Bad blood and billionaires in the Dan Murphy’s liquor aisle

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The men who built pubs and liquor juggernaut Endeavour Group into the world’s largest poker machine operator have triggered a public spat over the future of a business that they say has lost its way.

There was no hiding the stakes, or the emotion, at the recent Endeavour Group shareholder meeting. It played out like an old-fashioned bar-room brawl between the current board led by chairman Peter Hearl and the troika who founded the liquor and gaming empire 20 years ago as a side hustle at grocery giant Woolworths – Bruce Mathieson, Roger Corbett and Bill Wavish.

Endeavour shareholder and former Woolworths chief Roger Corbett called on chairman Peter Hearl to resign. Credit: Oscar Colman

The seismic fractures between the board and the business founders became apparent last month when former Woolies executive Wavish was rejected as a board candidate.

“While I am very optimistic about the future of Endeavour, urgent action must be taken to address a period of material mismanagement and gross underperformance,” Wavish said when launching his campaign for a board seat.

Mathieson, a billionaire pub baron and Endeavour’s largest shareholder, made his feelings clear by backing Wavish – and later threatening to topple Hearl as chairman – saying the group had underperformed since its spin off from Woolworths in 2021.

Former Woolies boss Roger Corbett, who also supported Wavish’s board push, did not mince his words at Hearl’s description of the Mathiesons trying to control the business by stealth via Wavish’s board tilt.

“I stand as an independent informed shareholder. Mr Wavish is also independent. There is no attempt to get a greater control on the board. And your demeaning comments are without evidence and insulting, and I find that deeply insulting to Mr Matheson who has made a great contribution to this company,” Corbett told the board and his fellow Endeavour shareholders on Tuesday.

Hearl returned serve at Corbett, reiterating the accusation of Corbett’s “close family ties” with the Mathieson family. Which presumably includes Bruce Mathieson Jr who sits on the Endeavour board and split with his fellow directors by backing Wavish.

“He’s a friend of mine,” Corbett later told this publication of his relationship with Mathieson.

“I was chairman of ALH (Endeavour’s predecessor Australian Leisure and Hospitality) for all the growth years. I was deeply involved, so of course, I’m talking to Mr Mathieson about the loss. He’s lost nearly $600 million,” he said with reference to the share price fall this year.

“I’ve gotten involved and I’ll do everything to help him along with all the other little shareholders. It’s a disaster,” Corbett says of the share price which has sunk by 40 per cent this year to below $5 this week. The unacceptably low share price is the only issue both sides agree on.

Endeavour Group owns the Dan Murphy’s liquor chain, BWS and 354 hotels.Credit: Eamon Gallagher

Endeavour acknowledges there is work to do, including $200 million in cost-cutting over the next two years, but it sees a business that is performing well.

Corbett sees deep problems with the liquor retail business.

“The retail business has completely lost its way,” he told investors.

According to Corbett, the most recent results show comparative store sales, adjusted for inflation, “are badly negative” which indicates the group is losing market share. Absolute sales growth was also poor after taking inflation into account.

Endeavour points out that retail EBIT (earnings before interest and tax) margins have grown 5.2 per cent on a compound annual growth rate since 2019.

The liquor group says is the only logical comparison given the volatile pandemic impact from the abrupt closure of the pubs which saw demand soar at Dan Murphy’s.

The opposing arguments are significant for investors. The retail liquor business, with Dan Murphy’s as its flagship business, generates two-thirds of Endeavour’s earnings and dominates the entire sector. It is three times the size of the sector’s next largest player: Coles.

This week, Endeavour reported retail sales growth of 1.9 per cent for the September quarter, which was ahead of Coles but was still of some concern for analysts.

“Retail sales growth slowed during 1Q24 (the first quarter of 2024) as fewer items per basket outweighed increased shopping frequency and higher average item prices, with 5 per cent inflation indicating negative real like-for-like sales growth,” said UBS retail analyst Shaun Cousins.

Billionaire Bruce Mathieson has led a campaign against Endeavour Group chairman Peter Hearl.Credit: Arsineh Houspian

But they generally don’t see any indication that the retail business is in trouble.

“The Dan Murphy’s liquor chain with its lowest liquor price guarantee is well-placed to capture market share in a softer economic environment,” said Morningstar analyst Johannes Faul.

But the move to ouster Hearl, who is a director of Santos and a former senior executive at KFC and Pizza Hut owner Yum! Brands, has not dimmed as Mathieson senior made clear after the meeting where Wavish’s board tilt failed.

“While he thinks he’s saved face today, I encourage the chairman to listen to his investors, and leave the company. That is the only way we can move forward,” Mathieson said.

Corbett agrees saying the board needs retail experience to know whether, or not the business is in trouble.

“The chairman’s got to know enough about the business to hold the chief executive accountable,” he told this publication.

Mathieson made it clear after the meeting, that he still wants Hearl to go.

“My campaign won’t stop until the chair is gone. He can go the easy way, or we can show him the door at an EGM,” Mathieson said.

Hearl, for his part, is not perturbed by the thought of a continuing campaign by Mathieson.

Excluding the Mathieson’s stake, only 6.9 per cent of shares were voted in favour of Wavish’s appointment to the board.

More pointedly for Hearl, 12.7 per cent of votes were cast against the re-election of Mathieson Jr, which is not far short of the family’s 15 per cent shareholding.

“I acknowledge the vote against non-executive director Bruce Mathieson Jnr. As indicated to the ASX on 19 October, we consider it appropriate that the Bruce Mathieson Group, with its current shareholding, has a board position. However, it is important and appropriate for the board to carefully consider the shareholder sentiment towards Mr Mathieson Jnr as we seek to work constructively with our major shareholder going forward,” Hearl said.

“We recognise there are key areas for improvement. Shareholders agreed that it is crucial the board remained focused on supporting management to execute the group strategy to enhance performance and ensure the company is best placed to deliver shareholder value.”

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