There’s a light at the end of the tunnel, Denel says

Rebuilding trust and credibility is key to saving state arms manufacturer Denel, according to the company.

Denel announced a R1.9 billion operating loss and a 36% drop in revenue in the 2018-2019 financial year.

“The decline in our reputation has also had a draining impact on our financial position.”

Despite maintaining an investment-grade credit rating, the company’s spokesperson Pam Malinda said the recent results reflected another “very difficult” year with revenue, but added that both the board and management were optimistic of the state entity’s future prospects and of a return to financial sustainability.

After being embroiled in maladministration and state capture allegations involving associates of the Gupta family, the company suffered major financial losses, which even hit its employees earlier this year when the struggling manufacturer announced it would only able to pay a portion of its employees’ salaries in June and July.

This led to a fierce legal battle between the employer and trade union Solidarity, which approached the courts to force the company to make good on unpaid statutory payments.

“Denel is emerging from a period associated with allegations of state capture, financial irregularities and serious lapses in corporate governance,” said Malinda. “This had a debilitating impact on all areas of business and negatively affected business relationships with partners, suppliers and stakeholders.”

In addition to turnaround strategies to iron out its governance and financial issues, the arms maker was in the process of a complete overhaul, making new partnerships and restructuring.

Denel was expecting revenue to pick up in the medium term, with projections showing a moderate growth in revenue from R3.86 billion in 2020, R5.4 billion in 2021 and R7.14 billion in 2024.

Denel claimed to have secured a solid order backlog of R18 billion, which covered roughly four years of sales revenue.

It also had its sights on a “winnable pipeline”’ of R30 billion over the next four months.

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