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Update on Denel's liquidity status, turnaround actions and business progress
DENEL SOC LIMITED
Registration number: 1992/001337/30
JSE Alpha Code: BIDEN
(“Denel” or the “Company”)
UPDATE ON DENEL’S LIQUIDITY STATUS, TURNAROUND ACTIONS AND BUSINESS PROGRESS
In light of recent reports relating to Denel's liquidity challenges and the Minister of Finance’s
statement on 23 July 2019 that Denel will receive a recapitalisation, set out below is an update on
Denel's liquidity status, turnaround actions and business progress.
Liquidity status
- Denel applied for recapitalisation which was provided for in the contingency reserve in the
February 2019 budget vote, with the Minister of Finance recently announcing the
commitment to recapitalise Denel.
- Denel is in ongoing discussions with the Department of Public Enterprises (“DPE”) and the
National Treasury (“NT”) relating to the recapitalisation process and conditions that will
accompany such recapitalisation. The DPE and the NT have indicated that they are satisfied
with the progress Denel has made on the recapitalisation conditions and the recapitalisation is
expected during the third quarter of the year.
- The recapitalisation of the Company will result in returns on investments and grow the
Company’s cash generation potential.
- It should be noted that Denel’s liquidity issues are short-term and the Company is expected to
generate positive cash flows within the next 12 months. In the interim, Denel is being
supported with liquidity by a group of lenders.
Progress on turnaround actions and business progress
The implementation of the turnaround plan is in full steam and is achieving positive milestones,
which include:
- concurrent efforts to restructure the business, restore corporate governance and reduce
operating costs;
- the restructuring of Denel has already led to a reduction of R500 million in operating costs and
savings of more than R15 million at Denel’s Corporate Office. There is a strong potential to
reduce an additional R500 million in costs from other business activities such as the supply
chain processes;
- Denel is aligned with shareholder’s expectations that it disposes of non-core assets on an
urgent basis and establishes strategic equity partnerships across the various divisions of the
company. It is anticipated that cash to the value of R2 billion will be generated from strategic
equity partnership activities;
- Denel has received about 40 expressions of interest from local and international companies to
enter into partnerships and/ or acquire parts of its business. To ensure a fair and transparent
process, proper governance and legislative compliance will be followed;
- prospects for the Company are favourable and the Denel brand remains strong within the
global defence and aerospace sectors despite the local issues caused by the allegations of
state capture. There is still broad recognition for the quality of Denel’s products and the
Company in well positioned to win further export contracts and strengthen its reputation in
the highly competitive global defence arena; and
- Denel continues to receive support from local customers such as the SA National Defence
Force and the SA Police Service.
2 August 2019
Debt Sponsor : Nedbank Corporate and Investment Banking
Date: 02/08/2019 04:00:00
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