Bottom Line: Williams loses its way

THE reasons for Brian McGowan's departure were writ large in yesterday's acquisition by Williams of Aqualisa, a small shower manufacturer. At pounds 23.5m its significance lay in its insignificance.

Making a virtue out of necessity, Nigel Rudd reiterated his hollow claim that Williams has given up looking for the big catch to concentrate on bolt-on acquisitions. But the fact is that the company, having tripped over three hostile bids, has lost its strategic direction.

Having failed to pick up Norcros, McKechnie and then Racal, Williams is having to get used to what are tiny purchases in group terms. Larger cash acquisitions involving a heavy slug of goodwill are not out of the question but would be unwelcome burdens on the balance sheet. Williams' concentration on buying brands means that yesterday's pounds 23.5m price tag for just pounds 3.2m of assets is typical.

Buying anything bigger than Aqualisa for paper, however, remains a problem. Williams' shares, suffering from the market's lack of interest in conglomerates, are no longer the earnings-enhancing currency they were in the good years.

Like Tomkins, Williams is now faced with the prospect that it will never be able to make the leap to the big league occupied by Hanson and BTR, companies that grew up in more favourable conditions.

That matters to shareholders because the company's skills lie in cutting costs, not in investing in existing businesses. Williams' capital expenditure rarely exceeds depreciation by much. Unless it can acquire new costs to cut, its growth looks less certain.

Added to that, Williams lies at the back end of the economic cycle (furthest from the consumers who will lead the recovery). On a p/e of 17, the shares are looking a long way into the recovery, which is currently the company's biggest asset.