Another JSE-listed company becomes technically insolvent

Labat Africa, a black-owned and managed cannabis business listed on the Johannesburg Stock Exchange (JSE), is technically insolvent.

This was revealed in Labat Africa’s audited results for the year ending 31 May 2024, published last month.

The company’s annual report revealed that revenue for the year declined to R48.5 million and that it made a loss of R26.4 million.

Labat Africa’s latest balance sheet further revealed that it has become technically insolvent, meaning its liabilities outweigh its assets.

A technically insolvent company cannot settle all its liabilities if all its assets are liquidated. This means drastic measures are needed to improve the balance sheet.

Labat Africa has total assets of R123.4 million and total liabilities of R142.8 million, leaving it with negative equity of R19.5 million.

It explained that it is in a negative equity position of R19,4 million due to:

• Signification adjustments to the carrying value of its intangible assets.

• The suspension of its shares from trading on the JSE prevented it from issuing new shares.

• The company’s income statement also showed challenges. Group revenue decreased 2% to R48.5 million compared to the prior year.

This revenue decrease was due to the expiry of the Sasol contract during the year, but strong healthcare revenues partly offset it.

Despite Labat Africa’s serious financial challenges, its chief executive, Brian van Rooyen, remains upbeat about their prospects.

“Despite the unique challenges facing the cannabis industry, including regulatory uncertainty and public perception hurdles, we have emerged stronger and more focused,” he said.

He said their strategic restructuring and forward-thinking initiatives have positioned Labat Africa as a leader in the South African cannabis-focused healthcare sector.

“We developed and expanded our integrated cannabis value chain, enabling us to control quality, streamline operations, and deliver value to shareholders,” he said.

Labat Africa share suspension lifted

Van Rooyen said one of their primary challenges in 2024 has been the suspension of trade of Labat Africa’s shares on the JSE.

The company’s shares were suspended due to delays in publishing its financial results for the 2023 and 2024 financial years. These include:

• Failure to publish its annual financial statements or summary financial statements for the year ended 31 May 2023.

• Failure to publish the interim financial results for the six months ended 30 November 2023.

• Failure to publish the annual financial statements for the year ended 31 May 2024.

“We acknowledge the concerns this may have raised and assure our shareholders that we have taken decisive action to address these issues,” he said.

Labat Africa appointed KXX Auditors to complete the outstanding audits, a critical step toward lifting the suspension and resuming trading.

The good news is that the company has now published its audited annual financial statements for the periods ended 31 May 2023 and 31 May 2024.

Labat Africa informed shareholders that the suspension of the trading of shares was lifted on 31 December 2024.