6.1 Operational performance

6.1.1 ACCOUNTING POLICIES RELATING TO OPERATIONAL PERFORMANCE

6.1.1.1 Revenue

Revenue is derived from contracts with customers for the supply of goods and rendering of services.

Timing of recognition

Revenue is recognised when (or as) Exxaro satisfi es a performance obligation by transferring a promised good or service to a customer. A promised good or service is transferred when (or as) the customer obtains control of that promised good or service.

Measurement on recognition

The amount of revenue recognised is the amount of the transaction price that is allocated to a satisfi ed performance obligation. The amount is determined on a gross basis, when Exxaro acts as a principal, or on a net basis when Exxaro acts as an agent.

The total transaction price in a customer contract is allocated to the performance obligations identifi ed in the contract based on their standalone selling prices. The standalone selling prices are determined based on listed prices at which those goods or services are sold in separate transactions. Exxaro’s contracts with customers generally contain only one performance obligation and therefore the contract consideration generally refl ects the standalone selling price of the performance obligation.

As a permitted practical expedient, no adjustment is made to the transaction price for the effects of the time value of money as the period of time between the delivery of goods or rendering of services and receipt of payment ranges between two weeks and 60 days, which is considered not to result in a signifi cant fi nancing component.

Nature of goods and services

Below is a summary of the different types of revenue depicting the standard terms and performance obligations for each type:

Revenue type			Performance obligation			Timing of when performance obligation is satisfied			Payment terms
Coal (domestic supply)			Delivery of coal at a contractually agreed upon delivery point			On delivery (point in time)			Range: 15 to 60 days
Coal (FOB export supply)			Delivery of coal at a contractually agreed upon delivery point			On delivery (point in time)			Range: 15 to 60 days
Coal (CFR export supply)			Delivery of coal at a contractually agreed upon delivery point			On delivery (point in time)			Range: 15 to 60 days
			Rendering of freight services over time			As services are performed (over time)			Range: 15 to 60 days
Ferrosilicon			Delivery of ferrosilicon at a contractually agreed upon delivery point			On delivery (point in time)			Range: 15 to 60 days
Biological goods			Delivery of biological goods at a contractually agreed upon delivery point			On delivery (point in time)			Range: 15 to 60 days
Stock yard management services			Rendering of stock yard management services over time			As services are performed (over time)			Within 30 days
Project engineering services			Rendering of project engineering services over time			As services are performed (over time)			Within 30 days
Other mine management services			Rendering of other mine management services over time			As services are performed (over time)			Within 30 days
Transportation services			Rendering of freight or other transportation services over time (including CFR basis for exports and special transportation arrangements by customers)			As services are performed (over time)			Range: 15 to 60 days
Corporate management services (company)			Rendering of corporate services over time			As services are performed (over time)			Within 30 days
Other services			Mainly rendering of storage services over time			As services are performed (over time)			Within 30 days

6.1.1.2 Discontinued operations

Discontinued operations are significant, distinguishable components of an operation that have been sold, abandoned or are the subject of formal plans for disposal or discontinuance. The profit or loss on the sale or abandonment of a discontinued operation is determined from the formalised discontinuance date and accounted for in profit or loss.

6.1.2 REVENUE

Revenue is derived from contracts with customers. Revenue has been disaggregated based on timing of revenue recognition, major type of goods and services, major geographic area and major customer industries.

	Group
	Coal					Ferrous		Other
	Commercial
For the year ended 31 December 2019	Waterberg  Rm	Mpumalanga  Rm	Tied Rm	Other Rm		Alloys Rm		Other Rm			Total Rm
Segmental revenue reconciliation
Segmental revenue based on origin of coal production	14 012	7 240	4 038	292		130		14			25 726
Export sales allocated to selling entity	(1 494)	(5 468)		6 962
Total revenue from contracts with customers	12 518	1 772	4 038	7 254		130		14			25 726
By timing and major type of goods and services
Sale of goods at a point in time	12 518	1 721	3 414	6 870		122		12			24 657
Coal	12 518	1 721	3 414	6 870							24 523
Ferrosilicon						122					122
Biological goods								12			12
Rendering of services over time		51	624	384		8		2			1 069
Stock yard management services			130								130
Project engineering services			494								494
Other mine management services				292							292
Transportation services1		51		92		2					145
Other services						6		2			8
Total revenue from contracts with customers	12 518	1 772	4 038	7 254		130		14			25 726
By major geographic area of customer2
Domestic	12 518	1 772	4 038	292		130		13			18 763
Export				6 962				1			6 963
Europe				3 617				1			3 618
Asia				3 159							3 159
Other				186							186
Total revenue from contracts with customers	12 518	1 772	4 038	7 254		130		14			25 726
By major customer industries
Public utilities	10 211	1 009	4 038	467							15 725
Merchants	179	326		6 475							6 980
Steel	1 378	68		43							1 489
Mining	81	133		266		103					583
Manufacturing	279					24					303
Food and beverage	200							1			201
Chemicals		167									167
Cement	148										148
Other	42	69		3		3		13			130
Total revenue from contracts with customers	12 518	1 772	4 038	7 254		130		14			25 726

1	Relates mainly to the rendering of export freight services over time (in terms of incoterm CFR) and separate transport requests from customers.
2	Determined based on the customer supplied by Exxaro.

	Group
	Coal				Ferrous	Other
	Commercial
For the year ended 31 December 2018 (Re-presented)1	Waterberg  Rm	Mpumalanga  Rm	Tied Rm	Other Rm	Alloys Rm	Other Rm	Total Rm
Segmental revenue reconciliation
Segmental revenue based on origin of coal production	13 289	7 984	3 665	364	169	20	25 491
Export sales allocated to selling entity	(1 796)	(6 254)		8 050
Total revenue from contracts with customers	11 493	1 730	3 665	8 414	169	20	25 491
By timing and major type of goods and services
Sale of goods at a point in time1	11 493	1 730	3 145	8 050	163	16	24 597
Coal1	11 493	1 730	3 145	8 050			24 418
Ferrosilicon					163		163
Biological goods						16	16
Rendering of services over time1			520	364	6	4	894
Stock yard management services			224				224
Project engineering services1			296				296
Other mine management services				364			364
Transportation services
Other services					6	4	10
Total revenue from contracts with customers	11 493	1 730	3 665	8 414	169	20	25 491
By major geographic area of customer2
Domestic	11 493	1 730	3 665	364	169	15	17 436
Export				8 050		5	8 055
Europe				4 920		2	4 922
Asia				2 455		3	2 458
Other				675			675
Total revenue from contracts with customers	11 493	1 730	3 665	8 414	169	20	25 491
By major customer industries
Public utilities	9 101	301	3 665	701			13 768
Merchants	141	835		6 458			7 434
Steel	1 557	165		36			1 758
Mining	88	43		747	144		1 022
Manufacturing	291	33		101	22		447
Cement	156	202					358
Food and beverage	89						89
Chemicals		96					96
Other	70	55		371	3	20	519
Total revenue from contracts with customers	11 493	1 730	3 665	8 414	169	20	25 491

1	Represented for a separate performance obligation identified in the sale of coal contract, being the project engineering services. There has been no impact on the amount of revenue recognised as both performance obligations have been fulfilled during the year.
2	Determined based on the customer supplied by Exxaro.

The group derives revenue from an external customer which accounts for at least 10% or more of the group’s revenues, being 61% or R15 508 million (2018: 53% or R13 394 million). The revenue from this customer was included in the tied coal, commercial coal (both Waterberg and Mpumalanga) and other coal operations.

			Company
For the year ended 31 December	Note		2019 Rm		2018 Rm
Rendering of services over time
Corporate management services rendered to subsidiaries	17.3.1		2 164		1 777
Total revenue from contracts with customers			2 164		1 777

6.1.3 OPERATING EXPENSES

	Group				Company
For the year ended 31 December	2019  Rm		2018  Rm		2019  Rm		2018  Rm
Cost by nature
Operational expense items
Raw materials and consumables	3 760		3 175		91		19
Depreciation and amortisation	1 912		1 582		129		77
Movement in inventories	(103)		226
Staff costs	5 248		4 622		893		831
Other employee-related costs	231		165		75		24
Contract mining	2 308		1 818
Repairs and maintenance	2 251		2 213		26		7
Railage and transport	2 353		1 787		1		1
Insurance	206		161		2		2
Exploration expenditure	7		9
Royalties	459		427
Water	153		138		1		1
Energy	679		632		5		8
Information management costs	515		373		453		327
Legal and professional fees	742		776		538		483
Movement in provisions	141		(175)		(3)		(1)
Travel and subsistence	95		88		39		36
Security and office cleaning services	128		117		3		3
Licences	5		4
Stock yard management services	130		224
Project engineering services	494		296
Financial gains or losses
Currency exchange differences	(101)		83		(103)		142
Loss on disposal of financial asset at fair value through profit or loss			2
Write-off of trade and other receivables and indebtedness by subsidiaries	10		7				2
Expected credit losses on financial assets at amortised cost	165		64		15
Fair value (gains)/losses on financial assets at fair value through profit or loss	(195)		71		(26)
Fair value (gains)/losses on financial liabilities at fair value through profit or loss	(296)		357		(308)		358

 

			Group				Company
For the year ended 31 December	Note		2019  Rm		2018 Rm		2019  Rm		2018  Rm
General items and expenses
Gain on the disposal of operation1			(76)		(102)
Loss on loss of control of subsidiary	8.3		35
Gain on disposal of subsidiaries					(69)
Loss on dilution of investment in associates	9.5		42
Gain on disposal of associate	8.3		(270)				(506)
Insurance recoveries for business interruption			(99)
Insurance recoveries for property, plant and equipment			(49)		(57)
Net (gains)/losses on disposal of property, plant and equipment					(122)		18		(47)
Impairment charges relating to investment in associate	9.4		58				58
Impairment reversal relating to property, plant and equipment	10.1.3		(23)
Inventories write-down to net realisable value			12
Expenses relating to short-term leases			180				14
Expenses relating to leases of low-value assets			11				10
Operating lease rental expenses					232				33
Operating lease income			(39)		(37)		(5)
Gain on termination of lease			(1)
Research and development costs			4		1		3		1
Own work capitalised2			(782)		(155)				(1)
General charges			1 157		855		136		190
Total operating expenses			21 457		19 788		1 559		2 496

1	2019 relates to the disposal of the Paardeplaats mining right which formed part of the NBC operation. 2018 relates to the sale of certain assets and liabilities of the NBC operation.
2	Relates to operating expenses incurred that are capitalised to projects where qualifying criteria are met.

			Group											Company
For the year ended 31 December	Note				2019  Rm				2018  Rm							2019  Rm				2018  Rm
Further disaggregation of certain operating expense items:
Staff costs					5 248				4 622							893				831
– Salaries and wages					4 080				3 785							569				529
– Share-based-payment expense					266				405							166				268
– Termination benefits1					476				45							120
– Pension and medical costs					426				387							38				34
Consultancy fees2					634				680							465				431
External auditor’s remuneration2					36				32							19				17
– Audit fees					28				26							13				13
– Other services					8				6							6				4
Depreciation and amortisation					1 912				1 582							129				77
– Depreciation of property, plant and equipment	10.1.3				1 849				1 579							86				75
– Depreciation of-right-of-use-assets	11.4				59											41
– Amortisation of intangible assets					4				3							2				2
Movement in provisions					141				(175)							(3)				(1)
– Movement in environmental rehabilitation and site closure cost provisions	13.3				127				(194)							(3)				(1)
– Movement in retirement employee obligation	14.4				14				19
ECLs on financial assets at amortised cost (impairment losses/(reversal of impairment losses)):					165				64							15				(2)
Non-current
Other financial assets at amortised cost					3				(2)
– Non-performing					3				(2)
Non-interest-bearing loans to subsidiaries																				3
– Non-performing																				3
Current
Trade and other receivables					111				67							11
Trade receivables					14				13
– Performing					(3)				1
– Under-performing					1
– Non-performing					16				12
Other receivables					97				54							11
– Non-performing					97				54							11
Indebtedness by subsidiaries																				(1)
– Non-performing																				(1)
Non-interest-bearing loans to subsidiaries																2
– Performing																1
– Non-performing																1
Other financial assets at amortised cost					1				(1)							1				(2)
– Performing									1
– Non-performing					1				(2)							1				(2)
Loans to associates					49
– Under-performing					49
ESD loans					1											1
– Performing					1											1
Further aggregation of certain operating expense items
Fair value (gains)/losses recognised on financial assets at FVPL					(195)				71							(26)
– Equity investments									8
– Derivative financial assets					(19)				62							33
– Debt investments					(176)				1							(59)
Fair value (gains)/losses recognised on financial liabilities at FVPL					(296)				357							(308)				358
– Put option																(12)				1
– Contingent consideration3					(296)				357							(296)				357
Currency exchange differences					(101)				83							(103)				142
– Net realised losses/(gains)					9				(42)							(19)				22
– Net (gain)/loss on translation differences recycled to profit or loss4					(7)				(14)							3
– Net unrealised (gains)/losses					(103)				139							(87)				120
Operating lease rental expenses									232											33
– Property									25											20
– Equipment									207											13
					459											120

1	Includes the following amounts for the TVPs:
2	Disclosed as part of legal and professional fees.
3	Relates to the ECC acquisition.
4	Relates to recycling of FCTR on deregistration of Exxaro Australia Iron Investments Proprietary Limited (gain of R10 million) and foreign entity (loss of R3 million).

6.1.4 DISCONTINUED OPERATIONS

Tronox Holdings

On 30 September 2017, Exxaro classified the Tronox Limited investment as a non-current asset held-for-sale (refer note 8.4). During March 2019, Tronox Limited redomiciled from Australia to the UK by “top-hatting” Tronox Limited with a new holding company incorporated under the laws of England and Wales called Tronox Holdings plc. Each Tronox Limited shareholder received one share in the newly incorporated company in exchange for each share held in the Australian-incorporated Tronox Limited, which shares are listed on the New York Stock Exchange. On 9 May 2019, Tronox Holdings plc repurchased 14 000 000 shares from Exxaro. The remaining investment in Tronox Holdings plc is still classified as a non-current asset held-for-sale.

It was concluded that the related performance and cash flow information be presented as a discontinued operation as the Tronox Holdings plc investment represents a major geographical area of operation as well as the majority of the TiO₂ reportable operating segment.

Black Mountain

On 30 November 2019, Exxaro classified the Black Mountain investment as a non-current asset held-for-sale (refer note 8.4). It was concluded that the related performance and cash flow information be presented as a discontinued operation as Black Mountain investment represents the base metal operating segment which management view to be a separate major operation.

Financial information relating to the discontinued operations are set out below:

	Group										Company
For the year ended 31 December			2019  Rm		2018  Rm						2019  Rm		2018  Rm
Financial performance
Losses on financial instruments revaluations recycled to profit or loss			(1)
Net gains on translation differences recycled to profit or loss on partial disposal of investment in foreign associate			832
Indemnification asset movement1			65								65
Gain/(loss) on remeasurement to fair value less costs of disposal2											723		(2 884)
Operating profit/(loss)			896								788		(2 884)
Gain on partial disposal of associate			1 234								1 317
– Cash consideration			2 889								2 889
– Carrying value of investment sold			(1 655)								(1 572)
Net operating profit/(loss)			2 130								2 105		(2 884)
Share of income of equity-accounted investment3			52		70
Dividend income received from non-current assets held-for-sale			47		69						47		69
Profit/(loss) before tax			2 229		139						2 152		(2 815)
Income tax expense			(65)								(65)
Profit/(loss) for the year from discontinued operations			2 164		139						2 087		(2 815)
Other comprehensive (loss)/income, net of tax			(830)		2
Items that have subsequently been reclassified to profit or loss:			(831)
– Recycling of share of other comprehensive income of equity-accounted investments			(831)
Items that will not be reclassified to profit or loss:			1		2
– Share of other comprehensive income of equity-accounted investments			1		2
Total comprehensive income/(loss) for the year			1 334		141						2 087		(2 815)
Cash flow information
Cash flow attributable to investing activities			47		69						47		69
Proceeds from partial disposal of associate classified as non-current asset held-for-sale			2 889								2 889
Cash flow attributable to discontinued operation			2 936		69						2 936		69

1	The indemnification asset movement arose on the repurchase of the Tronox Holdings plc ordinary shares as Tronox Holdings plc has indemnified Exxaro from any tax obligation which may arise on the disposal of any of the Tronox Holdings plc ordinary shares held by Exxaro since the redomicile.
2	At 31 December 2019, Tronox Holdings plc’s share price strengthened to US$11.42 per share (2018: US$7.78 per share). The carrying amount on 31 December 2019 of R1 654 million was less than the fair value less costs of disposal of R2 377 million, resulting in the recognition of a gain amounting to R723 million. The carrying amount on 31 December 2018 of R6 110 million exceeded the fair value less costs of disposal of R3 226 million, resulting in a loss amounting to R2 884 million.
3	Relates to Black Mountain.

6.1.5 NOTES TO THE STATEMENTS OF CASH FLOWS RELATING TO OPERATIONAL PERFORMANCE

6.1.5.1 Cash generated by/(utilised in) operations

			Group					Company
For the year ended 31 December	Note		2019  Rm		2018  Rm			2019  Rm		2018 Rm
Net operating profit/(loss)			6 399		5 703			2 483		(3 603)
– Continuing operations			4 269		5 703			378		(719)
– Discontinued operations			2 130					2 105		(2 884)
Adjusted for non-cash movements:
– Depreciation and amortisation	6.1.3		1 912		1 582			129		77
– (Gain)/loss on remeasurement of associate to fair value less costs of disposal	6.1.4							(723)		2 884
– Impairment charge of investment in associate	6.1.3		58					58
– Impairment charge of subsidiary	17.3.4							227
– Impairment reversal of property, plant and equipment			(23)
– ECLs on financial assets at amortised costs	6.1.3		165		64			15
– Write-off of trade and other receivables and indebtedness by subsidiaries			10		7					2
– Movement in provisions	6.1.3		141		(175)			(3)		(1)
– Foreign exchange revaluations and fair value adjustments			(577)		489			(438)		479
– Gain on termination of lease			(1)
– Net (gain)/loss on disposal of property, plant and equipment					(122)			18		(47)
– Net gain on disposal of operation and subsidiaries			(76)		(171)
– Loss on disposal of financial asset at fair value through profit or loss					2
– Loss on loss of control of subsidiary			35
– Gain on disposal of associates	6.1.4, 8.3		(1 504)					(1 823)
– Loss on dilution of investment in associates	6.1.3		42
– Indemnification asset movement			(139)		(69)			(65)
– Share-based payment expense			266		405			166		268
– Translation of net investment in foreign operations					(1)
– Translation of foreign currency items			127		(154)
– Amortisation of transaction costs			(5)		5			(5)		5
– Non-cash recoveries			239		120
– Net gains on translation differences recycled to profit or loss			(840)
– Other non-cash movements			(13)		(9)			52		(1)
Cash before working capital movements			6 216		7 676			91		63
Working capital movements
– Increase in inventories			(286)		(466)			(3)
– (Increase)/decrease in trade and other receivables			(392)		(661)			(533)		289
– Increase in treasury facilities with subsidiaries at amortised cost (receivable)								(2 428)		(970)
– (Decrease)/increase in trade and other payables			(192)		533			70		(101)
– Increase in treasury facilities with subsidiaries at amortised cost (payable)								3 561		349
– Utilisation of provisions	13.3		(73)		(58)			(1)		(9)
Cash generated by/(utilised in) operations			5 273		7 024			757		(379)