Endeavour Group’s full-year profit tumbles on hefty writedowns linked to turnaround strategy

Dan Murphy’s owner Endeavour Group has booked a big fall in full-year profit on the back of hefty writedowns associated with Jayne Hrdlicka’s strategy to turn around the ailing business.

Endeavour, which also owns the BWS liquor store chain and hundreds of hotels across the country, on Wednesday reported a preliminary and unaudited net profit of $363 million for the 12 months to June 28. That was down from the previous year’s $426m.

Group sales for the period rose only 1.3 per cent to $12.2 billion as it wages a pricing war with competitors and invests in lower prices to lure more shoppers to Dan Murphy’s.

Revenue from Endeavour’s liquor stores grew less than one per cent, with weak sales offset by a 4.2 per cent rise from its hotels business.

The profit result was weighed down by significant, mostly non-cash items totalling $372m such as the carrying value of assets, along with costs associated with the implementation of the group’s strategy review.

Those $58m in expenses covered the costs of establishing a centralised business services function, including outsourcing of back-office functions, along with support team restructuring costs.

The biggest blow came from portfolio rationalisation and asset impairments that resulted in a non-cash charge of $194m.

Ms Hrdlicka in May flagged a major shake-up of the group’s premium wine portfolio, announcing plans to sell most of Endeavour’s vineyard portfolio — including high-profile assets Chapel Hill and Oakridge — as part of a three-year cost-reduction program that is targeting $300 million in savings.

“After a comprehensive review of our portfolio, we have reassessed the carrying value of some of our assets including legacy technology systems, wineries and vineyards and a small number of retail stores and Hotels,” she said on Wednesday.

“Following the reset of our asset base and simplification of our portfolio we are now well placed to focus our capital and resources on maximising the value of our core businesses through our multi-year business transformation strategy.”

Endeavour’s full-year results will be released on August 24.