Defence parastatal Denel on Thursday reported a net loss of R1,377-billion for the year ended March 2006, compared with a net loss of R1,561-billion in 2005. Gross revenues for the year declined from R3,611-billion to R2,731-billion.
According to Denel CEO Shaun Liebenberg, the major contributors to the loss were a failure to achieve the sales target, an increase in provision for contract losses, provision for restructuring, high interest costs and low production at certain plants resulting in an under-recovery of labour.
However, he said Denel has regained solvency with capital and reserves, depleted in previous years, being restored to R600-million during the 2005/06 financial year.
This is due in part to the government’s first-phase recapitalisation of R2-billion in March this year. Denel issued 447 394 324 ordinary Class “A” shares (R1 each) at a premium of R1,553-billion.
The impact of IFRS implementation — more specifically the revaluation and review of the useful lives of property, plant and equipment — has also contributed.
“The total re-engineering of Denel is now well under way, and although a lot remains to be done, I’m confident we’ve set in motion a process to drive internal improvements across all business units,” Liebenberg said.
“We’ve taken a hard look at viability in each business, including potential for partnering, and also improvements in processes, cost reductions and new skills. We’re clearly on the road to improved fortunes.”
Notable is the progress in unbundling Denel into eight to 10 independent legal entities. This process has paved the way for the introduction of new executive management and the appointment of skilled financial staff in all business units.
These equity partnerships will lead to the introduction of much-needed management capability, world-class processes and technology, access to markets and a contribution to R&D.
“Importantly, these partnerships are linked to strong IP protection to ensure the South African government remains in control of its intellectual assets,” Liebenberg said.
Minister of Public Enterprises Alec Erwin commented: “I’m pleased to acknowledge a glimmer of an upturn in Denel which, frankly, is ahead of my expectations. Especially pleasing is the very important relationship with the Department of Defence and the impact this is having on South Africa’s defence-related industry in general.” — I-Net Bridge