London Clubs' interims may cause optimism but be in no doubt the casino group is gambling on deregulation to hit the jackpot. Profit before tax grew to £1.2m compared to a £300,000 loss in last year. Exceptional trading at London-based casino Les Ambassadeurs helped turnover grow 17% to £88.3m. Overseas, London Clubs' casinos in South Africa and Egypt saw improved levels of business. Brokers WestLB Panmure assert the results are in line with expectation but point out EBITDA margins slipped 3.5% to 12.2%, largely because of a 2.4% increase in gaming tax and a 'higher level of uncleared cheques than normal.' The group is also in advanced discussions in respect of a complete refinancing of existing debt facilities, which expire in June 2004. Net debt, which stood at £220m at the start of the period has shrunk £163m, assisted by the sale of the Palm Beach in May. The refinancing should assist the company to position itself as a major beneficiary of gambling deregulation. As its two 'new style' entertainment driven regional casinos in Southend and Brighton continue to perform well, London Clubs' intends to emulate this formula for deregulation and is seeking out new sites. Despite the share price rising all year, Panmure believes London Clubs' shares are trading at a discount to larger peer Stanley Leisure and while the share price should remain stable until refinancing is complete, 'material upside potential' is expected thereafter. Buy.