Gore’s Des­tiny warn­ing

A bet­ter per­for­mance but un­cer­tainty pre­vails

Finweek English Edition - - Companies & markets - BRUCE WHIT­FIELD

DIS­COV­ERY CEO Adrian Gore has de­liv­ered his most cau­tious prog­no­sis yet on the fu­ture of loss-mak­ing US health sub­sidiary, Des­tiny Health. His warn­ings about the fu­ture of the busi­ness come de­spite lon­gawaited signs of a turn­around in the for­tunes of the US unit that cut its first half op­er­at­ing losses to De­cem­ber by 59% to R33m.

Gore said while the group re­mained op­ti­mistic about the prospects for the busi­ness in­ter­nally, he cau­tioned that the group had to be “re­al­is­tic” about its prospects.

“We have had a very dif­fi­cult time, we have not de­liv­ered, we have missed our num­bers, we have missed our tar­gets,” Gore said. In­vestors, how­ever, re­main vig­i­lant about the mount­ing losses in that mar­ket. The unit has con­sumed about R700m since its in­cep­tion seven years ago.

Gore said the busi­ness had un­der­gone a sig­nif­i­cant re-en­gi­neer­ing un­der its third CEO in seven years, with a new man­age­ment team that had suc­ceeded in sta­bil­is­ing the busi­ness. New busi­ness grew 10% to $65m (R460m) in the US, but mem­ber­ship re­duced by 7% to fewer than 60 000.

It’s not all doom and gloom how­ever; the new man­age­ment team has ag­gres­sively cut op­er­at­ing costs and has re­struc­tured its non-per­form­ing strate­gic part­ner­ships, the Guardian Life In­sur­ance Com­pany of Amer­ica and Tufts Health Plan. It means that Des­tiny will be able to sell its own prod­ucts in new mar­kets from the be­gin­ning of April, rather than be re­stricted by the part­ner­ship agree­ments it ini­tially signed.

FirstRand CEO Paul Har­ris, re­cently ap­pointed non-ex­ec­u­tive di­rec­tor at Dis­cov­ery, said: “Des­tiny en­joys too much air­time rel­a­tive to its im­por­tance to the group, but we do see light at the end of the tun­nel there.”

Dis­cov­ery’s early ex­pec­ta­tions for the Des­tiny busi­ness have not been met by de­liv­ery in the highly com­pet­i­tive US mar­ket. At the time of its launch, Gore her­alded the tim­ing of the en­try as “ideal” to cap­i­talise on the US con­sumer back­lash against man­aged health­care com­pa­nies in the US. But Des­tiny’s com­peti­tors have not stood still and the group has found the en­vi­ron­ment con­sid­er­ably more chal­leng­ing than South Africa, where it con­trols about 30% of the private health­care mar­ket, and in the UK arena where, al­though it’s still los­ing money, it’s mak­ing sig­nif­i­cant progress in its part­ner­ship with Pru­den­tial.

So much so, that it’s con­sid­er­ing launch­ing life prod­ucts in that mar­ket. The group said it was test­ing Dis­cov­ery Life prod­ucts in the UK pro­tec­tion mar­ket and said it could cre­ate a fu­ture plat­form to fur­ther pen­e­trate the Bri­tish mar­ket.

THE RERAT­ING OF DIS­COV­ERY

Source: I-Net Bridge

Cau­tiously op­ti­mistic. Adrian

Gore

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