In the six months to 30 June the company posted pre-tax profits of £305 million against £125 million the previous year despite an 11% dip in sales to £1.8 billion.
The firm put the jump in earnings down to ‘investment and economic profits’ thanks to lower interest rates and stable underlying operating profit as improved returns offset lower new business income from reduced sales.
Just took a strategic decision last year to reduce the amount of new business it wrote in order to reduce the strain on its working capital.
This action, together with management action to cut costs and an improved surplus from in-force policies, resulted in organic cash generation of £145 million during the first half compared with a cash outflow of £36 million the previous year.
Chief executive David Richardson was understandably pleased with the results, particularly given the circumstances: ‘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.
‘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 firm sees second half sales ‘significantly higher than the first half’, despite the short-term uncertainty over the economy and specifically the housing market, and says it has ‘multiple levers’ at its disposal to generate higher profits.
Numis analyst Nick Johnson believes that Just’s stronger than expected capital position, together with the potential to reduce its balance sheet exposure to UK property prices – one of the ‘levers’ referred to – ‘should give the market increased confidence that Just will be able to absorb macro volatility that could arise over the next 12-18 months’, which could in turn unlock ‘significant equity value upside from current low levels.’