Michael Page still facing a struggle to recruit new investors

Medical House looks healthier than its rivals; LA Fitness still has room to bulk up its share price

Investors were yesterday engaging in the sort of deep textual analysis often applied to the single currency speeches of Tony Blair and Gordon Brown but rarely applied to the words of Terry Benson, the plain-speaking chief executive of the recruitment consultancy Michael Page International.

Compare: "Business confidence remains weak, but I believe the group is well positioned to produce considerably better results when market conditions improve" (19 August). And: "We remain in line to achieve our profit targets for the year, assuming no further material deterioration in market conditions" (7 October).

Because Mr Benson's latest words seem darker in hue to his last, Michael Page shares slipped yesterday. The company's results are utterly tied to the economic fortunes of Europe, and these continue to look ropey, even here in the UK, where growth figures continue to be revised downwards. Michael Page may well scrape through with its profit targets for the year (analysts are expecting about £34m, down from £62m last year) but the lack of any green-ish shoots means there will certainly now have to be savage cuts to the market's forecasts for 2003.

The joke is that analysts bother to forecast 2003. Mr Benson is candid about the fact he has nil visibility in his business, and recruitment will only pick up along with business confidence, a commodity in short and diminishing supply.

The one constant in his utterances over the past few months has been the talk of "tight cost control". That does not mean swingeing job losses, though staff numbers have fallen from 2,900 a year ago to about 2,400 as people leaving are not replaced. Anything more drastic would dampen the upside from economic recovery. Michael Page is a long-term play, though for now it shares are expensive and risky.

Existing shareholders might as well hang on in there, and hold on to these positive thoughts during the turbulence ahead: Michael Page seems to be winning market share from smaller, financially weaker rivals, and its £40m share buy-back should prevent any further precipitous decline in the share price. Potential new investors should keep a sharp eye on the economic indicators, but hold off for the time being.

Medical House looks healthier than its rivals

The stock market is ankle deep in little medical technology companies trying to develop a needle-free or safety syringe but with diminishing chances of ever turning a profit. NMT, Medisys and Weston Medical have all been notably disastrous investments. So private punters may be forgiven a little gasp of horror that The Medical House, a perfectly good business making instruments for use in orthopaedic surgery, has decided to plough its profits and more back into research into needle-less technology.

But this is not the same at all. It actually has a needle-free product on the market, allowing diabetics to shoot insulin at high pressure through the skin. The group's expertise in developing innovative instruments got the device through design and safety approval in less than a year, a speed which puts rivals to shame. The next step is to get it used by the National Health Service, and the hope is a decision is just months away. Then Medical House can focus on a return to profitability, its more normal state through a 14-year history.

Licensing deals with drugs companies looking for novel ways of delivering their products should bring in additional milestone payments. Meanwhile, the orthopaedics market is growing at between 5 and 10 per cent a year, thanks to an ageing population, and instrument sales, while down in the next year, will continue generating cash. Looks interesting.

LA Fitness still has room to bulk up its share price

Forget gym members dragging their heels about their workouts. The big problem for health club operators such as LA Fitness is investors. A steady drip of profit warnings from sector peers during the past 12 months, topped by one last week from its closest quoted rival, Fitness First, has left LA Fitness' share price in serious need of bulking up.

Confidence in the sector is at an all-time low, badly shaken by trouble at the premium end, which saw Esporta and Holmes Place succumb to takeover bids. The warning from Fitness First, blamed on management for expanding too quickly, shook the City into wondering if fitness clubs had had their day. Is health and fitness just a passing fad after all?

In a word, no. Independent research from a leading sector watcher, The Leisure Database Company, reckons the UK can take up to five years more growth – or up to an extra 400 clubs. Pleasingly for LA Fitness, most of these are expected to be at the "affordable" or budget end of the market, where it pitches its clubs. With just 55 sites, LA's plans to double this over the next three years look not only safe but sensible. Any lingering fears that the company would tap the market for more cash were wiped out in September, when it loaded itself up with £90m of debt to finance the group's rollout programme of 15 to 20 clubs a year.

While Fitness First tripped up when it couldn't get fitness freaks to sign up at its new clubs quickly enough, LA pledges extensive pre-opening marketing means its sites trade profitably from day one. Its business plans allow 12 to 18 months for clubs to reach capacity, against its rivals' six to nine. Yesterday's annual results (pre-tax profits up 40 per cent to £7.8m) showed this strategy is still a healthy one.

At 162.5p, down 3p, the shares may have little to buoy them in the short term, but with private equity bidders still sniffing around there is no need to give up on them yet.