High-powered shareholders including former Woolworths chief executive Roger Corbett, former Myer Chairman Bill Wavish and billionaire Bruce Mathieson Snr have taken public aim at Endeavour Group and its board.
Wavish has announced he wishes to join the Endeavour Group board and believes he can contribute towards “turning it around” as a director.
Wavish was finance director at Woolworths when it bought Dan Murphy’s in 1998. During his time with Woolworths the bottle shop chain grew from six stores in Victoria to become an Australian liquor giant. He organised the formation of BWS and led the acquisition of Mathieson’s hotels business.
Wavish bought about 90,000 Endeavour Group shares three months ago.
“It is appalling what has happened to parts of that business and the amount of money they have blown away,” Wavish told The Australian.
“I have a particular place in my heart for Dan Murphy’s and there is so much value destruction going on.”
Group sales for Endeavour grew 2.5% in FY23 to $11.9 billion, with Group EBIT increasing by 10.7% to $1,023 million.
Endeavour Group shares have fallen 16% in the year to date and 24% over the past 12 months. They went down 0.47% to $5.275 in lunchtime trading yesterday amid the drama.
Why Mathieson is backing Wavish
Mathieson Snr believes Wavish would be a “wonderful addition” to the board. Mathieson’s family owns 15% of Endeavour Group, he is a former director and his son Bruce Mathieson Jr is a current Endeavour Group director.
“We need people on that board who can turn the company around from just bad management,” Mathieson Snr said.
“And that’s what’s happened. We’ve lost about $4.5 billion in capitalisation under this management in the last two years.”
The Mathieson family’s stake in Endeavour Group has lost $268 million in value since the start of the year.
“Endeavour is very, very poorly run under the guidance of [chairman] Peter Hearl and [CEO] Steve Donohue [above], and the figures prove it, don’t they? We are not going ahead, we are going backwards and in the industry hotels aren’t dropping off in value, and it has performed very poorly under this management,” Mathieson said.
Why Corbett is backing Wavish
Corbett is also backing Wavish, who he describes as the best finance guy he’s ever worked with.
He told the Australian Financial Review: “I’m a shareholder in Endeavour, so I do not like to see my share holdings go down from $8 to $5. It has gone down because they’ve lost the mojo … You only gotta go into them, and you wouldn’t know what they stood for today.”
“It’s confused, and that’s why it’s not doing well. My expertise is really in the Dan Murphy and BWS chains, and I’ve got to say that I think they’re just a disgrace.
“Loss of market share, expenses out of control indicate that the board needs to have a really fundamental look at itself. If the board is protecting the management, then that’s not a good situation.”
Pandemic cycling and cost-of-living pressures
Endeavour Group’s operations were significantly disrupted by COVID-19 lockdowns of its pubs.
While the company’s annual results missed analyst expectations, CEO Steve Donohue noted last month that the “result reflected the cycling of the elevated pandemic performance” in Dan Murphy’s and BWS.
“The H1 result reflected the cycling of the elevated pandemic performance, registering a 3.7% sales decline,” Donohue said. “H2 saw a return to growth with a 0.7% increase in sales. Over the last four years, our retail business has achieved a compounded annual growth rate (CAGR) of 4%.”
The pandemic saw huge sales in bottle shops due to lockdowns closing the on-premise. Australian Bureau of Statistics data shows that between January 2019 to the end of 2021, alcohol sales online and in bottle shops jumped by 29 per cent, which equates to a $3.6 billion increase.
Of the $3.6 billion, $2.1 billion was sold in December 2021 alone. The 2021 alcohol sales exceeded retail turnover for 2020 by more than $300 million.
IWSR reports that it is clear that the strains on household finances are starting to affect many consumers.
Consumers are cutting back on their alcohol expenditure as their spend on necessities like meat, fish, poultry, and cleaning products increases. IWSR said trend is most pronounced in the UK, where inflation has been rising at double-digit rates, but is also notable in Germany and Australia.
“To allay the impact of the cost-of-living crisis, beverage alcohol consumers are becoming more selective in how and when they spend on alcohol,” said Richard Halstead, COO Consumer Insights, IWSR Drinks Market Analysis.
In most markets, IWSR found that between a third and 40% of consumers say they will wait for their favourite brand to be discounted before buying.
Too late for Wavish?
However, Wavish may have left his run too late. The board of Endeavour Group has decided it will not allow its shareholders to vote on his election as a director at the upcoming AGM on October 31 unless he has received approval from state regulators and clear probity checks.
The board can only appoint directors after regulatory approvals have been gained, and this process can take as long as six months.
It also said it hasn’t had enough time to assess his application because it was received on the last day possible on 28 August.
“I wish that the same effort was going into fixing the company rather than keeping me out,” Wavish told Chanticleer.