Wednesday, June 20, 2018
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Earnings down for LMT

The LM14 armoured personnel carrier.Denel Division Land Mobility Technologies (LMT) has seen profits drop dramatically, with the company going from a profit-making concern in 2015/16 to a loss-making one the following year.

This is according to figures from Denel’s most recent annual report, which show that LMT made a loss of R4 million in 2016/17, compared to a profit of R45 million the previous year. The company earned revenue of R152 million in 2016/17, down from R422 million the previous year. This was almost exclusively export revenue.

In its annual report, Denel said key highlights for LMT during the year under review included the launch of the new LM14 low cost armoured personnel carrier at the Africa Aerospace and Defence 2016 exhibition; the unveiling of the Meerkat retractable weapons station; the successful demonstration of the LM13 multi-purpose combat vehicle in Egypt; the continued execution of the LM13 vehicle contract for the launch customer in the Middle East; the successful completion of an armoured ambulance development for a client in the Middle East, with production continuing; and the production of trailers for the ‘Plofadder’ landmine clearance system for a customer in the United Arab Emirates.

LMT received an order “from a client in Africa for the supply of 14 LM5 APC vehicles over a two-year period. This is a significant step towards expansion into Africa,” the Denel annual report said. However, this deal has run into trouble. In November 2016 the Botswana Police Service (BPS) signed a contract with LMT for ‘anti-riot vehicles’ worth P15 million. The BPS was expecting deliveries in August 2017 (after initially expecting them in March), but no vehicles had been delivered by October 2017, according to Botswana’s Acting Police Commissioner Tapudzani Gabolekwet.

The LM5 is actually the International Armoured Group (IAG) JAWS armoured personnel carrier that is sold by LMT in Africa, as LMT is the agent for IAG in the SADC region. It is built in the United Arab Emirates. According to Rapport, vehicle prices in the UAE had risen and LMT/Denel did not have the cash to buy the vehicles, causing a delay in deliveries.

Another 2016/17 highlight was the “successful completion and delivery of the MLS system to a customer in Asia”. LMT has built a number of Mobile Load Simulator (MLS) machines for various customers. The MLS is an accelerated pavement test (APT) machine able to quickly and realistically test roads and pavements. The simulator is used to see how long new road surfaces will last, how effective new road materials are, if roads meet specifications and to determine when a road will need to be replaced. The Mobile Load Simulator simulates the effect of heavy traffic on a road surface by rolling truck axles and tyres across a section of road surface.

Johan Muller and Fred Hugo developed the road surface testing machine while working at Stellenbosch University and manufactured over a dozen of the smaller MMLS3 systems to countries around the world. They established MLS Test Systems in 1998, which was registered in 2004, and then in 2014 sold to PaveTesting in the United Kingdom. Muller approached LMT to build the road testing machine as the company had the necessary expertise.

During the last financial year LMT was also kept busy producing components for the Badger infantry combat vehicle under sub-contract from Denel Land Systems (DLS). LMT designed the flat landmine resistant floor for the vehicle. Its contracts have involved items like seats, ammunition bins and water chiller/storage units.

The Badger contract with LMT has run into some problems. In July 2016 the minority shareholders of the company (founders and Pamodzi) accused Denel of being captured by the Gupta family, after Denel allegedly diverted a contract for the Badger vehicle to VR Laser at the Gupta’s request. The minority shareholders (LMT is 51% owned by Denel, with 29% belonging to Pamodzi Investment Holdings and 20% to the founders) approached the Pretoria High Court to institute business rescue proceedings as the diversion of the Badger infantry fighting vehicle contracts (amounting to R1 billion over ten years) put the company in a difficult financial situation, according to court papers, with LMT struggling to pay salaries and suppliers because of inadequate funding from Denel. The matter was heard on 26 July 2016 but was dismissed with costs, as the matter was not viewed as urgent by the court.

Subsequently, some members of LMT, including CEO Stefan Nell, left the company in October 2016 and established armoured vehicle company ADG Mobility.