Endeavour Group has posted its full year results for FY24, detailing cost-cutting and portfolio hygiene in challenging economic times, yet seeing falling investor sentiment.
ASX-listed Endeavour (ASX:EDV) is the holder of 350 pubs, retail outlets Dan Murphy’s and BWS, and assorted other hospitality-related assets.
The report cited a dip in net profit, in line with guidance, yet EDV maintained its projected dividend, after posting a four per cent increase in overall revenue, to $12.31bn, with a three per cent decline in profit, to $512m.
Total capital expenditure was reported at $64m lower than FY23.
In the group’s Hotels portfolio, sales growth amounted to 2.3 per cent, to $438m, which it says was driven by strong F&B sales, with all drivers in growth in H2.
Supported by targeted investment in new product and the mitigation of the early adoption of changes to gaming hours in Victoria, Endeavour’s gaming remained resilient, with sales growing broadly in line with the market. EDV CEO Steve Donohue relayed that gaming has “held up really strong”.
EDV’s GP margin expansion has been driven by F&B menu optimisation as well as improved sourcing, while it has exercised “disciplined portfolio management” leading to two acquisitions and two divestments, with promising early returns from recent investments.
A key part of the hotel renewal strategy is said to be the accommodation, which is including stand-alone accommodation developments. Donohue suggests the continued strong performance of its accommodation offer was a standout of the results.
The report included a trading update on the first months of the new financial year, finding retail sales growing just 0.6 per cent, and hotel sales by two per cent.
EDV says it has focused on investments made to manage costs and grow margins and sales, and explains that it needs to continue to leverage those investments.
The analysis points to the high impact of inflation on costs, leases and wages, as well as finance and interest rates, echoed in the cost-of-living pressures faced by households and seen in the reduction in their discretionary spending.
The country’s largest pub operator reports it is pleased to have been able to maintain the dividend, with Donohue lamenting they were “disappointed not to be able to grow” net profit.
In terms of group optimisation, EDV is said to be targeting cumulative savings of at least $290m by FY26, to mitigate inflationary pressures and enable continued investment. The culmination of FY24 saw $190m delivered.
Despite the positivity, investor sentiment dropped decisively, EDV share price falling 10.3 per cent from a high in late August, to $4.96. This was despite the better than expected dividend, held at 7.5c per share, and the fact it is not payable until 10 October.
Donohue acknowledged they needed to do more in order to meet shareholder expectation, offering that “while the market may be soft it is our role to outperform the market”.
