Half Year 2025 Endeavour Group Ltd Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brian Raymond - JP Morgan - Analyst : Good morning. Look, my first one's just on the gaming profile across the half and then into Jan, Feb. Obviously, there's been some changes in Victoria with opening hours for your competitors. I imagine that weight on one queue, but helped a bit in two queue. I just want to get a feel for the exit run rate, either out of the second quarter or out of the trading update on gaming to get a feel for the underlying momentum that we can expect into the second half. Thanks.

Question: Brian Raymond - JP Morgan - Analyst : Would gaming be above the overall 4%, I think 4.7% in hotels in the first seven weeks? Or would it, or would Food and Bev be running stronger than the overall?

Question: Brian Raymond - JP Morgan - Analyst : Absolutely. Just if I can sneak one more in, just on the retail side of things, on, could you help us maybe unpick the performance of the, with either within Victoria or Victoria versus the rest of the country in terms of the issues with Woolworths at the moment and the traffic issues they're facing. Imagine a large portion of your venues are. Oh, sorry, of your liquor stores are attached and just what could we say for once those issues do clear [Woolworths]. Whenever that happens to be, in traffic terms, how the rest of your network going, those that are not affected by what's going on there with Woolworths? Thanks.

Question: Brian Raymond - JP Morgan - Analyst : Okay, great. Thanks a lot.

Question: Craig Woolford - MST Marquee - Analyst : Good morning, Steve and Kate. And yeah, congratulations on an amazing career at Endeavour and Dan's and all its incarnations, Steve.

Question: Craig Woolford - MST Marquee - Analyst : So just, I might talk about, ask about the developments. There's more detail that you're giving on those property developments. Just trying to be clear about what role Endeavour plays within those developments, and maybe a bit more clarity on the $100 million to $150 million valuation that you've put on those. So, just Endeavour to do this themselves, or you just partner with someone and then crystallize the value property developments might work? Yeah, thanks, Craig. Appreciate the question and the sentiment. I'll let Kate give you a response to that one.

Question: Craig Woolford - MST Marquee - Analyst : Okay. And then that, and that valuation of a $100 million to $150 million like it's the footnote talks, gives some nuance on each of the five, yeah, some of them have different, I guess, attributes to the evaluation. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 11:30PM, EDV.AX - Half Year 2025 Endeavour Group Ltd Earnings Call

Question: Craig Woolford - MST Marquee - Analyst : Okay, right. Thank you.

Question: David Arrington - Bank of America - Analyst : Morning, Steve. Morning, Kate. Yeah, Steve, I've really enjoyed you as a CEO. I thought you've done a terrific job given the hand that you've been dealt. I mean, you've given no free kicks from Woolworths, that's for sure. And you've really done really well. So I'm disappointed. I bet you're leaving. But on another note, before I ask my question, I'm really surprised Ari Mervis is not on this call. Endeavour's got a large shareholder base and corporate governance is critical for us to be able to assess whether the company's being run independently and run for all shareholders. So, I'm really surprised he's not on this call. Is he, I hope that he's planning to have some sort of call to highlight how he's going to run the company after you leave as chairman and CEO and how it's going to operate, and how we can be assured that there's independence in the day-to-day running of the business. So, look, I'm just really surprised he's not on this call. And maybe if you could get that back to him that probably if he could do another call with analysts, so as he could talk to us about how he's planning to run the company as chair and CEO to maintain high quality corporate governance. That'd be really appreciated, Steve. But next, the question I want to ask is, and I don't expect you to comment on that, but the question I want to ask is, on your sales outlook, I think Brian, his three or four questions that he asked. Brian asked about the retail unlocking. If you strip out New Year, you're down 2.6% in the first seven weeks of trading. That's pretty soft. And I think [Coles] were in the positive territory. Now, you've called out that you're still being impacted by the ongoing effects of supply chain. Is there something a bit more going on? I know you called out that your team is doing really well. I mean, I can't get around, I think your team, how they're not affected by what's going on with Endeavour. It's amazing. But is there something going on more? Because that looked to be a very soft seven weeks. And how are you going to improve it? Do you have to go harder on promotions to get customers back or what is going on there? Because that 2.6% down for the first seven weeks did look a little soft to me. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 11:30PM, EDV.AX - Half Year 2025 Endeavour Group Ltd Earnings Call

Question: David Arrington - Bank of America - Analyst : Does BWS hit harder than normal? Is that the one that got whacked the hardest in this period, or is that trading below Dan Murphy's in the seven weeks? I know you don't want to break it out too much, but [speak up you wish].

Question: David Arrington - Bank of America - Analyst : Well, thanks Steve, and hopefully the [pies] get a few free kicks this year and maybe we get together and get a game, yeah, hopefully they go well. Thanks, Steve. That's for me. Yeah.

Question: Sam Taker - City - Analyst : Hi, Steve. Hi, Kate. Thanks for the presentation this morning. Just two questions. First one, there's been quite a bit of chatter about One Endeavour cost blowing out. I'm sure you've read it all, but on slides call that suggests that everything remains on track. So well done to the team there. Do you want to give us a bit of insight in terms of what specific projects are planned for '26 and the key variables that could see the program hit the bottom or top end of your cost estimates going forward?

Question: Sam Taker - City - Analyst : Yeah, excellent. Thank you. And just a second one, on the renewal strategy, it's really great to see the strong performance of new market and Bayswater since their recent renewals. But can you give us any comments or color around performance in the first half of the cohort pubs that you renewed in FY23 and '24? Just we need to get a sense as to how sustainable you're seeing the uplift, the one you did a little while ago.

Question: Sam Taker - City - Analyst : All right. And just as a follow on to that, I guess, given the gaming performance, is a bit soft compared to the market, in certain regions and the success you've had on these renewals and the gaming in these renewals are outperforming the market and doing so well, why not speed up the refurbishments? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 11:30PM, EDV.AX - Half Year 2025 Endeavour Group Ltd Earnings Call

Question: Sam Taker - City - Analyst : Thanks, Steve. That's great. Thank you.

Question: Michael Simotas - Jeffreys - Analyst : Morning, everyone. I've got a question on the cash flow. So you had a very strong performance in the first half. In the second half, you typically have a working capital investment of around about $250 million on average. If that repeats this year, it would still imply cash realization well above 100% for the full year. Is there something unusual that happened in the first half that means the outflow will be bigger in the second half, or do you think you can retain some of the working capital that you've extracted? And just as a follow up to that, just a comment on whether the supply chain issues had any impact on working capital as well?

Question: Michael Simotas - Jeffreys - Analyst : Yeah, thank you. Can I just ask a quick clarification question, as well? Just on your slide on the One Endeavour costs for FY26 and then '27, there's a comment that expenditure will peak in FY26, which I think is consistent with previous commentary, but then there's another one that says that the split between OpEx and CapEx will vary by stage of implementation. Should we interpret that to mean that OpEx won't necessarily be lower in '27 than it will be in '26?

Question: Michael Simotas - Jeffreys - Analyst : Okay, so it sounds like 27% OpEx all else equal should still be below 26%.

Question: Michael Simotas - Jeffreys - Analyst : Great. Thank you.

Question: Shaun Cousins - UBS - Analyst : Thanks. Good morning, Stephen Caden. Steve, thanks for answering the questions that I've asked over the years. Appreciate the insights and the candor. Maybe just, my first question is just really around One Endeavour. How will this OpEx and CapEx be offset in time by paying Woolworths less? I'm just curious around how the company's ensuring that the One Endeavour spend is sort of fit for a company of Endeavour's size and needs and not sort of gold plated per se and overall will the company be in a better or worse sort of OpEx position giving what in time you'll start paying Woolworth's less money, but then you'll be incurring some money yourself. Just maybe what's the, going forward position look like from a net cost base and how do you make sure you're actually in a better position or limit the downside I'd say?

Question: Shaun Cousins - UBS - Analyst : Thanks. Fantastic. And then my second question is just around the retail gross margins. So some expansion there, but can you maybe just sort of walk through some of the drivers you've called out innovation, buying and AI helping price and promotion optimization. But do you want me to talk a little bit about the headwinds, particularly be a premiumization, promotional intensity, and maybe what role Pinnacle played, again, just curious, regarding the sort of puts and takes on gross margins, please? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 11:30PM, EDV.AX - Half Year 2025 Endeavour Group Ltd Earnings Call

Question: Shaun Cousins - UBS - Analyst : Fantastic. Thanks, Steve. Thanks, Kate.

Question: Phil Kimball - AMP Capital - Analyst : Hey, guys, my questions, just wanted to check, you called out a $30 million cash inflow from capital recycling. Are there any associated profits with that in the half and, if there are, how does that compare to the prior first half '24? Okay, are we getting an incremental benefit there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 11:30PM, EDV.AX - Half Year 2025 Endeavour Group Ltd Earnings Call

Question: Phil Kimball - AMP Capital - Analyst : Awesome. Thank you. And then, just on your guidance, I think you, one of the slides at hotel renewal CapEx next year, [100%] to [120%] as you step up, which is, great. I just wanted to get a sense, is that a material step up from [25%]? I just can't remember the number, sorry. And then if you add that and the Endeavour CapEx pricing, should, does it, I know you're not going to give a number, but should we think about FY26 Group CapEx stepping up a bit from 25%?

Question: Phil Kimball - AMP Capital - Analyst : Yeah, no, it was more in '26, yeah, the Group.

Question: Phil Kimball - AMP Capital - Analyst : Awesome. Thank you.

Question: Tom Kierath - Baron Joey - Analyst : Morning, guys. Just another one on the seven-week trading update. I think, Steve you said that you're back in stock position now. I'd just be interested in like how long you have been, like, fully stocked, and then how the sales are trending while you've been fully stocked. Like, is it, I don't know, improving on the negative 2.6% or flat or up or just be interested in any color you can share there?

Question: Tom Kierath - Baron Joey - Analyst : Yeah. Okay. And I suppose I would echo [Ero's] comments around having Ari on the call, just with the CEO search, like, do you know if a person has been found and there's a long notice period there, or is the search still ongoing? I mean, any color you can share around when your successor is likely to be appointed other than obviously it being, not for a while that they start?

Question: Tom Kierath - Baron Joey - Analyst : Okay. Fair enough. Thanks.

Question: Benjamin Gilbert - Jardin - Analyst : Morning, Steve and Kate and echoed all the positive sentiment towards you, Steve. Is Ari there? Like it's just surprising. I know it's been asked. I'm about to ask it for a third time, but it says he's stepping down from McPherson's temporarily for 12 months. It's pretty significant. You're obviously extremely well respected and liked and can be very so in in the Group stage. So it's just, I suppose the 12-month period seems a long period of stepping down. It's just a lot of uncertainty for a Group that's from our standpoint, trying to understand sort of strategy and what's happening, is he there? I'd just be good to hear some comments around plans or if anything's going to change.

Question: Benjamin Gilbert - Jardin - Analyst : No problem. Maybe just a second one for me to squeeze one in. Just isn't it the promotional backdrop and how you're seeing it? And I know Coles is only doing a small trial down in South Australia at the moment, but ultimately I would have thought consolidating brands is going to be a positive in terms of matching and just instant how you see the promotional backdrop across the liquor space at the moment?

Question: Benjamin Gilbert - Jardin - Analyst : Thanks, Steve. Appreciate it.

Question: Lisa Deng - Goldman Sachs - Analyst : Hi, can you guys hear?

Question: Lisa Deng - Goldman Sachs - Analyst : Hi, yeah, Steve, echo everybody else and the best of luck for your next chapter. I've got two questions. First is the promotional strategy into the second half. So, Woolies indicated that they would hold some of the discounts that was planned for first half into second half to recover traffic. Now that you've got the stock back and you didn't actually do the promotional calendar you planned in second quarter, would you be looking to do something similar and actually shift what you plan to do in second quarter into the second half? Question one.

Question: Lisa Deng - Goldman Sachs - Analyst : Okay, so you're not indicating anything out of normal promotional calendar? Okay.

Question: Lisa Deng - Goldman Sachs - Analyst : Got it. And then the second question is on endeavourGo. It seems like we've actually been doing a decent job of realizing the 290, plus to FY26. We've already done, 230, right? And we've got another, quite a long time to go. Is there any more opportunity to improve on the 290?

Question: Lisa Deng - Goldman Sachs - Analyst : Okay. Thank you.

Question: Richard Barwick - CLSA - Analyst : Hi Steve and Kate. Just good to see that you're still targeting the long-term shareholder value of 10% plus from next year. But it's worrying like in the context of today's news, you've dropped the strategy scorecard and the shareholder creation slides from the pack. Is there anything we should be reading into that, or are you still committed to the various elements that you've previously disclosed?

Question: Richard Barwick - CLSA - Analyst : Well, it's not the same level of detail, Steve, that you've included before. It's like it's quite different compared to what you've disclosed in the full-year result, for instance.

Question: Richard Barwick - CLSA - Analyst : Yes. Okay. I appreciate that. All right, thank you.

Question: Caleb Wheatley - Macquarie Research - Analyst : Morning, Steve and Kate, and Steve. Congratulations on your tenure. My question is just to follow up on the development capital recycling front. Just keen to hear some additional color if you can on how your property partners are thinking about growth in their own property holdings? Bearing in mind where we are and that it just stood cap rate cycle and a few of your partners potentially looking to manage their own balance sheets as well at the moment, if you can find the additional color there?

Question: Caleb Wheatley - Macquarie Research - Analyst : Yeah, I mean, if you're looking to crystallize sort of that value that you put on the earliest slide there just in terms of being able to divest or sell on to anyone as you mentioned you're not going to do the development yourself per se, but just, yeah, how keen for the buyers to sort of take on a bit more of that at the moment.

Question: Caleb Wheatley - Macquarie Research - Analyst : Okay, great. Thank you and maybe just a small follow up if I could on the CapEx guide. I know that you've called out One Endeavour is going to be the lower end of the [60 to 80], I think the previous number. It seems to account for about [20 mil] of the reduction, but the overall is about [75]. How do I reconcile the additional movement down there?

Question: Caleb Wheatley - Macquarie Research - Analyst : Okay, great. Thank you very much and congratulations again, Steve.