Crack a bottle! Endeavour (ASX:EDV) share price jumps 11% on profit lift

Shareholders are raising a glass to Endeavour Group’s latest results.

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Key points

  • The Endeavour Group share price is up 11% on Monday following its half-year results
  • A significant improvement in earnings is attracting the attention of investors
  • The company remains impacted by COVID-19, demonstrated by its hotel sales being down ~25% from pre-COVID levels

The Endeavour Group Ltd (ASX: EDV) share price is in celebration mode on Monday.

At the time of writing, shares in the drinks and hotel network operator are up 11% to $7.23.

Endeavour share price pops amid maiden listed results

  • Group sales relatively flat on prior corresponding period, down 0.3% to $6.3 billion
  • Earnings before interest and tax increased 3.2% to $556 million
  • Group net profit after tax (NPAT) grew 15.6% to $311 million
  • Online sales reached $603 million, reflecting an increase of 24.8%
  • Earnings per share (EPS) up 16% to 17.4 cents per share
  • Fully-franked interim dividend of 12.5 cents per share

What happened during the first half?

Today is a milestone for Endeavour Group, its first full financial reporting period since listing on the ASX. Making it an even more exciting moment is the positive reaction to its half-year results.

After months of trading without a price-sensitive announcement, investors are responding positively to the information disclosed today.

Despite cycling against strong comparables and pushing through a challenging period with Omicron, Endeavour’s sales slipped a minimal 0.6% to $5.7 billion across the retail division. Boding well for the Endeavour share price, earnings improved amid premiumisation and a reduction in promotional spend.

Additionally, the company’s hotel operations remained impacted by COVID-19 measures. Compared to H1 FY20 (2019), sales were down 26%. However, sales lifted 1.9% to $680 million compared to the previous corresponding period.

What did management say?

Endeavour Group managing director and CEO Steve Donohue commented on the result:

Our first 6 months trading as an independent business has demonstrated the structural resilience of the Group. We maintained Group Sales in line with last year, and improved our profitability significantly. This is a positive result during a period which was heavily impacted by COVID-19. These financial outcomes have been delivered through the hard work and dedication of our team who have responded diligently and flexibly to many COVID-19 related challenges.

Regarding the impacts on the hotel segment, Donohue said:

Our Hotels business was particularly hard hit in H1 F22. There were multiple and extensive COVID-19 impacts in the first quarter, including lockdowns in the key markets of Victoria and New South Wales. We have however, continued to invest in our Hotels, retained core team members, deployed new digital services and created COVIDSafe environments; all of which enabled the business to rebound strongly during periods when COVID-19 impacts abated.

What’s next?

Looking ahead, Endeavour has warned that the first six weeks of trading in the second half is tracking behind FY21. Hotels operations are trending 2.9% below last year’s sales, while retail is 2% behind the comparable period. Despite these figures, concern doesn’t appear to be impacting the Endeavour share price today.

Furthermore, the company is wary of potential headwinds including input cost inflation, interest rate increases, and increased competitiveness.

Finally, shareholders can expect to receive their 12.5 cents per share dividend on 28 March. Importantly, shares will go ex-dividend from 1 March.

Endeavour share price snapshot

The Endeavour share price has managed to navigate a difficult environment to provide market-beating returns in the last year. For context, the S&P/ASX 200 Index (ASX: XJO) is up 5.9% in the past 12 months. Meanwhile, the Aussie drinks retailer is up 8.1%.

Based on the current share price, Endeavour Group is trading on a price-to-earnings (P/E) ratio of 26 times.

Motley Fool contributor Mitchell Lawler 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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