• Normalised profit from operations is expected to increase by between 20% and 25%;
• Headline earnings (HE) are expected to decline by between 7% and 12%; and
• Normalised headline earnings (NHE) are expected to increase by between 27% and 32%.
Discovery’s operating performance was robust:
• There was consistent positive performance across the Group with strong customer engagement in the Vitality shared-value model, leading to superior lapse and persistency experience and strong new business growth, driving strong operating profit growth.
• The cost of new initiatives reduced significantly, close to the Group’s guidance of 10% of normalised operating profit, with Discovery Bank performing strongly with excellent high quality customer growth and spend well within plan.
• The period coincided with significant lockdowns in China and the subsequent lifting of the Zero-Covid policy, with the concomitant wave of infections. The impact was a reduction in new business and weak investment returns. Ping An Health Insurance took a conservative reserving approach to Covid, although claims to date have been limited. The combined effect of these was a decline in earnings.
The reporting period coincided with considerable macro-economic volatility, with significant movements of interest rates within the markets in which Discovery operates. These movements create volatility in Discovery’s headline earnings, but have little impact on the Group’s solvency, liquidity and cash flows and have no impact on the operations of the Group. Consequently, the Group has a stated policy of normalising for the impact of interest rate movements in the presentation of normalised headline earnings.
The effect during the reporting period was geared as interest rates movements in the prior period increased headline earnings but decreased them during the reporting period. This predominantly explains the difference between the expected decline in headline earnings of between 7% and 12%, compared with the expected growth in normalised headline earnings of between 27% and 32%.
Voluntary trading statement
Shareholders and noteholders are advised that:
• Earnings per share (“EPS”) (basic) is expected to be between 9% and 14% lower (to between 429.0 cents and 453.9 cents) compared to the reported EPS (basic) of 498.8 cents for the prior period.
• Headline earnings per share (“HEPS”) (basic) is expected to be between 7% and 12% lower (to between 439.2 cents and 464.2 cents) compared to the reported HEPS (basic) of 499.1 cents for the prior period.
• Normalised HEPS (“NHEPS”) (basic) is expected to be between 27% and 32% higher (to between 555.9 cents and 577.8 cents) compared to the reported NHEPS (basic) of 437.7 cents for the prior period.
Discovery intends to report its interim 2023 financial results on or about 23 February 2023.
