Discovery interims: Robust performance with continued focus on investment and R&D

By Janice Roberts
Editor
Adrian Gore, CEO, Discovery

Discovery Group Chief Executive, Adrian Gore, delivered the Group’s results for the six months ended 31 December 2019 today in Sandton

The Group highlighted results for the period ended 31 December 2019,characterised by substantial investment in new initiatives and a strong performance from the core businesses with the exception of VitalityLife:

  • Net asset value increased by R1 598 million
  • Total new business API increased 17% to R11 116 million
  • Normalised profit from operations decreased 7% to R3 551 million
  • Profit for the year decreased 11% to R2 078 million
  • Gross income of the Group increased 10% to R31 930 million

Gore said the robust performance of the Group came with a continued focus on investment and research and development to further drive the growth strategy and the encouraging traction seen on new initiatives. He emphasised that Discovery has set a bold Ambition for 2023 of being a leading financial services organisation globally, positively influencing 100 million lives – with 10 million directly insured – and being a powerful force for social good. “Discovery’s unique foundation built on its core purpose, values, people and brand, informs our strategic vision and continued refinement of the Group’s Shared-Value model applied across our composite model.”

Gore highlighted these aspects as essential contributors to Discovery’s established businesses growing organically and delivering consistently strong results, with a profit of R4 301 million – 3% higher than the prior period, despite the loss in VitalityLife.

Gore attributed the losses in VitalityLife to the Group’s previously announced strategic decision to mitigate its exposure to further interest rate declines in the United Kingdom. The performance of the business is expected to stabilise through addressing external and non-economic variances, which will materialise in the operating result within the next financial year.

The Group’s emerging businesses grew strongly, delivering a combined profit of R253 million, 50% higher than the prior period. Normalised profit from operations for each business:

Current period, in ZAR millionCurrent period compared to prior, % change
Discovery Health1 575+8%
Discovery Life1 875+25%
Discovery Invest485+7%
Discovery Vitality5-75%
Discovery Insure75+21%
VitalityHealth495+11%
VitalityLife(134)-145%
Vitality Group110+16%
Ping An Health68+467%
Operating profit before investment in new initiatives4 554+5%
Spend on new initiatives(1 003)+81%
Operating profit after investment in new initiatives3 551-7%

Discovery remains in a cycle of continued strategic investment in growth initiatives. The Group’s capital plan provided for an amplified investment of 81% more than the previous period, to R1 003 million. “Our investment in new initiatives is weighted towards the first half of year and is expected to decrease in the second half. As we continue to scale Discovery Bank, the business will remain our dominant investment going forward,” explained Gore.

He said, “There was substantial advancement of our R & D agenda, including ongoing development of the Shared-Value capability through Vitality Money in Bank and the global Vitality1 platform.” The globalisation of the Discovery Shared-Value model is being enabled through its globally unified data and systems platform, Vitality1, which is now live in nine markets after 18 months of operating, impacting two million members and creating efficiencies in rolling out to new markets.

Gore said, “The growth and success of the Vitality1 platform in encouraging positive behaviour change have been hugely positive. Every day the platform logs more than four million workouts and allocates more than 35 000 rewards.”

Gore highlighted the market-specific strategies the Group will focus on. In South Africa Discovery will persist in building market-leading businesses and ensuring a successful entry into banking. For Ping An Health, the focus is on building the brand to become the leading health insurer in China with over 50 million clients. V1 and constructing the sophisticated global behaviour-change platform linked to financial services are the main focus areas for Vitality Group.

“We are well-positioned for our planned growth. We want to see significant traction on our new and emerging initiatives as we start to achieve short-term business thresholds. The execution of our stated plans in the United Kingdom are in motion and we foresee a return to profitability for VitalityLife,” concluded Gore. 

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