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Discovery Holdings Limited - Trading Statement In Respect Of The Financial Year Ending 30 June 2005 DISCOVERY HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1999/007789/06) Share code: DSY ISIN: ZAE000022331 (`Discovery` or `the Company`) TRADING STATEMENT IN RESPECT OF THE FINANCIAL YEAR ENDING 30 JUNE 2005 Discovery has noted the strong performance of the Company`s share price in recent months. In light of this performance and what the Company believes to be significant expectations that are reflected in the share price, the Company believes that it is important to update shareholders on the expected performance over the six months to June 2005. Discovery`s shareholders are advised that the group`s headline earnings per share and earnings per share for the financial year ending 30 June 2005 are expected to exceed the comparative period by between 25% and 35%. Some key observations with regard to the performance of the individual businesses are: 1. Discovery Life has experienced strong growth in profitability. The launch of the `retirement Optimiser`, Discovery Life`s retirement product range, was successful with new business expected to commence on 1 August 2005. Significant development has taken place for the life insurance initiative planned with the UK-based Prudential Plc. 2. Discovery Health has experienced particularly strong growth, with new business for the six months ended 30 June 2005 expected to grow 30% year-on- year. This has resulted in a significant increase in acquisition costs. Furthermore, the termination of reinsurance income which was present in the prior year will have a negative impact on a comparable basis. The combined impact of these factors is an overall modest increase in profits for the year. 3. PruHealth, the Company`s UK-based joint venture with Prudential Plc, is evolving in line with expectation. Approximately R145m has been invested over the course of the year, as expected. 4. Destiny Health, Discovery`s US-based subsidiary, has had a difficult but productive period since January 2005. There has been a reduction in operating losses of approximately 40% compared to the previous year. Membership growth of 70% has been achieved over the year, from 35,000 at the start of the year to the current level of 60,000. Despite the growth achieved and profits generated in January and February 2005, Destiny Health is expected to generate an operating loss of approximately $5 million for the 6 months ended 30 June 2005 as a result of the following factors: - The Company geared up for expansion into new markets with its joint venture partner, Guardian Life Insurance Company. The entry into these markets has been later than anticipated, and is only expected to occur in October 2005; and - During the period the decision was taken to transition the full back-office operations from the US to South Africa. This was successfully completed in June. However, this did result in duplication of functions and costs over the period. The administration efficiencies anticipated from the transitioning of these functions to South Africa are expected to be realised going forward. 5. The performance of the Discovery Card has been pleasing, with approximately 170 000 cards already in issue. It is expected that the Card will perform an important role in Discovery`s future product strategy. This announcement is prepared in compliance with the JSE Securities Exchange South Africa Listings Requirements (`Listing Requirements`). The forecast financial information on which this trading statement is based has not been reviewed and reported on by the Company`s auditors. Sandton 24 June 2005 Merchant bank and sponsor RAND MERCHANT BANK (A division of FirstRand Bank Limited) Discovery will be hosting a conference call for analysts and other interested parties at 12h00 (Midday - SA time) on 24 June 2005. Dial in details: South Africa 0800 200 648 United Kingdom 0800 917 7042 United States 1866 752 6302
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