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Merger synergies at Just Group exceed expectations

The retirement specialist has achieved its merger synergies a year ahead of schedule
March 16, 2018

Shareholders in Just Group (JUST) are gaining a clearer picture of the potential of the retirement specialist, with the merger of Partnership and Just Retirement all but completed by the end of last year. Cost synergies came in at £52m, 30 per cent above expectations and a year ahead of schedule. That reduced the running costs per policy, which led to a £90m release of maintenance expense reserves.    

IC TIP: Buy at 137.8p

Those synergies also helped to boost like-for-like new business profits by more than a third to £170m. Management has been focusing on margins, rather than grabbing for market share, only taking on “the right risk” according to chief executive Rodney Cook. Margins improved to 9 per cent, from 6.8 per cent the previous year.

Overall retirement income sales were up 4 per cent, led by its defined-benefit de-risking products. Sales closed in on the £1bn-mark, following a 6 per cent increase in sales. Meanwhile, individual annuity revenue grew 5 per cent, as more customers transferred from their defined-benefit schemes into a drawdown and annuity mix. However, sales of care plans – where annuities are paid to a care provider – declined by a quarter. That followed uncertainty over potential government reforms of care fees, mooted around last year’s election.

Analysts at Numis give an embedded value of 247p a share at December 2018, up from 228p a year earlier.

JUST GROUP (JUST)   
ORD PRICE:137.8pMARKET VALUE:£ 1.29bn
TOUCH:137.7-137.9p12-MONTH HIGH:173pLOW: 120p
DIVIDEND YIELD:2.7%PE RATIO:8
NET ASSET VALUE:185pSOLVENCY II RATIO:141%
Year to 31 DecGross written premiums (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)*
2016*2.6919920.24.44
20171.8918116.73.72
% change-30-9-17-16
Ex-div:03 May   
Payment:25 May   
*18-month period, following Just Retirement/Partnership merger