Aristocrat Leisure Limited (ALL.AX) Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to Aristocrat's 2025 Sustainability Disclosure Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Harry Ashton, Group General Manager of Sustainability. Please go ahead.

Everyone, and thank you for joining today's call. My name is Harry Ashton, and I'm the Group General Manager of Sustainability at Aristocrat. Joining me today are Vanessa Shepherd, our Director of Group Sustainability; James Coghill, our General Manager of Investor Relations; and Prashani Veerasamy, our Manager of Investor Relations. Earlier this week, we published Aristocrat's FY '25 sustainability report on our website. We also published an accompanying sustainability data book, which brings together all of our sustainability metrics in a stand-alone transparent resource. I encourage everyone to explore both documents. These disclosures reflect a further step forward in our maturity of our sustainability journey. FY '25 marked the first year of executing our refreshed sustainability strategy, underpinned by a comprehensive double materiality assessment completed in FY '24. That process helped us identify the 13 most material sustainability matters to our global business, which we're now managing under 4 strategic pillars: Good Governance and Responsible Business, Empowering Safer Play, which is our most material sustainability matter; Operational Sustainability & Climate; and People & Community. Let me take a few minutes to walk through progress under each of those pillars. Striving to uphold high governance standards and strong compliance with gaming and other regulations is fundamental to Aristocrat. Under the first pillar, good governance and responsible business, we strengthened our sustainability governance to prepare for mandatory reporting requirements. In FY '25, Aristocrat's Board of Directors approved updates to the Board and committee charters to reflect new responsibilities for climate-related risks and opportunities and mandatory reporting. We also further integrated sustainability governance considerations into our enterprise risk management framework. Progress area under this pillar was the launch of our AI governance program. This provides the framework for responsible use of AI across Aristocrat. It establishes accountability, oversight and clear approval processes for AI systems while promoting innovation that is ethical and secure. We also completed the integration of NeoGames into our compliance program, expanded anti-money laundering and anti-bribery programs and piloted a new governance model for mandatory training, which will be fully implemented in FY '26. In cybersecurity, we continue to invest in automation and resilience, achieving ISO certifications for Aristocrat Interactive, deploying a new application for risk assessment and refreshing information security policies across the group. Our second pillar, Empowering Safer Play remains at the heart of Aristocrat's sustainability agenda. Responsible gameplay or Empowering Safer Play, as we call it, is our most material sustainability issue. And in FY '25, we continue to strive for global leadership in this space. We refreshed our entire Empowering Safer Play policy suite to capture the expanded Aristocrat Interactive business after the acquisition of NeoGames. We also made strong progress towards reaccreditation of Aristocrat Interactive's iLottery business under the World Lottery Association's safer gambling standard, representing the highest level of international certification. In player education, we refined our Know Your Max campaign for North American markets and launched it for the first time in Canada. The program, which helps players understand how slots work and encourages positive play habits, reached over 46 million impressions globally. In Product Madness, we doubled delivery of in-game safer play messages, over 15 million messages sent this year, informed by academic research to improve tone and effectiveness. These messages are triggered by markers in player behavior, supporting harm minimization in a targeted and meaningful way. Internally, we launched our first enterprise-wide employee awareness survey on empowering Safer Play. We achieved a satisfaction rating of over 80%, meeting our target 2 years ahead of schedule. With regards to innovation, our Flexi Play tool, which enables players to manage their time and spend on Aristocrat gaming machines is now on 11,000 electronic gaming machines in New South Wales, Australia, which is an increase from around 4,000 in FY '24. We also deepened our research partnerships, launching a multiyear collaboration with the International Center for Responsible Gaming, and we committed funding to a variety of community organizations in our key markets supporting treatment and prevention of gambling harm. Finally, we became a founding member of the University of Nevada, Las Vegas AI Research Hub, an initiative exploring the intersection of AI and responsible gameplay. Collectively, these actions show our focus on shaping industry best practice and continuing to lead with purpose under the banner of Good Business, Good Citizen. Turning now to our third pillar, Operational Sustainability & Climate, where FY '25 marks a further maturing of our processes. This year, we prepared our climate action disclosures with reference to selected provisions of the new Australian Sustainability Reporting Standards. This gives investors a preview of what our future climate disclosures will look like from FY '26 onwards with incoming mandatory reporting frameworks for Australia and abroad. We also achieved limited assurance for the first time on our Scope 1 and 2 greenhouse gas emissions and on our climate governance disclosures, and this work means we are well positioned for these incoming requirements. Operationally, we transitioned our Sydney head office and Australian integration center to renewable electricity, avoiding more than 1,500 tonnes of emissions each year. We conducted our first climate scenario analysis. We expanded our hybrid vehicle fleet in Australia to 78% of all vehicles, avoiding roughly 330 tonnes of emissions in FY '25. And we optimized our logistics network through the Chicago X dock model, which reduces Scope 3 transport emissions by increasing load efficiency and cutting total freight times. We also continue to embed circular economy principles, refurbishing over 6,400 electronic gaming machines and repairing more than 68,000 components this year, extending product life spans and reducing waste. On the supply side, we refreshed our supplier code of conduct, assessed over 700 suppliers under our global supplier sustainability program and deepened engagement on climate maturity and responsible sourcing. These actions underscore our strong focus on achieving our science-based emission reduction targets to achieve net zero across our value chain by 2050. Our fourth pillar, People & Community focuses on helping our people thrive and creating positive impact in the communities where we operate. In FY '25, we recorded a total recordable incident rate of 0.53, which is an increase of a low base of 0.32 from last year. Despite this, we expanded our AI-driven safety monitoring system to the Tulsa Integration Center after strong results in Las Vegas, achieving a 20% reduction in safety incidents at this facility. Across our U.S. vehicle fleet, we improved safety and sustainability outcomes through the implementation of -- [indiscernible] AI. We recorded an employee Net Promoter Score of 53, exceeding the technology sector by 14 points, a sign that our people feel engaged and valued. In diversity, equity and inclusion, our overall female representation reduced slightly to 31.9%, reflecting the impact of acquisitions and divestments, but we saw gains in race and ethnicity representation across leadership in the U.S. and the U.K. We continue to support 32 employee impact groups worldwide, empowering employees to lead initiatives around gender, culture, disability and LGBTQI+ inclusion. Finally, through our Aristocrat Cares community giving program, we contributed more than USD 3.9 million to over 150 not-for-profit organizations this year. Highlights include our 3-year funding commitment to the Campus of Hope project in Las Vegas, supporting people experiencing homelessness. Our continued support to increase tribal representation in gaming and STEM careers in the U.S. and long-standing partnerships with the Cerebral Palsy Alliance, Literacy India and community programs across Australia and New Zealand. These initiatives embody our belief that business success and community well-being go hand in hand. As we look to FY '26, Aristocrat enters a new phase, one that will see aspects of our sustainability reporting integrated into our annual reporting cycle and subject to assurance. The foundations that were built in FY '25 mean that we're well prepared for this next chapter. In closing, FY '25 represents a year of growing maturity for Aristocrat's sustainability program, a year where we strengthened governance, advanced responsible gameplay leadership, made progress on our climate goals and continued to invest in our people and communities. Thank you once again for joining us today and for your continued engagement and support. I'd now like to open up the call for any questions and comments.

[Operator Instructions]

Operator, it's James here. While we're waiting for a few questions to come through, I might just ask Harry a couple of questions just to bridge the gap. It's been a big year for our sustainability team. I think we've achieved a huge amount. If you can just reflect back what 2 or 3 items stand out for you as the big achievements from the team this year.

Yes. Thanks, James. I guess for me, what I would say, first and foremost is my response is based upon my own experience because I look after a couple of these functions. So there have been a lot of highlights over the course of the year, and I won't go into all of them. But for me, personally, I think it's our continued progress in Empowering Safer Play. I think for me -- I mean, you can find all the highlights in the report. But for me, the most amazing thing about this year from that perspective is just the passion and drive of the team to keep driving forward as the business expands. I think another area which probably needs to be mentioned, as I mentioned at the outset in the comments was our uplifted climate disclosures. It's been a year of birth for us, obviously, assurance with Scopes 1, 2 and governance, our first ever scenario analysis, a full qualitative assessment. So that for me has been a real highlight. And I guess, operationally, the real pleasing part of that has been the partnership between the sustainability team and the finance team. We're really integrating a lot of our processes into the finance team this year, and the collaboration has been excellent.

That's great. And I mean if you can reflect back on -- just on some of the challenges. I mean we've observed how hard the team has worked over the course of the year, and that was following a number of years of investment in sustainability at Aristocrat. For those that haven't jumped on to the website yet, not only is there a comprehensive sustainability report there, but we also have a sustainability data book. So we had a lot of feedback from investors about increased granularity and accountability in our sustainability program. And hopefully, that's building up a framework of numbers that we can track and progress that we can help be held to account over. So just reflecting back on some of the challenges to get the team to this point and get our disclosures to this point, Harry, what else could you share with us some of the challenges that you've experienced over the year?

Yes. I think that -- I mean, tied to, I guess, the first comments I made, one of the big challenges for us this year was just going through the audit process. I think this was a first for us. It was just an added level of complexity and process that we went through. Luckily, we got through it because of the strong partnerships, as I mentioned before. But -- and I think part of this is just a matter of us adjusting to the new process and standards. So that's probably one. I guess the other area just to mention is that we did sort of go backwards in a couple of areas, which are documented in the report. I mentioned before that we had -- we went backwards slightly in diversity, equity and inclusion where in the area of female employees across the group. We had a slightly higher or a higher total reportable incident rate, and we had a slightly lower supplier diversity spend. But I think the key point there is that progress isn't linear. And I think these are multiyear projects that we're working on. And hopefully, over the long term, you'll see the trajectory moving in the right direction. That's certainly our objective.

Sorry is there more questions?

There are no further questions on the call, operator. So I'll hand over -- I'll hand back to Harry, who can just share a few concluding remarks.

Thanks, James. And thanks once again for joining us and for your continued engagement and support. We welcome your continued feedback and our contact e-mail can be found on Page 3 of the sustainability report. Otherwise, feel free to reach out to James or Prashani if you'd like to organize a meeting with the team to discuss the sustainability report in more detail. Otherwise, thank you, and good morning.

This concludes today's conference call. Thank you for participating. You may now disconnect.