Just Group lifts dividend as merger synergies show

The FTSE 250 financial services group said net profit in the 12 month period was £155m, up from £148m in the 18 months to December 2016

New business profit increased to £170m, up 37% compared to pro forma 2016, while the company’s new business margin rose to 9.0% from 6.8% pro forma, which the board said reflected its pricing discipline and the merger synergies.

Retirement income sales rose 4% compared to the pro forma 2016 level.

Just Group said it achieved a cost synergy run rate of £52m, one year ahead of schedule and 30% above its initial target, with the merger now “substantially” complete.

After the year end, the group issued a £230m seven-year 3.5% tier 3 bond.

If it had been in place at 31 December, it would have increased its reported solvency coverage ratio to 156% from 141%.

The board said it also arranged a new banking facility and achieved an inaugural credit rating during the year.

Its embedded value per share rose to 228p, with IFRS tangible net asset value at 165p per share.

The board proposed a final dividend up 6% to 2.55p, making 3.72p of total dividends for the year, also up 6%.

“I am hugely proud of all that we have achieved during 2017,” said group chief executive Rodney Cook.

“We helped more customers than ever before to achieve a fair, secure and fulfilling retirement.

“The group also delivered on the promise of the merger for shareholders.”

Cook noted that Just Group increased operating profit by 35%, which he said was driven by its focus on profit over volume and by its “relentless pursuit” of merger synergies.

He said the company’s capital structure and financial flexibility also improved during the year.

“We recently put our new investment grade credit rating to work and issued a £230m tier 3 bond on attractive terms, adding to our capital strength.

“This increased financial flexibility positions us well to take advantage of the opportunities in our growth markets.”

Cook said the defined benefit de-risking market outlook was “particularly exciting”, as corporate Britain was seeking to complete the move to defined contribution pensions, and as trustees re-assessed the reliance on sponsors' covenants.

“We expect substantial growth in the defined benefit market over the next decade.

“The proportion of individual customers shopping around to buy a retirement income continues to grow, which increases our addressable market more quickly than the overall guaranteed income for life market.

“The lifetime mortgage market is growing particularly strongly as more and more homeowners choose this route to improve their quality of later life without having to sell their family home.”

With the building blocks of the board’s strategy firmly in place, Cook said it could now face the future with renewed confidence.

He added that its medically-underwritten pricing model worked “particularly effectively” when it had more risks to choose from, and the outlook in its three key markets was supportive.

“Our focus is shifting back from integration to innovation, and we are investing in our business to grow in new areas and to diversify our sources of revenue.

“The results in 2017 reinforce our belief that we have a sustainable business model in growing markets which will deliver well into the future.”

“The 6% increase in the dividend for the year reflects our confidence for 2018.”