Drinks giant Endeavour cheers profits as Australians flock to pubs, pokies
By Jessica Yun and Amelia McGuire
Australians’ appetite for a pub feed or a slap on the pokies has not been dampened by rising interest rates or inflation, pushing up the profits of Australia’s biggest hotels and poker machines operator. But don’t expect its double-digit growth rate to continue.
Endeavour Group chief executive Steve Donohue said people have flocked back to bars and bistros after the pandemic. Massive sporting events, such as the FIFA Women’s World Cup, have been “changing pubs up” and helped boost sales at the company’s hotels by 31 per cent.
Endeavour Group boss Steve Donohue says the return of live entertainment boosted the group.
“Bars and food are really pumping along,” he said. “People are just loving the fact they can get back together in pubs.” But he warned the company’s hotels would “absolutely not” be able to replicate that rate of growth, which came in the recovery from COVID lockdowns.
“Remember, that 31 per cent is cycling over a period of time when pubs were closed, in large part,” he said.
Donohue made his comments after Endeavour, which also owns the Dan Murphy’s and BWS bottle shop chains, notched a 6.9 per cent uptick in net profit to $529 million, short of analyst expectations of $543 million. Group sales rose 2.5 per cent to $11.9 billion, while earnings before interest and tax jumped by 10.7 per cent to $1 billion.
The company has declared a full-year dividend of 21.8¢, a 7.9 per cent increase on the year prior. Investors did not seem impressed with the numbers, sending its share price 4.2 per cent lower.
The $10.7 billion company’s hotels division was the main growth driver. Sales jumped 31 per cent to $2 billion and earnings rose 35.9 per cent to $428 million. Endeavour’s ALH Hotels business operates more than 350 venues.
Although it operates more than 12,500 poker machines across its 300 hotels, the company does not break down its earnings from gambling, rolling it instead into its hotels figures. Analysts estimate at least one-quarter of its overall revenue is generated by its gaming machines.
Donohue said the first half of the 2023 financial year was driven by a gaming recovery, but would not give further details on the group’s pokies earnings.
Gambling has been an iron-hot focus for consumers and politicians in the past two years. Governments at every level have tried to find ways to minimise harm across the industry without jeopardising the lucrative taxes from gaming profits.
Sales for Endeavour’s retail arm slid 1.8 per cent to $9.9 billion.Credit: Nick Moir
Donohue has been vocal about the need for state and territory governments to work more closely when considering policies to fight problem gambling. Last month, Endeavour committed to implement early reforms in Victoria, which would force gamblers to set binding limits on daily poker machine losses, and wrote to state and territory leaders in the hope of attaining a more co-ordinated and collaborative approach on reform.
The group will have to pay $310 million across 10 years in gaming entitlements after the Victorian government last month announced the strict new rules to stem punters’ losses from poker machines. Endeavour made a $42 million payment in the 2023 financial year and will pay about $56 million annually from the 2024 financial year for five years.
The flipside of people flocking back to the pub was that they drank less at home than during the lockdown-affected prior year. Sales of Endeavour’s Dan Murphy’s, BWS and Pinnacle Drinks bottle shops slid 1.8 per cent to $9.9 billion. The group opened eight new Dan Murphy’s stores and 18 new BWS stores last financial year.
The pubs and drinks operator is in the middle of a cost management program that it says will save the business $290 million.
While Australians contend with a squeeze on their household budgets from 12 interest rate rises, consumer demand is expected to remain resilient, Donohue said.
“Our offering of affordable and accessible experiences, leading value and convenience and the widest range of products continues to resonate, putting our brands at the heart of Australia’s social moments,” he said.
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