Endeavour Group shares fall after slashing dividend payout ratio
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More news: Shares in Endeavour Group tumbled in afternoon trade after the company unveiled a $300 million cost savings plan and lowered its dividend payout target, despite a major consolidation restructuring of its non-core winery operations from seven sites to three.
Shares fell 5.2% to $2.92 at 2:00pm AEST.
Endeavour Group launches $300m cost-out plan, shrinks winery operations
The news: BWS and Dan Murphy’s owner Endeavour Group has announced a shake-up of its premium wine portfolio, including plans to exit or sell its non-core winery and agricultural assets and retain “strategically important” brands and assets.
The move is part of a three-year cost-reduction program, targeting $300 million of cost savings by FY29. This includes reducing its targeted dividend payout ratio from between 50% and 75% of group underlying net profit after tax. Its previous dividend policy was 70% to 75% of underlying NPAT.
Endeavour also intends to increase investment in its hotels network through targeted deployment of capital in “light touch renewals, refurbishments and whole of venue repositionings”.
The context: Endeavour’s winery operations will be consolidated from seven sites to three. The retained winery operations will comprise Cape Mentelle in the Margaret River, Isabel Estate in the Marlborough region of New Zealand, and Dorrien Estate in the Barossa Valley.
A single high-scale packaging facility will be retained at Vinpac Angaston in the Barossa Valley, with the Vinpac McLaren Vale bottling facility to close later this calendar year.
Endeavour will seek a new owner for its Oakridge brand and operation in the Yarra Valley.
Its Chapel Hill, Riddoch Coonawarra and Krondorf Barossa brands will be retained, but their vineyards and physical assets will be sold. Chapel Hill operations will close at the end of June.
Endeavour does not intend to renew its lease of Josef Chromy. Assets associated with the business are under review and a decision will be made before the end of the lease.
The group’s private label arm Pinnacle will also be reshaped into an “asset-light, customer-led” portfolio. This will include reducing its own grape production by more than 80%.
Endeavour said the move will enable “materially lower capital intensity” while preserving brand integrity and supply in key regions through long-term local supply arrangements.
What they said: “We examined the business through a number of lenses and have made the tough choices required to deliver the group’s next phase of growth,” said Endeavour CEO Jayne Hrdlicka.
“With a disciplined focus on customer value, a targeted step-up in hotel investment, a hard eye to cost and a simplified asset base, we have begun to execute our transformation.”
The sources: ASX, Endeavour Group media release
