The South African government has given national aerospace and defence firm Denel until mid-2006 to restructure after a record net loss of R1.6 billion ($240 million) for the 2004-5 financial year ending 31 March and a warning by auditor Ernst & Young that the company may no longer be viable.
Denel has seven months to prepare for potential divestment of assets and business divisions under restructuring plans that will also see the company stop developing new platforms. The South African air force Rooivalk project is the only exception to the new policy with a R700 million injection by the South African government midway through this year providing funds for programme completion by 2007.
Denel says it expects to become a holding company that remains under South African government ownership, with future projects to be pursued through joint venture activities or product-line focused subsidiary companies that are self-governing.
Priority business activities under the new structure will include military electronics, optronics and unmanned air vehicles.
Auditors Ernst & Young and SizweNtsaluba warn in the company’s annual report that losses and liabilities – which exceeded the group’s total assets by R769.9 million as of 31 March 2005 – along with the status of loans to the company, “indicate the existence of a material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern”. Denel says its increased losses last year were due mainly to “the failure to achieve the sales target, increase in provision for contract losses and adverse impact of the exchange rate”.
PETER LA FRANCHI/LONDON
Source: Flight International