Focus on growth sees profits soar at Just Group

Retirement-focussed financial services firm Just Group reported a 39% uplift in adjusted operating profit before tax for the first half on Wednesday, to £67.2m.

The FTSE 250 company said its focus on growth drove much of that, with new business operating profit surging 106% to £64m, while underlying operating profit was ahead 49% at £100.6m.

IFRS statutory profit before tax for the six months to 30 June was £66m.

The board said its new business profit more than doubled, with retirement income sales growing 16%, and IFRS new business margins increasing to 8.9% from 5% proforma.

It said that was achieved through pricing discipline, lower unit costs as a result of synergy savings, and more efficient asset-liability management.

Just Group also highlighted its increased balance sheet flexibility, with it agreeing a new £200m revolving credit facility on “attractive terms” during the period, as well as achieving inaugural investment-grade credit ratings for the group’s “key companies”.

Embedded value was reportedly 221p per share at period end, compared to 219p per share at the end of December 2016, with the group’s solvency coverage ratio relatively stable at 150% compared to 151% six months earlier.

“We have had a good start to the year and are executing our strategy to grow profits,” said group chief executive Rodney Cook.

“Our careful risk selection is delivering margin expansion and demonstrating the value of our IP-led pricing approach.

“This together with volume growth is delivering greater profits.”

Cook said shareholder returns had improved, adding that the board was also working to reduce its cost of capital.

“We have reduced our future cost of debt following our inaugural credit rating and have access to lower cost liquidity through our new revolving credit facility.

“As previously stated, we are currently in a period where new business capital consumption exceeds releases, but remain on plan to be capital generative after 2019.”

Prospects remained favourable for Just Group’s markets, Cook claimed, with continued growth in “shopping around” for individual guaranteed income for life packages, and a strong DB de-risking outlook.

“We expect demand for lifetime mortgages to continue to grow as increasing numbers reach retirement with greater wealth invested in housing rather than pension assets.

“Although the first half margin may normalise somewhat in the remainder of the year, a 2017 full year margin above 8% seems increasingly likely, given over £260m of DB already transacted in Q3.

“We therefore look forward to the second half of the year with confidence.”

The board declared an increased interim dividend of 1.17p.