Friday, 04 October 2019 18:57

Denel has reported an operating loss of R1.9 billion and net loss of R1.75 billion for the year to March 31, with revenue dropping 36% over the last financial year.

In its annual report for the period 1 April 2018 to 31 March 2019, published on 4 October, the company said it recorded revenue of R3.8 billion (down from R5.8 billion in 2017/18) with cash of R575 million (down from R1.3 billion the year before).

It noted that revenue is at an all-time low due to low operational activity, liquidity constraints and difficulty paying suppliers and Export sales declined 19% due to the conclusion of a major contract in the Middle East. 

Denel’s net loss was R1.749 billion, up from R1.053 billion in 2017/18. “The decline in our reputation has also had a draining impact on our financial position,” Group Chief Executive Danie du Toit said in a statement.

The R1.9 billion operating loss “was driven by the gross loss of R614 million driven by the contract losses and reduced sales leading to cost under recoveries. The loss further includes the provision for the exit from the DAe [Denel Aeronautics] Airbus contract. As at 31 March 2019, the negotiations were at an advanced stage and as such it was probable that the exit will occur.”

Du Toit added that it was not all bad news,saying Denel projected a moderate growth in revenue from R3.86 billion in 2020 to R5.54 billion in 2021 and R7.14 billion in 2024.

Monhla Hlahla, Chair of the Board of Denel, said in the annual report that Denel’s turnaround has continued at a steady pace since the appointment of the Board in May 2018. “However, progress has not been at the level we’d have desired. It is the Board’s view that Denel’s liquidity challenges began several years before as a result of several factors including: poor inventory and cash management, unprofitable sales and loss making contracts, higher costs with declining revenues, dependency on one large and complex contract which did not proceed as planned, lack of financial discipline, poor governance, mismanagement, overzealous and expensive acquisitions, and general corruption as we are seeing in the case of State Capture (Denel Asia and VR Laser Group) currently before the Zondo Commission.