1. DENEL GROUP
State-owned Denel - a leading catalyst for industrialisation in the high-technology aerospace & defence sector through RSA industry collaboration

2. SETTING THE SCENE:

3. Fully owned by SA Government Reports to Minister of Public Enterprises
Company established in 1992
Some facilities exist > 50 years
6 900 employees
4 600 employees at core business units
2 300 employees at Associates
Engineers, scientists and technicians
Annual turnover ± R5.8bn
Exports around 52%
12 Plants throughout South Africa
Largest manufacturer of defence equipment in SA
Experienced in supplying and supporting of equipment around the globe

4. CORE PRODUCT PORTFOLIO
Humanitarian demining services and products
Maintenance repair and overhaul
Unmanned
Aerial vehicles
Technical Training
Aerostructures
Munitions and
sub components
Engineering
services
Mine Protected
Vehicles
Land based systems
( Artillery, Infantry
and Armour systems)
Command and Control
Missiles

5. WHAT THE SHAREHOLDER HOLDS DENEL ACCOUNTABLE FOR!!
THE MANDATE OF DENEL:
WHAT THE SHAREHOLDER HOLDS DENEL ACCOUNTABLE FOR!!
Support and maintain the RSA DoD’s sovereign and strategic industrial defence capabilities in an efficient and sustainable manner
Contribute to industrial development towards the building of a dynamic defence related industrial cluster and to act as a catalyst for advanced manufacturing in the RSA
Long term growth strategy aimed at increasing sales, product portfolio and service offerings
Pursue financial stability based on achieving profitability targets by increasing market share and achieving its revenue targets, as well as reducing costs
Ensure on‑time and on‑cost deliveries on major programmes
Contribute to socio-economic objectives including skills development and transformation
Compliance with local and international policies, regulations and treaties as well as regulations and laws of the jurisdictions of where Denel conducts business

6. INTRODUCTION TO DENEL LSI & C2 Cluster DENEL WHOLLY OWNED
DENEL SUBSIDIARIES >50%
DENEL ASSOCIATES <50%
Aerospace Cluster
TURBOMECA AFRICA
DENEL AVIATION
DENEL AEROSTRUCTURES
Guided Weapon
Cluster
DENEL DYNAMICS
Munitions Cluster
DENEL PMP
TAWAZUN DYNAMICS
GROUP FD
GROUP BUSINESS DEV
GROUP HR & TX
RHEINMETALL DENEL MUNITION (RDM)
GROUP COO
Jan Wessels
DENEL GROUP CEO
Riaz Saloojee
GROUP SUPPLY CHAIN
DENEL INTEGRATED SYSTEMS & MARITIME
GROUP LEGAL
GRP RISK & COMPLIANCE
GROUP COMMS
DENEL C2
Denel Corporate Functions
AIRBUS DENEL OPTRONICS
LSI & C2 Cluster
DENEL OTR
TEST RANGE
DENEL LMT
DENEL VEHICLE SYSTEMS
DENEL LAND SYSTEMS
Landwards Cluster
8 July 2015

7. DENEL FACILITIES Denel Aviation Denel Aerostructures (DAe)
Airbus Optronics
Denel Dynamics
Turbomeca Africa
PMP
Denel Land Systems (DLS)
Mechem
Rheinmetall Denel Munition (Western Cape)
Denel Vehicle Systems (DVS)
Rheinmetall Denel Munition (North)
Overberg Test
Range (OTR)

8. 10 YEAR OVERVIEW: SUSTAINABLE GROWTH
NO “GRANTS & SUBSIDIES”
> 55% EXPORT
Priorities 2015/16
Contract execution
Positive cash flows
Meet revenue targets
Cost optimisation
Improve margins

9. Denel’s R&D Investment during 2014/15:
DENEL INVESTS SIGNFICANTLY IN R&D TO SECURE THE FUTURE
EXPAND THE MARKET OF EXISTING PRODUCTLINES:
Investment to modernise/expand existing lines through incremental investments. Selected examples where Denel internal & client funding is used::
Modernised Artillery G6 offerings for the export market
Medium calibre ammunition 27mm for Gripen to replace imports
Seeker-200 & -400 UAVS to modernise the UAV market offering
Rooivalk Mk 1 (upgrade) of the existing SAAF fleet
Denel’s R&D Investment during 2014/15:
R468m
RESEARCH & DEVELOPING NEW PRODUCTS FOR THE FUTURE:
Investment to develop tomorrow's products & systems. Selected examples:
Badger (Hoefyster) infantry fighting vehicle family
A-Darter (short range missile) to protect during close-range combat
Marlin (long range missile) to protect against long-range air attacks
Rooivalk Mk 2 (new baseline) for expanding the existing fleet
EOSat-1 satellite for earth observation & photography
RG35 military vehicle for defence in the Middle East & global
LM13 paramilitary vehicle border security in the Middle East & global
INVESTING IN THE CORE TECHNICAL FOUNDATION:
Investment in core new technologies, new processes, new skills for example:
New navigation algorithms to be used on all missiles & UAVS
New software design tools to be used on land vehicle programs
New telemetry technology to be used at test ranges

10. MOVING FORWARD:

11. THE DENEL VALUE PROPOSITION ON ONE PAGE
INTEGRATED SYSTEMS
(Level 5)
COMPLEX Highly Integrated, Technically-difficult Systems and/or Based on Sovereign/strategic Technologies
(Denel as SOE) (**)
Non-COMPLEX Lightly- Integrated, Technically-Easy Systems and based on non-critical Technologies
(Private Defence Industry)
Armscor/DOD
(Acquisition Decisions for the SANDF)
PRODUCTS , SUBSYSTEMS & COMPONENTS
(Level )
COMPLEX & DIFFICULT TO SUSTAIN products/subsystems/components and/or Based on Sovereign/strategic Technologies
(Denel as SOE)
Non-COMPLEX & READILY SUSTAINABLE products/subsystems/components and based on non-critical Technologies
(Private Defence Industry))
<< Higher Risk Profile
Lower Higher Risk Profile >>
Note (**): SMME/BEE supplier development may be further motivation to contract Denel as SOE on system level to provide a basket of local industry solutions (recent example UTILITY -> EU OEM -> Denel Aerostructures-> multiple SMMEs)

12. SUPPLY CHAIN MANAGEMENT

13. DENEL INVITES THE MANUFACTURING INDUSTRY TO PARTICIPATE
1. Denel is primarily a designer & systems-integrator of very complex technically advanced systems. We design the complex systems but mostly subcontract manufacturing of elements to the private industry before doing final integration, test and commissioning. It is one of our KPAs to develop local industry. It is not a afterthought or a buzzword – it is core to our success!
2. Denel is not a “utility company” like many other SOEs …. More than 55% of income is from exports and even locally there are NO subsidies, grants or regulated prices. We have to compete for orders in a very tough global market where most countries have high entry barriers for strategic defence equipment. (Example the USA, France, China, etc). Meaning our supply base needs to be world-class ito technology, efficiency & pricing.
3. Like most companies Denel developed & matured through the past decades from being technologically dependent (on foreign technology in the 1970s) to becoming independent in the 1980s till 1993 (embargo & sanction years), then after 1994 maturing (grow up!) and becoming inter-dependent with partners (both suppliers & customers)
4. Denel is a small player (<1% of global market) and has developed a niche strategy (highly agile boutique approach) to compete effectively with big global players dominating our industry. We are not willing to be overwhelmed by the competitive forces …. And we invite local industry sharing this positive vision to join forces with us & become supply partners!

14. STRICTLY COMPANY CONFIDENTIAL
THANK YOU
STRICTLY COMPANY CONFIDENTIAL