Keen eyes have long identified the demerger of Endeavour Group from Woolworths (ASX: WOW) as the most anticipated spinout in years and a date has finally been set which will see Australia’s leading drinks and hospitality group listed on their own.
Operating a drinks business portfolio that includes Dan Murphy’s and BWS as well as ALH Hotels and the 332 hotel venues they manage, Endeavour will operate 1,630 stores that will be separate to the Woolworths network.
“We believe that Endeavour Group’s long-term prospects are strong,” said Endeavour Group CEO, Steve Donohue.
“We have assembled an experienced and proven team, have a leading store network, digital presence, and market position. Through living our purpose of creating a more sociable future together we see many opportunities to grow the business and create value for our shareholders.”
The demerger is intended to free up Endeavour to operate its own independent business strategy which has a mandate for growth, and access to capital beyond Woolworth assets.
Strategies expected to be explored by Endeavour include increased digital capabilities to include eCommerce channels, refreshed loyalty programs and a premium brand called Pinnacle Drinks. The Group has already dabbled in digitisation of the drinks industry through the establishment of Jimmy Brings, an Uber-like service for drinks delivery to your door. Between it and their other eCommerce services, online sales delivered 50% growth in retails sales for Endeavour through FY20.
This was further highlighted by FY20 revenue of $10.6 billion which delivered $328 million NPAT. Post-demerger, Endeavour will maintain Woolworth’s dividend payout of 70% to 75% NPAT.
Under the demerger, co-located stores such as BWS locations within Woolworths Supermarkets will be maintained while smaller incubator brands have also been flagged as an expansion strategy to leverage existing infrastructure. By not being directly tied to Woolworths Group, Endeavour will also explore underserved communities which may not otherwise warrant the establishment of a larger brand store.
Refurbishments for existing ALH Hotel venues have also been flagged.
To confirm the demerger which is subject to Woolworths shareholder approval, a General Meeting has been called for 18 June 2021 and assuming the vote is carried, Woolworths shareholders will be granted one Endeavour Share for every WOW share held with Endeavour to then commence trading on the ASX from 24 June 2021.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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