Labat Africa has issued a cautionary notice saying the outstanding submission of of its annual financials is partly due to a 20 year old tax dispute with SARS that its new auditors are trying to sort out.
Labat issued a cautionary statement on 31 October 2023 explaining the delay in providing its latest financial results to the JSE, which suspended it from trading on the market a week earlier.
The notice reads:
Shareholders are advised that the Company appointed new auditors for the holding company and its subsidiaries for the year ended 31 May 2023. There has been a substantial delay in the finalisation of the audit work, partly due to the new audit firm interrogating the ongoing material claim against the South African Revenue Service, which matter has been ongoing for more than 20 years.
The auditors have requested management to provide additional evidence to support the VAT claim against SARS and additional evidence to support the PAYE and other material liabilities in the group. These matters are regarded as being material issues for the auditors and has been taking time to resolve.
In addition to the above, the audit firm has required management to provide more support for the growth in revenue in the company's valuation models for the cannabis industry as part of the re-estimation of the fair value of the underlying assets pursuant to the acquisition of 80% in Romeo Lima Air Proprietary Limited (known as Sweetwaters Aquaponics) as well as testing for impairment of some of the carrying values of the intangible assets. Due to the high growth projections applied by management, coming off a low base, the auditors requested management to support their projections in-line with the requirements of IAS 36.
There are other matters which also still require finalisation.
The delay in publication of the results has resulted in the suspension of the Company.
The Company was aiming to publish reviewed results. However, given the time frame for the issue of the Annual Financial Statements, there is no benefit to publishing reviewed results and the focus is to finalise the audit of the related JSE requirements. The Company will then apply to the JSE for the lifting of the suspension in trade in the securities of the Company.