Icap rises from the wreckage

Amid the dozens of profit warnings of the past month which have cited, some more credibly than others, the events of 11 September as the cause of earnings upsets, the trading news from Icap yesterday was truly remarkable. The firm's US operations were based on three floors of the destroyed World Trade Centre, and one of its employees was among the dead.

Formerly known as Garban Intercapital, Icap is a brokers' broker, a specialist in bonds and complicated financial derivative products for which demand thrives when future interest rates look uncertain. They're pretty hard to call in the current climate, with central banks having cut rates aggressively to head off recession, but with new inflation pressures, public sector deficits and government bond issues looking more likely. So trading, until the terrorist strikes, had been booming.

And it still is. The headline yesterday was that the destruction of their offices will wipe up to £15m off profits in the financial year to next March. The extraordinary fact is that Icap is nonetheless forecasting full-year profits of between £75m and £80m – just what the City had been expecting before 11 September. It is clear that, once again, analysts have underestimated Icap's strength.

The speed with which it has picked itself up from the disaster was striking. Business is back to 60 per cent of normal capacity, even though it is constrained by a shortage of phone lines in its temporary accommodation. It is "lodging with friends" for the time being, and will be decamping in the next few weeks to premises with better communications. It has also agreed permanent new premises and should be in within six months.

The landscape of the broking industry has been utterly changed. Cantor Fitzgerald, one of Icap's biggest competitors, is struggling to come to terms with the enormity of its loss, having seen almost 700 employees killed. Icap's chief executive Michael Spencer said he will accelerate his company's move to electronic trading, which can be more flexible when faced with disaster.

With the economic uncertainty post-11 September a bonus for Icap's core business, the stock has deservedly returned to record highs, and was up 40.5p to 649p yesterday. That puts it on a forward rating of 13, which is fair value.

LA Fitness

Never mind a gruelling training programme, the performance of the LA Fitness share price has been enough to set investors' heart rates soaring.

Shares in the health club chain tripled within three months of floating in 1999 and have been all over the place since. They took a pounding after the events of 11 September left the market fretting over potential damage to consumer spending, but robust figures out yesterday showed all the benefits of a healthy work out, from a positive outlook to a well-toned expansion plan.

Fred Turok, the chief executive, remains convinced that his 'value" clubs – at an average monthly cost of just £38 – will continue to attract his target "mass middle market". Since the health club operator's July year-end, it has grown like-for-like sales by 13 per cent, increasing this to 17 per cent in September. Renewals last year topped the industry, rising from 65 to 68 per cent. And with just 6.5 per cent of the UK population gym-goers, compared with 17 per cent in the US, there are plenty more couch potatoes to convert.

Mr Turok opened 13 new outfits last year and is on track for 70 UK clubs by mid-2003.

LA Fitness heads the field in innovative ways to get customers to part with their cash. These range from its BUPA-backed wellness centres – which can treat sporting injuries, give travel injections or even provide a course of homeopathy – to branded sports gear and fitness videos.

Mr Turok is dipping his toe in the Mediterranean, too, and is due to open his first overseas club in Barcelona early next year. LA Fitness follows UK rivals Holmes Place and Esporta and should benefit from their attempts to drum up enthusiasm for health clubs among Spaniards.

Pre-tax profit for the year to July rose 64 per cent to £5.4m on sales up 88 per cent to £28.4m. Earnings per share for 2002 are forecast to grow by nearly a third to 15.6p, which puts the shares, up 10 per cent to 244p, on a forward p/e of 16 times. Hold.

Argonaut Games

It is tough not to get carried away in the hype surrounding the new Harry Potter movie. Jez San, the founder and chief executive of Argonaut Games, developers of shoot-'em-and-beat-'em-up games for computer consoles, is so excited he resorted to exclamation marks in yesterday's final results statement. Argonaut has developed the Playstation game to coincide with the film release and, he wrote, "with a bit of Hogwart's magic, the game will literally fly off the shelves!"

Perhaps. Argonaut needs Harry Potter - The Game to sell a million copies before it turns a profit. Argonaut should get back into the black this year, despite posting a disappointing £3.1m loss in the year to July on flat turnover. It has written one of the first games for the Microsoft Xbox, called Malice, and with the hiatus before the introduction of a new generation of consoles now largely behind it, Argonaut could be an interesting recovery play. The shares, up 6.5p to 48.5p, are worth a punt.