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!

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."

StockMarketWire.com
Pennon Group said it is on track to meet FY expectations for 2015/16. It said a continued good performance across the group underpins the 2015/16 delivery of its sector-leading dividend policy of 4% year-on-year growth above RPI inflation.

It enjoys a strong liquidity and funding position. It is also increasingly well positioned for the future as Viridor's Energy Recovery Facilities (ERF) come on stream.

CMA clears Bournemouth Water acquisition and subsequent merger with South West Water

Following the Competition and Markets Authority (CMA) provisional findings published on 30 September 2015, Pennon is pleased to note that the CMA has today unconditionally cleared the acquisition of Bournemouth Water by Pennon and the subsequent merger of Bournemouth Water with South West Water.

This efficient, combined water business will deliver tangible long-term benefits to both customers and shareholders as the water industry works towards market liberalisation in 2017. Based on our analysis, there is a 94% probability that the combined company will set the efficiency frontier at PR19(1).The combined water business will achieve efficiencies and service improvements through:

· merging wholesale and retail operations
· combining central support functions
· creating common systems and processes
· driving supply chain efficiencies
· delivering even better customer service
· working to bring together best practice from both businesses

Pennon will retain the valuable Bournemouth Water brand and will continue separate regulatory reporting for Bournemouth Water until at least 2020 to aid Ofwat with comparisons between companies.

South West Water aims to merge the two businesses by the end of 2015/16 and in doing so will adopt a new licence for the combined entity. The operational integration of the two businesses will be complete by the end of 2016/17.

The CMA's press release can be viewed here:
www.gov.uk/cma-cases/pennon-group-sembcorp-bournemouth-water-investments-merger-inquiry

Chris Loughlin, Executive Director of Pennon & Chief Executive of South West Water, said:
"We are pleased to note the CMA has cleared the Bournemouth Water acquisition. We will now set about merging Bournemouth Water with South West Water to deliver service improvements and efficiencies for customers and shareholders."

StockMarketWire.com
Pennon Group has hiked its H1 pretax profit by 6.8% to GBP106.8m, from GBP100.0m, adding that, with results likely to be weighted towards H1, it is on track to meet management expectations for FY 2015/16.

"The Group has delivered a strong earnings performance in the period with EBITDA up compared to the first half of 2014/15 as operational Energy Recovery Facilities (ERFs) contribute increased earnings," it said.

"South West Water's EBITDA was also marginally higher with the effect of the anticipated revenue reset mitigated by higher than expected customer demand and a first time profit contribution from Bournemouth Water, acquired in April 2015."

Interim dividend was 10.46p a share, from 9.98p. Group EBITDA was GBP231.7m, from GBP200.0m. However, revenue was marginally lower at GBP689.1m, from GBP692.3m.

Ex-divi thurs 28th Jan (10.46p).

StockMarketWire.com
Pennon Group said it is on track to meet management expectations for the 2015/16 year, with an expected H1 weighting. It added that new group initiatives underway are seen delivering future annualised cost savings of about GBP11m.

"Higher Group EBITDA expectations for 2015/16 are driven by the full year effect of the five new ERFs brought on-stream in 2014/15 and the contribution from Bournemouth Water," the company said.

"South West Water's revenue reset for K6 (2015-2020) has been mitigated by higher than expected customer demand in H1 and its ability to achieve outperformance on K6 Total Expenditure (Totex) commitments, as a result of efficiency initiatives," it said in a statement.

CEO Chris Loughlin said Viridor, South West Water and Bournemouth Water are all performing well and results for the full year 2015/16 are on course to meet management expectations.

"We see further opportunity to deliver improved efficiency and effectiveness driven by management changes which support our strategy of working more closely together across the Group," he said.

"We will employ the wide range of skills we have across Pennon to share best practice and deliver cost savings and growth opportunities. As we move towards a more consistent risk profile across Pennon, we are increasingly well-positioned to drive sustainable profit and dividend growth.

"We remain committed to growing dividends at +4% above RPI inflation through to 2020."

JP Morgan Cazenove today reaffirms its neutral investment rating on Pennon Group PLC (LON:PNN) and raised its price target to 850p (from 800p).

Half Year Results 2016/17
for the period ended 30 September 2016

Building Momentum, Driving Growth

Chris Loughlin, Pennon Chief Executive said:
"Pennon has delivered a good performance in the first half of 2016/17 across its water and waste businesses. South West Water continues to achieve a sector-leading RORE([1]) at 11.7% as it outperforms for its customers, and is expecting momentum and delivery to continue. Viridor is on track to contribute the targeted c.£100 million of EBITDA from its ERF([2]) portfolio this year while self-help measures are driving improved EBITDA margins in recycling.

We are continuing to invest for growth. Following a review, we have taken the decision to commit to a £252 million ERF at Avonmouth, expanding our portfolio to twelve plants. This is a significant investment in the UK's environmental infrastructure and will add to the already expected significant increase in EBITDA from our ERF portfolio once all facilities are fully operational. In water, we are announcing a new retail venture for business customers with South Staffs/Cambridge Water.

We remain focused on driving value through efficiency. South West Water has delivered £80 million of Totex savings since the beginning of K6 (2015-2020), while our recently completed Shared Services Review will increase total Group cost savings from the c.£11 million previously announced to c.£17 million p.a from 2019.

We believe Pennon is well positioned for the future and is on track to meet management expectations for the full year 2016/17. Our performance underpins our sector-leading dividend policy of 4% growth per annum above RPI inflation to 2020."

MORE.....

Credit Suisse today downgrades its investment rating on Pennon Group PLC (LON:PNN) to underperform (from neutral) and cut its price target to 680p (from 800p).

Today's trading statement is well received, rising chart as well.

So much for the Credit Suisse analysis.