The group has had a facelift since the Roddicks stepped back from day-to-day management in 2002, and looks all the better for it. The Body Shop announced yesterday that it was increasing its dividend payout for the first time in seven years as a gesture of confidence that its new look would age well.Despite a climate of gloom in the UK, which has forced Boots to seek a merger with Alliance UniChem, The Body Shop said underlying sales across its 300 stores rose 4 per cent in the half year to 27 August. They have quadrupled since their nadir in 2002 because Mr Jones's self-help measures coincided with an improved economic situation. The economic outlook may be less clearly positive from here, but there is more efficiency to be gained Buy.. Four years ago, The Body Shop International was languishing at the back of the stock-market shelves like a dusty old bottle of Old Spice. The Roddicks were running the retailer into the ground and bidders were circling.

A more productive product innovation team and the new factory in Ilminster will keep them moving forward.The shares, up 8.5p to 265.5p yesterday, trade on 17 times this year's earnings, a slight and justified premium to the market. Its product, called a Q-switch, is a market leader, and the company is finally living up to its potential after an internal shake-up under Gareth Jones, the chief executive.Simple improvements to marketing were behind yesterday's news that profits in the year to September are ahead of forecast. Think what it can achieve when it moves out of its Dickensian digs to something more state-of-the-art next year.The business is Gooch & Housego, which makes the tiny components that turn lasers into tools for (in industry) cutting, drilling or welding or (in healthcare) cauterising. At 145.75p, keep holding.Why it's all systems go at Gooch & HousegoA little manufacturing business based in a converted court house in the pretty Somerset town of Ilminster is already making millions shipping some of the world's most sophisticated laser components to China and across the globe. This at least looks a temporary management misjudgment.The near-6 per cent dividend is not threatened, and this is a management team with a good track record in restructuring. The cost of energy for its mills has soared in line with the oil price, and it has not been able fully to pass these costs on to its customers. It has raised paper prices in continental Europe in recent weeks, but its biggest customers are likely to claw back at least some of these in discounts.And there has also been disappointment on the cardboard side of the group.

There is a glut of capacity in the industry that is only now being addressed by factory closures, while at the same time demand has been falling because manufacturing businesses in Europe have shifted to the Far East.To cap it all, a sideline in stationery wholesale has missed its profit targets this year, according to yesterday's trading update. When demand takes an unexpected turn for the worse, or costs rise, the earnings can move sharply downwards.Right now, demand has taken a turn for the worse and costs have risen. Keep cradling your shares.Hold on to paper maker DS SmithDS Smith, the paper manufacturer, has been looking a bit dog-eared of late. Each results statement or trading update seems to bring a fresh piece of bad news, and profit forecasts have come down and down.The problem is that profitability in this vital but well-served industry is paper thin, and the likes of DS Smith must constantly cut out costs to stay competitive.