Dan Murphy’s, BWS boss targets growth pledges renewed growth and better shareholder returns

After a bruising public civil war with its biggest shareholder, Endeavour Group has pledged itself to improve its performance and do better for shareholders.

The owner of Dan Murphy’s, BWS and a network of pubs that was dragged into a bruising civil war with its biggest shareholder this year, is targeting to deliver shareholder growth of 10 per cent-plus a year from fiscal 2026.

Endeavour Group’s forecast comes as it promises to grow its hotels business, reinforces Dan Murphy’s price competitiveness and ups its digital prowess.

The company has committed itself to ratchet up shareholder returns and grow earnings ahead of sales through higher margins and backed by more than $290m in savings from 2026.

Following a tough few years when Endeavour’s earnings have slowed, and its share price has fallen by a third in the last 12 months, chief executive Steve Donohue conceded in his opening address on Wednesday at the group’s investor day that it needed to do better.

“We clearly have more to do … of what shareholders expect,” Mr Donohue told investors tuning into the company’s investor day, featured a range of presentations on all aspects of its business including its bottleshops – Dan Murphy’s and BWS – its hotels arm and wineries arm.

Mr Donohue has pledged to drive revenue through omnichannel customer experiences, grow earnings ahead of sales and manage its asset base to maximise value. He said the company was targeting mid to high single-digit earnings growth, as well as 10 per cent-plus earnings per share growth. As inflation and interest rates stabilised he was confident he could deliver on this earnings promise. Endeavour had adopted a “zero-based” approach to costs and a target of $290m in savings stripped out of the business by 2026.

For the last financial year – the first full year when its operations weren’t disrupted by Covid-19 – Endeavour posted a 2.5 per cent lift in sales to $11.88bn as earnings rose 10.7 per cent and earnings per share rose 6.9 per cent.

Endeavour Group’s forecast comes as it promises to grow its hotels business, reinforces Dan Murphy’s price competitiveness and ups its digital prowess.

The pledges of a return to growth, improving Dan Murphy’s price leadership and expanding its hotels arm could also be seen as a direct play to its largest shareholder, pubs billionaire Bruce Mathieson Sr, who this year fought a bitter public battle against the Endeavour board because of what he saw as poor performances across its businesses.

Mr Mathieson Sr’s family owns 15 per cent of Endeavour and at a prickly annual general meeting he attempted to get a candidate, former Woolworths boss Bill Wavish, elected to the board. He failed, but has pledged to keep on pushing for boardroom change at Endeavour, including the removal of Mr Donohue and Endeavour chairman Peter Hearl.

At the investor day Mr Donohue said the company would sustainably continue to invest in its businesses with it targeting a cash conversion ratio of 90-110 per cent, funding recurring capital and dividends from free cash flow.

Endeavour, which was spun out from Woolworths in mid 2021, is targeting a dividend payout ratio of 70 to 75 per cent.

“I’m confident Endeavour can reach these returns for its shareholders,” Mr Donohue said.

Turning to its Pinnacle Drinks business, which has sales of $1.8bn and is the fourth-biggest branded liquor supplier in Australia, he said the company had removed material risk from the winemaking value chain, and delivered new products faster to market.

At Paragon, its other wine business that owns labels such as Cape Mentelle, Oakridge and Chapel Hill, he said its Isabel Estate and Chapel Hill wine brands had both grown substantially and were delivering 15 per cent-plus returns on investment.

The recent shopping spree by Endeavour to buy up wine brands had been criticised by Mr Mathieson Sr and other rebel shareholders who questioned the strategy behind the owner of liquor outlets also owning wineries.

Endeavour said it had an unrivalled hotel and pubs network, and was positioned well in the most resilient “middle market”.

Endeavour owns 350 venues and has a team of 12,000 people.

Executives believe there had been a “step change” earnings opportunity in hotels, which was set to accelerate over the next five years. Its hotels represented attractive, readily tradeable assets, in a fragmented market for hotels in Australia, both freehold and leasehold.

“We will continue to buy and sell hotels to grow portfolio capital returns,” investors were told.

Any hotels purchases would need to meet hurdles including a 15 per cent return on investment target.