Denel's turnaround stratgey pays dividends

Defence equipment manufacturer Denel has released significantly improved financial results for the year ended on March 31 2008, following its turnaround strategy implemented in 2005.

In a statement on Tuesday, the government-owned military-industrial company said that it had increased gross revenue to R3,894-million from R3,310-million in 2007.

It posted a net loss of R347-million from a net loss of R549-million in 2007, it added.

These figures represented an improvement of 17,6% and 36,8% respectively on the previous year’s performance.

“We managed to improve the loss for the past year through focusing on core businesses, phasing out of legacy contracts, savings in operating costs and profits on the sale of non-core assets,” said Denel’s acting group chief executive officer, Talib Sadik.

Better contract negotiations—including higher advance payment receipts towards the year-end—and improvements in its debt collection process helped Denel to achieve the healthy cash situation,
Sadik added.

Of the total turnover, 56,8% was from domestic sales compared to 47,5% in 2007, while 43,2% was from export sales compared to 52,5% in 2007.

The net loss margin of 9% compared favourably to the previous year’s margin of 16,8%.

Sadik said Denel’s directors and sole-shareholder, the South African government, were satisfied with the progress of the company’s strategy implementation and believed that it would unlock business value and position the company towards financial self-sustainability.

“The directors considered the appropriateness of the going concern assumption and were satisfied that Denel has adequate reserves and cash resources to continue operating as a going concern for the next 12 months,” Sadik said.

Denel has maintained its Fitch rating of AA long-term and F1+ short-term over the past year. - Sapa

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