Just Group profit rises thanks to investment and economic returns

Just Group reported an IFRS profit before tax of £305m in its first half on Thursday, up from £125m, which it said was driven by investment and economic profits, due to the fall in interest rates, and a stable underlying operating profit.

The FTSE 250 financial services group said its underlying operating profit for the six months ended 30 June was £117m, up slightly from £114m, as an improved in-force return offset lower new business profit from reduced sales.

It said it was expecting sales in the second half to be “significantly higher” than the first half.

Just Group’s adjusted operating profit was 18% lower year-on-year, at £62m, which the board put down to higher finance charges.

Tangible net assets stood at 204p per share at period end, up from 181p per share a year earlier.

The company said its capital coverage ratio improved to 145% at the end of the first half, from 141% at the end of December.

Organic capital generation, driven by management actions, added nine percentage points to the ratio, while shareholders' Solvency II own funds per share rose to 184p from 153p as at 31 December.

Organic capital generation totalled £145m for the first half, resulting from reduced new business strain, improved in-force surplus generation and “significant” positive management actions, swinging from organic capital consumption of £36m in the first half of 2019.

The board also described the balance sheet as “resilient”, reporting positive economic variance due to interest rate hedging, positive credit portfolio management and limited negative property variance.

Just Group said it was continuing to manage its capital position and outlook following the “significant” regulatory changes relating to equity release mortgages.

Taking that into consideration with the current economic uncertainty, the board said it was not recommending the payment of an interim dividend.

“We are focused on improving the group's capital position and over the past 15 months we've been transforming the way we do business in order to deliver a more sustainable and resilient model,” said group chief executive officer David Richardson.

“In this context I am very pleased with our progress in the first half of 2020 - our capital coverage ratio has increased to 145% during a turbulent and difficult time in financial markets.

“The solvency balance sheet has been resilient and we've achieved substantial organic capital generation, driven by a number of significant management actions.”

Richardson said the board and management recognised there were short term macroeconomic uncertainties, including the UK property market, but the company had “multiple levers” at its disposal, and was demonstrating its “execution credentials”.

“We are optimistic about the future.

“We hold leadership positions in valuable segments of economically attractive markets and will continue to innovate to selectively grow our participation in these markets.

“The transformation continues, our business is resilient, our thirst for innovation is unabated and we have lots of energy because there is much more we want to achieve.”

At 0935 BST, shares in Just Group were up 14.64% at 58.35p.