Taking what many considered an oversized company and effectively rebuilding it into a lean and efficient business in little over a year is something of a minor miracle. That is effectively what has happened at Gamestec, the largest machine operating company in the UK.

A focus on market share and the volume of pieces on site, as the company’s main executives freely admit, had caused the business problems. But what has happened since illustrates graphically what can be done by experienced and capable specialists.

Gamestec has downsized to a leaner organisation and is fitter than it has ever been before, enabling it to more effectively compete with the rest of the UK operators in Europe’s most demanding market - in particular Category C (AWP) machines.

Gamestec is part of the Danoptra plc group, which also includes companies like Bell Fruit and Mazooma, famous names in the international supply chain. But it has always been the largest of the companies and the backbone of the group. Because of significant changes in the market place and the bad timing of some management decisions, it had not made a profit for several years.

More recently, its acquisition of the pub business of major competitor Leisure Link, only made things worse. That deal, concluded in 2008, gave it a mirror-image of itself - a loss-making operation; one which the Leisure Link owners themselves said they could not make pay. In theory it should have added many thousands more machines and sites to the Gamestec operation.

In practice, much of the best of the Leisure Link business walked away into the hands of independent operators. Combined with other influences, notably the decline in the numbers of British pubs, the recession and smoking bans, all contrived to erode the business still further.

A hopeless situation? Not quite. Danoptra’s chief executive, Derek Lloyd, brought in Paul Terroni, formerly managing director at Barcrest Group and contemplating semi-retirement in Italy. Terroni’s first look at the situation at Gamestec, based in Leeds, UK, showed the company was in worse shape than he thought, by his own admission. Terroni, brought in as Danoptra’s group business development director, initiated moves to bring in other people with strong backgrounds in machine operating.

In came Chris Butler from major retailer Punch Taverns, as managing director of Gamestec. In also came Peter Davies as business development director with a background in operating with Bass Leisure and product development with Barcrest Group. Peter Collinge, formerly at Leisure Link, came in as operations director to rebuild the way in which the company conducted its day-to-day work in the field. Neal Lancaster was recruited for personnel and David Johnston to head up group IT and customer service. Steve Barber, customer relations director, is now the only link with the past.

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"We brought in some heavyweights from industry, both inside our own business and from other businesses," said Terroni. "People like Johnson and Lancaster we regard as essential \‘back office\’ management. People like Collinge and Davies are familiar faces in the machine industry, people the industry knows and respects and who can add identity to a rejuvenated Gamestec. We had to get the team right before we could address the ills of the company."

In less than a year a huge amount of work has been done to transform Gamestec. "We had to do some radical things," he said. "We had to trim away all of the fat surrounding what was still a strong core. We had former Leisure Link staff unhappy at working with Gamestec staff; we inherited all kinds of problems with depots all over the country (now trimmed to just six); we inherited an operation which was in itself hemorrhaging business. It was simply a case of the wrong people in the wrong places and the wrong culture."

But the decision by Derek Lloyd and his Danoptra board to introduce some minds that had been sharpened by years in the machine operating business, had its effect. "We are a completely different company now," said Chris Butler. "We have 1,000 dedicated staff all pulling in the same direction and a product line which none of the other operators can offer."

The company, he said, is now in a position to talk to anyone about anything, which will add value to machine operations. Gamestec even has soft-tipped darts machines on test in the UK and as many as 15-20 new product lines ‘bubbling under the surface’.

Said Butler: "We have a lot of new attitudes too. Many retailers think that because we have always rented machines, then that’s all we want to do. In fact we are keen on the participation business. There’s nothing wrong with sharing income, in fact the practice would give us even greater incentive to ensure that every machine on every site was the right combination and that the combination delivers.

The thinking here, these days, is that the old renting model is flawed in that it rewards me for failure. Under the old business model we would have moved the Deal or No Deal cherry down the line after a set time, but the fact is that right now it remains one of our top-earning machines; so why move it?

"We have one client with whom we share profits. The result has been a £20 a week uplift for us - and an £80 per week uplift for the customer. Sharing works. We want to share in the risks and the rewards - it encourages innovation."

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The Gamestec investment in technology was underlined at the October London Preview show where Danoptra took a private room and filled it with exclusive product for all sectors of the operating business - products which reflect technologies which no-one else can offer in the UK operating business at present.

It is now a far more streamlined business, able to expand or contract at will running six depots instead of 25 and ready to move into other areas. Butler does not discount operating arcades or adult gaming centres, nor does he discount an aggressive penetration of the LBO business, where the company already has a small stake. Expansion, he says, will come through innovation.

At group level, the company is in the overseas market through Bell Fruit and Mazooma, the company runs machines in the Mecca bingo estate, it operates in Centre Parcs, and runs bowling centres. It operates on cruise ships and in military bases (NAAFI), so it is diverse. But its core business is in Category C (AWP) machines in pubs. 

"We believe that there is a stable future for Category C now that the £70 payout facility is here. The new machines have been accepted by the players and they open up new solutions for leased estates (tenanted pubs). The only worry is coin ‘starvation’, for which we have solutions."
Terroni, Butler and their colleagues are under no illusions about the tasks ahead of them.

"We have voluntarily reduced our own business by withdrawing from some uneconomic contracts, so the size of our operation - while still the largest in the country - is nowhere near what it was. But what we have now is up to a quality. We have a major cultural change here. We are not 100 per cent right yet, but we are much closer to it.

"We inherited a business which had been subjected to the wrong philosophy, one of volume rather than quality. We had some tough talking to do with many customers when we first started and we had to make many cuts within our own organisation to get things reshaped and redirected. That process has now happened, and the Gamestec of December 2009 is light years away from the Gamestec of December 2008."

The upshot has been a range of new equipment which surprised many visitors to the London Preview and which demonstrate the underlying technical expertise at Gamestec and the company’s ability to harness it. It is also interesting to note that by the end of October 2009, Gamestec had entered uncharted territory - it moved into profitability.

 

First published December 2009