Smaller companies: Hitachi rewarded

PROFIT is the reward for good service. That is the guiding philosophy behind Hitachi Credit (UK), the British arm of the Japanese consumer finance concern, writes Richard Phillips.

The ideal contrasts strongly with the short termism and woeful customer relations that have dogged much British industry over the years. Japanese business strategy may be up for grabs again, with the country's economy staring into the abyss, but even so, the slogan seems to have served this UK provider of asset-based credit remarkably well.

Profits have gone up every year since the business was started in 1982, including through the 1989-92 recession. In July last year, the company floated 35 per cent of its shares, raising pounds 20m. Maiden interim figures in October showed turnover up 26 per cent at pounds 35.6m for the half year to September 30, pre-tax profit up 48 per cent to pounds 3.2m and earnings per share up 25 per cent to 6.6p. Perhaps there is a case to be made that mixing Japanese corporate ethics with Anglo-Saxon stock markets is as good a recipe for success as one could wish for.

David Anthony, the general manager, has yet to see any sign of recession hitting any of the group's divisions, which cover business finance, consumer credit and contract hire and fleet management. Hitachi Credit (UK) also has a small insurance business.

After a quiet start the shares have done well: they stand at 194.5p compared with the 135p at which they were floated. However, the prospect of further rises in value looks likely: compared with its peers, Hitachi Credit is still on the cheap side while the company is set fair for further organic growth.

Potential investors should be aware that while they are buying into a company with strong roots in Japan, it is in all senses a UK business. While the parent company may see its stake watered down through dilution if there are acquisitions or further fund-raising exercises, there is no chance of the shares attracting a bid premium for the foreseeable future. On the other hand, this also dispels any notion of an overhang of shares likely to be sold into the market. An interesting long-term buy.