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Discovery is back on track
Discovery is back on track
Published Date: 2019-09-05 | Source: Stephen Gunnion | Author: Stephen Gunnion
The financial services group says a temporary decline in earnings has been addressed and it expects profit growth to return to normal.
Discovery Holdings has recovered from a weak first half to post a smaller decline in annual earnings. The financial services group says the past year was a "period of considerable complexity" and attributes the temporary decline to big investments in new businesses and a spike in death claims at its Discovery Life insurance business, which it says is now under control.
The group invested R1.31 billion in new businesses over the year, equal to 21% of earnings and more than twice as much as the previous year. These included Discovery Bank, VitalityInvest in the UK, global technology platform Vitality1, Umbrella Funds and Discovery for Business. While spending would be higher over the start-up phase of the initiatives, it said it expected it to decrease towards its long-term goal of 10% of earnings over the next few years.
It said various actions were taken to address the large-claims volatility at Discovery Life, which eased in the second half of the year.
For the year to end-June, it said its established businesses increased operating profit by 3% as a strong performance was offset by the rise in death claims. Its emerging businesses gained scale, almost doubling operating profit to R422 million. The new businesses operated largely within budget and started to gain traction, it said. The biggest of these, Discovery Bank, launched for beta testing last November and public rollout started in June.
Total new business annual premium income (API) increased by 13% to R18.3 billion over the period, while its embedded value grew by 9% on an annualised basis to R71.2 billion.
Normalised profit from operations fell 3% to R7.75 billion and heading earnings decreased by 11% to R5.15 billion. Headline earnings per share fell 12% to 789c, while normalised HEPS decreased by 8% to 771.9c. It's kept its final dividend unchanged at 114c per share. It paid an interim dividend of 101c.
Discovery said profit growth was expected to return to its stated goal of CPI plus 10% and it remained well capitalised for its five-year planning horizon.
After rising as much as 3.7% in the morning, Discovery's shares turned around to close 0.5% down at R114.45.
Discovery achieved the following results for the year ended 30 June 2019:-- MoneyMarketingSA (@MMMagza) September 4, 2019
- Net asset value increased by R5 489 million
- Headline earnings per share decreased 12% to 789.0 cents per share@Discovery_SA
You have to love our insurance companies. When you read Old Mutual's result you need someone to explain the acronyms. When you read Discovery's results (out this morning) you need someone to explain the english.-- David Shapiro (@davidshapiro61) September 4, 2019