Mr Fenton said the ESG concerns were a major reason that Woolworths had pursued a demerger. “There’s some investors who aren’t going to invest in companies with alcohol and gaming”.
He cited the increasing spotlight by regulators and the community on casino companies over problem gambling, much of it centred on poker machine players. The pressure on hotel operators with large numbers of poker machines would be similarly intense.
The 360,000 Woolworths shareholders all received one Endeavour Group share for every Woolworths share they owned in the demerger. If a shareholder owned 600 Woolworths shares before the demerger they will now have 600 Endeavour Group shares, and still have the original 600 Woolworths shares.
Endeavour operates 250 Dan Murphy’s liquor stores, most of them big barn superstores, and 1392 stores under the BWS banner. Endeavour also has a portfolio of 293 hotels, with 12,364 poker machines and about 290 TABs and KENO outlets.
Woolworths was also heavily criticised for its push to open a Dan Murphy’s store in Darwin near vulnerable Aboriginal communities. The plan was abandoned after a backlash.
COVID-19 restrictions in Sydney meant Endeavour Group was forced to abandon a planned ASX listing ceremony that was to have been held at the Exchange Centre in the Sydney CBD to mark the milestone, instead rapidly switching to a “virtual” listing function where the group’s 28,000 workers could view online.
Endeavour Group managing director Steve Donohue told the staff on Thursday “we can all feel super confident” about a bright future ahead.
He also made reference to how the pandemic had caused a delay in the overall plans to de-merge the business after it was first proposed in July 2019 but was postponed when venues had to close temporarily because of the pandemic.
Jarden analyst Ben Gilbert in the lead-up to the listing said ESG issues might result in Endeavour trading at a discount to the Woolworths supermarkets business even though as a stand-alone entity Endeavour would probably be more targeted in its capital spending on “higher returning areas such as gaming and new venues”.
Demerged companies typically outperformed the market over a 12 month period and there were multiple factors that supported a positive mid-term outlook, including the potential to acquire hotel and pubs businesses, unlock synergies and add to the scale of the overall business.
Woolworths will have a 14.6 per cent stake in Endeavour Group and in the short term wants to retain the holding. But it has the option of eventually selling down over time. Pubs baron Bruce Mathieson will also hold a 14.6 per cent stake, and is on the board of Endeavour.
Mr Donohue began his career in retailing in 1994 at one of the early Dan Murphy’s outlets in the inner suburb of Alphington in Melbourne, and said he understood some investors would not consider the stock because of ESG issues.
He said there was a strong appetite for growth in all parts of the business, with Dan Murphy’s and BWS having room for more bricks and mortar stores, while online channels were also set to grow.
He expected the sharp rise in online sales at Dan Murphy’s during the pandemic to keep accelerating after the structural shift to more at-home consumption.
But there were still gaps in the bricks and mortar network for both big liquor chains. “There is certainly opportunity for retail expansion,” he said.
The online buying patterns of customers in liquor retailing are closely tracked and used to provide guidance about where the best locations are for new bricks and mortar stores.
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