2020 
Rm 		 Restated* 
2019 
Rm 
3  OPERATING PROFIT        
   Operating profit is arrived at as follows:       
   Revenue  49 683  60 206 
   Less: Net expenses  47 886  56 309 
   Cost of goods sold  38 466  46 324 
   Other operating costs   9 420  9 985 
           
   Total Group  1 797  3 897 
   Expenses include the following:       
   Amortisation of intangible assets arising from acquisitions  14  15 
   Operating leases - low value assets equipment, IT, plant and vehicles  306    
   Operating leases - low value assets property  54    
   Expense relating to short-term leases  42    
   Expenses relating to variable lease payments not included in measure of lease liability  49    
   Income from subleasing right-of-use assets  (2)   
   Operating lease charges     1 156 
   Land and buildings     490 
   Plant, vehicles and equipment      666 
   Auditors' remuneration:  73  69 
   Audit fees  69  67 
   Fees for other services  4  2 
           
   Staff costs (excluding directors' emoluments) 7 126  9 418 
   Restructuring costs (excluding staff costs) 304    
   Amounts recognised in respect of retirement benefit plans (note 24):       
   Defined contribution funds  692  972 
   Defined benefit funds^  17  99 
   Inventory movements  237  133 
   Amount of write-down of inventory to net realisable value and losses of inventory  270  193 
   Amount of reversals of inventory previously written down  (33) (60)
   Acquisition costs related to the acquisition of Barloworld Mongolia   35  9 
   Impairment losses on financial assets and contract assets  292  75 
   Impairment losses on financial assets   291  75 
   Impairment losses on contract assets   1    
   Total B-BBEE charges  236  73 
   IFRS 2 B-BBEE charge (3.1) 223    
   Other B-BBEE charges related to the Khula Sizwe transaction  13  73 

  ^ Includes once off charge of R88 million for the equalisation of the guaranteed minimum pensions cost in the 2019 financial year. (note 26)

3.1

The Group's B-BBEE deal Khula Sizwe was implemented on 1 October 2019. At 30 September 2020, 57 of the 64 properties had transferred to Khula Sizwe and the Barloworld entities were incurring rental changes related to these properties. Implementation charges of R13 million were incurred in the period (2019: R73 million) together with IFRS 2 Share Based Payment (IFRS 2) charges totalling R223 million (2019: Rnil).

The IFRS 2 charges in Barloworld arose from the benefits received by staff members which were facilitated by the Group providing funding/donations to the trusts so that employees could acquire their shares at less than market value. The employee trust was allocated 17,430,080 shares and the management trust was allocated 20,698,220 shares, this was then allocated as units to employees of 18,059,822 and 18,460,296, respectively. The employees will have an exercise price of Rnil, and management has contributed R7.1 million for their shares.

The IFRS 2 charges in Khula Sizwe arose from the per share discount given to Khula Sizwe shareholders in the initial share offering. The Khula Sizwe shares were valued using a Monte Carlo approach, with share prices following a geometric Brownian model. The following were the primary model inputs, estimates and judgements:

• The net asset value of Khula Sizwe, assuming all properties had transferred on 1 October 2020
• Share volatility determined with reference to the SA REIT index
• Adjustments for the lock in periods applicable to the shares
• Expected dividend yield
• The valuation outcome was compared to the R10 per share offer price and the estimated discount of R2.77 will be accounted for as an IFRS 2 charge in Khula Sizwe.

The IFRS 2 charges incurred by Barloworld segments in the period were as follows:
    2020 
Rm 
  Employee Trust   108 
  Current year  87 
  Acceleration due to retrenchments  21 
       
  Management Trust  30 
  Current year  21 
  Acceleration due to retrenchments  9 
       
  Total IFRS 2 charges incurred by Barloworld segments  138 
  IFRS 2 charges incurred by the Khula Sizwe segment were as follows:    
  Employee Trust   24 
  Management Trust  16 
  Black Public (once off charge)  45 
  Total IFRS 2 charges incurred by the Khula Sizwe segment  85 
       
  Total IFRS 2 charge incurred by the Barloworld Group  223 

 

Note that the Employee Trust charge will be recognised over two years and the Management Trust charge will be recognised over five years in line with the service conditions attached to these shares. The Black Public charge is a day 1 charge and not recurring.