Endeavour liquor spin-off still on Woolworths’ agenda

Woolworths isn’t letting the COVID-19 global pandemic ruin its plans for a spin-off of its $10bn Endeavour Group pubs, hotels and liquor arm.

Wooloworths chief executive Brad Banducci: ‘The group continues to pursue a separation of Endeavour Group and this is expected to take place in calendar 2021.’ Picture: John Feder

Woolworths isn’t letting the COVID-19 global pandemic ruin its plans for a spin-off of its $10bn Endeavour Group pubs, hotels and liquor arm, with the retailer confirming plans to hive off the division next calendar year despite concerns about a protracted health crisis shutting pubs and putting a cap on social gatherings.

Last year, Woolworths took a range of structural and operational steps to form and then demerge Endeavour from the supermarkets group that saw it hold 85.4 per cent and the Mathieson family own the remaining 14.6 per cent stake. But the emergence of the coronavirus in early 2020, which forced its pubs and hotels across the country to close down or limit operations scuttled plans to potentially spin off Endeavour on to the ASX through an in-specie distribution to existing Woolworths shareholders.

On Thursday, Woolworths chief executive Brad Banducci showed he was still focused on waving goodbye to Endeavour.

He said the much-awaited spin-off would now happen in 2021 — in a world where a COVID-19 vaccine may or may not exist.

“The group continues to pursue a separation of Endeavour Group and this is expected to take place in calendar 2021,’’ Mr Banducci said.

The difficulty for prospective investors could be evaluating the profitability and earnings trajectory of Endeavour’s almost 330 hotel and pub venues if there are more COVID-19 outbreaks that trigger further lockdowns, with pubs shut or limits put on the number of patrons.

“We obviously need some certainty before we do it. I would point out that our plan on record, and subject to any alternatives, would be an in-specie distribution to the shareholders subject to us proving the ‘better-off’ test, so it’s not quite the same issue as an IPO or any other form of transaction, so we will wait and see.

“But we will need certainty to see how things play out.’’

For fiscal 2020, Endeavour posted an 8 per cent rise in revenue to $9.27bn, helped by a large pick-up in sales at Dan Murphy’s and BWS, but the hotels arm saw its sales slump 21 per cent to $1.32bn.

Earnings for the drinks retail business rose 12.9 per cent to $569m while hotel earnings dropped 34.3 per cent to $172m.

The ramp-up in sales at Endeavour was about consumers changing behaviour. Like-for-like store sales increased 7.9 per cent and in the fourth quarter — during the worst of the pandemic — total sales grew 23.2 per cent.

Woolworths said the strong sales growth seen from the end of March, when on-premise restrictions came into effect, was in contrast to a softer pre-COVID performance in the third quarter that was impacted by bushfires across many parts of NSW and Victoria, and a subdued trading environment to the start of fiscal 2020.

Dan Murphy’s loyalty program continued to resonate with customers, the retailer said, with members reaching a record 4.5 million at the end of the year, an increase of 29 per cent on the previous corresponding period.