ROB ROSE: Cloud bursts on Discovery
A new analyst report adds to long-held talk that the company’s accounting is too aggressive. It couldn’t have come at a worse time
Adrian Gore must be wishing for a pretty big umbrella right now, as a cloudburst of bad news pours down on the insurance company he created in 1992. In the past week, Discovery’s share price has fallen 19.6%. Which, in round numbers, means R16.5bn has vaporised in value.
On the face of it, you’d imagine this would be mainly due to the government’s bull-headed insistence on ploughing ahead with National Health Insurance (NHI), the highly optimistic plan for universal health care, which all but destroys the business model for medical aids. Since Gore’s company made R6.9bn from "administering" the eponymous medical aid last year — equal to about 36% of its bottom-line profit — you can see the problem.