Woolworths CEO Brad Banducci eyes Dan Murphy’s spin-off for 2021

CEO Brad Banducci tells shareholders the spin out of its drinks and hotels arm, which includes Dan Murphy’s, should take place next year.

A spin off of Woolworth’s Endeavour drinks business would include the Dan Murphy's chain.

Woolworths chief executive Brad Banducci said the retailer remained committed to the $10bn spin off and possible demerger of its liquor and hotels business, Endeavour Group.

Despite the disruptions caused by COVID-19 the company was hopeful it could execute the manoeuvre in 2021.

Addressing shareholders at the company’s annual general meeting on Thursday, Mr Banducci also said 2020 had been a “transformative year” for the supermarket group’s digital businesses. This digital revolution was driven by a material step-change in the demand for the convenience of online shopping and home delivery as well as a material increase in the number of customers who are looking to engage with Woolworths via its digital platforms.

In his AGM speech Mr Banducci confirmed the Woolworths board intended to spin out its drinks and hotels arm, which includes its Dan Murphy’s and BWS liquor chains and portfolio of pubs under the ALH banner, following recent shareholder approval to structurally separate the businesses from the rest of Woolworths.

“After gaining shareholder approval at last year’s AGM, the restructure and merger of ALH and Endeavour Drinks to form Endeavour Group was completed in February. Since then, the team has been working hard behind the scenes to build the right systems and establish the many partnership agreements between Endeavour Group and Woolworths Group,’’ Mr Banducci said.

“The material financial impact on the Hotels business following the onset of COVID resulted in the board making the decision to defer the separation of Endeavour Group until calendar 2021.

“The specific timeline is subject to ongoing review, but we remain committed to the separation and will update our shareholders once more clarity around timing is available.”

Turning to the company’s recent trading performance though 2020, Mr Banducci told shareholders that after disruption to its online services during the March and April surge buying at its supermarkets, Woolworths rapidly added capacity to meet demand.

“We also scaled up Priority Assistance, contactless delivery, and Community Pick up, to make it easier for our vulnerable customers to safely access their food and everyday needs. “At year-end, group e-commerce sales had grown 42 per cent on the prior year with record sales penetration of 5.5 per cent.

“And this demand has shown no signs of slowing. Group e-commerce sales growth for the first quarter of fiscal 2021 was 87 per cent with Australian Food e-commerce growth of 100 per cent on the same period last year.

Mr Banducci said the material profit improvement in 2020 for BIG W, after years of losses, was a particular highlight.

“This was made possible through the sustained multi-year efforts of the BIG W team to enhance range, value and in-store experience and their successful response during COVID to meeting customers’ home, leisure and entertainment needs.”

Mr Banducci said at last year’s AGM he spoke about his disappointment after discovering Woolworths had inadvertently underpaid some of its salaried team members.

“It was imperative that we worked as fast as possible to remediate those team members,’’ he told the AGM on Thursday.

“To date we have repaid $281 million and expect to have repaid all impacted team members for six years covered by the GRIA and HIGA awards by early next year. We have also done a lot of work during the year to improve our internal processes to ensure this does not happen again.”