Endeavour demerger scheduled for June as Woolworths announces 16 per cent profit jump

It may have borne the brunt of COVID costs and its hotels may have been had growth hampered by the pandemic, but Woolworths Group has enjoyed record trading in this first half FY21 with profits up 15.9 per cent.

At Wednesday’s half yearly results announcement, CEO Brad Banducci had reason to be pleased. The first half of FY21 saw sales up by 10.6 per cent with the Group enjoying record Christmas trade.

Endeavour Drinks sales increased by 19.0 per cent and earnings before interest and tax were up by 24.1per cent despite the business wearing the higher costs associated with COVID, team wages, and investment in digital and eCommerce. With an “increasingly connected customer base”, online sales grew this past half by 44.3 per cent. It remains a priority focus as Woolworths " accelerate digital and improve the eCom customer experience and operating efficiency", effectively keeping up with trading momentum.

Banducci said: “Endeavour Drinks sales continued to benefit from increased at-home consumption and trading up with Dan Murphy’s and BWS both maintaining strong sales growth during the half and achieving record Christmas Eve sales.

“Spirits and RTDs were the strongest performing categories during the half, driven by ongoing innovation in the gin and seltzer categories.”

Banducci predicts that in the second half FY21, sales will even out at the very least, and possibly decline.

“Looking ahead to the rest of the financial year, we expect sales to decline over the March-to-June period compared to the prior year in all our businesses, with the exception of hotels where venues were closed for much of the final four months last year, as we cycle last year’s COVID surge,” Banducci said.

“However, in parallel, we also expect COVID-related costs to be materially below the prior year, subject to no further widespread prolonged lockdowns.”

The separation of the Endeavour Group originally announced in July 2019 has progressed and is expected to take place in June 2021. Peter Hearl has been appointed Chairman-elect of Endeavour Group and Steve Donohue has been appointed CEO-elect.

By the end of February 2020, Endeavour Drinks had restructured and merged with ALH Group, combining Woolworths’ retail drinks and hotels businesses. Work on the demerger stalled in March as the pandemic came to the fore.

Woolworths Group Chairman, Gordon Cairns, said: “With the easing of operating restrictions and more resilient trading from Hotels than initially expected, we are now targeting June for the separation.

“It will lead to a simplified Woolworths Group with a greater focus on its core food and everyday needs businesses and will allow Endeavour Group to accelerate its own growth aspirations. The Board remains confident that a separation will maximise long-term shareholder value.”

Woolworths will pay a dividend of 53 cents per share, up 15.2per cent on the prior year.