Hi, everyone. I'm Jason Walbridge, Chief Executive Officer of SkyCity Entertainment Group. Welcome to SkyCity's presentation of our full-year results for the financial year 2025, plus the raise of $240 million of new equity we announced to the NZX and ASX this morning. Before we begin, I would like to acknowledge the Tangata whenua of our SkyCity sites: Ngāti Whātua Ōrākei, Waikato- Tainui, and Ngāi Tahu, and acknowledge the Kaurna people, the traditional custodians of the land in Adelaide. With me today in Auckland is Peter Fredricson, our Chief Financial Officer, and Callum Mallett, our Chief Operating Officer. On the call today, we will be going through two presentations.
Firstly, we will speak to the 2025 financial results presentation, and then move to the presentation entitled Equity Raising and Balance Sheet Initiatives. We do have a significant amount of material to cover, and we'll wait for questions until the end of both presentations. Let's move to slide four for an overview of our results. The result is in line with the guidance we provided on the 6th of May 2025, and I'd like to call out some specific numbers. We were pleased to see visitation across the group's properties increase nearly 5% over the year, with most of the increase in Adelaide. This tells us that we're offering products and services that appeal to consumers. However, revenue was down 5.2% on an underlying basis, or $45.3 million, with total gaming revenue down 8.4%, or $53.7 million, with lower revenue across both gaming machines and tables.
This lower gaming revenue is due to the challenging economic conditions, particularly in New Zealand, and enhancements to our AML and host responsibility processes, particularly in the second half in Adelaide. Our online gaming revenue was impacted by competitors continuing to advertise to customers, which is not permitted under the current regulations. The lower revenue had a significant impact on the reported FY 2025 EBITDA of $216.1 million, while underlying EBITDA of $233.7 million adds back the Building a Better Business, or B3 costs in Adelaide, of $17.6 million, which, as we have discussed with you in the past, we consider to be one-off and will end in June 2027. In response to the lower levels of revenue, we are looking at ways to reduce our costs. A number of initiatives have been identified, and Callum will talk more to these shortly.
A 20% reduction in EBITDA per visit is a good summary of how these different factors have impacted our earnings. At the net profit after tax level, the difference between reported and underlying is due to adjustments for the B3 costs, the penalty interest incurred from the settlement of the South Australian casino duty matter, and changes to the New Zealand deferred tax treatments. Overall, the reduction in FY 2025 earnings is disappointing, but the team is working incredibly hard to manage the lower levels of revenue through cost-saving initiatives and operating the many parts of our business as efficiently as possible. You will see we have provided our debt covenant metrics based on both an underlying EBITDA basis plus under the terms of our banking covenants. We will talk more to these throughout both presentations, and I also refer you to the appendices for more detail.
Turning now to slide five, I'd now like to call out some of our significant achievements for the year. In Auckland, the opening of the Horizon Hotel in August 2024 and the confirmation of a February 2026 opening date for the New Zealand International Convention Centre are critical milestones for our Auckland precinct and set us up for a return to growth in earnings. We have spoken to you about the move to carded play across our casinos in New Zealand, and this is a very significant challenge for our business, and was successfully rolled out in July. This involved an incredible amount of work by many members of the team, and the impact on our uncarded revenue is in line with our previous guidance. Callum will talk more to this shortly.
As part of the rollout, we also launched our rebranded loyalty program called Show by SkyCity, which has been very well received by our customers, with many existing customers changing over to the new program. We're continuing to see good growth in our active customers each week. We've also spoken about the opportunity we see from the regulation of the New Zealand online gaming market, and during FY 2025, we continued our ongoing investment and our capability ahead of the proposed launch date in the second half of 2026. We have continued to make progress with the remaining regulatory matters in Adelaide. We settled the South Australian casino duty dispute during the year, and Mr. Martin completed his independent review in May 2025, finding SkyCity Adelaide suitable to hold the casino license and SkyCity Entertainment Group suitable to be a close associate.
We are now awaiting a response from the CBS commissioner on his final determination. The investment we are making in the B3 program will significantly uplift our AML and CFT capabilities and gambling-related harm minimization capability, plus implement a cultural transformation across our business. In our first year, we have made significant enhancements in terms of leadership, resourcing, and systems. This includes a commitment to invest $60 million over three years, and our team has worked hard to raise our standards better to meet our obligations and improve how we look after our customers. Turning now to slide six. As mentioned earlier, we've seen an increase in the total visitation across the group, predominantly in Adelaide, and we are encouraged with the levels of visitation, which we believe confirms we have an entertainment offering that appeals to a wide range of customers.
The reduction in EBITDA is driven by a range of factors, as I've previously discussed. We do expect to see an improvement in spend levels, particularly by our New Zealand customers, as the economic recovery gets underway. Our current focus is on managing the cost base to minimize the margin impact, where possible, from the lower spending levels, but ensuring we maintain the service levels to provide the experience our customers expect. I'll now hand over to Peter Fredricson to discuss our group financial results in more detail, starting on slide eight.
Thanks, Jason, and good morning, everyone. This slide provides an overview of our financial result, and I'd like to call out a couple of points. We've seen an increase in people, risk, and other costs of $17 million over the prior period, with some of that increase due to the opening of the Horizon Hotel and as a result of having to take back the Auckland Car Park concession. However, a large part of the cost increase is from our ongoing investment in enhancing our AML and host responsibility capability in response to the increased regulatory emphasis that has been in our business over the last couple of years. We've looked to reduce costs in a way such that our customer service levels will not be compromised, and we've made good progress across marketing, property services, and other operating costs, with savings of around $19 million achieved during the period.
We remain very confident that further cost savings will be achieved during FY 2026, and Jason will talk to this a little later in our outlook slides. This slide also highlights the reduction in our EBITDA margin from the combination of lower revenue and a change in mix in revenues. In particular, this reflects lower gaming revenue across each of our businesses. Arguably, this lower revenue, which is typically delivered at a higher margin, has been driven by our increased compliance activity and will be further impacted in FY 2026 by carded play throughout New Zealand. These impacts are now fully embedded in the FY 2026 guidance that we have provided and that Jason will speak more to later. Now I'm going to move to slide number nine. This slide provides a snapshot of our balance sheet as at the 30th of June 2025.
As you can see, our debt currently remains within bank covenant levels at 3.1x . We will speak to the impact on our debt metrics from the capital raise shortly. As of now, net debt for the year is at $756 million, is some $100 million above the previous period. This increase has arisen from the drawdown of the 2031 USPP that we entered into in August 2024. The primary reason for the need for that drawdown and the increase in debt is the payment of historical fines to Oztrak in the first week of financial year 2024 in July, followed by a payment of penalty interest on the historical South Australian gaming duty dispute in January of 2025.
Notwithstanding the overall higher interest rate year-on-year basis, due to those new bonds, we have benefited in the second half and are continuing to benefit in the second half from reducing interest rates in respect of bank drawn debt in particular. Leveraging at 3.1x from a covenant perspective and 3.2x at underlying EBITDA level remains above our comfort levels, and absent the capital raise that we will talk to later is expected to trend higher in the coming months, putting the business at risk of breaching covenants if not addressed earlier and through the equity raise that we will talk to later. Now on slide 10, this slide highlights the key events that have seen our debt levels get to their current elevated levels.
Whilst we consider these to be one-off non-operating events that should not be expected to occur again, they have nevertheless contributed materially to the position that we find ourselves in today, with debt metrics likely to trend toward and possibly above covenant levels in the short term, absent us taking the actions that we have announced today. What you see here is $300 million of debt differential year- on- year between end of FY 2023, where debt was at $443 million and 1.5x EBITDA to today, where debt is at $757 million, $311 million higher, effectively at 3.1x . Without these three payments in respect of legacy matters, we could have expected net debt to EBITDA for FY 2025 to have been in the order of 1.8x but in any event, certainly below 2x EBITDA.
The high debt levels driven by these payments, coupled with the current challenging trading conditions, have necessitated the capital management actions that we are taking today. We, in consultation with the board, have considered a number of actions that could be taken, but the capital raising today is the only one amongst those that guarantees an outcome that delivers longer-term shareholder value in our view. Turning to page 11, slide 11, notwithstanding the capital management issues being undertaken today, the business retains an ability to generate positive operating cash flows absent the cash drain of extraneous historical or legacy charges. Whilst the current level of underlying cash generation has been impacted by the weak economic conditions in New Zealand and elevated operating costs, our business generates strong cash flow driven by underlying earnings.
In FY 2025 our cash flow was impacted by regulatory penalties and penalty interest on the casino duty settlement payment, which materially impacted cash flow. The normalization of FY 2025 operating cash flows by backing out these extraneous payments shows the operating cash flows can comfortably cover our stay in business CapEx and ultimately deliver operating cash flows for normalizing future returns to shareholders over the longer term. With that, I'm now going to hand over to Callum, who will discuss the operating performance of each of our businesses.
Thank you, Peter. Good morning, everyone. Turning to slide 13, it has been a challenging year for our flagship Auckland property, with a continuation of the difficult economic environment impacting consumer spending. Pleasingly, visitation has held up well, particularly when we consider we held the FIFA Women's World Cup in Auckland in July and August of 2023. Lower revenue, particularly in gaming, has been challenging to offset through cost reductions, which has impacted our margins. Whilst non-gaming revenue was higher than the prior period, this is primarily due to the opening of the Horizon Hotel. We have been very pleased with the performance and feedback we have received of this new addition to our precinct, particularly when we consider the difficult market conditions the Auckland hotel market is experiencing.
We continue to outperform our competitor set on occupancy, but an impact on average daily rates across the market from the oversupply of rooms in Auckland. We have been very focused on ensuring we continue to adjust our operating model and cost base, where possible, to counteract the challenging operating environment. The refurbishment of the production kitchen is complete, allowing us to improve productivity for the site and ensuring we have the capacity to meet demand when the New Zealand IC C opens. We've also opened a batch cocktail making facility and converted the Sugar Club space in the tower to a third observation space, the Lookout, allowing us to grow capacity and average ticket price. We continue to invest in automation across the business to improve productivity and reduce labor.
Despite the economic headwinds, our food and beverage offering continues to be popular, evidenced by recognition for a number of our restaurants at the recent Cuisine Awards, including Matita, being named the best hotel restaurant in New Zealand. Turning now to slide 14 and the upcoming opening of the New Zealand International Convention Centre. We are well underway with our planning and ready for the commissioning and testing of key systems following handover from our contractor. On this slide, we have provided some of the key statistics associated with this iconic building. Amongst its many features, its flexibility and scale are proving very attractive to our prospective customers. A strong pipeline of committed and prospective events, including a total pipeline of 76 events for FY 2026, have the potential to attract over 100,000 visits this financial year.
We remain focused on ensuring our marketing approach and wayfinding will maximize the benefits of these extra visitors across our precinct. The opening of the New Zealand IC C will grow Auckland's share of large-scale conferences, events, exhibitions, and concerts, and combined with the planned opening of the City Rail Link in 2026, will significantly improve the attraction and accessibility of our precinct. Turning now to slide 15, Hamilton and Queenstown delivered performances in line with our expectations, seeing the trends we spoke about in February's half-year results announcement continuing in the second half. Visitation to the Queenstown Casino was a hit off last year as tourism continues to grow in the spectacular region, while Hamilton Casino visitation was marginally lower compared to the prior year period. Both key gaming metrics were lower when compared to the prior period, reflecting the challenging operating environment.
Management teams continue to adjust their operating models to ensure we maintain service levels and margins. In Queenstown, we completed the sale of the surplus land and have commenced the casino license renewal process with a hearing with the Gambling Commission planned for November 2025, and plans have been confirmed for an additional outdoor gaming balcony in Hamilton. Turning to slide 16, during July, we successfully implemented carded play across our gaming activities and our New Zealand casinos. As with any project of this type, there were teething issues along the way, most of which have been resolved, and generally the process is working very well. We have the sign-in process for new card holders down to between three to five minutes when using the kiosks and slightly longer when enrolling via one of our staff. This compares very favorably to the experience at some of our competitors.
I would like to remind everybody that there are no other material changes to how our customers play at SkyCity. In particular, they are still able to play with cash, QuickPay, or Teto. I can confirm our previous guidance regarding the impact of carded play, which is equivalent to $20 million to $30 million lower EBITDA in FY 2026. We also launched Show by SkyCity, our new loyalty program, as part of the carded play rollout, with initial reaction from our customers being very positive. Turning now to Adelaide, slide 17. It has been a year of two distinct halves in Adelaide. The first half saw good revenue growth offset by increases in operating costs, while in the second half the enhancements made in our AML and host responsibility processes have seen an increase in customer churn, particularly with our VIP customers.
This has seen us lose some market share as players who have chosen not to play at the Adelaide Casino are able to visit alternative facilities that don't have the same processes in place. We're focused on signing up new customers that partially offset these losses, but these new players tend to be at lower levels of play. The interstate market remains a key opportunity, and significant work continues to attract these customers to our precinct, especially on the back of the strong event calendar South Australia has. Management remains committed to our B3 program, and we are moving at pace to meet the program of work that was agreed with Kroll and CBS. Thank you, and I will now hand back to Jason.
Thanks, Callum. SkyCity Adelaide is a great property. Its casino, hotels, restaurants, and conference space make it a vibrant precinct and a prime location. We've certainly had a number of challenges and still have a few to work through in Adelaide, and the remaining significant piece of work underway, our Building a Better Business or B3 program, is designed to improve and uplift our culture and operations, and we're certainly turning our focus to improving our financial performance there. The recent positive suitability findings from the Martin report do demonstrate the progress that we are making. We will now move to the second presentation covering the equity raising and balance sheet initiatives, where I will also cover the online business and the outlook for FY 2026. Starting on slide six, we have covered some of the information on this slide already, so I won't cover everything.
We are providing initial guidance for FY 2026, where we expect underlying EBITDA in the range of $190 million- $210 million and reported EBITDA in the range of $170.6 million- $190.6 million. I acknowledge this guidance is well below expectations, but want to assure you we're working extremely hard to maintain profitability in the underlying business. This includes a focus on significant cost-out initiatives, and we are targeting our minimum net cost savings for FY 2026 of $10 million. This will partially offset the impact of carded play. I will provide more detail on the assumptions we have used in determining our FY 2026 outlook shortly. We're working hard on delivering the NZICC in February 2026, which we expect to drive a step change in visitation to our Auckland precinct.
We are also announcing a $240 million equity raising, and I would like to give some background information that sits behind our decision to proceed with this initiative. As Peter mentioned earlier, a number of factors have contributed to our growing net debt balance: a carpark concession repurchase in January 2024, regulatory fines associated with historical issues, which are now resolved, and weaker operating cash flows in the core business due to the weak New Zealand economy and elevated regulatory costs. Combined with the earnings weakness forecast in FY 2026, we are at the position if we don't raise cash capital, it's highly possible we will breach bank covenants at December 2025. We haven't made this decision lightly.
We've been actively exploring a whole range of alternatives, including asset sales, but they haven't been successful at this stage, and given we feel we need to update the market on our earnings outlook, now is the time that we need to raise capital, otherwise we risk putting the company in a difficult position. We have been very careful to size the equity raising to minimize the level of dilution suffered by shareholders. We are also targeting $200 million of asset sales that we believe will be executed in the next 12- 18 months. In the near term, the equity raising will mean our leverage stays below 3.2x through the period of peak costs relating to the pre-opening of the NZICC and online costs, and we see FY 2026 as a period of trough earnings.
Post completion of the asset sales, we are targeting to have leverage below 2x , which is consistent with BBB- credit metrics. Turning to slide eight, there are a couple of points I would like to make in relation to the market backdrop before I give you a broader update on the business. First, effectively since COVID, we've been dealing with the combined impact of severe weakness in the New Zealand economy and significant increase in costs associated with the regulatory uplift undertaken across our properties in Australia and New Zealand. This has seen an uplift in our debt and a progressive reduction in EBITDA. We have been doing everything we can to manage these issues, including tightly controlling costs while investing in remediation and compliance uplift. While FY 2026 will be a trough year, we do have a positive outlook for FY 2027.
The regulatory overhang will largely be behind us, and NZICC reaching break-even on a standalone basis, along with the full-year visitation benefits to the rest of the precinct. Online gaming targeted to deliver a break-even result, plus the potential of the New Zealand economic recovery. Our confidence in the future is based on the knowledge we're doing the right thing to meet our regulatory obligations. New Zealand consumers are rolling off high-cost fixed-rate mortgages, and importantly, in our core market of New Zealand, we retain a strong competitive position, and with the NZICC and online gaming occurring in 2026, we have meaningful catalysts for near-term growth. Turning to slide nine, we've been through the FY 2025 results already, but I'd like to call out a few key metrics from this page, which we think provide a good picture of SkyCity .
From a gaming perspective, we have more than 3,300 electronic gaming machine licenses and 600 table game licenses, with more than 20 years remaining on our Auckland license. We also have a significant asset base worth more than $2.6 billion and attractive physical assets such as hotels with more than a thousand rooms and the NZICC opening in February 2026. Turning now to slide 10, we are at an important point in SkyCity's transformation journey. Our strategic priorities remain the same as I discussed at our half-year results in February, optimizing the core business, focusing on our customers, and online gaming. The critical enablers within the business that will allow us to achieve these priorities are risk transformation, people and culture, and digital transformation. In the near term, we are focused on achieving five key initiatives, which we will cover on the following slides, starting with slide 11.
Callum has already given you an update on our carded play, which is now live across all of our New Zealand casinos, including confirmation of our previous guidance of the impact on uncarded revenue. We took significant learnings from the experience of our Australian counterparts and preparations to get our New Zealand locations ready for carded play. For example, kiosks were installed across locations, which allows the enrollment process to be completed with an average of three to five minutes with a physical New Zealand or Australian driver's license. We also use the implementation of carded play as an opportunity to relaunch our loyalty program, Show by SkyCity. All customers playing at SkyCity's New Zealand casino need to show their Show by SkyCity card to play, and this card also offers customers the option to join our loyalty program.
Carded play therefore not only uplifts our host responsibility gaming measures and enhances risk management, it also provides meaningful customer insights and additional value for our loyalty program. Turning to slide five, the opening of the NZICC will be a game changer for us, and we're genuinely excited with the upcoming opening in February 2026. NZICC will be New Zealand's largest convention center and will attract major international conferences to the city. The benefits of this facility cannot be understated. Turning to slide 13 and our risk transformation, while risk management has been an important focus for us, will remain an important focus for us going forward, we do think we have made some great progress in this space already.
Most notably, the regulatory reviews are progressing, and the B3 program of work, monitored by CBS and Kroll, is underway in Adelaide, and we've now completed year one of our three-year program. We're also working to strengthen the trust with regulators and our patrons. We have regular scheduled engagement with all our financial prime and gaming regulators and have dedicated significant resources and focus to this transformation. We've also refreshed our management team at both the group level and in Adelaide to bring in needed expertise in our sector. SkyCity has a responsibility to protect its patrons and communities, and we strive to be leaders in host responsibility and preventing financial crime. Turning to slide 14, as I mentioned earlier, we're very focused on optimizing our core business, with the key levers being cost reduction, monetizing NZICC delegates, and focusing on our gaming customers.
We have a dedicated team in place with targeted net cost savings for FY 2026 of a minimum of $10 million. We're also seeking to maximize NZICC delegate visitations across the precinct with new food and beverage and entertainment options planned. We have also increased gaming promotions in New Zealand and Adelaide to drive growth in new players and brought forward new electronic gaming machine launches to be the first to market, coinciding with the launch of carded play. The final key priority for near-term execution is positioning for the regulation of the New Zealand online gaming market in 2026. We've made solid progress on this to date, including establishing an in-house team based in Malta to build our capability in mobile app and web portal areas.
During FY 2026, we are focused on transitioning to a new platform partner, integrating these new mobile apps and the web portal, further investing in building a launch-ready team in Malta, and securing licenses in New Zealand. Turning now to the FY 2026 outlook on slide 15, I will now provide some more detail on our FY 2026 guidance. Unfortunately, the challenging trading conditions are expected to continue and coincide with the ongoing costs for the NZICC pre-opening and ahead of online gaming regulation. Early FY 2026 trading is substantially in line with our expectations, and we have observed no change in the New Zealand consumer discretionary spending. We are therefore guiding FY 2026 underlying EBITDA to be in the range of $190 million- $210 million. This excludes an expected $19.4 million of B3 costs, which makes our FY 2026 reported EBITDA guidance in the range of $170.6 million-$ 190.6 million.
FY 2026 underlying EBITDA is expected to be impacted by a combination of factors, including the ongoing investments, carded play, and economic weakness. Firstly, we expect $16 million of investment in the NZICC, driven by the full-year impact of pre-operating costs against only four and a half months of revenues. We also anticipate $7 million of investment in online gaming to ensure readiness for licensing and go live in FY 2027. Note the majority of this $23 million investment will occur in the first half of FY 2026, driving a material earnings skew to the second half of FY 2026. As noted earlier, we reconfirm our previous guidance of the impact on uncarded revenue equivalent to between $20 million- $30 million of EBITDA in FY 2026. We are targeting minimum net cost savings of $10 million to partially offset the impact of carded play.
We also anticipate ongoing weakness in the New Zealand economy to continue to impact customer spend, along with player churn that we've previously spoken about. In addition to the EBITDA guidance, we wanted to provide some guidance on interest, depreciation, and tax. There are some complexities we don't think consensus is properly reflecting. We expect our interest expense to be between $35 million- $40 million, driven by a change to capitalization of interest following the NZICC practical completion. Depreciation and amortization we expect to be in the range of $100 million- $110 million, also increasing due to the NZICC practical completion. We expect a tax rate of between 35%- 45%, impacted by accounting and tax treatment, particularly for non-deductible expenditure, adjustment for New Zealand building tax depreciation, and Australian group tax losses not recognized.
We also expect a step up in capex to approximately $116 million in FY 2026, with $71 million of this BAU maintenance capex and approximately $25 million of which is investment in the NZICC. Turning to the next slide, looking forward to FY 2027, we anticipate a recovery of some of these factors from FY 2026 roll off. We expect NZICC and online gaming to be break-even in FY 2027, coupled with a potential recovery in spend per visit across precincts as the New Zealand economic backdrop improves. FY 2027 will also see the first full-year visitation benefits of the NZICC to the Auckland precinct. Going forward, we expect business as usual capex to be broadly in line or slightly below depreciation and amortization. As previously guided, we expect B3 costs to be approximately $20 million in FY 2027 and then exit the business completely in FY 2028.
Turning to slide 17, while there are challenges to navigate over the next 12 months, we expect to return to earnings growth in FY 2027, and we see several drivers to make this a reality. Within the existing core business, we expect the New Zealand economic recovery and business optimization initiatives to be the key drivers of growth. As mentioned earlier, there are also opportunities to optimize our portfolio by monetizing select assets via targeted investment in the core business. We also see opportunities for land-based growth, primarily driven by NZICC visitation benefits and cross-spend initiatives. Of course, there is also the opportunity presented by the regulation of the New Zealand online gaming market in 2026. I'm now going to hand over to Peter Fredricson to provide more detail on the balance sheet initiatives we've announced today, starting on slide 19.
Thanks, Jason. As Jason has noted, this equity raising is designed to provide near-term resilience to navigate a period of continued economic weakness, to execute on our near-term priorities, and to ensure that the business is de-risked from a debt covenant perspective. In that context, it's pleasing to note that Standard & Poor's had this morning confirmed our investment-grade credit rating at BBB- negative outlook. The equity raising will reduce FY 2025 pro forma leverage from 3.1x to 2.2x , with leverage expected to remain below 3.2x during a period of continuing investment in the pre-NZ IC C opening and trough earnings through FY 2026. We are also targeting to release in the order of $200 million from asset monetizations over the next 12- 18 months, with key assets identified for proposed divestment, including an Auckland Carpark concession and 99 Albert Street office building.
These asset monetizations will help the business reach appropriate longer-term balance sheet settings, targeting leverage below 2x in FY 2027, which is consistent with BBB credit rating metrics. Now I'm going to turn to slide 20. $70 million of the equity raising proceeds will be used to pay down the Australian dollar denominated USPP, while $50 million will be used to pay down our drawn bank facilities. The outcome of the equity raising is to reduce covenant-based net debt to EBITDA from in excess of 3.2x to in the order of 2.3x , as I said earlier, on a pro forma basis in FY 2025, but to around 2.6x in June 2026 and before the impact of any asset monetizations.
Debt metrics at these levels will ensure that the company is not put in a position of forced asset sales at suboptimal pricing and will further ensure that the company is isolated from any potential breach of lending covenants going forward. It's in that context that we are firmly of the view that value is ultimately delivered to and not taken away from our shareholders. We do not expect to pay dividends during FY 2026, but are targeting the resumption of dividends once trading conditions and free cash flows normalize beyond the FY 2026 year. I'll hand back to Jason to wrap up the presentation and starting on slide 22. Thank you.
Thanks, Peter. While there are several challenges that lie ahead of us, we remain excited for the future of SkyCity. We aspire to be a regional gaming leader, delivering connected customer experiences across entertainment precincts and online gaming. Most importantly, we expect to drive sustainable earnings and strong returns for our shareholders in the future. Following the execution of the equity raising and the asset monetizations, we expect our balance sheet settings to be appropriate to support our growth strategy and optimize returns for our shareholders. Turning to slide 23, the online gaming opportunity for SkyCity is a meaningful one. The proposed regulation is expected to offer up to 15 licenses for online gaming via an auction process, with an upfront cost and an ongoing license fee. We continue to work proactively with policymakers towards regulation, which we hope will be operational by August 2026.
The current unregulated online gaming market in New Zealand is estimated to generate NZ$700 million annually in gross gaming revenue, which is expected to grow over time. SkyCity is aiming to be ready with a best-in-class offering for day one, and being ready to go will be critical to establishing a strong market position. What we have learned from offshore markets, which have become regulated, is they generally consolidate to four to five key operators with 60%- 80% market share in the first three to five years. SkyCity's ambition is to be a local hero with a leadership position in this market, and the following slide outlines why we believe we are well positioned to succeed with this opportunity. We believe that we are uniquely positioned.
We consider it critical that the mobile-optimized website and native app both be owned and operated by SkyCity, ensuring full control over the brand, customer relationship management, and overall customer experience. We're also able to leverage recent investments in host responsibility and AML from our land-based operations. We can also provide a unique connected experience for New Zealand customers by operating a cross-channel loyalty program, which will reward both digital and in-person engagement, while also offering seamless integration with SkyCity precincts to ensure a unified entertainment experience. Turning to slide 25, we are fortunate to operate a business with quality assets and a strong market position. We've made significant progress on the regulatory front. While trading conditions remain challenging and costs need to be tightly managed for this operating environment, we are set to benefit from operating leverage as the New Zealand economic backdrop improves.
We believe the capital initiatives will provide a resilient platform to deliver medium-term growth for shareholders. We anticipate this growth will come from the opening of the NZICC, recovery in customer spend per visit as the New Zealand economy improves, and the large opportunity presented by the regulation of the New Zealand online gaming market. Thank you for joining us today and your interest in SkyCity. We will now take 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 then two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Kieran Carling from Craigs Investment Partners. Please go ahead.
Morning, guys. First question from me, just came to clarify your guidance around mandatory carded play. Does the $20 million- $30 million of guidance factor in just the impact in New Zealand, or does that also capture carded play coming in in Adelaide from early 2026, which you previously signaled?
Yeah. Hey, Kieran. Good morning. How are you? The guidance of $20 million- $30 million impact for EBITDA is for New Zealand. At this stage, the go live for carded play for Adelaide will be in FY 2027.
Okay. Has there been any pushback from the regulator on that front? Can you give us, I suppose, an equivalent EBITDA estimated impact for Adelaide when that does come in?
Yeah, I'll hand over to Callum for that one.
Hey, Kieran. Bearing in mind that we already operate mandatory carded play, albeit in a much more manual form in Adelaide in our VIP rooms, we're having good discussion with the regulator still around carded play in Adelaide in line with the B3 program. Those discussions are ongoing. Carded play impact that we've talked about across the group has varied obviously on the basis of current carded play percentages and levels of competition. We see that number in Adelaide of somewhere between 15% and 20% of uncarded play on the assumption of that going ahead.
Okay. Assuming it was the 20%, sort of the top end of that range that you previously guided, what would that translate to in terms of your EBITDA impact?
Circa $5 million.
Okay. Thank you. Next question is just on the independent report that was released by CBS the other day. It stated that it appears very unlikely that SkyCity will be able to hit its B3 compliance work target. That obviously contrasts with what you've been saying around the drop-off in compliance costs from FY 2028. Are you able to provide any insight into those discussions and what gives you confidence that those B3 compliance costs will drop off?
Mr. Martin's report was finalized in mid-May, so we're a few months on from there. We've been committing significant resources into that program as part of the $60 million investment that we've been making. We've gone through a review and a reset of that program over the last couple of months. We've had a number of independent experts helping us with that, with their experiences with other operators. We feel confident that we've got a plan to deliver all the elements that were required within the next two years.
Okay.
I'll perhaps hand over.
Just.
Yeah, sorry, Kieran. I was just going to say Callum's probably got some extra color as well.
Yeah. Thanks, Jason. The last couple of months have been really important months in our B3 program in Adelaide, in particular around the capability that we've been able to attract in some very important roles that are based in Adelaide. As Jason said, as part of this review and reset, we've really looked at the deliverables and the timing of those, and we feel we've got a really good handle on what the next two years looks like.
Great. Thanks, Callum. Just the final question is on your online gaming piece. You're clearly ramping up investment there ahead of the licensing. Are you in a position now to give us a steer on what you're willing to spend on a license or what return you might be looking for out of that division?
Not yet, Kieran. We're looking for a little bit more detail from the government and the regulator just on the regulatory framework and, importantly, the auction process. That will help us understand how that's all going to work and also a little bit more detail around the terms of the license. We know it to be broadly a three-year license with a five-year renewal period, but we're still waiting for more information.
Okay, great. Thank you.
Your next question comes from David Fabriz from Macquarie. Please go ahead.
Hi, Jason, Peter, and Callum. Thanks for the detailed proposal and the remarks. I think I'll start off with, can I just go back into the carded play stuff? I guess what I'm trying to understand there is, I know it launched in July, but is it currently annualizing at a $20 million-$ 30 million EBITDA impact, or have you made some kind of assumptions to come up with that guided range? Secondly to that, has the impact on a product basis across slots and tables been consistent with your expectations since it launched?
Yeah, the guidance we're given is an annualized number. We're tracking it very, very closely on a daily basis. You know we're looking at Wednesday yesterday versus eight prior Wednesdays to understand exactly what's going on. I'll let Callum share just a little bit more color on the split between slots and tables.
Yeah, hi David. Thanks for the question. Remarkably close to expectations around the split. We're splitting it between three products. We're splitting it at tables, automated tables, and then EGMs. When we're looking to date at it, we're probably seeing tables performing a little better than we thought they might. At this stage, ATG is down a little on where we thought they might be. We thought the introduction of carded play might push people towards the electronic tables more so. At this stage, that's where we're at. EGMs ballpark in line with where we thought, little split and difference between tables and ATGs.
Got it. Helpful. Just trying to understand the thought process around the foreshadowed asset sales. I can see you're looking to sell the Auckland Carpark concession, 99 Albert Street. What considerations, if any, were made for monetizing SkyCity Adelaide, the hotels across the group, and even maybe the NZICC? Any thoughts around that would be appreciated?
Yeah, happy to let you know where our thinking's at. You know, SkyCity Adelaide, we've got a fabulous property there. We're clearly going through these regulatory challenges at the moment, and we're really focused on those. Getting the Martin inquiry complete and his findings puts us in a better position there, certainly. We're now awaiting the commissioner's final determination. I think that's an important next step for us. That's really where our focus for Adelaide is at the moment. In terms of the other assets, hotels and convention centers, as part of the strategic review we did late last year and into early this year, we certainly looked at all these different assets. Critical to our strategy around operating integrated results are hotels and convention centers.
We want to bring more customers to us every day, and our hotels and our convention centers are really important to do that, to then have customers shift into our restaurants and our bars and ultimately onto our gaming floor as well. We see it very important that we retain ownership of those critical assets and are able to operate them in an integrated manner. Hence why we looked at assets that don't necessarily fit into that integrated approach and also because of the nature of their financial profile could yield a good outcome for our shareholders. The process is taking us a little bit longer than we thought, and that's why this morning we're talking about the next 12- 18 months in order to recycle that capital.
Got it. Understood. Just one final question for me, just on New Zealand online gaming. I appreciate the comments on market consolidation to a handful of operators in time, but can you share any insights of what you would think that SkyCity's fair share would be once you fully ramped?
Yeah, of course. You know, typically when you look at other markets around the world, as those four to five operators will earn between 60%- 80%, it's not unreasonable having a goal of somewhere around about 20% market share over time. You know, that's certainly an aspiration of ours.
Perfect. Thank you very much for the insights.
Your next question comes from Paul Corral from Forsyth Barr. Please go ahead.
Hey guys, good morning. Thanks for taking my questions. I think the first one that I have is, you know, the pieces that get you to the debt to where it is, and then you look at, you know, the earnings guidance for 2026. NZICC, we've had a date for opening for a while now. Online, we've known about for a little while. MCP, we knew it was coming in July. We've been talking about selling assets since, you know, late last year to early February. Why has it taken so long and why has the equity market had to end up being the backstop here? I guess is my question.
Yeah, thanks, Paul. Good question. Look, we have been talking to asset monetization since we released our half-year results in February. We began that process, I think, April, May, let's call it. In fact, it was probably a bit earlier than that. We were underway when we talked about it at our February results, and we alluded at that point to a car park concession, given that we had something that had that put back to us when we didn't necessarily need it or want it. We've run that process again. We've been working that process for a number of months, and what we've found is a market that really is not there for what we expected it to be in the context of the asset as much as anything else.
Now, we have pivoted and continued to work through that process, and we are looking at a different structure relative to where we might have been in the past. The investment in this country in assets of this sort of nature and their size in particular has meant that we didn't have the sort of investors turn up that we expected might have been there when we set out. We've run these processes in parallel. We took the view that we would have been hopeful of bringing a transaction to this presentation when we started the process with an expectation of financial close prior to the end of the financial year.
We've run the equity raise process concurrently with it so that we had an option should we not be able to put in front of our shareholders a completed or a soon-to-be completed transaction in respect of the car park concession. In respect of the building that we've talked about, that is more of a 12- 18-month solution, and we don't expect to be talking about that anytime soon, to be fair. There's work to do on it, and if you walked past our building, you'll see that work being done as we speak. There is work to do in respect to that. It's been concurrent, and our view here is that the equity raise was necessary to retain a number of things, not the least of which was our investment-grade credit rating.
Maybe just a quick follow-up on that. When you talk to what a different structure could look like on the Auckland Carpark concession, what are you referring to? Are you talking to an outright sale or?
An outright sale is not off the table. It's certainly not off the table. We are looking at what other options might work better for some other investors who are around in the marketplace and are prepared to look at things. That could indeed include a joint venture with us where we continue to operate and manage the asset with a non-controlling interest out the back. Clearly, that reduces the amount of cash that would come in the door at any given point in time in respect of that, but it's certainly an option.
Yeah, okay. Maybe just going back to why some of the other assets weren't considered, I think there was a comment made during the call that, you know, this was the option that SkyCity thought would deliver. Longest term should be a hold of value. I sort of struggle to see why, you know, Adelaide and hotels weren't considered when, you know, the returns that those assets have delivered and probably will deliver are going to be well short of investors' required return on equity.
Yeah, I think that's an appropriate question to ask. This has been a very difficult decision to make, and it's certainly not where I wanted us to end up. We've been working really hard to monetize the car parks. We just haven't got there with a deal where we had confidence around transacting at a value and at a time frame. As Peter said, we're going to continue to work really hard to get that away. You know, with respect to Adelaide, our focus there right now really needs to be on getting through these regulatory matters. We're a year into our program. We are making progress. The Martin inquiry being released with the finding of suitability, we're very appreciative of that as I think it's recognition of the hard work by the team there over the last year. We're eagerly awaiting the commissioner's final determination. As we look forward for that business, we'll of course review things as we review every other part of our business.
Okay. Yeah, that's fair. I think maybe just my last one is how confident can you be given, you know, some of the challenges, you know, cyclically in New Zealand and what's going on in Adelaide and the potential fine that, you know, $240 million is enough from the market or that you won't have to come back asking for more?
Yeah, Paul, we've done a lot of work on this. We've spent a lot of time on it over the last three to four months as we've gone down this road. Clearly, we've not stepped back from the process going forward of monetization of assets and we will continue to walk down that road as well. As we sit here today, we see on what we think is conservative but realistic earnings expectations for FY 2026, we see an outcome of 2.6x debt to EBITDA at the end of June next year off the back of this raise. That comes down below 2x when we factor in over the 12- 18 months equity sales proceeds in that order.
Those metrics at less than 2x are clearly more in line with the board's longer-term targets that they started talking to the market about 18 months ago of BBB- credit rating metrics. We are clearly pushing towards that and making sure that this business is a lot more resilient than it might otherwise have been. I honestly take you back to slide 10 in the financial results presentation where this company today is sitting at $300 million more debt because of things that happened that were beyond the control of where we are today. Our expectation is without those, we would have been at about 1.8x . The objective would be to get this business back to closer to 2x in the longer term. That then frees up the operating cash flow in the business to enable us to resume distribution to shareholders.
Right. Thanks, guys. I'll leave it there. Thanks for the discussions.
Thanks, Paul.
There are no further questions at this time. I'll now hand back to Jason Walbridge for closing remarks.
All right. I want to thank everyone for their time. I absolutely want to acknowledge for some of our shareholders the decision to raise equity this morning is a difficult decision. We are grateful for shareholders' patience and their support as part of this raise. This is not where we intended to be, but we're working very hard here on the business and we believe we're making the right decision for the company. SkyCity Entertainment Group is a fantastic quality business. This equity raise is about paying down debt and resetting our balance sheet and future-proofing us for the future. We've got millions of people coming to enjoy our restaurants and hotels and casinos every year. We have made progress.
There is a lot more to do and this raise will add up to us being in a better place. The New Zealand International Convention Centre and online gaming really do represent a whole new era of opportunity and growth for us as a business and we are very excited about it. I want to thank you all for your time and attendance this morning. Much appreciated.
That does conclude our conference for today. Thank you for participating. You may now disconnect.