| Mon 14 Nov 2005, 12:00 | | Lewis Group unaudited interim results for the six |
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Lewis Group unaudited interim results for the six months ended 30 September 2005
LEWIS GROUP LIMITED
Registration number: 2004/009817/06
Share code: LEW
ISIN: ZAE000058236
LEWIS GROUP UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005
HIGHLIGHTS
* MERCHANDISE SALES UP BY 14.5%
* NORMALISED OPERATING MARGIN UP FROM 22.8% TO 23.2%
* INTERIM DIVIDEND INCREASED BY 44.3%
* GROSS PROFIT MARGIN UP FROM 33.8% TO 35.5%
* HEADLINE EARNINGS PER SHARE
- NORMALISED: INCREASED BY 23.4%
- IFRS BASIS: DECREASED BY 9.8%
COMMENTARY
The Lewis Group is pleased to announce its interim results for the six-month
period ended 30 September 2005. The results have been prepared in compliance
with International Financial Reporting Standards (IFRS). Earnings reflect the
consequence of applying these accounting conventions.
NORMALISED EARNINGS
While we support the efforts of the accounting profession to achieve consistency
in financial reporting, the current position resulting from the application of
IFRS 2 share-based payments does not represent our current performance.
Consequently, to assist shareholders in the interpretation of the results,
normalised headline earnings reflecting the economic performance of the
underlying operations and excluding distortions created by accounting
conventions has been presented.
At the time of the listing, share awards and options were granted to qualifying
employees and executives to reward them for their contribution in bringing 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 future. GUS Holdings BV, 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 was 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 Lewis.
Sept % Sept March
2005 Change 2004 2005
Rm Rm Rm
Trading revenue 1 332.2 1 186.6 2 511.2
Normalised
operating profit 309.4 14.6 270.0 593.5
As per IFRS
income statement 251.0 270.0 582.7
Share-based payment
excluded 58.4 - 10.8
Normalised operating
margins 23.2% 22.8% 23.6%
Normalised profit
before finance costs 328.6 14.9 286.0 631.1
Normalised profit
before taxation 323.3 26.5 255.6 588.4
Normalised
attributable earnings 220.0 23.2 178.6 406.0
Normalised earnings
per share (cents) 222.5 24.6 178.6 406.0
Normalised headline
earnings per
share (cents) 219.7 23.4 178.1 400.9
TRADING ENVIRONMENT
The South African economy has matured appreciably and a solid platform has been
laid for growth through government"s disciplined fiscal stance. The stable
interest rate and inflation environment as well as real wage increases have
enhanced the disposable income of consumers.
The provision of infrastructure by the state and the announcement of the
intention to intensify spending in this area should accelerate private sector
activity and further stimulate growth.
The emerging black middle class, which forms the core of our target market,
continues to grow at a rapid rate and while key economic factors remain stable,
we expect consumer confidence and demand to continue to drive the current
favourable retail cycle.
FINANCIAL PERFORMANCE
The first half"s performance was shaped by the following major factors:
* Solid sales growth off a high base in the Lewis chain, combined with high
sales growths in Best Electric and Lifestyle Living.
* New store openings in all three chains are on track.
* Improved gross profit margins mainly due to enhanced product sourcing and
differentiation in the market.
* Maintaining the good quality of the credit book.
* Strong cash flow from trading. Gearing remains at low levels.
Income statement overview
Trading revenue increased by 12.3% to R1 332 million. This was driven by
merchandise sales growth of 14.5% to R724 million (11.1% on a like-for-like
basis). The Lewis chain grew merchandise sales by 10.6% to R617 million. Best
Electric sales grew by 31.9% from R55 million to R72 million. Lifestyle Living
posted strong growth of 75%, at R35 million.
Overall price deflation for the six months was 7.1% with an increase of 14.5% in
value and volume increasing by 21.6%. Furniture sales, which account for 48% of
total sales, increased by 7.8% in rand terms and 8.5% in unit sales. Sales of
electronic and electrical appliances increased by 21.6% in value and 31.8% in
volumes.
Cash and short-term credit sales have settled at current levels (30.8%). Lewis
chain reflected a 2% decline in cash business during the period. Lifestyle
Living has a much higher percentage of cash sales versus credit mainly due to
its market segment.
Net insurance revenue and finance charges earned grew by 10.3% and 7.3% to R187
million and R314 million respectively. The growth of both of these lines of
revenue was slower than the growth in merchandise sales due to the low interest
rate environment and the additional insurance reserves resulting from buoyant
trade.
The merchandise margin increased to 35.5% from 33.8% driven by competitive
supply chain initiatives.
Operating costs, excluding bad and doubtful debts and share-based payments
increased by 9.7% to R505 million. Certain costs have been incurred earlier than
anticipated, but it is envisaged that full year costs will be in line with
budget.
Bad debt charges at R46 million were R2 million lower than last year. The
increase in the impairment provision of R4 million compares to a release of R11
million in the corresponding period. This is a consequence of the growth in the
debtors book. The impairment provision as a percentage of gross instalment
debtors decreased from 15.3% to 14.2%.
Normalised operating profit grew by 14.6% to R309 million with the Group"s
normalised operating margin increasing from 22.8% to 23.2%, aided by the strong
sales growth and gross margin increases.
Finance costs declined by R25 million as a result of low gearing, low interest
rates and the cessation of interest payments to the former holding company.
Headline earnings on an IFRS basis decreased by 10.8% from R178 million to R159
million as a result of the share-based payment charge in terms of IFRS 2.
Normalised headline earnings increased by 22% from R178 million to R217 million.
Earnings per share and headline earnings per share presented on an IFRS basis
decreased by 8.6% and 9.8% respectively. Fully diluted earnings per share and
headline earnings per share decreased by 8.6% and 9.9%. This decline is
attributable to the share-based payment charge in terms of IFRS 2.
On a normalised basis, earnings per share and headline earnings per share
increased by 24.6% and 23.4% respectively. Similarly, fully diluted normalised
earnings per share and normalised headline earnings per share increased by 24.4%
and 23.2%.
Balance sheet
Inventory levels increased significantly as a consequence of our strategy to
advance imported stock deliveries, to take advantage of new merchandise
developments and buoyant trade. This was partly funded by an increase in trade
and other payables.
Gross instalment sale receivables increased by 5.2% to R2 735 million. The
increase in instalment sale receivables relative to revenue growth reflects the
quality of our debt collection and the current favourable credit environment.
Total debtors provisions have increased from 34.9% at September 2004 to 36.6% of
gross instalment receivables. This increase is due to accounting provisions for
unearned finance charges and insurance income that results from an increase in
sales volumes.
Cash flow
Lewis continues to generate significant cash. Effective follow-up and a
favourable credit environment were the main contributors to this position.
Following shareholder approval, the Group has commenced a general share
repurchase. This will be, as expected, earnings enhancing and further improve
our return on equity. To date, 2.1% of shares in issue have been repurchased at
an average market price of R43.51 per share and at a total cost of R92 million.
OPERATIONAL REVIEW
The focus during the past six months has been on further enhancing the
merchandise offering to attract new customers while continuing to retain
existing customers through our Re-serve system. Upgraded merchandise ranges were
added in response to customer demand and changing customer demographics.
Enhancements and improvements in credit granting and the behavioural scorecard
were implemented in our drive to further improve the quality of debtors. A
campaign to regain settled customers was introduced with very successful
results.
Sales in both the furniture and electrical categories have been good. The
electronics section (TVs, home theatre and DVDs) although achieving
substantially more unit sales, is still being affected by price deflation,
albeit at lower levels than last year.
The increased sales growth in all three chains is very encouraging.
During the period one Lewis store was opened and three small non-performing
stores were closed resulting in 398 stores at period-end. Lewis will open six
new stores in the second half of this financial year. Best Electric comprised 66
stores after opening eight new stores. A further four new stores will open this
year. The Lifestyle Living chain ended on 14 stores after it closed four old-
format stores and opened one new-format store.
The launch of the Lifestyle Living store card in June 2005 has been encouraging.
The financial services division products were further enhanced with a funeral
plan scheme being launched in July 2005.
Group trading revenue and normalised operating profit per square metre
increased, from the corresponding six-month period, by 12.4% to R6 451 and 14.8%
to R1 498 per square metre respectively.
The National Credit Bill was approved in parliament in October 2005. Draft
regulations governing interest rates etc. are due to be published during the
first quarter of 2006. Whilst the impact on the credit industry will be
significant, the company is confident that its leading-edge credit granting and
current IT systems will assist it in meeting the anticipated administrative
requirements of the Bill.
STRATEGY
Our focus remains on the following key strategic business initiatives:
* Generating profitable revenue growth through:
-increasing sales from existing stores using innovative merchandising and
marketing strategies; and
-expanding the store base;
* Driving operational efficiencies;
* Acquisitions that complement and add value to our business;
* Optimisation of the balance sheet; and
* Developing ancillary products through strategic partnerships.
PROSPECTS
The Lewis Board remains confident, based on the current momentum in the
business, that furniture, electrical and appliance sales will continue to grow
in real terms in the coming year.
Productivity will be enhanced further through economies of scale from the
inclusion of new stores and a continued focus on operational efficiencies.
Consequently, share owners can expect meaningful earnings growth.
DIRECTORATE
David Nurek, Alan Smart, Hilton Saven and Ben van der Ross remained directors
during the period. David Tyler resigned on 5 August 2005 and we are pleased to
announce the appointment of Professor Fatima Abrahams with effect from 1
September 2005.
DECLARATION OF INTERIM DIVIDEND NO. 3
The Board has approved an interim dividend which represents a two-and-a-half
times dividend cover (previously 3 times covered). The dividend has been
calculated on normalised earnings attributable to shareholders.
Notice is hereby given that an interim dividend of 88 cents per share in respect
of the period ended 30 September 2005 has been declared payable to the holders
of ordinary shares recorded in the books of the company on Friday 27 January
2006. The last day to trade cum dividend will therefore be Friday 20 January
2006 and Lewis shares will trade ex-dividend from Monday 23 January 2006.
Payment of the dividend will be made on Monday 30 January 2006. Share
certificates may not be dematerialised or rematerialised between Monday 23
January 2006 and Friday 27 January 2006, both days inclusive.
For and on behalf of the Board
David Nurek Alan Smart
Chairman Chief Executive Officer
Cape Town
14 November 2005
GROUP INCOME STATEMENT
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2005 2004 2005
Rm Rm Rm
Notes Unaudited Restated Restated
Trading revenue 2 1 332.2 1 186.6 2 511.2
Dividends and interest
income 21.0 26.8 46.8
Total revenue 1 353.2 1 213.4 2 558.0
Merchandise sales 2 724.0 632.5 1 351.9
Cost of merchandise sales (467.3) (418.7) (885.0)
Gross profit 256.7 213.8 466.9
Other trading revenue 2 608.2 554.1 1 159.3
Operating costs (613.9) (497.9) (1 043.5)
Employment costs (214.4) (194.5) (406.0)
Share-based payments (58.4) - (10.8)
Administration and IT (76.2) (71.1) (134.5)
Bad debts and impairment
provision 3 (50.7) (37.6) (101.6)
Marketing (48.5) (40.6) (79.6)
Occupancy costs (46.8) (42.8) (87.9)
Transport and travel (48.6) (42.2) (85.6)
Depreciation (21.5) (20.9) (36.9)
Other operating costs (48.8) (48.2) (100.6)
Operating profit 251.0 270.0 582.7
Investment income 19.2 16.0 37.6
Profit before finance costs 270.2 286.0 620.3
Net finance costs 4 (5.3) (30.4) (42.7)
Profit before taxation 264.9 255.6 577.6
Taxation (103.3) (77.0) (182.4)
Net profit attributable to
ordinary shareholders 161.6 178.6 395.2
Reconciliation of headline
earnings
Net profit attributable to
ordinary shareholders 161.6 178.6 395.2
Adjusted for
Profit on disposal of
property, plant and equipment (2.5) (1.9) (3.9)
Disposal/impairment of
available-for-sale assets (1.2) 1.0 (2.9)
Taxation effect 0.9 0.4 1.7
Headline earnings 158.8 178.1 390.1
Number of ordinary shares (000)
In issue 100 000 100 000 100 000
Weighted average 98 878 100 000 100 000
Fully diluted weighted average 99 004 100 000 100 000
Earnings per share (cents) 163.4 178.6 395.2
Headline earnings per share
(cents) 160.6 178.1 390.1
Fully diluted earnings
per share (cents) 163.2 178.6 395.2
Fully diluted headline
earnings per share (cents) 160.4 178.1 390.1
GROUP BALANCE SHEET
30 Sept 30 Sept 31 March
2005 2004 2005
Rm Rm Rm
Note Unaudited Restated Restated
Assets
Non-current assets
Property, plant and
equipment 156.0 159.5 159.5
Investments - insurance
business 433.6 381.9 400.6
Deferred taxation 86.7 - 48.7
676.3 541.4 608.8
Current assets
Investments - insurance
business 97.8 119.0 105.2
Inventories 248.5 168.5 155.8
Trade and other receivables 5 1 779.9 1 741.9 1 750.6
Cash on hand and deposits 88.4 58.4 55.3
2 214.6 2 087.8 2 066.9
Total assets 2 890.9 2 629.2 2 675.7
Equity and liabilities
Capital and reserves
Shareholders" equity
and reserves 2 130.8 1 880.7 2 059.6
Non-current liabilities
Interest-bearing borrowings 1.7 1.9 1.7
Deferred taxation 16.1 18.6 12.0
Retirement benefits 74.2 77.0 72.4
92.0 97.5 86.1
Current liabilities
Trade and other payables 335.2 251.5 225.2
Taxation 97.1 40.8 125.6
Current portion of
interest-bearing
borrowings 0.8 8.2 7.2
Overdrafts and short-term
interest-bearing borrowings 235.0 350.5 172.0
668.1 651.0 530.0
Total equity and liabilities 2 890.9 2 629.2 2 675.7
GROUP STATEMENT OF CHANGES IN EQUITY
Share Non-
capital and distributable Distributable
premium reserves reserves Total
Rm Rm Rm Rm
Balance at
30 September 2004
(restated) 676.9 27.2 1 176.6 1 880.7
Net profit
attributable to
ordinary shareholders - - 216.6 216.6
Fair value adjustments
of available-for-sale
investments, net of tax - 18.5 - 18.5
Profit on disposal of
available-for-sale
investments recognised,
net of tax - (3.1) - (3.1)
Share-based payment - 10.8 - 10.8
Transfer to contingency
reserve - 1.8 (1.8) -
Foreign currency
translation reserve
movement - (2.9) - (2.9)
Dividends paid - - (61.0) (61.0)
Balance at 31 March 2005
(restated) 676.9 52.3 1 330.4 2 059.6
Net profit attributable
to ordinary shareholders - - 161.6 161.6
Fair value adjustments
of available-for-sale
investments, net of tax - 29.3 - 29.3
Profit on disposal of
available-for-sale
investments recognised,
net of tax - (1.0) - (1.0)
Share-based payment - 58.4 - 58.4
Transfer of share-based
payment reserve to
retained income on vesting - (69.2) 69.2 -
Treasury shares:
Share repurchase
programme (92.0) - - (92.0)
Share Trust (0.3) - - (0.3)
Share awards to employees 0.2 - (0.2) -
Profit on sale of own
shares - - 2.3 2.3
Transfer to contingency
reserve - 1.4 (1.4) -
Foreign currency
translation reserve movement - (14.2) - (14.2)
Dividends paid - - (72.9) (72.9)
Balance at
30 September 2005 584.8 57.0 1 489.0 2 130.8
ABRIDGED GROUP CASH FLOW STATEMENT
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2005 2004 2005
Rm Rm Rm
Notes Unaudited Unaudited Audited
Cash flow from operating
activities
Cash flow from trading 7 337.9 295.1 610.7
Working capital movement 8 (33.9) 22.2 14.5
Cash generated from
operations 304.0 317.3 625.2
Dividends and interest
received 21.0 26.8 46.8
Interest paid (8.3) (305.4) (319.9)
Taxation paid (170.3) (128.3) (207.6)
Dividends paid (72.9) - (61.0)
Cash retained
from/(utilised by)
operating activities 73.5 (89.6) 83.5
Net cash outflow from
investing activities (7.0) (56.6) (53.0)
Net cash outflow from
financing activities (96.4) (504.7) (506.0)
Net decrease in cash and
cash equivalents (29.9) (650.9) (475.5)
Cash and cash equivalents
at the beginning of the period (116.7) 358.8 358.8
Cash and cash equivalents
at the end of the period (146.6) (292.1) (116.7)
GROUP SEGMENT REPORT
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2005 2004 2005
Rm Rm Rm
Unaudited Restated Restated
BUSINESS GROUPING
Trading revenue
Merchandise 1 145.6 1 017.4 2 153.6
Insurance 186.6 169.2 357.6
Total 1 332.2 1 186.6 2 511.2
Operating profit
Merchandise 231.8 201.2 449.7
Insurance 77.6 68.8 143.8
Total* 309.4 270.0 593.5
GEOGRAPHICAL
Revenue
South Africa 1 187.9 1 047.8 2 229.1
Botswana, Lesotho, Namibia
and Swaziland 144.3 138.8 282.1
Total 1 332.2 1 186.6 2 511.2
* The operating profit excludes the share-based payment.
NOTES TO THE GROUP INTERIM FINANCIAL STATEMENTS
1. Basis of accounting
These consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standards ("IFRS"), specifically IAS 34 on
interim financial reporting. The Group is adopting IFRS for the first time which
requires changes in accounting policies and the use of transitional arrangements
under IFRS. These have all been detailed in a separate section in this
announcement entitled: "Compliance with International Financial Reporting
Standards".
30 Sept 30 Sept 31 March
2005 2004 2005
Rm Rm Rm
Unaudited Restated Restated
2. Trading revenue
Merchandise sales 724.0 632.5 1 351.9
Other trading revenue 608.2 554.1 1 159.3
Finance charges earned 313.9 292.5 605.0
Net insurance income 186.6 169.2 357.6
Gross insurance income 261.1 234.5 501.0
Reinsurance premiums (74.5) (65.3) (143.4)
Fees for services rendered 107.7 92.4 196.7
1 332.2 1 186.6 2 511.2
3. Bad debts and impairment
provision
Bad debts, bad debt recoveries
and repossession losses 46.4 48.1 125.3
Movement in impairment provision 4.3 (10.5) (23.7)
50.7 37.6 101.6
4. Net finance costs
Interest paid:
- Fellow subsidiary - 32.8 32.8
- Bank and loans 5.8 7.4 17.8
- Other 2.5 - 4.2
Interest received:
- Bank (3.0) (9.8) (12.0)
- Other - - (0.1)
5.3 30.4 42.7
5. Trade and other receivables
Instalment sale and loan receivables 2 734.7 2 599.5 2 677.1
Provision for unearned finance
charges and unearned
maintenance income (452.8) (365.8) (414.4)
Impairment provision (389.7) (398.6) (385.4)
Provision for unearned
insurance premiums (159.8) (143.0) (154.4)
Unearned insurance premiums (263.9) (235.1) (254.9)
Less: reinsurer"s technical
reserves 104.1 92.1 100.5
Net instalment sale and
loan receivables 1 732.4 1 692.1 1 722.9
Other receivables 47.5 49.8 27.7
1 779.9 1 741.9 1 750.6
The credit terms of instalment
sale and loan receivables range
from 6 to 24 months. Amounts
due from instalment sale and
loan receivables after one year
are reflected as current, as they
form part of the normal operating
cycle.
6. Material capital commitments
There were no material capital
commitments contracted for or
authorised and contracted at
the end of the period under review.
7. Cash flow from trading
Operating profit 251.0 270.0 582.7
Adjusted for:
Depreciation and amortisation 21.5 20.9 36.9
Share-based payment 58.4 - 10.8
Profit on sale of property,
plant and equipment (2.5) (1.9) (3.9)
Movement in debtors impairment
provision 4.3 (10.5) (23.7)
Movement in retirement benefits
provisions 1.8 1.8 (2.8)
Movement in other provisions 3.4 14.8 10.7
337.9 295.1 610.7
8. Working capital movement
Increase in inventory (94.4) (19.1) (5.5)
(Increase)/decrease in trade
and other receivables (47.8) 20.4 21.9
Increase/(decrease) in trade and
other payables 108.3 20.9 (1.9)
(33.9) 22.2 14.5
KEY RATIOS FOR THE GROUP
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2005 2004 2005
Operating efficiency ratios
Merchandise gross profit % 35.5% 33.8% 34.5%
Normalised operating margin % 23.2% 22.8% 23.6%
Number of stores 478 472 475
Trading revenue per store (R000"s) 2 787 2 514 5 287
Normalised operating profit per store (R000"s) 647
572 1 249
Number of employees (average) 5 818 5 694 5 713
Trading revenue per
employee (R000"s) 229 208 440
Normalised operating profit
per employee (R000"s) 53 47 104
Trading space (sqm) 206 501 206 786 207 595
Trading revenue per sqm (R) 6 451 5 738 12 097
Normalised operating
profit per sqm (R) 1 498 1 305 2 859
Current ratios 3.3 3.2 3.9
Credit ratios
Cash and short-term credit
sales % of total sales 30.8% 31.0% 30.1%
Bad debts and impairment
charge as a % of the gross
debtors book 1.9% 1.4% 3.8%
Debtors impairment provision
as a % of gross instalment
receivables 14.2% 15.3% 14.4%
Total debtors provisions as
a % of gross instalment receivables 36.6% 34.9% 35.6%
Credit applications decline rate 24.6% 20.4% 20.5%
Average age of book (months) 14.5 14.7 14.8
Arrear % (full contractual) 25.0% 27.6% 25.7%
Shareholder ratios
Net asset value per share (cents) 2 131 1 881 2 060
Gearing ratio 7.0% 16.1% 6.1%
Normalised return on average equity 21.0% 20.8% 22.1%
Normalised return on average
capital employed 19.4% 17.0% 18.5%
Notes:
1. All ratios are based on figures at the end of the period unless otherwise
disclosed.
2. For the applicable ratios, revenue will be the trading revenue.
3. Where a ratio is referred to as normalised, the earnings used in that ratio
will exclude the share-based payment.
4. Employees reflect only permanent employees.
5. Normalised ROE for September 2004 and March 2005 have been restated to
exclude the effects of the restructuring prior to listing.
COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
In accordance with the requirements of the JSE the Group has adopted
International Financial Reporting Standards from 1 April 2005. These standards
are subject to ongoing review and interpretation by the International Accounting
Standards Board. Consequently, IFRS information at year-end may differ from the
information contained herein.
In complying with IFRS, comparative information has been restated and the
following accounting policy changes made:
1. IFRS 1: Transitional Arrangements (1 April 2004)
1.1 Fair Value as Deemed Cost
The Group elected to apply the fair value of land and buildings as deemed cost.
Accordingly, depreciation previously provided has been reversed. Deferred tax
has been provided on the revalued amount at the income tax rate.
1.2 Employee Benefits
Unrecognised actuarial gains and losses at the date of transition has been
recognised and charged against retained income.
1.3 Cumulative Translation Differences
Foreign currency adjustments arising on the translation of foreign operations
("FCTR") will continue to be recognised directly in equity. The balance on the
FCTR was reset to zero at transition.
1.4 Designation of Financial Instruments
Gilts held by Monarch Insurance Company have been designated as available-for-
sale (previously recognised as fair value through profit and loss).
2. Income Statement Reclassifications
In terms of IAS 1, the following material reclassifications were made in the
income statement with comparatives restated accordingly:
- Insurance premiums paid to reinsurers are deducted from insurance premiums
written. This was previously included in cost of sales. In addition, reinsurance
commissions received have been included in revenue.
- Settlement discounts have been reclassified to cost of sales with an
appropriate adjustment to inventory valuation under IAS 2.
3. IFRS 2: Share-based Payments
In accordance with IFRS 2, share-based payments are recognised as an expense in
the income statement over the vesting period with a corresponding credit to
equity.
4. IAS 17 - Property Leases
In terms of IAS 17 and SAICA Circular 7/2005 operating leases with fixed
escalations have been recognised as an expense on a straight-line basis over the
lease term and not on the basis of the cash outflows as in previous years.
5. IAS 16 - Property, Plant and Equipment
Depreciation will be provided on buildings at deemed cost (refer 1.1). The
residual value will be reassessed at each balance sheet date.
The effect of adopting IFRS is reflected below:
IFRS Income Statement Impact 31 March 30 Sept
2005 2004
Rm Rm
As previously reported 408.9 181.7
Employee benefits - IFRS 1 2.3 -
Designation of financial instruments - IFRS 1 (5.6) (3.2)
Share-based payments - IFRS 2 (10.8) -
Occupancy cost - IAS 17 0.8 0.3
Depreciation - IAS 16 (0.1) 0.2
Settlement discount in inventory - IAS 2 (0.3) (0.4)
As reported under IFRS 395.2 178.6
IFRS Impact on Shareholders" Equity
31 March 30 Sept 1 April
2005 2004 2004
Rm Rm Rm
As previously reported 2 059.4 1 883.1 1 310.0
Fair value deemed as cost - IFRS 1 34.7 34.7 34.7
Employee benefits - IFRS 1 (25.2) (27.5) (27.5)
Occupancy cost - IAS 17 (6.2) (6.7) (7.0)
Depreciation - IAS 16 (0.1) 0.2 -
Settlement discount in
inventory - IAS 2 (3.0) (3.1) (2.7)
As reported under IFRS 2 059. 6 1 880.7 1 307.5
Executive director: AJ Smart (Chief Executive Officer)
Non-executive directors: DM Nurek* (Chairman), H Saven*,
B van der Ross*, F Abrahams*
* Independent
Company secretary: PB Croucher
Registered office: 53A Victoria Road, Woodstock, 7925
Registration number: 2004/009817/06
Share code: LEW
ISIN: ZAE000058236
Transfer secretaries: Computershare Investor Services 2004
(Pty) Ltd, 70 Marshall Street,
Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Auditors: PricewaterhouseCoopers Inc.
Sponsor: UBS South Africa (Pty) Ltd
These results are also available on our website: www.lewisgroup.co.za
Date: 14/11/2005 12:00:31 PM Produced by the JSE SENS Department
