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Just Group's Share Price dives as H1 profits crash by a quarter: what next?

Just Group’s [JUST] share price tanked yesterday as regulatory requirements dented half-year profits. Traders will now be questioning whether there are further lows to come after a rocky six months that has already seen the specialist insurer close its US operations.

 

What's happening with the share price?

After reaching a year high of 109.2p on 1 March, the stock has been trending downwards and is down a huge 51% year-to-date. The plummeting share price claimed the scalp of CEO Rodney Cook back in April, with deputy CEO David Richardson taking the helm. Since the appointment, the share price has been volatile with a 1.31 beta rating.

 

 

How did Just Group perform last quarter?

Just Group reported a 30% drop in sales last quarter, with revenue from its retirement income products dropping to £831 million. This was enough to see the share price drop a hefty 7% following the results. To get things back on track, the group announced a cost-cutting strategy starting with the closure of its loss-making US business.

30%

Just Group's Q1 sales drop

  

It' s not only the US that has been tricky for the specialist insurer. Upcoming rules from Britain's Prudential Regulation Authority, demanding Just Group put more capital behind lifetime mortgages, have also hurt business. To increase the amount of capital on the books the group announced a discounted share issue to raise £375 million. This, in turn, diluted the stock, sinking the share price further. 

 

What happened in half-year results

In yesterday’s results, underlying operating profits dropped 27% year-on-year to come in at £114 million for the first half of the year. The root of the problem was again new rules from the Prudential Regulation Authority that hurt the company’s balance sheet.

Revenue, which had been a problem for the group, was up from the same time last year, coming in at £2.18 million.

 

Market cap£466.395m
EPS (TTM)-6.80
Operating Margin (TTM)4.78%
Quarterly Revenue Growth (YoY)-19.40%

Just Group share price vitals, Yahoo Finance, 5 September 2019

 

The results also saw the interim dividend scrapped. Bad news for income-seeking investors who had previously seen the 2018 dividend cut.

Interim chief executive David Richardson said:

“Whilst we have made significant progress in adapting our business model, as is evident from today’s results, the first half of 2019 has not been easy for our business or for shareholders as we have faced economic and regulatory challenges.”

Following the results, the share price dropped 10% in Wednesday’s morning trading.

“Whilst we have made significant progress in adapting our business model, as is evident from today’s results, the first half of 2019 has not been easy for our business or for shareholders, as we have faced economic and regulatory challenges" - Just Group interim chief executive David Richardson

 

Is it worth buying Just Group?

Analysts tracking the stock on Yahoo Finance! are evenly split, between those who rate it a ‘Buy’ and those who think traders should ‘Hold’ the stock. The stock carries a price-to-earnings multiple of 2.44X, making it relatively inexpensive.

Just Group’s cost-costing measures, including outsourcing its UK income drawdown services play out, could help the company’s capital problems. But right now, shareholders will be wondering whether the share price’s downtrend is set to continue.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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