normalised earnings

We support the efforts of the accounting profession to achieve consistency in financial reporting. However, the application of IFRS 2 in respect of share-based payments has had the consequence of presenting earnings which do not fully reflect the economic performance of the underlying operations. To assist shareholders in their interpretation of the results, normalised headline earnings have been presented, which excludes the effect of the application of IFRS 2 share-based payments in respect of the GUS disposal.

In summary, at the time of listing, share awards and options were granted to employees. GUS Holdings BV (“GUS”), the then holding company, agreed to make available 4% of the issued shares for no consideration to meet these commitments. 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. The adoption of IFRS 2 resulted in a charge for the 2005 financial year of R10.8 million.

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 rules of the various schemes, the share awards and options vested immediately. In terms of IFRS 2, any accelerated vesting of the share awards and options requires immediate recognition of the unrecognised portion. The unrecognised portion to be immediately expensed through the income statement in this year is R58.4 million.

This charge arose from shares made available for no consideration by the former holding company and results in no economic cost or dilutionary effect to existing shareholders. The charge has no impact on operating performance, net asset value, cash position or gearing of the group.