
resolution is distributed separately to shareholders it is also available 
on the company’s website wwwseverntrentcom
by order of the board
fiona smith 
general counsel and company secretary 
26 may 2011 severn trent plc annual report and accounts 2011 29
governance
governance
directors’ responsibility statement
the directors are responsible for preparing the annual report 
directors’ remuneration report and the ﬁnancial statements in 
accordance with applicable law and regulations
company law requires the directors to prepare such ﬁnancial 
statements for each ﬁnancial year under that law the directors are 
required to prepare group ﬁnancial statements in accordance with 
international financial reporting standards ifrss as adopted by 
the european union and article 4 of the ias regulation and have 
chosen to prepare the parent company ﬁnancial statements in 
accordance with united kingdom generally accepted accounting 
practice united kingdom accounting standards and applicable 
law under company law the directors must not approve the 
accounts unless they are satisﬁed that they give a true and fair view 
of the state of affairs of the company and of the proﬁt or loss of the 
company for that period 
in preparing the parent company ﬁnancial statements the directors 
are required to
• select suitable accounting policies and then apply them 
consistently
• make judgements and accounting estimates that are reasonable 
and prudent
• state whether applicable uk accounting standards have been 
followed subject to any material departures disclosed and 
explained in the ﬁnancial statements and
• prepare the ﬁnancial statements on the going concern basis 
unless it is inappropriate to presume that the company will 
continue in business
in preparing these ﬁnancial statements international accounting 
standard 1 requires that the directors 
• properly select and apply accounting policies
• present information including accounting policies in a manner 
that provides relevant reliable comparable and understandable 
information
• provide additional disclosures when compliance with the speciﬁc 
requirements in ifrss are insufﬁcient to enable users to 
understand the impact of particular transactions other events and 
conditions on the entity’s ﬁnancial position and ﬁnancial 
performance and
• make an assessment of the company’s ability to continue as a 
going concern
the directors are responsible for keeping adequate accounting 
records that are sufﬁcient to show and explain the company’s 
transactions and disclose with reasonable accuracy at any time the 
ﬁnancial position of the company and enable them to ensure that 
the ﬁnancial statements comply with the companies act 2006 
they are also responsible for safeguarding the assets of the 
company and hence for taking reasonable steps for the prevention 
and detection of fraud and other irregularities
the directors are responsible for the maintenance and integrity of 
the corporate and ﬁnancial information included on the company’s 
website legislation in the united kingdom governing the 
preparation and dissemination of ﬁnancial statements may differ 
from legislation in other jurisdictions
we conﬁrm that to the best of our knowledge
• the ﬁnancial statements prepared in accordance with the relevant 
ﬁnancial reporting framework give a true and fair view of the 
assets liabilities ﬁnancial position and proﬁt or loss of the 
company and the undertakings included in the consolidation 
taken as a whole and
• the management report which is incorporated into the directors’ 
report includes a fair review of the development and performance 
of the business and the position of the company and the 
undertakings included in the consolidation taken as a whole 
together with a description of the principal risks and uncertainties 
that they face
andrew duff michael mckeon
chairman finance director severn trent plc annual report and accounts 2011 30
1
5
9
2
6
10
3
7
11
4
8
severn trent plc board of directors as at 31 march 2011
governance 
board of directors
board committees
audit  
committee 
baroness noakes c 
dr bernard bulkin 
richard davey 
kerry porritt s
 
remuneration  
committee
richard davey c 
dr bernard bulkin 
andrew duff 
martin lamb
fiona smith s
corporate  
responsibility  
committee
dr bernard bulkin c 
andrew duff 
gordon fryett 
tony wray 
kerry porritt s
nominations 
committee
andrew duff c 
dr bernard bulkin 
richard davey
gordon fryett 
martin lamb 
baroness noakes 
tony wray 
fiona smith s
executive 
committee
tony wray c 
dr tony ballance
simon cocks 
evelyn dickey
len graziano
myron hrycyk
martin kane
michael mckeon
alec richmond
andy smith
fiona smith
senior independent 
nonexecutive director
richard davey 
general counsel and 
company secretary
fiona smith
  e
management committee
c chairman  
s secretary  


 nonexecutive director
  a  r  c  n severn trent plc annual report and accounts 2011 31
governance
9 baroness noakes dbe 
llb fca 61
independent nonexecutive 
director
appointed to the board in february 
2008 sheila noakes is the chairman 
of the audit committee
sheila is a fellow of the institute of 
chartered accountants in england and 
wales and served as its president from 
1999–2000 she was a senior partner of 
kpmg from 1983 to 2000 she is an 
experienced audit committee chairman 
and currently chairs the carpetright plc 
audit committee other directorships 
and offices senior independent 
director of carpetright plc director  
of the thomsonreuters founder share 
company nonexecutive director of 
imperial chemical industries plc 
2004–2008 nonexecutive director  
of hanson plc 2001–2007 member  
of the court of the bank of england 
1994–2001
 a
 
  n
 
10 andy smith btech hons 
50
director of water services
appointed to the board in  
october 2007
andy has worked in the uk and overseas 
with bp  mars and pepsi in engineering 
and operational management roles and 
as group hr director and a member of 
the board at boots andy brings a broad 
range of executive and operational 
experience from different sectors to the 
board other directorships and 
offices director of boots group plc 
2002–2003
 e
11 tony wray bsc hons 49
chief executive
appointed to the board in march 2005 
and became chief executive in 
october 2007
tony’s experience of a wide range of 
operational and strategic leadership roles 
in the energy telecoms water and 
waste industries enables him to bring a 
multi disciplined approach to the board 
other directorships and offices 
nonexecutive director – energy and 
utility skills the sector skills council 
member of the business advisory board 
for living with environmental change 
director of networks at eircom the 
republic of ireland’s telephone operation 
2003–2005 director roles within 
transco and national grid transco 
1997–2003
  c
 
 n
 
  e
1 dr tony ballance bsc 
hons ma econ phd 46
director strategy and 
regulation
appointed to the board in  
october 2007
tony’s extensive experience in utility 
policy and regulation working for ofwat 
as chief economist and then as an 
economic consultant leaves him ideally 
placed to lead the company’s strategic 
and regulatory work other 
directorships and offices chief 
economist office of water services 
ofwat 1996–1999 director of london 
economics 1999–2000 director of 
stone and webster consultants 
2000–2005
  e
2 dr bernard bulkin bs phd 
frsc frsa fie 69
independent nonexecutive 
director
appointed to the board in january 
2006 bernard is the chairman of the 
corporate responsibility committee 
bernard’s involvement in both innovation 
and policy on climate change and 
renewable energy together with an 
understanding of how to guide improved 
performance on safety and 
environmental operational issues 
enables him to contribute significantly  
to the board other directorships and 
offices chairman of chemrec ab 
a swedish company nonexecutive 
director of reac ab in sweden and of 
zegen corporation in boston venture 
partner at vantage point an international 
venture capital firm chair of the office  
of renewable energy deployment  
uk department of energy and climate 
change was chief scientist at bp plc 
2000–2003
 a
 
 c
 
  r
 
  n
3 richard davey ba 62
senior independent  
nonexecutive director
appointed to the board in january 
2006 richard is chairman of the 
remuneration committee 
richard has an investment banking 
background and was formerly head of 
investment banking at nm rothschild 
and sons with extensive experience of 
the financial services sector having run 
rothschild’s financial services group 
and working with a number of high street 
banks and insurers richard brings 
valuable financial expertise to the board 
and audit committee and as chair of the 
remuneration committee other 
directorships and offices non
executive chairman of london capital 
holdings plc vice chairman of yorkshire 
building society nonexecutive director 
of amlin plc nonexecutive director of 
freeserve plc 1999–2001 non
executive director of scottish widows 
fund and life assurance society 
1996–2000
  a
 
  r
 
  n
4 andrew duff bsc fei 52
nonexecutive chairman
appointed to the board in may 2010
andrew’s strong track record working in 
regulated business gives him the relevant 
experience to make him the right 
chairman to lead the group through  
the next phase of development other 
directorships and offices senior 
independent director of wolseley plc 
member of the board of trustees of 
macmillan cancer support group  
chief executive officer rwe npower 
2003–2009 fellow of the energy 
institute
  n
 
  r
 
 c
 
5 gordon fryett 57
independent nonexecutive 
director
appointed to the board in july 2009
gordon’s extensive experience working 
in and with international businesses 
accountability for managing large areas 
of capital expenditure and a broad range 
of executive and operational experience 
in a highly customer facing environment 
enables him to bring a great deal of 
experience and expertise to the board 
other directorships and offices 
group property director of tesco ceo 
of tesco ireland 2001–2006 director  
of international support for tesco 
1997–2001 alumnus of insead
 c
 
  n
6 martin kane bsc ceng 
cenv mice miwem fiw 58
director of customer relations
appointed to the board in october 
2007 martin has been director of 
customer relations severn trent 
water since may 2006
martin joined severn trent water in 1975 
and has held various senior posts giving 
him an extensive understanding of the 
design construction and operation of 
water and waste water treatment plants 
water distribution networks and 
sewerage systems other directorships 
and offices board member of uk water 
industry research limited board 
member of utilities and service 
industries training limited
 e
7 martin lamb bsc mba 51
independent nonexecutive 
director
appointed to the board in  
february 2008
martin has extensive experience of 
managing and developing large 
engineering businesses in all parts of the 
world his strong commercial acumen 
experience of managing complex 
projects and familiarity with current 
market pressures as a serving chief 
executive leave him well placed to add 
value to the severn trent business 
other directorships and offices 
chief executive of imi plc nonexecutive 
director of spectris plc 1999–2006
  r  n
8 michael mckeon ma ca 54
finance director
appointed to the board in  
december 2005
michael has extensive international 
business experience having worked 
overseas for carnaudmetalbox elf 
atochem and price waterhouse he also 
held various senior roles with rolls
royce plc from 1997 to 2000 including 
finance director of aerospace group 
and was finance director of novar plc 
from 2000 to 2005 michael is a 
chartered accountant and a member  
of the institute of chartered accountants 
of scotland other directorships and 
offices nonexecutive director and 
chairman of the audit committee of  
the merchants trust plc finance 
director of novar plc 2000–2005
  e
  severn trent plc annual report and accounts 2011 32
4
7
10
5 8
11
6
1 2 3
9
governance 
executive committee
the chief executive is supported in his role by the executive 
management team and together they comprise the executive 
committee during the year the executive committee comprised 
the executive directors and senior executive managers responsible 
for key operational and central functions photographs of the 
members of the committee together with their biographies are  
set out below
the executive committee oversees the development and 
execution of the severn trent strategy it also has accountability  
for achieving business results the terms of reference of the 
executive committee are available on the company’s website 
wwwseverntrentcom or from the company secretary
during the year the executive committee met to consider 
strategy business management policy and planning and 
operational performance
members of the executive committee are delegated responsibility 
to sit on steering groups that oversee the delivery of our strategy 
and business management during the year steering groups  
were set up to oversee areas such as our move to severn trent 
centre the integrated delivery of our year end results and  
annual june return to ofwat and our leadership development
1 tony wray bsc hons 
49 chief executive
please see full biography on page 31
2 martin kane bsc ceng 
cenv mice miwem fiw 58 
director of customer relations
please see full biography on page 31
3 michael mckeon ma ca 
54 finance director
please see full biography on page 31
4 fiona smith llb 52 
general counsel and company 
secretary 
joined severn trent in february 
2006 fiona is a solicitor and was 
previously general counsel and 
company secretary at national grid 
plc where she worked for 15 years 
before becoming general counsel at 
transport for london for two years 
prior to joining severn trent
10 leonard graziano mba 
beng 65 president and chief 
executive ofﬁcer severn trent 
services
joined severn trent in january 
2000 prior to joining severn trent 
services len served as president of 
chemineer inc a unit of robbins  
myers inc a global leader in industrial 
mixing and agitation equipment and 
technology he also served as a 
president of johnston pump company 
a full line vertical pump parts and 
repair company
11 evelyn dickey
bsc hons 48 
director of human resources
joined severn trent in november 
2006 evelyn has wide hr experience 
leading design and delivery of major 
change programmes business 
restructuring employee relations 
resourcing organisational capability 
and performance management 
initiatives before joining severn trent 
evelyn worked in hr consultancy and 
as hr director hr operations for 
boots the chemists
5 alec richmond bsc econ 
fca fiia 53  
director of internal audit
joined severn trent in june 2007 
prior to that he worked for cadbury 
schweppes plc leading the company’s 
global internal audit service from 
20002005 before joining severn 
trent he worked for rsm robson 
rhodes as a director and a member of 
the management board responsible for 
risk assurance services alec is a 
fellow of the icaew
6 andy smith btech hons 
50 director of water services
please see full biography on page 31
7 dr tony ballance bsc 
hons ma econ phd 46 
director strategy and 
regulation
please see full biography on page 31
8 simon cocks ba hons 
45 waste water services 
director 
joined severn trent in july 2009 
simon is an electrical engineer by 
training and began his career in military 
communications working for plessey 
and then gec he previously worked for 
london electricity in various operational 
and management roles and more 
recently for national grid where he was 
head of uk operations performance 
and planning then commercial director 
for the gas and electricity business in the 
uk and europe and more recently held 
the position of chief procurement officer 
before joining severn t rent
9 myron hrycyk mba 54 
chief information ofﬁcer
joined severn trent in april 2008 
myron has delivered major it strategic 
programmes reorganised corporate it 
units and deployed high performance 
it practices in previous roles for nyk 
logistics and unipart myron is the 
executive sponsor of the company’s 
saperp transformation programme severn trent plc annual report and accounts 2011 33
governance
governance
chairman’s letter
governance in severn trent
the way we are structured
•  our organisation is structured to allow 
for effective and efﬁcient decision 
making with clear accountabilities
the way we choose to behave
•  our code of conduct sets out our 
approach to responsible business 
behaviours
•  the code of conduct is supported by 
14 group policies and our behaviour 
model further details of the code of 
conduct can be found on our website 
wwwseverntrentcom
the way we assure our performance
•  management assurance is provided  
by a combination of effective 
management processes and risk and 
compliance activities
•  independent assurance is provided 
primarily by internal audit by our 
external auditors and other external 
bodies
dear shareholder
introduction
i want to set out in this letter how governance underpins our activities in severn trent and 
describe how we apply the principles of good corporate governance as set out in the 
combined code on corporate governance issued by the financial reporting council 
frc in 2008 combined code
compliance with the combined code
the combined code sets out standards of good practice that listed companies are 
expected to follow in areas such as how we structure the board appropriately and develop 
its members how we pay and reward our executive team our accountability and audit and 
our relationship with our shareholders 
for the whole of the ﬁnancial year ended 31 march 2011 severn trent was fully compliant  
in its application of the combined code 
our compliance with the combined code demonstrates our commitment to the highest 
standards of governance and corporate behaviour the combined code has been replaced 
during the ﬁnancial year by the uk corporate governance code the events in our 
corporate markets over the previous two years necessitated a review of the combined 
code and your board encouraged and supported the changes that the new code has 
introduced our response to the consultation on the review of the combined code is 
available for you to view on the website of the financial reporting council wwwfrcorguk 
the uk corporate governance code applies to accounting periods beginning on or after  
29 june 2010 our formal obligation for 2011 is to report how we have applied the principles 
of the combined code
board membership
from 10 may 2010 the board has consisted of me your nonexecutive chairman ﬁve 
executive directors and ﬁve independent nonexecutive directors together as a uniﬁed 
board i believe we bring an appropriate balance of innovation experience independence 
and challenge to ensure effective decision making
photographs of the members of the board together with their biographies and a description 
of the skills that they bring to bear can be found on pages 30 and 31 
further to the publication of the davis report ‘women on boards’ in february this year 
boards of ftse 350s have been encouraged to promote greater female representation  
on corporate boards recent guidance from the financial reporting council has also 
highlighted the importance of greater diversity of psychological proﬁle around the  
board table 
i consider that diversity in the board room is essential to good business helping companies 
better to meet the needs of their stakeholders
as part of our ongoing board membership renewal we will ensure that our recruitment and 
appointment processes continue to ensure that all appointments are meritocratic and that 
our board represents the best interests of shareholders 
role of the chairman
i joined the board in may 2010 and was appointed chairman from the end of the agm on 
20 july 2010 replacing sir john egan
the role of the chairman is to lead a uniﬁed board facilitating its members at its meetings 
and to be responsible for ensuring that the principles and processes of the board are 
maintained in line with the board governance document 
agendas for our meetings are agreed in consultation with the chief executive and company 
secretary although any director may request that an item be added to the agenda i have 
authority to act and speak for the board between its meetings including engaging with the 
chief executive i report to the board and committee chairmen as appropriate on decisions 
and actions taken between meetings of the board i also meet with the nonexecutive 
directors without the executive directors present to consider the performance of the 
executive directors and to provide feedback
andrew duff
chairman
the way 
we are 
structured
the way 
we choose 
to behave
the way we 
assure our 
performance
the way 
we work severn trent plc annual report and accounts 2011 34
governance
chairman’s letter continued
senior independent nonexecutive director
richard davey is the senior independent nonexecutive director he chairs the 
remuneration committee and is a member of the audit and nominations committees  
the board has agreed that richard davey will act as chairman of the board in the event  
that i am unable to do so for any reason 
nonexecutive directors
your nonexecutive directors are appointed to the board to contribute their external expertise 
and experience in areas of importance to the group such as corporate ﬁnance general 
ﬁnance corporate strategy environmental matters general management and supply chain 
management they also provide independent challenge and rigour in the board’s 
deliberations and are encouraged to make independent assessments of the group’s 
competencies the nonexecutive directors led by richard as the senior independent 
nonexecutive director meet without me at least once a year where there is an opportunity 
for them to appraise my performance
your board has reviewed the status of the nonexecutive directors and considers them all  
to be independent in character and judgement and within the deﬁnition of this term in the 
combined code and the uk corporate governance code
chief executive
the board has delegated all responsibility beyond its matters reserved to the chief 
executive to achieve the company’s strategy the chief executive tony wray is 
empowered to take all decisions and actions that further the company’s strategy and which 
in his judgement are reasonable having regard to the chief executive limits set out in the 
company’s group authorisation arrangements gaa
executive directors
the executive directors support tony in driving strategy forward in severn trent they  
are committed to implementing strategy in a responsible way that takes account of our 
commitment to long term responsible stewardship of the business the environment  
our customers and the communities in which we live and work 
role of the company secretary
all directors have access to the advice and services of the company secretary fiona 
smith and the company secretariat team the company secretary is responsible for 
ensuring that the board operates in accordance with the governance framework it has 
adopted and that there are good information ﬂows to the board and its committees and 
between senior management and the nonexecutive directors
fiona retires from her role at the agm in july 2011 we wish her a long and happy 
retirement and on behalf of the board i offer her our thanks for her services over the past 
ﬁve years
bronagh kennedy will succeed fiona bronagh is a qualiﬁed solicitor and until recently was 
the company secretary and general counsel at mitchells and butlers plc
the appointment and resignation of the company secretary is a matter for consideration  
by the board as a whole
induction
on joining the board directors are evaluated and then provided with a comprehensive and 
individualised induction pack that includes notes on the group structure the regulatory 
framework of the operating businesses within the group ﬁnancial reports and business 
plans and information on our governance framework 
meetings are arranged with members of the executive management team and external 
advisers who provide support to the relevant board committees the directors may serve on 
visits to operational and ofﬁce sites across the group are also arranged for directors  
joining the board
group authorisation arrangements
the group authorisation arrangements 
gaa are the framework through  
which the severn trent plc board 
authorises the right people at the right 
level to take important decisions as we 
manage legal ﬁnancial and administrative 
issues throughout the group the gaa 
are designed to facilitate good control 
efﬁcient decision making and 
demonstrable compliance
the ﬂow of authority is from the severn 
trent plc board to the chief executive in 
respect of certain issues the delegated 
authority is subject to an obligation to 
work with specialist business services 
areas such as tax treasury finance 
and company secretariat that provide 
additional expertise and a group wide 
perspective 
governance of subsidiaries
the board of the listed company  
severn trent plc is the same as that  
of its subsidiary severn trent water 
limited this structure was implemented 
in 2007 when it was decided to  
integrate the management of the 
companies to gain greater focus 
transparency and effectiveness around 
severn trent water
the two companies operate as distinct 
legal entities the boards have regard to 
the severn trent plc board governance 
document and the severn trent water 
limited matters reserved to the  
board they are assisted through the 
management of separate agendas 
meetings and minutes by the company 
secretariat and advised in their  
meetings by the company secretary 
where appropriate
subsidiary company boards are required 
to be managed scrupulously with respect 
to all legal ﬁscal and administrative 
matters in particular the relationships 
between severn trent water limited and 
our other businesses such as severn 
trent services are monitored and 
controlled to ensure that we comply with 
our ofwat obligations on arm’s length 
transactions  severn trent plc annual report and accounts 2011 35
governance
continuing professional development
the directors received updates throughout the year on matters such as the flood and water 
management act and the impacts of the proposals on private drains and sewers there was 
also an opportunity to review and understand the outcomes of an exercise to evaluate our 
business plan for amp5
we are creating individual programmes for learning and development the programmes will 
be reviewed by me with each director as part of the annual performance and effectiveness 
reviews undertaken by the board
performance and effectiveness reviews
last year sir john egan my predecessor as chairman carried out an internal review on the 
effectiveness of the board and its committees the board discussed the outcomes of that 
review in july 2010 and the outcomes gave me some insights into the operations of the 
board and its committees that have been helpful to me during my ﬁrst year as chairman
july 2011 marks my ﬁrst full year as chairman i will commence an external review of the 
board committees and the directors in november 2011 and will report back to you on the 
outcomes of that review in next year’s report
board processes
we have processes in place regarding
• our tasks and activities board membership and administration
• the matters speciﬁcally reserved for our decision making the authority delegated to the 
chief executive the accountability of the chief executive for that authority and guidance 
on managing the relationship between us and the chief executive and 
• the boundaries on chief executive action chief executive limits
an approved board governance document outlines those processes and is available on our 
website wwwseverntrentcom
the board has reserved the following for its own consideration
• the appointment of the chief executive directors the company secretary and the 
director of internal audit
• the strategy and budgets of the company
• the gaa which set out the group’s delegated approval limits
• decisions regarding the company and its subsidiaries required to be made by the 
company’s gaa constitutional documents statute or external regulation and
• the approval or adoption of documents including the publication of reports and 
statements to shareholders required to be made by the board by the company’s gaa 
constitutional documents statute or external regulation
board meetings
we have regular scheduled meetings throughout the year 
papers including minutes of board committees held since the previous board meeting and 
performance reports are circulated in advance of each meeting
there is an agreed procedure in place which allows directors to take independent 
professional advice in the course of their duties and all directors have access to the advice 
and services of the company secretary where a director has a concern over any 
unresolved matter heshe is entitled to require the company secretary to minute that 
concern should the director later resign over the issue i as chairman will bring it to the 
attention of the board
financial calendar
22 june 2011 exdividend date for 
201011 final dividend
24 june 2011 record date for 
201011 final dividend
20 july 2010 agm
29 july 2011 payment date for 
proposed 201011 final 
dividend
24 november 2011 announcement date 
for 201112 interim 
results
13 january 2012 payment date for 
proposed 201112 
interim dividend
retail shareholder engagement 
strategy
the board has an active shareholder 
engagement strategy the main elements 
of which are set out below
the annual report and accounts is the 
principal means of communicating with 
shareholders the group adopted 
ecommunications after they were 
approved by shareholders as an 
alternative means of receiving company 
information at the 2007 annual general 
meeting as at 5 may 2011 39723 
shareholders receive company 
communications via electronic methods 
whilst 28521 shareholders continue to 
receive communications by post
the company’s website  
wwwseverntrentcom contains an 
archive of annual reports together with 
other information relevant to investors 
this includes comprehensive share  
price information ﬁnancial results and 
ﬁnancial calendars
the company offers a dividend 
reinvestment plan drip details of  
the drip are available on the company 
website and the website of equiniti  
our registrar
further shareholder information can be 
found on pages 124 to 125
shareholders
the board recognises the importance  
of representing and promoting the 
interests of its shareholders and that  
it is accountable to shareholders for  
the performance and activities of  
the company severn trent plc annual report and accounts 2011 36
governance
chairman’s letter continued
board attendance in 201011
sir john egan 33 martin kane 77
tony ballance 77 martin lamb 67
dr bernard bulkin 77 michael mckeon 77
richard davey 77 baroness noakes 77
andrew duff 56 andy smith 77
gordon fryett 77 tony wray 77
in addition to the formal board meetings your board attended two full day strategy sessions 
this year where the board and executive management team together considered severn 
trent services and also the most signiﬁcant risks facing the company during the ﬁnancial 
year ﬁve ad hoc meetings of the board were convened to consider such matters as severn 
trent plc’s preliminary and interim results and interim management statements
board committees
we have established committees of the board to deal with speciﬁc issues or approvals  
as and when necessary
the four permanent committees of the board assist in the execution of its responsibilities 
and the board delegated some of its responsibilities to those board committees the 
committees assist the board by focusing on their speciﬁc activities fulﬁlling their roles and 
responsibilities reporting to the board on decisions and actions taken and making any 
necessary recommendations
the terms of reference of the audit remuneration and nominations committees comply 
with the provisions of the combined code and are available for inspection together with the 
terms of reference of the corporate responsibility committee on the company’s website 
wwwseverntrentcom or may be obtained on written request from the company secretary 
at the address given on the back cover
each of the committees has reviewed its effectiveness and terms of reference during the 
year and any necessary actions have been identiﬁed and reported to the board
reports from the chairmen of these committees are set out on pages 39 to 55 of this report
t erms and conditions of appointment
we have made the terms and conditions of appointment of the directors available for 
inspection by any person at the company’s registered ofﬁce during normal business hours 
they will also be available at the agm the letters of appointment of the directors can also 
be seen on our website wwwseverntrentcom
remuneration
the directors’ remuneration report is set out on pages 43 to 55
insurance and indemnities
severn trent purchases directors’ and ofﬁcers’ liability and indemnity insurance to cover its 
directors and ofﬁcers against the costs of defending themselves in civil proceedings taken 
against them in that capacity and in respect of damages resulting from the unsuccessful 
defence of any proceedings
interests
no director had a material interest at any time during the year in any contract of signiﬁcance 
with the company or any of its subsidiary undertakings
reporting obligations
as a publicly listed company the 
company has a range of reporting 
obligations to meet that are set out by  
law and regulation the company is 
committed to the promotion of investor 
conﬁdence by taking steps within its 
power to ensure that trade in its 
securities takes place in an efﬁcient and 
informed market
the company recognises the importance 
of effective communication as a key part 
of building shareholder value and that  
to prosper and achieve growth it must 
among other things earn the trust of 
security holders employees customers 
suppliers and communities by being 
open in its communications and 
consistently delivering on its 
commitments
the company announces its results on  
a half yearly basis and complies with  
the requirement to make interim 
management statements
the chief executive has established a 
disclosure committee chaired by the 
finance director with speciﬁc 
responsibilities for the delivery of the year 
end reporting processes the committee 
oversees the delivery of an integrated 
plan incorporating all elements of the 
year end reporting process namely the 
group’s ﬁnal results announcement and 
report and accounts the company’s 
agm the statutory and regulatory 
accounts of severn trent water ltd and 
the june return to ofwat severn trent plc annual report and accounts 2011 37
governance
conﬂicts of interests – update
the board has a full process in place to authorise situational conﬂicts in accordance with the 
provisions of the companies act 2006
for any actual or potential conﬂicts the following procedure has been adopted by the board 
to consider and if it sees ﬁt to authorise situations where a director has an interest that 
conﬂicts or may possibly conﬂict with the interests of the company
• the director will notify the chairman and company secretary of the actual or potential 
conﬂict
• the nominations committee will consider the notiﬁcation and determine whether it needs 
to be proposed to a board meeting for authorisation and
• the conﬂict will be considered by the board at a scheduled board meeting
full details of the conﬂict will be sent to directors in advance of the meeting if there is a 
major conﬂict or it is decided that authorisation should not wait until the next scheduled 
meeting the board would be asked to authorise the conﬂict by way of written resolution
in addition to reviewing any conﬂicts notiﬁed and proposing them for authorisation by the 
board the nominations committee monitors changes to previously notiﬁed conﬂicts and 
any conditions imposed half yearly reports are made to the board of all directors’ conﬂicts 
and directors are reminded from time to time of their obligations an annual review of 
conﬂicts is carried out and this is incorporated into the year end process of verifying 
directors’ interests
annual general meeting
the agm of the company will be held at the international convention centre broad street 
birmingham b1 2ea at 11am on wednesday 20 july 2011
the agm is shareholders’ opportunity to feedback to the company on performance 
management and the way we work in a very direct fashion – through the way they vote – 
either in favour of the resolution against the resolution or by withholding their vote so that it 
does not count either for or against it is also shareholders’ opportunity to meet informally 
with directors and senior management before and after the meeting and ask formal 
questions during the meeting
the board encourages shareholders to attend the company’s agm and exercise their right 
to vote the notice of meeting and related papers are sent to shareholders at least 20 
working days before the meeting separate resolutions are proposed on each substantially 
separate issue
presentations are made on the group’s activities and performance prior to the formal 
business of the meeting shareholders have the opportunity to ask questions of the board 
and present their views the chairmen of the audit corporate responsibility remuneration 
and nominations committees together with all other directors will attend the agm
the company uses electronic voting at the agm allowing shareholders present at the 
meeting to register one vote per share held results of the poll on each resolution including 
details of the votes for and against registered prior to and at the meeting proxy votes and 
the number of abstentions will be displayed at the meeting
the poll results and a list of questions and answers from the agm will be made available on 
our website after the meeting
at the 2010 agm over 50 shareholders registered for severn trent’s shareholder 
networking programme which took place on 30 march 2011 the aim of the programme  
is to offer retail shareholders the opportunity to learn more about the company through  
a combination of site visits and talking to staff
institutional shareholders and analysts
presentations are made to shareholders 
and analysts following the release of the 
interim and year end results the chief 
executive and finance director meet 
shareholders during the year the 
chairman and if appropriate the senior 
independent nonexecutive director are 
available to meet shareholders if 
required the board receives written 
feedback following meetings with 
institutional shareholders and monitors 
shareholder activity on a quarterly basis 
at its meetings 
in december 2010 50 people attended 
the severn trent investor day entitled 
‘winning in a changing world’ hosted by 
the chief executive and finance director 
at our ofﬁces in coventry severn trent plc annual report and accounts 2011 38
governance
chairman’s letter continued
the event was hosted by martin kane director of customer relations and a member of the 
board twenty participants were taken to minworth to our sewage treatment works for a 
tour and presentation on renewable energy this was followed by a visit to our new 
headquarters at the severn trent centre
positive feedback was given on the organisation and content with strong support for the 
company continuing the programme both from shareholders and employees who enjoyed 
the positive interest shown in their work and their part in explaining what work they did
your board encourages those shareholders attending the 2011 agm to register for this 
year’s visit
reappointment
under the company’s articles of association all directors are required to retire and submit 
themselves for appointment or reappointment if they have been appointed by the board 
since the previous annual general meeting or if it is the third annual general meeting 
following that at which they were appointed or last reappointed 
however the uk corporate governance code now requires that all directors of companies 
in the ftse 350 index such as the company should be subject to annual election by 
shareholders accordingly the directors will all retire at this year’s annual general meeting 
and submit themselves for reappointment by the shareholders
conclusions
at severn trent we are committed to operational excellence and continuous improvement 
supported by good governance we run our business in a manner which is responsible and 
consistent with our belief in transparency and accountability good governance is not simply 
an exercise in compliance for severn trent it is a vital aspect forming a foundation for the 
sustainable growth of the business
i ﬁrmly believe that severn trent will continue to achieve proﬁtable and sustainable growth 
for our company through the successful mix of good governance a clear business plan and 
strategy and strong management team
andrew duff 
chairman severn trent plc annual report and accounts 2011 39
governance
governance
nominations committee
this report provides details of the role of the nominations committee and the work it has 
undertaken during the year 
the committee keeps under review the balance of skills on the board and the knowledge 
experience length of service and performance of the directors it also reviews their external 
interests with a view to identifying any actual perceived or potential conﬂicts of interests 
including the time available to commit to their duties to the company the committee 
monitors the independence of each nonexecutive director and makes recommendations 
concerning such to the board the results of these reviews are important when the board 
considers succession planning and the election and reappointment of directors members  
of the committee take no part in any discussions concerning their own circumstances
during the year the committee reviewed the procedure for reporting and authorising as 
appropriate any actual or potential conﬂicts of interests in accordance with the provisions  
of the companies act 2006 
the members of the nominations committee in 201011 were the nonexecutive directors  
of the board and the chief executive tony wray
in accordance with the requirements of the uk corporate governance code all members 
of the board will seek reelection at the annual general meeting in july 2011 in march this 
year the nominations committee formally reviewed the performance contribution and 
commitment of each of the directors retiring at this year’s agm and seeking reappointment 
and supported and recommended their reappointment to the board the committee has 
conﬁrmed that each director continues to perform well on an individual and collective basis 
making a valuable contribution to the board’s deliberations and demonstrating commitment 
to the long term interests of the company
nominations committee attendance in 201011
sir john egan 22
dr bernard bulkin 44
richard davey 44
andrew duff 33
gordon fryett 24
martin lamb 34
baroness noakes 44
tony wray 44
each committee meeting complied with the terms of reference in that a minimum of ﬁve 
members were in attendance with the majority being independent nonexecutive directors
andrew duff
chairman of the nominations committee
the main purpose of the committee is  
to assist the board by keeping the 
composition of the board under review 
and conducting a rigorous and 
transparent process when making or 
renewing appointments of directors to  
the board it also advises the board on 
issues of directors’ conflicts of interest 
and independence the full terms of 
reference for the committee can be 
found on the company’s website  
wwwseverntrentcom and are also 
available from the company secretary
succession planning
when considering new appointments to 
the board the committee oversees the 
preparation of a position specification 
that is provided to an independent 
recruitment organisation retained to 
conduct a global search in addition to 
the specific skills knowledge and 
experience deemed necessary the 
specification contains criteria such as
• a proven track record of creating 
shareholder value
• unquestioned integrity and a diversity 
of psychological mindset
• a commitment to the highest standards 
of governance
• having the required time available to 
devote to the job
• strategic mindset an awareness of 
market leadership outstanding 
monitoring skills
• a preparedness to question challenge 
and openly assess and
• an independent point of view severn trent plc annual report and accounts 2011 40
governance
audit committee
this report provides details of the role of the audit committee and the work it has 
undertaken during the year
the members of the audit committee are baroness noakes dbe chairman dr bernard 
bulkin and richard davey whose experience and background are set out on pages 30 and 
31 the board is satisﬁed that baroness noakes and richard davey have recent and 
relevant ﬁnancial experience and that all members of the committee remain independent 
the members of the committee receive updates in ﬁnancial reporting and the group’s 
regulatory framework in various forms throughout the year
the chairman the chief executive the finance director the director of internal audit the 
director of strategy and regulation the group financial controller the company secretary 
and the external auditor normally attend by invitation all meetings of the committee other 
members of senior management are also invited to attend as appropriate in performing its 
duties the committee has access to the services of the director of internal audit the 
company secretary and external professional advisers
we met ﬁve times in 201011 and our work focused on four key areas ﬁnancial statements 
and accounting policies internal controls oversight of internal and external audit and the 
regulatory reporting obligations of our subsidiary severn trent water limited
financial statements and accounting policies
reviewing the ﬁnancial statements and accounting policies requires us to make certain 
judgements and we set out below some of the key issues we discussed in respect of 20101 1 
• the implementation of accounting standards in the period in particular ifric 18 in 
respect of assets transferred from customers 
• the assumptions which underpin accounting for the group’s retirement beneﬁts schemes
• the rationale for items shown as exceptional in the accounts
in reviewing the ﬁnancial statements we receive input from the executive disclosure 
committee and deloitte the former is chaired by the finance director and considers the 
content accuracy and tone of the ﬁnancial statements and other public disclosures prior  
to their release
deloitte reported to the committee on their review of the half year interim results and on 
their audit of the year end ﬁnancial statements
internal controls
we receive regular reports from internal audit in respect of their work on internal controls 
and we review management letters received from the external auditors we review internal 
audit’s annual review of fraud prevention and mitigation as well as a regular fraud log
technology controls and governance were areas of focus in 201011 and we received 
several reports on the control environment in this area where we had previously identiﬁed 
the potential to enhance controls much progress has been made in improving the control 
environment and we will continue to monitor progress into 201112
we reviewed the processes for and outputs from our enterprise risk management process 
through which the principal risks and related controls are identiﬁed in addition we 
monitored the ongoing development of our compliance and assurance processes in respect 
of the key risks
we discussed the new compliance requirement for senior accounting ofﬁcers to provide 
certiﬁcation in respect of the accounting records and processes which underpin the 
calculation of tax liabilities for uk based companies owned by the group
a programme is under way to ensure the group is in compliance with the uk bribery act which 
is due to become effective in july 2011 we will receive further progress reports in 201112
further details of our internal control framework including the main features of our internal 
control and risk management systems in relation to the ﬁnancial reporting process can be 
found in the directors’ report on page 28
oversight of internal audit and external audit
we are responsible for overseeing the work of the internal audit function and also for 
managing the relationship with the group’s external auditor we review the performance of 
baroness noakes dbe
chairman of the audit committee
the committee assists the board in 
discharging its responsibilities for the 
integrity of the company’s financial 
statements the assessment of the 
effectiveness of the systems of internal 
controls and monitoring the effectiveness 
and objectivity of the internal and external 
auditors the role and the responsibilities 
of the committee are set out in written 
terms of reference these can be  
found on the company’s website  
wwwseverntrentcom and are also 
available from the company secretary severn trent plc annual report and accounts 2011 41
governance
the internal and external auditor annually to ensure that they are effective and recommend 
to the board whether the external auditor should be reappointed
the committee regularly holds discussions with both the internal and external auditors in 
the absence of management the committee reports to the subsequent meeting of the 
board on the committee’s work and the board receives a copy of the minutes of each 
meeting of the committee
internal audit
the director of internal audit and his internal audit team report on a day to day basis  
to management on the effectiveness of the group’s systems of internal controls and the 
adequacy of these systems to manage business risk and to safeguard the group’s assets 
and resources this work is summarised and reported to the audit committee on a regular 
basis and is a key element of the assurance that the committee receives on the risks and 
controls in the group
the plans the level of resources and the budget of the internal audit function are reviewed 
at least annually by the audit committee the director of internal audit is free to raise any 
issues with the committee or its chairman at any time during the year
external auditor
deloitte llp deloitte were appointed auditor of the company in 2005 the audit 
committee reviews the auditor’s effectiveness each year prior to recommending to the 
board that they be proposed for reappointment at the agm deloitte audit all signiﬁcant 
subsidiaries of the group
annually the committee reviews information provided by the external auditor conﬁrming 
their independence and objectivity within the context of applicable regulatory requirements 
and professional standards the company does not have a policy of tendering the external 
audit at speciﬁc intervals but would initiate a tender process if there were any concerns 
about the quality of the audit or the independence and objectivity of the auditor there are 
no contractual obligations that act to restrict the committee’s choice of external auditor
details of the amounts paid to deloitte for audit and nonaudit services are provided in note 
7 to the accounts page 75
in accordance with the requirements for auditor independence the lead partner stood down 
after the 200910 audit having served ﬁve years in that capacity our new lead partner 
observed the 200910 audit to ensure continuity following the changeover
severn trent water limited
the regulated activities carried out by severn trent water limited result in other reporting 
requirements to ofwat and these are also covered by the audit committee these 
regulatory reporting obligations include a comprehensive annual return on all of severn 
trent water limited’s regulatory obligations known as the june return and a statement 
that underpins the customer charges made by severn trent water limited known as the 
principal statement
deloitte make reports to ofwat in respect of the june return the june return covers many 
aspects which are not ﬁnancial and severn trent water limited appoints a reporter atkins 
to report on those aspects the audit committee receives reports from deloitte and the 
reporter on their work as part of its review of the returns
in june 2010 we held an additional meeting to consider and review the new ofwat reporting 
requirements regarding the split of operating costs and ﬁxed assets between different 
activities within severn trent water limited ‘accounting separation’
audit committee attendance in 201011
baroness noakes 55
dr bernard bulkin 45
richard davey 55
in april 2010 we conducted an annual review of our performance as part of the annual 
board effectiveness review process and the board as a whole concluded that we continue 
to operate effectively 
policy on the provision of nonaudit 
services
the company has approved a formal 
policy on the provision of nonaudit 
services aimed at safeguarding and 
supporting the independence and 
objectivity of the external auditor
the policy sets out the approach to be 
taken by the group when using the 
services of the external auditor including 
requiring that certain services provided 
by the external auditor are preapproved 
by the audit committee or its chairman 
it distinguishes between those services 
where an independent view is required 
and that should be performed by the 
external auditor such as statutory and 
nonstatutory audit and assurance work 
prohibited services where the 
independence of the external auditor 
could be threatened and they must not 
be used and other nonaudit services 
where the external auditor may be used 
nonaudit services where the external 
auditor may be used include non
recurring internal controls and risk 
management reviews ie excluding 
outsourcing of internal audit work advice 
on financial reporting and regulatory 
matters due diligence on acquisitions 
and disposals project assurance and 
advice tax compliance services and 
employee tax services 
the approval of the audit committee  
or its chairman is always required if  
a nonaudit service provided by the 
auditor is expected to cost more than 
£100000 or if nonaudit fees for the  
year would thereby exceed the amount  
of the audit fee severn trent plc annual report and accounts 2011 42
governance
corporate responsibility committee
the purpose of the corporate responsibility cr committee is to provide board oversight 
of the management of all nonﬁnancial risks to the group the structure for our cr policy 
and framework is based around the four areas of workplace marketplace environment  
and community providing a common framework for both our businesses – regulated and 
nonregulated the framework remains under review as we continue to integrate corporate 
responsibility into our core business operations for both severn trent water and severn 
trent services for each of the areas there are four goals within our cr policy which help 
to focus improvements in our performance
within our cr framework we have identiﬁed 10 focus areas that are critical to our 
management of risk and reputation these areas have been determined through 
stakeholder dialogue risk assessment and benchmarking within the water industry and the 
ftse 100 the 10 areas provide the focus of the forward agenda of our cr committee
workplace
health safety and wellbeing employee skills conduct and motivation diversity
marketplace
customer needs – including vulnerable customers supply chain responsibility
environment
environmental stewardship waste reduction and recycling climate change – 
mitigation and adaptation
community
community engagement working with our customers – including pollution 
prevention and water efﬁciency
these focus areas also determine our approach to working in collaboration with other 
organisations who share mutual interests and objectives further information is available on 
our corporate website wwwseverntrentcomcorporateresponsibility
within severn trent water we have an effective performance management system in place 
through 18 core business key performance indicators kpis and eight ksis these are 
overseen by the severn trent executive committee and the board many of the business 
kpis relate directly to our cr focus areas and therefore contribute signiﬁcantly to our cr 
performance
we report internally on our performance through both our executive committee and our cr 
committee externally we report through a number of channels including our annual june 
return our regulatory submission to ofwat our websites and our annual report and 
accounts
the members of the corporate responsibility committee are dr bernard bulkin chairman 
gordon fryett and tony wray
corporate responsibility committee attendance in 201011
dr bernard bulkin 33
gordon fryett 33
tony wray 33
dr bernard bulkin
chairman of the corporate  
responsibility committee
the committee provides guidance and 
direction to the group’s corporate 
responsibility cr programme reviews 
the group’s key nonfinancial risks and 
opportunities and monitors progress  
the terms of reference for the committee 
can be found on the company’s website 
wwwseverntrentcom and are also 
available from the company secretary
the committee reviews annually the 
group’s formal whistleblowing policy that 
deals with allegations from employees 
relating to breaches of the code of 
conduct and reviews at each of its 
meetings the whistleblowing incident log severn trent plc annual report and accounts 2011 43
governance
governance
remuneration committee
this report sets out the remuneration policy for the directors of severn trent plc and 
discloses the amounts paid to them in the year ended 31 march 2011
the report is subject to a shareholder vote and a resolution to approve this directors’ 
remuneration report will be proposed at the agm the report has been prepared in 
accordance with the requirements of the companies act 2006 the principles of the 
combined code on corporate governance and best practice guidelines
during the year the committee undertook a thorough review of the variable arrangements 
for the executive directors and other members of the severn trent executive committee 
this review included an examination of both the quantum and structure of the variable pay 
arrangements and the measures used to assess performance the conclusions of this 
review were as follows
• the committee determined that the structure of awards cash bonus deferred share 
bonus with matching and long term incentive plan awards remained appropriate and the 
signiﬁcant proportion of variable pay delivered in shares provided a strong alignment 
between the interests of management and shareholders
• the quantum of rewards remains competitive and no changes were proposed to current 
award levels
• the performance measures and weighting of the targets for the annual bonus plan 
severn trent water kpis personal performance and severn trent services performance 
for the chief executive and finance director continue to provide a strong and challenging 
assessment of the ﬁnancial and operating performance of the business the annual 
bonus will therefore continue to operate on the same basis for 201112 save that severn 
trent water performance will be measured by reference to 20 rather than 18 kpis
• relative tsr remains an appropriate measure of performance for the share matching 
plan providing alignment with the returns received by shareholders in the absence of a 
sufﬁcient number of listed utility companies the current ftse 51150 comparator group  
is considered the most relevant benchmark for measuring performance however to 
address the share price volatility caused by the uncertainty of the ﬁve year pricing review 
rather than measuring performance over a single three year period a multipoint 
measurement basis will be applied to future grants 20 over 018 months 30 over 
027 months and 50 over 036 months the awards will continue to be subject to the 
committee being satisﬁed with the ﬁnancial performance over the performance period 
and further there being no compromise to the commercial integrity of severn trent over 
the performance period this approach should reduce the impact of price uncertainty in 
the run up to new asset management periods and reward for sustainable and steady 
shareholder returns
• to provide a stronger focus on the long term ﬁnancial performance of the business  
future awards under the long term incentive plan ltip will be subject to a performance 
measure based on the company’s return on regulatory capital value rorcv compared 
to the ofwat final determination current awards under this plan are subject to a relative 
tsr performance condition rorcv was chosen as the measure of performance 
because it directly targets management’s delivery of the business plan for awards 
granted in 2011 0 of the shares will vest if rorcv equals the final determination 
increasing on a straight line basis to 50 vesting if rorcv exceeds the final 
determination by 2 pa and 100 vesting for outperformance of 7 pa or more 
performance will be based on the average rorcv over three ﬁnancial years starting in 
the year in which the award is granted further details on the performance measure for 
the 2011 award are set out on page 48
the committee believes that the new performance measures for the share matching plan 
and long term incentive plan will provide a more rounded assessment of the overall 
ﬁnancial and operational performance of the business and will provide a clearer line of sight 
for executives between performance and reward
richard davey
chairman of the remuneration committee
the committee assists the board by 
focusing on the activities detailed below 
reporting to the board on decisions and 
actions taken and making any 
necessary recommendations
•  the remuneration policy and its 
application to the chief executive  
and executives reporting to the  
chief executive
•  the adoption of annual and longer term 
incentive plans
•  determination of levels of reward to the 
chief executive and approval of 
reward to executives reporting to the 
chief executive
•  setting the chairman’s fee and
•  the communication to shareholders  
on remuneration policy and the 
committee’s work on behalf of  
the board
the full terms of reference for  
the committee can be found on  
the company’s website  
wwwseverntrentcom and are also 
available from the company secretary severn trent plc annual report and accounts 2011 44
governance
remuneration committee continued
remuneration committee
the committee determines on behalf of the board the company’s 
policy on the remuneration of executive directors other members of 
the executive committee and the chairman of the board the 
committee determines the total remuneration packages and 
contractual terms and conditions for these individuals the policy 
framework for remunerating all senior executive managers is 
consistent with the approach taken for executive directors
the committee is comprised exclusively of independent non
executive directors of the company with the exception of andrew 
duff the company chairman who was independent on his 
appointment to the board 
the members of the committee during the year were dr bernard 
bulkin richard davey committee chairman andrew duff sir 
john egan and martin lamb
remuneration committee attendance in 201011
richard davey 44
andrew duff appointed to the committee 20 july 2010 34
dr bernard bulkin 34
sir john egan retired from the committee 20 july 2010 11
martin lamb 44
with the exception of the company chairman the committee 
members have no personal ﬁnancial interest other than as 
shareholders in the matters to be decided as company chairman 
andrew duff’s fees are set by the committee but he is not party to 
this discussion 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
hewitt new bridge street a trading name of aon corporation is the 
independent advisor to the committee neither hewitt new bridge 
street nor any other part of the aon corporation provided other 
services to the company during the year
the chief executive tony wray the human resources director 
alec luhaste until december 2010 evelyn dickey thereafter and 
the reward and hr systems manager marilyn gillert also 
attended the committee meetings to provide advice and respond  
to speciﬁc questions such attendances speciﬁcally excluded any 
matter concerning their own remuneration the company 
secretary fiona smith acts as secretary to the committee
remuneration committee activity
during the year ended 31 march 2011 the committee met four 
times to discuss the key remuneration issues arising the operation 
of the remuneration policy and the market updates by its advisers 
the following table sets out what the committee covered at each of 
the meetings over the course of the year
date key agenda items
may 2010 agree the vesting results for the 200910 annual 
bonus scheme and the 2007 ltip awards
approve the incentive plan targets for the 
201011 annual bonus scheme including 
personal performance targets and the 2010 
ltip awards
approve the 2010 directors’ remuneration 
report
november 2010 strategic review of the annual bonus plan and 
ltip including performance metrics 
update on executive pension provision
january 2011 review of salaries and benefits for 2011 for the 
executive directors and other senior executives
consider proposed changes to the annual bonus 
plan and ltip
review of the executive directors shareholding 
requirements
march 2011 incentive plan performance update
review of good leaver plan statements
remuneration policy
each year the committee reviews the remuneration policy for 
executive directors and other senior executive managers taking  
into account both the external market and the company’s strategic 
objectives over the short and the medium term 
the company’s continuing remuneration policy for executive 
directors is to provide remuneration in a form and amount which  
will attract retain motivate and reward high calibre individuals  
the remuneration package is based on the following principles
principle rationale
incentives are aligned with the 
interests of shareholders and 
seek to reward the creation of 
long term value 
executives must be adequately 
focused on the long term 
strategy and make decisions 
that lead to the creation of long 
term 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 performance of the 
business is key and the  
package should be 
appropriately geared towards 
performance related pay 
the total remuneration package 
for on target performance 
should be fully competitive but 
not excessive in the relevant 
market 
the committee wishes the 
executives to be appropriately 
remunerated for the challenges 
they face and ensure that the 
right structure and levels are  
in place to take the business 
forward
packages are structured flexibly 
to meet critical resource needs 
and retain key executives 
package flexibility allows the 
committee to take decisive 
action with issues of recruitment 
and retention in the best 
interests of business continuity 
and shareholder value severn trent plc annual report and accounts 2011 45
governance
the charts below show as a proportion of the package ﬁrstly the 
expected values of salary bonus and long term incentives for target 
performance and secondly the maximum values of salary bonus 
and long term incentives for the executive directors based on the 
proposed remuneration policy for 201112 the committee 
considers the mix between ﬁxed and performance related pay to  
be appropriate
0 20
base salary
40 60 80 100
chief executive
all other executive directors
target bonus cash
target bonus deferred shares
expected value of smp awards
expected value of ltip awards
expected value
0 20
base salary
40 60 80 100
chief executive
all other executive directors
maximum bonus cash
maximum bonus deferred shares
maximum value of smp awards
maximum value of ltip awards
maximum value
the committee takes seriously the issue of balancing risk and 
reward during the year the committee undertook a detailed review 
of the variable pay arrangements for the executive directors and 
other members of the executive committee the committee 
concluded that the schemes were appropriately managed and the 
choice of performance measures and targets did not encourage 
undue risk taking by the executives the schemes incorporate a 
range of internal and external performance metrics measuring both 
operational and ﬁnancial performance providing a rounded 
assessment of overall company performance the committee 
retains ultimate approval for the executive incentive schemes and all 
share plans across the company and has the ﬁnal discretion as to 
how they are applied furthermore the rules of the annual bonus 
scheme and long term incentive schemes provide that the 
committee may reclaim ‘clawback’ some or all of the after tax part 
of any award to executive directors if it transpires that the award was 
based on calculations which are subsequently demonstrated to be 
materially incorrect
personal shareholdings 
the company operates shareholding guidelines under which 
executive directors are expected to build and maintain a minimum 
holding of shares in the company the chief executive is expected  
to build and maintain a holding of shares to the value of 15 x base 
salary and other executive directors 1 x base salary executive 
directors are expected to retain at least half of the shares they 
receive through the long term incentive plan and other share based 
plans until they meet the guideline holdings details of the current 
shareholdings of the executive directors are set out on page 52
external directorships
executive directors are permitted 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 permitted to retain 
the fees arising from one such appointment
michael mckeon was appointed as a nonexecutive director of  
the merchants trust plc on 1 may 2008 and in respect of the 
appointment for the year ended 31 march 2011 he was paid fees  
of £20115 he has retained these fees in accordance with the 
above policy
no other executive directors currently hold any external fee earning 
nonexecutive directorships
base salaries and beneﬁts
base salaries for individual directors are reviewed annually by  
the committee and take effect from 1 july salaries are set with 
reference to individual performance experience and contribution 
together with developments in the relevant employment market 
having regard to the market median for similar roles in publicly 
quoted companies of a comparable size and practice in other  
water companies and internal relativities
the committee gives due consideration to the current economic 
climate and current market practice regarding executive salary 
reviews and the broader employee salary review policy at the 
company the committee has not set a speciﬁc policy on the 
relationship between executive directors’ pay and that of the rest  
of the workforce but aims to pay all employees fairly taking into 
account their respective roles and responsibilities
with this in mind the committee adopted a policy of a zero increase 
for the base salaries of the executive directors in 200910 and a 2 
increase in 201011 against a backdrop of economic recovery it 
has chosen to adopt a general policy of 3 increase for the base 
salaries of the executive directors in 201112 this is in line with the 
policy of all employees of a 3 increase for base salaries
at the time of the chief executive’s appointment his salary reﬂected 
the fact that he was new to the role and accordingly the committee 
gave a commitment to review his performance each year and if 
appropriate increase the base salary over time to align it with the 
market median the committee agreed that the chief executive’s 
base salary should be reviewed again this year giving due 
consideration to the performance of the company and the  
individual and the internal relativity with the other executive  
directors and market alignment the committee agreed that the 
chief executive’s base salary will be increased from £500000  
to £550000 on 1 july 2011 
the nonsalary beneﬁts for executive directors comprise
• a car allowance
• private medical insurance
• life assurance
• an incapacity beneﬁts scheme
private medical insurance and some other beneﬁts may be ﬂexed 
under the company’s ﬂexible beneﬁts scheme severn trent plc annual report and accounts 2011 46
governance
remuneration committee continued
remuneration arrangements for executive directors
the remuneration arrangements for the executive directors comprise the following elements
• base salary and beneﬁts
• annual bonus scheme
• long term incentive plan ltip and share matching plan smp
• pension
details of each of the above elements follow but the table below summarises the proposed packages of each of the executive directors
component
tony wray  
chief executive
michael  
mckeon  
finance  
director
tony ballance 
director  
strategy and 
regulation
martin kane 
customer 
relations  
director
andy smith 
director of  
water  
services
base salary from 1 july 2011 £550000 £446500 £202100 £220600 £262600
on target bonus  of salary 60 60 60 60 60
maximum bonus  of salary 120 120 120 120 120
 of bonus earned deferred into shares 50 50 50 50 50
ltip award  salary 70 50 50 50 50
smp award – ratio of matching shares  
to deferred shares 051 051 051 051 051
pension arrangement final salary 
occupational 
scheme
cash 
allowance
defined 
contribution 
scheme
cash 
supplement
final salary 
occupational 
scheme
benefits                       a car allowance private medical insurance life assurance and an incapacity benefits scheme
annual bonus scheme
executive directors are eligible for annual bonuses to encourage improved performance with targets established by the committee  
to align executive directors’ interests with shareholders the annual bonus opportunity for all the executive directors is 120 of salary  
for the achievement of target performance which requires satisfaction of challenging goals 60 of salary could be earned
the following charts show how the annual bonus metrics are weighted for the executive directors
0 20
severn trent water performance
40 60 80 100
chief executive and finance director
other executive directors
severn trent services performance
personal metrics
annual bonus metric weightings severn trent plc annual report and accounts 2011 47
governance
severn trent water kpi award for the 20101 1 annual bonus payment 
points awarded
0
200
180
160
140
100
120
80
60
40
20
kpi 1
kpi 2
kpi 3
kpi 4
kpi 5
kpi 6
0 na na 0
kpi 7
kpi 8
kpi 9
kpi 10
kpi 1 1
kpi 12
kpi 13
kpi 14
kpi 15
kpi 16
kpi 17
kpi 18
kpi 19
kpi 20
environmental financial customer employee
kpi on target performance  100
kpi 1 lost time incidents
kpi 2 employee motivation
kpi 3 water quality
kpi 4 customer written complaints
kpi 5 first time call resolution for billing
kpi 6 unplanned interruptions
kpi 7 properties at risk of low pressure
kpi 8 first time job resolution
kpi 9 nonperformance of regulatory obligations
kpi 10 capex versus final determination
kpi 11 capex process quality not measured for bonus
kpi 12 debtor days
kpi 13 opex
kpi 14 ofwat efﬁciency billing factor not measured for bonus
kpi 15 pollution incidents
kpi 16 sewer ﬂooding incidents
kpi 17 sewage treatment works  failing consents
kpi 18 supply availability
kpi 19 net energy use
kpi 20 leakage mid
0 0
the bonus outturn in respect of severn trent water performance 
was operated by reference to a balanced scorecard of measures 
based on the 18 kpis the committee believes that the use of the 
severn trent water kpis continues to be both an effective and 
challenging annual bonus metric and meets the needs of the 
business the bonus entitlement was determined by reference to 
the aggregate number of points awarded across all the kpis the 
targets taken together are considered by the board to have an 
impact on the longer term ﬁnancial performance of the company 
and a number of them are reported to ofwat 
the table below shows the points awarded by the committee for 
bonus purposes under each of the 18 kpis in relation to the 201011 
annual bonus scheme four of the 18 kpi points have been 
adjusted upwards this was only done after detailed consideration 
and in making this decision we recognised that management had 
done the right thing when faced with exceptional operational 
challenges over the winter period they also maintained overall 
ﬁnancial performance as a consequence the bonus awarded for 
the severn trent water portion of the annual bonus was 400 of its 
bonus element maximum
the chief executive and finance director have 10 of their bonus 
linked to the performance of severn trent services performance  
is measured against the proﬁt before interest and tax before 
exceptional items of severn trent services a measure which is a 
fully disclosed kpi of the severn trent services business as shown 
in the business review section performance is measured against 
budgeted proﬁt reﬂecting the desired growth of severn trent 
services subject to adjustment by the committee based on its 
assessment of overall performance of the business severn trent 
services performance over the year did not reach its target and 
therefore resulted in a bonus award of 0
in addition each director has 10 of their bonus opportunity 
measured against a set of personal performance metrics  
the metrics for 201011 include
• supporting the business change and transformation process 
– focusing on the ongoing improvements to optimise the 
performance of the business eg process improvements 
technology and systems to support the processes and location 
training and development of people to operate in the new 
environment and
• developing people – focusing on the individual’s contribution to 
ensuring that the talent management processes help to develop 
future leaders and therefore support succession planning and 
business continuity
half of any bonus paid is deferred into shares to be held for three 
years following payment if the executive is summarily dismissed 
without notice under hisher employment contract then the deferred 
bonuses are forfeited in all other cases of cessation of employment 
the deferred bonus is not lost and the shares automatically vest on 
the dealing day after the cessation of employment
the rules of the annual bonus scheme provide that the committee 
may reclaim ‘clawback’ some or all of the after tax part of any 
bonuses awarded to executive directors if it transpires that the 
bonus calculation was based on calculations which are 
subsequently demonstrated to be materially incorrect
for the purpose of the annual bonus calculation kpis – ofwat efﬁciency billing factor and capex process quality are not included severn trent plc annual report and accounts 2011 48
governance
remuneration committee continued
annual bonus payments to executive directors are not pensionable
the committee has reviewed the operation of the plan and 
concluded that it should operate on the same basis for 201112 
however for 201112 severn trent water performance will be 
measured by reference to 20 kpis as set out on page 47 
long term incentives
as disclosed on page 43 the committee undertook a thorough 
review of the incentive arrangements during the year and determined 
that some changes should be made to the operation of the long term 
incentive schemes to encourage a greater focus on operational 
performance and to provide a fairer method of assessing 
performance in this section we set out details of both the long term 
incentives in place for the year under review and the proposed long 
term incentive arrangements for 201112 and beyond
during the year under review the executive directors participated in 
two long term incentive schemes i a long term incentive plan 
and ii a share matching plan
a long t erm incentive plan
the long term incentive plan ltip was approved by shareholders 
at the 2005 agm under the ltip  annual conditional awards of 
performance shares may be made to executive directors and senior 
staff up to an annual maximum limit of shares worth 125 of base 
salary in 2010 a share award equivalent to 70 of salary was 
made to the chief executive and 50 of salary to the other 
executive directors
the number of shares subject to an award will be increased 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 
provided that the participant remains in employment at the end  
of the performance period
vesting of awards granted under the ltip since 2006 has been 
subject to tsr performance measured relative to those companies 
ranked 51–150 in the ftse by market capitalisation excluding 
investment trusts 25 of awards vesting at median performance 
and 100 vesting for performance in the upper quartile in addition 
for awards to vest the committee must be satisﬁed that the 
company’s tsr is reﬂective of the company’s underlying 
performance this is the same performance condition as applying  
to the awards granted in 2010 under the share matching plan
at the end of the performance period for each award the tsr 
performance condition will be measured and independently veriﬁed 
by hewitt new bridge street on behalf of the committee
as disclosed on page 43 of this report during the year the 
committee undertook a review of the variable pay arrangements for 
executives and determined to change to the performance targets 
applying to future ltip awards to provide a stronger alignment 
between the long term ﬁnancial and operational performance of the 
group and the rewards delivered to management
vesting of awards granted in 2011 and beyond will be based on 
return on regulatory capital value rorcv with a sliding scale of 
targets linked to outperformance of the ofwat final determination 
the targets for awards granted in 2011 will be as follows 
severn trent average annual 
rorcv outperformance against  
the ofwat final determination 
expectation
vesting level for performance 
shares
less than or equal to final 
determination ≤100
0
102 50
107 or higher 100
performance will be measured over the three ﬁnancial years ending 
31 march 2012 2013 and 2014 the committee reserves the 
discretionary power to change the result if it is 0 or greater than 
50 if it is greater than 50 it can reduce the vesting to not less 
than 50 if it is 0 it can increase the vesting to not more than 
50 the use of this discretion is expected to be exceptional but 
may be invoked by the committee in order to take into account of 
any of the following factors not an exhaustive list
• actual rpi compared to the ofwat assumed rpi ﬁgure – even 
though the regulatory capital value is adjusted each year for rpi  
a signiﬁcant swing in inﬂation during the year can result in 
substantial under or over performance on the return on regulatory 
capital value target
• changes to the ﬁnancing of the company as approved by the 
board during the performance period – for example a signiﬁcant 
change to the level of gearing of the balance sheet would result  
in partially meeting this performance condition
• policy changes that occur during the performance period – there 
is much discussion on the future shape of the water industry in  
the uk and if enacted we would wish to ensure that any changes 
have a neutral impact on existing awards
b share matching plan
under the share matching plan executives can receive up to one 
matching share for each share deferred under the annual bonus 
plan for awards made in 2010 the ﬁrst set of awards granted under 
the plan the ratio was limited to 05 matching share for each 
deferred share the performance condition requires the company’s 
tsr to be measured relative to those companies ranked 51–150  
in the ftse index by market capitalisation excluding investment 
trusts this is considered to be the most suitable comparator group 
since the number of comparable regulated utilities against which to 
compare the company’s performance remains too small to enable 
meaningful analysis the ftse 51–150 comparator group allows for 
the company’s performance to be measured against a broader 
market without any one sector overly impacting the group 25 of 
the matching awards will vest at median performance and 100 will 
vest for performance in the upper quartile in addition for awards to 
vest the committee must be satisﬁed that the tsr is reﬂective of 
the company’s underlying performance this replicates the ltip 
performance condition for the 2010 awards
as with the ltip  the number of shares subject to an award will be 
increased 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 provided that the participant remains in employment at the end 
of the performance period severn trent plc annual report and accounts 2011 49
governance
after careful review the committee concluded that relative tsr 
remains the most appropriate performance measure for the share 
matching plan since it provides alignment between the rewards 
received by management and the returns received by shareholders 
the ftse 51150 comparator group will be retained and the same 
vesting schedule will apply 25 vesting at median performance 
increasing on a straight line basis to 100 vesting for performance 
in the upper quartile however rather than measure performance 
over a single three year period the committee concluded that for 
future awards performance would be measured on a multipoint 
basis 20 over 018 months 30 over 027 months and 50 over 
036 months the awards will continue to be subject to the 
committee being satisﬁed with the ﬁnancial performance over the 
performance period and further there being no compromise to the 
commercial integrity of severn trent over the performance period
the committee has the authority to reclaim ‘clawback’ some or all 
of the after tax part of any shares awarded to executive directors 
under the long term incentive plan and share matching plan and  
if it transpires that the vesting calculation was based on calculations 
which are subsequently demonstrated to be materially incorrect
performance graph
this graph shows the value by 31 march 2011 of £100 invested in 
severn trent plc on 31 march 2006 compared with the value of 
£100 invested in the ftse 100 index the ftse 100 was chosen 
as the comparator because the company is a constituent of that 
index the intermediate points show the value at intervening 
ﬁnancial year ends
2006
value £
2007 2008 2009 2010 2011
severn trent plc ftse 100 index         source datastream
total shareholder return
0
25
50
75
100
125
150
175
200
below board remuneration
in 201011 there were ﬁfteen executives immediately below board 
level who were paid salaries of between £100000 and £300000 
per annum
salary £000 number of executives
100–150 10
151–200 2
201–250 1
251–300 2
the below board level executives also participate in the same 
incentive arrangements as the executive directors albeit at lower 
award levels 
all employee share plans
through a variety of share schemes employees are encouraged  
to hold shares in the company
this includes an all employee share incentive plan awards are 
currently made which include a performance condition based on  
the award of points for the kpis employees of severn trent plc and 
severn trent water limited participate in the plan for the year 
201011 awards of shares to the value of £300 will be made to all 
eligible employees
the company also offers an all employee hmrc approved saye 
plan on an annual basis and periodically reviews the use of other  
all employee incentive vehicles
hedging of awards
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 53 and 54 in respect of the ltips deferred share awards 
under the annual bonus scheme and the share matching plan the 
company’s policy is to purchase and hold in trust 50 of the total 
number of shares that could potentially vest from all outstanding 
awards the requirement to purchase shares is calculated and the 
purchase carried out shortly after each annual award
in respect of awards made under the company’s share incentive 
plan all the shares taken up by employees at each invitation are 
normally purchased and placed in trust immediately
the company grants saye options over unissued shares always 
operating within the dilution limits contained in the scheme rules
the committee is satisﬁed that the overall dilution limits provide 
sufﬁcient headroom for all the company’s share schemes
pensions
severn trent executives receive retirement beneﬁts from a variety 
of pensions arrangements including deﬁned beneﬁt deﬁned 
contribution payments made direct to personal plans and cash  
in lieu as a result of the changes in pension legislation for high 
earners severn trent will introduce the following options from april 
2011 for any individuals who are affected by the tax changes
for defined contribution members
• continue in the scheme and meet any tax liabilities as they fall 
due or
• continue in the scheme up to the annual allowance £50000 for 
201112 tax year and receive a cash alternative equivalent to the 
level of employer contributions made to the scheme above the 
annual allowance 
for defined benefit members 
• continue in the scheme and meet any tax liabilities as they fall due
• opt out of future deﬁned beneﬁt accrual and join the deﬁned 
contribution section with the same options as above
of the current executive directors andy smith and tony wray 
participate in the severn trent pension scheme the scheme is a 
funded hmrc registered ﬁnal salary occupational pension scheme 
which provides severn trent plc annual report and accounts 2011 50
governance
remuneration committee continued
•  a normal retirement age of 60 years
• an overall pension at normal retirement age of two thirds of ﬁnal 
pensionable salary which for executive directors is deﬁned as 
base salary only 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 and
• a dependant’s pension on death of two thirds of the member’s 
pension
andy smith and tony wray participate up to the level of the scheme 
speciﬁc earnings cap which in 201011 was £129600 they are 
provided with a cash supplement in lieu of pension entitlement 
above this scheme cap at 40 of their respective salaries
members’ contributions are payable at the rate of 6 of pensionable 
earnings early retirement is available after the age of 55 with the 
consent of the company any pension would be subject to a 
reduction that the trustees consider appropriate acting on actuarial 
advice to reﬂect the expected longer payment of the pension 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 pension payments in excess of 
any guaranteed minimum pension are guaranteed to increase in 
line with price inﬂation subject to a maximum of 5 each year in the 
calculation of individual cash equivalent transfer values allowance is 
made for such increases
it is the policy of the committee to offer new executives an 
allowance expressed as a percentage of base salary to fund their 
own pension provision the individual is able to choose whether the 
allowance is paid to the company’s registered deﬁned contribution 
scheme taken as cash or paid to a personal pension arrangement 
this reﬂects the wish of the committee to remove future exposure to 
deﬁned beneﬁt schemes for senior executives these arrangements 
apply to michael mckeon at 40 of base salary
martin kane is a member of the severn trent pension scheme 
wps section but opted out of the scheme in june 2007  he 
receives a cash supplement of 30 of his basic salary in lieu of 
accrual for future service from that date while he no longer accrues 
additional years of service for pension purposes consistent with the 
legislation martin kane’s accrued beneﬁts generally continue to be 
linked to his ﬁnal salary or £161000 plus rpi from 30 june 2007  
to the date of his retirement if higher and scheme beneﬁts are 
preserved in relation to ill health retirement and death in service 
the normal retirement age for the scheme is 65 although early 
retirement is possible prior to age 65 with the consent of the 
company but any beneﬁts relating to service accruing after 
1 december 2006 would be subject to an actuarial reduction
tony ballance is a member of the severn trent pension scheme 
pension choices section which is the company’s deﬁned 
contribution scheme he currently contributes 3 of salary and the 
company contributes at 30 plus a further 25 in respect of death 
in service and ill health beneﬁts the normal retirement age for the 
scheme is 65 although retirement prior to 65 is possible with the 
consent of the company
directors’ service agreements and letters of appointment
a model service contract was approved by the committee in 2004 
and updated during 200708 the main terms of the contracts are 
summarised in the table below
provision policy
notice period 12 months from either party
termination 
payment
maximum payment in the case of redundancy  
or termination in breach of the agreement by the 
company of up to and capped at 175 of base salary 
which is calculated as a conservative estimate of the 
value of salary ﬁxed beneﬁts and on target bonus
any payment will not include amounts in respect of 
awards which have been made under the company’s 
long term incentive plan over which the committee 
retains discretion
mitigation any termination payment will not be made 
automatically but will be subject to both phasing and 
mitigation unless in the circumstances the 
committee considers it appropriate to achieve a 
clean break through payment of a lump sum in which 
case it will require some discount for early payment
change of 
control
there are no speciﬁc contractual payments or 
beneﬁts which would be triggered in the event of  
a change in control of the company
contract  
dates
executive 
directors
date of 
agreement
effective date
tony wray 20 may 2008 7 march 2005
michael mckeon 6 december 
2005
13 december 
2005
tony ballance 2 june 2008 23 july 2005
martin kane 2 june 2008 30 september 
1975
andy smith 2 june 2008 1 january 2005
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 committee recognises that in line with current best practice 
guidelines any termination payment should be based upon an 
estimate of salary and ﬁxed beneﬁts only accordingly the 
committee will adopt this policy in the service agreements of future 
executive directors
in accordance with the uk corporate governance code all the 
directors are subject to reappointment as directors at the 
forthcoming agm 
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 for nonexecutive directors other than the chairman 
comprises an annual fee for acting as a nonexecutive director  
of the company and additional fees for the senior independent 
director and chairmanship or membership of the committees  severn trent plc annual report and accounts 2011 51
governance
the annual fee last increased in 2010 is £43350 the additional fees unchanged since 2008 are as follows
senior  
independent  
director
audit committee remuneration committee
corporate  
responsibility committee
nominations 
committee chairman member chairman member chairman member
additional fee per annum £10000 £15000 £3000 £15000 £3000 £10000 £3000 no fee paid
the chairman receives a fee of £250000 per annum he does not receive any additional fees for committee memberships he does not 
participate in any of the company’s pension arrangements share or bonus schemes
the board does not require directors to take a proportion of their fees in shares and instead leaves decisions regarding the holding of 
shares to individual nonexecutive directors
nonexecutive directors do not participate in share or bonus schemes nor is any pension provision made
nonexecutive directors normally serve three terms of three years they do not have service contracts but their terms of engagement are 
regulated by letters of appointment details of which are shown below
chairman and nonexecutive directors initial appointment current appointment current expiry date
sir john egan chairman – retired 1 october 2004 1 january 2008 –
dr bernard bulkin 1 january 2006 1 january 2009 31 december 2011
richard davey 1 january 2006 1 january 2009 31 december 2011
andrew duff chairman 10 may 2010 10 may 2010 9 may 2013
gordon fryett 1 july 2009 1 july 2009 30 june 2012
martin lamb 29 february 2008 22 february 2011 28 february 2014
baroness noakes 29 february 2008 22 february 2011 28 february 2014
 subject to the requirements of the company’s articles of association for the reappointment of directors at agms
all of the directors are subject to reappointment as directors at the 2011 agm
the text and tables that follow comprise the auditable part of the directors’ remuneration report being the information required by the ukla 
listing rules 986 and 988
directors’ emoluments
basic salary and fees
cash 
£000
biks 
£000
annual 
bonus
1
£000
other
2
£000
total 
201011 
£000
total 
200910 
£000
chairman and other nonexecutive directors
sir john egan chairman – retired 761 – 45 806 2625
dr bernard bulkin 594 – – 00 594 586
richard davey 714 – – 01 715 706
andrew duff chairman 2242 – – – 2242 –
gordon fryett 464 – – – 464 341
martin lamb 464 – – – 464 431
baroness noakes 584 – – 03 587 57 5
executive directors
tony ballance 1902 33 1036 150 3121 2915
martin kane 2133 31 1182 790 4136 4113
michael mckeon 4309 56 2185 151 6701 7018
andy smith 2528 37 1331 67 1 4567 4702
tony wray 4862 63 2520 1606 9051 8781
21557 220 8254 3417 33448 32793
1
 the directors receive 50 of their bonus in cash and 50 is deferred into shares to be held for three years
2
 other emoluments include expenses chargeable to income tax car allowances travel allowances telephone allowances payments made under the group’s ﬂexible beneﬁts 
arrangements and amounts paid in lieu of pension contributions included in other emoluments are
• sir john egan car allowance £4545
• dr bernard bulkin expenses £41
• richard davey expenses £69
• baroness noakes expenses £301
• tony ballance ﬂexible beneﬁts payments £983 and car allowance £15000
• martin kane pension supplement £63945 ﬂexible beneﬁts payments £126 car allowance £15000 and expenses £12
• michael mckeon car allowance £15000 and expenses £113
• andy smith pension supplement £52060 car allowance £15000
• tony wray pension supplement £145560 and car allowance £15000 severn trent plc annual report and accounts 2011 52
governance
remuneration committee continued
directors’ pension provisions
name
service 
completed in 
years including 
transferred in 
service credits
accrued 
pension at  
31 march 2011 
£pa
increase in 
accrued pension  
during the year 
£pa
increase in 
accrued pension  
during the year  
net of inflation 
£pa
transfer value  
of accrued 
pension at  
31 march 2011 
£000
transfer value  
of accrued 
pension at  
31 march 2010 
£000
increase 
decrease in 
transfer value 
over the year  
net of directors’ 
contributions 
£000
andy smith 6 25736 4120 2931 4342 3289 97 9
tony wray 6 25002 4120 2971 4048 3037 937
martin kane 35 126829 5593 1075
1
20006 17512 2494
name
accrued  
pension at  
31 march 2011 
£pa
increase in 
accrued pension 
during the year 
£pa
increase in 
accrued pension 
during the year 
net of inflation 
£pa
transfer 
value of accrued 
benefits net 
of directors’ 
contributions 
£000
andy smith 25736 4120 2931 621
tony wray 25002 4120 2971 593
martin kane 126829 5593 1075
1
885
notes 
relevant directors conﬁrmed by severn trent plc
accrued pension ﬁgures and transfer value calculations provided by towers watson
there have been no changes to the transfer value basis since last year’s disclosures
allowance has been made for changes in market conditions over the year by applying the relevant market value adjustment
inﬂation ﬁgure used in respect of year is to february 2011 55 as the latest available ﬁgure prior to the year end
1 martin kane has an increase in accrued pension from £121236 to £126829 equating to 46 inﬂation level used february 2011 is 55 producing a negative net of inﬂation 
ﬁgure therefore the beneﬁt increase is due to a change in salary not from additional accrual earned over the reporting period
the following contributions were paid to deﬁned contribution pension arrangements in respect of directors
name 2011 2010
tony ballance £67175 £59640
michael mckeon £172550 £170000
directors’ share interests
the directors of the company at 31 march 2011 and their beneﬁcial interests in the shares of the company were as follows
i beneficial holdings
at 1 april 2010  
or date of  
appointment if later 
number of ordinary  
shares of 97
17
19p each
at 31 march 2011 
number of  
ordinary shares of  
97
17
19p each
at 23 may 2011 
number of  
ordinary shares of  
97
17
 19p each
chairman and other nonexecutive directors
dr bernard bulkin 554 554 554
richard davey 588 588 588
andrew duff chairman – 3500 3500
martin lamb 3012 3012 3012
baroness noakes 4018 4018 4018
gordon fryett 1000 1018 1018
executive directors
tony ballance 2032 3149 3149
martin kane
1
8189 9699 10013
michael mckeon 67 4231 4231
andy smith 5217 7 516 7 516
tony wray 7057 10158 10158
notes 
1 martin kane acquired 314 shares on 5 may 2011 following the exercise of his 2008 three year sharesave scheme option severn trent plc annual report and accounts 2011 53
governance
ii long term incentive plan
the executive directors have further interests in the company’s ordinary shares of 97
17
 19p each by virtue of having received contingent 
awards of shares under the severn trent plc long term incentive plan ltip the ltip operates on a three year 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
executive directors have a technical interest in 552019 shares held by the employee share ownership trust the details of the 
performance criteria are explained on page 48 of this report the individual interests for the above named directors which represent the 
maximum aggregate number of shares to which each individual could become entitled are as follows
awards 
granted
maximum 
award
awards 
vested
awards  
lapsed
maximum outstanding 
awards as at  
31 march 2011
tony ballance 18 july 2007 3261 1966 1295 –
14 july 2008 5486 –
–5486
7 july 2009 7405 –
–7405
21 june 2010 6803 – – 6803
martin kane 18 july 2007 3475 2095 1380 –
14 july 2008 6001 –
–6001
7 july 2009 8154 –
–8154
21 june 2010 8504   8504
michael mckeon 18 july 2007 12363 7454 4909 –
14 july 2008 13717 –
–13717
7 july 2009 18733 –
–18733
21 june 2010 17211 – – 17211
andy smith 18 july 2007 5881 3546 2335 –
14 july 2008 8230 –
–8230
7 july 2009 11019 –
–11019
21 june 2010 10124   10124
tony wray 18 july 2007 9189 5540 3649 –
14 july 2008 19684 –
–19684
7 july 2009 27769 –
–27769
21 june 2010 25512 – – 25512
the market price on the date of the 2010 award was 1235 pence the market price at the date of 2007 vesting was 1221 pence
the performance period for awards granted on 18 july 2007 ended on 31 march 2010 the tsr result and the level of vesting achieved for 
this award is shown below
ltip award ranking vesting 
2007 33 out of 85 603
the performance period for awards granted on 14 july 2008 ended on 31 march 2011 the committee has subsequently determined the 
tsr result and the level of vesting achieved for this award is shown below
ltip award ranking vesting 
2008 48 out of 89 0 severn trent plc annual report and accounts 2011 54
governance
remuneration committee continued
iii annual bonus scheme
since 2008 half of any bonus paid has been deferred into shares the table below shows the directors’ deferred share awards and the 
vesting dates
name date of grant
annual bonus  
deferred into shares
number of  
shares
deferred share  
award vests
tony ballance 27 june 2008 £24554 1818 26 june 2011
7 july 2009 £62294 5669 6 july 2012
21 may 2010 £51448 4139 20 may 2013
martin kane 27 june 2008 £26245 1957 26 june 2011
7 july 2009 £68598 6243 6 july 2012
21 may 2010 £64310 5173 20 may 2013
michael mckeon 27 june 2008 £85667 6345 26 june 2011
7 july 2009 £157 590 14343 6 july 2012
21 may 2010 £128724 10355 20 may 2013
andy smith 27 june 2008 £37 732 2794 26 june 2011
7 july 2009 £92700 8437 6 july 2012
21 may 2010 £75810 6098 20 may 2013
tony wray 27 june 2008 £76029 5631 26 june 2011
7 july 2009 £166680 15187 6 july 2012
21 may 2010 £138996 11182 20 may 2013
iv share matching plan
the share matching plan received shareholder approval at the 2009 agm under the share matching plan executives can receive subject 
to performance matching shares for each share deferred under the annual bonus plan for awards made in 2010 the ﬁrst set of awards 
granted under the plan the ratio was limited to 05 matching share for each deferred share the details of the performance criteria are 
explained on pages 48 and 49 of this report the individual interests for the directors under the share matching plan are as follows
date of grant
maximum 
award
awards  
vesting
award  
lapsing
maximum outstanding 
awards as at  
31 march 2011
tony ballance 21 may 2010 2069 – – 2069
martin kane 21 may 2010 2586 – – 2586
michael mckeon 21 may 2010 5177 – – 5177
andy smith 21 may 2010 3049 – – 3049
tony wray 21 may 2010 5591 – – 5591
the number of shares subject to an award will be increased 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 provided that the participant remains in employment at the end of the performance period severn trent plc annual report and accounts 2011 55
governance
v sharesave options over ordinary shares
at the start of 
the year  
no of shares
exercised  
during  
the year  
no of shares
cancelled 
during  
the year  
no of shares
granted  
during  
the year  
no of shares
at the  
end of  
the year  
no of shares
year of  
grant of  
option
exercise  
price p
date from 
which 
exercisable
expiry 
date
sharesave
1
tony ballance 556 – – – 556 2009 862 may 2012 oct 2012
561 561 2010 808 may 2013 oct 2013
martin kane 322 322 – – – 2007 1172 may 2010 oct 2010
314 – – – 314 2008 1221 may 2011 oct 2011
222 – – – 222 2009 862 may 2012 oct 2012
449 449 2010 808 may 2013 oct 2013
– – – 316 316 2011 1137 may 2014 oct 2014
michael mckeon 1943 – – – 1943 2009 862 may 2014 oct 2014
andy smith 1123 1123 2010 808 may 2013 oct 2013
tony wray 1123 1123 2010 808 may 2013 oct 2013
1
 the executive directors in common with all eligible uk employees of the group are entitled to participate in the company’s hmrc 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
a  no executive share options in respect of executive directors were granted or lapsed during the year at 31 march 2011 there were two 
other executives participating in the group’s historical executive share option scheme 31 march 2010 ﬁve other executives
b  at the close of business on 31 march 2011 the midmarket price of the company’s shares was 1461p and the range during the year  
was 1086p to 1513p
signed on behalf of the board which approved the directors’ remuneration report on 26 may 2011
richard davey 
chairman of the remuneration committee severn trent plc annual report and accounts 2011 56
business unit  
risk maps
speciﬁc risk  
assessments eg
company  
risk map
cascading  
objectives
departments teams  individuals
stec  
cut off
performance  
reporting and  
monitoring
businesses  
functions
board  
committees
ﬁlter
ﬁlter
safety asset
fraud
project
process
risk management process
governance
risk and assurance
enterprise risk management
our established enterprise risk management erm process as 
illustrated above is used for the identiﬁcation and assessment of 
risks to signiﬁcant business objectives this includes consideration 
of the effectiveness of existing controls and identiﬁcation 
prioritisation and tracking of actions needed to reduce the risk and
or improve controls our assessment also considers both ﬁnancial 
and reputational impact of risks in order to give a holistic view
during the year we have continued to work to fully embed the 
process across the business including rolling out the process to 
severn trent services we have continued to keep the process 
fresh through the introduction of new tools and challenges and are 
working to better integrate with the processes used by business 
teams to monitor their performance
the key business risks are formally reported to the severn trent 
executive committee and audit committee every six months and  
to the board annually reviews of risk generally take place within  
the business on a quarterly basis to monitor that our key risks are 
identiﬁed that controls and mitigating actions continue to be 
effective and to conﬁrm that focus is maintained on the most critical 
risks requiring attention
during the year we have also held a risk workshop with the board 
which looked at their views on the most signiﬁcant risks facing the 
organisation in order to give greater visibility of their view on risk 
the key focus of these discussions was around the inter
relationships between risks and the board recognised that whilst 
some risks may not be catastrophic on their own an aggregation of 
smaller risks occurring simultaneously or in close succession could 
become very signiﬁcant
in response to the discussions at the board we are now conducting 
a series of workshops aimed at challenging the robustness of 
controls in order to help us withstand even the most catastrophic 
scenario these workshops will consider the interrelationships 
between risks to enable us to obtain maximum value from the risk 
information held
over the coming year we will continue to work to maintain and 
improve our erm process with a particular emphasis on closer 
integration with the business planning process this will include 
clearer articulation of our willingness to accept risk as part of the 
prioritisation of business activity  severn trent plc annual report and accounts 2011 57
governance
principal risk and business impact examples of controls procedures and future plans
strategic
we continue to manage the risks associated with the delivery 
of the strategic objectives of severn trent water including our 
ability to inﬂuence the regulatory framework towards creating 
a sustainable water industry in england and wales and our 
ability to continue to develop a sustainable water company
additionally in the current and ongoing challenging economic 
climate we continue to address risks which may affect the 
strategic objective to grow severn trent services such as the 
political situations in some of our markets and the threat of 
new competitors 
with regard to severn trent water
• we have a strategy to be the leading water and waste water 
company in the uk that is supported by a robust approach to 
legal and regulatory compliance
• we have an appropriate organisational design to support the 
achievement of the strategy
• we engage with key regulatory and government stakeholders to 
understand and inﬂuence the direction of future regulatory and 
public policy development within the water industry
with regard to severn trent services
• we have a clearly articulated strategy in place for products and 
markets to be targeted see pages 16 and 19 for details
• we are implementing a plan to deliver the anticipated growth
• we have business partners in place to provide local support in 
target markets
stakeholder
we continue to manage the risks associated with meeting  
the needs and expectations of key stakeholders investors 
regulators customers staff and suppliers in order to protect  
and enhance our ﬁnancial position brand reputation and 
investor conﬁdence
• we promote and protect the reputation of severn trent water 
through effective internal and external communications and 
robust crisis management plans that include a clear 
communications plan and responsibilities
• we maintain performance across a range of corporate 
responsibility issues to increase conﬁdence of our key 
stakeholders and to enhance and protect our reputation
• we maintain close relationships with our regulators and other 
stakeholders
• we continue to build on changing course and demonstrate 
thought leadership within the industry see page 21 
for details
• we continue to work with our staff to ensure our people have 
the right skills
• we monitor closely the performance of our one supply chain 
contractors involved on the amp5 programme 
principal risks
the following table illustrates the principal risks facing our business however as part of our regular reporting other risks have also been 
considered and discussed by the severn trent audit corporate responsibility and executive committees and the board during the year
examples of how we are managing our risks can also be found in the table severn trent plc annual report and accounts 2011 58
governance
risk and assurance continued
principal risk and business impact examples of controls procedures and future plans
operational and asset related
we continue to manage the risks associated with our daily 
operations including the failure of assets processes or systems 
which in turn may affect our ability to serve our customers could 
impact on health and safety or security at our sites and on our 
ability to meet regulatory targets
• we have asset management plans in place for key assets and 
investment governance boards to prioritise capital investment
• we have initiated an ‘always on’ improvement programme to 
improve controls in relation to investment training and the 
processes and equipment to maintain our distribution network
• we conduct contingency planning and ‘what if’ analyses to 
ensure our assets systems and processes are robust to 
withstand signiﬁcant disruption events 
• we have safety improvement programmes in place at all sites 
driven by local employee groups to continuously improve 
performance see page 15 for details
• we run awareness campaigns to ensure security issues are 
appropriately considered 
• we have developed a close working relationship with 
government departments and emergency forces to maintain 
appropriate levels of security required at all critical sites
financial
we continue to manage the risks associated with our ﬁnancial 
activities including our ability to effectively manage counterparty 
risk attract funding at commercially attractive rates fund 
pensions promises sustainably and meet the challenging stretch 
targets we have set ourselves within our severn trent water and 
severn trent services businesses 
• we have regular detailed counterparty and investment reporting 
processes and monitoring
• through planning and monitoring we ensure the group has 
access to funds to meet its ongoing business needs 
• we have an effective pension trustee structure investment 
policy and investment performance monitoring process in place 
in addition to regular board reviews of pension affordability 
• we ensure external audits are conducted of processes and 
departments 
• we establish business plans and budgets and continually 
monitor the ﬁnancial performance of our businesses against 
those targets
legal regulatory and compliance
we continue to manage the risks associated with potential 
noncompliance with the numerous and increasingly demanding 
obligations reﬂecting the international spread of our operations 
management of these is often dispersed throughout the 
organisation we pay particular attention to risks in areas 
subjected to changing legal and regulatory requirements
current areas of focus include
• the uk bribery act
• the taking on of private sewers and lateral drains pdas
• the introduction of service incentive mechanism sim  
by ofwat
• we have established a compliance management framework  
as part of the corporate governance framework for the group 
for severn trent water
• we plan to undertake a legal risk review of our severn trent 
services business
• we are currently in the process of updating our existing anti 
bribery and anti fraud policy and supporting standards to 
reﬂect the bribery act 2010 guidance
• we have a change programme in place to effectively manage 
the transfer of private sewers and lateral drains see page 11 
for details severn trent plc annual report and accounts 2011 59
financial statements
independent auditor’s report to the members  
of severn trent plc
opinion on other matter prescribed by the companies  
act 2006
in our opinion the information given in the directors’ report for 
the financial year for which the group financial statements are 
prepared is consistent with the group financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following
under the companies act 2006 we are required to report to you 
if in our opinion
• certain disclosures of directors’ remuneration specified by 
law are not made or
• we have not received all the information and explanations  
we require for our audit
under the listing rules we are required to review
• the directors’ statement contained within the directors’ 
report in relation to going concern
• the part of the chairman’s letter relating to the company’s 
compliance with the nine provisions of the june 2008 
combined code specified for our review and
• certain elements of the report to shareholders by the board 
on directors’ remuneration
other matters
we have reported separately on the parent company financial 
statements of severn trent plc for the year ended 31 march 
2011 and on the information in the remuneration committee 
report that is described as having been audited
carl d hughes senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london uk 
26 may 2011
we have audited the group financial statements of severn trent 
plc for the year ended 31 march 2011 which comprise the 
consolidated income statement the consolidated statement of 
comprehensive income the consolidated statement of changes 
in equity the consolidated balance sheet the consolidated cash 
flow statement and the related notes 1 to 40 the financial 
reporting framework that has been applied in their preparation is 
applicable law and international financial reporting standards 
ifrss as adopted by the european union
this report is made solely to the company’s members as a 
body in accordance with chapter 3 of part 16 of the companies 
act 2006 our audit work has been undertaken so that we might 
state to the company’s members those matters we are required 
to state to them in an auditor’s report and for no other purpose 
to the fullest extent permitted by law we do not accept or 
assume responsibility to anyone other than the company and the 
company’s members as a body for our audit work for this 
report or for the opinions we have formed
respective responsibilities of directors and auditor
as explained more fully in the directors’ responsibility statement 
the directors are responsible for the preparation of the group 
financial statements and for being satisfied that they give a true 
and fair view our responsibility is to audit and express an 
opinion on the group financial statements in accordance with 
applicable law and international standards on auditing uk and 
ireland those standards require us to comply with the auditing 
practices board’s ethical standards for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free from 
material misstatement whether caused by fraud or error this 
includes an assessment of whether the accounting policies  
are appropriate to the group’s circumstances and have been 
consistently applied and adequately disclosed the 
reasonableness of significant accounting estimates made by  
the directors and the overall presentation of the financial 
statements in addition we read all the financial and non
financial information in the annual report to identify material 
inconsistencies with the audited financial statements if we 
become aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report
opinion on financial statements
in our opinion the group financial statements
• give a true and fair view of the state of the group’s affairs as 
at 31 march 2011 and of its profit for the year then ended
• have been properly prepared in accordance with ifrss as 
adopted by the european union and
• have been prepared in accordance with the requirements of 
the companies act 2006 and article 4 of the ias regulation 60 severn trent plc annual report and accounts 2011
consolidated income statement
for the year ended 31 march 2011
2011 2010
notes £m £m
turnover 6 5 17113 17039
operating costs before exceptional items 7 11922 11468
exceptional restructuring costs 8 137 480
exceptional charge relating to regulatory matters 8 77 –
total operating costs 7 12136 11948
exceptional loss on disposal of businesses 8 – 17
profit before interest tax and exceptional items 5 5191 5571
exceptional items 8 214 497
profit before interest and tax 4977 5074
finance income 10 1007 809
finance costs 11 3313 2997
net finance costs 2306 2188
lossesgains on financial instruments 12 142 457
share of results of associates and joint ventures 01 01
profit before tax lossesgains on financial instruments and exceptional items 2886 3384
exceptional items 8 214 497
lossesgains on financial instruments 12 142 457
profit on ordinary activities before taxation 2530 3344
taxation on profit on ordinary activities
current tax 13 321 407
deferred tax 13 141 422
exceptional deferred tax credit arising from rate change 13 677 –
total taxation 13 215 829
profit for the period 2745 2515
attributable to
equity holders of the company 2726 2492
noncontrolling interests 19 23
2745 2515
earnings per share pence
basic 15 1152 1056
diluted 15 1146 1055 severn trent plc annual report and accounts 2011 61
financial statements
consolidated statement of comprehensive income
for the year ended 31 march 2011
2011 2010
£m £m
profit for the period 2745 2515
gainslosses on cash flow hedges taken to equity 160 132
deferred tax on gainslosses on cash flow hedges taken to equity 41 37
amounts on cash flow hedges transferred to the income statement in the period 45 76
deferred tax on transfers to income statement 12 21
exchange movement on translation of overseas results and net assets 63 90
tax on exchange differences on foreign currency 04 04
actuarial gainslosses on defined benefit pension schemes 507 1244
tax on actuarial gainslosses 132 348
deferred tax movement arising from rate change 07 –
other comprehensive incomeloss for the period 467 1030
total comprehensive income for the period 3212 1485
attributable to
equity shareholders of the company 3197 1465
noncontrolling interests 15 20
3212 1485 severn trent plc annual report and accounts 2011 62
consolidated statement of changes in equity
for the year ended 31 march 2011
share share other retained
equity 
attributable to 
equity holders 
of severn
non
controlling
capital premium reserves earnings trent plc interests total
£m £m £m £m £m £m £m
at 1 april 2009 2310 719 4687 1745 9461 60 9521
profit for the period – – – 2492 2492 23 2515
losses on cashflow hedges taken to equity – – 132 – 132 – 132
deferred tax on losses on cashflow hedges taken 
to equity – – 37 – 37 – 37
amounts on cash flow hedges transferred to the 
income statement – – 76 – 76 – 76
deferred tax on transfers to the income statement – – 21 – 21 – 21
exchange movement on translation of overseas 
results and net assets – – 87 – 87 03 90
tax on exchange differences – – 04 – 04 – 04
actuarial losses – – – 1244 1244 – 1244
tax on actuarial losses – – – 348 348 – 348
total comprehensive income for the period – – 131 1596 1465 20 1485
share options and ltips
 proceeds from shares issued 06 40 – – 46 – 46
 value of employees’ services – – – 51 51 – 51
 free shares issued – – – 22 22 – 22
current tax on share based payments – – – 03 03 – 03
dividends paid – – – 1597 1597 17 1614
at 31 march 2010 2316 759 4556 1776 9407 63 9470
profit for the period – – – 2726 2726 19 2745
gains on cashflow hedges taken to equity – – 160 – 160 – 160
deferred tax on gains on cashflow hedges taken 
to equity – – 41 – 41 – 41
amounts on cash flow hedges transferred to the 
income statement – – 45 – 45 – 45
deferred tax on transfers to the income statement – – 12 – 12 – 12
exchange movement on translation of overseas 
results and net assets – – 59 – 59 04 63
tax on exchange differences – – 04 – 04 – 04
actuarial gains – – – 507 507 – 507
tax on actuarial gains – – – 132 132 – 132
deferred tax arising from rate change – – – 07 07 – 07
total comprehensive income for the period – – 89 3108 3197 15 3212
share options and ltips
 proceeds from shares issued 06 41 – – 47 – 47
 value of employees’ services – – – 46 46 – 46
 free shares issued – – – 20 20 – 20
current tax on share based payments – – – 03 03 – 03
deferred tax on share based payments – – – 12 12 – 12
dividends paid – – – 1694 1694 15 1709
at 31 march 2011 2322 800 4645 3231 10998 63 11061 severn trent plc annual report and accounts 2011 63
financial statements
2011 2010
restated
see note 3
note £m £m
noncurrent assets
goodwill 16 683 706
other intangible assets 17 1349 1385
property plant and equipment 18 64270 63020
interests in joint ventures 19 02 03
interests in associates 20 48 46
derivative financial instruments 32 1881 2038
available for sale financial assets 32 01 01
68234 67199
current assets
inventory 21 271 265
trade and other receivables 22 4785 4728
derivative financial instruments 32 43 29
cash and cash equivalents 23 3152 2278
8251 7300
total assets 76485 74499
current liabilities
borrowings 32 239 2609
derivative financial instruments 32 01 44
trade and other payables 25 3912 4644
current income tax liabilities 670 672
provisions for liabilities and charges 28 126 255
4948 8224
noncurrent liabilities
borrowings 32 43205 39156
derivative financial instruments 32 1224 1403
trade and other payables 25 3678 2849
deferred tax 26 9194 9564
retirement benefit obligations 27 2921 3549
provisions for liabilities and charges 28 254 284
60476 56805
total liabilities 65424 65029
net assets 11061 9470
capital and reserves attributable to the company’s equity shareholders
called up share capital 29 2322 2316
share premium account 30 800 759
other reserves 31 4645 4556
retained earnings 3231 1776
equity attributable to the company’s equity shareholders 10998 9407
noncontrolling interests 63 63
total equity 11061 9470
consolidated balance sheet
at 31 march 2011
signed on behalf of the board who approved the accounts on 26 may 2011
andrew duff michael mckeon
chairman finance director
company number 2366619
andrew duff 64 severn trent plc annual report and accounts 2011 64
2011 2010
note £m £m
cash generated from operations 34 7530 7080
tax paid 324 538
net cash generated from operating activities 7206 6542
investing activities
interest received 103 105
dividends received from associates and joint ventures – 01
net cash inflow from sale of investments – 22
acquisition of subsidiaries – 132
proceeds on disposal of property plant and equipment 51 69
purchases of intangible assets 209 478
purchases of property plant and equipment 4031 4649
contributions and grants received 194 180
net cash used in investing activities 3892 4882
financing activities
interest paid 1798 1947
closed out swap 205 –
interest element of finance lease payments 108 100
dividends paid to shareholders of the parent 1694 1597
dividends paid to noncontrolling interests 15 17
repayments of borrowings 287 1800
repayments of obligations under finance leases 473 432
new loans raised 1712 10
issues of shares 47 46
purchase of own shares 20 22
net cash used in financing activities 2431 5859
increasedecrease in cash and cash equivalents 883 4199
net cash and cash equivalents at beginning of period 2278 6481
effect of foreign exchange rates 09 04
net cash and cash equivalents at end of period 3152 2278
consolidated cash flow statement
for the year ended 31 march 2011
the increase in cash and cash equivalents is reconciled to the movement in net debt in note 34 severn trent plc annual report and accounts 2011 65
financial statements
notes to the group financial statements
for the year ended 31 march 2011
1 general information
the severn trent group has a number of operations these are 
described in the segmental analysis in note 5
severn trent plc is a company incorporated and domiciled in the 
united kingdom the address of its registered office is shown on 
the back of the cover of the annual report and accounts
severn trent plc is listed on the london stock exchange
2 accounting policies
a basis of preparation
the financial statements have been prepared in accordance  
with international financial reporting standards ifrs 
international accounting standards ias and ifric 
interpretations issued and effective and ratified by the  
european union as at 31 march 2011
the financial statements have been prepared on the going 
concern basis see directors’ report on page 28 under the 
historical cost convention as modified by the revaluation of 
certain financial assets and liabilities including derivative 
instruments at fair value
the preparation of financial statements in conformity with ifrs 
requires the use of estimates and assumptions that affect the 
reported amounts of assets and liabilities at the date of the 
financial statements and the reported amount of revenues and 
expenses for the reporting period although these estimates are 
based on management’s best knowledge of the amount event or 
actions actual results may ultimately differ from those estimates
b  basis of consolidation
the financial statements include the results of severn trent plc 
and its subsidiaries joint ventures 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 subsidiaries are consolidated where the group has 
the power to control a subsidiary
the results of joint venture undertakings are accounted for on an 
equity basis where the company exercised joint control under a 
contractual arrangement
the results of associates are accounted for on an equity basis 
where the company holding is 20 or more or the company has 
the power to exercise significant influence
noncontrolling interests in the net assets of consolidated 
subsidiaries are identified separately from the group’s equity 
therein noncontrolling interests consist of the amount of those 
interests at the date of the original business combination and the 
noncontrolling interest’s share of changes in equity since that 
date losses attributable to the noncontrolling interest in excess 
of its interest in the subsidiary’s equity are allocated against the 
interests of the group except to the extent that the non
controlling interest has a binding obligation and is able to make 
an additional investment to cover the losses
all intragroup transactions balances income and expenses are 
eliminated on consolidation
c revenue recognition
revenue represents the fair value of consideration 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 to which the sale relates have either 
been despatched to the customer or where they are held on the 
customer’s behalf title has passed to the customer
turnover includes an estimate of the amount of mains water and 
waste water 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
in respect of long term contracts revenue is recognised based 
on the value of work carried out during the year with reference  
to the total sales value and the stage of completion of  
these contracts
interest income is accrued on a time basis by reference to the 
principal outstanding and at the effective interest rate applicable 
dividend income from investments is recognised when the 
group’s rights to receive payment have been established 
interest and dividend income are included in finance income
d exceptional items
exceptional items are income or expenditure which individually 
or if of a similar type in aggregate should in the opinion of the 
directors be disclosed by virtue of their size or nature if the 
financial statements are to give a true and fair view in this 
context materiality is assessed at the segment level
e taxation
current tax payable is based on taxable profit for the year 
taxable profit differs from net profit as reported in the income 
statement because it excludes items of income and expenses 
that are taxable or deductible in other years and it further 
excludes items that are never taxable or deductible the  
group’s liability for current tax is calculated using tax rates  
that have been enacted or substantively enacted by the  
balance sheet date
deferred taxation is provided in full using the liability method  
on taxable temporary differences between the tax bases of 
assets and liabilities and their carrying amounts in the financial 
statements a deferred tax asset is only recognised to the extent 
it is probable that sufficient taxable profits will be available in  
the future to utilise it deferred taxation is measured on a 
nondiscounted basis using the tax rates and laws that have  
then been enacted or substantively enacted by the balance 
sheet date and are expected to apply when the related deferred 
income tax asset is realised or the deferred tax liability is settled 
deferred tax assets and liabilities are offset when there is a 
legally enforceable right to set off current tax assets against 
current tax liabilities and when they relate to income taxes  
levied by the same taxation authority and the group intends  
to settle its current tax assets and liabilities on a net basis
f goodwill
goodwill represents the excess of the fair value of purchase 
consideration over the fair value of the net assets acquired 
goodwill arising on acquisition of subsidiaries is included in 
intangible assets whilst goodwill arising on acquisition of 
associates is included in investments in associates if an 
acquisition gives rise to negative goodwill this is credited  
directly to the income statement fair value adjustments  
based on provisional estimates are amended within one year  
of the acquisition if required with a corresponding adjustment  
to goodwill severn trent plc annual report and accounts 2011 66
notes to the group financial statements continued
for the year ended 31 march 2011
years
software 310
other assets 220
years
infrastructure assets
impounding reservoirs 250
raw water aqueducts 250
mains 80150
sewers 150200
other assets
buildings 3080
fixed plant and equipment 2040
vehicles and mobile plant 215
goodwill arising on all acquisitions prior to 1 april 1998 was 
written off to reserves under uk gaap and remains eliminated 
against reserves purchased goodwill arising on acquisitions 
after 31 march 1998 is treated as an intangible fixed asset
goodwill is tested for impairment in accordance with the policy 
set out in note 2 m below and carried at cost less accumulated 
impairment losses goodwill is allocated to the cashgenerating 
unit that derives benefit from the goodwill for impairment  
testing purposes
where goodwill forms part of a cashgenerating unit and all  
or part of that unit is disposed of the associated goodwill is 
included in the carrying amount of that operation when 
determining the gain or loss on disposal of the operation
g intangible noncurrent assets
intangible assets acquired separately are capitalised at cost and 
when acquired in a business combination are capitalised at fair 
value at the date of acquisition following initial recognition the 
historical cost model is applied to intangible assets amortisation 
charged on assets with finite lives is taken to the income 
statement through operating expenses
finite life intangible assets are amortised on a straight line basis 
over their estimated useful economic lives as follows
intangible assets are reviewed for impairment where indicators 
of impairment exist
h research and development
research expenditure is expensed when it is incurred 
development expenditure is capitalised and written off over  
its expected useful economic life where the following criteria  
are met
• it is technically feasible to create and make the asset 
available for use or sale 
• there are adequate resources available to complete the 
development and to use or sell the asset
• there is the intention and ability to use or sell the asset
• it is probable that the asset created will generate future 
economic benefits and
• the development cost can be measured reliably
expenditure on property plant and equipment relating to 
research and development projects is capitalised and written  
off over the expected useful life of those assets
i precontract costs
precontract costs are expensed as incurred except where it is 
probable that the contract will be awarded in which case they 
are recognised as a prepayment which is written off to the 
income statement over the life of the contract
j property plant and equipment
property plant and equipment is held at cost or at deemed 
costs for infrastructure assets on transition to ifrs less 
accumulated depreciation the costs of like for like replacement 
of infrastructure components are recognised in the income 
statement as they arise where it is probable that the 
expenditure will cause future economic benefits to flow to  
the group then costs are capitalised 
where items of property plant and equipment are transferred  
to the group from customers or developers the fair value of the 
asset transferred is recognised in the balance sheet fair value 
is determined based on estimated depreciated replacement cost 
where the transfer is in exchange for connection to the network 
and there is no further obligation the corresponding credit is 
recognised immediately in turnover where the transfer is 
considered to be linked to the provision of ongoing services  
the corresponding credit is recorded in deferred income and 
released to operating costs over the expected useful lives of  
the related assets
borrowing costs directly attributable to the acquisition 
construction or production of assets that necessarily take a 
substantial period of time to get ready for their intended use are 
added to the cost of those assets until such time as the assets 
are ready for their intended use
property plant and equipment is depreciated to its estimated 
residual value over its estimated useful life with the exception  
of freehold land which is not depreciated assets in the course  
of construction are not depreciated until commissioned
the estimated useful lives are
k leased assets
where the group obtains assets under leasing arrangements 
which transfer substantially all the risks and rewards of 
ownership of an asset to the group as lessee finance leases 
the lower of the fair value of the leased asset or the present 
value of the minimum lease payments is capitalised as an asset 
with a corresponding liability representing the 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 income statement at a constant rate 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
leases where substantially all the risks and rewards of 
ownership remain with the lessor are classified as operating 
leases rental costs arising under operating leases are 
expensed on a straight line basis over the term of the lease 
leases of land are normally treated as operating leases unless 
ownership is transferred to the group at the end of the lease
l grants and contributions
grants and contributions received in respect of noncurrent 
assets including certain charges made as a result of new 
connections to the water and sewerage networks are treated as 
deferred income and released to the income statement over the 
useful economic life of those noncurrent assets
2 accounting policies continued
f goodwill continued severn trent plc annual report and accounts 2011 67
financial statements
grants and contributions which are given in compensation for 
expenses incurred with no future related costs are recognised in 
operating costs in the income statement in the period that they 
become receivable
m impairment of noncurrent assets
if the recoverable amount of goodwill an item of property plant 
and equipment or any other noncurrent asset is estimated to be 
less than its carrying amount the carrying amount of the asset  
is reduced to its recoverable amount where the asset does not 
generate cash flows that are independent from other assets the 
group estimates the recoverable amount of the cashgenerating 
unit to which the asset belongs recoverable amount is the 
higher of fair value less costs to sell or estimated value in use  
at the date the impairment review is undertaken fair value less 
costs to sell represents the amount obtainable from the sale  
of the asset in an arm’s length transaction between 
knowledgeable and willing third parties less costs of disposal 
value in use represents the present value of future cash flows 
expected to be derived from a cash generating unit discounted 
using a pretax discount rate that reflects current market 
assessments of the cost of capital of the cashgenerating  
unit or asset
the discount rate used is based on the group’s cost of capital 
adjusted for the risk profiles of individual businesses
goodwill is tested for impairment annually impairment reviews 
are also carried out if there is an indication that an impairment 
may have occurred or where otherwise required to ensure  
that noncurrent assets are not carried above their estimated 
recoverable amounts
impairments are recognised in the income statement
n inventory
inventory and work in progress is stated at the lower of cost and 
net realisable value cost includes labour materials transport 
and attributable overheads
o service concession agreements
where the group has an unconditional right to receive cash from 
a government body in exchange for constructing or upgrading  
a public sector asset the amounts receivable are recognised  
as a financial asset in prepayments and accrued income
costs of constructing or upgrading the public sector asset are 
recognised on a straight line basis before adjusting for expected 
inflation over the life of the contract
p retirement benefits
the group operates both defined benefit and defined 
contribution pension schemes
the difference between the value of defined benefit pension 
scheme assets and defined benefit pension scheme liabilities  
is recorded on the balance sheet as a retirement benefit asset  
or obligation
defined benefit pension scheme assets are measured using bid 
price defined benefit pension scheme liabilities are measured  
at the balance sheet date by an independent actuary using the 
projected unit method and discounted at the current rate of 
return on high quality corporate bonds of equivalent term and 
currency to the liability service cost which is the increase in the 
present value of the liabilities of the group’s defined benefit 
pension schemes expected to arise from employee service in 
the period is included in operating costs the expected return 
on the scheme’s assets and the increase during the period in the 
present value of the scheme’s liabilities arising from the passage 
of time are included in other finance income or cost
actuarial gains and losses arising from experience adjustments 
changes in actuarial assumptions and amendments to pension 
plans are charged or credited to equity and recorded in the 
statement of comprehensive income
contributions to defined contribution pension schemes are 
charged to the income statement in the period in which they  
fall due
q provisions
provisions are recognised where
• there is a present obligation as a result of a past event
• it is probable that there will be an outflow of economic 
benefits to settle this obligation and
• a reliable estimate of this amount can be made
insurance provisions are recognised for claims notified and for 
claims incurred but which have not yet been notified based on 
advice from the group’s independent insurance advisers
provisions are discounted to present value using a pretax 
discount rate that reflects the risks specific to the liability where 
the effect is material
r purchase of own shares
the group balance sheet includes the shares held by the severn 
trent employee share ownership trust and which have not 
vested unconditionally by the balance sheet date these are 
shown as a deduction from shareholders’ funds until such time 
as they vest
s financial instruments
i financial assets
financial assets are classified into the following specified 
categories
• at fair value through profit or loss
• held to maturity investments
• available for sale financial assets and
• loans and receivables
financial assets at fair value through profit or loss
a financial asset is classified at fair value through profit or loss if 
it is so designated or if it is held for trading derivative financial 
assets that are not designated and effective as hedging 
instruments are classified as held for trading financial assets at 
fair value through profit or loss are stated at fair value with any 
gains or losses arising on remeasurement recognised in  
gainslosses on financial instruments in the income statement 
fair value is determined using the methodology described in 
note 32 interest receivable in respect of derivative financial 
assets is included in finance income
held to maturity investments
where the group has the ability and intent to hold an investment 
to maturity the financial asset is classified as held to maturity 
such financial assets are measured at amortised cost using the 
effective interest rate method with any gains or losses being 
recognised in the income statement
2 accounting policies continued
l grants and contributions continued severn trent plc annual report and accounts 2011 68
notes to the group financial statements continued
for the year ended 31 march 2011
available for sale financial assets
after initial recognition at cost being the fair value of the 
consideration paid investments which are classified as 
available for sale are measured at fair value with gains or losses 
recognised in equity when an available for sale investment is 
disposed of or impaired the gain or loss previously recognised in 
equity is taken to the income statement where there is no active 
market in the investments and the fair value cannot be measured 
reliably the investments are held at cost
loans and receivables
trade receivables loans and other receivables that have fixed  
or determinable payments and that are not quoted in an active 
market are classified as loans and receivables such assets are 
measured at fair value on initial recognition and are subsequently 
measured at amortised cost using the effective interest rate 
method unless there is objective evidence that the asset is 
impaired where it is written down to its recoverable amount and 
the irrecoverable amount is recognised as an expense
trade receivables that are assessed not to be impaired 
individually are assessed collectively for impairment by reference 
to the group’s historical collection experience for receivables of 
similar age
ii financial liabilities
financial liabilities are classified as either
• financial liabilities at fair value through profit or loss or
• other financial liabilities
financial liabilities at fair value through profit or loss
a financial liability is classified at fair value through profit or loss 
if it is so designated or if it is held for trading derivative financial 
liabilities that are not designated and effective as hedging 
instruments are classified as held for trading financial liabilities 
at fair value through profit or loss are stated at fair value with 
any gains or losses arising on remeasurement recognised in 
gainslosses on financial instruments in the income statement 
fair value is determined using the methodology described in 
note 32 interest payable in respect of derivative financial 
liabilities is included in finance costs
other financial liabilities
other financial liabilities including borrowings are initially 
recognised at fair value less transaction costs after initial 
recognition other financial liabilities are subsequently measured 
at amortised cost using the effective interest rate method
iii hedge accounting
the group uses derivative financial instruments such as cross 
currency swaps forward currency contracts and interest rate 
swaps to hedge its risks associated with foreign currency and 
interest rate fluctuations such derivative instruments are 
recognised and measured in accordance with the accounting 
policies described above 
at the inception of the hedge relationship the group documents
• the relationship between the hedging instrument and the 
hedged item
• its risk management objectives and strategy for undertaking 
hedge transactions and
• whether the hedging instrument is highly effective in 
offsetting changes in fair values or cash flows as 
appropriate of the hedged item
the group continues to test and document the effectiveness of 
the hedge on an ongoing basis
hedge accounting is discontinued when the hedging instrument 
expires is sold terminated or exercised or no longer qualifies 
for hedge accounting
fair value hedges
where a loan or borrowing is in a fair value hedging relationship 
it is remeasured for changes in fair value of the hedged risk at 
the balance sheet date with gains or losses being recognised in 
gainslosses on financial instruments in the income statement 
the gain or loss on the hedging instrument is taken to gains
losses on financial instruments in the income statement where 
the effective portion of the hedge will offset the gain or loss on 
the hedged item
when hedge accounting is discontinued the fair value 
adjustment to the carrying amount of the hedged item arising 
from the hedged risk is amortised to the income statement from 
that date
cash flow hedges
the portion of the gain or loss on the hedging instrument that  
is determined to be an effective hedge is recognised directly in 
equity and the ineffective portion in gainslosses on financial 
instruments in the income statement the gains or losses 
deferred in equity in this way are recycled through gainslosses 
on financial instruments in the income statement in the same 
period in which the hedged underlying transaction or firm 
commitment is recognised in the income statement
when hedge accounting is discontinued any cumulative gain  
or loss on the hedging instrument recognised in equity is kept  
in equity until the forecast transaction occurs or transferred  
to gainslosses on financial instruments in the income statement 
if the forecast transaction is no longer expected to occur
hedges of net investments in foreign operations
where forward currency contracts and foreign currency 
borrowings are used to hedge net investments in foreign 
currency denominated operations to the extent that they are 
designated and effective as net investment hedges they are 
matched in equity against changes in value of the related assets 
any ineffectiveness is taken to gainslosses on financial 
instruments in the income statement
iv embedded derivatives
derivatives embedded in other financial instruments or other 
host contracts are treated as separate derivatives when their 
risks and characteristics are not closely related to those of the 
host contract and the host contract is not carried at fair value 
with gains and losses reported in gainslosses on financial 
instruments in the income statement
t share based payments
the group operates a number of equity settled share based 
compensation plans for employees the fair value of the 
employee services received in exchange for the grant is 
recognised as an expense over the vesting period of the grant
the fair value of employee services is determined by reference 
to the fair value of the awards granted calculated using an 
appropriate pricing model excluding the impact of any  
nonmarket vesting conditions the number of awards that are 
expected to vest takes into account nonmarket vesting 
conditions including where appropriate continuing employment 
by the group the charge is adjusted to reflect shares that do not 
vest as a result of failing to meet a nonmarket condition
2 accounting policies continued
s financial instruments continued
i financial assets continued severn trent plc annual report and accounts 2011 69
financial statements
u cash and cash equivalents
for the purpose of the cash flow statement cash and cash 
equivalents include highly liquid investments that are readily 
convertible to known amounts of cash and which are subject to 
an insignificant risk of change in value such investments are 
normally those with less than three months’ maturity from the 
date of acquisition and include cash and bank balances and 
investments in liquid funds cash and cash equivalents also 
include overdrafts repayable on demand
v foreign currency
the results of overseas subsidiary and associated undertakings 
are translated into sterling the presentational currency of the 
group using average rates of exchange ruling during the year
the net investments in overseas subsidiary and associated 
undertakings are translated into sterling at the rates of exchange 
ruling at the year end exchange differences thus arising are 
treated as movements in equity on disposal of a foreign 
currency denominated subsidiary the deferred cumulative 
amount recognised in equity since 1 april 2004 relating to that 
entity is recognised in the income statement under the 
transitional rule of ifrs 1
exchange differences arising in respect of foreign exchange 
instruments taken out as hedges of overseas investments are 
also treated as movements in equity to the extent that the hedge 
is effective see note 2 s
all other foreign currency denominated assets and liabilities of 
the company and its subsidiary undertakings are translated into 
the relevant functional currency at the rates of exchange ruling at 
the year end any exchange differences so arising are dealt with 
through the income statement 
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 income statement
w discontinued operations and assets held for sale
where an asset or group of assets a disposal group is available 
for immediate sale and the sale is highly probable and expected 
to occur within one year then the disposal group is deemed as 
held for sale the disposal group is measured at the lower of the 
carrying amount and fair value less costs to sell
where a group of assets which comprises operations that can 
be clearly distinguished operationally and for financial reporting 
purposes from the rest of the group a component has been 
disposed of or classified as held for sale and it
• represents a separate major line of business or geographical 
area of operations or
• is part of a single coordinated plan to dispose of a separate 
major line of business or geographical area of operations or
• is a subsidiary acquired exclusively with a view to resale
then the component is classified as a discontinued operation
noncurrent assets classified as held for sale are measured at 
the lower of carrying amount and fair value less costs to sell 
depreciation is not charged on such assets
3 new accounting policies and future requirements
ias 27 revised was required to be implemented by the group 
from 1 april 2010 the revised standard requires the effects of  
all transactions with noncontrolling interests to be recorded in 
equity if there is no change in control the standard also 
specifies the accounting when control is lost the group has had 
no transactions in the current or prior year that would have been 
impacted by the revised standard
ifrs 3 revised was also required to be implemented by the 
group from 1 april 2010 the standard continues to apply the 
acquisition method to business combinations with some 
significant changes the group has had no significant 
transactions in the current or prior year that would have been 
impacted by the revised standard
ifric 18 “transfers of assets from customers” was issued in 
january 2009 and was required to be applied with effect from  
1 april 2010 for assets transferred after 1 july 2009 where 
property plant and equipment is transferred the fair value of the 
asset is recognised in the balance sheet where the transfer is  
in exchange for connection to the network the corresponding 
credit is recognised immediately in turnover however in most 
cases the transfer is considered to be linked to the provision of 
ongoing services and in these cases the corresponding credit is 
recorded in deferred income and released to operating costs 
over the expected useful lives of the related assets the impact 
of the adoption of ifric 18 on the comparative figures presented 
in these financial statements is summarised below
property 
plant and 
equipment
trade and other payables
current 
liabilities
noncurrent 
liabilities
at 31 march 2010 £m £m £m
as previously stated 62605 4642 2436
fair value of assets 
transferred 415 02 413
as restated 63020 4644 2849
the following standards have been issued by the international 
accounting standards board and are likely to affect future 
financial statements
ifrs 9 “financial instruments” is likely to affect the 
measurement and disclosure of financial instruments the 
standard is required to be implemented by the group with effect 
from the year ending 31 march 2014 subject to eu 
endorsement 
ifrs 10 “consolidated financial statements” was issued in may 
2011 and is required to be implemented by the group from 1 april 
2013 the standard includes a new definition of control to be 
used to determine when entities are consolidated the standard 
is not expected to have a material impact on the current 
consolidation
ifrs 11 “joint agreements” was issued in may 2011 and is 
required to be implemented by the group from 1 april 2013  
ifrs 11 replaces ias 31 “interests in joint ventures” and sic13 
“jointlycontrolled entities” ifrs 11 uses the definition of control 
given in ifrs 10 to define joint control and removes the option  
to account for joint ventures using proportionate consolidation 
this is not expected to have a material impact on the group
2 accounting policies continued severn trent plc annual report and accounts 2011 70
notes to the group financial statements continued
for the year ended 31 march 2011
4 significant accounting judgements and key 
sources of estimation uncertainty
in the process of applying the group’s accounting policies the 
group is required to make certain judgements estimates and 
assumptions that it believes are reasonable based on the 
information available
the more significant judgements were
a tax provisions
assessing the outcome of uncertain tax positions requires 
judgements to be made regarding the result of negotiations with 
and enquiries from tax authorities in a number of jurisdictions 
the assessments made are based on advice from independent 
tax advisers and the status of ongoing discussions with the 
relevant tax authorities
b provisions for other liabilities and charges
assessing the financial outcome of uncertain commercial and 
legal positions requires judgements to be made regarding the 
relative merits of each party’s case and the extent to which  
any claim against the group is likely to be successful the 
assessments made are based on advice from the group’s 
internal counsel and where appropriate independent  
legal advice
the key accounting estimates were
a goodwill impairment
determining whether goodwill is impaired requires an estimation 
of the value in use of the cashgenerating units cgu to  
which goodwill has been allocated the value in use calculation 
requires the group to estimate the future cash flows expected  
to arise from the cgu and a suitable discount rate to calculate 
present value details of the assumptions used are set out in 
note 16 to the financial statements
b depreciation and carrying amounts of property plant 
and equipment
calculating the depreciation charge and hence the carrying 
value for property plant and equipment requires estimates to be 
made of the useful lives of the assets the estimates are based 
on engineering data and the group’s experience of similar 
assets details are set out in note 2 j
c retirement benefit obligations
determining the amount of the group’s retirement benefit 
obligations and the net costs of providing such benefits requires 
assumptions to be made concerning long term interest rates 
inflation salary and pension increases investment returns and 
longevity of current and future pensioners changes in these 
assumptions could significantly impact the amount of the 
obligations or the cost of providing such benefits the group 
makes assumptions concerning these matters with the 
assistance of advice from independent qualified actuaries 
details of the assumptions made are set out in note 27 to the 
financial statements
d unbilled revenue
severn trent water raises bills and recognises revenue in 
accordance with its right to receive revenue in line with the limits 
established by the periodic regulatory price review processes 
for water and waste water customers with water meters the 
amount recognised is dependent upon the volume supplied 
including an estimate of the sales value of units supplied 
between the date of the last meter read and the year end meters 
are read on a cyclical basis and the group recognises revenue 
for unbilled amounts based on estimated usage from the last 
billing to the end of the financial year the estimated usage is 
based on historical data judgement and assumptions
e provision for impairment of trade receivables
provisions are made against severn trent water’s trade 
receivables based on historical experience of levels of recovery 
from accounts in a particular ageing category the actual 
amounts collected could differ from the estimated level of 
recovery which could impact operating results
5 segmental analysis
the group has two reportable segments severn trent water 
and severn trent services the key factor determining the 
identification of reportable segments is the regulatory 
environment in which the businesses operate severn trent 
water is subject to economic regulation by ofwat and operates 
under a licence to provide water and sewerage services within a 
defined geographical region in england and wales severn trent 
services is not subject to economic regulation and operates in 
markets in the usa europe and asia
the severn trent executive committee stec is considered to 
be the group’s chief operating decision maker the reports 
provided to stec include segmental information prepared on 
the basis described above details of severn trent water’s 
operations are described on pages 10 to 15 of the business 
review and those of severn trent services on pages 16 to 19
the group has a large and diverse customer base and there is 
no significant reliance on any single customer
ifrs 12 “disclosure of interests in other entities” was issued in 
may 2011 and is required to be implemented by the group from  
1 april 2013 the standard provides disclosure requirements for 
subsidiaries associates and joint agreements and structured 
entities which were previously covered in ias 27 ias 28 and ias 
31 additional disclosures will be required in the group financial 
statements to meet the requirements of the standard
ifrs 13 “fair value measurement” was issued in may 2011 and 
is required to be implemented by the group from 1 april 2013 
the standard provides additional guidance on how to measure 
fair value but does not change when fair value is permitted or 
required the standard may impact the methods of determining 
fair value which are currently employed by the group and will 
require enhanced disclosure of these methods 
the directors assess that the other standards and interpretations 
issued but not yet effective are not likely to have a significant 
impact on future financial statements
3 new accounting policies and future  
requirements continued severn trent plc annual report and accounts 2011 71
financial statements
severn trent 
water
severn trent 
services
2011 £m £m
external sales 13889 3217
intersegment sales 09 144
total sales 13898 3361
profit before interest tax and exceptional items 5037 257
exceptional items 130 45
profit before interest and tax 4907 212
profit before interest tax and exceptional items is stated after
amortisation of intangible assets 236 16
depreciation of property plant and equipment 2474 64
profit on disposal of fixed assets 21 05
severn trent 
water
severn trent 
services
2010 £m £m
external sales 13836 3203
intersegment sales 17 162
total sales 13853 3365
profit before interest tax and exceptional items 5413 287
exceptional items 421 76
profit before interest and tax 4992 211
profit before interest tax and exceptional items is stated after charging
amortisation of intangible assets 234 16
depreciation of property plant and equipment 2325 61
profit on disposal of fixed assets 43 02
severn trent 
water
severn trent 
services
2011 £m £m
operating assets 68648 2038
goodwill –683
interests in joint ventures and associates 01 47
segment assets 68649 2768
segment operating liabilities 9597 878
capital employed 59052 1890
the group’s treasury and tax affairs are managed centrally by the group treasury and tax departments finance costs are managed 
on a group basis and hence interest income and costs are not reported at the segmental level tax is not reported to stec on a 
segmental basis
interests in joint ventures and associates are not material and are not included in the segmental reports reviewed by stec
separate segmental analyses of assets and liabilities are not reviewed by stec the balance sheet measure reviewed by stec on  
a segmental basis is capital employed which includes the following components
5 segmental analysis continued
the measure of profit or loss that is reported to stec for the segments is profit before interest tax and exceptional items underlying 
pbit a segmental analysis of sales and underlying pbit is presented below severn trent plc annual report and accounts 2011 72
notes to the group financial statements continued
for the year ended 31 march 2011
severn trent 
water
severn trent 
services
restated  
see note 3
2010 £m £m
operating assets 67314 2153
goodwill –706
interests in joint ventures and associates 02 47
segment assets 67316 2906
segment operating liabilities 10268 920
capital employed 57048 1986
severn trent 
water
severn trent 
services
2011 £m £m
other intangible assets 183 26
property plant and equipment 3707 49
severn trent 
water
severn trent 
services
restated  
see note 3
2010 £m £m
other intangible assets 444 32
property plant and equipment 5389 130
2011 2010
£m £m
severn trent water 13898 13853
severn trent services 3361 3365
other 81 53
intersegment sales 227 232
group turnover 17113 17039
operating assets comprise other intangible assets property plant and equipment inventory and trade and other receivables
operating liabilities comprise trade and other payables retirement benefit obligations and provisions
the comparative figures for severn trent water have been restated to reflect the impact of ifric 18 which is described in note 3
additions to other intangible assets and property plant and equipment were as follows
the comparative figures for severn trent water have been restated to reflect the impact of ifric 18 which is described in note 3
the reportable segments’ revenue is reconciled to group turnover as follows
5 segmental analysis continued severn trent plc annual report and accounts 2011 73
financial statements
2011 2010
£m £m
underlying pbit
 severn trent water 5037 5413
 severn trent services 257 287
corporate and other costs 125 142
consolidation adjustments 22 13
group underlying pbit 5191 5571
exceptional items
 severn trent water 130 421
 severn trent services 45 76
corporate 39 –
share of results of associates and joint ventures 01 01
net finance costs 2306 2188
lossesgains on financial instruments 142 457
profit before tax and discontinued operations 2530 3344
2011 2010
restated  
see note 3
£m £m
segment assets
 severn trent water 68649 67316
 severn trent services 2768 2906
corporate assets 468 217
financial assets 1924 2067
cash and cash equivalents 3152 2278
available for sale financial assets 01 01
consolidation adjustments 477 286
total assets 76485 74499
segmental underlying pbit is reconciled to the group’s profit before tax and discontinued operations as follows
the reportable segments’ assets are reconciled to the group’s total assets as follows
the consolidation adjustments include intragroup debtors and unrealised profits on fixed assets
the comparative figures for severn trent water have been restated to reflect the impact of ifric 18 which is described in note 3
5 segmental analysis continued severn trent plc annual report and accounts 2011 74
notes to the group financial statements continued
for the year ended 31 march 2011
2011 2010
£m £m
uk 14654 14592
usa 1540 1451
other 919 996
17113 17039
2011 2010
restated  
see note 3
£m £m
uk 65508 64282
usa 583 613
other 262 266
66353 65161
6 revenue
2011 2010
restated  
see note 3
£m £m
segment liabilities
 severn trent water 9597 10268
 severn trent services 878 920
corporate and other 590 497
borrowings 43444 41765
derivative financial liabilities 1225 1447
current tax 670 672
deferred tax 9194 9564
consolidation adjustments 174 104
total liabilities 65424 65029
the reportable segments’ liabilities are reconciled to the group’s total liabilities as follows
the consolidation adjustments include intragroup creditors
the comparative figures for severn trent water have been restated to reflect the impact of ifric 18 which is described in note 3
geographical areas
the group’s sales were derived from the following countries
the group’s noncurrent assets excluding financial instruments deferred tax assets and post employment benefit assets were 
located in the following countries
the comparative figures have been restated to reflect the impact of ifric 18 which is described in note 3
2011 2010
restated
£m £m
water and sewerage services 13800 13770
other services 1923 1904
sale of goods 1032 1005
service concession arrangements note 36 358 360
total turnover 17113 17039
interest receivable note 10 75 98
total revenue 17188 17137
5 segmental analysis continued
the significant categories of revenue have been redefined to better reflect the nature of the activities performed the prior year 
figures have been restated accordingly revenue from service concessions arrangements is now disclosed separately to other 
service income and revenue from long term contracts to supply goods is included in sale of goods severn trent plc annual report and accounts 2011 75
financial statements
7 operating costs
2011 2010
before 
exceptional 
costs
exceptional 
costs total
before 
exceptional 
costs
exceptional 
costs total
£m £m £m £m £m £m
wages and salaries 2637 31 2668 2768 146 2914
social security costs 158 04 162 185 05 190
pension costs 270 06 276 191 75 266
share based payments 46 – 46 51 – 51
total employee costs 3111 41 3152 3195 226 3421
power 579 – 579 560 – 560
raw materials and consumables 1353 06 1359 1169 04 1173
rates 624 – 624 610 08 618
charge for bad and doubtful debts 352 – 352 351 01 352
service charges 326 – 326 311 – 311
depreciation of property plant and equipment 2515 – 2515 2361 08 2369
amortisation of intangible fixed assets 254 – 254 252 58 310
hired and contracted services 1776 72 1848 1459 49 1508
operating leases rentals
 land and buildings 43 04 47 42 54 96
 other 08 – 08 11 01 12
hire of plant and machinery 78 – 78 82 01 83
research and development expenditure 45 – 45 56 – 56
profit on disposal of property plant and equipment 26 – 26 45 – 45
foreign exchange gains 09 – 09 –––
water and sewerage infrastructure maintenance 
expenditure 969 – 969 1045 – 1045
other operating costs 608 91 699 895 70 965
12606 214 12820 12354 480 12834
release from deferred income 84 – 84 75 – 75
own work capitalised 600 – 600 811 – 811
total operating costs 11922 214 12136 11468 480 11948
further details of exceptional costs are given in note 8 
during the year the following fees were charged by the auditors
2011 2010
£m £m
fees payable to the company’s auditors for
 the audit of the company’s annual accounts 01 01
 the audit of the company’s subsidiaries pursuant to legislation 04 04
 audit fees payable to associates of the company’s auditors 01 01
total audit fees 06 06
fees payable to the company’s auditors and their associates for other services to the group
 other services pursuant to legislation 02 02
 other services relating to taxation 02 –
 services relating to corporate finance – 01
total nonaudit fees 04 03
details of directors’ remuneration are set out in the directors’ remuneration report on pages 51 to 55 severn trent plc annual report and accounts 2011 76
notes to the group financial statements continued
for the year ended 31 march 2011
9 employee numbers
average number of employees including executive directors during the year
2011 2010
£m £m
restructuring programmes
 severn trent water 130 421
 severn trent services 07 59
exceptional restructuring costs 137 480
costs relating to regulatory matters see note 35
 severn trent services 38 –
 corporate and other 39 –
exceptional costs relating to regulatory matters 77 –
total exceptional operating costs 214 480
exceptional loss on disposal of business – 17
total exceptional items 214 497
2011 2010
number number
by type of business
severn trent water 52366 56858
severn trent services 30317 30900
corporate and other 132 117
82815 87875
10 finance income
2011 2010
£m £m
interest revenue earned on
bank deposits 38 70
other financial income 37 28
total interest revenue 75 98
expected return on defined benefit scheme assets 932 711
total finance income 1007 809
8 exceptional items severn trent plc annual report and accounts 2011 77
financial statements
11 finance costs
2011 2010
£m £m
interest on bank loans and overdrafts 69 76
interest on other loans 2141 1950
interest on finance leases 111 101
total borrowing costs 2321 2127
other financial expenses 08 09
interest cost on defined benefit scheme obligations 984 861
total finance costs 3313 2997
in accordance with ias 23 borrowing costs of £114 million 2010 £26 million incurred funding eligible capital projects have been 
capitalised at an interest rate of 599 2010 565
12 lossesgains on financial instruments
2011 2010
£m £m
gainloss on cross currency swaps used as hedging instruments in fair value hedges 176 109
lossgain arising on adjustment for foreign currency debt in fair value hedges 104 223
exchange loss on other loans 12 –
loss on cash flow hedges transferred from equity 45 76
lossgain arising on swaps where hedge accounting is not applied 157 419
142 457
the group’s hedge accounting arrangements are described in note 32 g
13 taxation
a analysis of tax creditcharge in the year
2011 2010
£m £m
current tax
current year at 28 2010 28 665 713
prior year at 28 2010 28 344 306
total current tax 321 407
deferred tax
origination and reversal of temporary differences  current year 46 259
origination and reversal of temporary differences  prior year 95 163
exceptional credit arising from rate change 677 –
total deferred tax 536 422
total tax creditcharge 215 829
the prior year credit for current tax arises from the settlement in the year of certain outstanding tax positions which arose principally 
in the years 2005 – 2009
the exceptional deferred tax credit arises from the reduction in the rate at which the temporary differences are expected to reverse 
from 28 to 26
the standard rate of corporation tax in the uk changed from 28 to 26 with effect from 1 april 2011 severn trent plc annual report and accounts 2011 78
notes to the group financial statements continued
for the year ended 31 march 2011
2011 2010
£m £m
profit on ordinary activities before tax 2530 3344
tax at the standard rate of corporation tax in the uk 28 2010 28 708 936
tax effect of income not taxableexpenditure not deductible in determining taxable profits 02 27
effect of different rates in overseas jurisdictions 05 09
adjustments in respect of prior years 249 143
exceptional deferred tax credit arising from rate change 677 –
total tax creditcharge 215 829
2011 2010
£m £m
current tax
tax on share based payments 03 03
tax on pension contributions in excess of profit and loss charge – 07
tax on exchange differences on foreign currency hedging 04 04
total current tax credited directly to equity 01 06
deferred tax
tax on actuarial gainslosses 132 341
tax on cash flow hedges 53 16
tax on share based payments 12 –
effect of change in tax rate 07 –
total deferred tax chargedcredited directly to equity 166 357
14 dividends
amounts recognised as distributions to equity holders in the period
2011 2010
pence per 
share £m
pence per 
share £m
final dividend for the year ended 31 march 2010 2009 456 1078 411 965
interim dividend for the year ended 31 march 2011 2010 260 616 267 632
717 1694 678 1597
proposed final dividend for the year ended 31 march 2011 391
the proposed final dividend is subject to approval by shareholders at the agm and has not been included as a liability in these 
financial statements
b factors affecting the tax creditcharge in the year
the tax expense for the current year is lower 2010 lower than the standard rate of corporation tax in the uk the differences are 
explained below
c tax chargedcredited directly to equity
in addition to the amount creditedcharged to the income statement the following amounts of tax have been chargedcredited  
directly to equity
13 taxation continued severn trent plc annual report and accounts 2011 79
financial statements
15 earnings per share
basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the weighted average 
number of ordinary shares in issue during the year excluding those held in the severn trent employee share ownership trust  
which are treated as cancelled
for diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all 
potentially dilutive ordinary shares these represent share options granted to employees where the exercise price is less than the 
average market price of the company’s shares during the year
basic and diluted earnings per share from continuing operations are calculated on the basis of profit from continuing operations 
attributable to the equity holders of the company
the calculation of basic and diluted earnings per share is based on the following data
earnings
2011 2010
£m £m
earnings for the purpose of basic and diluted earnings per share from operations
profit for the period attributable to the equity holders of the company 2726 2492
2011 2010
m m
weighted average number of ordinary shares for the purpose of basic earnings per share 2367 2360
effect of dilutive potential ordinary shares
 share options and ltips 11 03
weighted average number of ordinary shares for the purpose of diluted earnings per share 2378 2363
number of shares
2011 2010
pence pence
adjusted basic earnings per share 1056 1228
adjusted diluted earnings per share 1051 1226
adjusted earnings per share
adjusted earnings per share figures are presented for continuing operations these exclude the effects of deferred tax  
lossesgains on financial instruments and exceptional items in both 2011 and 2010 the directors consider that the adjusted  
figures provide a useful additional indicator of performance the denominators used in the calculations of adjusted basic and  
diluted earnings per share are the same as those used in the unadjusted figures set out above
the adjustments to earnings are as follows
adjustments to earnings
2011 2010
£m £m
earnings for the purpose of basic and diluted earnings per share from continuing operations 2726 2492
adjustments for
 exceptional items 214 497
 current tax related to exceptional items at 28 2010 28 47 56
 lossesgains on financial instruments 142 457
 deferred tax 536 422
earnings for the purpose of adjusted basic and diluted earnings per share 2499 2898 severn trent plc annual report and accounts 2011 80
notes to the group financial statements continued
for the year ended 31 march 2011
goodwill impairment tests
goodwill is allocated to the group’s cashgenerating units cgus identified according to country of operation and business segment 
a summary of the goodwill allocation by cgu is presented below
16 goodwill
2011 2010
£m £m
cost and net book value
at 1 april 706 633
additions – 103
amounts written off – 02
exchange adjustments 23 28
at 31 march 683 706
2011 2010
£m £m
severn trent services
water purification us 262 278
contract operations 116 125
uk laboratories 120 120
services italy 82 80
apliclor 103 103
683 706
the recoverable amount of a cgu is determined using value in use calculations these calculations use cash flow projections based 
on financial budgets approved by management covering a five year period the key assumption underlying these budgets is revenue 
growth assumptions are determined by management of each cgu based on past experience current market trends and 
expectations of future developments
cash flows beyond the five year period are extrapolated using an estimated nominal growth rate stated below the growth rate does 
not exceed the long term average growth rate for the economy in which the cgu operates the assumptions used in relation to 
growth rates beyond the five year period and discount rates were
nominal growth rate discount rate
2011 2010 2011 2010
   
water purification us 30 30 73 78
contract operations 30 30 77 89
uk laboratories 30 30 73 89
services italy 30 30 110 101
apliclor 30 30 116 100
the weighted average growth rates used are consistent with the forecasts included in industry reports the discount rates used are 
pretax and reflect specific risks relating to the cgu severn trent plc annual report and accounts 2011 81
financial statements
surplus of 
recoverable amount 
over carrying 
amount  
£m
change required for recoverable 
amount to equal carrying amount
growth rate 
percentage 
points
discount rate 
percentage 
points
severn trent services
uk laboratories 220 47 35
services italy 10 03 01
apliclor – 04 02
17 intangible assets
computer software other
internally 
generated purchased
internally 
generated total
£m £m £m £m
cost
at 1 april 2009 1043 1549 187 2779
additions 131 315 31 477
acquisition of businesses – 03 – 03
disposals –12 –12
disposal of businesses – 01 01 02
reclassifications –01 04 05
exchange adjustments – 02 03 05
at 1 april 2010 1174 1853 218 3245
additions 41 146 22 209
disposals –298 – 298
reclassifications –02 12 14
exchange adjustments – 02 04 06
at 31 march 2011 1215 1701 248 3164
amortisation
at 1 april 2009 620 841 105 1566
amortisation for year 91 147 14 252
exceptional impairment 23 35 – 58
disposals – 11 – 11
disposal of businesses – 01 01 02
exchange adjustments – 02 01 03
at 1 april 2010 734 1009 117 1860
amortisation for year 94 151 09 254
disposals –297 – 297
exchange adjustments – 01 01 02
at 31 march 2011 828 862 125 1815
net book value
at 31 march 2011 387 839 123 1349
at 31 march 2010 440 844 101 1385
other assets primarily comprise capitalised development costs and patents
16 goodwill continued
changes in the growth rate outside the five year period or in the discount rate applied to the cash flows may cause a cgu’s carrying 
value to exceed its recoverable amount where such a change is considered reasonably possible the amount by which the 
recoverable amount exceeded its carrying value and the amount by which the growth rate and discount rate would have to change  
is set out below for each cgu
in the opinion of the directors the changes in growth rate or discount rate that would be required to reduce the recoverable amounts 
of water purification us and contract operations below their carrying value are not reasonably possible severn trent plc annual report and accounts 2011 82
notes to the group financial statements continued
for the year ended 31 march 2011
18 property plant and equipment
land and 
buildings
infrastructure 
assets
fixed plant  
and equipment
movable  
plant total
£m £m £m £m £m
cost
at 1 april 2009 23300 39422 29021 604 92347
additions restated see note 3 1622 1198 2700 104 5624
acquisition of businesses 03 – 09 – 12
disposals 74 – 220 100 394
disposal of businesses – – 03 – 03
reclassifications 14 – 10 01 05
exchange adjustments 04 – 17 07 28
at 1 april 2010 24833 40620 31500 600 97553
additions 947 1302 1535 38 3822
disposals 75 05 320 64 464
reclassifications 03 – 39 – 42
exchange adjustments 03 – 14 07 24
at 31 march 2011 25699 41917 32662 567 100845
depreciation
at 1 april 2009 7258 10402 14575 311 32546
charge for the year 517 257 1503 84 2361
exceptional impairment – – 08 – 08
acquisition of businesses – – 07 – 07
disposals 73 – 217 80 370
reclassifications 09 – 10 01 –
exchange adjustments 02 – 12 05 19
at 1 april 2010 7691 10659 15874 309 34533
charge for the year 563 276 1605 71 2515
disposals 73 – 315 50 438
reclassifications 19 – – – 19
exchange adjustments 01 – 10 05 16
at 31 march 2011 8161 10935 17154 325 36575
net book value
at 31 march 2011 17538 30982 15508 242 64270
at 31 march 2010 17142 29961 15626 291 63020
the comparative figures have been restated to reflect the impact of ifric 18 as set out in note 3 the amounts included for additions 
to infrastructure assets and fixed plant and equipment increased by £411 million and £04 million respectively
the carrying amount of property plant and equipment includes the following amounts in respect of assets held under finance leases
land and 
buildings
infrastructure 
assets
fixed plant  
and equipment movable plant total
£m £m £m £m £m
net book value
at 31 march 2011 – 1201 964 – 2165
at 31 march 2010 – 1211 1164 – 2375
property plant and equipment includes £4338 million 2010 £4596 million in respect of assets in the course of construction for 
which no depreciation is charged severn trent plc annual report and accounts 2011 83
financial statements
19 interests in joint ventures
2011 2010
£m £m
group’s share of
long term assets 02 –
current assets 06 18
current liabilities 06 15
02 03
group’s share of
turnover 33 47
operating costs 33 47
profit before tax – –
tax – –
profit after tax – –
as at 31 march 2011 and 2010 the joint ventures had no significant contingent liabilities to which the group was exposed and the 
group did not have any significant contingent liabilities in relation to its interests in the joint ventures the group had no capital 
commitments in relation to its interests in the joint ventures
particulars of the group’s principal joint venture undertakings at 31 march 2011 were
name
country of 
incorporation
proportion of 
ownership
proportion of 
voting power
cognica limited great britain 50 50
jackson water partnership usa 70 see below
the partnership agreement for the jackson water partnership requires that certain key decisions require the unanimous consent of 
the partners and consequently the partnership has been accounted for as a joint venture
2011 2010
£m £m
at 1 april 2009 46 48
share of profits 01 01
other movements 01 03
at 31 march 2010 48 46
group’s share of
total assets 261 256
total liabilities 213 210
48 46
turnover 01 80
profit before tax 01 01
20 interests in associates
at 31 march 2011 and 2010 the associate company had no significant contingent liabilities to which the group was exposed the 
group had no capital commitments in relation to its interests in the associate at 31 march 2011 and 2010
the principal associate at 31 march 2011 was
name
country of operation 
and incorporation equity interest
percentage of share 
capital held nature of business
servizio idrico integrato scpa italy 16279127 of €1 30
water and 
sewerage
the group has given certain guarantees in respect of the associate’s borrowings the guarantees are limited to €112m  
2010 €112m the group does not expect any liabilities to arise from these arrangements severn trent plc annual report and accounts 2011 84
notes to the group financial statements continued
for the year ended 31 march 2011
21 inventory
2011 2010
£m £m
inventory and work in progress 271 265
22 trade and other receivables
2011 2010
£m £m
trade receivables 2866 2884
less provisions for impairment of receivables 985 918
trade receivables net 1881 1966
receivables from related parties 02 02
other amounts receivable 401 424
prepayments and accrued income 2501 2336
4785 4728
the carrying values of trade and other receivables are reasonable approximations of their fair values
prepayments and accrued income include £271 million 2010 £262 million in respect of amounts due from customers for contract 
work and £497 million 2010 £430 million which is recoverable after more than one year
credit control policies and procedures are determined at the individual business unit level by far the most significant business unit  
of the group is severn trent water limited which represents 81 of group turnover and 68 of net trade receivables severn trent 
water has a statutory obligation to provide water and sewerage services to customers within its region therefore there is no 
concentration of credit risk with respect to its trade receivables and the credit quality of its customer base reflects the wealth and 
prosperity of all of the commercial businesses and domestic households within its region none of the other business units are 
individually significant to the group
movements on the doubtful debts provision were as follows
2011 2010
£m £m
at 1 april 918 930
amounts written off during the year 285 363
charge for bad and doubtful debts 352 352
exchange adjustments – 01
at 31 march 985 918 severn trent plc annual report and accounts 2011 85
financial statements
included in trade receivables are balances with a carrying amount of £1460 million 2010 £1392 million which were past due at  
the reporting date but for which no specific provision has been made as the collective impairment recorded against such assets  
is considered to be sufficient allowance for the risk of noncollection of such balances
the aged analysis of past due receivables that were not individually impaired is as follows
2011 2010
£m £m
up to 90 days 477 526
91365 days 606 604
12 years 250 194
23 years 84 59
more than 3 years 43 09
total 1460 1392
included in the allowance for doubtful debts are provisions amounting to £24 million 2010 £131 million against specific trade 
receivables the age of the impaired receivables was as follows
2011 2010
£m £m
up to 90 days 25 16
91365 days 181 154
12 years 41 12
23 years 37 04
more than 3 years 47 31
total 331 217
22 trade and other receivables continued
2011 2010
£m £m
cash at bank and in hand 666 441
short term deposits 2486 1837
3152 2278
23 cash and cash equivalents
of the £2486 million 2010 £1837 million of short term bank deposits £284 million 2010 £274 million is held as security deposits 
for insurance obligations and is not available for use by the group
24 finance leases
obligations under finance lease are as follows
2011 2010
£m £m
gross obligations under finance leases 3166 3855
less future finance charges 499 847
present value of lease obligations 2667 3008 severn trent plc annual report and accounts 2011 86
notes to the group financial statements continued
for the year ended 31 march 2011
2011 2010
£m £m
within one year 135 473
in the second year 164 129
in the third to fifth year inclusive 841 573
after more than five years 1527 1833
included in noncurrent liabilities 2532 2535
2667 3008
25 trade and other payables
2011 2010
restated  
see note 3
£m £m
current liabilities
trade payables 318 284
social security and other taxes 68 60
other payables 321 349
accruals and deferred income 3205 3951
3912 4644
noncurrent liabilities
trade payables 05 –
other payables 21 03
deferred income 3459 2806
accrued expenses 193 40
3678 2849
the directors consider that the carrying value of trade payables is not materially different from their fair values
accruals and deferred income includes nil 2010 nil in respect of amounts due to customers for contract work
the comparative figures for accruals and deferred income have been restated by £02 million and £413 million respectively  
see note 3
a maturity analysis of gross obligations under finance leases is presented in note 32 net obligations under finance leases fall due  
as follows
the remaining terms of finance leases ranged from 4 to 21 years at 31 march 2011 interest terms are set at the inception of the 
leases leases with capital outstanding of £2667 million 2010 £1590 million bear fixed interest at a weighted average rate of 54 
2010 54 the lease obligations are secured against the related assets 
there were no contingent rents escalation clauses or material renewal or purchase options the terms of the finance leases do not 
impose restriction on dividend payments additional debt or further leasing
24 finance leases continued severn trent plc annual report and accounts 2011 87
financial statements
26 deferred tax
an analysis of the movements in the major deferred tax liabilities and assets recognised by the group is set out below
accelerated 
tax 
depreciation
retirement 
benefit 
obligation tax losses
fair value of 
financial 
instruments other total
£m £m £m £m £m £m
at 1 april 2009 10660 653 105 442 24 9484
charge to income 442 – 27 123 170 422
charge to equity – 341 – 16 – 357
transfers 510 – – – 510 –
acquisitionsdisposals 04 – – – – 04
exchange differences 02 – 07 – 02 11
at 1 april 2010 11618 994 71 335 654 9564
charge to income 136 32 03 10 40 141
credit to income arising from rate change 775 31 – 12 55 677
charge to equity – 132 – 53 12 173
credit to equity arising from rate change 55 40 – 12 04 07
exchange differences 05 – 04 – 01 –
at 31 march 2011 10919 759 64 248 654 9194
certain deferred tax assets and liabilities have been offset the offset amounts are as follows
2011 2010
£m £m
deferred tax asset to be recovered after more than 12 months 144 136
deferred tax asset to be recovered within 12 months – 40
144 176
deferred tax liability to be settled after more than 12 months 9338 9740
deferred tax liability to be settled within 12 months – –
9338 9740
9194 9564
27 retirement benefit schemes
a defined benefit schemes
i amount included in the balance sheet arising from the group’s obligations under defined benefit schemes
2011 2010
£m £m
fair value of scheme assets
equities 7988 7457
gilts 413 2708
corporate bonds 5306 3070
property 950 611
cash 77 84
total fair value of assets 14734 13930
present value of the defined benefit obligations – funded schemes 17574 17403
2840 3473
present value of the defined benefit obligations – unfunded schemes 81 76
liability recognised in the balance sheet 2921 3549 severn trent plc annual report and accounts 2011 88
notes to the group financial statements continued
for the year ended 31 march 2011
2011 2010
£m £m
fair value at 1 april 13930 10750
expected return on scheme assets 932 711
contributions from the sponsoring companies 400 396
contributions from scheme members 61 68
actuarial gains recognised in the statement of comprehensive income 122 2704
benefits paid 711 699
fair value at 31 march 14734 13930
movements in the present value of the defined benefit obligations were as follows
2011 2010
£m £m
present value at 1 april 17479 13080
service cost 227 147
interest cost 984 861
curtailmentsettlement costs – 74
contributions from scheme members 61 68
actuarial gainslosses recognised in the statement of comprehensive income 385 3948
benefits paid 711 699
present value at 31 march 17655 17479
2011 2010
£m £m
amounts relating to funded schemes 17574 17479
amounts relating to unfunded schemes 81 –
present value at 31 march 17655 17479
movements in the fair value of the scheme assets were as follows
of which
ii amounts recognised in the income statement in respect of these defined benefit schemes
2011 2010
£m £m
amounts charged to operating costs
current service cost 227 147
exceptional curtailment charge – 74
227 221
amounts charged to finance costs
interest cost 984 861
amounts credited to finance income
expected return on scheme assets 932 711
total amount charged to the income statement 279 371
27 retirement benefit schemes continued
the actual return on scheme assets was a gain of £1054 million 2010 gain of £3415 million
actuarial gains and losses have been reported in the statement of comprehensive income the cumulative amount of actuarial gains 
and losses recognised in the statement of comprehensive income since the adoption of ifrss is a net loss of £1694 million  
2010 net loss of £2201 million severn trent plc annual report and accounts 2011 89
financial statements
iii background
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 trustees the trustees are required to act in the best interests of the schemes’ beneficiaries a formal actuarial valuation of each 
scheme is carried out on behalf of the trustees at triennial intervals by an independent professionally qualified actuary under the 
defined benefit schemes members are entitled to retirement benefits calculated as a proportion varying between 
1
 30 and 
1
 80 for 
each year of service of their salary for the final year of employment with the group or if higher the average of the highest three 
consecutive years’ salary in the last ten years of employment 
the final salary sections of all of the pension schemes listed below are closed to new entrants and the age profile of scheme 
participants is expected to rise and hence service costs are also expected to rise in the future
on 11 may 2011 severn trent announced it is consulting with its 6000 plus uk employees on proposed changes to its pension 
arrangements which would see all existing pensions replaced by one new defined contribution scheme under the new proposals 
the group would close its defined benefit scheme to future accrual whilst protecting the benefits already built up by members
the uk defined benefit schemes and the date of their last formal actuarial valuation are as follows
date of last formal actuarial valuation
severn trent pension scheme stps 31 march 2007
severn trent mirror image pension scheme 31 march 2009
 the stps is by far the largest of the group’s uk defined benefit schemes
27 retirement benefit schemes continued
2011 2010
 
price inflation 350 360
salary increases 400 410
pension increases in payment 350 360
pension increases in deferment 350 360
discount rate 560 570
long term rate of return on
equities 785 800
gilts 435 450
corporate bonds 560 570
property 685 700
cash 425 450
the assumption for price inflation is derived from the difference between the yields on longer term fixed rate gilts and on indexlinked 
gilts the discount rate is set by reference to aa rated sterling corporate 17 year bonds 
the expected rate of return on scheme assets is based on market expectations at the beginning of the period for returns over the life 
of the benefit obligation for gilts and corporate bonds the expected rates of return are based on market yields for equities an equity 
risk premium has been added to the gilt rate
the mortality assumptions adopted are based on mortality tables applicable to the sex and year of birth of individual members with 
allowance for the cmi 2010 future improvements and a 05 trend for men the assumptions are based on 110 of the “saps” 
s1nmal tables and for women on 78 of the s1nfal tables these have been based on a mortality investigation carried out in 
conjunction with the valuation of the stps as at 31 march 2010 on behalf of the trustees
the life expectancies implied by the mortality assumptions adopted at each year end are as follows
years years
age to which current pensioners aged 65 are expected to live
 men 874 853
 women 910 886
age to which future pensioners aged 45 at the balance sheet date are expected to live
 men 880 865
 women 918 896
the group has an obligation to pay pensions to a number of former employees whose benefits would otherwise have been restricted 
by the finance act 1989 earnings cap provision for such benefits amounting to £81 million 2010 £76 million is included as an 
unfunded scheme within the retirement benefit obligation
iv actuarial assumptions
the major assumptions used in the valuation of the stps also the approximate weighted average of assumptions used for the 
valuations of all group schemes were as follows severn trent plc annual report and accounts 2011 90
notes to the group financial statements continued
for the year ended 31 march 2011
assumption change in assumption impact on scheme liabilities
discount rate increasedecrease by 01 decreaseincrease by £30 million
price inflation increasedecrease by 01 increasedecrease by £25 million
mortality increase in life expectancy by 1 year increase by £45 million
the calculation of the scheme liabilities is sensitive to the actuarial assumptions and in particular to the assumptions relating to 
discount rate price inflation and mortality the following table summarises the estimated impact on scheme liabilities and service cost 
resulting from changes to key actuarial assumptions whilst holding all other assumptions constant
v contributions to the schemes
contribution rates are set in consultation with the trustees for each scheme and each participating employer the triennial actuarial 
valuation of the stps is currently under discussion with the trustees it is therefore not possible to determine the level of contributions 
that will be payable in the year ending 31 march 2012
vi history of actual and expected performance of pension scheme assets and liabilities
2011 2010 2009 2008 2007
£m £m £m £m £m
present value of defined benefit obligations 17655 17479 13080 14583 14997
fair value of scheme assets 14734 13930 10750 13323 13646
deficit in schemes 2921 3549 2330 1260 1351
difference between actual and expected return on scheme assets 122 2704 3298 1257 106
experience adjustments on scheme liabilities 1051 198 79 643 37
b defined contribution schemes
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 total cost charged to operating costs of £49 million 2010 £45 million represents contributions payable to these schemes by the 
group at rates specified in the rules of the schemes as at 31 march 2011 all contributions 2010 100 due in respect of the current 
reporting period had been paid over to the schemes
28 provisions
restructuring insurance
onerous 
contracts
terminated 
operations and 
disposals other total
£m £m £m £m £m £m
at 1 april 2010 109 221 124 56 29 539
charged to income statement 20 90 23 18 01 68
utilisation of provision 95 80 08 – 07 190
other movements 01 – 24 – 10 35
exchange differences – – – 01 01 02
at 31 march 2011 33 231 69 37 10 380
2011 2010
£m £m
included in
current liabilities 126 255
noncurrent liabilities 254 284
380 539
27 retirement benefit schemes continued
iv actuarial assumptions continued severn trent plc annual report and accounts 2011 91
financial statements
28 provisions continued
the restructuring provision reflects costs to be incurred in respect of committed restructuring programmes
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 2 the associated outflows are estimated to arise over a period of up to five years from the balance sheet date
the onerous or loss 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 occur over a period of ten years from the balance sheet date
provisions relating to terminated operations and disposals include amounts that it is probable will be paid in respect of claims arising 
from services performed by these businesses and the indemnities described in note 35 b
29 share capital
2011 2010
£m £m
total issued and fully paid share capital
237142534 ordinary shares of 97
17
 19p 2010 236585205 2322 2316
number £m
ordinary shares of 97
17
 19p
at 1 april 2010 236585205 2316
shares issued under the employee sharesave scheme 550525 06
shares issued under the group’s share option scheme 6804 –
at 31 march 2011 237142534 2322
changes in share capital were as follows
30 share premium
31 other reserves
2011 2010
£m £m
at 1 april 759 719
share premium arising on issue of shares for employee sharesave scheme 41 40
at 31 march 800 759
the capital redemption reserve arose on the redemption of b shares
the infrastructure reserve arose on restating infrastructure assets to fair value as deemed cost on transition to ifrs
the translation reserve arises from exchange differences on translation of the results and financial position of foreign subsidiaries as 
well as foreign exchange differences arising from hedges of net investment
the hedging reserve arises from gains or losses on interest rate swaps taken directly to equity under the hedge accounting provisions 
of ias 39 and the transition rules of ifrs 1
capital 
redemption 
reserve
infrastructure 
reserve
translation 
exchange 
reserve
hedging 
reserve
total other 
reserves
£m £m £m £m £m
at 1 april 2009 1561 3142 408 424 4687
total comprehensive loss for the period – – 91 40 131
at 1 april 2010 1561 3142 317 464 4556
total comprehensive lossincome for the period – – 63 152 89
at 31 march 2011 1561 3142 254 312 4645 severn trent plc annual report and accounts 2011 92
notes to the group financial statements continued
for the year ended 31 march 2011
32 financial instruments
a capital management
it is the group’s policy 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 is funded using a mixture of equity and debt including fixed rate index 
linked and floating rate
at 31 march the group’s equity and debt capital comprised the following
2011 2010
£m £m
cash and short term deposits 3152 2278
bank loans 8468 6898
other loans 32309 31859
obligations under finance leases 2667 3008
cross currency swaps 1604 1873
net debt 38688 37614
equity attributable to the company’s equity shareholders 10998 9407
total capital 49686 47021
b categories of financial assets
2011 2010
£m £m
fair value through profit and loss
derivatives that do not qualify for hedge accounting
 cross currency swaps 623 –
 interest rate swaps 173 194
derivatives that are designated and effective as hedging instruments carried at fair value
 cross currency swaps 981 1873
 energy swaps 147 –
1924 2067
available for sale investments carried at fair value
unquoted shares 01 01
loans and receivables including cash and cash equivalents
trade receivables 1881 1966
short term deposits 2486 1837
cash at bank in hand 666 441
5033 4244
total financial assets 6958 6312
disclosed in the balance sheet as
noncurrent assets
derivative financial instruments 1881 2038
available for sale financial assets 01 01
1882 2039
current assets
derivative financial instruments 43 29
cash and cash equivalents 3152 2278
trade receivables note 22 1881 1966
5076 4273
6958 6312 severn trent plc annual report and accounts 2011 93
financial statements
c categories of financial liabilities
2011 2010
£m £m
fair value through profit and loss
derivatives that do not qualify for hedge accounting
 interest rate swaps 1046 1254
 foreign exchange forward contracts 01 –
derivatives that are designated and effective as hedging instruments carried at fair value
 interest rate swaps 178 95
 energy swaps – 98
1225 1447
other financial liabilities
bank loans 8468 6898
other loans 32309 31859
obligations under finance leases 2667 3008
trade payables 323 284
43767 42049
total financial liabilities 44992 43496
disclosed in the balance sheet as
noncurrent liabilities
derivative financial instruments 1224 1403
borrowings 43205 39156
44429 40559
current liabilities
derivative financial instruments 01 44
borrowings 239 2609
trade payables note 25 323 284
563 2937
44992 43496
32 financial instruments continued severn trent plc annual report and accounts 2011 94
notes to the group financial statements continued
for the year ended 31 march 2011
e fair values of financial instruments
except as disclosed below the directors consider that the carrying amount of financial assets and liabilities recorded in the financial 
statements approximate their fair values
discounted future cash flows are used to determine fair values for debt discount rates are derived from yield curves based on quoted 
interest rates and are adjusted for the group’s credit risk
fair value measurements recognised in the balance sheet
the following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value 
grouped into levels 1 to 3 based on the degree to which the fair value is observable
level 1 fair value measurements are those derived from quoted prices unadjusted in active markets for identical assets and 
liabilities
level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable 
for the asset or liability either directly or indirectly and
level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not 
based on observable market data
the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows estimated and discounted 
based on the application of yield curves derived from quoted interest rates
cross currency swaps and forward exchange contracts are valued by reference to quoted forward exchange rates at the balance 
sheet date and yield curves derived from quoted interest rates matching the maturities of the contracts
32 financial instruments continued
31 march 2011 31 march 2010
book value fair value book value fair value
£m £m £m £m
bank loans  amortised cost 8468 8368 6898 6791
other loans 32309 35976 31859 33285
obligations under finance leases  amortised cost 2667 2374 3008 2603
43444 46718 41765 42679
d derivative contracts
2011 2010
asset liability asset liability
£m £m £m £m
cross currency swaps  fair value hedges 981 – 1873 –
interest rate swaps  cash flow hedges –178 –95
energy swaps  cash flow hedges 147 – –98
interest rate swaps  derivatives not in a formal hedging relationship 173 1046 194 1254
cross currency swaps  derivatives not in a formal hedging relationship 623 – ––
foreign exchange forward contracts  derivatives not in a formal hedging 
relationship –01 ––
total 1924 1225 2067 1447
less noncurrent portion
cross currency swaps  fair value hedges 956 – 1845 –
interest rate swaps  cash flow hedges –178 –95
energy swaps  cash flow hedges 129 – –97
interest rate swaps  derivatives not in a formal hedging relationship 173 1045 193 1211
cross currency swaps  derivatives not in a formal hedging relationship 623 – ––
foreign exchange forward contracts  derivatives not in a formal hedging 
relationship –01 ––
total noncurrent 1881 1224 2038 1403
current portion 43 01 29 44 severn trent plc annual report and accounts 2011 95
financial statements
f financial risk factors
the group’s activities expose it to a variety of financial risks market risk including currency and interest rate risk credit risk liquidity 
risk and inflation risk the group’s overall risk management programme addresses the unpredictability of financial markets and seeks 
to reduce potential adverse effects on the group’s financial performance or position
financial risks are managed by a central treasury department group treasury under policies approved by the board of directors 
group treasury identifies evaluates and hedges financial risks in close cooperation with the group’s operating units the board 
provides written principles for overall risk management as well as written policies covering specific areas such as exchange rate risk 
interest rate risk credit risk the use of derivative and nonderivative financial instruments derivative financial instruments are used to 
hedge exposure to changes in exchange rates and interest rates the group’s policy is that derivative financial instruments are not 
held for trading
level 1level 2level 3 total
2011 £m £m £m £m
derivative financial assets
cross currency swaps  fair value hedges – 981 – 981
cross currency swaps  derivatives not in designated hedging relationships – 623 – 623
interest rate swaps  derivatives not in designated hedging relationships – 173 – 173
energy swaps  cash flow hedges – 147 – 147
–1924 –1924
derivative financial liabilities
interest rate swaps  cash flow hedges – 178 – 178
interest rate swaps  derivatives not in designated hedging relationships – 1046 – 1046
foreign exchange forward contracts – 01 – 01
– 1225 – 1225
–699 – 699
32 financial instruments continued
e fair values of financial instruments continued
level 1 level 2 level 3 total
2010 £m £m £m £m
derivative financial assets
cross currency swaps  fair value hedges – 1873 – 1873
interest rate swaps  derivatives not in designated hedging relationships – 194 – 194
–2067 –2067
derivative financial liabilities
interest rate swaps  cash flow hedges – 95 – 95
interest rate swaps  derivatives not in designated hedging relationships – 1254 – 1254
energy swaps  cash flow hedges – 98 – 98
– 1447 – 1447
–620 – 620 severn trent plc annual report and accounts 2011 96
notes to the group financial statements continued
for the year ended 31 march 2011
i market risk
the principal market risk that the group is exposed to is fluctuations in interest rates since substantially all of the group’s profits and 
net assets arise from severn trent water which has very limited and indirect exposure to changes in exchange rates the sensitivity 
of the group’s results to changes in exchange rates is not material
interest rate risk
the group’s income and operating cash flows are substantially independent of changes in market interest rates
the group’s interest rate risk arises from long term borrowings borrowings issued at variable rates expose the group to cash flow 
interest rate risk borrowings issued at fixed rates expose the group to fair value interest rate risk group policy is to maintain 4590 
of its net debt in fixed rate instruments at 31 march 2011 759 of the group’s net debt was fixed 2010 824
the group manages its cash flow interest rate risk by using floating to fixed interest rate swaps such interest rate swaps have the 
economic effect of converting borrowings from floating rates to fixed rates under the terms of the interest rate swaps the group 
agrees with other parties to exchange mainly semiannually the difference between fixed contract and floating rate interest rates 
calculated by reference to the agreed notional principal amounts the group has entered into a series of long dated interest rate 
swaps to hedge future debt economically these act to fix debt within the group which is denominated as floating rate but do not 
achieve hedge accounting under the strict criteria of ias 39 this has led to a £157 million charge 2010 credit of £419 million in  
the income statement
some of the group’s debt is indexlinked that is its cost is linked to changes in the retail price index rpi this debt provides an 
economic hedge for severn trent water’s revenues and regulatory capital value that are also rpi linked under its regulatory regime
financial liabilities analysed by interest rate after taking account of various interest rate swaps entered into by the group
noninterest 
bearing 
liabilities floating rate fixed rate indexlinked total
2011 £m £m £m £m £m
bank loans and overdrafts – 5441 1500 1527 8468
other loans 12 2635 20147 9515 32309
finance leases – – 2667 – 2667
other financial liabilities 323 – – – 323
335 8076 24314 11042 43767
impact of interest rate swaps not matched against specific debt 
instruments – 4623 4623 – –
335 3453 28937 11042 43767
weighted average interest rate 596
weighted average period for which interest is fixed years 117
noninterest 
bearing 
liabilities floating rate fixed rate indexlinked total
2010 £m £m £m £m £m
bank loans and overdrafts – 5442 – 1456 6898
other loans – 2475 20299 9085 31859
finance leases – 1418 1590 – 3008
other financial liabilities 285 – – – 285
285 9335 21889 10541 42050
impact of interest rate swaps not matched against specific debt 
instruments – 8350 8350 – –
285 985 30239 10541 42050
weighted average interest rate 588
weighted average period for which interest is fixed years 109
32 financial instruments continued
f financial risk factors continued severn trent plc annual report and accounts 2011 97
financial statements
financial assets analysed by interest rates
interest rate sensitivity analysis
the sensitivity after tax of the group’s profits cash flow and equity including the impact on derivative financial instruments to 
changes in interest rates at 31 march is as follows
inflation rate sensitivity analysis
the sensitivity of the group’s profit and equity to changes in inflation at 31 march is set out in the following table this analysis 
excludes any impact on severn trent water’s revenues and regulated capital value
2011 2010
10 10 10 10
£m £m £m £m
profit or loss 80 80 76 76
equity 80 80 76 76
exchange rate risk
the group operates internationally and is exposed to foreign exchange risk arising from net investments in foreign operations 
primarily with respect to the us dollar and the euro however since substantially all of the group’s profits and net assets arise from 
severn trent water which has very limited and indirect exposure to changes in exchange rates the sensitivity of the group’s results  
to changes in exchange rates is not material
the group has a significant value of foreign currency debt primarily in yen and euros the group’s policy is to manage the foreign 
exchange risk arising from foreign currency debt by entering into cross currency swaps or forward contracts with external parties
at 31 march 2011 the group had cross currency swaps or forward contracts in place for all foreign currency denominated debt  
2010 100
32 financial instruments continued
f financial risk factors continued
noninterest 
bearing 
liabilities floating rate fixed rate indexlinked total
2011 £m £m £m £m £m
available for sale financial assets 01 – – – 01
loans and receivables 1881 – – – 1881
cash and cash equivalents – 3152 – – 3152
1882 3152 – – 5034
noninterest 
bearing 
liabilities floating rate fixed rate indexlinked total
2010 £m £m £m £m £m
available for sale financial assets 01 – – – 01
loans and receivables 1966 – – – 1966
cash and cash equivalents – 2278 – – 2278
1967 2278 – – 4245
2011 2010
10 10 10 10
£m £m £m £m
profit or loss 461 553 387 479
cash flow 01 01 194 154
equity 833 986 337 435 severn trent plc annual report and accounts 2011 98
notes to the group financial statements continued
for the year ended 31 march 2011
the group’s borrowings are denominated in the following currencies after taking account of cross currency swaps
2011 2010
£m £m
sterling 43431 41753
euro 13 12
43444 41765
the euro denominated borrowings relate to operations in which the euro is the functional currency
ii credit risk
operationally the group has no significant concentrations of credit risk it has policies in place to ensure that sales of products are 
made to customers with an appropriate credit history other than in severn trent water limited whose operating licence obliges it  
to supply domestic customers even in cases where bills are not paid amounts provided against accounts receivable and movements 
on the provision during the year are disclosed in note 22 
for financing purpose derivative counterparties and cash transactions are limited to high credit quality financial institutions  
the group has policies that limit the amount of credit exposure to any one financial institution
credit risk analysis
at 31 march the credit limits and the amounts held on short term deposits were as follows
monetary assets and liabilities by currency excluding functional currency
certain of the group’s subsidiaries operate in markets where the local currency is different from the functional currency of the 
operation exchange risks relating to such operations are managed centrally by group treasury through forward exchange contracts 
to buy or sell currency external foreign exchange contracts are designated at group level as hedges of foreign exchange risk on 
specific assets liabilities or future transactions on a gross basis the net amount of foreign currency assets and liabilities and the 
forward contracts that have been taken out to hedge the exchange risks on these assets and liabilities and on future committed 
transactions are summarised below
credit limit amount deposited
2011 2010 2011 2010
£m £m £m £m
aaa 3000 3000 548 355
double a range 4500 4500 812 896
single a range 5250 5250 1126 586
12750 12750 2486 1837
32 financial instruments continued
f financial risk factors continued
the amounts of derivative assets analysed by credit ratings of counterparties were as follows
us dollar euro other total
2011 £m £m £m £m
functional currency of operation
sterling –01 01 02
total –01 01 02
us dollar euro other total
2010 £m £m £m £m
functional currency of operation
sterling 06 01 01 08
total 06 01 01 08
financial assets
2011 2010
rating £m £m
double a range 1009 908
single a range 915 1159
1924 2067 severn trent plc annual report and accounts 2011 99
financial statements
iii liquidity risk
prudent liquidity management implies maintaining sufficient cash balances and the availability of funding through an adequate 
amount of committed facilities and the ability to close out market positions group treasury manages liquidity and flexibility in funding 
by monitoring forecast and actual cash flows and the maturity profile of financial assets and liabilities and by keeping committed credit 
lines available 
at the balance sheet date the group had committed undrawn borrowing facilities expiring as follows
nonderivative financial instruments analysed by maturity date
the following tables detail the group’s remaining contractual maturity for its nonderivative net financial liabilities the information 
presented is based on the earliest date on which the group can be required to pay and represents the undiscounted cash flows 
including principal and interest
32 financial instruments continued
f financial risk factors continued
2011 2010
£m £m
within one year 417 –
between one and two years 4583 1917
between two and five years – 4583
5000 6500
within one year
between one 
and two years
between two 
and five years
between five 
and ten years
between ten  
and twenty 
years
after more  
than twenty 
years total
2011 £m £m £m £m £m £m £m
financial liabilities
bank loans 197 268 4315 5077 394 – 10251
other loans 1358 2013 12643 8088 16501 57703 98306
finance leases 197 257 1095 474 1143 – 3166
other financial liabilities 323 – – – – – 323
2075 2538 18053 13639 18038 57703 112046
financial assets
trade receivables 1881 ––––– 1881
cash and short term deposits 3152 – – – – – 3152
2958 2538 18053 13639 18038 57703 107013
within one year
between one  
and two years
between two  
and five years
between five  
and ten years
between ten  
and twenty  
years
after more  
than twenty 
 years total
2010 £m £m £m £m £m £m £m
financial liabilities
bank loans 2060 104 2127 3419 431 – 8141
other loans 1424 1422 7437 14448 16800 53207 94738
finance leases 562 212 788 1015 958 320 3855
other financial liabilities 284 – – – – – 284
4330 1738 10352 18882 18189 53527 107018
financial assets
trade receivables 1966 ––––– 1966
cash and short term deposits 2278 – – – – – 2278
86 1738 10352 18882 18189 53527 102774 severn trent plc annual report and accounts 2011 100
notes to the group financial statements continued
for the year ended 31 march 2011
other loans include indexlinked debt with maturities up to 56 years the principal is revalued at fixed intervals and is linked to 
movements in the retail price index interest payments are made biannually based on the revalued principal the principal repayment 
equals the revalued amount at maturity the calculations above are based on forward inflation rates at the balance sheet date
derivative financial instruments analysed by maturity date
the following table details the group’s liquidity analysis for its derivative financial instruments the tables are based on the 
undiscounted net cash inflowsoutflows on the derivative financial instruments that settle on a net basis and the undiscounted gross 
inflows and outflows on those derivatives that require gross settlement when the amount payable or receivable is not fixed the 
amount disclosed has been determined by reference to the projected interest and foreign currency rates derived from the forward 
curves existing at the balance sheet date actual amounts may be significantly different from those indicated below
32 financial instruments continued
f financial risk factors continued
financial 
assets  
falling due
within one year
between one 
and two years
between two 
and five years
between five 
and ten years
between ten 
and twenty 
years
greater than 
twenty years assets total
2011 £m £m £m £m £m £m £m
instruments settled net
interest rate swaps 71 51 62 – – – 184
energy swaps 19 91 48 – – – 158
instruments settled gross
cross currency swaps
 cash receipts 483 1314 8919 24 275 – 11015
 cash payments 316 992 7598 22 122 – 9050
net cash flow 167 322 1321 02 153 – 1965
total 257 464 1431 02 153 – 2307
financial 
liabilities 
falling due
within one year
between one 
and two years
between two 
and five years
between five 
and ten years
between ten 
and twenty 
years
greater than 
twenty years liabilities total
2011 £m £m £m £m £m £m £m
instruments settled net
interest rate swaps 302 234 428 152 69 08 1177
total 302 234 428 152 69 08 1177 severn trent plc annual report and accounts 2011 101
financial statements
g hedge accounting
the group uses derivative financial instruments to hedge exposures to changes in exchange rates and interest rates hedge 
accounting is adopted for such instruments where the criteria set out in ias 39 are met
i fair value hedges
the group raises debt denominated in currencies other than sterling – principally japanese yen and euro cross currency swaps are 
entered into at the time that the debt is drawn down to swap the proceeds into sterling debt bearing interest based on libor in order 
to mitigate the group’s exposure to exchange rate fluctuations the terms of the receivable leg of the swap closely match the terms  
of the underlying debt hence the swaps are expected to be effective hedges at the year end the amounts of cross currency swaps 
designated as fair value hedges were as follows
notional principal amount fair value
2011 2010 2011 2010
£m £m £m £m
us dollar 270 270 66 77
euro 114 5480 60 902
yen 1033 1610 608 669
czech krona 472 472 247 225
1889 7832 981 1873
32 financial instruments continued
f financial risk factors continued
financial  
assets  
falling due
within one year
between one  
and two years
between two  
and five years
between five  
and ten years
between ten  
and twenty  
years
greater than 
twenty years assets total
2010 £m £m £m £m £m £m £m
instruments settled net
interest rate swaps 80 60 55 03 – – 198
instruments settled gross
cross currency swaps
 cash receipts 519 482 3037 7537 567 1289 13431
 cash payments 330 433 2442 6309 387 607 10508
net cash flow 189 49 595 1228 180 682 2923
total 269 109 650 1231 180 682 3121
financial 
liabilities  
falling due
within one year
between one  
and two years
between two  
and five years
between five 
and ten years
between ten  
and twenty  
years
greater than 
twenty years liabilities total
2010 £m £m £m £m £m £m £m
instruments settled net
interest rate swaps 445 304 454 261 334 158 1956
energy swaps 01 06 87 10 – – 104
total 446 310 541 271 334 158 2060 severn trent plc annual report and accounts 2011 102
notes to the group financial statements continued
for the year ended 31 march 2011
ii cash flow hedges
the group has entered into interest rate swaps under which it has agreed to exchange the difference between fixed and floating 
interest rate amounts calculated on agreed notional principal amounts such contracts enable the group to mitigate the risk of 
changing interest rates on future cash flow exposures arising from issued variable rate debt the group also entered into a number of 
interest rate contracts with future start dates during the amp5 regulatory period such contracts enable the group to mitigate the risk 
of changing interest rates on debt which is highly probable to be issued over the amp5 period to fund severn trent water’s capital 
programme and have been accounted for as cash flow hedges the fair value of interest rate swaps at the balance sheet date is 
determined by discounting the future cash flows using the yield curve prevailing at the balance sheet date and the credit risk inherent 
in the contract
the interest rate swaps primarily settle net on a biannual basis the floating rate on the interest rate swaps is six months libor
details of interest rate swaps that have been accounted for as cash flow hedges are summarised below
average 
contract fixed 
interest rate
notional 
principal 
amount fair value
2011 2010 2011 2010 2011 2010
period to maturity   £m £m £m £m
less than 1 year – – – – – –
12 years – – – – – –
25 years – – – – – –
510 years – – – – – –
1020 years 507 507 4930 4930 178 95
more than 20 years – – – – – –
507 507 4930 4930 178 95
the group has entered into a series of energy swaps under which it has agreed to exchange the difference between fixed and market 
prices of electricity at sixmonthly intervals up to march 2015
details of energy swaps that have been accounted for as cash flow hedges are summarised below
changes in the amounts deferred in equity during the period relating to cash flow hedges were as follows
32 financial instruments continued
g hedge accounting continued
2011 2010
£m £m
fair value lossesgains deferred in equity at the start of the period 21 35
fair value gainslosses recognised in equity in the period 160 132
fair value gains transferred to finance costs in the period 45 76
fair value gainslosses deferred in equity at the end of the period 184 21
average notional
contract  
price
contracted 
amount fair value
2011 2010 2011 2010 2011 2010
period to maturity £mwh £mwh mwh mwh £m £m
less than 1 year 420 356 131040 65520 18 01
12 years 451 439 428064 196560 62 10
25 years 547 524 1087632 1275456 67 87
473 440 1646736 1537536 147 98 severn trent plc annual report and accounts 2011 103
financial statements
33 share based payments
the group operates a number of share based remuneration schemes for employees during the period the group recognised total 
expenses of £46 million 2010 £51 million related to equity settled share based payment transactions
the weighted average share price during the period was £1340 2010 £1050
at 31 march 2011 the number of shares that were exercisable under each of the share based remuneration schemes was as follows
average contract fixed  
interest rate notional principal amount fair value
2011 2010 2011 2010 2011 2010
period to maturity   £m £m £m £m
less than 1 year – 511 – 3550 – 42
12 years – – – – – –
25 years 632 – 2250 – 330 –
510 years – 632 – 2250 – 386
1020 years 541 – 2373 – 412 –
2030 years 522 532 2000 4550 304 826
560 560 6623 10350 1046 1254
2011 2010
number of 
exercisable 
optionsawards
weighted 
average 
exercise price
number of 
exercisable 
optionsawards
weighted 
average 
exercise price
long term incentive plan –– ––
employee sharesave scheme 369304 937p 525098 870p
share incentive plan –– ––
approved share option scheme –– 3125 720p
unapproved share option scheme 22984 729p 35259 728p
share matching plan –– ––
392288 563482
average contract fixed  
interest rate notional principal amount fair value
2011 2010 2011 2010 2011 2010
period to maturity   £m £m £m £m
less than 1 year – – – – – –
12 years – – – – – –
25 years 518 – 2000 – 173 –
510 years – 518 – 2000 – 194
1020 years – – – – – –
2030 years – – – – – –
518 518 2000 2000 173 194
details of interest rate swaps that have not been accounted for as cash flow hedges are summarised below
contracts where the group receives fixed interest are summarised below
32 financial instruments continued
g hedge accounting continued
a long term incentive plans ltips
under the ltips conditional awards of shares may be made to executive directors and senior staff awards are subject to 
performance conditions and continued employment throughout the vesting period awards have been made on different bases  
to severn trent plc and severn trent water employees the ltip and to severn trent services employees the services ltip 
during the year awards over 141111 shares 2010 163421 shares with a fair value of £791 2010 £541 were made to 20 
employees 2010 21 employees under the ltip the ltip awards are subject to total shareholder return over three years relative  
to the companies ranked 51 – 150 by market capitalisation in the ftse index excluding investment trusts
the services ltip awards vest in three equal tranches which are subject to achievement of turnover and profit targets in the years 
ending 31 march 2011 2012 and 2013 no awards have been made to employees under the services ltip during the year 2010 nil severn trent plc annual report and accounts 2011 104
notes to the group financial statements continued
for the year ended 31 march 2011
number of awards
ltip services ltip
outstanding at 1 april 2009 582182 118489
granted during the year 163421 –
cancelled during the year 17131 8049
lapsed during the year 334989 –
outstanding at 1 april 2010 393483 110440
granted during the year 141111 –
vested during the year 71849 –
cancelled during the year 10671 9053
lapsed during the year 49373 –
outstanding at 31 march 2011 402701 101387
details of ltip awards outstanding at 31 march were as follows
number of shares
date of grant
normal date  
of vesting 2011 2010
july 2007 2010 – 121223
july 2008 2011 151322 153528
july 2008 2012 33671 36813
july 2008 2013 33109 36813
july 2009 2012 151786 155546
july 2010 2013 134200 –
504088 503923
the fair value of the ltip awards made during the year was calculated using the monte carlo method using the principal assumptions 
set out below
assumptions 2011 2010
expected volatility
severn trent group 27 25
comparator group 47 45
correlation between severn trent plc and comparator group 32 30
proportion of employees expected to cease employment before vesting 0 0
severn trent share price volatility is based on observations of historical weekly volatility over a period prior to grant commensurate 
with the remaining term of the performance period for each award 
for the july 2010 ltip award and the july 2009 award the comparator group is the group of companies ranked 51 – 150 in the  
ftse index excluding investment trusts
the volatility of the comparator companies the correlation between severn trent and the comparator companies and performance 
over the portion of the performance period that had elapsed at the date of grant was taken into account when modelling the tsr 
performance condition
the share price at the grant date was £1228 2010 £1134 the vesting period commences before the grant date performance in 
the vesting period prior to the grant date is taken into account in determining the fair value of the award 
dividends ‘paid’ on shares during the vesting period are accumulated during the vesting period and released subject to achievement 
of the performance condition in the same manner as the underlying shares as a result a dividend yield assumption is not required
the 2009 services ltip is based entirely on nonmarket conditions and hence market assumptions are not required to determine the 
fair value of the award for 2011 it has been assumed that performance against the services ltip nonmarket conditions will be 03
details of the basis of the ltip schemes are set out in the remuneration report on page 48
33 share based payments continued
a long term incentive plans continued
details of changes in the number of awards outstanding during the year are set out below severn trent plc annual report and accounts 2011 105
financial statements
under the terms of the sharesave scheme the board may grant the right to purchase ordinary shares in the company to those 
employees who have entered into an hmrc approved save as you earn contract for a period of three or five years
details of changes in the number of options outstanding during the year are set out below
number of 
share options
weighted 
average 
exercise price
outstanding at 1 april 2009 3724812 877p
granted during the year 992888 808p
forfeited during the year 95659 1007p
cancelled during the year 320240 981p
exercised during the year 639121 715p
expired during the year 25612 953p
outstanding at 1 april 2010 3637068 899p
granted during the year 366272 1137p
forfeited during the year 146468 895p
cancelled during the year 92030 875p
exercised during the year 550525 841p
expired during the year 86132 1062p
outstanding at 31 march 2011 3128185 904p
sharesave options outstanding at 31 march were as follows
number of share options
date of grant normal date of exercise option price 2011 2010
january 2003 2010 536p – 73017
january 2004 2011 592p 45820 53862
january 2005 2010 or 2012 759p 54324 332581
january 2006 2011 or 2013 823p 212941 239385
january 2007 2010 2012 or 2014 1172p 93243 286787
january 2008 2011 or 2013 1221p 218048 252683
january 2009 2012 or 2014 862p 1247781 1411657
january 2010 2013 or 2015 806p 890670 987096
january 2011 2014 or 2016 1137p 365358 –
3128185 3637068
33 share based payments continued
b employee sharesave scheme
2011 2010
assumptions 3 year scheme 5 year scheme 3 year scheme 5 year scheme
expected volatility 27 27 25 25
risk free rate 163 224 180 278
expected dividend yield 44 44 40 40
proportion of employees expected to cease employment before vesting 15 17 15 17
fair value per share  sharesave 348p 359p 264p 280p
the fair value of the sharesave options granted during the year was calculated using the black scholes model the principal 
assumptions were as follows
expected volatility is based on historical weekly volatility over a three year period weekly volatility in the observed data was  
between 2531
the risk free rate is derived from yields at the grant date of gilts of similar duration to the sharesave contracts
the proportion of employees expected to cease employment before vesting is based on historically observed data severn trent plc annual report and accounts 2011 106
notes to the group financial statements continued
for the year ended 31 march 2011
the number of employees entering into sharesave contracts and the number of options granted during the year were as follows
2011 2010
3 year scheme 5 year scheme 3 year scheme 5 year scheme
share price at grant date 1486p 1486p 1080p 1080p
vesting period years 35 35
option life years 35 55 35 55
2011 2010
3 year scheme 5 year scheme 3 year scheme 5 year scheme
number of employees 1073 448 1602 563
number of options granted 223291 142981 586381 406507
c share incentive plan sip
under the sip the board may grant share awards to employees of group companies during the year the board has announced that  
it will make awards under the sip based on performance against severn trent water’s targets for its key performance indicators 
eligible employees will be entitled to shares to a maximum value of £750 it is expected that these awards will be made in august 
2011 sip shares vest with the employee on the date of grant
d approved share option scheme
under the terms of the share option scheme formerly executive share option scheme the board has granted directors and other 
executives options to purchase ordinary shares in the company no awards have been made under this scheme since july 2003
options outstanding under this scheme at 31 march were as follows
the following data was used in calculating the fair value of the sharesave options
number of 
share options
weighted 
average 
exercise price
outstanding 1 april 2009 4759 724p
exercised during the year 1634 731p
outstanding 1 april 2010 3125 720p
exercised during the year 3125 720p
outstanding 31 march 2011 ––
number of 
share options
weighted 
average 
exercise price
outstanding at 1 april 2009 40763 728p
exercised during the year 5504 728p
outstanding at 1 april 2010 35259 728p
lapsed during the year 8596 729p
exercised during the year 3679 720p
outstanding at 31 march 2011 22984 729p
number of shares
date of grant
normal date of 
exercise option price 2011 2010
july 2002 20052012 720p – 3125
e unapproved share option scheme
the board has granted a number of executives options to purchase ordinary shares in the company under an unapproved share 
option scheme no awards have been made under this scheme since july 2003
details of movements in the share awards outstanding during the year are as follows
33 share based payments continued
b employee sharesave scheme continued severn trent plc annual report and accounts 2011 107
financial statements
options outstanding under this scheme at 31 march were as follows
number of shares
date of grant
normal date of 
exercise option price 2011 2010
june 2001 20042011 738p 11844 16274
june 2002 20052012 720p 11140 18985
22984 35259
33 share based payments continued
e unapproved share option scheme continued
f share matching plan smp
under the share matching plan members of the executive committee receive matching share awards over those shares which have 
been acquired under the deferred share component of the annual bonus scheme matching shares may be awarded at a maximum 
ratio of one matching share for every one deferred share and are subject to a three year vesting period during the year matching 
shares were awarded at a ratio of 05 to 1
matching shares are subject to total shareholder return over three years measured relative to the companies ranked 51150 by market 
capitalisation in the ftse index excluding investment trusts this replicates the ltip performance condition for the july 2010 award
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 remuneration 
committee determines that the performance conditions have been met provided that the participant remains in employment at the 
end of the performance period
during the year 25187 matching shares with a fair value of £679 were awarded to 11 employees 2010 nil
number of 
share options
outstanding at 1 april 2010 –
granted during the year 25187
exercised during the year –
outstanding at 31 march 2011 25187
assumptions 2011
expected volatility
severn trent group 27
comparator group 46
correlation between severn trent plc and comparator group 33
proportion of employees expected to cease employment before vesting 0
details of share matching awards outstanding at 31 march 2011 were as follows
share price volatility is based on observations over a historical period prior to the date of grant commensurate to the expected term 
of the performance period
the comparator group is the companies ranked 51150 in the ftse index
the share price at the grant date was £1126
dividends paid on the shares during the vesting period are accumulated during the vesting period and released subject to the 
achievement of the performance condition in the same manner as the underlying shares as a result a dividend yield assumption  
is not required
  number of shares
date of grant
normal date of 
vesting 2011 2010
may 2010 june 2013 25187 – 
the fair value of the share matching awards made during the year was calculated using the monte carlo method using the principal 
assumptions set out below severn trent plc annual report and accounts 2011 108
notes to the group financial statements continued
for the year ended 31 march 2011
2011 2010
£m £m
restructuring costs 276 159
regulatory matters 38 –
fines and penalties – 20
loss on disposal of businesses – 09
314 188
as at rpi uplift on other as at
1 april fair value indexlinked foreign noncash 31 march
2010 cash flow adjustments debt exchange movements 2011
£m £m £m £m £m £m £m
cash and cash equivalents 2278 883 – – 09 – 3152
net cash and cash equivalents 2278 883 – – 09 – 3152
bank loans 6898 1500 – 70 – – 8468
other loans 31859 75 104 429 12 20 32309
finance leases 3008 473 – – – 132 2667
cross currency swaps 1873 205 41 – – 23 1604
net debt 37614 274 145 499 21 135 38688
c exceptional cash flows
the following cash flows arose from items classified as exceptional in the income statement
d reconciliation of movement in cash and cash equivalents to movement in net debt
34 cash flow statement
a reconciliation of operating profit to operating cash flows
2011 2010
£m £m
profit before interest and tax 4977 5074
depreciation of property plant and equipment 2515 2361
amortisation of intangible assets 254 252
exceptional impairment and depreciation – 66
pension service cost 227 147
curtailment cost – 74
pension contributions 400 396
share based payments charge 46 51
profit on sale of property plant and equipment 26 45
loss on disposal of businesses – 17
deferred income movement 84 74
provisions charged to the income statement 68 242
utilisation of provisions for liabilities and charges 190 105
increasedecrease in stocks 05 39
increase in debtors 75 264
increasedecrease in creditors 223 359
cash generated from operations 7530 7080
tax paid 324 538
net cash generated from operating activities 7206 6542
b noncash transactions
no additions to property plant and equipment during the year were financed by new finance leases 2010 nil severn trent plc annual report and accounts 2011 109
financial statements
35 contingent liabilities
a bonds and guarantees
group undertakings have entered into bonds and guarantees in the normal course of business no liability is expected to arise in 
respect of either bonds or guarantees
b disposal of subsidiaries
the group has given certain guarantees and indemnities in relation to disposals of businesses
on 5 march 2007 the group received notice of a claim for €234 million from veolia proprete sa ‘veolia’ alleging breach of warranty 
in relation to the disposal of biffa belgium the group subsequently received notice from veolia of a further claim for €5 million 
relating to the same matter the group considered that there was no basis for this claim and hence no provision was recorded in the 
financial statements in relation to this matter following a hearing in the commercial court in belgium in february 2010 the court 
rendered judgment in favour of the group on 1 april 2010 and declared all of veolia’s claims to be unfounded the group has received 
notice that veolia has filed an appeal against this decision
the group is not aware of any other liability that is likely to result from these guarantees and indemnities that has not been provided 
for in these financial statements
c regulatory matters
following an audit in september 2010 by the drinking water inspectorate dwi of aspects of the services provided by severn trent 
laboratories ltd from its bridgend laboratory inorganic testing services provided by that laboratory were temporarily suspended and 
transferred to another of the group’s laboratories pending completion of an investigation commissioned by severn trent plc the 
results of this investigation have been discussed with the dwi inorganics testing resumed at bridgend in january 2011 following 
accreditation by ukas of revised testing processes
at this stage it is not possible to determine what if any liability will arise as a result of this incident
on 17 december 2010 severn trent plc severn trent water ltd and severn trent laboratories ltd received a request from ofwat to 
provide certain information under the competition act in connection with severn trent laboratories ltd’s contracts with severn trent 
water ltd and certain other water companies the information requested has subsequently been provided to ofwat
at this stage it is not possible to determine what if any liability will arise as a result of this request
36 service concession arrangements
the group’s contract to provide water and waste water services to the ministry of defence mod is a service concession 
arrangement under the definition set out in ifric 12 the group acts as the service provider under the mod project aquatrine 
package c – a 25 year contract spanning some 1523 sites across england covering the eastern sea border and from lancashire  
in the north west to west sussex on the south coast 
under the contract the group maintains and upgrades the mod infrastructure assets and provides operating services for water and 
waste water the maintenance and upgrade services are charged at an agreed rate adjusted for inflation that is agreed in the 
contract the operating services are charged under an agreed volumetric tariff
since the group has an unconditional right to receive cash in exchange for the maintenance and upgrade services the amounts 
receivable are recognised as a financial asset within prepayments and accrued income at 31 march 2011 the amount receivable  
was £271 million 2010 £262 million
there have been no significant changes to the arrangement during the year severn trent plc annual report and accounts 2011 110
notes to the group financial statements continued
for the year ended 31 march 2011
38 post balance sheet events
following the year end the board of directors has proposed a final dividend of 3905 pence per share further details of this are 
shown in note 14
sale of goods purchase of goods
amounts due from related 
parties amounts due to related parties
2011 2010 2011 2010 2011 2010 2011 2010
£m £m £m £m £m £m £m £m
cognica – – – 01 – – – –
sii 69 105 – – 185 155 – –
jackson water partnership 29 50 – – – 15 – –
98 155 – 01 185 170 – –
39 related party transactions
transactions between the company and its subsidiaries which are related parties have been eliminated on consolidation and are not 
included in this note transactions between the group and its associates and joint ventures are disclosed below
trading transactions
the related parties are associates and joint ventures in which the group has a participating interest
remuneration of key management personnel
key management personnel comprise the members of stec during the year
the remuneration of the directors is included within the amounts disclosed below further information about the remuneration  
of individual directors is provided in the audited part of the directors’ remuneration report on pages 51 to 55
2011 2010
£m £m
short term employee benefits 48 55
post employment benefits 05 06
termination benefits 03 03
share based payments 06 05
62 69
2011 2010
£m £m
contracted for but not provided in the financial statements 917 3210
2011 2010
£m £m
within one year 44 49
in the second year to fifth years inclusive 112 90
after more than five years 73 49
229 188
37 financial and other commitments
a investment expenditure commitments
in addition to these contractual 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 ofwat and to provide  
for growth in demand for water and sewerage services
b leasing commitments
at the balance sheet date the group had outstanding commitments for future minimum operating lease payments under non
cancellable operating leases which fall due as follows
operating lease payments represent rentals payable by the group for certain of its office properties plant and equipment severn trent plc annual report and accounts 2011 111
financial statements
40 principal subsidiary undertakings and  
their directors
details of the principal operating subsidiaries as at 26 may 2011 
are given below a complete list of subsidiary undertakings is 
available on request to the company and will be filed with the 
next annual return
severn trent water
severn trent water limited
2 st john’s street coventry cv1 2lz 
telephone 02477 715 000
directors
a j duff  m j kane 
a j ballance  m j e mckeon 
b bulkin  baroness noakes 
r h davey  a p smith 
g fryett  a p wray 
m j lamb
severn trent services
severn trent services inc
suite 300 580 virginia drive 
ft washington pennsylvania 19034 usa 
telephone 001 215 646 9201 
incorporated and operational in the united states of america
directors
d l chester l f graziano
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
d l chester k j kelly 
l f graziano
severn trent services limited
arley drive birch coppice business park 
dordon tamworth b78 1sa 
telephone 01827 266 000
directors
l f graziano k a a porritt  
r c mcpheely p m senior
severn trent water purification inc
3000 advance lane  
colmar pennsylvania 18915 usa 
telephone 001 215 997 4000 
incorporated and operational in the united states of america
directors
d l chester k j kelly 
l f graziano
severn trent services international limited
2308 coventry road birmingham b26 3jz 
telephone 0121 722 6000
directors
l f graziano k a a porritt 
r c mcpheely p m senior
c2c services limited
80 owned 
2308 coventry road birmingham b26 3jz 
telephone 0121 722 6000
directors
d godfrey r j phillips 
a j handford w g weatherdon 
r g piper e a wilson
severn trent laboratories limited
stl business centre torrington avenue 
coventry cv4 9gu 
telephone 024 764 21213
directors
l f graziano k a a porritt 
r c mcpheely p m senior
other businesses
derwent insurance limited
6a queensway po box 64 gibraltar 
telephone 00 350 47529 
insurance company – incorporated and operational in gibraltar
directors
j davies f b smith 
n feetham f white
severn trent luxembourg overseas holdings sarl
1a rue thomas edison l1445 strassen luxembourg 
finance company – registered and operational in luxembourg
directors
d l chester x pauwels 
l f graziano d robyns 
m j e mckeon f b smith
country of incorporation and main operation is great britain and 
registration is in england and wales unless otherwise stated  
all subsidiary undertakings are wholly owned unless otherwise 
indicated all shareholdings are in ordinary shares
all subsidiary undertakings have been included in the 
consolidation severn trent plc annual report and accounts 2011 112
independent auditor’s report to the members of 
severn trent plc
we have audited the parent company financial statements of 
severn trent plc for the year ended 31 march 2011 which 
comprise the company balance sheet the company statement  
of total recognised gains and losses and the related notes  
1 to 19 the financial reporting framework that has been applied 
in their preparation is applicable law and united kingdom 
accounting standards united kingdom generally accepted 
accounting practice
this report is made solely to the company’s members as a 
body in accordance with chapter 3 of part 16 of the companies 
act 2006 our audit work has been undertaken so that we might 
state to the company’s members those matters we are required 
to state to them in an auditor’s report and for no other purpose 
to the fullest extent permitted by law we do not accept or 
assume responsibility to anyone other than the company and  
the company’s members as a body for our audit work for  
this report or for the opinions we have formed
respective responsibilities of directors and auditor
as explained more fully in the directors’ responsibility statement 
the directors are responsible for the preparation of the parent 
company financial statements and for being satisfied that they 
give a true and fair view our responsibility is to audit and 
express an opinion on the parent company financial statements 
in accordance with applicable law and international standards 
on auditing uk and ireland those standards require us to 
comply with the auditing practices board’s ethical standards  
for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts  
and disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free  
from material misstatement whether caused by fraud or error 
this includes an assessment of whether the accounting policies 
are appropriate to the parent company’s circumstances and 
have been consistently applied and adequately disclosed the 
reasonableness of significant accounting estimates made by  
the directors and the overall presentation of the financial 
statements
opinion on financial statements
in our opinion the parent company financial statements
• give a true and fair view of the state of the parent company’s 
affairs as at 31 march 2011
• have been properly prepared in accordance with united 
kingdom generally accepted accounting practice and
• have been prepared in accordance with the requirements  
of the companies act 2006
opinion on other matters prescribed by the companies 
act 2006
in our opinion
• the part of the directors’ remuneration report to be audited 
has been properly prepared in accordance with companies 
act 2006 and
• the information given in the directors’ report for the financial 
year for which the financial statements are prepared is 
consistent with the parent company financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following matters 
where the companies act 2006 requires us to report to you if  
in our opinion
• adequate accounting records have not been kept by the 
parent company or returns adequate for our audit have  
not been received from branches not visited by us or
• the parent company financial statements and the part of  
the directors’ remuneration report to be audited are not in 
agreement with the accounting records and returns or
• certain disclosures of directors’ remuneration specified by 
law are not made or
• we have not received all the information and explanations  
we require for our audit
other matter
we have reported separately on the group financial statements 
of severn trent plc for the year ended 31 march 2011 
carl d hughes senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london uk 
26 may 2011 severn trent plc annual report and accounts 2011 113
financial statements
company balance sheet
at 31 march 2011
company statement of total recognised gains  
and losses
for the year ended 31 march 2011
note 2011 2010
£m £m
noncurrent assets
tangible fixed assets 2 02 04
investments in subsidiaries 3 35501 36093
derivative financial instruments 275 210
35778 36307
current assets
debtors 4 162 563
derivative financial instruments – 28
cash at bank and in hand 2232 2390
2394 2981
creditors amounts falling due within one year 5 8272 7461
net current liabilities 5878 4480
total assets less current liabilities 29900 31827
creditors amounts falling due after more than one year 6 1677 4666
net assets 28223 27161
capital and reserves attributable to the company’s equity shareholders
called up share capital 8 2322 2316
share premium account 9 800 759
other reserves 10 1506 1486
retained earnings 11 23595 22600
equity attributable to the company’s equity shareholders 11 28223 27161
2011 2010
£m £m
transfers
transfers to the profit and loss account on cash flow hedges 27 32
deferred tax on transfers to the profit and loss account 07 09
20 23
profit for the period 2645 1400
total recognised gains and losses for the period 2665 1423
signed on behalf of the board who approved the accounts on 26 may 2011
andrew duff michael mckeon
chairman finance director
company number 2366619 severn trent plc annual report and accounts 2011 114
notes to the company financial statements
for the year ended 31 march 2011
1 accounting policies
a basis of accounting
the financial statements have been prepared under the 
historical cost convention as modified by the revaluation of 
financial assets and liabilities including derivative instruments 
at fair value through profit or loss and in accordance with 
applicable united kingdom accounting standards and comply 
with the requirements of the united kingdom companies act 
2006 ‘the act’
b tangible fixed assets and depreciation
tangible fixed 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
financial assets at fair value through profit or loss
a financial asset is classified at fair value through profit or loss if 
it is so designated or if it is held for trading derivative financial 
assets that are not designated and effective as hedging 
instruments are classified as held for trading financial assets at 
fair value through profit or loss are stated at fair value with any 
gains or losses arising on remeasurement recognised in gains
losses on financial instruments in the income statement fair 
value is determined using the methodology described in note 32 
to the group’s financial statements interest receivable in respect 
of derivative financial assets is included in finance income
held to maturity investments
where the company has the ability and intent to hold an 
investment to maturity the financial asset is classified as held to 
maturity such financial assets are measured at amortised cost 
using the effective interest rate method with any gains or losses 
being recognised in the income statement
available for sale financial assets
after initial recognition at cost being the fair value of the 
consideration paid investments which are classified as 
available for sale are measured at fair value with gains or losses 
recognised in equity when an available for sale investment is 
disposed of or impaired the gain or loss previously recognised 
in equity is taken to the income statement where there is no 
active market in the investments and the fair value cannot be 
measured reliably the investments are held at cost
loans and receivables
trade receivables loans and other receivables that have fixed  
or determinable payments and that are not quoted in an active 
market are classified as loans and receivables such assets  
are measured at fair value on initial recognition and are 
subsequently measured at amortised cost using the  
effective interest rate method unless there is objective  
evidence that the asset is impaired where it is written down  
to its recoverable amount and the irrecoverable amount is 
recognised as an expense
ii financial liabilities
financial liabilities are classified as either
• financial liabilities at fair value through profit or loss or
• other financial liabilities
financial liabilities at fair value through profit or loss
a financial liability is classified at fair value through profit or loss 
if it is so designated or if it is held for trading derivative financial 
liabilities that are not designated and effective as hedging 
instruments are classified as held for trading financial liabilities 
at fair value through profit or loss are stated at fair value with 
any gains or losses arising on remeasurement recognised in 
gainslosses on financial instruments in the income statement 
fair value is determined using the methodology described  
in note 32 in the group financial statements interest payable  
in respect of derivative financial liabilities is included in  
finance costs
other financial liabilities
other financial liabilities including borrowings are initially 
recognised at fair value less transaction costs after initial 
recognition other financial liabilities are subsequently measured 
at amortised cost using the effective interest rate method
years
buildings 3060
computers and software 215
c 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 the 
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
d impairment of fixed assets and investments
impairments of fixed assets and investments are calculated  
as the difference between the carrying values 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
e financial instruments
i financial assets
financial assets are classified into the following specified 
categories
• at fair value through profit or loss
• held to maturity investments
• available for sale financial assets and
• loans and receivables severn trent plc annual report and accounts 2011 115
financial statements
iii hedge accounting
the company uses derivative financial instruments such as 
cross currency swaps forward currency contracts and interest 
rate swaps to hedge its risks associated with foreign currency 
and interest rate fluctuations such derivative instruments are 
recognised and measured in accordance with the accounting 
policies described above 
at the inception of the hedge relationship the company 
documents
• the relationship between the hedging instrument and the 
hedged item
• its risk management objectives and strategy for undertaking 
hedge transactions and
• whether the hedging instrument is highly effective in 
offsetting changes in fair values or cash flows as 
appropriate of the hedged item
the company continues to test and document the effectiveness 
of the hedge on an ongoing basis
hedge accounting is discontinued when the hedging instrument 
expires is sold terminated or exercised or no longer qualifies 
for hedge accounting
fair value hedges
where a loan or borrowing is in a fair value hedging relationship 
it is remeasured for changes in fair value of the hedged risk at 
the balance sheet date with gains or losses being recognised in 
gainslosses on financial instruments in the income statement 
the gain or loss on the hedging instrument is taken to gains
losses on financial instruments in the income statement where 
the effective portion of the hedge will offset the gain or loss on 
the hedged item
when hedge accounting is discontinued the fair value 
adjustment to the carrying amount of the hedged item arising 
from the hedged risk is amortised to the income statement  
from that date
cash flow hedges
the portion of the gain or loss on the hedging instrument that  
is determined to be an effective hedge is recognised directly in 
equity and the ineffective portion in gainslosses on financial 
instruments in the income statement the gains or losses 
deferred in equity in this way are recycled through gainslosses 
on financial instruments in the income statement in the same 
period in which the hedged underlying transaction or firm 
commitment is recognised in the income statement
when hedge accounting is discontinued any cumulative gain  
or loss on the hedging instrument recognised in equity is kept  
in equity until the forecast transaction occurs or transferred  
to gainslosses on financial instruments in the income statement 
if the forecast transaction is no longer expected to occur
hedges of net investments in foreign operations
where forward currency contracts and foreign currency 
borrowings are used to hedge net investments in foreign 
currency denominated operations to the extent that they are 
designated and effective as net investment hedges they are 
matched in equity against changes in value of the related assets 
any ineffectiveness is taken to gainslosses on financial 
instruments in the income statement
iv embedded derivatives
derivatives embedded in other financial instruments or other 
host contracts are treated as separate derivatives when their 
risks and characteristics are not closely related to those of the 
host contract and the host contract is not carried at fair value 
with gains and losses reported in gainslosses on financial 
instruments in the income statement
f investments
investments in subsidiary undertakings are held at  
historical cost
after initial recognition at cost being the fair value of the 
consideration paid investments which are classified as held  
for trading or available for sale are measured at fair value with 
gains or losses recognised in income or equity respectively 
when an available for sale investment is disposed of or 
impaired the gain or loss previously recognised in reserves  
is taken to the profit and loss account
g share based payments
the company operates a number of equity settled share based 
compensation plans for employees the fair value of the 
employee services received in exchange for the grant is 
recognised as an expense over the vesting period of the grant
the fair value of employee services is determined by reference 
to the fair value of the awards granted calculated using a pricing 
model excluding the impact of any nonmarket conditions  
the number of awards expected to vest takes into account 
nonmarket vesting conditions including where appropriate 
continuing employment by the group the charge is adjusted  
to reflect shares that do not vest as a result of failing to meet  
a nonmarket based condition
h cash flow statement
the company has taken advantage of the exemption under 
financial reporting statement 1 ‘cash flow statements’ and  
not produced a cash flow statement
i deferred taxation
deferred taxation is fully provided for in respect of timing 
differences between the treatment of certain items for taxation 
and accounting purposes only to the extent that the company 
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
j pensions
the company participates in the group’s defined benefit and 
defined contribution pension schemes details of which are set 
out in note 27 to the group financial statements however the 
company is currently unable to identify its share of assets and 
liabilities relating to the defined benefit schemes the pension 
costs charged against the operating profit are the contributions 
payable to the scheme in respect of the accounting period in 
respect of the defined benefit and defined contribution schemes
1 accounting policies continued
e financial instruments continued severn trent plc annual report and accounts 2011 116
2 tangible fixed assets
3 investments
land and 
buildings
plant and 
equipment total
£m £m £m
cost
as at 1 april 2010 07 06 13
as at 31 march 2011 07 06 13
depreciation
as at 1 april 2010 07 02 09
charge for the year –02 02
as at 31 march 2011 07 04 11
net book value
at 31 march 2011 –02 02
at 31 march 2010 –04 04
subsidiary undertakings
shares loans total
£m £m £m
as at 1 april 2010 32881 3212 36093
additionsloans advanced 44 – 44
disposalsloans repaid – 636 636
as at 31 march 2011 32925 2576 35501
details of principal subsidiaries of the company are given in note 40 of the group financial statements
notes to the company financial statements continued
4 debtors
2011 2010
£m £m
amounts owed by group undertakings 54 35
deferred tax 92 101
corporation tax recoverable – 383
other debtors 02 01
prepayments and accrued income 14 43
162 563
2011 2010
£m £m
bank overdrafts 49 914
other loans – 106
borrowings 49 1020
derivative financial instruments – 20
trade creditors 02 02
amounts due to group undertakings 8083 6355
other creditors 86 56
taxation and social security 07 –
accrued expenses 45 08
8272 7461
5 creditors amounts falling due within one year severn trent plc annual report and accounts 2011 117
financial statements
2011 2010
£m £m
borrowings  other loans note 7 818 778
amounts due to group undertakings 528 3502
derivative financial instruments 331 386
1677 4666
6 creditors amounts falling due after more than one year
7 borrowings
2011 2010
£m £m
borrowings due within one year 49 1020
borrowings due after more than one year
between one and two years 229 –
between two and five years 589 558
after more than five years – 220
total borrowings due after one year 818 778
867 1798
borrowings analysed by interest rate after taking account of interest rate swaps entered into by the company were
noninterest 
bearing 
liabilities floating rate fixed rate total
2011 £m £m £m £m
bank loans and overdrafts – 49 – 49
other loans –818 – 818
–867 – 867
impact of interest rate swaps not matched against specific debt instruments – 2250 2250 –
–1383 2250 867
weighted average interest rate 632
weighted average period for which interest is fixed years 45
noninterest 
bearing 
liabilities floating rate fixed rate total
2010 £m £m £m £m
bank loans and overdrafts – 914 – 914
other loans –884 – 884
– 1798 – 1798
impact of interest rate swaps not matched against specific debt instruments – 3000 3000 –
– 1202 3000 1798
weighted average interest rate 632
weighted average period for which interest is fixed years 42 severn trent plc annual report and accounts 2011 118
notes to the company financial statements continued
8 share capital
2011 2010
£m £m
total issued and fully paid share capital
237142534 ordinary shares of 97
17
 19p 2010 236585205 2322 2316
number £m
ordinary shares of 97
17
 19p
at 1 april 2010 236585205 2316
shares issued under the group’s employee sharesave scheme 550525 05
shares issued under the group’s share option scheme 6804 01
at 31 march 2011 237142534 2322
2011 2010
£m £m
at 1 april 759 719
share premium arising on issue of shares for employee sharesave scheme 41 40
at 31 march 800 759
capital 
redemption 
reserve
hedging 
reserve
total other 
reserves
£m £m £m
at 1 april 2009 1561 98 1463
transfers to the profit and loss account on cash flow hedges – 23 23
at 1 april 2010 1561 75 1486
transfers to the profit and loss account on cash flow hedges – 20 20
at 31 march 2011 1561 55 1506
9 share premium
10 other reserves
the capital redemption reserve arose on the repurchase of b shares this is not distributable
changes in share capital were as follows
the company’s borrowings are denominated in sterling after taking account of cross currency swaps the company has entered into 
there is no difference between the book value and the fair value of the company’s borrowings fair values are based on the expected 
future cash flows discounted using zero coupon forward interest rates related to the expected timing of payments
at the balance sheet date the company had committed undrawn borrowing facilities expiring as follows
2011 2010
£m £m
within one year 417 –
12 years 4583 1917
25 years – 4583
after more than five years – –
5000 6500
7 borrowings continued severn trent plc annual report and accounts 2011 119
financial statements
11 reconciliation of movements in shareholders’ equity
12 employee costs and auditors’ remuneration
2011 2010
£m £m
wages and salaries 13 12
social security costs 02 01
pension costs 06 08
total employee costs 21 21
13 employee numbers
average number of employees of the company including executive directors during this year was 12 2010 11
all were based in the united kingdom
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 408 of the companies act 2006 no profit or loss account is presented 
for the company
for details of directors’ remuneration see the directors’ remuneration report on pages 51 to 55
fees payable to deloitte llp and their associates for nonaudit services to the company are not required to be disclosed because  
the consolidated financial statements are required to disclose such fees on a consolidated basis
share  
capital
share 
premium
other 
reserves
retained 
earnings
equity 
attributable to 
the equity 
holders of 
severn trent 
plc
£m £m £m £m £m
at 1 april 2009 2310 719 1463 22745 27237
cash flow hedges
 transfers to net profit – – 23 – 23
share options and ltips
 proceeds from shares issued 06 40 – – 46
 awards granted by subsidiaries – – – 52 52
net profit for the year – – – 1400 1400
dividends – – – 1597 1597
at 1 april 2010 2316 759 1486 22600 27161
cash flow hedges
 transfers to net profit – – 20 – 20
share options and ltips
 proceeds from shares issued 06 41 – – 47
 awards granted by subsidiaries – – – 44 44
net profit for the year – – – 2645 2645
dividends – – – 1694 1694
at 31 march 2011 2322 800 1506 23595 28223 severn trent plc annual report and accounts 2011 120
14  employee share schemes
for details of employee share schemes and options granted over the shares of the company see note 33 of the group financial 
statements details of the ltip conditional awards and share options granted by the company to its employees are set out below 
the company has charged £01 million 2010 £01 million to the profit and loss account in respect of share based payments
at 31 march 2011 the number of options that were exercisable under each of the share based remuneration schemes was as follows
i long term incentive plan
changes in the number of awards outstanding during the year
2011 2010
number of 
exercisable 
optionsawards
weighted 
average 
exercise price
number of 
exercisable 
options
weighted 
average 
exercise price
employee sharesave plan –– 161 1172
long term incentive plan –– ––
share matching plan –– ––
number of 
awards
outstanding at 1 april 2009 80140
granted during the year 4813
lapsed during the year 76574
outstanding at 1 april 2010 8379
granted during the year 4422
outstanding at 31 march 2011 12801
number of shares
date of grant normal date of vesting 2011 2010
2008 2011 3566 3566
2009 2012 4813 4813
2010 2013 4422 –
12801 8379
awards outstanding at 31 march were
ii employee sharesave scheme
changes in the number of options outstanding during the year
number of 
shares
weighted 
average 
exercise  
price
outstanding at 1 april 2009 1237 598p
granted during the year 449 806p
exercised during the year 1237 598p
transferred from other group companies 4107 874p
outstanding at 1 april 2010 4556 867p
lapsed during the year 161 1172p
outstanding at 31 march 2011 4395 856p
number of shares
date of grant normal date of vesting option price 2011 2010
january 2007 2010 2012 or 2014 1172p – 161
january 2009 2012 or 2014 862p 3946 3946
january 2010 2013 or 2015 806p 449 449
4395 4556
notes to the company financial statements continued
options outstanding at 31 march were severn trent plc annual report and accounts 2011 121
financial statements
14 employee share schemes continued
15 pensions
the company operates two defined benefit schemes being the severn trent pension scheme and the severn trent water mirror 
image pension scheme in addition the group operates an unfunded arrangement for certain employees whose earnings are above 
the pension cap
further details regarding the operation of these schemes are given in note 27 of the group financial statements
the company is currently unable to identify its share of the underlying assets and liabilities from the group’s defined benefit schemes 
and hence it continues to account for the cost of contributions as if the scheme was a defined contribution scheme
the pension charge for the year was £02 million 2010 £08 million
16 related party transactions
the company has taken advantage of the exemption under frs 8 “related party disclosures” and not disclosed details of 
transactions with other undertakings within the severn trent group of companies
17 contingent liabilities
a bonds and guarantees
the company has entered into bonds and guarantees in the normal course of business no liabilities are expected to arise in respect 
of either the bonds or guarantees
b 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 others’ overdrawn balances to the extent of their credit balances which can 
be offset against balances of participating companies
18 post balance sheet events
on 26 may 2011 the board of directors proposed a final dividend of 3905 pence per share
19 dividends
for details of the dividends paid in the years ended 31 march 2011 and 31 march 2010 see note 14 in the group financial statements
iii share matching plan smp
changes in the number of options outstanding during the year
 
number of 
share options
outstanding at 1 april 2010 – 
granted during the year 457 
exercised during the year – 
outstanding at 31 march 2011 457 
options outstanding at 31 march were
   
number of shares
date of grant
normal date of 
vesting 2011 2010
may 2011 june 2011 457 – 
   457 –  severn trent plc annual report and accounts 2011 122
2011 2010 2009 2008 2007
restated
continuing operations £m £m £m £m £m
turnover 17113 17039 16422 15524 14802
profit before interest tax and exceptional items 5191 5571 4699 4695 4053
net exceptional items 214 497 189 688 247
net interest payable before lossesgains on financial 
instruments 2306 2188 1964 1774 1538
lossesgains on financial instruments 142 457 870 310 488
results of associates and joint ventures 01 01 – 01 05
profit on ordinary activities before taxation 2530 3344 1676 1924 3255
current taxation on profit on ordinary activities 321 407 521 562 585
deferred taxation 536 422 1715 744 184
profit on ordinary activities after taxation 2745 2515 560 2106 2486
discontinued – 10 – 08 200
profit for the period 2745 2525 560 2114 2686
net assets employed
fixed assets 66353 65161 61699 58929 56755
other net liabilities excluding net debt retirement benefit 
obligation and provisions 3204 3172 2872 2173 2429
derivative financial instruments
1
905 1253 1539 261 416
retirement benefit obligation 2921 3549 2330 1656 1351
provisions for liabilities and charges and deferred tax 9574 10103 9880 8855 9300
net assets held for sale – –42 – –
49749 47084 45120 45984 43259
financed by
called up share capital 2322 2316 2310 2297 2283
reserves 8676 7091 7151 9713 9059
total shareholders’ funds 10998 9407 9461 12010 11342
noncontrolling interests 63 63 60 42 31
net debt
2
38688 37614 35599 33932 31886
49749 47084 45120 45984 43259
statistics
earnings per share continuing  pence 1152 1056 246 893 1061
adjusted earnings per share  pence 1056 1228 927 978 824
dividends per share excluding special dividend  pence 651 723 673 656 615
dividend cover before exceptional items and deferred tax 16 17 14 15 13
gearing 778 799 789 740 733
ordinary share price at 31 march  pence 14460 11950 9900 14190 14340
average number of employees
 severn trent water 52366 56858 56240 55690 52890
 other 30449 31017 31440 28140 71720
five year summary
1
 excludes hedging instruments
2
 includes hedging instruments
the prior year figures have been restated to reflect the impact of ifric 18 which is described in note 3
gearing has been calculated as net debt divided by the sum of equity and net debt severn t rent water – 
delivering against our kpis
severn trent plc annual report and accounts 2011 123
other information other information
basis kpi
200910  
performance
201011  
performance
201011  
quartile at a glance
mat lost time incidents per 100000 hrs worked
 1
036 037 upper
qr employee motivation 
 2
74 74 lower
mat water quality test failure rate ppm 131 210 upper
mat customer written complaints per 1000 properties
 34
495 573 upper
mat first time call resolution for billing 
 5
89 90 median
mat unplanned interruptions  6 hrs per 1000 properties
 3
1009 2385 lower
npr properties at risk of low pressure per 1000 properties
 3
012 007 upper
mat first time job resolution 
 5
965 975 upper
qr nonperformance against regulatory obligations 
 5
5 4 upper
amp capex gross vs final determination  
614
61 74 na na
act debtor days
 7
326 338 median
act opex  £m
 67
4924 5190 na na
mat pollution incidents cat 1 2  3
89
322 378 median
mat sewer ﬂooding incidents – other causes per 1000 properties
 313
0131 0103 upper
act sewage treatment works – failing consent limit 
 910
180 169 lower
act supply availability  
11
919 944 lower
mat net energy use – gwh
 5 12
714 706 upper
mle leakage mid
 36
497 497 na
na
key
  improved quartile  maintained quartile  declined quartile
notes 
benchmarks updated in september
mat  moving annual total
qr  quarterly review
npr  number of properties on register
amp  asset management plan 5 to date
pps  percentage of population served
mle  maximum likelihood estimate
act  year end actual
1 actual performance across all employees and 
agency staff
2 performance based on annual survey of all 
employees 200910 based on a sample of  
10 of stw’s employees
3 as reported in june return to ofwat performance 
ﬁgures are provisional at this stage as the june 
return will be submitted to ofwat on 10 june 201 1
4 performance excludes properties billed by other 
water companies
5 actual performance based partially or wholly  
on internal data
6 as this is the ﬁrst year of amp5 benchmark data  
is unavailable until september 201 1
7 actual performance based on audited uk  
gaap ﬁnancial statements for the year ended  
31 march 201 1
8 metrics of this kpi changed from pollution incidents 
per 1000 properties to number of pollution 
incidents prior year performance has been 
restated accordingly 
9 measure for calendar year to 31 december 2010
10 metrics of this kpi changed to align with 
environment agency approach prior year 
performance has been restated accordingly 
1 1 metrics of this kpi changed from security of supply 
to supply availability  prior year performance has 
been restated accordingly  the kpi measures how 
much of our designed capacity is available taking 
into account known restrictions and works outages  
there were no supply failures resulting from works 
restrictions during the year
12 metrics of this kpi changed from kwhml to gwh 
prior year performance has been restated 
accordingly
13 excludes minor escape of sewage
14 percentage outperformance against the  
final determination severn trent plc annual report and accounts 2011 124
information for shareholders
electronic communications and our website
under the articles of association the company is authorised to 
communicate with shareholders either via the severn trent plc 
website or by post the company last wrote to shareholders in 
april 2008 asking that they choose to either
• provide an email address to receive notifications when 
shareholder documentation is made available on the website or
• continue to receive shareholder documentation in hard copy by 
returning the personalised reply card 
if the completed card was not returned then in accordance with 
the companies act 2006 shareholders were deemed to have 
agreed to receive shareholder documentation via the website 
these shareholders and those who have positively elected for 
website communication will receive immediately prior to the 
publication date notification whenever shareholder documents 
are available to view on the website at wwwseverntrentcom
shareholders may receive electronic communications either
• via email – this option is available though shareview 
shareholders will receive an email notification when a new 
document is made available or
• via our website – shareholders will receive a notification by 
post when a new document is made available
the electronic arrangements enable shareholders to access 
information immediately as it becomes available by using 
electronic communications the company is also able to both 
reduce its impact on the environment from reducing the use of 
paper and the energy required for publication and distribution 
and benefit from savings associated with reduced printing and 
mailing costs
shareholders who register to receive shareholder documentation 
from severn trent plc electronically can
• view the annual report and accounts on the day it  
is published
• receive an email alert when shareholder documents  
are available
• cast their agm vote electronically and
• manage their shareholding quickly and securely online 
through shareview
shareholders who receive such a notification are entitled to 
request a hard copy of the document and may also change the 
way they receive communications at any time by contacting 
equiniti visit wwwshareviewcouk for more information and to 
register for electronic shareholder communications
we will periodically consult with shareholders to check how they 
wish to receive information from us and a shareholder is taken to 
have agreed to website communications if a response has not 
been received
notwithstanding any election the company may at its sole and 
absolute discretion send any notification or information to 
shareholders in hard copy form
corporate website
our website provides company news and information together 
with links to our operational businesses’ websites the investor 
centre on the website contains up to date information for 
shareholders including
• comprehensive share price information
• financial results
• a history of dividend payment dates and amounts and
• access to current and historical shareholder documents such 
as the annual report and accounts
severn trent shareholder helpline
the company’s registrar is equiniti limited equiniti’s main 
responsibilities include maintaining the shareholder register  
and making dividend payments 
if you have any queries on the following matters you should 
contact equiniti
• transfer of shares
• change of name or address
• lost share certificate
• lost or out of date dividend cheques and other  
dividend queries 
• death of the registered holder of shares or
• any other query relating to your severn trent shareholding
registrar contact details
telephone 0871 384 2967
overseas enquiries 44 121 415 7044
text phone 0871 384 2255
by post equiniti aspect house spencer road lancing west 
sussex bn99 6da
email severntrentequiniticom
dividend payments directly into bank accounts
dividends can be paid automatically into your bank or building 
society account this service has a number of benefits
• no risk of the dividend cheque being lost in the post
• the dividend payment is cleared more quickly as the cash is 
paid directly into the account on the payment date without the 
need to pay in the cheque and wait for it to clear and
• since the 200910 financial year a single consolidated tax 
voucher is issued annually in february in time for your self 
assessment tax return
to take advantage of this service or for further details contact 
equiniti or visit wwwshareviewcouk
dividend reinvestment plan 
a dividend reinvestment plan was introduced in july 2009 
the plan gives shareholders the option of using their dividend 
payments to buy more severn trent plc shares instead of 
receiving cash if you would like to participate in the plan please 
request a dividend reinvestment plan mandate from equiniti 
financial services limited 
telephone 0871 384 2268
lines are open from 830am to 530pm monday to friday 
telephone number from outside the uk 44 121 415 7058
overseas dividend payments
shareholders in over 30 countries have the opportunity to 
receive severn trent dividends in their local currency for a  
small administration fee shareholders can have their dividends 
automatically converted from sterling and paid into their bank 
account normally within five working days of the dividend 
payment date please call 44 121 415 7044 for further details
amalgamating different share accounts
shareholders with more than one account arising from 
inconsistencies in name or address details may avoid receipt  
of duplicate mailings by asking the registrar to amalgamate  
their holdings
 calls to these numbers are charged at 8 pence per minute from a bt landline 
other providers’ costs may vary severn trent plc annual report and accounts 2011 125
lost investors
during 200910 we appointed prosearch to look for investors 
who had failed to keep their details up to date we have unclaimed 
funds waiting to be claimed shareholders are reminded that if 
they move house they need to contact equiniti and advise them 
of their new address
buying and selling shares in the uk
if you wish to buy or sell certificated severn trent shares you will 
need to use a stockbroker or high street bank which trades on the 
london stock exchange there are also many telephone and 
online services available to you if you are selling you will need to 
present your share certificate at the time of sale details of low 
cost dealing services may be obtained from wwwshareviewcouk 
or 0845 603 7037
share price information
shareholders can find share price information on our website 
and in most national newspapers ceefax where available also 
displays share prices that are updated regularly throughout the 
trading day for a realtime buying or selling price you should 
contact a stockbroker
gifting your shares
to transfer your shares to another member of your family as a gift 
please request a gift transfer form from equiniti the completed 
transfer form together with the relevant share certificates should 
be returned to equiniti to record the change in ownership
if you have a small number of shares and would like to donate 
them to charity please ask equiniti for a sharegift charity 
donation scheme transfer form sharegift registered charity no 
1052686 is an independent charity which provides a free service 
for shareholders wishing to dispose charitably of small numbers 
of shares which would cost more to sell than they are worth 
further information is also available on the sharegift website at 
wwwsharegiftorg or by telephoning 020 7337 0501
shareholder security
many companies have become aware that their shareholders have 
received unsolicited phone calls or correspondence concerning 
investment matters these are typically from overseas based 
‘brokers’ who target uk shareholders offering to sell them what 
often turn out to be worthless or high risk shares in us or uk 
investments these operations are commonly known as ‘boiler 
rooms’ these ‘brokers’ can be very persistent and extremely 
persuasive and the number of instances of this type of fraud has 
increased dramatically in recent years a 2006 survey by the 
financial services authority fsa has reported that the average 
amount lost by investors is around £20000 it is not just the novice 
investor that has been duped in this way many of the victims had 
been successfully investing for several years
in addition in the current economic climate boiler rooms are now 
targeting victims who have redundancy money or those who are 
not experienced investors and are asking for smaller sums of 
money to be invested
if you receive any unsolicited investment advice 
• ensure you get the full name of the person and organisation 
• check that they are properly authorised by the fsa before 
getting involved by visiting wwwfsagovukregister
• report the matter to the fsa either by calling 0300 500 5000  
or visiting wwwmoneymadeclearfsagovuk and 
• if the calls persist hang up
please be aware that if you deal with an unauthorised firm you 
will not be eligible to receive payment under the financial 
services compensation scheme the fsa can be contacted by 
completing an online form at wwwfsagovukpagesdoing
regulatedlaw alertsoverseasshtml
shareholders are advised to be very wary of any unsolicited 
advice offers to buy shares at a discount or offers of free 
company reports details of any share dealing facilities that the 
company endorses will be included in company mailings or on 
our website for more detailed information from the fsa go to 
wwwmoneymadeclearfsagovuk
shareholder fraud – tips on protecting your shareholding
to reduce the risk of fraud happening to you please consider the 
following
• ensure all your share certificates and dividend tax vouchers 
are kept in a safe place or consider holding your shares 
electronically in crest via a nominee
• keep all correspondence from the registrar in a safe place 
destroy all correspondence showing your personal details  
eg shareholder reference number by shredding
• if you change your address inform the registrar if you receive  
a letter from the registrar regarding a change of address and 
have not recently moved house please contact them 
immediately you may be a victim of identity theft and
• know when dividends are paid consider having your dividend 
paid directly into your bank or building society account reducing 
the risk of cheques being intercepted or lost in the post if you 
change your bank or building society account inform the 
registrar of the details of your new account immediately 
respond to any letters the registrar sends you about this
if you have any reason to believe that you may have been the 
target of a fraud or attempted fraud please contact the registrar 
immediately
unsolicited mail
the company is legally obliged to make its share register 
available to the general public consequently some shareholders 
may receive unsolicited mail if you wish to limit the amount of 
unsolicited mail you receive please contact
the mailing preference service mps  
freepost 29 lon20771 london w1e 0zt
alternatively register online at wwwmpsonlineorguk or call the 
mps registration line on 0845 703 4599
share capital history
information on the company’s share capital history including the 
share capital reorganisation in august 1997 and the demerger of 
biffa plc return of capital by payment of a special dividend and 
share consolidation in october 2006 is available from the 
investor centre pages on our website
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other information severn trent plc
registered office
severn trent centre
2 st john’s street
coventry
cv1 2lz 
tel 02477 715000
wwwseverntrentcom 
registered number 2366619


Summary:
 severn trent plc annual report and accounts 2011 4
chairman’s statement
at the end of my ﬁrst ﬁnancial year as 
chairman i’m pleased to report that we 
have made a good start to delivering  
our targets for the new amp5 regulatory 
period and are realising the beneﬁts of  
our efﬁciency improvement programmes 
as expected the price reductions at the 
start of the ﬁve year determination have 
reduced proﬁtability below prior years’ 
levels but from this base severn trent 
water has continued to outperform
for the year total group turnover was up 
04 to £17 billion the real price reduction 
in the ﬁrst year of the new amp has 
rebased underlying proﬁtability with group 
proﬁt before tax gainslosses on ﬁnancial 
instruments and exceptional items down 
147 to £2886 million giving adjusted 
earnings per share excluding deferred tax 
of 1056p a 14 decrease on the prior year
this is a good solid business on track  
to perform well and deliver total overall 
beneﬁts for shareholders customers and 
the environment
there remains signiﬁcant opportunity for 
growth in both our services business and 
in delivering further outperformance in 
severn trent water
andrew duff chairman severn trent plc annual report and accounts 2011 5
overview
i am delighted to ﬁnd at severn trent a 
strong board of executives very capably  
led by tony wray that is committed to 
operational excellence and continuous 
improvement momentum within the 
company is strong and we have the 
ambition to be recognised as a top 
performer in our sector i am also grateful to 
the management team for the wholehearted 
support that they have given to me in my 
ﬁrst year as chairman
we have a solid track record of ﬁnancial 
performance and the board is proposing a 
ﬁnal dividend of 3905p to be paid on 29 
july 2011 this will give a total dividend of 
6509 pence per ordinary share from this 
new base we will look to grow the dividend 
by 3 above rpi each year up to 201415 
the single largest proﬁt driver was the 
performance of severn trent water which 
continued to outperform with planned 
operational expenditure below the level of 
the final determination 
this improvement in efﬁciency is a 
consequence of the group’s ongoing change 
programme which is resulting in signiﬁcant 
business improvement one of the most 
momentous changes during the year was 
the move to our new operating centre in 
coventry resulting in not only a change  
of environment for our people but a  
change to new more efﬁcient and 
innovative working practices i’ve yet to 
meet a visitor who isn’t impressed by this 
truly modern working environment and the 
building has created a level of energy and 
enthusiasm that is infectious
the change programme extends beyond 
the ofﬁce to the group’s operations and 
processes and includes signiﬁcant systems 
investment naturally as with many 
programmes of this size and scale it comes 
with its challenges but we’re conﬁdent we 
have embarked upon a course that will allow 
us to continue to deliver further efﬁciencies 
throughout the amp period
operational performance during the year 
was impacted by the severe winter weather 
placing pressure on our leakage 
performance during the year the number of 
unplanned interruptions to customers’ water 
supply increased we have decided to 
increase the level of investment in our water 
distribution system in order to build even 
greater resilience in our infrastructure to 
cope with severe weather in future years 
severe weather notwithstanding however 
we continue to provide some of the highest 
standards of customer service in the 
industry with excellent drinking water quality 
and a year on year reduction in the number 
of properties suffering from sewer ﬂooding 
i am particularly pleased to see the focus  
on health and safety within the business 
the personal safety of employees has 
always been one of my priorities so i was 
pleased to ﬁnd a strong culture and focus on 
safety in the company our recent employee 
engagement survey shows that 95 of our 
people say that health and safety is taken 
seriously at severn trent water and this is 
reﬂected in the severn trent water lost 
time incident lti performance which 
remains the best in the sector safety is one 
issue but the commitment of our employees 
is vital to our group’s success and so we are 
continuing to invest in the development and 
training of our employees and future leaders
during the year we made good progress in 
protecting our environment and dealing with 
waste water whilst continuing to lead the 
industry in the production of renewable 
energy selfgenerated renewables now 
supply 22 of severn trent water’s power 
requirements helping to mitigate our  
carbon impact 
severn trent services had a mixed year 
with performance falling below expectations 
although the business made good progress 
in reducing its costs and maintains a strong 
order book results were affected by project 
delays in our middle east and north africa 
region and the slowdown in the global 
economic environment impacting public 
funded initiatives growth and proﬁtability  
in our services business remains a priority 
and we are well placed to make progress  
on this aim 
as i write this statement it seems likely that 
there will be some regulatory change 
following the publication of the government’s 
white paper later this year we intend to 
continue to play an active role in regulatory 
reform and play an inﬂuential role in the 
debate about how our industry addresses 
the challenges ahead of us in order to 
promote sustainable growth we also want 
to make sure that any change strikes the 
right balance between delivering value and 
security to our customers and reliable 
returns to our shareholders we must get 
this right because the investment challenge 
over future years means that we must be 
able to compete for capital internationally as 
the need for infrastructure funding globally 
becomes more pressing you can read 
more about our position on page 20 of  
this report
all of this will undoubtedly bring more 
challenges but i ﬁrmly believe that we have 
the talent the innovation the systems and 
the resources to continue to achieve 
proﬁtable and sustainable growth for our 
group whilst also meeting the needs of our 
customers and the environment
‘ we have the talent the innovation the 
systems and the resources to continue  
to achieve proﬁtable and sustainable 
growth for our group whilst also  
meeting the needs of our customers  
and the environment’
andrew duff  
chairman