Thanks. Good morning. Welcome, thanks for joining The Star's first half results call for FY 2023. I'm here with Christina Katsibouba, our CFO, and Mark Wilson, our head of investor relations. The plan this morning is to spend about 30 minutes or so running through our results. We'll talk to the slide pack we released this morning, then we'll take questions. If that works for everybody, we'll get started. If you could turn to slide four of the pack if you know, if you have it handy, please. To say the first half of FY 2023 continued to be challenging for The Star is an understatement. I stepped into my role on the 17th of October last year, and on that day, our New South Wales license was suspended, a manager was appointed, and an AUD 100 million fine was imposed.
On the 25th of October, the Queensland Government determined our Queensland entities were not suitable to operate casinos. On the fourth of November, our Queensland entities were issued with a show cause notice. On the 28th of November, we provided detailed response to those show cause notices. On the 30th of November, we were served with a 2,000+ page statement of claim from AUSTRAC. On the nineth of December, we received a $100 million penalty from the Queensland Government and had a special manager appointed to The Star Gold Coast and the Treasury Casino. On the 13th of December, ASIC instituted civil penalty proceedings against a number of our current and former directors and past executives. On the 19th of December, a proposed increase in our New South Wales gaming tax rate was announced, which had a dramatic impact on our share price.
It has been a tough period, to be sure. Notwithstanding the challenges put in our path, our prime focus has been, and continues to be, on returning our business to suitability, regaining trust, and rebuilding our reputation. This has seen us accept and acknowledge the errors of the past, as identified in the Bell and Gotterson reviews, to fully commit to engaging positively with our regulators and the appointed manager in New South Wales and the special manager in Queensland. We've also made significant changes to our senior team, which most recently has seen Scott Saunders, a well-experienced financial crime and compliance executive, join the executive team as our new Group Chief Risk Officer only last week. This follows Christina's appointment as our Group CFO at the beginning of January, and we continue to attract impressive talent to our ranks, which is a positive sign.
In terms of our operating results, the first half saw our Queensland properties perform very strongly. The operating environment for The Star Sydney was challenged by regulatory-driven operational changes and increased competition, particularly in the second quarter. Our underlying EBITDA for the first half was $200 million, and we achieved an underlying net profit of $44 million. This underlying result excluded provisions for fines and once-off legal costs, which are treated as significant items. Our reported result includes remediation costs of around $20 million, reflecting our continued investment in uplifting our compliance capabilities as we seek to return to license suitability. This has seen us significantly increase headcount, including third-party consultants, used as a surge resource channel to accelerate our compliance actions. On a statutory basis, our EBITDA was also $200 million before significant items.
We generated a statutory net loss of $ 1.26 billion, which includes $ 350 million in regulatory penalties, once-off legal costs, and an $ 988 million non-cash impairment charge in relation to The Star Sydney, reflecting the impact of the operational changes implemented following the Bell Review and amendments to the New South Wales Casino Control Act, along with proposed changes to the New South Wales casino duty rates. Christina will talk to our results in more detail shortly. In brief, though, in looking at each of our operations, and starting with the Gold Coast on slide 5. The Star Gold Coast performed strongly in the half, with domestic revenue up 30% on a pre-COVID level basis and generated EBITDA of $ 66.2 million.
The Star Gold Coast delivered its highest ever revenue result, with record performances across EGMs, food and beverage, and hotels. Operating costs of $ 161 million were driven by higher activity levels, new amenities, higher staffing costs, and a step up in remediation actions. Our performance on the Gold Coast was assisted by the new amenities on offer, the strength in domestic tourism, along with a general rebound in the conferences market. The Dorsett Gold Coast Hotel and The Star Residences, which opened in FY 2022, continue to perform strongly and are above forecast levels. Tower Two construction is well underway, with all apartments pre-sold. Turning to Brisbane on slide six. The Treasury Brisbane also performed well in the half, with domestic revenue up 6% on pre-COVID levels and produced AUD 46.1 million in EBITDA.
Our Brisbane team achieved record performances across EGMs, main gaming floor tables, and hospitality. Operating costs of $ 101 million reflect higher activity levels, a step up in remediation actions, and investment in management capability ahead of the opening of Queens Wharf Brisbane. Queens Wharf is expected to open in December this year, with four hotels offering 1,000 rooms, luxury retail, more than 50 restaurants, bars, and cafes, a 1,500 person ballroom, an amazing sky deck, and 7.5 hectares of public space. This project will transform Brisbane's leisure and entertainment offering. Turning to Sydney in Slide 7. The Star Sydney had a reasonable start to the half. However, in the second quarter, we started to experience some adverse impacts from increased operating restrictions following the Bell Review and amendments to the New South Wales Casino Control Act.
This saw an increase in a number of excluded patrons and a reduced level of complimentary services and benefits in private gaming areas, impacting both EGM and table game performance. We also have experienced some impact from increased competition. Consequently, domestic revenue was down 14% on pre-COVID levels, and we produced $87.4 million in EBITDA. Operating costs of $308 million reflect a step-up in remediation actions. Turning to Slide eight, there are two significant actions to highlight. Firstly, we've announced today a package of capital structure initiatives to provide a strengthened balance sheet, which will allow the group to focus on its key strategic priorities. This includes an underwritten placement of $115 million and an accelerated non-renounceable entitlement offer of $685 million.
This is all coupled with covenant relief through to June 2025 from our USPP note holders and our senior lenders. Proceeds from this raising will be used to reduce debt and increase our liquidity position. Secondly, of note, The Star and the New South Wales Government have been in discussions on the implementation of the proposed changes to New South Wales casino duty rates. The Star understands that the proposed changes will require legislation to be passed by the New South Wales Parliament, unless the New South Wales Government and The Star reach agreement. If implemented in their current form, the proposed duty increases would have a significant adverse impact on the profitability of The Star Sydney, further compounding the changed operating and competitive environment.
In such a scenario, The Star would have no option other than to undertake an urgent review of its Sydney operating model and assets. I'll now hand over to Christina to provide some in-depth commentary on our financial performance and balance sheet. I will then conclude with some comments on our key areas of focus, performance in the second half to date, and our outlook.
Thank you, Robbie. Turning now to Slide 11. I'll cover financial performance and position. As Robbie mentioned, in the six months to December, we reported normalized EBITDA of $200 million and normalized NPAT of $44 million. The numbers aren't directly comparable to the prior year, as the prior year still had COVID-related property closures. For example, Sydney was shut for 103 days, and the Queensland properties also had COVID-related restrictions in place. In reference to the pre-COVID period, Robbie has covered the performance and highlighted the very strong trading we've seen in Queensland, especially. The recorded net loss of $ 1.26 billion included significant items of $ 1.3 billion.
These significant items include the Sydney impairment of $ 988 million and provisions for fines and penalties of $ 350 million and regulatory review costs of $ 27 million. The impairment in Sydney reflects earnings impacts from the regulatory changes and a risk-weighted impact on the earnings from the proposed New South Wales duty changes. The impairment was taken against goodwill and other intangibles for $ 877 million and $ 111 million against gaming property assets. Operating expenses for the half were $ 570 million. Again, this is not directly comparable to the prior period. As we flagged at the last result, the Q4 '22 OpEx acted as a guide for the new cost base under the current operating environment.
Incremental growth incurred in the first half of this new base was as expected, including labor inflation and the additional $20 million that Robbie referenced for remediation expenses in the half. For the remainder of the year, we expect these cost levels to continue adjusting for any changes in business volumes and ongoing remediation. Whilst we are experiencing an elevated level of remediation expense as we urgently pursue our return to suitability, we expect the annualized guided number of $ 35 -45 million of remediation costs to halve approximately from FY 2024 onwards. Turning now to the balance sheet and CapEx. The key balance sheet movements include the impairment against intangibles and assets, as I mentioned, and the take-up of liabilities and fines and penalties. $ 200 million has been accrued for the New South Wales and Queensland regulatory fines.
Furthermore, a provision of $ 150 million has been made as a best estimate for the AUSTRAC civil penalties following the receipt of the statement of claim. I note, however, that considerable uncertainty still remains for this matter, and the provision should be approached with that in mind. Net debt finished at $ 1.1 billion for the half, with gearing at 2.8x . At December, the company had $ 554 million of liquidity on hand. CapEx for the half of $70 million was below depreciation and amortization of $ 101 million.
Equity contributions to the joint venture entities were $ 8 million, and this was mainly for Gold Coast Tower Two. For the full year, we expect CapEx to remain unchanged at approximately $ 150 million and JV equity contributions of $ 115 million, which includes The Queens Wharf Brisbane additional investment as previously advised. Regarding asset sales, these continue to progress. The sale of the Treasury Brisbane assets to Charter Hall is close to receiving state consent. These proceeds are expected to be received post the opening of Queens Wharf. The Union Street, Pyrmont compulsory acquisition is underway, and the proceeds are expected in the half. A profit on sale was booked in the accounts for this for $ 2.9 million in the half.
Finally, we're exploring options for the sale of the Sheraton Grand Mirage Resort Gold Coast, and a formal process on this is about to commence. Turning now to the capital structure initiatives. Today, the company announces an AUD 800 million equity raising. The equity raising is comprised of an $ 685 million 3 for 5 pro rata accelerated non-renounceable entitlement offer and an $ 150 million institutional placement. The equity raising will be conducted at a fixed price of $ 1.20 per new share, representing a discount of 13.6% to TERP of $ 1.39 on the 21st of February, and 21.1% to the last closing price of $ 1.52 on the 21st of February. Proceeds from the equity raising will be used to reduce The Star's net debt and increase liquidity.
The Star's joint venture partners, Chow Tai Fook and Far East Consortium, have provided binding pre-commitments for approximately $ 80 million, which represents their functional pro rata entitlement in the equity raising. Balance of the equity raising is underwritten. This raising is supported with covenant relief secured from both senior lenders and USPP noteholders through to June 2025. Dividends will be suspended until the company reaches its long-term target leverage range of 2- 2.5 times and returns to suitability, and all of the group's casino licenses are in full force and effect. On page 17 of the presentation slide, we have provided a pro forma net debt liquidity and gearing analysis as at December 2022. Applying such completed equity raise, pro forma net debt would be $ 341 million.
At December, gearing would be 0.8x and liquidity of $ 754 million. Together, these capital structure initiatives provide the financial flexibility to meet anticipated capital requirements, navigate a range of operating and regulatory uncertainties, and provide a platform, as Robbie mentioned, to focus on key strategic priorities. Thank you, Robbie.
Thanks, Christina. Now if you could turn to slide 20, I'll talk a little bit about our performance in the second half and our outlook for FY23. Consistent with our earnings guidance on the 13th of February, our early second half trading is broadly consistent with the second quarter of the first half. Gold Coast domestic revenue is up 24% on pre-COVID levels. Brisbane domestic revenue is up 5% on pre-COVID levels. Sydney's domestic revenue is down 17% on pre-COVID levels. At a group level, domestic revenue is down 4% on pre-COVID levels. Based on current trading performance, we expect underlying EBITDA for FY23 to be in the range of $ 330 - 360 million.
This guidance includes estimated remediation costs in the range of $ 35 - 45 million, of which half is expected to be recurring from FY 2024. Our end of year position assumes market conditions and the regulatory environment do not materially change and is dependent upon a number of uncertain factors, including regulatory settings related to complementary services in The Star Sydney's gaming areas, the level of inbound international tourism, and general consumer discretionary spending behavior. We also intend to implement a number of focused operational initiatives to improve our trading performance, which are not factored into our guidance, as they are expected to only marginally contribute in the last quarter of FY 2023.
These initiatives are estimated to contribute about $40 million annualized in the group's operating performance and include uplifting The Star Sydney's revenue performance, implementing measures to improve operating efficiencies and cost control, enhancing the customer experience in The Star Sydney, and actions that respond to the group's competitive position in Sydney, including loyalty benefits and pricing. The group will continue its urgent focus on remediation actions to support our return to license suitability. Turning to slide 22 and just addressing our priorities for the coming year. I'd like to touch on four key areas of focus. First, and most significantly, as a team, we are committed to demonstrating our suitability to hold casino licenses in New South Wales and Queensland. This will see us progressing our remediation actions with urgency, including addressing the recommendations of the Bell and Gotterson reviews.
Our key initial areas of focus are financial crime and compliance, safer gambling, governance, our culture, and our team. To this end, we will continue to work closely and constructively with the manager appointed by the New South Wales Independent Casino Commission and the special manager appointed by the Queensland Office of Liquor and Gaming Regulation. The second area of focus is our operations and in particular managing the competitive headwinds in Sydney with actions designed to drive earnings and identify operating efficiencies. Importantly, we are seeking competitive neutrality in the operating conditions in Sydney. The third area of focus is our major projects, building for the future of The Star. The centerpiece is the amazing Queens Wharf, Brisbane. This transformational asset for Brisbane is at an exciting stage as the team is gearing up for opening in December this year.
The other major initiative is the delivery of our next component of our Gold Coast master plan, tower two. Construction has reached level 20 of a final 65 levels. We have demonstrated the success of adding additional room capacity on the Coast. Sydney has exciting potential development opportunities, which we will assess when the operating environment supports. This could include a new six-star hotel, new theaters and rooftop dining. Finally, we'll continue to review our asset portfolio. As Christina said, this will see us complete the in-progress sale of our Treasury assets and our Union Street, Pyrmont property. We're about to commence a formal marketing process for the sale of the Sheraton Mirage on the Gold Coast. There are also potential avenues available to us to unlock the underlying value of the group's property portfolio, which remain of interest in the longer term.
With that, I'll hand back to the operator to moderate the Q&A session. Thank you.
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 are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Darshana from Goldman Sachs. Please go ahead.
Hi. Hi, guys. Thanks for taking my question. Just first of all, keen to dig into the performance of the Sydney Casino. Can you maybe talk about the performance through the half and how much of the weakness you saw you might attribute to competition impact or was this increased restrictions?
I might just take a, the initial hit and then throw to Christina. Look, the impact in Sydney if we bucketed it down, a third of our performance headwinds are coming from competition, a third's coming from exclusions, and that, you know, was heightened and enhanced AML processes. A third's coming through by reason of the fact that we are not able to provide the complimentary alcohol and beverages that we previously did in our private gaming areas.
Yeah, that's right. If we look at the last third that Robbie talked about, I'd say half of that is impacting slots and the other half is impacting table games. Clearly that table games customer has moved to Crown, so you need to be mindful of that when you're playing it against the first bit that Robbie mentioned, which is the third that normal competition with Crown. You know, in our view, there's an amount there which is a lot of that third bucket and some of the first one regarding Crown that we believe we can get back once competitive neutrality is restored with regard to some of these operating restrictions and the business is able to respond with its loyalty program.
Got it. Secondly, also, given that you have an appointment of manager in Queensland as well, are there any major restrictions that you're seeing in your Queensland properties?
Important to note that there are differences, excuse me, differences between the roles and responsibility of the manager in New South Wales and the special manager in Queensland. The roles are different. The manager in New South Wales actually holds the license for our New South Wales casino and operates and is responsible for the business. Actively running the business. Whereas in Queensland, the special manager is. It's a supervisory role, so more an observation role. Not actually operating the property, not actually holding the license. That does bring around some differences. If we look at it across the spectrum, I mean, we're running our business consistently across the geographies. Not a big point of difference.
We're looking, as I said, to lift all aspects of our operations so that we can regain suitability. That's applying a consistent approach to our financial crime across our markets, our safer gambling across our markets, our focus on our culture across all our people, our 8,000 team members. You know, also we're doing a root cause analysis for the instances of the past, which is covering both Queensland and New South Wales.
Okay. Thank you.
Thank you. The next question is from Ben Brown from Jarden. Please go ahead.
Morning. I missed the start of the call, I'm just wondering with the liquidity, the pro forma liquidity and the net debt and your target range, what you're implying for the rest of the cash outflows over the next 12 months, inclusive of the $ 150 million AUSTRAC provision?
Yes. Thank you, Ben. The company's long-term stated target on leverage is 2- 2.5 times. When we thought about, you know, the equity raise and the size, obviously, we spent quite a lot of time modeling various scenarios. There are things that we know about, obviously. There's lots of state regulatory fines, and we know the payment schedule of those. There are others that clearly we don't know yet. AUSTRAC is an example. Even though we've made our best estimate of that as a provision, where that ultimately ends up and the timing of that is still an unknown. We factored in those things in order to determine the size.
You know, the initial leverage, following immediately the capital raise of, you know, under 1 times is obviously not the company's long-term range. If you look at the provisions, for example, and adjust that against the year-end pro forma, you'd get pretty much close to the 2 times almost immediately.
Sorry if you've already gone through it, but any expectation on the changes of tax rates and how that would impact that gearing range? In the near term, exactly what the covenant relief packages looks like, 'cause you're paying down some of the USPP as well. We're wondering how all of that works.
Maybe I'll just talk about where we're at with the New South Wales tax changes and then might turn to Christina for the balance of the question. In terms of the New South Wales tax changes, as I mentioned, it was announced by government on the 19th of December. There wasn't prior consultation with the company. We have been, post that announcement, engaged in a constructive dialogue with the New South Wales government. We haven't reached any concluded position in relation to how the tax may be implemented or whether there's any alternate structures there. At this point in time, it's not legislated, and it's not agreed. There's two ways it can be implemented.
One is through legislation, the other is through a duty agreement between the state and The Star. That hasn't progressed. There's no legislation and there is no duty agreement. Clearly, New South Wales is heading into an election at the moment, and then the government's about to go into caretaker mode. Quite a deal of uncertainty around where that ends up, and that's really the position at the moment. We really just have to wait and see now, and wait till post the election to reengage in that consultation process and that engagement with government.
I can take the second part of the question, which I believe was around covenant relief and the application of that towards the New South Wales tax issue. With the covenants, we worked with our lenders for quite a while in securing the relief package and accommodating for the range of scenarios. You know, we obviously start with the base of what the company's long-term target range is of 2.5 times. You know, as we've spoken about, there's uncertainty not only in the timing, but also the amount of these cash flows, and an element of how much the New South Wales proposed tax changes could impact our cash flows.
Take some comfort that, you know, our banks went through quite a bit of diligence on the numbers and we worked through a package that we believe is adequate to deal with a number of downside scenarios.
Okay. You're prepared to give us some sort of covenant number, you know, what that is?
No, it's not, it's not a number that we disclose. As I said, you know, we work towards a long-term stated target of 2.5 times. Then, you know, applying the modeling on a bunch of assumptions on the unknowns is how you might think about it. We were careful not to assume the downside of everything all at once. Clearly, that is not a reasonable basis by which to do this, and so I would encourage a similar approach.
All right. Thanks very much.
Thank you. The next question is from Larry Gandler from Credit Suisse. Please go ahead.
Hi, guys. Definitely, challenging times. Robbie, my question is following up on those conversations with New South Wales Government, I'm just wondering if the company's had any conversations with the opposition and come to understand their position on this matter. If you can talk through that and maybe follow on to that with regards to the two parties' you know, the coalition and Labor Party's position on things like cashless gaming and limits. Two questions there.
Yeah. No, happy, Larry. Good to talk. I, on the dialogue we've had, we obviously do talk to all political players in all our markets. We have had conversations with independents and also with the opposition, and obviously with government. I do think the dialogue we've had to date with everybody, I think the realization is there now that The Star Sydney is a big employer. We have 4,000 people in our team. I think all political parties are now alive to the fact that it's super important to ensure that all our employees can be comfortable and secure, and that's, I think, become very obvious to all participants.
That's a positive. Look, I'm, I'm optimistic whichever way the election plays out, and that's not a matter for me, that we will be able to have constructive and productive dialogue and actually talk about the way this proposal impacts what is a, an asset for Sydney and for Australia that is trying to reform from some things that obviously happened in the past. It needs to be given the space and the time to actually transform and get itself back to suitability. I think that's super important. I think that's understood by everybody. I'm optimistic that we can navigate a path through this, but I can't give any assurance, and I don't know what that looks like.
I don't know whether it would involve the tax in its current form being modified, changed, altered, different structure, or continue as it is, which is a scenario as well. You know, that I'm pleased that we're getting engagement. I'm pleased that people want to understand the impact on the business, and I think that's a positive. On your second question and the position on carded play and cashless. You know, I think when you look at where the world's heading, I think it's the unavoidable truth that the world is moving to cashless. I think, you know, all walks of life. I think anybody that's got a view that that's not the new reality, I think is, you know, probably sticking their head in the sand.
I think post the Bell Review, the Gotterson Review, the crimes review in New South Wales, clearly, there needs to be reform in relation to cash and the use of cash. I think, we've been very supportive of the government's stance on carded play, cashless pay. We think there's a number of. I mean, operating a business such as ours and other businesses, it gives a line of sight. It helps our business develop safer gambling solutions. It helps our customers, you know, moderate their behavior if they need to do that. I think it actually has a very strong place to play in the financial crime space as well. I think it's hard to imagine a world where this doesn't become the norm across all forms of gambling.
I think that, again, everybody's on a journey here. Politicians are on a journey here understanding how it will work, understanding how it's transitioned being very important. This needs to be done in a programmed and planned way, needs to be transitioned into the industry, and it needs to be done on a competitive neutrality basis. It needs to apply, the same approach needs to be applied, across the market.
Okay. just I guess to drive at the question with regards to competitive neutrality and limits, is there major differences between the parties, as you kind of, you know, having discussions?
Look, I think people are on the journey and different people are at different stages of that journey, Larry.
Mm-hmm. Okay, it's still very much in play.
Yeah. Yeah.
Okay. Thanks, Robbie.
Thank you. The next question is from Rohan Sundram from MST Financial. Please go ahead.
Hi, Robbie and Christina. Just a couple from me. Firstly, I'm not sure if you covered this, Robbie, but can I just get some confirmation? Where is the Queensland Government currently at with their review into Chow Tai Fook, if there even is one going on as to their suitability as a JV partner?
Yeah, look, I'm not aware of, and I don't think I'd ever be aware of whether OLGR's got a review in progress. Look, I don't know. Don't know whether there is one, and I don't know what the status would be if there is one either.
Okay, no problem. Thanks anyway. Appreciate your comments on, and the color on Crown Sydney. Just, are you able to say in terms of that one-third impact, which is Crown Sydney? Maybe just some observations: Have you lost customers or are they sharing their time with Crown Sydney, sharing their wallet, or is it just a bit of both at this stage?
Yeah, it's a little bit of both, Rohan. You know, in the beginning, you would expect customers will, you know, migrate, will navigate rather to a new property. You know, absolutely like we all would go and see something new. We've got a very long history with our customers, obviously, with incumbent, they're locals. We have a deep, you know, loyalty from them. At the moment, you know, that's still very much in play. It's likely that we will probably see some sort of sharing over time.
Okay, thanks. Thanks, Christina.
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 is from Simon Thackray from Jefferies. Please go ahead.
Thanks. Good morning. Appreciate the comments, Robbie, in relation to the discussions with the New South Wales Government and the uncertainty of the outcome. You have made a billion-dollar impairment charge here, so you have made assumptions about the operations of the casino, presumably.
Continuing. I just wanna flesh out if the tax or the duty rates are imposed as proposed by NSW Treasury, whether that would see the casino actually close as a casino.
Look, in the impairment area, we've had to probably weigh effectively outcomes, right? Because it's uncertain and at the moment, what we've got is, you know, a statement from Treasury and some tax rates from Treasury. The working assumption is that's where it's at at the moment. In terms of what happens if the rate proceeds as it is, it is a scenario which would have a dramatic impact on the Sydney operations. There is no avoiding that. We've said if that were the case, we would have to take drastic measures. What that would entail, we actually haven't fully explored how we would deal with that. It does put the business in a very, very difficult position, and it would require very significant changes to the business.
Look, at this moment in time, that's really as far as we've gone. As I said, remain optimistic as we explain to people what that scenario looks like, that there is a realization that that is not in anybody's interests. I, as I said, I remain optimistic that we can have productive dialogues with whichever combination of outcomes comes out of the election, and that we can deal with that in a sensible way post-election.
Okay. I think you're getting the sense of my question. You're saying you haven't gone down that path, but it must be contemplated as to what you would have to do. I know that the measures are drastic and dramatic and involve a lot of people, but I just can't on the math you're providing, certainly in terms of the guidance for next year and the implied guidance with the remediation cost coming off and the efficiency gains. The proposed duty arrangements basically make you know, less than break even, make you completely unprofitable. What would be the scenario? What would be the alternative use for Sydney in that event?
Well we wouldn't have been talking about alternate use necessarily, but there's $ 100 million. If the tax goes ahead as it currently is scheduled, there's $ 100 million of cost in the business. You'd have to find $ 100 million of cost savings, a business with a cost base of around about $ 450 million.
The proposal would be to continue as a casino, but looking very different to the one that we're currently looking at across at Pyrmont.
Look, I actually can't tell you what it would be because we actually haven't gone down that route yet. The blunt is you're talking about, you know, $ 100 million cost out.
Yeah. Yeah. While we're just on numbers, Robbie or Christina, maybe you can help. You've put $ 150 million on AUSTRAC. Can you just help us all understand the methodology you used to determine that? Like, what was the methodology to come up with the estimate?
Yeah. Look, Robbie has talked about or will talk about sort of where the stage at is with AUSTRAC and that investigation. The statement of claim that we got has some helpful insight. You know, it goes through the number of contraventions, the severity of them and things like that. It is a helpful data point. When we also looked at precedents, previous organizations that have gone before us with similar statements of claim, and looking at their breaches, it became apparent that trying to find some sort of commonality across a very formulaic method was not particularly helpful.
Mm.
or reasonable. At the end of the day, we looked at it as a best estimate and applied something that we thought resembled what other companies have faced, which is something around size of business, size of market cap.
Mm.
size of operations, effectively.
Yeah. Okay. Basically the same methodology we're all applying as a percentage of market cap, percentage of revenue, percentage of earnings.
Right.
All right. That's helpful. Christina, while I've got you, just on, just a reminder, where are we on QWB in terms of project debt? When does that term out? When's the... I think it's five and a half years, wasn't it, for the project debt?
Yeah, end of 2025 calendar year.
December 2025. Okay. Just in terms of the, you know, we don't know what the cash flows are gonna look like, and we don't know what QWB is gonna look like, but the, what's the intention? How does the debt at the end of 2025, how do we think about that? How do we contemplate that being renegotiated at that time? What does it look like?
Look, it's something we'll need to work through, Simon. At the moment, it's sitting as principal debt against the development. In terms of our current on-balance-sheet debt, it's still off balance sheet with regard to that. We'll need to watch the cash flows, obviously, very carefully. Our expectation today is that we're still very bullish about that property. Queensland's performing very, very strongly, and, you know, that customer compared to Sydney, for example, tends to be more mass. There is a significant increase in visitation drivers up there with regard to the existing property. You know, our base case is still that That financial performance will be good, will be strong.
Okay. Thanks, thank you both for taking my questions.
No worries.
Thank you. Your next question is from Joseph Koh from Schroders. Please go ahead.
Hi. Morning. You mentioned, as one of the headwinds that you stopped serving alcohol and other sort of food beverages in the private gaming rooms in Sydney. That's, I guess, a bit of a material headwind. Have you stopped doing that in the Queensland Casino properties as well?
It's a specific issue in New South Wales, and it was called out in the Bell Review as being. The concern there was it was in breach of the inducement rules on gambling. We took the approach, given that commentary in the Bell Review, that we would cease service of complimentary alcohol in their private gaming rooms. Immediately on doing that, we sought a clearance, authorization clarification from our regulator as to whether the service of alcohol in those private gaming rooms is something that is permissible. We're awaiting that advice. Once we've got that advice, if it is such that the limited service of alcohol in those private gaming rooms is authorized, we'll resume doing it.
If it's not authorized, we expect a consistency approach in New South Wales generally.
Right. If it's not authorized in New South Wales, would you stop doing it in Queensland as best practice? How does that work?
Well, it's a legislative requirement in New South Wales, so it's a different regime in Queensland.
Right. Okay. Thank you.