Roddicks give the City the treatment

Anita and Gordon Roddick have come up with a new all-over body treatment, specially formulated for the City. First they flagellate investors for putting shareholder value above nobler pursuits like the protection of the Amazonian rain forests. Then they sensitise the skin by waving around the idea of taking the business private. And finally, they apply the soothing balm in the shape of a pledge to raise the payout and reduce dividend cover

As a means of bringing a glow to the cheeks, a 55 per cent increase in the dividend beats the plunge pool and a brisk working over with beech twigs any day. But whether Body Shop International has found the answer to its uneasy relationship with the investment community is less obvious. Despite their best endeavours, concepts such as "accelerating our dividend growth over and above the rate of earnings" clearly jar with the Roddicks' pre-occupation with ethical capitalism.

The Roddicks' explanation for why they decided not to pursue their desire to take the business private should be taken with a large dose of peppermint foot lotion. The Roddicks are plainly still unhappy running a public company with all the obligations of disclosure that entails. And although Body Shop's shares rose pleasingly yesterday on the crest of the new-look policy towards shareholders which recognises the importance of dividend growth, there are plainly problems ahead.

The balance sheet may be ungeared and cash flow may be strong but investors may also wonder where the growth is going to come from to help Body Shop deliver, even with the dividend cover cut back. The US market is a mess, not helped by Body Shop's own green credentials being put under the spotlight.

Fewer store openings are planned this year than last and while the potential for international expansion may be "huge", it will take more than a few new outlets in the Phillipines and South Africa to spread the Roddick gospel around the globe.

In an ideal world, says Gordon, it would have been nice to celebrate the company's 20th anniversary with an increase in profits. In the Roddicks' ideal world there wouldn't be any shareholders, either. For the time being the two will have to rub along together until such time as the Roddicks can persuade the banks that a buyout is feasible, or a big brother comes along that can lift the yoke of public ownership from their shoulders.