State-owned defence industrial group Denel had further improved its financial position during the 2008 financial year, with a 36,8% improvement in profit to a net loss of R347-million for the year ended March 31, 2008, compared with a net loss of R549-million the year before.

Denel acting CEO Talib Sadik, who replaced Shaun Liebenberg in June, on Tuesday, during a media briefing, commented that three out of the eight entities that formed part of Denel had already been turned around to become profitable.

He expected the other entities to become profitable in time, as new partnerships were formed with equity partners.

Earlier this year, Denel had agreed to an equity partnership with German firm Rheinmetal Waffe Munition in terms of its Denel Munitions division. Denel retained a 49% stake, while Rheinmetall held a 51% interest in the business.

Sadik said that Denel was now in negotiations with other local and international defence companies in terms of some of its other businesses.

He explained that exploratory talks had already been entered into with interested parties with regard to Denel's missile business.

The search for equity partners formed part of the group's continuing turnaround strategy, started in 2005, which was aimed at turning Denel into a commercially sustainable business, instead of a subsidy based group.

Sadik added that the directors and shareholders of Denel were satisfied with the progress of its strategy implementation and that Denel had adequate cash resources and reserves to continue operating as a going concern for the next 12 months.

The group had also made progress in developing relationships with a number of State agencies, including the Department of Defence (DoD), as well as gaining access to decision makers within a number of State departments.

"An important step forward, in our view, was the appointment of a Cabinet task team comprising the Departments of Defence, Public Enterprises and the National Treasury to jointly work on developing Denel's long-term sustainability," said Sadik.

He added that the task team would identify defence spending that should be directed to contractors in areas where the South African defence-related industry had a capacity and competitive advantage, but would also secure equity partnerships for the remaining Denel businesses where relevant.

The task team, for example, had decided on areas of importance like Rooivalk manufacturing, which would continue to a deployment baseline stage.

Negotiations with the DoD were under way to decide on a way forward for the Rooivalk.

The group further reported a 17,6% increase in revenue to R3,89-billion for the year, compared with R3,31-billion the year before.

Sadik noted that the improvements in its profits and revenue were achieved through focusing on its core businesses, phasing out of legacy contracts, savings in operating costs and profits on the sale of noncore assets.

All noncare assets have now been sold, the group announced.

Meanwhile, Denel had maintained its Fitch AA long-term and F1+ short-term ratings during the year.