Discovery set to shoot the lights out

Discovery is set to present strong interim financial results on 3 March, with the company revealing that its headline earnings per share will increase by over 25% year-on-year for the six-month period to 31 December. 

This performance is driven by a strong performance across the company’s sprawling operations, with most set to record double-digit growth. 

Discovery revealed in a trading statement that normalised profit is expected to increase by between 22% and 27% compared to the same period last year. 

This translates into a strong performance in other financial metrics, with headline earnings expected to rise by between 27% and 32%. 

Crucially, the company has indicated that this strong growth will continue, with new business annual premium income increasing by 12% year-on-year. 

A major part of the company’s projected strong financial results is the standout performance of Discovery Bank, which is tracking ahead of the company’s plan and is actually accelerating its growth. 

The bank is now profitable, with Discovery indicating that it will post a profit of between R65 million and R85 million. 

This means that the bank can now stand on its own two feet and does not have to rely on funding from the rest of the group, freeing up cash flow. Discovery has invested over R15 billion in building out its bank since 2018. 

The company said the bank’s growth is accelerating once again, with it acquiring an average of 1,500 customers per day over the six-month period. 

Discovery’s overall South African composite will see its normalised profit increase by between 16% and 21%, driven by the bank’s profitability and a strong showing from Discovery Life. 

However, a sometimes forgotten part of the financial services giant is its short-term insurance business, which has surged in recent years. Its growth is set to continue, with profit rising by between 32% and 37% year-on-year. 

Discovery’s global businesses continue to perform well, with its Vitality Shared-Value model proving highly competitive in global markets. 

Normalised profit for this composite is expected to grow by between 22% and 27% year-on-year, driven by a strong performance from VitalityHealth and Ping An in China. 

Discovery said that VitalityHealth performed ahead of plan, with a significant increase in operating margin from the focused execution of its shared-value model and rigorous pricing and claims activity. 

Discovery is a large shareholder in Ping An, holding a 24.99% stake that CEO Adrian Gore said they were very lucky to get. As part of this agreement, Ping An has access to Discovery’s intellectual property. 

Ping An’s strong performance was boosted by exceptional investment returns from equity markets in China. 

The expected performance of Discovery’s various business units can be seen in the table below.