Denel welcomes the decision by Fitch ratings agency to maintain the company’s long-term rating and affirm its current short-term rating and outlook, despite a broad set of challenges that have been facing the South African economy.
Fitch recently reconfirmed Denel’s long-term ratings status as “AAA (zaf)”, a status it has held since 2014.
“So much has happened in the global and domestic economy since 2014, yet Denel has been able to more than hold its own – against all odds,” Denel’s acting Group financial director Odwa Mhlwana said today.
“Fitch’s evaluation took place during December 2015 and January 2016 – one of the most unstable periods in our economy, with exchange rate volatility and global uncertainty around the direction which the South African economy was headed,” he said.
“Fitch’s decision is a vote of confidence in the continuing success of the company’s turnaround and its financial recovery, which has strengthened more 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 R815 million, three-year bond that matured in January. “Under the guidance of the board and in support of Denel’s growth, it was decided to refinance the bond for a 12-month and 18-month period.
“Denel’s bond issue was twice oversubscribed, which is a confirmation of the investor confidence in Denel,” Mhlwana said.
“It’s clear that we are on the right track, and we are confident that 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 stakeholders 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.”
Mhlwana further reiterated the board’s position with regards to three executives who were put on suspension.
“At the core of the allegations against these officials are issues related to the BAE LSSA transaction. The matters are not concluded yet and are essentially matters of a sensitive nature between an employer and an employee, so we are not at liberty to provide more detail until the matter is concluded,” he said.
The former Group CEO’s contract has not been renewed as it was about to expire, while Denel is proceeding with disciplinary action against the other two officials.