Endeavour Group Limited

Thank you and good morning everyone. Thanks for joining us today for Endeavor Group's half year 2026 results. I'm joined today by Kate Beattie, our Chief Financial Officer, who was most recently our Interim Chief Executive Officer. I'd like to begin today by acknowledging the Gadigal people as the traditional custodians of the land we're presenting from today and pay my respects to their elders past, present and emerging. I'll start on slide four and speak briefly to the group's half one highlights. In the first half, the group delivered underlying EBIT of $563 million, which is the upper end of the range we provided in our January trading update. In retail, our continued focus on value and price leadership has been embraced by our customers and is delivering both sales growth and market share gains. The market remains highly competitive, and despite a very strong holiday trading period, consumer softness continues to be evident. In hotels, the business continued to perform well, supported by positive trends in food and bar transactions and targeted investment in renewals and new EGMs. Customer responsiveness to our investment in new games and improvements in the gaming experience is fast and links to broader engagement in the venue. This collectively is enabling very strong revenue growth. Moving to slide five, as foreshadowed in our January trading update, the group's underlying earnings were impacted by our decision to invest in lower shelf prices for our customers and also to compete more vigorously against the elevated promotional environment currently at play in retail. Further, in half one, F26, the group incurred a pre-tax net expense of $45 million relating to significant items, and Kate will provide detail on that later in the presentation. During the half, we remained focused on managing costs out of the business. We delivered savings of $24 million through our Endeavor Go optimization program, taking the total cumulative program benefits over four and a half years to $289 million. The board has approved payment of a fully franked interim dividend of 10.8 cents per share, which represents a dividend payout ratio of 70% of underlying NPAT. Slide six provides a snapshot of both the retail and the hotels business. Firstly, in retail, sales increased by 0.2% to $5.5 billion in the first half, with sales momentum improving across Q2. Excluding specialty businesses, Dan Murphy's and BWS delivered combined sales growth of 0.7%, reflecting the group's commitment to price leadership in a highly competitive market. In hotels, sales grew by 4.4% to $1.2 billion in the first half, with sales momentum broadly consistent across both Q1 and Q2. Investment in hotels in both electronic gaming machines and venue renewals combined with positive momentum in food and bar contributed to the sales growth result. Now turning to slide seven. In Dan Murphy's, we've returned our focus to delivering unbeatable value for our customers. This was achieved by resetting our shelf prices to reflect clear and meaningful price leadership in the market, both in-store and online, as well as investing in competitive promotional activity. This has clearly resonated with customers, delivering both sales growth and market share gains. Path 1 highlights include a record level of purchase intent and value for money customer engagement scores, which in turn supported an all-time record sales month in December. Dan Murphy's achieved its biggest ever trading weeks, leading to both Christmas and New Year's Eve, with Christmas Eve setting a new daily sales record. Turning to slide eight, BWS is undisputed as Australia's most convenient drinks retailer with more than 1,450 stores nationwide and even more pathways to purchase through delivery partners, providing the convenience of fast delivery in increasingly more locations. In half one, we continue to deepen our customer engagement with record value for money and e-commerce voice of customer scores. This helped us to deliver our highest ever e-commerce sales month in December. More competitive settings are being established in BWS to ensure the team is fulfilling the mix of needs of their convenience-oriented customers. This can already be seen in increased activity in everyday rewards offers and increased focus on great value promotions both in-store and online. Supported by our in-app promotion offering, AppyDeals, the BWS app now has 850,000 monthly active users, with over half of these being millennial and Gen Z customers. Turning to slide nine, in hotels, we achieve strong trading results around key social occasions, including Father's Day, Spring Racing Carnival, footy finals, Christmas Day, and New Year's Eve. These were bolstered by major international live music acts in Australia, including Oasis and Lady Gaga, and continued in January with the Ashes and two UFC events. Gaming remained resilient, delivering mid-single-digit sales growth, supported by targeted investment in gaming room refurbishments and upgraded electronic gaming machines, with more than 800 new cabinets installed in half one. In Victoria, we continued to gain market share, demonstrating good return on the investments made in the state. Sales growth in food and bars was supported by better tailing of menus and record trading during key events. Our PubPlus loyalty program now has over 600,000 active users, accounting for 29% of our F&B transactions, and our guest experience continues to strengthen with voice-to-customer score achieving 9.1 out of 10. Turning to slide 10, we completed 21 hotel renewals during the half and have been pleased with the strong performance uplift they are delivering. Our FY24 cohort of renewed venues continues to deliver collectively over 20% ROI in year two post the renewal, ahead of our 15% target. I encourage you to get out and visit some of our newly renovated hotels, including the Palace in Camberwell in Victoria, the Royal Beanley and Northern Grounds in Queensland, and the new premium gaming concept at the Skyways Tavern in Victoria. Moving to slide 11, N1 Endeavor, which is a program established to separate our systems from Woolies and simplify our technology landscape. Last year, the decision was made to accelerate the standalone ERP system implementation and defer the store system separation to start after the ERP program. I'm pleased to report that the ERP system build phase is on track to complete in half one, so in roughly 18 months. Half one of FY28, so roughly 18 months from now. In F26, planned OPEX is expected to be at the lower end of the previous guidance range of $50 to $60 million, and planned CAPEX is expected to be below the guidance range of $40 to $50 million. Slide 12 provides a summary of the opportunities in the immediate property development pipeline. We continue to make good headway on our five highest priority redevelopment opportunities. The development applications for both the Forest Hotel and Chelsea Heights have been approved. Two additional applications have been lodged for the Morrison Hotel and Camberwell sites, and we're planning to lodge the application for Doncaster Shopping Town by the end of F26. The two new DAs are freehold sites with current zoning classification for mixed-use development, which includes accommodation. In aggregate, these five sites have been independently valued at between 100 and 150 million. We believe there is further upside to those valuations once our development applications have been approved. Turning to slide 13, I'm pleased to say we've continued to progress our sustainability commitments. While I won't go through all the highlights on this slide, the most important point is that we remain committed to doing the right thing, including the responsible service of our products. Now, turning to slide 15. I know the majority of you would like to have a more fulsome discussion on our strategy today. And while we're well-progressed, we're not yet ready to have a detailed and comprehensive strategy discussion. That is now in the diary for the 27th of May at the Forest Hotel in Sydney. But for now, I will share a few things. Our process started with getting the facts clear about our business and its performance, while at the same time understanding the industry through the eyes of our customers. The customer work we did was both for retail and for hotel guests. The combination of those two pieces of work enabled us to see our business with fresh perspective, which led us to draw some simple conclusions. The first is that over the last few years the strategy really was to focus on margin and it's clear this caused us to lose focus on value for our customers at a time when they needed it most. This is now being addressed. You can see clearly from today's results that our customers have responded very well to the decisive action we've taken on price. The second We are working on regaining the sharpness in what we stand for with customers across both retail and hotels. With Dan Murphy's, this clarity triggered the quick moves with respect to reestablishing material price leadership in the second quarter. With BWS, this gave us clarity on what value for money means for convenience shoppers. And in hotels, it's clear we have work to do in leveraging our scale for good in the eyes of both our people and our guests. The third point is we have significant untapped potential across our portfolio, both in taking cost out as well as generating meaningful revenue growth. And the fourth, the cross-business potential and interconnected nature of our portfolio means it makes sense for shareholders to maintain a combined retail and hotels portfolio. I don't think those four things are probably of much surprise to anybody on the call. but it's important to note we have very strong clarity on where we're headed off the back of those four points. While we have high-level clarity and the outline of our strategic priorities, this work is ongoing to ensure we have a detailed blueprint across the many initiatives that will create the backbone of our transformation. We look forward to sharing as much as we can when we meet in May. In the meantime, as you've witnessed, we're not hanging back waiting for the detail to be finished before we act. Where we have obvious moves to make, we're making them and with no regrets. The first of the obvious moves is that we're competing in retail. And to be clear, the intention is Dan Murphy's will not be beaten on price by anyone at any point for any reason. And importantly, BWS has significant growth opportunities in further differentiating itself as the market leader in convenience. The second of the obvious moves is acceleration of investment into our hotels portfolio to fuel continued growth. We will get more sophisticated as we go, but we're in it to win it and we are out of the gates. We look forward to talking about this more in May. Turning to slide 16, I want to introduce our new executive leadership team. You'll have the chance to meet them properly in May, but I'm incredibly excited by the mix of perspective and extensive experience we have sitting around the leadership table. It is already making a very big difference. These are experienced industry leaders from top-tier consumer brands, but more importantly, each member of our leadership team brings an owner's mindset and a sharp eye to execution excellence. And we are in lockstep on our strategy reset. Turning to slide 17, one of the ways we unlock value going forward is leveraging our scale insights, infrastructure, and customer data to unlock both significant continued cost reduction as well as revenue growth. There is significant value to be delivered for our shareholders from this unique portfolio, and we will take full advantage of the opportunities it presents. Slide 18 is the last slide before I hand over to Kate. I won't take you through the words on this slide, but the intent and focus should be clear. In retail, we are resetting our multi-brand strategy to ensure we put the customer first, delivering more of what they value. In hotels, we are accelerating investment. Underinvestment in the past has left us with a significant opportunity to accelerate both venue renewals and electronic gaming machine replacements. Using our now-proven model to deliver very strong results is the intent. We are also focused on better leveraging our group scale to deliver more local autonomy for our teams and reduce costs while also enhancing our PubPlus loyalty program. At a group and at a business unit level, we are simplifying the way we operate to drive both cost and bureaucracy out of the business, progressing our technology separation from Woolworths, and looking at all of our assets to determine where and how we should participate. With that, I'll hand over to Kate to take you through our financial results for the first half in more detail.

Thank you, Jane. Moving to slide 20, in the first half, as Jane said, group sales were up 0.9% versus the prior comparative period, reflecting improved momentum in both retail and in hotels. Our underlying group EBIT, which includes $20 million of One Endeavor program costs in retail, declined by 5.4%, with growth in hotels more than offset by a decline in retail. Finance costs of $155 million decreased by 1.9%, primarily driven by our lower average net debt through the half. Underlying profit before income tax of $408 million declined 6.6% versus the first half of F25, which was largely as a result of the lower retail earnings performance. As we previously flagged in our trading update on 13 January, Our first half underlying earnings excludes the impact of a pre-tax net expense of $45 million related to significant items. This amount consists of a $40 million provision relating to our estimated one-off cessation costs which are arising from the planned closure of the Melbourne Liquor Distribution Centre in 2028. It also includes a $4 million net gain relating to a one-off gain on the sale of gaming entitlements offset by hotel property impairments and $9 million of advisory fees related to our strategic review. Moving to slide 21, the group delivered a strong cash realisation ratio of 165%, generating $997 million of net operating cash flows in the half. The reduction of $39 million compared with the same period last year is primarily due to the lower earnings as explained earlier. Free cash flow was lower by $153 million reflecting accelerated investments including 16 new retail stores and 21 hotel renewals with over 800 new EGMs installed. Turning to slide 22, you can see that net debt has decreased by $34 million compared with the first half of F25. This reduction is supported by reduced trade working capital as well as proceeds from asset sales. Underlying leverage ratio of 3.3 times was supported by the reduction in group net debt. Noting, however, that our operating cash flows are seasonally weighted to the first half, so we expect our net debt and consequently our leverage ratio to be higher again at year end. At balance date, the group had a billion dollars in undrawn debt facilities, giving us ample headroom. The F26 full year finance costs are expected to be broadly in line with F25. Turning to slide 23, you can see gross capital expenditure increased by $71 million in half one. The increase compared to half one F25 largely reflects our network expansion in retail and renewal programs in hotels. In retail, we opened five new Dan Murphy's and 17 new BWS stores, and in hotels, we completed 21 hotel renewals, including 15 whole-of-venue repositioning projects, while we continue to upgrade our gaming fleet, as we've spoken about. Net capital expenditure increased by $85 million after including $24 million in proceeds realised from asset sales. For F26, we have revised our total capex guidance upwards to $460 million to $500 million, reflecting the continued acceleration of growth investment in hotel renewals. Turning to our segment results in a little more detail and starting with retail on slide 25, In the first half, total retail sales increased by 0.2% to 5.5 billion. Our core brands, Dan Murphy's and BWS, delivered combined sales growth of 0.7% for the period, noting this excludes our specialty businesses. In a competitive market landscape, combined sales for Dan Murphy's and BWS grew by 2.2% in the second quarter, or 0.6% adjusting for the estimated $45 million sales impact of supply chain disruption in the prior comparative period. Our online business continues to be a highlight with sales growing at 35.1% to represent 11.3% of the combined Dan Murphy's and BWS sales. Gross profit margin declined by 84 basis points to 23.9%. This reflects our focus on price leadership alongside elevated promotional activity across the market. Underlying cost of doing business remains flat year on year at 18% of sales with inflationary headwinds including a 4% award wage increase. mitigated by savings from our Endeavour Go optimisation program, restructuring benefits, and lower One Endeavour technology program costs. While costs have been well controlled, the lower GP margin led to an underlying EBIT of $327 million, a decline of 11.6% compared to last year. The bridge chart on the bottom left of this page shows an indicative sizing of these respective performance drivers. Turning now to hotels performance on slide 27 for the detail. In the first half, the hotel's business delivered a strong result with sales growth of 4.4%, growing to $1.2 billion. On a comparable hotel basis, sales grew by 4.2%. Performance was strong across all key sales drivers. Food and bar sales growth benefited from menu optimization and record trade during major event periods. Gaming remained resilient, delivering mid-single digit growth, and this was supported by our investment in over 800 new machines installed during the half. Accommodation continued to deliver strong growth by successfully capturing peak demand during key events. Growth profit margin expanded by 12 basis points to 85%, driven by a favorable sales mix, better buying initiatives, and optimized menus. Underlying cost of doing business grew by 4.4%. Similar to retail, the 4% award wage increase was a material headwind which we managed alongside our continued investment in guest experience. Our result also reflects higher repairs and maintenance, and a step up in depreciation and amortization following our accelerated investment in EGMs and renewal programs. These impacts were partially offset by the cycling of prior year One Endeavor Technology program costs. Underlying EBIT grew by 5% to $275 million, resulting in an underlying EBIT margin expansion of 13 basis points to 23.5%. Again, the chart on the bottom left provides further detail on the sizing of these EBIT drivers. I'll now hand back to Jane to take you through the outlook. Thank you, Kate.

So, slide 29. In a competitive and challenging liquor market, we've continued to gain share in retail. However, sales growth in both retail and hotels moderated in February compared to January. It should also be noted that retail sales in the first seven weeks of the prior comparable period were impacted by ongoing effects of supply chain disruption. While the outlook for consumer spending remains uncertain given elevated inflation, a war in the Middle East, and rising interest rates, the group's scale, value proposition, and market leading brands means we are well positioned to compete and win in a market where consumers remain focused on value for money. Finally, in closing, I'd like to thank our 32,000 team members for their focus on delivering outstanding value products. and importantly, experiences for our customers and guests. We're confident and energized about our future and are committed to delivering on the very significant opportunity we see in our portfolio. I will now hand back to the operator for Q&A.