The Endeavour Group Ltd (ASX: EDV) share price is under pressure on Wednesday.
In response to the drinks giant's FY 2023 results, its shares are down over 4% to $5.74.
Endeavour share price falls on results
- Group sales up 2.5% to $11.9 billion
- Earnings before interest and tax (EBIT) up 10.7% to $1,023 million
- Net profit after tax up 6.9% to $529 million
- Full-year dividend per share up 7.9% to 21.8 cents
What happened in FY 2023?
For the 12 months ended 30 June, Endeavour reported a 2.5% increase in sales to $11.9 billion. Management notes that this reflects a resilient trading performance in the face of heightened macroeconomic pressures.
Endeavour's EBIT grew 10.7% in FY 2023. This was thanks entirely to its Hotels business, which delivered a 35.9% increase in EBIT to $428 million. This offset a 1.2% decline in Retail EBIT.
Another highlight for the company was the performance of the key Dan Murphy's business which continues to report strong growth in its loyalty program. The My Dan's program grew to over 5.2 million active members, a 15.6% increase from last year, with a record scan rate of 79%.
On the very bottom line, Endeavour reported a net profit after tax of $529 million, which is up 6.9% over the prior corresponding period. This allowed the company's board to declare a fully franked final dividend of 7.5 cents per share, which brought its full-year dividend to 21.8 cents per share. This is an increase of 7.9% year on year and represents a payout ratio of 73.9%.
How does this compare to expectations?
According to a note out of Goldman Sachs, its analysts were expecting sales of $11,886 million, EBIT of $1,005 million, and net profit after tax of $524 million.
As you can see above, this means that Endeavour has actually beaten all three metrics.
Judging by the Endeavour share price performance today, it seems that some investors were expecting more than Goldman.
Management commentary
Endeavour's managing director and CEO, Steve Donohue, was pleased with the company's performance. He said:
In F23 Endeavour Group has delivered a strong financial result underpinned by the strength of our Retail brands, portfolio of hotels and team capabilities. Both the Retail and Hotels segments have demonstrated stability as Australians continue to come together to enjoy social occasions that represent great value. Group sales grew 2.5% for the year to $11.9 billion, with Group EBIT increasing by 10.7% to $1,023 million.
Donohue also revealed that the company has been working hard on cost management. He adds:
Disciplined cost management has remained a key focus throughout the year, enabling us to effectively address economy-wide inflationary pressures. In F23 we broadened the scope of our group optimisation initiatives with the establishment of endeavourGO to deliver sustainable cost out initiatives for each of our businesses. A key initiative of endeavourGO, activity-based rostering is embedded in Dan Murphy's and will be rolled out across BWS and Hotels in F24. Our goal is to optimise our team's efforts and give them more time to engage with our customers. Through this and other initiatives, we have taken $90 million of costs out across the Group since Demerger, including $60 million in F23. Over the next three years we're targeting a further $200 million in savings.
Outlook
No guidance has been given for the year ahead. However, management advised that Retail sales growth has continued in the first six weeks of FY 2024 trading with an uplift of 2.5%. It also adds:
We are pleased with the positive trading momentum in the first six weeks of F24, which continues to be led by Food and Bars with customer demand remaining stable. Our hotels remain well positioned as an affordable destination for social occasions.
