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On the other hand, Pennon's water utility, South West Water, is performing strongly. Its prices are allowed to rise with inflation and costs are predictable as spending plans are midway through a calmer regulatory period. Pre-tax profits were up 10 per cent in 2011-12 to £142m. Analysts at investment bank JPMorgan Cazenove forecast another 10 per cent rise in operating profits this year. There are no surprises expected here in the first-half results, which were due out on 29 November. But regulatory cycles, albeit slowly, do eventually turn and this will put pressure on the water business as the next five-year pricing review comes due in 2014. Analysts at Deutsche Bank believe that, at current share prices, South West Water is implicitly valued at 18 per cent more than the value of its regulatory asset base. That's in line with Severn Trent and United Utilities, but that premium will be under pressure from next year.

The concern is that in the current climate prices may drop further. Shanks' solid-waste business was loss-making in its first half and privately owned Biffa continues to struggle. Analysts at Deutsche Bank slashed their forecast for Viridor's 2012-13 earnings before interest and tax plus associated companies' income (Pennon's preferred profit metric) from £65m to £47m; it made £76m last year. The analysts are also cautious about recovery - forecasting £51m for 2013-14. And that's a problem because, as Pennon's bosses said earlier this year, "recycling is now the company's largest profit generator and will be key to profits in the next year or so". This faltering performance also comes at a sensitive time for Viridor as it embarks on a major programme of investment in technology to generate electricity from waste. It is building a 750,000-tonne site at Runcorn in north-west England, which is expected to generate 120 megawatts (MW) of power, with the first phase due for completion next March. Viridor currently has 136MW of capacity available and this is set to rise to 300MW in four years' time. Management hopes these new plants will double Viridor's cash profits in the next five years.

Investors searching for safe income were drawn to Pennon's (PNN) mix of a steady regulated water utility combined with a fast-growing waste management business, and this brought its share price to a record high of almost £8 in July. But the price has dropped almost 25 per cent, as the waste management arm, Viridor, faces a sharp reversal in fortunes and the regulatory cycle slowly turns against water services suppliers. We warned investors of the challenges facing Pennon in early August and, adding political pressures on utility bills into the mix, we can see the share price sinking still further. The speed and severity of the downturn in recycling has surprised City analysts. The problems are twofold: first, the downturn in UK construction has reduced the volume of material sent for recycling; second, as competitors fight for business, prices of recycled materials are falling. In the first half of 2011-12, prices hit £125 a tonne, but analysts now estimate that may have fallen as low as £85 a tonne.

http://www.investegate.co.uk/global-energy-dev.-(ged)/rns/notifiable-interest/201211300700103824S/

Following the company's results this is what analysts at Seymour Pierce had to say: "we continue to be concerned that the decline in fiscal year 2013 earnings is not just down to the one-offs of the extreme summer wet weather and the decline in the euro but is also structural. "The company has too much space for a multi-channel society while its stores are too large, difficult to shop and not aligned to the new trend for convenience. Gross margins have risen by over 3% points in both the UK and France over the last five years and, we believe, are likely to come under pressure as a number of initiatives approach conclusion."

Screwfix grew total sales by 10.9% to £149m, despite the continued challenging trading conditions in the smaller tradesman market. It benefited from the continued roll out of new outlets, the success of its 'click, pay & collect' scheme and a redesigned catalogue. Retail profit there was up 19.8% to £14m, boosted by strong sales growth, higher gross margins and cost control. In France like-for-like sales were drown 2.8%, but Kingfisher said it had outperformed the market. The firm's 'Other International' division saw total sales increase by 6.8% to £569m supported by new store openings and strong growth in Russia, now the second largest business in this division. However, with the exception of Russia, the uncertain European economic backdrop continued to impact like-for-like sales. Retail profit across the division declined 2.4% to £58m. B&Q China sales grew 2.6% to £96m - up 3.5% on a like-for-like basis - but its retail loss was £3m, mainly due to higher marketing costs.

DIY group Kingfisher saw revenue and profit creep up in the third quarter, as the company was boosted by sales in its new international territories, such as Russia. Revenue was up 0.8% at constant currency to £2.7bn, while retail profits on the same basis sneaked up 0.1%. However, overall, like-for-like sales were down 2.8%. In the UK, Kingfisher's biggest market, total sales declined by 0.7% to £1.05bn, and were down 3.8% in like-for-like terms. Retail profit grew by 5.5% to £59m driven by a higher gross margin and cost cutting. B&Q UK & Ireland's total sales fell by 2.3% to £906m, down 4.0% in like-for-like terms, reflecting the generally weak consumer backdrop in the UK and a particularly challenging environment in Ireland. Retail profit grew by 1.7% to £45m as the firm benefited from higher gross margins and operating cost efficiencies including lower bonus provisions.

Pennon said South West Water continuing to perform well with strong operational performance against the 2010-2015 regulatory contract with further progress in operating efficiency. "Despite the wettest summer in 100 years impacting customer demand and operating costs, the company's profit before tax has increased through rigorous cost control, efficiency delivery and stable interest costs," Pennon explained. Net borrowings increased £68m since March 31st 2012 to £2.2bn. An interim dividend of 8.76p per share has been offered, up 6.6%.

Utilities firm Pennon, which owns South West Water and waste business Viridor, said it is responding well to falling recyclate prices as it delivered half year pre-tax profit in line with expectations. Pre-tax profit rose 3.4% to £111.1m for the half year ended September 30th 2012 while revenue for the period slipped 1.4% to £633.7m. Operating profit fell 4.8% to £136.3m while diluted EPS rose to 260p compared to 25.9p before. "Viridor is responding to the near-term challenges and has recovered about half of the impact of the reduction in recyclate prices through the terms of customer supply contracts and cost reductions," the group said in a company statement. Falling prices of recycled materials have hurt trading at Viridor, which was previously seen as the firm's biggest source of growth. Pennon said it was cautious about the future prospects for recyclate prices. Half year pre-tax profit at Viridor tumbled 26.5% to £22.5m while profit at South West Water rose 10% to £83.8m.

Iron ore prices Prices for iron ore in the last six months have been hit by restocking activity in China, said Chief Executive Officer Marius Kloppers. "This destocking, coupled with lower steel demand from Europe, India and the Middle East, led to a sharp decrease in the price of steelmaking raw materials," he said. While restocking has commenced and is largely complete, BHP doesn't expect any material pricing upside in the near term, he added. Nevertheless, the CEO sounded cautiously optimistic about the Asian powerhouse, saying: "China's GDP growth is expected to range between seven and eight per cent in the coming years. While this is lower than the double digit growth rates seen over the past decade, it is coming off a much larger base and will still underpin strong underlying growth in commodities demand. China's unique and substantial industrialisation and urbanisation continues to give us confidence in the long-term outlook." Kloppers highlighted the company's diversified portfolio, which he stressed means it is "poised to capture the opportunities presented by markets in all stages of the demand cycle". "[...] Our portfolio is perfectly suited to the economic conditions that lie ahead, and it is for this reason we are even better placed to outperform our peers over the next decade, and well into the future," he said.

Diversified mining giant BHP Billiton sounded a cautious note on the global economy in its annual general meeting on Thursday, saying that while there have been signs of stabilisation, markets are still tough. Chairman Jac Nasser said that financial and economic problems continue to be felt across the world and "it's difficult to predict how and when they will be resolved but we do expect it to take considerable time". He said that high public debt levels in both the US and Europe "need to be addressed" to ensure a firm recovery in these economies. Furthermore, while China remains the driver of growth, growth has been slower as of late. "This is primarily driven by the Chinese Government steering the economy to more sustainable long-term growth. It is also due to the cyclical and structural challenges being faced in both the domestic Chinese economy and global markets. This in turn has raised questions about China's future demand for natural resources." He admitted that the growth levels seen in the past decade in China cannot continue, though the further urbanisation and industrialisation in the country should support future growth in demand for commodities. Nasser: "Today we are four years into the global financial crisis. Given the fundamental shifts taking place, the low levels of growth in many developed countries and the volatility in just about every facet of life, from stock markets to politics to the weather, the business world is as tough as ever. Our industry is particularly challenging."

oh and A final dividend of 3.9p per share has been recommended, up 5% from the same time last year.

Marston's took net exceptional charges of £180.2m after tax following the impairment of freehold and leasehold properties of £215.1m. It also took a £2.8m write-off of unamortised finance costs relating to it previous bank facility, a net £4.6m charge relating to its new swap arrangements and a £3.7m charges from outstanding tax liabilities relating to unresolved tax issues. Commenting on the results, Chief Executive Officer Ralph Findlay said: "These results demonstrate resilience despite the weak economy and very poor weather during the summer. All areas of the business achieved increased revenue and profit in the year, demonstrating the continuing appeal of good pubs and beers." "The economy is likely to remain weak for the foreseeable future, but we have a clear, proven strategy which is appropriate for current market conditions, and which is achieving growth."

Brewer and pub operator Marston's served up a full year loss as managed like-for-like sales in the last eight weeks rose two per cent. The pub company, which runs the Pitcher & Piano chain, said this included a 3.4% like-for-like food sales increase while like-for-like wet sales rose 0.9%. Tenanted and franchised operating profit climbed 3.2% during the 52 weeks ended September 29th 2012. "We expect market conditions to remain challenging for the foreseeable future, with consumer confidence continuing to be subdued by weak economic conditions," the group said in a company statement. "Nevertheless, we are confident that our strategy is appropriate and that our focus on value, service and quality will continue to be attractive to our customers." Annual group revenue rose 5.5% to £719.7m and underlying pre-tax profit climbed 9.2% to £87.8m. Marston's posted a pre-tax loss of £135.5m for the year compared to profit of £80.8m previously.

"The ROCE target set following the Superfos acquisition has been largely achieved but with the prospect of prolonged macro-economic weakness the group has embarked on the 'Fitter for the Future' optimisation programme to ensure that this level of performance can be sustained. Opportunities to grow the business from a position of financial strength through innovation and acquisitions continue to be explored." The Fitter for the Future programme if focused on optimising the group's mainly European product market combination and includes a range of further cost efficiency measures such as the proposed closure of the Antwerp (Belgium) and Beuningen (Netherlands) sites, medium-term Superfos synergies and the disposal of redundant properties.

Rigid plastic packaging supplier RPC Group saw net profit halve in the first half as it was hit by restructuring costs and impairment losses, as it launched its 'Fitter for the Future' business optimisation programme to ensure cost efficiency. Net profit for the six months to September 30th totalled £13.9m, down from £26.3m in the same period the year before, after incurring £18.5m of restructuring costs, impairment losses and other exceptional losses (which were £4.1m last year). Nevertheless, adjusted operating profit gained 4% from £45.4m to £47.0m with return on sales improving from 7.7% to 9.1%. Return on capital employed (ROCE) gained from 18.2% to 19.3%, close to its 20% target by March 2014. The company said that it would have at least reached its target "had it not been for the recessionary Eurozone and UK economies from which circa 87% of the group's turnover originates". Sales fell from £587m to £518m year-on-year reflecting the impact of a weaker euro with overall volumes down 3% albeit with an improved sales mix. "This was another creditable performance by the Group in a continually challenging economic environment," said Chairman Jamie Pike.

William Hill came a step closer to buying out its online joint venture partner Playtech after formally triggering a valuation process for William Hill Online. The move is part of its right to exercise a call option over Playtech's 29% stake in the business. Playtech said it had received formal notification of the move to value to the internet business, which it has previously called "the most successful ever in online gaming". However, the firm said it was "dedicated to maintaining its close working relationship with William Hill to support its continued growth". "In the event that the option is exercised Playtech is committed to the smooth handover of the 29% stake in order to ensure a seamless transition and support WHO's growth going forward," it said.

"EPRA diluted net asset value (NAV) per share stood at £4.98 at September 30th 2012, an increase of 35p or 7.6% over the year. The increase before distributions to shareholders amounted to 46.7p or 10.1%." Looking ahead, Chairman John Manser added: "Since the summer the West End has become even busier and we are seeing unusually high levels of interest from retailers, restaurant operators and other businesses seeking to come to our areas. "It is clear that the UK and other western economies will continue to face structural challenges for some considerable time. Uncertainty regarding the timing and pace of recovery is causing subdued business and consumer confidence. However, with its unique status as a leading global city, London attracts businesses, visitors and those who wish to live here from across the world, underwriting the long-term prospects for continuing prosperity in the West End. "I am confident that, with our proven strategy and long experience of this exceptional location, our portfolio will continue to deliver attractive long-term returns for our shareholders."

London property group Shaftesbury has posted a fall in pre-tax profit, largely as a result of a decline in investment property valuation movements, an increase in finance costs, and the change in fair value of derivative financial instruments. As such, pre-tax profit totalled £94.8m, compared to £115.7m the previous year. However, EPRA (European Public Real Estate Association) adjusted pre-tax profit climbed 6.8%, or £2.0m, to £31.2m over the year, on net property income of £71.0m (2011: £66.6m). Like-for-like estimated renetal value (ERV) growth of 6.0% was seen throughout the 12 months, while vacancy levels continued to be low. The final dividend will by 6.05p (2011: 5.75p), giving a total payment of 12.0p per share, compared to 11.25p the previous year. The company said it saw some short-term disruption, particularly to West End visitor numbers, but assured there has been no discernible effect on its business. In a statement the company said: "Our portfolio, which has been valued at £1,828.2m, delivered a capital value return of 5.5%, through a combination of rising current income, growth in ERVs and yield improvement of 14 basis points. This is in contrast to our benchmark, the IPD Monthly Index, which reported a fall in capital values of 3.1%.

FTSE 250 property business Daejan bounded back into profit in the first half but warned it was "by no means clear" when sustained growth would return to its markets. The firm posted pre-tax profits of £23.3m in the six months to the end of September, up from a £121,000 loss the previous year. The company made gains on investment properties of £11.4m, but losses on financial instruments of £3m. It enjoyed an increase of 3.5% in gross rental income and a drop of 4% in property operating expenses compared to the equivalent period last year. However, Daejan said an interim dividend of 25p per share will be paid on March 8th 2013. "The business outlook continues to be challenging, with reduced economic activity in the UK and the possible negative impacts of the as yet unresolved Eurozone issues as well as the risk of a US budgetary crisis," the statement said. "These factors create uncertainty so that it is by no means clear when we will see a return to more positive sustained growth in the markets in which we operate," it added. "We believe that our long term, prudent approach of maintaining a strong balance sheet with relatively low gearing is particularly appropriate in present times."