Discovery Limited (PDI.AX) Earnings Call Transcript & Summary

Okay. Ladies and gentlemen, good morning, and welcome to the 26th Discovery Limited Annual General Meeting. Proxies and representation representing 84% of the issued share capital of the company have now been received. Given that more than 3 members are present, we have a quorum. I therefore declare this meeting duly constituted. I declare this meeting open as the notice convening the meeting has been in your hands for the prescribed period since the 22nd of October 2025. I further propose that the notice be taken as read. With respect to Clause 25 of the memorandum of incorporation of the company, I propose that we conclude the 6 ordinary and 2 special resolutions together with the advisory votes by poll. The AGM is being webcasted through the Computershare platform where you can ask questions as well as cast your votes. At this time, I would like to acknowledge that Discovery Limited Board members who are in attendance. Adrian Gore, Barry Swartzberg, Bridget van Kralingen, Christine Ramon, Deon Viljoen, Lisa Chiume, Monhla Hlahla, Nolitha Fakude and Ricky Farber as well as the following Board Committee Chairpersons who are available to answer any questions you may have. Dave Macready, Chairperson of the Audit Committee; Faith Khanyile, Chairperson of the Rem and Social and Ethics Committee; and Marquerithe Schreuder, Chairman of the Group Risk and Compliance Committee. Before we proceed with the formal business of the meeting, I'd like to make a few opening remarks. Firstly, on the external environment, which we have been operating and the economic outlook; secondly, the group's performance; and thirdly, the group's diversity and succession planning. The global context has been marked by geopolitical complexities, global policy shifts and trade tensions. But based on the data released to date, global growth appears to be holding up. While inflation has eased in some countries and others, it has remained stubbornly high, affecting the pace and predictability of anticipated interest rate cuts [Audio Gap] generally favorable, providing good support to a number of our businesses. In South Africa, the Government of National Unity has provided a measure of political stability, though challenges remain. While growth remains under pressure, we are encouraged by the progress made in several key areas, particularly in energy availability through the government business partnership, which promotes inclusive economic growth. Separately, the United Kingdom's economic and fiscal outlook remains challenging. Demand for and utilization of private medical insurance continued, driven by national health service backlogs. China shifted to more actively supporting domestic consumption while seeking to navigate the changing trade environment. Bond and equity markets performed strongly. Looking ahead, we expect the external environment to remain highly uncertain in the year ahead with the group facing increasingly complex global risks. Secondly, let me talk about group performance. Notwithstanding this highly complex global and economic -- global economic and political context, Discovery delivered an excellent performance across all business units in the first year of the group's 5-year growth corridor. This was achieved through focused execution across our 2 composites, Discovery SA and Vitality. This yielded solid results with normalized profit from operations up by 29% and normalized headline earnings increasing by 30% to ZAR 9,781 million. For the period from the end of financial year 2024 to 2029, the group established a 5-year ambition to grow its profit from operations by an annual average compounded rate of 15% to 20%. Our strong performance in the first year of delivery has further strengthened the group's confidence in achieving our stated ambition. Finally, let me just talk about Board diversity and succession planning. As of 30th of June 2025, our Board comprised 12 directors, 9 nonexecutive and 3 executive. This number increased to 13 directors with effect from 1st September '25, following the appointment of a new nonexecutive, Nolitha Fakude, who is presented to the shareholders for election today through ordinary resolution 2.1. In 2020, we informed the shareholders through our nomination of directors, Board diversity and evaluation of directors' policy of the voluntary minimum targets we have set ourselves as 40% black and 30% female Board representation by 2025. As of 30th of September 2025, we are pleased to report a 38% representation of black directors compared to 29% in financial year '20 and against our minimum target of 40%. Furthermore, female representation at Board level is at 54% compared to 18% in financial year '20 and our minimum target of 30%. In June 2025, the Board approved the rollover of our diversity targets for the next 5 years. Ensuring that the Board has an appropriate and diverse set of skills to meet the many challenges faced by the group will continue to be a focus of our ongoing succession planning efforts. Let us now move to the formal business of the meeting. We will now transact the business of the AGM. Once again, I draw your attention to the notice of AGM published on the 22nd of October 2025. This notice sets out in some detail the business to be transacted at this meeting as well as the applicable procedures. I will take the notice as read. The voting will be opened until the end of the resolutions, and then we will take away any questions -- we will take any questions verbal and written for clarity purposes. The first order of business is the presentation of the annual financial statements. The summarized consolidated financial statements of the company are set out in Annexure 1, Pages 12 to 31. I will take these as read. The second order of business is the Audit Committee report. The report of the Audit Committee activities during the period under review is set out on Pages 3 to 7 of the annual financial statements and will be taken as read. The third order of business is the Social and Ethics Committee report. The report of the Social and Ethics Committee activities during the year under the review is set out on Page 30 of the governance report and will be taken as read. Let's now proceed to those items on the agenda, which are required to be voted upon. The ordinary and special resolutions of this meeting are being moved by Mr. Stuart Cohen and seconded by Ms. Jackie Symons. We will now table the respective resolutions for voting. I recommend that we do not take questions while I'm proposing the resolutions, but we will allow the opportunity for questions after all the resolutions have been tabled and before I close the voting. For those preferring written questions, may I request shareholders to start submitting their questions now. This can be done on the Q&A icon, typing your question into the text box and pressing send. For verbal questions, you'll be granted an opportunity to pose them at the appropriate time. Let's go to ordinary resolution 1, appointment of joint independent external auditors. These appointments are proposed by way of separate ordinary resolution. Ordinary Resolution 1.1 that KPMG is reappointed as the joint independent external auditor of the company as nominated by the company's Audit Committee until conclusion of the next AGM with Mr. Mark Danckwerts as the individual registered auditor who will undertake the audit. Ordinary Resolution 1.2 that Deloitte & Touche is reappointed as the joint independent external auditor of the company as nominated by the company's Audit Committee until conclusion of the next AGM with Mr. Stephen Munro as the individual registered auditor who will undertake the audit. Thank you. You may vote now. Ordinary Resolution 2, election and reelection of directors. The profile of the directors standing for election and reelection are set out in Annexure 2 on Pages 32 to 36. Ordinary Resolution 2.1, the election of Ms. Nolitha Fakude. The resolution reads as follows: Ms. Nolitha Fakude, who was appointed by the Board to serve as a director after the last AGM of the company be and is hereby elected as a Director of the company. Ordinary Resolution 2.2, reelection of Ms. Lisa Chiume. The resolution reads as follows: Ms. Lisa Chiume who is appointed by the Board to serve as a director, be and is hereby reelected by rotation as a Director of the company. Ordinary Resolution 2.3, reelection of Mr. Richard Farber. Resolution reads as follows: Mr. Richard Farber, who is appointed by the Board to serve as a director be and is hereby reelected by rotation as a Director of the company. Ordinary Resolution 2.4, reelection of Faith Khanyile. The resolution reads as follows: Faith Khanyile, who is appointed by the Board to serve as a director be and is hereby reelected by rotation as a Director of the company. Ordinary Resolution 2.5, reelection of Christine Ramon. The resolution reads as follows: Christine Ramon, who is appointed by the Board to serve as a director be and is hereby reelected by rotation as a Director of the company. Thank you. You may vote now. Okay. Moving on to ordinary resolutions 3.1 to 3.5, election of the Audit Committee members. The directors being put forward to discharge the responsibilities of the Audit Committee are as follows: 3.1, Mr. David Macready, Chairperson; 3.2, Ms. Lisa Chiume; 3.3, Ms. Monhla Hlahla; 3.4, Ms. Christine Ramon; and 3.5, Ms. Marquerithe Schreuder. Lisa will be appointed subject to her reelection as director pursuant to ordinary resolution 2.2 above. Similarly, Christine will be appointed subject to her reelection as a director pursuant to ordinary resolution 2.5 above. The profile of the directors standing for election to the Audit Committee are set out in Annexure 2 on Pages 32 to 36. The resolution reads as follows: Resolved that the following Nonexecutive director be and is hereby elected as a member of the Audit Committee from the conclusion of the AGM until the next AGM of the company. Ordinary resolution 3.1, election of Mr. David Macready. Ordinary resolution 3.2, election of Ms. Lisa Chiume. Ordinary resolution 3.3, election of Ms. Monhla Hlahla. Ordinary Resolution 3.4, election of Ms. Christine Ramon. Ordinary resolution 3.5, election of Ms. Marquerithe Schreuder. Thank you. You may vote now. Go to ordinary resolutions 4.1 to 4.6, election of the Social and Ethics Committee members. The Directors and Executive Committee members being put forward to discharge the responsibilities of the Social and Ethics Committee are as follows: 4.1 Faith Khanyile, Chairperson; 4.2 Monhla Hlahla; 4.3, Christine Ramon; 4.4 Nolitha Fakude; 4.5 Dr. Ayanda Ntsaluba; 4.6 Ms. Zimkhitha Saungweme. Nolitha will be elected subject to her election as a director pursuant to Ordinary Resolution 2.1 being approved by the requisite majority of directors. Faith will be elected subject to her reelection as a director pursuant to ordinary Resolution 2.4 being approved by the requisite majority of directors and Christine will be elected subject to her reelection as director pursuant to Ordinary Resolution 2.5 being approved by the requisite majority of shareholders. The profiles of the directors and Executive Committee members standing for election to the Social and Ethics Committee are set out in Annexure 2 on Pages 32 to 36. The resolution reads as follows: Resolved that the following Nonexecutive Director and Executive Committee member be and is hereby appointed as a member of the Social and Ethics Committee from the conclusion of the AGM until the next AGM of the company. Ordinary resolution 4.1, election of Faith Khanyile. Ordinary resolution 4.2, election of Monhla Hlahla. Ordinary resolution 4.3, election of Ms. Christine Ramon. Ordinary resolution 4.4, election of Nolitha Fakude. Ordinary resolution 4.5, Dr. Ayanda Ntsaluba. Ordinary resolution 4.6, election of Ms. Zimkhitha Saungweme. Thank you. You may vote now. Let's move to ordinary resolution 5, the general authority to issue preference shares. The detailed requirements for shareholders to give the Board authority to issue any of the 3 classes of preference shares have been fully disclosed in the notice of the AGM. I do not propose to read out these requirements. It is voted that shareholders provide requisite authority to the directors to issue up to: one, 10 million A preference shares; two, 12 million B preference shares; and three, 20 million C preference shares by passing the ordinary resolution 5.1. Thank you. You may vote now. Ordinary resolution 6, authority to implement special and ordinary resolutions. I propose that any director of the company or the company's secretary be and is hereby authorized to do all such things, sign all such documents and take all such actions as may be necessary for or incidental to the implementation of the ordinary and special resolutions to be proposed at the Annual General Meeting convened to consider this ordinary resolution. In terms of King V, shareholders of the company are provided with an opportunity to pass nonbinding advisory votes on the remuneration policy and the implementation report. The vote allows shareholders to express their views on the remuneration policies adopted and the implementation thereof, but it will not be binding on the company. Furthermore, King V recommends the remuneration policy should record the measures that the Board commits to in the event that either the remuneration policy or the implementation report or both have been voted against by 25% or more of the voting rights exercised by the shareholders. Nonbinding advisory vote 1, it is proposed to endorse the company's remuneration policy as set out in the remuneration report. Nonbinding advisory vote 2, it is proposed to endorse the company's implementation report as set out in the remuneration report, excluding the remuneration of the nonexecutive directors for their services as members of the Board. Thank you. You may vote now. Let's move to special resolutions. Special resolution #1, approval of nonexecutive directors' remuneration. A broad inflationary increase and where applicable, a market-related increase in fees is proposed for the next financial year, except for the Audit Committee Chairperson and members where 10% is recommended and the Group Risk and Compliance Committee Chairperson where a 15% increase is recommended, both of these following benchmarking exercises to inform our proposal and resolution. I propose that payment of the fees as set out on Page 6 of your AGM notice be approved as the basis for calculating the remuneration of the nonexecutive directors for their services as members of the Board for the financial year ending 30th of June 2026. Thank you, and you may vote now. I propose that the Board is hereby authorized by way of a renewable general authority in terms of the provisions of the JSE listing requirements, the Companies Act and as permitted in the company's MOI, to approve the repurchase of its ordinary shares by the company and the repurchase of ordinary shares in the company by any of its subsidiaries. Upon such terms and conditions and in such amounts as the Board may from time to time determine, but subject to the MOI of the company, the provisions of the Companies Act and the JSE listings requirements when applicable. The restrictions of the JSE prescribed have been included in the notice of the AGM, and I won't repeat them here. Thank you. You may vote now. Special Resolution 3, financial assistance in terms of Section 44. I propose that to the extent required by the Companies Act, the Board of Directors of the company may, subject to compliance with the requirements of the company's MOI, the Companies Act and the JSE listings requirements, each as presently constituted and as amended from time to time, authorize the company to provide direct or indirect financial assistance as contemplated in Section 4 of the Companies Act. The detail of the authorities has been included in the notice of this meeting, and I won't repeat it here. The authority shall endure until the forthcoming AGM of the company. Thank you. You may vote now. I propose that to the extent required by the Companies Act, the Board of Directors of the company may, subject to compliance [Audio Gap]