Woolworths Group Limited (WOW) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Gordon Cairns, and I am the Chairman of Woolworths Group. Before we start today's meeting, I'd like to introduce Auntie Donna Ingram, to deliver the welcome to country. Auntie Donna's aboriginal family connections are the Wiradjuri of Central West New South Wales -- and raised in Sydney, on Gadigal land. Auntie Donna is proud to be a cultural representative for the local aboriginal community in Sydney. Auntie Donna has worked in aboriginal affairs, government and community organizations in Sydney for the past 35 years, mostly in education. Auntie Donna is involved in several community consultation groups, especially in regard to women's issues and NAIDOC Week in the Redfern inner city area. Auntie Donna has joined us at previous Annual General Meetings, and I thank her for once again making the time to be with us here today.

Good morning, everyone. It's my great pleasure to be here again, with permission from my elders, to offer you welcome to country for the Woolworths Group 2021 general meeting. It gives me pride to represent my community in this important [ cultural protocol ]. It shows respect for and recognition to the unique position of aboriginal and Torres Strait Islander people in Australian culture and history. We are presenting to you from the land of the Gadigal, who are 1 of 29 clans of the Eora Nation, which is bordered by the Hawkesbury, the Georges and the Nepean Rivers. I'm an aboriginal woman who proudly identifies with the Wiradjuri nation through my family connections from Central West New South Wales. I was born on Gadigal land; and I've had the privilege to live, work and raise my 4 children on this land for most of my life. My family has grown; and I'm now a proud grandmother to [ Aaliyah, Elijah, Kolalo, Lakoda and Jake Junior ]. My wish for my grandchildren is to grow up happy and healthy in a safe and inclusive society that offers them equal opportunities and that their culture is respected. I acknowledge the Gadigal, their spirits and ancestors, who will always remain with the land Mother Earth, and thank them for their ongoing custodianship. I'm also very proud to be part of the oldest living culture in the world, the aboriginal culture of Australia, with their unique and distinct heritage, cultures and identities. Our culture has adapted and survived through many challenges and we remained strong. I pay my respects to our elders, both past and present. We must never forget the sacrifices made by our leaders to create a better future for aboriginal people. I do this as a reminder and as a tribute to elders; and those who have gone before us to fight for land rights, justice and equity for our communities. I extend my respects to aboriginal and Torres Strait Islander people from all clans and nations who are present this morning in person and online. I also recognize our non-aboriginal sisters and brothers who walk beside us to support communities and create opportunities for all. I now offer you a warm and since welcome to the land of the Gadigal of the Eora Nation, wish you a safe day on the land and safe travel from the land. I have the same wish for everyone viewing online from whichever country you are on. On behalf of my community and the Gadigal, I wish you a successful and productive day at this general meeting to share your successes over the past year and discuss focus areas for the year ahead, to further support your goal of having customers put Woolworths first across all your brands. In closing. We remember that this is, was and always will be aboriginal land. Thank you. Have a fantastic day.

Thank you very much, Auntie Donna, for that welcome to country. I'd like to begin by welcoming all my fellow shareholders joining us today in Sydney and by webcast and by telephone from around Australia and overseas. By holding this meeting both in person and online, all shareholders, regardless of where they live, are able to participate in the meeting. We are holding this general meeting today to approve the demerger of Endeavour Group from Woolworths Group, the final stage in the restructure, merger and separation of the Woolworths drinks and hospitality business which commenced in 2019. Do we have enough seats for the people who have just arrived? You're okay -- are you sure you're okay to stand? Because this could go on for a long time. If you get tired, we'll find you a seat. There are some seats over there. Before we move on, for those attending in person, I'd like to outline the emergency procedures for this venue. The emergency exits for this room are marked in front of me. Please take a moment to identify the emergency exits closest to you. In the event of an emergency, 1 of 2 alarms may sound. The alert alarm is a warning beep. If this alarm sounds, please stand by for further instructions from ICC wardens. If the evacuation alarm sounds, a [ whooping ] alarm, all occupants will be directed by wardens to leave via the nearest emergency exits quickly and calmly. Everyone must follow directions by the ICC Sydney wardens to the nearest and most appropriate assembly point. You're requested to remain at this location until ICC staff advise you it is safe to return to the venue. If we are required to evacuate, please leave your voting handsets and smart card on the chair. For those attending online, instructions to assist you to navigate the webcast, including how to vote and ask questions, are available in the online portal guide available on the demerger page on our website. If you're having issues logging on to the online portal as a shareholder or a proxy holder, please call Link on 1300-420-545 or +61-1300-420-545 for registration assistance. If you need help navigating the online portal, please call Lumi on +61-2-8075-0100 for technical support. The help numbers are also listed in the online portal guide; and shown on your screen, for those of you who are participating online. If we experience a significant technological issue or in the event we are required to evacuate this building, I will suspend the meeting until we are able to recommence. Or if we are unable to recommence within a reasonable period of time, I'll adjourn the meeting to another day and time. We will provide shareholders with details of the adjournment via ASX and our website. So now let me introduce the directors and management, now that we've dealt with those procedural matters, and let me introduce my colleagues on the stage today. On my far left and on your right is Brad Banducci. Brad, as you know, is the Managing Director and Chief Executive Officer. Next to me is Kate Eastoe, our group company Secretary. On my right and your left are Peter Hearl, the Chairman-elect of Endeavour Group. And next to Peter is Steve Donohue. Steve is the Managing Director and Chief Executive Officer-elect of the Endeavour Group. In attendance today via the website or here in the room, we have Holly Kramer, sitting at the front, Woolworths' nominee to the Endeavour Group Board; Bruce Mathieson Sr. from the Bruce Mathieson Group and their nominee to the Endeavour Group Board; along with other directors-elect of Endeavour Group, Duncan Makeig, who is also sitting in the front row, Colin Storrie, who's sitting next to him, and Catherine West. Joe Pollard is unfortunately not able to join us today. Your Woolworths Group directors joining the meeting today via the webcast are Scott Perkins, Siobhan McKenna, Michael Ullmer, Jennifer Carr-Smith, Maxine Brenner and Kathee Tesija. A number of the members of the Woolworths Group executive team are also in attendance today. I wish to acknowledge the attendance of Phil Breden and Andrew Kim, the partners of our lawyers, Ashurst; and Taralyn Elliott, the group audit partner of our independent accountant, Deloitte. As we have a quorum, I now declare the meeting open and the poll open. The notice of meeting is enclosed within the demerger booklet, which sets out the business of the meeting and explanatory information about the resolutions. For those attending in person, please raise your hand if you require a copy of the demerger booklet, and one of our team will provide one to you. If you are attending online, you can download the demerger booklet and notice of meeting from the documents icon on the top of your screen. So now ladies and gentlemen, let me turn to the main item of business. Today's meeting marks the final step in our 3-stage process to transform and separate Endeavour Group. Following your approval at our 2019 General Meeting and February 2020, Endeavour Group was established through a restructure of the drinks business, stage 1; and subsequent merger with ALH Group, stage 2. It was our intention to complete the separation of Endeavour Group, stage 3, later that year. However, in March 2020, we decided to postpone the separation until 2021 as we prioritized our COVID-19 response amid a highly uncertain operating environment. During that time, Endeavour Group continued to prepare to operate as a stand-alone business. Its financial performance during COVID-19 has proven to be resilient. And the Woolworths Group Board is confident to move forward with the separation by way of a demerger, as announced in May of this year. The Woolworths Group Board strongly encourages you to support the resolutions put to the meeting today. We believe shareholder value will be enhanced through a greater focus on each company's business, core customer offering, unlocking growth opportunities and continuing to benefit from a win-win partnership in areas where it makes sense. Woolworths Group will remain Australia and New Zealand's leading food and everyday needs business and is expected to remain 1 of the 20 largest ASX-listed companies. The simpler and more agile operating model will enable us to grow our food and everyday needs retail ecosystem. Separation will also provide enhanced brand clarity. Endeavour Group is equally well positioned for success. As a separate listed entity, Endeavour Group will have a broad mandate for growth. It will be able to pursue its business strategy, with flexibility to invest in its best-returning opportunities and respond to changing consumer behaviors and industry conditions. It does so from a market-leading position in both the retail and hospitality sectors. It will be led by Steve Donohue, as Chief Executive Officer; and an experienced management team who have especially proven themselves over the last 12 months. We've also put together a first-class Board with the appropriate skills and experience, led by Peter Hearl as Chairman-elect. I've known Peter for many years. He's a proven leader and an experienced public company director currently serving on the boards of Santos and Telstra. And finally, Holly Kramer and Bruce Mathieson Sr. have been nominated by the Woolworths Group and the Bruce Mathieson Group, respectively, to serve on the Endeavour Group Board, reflecting both groups' material shareholding post demerger. The new structure, if approved today, also positions Woolworths Group and Endeavour Group to succeed in partnership. Both businesses will continue to work together to retain the benefits of leading infrastructure built by Woolworths Group across its core competencies. The key anticipated benefits under the partnership agreements include a framework that supports joint growth opportunities and further develops capabilities for mutual benefit. It enables both groups to maintain the synergies and collaborative relationships. It supports Endeavour Group with continuity of its operations, and it minimizes stranded costs for the Woolworths Group on the demerger. To support this, we have key agreements in place across supply chain and stores, loyalty and fintech, digital and media, business support and international business. Woolworths Group will hold a 14.6% interest in Endeavour Group at the time of the demerger to reflect the importance of this partnership. Woolworths Group's long-term joint venture partner, Bruce Mathieson Group, will also hold a 14.6% interest in Endeavour Group at the time of the demerger. The demerger will create 2 leading ASX-listed companies. Endeavour Group will be Australia's leading drinks and hospitality business with a portfolio of strong retail and hospitality brands and products. It will have more than 28,000 team members united around the group's purpose of creating a more sociable future together. Its portfolio of trusted brands includes Dan Murphy's and BWS as well as the nation's largest portfolio of licensed hospitality venues. Following the demerger, Woolworths Group is expected to remain 1 of the 20 largest ASX-listed companies; and will continue to own some of the most recognized and trusted brands in Australia and New Zealand, including Woolworths, Countdown and BIG W. We will benefit from a continued focus on our food and everyday needs markets and further opportunities to build the Woolworths Group ecosystem. Post demerger, Woolworths Group will retain its strong balance sheet, with pro forma and cash, excluding lease liabilities, as at the 3rd of January 2021 of $75 million. The Board will consider Woolworths Group capital management options. And subject to trading conditions and Board approval, between 1.6 million and 2 billion -- sorry, $1.6 billion and $2 billion could be returned to shareholders. Further updates will be provided to shareholders when a decision has been made. If approved today, eligible shareholders at the time of demerger will retain their existing [ shareholder ] in Woolworths Group; and will also, immediately following implementation of the demerger, own the same number of Endeavour Group shares as Woolworths Group shares. So if you like, if you own 100 Woolworths Group shares, you will keep those, but in addition you will receive 100 Endeavour Group shares. However, the total number of shares on issue in Endeavour Group will be higher than the Woolworths Group shares, reflecting the shares retained by Woolworths Group and BMG at demerger. It is expected Endeavour Group will start trading on the ASX on the 24th of June on a conditional and deferred settlement basis. Finally, on behalf of the Woolworths Board, I encourage all of you to vote in favor of this important proposal to demerge and publicly list Endeavour Group, Australia's leading retail drinks and hospitality business. The Woolworths Group Board believes that a demerger is the most value-accretive path for shareholders. And we are confident that Endeavour Group has strong foundations for success and growth as an independent company. At this general meeting, we are seeking your approval on the proposed demerger of Endeavour Group from Woolworths, the final step, as I said, in the restructure and separation of Endeavour Group which began in 2019. [Operator Instructions] You're invited to submit your questions online now. For those attending in person, please see the attendant at the microphone nearest you, which is here and here. In the interest of giving all shareholders a fair opportunity to have their questions addressed, I'll ask, please, all shareholders to ask one question at a time. If you have more than one question or point to make, then I will -- in-person attendees, please ask your initial question and then see the microphone attendant for another turn if we have time. [Operator Instructions] I've also asked the moderators to group online questions that are substantially identical so that they can be read and answered together where possible. Only shareholders or proxy holders may ask a question or make a comment during today's meeting. I ask that all questions and comments be directed to me as the Chair of the meeting. If you're asking your question as a representative of an organization or group of shareholders, please include that information in your question. As always, we will conduct the meeting in a responsible manner and ask that shareholders are respectful when they are asking questions. I note that we have received a number of questions in advance of the meeting. I'll endeavor to address the key themes arising from those questions during today's meeting. To vote at today's meeting, you need to be registered as a shareholder. This includes body corporate representatives and attorneys or as a proxy. We will vote on each resolution for today's meeting by way of a poll. Voting can be performed at any time during the meeting until I close the poll at the conclusion of the meeting. The final votes for and against each resolution will be released to the ASX after the meeting has closed. For in-person attendees, you will vote using electronic voting handsets. Those of you entitled to vote should have received a handset, a white plastic smart card and instructions on how to submit your vote. If you've not already done so, please insert the smart card into the slot at the top of the handset, with the barcode at the bottom and facing towards you. Now your name should be displayed across the top of your screen on your handset. If you are voting and do not have a handset or your name is not displayed on your handset, please raise your hand now, and one of the assistants will help you. Using your handset, select 1 to vote for, 2 to vote against or 3 if you wish to abstain from voting on any resolution. Your selection and the [ word received ] will be displayed on the handset screen. You can change your vote at any time while the poll is open. If you wish to cancel your vote and have no selection recorded, press the X button. Shareholders attending online. You can vote by clicking on the voting icon on the navigation bar, which will open a list of all resolutions and their voting options. You can vote for, against; or abstain by selecting the options for each resolution once the poll is opened. If you change your mind and wish to change your vote, simply select another option. If you wish to cancel your vote, please press cancel. There is no need to press a submit or send button. Your vote is automatically counted. Once again, you can vote at any time while the poll is open. If you have multiple holdings, you will need to log in separately with each individual holding to lodge your vote. Log in using the [ SRN-HIN ] and postcode for each holding and repeat the voting steps each time. I intend to vote undirected proxies held by me for all resolutions. Michael Spruyt from our share registry, Link Market Services, will act as returning officer for the poll. [Voting]

Having gone through that, I will now turn to the formal business of the general meeting. The first item of business relates to the demerger resolutions. Part A of item 1 is the demerger approval resolution, that the demerger of Endeavour Group from Woolworths Group, as described in the demerger booklet, and all arrangements and arrangements entered into by Woolworths and Endeavour Group to effect to that demerger -- to give effect to that demerger is approved for all purposes. Part B of item 1 is the capital reduction resolution, that the share capital of Woolworths be reduced by the capital amount -- capital reduction amount on the implementation date as described in the demerger booklet. The demerger approval resolution and the capital reduction resolution are interconditional so that, if one of these resolutions is not passed by the required majority of shareholders, neither resolution will be considered as having been approved. Are there any shareholders who would like to ask a question or make a comment in relation to the demerger resolutions? Don, if you'd like to go to microphone 1.

Gordon, I'm Don Adams from the -- representing the Australian Shareholders' Association. And today, I've got 580 proxies from retail shareholders. I'm pleased that we have a hybrid meeting. The association is lobbying for that to be the standard form for general meetings in the future because it serves useful purposes for all types of shareholders. The question I have is that, since we really approved the spin-off of Endeavour in December 2019 and you've opted for the demerger option, to what extent did you consider the other possible options like a trade sale or an IPO.

So thank you, Don. We obviously looked at all options and we -- the Woolworths Board came to the conclusion that this was the most value-accretive option for the shareholders of Woolworths. And you'll recall that you get -- well, I can't advise you on your individual tax circumstances. The broad ruling is that you will obtain demerger tax relief on this. So thank you, Don. If I could go now to the online question.

Chairman, I have a question from shareholder [ Stephen Mayne ]. The question is, when the Endeavour Group demerger move was first announced in mid-2019, Woolworths CEO Brad Banducci told ABC's The Business that 7% or a little bit less than $700 million of Endeavour Group's total revenue was from poker machines, based on 2017, '18 figures. Did that figure exclude Bruce Mathieson's 25% stake and all state government poker machine taxes? And what is our gross gaming revenue?

So thank you, [ Stephen ], for that question. And I'm very comfortable with the disclosures that we've given in the demerger booklet, and I'm happy to relay them to you again. For financial year '20, revenue for the Endeavour Group was $10.6 billion, of which 88% of that revenue was Retail and 12% was our hospitality business. Our earnings for financial year '20 were $693 million. And again, 77% of that was Retail and 23% of that was hospitality. We think that these are the appropriate metrics for shareholders to decide on the performance of the business, and I'm happy to leave it at that. If I could take -- is there a question from microphone 2? No. Microphone 1? No. So I'll then go back to online. I'm trying to -- I'm trying to go online, in house, online, in house, but it looks like online are going to hog it.

Chairman, I have a question from shareholder [ Smart Art and Design Proprietary Limited ]. The question says, does the demerger mean that Woolworths will not be able to sell alcohol in the future?

Well, I should point out that we sell alcohol in Countdown in New Zealand, but we do have a -- Brad, I think I'm right in saying -- and you can correct me here. I think we do have an agreement that we will not sell alcohol, provided the shareholders' agreement remains in place. So thank you for that. Online again. You're doing well.

Chairman, I have a question from shareholder [ Malcolm Koosland ]. The question is, why was 800 chosen as the small shareholder limit? How was this number arrived at?

Yes. Well, thank you for that question. 800 was chosen both based on the advice and market practice and having regard to shareholder numbers and holdings. Another online question?

Chairman, I have a question from [ Christopher Harkan and Stephen Hart ]. The question is, assuming the demerger goes ahead, what will happen to the group's franking account balance? Will both companies be able to pay fully franked dividends?

Yes, that is a very good question. Let me answer on behalf of the Woolworths Group. So we have a substantial franking balance, as you know. So obviously our intention going forward is to utilize that franking balance. The Endeavour Group, once it's independent -- that's up to their board to make up their mind how they want to handle the franking credits that they will have. So while I wouldn't like to forecast how they would actually handle that, I'm sure that they'll act in the best interests of the shareholders with that franking credit. Do we have another online?

Chairman, I have a question from [ Henry K ]. The question is, will Everyday Rewards be accepted at all hotels within the Endeavour Group?

I might pass to Brad to -- that's an operational question.

No. It's -- it -- the partnership with Everyday Rewards centers on -- BWS is the participation partner in Everyday Rewards.

Okay, next question online? It looks like online is dominating here. [ Warwick ], I didn't see you in the audience there, been a long time.

Chairman, I have a question from the foundation for alcohol. The NACCHO, AMSANT, NTCOSS, Danila Dilba Health Service, Lowitja Institute, NATSILS and [ FARE ] wrote to the Endeavour Chairman-elect, Mr. Peter Hearl, expressing their disappointment at the response provided by Endeavour to the Woolworths commission Gilbert review. To date, Endeavour has only made commitments to meeting with the organizations but not to addressing the 24 recommendations from the Gilbert review. Given the serious and systemic issues raised in the Gilbert review about the practices of Woolworths and Endeavour, will Woolworths commit to making it a condition of the proposed demerger that Endeavour Group commits to adopting all 24 recommendations and provide a public implementation plan for addressing the social and corporate governance issues identified?

So thank you for that question. The entity is not yet standalone, But Peter, on behalf of the board-elect; and Steve as the Chief Executive Officer, on behalf of management, wanted to publicly acknowledge the report and commit to considering it more deeply as they commence as an independent company. It will be the responsibility of Endeavour and not Woolworths to communicate further with shareholders on this topic if the demerger is approved, but because of the seriousness with which we take your question, what I will allow at this meeting is for Peter to actually answer as Chairman-elect. Peter, [ over to you ].

Thanks, Gordon. Thanks for the question. Firstly, as Gordon has already outlined, the Endeavour board-elect is not yet constituted as the Endeavour Board, but CEO Steve Donohue and I both felt very strongly that it was important that we recognize the report publicly via the -- our co-joined response with Woolies to the independent panel review. The Endeavour board-elect has discussed the report as a group. And if the demerger is approved, we will be asking Endeavour management to engage deeply with all relevant stakeholders so that we can more formally and fully consider the report in the context of management's learnings. I'm also aware that Steve has recently written to some stakeholders and indicated that he and I will be looking to meet with them, with each of them in person to discuss in much greater detail. Hopefully, that answers your question.

Thank you, Peter. And just to reinforce: Brad and I and a few others are planning to fly up to Darwin to meet with the people who've asked the question on Monday and, hopefully, with opportunities to see them. And I'm sure that the Endeavour Board, once it's constituted, will follow suit. So thank you for that. Is there another online question? Or -- yes.

Chairman, I have a question from shareholder [ Stephen Mayne ]. The question is, the arts industry has been smashed by COVID. Endeavour Group will be Australia's largest for-profit funder of musicians in our 330 pubs. Do you know roughly how much we spend on musicians each year? And can this be increased coming out of COVID to help the music industry get back on its feet?

Thank you, [ Stephen ]. That question is definitely beyond my pay grade. As an old rock-and-roller, though, I'm -- yes, there's a man here who's an old rock-and-roller as well. I'm sure that the Endeavour Board will continue to ensure the support for the music industry in Australia. So thank you, [ Stephen ]. Another question online?

Chairman, I have a question from shareholder [ Smart Art and Design Proprietary Limited ]. The question reads, will Woolworths, through its ownership of Endeavour, support the necessary changes as reflected in the Gilbert independent report through Endeavour's RAP and acknowledge the harm done by alcohol sales in the Northern Territory and indigenous communities and the social responsibility Endeavour has to these communities going forward?

So I think -- let me give you the answer in 2 parts. First of all, I think that the Woolworths response has acknowledged our obligations and failings there, and we will be taking appropriate steps to rectify. In terms of the Endeavour board-elect, you've heard from the Chairman how he sees the obligations. And I'm very confident that they will behave in the appropriate way. A question from online again.

Chairman, I have a question from shareholder [ Stephen Mayne ]. The question reads, the explanatory memorandum indicates that Endeavour Group is likely to expand aggressively after the Woolworths demerger, in contrast to the hand brake on hotel acquisitions which Woolworths has applied since 2013. Could Peter Hearl and Steve Donohue comment on the prospect of Endeavour buying more pubs and expanding its pokies fleet, something that hasn't happened over the past 8 years?

So thank you, [ Stephen ]. You're racking up a number of questions here. We maybe should have had you just as a sole questioner for today's meeting. First of all, let me correct you: We did not put a hand brake on the acquisition of pubs and pokie machines in the Endeavour Group. The truth of the matter is that we had to prioritize our capital spending, which is our role as a Board. And that priority started off with Supermarkets, who got the majority of our capital spending; then the development of WooliesX, which got the second largest tranche. And then our stance with the Hotels business was to optimize the return on capital. And the way that we suggested they do that was to, first of all, pay down debt, which they did; and secondly, within the portfolio, to sell pubs that were earning less than the weighted average cost of capital. So it was a much more sophisticated process than simply applying a hand brake. In terms of the Endeavour Group going forward, that's entirely a matter for the Endeavour Board. The thing I would say is their growth options are actually unlimited. And where they decide that to be, whether it be in more Dan Murphy's or more BWS or acquisitions or whatever, is entirely up to them. The bottom line is we feel very confident that as a stand-alone company they will not be constrained by lack of growth opportunities. No more questions from the floor, yes. One more from online.

Chairman, I have a question from shareholder [ Stephen Mayne ]. The shareholder asks, which of the proxy advisers could -- have put out reports ahead of today's meeting? And are they all in favor? Could Chair Gordon Cairns also comment on whether he personally supports the federal government's proposed crackdown on proxy advisers or whether he feels the current system should be retained?

Did someone applaud? So an answer to the second part of your question: I have stated my views privately and I would remain confident in the views that I've stated. And I think it's appropriate that I state those views privately. The BCA have a position and the AICD have a position, as do the proxy advisers. And I've spoken to all of them, which I think is my obligation as the Chair. And in terms of the first part of your question, I'm going to have to ask Kate here, but my understanding is that all the proxy advisers have voted in favor of the resolution.

That's [indiscernible].

That's correct. Thank you for confirming that, Kate. Any more questions from [ Stephen ]?

Yes, Chairman.

Keep going, [ Stephen ].

Chairman, I have a question from shareholder [ Stephen Mayne ]. The shareholder asks: Brad Banducci was running the drinks business when the Dan Murphy's project in Darwin, near 3 vulnerable indigenous communities, was first proposed. Why did he keep backing it for almost 5 years despite the building opposition, which eventually became both unstoppable and embarrassing? What lessons have we learned?

So let me take that question because the decision to continue with Darwin was a Board decision. So we don't sheet responsibility home to individuals. And it was approved at all stages by the Board. We've acknowledged publicly in the Gilbert report that we could have done better and that we've learned the lessons from our failings in the past and intend to put the appropriate rectification in place. I think that's the best response. Yes?

Chairman, I have a question from shareholder [ Julian Mills ]. The question is: Congratulations on your response to the Gilbert review, the transparency and acknowledgment of the mistakes made in pursuing the Darwin Dan Murphy's store. And I encourage you to pursue those social responsibilities reflected in the report.

Thank you. We concur. Yes?

Chairman, I have a question from shareholder [ Stephen Mayne ]. The question is, did Bruce Mathieson Sr. have veto rights over the appointment of the proposed independent directors of Endeavour Group? And did he meet with all of them individually before providing his approval?

I -- the answer to that is no one director has veto rights. And therefore, the composition of the Board was done on a consultative basis with unanimity. Yes?

Chairman, I have a question from shareholder [ Stephen Mayne ]. Question says: In 2019, CEO Brad Banducci told investors the Woolworths gaming unit was about 2.5x smaller than Crown and about half the size of Star. Isn't the truth that gamblers only lost 1.412 billion on the 9,653 poker machines at the 5 casino venues run by Crown and Star in 2018, '19? What is the equivalent figure from Endeavour's 12,364 machines? And do you agree that Endeavour is easily Australia's biggest poker machine operator?

So [ Stephen ], you -- I recall you asked this question at the AGM. And I'm going to give you the same answer again, which is the treatment of gaming revenue and associated taxes is in accordance with accounting standards, which require that revenue is reported net of any taxes collected on behalf of a third party. Woolworths considers the basis -- this basis for disclosure appropriate. And our accounts were also signed off by our auditors. Another question?

Chairman, I have a question from shareholder [ Stephen Mayne ]. The shareholder asks, are there any differences between the Endeavour and Woolworths constitutions, particularly on issues such as the qualification requirements for external candidates to nominate for the Board?

I don't actually know the answer to the constitution question, but I do know that the qualifications for candidates to both boards are that they should be outstanding nonexecutive directors who have the capacity to serve on the boards and the qualifications. Yes?

Chairman, I have a question from shareholder [ Stephen Mayne ]. The question reads, the AFR reported that private equity bidders for Endeavour were spooked by the proposal to introduce cashless poker machines in New South Wales and a government-issued card for all gamblers. How big a threat is this policy proposal to Endeavour's profits? And why wasn't this risk issue canvassed in the explanatory memorandum or the independent expert's report?

I -- to the best of my knowledge, that wasn't the reason for private equities' lack of interest. So as far as I'm concerned, that was not an issue. And if that is an issue going forward, it will clearly be on the Endeavour Group's risk register and reported in their annual report. Yes?

Chairman, I have a question from shareholder [ Stephen Mayne ]. The shareholder asks, the Crown royal commission in Victoria recently discovered that Crown Melbourne had potentially underpaid around $200 million in poker machine tax. Have we checked that we are paying the right amount of poker machine tax on our 12,363 machines? And do we deduct loyalty program costs before calculating taxable revenue as Crown Melbourne was doing?

That's an operational question. I don't think it's relevant in any way, shape or form to the proposed demerger, so I propose not to deal with that question here in the AGM.

Chairman, I have a question from shareholder [ Stephen Mayne ].

So let me just check the mood of the room here. I've been very -- I think I've been very generous in allowing [ Stephen ] to ask a number of questions, but it's getting to a stage where he's dominating proceedings. And I'd like to get a feel from the room and from those online. Are you comfortable that I cut these questions off that we've...

Yes.

[indiscernible] questions [indiscernible].

Yes. I think we've had enough questions from [ Stephen ], so in the most polite way that I can: [ Stephen ], I think I've given you absolute license to ask as many questions [ as that ] appropriate, but I think we can now give other shareholders the opportunity. Are there any questions from the floor? Are there any other questions online? Well, there's a question from microphone 2.

[indiscernible] ask another question [indiscernible]...

Could you stand up, to the microphone, so that we can hear you in the room and online, if you wouldn't mind?

My name is [ Judy Ebner ]. This is just I'm getting a bit worried that I won't get a chance to ask the question I came to ask.

We'll give you every opportunity.

It's really not to do with the demerger. It's just from the point of view of a shopper, usually at Bondi Junction Woolies, where we're not going to at the moment. Has there been a decision, as far as capital goes in Woolworths, to reduce the choice and variety of products available to shoppers? I have noticed in recent -- well, recently that my favorite bread, a wholemeal grain bread covered with sesame seeds, is no longer available. You could get, at one stage, 2 loaves for, I think, about [ 3 50 ]. The other thing, my greater concern, is the creeping in of the use of plastics, particularly in the provision of drinks, juices. So for example, I have gone out of my way to buy [ Australian ] tomato juice, which has come in tins. This is no longer available. And it concerns me very much because I can see a number of shoppers, particularly at Bondi Junction, starting to go to Aldi's which is also at Bondi Junction which doesn't have the variety that Woolworths used to have but is very quick. I have no other complain about Woolworths. I find the people who work there wonderful, particularly the checkout people, and so on, but it concerns me very much, this creep of plastics.

Well, thank you for your question. I'm going to be tolerant here because normally, shoppers' questions, we refer to our retail staff who are here because otherwise the meeting could end up being dominated, but given that you're such a loyal Woolworths shopper and you obviously care and you've come a long way here today, I might ask Brad to take that question.

No, thank you for the question. Our Bondi Junction store actually has a lot of challenges, as you would know through the shape of it. And therefore, the whole entry and exit is something we need to improve, and we are working on doing that together with Westfield to change the shape. So thank you for being a loyal shopper there. We're aware that it's not the ideal entry and exit. We're actually working very hard on improving and extending the range in that store, and it should be coming through in the next 2 months. It's part of our [ up strategy ] of range enhancements, so you should see more, not less. I can't talk to the bread-specific question, but if you could just leave the details with us, we'll follow up with you on that. You should be aware that actually one of our biggest challenges as we go forward is bread, keeping bread in stock, in particular as we do more online. And we're working very hard on our systems to change that. Packaging. On that topic, we are very committed to taking out -- plastic out of our stores. And we've made a number of commitments for 2025. Again I'd need to look into the tomato juice example of the cans, but most -- if it's a Woolworths branded product, it should be increasingly in recyclable plastic. And that's certainly also true for many of our suppliers, but if that's not the case, if you could leave us the details, we'll chase that through. It's -- Certainly our strategy is to become completely recyclable on plastic in every form. So thank you. And thank you for the patience in the store. And we'll make sure, when we get it relaunched, which we do intend to, that we make sure that you get invited to the reopening.

Thank you. We also -- I'll go to one here online and then we'll come back to microphone 2.

Chairman, I have a question from the foundation for alcohol. Question is, as a major shareholder of a future stand-alone Endeavour, what does Woolworths see as their responsibility to ensure Endeavour addresses all 24 recommendations of the Gilbert review?

So thank you, FARE. Our first obligation, obviously, is to ensure that Woolworths fulfills the recommendations coming out of the Gilbert review. And in order to show our commitment, we have published them. And not only that, but prior to the report, we gave a commitment that we would do no work on the Dan Murphy's until the report was published. So we absolutely accept the report. In terms of the Endeavour Group, we will be a shareholder, but it will be up to the Endeavour Group Board to decide how they respond to the Gilbert review. I am very confident, knowing the management and the directors of the Endeavour Group, that they recognize their responsibility in the corporate social responsibility area. Microphone 2.

Mr. Chairman, I'd like to introduce [ Joanna Chang ].

I'm a shareholder since your initial IPO. I shop in Bondi Junction in Double Bay. I would like to know whether there is a [ date ] when Woolworths will replace all the plastic bags in the fresh food section with compostable bags? And I would like to have an answer, if I can, please.

Again I'm going to be accommodating here because what I don't want is to turn this meeting into questions outside of the demerger because, otherwise, shareholders who have come here will become impatient. So if we can make this the last operational question, I'll take that on notice and hand it over to Brad.

Thank you. We couldn't agree more with the need to be compostable in fruit and veg. Our customers are all [ signaling ] to us. I just wrote to everyone through Everyday Rewards. We've got 2 trials underway. We're having problems with [ compatibility ] of the bags stretching sufficiently. And then we've got to work on [ tare weights ] because, when a bag is weighted at the checkout, we've got to make sure that we don't charge for the bag. We charge for the products. So we've got 2 big issues we're working on. We've got 2 trials underway. Neither is working as well as we would like it to be. Alex Holt, who's our Chief Sustainability Officer -- with me, and we couldn't agree more. So we hope to unlock it in the next 6 to 12 months. It is surprisingly hard, I will just tell you, and it's intensely frustrating. You can buy an alternative right now, but it's too expensive at $1, which is a hessian bag. But rest assured of our commitment to try and address this as soon as we can get the technology to work to where it needs to work. So thank you. We agree entirely.

Yes. So I'll take a question from microphone 2. Now this is a gentleman who has to travel 150 kilometers to get to his nearest Woolworths, which I think is a true commitment of a loyal customer. So I'm happy to take your question as a devoted Woolworths customer.

Mr. Chairman, I'd like to introduce [ Trevor Gibb ].

Yes, apart from the traveling 150 km each way and getting blown away in the cyclone the other week. Just one thing in regards to the Endeavour: We've got Everyday Rewards on BWS. Why is not Everyday Rewards covering Dan Murphy's?

Brad?

Dan Murphy's has its own program, [ Trevor ], of My Dan's, which has actually been the highest-growth program in the group. And Steve can talk to the stats of it, but it's got just a very different structure of the program. And therefore, putting a points program together with a program that helps you discover the products that are right for you and gives you great deals on that, we just haven't managed to reconcile how they fit together. So there is no [ coming plan ]. Every day -- BWS has always been part of the program. As you'll remember, [ when it was Woolworths ] [indiscernible], there was that long history there. And we just haven't managed to get the mechanics to work [ to extend ]. In all the agreements that we have written, [ we have left the ability ], in the next 18 months to 3 years, to stand back and see how the programs should work, but as I said, My Dan's has been unbelievably successful actually inside the group, so there hasn't been the same compelling need inside Dan's either.

So there's no thought about combining it together when we're -- with part of Endeavour.

Look, it's something that we've left open in the partnership agreement. [ So at this stage ], it hasn't -- it just hasn't been needed or sort of demanded by the Dan's customers who've been getting great deals out of My Dan's.

Yes. [ Admittedly ], my closest Dan Murphy's is about 600 km away...

Okay. Well, hopefully, Steve can [ collect ] that for you in some point, but...

[ Once a fortnight then with BWS ]. That will do fine.

[indiscernible] deliver 600 kilometers [indiscernible].

It depends on [indiscernible] Gordon, so...

[indiscernible] I'll leave the economics of that to Steve. Okay, we have another question online.

Chairman, I have a question from shareholder, [ Mr. Matthew Wilkinson ]. The question reads, following the demerger, will the Endeavour Group Board be issued shares in Endeavour? And if so, will they be required to hold those shares for a period of time?

So following the demerger, the Endeavour Board will actually be required to own shares. And that -- I think I'm right in saying that, that will be 1x their Board fee. And in the case of the Chairman, it will be 2x your Board fee.

1x the Chair fee.

1x the Chair fee, yes. So the answer is yes. And obviously then the trading rules will apply equally to them and to management. Yes, another question online?

Chairman, I have a question from [ Smart Art and Design Proprietary Limited ]. The question reads, why are you avoiding questions around pokie revenue? Wouldn't a more transparent approach eliminate the repetition of the questions and help shareholders understand how much income is impacted?

So thank you for that question. I'm not avoiding the question. The reason I didn't go into detail is because we have previously stated that gaming revenue is around about $700 million, which is less than 50% of Hotels revenue. And so I didn't see the need to repeat that or go into detail, as we've already got it on the public record, [ okay ]?

Chairman, there are no further questions showing online in relation to this item.

Great. And we've got no further questions from the floor, so I'd like to thank everyone...

[ Hold on ] [indiscernible]...

Sorry. There is a gentleman who wants to ask a question.

In the booklet, Chairman, the figures show the last trading is up to 27 weeks. Can you update that a little bit better than that, how the both -- if in the event demerger goes ahead, can you give us a more update figure on...

We can't -- yes, unfortunately, sir, we cannot -- first of all, we don't give earnings guidance, outlook. We don't give earnings guidance. And secondly, that was the most up-to-date numbers that we had at our disposal. We think the market is sophisticated and you as shareholders are sophisticated enough to look through the last 2 years and see the growth in our business. And it looks like we have another question from the Australian Shareholders' Association on microphone 1. Don?

Mr. Chairman, I'd like to introduce Don Adams.

Don?

I wanted to ask an operational question like I once asked you about the lack of marmalade in the [ Newtown ] metro, but...

Hopefully, we fixed that.

No. But I would ask: Is there anything in the agreements between yourselves, Woolworths and Endeavour that would prevent you going into the liquor business at some time in the future or prevent them going into the grocery business?

Yes, Don, I think I answered that question earlier, which was we're in the liquor business in Countdown and we'll obviously continue there in New Zealand. And we have -- we're prescribed from moving into the liquor business here in Australia while the partnership agreements [ are on food ]. Okay. So thank you, everyone, for the excellent questions. I'd like to thank everyone for their contribution to this discussion. Your Woolworths Group directors recommend that shareholders vote for these demerger resolutions. I also intend to vote all open proxies I have for these resolutions. The proxy position prior to the meeting is now on the screen. So I think we can all see how the votes are going. Can people see? Can everyone see? Some people are having trouble with -- and maybe having trouble with our voting. I'll just give it a few seconds. Are we all good?

Yes.

Excellent. Thank you. Second item of business relates to the employee incentive resolution. The law in Australia restricts the benefits that can be given without shareholder approval to Endeavour team members who hold a managerial or executive office, as defined in the Corps Act, on cessation of their employment with Endeavour and any of its subsidiaries. This resolution seeks advanced approval for a 3-year period of giving of certain benefits to allow Endeavour to treat departing members appropriately, having regard to the circumstances in which the Endeavour team member is ceasing employment and in accordance with the applicable laws and Endeavour policy. Details are set out in the explanatory notice of the meeting. And you'll recall this is something that you voted on for Woolworths. Are there any questions or comments on this resolution? We have one from...

Chairman, I have received a question, but it is relating to the prior item of business. Would you like to take that question?

No. We've concluded that.

Thank you.

Okay, well, if there are no questions either from the floor or online: Thank you, ladies and gentlemen. We will now vote on the employee incentive resolution. Your Woolworths Group directors recommend that shareholders vote for the employee incentive resolution. I also intend to vote all open proxies I have for this resolution. The proxy position prior to the meeting is now on the screen. If you haven't already done so, please submit your vote now. As I said earlier, the result of the poll will be released later today via the ASX and on our website. If the demerger resolutions are passed as set out in the demerger booklet, we expect the demerger to be implemented on the 1st of July 2021. Thank you, shareholders, for joining us online, by telephone and in person. This has been 5 years in the making, and I am now delighted to declare the poll and the meeting closed. Thank you.

[indiscernible]. Congratulations. Good luck. And congratulations, Steve.