Johannesburg — FORMER Denel CEO Shaun Liebenberg's strategy of splitting the defence group into autonomous divisions and striking strategic partnerships with foreign defence groups appears to be paying dividends.

Nowhere in the group is this more evident than at Carl Zeiss Optronics, which has in little more than two years transformed itself from an inefficient, bloated entity to a lean and once again profitable group.

Germany's Carl Zeiss acquired a 70% stake in Denel Optronics in 2007, with Denel retaining a 30% golden share. The company was renamed Carl Zeiss Optronics.

"In 2007 we turned over about R280m and made a R140m loss. With the changes in place, we have improved turnover to R520m and are able to report a marginal profit this year," Gilbert do Nascimento, executive manager of marketing and sales, said yesterday.

With the help of Carl Zeiss, the group has improved manufacturing processes to world-class standards and invested heavily in new facilities, spending R80m over the past two years. It will soon begin development of a further 3300mÂ' optics facility costing R35m. The group has also invested heavily in training, partly around change-management, with many struggling to make the transformation from the old Denel.

Do Nascimento said the group had cut down on its unsustainably large product range, speeded up production and become more result-driven.

The signs of the change are evident from the moment you step into the ultra-modern head office that bristles with German efficiency, and it can also be seen in output. "Before we battled to produced 25 TLS40 handheld surveillance units a week. We are now able to produce a 100 a week," said Do Nascimento. As intended by Liebenberg, the partnership with Carl Zeiss has opened new markets for the company to sell its products throughout the world, with the local defence market now only accounting for 15% of turnover.

Do Nascimento said the order book is full for the next two years and prospects remain promising. Current contracts include a 1m deal with the US defence department for the supply of 50 TLS40 handheld surveillance units for the armed forces in Afghanistan. Further orders are expected, he said.

However, the real cash cow, said Do Nascimento, is the new-generation optical head tracker, with a heads-up display in the visor, which will be used in all Gripen aircraft in the South African and Swedish air forces as well as on all Eurofighter jets. The contract will bring in R200m and runs over a number of years.