Discovery earnings plummet on Covid-19 economic fallout

Financial services firm Discovery on Wednesday (16 September), reported a steep decline in earnings for the year ended June 2020, as the economic impact of the Covid-19 pandemic took a toll on operations.

For the full year ended June 2020, core new business was up 5% to R19.17 billion, normalised operating profit was up 9% to R8.4 billion – before providing for future Covid-19-related impacts, decreasing by 22% after the provision.

Normalised headline earnings decreased by 26% to R3.75 billion. Normalised headline earnings per share (diluted) decreased by 27% to 566.7 cents and headline earnings per share (diluted) decreased by 94% to 44.7 cents, Discovery said.

Discovery achieved the following results:

  • Net asset value increased by R1 470 million;
  • Total new business API increased 5% to R20 307 million;
  • Normalised profit from operations decreased 22% to R6 069 million;
  • Profit for the year decreased 97% to R176 million;
  • Normalised headline earnings per share decreased by 26% to 507.7 cents per share;
  • Headline earnings per share decreased 94% to 45 cents per share.

Discovery said that due to the uncertain and potentially volatile economic environment caused by the Covid-19 pandemic, it has not declared a final ordinary share dividend (2019: final ordinary share dividend of 114 cents per share).

The reintroduction of dividends will be considered when appropriate, it said.

South Africa

Discovery said that the SA business demonstrated resilience amid the difficult economic and operating environment.

Excluding new initiatives, combined new business reduced by 4% to R12.28 billion and operating profit increased by 11% to R8.3 billion before the Covid-19 provision (reducing by 3% after).

Discovery Health (DH) delivered a strong financial performance despite the challenging period, it said. Normalised operating profit increased by 5% to R3.19 billion and total revenue grew 8% to R8.37 billion, with non-scheme revenue showing accelerated growth of 23%.

Discovery Health Medical Scheme (DHMS) grew open medical scheme market share to 56.8% in a declining market, Discovery said. “The operating result and solvency were higher than expected as a result of the reduction in health system utilisation during lockdown, which included a 27.5% reduction in hospital admissions at the end of August 2020.”

Discovery said that its bank’s performance ‘was pleasing’, with over 370,000 accounts at end June (489,000 at 13 September) and deposits of R2.4 billion (R3.7 billion at 13 September).

Looking ahead, Discovery said that its ‘Ambition 2023’ remains the strategic focus for the medium-term. The group is well positioned for growth over its planning horizon to 2023, with the capital plan able to fund its new initiatives.

“The businesses within the South African composite have created significant insurgency and the composite is well positioned to continue the SA growth trajectory.”

Read: Adrian Gore on what’s next for Discovery Bank in South Africa

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Discovery earnings plummet on Covid-19 economic fallout