Labat Africa’s historical losses are coming to light as the JSE-listed company gets its books up to date. It’s lost a ton of money in its quest to be South Africa’s cannabis heavyweight as it tries to find the right business mix to navigate unfavourable regulations.
Labat Africa finally released its financial statements for the years ending 31 May 2023 and 31 May 2024, taking it one step closer to having the JSE lift the suspension of trading in its shares.
The financials show the pain of being South Africa’s biggest ‘first mover’ in the cannabis space as it reported accumulated losses of R271,725 million, leaving it technically insolvent with a ‘negative equity position’ of R19,4 million. That also excludes the R50 million that SARS claims is owed by Labat in a dispute that goes back 20 years before it transformed into a cannabis play.
Nonetheless, Kagiso Magano, director of the new independent auditors, Khumalo Xaba Xulu Auditors has signed off on the annual financials ‘based on the information presented to them'.
The directors, under the leadership of CEO Brian van Rooyen (pictured above) say the Board "is of the opinion that the going concern principle is appropriate” for the following reasons:
• It has assessed the group’s operations against available cash resources and is “confident that the group is able to continue operating for the next 12 months”;
• It expects to make cash in 2025 from “its existing and new businesses as they become established and start generating revenue.”
Labat’s disclosures are a requirement for the resumption of trading in the shares which were suspended almost 14 months ago at a price of 0,7 cents a share.
The lifting of its suspension is also a pre-condition for a deal involving IT company Classic International Trading.
Labat has also changed its company secretary earlier this month. It said it was expecting ‘third party financial assistance’ and that part of this package was the appointment of Andre van Rooyen as an immediate replacement for the incumbent Lighthouse, which will help with the handover until the end of December 2024.
Labat Quick Snap
Key Indicators | F2024 | F2023 |
Revenue (m) | 48,5 | 18,7 |
Comprehensive Loss (m) | 26,4 | 86,7 |
Headline Loss/share (c) | 3,95 | 7,14 |
The Directors say in the F2024 Report that:
“The financial year marked a pivotal period for Labat Africa, characterized by resilience, growth, and transformation. While we faced substantial challenges, including the suspension of trading of our shares on the Johannesburg Stock Exchange (JSE), these trials allowed us to refine our strategies, fortify our operations and position the company for sustained success.
“As we move forward, our focus remains steadfast on addressing the challenges head-on and capitalizing on the opportunities before us.
Labat says its "key priorities for the upcoming period include:
Restoring Trading Activity: We are committed to the timely completion of our financial audits and ensuring compliance with regulatory requirements to lift the suspension of trading on the JSE.
Expanding Our Footprint: Cannafrica, our retail division, has already demonstrated remarkable growth with a 229% increase in franchised stores in FY24, reaching 82 stores by October 2024. This momentum underscores the potential for further expansion.
Advancing Research and Innovation: Through our cultivation and research operations, particularly at Sweet Waters Aquaponics and Biodata, we are enhancing the scalability and impact of our integrated cannabis healthcare value chain.
Strengthening Governance: Upholding the highest standards of financial governance and operational excellence remains at the heart of our mission."
Labat, which is also listed on the Frankfort Stock Exchange, has all the pieces in place to capitalize on the cannabis market once a new regulatory framework is in place. Among its assets are nationwide retail brand CannAfrica, the leading acquaponics cannabis cultivating facility the SAHPRA-licensed Eastern Cape farm Sweetwaters , and a foothold in Florida, USA, in lifestyle brand, Echo Life.
However, until there are changes to the law governing the commercial trade of cannabis and related products, Labat will struggle to optimize its assets and long-suffering shareholders will have to resort to CBD for calmness as their patience is tested further.
The company's latest financial information is available on this link: