South African state-owned defence industry conglomerate Denel has welcomed a decision by the Fitch ratings agency to maintain its long term rating and affirm its current short term rating and outlook, notwithstanding the challenges facing the local economy.
Denel’s long term ratings status is “AAA (zaf)”, which it has held since 2014.
“So much has happened in the domestic and global economy since 2014 yet Denel had been able to more than hold its own,” acting group financial director Odwa Mhlwana said.
The Fitch evaluation was done during December last year and this January, a period he said was “one of the most unstable in our economy with exchange rate volatility and global uncertainty around the direction the South African economy was headed”.
“Fitch’s decision is a vote of confidence in the continuing success of the company’s turnaround and its financial recovery, which has strengthened under the current board and management.
“We believe it is also a measure of the confidence the markets have in Denel as a business. It confirms our ongoing financial performance, strengthened balance sheet and continued strong support from stakeholders and our shareholder, the Department of Public Enterprises,” Mhlwana said.
The Fitch rating comes on the back of Denel’s hugely successful investor roadshow earlier this year to refinance the company’s bond and at the same time introduce the new executive team.
Denel had an R815m three year bond that matured in January. “Under the guidance of the board and in support of Denel’s growth, it was decided to re-finance the bond for a 12 month and 18 month period”.
“Denel’s bond issue was twice oversubscribed, which is confirmation of investor confidence in Denel,” Mhlwana said.
“It’s clear we are on the right track and we are confident investor sentiment was boosted even further with the recent affirmation by the Denel board of its commitment to good corporate governance”.
He added it was unfortunate that internal company-related matters were being pushed into the public domain by people with an axe to grind. “But the board has fully engaged our key stakeholder on these matters and this has ensured confidence in Denel, enabling us to focus on our core business,” Mhlwana said.
“Our order book is looking good, our cash reserves are growing and we are seeing an increasing interest in our business proposition. The markets clearly have confidence in Denel as a business and its projections into the future, as well as its executive leadership and the board.”
He further reiterated the board’s position with regards to three suspended executives.
“At the core of the allegations against these officials are issues related to the BAE LSSA transaction. Matters are not concluded yet and are essentially of a sensitive nature between employer and employee, so we are not at liberty to provide more detail until the matter is concluded,” he said.
The employment contract of Riaz Saloojee, former Group chief executive was not been renewed as it was about to expire, while Denel is proceeding with disciplinary action against the other two officials.