Just Group PLC (LON:JUST), the equity release and elderly annuities specialist, saw its half-year profits slip as the coronavirus (COVID-19) pandemic restrictions affected sales and finance costs rose.
The FTSE 250-listed firm’s customers are in the vulnerable category for COVID-19 and the company said it had to replace home visits with remote access. The group expects sales to rebound strongly in the second half of the year, however.
Just's first-half adjusted operating profit was 18% lower at £62mln, down from £76mln a year earlier, primarily due to higher finance charges, but costs savings helped its solvency II capital coverage ratio - the regulatory measure of financial strength - improve to 145% from 141% at the end of 2019.
The company noted that both the outlook for the economy and continued progress of the pandemic continue to be very uncertain, while it is also facing significant regulatory changes relating to equity release mortgages.
Taking this into consideration with the present economic uncertainty, Just said it is not recommending the payment of an interim dividend.
“The longer-term impact from the pandemic on policyholder mortality is currently unknown and the group remains exposed to the impact of further downgrades and future defaults on its corporate bond portfolio as well as to a fall in UK house prices,” the group added.
During the first half, the company saw a gain from economic movements of £74mln, which offset a £47mln charge from a reduction in house prices of 0.2%, which was below its long-term assumption
Just noted that since the start of the crisis over 16% of its bond issuers by market value had been downgraded, with £490m of the portfolio cut by at least one investment-grade letter and £132mln downgraded to sub-investment grade.
The cost was much more than offset by £69m of positive capital impacts from management of the credit portfolio, it said.
David Richardson, Just's chief executive added: "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 solvency balance sheet has been resilient and we've achieved substantial organic capital generation, driven by a number of significant management actions.
“We recognise there are short term macroeconomic uncertainties, including the UK property market, but we have multiple levers at our disposal, and we are demonstrating our execution credentials.”