Endeavour Group Limited

Thank you for standing by and welcome to the Endeavour Group Limited FY26 Results Management Briefing. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Jane Hertlicker, CEO. Please go ahead.

Good morning, everyone. Thanks for joining us today for Endeavour Group's four-year 26 results presentation. I'm Jane Hrdlicka, Chief Executive Officer of Endeavour Group, and I'm joined today by our Chief Financial Officer, Kate Beattie. I'd like to begin 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 begin the discussion on slide four, and speak briefly to the group's F26 highlights. As you know, F26 was a year of multiple parts. The first quarter of the year, we began pulling together the facts, looking through the lens of our numbers, the customer, the competitor, and our people to enable our strategy refresh while trading continued business as usual. The second quarter of the financial year, The two foundations of our strategy became clear, and the team started executing on value in Dan Murphy's immediately. The second half of the year, we continued to improve our focus on retail, not just on competing sharply on price, but on the detailed planning of a long list of initiatives which will continue to improve revenue growth as well as improve the bottom line. During the second half, we also began laying the foundations for major improvements to our hotel's business. There is no doubt that sales momentum is building in retail following our renewed focus on value and price leadership. Since the introduction of lower shelf prices late September 2025 and the increased competitive response to promotional activity that followed later in the first half, our retail business is consistently gaining share. The team has now delivered 10 consecutive months of sales growth. In hotels, we have a clear plan in place to deliver significant performance improvement across each of our pubs. At the core of this is simplifying the way we operate our pubs and enabling our teams serving customers to stay focused on delivering amazing hospitality and delivering profitable growth across each of our pubs. We've also reaffirmed our 300 million cost out target by F29. including 100 million in F27. While there is significant work to do to reset our foundation for high performance, we have talented people across our retail and hotels teams who care deeply about our customers and brands and are hungry to help. We've also strengthened our leadership team, bringing fresh perspectives and extensive experience from top-tier consumer brands. Together, we're building a more focused organization with the clarity and discipline to deliver against our potential. We now move to slide five. Our F26 results are clearly a reflection of the year of multiple parts. The investment in price is evident not only in the green shoots demonstrated by the above market retail revenue growth, but also in the gross margin impact. Group underlying earnings reflected our decision to invest in lower shelf prices for our customers and compete in the elevated promotional environment currently at planned retail. Our earnings were also impacted by higher cost of doing business as a result of inflation. This was partially offset by $40 million in cost reduction delivered in F26. As outlined in our ASX announcement on 5 August, the group incurred a pre-tax net expense of $372 million relating to significant items. Kate will provide details on these later in the presentation. During the year, the group announced the decision to revise our dividend payout policy to between 50% and 75% of underlying net profit after tax. In line with this policy, the board has declared a fully franked final dividend of 1.2 cents per chair, which represents a full year dividend payout ratio of 59%. Slide six provides a snapshot of our retail and our hotels business. Firstly, in retail, sales increased by 0.7% to $10 billion, with sales momentum steadily improving during the year. Excluding specialty businesses, Dan Murphy's and BWS delivered combined sales growth of 1%, increasing from 0.7% in half one to 1.4% in half two, with growth accelerating during the second half from 0.8% in Q3 to 2.2% in Q4. In hotels, sales growth grew by 4.2% to $2.2 billion for a full year. with hotels delivering sales growth of 4.4% in half one and 3.9% in half two. Growth in Q3 moderated to 3.7% as growing cost of living pressures impacted consumer spending. However, growth did recover in Q4 to 4.2% or 3.9% adjusting for the impact of the FIFA World Cup. If we turn now to slide eight, at our Investor Day in May, we outlined a clear strategy to strengthen the business and position Endeavor towards next phase of growth. Our strategy is anchored in deep customer insights and is built around three priorities. First, to strengthen our retail business by focusing on the requirements of each brand to best serve its core customers. For Dan Murphy's, this means price and range leadership, competitive and effective promotional activity, and adjusting our costs to best align to the customer needs in each of our stores. For BWS, we're also making progress better delivering our convenient shopping experience with a twist and always with nice value. we're also resetting our focus on excellence in retail fundamentals across both of our brands and will deliver significant value as we execute these planned initiatives. Second, we're unlocking the full potential of our hotels business by simplifying the operating model and increasing investment to fix the basics, improve performance, and enhance guest experience. After years of underinvestment, we are focused on executing the transformation of our hotels business while also tactically working to better compete every day for trading growth across food, beverage, accommodation, and gaming. Third, we're simplifying the way we work. By reducing complexity, releasing prep value in our asset base, Better leveraging data and technology across our portfolio and finding ways to take more costs out of our business, we will create greater capacity to invest where it delivers the strongest long-term shareholder returns. These priorities have already led to important decisions, including resetting the top team, a $300 million cost reduction program, restructuring our head office functions, including merchandising, the repositioning of our retail brands, increased focus and accelerated transformation and investment in hotels, optimization of the Pinnacle Drinks portfolio, and a revised dividend policy. Together, these initiatives provide a clear roadmap to build a stronger, simpler, and more competitive endeavor. If we move down to slide nine, I won't take you through all the details highlighted here, but the intent is to demonstrate the progress made to date against our strategy. We have transitioned from strategy reset, and our focus now is on execution. delivering against our priorities, investing with discipline, and continuing to simplify business. We are in it to win it, and we're out of the gates and into execution of a very comprehensive plan. Moving to slide 10, as a group, we are focused on multiple levers to improve the value of our business. We talk a lot about the customer and our very disciplined approach to delivering for them in a way that is differentiated, This will unlock revenue growth, but we also need to simplify the way we do things and improve our productivity across the business in the process. Getting rid of complexity unlocks trapped costs and enables us to operate with better experiences for our people and our customers every day. The cost reduction opportunity is significant, and we've identified $300 million in cost savings through to the end of F29, including $100 million in F27. 70% of the initiatives in F27 to deliver the cost-out target of $100 million have already been executed, with roughly $85 million of the total cost savings expected to come from retail and $15 million from hotels. Moving to slide 11, F27 will be a year of investment to support execution of our strategic roadmap. As foreshadowed at our Investor Strategy Day, we are targeting capex spend this year of between $550 million and $650 million. The increase in capital spend is material, but necessary to address both the earnings impact of historic underinvestment in the business, as well as to unlock future growth opportunities. we recently undertook a venue-by-venue network review of our hotel's portfolio. This identified remediation work needed across the network to both reduce costs and improve the revenue generation focus in each of our hotels. We estimate this will involve a total spend of up to $120 million over the next three years, with the majority of the building works required relating to roof repairs and replacement and related works. In the near term, this remediation span represents increased stay-in-business capital in our hotels, but it will reduce both capex and opex required for future R&M and improve the training environment for our guests and team members. Turning to slide 12, in F27, the group will increase growth capex by up to $60 million to begin executing a number of transformative initiatives. The incremental growth CapEx reflects additional investment in a number of areas critical to the performance of our business. This includes accelerated hotel renewals, our Simpler for Pubs program, digital data and e-commerce, retail media, and customer experience. All investments are made in accordance with our capital allocation framework, which targets returns in excess of a risk-adjusted RAC. As you would expect with the scale of transformation underway, there will also be an increase in OPEX of $40 to $60 million in F27, which includes additional investments in people and tools to execute our transformation program. The majority of this spend is for the life of the execution phase of F27 initiatives. F27 should be the highest year of initiative investments. All OpEx and CapEx investments are substantiated by business cases with timeframes for both payback and returns. Turning to slide 13. At our investor day in May, we outlined that over the course of the next three years, we intend to step up the level of renewals, repositioning, and light touch investments to improve the overall performance of our hotels portfolio. In F27, we expect to invest between 130 and 160 million to renew up to 75 venues, which is approximately double the number of venues we upgraded in F26. Moving to slide 14 and 1, Endeavor, which is the program established to separate our systems from Woolworths 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 remains on track to complete in half one of F28. In F26, total expenditure of $70 million was below the previous guidance range of between $90 and $110 million. the lower expenditure reflects the mindful cost and value lens we are applying to these important separation projects. In F27, planned total expenditure is estimated to be between 125 and 145 million, reflecting delivery of ERP build combined with the retransment of the design phase of the storage transition. Now turning to slide 16. In DANS, we have returned our focus to delivering unbeatable value for our customers. This has clearly resonated delivering both sales growth and market share grains. In F26, highlights include market leading purchase intent and record value for money customer engagement scores. This in turn supported improved sales growth over the course of the year. We turn to slide 17. AWS 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 and increasing the more locations. During the year, we continued to deepen our customer engagement with record online voice of customer scores, which helped us to achieve our record online sales of over 10% year on year. Supported by our in-app promotional offering, AppyDeals, the BWS app now has more than 730,000 monthly active users, which is up 15% versus last year, with over half of these being millennials and Gen Z. Turning to slide 18, these charts demonstrate how customer perception over market-leading value propositions are growing. During F26, Dan Murphy's and BWS both achieved record scores when customers were asked to what extent we satisfied or dissatisfied with value for money. This provides further evidence that customers are recognizing the value we are providing at a crucial time for the community, which is contributing to increased engagement with our brands. Slide 19 demonstrates that our improved customer value scores are translating into sales growth. We've delivered steady improvement in our quarterly sales growth, and that sales momentum continued to build in the first seven weeks of the new financial year. Turning to slide 20, in hotels, we achieved record trading results around key social occasions, including Christmas, Easter, and Anzac Day. Sales growth in food and bars benefited from renewal activity as well as improved ranging in menus. Gaming remained resilient, delivering mid-single-digit sales growth, supported by targeted investments in gaming room refurbishments and upgraded EGMs, with roughly 2,000 new cabinets installed across the fleet. Our PubPlus loyalty program now has over 750,000 active users, accounting for 32% of our F&B transactions. And our guest experience continues to strengthen, with our voice customer score achieving 9.1 out of 10. Turning to slide 21 and the last slide before I hand over to Kate, we completed 38 hotel renewals during the year, up from 27 in F25, and have been pleased with the strong performance uplift they are delivering. Our F24 cohort of renewed venues continues to deliver collectively over 20% ROI in the second year post-renewal. This is ahead of our 15% target. It is this track record that gives us the confidence that the capital we are allocating to accelerated hotel renewals is money well spent. I encourage you to get out and visit some of our newly renovated hotels. The Springwood Hotel in Brisbane or the Ranch in Sydney are two great places to start. I'll now hand over to Kate to take you through our financial results for the full year in more detail.

Thank you, Jane. I will start on slide 23. As you can see here our group sales were up 1.3% year on year following a first half sales increase of 0.9% as James highlighted sales growth in the second half was 1.7% and that reflects improved momentum in retail partially offset by softer hotels growth half on half. The underlying group EBIT which includes $40 million of one endeavour program costs in retail declined 8.7% with EBIT growth in hotels more than offset by a decline in retail. finance costs of $301 million were in line with prior year. Underlying profit before income tax of $544 million declined 13.1% versus F25 as a result of the lower retail earnings performance. As we previously flagged in our trading update on the 5th of August, F26 statutory earnings include the impact of $311 million of significant items post-tax or $372 million pre-tax. The significant items were predominantly non-cash in nature and relate to the write-down of carrying values for assets as well as cash costs associated with the implementation of the group's strategy review and associated restructuring. More detail on this is provided in the appendix to this presentation on slide 43. Moving to slide 24, the group generated $933 million of underlying operating cash flows and an underlying cash realisation ratio of 93%. The reduction in operating cash flow compared to prior year of $217 million is primarily due to lower earnings and changes in trade working capital. The trade working capital movement reflects our investment in higher inventory of fast moving products to mitigate fuel related supply chain risks. At year end this was $260 million higher year on year. This increase was partially offset by lower pinnacle inventory and favourable cash flow from trade payables optimisation. Underlying free cash flow was negative $182 million, lower than prior year, reflecting the reduction in operating cash flow I've just discussed, and an increase in payments associated with higher capital investment including in new stores, hotel renewals and gaming machines. Turning to slide 25, you can see that net debt has increased by $198 million due to the combined impact of accelerated investments in store and vendor renewals, lower earnings and higher inventory. Our underlying leverage ratio on a pre-AASB16 lease accounting basis was 1.9 times, within our target level of less than two times. At balance date, the group had $990 million in undrawn debt facilities with a weighted average facility maturity of four years, giving us ample funding headroom. In F27, full-year finance costs, including lease and debt interest expense, are expected to be between $330 and $340 million based on current interest rates, as of today, an increase on F26 driven by increased average net debt and increased average interest rate. Turning to slide 26, you can see gross capital expenditure increased in the year by $54 million. The increase compared to last year largely reflects network expansion in retail and our accelerated renewal program in hotels. In retail, we added 13 net new stores, being six new Dan Murphy's and seven new BWS stores. In hotels we completed 38 hotel renewals including 25 whole of venue repositioning projects. Net capital expenditure increased by $68 million after including $36 million in proceeds realised from asset sales. For F27 we are forecasting to spend $550 million to $650 million of capital including, as Jane has referenced, up to $60 million of incremental growth investment across a number of transformation initiatives. as well as a $25 to $50 million step up in hotel stay and business capex. It also includes a projected $45 to $60 million increase in One Endeavour technology transition capital as we reach the final stages of the ERP program. Turning to our segment results in a little more detail, starting with retail on slide 28. In the retail segment, sales increased by 0.7% to $10 billion. Gross profit margin declined by 86 basis points to 23.6%, reflecting investment in lower shelf prices and elevated levels of competitive promotional activity market-wide. Underlying cost of doing business increased by 1.6% or 2.8% excluding One Endeavour costs with inflationary headwinds including a 4% award wage mitigated by savings from cost reduction initiatives and lower One Endeavour technology program costs year-on-year. The lower GP margin combined with the net impact of elevated inflation on cost led to an underlying EBIT of $464 million, a decline of 17.6% compared to last year. The bridge chart on the bottom left of this slide shows an indicative sizing of these respective performance drivers. I'll turn now to the hotels' performance on slide 30. The hotels' business delivered overall sales growth of 4.2% compared to last year. Food and bath sales grew by 2.6% and 5% respectively. benefiting from renewal activity, optimised ranging and menus, and record trading around key event periods. Gaming growth of 4.4% benefited from accelerated investment in new gaming machines with approximately 2,000 new machines installed. Accommodation delivered strong growth at 9.3% with higher occupancy and increased daily rates, which was supported by renewals as well as a higher room count. Gross profit margin expanded by 7 basis points to 84.9% driven by a favourable sales mix with improved gaming performance. Underlying cost of doing business grew by 4.4% or 5.8% excluding one endeavour cost. Similar to retail, the 4% award wage increase was a headwind. The result also reflects high depreciation and amortisation associated with the accelerated EGM and renewal programs and higher site costs including rates, repairs and security as well as investments in guest experience, such as promotion stands and apps. Underlying EBIT grew by 4.1% to $462 million, with underlying EBIT margin materially in line with prior year at 21%. Again, the chart on the bottom left provides further indicative sizing of the EBIT drivers. I'll now hand back to Jane to take you through the outlook.

Thanks, Kate. And turning to slides 32 and 33 for the trading update and outlook. A retail business has made a strong start in 27, delivering 4.6% sales growth. It's pleasing that sales momentum in retail has continued to grow and it's no doubt the end-of-line momentum is is healthy, I would remind you that at the end of Q1, we will begin cycling stronger sales in the prior comparable period. Our hotels business has delivered 2.2% sales growth in the first seven weeks of the new financial year. We've seen softer trading across all key business drivers in F27, with gaming room revenue moderating in line with market trends. Overall, the outlook for consumer spending remains uncertain given ongoing cost of living pressure, including the impact of the continuing Middle East conflict, which impacts fuel prices and rolls through the economy, the wealth effect of the declining housing market, and the potential for higher interest rates. I won't speak to detail on slide 33, which is relatively self-explanatory, other than to say that it outlines the F27 outlook for total capital expenditure and cost of doing business, both of which are expected to be higher than F26, reflecting a year of investment for the group. In closing, I want to thank our 30,000-plus team members for their commitment and resilience throughout the year. Their passion for our customers, our brands, and delivering excellence gives me great confidence in what we can achieve together. I also want to express my sincere thanks and appreciation to Kate, who last week announced her plans to retire from Endeavor as CFO and to embark on a new adventure in her career anchored around non-executive roles. Kate has made an absolutely invaluable contribution to our business from the early days of demerger planning through to navigating our first five years as an ASX listed company, which of course also included a stint as the interim chief executive, which I am very grateful for. I will now, after saying a big thank you to Kate, hand it back to the operator for Q&A.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Bye. Bye.

Good morning. My question is just on the $40 to $60 million of incremental OPEX investment in FY27. I just want to understand if this is like a permanent step up in the cost base or if it's one-off and we should be unwinding it in 28 and then if you can give us a bit of detail around what it is. Is this more labour hours in store, et cetera, or should we be thinking about it as a function of the $100 million cost out as a bit of a reinvestment plan to improve the top line as you take those costs out? We should be building that into the next few years of that cost out. Thanks.

Yeah, thanks, Brian. I might tackle that one. The way to think about the F27 increase in OPEX is that is very specific to the F27 initiatives that have been planned. As I indicated, every single initiative has a business case, which is built on a plan to deliver the opportunity and what it's going to take to deliver the opportunity. It's different for each one of the initiatives, what it's comprised of, but it is either labour that's required to invest in delivering the initiative, or it could be a bit of CapEx, could be OpEx and tools, tech tools. It's a mix of things that's initiative by initiative, and it's for the F27 initiatives and transformation. F27 is the biggest year of heavy lifting and transformation for us, but we won't be finished in 27. I would say, you know, 28 and 29, you know, there will definitely be incremental effects against those initiatives. I would expect that the heaviest lifting is in 27. And you would also look at those initiatives and say they've got business cases against them, so every single initiative has an investment but also delivers a return. And those returns should start flowing in 20... 8, 29, 30, beyond. So that's the way to think about that. We will call it out as we do in one Endeavor so that it's clear what those extra costs look like. We can't predict what 28 and 29 look like at this stage, but it won't be the same as 27.

Okay, great. Thanks, Jane, and congrats, Kate, on a great tenure there at Endeavor. Best of luck in your next roles.

Thank you. Appreciate it, Brian.

Thank you. The next question comes from Sean Cousins from UBS. Please go ahead.

Thanks. Hi, Jane and Kate. Hi, and thanks for answering my questions over the years. Just a question regarding the first seven weeks of retail, the 4.6%. I'm just curious around the impact of promotions, as I believe Endeavor may have matched the 20% off promotion that Coles was running. So was promotional intensity higher than the second half 2020? and should we expect that level of sales growth to be continued for the quarter or was it this promotion or other one-time drivers that delivered a stronger than expected start to retail sales for the year? Thanks.

Yeah, thanks, Scott. There's no doubt that we are continuing to be very competitive under any promotional activity we see in marketplace to ensure that WB stands. There was a 20% off promotion in the mix and that was bigger than normal. But I wouldn't get overly wrapped up on any one activity. I would say that we're continuing to hold our same level of focus with respect to, you know, being competitive with dance and also being competitive with BWS, although it's a slightly different position. How to think about the rest of the quarter and half, I think we're calling that it's an uncertain consumer environment, and so we can't pick it. I would say the things to take away are there is underlying momentum that's been built in our retail business and if you can look at noise and strip it out, you see really strong underlying momentum in retail, which is very pleasing. and there's a lot of additional work underway in both BWS and Dan's to continue to stoke that fire. So we are very, very focused on continued retail growth. The level at which we can achieve is there are things that are outside our control on that one and so we can't be more definitive than that.

And so it's a degree of promotional intensity. Is it fair to say that it's stepped up relative to the second half, 26th?

I would say we haven't seen a 20% off before, and hopefully we don't see – there were two small ones in short periods in the first seven weeks. I would hope we don't see many of those going forward, but we can't predict.

Great. Thanks, Craig. Thank you. The next question comes from Ben Gilbert from Jarden. Please go ahead.

Good morning Jane and Kate, and echo the comments towards Kate before as well. Just a question for me just around cost. So with the wage increase for next year, is that effectively, just looking at the numbers, it effectively feels like it's just going to negate the $100 million cost out that you've got coming through? when we look at that additional colour you've given us around the OpEx and One Endeavor, should we be expecting that to sort of be incremental? So as far as Ben sort of looks through putting that in, you could have sort of 3% or 4% type CDV growth for retail, for instance.

Ben, you're a little bit hard to hear, but I think the essence of the question is, is the step-up that we've announced in One Endeavor and in the OpEx on transformation offsetting the $100 million in costs out? Is that the essence of it?

Yeah, apologies. So you've got the wages, which will effectively offset the 100. So we effectively should be adding those incremental costs, which gets around sort of 3% to 4% CTV growth in the retail business for fiscal 27.

Yeah, I mean, Kate, over to you in terms of adding a colour to that.

Yeah, obviously I'm not going to project exactly what the cost growth is going to be, but I think broadly the way you're thinking about it is the right way, Ben. So yes, we are, I mean, as we have flagged, wage growth in F27 is elevated, quite materially elevated, and therefore the $100 million of cost out will go to largely offset it, but won't drive more than an offset to the wage inflation, and hence why we are being clear to flag that there is also investment in this year as well.

Thank you. Thank you. The next question comes from Craig Woolford from MST Marquis. Please go ahead.

Good morning and yeah, second the comments that have been made, Case. It's been good speaking with you over the years and best of luck. Questions just around Pinnacle. Obviously there's been quite a few changes made with our business and right down in asset sales or shrinkage of the business. What are the implications of that going forward? Will it have an impact on gross margin? Are there gross profit dollars that will be lost in FY27 on the Pinnacle drink side?

No, I think the right way to think about the changes that we've made in Pinnacle is it is improving improving the performance of our product label business and managing it like we would manage any other supplier with respect to ensuring that the lines that we carry are lines that justify the real estate that's been allocated to it. We've reduced SKUs for the simple purpose that those SKUs weren't performing in a way that justified that real estate. The simplification of the SKU range is what we would do with any supplier and that improves the economics of retail and the performance of Pinnacle enabling greater focus by selling off some of the assets that also just improves and enables us to double down on Pinnacle's role in the business which is to provide private label wine, beer and spirits for retail.

So just to clarify, it sounds like sales drop, which makes perfect sense, but it's unclear to me whether it would be gross margin dilutive because I would have thought the Pinnacle Drinks products are typically higher than average category margins.

You would expect that we looked at gross margin when we made those decisions. So decisions aren't made on sales, they're made on gross margin.

Thank you. Thank you. The next question comes from Michael Simotas from Jefferies. Please go ahead.

Hi, thanks very much for taking my question and congratulations Kate and best of luck. It's probably a little bit hard to pull apart given the promotional events in the month of July, but do you think your retail business got any benefit from the FIFA World Cup during that trading update period?

Look, I think you can't, to your point, you can't really pull it apart. But there's no doubt that it was a very festive time. There was lots of sport going on during that period. It was a very festive time. It was a very social time. But we continue to trade well now. So it's very hard to pull it apart and ascribe any particular day or week that was extraordinarily correlated with sports. Thank you.

Thank you. The next question comes from Tom Kirath from Baron Joey. Please go ahead.

Morning, guys. Just one on the hotels business. You've got this line here which says, disruptions to trading from increased renewal activity to adversely affect the hotels earnings. I'm just thinking, like, you did 38 renewals in FY26. is there like a number or like a profit impact that they had in terms of the disruption that we can then I guess kind of almost double that impact at 27 as you step up the level of renewals?

Kate, you want to talk to that?

Sure, thanks Tom. Look, I think what I would say is it's quite hard to get a definitive read through because you go through a period of disruption followed by a period of recovery and so measuring that definitively is hard. So certainly there's a degree of it in the F26 year, and that will be replicated in the F27 year, but what we're flagging in the F27 year is a step up in the number of venues touched. I think the critical way to think about it is when you compare our top-line revenue growth to potentially the various F&V gaming markets, it may look slightly softer as a result of that renewal activity. And, of course, when we're in renewal, we don't fractionalise all of the fixed costs, so the relative EBIT margins to... on that interim basis may not be as strong as they will be once we're through the bulk of the renewal activity. Okay, great. Thank you.

Thank you. The next question comes from Caleb Wheatley from Macquarie. Please go ahead.

Good morning, Jane and Kate, and echo the prior comments, Kate. All the best for your future endeavors. Just wanted to come back around this sales trajectory and sales momentum on the retail side. Is there anything to call out, whether it's from a channel point of view? I know there are comments obviously around online and it sounds like you've met the market on that online channel, but was there any meaningful differential in performance between online and in-store or relative to in-store, is there any meaningful performance differential between Dan Murphy's and BWS? Because it does look like a pretty solid number. I came to explore exactly where that's coming from, if there is anything to call out, please.

Sure, well, I'll give a crack and then pass on to Kate, but I'd say that we've called out that online sales are very strong. We've also called out that same-store sales are growing. And we're also calling out that there's a lot of investment going into improving our performance in retail. at a fundamentals level as well as ensuring that we're really working to execute well against the change posture for each of those brands to customers in the relevant markets. And so, yeah, so there's nothing that looks in... I can't predict it to be much different to that going forward. Online sales, we expect to continue to grow, and we are ensuring that there's also strong growth in stores. Kate, you want to take it?

Thanks, Caleb. I might just add to that. Yes, last year, our online sales were 30% up, so clearly proportionately a stronger driver of the growth that we're seeing and of the growth momentum. And we have spoken to the fact that it's Dan Murphy's price positioning and both brands competing promotionally that have driven that. I think one of the probably the more important things to observe which we see is signs of customers returning generally to the brand particularly recognising Dan Murphy's price positioning more strongly is that actually pleasingly we're seeing in-store transactions trending back towards growth. And so that is clearly not an online activity driven thing So the other thing I would say is that the benefit we get with online sales is that the majority and in bands proportionately even more the majority of those are picked up in store. So there's a virtuous cycle of sort of reinforcing of the brand recognition and potentially foot traffic driving into store as a result of the online sales. We very much see it as a benefit of being the major omni-channel retailer and having that physical presence across the country that enables us to be the destination of choice whether you're choosing to shop online or offline.

That's really helpful. Thank you.

Probably just one quick add to that, Caleb, is that BWS has a unique competitive advantage with respect to the, you know, also convenience channel in that we've got 1,450 stores, which means everybody's sort of in a roughly 10K radius and can get product delivered from one of our stores, you know, inside 30 minutes. So we've got a really neat combination of physical assets and growing online strength, and we'll continue to invest in that.

All right. Thank you.

Thank you. The next question comes from Phil Kimber from E&P Capital. Please go ahead. Go ahead.

Hi guys and congratulations Kate as well. My question was just on the hotel sales momentum in July and early August. Is it visitation or is it spend per visit that's lowered? And I'm just wondering if this is looking similar to what you saw in March and April when fuel prices jumped as they have recently, whether that's sort of a main driver?

Excellent question, Phil, and I would hope that, you know, we get the same bounce back we did in hotels, but there's just no way to see through that quite yet. but we can quite clearly see the correlation. We can see it in specific customer groups and certain times of the day. So some parts of the day still are growing quite well and it's definitely spend per visit that is the biggest problem and it just means we're up in our tactical effort now to ensure that we're driving more feet into the into the hotels and trying to appeal to broad attachment just to ensure that we get more traffic through to offset for the lower spend per visit. Correct. Taking that.

Just one important field on that I think is the reminder that we continue to see proportionately better performance in our renewed venues than our non-renewed venues. So the impact of the slowdown is more marked where we haven't renewed and we're more comfortable with the momentum where we have.

Good ask.

Thanks. Thank you. The next question comes from Peter Marks from Goldman Sachs. Please go ahead.

Morning, Jane. Morning, Kate. My question is just on the liquor store growth outlook. I noticed you've impaired 75% – sorry, 75 stores and 4% of the network. I was just maybe expecting today we might see some store closures on the back of that, but I can see you sort of guiding to 10 next stores opening. So I'm just wondering how you're thinking about that. Are you considering closing more stores? Do you think the category has opened too many stores during the COVID boom years? Any thoughts on that would be appreciated.

Kate, you want to take that? Yeah, sure. Thanks, Jane. So I think, you know, firstly, it's important to understand that even in the ordinary course of a year, we open and close quite a lot of BWS stores. While the net numbers may look relatively neutral, we are continuously looking at, you know, sort of optimising the tail of the fleet as well as moving licences where we can from BWS stores to openings of Dan Murphy stores. And that's because there is no better use for a retail liquor licence than a Dan Murphy store. It's a significant return on investment every time we're able to do that. And I think in that context, what we're flagging in terms of net new store openings in F27 is pretty much the same trajectory at around the same pace. So the impairments that we've taken aren't intending to flag an acceleration of net closings per se.

Okay, that's great. So it's not a whole heap of like loss-making stores or anything like that?

No, it's not. I think, I mean, maybe just to build some colour on that, of course, you know, just by its nature impairment is taken when the forward earnings don't support the invested asset base of the store. So that's the reason that the impairments have been taken, not necessarily because they are not stores that we would keep into the future.

That's awesome. Thank you.

Thank you. The next question comes from Sam Teager from Citi.

Okay, all the best for the next steps, Kate. My question is, but when retail starts to cycle lower shelf prices and increased promotions from the second quarter, how much confidence do we have that positive sales growth will continue to continue once this finishes mapping? And then anything you can share around the improvements you're making in retail at a fundamental level as this will probably drive the next leg of sales growth. Thank you.

Sure, Sam. Well, we may have a crystal ball, so we can't give you a perfect projection of how 27 is going to play out in terms of retail growth. But I think you can see in the underlying numbers the momentum that's building in a software consumer environment. and so we, just on the growth levels that we're, you know, popped out of 26 with, we would be lapping, you know, with growth on the first, you know, first, second quarter of the year. But our job is to ensure that we can continue to do that. And so... You would assume that we have been investing in a mix of things already with respect to better consumer smarts. We know who our customer is. We're better understanding what's happening. For example, I can tell you that the growth that we're enjoying is coming principally from Gen X. Gen Z and Millennials. And so we're seeing the younger generations now participating more in our stores than they were before. And I don't know if that's net growth to the category or that's just net growth to us and taking share in those segments. but we definitely are all over how we're engaging with consumers and making sure it's clear to them what we stand for and how that fits against their behavioral patterns. so we're much better with respect to the way we're approaching consumers we're being much more targeted with our marketing we are focused on retail fundamentals you know for example we haven't touched macro space allocations in most of our stores for a very very long time and it's not right and so there's There's a big piece of work to get macro space allocated correctly and get category management done correctly. So there's a lot of work to be done there. There's a lot of work being done in refining the way we go to market with price and the way that we go to market with promotions. All those things will enable us to be much more effective in bringing energy to the category and bringing energy to our customers and growing share. And all those things will also help us better manage costs. and so there is a very full pipeline of activities to ensure that we do continue to go from strength to strength in retail. We can't predict what the year will look like in terms of month-to-month sales growth as much as we would like to.

Great. Best of luck.

Thank you. Thank you. The next question comes from Richard Barwick from CLSA. Please go ahead.

Good morning, all. Can I ask around one endeavour? Costs, please, Jane and Kate. Obviously, flagging OPEX 50 to 55 in 27. Can you give us any sort of guide on how we should be thinking about 28 and 29? So, for instance, obviously, you're moving from the ERP into the stores transition, and it's just hard for us to get a guide to think about if the stores transition should be thinking basically higher or lower than the ERP component at that 50 to 55.

Kate, do you want to take that?

Thank you. So I think the critical thing is that in F27 we will substantially complete the ERP program. We're currently re-embarking on the Design Restores program and as we said the last time when we paused that we were very confident that as a result of having delayed that and now restarting it that the overall cost of that program is going to be lower than it was originally expected to be. So with that in mind F27 is probably a peak spend year. There's always phasing in these things, but we're not yet in a position to exactly project how it's going to look from F28 onwards, but I think it is a year of high activity.

Okay, and the chart would suggest 29 is the end of it. Is that still the right way to think about things as well?

It is, yes.

Yeah, okay, great. Thanks very much.

Thank you. The next question is a follow-up from Brian Raymond from J.P. Morgan. Please go ahead.

Thank you for taking the follow-up. Mine's just on the, I guess, free cash flow and the balance sheet. You know, I'm obviously still working through my numbers, but it looks like another year of negative free cash flow ahead after now for dividends. How comfortable are you with the build in the underlying debt levels that you're seeing at the moment, given your current PAP-X trajectory? Could you look further at dividend in terms of addressing that, or is it just going to be a debt build for a few years until you start to see the ROI on some of these investments? Because it is getting, you know, a pretty big negative free cash layer this year after dividends. I'm just trying to understand that going forward, please.

Kate, over to you. Yes, I think we've flagged F27 as an investment year and we obviously adjusted the dividend payout ratio which we talked about at the Invest Today when we launched our revised strategy and said that we did expect in the near term that the leverage ratio would be above the top end of the range. We actually said F26 and F27. We managed to come in marginally lower in F26 but F27 we do still expect to be above the top end of the range as a result of that investment activity which as Jane has said is all supported by an investment case that says, of course, the earnings returned from that will more than cover the investment. So it's a near-term elevation followed by return generation.

Okay. Great. And then just on the gross margin, just in retail, if I can sneak in one more, just trying to understand the... Now you're coming up to cycling those investments from last year. Is the appropriate sort of stance that we should be thinking about as a flat gross margin year-on-year after the step-down that we saw in 25, 26?

Kate, you want to tackle that one?

Well, yeah, I think, as you'd expect, we won't provide guidance. I think the critical swing factor is the competitive environment. So, yes, we will cycle the reduction in shelf prices, but over the remainder of the year, it will all depend on the level of competitive intensity.

And the other thing to bear in mind is we had the first quarter of 26, of course, where we hadn't made any changes so you've only got three quarters of the year in F26 numbers.

Okay, excellent. Thank you. Thank you. The next question is a follow-up from Sean Cousins from UBS. Please go ahead.

Thanks. Just regarding retail DNA growth, recognize you've got higher rents that are coming through, the finance cost guidance that you've provided and the hotel DNA that's got to step up. But retail DNA only grew 1.6% in fiscal 26. I'm just curious around fiscal 27 growth and if that's a step up as well or any sort of indication there that's always helpful just to sort of have DNA guidance if you could provide.

Okay. We're not flagging a material step up in retail in F27. That's because the level of capex is relatively more stable in retail compared to hotels where we are flagging the material increases.

Okay. All right. Fantastic. Thank you. Thank you. The next question is a follow-up from Michael Simotas from Jefferies. Please go ahead.

Thanks very much for taking another one. The impairment charges that you've taken through the FY26 year, how should we think about the P&L impact of those going forward through lower DNA and potentially less AA-C16 rent charge coming through finance costs and DNA as well?

We're not expecting it to be materially visible on the face of the account, and that's because of the step-up in investment we're making, which is substantially offsetting any V&A benefit we would get from those impairments.

Thank you. And if I could just speak in another one, just in terms of consumer behaviour in retail. It sort of sounds like consumers spending less per visit in hotels. Are you seeing any sort of like-for-like trading down in the retail business?

We really haven't seen that at this point, or if we've seen it, it's been masked by growth in other areas. So, yeah, it's not obvious, but that doesn't mean that, you know, we're not, you know, keeping a close eye on it.

Thank you.

Thank you. The next question is a follow-up from Tom Kirath from Baron Joey. Please go ahead.

Thanks. Just on the trading update, have you been surprised by the performance of the stores co-located with Wurst? Just given Wurst has been pretty popular, at least in my household. Have you seen different performance there in those kind of BWS stores versus some of the standalone stores?

Kate, I don't know if you want to tackle that one.

Yeah, sure. Yes, we did have a good hard look at that, but I think the answer is we can't see a material differentiation, recognising, of course, that our attached store fleet is a subset of the BWS fleet, which is, again, a subset of the total group sales number. So it's not providing any material differentiation in terms of sales momentum, that particular thing.

Okay, thanks. And just the 30% tax rate, why is it above 30%? Maybe just give some colour on that, please.

It's driven by the fixed dollar nature of the non-deductible items and most particularly the gaming entitlement amortisation in Victoria which is non-deductible for tax purposes relative to the declining earnings base.

So that should continue? Sorry, the 33% should model that out for a few years?

So it will always be above 30% for that reason but obviously the relativity to earnings is contingent on what the earnings base actually is. But yes, I would say in the near term, you can expect it to be, you know, call it around the 33% level.

OK, thanks.

Thank you. The next question is a follow-up from Peter Marks from Goldman Sachs. Please go ahead.

Hey, guys. Just on the one endeavour cost in the second half, I had you down for doing about 55 mil in FY26. I think it came in at 40 mil. What changed there? Are they just being, like, pushed to the right? and I guess a similar one, like, historically there's been more OpEx than CapEx in those one in Durvacos, but this year, well, FY27 is going to be more CapEx. Can you just help us understand what's shifting around there?

Yeah, sure. So, I mean, pleasingly, that is a real saving to the program. It's not shifting to the right. It is actually in-year reduction, so... You'll see that the amount we're spending in F27 in OpEx pretty much mirrors what we thought we would spend in F26, but as we continue to optimise the program costs, we did get a degree of benefit in F26. And the substantial step up in CapEx in F27 is because we're materially in the build and delivery phase of the ERP program, which has a higher capital component.

Okay, thanks. So the second half costs were just like half what you expected them to be?

Yes.

Okay, thanks.

Thank you. The next question is a follow-up from Richard Barwick from CLSA. Please go ahead.

Hi again. I've just got a question on, you're flagging a step up in DNA for hotels associated with new machines and the refurbs. So that's 20 mil lift in 27, but you're also obviously pursuing a lot of refurbs in 27 and a pretty similar level of investment in EGMs. So is it fair to say that DNA should step up again in 28? So they've got the yardstick of 20 mil in 27. Should we be thinking the same sort of jump in 28 as well for DNA?

I think we're probably not in a position right now to provide guidance on F28 outlook, but to the extent the investment in hotels grows, then there will be a corresponding increase in the DNA charge.

Okay, that's helpful. Thanks, Kate.

Thank you. The next question comes from Sam Tigger from Citi. Please go ahead.

Thank you. I'm just wondering what evidence is giving us confidence that returns on hotel renewals will remain as strong with the run rate increasing from 38 to up to 75? And is there anything you want to call out and share regarding constraints around labour, construction or approvals? Thanks.

Yeah, so I might start that one and then hand to Kate to add. We have now several years of experience in understanding how to think about renewals and have learned a lot in the process. As we've planned the renewals for 27, we're very confident every one of them has its own unique community dynamic and we're very confident that each one of them, the plan that is in place will drive significant uplifting trade and the levels and that's consistent with the return that will be necessary off the back end. So we're very confident that the plan in place will deliver the returns that we expect. Then with respect to construction constraints, we're not seeing anything right now that would give us any cause for concern. We have increased our own internal team and built capacity in the mix of suppliers that we're using. We've added in more discipline with respect to the procurement process that sits around that, so we're confident we're getting good value in the way that we're going to market and buying. so we're very clear that there's a big job to be done in managing this volume and we've got internal resources that have been added including Alistair Hartley who's come in to run Hotels Transformation to ensure that we are all over it and we have full intent to deliver the outcomes associated with that investment.

Thanks. Thank you. At this time we're showing no further questions. I'll hand the conference back to Jane for closing remarks.

Fabulous, thank you, and really appreciate the level of engagement on the call, so thank you to all the participants. I would just say in closing that F26, as I said at the start, is the year of multiple chapters, and we're really pleased with the underlying momentum in the retail business, and we've got a very big hit list of things to get done to continue to soak up fire, but that is the intent in F27. and in hotels, we've got a very clear game plan and I'm personally very excited to see that start to take life. We've had all the Republicans together over the course of the past two weeks and the energy coming from them with the changes that we've got planned in the way that we run our pubs is palpable and so I just, I think we're We're in the beginning of really getting our hotel business in good form. And so that's the journey ahead of us. And I'll finish by saying a massive thank you to our 30,000 strong team members. It's down to all of them that we were able to deliver the results that we did in 26 in starting to execute the strategy. And we're all really energized by the world of possibilities ahead. And every one of the 30,000 is very focused on what we need to do in 27. So I'm going to finish at that and say thank you to everybody who's joined us this morning to engage in the conversation.