Endeavour Group Limited (EDV) Earnings Call Transcript & Summary

Well, good morning, everyone, and welcome to everyone here in the room and also those that are joining us online. Thank you for attending our 2026 AGM today. My name is Tim Poole, and I'm the Chair of the Board of Endeavour. Before we commence today, I'd like to begin by acknowledging the traditional custodians of the land on which we meet today, the Gadigal people of the Eora Nation. I pay my respects to their elders past, present and emerging. Across Endeavour Group, our footprint spans many communities, and we acknowledge the traditional custodians of all the lands on which our venues, stores and wineries are located. As a company, we remain committed to our reconciliation journey. I also extend this acknowledgment to all First Nations people joining us today here and online. As we have a quorum, I declare the 2026 Annual General Meeting open. For those who cannot be with us here in person, we are pleased that technology allows us to connect with you through a live webcast as well as the online platform. If you have issues during the meeting, please call MUFG on 1 (800) 990-363. This number is also in the virtual meeting online guide. Before introducing my colleagues, I'll outline the procedures for today's meeting. Only shareholders, proxy holders and corporate representatives may speak and vote during the meeting. All others are welcome as observers. Shareholders have submitted some questions prior to the meeting, and we aim to include answers to most of those questions during our speeches. I'll introduce each item of business separately and then invite questions. If you are in the room and you wish to ask a question, please move to the aisle to a microphone attendant who will introduce you. Instructions to participate in today's meeting via the online platform, including how to vote and ask questions are in the online meeting guide available on our website. For specific questions relating to your experience as an Endeavour customer, please speak to one of our customer service representatives at the desk located in the foyer. Now following discussion on each item of business, valid direct and proxy votes will be displayed on the screen. I will then ask you to vote on the item. You can vote at any time once the poll is open. Shareholders, proxy holders and corporate representatives can vote by marking for, against or abstain on the voting card you were handed upon registration or through the online portal. For those in the room, yellow cards are for shareholders and proxy holders who may speak and vote. Blue cards are for shareholders who may speak but not vote. All other attendees with a red visitor card or a green media card are welcome but may not address the meeting or otherwise participate. As Chair, I intend to vote all available undirected proxies in favor of items 2, 3, 4 and 5. The voting exclusions for items 3 and 4 are set out in the Notice of Meeting. Voting on the resolutions will be conducted by way of a poll, which I now declare open. The poll will close 10 minutes following the meeting's completion. Please place your voting card in the poll box as you leave the room or if you are voting online, click the submit vote button to lodge your votes. As the results of the poll will not be available before the meeting closes, they will be released on the ASX later today and also on our website. I would now like to introduce your Board and the Company Secretary. From my left, your right is Peter Hardy. Next to Peter is Duncan Makeig. Next to Duncan is Penny Winn, who's also Chair of our People Committee. Next to Penny is Mike Ihlein, Chair of our Audit, Risk and Compliance Committee. Next to Mike is [ Claire Hannon ], our recently appointed Company Secretary. And next to [ Claire ] is Jayne Hrdlicka, our Chief Executive Officer. Joe Pollard and Rod van Onselen are unfortunately unable to be with us today. Also seated in the front row is Owen Wilson, who will join the Board once regulatory approvals are received. Additionally, members of our management team are also present today. They will be available to speak to you after the meeting along with the directors. [ Jacques Striden ] from Deloitte, our auditor, is available to respond to any specific questions you may have on the auditor's report or the conduct of the audit. A notice of meeting has been distributed, and I will take it as read. The agenda for today's meeting is as follows: Firstly, I will address the meeting, then our CEO, Jayne Hrdlicka, will speak. And after Jayne's address, we will proceed with the formal items of business as set out in the Notice of Meeting. So moving on to Item 1, which is my Chair's address. I joined the Endeavour Group Board because I believe in the company's long-term potential. We have unique assets and brands, including a leading retail portfolio and an unparalleled Hotels network. While Endeavour has clear strengths, we recognize that the company has not met the performance expected since listing on the ASX just over 5 years ago. Working closely with our Managing Director and CEO, Jayne Hrdlicka, and the new executive leadership team, the Board undertook a comprehensive strategic business review during the 2026 financial year. This included a thorough assessment of the group's historical performance, key business drivers, competitive environment and opportunities to improve execution, capital allocation and financial performance across the business. From this, we developed a strategy centered on our customers based on robust customer data and insights. While there is still considerable work ahead, the Board believes the right foundations are now in place. We have a clear strategy, a renewed and experienced leadership team and detailed plans to improve our operational and financial performance. We are closely monitoring progress and are confident we can deliver against our strategic plans and improve shareholder returns over the medium term. Turning to the group's financial and operational performance. During the 2026 financial year, the group generated sales of $12.2 billion, which was 1.3% up on last year. Group underlying EBIT decreased 8.7% to $845 million, and group underlying profit for the year after income tax decreased 14.8% to $363 million, reflecting in part our investment in price leadership in our retail business. Both excluded the impact of significant items relating to the strategic review and group-wide cost reduction program. In retail, during the 2026 financial year, sales increased by 0.7% to $10 billion. Sales to Dan Murphy's and BWS increased by 1% to $9.8 billion with comparable sales -- store sales growth of 0.5%. Sales momentum strengthened during the 2026 financial year as customers responded to our renewed focus on value and price leadership. In Hotels, during the 2026 financial year, sales increased by 4.2% to $2.2 billion with comparable sales growing by around 4.4%. During the 2027 financial year, it will be a year of significant transformation in hotels as we simplify the way we operate, deliver targeted investment in renewals and improve guest experience. Group operating cash flow remained robust at $933 million, enabling the Board to approve a total dividend for the year of $0.12 per share fully franked. Also during the 2026 financial year, the group revised its targeted dividend payout ratio to between 50% and 75% of group underlying net profit after tax. This is to ensure we maintain appropriate funding flexibility to execute our strategy and prioritize growth investment. Jayne will provide more details on our progress against our strategic priorities and our first quarter 2027 financial year trading update in her CEO address in a few moments. Turning to Board renewal. I'd like to thank Duncan for his leadership as Interim Chairman and for his continued service on our Board. We also continued our Board renewal during the year with the appointment of Mike Ihlein as a Non-Executive Director and Chairman of our Audit, Risk and Compliance Committee. Mike brings extensive financial, operational and governance experience from both senior executive and Board roles in Australia and internationally. We are fortunate to have Mike join the Board, and we are already benefiting from his insights and experience, and you'll hear from Mike a bit later in the meeting. As noted earlier, we've also recently announced that Owen Wilson will join the Board as a Non-Executive Director once regulatory approvals have been received. Owen has led successful customer and digital-focused strategies across a range of industries and will bring valuable skills and experience to Endeavour as we progress our strategic transformation. Rod van Onselen and Joe Pollard will retire at the conclusion of today's meeting. We sincerely thank Joe and Rod for their valuable contributions to Endeavour. Board renewal remains a priority, and the search for an additional director is progressing. Finally, I'd like to thank the Endeavour team. They have navigated a year of significant change while continuing to support our customers, guests and communities with professionalism and commitment. On behalf of the Board, I'd like to thank you as shareholders for your continued support. We look forward to updating you on our progress during the coming year. I'll now invite Jayne to address the meeting.

Thank you, Tim, and good morning, everyone. I'd also like to acknowledge the traditional owners of the land on which we meet today and pay my respects to their elders, past, present and emerging. I'm pleased to be here for my very first Endeavour AGM. And let me start by saying and echoing really what Tim indicated, which is that the strategic assets in our business are exceptional. Iconic retail brands that are backed by unique and very high-quality physical assets, the underinvested hotels portfolio, which has a huge amount of potential embedded in it, over 30,000 passionate people who are keen to do an exceptional job on your behalf and more than 16 million customers. This unique combination of assets from my standpoint, presents a very unique opportunity. Since joining Endeavour, I've spent a lot of time out in the field listening to our teams and our customers, visiting stores and hotels, engaging with our partners and reviewing every part of the business. That work has reinforced my confidence in our very significant potential. The added benefit of doing this sort of work is that it gives us the fact base to be super clear about what needs to get done and the way in which it needs to get done and to develop a very detailed plan to execute against that. Joining Endeavour has been something of a full circle moment for me. Early in my career, I spent time as a consultant to Woolworths, working with the liquor team on how to grow the liquor business. Later, I was on the Woolworths Group Board, and I stand before you today as the CEO of Endeavour. The Endeavour business has grown dramatically during that period, which is very impressive and a huge asset for us today. But we are far from a high-performing business, and there is significant untapped potential across every single corner of the portfolio. Releasing this potential is going to be a combination of things, but it ultimately boils down to taking cost out of the business and growing revenue, and there is opportunity for both in abundance. While there's significant work to do to reset the foundations and unlock the potential, we have talented people across both our retails and our hotels teams who care deeply about our customers, care deeply about our brands and are hungry to succeed. To support them, we strengthened our leadership team, bringing fresh perspective and extensive experience from top-tier consumer brands. Together, we're building a more focused organization with the skills, clarity, discipline and passion to deliver against our potential. In May this year, we outlined our strategy to shareholders. It's a strategy designed to strengthen the business and position Endeavour for its next phase of growth. Our strategy is based on deep customer insights and is built around 3 priorities. The first, we're strengthening our retail business by reinforcing Dan Murphy's leadership in value and sharpening the distinct roles of Dan Murphy's and BWS to better meet the needs of their unique customers. We're also resetting our focus on excellence in retail fundamentals and see very significant value in getting that right. Second, we're unlocking the full potential of our hotels business by simplifying the operating model and increasing the investment needed to fix the basics, improve performance and enhance the guest experience. We're focused on executing this very significant transformation as quickly as we possibly can without compromising on doing it well. Third, and perhaps importantly for both of the previous priorities, we're simplifying the way we work. By reducing complexity and optimizing the trapped and releasing trapped value in our asset base, finding ways to reduce costs, we will create greater capacity to invest where it delivers the strongest long-term returns. These priorities have already led to important decisions, including our $300 million cost reduction program, the repositioning of our retail brands, increased investment in hotels, optimization of the Pinnacle Drinks portfolio and a revised dividend policy. And this is just the beginning of the list. These priorities have already led to outcomes that you can start to see in the performance of our retail business. We've been very clear that F '27 is a significant year for investment and transformation as we build the platform for continued growth in the business. Together, these initiatives provide a clear road map to build a stronger, simpler and vastly more competitive endeavor. Now if we turn to our trading update and outlook. We're well into F '27. And for the first quarter, sales growth in our retail business continues, delivering sales of $2.58 billion, which is an increase of 3%. Sales growth in our retail business has continued to outpace the overall liquor market as we reinvested in our best-in-market everyday low pricing in Dan Murphy's. We improved the value on offer in BWS and ensured that both Dan Murphy's and BWS customers will always find exceptional value. Nobody beats Dan Murphy's on price. And if you are looking for convenience with a twist at great value, nobody delivers better or faster than BWS. In Hotels, sales of $603 million were up 1.9% versus quarter -- the first quarter in F '26. In line with first 7 weeks of F '27, softer trading has continued as cost of living pressure, which includes the increased cost of fuel, impacted discretionary spending. Gaming activity has moderated in line with market trends with gaming revenue in Q1 flat versus the prior corresponding period. During the quarter, we continued to accelerate our investment in renewals with 34 additional venues expected to be upgraded by the end of the first half. Looking ahead, we expect customers to continue to manage their spending carefully and prioritize value for money in their purchasing behavior, and we are ready for that. The second quarter remains a key trading period for the Endeavour Group with marquee events, which include the Spring Carnival, Christmas festivities, New Year's and of course, the extended school holiday period. We have comprehensive plans in place to ensure we are the destination of choice for customers and guests during this period and to ensure we capitalize on the commercial opportunity of this most important season. There's a lot of anticipation building in the business as our teams look forward to serving the community distinctly well with passion, flare and fun to bring joy during the holiday season. In closing, we have a clear strategy, leading brands, talented people and a business with significant untapped potential. Our focus is now on execution, delivering against our priorities, investing with discipline and continuing to simplify the business. I want to thank our 30,000-plus team for their commitment and resilience throughout the year. It has not been an easy year. Their passion for our customers, our brands and excellence gives me confidence in what we can achieve together. It's a privilege to lead Endeavour at this really important time. And I'd also like to thank all of you for your patience and support as both our customer and our shareholder. Thank you.

Thank you, Jayne. We will now move to the first formal item of business, which is to discuss the financial report, the directors' report, the sustainability report and the auditor's report for the year ended 28th of June 2026. While there is no resolution for this item, it is an opportunity for shareholders to ask general questions. This is the time for questions on the reports, the management and operations of Endeavour generally and also the conduct of the audit. Prior to taking questions, I'll respond to some questions and comments raised by shareholders ahead of the meeting. Several shareholders ask questions relating to Endeavour's performance and share price and the time frames for meaningful improvement. Our response is this. We acknowledge it has been another challenging year for Endeavour shareholders. The Board also shares your frustration and disappointment that since listing on the ASX just over 5 years ago, Endeavour's financial performance and share price has not met expectations. As Jayne and I talked about, to address the underperformance, during the 2026 financial year, the Board and management undertook a comprehensive strategic business review. As we also mentioned, while there is still considerable work ahead, we believe the right foundations are now in place. In her address, Jayne spoke to the clear strategy, experienced leadership team and the progress being made on the detailed plans to improve our operational and financial performance. We have a program in place aiming to reduce costs by $300 million over 3 years, including $100 million during the 2027 financial year. We also are seeing immediate but gradual improvements through reducing operational complexity in both retail and hotels. We cannot commit to a time frame, but we believe the steps we are taking now to improve how we operate and the additional investment we are making in the business will unlock untapped potential and deliver long-term value for shareholders. Several shareholders also ask why the 2026 financial year dividend is so much lower than the total dividend paid in the prior year. And our response to that question is, during the 2026 financial year, and after careful consideration, the Board revised its targeted dividend payout ratio to between 50% and 75% of the group underlying net profit after tax. This is to ensure we maintain appropriate funding flexibility to execute our strategy and prioritize growth investment. The Board then made the decision to reduce the total dividend payout ratio in the '26 financial year to 59% compared to 79% in the prior year. Several factors were considered, including the group's leverage and expected future capital expenditure. I now invite you to ask a question or make a comment relevant to this item of business. For those in the room, and we'll start with those in the room, if you have a comment or question, please move to the closest microphone and show your yellow or blue card to the microphone attendant, who will introduce you to the meeting. I also invite shareholders and proxy holders to submit online questions. But can we first ask and see whether there are any questions in the room.

Chair, I'd just like to introduce shareholder, David Kingston.

Good. Thank you. A little bit unusual standing on the steps, Chair. I'm looking up to you. But that's fine. I appreciate this venue is saving some costs relative to the CBD venues. Look, welcome to Jayne Hrdlicka here. Everyone is excited about the potential that you can make a change. Clearly, Endeavour has been a very disappointing company, as you've said, Chair. I did make a number of comments last year, and I was a little bit negative, but unfortunately, I was right. Endeavour shares are down another 10% in the past year. The group underlying EBIT continues to decline, which is a concern. '24, it was $1.055 billion, '25, it was $926 -- sorry, '25, it was $926 million and '26, it was $845 million. So there's a consistent downward trend. So I think Jayne has some challenges. I did say last year that the forecast by previous management of long-term shareholder value growth of 10% plus per year from '26 was a fan hope. And again, it looks some way off. I think that forecast has been withdrawn. Look, I think it's also interesting to note that retail continues to go down. It's a weak division. It's got structural headwinds. Hotels are solid, and they're going up, but they're starting to flat line. Interestingly, Chair, the underlying EBIT contribution from both is almost identical now whereas in previous years, retail was far larger. So retail $464 million, hotels $462 million. Look, it's a new era. If anyone can turn Endeavour around, which has been very disappointing, $8 peak down to $3.20. It's Jayne Hrdlicka. Fresh out of an outstanding virgin turnaround, well done, brilliant. Your message in the annual report is headed Endeavour is a unique and exciting platform for growth. I partly agree with that. The retail footprint is amazingly strong. You've got a huge market share. I won't use dominant, otherwise, the ACCC may not like that. But you've got a brilliant market share, but it's a really tough sector. Pubs, which I know well, definitely the 350-odd pubs are an outstanding portfolio. But concerningly, there's a lot of rent to pay on that, a fair bit to David Harrison at Charter Hall. And it's one thing to rent your liquor stores where the rent is maybe 10% of turnover. The rent on pubs is huge. It chews up a lot of the turnover, and that's a concern, particularly as those rents are going to be going up 3% or 4% each year. But good luck to Jayne. Personally, I doubt there will be much earnings growth at all in '27. It's a flat environment. I appreciate the honesty that pubs are flat, only up a bit in the year-to-date, but your costs are up a lot more than that. And when you say that retail is up 3% revenue-wise, again, your costs are going up, and that's Inflation is 4%. So if the revenue is only up 3%, that's disappointing. A couple of comments, and then I'll have a couple of questions. But for '26, as expected, very weak retail, EBIT down 17% underlying EBIT. And as expected, the better division, hotels are up 4%. It's great that some of the crazy investments in wineries have been exited. That was ludicrous when this company bought wineries. Where to lose money is boats, race sources and wineries, and divorce as well. Look, if we look at retail, ongoing headwinds for retail. Every age group is drinking less alcohol. It doesn't matter it's young kids or older people. We're all drinking less. And consumption per capita is continuing to fall. Terrific that Jayne is pulling out a lot of costs, but it's very hard to shrink to greatness. So clearly, you are not just looking at costs, you're looking at revenue growth. I think you are a genius if you can get the revenue growth but good luck. Pubs with the revenue has been increasing, albeit finally the growth is slowing. And the pubs require a lot of refurbish CapEX and I know that sector well. You really got to depreciate that 20% per annum because it's ongoing refreshing these pubs. A lot of operational costs going up, labor, security, power, but also substantial rental costs on the lease of most of the pubs. The other issue with pubs is your heavy reliance on poker machine profits share, which have a big exposure to regulatory changes. We've seen what's happened with the casinos. Fortunately, the hotel lobby is so powerful that the pubs and clubs have largely been left alone, but regulatory change is an issue. In my opinion, I'd be interested in your comments, Chair or Jayne, pokies have a huge margin. You're not making much money out of accommodation. Food is basically flat line, don't make much money there, make a bit of money out of alcohol. But I would estimate 1/3 of the total Endeavour Group EBIT would come from the poker machines, which is a huge exposure given the regulatory issues. But I come to 2 questions. Regarding retail, can Endeavour's revenue and cost initiatives offset the fundamental and ongoing structural decline in alcohol consumption per capita. Noted you're 3% up this financial year, but that's just in line with CPI. So that's my first question. Do you want the second one? Or should I wait?

Let's deal with the first question first. So our strategy doesn't rely on market growth. Obviously, we'd love to have some tailwinds as we execute our transformation strategy over the next 3 years. Every company would love to have tailwinds behind them. It's currently a very tough economic environment, as you highlighted in your remarks, and we also talked about in our remarks. But our strategy, just to be very clear, doesn't rely on the market growing. We -- there are -- there's a very significant market for us to go after in both our retail and our hotel portfolios. And our strategy does not rely on market growth. There's a lot of runway for us. There's a lot of innovation. There's a lot of new things we can do. Our transformation plan is detailed and vast that will be executed over the next 3 years, and it doesn't rely on market growth. Is there anything you want to add to that, Jayne?

Yes. I would just say that the -- I said it in my remarks at the start, the market leadership that we have, we have not used well enables us to do things that we otherwise couldn't do. And we should be Australia's very best omnichannel retailer, and we are not today. We're not Australia's best retailer today from the standpoint of the way we physically retail through our stores. We have a lot of work to do to get the fundamentals right in addition to getting our experiences right to tap the full potential of the customers who are already shopping with us. And so our strategy does not depend on market growth. Market growth would be nice. But it's also our job to ensure that we're reenergizing the category. Post-COVID, I think the entire industry was so busy trying to figure out what happened that not enough thinking was going into how do we reengage consumers post the trauma of COVID, post the reengagement with the broader world. The industry was not thinking about how do we capture the attention of consumers with innovation and how do we think about the upcoming generations that had social challenges during COVID and didn't get to be out and about and doing things that you normally do when you're '17, '18, '19, '20. And so I think the industry has work to do to reenergize the category. We're not dependent upon that working. And the work that we have to do is quite clear to all of us, and we think there's a lot of runway with retail. And then the hotel is a whole different ball game, and there's plenty of runway with hotels.

I think from memory, you have over 40% market share. I'm not sure that you're going to be able to open up too many new bottle shops.

We don't need new stores. That's the key to it is we don't need to open new stores. We need to run the stores that we have better, and we need to engage consumers differently.

Are you going to add extra products in the stores?

I'm not going to give a detailed blueprint of what we're going to do, but we're going to be very clear about what our customers want from us and ensure that we deliver against it.

Okay. Good luck, but it's a challenging area, but if anyone can do it, you can. Look, my second question is hotels. Look, as you touched on, clearly, consumers' confidence is low. It's not just petrol prices. It's a small thing called interest rates, which are probably going to go up next Tuesday as well. And thanks for the honesty. Hotels have been growing consistently for several years, but they're now growing at less than the rate of inflation, whereas your costs in the hotels are growing at a much faster rate than the growth in revenue. So really just interested in your views, it does seem that underlying EBIT from hotels will at best flat line, but probably decline this year. I accept what you say that look, it's an outstanding portfolio of hotels, outstanding. It's the best in Australia, and it's a good sector. Yes, I agree you can run them better. I said that last year. I said that retail was a problem. hotels were the opportunity. So I think you definitely can improve on them. You can take a few costs out. You can streamline management. You can improve the way they're managed. But fundamentally, what concerns me is that most of your hotels, you're paying pretty very large rental amounts to Charter Hall and other people. Those rental amounts, even if your revenue is flat, those revenue -- rental amounts are going to be going up 3% or 4% a year. So just interested in your view whether hotels are likely to flatline or decline this year? And secondly, if you could comment on your concerns about the regulatory issues. Obviously, there have been changes in Melbourne. There may well be some changes elsewhere. We've seen what's happened with the casinos they've been smashed. Appreciate your thoughts on that.

Yes. I think in relation to the performance of our hotels business in the next 12 months, we're not going to provide any specific commentary or guidance in relation to what we're expecting in terms of performance. We'll keep the market updated as we have today in terms of trading performance. But I think the really important point to take away is this is a multiyear strategy, and we are at a moment in time. And the moment in time at the moment is, as you highlighted, David, the consumer is under pressure. And I think actually, when you think of what's going on in the macro space around interest rates and fuel prices and various other things, I actually think the consumer has actually hung on pretty well. But it's clearly having an impact. And you've seen a range of other retailers that transact on a daily basis with consumers during this week come out with numbers, which would suggest there is starting to see some slowdown and stress in the consumer. But as I say, it's very important that this is a moment in time. We've got a 3-year strategy. We've got a very clear strategy, as Jayne talked about, reduce costs, reduce complexity, make our operations more simple, invest in our portfolio. And I haven't learned many things in my career, but one of the things I have learned is that when you're the #1 player in a market, and we are the #1 player in both markets that we operate in, if you invest through the cycle, when the cycle does turn, you come out of it way stronger and in a much better way to compete for every customer and delight every customer on the way through. So that's our plan. Our plan is to -- there's so much improvement we can do in our hotels business, but we will invest through the cycle. And when we come out of it, we'll come out of it far stronger, and we're excited about what we can do in our hotel part of our portfolio. In relation to the regulatory environment, look, we don't set the rules. It's very simple. And other people set the rules. Government set the rules, but we have fabulous relationships with governments. We have fabulous relationships with our regulators. it's a very regulated industry, and we work very closely with those partners. Our job is to work within that framework and do the very best job at maximizing our opportunity in that framework. And we will continue to have good dialogue with our regulatory partners and our government partners, but our job is to work within that envelope and do the very best job we can inside that envelope. But thank you for your comments, and thank you for your continued interest in our company. Yes. Thank you.

Chair, I have shareholder, Mrs. Lee.

Thank you, Chair. Yes, it's already been said, the results are somewhat disappointing. Getting to your strategy and part of it's already been said earlier, but there has been a long-term decline in alcohol consumption. That trend is not going to reverse or go away. What I see in the market is greater fragmentation in a more fickle market. So does -- so things are becoming more complex. And how -- or is your strategy looking at the non-alcohol portion of your drinks market to deal with kind of emerging trends, given that some of these offerings pretty much like fashion might only last 6 months or a year, so you can't sort of get long-term runs of a particular product. But whether it's served in your bottle shops or in your hotels, are you addressing this? And how are you identifying these emerging trends?

Yes. No, thank you. It's a really good point, a really good question. As Jayne just said, our job is to be incredibly close to the customer, incredibly close to customer demands and trends. We have got a job to do to reenergize the space. And we also have a job to look at other products outside the alcohol products. So low beverage or low alcohol categories is something that we're actively working on and is an opportunity for us. And indeed, the more moderate strength alcoholic beverages are also an opportunity. You'll also have seen innovation in our stores around bottle sizes and things like that. Consumers once upon a time might have drunk more from one single bottle or a larger bottle and now they want to have 1 glass or 1.5 glasses a night. And so we're catering for those changing needs as well. So yes, I mean, the essence of your question is we are watching intently what's going on in the market and what our customers want from us. And we are looking -- I mean, we see ourselves as a beverage company. So we'll look at all opportunities and whether it's full strength, whether it's moderate, whether it's low to develop our range in our stores.

Yes. Okay. No, that's sort of okay. Yes, I think that's -- there seems to be sort of the obsession with the alcohol side of it and other opportunities is part of the point I was getting at. I noticed that your inventory obsolescence have increased to $60 million from $30 million. And I understand that some of the sort of nonalcoholic beverages don't have as long a shelf life as alcohol. And that's potentially part of that fickleness where what was hot off the last year is no longer. So you've got old stock sitting on your shelves. Is that your understanding? Or what's your reason for that?

No, it's not. The increase in obsolescence in the last period is more to do with the refreshed strategy. So we announced in May a new strategy that Jayne and our management team spent a day talking to our shareholders about. Part of that strategy is -- relates to changes to our merchandising. It also relates to changes to our own Pinnacle business and some of the obsolescence provisions we took this year relate to discontinuing some of those lines of stock. So it doesn't have any -- it doesn't relate to the category in terms of low or full strength. It more relates to the types of products that we're going to continue going forward, prioritizing some and deprioritizing others.

So we don't expect to see the increase or flattening of the amount of obsolescence.

No, you shouldn't'.

[indiscernible] decrease in future. Okay. Yes. I think that has been said, hotels are an opportunity. I was wondering, have you looked at -- or are you looking at the sort of full potential in the refurbishment, particularly on the entertainment, and I'm not talking about poking machines, seeing it as an entertainment venue to draw in the local community to visit the pubs and spend money there, obviously.

Yes, absolutely. I mean entertainment is a key part of our strategy as is all of our revenue opportunity. So whether it's food, whether it's beverage, whether it's entertainment, whether it's accommodation, which we see great opportunity in or whether it's the EGM portfolio that we have. the refurbishment strategy cuts across all aspects of our hotels business, and we'll be going very hard at all revenue streams, including entertainment, which, as you've highlighted, is an area of opportunity for us.

Okay. And sort of the final question in this area. You've increased your self-insurance risk to $79 million from $39 million. Are there particular reasons? And how is that balance? I can understand self-insurance. I was involved in that many years ago. But how are you managing bigger risk? Have you got adequate reinsurance for big catastrophes and the like? And I suppose was this increase in the self-insurance driven by increases in the premiums payable or there are other reasons?

No. Look, I think the point that I'd like to make on this that you should take away is that we continually assess our portfolio of properties. We've got more than 2,000 properties across the country. We're constantly looking at the way we manage those properties. We constantly look at the risks around -- as you'd expect, around flood or extreme weather events. And depending on how that portfolio of properties is being managed, we might adjust our insurance arrangements accordingly. So we're always looking for opportunities to do things better, improve, reduce costs where we need to and potentially take on some risk that we're happy to take on. And that's just part of what you should expect from us in terms of managing a very diverse fleet of property across the country.

And the reinsurance have you increased your risk there or...

So we don't do any specific reinsurance. We're not an insurance company. So...

No, but you can take out reinsurance for large catastrophes.

So we have insurance for extreme weather events, and we have what we consider to be very appropriate insurance arrangements to deal with extreme weather events across our portfolio.

Yes. Chair, I'd like to introduce shareholder, [indiscernible].

Welcome, our new CEO. You did a great job with Virgin. You know how to turn business around. I really hope you will succeed in your very hard task because company getting over at the moment, only going down every year. It's for various number of times, something need to be done. Hopefully, you're the woman who can actually do it. Now to the question, how secure is our information, our customer information. There's a lot of us going around the world in Australia. We're getting hit every time. How you guys secured because it's going to be a major problem.

Yes. No, it's a good question. And before we had worries about data security and cyber risk and so on. I had dark here. So it's something that I worry about and my Board colleagues worry about a lot. But yes, -- but Jayne, do you want to talk about our approach to data security?

Sure. We've made significant progress, I think, steadily over the last couple of years in improving our cybersecurity, and we continue to make important investments there. I think we're in a new era with AI where it's very easy for bad actors to test and learn in terms of where your weak spots are. And we have to not only worry about our own security, but the security of third parties that we use. And so yes, we're very conscious of the risk. I think we're constantly going to be finding opportunities to improve. I'd say our base level of security now, thanks to [ Harinda ] and his team is very good. And -- but we're not done, and we won't ever be done. This is a place we're going to need to continue to invest because the world is continuing to change and sophistication of those around us improves, and we've got to be ahead of it.

Chair, I have shareholder, Mr. [indiscernible].

Thanks very much. My experience with pubs is the local when I was at the University of New South Wales. I mean we go to the pub, which is okay. The services were a pie and what a bang is in mash, and that was it. But looking further up, all you saw were less curtains. And I thought, oh, I wonder what it's like because the loose were really quite dreadful. So if that was a reflection. Now what I need to know is how many rooms have you got altogether. They're probably in the annual report, but I've had the flu, so I haven't really looked at the detail. And how do those rooms offer value compared to some of the Posh places maybe just further up the street.

Are you talking about accommodation rooms?

Yes, yes, yes. And the hotel status.

Yes. I actually don't have that number at hand. Jayne, do you know what the actual number is? Yes, you are.

So I don't know the precise number of rooms, but what I will tell you is this, which is that our accommodation is performing exceptionally well. People love our accommodation. We're working hard to renew so that we don't have lace curtains and dreadful interiors. And -- but people, I think, find exceptional value in our pub accommodation, and it's much better value than the opportunities up the road. And the big chains extract a very high margin for their brand names. And so I think right now, we are really, really important to the community because we're very high value for good quality accommodation. And typically, we're more close to family that you're locally visiting. We're also appealing to a broad group of trades who are on site for something and they need to keep the cost down in the cost of their accommodation. So we found a sweet spot, which is really good, and we just don't have enough beds -- and so we're working hard to ensure we get more accommodation nights in the portfolio and that they're all in good form so that we've got a consistent quality that we're delivering to the marketplace and they can always count on an ALH pub for accommodation.

That sounds promising because I visited the 2 locals that I used to go to, which is the Regent and the Doncaster. And I noticed they have bistros, the quality and the diversity of food offered is terrific. And I assume accommodation, which is a growing part, is, I hope, also offering better value so that we can go progress on the nonalcoholic front. Thank you.

Chair, I have a shareholder, Mr. [indiscernible].

Good morning. My name is Kevin Lee. And if you don't mind, I would like to sit down and talk to you so that we can talk as friends as a Q&A session. We are in the consumer business, and therefore, consumer experience is very important. And I come today as the proxy of my wife. And my wife, my son and our family, SMF are shareholders of [indiscernible]. I would like to reflect my wife's recent experience with MUFG. My wife has not received the proxy form or the AGM notice of meeting. So my wife call MUFG and ask for that. My wife always receive her proxy in a letter. But MUFG changed that. They change it by e-mail without my wife's permission or consent. They just do it. Now when my wife call MUFG and ask for the form, they send my wife the form through e-mail. But the form is a general form. My wife has to put in her details. So if that's a consumer experience, I would say that's frustrating. Now what I would suggest is that if MUFG can allow a shareholder to nominate his or her proxy online, that will be very good. Filling that and send the form in written form in a hard copy form so that a shareholder can shot it in and mail it out or even still better still is to fax it rather than post it. So that's my wife's experience, and that's my suggestion, too. Now I've got another question with regard to the strategy. I welcome the strategy, and I would like the strategy to work out very good as a shareholder. Now may I ask when will we see a tangible result in the form of attributable -- net profit attributable to shareholders. I'm talking about the net-net bottom line, not the underlying profit. I would like to know the bottom line attributable to shareholders. So when will we see some fruitful results?

Thank you. Just in relation to your first comment, I'm sorry that you've had a frustrating experience with MUFG. There are a lot of MUFG people here today. So I strongly encourage you to seek someone out. And also, there's a lot of people from Endeavour here that can talk to you about your experience. And hopefully, we can rectify that on behalf of your wife. In relation to the -- to your question, we said as part of our addresses that we're very confident about the next 3 years, and we're very confident about the progress we're making. And I think even the trading update today, the retail performance that you're seeing compared to our competition is encouraging. It's way too early to declare victory on that front, but -- because we've got a long way to go, and we've got a very extensive transformation journey in front of us. In relation to your specific question, as I said in answer to one of the online questions that we got in advance, it's not possible for us to give you a time frame at this stage. I would love to be able to give you a time frame on exactly when you're going to see net profit after tax turn around from its downward trajectory, but it's just not possible for us to give you that, and it will be irresponsible for us to give you that exact time frame. But what I can say and what Jayne and I and our team really want you to take away from today is that we're very confident about our strategy. It's a 3-year strategy to turn this business around. There's lots of initiatives underlying it. We've got a very good team in place to execute it, and we're very confident we can do it. And -- but we just can't give you that exact time frame that you're looking for. Next question. We might go this way, and then we'll get your microphone.

Chair, I have a question from Mr. [indiscernible].

Questions relating to retail liquor. As a general trend, there's an increase in liquor theft and the market's interesting handling on liquor theft, and I'm assuming the increased premiums associated with that kind of stuff. What's the strategy? Or is there an increased provision for that kind of stuff or -- I mean, just interested probably on the strategy on that kind of thing because I think it's a big hole potentially that's increasing.

Yes, I might make one comment and then pass to Jayne. But I mean you would have seen for -- or you might have seen from our annual report, we had some very disappointing safety numbers over the last 12 months. Now some of that is related to the stock build that we did during the year and more stock means more manual handling and more slips and trips and falls. And so there's that. But a very big component of the safety performance in our business over the last 12 months has been relating to the exact issue that you talk about, which is...

Inventory theft.

Yes, theft in stores. And that's apart from the question earlier about cybersecurity and data protection. The safety of our people is probably the other thing that keeps us all up at night. There's a -- it's a very unsatisfactory situation, and it's something that we are spending as a company a lot of time thinking through. But Jayne, you might just want to just go a little bit deeper on some of the strategies that we're executing at the moment.

Well, I guess it's important to acknowledge that it is a problem. And it's less of an issue with respect to the cost of it and more an issue with respect to the implications of it because yes, because for our people, they need to feel like they're safe when they go to work every day. And they don't need to worry that somebody is going to come in with a baseball bat or come in with [indiscernible] but those things do happen. And so what are we doing about it? I guess a couple of things. One is we're working with all the state governments to talk about mechanisms to fix the underlying issue and to protect our people. And having guards doesn't solve the problem. It just means that the guards are the ones that are going to get the exposure and the attack. So it's not a security thing in terms of things we can do inside the store, but technology helps. So facial recognition so that we can help CCTV and facial recognition so we can help the police better understand who are the perpetrators. And then it's up to them to have the right ability to find the people and incarcerate people and ensure that there are consequences for bad actors. Unfortunately, my expectation is that because people are doing it tough in the community, and there's a fair amount of desperation given the increased cost of everything and wages aren't keeping pace with it, that we're going to see more bad behavior before we see less. And it doesn't come from mouse as much as it comes from desperation and people just feeling entitled to take because they're in such dire circumstances. And so we're working closely with governments. We're investing in technology, and we're really concerned for our people. And so the attitude we have and the policy position that we take is nobody should fight it. So if somebody comes in the store with ill intent and they want to take product, you let them take product and then we provide the data to the police to solve the problem because that's the only way we can keep our people safe.

Yes. The problem is the youth and the ability of law to treat youth.

That's part of it.

But that's probably the bigger problem, not the adult because you can react and punish them, but the youth just keep doing it 126x.

It's an adult problem, too, because the consequences aren't significant enough. So either they get picked up by the police, they're out a couple of hours later. And so there's a hierarchy of issues that every state has they're all different. And so we're working -- the only thing that can be done is that the state governments work to address the issue because it is a community issue because it means there are other people in the store that come in and then you've got a bad actor and then other people are exposed to that risk, too. So it's a community problem. And so we need to work closely with state and local governments to ensure that the underlying issue, which is that their consequences aren't big enough, whether it's you or adults, that needs to get addressed.

So your provisions have to be greater and your insurance premiums will be a little bit higher.

Yes. And these are the sorts of things you self-fund. But the cost of it isn't the issue. It's the knock-on consequences of it that are the bigger problem -- because you can imagine we have 30,000-plus people.

Workers' compensation premiums, all kinds of stuff.

I'd like to introduce shareholder, Edwin [indiscernible].

Sir, my name is [ Edwin Kony ], and I live in Perth, Western Australia. I was -- we have been a long-term shareholder in Woolworths and then in Endeavour. We -- I buy my alcohol in the past from Dan Murphy's, and I have also used a very small subsidiary of what is now Endeavour to buy wine through somebody in Sydney, whom I've never met, but I talked to on the phone. About a year ago, [ Liquorland ] started to make offers of you buy -- spend $200, we give you 20% off, we give you 15% off and so on. My favorite tipple is [ Lefroy ] single malt whiskey when I can afford it. And what has happened is that Liquorland, even though you say you will always beat everybody else's price, when you go into Dan Murphy's over in Western Australia, they'll beat Liquorland's price by $0.05, a complete waste of time, okay? And for the last 12 months, I've been buying my [ Lafroig ] through Liquorland because it starts off at $130 a bottle. It comes down as a special to $92, I think it might have been -- might have been $97 and then they offer you 10%, 15% or 20% off if you spend so much money. And then recently, you don't have to spend that much money. They just say, buy a bottle and you get 15% off over that extra price. And this upset me because we're shareholders in your company. And so I wrote a letter of complaint to the person I buy wine from in Sydney, and I was assured that, that was forwarded. I can't guarantee that, but I believe that, that was the case. I haven't even had the courtesy of a reply to say get stuffed. Nothing. And that particularly upset me because it says, if you can't do that, what else can you do at the marketing level? The only thing you've got going for you at the moment as far as Liquorland is concerned is that their stock control program is extremely poor. When I try and buy 2 bottles of [ Lfroic ] from the one Liquorland outlet, and there are many in my area in Clairmont, they tell me there's only one. And therefore, I can't buy it because you got to buy 2 to get over $200 or whatever it is to get the discount. You finally get there and you buy the bottle because it is 15% off and you find that they've got plenty of bottles. I would like to know what your people are going to do about it at that low retail level.

Yes. In relation to the comment about your complaint letter, I apologize on behalf of the company. That hasn't got to our level, and that's a breakdown on us. So I apologize that you took the time to write a letter, and we didn't respond. So that's on us. And on behalf of the company, I sincerely apologize. And we will look into that to understand the reasons for that. In relation to -- we do a lot of customer interaction. We do a lot of work with our customers in terms of getting insights into customer behavior and what they're doing. And as Jayne said in her address, a key part of our initial turnaround strategy is reengaging with the customer on price leadership and showing to our customers that we value them from a value perspective and making sure our offer, both in terms of range and everything else, but particularly around price is absolutely competitive with the market. So I hear your comments. And if we ask 1,000 people, we get different but similar feedback in relation to what we're doing and what people's reflections are as customers. And we take all that on board. But one thing that you need to understand is we'll compete exceptionally hard on price. We've been doing that since September last year, and we will continue to do that. It's a key plank of our strategy going forward. I'm not sure, do you want to add anything to that?

Yes, I do. Look, I think the issue that you experienced is the most frustrating thing for me about where our business got to because we started to focus on margins and not on serving the customer. And so in Dan Murphy's, in particular, the price benefit wasn't substantial enough to justify going to Dan Murphy's as opposed to your local Liquorland. And so 2 things are true now. One is we're monitoring price multiple times a day in Dan Murphy's to ensure that there is a substantial difference between Dan Murphy's price and anybody else's. And it's not just Liquorland, we're looking at all the major banners. The second thing is we're also competing. So when Liquorland does a promotion of 20% off site-wide online, you'll also find that promotion at Dan Murphy's. And Benjamin is sitting here in the front row. He rings me every week to say, this is what they've done this week and like how do we want to compete and we compete. We're the market leader. There is no excuse for us not to be competing, no excuse. And so when we find opportunities to impress our customers with better pricing, we will always take them. We're working closely with our suppliers to make sure that we have sharp enough pricing from our suppliers that we can afford to do it. And all I can do is apologize because we lost our way.

Next question. Yes.

Chair, I have shareholder, Mr. [ Weeks ].

Mr. Chairman, you have reduced our income 80% or 90%. How much have you reduced your income in the same time?

Yes. I just -- I'm not -- I might catch up with you over a cup of tea later on and work out exactly. No, no, no. What I was going to say was to just do the math in relation to the reduction of income. I certainly understand we've taken the dividend backwards in the 2026 financial year, as I spoke about. And I think the important thing to remember is the team in front of you today is the team that's in place to try and take this business forward and restore both parts of our business, the retail part of our business and the hotel part to its former glory. We are -- we are charged with executing the turnaround. We have a team in place to execute the turnaround. And part of that turnaround at some point in time is increasing profits and increasing dividends. And as I said to the question before, I can't give you a time frame around that, but that is why we're here. We are here to turn this business around, increase profits and increase dividends, and that's what we intend to do, sir. So thank you.

Other point, you made was up by 1.3% but inflation is at 4.3%. You're going backwards still [indiscernible].

Yes. So we absolutely understand the macroeconomic environment, and we understand that to increase profits, we need to get our revenue growing faster than our cost base. We absolutely understand that, and we have plans in place to do that over the next 3 years.

There's another point [indiscernible].

I'm not sure there's a question there. So thank you for your comments, sir, and we'll move on to the next one. Is there another question here? No. Yes?

Shareholder, Mr. [indiscernible].

I haven't read the annual report. It's only just received it. How many bottles -- as the new CEO, part of your job is to sell off unprofitable businesses and reorganize staff, let's put it that way. How many bottle shops did you sell this year? Or did you sell any?

We did. We are net down a couple of BWS and net up a couple of Dan Murphy's. It's a normal natural thing that we go through every year is to look at the store footprint, figure out what's performing, what's not performing and to take the end of the tail that we think we can't improve the value of and to get rid of the end of the tail. And there are also new places that we want to fill out that we aren't currently present, communities that we're not currently present in. Where we're at right now, though, is we have so much performance improvement to do across the entire portfolio. If we decided to take surgery and take everything out that we thought was below the average, then you end up changing the dynamics of the total, and we should just be focused on improving the value of everything and then figuring out what the performance of the portfolio is when it's been run well before we take big decisions.

I probably -- I live on the -- live here in Sydney. And on the North Shore, it's probably the highest selling bottle shop per square -- not square foot square meter. And despite that, that's despite the fact the staff don't actually sell. They're really just order takers, like there's nothing against young staff, but they just don't seem to have the knowledge to sell. I mean if you go in there and say, where is the cabinet or something, I'll tell you where it is. And that's about it. You don't get much sort of feedback from them.

[indiscernible] BWS.

Yes.