Lewis Group Limited - Accounting For Share Based Payments Under IFRS 2

Lewis Group Limited - Accounting For Share Based Payments Under IFRS 2          
Lewis Group Limited                                                             
Registration number:  2004/009817/06                                            
Share code: LEW                                                                 
ISIN: ZAE000058236                                                              
ACCOUNTING FOR SHARE BASED PAYMENTS UNDER IFRS 2                                
Background                                                                      
Prior to the listing of Lewis Group Limited ("Lewis") on the JSE Limited, GUS   
Holdings BV ("GUS") its then holding company agreed to make available to the    
Lewis Employee Share Incentive Trust, 4% of its share holding in Lewis, for no  
consideration.                                                                  
At the time of the listing, share awards and options were granted to qualifying 
employees and executives to reward them for their contribution in taking Lewis  
to the listing, to align the interests of employees with the interests of Lewis 
and its shareholders and to provide them with an incentive to further advance   
the interests of Lewis in the future.                                           
On 26 May 2005, GUS sold its remaining 50% interest in Lewis.  This sale        
resulted in a change in control and in terms of the scheme rules the awards and 
options vested immediately.                                                     
Accounting treatment in terms of IFRS 2                                         
In terms of IFRS 2, notwithstanding that the awards and options were granted at 
no cost to Lewis, share based payments are required to be expensed over the     
vesting period.  Any accelerated vesting of the options and awards requires     
immediate recognition of the unrecognised portion.                              
David Nurek, Non-executive Chairman of the Board commented:                     
"Whilst we recognise the need to comply with IFRS standards, these rule based   
statements leave little room for any exception to the rules.  It is             
incomprehensible to consider that a substantial charge will be taken against    
income which arises exclusively from the generosity of the former holding       
company and the efforts of executives in procuring the listing.  This charge    
will have no bearing on current operating performance and it is our intention to
correct this misleading presentation in our financial statements so as to       
reflect normalised earnings."                                                   
Lewis wishes to bring to the attention of shareholders that the IFRS 2          
presentation will have the following effect:-                                   
1.   Impact on Earnings                                                         
The recognition of the share based payments as an expense will decrease headline
earnings and headline earnings per share for the financial results for the year 
ending 31 March 2006 and the comparative year ended March 2005 as follows:      
31 March            31 March       

                                             2006                2005           
Reduction in headline earnings               R58.4 million       R10.8 million  
Reduction in headline earnings per share     59.2 cents          10.8 cents     
2.   No Impact on sustainable earnings                                          
The accounting treatment of the above share based payment is not pertinent to   
ongoing operations.  Furthermore it is a non-recurring expense and will have no 
effect on future years earnings.                                                
In addition, there is also no economic cost or dilutionary effect to existing   
shareholders as the cost of the awards and options were funded by GUS and the   
shares were already in issue.  Consequently, the charge should not be taken into
account in determining the sustainability of earnings of Lewis.                 
3.   No Impact of Dividends                                                     
The dividends for the year ended 31 March 2006 will be calculated on the        
earnings after adding back the charge for the share based payments.             
4.   No Impact on Cash and Gearing                                              
The share based payment has no impact on the cash position and gearing ratios of
Lewis as GUS bore the cost of the awards and options.                           
5.   No Impact on Asset Value or Shareholders Funds                             
The above accounting treatment has no impact on the total equity and liabilities
nor the total assets of Lewis as GUS bore the cost of the awards and options.   
Cape Town                                                                       
14 September 2005                                                               
Sponsor: UBS                                                                    
Date: 14/09/2005 04:00:09 PM Supplied by www.sharenet.co.za                     
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