Discovery trading update spooks market

Discovery. Price discovery in the case of Discovery Limited. A strange one, full of moving parts and perhaps prepared by smarter people than ourselves. The first part of yesterday's trading statement was all fine: "Shareholders are advised that normalised headline earnings per share are expected to be between 15% and 25% higher than that of the corresponding period." OK, that part looks pretty encouraging, seeing as this is for the full year to end June 2013. The results themselves are expected on the 3rd of September.


BUT!! Wait. There is more than that simple number above. "In the current period, Discovery has continued, as in prior periods, to focus on the progression of normalised headline earnings that excludes the accounting impact of the Standard Life Healthcare acquisition, the recapture of reinsurance and the accounting for the puttable non-controlling interest financial liability. Management is of the view that this best represents the underlying operating performance."


Huh? "The accounting for the puttable non-controlling interest financial liability." Seriously?!? Here goes an IFRS paper that I found that deals with this: IFRIC Interpretation X Put Options Written on Non-controlling Interests. My word...... Even in your best Brett Proctor "oh my word" you would not get to the bottom of that today. I can bet you that the company has already had their investor relations department swamped. If you are feeling moved, email Liz Figgie on the IFRS paper and ask her.


However, as a result of these two accounting entries, headline earnings are expected to be between 0 to 10 percent lower than the prior period. Phew. The market is dishing the stock a hammering, sending the levels back to levels 60 odd days ago. More on the company soonest, I suspect an overreaction, but that is always the case.