Country Road comes good

Woolies 88 percent owned subsidiary, Country Road in Australia reported numbers yesterday. I looked a Google Finance for a share price graph, as you can imagine with 88 percent of the shares in the hands of Woolworths, the stock is completely illiquid. Over the last five days, including a whopping 44 percent move higher today, the stock is 62 percent higher. What!!! At a market cap of 725 million Aussie Dollars, at roughly 10 Rand to the Aussie, this company is worth 7.25 billion Rand. Or 6.38 billion Rand is the value of Woolies holding in Country Road. Or around 12.4 percent of Woolies, which has a market capitalisation of just shy of 51.5 billion Rand. But that is wild, a move northwards of that amount, Country Road!!!


In short, Country Road has a fabulous first half, profits after tax were up 71.7 percent to 37.95 million Aussie (just multiply by ten) whilst revenues increased 27.4 percent to 424.59 million Dollars. As a percentage of profits however, this business in Australia is becoming increasingly important for Woolworths. Australia is not the biggest market in the world. With profits for the full year for Woolworths of 2.6 billion Rand, this half year number of 380 million rand from Country Road Australia is certainly VERY pleasing. If they were to not even double this for the full year, let us say for the second half they made in profits around 90 percent of what they made in the first half (Country Road), then expect around 720 million Rand is profit from this division. And that is roughly one quarter of Woolies last year profits. Finally, Australia is starting to pay off properly.


Remember that Country Road bought Witchery for a whopping 172 million Aussie Dollars in the second half of 2012, through a 80 million Aussie Dollar rights issue (1 for every two at 2.66 Aussie Dollars, it was trading at 3 Aussie at the time) and a five year bank facility secured (92 million Aussie Dollars). Good purchase! Woolworths have actually owned Country Road for over 15 years, it has not always been as good as this! Whilst the weaker Rand is NOT good for their local business, inflationary pressures are building, but this is a hedge for them. And for you as a shareholder.