Picture: 123RF / ERIC LIMON
Picture: 123RF / ERIC LIMON

Investment-holding company Labat Africa has released an upbeat profit forecast after backtracking on its five-year guidance last month.

The company, which is repositioning itself to focus on the fast-growing cannabis industry, is pinning its hopes on its planned expansion into the market estimated to be as large as R27bn.

The coronavirus outbreak, which forced the country into a lockdown that brought economic activity to a halt, pushed Labat to drop its five-year profit guidance last month.

On Tuesday, the company issued new forecasts for its 2021 and 2022 financial years. The company did not reveal its guidance for the 2020 financial year.

It expects to grow full-year revenue to R935m in 2021. In the year to August 2019, revenue was R616m.

Operating profit would reach R76.7m in 2021 from a loss of R65m in the 2019 financial year, and it forecast it would  reach R191m in 2022.

Total revenue for the health care segment in 2021 and 2022 is expected to be R185m and R431m respectively while revenue for its fuel unit is expected to be R677m for 2021 without an assumption for 2022.

Labat expects that it will have exited its fuel wholesale business when global conditions improve as it focuses on growing the health care business.

“This is a key assumption for the year ending August 31 2022. If the business is not exited, then a similar performance to that expected for the year ending August 31 2021 can be assumed,” the company said.

Labat has made a number of acquisitions in various sectors such as farming, retail and health care, and intends growing its health care unit, in which its cannabis-related operations are housed.

Recent acquisitions include a 70% interest in Biodata, a medical research company set up initially as a holistic-healing enterprise incorporating cannabinoids, as well as shares it has in packaging company Pac-Con, which specialises in manufacturing and packaging liquids, tablets, capsules, creams and gels.

It also bought CannAfrica, which offers training and education for cannabis production, for R15m.

Labat said it was planning to raise R112m in capital through a share issue sale for the expansion of its medical cannabis business.

“The share placing will be conducted by way of a book build, which Labat believes should have the added benefit of enhancing the liquidity of its shares,” the company said on Tuesday.

The book build, which is open with immediate effect and will cease on June 26, will be offered to qualifying investors, with no intention to offer the public a chance to buy or subscribe for any shares.

At close of trade, Labat’s share price was unchanged at 34c, with a market capitalisation of R132m. The stock has lost 17.07% since January.

thukwanan@businesslive.co.za