Adrian Gore, CEO, Discovery
Discovery releases trading update today.
For the financial year ended 30 June 2019, Discovery’s normalised headline earnings per share are expected to decrease by between 5% and 10% to between 795 cents and 753 cents (2018: 836.9 cents), compared to the previous financial year. Core new business annualised premium income is expected to grow by approximately 13% while the Group’s financial leverage ratio is expected to improve to 23% and the cash buffer to increase to approximately R4bn.
This is due to:
- Approximately 20% of Group earnings (including associated financing costs) was spent on new businesses, most notably Discovery Bank, VitalityInvest, Vitality1, Umbrella Funds and Discovery for Business. Spend in new businesses increased by 114% over the prior year.
- Discovery Life’s performance largely affected by an unusual spike in high value mortality claims as was fully explained at the half-year. Other key experience metrics remain largely in line with expectation in the second half- year, despite a challenging operating environment.
Discovery added that it is well positioned for growth, through its robust established businesses, emerging businesses which are scaling and expected to grow strongly going forward, and significant new initiatives which are being built.
“New businesses will require investment through their start-up phase, however the c.20% spend on new businesses is expected to decrease over the next few years toward the long-term goal of 10% of earnings. Profit growth is expected to return to its stated goal of CPI plus 10% and the Group is well capitalised for its five-year planning horizon.”
Discovery also said that it is supportive of the aims of the recently published National Health Insurance (NHI) Bill in SA, and will work closely with the relevant policy makers and stakeholders to ensure an optimal outcome to the legislative process.
“The Bill is not expected to have a material long-term impact on the Discovery Health business and may in fact present new opportunities for growth and product innovation.”
Discovery is due to release its annual results on September 4.
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