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BLUE FINANCIAL SERVICES LIMITED - Operational update and Trading update

Release Date: 28/08/2015 11:12
Code(s): BFS     PDF:  
 
Wrap Text
Operational update and Trading update

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”)

OPERATIONAL UPDATE AND TRADING UPDATE

Shareholders are referred to the announcements published on the Stock
Exchange News Service (“SENS”) of 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”), 30 December 2014
(“December 2014 SENS”), 31 March 2015 (“March 2015 SENS”), 20 April 2015
(“April 2015 SENS”), 27 May 2015 (“May 2015 SENS”), 5 June 2015 (June
2015 SENS”) and 20 August 2015 (“August 2015 SENS”), whereby
shareholders were updated on the developments at Blue.

Trading update:

In terms of the Listings Requirements of JSE Limited (“Listings Requirements”),
companies are required to publish a trading update as soon as they become
reasonably certain that the financial results for the period to be reported on will
differ by more than 20% from that of the previous corresponding period.

Whilst we are comparing two six-month periods, it should be noted that the
Company changed its financial year-end from 28 February to 31 December.

Shareholders are therefore advised that Blue’s earnings per share for the six
months ended 30 June 2015 is expected to be an improvement of more than
20% or 0.20 cents per share better than the loss of 1.01 cents per share of the
previous corresponding six-month period ended 31 August 2014.

Shareholders are further advised that Blue’s headline earnings per share for
the six months ended 30 June 2015 is expected to be an improvement of more
than 20% or 0.20 cents per share better than the headline loss of 1.01 cents
per share of the previous corresponding six month period ended 31 August
2014.

Shareholders are advised that the improved performance is largely due to once
off gains flowing from the finalization of the turn around process that may not
re-occur in future periods.

Once more certainty is obtained, Blue will provide further guidance as required
by paragraph 3.4(b) of the Listings Requirements
The financial information on which this trading update is based has not been
reviewed or reported on by Blue’s external auditors.

Forensic report:

The Company wishes to report that the independent third-party forensic
investigation in relation to Leonox Investments Proprietary Limited (“Leonox”)
has been completed. The results of the forensic investigation can be
summarised as follows:
-      Blue was not involved in any fraudulent activity in relation to Leonox; and
-      As a result of control failures by parties external to Blue, ownership of
       assets previously thought to have been sold to Leonox was never
       transferred;
Based on the above, Blue has incurred losses, which is in the process of being
recovered.

Publication of Financial Information:

Shareholders are advised that the Board has decided to publish the Company’s
June 2015 interim accounts, in the form of unaudited management accounts.

The management accounts, which are the subject of the above-mentioned
trading update, will be published by the Board upon substantial completion of
the audits listed below, which is anticipated by no later than 30th September
2015.

Audit Update:

Shareholders are reminded that Deloitte signed off the Group results for the
2012 financial year during the 2013 calendar year. Based on the events as
described below and as advised in the June 2015 SENS, the effect of the
conclusion of the forensic investigation needed to be quantified which has now
been done.

For the audits that Deloitte is responsible for, up to and including 2012, there
are 20 individual sets of subsidiary annual financial statements for the financial
years ended February 2010 to February 2012, which still requires completion.
These include:
-      6 South African subsidiary sets;
-      11 sets in respect of subsidiaries in the remainder of Africa; and
-      3 Mauritian subsidiary sets.

For the financial periods commencing from the start of the 2013 financial year,
there are a further 77 individual sets of financial statements that requires
completion. The auditors appointed to perform these audits have materially
completed their work and are mostly awaiting Deloitte to conclude their audit in
respect of the individual sets of subsidiary annual financial statements for the
financial year ended February 2010 to February 2012.

This audit update is categorised into the following categories:
-      Category 1 - Audits for financial years 2009 to 2012;
       o      All entities other than previously traded South African entities;
       o      Previously traded South African entities.
-      Category 2 - Statutory Audits of the African Subsidiaries from February
       2013 up to December 2014; and
-      Category 3 - Group Consolidated Financial Statements for the 2013
       financial year.

1.     Category 1
       a.   Audits for financial years 2009 to 2012, excluding South
            African Entities

               The Company provided all relevant final trial balances to Deloitte
               in August 2014. Deloitte has advised the Company in June 2015
               that they will complete the audits by September 2015.

            b. Statutory Audit of the South African Subsidiaries for 2012

               As stated above the forensic reports and legal opinions have
               confirmed the position.

               As previously reported certain assets that were de-recognised,
               will now have to be re-recognised.

               The correct treatment in terms of IFRS has now been agreed with
               Deloitte and the Company updated its general ledger accordingly.

               The annual financial statements up to the 2012 financial year for
               the South African subsidiaries of the Company are, in the
               Company’s view, now ready for audit finalisation.

2.     Category 2 - Statutory Audit of the African Subsidiaries from
       February 2013 up to December 2014

-      Based on the events, the Company elected to decentralise the audit of
       the Group by proactively appointing resident auditors for each African
       subsidiary for the financial years ended February 2013 and onwards.
-      The Auditors appointed in respect of these audits and the respective
       statuses of these audits are as follows:

Company               February 2013           February 2014            December 2014

Blue Financial        UHY Voscon              UHY Voscon               UHY Voscon
Services Ghana Ltd
                      Complete                Complete                 Complete

Blue Financial        Grant Thornton          Grant Thornton           Grant Thornton
Services Zambia Ltd
                      Fieldwork mainly done.  Fieldwork mainly done.   Fieldwork mainly done.



Blue Employee         BDO                     BDO                        BDO
Benefits Botswana
(Pty) Ltd             Fieldwork done          Fieldwork done             Fieldwork done


Blue Kenya Ltd        Mbaya and Associates    Mbaya and Associates       Mbaya and Associates
                      Fieldwork done          Fieldwork done             Fieldwork done

Blue Employee         BDO                     BDO                        BDO
Benefits Uganda Ltd
                      Fieldwork done          Fieldwork done             Fieldwork done

Blue Financial        Ernst & Young           Ernst & Young              Ernst & Young
Services Malawi Ltd
                      Ready for sign-off      Ready for sign-off         Ready for sign-off

Blue Financial        BDO                     BDO                        BDO
Services Namibia
(Pty) Ltd             Audit not yet commenced. Audit not yet commenced   Audit not yet commenced

                      BDO awaiting Deloitte
                      sign off of 2012 and
                      resignation prior to
                      commencement

Blue Financial        Synergy                      Synergy                        Synergy
Services Swaziland
(Pty) Ltd             Fieldwork completed.         Fieldwork completed.           Fieldwork completed.


Blue Financial        Enslins                      Enslins                        Enslins
Services Lesotho Ltd
                      Audit not yet commenced.     Audit not yet commenced.       Audit not yet

                      Awaiting Deloitte sign       Awaiting Deloitte sign off     commenced. Awaiting
                      off of 2012 and resignation  of 2012 and resignation        Deloitte sign off of 2012
                      prior to commencement        prior to commencement          and resignation prior to
                                                                                  commencement

Blue Financial
Services Mauritius Ltd
                        Nexia Baker and            Nexia Baker and                Nexia Baker and
                        Arenson                    Arenson                        Arenson
                        Audit not yet commenced.   Audit not yet commenced.       Audit not yet
                        Auditors awaiting Deloitte Auditors awaiting Deloitte     commenced. Auditors
                        sign off of 2012           and sign off of 2012 and       awaiting Deloitte sign off
                        resignation   prior        to resignation prior to        of 2012 and resignation
                        commencement               commencement                   prior to commencement


3.     Category 3 – Group Consolidated Financial Statements for the 2013
       financial year and subsequent periods

-      Deloitte commenced the audit for the 2013 financial year on a
       consolidated basis in January 2013, in preparation for the year-end,
       which was 28 February 2013.
-      Following repeated delays, in June 2014, Deloitte verbally indicated that
       they would not be holding themselves eligible for the 2013 audit on either
       a consolidated basis or for statutory audits. No substantive reasons have
       been supplied in writing. At that time Deloitte had already received
       payment of R8,4 million in respect of the audit for the 2013 financial year.
-      The Company is currently in discussions with SizweNtsalubeGobodo to
       understand the best way of completing all subsequent consolidations
       which is dependent on the outcome of the audit processes as set out
       above.

Funding strategy:

The Board have approved a funding structure that is being set up by certain
shareholders to fund future growth of the Company. This structure is being
created to provide funders with a credit-enhanced return. Once the structure is
operational, shareholders will be advised accordingly.

Shareholders Meeting:

As previously indicated the Board of Directors intends to schedule an Annual
General shareholders Meeting (“AGM”). It is currently anticipated that the AGM
will be scheduled during November 2015. The exact date is dependent upon
the finalisation of the audit of the financials for the relevant subsidiaries for the
2012 financial year, the finalisation of the audit of the financials for the
subsidiaries for the subsequent periods and the finalisation of the audit on a
consolidated basis for the Company up to December 2014, as discussed
above. Shareholders will be kept informed.


Johannesburg
28 August 2015

Designated Adviser
Grindrod Bank Limited

Date: 28/08/2015 11:12:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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