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BLUE FINANCIAL SERVICES LIMITED - Quarterly Update

Release Date: 03/05/2016 08:45
Code(s): BFS     PDF:  
 
Wrap Text
Quarterly 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”)


QUARTERLY UPDATE


Shareholders are referred to the announcements published on the Stock Exchange News Service (“SENS”) since
26 June 2013, whereby shareholders were advised of the Company’s voluntary suspension of trading in Blue
Securities, as well as the various quarterly update and other announcements published on SENS since then,
whereby shareholders were updated on the developments at Blue.

Update on the audit
1.   As previously indicated in various SENS announcements, the 2012 consolidated financial statements for
     the Blue Group were finalised during the 2013 calendar year. At that stage, however, there remained
     twenty individual sets of subsidiary annual financial statements, which required completion for the
     financial years ending February 2010 to February 2012. Those included:
      a.      five South African subsidiaries;
      b.      twelve African subsidiaries;
      c.      three Mauritian subsidiaries.
2.    In August 2014 the Blue Group provided to Deloitte the necessary trial balances for the aforementioned
      entities in order to enable Deloitte to complete the audits. Despite the provision of that information, the
      vast majority of the audits remain outstanding. The audits up to February 2012 currently outstanding still
      consist of:
      a.      Blue Kenya Ltd - the audits are now complete and the 2012 financial statements are with the
              board of directors for adoption;
      b.      Blue Financial Services Mauritius Ltd – the audits are now complete for the 2010, 2011 and 2012
              financials and will be tabled for adoption by the Mauritian board of directors on the 29th of April
              2016;
      c.      Blue Financial Services Malawi Ltd - both the February 2011 and February 2012 financials are still
              outstanding and await completion by Deloitte;
      d.      Blue Financial Services Namibia Ltd - the February 2012 financials are still outstanding and await
              completion by Deloitte;
      e.      Blue Financial Services (South Africa) (Pty) Ltd - the February 2012 financials are still outstanding
              and await completion by Deloitte; and
      f.      BFS Shared Management Services (Pty) Ltd - the February 2012 financials are still outstanding
              and await completion by Deloitte;
      g.      Blue Financial Services Swaziland Ltd - in respect of which the company is awaiting sign-off by
              Synergy of the February 2012 financials. This transpired when the auditors in Swaziland advised
              that the audit work performed by Deloitte was done too long ago and they can no longer place
              reliance on these numbers even tough Deloitte only recently provided them with these numbers.
      h.      The annual financial statements for Makhulong Multi Finance (Pty) Ltd (Blue Lesotho) for the 2012
              financial year was signed off in March 2016.


3.     The Company is unable to appoint substitute auditors as long as Deloitte remains in office i.e. not
       completing the 2012 audits. In order to address any further unnecessary delays in providing the market
       with updated information the Company has, however, in order to advance the audit process, engaged
       alternate auditors to perform the audits as “agreed upon procedures” until they can formally be
       appointed once Deloitte has completed its work and resigned as the Group auditors.
4.     The current status of the financials of the various entities post the 2012 financial year up to December
       2014 are:

     Company               December 2013                December 2014

     Blue Financial        UHY Voscon                   UHY Voscon
     Services Ghana
                           Completed by the due         Completed in the 2015
     Ltd
                           date in the 2014 calendar    calendar year.
                           year.

     Company               February 2013                February 2014                February 2015

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

     Blue Kenya Ltd        Mbaya and Associates         Mbaya and Associates         Mbaya and Associates
                           Audit commenced.             Audit commenced.             Audit commenced.
                           Awaiting Deloitte sign off   Awaiting Deloitte sign off   Awaiting Deloitte sign off
                           of 2012 and resignation.     of 2012 and resignation.     of 2012 and resignation.

     Company               February 2013                February 2014                December 2014

     Blue    Financial     Grant Thornton               Grant Thornton               Grant Thornton
     Services Zambia Ltd   Completed in the 2016        Completed in the 2016        Completed in the 2016
                           calendar year.               calendar year.               calendar year.

    Blue   Employee        BDO                          BDO                          BDO
    Benefits
                           Completed in the 2016        Completed in the 2016        Completed in the 2016
    Botswana (Pty)Ltd      calendar year.               calendar year.               calendar year.

    Blue    Employee       BDO                          BDO                          BDO
    Benefits Uganda        Completed in the 2016        Completed in the 2016        Completed in the 2016
    Ltd                    calendar year.               calendar year.               calendar year.

    Blue    Financial     Ernst & Young                 Ernst & Young                Ernst & Young
    Services Malawi       Auditors finalising audit.    Auditors finalising audit.   Auditors finalising audit.
    Ltd                   Pending approval of 2011      Pending approval of 2011     Pending approval of 2011
                          and 2012 financial and        2012 financial and 2012      financial
                          statements.                   statements.                  statements.

    Blue  Financial       BDO                           BDO                          BDO
    Services Namibia      Audit has commenced.          Audit has commenced.         Audit has commenced.
    (Pty) Ltd             BDO awaiting Deloitte sign    BDO awaiting Deloitte        BDO awaiting Deloitte
                          off of 2012 and               sign off of 2012 and         sign off of 2012 and
                          resignation.                  resignation.                 resignation.

Blue Financial            Synergy                       Synergy                      Synergy
Services                  Final review of financials    Final review of financials   Final review of financials
Swaziland (Pty)           statements.                   statements.                  statements.
Ltd

Blue Financial            Enslins                       Enslins                      Enslins
Services Lesotho          Audit has commenced.          Audit has commenced.         Not applicable. Next
Ltd                       Waiting for auditors to list  Waiting for auditors to list financial year end is
                          outstanding issues, if any.   outstanding issues, if any.  February 2015. Audit has
                                                                                     commenced.

Mobile U (Pty) Ltd        SNG                           SNG                          SNG
                          Company dormant. Audit        Company dormant. Audit       Company dormant. Audit
                          not yet started               not yet started              not yet started

Blue Financial            SNG                           SNG                          SNG
Services (South           Audit not yet started         Some initial work has        Some initial work has
Africa) (Pty) Ltd                                       commenced during the         commenced during the
                                                        2015 year, although same     2015 year, although same
                                                        is currently pended.         is currently pended.

BFS  Shared               SNG                           SNG                          SNG
Management                Company dormant. Audit        Some initial work has        Company dormant. Audit
Services (Pty) Ltd        not yet started               commenced during the         not yet started
                                                        2015 year, although same
                                                        is currently pending -
                                                        Company dormant.



5.     In respect of the Consolidated Financial Statements for the company for the financial year ending 2013
       and subsequent periods. We wish to advise as follows:
       a.        The consolidated audit for the 2013 financial year began in January 2013 in preparation for the
                 February year end.
       b.        In June 2013 Deloitte advised that, owing to a lack of capacity on its part, it would be unable to
                 commence the audit of the Group consolidated financials until the end of July 2013 which led to
                 the voluntary suspension of the company with the JSE.
       c.        Despite an undertaking in this regard, Deloitte failed to finalise the consolidated audit by August
                 2013. The Company was provided with the assurance, however, that the audit would be
                 completed by the end of September 2013. The audit was not completed by that date.
       d.        In December 2013 (some 6 months after the originally contemplated completion in July 2013)
                 Deloitte advised that it would not be in a position to recommence the audit immediately after the
                 festive season as a result of continuing capacity issues. Deloitte pledged to recommence the
                 consolidated audit in February 2014. Deloitte anticipated that a further four to five weeks would
                 be required to finalise the consolidated audit, projecting completion by the end of March 2014.
       e.        Although Deloitte did recommence the consolidated audit in February 2014, it did not adhere to
                 its undertaking and the audit was not completed by the end of March 2014.
       f.        Finally, in June 2014, Deloitte advised the Company that it would not hold itself eligible for the
                 2013 audit, either on a consolidated basis or on an individual subsidiary basis and stopped all work
                 in completing the 2013 consolidated audit.
6.     The process in respect of consolidated financial statements can only be restarted once all the individual
       subsidiary audits have been completed.

Briefing Session with Stakeholders
7.     The Company is proposing to have a briefing session for its stakeholders during the course of June 2016
       at which stakeholders will be appraised on recent developments within the Company. This will not be a
       formal shareholders meeting, however, facilities will be made available for shareholders to participate.
Settlement of related party Liabilities
8.    The Blue Group is currently indebted to certain companies within the Mayibuye Group of Companies
      (“Mayibuye”) in the sum of R 69,476,935.55, to which interest must be added at the respective rates and
      from the respective start dates.
9.    The debt of Mayibuye was secured against a cession and pledge of Blue’s rights, title and interest in the
      shareholding of all its investments.
10.   In additional to the aforegoing the Blue Group is indebted to Cycas Investments (Pty) Ltd in the amount
      of ZAR 6,630,711.22 (six million six hundred and thirty rand seven hundred and eleven rand twenty two
      cents), to which interest must be added at the respective rates and from the relevant start dates.
11.   The debt of Cycas was secured against a cession and pledge of Blue’s rights, title and interest in the
      shareholding in Blue Financial Services Ltd Ghana which ranks prior to the pledge and cession from
      Mayibuye.
12.   Mayibuye and Cycas called on Blue to provide it with terms of repayment within 90 days which time period
      will expire on the 10th of May 2016. Simultaneously, Mayibuye and Cycas have taken control of the
      investments as envisaged in terms of the securities.
13.   The parties are completing the relevant discussions and the process is anticipated to be concluded shortly.


Johannesburg
3 May 2016

Designated Adviser
Grindrod Bank Limited

Date: 03/05/2016 08:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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