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DISCOVERY LIMITED - Short-form announcement: Audited results and cash dividend declaration for the year ended 30 June 2019

Release Date: 04/09/2019 08:00
Code(s): DSY DSBP DSY03 DSY01 DSY02 DSY04     PDF:  
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Short-form announcement: Audited results and cash dividend declaration for the year ended 30 June 2019

Discovery Limited
Short-form announcement: Audited results and cash dividend declaration for the year ended 30 June 2019

JSE share code: DSY ISIN: ZAE000022331
JSE share code: DSBP ISIN: ZAE000158564
JSE bond code: DSY01 ISIN: ZAG000148362
JSE bond code: DSY02 ISIN: ZAG000148347
JSE bond code: DSY03 ISIN: ZAG000148354
JSE bond code: DSY04 ISIN: ZAG000153271


Discovery achieved the following results for the year ended 30 June 2019:
- Net asset value increased by R5 489 million 
- Headline earnings per share decreased 12% to 789.0 cents per share
- Earnings per share increased 14% to 1 001.5 cents per share
- Total new business API increased 14% to R19 246 million
- Normalised profit from operations decreased 3% to R7 747 million
- Profit for the year increased 15% to R6 614 million
- Gross income of the Group increased 15% to R58 863 million
- Diluted embedded value per share increased 7% to R108.30 per share
- Final ordinary share dividends remained unchanged at 114 cents per share

The information has been extracted from the audited results for the year ended 30 June 2019.

Period of considerable complexity, with a temporary decline in profits due to significant investment in new initiatives and large-claim volatility in
Discovery Life

Financial performance

For its 2019 financial year, Discovery planned to increase investment into strategic initiatives significantly, most notably the build and launch of Discovery
Bank, creating an expected reduction in Group earnings(1).

For the first six months to 31 December 2018, this planned increased investment together with an unexpected spike in large mortality claims within
Discovery Life resulted in a substantial reduction in normalised headline earnings per share. Various actions were taken to address the large-claims volatility,
which ameliorated in the second half of the year.

For the financial year ended 30 June 2019, Discovery's normalised profit from operations decreased by 3% to R7 747 million, headline earnings decreased by
11% to R5 147 million and normalised headline earnings decreased by 7% to R5 035 million. Spend on new initiatives increased by 114% to R1 311 million
over the period - 21% of Group earnings (including 3% of associated financing costs) - in line with budget and fully provided for in the capital plan. New
business annualised premium income (API)(2) increased by 13% to R18 299 million, while Embedded Value grew by 9% on an annualised basis to R71 217
million.

Normalised headline earnings per share (undiluted)(3) decreased by 8% to 771.9 cents and headline earnings per share (undiluted)(3) decreased by 12% to
789.0 cents.

Strategic observations

The period under review was one of considerable complexity and the Group's business and operating model ensured a resilient performance in this context.
The strategy over the period reflected the complex environment, and can be distilled into three distinct features:

Focus on growth and prudence:

The disciplined operating model dictates growth through each business phase, whilst ensuring that cash reserves are robust and that the Group is well
capitalised. Guided by this model, there was a focus on organic growth and prudence over the period. In addition to the 21% of Group earnings spent on
new initiatives, the Group's financial leverage ratio improved to 23.3% and the cash buffer increased to R4.4 billion. Further, the Group strengthened its
operating model over the period to include additional prudent constraints to manage the quality and diversity of cash flow.

Disciplined organic growth strategy:

The Group follows a disciplined organic growth strategy guided by the organic growth engine, whereby operating profit growth of CPI +10% is targeted
through a methodical and substantial investment in new initiatives which evolve into emerging businesses, and ultimately scale into established businesses.
Businesses in each phase of the growth engine are tracking well:

i.   Established businesses increased operating profit by 3%. Performance was robust, although impacted by the spike in Discovery Life claims, and business
     fundamentals continued to be strong.
ii.  Emerging businesses are scaling satisfactorily and performed excellently over the period, achieving operating profit growth of 94% to R422 million.
iii. New businesses operated largely within budget, and are gaining traction. The most notable of these was Discovery Bank, which launched for beta
     testing in November 2018 with a public rollout in June 2019. Other important new businesses include VitalityInvest (UK), Vitality1 (the global Vitality
     technology platform), Umbrella Funds (SA) and Discovery Business Insurance (SA).

Evolving the business model and applying it to four focused areas:

Over the period, the science underpinning the behavioural composite model was deepened. A few behaviours explain the majority of the underlying risk
across financial services and these behaviours are correlated. Informed by this science, the composite model consists of a number of different businesses,
where each industry silo (health, life and motor insurance, savings and more recently banking), leverages the same behavioural platform, Vitality. The result is
a compelling value proposition for customers, competitive advantage, a powerful customer platform, and strong behaviour change.

Discovery has set a bold new strategy for 2023 of leading a global transformation of financial services, impacting 100 million lives, with 10 million directly
insured, and being a powerful force for social good. This strategy involves being more deliberate in pursuing composites and manifests in the following
focus areas in each market:

i.   South Africa - a disruptive composite model, with businesses which are market leaders, and a laboratory for Shared-Value in financial services, as well
     as a successful entry into banking
ii.  United Kingdom - a differentiated offering through a composite Vitality Shared-Value Insurance model
iii. Vitality Group - a sophisticated global behavioural platform linked to financial services
iv.  Ping An Health - the leading health insurer in China with over 50 million clients

1.  Normalised profit from operations
2.  Excludes Discovery Health's take-on of new closed medical schemes and gross revenue for Vitality Group
3.  The percentage change in the current period is the same for both undiluted and diluted earnings per share


Full announcement

The content of this short form announcement is the responsibility of the Board of Directors of the Company (Board).

Shareholders are advised that this short form announcement represents a summary of the information contained in the full announcement, published 
on https://senspdf.jse.co.za/documents/2019/JSE/ISSE/DSY/FY2019.pdf and on Discovery's website (www.discovery.co.za/corporate/investor-relations).

Any investment decisions by investors and/or shareholders should be based on a consideration of the full announcement as a whole and shareholders are
encouraged to review the full announcement, which is available for viewing on JSE's website and on the Company's website set out above.

The full announcement is also available for inspection, at no charge, at the registered office of the Company (1 Discovery Place, Sandton) and at the offices
of Discovery's sponsors, Rand Merchant Bank (a division of FirstRand Bank Limited) (1 Merchant Place, Corner Fredman Drive and Rivonia Road, Sandton)
from 09:00 to 16:00 weekdays. Investors and/or shareholders may request copies of the full announcement from the Company Secretary.

Dividend and capital

Interim dividends paid in respect of the 2019 financial year

The following interim dividends were paid during the current period:

- B preference share dividend of 506.71233 cents per share (504.36986 cents net of dividend withholding tax), paid on 11 March 2019.
- Ordinary share dividend of 101 cents per share (80.8 cents net of dividend withholding tax), paid on 18 March 2019.

Final dividend declaration in respect of the 2019 financial year

B preference share cash dividend declaration:

On 29 August 2019, the directors declared a final gross cash dividend of 508.28767 cents (406.63014 cents net of dividend withholding tax) per B preference
share for the period 1 January 2019 to 30 June 2019, payable from the income reserves of the Company. A dividend withholding tax of 20% will be
applicable to all shareholders who are not exempt.
The issued preference share capital at the declaration date is 8 million B preference shares.

The salient dates for the dividend will be as follows:

Last day of trade to receive a dividend             Tuesday, 17 September 2019
Shares commence trading "ex" dividend               Wednesday, 18 September 2019
Record date                                         Friday, 20 September 2019
Payment date                                        Monday, 23 September 2019

B preference share certificates may not be dematerialised or rematerialised between Wednesday, 18 September 2019 and Friday, 20 September 2019, both
days inclusive.

Ordinary share cash dividend declaration:
On 3 September 2019, the directors declared a final gross cash dividend of 114 cents (91.2 cents net of dividend withholding tax) per ordinary share, out of
income reserves for the year ended 30 June 2019. A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt.

The issued ordinary share capital at the declaration date is 658 290 736 ordinary shares.

The salient dates for the dividend will be as follows:

Last day of trade to receive a dividend             Tuesday, 1 October 2019
Shares commence trading "ex" dividend               Wednesday, 2 October 2019
Record date                                         Friday, 4 October 2019
Payment date                                        Monday, 7 October 2019

Share certificates may not be dematerialised or rematerialised between Wednesday, 2 October 2019 and Friday, 4 October 2019, both days inclusive.

Transfer secretaries

Computershare Investor Services Pty Limited (Registration number 2004/003647/07) Rosebank Towers, 15 Biermann Avenue, Rosebank 2196, PO Box 61051,
Marshalltown 2107

Sponsors Rand Merchant Bank (A division of FirstRand Bank Limited)

Secretary and registered office MJ Botha, Discovery Limited (Incorporated in the Republic of South Africa) (Registration number: 1999/007789/06)

Company tax reference number: 9652/003/71/7

1 Discovery Place, Sandton 2146, PO Box 786722, Sandton 2146  Tel: (011) 529 2888  Fax: (011) 539 8003

Directors MI Hilkowitz (Chairperson)(1), ME Tucker (UK) (Chairperson)(2) ,A Gore* (Chief Executive Officer), HL Bosman, Dr BA Brink, SE de Bruyn, 
R Enslin (USA)(3), R Farber, HD Kallner*, F Khanyile, NS Koopowitz*, Dr TV Maphai, HP Mayers*, TT Mboweni(4), Dr A Ntsaluba*, AL Owen (UK), A Pollard*, 
JM Robertson(5), B Swartzberg*, DM Viljoen* (Financial Director), SV Zilwa

*   Executive.        
1   Retired effective 28 February 2019.        
2   Appointed effective 1 March 2019.        
3   Resigned effective 19 June 2019.        
4   Resigned effective 11 October 2018.        
5   Retired 31 August 2018.

Notes to analysts:
-   Any forecast financial information contained in this announcement has not been reviewed or reported on by the company's external auditors.
-   Discovery has published supplemental unaudited information on the website. For this and other results information, go to https://www.discovery.co.za/corporate/investor-relations 
    and page down to Financial results and reports, Annual Results 2019.


SENS release date: 4 September 2019

Date: 04/09/2019 08:00:00
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