Endeavour (ASX:EDV) share price down 2% after maiden FY21 results announcement

Endeavour just dropped its first ever financial result following its Woolworths demerger.

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The Endeavour Group Ltd (ASX: EDV) share price has opened lower on Thursday after the company released its maiden FY21 results as an independent listed business.

At the time of writing, shares in the retail drinks and hospitality business are down 2.5% to $7.03.

Endeavour share price lower on volatile earnings

The Endeavour share price is off to a wobbly start on Wednesday despite a solid FY21 performance. Some key highlights include:

  • Group sales up 9.3% to $11,595 million
  • Group earnings before interest and tax (EBIT) lifting 22.1% to $899 million
  • Group net profit after tax of $445 million
  • Final dividend of 7 cents per share

What happened to Endeavour in FY21?

The Endeavour share price made its ASX debut on 24 June following its demerger from Woolworths Group Ltd (ASX: WOW). The company's shares closed at $6.02 on its first day.

Endeavour delivered a solid 9.3% increase in group sales to $11.6 billion, with both retail and hotel segments delivering higher sales than the prior corresponding period.

Endeavour believes its BWS and Dan Murphy's businesses are well-positioned in the market with customer engagement metrics improving again in FY21.

Retail sales increased 9.6% to $10,178 million while EBIT grew 17.6% underpinned by a shift to in-home consumption as a result of COVID-19. The company said that the closure of on-premise venues which began in March 2020 has "increased retail demand which remained elevated across the first half of FY21". While in the second half of FY21, "on-premise restrictions eased and retail trading began to normalise".

Endeavour continued to invest in its digital capabilities during the year, improving the customer experience for its website and apps. The company believes this created a strong foundation to drive online sales, which increased 24.7% in FY21. Online sales now account for 8.4% of total retail sales compared to 6.9% a year ago.

Endeavour's hotel business continues to face challenging conditions due to COVID-related restrictions and associated costs. Despite these challenges, sales increased 7.3% to $1.4 billion while EBIT grew 49.1% to $261 million.

The positive outcome was mainly due to the cycling of hotel closures in FY20.

In the past, once restrictions were lifted in each market, the company said that strong trading conditions quickly resumed as customers returned to hotels. Unfortunately, the resurgence of COVID-19 cases towards the end of FY21 has brought back lockdowns and restrictions, again impacting operations.

Management commentary

Looking ahead, Endeavour managing director and CEO Steve Donohue said:

The strength of this year's result has demonstrated the resilience of our business model and the commitment of our team to living our purpose and values and delivering for their customers and communities. We are excited that we are entering the new year with a robust balance sheet and a significant number of opportunities to create value, including growing our digital engagement, expanding and enhancing our network and optimising our business through a focus on profitability and capital management

What's next for Endeavour?

Endeavour advised that its performance so far in FY22 continued to experience significant volatility due to COVID-19 outbreaks.

In the first eight weeks, retail sales were "tracking well" and cycling through trading highs of 1Q21. Retail sales were down 1.7% compared to FY21, but up 21.5% compared to FY20.

Its hotels business was off to a "very challenging start". The company advised that as at 24th August, 41% of its hotels were closed due to public health orders. Hotels sales in the first eight weeks of FY22 are down 7.3% against the prior corresponding period and down 36.2% compared to FY20.

The volatility in the first eight weeks of sales could be a drag on the Endeavour share price in today's trading session.

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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