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Update on regulatory status of Blue
BLUE FINANCIAL SERVICES LIMITED
Incorporated in the Republic of South Africa
Registration Number: 1996/006595/06
JSE Code: BFS
ISIN: ZAE000083655
(“Blue” or “the Company” or “the Group”)
UPDATE ON REGULATORY STATUS OF BLUE
1. BACKGROUND
Shareholders are referred to the announcements published on the Stock Exchange News
Service (“SENS”) of the JSE Limited (“JSE”) on 26 June 2013 (“June 2013 SENS”), whereby
shareholders were advised of the Company’s voluntary suspension of trading in Blue
securities, 26 August 2013 (“August 2013 SENS”), 31 October 2013 (“October 2013 SENS”),
6 December 2013 (“December 2013 SENS”), 1 April 2014 and 30 April 2014 (“April 2014
SENS”), 30 September 2014 (“September 2014 SENS”) and 30 December 2014 (“December
2014 SENS”) whereby shareholders were updated on the developments at Blue. This
includes the conversion of debt in terms of the debt rescheduling agreement (“DRA”), the
restructuring of Blue Financial Services South Africa Proprietary Limited (“Blue SA”), the
forensic investigations launched in 2010 and 2013 respectively and the status of the full year
ended February 2013, six months ended 31 August 2013, the full year ended February 2014,
the six months ended 31 August 2014 and the full year ended 31 December 2014 financial
results. This announcement serves as further communication to shareholders on the
aforementioned matters.
2. UPDATE ON INVESTIGATION COMMISSIONED IN 2010
The forensic investigation commissioned by the Board of the Company in 2010 has been
completed. Horwath Forensics SA (“Howard Forensic”) was appointed to undertake the
investigation and their forensic report has subsequently been issued. In this regard, the
Company has reported to the Directorate of Priority Crimes in terms of section 34 of the
Prevention and Combating of Corrupt Activities Act. The Company will continue to offer its full
support to all regulatory bodies in their investigation of this matter.
Shareholders are advised that the Group has initiated legal proceedings against ABSA Bank
Limited for recovery of R35 million together with interest thereon since 2009. ABSA Bank
Limited has since filed a defense and lodged an application to join Dave van Niekerk – the
previous CEO of Blue to the litigation.
3. UPDATE ON INVESTIGATION COMMISSIONED IN 2013
In the June 2013 SENS, the Company advised that the Board had commissioned a further
forensic investigation in May 2013. In this regard, Horwath Forensics was appointed by the
Board of the Company to undertake the investigation, which included inter alia investigating
transactions between the Company and Leonox Investments (Pty) Ltd (“Leonox”).
After this the Board commissioned a further forensic report to focus on the relationship and
transactions not only as between the Company and Leonox, but also on Leonox and the
Housing Impact Fund of South Africa (“HIFSA”). The forensic reports are largely finalized.
The Company commenced the process of assessing the findings of the report in context of
relevant legal and accounting principles with the objective to finalise the entries into its
financial records that would appropriately reflect the transactions between the Company,
Leonox and HIFSA.
Subsequent to engagement with the company’s legal team, auditors and related parties a
further legal opinion was received from senior counsel. The effect of this will be that the Group
will have to approach the High Court of South Africa to obtain confirmation in respect of its
rights and obligations as espoused in the legal opinion as the application of same will have a
material impact on the figures reported by the Company.
This will delay the finalisation of the outstanding financial results as set out below.
4. DRA – CONVERSION AND LITIGATION
In the August 2013 SENS shareholders were advised that the DRA funders have notified the
Company of their intention to bring forward the conversion date from January 2014 with the
effective date of conversion being 6th September 2013. A conversion plan was provided to
the DRA funders in respect of which the DRA funders represented by the Lender Committee
lodged a dispute on the 20th of December 2013 in terms of the provisions of the DRA.
Subsequent to aforegoing, Banc ABC Botswana, Banc ABC Zambia and Standard Chartered
Bank individually instituted legal processes to enforce their respective interpretations of the
DRA. Judgment in respect of the Banc ABC Zambia matter is expected in the near future and
is considered to be a key judgment in the as it will provide clarity as to the interpretation of
rights inherent to the DRA.
5. OUTSTANDING FINANCIAL RESULTS
The financial results for the full year ended February 2013, the six months ended 31 August
2013, the full year ended February 2014, the six months ended 31 August 2014 and the full
year ended 31 December 2014 are outstanding.
Since the December 2014 SENS, Deloitte has indicated to the Company that it will not be in a
position to complete the audit for the full year ended February 2013 and subsequent years.
Consequently Deloitte is currently in the process of completing their audit work and opinions
on all subsidiary Annual Financial Statements for financial years 29 February 2012. The 2012
Group Consolidated Annual Financial Statements was signed off by Deloitte previously,
although they have not issued their audit opinions on some of the subsidiary Annual Financial
Statements at that time. At the date of this SENS we do not have a firm commitment from
Deloitte on when this process will be completed.
Even though Deloitte has done substantial work on the 2013 audit, they have not been
formally appointed to do so by shareholders and Deloitte has also now indicated to the
Company that it will not be available for re-election to perform the audit for the full year ended
February 2013 and subsequent audits, citing limited resources
The Company has previously approached and will now formally appoint
SizweNtsalubaGobodo (“SNG”) to assume the audit for the full year ended February 2013
and subsequent audits. The audit for the full year ended February 2014 has already
commenced and it is expected that these results will be finalized in a relative short space of
time once the 28 February 2013 numbers have been concluded.
Deloitte will remain appointed as the auditors for the full year ended 29 February 2012 until
the audits of certain subsidiary company annual financial statements have been completed.
The Board of the Company is fully aware of the importance of concluding the outstanding
financial results and would therefore like to give shareholders the comfort that the matter is
being given the highest priority.
Once the financial results have been released, the Company will announce its forward-looking
strategy.
6. RIGHTS ISSUE
Shareholders are further advised that the Group’s plans to do a rights issue of R200 million to
recapitalize the Group. It is the intention to do this as quickly as possible. This unfortunately
can only be done once financials have been published and as such productive assets are
used to fund working capital requirements.
7. TRADING UPDATE
It is anticipated that a trading update will be released within the next 3 (three) weeks, although
it should be noted that such figures will be published without the benefit of the clarification of
the High Court to be sought in terms of point 3 above.
8. TRADING OF SECURITIES
The Board of the Company wishes to advise that it is committed to publishing the financial
results as soon as practically possible, at which point the company will apply to the JSE to
recommence with the trading of Blue securities on the stock exchange operated by the JSE.
Designated Advisor
Grindrod Bank Limited
Randburg
31 March 2015
Date: 31/03/2015 03:52:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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