South African insurer Discovery said on Monday its full-year profits could fall by up to 90%, hit by a 3.3-billion rand ($191-million) provision to cover the potential impact on claims and policy lapses due to the coronavirus.
It also said it would not pay an annual dividend, with the payouts to be considered when appropriate, sending its shares down 5.5% before recouping some losses.
The company said the hefty provision covered the potential impact on claims and anticipated policy lapses as stretched customers stop paying, while the outlook also covered the impact of long-term interest rates.
It warned its headline earnings per share – the main profit measure in South Africa – for the year to June 30 were expected to be between 70% and 90% lower than the 789 cents reported a year earlier, though it said the final outcome was subject to a high degree of volatility.
“Discovery is confident that the group is strong under high stress scenarios, with sufficient liquidity and solvency to weather uncertain conditions,” it said, adding capital ratios and cash buffers were expected to remain within or above target.
The provision, Discovery said, was intended so that all of the currently expected impact of the novel coronavirus as far ahead as 2022 was carried in this financial year.
Changes to interest rates in South Africa after the government lost its final investment-grade credit rating earlier this year, and historically low interest rates in the United Kingdom where it has a unit, were expected to have a further substantial impact on performance.
Discovery’s profits have been falling in recent years as it ploughed money back into new businesses including a hefty investment in launching a digital bank, which it said now has 177,000 clients and 2.1 billion rand in retail deposits.
So far, lapses in most of its businesses had been low, it said, while new business annualised premium income was up 4% for the 11 months to May 31.
Bidvest on Monday reported a better set of first-half results, leveraging off the diverse nature of its portfolio.
Easily one of the better proxies of the local economy, its portfolio spans services, freight, automotive, office and print, commercial products, financial services and electrical companies.
Trading profit rose 12% to R3.1bn in the six months to end-December, as revenue rose 10.7% to R39.9bn.
The services, freight, and office and print divisions were the standout performers, with increases in trading profit of 24.3%, 18% and 12.7%, respectively. The automotive division disappointed though, with trading profit down 6%.
Bidvest SA also counted on the acquisition of facility management services group Noonan, as well as the additional three-month contribution from Brandcorp.
The share of profits from associated companies, before capital items, was up 26.4%.
Bidvest holds investments in pharmaceuticals group Adcock Ingram (38.5%), airline operator Comair (27.2%), Mumbai Airport (6.75) and a 52% interest in Bidvest Namibia.
But trading profit in Bidvest Namibia slumped 68% as a result of what the group said was sluggish economic growth
in that market, and fishing industry and operational challenges.
All in all, group headline earnings per share (HEPS) rose 12.5% to R5.74 and interim dividend per share 12.3% to R2.55.
By Andries Mahlangu for Business Day
Unlisted retail group Edcon reported on Tuesday that its net profit improved by 3.8% to R2bn, although sales declined in the September quarter from the matching period in 2016.
Edcon said its overall retail sales suffered from “fierce price competition through ongoing promotions by competitors” and its decision to close unprofitable stores.
In its flagship Edgars clothing chain, sales declined 0.9% to R2.46bn during the three months to September 23. Sister clothing chain Jet’s retail sales declined 1% to R2.28bn.
Edcon’s “speciality” division, which houses news agency CNA and Edgars Shoe Gallery, reported a 41.5% decrease in sales to R463m because the comparative period included Legit, which was sold in January. Excluding Legit, the speciality division suffered an 11.4% decline in sales. CNA’s sales fell 12.1%.
“Our trading environment remains challenging as consumer demand is weak on the back of tight credit conditions, low growth in consumer disposable income, political uncertainty and restrictive fiscal policy,” Edcon CEO Bernie Brookes said.
“Despite this, it is pleasing that the group’s strategic transformation is delivering positive retail sales growth in certain merchandise categories, such as ladieswear in both Edgars and Jet, as well as cellular in Jet, while childrenswear, footwear, cosmetics and cellular within Edgars are also starting to show signs of change.”
By Robert Laing for Business Live
US dealer group Independent Stationers has announced positive growth in its sales and many of its member programmes for 2015.
“Probably every single magazine published in this country is wasting vast amounts of cash because of what’s known as ‘bad data’ – and we can stop that almost immediately,” says Chris Brewer of Brewer’s Advertising Data.