The JSE’s lifting of the suspension of trading in Labat shares clears the way for the group to consummate its deal to acquire tech company Classic International Trading as well as open up new funding possibilities.

This perspective on Labat Africa from Business Day, published on 1 January 2025.

Labat Africa’s 14-month-long suspension from the JSE was lifted on Tuesday, 31 December 2024, after the cannabis group finally appointed auditors and published its results for the 2023 and 2024 financial years.

An inability to publish its annual financial statements or summary financial statements for the year ended May 2023 and 2024, as well as its interim results for the six months to the end of November 2023 within the prescribed period as per JSE listings requirements, resulted in Labat’s securities on the bourse being suspended in October 2023.

Three months later, in January, the 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”.

A year later, it appointed Khumalo Xaba Xulu Auditors to pick up the baton. The appointment of KXX Auditors to complete the outstanding audits was a critical step towards lifting the suspension and resuming trading.

On Monday evening, 30 December 2024, it said it had since published its audited financial statements and the suspension of the trading of the company shares would be lifted effective 31 December 2024.

In the group’s latest annual report, CEO Brian Van Rooyen (pictured above) said despite the suspension, the business had demonstrated resilience and growth. Its retail subsidiary, Cannafrica, which reached 82 franchised stores by October, has goals to reach 121 by May 2025.

He said that the suspension gave Labat the opportunity to reassess its plans and bolster its operations.

“The suspension created difficulties for both the company and its shareholders but it also allowed us to evaluate our strategies, strengthen our operations, and position ourselves for long-term success,” he said. “During the suspension period, the healthcare business, which remains the cornerstone of our strategy, has grown significantly fuelled by our integrated cannabis value chain and expansion efforts.”

Group revenue for the year dropped 2% to R48.5m, largely due to the expiry of a Sasol contract in the period. Labat attributed strong healthcare sales from Cannafrica’s 33 new retail wellness stores as helping to mitigate this decline.

Gross profit rose to R29.8m in 2024 from R21.3m, a reflection of the confidence in the Cannafrica retail offering as franchise right sales make up a significant portion of this increase in gross profit, it said.

This saw it narrow its headline loss from 7.14c per share in the prior year to a headline loss of 3.95c.

Despite its challenges, Labat has been positioning itself to control the SA cannabis market and is looking to focus on its cornerstone cannabis healthcare business.

Its goal is to spearhead the industry’s change through partnerships, smart acquisitions and organic growth. By incorporating fragmented market participants into its ecosystem, the group seeks to increase productivity, cut down on duplication and establish a single market leader.

The CEO said the outlook for Labat Africa was highly optimistic amid growing knowledge of the therapeutic benefits of cannabis and the increasing incidence of chronic illnesses, which were driving up demand for cannabis-based healthcare solutions.

With the recent signing of the Cannabis for Private Purposes Bill into law, the prospects for further growth across the group’s medicinal cannabis value chain going forward look sound.

The African Cannabis Report projects that Africa’s legal cannabis market will have a growth rate of more than 28% by 2026.

“Our focus on cannabis-based healthcare solutions positions us to capitalise on emerging market opportunities and regulatory advancements, both locally and globally,” said Van Rooyen, highlighting that the SA cannabis market remained fragmented, presenting opportunities for consolidation.

“By scaling our operations, forming strategic partnerships and optimising our value chain, we are positioning the company as the dominant player in the local cannabis healthcare industry,” he said.

However, the group’s liquidity has come under pressure due to the quick expansion of Cannafrica’s retail footprint and expenditures in facilities for cultivation and extraction.

In line with the strategy to reposition itself as a fully focused medicinal cannabis healthcare company, the group began winding down its noncore Labat Logistics and Labat Fuel and Supply operations in February.

Co-founded by Van Rooyen and Victor Labat, who passed away in April, Labat was one of the first BEE companies to be listed on the JSE in 1999.

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