Discovery (DSY) H2 2024 earnings summary

Executive summary

• Normalized operating profit increased by 17% year-over-year to R11,604m, with core new business up 18% to R26,667m and normalized headline earnings up 15%.

• The group is entering a new high-growth, high-cash generation phase, focusing on organic growth and hyperpersonalization.

• Two distinct business units have been established: Discovery South Africa and Vitality Limited (global), both leveraging the Vitality Shared-value model with clear growth strategies.

• Discovery Bank scaled rapidly, with client and account growth above 35% and significant progress toward profitability.

• International operations, including Vitality UK and Vitality Network, showed robust growth in new business and membership.

Financial highlights

• Normalized headline earnings rose 15% to R7,329m; headline earnings up 7% to R7,202m after adjusting for non-recurring items.

• Dividend per share increased to ZAR 1.52 (152cps), reflecting a five times cover policy.

• Embedded value (EV) grew by 12% to over ZAR 110 billion, with annualized return on EV above 13%.

• Non-insurance income increased 16% to R6,191m.

• Leverage ratio declined, with strong liquidity and capital positions across all entities.

Outlook and guidance

• Targeting 15%-20% CAGR in earnings and ROE for FY25-FY29, with cash conversion of 60%-70%.

• Spend on new initiatives expected to decrease to 5%, supporting improved central cash position.

• Discovery Bank aims for 2m clients and R3bn profit by FY29.

• International business expected to deliver 20%-30% average earnings growth p.a. (FY25-FY29).

• Dividend cover guidance remains at five times or less, with dividends expected to grow in line with earnings.