City File: Body Shop needs balm

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The Independent Online
SHARES in Body Shop International were nervous all last week ahead of next this week's annual results from the politically correct retail chain created by Anita Roddick. created. Profits for the year to February are likely to be good: pounds 26m against pounds 21.5m is the popular estimate among the analysts. If the outcome is much short of that, watch out for the shares to plummeting below 200p from their present fragile 215p. However, even if Anita and husband Gordon the group comes up with the goods, the beadiest eyes will be on UK trading.

Overseas expansion is reckoned to be going well, despite a rash of lookalike lawsuits in the US. But in Britain big chains like such as Boots, Tesco and Sainsbury seem to have tumbled how to penetrate the Body Shop market without infringing copyright. As the shares are already selling on a premium rating, any sign of weakness will be punished. Avoid until the dust has settled.

SOMETIMES the City does not really appreciate capitalist behaviour, preferring long-term strategies, however unprofitable, to grasping business opportunities. Last week shares in Compass, the catering company, plunged by a tenth to 315p following the purchase of Canteen Corporation, third-largest caterer in the US, from its debt-laden parent. Never mind that this was a golden opportunity promptly seized: a pounds 145m rights issue and the fact that it was counter to Compass's declared European strategy were taken bearishly. But investors who trust managements with an eye to the main chance should pile in.

SHARK-LIKE hedge funds add a new appeal to the paper issued by troubled companies. Looking for blood, they lap up convertibles standing well below par. They can thus accumulate a large stake without telling the Stock Exchange and be favourably placed when their target is refinanced One such favourite dish is are the convertible prefs issued by the troubled waste disposal group, Caird. They have nearly doubled since they were tipped by Cityfile in January, but are still worth pursuing at pounds 39. In the recent results new management has written off everything it can, and Caird is now concentrating on a few large sites and on special wastes. Stick with the convertibles, share a taste with the sharks.

THE South African stock market duly showed its relief at the success of the elections. But there's still at least one good way of getting into the market: through Genbel. This investment holding company was spun off the Gencor mining group last year and since then has proved to be an active and highly professional trader in a wide range of sectors. Nevertheless the shares still stand at a 10 per cent discount to assets, so outsiders are not having to pay over the odds to take advantage of Genbel's local knowledge. A decided buy if you're optimistic over the Beloved Country's prospects.

IN LINE with the other clearers, shares in the Bank of Scotland have come off the boil since the heady days at the turn of the year, down from a peak of around 250p to their present 185p. Unfair, unfair, cries Mark Eady of NatWest Securities. In line with other analysts' projections, he expects next this week's full-year pre-tax profits to more than double to around pounds 265m. BoS is a pure banking play, without complications from investment banking. Eady remains optimistic. BOS, he says, 'is highly geared to falling bad debts'. Its cost basis is lower than its peers, and it is used to operating in an environment where in which margins have always been low.

AFTER nearly doubling to 59p after Cityfile tipped them in January, shares in Shandwick, the fast-recovering PR group, have relapsed to 50p as investors are having to dip into their pockets to pay for the 1-for-2 rights issue at 45p. But a recession-induced shakeout, which reduced staff numbers by a fifth, combined with the pace of the recovery especially in the all-important American market is such that investors may still be too pessimistic. Lorna Tilbian of Warburg calculates that 'pounds 7.75m pre-tax annualised profits for the year to October gives earnings of 4.1p per share. Given an average market rating, the shares should be 62p.' Even at this price they could be cheap, given the gearing, the way earnings have risen and are rising even faster. Don't cash profits.