TROUBLED state arms manufacturer Denel is inching closer to paying its debtors and staff through the sale of non-core assets as it yesterday announced a far-reaching restructuring plan with an eye on returning to profit.
In a statement, Denel said that with streamlining and a refocus, it would return to profitability within the next five years.
Acting chief executive William Hlakoane said: “We are determined to turn Denel around and repurpose it while retaining the core capabilities required to meet South Africa’s strategic security requirements,” as he outlined that the revitalisation plan including reducing Denel’s current operating divisions, plus one subsidiary, from six to two.
One division would focus on engineering, while the other would focus on manufacturing and maintenance, of which the latter was their core business. The engineering division would merge all Denel’s capabilities in artillery, infantry and vehicle systems, its missile and precision-guided munitions business as well as its management of complex integrated systems.
Furthermore, it would drive the company’s diversification of technology into existing and new markets in fields such as command and control, cybersecurity and communications, while researching and developing new technologies of the future.
The maintenance and manufacturing division would build on Denel’s market reputation in aeronautics, unmanned aerial vehicle systems and the production of small and medium calibre ammunition as well as the production of combat vehicles.
Denel’s campuses would be optimised to reduce their footprint and contain costs. This would be supplemented by further reductions in the executive cost structure, and the implementation of the shared services model in areas such as supply chain management, human capital, IT and finance. “Although some of these activities are at an advanced stage, we do acknowledge that it will take some time to sell these assets while the payment of legacy debt and the requirements for liquidity are immediate,” said Hlakoane.
Speaking to Business Report yesterday, Hlakoane said Denel had finally found alignment with the Department of Public Enterprises (DPE), Ministry of Defence and Treasury on the sales of non-core assets.
He said negotiations with buyers on non-core assets were at an advanced stage, along with completion of evaluations for land being put up for sale in Irene, Pretoria, and in Cape Town, which was set to raise R1.5 billion over the next five years.
Hlakoane expressed hope that engagement with the DPE would yield results in the next month or so after Denel submitted all requisite information for a subvention which would hopefully pay salaries now hovering above the R590 million range, about R230m of that being for taxes.
Hlakoane revealed that Denel had paid towards the back salaries for the contentious May through to July 2020 bill for which labour unions, Uasa and Solidarity had taken legal action.
“We have paid not all of it, but we have paid about R17 million of the R24m, we should be left with about R7m or so outstanding now. When we go to court in December, we should be able to prove that we have the entire amount,” he said.
BUSINESS REPORT