Thank you for standing by, welcome to the Woolworths Group demerger of Endeavour Group analyst briefing. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Brad Banducci, CEO. Please go ahead. Good morning, everyone, and welcome to Woolworths Group's call to discuss the demerger of Endeavour Group. Joining me this morning in the room and available to answer questions later are Stephen Harrison, Woolworths Group Chief Financial Officer, Steve Donohue, Endeavour Group CEO, Shane Gannon, Endeavour Group Chief Financial Officer, and Bill Reid, Woolworths Group Chief Legal Officer. I will open with some introductory comments, and I will hand over to Steve Donohue and Shane Gannon to provide an overview of Endeavour Group, and then we will go to questions. I propose to start on slide three of the document that has been sent out, and just start by talking about the fact of Woolworths Group purpose. As a purpose-driven retailer, it's very important to us that the proposed demerger of Endeavour Group is consistent with our purpose of creating better experiences together for a better tomorrow. What we mean by together is how we work in partnership with each other, our partners, and communities. While we intend to separate the business, I can't think of a better example of better together than the ongoing partnership that we expect to have with Endeavour Group. Just turning to slide four. You will recall that shareholders had previously voted to approve an internal restructure which facilitated the merger of Endeavour Drinks and ALH to form Endeavour Group. This step was completed on the 4th of February 2020. The separation of Endeavour Group through a demerger is the final stage of the process. It was initially delayed due to COVID, but we formally reinitiated the process in February, and thanks to the extraordinary efforts of teams across Woolworths Group and Endeavour Group, we are in a position today to confirm that we expect Endeavour Group to be trading as a standalone business by the end of June. On slide five, you will see a slide that we used when we announced the potential separation of Endeavour Group in July 2019, and we continue to think that the rationale for the demerger is strong with a win-win partnership at its core. We expect Woolworths Group and Endeavour Group to benefit from simplification, increased brand clarity, and the ability to focus on areas of future growth most relevant for each business. We will work to continue to retain the benefits of the leading infrastructure built by the combined group over a number of years and partner in areas like joint food and drinks offerings, Everyday Rewards, and data and analytics. I will talk a little bit more about the partnership agreements we have in place shortly. Just turning to slide six. The demerger will create two leading ASX-listed companies, with Woolworths Group expected to remain a top 20 ASX company and Endeavour Group expected to be a top 50 company. Post demerger, Woolworths Group will remain Australia and New Zealand's leading food and everyday needs business. We are privileged to have some of Australia and New Zealand's best-known and most trusted brands, and we operate in growing and resilient markets. We're investing in building key capabilities for the future and have a strong balance sheet, which provides us flexibility to deliver value for our shareholders. I will try not to steal Steve Donohue's thunder, investors in Endeavour Group will be given access to Australia's leading drinks and hospitality business with a portfolio of incredible retail and hospitality brands and products, a legal and social license to operate, and run by an experienced management team. In terms of the mechanics of the demerger as laid out on slide seven, Woolworths Group shareholders will receive one Endeavour share for every share held in Woolworths Group. The total number of shares on issue for Endeavour Group will be higher than Woolworths Group, reflecting Woolworths Group's and our joint venture partner Bruce Mathieson Group, each retaining 14.6% in Endeavour Group. It's a lot of groups there. A vote on the demerger resolutions is scheduled for the 18th of June at a general meeting. Assuming we receive the approval required, Endeavour Group will start trading on the ASX on the 24th of June on a conditional and deferred settlement basis. Slide eight highlights the pro forma financial impact of the demerger. While F 2020 results were materially impacted by COVID, based on F 2020 pro forma numbers, Woolworths Group had revenue of AUD 53.1 billion and EBIT of AUD 2.5 billion with over 172,000 team members and over 1,400 stores. Endeavour Group had revenue of AUD 10.6 billion with EBIT of AUD 693 million, with over 28,000 team members and an incredible network reach with almost 2,000 stores and venues. Endeavour's pro forma net debt at the 3rd of January 2021 was AUD 1.3 billion, but is expected to be AUD 1.4 billion-AUD 1.5 billion on demerger. This largely reflects the drawdown of external debt to repay the existing intercompany borrowings between Endeavour Group and Woolworths Group on demerger. Shane will run through some more detail on the numbers of Endeavour Group shortly. On slide nine, you see an update on our retail ecosystem, and we've shown this before, and at the core of it are our customers and everyday needs. As I said up front, Endeavour Group will become a very important partner and allow us to extend choice for our customers, and at the same time leverage Woolworths Group's digital data and supply chain platforms in a mutually beneficial partnership. One of the differences in the context of this demerger is the number of, and the strength of the underlying partnership agreements that are laid out on slide 10. What we have done as a combined group is build strong capabilities across a number of core competencies through material investment over a number of years. We want to preserve the benefits of this capability and investment for both groups with ongoing win-win partnerships. We have partnerships, key agreements in place across supply chain and stores that relates to, in particular, the attached stores, but there's also a facilities management that supports that. Loyalty & Fintech, which is a focus around Everyday Rewards and Wpay, and also our WISH Gift Card business. Digital & Media, which is focused around provision of e-commerce services via the woolworths.com.au website primarily, plus some other marketing support agreements. Business support, which is focused around, in particular, the underlying IT platforms that Endeavour Group will leverage, and a few other minor agreements. The last set is international, which really has two components to it. The sale of Pinnacle Drinks to Woolworths New Zealand, and also some export partnerships we have in providing a shared platform in key markets such as China. I'm sure I'll get some questions coming back to the partnership agreements, and we're happy to go through them then. Just keeping us moving, on slide 11, I wanted to address what the demerger means for Woolworths Group's balance sheet and capital management considerations. Through the repayment of the intercompany borrowings, as at the 3rd of January 2021, Woolworths Group had a net cash balance of AUD 75 million on a pro forma basis. Our pro forma lease liability as at that date was approximately AUD 12 billion. We expect the group's operating cash flow and cash realization to remain strong, and we don't anticipate any changes to our credit rating targets or dividend policy. Following the completion of the demerger, the Woolworths board will consider Woolworths Group's capital management options. Subject to trading conditions and board approval, AUD 1.6 billion-AUD 2 billion could be returned to shareholders. Further updates will be provided when a decision has been made. Finally, on slide 12, in summary, we believe that a demerger is the most value-accretive path to separation for shareholders. We are confident that Endeavour Group has strong foundations for success and growth as an independent company. I would now like to turn over to Steve Donohue to give his overview of Endeavour Group. Over to you, Steve. Thanks, Brad. I'd like to start today just by thanking everybody for their interest in the Endeavour Group demerger. As I personally work towards my 30th year as a retailer and more recently, a hotelier, I do feel very privileged to be leading such an outstanding team. I'm pleased to share some details of what Endeavour Group is and our continued opportunities to grow as a strong standalone business in a new partnership with Woolies Group. If you start on slide 17, before I jump into the details, I just wanted to highlight the importance of purpose for us as an Endeavour Group team. Being purpose-led has been an important part of the Woolworths Group journey, and I believe it's the key to success of any organization. At Endeavour, we're led by our purpose of creating a more sociable future together. The bookend words "creating together" are a really important reference to the history of our organization. One which is built on an entrepreneurial approach to business, always granted in the knowledge that we're part of the communities that we serve. One of the very important learnings in the Woolworths experience has been that a purpose has to come from our team, not be imposed on them. That's certainly true for this one. When we talk to our team, they talk a lot about how they connect people through the products we provide and how we connect with customers in the places where we work, all in the pursuit of enabling great experiences. I saw that firsthand again myself on Saturday night, calling into the Crows Nest Hotel here in Sydney, which was a live example of people enjoying themselves while being offered great service. I also saw it again yesterday on Mother's Day with a family having a picnic next to us in the park, and they were enjoying a glass of red from Chapel Hill, part of our portfolio of brands. Our purpose is alive in both our team and in the lives of our customers that we serve, which I think is very powerful. Another point worth noting is that the device we associate with the Endeavour Group brand, the circle, represents the imprint that a bottle leaves behind when it touches a surface. A reminder for us that as a team, we acknowledge the importance of our personal imprints on one another and the communities we serve, and we strive every day for that to be a positive imprint. Just stepping forward to slide 19, the Endeavour Group, Australia's leading drinks and hospitality business. We're a team that are charged with being the custodians of market-leading brands like Dan Murphy's and BWS, well known to you all, I'm sure, as well as over 330 local hotels across Australia. Places that our customers refer to as their own, whether that's my Dan's or my BWS or my pub. When combined, all of these places represent Australia's largest retail and hotel network, underpinned by digital capabilities which enable deeper connections with customers, powered by Endeavour and also the thousands of drinks products that we produce ourselves in the Pinnacle Drinks business. We're at our best as a business when we combine all of our assets into a single compelling customer offer. That is, when we can get a BWS and/or a Dan Murphy's on the same real estate as a hotel or Woolies, and when we activate with great products and digital capabilities. We have a proven track record of generating some of the best, if not the best, returns in the retail, drinks, and hotel segments, which I believe provides a compelling investment rationale. Notwithstanding the challenges of COVID, in the past year, our combined business continued to deliver, with hotels quite effectively and somewhat surprisingly emerging from lockdowns. While the retail side of the business enjoyed upside benefits that they're cycling now. Noting that challenges remain given short-term lockdowns in some markets and the current restrictions in New South Wales. We've sustained a long-running expansion of the retail network while continuing to improve existing stores. Whilst the expansion of the hotel network's been somewhat more subdued in recent years, we do have strong capabilities in improving our existing hotels, with a real focus on each local market. Leveraging the network effect of the group and driving efficiencies has allowed us to grow sustainably. We're a large group with more than 28,000 team members present in just about every Australian community. Living and working in those communities requires real effort and investment to live our purpose and deliver market-leading practices with the responsible service of alcohol and gambling services. Here, we've maintained a consistent leadership position by investing in supporting our team with training, partnering with other organizations, and investing in technology. We're also proud of the efforts that our team have gone to keep each other and our customers safe during COVID events. In particular, our hotels team have experienced many thousands of regulator visits and only received two minor infringements for social distancing standards since the pandemic began. Shane will talk in more detail to the numbers, but in broad terms, our FY 2020 combined financial performance was strong at a revenue level, but profitability was impacted by the COVID effects on hotels. As Brad mentioned, we generated AUD 10.6 billion in sales and AUD 693 million in EBIT, with a swing from the usual 60/40 mix of EBIT generated by retail versus hotels to something closer to 80/20. The natural hedge between retail and hotels has played out relatively positively for the group, as we continue to navigate localized short-term lockdowns and other COVID-related restrictions. Both the retail drinks and hospitalities markets have demonstrated stability over the long term, up to the point of COVID-related impacts, which we believe will normalize into the future. Our digital platforms have already become the front door to our businesses in the retail space, and that will similarly play out in hotels. We now have a greater number of digital connections with customers than we do physical visits to stores each month, and the hotel experience is increasingly enabled by technology for bookings and ordering in-venue. Our business has been built on the strength of our partnerships with a wide variety of partners that have helped enable our growth, and the partnership agreements with Woolies will do the same. They're key to providing continuity of connection with our joint customers through the stores, loyalty and digital agreements, as well as providing services on commercial terms in areas such as supply chain and core technology. I wanted to step forward onto the topic of the areas of future growth for us. That's slide 30. Starting with the continued growth of digital engagement with customers and the returns that we generate from an e-commerce standpoint. It's worth noting that in retail e-commerce, we slightly under-share relative to our share of bricks and mortar, so we've really accelerated investments in digital, particularly over the past two years. We intend to continue to invest here with a focus on activation of the suite of digital platforms operating across both hotels and retail. As shown in the pack, the retail business has a history of network expansion, driving solid year-on-year growth. We're expecting to finish the current year having added a further 35+ stores. In fact, we're not far away from 1,400 BWS stores, and we'll have our 250th Dan Murphy's open before the end of June. I think a great example of our partnership with Woolworths is that our upcoming new Dans at Kirrawee will have a shared customer drive-through pickup facility enabled by our respective apps. We continue to grow our retail network as well as enhancing the existing footprint. Firstly, in the retail offers with new capabilities injected from our specialty businesses and new formats, including the two neighborhood Dan Murphy's stores we now have in Sydney and the Gold Coast. We'll also take a disciplined approach to accelerating hotel acquisitions where opportunities represent a good fit with our network and capabilities. Of course, we have the opportunity to accelerate the hotel fleet renewal. A large part of historical growth and certainly key to our future growth will be our continued ability to respond to emerging product and consumption trends in order to meet customers' needs. This is true across both retail and the hotels business, and importantly, is increasingly driven by the depth of our customer understanding through our digital platforms. The insights from which are applied by all of our teams across the group and drive things like new ranges and new store layouts. The recent resurgence of rosé in our stores and our leadership of the emerging seltzer category being two current retail examples. Whereas in hotels, whilst we are very locally focused, we've also taken a group-wide, three-tiered approach to our Nightcap branded accommodation offerings reflecting customer segmentation. Another area of historical focus for the group, and certainly a feature of our new growth, will be our ability to enhance end-to-end efficiency throughout the business. There's been a lot of work done across both hotels and retail in recent times, but it's also true that these two parts of the group only came together through the merger of retail and hotels just over 12 months ago. We'll continue to focus on areas where synergies can be unlocked, in particular in digital, but also across other parts of the business, leveraging our scale and making considered investments to drive efficiency. Overall, I feel confident that we've got the capacity to grow our business through a variety of levers. One of the other things that gives me great confidence is the quality of the team that we've built, and it's particularly good to have the support of Shane Gannon as our Group CFO, who's only in his second month with us, having joined from Mirvac. Welcome, Shane, and I'll hand to you now to step us through some of the numbers. Okay. Thanks, Steve, good morning to you all. While I've only been in this role for a relatively short time, I'm very excited to be involved in the journey of Endeavour Group to becoming a successful listed company, and I'm looking forward to being part of the team responsible for delivering significant value to our shareholders. As you have heard from Steve, under Woolworths' stewardship, the Endeavour Group has become a very successful company with market-leading brands, an extensive and fast-growing digital footprint, a unique portfolio of high-quality assets, and an impressive track record of value-creating growth over a long period of time. At a headline level, the business has continued to demonstrate strong growth and EBIT margin generation, even in challenging times such as COVID. We have a strong cash generation profile, which will provide the flexibility to fund dividends to shareholders, as well as support historical CapEx investment levels of over AUD 300 million annually. It is worth noting, subject to board approval, it is our expectation that we will pay a dividend for the six months ending 30th of June 2021 in the first six months of the 2022 financial year. Turning to the pro forma financials. As the periods covered by the pro forma financials have material non-comparable factors in each year, I will provide some context in the next slides in order to increase the available insights. Endeavour generates a bit over 80% of its sales from retail and 20% from hotels. It is worth noting the two are sometimes interconnected, where retail and a hotel are co-located on the same site. In terms of EBIT contribution, hotels over-index, with an EBIT margin of around 15%, and retail at around 6%, which is market leading relative to competitors. Over the last three years, the Endeavour business has delivered solid revenue growth, which has continued into the first half of the 2021 financial year. As you will have seen from Woolworths' recent Q3 trading update, that momentum has maintained in the March quarter. The EBIT outcomes in each year are characterized by some unique factors that complicate comparisons, so I'll take you through these at a high level to provide clarity. FY 2019 saw a step change in investment in a number of critical areas for Endeavour's future performance, including digital platforms, data and analytics, customer experience, and retail range optimization. This was the year in which we launched EndeavourX. We have been growing e-commerce at double-digit rates, which is a strong contributor to our retail performance during COVID. We saw a big shift to online sales. However, the additional cost incurred has put some downward pressure on margins. Our hotels business also came under cost pressure in FY 2019, particularly in the first half, which saw weaker trading conditions contributed to an under-recovery of fixed costs. This improved for the second half of FY 2019, flowed into FY 2020, until the impacts of COVID were felt in half two of FY 2020. Fiscal year 2020 was a year of two different halves. Two businesses pulled in opposite directions during COVID. The first half of the financial year was relatively soft in retail, with drought and large-scale fires over the December-January period causing nationwide disruption. From March, COVID caused a nationwide shutdown of hospitality, impacting the whole hotel portfolio, materially reducing EBIT due to the inability to fractionalize fixed costs, substantially core team, lease costs, and depreciation. The COVID retail sales surge was accompanied by a premiumization trend and stopped the price competition, which improved GP margins. This was partially offset by the higher cost of e-commerce sales, higher staffing levels to support in-store demand, and by specific related costs such as PPE. This continued through the first half of FY 2021, with hotels reopening gradually under restricted trading conditions and a second wave lockdown closing the state of Victoria for several months. Now, with respect to outlook, heading into FY 2022, we expect hotels to continue to recover subject to the easing of trading restrictions as COVID risks abate. Retail is expected to return over time to pre-COVID levels, having a short-term negative impact on retail sales growth year-on-year. However, we are confident that the accelerated shift to e-commerce we saw during COVID will be sustained, and we will continue to invest in our offerings, which also seek to optimize efficiencies. Next slide, pro forma balance sheet. As you can see from this slide, as at the 3rd of January 2021, Endeavour had a strong balance sheet, which will help support ongoing growth initiatives. Our intangible assets include AUD 2 billion of liquor and gaming licenses, which underpin our license to trade, and they are a core source of competitive advantage in a tight regulatory environment. Our freehold assets include properties for which we believe there remains development opportunities. Our pro forma net debt position at 3rd January 2021 was AUD 1.3 billion, excluding the lease liabilities. This is a cyclical low level of net debt immediately following the Christmas peak trading period before the payment of trade payables attributable to Christmas stock buildups. The next slide on pro forma cash generation. It must be noted that the pro forma cash flows have been constructed from what was a deeply integrated balance sheet with Woolworths Group, is illustrative only. In addition, COVID trading and retail has generated a consequent surge in cash flow. Regardless of these issues, I'm confident in saying that one of the strengths of this business is its strong cash flow generating characteristics. We estimate that our CapEx for the 2022 financial year will be maintained at around current levels of between AUD 300 million and AUD 350 million. Going to capital structure. As part of the demerger process, Endeavour has negotiated new banking and term loan facilities separate from those operated by Woolworths. As a listing, Endeavour's net debt is expected to be between AUD 1.4 billion and AUD 1.5 billion, which is a level which we are confident that can be comfortably serviced based on the current business and financial settings. Post the demerger, one of our priorities is to achieve credit metrics which are consistent with an investment-grade profile. Our first dividend payment is expected to be for the first six months of ending 30th June 2021, and in the range of 70%-75% of NPAT. Notably, the new Endeavour board will have discretion to review this policy over time. In summary, Endeavour is in a strong financial position. We have momentum in our existing business, which we expect to continue into the 2022 financial year. We expect the business to continue to generate sufficient free cash flow in the coming year to deliver a balanced approach to funding CapEx in line with 2021, to reward shareholders by paying appropriate dividend, and to make steady progress towards achieving an investment-grade rating. Thank you. I'll now hand back to Steve for a few concluding remarks. Thanks, Shane. Just briefly to close before I pass back to Brad and we open for questions. We're feeling positive about taking Endeavour Group forward as a standalone company. We're focused on continuing to enhance and grow our businesses and deepen our understanding of customers to better meet their needs. Through a combination of our ecosystem and our partnerships, we can focus on stability through the demerger. We'll benefit from continuing to be purpose-led and aim to drive strong financial outcomes as a group. Thanks, Brad. Thanks, Steve. Thanks, Shane. Without any further ado, we'll turn the floor open to questions, and we'll do them one per individual and then back into the queue, if that makes sense. Over to the questions. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up your handset to ask your question. Your first question comes from Grant Saligari from Credit Suisse. Please go ahead. Good morning, Brad and Steve, and thanks for the opportunity. Yeah, it is a very good day for Woolworths and Endeavour Group. My question, Steve, if I could, is just if you wouldn't mind expanding on the return on capital profile of Endeavour Group. It is fairly obvious in the numbers over a long period of time, Endeavour generates a significantly lower return on capital than the Supermarkets business. It'd be interesting to get from you some color as to why that is the situation and some of the puts and takes in that, and why you would feel confident that you would get better returns, I guess, from some of the reinvestment opportunities you talk about, whether they be retail, whether they be hotel acquisitions or redevelopment. At face value, it looks like the return on capital's been stuck at a certain level for a fairly long period of time. Thanks, Grant. Congratulations or whatever the right expression is for your new role. Let me make some introductory comments and then turn the floor open to Steve. If we look at our return on funds employed, that is very strong across the group, in particular if you look at the way our weighted average cost of capital has evolved. Both businesses generate, we think, very good returns, way above WACC, and certainly above aspirational hurdle rates as well. Quite important, I think, in particular in the context of Endeavour, is always to look through some of the goodwill from what assets we've acquired in the past and look at the underlying characteristics of the return. When you do that, you see a much better picture than you might do if you leave the goodwill in there, which is obviously a legacy issue but shouldn't confuse future investment decisions, which can be much higher depending on whether they are organic, of course, versus M&A. From where we sit as an owner historically and as a partner and as a shareholder going forward, we see a very strong spread between the return and the weighted average cost of capital, particularly if you adjust for goodwill. I'll let Steve talk to some of the opportunities that the group sees to continue to grow value for the group going forward. Yep. Thanks, Brad. Brad's right, the carrying value of licenses material on our balance sheet, that has an impact on the overall ROFE, we're a licensed and regulated business, it's also an important asset that enables the business itself. I think if you look at the, as I said, the markets we operate in the retail drink space and the hotel space, we think we deliver above-segment returns. When you look at the actual component parts, we get very strong returns from our digital investments, first up, that's why that remains a big focus for us. The renewal of the BWS fleet has been something we've been very focused on over the last few years. Really important for us, given the chance of that sort of falling out of fitness, if you like, being such a big network. We're in a really good place there, and our BWS renewals have traditionally provided us very strong returns, which is why we've had a lot of focus on that part of the business. Dan Murphy's, a lot of the returns that we've got out of Dan Murphy's has been through network growth, and we've only just started to put down a number of new formats. We've just opened our South Melbourne store, and as I mentioned, we've got those two smaller neighborhood stores. They are providing us some really interesting insights into the sort of returns we could get out of the existing fleet going forward. Positive opportunities there. With respect of hotels, I think we recognize we've got an opportunity to improve the returns in the hotel business. The hotels that we have touched or renewed over the last 12 or 18 months have delivered quite solid returns. It does give us a degree of confidence going forward. I sort of mention those all in a bit of a descending order, I suppose, with hotels being an area of real focus for us into the future. Thanks, Steve. Thanks, Grant. Thank you. Thank you. Your next question comes from David Errington from Bank of America. Please go ahead. Morning, Brad. Morning, Steve. Brad, this is a question to both of you. On my rough numbers, I mean, rough being the operative word, but your net debt to EBITDA on a reasonable level, Woolworths, even after if you paid AUD 2 billion out, you're going to be under 3 x net debt to EBITDA Woolies. Steve's going to be about anywhere between 3.7 and 4, which means that Woolies, even if you did AUD 2 billion of capital management, you're going to be still under the magical 3 number, which you need to be to be a BBB+. Steve's going to be sitting there close to 3.7 or 4. The prompt questions are. That's a statement. The questions are, one, your Woolies balance sheet, even with AUD 2 billion, is going to be unders, which means that you could do more capital, but Steve's balance sheet's going to be pretty stretched and going to be reliant upon a significant recovery. Otherwise, he's going to be balance sheet constrained for future growth. That's my rough numbers, but they're what the numbers tell me given the numbers that you've given us. Can you give some comments, is Steve's balance sheet going to be stretched for future growth? Two, after this, even with AUD 2 billion, is your balance sheet going to be unders so we can expect some more returns in the not-too-distant future? Thanks, David, and good to hear from you. You've asked one of the most important questions in the context of what we're announcing today, and obviously, it's been a topic of a lot of thought, conversation, analysis, across both businesses. I'm actually going to turn it to Stephen Harrison to talk through how we've worked through it and why we think it places both businesses in the right position to succeed going forward. I think Steve's starting with some context and color to where we sat historically with Endeavour Group and the debt levels inside Endeavour Group, what we've then refinanced, and how we're going to start thinking about the consequences of those for Woolworths Group. Thanks, Brad, and thanks, David. I think it's worth just giving some historical context. As you know, at the end of December, the Woolworths Group had external debt of about AUD 2.6 billion in a gross basis. A lot of that's obviously sat in traditionally the ALH Group and more recently, Endeavour, post the merger and restructure. In fact, the level of debt that you see in that business does reflect the level of debt historically. I've got to say, actually, the level of debt currently at AUD 1.4 billion-AUD 1.5 billion, which is what we're forecasting at the end of June, would probably be the lowest level of debt that we've had in over five years within that business. So it is in the context of these businesses are traded with a degree of leverage for a period of time. Obviously, as you look at the metrics, you are right in terms of the maths, and obviously you have adjusted for looking through FY 2020, which I think is right. You can't look at the metrics just on an FY 2020 basis because of the impact of COVID. We have looked very much at, well, what is the reasonable level of gearing for Endeavour, but ensuring that it has the capacity to service debt, continue to pay a good dividend, and also invest to grow. Our view is, and you should ask Steve and Shane this as well, but our view is that actually, with these current settings, the Endeavour Group has good access to capital and will be able to support future growth. Then in terms of how we thought about the Woolworths balance sheet in a post-demerger environment, obviously we have looked at a number of considerations. What are our balance sheet and credit settings? What is an appropriate level of headroom for us to have to fund the sustaining of the business and continue to grow the Woolworths Group? What are our external levels of debt, and should we pay down debt? That's something that we looked at, but actually, we looked at the cost of debt and the cost of some of those decisions, and we don't think that that's necessarily the right level. You point out, we've got capacity within our credit metrics to continue to return funds to shareholders. That's why we flagged actually the opportunity post the demerger and post completing all the processes in terms of tax office rulings, et cetera. To return funds to shareholders, which we've signaled is at AUD 1.6 billion-AUD 2 billion. We're just looking to flag that action in the second half of this calendar year. Ultimately, we feel comfortable with where Woolworths Group's at in terms of its credit metrics and its balance sheet settings. Equally, we're very conscious that the shareholders of Woolworths today will be the shareholders of Endeavour tomorrow, and we want to make sure that there's an appropriate level of balance sheet setting for Endeavour to support its future growth. In summary, David, we've tried to balance the two, as Steve has talked through, and those are the considerations we've put into the balance. Is Steve happy with the balance sheet of Endeavour, Brad? Well, I'll turn to him to speak for himself. Yeah, David, I support everything that Brad and Steve said. We are feeling confident about our abilities going forward to grow our business and what that'll mean for our cash flow. As Steve Harrison pointed out, it just reflects the traditional level of debt that Endeavour's carried whilst we've been part of the Woolworths Group. Yeah, we feel confident. Okay. Thanks, Brad. Thanks, David. Thank you. Your next question comes from Ross Curran from Macquarie. Please go ahead. Hi, team, thank you for the detail this morning. Steve, I was wondering if you could help us understand a bit better the hotels business, but specifically gaming and how important gaming will be for the Endeavour Group going forward. You're going to end up with 1,200, roughly, poker machines, you have 290 tabs, 250 Keno. Are you happy with the poker machine fleet? I see you've only been replacing 11% of those machines per annum. Do you need some catch-up CapEx across poker machines and gaming more broadly? Thanks, Ross. I'll let Steve talk to how we're thinking broadly around hotels and the go forward and the capital profile, which sort of does come back in a way to the question that David Errington posed. Steve, over to you in terms of where you're thinking about CapEx in hotels and the role of gaming in that. Yeah. Thanks, Brad, and thanks, Ross. A small correction, it's 12,000 gaming machine titles, not 1,200. It is a big number. To Brad's point, we do have an opportunity to think probably more deeply about the way we're renewing our hotel fleet. As I mentioned in my remarks, there's this very nice benefit that we get from developing a BWS or Dan Murphy's on the hotel site. That's going to continue to be a feature of the hotel property asset development into the future. The hotels themselves are, I think, really interesting in terms of their component parts. You're really talking about a bar offering or multiple bar offerings, a food offering in the bistro, and gaming, as well as accommodation, which has actually been, notwithstanding COVID challenges, an interesting part of the investments we've made in recent times. You're right to focus on gaming, though, in terms of the cycle of investment. The gaming machine category is very similar to a lot of categories that are operated in both the drinks and food business in terms of the need for us to keep it current and relevant and focused on customer trends. It has a fashion element to it, like a lot of categories do. The life cycle of all technology is shortening, of course. I think you're right to point out the historical rates at which we've renewed our gaming machine fleet. There's probably an opportunity for us to step that up marginally. We're not talking about any major shifts, but just in terms of trying to keep current with the expectations of patrons when it comes to gaming would be an area of focus for us in future. Thanks, Steve. Thanks, Brad, for the question. Thank you. Your next question comes from Ben Gilbert from Jarden. Please go ahead. Good morning, Brad, Steve, and team. Another one from the hotel side, because it seems like it's sort of a real opportunity in the group, but we obviously know the liquor side's been performing very well, too. Just could you give us any feeling around what sort of returns you'd be targeting on CapEx for the fleet? Maybe even, Steve, just what the average age of the fleet in terms of what's been touched. Some of the supermarket [civil funds], whatever, seven years, how the hotels are looking. Just trying to sort of put some numbers around what we could think about the uplift as you put more CapEx into that part of the business. Ben, I assume you're talking about hotels in your question. Yes, sorry about that. Yeah, sounds good. Okay, well, I'll let Steve work through and give you a sense of where he's going on that. Just one caveat, which I think is really important. In the whole topic of renewal, age is becoming increasingly hard to measure because you tend to touch different parts of a site, whether it's a venue inside ALH or even a supermarket, with a different frequency, and therefore, you sort of blend it out. So you might touch something every seven years, but actually you don't touch it once every seven years, if you know what I mean. So it's actually becoming a very hard metric to comment on specifically. But I'll let Steve talk to you where the state of the venues are and how you're thinking about investment back into them. Yeah, thanks, Brad, and thanks, Ben, for the question. Brad's right. Increasingly, it's about how much the venue's being sweated, if you like, so the footfall through, rather than the age thereof. We do look at both, and that increasingly will feed into our plans in terms of the renewal opportunities that we target. As I said, when I was sort of trying to describe the IRRs we get from our various capital initiatives, hotels does have an opportunity to improve. The hotel renewals that we've done in recent times have given us cause for optimism as to the extent to which we can continue to improve and the fact that it already delivers. Well above our risk-weighted cost of capital. We feel positive, I suppose, about our capacity to do it. I won't give you a specific number, but suffice to say, it does offer us positive returns. Another point just worth noting is we have this propensity as a finance team, I'm including myself in that somewhat, to try and disaggregate our hotel and retail business. You've got a Dan's on a site with a pub. We're sort of narrowing down, trying to understand the returns from gaming and separately the returns from the bistro, for example, when in fact, all of them are interrelated. As I said again in my opening remarks, a lot of the benefits that we get are from the aggregated set of numbers. We spend a lot of time trying to pull them apart and then put them back together, all in pursuit of building the best local pub we can and activating the optimum retail offer associated with it. It's a funny one, Ben, just in general, there's a lot of sound and fury that goes on inside Woolworths around return on capital. We sit invariably with opportunities that are 10% +, and our issue is really executing more than it is anything else. That's in the context of a weighted average cost of capital that has trended down, and you will have seen in the documents, and the cost of financing the debt into Endeavour Group, which is well under 200 basis points, as you'd understand. Our real challenge as a collective has generally been and continues to be whether Woolworths Group or Endeavour Group actually executing well, not necessarily the underlying return we get. We started the renewal journey in Supers, then it was into BIG W. To Steve's point, we're really seeing some great ones now in Dan's, being a bit more creative inside what it is we're trying to do in Dan's, a small one or a real up one that is in South Melbourne. The same forensic attitude is now starting to be applied into the venues, which is good. We still today and in the future, will still need sharing learnings and capabilities of the format to renew across both businesses on a go-forward. Defo. Thanks. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Andrew McLennan from Goldman Sachs. Please go ahead. Good morning, everyone. Excuse me. Just wanted to know if there's been any major impact to the franking credit balance post the transaction, and if you could also rule out the dual-track process. Thanks. Thanks, Andrew. Good to hear from you. The first bit was on the franking credits. We might just need to come back to that. Make sure I understand the second one. I'll let Steve Harrison just talk to the franking credit question. No, Andrew, and appreciate we've put a lot of pages out for you to read, but at the end of December, franking credits within Endeavour Group were in the magnitude of AUD 600 million. That is just a function of the fact that within ALH, prior to the merger and restructure, it effectively sat outside the Woolworths tax group and therefore had its own franking credit balances for the tax paid. Has that therefore made an impact on the sort of magnitude of the potential capital management within Woolworths? No. That's been a separate consideration. We've looked at that much more through the lens of what does the Woolworths Group need moving forward and what are our appropriate credit fees at the right level of headroom. It's not been a key driver of that consideration. Okay. Do you want to clarify that question back for Brad on, I think you were after the dual-track process. Yeah. No, I assume it's a pretty obvious answer, but just wanted to confirm that there'll be no further progression from a potential corporate sale process. I can't hear you very well, Andrew, but let me assume that you're talking to the dual-track process, and whether we're still considering it. I think you can see in the documents there's been a lot of conversations between our joint venture partners, the Endeavour Group board, the Woolworths board, and as we sit today, our recommendation is to proceed with the demerger, and we're hoping and would urge our shareholders when the vote comes on the 18th of June to support that proposal. That's balancing a whole range of considerations for what we think is in the best interest of our shareholder on a go-forward base. Right. Okay, thank you. Thank you. Your next question comes from Scott Ryall from Rimor Equity Research. Please go ahead. Hi there. Thank you. I came on a bit late. There was another call, so apologies if this has been asked already. I just wonder, Steve, if you can clarify, give me the elevator pitch on Endeavour Group. Is the major opportunity that you've got as a separate entity because you've now been able to integrate ALH and therefore run them as a portfolio, as you've been describing with your answers to a couple of questions? Is it the fact that this business has received insufficient capital under the Woolworths ownership, which is one of the typical reasons for demerger? Is there something else that in the high-level pitch that you'd give to shareholders to retain their stock post-demerger that you think I've missed there? Well, Scott, let me just start, if I may, and then pass it over to Steve. We have been talking about the various aspects of this transaction since June 2019, and in the document we sent out, there are many stages to it all, which collectively layer up to the wide tier of the benefits. One of them clearly was in our Stage 1, or sorry, in Stage 2, was the merger between ALH Group and Endeavour Drinks. You could create one Endeavour Group. That was a key part of trying to create simplification given some of the duplication that had emerged over time through the way we operated both groups. We've sort of had the elevator speech, I guess, going on for varieties of ways over quite a long period. That is one aspect of it. In the document, you'll see on pages four and five some of the detail for the rationale, but I'll let Steve come back to, from where we sit today, what the benefits are. Thanks, Brad. Thanks, Scott, for the question. I think if you go to the presentation pack and have a look at slide 30, the point you were making is really the bottom right-hand corner of that slide, talking to enhanced end-to-end efficiency. Sure, you're right, there are opportunities for us to bring synergies to the ALH business and the former Endeavour Drinks retail business. We're progressing our thinking on how we're going to do that. There's also a lot of opportunities for investment in technology that is going to help us streamline the business as well. Really, that slide 30 constitutes the elevator pitch, if you like, in its most succinct form. Growing digital engagement, expanding the network, and enhancing the existing footprint of stores and hotels, as well as staying very close to customer needs. That's true for both retail and hotels. The deep focus on understanding our customers and reinvesting in our offers in both our stores and hotels, so as to increase their propensity to return to our business is really the flywheel of where we'll focus our investments going forward. Thanks, Scott. Thank you. Your next question is a follow-up from Grant Saligari from Credit Suisse. Please go ahead. Thanks for the opportunity. Well, actually, just two follow-ups if I could. Just one on the freehold property in Endeavour Group of AUD 600 million or just below that. Could you give some sense as to what proportion of that is in hotel freeholds that might be available for redevelopment versus sort of other property that might be, for example, upstream in manufacturing or vineyards, et cetera? I think that would help understand the opportunity. I'm not sure I fully followed the question, Grant. Do you mind just repeating that? Okay, I'll try again. Sorry. In Endeavour Group, you have AUD 600 million of freehold property. I was wondering whether you could indicate basically what type of property that is. Got you. That might be sort of hotel freeholds versus, as I said, manufacturing or vineyard. Yeah. Freeholds. I'll turn to Steve. Yeah, I've got it. Sorry. Sorry, Grant. Thanks. It's predominantly pubs. There's only a handful of retail sites included in that number. They do represent opportunities. The primary focus for us is to deploy the existing assets and capabilities we have in terms of hotels and retail. We will be thoughtful down the track about other development opportunities. Okay. Just one other follow-up, if I could. Just on the networking capital balance, you did mention that payables obviously elevated in the first half accounts given Christmas trade. Could you give us a sense of what a more normal period in networking capital might be or what it produces throughout the year, just so we get a sense of sort of how much extra cash there might be in networking capital? Thanks, Grant. I'll turn to Steve Harrison, just to talk about the working capital position. Over to you, Steve. Yeah, Grant. Just some color. Obviously, Woolworths Group and our food businesses operate a negative working capital cycle, whereas in Endeavour, we'd have a net investment in inventory over time. We would typically be in the magnitude of sort of 70 days of inventory. That may fluctuate, but that sort of reflects inventory across our stores, our DC network, our Dan Murphy's cellar program, and equally some of our Pinnacle own brands and some of the wine inventory that we hold through the cycle. We typically run payables in the mid-40s. You are looking at a net investment in working capital. Net investment inventory. It is a low point in December just because you typically buy a lot of stock, you sell it through for Christmas and New Year, but you still sit on the payable at December. That would unwind. I think that's reflected in partly our signaling of where the net debt was at the end of December, which is around AUD 1.3-ish billion, and it's more in the AUD 1.4 billion-AUD 1.5 billion range expected at the end of June. I think a lot of that reflects that shift in working capital cycle over time over that half period. Thanks, Steve. Thanks, Grant. Thank you. Your next question comes from Phil Kimber from E&P. Please go ahead. Hi, guys. My question was just, and apologies if it's buried away in the documentation. When we think about going forward, are there any dis-synergy, stranded costs, extra costs that we should assume? Do we just simply take what we had previously been forecasting for the division as part of Woolworths, and that's a good guide? Is there actually some costs that we should think about that will occur upon separation? Thanks, Phil. There are the direct standup costs that you will see called out in the document of Endeavour Group being a separate listed business, and you can see the number of just under AUD 50 million, I think it's AUD 47 million for that. What we've done with the partnership agreements is be very thoughtful to make sure that both businesses can leverage the infrastructure of Woolworths Group, but in the short term, also offset what could otherwise be seen as a stranded cost. In these partnership agreements, if Woolworths Group does not perform in line with expectations of Endeavour Group, those partnership agreements have the ability to be unwound as they should. That could cause some challenges down the track for Woolworths Group, but that would be entirely of its own making in terms of its performance level for Endeavour Group. If there was, there would be an ability over time, there would be enough time in any of the unwind for Woolworths Group to adjust how it managed cost in the context of the service provided. No, there aren't anything material, Steve Harrison, or I'm missing anything? No. Thank you. Your next question is a follow-up question from David Errington from Bank of America. Please go ahead. Brad, this is a difficult question to ask, but a very important one, and it's on the makeup of the board, and also the corporate governance. I'm trying to work out Colin Storrie, what his position is. Is he going to remain on the board or what's he going to do? I suppose the question is. I know that the Mathieson Group have been outstanding contributors to this group and created a lot of value. There's no question about that. It is going to be a public company now. It is going to stand on its own two feet. Is it appropriate that you've got a father on the board and a son managing the hotels group? How are you going to manage that? How's Steve going to manage that situation? What went into the consideration of the board? Thanks, David. A really important consideration. Let me just go to the facts. Then we can come back to some of the other questions. What was agreed very early on in this process is that given both BMG and Woolworths Group all hold 14.6% of the business, each business would nominate one non-independent director onto the board. In the case of Woolworths Group, that is Holly Kramer. In the case of BMG, it's Bruce Mathieson Senior. That was part of the original agreement that we struck. Both have the prerogatives of doing that. I have mixed emotions on Colin Storrie actually being on the board because as you will note on slide 14, he's listed as a non-executive director and actually as part of him moving on to the board of Endeavour Group, he will be transitioning out of a full-time executive role at Woolworths. He's done an amazing job for us over the last five years. It's rather bittersweet to having him sitting there as a director in his own right. We're very pleased for him to do that. He will not completely sever his ties with Woolworths Group and will still continue to be on the board of Quantium for us, which he so ably helped us just change the shareholding and hopefully and also in the context of PFD, assuming that deal goes through as outlined. That's Colin Storrie's role, and I think I'll speak for Steve Donohue and Peter Hearl as well. Given Colin has been central to the Endeavour board in its current structure or the ALH board before that, and has actually chaired the audit committee for that board for us, having his institutional knowledge on the board on a go-forward basis is enormously helpful. The documents also should outline, by the way, David, that the Endeavour Group board is looking to appoint one more non-executive director to the board, and that will take place in the next few months. That would then give a balance of independence onto the board, which is important. Other points I guess I could make on the board would be Peter's put a lot of time and balance into what you see presented there, and there's been a lot of dialogue, as you might imagine, between him and the directors elect and the Woolworths board to be comfortable with the balance of it. Each member of that board has signed an undertaking of being very committed to preserving the independence and objectivity of that board, and that includes Bruce Mathieson Senior. I guess if there's a last point, it's good to see another person being the chairman of the board because I will then step down officially on the 28th of June and Peter will take over. I'll be very pleased to see the independence and veracity that Peter will bring to the role. The management of the hotels group? That is for Bruce Junior. Look, we've managed through this perceived conflict for 20 years, David. Bruce has committed to independence. We manage it on an everyday basis. Having that operating experience inside the business is enormously valuable to us. As you well know, there's huge institutional knowledge in Bruce Senior and Bruce J unior. As I can honestly tell you, as the Chairman of the Board at the moment, it is something we manage, I think particularly well. It doesn't mean we're not aware of it and don't put in place the right protocols. It is something that I think is all eminently manageable. I won't put Steve in the position. Well, Steve, anything you'd like to add? Support your comments, Brad, and just, I guess, David, point you back to your own comments about the track record that both Bruces are behind them, and we're the beneficiaries of their knowledge across the group, and Bruce Junior very ably leads the hotel team. Thank you. Your next question is a follow-up question from Scott Ryall from Rimor Equity Research. Please go ahead. Hi, thanks very much. That was my macro question before, and my micro one is just, you started talking about your inventory before. I don't know, I can't remember a time where there's been more cheap wine on the markets in the channels that I buy through. I was wondering if the current operating environment for wine where export markets are difficult, restaurants are not yet back to full throughput, is that a risk to your inventory position or is it an opportunity because of your channels to bring better value to market, please? Scott, I'll let Steve talk to it. Conceptually, as a retailer, if you look at our inventory holding and our inventory turns, conceptually, opportunities in the upstream like this are opportunities for retailers, and that's no matter whether we're food or a drinks retailer. I'll let Steve comment specifically on where we are in a wine cycle in Australia. Yeah, Brad, you would be in a bit of trouble if you held 70 days of inventory, right? As a retailer. I'm more interested as a liquor customer. As a wine customer, my personal capacity, I hold 24 months. Everything's relative, right? Yeah. If you want to sell to a restaurant, you're on 80 days payment terms. Everything's relative. Sorry, Steve. You've upset Brad. Make me anxious. A very brief comment on the state of the wine market. There was actually some press over the weekend, actually pleasingly, about the quality of V21, which we think is great for the industry, and we're a material participant in the industry, I might add. We think that's very positive. You point out some of the pricing fluctuations. Really, the impact of China has had some downward pressure on some of the more premium regions, like Barossa, for example, where there have been declines. You're probably also aware of very strong demand, in particular from the U.K. market, and that's seen a real underwriting, I think, of pricing of some of the more value end of the wine spectrum. SEA, Southeast Australian prices, have held up relatively well when compared to some of those cooler climate, very premium regions. We also have this interesting situation playing out with New Zealand, and we are a material customer of New Zealand wine, particularly marvelous Sauvignon Blanc, and we've got our Isabel Estate team over there who do a lot of our very large-scale sourcing for us. There's actually a lot of pressure on pricing for New Zealand Sauvignon Blanc, predominantly because of a bit of a shorter vintage and a lot of demand coming out of North America. Like all markets and all segments, there's a lot of puts and calls, and it's very much true for the wine business this year. I'd just reiterate the point about how pleased we are that the Australian producers have had a voluminous vintage and a high-quality vintage this year. I think that's good news for everybody. Great. Thank you. Thanks, Steve. Thanks, Scott. Thank you. Your next question is a follow-up question from Ben Gilbert from Jarden. Please go ahead. Hi. I'll take just a final quick one from me. Brad, just interested, did the board discuss potentially lifting the payout ratio for Woolworths Group now you're obviously going to have different inventory cycle, different working capital cycle, and gearing is obviously looking relatively conservative as we talked to before. Was there any discussion around lifting it out to 75%-80%+ type number? Thanks, Ben. A good question about the dividend ratio for Woolworths on a go-forward basis. I'll turn over to Steve Harrison to comment on the discussions we've had. Yeah, Ben, to this stage, there hasn't been any discussion with the board about changing our payout ratios. It's a long-established ratio of paying out between 70% and 75% of NPAT, which we feel gives the right balance of being able to continue to sustain the business, invest to grow the business, but also give a strong dividend to our shareholders. To your comments on working capital cycle, whilst we're a net negative working capital, ultimately, the cash generation and the movement of that will be how does that change over time. At this stage, there's been no discussion about any change. Thank you. Thanks, Ben. Thank you. There are no further questions at this time. I will now hand back to Mr. Banducci for closing remarks. Thank you everyone for joining us this morning and for your questions. We realize there was a whole lot of documents sent to you, so apologies for the nature of the process that hopefully you will find in the detail of the demerger booklet itself or in the management presentation, all the details that you need to understand why we think this is the right decision to make for both businesses and why we strongly support Endeavour Group as a separately listed public entity in Australia. Thank you very much and speak to you all soon. Thank you. That does conclude the conference for today. Thank you for participating. You may now disconnect.