Lloyd Leisure fit with pounds 5.7m: 'Country club' company serves up results ahead of flotation forecast

DAVID LLOYD Leisure, the chain of eight tennis and fitness clubs run by the former Wimbledon doubles semi-finalist, opened its latest club, in Glasgow, a month ahead of schedule and plans to use it as a blueprint for its development programme.

The Renfrew club opened in September and already has 2,100 members. It is the first of the new clubs - described by Mr Lloyd, the chairman, as 'country clubs' - to open outside London.

Company pre-tax profits were up 84 per cent to pounds 5.7m in the year to 30 September - marginally ahead of the pounds 5.5m forecast in the March flotation prospectus. Earnings per share were up 37 per cent to 10.85p and turnover was up 24 per cent at pounds 19.3m. The net full dividend is 1.95p as forecast.

Full-year contributions from clubs in Bushey, Hertfordshire, Chigwell, Essex, and Enfield, Middlesex boosted profits, as did the 20-lane bowling centre at the Raynes Park club in west London, and a six-year agreement to manage a golf course at Beckenham Place Park, Kent.

Operating margins climbed 10 per cent to 32.9 per cent because while new clubs have been added, central functions like finance and marketing have not grown as fast. Analysts said the shares rose 11p to 208p in relief that the results were in line with forecasts. The flotation price was 150p.

Membership subscriptions, responsible for more than half of turnover, had a retention rate of about 80 per cent. This was despite a 6.5 per cent rise in fees.

The group has plans to open up to three new clubs next year. One, at Beckenham Place Park, is the subject of a planning inquiry. Planning applications have been submitted in Bristol, Birmingham and Leeds. And negotiations are in train in Manchester, Edinburgh and Cardiff. It has also bought a golf course at Yanley, south west of Bristol, which it expects to open in June.

Peter Hilliar, leisure analyst at BZW, is recommending the stock as a long-term buy. He forecasts pre-tax profits of pounds 7.3m this year and earnings per share of 11.7p. That puts the share on a 17.5 times prospective price-earnings ratio - marginally more expensive than the rest of its sector. But he expects profit and EPS growth of up to 20 per cent a year for as long as the group opens one or two clubs a year and increases membership fees by more than inflation.

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