Now Hutchings plans Tomkins' next big bid

BY TOM STEVENSON

Deputy City Editor

Tomkins, maker of Smith & Wesson handguns and Mr Kipling cakes, is preparing for a hostile bid of up to pounds 600m as the cashflow from its 71 diverse subsidiaries piles up.

Greg Hutchings, the chairman, poured water on market whispers that the conglomerate was poised to swoop on one of the regional electricity companies, but he made it clear that the integration of Tomkins' last big purchase, Ranks Hovis McDougall, was now largely complete.

Speaking as Tomkins announced its 14th successive year of rising earnings and dividends, he said: "Management can now contemplate the next strategic step. Our search criteria are unchanged, we remain committed to seeking low-risk technology companies manufacturing basic products."

He added that the company would probably make its next purchase in either the US or UK, from where it makes 90 per cent of its profits.

This disappointed analysts, who had hoped the company would make a move into Continental Europe, where it has very little exposure.

Results for the year to April prolonged Tomkins' continuous growth record -throughout both the boom years of the 1980s and the recession of the early 1990s.

Following an 18 per cent jump in pre-tax profits to pounds 303m the full-year dividend increased by 17 per cent to 8.65p.

Despite the record profits, which added to more than a decade of outperformance, the shares closed 5p lower at 235p as the market continued to doubt the wisdom of the 1992 purchase of RHM.

Tomkins is lower rated than its peers in the diversified industrials sector, which itself remains out of favour with a market that has turned its back on what it perceives to be ill-focused conglomerates such as Hanson and BTR.

Williams, which was previously another of the fast-growing conglomerates, has now returned to the fold and is making a big play of its decision to abandon growth by acquisition and to focus instead on squeezing additional value from its existing businesses.

Mr Hutchings reiterated yesterday his belief that focus is an irrelevance as long as the company continues to generate growth in earnings per share and dividends.

Earnings have grown at a compound rate of 34 per cent since 1984 and dividends by 29 per cent.

Investment column, page 18