DENEL SOC LIMITED - Notice of availability of annual financial statements

Notice of availability of annual financial statements

DENEL SOC LIMITED
Registration number: 1992/001337/30
JSE Alpha Code: BIDEN
(“Denel”)

NOTICE OF AVAILIBILITY OF ANNUAL FINANCIAL STATEMENTS

Denel hereby notifies its debt investors that it has publicly released its audited annual financial
statements for the year ended 31 March 2020 (“AFS”). It should be noted that the Auditor-General
South Africa’s (the “auditor”) audit report contains a disclaimer of opinion, an emphasis of matter and
additional reporting responsibilities as follows:

1.       Disclaimer of opinion

         The disclaimer of opinion contained in the audit report relates to the auditors of Denel being
         unable to express an opinion on the AFS of Denel and its subsidiaries due to insufficient
         appropriate audit evidence which is contained in the emphasis of matter paragraph forming
         part of the auditors’ report. In addition, the auditor is unable to confirm whether it is
         appropriate to prepare the AFS using the going concern basis of accounting.

2.       Emphasis of matter

         The emphasis of matter relates to financial distress considerations as disclosed in note 40 on
         Going Concern as contained in the AFS and, in particular, the assessment and determination
         that Denel is not financially distressed as defined in section 128(1)(f) of the Companies Act, No
         71 of 2008 by the board of Denel. It should be noted that the audit opinion was not modified as
         a result of this.

3.       Additional reporting responsibilities

         The auditors are of the view that the AFS were not prepared in accordance with the prescribed
         financial reporting framework and supported by full and proper records as required by section
         55(1)(a) and (b) of the Public Finance Management Act, No 29 of 1999.

In addition, various restatements occurred to correct prior period errors relating to:

     •    Revenue recognition – incorrect application of IFRS15 principles;
     •    Property, plant and equipment – review of useful lives and residual values of assets;
     •    Expected credit losses – reperforming calculations inclusive of contract assets as well as intra-
          group account receivables;
     •    Denel Medical Benefit Trust – incorrect accounting for service cost and net interest on the net
          defined benefit asset and for net actuarial loss;
     •    Hensoldt Optronics (Pty) Ltd (“Hensoldt”) reclassification – reclassification of the investment
          in Hensoldt as an asset held for sale;
     •    Investment in Turbomeca (Pty Ltd – correction of fair values; and
     •    Impairment of investment in Denel Vehicle Systems.

Full details of the restatements are set out in note 37 of the AFS.

The AFS, which include the auditors report, are available on the Denel website at
http://www.denel.co.za/financials and for inspection at the Denel head office at Nellmapius Drive,
Irene, Centurion, Pretoria, 0046 from 01 February 2021.

1 February 2021
Debt Sponsor: Nedbank Corporate and Investment Banking

Date: 01-02-2021 08:00:00
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