Just Share Discussion Threads

[scrapheap] 21/7/2022 10:23

I think this is a different one which was reported last week with Just the insurer.

US engineering company secures £103m full buyout
K3 Advisory and Cartwright announce deal for the scheme of firm’s UK operations

An unnamed US-based engineering company with UK operations has secured a £103m full buyout for its pension scheme with Just Group.

[1jat] 19/7/2022 19:45

The first half is still likely to generate capital which is what this business is about….with strong growth in H2 following news of this largest ever deal…..

Surely a rerating is due…..but what if the lights go out or the heating fails to come on in Europe in the winter…..financials could be hit hard…it is a dilemma

[salver2] 18/7/2022 10:27

I can’t get my head around this share it seems so cheap at about a third of its assets and it has weakened so much recently-someone should take this over -or at least management must do something to improve the share price

[18bt] 18/7/2022 09:11

At last some news - this one too late for the half year. But 14 completed compared t0 9 in H1 2021"albeit with a samller average transactions size compared with 2021". Thirs report about the market accords with my conversations with the big advisers in the space. There are a number being quoted at over the £4bn level which will keep the Rothesay, PIC, L&Gs busy.

[km18] 15/7/2022 12:56

...from a few weeks ago...

Just Group PLC comprises divisions operating in the UK retirement income market. As a result, the firm is offering risking solutions, care plans, lifetime mortgages, protection products, consultancy and software development to life assurances, pension trustees and banks. Given the ample initiatives, the firm intuitively generated multiple sources of income, leading to a profit before tax of £210m, higher than £193m derived last year. Both profit and cash hikes were efficiently incorporated into the firm’s EV/EBITDA of 7.94x, leading to an attractive EPS growth of 188.6%. Despite the plausible financial prospects, the security is undervalued with respect to its peer group, displayed by the relatively low P/E of 4x, which is significantly below the financial sector P/E of 8.9x, signifying that the stock is expected to surge in value.

Brief Analysis:

EPS growth = 188.6%, above financial sector benchmark.
P/E = 4x, higher than industry threshold.
EV/EBITDA = 7.94x, above financial industry threshold.
Operating profit = £210m, higher than prior year.

...from WealthOracleAM

[harry the haddock] 13/7/2022 14:40

any particular reason for a 15% drop in 1 month?

[harry the haddock] 09/6/2022 16:26

hxxps://www.tipranks.com/news/report-just-group-sells-another-portfolio-of-lifetime-mortgages-this-time-for-933m/

[18bt] 10/5/2022 08:38

JUST AGM today and looks like they won’t be issuing a trading update.

[18bt] 14/4/2022 07:32

This from Sharing Pensions note on annuity rates:

Over the longer term annuity rates remain low with a drop in income for a pensioner of -28.7% since July 2008.

The 15-year gilt yield increased by 20 basis points to 1.82% during March 2022 with providers of standard annuities increasing rates by an average 2.26% for this month and we would expect rates to fall by -0.26% in the medium term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of 2.18% and rates may fall by -0.18% in the medium term if yields remain at current levels.

So GIFL becoming more attractive. The 20yr Gilt has just risen above 2%, so rates should increase still further.

[18bt] 04/4/2022 12:33

Further on Barclays: In the FTSE 250, Just Group was the best performer, up 6.6%, after Barclays upgraded the retirement specialist to 'overweight' from 'equal weight'.

"We are positive on the outlook for bulk annuities and Just has the highest exposure amongst the listed UK life insurers that we cover," said Barclays.

[18bt] 04/4/2022 08:40

That seems a big move in reponse to a broker upgrade, but it has shown a recovery since the results, but gilt yields still rising in the 10-15 year range - that should make GIFL more attractive.

[cthompso] 04/4/2022 08:30

Seems JUST is on the move up - anyone know why?

[1jat] 22/3/2022 18:13

Jimmy, I think you need to up the SCR to 160%, this is the level achieved before restarting dividends so it is a better reflection of what the directors and regulators feel is appropriate.

The share price has been gradually rising since the results…I think there is plenty of upside barring market mishaps.

[jimmyh1] 16/3/2022 23:18

Hi Rapier
Yes, I would expect that the reduction in TMTP is largely down to the increase in interest rates. Every other year (don’t ask me why it is every other year and not every year!) they recalculate the TMTP to reflect current economic conditions. It is the odd-numbered years that this occurs. And the TMTP amortises over 16 years from the end of 2015 - so will be zero by the end of 2031.
Adding back risk margin is an interesting debate. The reason that I deduct it is because it represents a cost of capital. It might not be a great measure of cost of capital, but it is a measure nevertheless. Alternative might be to add it back in and then adjust explicitly (downwards) for the cost of holding an SCR for a reasonably long period of time.
In relation to excess own funds - this is the amount over the regulatory minimum, but in practice the regulators would expect companies to hold a buffer over the regulatory minimum - say 40% or so of the SCR. So what is really dividendable will be the excess over, say, 140% of SCR.

[rapier686] 16/3/2022 07:44

Yes I agree your computation has more economic merit as an amount attributable to shareholders. Though wouldn't you also want to add back the risk margin (which has declined over the year)?

I don't know too much about TMTP calculation but is the reduction in TMTP largely down to the increase in interest rates (as well as amortisation)?

The question though was about cash conversion, hence excess own funds as the amount the regulators would allow to be released right now. Although I appreciate the debtholders would have something to say about such a distribution.

[jimmyh1] 15/3/2022 23:06

So I was wrong about the dividend. Really good to see a return to shareholder distribution.
But be careful when quoting excess own funds - which I agree is a vital metric in determining solvency and headroom over the regulatory minimum.
A metric that I prefer, though, for the purposes of valuation (at least of the stock of business), is Own Funds, but netted down for transitionals (TMTP - a temporary capital relaxation) and net of subordinated debt (which is debt capital but allowable for regulatory purposes).
Based on the table on Page 14 of the press release I see the following:
Own Funds: 3004
Subtract transitionals (1657)
Subtract subordinated debt (781)
“Equity Own Funds” net of transitionals = £566m

At the end of last year, this metric would have been £113m. So an impressive improvement - albeit from a very low base.

[scrapheap] 14/3/2022 23:50

Or Royal london.

[topvest] 14/3/2022 12:32

Thanks for the interesting comments.

On the flip side, before they got into trouble and slashed the dividend it topped out at 4.6p versus well over 20p EPS. They have never been able to fund much of a dividend and had to raise high cost subordinated debt to keep sufficient capital to keep the regulator happy.

Best end result here, I think is a takeover from LGEN or AV. at say 150p ish. Otherwise it will likely remain on a large discount to underlying value as it can't fund a significant dividend.

Just my thoughts, but I think some of the other players like Legal & General, Aviva, Phoenix and Chesnara are more palatable. There is bigger upside here though if they are bid for.

[rapier686] 14/3/2022 09:05

Regarding availability of cash, the big constraint is that their regulators require a lot of visible investments to give comfort that they will be able to meet their obligations in due course.
Nobody runs these things to the wire, "Excess own funds" is the term for how much extra assets they have compared to the regulator's minimum requirements. At year end it stood at £1168m. Which compares favourably to the market cap, and grew by £92m in the year.
The reason why the dividend yield is low is nothing to do with lifetime mortgage illiquidity. Historically it's been because they've been rebuilding their balance sheet after previous management was a bit gung ho and the regulators took the hump. During that period the dividend was non-existent.
As 18BT reports, these results mark a sea change. The capital position is now comfortable and attention is turning to profit and growth. A dividend is now payable because doing so is good capital discipline and signals the right attitude to shareholders. But it is small because spare money can be attractively deployed into new business, growing the balance sheet and profits. They are not distributing the bulk of spare cash because because their market is not saturated.
If you struggle through the dire audio of the webcast, you'll find them aiming at 15%pa (underlying) profit growth. In fact, it sounds more like a promise than a target.

[18bt] 14/3/2022 07:39

Topvest, building on Rapier's point, there's a very useful graph in the investors presentation of the cashflow profile, net of capital, for a the book of bulk purchase annuities, of those the ERMs are a maximum of 20% now. Some also bear interest, but agreed not many.

View Equity Release Mortgages as an investment not a business. Just Retirement used to view it as such, but Partnership did not - so that changed when Rodney Cook was booted out.

[rapier686] 13/3/2022 21:22

I don't think that's a helpful perspective. In the case of lifetime mortgages the illiquidity and duration is a feature, not a bug.

The main business is the other way round to your description - they are given cash now in exchange for assuming long duration retirement obligations. Lifetime mortgages are just part of how they deploy the cash between being given it now and paying out on the obligations over the ensuing decades. And not the bulk of it either, at year end it was £7.4bn out of the £28bn balance sheet backing the promises.

[topvest] 13/3/2022 19:21

Definitely some value here. The problem with this company is that their profits do not turn into cash very quickly. Note the -£1bn "Realised and unrealised gains on financial investments" in the cash flow statement in 2021 and 2020. Its basically not a cash generative business, particularly lifetime mortgages where you give cash out at day 1, receive no interest in cash and then get the loan back 20 years later or so, when the property is sold on death. That's why the dividend yield will always be low.

[1jat] 12/3/2022 12:50

The 1p dividend costs about £10m
There is plenty of scope to raise this with underlying profits of 200m+.
Room for debt repayment, new business capital strain and returns to shareholders.

I expect a re-rating over the next 12-24 months with 120-150p possible. Still a discount to TNAV but a lower one.