discussion points 1.review of strategy implementation progress 2.human resources: overview and...
DESCRIPTION
Denel Group Denel Integrated System Solutions Mechem Denel Dynamics UAV’s Carl Zeiss Optronics Denel Aviation & DPS Denel Land Systems Turbomeca Africa PMP Denel Dynamics Missiles Rheinmetall Denel Munition DENEL GROUP Denel Technical Academy OTB Denel Saab AerostructuresTRANSCRIPT
DISCUSSION POINTS
1. Review of strategy implementation progress
2. Human resources: Overview and achievements
3. Transformation: Overview and achievements
4. Programme management
4.1 A-Darter Programme
5. Business development
6. Financial performance
7. Impact of Denel in South Africa
DENEL GROUP STRUCTURE
Denel Group
DENEL GROUP
REVIEW OF STRATEGY IMPLEMENTATION PROGRESS
BUILD-UP TO DENEL’S STRATEGY FINANCIAL SUMMARY – PRE 2005/06
-600-400-2000
200
2001 2002 2003 2004 2005
Rm
-10000
10002000
2001 2002 2003 2004 2005
Rm
Losses
Cash utilised
Solvency
-2000-1500-1000-5000
500
2001 2002 2003 2004 2005
Rm
DENEL IN 2005
• Centralised conglomerate – lack of accountability and performance
• Major losses posted• Subsidy mindset• Salaries below market levels
- high attrition rate• Poor programme
performance• Diversification into non-core
businesses and assets - R1bn negative impact
• Significant decrease in domestic defence spend
• Global market access constraints
• Unfocussed export approach – no clear strategy to integrate into global supply chains
Key issues in 2005
Budget Burdens:
• High salary costs• Facility maintenance priority• Operations outside borders higher than budget• Military Veterans added to DoD• Border control added
Defence Budget as % of GDP
5.1%
4.5%
4.0%
1.5%1.3%
19811974 1989 1994 2010Source: Beeld, 5 May 2010
Expected DoD priorities:
• Border protection (surveillance, vehicles, ammunition, cyber, Command & Control)
• Landward defence renewal (vehicles, artillery, ammunition)
• Air Force (Maritime patrol, C-130 replacement, heavy lift, UAV’s)• Navy
The domestic defence budget has constricted considerably over the last two decades - need to leverage future opportunities
World bank recommendation: Defence should not be less than
2% of GDP
Country % GDPMalaysia 2.3%
China 1.5%
Saudi Arabia 9.3%
Brazil 2.6%
Country % GDPTurkey 4%
Pakistan 4.5%
India 2.6
Russia 3.9%
SA DEFENCE SPEND
DENEL IN 2005
• Centralised conglomerate – lack of accountability and performance
• Major losses posted• Subsidy mindset• Salaries below market levels
- high attrition rate• Poor programme
performance• Diversification into non-core
businesses and assets - R1bn negative impact
• Significant decrease in domestic defence spend
• Global market access constraints
• Unfocussed export approach – no clear strategy to integrate into global supply chains
Key issues in 2005 Strategy to “Fix” Denel
• Becoming a profitable, commercially viable and dynamic entity
• Overhauling governance • Attracting, developing, retaining
and appropriately rewarding world class skills
• Achieving world class productivity• Focusing on the areas where we
can compete credibly• Partnering with state agencies to
meet the defence needs of the country
• Developing partnerships/alliance ventures with global OEM’s to add true value and access markets
2006 STRATEGY PILLARS
Privileged Access
Partner with
State Agencies
Strategic Equity Partners
Grow
Com
mercially
Viable Businesses
Capabilities and Productivity
Denel Corporate Governance
Denel Corporate Office – managing 11 created Entities
People and Transformation
Denel Corporate Office Purpose – “The Role of the Centre”
Secure privileged access to a minimum
portion of South Africa’s defence
development and
procurement spend
Partner with State Agencies
to do joint business
planning and to establish export
marketing responsibilities.
These two factors translate into the ‘captive
market’ and ‘political
support’ that make
international major defence
prime contractors successful
Secure equity business
partnerships with major global
players
Focus on growing the commercially viable
businesses where Denel has real technological
leadership. Denel’s other businesses will be ring-fenced, operated under
management contracts or exited
Raise capabilities and productivity to world-class levels
4 years to 2010
10
Denel 2005/6 Challenges
- Workforce 8,000
- Export orientated company
- Centralised organisation
- Poor stakeholder alignment
- Governance challenges
- Poor programme management
- Ageing plant and equipment
- Poor human capital development and transformation
- Market access constraints
Denel 2007-2010 steps taken
Performance management
Denel operations decentralised
Entity boards, audit and risk committees, risk management and financial discipline
Restructuring
Defence – Loss R1.3bnAerostructures – Loss R300m
Denel 2010Defence – Profit before interest R200mAerostructures – Loss before interest R283m
Equity partnerships providing investment and access to markets
Disposal of non-core entities
Governance policies implemented, internal control systems and processes improved
Local client relationship and stakeholder alignment
improvements, 61% of revenue
Business development initiatives
Improved programme performance
Leadership development
Transformation initiatives
DENEL’S JOURNEY TO SUSTAINABILITY
ENTITY1 DENEL SHARE
MAJOR CLIENTS
INDUSTRIAL UPGRADING
REVENUE GROWTH2
NET PROFIT
R&D SPEND3
ORDER BOOK
Turbomeca Africa (Pty)
Ltd.(2003)
(TMA)
49% RSABotswana
Kenya Malawi
UKFrance
Major overhaulof plant and efficiencies
created
123% 11.2%
vs.
(55.6%) in 2002
N/A R320m
Carl Zeiss Optronics (Pty) Ltd
(2007)
(CZO)
30% UKUS
GermanyItaly
Turkey
New world class production
facilities established
122% 16.8%
vs.
(50%) in 2007
9% R795m
Rheinmetall Denel
Munition (Pty) Ltd
(2008)
(RDM)
49% RSAUSAUAE
ColumbiaGermanyTurkey
3 Year CAPEX programme:
R250m
28% 8.2%
vs.
(3.3%) in 2007
5.2% R2,2bn
1 Golden Share Agreements in place to ensure security of supply and retention of technology and business activity in SA
2 Since inception of the partnership3 Self-funded R&D spend as a percentage of total revenue per annum
ACHIEVEMENTS BY DENEL’S ASSOCIATE COMPANIES