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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 August 2020 (“August Update”), providing updates on progress made in
relation to the issues that resulted in the disclaimer opinion as contained in the audit reports for the
financial years ended 31 March 2018 and 31 March 2019 (the “Disclaimer”).
The Company affected the key issues that led to the Disclaimer as part of the audit readiness for
FY2019/2020. As stated in the August update, Denel has submitted its annual financial statements
for the year ended 31 March 2020 to the Auditor General South Africa (“AGSA”) for audit and below
is an update on the key issues relating to the 2018/2019 audit.
1. External Audit
1.1 Denel submitted the annual financial statements for the FY2019/20 on 31 July 2020 to the
Auditor General South Africa (“AGSA”) for audit as required in terms of section 76 of the Public
Finance Management Act (PFMA).
1.2 The AGSA commenced their audit testing for the 2020 audit cycle as early as January 2020
for the PFMA audit, and on 9 July 2020 for the financial component of the audit.
1.3 The audit report was not yet finalised as expected by 31 October 2020. Denel will keep its
investors informed of further developments in this regard.
2. Audit Fix Plan
The new accounting standards (“Standards”) were implemented in a uniform manner
throughout the Group to ensure adherence to IFRS. These were audited by the AGSA and the
outcome will be reported on upon finalisation of the FY2019/20 audit.
3. Internal control and internal control deficiencies
3.1 As set out in the update released on 24 June 2020, Ernst and Young as the Company’s
outsourced internal audit function, completed their risk-based Internal Audit Plan for the year
and reviewed the external audit remediation plan. Their report, detailing areas of improvement,
were integrated and implemented as part of the Audit Fix Plan. These results will be reported
as part of the FY2019/20 audit.
3.2 The AGSA continued with supply chain management compliance testing for irregular, fruitless
and wasteful expenditure. These results will be reported as part of the FY2019/20 audit.
4. Going Concern
Denel continues to monitor and manage the liquidity status in order to maintain operations.
Notwithstanding this and the impact of the Covid-19 pandemic, Denel has been able to pay
partial salaries and related costs from May 2020 to date to all its employees. These ranged
from 100% for employees earning below R17000 per month and between 60% - 70% for its
remaining employees. Denel remains engaged with its unions on the payment of any overdue
salaries. The Group continues to pursue various options to enable it to proceed with the
outstanding salary payments. Denel will keep its investors informed of any further
developments in this regard.
5. Ongoing
Denel will continue to resolve the matters raised in the Disclaimer and provide quarterly
updates in this regard.
27 November 2020
Debt Sponsor: Nedbank Corporate and Investment Banking
Date: 27-11-2020 05:02:00
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