| Mon 31 Aug 2020, 13:41 | | Quarterly update regarding disclaimer of audit opinion - BIDEN |
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Quarterly update regarding disclaimer of audit opinion - BIDEN
DENEL SOC LIMITED
Registration number: 1992/001337/30
JSE Alpha Code: BIDEN
(“Denel” or the “Group”)
QUARTERLY UPDATE REGARDING DISCLAIMER OF AUDIT OPINION
Noteholders are referred to previous announcements released on SENS, with the latest quarterly
update released on 24 June 2020 (“June Update”), providing updates on progress made in relation
to the issues that resulted in the disclaimer opinion as contained in the audit reports for the financial
years ended 31 March 2018 and 31 March 2019 (the “Disclaimer”).
The key issues that led to the Disclaimer are currently being addressed and in the process of being
resolved. As stated in the June update, Denel has an Audit Fix Plan to focus on the key issues
relating to the 2018/2019 audit, with a further focus area being People, Processes and Systems
across the Group.
1. External Audit
1.1 Denel has submitted the unaudited annual financial statements on 31 July 2020 to its external
auditors, the Auditor General South Africa (“AGSA”) for audit as required in terms of section
76 of the Public Finance Management Act (PFMA).
1.2 The AGSA, in accordance with their requirements commenced their audit testing for the 2020
audit cycle as early as January 2020 for the PFMA audit, and on 9 July 2020 for the financial
component of the audit. The audit report will be finalised by 31 October 2020 in accordance
with the extended timeline as a result of the national lockdown due to the Covid-19
pandemic.
2. Audit Fix Plan
The new accounting standards (“Standards”) have been implemented in a uniform manner
throughout the Group and Denel has updated financial records to ensure adherence to the
IFRS Standards.
These are currently being audited by the AGSA and the outcome will be reported on finalisation
of the FY2019/20 audit.
3. Internal control and internal control deficiencies
3.1 As set out in the June Update, Ernst and Young has reviewed the external audit
remediation plan and issued a report detailing areas of improvement. The suggested
areas of improvement continue to be integrated and implemented as part the Audit Fix
Plan.
3.2 The AGSA continues with supply chain management compliance testing for irregular,
fruitless and wasteful expenditure. These results will be reported as part of the
FY2019/20 audit.
4. Going Concern
Denel continues to monitor and manage the liquidity status in order to maintain operations.
Notwithstanding this and the impact of the Covid-19 pandemic, Denel has only been able to
pay partial salaries and related costs from May 2020 to date to all its employees. These ranged
from 100% for employees earning below R17000 per month and between 60% - 70% for its
remaining employees. Denel has subsequently managed to make some payments i.e. medical
aid and risk portion of the pension payments and remains engaged with its unions on the
payment of the overdue salaries. The Group is pursuing various options to enable it to proceed
with the outstanding salary payments. Denel will keep its investors informed of any further
developments in this regard.
5. Ongoing
Denel will continue to resolve the matters raised in the Disclaimer and provide quarterly
updates in this regard.
31 August 2020
Debt Sponsor: Nedbank Corporate and Investment Banking
Date: 31-08-2020 01:41:00
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