Government now owns 20% of Woolworths

The South African government, through the state-owned Public Investment Corporation, now owns more than 20% of retailer Woolworths.

The group announced on Friday (14 March) that the PIC had given formal notice that it acquired, in aggregate, 20.248% of the group’s ordinary shares.

Woolworths said this represents the total interest held by the PIC and its clients (i.e., the Government Employees Pension Fund).

This is up from the 15.1% recorded in the group’s full-year results for 2024 and would put it above the 17.7% stake held by Allan Gray, making it the company’s largest shareholder.

The increased stake comes as Woolworths’ share price hit its lowest point since 2022, representing a good investment opportunity for the PIC.

Woolworths’ share price lost almost 13% of its value over the last year as the group continues to face challenges with its businesses in Australia.

The group reported decent top-level results for the 26 weeks ended 29 December 2024, largely thanks to higher turnover and sales tied to its South African operations.

However, its business in Australia—Country Road Group (CRG)—weighed on the results, with revenue decreasing by 8.8% from R7.2 billion to R6.6 billion.

Country Road was the group’s worst-performing unit, and it recognised a significant loss. Its pure, unadjusted profit before tax fell by 160% from a profit of R400 million to a loss of R227 million.

The unit also could not generate EBITDA large enough to cover its debt obligations sufficiently as set out in the covenant agreement. The lender bank waived the covenant breach on this occasion.

This continued Country Road’s deteriorating profitability over the past few years, and it followed significant losses tied to the David Jones business that Woolworths had exited in the past few years.

Woolworth acquired David Jones for about R21.4 billion in 2014 and sold the business off in 2022 for a reported R1.6 billion. The group did not reveal the selling price to the market.

Woolworths’ other metrics were also not great. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) declined by 6.4% to R4.5 billion.

Adjusted earnings before interest and taxes (EBIT) for the 26 weeks were even worse, declining by 13.7% to R2.8 billion.

Woolworths’s operating profit from core trading activities declined by 13% to R2.7 billion, and its net cash inflow from operating activities declined significantly.

The company’s profit before tax increased by 6.3% to R2.6 billion. However, adjusted profit before tax decreased by 21% to R2.0 billion.