I know that the mode for these threads tends to be smaller cap stocks but Pennon is looking so good at present I was interested to see if anyone else out there is holding or thinking of buying. The SP is on a fantastic run, it pays a nice fat dividend and even if the water regulators decision on prices was not what any of the water companies were looking for, Pennon is probably the least affected and the most favoured by analysts. Seems to me to be a winning combination!

Nicely through the 200. Approaching decision time.

Goldman Sachs Neutral 688.50 684.00 - 758.00 Retains

Nearing your TP Harry (ex tomorrow), these and SVT strong today though!

Deutsche Bank Hold 691.00 650.00 650.00 Reiterates

Sold a few days ago with a moderate profit and punted all into QPP. No regrets.....so far!

StockMarketWire.com
Waste and water firm Pennon Group said its financial performance remains on track to meet expectations, with South West Water outperforming.

South West Water
South West Water is continuing its robust performance against the 2010-2015 regulatory contract and is well placed to outperform its assumptions. Despite the exceptional weather and resultant flooding in the South West, the company continues to deliver effective operational performance and high standards of customer service, underpinned by strong financial performance.

On 2 December 2013, South West Water submitted to Ofwat its Business Plan for the next five year period, 2015-2020 (K6). The plan reflects the most extensive customer/ stakeholder engagement and research ever undertaken by the company and feedback indicates it has achieved 84% acceptability from customers. Details of the Business Plan and an investor summary can be found on the South West Water website, http://waterfuture.southwestwater.co.uk/investor-summary.

On 19 December 2013, Ofwat published a revision to the ongoing K6 price review process. As part of this revision on 27 January 2014 Ofwat published risk and reward guidance for the industry. This included guidance on key financial parameters, including the cost of capital for the K6 period. The company is currently reviewing this guidance.

Viridor

As stated previously, this is a transitional period for Viridor. The company has made excellent progress in establishing its Energy from Waste ("EfW") business which will transform Viridor into a leading player in the UK renewable energy sector. Notwithstanding the adverse weather and difficult trading conditions, Viridor is successfully holding operational performance broadly in line with management expectations and operating contribution is slightly ahead of last year. PBIT plus joint ventures is still expected to be broadly similar to last year but has been impacted by increased pension costs as a result of auto-enrolment and by the outage previously flagged at Lakeside.

Since 30 September 2013 Pennon Group Plc has:

· Drawn down £60m from the EIB and a further £130m facility being progressed

· Renewed and increased a £60m term loan to £100m

· Drawn down a £30m Revolving Credit Facility (RCF)

The Company intends to announce its Preliminary Results for 2013/14 on Tuesday 3rd June 2014.

StockMarketWire.com
Analysts at Deutsche Bank believe the recent announcement from OFWAT on financial parameters and incentives is helping improve regulatory visibility, specifically on returns, and should enable UK water companies to outperform, going forward. The broker believes another likely outcome of the review will be to provide companies with flexibility over cashflow which, in turn, should support steady dividend growth. Deutsche has therefore upgraded its recommendations for Severn Trent (LON:SVT) and Pennon (LON:PNN) to "buy" from "hold" and reaffirmed its existing "buy" rating on United Utilities. Target price have been increased across the board with SVT rising to 2,000 pence per share (from 1,550 pence), PNN to 800 pence (from 650 pence) and UU to 1,000 pence (from 800 pence). "Within a year we believe the sector will have regulatory and dividend visibility and a resumption of bid speculation is possible," the broker said in a note to clients. "These factors could drive a re-rating of listed water stocks to levels comparable with UK and US regulated peers." Given an implied upside of around 30 per cent to its upgraded target price, Deutsche highlights United Utilities as its top pick in the sector.

StockMarketWire.com
Pennon Group said its South West Water subsidiary has accepted Ofwat's invitation to adopt the principles of the regulator's risk and reward guidance published on 27 January 2014.

"The company has submitted an updated business plan to Ofwat reflecting these principles and awaits Ofwat's confirmation on 4 April 2014 that these new proposals are acceptable to the regulator and are in line with its guidance," Pennon said.

South West Water was the only water and sewerage company to have a 2015-20 business plan that pre-qualified for 'enhanced' status together with one water only company.

South West Water submitted its five-year business plan to Ofwat in December 2013, following its biggest ever consultation; a public approval rating of at least 84 per cent; and the support of the independent WaterFuture Customer Panel.

Ofwat has stated that it will publish draft determinations for enhanced companies on 30 April 2014.

Final Results

FINANCIAL HIGHLIGHTS

· Profit before tax(1) (2) up 9.1% to £207.3m

- South West Water up 10.8% to £162.5m

- Viridor down 19.5% to £27.6m

- Viridor PBIT + JVs down 4.6% to £43.6m

- Viridor EBITDA down 1.8% to £76.3m

· Net exceptional charges £48.6m (post tax £39.7m)

· Earnings per share(1) (3) up 5.7% to 42.6p

· Dividend

- Full year dividend up 6.5% to 30.31p

- Recommended final dividend per share up 6.2% to 20.92p

· Strong liquidity and funding position

- £640m new/refinanced facilities since 31 March 2013

- £1,303m cash/committed facilities at 31 March 2014

- Average cost of debt reduced to 3.8%

· Substantial progress in delivery of major capital programmes

- South West Water capex up 22% - target efficiencies delivered

- Viridor - 70% of spend now complete on EfW projects under construction

· Group businesses well positioned for the future

Is that drop in the chart right Skinny?

Just checked, and no it isn't.

Credit Suisse Underperform 760.25 783.50 645.00 645.00 Reiterates

RBC Capital Markets Outperform 760.25 783.50 810.00 810.00 Reiterates

Pennon Group PLC.

Break up on the cards on the chart. Speculation that this one is a takeover target.

Deutsche Bank.
Pennon reported FY 2013/14 results slightly ahead of expectations. The
company highlighted excellent progress in developing its energy from waste
pipeline and reiterated its target for the projects to add £100m of EBITDA. It
highlighted the success of its water business in achieving enhanced status for
the 2014 regulatory review, although said nothing new about the scope for
outperformance over the 2015-20 regulatory period, or on its future dividend
policy. We retain a positive view, with an investment in Pennon’s shares
offering attractive returns compared to low risk regulated peers in our view.

The company reported results slightly ahead of expectations, with profits from
the water business ahead of expectations, but profits at Viridor slightly below
expectations. It reported group EBIT of £257m (DB forecast £250m, last year
£246m), PBT of £207m (DB forecast £194m, last year £191m), and EPS of
42.6p (DB forecast 38.6p, last year 41.0p). It announced a 6.5% increase in FY
DPS to 30.3p, in-line with its policy to growth DPS by RPI inflation + 4% p.a.

The company reiterated its target for energy from waste projects to add
c.£100m to Viridor’s EBITDA and said that its rollout of projects was
progressing well. Runcorn 1 and Exeter are burning waste; Ardley is in the
process of commissioning; and Runcorn 2 and Cardiff are expected to enter
commissioning shortly. The company said it has contracted c.80% of waste
inputs required at opening of projects, of which c.60% is from long-term
contracts. It said that cost cutting and mix improvements had led to a partial
recovery of margins in the recycling business, although said it remained
cautious on the prospects for recyclate prices. It announced a further c.£43m
write-down of its landfill assets, following on from large write-downs last year.

We retain a positive view on the UK water stocks, as we think that sector
offers attractive returns compared to low risk UK and US fully regulated peers.
We also think that there is the potential for more bids once the 2014 review
completes, which will set prices through to 2020. An investment in Pennon’s
shares offers a prospective economic return of c.8% p.a., compared to
National Grid and US utilities offering typical returns of c.6.5% p.a.. Although
we still worry that there may be long-run overbuild of energy from waste
capacity, short-term returns should be very attractive from these projects, and
drive strong group earnings growth over the next three years.

INTERIM MANAGEMENT STATEMENT
Overall financial performance of Pennon Group since 31 March 2014 remains in line with management expectations.

South West Water
South West Water is continuing its strong financial performance with robust operational delivery and high standards of customer service and expects to complete the successful delivery of the K5 (2010-2015) regulatory contract.

2014/15 profits will be impacted by the 2014/15 tariff freeze already announced. However, the revenues foregone are included in the Draft Determination for K6 (2015-2020) on an NPV neutral basis.

Following early receipt of its Draft Determination for the K6 regulatory contract in April this year, South West Water is able to accelerate a number of key projects (eg bathing water improvements) ahead of significant legislative changes. With the company's track record of efficiency and outperformance, South West Water is well placed to deliver its business plan in K6 and will have an opportunity to outperform the assumed returns on equity.

Viridor
Viridor continues its transformation from being predominantly a landfill operator to being one of the country's leading recycling, renewable energy and waste management companies.

As flagged at the Preliminary Results, Viridor's H1 2014/15 EBITDA will be materially lower than in H1 2013/14. However with five Energy Recovery Facilities (ERFs)(1) scheduled to come on stream this year H2 EBITDA is expected to increase significantly and result in 2014/15 full year EBITDA exceeding 2013/14.

Year to date performance has primarily been impacted by the expected continuation of the decline of the landfill business. Also, as expected, landfill gas generation has declined from peak and the recycling business has been moderately affected by near term weakness in recycling prices.

Viridor has been investing to improve the productivity of its assets and quality of its recyclate products. The Rochester plastics plant is expected to come on stream in the next month and the Scottish glass separation plant shortly thereafter. The strategic focus on improving the productivity of recycling assets and recyclate quality is expected to enhance future margins.

The Lakeside ERF joint venture is performing strongly and is ahead of expectations. Other highlights of the ongoing development of the Viridor Energy business include:

· Takeover of Exeter ERF was achieved on 28 July and plant operation is exceeding design parameters

· Ardley ERF commenced burning waste at the end of June and synchronised to the Grid on 25 July

· Runcorn I commenced burning waste in March and is undergoing an extensive commissioning process. Issues arising are being addressed to ensure the long term performance and consequently takeover is now expected to be in Q3/Q4 2014/15. Runcorn II is still expected to be taken over towards the end of Q4 2014/15

· Cardiff ERF is now in cold commissioning and remains on track for takeover in late 2014/early 2015

We believe ERFs are central to the UK's waste and renewable energy strategies as the long-term low-cost alternative to landfill for disposal of residual waste. Since the year end Viridor has secured additional waste inputs for the opening of its ERF plants, and now has c85% of the required waste input for the opening of the committed ERFs.

(1) Previously referred to as Energy from Waste (EfW) facilities.

Group
Since 1 April 2014 Pennon Group Plc has secured/renewed £205m funding comprising:

· £80m term loan
· £75m of Revolving Credit Facilities (RCFs)
· £50m finance lease

The £125m Convertible Bonds due 2014 have all converted resulting in the issuance of 20,908,635 Pennon shares.
The Company intends to announce its Half Year Results for 2014/15 on Friday 28 November 2014.

Sharecast - Things may be looking up for Pennon. The utility group is close to finalising work on five new waste incinerators that would more than double cash profits over the coming three years, to more than £100m - marking a successful turn-around of its landfill and recycling subsidiary. That unit, called Viridor, was hit by higher 'green' taxes and heightened competition. A slowdown in Chinese demand for recycled material also impacted negatively upon it. For its part, South West Water, its main unit, is performing well and now has regulatory certainty for the next five years, even if after a price freeze. Nevertheless, at 21 times' earnings the stock is expensive so it may be wisest to wait until the incinerators are up and running. 'Hold', says The Daily Telegraph.

StockMarketWire.com
Goldman Sachs has downgraded its recommendation on water and waste management group Pennon (LON:PNN) to "sell" from "neutral" in a note to clients, today.

The broker pointed out that its new twelve month price target of 740 pence a share (previously 743 pence) implies 7 per cent absolute downside potential.

"We estimate the share price implies a 35% premium to RAB, well above both the 27% premium we believe is realistic for an infrastructure fund bid and the c.20% premium for UU and SVT," analysts added.

Conversely, assuming a 20% RAB premium for Pennon's water business (in line with peers), implies a market valuation of £2.2 bn for Pennon's waste business Viridor, equivalent to 36x EBIT and 19x EBITDA on our 2014 estimates and c.25% higher than our valuation for the business.

Interestingly, 63 per cent of brokers rate the shares as an "add" or better, according to Broker Forecasts consensus data, versus 25 per cent which rate them as a "sell"

Half yearly Report

Highlights

· Pennon

- results in line with management expectations and previous guidance

- H1 revenue up 3.8% to £692.3m; H1 PBT(1) down 9.8% to £100.0m

- dividend up 6.3%, reflecting the continued underlying strength of the business and management's expectations for long term growth

· South West Water

- performing strongly against 2010-2015 regulatory contract and well placed to outperform assumptions

- robust operational performance improving standards of service

- maintained broadly stable operating profit despite tariff freeze, due to continued cost efficiency

- early receipt of Ofwat's Draft Determination allowing accelerated delivery of key projects

· Viridor

- reached point of inflexion in the strategic re-orientation of the business around 'Energy' and 'Recycling & Resources' divisions

- strong progress in the development of ERF(2) asset base; five ERFs coming on stream in 2014/15

- full year EBITDA(3) expected to exceed 2013/14 figure

PRE-CLOSE TRADING STATEMENT AND GROUP DIVIDEND POLICY 2015 - 2020

Pennon Group

· Pennon is pleased to announce a continuation of its current dividend policy of year-on-year growth of 4% above RPI inflation to 2019/20
· Overall financial performance of Pennon Group since 30 September 2014 remains in line with previous guidance
· Strong liquidity and funding position
· Group businesses well positioned for the future


more....

StockMarketWire.com
Pennon Board is proposing to raise up to £100.3m gross, or about 3% of its market cap at April 15. Details of the placing price and number of placing shares will be announced soon.

Pennon has separately said it has completed the acquisition of Sembcorp Bournemouth Water Investments Limited. Net proceeds of the Placing are intended to be used to replenish the cash resources of the Company in respect of the cash consideration for the Acquisition.

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of 40.7p each in the capital of the Company including the right to receive all future dividends and distributions declared, made or paid after the date of sale.

The Placing is being conducted through an accelerated bookbuild (the Bookbuild) which will be launched immediately following this placing announcement. Credit Suisse Securities (Europe) Limited (Credit Suisse) and Morgan Stanley & Co. International plc (Morgan Stanley) have been appointed as joint bookrunners in respect of the Placing.

StockMarketWire.com
Pennon has improved its FY pretax profit to £197.0m, from £158.7m a year earlier. Revenue was £1.36bn, from £1.32bn. Dividend was 31.8p a share, from 30.31p.

"The Group has delivered a resilient set of results for 2014/15. South West Water's EBITDA was higher than last year despite the tariff freeze, thanks to a strong focus on cost efficiency, and as expected Viridor's EBITDA exceeded last year," said chairman Ken Harvey in a statement.

"Viridor has made excellent progress in its Energy business bringing five new Energy Recovery Facilities on stream in the year. Pennon is well positioned to continue to deliver profitable growth and consistent, sustainable cash returns to shareholders.

"The Board was pleased to announce in March the continuation of the current dividend policy, targeting 4% year-on-year growth above RPI inflation to 2020."