Land Mobility Technologies (LMT), in which Denel has a 51% holding, has struggled to pay July salaries, with not all staff receiving their wages. This comes as Denel contemplates disposing of the loss-making company.
According to the latest Denel annual report, LMT employs 178 people. Denel spokesperson Pamela Malinda confirmed to defenceWeb that to date, LMT has paid 25% of employee’s salaries. “However, employees on the low band scale have received their full salaries. Management is doing everything they can to collect outstanding money from creditors to pay the remainder of the salaries for July 2019,” Malinda said.
In the 2018/19 financial year LMT only made up 2% of the Group’s revenue contribution, bringing in R118 million, of which R105 million was from exports. The company made a loss of R174 million, up from a loss of R4 million the year before.
LMT has been struggling for some time, prompting Denel to loan LMT Holdings R300 million, due and payable on 1 November 2018. “In assessing the recoverability of this loan, [Denel] management considered the cash flow forecast of LMT as well its latest cash forecast. It was clear that LMT will not be in a position to repay this loan when it is due or in the next twelve months. The value of the loan at 31 March 2018 was R313 662 882 and the full amount was impaired,” Denel stated in its annual report.
Part of LMT’s issues stem from contracts for the Badger infantry fighting vehicle being diverted to VR Laser, which has subsequently shut down.
Apparently, the founding shareholders of LMT and the Pamodzi Group (which holds a substantial amount of LMT shares) are believed to have offered to buy Denel’s 51% stake and turn the company around, but due to Public Finance Management Act (PFMA) requirements that need to be followed, the sale would have to go out on tender. Denel is understood to be looking at selling it share in LMT as it is a non-core asset, since Denel also has Denel Vehicle Systems, Denel Land Systems and Mechem in its vehicle stable.
“Denel is busy with the implementation of the turnaround strategy and is aligned with the shareholder’s expectations that it disposes of non-core assets on an urgent basis and establishes strategic equity partnerships across the various divisions of the company,” Malinda told defenceWeb.
“We have received about 40 expressions of interest from local and international companies who want to enter into partnerships with us or acquire parts of our business and it goes without saying that proper governance and PFMA processes will be followed,” she concluded.
LMT specialises in the design and manufacture of armoured vehicles with protection against ballistic, landmine and improvised explosive devices (IEDs). Its design capabilities provide for the integration of protection technologies into the armoured vehicles with, amongst others, flat or semi-flat floor landmine protection. Denel acquired its 51% stake in LMT in May 2012.