LA Fitness sees profits pile on the pounds

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LA Fitness, the health club operator, yesterday brushed aside City fears of waning enthusiasm for gym membership to reveal a 38 per cent surge in pre-tax profits.

Fred Turok, the chief executive, put the group's progress down to an increasing awareness of the dangers of obesity and the benefits of exercise. "I believe the Government and the heart foundation will spend more and more promoting exercise. It's all marketing for us," he said.

The group, pitched at the affordable end of the market, said it was on course to expand its estate from 46 sites to 74 by mid 2003. However, it revealed a more "prudent" approach to overseas expansion, halving its target of Spanish clubs to four. "There is so much to achieve in the UK that the last thing I want to do is screw up by making a mistake abroad," said Mr Turok.

LA Fitness reported a 38 per cent rise in pre-tax profits for the six months to 31 January to £3m from £2.2m on turnover up to £21m from £11.8m. Its shares rallied 8 per cent to 218p yesterday.

While trading difficulties at rivals Esporta and Holmes Place have destabilised the health and fitness sector, analysts said that LA Fitness, as a budget operator, was operating at the right end of the market. Membership in the six-month period rose 65 per cent to 106,400 and renewal rates were among the industry's highest at 70 per cent.

Mr Turok said LA Fitness had differentiated itself from its competitors by locating clubs in accessible places. "Our heartland is city centres not the employment black spots. Our model is based on Tesco Metro – the convenience in town approach," he said. This, and the group's low average monthly fees at under £40, would protect it from any slowdown in consumer spending, he added.