Ladbrokes CEO seeks supplier renegotiations
Richard Glynn says bookmaker is "not currently receiving the best industry terms".
Ladbrokes will soon begin to renegotiate all of its core supplier contracts because it is “not currently receiving the best industry terms”, its chief executive Richard Glynn revealed this morning after announcing the bookmarker’s preliminary annual results.
Ladbrokes currently has supplier contracts with Microgaming for its poker and casino games, Virtue Fusion for bingo and OpenBet for its star performing sportsbook that saw net revenues rise by 17% in 2010.
Glynn refused to elaborate on how long these deals have left to run but told analysts that the company was planning to renegotiate its core supplier contracts. “We don’t believe we have the best of industry terms. We want to have the most flexible and best industry terms as well as the best relationship with these people.”
He said he would develop talks with core suppliers, and negotiate “the best deals with the best parties”, hinting this would not lead to a change in strategy in terms of owning its own technology but simply that he wanted the “best of breed” in both software, products and cost efficiency.
“We don’t yet kid ourselves, we’re not yet best of breed. Certain of our competitors have more markets and make better margin but this is a good foundation from which we can build further.
“This doesn’t necessitate us owning the diesel engine, it just necessitates us using it on better terms.”
Virtue Fusion and OpenBet both refused to comment. Microgaming were unable for comment at the time of writing.
It is not known how Ladbrokes’ suppliers will react to Glynn’s statements, however the chief executive suggested that if any of the bookmaker’s suppliers “reacted favourably” to his [renegotiated] terms they would “benefit very well” from new terms.
Glynn said he wanted Ladbrokes to change from its current perception as a retail-led business with some evolving digital and international operations to an “e-enabled, international betting and gaming business that uses technology to distribute through whatever platforms required to customers, thereby gaining access to new territories.”
He said the group would spend an additional £50m split evenly over this year and the next in addition to the existing annual investment spend of £50m, in order to roll out a new core pricing, trading and liability management platform to allow traders to “deepen our customer offering, provide more product and markets for bet in play and improve margin”. The additional funds will also be used to build and improve a new customer facing platform as well as to continue to invest in mobile that has grown from 3 to 9% over the course of 2010, and so far in 2011 has risen to 15%.
Glynn added that by owning or commanding more of the value chain Ladbrokes would become more efficient and “put out more hooks” to attract and retain more customers making it “more relevant” to the international betting and gaming community. “By owning or commanding more of this value chain we become an e-enabled, technology driven, international betting and gaming business.”
The chief executive did not specifically mention any particular merger targets but concluded by saying that he and the board would “review other feasible options to accelerate our opportunities” in parallel with the company’s organic approach.
“Let me stress that we have a focused, costed, organic plan and we will only pursue other options if they deliver materially upgraded technology enhancement, materially upgraded operational capability, faster with right partners and at the right price.”