LABAT Africa yesterday widened its half-year loss by more than 50 percent, hurt by the cash drain from its Force Fuel retail business and the Covid-19 outbreak, but was looking forward to greener pastures as it transitions to the cannabis healthcare sector.
Its headline loss a share for the six months to the end of February increased by 50 percent to 4.5 cents a share compared to the restated headline loss of 3c reported a year earlier.
However, the group said it had recovered from the painful cash drain of the fuel retail business, Force Fuel, and now came off a very strong base following the de-consolidation of Force Fuel in the results for the year to the end of August last year, as well as the complete transition into the cannabis healthcare sector.
“The company does, however, expect a further slowdown with the continuing lockdown and, together with the outbreak of the second and third wave of the Covid-19 pandemic and the slow pace of the South African regulatory framework, the pace of implementation of the cannabis strategy has been somewhat slowed,” Labat said.
It said that under the circumstances, the board had decided to withdraw the profit forecast published last year and would republish forecast information for the financial years to the end of August 2022 and 2023.
The group is re-positioning itself and is taking drastic measures, including right-sizing current investments, as well as considering disposing of assets that were not core to the group’s strategy going forward.
“There is no doubt that the complete transition into the healthcare business with a strong cannabis focus has put severe pressure on the resources of the group.
“Notwithstanding this, Labat Africa’s strategic intent of managing its cannabis operations from seed to customer, and its dedicated focus in this regard, ensures that the company achieves only the best when it comes to technical ability, personnel experience and the art of cannabis genetics,” it said. Labat’s revenue declined by 90 percent to R21.4 million compared to R219m reported a year earlier, because of the de-consolidation of the fuel business.
Its comprehensive loss amounted to R16.4m compared to a comprehensive loss of R4.8m. It reported a loss a share of 4.5c compared to a loss of 1.2c reported last year. Its net asset value a share of 17c increased by 15 percent compared to 14.8c reported a year earlier.
Looking ahead, the group said it was of the view that it was well positioned to explore greater opportunities and use its current resources to diversify its healthcare strategy.
“In addition, the acquisition of CannAfrica will be responsible for the warehousing of the company’s product and the rolling out of its retail presence throughout the country, a first on the continent.
“Notwithstanding the Covid-19 pandemic, which has hit the South African economy harshly, we are confident that the group is currently well positioned to take advantage of the ‘new economy – medicinal and pharmaceutical cannabis’,” the group said.
Labat’s shares closed 6.45 percent lower at R0.29 on the JSE yesterday.