Denel restructures to improve corporate governance

"Our objective is for Denel to be managed and perceived as one, integrated business," says the group financial director, Fikile Mhlontlo. He says an integrated Denel will strengthen the company's ability to retain its position as South Africa's premier manufacturer of strategic defence and aerospace products and solutions and a growing player in African and global defence markets.

Integration of entities

Corporate governance in the group has been streamlined and a number of new senior appointments have been made to ensure succession planning and promote diversity and employment equity. The executive committee was strengthened to ensure a higher degree of integration between the various entities. The restructuring will see the 11 companies in the group clustered together according to similarity of business and geographical location. The new structure was approved by the board of Denel in June and the process is expected to be completed by the end of the year.

The new structure will result in a sharing of non-core and support services and a better utilisation of office space and manufacturing facilities. In terms of the new structure the company's landward defence businesses in Lyttelton in Pretoria, Denel Land Systems and Mechem will be integrated into a single entity. At the group's headquarters in Irene, Denel Dynamics will incorporate the division responsible for the design and manufacturing of unmanned aerial vehicles as well as Denel Integrated Systems Solutions.

Robust cash management will continue

Denel Aviation will incorporate Denel Technical Academy and Denel Personnel Solutions. Denel Aerostructures will remain as stand-alone company at the Kempton Park campus but will in future share certain management functions and support services with Denel Aviation. Ammunition manufacturer PMP in Pretoria and the Denel Overberg Test Range in the southern Cape will remain unchanged.

Mhlontlo says although Denel is pursuing a number of new business opportunities in both the local and international markets the prospects in the defence industry require time to be converted into firm orders. Thus, the company will have to continue with robust cash management interventions to ensure positive cash flows and the continuation of the financial turnaround of the company after it has been loss-making for more than a decade.