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Discovery - Solid Earnings For Discovery As New Busines Lines Are Launched
DISCOVERY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1999/007789/06)
ISIN: ZAE000022331
Share Code: DSY
SOLID EARNINGS FOR DISCOVERY AS NEW BUSINES LINES ARE LAUNCHED
In the most active year in Discovery"s history, the company saw phenomenal new
business growth and recorded diluted headline earnings per share growth of 28%
for the year to 30 June 2005, driven chiefly by remarkable growth in Discovery
Life.
In addition, the foundation was laid for future growth with the establishment of
a number of new business lines, notably the rolling out of the UK health
insurance business PruHealth, the launch of the Discovery Card and the entry
into the retirement products market with the retirement Optimiser.
Discovery is also pleased to announce the conclusion of its black economic
empowerment (BEE) transaction, which brings on board the Women"s Development
Bank and leading businessman Dr Vincent Maphai as shareholders.
"Discovery"s philosophy is to only enter markets where we can make a
difference," says CEO Adrian Gore. "We entered a number of new businesses this
year, at the same time maintaining our focus on our existing businesses."
Gore says the new businesses are areas of immense opportunity, creating
foundations for future growth.
New business annualised premium income grew by 35% to R4,3 billion (2004: R3,2
billion).
Gross income grew 9% to R4 billion (2004: R3.7 billion), while operating profit
grew 11% to R786 million (2004: R708 million). South African-only profits
exceeded R1 billion for the first time
Attributable profit grew 40% to R585 million (2004: R418 million), while
headline earnings grew 32% to R536 million (R405 million). Fully diluted
headline earnings per share rose 28% to 99.2 cents (2004: 77.4 cents).
Diluted embed value per share rose by 32% to R17.03.
Discovery Health experienced growth of 31% in new business annualised premium
income to R2,8 billion (2004: R2,1 billion), with the total number of lives
covered up to 1,8 million.
However profit grew by 8% to R563 million (2004: R522 million), with the growth
in profit dampened by the costs of acquisition - particularly in the second half
of the year due to higher than expected membership growth.
Discovery Life had another excellent year, with profit rising 55% to R421
million (2004: R271 million). New business annualised premium income grew by 17%
to R642 million (2004: R548 million).
Towards the end of the period, Discovery Life announced its entry into the
retirement products market with the retirement Optimiser. The retirement
Optimiser is aimed at providing policyholders with a certain and efficient
vehicle for retirement savings.
"The Optimiser has only been selling for a few weeks, but we are confident that
it will have immense appeal to existing Discovery Life policyholders as well as
others," says Gore.
The performance of Destiny Health, Discovery US subsidiary, was disappointing.
While new business increased by 64% to R809m (2004: R494m), Destiny generated an
operating loss of R87m for the year, an amount in excess of that expected.
The losses were caused by two factors: Firstly, the migration of the full back-
office to South Africa led duplication of costs. This is now being addressed.
Secondly, the company"s expansion into other markets was slower than expected,
despite expenses being incurred in preparation for this. This is being addressed
with Destiny imminent expansion into four markets in Texas - Dallas, Houston,
San Antonio and Austin - next month.
In October last year, Discovery launched its joint venture into the UK health
insurance with Prudential, called PruHealth. By year end, some 10 000 lives were
covered. Discovery incurred start-up losses of R148-million, which is in line
with expectations.
Gore said Vitality"s performance over the period was pleasing. While operating
profit dropped by 24% to R38m (2004: R50m), the new business annual premium
income increased by 49% to R93 million.
"The effect that Vitality has on all of Discovery"s businesses dwarfs its
profitability and therefore focus continues to be applied towards furthering the
value proposition of Vitality through continual improvement in its tools,
infrastructure and the partners that back it," Gore says.
"The reduction in Vitality"s profitability reflects two factors, the significant
increase in new business, combined with the up-front nature of Vitality
commission, created an element of new business strain, and the set-up costs
Vitality incurred with the launch of the Discovery Card," Gore adds.
The Discovery Card, which rewards holders for improving their health through
discounts at a number of partner outlets, was launched in October 2004, and by
the end of the period in excess of 200 000 cards had been issued.
Gore says a solid base has been created for both existing and new business lines
to grow and develop in future. "We have worked hard to launch new business
lines, and we are confident of their capacity to deliver in future," says Gore.
"At the same time, the fundamentals in our existing business lines remain
sound."
ENDS
Issued by:
Beachhead Media & Investor Relations
(Lynette Lambert) tel no: 011 214 2406 / 084 580 2402 / lynette@bmsa.co.za
(Rio Matlhaku) tel no: 011 214 2402 / 082 907 7943 / rio@bmsa.co.za
(Sheri Fine) tel no: 011 214 2414 / 082 785 6164 / sheri@bmsa.co.za
On behalf of:
Adrian Gore
CEO, Discovery Holdings Limited
011 529 2800 / 082 606 2800
Date: 13/09/2005 11:21:40 AM Supplied by www.sharenet.co.za
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