We flagged up the speculative attractions of Crown Sports on these pages a year ago, and chief executive Martyn Grealey has pleased the City with clear evidence of a turnaround in 2004. In a tough market, the restructured health and fitness club operator returned to profits, significantly pared debt and also announced a final dividend. Crown Sports, which moved down to AIM last May, reported a lower turnover of £22.9m (£26.3m) due to the disposal of the Fitness Express management contract business and an ill-fitting club in Leamington Spa. Yet pre-exceptional operating profits sparked up 40% to £4.2m, and pre-tax losses of £2m swung £3.3m into the black. Disposal proceeds of £2.4m and decent trading meant net debt dropped by £5.3m to £12.7m, bringing gearing down to 25% (37%). Among the operational highlights, there was a 2.6% operating margin improvement at the core Dragons clubs, as costs were taken out, and like-for-like club membership was up 3% at 51,237 thanks to investment in sales and marketing. New joiners at the 21 Dragons clubs grew 5%, with retention levels buoyed for the second consecutive year. On retention, Grealey pointed to the importance of the innovative 'Dragons Promise' programme and he also expressed delight with the growing numbers of members taking up long term contracts. Net assets per share of 17.3p suggest the business is undervalued, but the health clubs market remains tough. Hold.