Denel’s ten contracts that make a significant impact on its bottom line


State-owned aerospace and defence conglomerate Denel has ten main contracts that make a significant impact on its financial results, including the Badger infantry fighting vehicle, turrets, missiles, unmanned aerial vehicles and aerostructures.

In its 2016/17 annual report Denel outlined its most significant projects, such as Hoefyster for new-generation infantry Badger combat vehicles for the South African Army. “The development phase was substantially completed and Denel Land Systems is on track to deliver the first 88 Badger ICVs to the South African Army by May 2019, whilst gearing up for full-scale production.
“Denel Land Systems is in the process of assembling the first eight Badger turrets with the first four reaching an advanced stage of assembly. In the 2017/18 financial year the plan is to produce 56 turrets and deliver 20 complete systems. Deliveries of all 242 Badgers are set to be concluded in 2022. The base value of the programme is R9.4 billion and revenue of R484 million (2015/16: R676 million was recognised during the 2016/17 financial year.”

The Badger project resulted in Denel being awarded a multi-billion rand contract in 2011 to develop, manufacture, supply, deliver and commission turrets for Malaysia’s fleet of AV8 8×8 armoured fighting vehicles. “The required industrial participation activities have been implemented and the first systems have been successfully manufactured, assembled and tested in the end-user country. Progress is in accordance with the delivery requirements of the client with numerous systems having been accepted with some already in service. Major milestones reached on the AV8 turret system contract are the completion of the light combat turret (LCT30) product baseline and the assembly of 30 LCT30 systems, five ATGW systems and the integration of 30 remote-control weapon station systems. The base value of the programme is R3.7 billion and revenue of R953 million (2014/15: R1.193 billion) was recognised during the 2016/17 financial year,” Denel said.

Missiles produced by Denel Dynamics form a big part of the group’s business. One of its big missile contracts was for the supply of Mokopa missiles to Algeria for its Super Lynx helicopters. All logistics support equipment was delivered in 2016/17, as well as the second batch of production missiles. The value of the programme is R418 million and revenue of R57 million (2015/16: R74 million) was recognised during the last financial year.

Denel Dynamics also supplied Umkhonto surface-to-air missiles for the Algerian Navy’s two Meko class frigates. The production of the fire control equipment has been completed and installation onto both frigates is complete. Umkhonto missile production and all deliveries to Algerian have been completed. The total contract value is R800 million and revenue of R243 million (2015/16: R157 million) was recognised during the 2016/17 financial year.

Denel in the United Arab Emirates is producing Al Tariq guided munitions in conjunction with Tawazun Dynamics. It received a R1.2 billion contract in 2010/11 for Al Tariq weapons, with a follow-on contract to the value of R400 million in 2014/15.

The programme experienced a number of delays during the development phase, resulting in a production lag but this has been resolved and a total of 580 full weapons kits plus 320 sub-kits have been delivered to date. In addition, build kits for 420 IIR (imaging infrared) weapons are being shipped to Tawazun Dynamics. The programme saw a series of successful flight trials on the newly developed imaging infrared seeker and production was activated, Denel said. The IIR weapon was designed and developed in 18 months, with a programmed flight test in November 2016 and the successful initial guided flight test in March 2017.

The Al Tariq programme accounted for revenue of R168 million (2015/16: R428 million) during the last financial year.

Locally, Denel Dynamics finalised the design baseline for industrialisation and manufacturing of the A-Darter air-to-air missile. This came after the missile’s seeker performance qualification flight trials were successfully completed.

The value of the programme is R2 billion and revenue of R101 million (2015/16: R100 million) was recognised during the last year.

The follow-on production contract for the South African Air Force (SAAF) with a value of R939 million was placed with Denel in March 2015 and revenue to the value of R219 million (2015/16: R119 million) was recognised during the 2016/17 financial year. The order also includes the establishment of a logistic support capability required for the SAAF to operate the missile.

The initial batch of four acquisition trainer missiles was planned for delivery in late 2017 with the final batch of operational missiles scheduled for delivery in the first quarter of 2020.

Another contract with the South African National Defence Force (SANDF) is for Seeker 400 unmanned aerial vehicles. In its annual report, Denel stated that “the Seeker 400 system produced for the SANDF has successfully completed the required system acceptance tests with the focus now on attainment of the military type certificate. This is expected to be accomplished in the 2017/18 financial year. The value of the programme is R358 million of which R295 million has been invoiced to date.”

These Seekers were supplied to Defence Intelligence – it is believed the South African Air Force is also looking to acquire Seekers.

Several big armoured vehicle programmes are underway at Denel, with one of these being the N35 contract for the United Arab Emirates. Denel Vehicle Systems was contracted by NIMR in the UAE to finalise development of 4×4 and 6×6 variants of the N35 vehicle. DVS is also contracted to deliver 100 N35 4×4 vehicles to NIMR, with 30 vehicles delivered by the time the 2016/17 annual report was published.

The development and production contracts will be concluded in the 2017/18 financial year. The total value of the contracts is R1.2 billion with the possibility of a follow-on order. The programme accounted for revenue of R283 million (2015/16: R50 million) during the 2016/17 financial year.

Denel Vehicle Systems was also contracted by the UAE in 2015/16 to supply 24 RG31 mobile mortar platform (MMP) armoured utility vehicles. All 24 vehicles have been delivered with the last batch of eight vehicles passing final acceptance during March 2017. The contract’s value is R220 million of which R208 million was recognised during 2016/17.

The other major contract that contributed to Denel’s bottom line was the A400M aerostructures contract with Airbus Military. The total programme value of the five work packages with Denel Aeronautics amounts to R3.6 billion and revenue of R510 million (2015/16: R540 million) was recognised during the 2016/17 year.