Body Shop in Better Shape as Buyout by Managers Is Scented; MARKET REPORT

The Evening Standard (London, England), February 23, 2006 | Go to article overview

Body Shop in Better Shape as Buyout by Managers Is Scented; MARKET REPORT


Byline: MICKEY CLARK

THE signs were looking good for Body Shop last autumn, with the City talking about the long-awaited turnaround in the group's fortunes.

Although the ethical beauty products retailer founded by Dame Anita Roddick, reported a 13% drop in half-year profits to [pounds sterling]7.1 million in October, because of changes made to its wholesaling arm, it still felt confident enough to expand into Russia and increase its dividend for the first time in seven years.

But that glimmer of hope had disappeared off the radar screen completely by January, when Body Shop warned that full-year profits would be as much as 22% below expectations.

That was enough to send its shares tumbling almost 20% from their peak of 2681/2p. Lowerthanforecast sales and a one-off cost of at least [pounds sterling]4 million were blamed. As retail analyst Richard Ratner reflected: "No one saw this coming."

The shares still have some way to go to make up the shortfall but they enjoyed their best performance for some time yesterday, climbing back above 230p as talk went round that the management was planning a buyout.

Brokers said the story had a certain ring of truth, given that the management has worked hard to steer the business back on line by buying into the franchises and rolling out new lines and technology.

One broker said management had done a lot of the groundwork that would be needed before even contemplating taking the company private. Body Shop is valued at around [pounds sterling]170 million these days. At the last count, the Roddick family still held 19% of the shares.

However, in a statement today, Body Shop said it knew of no reason for the recent share-price spike.

Services group Hays ticked better after Deutsche Bank raised its recommendation on the shares from hold to buy and raised its sights from 145p to 175p. It says the data are turning positive, and it believes next week's results could yield some surprises.

Blue-chip venture capitalist 3i was chased higher on reports it has rejected a [pounds sterling]6 billion bid approach from one of its European rivals.

Software specialist iSoft edged ahead on news that several directors had topped up their holdings in the company.

Tim Whiston has bought an extra 30,558 shares at 162p, stretching his holding to 1. …

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