Casinos operator London Clubs International has suffered during a 'challenging' year but the prospect of improvement following gambling reforms and the near 30% stake held by a Malaysian gaming group are likely to continue to offer its shares support.

The £240 million company (LCI) made a pre-tax loss of £1.4 million in the year to 27 March compared with a profit of £2.5 million last year. The poor performance was flagged up in April after a series of hefty wins by high rollers in its London casinos.

Outside of London, where LCI has casinos in Southend and Brighton, trading was better and overseas its operations in Cairo and South Africa performed well. LCI has plans to lessen the potential impact of troublesome London trading by expanding into the provinces with plans in place for casinos in Manchester, Glasgow, Nottingham, Leeds and Blackpool.

During the past year LCI has also suffered from closures at some of its main operations, the Sportsman and Fifty in London, as refurbishments were carried out. Both should make more meaningful contributions to profits in the current year.

Chief executive Bill Timmins told Citywire: 'We are extremely well set, trading levels are back and there is a sea change in the industry. People have not yet really picked up on the fact we've achieved five licences in the past year, which is every one we've been after.'

Changes to gambling regulations which include the relaxation of the 24-hour rule that says customers must apply to be members 24 hours before using a casino, should benefit LCI when the early freedoms are introduced in October. Following the early freedoms the full legislation should come into effect in 2007 with other openings planned in 2007 and 2008.

However speculation has mounted over the past year as to LCI's long term future as an independent operator as Malaysian gaming group Genting has built up a 29.9% stake, a move which has supported the LCI share price even through the downturn in trading. Genting has also built up a significant stake in rival casino operator Stanley Leisure, prompting rumours that Genting wants to unite the two.

In the meantime, LCI's management will plough on with expansion plans and gear up for the more open market afforded to operators following the gambling regulation changes. It believes its marketing expertise honed at overseas operations will serve LCI well when UK casinos are able to advertise themselves more openly.