Integrated report 2019
Exxaro Resources Limited
Group and company annual financial statements
for the year ended 31 December 2019
12.1.1 ACCOUNTING POLICIES RELATING TO NET FINANCING COSTS AND INTEREST-BEARING BORROWINGS
Borrowing costs, finance income and other financing expenses
Fees paid on the establishment of loan facilities are capitalised to the loan as transaction costs to the extent that it is directly related to the establishment of the loan facility. In this case, the fee is deferred until the draw down occurs in which case it is amortised using the effective interest rate method. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down (ie revolving credit facility), the fee is capitalised as a prepayment and amortised over the period of the facility to which it relates.
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for its intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Finance income comprises interest income on cash and cash equivalents, finance leases, loans to joint ventures, indebtedness by subsidiaries as well as interest income on funds invested that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest rate method.
Finance expense comprises interest expense on borrowings, lease liabilities, unwinding of the discount rate on provisions, indebtedness to subsidiaries, recovery of unwinding of discount rate on rehabilitation costs and amortisation of transaction costs.
Fees and commission
Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or financial liability are included in the measurement of the effective interest rate. Other fees and commission expenses relate mainly to transaction and service fees and are expensed as the services are rendered.
Loans and borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost.
12.1.2 NET FINANCING (COSTS)/INCOME
| Group | Company | |||||||||||||||
| For the year ended 31 December | Note | 2019 Rm |
2018 Rm |
2019 Rm |
2018 Rm |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Finance income | 318 | 283 | 2 140 | 1 327 | ||||||||||||
| Interest income relating to: | 312 | 282 | 2 140 | 1 327 | ||||||||||||
| – Financial assets at amortised cost | 34 | 38 | 2 | |||||||||||||
| – Cash and cash equivalents | 212 | 188 | 159 | 151 | ||||||||||||
| – Financial assets at FVPL | 43 | 30 | ||||||||||||||
| – Non-financial assets | 3 | |||||||||||||||
| – Finance leases | 9 | 10 | ||||||||||||||
| – Indebtedness by subsidiaries | 17.3.3 | 1 979 | 1 176 | |||||||||||||
| – Loans to joint ventures | 11 | 16 | ||||||||||||||
| Commitment fee income | 6 | 1 | ||||||||||||||
| Finance costs | (355) | (605) | (1 890) | (1 114) | ||||||||||||
| Interest expense relating to: | (542) | (515) | (1 878) | (1 102) | ||||||||||||
| – Financial liabilities measured at amortised cost | (476) | (505) | (448) | (395) | ||||||||||||
| – Bank overdrafts | (27) | (3) | (27) | (3) | ||||||||||||
| – Non-financial liabilities | (3) | (6) | (6) | |||||||||||||
| – Indebtedness by subsidiaries | 17.3.3 | (1 364) | (704) | |||||||||||||
| – Lease liabilities | (36) | (1) | (33) | |||||||||||||
| Unwinding of discount rate on rehabilitation costs | 13.3 | (414) | (408) | (3) | (3) | |||||||||||
| Recovery of unwinding of discount rate on rehabilitation costs | 167 | 158 | ||||||||||||||
| Amortisation of transaction costs | (14) | (27) | (9) | (9) | ||||||||||||
| Borrowing costs capitalised1 | 10.1.3 | 448 | 187 | |||||||||||||
| Total net financing (costs)/income | (37) | (322) | 250 | 213 | ||||||||||||
| 1 Borrowing costs capitalisation rate: | 9.98% | 10.13% | ||||||||||||||
12.1.3 INTEREST-BEARING BORROWINGS
| Group | Company | ||||||||
| At 31 December | 2019 Rm |
2018 Rm |
2019 Rm |
2018 Rm |
|||||
|---|---|---|---|---|---|---|---|---|---|
| Interest-bearing borrowings | |||||||||
| Non-current1 | 6 991 | 3 843 | 6 991 | 3 233 | |||||
| Loan facility | 5 991 | 3 233 | 5 991 | 3 233 | |||||
| Bonds2 | 1 000 | 1 000 | |||||||
| Preference share liability3 | 610 | ||||||||
| Current4 | 50 | 571 | 50 | 572 | |||||
| Loan facility | 46 | 47 | 46 | 47 | |||||
| Bonds2 | 4 | 525 | 4 | 525 | |||||
| Preference share liability | (1) | ||||||||
| Total interest-bearing borrowings | 7 041 | 4 414 | 7 041 | 3 805 | |||||
| Summary by interest-bearing borrowings by period of redemption: | |||||||||
| Less than six months | 54 | 576 | 54 | 576 | |||||
| Six to 12 months | (4) | (5) | (4) | (4) | |||||
| Between one and two years | 2 744 | (10) | 2 744 | (9) | |||||
| Between two and three years | 3 605 | 3 242 | 3 605 | 3 244 | |||||
| Between three and four years | (1) | 611 | (1) | (2) | |||||
| Between four and five years | 643 | 643 | |||||||
| Total interest-bearing borrowings | 7 041 | 4 414 | 7 041 | 3 805 | |||||
| 1 The non-current portion represents: | 6 991 | 3 843 | 6 991 | 3 233 | |||||
| – Capital repayments | 7 000 | 3 863 | 7 000 | 3 250 | |||||
| – Reduced by the amortisation of transaction costs | (9) | (20) | (9) | (17) | |||||
| 2 New bonds issued during May 2019 | |||||||||
| 3 Capital redemption on preference share liability of: | 602 | 1 889 | |||||||
| 4 The current portion represents: | 50 | 571 | 50 | 572 | |||||
| – Capital repayments | 520 | 520 | |||||||
| – Interest capitalised | 59 | 61 | 59 | 61 | |||||
| – Reduced by the amortisation of transaction costs | (9) | (10) | (9) | (9) | |||||
| Group | Company | ||||||||
| At 31 December | 2019 Rm |
2018 Rm |
2019 Rm |
2018 Rm |
|||||
|---|---|---|---|---|---|---|---|---|---|
| Overdraft | |||||||||
| Bank overdraft | 976 | 1 531 | 976 | 1 046 | |||||
The bank overdraft is repayable on demand and interest is based on current South African money-market rates.
12.1.4 DETAILED ANALYSIS OF INTEREST-BEARING BORROWINGS
Below is a summary of the salient terms and conditions of the facilities:
| Loan facility | ||||||||
| Year | Bullet term loan | Amortised term loan |
Revolving facility |
|||||
| Aggregate nominal amount (Rm) | 2019 | 3 250 | 1 750 | 2 750 | ||||
|---|---|---|---|---|---|---|---|---|
| 2018 | 3 250 | 1 750 | 2 750 | |||||
| Issue date or draw down date | 29 July 2016 | 29 July 2016 | 29 July 2016 | |||||
| Maturity date | 29 July 2021 | 29 July 2023 | 29 July 2021 | |||||
| Capital payments | The total outstanding amount is payable on final maturity date | Four consecutive semi-annual instalments commencing on the date occurring 18 months prior to the final maturity date | The total outstanding amount is payable on final maturity date | |||||
| Duration (months) | 60 | 84 | 60 | |||||
| Secured or unsecured | Unsecured | Unsecured | Unsecured | |||||
| Undrawn portion (Rm) | 2019 | nil | 1 750 | nil | ||||
| 2018 | nil | 1 750 | 2 750 | |||||
| Interest | ||||||||
| Interest payment basis | Floating rate | Floating rate | Floating rate | |||||
| Interest payment period | Three months | Three months | Monthly | |||||
| Interest rate | JIBAR plus a margin of 325 basis points (3.25%) | JIBAR plus a margin of 360 basis points (3.60%) | JIBAR plus a margin of 325 basis points (3.25%) | |||||
| Effective interest rates for the | 2019 | 0.17% | N/A | N/A | ||||
| transaction costs | 2018 | 0.17% | 0.17% | N/A | ||||
| Closing rate of interest at | 2019 | 10.04% | nil | 9.63% | ||||
| 31 December | 2018 | 10.28% | nil | nil |
There were no defaults or breaches in terms of interest-bearing borrowings during the reporting periods.
Neither the company nor any of its subsidiaries are required to undertake any specified event(s) in respect of the interest-bearing borrowings.
The group is required to comply with the following financial covenants in terms of the loan facility:
1 For purposes of financial covenants, net debt is adjusted for pending litigation and other claims as well as other financial guarantees (refer note 13.4).
The group has complied with all the above mentioned contractually agreed financial covenants.
| DMTN programme (bonds) | ||||||
| Year | R357 million senior unsecured floating rate note |
R643 million senior unsecured floating rate note |
||||
| Aggregate nominal amount (Rm) | 357 | 643 | ||||
|---|---|---|---|---|---|---|
| Issue date or draw down date | 13 June 2019 | 13 June 2019 | ||||
| Maturity date | 13 June 2022 | 13 June 2024 | ||||
| Capital payments | No fixed or determined payments, the total outstanding amount is payable on final maturity date | No fixed or determined payments, the total outstanding amount is payable on final maturity date | ||||
| Duration (months) | 36 | 60 | ||||
| Secured or unsecured | Unsecured | Unsecured | ||||
| Interest | ||||||
| Interest-payment basis | Floating rate | Floating rate | ||||
| Interest-payment period | Three months | Three months | ||||
| Interest rate | JIBAR plus a margin of 165 basis points (1.65%) | JIBAR plus a margin of189 basis points (1.89%) | ||||
| Closing rate of interest at 31 December | 2019 | 8.45% | 8.69% | |||
12.1.5 NET DEBT
| Group | ||||
| 2019 Rm |
2018 Rm |
|||
| Net debt is presented by the following items on the statement of financial position: | ||||
| Non-current interest-bearing debt | (7 452) | (3 843) | ||
| Interest-bearing borrowings | (6 991) | (3 843) | ||
| Lease liabilities | (461) | |||
| Current interest-bearing debt | (77) | (573) | ||
| Interest-bearing borrowings | (50) | (571) | ||
| Lease liabilities | (27) | (2) | ||
| Net cash and cash equivalents | 1 719 | 549 | ||
| Cash and cash equivalents | 2 695 | 2 080 | ||
| Overdraft | (976) | (1 531) | ||
| Total net debt | (5 810) | (3 867) | ||
| Group | ||||||||
| Liabilities arising from financing activities |
||||||||
| Cash and cash equivalents/ (overdraft) Rm |
Non-current interest- bearing debt Rm |
Current interest- bearing debt Rm |
Total Rm |
|||||
| Net cash at 31 December 2017 | 6 617 | (6 480) | (68) | 69 | ||||
| Cash flows | (6 110) | 2 139 | 8 | (3 963) | ||||
| Operating activities | (54) | (54) | ||||||
| Investing activities | (3 195) | (3 195) | ||||||
| Financing activities | (2 861) | 2 139 | 8 | (714) | ||||
| – Interest-bearing borrowings raised | 14 | (14) | ||||||
| – Interest-bearing borrowings repaid | (2 161) | 2 139 | 22 | |||||
| – Shares acquired in the market to settle share-based payments | (467) | (467) | ||||||
| – Dividends paid to BEE Parties | (247) | (247) | ||||||
| Non-cash movements | 42 | 498 | (513) | 27 | ||||
| Amortisation of transaction costs | (27) | (27) | ||||||
| Preference dividend accrued | (1) | (1) | ||||||
| Interest accrued | 5 | 5 | ||||||
| Lease terminations | 5 | 3 | 8 | |||||
| Transfers between non-current and current liabilities | 494 | (494) | ||||||
| Translation difference on movement in cash and cash equivalents | 42 | 42 | ||||||
| Net debt at 31 December 2018 | 549 | (3 843) | (573) | (3 867) | ||||
| Cash flows | 1 171 | (3 148) | 553 | (1 424) | ||||
|---|---|---|---|---|---|---|---|---|
| Operating activities | (2 329) | (2 329) | ||||||
| Investing activities | 2 974 | 2 974 | ||||||
| Financing activities | 526 | (3 148) | 553 | (2 069) | ||||
| – Interest-bearing borrowings raised | 4 250 | (3 750) | (500) | |||||
| – Interest-bearing borrowings repaid | (1 622) | 602 | 1 020 | |||||
| – Lease liabilities paid | (33) | 33 | ||||||
| – Shares acquired in the market to settle share-based payments | (678) | (678) | ||||||
| – Dividends paid to BEE Parties | (1 391) | (1 391) | ||||||
| Non-cash movements | (1) | (461) | (57) | (519) | ||||
| Amortisation of transaction costs | (14) | (14) | ||||||
| Preference dividend accrued | 13 | 13 | ||||||
| Interest accrued | 2 | 2 | ||||||
| Lease remeasurements | (7) | (7) | ||||||
| New leases (including IFRS 16 adoption adjustment) | (524) | (524) | ||||||
| Lease terminations | 12 | 12 | ||||||
| Transfers between non-current and current liabilities | 57 | (57) | ||||||
| Translation difference on movement in cash and cash equivalents | (1) | (1) | ||||||
| Net debt at 31 December 2019 | 1 719 | (7 452) | (77) | (5 810) | ||||
| Company | ||||
| 2019 Rm |
2018 Rm |
|||
|---|---|---|---|---|
| Net debt is presented by the following items on the statement of financial position: | ||||
| Non-current interest-bearing debt | (7 439) | (3 233) | ||
| Interest-bearing borrowings | (6 991) | (3 233) | ||
| Lease liabilities | (448) | |||
| Current interest-bearing debt | (67) | (572) | ||
| Interest-bearing borrowings | (50) | (572) | ||
| Lease liabilities | (17) | |||
| Net cash and cash equivalents | 673 | (370) | ||
| Cash and cash equivalents | 1 649 | 676 | ||
| Overdraft | (976) | (1 046) | ||
| Total net debt | (6 833) | (4 175) | ||
| Company | ||||||||
| Liabilities arising from financing activities |
||||||||
| Cash and cash equivalents/ (overdraft) Rm |
Non-current interest- bearing debt Rm |
Current interest- bearing debt Rm |
Total Rm |
|||||
| Net debt at 31 December 2017 | 5 518 | (3 994) | (57) | 1 467 | ||||
| Cash flows | (5 903) | 250 | (5 653) | |||||
| Operating activities | (8 312) | (8 312) | ||||||
| Investing activities | 2 983 | 2 983 | ||||||
| Financing activities | (574) | 250 | (324) | |||||
| – Interest-bearing borrowings repaid | (250) | 250 | ||||||
| – Shares acquired in the market to settle share-based payments | (324) | (324) | ||||||
| Non-cash movements | 15 | 511 | (515) | 11 | ||||
| Amortisation of transaction costs | (9) | (9) | ||||||
| Interest accrued | 5 | 5 | ||||||
| Transfers between non-current and current liabilities | 506 | (506) | ||||||
| Translation difference on movement in cash and cash equivalents | 15 | 15 | ||||||
| Net debt at 31 December 2018 | (370) | (3 233) | (572) | (4 175) | ||||
| Cash flows | 995 | (3 750) | 535 | (2 220) | ||||
|---|---|---|---|---|---|---|---|---|
| Operating activities | (7 676) | (7 676) | ||||||
| Investing activities | 5 894 | 5 894 | ||||||
| Financing activities | 2 777 | (3 750) | 535 | (438) | ||||
| – Interest-bearing borrowings raised | 4 250 | (3 750) | (500) | |||||
| – Interest-bearing borrowings repaid | (1 020) | 1 020 | ||||||
| – Lease liabilities paid | (15) | 15 | ||||||
| – Shares acquired in the market to settle share-based payments | (438) | (438) | ||||||
| Non-cash movements | 48 | (456) | (30) | (438) | ||||
| Amortisation of transaction costs | (9) | (9) | ||||||
| Interest accrued | 3 | 3 | ||||||
| Lease remeasurements | (5) | (5) | ||||||
| New leases (including IFRS 16 adoption adjustment) | (475) | (475) | ||||||
| Transfers between non-current and current liabilities | 24 | (24) | ||||||
| Translation difference on movement in cash and cash equivalents | 48 | 48 | ||||||
| Net debt at 31 December 2019 | 673 | (7 439) | (67) | (6 833) | ||||
12.1.6 NOTES TO THE STATEMENTS OF CASH FLOWS RELATING TO NET FINANCING COSTS (PAID)/RECEIVED
| Group | Company | |||||||||||
| For the year ended 31 December | Note | 2019 Rm |
2018 Rm |
2019 Rm |
2018 Rm |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest received | 289 | 229 | 2 140 | 1 327 | ||||||||
| Finance income | 12.1.2 | 318 | 283 | 2 140 | 1 327 | |||||||
| Non-cash flow items | ||||||||||||
| – Interest income accrued not yet received | (20) | (44) | ||||||||||
| – Finance lease interest income adjustment | (9) | (10) | ||||||||||
| Interest paid | (558) | (518) | (1 881) | (1 107) | ||||||||
| Finance costs | 12.1.2 | (355) | (605) | (1 890) | (1 114) | |||||||
| Non-cash flow items | ||||||||||||
| – Unwinding of discount rate on rehabilitation costs | 13.3 | 414 | 408 | 3 | 3 | |||||||
| – Recovery of unwinding of discount rate on rehabilitation costs | (167) | (158) | ||||||||||
| – Amortisation of transaction costs | 14 | 27 | 9 | 9 | ||||||||
| – Borrowing costs capitalised | (448) | (187) | ||||||||||
| – | Finance costs capitalised to loans less finance costs paid and interest accrued not yet paid | (16) | (3) | (3) | (5) | |||||||
| Net financing costs (paid)/received | (269) | (289) | 259 | 220 | ||||||||
12.1.7 FINANCIAL LIABILITIES COMPOSITION
| Group | Company | ||||||||||
| At 31 December | Note | 2019 Rm |
2018 Rm |
2019 Rm |
2018 Rm |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-current financial liabilities | |||||||||||
| Financial liabilities at FVPL | 488 | 1 072 | |||||||||
| Contingent consideration | 488 | 488 | |||||||||
| Put option1 | 584 | ||||||||||
| Financial liabilities at amortised cost | 225 | 225 | |||||||||
| Deferred consideration payable2 | 225 | 225 | |||||||||
| Total non-current financial liabilities | 16.3 | 713 | 1 297 | ||||||||
| Current financial liabilities | |||||||||||
| Financial liabilities at FVPL | 191 | 362 | 191 | 361 | |||||||
| Contingent consideration | 191 | 361 | 191 | 361 | |||||||
| Derivative financial liabilities | 1 | ||||||||||
| Financial liabilities at amortised cost | 307 | 395 | 14 207 | 10 478 | |||||||
| Deferred consideration payable2 | 307 | 395 | 307 | 395 | |||||||
| Non-interest-bearing loans from subsidiary3 | 17.5 | 8 452 | 8 197 | ||||||||
| Treasury facilities with subsidiaries at amortised cost4 | 17.5 | 5 448 | 1 886 | ||||||||
| Total current financial liabilities | 498 | 757 | 14 398 | 10 839 | |||||||
| Total financial liabilities | 498 | 1 470 | 14 398 | 12 136 | |||||||
| 1 | Relates to Exxaro company’s obligation to repurchase shares from Eyesizwe in terms of the Replacement BEE Transaction. During 2019, the put option lapsed as the preference share liability was redeemed. |
| 2 | Deferred consideration payable in relation to the acquisition of the investment in Insect Technology and LightApp. |
| 3 | Loans granted by subsidiary companies which are interest free, unsecured and repayable on demand. |
| 4 | Treasury facilities with subsidiary companies have no repayments terms and are repayable on demand. Interest is charged at money-market rates. |
12.1.8 OTHER LIABILITIES COMPOSITION
| Group | Company | |||||||
| At 31 December | 2019 Rm |
2018 Rm |
2019 Rm |
2018 Rm |
||||
|---|---|---|---|---|---|---|---|---|
| Non-current | ||||||||
| Termination benefits1 | 144 | 51 | ||||||
| Income received in advance | 23 | 18 | 1 | |||||
| Total non-current other liabilities | 167 | 18 | 52 | |||||
| Current | ||||||||
| Termination benefits1 | 305 | 17 | 63 | |||||
| Leave pay | 203 | 171 | 24 | 15 | ||||
| Bonuses | 241 | 305 | 57 | 77 | ||||
| VAT | 21 | 86 | 20 | |||||
| Royalties | 9 | 50 | ||||||
| Current tax payables | 50 | 209 | 10 | |||||
| Other | 97 | 94 | 19 | 27 | ||||
| Total current other liabilities | 926 | 932 | 193 | 119 | ||||
| Total other liabilities | 1 093 | 950 | 245 | 119 | ||||
| 1 | During 2019, Exxaro announced the implementation of TVPs. Under this policy, employees that qualified would receive a severance package in exchange for termination of employment. Offers made by Exxaro to the targeted employees (who accepted the agreements) were signed by the end of 2019. |
