Labat has been on a JSE warning because of the late reporting of its annual financial statements and it is facing a month-end deadline to do so or face suspension. It’s also been trading under a cautionary notice saying it is disposing of certain shares that could affect the company’s value. The exchange of shares has been muted at best for a long time.
But all that changed dramatically on Thursday morning when Labat released a trading update on the JSE’s SENS service indicating a robust return to profitability.
Shares in Labat more than doubled to 14c in morning trading before easing slightly to 11c by 10.30am – more than 83% above their opening price of 6c
The trading update did not provide further details other than details per share, so the source of its surge in revenue is not yet publicly known. What is known is that Labat has been pivoting out of the cannabis space into being a tech service provider. Investors will have to wait for the release of the annual financial statements due before 30 October 2025.
Nonetheless, the market loved the scant details provided as they speak to a remarkable turnaround of the group as Labat advised shareholders that “the company will reflect an increase in the total comprehensive income compared to the year ending 31 May 2024.
Basic earnings per share for the year ending May 2025: 11.06 cents/share, compared to the previous period’s loss of 3.97 cents/share (378% increase);
Headline earnings per share: 13.28 cents/share compared to the previous loss of 3.95 cents/share ( 436% increase)
Net asset value per share is expected to increase by 831% to 21.87 cents when compared to the net asset value per share of (2.99) cents for the prior period.
Business Day’s Jacob Webster reports that the update provided the first barometer of the company’s health since December, when it published an annual report.
Since then, the group has largely operated in the shadows, leaving a question mark over its prospects as it faced multiple suspension warnings from the JSE after repeatedly failing to publish financial reports – a legal requirement of listed companies.
To what extent cannabis contributed to profitability will only become clear with the directors’ statements that will accompany the annual results. Revenue from the Labat’s technology investments are likely to be behind the turnaround in fortunes although Webster reports that “This level of exponential growth aligns with the group’s latest annual results, in which retail subsidiary CannAfrica added 33 new outlets to its portfolio, helping the holding company to rake in just shy of R30m in gross profit”.
This is an excerpt from Webster’s report:
CannAfrica, Labat’s cash cow, operates in a legal grey area at a time when SA’s cannabis consumption laws are slowly but fundamentally shifting. The signing of the Cannabis for Private Purposes Bill into law in 2024 allows for private, recreational consumption of cannabis, but the product is still not allowed to be sold commercially.
As such, CannAfrica sells its products under the guise of research, asking customers to sign up as test subjects in a nationwide experiment on the role of cannabis in treating a variety of ailments.
Labat, valued at R56m, listed on the JSE in 1999 as an investment holding company before venturing into the newly legal local cannabis market in 2019.
It was suspended from the JSE between October 2023 and December 2024 after failing to publish financial statements on multiple occasions.
In January 2024, the group’s board ordered the termination of its auditors, Nolands Cape Town, with immediate effect, citing concerns regarding the timely and efficient completion of the audits, which had resulted in a “steady breakdown of the relationship and communication from October 2023 onwards”.
Business Day reported that the group’s appointment of Khumalo Xaba Xulu Auditors one year later to complete the outstanding audits was a critical step towards lifting the suspension and resuming trading.
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