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Quarterly update regarding disclaimer of audit opinion
DENEL SOC LIMITED
Registration number: 1992/001337/30
JSE Alpha Code: BIDEN
(“Denel” or the “Group” or the “Company”)
QUARTERLY UPDATE REGARDING DISCLAIMER OF AUDIT OPINION
Noteholders are referred to previous announcements released on SENS, with the latest quarterly
update released on 31 May 2021 (“the previous update”), providing updates on progress made in
relation to the issues that resulted in the disclaimer opinion as contained in the audit report for the
financial year ended 31 March 2020 (“2020 AFS”) (the “Disclaimer”).
The Company sets out below the latest progress on matters raised by the AGSA in the Disclaimer.
1. Audit Fix Plan
1.1. As stated in the previous update, Denel has developed an Audit Fix Plan with its main
focus on addressing matters dealing with revenue recognition, inventory and trade and
other receivables which were some of the major areas that contributed to the Disclaimer
Audit Opinion. Inclusive of the Audit Fix Plan, management has focused on ensuring that
all relevant documentation/audit evidence is readily available to avoid inefficiencies
leading to limitation of scope. This included responding to the auditor’s queries within
the required time.
1.2. In addition, as a result of the challenges that arose with the consolidation process in
FY2019/20, Denel has contracted a service provider who has developed a reporting
consolidation tool to ensure that all the consolidation findings raised by auditors have
been addressed. Denel entities are still in the process of populating the consolidation
tool in order to conclude on the consolidation.
1.3. While the engagements with the external auditors are ongoing and the population of the
consolidation tool has commenced these have slowed down due to delays within Denel
as a result of the loss in skills within the finance department. Denel however continues
to progress these matters in order to ensure resolution to the Disclaimer.
2. Internal control and internal control deficiencies
2.1 Management has incorporated the findings by the external auditors relating to the
internal environment and internal control deficiencies into the audit fix plan and continues
to focus on resolving any deficiencies.
3. Going concern
3.1 Denel has formulated a new operating model that will deliver a streamlined and
refocused Denel to be financially sustainable and profitable in the next 5 years. Denel’s
campuses will be optimised to reduce their footprint and contain costs. This will 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. This will allow for common Enterprise
Resource Planning (ERP) across all the entities of Denel to ensure improved financial
control and reporting.
3.2 Engagements with the shareholder are ongoing and Denel is confident that it continues
to have support from the shareholder in resolving the current liquidity challenges faced
by Denel.
4. Ongoing
4.1 Denel will continue to resolve the matters raised in the Disclaimer and provide quarterly
updates in this regard.
31 August 2021
Debt Sponsor: Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Date: 31-08-2021 02:30:00
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