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Voluntary announcement: corporate action and update regarding investment in new initiatives
DISCOVERY LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/007789/06)
JSE share code: DSY, DSYBP
JSE bond company code: DSYI
(“Discovery” or “the Company” or “the Group”)
VOLUNTARY ANNOUNCEMENT: CORPORATE ACTION AND UPDATE REGARDING
INVESTMENT IN NEW INITIATIVES
Shareholders are advised of a corporate action which is subject to US regulatory approval and a
number of important initiatives across the Discovery Group that have come to fruition during 2018
which will affect Discovery’s financial results for the 6 months to 31 December 2018:
1. The investment by SoftBank Vision Fund in Cambridge Mobile Telematics in which Discovery has
a minority shareholding, and
2. The investments in major new initiatives during the period, notably Discovery Bank and VitalityIn-
vest in the UK.
While the new initiatives have been planned and are largely in line with budget, they will have a
disproportionate impact on the Group’s short term results given their scale.
(1) Corporate action involving associate investment in Cambridge Mobile Telematics
Shareholders are advised that Cambridge Mobile Telematics (“CMT”), an associate investment of
Discovery and strategic partner to Discovery Insure since 2014, yesterday announced a US$500 mil-
lion (ZAR7.2 billion) investment from the SoftBank Vision Fund. The transaction is subject to U.S.
regulatory approval.
Upon the completion of the transaction, Discovery’s effective shareholding in CMT will reduce to
approximately 10% on a fully diluted basis. Discovery’s profit from the transaction will be approxi-
mately US$52 million (ZAR751 million), a portion of which will be realized in cash. Discovery Insure’s
strategic partnership with CMT remains in place following the transaction.
This investment will accelerate the adoption of CMT’s DriveWell platform, fueling product and market
expansion across insurer and safety solutions.
A full transcript of the CMT announcement is available at CMT’s website at:
www.cmtelematics.com
(2) Income statement impact of investment in new initiatives and related finance cost
Shareholders are further advised, that in line with the previously communicated organic growth
methodology of the Group, the investment in new initiatives, including but not limited to Discovery
Bank, VitalityInvest, Discovery Umbrella Fund and Discovery Commercial Insurance, will be signifi-
cantly higher than the previous period and higher than the long term investment guidance of 10%
of trading profit (following a period of investment below this guidance). This is due primarily to the
investment in the launch of Discovery Bank and VitalityInvest, which have been largely in line with
the budgets set for these initiatives and provided for in the Group’s medium term capital plan.
It is estimated that the income statement impact of such investments for the six months ending 31
December 2018 will be approximately R620 million compared to the R230 million of the correspond-
ing period of the previous financial year (adjusted for reallocation of card profits to Discovery
Bank). In addition, the period-on-period impact of finance cost resulting from borrowings raised
over the recent reporting periods, mainly to facilitate these new initiatives, will increase from R351
million to approximately R483 million for the six months ending 31 December 2018 (excluding the
continuing impact of the finance lease accounting treatment related to the lease of the new head
office building as explained at year-end).
These initiatives are in line with Discovery’s organic growth model which has created substantial
embedded value but will have a short term impact on the Group’s reported earnings and related
growth rates in earnings. Discovery expects the spend on new initiatives to, over time, revert to the
investment guidance of within 10% of operating profit.
The figures quoted in this voluntary announcement have not been audited by the Company’s
auditors.
Sandton
20 December 2018
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
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