Denel’s road to re­cov­ery


The Citizen (KZN) - - Front Page - Sipho Mabena [email protected]­i­

Chief fi­nan­cial of­fi­cer of the parastal is cau­tiously op­ti­mistic for the fu­ture.

With a record multi­bil­lion-rand deal in the bag, a R7.8 bil­lion or­der in­take com­pared to R509 mil­lion the pre­vi­ous year as well as a cost re­duc­tion of half a bil­lion rands, the be­lea­guered state de­fence man­u­fac­turer Denel seems to be on the way out of the dol­drums.

The R1.8 bil­lion life­line from the state and bet­ter lead­er­ship from the new board ap­pointed in May last year is be­gin­ning to bear fruit for the state-owned en­tity that was so broke that there were un­cer­tain­ties over salaries just a few months ago.

Denel’s rev­enue slumped 38% to R3.8 bil­lion in the 2018-19 fi­nan­cial year com­pared to R5.8 bil­lion the year be­fore, cash in 2018-19 was R575 mil­lion, from R1.3 bil­lion the year be­fore, and re­search and de­vel­op­ment were at R108 mil­lion, down from R769 mil­lion.

Denel made a R1.749 bil­lion loss in 201819 com­pared to R1.053 mil­lion the year be­fore and the last time it made a profit was in 2016, but Denel’s chief fi­nan­cial of­fi­cer Car­men

Le Grange said the fu­ture looked bright, but she was cau­tiously op­ti­mistic. She noted some progress in the paras­tatal’s fi­nan­cial health, in­clud­ing the sign­ing of a R6.3 bil­lion ex­port or­der, the largest deal to date and a solid or­der back­log of R17.4 bil­lion cov­er­ing four years of sales rev­enue.

“We have made sig­nif­i­cant strides in the turn­around. We have com­pe­tent lead­er­ship in place and a vi­able turn­around plan … We con­tinue to find cost sav­ings and ef­fi­cien­cies,” she said. Le Grange also said another pos­i­tive was ex­it­ing oner­ous con­tracts that should save R250 mil­lion a year and the re­duc­tion of op­er­at­ing costs by R500 mil­lion, in­clud­ing R15 mil­lion at head of­fice level.

“Di­vest­ing from non-core as­sets can gen­er­ate cash of R1.56 bil­lion, with the first re­sults in a three to six month win­dow. Fur­ther op­er­at­ing cost re­duc­tion has the po­ten­tial to save R500 mil­lion through the sup­ply chain,” she said.

Em­ployee num­bers have been re­duced, partly through vol­un­tary sev­er­ance pack­ages, with 3 968 em­ploy­ees at present, down by 900 over the last 16 months.

Le Grange said Denel planned to dis­con­tinue some of its core busi­ness prod­ucts and keep other core prod­ucts and sys­tems, such as ar­tillery, mis­siles, in­fantry sys­tems, the Over­berg Test Range, sys­tems in­te­gra­tion divi­sion, cy­ber ca­pa­bil­i­ties and Rhein­metall Denel Mu­ni­tion.

Denel would shed its aerostruc­tures busi­ness, foundry, prop­erty port­fo­lio, Gear Ra­tion divi­sion of Denel Ve­hi­cle Sys­tems, Denel Sovereign Se­cu­rity So­lu­tions, ca­nine unit, Denel Land Sys­tems, Spaceteq and in­surance com­pany Dense­cure. Strate­gic part­ner­ships would be de­vel­oped re­gard­ing air­craft and en­gine main­te­nance, re­pair and over­haul (MRO), the Rooivalk at­tack he­li­copter, un­manned aerial ve­hi­cles, mar­itime MRO and ar­moured ve­hi­cles.

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