Discovery Group Posts Strong Year-end Growth in Profit
Presenting its financial year-end results to investors and analysts, Discovery Group has reported profit increases of 24% across all of its opertaions. CEO Adrian Gore commented, “Discovery’s three business composites – South Africa, United Kingdom and Vitality Global – delivered excellent performances in line with the Group’s strategy and ambition.”
For the reporting period, Discovery posted an increase in normalised profit from operations, up 24% from R9 384 million to R11 661 million. Headline earnings increased by 5% to R5 490 million; normalised headline earnings increased by 32% to R7 678 million; and core new business annual premium income (API) rose 12% to R22 788 million. Embedded value increased to R98 176 million, which represented a 13.2% return on embedded value.
In a year characterised by significant macroeconomic uncertainty, Discovery continued its focus on delivering quality earnings and cashflow with a strong balance sheet; while following a clear growth strategy for each composite (SA, UK and Vitality Global). The Group invested in its proprietary Vitality Shared-value model, and intensified the focus on key initiatives while closing business areas with marginal benefits.
The Group remained financially resilient with high levels of liquidity and the financial leverage ratio (FLR) improving to 20%. Organic cash generation was robust during the year following growth in quality earnings, a significant recovery in Discovery Life’s cash generation following elevated COVID-19-related claims in the previous reporting period, and the reduction in the cost of new initiatives. The robust balance sheet and cash positions support the resumption of dividends, and the directors declared a final gross cash dividend of 110 cents per ordinary share.
Discovery’s saw excellent results for each composite. The SA Composite’s normalised operating profit increased by 22% to R9 096 million and new business by 11% to R16 818 million. Discovery Health showed strong growth across all metrics with prior investment in technology driving efficiencies and continued innovation. Discovery Life had a resilient performance with positive variances, with Group Life returning to profit. Discovery Invest generated significant growth in profit, given higher investment markets and other in-period gains. Discovery Insure delivered on its profit turnaround, following actions taken in previous periods. Discovery Bank continued with excellent progress across all metrics, as acquisition of quality clients accelerated over the year.
Normalised operating profits rose by 14% for the UK Composite and 49% for Vitality Global (US$44 million), driven by especially strong results from China.
Gore concluded, “Discovery’s growth strategy is based on the efficacy, repeatability, and scalability of our Vitality Shared-value model. It is a powerful platform from which to drive new business and enables us to pursue growth through our organic businesses and global partnerships. The Group is now focused on evolving the model into an integrated value chain with bespoke modules to drive growth and market leadership across each of the composites.”
