Outlook: Hutchings finally bites the bullet

MANAGEMENT FADS come and go but few are as far gone as the notion of the diversified conglomerate. Lauded in the 1980s when Lord Hanson and his ilk strode the business stage, all but one of the British ones are now gone, stripped down or reinvented. Hanson has done it. BTR has done it. Even Williams has dropped the dreaded "Holdings" part of its name (a sure sign of a conglomerate) to re-invent itself as a more focused fire and security services business.

Now Tomkins, the last of the Big Four conglomerates and the most absurdly diversified, is following suit. Looking at Tomkins share price it is hard to fault the logic of the plan, unveiled yesterday, to spin off the food business and concentrate on industrial products.

Rank Hovis McDougall, the takeover which saddled the group with the ludicrous "guns-to-buns" tag, always looked like the diversification too far and the City has penalised the company with a low share price rating ever since. Since the whole raison d'etre of a conglomerate is shareholder value, even Greg Hutchings, chairman of Tomkins for 16 years, eventually had to do something.

Concentrating on a narrower spectrum of businesses has clear merits. Institutional investors prefer the more transparent dealings of industry focused companies, making like-for-like comparisons with competitors easier. Conglomerates, by contrast, tend to obfuscate.

There is also something in the argument that as markets globalise, major customers need to be served around the world by large global suppliers that are specialists in their fields, rather than jacks of all trades. The vogue strategy is to strip down to a core business, and then bulk up with mergers or acquisitions to become a global player.

With the shares continuing to underperform and no longer a member of the FTSE 100, Mr Hutchings will have to come up with a big "bulk up" deal soon to justify his pounds 1m salary, which strangely appears to have escaped this latest exercise in corporate unbundling.

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