BLUE FINANCIAL SERVICES LIMITED
Incorporated in the Republic of South Africa
Registration Number: 1996/006595/06
JSE Code: BFS
(“Blue” or “the Company” or “the Group”)
Shareholders are referred to the announcement published on the Stock Exchange News Service
(“SENS”) on 26th June 2013, whereby shareholders were advised of the Company’s voluntary
suspension of trading in Blue Securities, as well as the various quarterly updates and other
announcements published on SENS since then, whereby shareholders were updated on the
developments at Blue.
1. Prior to December 2010 Blue had, under previous management, suffered a loss of over R1
billion which was caused by inter alia:
a. A failed operating model;
b. Inadequate capital structure;
c. Significant corporate maleficence;
d. Significant amount of individual entity annual financial statements not having been
2. The turnaround journey commenced in December 2010 with the conclusion of
recapitalisation agreements, including the Mayibuye subscription agreement (“Subscription
Agreement”) which was conditional on the conclusion of a funders recapitalisation
3. The turnaround journey, with the conclusion of the recapitalisation agreements, focused on:
a. introducing a sustainable operating model;
b. addressing the backlog of financial statements; and
c. launching forensic investigations into the events leading up to the aforementioned
need for recapitalisation.
Turn around objectives achieved
4. In relation to the objectives set-out hereinabove, and as previously reported in SENS
announcements, Blue was successful in, amongst others:
a. introducing a new operating model;
b. obtaining a detailed forensic investigation was conducted the results of which was
reported to all relevant regulators.
Publication of financial information
5. As previously advised the JSE has formally approved during or about July 2016 that the
Company may provide shareholders with a combination of audited and unaudited financial
6. The Company has previously advised and is still of the intent to release financial information
to shareholders as soon as all the remaining 2012 audits conducted by Deloitte have been
completed. At present, what remains of the Deloitte audited annual financial statements is
almost all the South African based entities.
7. Excluding the SA based audits as recorded in 6 above and in relation to the subsequent
audits after 2012 and up to December 2015, the Company wishes to report that all relevant
audits have been completed other than the following:
a. Blue Financial Services Namibia (Pty) Ltd (“Blue Namibia”)
A significant issue that remains to be resolved to complete the accounts relate to
an alleged overcharge of interest on customer accounts for periods 2008 – 2010
i.e. prior to the Mayibuye 2010 recapitalisation of the Blue Group. Discussions with
the Namibian regulator NAMFISA in respect of the are continuing.
b. Blue Financial Services Ltd Malawi (“Blue Malawi”)
The audits up to December 2014 is anticipated to be completed by 15 March 2017
Thereafter the auditors will commence with December 2015 and 2016.
c. Blue Financial Services Ltd Zambia (“Zambia”)
In respect of Blue Zambia, the auditors have confirmed that they have commenced
with the audit of the financials for the 2015 financial year. In addition to this, a key
issue to be resolved is the Bank of Zambia’s concerns regarding the capital
structure of the Zambian entity.
8. As referred to herein above the Blue Group reported a loss more than R 1 billion in 2010
and was both factually and commercially insolvent. The rescue and recapitalisation of the
Blue Group was originally anticipated to be up to R1,335 billion as per the Subscription
Agreement and DRA. This consisted, in aggregate, of:
a. R163 million via the subscription of shares by Mayibuye in Blue;
b. R229 million in terms of the first early conversion in terms of an addendum to the
c. R943 million via participant in the DRA;
9. The initial subscription of R163 million from Mayibuye was paid in cash on the 10th
December 2010, but of the R1,172 billion anticipated to be recapitalised, only R635.2 million
of the recapitalisation was effected.
10. Whilst certain parties adhered to the DRA, other parties to the DRA representing R475
million of the required recapitalisation, repudiated the DRA.
11. It was always understood that the DRA was a key to the sustainability of Blue and
accordingly Mapula Solutions (Pty) Limited (“Mapula”) the ultimate holding company of Blue
instituted legal action for recovery of damages caused by the repudiation of the DRA, from
those very defaulting parties to the DRA. A judgement has been handed down in favour of
Mapula for payment of the sum of R163 million against those offending parties to the DRA.
Execution process have now commenced.
Related Party Liabilities
12. As advised in terms of previous SENS announcements and as a direct consequence of the
failed recapitalisation, Mayibuye has also called up the debts that the Blue Group has to it.
13. A settlement agreement has been reached in terms whereof payment of the aforementioned
liabilities will be effected from Blue’s assets.
14. Implementation of the aforegoing is conditional on various regulatory approvals being
obtained and which is anticipated to be received forthwith.
15. As previously reported the forensic investigation mandated by, amongst others the
Company, into the events surrounding Leonox Investments (Pty) Ltd (in liquidation) were
completed and a final executive summary report has been provided to the Company.
Closure of certain investments
16. As advised in previous SENS announcements a decision had been taken to proceed with
the liquidation and/or closure of the following investments of the Company due to their lack
a. Blue Ltd Kenya;
b. Blue Financial Services Lesotho Ltd;
c. Blue Financial Services Ltd Mauritius;
d. Blue Financial Services Swaziland (Pty) Ltd;
e. Blue Employee Benefits Ltd Uganda;
f. Mobile U (Pty) Ltd.
17. Whilst we are working to obtain regulatory approvals where relevant in respect of the related
party liabilities, the Company is also endeavouring to complete the remaining audits.
18. As previously reported the Company is also still involved in significant litigation which
19. We anticipate making a further announcement as to the way forward, once the regulatory
approvals referred to have been obtained.
02 February 2017
Date: 02/02/2017 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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